Following the approval of Portugal’s 2025 State Budget, the Portuguese Parliament has introduced several changes affecting salaries, subsidies, and tax declarations. These updates include an increase in the minimun wage across different regions, adjustments to the subsidy system, and modifications to income tax (IRS) regulations.

An improvement of minimum salary by regions 

The Portuguese government aims to gradually raise the guaranteed minimun monthly wage (RMMG), a policy in place for decades. As of January 2025, the national minimum wage has increased by 6.1%, reaching 870€ ($906.63). However, it was initially set at 820€ before adjustments.

For Portugal’s island territories, the minimum wage increase follows a different structure:

  • In the Azores, the new minimun wage stands at 913.50€ ($952.23), reflecting a 52.50€ increase from last year.
  • In Madeira, the minimum wage has risen to 915€ ($953.70), up from 850€ in 2024.

These adjustments aim to align wages with the higher cost of living in the islands. Additionally, unemployment benefits (IAS) has been raised by 2.6%, increasing from 509.26€ to 522.50€ ($544.60).

Variations in subsidies and tax declarations  

Several updates have been made to benefits and tax policies:

  • Food allowance exemption: the tax-exempt limit for meal allowances paid via food vouchers or food cards has increased to 10.20€ ($10.63), up from 9.60€ in 2024.
  • IRS bracket adjustments: the withholding tax brackets for employees and pensioners have been revised, increasing the standard deduction. The new deduction is set at 4,462.35€ ($4,651.11), equivalent to 8.54 times the RMMG.

Finally, a tax benefit now applies to individuals under 35 years of age (non-dependent) under the Young IRS regime. This initiative extends tax relief for young professionals during their first 10 years of earning income. The maximum eligible salary is capped at 55 times the IAS amount, approximately 28,737.50€ ($29,947.35). Thus, 100% exemption will be given in the first year of income; 75% exemption between the 2nd and 4th year of income; 50% exemption between the 5th and 7th year of income; and, finally, 25% exemption for the 8th and 10th year of income.  

Portugal’s 2025 State Budget introduces key payroll changes that impact businesses and employees. Staying informed about these updates is crucial for optimizing tax strategies and ensuring compliance with new regulations.

Auxadi offers payroll management for your company in Portugal and more than 50 jurisdictions thanks to its experience of more than 45 years and its assistance with local experts. We have a headquarters in Portugal, which was also our first international subsidiary, further strengthening our knowledge and commitment to the Portuguese market. Do not hesitate to contact us! 

Can Auxadi help?

Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.