English speaking accountants in Portugal

Corporation Tax (IRC)

Portugal – Corporation Tax (IRC)

Corporation Tax in Portugal is known as Imposto sobre o Rendimento das Pessoas Coletivas (IRC). It is charged on the taxable profits of companies and other entities that are subject to IRC.

 

Corporation Tax rates

For tax periods commencing in 2026, the standard rate of IRC is 19%.

For companies qualifying as small or medium-sized enterprises (PMEs), or as Small Mid-Caps, and which carry on a commercial, industrial or agricultural activity as their principal activity, a reduced rate applies to the first €50,000 of taxable profit. The rate is 15% on the first €50,000 and 19% on taxable profit above €50,000.

Certain qualifying start-up companies may benefit from a further reduced rate of 12.5% on the first €50,000 of taxable profit, subject to the applicable conditions.

In addition to IRC, companies may be subject to a Municipal Surcharge (Derrama Municipal), depending on the municipality in which they operate. The municipal surcharge is imposed on taxable profit and may be up to 1.5%, although the actual rate and any available exemptions depend on the relevant municipality.

Companies with taxable profits exceeding €1.5 million may also be subject to the State Surcharge (Derrama Estadual) at the following rates:

• 3% on the portion of taxable profit exceeding €1.5 million up to €7.5 million;
• 5% on the portion exceeding €7.5 million up to €35 million; and
• 9% on the portion exceeding €35 million.

 

Autonomous Regions

The Autonomous Regions have reduced IRC rates.

For companies operating in the Azores, the general IRC rate is 13.3%. Qualifying PMEs may benefit from a rate of 8.75% on the first €50,000 of taxable profit, with the applicable conditions and regional rules applying.

The Madeira region also has its own reduced rates, subject to the applicable legislation and conditions.

 

Tax period

The Portuguese IRC tax period normally coincides with the calendar year, ending on 31 December.

Companies may, subject to the applicable rules, adopt a tax period other than the calendar year. In particular, companies that are part of a group required to prepare consolidated financial statements may adopt the same annual tax period as the group where the relevant conditions are met. The alternative tax period must generally be maintained for at least five tax periods, subject to the exceptions provided by law.

 

Autonomous taxation of certain expenses

In addition to IRC on taxable profits, Portuguese companies may be subject to Autonomous Taxation (Tributação Autónoma) on certain expenses. This tax is calculated separately from the normal IRC liability.

 

Passenger vehicles

Expenses and charges relating to passenger vehicles, certain light commercial vehicles, motorcycles and motorbikes are subject to autonomous taxation at rates that depend on the vehicle's acquisition cost.

For 2026, the principal rates for qualifying vehicles are:

• 8% where the acquisition cost is below €37,500;
• 25% where the acquisition cost is €37,500 or more but below €45,000; and
• 32% where the acquisition cost is €45,000 or more.

 

The expenses subject to this autonomous taxation include, among other things, depreciation, rental or leasing costs, insurance, maintenance and repairs, fuel and taxes relating to the ownership or use of the vehicle.

 

For qualifying plug-in hybrid passenger vehicles and certain natural-gas vehicles, reduced autonomous-taxation rates apply, subject to the statutory conditions. The applicable rates are 2.5%, 7.5% and 15%, depending on the vehicle's acquisition cost.

 

Certain fully electric vehicles are generally outside autonomous taxation, although a 10% rate can apply where the vehicle's acquisition cost exceeds the statutory limit. For 2026, the relevant threshold is €62,500.

 

Where a company is subject to autonomous taxation and has a tax loss, the applicable autonomous-taxation rates can ordinarily be increased by 10 percentage points. However, specific transitional rules apply for 2026, including an exemption from this increase in certain circumstances where the company has generated taxable profit in one of the preceding three years and has complied with its relevant filing obligations.

 

Entertainment and representation expenses

 

Representation expenses (despesas de representação), including certain expenditure on receptions, meals, trips and entertainment provided to customers, suppliers or other persons, are subject to autonomous taxation at 10%.

 

Undocumented expenses

 

Undocumented expenses are subject to autonomous taxation at 50%.

This rate increases to 70% where the expenses are incurred by entities that are wholly or partially exempt from IRC, entities that do not carry on a commercial, industrial or agricultural activity as their principal activity, and certain other entities covered by the legislation.

It should also be noted that undocumented expenses may be non-deductible for normal IRC purposes, meaning that the autonomous taxation can arise in addition.