SIFIDE Tax Benefits: How Technology Companies Can Reduce Taxes and Continue to Foster Innovation

Tax incentives for technology companies, such as SIFIDE, are essential for keeping pace with the rapid evolution of the Information and Communication Technologies (ICT) sector. Through this mechanism, companies can reduce taxes and invest more in Research and Development (R&D), increasing their competitiveness in the global market.

SIFIDE - Tax Incentive System for Corporate Research and Development stands out as a strategic tool to transform the innovation effort into a competitive advantage for these companies. In this article, we will address how companies in the technology sector can make the most of this fiscal instrument.

// The Evolution of the Tech Sector in Portugal

In the last five years, Portugal has consolidated itself as one of the main tech hubs in Europe, registering significant progress that has promoted the innovation and competitiveness of technology companies. This growth is driven by a combination of strategic factors, such as government policies focused on digitalisation and innovation, as well as the increase in foreign investment in technology. Although it is not yet the ideal ecosystem for all investors, Portugal stands out for its fiscal attractiveness and the various financial and tax incentives for innovation, such as SIFIDE – Tax Incentive System for Corporate Research and Development, allowing companies to reduce costs and invest in the development of new technologies.

According to the Mapping Investors for European Innovators report, published by the European Patent Office (EPO), Portugal currently ranks 16th among European countries with the most active investors in the tech startup sector, with 1,450 transactions recorded and a total of 3.6 billion euros invested between 2000 and 2023. This sustained growth highlights the country's growing attractiveness to international investors and the dynamism of its entrepreneurial ecosystem, with cities like Lisbon and Porto consolidating themselves as strategic hubs for technological innovation.

The presence of technological multinationals has been another determining factor for the development of the sector in Portugal. Companies like Google, which established a support centre for Europe, the Middle East, and Africa in 2018, and automotive industry giants like Volkswagen and Mercedes-Benz, which created technology centres in Lisbon, demonstrate the confidence of large organisations in the business environment and Portuguese talent. Furthermore, Amazon has been expanding its operations in the country, reinforcing Portugal's role as an attractive destination for technology investments. These movements have contributed not only to the creation of qualified employment but also to the consolidation of a robust innovation ecosystem.

The evolution of technological talent in Portugal has followed this growth trend. According to data from the Tech Nation Report, the number of professionals in the technology sector has increased significantly, rising from 5,200 in 2015 to around 20,700 in 2024. This increase is largely due to the role of universities and training centres, which have been betting on specialised courses aligned with the needs of the global market.

However, despite these advances, the sector still faces important challenges. One of the main obstacles is the need to increase the weight of technology in the Gross Domestic Product (GDP), in order to reach the European average and ensure sustainable long-term growth. The shortage of specialised professionals, mainly in critical areas such as cybersecurity and artificial intelligence, is another factor that requires a strategic response from companies and educational institutions.

The continued commitment to innovation and financing through tax benefits, such as SIFIDE (Tax Incentive System for Corporate Research and Development), assumes a fundamental role in overcoming these challenges, allowing companies to reduce their tax burden and reinvest in innovation projects and the hiring of highly qualified talent.

// How does SIFIDE support the Tech Sector?

The SIFIDE - Tax Incentive System for Corporate Research and Development is an indispensable tax incentive for technology companies in Portugal. It allows companies to deduct up to 82.5% of eligible R&D expenses. This tax deduction covers projects ranging from enterprise software, artificial intelligence, blockchain, or cybersecurity, enabling companies of any size to reduce their tax burden and use the attributed tax benefit to continue investing in innovation and hiring people.

According to data released by the National Innovation Agency (ANI), in the last 5 years, the ICT sector registered an increase of about 40% in the number of approved applications compared to the same period. On the other hand, the average tax credit approved and attributed to Portuguese companies via SIFIDE also increased, going from €201,000 between 2014-2019 to €241,000 between 2019-2024. These data reinforce the increased effort made by Portuguese companies in R&D activities.

To calculate SIFIDE in technology companies, it is important to understand the company's objective, the type of project being developed, and the project's differentiation factor compared to existing solutions in the market. Once these issues are validated, it is necessary to understand the expenses associated with the project or projects under development. In this type of company, and taking into account our experience, expenses such as the following are eligible:

• Salaries of qualified technical teams assigned to the project;
• Operating costs, which can go up to 55% of the cost of the teams;
• Acquisition of patents and registration costs;
• Contracting of R&D services from recognised entities;
• Audits and demonstration actions related to R&D projects.

// Which tech projects can apply for SIFIDE?

In recent years, investor interest in new technologies such as Blockchain, Web 3.0, and Artificial Intelligence has been redefining the paradigm of technological innovation and altering the way we live and work. 

From a B2B point of view, we speak of tools that aim, essentially, to respond to needs such as Cost Reduction, Automation and Process Simplification, mitigating the impact of the lack of qualified labour, supporting the creation of integrated systems for management support and decision making or adapting to trends and end-consumer demands.

From the End User point of view, we speak of tools that adjust to their behaviour. A behaviour marked not only by the consumption experience but also by what is “easy, immediate, and sustainable”, i.e., easy to use, immediate in obtaining answers, and not representing significant harm to the environment.

The combination of all these factors, needs, and technological advances has opened doors to innovation and the development of new technologies and systems. Thus, companies of any size developing R&D projects that can be framed within the following categories are eligible:

1. Enterprise and Corporate Technology

• Enterprise Software - Software solutions for business management (ERP, CRM, process automation, data analysis).
• FinTech – Digital payments, blockchain, cryptocurrencies, and digital credit.
• Real Estate – Property management, smart leasing, and real estate investment analysis.
• Recruitment and Talent – Technology-based recruitment and talent management platforms.
• Legal – Technology applied to the legal sector (LegalTech), process automation, and compliance.
• Hosting – Web hosting services and cloud computing infrastructure.
• Security – Cybersecurity, data protection, and corporate security.

2. Industry and Engineering

• Engineering and Manufacturing Equipment – Solutions for industrial optimisation and process automation.
• Space – Aerospace technology, satellites, and space exploration.
• Semiconductors – Semiconductor development and electronic hardware innovation.
• Consumer Electronics – Smart devices, wearables, and entertainment technology.
• Robotics – Industrial automation, service robotics, and intelligent assistants.

3. Consumer and Lifestyle

• Home Living – Smart homes, residential automation, and sustainable design.
• Fashion – Innovation in fashion, personalised experiences, and supply chain sustainability.
• Kids – Educational platforms and digital entertainment for children.
• Dating – Dating applications and socialisation platforms.

4. Health and Wellness

• Health – Digital solutions for health, telemedicine, and smart medical devices.
• Wellness and Beauty – Fitness applications, health trackers, digital aesthetics, wearables, and online consultation platforms.

5. Energy and Sustainability

• Energy – Technologies for renewable energies and energy efficiency.
• Chemical Products – Innovation in sustainable materials and advanced chemical processes.

6. Media and Entertainment

• Media – Production and distribution of digital content, streaming, and social networks.
• Music – Streaming, copyright management, and new forms of music consumption.
• Gaming – Video game development, virtual reality, and gamification of products and services.
• Event Tech – Technology for events, digital ticketing, and immersive experiences.
• Sports– Performance analysis, smart equipment, and fan engagement solutions.

7. Mobility and Tourism

• Travel – Booking platforms, interactive guides, and personalisation of travel experiences.
• Transport – Urban mobility, autonomous vehicles, and smart logistics.

8. Education and Training

• Education – Online learning platforms, educational management and support tools, and personalised teaching.

// What type of technologies can be used in R&D projects in the tech sector?

Companies intending to benefit from SIFIDE must demonstrate their ability to develop technological solutions that promote efficiency, automation, and innovation, through the integration of business models such as:

1. SaaS (Software as a Service) – Cloud-based software models, allowing access to scalable and flexible business tools and solutions.
2. Manufacturing (Advanced Manufacturing) – Integration of technology into the production chain, such as intelligent automation, robotics, and 3D printing, to optimise processes and reduce costs.
3. Marketplace & E-commerce – Digital platforms that facilitate commercial transactions, connecting buyers and sellers efficiently, using artificial intelligence for personalisation and improvement of the user experience.

From the perspective of the technology adopted in the business models being developed or optimised, the following stand out:

• Artificial Intelligence (AI) – Application of advanced algorithms to automate tasks, analyse data, and provide predictive insights for strategic decision-making.
• Deep Tech – High-impact technologies requiring significant advances in science and engineering, such as quantum computing and nanotechnology.
• Machine Learning (ML) – Automatic learning algorithms that allow systems to continuously improve based on real-time data.
• Big Data – Analysis of large volumes of data to identify patterns, trends, and optimisation opportunities in various business areas.
• Internet of Things (IoT) – Connected devices that communicate with each other, allowing real-time remote monitoring and control of equipment and processes.
• Hardware – Development of physical devices that support innovative technological solutions, such as wearables, sensors, and smart industrial equipment.
• Blockchain – Decentralised technology to ensure security, traceability, and transparency in processes such as digital payments and supply chain management.
• 3D Technology – 3D printing and three-dimensional modelling for the creation of advanced prototypes and product personalisation.
• Augmented Reality (AR) – Technology that overlays digital elements onto the real world, improving experiences in sectors such as retail, tourism, and health.
• Computer Vision – Computer vision systems that allow the analysis of images and videos for facial recognition, pattern detection, and environmental monitoring.
• Recognition Technology– Facial, voice, and biometric recognition technologies applied in security, authentication, and service personalisation.
• Virtual Reality (VR) – Immersive and interactive environments for simulations, training, and entertainment experiences.
• Autonomous & Sensor Tech – Development of sensors and technologies for autonomous vehicles and smart devices that operate independently.
• Connected Devices – Integration of smart connected devices to optimise residential and industrial automation.
• Deep Learning – A subcategory of artificial intelligence that allows the analysis of complex data through deep neural networks.
• Natural Language Processing (NLP) – Processing of natural language for advanced interaction between humans and machines, improving virtual assistants and text analysis.
• Nanotech – Applications of nanotechnology in areas such as health, electronics, and advanced materials for innovative solutions at a molecular scale.
• Quantum Technologies – Quantum computing and quantum cryptography offering new possibilities for data processing and security.

// Tax Advantages for Tech Companies

With SIFIDE, technology companies can benefit from a tax reduction of up to 82.5%, between base and incremental rates, which maximise incentives for Research and Development (R&D) projects.

• Base Rate: 32.5%; however, Small and Medium-sized Enterprises (SMEs) with fewer than 2 years of activity and that have not used the incremental rate receive a 15% uplift.
• Incremental Rate: 50% of the increase in expenses relative to the average of the two previous years, up to 1.5 million euros.

Based on the expenses mentioned in point 2, companies can deduct up to 82.5% of the expenses incurred from their Corporate Income Tax (IRC) liability. The tax benefit is attributed in the form of a tax credit that can be deducted from the CIT liability over 12 years.

The application must be submitted within 5 months after the end of the fiscal year (by 31 May for most companies) and requires a detailed analysis of R&D activities, as well as rigorous documentation.

// Specialised Support from Yunit Consulting

At Yunit Consulting, you can find a specialised team composed of engineers, managers, and finance experts capable of ensuring support throughout the entire application process, which consists of:

• Analyzing and studying in detail the project objectives and the type of technology being used;
• Identifying and validating R&D activities;
• Technical description of the projects;
• Calculation of eligible investments;
• Preparation and submission of the application.

With a technical, financial, and strategic approach, Yunit ensures that companies maximise tax benefits and turn the R&D effort into a lever for sustainable growth.

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Last update: 21 January 2025