SIFIDE II: what Portugal’s R&D tax credit gives back, and how long it lasts

A benefit worth up to 82.5%, and a deadline that is running out

SIFIDE II is the largest innovation tax break in Portugal. In 2023 it granted, on the Government’s own figures, more than 630 million euros of tax benefits⁶. What it does is easy to state: a company that spends money on research and development can deduct a percentage of that spending from its corporate tax charge.

The percentage is the part that is not easy, because there are two of them, and one depends on the company’s own history. And there is a detail almost no page mentions: the Investment Tax Code, in the wording currently in force, covers only tax periods up to 2025².

The two rates of article 38.º

Article 38.º(1) deducts from the corporate tax charge, up to its full amount, the value of research and development spending, “to the extent it was not the object of non-repayable State co-funding”, at a double percentage¹:

• Base rate: 32.5% of the spending incurred in the period.
• Incremental rate: 50% of the increase in that spending over the simple arithmetic average of the two previous financial years, capped at 1,500,000 EUR.

The two add up. That is why the National Innovation Agency, which administers the scheme, sums up the combined effect by saying the support “can mean recovering up to 82.5% of the R&D investment”⁵, which is exactly 32.5% plus 50%.

Note the role of the average. A company that has never spent on R&D has an average of zero, so all of its first year’s spending is an increase and earns both rates in full. A company that spends the same amount every year has no increase at all and earns only the 32.5%. The regime pays for additional effort, not steady effort, and that logic explains the design.

The 1,500,000 EUR limit applies to the incremental credit itself. A company with an increase of 4,000,000 EUR would produce 2,000,000 EUR of incremental credit and receives 1,500,000 EUR: the difference cannot be recovered through this route.

The uplift for young SMEs is an alternative, not an addition

Paragraph 2 of the same article grants a 15% uplift to the base rate to micro, small and medium enterprises that have not yet completed two financial years, which practice reads as a rate of 47.5%¹. The condition almost every summary drops sits in the same sentence: the uplift is for those who “did not benefit from the incremental rate set in subparagraph (b) of the preceding paragraph”.

In other words, 47.5% and 50% never add up, and a company in that position has to pick one route. In practice the normal route almost always wins, because a newly created company has no R&D spending in the previous financial years: the increase is the whole of its spending, and 32.5% plus 50% gives 82.5%, well above 47.5%. The uplift only pays off in the opposite case, where the period’s spending sits at the level of the previous average and there is no increase to claim.

The ceiling is the corporate tax charge, and the derrama sits outside it

This is the part that most surprises anyone doing the arithmetic for the first time. The deduction is made “against the corporate tax charge determined under article 90.º(1)(a) of the corporate tax code, up to its full amount”¹. Two consequences follow:

1. The derrama is not reduced. The municipal surcharge, set by each municipality up to 1.5% of taxable profit, and the state surcharge, due above 1,500,000 EUR of profit, sit outside the ceiling and are paid in full. A company with a SIFIDE credit larger than its tax charge still has tax to pay.
2. There is no refund. The deduction takes the charge to zero and stops there. SIFIDE is a credit against tax, not a grant.

The carry-forward is twelve periods, not eight

The part that does not fit for insufficient tax charge is not lost. Article 38.º(4), as amended by Law 21/2023 with effect from 1 January 2024, allows it to be deducted “up to the twelfth following period”¹.

Twelve periods is a long time, and that is deliberate: a company investing in R&D usually spends heavily before it turns a profit, and a short deadline would make the benefit useless precisely for those investing most. Deadlines of five or eight years are still quoted, and they belong to other tax benefits. It is worth checking, because the difference decides whether the credit is used or lapses.

Which costs count

The substance of the regime is not the arithmetic, it is deciding what counts as eligible spending. Article 37.º(1) lists ten categories³, among them:

• acquisitions of newly created or acquired tangible fixed assets, other than buildings and land, in proportion to their use for R&D;
• spending on staff qualified at least at level 4 of the National Qualifications Framework and directly engaged in R&D tasks;
• operating costs, up to a maximum of 55% of those staff costs;
• contracting R&D activities out to public bodies, bodies of recognised public interest, or bodies whose R&D standing is recognised by the National Innovation Agency;
• registering and maintaining patents, and R&D audits.

Two uplifts are worth noting: spending on staff at level 8 of the National Qualifications Framework counts at 120%, and spending on product eco-design projects also counts at 120%³.

Conditions, the application and the Agency’s declaration

Article 39.º imposes two cumulative conditions: taxable profit must not be determined by indirect methods, and the company must not owe the State or Social Security anything, unless payment is duly secured.

The application goes to the National Innovation Agency by the end of the fifth month of the year following the financial year, and article 40.º(3) is explicit that “applications relating to years before that tax period are not accepted”⁴. The agency issues a declaration certifying that the activities genuinely amount to research or development, including the calculation of the increase over the two-year average, and that declaration forms part of the company’s tax documentation file. The company may also be subject to a technological audit.

Finally, article 42.º closes the door on stacking: the deduction “is not cumulative, in respect of the same spending, with tax benefits of the same nature, including contractual tax benefits”⁸. In practice, every euro of spending has to be allocated either to SIFIDE or to the RFAI investment relief, never to both.

How long it lasts: what the Code says and what has been authorised

Article 35.º is terse and decisive: “SIFIDE II, applying in the tax periods from 2014 to 2025, works under the terms of the following articles”². Article 38.º(1) repeats the limit by referring to spending incurred “in tax periods beginning between 1 January 2014 and 31 December 2025”¹.

On 16 April 2026, Law 13/2026 was published, authorising the Government to amend the Investment Tax Code with a view to revising and extending SIFIDE II⁷. Among the authorisation’s guidelines are extending the regime to the 2026 tax period, widening the scope of R&D investment to productive-innovation spending flowing from earlier R&D activities, aggregate calculation under the group taxation regime, and extending execution deadlines from three to five years.

There is also a structural repeal: the indirect route for applying SIFIDE II through investment funds ends, so subscribing fund units can no longer be treated as executing the investment⁷. The Government explained the decision with its own figures: more than a billion euros placed in funds supposedly to invest in R&D sat idle, and there is a transitional period of up to five years for investments already placed to be carried out⁶.

The practical point is this: a legislative authorisation is not the amendment. The authorisation runs for 180 days and it is the Government’s decree-law that changes the Code. Until that decree-law is published, the last tax period covered remains 2025. Anyone budgeting R&D for the 2026 financial year should check where the law stands before counting on the benefit.

A worked example

An SME spent 200,000 EUR on R&D this period, after 120,000 EUR the year before and 80,000 EUR the year before that. Taxable profit is 300,000 EUR.

The credit is 115,000 EUR, or 57.5% of what the company spent. But the year’s tax charge is 55,000 EUR, so only half is used straight away: corporate tax goes to zero and the other 60,000 EUR moves into the following periods. That is the normal position for a company investing in R&D, and it is why the carry-forward period matters as much as the rate.

You can run your own period through the SIFIDE calculator, which shows the two rates separately, the tax charge that caps the deduction and how much carries forward.