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July 8, 2024

Portugal adopts tax incentives for capital market development and non-financial companies' capitalization

  • Significant tax reform has been adopted, aimed at stimulating the capital market and promoting the capitalization of non-financial companies in Portugal.
  • A tax regime applicable to corporate-form venture capital Alternative Investment Vehicles (AIVs) and credit AIVs incorporated and operating in accordance with national legislation is now in force.
  • A special regime is also foreseen for real estate undertakings for collective investment to promote affordable housing leases or subleases.

Executive summary

The Portuguese Parliament has approved a new law (Law no. 31/2024, of June 28) that represents significant tax reform aimed at stimulating the capital market and promoting the capitalization of non-financial companies in Portugal. This legislation is considered crucial to meeting the targets established in the Recovery and Resilience Plan (RRP) agreed with Brussels, viewed as being essential for the national economy.

Among the main changes, the legislation updates the tax regime applicable to Undertakings for Collective Investment (UCI), aligning terminology with the Asset Management Regime (AMR), approved by the Decree-Law no. 27/2023, of April 28. This adjustment allows the UCI, including Alternative Investment Vehicles (AIVs) in real estate, venture capital, credit, etc. to operate with greater clarity and legal certainty, promoting diversified investment.

Notably, Law no. 31/2024 extends the special tax regime, previously restricted to venture capital funds, to venture capital AIVs and credit AIVs, encompassing both the contractual nature of these regulated investment vehicles (Investment Funds) and the corporate nature they can assume (Collective Investment Companies).

Another significant aspect is the creation of a special tax regime for AIVs in real estate for affordable rental.

The capital market plays a crucial role in financing the economy, offering an alternative to traditional bank financing. UCI emerges as a significant source of financing, channeling resources from individual and institutional investors to companies. This mechanism not only diversifies the sources of financing for companies but also promotes financial stability and sustained economic growth.

The recent tax measures, which include incentives for establishing and operating UCI, are fundamental for creating a positive long-term investment environment. By offering tax benefits such as Corporate Income Tax (CIT) exemptions and reductions in income taxation, the law aims to encourage active participation in the capital market, facilitating companies' access to the necessary capital for innovation, expansion and sustainable development.

The tax incentives directed at venture capital and credit AIV are particularly important, as these funds aim to finance emerging and high-growth sectors, promoting innovation and competitiveness in the global market.

Additionally, the promotion of residential leasing through real estate UCI should help mitigate the housing crisis in Portugal, increasing supply and ensuring that investments also meet critical social objectives.

In summary, diversifying funding sources through the capital market not only strengthens Portuguese companies and entrepreneurs but also contributes to the country's economic resilience, better preparing it to face future challenges and seize global opportunities.

A summary of the main tax measures introduced in the new law follows.

Detailed discussion

Scope of tax regime applicable to Portuguese undertakings for collective investment

The terminology defining the subjective scope of the tax regime foreseen in article 22 of the Tax Benefits Code (TBC) is revised and now refers to UCI incorporated and operating in accordance with the national legislation.

The revised terminology for tax purposes is now aligned with the one foreseen in the AMR.

According to the AMR, UCI includes those investing in securities and AIV, which comprise real estate AIV, venture capital AIV, credit AIV and other AIV that may have broader purposes under AMR article 208, paragraph 1, subparagraph d. For venture capital AIV and credit AIV, a specific tax regime is foreseen, as addressed below.

Depending on whether they have legal personality, the abovementioned UCI may take the form of corporations (i.e., Collective Investment Companies) or adopt a contractual form (i.e., Investment Funds).

Taxation of income from participation units or shares in undertakings for collective investment

The new law clarifies that both income from the redemption of participation units and shares, obtained by taxpayers subject to Personal Income Tax (PIT), with tax residency in Portugal, outside the scope of a commercial, industrial or agricultural activity is subject to PIT at a special rate of 28% (also taking into consideration the new tax-exclusion regime described below).

The terminology for determining the applicable taxation for nonresident taxpayers, who do not have a permanent establishment in Portugal, has also been updated. This change aligns with the revisions made to Article 22 of the Tax Benefits Statute, now referring to real estate UCIs and securities UCIs.

Tax regime applicable to venture capital AIV, credit AIV and securities investment companies for economic development

The special tax regime currently applicable to venture capital funds is now extended to corporate-form venture capital AIV and credit AIV incorporated and operating in accordance with national legislation, as well as to securities investment companies for economic development foreseen in Decree — Law no. 77/2017.

Under this tax regime, income of any nature obtained by those entities is exempt from CIT.

The new law also extends the tax regime applicable to income obtained by participants in venture capital funds to participants or shareholders of the above-mentioned entities.

Real estate undertakings for collective investment to promote affordable housing lease or sublease

A special tax regime will now apply to income derived from participation units or shares obtained by participants or shareholders of UCI (excluding for venture capital AIV and credit AIV). This tax regime applies provided that:

  • The UCI is incorporated by December 31, 2025 (or has its constitutive articles amended by this date to comply with the current regime).
  • The UCI's constitutive articles provide that at least 5% of its assets consist of real estate intended for residential lease or sublease under contracts in accordance with the Portuguese Rental Support Program, as well as in accordance with other laws promoting affordable housing lease or sublease, provided that these laws are legally recognized as similar.
  • The UCI's assets, in the proportion of the abovementioned percentage and with reference to the balance sheet value as of the last day of the fiscal year preceding the one in which the income was generated, are subject to residential leasing or subleasing contracts within the framework of the Portuguese Rental Support Program, or under other laws promoting affordable housing lease or sublease, provided these laws are legally recognized as similar.

Under the revised regime, the percentage indicated in the table below is excluded from taxation for PIT or CIT purposes, and shall apply to the income obtained by participants or shareholders of the UCI derived from distribution, redemption or liquidation:

Eligible assets

Tax exclusion

From 5% to 10%


From 10% to 15%


From 15% to 25%


More than 25%


A UCI that falls into the bottom threshold of the table above is entitled to a 25% reduction of the rate provided for in section 29.2 of the Stamp Duty General Table, applicable to the net asset value of the UCI.

Admission of securities to trading on a regulated market

PIT: Capital gains

Law no. 31/2024 provides that the net positive balance of capital gains minus losses when shares and other securities are sold that are related to securities admitted to trading or investments in open-ended UCIs taking a contractual or corporate form, should exclude the percentages in the table below. (Note that contractual/corporate form for these purposes excludes micro and small enterprises not listed in a regulated or unregulated stock market, as well as certain countries, territories or regions with more favorable tax regimes.)

Holding period

Tax exclusion

From 2 to 5 years


From 5 to 8 years


More than 8 years


The net balance of capital gains and losses realized within the same year, including the net balance related to (i) micro and small enterprises not listed on regulated market or unregulated stock markets and (ii) securities admitted to trading or investments in open-ended UCI (taking a contractual or corporate form), whether positive or negative, should be considered in determining net income, without eliminating the option to aggregate the income and applying the PIT progressive rates, when applicable.

Because Law no. 31/2024 does not provide a transitional regime, the regime described above seems to apply immediately, even if the capital gains arise from shares and other securities acquired before the new law enters into force. However, this could be a potential point of conflict with the Portuguese tax authorities and, therefore, it should be duly monitored.

CIT: Tax deductibility of expenses related to initial public offerings

When assessing the taxable profit of taxpayers subject to CIT, expenses related to the initial admission to trading on a regulated market of securities (i) representing at least 20% of the company's share capital for trading or (ii) related to the public offering of securities carried out in the same fiscal year or the fiscal year prior to that admission, are increased by 100% (i.e., doubled).

For purposes of this regime, deductible expenses include fees, commissions and other charges directly related to the admission to trading, including those for necessary preparatory steps, as well as directly related brokerage expenses.

It is foreseen that if the admission to trading on a regulated market or the public offering of securities, as described above, does not occur by the subsequent fiscal year, the amount corresponding to the abovementioned percentage, increased by 5%, should be considered as income for purposes of assessing the taxable profit for that fiscal year.

Additionally, eligible expenses and losses related to the second admission to a regulated market, without minimum share capital dispersion, are increased by 50% of their amount.

The application of this regime is subject to the applicable European rules on de minimis aid.

Pan-European pension products

Tax benefits

The tax regime applicable to retirement-savings funds and retirement-savings plans is extended to Pan-European individual retirement products (i.e., long-term individual savings products aimed at retirement) that are established and operate under national legislation or, if not established in Portugal, are domiciled in another Member State of the European Union or the European Economic Area.

Rules applicable to the abovementioned products include:

  • A CIT exemption applies on income derived from these products, provided the entities are established and operate under Portuguese legislation.
  • A PIT deduction may be claimed for a percentage of the amount the taxpayer invested in these products within the respective year, with a maximum limit of €400.
  • Special rules apply to the taxation of amounts paid under eligible products.

PIT: Reinvestment regime

Gains from the onerous transfer of real estate (qualified as the permanent residence of the taxpayer or the taxpayer's household) are exempt from taxation if the gains, deducted by the amortization of any loan used to acquire the property are reinvested in Pan-European individual retirement products or are reinvested in another property, land plot for construction, or the construction, expansion or improvement of another property exclusively for permanent residential purposes.

Stamp Duty

Similar to the exemption applicable to amounts invested in retirement-savings funds, education-savings funds, education-retirement-savings funds, shares-savings funds or pension funds, the investments in Pan-European individual retirement products are exempt from Stamp Duty.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young, S.A., Portugal

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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