Portugal’s centre-right minority government today approved a major income tax cut for more than 300,000 citizens aged 18-35, slashing by two-thirds the average tax rate they will pay from next year, in a move aimed at stemming immigration of young people.

Prime Minister Luiz Montenegro said “the vast majority will pay somewhere between 4.4% and 7%-8%”, while the maximum tax rate for all young people earning up to €5,800 a month will be 15%. Currently, income tax rates range between 13% and 48% across all salary brackets.

The measure must be approved by parliament, where the center-right governing coalition that came to power after March 10 elections does not have a majority, but most opposition parties are calling for such tax cuts, which would make it easier to pass the measure.

“We give more hope to young Portuguese to stay in Portugal. We need them here… it is possible to reverse the trend (of immigration) which has unfortunately worsened in recent years,” the prime minister stressed at a press conference.

He added that this tax cut would cost state coffers around 1 billion euros a year.

According to the Migration Observatory, around 850,000 young people, or 30% of citizens between the ages of 15 and 39, have left the country – one of the poorest in Western Europe – for some time and are living abroad, due to poor working conditions and low wages.

The government will also provide young people with a government guarantee, which can cover up to 15% of mortgages worth up to €450,000, as many do not have enough savings to make the down payment required by banks, exempting them from municipal taxes.

The government had previously announced income tax cuts for the middle class of €1.5bn compared to 2023 levels.