Portugal is offering young people a 10-year progressive system of benefits under which they will not pay taxes in the first year of work. The Guardian reports that the government is trying to stop youth protests and the brain drain by doing this.
The measures, which will affect 400,000 people, were included in the budget after negotiations with the opposition Socialists. Under Luiz Montenegro’s leadership, the Portuguese government is abandoning the proposed 15% income tax cap for people aged 18 to 35 and replacing it with a progressive scheme. It stipulates that young people earning up to €28,000 (£23,500) per year will be exempt from taxes:
- 100% in the first year of work;
- 75% – from two to four;
- 50% – from five to seven
- 25% – from eight to ten.
The authorities believe that this step can help many people – from 350,000 to 400,000. The average annual salary in Portugal is about 20,000 euros, and income tax rates range from 13 to 48%.
Officials estimate that 2025 the scheme will cost 645 million euros, while the restriction would cost 1 billion.
Work is underway, particularly on housing affordability. As of August 1, 2024, buyers under 35 were exempt from real estate transfer tax and stamp duty. The exemption is only available for purchasing the first and foremost home; investment housing is not eligible.
In addition, the buyer must not be a dependent, and it is necessary to confirm paid activity. The purchase amount is also specified — no more than 316,272 euros.
Suppose the transaction is for an apartment or house that costs more than the specified limit but less than 633,453 euros. In that case, the buyer can claim a tax rebate and use the deduction. If the property has two owners, the assessment is done individually.
The issue of real estate is very relevant in Portugal, and the shortage of housing has led to large protests, primarily against foreigners, for whom the country has many preferences, according to local residents. In addition, the influx of tourists has made it difficult for locals to rent apartments or houses at affordable prices.
From 2020 to 2021, housing in Portugal rose in price by 157%, rents jumped by 112%, while just over half of Portuguese workers earned less than €1,000 per month.