What's the corporate tax rate to pay on my business income with Rauva?

Corporate Income Tax (IRC) applies to companies operating in Portugal, with non-resident companies taxed on their Portuguese income. The calculation formula for IRC is complex and depends on several factors.

The tax is based on the profits of the previous year but must consider:

• RC rate: The standard IRC rate is 21% and reduced to 17% for the first 50.000€ of taxable income for SMEs.
• SMEs and companies headquartered in Madeira and the Azores - IRC rate is 14,7% in Madeira and the Azores and reduced to 11,9% for the first 50.000€ of taxable income for SMEs.
• Profitable taxable income: Calculated by deducting losses and eligible tax benefits from taxable profits.
• Additional factors like the Municipal Surtax (a local profit-based tax) and Autonomous Taxation, which covers specific costs like company vehicles, also influence the final tax amount.
• If the taxable profit exceeds 1.5€ million, an additional tax called "Derrama Estadual" is applicable, ranging from 3% to 9% in mainland Portugal, and from 2,1% to 6,3% in Madeira and the Azores.

It's also important to understand the different Corporate Tax Regimes

General Regime of IRC

The General Regime of IRC in Portugal applies to companies that are ineligible for the Simplified or Fiscal Transparency Regimes. Companies under this regime must maintain detailed accounting records, including a chart of accounts, income statements and balance sheets. While more complex, this regime offers flexibility in expense deductions and taxable profit calculations, potentially reducing tax liabilities compared to the Simplified Regime.

Simplified Regime of IRC

The Simplified Regime of IRC suits small businesses and sole proprietors with smaller-scale activities. It replaces detailed accounting with a coefficient-based method to calculate taxable profit, varying by sector. While advantageous for low-income companies, it imposes restrictions on expense deductions, potentially disadvantaging those with high expenses. After applying the coefficient, the IRC rates of 17% or 21% are applied as explained in the previous point.

IRC Fiscal Transparency Regime

The Fiscal Transparency Regime of IRC applies to partnerships like general, limited, and limited liability companies, obligatorily to companies that engage in an activity specifically listed in the list of activities referred to in Article 151 of the IRS Code, provided that:

a) All individual shareholders are professionals in that activity, or

b) The number of shareholders does not exceed five, none of them is a public legal entity, and at least 75% of the share capital is held by professionals who carry out the mentioned activities.

Instead of taxing the company directly, profits and losses are distributed to partners or shareholders based on their ownership share. They report these in their personal income tax returns (IRS), preventing double taxation.

Choosing the right regime depends on factors like turnover, expenses, and corporate structure. This criterion is particularly relevant in cases where the companies are single-member Limited Liability Companies (Unipessoal, LDA.), as if such a company engages in an activity listed in Article 151 of the IRS Code, it will be necessarily included in the simplified regime and cannot opt for either the simplified regime or the general regime.