Gradual corporate tax reduction until 2028
The new corporate tax reduction sets out a progressive downward path for rates applied to companies over the next three years. In 2026, the general tax rate will fall from 20% to 19%, applying to income earned that year. In 2027, it will drop to 18%, and the following year to 17%.
This gradual evolution aims to strengthen Portugal’s tax competitiveness compared to other European markets, making the country more attractive for both domestic and foreign investment. By reducing the tax burden on corporate profits, the Government aims to boost the modernisation of the productive sector and support value creation.
The reduction in corporate tax also positively impacts companies’ ability to reinvest profits, finance new operations and strengthen financial stability. This fiscal adjustment occurs within a context of sustained economic growth and policies that encourage innovation and productivity.
Additional benefits for small and medium-sized enterprises
The corporate tax reduction also extends to small and medium-sized enterprises (SMEs), which will benefit from a more advantageous rate on the first €50,000 of taxable income. This rate, currently set at 16%, will drop to 15% as early as 2026.
This fiscal relief represents an opportunity for SMEs to strengthen liquidity, invest in digital transformation, hire new employees and increase competitiveness. For many of these companies, especially those operating in traditional sectors, the measure could translate into additional profitability and sustainability margins.
The tax reduction applied to this segment of the national economy directly stimulates entrepreneurship, encouraging job creation and the development of new business initiatives.
Economic impact of the corporate tax reduction
The corporate tax rate cut has direct implications for public finances and the real economy. According to official estimates, a one-percentage-point reduction represents a decrease in tax revenue of around €300 million. However, the expected multiplier effect on investment and business growth may offset part of this loss through increased economic activity.
Companies benefiting from the corporate tax reduction will have greater capacity to invest in innovation, energy efficiency and internationalisation. By freeing up financial resources, the measure contributes to higher productivity and promotes sustainable medium-term growth.
Moreover, the tax relief creates more favourable conditions for business financing, reducing the weight of tax obligations on corporate income and strengthening Portugal’s business ecosystem.
A measure to stimulate the national economy
With the corporate tax reduction, Portugal strengthens its position as a competitive destination for investment. The gradual rate decrease to 17% by 2028 aims to consolidate business confidence, encourage the creation of new companies and foster the country’s reindustrialisation.
This policy of reducing corporate tax plays an essential role in balancing fiscal sustainability with economic stimulus. By promoting a more predictable and competitive tax environment, Portugal moves closer to European averages, enhancing its appeal to investors and international startups.
In the medium term, the measure is expected to contribute to economic diversification, increased productivity and stronger value chains. The corporate tax reduction is, therefore, a strategic tool to support economic growth, business innovation and the consolidation of Portugal as a modern and competitive economy.
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