Taxation 2024: Impact on Startups in Portugal

Taxation 2024: Impact on Startups in Portugal

Despite the government’s dismissal, the State Budget for 2024 has been approved, and the Government will remain in office until the legislative elections and the subsequent inauguration of a new Government. Discover, at the Taxation Workshop 2024 on December 19th, the main changes that will affect startups based in Portugal for the upcoming year.

Corporate Income Tax (IRC) – Applicable Rate for Startups

In 2024, startups will benefit from a reduced corporate income tax rate of 12.5% on the first €50,000 of taxable income, provided they meet the following requirements: They are innovative companies with high growth potential or have been recognized by ANI for engaging in research and development activities or certification in the technology sector. They have completed at least one round of venture capital financing or through the contribution of equity or quasi-equity instruments, notably by business angels. They have received investment from Banco Português de Fomento or funds managed by it, its subsidiaries, or one of its equity or quasi-equity instruments.

Fiscal Benefits for Productive Investment and RFAI

Salary costs arising from the creation of jobs for employees with a master’s or doctoral degree become relevant expenses, and the created jobs must be maintained for a minimum period of five years (or three years for SMEs).

Regarding RFAI, salary costs and investments in intangible assets cannot exceed 50% of the relevant expenses when companies do not qualify as micro, small, and medium-sized enterprises.

Fiscal Regime for Business Capitalization Incentives

The annual deduction will now be calculated by applying a variable rate, corresponding to the average 12-month Euribor rate during the tax period, plus a spread of 1.5%, or, if the taxpayer is an SME or Small Mid Cap, 2%.

For the calculation of the fiscal benefit, the amount of eligible net increases in equity will include the increase in the current financial year and the preceding six periods (currently the current year and the last nine). The deduction is enhanced by 50%, 30%, and 20% for the tax periods of 2024, 2025, and 2026, respectively.

Fiscal Incentive Regime for Scientific Research and Innovation

This is a new regime introduced for 2024 following the end of the non-habitual resident regime, maintaining the application of the special 20% rate on Category A (dependent work) and Category B (business and professional) incomes for 10 consecutive years, as well as the exemption on incomes from dependent work, business and professional, capital gains, property, and capital gains obtained abroad.

However, this regime only applies to taxpayers who become tax residents in Portugal and earn incomes falling under the following situations: Teaching and scientific research careers in higher education, including scientific employment in entities, structures, and networks dedicated to the production, dissemination, and transmission of knowledge integrated into the national science and technology system. Qualified job positions within contractual benefits for productive investment. Research and development jobs for workers with a Ph.D. under SIFIDE.

RNH – Non-Habitual Residents

The State Budget for 2024 revokes the existing regime, effective from January 1, 2024, with the safeguard of maintaining the applicability of the regime for taxpayers who are registered as non-habitual residents as of December 31, 2023. Additionally, there is the possibility of joining the Non-Habitual Resident regime until March 31, 2024, for the year 2023, for those who meet the necessary conditions by December 31, 2023.

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