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19 February 2010

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Budget for 2010 – direct taxation details

The Budget for 2010 was presented to the parliament by the Ministry of Finance on 26 February 2010. Details of the Budget regarding direct taxation are summarized below. Unless otherwise indicated, these measures will apply from the day following publication of the law in the Republic Gazette.
(a) Corporate taxation.

-   Payments of remuneration and bonuses to managers and administrators will be subject to an autonomous penalty tax (taxa autonoma) of 35% (50% in case of payments made by financial institutions) provided that such payments are over 25% of the annual remuneration, and exceed EUR 27,500. Those limits do not apply if at least 50% of the payment is deferred for a period of 3 years and is conditional upon the employer's financial performance during that period.
-   The amount of corporate income tax (imposto sobre o rendimento das pessoas colectivas – IRC) due cannot be lower than 75% (previously, 60%) of the IRC that would be due in case no tax benefits or special regimes were applied by the taxpayer.
-   The exemption applied on dividends distributed by resident entities to entities resident in a EU Member State is extended, under certain conditions, to (i) dividends distributed to an entity resident in an EEA country; and (ii) dividends distributed to a permanent establishment situated in a EU Member State or in an EEA country, the head office of which is an entity resident in another EU Member State or in a country that is part of the EEA.
-   The exemption method for elimination of economic double taxation (which applies to profits distributed by entities resident in EU Member States to resident entities in Portugal) is extended, under certain conditions, to (i) profits distributed by EEA-resident entities; and (ii) profits distributed to a permanent establishment in Portugal of an EU and EEA-resident entities.
-   The simplified regime for the calculation of the IRC taxable base is revoked with effect from 1 January 2011.

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