The Government is preparing a redefinition of the concept of income, which could bring significant changes to the way the IRS is calculated. The new synthetic notion of income, still under study, aims to simplify the tax system and harmonize different types of gains, but may also imply adjustments in taxation.
The topic was addressed by the Minister of Finance, Joaquim Miranda Sarmento, during a parliamentary hearing in the Budget, Finance and Public Administration and Labor, Social Security and Inclusion committees.
According to Notícias ao Minuto, the minister admitted that the measure could change the tax framework of some income, although he guaranteed that social support currently exempt will not be covered.
Government promises to simplify without increasing the tax burden
According to the minister, the proposal under development aims to create a single and coherent definition of income, integrating several sources of earnings (from work, capital, pensions or business activities) into the same model. The intention is to reduce disparities, eliminate exceptions and make the system fairer and more transparent.
“We want the notion of income to be clear, unique and coherent, to avoid situations in which two taxpayers with similar realities are treated differently”, said Joaquim Miranda Sarmento, quoted by the publication.
Despite the possibility of changes, the minister assured that this review does not intend to increase the tax burden on families. The priority, he explained, is administrative simplification and standardization of rules.
Social support will remain exempt
During the hearing, the government official made a point of ensuring that social benefits such as family benefits, unemployment benefits or solidarity supplements for the elderly will remain outside the scope of the IRS. “There will be no taxation on social support. What is at stake is just the way in which taxable income is defined and calculated”, he explained.
According to Notícias ao Minuto, this clarification comes after the PS requested clarifications on the possible impact of the new notion on the taxation of benefits that are currently exempt.
When can it come into force
The proposal should be presented throughout 2026, after a phase of public consultation and technical analysis. The Ministry of Finance ensures that the review will be carried out prudently, to guarantee stability and confidence in the tax system.
The new definition of income is part of a broader tax modernization reform, which also includes the simplification of deductions, benefits and reporting obligations. The Government also intends to reinforce the fight against evasion, making the relationship between the State and taxpayers more transparent.
Miranda Sarmento highlighted that the Executive wants to “modernize the system without penalizing families” and that any change will be accompanied by compensation measures, if there is a significant impact.
“This is not a reform to collect more taxes, but to create a simpler, more coherent and predictable system”, concluded the minister, quoted by .
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