The ICE — Incentive for the Capitalisation of Companies — is a corporate tax relief that allows a company to deduct from taxable profit 4.5% of the increase in eligible equity. It was created by the 2023 State Budget and is set out in article 41-A of the Corporate Income Tax Code (CIRC). The deduction is capped at the greater of EUR 4 million and 30% of tax EBITDA for the year.
What the ICE is and what it is for
The ICE lets companies deduct from taxable profit an amount equal to 4.5% of the increase in eligible equity over the current financial year and the six preceding years. It was created by Law 24-D/2022 of 30 December (the 2023 State Budget Law), replacing the earlier DLRR (deduction for retained and reinvested profits), and it corrects the asymmetric treatment of debt finance, whose interest is deductible, against equity finance, which was not.
The legislator’s aim is to encourage Portuguese companies to capitalise, reducing a historic dependence on bank credit. On Bank of Portugal figures, Portuguese SMEs have equity ratios well below the European average, and the ICE is one part of the response.
Who can claim the ICE
The ICE is available to companies resident in Portugal and subject to corporate income tax that carry on a commercial, industrial or agricultural activity. Excluded are:
- Credit institutions, financial companies and subsidiaries of banking institutions
- Entities applying the accounting standards for financial institutions
- Companies in financial difficulty within the meaning of EU law
- Companies with unsettled tax or social security debts
There is no size limit: the ICE applies to micro companies, SMEs and large companies alike.
Which increases in equity are eligible
| Type of increase | Eligible |
|---|---|
| Cash contributions on a share capital increase | Yes |
| Contributions in kind (conversion of claims) | Yes |
| Conversion of shareholder loans into capital | Yes |
| Covering losses with new contributions | Yes |
| Additional capital contributions | Yes |
| Retained (undistributed) profits taken to reserves | Yes |
| Asset revaluations | No |
| Donations or non-repayable grants | No |
What is measured is the net increase in equity over time. Dividend distributions, capital reductions and the cancellation of additional contributions all reduce the eligible amount.
Calculating the ICE in practice
The formula: ICE deduction = cumulative net increase in eligible equity × 4.5%
The net increase takes in the current year and the six preceding years, so the relief accumulates over time.
Example 1 — cash increase in share capital
An SME increases its capital by EUR 100,000 in cash from its shareholders in 2025:
- Annual deduction: EUR 100,000 × 4.5% = EUR 4,500 a year
- Relief over 7 years: EUR 31,500 of total deduction
- Tax saved (at 19%): EUR 5,985
Example 2 — conversion of shareholder loans
A company with EUR 200,000 of shareholder loans converts them into capital in 2025:
- Annual deduction: EUR 200,000 × 4.5% = EUR 9,000 a year
- Tax saved over 7 years (at 19%): EUR 11,970
Example 3 — retained profits
A company makes EUR 150,000 of profit in 2025 and the shareholders decide not to distribute it, taking it to reserves instead:
- Annual deduction: EUR 150,000 × 4.5% = EUR 6,750 a year
Caps and special rules
The ICE deduction cannot exceed, in any year, the greater of:
- EUR 4,000,000 (the absolute cap)
- 30% of tax EBITDA for the year (earnings before interest, tax, depreciation and amortisation, adjusted for tax purposes)
For most SMEs the 30%-of-EBITDA cap is the binding one. For a company with tax EBITDA of EUR 50,000, the maximum deduction that year is EUR 15,000.
Any amount not deducted because of the cap can be carried forward for five years.
Anti-abuse rule (art. 41-A(6)): if the increased capital is taken back out of the company within the following three years, by distribution, capital reduction or an equivalent transaction, the deduction is reversed with compensatory interest.
What changed for the ICE in 2026
The 2026 State Budget Law (Law 73-A/2025 of 30 December) left the ICE structurally unchanged. The rate stays at 4.5%, the caps stay as they were, and the regime applies to the same years. What changed indirectly is the general corporate tax rate, from 20% in 2025 to 19% in 2026, which makes the nominal saving from the ICE slightly smaller while the mechanics stay identical.
For SMEs benefiting from the reduced 15% rate on the first EUR 50,000 of taxable income, the saving should be worked out at the effective marginal rate.
Frequently asked questions about the ICE in 2026
What is the ICE?
The ICE is a corporate tax relief allowing a deduction from taxable profit of 4.5% of the increase in eligible equity. It is set out in article 41-A of the Corporate Income Tax Code.
How does the ICE work for corporate tax?
A deduction from taxable profit of 4.5% of the increase in eligible equity in the current year and the preceding 6 years, capped at the greater of EUR 4m and 30% of tax EBITDA.
What is the maximum ICE deduction?
The greater of EUR 4,000,000 and 30% of tax EBITDA. Any excess can be carried forward for 5 years.
Can the ICE be combined with other reliefs such as SIFIDE?
Yes. The ICE is compatible with SIFIDE, RFAI, the pay-rise incentive and other corporate tax upliftings. The no-double-counting rule applies only within the same expense or transaction.
Is your company claiming the ICE?
Hugo Ribeiro, Chartered Accountant (OCC) since 2000, reviews your company’s ICE deduction potential and works out the actual saving on the Modelo 22 return.
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