The IFICI regime (“Tax Incentive for Scientific Research and Innovation”) was created to attract highly qualified foreign professionals to Portugal.
Because of this, it is a demanding regime, and certain details cannot be overlooked, failing to meet them often leads to the rejection of the IFICI application.
In this article, we outline the most frequent reasons for rejection across the most common access routes to the IFICI: being an employee of a Portuguese company or serving on its corporate bodies, whether the company belongs to the taxpayer or to a third party.
1. Wrong Economic Activity Code
Among all the ways to qualify for the IFICI, the most common, and also the one that leads to the highest number of rejections- is accessing the regime through work performed for a Portuguese company, either as an employee or as a member of its corporate bodies.
This is precisely where the company’s main CAE (“Economic Activity Code”) becomes crucial.
The IFICI requires that the company’s main CAE corresponds to one of the activities considered by IAPMEI or AICEP as relevant to the Portuguese economy, as listed in Annex B of their official notices.
Being the reason why selecting the correct CAE upon the company’s incorporation or when choosing the employment company (inclusive EOR) is so important.
And, although the law does not state this explicitly, having an eligible secondary CAE is not enough.
Thus, the company must have an eligible main CAE. Otherwise, the IFICI application will be rejected, a situation far more common than many expect.
2. No Portuguese sourced remuneration
The IFICI requires the taxpayer to carry out economic activity in Portugal and contribute to the national economy.
This means the taxpayer must earn Portuguese source remuneration in the very first year they wish to benefit from the regime - that is, the year they become a tax resident in Portugal.
If the taxpayer is a member of the company’s corporate bodies, they do not need a fixed monthly salary, but they must receive some form of remuneration for their duties (for example, fees for attending board meetings).
Therefore, it is essential to ensure that, at the time of submitting the IFICI application, the taxpayer has already earned Portuguese source remuneration and can prove it to the Portuguese tax authorities. Otherwise, the IFICI application will be rejected.
2.1. The Portuguese EOR
A frequent mistake occurs when a taxpayer works remotely for a foreign company through a Portuguese EOR (“Employer of Record”). Even though the employment contract is with a Portuguese entity, if the salary is paid by the foreign company, the income is generally considered foreign-source rather than Portuguese-source.
An equally important, and often overlooked, point is that the same risk of rejection may arise even when the salary is paid entirely by a Portuguese EOR. If the EOR’s real business is primarily payroll and employer of record services, and its CAE and operational substance reflect that role, the Portuguese tax authorities may conclude that the employment does not fall within the spirit or purpose of the IFICI eligible activities.
In other words, taxpayers should be cautious about assuming that an EOR structure automatically qualifies them for the IFICI regime. At their core, EORs are payroll service providers, and their main economic activity may not align with the policy goal of attracting highly qualified professionals to work in qualifying sectors of the Portuguese economy.
This risk increases when an EOR has added or amended CAE mainly to market itself as “IFICI compatible” for clients. Such practices are likely to attract greater scrutiny from the Portuguese tax authorities, who will look beyond the CAE and assess the company’s actual substance and business model.
It is also essential to remember that, for IFICI purposes, your employer is the Portuguese EOR - not your former foreign employer, which becomes merely the EOR’s client. As a result, the activities, sector, or qualifications of the foreign company are generally irrelevant when determining whether your employment meets the IFICI requirements.
3. Job role not considered qualified
When accessing the IFICI through an employment contract with an eligible company, the taxpayer must hold a qualified position, as defined in Annex A of the official notices issued by IAPMEI and AICEP.
Proof of this is provided by submitting the employment contract with the IFICI application before the Portuguese tax authorities.
Thus, the job title in the employment contract must match the terminology used in IAPMEI or AICEP’s official notices. Generic titles (such as “senior associate”) or functional descriptions without a clear job title should be avoided.
Hence, the golden rule is that the taxpayer’s role must be stated clearly, precisely, and must qualify as a “qualified position”. If so, it is very unlikely that the fulfillment of this requirement will be compromised.
4. Proof of Academic Qualifications.
To access the IFICI, the taxpayer must hold at least level 5 of the European Qualifications Framework or level 5 of the International Standard Classification of Education.
And the respective proof is provided through the submission of a diploma or academic certificate before the Portuguese tax authorities upon the application for the IFICI.
Therefore, it is essential that the diploma clearly shows the qualification level, with no room for ambiguity. If the Portuguese tax authorities have any doubts, they will request additional clarification and your IFICI application likely be on thin ice.
Note: when the taxpayer is a member of the company’s corporate bodies, the Portuguese tax authorities have often waived the requirement to prove academic qualifications. However, this interpretation may change.
5. Monitoring of the Requirements
Unlike its predecessor – the Non-Habitual Resident regime - the IFICI is not a “grant and forget” tax regime.
Compliance is monitored by the Portuguese tax authorities throughout the entire 10 year period of the regime.
This means that any relevant change – such as job role, loss of corporate body position or change in the company’s main CAE -, may affect continued eligibility.
Hence, ignoring this ongoing monitoring is one of the main reasons taxpayers lose access to the IFICI. Ensuring full compliance year after year is essential.
6. Company lacks economic substance
Finally, a note on companies created solely as vehicles to access the IFICI.
Setting up a company in Portugal with an eligible main CAE may allow initial access to the regime. But as previously mentioned, the IFICI is not a tax regime that is granted and forgotten.
If the company does not show real economic substance over time, no genuine commercial activity, no clients, no cash flow, the risk of inspection by the Portuguese tax authorities is significant.
And if the Portuguese tax authorities conclude that the company lacks economic substance and was created only to obtain tax benefits, they may revoke the IFICI status. Such revocation is retroactive, meaning previously reported, and taxed income will be reassessed under the general PIT (Personal Income Tax) rules. The resulting tax liability will be certainly much higher and will also include compensatory interest.
Final thoughts
Most IFICI application rejections result from mistakes and misinterpretations that can easily be avoided, and not from failing the substantive requirements.
Ensuring that no detail is underrated, and avoiding the errors described above, greatly increases the likelihood of approval and prevents the IFICI application and the life decisions tied to it from becoming a frustrated expectation.
Frequently Asked Questions
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