Portugal: State Budget 2020
The State Budget for 2020, approved by Law no. 2/2020 of 31 March, brought some changes from the tax point of view. Some of these changes are highlighted below:
Corporate Income Tax (IRC)
- Extension of the Patent Box regime (income contributing to the calculation of taxable profit in only 50% of its value) to copyright on computer programs. In this context, the obligation is established that industrial or intellectual property rights, including now on computer programs, must be registered (and not only subject to registration, as until now);
- The reduced corporate income tax rate of 17%, applicable to Small or Medium-sized Enterprises (SMEs), will now apply to the first EUR 25 000 of taxable income, instead of the previous EUR 15 000;
- The coefficient of the simplified regime applicable to income from the operation of a local accommodation establishment, in the form of a dwelling or apartment, located in a containment area, is increased from 0.35 to 0.50, while the coefficient of 0.35 is maintained for income from this activity outside the containment areas;
- The period for deduction of up to 10% of the profits retained and reinvested in applications that are considered relevant (DLRR) is extended to 4 years (previously 3 years); The maximum amount of profits retained and reinvested for the purposes of this deduction per taxpayer is also increased from EUR 10 000 000 to EUR 12 000 000.
Personal Income Tax (IRS)
- Introduction of a special 10% rate on foreign source pension income, obtained by non-habitual residents (RNH); This new regime does not apply to taxpayers who are already registered as RNH (until the 10 year period is exhausted) or whose application for registration has already been submitted or those who on 1 April 2020 are considered to be resident in Portugal and apply for registration as RNH until 31 March 2021.
- Doubtful debts are considered to have been in arrears for more than 12 months (previously 24 months); The request for prior authorisation for VAT deduction of doubtful debts must be answered by AT within 4 months (previously 8 months), maintaining the rule of tacit rejection.
IAS (Social Support Index)
- The value of the Social Support Index (IAS) for 2020 is updated to EUR 438.81.
- A specific exemption from Stamp Duty is introduced on loans, and interest thereon, for a period not exceeding one year, when granted by companies, under a centralised cash management contract ("cashpooling"), in favour of companies with which they are in a control or group relationship.
General Tax Law (LGT)
- A settlement system is introduced between the Tax Authority and taxable persons classified as micro or small enterprises, enabling them, at the time of payment of tax obligations, if they have overdue and unpaid tax credits, to take advantage of the respective settlement, paying only the difference between the amount receivable and payable.
NEWCO is fully available to elaborate on any of these developments or to provide clarifications on the impact that these changes may have on your companies.