The IP Box regime (article 50-A of the IRC Code) lets a company exclude 85% of net income from patents, industrial designs or models and software copyright from taxation. In practice, only 15% of that income is taxed under IRC — a very significant saving for technology companies.
What the IP Box is
The IP Box is a tax incentive for exploiting intellectual property developed by the company itself. Eligible income (royalties, licensing, granting of use) benefits from an 85% exclusion from the IRC tax base. Since the 2024 State Budget the regime was reinforced (up from 50% to 85%) and now explicitly includes software.
Which income is eligible
- Registered patents;
- Registered industrial designs or models;
- Software copyright;
- Arising from assignment or temporary-use contracts (licensing/royalties).
The income must result from the company's own R&D activity and the IP must be registered.
How it is calculated: the nexus approach
The benefit follows the OECD nexus approach: the exemption is proportional to the share of R&D carried out by the company itself in the total development cost of the asset. The more developed in-house (vs acquired from third parties or intra-group), the larger the fraction of the 85% the company can use. This requires good cost records per asset.
Worked example
A software house with EUR 200,000 of net software-licensing income, 100% developed in-house: 85% (EUR 170,000) is excluded from tax and only EUR 30,000 enters the IRC base. The saving can reach tens of thousands of euros per year.
IP Box, SIFIDE and startups
The IP Box pairs well with SIFIDE: the company gets a tax credit on its R&D investment and an exemption on the income from the resulting IP. For software companies and startups with their own product, it is one of the most powerful tax structures in Portugal. See our accounting for startups.
Frequently asked questions about the IP Box
How much does the IP Box exempt in Portugal?
85% of net income from patents, industrial designs and software copyright — only 15% is taxed under IRC.
Is software covered by the IP Box?
Yes. Since the 2024 State Budget, software copyright is expressly included.
How does the nexus approach work?
The exemption is proportional to the share of in-house R&D in the asset's development cost — more in-house development, larger benefit.
Can the IP Box be combined with SIFIDE?
Yes. They are distinct incentives: SIFIDE rewards R&D investment; the IP Box exempts the income from the resulting IP.
Which companies benefit most from the IP Box?
Software, technology and industrial companies with their own product, patents or in-house-developed licensed software.