Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Coletivas, or IRC Portugal) is a fundamental aspect of Portugal’s taxation system, affecting businesses operating within its borders. Understanding the nuances of IRC Portugal, including the mainland tax rate, the Autonomous Region of Madeira tax rate, and the Madeira International Business Centre (MIBC) tax rate, is crucial for companies with international services aiming to optimize their tax obligations.
What is IRC in Portugal?
National Corporate Income Tax Rate in Portugal
In the Portuguese mainland, the standard IRC rate is set at 21%. This rate applies uniformly to resident entities and permanent establishments of non-resident entities engaged in commercial, industrial, or agricultural activities. Small and medium-sized enterprises (SMEs) benefit from a reduced rate of 17% on the first €50,000 of taxable income, with the standard rate applying to any excess. Additionally, certain municipalities may levy a local surtax of up to 1.5%, and a state surtax is imposed on taxable profits exceeding €1.5 million, with rates varying based on profit brackets.
Corporate Income Tax Rate in Madeira
The Autonomous Region of Madeira offers a more favourable tax regime than mainland Portugal. The standard IRC rate in Madeira is 14.7%, applicable to resident entities and permanent establishments of non-resident entities. SMEs in Madeira enjoy a reduced rate of 11.9% on the first €50,000 of taxable income, with the standard rate applied thereafter. Like the mainland, Madeira imposes a regional surtax on taxable profits exceeding €1.5 million, with rates ranging from 2.1% to 6.3%, depending on the profit amount.
Madeira International Business Centre (MIBC) Tax Rate
The MIBC is a special tax regime designed to attract international investment to Madeira. Companies licensed to operate within the MIBC benefit from a reduced IRC rate of 5% on qualifying income. This preferential rate applies to profits derived from operations exclusively conducted with non-resident entities or other MIBC-licensed companies. It’s important to note that income obtained from activities with Portuguese entities outside the MIBC is taxed at Madeira’s standard IRC rate of 14.7%.
To qualify for the MIBC tax benefits, companies must meet specific substance requirements, including:
- Job Creation: Within the first six months of operation, companies must create:
- 1 to 5 jobs and make a minimum investment of €75,000 in fixed assets within the first two years or
- 6 or more jobs.
- Taxable Profit Limits: The reduced 5% tax rate applies to a particular ceiling of taxable profit determined by the number of employees. For instance:
- 1 to 2 employees: €2.73 million
- 3 to 5 employees: €3.55 million
- 6 to 30 employees: €21.87 million
- 31 to 50 employees: €35.54 million
- 51 to 100 employees: €54.68 million
- More than 100 employees: €205.5 million
Profits exceeding these thresholds are taxed at Madeira’s standard IRC rate.
Recent Developments
As of February 2025, the Portuguese government has approved a reduction in the national corporate income tax rate from 21% to 20%, effective from the fiscal year 2025.
IRC Portugal: Conclusion
Navigating Portugal’s corporate tax landscape requires thoroughly understanding the different corporate tax rates and special regimes like the MIBC. Businesses operating or planning to establish operations in Portugal, particularly in Madeira (with the aim to expand to international markets), must assess their tax structure to make informed decisions that align with their strategic and financial objectives.
Frequently Asked Questions about IRC Portugal
- What is the standard corporate income tax rate in mainland Portugal?
- As of 2025, the standard IRC rate in mainland Portugal is 20%.
- Are there tax incentives for small and medium-sized enterprises (SMEs) in Portugal?
- SMEs benefit from a reduced IRC rate on the first €50,000 of taxable income: 17% in mainland Portugal and 11.9% in Madeira.
- What is the Madeira International Business Centre (MIBC)?
- The MIBC is a special tax regime in Madeira offering a reduced IRC rate of 5% on qualifying income to attract international investment.
- What are the requirements for benefiting from the MIBC tax incentives?
- Companies must create a minimum number of jobs and, in some cases, make a specified investment in fixed assets within the initial years of operation.
- Do MIBC tax benefits apply to all income?
- The 5% IRC rate applies to income from operations with non-resident entities or other MIBC-licensed companies. Income from activities with Portuguese entities outside the MIBC is taxed at the standard Madeira rate.
- Have there been recent changes to Portugal’s corporate tax rates?
- Effective from 2025, the national IRC rate decreased from 21% to 20%, and Madeira’s standard rate adjusted to 14%. The MIBC’s 5% rate remains unchanged.
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
