Prime Minister Luís Montenegro announced the measures following a Council of Ministers meeting on Thursday, 17 September, although most had already been outlined in recent weeks.

Income tax rates

The Government will reduce IRS income tax rates across the first six tax brackets by 0.3 to 0.5 percentage points, which is expected to cost the State around €400 million and will begin to be reflected in workers’ pay from November.

Under the new rates, the first bracket will fall from 12.5 percent to 12.2 percent, while the second will drop from 15.7 percent to 15.2 percent.

The third will be reduced from 21.2 percent to 20.2 percent, the fourth from 24.1 percent to 23.6 percent, the fifth from 31.1 percent to 30.6 percent and the sixth from 34.9 percent to 34.6 percent.

Pension supplement

In December, around two million pensioners will also receive an extraordinary supplement alongside their pension.

Those receiving up to €537.13 will get €200, while pensions between €537.13 and €1,074.26 will get €150, and pensions between €1,074.26 and €1,611.13 will get €100.

Meanwhile, those with pensions above €1,611.13 will not qualify.

This measure represents a further cost of around €400 million to the State and will be the third consecutive year in which a similar payment has been made.

Rail Pass

The Government has also approved expanding the Green Rail Pass to urban rail services in Lisbon and Porto, including Fertagus.

This pass costs €20 a month and allows travel across the country’s railway network, except Alfa Pendular services.

However, despite an earlier announcement that the extension would coincide with Mobility Week, which runs until 22 September, no start date has yet been confirmed.

Additional support will be made available to sectors particularly affected by higher fuel prices, including freight and passenger transport operators, taxis, private social solidarity institutions and voluntary firefighter associations.

Agricultural diesel

Last week, the government also maintained the extraordinary €0.10 per litre support for coloured and agricultural diesel and extended the fuel tax (ISP) discount mechanism until the end of the year.

Montenegro said the current tax measures amount to around €0.23 in savings per litre and could rise to €0.25 next week, when diesel is expected to become €0.10 more expensive and petrol costing €0.08 more.

According to the Government, the measures approved so far, including support already introduced, amount to around €2.3 billion being returned to taxpayers.

Auction warning

As reported by ECO, Montenegro also used his address to warn against what he described as an “auction” of disconnected measures, referring to opposition demands for further intervention on the cost of living.

As a parliamentary debate requested by the Socialist Party (PS) on rising living costs is due to take place, the Prime Minister rejected calls to reduce VAT on food to zero, arguing that he would not exchange the €800 million already being returned to families through the Government’s measures for a zero VAT rate on selected food products.

Furthermore, both the PS and Chega have repeatedly called for food VAT to be reduced to zero, pointing to the measure introduced in response to inflation in 2022.

Montenegro invoked Portugal’s experience during the financial crisis and the troika's intervention, warning that measures introduced without regard for the country’s finances could lead to greater sacrifices later.

He added that the Government would not support measures that provided short-term relief only to leave Portugal facing higher costs in the future, stressing the need to maintain room for manoeuvre and adjust its response to circumstances.