The Portuguese government approved a comprehensive set of tax proposals during the Council of Ministers meeting, on 4 July 2024, to promote the scale of Portuguese companies, consolidation and capitalisation; develop new financing and streamline existing mechanisms; foster entrepreneurship and enhance innovation and talent; and ensure sustainability and circularity of the economy.
Some of the proposed tax measures include:
- Corporate income tax (CIT) reduction
Gradual reduction of the corporate tax rate by 2% annually to 15% by 2027. The CIT rate will be lowered from 17% to 12.5% over three years for small and medium-sized enterprises (SMEs) for the first EUR 50,000 of taxable income.
- Revision of goodwill tax deduction rules
The goodwill tax deductibility regime will be amended for mergers and acquisitions and its scope will be expanded to include currently excluded assets and operations, effective from 2025.
- Extending the participation exemption
The minimum holding requirement will be lowered from 10% to 5% (valid for one year) as part of the expanded scope of the participation exemption regime.
- Capital gains tax credits
Tax credits for capital gains and dividends earned by individuals who invest in company capitalisations.
- VAT Groups
VAT groups have been introduced to increase the cash flow of companies, streamline VAT refund processes, and expedite related activities, effective from 2025.
- Cash VAT regime
The eligibility for the cash VAT regime will be extended to companies with a turnover of up to EUR 2 million (from EUR 0.5 million) in the previous year.
