2026 State Budget – Key Tax Changes

The State Budget for 2026 brings tax changes with a direct impact on competitiveness and management decisions. This article summarises the main measures and the opportunities they present for companies. These proposals, designed at national level, may be adjusted at regional level, which may have an impact on the comments below.

1) IRS – Changes to disposable income and impacts on housing

Housing and property income

• The deduction for rental expenses increases to €900 in 2026 and €1,000 in 2027, with increases for incomes up to €30,000 and incentives to settle in the interior.
• The reinvestment scheme is extended, allowing capital gains to be excluded from taxation when the proceeds of the sale are reinvested in properties intended for moderate rents (up to €2,300).
• The special tax rate on property income is reduced from 25% to 10% for landlords with moderate rents.

Tax brackets, labour income and exemptions

• Update of tax brackets by 3.5%.
• Reduction of 0.3 percentage points in rates for the 2nd to 5th brackets.
• The minimum subsistence level now corresponds to the greater of the legal amount and 14 times the national minimum wage, exempting workers on the national minimum wage from taxation.
• The exemption for bonuses/gratuities up to 6% of the annual base salary remains in place.

2) Social Security – Strengthening social protection and combating evasion

Social Security measures for 2026 remain uniform across the country.

Main changes

• Update of the Solidarity Supplement for the Elderly to €670.
• Publication of the list of Social Security debtors, reinforcing transparency and compliance.
• Expansion of electronic data sharing between AT, IRN and BdP, increasing accuracy and efficiency.
• Young people under the age of 30 retain the possibility of accumulating part of their unemployment benefit with their salary when entering the labour market.

3) VAT – VAT groups, housing and digital modernisation

VAT Group Regime: A regime comes into force that allows balances to be offset between companies in the same corporate group, reducing financial costs and improving cash flow management.

Housing: A reduced rate of 6% applies to housing construction up to €648,000 and rentals up to €2,300, a regime planned to remain in place until 2029.

Digitisation: Equivalence of PDF invoices to electronic invoices extended until 31 December 2026.

4) IMT – Updating of brackets and incentives for young people

• 2% increase in tax brackets.
• Young people up to the age of 35 continue to benefit from exemption up to €330,539 for the purchase of their own permanent home.

5) Stamp duty – Guarantees and mortgage loans

• New exemption for guarantees provided to the State in credit recovery and public asset recovery proceedings.
• End of exemptions for renegotiation of mortgage loans with terms ≥ 5 years — return to the general regime.

6) Tax Benefits – Evolution between 2025 and 2026

7) Hiring Incentives – “L” Internships and other measures for young people

“L” internships

• Levels 5 to 8 of the QNQ.
• Public contributions between 80% and 95%.
• Increases when:
  • there is a permanent contract,
  • the candidate is up to 35 years old,
  • there is long-term unemployment,
  • there is a disability.

Other programs relevant for 2026

ATIVAR.PT – internships for entering the labour market.

• Sustainable Employment Commitment – direct support for permanent contracts.
• Support for hiring qualified young people – funding per job.
• Incentives for inclusive hiring – workers at risk of exclusion.

Impact on businesses

• Direct reduction in wage costs.
• Possibility of additional bonuses for hiring.
• Support for retention in the early stages.
• Improvement in ESG indicators relating to employment policies.

8) Tax benefits that companies may be missing out on