The Scientific Research and Innovation Tax Incentive (IFICI) is a program created to attract qualified talent to Portugal, offering a reduced IRS rate (20%) for 10 years to professionals who have never been tax residents in the country in the previous five years and who work in areas considered high added value. However, can a newly established company allow its employees to benefit from this program? Let’s analyse what the Portuguese Tax and Customs Authority Binding Information (PIV 28121) states.
IFICI Requirements: What’s at Stake?
For an employee to benefit from IFICI, it’s not enough to meet the personal requirements (being a tax resident in Portugal as of 2024, practising a qualified profession, not having benefited from other special programs, etc.). The employer must also meet specific requirements, namely:
- Have made significant investments and benefited from the Investment Support Tax Regime (RFAI) in the fiscal year in which it began operations or in any of the previous five fiscal years;
- Perform an economic activity included in the list of eligible CAEs;
- Export at least 50% of its revenue in the fiscal year it began operations or in the previous two fiscal years.
The Case of Newly Incorporated Companies
The Binding Information analysed expressly states that, to consider the investment requirement and the RFAI benefit met, the company must have made significant investments and benefited from the RFAI in the fiscal year in which it began operations or in any of the previous five fiscal years. In other words, the law requires a history of investment and tax benefits that can go back up to five years.
In the case of a newly incorporated company that does not yet have a significant investment history or benefit from the RFAI, it will not be possible to meet this requirement. The same applies to the export requirement: if the company does not yet have significant revenue or an export history, it cannot demonstrate that it exported more than 50% of its revenue in the current fiscal year or the previous two.
Conclusion: Are New Companies Left Out?
Based on the Federal Revenue Service’s interpretation, a company without a track record, that is, one that has not yet made significant investments or benefited from the RFAI, and that cannot demonstrate the required export volume, does not meet the requirements for its employees to benefit from the IFICI. The regime was designed to reward already established companies with proven investment and internationalisation. Therefore, for newly created companies, the recommendation is to strategically plan growth and investments so that, in the future, they can offer this tax benefit to their employees. Until then, access to the IFICI will, in practice, be prohibited.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
