Portugal Corporate Tax - Guide for International Expansion

Are you planning to do business in Portugal? Then it's essential to understand how corporate income tax works and what it means for your company.

In this guide, we'll break down everything you need to know about corporate taxes in Portugal, from setting up your business to staying compliant. Whether you're launching a new venture or expanding your business, understanding your tax obligations is key to running a successful operation. And if you're looking for smart ways to save money and manage international payments, we'll also show you how Wise Business can help simplify cross-border transactions and keep your finances running smoothly.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Portugal corporate tax rate in 2025

The standard corporate income tax rate in Portugal is 20% for companies with taxable profits exceeding €50,000. Companies with taxable profits up to €50,000 benefit from a reduced rate of 16%.¹ Additionally, there's a state surcharge (derrama estadual) that applies to companies with taxable profits above €1.5 million, adding between 3% to 9% depending on the profit level, which can bring the combined rate to over 30%.²

Portugal also levies a municipal surcharge (derrama municipal) of up to 1.5% on taxable income, which varies by municipality. Companies operating in the Autonomous Regions of Madeira or the Azores can benefit from significantly reduced rates, with some qualifying for rates as low as 8.75%.²

For companies resident in Portugal, corporate income tax applies to worldwide income. A company is considered tax resident if it has its registered office or place of effective management in Portugal. Non-resident companies are only taxed on Portuguese-source income, typically subject to withholding tax rates that can vary depending on applicable double taxation treaties.²

Read more about the corporate tax in United States

How to pay corporate tax in Portugal

Corporate taxes in Portugal must be paid in euros through the Portuguese Tax Authority's online portal, Portal das Finanças. Companies are required to register for corporate income tax (IRC) and obtain a tax identification number (NIPC) before commencing operations.³

The tax year in Portugal typically follows the calendar year, from 1 January to 31 December. Companies can, with prior approval, opt for a different accounting period. Companies must file their annual corporate tax return (Modelo 22) by 31 May of the following year. While specific extensions have been granted in certain years, 31 May remains the standard and official deadline.³

Portugal operates a pay-as-you-earn system for corporate tax, requiring companies to make advance payments throughout the year. For companies with a commercial, industrial, or agricultural main activity, these payments are due in July, September, and by 15 December, each representing one-third of the previous year's tax liability. A final adjustment payment is then made by 31 May, at the time of the annual tax return filing.^{3 4}

Late payment of corporate tax incurs a daily interest charge at a rate of 5.997% per year. In addition, late assessment interest is charged at a rate of 4% per year. Penalties for late or non-payment of the tax due can range from 30% to 100% of the tax, with a cap of €45,000 in cases of negligence.⁴

Let's say your company has a turnover of €1.5 million and operates with a profit margin of 10%, giving it a taxable profit of €150,000.⁵

At Portugal's standard corporate tax rate of 20% (for profits above €50,000), the tax owed would be:

• First €50,000 × 16% = €8,000
• Remaining €100,000 × 20% = €20,000
• Total tax due: €28,000

If your company misses the tax payment deadline by 30 days, it will be charged interest at approximately 5.997% annually. The interest calculation would be: €28,000 × 5.997% × (30/365) = €137.95

So the total amount owed would be: €28,000 (tax) + €137.95 (interest) = €28,137.95

When expanding your business to Portugal, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local EUR account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Portugal

Some crucial steps to help your company stay compliant with Portuguese tax regulations are:

• **Register for taxes early: **After incorporation, register with the Portuguese Tax Authorities to obtain a company tax number (NIF). This is required before you can operate and pay the Portuguese corporate tax rate.
• Understand the Portugal corporate tax rate: From January 1, 2025, the standard corporate tax rate in mainland Portugal is 20% (previously 21%), with SMEs and mid-cap companies enjoying a reduced 16% rate on the first €50,000 of taxable income (Madeira Corporate Services, PwC, Chambers Practice Guides).⁴ Please note that municipal surcharges (up to 1.5%) and state surcharges on higher profits may be applicable, which could increase the effective corporate tax rate in Portugal.
• Meet tax payment deadlines: Corporate tax is paid in three advance instalments: July, September, and December, with a final settlement due in May of the following year when filing the annual return (Modelo 22).⁷
• File annual reports: Submit the Simplified Business Information (IES), which includes financial statements and tax details, by mid-July each year.
• Avoid penalties: Missing the corporate tax filing deadline can lead to fines and late-payment interest. To stay compliant with the 2024 Portugal corporate tax rate, many companies rely on corporate tax lawyers or professional accountants for accurate reporting and timely payments.

International Expansion to Portugal

If you’re planning to expand your business beyond its current locations, keep Portugal on your priority list. The country recorded a nominal GDP of USD 309 billion in 2024, with GDP per capita nearly three times the global average.⁸ Over the past decade, Portugal has maintained steady growth of around 2% annually, supported by strong private consumption and a dynamic services sector.

What makes it even more attractive is its tourism-friendly economy. It holds about 15% of the GDP. Besides this, the domestic market of 10.7 million people provides both a sizable consumer base and a steady labor supply. Unemployment stands at 6.5%, which means skilled professionals are widely available.⁸

At the same time, rising private consumption indicates higher purchasing power, making Portugal a promising destination for new ventures. Businesses can also benefit from lower energy costs compared to the EU average, adding to their competitiveness for manufacturing and operations.

As a member of the European Union, companies expanding to Portugal gain direct access to the EU single market and its 446 million consumers. The use of the euro ensures currency stability, while the country’s geographic location offers strong connectivity to Europe, Africa, and South America. Infrastructure in this country is robust, with 10 airports, an expanding rail system, and over 13,000 kilometers of road networks supporting logistics and trade.⁹

The Portuguese government actively supports foreign businesses and start-ups. Its incentives include R&D tax credits, grants for innovation, and deductions on corporate income tax for start-ups.¹⁰ Access to EU subsidies further strengthens the case for expansion. For those navigating the regulatory landscape, working with a corporate tax lawyer or corporate tax accounting expert can streamline compliance, corporate tax return filing, and long-term planning. Professional corporate income tax services ensure businesses stay compliant while maximizing available benefits under the Portugal corporate tax rate.

The roadmap to expansion in Portugal goes as follows:¹¹

1. Research the market to understand demand, competition, and pricing.
2. Secure funding through the Funding Portal or other SME financing options.
3. Choose a legal structure and register a business name.
4. Decide on a suitable location.
5. Register with the Commercial Registry Office.
6. Complete tax registration at the Finance Portal.
7. Obtain the required permits for your business activity.

Starting a business in Portugal as a foreigner demands solid research and planning. You’ll want to carefully weigh all your options and the documentation process to ensure a smooth business establishment.

Read more about the corporate tax in Nevada

Incorporation of Business in Portugal

Setting up a business in Portugal is a structured but relatively straightforward process. Entrepreneurs can register their companies through Empresa Online or in person at the Commercial Registry Offices. The main steps include:¹²

• Choose a company name: from the pre-approved list or by requesting approval from the National Registry of Corporations.
• Open a corporate bank account: deposit the required share capital.
• Draft the Articles of Association: signed by shareholders and attached to the incorporation deed.
• Commercial registration: formally establishes the company and records its appointed directors.
• Declaration of commencement of activity: submitted to the tax authorities within 15 days, usually signed by a certified accountant.
• Register for Social Security: within 10 days of tax registration.
• Set up corporate books: for shareholders’ and management resolutions.

Failure to meet the corporate tax filing deadline can result in penalties, making professional corporate tax services in Portugal even more valuable. Businesses planning expansion should factor in these obligations alongside the standard Portugal corporate tax rate and seek timely corporate tax advice to ensure smooth payment compliance.

Business Entity Types in Portugal

Portugal’s Commercial Companies Code defines several common business entities ^{12 6}:

Public Limited Company (Sociedade Anónima – S.A.)

• Incorporation time: around 2 weeks
• Minimum shareholders: 5
• Minimum share capital: €50,000, with up to 70% payable over 5 years
• Liability: limited to subscribed capital

Private Limited Liability Company (Sociedade por Quotas – Lda.)

• Incorporation time: approximately 2 weeks
• Minimum shareholders: 2
• Minimum share capital: €2, payable into a company bank account
• Management: one or more directors; an auditor is not mandatory
• Liability: limited to subscribed capital, with joint responsibility for by-law contributions

Sole Shareholder Private Limited Company (Sociedade Unipessoal por Quotas)

• Minimum shareholders: 1
• Minimum share capital: €1, with up to 50% payable over 5 years
• Liability: limited to subscribed capital, with joint responsibility for contributions in the by-laws

Choosing the right entity type depends on business size, funding needs, and long-term goals.

International corporate tax best practices

Here are some of the best strategies to ensure compliance with local tax laws, save money, and reduce tax burdens.

Stay compliant with local and international tax laws

Complete the legal registration process in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay up to date with local tax laws to remain fully compliant.

Adhere to global standards set by organisations

Companies should understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). With frameworks like Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax, companies can ensure transparency, prevent tax avoidance, and avoid legal risks.

Leverage double taxation treaties (DTTs)

DTTs are essential in ensuring you're not taxed on the same income twice. Portugal has an extensive network of double taxation agreements with over 70 countries, helping businesses avoid double taxation and reduce withholding tax rates on dividends, interest, and royalties.

Maintain up-to-date and transparent financial records

Maintaining clear and up-to-date financial records helps companies prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, having organised financial records simplifies the process during tax audits and ensures compliance with Portuguese documentation requirements.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Portugal efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Portugal

Who is liable for corporate tax in Portugal?

Companies resident in Portugal are liable for corporate income tax on their worldwide income. A company is considered tax resident if it has its registered office or place of effective management in Portugal. Non-resident companies are only taxed on Portuguese-source income, such as income from Portuguese branches, real estate, or other activities carried out in Portugal.

Are there any tax incentives for businesses in Portugal?

Yes, Portugal offers several tax incentives. The SIFIDE II scheme provides tax credits for research and development expenses. The Madeira Free Trade Zone offers reduced corporate tax rates as low as 5% for qualifying companies until 2027. Additionally, the Non-Habitual Resident (NHR) regime can benefit company directors and shareholders, and there are specific incentives for investment in interior regions and job creation.

What is the tax treatment of dividends in Portugal?

Dividends distributed by Portuguese companies to non-resident companies are generally subject to a withholding tax rate of 25% (or 35% for payments to tax havens). However, this rate can be significantly reduced or eliminated under applicable double taxation treaties.

Dividends received by Portuguese companies from other Portuguese or qualifying EU companies may be exempt from corporate income tax under the participation exemption regime. This exemption applies provided the receiving company holds at least 10% of the distributing company's share capital for a minimum of one year.

What is the process for registering for corporate tax in Portugal?

Companies must register with the Portuguese Tax Authority and obtain a tax identification number (NIPC) before starting operations. This can be done through the "Empresa na Hora" (Company in One Hour) service or online through the Portal das Finanças. Companies must also register for VAT if their annual turnover exceeds €12,500, and may need to register for other taxes depending on their activities.

What are the common pitfalls to avoid regarding corporate tax in Portugal?

Common pitfalls include failing to make advance tax payments on time, which can result in interest charges and penalties. Companies should also ensure proper documentation for transfer pricing, as Portugal has strict rules for transactions between related entities. Additionally, failing to comply with local accounting standards or missing filing deadlines can result in significant penalties. It's crucial to maintain proper substance in Portugal if claiming tax residency benefits.

Sources used in this article:

1. Garrigues: Portugal 2025 State Budget Law
2. Chambers Practice Guides: Corporate Tax 2025 - Portugal
3. Gov.pt: Corporate Income Tax (IRC) in Portugal
4. PwC Tax Summaries: Portugal Corporate Tax Administration
5. EY: Portugal Fiscal Measures in 2025 State Budget Law
6. Diário da República: Commercial Companies Code (PDF)
7. PwC Portugal: State Budget - Corporate Income Tax
8. FocusEconomics: Portugal Country Profile
9. ANA: Portuguese Airports
10. Dixcart: Government Incentives for Start-ups in Portugal
11. Gov.pt: Business Guide A-Z
12. Portuguese Embassy: Establishing Business in Portugal (PDF)

Sources last checked 08/09/2025