New IRS scales imply 3.5% increase in taxes in 2026 despite 3% offset

IRS brackets and respective tax hikes must be updated in 2026 by at least 3.51%, according to a formula that combines productivity and inflation, published in an ordinance this Friday in the Diário da República. The Government can still propose a more favourable increase in the Outline State Budget for 2026.

If the government maintains its course, and even combining the reduction in tax rates by 3% agreed with Chega between the 2nd and 5th tax brackets, “the tax burden will increase, since the tripartite agreement signed in an agreement with unions and company association bosses has fixed a salary update of 4.6% for next year,” says Deloitte’s tax expert, Ricardo Reis, in statements to ECO.

In 2025, the IRS brackets were updated by 4.6%, a tenth below the 4.7% target for wage increases set by unions and bosses. “The tripartite agreement, when referring to fiscal neutrality, does not establish a link with the 4.7% benchmark, which is relevant for the incentive to increase wages,” an official source from the office of Minister Joaquim Miranda Sarmento explained to ECO last year. This means that there is no guarantee of full fiscal neutrality, since dependent workers who benefit from such a rise in wages may see the tax burden increase as they move to a higher level of taxation, with a higher rate. In other words what’s given with one hand is likely taken by the other.

Source: Negócios