The special regime applicable to deferred tax assets arising from the non deduction of  costs and negative equity variations from impairment losses resulting from debts and  post-employment or other long-term employee benefits, enacted by Law No. 61/2014, of 26 August, comes into effect today – 27 of August.

This special regimes is applicable to costs and negative equity variations accounted for in  the taxable periods starting at or after January 1, 2015, as well as to deferred tax assets  registered in the annual accounts of the taxpayer reported to the last taxable period  prior to such date and to the part of the costs and negative equity variations associated  to them.

The following entities may apply for this regime:

  1. Commercial companies, public companies, saving banks, mutual agricultural credit  institutions and the Central Agricultural Credit Bank, with registered office or  effective  place of management in the Portuguese territory, pursuing primarily a  commercial, industrial or agricultural activity; and
  2. Permanent establishments in the Portuguese territory of entities that have the  same nature of the entities referred to in the previous paragraph but are domiciled  in another Member State of the European Union or in a State of the Economic  European Area bound to an obligation to exchange information for tax purposes  equivalent to the one established in the European Union.

The  decision to apply for the special regime  applicable to deferred tax assets must be  approved by the General Meeting of the taxpayer and  communicated  to the Tax and  Customs Authority until the tenth day after  the  publication of  Law 61/2014 – i.e. 5 of  September, 2014.

Pursuant to the special regime approved, the deferred tax assets arising from the non  deduction of costs and negative equity variations from impairment losses resulting from  debts and post-employment or other long-term employee benefits,  would be converted into tax credits whenever the taxpayer records in its annual accounts a negative net  result for the year, or is liquidated through voluntary dissolution, insolvency declared by  court decision or revocation of its authorisation by the competent supervising authority.

The taxpayer may use this credit to set it off against tax debts arising from State  Income  or Property Taxes that were borne by the same and whenever the taxable event occurs  before the conversion date. The credit amount not used for the offsetting of tax debt will  be reimbursed.

Please note that the procedures for the set-off of the tax credit against tax debts of the  taxpayer and the respective reimbursement of the non-used tax credit, as well as the  conditions and procedures for the use of the tax credit itself are still pending approval of  the necessary regulation to be issued by Decree of the Ministry of Finance.