Founders of the world: UNITE!
(And move to Portugal for easy funding and tax benefits)
Happy coincidences are a staple in Portuguese history. From Brazil being the only part of the Americas on the Portuguese side of the world under the Treaty of Tordesillas in 1494 to the waitress who accidentally made carnations the symbol of the 1975 revolution, without forgetting the ever-present similarities between soccer matches in the Euros, happy coincidences have often made history in Portugal.
Another such happy coincidence is now poised to make economic history in the country with the matching of two tax benefit regimes that create the perfect environment to attract startup and scaleup companies to Portugal with a combination of available funding and Personal Income Tax benefits.
The SIFIDE II Program
First we have the SIFIDE II program, a tax benefit with its origins in 1997 and revamped over the years, with its current (and potentially final) form being approved in 2014. The SIFIDE (which stands for Sistema de Incentivos Fiscais em Investigação e Desenvolvimento Empresarial) is a R&D focused tax benefit that allowed for a direct deduction against Corporate Income Tax (CIT) levies of up to 82.5% of the R&D costs incurred by Portuguese companies (currently 32.5%).
The 2014 configuration of the regime introduced the possibility of accessing the tax benefit through the investment in Portuguese based Private Equity and Venture Capital investment funds, whose investment policy is geared towards equity and quasi-equity investments in Portuguese based R&D companies.
Besides the requirement of the funds’ certification with ANI (Agência Nacional de Inovação) there are holding requirements for investors (minimum of five years) and capital deployment for the funds – minimum 80% of AUM to be invested in the first five years after each fundraising round.
This possibility triggered enormous demand by Portuguese companies who now had the best of both worlds: an 82.5% tax rebate paired with a high-growth potential investment. There are currently 68 SIFIDE eligible funds with an estimated EUR 2.5 billion of invested capital – a significant portion of which is available for deployment, due to the small universe of Portuguese based startup and scaleup companies.
This presents a great opportunity for foreign companies who are looking for funding for their R&D investments and already have a marketable product and a growing commercial operation.
Enter NHR 2.0. (TISRI)
The NHR 2.0 – officially called IFICI in Portuguese terms, TISRI in English, and NHR 2.0 for ease of reference by everyone else – is the Portuguese government’s answer to the repeal of the original Non-Habitual Resident regime.
This new regime originally entered into force on January 1st 2024 – but its regulation was only published late last year – and offers greater Personal Income Tax benefits than the previous NHR. Specifically, the NHR 2.0 regime provides for a full tax exemption on all foreign sourced income, with special relevance to capital gains – which in practice weren’t covered in the previous regime.
What this means for founders of foreign companies who are envisaging an IPO in the short to medium run is the possibility of a full capital gains tax exemption on the exit – all while still enjoying the sunny lifestyle of Portugal!
All that is needed is that they move to Portugal and establish a Portuguese subsidiary that qualifies as a tech startup – one of the criteria for qualification being a round of financing by a Portuguese Venture Capital or Private Equity investment fund. Sounds familiar?
As you must have figured by now, the conjunction of SIFIDE capital available to deploy and the potential for accessing the NHR 2.0 regime with the implementation of a Portuguese based tech startup is a powerful combination that can offer foreign resident founders the ultimate way for tax efficiency.
With SIFIDE their companies can establish a subsidiary that can access easy funding, a great job market where graduates of top-notch universities are in abundance, in a country with a very accessible visa regime and considered one of the best places to live in the world.
With NHR 2.0, founders and their employees can access a favorable tax regime with taxes on employment and freelance income being capped at 20% and a full exemption on income derived from foreign investments.
The two regimes were never structured or even meant by the Portuguese legislator to complement each other – but in typical Portuguese fashion, we’re now presented with one of those happy coincidences that may positively affect the country’s history, attracting know-how, creating employment and eventually positioning Portugal as a startup and scaleup hub for companies all over the world!
If you’d like to know more about this opportunity, please reach out for an introductory meeting. Fresh Portugal has an experienced team that can help with every step of the way – from guiding you through the visa process, to establishing introductions with SIFIDE funds, with everything you need for tax and corporate planning purposes in between.
