Young people up to 35 years old will be able to choose between current or new IRS.

New Young IRS: "There is no young person who is worse off than they are today"

In the Council of Ministers, in Braga, where new measures aimed at young people were discussed, the Government announced a new regime of Youth IRS that reduces rates to one third of the "normal" ones.

According to news shared by Notícias ao Minuto, young people who are already benefiting from the current IRS regime will be able to choose in January whether they want to stay in this or the new regime approved now by the government.

"There is no young person who will be worse off than they are today because those who are already benefiting from the young IRS today, from January can choose whether they prefer the regime they already have or if they prefer to opt for the regime that we will apply from January 1, 2025," indicated the Minister of Youth and Modernization, Margarida Balseiro Lopes, as can be read in the news."

This new regime is aimed at income from work of categories A and B, for young people up to 35 years old who do not exceed 81,199 euros in annual taxable income, and instead of granting an exemption (like the current one), it reduces the applicable IRS rates to one-third of the value of those currently applied to the first eight tax brackets.

So, according to the Prime Minister, Luís Montenegro, young people will now pay an income tax rate between 4.4% and 15% (the maximum rate applies to the 8th income bracket). Therefore, there will be a new table "with the new rates that represent a third of the general rates currently in Article 68 of the IRS code," as stated in the news article quoting the minister.

Note that the previous model granted a fiscal benefit that translated into an IRS discount for young people who completed their studies, and the new one provides a 100% income exemption up to a maximum value of 40 times the Social Support Index (IAS) in the first year; 75% income in the second year; 50% in the third and fourth years, and 25% in the fifth and sixth year of the benefit (with the reduction of the exemption accompanied by a decrease in the maximum annual income limit).

The monetary impact is also different: the new Young IRS regime will cost one billion euros throughout the legislature, while the Young IRS regime approved in the previous Government and in force in the State Budget for 2024, a cost of around 200 million euros in 2024.

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