Portuguese base erosion and profit shifting (BEPS) inspired measures
The Portuguese tax legislation includes the following provisions that are in line with BEPS:
- Anti-hybrid rules, very much in line with BEPS Action 2.
- CFC rules, very much in line with BEPS Action 3.
- Interest deduction limitation rules, very much in line with BEPS Action 4.
- Exchange of information, with the conclusion of agreements with black-listed jurisdictions, transposition of Council Directive 2011/16/EU, introduction of exchange of information clause in existing tax treaties and in the new tax treaties signed, amendment of patent box regime, very much in line with BEPS Action 5.
- Anti-treaty shopping and limitation on benefits clauses in tax treaties, very much in line with BEPS Action 6.
- Mandatory disclosure of aggressive tax planning schemes, very much in line with BEPS Action 12.
- Mandatory CbC reporting, in line with BEPS Action 13.
Portugal was one of the signatory countries of the Multilateral Instrument (MLI) in June 2017, which is effective from 1 June 2020 onwards, following the deposit of the instrument of ratification on February 2020.
Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS)
Since 2014, Portugal has embraced and implemented the FATCA and the global CRS for Automatic Exchange of Financial Account Information (the AEOI standard).
The implementation of the FATCA was made on an intergovernmental basis, through a Model 1 FATCA Intergovernmental Agreement. In 2014, the FATCA obligations were introduced in the Portuguese legal system, through the approval of the Financial Information Reporting Regime (FIRR). Two years later (2016), additional FATCA Complementary Regulations were approved, laying down rules on due diligence procedures and deadlines.
Also, Portugal is one of the CRS’s early adopters. On 29 October 2014, it signed the Multilateral Competent Authority Agreement (MCAA) for the CRS, formally reaffirming its commitment to start exchanging financial information automatically under the AEOI standard from 2017.
In October 2016, Portugal introduced into its domestic legal system a mechanism for reciprocal automatic exchange of information, with respect to residents in other EU member states and any other CRS participating jurisdictions, through the enactment of the Decree-Law No.64/2016, of 11 October. This law also transposed the Council Directive 2014/107/EU, of 9 December 2014 (also known as DAC2), amending the Council Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation.
With the adoption and implementation of these mechanisms, Portugal became part of the first set of jurisdictions that are exchanging financial account information with other jurisdictions committed to the CRS, on an automatic basis and at a global and multilateral level.
Transfers to offshores
Under Law 14/2017, of 3 May, the Portuguese tax authorities are required to publish on their website, on an annual basis, all transfers, including respective amount and reason, made to offshores, as well as statistics about such transfers.
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 EUR 50,000 to be carried out by most financial institutions to the 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.