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Portugal

3 July 2015

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Portugal's New Tax Regime for Undertakings for Collective Investment has Entered into Force

Portugal's new tax regime for undertakings for collective investment (UCI) (Decree-Law No. 7/2015) entered into force on 1 July 2015 and generally applies from that date.

UCI Types

The new regime applies to the following Portuguese UCI types:

  • Securities investment funds (fundos de investimento mobiliário);
  • Real estate investment funds (fundos de investimento imobiliário);
  • Securities investment companies (sociedades de investimento mobiliário); and
  • Real estate investment companies (sociedades de investimento imobiliário)

UCI Taxation

Under the new regime, UCIs are not subject to withholding tax, and investment income, capital gains and rental income is not included in taxable profits unless it originates from entities resident or domiciled in jurisdictions included on Portugal's blacklist. Costs incurred in relation to excluded income are also not considered in determining taxable profits.

Taxable profits are taxed based on the net profit for the financial year in accordance with the corporate income tax rules. The standard corporate tax rate (21%) applies, but UCIs are not subject to the municipal surcharge or state surcharge. Tax losses may be carried forward up to 12 years.

In addition, UCIs are subject to a stamp tax based on its global net asset value. A 0.0025% rate applies for UCIs investing exclusively in monetary market instruments and deposits. For other UCIs, the stamp tax rate is 0.0125%. The stamp tax must be self-assessed and paid quarterly.

UCI Investor Taxation

The taxation of investor income from a UCI depends on the residence of the investors and the UCI type.

For individual investors resident in Portugal, income distributed by a UCI or derived from the redemption of units or shares of a UCI is subject to final withholding tax at a rate of 28%. For corporate investors resident in Portugal, a 25% non-final withholding tax applies. However, if the corporate investor benefits from an investment income tax exemption, the withholding tax is final.

For both individual and corporate non-resident investors, income distributed by a securities investment UCI or derived from the redemption of units or shares is tax exempt as long as evidence is provided for their non-resident status and they do not have a permanent establishment in any Portuguese territory to which the income may be attributed. Income derived from a real estate investment UCI is subject to tax at a rate of 10%.

If a non-resident fails to meet the general conditions, is resident in a black-listed jurisdiction, or is directly or indirectly held by a Portuguese resident (25% or more), then the exemption or 10% rate will not apply. In such cases, a final withholding tax of 25% will apply for corporate investors, 28% for individuals, and 35% if resident in a black-listed jurisdiction.

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