Tax Incentive for Scientific Research and Innovation – IFICI

i.      INTRODUCTION

Since around 2010, the Portuguese government implemented a tax regime with the purpose of attracting non-residents to transfer their residence to Portugal – the Non-Habitual Resident status. This regime had very broad conditions, which made it a huge success. This success determined its death, and the regime was revoked with effect to the end of 2023.

However, the same law that closed that regime opened a new one, with effect to 1 January 2024, replacing the Non-Habitual Resident regime, now with the specific aim of attracting highly qualified professionals to specific areas of activity, promoting the development of an economy geared towards innovation and digital transformation and increasing the competitiveness of Portuguese companies. To this end, Article 58-A was introduced into the Tax Benefits Statute (EBF).

Although the new regime had been implemented, it took quite a while until the conditions required for its effective implementation were made available, and it was only on 23 December 2024 that a Ministerial Order was published to regulate the new tax incentive scheme (IFICI) provided for in article 58-A. The regulations establish, among other things, the applicable registration procedures, the highly qualified professions, as well as the industrial and service activities that fall within the scope of this scheme.

Later, on February 13, 2025, a government department (IAPMEI) published another relevant list, now of the qualified jobs and the economic activities considered relevant to the national economy.

Finally, an Order published on 20 February 2025, approved the registration form for the scheme.

As we shall see, in contrast to the previous regime, this new one is based on strict conditions as to whom may benefit from it.

ii.           CONDITIONS

Taxpayers who become resident for tax purposes under the terms of the IRS Code, but who have not been resident in Portuguese territory in any of the previous five years and who carry out the activities referred to in Article 58-A may benefit from the IFICI regime. Under the terms of this article, entitlement to the favorable tax regime, each year for a period of 10 consecutive years from the date of registration as a resident in Portuguese territory, is conditional on meeting the following requirements:

1.   The taxpayer is considered to be tax resident in Portuguese territory at any time during the year in question; and

2.   The taxpayer continues to earn income each year from carrying out one of the activities referred to in Article 58-A.

Taxpayers who, during the 10-year period, have not exercised their right to be taxed under these terms, may resume enjoying this right in any of the remaining years of the period, provided that from the year in which they regain their tax resident status in Portugal they start earning income from carrying out one of the article 58-A activities.

It should also be noted that if the taxpayer starts a new activity within a maximum period of six months from the end of the activity previously carried out, for legal purposes the taxpayer will be deemed to continue to earn income from one of the afore-mentioned activities.

Finally, will not be able to benefit from this regime:

a)   Taxpayers who benefit or have benefited from the non-habitual resident regime;

b)   Taxpayers who have opted for taxation under the tax regime for former residents; and

c)   Income from salaries that are taken into account for the purposes of the RFAI.

Activities to be carried out in the Autonomous Regions of the Azores and Madeira will be subject to the terms to be defined by regional legislative decree. In these cases, taxpayers will have to be registered in such Regions.

iii.         TAX BENEFIT

Taxpayers who meet the requirements set out above will be able to be taxed at the special rate of 20% for IRS on net income in categories A and B earned from the activities mentioned above, for a period of 10 consecutive years from the year of their registration as a resident in Portuguese territory, without prejudice to the option of aggregation.

However, as part of the elimination of International Double Taxation, taxpayers who benefit from the regime, and that:

• Obtain income from professional activity, capital income, rentals and capital gains abroad, will have this income exempt, although included for the purposes of determining the rate applied to the remaining income; and
• Obtain income paid or made available by non-resident entities without a permanent establishment in Portuguese territory, domiciled in a country or territory subject to a clearly more favorable tax regime, included in the Portuguese official blacklist, will have this income taxed at the rate of 35%.

iv.         REGISTRATION IN THE REGIME

Taxpayers registered as resident in Portugal must submit their applications for registration by January 15th of the year following the year in which they become resident in Portugal. For the purpose of applying for registration and communicating changes, taxpayers must submit the following information to the entities responsible for analyzing and verifying the requirements of their situation:

1. Copy of the individual employment contract, when the activity carried out is a job;
2. An up-to-date permanent commercial certificate, when the activity carried out is that of a member of a corporate board;
3. Copy of the grant contract, when the activity is scientific research;
4. Proof of applicable academic qualifications;
5. The document referred to in article 10.2, for the situations provided for therein;
6. Other documents that may be requested.

It is the responsibility of the company where the activity is carried out to prove the requirements relating to the activities provided for in Article 58-A, by confirming, by March 15, in the respective reserved area of the Finance Portal, that the taxpayer meets the established requirements.

v.          PROFESSIONS AND ACTIVITIES

Where the previous regime allowed anyone who had not been resident in Portugal in the previous 5 years to apply for the benefit, the current one only accepts those who will be carrying out a specific type of professional activity in companies that carry out their activity in areas of activity specifically stated in the official lists issued for this purpose.

Moreover, in addition to these two conditions concerning the activity (that of the individual and that of the employer entity), the employer entity, depending on its particular type of activity must comply with additional requirements. Namely, be integrated into the national science and technology system; having a formal contract for tax benefits on productive investment; being a company that exports at least 50% of its turnover; have their costs with personnel working on research and development eligible for the purposes of the system of tax incentives for research and business development, under the terms of the Investment Tax Code; or being a certified startup company.

The application of the benefit depends on the verification of compliance of the requirements relating to the activity carried out by the taxpayer, which is a responsibility of the entities where the applications for registration are submitted. These entities are 6 different government departments.

The level of qualifications of employees that may apply for this regime must be at least level 5 of the European Qualifications Framework, or level 5 of the International Standard Classification of Education (ISCED). For some activities they are required to have level 6 of these 2 systems with three years of duly proven professional experience, and in some cases the level 8 is required.

The activities accepted under the scheme are very varied. These include, among others:

-     Higher education teaching and scientific research;

-     Extractive and manufacturing industries;

-     Tourism and related activities;

-     Computer and related services;

-     Agricultural, aquaculture, fish farming, farming and forestry activities;

-     Research and development and technology-intensive activities;

-     Information technology and audiovisual and multimedia production;

-     Defense, environment, energy and telecommunications;

-     Health;

-     Shared service center activities.

Also considered as highly qualified professions for the purposes of the regime are the positions of directors, managers and managing directors of the employer entities.