Published in DR decree-law that reduces IRS rates for 2026

A new decree-law has been published to reduce IRS rates for the first six income brackets starting in 2026, with a 50% discount on withholding taxes for November. The changes, retroactive to January, lower rates from 12.50% to 12.20% for the first bracket and similarly for others. The government, led by Luís Montenegro, opted for a decree-law to implement these changes instead of a direct legislative amendment. Higher earners above certain thresholds will not benefit from the 50% reduction. The withholding mechanism allows for monthly adjustments, with final IRS calculations determining any refunds or additional payments due.