Portugal

Corporate - Corporate residence

Last reviewed - 20 January 2021

A resident company is one whose head office or effective management is located in Portugal.

Permanent establishment (PE)

Under Portuguese tax law, any fixed place of business in Portugal through which the business of an enterprise is wholly or partly carried on is deemed to constitute a PE in Portugal.

A fixed place of business comprises, among others, a place of management, a branch, an office, a factory, a workshop, a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources, and also a building site or a construction or installation project if it lasts more than six months (time period may differ considering the applicable tax treaty).

Following the amendments introduced to the Corporate Income Tax in 2021, the concept of PE is now aligned with BEPS Action 7 on Permanent Establishment Status, the OECD Model Tax Convention on Income and on Capital (OECD MC) as it read on 21 November 2017, and respective Commentaries, as well as with the Portuguese position on the Multilateral Convention. The amendments introduced also follow the UN Model Convention. Accordingly, the following situations now constitute a PE in Portugal:

  • Business activities derived from services, including consulting services, performed by an enterprise, through its own staff or subcontractors hired with the purposes of carrying such activities in the Portuguese territory; provided that such activities are performed for a period or periods exceeding in the aggregate 183 days in any twelve month period starting or ending in the relevant tax year;
  • Installations, platforms or ships in general used in prospective or exploitation of natural resources, in case the respective activity exceeds 90 days;
  • A PE may also be deemed to exist in case of a person (a dependent agent), that is not an independent agent, acts in the Portuguese territory on behalf of an enterprise and, in doing so:
    • habitually has an authority to intermediate and conclude contracts that are binding for the enterprise, within the scope of the respective activitiesnamely contracts:
      • in the name of the enterprise, or
      • for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use, or
      • for the provision of services by that enterprise;
    • habitually concludes the contracts mentioned previously, or habitually plays the principal role leading to the conclusion of such contracts that are routinely concluded without material modification by the enterprise;
    • maintains in the Portuguese territory a stock of goods or merchandise for delivery in the name of the enterprise, even if it does not conclude contracts in respect of such goods or merchandise or has any intervention in the conclusion of such contracts.

Additionally, the term PE shall be deemed not to include the following actions:

  • Use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to the enterprise.
  • Maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display, or delivery.
  • Maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise.
  • Maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise.
  • Maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.
  • Maintenance of a fixed place of business solely for any combination of activities mentioned above, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

The above does not apply in case of:

  • Use of facilities or the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of delivery;
  • A fixed place of business or stock of goods or merchandising used or maintained by an enterprise if the same enterprise or a closely related enterprise constitute complementary functions that are part of a cohesive business operation and carries on business activities at the same place or at another place in the Portuguese territory, in order to prevent the fragmentation of activities between related parties.

For the purpose of assessing the recognition of a PE, domestic law has adopted the definition of a "person or enterprise closely related to an enterprise" in line BEPS Action 7 and the OECD MC.