Non-resident taxpayers with a Portuguese permanent establishment are subject to tax regarding (i) income derived by or through the permanent establishment, and (ii) other income arising from Portuguese sources through activities with a similar nature to those carried out by the permanent establishment.

Non-resident companies without a permanent establishment are generally liable to corporate income tax only for their Portuguese source income, including capital gains.

From 1 January 2018, a permanent establishment is required to adopt a suitable and justifiable method to apportion costs, losses, or negative changes in assets that are related to other operations or assets of the taxpayer.

According with the Corporate Income Tax Code (CITC), the term permanent establishment means a fixed place of business through which an activity of a commercial, industrial or agricultural nature is carried out. Where this condition is met, the term permanent establishment includes:

• A place of management;
• A branch;
• An office;
• A factory;
• A workshop;
• A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and
• Facilities, platforms, or ships in general used in prospective or exploitation of natural resources, if they last for more than 90 days (reduced from 6 months effective 1 January 2021).

Effective 1 January 2021, the concept of permanent establishment also includes the following:

• An enterprise furnishing services including consulting services through its own personnel or subcontractors hired for carrying out such services in Portugal for a period or periods aggregating more than 183 days within any 12-month period;
• A dependent agent PE is constituted where a person (other than an independent agent) acts on behalf of a non-resident enterprise and in doing so:
  • habitually exercises powers of intermediation and conclusion of binding contracts, in the context of the enterprise's activities, including contracts:
    • in the name of (on behalf of) the enterprise;
    • for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use; or
    • for the provision of services by that enterprise;
  • plays a decisive role in the conclusion by the enterprise of contracts referred to above in a routine manner and without substantial changes; or
  • maintains a stock of goods or merchandise in Portugal for their delivery on behalf of the enterprise, even though the person does not usually conclude contracts in relation to those goods nor has any intervention in the conclusion of such contracts;
• Use of facilities or the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of delivery; and
• A fixed place of business for storing goods or for the maintenance of a stock of goods or merchandise if an enterprise, or a closely related enterprise (50% control or common control), exercises a complementary activity that forms a coherent set of businesses activities in the same place or other places in Portugal, where:
  • the installation or warehouse constitutes a permanent establishment of that enterprise or other closely related enterprise; or
  • the whole activity resulting from the combination of activities carried out by two or more closely related enterprises in the same place, or by the same enterprise or closely related enterprises in different places in Portugal, is not preparatory or auxiliary in nature.

Notwithstanding the above, the definition of permanent establishment does not include:

• The use of facilities solely for the purpose of storage, display or delivery of goods or merchandise owned by the enterprise;
• The maintenance of a stock of goods or merchandise owned by the enterprise solely for the purpose of storage or display and the maintenance of a stock of goods or merchandise owned by the enterprise solely for the purpose of processing by another enterprise;
• The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the enterprise;
• The maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary nature; and
• The maintenance of a fixed place of business solely for any combination of activities previously mentioned, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary nature.