T04E - IRC

Note: These guidelines are intended only as a summary. Tax laws and regulations change frequently and sometimes unexpectedly. It is strongly recommended that you seek professional advice. 

Companies are obliged to have a certified accountant responsible for their accounts. 

To calculate the Corporate Income Tax (IRC) you have to pay attention to the income subject to tax, the so-called corporate tax base, for a given fiscal year. Resident entities are liable to IRC on a total liability base, that is to say, on the world-wide income from Portuguese and foreign sources. Non-resident entities are liable to tax in terms of real liability, that is to say, only on income from Portuguese sources. Then, the IRC tax, the municipal surcharge and, in some cases, an additional tax on the taxable profit are applied.

CORPORATE INCOME TAX (IRC) is levied on:

• Corporate entities with their head-office or effective management in Portuguese territory, which are deemed to be resident

• Unincorporated entities with their head-office or effective management in Portuguese territory deemed to be resident

• Incorporated or unincorporated entities without their head-office or effective management in Portuguese territory (deemed to be non-resident) deriving income in Portugal.

TAXABLE BASE

a) Resident entities:

I) if they exercise as their main activity a commercial, industrial or agricultural activity, the tax base is the profit. However small businesses may opt a simplified taxation system, explained below 

ii) If they do not exercise as their main activity a commercial, industrial or agricultural activity, the tax base is formed by the overall income.

b) Non-Resident entities:

I) if they have a permanent establishment in Portuguese territory, the taxable base is made up of the profit attributable to that permanent establishment

ii) If they have no permanent establishment in Portuguese territory, the taxable base is made up of incomes of different categories separately considered for IRS purposes. 

c) Offshore Property Companies:

Since 2002, various fiscal measures have been introduced regarding Offshore Property Companies.  In addition to tax haven domiciled companies no longer being eligible for specific tax breaks, these corporate entities will also be assigned a “presumed” minimum income, based in this case on 1/15th of the “Valor Matriz” (assessed rateable value). Corporate Income Tax (IRC), as well as all necessary filing obligations, will be due.  To further clarify these measures, the Government has updated its “black-listed + 1 revoked” of offshore havens, and has defined a registration process for self-identification of these non-resident companies.

RATES
The Government reduced the Corporate Income Tax (IRC) rate from 21% to 20% for 2025 on Mainland Portugal when applied to resident entities liable to tax based on profits and to permanent establishments of non-resident entities. For Madeira and the Azores the rate is 14.7%.

In the case of small or medium-sized companies and small-mid-cap companies are now subject to IRC at a rate of 16% (previously 17%), on the first €50,000 of taxable income. For Madeira this is 11,9% expected to be 11,2% in 2025 and the Azores 8,75%.

Newly established companies in Portugal enjoy favourable tax rates. Entities qualified as Startups will be subject to IRC, at a rate of 12.5% ​​on the first €50.000 of taxable income (8.75% in Madeira and the Azores) with excess amounts taxed at 20% in mainland Portugal or 14.7% in Madeira and the Azores.

Check with your accountant to know if your SME classifies as Startup and if you are eligible.

Non-resident entities without a permanent establishment within Portuguese territory or deriving income therein not attributable to a permanent establishment are subject to IRC at a rate of 25% as a rule.  For Companies domiciled in a black-listed offshore territory (see point c above), the tax rate increased to 35%.  Other situations you will find on the link at the end of the bulletin.

The mandatory minimum rate of 15% on multinationals with an annual turnover of more than 750 million euros, which arises from a European directive that came into force in January 2024, has now been transposed into national legislation.

Madeira International Business Centre (MIBC)/ Zona Franca de Madeira
Companies that set up offshore in the Madeira Free Trade Zone need to get information about the IRC rate of the Autonomous Region with the company accountant for more information.

As of January 2025, this might change in Madeira as there is a proposal that new companies that establish themselves offshore on the Madeira Free Trade Zone will be taxed at the general IRC rate of the Autonomous Region, currently set at 14.7%, instead of the 5% in force for new companies. The preferential 5% tax regime for new companies that had already set up prior to that date would continue until 2028.   

Company vehicles
In 2025 all autonomous taxation rates will be reduced by half a percentage point in terms of IRC that are levied on vehicles of companies or individual entrepreneurs. In addition, the values on which the fees apply will be updated, with each instalment rising by 10 thousand euros.

In 2024: 8.5% for vehicles up to €27,500  
In 2025: 8% for vehicles up to €37,500

In 2024: 25.5% for vehicles between €27,500 - €35,000 
In 2025: 25% for vehicles between €37,500 - €45,000

In 2024: 32.5% for vehicles over €35,000
In 2025: 32% for vehicles over €45,000

MUNICIPAL SURCHARGE 
In addition to corporate income tax, municipalities may levy a Municipal Surcharge (“Derrama Municipal”).  up to 1.5% levied on taxable profits (depending on the municipality of the activities) reduced rates may apply to companies with a turnover of less than €150,000.00 with reference to the previous tax year.  An exemption may also apply to companies that carry out a specific activity or that have been recently incorporated and create new jobs.

Under the Special Regime of Group Taxation, the Municipal Surcharge is levied on the taxable income assessed by each company part of the group.

The Municipal Surcharge is levied on the taxable profit of the year, before the deduction of tax losses.

You can find a list for 2024 HERE (you will need your log in details to the Finanças website) once it has been published by the authority.

STATE SURCHARGE
Both resident and non-resident companies in Portugal, which carry out activities of a commercial, industrial or agricultural nature primarily, are subject to state surcharge - additional tax on taxable profit. State Surcharge (“Derrama Estadual”) of 

• 3% (2,1% Madeira and 2,4% Azores) on taxable profits exceeding € 1.5 million up to € 7.5 million, 

• 5% (3,5% Madeira and 4% Azores) on taxable profits exceeding € 7.5 million up to € 35 million and 

• 9% (6,3% Madeira and 7.2% Azores) on taxable profits exceeding € 35 million.

Companies with head office or place of effective management in the Autonomous Region of Azores have different rates; please contact an accountant in your region.

For collection in 2025 with reference to the fiscal year of 2024, please check in Finanças website. 

You can find the fiscal calendar here: Calendário/Agenda Fiscal. 

Submission of the periodic Income Statement Model 22, by electronic data transmission, by the entities subject to IRC, whose tax period coincides with the calendar year, can be done here.

CORPORATE SIMPLIFIED REGIME 
Resident taxpayers that are not exempt or subject to a special taxation system, engaged primarily in a commercial, industrial or agricultural activity, may opt by assessing their taxable income according to a simplified regime. For conditions that need to be met, contact your accountant. 

The option for the simplified regime must be formalised in the beginning of activity return or in the modifications return due by the end of the 2nd month of the tax period in which the company wishes to start the application of the regime (February for companies with fiscal year equal to civil year).

Some autonomous taxation does not apply in the simplified scheme. 

OFFSHORE PROPERTY COMPANIES
Offshore companies holding property in Portugal are subject to special taxation. If rent is received, then the company is assessed on its net income.  If there is no business activity, the assessment is based on notional income, determined at the rate of 1/15th of the rateable value (“Valor Patrimonial”).   

In the case of income from real estate and capital gains derived by a non-resident entity without a permanent establishment within Portugal, the tax assessment shall be made by the taxpayer (or the fiscal representative) on the basis of the periodical income tax return. Such entities are required to appoint a fiscal representative having domicile, head-office or effective management in Portugal to represent them before the Tax Authority. 

Exemption
Interest arising from the remuneration of public debt paid to social security and pension institutions is now exempt from IRC.

IRC exemption for real estate investment funds revoked
The income obtained by investment funds set up between 2008 and 2013 with assets in real estate subject to urban rehabilitation will no longer be exempt from IRC.

Property income from rental contracts for permanent housing that was used as an AL establishment until 31st of December 2022, provided that the rental contract is signed until 31st of December 2024, will be exempt from IRC until 31st of December 2029.

From 01/01/2024, corporate entities will have to pay tax installments and any other credits charged by AT (Finanças) exclusively through electronic payment methods.

For more information, please contact your accountant.

You may find the following website useful. gov.pt
Most recent diplomas with changes to the law: Lei n.º 82-A/2023, de 29 de dezembro and PortaldasFinanças