Portugal’s Government plans new tax changes for 2026. Expats living in or investing in Portugal should closely follow these updates. The Government has approved the State Budget proposal, but Parliament must still debate and vote on it later this autumn.
Lower Personal Income Tax Rates (IRS)
The Government will reduce personal income tax again in 2026. Rates for the second to fifth brackets will drop by 0.3 percentage points, to 15.7%, 21.2%, 24.1% and 31.1%.
Expats under the ordinary tax regime will notice slightly lower withholdings and higher net income from January 2026. Those under the Non-Habitual Resident (NHR or NHR 2.0) regime will not benefit directly, but they should continue to review their residency and compliance status.
Corporate Tax Reduction (IRC)
The Government will also cut corporate income tax. The mainland rate will fall from 20% to 19%, while Madeira’s regional rate will fall from 14% to 13%.
Small and medium-sized enterprises will pay 15% instead of 16% on their first €50,000 of taxable profit. These reductions aim to strengthen Portugal’s competitiveness and attract new investment across all regions.
Minimum Wage and Economic Outlook
The national minimum wage will rise from €870 to €920 in 2026. This increase follows the tripartite agreement for 2025–2028.
The Government expects a budget surplus of approximately 0.1% of GDP next year and projects economic growth of around 2%. Independent institutions, including the Bank of Portugal, forecast slightly slower growth.
Approval Timeline and Next Steps on the expected tax changes in 2026 in Portugal
Parliament will debate the Budget on 27 and 28 October and hold a final vote on November 27. The measures will only take effect after parliamentary approval has been obtained. Expats should therefore treat all figures as provisional until confirmed by law.
Strategic Considerations for Expats
Expats in Madeira and across Portugal should reassess their tax structures in light of the expected tax changes in 2026 in Portugal. Even small rate changes can affect salary planning, dividends, or investment income.
At Madeira Corporate Services, we help international clients align their residency, investment, and business strategies with Portugal’s evolving tax landscape.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
