The State Budget proposal for 2026, which has just been submitted by the government to Parliament, indicates that the minimum subsistence income will be updated to 12,880 euros, ensuring that salaries up to that amount (which, in principle, will be the national minimum wage in effect in 2026) will be exempt from tax.

The minimum subsistence level determines the level of income guaranteed to each taxpayer after taxes are applied. That is, whenever the income after taxes is less than the minimum subsistence level, the State waives the tax, leaving the taxpayer exempt from income tax.

As a general rule, the reference value is updated to ensure that those earning the national minimum wage are exempt from income tax. This is what happened this year, with the minimum subsistence level rising to €12,180, 14 times the current guaranteed minimum wage (€870).

This time, the value of the national minimum wage that will be in effect next year is not yet 100% set. There is, however, a multi-year agreement established by the Social Concertation, which, if fulfilled, guarantees a minimum wage of €920 in 2026.

However, in previous years, the Social Concertation agreement was revised. The employers' confederations and the government have not given any indication of this, but the Minister of Labor, Maria do Rosário Palma Ramalho, assured that she "will neither open nor close the door" to a review.

The amount now proposed for updating the minimum subsistence wage signals, however, that the government is not planning to go beyond the agreed-upon 50-euro increase. In fact, throughout the report accompanying the budget proposal, the government assumes 920 euros as the minimum wage for 2026.

When asked, the Minister of Finance did not explain, however, whether this is a fixed amount or not, referring the discussion to the Social Concertation.

On the other hand, it is worth noting that, in the case of the Civil Service, the base salary is expected to increase to 934.99 euros in 2026. With the minimum subsistence wage now proposed, civil servants will continue to be subject to personal income tax (IRS).