Portugal’s new budget reduces corporate taxes in 2026

Portugal’s new budget reduces corporate taxes in 2026 - Portugal Business News

Portugal Government News - Portugal’s new budget reduces corporate taxes amidst a Budget Surplus and the reduction of public debt which, for the first time in 16 years, will fall below 90% of GDP. The Portuguese Government submitted the proposed State Budget for 2026 (OE2026) to the Assembly of the Republic on October 9th, 2025.

Portugal’s budget forecasts growth of the Portuguese economy for next year above 2%, the maintenance of the budget surplus and the continued reduction of public debt which, for the first time in 16 years, will fall below 90% of GDP.

In 2025, the Portugal’s Government's proposal for the State Budget introduces a new way of looking at the State's accounts document, enabling greater transparency.

Portugal’s program-based budgeting model for 2026:

For the first time, the entire Central Administration, as well as the Social Security Budget, will be integrated into the program-based budgeting model. This means that specific objectives and actions are defined for each area of ​​government action, enabling the allocation of funds to each area to be verified. These goals will be measured by performance indicators, promoting greater transparency, efficiency, and accountability.

Thus, program budgeting allows for a new approach to budget management, focused on the results and impacts of public policies, and not just on the financial resources allocated.

This simplification and rationalization work also includes removing non-budgetary rules (also known as "budget riders") or other public policy measures from the State Budget Law.

For the Minister of State and Finance, Joaquim Miranda Sarmento, "this is a reformist and pioneering budget, which marks a change in the budgetary paradigm, reflecting this Government's commitment to transparency and accountability, before the country, families and businesses." 

In 2026, the Government intends to continue responding to the problems of families and businesses, with the State Budget being one of the instruments used in the Agenda to Transform Portugal.

Portugal’s New Tax Relief for Individuals in 2026:

Portugal’s Government will continue its path of tax relief for workers, with a further 0.3 percentage point reduction in the marginal rates for the 2nd to 5th IRS brackets.

Portugal’s increase in minimum wage and pensions in 2026:

At the same time, Portugal’s aim is to continue to drive wage growth, following the path of increasing the minimum wage to €1,100 by the end of the legislative term – this year, with a monthly increase of €50, to €920 – and of enhancing careers in Public Administration.

In terms of social action, policies to protect and support families and the most disadvantaged will be strengthened – the Solidarity Supplement for the Elderly will increase by €40 in 2026 to €670, ensuring that no pensioner will live on an income of less than €870 in 2029, and will be accompanied by an increase of XX% in pensions, supplements and other social benefits.

Portugal’s reduction of corporate taxes in 2026:

 

With regard to companies, Portugal’s budget highlights include the reduction of the IRC rate to 19% in 2026, and the reduction to 15% of the IRC rate applicable to the first 50 thousand euros of taxable income, in the case of SMEs and small-medium capitalization companies.

The Portuguese Government is thus continuing its path of reducing corporate taxes, which began in 2025, reducing the corporate income tax rate by 1 percentage point per year, with the target rate reaching 17% by 2028.

From taxation to human resources, the Government recognizes the importance of attracting foreign talent to the country, in order to meet the needs of the various sectors of the national economy, through regulated and humane immigration, in close collaboration with companies.

In 2026, government action will also be marked by the continued fight against bureaucracy in public services, in order to improve their quality, access and innovation.

Portugal’s budget for 2026 is now online on the following website:

 

Portugal’s 2026 State Budget proposal is now available on the website oe.gov.pt. This portal will not only provide documents related to the State Budget but also provide a systematic presentation of the measures planned for the coming year.

The website will also feature news regarding the activities of the Ministry of Finance, particularly budget execution, and a new financial literacy section called "Finanças à Lupa".