IFICI & Startups: Why Tax Planning Should Come Before Company Incorporation

With the introduction of the Incentive for Scientific Research and Innovation (“IFICI”), applicable from 2024, many questions have arisen regarding the practical implementation of the regime and the different routes taxpayers may use to access it.
 
For qualifying individuals, IFICI allows for a special 20% Personal Income Tax (“IRS”) rate, for ten consecutive years, on Portuguese employment and professional income obtained from qualifying activities. The regime also generally provides an exemption method for foreign-source income in categories A, B, E, F and G, subject to specific exceptions and limitations.
 
The application of the regime is subject to a number of general requirements, including, in particular, the following conditions:

• not have been considered a Portuguese tax resident during any of the five years preceding the year in which IFICI starts to apply;
• become and remain a Portuguese tax resident during the relevant years;
• continue to obtain income from an activity falling within one of the qualifying IFICI routes;
• not benefit, or have previously benefited, from the NHR regime;
• not opt for Programa Regressar and comply with the applicable incompatibility rules concerning other personal tax incentive regimes, including IRS Jovem; and
• not have previously benefited from IFICI.
  

The startup route under IFICI

Within this framework, one particular route has generated significant interest: employment positions and members of corporate bodies in entities certified as startups under Law no. 21/2023, of 25 May.
 
Article 58-A(1)(f) of the Portuguese Tax Benefits Code provides that IFICI may apply to individuals holding employment positions or acting as members of corporate bodies in companies certified as startups.
 
This means that a person relocating to Portugal who becomes an employee of a certified Portuguese startup, or assumes a position as a member of its corporate bodies, such as a director or manager, may potentially use this route to access IFICI, provided that all remaining conditions are met.
 
There is, however, an important distinction between the wording of the law and the subsequent administrative interpretation adopted by the Portuguese Tax Authority.
 
While Article 58-A(1)(f) simply refers to “employment positions”, Circular Letter no. 20276/2025 states that, in the case of employees, the position must be directly involved in scientific research or innovation activities. Members of corporate bodies are identified separately.
 
“For employees of certified startups, the Portuguese Tax Authority currently requires the position to be directly involved in scientific research or innovation activities.”
 
This distinction is relevant because the additional wording used by the Tax Authority was not accompanied by a detailed definition of what should be understood as a position “directly involved in scientific research or innovation”.
 
As a result, there may be more room for interpretation when the competent entity assesses whether a specific employment position qualifies. This should be considered before establishing the employment structure and, ideally, before the individual becomes Portuguese tax resident.

Not all IFICI routes operate in the same way

This should also be distinguished from other IFICI routes.
 
For example, Article 58-A(1)(d) covers certain qualified employment positions and members of corporate bodies in entities carrying out economic activities recognised by AICEP or IAPMEI as relevant to the Portuguese economy.
 
Under the administrative rules implementing this route, qualifying employment positions and minimum qualification requirements are defined more specifically. As a general rule, employees must hold a qualifying position under the relevant AICEP or IAPMEI rules and meet the applicable qualification requirements, whereas members of corporate bodies are treated separately.
 
The startup route follows a different structure. Rather than requiring the company to fall within the economic activities recognised under the AICEP/IAPMEI route, the relevant entity must have obtained startup certification under Law no. 21/2023.

 
What is a startup for these purposes?

“Simply incorporating a new Portuguese company does not automatically make that company a startup for IFICI purposes.”
 
Law no. 21/2023 establishes a number of requirements for a company to qualify as a startup. Among other conditions, the company must generally have been active for less than ten years, employ fewer than 250 employees, have annual turnover not exceeding EUR 50 million and maintain the required connection with Portugal.
 
The company must also meet at least one statutory innovation or financing condition. These may include having an innovative business model, products or services with high growth potential, carrying out research and development activities, obtaining qualifying venture capital financing or falling within other situations recognised under the applicable startup legislation.
 
Startup status must therefore be formally obtained. The fact that a company is newly incorporated, operates in the technology sector or considers itself innovative is not, by itself, sufficient for IFICI purposes.
 
This is why the startup route can be particularly relevant for entrepreneurs, founders and senior professionals considering relocating an innovative business, or part of an existing business, to Portugal. But the analysis should come before, rather than after, the incorporation and relocation process.

 
Planning before relocating to Portugal

For entrepreneurs considering different jurisdictions and looking for a competitive tax framework for themselves, their employees and their business, the interaction between IFICI and the Portuguese startup regime may create interesting opportunities.
 
The nature of the Portuguese company, the possibility of obtaining startup certification, the individual’s position, whether the person will act as an employee or as a member of the corporate bodies, the functions actually performed and the  timing of Portuguese tax residence can all become relevant to the final IFICI analysis.
 
“The available IFICI routes should ideally be assessed before the relocation takes place and before the Portuguese company or employment structure is implemented.”
 
Conclusion
 
IFICI can offer a favourable tax framework for certain individuals relocating to Portugal, particularly where the relocation is connected with an innovative business or a company that may qualify as a startup.
 
The startup route should, however, be analysed together with the certification of the company, the individual’s role and functions and the timing of the relocation. Addressing these points from the outset can reduce uncertainty during the registration process and allow the structure to be implemented in line with the applicable requirements.