Portugal State Budget 2024 - New Fiscal Incentives for Companies
Portugal has unveiled a comprehensive package of 60 economic measures designed to boost the country’s economy, having the secondary effect of attracting foreign businesses to establish operations locally. These initiatives, including tax reductions and new VAT groups, combined with the revised Non-Habitual Resident (NHR) regime and the new Incentive to the Capitalization of Companies (CFEI II), create a favourable environment for international companies. This blog post highlights why now is the perfect time for foreign companies to open a subsidiary or branch in Portugal.
Why Foreign Companies Should Establish Operations in Portugal Now
1. Portugal Economic Boost with Key Tax Incentives
The Portuguese government's Economic Acceleration Program includes:
Corporate Tax (IRC) Reductions: Starting in 2025, the corporate tax rate will decrease by two percentage points annually, starting at 19% and reaching 15% by 2027. For SMEs and small-mid cap companies, the IRC rate will gradually reduce from 17% to 12.5% over three years for the first 50,000 euros of taxable income.
15% Tax Rate for Multinationals: An effective tax rate of 15% for multinationals is expected to be approved soon.
VAT Groups: Introduction of VAT groups aims to improve cash flow, reduce VAT refund processes, decrease bureaucracy, and streamline procedures.
2. Fiscal Domain Enhancements
The package proposes several fiscal measures:
Cash Accounting VAT Scheme: Increased eligibility to alleviate cash flow pressure on companies.
Stamp Duty Exemption: Extension for centralized cash management operations.
Participation Exemption Regime: Expanded access to exempt dividends and capital gains received by resident companies from corporate tax, subject to conditions.
3. Research and Development (R&D) Incentives
The System of Tax Incentives for Business Research and Development (SIFIDE II) in Portugal has been revised to include:
Productive Innovation Investments: 20% of SIFIDE funds can be applied, provided the project is certified and financed by SIFIDE or other national and European R&D programs.
R&D Expenditure Requirement: Reduced from 7.5% to 5% of the previous year's turnover for invested companies.
4. The Incentive to the Capitalization of Companies (CFEI II)
This new regime aims to boost corporate investment by:
Offering tax incentives for equity investments.
Enhancing the financial stability and growth potential of companies operating in Portugal.
5. Tourism Sector Initiatives
Portugal is enhancing its tourism sector with several initiatives:
Strengthening Regional Tourism Entities: To boost local tourism.
New Delegations of Turismo de Portugal: Opening in countries such as South Korea, Mexico, Australia, and the United States.
Financial Support Lines: Reviewed and reinforced to develop investment projects.
International Tourism Academy: Created to qualify human resources and improve the integration of migrants and refugees.
Digitalization of Tourism Companies: Promoting the adoption of digital tools.
International Campaign: A six-million-euro investment to boost tourism.
Tax Breaks for Foreign Residents in Portugal - Understanding the New NHR Regime
You might have heard about the special tax regime for expatriates in Portugal. Let’s clarify the key points:
NHR 1.0: The original Non-Habitual Resident regime, which was in effect from 2009 until December 31, 2023. This regime allowed individuals to register until December 31, 2024, if they became residents before the end of 2023. It offered numerous tax benefits, including exemptions on foreign income.
NHR 2.0 or IFICI 1.0: This new regime started on January 1, 2024. While it retains many benefits of NHR 1.0, it excludes certain income types, such as pensions, and has a narrower scope.
IFICI+: Announced on July 4, the government is broadening the scope of IFICI 1.0. The new regulations emphasize a 20% tax rate on income from dependent and self-employment work. Passive income from non-Portuguese sources and non-blacklisted jurisdictions will also be exempt.
These changes aim to make Portugal even more appealing to foreign professionals and businesses.
This is the Right Time to Set Up a Company in Portugal
With these new measures and the enhanced NHR regime, now is the perfect time for foreign companies to establish operations in Portugal. The country’s commitment to creating a favorable business environment, combined with its attractive tax regime, makes it an ideal destination for international businesses.
Conclusion
Portugal’s recent economic measures and the revised NHR regime present significant opportunities for foreign companies. The combination of tax incentives, a competitive business environment, and an attractive quality of life makes Portugal a prime location for expanding operations. Don’t miss out on these opportunities. Get in touch with BRIDGE IN and make your move now!
