📅 Last updated: April 17, 2025
📄 Introduction
If you’re planning to do business in Portugal, you’ll need to understand IRC — the country’s corporate income tax system. It’s calculated based on net profits, after deducting eligible expenses and other allowances. Knowing how Portuguese corporate taxation works can help your company avoid surprises and operate more efficiently.
🔎 Who Pays IRC?
IRC applies to several types of entities:
- ✅ Resident companies with commercial, industrial, or agricultural activities — Taxed on their worldwide profits.
- ✅ Resident entities like associations, foundations, and civil societies — Taxed similarly to individuals, on all income.
- ✅ Non-resident companies with a permanent establishment in Portugal — Taxed on Portuguese-sourced income.
- ❓ Non-resident companies without a permanent establishment — Taxed via withholding on income from Portugal.
⚖️ How IRC Is Calculated
The IRC liability is calculated through a multi-step process:
- Determine net accounting profits (according to standard accounting rules)
- Adjust earnings for tax-specific provisions
- Apply deductions (e.g. tax losses, incentives)
- Apply the appropriate IRC tax rate
- Subtract prepayments and withholdings to calculate the final IRC payable
📈 IRC Rates in 2025
| Taxable Profit (€) | Mainland Portugal | Madeira | Azores |
|---|---|---|---|
| General Rate | 20% | 14.7% / 5% (CINM) | 14.7% |
| SME Rate (first €50,000) | 16% (or 12.5% in interior regions) | 11.9% | 8.75% |
| SME Remaining Taxable Profit (above €50,000) | 20% | 14.5% | 14.5% |
🔹 Lower SME rates may apply to micro, small or medium-sized enterprises operating in designated interior regions, Madeira or the Azores. Startups may also qualify for the 12.5% rate on the first €50,000.
💳 Advance Payments (Pagamentos por Conta – PPC)
Companies must make three advance IRC payments based on the previous year’s tax:
📅 Due Dates: July, September, and December 15
➖ Turnover ≤ €500,000 → Pay 80% of last year’s IRC
➕ Turnover > €500,000 → Pay 95% of last year’s IRC
✅ The third installment may be skipped if sufficient tax has been prepaid
💼 Surcharges
🏢 1. Municipal Surcharge (Derrama Municipal)
Some municipalities apply an additional tax of up to 1.5%:
- Lisbon & Porto: Always 1.5%
- Small businesses (turnover ≤ €150,000): Exempt
- Funchal (Madeira): 0% from 2023–2025
- CINM companies: Preferential rates may apply
✉️ 2. State Surcharge
In Portugal, large companies with taxable profits over €1.5 million must pay a State Surcharge (Derrama Estadual).
| Profit Bracket (€) | Mainland | Madeira | CINM |
|---|---|---|---|
| €1.5M – €7.5M | 3% | 2.1% | 0.42% |
| €7.5M – €35M | 5% | 3.5% | 0.70% |
| Above €35M | 9% | 6.3% | 1.26% |
But before the final tax return is submitted, they also make advance payments called PAC (Pagamento Adicional por Conta).
| Profit Bracket (€) | Mainland Rate | Madeira | CINM |
|---|---|---|---|
| €1.5M – €7.5M | 2.5% | 1.8% | 0.36% |
| €7.5M – €35M | 4.5% | 3.2% | 0.64% |
| Above €35M | 8.5% | 6% | 1.2% |
📊 If PAC payments exceed the state surcharge, the excess is refundable.
💰 Tax Benefits and Incentives
Portugal offers several tax incentives under its corporate tax regime:
- 📊 Deductions for R&D expenses
- 💼 Tax credits for job creation
- 🌍 Incentives for internationalisation
- 🏢 Preferential regimes in Madeira (CINM)
Need Guidance?
Navigating IRC rules, surcharges, and payment obligations can be complex — especially for foreign companies or newly established businesses.
👉 [Contact our team] to receive expert tax advice, support with compliance, and tailored solutions for your company.
