Corporate Income Tax

Deduction for reinvestment of retained earnings (DLRR)

It is now allowed reinvesting retained earnings in relevant applications within four years computed from the end of the tax year concerned (formerly, three years).

The maximum amount of retained earnings to reinvest was increased to EUR 12 million (formerly EUR 10 million).

Intangible assets, corresponding to the transfer of technology namely the acquisition of patent rights, licenses, know-how or technical knowledge not protected by patent, are now considered as eligible investment if they are amortizable for tax purposes and are not acquired from related parties.

The tax credit derived from assets acquired under financial leasing depends on the exercise of the call option within seven years computed from the date of the acquisition (formerly five years).

The amendments to the rules for reinvestment and to the exercise of the call option apply to ongoing periods from the first day of the 2020 tax period.

R&D tax incentive scheme (SIFIDE II)

SIFIDE II is extended until 2025 (formerly applicable until 2020).

Amendments have been introduced to the rules on the eligibility of contributions to public or private investment funds which invest predominantly in R&D companies, as follows:

• There  is obligation to maintain the participation units in these funds for a 5-year period; lack of compliance implies the payment of the amount of tax that would have been due if the benefit would not apply (payment is due in the year of the sale), plus late assessment interest;
• In order to assess the investment made, the investment fund management companies must send on annual basis to the National Innovation Agency (“Agência Nacional de Inovação, S.A.”), by 30 June, the last audited annual report, as well as a document (portfolio or other) with evidence of the investments made by the fund in the previous tax year; these entities may also request from the National Innovation Agency the issuance of a statement of compliance of the investment policy foreseen in the fund management regulation, however this statement is not binding in respect on the tax eligibility of the contributions;
• The recognition by the National Innovation Agency of the nature of R&D shall be made in relation to entities and not in relation to the investment projects.

Legislative authorisations

Inland Valuation Program

The Government is granted authorisation to introduce a tax benefits scheme corresponding to a tax credit of 20% of the costs incurred with the creation of jobs in inland regions that exceed the national minimum wage, capped at the tax due in the tax year concerned. This legislative authorisation relies on the authorisation from the European Union to expand the regional aid scheme.

Incentives to internationalization

The Government is granted authorisation to introduce tax benefits to activities aiming at promoting SME, with the purpose of internationalising their products and activities, access to markets and enhancement of the national products.

Deduction for reinvestment of retained earnings (DLRR)

The Government is granted authorisation to extend the list of beneficiaries and eligible investments under the DLRR tax benefits scheme. The proposal foresees that the acquisition of shareholdings in companies whose main statutory object is substantially identical to that of the acquiring company is considered as eligible investment, if through the acquisition the acquiring company has the majority of the share capital with voting rights, as well as the completion, within a 3-year period, of a business restructuring (namely a merger of companies or an asset deal).

Additionally, the Government is granted authorisation to incorporate within the scope of the DLRR tax benefits scheme Small Mid Cap companies, i.e. those employing less than 500 people.

This legislation authorisation relies on the authorisation from the European Union to expand the regional aid scheme.