Portugal has been cutting its corporate taxes year after year since 2024 and reached a corporate tax rate of 19% in 2026; small businesses pay only 15% on the first €50,000. In Madeira, licensed companies with jobs on the island pay 5%, and with IFICI the country has created its own tax regime for highly qualified newcomers. Company formation in Portugal therefore allows both corporate and personal taxation to be planned together.
19% and 15% for SMEs
Portugal is reducing its corporate tax step by step – from 21% to 20% in 2025 and to 19% since 1 January 2026. Small and medium-sized enterprises (SMEs) pay just 15% on the first €50,000 of taxable profit. Depending on the municipality and profit level, municipal and state surcharges apply in addition.
For companies with their seat and management in Madeira or the Azores, the rates are reduced by a further 30%: 13.3% instead of 19% and 10.5% on the first €50,000. The Portuguese tax authority publishes the current rules on the Portal das Finanças.
Madeira: 5% in the free zone
The Madeira free zone, the International Business Centre of Madeira, is based on Article 36-A of the Portuguese Tax Benefits Statute and has been approved by the European Commission as regional aid. Companies licensed by the concessionaire SDM pay 5% corporate tax – but only on profits from activities with customers outside Portugal or with other free zone companies. Eligible activities include international services, industrial activities in the industrial free zone, and shipping and aviation.
The licence is tied to real substance on the island. The company must start operating within six months – within one year for industry and transport – and meet one of two conditions: either create one to five jobs in the first six months and invest at least €75,000 in fixed assets in Madeira within the first two years, or create six or more jobs from the outset. In addition, the profit eligible for the reduced rate is capped according to the number of permanent jobs:
| Jobs in Madeira | Minimum investment | Profit taxed at 5% up to |
|---|---|---|
| 1 to 2 | €75,000 | €2.73 million |
| 3 to 5 | €75,000 | €3.55 million |
| 6 to 30 | none | €21.87 million |
| 31 to 50 | none | €35.54 million |
| 51 to 100 | none | €54.68 million |
| more than 100 | none | €205.5 million |
Profits above these ceilings are taxed at the regular Madeira rate. Distributions to shareholders remain tax-exempt until the end of 2033, provided they do not flow to low-tax jurisdictions.
The deadline at the end of 2026
The current regime applies to companies licensed between 1 January 2015 and 31 December 2026. For these companies, the 5% rate remains in place until 31 December 2033. New licences after 2026 would require a successor regime that would again need approval by the European Commission; whether and on what terms it will come is open.
The deadline for the licence is therefore decisive: anyone who wants to use the 5% rate must have obtained it by 31 December 2026. Since the licence application requires a company, a business plan and a jobs plan, starting early is essential.
IFICI: the successor to the NHR
For many years, non-habitual resident status, or NHR, was Portugal’s tax regime for newcomers – comparable to a non-dom regime. NHR has closed to new residents; since 2024 its successor has been IFICI, the tax incentive for scientific research and innovation under Article 58-A of the Tax Benefits Statute, often called NHR 2.0.
IFICI is open to individuals who become tax resident in Portugal and were not resident in the five preceding years. In addition, their activity must belong to one of the groups defined by law:
- teaching in higher education and scientific research
- qualified positions and board roles in companies with contractual investment benefits
- highly qualified professions in industrial and service companies exporting at least 50% of their turnover, or in companies with certain investment incentives
- other qualified positions recognised by the agencies IAPMEI or AICEP as relevant to the national economy
- research and development staff in entities eligible for R&D tax incentives
- positions and board roles in start-ups certified by Startup Portugal
Which professions count as highly qualified is set out in Ordinance 352/2024; this group also requires proof of qualifications. IFICI applies for ten years: income from the eligible activity in Portugal is taxed at a flat 20%, and most foreign income – such as dividends, interest, rental income and capital gains – is tax-exempt. Foreign pensions, which are taxed at the normal rates, and income from low-tax jurisdictions, taxed at 35%, are excluded. The application must be filed by 15 January of the year following arrival.
Portugal as a place to live
As a place to live, Portugal offers a mild climate, a high quality of life, international schools and a largely English-speaking business environment in Lisbon, Porto and Madeira. EU citizens can settle freely in Portugal.
Anyone setting up a company in Portugal and living there can align both levels: a company on the mainland or in Madeira carries the corporate tax, IFICI the personal taxation – provided one’s own activity falls within one of the eligible groups.
The formation process
The process in Portugal is straightforward and fast. Company formation in Portugal involves these steps:
- Tax number: Every shareholder and manager needs a Portuguese tax number (NIF).
- Legal form: The Lda, the Portuguese limited liability company, is the usual form; the share capital is at least €1 per shareholder.
- Formation: via the “Empresa na Hora” procedure or online through the ePortugal portal, often on the same day.
- Bank account and tax: opening a business account and registering the activity with the tax authority.
- Madeira licence: For the free zone, the licence application follows.
With complete documents, an Lda is often formed and operational within a few days.
Accounting and obligations
The key obligations for bookkeeping, accounts, audit and VAT at a glance – so you know from the start what running your company involves.
| Obligation | Rule |
|---|---|
| Bookkeeping | Under SNC by a certified accountant (Contabilista Certificado) |
| Annual accounts | Annually with the IES declaration by 15 July |
| Statutory audit | Statutory auditor from 2 of 3 in two consecutive years: total assets €1.5m, revenue €3m, 50 staff |
| Tax return | Corporate tax return (Modelo 22), statutory deadline 31 May |
| VAT: registration | On starting business; small businesses up to €15,000 exempt; rate 23% |
| VAT: returns | Monthly from €650,000 prior-year turnover, otherwise quarterly; SAF-T invoice data monthly by the 5th |
| Ongoing register duties | Confirm beneficial owner data (RCBE) annually |
As of 2026. Bookkeeping and filings are usually handled by specialised accountants in the target country.
Is Portugal right for you?
Whether Portugal suits you depends mainly on whether you plan to move there:
Suitable for
- Newcomers in research, technology and start-ups
- International service providers with a team in Madeira
- Entrepreneurs combining residence and company
- Families who want to live in the EU on the Atlantic
Less suitable for
- Traders with warehouses and logistics in Eastern Europe
- Retirees expecting tax-free foreign pensions
- Businesses focused on Asian markets
- Groups with complex shareholding chains
If you are looking for a place to live in southern Europe with its own regime for newcomers, also compare Cyprus and Malta with their non-dom status; Spain offers the Beckham Law for newcomers. The overview of all locations shows every option, and the tax comparison the rates. Which structure fits in an individual case can be clarified in an initial call.
