Lei n.º 21/2023, de 25 de maio
In order to Portugal to continue to be a cradle of startups, stimulating investment in innovation and technology, the “Assembleia da República” approved the Government’s proposed law, which came into force on May 26th, 2023.
The main changes include changes to the taxation regime for option plans for workers at start-ups and companies in the innovation sector and reinforcements in the tax incentive system for research and business development.
Furthermore, we found, for the first time, a definition for startup and scaleup in Portugal. Therefore, a startup is considered to be a company that has been operating for a period of less than ten years, has fewer than 250 employees and has less than 50 million euros in annual turnover. It should be noted that these cannot also have been born from a transformation or split of a large company, nor have any direct or indirect majority shareholding in the capital of a large company. The headquarters must be located in Portugal or, at least, 25 employees in Portugal.
It should also be noted that a startup must meet at least one of the following conditions:
In addition to these capital investments, there is also the introduction of the concept of business angels, that is, natural people who invest in startups, contributing to strengthening their financial capacity and their experience and knowledge of the market.
Now, if a simple investment through capital instruments or through business angels is enough to fulfil one of the additional requirements for a company to be defined as a startup, we can now dispense with the fact that the company must have essential characteristics such as innovation and technological development. Which already carries some nonsense and something new in comparison to other legal systems (as in Spain with the “Ley de Startups” or even as in Brazil with the “Marco Legal das Startups”).
The concept of scaleup is also introduced, this being the legal person that has been operating for more than 10 years, employs more than 250 workers and has a turnover that exceeds 50 million euros and meets the necessary conditions to obtain Tech Visa certification (under the terms of Portaria No. 328/2018, of December 19th). Thus, the main difference between startup and scaleup lies solely in these operational characteristics.
The recognition of startup or scaleup status is carried out through a prior communication procedure to Startup Portugal, exclusively by electronic means. It will issue a certified digital status document, maintaining an updated list of recognized startups and scaleups on its website. Maintaining the startup or scaleup status will depend on confirmation, every 3 years, by Startup Portugal, which will verify the continuity of the expected requirements. However, if legal entities no longer meet these requirements, they must communicate this fact to Startup Portugal within 30 days from the date of the event that gives rise to the lack of verification of the requirement(s).
In this way, obtaining certification from Startup Portugal could lead to the creation of entry barriers for other initiatives, which would then depend on prior approval or framework by this institution.
In the scope of taxation, only 50% of the gains from shareholdings are considered, being subject to the 28% rate for IRS purposes, whenever it is verified that the plan was granted by an entity that, in the year prior to the approval of the plan, is recognized as a startup and that meets one of the following requirements: (i) is classified as a micro, small or medium-sized company or (ii) develops its activity within the scope of innovation (art. 43º-C of the” Estatuto dos Benefícios Fiscais”).
This benefit depends on the maintenance of the rights underlying the securities generating the gains or equivalent rights, for a minimum period of 1 year, with the gains being taxed at the first of the following moments:
(i) sale of securities or similar rights acquired through the exercise of the option (gains will be determined by the positive difference between the sale value and the exercise price of the option or right),
(ii) loss of resident status in Portuguese territory (gains will be determined by the positive difference between the market value and the exercise price of the option or right) and
(iii) free transfer of securities or similar rights acquired through the exercise or subscription of the option (gains are determined by the positive difference between the value determined under article 45 of the IRS Code and the exercise or subscription price, plus whatever may have been paid to acquire this option or right).
There is also, at the level of the investment Tax Code, a reinforcement of the system of tax incentives in research and development, namely by increasing the increase to 120%, for the purposes of deducting the amount of IRC collection and the increase to 12 years of the deadline for deducting expenses that, due to insufficient collection, have not been deducted.
On the other hand, it is now mandatory that 85% of the investment of these funds be in companies dedicated mainly to research and development, and this condition must be met within 3 years from the acquisition of the participation units.
There are new rules to prevent situations of double tax benefit, namely due to the fact that companies dedicated mainly to research and development cannot benefit from the deduction from the IRC collection of these expenses, when relevant applications in the scope of research activities are involved and development financed, directly or indirectly, by investment funds within the scope of SIFIDE II.
In addition, reporting obligations are introduced. Therefore, participating entities must, by the end of the month following the submission of the periodic income declaration, inform that they benefit from SIFIDE II in relation to the relevant amount applied (i) in the case of participation in the capital of research and development institutions; (ii) in the case of contributions to investment funds, the management company.
However, it should be noted that these changes to the Investment Tax Code will only take effect on January 1st, 2024.
