Tax Incentives

PATENT BOX

Although the Patent Box has been a tax incentive available since 2014, there has been little adoption by Portuguese companies. Analyzing the Tax Authority report for the 2020 fiscal year, only 16 companies used this incentive.

In fact, all companies with income from certain industrial property rights, such as patents, industrial designs or models, and copyrights on Software, can see the taxation of income from these assets reduced by half.

SIFIDE

The System of Tax Incentives in Business Research and Development (SIFIDE) allows companies to deduct up to 82.5% of R&D expenses from the amount collected.

Expenses that, due to insufficient collection, cannot be deducted in the year in which they were incurred, may be deducted up to the 8th immediate year.

Applications must be submitted by the end of May of the year following the investment.

Recognition of suitability for R&D practice

The recognition of suitability for the practice of Research and Development (R&D) activities is awarded by the National Innovation Agency and can be considered a factor of differentiation and appreciation of entities in the market, proving their competence to carry out research activities. R&D.

RFAI

The Investment Support Tax Regime (RFAI) allows companies to deduct up to 25% of the investment made in non-current assets (tangible and intangible) from the value of the tax collected.

Exemptions or reductions in IMI, IMT and Stamp Tax are also granted in relation to the acquisition of buildings that constitute a relevant investment.

Funds that, due to insufficient collection, cannot be deducted in the year in which they were made, may be deducted up to the 10th immediate year.

DLRR

The DLRR is a tax benefit that allows companies to deduct from IRC collection up to 10% of retained profits that are reinvested in relevant applications, within four years from the end of the tax period to which the retained profits correspond.

For micro and small companies, the deduction may be up to 50% of the collection. For medium-sized companies, it can reach 25% of IRC collection. The maximum amount of retained and reinvested profits, in each tax period, is €12,000,000, per taxpayer.

CFEI

CFEI II is a tax benefit that corresponds to a deduction from IRC collection in the amount of 20% of investment expenses in assets allocated to exploration, which are made between July 1, 2020 and June 30, 2021.

The maximum accumulated amount of eligible investment expenses is €5,000,000, per taxpayer, with the expected deduction being made in the settlement of IRC for the tax period beginning in 2020 or 2021, up to 70% of the collection. of this tax, depending on the relevant dates of eligible investments.

TAX INCENTIVE FOR RECOVERY

The Tax Incentive for Recovery (IFR) is assumed to be a continuation of CFEI II. Although, in essence, the criteria and conditions of these two tax incentives are very similar, the IFR contains a set of particularities.

In practice, it is applicable to investments made between July 1st and December 31st, 2022, corresponding to a deduction from the collection of 10% and 25%, respectively, of the investment in eligible expenses up to the amount corresponding to the simple arithmetic average of the expenses of eligible investment from the three previous tax periods, and investment in eligible expenses that exceeds that limit. The calculated tax credit may be deducted up to a limit of 70% of the IRC collection.

With regard to conditions, it is worth highlighting (i) the obligation not to terminate employment contracts, under the terms of collective dismissal or due to the termination of the job, and (ii) the freezing of the distribution of dividends for three years .