Portugal Improves Its Score in a US Think Tank's Tax Competitiveness Index but Stays 33rd in the OECD

Portugal's tax system scores slightly better in this year's International Tax Competitiveness Index than last year, but its place in the table has not moved: it is 33rd of the 38 OECD (Organisation for Economic Co-operation and Development) member countries. The index is published each October by the Tax Foundation, a US think tank, and the ranking reflects its own methodology and its view of what makes a tax system good.

On the Tax Foundation's Portugal country page, the country scores 59.6 out of 100, a rank it describes as unchanged from 2025. The top-ranked country, Estonia, is given 100 and every other country is scored relative to it. Portugal sits just above Iceland, Spain, Italy, Colombia and France, which is last on 45.7.

A better score, the same place

According to ECO, the business daily that reported the results with the index's Portuguese partner, Instituto +Liberdade (More Freedom Institute), Portugal's score rose from 58.4 to 59.6, the third-largest improvement in the OECD after the Czech Republic and Iceland. That is a gain of 1.2 points (our arithmetic). The Tax Foundation changed its methodology this year and recalculated the 2025 results, and it warns that last year's scores on its site can differ from those published at the time.

The Tax Foundation credits Portugal with cutting its tax rate on long-term capital gains from 28 to 19.6 percent, making its notional interest deduction (a tax break for companies financed with their own capital rather than debt) more generous in 2025, and lowering its top corporate tax rate from 31.5 percent in 2024 to 30.5 percent in 2025 and 29.5 percent in 2026. ECO notes that this top rate includes the state and municipal surcharges (the derrama estadual and derrama municipal) on company profits.

Where Portugal scores well and badly

The index has five categories. Portugal's ranks, as published by the Tax Foundation, are:

• Corporate taxes: 34th (score 50.5), up one place;
• Individual taxes: 19th (61.2);
• Consumption taxes: 21st (56.7);
• Property taxes: 19th (60.7), up one place;
• Cross-border tax rules: 33rd (53.5).

Among the weaknesses it lists are a progressive corporate tax system with a high top rate of 29.5 percent, including "multiple distortive top-up taxes that limit loss offsets"; highly complex corporate tax incentives; and a top rate of IRS (personal income tax) of 53 percent once top-up taxes are included, with no ceiling on social security contributions.

On the plus side, it notes that companies can deduct property taxes from taxable income, that Portugal has a territorial system which exempts foreign dividends and capital gains from most countries, and that write-offs for investment in machinery are above average.

What it means for people living here

As ECO points out, the index does not measure how much tax households or companies actually pay. It scores how a system is designed, rewarding lower marginal rates, broad tax bases and simple rules, and the Tax Foundation itself says recent tax changes may not yet be reflected. For immigrants working in Portugal, the figures that matter in practice remain the IRS brackets, social security contributions and any special regime that applies to them. The index's main message is that Portugal's tax rules on companies and high earners remain among the least competitive in the OECD by this think tank's measure, while its taxes on individuals, consumption and property sit mid-table.