State Budget 2026 – Main Changes

Law No. 73-A/2025 approved the State Budget for 2026 (OE 2026), introducing a set of measures with a significant impact on tax matters. The following changes are highlighted in summary:

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Personal Income Tax (IRS)

Regarding Personal Income Tax (IRS), the tax brackets are updated, as provided for by law, according to the applicable table.

There is also a significant change regarding the deduction for invoices. Expenses for the purchase of books in specialized establishments, tickets for cultural events (including theatre, music, dance and other artistic expressions), entrance to museums, historical sites and monuments, as well as expenses associated with borrowing books and other documents from libraries and archives, will now be considered for this deduction – corresponding to 15% of the VAT paid, up to a limit of €250 per family.

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Corporate Income Tax (IRC)

Regarding Corporate Income Tax (IRC), a reduction in the general tax rate from 20% to 19% was approved, effective in 2026.

For SMEs and Small Mid Cap companies, a reduction in the rate applicable to the first €50,000 of taxable income to 15% is also foreseen.

For start-ups, the reduced rate of 12.5% ​​remains applicable under the legally established terms.

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Value Added Tax (IVA)

Regarding VAT, the application of the reduced rate to the following operations is noteworthy:

• Services related to the transformation of olives into olive oil;

• Transfers of meat and edible offal, fresh or frozen, of game species, both large and small game*;

• Transfers of works of art carried out by registered dealers, in addition to transfers made by the author, their heirs or legatees*.

  
  

The VAT exemption applicable to certain goods used in agricultural activity is also extended*.

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Municipal Property Tranfer (IMT)

Regarding the Municipal Property Transfer Tax (IMT), the tax brackets are updated by 2%.

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Tax Benefits

The 2026 State Budget also introduces changes to the tax benefits regime, among which the following stand out:

• Incentive for salary increases: the exemption from personal income tax (IRS) and social security contributions on certain productivity, performance, profit-sharing and year-end bonuses is maintained, up to a limit of 6% of the annual base salary, without a regular character, in 2026. For corporate income tax (IRC), the minimum percentage of salary increase required to access the 200% increase in costs related to salary increases for workers with permanent contracts is reduced from 4.7% to 4.6%.

  
  

• Incentives for the consolidation of rural properties: renewal of the exemption from IMT (Property Transfer Tax) and stamp duty on transfers necessary for the execution of land consolidation operations.

  
  

• Extension of various tax regimes until December 31, 2026, specifically covering: social impact bond partnerships; international financial operations; financial services of public entities; entities managing designations of origin and waste management systems; sports, cultural and recreational associations; associations and confederations; incentives for forestry activity; forest management entities; certain deduction regimes under IRC (Corporate Income Tax) and IRS (Personal Income Tax); as well as VAT exemptions applicable to transfers and services provided free of charge.