System of tax incentives in research and business development: An analysis of the recent case Law of Portuguese Tax Arbitration

Abstract

The main objective of this work is to analyse the understanding of the tax authority regarding the application of the tax benefit in support of research and development in professional societies and whether this understanding complies with the legal provision. Additionally, to understand the sense of the recent decisions of the arbitral court in this matter. For this purpose, the study applies the legal research methodology. Several legal sources have been analysed, such as the personal income tax law, the corporate income tax law, the investment tax law, administrative doctrine and the jurisprudence of the Portuguese arbitration court. The study shows that the tax authority has been assuming an understanding that does not fit in the legislation currently in force and administrative doctrine concerning tax benefits for the research and development of professional companies. The public authority limits the tax deduction to these entities, and this limitation would not apply in the case of commercial, industrial or service companies. Moreover, the Portuguese arbitral court recently confirmed this discriminatory understanding and agreed with this view. Thus, case law contributes significantly to the clarification of the application of the law.