Corporate tax is falling again for many SMEs and micro-SMEs, and this changes the picture at the end of the financial year. The 2026 financial year not only changes figures, it changes decisions, because the corporate tax rate is being adjusted downwards again.
If your company is small—generally speaking, if its turnover does not exceed ten million euros—corporate tax will begin a downward trend that will continue for several financial years.
This is not a sudden jump, but a gradual reduction, year by year, which will bring the rate down from the current 25% to 20% from 2029 onwards. In practice, each annual closing will be taxed slightly less than the previous one.
It is a discreet but cumulative change.
The reduction is not automatic for ‘being small; it depends on meeting the requirements for small businesses each year.
1. Micro-SMEs fall under a different scheme.
When we talk about micro-SMEs—companies with a turnover of less than €1 million—the tax structure changes. From 2025 onwards, the tax rate will no longer be a flat rate but will become progressive.
The first €50,000 of the tax base will be taxed at a lower rate, while the excess will be taxed at a slightly higher rate. Furthermore, these rates are also reduced over the course of the financial years.
This means that two companies with the same profit may pay different amounts depending on how their tax base is distributed.
Not all the tax base is taxed at the lowest rate; only the first tranche.
2. Not all companies benefit from this reduction
It is worth stating this clearly: these reductions do not apply to asset-holding companies. If more than half of the assets are composed of securities or are not related to economic activity, the rate will remain at the general rate of 25%.
This is one of those nuances that are often overlooked and, when detected late, lead to unpleasant surprises.
A company may appear to be ‘operational’ and yet be considered a holding company for tax purposes.
3. Short financial years and proportional limits in micro-SMEs
When a micro-SME has a financial year of less than one year – for example, due to a change in the closing date – the portion of the tax base that can be taxed at the reduced rate is not fixed.
This limit of €50,000 is rated according to the actual length of the financial year. Furthermore, it can never exceed the tax base for the period itself.
In practice, this means that calculations must be made with greater care, because it is not always in the company’s best interests to close the financial year when it seems most convenient from a commercial point of view.
Changing the closing date can alter the effective corporate tax rate without this being apparent at first glance.
4. Tax turning point
The year 2026 marks a new step in this progressive reduction. Small businesses will be taxed at 23%, and micro-SMEs will see the rates applicable to their brackets drop again.
This scenario introduces an interesting variable into planning: the timing of profit generation becomes more important than before.
This is not an invitation to force decisions, but rather to think with a little more perspective.
Delaying or bringing forward income and expenses may make sense from a tax perspective, but only if there is a real economic reason behind it.
5. Planning without forcing, the silent key
In this context, it may be reasonable to assess whether it is advisable to postpone certain transactions to years with lower rates or to bring forward expenses to ease the tax burden for the current year.
However, adjustments of this kind must be made with caution. The line between planning and forcing is finer than it seems, and the authorities tend to pay particular attention to financial year-end closings that are ‘too convenient’.
Tax planning works best when it is discreet, consistent and documented.
6. A reduction that deserves to be monitored year after year
The reduction in corporation tax is not an isolated event in a single financial year. It is a process that unfolds over time and requires reviewing each year-end with a slightly different approach than usual.
It is not just a matter of paying less, but of understanding when and why you are paying less.
Taking the corporation tax rate for granted without reviewing the current regulations can lead to ill-advised decisions.
For further information, please consult our tax advisory service.
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