Tax breaks under the proposed scheme mean that under-35s would be granted a 100% tax exemption in their first year of work, up to €28,000 (£23,500). This would drop to a 75% exemption between their second and fourth year of work, 50% between fifth and seventh, and 25% between eighth and tenth. With the average salary in Portugal being €20,000, the scheme would be incredibly beneficial to young people - moving away from the fixed tax brackets for all adults set between 13% and 48%.
Changes arose after President Luís Montenegro’s snap-election victory in March 2024. His centre-right party, the Social Democratic Party, ended nearly a decade of rule by Portugal’s Socialist Party and formed a minority-government. Montenegro’s message was clear: “Give young people the future they deserve”.
The Emigration Observatory in Portugal reported that 850,000 young people (30% of 15-39 year-olds) have left the country at some point, for economic benefit and working opportunities. In the second-quarter of 2024, average unemployment in Portugal stood at 6.1% - amongst young people, 22%. Additionally, the Pew Research Centre also reported that, in Portugal, over 7 in 10 young people still live with their parents.
Due to the minority-government, the Socialist Party must abstain or the far-right Chega Party must vote for the budget. If neither of these scenarios happen the budget will fail to pass into law. The budget has been costed at €645 million - a key statistic which is likely to swing how parties decide to vote. Failure to pass the budget would cause the collapse of Montenegro’s government - the parliamentary vote will take place on October 31st.
