Quick answer: IRC (Corporate Income Tax) payments on account are advance tax payments for the current year, paid in three instalments (July, September, and December, for companies whose financial year coincides with the calendar year). The amount of each instalment is calculated based on the tax liability of the previous financial year, minus withholding tax, and corresponds to 80% or 95% of that amount depending on the company's turnover.
Many managers look at the July payment notice and assume it is a new tax. It is not. It is the same IRC, simply collected before the company knows how much it will actually owe. Understanding this mechanic is the difference between predictable cash flow management and an annual shock.
In summary
- There are three instalments: July, September, and December (the 7th, 9th, and 12th months of the tax period).
- Calculation base: IRC tax liability from the previous financial year minus withholding tax from that same year.
- Percentage: 80% if the previous year's turnover was equal to or less than 500,000 euros; 95% if it was higher.
- This total amount is divided into three instalments.
- If the company made a loss or had zero tax liability in the previous year, as a rule, no payments on account are due.
- It is possible to suspend or reduce the third instalment, with risks if the calculation fails.
What are payments on account, after all?
IRC is assessed at the end of the financial year, but the State does not wait an entire year to receive it. Payments on account are advance payments: the company pays money throughout the year and, when the Modelo 22 (Corporate Tax Return) is submitted the following year, these amounts are deducted from the final tax bill.
If the company paid more in advance than it owed, it receives a refund. If it paid less, it pays the difference. There is no additional tax, merely an advance cash flow requirement.
This same logic applies to self-employed individuals under IRS (Personal Income Tax), albeit with its own rules.
Who has to make payments on account
Resident entities carrying out commercial, industrial, or agricultural activities as their main purpose, as well as permanent establishments of non-resident entities, are subject to this requirement.
In practice, this means almost all private limited companies (sociedades por quotas) and public limited companies (sociedades anónimas) operating normally in Portugal, provided they incurred a tax liability in the previous financial year.
The following are exempt, among other cases:
- Companies that incurred no tax liability in the previous financial year (for example, due to a tax loss).
- Companies in liquidation, as from the date of dissolution.
- Entities that do not carry out commercial, industrial, or agricultural activities as their primary purpose.
- Situations where the calculated amount is negligible, with collection being waived when each instalment is under 50 euros.
How to calculate it, step by step
The calculation is based on the Modelo 22 declaration from the previous financial year.
Step 1. Identify the IRC tax liability from the previous financial year (total tax liability field, before deductions).
Step 2. Subtract any withholding tax suffered during that financial year.
Step 3. Apply the statutory percentage to the result:
- Previous year's turnover up to 500,000 euros: 80%.
- Turnover above 500,000 euros: 95%.
Step 4. Divide the result by three. This is the amount of each instalment.
Practical example
A company with a turnover of 380,000 euros in 2025 determined an IRC tax liability of 24,000 euros and suffered 1,200 euros in withholding taxes.
| Step | Calculation | Amount |
|---|---|---|
| Previous year's tax liability | €24,000 | |
| Less withholding tax | 24,000 − 1,200 | €22,800 |
| Applicable percentage (80%) | 22,800 × 0.80 | €18,240 |
| Amount of each instalment | 18,240 ÷ 3 | €6,080 |
The company will pay 6,080 euros in July, the same in September, and the same in December 2026, making a total of 18,240 euros paid in advance on account of 2026 IRC.
Deadlines in 2026
For companies with a tax period matching the calendar year:
| Instalment | Deadline month |
|---|---|
| 1st instalment | July 2026 |
| 2nd instalment | September 2026 |
| 3rd instalment | 15 December 2026 |
Companies with a tax period different from the calendar year apply the same rule to the 7th, 9th, and 12th months of their respective period.
Can you suspend or reduce the third instalment?
Yes, and this is where many companies save (or lose) money.
The law allows companies to stop making the third payment on account, in whole or in part, when they establish that the amount already paid equals or exceeds the IRC that will be due for the financial year. This decision makes total sense when business performance in the current year is lower than in the previous year.
However, there is a risk: if, upon submitting the Modelo 22, it is found that the company underpaid by more than 20% of what should have been handed over, compensatory interest is charged on the missing amount.
Therefore, suspending the third instalment should always be backed by a provisional set of accounts closed at the end of November, rather than guesswork. It is precisely this kind of decision that justifies having a certified accountant managing the business on a month-by-month basis.
What happens if you do not pay
Non-compliance with payments on account carries two distinct consequences:
- Compensatory interest, calculated from the deadline date until the tax is actually paid or until the deadline for submitting the Modelo 22.
- Fines for non-payment under the Regime Geral das Infrações Tributárias (General Regime for Tax Offences), the amount of which varies depending on the nature of the offence and whether settlement was voluntary.
Furthermore, an outstanding tax debt prevents the business from obtaining a certificate of good standing (certidão de situação tributária regularizada), which blocks applications for grants, public tenders, and, in many cases, bank financing.
Payments on account and special payments on account are not the same thing
Confusion between these two concepts persists. The special payment on account (PEC - Pagamento Especial por Conta) was abolished for tax periods starting on or after 1 January 2023. What remains today is the payment on account described here, and the additional payment on account linked to the state surtax (derrama estadual), applicable only to companies with taxable profits exceeding 1.5 million euros.
If your accounting records still refer to PEC in 2026, it is worth reviewing your financial reports.
How to reduce the impact on cash flow
Payments on account cannot be avoided, but they can be planned for:
- Calculate early in May, immediately after submitting the Modelo 22, to determine the exact amount of the year's three instalments.
- Set aside monthly provisions equal to one-twelfth of the total, rather than taking the hit over three specific months.
- Review withholding taxes suffered. Incorrectly reported withholding tax by clients inflates the calculation base.
- Evaluate suspending the 3rd instalment in November, backed by closed provisional accounts.
- Confirm applicable tax benefits, which reduce tax liability and, consequently, lower the following year's payments on account.
Frequently asked questions
Are payments on account an additional tax?
No. They are advance payments towards the current year's IRC, deducted from the final tax liability assessed in the Modelo 22.
Does a company with a loss in 2025 have to make payments in 2026?
As a rule no, because there was no tax liability in the previous financial year and the calculation base is zero.
What is the applicable percentage?
80% for turnover up to 500,000 euros and 95% above that threshold, always with reference to the previous financial year.
Can I pay all three instalments at once?
You can make payments early, but there is no discount for early payment. In most cases, from a cash flow perspective, it is not worth doing.
What if the company started operating this year?
In the first financial year there is no prior tax liability, so no payments on account are due. They begin in the financial year following the first one with an assessed tax liability.
Need support with your company's tax planning?
At Grupo Your, we assist companies of all sizes with the calculation, projection, and optimisation of IRC obligations throughout the year, including informed evaluations on suspending the third instalment. Get in touch with us.
Related articles:
- 2026 IRC Guide: Rates, Tax Benefits, and Regional Regimes
- Paying IRC in Instalments: What Your Business Needs to Know
- Deductible Expenses in IRC: A Complete Guide
- How to Pay Less Tax in 2026: A Guide for Portuguese Companies
```json
{
"@context": "https://schema.org",
"@type": "FAQPage",
"mainEntity": [
{"@type":"Question","name":"Are IRC payments on account an additional tax?","acceptedAnswer":{"@type":"Answer","text":"No. They are advance payments towards the current year's IRC, deducted from the final tax liability assessed in the Modelo 22 declaration."}},
{"@type":"Question","name":"Does a company with a loss in the previous year have to make payments on account?","acceptedAnswer":{"@type":"Answer","text":"As a rule no, because there was no tax liability in the previous financial year and the calculation base for payments on account is zero."}},
{"@type":"Question","name":"What percentage applies to IRC payments on account?","acceptedAnswer":{"@type":"Answer","text":"80% for companies with a turnover up to 500,000 euros in the previous year and 95% for higher turnovers."}},
{"@type":"Question","name":"Is it possible to suspend the third payment on account?","acceptedAnswer":{"@type":"Answer","text":"Yes, in whole or in part, when the amount already paid equals or exceeds the IRC due for the financial year. If the shortfall exceeds 20% of what is due, compensatory interest is charged."}}
]
}
```
