Portugal's tax authority evaluates dozens of fiscal benefits

Portugal's tax authority has completed evaluations for 31 of the country's roughly 540 fiscal benefits and is now examining an additional ten, according to the Director-General of the Tax and Customs Authority (AT).

Helena Borges informed a parliamentary working group that the Technical Unit for the Evaluation of Tax and Customs Policies (U-TAX) is progressively assessing fiscal incentives. The 31 benefits already evaluated account for 77% of the total fiscal expenditure. Among the ten incentives currently under review, eleven are nearing their expiration dates, and one concerns the Corporate Capitalization Incentive (ICE) in corporate income tax (IRC).

Borges highlighted that the number of fiscal benefits has remained relatively stable since 2019, with only minor, non-structural changes. Fiscal expenditure related to these benefits has consistently ranged between 5% and 7% of the Gross Domestic Product (GDP). While the real value of this expenditure has increased, its proportion of GDP has remained steady.

She also noted that approximately 60% of these incentives have a minimal impact on fiscal expenditure, each costing less than one million euros. A significant portion of the fiscal expense is concentrated in areas related to Value Added Tax (IVA) and income taxes, with a smaller number of entities benefiting from these more substantial incentives. The primary drivers of these fiscal benefits are preferential IVA rates and incentives within corporate income tax (IRC), including those for business research and development and ICE, as well as personal income tax (IRS), particularly for non-habitual residents and individuals with disabilities.

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it is very difficult and very risky to make a comparison with other countries when measuring the weight of fiscal incentives, because not all countries quantify fiscal expenditure in the same way, with different concepts from country to country.