On December 31, 2018, Portugal published 2019 budget law (No.71/2018) in the official gazette and generally applies as from 1 January 2019. The budget law includes changes to income tax law and other taxes. The budget law include the following income tax changes:
Corporate tax:
Under the Budget for 2019, intangible assets acquired from affiliates may no longer be subject to the Intangible Assets Tax Act, which deducts the cost of acquisition of eligible assets over a period of 20 years from the period in which the assets begin first, allowed to have been considered in the accounts;
Taxpayers that have submitted a corporate income tax return and an annual declaration in accordance with Portuguese tax legislation for the two previous fiscal years may be exempt from the special payments on account;
If a company no longer trades, the deadline for filing the corporation tax return and annual return and preparing the tax file with all necessary tax documents for the year until the last day of the following third month will be extended to the date on which the activity ceases. Previously, the deadline was the last day of the month in which the activities were stopped; and
Capital gains derived by nonresidents from the transfer of equity shares or similar rights in companies or other entities that do not have a seat or effective control in Portuguese territory no longer are exempt from tax, when, at any time during the previous 365 days, more than 50% of the value of the shares or rights was attributable, directly or indirectly, to real estate or rights over immovable property located in Portuguese territory.
Tax incentives:
Under the investment support tax regime to taxpayers that carry out a relevant investment is 25% on the first EUR 15 million and 10% on amounts exceeding EUR 15 million (previously, the threshold was EUR 10 million);
The maximum increase in the costs incurred for productive investments that can be attributed to investment projects, depending on the per capita purchasing power index of the region in which the project is located, increases from 10% to 12%;
The maximum amount of retained and reinvested earnings in each tax period is increased from EUR 7.5 million to EUR 10 million per taxpayer; and
The tax incentive system for research and development II (SIFIDE II) is extended to include contributions to public and private investment funds established to invest in companies dedicated mainly to research and development.
Value added tax:
The budget law transposes the EU voucher directive that aims to simplify, modernize and harmonize the VAT rules applying to vouchers across all EU member states into Portugal’s domestic legislation;
The reduced VAT rate of 6% in mainland Portugal, 5% in Madeira and 4% in the Azores is extended to a number of goods and services generally previously taxed at the standard rate, including digital publications;
Single-purpose vouchers as defined in the directive are subject to VAT when issued but for multipurpose vouchers, the VAT liability arises when the voucher is redeemed. Where a voucher is not redeemed, VAT is due on the expiry date of the voucher;
Telecommunications, broadcasting and electronically supplied services are subject to VAT in the EU member state where the supplier is established, provided (i) the consumer is not a taxable person and is established in a different member state to the supplier; and (ii) the value of the services provided does not exceed EUR 10,000 (excluding VAT) in the previous or current calendar year; and
The budget law also transposes the EU directive on electronic services and distance sales into domestic law, allowing VAT-registered entities established outside the EU to use the Mini One-Stop Shop (MOSS) system.