Portugal

R&D Tax Credit and Cash Grants

Portugal has a broad selection of competitive grants and tax incentives to encourage R&D activities. The grants and tax incentives may be utilised concurrently and non-refundable cash grants may be coupled with the R&D tax credit. Moreover, the incentive comprises of a credit alongside the corporate tax liability for expenditures acquired on R&D activities (net of any cash grants prepared by the Portuguese Government to the R&D job). Portugal’s R&D credit is defined by the following rates:  Base Rate, Incremental Rate, and Patent Box.

Description of Incentive

The Portuguese R&D tax credit for corporate R&D encourages companies to engage in innovative activities – ultimately, resulting in a boost productivity, economic development and increasing qualifications of the workforce. The tax credit contains three components:

• 32.5% base rate applicable to expenses related to R&D in the current tax year
• 50% incremental rate for expenses incurred during the period, compared to the simple average of the two previous tax years with a benefit capped at €1.5 million.
• Patent Box: 50% of income from patents, industrial designs or models registered on or after January 1, 2014 is relieved from corporate tax.

For SMEs an increase of 15% of the base rate applies, while unused credits may be carried back for one year and carried forward eight years from 2014 onwards. Tax credits are not deductible due to the insufficient tax payable in the period in which they were granted. The tax credit has been extended by the Government to 2020 and is expected to continue past this date.

Eligibility Requirements

Eligible expenses include:

• tangible fixed assists excluding buildings and land;
• employees and contractors directly involved in R&D activities;
• Directors or professionals participating in management of R&D institutions;
• Operating expenses;
• Subcontracted R&D costs
• Patent costs;
• R&D audits

Qualifying activities include:

• basic research;
• applied research;
• experimental development

Other Considerations

The tax incentive is available to current and retroactive investments. A R&D credit may be claimed through the annual corporate income tax return and must be filed by 31 July of the following year in which the expenditure was experiences. Alternatively, it may filed before the end of the seventh month after the end of the company’s fiscal period-end.[/fullwidth]

Services

Swanson Reed offers the following services:

• Advice on tax preparation relevant to claiming the R&D tax credits incentive
• Preparation of documents relating to filing and substantiating a R&D taxation claim
• R&D tax advice and consultations
• R&D tax claim planning and preparation

For a full range of services in relation to the credit, please click here.