Tax Withheld From November Pay and Pensions Will Be Cut in Half, Christmas Bonus Included, as the IRS Cut Becomes Law

Most employees and pensioners in mainland Portugal will see more money in their November payslip. A ruling from the Ministry of Finance says that for salaries and pensions paid between 1 and 30 November 2026, employers and pension funds should withhold only half of the IRS (personal income tax) that the normal 2026 tables would take. If a Christmas bonus is paid in November, it gets the same treatment.

The change is how the Government is passing on this year's IRS rate cut, which it wants to apply to all of 2026, backdated to January. On Tuesday 20 October, President António José Seguro signed into law the parliamentary decree that authorises the Government to cut the rates of the first six income brackets.

What the November rule says

The rule is Despacho n.º 12523-A/2026 (Order 12523-A/2026), signed by Finance Minister Joaquim Miranda Sarmento on 13 October and published in a supplement to the Diário da República (official gazette) on 14 October. In short:

• Who: anyone paid a salary (employment income) or a pension between 1 and 30 November 2026 who is resident in mainland Portugal.
• How much: the employer or pension payer works out the withholding with the normal 2026 tables and then applies "only 50 percent of that amount".
• Christmas bonus: where a payment includes more than one month's pay, "as is the case, notably, with the Christmas subsidy", the half rule applies too.
• Who is left out: people whose monthly income is above the upper limit of the second-highest line of the tables. For a single employee with no dependants that line ends at 20,221 euros a month, and for a single pensioner at 18,332 euros, so only very high earners are affected.
• Where: the order covers the mainland only. The Azores and Madeira have their own withholding tables and are outside it.
• December: from 1 December the normal 2026 tables apply again in full.

If an employer gets November wrong, the order lets it correct the withholding in the following months, up to the end of December 2026.

The order explains the reasoning: the rate cut takes effect from 1 January, so the Government wants its benefit to reach people's net pay "as quickly as possible", including the effect of the tax already withheld since the start of the year.

What it could mean in euros

We applied the 2026 withholding tables in Despacho n.º 233-A/2026 to a few monthly amounts. These are our own calculations for a single person with no dependants, before any other adjustments a payroll system may make:

• a salary of 1,000 euros: about 36 euros withheld normally, so about 18 euros more in November;
• a salary of 1,500 euros: about 168 euros normally, so about 84 euros more;
• a salary of 2,500 euros: about 471 euros normally, so about 236 euros more;
• a pension of 1,500 euros: about 152 euros normally, so about 76 euros more.

Where the Christmas bonus is paid with November's salary, the tables are applied to each month's pay separately, so the extra roughly doubles. Many employers pay the bonus in December, or spread it across the year, and in those cases only the normal November salary is affected. A salary of 920 euros (the 2026 minimum wage) or less has no IRS withheld at all, so it gains nothing.

Why it may mean a smaller refund in 2027

Withholding is only an advance on the tax you owe. What you actually pay for 2026 is settled when you file your IRS return in the spring of 2027, using the new, lower rates.

The rate cut itself is modest. As we reported when parliament approved it, the first six brackets fall by 0.3 to 0.5 percentage points. By our calculation a single taxpayer saves about 171 euros a year at 43,090 euros of taxable income, and less below that.

For many people, halving November's withholding gives back more than that. Someone earning 2,500 euros a month who also gets the Christmas bonus in November would keep about 470 euros more that month. If the November relief is larger than what the lower rates save you over the whole year, the difference comes back in the 2027 return: a smaller refund than usual, or in some cases a bill. It is worth keeping that in mind before spending the extra.

What still has to happen

The law signed on Tuesday is an authorisation law. It lets the Government change the Código do IRS (Income Tax Code), but the new rates take effect only once the Government approves and publishes the decree-law itself. The President's note of 20 October covers Decreto da Assembleia da República n.º 113/XVII (Decree of the Assembly of the Republic 113/XVII). The law still has to be published in the Diário da República.

You do not need to do anything to get the November change: it is applied by whoever pays your salary or pension. If you live in the Azores or Madeira, or you are paid from Portugal but are not tax resident here, check with your employer or pension payer, because the November order does not cover you.