The President of the Republic signed into law on Monday a bill from the Assembly of the Republic that modifies the corporate income tax (IRC) code, reducing its general rates.
The reduction of the general IRC rate from 20% to 19% in 2026 was approved on October 17 in the final global parliamentary vote, with support from PSD, CDS-PP, Chega, IL, PAN, and JPP.
PS, Livre, PCP, and BE voted against the measure.
The new rate stipulated 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 law includes further decreases over the following two years. The rate will drop to 18% in 2027 and to 17% starting in 2028.
Complementing the reduction in the general rate, there will be a decrease in the rate applied to the first bracket of profits for Small and Medium Enterprises (SMEs) and small-medium capitalization 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%. Starting next year, this will be reduced to 15%.
During the general debate on the initiative on September 19, Finance Minister Joaquim Miranda Sarmento described the tax reduction as a “strategic choice” for the country, aimed not only at fostering growth and raising salaries but also at promoting “social cohesion.”
The reduction of IRC, initiated in the fiscal period of 2025 with a decrease in the general rate from 21% to 20%, will impact the public accounts for the following year.
According to the report on the State Budget proposal for 2026 (OE2026), the government anticipates that the one percentage point reduction in the rate will result in a revenue loss of 300 million euros.
