Portugal’s corporate rate is falling. What that actually changes for you
Twenty, nineteen, eighteen, seventeen. The glide path is real, it is in the statute, and each step gets a round of coverage. What the coverage leaves out is that the reduced band for small companies moves once and then stops, that the surcharge on large profits has not been touched since 2017, and that companies taxed by withholding get nothing at all. We modelled it by profit level so you can find your own row.
One reform, four different answers
The same law produces very different outcomes depending on which rate you were actually paying.
From 20% to 17% across three budgets. This is the reform as described, and for a company whose profit sits comfortably above the reduced band it is accurate. The benefit arrives in equal annual slices rather than all at once.
The headline, correctly appliedThe reduced band goes 16% to 15% in 2026 and then stands still: 15% in 2027, 15% in 2028. A company whose entire profit sits in that band receives its whole benefit in the first year of a four-year programme, and then reads three more years of announcements about a rate it does not pay.
Once, and then nothingArticle 87(4) still charges 25% on income of entities with no seat, effective management or establishment here, and 35% where the recipient is domiciled in a listed jurisdiction. Neither number is part of this reform. If Portugal taxes you by withholding, the glide path is somebody else’s.
Unchanged, and easy to missThe derrama estadual in article 87.º-A carries the wording it was given by Lei 114/2017 and has not been amended since: 3%, then 5%, then 9%. A company large enough to pay it watches the bottom of its rate stack fall three points while the top of it stays exactly where it was in 2017.
Nine years without a changeYour effective rate, year by year
Taxable profit, where the company sits, whether it qualifies as an SME, and the municipal surcharge your council actually charges. Everything else is statutory.
Set the profit to €50,000 and watch the last three columns refuse to move. Then set it to €3 million and watch all four fall in step. Same reform, same company type, opposite experience of it — which is why two business owners can read the same headline and both be right about what it did for them.
Who the three points actually reach
Effective rate on taxable profit, mainland, with the maximum municipal derrama of 1.5% and no other adjustments.
| Taxable profit | 2025 | 2026 | 2027 | 2028 | Points gained |
|---|---|---|---|---|---|
| €50,000 (SME) | 17.50% | 16.50% | 16.50% | 16.50% | 1.00 |
| €100,000 (SME) | 19.50% | 18.50% | 18.00% | 17.50% | 2.00 |
| €400,000 (SME) | 21.00% | 20.00% | 19.13% | 18.25% | 2.75 |
| €3,000,000 | 23.00% | 22.00% | 21.00% | 20.00% | 3.00 |
| €10,000,000 | 24.55% | 23.55% | 22.55% | 21.55% | 3.00 |
| €50,000,000 | 27.31% | 26.31% | 25.31% | 24.31% | 3.00 |
A rate cut is worth most to whoever was paying that rate. The smallest companies in the table gain a third of what the largest gain, because two thirds of the programme happens to a rate they never touch.
There is no sleight of hand in this. The reduced band exists to help small companies and it was already well below the general rate; narrowing the gap between them is a defensible choice. But “corporate tax falls again in 2027” is, for a company earning €40,000, a sentence about somebody else, and it will be printed twice more.
Still far ahead, and quietly losing ground
Madeira and the Azores both apply the full 30% reduction the regional finance law allows. Because that is a percentage of the mainland rate, the regional rate falls when the mainland rate falls.
| General rate | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|
| Mainland | 20.0% | 19.0% | 18.0% | 17.0% |
| Madeira and Azores, ordinary | 14.0% | 13.3% | 12.6% | 11.9% |
| Gap, in percentage points | 6.00 | 5.70 | 5.40 | 5.10 |
| Madeira free zone, licensed | 5.0% | 5.0% | 5.0% | 5.0% |
The proportional advantage is constant at 30% throughout. The advantage measured in euros per euro of profit shrinks every year, by about 0.3 points annually.
- 8.75% on the first €50,000 for micro, small and medium enterprises in the Azores, under Regional Legislative Decree 27/2025/A
- 12.5% on the first €50,000 for startups meeting the innovation condition of article 2(1)(f) of Lei 21/2023, under article 87(8) CIRC
- 12.5% on that band for SMEs operating and effectively managed in designated interior territories
- 5% for licensed Madeira free-zone companies, within the headcount ceiling, to 2033
- Municipal derrama of up to 1.5% of taxable profit, set council by council
- Derrama estadual of 3%, 5% and 9% above €1.5m, €7.5m and €35m — reduced in the regions, unchanged everywhere since 2017
- Autonomous taxation on cars, entertainment and undocumented expenses, which is charged whether or not you made a profit
- The additional payment on account for companies over the surcharge threshold
What this page deliberately leaves out
Charged on vehicles, entertainment, allowances and undocumented expenses at rates that have nothing to do with your profit, and payable even in a loss year. For a company with a car fleet it can exceed the corporate tax itself, and none of it falls between 2025 and 2028.
Often the larger numberResearch and development, investment allowances, reinvested profits, the Azores reinvestment credit of 20% to 40%. These reduce the tax rather than the rate and can move your effective burden further than three points of headline ever will.
Where the real planning isArticle 87(1) now reads 17% with no further step written into it. Whether a future budget goes lower is a political question and we have no view worth publishing. Plan on 17% and treat anything below it as a windfall.
The statute stops hereIt is published annually and varies more than people expect — some councils charge the full 1.5%, some charge nothing, and several charge a reduced rate to companies below a turnover threshold. On a small profit it can be worth more than a year of the national reduction.
Check it, it is a real number- CIRC, artigo 87.º — rates. Paragraph 1 (general rate, now 17%); paragraph 2 (15% on the first €50,000 for SMEs and small mid caps); paragraph 4 (25% for non-residents without a permanent establishment, 35% for listed jurisdictions); paragraph 8 (12.5% for qualifying startups).
- Lei n.º 64/2025, de 7 de novembro, artigo 3.º — the transitional rule: 19% for periods beginning in 2026, 18% in 2027, and the enacted 17% from 2028; the reduced band applies from periods beginning on or after 1 January 2026.
- Lei n.º 45-A/2024, de 31 de dezembro — the preceding wording, giving 20% and a reduced band of 16% for periods beginning in 2025.
- CIRC, artigo 87.º-A — derrama estadual, in the wording of Lei 114/2017 and unamended since: 3% above €1.5m, 5% above €7.5m, 9% above €35m.
- Decreto Legislativo Regional n.º 27/2025/A — the 8.75% rate on the first €50,000 for micro, small and medium enterprises in the Azores, under article 41.º-B of the tax benefits statute.
- EBF, artigo 36.º-A — the Madeira free-zone regime at 5%, separate from all of the above and running to 2033.
One note on sourcing. Published guides disagree about the Azores: several give 13.3% for 2026 and at least one gives 16.8%. The 16.8% figure is what a 20% reduction off the old 21% rate produced and is stale. We have used 13.3%, which is 70% of the mainland 19% and matches both the professional-body analysis of the 2026 budget and the previous year’s regional figures of 14% and 11.2%, themselves 70% of 20% and 16%.
What owners ask after reading the headline
What is the Portuguese corporate tax rate in 2026?
The general IRC rate is 19% for tax periods beginning in 2026, with 15% on the first €50,000 of taxable income for companies qualifying as small or medium enterprises or small mid caps. It falls to 18% in 2027 and 17% from 2028, under the transitional rule in article 3 of Lei 64/2025. The municipal derrama of up to 1.5% and the state surcharge on large profits sit on top.
How much does the reduction actually save a small company?
Less than the coverage implies. If all your profit sits within the first €50,000, your rate goes from 16% in 2025 to 15% in 2026 and then stays at 15% for 2027 and 2028. That is one point, once. The three further cuts announced for 2027 and 2028 apply to the general rate, which you are not paying.
Who gets the full three-point reduction?
Companies that pay the general rate on all or most of their profit. The benefit scales upward: on our model a company with €50,000 of profit sees its effective rate fall by one point between 2025 and 2028, one with €100,000 by two points, and anything above roughly €1 million by the full three. A rate cut is worth most to whoever was paying that rate.
Does the reduction apply to non-resident companies?
Not to those without a permanent establishment here. The 25% rate in article 87(4) for entities with no seat, effective management or permanent establishment in Portugal is untouched by the reform, as is the 35% rate for entities domiciled in listed jurisdictions. If you are taxed by withholding rather than by assessment, nothing on this page changes for you.
What happened to the state surcharge on large profits?
Nothing. The derrama estadual in article 87.º-A still carries the wording given to it in 2017: 3% on taxable profit between €1.5 million and €7.5 million, 5% up to €35 million and 9% above that. It was not part of this reform. A company large enough to pay it sees the bottom of its rate stack fall and the top of it stay exactly where it was.
How do Madeira and the Azores compare?
Both autonomous regions apply the full 30% reduction the regional finance law allows, so for 2026 the general rate is 13.3% against 19% on the mainland, and 10.5% on the first €50,000 against 15%. Because the regional rate is a percentage of the mainland rate, it falls as the mainland falls — the proportional advantage stays at 30% while the gap in percentage points narrows from 6.00 in 2025 to 5.10 in 2028.
Are there rates below the standard reduced band?
Yes, three. Startups meeting the innovation condition in article 2(1)(f) of Lei 21/2023 pay 12.5% on the first €50,000 under article 87(8). SMEs operating and effectively managed in designated interior territories can reach 12.5% on that band. And in the Azores, micro, small and medium enterprises have an 8.75% rate on the first €50,000 under Regional Legislative Decree 27/2025/A.
Does any of this affect a Madeira free-zone company?
No, and that is the point of the free-zone regime. A licensed company in the International Business Centre is taxed at 5% within its headcount ceiling under article 36.º-A of the tax benefits statute, which is a separate regime with its own end date of 2033. It does not move with the general rate, and the general rate falling slightly narrows the advantage without approaching it.
The rate is the smallest lever on your actual bill
Three points over three years is worth having and is worth roughly what one properly claimed credit is worth in a single year. Send us last year’s return and we will tell you where your effective rate really comes from — the municipal derrama you could have avoided, the autonomous taxation nobody budgeted, the incentive you qualified for and did not claim. Then we will tell you what 2028 looks like.