DAC 6 – Filing of information on reportable domestic and cross-border arrangements: postponement of deadlines
Decree-Law 53/2020, of 11 August, transposes into national law Council Directive (EU) 2020/876, of 24 June 2020, that amends Directive 2011/16/EU, of 15 February, on administrative cooperation in the field of taxation.
The Decree-Law postpones the deadlines to file information on reportable domestic and cross-border arrangements, foreseen in Law 26/2020, of 21 July, as follows:
- Information on reportable cross-border arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020 – to be filed by 28 February 2021;
- Reportable domestic or cross-border arrangements made available for implementation or ready for implementation, or where the first step in its implementation has been made between 1 July 2020 and 31 December 2020 (also applicable to intermediaries having provided, directly or by means of other persons, aid, assistance or advice concerning a reportable arrangement) - the period of 30 days for filing information to begin by 1 January 2021;
- Situations covered by legal or contractual secrecy involving the filing of information on reportable domestic or cross-border arrangement made available for implementation or ready for implementation, or where the first step in its implementation has been made between 1 July 2020 and 31 December 2020 – the period of 5 days to inform the taxpayer to begin by 1 January 2021;
- Domestic and cross-border marketable arrangements – first periodic report to be filed by the intermediary by 30 April 2021.
COVID-19 – Social Security: Exemption and partial relief of employer’s contributions
Decree-Law 46-A/2020, of 31 July, published in the Official Gazette, establishes the extraordinary support to the gradual recovery of the activity of companies in business crisis situation, with temporary reduction of the standard working hours. It also foresees the exemption and partial relief of Social Security contributions due by the employer, as follows.
The referred exemption and partial relief are granted to employers in a business crisis situation that access the extraordinary support now published (the remaining requirements laid down in the diploma should be met). The measure benefits the following entities:
- Micro, small and medium sized companies
(i) August and September 2020: full exemption;
(ii) October, November and December 2020: partial relief of 50%.
- Large companies
(i) August and September 2020: partial relief of 50%;
(ii) October, November and December 2020: no exemption or partial relief available.
COVID-19 – Additional extraordinary tax measures for cooperatives, micro, small and medium sized companies
Law 29/2020, of 31 July, published in the Official Gazette, establishes COVID-19 pandemic related tax measures to support cooperatives as well as micro, small and medium sized companies (SME), as follows:
I – Payments on account of CIT: temporary suspension
Cooperatives, as well as micro companies and PME are allowed not to make the payments on account of CIT foreseen in articles 105 and 107 of the CIT Code, regardless of the fact that the respective payment can be made in extended deadlines as established in Notice 104/2020-XXII of the State Secretary of Tax Affairs, of 9 March 2020.
II – Special Payment on account of CIT: temporary suspension and early refund
Cooperatives, as well as micro companies and PME are allowed not to make the special payment on account of CIT foreseen in article 106 of the CIT Code.
In 2020, these entities are also allowed to request an early refund of the special payment on account that was not deducted until 2019, without the need to observe the deadline foreseen in article 93 no. 3 of the CIT Code.
III – Deadline for refunds of VAT, CIT and PIT
The refund of withholding taxes, payments on account or VAT in excess of the amounts due is made within 15 days following the fling of the respective return by the taxpayer.
2020 Supplementary Budget gazzetted - Additional COVID-19 tax measures enacted
Law 26-A/2020, of 24 July, amends the 2020 State Budget Law. It includes the following tax measures:
I - Corporate Income Tax
(i) Tax incentives
- Incentives to SME restructuring in 2020 under the tax neutrality regime were introduced. Subject to several requirements, it is allowed the disregard, in the first three tax years, of the deduction limits on tax losses of the incorporated companies, which have been incorporated by means of a tax neutral merger.
- Introduction of a special investment tax credit scheme (“Crédito Fiscal Extraordinário de Investimento” or “CFEI II”); any taxpayer who incurs investment expenses between the 1st of July 2020 and the 30th June 2021 (or if the entity’s taxable period starts July 1st, during the 12 following months) on the acquisition of tangible fixed assets, non consumable biological assets and intangible assets, benefits from a 20% CIT deduction on investment expenses, up to EUR 5 million and capped at 70% of the CIT assessed (carry forward for 5 years is allowed in case the CIT assessed is not sufficient). Among other requirements, the taxpayer is disallowed to terminate or make redundant any employees for a period of 3 years (otherwise penalties arise).
(ii) Payments on account
- Cooperatives, micro, small and medium companies can request in 2020 the full refund of the amount of special payments on account (“Pagamento Especial por Conta” or “PEC”) that until 2019 was not yet deducted (meaning that the refund is not condition to wait for the sixth tax year following the year in which the PEC was paid).
- Introduction of an exceptional limitation on 2020 payments on account owed by CIT taxpayers, ranging from 50% to 100% of the respective amount, under certain conditions.
(iii) Tax losses
- Period for carry forward of tax losses: the deadline for carrying forward tax losses generated by large companies in 2020 and 2021 was extended to 12 tax years (currently 5 tax years), although the carry forward of tax losses generated by SME is kept at 12 tax years. In addition, there is an increase of the tax loss deduction limit from 70% to 80%, when the difference stems from tax losses incurred in 2020 and 2021. Finally, the 2020 and 2021 tax years are disregarded when calculating the deadlines for the carry forward of tax loss in 2020.
- A special regime was created allowing the transmission of tax losses of SME qualifying in 2020 as "company in difficulties" and corresponding deduction (subject to a series of requirements) of those tax losses by the acquiring company, in case the SME is
acquired by the 31st December 2020.
II - Personal Income Tax
Taxpayers under Category B (self employment income) who must make a payment on account in 2020, but do not make the first and second payments on account, may rectify the full amount owed up to the deadline for the third payment on account (20th December 2020). Such rectification will occur free of charge.
III - Additional Solidarity Levy for the Banking Sector
A Solidarity Levy for the banking sector ("Adicional de Solidariedade do Setor Bancário") was introduced. It is due by credit institutions and
branches in Portugal of credit institutions whose head office and place of effective management are not located in the Portuguese territory. It shall be levied on the amount of the liabilities, net from the liability items included in capital and the deposits covered by the Deposit Guarantee Fund and the Mutual Agricultural Credit Guarantee Fund, where applicable; and the notional amount of the financial derivatives accounted for in the off-balance sheet.
The applicable rates vary depending on the taxable base:
- The liabilities (including the liability items that are included in capital), are subject to a rate of 0.02%;
- The notional value of off-balance sheet derivative financial instruments is subject to a rate of 0.00005%.
The Solidarity Surcharge shall be self-assessed until the last day of June of the year followingwhich the accounts refer to and must be paid within that period.
A transitional regime applies in 2020 and 2021.
IV - Instalment plans for the payment of tax and Social Security debts
An exceptional regime is applicable to tax and Social Security debts incurred during the period between the 9th March and the 30th June 2020.
Amendments to existing instalment plans under the new regime do not require additional guarantees. Existing guarantees are maintained, which will be progressively reduced as prescribed in the Tax Procedures Code (‘Código de Procedimento e de Processo Tributário’).
Reportable cross border arrangements – Council Directive (EU) 2018/822 (DAC 6)
Law 26/2020, of 21 July, published in the Official Gazette, transposes Council Directive (EU) 2018/822, of 25 May 2018. It determines the obligation to report to the tax authorities certain internal and cross border tax arrangements.
Hybrid mismatches – Anti Tax Avoidance Directive (ATAD) transposed
Law 24/2020, of 6 July, published in the Official Gazette, transposes the Anti Tax Avoidance Directive (ATAD) as regards hybrid mismatches with third countries.
Following the transposition, the CIT Code now includes Article 68-A (Definitions), Article 68-B (Hybrid Mismatches), Article 68-C (Reverse Hybrid Mismatches) and Article 68-D (Tax Residency Mismatches).
This Law further amends no. 11 of Article 67 of the CIT Code, regarding limitation on the tax deductibility of financial expenses. These rules now apply to credit securitization companies, previously excluded.
COVID-19 - Additional tax measures proposed to support micro, small and medium sized companies, and cooperatives
The Parliament approved a law proposal that includes additional tax measures to support micro, small and medium sized companies (as per the definition included in EU Commission's Recommendation of 6 May 2003), as well as cooperatives, as follows.
(i) Corporate Income Tax
- Payments on account:
- temporary suspension of the payments on account of CIT as well as the special payment on account shall apply to micro, small and medium sized companies, as well as cooperatives;
- In case the amount of the payment on account assessed and paid exceeds the amount effectively due, the refund of the excess should be made within 15 days upon the filing of the respective tax return/statement.
- Special payments on account: In 2020, micro, small and medium sized companies, as well as cooperatives, can request the refund of the amounts of special payments on account that were not offset against the tax due until 2019, without the need to meet the legal deadline (as a rule, within 90 days upon the end of the 6th tax year following the one to which the special payment on account concerns);
- In case the amount of VAT assessed and paid exceeds the amount effectively due, the refund of the excess should be made within 15 days upon the filing of the respective tax return.
(iii) Withholding taxes
- In case the amount of PIT or CIT withholding taxes assessed and paid exceeds the amount effectively due, the refund of the excess should be made within 15 days upon the filing of the respective tax return/statement.
These measures are not yet in force.
COVID-19 - Postponement of deadlines
Following Orders issued by the State Secretary of Tax Affairs, the following deadlines to comply with tax obligations have been extended:
- 2019 Company's Simplified Information / Annual Statement ("IES/Declaração Anual") - can be filed until 15 September 2020; this is a second extension, as there was a first extension to 7 August:
- Personal Income Tax 2020 first payment on account - can be paid until 31 August 2020 (20 July, as a rule).
COVID-19 - VAT - Postponement of deadlines for filing of returns and payment
An Order of the State Secretary of Tax Affairs dated 24 June 2020 extends the deadlines to file VAT returns, as well as the deadlines for the payment of VAT, as follows:
I - Filing of VAT returns and payment of VAT
- May and June 2020 monthly VAT returns
- Can be filed until 17 July and 17 August 2020, respectively;
- The payment of the VAT assessed can be made until 25 July and 25 August 2020, respectively.
- April to June 2020 quarterly VAT return
- Can be filed until 22 August 2020;
- The payment of the VAT assessed can be made until 25 August 2020.
II - Replacement VAT returns
- February and March VAT monthly returns;
- January to March VAT quarterly return;
- That have been completed based on the data of the web-based invoice record (“e-Fatura”), without other supporting documentation;
- Applicable to VAT taxpayers with a turnover up to EUR 10 million (with reference to 2019), or that have started their activity on or after 1 January 2020, or that have restarted their activity on or after 1 January 2020 and had no turnover in 2019;
- Regularisation by means of replacement VAT returns to be made until 20 December 2020 (any VAT due should be paid on the same moment without any penalties).
2020 Supplementary Budget Proposal presented to the Parliament
On 9 June, the Government submitted to the Parliament the Supplementary Budget Proposal for 2020. The document includes a number of proposed tax measures, already included in the Economic and Social Stabilization Program
COVID-19 - Economic and Social Stabilization Program: main tax measures proposed
Council of Ministers’ decision 41/2020, of 4 June, published in the Official Gazette of 6 June 2020, approves the Economic and Social Stabilization Program (“Programa de Estabilização Económica e Social” or “PEES”). PEES aims to respond to the consequences of the COVID-19 pandemic. The main tax measures proposed are as follows.
I - CIT
a) 2020 Payment on Account
The rules and payment methods of the 2020 payment on account (PPC) are adjusted as follows:
- Decrease in billings of over 20% in the 1st semester of 2020 – PPC is capped up to 50%;
- Decrease in billings of over 40% in the 1st semester of 2020, along with the tourism and food sectors - PPC is capped at 100%.
b) Autonomous taxation
Aggravated autonomous taxation rates are waived for companies that show taxable losses in 2020, having assessed taxable profits in previous tax years.
c)Taxable losses generated in 2020 and 2021
- The years of 2020 and 2021 will not be relevant for the purposes of the computation of the time limit to offset existing taxable losses at 1 January 2020;
- Extension to 10 years (as opposed to the 5 years established in the existing rule, except in case of small and medium sized companies) of the time limit to carry forward taxable losses generated in 2020 and 2021;
- The cap on taxable profit to offset taxable losses generated in 2020 and 2021 is increased to 80% (as opposed to the 70% cap established in the existing rule).
d) Restructuring of Small and Medium-sized Companies (SME’s) taking place in 2020
(i) Business restructuring
It is foreseen:
- Waive on the cap concerning the use by the acquiring company of the taxable losses of the acquired companies (with reference to the assets of the companies involved in the restructuring); this measure prohibits profits distributions throughout a 3-year period;
- Waive of the State Surtax, for the same 3-year period.
(ii) Acquisitions of an SME
It is foreseen the transfer of taxable losses is allowed upon the acquisition of SME’s that are considered ‘companies in difficulty’ in 2020, ”, and respective use at the level of the acquiring entity; this measure prohibits profits distributions and requires the maintenance of jobs for a 3-year period.
e) Special investment tax credit (“Crédito Fiscal Extraordinário de Investimento” or “CFEI”)
Investment expenses made in the 2nd semester of 2020 and in the 1st semester of 2021 allow:
- A CIT credit of 20% of the total expenses incurred (capped at EUR 5 million);
- The CIT credit can be carried forward for a maximum of 5 tax years;
- The measure requires the maintenance of jobs throughout the period of the tax credit, and for a minimum of 3 years.
II - VAT – Refund to event organizers operating in the tourism sector
It is foreseen the refund of VAT deducted and included in expenses incurred in by organizers of congresses, fairs, exhibitions , seminars and similar events. The expenses concerned should relate to direct needs of the organizers related to the referred events.
III - Social Security
Further exemptions and reductions of the employer’s Social Security contributions are established. The measure implies prohibition of collective termination of jobs and profits distributions throughout the period of its effectiveness.
a) Micro and SME’s
- July 2020 – closed down companies and companies with a decrease in billings of over 40% - exemption;
- August and September 2020 – companies with a decrease in billings equal to or higher than 40% - exemption;
- October and December 2020 – companies with a decrease in billings equal to or higher than 40% - reduction by 50%;
b) Large companies
- July 2020 – closed down companies and companies with a decrease in billings of over 40% - exemption;
- August and September 2020 – companies with a decrease in billings equal to or higher than 40% - reduction by 50%;
- October and December 2020 – companies with decrease in billings equal to or higher than 40% - no reduction available.
IV – Additional solidarity tax for the banking sector
An additional solidarity tax for the banking sector will be created, amounting to 0.02 pp. It shall be owed by:
- Credit institutions with head office and place of effective management in the Portuguese territory;
- Subsidiaries in Portugal of credit institutions whose head office and place of effective management are not located in the Portuguese territory;
- Branches in Portugal of credit institutions whose head office and place of effective management are located outside the Portuguese territory.
V – Simplification measures
Several measures are foreseen, such as:
- SIMPLEX SOS – simplifications of public administration procedures, such as the simplification of notifications, of the calculation of deadlines, of the issuance of opinions, as well as the facilitating of the use of digital means for notifications and establishing contact;
- Transitional regime for the reduction of court fees, aiming at increasing the number of concluded proceedings by means of settlement, agreement or withdrawal;
- Increasing the efficiency of the administrative and tax courts by means of specialisation; expediting and allowing for greater transparency in court cases through the increased use of electronic means.
VI – Payment in instalments of tax and Social Security debts
Insolvent companies or those either with an approved business recovery plan (“Processo Especial de Revitalização” or “PER”) or under the extra judicial procedure for companies’ recovery (“Regime Extrajudicial de Recuperação de Empresas” or “RERE”), that are effectively compliant with those plans, are granted the following benefits:
- Existing recovery plans may include tax and Social Security debts which relative taxable event occurred from 9 March to 30 June 2020; these debts are subject to the same requirements as the existing plans, no additional guarantees and required, and the respective payment can me made in up to the maximum number of instalments agreed upon in the existing recovery plan;
- In case the existing instalment plan ceases before 30 December 2020, the number of instalments applicable to the new debts can be extended until the end of the referred date.
COVID-19: Reduced value-added tax (VAT) rate for disinfectant gel
Order no. 5335-A/2020, published in the Official Gazette, establishes the application of a reduced VAT rate to imports, transfers, and intra-Community acquisition of masks for respiratory protection and skin disinfectant gel. This measure is effective from 8 May 2020 to 31 December 2020.
COVID-19: Exemption and reduced VAT rate applicable to certain goods
Law no. 13/2020, of 7 May 2020, published in the Official Gazette, establishes the following temporary measures:
- Exemption from VAT on intra-Community supply and acquisitions of goods (listed in the annex to the referred Law) necessary to tackle the effects of the COVID-19 outbreak. It applies to acquisitions made by the state and other public bodies or non-profit organisations. This measure applies from 30 January 2020 to 31 July 2020.
- Application of the reduced VAT rate to imports, as well as intra-Community supplies and acquisitions, of masks for respiratory protection and skin disinfectant gel. The reduced rate applies from the 8 May 2020 to 31 December 2020.
COVID-19: Extension of tax benefits for donations to public enterprises
Order 157/2020/XXII, of 4 May 2020, of the State Secretary of Tax Affairs (Secretário de Estado dos Assuntos Fiscais or SEAF) establishes the extension, until 31 July 2020, of the corporate income tax (CIT) additional deduction (40%) relevant to costs incurred with donations granted to the entity SPMS (Serviços Partilhados do Ministério da Saúde), EPE (public enterprise or Empresa Pública Empresarial), and to medical institutions integrated in the regional health public services, all having the status of EPE.
The stamp tax exemption applicable to such donations is also extended to 31 July 2020.
COVID-19: Additional deduction of donations granted to public enterprises
Order 137/2020-XII, of 3 April 2020, of the State Secretary of Tax Affairs, establishes that, while the state of emergency is in force, donations granted by resident entities to the entity SPMS, EPE, and to hospital institutions integrated in the regional health public services, all having the status of EPE:
- are allowed as a tax deductible cost for CIT purposes for 140% of the respective amount, and
- are exempt from stamp tax.
COVID-19: Extension of deadlines to file tax statements and pay taxes
Order 153/2020-XXII, of 24 April 2020, of the State Secretary of Tax Affairs, extends the deadlines to comply with several tax obligations, as well as the deadlines for the payment of taxes.
Company’s Simplified Information (IES) / Annual Statement
The deadline to file the IES was extended to 7 August 2020.
Tax file ('dossier fiscal')
The deadline to prepare, or to file (when applicable), the tax file was extended to 31 August 2020.
Transfer pricing documentation
The deadline to prepare, or to file (when applicable), the transfer pricing documentation was extended to 31 August 2020.
- March 2020 periodic VAT return:
- Can be filed until 18 May 2020.
- The payment of the VAT assessed can be made until 25 May 2020 (eligible taxpayers can opt to pay the tax in instalments).
- VAT payers with a turnover up to 10 million euros (EUR) (with reference to 2019), or that have started their activity on or after 1 January 2020, or that have restarted their activity on or after 1 January 2020 and had no turnover in 2019, may complete the VAT return based on the data of the web-based invoice record ('e-Fatura') without the need for other supporting documentation, and, if necessary, regularised by filing a replacement VAT return until 31 August 2020 (any VAT due should be paid at the same moment).
- April 2020 periodic VAT return:
- Can be filed until 18 June 2020.
- The payment of the VAT assessed can be made until 25 June 2020 (eligible taxpayers can opt to pay the tax in instalments).
Quarterly regime: January 2020 to March 2020 periodic VAT return
- Can be filed until 22 May 2020.
- The payment of the VAT assessed can be made until 25 May 2020 (eligible taxpayers can opt to pay the tax in instalments).
VAT payers with a turnover up to EUR 10 million (with reference to 2019), or that have started their activity on or after 1 January 2020, or that have restarted their activity on or after 1 January 2020 and had no turnover in 2019, may complete the VAT return based on the data of the web-based invoice record ('e-Fatura') without the need for other supporting documentation, and, if necessary, regularised by filing a replacement VAT return until 31 August 2020 (any VAT due should be paid on the same moment).
CIT and PIT withholding taxes (WHTs)
- Assessed in April 2020: Can be paid until 25 May 2020.
- Assessed in May 2020: Can be paid until 25 June 2020.
- Assessed in April 2020: Can be paid until 25 May 2020.
- Assessed in May 2020: Can be paid until 25 June 2020.
2020 State Budget published
Law no. 2/2020, of 31 March 2020, published in the Official Gazette, approved the State Budget for 2020, having entered into force on 1 April 2020.
We highlight the following measures:
- Patent box regime: The existing 50% relief from taxation now applies to income from computer program copyrights.
- Deduction for reinvestment of retained earnings: The existing tax credit is allowed throughout a four-year period (previously, three years), increasing the eligible amount to EUR 12 million (previously, EUR 10 million), and covering the acquisition of intangibles. A legislative authorisation was granted to the government to increase the type of beneficiary and eligible investments under this scheme.
- Research and development (R&D) tax incentive scheme (SIFIDE II): The existing regime was extended until 2025 (previously, 2020) and now foresees stricter rules for contributions to investment funds that finance R&D companies (a five-year mandatory holding period by the unit holder and the need to provide thorough detail of the investment fund portfolio).
VAT and other indirect taxes
- Electrical and plug-in vehicles: The deduction of VAT included in expenses incurred with electrical and plug-in hybrid vehicles is allowed.
- Excise duties: Increase of 0.3% on excise duties in general (tax on alcohol and alcoholic products, tax on oil and energy products, tax on tobacco products, vehicle tax, and vehicle circulation tax).
An exemption from stamp tax applies on cash-pooling contracts when established between companies in a domain or group relationship created, being applicable to loans not exceeding a one-year period. A relationship of domain or group exists when a so-called ‘dominant company’ holds, for more than one year, directly or indirectly, at least 75% of the capital of another so-called ‘dominated company(s)’, provided that such participation grants more than 50% of the voting rights.
A stamp tax exemption now applies on the transfer of an ongoing concern (commercial, industrial, or agricultural establishments) within the context of a business restructuring.
In 2020, the 50% increase of the stamp tax rate on consumer credit is maintained and, in addition, the tax rates of consumer credit have also increased.
The exemption from property transfer tax applicable on the acquisition of real estate by credit institutions (including their subsidiaries), in case those assets are sold to related parties, has ceased to apply.
A new 7.5% rate applies on the acquisition of residential properties whose taxable basis exceeds EUR 1 million (currently the highest rate for residential properties is 6%).
COVID-19: Tax and other measures enacted (amended)
Simplification measures for completion of VAT returns and issuance of PDF invoices
Order no. 129/2020-XXII, of 27 March 2020, issued by the Secretary of State for Tax Affairs, establishes simplification procedures to adapt compliance reporting obligations to the current circumstances caused by the COVID-19 pandemic.
In case of taxable persons that meet certain requirements, the VAT returns for February 2020 can be calculated based on the data in the 'e-invoice' platform, not requiring supporting documentation. In turn, for the regularisation of the situation without any costs/penalties, the VAT returns should be replaced based on all the support documentation, provided that this replacement and respective payment/adjustment occurs during the month of July 2020.
In addition, the issuance of PDF invoices must be accepted during the months of April, May, and June 2020, and will be considered electronic invoices for all purposes provided for in the tax law.
Finally, the above-mentioned Order extends the regime of fair impediment to the fulfilment of the fiscal obligations, considering, for its application, the situations of infection or prophylactic isolation determined by a health authority, as well as the situations of fixing a health fence that interrupts the movement of taxpayers or certified accountants, provided that they have their professional or tax domicile in the aforementioned areas.
Deferral of payment of CIT and PIT WHTs and VAT
Following the publication of Decree-Law 10-F/2020, of 26 March 2020, and effective as from 12 March 2020, the payment of CIT and PIT WHTs, as well as VAT (monthly and quarterly regimes) due in April, May, and June 2020 can be deferred, as follows:
- Payment in three or six monthly instalments, upon electronic request, with no interest due or need to present a guarantee.
- The first instalment should be paid within the legal deadline foreseen; subsequent instalments should be paid in the next months, within the legal deadline foreseen.
- This measure applies to:
- Self-employed workers.
- With a turnover up to EUR 10 million euros (EUR) in 2018.
- That have started their activity from 1 January 2019 onward.
- That have reinitiated their activity from 1 January 2019 onward, not having registered any turnover in 2018.
- Which activity is included in a sector that was closed following the declaration of a state of emergency, as foreseen in Article 7 and Annex I of Decree-Law 2-A/2020, of 20 March 2020.
- Which invoicing in 2020 (as communicated through the e-invoice system or with reference to the turnover) decreases by at least 20% in the average three months prior to the month in which the taxes should paid (with reference to the same period in 2019); certification by statutory auditor or certified accountant is required.
Deferral of payment of social security contributions
Decree-Law 10-F/2020, of 26 March 2020, also establishes that the payment of Social Security contributions can be deferred, as follows:
- Social contributions due in March 2020 with reference to February 2020: Entities that did not pay the social contributions due on 20 March 2020 with reference to February 2020 can make the respective payment until 31 March 2020.
- Social contributions due in April, May, and June 2020: Deferral of payment allowed as follows:
- Payment of 1/3 of the amount of the social contributions due by the employer, to be made in the month in which they are due.
- The remaining 2/3 of the social contributions can be made in three or six monthly equal instalments, starting in July 2020, interest-free.
- It is not necessary to file a request to have access to this measure; however, in July 2020, the employer should inform the Social Security authorities which instalment period (three or six months) will be implemented.
- Entities that paid the total amount of the social contributions due in March 2020 and related with February 2020 can initiate the deferred payment in April 2020 ending in June 2020.
- This measure applies to:
- Self-employed workers.
- Private and social employers:
- With less than 50 employees.
- With 50 and up to 249 employees, that:
- Face a decrease of at least 20% of invoicing (as communicated through the e-invoice system or with reference to the turnover) in March, April, and May 2020, with reference to the same period in 2019.
- Having started their activity in less than 12 months, face a decrease of at least 20% of invoicing (as communicated through the e-invoice system or with reference to the turnover), with reference to the average of the period of activity.
- With 250 or more employees:
- That face a decrease, duly certified by joint statement of the entity and the respective certified accountant, of at least 20% of the invoicing (as communicated through the e-invoice system or with reference to the turnover) in the months of March, April, and May 2020, with reference to the same period in 2019 (average of the period of activity in case of entities that have started their activity in less than 12 months).
- A social solidarity private institution or equivalent.
- An entity which activity is included in a sector that was closed following the declaration of a state of emergency.
- An entity which activity was suspended, following legislation enacted or administrative decision.
- The number of employees considers the statement of remunerations of February 2020.
- Lack of payment of the first instalment of 1/3 implies the cease of the benefits; all instalments shall become due immediately, and interest will be charged.
Suspension of tax and social security procedures
As per Law 1-A/2020, of 19 March 2020, effective as of 13 March 2020, and Decree-Law 10-F/2020, of 26 March 2020, effective as of 12 March 2020, the following measures have been enacted:
- Suspension of ongoing compulsory tax and social security collection procedures, of ongoing tax and social security debt instalment plans, and of deadlines of tax procedures.
- Suspension of deadlines for filing tax administrative and judicial claims, and hierarchical appeals, unless these procedures are allowed by other means (conference call or videoconference).
Exemption from VAT on donations
Order no. 122/2020-XXII, of 24 March 2020, issued by the State Secretary for Tax Affairs, establishes that, during the national emergency situation related with the COVID-19 pandemic, the exemption foreseen in Article 15, no. 10 (a) of the VAT Code, is also applicable to the supplies of goods free of charge made to the state, to private social security institutions, and to non-governmental non-profit organisations, for later distribution to people in need, even if those goods remain in the ownership of those entities. The right to deduct the tax incurred applies as provided for in Article 20, paragraph 1, point (b) (IV) of the referred Code. For this purpose, people in need are also considered those who are receiving health care in the current pandemic context, who are considered victims of catastrophe.
Deferral of CIT payments and of the deadline for filing the 2019 CIT return
Following the publication of Order 104/2020-XXII, of the State Secretary of Tax Affairs, of 9 March 2020, the following measures have been introduced:
- The first special payment on account was extended from 31 March 2020 to 30 June 2020.
- The filing of the 2019 CIT return and payment of CIT, Municipal Surtax and State Surtax, if due (usually, 31 May, in case of taxpayers with a tax year corresponding to calendar year), was extended to 31 July 2020.
- The first CIT prepayment, and the first State Surtax additional prepayment, have been extended from 31 July 2020 to 31 August 2020.
Multilateral Convention: Portugal deposits instrument of ratification
Following the deposit of the instrument of ratification on 28 February 2020, the Multilateral Convention to implement tax treaty related measures to prevent base erosion and profit shifting (Multilateral Convention) shall enter into force on 1 June 2020 in respect of Portugal.
The production of effects of the provisions of the Multilateral Convention should be assessed on a case-by-case basis in respect of each convention for the elimination of double taxation concluded by Portugal.
2020 State Budget Law proposal delivered to the Parliament
On 16 December 2019, the government delivered the 2020 State Budget Law proposal to the Parliament.
Ratification and approval of Multilateral Instrument (MLI)
Presidential Decree no. 70/2019 and Parliament’s Resolution no. 225/2019, both of 14 November 2019, were publish in the Official Gazette. They ratify and approve, respectively, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ('Multilateral Instrument' or MLI).
Under no. 2 of Article 34 and Article 39, both of the MLI, the MLI shall enter into force in respect of Portugal on the first day of the month following the expiration of a period of three calendar months beginning on the date of the deposit of the instrument of ratification with the Secretary-General of the Organisation for Economic Co-operation and Development (OECD) (Depositary).
Tax treaty between Portugal and Angola enters into force
Following the publication of Notice n.º 93/2019, published in the Official Gazette of 1 October, the tax treaty between Portugal and Angola for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income entered into force on 22 August 2019. Accordingly, its provisions shall apply for the first time:
- In Portugal:
- Regarding taxes withheld, where the taxable event occurs on or after 1 January 2020.
- For other taxes, regarding tax years starting on or after 1 January 2020.
- In Angola:
- Taxes where the taxable event occurs after 31 December 2019.
The tax treaty between Portugal and Angola for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income foresees, among other measures, the following:
- Dividends: Rate of 8% in case of ownership of the share capital in at least 25% for 365 days, including the day in which dividends are paid; 15% in the remaining situations.
- Branch profit tax: Taxation of 8% of the amount of the profits repatriated.
- Interest: Rate of 10%.
- Royalties: Rate of 8%.
- Technical services: Rate of 5% (includes services of a technical nature, management services, or consultancy services).
Law 119/2019, published in the Official Gazette of 18 September, amended several tax codes. We highlight the most relevant amendments introduced.
Profits and gains: Bonds and other subordinated securities
It is now considered as income, at the level of the issuer, the total or partial reduction of the principal debt in bonds or other subordinated securities. This rule applies provided that they do not attribute to the holder the right to receive dividends or voting rights at the General Meeting of Shareholders and are not convertible into shares.
Negative equity variations: Bonds and other subordinated securities
The specific reference to instruments of regulated financial sector entities is eliminated. The provision now covers CIT payers in general, allowing a tax deduction of the negative equity variations related with the distribution of income from bonds or other subordinated securities, provided that they do not attribute to the holder the right to receive dividends or voting rights at the General Meeting of Shareholders and are not convertible into shares.
Total or partial relief or refund of WHT on income earned by non-resident entities: Simplification of procedures
There is a simplification of the procedures applicable to non-resident entities to waive or obtain a refund, totally or partially, of the WHT on Portuguese-sourced income. It will now be necessary to present a standard form, yet to be approved, accompanied by a document issued by the competent authorities of the state of residence certifying the tax residence and subjection to income tax, in the period concerned.
Tax file: Large Taxpayers
Taxpayers followed by the Unit of Large Taxpayers are now required to file the tax file, including the transfer pricing file, by 15 July following the end of the tax period (15th day of the seventh month for entities with a tax year different from the calendar year). Entities that apply the special tax regime of group taxation (RETGS) continue to be required to deliver the tax file by 15 July following the end of the tax period (15th day of the seventh month for entities with a tax year different from the calendar year).
Article 143 is added to the Corporate Income Tax Code. It includes a definition of 'turnover', being sales and services provided, including rents of investment properties. In case of banks, insurance companies, and other financial entities, the concept of 'turnover' corresponds to interest and similar income and commissions, gross premiums issued and commissions of insurance contracts, or provision of services contracts, depending on the nature of the activity developed by the taxable person.
As a consequence of this amendment, there is a revocation of numbers 4 and 5 of Article 106, concerning the turnover for the purposes of the Special Payment on Account.
The definition of transactions subject to transfer pricing rules was broadened to explicitly include transactions with associated enterprises within the scope of business restructurings.
Transfer pricing methods
The hierarchy of transfer pricing methods to be adopted by taxpayers to ensure the best comparability between the transactions or series of transactions conducted with associated enterprises and substantially similar transactions between independent enterprises was removed. Furthermore, a reference to the use of other methods or techniques of analysis was introduced in the case where transfer pricing methods cannot be used due to the unique or singular character of transactions or due to the lack or scarcity of reliable comparable data. These amendments aim at aligning the Portuguese transfer pricing legislation with the guidelines included in the 2017 version of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Company’s Simplified Information / Annual Statement
The content of the legislation has been updated to be aligned with the information included in the Company’s Simplified Information / Annual Statement regarding (i) information on transfer pricing methodologies used in the transactions, (ii) changes that occurred to the methodologies adopted (if any), and (iii) information on any transfer pricing adjustments made during the year due to the non-compliance of the arm’s-length principle in the terms and conditions of the transactions (if any).
Transfer pricing adjustments
The power of the Portuguese Tax Administration was strengthened, now allowing corrections to the taxable profit/taxable income in case of non-compliance with transfer pricing rules.
Advance Pricing Agreements (APAs)
The term of Advance Pricing Agreements is extended from three years to four years.
The legal deadlines for the payment of VAT have been extended by five days. As of 1 October 2019, the deadlines will be as follows:
- Monthly regime, until the 15th day of the second following month.
- Quarterly regime, until the 20th day of the second following month.
The deadlines for submitting periodical VAT returns remain unchanged.
Tax on drinks with added sugar or sweeteners: Introduction of new taxation brackets
Introduction of two new taxation brackets for the taxation of concentrates with a sugar content equal to or higher than 50 g/l. A reduction of the rate applicable to the previously two existing brackets is also introduced. Accordingly, there are now four tax rates that apply to sugar added beverages based on the respective sugar contents. These amendments are effective as of 1 October 2019.
Packages intended for export or to be used as board supplies will no longer be required to make reference to 'export'. Additionally, the option to include the bar code option on the packages has been revoked.
Public sales of tobacco packs manufactured for domestic consumption will be required to have a unique identifier, in addition to the special stamp, in accordance with applicable law. These changes entered into force on 1 October 2019.
Circulation Tax (IUC)
For the purposes of IUC, from 1 January 2020 onwards, vehicles are considered:
- Category A: Passenger cars and mixed-use cars with a gross weight not exceeding 2,500 kg that have been registered for the first time in national territory, in a member state of the European Union (EU), or in a member state of the European Economic Area (EEA) from 1981 until the date of entry into force of the Circulation Tax Code.
- Category B: Passenger cars referred to in Article 2 paragraph (1) subparagraphs (a) and (d) of the Road Tax Code and mixed-use cars with a gross weight not exceeding 2,500 kg that were first registered in the national territory, in a member state of the European Union, or in a member state of the European Economic Area after the entry into force of the Circulation Tax Code.
It is now specifically foreseen that taxable persons liable to charge the tax and entities that bear the tax can file a claim under article 131, no. 1, of the Tax Process and Procedure Code (claim concerning error in case of self-assessment). This amendment entered into force on 1 January 2020.
Offset of stamp tax
Article 51 of the Stamp Tax Code is revoked. It concerned the offset of the tax due in result of the annulment or reduction of the transaction amount or material errors in the computation of stamp tax. This revocation will produce effects as from the entering into force of the monthly stamp tax statement foreseen in article 52-A of the Stamp Tax Code. In case it is not possible to offset against periods prior to the date of entry into force of the monthly statement, taxpayers shall file a claim within a two-years term.
Changes to the data reported in the monthly stamp tax statement shall be made by means of a replacement statement regarding the period to which said changes refer: (i) at any time should the change result in a higher amount of tax being levied or (ii) within one year following the filing of the statement or the date of completion of a tax audit, whichever occurs first, should the change result in a lower amount of tax being levied.
Tax refunds to the taxpayer shall be done by the end of the second month following the month in which the replacement return was filed.
The above-mentioned deadlines do not extend the deadlines for filing administrative and/or judicial claims against the tax settlement.
This amendment has entered into force on 1 January 2020.
Online bingo prizes are excluded from stamp tax.
Property tax (IMI)
Property registered in the name of undivided inheritances
The identification of the heirs with reference to the respective share is now included in the urban land register in case of property registered in the name of undivided inheritances.
Access to tax booklets
Lawyers and solicitors are also allowed to access to the information included in the tax booklets of the real estate owned by their clients if acting for the benefit of the client, being, however, subject to confidentiality obligations regarding the information accessed.
Aggravated tax rates for partially vacant urban properties
The IMI rates are increased threefold also to partially vacant urban properties, for buildings that are not registered under the condominium regime, levied on the part of the Tax Registration Value that corresponds to the vacant areas.
Property transfer tax (IMT)
Power of settlement
In case the IMT return (Form 1) is filed by electronic means or under the special procedure for transfer, encumbrance, and immediate registration of urban property in a single face-to-face service, the tax office of the taxpayer's domicile or head office is considered competent for the settlement of the IMT.