The CIRC covers the taxation of income earned by corporate entities, including companies, cooperatives, associations, foundations, public institutes and foreign companies having a permanent establishment in Portugal (in what concerns income imputed to such permanent establishment), provided such entities have their seat or place of effective management in the Portuguese territory.

The CIRC also covers income earned by entities which have no legal personality but which have their seat or place of effective management in Portugal (eg., investment funds, pending inheritances, irregular companies).

Finally, the CIRC also covers income earned by non-resident entities in Portugal (source income).

Governmental entities, certain charities, certain cooperatives, and tax transparent entities (see below), though subject to income tax, are exempted therefrom in accordance with the CIRC.


The CIRC considers that a corporate entity is resident in Portugal if it has its seat or place of effective management in Portugal.

The concept of "seat" is linked to the concept of "incorporation", i.e., any entity which is legally incorporated in Portugal and has its head-offices formally located in Portugal is deemed resident in Portugal (even if effectively managed from a different country).

The concept of "place of effective management" covers all entities which, having their seat in another Country, are however effectively managed from Portugal (corporate bodies meeting in Portugal, members of Board of Directors residing in Portugal and making decisions regarding the company in the Portuguese territory).

The Corporate Income Tax is levied on the worldwide profits declared by resident entities (net taxation). Non-resident entities which earn income in Portugal are taxed on such income, regardless of its profit element (gross taxation - see our next contribution).

Income which is subject to the laws on gambling is not covered by the CIRC.

Whenever the resident entity does not exercise a commercial, industrial or agricultural activity, income tax is levied on the sum of the several types of income earned by such entity, as such types of income are defined in the CIRS (kindly see our previous contribution).


Taxable profit is defined by reference to a given year, as ...

... the net profit (which net profit results from the difference between income effectively earned and costs or losses effectively incurred in connection with the activity) added of positive asset variations (with the exception of equity contributions, potential capital gains and asset variations which are subject to inheritance tax) and deducted of negative asset variations (with the exception of donations unrelated to the activity, potential capital losses and certain distributions to shareholders or partners).

In order to avoid economic double taxation, profits received from participations held in the capital of other companies are not deemed earned income in their entirety. Thus: (a) when such participation is higher than 25% and has been held for more than 2 years, or it has been held since the incorporation of the participated company, an amount equal to 95% of such received profits will not be considered as taxable income, provided such participated company is also resident in Portugal or is resident in a E.U. Country; (b) when such participation is below 25% but the activity of the shareholder is of a given nature (e.g.: holding company ("SGPS"), venture capital company, or other type of company as defined by law) 95% of the received profits will not be considered as taxable income, provided such participated company is also resident in Portugal or is resident in a E.U. Country. In all other cases, the tax credit for economic double taxation amounts to only 60% of such distributed profits (it should be noted that the formula established by article 72 of the CIRC leads to a devaluation of such tax credit, making it effectively lower than the mentioned 60%).

The cost of fixed assets is accepted as a taxable cost over a number of years, in accordance with the respective amortization rate. Such amortization rate may be the same every year ("m'todo das quotas constantes") or it may be higher in the first years and lower in the subsequent years ("m'todo das quotas degressivas"). Any revaluation of fixed assets will only be accepted for tax purposes if specifically authorized by law.

Provisions created by resident entities will be accepted for tax purposes, provided they relate to (a) certain unrecoverable credits, (b) depreciation of stocks (when their market value becomes lower than their acquisition cost), (c) certain charges and payments to be incurred in connection with certain judicial claims, (d) compliance with regulations issued by the Bank of Portugal or by the Portuguese Insurance Institute and (e) certain costs to be incurred by oil extracting companies.

The CIRC also allows the tax deduction of certain other costs, including those relating to (a) certain social activities (insurance policies, children care centres, restaurants, provided such costs revert for the benefit of the employees), (b) donations made in favour of public or private cultural entities.

The CIRC does not accept the tax deduction of certain costs, including (a) fixed assets not subject to depreciation, (b) recreational boats or aircrafts, save when such assets are directly connected with the exercise of a commercial, industrial or agricultural activity, (c) passenger vehicles in the proportion of their cost exceeding a fixed amount (which is currently of Escudos 6 million), (d) paid taxes, (e) indemnity payments related to facts which might have been insured, (f) confidential and non-documented expenses (these costs being subject to additional tax charges).

Tax losses can be carried forward for a period of up to 5 years.


The current corporate income tax rate is of 36%. An additional surcharge may be locally levied, which surcharge can not be higher than 10% of the corporate income tax (total tax becoming of 39.6%).

Entities which do not exercise a commercial, industrial or agricultural activity are subject to a tax rate of 20%.

These rates do not apply to transparent entities. Transparent entities are entities which are subject to the CIRC but the profits of which are imputed to their partners and taxed at the level of such partners. Such is the case of civil companies, professional companies (such as law firms) and certain real estate administration companies.

Corporate groups may be taxed on a consolidated basis, provided: (a) all group companies reside in Portugal, (b) the entire income of such group companies is subject to corporate income tax in Portugal and (c) the controlling company holds 90%, or more, of the capital of all group companies.


Resident entities which are subject to corporate income tax must, by reference to the profits generated in a given year, deliver a tax declaration on or before May 31 of the following year.

In such tax declaration, the resident entity must calculate the amount of tax due. As part of such tax was already paid (as payments on account are to be made during the months of July, September and December), such resident entity will pay the difference (if any) on the day it delivers the said tax declaration (i.e., on or before May 31 of the following year). If the tax declaration shows a tax loss, or the amount of tax due is lower than the amount of payments made on account, a refund will be given by the tax authorities.

Payments on account are determined in accordance with the profits declared by reference to the previous year and correspond to 75% of the tax paid in such previous year (25% of such amount being paid in each of the months of July, September and December).

Resident entities may also be subject to withholding taxes on certain types of income (as is the case of royalties, real estate income, interest, profits and other capital income).

Please, note that the contents of this Article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Miguel Teixeira de Abreu, Abreu, Cardigos & Partners, Lisbon, Portugal.