In Portugal, IRS exemption on salaries and pensions depends on precise rules established in tax law. These rules determine the amount a taxpayer can receive without paying tax, as well as which social benefits are, by nature, outside of taxation. The regime is defined by the IRS Code and updated annually through the State Budget and the ordinances that set the withholding tax tables. In our country, citizens who receive salaries below this amount are exempt from paying IRS.
The starting point is the so-called “existence minimum”, the minimum annual amount of income that the State considers necessary to guarantee the taxpayer’s subsistence. This limit is decisive in determining whether or not someone is exempt from paying IRS at the end of the year.
For 2025, the minimum existence was set at 12,180 euros per year, which corresponds to around 870 euros per month x 14 months.
Anyone who, throughout the year, obtains gross income equal to or less than 12,180 euros, whether through salary (Category A) or pension (Category H), is exempt from IRS in the final assessment, that is, in the declaration submitted to the Tax Authority. This regime is based on article 70 of the IRS Code (CIRS), which regulates the minimum existence and applicable deductions.
Withholding tax: a (sometimes) apparent exemption
Withholding tax is a monthly advance on tax. This year, salaries at the level of the national minimum wage (870 euros) do not have withholding tax, meaning the worker receives the full amount. In pensions, the general rule from October to December this year is identical (exemption up to 870 euros).
However, this year there was an exception in August and September, in which there was an exemption from withholding for pensions up to €1,116/month (single/married two holders) and up to €1,152/month (married, single holder). These levels vary depending on the family situation and are shown in the 2025 tables.
The fact that there is no monthly retention does not guarantee exemption from settlement. The true exemption is confirmed in the final settlement: if the gross annual income is equal to or below 12,180 euros, there is no tax to be paid and any withholdings are returned.
Social benefits that are exempt by nature
In addition to situations where income is low, there are social benefits that are not subject to IRS by law, regardless of the amount received. These include:
- Unemployment benefit;
- Family allowance;
- RSI – Social Insertion Income;
- Social action subsidies, awarded by public entities, Santa Casa da Misericórdia or private social solidarity institutions (IPSS), intended for health, education, support for the elderly, children or people with disabilities.
These benefits are considered non-taxable income and are based on article 12 of the CIRS, which define the scope of the tax and the exclusions expressly provided for.
Therefore, anyone who only earns this type of income does not have to submit a IRS declaration, in accordance with article 58 of the CIRS, unless they accumulate other sources of taxable income.
Other frequent exemptions
There are also partially exempt income from work, even above the subsistence minimum. This is the case with the meal allowance, which is exempt up to 6 euros per day when paid in cash, or up to 10.20 euros per day if paid by card or voucher.
This tax benefit is contained in article 2, paragraph 3, subparagraph b) of the CIRS.
Also the IRS Jovem, provided for in article 12-B of the same Code, allows a partial or total exemption of income from work for young people up to the age of 30, in the first years of their career. In 2025, the exemption is 100% (1st year), 75% (2nd–4th), 50% (5th–7th) and 25% (8th–10th), limited to 55 × IAS = 28,737.50 euros.
What happens in practice
In practice, any worker or pensioner who receives less than 12,180 euros per year does not pay IRS, even if they have suffered small monthly withholdings, these are returned after submitting the declaration. Those who receive more than this amount can continue to be exempt from withholding tax (that is, without monthly discounts) but will have to pay tax in the final settlement if they exceed the minimum amount.
Social benefits such as unemployment benefit, family benefit and RSI do not even enter IRS accounts and are automatically excluded. In turn, meal subsidies and IRS Jovem represent specific benefits that alleviate the tax burden on work income.
Applicable legal basis
The IRS exemption regime is regulated in:
- Personal Income Tax Code (CIRS), approved by Decree-Law no. 442-A/88, of November 30, with successive amendments;
- State Budget Law for 2025, which updates the minimum existence and exemption limits;
- Annual ordinances on withholding tax tables, published in the Official Gazette;
- Articles 2, 2-B, 12, 13, 69 and 70 of the CIRS, which define taxable income, exclusions, exemptions and deductions.
In summary, salaries and pensions up to 12,180 euros per year are exempt from , as well as all social benefits expressly excluded from tax. These mechanisms guarantee that lower incomes and social support situations are protected from taxation, complying with the principle of tax justice and progressiveness of the Portuguese system.
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