SIFIDE II: How to Deduct Up to 82.5% of AI Investment in Portugal

What is SIFIDE II

SIFIDE II — the Tax Incentive System for Business R&D — allows companies in Portugal to deduct R&D expenses from corporate tax (IRC). The programme is managed by ANI (National Innovation Agency) and runs until the end of 2026.

Unlike grants, SIFIDE II works through tax deduction: the company directly reduces the tax it owes. There is no prior application with approval required — the company incurs the expenses, submits the application to ANI, and deducts from the corresponding tax year.

Deduction rates

SIFIDE II offers two components that can be combined:

• Base rate: 32.5% of R&D expenses incurred in the period
• Incremental rate: 50% of the increase in expenses compared to the average of the previous two years, up to a maximum of EUR 1.5 million

Combining both rates, a company can recover up to 82.5% of its R&D investment. For SMEs with less than two years of R&D activity (no history for the incremental rate), there is a 15% surcharge on the base rate, resulting in 47.5% deduction.

Eligible expenses for AI projects

• R&D personnel — salaries of employees directly involved in research and development. PhD holders count at 120% of value
• Software — acquisition or development of software for R&D activities, including machine learning tools and AI platforms
• Scientific equipment — hardware acquired new for research activities
• AI, blockchain and cybersecurity projects — explicitly mentioned as eligible areas
• Eco-design expenses — counted at 110% of value
• Collaborative R&D projects — partnerships with universities or research centres

Who is eligible

Any company subject to corporate tax in Portugal, regardless of sector or size. There are no restrictions by revenue or headcount. The condition is that the company incurs expenses qualifying as R&D under the programme's definitions.

A frequently overlooked point: you don't need to be a "tech company". A restaurant developing an AI-powered inventory management system, a clinic implementing machine learning data analysis, or a logistics company creating route optimisation algorithms — all can be eligible, provided there is a research or development component.

How to apply

1. Identify R&D expenses

Map all company activities involving research, experimental development or creation of new technical knowledge. Include software projects, automation, AI and process innovation.

2. Submit application to ANI

The application is submitted to ANI after the close of the fiscal year. The company describes the R&D projects carried out and associated expenses. ANI evaluates and issues a technical opinion.

3. Deduct from corporate tax

With a favourable ANI opinion, the company includes the deduction in its tax return (Modelo 22). If the deduction exceeds the tax liability for the year, the remainder can be carried forward for the next 8 years.

SIFIDE II and AI adoption

According to Eurostat data from December 2025, only 11.5% of Portuguese companies use AI — against an EU average of 20%. One of the cited barriers is implementation cost. SIFIDE II directly reduces that cost, but most SMEs are unaware that their automation and AI projects qualify.