The importance of tax benefits for the business sector

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Focusing on the most relevant Tax Benefits for companies, their main objective is to promote investment, competitiveness, innovation, research and development, and job creation. From the companies' perspective, these should be seen as an opportunity, as they can confer advantages over their competitors. The possibility of deducting part of the expense incurred in R&D or Innovation, rather than just being used, should be seen as an opportunity to accelerate the realisation of certain investments which, considering the rapid evolution of the current market, can make all the difference. 

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These are the most relevant tax instruments for companies

Among the most relevant Tax Benefits for Portuguese companies, and which promote their competitiveness, it is worth mentioning:

• RFAI (Tax Regime for Investment Support) which, through the promotion of business investment and the creation and maintenance of jobs, aims to contribute to the revitalisation of the national economy. It allows deductions from the IRC (Corporate Income Tax) payable ranging from 10% to 30% of the total investment amount, depending on the region. It is intended for SMEs and Non-SMEs inserted in strategic economic activities, such as extractive and manufacturing industries, tourism, and research and development and high technology intensity activities. Furthermore, it enables total or partial exemption from taxes, such as IMI (for a period of 10 years), IMT, and Stamp Duty. An aspect to keep in mind: for the company to benefit from this, the investments in question must promote job creation.

• SIFIDE (Tax Incentive System for Business Research and Development), which aims to increase company competitiveness by supporting their Research & Development effort through the deduction from the IRC payable of a percentage of the respective R&D expenses (32.5% referring to expenses of the year in question, to which 50% of the increase compared to the average of the two previous years is added). Which, for example, in the first year a company applies, corresponds to an 82.5% incentive rate. It should be noted that SIFIDE is currently one of the most attractive Tax Benefits in Europe regarding R&D. 

• DLRR (Deduction for Retained and Reinvested Profits), a tax incentive for investment only in favour of micro, small, and medium-sized enterprises, which allows the deduction from the IRC payable of 10% of retained profits that are reinvested, within four years, in relevant applications. When eligible investments made in inland territories are at stake, this incentive is increased by 20%.

Discover the 3 tax benefits that will disappear starting this year

It should be noted that the 2022 fiscal year is the last opportunity to take advantage of DLRR, since starting in 2023 this fiscal instrument, together with RCCS (Conventional Remuneration of Share Capital) - which aims to promote company capitalisation through share capital increases via cash inflows or through the conversion of credits or through the use of profits from the financial year itself within the scope of the company's constitution – will be extinguished, giving way to a new Tax Regime: Incentive for the Capitalisation of Companies (ICE). 

This year is also the last opportunity for companies to take advantage of IFR (Tax Incentive for Recovery), a tax benefit only for investments made during the second half of 2022, which has a generalised application (sectoral and geographical), making it a unique opportunity for some companies, allowing the deduction from the IRC payable of up to 25% of investment expenses.

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Eduardo Silva – Technical Director | Yunit Consulting