The announcement

The Ministry of Finance announced on Tuesday, 13 October 2026 that withholding tax (retenção na fonte) on income from work and on pensions will be cut by 50% in November. The reduction also applies to the Christmas bonus paid that month, which is withheld separately from regular pay. From December, the withholding tables currently in force apply again. The ministry said an order formalising the new November tables has already been issued and should be published soon. The statement was sent to newsrooms and was attributed to the office of Joaquim Miranda Sarmento.

Parliament's interim cut

Parliament approved the interim reduction of the IRS on Friday, 9 October 2026, passing it urgently in generality, in specialty and in a final global vote. The approval authorises the government to amend the IRS Code and change the rates that apply to all income earned in 2026. When the tax office calculates 2026 tax in 2027, it will use the rates in force on 31 December 2026 rather than the current ones. The cut lowers rates by between 0.3 and 0.5 percentage points, as decided by the government up to the sixth bracket ('6.º degrau'). Withholding is adjusted so that the relief is concentrated in a single month, November, instead of waiting for the annual settlement.

Why November

The ministry argues the change matters for households now rather than in early 2027. Refunds from next year's settlement would arrive only after 2026 income declarations are submitted and accepted, a wait the ministry describes as lasting months. Diário de Notícias calls the move unexpected and notes that it brings forward into November part of the relief planned for January. The ministry's own words on the purpose of the measure are:

“so that families benefit immediately from this reduction, without having to wait for the IRS settlement next year”

Under this approach, the reduction reaches monthly pay and pension payments in the month the decision takes effect, rather than as a refund after filing.

What happens next

The despacho formalising the November tables is due to be published soon, and it will set the new withholding rates for that month. From December, the tables in force before this announcement return. The interim reduction has retroactive effect from 1 January 2026, so it covers the full year of 2026 income. The rates used in the 2027 calculation will be those in force on 31 December 2026, with the cut of 0.3 to 0.5 percentage points applied up to the sixth bracket. The ministry has not set out any further changes to withholding beyond November in the statement.