Portugal news - The OECD highlights Portugal’s tax incentives for R&D investments in its “Corporate Tax Statistics” 2024 report.
While R&D incentives can provide important tax support for R&D and innovation, they are also often seen as a means of attracting mobile intangible investment. From a country perspective, the preferential tax treatment for R&D investments is greatest in France followed, by Poland and Portugal.
Moreover, the largest reductions in the cost of capital for R&D investments are observed in Poland, Portugal and France, which are among the jurisdictions with the lowest cost of capital estimates, since these jurisdictions provide greater tax incentives for firms to increase their R&D investment.
It is to be noted that, for profitable small and medium-sized enterprises (SMEs), implied marginal R&D tax subsidy rates were highest in Colombia, Iceland and Portugal in 2022.
Foreign and domestic MNEs account for significant shares of Corporate Income Tax revenues (CIT) revenues in several jurisdictions. In Portugal, the contribution of MNEs to total Corporate Income Tax revenues (Portuguese acronym: IRC) reached 35% in 2021 according to the OECD.
Among all 90 jurisdictions, eight jurisdictions have an Allowance for Corporate Equity (ACE), namely Belgium, Cyprus, Italy, Liechtenstein, Malta, Poland, Portugal and Türkiye. Including this provision in their tax code has led to an additional reduction in their Effective Average Tax Rates (EATRs) of between 0.3 to 4.5 p.p. Countries with a lower EATR usually have larger foreign investments entering the country.
Comparing the patterns of tax depreciation across jurisdictions shows that the most significant effects are observed in jurisdictions with an Allowance for Corporate Equity (ACE), such as Italy, Malta, Poland, Portugal and Türkiye among others, as well as in jurisdictions with larger accelerated depreciation provisions, such as Canada, South Africa, the United Kingdom and the United States.
Portugal’s financial reporting is divided into 46 individual jurisdictions with 13,614 employees that translate the level of data disaggregation. Since the OECD implemented Country-by-Country reports (CbCRs) to combat Base Erosion and Profit Shiftings (BEPS), Portugal’s number of CbCRs now amounts to 24.
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