Government keeps IRS-exempt productivity bonuses for companies that increase salaries by 4.5% next year

The government's 2027 State Budget proposal maintains the IRS exemption for performance and productivity bonuses up to 6% of a worker's annual base salary. To qualify, companies must increase their average annual base salary by 4.5% and ensure this increase applies to workers earning at or below the company's average base salary from the previous year. This tax benefit is currently set to expire on December 31, 2027.

Why it mattersIf you are employed in Portugal, this policy provides your employer with a tax incentive to offer you a performance bonus free of IRS deductions, provided they meet the 4.5% average salary increase threshold in 2027.

Minister assures tax neutrality for salary increases up to 4.5%

The Minister of Finance stated that the 2027 State Budget proposal ensures 'tax neutrality' for salary increases of up to 4.5%. This is achieved by updating IRS brackets by 3.88%, raising the 'mínimo de existência' (subsistence threshold), and maintaining the previously proposed reductions in IRS rates, ensuring that individuals receiving such raises will pay less IRS in 2027 than in 2026.

RTP· 22m agoRead original ↗

Useful?

Labor & Taxes

Government needs 200 million more to complete promised IRS tax cuts

The 2027 State Budget proposal includes a 550 million euro tax relief through updated tax brackets and specific deductions, which adds to the 400 million euro reduction in tax rates scheduled for this year—the latter of which will be voted on this Friday, October 9. The government also confirmed that salary increases up to 4.5% will remain tax-neutral, ensuring that workers' net income rises rather than being absorbed by higher taxes, and set the new minimum wage at 970 euros per month with an increased tax-free minimum threshold of 13,580 euros.

Observador· 23m agoRead original ↗

Useful?

Government keeps IRS-exempt productivity bonuses for companies that increase salaries by 4.5% next year

This update is from Bica

More on Labor & Taxes

Minister assures tax neutrality for salary increases up to 4.5%

Government needs 200 million more to complete promised IRS tax cuts

Tax burden remains at 35% in 2027 thanks to increased employment and wages