Portugal

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 and following the EU Anti-Tax Avoidance Directives (ATAD).
• CFC rules, very much in line with BEPS Action 3 and following the EU ATAD.
• Interest deduction limitation rules, very much in line with BEPS Action 4 and following the EU ATAD.
• Exchange of information, with the conclusion of agreements with black-listed jurisdictions, introduction of exchange of information clauses in existing tax treaties and in the new tax treaties signed, amendment of patent box regime, very much in line with BEPS Action 5 and following the transposition of EU Council Directive 2011/16/EU and its subsequent amendments (Directive on Administrative Cooperation or DAC).
• 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 and following the EU DAC6.
• Mandatory CbC reporting, in line with BEPS Action 13, having transposed EU Directive 2021/2101 (EU public CbC reporting).
• Pillar Two mechanisms, namely the IIR, the UTPR and a QDMTT, generally in line with the EU Directive 2022/2523 and the OECD/Inclusive Framework administrative guidance.

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 in 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.

The State Budget Law for 2023 has changed the deadline for fulfilling the reporting obligation of the CRS regime. Therefore, for the purposes of the CRS regime, reporting financial institutions must report information regarding each account subject to communication by 31 May of each year (previously, 31 July).

Additionally, the communication and reporting deadline for the FATCA regime has not undergone any changes, so the deadline for fulfilling the reporting obligation of the FATCA regime remains 31 July of each year, with reference to 31 December of the previous year.

Transfers to countries, territories, and regions with a more favourable tax regime

Following Law 14/2017, of 3 May, that amended the General Tax Law, the Portuguese tax authorities are required to publish on their website, on an annual basis, all transfers, including respective amount and reason, as well as statistics about those transfers, whose beneficiaries are in countries, territories, and regions with a more favourable tax regime (see list below).

List of countries, territories, and regions that provide a more favourable tax regime:

Notes

1. The Portuguese authorities have signed tax information exchange agreements (TIEAs) with these jurisdictions (in the case of the Channel Islands, only with Guernsey and Jersey). The following TIEAs are in force: Bermuda, Cayman Islands, Gibraltar, Isle of Man, Jersey, and Saint Lucia.
2. Alderney, Brechou, Great Sark, Guernsey, Herm, Jersey, Jethou, Lihou, and Little Sark.

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 held by individuals or entities residing in the Portuguese territory (IFR regime).

Reporting financial institutions must report to the PTA, by 31 July of each year, regarding the IFR regime, 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.

The new digital platform reporting rules - DAC 7

The Directive (EU) 2021/514 of 22 March 2021, hereafter referred to as DAC 7, represents a new amendment, specifically the seventh, to Directive 2011/16/EU on administrative cooperation in the field of taxation. On 26 July 2023, Law No. 36/2023 was published, transposing DAC 7, in Portugal.

Reporting platform operators are required to report to the PTA specific information with respect to the operator itself and also with respect to the reportable sellers by 31 January of the year following the calendar year in which the seller is identified as a reportable seller. Tax administrations have until the end of February to exchange information between Member States.

The first reporting year was 2023, so the first declaration should have been submitted by the reporting platform operator by 31 January 2024 (covering the 2023 calendar year), and the tax administrations exchanged information between Member States by the end of February 2024.

The reporting deadlines are the same for subsequent years, both for reporting platform operators (31 January, referring to the previous calendar year) and for tax administrations (by the end of February of the calendar year following the one being reported).

In the event of non-compliance, by the reporting platform operator, to comply with DAC 7 reporting obligations, the PTA is expected to impose penalties.