• Service: Tax, Global Indirect Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/24/2014

Portugal - Tax law changes affecting corporate, individual taxpayers (2014) 

February 24:  Newly enacted corporate tax law changes and other tax law provisions part of the legislation enacting the 2014 budget measures include:
  • Reduced rate of corporate income tax, from 25% to 23%, for 2014
  • A new tax bracket for state surcharge purposes for taxable profits exceeding €35 million, now subject to a tax rate of 7%, instead of 5% (previously, the state surcharge was imposed at 3% of taxable profit between €1.5 million and €7.5 million and at 5% for taxable profit exceeding €7.5 million)
  • Expanded tax loss carryforward period of 12 years for amounts assessed after 1 January 2014 (previously, the loss carryforward period was five years)
  • Limited deduction of tax losses (limited to 70% of taxable profit, whereas previously, the limit was 75%)
  • Limited deduction of interest and other financing expenses (threshold reduced from €3 million to €1 million, with any net financing expenses exceeding this threshold carried forward for five years)
  • A “global” participating exemption regime
  • An optional participation exemption regime for profits and losses of foreign permanent establishments
  • Tax group relief—minimum holding requirement for a company to be part of a tax group reduced from 90% to 75%
  • Patent box regime—income derived from patents and certain other intangible assets registered after 1 January 2014 only taxable for 50% of such income
  • Amortization of certain intangible assets allowed over a 20-year period
  • Changes to the research and development (R&D) tax benefit system
  • No deduction by employers for health and life insurance premiums paid on behalf of employees or their family members

Read a February 2014 report [PDF 126 KB] prepared by the KPMG member firm in Portugal: Main changes in Portuguese tax law for 2014

The tax law changes also provide measures affecting individual income tax—such as a simplified tax regime for business and professional income, and continuation of the “extraordinary solidarity contribution” at rates ranging between 3.5% to 50%.

Other measures concern the value added tax (VAT) and stamp duties, and continue a contribution relating to the energy sector, at a rate of 0.85% of the greater of the net accounting value of fixed assets or regulatory assets.

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