Tag Archives: Portugal

Portugal Launch Investment Tax Credit

Portugal’s Finance Minister Vitor Gaspar has unveiled details of a raft of financial and fiscal incentives, designed to boost investment, growth, and employment in Portugal.

Rua Augusta, Lisboa, Portugal
Rua Augusta, Lisboa, Portugal

The elegant downtown of Lisbon, the heart of the city is Baixa’s Rua Augusta, which leads to Lisbon’s famous Terreiro do Paço. Picture courtesy of Osvaldo Gago.

Gaspar made clear that “the time is right for investment,” given the successful reduction of the budget deficit and in view of financial stability in Portugal. The Minister argued that the Government’s proposed measures are intended to initiate the recovery of economic activity by reviving “productive private investment.” As a result, an increase in investment is expected in the second half of the year, Gaspar said.

To re-launch investment in Portugal in 2013, the Government plans to introduce an extraordinary investment tax credit. The Government also plans to introduce a package of fiscal initiatives, designed to create attractive fiscal conditions, to stimulate productive investment.

Alluding to the extraordinary investment tax credit as an “innovative measure, unprecedented in Portugal,” given the amount and scope of the investment tax break, Finance Minister Gaspar explained that the provision corresponds to a corporate tax reduction (IRC) of 20 percent of the investment, up to a maximum 70 percent of total IRC due.

Gaspar emphasized that the incentive will serve to reduce the effective corporate tax rate to 7.5 percent for those companies that elect to invest significantly in 2013. Already approved by the European Union, the provision will apply to investments realized between June 1, 2013, and December 31, 2013, up to EUR5m (USD6.5m).

The proposed package of fiscal measures is designed to consolidate the various tax benefits currently provided for in the country’s Investment Tax Code.

Defending the proposals, Finance Minister Gaspar underscored that Government efforts to balance the Portuguese budget will not be affected by the resulting revenue shortfall, pointing out that the tax initiatives will generate growth and promote economic activity.

Referring to the announcement as “a very important day” for Portugal, Economy and Employment Minister Alvaro Santos Pereira stated that the proposals are already having a positive impact on the country’s economy, by “restoring investor confidence.”

State Secretary for Fiscal Affairs Paulo Nuncio stressed that the provisions are a “very powerful incentive,” both for companies that have not thought about investing in 2013, and for businesses that have so far hesitated, unsure of whether to invest in Portugal or in other countries.

The European Union outlaws exit taxes

The European Commission has sent reasoned opinions to Belgium, Denmark and the Netherlands, requesting that they change their exit tax rules on companies that transfer their seat or assets to other member states. 

The Commission considers these provisions to be incompatible with the freedom of establishment provided for in Article 49 of the Treaty on the Functioning of the European Union (TFEU). A similar case against Sweden has been closed, following compliance by the Swedish authorities. 

The Commission has called on the aforementioned countries to amend the following provisions:  

  • Belgium – Article 208, 209 and 210, paragraph 1, point 4 of the Income tax code (CIR92), that provides for the immediate taxation of capital gains where the company switches fiscal residence to outside Belgium;
  • In Denmark, Section 7A of the Danish Corporate Tax Act provides for immediate taxation of capital gains on assets transferred outside Denmark; and
  • In the Netherlands, articles 3.60 and 3.61 of the Income Tax Law 2001 and articles 15c and 15d of the Corporate Tax Law 1969, which provide for exit taxation of non-incorporated businesses and companies.

The Commission considers that such exit tax rules are likely to dissuade businesses and companies from exercising their right of freedom of establishment and constitute restrictions of Article 49 TFEU.

The Commission’s opinion is based on the Treaty as interpreted by the Court of Justice of the European Union in De Lasteyrie du Saillant, Case C-9/02 of March 11, 2004, and in N, Case-470/04 of September 7, 2006, and on the Commission’s Communication on exit taxation of December 19, 2006. The immediate taxation of accrued but unrealized capital gains at the moment of exit is not allowed if there would be no similar taxation in comparable domestic situations. It follows from the case-law that the member states have to defer the collection of their taxes until the moment of actual realization of the capital gains.

The Commission had already referred Spain and Portugal to the Court of Justice for similar exit tax rules, and sent a reasoned opinion to Sweden,