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The Business Capitalisation Incentive (ICE) is a tax benefit designed to strengthen companies' equity, allowing them to deduct a portion of eligible net increases in equity from their taxable profit and, consequently, reduce their corporate income tax liability.
This tax regime was introduced to replace the Deduction for Retained and Reinvested Profits (DLRR) and the Conventional Remuneration of Share Capital (RCCS), bringing together incentives for business capitalisation under a single tax instrument.
ICE aims to promote stronger financial structures, encouraging companies to rely on self-financing through equity rather than depending on debt financing.
Therefore, if your company has strengthened its equity, there may be an opportunity to benefit from a tax incentive that is worth exploring.
This incentive is available across different sectors, but requires companies to meet strict eligibility criteria. Eligible entities include corporate income tax (IRC) taxpayers (commercial companies, cooperatives and public companies) with their registered office or effective management in Portugal, provided they meet all of the following conditions:
Carry out a commercial, industrial or agricultural activity as their main activity.
Maintain properly organised accounting records in accordance with the Portuguese Accounting Standards (SNC).
Be up to date with all tax and social security obligations.
Taxable profit must not be determined using indirect methods.
Must not be an entity supervised by the Bank of Portugal or the Portuguese Insurance and Pension Funds Supervisory Authority (ASF), nor a branch of a financial institution or insurance company.
Total net increases in equity over the last 7 years.
Based on the average 12-month Euribor rate.
The maximum annual deduction is the HIGHER of the following two amounts:
For calculation purposes, the following transactions are considered eligible increases in equity:
A capital increase today could generate tax savings for almost a decade? ICE operates on a rolling-account basis, whereby current investment is added to net increases in equity over the previous six years, extending the benefit over time. However, distributing dividends or reducing share capital decreases this historical balance and may cancel out future deductions. Careful management is therefore essential to avoid losing accumulated tax benefits.
In a business environment where companies are often undercapitalised and excessively reliant on bank debt, ICE should not be viewed merely as a tax benefit, but as a strategic management tool that turns tax savings into internal investment. By rewarding the strengthening of equity, this incentive enables companies to reduce their dependence on external financing (banks) while also lowering their corporate income tax liability.
If my company generates profits, why not take advantage of tax incentives to strengthen its liquidity and financial resilience?
Strengthening equity through ICE improves financial autonomy, signalling lower risk to banks and facilitating the negotiation of more favourable spreads. This financial strength is crucial to securing the co-financing required for applications to funding programmes such as Portugal 2030.
By retaining profits and reducing debt, companies build up financial reserves that help cushion external shocks, such as rising interest rates. This resilience allows them to maintain operations without resorting to emergency borrowing, ensuring business continuity.
ICE turns part of the corporate income tax bill into liquidity that remains within the company, helping to protect its cash position. This cycle of Tax Benefits turns tax savings into self-financing, directly supporting investment in future growth.
A balanced balance sheet increases a company's value in mergers or succession processes, serving as a key indicator of financial health. The incentive encourages long-term management, ensuring financial Sustainability and the sustained growth of business value.
The Complete Guide to Tax Optimisation for Your Company. Technical details, competitive advantages and eligible expenditure breakdowns, all in one document. Make informed decisions with Yunit's seal of quality.
