State budget 2024: Measures with the greatest impact for companies

The State Budget for 2024 has been approved and brings with it a series of measures that promise to have a significant impact on the Portuguese business fabric. The State Budget for 2024 introduced, however, several significant tax changes affecting companies in Portugal. These changes aim to support economic growth, encourage investment and increase competitiveness in the global market.

This article aims to explore some of the most relevant initiatives and changes that may influence the way companies operate and develop.

1 – Strengthening of Tax Incentives for Innovation: The national executive has increased tax incentives for companies that invest in research and development. This initiative aims to promote innovation and increase the competitiveness of companies at international level.

As far as tax policy is concerned, the government is also putting forward the proposal to revise existing tax incentive schemes for investment. The purpose of this review is to simplify procedures and reduce red tape which is often an obstacle to business investment. It is anticipated that, with the implementation of these changes, a greater number of companies will enjoy benefits that boost their growth and strengthening in the market.

2 – Reinforcement in Support for Entrepreneurship and Innovation: The Government of Portugal recently announced significant measures to boost entrepreneurship in the country, with a particular focus on startups and small companies operating in the technological and digital sectors. This initiative aims to promote sustainable economic growth and stimulate the creation of highly qualified jobs.

Within the proposed measures, there is an increase in financial and technical support for young innovative companies. The objective is clear: to encourage the development of advanced technological solutions and to foster competitiveness on the international scene.

In addition, the Government is stepping up incentives for research and development (R&D). Startups and companies dedicated to technological innovation are the main focus of this strategy, which aims to create a robust innovation ecosystem. This environment conducive to innovation has the potential to attract not only national talent, but also foreign investment, putting Portugal on the map as a hub of innovation and technology.

These measures reflect the Government’s commitment to supporting entrepreneurship and innovation, key elements for Portugal’s economic future.

3 – Labour Flexibility: The new legislation introduced promotes greater flexibility in working models, covering distance work and adaptable schedules. This measure aims to adapt the labour market to the contemporary dynamics and needs of both companies and workers.

This State Budget reinforces vocational training programs, with the aim of reducing the gap between existing skills in the market and business requirements. This action is essential to ensure that Portuguese workers are equipped to meet the needs of an ever-changing market.

It also highlights the tax incentive for the appreciation of wages, now allowing wage increases regardless of collective labor regulation. For the year 2024, the minimum wage increase established is 5%, encouraging the retention of talent and increased purchasing power of workers.

In addition, the salary costs resulting from hiring employees with a master’s or doctorate degree are now recognized as significant investments under the Tax Investment Support Regime (RFAI). This change aims to promote the qualification of workers and innovation in the business fabric.

4 – Sustainability and Energy Transition: Sustainability and energy transition are fundamental pillars for responsible business development and aligned with carbon neutrality goals. Companies that commit to sustainable practices and investment in renewables not only contribute to a greener future, but also benefit from incentives that can result in significant long-term savings.

One of the most significant initiatives in this direction is to maintain the 20% increase in expenses and losses related to electricity and natural gas consumption, considered in the calculation of taxable profit for the years 2023 and 2024. This measure aims to mitigate the financial impact of energy costs for companies, a consideration of particular importance in the current uncertain economic scenario.

These encouraging policies are essential to encourage companies to actively participate in the energy transition, promoting a sustainable and economically viable business environment. Through these actions, companies not only advance towards sustainability, but also position themselves competitively in the market, preparing for the challenges and opportunities of the future.

5 – Tax Reform: The ongoing tax reform represents a significant milestone in simplifying the tax system for companies in Portugal. With the aim of reducing bureaucracy and increasing the transparency of tax obligations, this reform emerges as a strategy to revitalize the business environment and capture greater international investment.

One of the most notable initiatives is to reduce the tax burden for small and medium-sized enterprises (SMEs), with a special focus on those that commit to digitalization processes and sustainable practices. This incentive is a clear sign of support for the modernization and competitiveness of SMEs on the global stage, underlining the growing importance of technology and sustainability in the contemporary economy.

Regarding the Corporate Income Tax (IRC), the introduction of a new tax deduction applicable to goodwill – positive commercial value – acquired in mergers or acquisitions of companies is highlighted. This deduction will be distributed fairly over the first 15 years following initial recognition. This measure is designed to foster the activity of mergers and acquisitions, potentially leading to the consolidation of markets and the formation of robust and well-structured business conglomerates.

In short, the tax reform proposes to create a more favorable environment for companies operating in Portugal, encouraging innovation, efficiency and sustainable development, fundamental pillars for success in the global market.

These are just some of the measures and tax changes that stand out and that the State Budget of 2024 brought to companies in Portugal. It is important that companies remain informed and prepared to take advantage of the opportunities and face the challenges that these changes can bring, thus achieving maximize the benefits and minimize the tax impacts on their operations.

Adaptation and anticipation will be keys to business success.

Find out how ValuingTools can help you drive your business growth against the measures and changes in the 2024 State Budget. Talk to our team of expert professionals today and prepare for a successful year.