Portugal: Tax

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This country-specific Q&A provides an overview to tax laws and regulations that may occur in Portugal.

It will cover witholding tax, transfer pricing, the OECD model, GAAR, tax disputes and an overview of the jurisdictional regulatory authorities.

This Q&A is part of the global guide to Tax. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/tax-3rd-edition/

  1. How often is tax law amended and what are the processes for such amendments?

    Tax law is amended on an annual basis. In fact, since the Portuguese Constitution foresees the need for the Parliament’s approval for legislation on tax issues, the Government usually includes tax law amendments in the State Budget Law Proposal presented to the Parliament each year which will then be submitted to discussion and approval. Thus, the annual State Budget Law foresees amendments to most of tax Codes, as well as authorizations valid for one year for the Government to legislate within a certain tax matter.

    The Government may also occasionally create a committee composed of highly considered individuals with an in-depth knowledge of a certain tax matter for the preparation of substantial tax reforms, which will then be submitted for Parliament’s discussion and approval.

    In either case, after obtaining Parliament’s approval, tax laws must be enacted by the Portuguese President, being afterwards published in the National Gazette (“Diário da República”), when they finally enter into force.

  2. What are the principal procedural obligations of a taxpayer, that is, the maintenance of records over what period and how regularly must it file a return or accounts?

    Tax resident taxpayers must keep their records (physically or electronically) for at least 10 civil years.

    Income tax returns must be filed on an annual basis and until the end of May of the following year, as a rule, both for corporate and individual taxpayers.

    Value Added Tax (VAT) periodic returns must be filed monthly (until the 10th of the second month following the month when the operations took place) or quarterly (until the 15th of the second month following the quarter when the operations took place), depending on if the turnover obtained by the taxpayer in the previous year was equal or higher than € 650.000 (monthly regime) or lower (quarterly regime).

  3. Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?

    Portuguese key regulatory authority for tax issues is the so-called AT (“Autoridade Tributária e Aduaneira”).

    At the local tax office, taxpayers solve most of their standard issues rapidly. However, in order to optimize resources, the AT has been increasingly developing its internet portal (www.portaldasfinancas.gov.pt) in such a way that by acceding it with the respective credentials, a taxpayer can submit tax returns, consult his/her tax situation, submit exemption requests and present other claims. More recently, the portal has included a special service called “e-balcão”, which allows taxpayers to submit a specific query to the AT and obtain an answer within some days.

    There is also an AT direct telephone line available which can be used to solve specific issues or even clarify more general queries.

  4. Are tax disputes capable of adjudication by a court, tribunal or body independent of the tax authority, and how long should a taxpayer expect such proceedings to take?

    Apart from administrative claims (which are, sometimes, legally mandatory for certain matters before bringing them to the court), taxpayers may dispute a tax assessment or decision before judicial or arbitral courts.

    Judicial proceedings may take many years to get to a final decision as there is the possibility of appeal to judicial higher courts. As such, taxpayers now tend to go to arbitral courts more often, as decisions can be taken within just a few months and with very limited possibilities of appeal.

  5. Are there set dates for payment of tax, provisionally or in arrears, and what happens with amounts of tax in dispute with the regulatory authority?

    Within a tax year and apart from withholding taxes which can apply on income paid to both individual and corporate taxpayers, the latter (and individuals with business and professional income, although under different rules) may also be subject to payments on account of the final tax due, to be made into three instalments (July, September and 15th of December of the relevant tax year), corresponding to 95% (if the turnover of the previous year was higher than € 500,000) or 80% (if the turnover of the previous year was equal or less than € 500,000) of the tax assessed in the previous year net of not refunded withholding taxes.

    Corporate taxpayers may also be subject to special payments on account (in one installment – March – or in two installments – March and October), as well as to additional payments on account (under a surcharge tax) which is due by entities subject to the regime of both payments on account and special payments on account that have reported, in the previous tax year, a taxable profit exceeding € 1,500,000. Final corporate tax is due with the filing of the tax return until the end of May of the following year.

    Personal income tax (PIT) is due after the filing of the tax return and until the 31st of August or the 31st of December of the following year, depending when the tax assessment is issued.

    For VAT purposes, the deadline for submission of the periodic returns (monthly or quarterly) also applies to the payment of tax.

    Whenever there is a tax dispute, the taxpayer may pay the tax and ask for a refund with indemnity interest should he/she win. If the tax under dispute is not paid, a tax enforcement proceeding is initiated and it can be suspended as long as the taxpayer presents a guarantee. Should the taxpayer win, he may claim an indemnity for the costs incurred with the guarantee.

  6. Is taxpayer data recognised as highly confidential and adequately safeguarded against disclosure to third parties, including other parts of the Government?
    Is it a signatory (or does it propose to become a signatory) to the Common Reporting Standard? And/or does it maintain (or intend to maintain) a public Register of beneficial ownership?

    Officers working for the tax authorities must treat as confidential (including with respect to other parts of the Government) the information obtained on the tax situation of taxpayers and the elements of personal nature obtained during a tax procedure, including those covered by professional secrecy or any other legally protected secrecy duty, with the following exceptions:

    i) authorization of the taxpayer for the disclosure of his tax situation;

    ii) legal cooperation of the tax administration with other public entities;

    iii) mutual assistance and cooperation of the tax administration with the tax administrations of other countries resulting from international conventions to which the Portuguese State is bound, whenever reciprocity is contemplated; and

    iv) collaboration with justice under the Code of Civil Procedure and Code of Criminal Procedure; and

    v) confirmation of the tax identification number and fiscal domicile to the entities legally competent to carry out the commercial, land or car registration.

    The State Budget Law usually foresees a one-year valid authorization for the exchange of information between the AT and the Social Security.

    In addition, both the AT and the Social Security are authorized by the National Data Protection Commission to publish lists with the identification of their debtors.

    That said, in recent years other parts of the Government have been exerting pressure to obtain taxpayer data for the purposes of facilitating the execution of their public policies.

    Portugal is a signatory to the Common Reporting Standard which is into force since January 2016.

    In addition, the Legal Regime of the Central Registry of the Beneficial Owner was introduced by Law n. º 89/2017, of the 21st of August, which transposed chapter III of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015, resulting in the creation of a public Register of beneficial ownership.

  7. What are the tests for residence of the main business structures (including transparent entities)?

    An entity is deemed to be tax resident in Portugal whenever its head office or place of effective management is located in Portuguese territory.

    To establish that, notwithstanding the registered head office abroad, the place of effective management is in Portugal may not be an easy task for the tax authorities.

  8. Have you found the policing of cross border transactions within an international group to be a target of the tax authorities’ attention and in what ways?

    Cross border transactions within an international group are one of the targets of the tax authorities, which focuses on transfer pricing issues, withholding tax (dividends, interest – e,g. under cash pooling agreements or otherwise - royalties), payments to low tax jurisdictions, etc.

  9. Is there a CFC or Thin Cap regime? Is there a transfer pricing regime and is it possible to obtain an advance pricing agreement?

    The Portuguese law foresees CFC rules both for individual and corporate taxpayers.

    Under such rules, profits or income obtained by non-resident entities clearly subject to a more favorable tax regime, are imputed to Portuguese tax resident taxpayers that hold directly or indirectly, including through a representative, fiduciary or intermediary, at least 25% of their share capital, voting rights or attribution rights over the income or assets of such non-resident entities. This percentage is reduced to 10% whenever at least 50% of the mentioned share capital, voting rights or attribution rights over the income or assets of such non-resident entities are held, directly or indirectly, by Portuguese tax resident taxpayers.

    An important exception to the CFC regime occurs when the non-resident entity is resident or established in another Member State of the European Union (EU) or in another member State of the European Economic Area (EEA) bound to administrative cooperation on tax matters equivalent to the cooperation established within the EU, as long as the Portuguese taxpayer is able to prove that the incorporation of the non-resident entity relies on valid economic reasons and it carries out a business activity.

    The Portuguese Corporate Income Tax (CIT) Code currently foresees the limitation to the deductibility of financing expenses up to the higher of the following: (i) € 1,000,000; or (ii) 30% of EBITDA. The exceeding financing expenses of a certain tax year may be deductible on the following 5 tax years, after deducting the financing expenses of each year, provided that the previously mentioned limits are not exceeded.

    Portuguese transfer pricing rules are in line with the Organization for Economic Co-operation and Development (OECD) guidelines.

    The Portuguese law foresees the possibility of entering into unilateral, bilateral or multilateral APA (“Advance Pricing Agreements”) with the tax authorities, valid up to 3 years and renewable. Amongst several obligations, the taxpayers must prepare an annual report on the application of the APA, otherwise the agreement will be deemed to expire. The conclusion of an APA requires the payment of a fee to the tax authorities, based on the taxpayer’s turnover.

  10. Is there a general anti-avoidance rule (GAAR) and, if so, in your experience, how would you describe its application by the tax authority? Eg is the enforcement of the GAAR commonly litigated, is it raised by tax authorities in negotiations only etc?

    There is a GAAR in the Portuguese law which was implemented in 1999 in the General Tax Law.

    In the last years the Tax Authorities made a relevant effort to enforce more often the GAAR (e.g. in situations in which the taxpayer opts for realizing a capital gain instead of receiving a dividend, maintaining indirectly the shareholding). The GAAR enforcement has been litigated, and the tax authorities have had a low rate of success.

    But the real GAAR is the informal one: the general provision that governs the deductibility of costs, which the tax authorities prefer to apply in order to try to circumvent the demanding requirements of the GAAR. There is also arbitral and judicial litigation on several specific anti-abuse rules, namely regarding the deduction of costs incurred within the activity of the company and the autonomous taxation on certain expenses deemed to be incurred outside the scope of the company’s activity.

  11. Have any of the OECD BEPs recommendations been implemented or are any planned to be implemented and if so, which ones?

    i) Action 1 (digital economy) has been addressed only in the EU realm and VAT context. Without significant international changes to the concept of Permanent Establishment and/or to the rights of the source country and its definition (along with amending countless agreements on double taxation), we do not see how the taxation of profits of multinational companies in the Portuguese market or in any other market can be satisfactorily addressed;

    ii) Action 2 on hybrid mismatch arrangements is under implementation, following Council Directive (EU) 2016/1164 of 12 July 2016;

    iii) Actions 3 and 4 have been addressed through the CFC rules and interest deduction rules which already existed under Portuguese law, albeit with some limitations imposed by the prohibition of discrimination (freedom of establishment, etc.) provided for in the EU Treaty;

    iv) Action 5 on harmful tax practices has been addressed on the side of the intellectual property income: patent box was amended (see infra);

    v) Action 6 on treaty abuse has been addressed through the adhesion of Portugal to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS;

    vi) Action 7 on the artificial use of the permanent establishment has no implementation yet;

    vii) Actions 8, 9 and 10 on transfer pricing issues, which aims to prevent base erosion triggered by the transfer of valuable IP rights to low tax locations where there is no or little business activity, were addressed from an outbound perspective by requiring in the context of the patent box regime that the acquirer met some requirements, and from the inbound perspective by requiring that the amount of the tax benefit be dependent on substantial activity (research and development) requirements;

    viii) Action 11 on monitoring BEPS has no known specific measure;

    ix) Action 12 on the disclosure of aggressive tax planning was already implemented in Portugal prior to BEPS;

    x) Action 13 (rules regarding transfer pricing documentation in order to enhance transparency for tax administration) is being implemented following Portugal adherence to the automatic exchange of information under the Country-by-Country (CbC) report. Portugal already set up a tax form for this purpose;

    xi) Action 14 on dispute resolution mechanisms has no known specific measure in Portugal;

    xii) Action 15 relates to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting which was already signed by Portugal but has not entered into force yet.

  12. In your view, how has BEPS impacted on the government’s tax policies?

    Portugal is a member state of the EU and of the OECD, and so most of BEPS policies were either already implemented or are under implementation/consideration.

    The need to implement BEPS actions has in general reinforced what was already a tendency of the Portuguese law to prevent tax evasion and impose more transparency and compliance on business activities.

  13. Does the tax system broadly follow the recognised OECD Model?
    Does it have taxation of; a) business profits, b) employment income and pensions, c) VAT (or other indirect tax), d) savings income and royalties, e) income from land, f) capital gains, g) stamp and/or capital duties.
    If so, what are the current rates and are they flat or graduated?

    The Portuguese tax system is based on the OECD Model.

    Thus, Portuguese resident taxpayers are subject to taxation on their worldwide income whereas non-resident taxpayers are subject to taxation only on income deemed to be obtained in Portugal.

    PIT has 6 categories of income: (i) employment income; (ii) business and professional income; (iii) capital income; (iv) pensions; (v) rental income; and (vi) capital gains.

    Progressive rates apply to income obtained by resident taxpayers and vary between 14.5% and 48% (for annual taxable income exceeding € 80,640). There is an additional solidarity progressive surcharge applicable to taxable income exceeding € 80,000 which varies between 2.5% (for taxable income exceeding € 80,000 up to € 250,000) and 5% (for taxable income exceeding € 250,000). Capital gains, dividends, interests and rental income may be subject to a flat rate of 28%, and tax resident taxpayers are able to choose whether such income should be aggregated to the remaining income and subject to the general progressive rates. Several deductions are available.

    The normal CIT rate is 21% (for mainland as well as the Autonomous Region of Madeira, but of 16.8% in the Autonomous Region of Azores), although resident taxpayers certified as small or medium companies may benefit from a reduced 17% rate (16% in the Autonomous Region of Madeira and 13.6% in the Autonomous Region of Azores) for the first €15,000 of taxable income. A municipal surcharge of up to 1.5% of the taxable income also applies. A state surcharge applies varying between 3% (for taxable profit exceeding € 1.5 M and up to € 7.5 M), 5% (for taxable profit exceeding € 7.5 M and up to € 35 M) and 9% (for taxable profit exceeding € 35 M).

    Autonomous taxation applies at different rates on certain expenses incurred by corporate taxpayers and deemed not to be totally or partially connected to their activity or deemed to be in reality an informal fringe benefit for the employees.

    The VAT standard rate is 23% (22% in the Autonomous Region of Madeira and 18% in the Autonomous Region of Azores), being the intermediate rate of 13% (12% in the Autonomous Region of Madeira and 9% in the Autonomous Region of Azores), and the reduced rate of 6% (5% in the Autonomous Region of Madeira and 4% in the Autonomous Region of Azores).
    Apart from Municipal Property Tax and Municipal Tax on Onerous Property Transactions, there is also stamp duty which applies, amongst others acts (such as rental agreements, bank guarantees and loans), to the free transfers of assets (either through donation or succession) at a 10% rate, although an exemption applies when the beneficiary is the spouse, partner, descendant or ascendant of the transferor.

    Although Portugal does not have a wealth tax, an Additional Municipal Property Tax applies to the sum of the tax registered value of all the urban properties (excluding those classified as serving "trade, industry, or services" purposes and "others") held by each corporate or individual taxpayer on the 1st of January of each year. Individual taxpayers benefit from a deduction of € 600,000 to the taxable base (or of € 1,200,000 in case of married or unmarried couples) and are subject to a rate of 0.7% or 1% applicable to the amount of the taxable base exceeding € 1,000,000.00 (or than € 2000.000 in case of married or unmarried couples). Corporate taxpayers are subject to a 0.4% rate, however urban properties owned for the personal use of the company’s shareholders, members of the board or of any administrative bodies, management or supervision, are subject to a rate of 0.7% (and to a rate of 1% for the part of the taxable amount exceeding € 1,000,000).

  14. Is the charge to business tax levied on, broadly, the revenue profits of a business as computed according to the principles of commercial accountancy?

    Tax resident companies as well as permanent establishments of non-resident entities are subject to taxation on their annual profit, determined under the terms of the accounting standards (based on the adoption of the International Financial Reporting Standards - IFRS) and subject to the corrections imposed by the CIT Code. Broadly, one can say the principal determinant of the taxable base is the profits of the business as computed according to the principles of commercial accountancy.

  15. Are different vehicles for carrying on business, such as companies, partnerships, trusts, etc, recognised as taxable entities? What entities are transparent for tax purposes and why are they used?

    Portuguese law foresees different vehicles for carrying on business, being companies the most commonly used. Such vehicles are, as a rule, recognized as taxable entities.

    Transparent entities foreseen under the terms of the CIT Code correspond to the following:

    i) civil companies with commercial capacity;

    ii) firms of professionals;

    iii) asset-management civil companies, the equity capital of which is controlled, directly or indirectly, for more than 183 days by a family group or a limited number of members, under certain conditions;

    iv) Complementary Business Groupings (“ACE”), constituted and operating in accordance with the applicable law; and

    v) European Economic Interest Groupings (“AEIE”) treated as residents.

    Under this regime, income obtained by transparent entities is determined under the CIT Code rules and directly imputed to the shareholders or participants, regardless of any income distribution.

    Although this regime is deemed to promote tax neutrality, applying the same taxation regardless of the way entities chose to develop their activity (either individually or collectively), this is not the case when the shareholder or participant of the transparent entity is an individual, as the progressive PIT rates up to 48% are much higher than the normal CIT rate of 21%. That is why in Portugal transparent entities are created for carrying on business whenever there is no other option under law, or by reason for any practical reason usually not related to the transparent entities tax regime.

  16. Is liability to business taxation based upon a concepts of fiscal residence or registration? Is so what are the tests?

    Under Portuguese law, taxation in general (including business taxation) is based on tax residency.

    Corporate taxpayers are deemed to be tax resident if their head-office or place of effective management is in Portuguese territory and are taxed on their worldwide income. Non-resident corporate taxpayers with a permanent establishment in Portugal are subject to taxation on their taxable profit allocated to such permanent establishment. Non-resident corporate taxpayers without any permanent establishment in Portuguese territory are subject to taxation only on income deemed to be obtained (sourced) in Portugal.

    Individual resident taxpayers are subject to taxation on their worldwide income and non-resident individual taxpayers are subject only on income deemed to be obtained in Portuguese territory (for business income, if it is carried out through a permanent establishment in Portugal).

    The main tests for individuals are “having been in Portugal more 183 days in the last 12 months” and “having a permanently available place of residence in Portugal”.

  17. Are there any special taxation regimes, such as enterprise zones or favourable tax regimes for financial services or co-ordination centres, etc?

    Portugal benefits from the Madeira International Business Centre (MIBC) regime, which was already established for entities licensed to operate until the 31st of December 2014 and was extended to entities licensed to operate as from the 1st of January 2015 until the 31st of December 2027.

    Apart from other advantages, such entities benefit from a reduced 5% CIT rate within certain activities and as long as certain conditions are met (number of employees hired, which is also the determinant of the maximum plafond of the taxable base subject to the reduced rate), as well as from a 50% deduction to their assessed tax, as long as at least two of the following conditions are met:

    • They contribute to the modernization of the regional economy, namely through technological innovation of products and of manufacturing processes or of business models;
    • They contribute to the diversification of the regional economy, namely through new value-added activities;
    • They promote the hiring of highly qualified human resources;
    • They contribute to the improvement of environmental conditions;
    • They create, at least,15 jobs which must be kept for a minimum period of five years.
      Non-resident shareholders of companies licensed to operate in the MIBC may also benefit from tax exemption on dividend and interest.

    Exemptions on stamp duty, property tax, property transfer tax, and regional and municipal surcharges also apply, but subject to an 80% limitation per tax and transaction or period.

    Tax benefits for MIBC licensed entities cannot exceed annually the highest of the following limits: (i) 20.1% of annual gross added value, (ii) 30.1% of annual labour costs or (iii) 15.1% of annual turnover.

    Entities resident in the Autonomous Region of Azores may benefit from a contractual regime of incentives for investments with strategic relevance made in that territory. Apart from other advantages, eligible investments may benefit from:

    • Deduction to the tax assessed of 30% of the expenses with the relevant investment, up to 90% of this tax;
    • Exemption or reduction of Municipal Property Tax for up to 10 years on real estate used in the investment project;
    • Exemption or reduction of at least 75% of the Municipal Tax on Onerous Property Transfers on the purchase of real estate to be used in the investment project.

    The attribution of the mentioned tax benefits depends on the signature of an agreement between the promotor of the investment and the Autonomous Region of Azores and must be communicated to the European Commission.

    At a national level there is also a contractual regime for granting tax benefits on relevant investment projects.

  18. Are there any particular tax regimes applicable to intellectual property, such as patent box?

    Portugal adopted in 2016 the international recommendations on intellectual property and patent box regimes deriving from BEPS Action 5 and thus amended the tax rules applicable to corporate income deriving from patents and other industrial property rights.

    The regime provides for a 50% reduction of the qualifying taxable IP income. A limit was erected that is a function of the total costs incurred in developing the asset protected by the IP right.

  19. Is fiscal consolidation employed or a recognition of groups of corporates for tax purposes and are there any jurisdictional limitations on what can constitute a group for tax purposes? Is a group contribution system employed or how can losses be relieved across group companies otherwise?

    Portuguese companies which operate within an economic group may choose to be taxed under the group taxation regime (“RETGS”), as long as the following conditions are met:

    • the parent company holds, directly or indirectly, including through a company resident for tax purposes in another member State of the European Union country or within the European Economic Area (in this case, only when an administrative cooperation agreement applies), at least 75% of the share capital of the controlled companies, and more than 50% of the voting rights;
    • all group companies are tax resident in Portugal and subject to the CIT general regime;
    • the parent company has held the relevant shareholding for more than 1 year (or from the date of its incorporation), is not controlled by any other company resident in Portugal which would qualify as dominant for the purpose of this regime, and it did not renounce to the application of the regime within the three previous years.

    This regime is also available when the parent company is tax resident in another member State of the EU or of the EEA (if an administrative cooperation agreement applies) and holds the Portuguese subsidiary through a PE in Portugal, although it is then required that one of the Portuguese tax resident controlled companies be appointed as the responsible for the fulfilment of all the obligations under this regime (save from its PE in Portugal, the parent non-resident company will not be part of the Portuguese tax group).

    For the determination of the group’s taxable profit, the tax losses of a controlled company may be offset against individual profits of other controlled companies.

  20. Are there any withholding taxes?

    Portuguese law foresees withholding taxes both for CIT and PIT purposes.

    In general, when applied to income obtained by non-resident entities, such withholding tax is definitive and liberates such entities from the obligation of filing a tax return in Portugal.

    For resident entities, the withholding tax usually corresponds to a payment on account of the final tax due by the taxpayer which will only be assessed with the filing of the respective annual tax return, after which he can either have to pay more tax or receive a tax refund.

  21. Are there any recognised environmental taxes payable by businesses?

    Environmental taxes have been introduced in Portugal in the last years. There is no tax specifically targeting businesses, save from the carbon tax below mentioned.

    Apart from the pre-existing taxes on energy and on the car registration and the annual circulation taxes for vehicles which have a CO2 component, the Portuguese government appointed in 2014 a Commission for Environmental Tax Reform, and thereafter the Parliament approved a new law, enacted on the 1st of January of 2015, which introduced, amongst others, the following measures:

    • Incentive to scrap cars at the end of their working life and acquire an electric vehicle;
    • A tax on plastic bags (passed on to the consumer);
    • Revision of the waste management tax;
    • Revision of the hydric resources utilization tax;
    • Incentives to the use of bike-sharing and car-sharing;
    • An increase on the rates of the Tax on Vehicles using gasoline and gasoil based on the CO2 emissions;
    • Deduction of the VAT for tourism vehicles which are electrical, or hybrid plug-in;
    • A carbon tax on some sectors not included in the European Emissions Trading Scheme.
  22. Is dividend income received from resident and/or non-resident companies exempt from tax? If not how is it taxed?

    As a general rule, dividends received by resident companies are subject to a 21% CIT rate, whereas dividends paid to non-resident companies are subject to withholding tax at a 25% rate or a reduced rate (between 5% and 15%) foreseen under the terms of the applicable Double Tax Treaty.

    Portugal has transposed the EU Parent-Subsidiary Directive provisions which result in a withholding tax exemption under the conditions set forth therein, and established more recently a participation exemption regime.

    Under this regime, dividends are exempt whenever the Portuguese company is not tax transparent and holds a minimum of 10% of the capital or voting rights of its subsidiary, for a minimum period of 1 year. The participated company cannot be resident in a black-listed jurisdiction and must be subject and not exempted from CIT or, if EU resident, from a tax mentioned under article 2 of Directive 2011/96/UE or, if resident outside the EU, from a tax similar to the CIT, provided additionally that the rate applicable under such CIT is not lower than 60% of the Portuguese CIT rate.

  23. If you were advising an international group seeking to re-locate activities from the UK in anticipation of Brexit, what are the advantages and disadvantages offered?

    Portugal benefits from legislation applicable on an EU wide basis (passport feature and EU wide compliance and guarantees), and is also a compliant OECD member state, with an extensive net of Double Tax Treaties (currently, 79 of which 77 are already in force).

    Apart from the highly-skilled human resources and the fact that salaries are not too high, some of the previously described regimes can represent an advantage for companies re-locating to Portugal, such as the participation exemption regime, the MIBC regime, as well as many other incentives that Portuguese law foresees for investment activities, including contractual tax incentives for significant investments, tax incentives for companies established in the interior of the country as well as the non-habitual tax resident regime which may apply to employees relocated to Portugal resulting in a lower tax burden also for the company.

    The biggest disadvantage would be the fact that the CIT rate of 21% has not been lowered as it was foreseen when the CIT reform took place in 2014. But it may be a non-issue should a contractual tax regime (applicable for 10 years) be negotiated (it is common, and nowadays a streamlined procedure), not to mention other generous (and automatic) regimes granting CIT credits in connection to new investments (RFAI) and to research and development (SIFIDE).