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4 March 2012

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Budget for 2012 – direct taxation: Amendments

The Budget for 2012 (Law 64-B/2011), published in the Republic Gazette of 30 December 2011 and in force as of 1 January 2012 (for previous report, see Portugal-1, News 2 January 2012), was approved with amendments to its original text (for details on the original text, see Portugal-1, News 31 October 2011). The main legislative amendments on direct taxation are summarized below. For details on indirect taxation, see Portugal-2, News 16 January 2012.

Corporate taxation

-   Withholding tax on investment income obtained by resident and non-resident entities without a permanent establishment in Portugal is increased to 25% (previously, 21.5%).
-   It is clarified that the new withholding tax rate of 30% levied on investment income paid to non-resident entities domiciled in "black-listed" jurisdictions applies to all types of investment income.
-   The carry-forward period for tax losses and capital losses realized by entities whose core business is not a commercial, industrial or agricultural activity, is extended from 4 to 5 years (only applicable to tax losses and capital losses assessed after 1 January 2012).
    The rate of autonomous taxation on profits distributed to entities wholly or partially exempt from corporation income tax, when the respective shareholding has not been held for a minimum period of 1 year, is increased to 25% (previously, 21.5%).
-   Negative equity variations assessed in 2011 resulting from changes in the accounting policy of recognition of actuarial gains and losses related to defined benefit pension plans and other post-employment benefits (in respect to contributions made in 2011) are deductible in equal parts (without limitation) in 2012 and during the 9 subsequent fiscal years.

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