IRC (Imposto sobre o Rendimento das Pessoas Coletivas) is Portugal's corporate income tax, charged on the profits of companies and other legal entities — this is distinct from the individual self-employment tax (IRS Categoria B) that applies to freelancers/sole traders. Under Article 87 of the IRC Code, the general mainland rate is being phased down: 21% (2024), 20% (2025), 19% (2026), 18% (2027), with a target of 17% from 2028. Small and medium enterprises get a reduced 15% rate on the first €50,000 of taxable income, and companies may also owe a municipal surtax (derrama municipal) on top of IRC.
Anyone incorporating a company in Portugal (Lda, SA, Sociedade Unipessoal por Quotas, etc.) needs to budget for IRC separately from VAT and payroll costs, understand the SME reduced-rate bracket that benefits most small newcomer-run businesses, and know the annual filing calendar (Modelo 22 and IES) to avoid penalties. The rate has been falling year-over-year, so figures newcomers may find in older blog posts or guides are often stale.
Key Facts
General (mainland) IRC rate for tax periods beginning in 2026: 19%, per transitional Article 87 rules — down from 20% in 2025 and 21% in 2024, on a path to 18% in 2027 and 17% from 2028.
Reduced SME rate: 15% on the first €50,000 of taxable income for taxpayers that directly and principally carry out an agricultural, commercial, or industrial economic activity and qualify as a small/medium enterprise or "Small Mid Cap"; the general rate applies to the excess above €50,000.
Qualifying startups under Lei n.º 21/2023 may benefit from a further-reduced 12.5% rate on the first €50,000 bracket (reported by the Portal das Finanças text; confirm eligibility criteria before relying on this).
Non-resident entities without a Portuguese permanent establishment: 25% rate; certain income (e.g., payments to entities in low-tax jurisdictions, undisclosed beneficial owners) can be taxed at 35%.
Derrama municipal: an additional municipal surtax on taxable profit, set independently by each município, capped at 1.5% of taxable profit — actual rate varies by municipality and is published annually.
Derrama estadual: an additional state surtax applying only to taxable profit above €1,500,000, at progressive rates reportedly of 3% (between €1.5M and €7.5M), 5% (between €7.5M and €35M), and 9% (above €35M) — confirm current bracket rates before relying on them for a specific filing.
The Autonomous Regions (Azores and Madeira) apply their own reduced regional IRC rates under regional legislative decrees (e.g., an SME rate reported around 8.75% on the first €50,000 in the Azores under Decreto Legislativo Regional n.º 27/2025/A, and the Madeira Free Zone's special 5% IRC regime for licensed entities, recently extended to 2033) — these are region-specific incentive regimes and should be verified against the applicable regional decree before use.
Steps
1. Determine your taxable period and applicable rate bracket — Most companies use the calendar year as their tax period. Apply the general rate to taxable income above €50,000 and the SME reduced rate (if eligible) to the first €50,000.
2. Make payments on account during the year — Companies with commercial, industrial, or agricultural activity as their main activity generally make advance payments on account of IRC during the tax year (mid-year and year-end installments), reconciled against the final liability when the annual return is filed. Confirm the exact installment months and amounts applicable to your company's size with an accountant or the Portal das Finanças, as rules vary by turnover.
3. File the annual IRC return (Modelo 22) — Submit Modelo 22 electronically via the Portal das Finanças declaring taxable profit/loss and computing the IRC due. The standard statutory deadline is May 31 of the following year (5th month after fiscal year-end for non-calendar-year filers); this deadline has been administratively extended in some recent years (e.g., a 2026 extension was reported), so confirm the current-year deadline before filing.
4. File the annual IES (Informação Empresarial Simplificada) — Submit the IES — combining the annual accounts, simplified tax filing, and statistical declarations — via the Portal das Finanças, generally due by July 15 (7th month after fiscal year-end for non-calendar-year filers).
5. Pay any derrama municipal and derrama estadual due — These surtaxes are calculated and settled together with the IRC return where applicable — derrama municipal for nearly all companies with profit, derrama estadual only for companies with taxable profit above €1.5 million.
Timelines
Modelo 22 (annual IRC return): due May 31 following the tax year-end (subject to occasional administrative extension — verify current-year deadline).
IES (Informação Empresarial Simplificada): due July 15 following the tax year-end.
Common Mistakes
Using an outdated general IRC rate (e.g., 21% or earlier figures) found in older articles — the rate has been decreasing annually since 2024.
Assuming the SME reduced rate applies to all taxable income rather than only the first €50,000 bracket.
Overlooking derrama municipal, which applies on top of IRC in nearly every municipality and is easy to miss when budgeting.
Confusing IRC (company-level corporate tax) with IRS Categoria B (individual self-employment tax) — these are different regimes with different rates, brackets, and filing forms.
Missing the Modelo 22 or IES deadlines, which can trigger penalties even when no tax is ultimately due.