Tax benefits applicable inland

The SB Proposal provides that the 12.5% IRC rate applicable to companies engaging directly and mainly in an agricultural, commercial, industrial business or in the provision of services in inland territories and which qualify as a micro, small or medium-sized enterprise, will apply to the income up to EUR 25,000 of the respective taxable income. Currently this rate only applies to the first EUR 15,000 of taxable income.

The proposed change accompanies the proposed increase of the first IRC bracket from EUR 15,000 to EUR 25,000.


National monuments and buildings individually classified as public or municipal interest buildings

The IMI exemption currently applicable to buildings classified as national monuments and buildings classified as public or municipal interest buildings is repealed.


Costs incurred with the purchase of liquified petroleum gas (LPG)

As part of the assessment of tax benefits harmful to the environment, the SB Proposal proposes to eliminate, in terms of IRS (class B) and IRC, the currently applicable 20% increase in expenses incurred with the acquisition of liquefied petroleum gas (LPG) for the supply of vehicles.

The rates of separate car taxes applicable to LPG vehicles are also reviewed.


Restructuring operations

The SB Proposal provides for an extension of the scope of the exemptions applicable in the context of IMT, Stamp Duty and emoluments and other legal charges currently attributed to companies, state-owned enterprises, cooperatives, confederations and employer and trade union associations, as well as associations of a business or sectoral nature, in the context of a reorganization, as a result of restructuring operations or cooperation agreements. Those benefits will also apply to other entities (for instance, CIUs or branches) performing similar operations or executing similar agreements.

The SB Proposal further applies the benefit of the Stamp Duty exemption to transfers of commercial, industrial or agricultural establishments, necessary for restructuring operations or cooperation agreements.

To date, the exemption applies only to non-residential buildings and residential buildings allocated to the main business, required for the restructuring operations or the cooperation agreements.


Panda bonds

As provided for in the 2019 State Budget, the SB Proposal provides for an IRS or IRC exemption on interest arising from loan agreements concluded by the Agência de Gestão da Tesouraria e da Dívida Pública, IGCP, E.P.E., for and on behalf of the Portuguese Republic, in the form of renminbi bonds placed on the domestic debt market of the People's Republic of China, provided that the creditor is a non-resident (with the exception of those residing in a country, territory or region subject to a clearly more favorable tax regime) without a permanent establishment in Portuguese territory to which the loan can be attributed.


World Youth Day

The SB Proposal foresees that donations in cash or in kind granted to the WYD-Lisbon 2022 Foundation (entity in charge of organizing and coordinating the World Youth Day to be held in 2022 in Lisbon), will be considered as expenditures of the period in 140% of the respective total, for IRC and IRS class B purposes.

The SB Proposal further contemplates an IRS tax rebate of 30% for donations granted to the Foundation by natural persons residing in Portugal, provided that they are not booked as expenses of the period.


Mission Structure for the Commemorations of the Circum-Navigation commanded by Fernão de Magalhães

The SB Proposal foresees that any donations made by natural or corporate persons to the Mission Structure for the Commemorations of the Circum-Navigation commanded by Fernão de Magalhães will benefit from the Cultural Sponsorship framework.


Extension of tax benefits

The following tax benefits are proposed to be extended until 31 December 2020:

  • IRS exemption applicable to interest from savings accounts of pensioners;
  • IRS or IRC exemption applicable to interest from external loans and lease instalments of imported equipment;
  • Special IRC taxation applicable to income from financial services provided by state entities;
  • IRC exemption applicable to gains from swap operations and interest on loans granted by non-resident financial institutions;
  • IRC exemption applicable to interest on deposits from non-resident credit institutions;
  • Stamp Duty exemption on external financing operations for the acquisition of ships, containers and other equipment for ships, taken out by merchant shipping companies;
  • IRC exemption applicable to regional wine committees;
  • IRC exemption applicable to entities managing integrated waste management systems for specific waste streams;
  • IRC exemption applicable to income from sports, cultural and recreational associations;
  • IRC exemption applicable to vacant lots;
  • IRC and IRS class B surcharges on expenses incurred with the purchase of electricity and vehicular natural gas (NGV) to supply vehicles;
  • Increase of expenses with car-sharing and bike-sharing systems incurred by IRC and IRS taxable persons;
  • Increase in IRC expenses for the acquisition of fleets of bicycles for the benefit of the taxable person's staff;
  • Cultural sponsorship framework;IRS deductions for donations in cash made by resident natural persons falling within the sponsorship framework;
  • No VAT on free transfers of goods and services supplies made by the beneficiaries of the donations to their sponsors.

The SB Proposal also foresees that these benefits will be reevaluated in 2020, taking into account the methodology explained by the Working Group for the Study of Tax Benefits, in a report published in May 2019.


Forest Savings Plans – Enabling Act

The renewal of the enabling act foreseen in the State Budget for 2019 for the creation of a tax benefit scheme under the Forest Savings Plans ("PPF") is foreseen.

In particular, an IRS exemption may be created for interest earned from PPF and that a deduction may be made to the collection corresponding to 30% of the cash values applied, per year, through contributions to PPF, capped at EUR 450 per taxable person.


Inland Development Program – Enabling act

The enabling act set forth in the 2019 State Budget will also be renewed to authorize the creation of a tax benefits scheme within the Inland Development Program by way of a tax rebate corresponding to 20% of the period expenses incurred with the creation of jobs inland in excess of the amount of the guaranteed minimum monthly salary, applicable to IRC taxable persons that create jobs in those territories.


Incentives to globalization and export – Enabling act

The SB Proposal authorizes the Government to create new tax benefits in 2020 for the globalization of Portuguese companies.

In particular, it is foreseen that Stamp Duty exemptions on premiums and commissions for export credit insurance policies, with or without a State guarantee, may be created, with the possible inclusion of other forms of export financing guarantees.

A specific IRC framework is also foreseen aimed at the globalization and development of national supply.

This enabling act is subject to the State aids framework and the EU’s approval.