The State Budget for 2025 (OE2025) has been approved by the Portuguese Parliament, after extensive and intense discussion in the specialised section. Here are the main measures that were approved and their implications:
Youth Personal Income Tax
The new IRS Jovem model was approved, extending the IRS exemption for 10 years for young people up to the age of 35. The exemption is gradual, ranging from 100 per cent in the first year to 25 per cent in the last three years. The eligible income limit is 55 times the Social Support Index (IAS), approximately 28,000 euros per year. This measure was passed with the PS and Chega abstaining and the PSD and CDS-PP, among others, voting in favour.
Updating the IRS tax brackets
The IRS brackets will be updated by around 4.6 per cent, reducing the tax burden, especially for those on the lowest incomes. In addition, the exemption limit for meal allowances paid by card will be increased to 10.20 euros per day.
Minimum Wage & IRS Exemption
The national minimum wage will be 870 euros in 2025 and will remain exempt from IRS, guaranteeing more disposable income for families.
Free Social Pass
The free social pass will be extended to all young people up to the age of 23, regardless of their study status, facilitating access to public transport at no cost.
Housing
Measures to support the purchase of a first home by young people up to the age of 35 include a public guarantee for 100 per cent financing of mortgage loans, exemption from IMT and stamp duty. The IMT exemption limit has been updated for properties up to 324,058 euros.
Pension increase
Proposals for an extraordinary increase in pensions were approved, with both the PS and PSD presenting proposals that were partially favourable. The PS proposed an increase of 1.25 percentage points higher than that resulting from updating the law, while the PSD admitted an extra bonus depending on the budget margin.
Hiring professionals for INEM
The PAN proposal to hire at least 400 pre-hospital emergency technicians for INEM by the end of 2025 was approved.
Accessibility & Inclusion
Livre's proposal to transfer funds to eliminate architectural barriers and adapt buildings to guarantee access for people with reduced mobility was approved. In addition, funds to produce communication materials and ensure accessibility to digital content were also approved.
Economic Analysis
The 2025 State Budget reflects an effort to balance budgetary responsibility with social and economic support measures. Here are some key observations:
| Reducing the Tax Burden: The updating of the personal income tax brackets and the extension of the Youth Personal Income Tax are aimed at reducing the tax burden, especially for lower income earners and young people, which can stimulate consumption and the economy.
| Social Support: Measures such as the free social pass, the increase in the IRS-exempt minimum wage and support for youth housing demonstrate a commitment to social inclusion and the reduction of inequalities.
| Investment in Health: The hiring of more professionals for INEM is a positive step towards strengthening the health system, especially in pre-hospital emergencies.
| Budget Sustainability: The government has faced significant challenges in maintaining a balanced budget, with the approval of the SB2025 avoiding a political crisis and guaranteeing economic stability in the short term.
However, criticism persists over the lack of deeper solutions to structural problems, such as rising house prices and the need for a more significant ‘wage shock’, as defended by the PCP. To summarise, the SB2025 represents a compromise between responsible budget management and support for families and young people, but leaves room for future discussions on broader and more sustainable reforms.
Conclusion
The 2025 State Budget incorporates several positive measures that reflect a commitment to social protection and tax relief, especially for young people and families on lower incomes. The extension of the IRS Jovem for 10 years, together with the updating of the IRS brackets, is a significant incentive to retain young people in the labour market and stimulate consumption. However, these initiatives, while worthy, are not enough to solve the structural challenges facing the Portuguese economy.
Affordable housing remains one of the biggest obstacles to social and economic mobility. Despite IMT exemptions and other measures aimed at young people, there is a lack of a robust policy to tackle the core of the problem: the shortage of housing supply in urban areas and price controls in the rental market. The lack of incentives to build public housing and effective regulation of the property market jeopardises the effectiveness of these policies.
In the field of wages, the increase in the national minimum wage to 870 euros is a positive step, but insufficient in the face of inflation and the rising cost of living. In addition, there is a clear need for a comprehensive strategy that includes incentives for productivity, innovation and the qualification of the labour force, so that wage increases don't just depend on government decrees.
I would also highlight efforts in the area of health, such as hiring professionals for INEM, and inclusion, with the elimination of architectural barriers and improved digital accessibility. These investments have a significant social impact, but they need to be underpinned by an integrated vision that ensures the continuity and effectiveness of the initiatives.
On the other hand, the budget faces a crucial challenge: the balance between budgetary responsibility and investment in structural reforms. Without a more comprehensive plan that includes greater diversification of the economy and policies that promote sustainable growth, the risk of perpetuating external dependencies and widening regional inequalities remains high.
In short, the SB2025 is a balanced and socially conscious budget, but it leaves open fundamental questions about how Portugal can build a more resilient, competitive and fair economy in the long term. The lack of structural reforms limits the transformative potential of this budget, which is more reactive than visionary.
By Piedade Duarte Oliveira
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