The Corporate Income Tax (IRC) is the tax levied on corporate profits in Portugal. It is an essential component of the Portuguese tax system and has a significant impact on company finances. In this article, we will provide a complete guide on the IRC in Portugal, addressing its main characteristics, application rules and implications for companies.
1. IRC Framing Rules
All companies carrying out lucrative activities in Portugal, regardless of their legal form, are subject to IRC. It is important to understand the framework criteria and the associated tax obligations, such as the creation of organized accounting and the submission of periodic corporate income tax returns.
2. Determination of Taxable Income
IRC is levied on the taxable income of companies. To determine the taxable income, companies must make adjustments to the accounts and accounting results, taking into account the specific tax rules. It is necessary to know the applicable accounting methods and standards to ensure the correct calculation of taxable income.
3. IRC Rates
Corporate income tax rates in Portugal are scaled according to the companies’ level of profit. Currently, the general corporate tax rate is 17% for companies with a taxable profit of less than 25.000 euros and frame worked as SME’s Companies. Results above this amount are taxed at 21%. For companies with a taxable profit equal to or greater than 25 million euros, tax rate are 25%. It is important to be aware of the applicable fees and plan accordingly for the tax burden.
4. Tax Benefits and Incentives
There are tax benefits and incentives available for companies in Portugal. These include special regimes for companies located in special economic zones, deductions for Research and Development (R&D) expenses and tax benefits for investments in certain areas, such as tourism or renewable energies. It is important to know and evaluate these benefits to optimize the company’s tax situation.
5. Tax Obligations and Deadlines
Companies are subject to a number of tax obligations related to the IRC, including filing periodic returns, paying the tax due and maintaining proper records and documentation. It is crucial to meet the deadlines set by the tax authorities and keep organized accounts to ensure compliance with tax obligations.
Final Considerations
Corporate income tax is a complex tax that requires a solid understanding of tax rules and regulations in Portugal. It is essential for companies to know the framework rules, correctly calculate taxable income, be aware of the applicable rates, consider tax benefits and incentives and comply with tax obligations and established deadlines.
