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Portugal Corporate - Significant developments

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February 2019

Tax treaty with Angola published 

Resolution 23/2019, of the Parliament, was published in the Official Gazette of 14 February. It approves the tax treaty between Portugal and Angola. The tax treaty foresees the following rates:

  • Dividends: 8% rate in case of a participation of at least 25% held in the previous 365 days; 15% in the remaining cases.
  • Interest: 10%.
  • Royalties: 8%.
  • Fees for technical services: 5% (includes technical, management, and consultancy services).

On the matter of permanent establishment (PE), namely in what concerns preparatory and ancillary activities and dependent agent, the tax treaty follows Base Erosion and Profit Shifting (BEPS) Action 7 – Preventing the Artificial Avoidance of Permanent Establishment Status. It is also in line with the position of Portugal towards the Multilateral Convention.

The tax treaty is not yet in force.

Automatic access of the Portuguese Tax Authority (PTA) to financial information of residents

Law 17/2019, of 14 February, approved the regime for the automatic exchange of financial information with respect to accounts with a balance or value that exceeds 50,000 euros (EUR) to be carried out by most financial institutions to the Portuguese Tax Authority (PTA).

Reporting financial institutions must report to the PTA, by 31 July of each year, the following information regarding each account subject to communication, with reference to 31 December of the previous calendar year:

  • The name, address, Tax Identification Number (TIN), and date and place of birth (in the case of an individual) of each reportable person that is an account holder. In the case of any entity, the name, address, and TIN, as well as the name, address, TIN, and date and place of birth of each of its controlling persons that is deemed reportable.
  • The account balance or value (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) as of the end of the relevant calendar year or, if the account was closed during such year, the closure of the account.
  • In the case of any custodial account: (i) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited with respect to the account during the calendar year; and (ii) the total gross proceeds from the sale or redemption of financial assets paid or credited to the account during the calendar year with respect to which the reporting financial institution acted as a custodian, broker, nominee, or otherwise as an agent for the account holder.
  • In the case of any depository account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period.
  • In the case of any other account, the total gross amount paid or credited to the account holder with respect to the account during the calendar year with respect to which the reporting financial institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the account holder during the calendar year or other appropriate reporting period.

This regime covers financial accounts whose holders or beneficiaries are resident on national territory with respect to the information related to 2018 and following years.

January 2019

Transposition of European Union (EU) Directive package Anti Tax Avoidance - Law Proposal

Law Proposal no. 177 was presented for discussion at the Parliament. It aims at transposing EU Counsel Directive 2016/1164, of 12 July, as modified by EU Counsel Directive 2017/952, of 29 May. The law proposal includes measures on matter of tax deductibility of interest, exit taxes, general anti-abuse provision, and controlled foreign companies (CFCs), amending several provisions of the Corporate Income Tax (CIT) Code and General Tax Law. EU provisions on matter of hybrid mismatches shall be dealt with at a later stage, given its complexity.

December 2018

2019 State Budget Law

Law 71/2018, of 31 December, approved the 2019 State Budget Law. The amendments introduced in the tax law are, in general, effective form 1 January 2019 onwards.

Portugal/Finland tax treaty terminated

Notice 146/2018, published in the Official Gazette, confirms the termination of the tax treaty signed between Portugal and Finland on 27 April 1970. This is effective from 1 January 2019 onward.

November 2018

Tonnage tax and support seafarer schemes published

Decree-Law 92/2018, of 13 November, published in the Official Gazette, establishes the Portuguese tonnage tax scheme and scheme to support seafarers.

Tonnage tax scheme

Entities liable to CIT, with registered head office or place of effective management in Portugal, that carry out as their main activity the maritime transport of cargo and passengers may opt to be taxed under the tonnage tax scheme. Medium and large companies covered by restructuring aid from the European Commission are excluded. The option for the scheme is valid for five years, except if the taxpayer asks to opt out.

The scheme applies to income from eligible activities carried out through ships that, among others, meet the following requirements:

  • Fly a flag of a European member state or a Economic European Area (EEA) state, and are strategically and commercially managed from an EU or EEA state.
  • Regarding which at least 60% of the respective net tonnage flies a flag of an EU or EEA state, and the respective commercial and strategic management is run from that state.

The following revenues are eligible for the regime:

  • Core revenues from maritime transport activities (cargo and passenger transport).
  • Ancillary revenues closely connected to shipping activities.
  • Revenue from towage and dredging, subject to certain conditions.

The tonnage tax profit is calculated on the basis of a notional daily profit per ship based on a sliding tariff by reference to the net tonnage of the ship, as follows:

Net tonnage Daily taxable income for each 100 net tonnes (EUR)
Up to 1,000 net tonnes 0.75
From 1,001 to 10,000 net tonnes 0.60
From 10,001 to 25,000 net tonnes 0.40
Greater than 25,001 net tonnes 0.20

Costs and losses incurred and related with the eligible activities are disallowed for tax purposes. No deductions are allowed to the taxable profit assessed. The taxable profit assessed is subject to CIT at the standard rate of 21% (municipal surtax and state surtax may also apply). Taxable losses generated in tax years prior to the start of the scheme can be offset against taxable profits generated by non-eligible activities (in the proportion of such activities on the total profits). The taxpayers are required to maintain separate accounting records for both eligible and non-eligible activities.

The European Commission has already approved the scheme as state aid.

Scheme to support seafarers

Seafarers employed on vessels are exempt from personal income tax (PIT) (a minimum stay of 90 days in the vessel is required, in each tax year, among other conditions). They are also eligible to pay reduced rates of contributions to social security (6% in total, being 4.1% borne by the employer and 1.9% by the seafarer).

October 2018

2019 State Budget Law proposal

Following the presentation of the 2019 State Budget Law proposal at the Parliament, the following amendments have been proposed. The final law is expected to be published by the end of December 2018, becoming effective on 1 January 2019.


Intangible assets

The amortisation of the acquisition cost of intangible assets (brands, licences, and goodwill acquired through business concentrations) shall be disallowed as a tax deductible expense when acquired from related parties, as per the definitions included in the transfer pricing rules (currently, tax amortisation is allowed throughout a 20-year period).

Capital gains realised by non-residents

Capital gains realised by non-residents shall not be exempt from taxation in case of a transfer for consideration of shares or similar rights in a non-resident company if the value of such shares or rights results, directly or indirectly, in more than 50% of real estate or rights in rem of real estate located in Portugal. This rule shall not apply in case the real estate is allocated to an agricultural, industrial, or commercial activity (except sale and resale of real estate).

Contractual tax benefits 

The tax credit available may increase to 12% (currently 10%) based on the per capita purchasing power index of the region in which the investment project is located. 

Tax Regime for Investment Support (RFAI)

Eligible investments up to EUR 15 million (currently EUR 10 million) shall benefit from a tax credit corresponding to 25% of the respective amount. The tax credit corresponding to 10% of the eligible investments above that amount shall remain unchanged.

Tax benefit for the reinvestment of retained earnings (DLRR)

The maximum amount of retained and reinvested earnings shall be increased to EUR 10 million (currently EUR 7.5 million). The maximum tax deduction of retained and reinvested earnings shall be increased by 20% in case of entities located in inland regions.

Sovereign debt issued in the Chinese market

Interest on Portuguese sovereign debt issued in renminbi in the People's Republic of China domestic debt market shall be exempt from PIT and CIT. The exemption shall apply for holders or subscribers that are not resident in the Portuguese territory or have a PE herein to which the loan is allocated (except if resident in a blacklisted jurisdiction). The information regarding the tax residency of the beneficiary shall be provided upon subscription at the Portuguese Treasury Management and Public Debt Agency (IGCP, E.P.E.).

Legislation authorisation: Job creation in inland regions

The government shall be authorised to introduce a regime of tax benefits under the Program for Valuing Inland Regions ('Programa de Valorização do Interior'). The tax credit shall consider the costs incurred with the creation of jobs in inland regions, corresponding to 20% of those costs, capped at the tax due in the tax year concerned. This legislation authorisation relies on the authorisation from the European Union to expand the regional aid scheme.

Value-added tax (VAT)

Telecommunication, broadcasting, or television services and services provided by electronic means

Telecommunications, broadcasting, television services, and services provided by electronic means (as mentioned in Annex D of the VAT Code) shall be taxed at the place where the service provider is established, provided that: 

  • the total value of such services does not exceed EUR 10,000, with reference to the previous year;
  • the acquirer is not a VATable person, and
  • the service provider has its head office, PE, or domicile only in that member state.

Property taxes

Reorganisation of companies as a result of restructuring operations or cooperation arrangements

Exemptions from property transfer tax (IMT), stamp duty, and emoluments in the context of restructuring operations or cooperation agreements will become:

  • automatically applicable in case of demerger, and
  • applicable also in case of mergers and demergers involving confederations and employers' and trade union associations, as well as business or sectoral associations (the regime shall apply with the necessary adjustments).

An anti-abuse rule is foreseen. Under this rule, the referred exemptions shall cease to apply when it is concluded that the main or one of the main purposes of the operation was to obtain a tax advantage. The corresponding additional tax assessments shall then be increased by 15%.

Legislative authorisation: Promotion of urban rehabilitation and utilisation of degraded or vacant properties

The government shall be authorised to amend the rules regarding the classification of urban real estate or their legal units as vacant in order to allow the use of these properties. The concept of 'areas of urban pressure' shall also be defined. It is also foreseen that municipalities can increase the property tax (IMI) rate applicable to urban real estate properties or their legal units located in areas of urban pressure that are vacant for more than two years. The IMI rate can be increased six times. An additional increase of 10% in each of the following years is also foreseen, capped at 12 times the IMI rate applicable.

Additionally, the government shall also be authorised to:

  • Review the Legal Regime of Development and Construction that approved the urban rehabilitation legal regime; the amendments concern the subpoenas to perform maintenance, rehabilitation, or demolition works and their coercive execution.
  • Amend the Land Registration Code, in what concerns rules regarding acts subject to registration, among others, the burden of transferring real estate that has been subject to coercive works by a public entity.

General tax law

Reporting obligations of financial institutions

The information on transfer and remittance of funds for a country, territory, or region with privileged taxation shall be communicated to the PTA by the financial institutions as well as by the Bank of Portugal (even if the information is already covered by another tax-reporting regime).   

General taxation infringements law

Information regarding financial operations

The failure or delay in submitting the statement on the opening and holding of bank accounts or cross-border transfers, including to countries, territories, or regions with privileged taxation, by credit institutions, financial companies, and payment institutions to the PTA shall be punished with a fine ranging from EUR 3,000 to EUR 165,000.

The errors or inaccuracies on the aforementioned statement shall be punished with a fine ranging from EUR 3,000 to EUR 165,000.

Exchange of information

Access to information held by the Bank of Portugal

The General Regime on Credit Institutions and Finance Companies shall foresee that the duty of secret imposed to the Bank of Portugal shall not prevent the exchange of information with the Tax and Customs Authorities if such information is relevant for the latter. 

August 2018

Central Registry of Beneficial Ownership - Further regulation published

In August 2018, further regulation has been published in Portugal in respect of the Central Registry of Beneficial Ownership. The regime is foreseen in EU Directive (EU) 2015/849, of the European Parliament and of the Council, of 20 May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, transposed into Portuguese law in 2017.

Lack of compliance or inaccurate reporting may imply criminal and civil liability.

The first communication for existing entities is due 30 April 2019.

Last Reviewed - 01 July 2019

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Portugal contacts
Jaime Esteves Title = Jaime Esteves width=55px
Jaime EstevesTax Lead Partner+351 213 599 601
Jorge Figueiredo Title = Jorge Figueiredo width=55px
Jorge FigueiredoPartner, Financial Services / International Tax Structuring+351 213 599 618
Leendert Verschoor Title = Leendert Verschoor width=55px
Leendert VerschoorPartner, Transfer Pricing / Human Resources / International Tax Structuring+351 213 599 631
Maria Torres Title = Maria Torres width=55px
Maria TorresPartner, Mergers & Acquisitions Tax+351 225 433 135
Rosa Areias Title = Rosa Areias width=55px
Rosa AreiasPartner, International Tax Structuring+351 225 433 197
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Susana ClaroPartner, Indirect Taxes+351 213 599 618
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Paulo RibeiroPartner, Tax Management & Accounting Services+351 213 599 513
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Adriao SilvaDirector, Financial Services+351 213 599 625
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Catarina GonçalvesPartner, International Tax Structuring+351 213 599 659
Susana Caetano Title = Susana Caetano width=55px
Susana CaetanoDirector, Indirect Taxes+351 213 599 610
Ana Reis Title = Ana Reis width=55px
Ana ReisDirector, International Tax Structuring+351 225 433 135
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