The deduction for retained and reinvested profits constitutes a regime that allows the deduction for retained and reinvested profits. It translates into an SME incentive measure that allows the deduction of the retained earnings that are reinvested, in relevant investments, from the collection of the IRC.
The taxpayers of IRC residing in Portuguese territory can benefit from the DLRR, as well as non-resident taxpayers with a permanent establishment in this territory, who mainly carry out an activity of a commercial, industrial or agricultural nature.
IRC taxpayers who cumulatively fulfill the following conditions can benefit from this regime:
- Be micro, small and medium-sized companies;
- Have organized accounting;
- Your taxable profit is not determined by indirect methods;
- Have the tax and contributory situation regularized.
Relevant investments are considered to be property, plant and equipment acquired in new condition, with the exception of:
- Land, except in the case of use for mining concessions, natural mineral and spring waters, quarries, muds and sand in extractive industry projects;
- Construction, acquisition, repair and expansion of any buildings, except when used for productive or administrative activities;
- Light passenger or mixed vehicles, pleasure boats and tourism aircraft;
- Comfort or decoration items, except hotel equipment for tourism purposes;
- Assets related to activities under concession or public-private partnership agreements entered into with public sector entities.
Deduction from collection, in the tax periods beginning on or after January 1, 2014, up to 10% of retained earnings that are reinvested in investments considered relevant and whose investment is made within the 4 years following the constitution of the reserve. The deduction made in the period can be up to 25% of the period’s collection.
Micro and small companies can enjoy a 50% deduction from the IRC collection. The maximum amount of retained and reinvested profits, in each tax period, is € 12,000,000, per taxpayer.