IRS

In the context of Personal Income Tax (IRS), the following changes have been proposed:

There is a proposal to amend the tax regime for former residents, introducing a 50% limitation on tax exemption for a period of five years.

An extension from 3 to 5 preceding years is foreseen for which passive subjects were not considered residents in Portuguese territory in order to access the tax exemption for dependent employment income and category B. Additionally, there is the possibility of adherence for passive subjects who become residents in Portuguese territory until 2026.

A limitation is proposed for tax exemption up to 250,000 euros, applicable only to passive subjects who become tax residents in the year 2024 or later.

Young Taxpayers’ IRS

A proposal is made to change the young taxpayers’ IRS regime, extending the exemptions to:

• In the first year: total exemption (previously 50%), with a limit of 40 (previously 12.5) x IAS;
• In the second year: 75% exemption (previously 40%), with a limit of 30 (previously 10) x IAS;
• In the third and fourth years: 50% exemption (previously 30%), with a limit of 20 (previously 7.5) x IAS;
• In the final year: 25% exemption (previously 20%), with a limit of 10 (previously 5) x IAS.

Article 25 – Specific Deductions of Category A

A proposal is made to increase the increase in union dues in the specific deduction of dependent employment income from 50% to 100%. A similar provision is proposed for the specific deductions of pension income (Category H) in paragraph a) of no. 4 of Article 53 of CIRS.

Article 68 – General Rates:

The proposed amendment will allow a reduction in the average IRS rate by up to 2.4%, with a greater emphasis on households with gross incomes of up to 2000 euros per month.

Article 81 – Elimination of international legal double taxation:

It is proposed to repeal the non-habitual resident tax regime and replace it with the Tax Incentive for Scientific Research and Innovation. Under this proposal, the exemption method will be applied to income obtained abroad from categories A, B, E, F, and G. These incomes will be compulsorily aggregated for the purpose of determining the rate to be applied to the remaining income. If these incomes are paid or made available by non-resident entities without a permanent establishment in Portuguese territory, which are domiciled in a country, territory, or region subject to a clearly more favorable tax regime.

Tax Incentive for Employee Housing:

It is proposed to exempt income tax (IRS) and contributions to social security for in-kind income resulting from the use of a permanent residence located in national territory, provided by the employer, for the period between January 1, 2024, and December 31, 2026. This exemption will apply up to the limit of rents provided for in the Support for Renting Program, approved by Decree-Law No. 68/2019, of May 22. However, the properties mentioned in the previous paragraph will not be included in that program.

Regarding Corporate Income Tax (IRC), for the purpose of determining the taxable profit of the employers, it is proposed that a depreciation quota corresponding to twice that resulting from the table annexed to Regulatory Decree No. 25/2009, of September 14, can be applied to the properties owned, constructed, acquired, or converted by the taxpayers for the housing of employees benefiting from this Tax Incentive for Employee Housing scheme.

This Tax Incentive for Employee Housing scheme does not apply to employees who directly or indirectly hold a participation of no less than 10% of the share capital or voting rights of the employer.

Income Tax Exemption for Profit Sharing with Employees (“balance bonuses”):

It is proposed that amounts granted to employees as profit sharing of the company, by way of balance bonuses, paid by entities whose average nominal valuation of fixed remunerations per worker in 2024 is equal to or greater than 5%, are exempt from income tax (IRS) up to the limit of 5 times the national minimum wage (5 x 820 = 4,100 euros).

IRC

Article 45.º-A – Intangible assets, investment properties, and non-consumable biological assets

It is proposed that the tax deduction provided for in subparagraph b) of paragraph 1 of Article 45.º-A of the Corporate Income Tax Code (CIRC), concerning goodwill acquired in the context of a concentration of business activities, be made in equal parts during the first 15 tax periods after initial recognition. This deduction will continue not to apply to intangible assets acquired in the context of mergers, spin-offs, or asset contributions when the special regime provided for in Article 74 of the CIRC is applied, nor to the goodwill relating to shareholdings.

Article 87.º – Rates

It is proposed that the 17% Corporate Income Tax (IRC) rate for the first €50,000 of taxable income, currently provided for in paragraph 2 of Article 87.º of the CIRC, be reduced to 12.5% for entities qualified as startups, under the terms provided for in Law No. 21/2023, of May 25, and that cumulatively meet the conditions set out in point f) of paragraph 1 of Article 2 of that law. Similar to the 17% rate, it is proposed that the 12.5% rate also be subject to the applicable European rules on de minimis aid.

Article 88.º – Autonomous taxation rates

It is proposed to reduce the autonomous taxation rates on charges incurred or borne by taxpayers who do not benefit from subjective exemptions and who engage primarily in commercial, industrial, or agricultural activities related to passenger cars, light commercial vehicles referred to in point b) of paragraph 1 of Article 7 of the Vehicle Tax Code, motorcycles, or motorbikes, as follows:

Purchase Value (PV)	Current Draft	2024 Budget Proposal
PV < 27.500€	10%	8,5%
27.500€ ≤ PV < 35.000€	27,5%	25,5%
≥ 35.000€	35%	32,5%

Additionally, it is proposed to explicitly include in the wording of the law that the 10% rate applicable to charges related to vehicles powered exclusively by electric energy, whose acquisition cost exceeds the limit defined in the regulation referred to in point e) of number 1 of article 34 of the Corporate Income Tax Code (currently €62,500), does not apply to situations excluded from autonomous taxation under number 6 of the same article.

VAT

Article 9

It is proposed that the following services be exempt from VAT when provided free of charge: the services provided for in number 13 of article 9 of the VAT Code, as well as those listed in item 2.32 of List I attached to the VAT Code, provided that they are provided to people who accompany others with a degree of disability equal to or greater than 60% and on whom they depend for the respective visit; and that this disability is duly proven by presenting the multi-purpose disability medical certificate issued in accordance with the applicable legislation.

Amendment to Decree-Law No. 84/2017, of July 21 – Article 152

Article 2

It is proposed that, similar to what already happens with companies with the main CAE (Portuguese classification of economic activities) 82300, companies with the main CAE 79110 should also be able to be reimbursed for the VAT incurred in the expenses provided for in sub-items i) to iv) of item e) of number 1 of article 2 of Decree-Law No. 84/2017, relating to the organization of congresses, fairs, exhibitions, seminars, conferences, and similar events.

Tax Benefits

Article 19º-B EBF – Wage Appreciation Tax Incentive

It is proposed to amend the wage appreciation tax incentive, with the minimum increase being reduced from 5.1% to 5%. Workers must be covered by a dynamic Collective Bargaining Agreement (CBA), and the salary range must be defined by the ratio between the fixed annual remuneration of the top 10% of the highest-paid workers relative to the total and the fixed annual remuneration of the bottom 10% of the lowest-paid workers relative to the total. It is proposed to include any type of negotiated CBA, collective agreement, collective contract, company agreement, adherence agreement, and arbitral decision in voluntary arbitration within the concept of dynamic CBA.

Article 43º-C EBF – Tax Incentive for the Acquisition of Equity in Startups

Proposed changes to the tax incentive for the acquisition of equity in startups include the possibility of reducing income tax (IRS) liability for entrepreneurs when the options, subscriptions, allocations, or equivalent effects plan is granted by the entity in the year of plan approval, provided it is the company’s first year of activity.

Regime applicable to startups and scale-ups – Amendment to Law No. 21/2023, of May 25

It is proposed to maintain the benefit of exemption from taxation in IRS under Article 43º-C of the EBF, provided that the titles generated from the gains of the plans remain in their possession for a minimum period of 2 years from the exercise of their option or subscription.

Article 43º-D EBF – Corporate Capitalization Incentive Regime

It is proposed to amend this tax benefit by changing the rate applied to eligible own capital increases from 4.5% (or 5% in the case of micro or SMEs or small mid-caps) to the 12-month Euribor rate, corresponding to the average of the tax period, calculated based on the last day of each month, plus a spread of 1.5 percentage points (or a spread of 2 pp in the case of micro or SMEs or small mid-caps)..

It is proposed to reduce the deduction in the determination of taxable profit for eligible own capital increases from 10 to 7 tax periods and to change the eligibility of own capital increases resulting from cash contributions by entities with special relationships, where financing is provided by the taxpayer or by those entities during the period of the tax benefit.

Article 59º-D EBF – Tax Incentives for Forestry Activity

It is proposed that a coefficient of 0.1 be applied to the first installation premiums for young farmers for the simplified taxation regime of category B of IRS, with these incomes being considered only 50% when covered by the organized accounting regime.

Article 58º-A EBF – Tax Incentive for Scientific Research and Innovation

It is proposed to create a new tax benefit in IRS, replacing the non-habitual resident tax regime, which is intended for individuals who become residents in Portugal and have not been residents here in any of the previous five years.

These individuals must earn income that falls within careers of higher education teaching and scientific research, qualified positions under contractual investment benefits, and research and development jobs for personnel with minimum qualifications at level 8 of the National Qualifications Framework, whose costs are eligible for the purposes of the tax incentives system for business research and development, in accordance with subparagraph b) of paragraph 1 of Article 37 of the Corporate Income Tax Code.

Corporate Income Tax Code

Contractual tax benefits – Articles 8, 11, and 13

Application of the special rate of 20% to dependent employment income obtained by workers covered by the creation of jobs under the investment made under the established tax benefit contract. The salary costs resulting from the creation of jobs, when related to personnel with qualifications at level 7 (master’s degree) or level 8 (Ph.D.) of the National Qualifications Framework, due to the initial investment in question, calculated over a period of two years, are considered relevant applications for the contractual tax benefit.

Investment Support Tax Regime (RFAI) – Article 22

The salary costs resulting from the creation of jobs, when related to personnel with qualifications at level 7 (master’s degree) or level 8 (Ph.D.) of the National Qualifications Framework, are considered relevant applications for the RFAI tax benefit.

Tax Incentive in the Common Agricultural Policy

It is proposed that taxpayers who receive subsidies or grants under the Common Agricultural Policy (CAP) in 2024, for the previous year, may opt for their respective taxation in the year 2023.

Tax Incentive for Renewal of Freight Transport Fleet

It is proposed to exempt Corporate Income Tax (IRC) on the positive difference between the capital gains and the losses resulting from the onerous transfer of commercial vehicles with a gross weight equal to or greater than 35 tons, acquired before July 1, 2021, and with the first registration before this date, subject to taxation under the D category of the Vehicle Tax Code (IUC).

The tax benefits provided in this article apply during the tax period beginning on or after January 1, 2024.