For more than 10 years, Portugal has been adopting a series of tax measures to strengthen its competitiveness and encourage foreign investment. To this end, in recent years, Portugal has adopted a personal income tax reform, together with the implementation of personal tax regimes, as well as a corporate tax reform.
Moreover, from the perspective of many foreign countries, Portugal is considered the main connecting jurisdiction, not only with Europe - which allows the use of various community regimes that Portugal, as a member state of the European Union (EU), benefits from - but also with its former colonies, namely Brazil and the group of countries designated as Portuguese-speaking African Countries (PALOP), such as Angola, Guinea-Bissau, Cape Verde, São Tomé and Príncipe, Mozambique and Equatorial Guinea. Indeed, the historical ties that unite Portugal with these countries have allowed the establishment of several agreements that allow and encourage people and jurisdictions.
In addition, Portugal benefits from an extensive network of double tax treaties (DTAs), including, for example, with Macao, which can be a gateway to China.
There is also the Portuguese coastline, which confers a particular geographical advantage - reinforced by deep water ports, such as the port of Sines, and by the opportunities brought by the opening of the Panama and Suez canals - it seems that this is the moment for foreign investors to take advantage of the future opportunities that Portugal, as a host country and as a leading position on the international tax scene - and therefore a natural platform for investment - has to offer today.
With all this in mind, we would like to take this opportunity to summarize some of the main opportunities and other aspects that make Portugal so attractive for investment.
The Golden Visa
Under this regime, citizens of non-EU countries who make or carry out one of the legally required investments, such as the transfer of capital of at least €1,500,000.00 or the acquisition of real estate worth at least €500,000.00 or €350,000.00 with renovations (among other things), may apply for a residence permit from the Portuguese Immigration and Borders Service (SEF).
The Portuguese regime for non-habitual residents
In practical terms, this system has undeniable advantages in terms of income taxation, such as the fixed rate ofIRS of 20 % applicable to labor income and self-employment income generating high value-added activities of a scientific, artistic or technical nature, compared to the maximum possible effective taxation of 53 %, and also the fact that most of the income earned abroad by RNHs is exempted in Portugal, provided certain conditions are met.
Succession and donation
Portugal does not levy a tax on the free transfer of property (donations), during life or at death (mortis causa), when the beneficiaries are the owner's spouses, de facto spouses and descendants or ascendants in the direct line of descent, unlike in France, for example, where there is no wealth tax in Portugal.
Portuguese participation exemption scheme
The participation exemption regime provides tax benefits for companies that are resident in Portugal for tax purposes, such as the exclusion, for the purpose of determining their taxable profit, of profits and reserves distributed to such companies, or the exemption of capital gains arising from the costly sale of participations held by taxable subjects, after verification of certain conditions provided for by the law.
Non-resident entities also benefit from a tax exemption on profits and reserves distributed to them, provided that they are resident in the EU, the European Economic Area (EEA) or in a state with which Portugal has signed a double tax treaty.
Opportunity for companies to invest in tax loss deduction and reporting
Tax losses incurred in a given tax period can be carried forward and deducted from taxable profits for a period of 5 years (limited to 70 % of taxable income determined in that same year). It should be noted, however, that companies recognized as small and medium-sized enterprises (SMEs) benefit from an extension of the reporting period, as they can deduct tax losses for 12 tax years.
The patent regime
This regime applies to contracts for the assignment or temporary use of certain industrial property rights and represents a form of promotion for companies wishing to invest in Portugal. Under this regime, the income from these contracts is taxed at only half of its value, provided certain conditions are met.
The Portuguese tax neutrality regime
The Portuguese tax neutrality regime, together with the provisions of the EU Merger Directive, applies to various corporate restructuring operations, providing for a tax exemption of capital gains resulting from such restructuring operations, provided certain conditions are met.
The Portuguese tax arbitration regime
Arbitration has several advantages over court proceedings. It allows the resolution of disputes in a simpler way, because the treatment is simplified and the process is dematerialized, electronic and faster. Indeed, as a rule, the final decision is rendered within a maximum of 6 months (on average 4.5 months).
Portugal has signed a DTA with 79 countries, including all Portuguese-speaking countries, 12 American countries, 17 Asian countries and almost all European countries.
In the absence of a DTA, Portugal continues to unilaterally offer a reduction or elimination of international double taxation to resident taxpayers.