The Business Association of Portugal (AEP) will present a series of proposals to be included in the State Budget for 2021, including measures that directly affect three major themes: liquidity; maintenance and creation of jobs; and capitalization and investment. Essentially aimed at companies, the proposal suggests “the creation of a public fund to support companies' treasury, without bureaucracy and with zero interest rate; and the creation of a transversal program of reindustrialization for a decade along the lines of the 'AEP Portugal Industrial Program i.5.0', which JE released first hand.
AEP's proposal to which the JE had access also contains an investment tax code, to reinforce the deduction regime for retained and reinvested profits; the elimination of limits on the deduction rate and the maximum amount of profits to be retained by the micor and small and medium-sized companies (MSMEs) and to extend the limit on the collection of IRC to 75% and the reinvestment period to five years.
Still in terms of liquidity, AEP intends to extend tax and social contribution deferrals for companies as long as the effects of the pandemic are maintained; the settlement of State debts to private suppliers; and the extension of bank credit moratoriums to families and companies until at least June 2021 (another three months).
The association also intends to "ensure that credit lines with public guarantee reach companies that need them quickly - eliminating complexity and legislative instability - in sufficient amount".
With regard to maintenance and job creation policies, the association led by Luís Miguel Ribeiro wants, in addition to reindustrialization, to create a 'Covid-19 emergency fund' within OE 2021, “to use only if the prolongation of the pandemic requires additional funds for health and support for families and companies ”.
Enable a return to the simplified lay-off regime as long as the effects of the pandemic remain, apply a temporary cut of two percentage points to the standard VAT rate, already applied from the last quarter of 2020 and ensure that the green tax reform and the implementation of green hydrogen technology “are carried out with the most appropriate degree of gradualism to preserve the competitiveness of companies and generate new areas of 'green business'”,
AEP also hopes to “enhance the success of the RERE - Extrajudicial Regime for the Recovery of Companies by creating an incentive (tax and / or other) so that whoever buys credits from a recovering company has an advantage in buying the remaining credits of that company (aggregation of credits) if you bet on maintaining the operation and recovering the company, thus attracting longer-term investors ”.
In the area of capitalization and investment, the association proposes: strengthening the provision of state guarantees in export credit insurance: accelerating the start-up of Banco de Fomento; and the more extensive and expeditious use of non-refundable incentives.
The conversion into capital transfer in favor of companies of part of the State guarantees in the credit lines to MSMEs (Micro, Small and Medium Enterprises) is another proposal, as are the creation of a tax incentive for voluntary conversion (for mutual agreement) and temporary credit in capital (exemption from taxation of their remuneration and capital gains), in the case of SMEs and Mid Caps at risk of closure, applied to individual credits of suppliers, but which may extend to other creditors.
Establish a very favorable asset revaluation regime, to counter the decapitalization of companies; extend, at least during 2021, the incentive to corporate restructuring for MSMEs created in the Supplementary State Budget of 2020; and allowing the recording of tax losses deduction under IRC as a tax asset in the balance sheet for viable MSMEs and its gradual use to pay any taxes, are three more proposals.
More specifically, and regarding the IRC Code, the associative structure aims at a progressive and programmed reduction of the tax rate - with a view to stimulating investment and economic recovery - “starting by establishing an objective until the end of the legislature, ensuring that the measure extends and is not reversed in the next legislature; and significantly cut the state tax rates at various levels and, in the long term, eliminate them, with advantages in terms of simplification, fiscal competitiveness and relief from the contributory effort ”.
With regard to the Tax Benefits Statute, AEP recommends the elimination of the limit of tax base (25 thousand euros) within the scope of the tax benefit related to the installation of companies in the interior regions (IRC rate of 12,5% up to that limit) and extend the benefit to Mid Caps, currently restricted to micro, small and medium-sized companies.
Luís Miguel Ribeiro has already put some of these proposals to the appreciation of the Government, and says that some of them - namely those related to reindustrialization - were welcomed by Minister Pedro Siza Vieira. But, as we know, the Budget is 'another story'.