PORTUGAL Trends and Developments Contributed by: João Riscado Rapoula and Hugo Leonardo, VdA
Corporate Tax in Portugal: An Introduction Portugal is keeping the pace as a prime destina - tion for investment, supported by growing flows of domestic and international capital and a favourable economic outlook. The country has achieved progress in reducing its debt-to-GDP ratio, which was expected to reach approximately 90% in 2025 with continued improvement projected for 2026. This positive trajec - tory reflects the authorities’ commitment to prudent fiscal management and the promotion of policies that enhance stability and economic competitiveness. Although geopolitical uncertainties and risks of frag - mentation in global trade remain a concern worldwide, Portugal has maintained an environment of confi - dence, driven by structural reforms and institutional resilience. This has enabled Portugal not only to miti - gate potential external impacts but also to reinforce its appeal among international investors and trading partners, even as growth moderates in some key export markets. In a challenging political landscape, the State Budg - et Law for 2026 was duly approved, consolidating reforms from prior years and introducing new tax measures aimed at fostering investment and busi - ness competitiveness. Below, we highlight some of these measures, along with significant national and international case law developments that may impact entities subject to Portuguese taxation. Corporate income tax rates Building on the reductions introduced by the State Budget Law for 2025 – which lowered the standard corporate income tax (CIT) rate from 21% to 20% and the reduced rate from 17% to 16% – the Portuguese State Budget Law for 2026 confirmed the reduction of the standard CIT rate to 19% and of the reduced rate to 15%, in a clear demonstration of Portugal’s continued commitment to fostering a competitive and attractive environment for business investment. For micro, small and medium-sized enterprises, as well as Small Mid-Caps that qualify as start-ups, the CIT rate on the first EUR50,000 of taxable income is set at 15%, making Portugal’s start-up landscape even more attractive for entrepreneurs.
Meanwhile, those micro, small and medium-sized enterprises, as well as Small Mid-Caps that qualify as start-ups, with active operations and effective management in Portugal’s inland territories enjoy an even more competitive CIT rate: 12.5% on the first EUR50,000 of taxable income. This offers an incen - tive for innovative businesses to invest and expand in these regions. Tax incentives on housing The Portuguese government has unveiled a legislative proposal, introducing new tax measures and special regimes aimed at supercharging the housing market. These reforms are set to streamline affordable rentals and boost new construction and rehabilitation pro - jects, making it easier than ever to bring fresh housing supply to the market. With a sharp focus on incentivising investors, devel - opers and property owners, the new package is designed to unlock exciting opportunities in real estate – helping more people access quality housing and driving sustainable growth across the sector. For the first time in Portugal, “built-to-rent” projects are being actively encouraged, with tax benefits that can remain in place for up to 25 years. It is aimed at being a game changer for forward-thinking players looking As an incentive to stimulate investment in the residen - tial rental sector, the legislative proposal provides that just 50% of income derived from contracts with mod - erate rents – secured up until 31 December 2029 – will be taken into account when calculating taxable profit for CIT purposes. This preferential treatment repre - sents a significant advantage for investors, directly lowering the effective tax burden and further enhanc - ing the appeal of the Portuguese rental market. Investment contracts for rental The Portuguese government has decided to intro - duce a new mechanism that allows investment in the construction, rehabilitation or acquisition of proper - ties intended for residential rental at moderate rents, for periods of up to 25 years. This mechanism allows investment in the construction, rehabilitation or acqui - sition of properties intended for residential rental at to shape Portugal’s housing future. Tax incentives for investing entities
497 CHAMBERS.COM
Powered by FlippingBook