Corporate Income Tax (IRC): Do you know how to reduce the amount you pay? 5 questions and answers about tax benefits for companies.

Are you up to date with all the tax benefits available to save on Corporate Income Tax (IRC)? 

If your company's fiscal year end coincides, as in most cases, with the calendar year, by now you already know how much IRC (Corporate Income Tax) you have to pay and, probably, have even already settled it.

But is it the case that: 

• In the year 2022, you made investments that would allow you to enjoy tax benefits, consequently leading to a reduction in the IRC you had to pay?
• You took advantage of a tax benefit, but are you maximising the use of all available benefits?

Knowing the main tax instruments for investment support can make the difference in your company's treasury and, therefore, we answer 5 fundamental questions so you can act in an informed manner and optimise your investments.

1. What are Tax Benefits?

Much is said about Tax Benefits, the numbers, the various typologies, their advantages, but the essential point is not always given due prominence: all Tax Benefits require a well-founded justification that must be included in each company's Tax Dossier or in the respective application, in the specific case of SIFIDE.
In practice, tax benefits for investment support - which can also be cumulative with financial incentives - correspond to a reduction of the tax payable in return for investment made. 

How to avoid surprises and increase the probability of saving on IRC through these tax instruments? It is essential to count on the help of specialised professionals to maximise the generation of income and, in this way, allow companies a return on their investments and a reinforcement of their treasury.

2. Which Tax Benefits are most relevant for investors?

1. Contractual Tax Benefits for Productive Investment (BFCIP)
2. Tax Regime for Investment Support (RFAI)
3. Tax Incentive for Recovery (IFR) *New*
4. Deduction for Retained and Reinvested Profits (DLRR)
5. Tax Incentive System for Business Research and Development (SIFIDE II)
6. Tax benefits applicable to Interior Territories
7. Patent Box

Did you know there is a new Tax Benefit for companies? Yes, it is true! It is called "Tax Incentive for Recovery (IFR)" and is applicable to investments made between 1 July and 31 December 2022, up to a limit of €5M, per taxable person.  

The IFR presents several similarities with the Extraordinary Investment Tax Credit II (CFEI II) but has some specificities that we share in this article, highlighting the fact that it allows the deduction from the IRC payable of up to 25% of new investment expenses. 

>>> Want to know more? Download our Free E-book “Guide to Investment Tax Benefits” now, where you will find everything you need to know to invest knowledgeably.

3. These tools can translate into substantial gains in terms of competitiveness for any company. How?

1. They encourage innovation and allow for accelerating investments;
2. They stimulate Research and Development activities;
3. They promote the valuation of Industrial Property and Copyright;
4. They favour the reinforcement of company capital;
5. They apply to productive and innovative investment;
6. They are possible to be used for an extended period;
7. They are cumulative with financial incentives (PT2020 / PT2030 / PRR).

4. What are the essential conditions to access Tax Benefits?

The attribution of Tax Benefits depends on compliance with specific requirements defined for each benefit. However, some conditions are transversal, namely:

1. Having organised accounting;
2. Not being considered a “company in difficulty”;
3. Having a regularised situation with the Tax Authority and Social Security;
4. Taxable profit being determined by direct methods. 

Each tax benefit is characterised by distinct specific eligibility conditions, making it essential to perform a diagnosis, not forgetting, in the end, the preparation of the legally required tax documentation.

5. Tax Benefits for companies: what is the most relevant date? 31 May

• Submission of Model 22: Since all values determined, in the various benefits, will have to be entered in the declaration, in fields specific to each benefit.
• Submission of SIFIDE application: in which the description of R&D activities developed by the company in the fiscal year in question is performed and the respective expenses are determined.

Notes: For companies closing the fiscal year on 31 December; dates updated as of March 2023; these deadlines may undergo changes.

We leave you with a challenge

We have helped companies of different sizes and activity sectors to be more competitive because we know their challenges regarding the correct applicability of Tax Benefits closely.

Would you like to see some of these topics clarified?

• Which Tax Benefits can I enjoy?
• Which tax benefit is most favourable for the investments my company has made?
• What are the consequences of using one or another of the Tax Benefits?
• What are the eligibility and applicability conditions?
• Given my investments, are there Tax Benefits that are cumulative? 

If you answered YES, we can schedule a small meeting to clarify these topics and provide you with a free Tax Framework Diagnosis without any commitment. 

At Yunit, we support companies in making better financial decisions so that they can make the qualitative leap they aspire to in their growth.

Shall we talk?

YUNIT ACCOMPANIES YOU THROUGHOUT THE PROCESS

For more information, schedule a meeting with our specialists via number: 21 330 72 02, or send your questions to the email: contacto@yunit.pt