IRC reduction in Portugal's 2025 state budget

IRC and businesses are at the heart of Portugal's new state budget proposal for 2025. This budget focuses on young people, families and pensioners, while incorporating specific measures to ease the tax burden on businesses, particularly small and medium-sized enterprises (SMES). The proposed tax adjustments are designed to encourage capitalization and support growth in the entrepreneurial sector.

IRC reduction and SME measures in Portugal's State Budget 2025

Always eagerly awaited by businesses, this year's draft budget proposes some interesting, albeit limited, initiatives to improve their financial situation. Here are the main measures that will affect SMEs:

1. IRC reduction for SMEs : The general corporate income tax rate has been lowered from 21% to 20%, and for SMEs and Small Mid Cap companies from 17% to 16%, with the taxable income ceiling raised from 25,000 to 50,000 euros.
2. Salary enhancement incentives : Salary increases will be increased to 200% in IRC, with a ceiling of 4,350 euros, to encourage employers to raise their employees' salaries.
3. Increased health insurance costs : Health insurance expenses for employees and their families will be increased by 20% for IRC purposes, encouraging companies to offer better social protection.
4. IRS exemption on the 15th month : Productivity bonuses and other bonuses, up to 6% of annual base salary, will be exempt from income tax (IRS) if wages have risen by at least 4.7%.
5. Reduction in autonomous tax rates : Autonomous tax rates for vehicles will be reduced by 0.5 points. For cars up to 37,500 euros, the rate will be 8%, 25% for those between 37,500 and 45,000 euros, and 32% for vehicles over 45,000 euros.
6. Incentives for company capitalization : Companies that increase their equity will be able to deduct an amount equivalent to the Euribor rate plus 2 points from their taxable income.
7. Increase in the national minimum wage : The national minimum wage will rise to 870 euros in 2025, with a target of 1,020 euros by 2028, an increase of 6.1% compared to 2024.

Finally, on the economic front, the budget proposal forecasts sustained growth for the Portuguese economy, with acceleration predicted to reach 2.1% in 2025, exceeding the eurozone average of 1.3%. This dynamism is underpinned by rising domestic demand and private consumption.

These measures testify to our determination to support SMEs while maintaining a fiscal framework favorable to investment and economic growth in Portugal.