The Corporate Income Tax (CIT) rates applicable to the taxable income of companies headquartered in Mainland Portugal are reduced: It decreases from 21% to 20% for entities with their headquarters or effective management in Portuguese territory, regardless of whether they primarily engage in commercial, industrial, or agricultural activities.

For taxpayers who directly and primarily carry out an economic activity of an agricultural, commercial, or industrial nature and qualify as SMEs or Small Mid Cap enterprises, the CIT rate applicable to the first €50,000 of taxable income decreases from 17% to 16%, with the 20% rate applying to the excess.

Throughout 2024, invoices for various goods/services requested by each taxpayer using their tax identification number (NIF) have been or should have been reported to the Tax Authority (AT) based on the CAE (Economic Activity Code) of the entity that issued the invoice. However, their registration is not always properly categorized under the correct deduction item.

According to the legislation in force, these expenses can only be automatically considered deductible in the IRS if they are previously validated in the E-Fatura system, with a deadline of February 25, 2025. Therefore, you should validate and/or register these invoices through the AT portal under “Citizens – E-Fatura: Invoices/Consumer/Complement Invoice Information.” You must check whether the invoices are recorded under the correct activity and categorize those that are not assigned to any category (Other).

If you have an open self-employment activity, expenses related to the activity or those for which VAT has been deducted must be identified as belonging to the activity (selecting “Yes”), and you must also indicate whether they are fully or partially related to the activity. Expenses outside the scope of professional activity should be identified as not belonging to the activity (selecting “No”).

Note: It is possible to manually enter expenses related to professional activity, healthcare, training and education, real estate, and nursing home costs in the IRS Model 3 form to be submitted by taxpayers. This disregards the information communicated through the E-Fatura portal, without prejudice to the obligation to provide proof of these expenses.

Taxpayers are required to file and keep in good order all books, records, and supporting documents for a period of 10 years, unless a different period is specified by a special provision. This includes documentation related to the analysis, programming, and execution of computerized processes, as well as backup copies of data supporting invoicing and accounting software.

Whenever taxpayers exercise a right with a time frame exceeding the previously mentioned period, the obligation to file and preserve all books, records, and supporting documents shall remain in effect until the expiration of the statute of limitations for the assessment of the corresponding taxes.

Invoices and other tax-relevant documents must be kept in a sequential and uninterrupted manner, adhering to the filing plan and ensuring the individualization of each fiscal year, encompassing all documents in their entirety. These documents, if in paper format, may be digitized and archived electronically. The destruction of original documents issued or received in paper form is only permitted after the necessary controls have been ensured. For invoices related to the acquisition of goods or services, this can only occur after the right to VAT deduction has been exercised, if applicable, and the respective accounting record has been made.

All taxpayers, whether individuals or legal entities, with headquarters, a permanent establishment, or a tax residence in Portugal, who maintain organized accounting and are required to prepare an inventory, must report their inventories to the Tax Authority (AT). Taxpayers subject to the simplified taxation regime for personal income tax (IRS) or corporate income tax (IRC) in the year to which the inventory refers (2024) are exempt from this obligation. It is important to note that Non-Profit Sector Entities (ESNL) are also required to report their inventory, provided they meet the aforementioned requirements.