Corporate - Deductions

Last reviewed - 19 February 2024

Depreciation and amortisation

The qualifying cost of an asset for tax purposes is the acquisition or production cost.

Depreciation must be computed by using the straight-line method or the declining-balance method. The latter cannot be applied to buildings, passenger vehicles, furniture, social welfare equipment, or second-hand assets.

Straight-line rates of depreciation are normally consistent with rates privately used by business and industry and are increased, for the purposes of applying the declining-balance method, by coefficients of:

  • 1.5 if assets have a useful life of less than five years.
  • 2 if the useful life is five or six years.
  • 2.5 for useful lives in excess of six years.

Different depreciation methods may be applied without previous approval from the PTA (annual depreciation cannot, however, exceed the depreciation resulting from using either the straight-line or declining-balance methods).

Some examples relating to the maximum straight-line depreciation rate are as follows:

Type of asset Depreciation rate (%)
Office building 2.00
Industrial building 5.00
Electronic equipment 20.00
Computers 33.33
Ordinary tool and paintings 25.00
Engines and machine tools 12.50
Office equipment 20.00
Furniture 12.50
Software 33.33
Passenger vehicles 25.00

Rates can be reduced by 50% in any one year at the taxpayer's option. If the reduction is more than 50%, the difference is not allowed for tax purposes at a future date. A total of 60% of additional depreciation on revaluation of fixed assets, as permitted by law from time to time, is allowed for tax purposes.

Depreciation rates of tangible assets may be increased by 25% in the case of companies with a schedule of two shifts (for three shifts, 50%), given the faster deterioration of those assets.

Assets with an acquisition value lower than EUR 1,000 can be depreciated in the acquisition year, unless the assets are part of a set of elements that should be depreciated as a whole.

Depreciation of yachts and airplanes that are not essential for business activities is not allowed as a cost for tax purposes.

Depreciation of passenger cars and certain other vehicles on the part of their cost of acquisition that exceeds certain amounts (as defined by law), with reference to their acquisition value, is also disallowed as a cost for tax purposes. The following caps apply (i.e. disallowed cost above the values below):

  • EUR 25,000 of acquisition cost in the case of vehicles acquired between 1 January 2012 and 31 December 2014 (EUR 50,000 in the case of electric vehicles).
  • EUR 25,000 of acquisition cost in the case of vehicles acquired from 1 January 2015 onwards (EUR 62,500 in the case of fully electric vehicles; EUR 50,000 in the case of hybrid plug-in vehicles; EUR 37,500 in the case of vehicles that use liquefied petroleum gas (LPG) or compressed natural gas).

Development expenses, patents, trademarks, licences, and similar rights may be amortised for tax purposes if acquired for a limited period of time.

The cost of acquisition of certain intangibles with unlimited life (i.e. trademarks, permits, production processes, models, and other industrial property rights) can be amortised for tax purposes over a period of 20 years.

Depreciation of non-consumable biological assets is tax deductible.

Expenses relating to assets generated internally are deductible for tax purposes in the tax year in which the cost is incurred.


Goodwill acquired as a result of a taxable corporate restructure or business combination can be amortised for tax purposes over a 15-year period (20-year for operations realised in the years 2014 to 2023), except if related with shareholdings or related to the acquisition of intangible assets from associated enterprises.

Start-up expenses

Start-up and research expenses are deductible for tax purposes in the respective tax year.

Limitation on the deductibility of financing expenses

Companies may only deduct net financing expenses up to the higher of the following limits: 

  • EUR 1 million or 
  • 30% of the earnings before interest, taxes, depreciation and amortisation, adjusted for tax purposes (tax EBITDA).

In the cases where the taxable year is less than a calendar year, the EUR 1 million limit is reduced proportionally to the duration of the taxable year. 

Besides Portuguese tax resident entities, PEs of non-resident entities are also covered by the scope of this rule. Entities subject to the supervision of the Portuguese Central Bank (Banco de Portugal) and the Portuguese Insurance and Pension Fund Supervisory Authority (Autoridade de Supervisão de Seguros e Fundos de Pensões), as well as Portuguese branches of financial entities or insurance companies resident for tax purposes in the European Union, are excluded from this rule. 

No distinction is made between bank and intra-group financing, domestic or foreign financing (EU or non-EU). 

Financing expenses considered as excessive (not deductible) in a certain fiscal year may be deductible in the following five fiscal years, provided that, together with the net financing expenses of that year, the above-mentioned limits are not exceeded.

Additionally, where financing expenses do not exceed 30% of the earnings before depreciation, net financing expenses, and taxes, the unused difference is added to the maximum deductible amount in the following five tax years, until its total deduction.

For the purposes of the regime, net financing expenses consist of, among others, any amounts due in connection to the remuneration of financing, including interest on overdraft facilities, short-term loans, bonds, financial expenses related to financial leases, or exchange losses, deducted from the profits or gains of the same nature.

Where the special regime of group taxation applies, there is the option to make the calculation considering the net financial expenses of the whole group and the sum of all the tax EBITDA (this option should be maintained for a minimum three-year period).

Interest on shareholder loans

If the rate applicable to interest and other compensation regarding loans provided by the shareholders to the company is higher than the Euro Interbank Offered Rate (EURIBOR) 12-month rate rounded up with a spread of 2% (at the date the loan was granted), the amount paid in excess is not tax deductible. This rule does not apply when the shareholder is a resident of a tax treaty country or when the interest rate is at arm's length under the transfer pricing provisions.

In the case of SMEs, shareholders' loans with an interest rate of the EURIBOR 12-month rate plus a spread up to 6% are tax deductible.

Bad debt

Impairment losses on doubtful debts are deductible for tax purposes when an insolvency or recovery has been requested or the credits have been claimed in court.

The annual amount of accumulated impairment losses on doubtful debts due for more than six months, with evidence that measures towards its recovery were taken, is capped at the following percentages of the debts:

  • More than 6 and less than 12 months: 25%.
  • More than 12 and less than 18 months: 50%.
  • More than 18 and less than 24 months: 75%.
  • More than 24 months: 100%.

Amounts guaranteed by insurance or mortgage, or due or secured by the state, autonomous regions, or municipalities, or due by related parties (e.g. 10% shareholding), or credits between companies held directly or indirectly in more than 10% of the capital by a natural person are not considered as doubtful debts, and the respective impairment loss is disallowed for tax purposes. The last two situations may still be considered as doubtful debts, provided the recovery of those credits is challenged in court.

The ageing of bills of exchange is calculated from the date when the respective payment is due.

Uncollectable debts are allowed as tax deductible costs if supported under insolvency, recovery enforcement, or in an out-of-court conciliation procedure for the viability of insolvent companies or companies in a difficult economic situation (mediated by the Institute for the Support of Small and Medium-Sized Enterprises or IAPMEI). This rule applies to the amount of the uncollectable debts that were not deducted for tax purposes as impairment losses (or for which the amount was insufficient).

Negative equity variations: Bonds and other subordinated securities

Negative equity variations related with the distribution of income from bonds or other subordinated securities are tax deductible, provided that they do not attribute to the holder the right to receive dividends or voting rights at the General Meeting of Shareholders and are not convertible into shares.

Charitable contributions

Donations to authorised charitable institutions are allowable at up to 0.8% of turnover, with the possibility of the cost being raised up to 150%. Donations to authorised educational, sport, and environmental institutions are allowable at up to 0.6% of turnover, with the possibility of the cost being raised up to 140%.

Donations to the state, municipalities, and foundations where the state or municipalities participate in the initial capital are fully deductible, with the possibility of the cost being raised up to 140%. Special application may be made by certain entities in order to be included under the referred regime.

Donations of computers, software equipment, training, and consultancy in the area of computers granted to the state, municipalities, foundations, and museums, as well as to authorised charitable and cultural institutions, are allowable at up to 0.8% of turnover, with the possibility of the cost being raised up to 140%.

Vacation accrual

Vacation allowance is tax deductible in the year in which the benefit accrues, regardless of the year in which payment is made.

Pension expenses

Contributions to pension, invalidity, and health schemes are tax deductible up to a rate of 15% of annual staff expenses, provided that, among other conditions, they are available to all employees and the management and disposition of the benefits are outside the control of the taxpayer, such as under an insured scheme with vested benefits.

Fines and penalties

Fines and penalties for infractions that do not have a contractual nature, including late assessment interest, are disallowed for CIT purposes.


All taxes other than CIT, autonomous taxation, state/regional surtax (Derrama Estadual/Regional), and local surtax (Derrama) constitute a normal business expense.

Other significant items

The costs borne from the acquisition of social passes are regarded as tax-deductible costs, increased by 50%, to the extent the employer attributes them on a general basis.

Uninsured losses, including indemnities to third parties, are disallowed unless the risk could not be insured.

Non-documented expenses are not tax deductible and are subject to a 50% autonomous taxation for fully taxable entities.

Non-duly-documented expenses are not tax deductible.

Net operating losses

Tax losses assessed in tax years starting on or after 1 January 2023 can be deducted against taxable profit generated in future taxable years for an unlimited time period. The new rule also applies to tax losses assessed in tax years prior to 1 January 2023, which carryforward period is still running as of that date. The deduction of carried forward tax losses is capped at 65% of the taxable income.

Carryback of losses is not allowed.

The tax losses carried forward are lost in case of a change in direct ownership of the company of at least 50% shareholding or voting rights (not applicable in case of changes within the same group of companies, under certain conditions). This does not apply if it is concluded that the operation does not have tax evasion as its main or one of its main purposes. Namely this happens if the operation was carried out under valid economic reasons.

Payments to foreign affiliates

A Portuguese corporation is allowed to deduct royalties, interest, and other costs paid to foreign affiliates, provided the amounts are at arm's length. Service fees paid are allowed if there is adequate proof that the service was effectively rendered (an invoice is required in cases where the supplier of the goods or services is obligated to issue such document; otherwise, other supporting documents are required) and has economic substance, as well as if the amount is at arm's length.

Payments to entities resident in a black-listed jurisdiction

Payments made or due, indirectly, to entities resident in a black-listed jurisdiction, when the taxable person has or should have had knowledge of the final purpose given to such payments, will be non-deductible for tax purposes, except if the taxpayer demonstrates that such charges relate to genuine transactions and are not of an abnormal or exaggerated amount. Such knowledge is presumed whenever there are special relations between the taxpayer and the entities in a black-listed jurisdiction or between the taxpayer and the legal representative, fiduciary, or intermediary.