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
RFAI – Investment Support Tax Regime The RFAI is a tax incentive regime available to compa - nies carrying out activities in sectors specifically listed under Portuguese law, including: • extractive and manufacturing industries; • tourism, including activities of interest to the tour - ism sector; • IT activities and related services; • agricultural, aquaculture, fishing, livestock and forestry activities; • research and development and high-technology activities; • information technology, audiovisual production and multimedia; • defence, environment, energy and telecommunica - tions; and • shared services centre activities. In addition to the sectoral requirements, companies must cumulatively satisfy the following conditions: • maintain properly organised accounts; • have their taxable profit determined by direct assessment methods rather than indirect methods; • retain the assets subject to investment within the company and in the relevant region for a minimum period of three years from the date of investment, in the case of micro, small and medium-sized enterprises, or five years in all other cases, or for the minimum useful life of the assets if shorter, or until the assets are written off, dismantled, aban - doned or rendered unusable; • have no outstanding debts to the state or social security in respect of contributions, taxes or levies, or have such debts duly secured; and • make qualifying investments that generate job creation and maintain those jobs until the end of the minimum retention period applicable to the assets subject to investment. Where these conditions are met, the following tax benefits are available: • CIT deductions – in the case of investments made in the Norte, Centro, Alentejo, Autonomous Region of the Azores and Autonomous Region of Madeira, a deduction of 30% of qualifying expenditure
applies to investments up to EUR15,000,000, and 10% on the portion exceeding that threshold. For investments in the Algarve and Lisbon regions, a deduction of 10% of qualifying expenditure applies. • IMI exemption or reduction – for a period of up to ten years from the year of acquisition or construc - tion of the property, in respect of properties used in connection with qualifying investments. • IMT exemption or reduction – in respect of acquisi - tions of properties constituting qualifying invest - ments. • Stamp Duty exemption – in respect of acquisitions of properties constituting qualifying investments. Capitalisation Tax Incentive Regime (ICE) The tax incentive regime for company capitalisation was introduced by the State Budget for 2023 and replaced the DLRR regime, the deduction for retained and reinvested profits, which was repealed in that same year. The regime consists of a deduction from taxable prof - it, available to Portuguese companies, corresponding to the application of the 12-month Euribor rate, equal to the average for the tax period, calculated on the basis of the last day of each month, plus a spread of two percentage points, applied to the net increase in eligible equity. The deduction may not exceed, in each tax period, the greater of the following limits: • EUR4,000,000; or • 30% of earnings before depreciation, amortisation, net financing costs and taxes. For the purposes of the ICE regime, the following are considered net increases in eligible equity: • cash contributions made in the context of the incorporation of a company or the share capital increase of the beneficiary company; • in-kind contributions made in the context of a share capital increase corresponding to the con -
version of debt into equity; • share issue premiums; and
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