Tax incentive to wage increase

Law No. 65/2025, of 7 November, revokes paragraph 2 of Article 19-B of the Tax Benefits Statute (EBF), thereby making the tax incentive to wage increase not conditional on a reduction in the salary range compared to the previous year. This amendment takes effect on 1 January 2025.

In accordance with Article 19-B of the EBF, taxpayers subject to corporate income tax may deduct 200% of the costs corresponding to wage increases, accounted for as costs for the financial year, relating to employees with permanent employment contracts, provided that the following cumulative conditions are met:

• The increase in the average annual base salary in the company, compared to the end of the previous year, is at least 4.7%; and

• The increase in the annual base salary of employees who earn less than or equal to the average annual base salary of the company at the end of the previous year is at least 4.7%.

Only employees covered by a collective labour agreement that has been updated or signed less than three years ago are considered.

To calculate the benefit, the amounts paid by the employer to the employee as basic remuneration and social security contributions payable by the same entity are considered as charges.

The maximum annual amount that can be increased per employee is five times the minimum guaranteed remuneration (€4,350 in 2025), not including charges resulting from the updating of this amount.