Portugal

Mayors lose with IRS, but have more revenue in OE2027

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Briefings

Portuguese local authorities will receive more funds overall, but face reduced revenue from the State's tax system. The 2027 State Budget proposal increases the Financial Equilibrium Fund by 238.64 million euros, while the Municipal Social Fund grows by 30.11 million euros. Total local funding reaches 330 million euros, a 4.75% increase over 2026. However, the minimum participation rate for local municipalities in State taxes drops from 2.74% to 2.3%. The 2027 budget also allocates 15% of excess funds based on population, favoring municipalities with lower average population than the national average. The Emergency Fund authorization increased from 10 million to 22.51 million euros, allowing access to EU funds in emergencies.

Key points

• The 2027 State Budget proposal increases the Financial Equilibrium Fund by 238.64 million euros.
• The minimum participation rate for local municipalities in State taxes drops from 2.74% to 2.3%.

Context

This briefing covers the 2027 State Budget proposal in Portugal, detailing changes to local funding allocations and tax participation rates. The key finding is the trade-off between increased total funding and reduced tax revenue participation.

Limitations

Data reflects the 2027 State Budget proposal as of October 8, 2026. Specifics on population-based funding criteria and emergency fund usage depend on future implementation and actual population figures.

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