Incentive measures for investment in Portugal

June 17th last saw the publication in the Portuguese Official Journal of Decree-Law 82/2013, of 17 June, which introduces a range of incentive measures for investment in Portugal, consolidating the Investment Support Tax Regime and the Tax Incentive System Regime for Business Research and Development provided for in the Tax Code for Investment.

As is clear from the preamble to the above-mentioned legal instrument, among the various reasons which justify these measures is the need felt by the Government to reduce the public spending burden, making it more equitable, sustainable and efficient, as well as to promote competitiveness, employment and the internationalisation of Portuguese companies.

Of the various amendments brought in by Decree-Law 82/2013, the addition to Articles 26 to 40 of the Tax Code for Investment (passed by Decree-Law 249/2009, of 23 September) is particularly worthy of note. Of these, the following should be highlighted:

1)    Scope of application

Under Article 27(1), the addition is applicable to Corporation Tax (IRC) taxable persons which carry on their main activity in the agricultural, forestry, agro-industrial and tourism sectors as well as in the extraction or transformation industry, with the exception of the steel, shipbuilding and synthetic fibres sectors, as defined in Article 2 of Regulation (EC) 800/2008, of the Commission, of 6 August”.

2)    Tax incentives

Clearly with a view to benefiting investment in Portugal, the lawmakers have enshrined a number of tax benefits in Article 28, which are listed below:

  • Deduction from the IRC tax base – up to 50% of the tax base – of the following amounts for investments in regions which are eligible for support within the scope of regional incentives:
    • 20% of the relevant investment for an investment of up to €5,000,000.00;
    • 10% of the relevant investment for an investment of over €5,000,000.00.
    • Exemption from Municipal Property Tax, for a period of five years on properties they own which constitute a relevant investment;
    • Exemption from Municipal Property Transfer Tax on acquisitions of properties which constitute a relevant investment;
    • Exemption from Stamp Duty on acquisitions of properties which constitute a relevant investment.

3)    Who can benefit from the incentives

Based on the scope of application mentioned above, the beneficiaries of the incentives provided for in the legislation in question are IRC taxable persons resident in Portugal or who have a fixed establishment in Portugal, which carry on a main activity which is commercial, industrial or agricultural in nature and, finally, those which make investments that are considered relevant in the financial years 2013 to 2017.

In addition, the IRC taxable person must meet the following cumulative conditions:

1)    keep duly organised accounts, in accordance with the accounting standards and other legal provisions in force for the relevant sector of activity;

2)    its taxable profit is not determined using indirect methods;

3)    keep the goods which are the subject-matter of the investment in the company and in the region for a minimum period of five years;

4)    not be in debt to the state or to social security for any contributions, taxes or have the payment of their debits duly assured;

5)  not be considered a firm in difficulty under the Commission Communication (Community guidelines on State aid for rescuing and restructuring firms in difficulty, published in the Official Journal of the European Union, C244, of 1 October 2004.);

6)    make a relevant investment which ensures the creation and continuation of work posts up to the end of the deduction period (2013 to 2017).

4)    Relevant investments assigned to the company

Given that the concept of “investments that are considered relevant” is an indeterminate one, the lawmakers defined it in Article 27(2) as:

  • investment in tangible fixed assets, which are new at the time of acquisition, with the exception of:
    • land, except when it is destined for running mining concessions, natural mineral and spring water, quarries, claypits and sandpits in extraction industry projects;
    • construction, acquisition, repair and expansion of any buildings, unless they are manufacturing installations or assigned to administrative activities;
    • light passenger or mixed vehicles;
    • furniture and comfort or decorative articles, except for hotel equipment allocated to tourism;
    • social equipment, with the exception of that which the company is obliged to have by law;
    • other investment goods which are not directly and essentially associated with the production activity in which the company is engaged.
  • investment in intangible assets, consists of expenses with the transfer of technology, namely through the acquisition of rights to patents, licences, know-how or technical knowledge not protected by patent.

Finally, it should be highlighted that the tax incentives identified above are not cumulative for the same investment with any other tax benefit of the same kind, whether provided for in Decree-Law 82/2013 or in any other legislation.

João Neto Peixe