On 29 October 2026, the Council of Ministers approved the decree-law implementing the 2026 personal income tax (IRS) rate reduction, following parliamentary authorization granted in the State Budget debate. The measure lowers marginal rates across several brackets, aiming to increase disposable income for households amid persistent inflationary pressures. The tax cut is part of the government’s broader strategy to stimulate domestic consumption while maintaining fiscal discipline, with the revenue impact offset by improved tax compliance and economic growth projections.
Key Takeaways
- Bracket Adjustments: The reform reduces rates in the second through fifth income brackets, with the top marginal rate falling from 48% to 47% for income above €80,000.
- Effective Date: Changes apply retroactively to 1 January 2026, requiring employers to adjust withholding tables for November and December payrolls.
- Fiscal Cost: The Ministry of Finance estimates a €1.2 billion revenue foregone in 2026, partially compensated by stronger-than-expected VAT and corporate tax collections.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement