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7 April 2016

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Portugal 2016 Budget Law Published

On 30 March 2016, Portugal published the 2016 Budget Law (Law n.º 7-A/2016) in the Official Gazette. The main tax-related measures of the budget are summarized as follows.

CbC Reporting

Country-by-Country (CbC) reporting requirements are introduced for fiscal years beginning on or after 1 January 2016 for MNE groups meeting a consolidated group revenue threshold of EUR 750 million in the previous year. The new requirements are in line with the guidelines developed as part of Action 13 of the OECD BEPS Project. Click the following link for previous coverage of Portugal's CbC requirements.

Patent Box Regime

The Budget Law provides for the amendment of the patent box regime to bring it in line with the modified nexus approach developed as part of Action 5 of the OECD BEPS Project. This includes that the benefits of the regime will apply in proportion to the actual activities performed by the taxpayer claiming the benefits.

The current regime will be closed for new applicants from 30 June 2016, but will be grandfathered to 30 June 2021. Additional details of the new amended regime will be published once available.

Participation Exemption

The conditions for the dividend and capital gains participation exemption regime are amended. The required holding period is reduced from two years to one year, but the required holding percentage is increased from 5% to 10%. The change is effective from 2016.

Loss Carryforward Limit

The standard net operating loss carryforward limit is reduced from 12 years to 5 years. The change is effective for losses incurred in tax periods beginning on or after 1 January 2017. However, for SMEs the 12-year limit continues to apply.

Asset Valuation Step-up

In 2016, taxpayers are allowed to revalue qualifying fixed assets and investment property for tax purposes. The revaluation is subject to tax at a lower rate of 14% to be paid in three equal installments in 2016, 2017 and 2018.

Click the following link for Law n.º 7-A/2016 (Portuguese language).

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