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6 November 2018

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Portugal 2019 Budget Law Submitted to Parliament

Portugal's proposed Budget Law for 2019 was submitted to parliament on 15 October 2018. Some of the main tax-related measures include:

  • The introduction of new expense deduction restrictions, including:
    • This disallowance of impairment losses on bad debt between companies as a deductible expense where the companies are more than 10% directly or indirectly held by the same legal or natural person, except in certain cases where the debtor has been subject to any enforcement or insolvency proceedings, special revitalization or extrajudicial recovery process, and where the debts have been claimed at a judicial or arbitration court;
    • The disallowance of the amortization of the acquisition cost of intangible assets (brands, licenses, and goodwill acquired through business concentrations) as a deductible expense where acquired from a related party;
  • The introduction of the rule that gains may be taxed in Portugal from the alienation of shares or similar rights in companies not resident in Portugal when deriving more than 50% of their value from immovable property or rights to immovable property situated in Portugal at any time in the 365 days preceding the alienation, except where the property is used for an agricultural, industrial or commercial activity that does not consist of the purchase and sale of real estate;
  • The amendment of certain investment provisions, including:
    • An increase in the cap for the 25% tax credit under the investment support regime (RFAI) from EUR 10 million to EUR 15 million, with investment amounts exceeding the cap eligible for a 10% tax credit;
    • Changes in the reinvestment of retained earnings regime (DLRR) including an increase in the reinvested earning cap from EUR 7.5 million per tax period to EUR 10 million, with a 20% increase in the maximum for entities located in inland regions;
    • An increase in the additional tax credit for the contractual tax incentives from up to 10% to up to 12% based on the per capita purchasing power index of the region in which an investment is made; and
    • The introduction of a tax credit equal to 20% of costs incurred for the creation of jobs in inland regions, capped at the tax due for the year;
  • An expansion of the scope of the 6% reduced VAT rate to include:
    • Services provided by bullfighting artists;
    • Hairpieces supplied to cancer patients;
    • Prosthesis, and related equipment and goods;
    • Tools and equipment exclusively or mainly used for rescue and relief operations acquired by the National Institute of Medical Emergency;
    • Cleaning services and cultural interventions aimed at preventing fires; and
    • Tickets to singing, dancing, musical, theatre, and circus shows taking place in fixed artistic facilities or circus facilities;
  • The extension of the scope of the 13% intermediate VAT rate to include tickets to cinema, bullfighting, and other shows; and
  • The introduction of the rules to simplify VAT requirements in the EU, which includes allowing small undertakings the option to apply the VAT rules used in their home country provided that annual sales do not exceed EUR 10,000 in the preceding year and the recipient is not a VAT taxable person (B2C).

Click the following link for the proposed Budget Law (Law no. 156/XIII) on the parliament website (Portuguese language).

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