Portugal’s center-right minority government is taking steps to address the exit of youth from the country by proposing a 100 percent tax break for individuals aged 35 and under, in a measure aimed at discouraging emigration.
Under the initiative, introduced as part of the government’s first budget bill on Thursday, individuals under 35 earning up to 28,000 euros (about $30,500) per year will receive a 100 percent tax exemption in their first year of work. This exemption will gradually decrease to 25 percent between the eighth and 10th years. The plan is expected to affect more than 300,000 people.
Around 850,000 people aged 15 to 39, or approximately 30 percent, have left the country and are now living abroad due to poor working conditions and low wages, according to the Emigration Observatory.
“This is a budget that seeks to lower taxes for families, youth, and companies ... while promoting economic performance and betting on investment,” Finance Minister Joaquim Miranda Sarmento told a news conference. “It’s a cautious macroeconomic scenario. The Portuguese economy has enormous potential”
The Democratic Alliance coalition won the March 10 election by a slim margin over the outgoing Socialist Party, whose support it needs to pass legislation. Failure to pass the budget could result in the collapse of the government.
The Democratic Alliance has ruled out working with Chega, the anti-immigration, populist party that is now the third-largest political force in Portugal, having quadrupled its parliamentary representation to 50 lawmakers.
He said that this tax cut will cost the state about 1 billion euros ($1.09 billion) a year.
Portugal’s capital, Lisbon, has also proved financially unviable for many young Portuguese due to low wages and high rents.
Immigration
In 2020, Portugal’s population increased for the fourth consecutive year due to a higher number of immigrants than emigrants. There were 67,160 arrivals compared to 25,886 departures, resulting in an overall growth of 0.02 percent.Under the previous socialist government, which was in power for eight years since 2015, Portugal had one of Europe’s most open immigration regimes, with policies that allowed illegal immigrants to regularize their status via work offers.
Portugal’s foreign population hit more than 1 million in 2023, more than double 2018’s figure of 480,000
“We need people in Portugal willing to help us build a fairer and more prosperous society,” Montenegro said at the time. “But we cannot go to the other extreme and have wide-open doors.”
Under the new rules, immigrants must secure an employment contract before moving to the country, with priority given to qualified professionals, students, people from Portuguese-speaking nations, and those seeking family reunification.
