Portuguese Government Offers Tax Breaks for Under 35s

The centre-right government of Portugal is poised to introduce significant tax reductions for residents aged 35 and younger, aiming to deter youth emigration and attract foreign nationals to the country.

In a strategic move to retain its young population, the Portuguese government revealed tax incentives for younger citizens in its proposed 2025 budget, unveiled to Parliament on Thursday.

This new tax policy extends to foreigners as well, reflecting the government’s overarching goal of enticing young people to relocate to Portugal.

As part of this initiative, individuals aged 35 and under would enjoy a tax exemption on income up to €28,000 during the first year. This tax advantage would diminish progressively over the next decade, transitioning from a 75% exemption in the second year to 50% in the third year and finally to 25% in the fourth year. The comprehensive plan spans a total of ten years.

Finance Minister Joaquim Miranda Sarmento emphasized the necessity of this tax break as a critical strategy for maintaining the youth population, estimating that between 350,000 and 400,000 young people could benefit from these incentives, according to the Financial Times.

Portugal currently has one of the lowest average salaries in Europe, leading to a concerning trend where approximately 30% of young individuals aged 15 to 39—around 850,000 people—have chosen to leave the nation, based on data from the Emigration Observatory.

The projected cost of these tax breaks for younger citizens amounts to approximately €650 million, equivalent to nearly 0.2% of Portugal’s GDP.

The existing government has previously committed to initiatives designed to retain young residents. Notably, in June, they introduced exemptions from the Real Estate Property Tax (IMT) and Stamp Duty (IS) for young individuals purchasing their primary residences, applicable to those up to 35 years old.

It is crucial for the forthcoming budget to pass in the parliamentary vote scheduled for October 31; failure to do so could result in the collapse of Prime Minister Luís Montenegro’s government, which has only been in power since April following the third snap election in three years.