Portuguese tax legislation provides a range of incentives designed to support business investment, innovation, job creation, and sustainable growth.

Understanding these tax benefits can make a significant difference to your company’s tax burden, under the condition that all legal requirements are met.

In this article, we explore some of the main tax incentives currently available to businesses in Portugal.

• Reduced Corporate Income Tax (IRC) Rate or SMEs

Micro, small and medium-sized enterprises (SMEs), as well as Small Mid Cap companies, benefit from a reduced Corporate Income Tax (IRC) rate on the first 50,000 € of taxable income.

This measure is intended to ease the tax burden on smaller businesses, allowing them to strengthen their investment capacity and support long-term growth.

In certain cases, companies operating in Portugal’s inland regions may also benefit from additional tax incentives, provided they meet the applicable legal requirements.

• Tax Incentive Scheme for Investment (RFAI)

The Tax Incentive Scheme for Investment (RFAI) remains one of Portugal’s main tax incentives for business investment.

This scheme allows companies to deduct a percentage of eligible investments from their Corporate Income Tax (IRC), provided they operate in sectors covered by the relevant legislation.

Eligible investments may include:

• Production equipment; 
• Industrial facilities; 
• Technological assets; 
• Other business assets used in the company’s operations. 

The applicable deduction rates and limits vary depending on the location of the investment and the legislation in force.

• Tax Loss Carryforward 

Portuguese tax law allows tax losses incurred in a given financial year to be offset against taxable profits generated in subsequent years, within the limits established by law.

This mechanism helps reduce the tax burden of businesses that experience periods of lower profitability or undertake significant investment projects.

• Incentives for Business Capitalization

The Government continues to encourage stronger corporate capitalization through tax measures aimed at reducing companies’ reliance on debt financing.

Under certain conditions, capital contributions made by shareholders may receive favorable tax treatment, helping businesses strengthen their financial structure and improve long-term resilience.

• Employment Incentives

A range of incentives is also available for companies that create new jobs or recruit employees under specific public employment support programmes.

Depending on the applicable legal framework, these incentives may take the form of tax benefits or direct financial support granted by public authorities.

How Can You Find Out Which Tax Incentives Apply to Your Business?

Not all tax incentives are available to every company.

Eligibility depends on several factors, including:

• The size of the business; 
• The sector of activity; 
• The location of the investment; 
• The type of investment being made; 
• Compliance with the legal requirements established for each incentive. 

For this reason, before making any significant investment decision, it is advisable to carefully assess your company’s tax position and determine which incentives may apply.

If you would like to identify the tax benefits available to your business, consult a Certified Accountant. Professional guidance can help you maximize available tax incentives while ensuring full compliance with Portuguese tax legislation.