The 2026 State Budget introduces a set of tax changes with broad impact: adjustments to Personal Income Tax (IRS), including an update to tax brackets and a reduction in mid-range rates; an extension of certain tax benefits; targeted changes to the autonomous taxation rules in Corporate Income Tax (IRC); and a package of tweaks to indirect taxes (including VAT) and property-related taxes (including updated IMT brackets and measures focused on primary permanent housing). In 2026, the difference between “paying what is due” and “overpaying due to lack of structure” will tend to depend less on tricks and more on planning, documentation, and correct classification.
What changes in IRS in 2026
In 2026, IRS bracket thresholds were updated by around 3.51%, and the rates for the mid-range brackets (2nd to 5th) were reduced by 0.3 percentage points. In practice, this tends to ease the tax burden for many taxpayers and better align the tax with inflation.
Beyond brackets and rates, there are measures expanding exemptions and deductions, notably:
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exemption from IRS for allowances and compensation related to volunteering (such as firefighters), up to an annual limit;
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new deductions linked to high-wear professions, covering expenses such as books and cultural performances, among others.
The key takeaway is the underlying logic: 2026 reinforces incentives and adjusts brackets, but it still rewards documentary consistency, correct classification, and the ability to evidence eligibility whenever deductions or exclusions apply.
Tax benefits: extensions and continuity
A relevant part of the 2026 tax framework is the extension of regimes and incentives, maintaining stability in measures many taxpayers and companies already use as reference points.
In particular, the following were extended until 31 December 2026:
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extraordinary support for agricultural production;
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incentives linked to productivity bonuses, profit-sharing, and balance-sheet bonuses.
Additionally, the tax regime applicable to the Madeira Free Trade Zone was extended until 2033, reinforcing predictability for structures and operations that fall under that regime.
What changes in IRC in 2026
In IRC, the changes mentioned focus mainly on the autonomous taxation regime and on adjustments with practical impact on cost management and internal policies.
Key points include:
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changes to the autonomous taxation regime, including plug-in hybrid vehicles under certain conditions;
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exclusion from the increased autonomous taxation rate for companies with prior profits and compliance with reporting obligations;
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recognition of remote-work expenses at up to 110% of their value for tax purposes.
From a business decision perspective, the message is simple: tax treatment is increasingly tied to how a company documents and reports, not only to what it spends.
Indirect taxes: VAT, ISV and ISP with adjustments in 2026
Regarding indirect taxes (including VAT, ISV and ISP), 2026 is marked by new exemptions and benefits, including:
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application of a reduced VAT rate to specific activities;
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extension of exemptions for non-profit entities, cooperatives and social solidarity institutions;
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adjustments to taxes on vehicles, beverages, fuels and tobacco products.
In practical terms, this can affect both consumers and businesses, especially where margin depends on the correct application of rates and on the ability to demonstrate the appropriate classification (type of activity, nature of the entity, eligibility for exemptions).
Property-related taxes: IMT in the spotlight in 2026
In property-related taxation, IMT is particularly relevant. In 2026:
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IMT brackets were updated by 2%;
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there are specific changes for primary permanent housing;
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measures such as exemptions for young people up to age 35 are maintained or reinforced, along with specific rules for transfers of contiguous rural properties with particular use classification.
For anyone buying or transferring real estate, 2026 reinforces the importance of confirming the correct classification before making irreversible decisions. Small differences in how the transaction is characterised, the intended use of the property, or the buyer’s profile can have a direct impact on the tax due.
Other measures with practical impact
In addition to IRS, IRC and indirect/property taxes, there are various measures with practical effects, including:
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updated monthly amounts for the audiovisual contribution;
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maintenance or adjustment of contributions in sectors such as banking and pharmaceuticals;
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repeal of certain solidarity surcharges, particularly in the banking sector.
Practical checklist for 2026
Most tax problems do not start with “the rate.” They start with a lack of structure. In 2026, these practices tend to reduce risk and friction.
For individuals
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Confirm whether new deductions and exclusions apply to your profile and whether there is sufficient documentary evidence.
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Review the classification of income and expenses in advance, avoiding last-minute corrections.
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Ensure documentation is consistent whenever benefits, deductions or specific regimes apply.
For companies
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Validate internal policies that may affect autonomous taxation (for example, vehicles) and ensure applicable conditions are met and documented.
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Review remote-work expenses and policies in light of the expected tax treatment.
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Ensure compliance and consistency in reporting obligations when these determine rates or penalties.
For those buying or transferring property
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Confirm the classification of the property and the buyer before signing.
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Check specific conditions applicable to primary permanent housing and age-related benefits where relevant.
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Prepare a complete documentary file for the transaction to avoid reclassification and later corrections.
Frequently asked questions
In 2026, will IRS be lower for everyone?
Updating brackets and reducing mid-range rates tends to ease the tax burden for many taxpayers, but the final effect varies depending on income, household composition, and applicable deductions.
Do the new deductions apply automatically?
No. Deductions and exclusions depend on correct classification and proof. In many cases, the difference is the ability to demonstrate entitlement properly.
What changes most significantly in IRC for companies?
The changes described focus on autonomous taxation and the tax treatment of certain expenses, including remote work, as well as conditions tied to reporting and prior profitability.
Do VAT and indirect taxes affect companies more, or consumers?
They affect both. For companies, correct application of rates and exemptions can change margin and the risk of reassessments. For consumers, indirect taxes are reflected in final prices, especially in categories with specific adjustments.
Does the 2026 IMT update change the cost of buying a home?
It can, because the update to brackets and specific conditions affects the final calculation. The impact varies with the property value, intended use, and the buyer’s profile.
Is there a universal “best tax regime” in 2026?
No. Effective tax classification is the one that is consistent with the taxpayer’s profile, tax residence, income sources, and documentary reality. What works in one case may be inappropriate in another.
This article is informational and summarises trends and tax measures referenced for 2026. Practical application depends on each taxpayer’s profile, facts, and documentation, and may evolve throughout the year with administrative guidance and applicable regulation. For more information, contact us.