Portugal’s 2025 Budget Law: Corporate Tax Cuts and New Incentives for Businesses

Portugal has presented its draft Budget Law for 2025, introducing several tax reforms that businesses should note. One of the key measures is a reduction in the corporate tax rate from 21% to 20%, along with a further reduction to the SME tax rate on the first EUR 50,000 of income, which will decrease from 17% to 16%.

The budget also aims to ease the tax burden on individuals by revising the personal income tax brackets. In addition, companies that provide employee health insurance or increase wages will benefit from new tax incentives. Health insurance costs will now be deductible at 120%, and companies that raise salaries by at least 4.7% will be able to deduct 200% of the wage increase cost, encouraging investment in staff benefits.

Other proposed changes include extending VAT exemptions for agricultural products and introducing a reduced 9% VAT rate on heat pumps, to incentivize the adoption of sustainable energy solutions.

To read the full draft Budget Law, click here:
Portugal Draft Budget Law 2025