Portugal’s new budget has a catch

Next year’s budget is out, and some of it lands in your payslip. It’s Friday, 9 October. Twenty-five degrees. Air quality: 28 (Good). Here’s what you need to know.

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THE 2027 BUDGET IS IN. HERE’S WHAT IT MEANS FOR YOU

The government delivered its 2027 State Budget to parliament yesterday, two days before the deadline, and it’s all but certain to pass. The PS, the Socialist Party, has said it will abstain after Prime Minister Luís Montenegro gave assurances on its four conditions. The first vote is on 28 October and the final vote on 24 November. The PCP, the Communist Party, and the Left Bloc will vote against. The hard-right Chega says it may too, unless the government lowers the retirement age, cuts VAT on fuel and scraps VAT on a basket of essential foods, three demands the government has already rejected.

The minimum wage rises by €50 to €970 a month next year, as set out in the 2024 pay agreement between the government, employers and the UGT union confederation. Unions want more, citing inflation: the CGTP, the largest union confederation, is asking for €1,100 and the UGT for over €1,000. Public-sector pay rises 2.3%, with a minimum increase of €60.52.

On IRS, income tax, the rate cuts announced last month already apply to this year. For 2027, the tax bands rise by 3.88% and the tax-free threshold rises to €13,580 a year, so anyone on the minimum wage pays no IRS. Productivity bonuses and profit-sharing will also be tax-free, up to 6% of a worker’s annual basic pay. One catch: the bands rise less than the 4.5% private-sector pay rise set as a target in that same pay agreement, so a bigger pay rise could push part of your income into a higher band. The Finance Minister says anyone with a rise of around 4.5% will still pay less than this year, because of the rate cuts.

For buyers, the state guarantee that lets people under 35 borrow up to 100% of a first home’s price stays, as does their exemption from IMT, the property transfer tax, and stamp duty on homes up to €338,141. For everyone else buying a home to live in, the IMT bands rise 2.3%, and homes up to €108,792 pay none. Porta 65, the rent support scheme for young people, will be strengthened, though the budget doesn’t say by how much.

Further down the list, the CSI, the means-tested pension top-up for older people on low incomes, rises from €670 to €720 a month, and corporation tax falls from 19% to 18%. Total health spending drops 1.5%, though funding for the SNS, the health service, itself rises 4%. The government expects to collect 5.2% more from fuel tax next year, which it puts down to higher consumer spending. Overall, it forecasts growth of around 2% and a small surplus, with public debt falling to 84.5% of GDP.

If you’re paid in Portugal, the changes to watch are the tax bands and the tax-free threshold, both of which apply from 2027. If you’re under 35 and buying, your guarantee and tax exemptions continue for another year. And because parliament can still change details before the final vote, treat everything here as the plan, not the final word.

Bottom line: more money at the bottom of the pay scale and continued help for young buyers, but a strong pay rise could see some of it lost to a higher tax band.

⚡ QUICK HITS

The government is preparing a shake-up of who runs the health service. According to Público, the SNS Executive Directorate, which coordinates the health service, would merge with ACSS, the body that handles much of its finance and administration, so hospitals need fewer sign-offs for things like hiring doctors. The DGS, the health directorate, would combine with the Ricardo Jorge public health institute into a new national public health agency, though some worry about the institute’s scientific independence. The SNS’s executive director, Álvaro Almeida, could leave before his term ends in 2028. Patients’ entitlements wouldn’t change. The reform has already missed deadlines in July and September, and the details are still being decided.

Marco Rubio called Portugal “the ideal gateway” to Europe for US tech companies during his Lisbon visit. The US Secretary of State met Prime Minister Luís Montenegro and Foreign Minister Paulo Rangel yesterday, praised Portugal’s defence spending and said US investors put more than $20 billion into the country last year. Rangel said Portugal is “seriously considering” the F-35 to replace its 28 F-16 fighter jets, alongside European options, and that the country’s approval for US operations from the Lajes airbase in the Azores didn’t cover actions that break international law. On Wednesday evening, around 300 people protested against the visit in Largo de São Domingos.

The Bank of Portugal says customers should keep hold of their bank card when paying in person. Instead of handing the card to staff, customers should be able to insert it into the terminal and enter their PIN themselves, privately. Shops and restaurants should position terminals so PINs can’t be seen, keep cameras from filming the keypad, and check their equipment for signs of tampering. Staff can still ask for photo ID if they doubt a card belongs to the person using it. The guidance also reminds merchants that they shouldn’t charge extra for card payments, and that refunds should go back to the card used.

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🍽️ SPOT OF THE DAY

DA CANA (JANELAS VERDES)

If your only memory of cachaça is a too-sweet caipirinha on holiday, this is the bar to change your mind. Da Cana pours only spirits made from sugarcane across the Portuguese-speaking world, with cachaça, Brazil’s national spirit, as the star. It’s distilled from fresh sugarcane juice rather than the molasses most rum is made from, and in Brazil it’s aged in barrels of more than 40 different woods, each leaving its own flavour. The shelves also hold grogue from Cape Verde, rum from São Tomé and Príncipe, cane spirit from Angola, and poncha, Madeira’s mix of cane spirit, honey and lemon.

When it opened, bartender Edu Ribeiro, a cachaça specialist from São Paulo, built the list around ten original cocktails, priced at €12 each and designed to go with the food. He calls cocktails “food you drink”. The opening menu had its surprises: one paired peach liqueur with a Tabasco infusion, finished with a generous chilli. The bar snacks mix Brazilian and African flavours, from escondidinho, a bake of cassava and creamy catupiry cheese, to minchi dim sum, a nod to Macau, and chamuças.

It’s the work of Raquel Lopes, one of the leading voices promoting cachaça in Europe, and Miguel Júdice of the Geographia restaurant. The bar is tucked into the side of the restaurant on Rua do Conde, with its own door.

Worth knowing before you go: Da Cana doesn’t have its own listing, so the link below takes you to Geographia. Look for the bar’s separate door on the same building. It’s an evening bar, but listings disagree on which days it opens, so check the hours before heading over. For dinner first, Geographia cooks food from across the Portuguese-speaking world and serves the bar’s cocktails too.

→ Find them here ←

Insider tip: if you think you don’t like cachaça, ask for it in the cocktail you’d normally order. The bar’s view is that it can stand in for any spirit.

📅 WHAT’S ON

See you tomorrow morning.

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