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Norway; Portugal

27 April 2011

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Treaty between Norway and Portugal – details

Details of the income tax treaty and protocol between Norway and Portugal, signed on 10 March 2011, have become available. The treaty was concluded in the Portuguese, Norwegian and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. Once in force treaty will replace the former income and capital tax treaty of 24 June 1970 between Norway and Portugal. The treaty generally follows the OECD Model Convention.

The maximum rates of withholding tax are:

-   15% on dividends in general; 5% if the beneficial owner is:
-   a company (other than a partnership) that has for an uninterrupted period of at least 12 months prior to the payment of the dividends or if the company paying the dividends has existed for less than 12 months, during the lifetime of the company, holds directly at least 10% of the capital of the company paying the dividends; or
-   either contracting state or a political or administrative subdivision or a local authority or the central bank thereof;
-   the Government Pension Fund (in the case of Norway) or "fundos de capitalizacão administrados por entidades públicas" (in the case of Portugal);
-   10% on interest, subject to exceptions; and
-   10% on royalties.

Deviations from the OECD Model include that:

-   the term "permanent establishment" (PE) includes a building site, a construction, assembly or installation project or a supervisory or consultancy activity connected therewith but only where such site, project or activity lasts for more than 6 months (Art. 5(3));
-   the term "royalties" includes payments received for the use of or the right to use films or tapes for radio or television broadcasting (Art. 12(3));
-   the treaty includes an article on independent personal services (Art. 14) in line with the UN Model Convention (2001); and
-   the treaty includes an article on offshore activities (Art. 21).

Both countries generally provide for the credit and exemption-with-progression methods to avoid double taxation (Art. 23(1)(2)).

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