The President of the Republic, Marcelo Rebelo de Sousa, announced on Monday the formal approval of the Corporate Income Tax (IRC) reduction, as detailed in a statement on the Presidency’s website.
“The President of the Republic has sanctioned the Assembly of the Republic’s bill amending the Corporate Income Tax Code, reducing the general rates,” the statement read.
What will change?
The reduction in the general IRC rate from 20% to 19% in 2026 was approved in Parliament’s final global vote with favorable votes from PSD, CDS-PP, Chega, IL, PAN, and JPP. PS, Livre, PCP, and BE voted against it.
The new rate outlined in the bill will apply to income earned by companies in 2026.
In addition to the reduction from the current 20% to 19% next year, the bill establishes further decreases in the subsequent two years. The rate will drop to 18% in 2027 and to 17% from 2028.
Complementary to reducing the general rate, there will be a decrease in the rate applied to the initial tranche of profits for small or medium enterprises and small mid-cap companies.
Currently, the rate applied to the first 50,000 euros of taxable income for SMEs is already lower than the general IRC rate, standing at 16%. From next year, it will be reduced to 15%.
For the decree approved by the President to become effective, it must still be published in the Official Gazette.
During the general debate on the initiative on September 19, the Finance Minister, Joaquim Miranda Sarmento, described the reduction as a “strategic choice” for the country, aiming not only to promote growth and wages but also “social cohesion.”
The IRC reduction, initiated in the 2025 fiscal period with a decrease in the general rate from 21% to 20%, will affect next year’s public finances.
According to the report on the proposed State Budget for 2026, the government estimates that a one percentage point tax reduction will lead to a revenue loss of 300 million euros.
“Never confuse lowering IRC with favoring entrepreneurs”
The Economy Minister, Castro Almeida, urged in Parliament not to confuse the IRC reduction, approved this month, with an “advantage” for entrepreneurs.
“Never confuse lowering IRC [Corporate Income Tax] with favoring entrepreneurs. We lowered IRC to provide companies with the conditions to grow and prosper,” Castro Almeida stated during a joint hearing with the Agriculture and Fisheries and Budget, Finance, and Public Administration Committees.
The leader of the Ministry of Economy and Territorial Cohesion also argued that the state should only collect from companies what is “essential to maintain the social state, and not one more euro.”
Castro Almeida expressed satisfaction in being part of a government that set a “decline trajectory” for taxes on corporate profits, providing predictability to entrepreneurs.
