Two 400 Million Euro Measures Go to the Council of Ministers Next Week: an IRS Cut Reaching the Sixth Bracket and a One-Off Pension Supplement
Montenegro used the Chega censure debate to announce an IRS reduction worth 400 million euros, felt through lower withholding in November, and a pension bonus of about the same value paid with the December pension.
Luís Montenegro used a censure debate he was never going to lose to announce two decisions that cost 400 million euros each. Speaking in the Assembleia da República (Assembly of the Republic) on Tuesday afternoon, the prime minister said the government would cut IRS, the personal income tax, as far as the sixth bracket, and would pay pensioners a one-off supplement with their December payment. Both go to the Conselho de Ministros (Council of Ministers) next week.
"To support the middle class, there will be a reduction in IRS up to the sixth bracket worth 400 million euros," Montenegro told the chamber. "In practice this reduction covers every IRS taxpayer, even those above that income bracket, given the progressivity of the tax." The relief arrives by an indirect route: "This tax relief will already be felt through a reduction in withholding at source in November, in salaries and in the subsídio de Natal (Christmas allowance)."
That mechanism has a tail. Adjusting the withholding tables in the closing weeks of a year front-loads the money into two pay packets, and tax specialists have warned each of the past two years that withholding less at source means a thinner refund the following spring, or a bill rather than a cheque. Hugo Soares, who leads the PSD parliamentary group, called it the fifth IRS reduction of Montenegro's time in office.
The Pension Bonus Was Already Written Into Law
The second decision is less of a surprise than it sounds. Article 49 of Lei n.º 73-A/2025 of 30 December, the 2026 State Budget, contains a single sentence: in 2026, the government shall pay an extraordinary pension supplement, according to how budget execution develops and the revenue and expenditure trends within it. Parliament wrote the obligation and left the trigger to the accounts. Tuesday supplied the size and the date, not the decision in principle.
"The first is to grant an extraordinary supplement to pensioners on a progressive basis up to 1,611.13 euros, representing a value of around 400 million euros, which will be paid together with the December payment," Montenegro said. Roughly two million pensioners qualify.
That ceiling is three times the Indexante dos Apoios Sociais (Social Support Index), the reference figure anchoring most Portuguese social payments. Portaria n.º 480-A/2025/1 of 30 December fixed the 2026 index at 537.13 euros, up 2.80 percent from 522.50. Three times 537.13 is 1,611.39 euros; the figure given in the chamber was 1,611.13, a 26-cent discrepancy the Council of Ministers text will presumably settle.
Montenegro did not set out the bands. If the government repeats last year's design, the bonus would be 200 euros for pensions at or below one index unit, 150 euros between one and two, and 100 euros between two and three, paid automatically with no application required. It is a one-off, and this government has consistently preferred a conditional annual cheque to the permanent increases for low pensions that the previous administration favoured.
What It Adds To
The 400 million euros of IRS relief is discretionary money on top of what the tax was already going to give back: two routine indexations, of the bracket limits and of the minimum existence threshold, will cost the state 401 million euros next year before anyone touches a rate.
The setting was a motion of censure tabled by Chega over the prime minister's refusal to sack his interior minister, the thirty-seventh such motion in Portuguese democracy. Its arithmetic was settled before the debate began: a censure motion needs 116 votes, and the Socialists announced on Monday that they would abstain. The real fight is the 2027 budget, where the same parties will have to find terms, and where a government that has just committed 800 million euros of this year's execution surplus will have less room to offer. Our guide to Portuguese income tax covers the brackets and the withholding tables the November change will run through.
