Portugal | Employment Tax | Tax incentive for scientific research and innovation

Employment Tax

Tax incentive for scientific research and innovation

Who can benefit?
An individual can benefit from this new tax incentive, provided that he/she cumulatively meet the following criteria:

• Qualify as a tax resident individual in Portugal in a specific year; and
• Has not been considered as a tax resident individual in Portugal in any of the 5 years preceding the aforementioned year; and
• His/her professional activity is carried out for eligible entities/projects, namely:
  • Teaching in higher education and scientific research;
  • Qualified job positions within the scope of contractual benefits for productive investment;
  • Activities considered as “high value-added” carried out in companies with relevant applications that benefit or have benefited from the RFAI;
  • Activities considered as “high value-added” carried out in industrial and service companies that export at least 50% of their annual turnover;
  • Qualified job positions in entities exercising economic activities recognised by AICEP or IAPMEI as relevant to the national economy;
  • Research and personnel development whose costs are eligible for SIFIDE;
  • Job positions in entities certified as startups;
  • Job positions or other activities carried out by tax residents in the Autonomous Regions of Azores and Madeira.

What is the process for registration under this incentive?
Individuals/entities eligible for this incentive must be registered:

• Before the Portuguese tax authorities (PTA), as tax residents in the year they start their residency in Portugal; and
• Before several public departments (FCT, IAPMEI, AICEP, PTA, among others), depending on their specific situation.

What is the applicable taxation?
Those eligible for this tax incentive may benefit from taxation of their employment and self-employment income at a flat tax rate of 20%.

Additionally, they may benefit from an exemption from taxation (with progression) on their foreign sourced income, with the exception of pension income, which remains subject to taxation in Portugal under the terms applicable to the ordinary resident taxpayers in national territory.

How can we assist you?

1. Identify eligible entities/projects
2. Analysis of activities performed in Portugal to determine whether they are qualified as “high value-added”
3. Registration of employees and employers before the required entities, depending on their specific situation

Relevant notes:
The right to be taxed under the terms of this tax incentive remains in effect for a period of 10 years and depends on the taxpayer being considered as a tax resident in Portugal at any time during the tax year and continuing to receive, each year, income related to the exercise of one of the eligible activities.

The publication of instructions and regulations by the Government/PTA regarding the practical procedures inherent to this incentive is still pending.

Contacts
For further information, please contact Vialto Partners Portugal:

Ana Duarte
Partner

Further information on Vialto Partners can be found on our website: www.vialtopartners.com

For additional alerts, please visit: www.vialtopartners.com/regional-alerts

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Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

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Further information on Vialto Partners can be found here: www.vialtopartners.com

Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

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