Il Portugal is preparing to become a tax haven for young people under 35. After the exit of many pensioners, discouraged by a less favorable tax regime, the center-right government, led by Prime Minister Luís Montenegro, has launched an ambitious plan that offers 10 years of tax breaks to young people starting their careers. The goal is twofold: to stop the growing brain drain and to encourage foreigners to settle in the country.
According to the Emigration Observatory, around 850 young people, or 30% of the 15-39 age group, have left Portugal, attracted by job opportunities abroad. The main reasons for this emigration include skyrocketing rental costs, low wages and poor working conditions. Currently, the minimum monthly wage is 870 euros, while the average monthly wage is 1.640 euros, among the lowest in Europe.
The need to review fiscal policies became evident when the government backtracked on previous measures that had caused social discontent, including the proposal to a 15% income tax cap for young people between 18 and 35. The new law, now more favorable, was designed to gain the support of the socialists in Parliament and to address citizens' concerns.
Lower taxes for young people: Portugal's plan
The new law, an integral part of the 2025 budget, provides for a tax relief that zero taxes for the first year of work for young people earning up to 28 thousand euros. Subsequently, young people will benefit from tax discounts: 75% from the second to the fourth year, 50% from the fifth to the seventh, and finally 25% from the eighth to the tenth year. According to the government, between 350.000 and 400.000 young people could benefit from this initiative and it will cost around 645 million euros in 2025, compared to one billion for the proposed ceiling.
In addition to tax breaks, the budget law includes other significant economic measures, such as a reduction in the corporate tax rate and increased public spending to improve the salaries of teachers, health workers and the police. The government is also trying to facilitate thefirst home purchase for young people, eliminating some municipal taxes, stamp duties and commissions. Montenegro said reducing personal income tax would be a “fundamental principle” of government policy.
However, the lack of affordable housing continues to be a key issue. In recent years, the policies adopted by Portugal to recover from the 2008 financial crisis and attract foreign investment have raised numerous protests, highlighting the economic difficulties of many citizens.
Is the new plan really sustainable?
Some argue that the plan will not bring real benefits, since the measures also apply to foreigners, increasing the competition in the labor market. The new law is designed to win the support of socialists in parliament and address citizens' concerns, but the future of the new rules is uncertain.
Il balance will be approved only if opposition socialists abstain or the far-right Chega party supports it, but neither of these scenarios is guaranteed. Failure to pass the budget would lead to the collapse of Montenegro's government, which came to power in April after three snap elections in three years. parliamentary vote on the budget is expected for the 31 October.
