Corporate Income Tax (IRC) Payments on Account 2026: Deadlines (July, September, December), Calculation, and How to Pay
Payments on account (PPC) are an advance payment of Corporate Income Tax (IRC) for the current financial year, which companies pay to the State in three instalments throughout the year — July, September, and by 15 December 2026. This tax mechanism, regulated by the IRC Code, primarily aims to anticipate the State's tax revenue, ensuring a more stable cash flow. The amount of each instalment is calculated based on the IRC assessment from the previous year and is deducted from the final tax calculated in the Model 22 declaration of the following year, functioning as a tax credit. It is crucial for companies to understand the nature, deadlines, and calculation methods of PPC, as well as exceptions and the implications of an incorrect calculation, to avoid penalties and optimise their financial management.
1. What is Corporate Income Tax (IRC) Payment on Account and its Relevance
Payment on account is not a separate or additional tax, but rather a method of anticipating Corporate Income Tax (IRC) that the company will assess at the end of the financial year. This advance payment is a fundamental characteristic of the Portuguese tax system for companies, aiming to balance the State's revenue flow throughout the fiscal year. For companies, although it represents a cash outflow, PPC is a tax credit that will be deducted from the total IRC due when submitting the Model 22 Declaration for the year in which the payments were made. Its main basis lies in the principle of annual taxation, allowing the tax administration to receive the tax in phases, instead of in a single payment the following year.
The relevance of PPC is not limited to the State's perspective. For companies, correct management and planning of these payments are crucial. Inadequate planning can lead to overpayments, unnecessarily tying up capital, or, conversely, to insufficient payments, which can result in compensatory interest. In-depth knowledge of PPC rules allows companies to optimise their liquidity and avoid unpleasant surprises with the Tax and Customs Authority (AT).
2. Scope of Application: Who is Obligated and Who is Exempt
The obligation to make IRC payments on account covers the vast majority of legal entities engaged in commercial, industrial, or agricultural activities. However, there are specific criteria that determine this obligation, as well as situations of exemption, which are important to know for the correct application of tax rules.
2.1. Who is Obligated to Make Payments on Account
According to Article 105 of the IRC Code (CIRC), the following entities are obliged to make payments on account:
- Companies and other entities subject to IRC that primarily carry out commercial, industrial, or agricultural activities.
- Entities that have assessed IRC in the previous year, net of non-refundable withholding taxes, amounting to more than €200. This threshold is fundamental, as companies with a very low tax burden may be exempt.
2.2. Who is Exempt from Payments on Account
The same Article 105 of the CIRC establishes the conditions for exemption from payments on account, which apply in the following situations:
- In the first year of activity: Companies starting their activity are exempt from making payments on account in the first financial year. This measure aims to alleviate the initial tax burden on new businesses, allowing them to focus on their development.
- IRC-exempt entities: Entities that benefit from total IRC exemption, either by nature or by specific legal provision, are not subject to this advance payment.
- Net assessment of the previous year not exceeding €200: If the IRC assessment for the previous tax period, after deducting non-refundable withholding taxes, is equal to or less than €200, the company is exempt.
- Entities under the simplified regime: As a rule, entities falling under the simplified IRC taxation regime, due to their smaller size, are exempt from making payments on account. However, it is crucial to always check the legislation in force, as there may be exceptions or changes.
- Entities that have ceased to earn IRC-taxable income: If an entity, due to a change in its activity or status, ceases to earn income subject to IRC, it may be exempt.
- Dissolution or cessation of activity: In the event of cessation of activity or dissolution of the company, payments on account cease to be due from the date of occurrence.
3. Deadlines for Payments on Account in 2026
Compliance with deadlines is a critical aspect of managing payments on account. Late payment can lead to the application of default interest and other tax penalties. Payments are made in three instalments, distributed throughout the calendar year.
3.1. Payment on Account Calendar for the 2026 Financial Year
The deadlines for submitting payments on account, as per Article 104 of the CIRC, are as follows:
| Instalment | Deadline for 2026 | Reference Period |
|---|---|---|
| 1st instalment | by 31 July 2026 | First half of the fiscal year |
| 2nd instalment | by 30 September 2026 | Third quarter of the fiscal year |
| 3rd instalment | by 15 December 2026 | Last quarter of the fiscal year |
It is important to note that these deadlines are unchangeable and their observance is fundamental to avoid fines and interest. Companies must plan their cash flow to ensure the availability of funds on these dates.
4. Methodology for Calculating Payments on Account
The calculation of payments on account is determined based on the IRC assessment of the previous year, adjusted by a percentage that varies according to the company's turnover. This methodology aims to approximate the advance payment amount to the tax expected to be due.
4.1. Calculation Basis (Net Assessment)
The calculation basis for PPC is the IRC assessment of the previous tax period, as determined in the Model 22 Declaration, net of non-refundable withholding taxes. That is, the value that will serve as a reference is the "Net Assessment" field of the Model 22 from the previous year (for example, for 2026, the 2025 assessment is used).
4.2. Applicable Percentages
The percentages to be applied to the net assessment of the previous year depend on the company's turnover in the previous tax period, as stipulated in paragraph 1 of Article 105 of the CIRC:
- If the turnover of the previous tax period is equal to or less than €500,000, the percentage to be applied is 80% of the net assessment.
- If the turnover of the previous tax period is greater than €500,000, the percentage to be applied is 95% of the net assessment.
The total amount calculated is subsequently divided into three equal instalments for payment purposes.
4.3. Practical Calculation Examples
Example 1: Small Company
- Turnover (2025): €350,000
- Net IRC Assessment (2025): €10,000
Calculation:
- Determine the applicable percentage: Turnover ≤ €500,000, so 80% applies.
- Calculate the total PPC amount: €10,000 * 80% = €8,000
- Calculate the amount of each instalment: €8,000 / 3 = €2,666.67
Each of the three instalments to be paid in 2026 will be €2,666.67.
Example 2: Medium Company
- Turnover (2025): €1,200,000
- Net IRC Assessment (2025): €40,000
Calculation:
- Determine the applicable percentage: Turnover > €500,000, so 95% applies.
- Calculate the total PPC amount: €40,000 * 95% = €38,000
- Calculate the amount of each instalment: €38,000 / 3 = €12,666.67
Each of the three instalments to be paid in 2026 will be €12,666.67.
Example 3: Company with Reduced Assessment
- Turnover (2025): €150,000
- Net IRC Assessment (2025): €150
Analysis: The net IRC assessment for the previous year is €150. Since this amount is less than €200, the company is exempt from making any payments on account for the 2026 financial year, as per paragraph 2 of Article 105 of the CIRC.
5. Limitation and Suspension of the 3rd Instalment of Payments on Account
One of the most important flexibilities of the payments on account system is the possibility to limit or suspend the payment of the third instalment. This measure aims to prevent companies from making excessive payments to the State when they anticipate a significant reduction in their taxable profit in the current financial year.
5.1. Conditions for Limiting or Suspending
The faculty to limit or suspend the third instalment is provided for in paragraph 7 of Article 105 of the CIRC. A company may choose not to make or reduce the payment of the third instalment if it estimates that the amount of tax already paid (PPC and withholding taxes) will be equal to or greater than the tax that will ultimately be due, considering the income of the current tax period.
To make this decision, the company must make a rigorous estimate of its taxable profit for the financial year in question. This estimate must be based on concrete data and realistic projections, and not on mere assumptions.
5.2. Risks and Penalties in Case of Estimation Error
Despite the flexibility, this option carries a significant risk. If the company's estimate is lower by more than 20% than the tax that would actually be due (considering payments on account and withholding taxes), the company will be subject to compensatory interest. Compensatory interest is calculated on the difference between the tax that should have been paid and the tax actually paid, from the deadline for payment of the third instalment until the deadline for submitting the Model 22 Declaration for the financial year in question.
The rate of compensatory interest is defined annually by order of the Minister of Finance, and is generally higher than the default interest rate, which underlines the importance of an accurate estimate.
Risk Example:
- Total PPC due (calculated based on the previous year): €12,000 (€4,000 per instalment)
- Estimated tax for the current year: €10,000
- PPC already paid (1st and 2nd instalments): €8,000
- Third instalment suspended.
- Final tax assessed (in the Model 22 of the following year): €11,500
In this case, the final tax (€11,500) is higher than the estimated tax (€10,000). The difference is €1,500. The error percentage is (€1,500 / €11,500) * 100% = 13.04%. As this error is less than 20%, no compensatory interest will be applied.
However, if the final tax assessed was €13,000, the difference would be €3,000. The error percentage would be (€3,000 / €13,000) * 100% = 23.08%. As this error is greater than 20%, compensatory interest would be applied to the unduly suspended difference (in this case, the part of the 3rd instalment that should not have been suspended, i.e., the difference between €13,000 and the estimated €10,000, or €13,000 minus the €8,000 paid and minus the €4,000 that was estimated to be paid, which would be €1,000).
The decision to limit or suspend the third instalment should be based on solid financial projections and, ideally, with the support of a certified accountant.
6. How to Make Payments on Account
The process of making payments on account is relatively simple and fully dematerialised, carried out through the electronic platform of the Tax and Customs Authority.
6.1. Generating the Single Collection Document (DUC)
To make the payment, the company must generate a Single Collection Document (DUC) on the Tax Portal. The steps are as follows:
- Access the Tax Portal with the company's login credentials (NIF and password).
- Navigate to the "Services" area and then "Pay".
- Select the "IRC" option and then "Payments on Account".
- Indicate the tax period (year 2026) and the instalment to which the payment refers (1st, 2nd, or 3rd).
- The system will pre-fill the amount to be paid based on the data declared in the previous year. However, the taxpayer has the option to change this amount, for example, if they choose to limit the third instalment.
- After confirming the data, the DUC is generated, containing the Multibanco reference and the respective amount.
6.2. Payment Methods
The DUC can be paid through various means:
- Multibanco: Using the payment reference generated in the DUC.
- Homebanking: Through the services/state payment service available on the bank's platform.
- Direct Debit: Companies can opt for direct debit so that payments are made automatically on the deadlines, avoiding forgetfulness. This option requires prior authorisation from the AT.
- At CTT branches or banking institutions: In specific cases, although less common for larger companies.
It is essential that payment is made within the legal deadline to avoid default interest and other tax penalties.
7. Common Errors to Avoid in Managing Payments on Account
The management of payments on account, despite being seemingly simple, is prone to some errors that can have significant financial and tax implications. Knowing and avoiding these errors is crucial for the company's financial health.
7.1. Not Considering Withholding Taxes
A common mistake is to calculate PPC based on the gross assessment, ignoring withholding taxes already made. The assessment to be considered for the PPC calculation is the net assessment of non-refundable withholding taxes. Not deducting these withholdings can lead to excessive payments on account, unnecessarily tying up capital. It is fundamental to consult the Model 22 table that reflects this value.
7.2. Unawareness of Payment Deadlines
Failure to meet payment deadlines is one of the most frequent causes of penalties. Default interest is applied to the outstanding amount from the deadline until the date of actual payment. The default interest rate is fixed annually and published in the Official Gazette. It is essential for the company or its accountant to maintain a strict tax calendar.
7.3. Error in Turnover Criterion
The application of the percentage (80% or 95%) depends on the turnover of the previous financial year. An error in classifying the turnover (above or below €500,000) will lead to an incorrect PPC calculation. It is important to verify the turnover reported in the Model 22 of the previous year to ensure the correct percentage is applied.
7.4. Poor Management of Suspension/Limitation of the 3rd Instalment
The decision to suspend or limit the third instalment must be based on solid financial projections. An overly optimistic or pessimistic estimate, resulting in an error greater than 20% compared to the final tax due, incurs compensatory interest. It is advisable that this decision be made with the support of a accounting professional and based on updated financial data.
7.5. Confusing PPC with Special Payment on Account (PEC)
Although the Special Payment on Account (PEC) was repealed in 2017, there is still some confusion. PPC is an advance payment of IRC due, while PEC was a minimum payment that was often irrecoverable. It is crucial to be clear about the nature of each, even though PEC no longer exists in the legal system.
7.6. Not Keeping Up with Legislative Changes
Portuguese tax legislation is dynamic and subject to frequent changes. Failure to keep up with these changes can lead to outdated calculations or the omission of new obligations or exemptions. Regular consultation of the IRC Code and other official sources is indispensable.
7.7. Not Managing Cash Flow in Advance
Payments on account represent significant cash outflows on specific dates. Lack of cash flow planning to meet these payments can create liquidity problems for the company. It is fundamental to include PPCs in the budget and cash flow projections.
8. Differences between Payments on Account and Other Tax Advances
In the Portuguese tax landscape, there are various tax advance mechanisms. It is crucial to distinguish Payments on Account (PPC) from other concepts, such as Additional Payments on Account (PAC) and withholding taxes.
8.1. Payments on Account (PPC) vs. Additional Payments on Account (PAC)
While PPC is an advance payment of the company's general IRC, the Additional Payment on Account (PAC), regulated by Article 106 of the CIRC, aims to tax profits exceeding certain thresholds. PAC applies to companies that obtain taxable profit above a given amount, being a form of additional taxation for larger or more profitable companies.
- PPC: Applicable to most companies with IRC assessment > €200, calculated on the net assessment of the previous year.
- PAC: Applicable to companies with taxable profit exceeding €1,500,000, calculated on the excess taxable profit, with progressive rates (3% for the bracket between €1.5M and €7.5M, and 5% for the bracket above €7.5M, for mainland Portugal). This is an additional tax and not an anticipation of "normal" IRC.
Both are advance payments, but they are based on different bases and purposes. PAC is an additional charge, while PPC is merely an anticipation of the IRC due.
8.2. Payments on Account (PPC) vs. Withholding Taxes
Withholding taxes are another advance payment mechanism, but they apply to specific income at the time of its payment or availability, such as capital income, services rendered, or rents. The entity paying the income is responsible for withholding a portion of the amount and remitting it to the State. Withholding taxes are subsequently deducted from the final tax (IRC or IRS) of the income beneficiary.
- PPC: Made by the company itself, based on its assessment from the previous year, as an advance payment of its own IRC.
- Withholding Taxes: Made by third parties (paying entities) on income paid to the company (or individuals), functioning as an advance payment of the final tax due by the company (or individual) benefiting from the income.
Withholding taxes, when not refundable, are deducted from the IRC assessment for PPC calculation purposes, which reinforces their nature as an advance tax payment.
9. Impact of Payments on Account on Cash Flow Management and Tax Planning
Payments on account, although a tax credit, have a direct and significant impact on companies' cash flow. Effective tax and cash flow planning must, therefore, integrate PPCs as a central element.
9.1. Cash Flow Management
The three annual PPC instalments represent considerable cash outflows that must be budgeted and foreseen. Lack of liquidity on due dates can lead to payment delays and, consequently, to the application of default interest. Companies should:
- Prepare cash flow budgets: Include the dates and estimated amounts of PPCs in short and medium-term planning.
- Monitor financial performance: Track interim results to anticipate any liquidity needs or the possibility of suspending the 3rd instalment.
- Negotiate credit lines: Access to short-term credit lines can be a safeguard for tighter cash flow moments, although the ideal is to have own funds.
9.2. Tax Planning
Within the scope of tax planning, PPC offers optimisation opportunities, especially regarding the 3rd instalment:
- Review projections: At the end of the third quarter, companies should review their taxable profit projections for the year. If projections indicate a reduction compared to the previous year, suspending or limiting the 3rd instalment can be a valid strategy to improve liquidity.
- Cost-benefit analysis: Weigh the risk of compensatory interest against the benefit of freeing up cash. In some scenarios, it may be preferable to pay the 3rd instalment in full to avoid the risk of penalty.
- Optimisation of withholding taxes: Withholding taxes are a tax credit that reduces the assessment for PPC purposes. Companies with income subject to withholding must ensure these are properly accounted for and reported.
Proactive tax planning and constant communication with the certified accountant are essential to maximise the benefits and minimise the risks associated with payments on account.
10. FAQ - Frequently Asked Questions about Corporate Income Tax (IRC) Payments on Account
10.1. What are the deadlines for payments on account in 2026?
The deadlines for Corporate Income Tax (IRC) Payments on Account in 2026 are: 31 July (1st instalment), 30 September (2nd instalment), and 15 December (3rd instalment). It is crucial to respect these deadlines to avoid default interest.
10.2. How are payments on account calculated?
The calculation is based on the net IRC assessment of the previous tax period. 80% of that assessment is applied if the previous year's turnover is equal to or less than €500,000, or 95% if it is greater than €500,000. The total amount calculated is then divided into three equal instalments. (See Article 105 of the CIRC).
10.3. Who is exempt from making payments on account?
Companies in their first year of activity, IRC-exempt entities, and companies whose net IRC assessment from the previous year does not exceed €200 are exempt (See Article 105, paragraph 2 of the CIRC).
10.4. Can I not pay or reduce the 3rd instalment?
Yes, it is possible to limit or suspend the entire 3rd instalment if the company estimates that the tax already paid (PPC and withholding taxes) will be equal to or greater than the final tax due. However, if the estimate is more than 20% lower than the tax that would be due, the company will be subject to compensatory interest (See Article 105, paragraph 7 of the CIRC).
10.5. Is Payment on Account (PPC) the same as Special Payment on Account (PEC)?
No. The Special Payment on Account (PEC) was repealed by the State Budget for 2017 and no longer exists. PPC is an advance payment of IRC due, while PEC had a different nature and was often irrecoverable.
10.6. What happens if I pay PPC late?
Late payment of PPC implies the application of default interest on the outstanding amount, calculated from the payment deadline until the date of actual payment. In addition to interest, fines for tax infringement may be applied.
10.7. Is PPC a cost for the company?
No, PPC is not a cost. It is an advance payment of the tax that the company would, in any case, have to pay. The amount paid as PPC is deducted from the final tax assessed in the Model 22 Declaration for the financial year in question.
10.8. Where can I consult the PPC amount to be paid?
The PPC amount is calculated based on the data from the Model 22 Declaration of the previous financial year. The company can consult these values in its declaration or on the Tax Portal when generating the DUC for payment.
11. Conclusion and Practical Recommendations
Corporate Income Tax (IRC) Payments on Account are a fundamental pillar of the corporate taxation system in Portugal, functioning as an advance mechanism that requires careful and informed management. Its correct understanding and application are crucial not only for fulfilling tax obligations but also for optimising cash flow management and financial planning of any organisation.
For the 2026 financial year, and subsequently, companies should adopt a proactive stance, focusing on the following points:
- Rigorous Cash Flow Planning: The deadlines in July, September, and December are key moments for cash outflows. Integrating PPCs into budgets and cash flow projections is indispensable to avoid liquidity constraints.
- Continuous Monitoring of Results: Regular monitoring of the company's economic and financial performance throughout the year allows for adjusting expectations and making informed decisions, especially when evaluating the 3rd instalment.
- Careful Analysis of Suspension/Limitation: The possibility of limiting or suspending the 3rd instalment is a valuable tool, but it should be used prudently. Making realistic financial projections and calculating the potential impact of compensatory interest are essential before making this decision. In case of doubt, full payment may be the safest option.
- Collaboration with Professionals: The complexity and constant changes in tax legislation require the support of qualified professionals. An experienced certified accountant not only ensures compliance with obligations but can also identify opportunities for tax optimisation and mitigate risks.
- Constant Updating: Staying updated on legislative and tax news is a duty of any manager or financial officer. Official sources, such as the Tax Portal and published legislation, are the best resources.
In summary, Corporate Income Tax Payments on Account should not be seen as a mere burden, but as an integrated component of the company's financial and tax strategy. Effective management of this mechanism contributes significantly to the organisation's financial health and tax compliance.
For more information and to make your payments, visit the Tax Portal.
12. Sources and Legal References
- Decree-Law No. 442-B/88, of 30 November: Approves the Corporate Income Tax Code (CIRC).
- Article 104 of the IRC Code: Deadlines for Payments on Account.
- Article 105 of the IRC Code: Calculation and Exemption from Payments on Account.
- Article 106 of the IRC Code: Additional Payment on Account.
- Law No. 114/2017, of 29 December: State Budget Law for 2017 (repeal of the Special Payment on Account).
- Tax Portal (Tax and Customs Authority): www.portaldasfinancas.gov.pt
Calculate your instalments: use the HVR IRC Payments on Account Calculator — base, 80%/95% rate and the three instalments (July, September and 15 December) in seconds.