Portugal has approved a gradual reduction of its corporate income tax (IRC) rate, introducing one of the most significant tax reforms of recent years.
Following the measures already introduced under the 2025 State Budget — which reduced the general corporate tax rate from 21% to 20% in 2025 — the Government has now approved a further gradual reduction of the IRC rate to 17% by 2028.
What changes
The reform establishes a three-year transition period:
- 2026: 19%
- 2027: 18%
- 2028: 17%
Small and medium-sized enterprises (SMEs) and small mid-caps will benefit from a 15% tax rate on the first €50,000 of taxable income, maintaining a lower rate than the general corporate rate.
These changes aim to enhance Portugal’s competitiveness, stimulate investment, and provide greater alignment with the average corporate tax levels across the European Union.
When does it take effect?
Although already published and in force since november 7 2025, the new rates will apply from the 2026 fiscal year onwards, affecting all companies subject to corporate income tax in Portugal.
What it means for businesses
For companies operating in Portugal, this change represents a valuable opportunity to reassess tax planning, reinvestment, and growth strategies. The new framework reflects Portugal’s broader goal of simplifying its tax system and encouraging sustainable business development.
Tax Department
João Valadas Coriel | Sofia Quental | Inês Grácio | Catarina Amaral
