If you have a company in Portugal - or are thinking of starting one - IRC is one of the taxes you cannot ignore. The Corporate Income Tax works for businesses the same way IRS works for families: it taxes income earned. But the rules are different, and several factors influence the final amount to pay.
This guide explains everything clearly, updated for 2026.
What Is IRC?
IRC - Imposto sobre o Rendimento das Pessoas Coletivas - is the tax applicable to income generated by companies and other entities in Portugal.
Although both IRC and IRS are levied on income, they work differently: while IRS applies progressive brackets to individuals, IRC uses a single base rate on the company's taxable profit.
Who Has to Pay IRC?
The following are subject to IRC:
- Commercial and civil companies with headquarters or effective management in Portugal (Lda., S.A., cooperatives, etc.)
- Entities without legal personality with headquarters or management in Portugal, whose income is not taxable under IRS
- Foreign companies without headquarters or effective management in Portugal, but which obtain income here not subject to IRS
Who Is Exempt?
Some entities are exempt from IRC, namely:
- The State, Autonomous Regions and local authorities (except for interest and other capital income)
- Social security institutions
- IPSS - Private Social Solidarity Institutions
- Certain legal entities with public utility status
How Is IRC Calculated?
The starting point for calculating IRC is the company's taxable profit - that is, the company's income after deducting tax-accepted expenses, such as:
- Salaries and other operating costs
- Interest
- Depreciation and tax-accepted provisions
Additional deductions may also be applied: tax losses from previous years and available tax benefits.
The Simplified Formula
Taxable Profit = Income − Accepted Expenses − Previous Losses − Tax Benefits
IRC Payable = Taxable Profit × IRC Rate + Autonomous Taxation + Municipal Surcharge − Payments on Account
What Are the IRC Rates in 2026?
In 2026, the general IRC rate dropped from 20% to 19%, with plans to reach 17% by 2028.
| Situation | Rate |
|---|---|
| Mainland Portugal and Madeira | 19% |
| Azores | 16.8% |
| SMEs and Small Mid Caps - first €50,000 of profit | 15% |
| SMEs and Small Mid Caps - profit above €50,000 | Standard rate (19%) |
Municipal Surcharge
In addition to the base rate, some municipalities apply an additional tax on taxable profit - the municipal surcharge - which can go up to 1.5%.
State Surcharge
The state surcharge applies to the portion of taxable profit exceeding €1.5 million. The rate is progressive, ranging between 3% and 9%.
Autonomous Taxation
There is also an additional component that many companies overlook: autonomous taxation. This applies to certain types of costs, regardless of the company's results - including per diem allowances, undocumented expenses and vehicle purchase costs.
When and How Is IRC Filed?
Model 22 Declaration
Model 22 is the annual declaration where the final IRC for the financial year is determined. In 2026, for most companies, this refers to the 2025 financial year.
Filing is done exclusively online through the Finance Portal.
Key Deadlines for 2026
| Obligation | Deadline |
|---|---|
| Model 22 Declaration | By May 31 |
| 1st Payment on Account | July 31 |
| 2nd Payment on Account | September 30 |
| 3rd Payment on Account | December 15 |
| IES Filing | By July 15 |
What Are Payments on Account?
Payments on account are IRC advances calculated based on the previous year's tax. They are mandatory for most companies and serve to avoid concentrating the full tax payment on a single date.
Can IRC Be Paid in Instalments?
Yes. IRC can be paid in instalments by submitting a request through the Finance Portal within 15 days of the payment deadline on the collection notice. Payment is limited to 36 instalments, with a minimum monthly amount of €25.50 each.
For debts of €10,000 or more, a guarantee (mortgage, surety bond, etc.) may be required.
Tax Benefits That Can Reduce IRC
- DLRR - Deduction for Retained and Reinvested Profits
Allows an IRC reduction of up to 10% of retained profits reinvested in relevant applications. SMEs can benefit from a 50% deduction on IRC liability. - SIFIDE II - R&D Tax Incentive System
Tax benefits for companies investing in Research & Development, allowing deductions of up to 82.5% on certain expenses. - Salary Increase Incentive
200% deduction on costs related to salary increases of at least 4.6%.
IRC vs. IRS: Key Differences
| IRS | IRC | |
|---|---|---|
| Who pays | Individuals (families) | Legal entities (companies) |
| Tax base | Personal income | Taxable profit |
| Rate system | Progressive brackets | Single base rate |
| Base rate 2026 | 13.25% to 48% | 15% to 19% (+surcharges) |
| Declaration | Model 3 | Model 22 |
| Filing deadline | April 1 to June 30 | By May 31 |
IRC Changes in 2026
- General rate reduced from 20% to 19%, expected to reach 17% by 2028
- SMEs and Small Mid Caps benefit from 15% rate on first €50,000 of taxable income
- PDF invoices continue to be accepted as electronic invoices until end of 2026
- SAF-T (Accounting) postponed to 2028, applicable to the 2027 fiscal period
Common Mistakes That Increase IRC
- Incorrect expense classification - costs that could be deductible but were not properly recorded
- Unapplied tax benefits - DLRR, SIFIDE II or other incentives left unclaimed
- Surcharges calculated on wrong basis - when taxable income is incorrectly determined
- Ignored autonomous taxation - vehicle expenses, per diem allowances or entertainment costs left untaxed
In Summary
IRC is the tax companies pay on their profits in Portugal. In 2026, the base rate is 19% on the mainland, with a more favourable regime for SMEs (15% on the first €50,000). The Model 22 declaration must be filed by May 31, and payments on account are spread across July, September and December.
Having your numbers properly calculated - with all expenses correctly classified and tax benefits applied - can make a significant difference to the final amount payable.
Note: This article is for informational purposes and was prepared based on official and specialised sources. For situations specific to your company, we always recommend consulting a certified accountant or the Finance Portal.
