The Portuguese tax system ranks as the sixth least competitive among the OECD countries, according to the International Tax Competitiveness Index developed by the international organization Tax Foundation.
According to the report published by the Institute +Liberdade, Portugal occupies the 33rd place in the 2025 edition of the index.
This index considers “over 42 variables in five categories”:
- Corporate Taxes
- Individual Taxes
- Consumption Taxes
- Property Taxes
- International Taxation
“This index aims to show not only which countries provide the best tax environment for investment but also the best tax environment to start and grow a business,” according to the Institute +Liberdade’s website.
Majority of Business Owners Describe Tax System as “Complex and Inefficient”
The majority of business owners (60%) consider the Portuguese tax system “complex and inefficient,” while a third acknowledge its effectiveness, according to the 2025 Tax Competitiveness Observatory by Deloitte.
The study released today indicates that 93% of companies find the system complex, but 33% view the tax system as effective, “reversing the pessimism of previous years.”
The perception has improved compared to 2023 and 2024, but it remains “far from the more favorable levels of 2019 to 2021.”
“Domestic companies are convinced that government fiscal policy can drive development and enhance the competitiveness of Portuguese companies,” the statement reads.
Among respondents, 98% believe there is room to improve tax policies directed at families and businesses, and 68% highlight the need to balance new measures with the consolidation of public accounts.
Conversely, 62% considered the tax system ineffective.
Geopolitical uncertainty is seen as the primary concern for Portuguese companies this year, while unemployment ranks lowest.
Business owners highlighted the reduction of the maximum nominal IRC rate to 20% and reducing autonomous tax rates in this year’s State Budget (OE2026), suggesting that revising VAT rules is a priority improvement area.
Regarding the IRS Jovem, 54% of respondents deemed the measure’s reinforcement “little or not effective” in preventing worker migration abroad, while 42% disagreed.
The area considered “most sensitive to attracting and/or retaining investment” was bureaucratic simplification, “maintaining relative leadership over the previous year,” ahead of the effective functioning of courts, financial investment incentives, and labor legislation.
Labor legislation, meanwhile, fell back in relative position among investment obstacles, returning to fourth place after reaching third place last year, overtaken by context costs and bureaucracy.
More than two-thirds (68%) of companies applied for tax incentives in recent years, and almost half (46%) applied for financial incentives, notably SIFIDE II (33%) and the Recovery and Resilience Plan (PRR) (13%).
The study was conducted in May this year with the participation of 197 companies, of which 50% belong to the tertiary sector and 55% had a turnover above 50 million euros. More than two-thirds (69%) have over 100 employees, and 64% are headquartered in Lisbon and 26% in the north of the country.
