The Supplementary State Budget for 2020 introduced a temporary tax benefit - the Extraordinary Tax Credit for Investment II (CFEI II), consisting of a deduction from the collection of the Corporate Income Tax (CIT), in the amount of 20% of the investment expenses in assets related to the exploration, which are carried out between 1 July 2020 and 30 June 2021, with a maximum eligible expenses limit of 5 million euros, per taxable entity.
The tax incentive covers investment expenses on tangible fixed assets and biological assets that are not consumable, acquired as new, but also expenses on development projects and elements of industrial property.
The advantage of this benefit is that it is not limited to certain activities and does not require the creation of jobs, like other existing benefits.
Entities subject to Corporate Income Tax (CIT) who are primarily engaged in a commercial, industrial or agricultural activity and who cumulatively fulfill the following conditions may benefit from CFEI II:
1. Have organized accounting, in accordance with the standardization accounting and other legal provisions in force for the respective sector of activity;
2. Your taxable profit is not determined by indirect methods;
3. Have their tax situation regularized;
4. Do not terminate employment contracts for three years, counting from the date of effect of this benefit, under the terms of collective dismissal or dismissal due to the extinction of the job.
The deduction is made in the settlement of IRC for the tax period beginning in 2020 or 2021, up to the competition of 70% of the collection of this tax, depending on the relevant dates of the eligible investments.
Applying the special tax regime for groups of companies, the deduction:
a. Is made at the amount determined under the terms of the IRC Code, based on the tax base of the group;
b. Up to 70% of the amount mentioned in the previous paragraph is made and cannot exceed, in relation to each company and for each tax period, the limit of 70% of the collection that would be determined by the company that made the eligible expenses, if it did not apply the special tax regime for groups of companies.
Eligible investment expenses
The following investment expenses are eligible:
a. Expenses for investment in assets related to exploration, those related to tangible fixed assets and biological assets that are not consumable, acquired in new condition and that come into operation or use until the end of the taxation period that begins on or after January 1, 2021.
b. Investment expenses in intangible assets subject to depreciation are also eligible, namely:
i. Expenses on development projects;
ii. Expenses with elements of industrial property, such as patents, trademarks, permits, production processes, models or other similar rights, acquired against payment and whose exclusive use is recognized for a limited period of time.
Eligible investment expenses are considered those corresponding to the additions of assets verified in the referred periods and those that, not referring to advances, translate into additions to the investments in progress initiated in those periods.
Asset additions resulting from ongoing investment transfers are not considered.
Expenses on investment in assets that can be used in the personal sphere, such as:
i. Light passenger or mixed vehicles, pleasure boats and tourism aircraft, which are not used for the operation of the public transport service or are not intended for the rental or transfer of the respective use or enjoyment in the normal activity of the taxable person;
ii. Furniture and comfort or decoration items, except when used for productive or administrative activities;
iii. Those incurred with the construction, acquisition, repair and expansion of any buildings, except when related to productive or administrative activities. The assets underlying the eligible expenses must be held and accounted for in accordance with the rules that determined their eligibility for a minimum period of five years or, when lower, during the respective minimum useful life period, determined in accordance with the applicable legislation.
CFEI II is not cumulative, in relation to the same eligible investment expenses, with any other tax benefits of the same nature provided for in other legal instruments.
Companies that use this tax credit without complying with the requirements will have to return the benefit, plus compensatory interest increased by 15 percentage points
Belzuz Abogados SLP
A presente Nota Informativa destina-se a ser distribuída entre Clientes e Colegas e a informaçăo nela contida é prestada de forma geral e abstracta, năo devendo servir de base para qualquer tomada de decisăo sem assistęncia profissional qualificada e dirigida ao caso concreto. O conteúdo desta Nota Informativa năo pode ser utilizada, ainda que parcialmente, para outros fins, nem difundida a terceiros sem a autorizaçăo prévia desta Sociedade. O objectivo desta advertęncia é evitar a incorrecta ou desleal utilizaçăo deste documento e da informaçăo, questőes e conclusőes nele contidas.