No Match Found
The following entities are subject to CIT on their taxable income:
|Taxpayers with head-office or place of effective management in the Portuguese territory, which carry out activities of a commercial, industrial or agricultural nature (corporations, cooperatives, etc)||Profit|
|Taxpayers with head-office or place of effective management in the Portuguese territory, which do not carry out activities of a commercial, industrial or agricultural nature (associations, foundations, civil partnership)||Global income (sum of income from all categories according to Personal Income Tax rules)|
|Taxpayers, non-resident in Portuguese territory, which carry out their activity through a permanent establishment (e.g. branch) herein||Taxable profit allocated to the permanent establishment in the Portuguese territory|
|Taxpayers, non-resident in the Portuguese territory, without a permanent establishment herein||Global income (sum of income from all categories according to Personal Income Tax rules) – generally subject to withholding tax|
|Resident entities and permanent establishment of non resident entities (1) (2)||21%||21%||16.8%|
|Resident entities and permanent establishment of non resident entities, certified as small or medium companies (1) (2) (3)||17% (for the first € 15,000 of taxable income)
21% (for the remaining taxable income)
|17% (for the first € 15,000 of taxable income)
21% (for the remaining taxable income)
|13.6% (for the first € 15,000 of taxable income)
16.8% (for the remaining taxable income)
|Resident entities that do not carry out a commercial, industrial or agricultural activity as their main activity||21%||21%||16.8%|
(1) A Municipal Surcharge may also apply.
(2) Additionally, a State Surcharge may also apply.
(3) In the case of micro, small or medium-sized enterprises, which carry out their activity and have effective management in inland areas (according to the delimitation to be established by decree), the rate applicable to the first € 15,000 of taxable income may be reduced to 12.5%
Certain incurred expenses incurred or supported by entities subject to CIT are subject to autonomous taxation (1)(2) at the rates provided below.
|Expenses||Rate 2017 (%)|
|Expenses with light passenger vehicles, light commercial vehicles and motorcycles||10 / 27.5 / 35|
|Non-documented expenses||50 / 70|
|Payments made to entities resident in a clearly more favourable tax regime or to open accounts in financial institutions resident or domiciled therein.||35 / 55|
|Daily allowances and car mileage paid to employees, for using their own vehicle, not charged to clients||5|
|Costs or expenses with indemnities resulting from cease of functions of managers and board members||35|
|Costs or expenses with bonus and other variable remunerations paid to managers and board members||35|
|Profits distributed to entities wholly or partially exempt from Corporate Income Tax||23|
(1) Autonomous taxation rates are increased by 10 percentage points whentaxpayers computetax losses in the tax period in which the referred facts have occurred.
(2) The application of these rates may be waived in certain situations and / or provide that some requirements are met.
Under the Special Regime of Group Taxation, the Municipal Surcharge is levied on the taxable income assessed by each company part of the group.
The Municipal Surcharge is levied on the taxable profit of the year, before the deduction of tax losses.
State Surcharge is due by Portuguese resident entities and by Portuguese permanent establishments of non-resident entities, which carry out commercial, industrial or agricultural activities as their main business.
The applicable rates are the following:
|Taxable income (€)||Rates (%)|
|From 1,500,000 to 7,500,000||3|
|From 7,500,000 to 35,000,000||5|
The State Surcharge is paid upon filing the CIT return. The payment corresponds to the difference between the State Surcharge assessed and the amount of the three additional payments on accounts made in July, September and until the 15th day of December of the previous year (7th and 9th months and until the 15th day of the 12th month of the tax year, if different from the calendar year). A refund arises in case the additional payments on account exceed the amount of the State Surcharge that would be due.
|Remuneration of board members||21.5||25|
|Lease of agricultural, industrial, commercial or scientific equipment||–||25|
|Interest of bank deposits||25||25|
|Interest on shareholders loans||25||25|
|Interest from debt securities||25||25 (4)|
|Capital income paid or made available to entities resident in blacklisted jurisdictions||N/A||35|
|Capital income paid or made available in accounts opened on the name of one or more owners but on behalf of third parties not identified||35||35|
|Income from repurchasing agreements||25||25 (4)|
|Income from participation units in venture capital investment funds||10||– (5) (6)|
|Income from participation units in forest resources real estate investment funds||10||– (5) (6)|
|Income from participation units/shareholdings in real estate investment funds and real estate companies||25||10 (6)|
|Income from participation units/shareholdings in securities investment funds and securities companies||–||– (6)|
|Other capital income||25||25|
(1) Exemption or reduction of the withholding tax rate could be possible by applying the domestic Law, a Double Tax Treaty (DTT) or other applicable international legislation, provided the respective conditions are met.
(2) Payment on account of the final tax due, with exception of capital income paid or made available in accounts opened on the name of one or more owners but on behalf of third parties not identified.
(3) Withholding at a flat rate, except when referring to rental income.
(4) Exemption available under the Decree-Law 193/2005, of 7 November, which provides for the Special Regime for the Taxation of Income from Debt Securities.
(5) Withholding tax at 10% if the beneficiary of the income is held, directly or indirectly in more than 25% by resident entities or individuals.
(6) Taxation at the rate of 35% if the beneficiary of the income is an entity resident for tax purposes in jurisdiction subject to a more favorable tax regime included in the list approved by the government.
Withholding taxes may be waived in the following cases:
|Interest/other investment income except dividends and reserves||Financial institutions subject to CIT||–|
|Commercial Interest||Entities subject to CIT||Resulting from late payment of sales or services|
|Interest on shareholders loans (“suprimentos”), commercial paper or bonds||Entities subject to CIT||(i) Minimum participation in share capital with voting rights of 10%, directly or indirectly|
|(ii) Held, consecutively, for the year prior to the date on which they were made available|
|Any income||Companies taxed under the special tax regime of group taxation(RETGS)||Income obtained during the application of the regime|
|Dividends and reserves distributed||Entities subject to CIT||(i) Direct participation or direct and indirect participation in share capital or voting right of at least 10%;|
|(ii) Held consecutively during the year previous to the date in which the profits are made available|
|Rents on the lease of equipment||Entities subject to CIT||–|
|Rental Income||Companies managing their own Real Estate that are not transparent for tax purposes not subject to CIT; Real Estate Investment Funds||–|
|Income derived from the rendering of services||Entities subject to CIT||Formalities are required|
|Commission on the intermediation of contracts||Entities subject to CIT||–|
|Remuneration of board members||Statutory Audit companies||Provided the Statutory Audit company is part of the board|
|Income in general||Entities exempt from CIT||Proof of exemption shall be provided to the debtor entity|
|Interest arising from loans granted by non-resident financial institutions||Financial institutions||Exemption on interest arising from loans granted by non-resident financial institutions to resident credits institutions, provided that such interest is not income of a permanent establishment located in Portugal|
|Gains deriving from swaps||Financial institutions||Exemption on gains deriving from swaps with resident credit institutions or with the Portuguese State through the Portuguese Government Debt Agency, provided that such gains are not income of a permanent establishment located in Portugal.|
|Interest arising from term deposits||Credit institutions||Withholding tax exemption on interest arising from term deposits made in entities that are legally authorized to accept such deposits by non-resident credit institutions|
|Dividends||Entities resident for tax purposes in the European Union (EU), the European Economic Area (EEA) or a permanent establishment located in other EU State member or EEA, or in a state with which Portugal has concluded a double tax treaty allowing exchange of information.||(i) A direct or direct and indirect participation of not less than at least 10% of the share capital or of the voting rights of the distributing entity;
(ii) Held, consecutively, for oneduring the year prior to the date in which the dividends are made available distribution date;
The beneficiary is subject, and not exempt, from CIT, to a tax mentioned in article 2.º of Council Directive 2011/96/UE, of 30 November, or to a tax identical or of a similar nature to CIT, as long as the applicable legal rate is not lowerless than 60% of the Portuguese CIT rate.
|Income derived from the rendering of services||Non-resident entities||Under the applicable Double Tax Treaty|
|Interest and royalties||Entities resident for tax purposes in the EU or in Switzerland||(i) Direct participation of at least 25% of the capital of another company, or
(ii) the other company holds a direct participation of at least 25% its capital, or
(iii) a third company holds a direct participation of at least 25% in its capital and the capital of another company, and in any case the participation is held for an uninterrupted period of at least two years.
Payments on account are due by Portuguese resident entities and by Portuguese permanent establishments of non-resident entities, which main business consists of carrying out commercial, industrial or agricultural activities.
Payments on account are due in July, September and 15th day of December of the respective tax year (otherwise on the 7th, 9th and until the 15th day of the 12th month of the tax year adopted, if different from the calendar year).
Payments on account are computed based on the CIT assessed in the previous tax year, net of withholding taxes incurred that cannot be either offset or refunded.
Regarding the tax year that begins on 1 January 2017, the due amount of payment on account shall be determined as follows:
|≤ € 500.000||(CIT assessed in 2016 - withholding taxes in 2016) x 80%|
|> € 500.000||(CIT assessed 2016 - withholding taxes in 2016) x 95%|
If the amount of the payments on account exceeds the CIT due, the taxpayer is entitled to a refund corresponding to that difference.
In case the taxpayer determines that the two first payments on account already made are equal or higher than the final CIT that will be due in that tax year, the taxpayer may decide to limit or not to make the third payment on account.
Where upon filing the CIT return it is determined that, as a result from the lack of the third payment on account, the taxpayer failed to make payments on account corresponding to more than 20% of the total amount that should have been paid, late assessment interest arises, computed between the deadline established for the third installment of the payment on account and the deadline for the filing of the CIT return (or the payment of the CIT due, if prior).
Entities that carry out commercial, industrial or agricultural activities, as well as non-resident entities with a permanent establishment in the Portuguese territory can be liable to the special payment on account (PEC – “Pagamento Especial por Conta”) regime, which in practice results in a minimum tax burden, computed as follows.
Payments are due in March each year (or in two installments in March and October or in the 3rd and the 10th month, if different from the calendar year):
PEC = [(1% turnover of previous tax year (1) - payments on account of previous year) - € 100] x 87.5%
(1) Capped at:
Minimum € 850
Maximum € 850 + 20% of the surplus, capped at € 70,000
This payment is deductible to the CIT assessed in the respective year or, in case the CIT assessed is not sufficient, it can be deductible in the following six tax years. Any part that cannot be deducted (within the six tax years) due to the insufficiency of tax assessed will only be refunded upon request.
PEC is not applicable in the first and second years of activity.
Under the Special Regime of Group Taxation, a PEC is due for each company part of the tax group, after the payments on account deduction that were due by each of those companies in the event such regime was not applicable.
Additional payments on account (“Pagamento Adicional por Conta”) are due by entities subject to the regime of both payments on account and special payments on account that have reported, in the previous tax year, a taxable profit exceeding € 1,500,000.
Additional payments on account are computed as follows:
|Taxable income (previous tax year)||Rate (%)|
|From € 1,500,000 to € 7,500,000||2.5|
|More than € 7,500,000 up to € 35,000,000||4.5|
|Exceeding € 35,000,000||6.5|
The additional payments on account are due in three installments in July, September and until the 15th day of December (or in 7th, 9th and until the 15th day of 12th month of the tax year, if different from the calendar year).
If the amount of the additional payments on account exceeds the State Surcharge due, the taxpayer is entitled to a refund corresponding to that difference.
The following impairment losses are accepted as tax deductible:
a) relating to bad debts duly accounted for as such in the books of the company, when the risk of non-recovery is considered to be justified;
According to the tax law, the recovery risk is justified whenever there is a:
b) relating to outstanding receipts that are accepted by insurance companies;
c) recognized for specific credit risk, securities and other instruments, by entities subject to the supervision of the Bank of Portugal and Portuguese branches of credit institutions and other financial institutions resident in another member State of the European Union or in the European Economic Area;
d) relating to exceptional devaluation of tangible fixed assets, intangible assets, biological and non-consumable assets and investment property;
e) relating to inventories when the respective net realisable value may be evaluated by an independent entity.
The following provisions are accepted as tax deductible:
a) the ones related to contingencies and liabilities resulting from lawsuits for facts that would determine their inclusion as costs deductible for tax purposes;
b) the ones related to contingencies resulting from after-sales services and guarantees established in the agreement with the acquirer of the goods/services;
c) the Technical provisions imposed by instructions and rules issued by the Portuguese Insurance Institute, by insurance companies that are subject to its supervision and by branches in Portugal of insurance companies established in another member State of the European Union;
d) the ones related to costs of restoration of environmental damage, whenever required by law.
Depreciation rates are generally calculated under the straight-line method, according to the minimum and maximum period of useful life of the assets and with reference to the sector concerned and the terms of its utilization.
The taxpayer may also elect to calculate depreciation under the declining-balance method in case of tangible fixed assets acquired as new, except furniture, social equipment, buildings and light or mixed-use passenger cars, the latter when allocated to an activity of public transportation or leased in the course of the taxpayer’s normal activity.
Upon request, other methods of depreciation and amortisation than the straight-line and the declining-balance ones may be used by the taxpayers, to the extent that prior approval is granted by the Portuguese tax authorities (PTA), unless the application of suchmethod results in an annual rate higher than that which would be applied by following the the methods expressly established in the tax law.
The acquisition or production cost of fixed assets subject to depreciation with a value not exceeding € 1,000 may be deducted in one fiscal year, except when such assets represent a part of a set of assets that should be depreciated as a whole.
Depreciation of light passenger or mixed-use vehicles is not deductible on the part of the acquisition or revaluation cost that exceeds the following amounts:
Regarding vehicles acquired in periods starting as of 1 January 2015, the following limits should be considered:
Depreciation of yachts and airplanes and all expenses related thereto are also not allowed as a cost for tax purposes, provided that such assets are neither used for the purpose of public transportation nor to be leased under the normal business activity of the taxpayer.
As of 1 January 2012, the depreciation of non-consumable biological assets is allowed as deductible for tax purposes.
As regards investment properties, corresponding improvements and non-consumable biological assets subsequently booked at fair value, their acquisition cost is acceptable as tax deductible over the period resulting from the application of the minimum tax depreciation rate of the assets, as if they were maintained at their acquisition cost.
According to Decree nr. 25/2009, of 14 September, some of the maximum straight-line depreciation rates are as follows:
|Tangible fixed assets||Method (%)|
|Office and commercial buildings||2|
|Machinery – tools:||Light||20|
|Office equipment (e.g.: photocopier)||20|
|Vehicles:||Light passenger and mixed-use vehicles||25|
|Heavy passenger vehicles||14.28|
|Heavy goods vehicles/trailers||20|
|Industrial property elements as patents, trademarks, licenses, manufacturing processes and other similar rights acquired against payment (1)||For exclusive utilization within a limited period of time||Rate determined by the period of time during which the exclusive utilization occurs|
|Without a limited period of time||During the first 20 fiscal years after the initial booking|
|Goodwill (1)||Goodwill from business combinations(excluding that relating to shareholdings)||During the first 20 fiscal years after the initial booking|
|Other situations||Not allowed, except in situations of effective and proved depreciation and when authorized by the PTA|
(1) It is not accepted as fiscal cost, the acquisitions of intangible assets from entities subject to a more favourable tax regime.
Tax deductibility rule
Net financing expenses are only deductible up to the higher of the following limits:
Any exceeding financing expenses of a given tax year may be deductible on the following 5 tax years, after deducting the financing expenses of each year, provided that the above-mentioned limits are not exceeded.
Whenever net financing expenses do not exceed 30% of earnings before depreciations, net financing expenses and taxes, the unused part increases the maximum deductible amount, until the following 5th tax year.
For the identification of the non-deductible net financing expenses and the unused limit that could increase the amount deductible in the following periods, should be considered the net financing expenses and the part of the unused limit computed firstly.
The carry forward of the amounts mentioned above can be limited in case the ownership of the share capital or the voting rights of the tax payer change in at least 50%.
Definition of net financing expenses
Expenses connected with the remuneration of debt, deducted from income of the same nature, such as:
Definition of earnings before depreciations, net financing expenses and taxes
Refers to the earnings before depreciations, amortizations, net financing expenses and taxes registered in the accounts, adjusted by:
Entities out of the scope
In case of group taxation, the dominant company may opt to apply the limitation mentioned above taking in consideration the following:
The option should be maintained for a minimum 3 year period, and must be reported to the tax authorities up to the end of the third month of the tax period in which it is intended to apply the option.
The transitional period introduced in the 2013 State Budget is maintained. As such, between 2014 and 2017, the applicable percentage rates limiting the tax deductibility of the net financing expense will be:
Profits or income obtained by non-resident entities that are clearly subject to a more favorable tax regime, are imputed to the Portuguese resident taxpayers subject to Corporate Income Tax (CIT) that hold either direct or indirectly, even if through a representative, fiduciary or intermediary, at least 25% of their share capital, voting rights or attribution rights over the income or the assets of those non-resident entities.
Whenever at least 50% of the non-resident entity’s share capital, of voting rights or of other rights over income or assets, are held, directly or indirectly, even through a third party, by entities subject to Portuguese PIT or CIT, the mentioned percentage is 10%.
For the determination of the holding percentages above referred, both the shareholdings, as well as the rights held, either direct or indirectly, by entities with which the taxpayer has special relations with, will be taken into consideration.
The imputation of profits or income obtained by the non-resident entities subject to a clearly more favorable tax regime is determined accordingly to the shareholding percentage or according to the attribution rights over income or assets directly or indirectly held by the Portuguese resident taxpayer.
An entity is considered as being subject to a clearly more favorable tax regime when:
Upon the distribution of profits or income by a non-resident entity subject to a clearly more favorable regime to a Portuguese resident taxpayer, the amounts that the Portuguese entity proves that have already been imputed in previous tax years should be deducted to the taxable income of the year in which the distribution takes place, up to the amount of the taxable income assessed. Should it be the case, a tax credit relating to the corporate income tax paid in the country of residence of the non-resident entity will apply.
This regime does not apply to non-resident entities that simultaneously meet the following conditions:
The regime is also not applicable when the non-resident entity is resident or established in another member State of the European Union or in another member State of the European Economic Area bound to administrative cooperation on tax matters equivalent to the cooperation established within the European Union and the Portuguese resident entity proves that the incorporation and functioning of the company rely on valid commercial reasons and that such entity carries out a business activity (either commercial – including the rendering of services industrial or agricultural activities).
Only realised capital gains and realised capital losses are relevant for the purposes of determining the taxable profits of an entity. Any latent or unrealised capital gains or capital losses, even if accounted for in the books of the entity, will not be relevant for the purposes of determining its taxable profits.
Any gains and losses arising from (i) the onerous transfer, (ii) insurance claims and (iii) the permanent allocation to other activities than the one effectively developed by a given entity in regards with tangible fixed assets, intangible assets, non-consumable biological assets and investment properties, even in case any of those assets are reclassified to non-current assets held for sale, as well as financial instruments, except those that are recognised at fair value, unless such recognition occurs at fair value through profit and loss and the respective adjustments are relevant for the determination of the taxable profits of the entity, are considered as realised capital gains or capital losses for tax purposes.
In case of a merger with no attribution of shares to the shareholder of the merged company, the positive or negative difference between the market value and the acquisition cost of the shares of the merged company within this operation is considered a capital gain or loss.
Capital gains and capital losses determined for tax purposes are usually different from capital gains and capital losses determined for accounting purposes and are quantified as follows:
Capital Gains/Capital Losses for tax purposes = Sales proceeds – (Acquisition Value - Accumulated depreciations - Impairment Losses) x inflation index
The following are also considered as onerous transfers :
In the transfer of shareholdings ofthe same nature, are considered transferred the shares acquired firstly (First In First Out method).
The entity that is subject to tax can opt by the weighted average cost to determine the cost of acquisition. In this case, the computation should take into consideration all the shares that belong to the same portfolio and the option should be maintained for a minimum period of 3 years. If the weighted average cost is used, the monetary devaluation coefficients is not applicable.
Transfer of shareholdings – Participation exemption regime
Capital gains obtained on the disposal of shareholdings are not subject to taxation if the shares have been held, uninterruptedly, for a period of 12 months, and represent 10% or more of the share capital or of the voting rights.
The changes introduced to the Participation Exemption regime are applicable to participations held at the time the 2016 State Budget enters in force (31st March 2016), being the new detention period counted as from the acquisition date of the percentage of 10% or more of the share capital or voting rights.
The regime is also applicable to:
Capital gains obtained on the disposal of shareholdings in which the value of real estate, directly or indirectly held, represents more than 50% of the assets (except immovable property allocated to an agricultural, industrial or commercial activity) are excluded from the participation exemption regime.
Capital gains obtained on the disposal of shareholdings acquired before 1 January of 1989 are not subject to taxation.
Reinvestment of the sales proceeds
The positive difference between the capital gains and losses obtained in an onerous transfer of tangible fixed assets, intangible assets and non-consumable biological assets, held for a period of at least one year, can be considered only in 50% of the respective amount if the sales proceeds are reinvestment on the acquisition, production or construction of tangible fixed assets, intangible assets or non-consumable biological assets. For this purpose the reinvestment must take place in the previous tax year, in the tax year in which the transfer occurs, or in the two tax years following the transfer.
The reinvestment in second-hand assets acquired from related entities or held for a period less than one year are not considered for the reinvestment regime. This regime is not also applicable to capital gains obtained by merged or divided companies in a merger or division operation and to capital gains obtained in the sale of assets not related to the company’s activity or obtained by companies in liquidation.
In case of partial reinvestment, a partial relief (proportional to the investment made) will apply.
In case the reinvestment is not fully accomplished during the reinvestment period, the difference (or the proportional difference) will be considered as taxable income of the second year following the disposal, increased in 15%.
Investment properties do not benefit from this regime, albeit recognized in the accounting as tangible fixed assets.
The Ministerial Order nr. 326/2017, from 30 October, provides the official monetary devaluation indexes applicable to certain assets and rights sold within 2017, as follows:
|Up to 1903||4.631,11|
|1904 to 1910||4.311,02|
|1911 to 1914||4.134,75|
|1925 to 1936||186,33|
|1937 to 1939||180,95|
|1944 to 1950||84,4|
|1951 to 1957||77,43|
|1958 to 1963||72,8|
|1967 to 1969||59,89|
|2012 to 2015||1|
Commercial transactions between associated enterprises should be subject to identical terms and conditions to those that would be accepted and agreed between independent entities (arm’s length principle).
Transfer Pricing Documentation
Companies with net sales and other income of € 3,000,000 or more (with reference to the previous fiscal year) should prepare, on a contemporaneous basis, transfer pricing documentation, which must be organized by the 15th day of the 7th month after the closing of the fiscal year to which the transactions concern and delivered with the tax authorities upon their request.
According to the legislation in force, this documentation should be prepared in the Portuguese language.
Simplified Business Information/Annual Statement
Specific information on transfer pricing, including the nature of transactions, amounts and transfer pricing methods applied, must be disclosed on the designated forms of the Simplified Business Information/Annual Statement.
Country-by-Country Report (CbC Report)
The obligation for submitting, for each fiscal period, financial and fiscal information by country or jurisdiction is required for entities with tax residence in Portugal that meet all the following criteria (i) are required to prepare consolidated financial report statements; (ii) that hold or control, directly or indirectly, one or more entities in distinct countries or jurisdictions; (iii) with annual consolidated group turnover in the immediately preceding fiscal year is more than, or equal to, € 750,000,000; and (iv) are not held by other entity that are obliged to submit a similar fiscal declaration.
Notwithstanding, even in the case of not being the parent company of the group, this obligation may fall in the entities with tax residence in Portugal, in particular when one of the following criteria is met: (i) the parent company has designated the Portuguese entity as the reporting entity; (ii) the parent company is not obliged to submit the CbC Report in its jurisdiction; (iii) the parent company is a tax resident in a country/tax jurisdiction with which Portugal does not have an automatic exchange of information agreement in force.
The CbC Report must be filed until the end of the 12th month after the closing of the fiscal year, according to a template to be made available by Portuguese tax authorities.
Each entity resident in Portugal for fiscal purposes is required to inform the Portuguese Tax Authorities about its condition of being a reporting entity. If the burden of this obligation falls into another entity, it is necessary to identity the fiscal residence of the group’s reporting entity.
Advance pricing arrangements
It is possible to conclude unilateral, bilateral or multilateral advance pricing arrangements with the tax authorities, with the aim of defining the terms and conditions of commercial and financial transactions with associated enterprises, for a given time period. The requirements and conditions for the conclusion of these advance pricing agreements are regulated in Decree-Ruling 620-A/2008, dated 16 July.
Portuguese resident companies which are members of an economic group may opt to be taxed under the special tax regime of group taxation (RETGS – “Regime Especial de Tributação de Grupos de Sociedades”).
Option for the Group taxation regime is available when:
A parent company resident for tax purposes in the European Union or in the European Economic Area (in the latter case, only when an administrative cooperation agreement applies), may also apply for the tax unit regime.
In this case, this option would imply the application of this regime to all the qualifying companies, resident for tax purposes in Portugal, being necessary to appoint one of those controlled companies as the responsible for the accomplishment of all the obligations arising from this tax regime.
Such option should be made:
Any change on the tax group should be reported:
If the change results from the closing of the activity of a company part of the group, the change should be reported to the tax authorities within 30 days from the closing of the activity, unless when the closing is subject to registry in the commercial registry office, in which case no communication would be needed.
Group’s taxable profit = Σ individual taxable profits + Σ individual taxable losses
Companies are not eligible to be a part of the tax group if they:
Taxable regime for consolidated profits
It should be considered, for the group taxable income the amount regarding the first tax period that has begun as of January 1, 2017, a quarter of the internal results which had been eliminated through the application of the previous tax regime of consolidated profits (Law 30-G/200, December 29) and that are still pending to be subject to taxation by the end of the taxable period that had begun on January 1, 2016, namely because this results are considered as being not realized in the group profits until that date, so the transitional regime should be kept as being applicable regarding the remaining amount of such results/profits of the group.
Additionally, it is also due an autonomous payment on account during July 2017 or, in case the entity has a different tax period from the calendar year, on the 7th month of the first taxable period which has begun on January 1, 2017, which should be computed bearing in mind the amount correspondent to the application of the CIT rate of 21% on the internal results included on the taxable profit of the group and should be deductible to the taxable amount payable on the CIT settlement regarding the first tax period that began in or after January 1, 2017.
Resident taxpayers that are not exempt or subject to a special taxation system, engaged primarily in a commercial, industrial or agricultural activity, may opt by assessing their taxable income according to a simplified regime, if the following conditions are met:
In the simplified regime, the taxable income is obtained by applying the following percentages to the income obtained:
|Sale of goods, as well as the rendering of services related to restaurants and beverage sectors, and hotel and similar activities, with exception to those related to private accommodation activities (house or flat)||0.04 (1)|
|Income from activities specifically listed in the table to which article 151.º of the Portuguese Personal Income Tax code refers||0.75|
Other income arising from the provision of services, as well as operating subsidies
|Income derived from the temporary transfer or use of intellectual or industrial property or know-how, other capital income, income from immovable property, the positive difference between capital gains and losses and positive equity variations not reflected in the net profit||0.95|
|Acquisition value of assets received for free, assessed in accordance with article 21.º, 2 of CIT Code||1|
|Income arising from private accommodation activities (house or flat)||0.35|
(1) These percentages and the limit referred in the following paragraph are reduced in 50% and 25%, respectively, in the first and second years of activity.
The taxable due determined as set out above cannot be lower than 60% of the annual amount of the monthly minimum guaranteed remuneration (Monthly minimum guaranteed remuneration fixed for 2017: € 557).
The option for the simplified regime must be formalized in the beginning of activity return or in the modifications return due by the end of the 2nd month of the tax period in which the company wishes to start the application of the regime.
Withholding tax exemption
It is possible to apply a withholding tax exemption on the profits and shares placed on disposal by a company considered as being resident, for tax purposes, in Portugal and subject without the possibility of being exempt of Corporate Income Tax (CIT) and also not taxed under the fiscal transparency regime, to another entity resident, for tax purposes, on the European Union, EEE or other Contract State with whom Portugal has already signed a Double Tax Treaty (DTT), since the following conditions are duly met:
Participation Exemption Regime: Capital gains and losses arising from the equity capital transfer
It is not considered for the taxable income computation of entities resident for tax purposes in Portugal, the capital gains and losses arising from the capital equity transfer, whatever ground this transaction is performed and which one is the transmitted percentage regarding shares that are own in a continuous basis of at least 1 year, once in the transmission date the requirements of the minimum percentage and time hold are duly verified, and also that the entity is not a taxable entity under the fiscal transparency regime nor resident in a territory considered as a tax heaven.
This rule will not be applicable in case there is a capital gain or loss on the transmission of shares, namely supplementary capital contributions, when the amount of the immovable property or the real state rights connected with the immovable property located in Portugal, with the exemption of the immovable properties that are affected to one specific activity that has a commercial, agricultural or industrial nature and that is not the purchase and sale of this immovable properties, does not represent more than 50% of the assets.
In this regard, please note also that the above mentioned tax regime as well as the necessary requirements are applicable to the shareholdings owned at the time of March 31, 2016. The time lapse must be counted from the owning date since the shareholding acquisition of at least 10% of the share capital or vote rights.
Tax deductible impairment losses and other adjustments on the price of shares or other equity instruments shall be considered positive components of the taxable income in the tax period in which the respective transfer occurs, provided that the participation exemption regime applies (as per art. 51.º-C of the Corporate Income Tax Code).
Contractual regime benefits for investment projects
A Corporate Income Tax (CIT) credit between 10% and 25% of the relevant applications to the CIT assessed and reductions or exemptions from Property Transfer Tax, Property Tax and Stamp Duty may be granted to eligible investment projects (amounting to or exceeding € 3,000,000), set up until 31 December 2020, since they provide job creation or maintenance, it is proved their technical, economic and financial viability, and:
Regarding the CIT benefit, in the case of projects in existing companies, the maximum annual deduction may not exceed the greatest of 25% of the total granted tax benefit or 50% of the CIT assessed in each tax period.
The mentioned tax benefits should respect the limits applicable to regional aid in force in which the investment is made.
The contractual tax benefits cannot be combined with any tax benefits of the same nature in respect of such relevant applications, except for the tax benefit for the reinvestment of retained earnings, provided that the applicable limits are not exceeded.
Municipal tax benefits
It is foreseen a tax exemption of Municipal Property Tax and Property Transfer Tax (besides the other ones applicable concerning the Municipal Property Tax and Property Transfer Tax) to support the investment performed on the county area and in accordance with the accomplishment of certain requirements and limitations granted by the Municipalities.
R&D – Incentive regime for research and development (SIFIDE II)
SIFIDE II will be in force until 2020.
A tax credit is available, under certain conditions, for R&D expenses, in the following percentages:
Companies should obtain a statement proving the expenses incurred, issued by the entity appointed by the member of Government responsible for the economy area.
Expenses related to products’ eco-design projects are now increased by 10%. This increase is dependent upon submission and approval of the project by the Portuguese Environment Agency (APA, I.P).
Special Tax Regime to Support Investments (RFAI)
RFAI applies to relevant investments made on fixed tangible and intangible assets.
A CIT credit is granted according to the eligible region in which investments are made, as follows:
in the case of investments made in the North, Centre and Alentejo regions and in the Autonomous Regions of the Azores and Madeira:
The abovementioned € 10.000.000 limit is applicable to tax periods starting on or after January 1, 2017, whereas the previous limit stood at € 5.000.000. Investments carried out in the tax period starting on or after January 1, 2016 can still benefit from the said deduction to the limit of € 10.000.000, as long as they have not been included in any period.
The mentioned deductions are limited to 50% of the CIT assessed in each tax period, except in the tax year of the beginning of activity and the next two tax years (since the company does not result from a demerge operation).
Any unused credit may be carried forward for ten years (provided the mentioned limit is not exceeded).
Additionally, exemptions or reductions from Property Tax (IMI), Property Transfer Tax (IMT) and exemptions of Stamp Duty may apply on the acquisition of real estate which qualifies as relevant applications.
The mentioned tax benefits should respect the limits applicable to regional aid in force in which the investment is made.
RFAI cannot be combined with any tax benefits of the same contractual nature in respect of such relevant applications, except for the tax benefit for the reinvestment of retained earnings, provided that the applicable limits are not exceeded.
Companies which increase their number of employees by granting permanent employment to people aged between 16 and 35 years old, inclusive, except young people with less than 23 years old which have not concluded secondary education and are not attending an educational program that provides for the increase the education degree or professional qualification or to long term unemployed, may claim an additional deduction of 50% of the related costs. The additional cost may be claimed for a period of five years, calculated from the date in which of the labour agreement was enacted.
The maximum amount of the additional deductible cost, per employee, is 14 times the minimum monthly wage.
The additional deduction of 50% of the costs incurred with the same employee is applicable to more than one employer, provided that the employers are not deemed to be related parties.
This regime cannot cumulate with other benefits to support the creation of jobs, applicable to the same employee or job.
Donations granted to certain entities whose main activity consists in the execution of initiatives in the social, cultural, environmental, scientific or technologic, sports and educational areas, are considered as cost for tax purposes (within certain limits, and in certain circumstances, on an additional deduction).
Credit for international double taxation
In case of existence of a double tax treaty concluded with Portugal, the deduction cannot exceed the foreign tax paid as foreseen in the treaty.
Economic double taxation relief on the profits and shares distribution
In order to benefit from a tax credit relief on the profits and shares distribution it is necessary to accomplish with certain requirements namely, i) an ownership not lower than at least 10% of the share capital or voting rights and, ii) this ownership has a time period (with no interruptions) of one year prior to the distribution or that has been kept for the necessary time to accomplish with this period of time.
It is also possible to benefit from this tax relief without the above mentioned requirements are duly verified regarding income of shares that being connected with the technical provisions of insurance companies and mutual insurances, are not, direct or indirectly, attributable to the policyholder as well as to the incomes from the following companies: regional development companies, investment companies and financial brokerage companies.
Madeira International Business Centre (MIBC)
The entities licensed to operate in the MIBC until 31 December 2014 are taxed at the CIT reduced rate of 5%, in force until 31 December 2020. This rate applies on taxable income thresholds, which will vary depending on the number of new jobs created.
That regime has been extended to entities licensed to operate in the MIBC as from 1 January 2015, and is valid until 31 December 2027 ("IV Regime").
Other tax benefits are also applicable to the entities in the MIBC, namely:
Entities licensed until 31 December 2014:
Entities licensed after 1 January 2015:
Companies licensed to operate under the previous regime may transition to the IV Regime. The total tax benefits available to MIBC entities are capped at the highest of: (i) 20.1% of annual gross added value, (ii) 30.1% of annual staff costs or (iii) 15.1% of annual turnover.
Autonomous Region of the Azores
Entities resident in the Azores benefit from a tax credit between 20% and 40% of the profits reinvested in certain fixed assets.
Financial services to public entities
When State, Associations of Public Law and Social Security carry out operations of finance other companies using funds obtained from credit institutions, they are subject to taxation on the difference of interest and other income capital they hold for such operations and the interest owed to these institutions, with exemption from withholding on CIT in each financial year.
Shipping companies of the merchant navy
Profits from the shipping activity are only taxable in 30% of their amount. The transactions of foreign financing for the purchase of ships, containers and other equipment for ships, shipping companies hired by the shipping companies merchant navy, even if the hiring is done through domestic financial institutions, are exempt from stamp duty.
Entities managing package systems and packages residue
These entities are exempt from CIT, except for capital income as defined for personal income tax purposes, throughout the period of the license, for results that during this period are reinvested or used to achieve the ends they are legally assigned.
Sports, culture and leisure associations
Profits obtained by sports, culture and leisure entities are exempt from CIT if the income subject to taxation does not exceed the amount of € 7,500. The amounts invested by sports clubs in new infrastructure, except when these investments result from subsidies received for this purpose, can be deducted to the taxable income, limited to 50% of such taxable income. In case of insufficient taxable income, the deduction can be made until the end of the second year after which the investment was made.
Associations and Confederations
Public corporations of an associative nature, incorporated by law with the purpose to discipline and represent the practice of liberal professions and employer, as well as employers’ associations and confederations and trade unions and associations are exempt from CIT, except on capital income and commercial, industrial or agricultural income, as defined for PIT effects.
Entities described above are also benefit from CIT exemption on income derived from training courses provided to associated members within their statutory purpose.
Parents’ associations are also exempt from CIT on income derived from the exploitation of school cantines.
Uncultivated community lands and local communities
Local communities are exempt from CIT on income derived from vacant land, including the income derived from the lease of the right of exploitation, from the transfer of goods or the provision of services to partners, provided that such income is allocated, in accordance with an approved utilization plan, with the local common behaviours or with the deliberations of the competent bodies of the partners, in forestall investment or other improvements on the vacant land or, in improvements in the local community that owns and manages the vacant land, within the fourth year after the income is obtained except in case of fair impediment on the fulfilment of the allocation term, notified to the Directore-General for Taxation with the respective written grounding, until the last day of the month following the end of the referred term.
Capital income as defined for PIT purposes and capital gains realized with the sale of vacant land are not exempt from CIT.
Incentives for the acquisition of companies in difficult economic situation
The regime of incentives for the acquisition of companies in a difficult economic situation, for cases approved by the Institute for the Support of Small and Medium Enterprise and Innovation (IAPMEI), foresees the possibility for the acquiring company to deduce the tax losses assessed, and not deduced by the acquired company, in the previous five fiscal years after the application of the regime provided that some of the requirements are fulfilled and that an authorization is granted by the finance minister. The deduction value depends on the holding percentage (aminumum of 50% is required) and isproportion of the acquiring company participation in the share capital of the acquired company, capped to 60% of the taxable income of the acquiring company as long as such tax losses are still within the legal carry forward period.
Please note that the above mentioned regime is also applicable to the processes approved by the Institute of Support to Small and Medium Enterprises and Innovation.
Tax Benefits for the carryover transactions/ operations
Carryover transactions/ operations regarding securities or similar rights realized on the stock exchange market as well as the report and fiduciary disposal in guarantees performed by financial institutions, namely credit and financial institutions with the interposition of central counterparties, are exempt from stamp tax duty
Tax benefit for the reinvestment of retained earnings (DLRR)
The reinvestment of retained earnings (“DLRR – Dedução por Lucros Retidos e Reinvestidos”) is a tax incentive to micro, small and medium-sized companies that allows a CIT deduction of 10% of the retained and reinvested earnings used for the acquisition of relevant applications. Reinvestment should be made within two years, computed as from the end of the tax year in which the earnings are realized. The annual deduction is capped at 25% of the CIT due, with a maximum annual deductible amount of € 5,000,000.
Note: Tax Benefits can not be granted or used if the taxpayer does not comply with obligations related with the payment of taxes or Social Security contributions due.
Conventional Remuneration of Share Capital (RCCS)
The regime foresees a deduction from the taxable profit corresponding to 7%, applicable to cash contributions and conversion of shareholder loans, up to € 2 million, upon the incorporation of an entity or capital increases.
The tax benefit has a wide application, regardless of the shareholders’ nature and is not limited to the de minimis rule.
The deduction to the taxable profit will be made in the tax period where the entries are made and in the following five tax periods.
The limitation to the net financing expenses of the taxpayers that use this benefit will be the higher value between € 1 million and 25% of the result before depreciations, amortizations, net financing expenses and taxes (30% in case of taxpayers not yet benefiting from this regime).
Tax benefit regarding the incorporation of companies in the interior regions
Micro enterprises and SME’s located in the interior regions of the country, engaged primarily in economic, agricultural, commercial, industrial or service providing activities, will benefit from a rate of 12.5% for the first € 15,000.00 of taxable amount.
The regions benefitting from this measure shall be established by ministerial ordinance, based on criteria such as migration and aging, economic activity and employment, entrepreneurship, among others.
This tax benefit is applicable to individual start-up investors, allowing a deduction of 25% of the eligible investment from the amount of Personal Income Tax payable. This investment is limited to shareholdings not exceeding 30% of the share-capital or the voting rights, to cash contributions actually paid, the annual amount of the eligible investment cannot exceed € 100,000.00 per taxable person, among other requirements.
This deduction is limited to 40% of the Personal Income Tax payable, with the possibility of a deduction in the two subsequent tax periods in case the annual limit is insufficient, without, however, exceeding the de minimis threshold.
Capital gains arising from the sale of shares are not taxable if the investment is held for at least 48 months and the realization value is reinvested in the same year or the year following the transmission.
Tax benefits are granted to ensure the interest in investment in the Portuguese territory.
A CIT exemption applies to capital gains obtained by nonresidents on the transfer of:
The capital gains realised on the transfer of shares in Portuguese resident companies are not exempt from taxation in Portugal, whenever one of the following situations occurs:
Interest on loans granted by non-resident financial institutions to resident credit institutions are exempt.
Are exempt when obtained by non-resident financial institutions in operations with resident credit institutions or with the State.
Are exempt when made by non-resident financial institutions.
Income deriving from participation units of securities investment funds and shares on security investment entities is exempt. The income of participation units in venture capital investment funds are also exempt, except if the entity is resident for tax purposes in a tax heaven, or its share capital is hold in more than 25% by a Portuguese entity, case in which the income is subject to withholding tax at the rate of 10%. Income deriving from participation units of real estate investment funds and shares on real estate investment entities is subject to withholding tax at the rate of 10%.
The income obtained in Portugal by non-residents may be exempt, in case of bonds with a maturity longer than one year and listed in a liquidation centralised clearing system.
The Minister of Finance may grant full or partial exemption on CIT for interest on foreign capital, representing loans and leasing payments for imported equipment when are liable to the State, Autonomous Regions, local authorities and their associations, or any of its departments, institutions and organizations, even companies providing public services, provided that the creditors have their domicile abroad and do not have a permanent establishment in Portuguese territory to which the loan could be allocated.
Loan agreements concluded by Instituto de Gestão da Tesouraria e do Crédito Público, E.P.E., in name and in representation of the Portuguese Republic, are exempt from CIT and PIT, provided that the creditor of the loan is a non-resident without permanent establishment in Portugal. The benefit depends on a certification by the Instituto de Gestão da Tesouraria e do Crédito Público, E.P.E..
Income deemed to be obtained in Portugal, arising from public and non-public debt securities issued by non-resident entities is exempt from PIT and CIT. This exemption applies when the income is to be paid by the Portuguese State as a warranter of obligations assumed by companies in which the Portuguese State, along with other EU Member States, are shareholders.
Gains obtained by non-resident financial institutions as a result of repos with resident financial institutions are exempt from CIT, as long as such gains are not attributable to a permanent establishment of those institutions located in Portugal.
Tax losses generated in tax years prior to 1 January 2010 can be carried forward for 6 years.
Tax losses generated from 1 January 2010 until 31 December 2011 can be carried forward for 4 years.
Tax losses generated from 1 January 2012 until 2013 can be carried forward for 5 years.
Tax losses generated from 1 January 2014 onwards can be carried forward for 12 years.
From 1 January 2014 onwards, the deduction of tax losses carried forward, even if the tax losses were generated before 2014, is limited to 70% of the taxable profit assessed in the relevant fiscal year.
Tax losses generated from 1 January 2017 onwards can be carried forward for a 5 years period.
From 1 January 2017 onwards, rules regarding the utilisation of carry forward tax losses under the FIFO method were revoked. This allows deducting first the carryforward tax losses which carry forward period ends first.
Regarding companies that under the foreseen Law Decree are considered as being a micro, small or medium company (so called “PME”) and proceed with an agricultural, commercial or industrial activity, have 12 years to carry forward the tax losses generated.
|Carry forward period|
Year at which tax losses are generated
|2008||TL||TL||TL||TL (1)||TL (1)||TL (2)|
|2009||TL||TL||TL (1)||TL (1)||TL (2)||TL (2)|
|2010||TL||TL (1)||TL (1)||TL (2)|
|2011||TL (1)||TLF (1)||TL (2)||TL (2)|
|2012||TL (1)||TL (2)||TL (2)||TL (2)||TL (2)|
|2013||TL (2)||TL (2)||TLF (2)||TL (2)||TL (2)|
|2014||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)|
|2015||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)|
|2016||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)||TL (2)|
|2017||TL (2)||TL (2)||TL (2)|
(1) Deduction of carryforward tax losses capped at 75% of the taxable profit.
(2) Deduction of carryforward tax losses capped at 70% of the taxable profit.
In 2017, taxpayers should file the Corporate Income Tax return regarding the tax year 2016.
The taxable income of entities that carry commercial, industrial or agricultural activities is computed on the net profit determined in accordance with the accounts, deducting the negative equity variations not reflected in the net profit, and considering the tax adjustments (added back or deducted) foreseen in the CIT code. These tax adjustments are included in Table 07 ("Quadro 07") of the CIT return ("Modelo 22").
The taxable income is determined in Table 09 ("Quadro 09") of the CIT return ("Modelo 22"), based on the taxable income obtained in Table 07 ("Q07"). Certain benefits may be deducted from the taxable income, as well as carry forward tax losses.
Total payable tax
The tax due results from applying the CIT rate to the taxable income assessed, with the subsequent deduction or adding-back of certain amounts, to quantify the tax payable or to recover, which are included in Table 10 ("Quadro 10") of the CIT return ("Modelo 22").
Taxation of CIV at Corporate Income Tax (CIT) level
CIV now assess a taxable profit corresponding to the net income of the period, computed in accordance with the applicable accounting standards, being however disregarded the following:
Tax losses generated by the CIV follow the regime foreseen in the CIT code, with the necessary amendments.
The computed taxable income is subject to the general. CIV are exempt from municipal and state surtax, being however subject to autonomous taxation foreseen in the CIT code.
CIT due by CIV is assessed in the periodic CIT return (Form “Modelo 22”) and the payment should be made until the last day of the time limit foreseen for the submission of the form.
Taxation of CIV at Stamp Duty level
Stamp Duty is also levied on the net asset value of the CIV, as follows:
The tax is assessed quarterly, in March, June, September and December of each year and is due by the CIV before the end of the month following the taxable event.
Taxation of CIV’s investors
Regarding the taxation applicable to income obtained by holders of participation units / shareholdings in the CIV, it is applicable the taxation «at exit» rule.
Income obtained by resident investors, is subject to taxation at Personal Income Tax (PIT) level (generally, at the rate of 28%) and CIT level (being considered in the taxable profit of the investors).
Income obtained by non-resident investors without permanent establishment benefit from a favorable tax regime:
This regime does not apply – being instead applicable the PIT and CIT regime foreseen for resident investors – whenever the investors are tax residents in “offshore” jurisdictions or, as a general rule, are held in more than 25% by tax residents in Portugal.
Foreign Investment Funds
Similar to other non-resident entities, foreign investment funds are taxed only on income obtained in Portugal.
Withholding tax at a rate of:
Retirement/Educational Saving Funds
CIT exempt when established and operating under national legislation.
Security Savings Fund
CIT exempt when established and operating under national legislation.
The positive difference between the amount due at the closing of the security savings funds and the amounts deposited is subject to withholding tax at the rate of 21.5%, but the taxpayer can opt for aggregating the other income considered for PIT purposes.
Venture Capital Funds
Exemption from CIT when established and operating under national legislation.
Exemption from CIT and Real Estate Transfer Tax when established and operating under national legislation.
Income obtained by pension funds established in another EU country or in a EEA Member State (bounded to administrative cooperation on tax matters), will also be exempt from CIT if they fulfil, cumulatively, the following requirements:
Real Estate Investment Funds in Forest Resources
Exemption from CIT when established and operating under national legislation, as long as:
a) at least 75% of its assets are allocated to the exploitation of forest resources, and
b) that exploitation is submitted to forest management plans or certification.
In case the above conditions are not met, the exemption will not be applicable, and the taxation regime for CIV will apply.
Dúvidas e questões, PwC Portugal
Tel: +351 213 599 616
Informações, subscrição e apoio técnico, PwC Portugal
Tel: +351 213 599 616