In an increasingly competitive global landscape, Portugal has sought to position itself as an attractive destination for business investment. In this context, tax policy has emerged as one of the fundamental pillars for fostering this attractiveness. And what tools does it offer us? What tax benefits for investment exist in Portugal?
Tax benefits, in this scenario, are not merely tax relief instruments: they are strategic levers that can boost innovation, growth and the internationalization of companies.
For entrepreneurs and managers operating in Portugal, understanding and taking advantage of these benefits is not just an opportunity, but an unavoidable necessity: to guarantee optimized tax management and enhanced competitiveness in the market.
In this article, we'll look at some of the main tax benefits for investment in Portugal, namely SIFIDE, REFAI and ICE. If you're interested in finding out all about one of them, read on to discover their characteristics and intrinsic advantages.
SIFIDE - System of Tax Incentives for Business R&D
What is SIFIDE
SIFIDE (Sistema de Incentivos Fiscais à Investigação e Desenvolvimento Empresarial) is an instrument created by the government to encourage investment in areas of innovation and research.
Through this system, companies are encouraged to invest in R&D (Research & Development) activities, with the aim of stimulating innovation, increasing competitiveness and boosting the national economy.
We visited the National Innovation Agency 's website to find out the general guidelines for this benefit. Below you can find them in detail.
How SIFIDE is calculated
SIFIDE includes a base rate for tax deduction from taxable income of 32.5% of R&D expenditure. In addition, an incremental rate of 50% of the increase in this expenditure in relation to the average of the previous two years applies, up to a limit of 1.5 million euros.
In practical terms, this support can mean recovering up to 82.5% of R&D investment. Yes: it's considerable and it will be difficult to find other benefits of this magnitude in the Portuguese tax landscape!
Which R&D activities are covered
The benefit essentially affects two business activities. The expenses considered within its scope are:
- Research expenses: incurred by the IRC taxpayer in order to acquire new scientific or technical knowledge;
- Development expenses: incurred by the IRC taxpayer by exploiting the results of research or other scientific or technical knowledge with a view to discovering or substantially improving raw materials, products, services or manufacturing processes.
But specifically: what expenses are considered for SIFIDE?
Which expenses are eligible
We went back to the ANI website to find out the list of eligible expenses considered for SIFIDE. The list is extensive:
- Expenditure on personnel directly involved in R&D tasks (If a doctorate, this is considered at 120%);
- Operating costs (up to 55% of personnel costs);
- Acquisitions of tangible fixed assets;
- Participation in the capital of R&D institutions and contributions to Investment Funds;
- Cost of registering, acquiring and maintaining patents;
- Expenditure on R&D audits;
- Staff participation in the management of R&D institutions;
- Hiring R&D activities from public entities (or with status) or reputable entities recognized by ANI;
- Expenses for demonstration actions;
- Expenses relating to R&D activities associated with product ecodesign projects are considered at 110%.
- Participation in the capital of R&D institutions and contributions to investment funds.
Who can benefit and how to apply
All IRC taxpayers who carry out an agricultural, industrial, commercial or service activity as their main activity can apply for this support system, provided they meet two cumulative conditions:
- Taxable profit is not determined by indirect methods;
- Who do not owe the Tax Authority or Social Security.
If you're thinking of applying, start here.
What elements must be included in the application form
The application form consists of two parts:
A - Identification of the company in its various quadrants;
B - Characterization of the project(s) and the respective expenses arising from the R&D activities, accompanied by the following set of documents:
- A copy of the non-debt certificates or authorizations to consult the tax and social security situation at the time of the application;
- Copy of the complete corporate tax return for the year in question;
- Annual Report for the year in question (or Analytical Balance Sheet, Profit and Loss Account and Notes to the Balance Sheet and Profit and Loss Account);
- Balance sheets for project cost centers.
End in sight
If you're interested in taking advantage of SIFIDE's tax benefits, remember that there will be major changes starting next year. If your activity falls within the scope of these, it's time to talk to your accountant about taking advantage of this benefit.
REFAI - Investment Support Tax Regime:
The Investment Support Tax Regime is a tax benefit provided for in Decree-Law no. 162/2014 of October 31, which allows companies to deduct a percentage of the investment made in non-current assets (tangible and intangible) from their taxable income.
Shall we find out more about him?
How the RFAI is calculated
We have visited the Incentive Portal to confirm the information in this section. IRC taxpayers are granted the following tax benefits:
- Corporate income tax deduction of the following relevant applications:
- In the case of investments made in the North, Center, Alentejo, Autonomous Region of the Azores and Autonomous Region of Madeira, 25% of the relevant applications for investments up to 5,000,000 euros, and 10% of the relevant applications for the excess;
- Construction, acquisition, repair and extension of any buildings, unless they are manufacturing facilities or are used for tourism, audiovisual production or administrative activities;
- In the case of investments in the Algarve and Greater Lisbon regions, 10% of the relevant applications.
- Exemption from or reduction of IMI, for a period of up to 10 years from the year of acquisition or construction of the property, in relation to buildings used within the scope of investments that constitute relevant applications;
- Exemption from or reduction of IMT on acquisitions of buildings that constitute relevant applications;
- Stamp Duty exemption on acquisitions of buildings that constitute relevant applications.
Which investments fall under RFAI
In general terms, we can consider:
- Tangible fixed assets acquired in new conditionwith the exception of:
- Land, except where it is intended for the exploitation of mineral concessions, natural and spring mineral waters, quarries, clay pits and sand pits in investments in the extractive industry;
- Construction, acquisition, repair and extension of any buildings, unless they are manufacturing facilities or are used for tourism, audiovisual production or administrative activities;
- Light passenger or mixed vehicles;
- Furniture and articles of comfort or decoration, except hotel equipment used for tourism;
- Social facilities;
- Other investment goods that are not allocated to the company's operations.
- Intangible assets, consisting of technology transfer expenses, namely:
- Through the acquisition of patent rights,
- Licenses,
- "Know-how
- Technical knowledge not protected by patent
These may not exceed 50% of the relevant applications, in the case of IRC taxpayers who do not fall into the category of micro, small and medium-sized enterprises.
Who can benefit from RFAI and how to apply
The RFAI is applicable to IRC taxpayers who carry out an activity under the following codes of the Portuguese Classification of Economic Activities, Revision 3 (CAE-Rev.3):
- Extractive industries - divisions 05 to 09;
- Manufacturing industries - divisions 10 to 33;
- Accommodation - division 55;
- Catering and similar - division 56;
- Editing activities - division 58;
- Motion picture, video and television program production activities - group 591;
- Computer programming and consultancy and related activities - division 62;
- Data processing activities, information 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 support service activities for companies - classes 82110 and 82910.
What are the requirements for using RFAI?
IRC taxpayers who meet all of the following conditions are eligible for this incentive:
- Have regularly organized accounts;
- Your taxable profit is not determined by indirect methods;
- Keep the assets invested in the company:
- For a minimum period of three years, in the case of SMEs;
- For five years in other cases;
- If less, for the duration of its minimum useful life;
- Until such time as they are physically scrapped, dismantled, abandoned or rendered unusable;
- They do not owe the State or social security any contributions, taxes or dues, or have duly guaranteed payment of these debts;
- They are not considered to be companies in difficulty under the terms of the Commission communication;
- Make a significant investment that will create jobs and maintain them until the end of the minimum maintenance period for the assets invested in.
What are the RFAI Deduction limits?
The deduction from taxable income respects the following limits:
- Up to competition of the total IRC tax: in the case of investments made in the tax period in which the company commenced business and in the following two tax periods, except when the company is the result of a demerger.
- Up to 50% of the corporate income tax: in all other cases.
Case studies
Let's take a practical example, shared by estrategor.pt:
In 2021, a company purchased production equipment worth 600,000 euros.
For this eligible investment, you can benefit from a tax credit of 150,000 euros (25%).
This credit can be deducted over the following 10 tax years and up to 50% of the IRC collection. Thus, we have
- Collection for the year: €80,000.00
- Maximum deduction: 40.000,00 € (80.000,00 x 50%)
- Tax credit to be deducted: €40,000.00
- Remaining tax credit (to be deducted in subsequent years): €110,000.00 (€150,000.00 - €40,000.00)
ICE - Incentive to Capitalize Companies
The 2023 State Budget Law repealed the Conventional Remuneration of Share Capital (RCCS) tax benefit and the Deduction for Retained and Reinvested Profits (DLRR). In their place, the Incentive for the Capitalization of Companies (ICE) tax regime was created with the aim of simplifying tax incentives for the capitalization of companies.
That's what we're going to talk about in this section.
How the ECI is calculated
The ICE only applies to capital increases made on or after January 1, 2023. It allows the deduction of 4.5% of corporate income tax over a period of ten years. This condition represents an increase in the deduction period compared to the previous regime, which had a maximum of six years.
The ICE covers entries in:
- Cash, at the time of incorporation or capital increase;
- In kind, carried out in share capital increases that correspond to the conversion of credits into capital;
- Share premiums;
- Accounting profits for the tax period when they are applied to retained earnings or directly to reserves or capital increases.
As well as profits applied to retained earnings in reserves, as provided for in the RCCS and DLRR (the benefits repealed by the new budget).
For micro, small and medium-sized enterprises (SMEs) or even a small-medium capitalization company, there is a 0.5 percentage point increase in the deduction rate, bringing it to 5%.
In addition, compared to the previous regime (RCCS), the deduction may not exceed either:
- 2 million euros
- 30% of tax EBITDA
However, this surplus can be deducted over the following five financial years, offering the possibility of using amounts that exceed 30% of EBITDA.
Who can benefit from the ICE
All national companies.
Tax Benefits in Portugal: Conclusion
Tax benefits such as SIFIDE, REFAI and ICE play a vital role in the Portuguese business landscape. By reducing the tax burden, they allow companies to have a more robust cash flow, which can be reinvested in crucial areas such as R&D, infrastructure and training.
From a macro point of view, reinvestment not only boosts the individual growth of each entity: it also makes it more competitive, innovative and resilient to market challenges. I know: this sounds like politician-speak. But without a competitive economy, there are no jobs,no more production and no incentive for innovation...
...there's no money!
From every company's point of view, tax management should not just be an obligation: it should be a strategic opportunity. The tax benefits available, when transformed into productive investment, can be the difference between success and business growth. That's why it's essential for companies to see taxation not just as a duty, but as an instrument for leverage and optimization.
Remember that the tax landscape can be complex, not least because of the constant changes in tax legislation (yes: there should be a long-term agreement on this). Seek expert advice from your accountant. And if you need it, we're here to help.
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