News Share

The Tax Hub

Daily Tax Newsletter

Portugal

16 May 2019

Responsive image

Portugal Publishes Law to Comply with ATAD

Portugal published Law No. 32/2019 in the 3 May 2019 edition of the Official Gazette. The law includes measures to comply with the EU Anti-Tax Avoidance Directive (ATAD), except for the hybrid mismatch rules. Given that several of Portugal's anti-avoidance rules were already generally in line with ATAD, the draft law does not include major changes but does include amendments to bring the rules further in line. This includes:

  • The 30% of EBITDA interest deduction limitation rules, which are amended with expanded definitions of financing expenses and net financing;
  • The rules regarding the deferral and payment of exit tax, which are amended with the repeal of the option to pay tax after gains are (deemed) realized and the related provisions, while the options for immediate payment or payment over five years are maintained where residence is transferred to an EU Member State or an EEA State with an agreement on mutual assistance;
  • The rules regarding the exclusion of profits of a PE, which are amended to include the condition that the PE is subject to tax on its profits that is at least 50% of the tax that would be paid in Portugal.

One area where greater changes are made is to Portugal's general anti-abuse rule (GAAR), which is amended to provide that:

  • If an arrangement or a series of arrangements, with the principal purpose or one of the principal purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law, is carried out with an abuse of legal forms or is not considered genuine, taking into account all relevant facts and circumstances, then the arrangement(s) will be disregarded for tax purposes and taxed according to the norms applicable to the business or acts that correspond to the economic substance or reality that do not produce the desired tax advantages;
  • If such arrangements or series of arrangements have resulted in the non-application of withholding tax or a reduction in withholding tax, it will be considered that the tax advantage is produced at the level of the recipient of the income, although the person responsible for withholding may be held liable if the person has or should have knowledge of the arrangement(s); and
  • If the GAAR is applied, the compensatory interest due will be increased by 15%.

Another area where greater changes are made is to Portugal's controlled foreign companies (CFCs) rules, which includes:

  • A change in the ownership conditions to include that in determining if the 25% ownership condition is met, the shares/rights owned by related parties of a taxpayer are considered;
  • The repeal of the provision that the ownership condition is 10% if at least 50% of a CFC is held by Portuguese residents;
  • The amendment of the favorable tax regime conditions to provide that the CFC rules apply if the foreign company:
    • Is established in a territory included in a government-issued list (blacklist); or
    • The tax paid on profits is less than 50% of the tax that would be paid in Portugal;
  • The adjustment of rules on the imputation of CFC income in line with ATAD; and
  • The removal of the exemptions where the CFC is engaged in certain activities not carried out in relation to the Portuguese market, which are replaced with exemptions where:
    • The CFC is established in an EU or EEA member state and carries on substantive activity in the agricultural, commercial, industrial, or service sectors supported by personnel, equipment, assets, and facilities; or
    • The CFC's specified passive income does not exceed 25% of total income, including:
      • Royalty income and other income derived from intellectual property rights, image rights, or similar rights;
      • Dividend income and income from the sale of capital shares;
      • Income from financial leasing;
      • Income arising from operations specific to banking activities (even if not exercised by credit institutions), and insurance or other financial activities with related parties;
      • Income from an enterprise that earns income from goods and services purchased and sold to related parties with little or no economic value added; and
      • Interest income or other income from capital.

The Law entered into force on 4 May 2019.

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Crosss Border Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment Streams.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More