How does the ICE work?
The tax regime for the corporate capitalisation incentive (“ICE”), in the version applicable to the 2025 period and set out in Article 43-D of the Tax Benefits Statute (“EBF”), allows a deduction for corporate income tax (IRC) purposes of an amount corresponding to the application of the 12-month Euribor rate (the average for the tax period, calculated on the last day of each month), plus a spread of 2 percentage points, to the amount of the net increases in eligible equity made in the period concerned.
Who can benefit?
Please note that this tax benefit applies to commercial companies or civil companies in commercial form, cooperatives, public companies and other legal persons governed by public or private law with their registered office or effective management in Portugal, provided that they:
- Do not operate in the financial or insurance sector;
- Keep organised accounts and comply with the legal provisions in force for their sector of activity;
- Do not have their taxable profit determined by indirect methods; and
- Have their tax and social security position in order.
Increase and limits of the deduction
It should be noted that this incentive is increased in the first years of its application by 50% and 20% in 2025 and 2026, respectively. This means that, once the deduction has been determined, it will be increased by 50% for the 2025 period and by 20% in 2026.
However, in 2025 the deduction may not exceed the higher of the following limits:
- €4,000,000.00; or
- 30% of the profit for the period before depreciation, amortisation, net financing costs and taxes, under Article 67 of the IRC Code (Tax EBITDA).
Nevertheless, the part of the deduction exceeding the second limit above is deductible in determining the taxable profit of one or more of the five subsequent tax periods, after the deduction for that same period, and subject to the same limits.
What counts as an eligible equity increase?
For the purposes of this regime, the law considers the following to be eligible increases in equity:
i) cash contributions made on the incorporation of companies or on share capital increases;
ii) contributions in kind made in share capital increases corresponding to the conversion of receivables into capital;
iii) share premiums; and
iv) the allocation of accounting profits available for distribution, under commercial law, to retained earnings or directly to reserves or to a capital increase.
As regards iv), note that the concept of “accounting profits available for distribution” must be determined by reference to the Commercial Companies Code (“CSC”), since it is not a tax law concept. Articles 32 and 33 of the CSC must therefore be taken into account, from which it follows that profits are only available for distribution after losses have been covered and the legal reserve (or any other reserve provided for in the articles of association) has been set up.
Accordingly, for ICE purposes, only profits allocated to free reserves and/or retained earnings, or to capital increases, after losses have been covered and the legal reserve set up, are relevant.
It should be stressed that there must be a net increase, i.e. a positive difference between the increases in eligible equity and the outflows, in cash or in kind, in favour of the shareholders, by way of capital reduction or distribution of assets, and distributions of reserves or retained earnings.
Exclusions
Finally, it should be noted that increases in equity resulting from the following are not taken into account for this benefit:
- Cash contributions financed by increases in eligible equity of another entity;
- Cash contributions made by an entity with which the taxpayer has a special relationship that are financed through loans granted, in the same tax period or in any of the six previous tax periods, by the taxpayer itself or by another entity with which that entity and the taxpayer have a special relationship; in these cases, the capital increases are presumed to have been financed by those loans, unless the taxpayer proves that the loans were used for other purposes.
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