The importance of R&D and its tax benefits in the Algarve

On the side of those who legislate, it is important to understand that it is essential to create more fiscal predictability

Talking about taxation is always a short-term conversation, due to the fact that Portugal has a tax system that is not very predictable and that is constantly changing the rules of the game.

Currently, there is constant legislative instability, which drives away investment, makes tax planning and decision-making by companies and even families themselves a game full of nuances to which one must pay close attention.

In terms of tax benefits, however, the case of SIFIDE – System of Tax Incentives in Business Research and Development stands out, which has even gained some prominence in recent times, arising from the Government's proposal to make SIFIDE more restrictive, since that abuses have been identified through the use of a double deduction from the benefit granted.

It is known that Research and Development (R&D) has a very important positive impact not only on companies, but also on the economy as a whole, as it is through R&D that new scientific and technical knowledge is developed with a view to improving matters raw materials, products, services or even processes for the production and manufacture of new products.

In the case of SIFIDE, its objective is to support the efforts of companies in R&D with the aim of increasing the competitiveness of the business network in Portugal in this area.

According to data from the National Innovation Agency (ANI), in the 2021 fiscal year, investments in R&D worth 1.614 million euros were declared, in the context of SIFIDE alone, reaching a total of 3.400 companies.

In short, this tax instrument makes it possible to recover part of the investment made in R&D, in order to boost future investment in R&D.

However, access to this tax benefit is subject to a set of cumulative conditions and eligibility requirements for expenses, ranging from expenses with personnel with a certain level of minimum educational qualifications, to the costs of registering and maintaining patents, which make its access is a bit complex, not to mention all the communication obligations and formalities, which the Portuguese tax system values ​​very much.


And in the case of the Algarve. What are the indicators within the scope of R&D Expenditure?

In a brief survey of statistical data in the National Innovation Agency (ANI) database on expenditure at current prices on R&D, in percentage terms the Algarve represents 0,8% of total R&D expenditure in the business sector, by geographic location (NUTS II and III).

The above indicator results from the National Scientific and Technological Potential Survey (IPCTN21) with reference to the year 2021, where 11.666 companies were surveyed regarding their expenditure on R&D.

Having said that, it is clear that the Algarve has an indicator of expenditure on R&D that is clearly below expectations compared, for example, with the Alentejo, which has around 3,96% of expenditure on R&D, and this is something that should worry us , as the Algarve has a set of exceptional conditions that may well leverage this value to more sympathetic numbers.

From the outset, the Algarve has universities in its region, and innovation depends in part on the relationship between companies and universities, which produce research with high economic value and it is essential for companies to benefit more from these positive externalities that academic research creates.

Secondly, the Algarve also has a business accelerator within the University of Algarve, the UAlg Tec Campus, whose main objective is to boost and expand the region's technological ecosystem, in partnership with the Algarve Tech Hub, where companies can benefit of R&D produced on the spot and at the same time make the transition and application of this knowledge.

There is also in Portimão, at ISMAT (Instituto Superior Manuel Teixeira Gomes), the “Nature-Based Solutions” (NBS) Hub Portugal, which aims to implement an innovative and inclusive urban regeneration, involving companies, municipalities and local communities.

However, this does not mean that universities or companies in the region are not playing their part and symbiotically taking advantage of all the positive externalities created by both. There is high-quality research and development in the Algarve's academia, combined with excellent cooperation relations with the business community, in fact, both parties have taken Herculean action in the face of the macroeconomic conditions in which the region has been experiencing in recent decades. Unfortunately, what they lack is economies of scale.

And that is not the fault of the academy, nor of the business fabric, but of the weak public policies and devoid of long-term strategy, implemented in the region in recent years.

In short, to access tax benefits, in the specific case of SIFIDE, it is necessary to have R&D and, for that, it is essential to create conditions for companies to be able to take advantage of all the economic value produced by universities in their research centers.

On the side of those who legislate, it is important to understand that it is essential to create more tax predictability, so that companies can carry out effective tax planning and efficient decision-making, and without this Portugal will unfortunately continue to have tax unpredictability.


Author Ricardo Proença Gonçalves has a degree in Business Management and a Post-Graduate Degree in Management of Health Units, from the Faculty of Economics of the University of Algarve. also holds a Executive Program in Management Control and Performance Assessment at Nova SBE. He is also an effective member of the Algarve Regional Delegation of the Order of Economists and a member of the think tanks «Thinking Algarve».

Note: article published under the protocol between the Sul Informação and the Algarve Delegation of the Economist Order


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