PORTUGAL LAW AND PRACTICE Contributed by: Joana Torres Fernandes, José Manuel Pereira da Costa, Danielle Avidago, Javier Mateo, António Pratas Nunes, Joana Loureiro Veríssimo, Madalena Mourão and David Serras Pereira, LVP Advogados
To benefit from the regime, the individual must become tax resident in Portugal, must not have been tax resi - dent in Portugal in any of the five preceding years and must carry out an activity that falls within the scope of the regime. Eligibility is subject to a two-tier validation: the appli - cant must exercise a qualifying activity as defined by law, and the entity for which the activity is performed must itself be recognised as eligible under the appli - cable rules. Qualifying activities include: • higher education teaching and scientific research; • qualified positions in contractual investment pro - jects; • highly qualified roles in specific sectors of strategic relevance to the national economy; • R&D personnel eligible under the Tax Incentive System for Business Research and Development (SIFIDE) framework; • positions or members of governing bodies in certi - fied startups; and • certain activities carried out by tax residents in the Autonomous Regions of the Azores or Madeira, subject to criteria defined under regional legisla - tion. Wage Enhancement Tax Incentive Introduced by the State Budget for 2025 and updated by the State Budget for 2026, the Wage Enhancement Tax Incentive is designed to reward employee per - formance through benefits at the level of IRS, social security contributions and CIT. With regard to employees, an exemption is granted on amounts paid or made available to employees by way of productivity bonuses, performance bonuses, profit- sharing payments and balance sheet gratifications, for IRS and social security contribution purposes, up to a limit of 6% of the employee’s annual base salary. In order to benefit from this exemption, the employer must:
• increase the average annual base salary across the company, by reference to the end of the prior year, by a minimum of 4.6%; and • ensure that the increase in the annual base salary of employees earning a value equal to or lower than the company’s average annual base salary at the end of the prior year is also a minimum of 4.6%. It should also be noted that, for CIT purposes, costs corresponding to the qualifying salary increases are deductible at 200% of their actual amount, recognised as an expense of the relevant financial year. SIFIDE – R&D Tax Credit In the context of available tax incentives, the SIFIDE regime deserves particular attention. Under this regime, certain research and development expenses may be deducted directly from the CIT tax liability, including: • research expenditure incurred with a view to acquiring new scientific or technical knowledge; and • development expenditure arising from the exploita - tion of research results or other scientific or tech - nical knowledge, with a view to the discovery or substantial improvement of raw materials, prod - ucts, services or manufacturing processes. Within these categories, eligible expenditure includes costs relating to fixed assets such as personnel costs for technical staff involved in research and develop - ment tasks, and costs associated with the participa - tion of directors and senior staff in the management of research and development institutions. The deductible expenditure is calculated on the fol - lowing basis. • Base rate – 32.5% of eligible expenses incurred in the relevant tax period. • Incremental rate – 50% of the increase in eligi - ble expenses incurred in the relevant tax period compared to the simple arithmetic mean of the two preceding financial years, up to a maximum of EUR1,500,000.
888 CHAMBERS.COM
Powered by FlippingBook