The Portugal 2026 State Budget tax changes unveiled in the Government’s proposal, introducing targeted tax measures that will shape the investment landscape for both companies and individuals. Understanding these tax changes in Portugal’s 2026 State Budget is essential for investors planning to establish, expand, or restructure their operations in the country.
A More Competitive Corporate Tax Environment
Although the Budget proposal itself does not modify the nominal corporate tax rate, a separate bill, approved in parallel, introduces a gradual reduction of the corporate income tax (IRC) rate to 19% in 2026, 18% in 2027, and 17% in 2028 (with expected corresponding rates for the Autonomous Region of Madeira of 13%, 12,6% and 11,9%). This planned reduction strengthens Portugal’s position as a competitive investment destination within the European Union.
Small and medium-sized enterprises (SMEs) and Small mid-caps will further benefit from a 15% reduced rate on the first €50,000 of taxable income, encouraging business retention and reinvestment of profits.
At the same time, the Government continues to promote sustainable mobility. Plug-in hybrid vehicles that meet the Euro 6e-bis emissions standard and achieve at least 50 kilometres of electric-only range now qualify for reduced autonomous taxation rates. This measure incentivises greener fleet management and contributes to lower long-term operating costs for companies.
Fiscal Incentives to Reward Salary Growth
The Incentivo Fiscal à Valorização Salarial remains one of the most significant measures for 2026. Companies that increase average base salaries by at least 4.6% can deduct 200% of the related expense for corporate tax purposes. This deduction also applies to employees earning up to the company’s average salary, linking fiscal relief to real wage improvement.
For investors and employers, this incentive reduces the effective tax burden while promoting workforce stability and productivity.
Personal Income Tax Adjustments
For individual taxpayers, the personal income tax (IRS) brackets will increase by 3.51%, and rates for the second through fifth brackets will decrease by 0.3 percentage points. These changes aim to maintain purchasing power amid moderate inflation. Performance and productivity bonuses remain exempt from IRS and Social Security contributions up to 6% of the annual base salary, provided the employer qualifies under the salary valorisation incentive. This exemption benefits both employees and entrepreneurs, particularly in growth-driven sectors.
Real Estate and IMT Updates
Real estate remains a preferred asset class for investors in Portugal. The Budget updates the taxable value brackets for IMT (Property Transfer Tax) by around 2%, reflecting current market conditions.For primary residences, the zero-rate threshold increases to €106,346, while properties above €1.15 million will be subject to a 7.5% rate. Although modest, these updates help preserve progressivity and align thresholds with actual transaction values. Investors should review how these adjustments affect acquisition costs and property structuring for 2026.
Outlook for 2026
Overall, the 2026 Portuguese State Budget tax changes confirm the government’s commitment to fiscal responsibility while fostering investment, employment, and sustainable growth. The combination of gradual corporate tax reductions, wage-linked incentives, and updated real estate thresholds reflects a balanced approach aimed at strengthening competitiveness without compromising stability.
However, these measures remain proposals until Parliament approves the final Budget law. Investors should monitor legislative developments and assess the implications within their broader tax and corporate planning frameworks, particularly in connection with regional regimes such as the Madeira International Business Centre (MIBC).
This article summarises selected measures from the Proposta de Lei do Orçamento do Estado para 2026, presented on October 9, 2025, aiming to identify the Portugal 2026 State Budget tax changes. The information provided reflects a legislative proposal subject to change before approval. It is for general informational purposes only and does not constitute legal or tax advice. Professional guidance should be sought before making decisions based on this summary.
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