Portugal’s Tax Incentives for Investors | Guide

Portugal’s Tax Incentives for Investors | Guide

Anastasiia Zapevalova
31 March 2023

Portugal is a very popular destination for foreign investors due to its stable economy, strategic location and favorable tax regime. In order to attract more investors from other countries, the Portuguese government has introduced a number of tax incentives and deductions, especially in the areas of intellectual property, research and development (R&D) and innovation. So what incentives are available to investors in Portugal?

Tax benefits for intellectual property

Portugal has a special tax regime for intellectual property (IP) rights, including patents, trademarks, copyrights and other related rights. This mode provides the following advantages:

  • Reduced tax rate of 10% for income derived from intellectual property rights developed or used in Portugal.
  • Exemption from tax on income derived from intellectual property rights developed or acquired outside Portugal for non-resident persons.
  • Patent box treatment with a reduced tax rate of 85% for qualified intellectual property income, applicable to income derived from intellectual property developed or acquired after March 31, 2019.

In addition, Portugal has introduced a special tax regime for new residents (NHRs) receiving income from intellectual property. This regime can be used by foreign individuals who become residents of Portugal for tax purposes and are not considered tax residents in the country of their main place of residence. Under the NHR, income derived from intellectual property is not subject to tax in Portugal, provided that the IP was developed or acquired outside Portugal.

Tax incentives for R&D and innovation

Portugal has introduced several tax incentives for companies involved in R&D and innovation. This should encourage companies to invest in new technologies, products and services, and to develop innovative solutions that can increase competitiveness in the global market.

One of the most significant tax incentives for R&D and innovation is the Research and Development Tax Credit (SIFIDE). It covers up to 82.5% of the company's research and development costs in Portugal. The tax credit can be used to reduce corporate tax liability or to receive a cash refund.

Portugal also provides tax incentives to companies that invest in venture capital funds that finance innovative start-ups and small and medium-sized businesses. Such companies receive a tax credit of up to 25% of the amount invested in the venture fund, as well as an exemption from capital gains tax on the sale of shares in the venture fund.

Read also: Complete guide to taxes in Portugal

Other tax benefits for investors

In addition to tax breaks for IP, R&D and innovation, Portugal also gives investors other tax breaks. Among them:

  • Reduced corporate tax rate for companies engaged in export activities
  • Exemption from tax on dividends, interest and royalties paid to non-residents
  • Tax deductions for investments in certain regions of Portugal such as Madeira and the Azores
  • Tax exemption for certain types of income, such as capital gains from the sale of shares in Portuguese companies

Let's take a closer look at tax deductions for investors in the islands, as Madeira has long been a popular destination for hotel investment, and the Azores are now booming and offer many opportunities for investment in agriculture, viticulture and tourism.

Tax deductions for investments in Madeira and the Azores

Madeira and the Azores are two autonomous regions of Portugal located in the Atlantic Ocean. Both have unique characteristics that make them attractive for investment, such as strategic location, natural resources and cultural heritage. To encourage investment in these regions, the Portuguese government has introduced several tax incentives, including tax deductions for qualified investments.

Here are some of the main features of these tax deductions:

Tax deduction rate. The tax deduction rate for qualified investments in Madeira and the Azores is 20%, which means that up to 20% of the investment amount can be deducted from the investor's taxable income.

Sphere of investment. To qualify for the tax deduction, you must invest in areas identified as priorities for economic development in Madeira and the Azores. This includes, but is not limited to, tourism, renewable energy, agriculture, fisheries and cultural industries.

Minimum investment amount. The minimum investment amount required to receive a tax deduction varies by sector and region. In Madeira, for example, the minimum investment amount for tourism projects is €500,000, and for other areas - €75,000. In the Azores, the minimum investment amount ranges from €20,000 to €500,000 depending on the sector and location.

Duration of tax deduction. The tax deduction is provided for a period of five years, starting from the year in which the investment was made.

Application process. To receive a tax deduction, an investor must submit a petition to the regional tax authority, providing detailed information about the investment project, including its economic, social and environmental impact on the local community.

In addition to tax deductions, Madeira and the Azores also offer investors other incentives such as reduced corporate tax rates, simplified administrative procedures and access to financing and support programs.

Overall, tax deductions for investments in Madeira and the Azores can be an attractive incentive for those looking to invest in these regions and exploit their unique potential. However, it is important to carefully evaluate the investment project and comply with legal requirements to ensure eligibility for the tax deduction and maximize its benefits.

Portugal offers a favorable tax regime for investors, especially in the areas of IP, R&D and innovation. Tax benefits available to investors can help reduce their tax liability, increase income and increase their competitiveness in the global market. If you are planning to invest in Portugal, it is important to understand what tax benefits are available to you and how you can take advantage of them.

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