What is Portugal’s new R&D tax incentive SIFIDE II?

Valerie Charoux
11 hours ago
2 min read

Government of Portugal News – Portugal’s Council of Ministers just enacted a law to strengthen support for innovation, scientific and technological research, and the competitiveness of Portuguese companies, through amendments to the Investment Tax Code, namely the Research and Development (R&D) Tax Incentive SIFIDE II.

1 - What is Portugal’s new R&D tax incentive SIFIDE II?

Portugal’s new R&D tax incentive SIFIDE II aims to increase the competitiveness of companies through a deduction from corporate income tax of a percentage of their R&D expenses (in the part not covered by non-refundable grants from the State or European Funds).

The R&D activities covered by SIFIDE II include:

1 - Research expenses for the acquisition of new scientific or technical knowledge,

2- Development expenses incurred through the exploitation of research results or other scientific or technical knowledge, with a view to the discovery or substantial improvement of raw materials, products, services or manufacturing processes.

2 - What are the changes between SIFIDE and SIFIDE II?

In 2023, SIFIDE granted "more than 630 million euros in tax benefits," but more than one billion euros that were placed in the funds, allegedly to invest in R&D, remained idle, he added.

SIFIDE II extends this scheme until the end of 2026 and introduces changes that ensure the strengthening of the economic impact of this incentive and greater efficiency and transparency in the application of tax benefits.

The Minister of the Presidency, António Leitão Amaro, stated that the Tax Authority evaluated the tax benefits of SIFIDE II, concluding that "the system is not working well: we are giving high tax benefits for transformations that in many cases do not happen".

Thus, on the one hand, SIFIDE is extended, that is, the tax benefits given to companies that directly invest in Research and Development (R&D), until 2026.

On the other hand, looking to the future, "the indirect SIFIDE II program ends, meaning when companies put money into investment funds for these funds to, ideally, invest in R&D." For money already placed in the funds or that will be placed by the end of the year, "there is a transitional period of up to five years for the investments to be made," he said.

It is also permitted that "a portion of these contributions, up to approximately 20%, may be invested in R&D" and "also in complementary productive innovation linked to that R&D," he added.

Leitão Amaro emphasized that "with this transitional regime, we are encouraging the money that is currently idle under a tax benefit to be mobilized for R&D or productive innovation."