At this time of year, the same pressure shows up again and again: closing the financial year with less tax and more control. Solar energy can help, as long as you understand what “gaining in IRC” actually means, because that phrase can refer to two different things and the difference changes your decision.
One route is reducing taxable profit, meaning you have more tax deductible expenses and, as a result, less profit subject to tax. The other route is reducing the corporate tax due, which is the tax calculated after applying the rate to taxable profit. Installing solar panels most often affects the first route through tax accepted depreciation. The second route can apply when the investment qualifies for investment tax incentives such as RFAI, and the impact can be stronger, but the requirements and documentation are far more demanding.
The key point about “until 31 December” is also simple: for tax purposes, what matters is the investment actually made and properly recognised in your accounts. For depreciation purposes, what matters is when the asset becomes operational or available for use. In practice, you want the system installed, accepted and operational, with documentation that matches what happened on site, because a payment made in December can be treated as an advance and an advance is not the same as an asset ready for use.
The safest and most common route: tax accepted depreciation
When your business installs a solar self consumption system, the usual approach is to record that investment as tangible fixed assets. That asset does not become a single expense in the same year. It is recognised over time through depreciation, which reduces taxable profit and tends to reduce Corporate Income Tax, provided there is enough taxable profit to absorb the expense.
In Portugal, there is a standard rate used for solar energy equipment, including photovoltaic solar equipment, of 8 percent per year under the general rules. In management terms, the direct tax effect is spread across several years. If the system starts operating during 2025, you can recognise depreciation already in 2025, typically in proportion to the period of use within the financial year.
Expectations should match reality. Depreciation creates a real tax effect, yet it rarely produces a large reduction simply because you install at year end, since the period of use within the year can be short. The bigger impact of this route appears consistently in the following years, which is the normal behaviour of an investment designed to last.
The route with greater impact, and greater requirements: RFAI and a deduction from tax due
If you want a potentially stronger impact on tax, you need to look at investment tax incentives such as RFAI. Here, the mechanism is no longer “creating an expense to reduce profit”. The mechanism is obtaining a tax credit that can be deducted from the corporate tax due, calculated as a percentage of the investment considered relevant and effectively made.
This is where clarity matters: RFAI is not universal. There are conditions on who can benefit, which activities qualify, what type of investment is covered, whether the asset is allocated to the business activity, and the obligation to keep the investment under the required conditions. The annual deduction also has limits and can be constrained by the tax due, which means that, even when you qualify, you may use part in one year and the remainder in other years, within the applicable rules.
That changes how you decide in December. If your goal is to frame the investment within a tax incentive, documentary rigour stops being a detail and becomes the centre of the process. You need to demonstrate the investment actually made, the correct framing and eligibility, and you need accounts prepared to reflect the investment in a defensible way.
What your business gains “this year” and what it gains for real over time
The tax gain within 2025, through depreciation, exists when the system becomes operational this year and when the asset is recorded correctly. That gain tends to be more visible in businesses with solid taxable profit, because the recognised expense directly affects the calculation.
At the same time, the real gain of business self consumption is operational. What changes the game is reducing electricity purchases, increasing cost predictability and protecting margins. That effect is monthly, cumulative and does not depend on interpretation. Tax should be treated as additional optimisation, not the only reason to move.
There is also a detail many businesses overlook and then find confusing: reducing the electricity bill can increase profit, because operating costs fall. Higher profit can mean higher corporate tax. That does not invalidate the investment. It simply means the investment did its job and improved the health of the business.
Corporate Income Tax rates and why this belongs in your calculations
In 2025, the general Corporate Income Tax rate in mainland Portugal is 20 percent. SMEs and companies classified as Small Mid Cap benefit from a reduced rate on the first 50,000 euros of taxable income, which in 2025 is 16 percent. In specific situations set out in law, an even lower rate can apply on that first slice, so it makes sense to confirm your exact position with your accountant.
This matters for a practical reason: when the effect comes from expenses such as depreciation, the “tax saving” depends on the effective rate that would apply to that profit. When the effect comes from a deduction from tax due, as with RFAI, usefulness depends on having enough tax due to use the deduction within the applicable limits. Your effective rate can also be influenced by municipal surtax and, in certain cases, state surtax, which is why overly simple simulations often fail when they meet real numbers.
What you need to ensure in practice for the investment to affect 2025 tax
If your ambition is to have an effect this year, the focus must be execution and proof. The installation needs to be completed and operational, and the documentation must match what happened on site. The accounts must recognise the asset correctly and consistently with the reality of the investment, including dates and supporting documents.
If you want to explore incentives such as RFAI, add another layer: confirm eligibility with your accountant, validate whether the investment fits the applicable rules, ensure the asset is new and allocated to the business activity, and prepare the file with discipline, because this is an area where easy promises end in costly adjustments.
Typical December mistakes that cost you money
A common mistake is believing that paying in December settles the financial year. What closes the year for tax purposes is the investment made and properly reflected, and, for depreciation, the asset becoming operational. Another mistake is treating RFAI as a guaranteed discount, when in reality it is a regime with definitions, limits and obligations to keep the investment in place. A third mistake is cutting corners on design and execution just to “make it in time”, because that damages the system’s profitability and creates problems that last for years, all because of a rushed decision measured in days.
Practical conclusion
Moving before 31 December makes sense when you can ensure three things at once: the system becomes operational during 2025, the accounting treatment and documentation are flawless, and your tax position allows you to benefit from depreciation and, where applicable, incentives such as RFAI.
Well executed solar improves the business first where it matters: cost and predictability. Corporate Income Tax becomes a positive consequence when the investment is handled rigorously and when your case has the conditions for it, without easy promises and without unrealistic expectations.
