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Tax Benefits represent a strategic opportunity for Portuguese companies to reduce their tax burden and use the tax deduction as a driver for growth.
By understanding how to strategically utilise these incentives, entrepreneurs can not only optimise their tax situation but also manage existing resources more efficiently, allocating them to crucial areas such as innovation, modernisation, and competitiveness.
It is essential for entrepreneurs, managers, and financial directors to be well-informed about these benefits and aware of their importance for sustainable and competitive growth. This article provides a detailed overview of everything entrepreneurs need to know about tax benefits.
Table of Contents
Tax benefits are extraordinary measures implemented by the government aimed at reducing the tax burden on Portuguese companies that contribute to strategic and socially relevant objectives, such as innovation, research, job creation, and sustainability.
These measures support and promote investment in essential economic sectors, foster sustainable growth, strengthen competitiveness, and encourage regional development.
By providing “tax relief,” tax benefits represent a clear opportunity for companies to legally and strategically optimise their tax management.
The importance of tax benefits for companies is largely defined by the strategic vision of the business owner and the future goals set for the organisation. For some, these incentives are an opportunity for investment and expansion; for others, they are merely a tax relief measure, lacking strategic direction.
When tax benefits are seen as a strategic opportunity to transform part of the tax burden into tax credits that strengthen the company’s growth, we are looking at an organisation that maximises not only its income but also the tax on that income. This tax relief can be strategically applied to foster innovation, expand operations, and enhance processes, contributing to value creation and increased competitiveness.
On the other hand, companies that are unaware of the importance of these benefits may use them sporadically, benefiting from tax credits only for ad hoc investments, without translating into a long-term strategic application. Such an approach often leads to stagnation, compromising the potential for growth and differentiation in the market.
Overall, tax benefits provide a valuable opportunity for companies to reinvest part of their tax burden into their own development. By doing so, they not only improve their competitive position but also contribute to regional and national economic growth, establishing themselves as drivers of growth and innovation.
The Fiscal Support Regime for Investment (RFAI) allows companies to deduct a percentage of corporate income tax (IRC) based on investments made in tangible and productive assets, such as machinery, buildings, and equipment necessary for productive activity. This incentive is aimed at companies that plan to grow through investments in infrastructure and productive equipment, promoting modernisation and value creation.
The Tax Incentive System for Business Research and Development (SIFIDE II) is an incentive directed towards companies that make investments in Research and Development (R&D). This benefit allows companies to deduct from IRC the expenses associated with R&D, such as costs for technical personnel, laboratory materials, patent acquisition, among others.
Recently introduced, the Business Capitalisation Incentive (ICE) allows companies to deduct a percentage based on net capital increases.
To determine if your company is eligible for tax benefits, it is important to follow a systematic approach and consider various factors. Here are the main steps and criteria to analyse:
The first step is to verify if your company’s activity sector is included in the eligible CAE (Portuguese Classification of Economic Activities) codes for tax benefits. Commonly covered sectors include:
After confirming that the sector is eligible, check if your company meets the general eligibility conditions:
Identifying eligible activities is crucial to determining the investments eligible for the calculation of the benefit to be assigned. In some cases, it is easier to identify the investments made, as is the case for companies with ongoing projects under PT2030. However, there may be other investments outside this scope that can be used to calculate the benefit, which is not always easily identified. The expertise of a specialised team can make a significant difference in maximising these benefits.
Similarly, some companies engage in daily innovation and R&D activities but are unaware of it. This is because the concepts of innovation and R&D are often perceived as highly complex and beyond the reach of Portuguese companies, especially SMEs. This mindset is one of the main factors that prevents many companies from accessing these tax benefits. Developing a new product or service, introducing improvements to an existing product, purchasing patents or registrations, and developing tools to optimise and improve internal processes are examples of activities that may be eligible for tax benefits.
The fact that Yunit is a Portuguese SME allows us to understand closely the challenges and needs of Portuguese entrepreneurs. This proximity has led us to invest in creating multidisciplinary teams capable of understanding each business’s specificities, thus playing a strategic role in the growth of Portuguese companies. From Engineering, covering fields such as Nanotechnology to Biomedicine, to Finance, Economics, and Management, this investment in knowledge diversification has already allowed us to optimise over 50 million euros where Innovation and R&D were not easily recognised.
Unlike SIFIDE, RFAI and ICE do not require a formal application. However, completing form 22 is necessary, and in the specific case of RFAI, a fiscal dossier must be prepared that details the project and respective investments used for calculating the tax benefit.
For SIFIDE, an application must be submitted and is subject to review by the National Innovation Agency (ANI). Preparing the application involves identifying all R&D activities undertaken by the company and the associated R&D expenditure. Once the R&D projects are identified, a descriptive memory of each project must be created, and all expenses allocated to these projects must be documented. Then, the application form is filled out, the necessary documents are attached, and the application is submitted on the designated platform.
Here is a summary of the process we follow with our clients to outline the various phases until the respective tax benefit is calculated:
Once form 22 is filled out, the tax payable and the corresponding tax deduction are calculated. At this point, part or all of the tax must be deducted, and any remaining balance is carried over as tax credit for subsequent years. In the case of RFAI, the tax deduction is limited to a maximum of 50% in the first year, except for companies less than 3 years old, while with SIFIDE, the full tax amount can be deducted.
Consider the case of João’s company, which calculated a Tax Benefit of €200,000 and a corporate income tax of €100,000. In this situation, João can use the tax credit in the first year to cover the tax owed and still have a remaining tax credit of €100,000 to carry forward to subsequent years.
By utilising tax benefits, the company not only reduces the tax it would otherwise have to pay but also increases financial resources for investing in areas critical to sustainable and competitive growth. This strategy helps thousands of companies in Portugal every year to turn corporate income tax into investment. At Yunit, over the past 5 years, we have successfully completed over 500 processes, resulting in an IRC reduction valued at over 60 million euros.
While it is possible for a company to seek tax benefits independently, hiring a specialised consultancy, such as Yunit Consulting, can make a significant difference in maximising results and ensuring compliance with all legal and tax requirements.
Yes, it is possible to benefit from tax incentives annually, provided that the company meets the criteria for each incentive. Incentives such as SIFIDE, RFAI, and ICE can be used every year if the company continues to invest and submit the required documentation.
The period to benefit from the tax credit can extend up to 12 years, depending on the type of tax benefit and current legal provisions.
The Deduction for Retained and Reinvested Earnings (DLRR) was a tax benefit designed to encourage SMEs to reinvest their profits in assets that drive growth. However, with the approval of the 2023 State Budget, the DLRR was repealed and replaced by the Business Capitalisation Incentive (ICE).
The documentation must be submitted with form 22 for ICE and RFAI, and with the application for SIFIDE. This should be delivered by the end of the 5th month of the year following the close of the financial year, generally by 31 May 2025.
Yunit has invested in creating multidisciplinary teams capable of understanding each business’s specificities, thus playing a strategic role in the growth of Portuguese companies.
Today, our teams comprise specialists in Management, Finance, and various Engineering fields, including Electronics, Mechanics, Chemistry, Biomedical, Nanotechnologies, Biomaterials, Environmental, Materials, and Agronomy, among others, and have already helped companies across over 30 different sectors optimise over 100 million euros invested in Innovation and R&D activities.
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Last updated: 5 November 2024
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