The Portuguese Tax Benefits Code ("EBF")


The introduction of the EBF in 1989 (by means of Decree-Law 215/89 of July 1) has allowed the concentration of the several tax benefits, which existed in the Portuguese tax system. In the case of corporate income taxes alone, there were more than 35 separate legal diplomas dealing with tax benefits.

The EBF was enacted under the form of a Code and it was then divided into the following sections:

  • General Provisions, dealing with the concept of tax benefit, its constitution, loss and transfer,
  • Procedural provisions dealing with the recognition of a tax benefit and the prior consultation procedure (whereby a taxpayer may request the opinion of the Tax Authorities as to the applicability of a given provision of the EBF to a particular situation),
  • List of Tax Benefits, divided into 4 major areas:

(a) Tax benefits in the financial sector (financial institutions and capital markets),

(b) Tax benefits in the Madeira and Azores Tax Free Zones,

(c) Tax benefits in the real estate sector,

(d) Other tax benefits (eg. diplomatic staff, scientific organisations, intellectual property income).

It should be noted that, as of the date in which the EBF was first published, there have been several amendments and changes to its provisions. In effect, since 1989, the EBF has been subject to more than 20 changes, amendments or other alterations. Furthermore, the Portuguese legislator has, again, created some other tax benefits in legal diplomas other than the EBF, thus starting a process of dissemination of legislative sources in the field of tax benefits.

Having made this introduction, we will now address the tax benefits which, in general, exist in the Portuguese tax system. We will, however, not address herein the tax benefits applicable to the Madeira and the Azores Tax Free Zones. That will be done on our next article:


The very first note must be addressed to the possibility, which certain investors actually have, of negotiating with the Portuguese Government the level of the tax benefits awarded to particularly important projects.

Such possibility exists whenever a given project, requiring the investment of at least Escudos 5 billion (approximately USD 28 million), is of special interest to the Portuguese economy and contributes to the strengthening of the Countryïs productive sector. For projects below Escudos 5 billion, there is still a chance of negotiating potential tax benefits provided such projects either (i) allow the reconstruction or the improvement of companies which are located in certain less developed areas of the Country or (ii) allow the internationalization of Portuguese companies.

Any negotiated tax benefits are granted to the investor under the form of an Agreement executed between the investor and the Portuguese Government, which Agreement also established the targets and penalties for non-compliance imposed on the project and the investor.


The EBF established a great number of legal benefits, including but not limited to the following:

(a) Income earned by Pension Funds and similar types of funds is exempted from corporate income tax,

(b) Dividends distributed by listed companies have a 50% deduction for the purposes of income tax, the same applying to dividends distributed by privatised companies (limited to the five years following the privatisation),

(c) Investments made by individuals in the acquisition of shares in State owned companies, following a public sale of such shares, may also be deducted from such individualïs tax returns, up to a certain limit in Escudos (which limit varies each year),

(d) Share option schemes between a company and its employees is also subject to certain benefits (tax deductibility of capital losses for the company and deduction from employeeïs tax returns of the amount used to exercise such options (up to a limit)),

(e) Capital gains derived from the sale of securities and bonds is tax exempted provided they are made by non-resident companies without a permanent establishment in Portugal (to which the respective income may be imputable),

(f) Capital gains derived from the sale of shares is tax exempted provided they are made by individuals and the shares have been held for periods longer than 12 months,

(g) Interest due in connection with loans granted by non-residents to the Portuguese Government, one of its political sub-divisions, to a local municipality or to certain Portuguese companies may be tax exempted, provided an authorisation is granted by the Ministry of Finances,

(h) Interest due in connection with loans granted by non-resident financial institutions to Portuguese credit institutions is also exempted from corporate tax,

(i) Income earned by handicapped individuals is also subject to a number of tax benefits,

(j) Intellectual property income is subject to a 50% reduction, if earned by Portuguese authors,

(k) International scientific organisations which wish to establish an activity in Portugal may also be exempted from corporate income tax, provided an authorisation is granted by the Ministry of Finances,

(l) The rates of tax applicable under the Real Estate Code may be reduced in certain occasions: Tourist utility immovables, immovables purchased by real estate investment funds.

The above list is an example of the most common tax benefits existing under the EBF. Other benefits exist which have not been referred to herein, either because of their complex formulas or of their more reduced interest.

It should be noted that the EBF also regulates the entire matter of taxing investment funds, where certain benefits exit, all of which are directed at the avoidance of economic double taxation (income earned by the Fund vs. income earned by the participant).


The CIRC includes certain benefits, namely the deferral of tax on the reinvestment of capital gains derived from the sale of assets.

Furthermore, there is a special provision in the CIRC, which deals with the avoidance of economic double taxation. This provision is important because, in respect hereof, the avoidance of economic double taxation in Portugal is far from complete as the general rule only allows a limited credit.

Recent legislation has been adopted which deals with the incorporation of sports companies. Before the introduction of such sports companies, the sports activities were exercised through clubs and associations. The legislation allowing the incorporation of sports companies also provided for certain tax benefits, the most relevant of which was the possibility of amortising the costs incurred in connection with the "purchase" of football players.

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.