DOING BUSINESS IN PORTUGAL

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, it can not replace a tax advice, or be considered as an official information.

 

Yes we tax in Portugal

 

Flash News

New tax reform: No specific information

New tax treaties:

  • Tax treaty between Portugal and Vietnam enters into force.

Local tax advisors

No specific information on the local tax advisors.

Useful Links

Website Ministry of Finance: Click here

Website Tax administration: Click here

VAT identification number within EU:

Permanent Establishment

The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:

  • Dependent agent who habitually concludes contracts in the name of a non-resident company (except if the activity is limited to purchase of goods);
  • Fixed place of business, building site, construction, assembly or installation and any related supervisory activity, for a period of 6 months.

Resident companies are taxed on their worldwide income.

Entities are considered to be resident for tax purposes in Portugal if their legal seat or their place of management & control is in Portugal.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 21%.

Small companies (revenues less than around 15kEUR) are taxed under a 17% CIT tax rate on the first 15kEUR of revenue (and 21% over).

Non-taxable income includes the following:

  • Dividends received from qualifying participations
  • Certain capital gains deriving from qualifying participations

 

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption
  • Payment between related parties exceeding the arm’s lengths principle;
  • Fines and penalties

Carry forward : Yes 12 years, but some restrictions may apply.

Carry back: No

Companies should submit the tax return annually before the 31 May of the following year.

Annual tax returns are established by the company on a self-assessment system.

Companies shall pay 3 advance payments on July, September and December of the current taxable year[; and the balance must be paid before 31 May of the following year (in the case where fiscal year coincides with calendar year)].

Whithholding Taxes (payment to foreign companies)

The local tax rates in Portugal are the following, subject to the provisions of an applicable double tax treaty, if any.

There is no WHT on the profits paid from a branch to its foreign head office.

The general rate of WHT on dividends is 25% of the gross amount.

Note: the rate is 35% if paid to a blacklisted jurisdiction. Click here for the list (https://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/tax-good-governance-world-seen-eu-countries_en).

The general rate of WHT on interest is 25%.

Note: the rate is 35% if paid to a blacklisted jurisdiction. Click here for the list (https://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/tax-good-governance-world-seen-eu-countries_en).

The general rate of WHT on Royalties is 25%.

Note: the rate is 35% if paid to a blacklisted jurisdiction. Click here for the list (https://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/tax-good-governance-world-seen-eu-countries_en).

The general rate of WHT on management fees is 25%.

Note: the rate is 35% if paid to a blacklisted jurisdiction. Click here for the list (https://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/tax-good-governance-world-seen-eu-countries_en).

The general rate of WHT on technical services is 25%.

Note: the rate is 35% if paid to a blacklisted jurisdiction. Click here for the list (https://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/tax-good-governance-world-seen-eu-countries_en).

Capital gains

Generally, worldwide capital gains are taxed under the regular CIT as general income.

Note: capital gains deriving from qualifying participations are exempt under the participation exemption.

VAT

Standard VAT tax rate is 23%

Reduced tax rates are:

  • 13% (among others, dairy products, animals, fruit and vegetables, most other foodstuffs, cultural events and social care services (unless exempt), catering services, and certain environmentally friendly items);
  • 6% for basic nessecities (among others, essential child nutrition, selected pharmaceutical products, books, certain newspapers and magazines, and certain agricultural products)

Zero-rated supplies include, subject to certain conditions:

  • exports of goods;
  • intra-Community supplies of goods;
  • Certain Aircraft and Vessels engaged in commercial international traffic;
  • Passenger transportation.
  • Services related to zero-rated vessels and Aircraft;
  • provision of services consisting of work on movable assets returned to a third country;
  • transport of goods and services directly related to import and export of goods;

Exempt supplies include, subject to certain conditions:

  • Certain financial services
  • Certain insurance services

Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.

EU taxable companies may claim a VAT refund to their own tax authorities through on the basis of the 13th EU Directive.

In case where for a tax period, Input VAT exceeds Output VAT, certain non-resident companies (which are not required to register and incur Portugal-VAT in the course of their business activities in Portugal) may apply for a refund under the same conditions than resident companies.

Refunds are subject to the reciprocity principle, which means that Portugal only refunds VAT to foreign companies in countries that offer similar refunds to Portugal companies.

No other specific information of VAT in Portugal.

Miscellaneous

The general statute of limitation is 4 years starting at the end of the year in which the tax return had to be filed.

The statute of limitation could be extended to 12 years in certain cases, i.e. negligent tax fraud.

There is no foreign exchange control in Portugal. Income and capital could be freely repatriated.

There are no thin capitalization rules in Portugal. However, there is a general limitation of deductibility with regards to the financing expenses.

 

 

 

Do not hesitate to share your experience in Portugal with us in the comments below. Any comments are welcome !

 

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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