The IRS Jovem regime was significantly reinforced in 2025, becoming one of the most attractive tax incentives available to young professionals in Portugal. However, its application raises complex questions — particularly for Portuguese tax residents who earned income abroad before starting work in Portugal.
One of the most frequent doubts we see is:
Does a year in which a Portuguese tax resident earned only foreign income count toward the 10-year IRS Jovem period?
The short answer is: yes — and this clarification is critical for correct tax planning.
What Is IRS Jovem in 2025?
IRS Jovem is a partial IRS exemption applicable to employment income (Category A) and self-employment income (Category B) earned by young taxpayers.
As of 2025, the regime applies under the following core conditions:
• The taxpayer is 35 years old or younger (assessed on 31 December of the tax year)
• The taxpayer is not a dependent in a household
• The income qualifies as Category A or B
• The taxpayer opts into the regime annually via the IRS return
The benefit applies for a maximum of 10 years of income generation, not exceeding the age limit.
Exemption Percentages by Year
The exemption is progressive and capped annually. In 2025, the maximum exempt amount is €28,737.50.
The exemption applies as follows:
• 100% — 1st year of income
• 75% — 2nd to 4th year
• 50% — 5th to 7th year
• 25% — 8th to 10th year
Although exempt, the income is still included for rate-setting purposes, meaning it influences the IRS rate applied to other taxable income.
The Key Question: When Does the 10-Year Count Start?
The 10-year period does not start in 2025 automatically, nor does it depend on when the taxpayer first earns income in Portugal.
Instead, the count begins in the first year in which the taxpayer earned work income (Category A or B) as a non-dependent, regardless of:
• Whether the income was earned in Portugal or abroad
• Whether the income was taxed or exempt
• Whether the IRS return was voluntarily submitted or later assessed
This distinction is essential — and often overlooked.
Foreign Income Earned by Portuguese Tax Residents
Under Portuguese tax law, tax residents are taxed on worldwide income.
As a result:
• Employment income earned abroad by a Portuguese tax resident
• Is subject to IRS reporting obligations
• Counts as a year of income generation for IRS Jovem purposes
There is no legal distinction between Portuguese-source and foreign-source income when counting the 10-year period.
What If No IRS Return Was Filed?
Another common misconception is that a year should be excluded if no IRS return was submitted.
That is incorrect.
If the taxpayer was legally required to submit an IRS return due to foreign income, the year:
• Still qualifies as a year of income generation
• Still counts toward the 10-year IRS Jovem period
Failing to file does not suspend or reset the benefit timeline. Otherwise, non-compliance would lead to an unfair advantage.
Practical Outcome in Real-Life Scenarios
Consider a taxpayer who:
• Was a Portuguese tax resident
• Earned employment income abroad in 2020
• Earned no income in 2021
• Earned income in Portugal from 2022 onward
In this case:
• 2020 counts as the 1st year
• 2021 is ignored (no income)
• 2022, 2023, and 2024 count consecutively
• 2025 becomes the 5th year, qualifying for the 50% exemption tier
The fact that the first income year was foreign-based is irrelevant for counting purposes.
Additional Conditions to Keep in Mind
The IRS Jovem regime is not available if the taxpayer:
• Benefits or has benefited from the Non-Habitual Resident (NHR) regime
• Benefits from the new scientific research and innovation tax incentive
• Opted for the former “ex-resident” tax regime
• Does not have their tax situation fully regularised
All eligibility requirements must be met in each year the option is exercised.
Key Takeaways for Young Professionals and Expats
• IRS Jovem counts years of income, not years in Portugal
• Foreign income earned as a Portuguese tax resident counts
• Failure to file does not exclude a year from the 10-year count
• Planning errors can significantly reduce the benefit
This makes early residency and income history analysis essential — especially for internationally mobile professionals.
Need a Personalised IRS Jovem Assessment?
At GoalSeek, we regularly advise:
• Young professionals relocating to Portugal
• Returnees and expatriates with foreign income history
• Freelancers and employees transitioning between countries
A precise review of your income timeline can make the difference between optimising the IRS Jovem benefit and losing years of exemption unnecessarily.
Professional guidance ensures the regime is applied correctly — and defensibly.
This article is for general information only and does not replace personalised tax advice under Portuguese law.
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