A tax rate of 33%! Portugal imposes an excess profit tax on oil companies.

Recently, the Portuguese government officially approved a temporary excess profit tax targeting oil exploration and refining enterprises, named Oil Sector Temporary Solidarity Contribution, with an applicable tax rate of 33%. The tax base is the excess portion of a company's 2026 annual profit that exceeds 20% of the average profit from 2024—2025.

This policy is temporary and specific, effective only for the fiscal year 2026. In a statement, the Portuguese Ministry of Finance indicated that rising fossil fuel prices due to the international geopolitical situation have continuously increased costs for residents and commercial operations, while oil companies have gained excess returns relying on the external market environment; therefore, levying this special tax is both fair and necessary.

Tax revenues will be allocated to two main areas: on one hand, subsidizing ordinary households and SMEs with weaker resilience; on the other hand, investing in energy transition to reduce the national economy's dependence on fossil fuels. Relevant tax payments are required to be calculated and paid in full by the end of September 2027.

Galp Energia's Profit Surge Makes It a Core Tax Target

The policy covers all enterprises conducting oil exploration and refining business within Portugal, and Galp Energia, the largest local oil and gas enterprise in Portugal, is the entity most significantly impacted.

Galp recently disclosed its second-quarter operating data. Benefiting from rising international crude oil prices and improved refining margins, adjusted net profit soared by 45% year-on-year to 540 million euros; cumulative net profit for the first half of the year increased by 44% to 812 million euros. This impressive performance has also made it a key focus of this temporary windfall tax.

Context of EU Policy Coordination, Not the First Energy Windfall Tax

Portugal is also the first country among Germany, Spain, Italy, Austria, and Portugal to implement specific legislation on an energy excess profit tax. In April this year, the finance ministers of these five countries jointly wrote to the European Commission, calling for the restart of a windfall tax mechanism similar to that during the 2022 energy crisis. The other four countries are still in the discussion stage and have not yet introduced implemented regulations.

As early as the European energy crisis stage in 2022, Portugal had already introduced a similar tax policy on excess profits for oil enterprises. This new policy still needs to be submitted to the Portuguese Parliament for deliberation, and the market generally expects the bill to pass smoothly.

Industry Impact Outlook

In the short term, the windfall tax will directly compress the post-tax profitability of oil refining enterprises in 2026, and the profit expectations of local energy companies like Galp face disruption. In the long run, the restarting of excess profit tax frameworks for energy enterprises by multiple European countries may reshape profit expectations for regional oil and gas companies, forcing enterprises to accelerate their layout of new energy and low-carbon transition projects.