Corporate Income Tax

Deduction of tax losses

The carry forward of tax losses will no longer be subject to time limitation. On the other hand, the deduction of tax losses is reduced to 65% (formerly, 70%) of the taxable profit.

This rule shall apply to the deduction of tax losses against taxable profit of tax years starting on or after 1 January 2023. It will also apply to tax losses assessed in tax years prior to 1 January 2023, which period for deduction is still running (except tax losses assessed in tax years prior to 1 January 2023 in which there was a situation as described in Article 6 no. 1 of the special regime applicable to deferred income tax assets - “Regime especial aplicável aos ativos por impostos diferidos” or “REAID”).

Tax losses assessed in 2020 and 2021 will continue to benefit from an additional deduction of 10 percentage points against the taxable profit. 

The carry forward of tax losses for an indefinite period also applies in the following cases:

  • assessment of overall income of collective bodies and other entities that do not carry has main activity a commercial, industrial or agricultural activity;

  • regime applicable to the transformation of companies;
  • transmission of tax losses under a restructuring;
  • special regime of tax neutrality applicable to operations consisting of an entry of assets of a legal person to the share capital entries of a company.

     

     

“Tax losses assessed in 2020 and 2021 will continue to benefit from an additional deduction of 10 percentage points against the taxable profit.”

Tax losses - Authorisation request for transmission waived

There will no longer be the need to apply for authorisation from the tax authority for the maintenance of tax losses in case of a change of ownership of more than 50% of the share capital or of the voting rights.

It will also not depend from authorisation the maintenance by the new dominant company of tax losses of previous years in the following cases:

(i) the new dominant company opts for the maintenance of the special regime of group taxation (“Regime Especial de Tributação de Grupos de Sociedades” or “RETGS”); or

(ii) the dominant company of the RETGS acquires the domain of a company that is the dominant company of another RETGS, and opts for the maintenance of said RETGS.

The carry forward of the tax losses is subject to the operation not having tax evasion as its main or one of its main purposes. Namely this happens if the operation was carried out under valid economic reasons.

 

Limitation on the tax deductibility of net financial costs

It no longer depends from authorisation of the tax authority the possibility of maintaining the credit and carry forward of the net financial costs that were not deducted in previous tax years, when a change of ownership of more than 50% of the share capital or of the voting rights occurs. The carry forward of the tax losses is subject to the operation not having tax evasion as its main or one of its main purposes. Namely this happens if the operation was carried out under valid economic reasons.

 

Profits and losses of permanent establishment located outside the Portuguese territory

The optional regime of disregarding the profits of a permanent establishment of a Portuguese entity located outside the Portuguese territory for the purpose of assessing the taxable profit will be amended in case of large companies. The regime will apply to taxable losses generated in the 12 previous tax years (formerly, five tax years).

In the case of transformation of the permanent establishment into a company, the reference 12-year period also applies, in case of large companies, for the purpose of applying the participation exemption regime and the regime of liquidation of companies (formerly, five tax years). 

 

Simplified tax regime - Crypto assets

Income concerning crypto assets shall be considered for the purpose of the computation of the taxable income under the simplified regime, by applying the following coefficients:

(i) 0.95 in the case of income from the mining of crypto assets.

 (ii) 0.15 on other income related with crypto assets (excluding income derived from mining) not regarded as investment income or resulting from the positive balance between capital gains and capital losses and other increases in wealth. 

 

Costs incurred with social passes

Costs incurred with social passes are allowed for 150% of the respective amount for the purpose of the computation of the taxable income (formerly, 30%).

 

CIT rate

The reduced CIT rate applicable to small and medium sized companies shall now apply to Small Mid Cap companies. The 17% shall apply to the first EUR 50,000 of taxable income (formerly, EUR 25,000).

A transitional regime for applying the reduced CIT rate was created. It shall apply to the cases where following a reorganisation of entities previously qualified as small and medium sized companies or Small Mid Cap, the beneficiary company no longer meets such requirements. The reduced CIT rate of 17% still applies in the two tax years following the reorganisation. The regime applies only to restructurings taking place between 2023 and 2026.

 

“The reduced CIT rate applicable to small and medium sized companies shall now apply to Small Mid Cap companies. The 17% shall apply to the first EUR 50,000 of taxable income (formerly, EUR 25,000).”

Special regime of group taxation - Autonomous Regions

If all companies part of a group taxed under the special regime of group taxation (“Regime Especial de Tributação de Grupos de Sociedades” or “RETGS”) have their registered office and place of effective management in the same Autonomous Region, the group shall be subject to the higher CIT rate applicable therein.

 

Autonomous tax rates

Costs incurred with vehicles exclusively powered by electric energy will be subject to autonomous taxation at the rate of 10% , if the acquisition cost exceeds EUR 62,500 (formerly, these were not subject to autonomous taxation).

Costs incurred with hybrid plug-in and CNG moved vehicles shall be subject to the same autonomous taxation rates: 2.5%, 7.5% and 15% (formerly, hybrid plug-in are subject to 5%, 10% and 17.5% and CNG are subject to 7.5%, 15% and 27.5%).

The aggravation of autonomous taxation rates by 10 percentage points in case of entities assessing tax losses does not apply in the tax years 2022 and 2023 in the following cases:

  • the taxpayer assessed taxable profit in one of the three previous tax years;

  • the CIT return and the Annual Statement/Companies Simplified Information concerning the two previous tax years were filed timely;

  • 2022 and 2023 correspond to the year of the commencement of activity or one of the two subsequent tax years.

     

Waive of withholding tax - Income from intellectual property

Withholding tax can be waived on income from intellectual property obtained by companies whose statutory object consists of creating, editing, producing, promoting, licensing, managing or distributing work or services, or other contents protected by copyright or related rights, including press publications.

 

Extraordinary support to costs incurred with electricity and gas

Costs and losses incurred or borne related with consumptions of electricity and natural gas, in the amount exceeding the previous tax year and excluding any fundings received, are allowed for 120% of the respective amount for the purpose of assessing the 2022 taxable profit.

The regime does not apply to taxpayers which turnover derives in at least 50% of economy activities related with:

  • production, transport, distribution and commercialization of electricity and gas; or

  • manufacturing of oil products, either refined or derived from residue, and other patent fuels.

 

Extraordinary support to costs incurred in agriculture

Costs and losses incurred or borne with the acquisition of certain goods utilized in agriculture are allowed or 140% of the respective amount for the purpose of assessing the 2022 taxable profit. 

This benefit is subject to de minimis state aid rules.

 

Contact us

Rosa Areias

Rosa Areias

Tax Lead Partner, Membro da Comissão Executiva, PwC Portugal

Tel: +351 225 433 101

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