Portugal Extends Its SIFIDE II R&D Tax Credit Through 2026 and Shuts the Fund-Based Route

Portugal's most heavily used business tax break has been given a stay of execution — and a clean-up. On Tuesday, 18 August 2026, President António José Seguro promulgated a government decree that extends the SIFIDE II regime — the Sistema de Incentivos Fiscais em Investigação e Desenvolvimento Empresarial (System of Tax Incentives for Business Research and Development) — through the 2026 tax year, while closing the fund-based route that had turned a chunk of the scheme into a pure tax play.

For any company doing research and development in Portugal — from a two-founder startup to a multinational's local lab — SIFIDE is the single biggest lever in the tax code. The promulgation removes the near-term uncertainty over whether the direct regime would survive, and confirms the terms on which R&D spending in 2026 can be written down against corporate tax.

What SIFIDE II actually is

SIFIDE is a credit against IRC (Imposto sobre o Rendimento das Pessoas Coletivas, the corporate income tax) — a dedução à coleta, meaning it reduces the tax bill itself, not just taxable profit. It has two components:

• A base rate of 32.5% of a company's eligible R&D spending in the year.
• An incremental rate of 50% of the increase in that spending over the average of the previous two years, capped at €1.5 million.

Stacked together, the deduction can reach up to 82.5% of qualifying R&D expenditure. Crucially for young companies, any credit a firm cannot use because it did not owe enough tax can be carried forward for up to eight years — so a loss-making startup can bank the benefit and cash it in once it turns a profit.

Eligible costs are wide: staff working directly on R&D (personnel holding a PhD count at 120% of their cost), operating expenses, equipment, contracted research bought from recognised institutions, patent registration and maintenance, and R&D audits. The Agência Nacional de Inovação (ANI, the National Innovation Agency) certifies which projects and entities qualify, and the Autoridade Tributária (AT, the Tax Authority) applies the credit.

What changed on 18 August

The decree does two things. First, it keeps the general regime running through the 2026 tax period, giving companies certainty over R&D budgeted for this year. Second, it ends "SIFIDE indireto" — the indirect route under which firms claimed the benefit by placing money in investment funds that were, in turn, supposed to finance R&D companies.

That indirect channel had become the reform's target. According to reporting by ECO and public broadcaster RTP, something on the order of €2 billion (RTP put it as high as €2.5 billion) had accumulated in SIFIDE funds without ever being deployed into actual research — money parked to harvest the tax credit rather than to fund innovation. Under the new rules, fresh allocations to such funds no longer qualify, though companies that already built up a stock of fund investments keep transitional access. The window for funds to actually channel their capital into eligible R&D firms is stretched from three years to five, and new annual reporting and audited declarations to ANI are layered on to track where the money goes.

The politics and the price tag

The legal groundwork was laid by Lei n.º 13/2026, of 16 April — a law in which parliament authorised the government to legislate by decree on the investment tax code. That authorisation was carried by the PSD, CDS-PP and Iniciativa Liberal, with the PCP against and several parties, including the PS and Chega, abstaining. Tuesday's promulgation is the final step turning that authorisation into force.

The stakes are fiscal as well as political. SIFIDE is the costliest single corporate tax benefit in Portugal, with a fiscal cost reported at around €900 million in 2024 — roughly half of it attributable to the indirect, fund-based route the government has now shut. The Secretary of State for Tax Affairs, Cláudia Reis Duarte, framed the move as a "responsible transition step" and announced a working group to evaluate the regime in depth. Estimates of the savings vary and should be read with care: officials have pointed to a positive fiscal impact of about €124 million in 2026, while broader framings put the eventual saving above €600 million. The scheme has also drawn scrutiny for abuse — the Tax Authority is reported to have inspected roughly 600 beneficiary companies over three years, identifying corrections of nearly €20 million.

What this means for founders and companies

• If you do genuine, in-house R&D, the benefit is intact. The base 32.5% rate, the incremental band and the eight-year carry-forward all continue for 2026. The reform bites on the fund workaround, not on companies that actually run research.
• Startups can still use it before they are profitable. The carry-forward means the credit is not wasted just because you have no tax to pay yet — a real advantage for early-stage founders. It pairs naturally with the StartUP Visa route for foreign founders building a company here.
• Get ANI certification right. The credit stands or falls on ANI recognising your project as eligible R&D; the tightened reporting rules make clean documentation more important, not less.
• Tax-driven fund investments lose their shine. Anyone who was placing money in SIFIDE funds primarily for the deduction should reassess — new allocations no longer earn the benefit.
• It is part of a wider innovation-finance picture. SIFIDE sits alongside grant programmes and the personal-tax side of the same agenda; founders weighing where to base their research should read it with our guide to the IFICI tax regime and against the backdrop of public research funding topping €1 billion for the first time.

The direction of travel is clear enough: Portugal wants to keep subsidising real research generously — up to 82.5% of the spend is not a modest incentive — while ending the arbitrage that let capital sit in funds collecting a tax break it was never meant to earn. The promised evaluation by the government's working group will decide what SIFIDE looks like from 2027 onward. For companies planning their 2026 research budgets, though, the message is that the incentive is still there, and still one of the most generous in Europe. Those weighing the full tax cost of operating here can start with our overview of how Portugal's tax system fits together. On the state programme now trying to close that gap, our report on the first Tech Foundry Portugal cohort, which filled 31 of the 40 places the state created for teams trying to get a validated laboratory result out of the laboratory sets the latest reference.