Small-medium capitalization (Small Mid Cap) companies carrying their activity in inland regions can now benefit from the reduced CIT rate of 12.5 %.
The referred rate will apply to the first EUR 50,000 of taxable income (currently, EUR 25,000).
A new regime for the creation of net jobs is established. Costs incurred with remunerations and social contributions related with the hiring of residents in inland regions are allowed in 120% of the respective amount for the purpose of the computation of the taxable profit.
“A new regime for the creation of net jobs is established. Costs incurred with remunerations and social contributions related with the hiring of residents in inland regions are allowed in 120% of the respective amount for the purpose of the computation of the taxable profit.”
There will be an additional deduction of 50% of all employment expenses (including fixed remunerations and social contributions) related to salary increases of employees with non-term labor agreements established by collective dynamic regulation instruments.
The following expenses are eligible:
a) concerning employees whose income has been increased in at least 5.1% with reference to the previous year; and
b) above the national minimum monthly wage of the tax year concerned.
The maximum amount of eligible expenses, by employee, must not exceed four times the national minimum monthly wage.
This incentive does not cover taxpayers whose wage scale has increased with reference to the previous year.
This incentive expires on 31 December 2026.
A deduction is allowed against the taxable profit corresponding to an amount resulting from applying a rate of 4.5% to the net increase in eligible equity. Said rate can be increased by 0.5 percentage points, in the case of micro, small or medium sized companies or small-medium capitalization companies – Small Mid Cap.
Such deduction shall not exceed, in each tax year, the higher of:
a) EUR 2 million; or
b) 30% of the tax EBITDA, pursuant to Article 67 of the CIT Code.
The amount that exceeds the cap provided for in b) above can be carried forward for a period of five years.
The net increases in eligible equity correspond to the sum of the increases in eligible equity after deducting outflows, in cash or in kind, in benefit of the holders of equity. These outflows consider reduction of equity or equity sharing, as well as distribution of reserves or retained earnings, occurring in each of the nine previous tax years.
Where the sum of the increases in eligible equity is negative, it is considered, it equals zero.
The following are eligible equity increases:
a) cash contributions made in connection with the incorporation of companies or the increase in the share capital of the beneficiary company;
b) contributions in kind made within the scope of the share capital increase that correspond to the conversion of credits into capital;
c) premiums for issuing of securities;
d) Accounting profits profits of the year that are applied to retained earnings or, directly, to reserves or to an increase in share capital.
For the purpose of the regime, only the net increase in eligible equity occurring in tax years starting on or after 1 January 2023 are relevant.
“4.5% of the amount of the net increase in eligible equity is allowed as a deduction to the taxable profit (increased by 0.5 percentage points in the case of micro, small, medium sized companies or Small Mid Cap companies).”
For the purpose of this regime, a deduction of 30% (formerly, 25%) is allowed against the tax assessed in the tax year concerned. Said deduction concerns the eligible expenses related with the investment made capped at EUR 15,000,000.
The PIT and CIT exemptions on interest from Portuguese sovereign debt issued in renminbi in the Chinese internal debt market are maintained.
Donations, in cash or in kind, to the Fundação JMJ–Lisboa 2023, are allowed:
a) as CIT deductible costs for 140% of the respective amount;
b) as PIT deductible costs for 140% of the respective amount under Category B (self-employment/ business income);
c) in all other situations, as a PIT credit corresponding to 130% of the respective amount.
The tax incentive schemes of Conventional Remuneration of Share Capital (“Remuneração Convencional do Capital Social” or “RCCS”) and Deduction for Retained and Reinvested Profits (“Dedução por Lucros Retidos e Reinvestidos” or “DLRR”) are revoked. The first continues to be in force for contributions to the share capital made until 31 December 2022.
Tax Lead Partner | Entrepreneurial & Private Business Leader | Membro da Comissão Executiva, PwC Portugal
Tel: +351 225 433 101