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The Portuguese industrial sector has established itself as one of the pillars of the national economy, driving growth, innovation, and job creation. Despite facing significant challenges, such as dependence on raw materials and the need for modernisation, the industry has demonstrated remarkable resilience, with traditional and emerging sectors reinventing themselves to compete in a globalised market.
In this context, tax benefits emerge as crucial instruments to boost the competitiveness and sustainability of industrial companies, allowing them to reduce the tax burden and reinvest in strategic areas. Incentives such as RFAI, ICE, and SIFIDE offer unique opportunities for companies that bet on innovation, energy efficiency, and the development of new technologies.
In this article, we explore the main financial and tax opportunities available for the industrial sector, the eligible sectors, the critical success factors in using these benefits, and answer the most frequently asked questions that many companies have on the subject.
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The Portuguese industrial sector plays a vital role in the national economy, representing approximately 20% of the Gross Domestic Product (GDP) and employing over 600,000 people. This significant contribution underlines the importance of industry as an essential pillar for the country's economic growth.
In recent years, the Portuguese industry has demonstrated resilience and adaptability in the face of global challenges. Globalisation and geopolitical instabilities have highlighted the need for continuous modernisation and innovation. Traditional sectors, such as textiles and footwear, have reinvented themselves, standing out for the sustainability and quality of their products. Digitalisation and artificial intelligence have become essential tools to address current challenges, including climate change.
Furthermore, it has recorded notable milestones, such as the record in exports of automotive components, which in April reached 1,100 million euros, an increase of 11% compared to the previous year. The footwear sector also has reasons to celebrate, with Portugal surpassing Spain, becoming the second-largest European producer, with 85 million pairs of shoes produced in 2022.
However, there are also challenges: the dependence on the non-EU market for raw material supply means that costs with this supply represent 53% of the turnover of the manufacturing industry in Portugal, while the scarcity of critical raw materials also boosts this price increase.
Therefore, it is increasingly relevant to reduce consumption, develop and implement more efficient processes, improve competitiveness and assume a strong positioning in supply chains, such as those for batteries, electronics, and high-performance material.
And this can only be achieved with a strong bet on innovation and research & development (R&D) so that we can keep up with other European countries in this matter.
The good news is that this bet on the growth and competitiveness of the industry can be boosted and maximised through financial instruments, such as Portugal 2030 or the Recovery and Resilience Plan (RRP), and/or fiscal ones, such as RFAI (Tax Regime for Investment Support) or SIFIDE (Tax Incentive System for Corporate Research and Development).
The Industry in Portugal has various forms of financial support to boost its growth and competitiveness. Among these, non-repayable funding programmes stand out, such as Portugal 2030 and the Recovery and Resilience Plan (RRP), as well as specific tax benefits for the sector.
Portugal 2030 is the framework programme resulting from the partnership agreement between Portugal and the European Commission that establishes the priorities for the application of European funds in the country for the period from 2021 to 2027. This programme makes available about 23 billion euros to support projects that promote the competitiveness, innovation, and sustainability of the Portuguese economy.
Opportunities for the following Incentive systems stand out:
The RRP is a national application programme, with an execution period until 2026, which aims to implement a set of reforms and investments designed to restore sustained economic growth, after the pandemic, reinforcing the goal of convergence with Europe over the next decade.
In addition to the available funding opportunities, companies can enjoy tax benefits that allow reducing the tax burden and encouraging investment in strategic areas.
Unlike the Incentive Systems of Portugal 2030 and the RRP, which mark the intention of an investment to be made in the future (after the submission of the application), tax benefits apply to investments already made by the company. In other words, in practice, companies that have made productive investments, investments in R&D activities, and/or reinforcement of equity can benefit from tax relief that can reach up to 82.5% of the CIT collection.
In the case of SIFIDE and RFAI, the best part of these tax incentives is the fact that they can also apply to investments made in projects that are being financed either by Portugal 2030 or by the RRP. However, in the case of RFAI, the maximum support limit for the region where the company is located cannot be exceeded. Thus, RFAI and SIFIDE are undoubtedly an opportunity for companies to benefit from tax relief and be able to continue investing in innovation with a view to sustainable and competitive growth.
On the other hand, ICE no longer applies to investments related to productive activities and/or research activities, but rather with a view to reinforcing the company's equity. This tax benefit represents an opportunity to stimulate the financial reinforcement of companies, making them more financially independent and more competitive.
For the funding and tax opportunities mentioned above, the following industrial activity sectors are eligible:
It is essential that companies verify the specific eligibility criteria for each tax benefit, ensuring that their activities and investments fall within the established conditions.
To maximise tax benefits, companies should consider:
Unlike SIFIDE, RFAI and ICE do not require an application. However, it is necessary to fill in Model 22 and in the specific case of RFAI it is necessary to prepare a tax dossier with all the necessary documentation evidencing the investments made and proving the requested tax benefit.
In the case of SIFIDE, the submission of an application is required, which will be analysed by the National Innovation Agency (ANI). To prepare the application, a survey of all R&D activities carried out by the company and the respective associated R&D expenditure must be carried out. Once the R&D projects are identified, it will be necessary to prepare the descriptive memory of each project and associate all expenditure with each of these projects. Then, the application form is filled in, the necessary documents are attached, and the application is submitted on the proper platform.
Once Model 22 is filled in, it contains the tax to be paid and the deduction from the collection of the respective tax benefit. At this moment, it is mandatory to deduct part or all of the collection and the remainder carries over as tax credit for the coming years. In the case of RFAI, the deduction from the collection is limited to a maximum of 50% in the first year, except for companies up to 3 years from their constitution; whereas in SIFIDE, the entire collection can be deducted.
Let's think about the case of João's company, which managed to calculate a Tax Benefit of €200,000 and a CIT collection of €100,000. In this situation, João, in the first year, can use the tax credit to settle the amount referring to the tax and still has a remaining tax credit in the amount of €100,000 that carries over to subsequent years.
Although it is possible for a company to seek tax benefits autonomously, resorting to a specialised consultancy, such as Yunit Consulting, can make all the difference to maximise results and ensure that all legal and fiscal requirements are met.
Yes, it is possible to enjoy tax benefits 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 necessary documentation.
The period to benefit from the tax credit can reach up to 12 years, depending on the type of tax benefit and the legal provisions in force.
At Yunit Consulting, we transform tax benefits into instruments of growth and competitiveness for companies. With more than 100 million euros optimised in innovation and R&D activities, we support companies from more than 30 sectors in identifying opportunities that often go unnoticed in day-to-day life.
What distinguishes us is the ability to go beyond simple tax reduction. We assume a strategic role, helping companies transform their activities into competitiveness factors, promoting investment in innovation, and preparing them for a more sustainable future.
Our multidisciplinary team is composed of specialists in Management, Finance, and Engineering from areas such as Electronics, Chemistry, Biomedical, Environmental, among others, ensuring a technical and personalised approach to each business. This diversification of knowledge allows us to understand the specific challenges of each sector and offer solutions that combine rigour, transparency, and proven results.
At Yunit, we believe that tax benefits are not just a relief on the tax burden, but an opportunity for companies to make the leap to a more competitive and innovative future. If you value a partner that combines technical knowledge, strategic vision, and focus on success, Yunit Consulting is the answer.
Contact us and discover how we can help your company transform challenges into opportunities.
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Last update: 11 November 2024
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