In 2026 Portugal's IRS Jovem exempts 100% of work income in year 1, 75% in years 2 to 4, 50% in years 5 to 7 and 25% in years 8 to 10, up to a cap of €29,542.15 (55 × IAS). It is not automatic: you must elect it on your tax return and notify whoever pays you. It applies to anyone aged up to 35 who is not a dependant, with category A or category B income. Legal basis: article 12-B of the Personal Income Tax Code.
Percentages and cap in 2026
| Year of obtaining income | Exempt | Cap (55 × IAS 2026) |
|---|---|---|
| Year 1 | 100% | €29,542.15 |
| Years 2 to 4 | 75% | €29,542.15 |
| Years 5 to 7 | 50% | €29,542.15 |
| Years 8 to 10 | 25% | €29,542.15 |
The percentages are set in article 12-B(5) of the Code. The cap is 55 times the IAS, which in 2026 stands at €537.13 under Ordinance 480-A/2025/1. The percentage applies to income; the cap limits the absolute amount exempted.
Who qualifies
Article 12-B(1) requires four things:
- Being 35 or under.
- Not being treated as a dependant in someone else's household.
- Having category A or B income — employment or self-employment. Organised accounts are not required: the simplified regime qualifies too.
- Electing the regime on your tax return.
It does not have to be your first job. The relief runs for ten years of obtaining income: someone in their third year of work is entitled to 75%, and someone in their seventh to 50%. And since 2025 no completed course of study is required — the level 4 National Qualifications Framework condition belonged to the old regime and was removed by Law 45-A/2024.
How to claim it, step by step
- Work out which year you are in. Counting starts with the first year you filed a return without being a dependant. Years without category A or B income, years declared on your parents' return, and years worked as a tax resident abroad do not count.
- Notify whoever pays you, in writing, that you want the regime and which year you are in. Article 99-F of the Code requires you to invoke the regime with the payer and state the year, because the year sets the percentage.
- Check the withholding on your payslip. The payer works out the rate on your whole income, including the exempt part, and applies that rate only to the non-exempt part. There is no separate IRS Jovem withholding table: it is the general table applied to a smaller base.
- Elect it on the Modelo 3 return. The tax authority pre-populates information about the benefit (article 12-B(8)), but pre-population does not replace the election.
If you do not notify them in time you are withheld in full and recover the excess on the following year's assessment. The benefit is not lost, but it sits idle for a year.
What you save — worked examples
Using the 2026 brackets (article 68 of the Code, as enacted by Law 73-A/2025) and the two-part rule in article 68(2), on taxable income:
| Year | Taxable income | Exempt % | Exempt | Tax | Saving |
|---|---|---|---|---|---|
| Year 1 | €14,400.00 | 100% | €14,400.00 | €0.00 | €2,093.54 |
| Year 3 | €24,000.00 | 75% | €18,000.00 | €1,092.78 | €3,278.45 |
| Year 5 | €42,000.00 | 50% | €21,000.00 | €5,223.96 | €5,224.10 |
The calculation most people get wrong: tax does not fall in proportion to the exemption. Exempt income still counts when determining the rate applied to the rest (article 12-B(4) and article 22(4)). The relief removes taxable base; it does not move you down a bracket. You can model your own case in the IRS Jovem calculator.
These figures start from taxable income and exclude personal tax credits, which vary by household.
Self-employed
Category B is covered, with or without organised accounts. Under the simplified regime the exemption applies to income after the coefficient, not to gross invoicing: someone invoicing €30,000.00 of services at the 0.75 coefficient arrives at €22,500.00, and it is that figure the percentage applies to.
Frequently asked questions
Is IRS Jovem automatic?
No. Article 12-B(1) says the exemption applies "by election on the tax return". You must also notify the regime and the year to whoever pays you, so that monthly withholding reflects it (article 99-F).
Does it have to be my first job?
No. The regime covers the first ten years of obtaining income, at a decreasing percentage. Someone in their third year of work enters at 75%; someone in their seventh enters at 50%.
Do I need a qualification?
No. Completing a course of study stopped being a requirement under Law 45-A/2024, which rewrote article 12-B with effect from 2025.
What happens if I change employer?
The count is unaffected: years with category A or B income are what matter, regardless of how many employers. But you must notify the regime and the year to the new employer, or you will be withheld in full again.
Does IRS Jovem apply to holiday and Christmas allowances?
Yes. The exemption applies to the year's income, allowances included, up to the cap of €29,542.15.
I worked outside Portugal. Have I lost those years?
No. Years worked as a tax resident in another country do not count towards the ten, so the relief waits. What does not wait is the age limit of 35.
Sources
- Personal Income Tax Code, article 12-B (as enacted by Law 45-A/2024 of 31 December) — percentages, cap, conditions and counting of years.
- Personal Income Tax Code, article 22(4) — exempt income counts when determining the rate.
- Personal Income Tax Code, article 99-F — withholding at source and notification of the payer.
- Personal Income Tax Code, article 68 (as enacted by Law 73-A/2025) — brackets used in the examples.
- Ordinance 480-A/2025/1 of 30 December — 2026 IAS: €537.13.
Want to confirm which year you are in and what you can save? HVR Business Consulting can work it out. Talk to us →