6 de March, 2023
In partnership with BDO, we present below the main tax benefits on income and deduction available to entities subject to Corporate Income Tax (IRC), including those still applicable to the 2022 tax period. See below the topics covered in this article:
TAX BENEFITS
APPLICABLE TO THE TAX PERIOD 2023 AND FOLLOWING
– Investment Support Tax Regime (RFAI)
– Tax Incentive System for Research and Enterprise Development II (SIFIDE II)
– Incentive to the Capitalization of Companies (ICE)
– Tax Incentive to Wage Enhancement
APPLICABLE TO THE 2022 TAX PERIOD
– Fiscal Incentive to Recovery (IFR)
– Deduction for Retained and Reinvested Profits (DLRR)
– Conventional Return on Capital Stock (RCCS)
INCREASE IN ELECTRICITY AND GAS EXPENSES
INCREASE IN AGRICULTURAL PRODUCTION EXPENSES
Recipients: IRC taxpayers who exercise an activity inserted in the following codes of the Portuguese Classification of Economic Activities
(CAE-Rev.3)1:
– Extractive industry (divisions 05 to 09) and manufacturing (divisions 10 to 33);
– Accommodation (division 55);
– Catering and similar activities (division 56);
– Publishing activities (division 58);
– Motion picture, video and television programme production activities (group 591);
– Computer programming, consultancy, and related activities (division 62);
– Data processing, hosting and related activities, and web portals (group 631);
– Scientific research and development activities (division 72);
– Activities of interest to tourism (subclasses 77210, 90040, 91041, 91042, 93110, 93210, 93292, 93293, and 96040);
– Administrative and business support service activities (classes 82110 and 82910).
Scope: Deduction to the IRC collection of investment expenses in non-current assets (tangible and intangible)
Tax advantage:
1) Regions eligible under Article 107(3)(a) of the Treaty on the Functioning of the European Union2:
– 25%3 of the relevant applications, if the value of the investment made is up to the amount of €15,000,000
– 10% of the relevant applications if the value of the investment made exceeds 15.000.000
2) Regions eligible under Article 107(3)(c) of the Treaty on the Functioning of the European Union4:
– 10% of the relevant applications
Eligible investment -ceiling: The regional aid ceilings in force in the region where the investment is carried out must be respected5.
Deduction to the collection: limit 50% of the collection or up to the total competition of the same in the tax period of the beginning of the activity and in the two following periods.
Reporting period 10 years: 10 years
Eligible investment expenditures
– Tangible fixed assets acquired in new condition;
– Intangible assets, constituted by expenses with technology transfer, namely through the acquisition of patent rights, licenses, know-how or technical knowledge not protected by patent;
– Additions of tangible fixed assets or intangible assets, verified in each taxation period, which translate into additions to the investments in progress6.
Ineligible investment expenses
– Land, except in the case of mining concessions, natural mineral waters and springs, quarries, dams and sand pits in extractive industry investments;
– Construction, acquisition, repair, and expansion of any buildings, except if they are manufacturing facilities or used in tourism, audiovisual production, or administrative activities;
– Light passenger or mixed vehicles;
– Furniture and articles of comfort or decoration, except for hotel equipment used in tourism;
– Social equipment;
– Other investment goods that are not allocated to the operation of the company.
Restrictions:
– Realization of relevant investment that provides job creation and its maintenance until the end of the minimum period of 3 years, in case of micro, small or medium enterprises, or 5 years in other cases;
– Maintenance in the company and in the region for a minimum period of 3 years from the date of investment, in the case of micro, small, or medium-sized companies, or 5 years in other cases, of the goods object of the investment or, when less, for the respective minimum useful life period, determined in accordance with DR no. 25/2009, of September 14, or until the period in which the respective physical slaughter, dismantling, abandonment, or unusability takes place, observing the rules foreseen in article 31º-B of the IRC Code;
– Does not apply to companies considered to be in difficulty in accordance with the Commission communication – Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty, published in the Official Journal of the European Union, No C 249, of 31 July 2014.
Recipients: IRC taxpayers resident in Portuguese territory who carry out, as their main activity, an activity of an agricultural nature,
industrial, commercial and services activities and non-residents with a permanent establishment.
Scope: Deduction of Research and Development (R&D) expenses from IRC taxable income1.
Tax Benefit: Corresponding to the value of R&D expenses, on a double percentage basis
– Basic rate: 32.5% of the R&D expenses made in the period2
– Incremental Rate: 50% of the increase of R&D expenses in the period in relation to the simple arithmetic average of the two previous fiscal years, up to a limit of 1.500.000
Eligible investment – limit: 1.500.000€ in relation to the incremental rate.
Deduction to the collection – limit: 100% of the collection.
Reporting period: 8 years
– Tangible fixed assets, provided they are created or acquired in new condition and in proportion to their allocation to R&D activities;
– Expenditure on staff with a minimum academic qualification of level 4 of the National Qualifications Framework (12th year of schooling), directly involved in R&D tasks. If the expenses refer to personnel with a minimum doctoral level education, they are considered at 120%;
– Expenses with the participation of managers and executives in the management of R&D institutions;
– Operating expenses, up to a maximum of 55% of the expenses with staff with a minimum schooling level of 12th grade directly involved in R&D tasks accounted for as remuneration, wages or salaries for the year;
– Expenses related to contracting R&D activities with public entities or entities benefiting from the status of public utility or entities with recognized good standing for R&D;
– Participation in the capital of R&D institutions and contributions to public or private investment funds, aimed at financing companies dedicated mainly to R&D, whose suitability in terms of R&D is recognized by the National Innovation Agency, S. A.
Eligible investment expenditures
– Patent registration and maintenance costs;
– Patent acquisition, registration and maintenance costs that are predominantly for R&D activities (only applicable to micro, small and medium enterprises);
– Expenses with R&D audits;
– Expenses with demonstration actions arising from supported R&D projects.
Ineligible investment expenditures
– Buildings and land
Companies: Taxpayers who, during the period in question, exercise, as their main activity, a commercial, industrial or agricultural nature.
Scope
Deduction from taxable income of the amount corresponding to net increases in eligible equity capital, namely increases in eligible equity capital after deduction of outflows, in cash or in kind, in favor of the holders of the capital, by way of capital reduction or asset sharing, as well as distributions of reserves or retained earnings.
Tax benefit: 4.5% (or 5% in the case of micro, small or medium enterprise or Small Mid Cap) of net increases in eligible equity capital1, namely:
– Cash contributions;
– Contributions in kind (conversion of loans into capital);
– Share premiums;
– Profits for the fiscal year.
Limit: The deduction cannot exceed, in each tax period, the greater of the following limits
– 2,000,000 euros or
– 30 % of the result before depreciations, amortizations, net financial costs and taxes
Recipients: IRC or IRS taxpayers with organized accounting
Scope: Increase of the charges corresponding to the wage increase determined by a dynamic1 collective bargaining agreement for employees with an open-ended employment contract, accounted for as a cost of the tax period
Tax benefit: 50% increase in the amounts paid by the employer to the employee, as fixed remuneration and social security contributions payable by the same entity, provided that:
(a) relating to employees whose remuneration has increased by at least 5.1% between the last day of the
of the tax period of the fiscal year in question and the last day of the tax period of the previous fiscal year; and
(b) workers whose remuneration is higher than the minimum monthly guaranteed remuneration (RMMG) applicable on the last
day of the tax period of the period in question.
Benefit limit: 4 times the RMMG per worker
– Taxpayers for which there is an increase in the workers’ salary range2 in relation to the previous year
– Employees that are part of the employer’s household
– Members of the corporate bodies of the IRC taxpayer
– Employees who directly or indirectly hold no less than 50% of the share capital or
of the voting rights of the IRC taxpayer
It includes non-negotiable Collective Agreements (Portarias de Extensão), which are a way for the Government to determine that the scope of application of a given collective agreement or arbitration award in force can be applied, in whole or in part, to employers and employees within the scope of the activity and professional sector defined in that instrument.
Click here and use the tool to search for collective agreements.
Recipients: IRC taxpayers who primarily exercise an activity of a commercial, industrial or agricultural nature.
Scope: Deduction from IRC taxable income of investment expenses in assets allocated to operation, which are made between July 1 and December 31, 2022.
December 31, 2022.
Tax Benefit:
– 10 % of the eligible expenses incurred in the taxation period up to the amount corresponding to the simple arithmetic average of the
eligible investment expenses of the three preceding tax periods;
– 25 % of the eligible expenses incurred during the tax period in the part exceeding the limit foreseen above.
Eligible investment – limit: 5 000 000 euros.
Deduction to the collection – limit: 70% of the collection.
Reporting period: 5 years.
Eligible investment expenditures:
– Tangible fixed assets1;
– Non-consumable biological assets1;
– Development projects2;
– Industrial property (such as patents, trademarks, permits, production processes, models, or other similar rights, acquired for valuable consideration and
rights, acquired for valuable consideration and whose exclusive use is recognized for a limited period of time).
Ineligible investment expenses:
– Light passenger or mixed vehicles, pleasure boats and tourist aircraft, except when such goods are assigned to the operation of the public transport service or are intended for rental or assignment of their use or enjoyment in the exercise of the taxpayer’s normal activity;
– Furniture and articles of comfort or decoration, except when affected to productive or administrative activity;
– Construction, acquisition, repair and expansion of any buildings, except when affected to productive or administrative activities.
Restrictions:
The beneficiary may not terminate employment contracts for three years, counted from the first day of the seventh month of the taxation period in which the eligible investment expenses are incurred, under the modalities of collective dismissal or dismissal by termination of employment, provided, respectively, in Articles 359 et seq. and 367 et seq. of the Labor Code;
The beneficiary cannot distribute profits for three years, counting from the first day of the seventh month of the tax period in which the eligible investment expenses are incurred.
Recipients: IRC taxpayers resident in Portuguese territory who exercise, as their main activity, an activity of an agricultural, industrial, commercial and services nature and non-residents with a permanent establishment, who qualify as a micro, small or medium enterprise.
Scope: Deduction to the income tax of retained profits that are reinvested in relevant applications under the scheme (obligation to set up a reserve in the Balance Sheet that is unavailable for a period of 5 years)
Tax benefit: 10% of retained earnings that are reinvested in relevant applications
Eligible investment – limit: 12 000 000 euros
Deduction to the collection limit:
– Medium Enterprises: 25% of collection
– Micro and Small Enterprises: 50% of collection
Reporting period: Not applicable
Eligible investment expenditures:
– Tangible fixed assets acquired in new condition
– Intangible assets, constituted by expenses with technology transfer, namely, acquisition of patent rights, licenses, know-how or technical knowledge not protected by patent, as long as they are amortized for tax purposes and are not acquired from an entity with special relations
– Additions of tangible fixed assets or intangible assets, verified in each taxation period, which translate into additions to the investments in progress
Ineligible investment costs:
– Land, except when intended for the exploitation of mineral concessions, natural and spring mineral waters, quarries, clay pits and sand pits in extractive industry projects;
– Construction, acquisition, repair, and expansion of any buildings, except when affected to productive or administrative activities;
– Light passenger or mixed vehicles, except when assigned to the operation of public transport service or intended to be rented in the exercise of normal activity of the taxpayer, pleasure boats and tourist aircraft;
– Articles of comfort or decoration, except for hotel equipment used in tourism;
– Assets used for activities under concession or public-private partnership agreements with public sector entities.
Recipients: Commercial or civil companies under commercial form, cooperatives, public companies, and other legal entities under public or private law.
Scope: Deduction from taxable income of the amount corresponding to the agreed return on capital, calculated by applying a rate of 7% to the amount of contributions made;
Tax Benefit: 7% of the increase in capital stock1 as a result of:
– Cash contributions;
– Contributions in kind (conversion of credits into capital);
– Profits from the fiscal year itself.
Limit of increase: 2 000 000 euros.
Limitation:
The beneficiary company is prevented from reducing its share capital with restitution to the shareholders, either in the tax period in which the relevant contributions for the purposes of the conventional remuneration of share capital are made, or in the following five tax periods.
Deduction period: 6 years.
Tax Incentive
Increase in 20% (for the purposes of determining the Taxable Profit) of the expenses and losses incurred or supported related to the consumption of electricity and natural gas, exclusively in the part exceeding those of the previous taxation period, deducted of any support received
under the terms of Decree-Law no. 30-B/2022, of April 18.
Exclusions
SPs that engage in activities that represent at least 50% of the turnover in the field of:
(a) Production, transmission, distribution and trade of electricity or gas;
b) Manufacture of petroleum products, refined or from waste, and of agglomerated fuels.
Tax Incentive
Increase in 40% of expenses incurred in the acquisition of goods related to agricultural production activities.
Eligible Expenditures
– Fertilizers, organic and mineral correctives;
– Flours, cereals and seeds, including mixtures, residues and wastes from food industries, and any other products suitable for the feeding of livestock, poultry and other animals, referenced in the Codex alimentarius, regardless of breed and functionality in life, intended for human consumption;
– Water for irrigation;
– Glass bottles.
Material authored by BDO, an Atlantic Bridge partner.
Author:
Atlantic Bridge
