Flash News NA 2025/05/27
Portugal_Tax benefit _ Incentive to the Capitalisation of Enterprises (ICE)
The tax regime of incentive to capitalization of companies (ICE) was created by article 251 of the State Budget Law for 2023 (Law no 24-D/2022, of 30 December), through the addition to the Statute of Tax Benefits (EBF) of article 43-D.
Subsequently, this rule was amended by Article 5 of Law 20/2023 of 17 May.
Both Law 24-D/2022 of 30 December and, subsequently, Law 20/2023 of 17 May established transitional regimes for the ECI in Articles 252 and 12 respectively.
This tax benefit replaced two other schemes, the Conventional Capital Remuneration (RCCS) and the Deduction for Retained and Reinvested Profits (DLRR), since it compensates companies that promote the reinforcement of equity capital, and which had positive results in the previous year and did not distribute them.
The ECI allows a percentage of net capital gains to be deducted from taxable profit.
The net capital increases correspond to the (eligible) equity increases, subtracting the outflows in favour of the holders of the capital. Thus, the following are considered eligible:
• Cash contributions for the formation of companies or increase in share capital;
• Inflows corresponding to the conversion of credits into equity;
• Share issue awards;
• Undistributed profits applied to deferred results, reserves or increase in share capital.
The incentive applies exclusively to commercial or civil companies in commercial form, cooperatives, public companies and other legal persons under public or private law with headquarters or effective management in Portuguese territory and who, in the exercise in question, they are principally engaged in a commercial, industrial or agricultural activity and fulfil all the following conditions:
• Are not entities subject to supervision by Banco de Portugal or the Insurance and Pension Funds Supervisory Authority, nor branches in Portugal of credit institutions, other financial institutions or insurance companies;
• Have regularly organized accounting, in accordance with the accounting standards and other legal provisions in force for their sector of activity;
• Its taxable profit is not determined by indirect methods;
• And have the tax and contributory situation regularized (on 31 December of each taxation period, for periods identical to the calendar year, or last day of the taxation period, for different taxation periods of the calendar year).
With the 2024 State Budget, the annual deduction from taxable profit provided for in the ICE Regime is calculated by reference to a compound rate between a variable rate, corresponding to the average of the 12-month Euribor rate in the taxation period, plus a spread of 1,5 percentage points (p.p.) - which will be 2 p.p. if it is a small mid cap or PME.
In the first years of its validity, the incentive is increased, with the rate being increased by 50%, 30% and 20% in 2024, 2025 and 2026, respectively.
The deduction from taxable income may not exceed, in each tax period, the greater of the following limits:
a) Four million euros; or
b) 30 per cent of profit before depreciation, amortisation, net borrowing costs and taxes in accordance with Article 67 of the IRC Code.
At Nominaurea, you will find a team available to support your company in all crucial and essential matters for its sustainable development, always ensuring compliance with and monitoring all required standards.
