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Portugal: Tax-Efficient Sectors

Special Corporate Income Tax Regimes

Portugal used to offer a number of special corporate income tax regimes by which businesses either paid reduced corporate income tax rates, were exempted from certain taxes altogether or were able to artificially inflate tax deductible allowances so as to reduce taxable profits. Most of these were swept away by the OECD and the EU, and what remains is the usual EU patchwork of special-interest support schemes.

The Portuguese Investment Agency has traditionally had the power to negotiate tailored incentive packages with companies developing large investment projects in Portugal, but under the EU's State Aid rules there are strict limits on what can be offered.

In October 2008, Portuguese Prime Minister Jose Socrates announced proposals for an additional lower band of corporate tax, in a move designed to help small companies cope with the ongoing global financial crisis and deteriorating economy.

Announcing the government's draft budget proposals for 2009, Socrates told parliament that the first EUR12,500 of a company's income would be subject to tax at a rate of 12.5%. The remainder would then be taxed at the normal rate.

The lower 12.5% rate was in place until December 31, 2011, at which point is was abolished.



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