A proposal to reduce corporate tax in the years 2026, 2027, and 2028 has been approved by the Council of Ministers, announced the Ministry of Finance. The ministry estimates the measure will cost 300 million euros annually.
The proposal covers two areas: a reduction in the general corporate income tax rate and a decrease in the rate applied to small and medium enterprises (SMEs) and small-to-medium-cap enterprises on the initial portion of their profits.
The government suggests reducing the general corporate income tax rate by one percentage point each of the next three years.
For 2026, the rate is proposed to decrease to 19%, followed by a cut to 18% in 2027, and to 17% in 2028.
Simultaneously, the tax on the first 50,000 euros of taxable income for SMEs is proposed to decrease from 16% to 15%, remaining at this rate in subsequent years.
This proposal was confirmed by Finance Minister Joaquim Miranda Sarmento after the Council of Ministers meeting, following Prime Minister Luís Montenegro’s announcement in parliament. The measure is outlined in the electoral program of the AD (PDS and CDS-PP) and the government program.
During a state of the nation debate, Montenegro expressed hope that the impact of cutting the tax rate from 21% to 20% in 2025, as approved in the latest State Budget, will not lead to a revenue loss.
“In 2014, when we first implemented a similar measure, we ended the year with more revenue. I expect that this year we can finish with the 1 [percentage point] reduction without losing IRC revenue. Time will tell,” said Luís Montenegro.
Finance Minister Miranda Sarmento emphasized the importance of the tax reduction, describing it as a “very relevant competitiveness measure,” aimed at making Portugal more attractive for foreign direct investment.
“The corporate income tax reduction is critical for the competitiveness of the Portuguese economy. Before this reduction, Portugal already had the second-highest nominal marginal tax rate in the OECD, when adding state and municipal surcharges. It has one of the highest effective rates, especially compared to cohesion countries, which are at our development level and are our direct competitors,” the minister stated, justifying the government’s initiative.
