Tax Planning and Legislative Developments: What to Watch in 2026
Tax Planning in Portugal 2026: Key Legislative Developments and Opportunities
Recent legislative measures are set to reshape corporate taxation, property income, and the application of special tax regimes in Portugal. For businesses, investors, and individuals alike, understanding these developments is essential to managing tax exposure and making informed structural and investment decisions.
Early consideration of these changes can support both compliance and tax efficiency under the current legal framework, helping taxpayers position themselves strategically for the year ahead.
With the beginning of a new year, it is the ideal moment for investors and taxpayers to review their tax situation.
Beyond compliance with annual tax obligations, the beginning of a new tax year is the ideal moment to review business structures and private investments from a tax planning perspective.
A clear understanding of why income has been taxed in a certain way can help taxpayers make more informed, strategic, and better-adjusted decisions in the coming years.
Below, we outline the key legislative developments and tax benefits that should be considered looking ahead.
Corporate Income Tax (IRC): Current Rules and Upcoming Changes
For the 2025 tax year (filing in 2026), the corporate income tax (IRC) rates in force for that year remain applicable.
Accordingly:
- The standard IRC rate is 20%; and
- For small and medium-sized enterprises (SMEs), a reduced rate of 16% applies to the first €50,000 of taxable profit, with the standard rate applying to any excess.
However, significant legislative changes have been approved for the coming years, introducing a gradual reduction of the standard IRC rate, as follows:
- 19% for tax periods beginning on or after 1 January 2026;
- 18% for tax periods beginning on or after 1 January 2027;
- 17% for tax periods beginning on or after 1 January 2028.
In parallel, SMEs and Small Mid Caps will benefit from a reduced IRC rate of 15% on the first €50,000 of taxable profit, applicable to tax periods beginning on or after 1 January 2026.
These changes reinforce the importance of reviewing corporate structures, profit allocation and investment strategies, particularly for businesses planning medium to long term operations in Portugal.
Property income: current rules and deductions
Rental income remains a focal point of tax policy. Currently, the framework distinguishes between property types:
- Income derived from properties allocated to services is generally subject to an autonomous tax rate of 28%.
- Residential rental income is generally taxed at 25%, although this rate may be reduced where leases are intended for the tenant’s permanent residence and have a duration of five years or more.
The 2026 Housing Reform (Renda Moderada)
Following recent parliamentary approval in early 2026, a new regime for "Moderate Rents" is set to change the market:
- 10% Tax Rate: A new autonomous rate of 10% is expected for residential contracts where the rent is considered "moderate" (typically capped at €2,300/month, depending on the municipality).
- VAT Reduction: A 6% VAT rate for the construction or rehabilitation of properties intended for affordable rental or sale.
Tax incentives and special regimes to review
Taxpayers should also review whether they may benefit from existing tax incentives and special regimes, including:
Youth IRS (“IRS Jovem”)
This regime has undergone legislative changes, which will be reflected in the IRS return relating to 2025 income.
Taxpayers
under the age of 35 may still benefit from relevant tax savings, as
a portion of their employment and self-employment income may be exempt from taxation, depending on the number of tax returns previously submitted in Portugal.
Programa Regressar
Although traditionally designed to encourage the return of Portuguese citizens, this regime may also apply to individuals who were previously tax resident in Portugal and later left the country.
Where applicable, it may allow for a 50% exemption on employment or self-employment income, up to a limit of €250,000.
NHR and IFICI+ regimes
These regimes may grant significant tax benefits, including:
- A 20% flat tax rate on income derived from certain qualifying professional activities; and
- Various exemptions applicable to specific categories of foreign-source income.
It is essential to review registration status, eligibility deadlines, and the nature of the professional activity carried out, as access to these regimes is subject to strict legal conditions.
The year 2026 presents both challenges and opportunities from a tax planning perspective. Legislative changes, combined with existing tax regimes, may significantly influence how income and investments are taxed.
A proactive review of income streams, property structures, and applicable tax regimes can help ensure that taxpayers remain compliant while positioning themselves efficiently under the current legal framework.
Whether you are considering relocating to Portugal or are already resident and wish to understand your tax exposure or require assistance with your IRS return, professional advice should be sought before making decisions or filing obligations.
If you would like to assess how these legislative developments apply to your specific situation, our Tax Team is available to provide tailored legal and tax advice.
To request a consultation, please complete our contact form and we will contact you shortly.
