Startups pay 12.5% IRC tax in 2024
Startups in Portugal will only have to pay 12.5% in their first year of activity in 2024 on the first €50,000 earned under the State Budget for 2024 which was handed to parliament earlier this week.
To be eligible, these companies must be innovative and have high growth potential and/or are involved in research and development, or are in the process of being certified as technology sector companies.
They must also have completed at least one round of venture capital funding by an entity that is legally qualified to invest venture capital, and is subject to regulation by the stock and capital markets regulator, the CMVM, or from other investors that are not founder shareholders in the company.
Also, the cost of acquisition associated to goodwill acquired as a result of a concentration of company activities whereby the initial recognition occurs in the tax periods that begin on or after January 1, 2024, will now be accepted as a tax expense for the first 15 years ad not 20 as is now the case.
Extraordinary support for agricultural production will remain in force for the tax year beginning on or after January 1, 2024.
The extraordinary support regime on electricity and gas approved by the State Budget in 2023 will remain in force on or after January 1, 2024, for the tax year.
On the other hand, the government has broadened the tax regime applicable on stock options (a form of equity compensation that allows an employee to buy a specific number of shares at a pre-set price. Many startups, private companies, and corporations will include them as part of a compensation plan for prospective employees).
The new Startups Law, which came into force in May, foresees that the beneficiaries of company stock options are only taxed when they cash in their options or are no longer resident in Portugal, for example, when the IRS tax applied is effectively 14% on capital gains.
Tax incentives for investments relevant to the Portuguese economy will remain intact through a reduction in IRC for companies involved in scientific research and innovation, and which aims to help companies capitalise. A new tax incentive called the IFICI has been created aimed at attracting and retaining high-qualified staff in the fields of scientific research, investment and business development. People will benefit from an IRS tax rate of 20% on net income in categories A & B earned for a period of 10 consecutive years from the year of their registration as a resident in Portuguese territory.