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Portugal Unites On Corporate Tax Reform Plans

by Ulrika Lomas, Tax-News.com, Brussels

16 October 2013


The Portuguese Government has unveiled details of its plans to reform corporation tax (IRC) in Portugal from 2014.

Approved by the Portuguese Council of Ministers during an extraordinary meeting held on October 13, the proposed tax reform aims to place Portugal among the most competitive countries in the European Union.

Drawn up in collaboration with the country's social partners, in order to obtain a broad consensus, Portugal's IRC reform is based on three key pillars. Firstly, the Government intends to significantly improve the country's competitiveness by lowering the rate of corporation tax. The Government plans to reduce the corporate tax rate from 25 percent currently to 23 percent in 2014, and to progressively lower the tax rate thereafter to between 17 percent and 19 percent by 2016.

Furthermore, the reform is intended to simplify existing reporting procedures and requirements thereby significantly reducing the administrative burden on businesses in Portugal. Portugal currently has one of the highest administrative tax burdens in the European Union.

Finally, the reform aims to boost investment by creating a new tax incentive regime for small- and medium-sized enterprises (SMEs) electing to reinvest their profits. Under the plans, SMEs will be able to deduct from their personal income tax (IRS) up to 10 percent of the amount reinvested. The objective is to boost the internationalization of these companies and to promote investment, a decisive element in the economic recovery of Portugal.

Defending the proposals, Portugal's State Secretary for Tax Affairs Paulo Núncio emphasized that the reform marks a break with the past and a new milestone for the future, representing a historic opportunity to modernize the corporate tax system for the good of the economy and for the country's future.

With its emphasis firmly on tax competitiveness, the reform is designed to generate confidence in the Portuguese economy, Núncio explained, noting that the reform will also attract investment by establishing stability and predictability in the country's tax system for both foreign and domestic investors. Efforts to simplify procedures will be of particular benefit to SMEs, the major driving force of the economy, the Minister ended.

TAGS: tax | investment | business | Portugal | corporation tax | tax rates | tax breaks | tax reform | Europe | Tax

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