The Portuguese tax system is the 6th least competitive in the OECD, according to the International Tax Competitiveness Index 2025, prepared by the Tax Foundation and released in Portugal by Instituto +Liberdade on October 20th. The ranking assesses the capacity of tax systems to promote economic growth through competitiveness (low and attractive rates for investment) and neutrality (absence of distortions that favor some taxpayers over others).
Portugal rose two places compared to 2024, now occupying 33rd place among 38 countries, reflecting a slight improvement. The main evolution was seen in the taxation of individual income, where the country went from 26th to 21st position, mainly due to the reduction in the long-term capital gains rate from 28% to 19.6% and the reduction in IRS rates. There was also a small advance in corporate taxation, after the reduction of the maximum rate from 31.5% to 30.5% and the reinforcement of the notional interest deduction.
Despite this, Portugal remains at the bottom of the table in the categories of international (32nd) and corporate (36th) taxation. The report highlights that the country maintains one of the highest effective rates in the OECD, compounded by municipal and state surcharges that can increase the total tax on corporate profits up to 30.5%. There are also complex tax benefits and excessive tax bureaucracy.
Among the positive points, Portugal benefits from a territorial taxation system, which exempts a large part of dividends and capital gains obtained abroad from tax, and from above-average tax amortizations for investments in machinery.
To improve, structural reforms are recommended: gradual and predictable reduction in IRC, simplification of the system and elimination of excesses and exceptions. The relief of the tax burden on work, with fewer levels and greater legislative stability will also improve Portugal’s position in this ranking.
Only with a multi-annual fiscal roadmap that ensures simplicity, predictability and competitiveness will Portugal be able to attract more investment and get closer to the most fiscally efficient countries in the OECD.
- The facts seen through the magnifying glass by André Pinção Lucas e Juliano Ventura – A partnership between POSTAL and the Institute
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