The IRC Code has been left relatively untouched, but companies can still count on some limited-effect novelties, such as the widening of the patent box’s scope and a small IRC reduction for SMEs, which reinforces the increasingly progressive nature of this tax, a distinctive and rather original feature of the national tax system.

But the really important news for companies come from somewhere else. The Stamp Duty Code, for one, advances an exemption for cash-pooling (whose taxation is an iniquity that ultimately punishes good management), and the Investment Tax Code increases the amount of the DLRR (Deduction for Retained and Reinvested Profits) and of the Tax Benefits, to a lesser extent.


Socially beneficial contributions

The SB Proposal sets a 30% increase for costs incurred by companies with the purchase of their employees’ travel passes. Such costs are currently deductible (without increase) if they are general in nature and are not income from employment (and if that is the case, they must be difficult or complex to individualize).


Income from patents and other industrial property rights

The patent box regime, currently applicable to income from the definitive assignment or temporary use of patents, designs or industrial models, will also apply to income from copyright on computer programs.

The SB Proposal applies this tax regime only to income from registered industrial or intellectual property rights.


Simplified Regime – Short-term Rentals

Following the measures to contain short-term rentals in some Municipalities, the SB Proposal increases from 0.35 to 0.50 the coefficient applicable to short-term rentals of “single-family houses” or “apartments” located in containment areas (i.e., tourist zones, as defined by a City Council resolution, with a high number of such establishments).


IRC Rate – SMEs

The SB Proposal increased the first IRC bracket from EUR 15,000 to EUR 25,000. The bracket (taxed at a reduced 17% rate) applies only to micro, small and medium enterprises and translates into an annual EUR 400 incentive per company.
The adjustment of the first IRC bracket is in step with the incentives set forth in the Inland Development Program.


Separate car taxes

The SB Proposal adjusts the maximum purchase price in the first bracket (10%) from EUR 25,000 to EUR 27,500. Consequently, the separate tax rate of 27.5% will apply to cars whose purchase price is between EUR 27,500 and EUR 35,000.

The SB Proposal further stipulates that the 10% increase in the separate tax rates levied on companies with tax losses will not apply in the two first taxation periods.

The taxes levied on LPG light passenger vehicles were generally increased. As for the separate taxes levied on the purchase price, general rates will apply instead of the reduced rates currently applicable:

  • For cars with a purchase price of less than EUR 27,500, the rate is increased from 7.5% to 10%;
  • For cars with a purchase price of between EUR 27,500 and EUR 35,000, the rate is increased from 15% to 27.5%;
  • For cars with a purchase price of EUR 35,000 and above, the rate is increased from 27,5% to 35%.


Municipal Affordable Rental Housing Programs

In line with the authorization granted to the Government in the beginning of 2019 under an enabling act, the SB Proposal sets forth an IRC (and IRS) exemption for property income earned within the context of Municipal Programs offering rental housing at affordable prices.

This exemption applies to eligible municipal programs and is subject to approval of the Minister for Finance.


Deduction of Retained and Reinvested Earnings (DLRR)

The SB Proposal puts forward an overhaul of the current Retained and Reinvested Profits Deduction framework, expanding the list of beneficiaries and relevant applications.


Globalization incentives

The SB Proposal sets forth an enabling act authorizing the creation of globalization incentives for Portuguese companies, including regarding IRC.