What is corporate income tax (IRC) and how is it calculated?

What is IRC?

IRC (Imposto sobre o Rendimento das Pessoas Coletivas) is the tax on the profit of companies and other legal entities, such as associations and foundations¹. It is, for companies, the equivalent of what IRS is for individuals: someone working on recibos verdes pays IRS; a limited company (Lda.) or public limited company (SA) pays IRC.

The tax is not charged on sales but on the taxable income (matéria coletável). You can estimate the amount in our corporate income tax calculator.

What is IRC charged on?

The base of IRC is the taxable income, reached in three steps from the company’s accounts:

1. you start from the accounting result (the period’s profit or loss);
2. you adjust it by the fiscal rules (some costs are not accepted, and corrections apply), reaching the taxable profit (lucro tributável);
3. you deduct prior-year fiscal losses and tax benefits, reaching the taxable income (matéria coletável).

So the taxable income is not turnover: a company with high sales but no profit may owe no IRC. The IRC calculator assumes you already have the taxable-income figure.

What is the IRC rate in 2026?

On the mainland, in 2026²:

The general rate fell from 20 % to 19 % in 2026 and is on a planned downward path: 18 % in 2027 and 17 % in 2028. The reduced SME rate of 15 % applies to small and medium enterprises and Small Mid Caps, on the first €50,000 of taxable profit.

The municipal and state surcharges

Two surcharges (derramas) are added to IRC:

• Municipal surcharge (derrama municipal): a tax of the municipality where the company is based, up to 1.5 % of taxable profit¹. The rate is decided by each town hall, so it varies; many municipalities apply lower rates or exemptions for companies with low turnover. Most companies pay the municipal surcharge.
• State surcharge (derrama estadual): a surcharge that only higher profits pay, in brackets on taxable profit¹: 3 % between €1.5 and €7.5 million, 5 % between €7.5 and €35 million and 9 % above €35 million. The vast majority of companies pay no state surcharge.

How is IRC calculated?

The total due is the sum of the three layers:

Total = IRC + state surcharge + municipal surcharge

1. IRC (coleta): apply the rate to the taxable income (19 % under the general regime; 15 % on the first €50,000 of an SME and 19 % on the rest).
2. State surcharge: zero for most; it only applies above €1.5 million of profit.
3. Municipal surcharge: the municipality’s rate (up to 1.5 %) on the profit.

Worked example

An SME with €40,000 of taxable income, in a municipality with a 1.5 % surcharge:

• IRC = €40,000 × 15 % = €6,000;
• state surcharge = €0 (profit is below €1.5 million);
• municipal surcharge = €40,000 × 1.5 % = €600;
• total due = €6,600, an effective rate of 16.5 %.

If the taxable income were €80,000, the IRC would be €50,000 × 15 % + €30,000 × 19 % = €13,200, because the part above €50,000 pays the general rate. Try your case in the IRC calculator.

IRC or recibos verdes?

People starting an activity often hesitate between working on recibos verdes (paying IRS and Social Security as an individual) or setting up a company (which pays IRC on its profit). The choice depends on the level of income, the costs and how you want to take money out of the company. For the individual side, see the recibos verdes calculator and the IRS calculator; for the company side, the IRC calculator. Each path has its own calculation and obligations.

What this calculation does not include

The calculator applies the rates to the taxable income, but the real IRC assessment, made in the Modelo 22 return, is more complete: it includes the autonomous taxation (on certain expenses, such as company cars and allowances), the special payment on account, the payments on account during the year and the specific rules of the autonomous regions (Madeira and the Azores have different rates). Use the estimate to grasp the order of magnitude and confirm the figures with your accountant.