August brought significant developments across several areas of Portuguese taxation, notably investment and capitalisation incentives for companies, the taxation of innovation, patronage and VAT.
In this edition of Highlights, we select some of the legislative changes, administrative guidance and case law that deserve particular attention for their practical relevance or potential economic impact.
SIFIDE II: extension to 2026 and the end of indirect investment through funds Decree-Law no. 170/2026 of 21 August amended the Tax Investment Code, extending the System of Tax Incentives for Business Research and Development (SIFIDE II) until 2026.
The most significant change, however, is not the extension itself. The decree repeals the possibility of using SIFIDE II indirectly through investment funds , materially changing one of the structures used to channel private investment into research and development.
The change places greater weight on direct investment in eligible R&D projects and should lead companies, investors and investment vehicles that relied on SIFIDE funds to reassess their models.
For companies carrying out, or planning to carry out, research and development, the extension keeps open an important opportunity to reduce their tax burden, although identifying, documenting and evidencing eligible expenditure is becoming increasingly important.
VAT and urban regeneration: authentic interpretation of the reduced rate Law no. 48/2026 of 17 August provided an authentic interpretation of item 2.23 of List I annexed to the VAT Code , on the reduced rate for certain refurbishment contracts.
The legislative intervention is particularly important in an area that has caused considerable dispute between taxpayers and the Tax Authority, especially as to which operations qualify for the reduced rate.
In August, new administrative guidance was also published on applying this item to building refurbishment contracts and to operations in urban regeneration areas.
In a sector where the difference between the reduced and the standard VAT rate can have a very significant economic impact, the contract should be correctly characterised, and its conditions checked, before the works are contracted and invoiced.
Patronage: new framework and the National Patronage Platform Following the changes announced the month before, Decree-Law no. 167/2026 of 17 August amended the Tax Benefits Statute and created the National Patronage Platform (Plataforma Nacional do Mecenato ).
The new framework seeks to strengthen private participation in funding activities of public interest and make it more accessible, while creating a tool to connect patrons, beneficiary entities and the public administration.
For companies and individuals with social responsibility policies, cultural investment or other initiatives that may fall within the patronage regime, the change is an opportunity to review the tax structure of their donations and assess the benefits of the different forms of support.
For beneficiary entities, the new model may also justify a review of how they raise and formalise private funding.
Capitalisation and salary increases: new guidance from the Tax Authority In August, the Tax Authority published new rulings on two important corporate tax incentives: the Corporate Capitalisation Incentive (Incentivo à Capitalização das Empresas , ICE) and the Tax Incentive for Salary Increases .
On capitalisation, the rulings addressed, among other matters, the effect of repaying supplementary capital contributions to shareholders and of partial profit distributions on the calculation of the benefit.
On salary increases, the Tax Authority ruled on whether pay rises linked to the update of the national minimum wage qualify.
This guidance shows that the incentives do not depend only on a formal increase in equity or in employee pay. The nature of the operations, their timing and how they are documented can directly affect whether the benefit exists and how large it is.
Careful planning of financing, profit distribution and pay policy can therefore be of significant tax relevance.
Startups and stock options: clarification of the employee equity incentive The tax regime for granting shares and stock options to startup employees was again clarified by the Tax Authority in August.
The rulings concern Article 43-C of the Tax Benefits Statute and, in particular, gains from option, subscription and share award plans and other mechanisms with equivalent effect .
As equity instruments become a more common part of remuneration, their tax treatment is particularly relevant for startups and fast-growing companies.
These mechanisms can be an important tool to attract and retain talent, but obtaining the tax treatment provided for depends on the structure of the plan, the characteristics of the employer and compliance with the statutory requirements.
Tax should therefore be considered when the incentive plan is designed, not only when the gains are granted or realised by employees.
Software, SaaS and artificial intelligence: the intellectual property tax regime Two binding rulings published in August are of particular interest to technology companies and to activities involving software and artificial intelligence .
The Tax Authority examined the application of Article 50-A of the Corporate Income Tax Code (IRC), the regime for certain income from copyright and industrial property, to perpetual licences and software licensed on a SaaS model .
It also considered the treatment of income from licensing or making available artificial intelligence models as customised copies .
These rulings show a growing need to adapt traditional intellectual property tax regimes to new ways of exploiting digital assets.
For companies developing software, algorithms or artificial intelligence models, the legal and economic form in which those assets are made available to clients may be decisive for their IRC treatment and for the possible application of the intellectual property tax regimes.
Non-resident investment funds: consolidating case law on withholding tax August again saw a significant number of arbitral decisions on the taxation of non-resident collective investment undertakings receiving Portuguese-source dividends.
The decisions continue to compare the taxation of these funds with the treatment of collective investment undertakings set up under Portuguese law, and with the EU principle of free movement of capital .
In several cases, the arbitral decisions published during the month again found that withholding tax on non-resident funds, in circumstances comparable to those of domestic undertakings, is incompatible with EU law.
This increasingly settled line of decisions remains particularly relevant for foreign funds and other investment vehicles that have borne tax in Portugal.
In those cases, a review of the amounts withheld and recovery of tax unduly paid should be considered, taking into account the applicable procedures and deadlines.
