Taxation · Tax Incentives
ICE:
The Corporate Capitalisation Incentive.
There is a tax incentive in force in Portugal since 2023 that can significantly reduce the corporate tax (IRC) your company pays, and which most business owners are unaware of.
It is called the ICE, the Corporate Capitalisation Incentive (Incentivo à Capitalização das Empresas), and it was created by the 2023 State Budget precisely to encourage companies to strengthen their equity rather than rely on external financing.
What is it, in plain terms?
Whenever your company strengthens its equity (whether through cash contributions from shareholders or by deciding not to distribute profits and keeping them in the company) it is entitled to a deduction from its taxable profit for corporate tax purposes.
In other words: by strengthening your company financially, you pay less tax. The State is rewarding those who invest in their own business.
Who can benefit?
The vast majority of Portuguese companies are covered. To benefit from the ICE, your company must:
- Have its registered office or effective management in Portugal;
- Carry out, as its main activity, a commercial, industrial or agricultural activity;
- Keep properly organised accounts;
- Not have its taxable profit assessed through indirect methods;
- Have a regularised tax and social security position.
Excluded are entities supervised by the Bank of Portugal or the ASF (banks, insurers and financial institutions) and, because they do not carry out a commercial activity as their main activity, entities such as non-profits, foundations and associations.
How is the benefit calculated?
The ICE is based on the net increases in eligible equity, a figure that takes into account what the company has reinforced over recent years minus what it has withdrawn.
In 2025, the rate applied is the 12-month Euribor (average for the period) plus a spread of 2 percentage points, with an additional 50% uplift on the calculated benefit. This means the effective benefit is substantial for companies that have capitalised over recent years.
The benefit results from a simple formula: net eligible increases × the period's rate × the uplift. It is the sum of the reinforcements (the current year and the six preceding ones) that is multiplied by the rate in force.
What counts as an "eligible reinforcement"?
Not all changes in equity are eligible. The following count as eligible increases:
- Cash contributions from shareholders for incorporation or share capital increases;
- Conversion of loans into capital (including shareholder loans, "suprimentos");
- Share premiums on the issue of shares;
- Profits retained in the company, applied to retained earnings, free reserves or a capital increase.
What is not eligible: revaluation reserves, equity method gains, supplementary capital contributions, contributions in kind of real estate, and the incorporation of reserves (free or legal) into capital.
The "running account" mechanism
An important point: the ICE works as a running account that considers the current year and the six preceding tax periods (up to the limit of the 2023 period).
This means that a year in which the company distributes dividends or reduces capital may decrease the benefit, but a weak year does not erase previous reinforcements. The balance accumulates and is considered in each financial year.
What changed from year to year?
| Year | Base rate | Uplift | Maximum cap |
|---|---|---|---|
| 2023 | 4.5% (5% for SMEs) | none | €2,000,000 |
| 2024 | 12m Euribor + 1.5pp (+2pp SMEs) | +50% | €4,000,000 |
| 2025 | 12m Euribor + 2pp (all companies) | +50% | €4,000,000 |
| 2026 | 12m Euribor + 2pp | +20% | €4,000,000 |
From 2025, the 2 percentage point spread applies to all companies, regardless of size. In 2024, this more favourable spread was reserved for SMEs and Small Mid Caps; other companies had only 1.5pp. The 50% uplift remains, making 2025 a particularly favourable year.
3 common mistakes that lose the benefit
1. Distributing profits without considering the tax consequences
Each distribution of reserves or retained earnings is an "eligible withdrawal" that reduces the balance of the ICE running account. Before deciding to distribute dividends, it is worth calculating the impact on the benefit.
2. Not claiming the benefit out of unawareness
The ICE is not claimed automatically, it must be entered in field 774 of Table 07 of Form 22 (Modelo 22) and in Annex D (field 437). If it is not claimed, the benefit is lost for that year, although the running account history is preserved for the following years.
3. Thinking it is only worthwhile for large companies
On the contrary, the ICE is especially advantageous for SMEs and micro companies which, having more sensitive equity, feel the impact of each euro reinforced more strongly.
How much can you save?
The exact amount depends on your company's capitalisation history, its turnover and the taxable result of each year. But as an illustration:
A company with €300,000 of net eligible increases, applying the 2025 reference rate with the 50% uplift, can obtain a deduction from taxable profit in the region of €18,000 to €20,000, which, at the 17% corporate tax rate (SMEs in Madeira), represents an approximate saving of €3,000 to €3,400 in corporate tax. And this benefit accumulates year after year.
The figures above are purely illustrative. The actual benefit varies with the 12-month Euribor for the period and with each company's specific history. The correct calculation requires analysing the running account of equity over recent years.
How do you know if your company is taking advantage of the ICE?
The honest answer is: if you have not asked your accountant, you probably are not.
The ICE requires analysis of the equity history, verification of the eligibility conditions, calculation of the running account over recent years and specific completion of Form 22. It is not a benefit that happens automatically.
At Arco Fiscal, we analyse each company's situation and calculate whether, and how much, it can benefit, at no additional cost for clients on a retainer. If you would like to understand whether your company has a benefit going unclaimed, get in touch.
If your company operates in the Madeira Free Trade Zone, there are regimes that may combine with your capitalisation strategy. Read also our guide on the Madeira Free Trade Zone.