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20 April 2020

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Portugal Budget Law for 2020 Approved and Published

Portugal's State Budget Law for 2020 (Law No. 2/2020) was approved by parliament and published in the Official Gazette on 31 March 2020. The main tax measures of the budget law include:

  • An increase in the deduction of expenses incurred as a result of the acquisition of travel cards/passes for the benefit of employees to 130% (i.e., 30% additional deduction);
  • The addition of copyrights on computer programs within the scope of the patent box regime (50% reduction of qualifying taxable IP income)
  • An adjustment of the coefficients for the tax base determination under the simplified regime with respect to income arising from the exploitation of local accommodation establishments in the form of a house or apartment, including a new coefficient of 0.50 for the operation of local accommodation in a containment area, otherwise a coefficient of 0.35
  • A reduction of the reduced tax rate for SMEs from 17.0% to 12.5% and an increase in the portion of taxable income to which the reduced rate applies from the first EUR 15,000 of taxable income to the first EUR 25,000;
  • An extension of the scope of VAT exempt services to include the services of psychologists and sign language interpreters
  • An extension of the scope of the reduced 6% VAT rate to include:
    • home care services for elderly people, children, and drug addicts, as well as remote assistance services to the elderly and chronically ill people;
    • visits to the zoo, botanic gardens, and public aquariums;
    • provision of service that consists of providing guided or non-guided visits to buildings classified as of national, public or municipal interest, and museums subject to certain requirements; and
    • treated wastewater;
  • The amendment of allowed VAT deductions to include electricity costs incurred for electric vehicles or hybrid plug-in vehicles;
  • An increase in the turnover threshold for VAT exemption from EUR 10,000 to EUR 12,500; and
  • With respect to the VAT deduction in relation to doubtful or bad credits, a reduction in the period of time after which credits may be considered bad from 24 months to 12 months from the date of maturity, provided there is objective evidence of impairment and steps have been taken to receive it, and a reduction of the authorization application deadline from eight months to four months to claim a bad debt deduction.

The budget law entered into force on 1 April 2020.

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