Lisbon Budget Slashes IRC, 15% Band Aims to Boost Small Firms

Portuguese companies may soon feel a welcome nudge on their tax bills, yet the concession arrives with important strings for public finances. Lisbon’s draft Orçamento do Estado for 2026 lowers the main IRC rate by 1 percentage point and unveils a special 15 % band for the first €50 000 of profit earned by the country’s legion of micro and small firms. In parallel, the Government must juggle a projected €300 million shortfall while promising not to loosen its deficit targets. Whether that arithmetic adds up is the conversation now echoing from Aveiro’s industrial parks to policy circles in Brasília Avenue.

A gentler bill for businesses, a tighter squeeze for the Treasury

The flagship measure slices the headline corporate income tax (IRC) from 21 % to 20 %, knocking about €199 million off gross receipts and leaving expected 2026 revenue at €9.532 billion, a 2 % decline versus the current forecast. Budget technicians warn that once deductions and special regimes are tallied, the net fiscal cost climbs to roughly €300 million. Still, the Finance Ministry frames the move as the next step on a four-year glide path toward a 17 % standard rate by 2028, arguing that predictability is more valuable to investors than a one-off windfall.

How the Government plans to plug the gap

Officials insist the cut will be self-financed through faster GDP growth, a crackdown on profit-shifting, and a re-ordering of sector-specific incentives. The draft hints at stricter transfer-pricing rules, beefed-up data-matching with other EU tax agencies and a gradual phase-out of legacy exemptions for energy-intensive industries. A rebound in tourism receipts and the expansion of tech exports are expected to provide further cushions. Even so, analysts at IGCP caution that Portugal must tread carefully to keep its debt-to-GDP ratio on the downward slope required by forthcoming eurozone fiscal rules.

What changes for life-size enterprises

For the country’s 800 000-plus SMEs, the headline figure is the new 15 % rate on the first €50 000 of annual profit. Associations such as CIP say the relief could unlock working capital for machinery upgrades, especially in the interior regions where financing remains scarce. Retail federation CCP believes the measure will help family-run shops weather higher energy costs, while start-up groups in Lisbon’s Hub Criativo do Beato argue that the multi-year road to 17 % allows founders to model cash-flow across funding rounds. Critics, however, fear the cut may skew benefits toward firms already in the black rather than those still scaling.

Where Portugal now sits on the European tax map

Once the change kicks in, Lisbon’s 20 % statutory rate will remain below Spain’s 23 % and France’s 25 %, but well above the 12.5 % magnet across the Irish Sea or Hungary’s 9 % ultra-low levy. Crucially, the reform leaves Portugal compliant with the OECD’s 15 % global minimum tax because the bargain band applies only to a slice of earnings. Economists at Nova SBE argue that while the statutory rate is front-page news, effective tax burdens tell a more nuanced story, with many multinationals already trimming their Portuguese bills via R&D credits and patent-box regimes.

Parliamentary calendar and possible plot twists

The enabling clause travels to the Assembleia da República alongside the wider Budget in mid-October. A simple majority can pass the tax article, but opposition parties are preparing amendments—from raising the €50 000 ceiling to demanding a faster descent to 17 %. Budget committees will dissect the numbers through November, and any changes could force a re-run of revenue projections just weeks before the final vote. Should the bill stumble, the Government risks missing its self-imposed start-date of 1 January 2026.

Why households should still pay attention

An IRC tweak may look distant to wage earners, yet the ripple effects could reach public hospitals, school hiring and local infrastructure. If lower taxation truly spurs capital investment, rising productivity might feed into better salaries. Conversely, should the €300 million gap widen, ministries could slow new recruitment, particularly in health and education, or lean on indirect taxes that fall more heavily on consumers. In short, the measure is not just an internal corporate affair; it is a balancing act between private-sector dynamism and the quality of public services that every resident ultimately relies on.