Corporate - Significant developments

Last reviewed - 08 August 2022

June 2022

2022 State Budget Law proposal

Law 12/2022, of 27 June, published in the Official Gazette, approves the 2022 State Budget. It is effective from 28 June 2022 onward however certain tax provisions are effective on different dates. Download PwC Portugal's newsletter for details on the budget - available here https://www.pwc.pt/pt/pwcinforfisco/orcamento-estado/2022/pwc-newsletter-oe22-en.pdf

April 2022

2022 State Budget Law proposal

Following the elections in January, on 13 April 2022 the Government presented the 2022 State Budget Law Proposal to the Parliament. While the discussion in details will now follow, being expected that some amendments are introduced to the Proposal, we highlight the most relevant tax measures proposed:

I – Personal Income Tax

Extension until 2023 of the tax regime for former tax residents

There is an extension of the tax regime applicable to former residents that returned to Portugal in 2019 and 2020. The 50% relief from taxation on employment and self employment/business income applies to taxpayers that became or will become resident in the Portuguese territory in 2021, 2022 and 2023. The relief requires that the taxpayers were resident in the Portuguese territory respectively prior to 31 December 2017, 2018 and 2019. The remaining requirements remain unchanged. Namely the taxpayers should not have been resident in the Portuguese territory in any of the 3 prior years and must have their tax situation regularized. The tax relief also applies to withholding taxes levied by paying entities.


II – Corporation Income Tax

Increased deduction under the Patent Box regime

It is proposed that the deduction to the taxable profit of the income from the transfer or temporary use of industrial property rights increases to 85% (currently, 50%). 

Special payment on account extinct

It is proposed that the special payments on account are extinguished.

III – VAT / Indirect Taxes

Exemptions from VAT on expenditures related to the defence effort 

The transposition of Council Directive (EU) 2019/2235 of 16 December 2019 amending Directive 2006/112/EC on the common system of value added tax and Directive 2008/118/EC concerning the general arrangements for excise duty as regards defence efforts within the Union framework, shall result in an exemption of certain supplies of goods and services utilised in the defence effort carried out for the implementation of a European Union activity.


Exemptions from VAT related with Covid-19

The transposition of Council Directive 2021/1159 of 13 July 2021 amending Directive 2006/112/EC as regards temporary exemptions on importations and on certain supplies, in response to the COVID-19 pandemic, shall result in exemptions on importations and on certain supplies, in response to the COVID-19 pandemic. It is proposed an extension until 31 December 2022 of the exemption from VAT applicable to supplies of medical devices for in vitro diagnosis of COVID-19 disease, COVID-19 vaccines and services related with those products, as foreseen in Law 4-C/2021 of 17 February. 


Other indirect taxes / excise duties

The Proposal includes a generalised increase by 1% of the Tax on Vehicles, the Circulation Tax, the tax on alcoholic beverages and non-alcoholic beverages with added sugar and taxes on tobacco.


IV – Real Estate Tax

Real Estate Transfer Tax (IMT) on the allocation of real estate to unit holders of investment funds

IMT shall be levied in the case of allocation of real estate to unit holders of private issued closed-end investment funds resulting from a redemption of units or a reduction of capital of said funds. Currently, IMT is levied only in the case of allocation of real estate resulting from a liquidation of private issued closed-end investment funds.


V – Tax benefits

CIT – Tax Incentive to Recovery (“Incentivo Fiscal à Recuperação” or “IFR”)

A CIT credit will be introduced in benefit of CIT taxpayers whose tax year corresponds to calendar year, incurring investment expenses namely in the acquisition of tangible assets, non consumable biological assets and intangibles. The investment period runs from 1 July to 31 December 2022 (the investment period runs from the start of the 7th month until the end of the 12th month of the tax year, in case of entities whose tax year starts after 1 January 2022). There is an overall cap of EUR 5 million for the eligible expenses; the CIT credit available corresponds to:

- 10% of the eligible expenses incurred in the tax year concerned capped at the average of the eligible investments expenses incurred in the three previous tax years;

- 25% of the eligible expenses incurred in the tax year concerned, in the amount that exceeds the amount mentioned in a).

Taxpayers starting their activity on or after 1 January 2021 are entitled only to a tax credit of 10% on eligible expenses.

The annual tax credit is capped at 70% of the tax assessed. For companies taxed under the special regime of group taxation the tax credit applies to the tax assessed by the group capped at the individual amount that would apply to each individual company incurring the eligible expenses. The tax credit can be carried forward for 5 years in the case of insufficiency of tax assessed.

The benefit cannot cumulate with any other benefits of the same nature in respect of the same eligible investment expenses.

The taxpayer cannot distribute profits or terminate labour contracts based on collective redundancy or layoff from the commencement of the 2022 tax year and for a 3-year period.


Contractual tax benefits & Tax Regime for Investment Support (“Regime Fiscal de Apoio ao Investimento” or “RFAI”)

There is an extension until 31 December 2027 of the contractual tax benefits regime as well as the RFAI. This results from the update of the new regional aid map and is effective as from 1 January 2022 onward.


Promotion of inland regions (“Programa de Valorização do Interior”)

As in the 2020 and 2021 State Budgets, the Government is granted authorisation to introduce a tax benefits scheme to promote inland regions (“Programa de Valorização do Interior”). It shall correspond to a CIT credit of 20% of the costs incurred with the creation of jobs in inland regions that exceed the national minimum wage, capped at the CIT assessed in the tax year concerned. This legislative authorisation relies on the authorisation from the European Union to expand the regional aid scheme.


PIT / CIT - Portuguese sovereign debt issued in the Chinese market

The PIT and CIT exemptions on interest from Portuguese sovereign debt issued in renminbi in the Chinese internal debt market are maintained.

January 2022

Tax treaty between Portugal and Sweden - Termination

Sweden terminated the Convention between Portugal and Sweden for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed on 29 August 2002. 

The termination is effective 1 January 2022, as per Article 30 of the Convention.