[ESTABLISHING A BUSINESS ENTITY IN PORTUGAL] 385
territory, such as banking and insurance activities. Foreign companies are also subject to taxes and other tariffs, including Corporate Income Tax (“IRC”), Value Added Tax (“IVA”), Vehicle Tax, Property Tax (“IMI”), among others. Companies must also respect deadlines regarding social security payments, as well as payments payable to its employees. It should be noted that the Treaty of the European Union establishes the free movement of capital, resulting in an overall framework of foreign investment within the EU, under the limits set by the subsidiary principle which is without prejudice of the legislation of certain Member States. All restrictions on capital movements and payments between EU Member States are prohibited. Member States may, however, take justified measures with the aim of preventing breaches of their own legislation, including taxation and supervision of financial institutions. EU countries may also provide procedures for the declaration of capital movements for administrative or statistical purposes and take other justified actions on the grounds of public policy or public security. However, these measures and procedures should not constitute a means of arbitrary discrimination or a simulated restriction on the free
• 30% of profit before depreciation, amortization, net financing costs and taxes. Net financing costs that are not deductible under the above terms may still be taken into account in determining the taxable profit of one or more of the five subsequent tax periods, after the net financing costs of that same period, subject to the aforementioned limitations. Whenever the amount of financing costs deducted is less than 30 % of the result before depreciation, amortization, net financing costs and taxes, the unused part of this limit is added to the maximum amount deductible, under the terms of the second limitation mentioned above, until the 5th tax period afterwards. For the aforementioned purposes, the first to be considered are the non-deductible net financing costs and the unused portion of the aforementioned limit that have been calculated earlier. V.3. Residency and Material Visa Restrictions Currently, Portuguese Law opens the possibility for foreign investors who invest either by themselves or through a company which they own, to apply for a Portuguese residence permit, if they reach a certain level of property investments, capital investments and/or job creation. The applicable legal regime was amended by Decree-Law no. 14/2021, of 12 February, which entered into force on 1 January 2022, and the current provisions of the Law are applicable to all applications for a residence permit for investment made after the aforementioned date of entry into force – without prejudice to the possibility of renewing residence permits or granting or renewing residence permits for family
movement of capital and payments. V.2. Deductibility of Financing Costs
Portuguese Law allows the deductibility of financing costs. In fact, net financing costs contribute to determining taxable profit up to the higher of the following limits:
EUR 1.000.000; or
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ILN Corporate Group – Establishing a Business Entity Series
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