SIFIDE: What Is This Tax Incentive and Which Expenses Are Eligible?

SIFIDE is a Portuguese tax incentive for companies carrying out Research and Development activities in Portugal. Through this mechanism, certain R&D expenses may generate a Corporate Income Tax benefit, reducing the amount of tax payable and encouraging companies to invest in the development of new knowledge, products, services or processes.

Eligibility does not depend solely on the amount invested. The company must demonstrate that genuine R&D activity took place, identify the associated expenses and document the scientific or technological component of the project.

For this reason, a SIFIDE application should be prepared around the projects actually carried out by the company rather than being based only on accounting records.

This article explains how SIFIDE works, which companies may benefit, which expenses may be considered eligible and how to prepare the information required for submission.

What is SIFIDE?

SIFIDE stands for Sistema de Incentivos Fiscais à Investigação e Desenvolvimento Empresarial, Portugal’s Tax Incentive System for Business Research and Development. It is designed to encourage business investment in innovation through the tax system.

In practical terms, the mechanism allows certain expenditure related to Research and Development to be taken into account for the purposes of a tax deduction.

Its objective is to strengthen Research and Development activity within the business sector and, in doing so, increase the competitiveness of Portuguese companies.

Official information on SIFIDE – Portugal’s Tax Incentive System for Business R&D is published by ANI.

In August 2026, Decree-Law No. 170/2026 extended the regime to the 2026 tax period and introduced changes to the framework, including changes relating to indirect investment through investment funds.

Which companies can benefit from this tax incentive?

Portuguese Corporate Income Tax taxpayers resident in Portugal whose main activity is agricultural, industrial, commercial or service-based may qualify, as may non-resident taxpayers with a permanent establishment in Portuguese territory, provided that the applicable conditions are met.

These conditions include the method used to determine taxable profit and having a regularised position with the Portuguese State and Social Security.

The fact that a company develops technology or innovation does not automatically mean that all of its activity qualifies as business Research and Development.

Startups and recently incorporated companies may also carry out eligible projects. In these cases, it is particularly important to distinguish genuine technological development from normal activities associated with creating, commercialising or implementing the business.

If the project is still at an early stage, the company incorporation process in Portugal should be considered separately from the assessment of R&D eligibility.

For newly incorporated businesses, it is also useful to structure accounting, reporting and project documentation from the outset. See our guide to the first 90 days of a company.

Which Research and Development activities may qualify?

The assessment begins by determining whether the project involves genuine scientific or technological uncertainty and whether it seeks to generate new knowledge or a substantial improvement rather than simply applying solutions that are already known and mastered by the company.

ANI essentially distinguishes between research activities and development activities.

Research activities relate to work aimed at acquiring new scientific or technical knowledge. Development activities involve applying that knowledge in order to discover or substantially improve raw materials, new products, services or processes.

Research and Development activities must therefore go beyond routine adaptations, commercial updates or changes that do not contain a genuine element of novelty.

A project may involve the development of new products, substantial improvements to production processes, applied research or the resolution of technical problems for which no directly available solution exists.

Which expenses are eligible under SIFIDE?

Eligible expenses depend on the nature of the R&D activities carried out and on the effective relationship between each cost and the project submitted.

ANI identifies the following among the categories that may potentially qualify:

• personnel expenses relating to employees directly involved in R&D tasks;
• certain operating expenses associated with those employees;
• acquisition of tangible fixed assets used in R&D activities;
• costs associated with the registration, acquisition and maintenance of patents;
• expenses relating to Research and Development audits;
• demonstration activities;
• certain expenses associated with outsourced R&D activities.

Outsourced activities may be considered where they are carried out by entities that meet the applicable conditions, including public entities or organisations recognised as suitable for performing R&D activities.

R&D carried out with public entities must be properly linked to the work identified in the project.

It is therefore not enough to have an invoice associated with technology or innovation. The company must demonstrate the connection between the expense, the R&D activity and the project’s technical objectives.

How are eco-design projects treated?

The regime provides a specific framework for certain R&D activities associated with product eco-design projects.

Product eco-design seeks to integrate environmental criteria into development, for example by reducing resource consumption, improving efficiency, reducing waste or changing materials and processes.

An environmental component does not, by itself, make a project eligible. It is still necessary to demonstrate the existence of Research and Development activities and their technical content.

How is the SIFIDE tax benefit calculated?

The calculation combines a base component with an incremental component.

The information currently published by ANI indicates a base rate of 32.5% on eligible R&D expenditure incurred during the relevant period.

The incremental component corresponds to 50% of the increase in expenditure compared with the average of the two previous financial years, subject to the applicable legal limit of €1.5 million.

For certain micro, small and medium-sized enterprises with fewer than two complete financial years and that have not benefited from the incremental rate, the regime provides for an increase in the base rate.

The incentive operates through a deduction from Corporate Income Tax due, up to the amount of the tax liability. In other words, it does not normally correspond to a direct payment to the company, but rather to a tax credit used when calculating the tax payable.

Where the tax liability is not sufficient to absorb the full benefit, the legislation provides for the possibility of carrying forward unused qualifying expenditure to subsequent periods within the applicable legal time limit.

The calculation should be documented and reconciled with the company’s accounting information. A structured management accounting system can make it easier to identify the actual costs of each project and distinguish normal operating activity from Research and Development.

How should a SIFIDE application be prepared?

A SIFIDE application requires more than a list of expenses. The company must describe its R&D projects, explain their objectives, demonstrate the technical novelty or uncertainty involved and connect the costs claimed to the activities that were actually carried out.

The application is submitted through the platform made available by the authority responsible for the scheme.

ANI, historically known as the National Innovation Agency and currently integrated into the new structure of the Agency for Research and Innovation, provides the platform, guidance and documentation required for the process.

The documentation normally required includes:

• identification and description of the company;
• detailed description of the R&D projects;
• schedule of expenses;
• declaration relating to the expenses signed by the Certified Accountant;
• IES annual accounting and tax information declaration;
• Modelo 22 Corporate Income Tax return;
• other technical or accounting documentation that may be requested.

Official information regarding application submission and required documentation should always be checked before filing.

The Portuguese Order of Certified Accountants also plays an important role in the accounting preparation process, but validation of the technological and scientific nature of the projects is the responsibility of the authority assessing the tax benefit.

What is the SIFIDE application deadline?

For companies whose tax period coincides with the calendar year, the information currently published by ANI indicates that the application must be submitted by the end of the fifth month of the year following the financial year to which the expenses relate.

Where the tax period does not coincide with the calendar year, the applicable rule should be assessed according to the closing date of that tax period.

Because the legislative framework was amended in 2026, the deadline applicable to each tax year should always be confirmed on the official platform before the application is finalised.

Waiting until the deadline is not advisable. Technical project descriptions and the collection of accounting documentation should begin well in advance.

Which mistakes can compromise the tax benefit?

One of the most common mistakes is confusing business innovation with R&D. Purchasing technology already available on the market or implementing a standard solution may significantly improve a company without, by itself, constituting a Research and Development activity.

Another risk is attempting to reconstruct all documentation only when the application is being prepared. R&D projects should retain technical, financial and operational evidence throughout their execution.

Care is also required where expenses have received other forms of public support. The regime contains rules designed to prevent the same expenditure from generating incompatible benefits or double funding.

The company should also ensure consistency between financial schedules, descriptions of the work carried out, allocation of employees and accounting documentation.

Using financial indicators to monitor the project can help management understand the scale of the investment, the resources being used and the expected economic impact.

Is SIFIDE only relevant to large companies?

No. The size of the organisation does not, by itself, determine whether Research and Development activity exists.

A technology, industrial or service SME may undertake a significant R&D effort even with a relatively small structure.

What matters is the nature of the work carried out, the existence of scientific or technological uncertainty and the company’s ability to demonstrate the R&D activities undertaken.

The mechanism can be particularly relevant for companies that systematically reinvest in substantial improvements to proprietary technologies, processes and solutions.

SIFIDE aims to increase competitiveness by strengthening the participation of the business sector in investment in knowledge and innovation.

How does SIFIDE fit into a financing strategy?

A tax incentive should be analysed as part of the company’s broader financial strategy rather than as an isolated decision.

Research and Development projects may require specialist recruitment, equipment, testing, prototypes and several development cycles before they begin to generate a return.

The tax benefit should therefore be considered alongside the financial capacity required to carry out the activity and other forms of financing and incentives for companies.

A tax credit does not remove cash flow requirements. The investment must first be incurred and documented before the corresponding tax effect can arise.

Before proceeding, the company should assess the impact on costs, liquidity, expected return and overall financial capacity.

How can FHH support the preparation process?

A robust process requires coordination between the technical component of the projects and the corresponding financial and accounting information.

FHH can support companies with the assessment of the applicable framework, organisation of information, financial structuring of projects and preparation of the documentation required for evaluation of the incentive.

The objective is to ensure that the R&D expenses presented are supported by consistent documentation and that the tax benefit is assessed within the company’s wider financial context.

If your company carries out Research and Development and would like to understand whether it may benefit from SIFIDE, speak with the FHH team.

What should you remember about SIFIDE?

• It is a tax incentive mechanism designed to encourage business investment in Research and Development.
• The benefit operates mainly through a deduction from Portuguese Corporate Income Tax.
• Not every form of innovation automatically qualifies as eligible R&D.
• Expenses must be directly related to properly identified activities and projects.
• The calculation of the incentive combines a base component and, where applicable, an incremental component.
• Technical and accounting documentation should be prepared consistently.
• The applicable framework and deadlines should be confirmed with ANI for the relevant tax year.
• The benefit should form part of a broader financial strategy rather than replace investment planning.

To assess how your Research and Development projects may fit within the SIFIDE framework, schedule a meeting with FHH.