1 January 2014
On 16 January 2014, the Republic Gazette published Law No. 2/2014 approving the corporate income tax reform and republishing the Corporate Income Tax Code accordingly. The law applies to tax years starting on or after 1 January 2014. The main amendments to the corporate income tax are summarized below.(a) Reduction of statutory tax rates
|-||Reduction of the statutory tax rate from 25% to 23%.|
|-||Introduction of a reduced 17% tax rate applicable to the taxable income up to EUR 15,000 earned by small and medium enterprises.|
|-||Optional regime applicable to entities that comply with all of the following requirements:
|-||The corporate income tax rate is applied on:
|-||The taxable basis referred to above is subject to a 50% and 25% reduction in the 1st and 2nd year of activity respectively.|
|-||Exclusion of some of the autonomous taxation rules of the special advance payments.|
|-||The need for prior authorization is replaced for mere reporting obligations in several operations, namely those relating to:
|-||Clarification of the concept of tax deductible costs, broadening the scope of the definition of costs related to the business activity.|
|-||Clarification that the proof of residence, for the purposes of applying a tax treaty, can also be made through proofing methods other than the official forms traditionally required by the Tax Administration.|
|-||Harmonization between tax and accounting concepts, namely in respect of depreciations, impairments, provisions and intangible assets.|
Introduction of a new participation exemption regime for dividends and capital gains, subject to the following requirements:
|-||Introduction of anti-mismatch rules in order to avoid double non-taxation.|
|-||Introduction of a 5-year carry-forward period for international tax credits.|
|-||Introduction of an exemption for income derived by foreign permanent establishments of Portuguese entities.|
|-||Extension of the carry-forward period for tax losses from 5 to 12 years.|
|-||Repeal of the impossibility of carrying forward tax losses in the event of changes in the entity's business or, in some cases, in the holding structure of the loss-making company.|
|-||Introduction of a new 20% participation threshold for transfer pricing rules to apply instead of the previous 10% requirement.|
|-||Expansion of the group taxation regime with a new minimum participation requirement of 75%, instead of the previous 90% requirement.|
|-||Introduction of a new list of operations covered by the regime in accordance with the ECJ case law, including reverse mergers.|
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