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10 October 2024

Portugal Prime Minister Presents New 'Accelerating The Economy' Programme

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Portugal's Prime Minister Luís Montenegro announced, on 4 July, that his government had approved 60 measures to "accelerate economic growth", including a proposal to reduce the standard rate...
Portugal Tax

Portugal's Prime Minister Luís Montenegro announced, on 4 July, that his government had approved 60 measures to "accelerate economic growth", including a proposal to reduce the standard rate of corporate income tax by two percentage points a year from the current 21% to reach 15% by 2027.

Montenegro leads the centre-right Democratic Alliance (AD) coalition minority government, which won the March elections by a slim margin over the outgoing Socialist Party (PS). It holds just 80 seats in the 230-seat legislature.

"Our aim is to make life easier for companies so they can generate more wealth and, accordingly, pay better wages," said Montenegro when presenting the programme 'Accelerating the Economy', following approval by the Council of Ministers.

The government, he said, wanted "companies with greater scale, more capitalised, prepared to invest and get return on their investments".

To this end, the current 17% corporate income tax rate for small and medium-sized enterprises (SMEs), which applies to companies with profits up to €50,000 per year, will also be reduced to 12.5% by 2027.

At the same time the government pledged to transpose the EU Minimum Tax Directive, which introduces a global minimum effective rate of corporate taxation at an agreed minimum rate of 15% for multinational enterprise (MNEs) and large-scale domestic groups in the EU. The European Commission had set a deadline of 31 December 2023 by which member states were to have transposed this Directive into their national laws.

Montenegro said his government's programme was also committed to innovation and sustainability. It is about "reinforcing all the mechanisms to enhance human capital and all the technology instruments so that research capabilities and scientific knowledge have a practical representation in companies' lives," he said, and about realising "the social and environmental goals, which we want to be beacons for the entire corporate fabric."

The fourth vector of the economic programme was "investing in areas of specialisation where we are more competitive and have more growth potential", he said. He cited tourism, where diversification and qualification "can remove seasonality and contribute to attracting more visitors as well as making its relative importance to the economy more sustainable."

In this area, the government has already begun the parliamentary process of dismantling many of the restrictions that were imposed by its predecessor on the regulation of Alojamento Local (AL) licences governing short-term rentals. These measures formed part of a wider programme called 'Mais Habitação', aimed at easing the housing crisis.

In May, the new government abolished the special contribution to local accommodation (CEAL), a 15% tax based on factors such as the economic coefficient of local accommodation and urban pressure, which was due to apply from 25 June.

It also revoked the 'coeficiente de vetustez' (coefficient of agedness), which was to assess properties for the purposes of the IMI annual municipal property tax based on the year of their construction or last major renovation.

In addition to these changes, the new government has announced the end of the ban on issuing new AL licences, the end of the rule that prohibited the transmission of AL licences when the ownership of properties change and has given local authorities autonomy to manage the Al licensing system.

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