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Madeira and Açores Taxes vs Mainland Portugal: What Differs in 2026

Both regions now charge 30% less IRS in every bracket — the first year Madeira matches the Açores all the way up. The official 2026 tables, IVA and IRC rates, the one tax where the two regions differ, and what stays the same.

By Andrew Kovalenko · · 8 min read · Human-written
Contents
  1. Do Madeira and the Açores pay less income tax than mainland Portugal?
  2. Is the solidarity surcharge lower too?
  3. Are dividends and interest taxed less?
  4. What are the IVA (VAT) rates in Madeira and the Açores?
  5. Whose VAT rate applies — where I live or where my client is?
  6. Do companies pay less corporate tax (IRC) in Madeira or the Açores?
  7. Do freelancers on recibos verdes get lower withholding in the regions?
  8. Is Social Security different for freelancers in Madeira or the Açores?
  9. Do I need to actually live there to get the lower rates?
  10. The honest summary
  11. Sources

Portugal has one tax system with three sets of rates. The mainland (continente) uses the national tables; the two autonomous regions, Madeira and the Açores, are allowed by the Lei das Finanças das Regiões Autónomas to cut income tax, corporate tax and VAT by up to 30%, and both now do. This guide is the delta: every place the regional number differs from the mainland one in 2026, the official source for each, and the handful of things that do not change when you move to an island. The mainland rates this page compares against are in the Portugal income tax rates 2026 guide.

Do Madeira and the Açores pay less income tax than mainland Portugal?

Yes — residents of either region pay IRS at rates 30% lower than the mainland, in every bracket, in 2026. The bracket limits are the same as on the mainland; only the rates change. Madeira’s table is written into its 2026 budget decree; the Açores apply “the national rates in force each year, reduced by 30%” under their own regional law, which is the same arithmetic.

Taxable income (2026)Mainland rateMadeira & Açores rate
up to €8,34212.5%8.75%
€8,342 – €12,58715.7%10.99%
€12,587 – €17,83821.2%14.84%
€17,838 – €23,08924.1%16.87%
€23,089 – €29,39731.1%21.77%
€29,397 – €43,09034.9%24.43%
€43,090 – €46,56643.1%30.17%
€46,566 – €86,63444.6%31.22%
above €86,63448.0%33.60%

The Madeira column is the official table in article 18.º of DLR n.º 8/2025/M. The Açores apply the same 30% reduction to the national rate by rule (DLR n.º 2/1999/A, art. 4.º), which gives identical figures.

Because every rate is cut by the same 30% and the bracket limits don’t move, the tax computed from the table is exactly 30% lower at every income level:

Taxable incomeMainland IRS (from the table)Madeira / AçoresDifference
€15,000€2,220.77€1,554.54€666.23
€25,000€4,682.24€3,277.57€1,404.67
€40,000€9,750.15€6,825.11€2,925.05
€60,000€18,318.28€12,822.80€5,495.48

These are the tax before deductions (deduções à coleta: dependants, health, education and the rest), which are fixed euro amounts and the same in all three places. Madeira also sets its own mínimo de existência (the income level below which no IRS is due), which its tax authority says fully exempts anyone earning the regional minimum wage. Our calculator uses the mainland tables; for a regional resident, its tax figure before deductions multiplied by 0.7 gives the regional one.

Is the solidarity surcharge lower too?

Only in the Açores. The taxa adicional de solidariedade (CIRS art. 68.º-A) applies to taxable income above €80,000. The Açores cut it by 30%, like every other IRS rate; Madeira does not, so a Madeira resident pays the mainland surcharge on top of the reduced regional brackets.

Taxable income sliceMainlandAçoresMadeira
€80,000 – €250,0002.5%1.75%2.5%
above €250,0005%3.5%5%

These figures are from the AT’s official rates summary, and Madeira’s 2026 budget did not change them. The surcharge is the one income tax where the two regions differ, and it only matters above €80,000. How the surcharge is calculated is in the solidarity surcharge guide.

Are dividends and interest taxed less?

Yes — the 28% flat rate on bank interest and dividends becomes 19.6% in both regions (28% less 30%). Madeira’s tax authority confirms that the 30% reduction of these taxas liberatórias continues in 2026, for both IRS and IRC; the AT lists the same 19.6% for the Açores. Whether a given payment gets the regional rate depends on the attribution rules for regional income, so check what your bank actually withholds rather than assuming it. For a company owner, this is the 19.6% figure in the recibos verdes vs Lda guide.

What are the IVA (VAT) rates in Madeira and the Açores?

Madeira charges 22% / 12% / 4% and the Açores 16% / 9% / 4%, against the mainland’s 23% / 13% / 6%. The structure is the same three tiers with the same lists of goods and services; only the percentages differ.

IVA rateMainlandMadeiraAçores
Normal23%22%16%
Intermediate (Lista II)13%12%9%
Reduced (Lista I)6%4%4%

The Açores cut every national rate by 30%, rounded to the nearest whole point (DLR n.º 15-A/2021/A, art. 47.º). Madeira’s reduction is smaller on the normal rate; its most recent change was the reduced rate, which went from 5% to 4% on 1 October 2024 (DLR n.º 6/2024/M). Nothing changed for 2026.

Whose VAT rate applies — where I live or where my client is?

For services, it’s usually not where you live. The CIVA decides between mainland, Madeira and Açores rates with the same place-of-supply rules it uses between countries (art. 6.º n.º 16). For most services that means:

  • Selling to a business (with a Portuguese NIF, acting as a business): the rate of the place where the client is established. A Lisbon freelancer invoicing a company in Funchal charges 22%; a freelancer in Ponta Delgada invoicing a Porto company charges 23%.
  • Selling to a private individual: the rate of the place where you (the supplier) are established. An Açores freelancer charges a private client on the mainland 16%.

There are exceptions: services connected to property follow the property, transport has its own rule (art. 6.º n.º 17), and sales of goods follow separate location rules. If most of your billing crosses the mainland–island line, confirm the rate for your case with your contabilista. Invoicing software lets you pick the rate per line. Small freelancers under the €15,000 exemption (art. 53.º) charge no IVA wherever the client is. Selling goods online has its own layer of rules, covered in the online sales VAT guide.

Do companies pay less corporate tax (IRC) in Madeira or the Açores?

Yes — Madeira’s 2026 IRC rate is 13.3%, and 10.5% on the first €50,000 of profit for small and medium companies, against the mainland’s 19% and 15%. Both are the mainland rates minus 30%, set in article 19.º of Madeira’s 2026 budget decree. The Açores reduce national IRC rates by 30% by the same regional rule as IRS, which gives the same 13.3% and 10.5%.

That changes the maths of incorporating. If you’re weighing recibos verdes against a single-person company as a regional resident, start from the recibos verdes vs Unipessoal Lda comparison and replace its IRC and dividend rates with the regional ones: 13.3% / 10.5% and 19.6%.

Madeira’s International Business Centre (the Zona Franca) is a separate, licensed regime with its own conditions and rates. It is not what an ordinary Madeira-resident company pays and is outside the scope of this guide.

Do freelancers on recibos verdes get lower withholding in the regions?

Your final tax is lower; your withholding may not be. The 2026 regional withholding tables (Despacho n.º 19/2026 in Madeira, Despacho n.º 1179/2026 for the Açores) cover salaries and pensions only. We found no separate regional withholding rate for recibos verdes, so check the rate the Portal applies when you issue a fatura-recibo. It matters less than it looks: withholding is an advance, and the annual IRS return calculates your actual tax with the regional rates. Anything withheld above that comes back as a refund. Freelancers who expect to invoice less than the €15,000 IVA exemption limit in the year are exempt from withholding altogether (CIRS art. 101.º-B), as on the mainland. The rest of the freelancer picture is in the freelancer tax guide.

Is Social Security different for freelancers in Madeira or the Açores?

No — the contribution is the same everywhere: 21.4% on 70% of what you bill for services. Rates come from the national Código Contributivo; the regional budgets change IRS, IRC and IVA, not contributions. Each region runs its own Social Security institute (in Madeira, the Instituto de Segurança Social da Madeira), but you declare and pay the same way. A few benefit minimums carry a small regional top-up; the sick leave and unemployment guide notes one.

Do I need to actually live there to get the lower rates?

Yes. The regional IRS rates apply to people who are tax resident in the region, not to anyone with an address there. The decrees say it plainly: the table applies to “sujeitos passivos de IRS residentes” in the region. In practice that means your morada fiscal is on the island and your life is there: where you sleep, work, keep your home and spend most of the year. The AT cross-checks address changes against other data, and a registration that doesn’t match reality is exactly the kind of arrangement it reverses. Our tax optimisation guide lists this among the strategies that backfire.

The honest summary

In 2026 both regions charge 30% less IRS in every bracket, and their rates are identical for the first time. The only income tax where they part ways is the solidarity surcharge above €80,000: lower in the Açores, unchanged in Madeira. VAT is lower in both, much lower in the Açores (16% normal rate), and for services the client’s location often decides the rate, not yours. Corporate tax is 13.3% (10.5% on the first €50,000). Social Security is the same everywhere. None of it applies unless you genuinely live there.

Sources

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