State Budget Proposal 2023 - Main Changes
Tax losses - deduction without time limitation
In relation to article 52 of the IRC Code - Deduction of Tax Losses, the elimination of the time limitation on the deduction of tax losses has been proposed, as well as a reduction of the taxable profit base for the deduction of tax losses from 70% to 65%.
Extraordinary regime to support expenses incurred with electricity and gas
The State Budget proposal (SB) foresees the creation of an extraordinary support regime for expenses incurred with electricity and gas, which aims at the possibility of a 20% increase in expenses with electricity and natural gas consumption.
This benefit cannot be accumulated with other support or incentives of any nature regarding the same eligible expenses and losses.
Extraordinary regime for expenses incurred in agricultural production
The SB also proposes the creation of an extraordinary support scheme for expenses incurred in agricultural production. It is proposed the possibility of increasing by 40% the expenses incurred with the acquisition of agricultural goods. This regime is applicable to the tax period beginning on or after 1 January 2022.
Tax benefits applicable to Inland Territories and Autonomous Regions
It is proposed that the reduced IRC rate of 12.5% will apply to the first €50,000 of taxable income, as well as the creation of a surcharge of 20% on expenses related to the net creation of jobs for companies located in hinterland territories, whose employees reside, for tax purposes, in hinterland territories, and receive income from dependent employment as a result of that job creation.
Reduced IRC Rate
It is proposed that the reduced IRC rate of 17% will apply to the first EUR 50,000 of taxable income. The SB proposal also adds companies qualified as Small Mid Cap companies to the scope of application of the reduced IRC rate.
Tax incentive to increase salaries
The SB also provides for the creation of a surcharge of 50% on expenses incurred with salary increases of at least 5.1% in relation to the previous year and above the minimum monthly remuneration guaranteed, for workers with contracts for an indefinite period.
To benefit from this incentive, companies cannot increase the pay gap between the highest and lowest paid workers.
Creation of the tax regime of the incentive to the capitalisation of companies by substitution of the conventional remuneration of the share capital
The SB proposal suggests the creation of the Incentive to the Capitalisation of Companies by substitution and revocation of the Conventional Remuneration of Share Capital. A deduction is foreseen in the determination of the taxable profit by applying a rate of 4.5% on eligible net equity increases (in the previous regime a rate of 7% was applied on capital increases).
The deduction is allowed during 10 tax periods (the previous regime only allowed the deduction during 6 periods). In addition, the part exceeding the 30% threshold of tax EBITDA (in the previous regime the threshold was 25%) may be deducted during the 5 subsequent periods.
In addition, this tax benefit is increased by 0.5 percentage points for SMEs or Small Mid Cap.
More information at https://www.occ.pt/fotos/editor2/analisep_oe2023d.pdf