Portugal: Super tax credit for 2013 and upcoming CIT reform

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Portugal: Super tax credit for 2013 and upcoming CIT reform

cassiano.jpg

graca.jpg

Tiago Cassiano Neves


Rafael Graça

The government has recently approved a Growth, Employment and Industrial Development Strategy package which it hopes will serve as a stimulus to re-launch private productive investment in Portugal. The package includes a Draft Bill (already presented to Parliament) for a special investment tax regime for qualified investments made in financial year 2013, which is drawing attention from taxpayers because of its very beneficial conditions.

In general terms, the super tax credit is equal to 20% of eligible investments made between June 1 2013 and December 31 2013 up to a maximum investment amount of €5 million ($6.6 million) per taxpayer, which may then be set off against 70% of the tax due, as long as such investment is operating – or being used – until the end of the fiscal year beginning on January 1 2014.

The super tax credit may be carried forward for five years, when a taxpayer is unable to (partially or fully) credit this amount because there is insufficient tax due.

Another interesting feature is that the super tax credit is excluded from the minimum corporate tax liability mechanism – which determines that the final tax due cannot be less than 90% of the CIT (corporate income tax) payable in the absence of certain listed tax incentives.

As a general rule, for investments to qualify as eligible for the super tax credit, they must consist of tangible fixed assets and depreciable intangible assets, acquired in new condition. There are a number of exclusions from the eligible investments, including land, certain vehicles, non-productive assets and intangible assets acquired from related parties. Eligible investments should be maintained for a five-year period subject to a recapture rule.

The super tax credit will be open to all corporate taxpayers (companies or branches) whose profits are not determined under indirect methods and have their tax and social security situation duly regularised.

A corporate taxpayer with eligible investments of €5 million with a potential CIT payable of €1 million will claim a super tax credit of €700,000 for 2013, reducing its effective tax rate from 25% to 7.5% (excluding surtaxes). This is rather favourable when benchmarked with other similar investment tax credits in place.

The Draft Bill, though technically still subject to minor changes during the legislative process, is expected to be approved rather swiftly and enter into force in July.

CIT reform

Also within the context of the government's push for growth and investment, further details on the cornerstones of the CIT reform for financial year 2014 were released.

Those cornerstones include a progressive reduction of the standard tax rate to set the rate closer to the European average; overall simplification of CIT namely for reporting obligations; strengthening of certain tax incentives to attract foreign direct investment; review of the group taxation regime and participation exemption (dividends and capital gains); changes to the loss carry-forward time limit to bring the time period in line with the best international practices; measures to reduce excessive corporate indebtedness; and further alignment of the corporate income tax with accounting.

The timetable is ambitious, with a first draft of the project expected by June 30 2013, followed by a public consultation period of two months and a final reform project presented to Parliament by October 2013.

Tiago Cassiano Neves (tiago.cassiano.neves@garrigues.com) and Rafael Graça (rafael.graca@garrigues.com)

Garrigues – Taxand

Tel: +351 231 821 200

Fax: +351 231 821 290

Website: www.garrigues.com

more across site & shared bottom lb ros

More from across our site

Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 Asia-Pacific Tax Awards
The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Rafael Tena tells ITR about the ‘crazy’ Mexican market, ditching the hourly rate, and refusing to grow his fledgling firm in an ‘unstructured way’
It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Gift this article