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1 - Tax Incentive Regime for Capitalisation of Companies (ICE)
The new Tax Incentive that appeared recently (SB 2023) has undergone further changes, highlighting that the deduction will now be calculated based on a variable rate, indexed to the 12-month Euribor average rate (instead of a fixed rate), plus a spread of 1.5 p.p. (2 p.p. if SME or Small Mid Cap). The deduction is further increased by 50%, 30%, and 20% in 2024, 2025, and 2026, respectively.
The incentive's reference period changes to 7 years (instead of 10 years), with eligible net equity increases from the current fiscal year and the previous six being relevant.
It is also clarified that equity increases resulting from cash contributions made during the tax benefit period, through loans granted by the taxpayer or entities with which they have special relations, are not eligible, unless the taxpayer proves that these were intended for other purposes.
2 – Contractual Tax Benefits (BFCIP) and Investment Support Tax Regime (RFAI)
Wage costs resulting from the creation of jobs for employees with Master's and Doctoral degrees (levels 7 and 8 of the National Qualifications Framework) are now considered relevant applications. These jobs must be maintained for a minimum period of 5 years (3 years in the case of SMEs).
In the case of Large Enterprises, wage costs and investments in intangible assets cannot exceed 50% of the relevant applications.
3 - CIT Rate applicable to Start-ups
The reduced rate of 12.5% (instead of 17%) applicable to the first €50,000 of taxable income is extended, this reduction being subject to the applicable European rules regarding de minimis aid.
4 - Autonomous Taxation
A reduction is applied to autonomous taxation on charges with passenger light vehicles or goods vehicles and motorcycles, which become:
- 8.5% (currently 10%) in the case of vehicles with an acquisition cost of less than €27,500;
- 25.5% (currently 27.5%) in the case of vehicles with an acquisition cost equal to or greater than €27,500 and less than €35,000;
- 32.5% (currently 35%) in the case of vehicles with an acquisition cost equal to or greater than €35,000;
Charges related to exclusively electric-powered vehicles are only subject to autonomous taxation at a rate of 10% if they have an acquisition value above €62,500 and are not excluded from taxation due to being vehicles allocated to public transport service exploitation and regarding which a written usage agreement has been signed between the employee and the employer.
5 - Tax Incentive for Wage Appreciation
The tax benefit provides for a majoration, by 50%, of expenses related to workers covered by a dynamic collective labour regulation instrument (fixed remuneration and social security contributions) that exceed the GMMR (Guaranteed Minimum Monthly Remuneration), borne by the employer, when there is a salary increase of at least 5% in the year 2024, compared to the last day of the previous taxation period and concerning workers with an open-ended employment contract (instead of the 5.1% previously foreseen). The maximum amount of majorable expenses, per worker, corresponds to four times the GMMR.
Any type of negotiational CLRI (Collective Labour Regulation Instrument) is susceptible to integrating the concept of dynamic CLRI, as provided for in the Labour Code (approved in the annex to Law no. 7/2009, of 12 February, in its current wording), namely: collective convention (collective contract, collective agreement, or company agreement), accession agreement, and arbitral decision in a voluntary arbitration process.
In the fiscal years of 2023 and 2024, the transitional regime is applicable, in which the extension ordinance and the working conditions ordinance are susceptible to integrating the concept of dynamic CLRI.
The concept of "Wage Range" is also clarified, meeting the clarifications provided by the TA (Tax Authority) through Circular Letter no. 20260/2023, of 19 September.
6 - Tax incentive for workers' housing
For the purposes of determining the taxable profit of employers, a depreciation quota corresponding to double that resulting from the table annexed to Regulatory Decree no. 25/2009, of 14 September, i.e., 4%, may be applied to properties held, constructed, acquired, or reconverted by companies for workers' housing.
7 - Amortisation of Intangible Assets and Goodwill
When recognised autonomously, under the terms of accounting standardisation, in the individual accounts of companies, the following are accepted as tax expenses:
- In equal parts, during the first 20 taxation periods following initial recognition, industrial property elements such as trademarks, permits, production processes, models, or other assimilated rights, acquired for consideration and which do not have limited temporal validity;
- In equal parts, during the first 15 taxation periods following initial recognition, the goodwill acquired in a business combination (previously 20 years);
The transitional provision of the State Budget Law also states that this regime is only applicable to assets whose initial recognition occurs in taxation periods beginning on or after 1 January 2024.
8 - Tax Incentive for Renewal of Freight Transport Fleet
CIT exemption for 2024, applicable to the positive difference between capital gains and capital losses resulting from the onerous transfer of goods vehicles with a gross weight equal to or greater than 35 tonnes, acquired before 1 July 2021 and with the first registration prior to this date, whose total realisation value is reinvested in goods vehicles that comply with Euro 6 C or E standards and have the first registration after 1 January 2024.
9 - Extraordinary Support Regime for Charges Borne with Electricity and Natural Gas
Maintenance in 2024 of the extraordinary regime currently in force for support for charges borne with electricity and gas, with these expenses and losses being able to be increased by 20%, relating to taxation periods beginning on or after 1 January 2023 and 1 January 2024.
Expenses and losses incurred or borne regarding electricity and natural gas consumption in the part that exceeds those of the taxation period beginning on 1 January 2021, deducting any
support received, are considered eligible.
Furthermore, the majoration of expenses and losses related to this extraordinary regime is not limited to the limit provided for in no. 1 of article 92 of the CIRC – “Liquidation Result”. However, it clarifies that the tax benefit cannot be accumulated with other support or incentives of any nature regarding the same eligible expenses and losses.
10 - Extraordinary Support Regime for Charges Borne in Agricultural Production
The extraordinary regime currently in force for support for charges borne in agricultural production will be maintained in 2024, regarding the acquisition of the following goods: (a) Manures, fertilizers, and organic and mineral correctives; (b) Flours, cereals, and seeds, including mixtures, residues, and waste from food industries, and any other products suitable for feeding livestock, poultry, and other animals, referenced in the Codex Alimentarius, regardless of breed and functionality in life, intended for human consumption; (c) Irrigation water; (d) Glass bottles.
This regime allows for a 40% majoration of expenses and losses incurred or borne with the acquisition of goods used within the scope of agricultural activities. It mentions that this majoration which, due to exceeding the limit provided for in no. 1 of article 92 of the CIRC – “Liquidation Result”, cannot be used in the first taxation period beginning on or after 1 January 2024, may be considered for the purposes of determining taxable profit up to the tenth following taxation period.
The tax benefit is subject to the applicable European rules regarding de minimis aid.
These are the 10 measures of the State Budget 2024 with the greatest impact on companies in Portugal. Be prepared for the changes and understand how they can influence your business.
Carlos Silvério, Tax Benefits Consultant
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