Legal alert no. 7
On 3 November 2016, it was published, in the Portuguese Official Gazette, Decree-Law n. 66/2016, which establishes an optional incentive scheme to the revaluation of certain assets related to the performance of business activities.
The present Decree- Law results from the legislative authorization granted by the State Budget Law for 2016 (Law n. 7-A/2016, of 30 March 2016), article 141 - “Legislative Authorization related to the revaluation of the tangible fixed asset and investment properties”, being established in subparagraph c) of the referred article that the Government is authorized “to enshrine that the subsequent revaluation reserve is subject to a special autonomous taxation of 14%, to be paid in equal parts in 2016, 2017 and 2018”.
Therefore, the referred Decree-Law creates a tax incentive to the revaluation of the tangible fixed asset related to the performance of commercial, industrial and agricultural activities, as well as, the investment properties and patrimonial elements of a tangible nature related to concession contracts, with encouragement for their revaluation in accordance with the applicable accounting standards, such as the strengthening of the equity capital.
For this purpose, the revaluation reserve is subject to a special autonomous taxation and, in return, it is allowed to the taxable persons covered by this scheme, the tax deduction of the depreciation’s increments of the revaluated asset.
In relation to its scope of application, the present scheme is applicable to the taxable persons of the Corporate Income Tax (IRC), as well as to the taxable persons of the Personal Income Tax (IRS) with organized accounting.
Under this framework, the tangible fixed asset with a useful life equal to or greater than 5 years may be subject to a revaluation, being the subsequent revaluation reverse subject to a special autonomous taxation of 14%, without the possibility to obtain any deduction, to be paid in equal parts in 2016, 2017 and 2018.
The application of the revaluation meets the criteria according to which the net value of each revaluated element must not exceed the element’ s market value at the revaluation date.
The mentioned autonomous taxation is settle by the taxable person in an official form, to be approved by a decree of the member of the Government responsible for the finance area, which shall be revealed until 15 December 2016.
Note that the tax revaluation of the elements related to the companies’ activity performed under this new scheme is facultative, being reported, to the taxable persons whose taxable period is in line with the calendar year, 31 December 2015, and taking effects, in terms of depreciations, from 2018.
It should further be noted that in case of error in the reverse charge of the special autonomous taxation, the taxable person has two years, from the submission of the declaration, to contest the reverse charge act. The referred contest must be preceded by administrative complaint (“reclamação graciosa”) addressed to the director of the tax administration’s peripheral regional body.
The present Decree-Law enters into force in 4 November 2016, the day after its publication.