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New rules and procedures for the application of Double Tax Treaties

Portugal

Following the amendments included in the Budget Law for 2008 (Law 67-A/2007), Portugal has finally decided to streamline the existing treaty forms in an attempt to further reduce compliance burdens on foreign taxpayers deriving Portuguese source income. Ministerial Order n? 30359/2007, published in the Official Journal of 31 December 2007, made available the new treaty forms, reducing the number of treaty forms from 12 to only 4. As form 1 January 2008, the following treaty forms are applicable: ? Form 21-RFI: claim for exemption or reduced rate under the tax treaty. This form which covers all types of income has to be presented to the tax authorities by the Portuguese withholding agent until the date when the tax becomes payable (i.e. the 20th day of the month following the one in which the liability for withholding arises).

Form 22-RFI: Request for refund of Portuguese withholding tax on dividends from shares and interest from debt securities. This form has to be filled within a period of 2 years as from the end of the year in which the liability for withholding arises, unless a more beneficial time-frame is established in the treaty ? Form 23-RFI: Request for refund of Portuguese withholding tax on dividends, interest and royalties (except for those included in Form 22-RFI). This form has to be filled within a period of 2 years as from the end of the year in which the liability for withholding arises, unless a more beneficial time-frame is established in the treaty.

Form 24-RFI: Request for refund of Portuguese withholding tax on other income. This form has to be filled within a period of 2 years as from the end of the year in which the liability for withholding arises, unless a more beneficial time-frame is established in the treaty. In the same way as previously, the treaty forms must be duly signed and certified in triplicate by the tax authorities of the beneficiary's country of residence, being one copy to the foreign tax authorities, another to the beneficiary of the income and the other to the Portuguese company. The later is only presented to the Portuguese tax authorities upon request. The main points arising from the application of the new rules included in the Budget Law for 2008 and the new forms for the application of Double Tax Treaties are the following: The compliance date for the certification of the treaty forms was extended to the 20th day of the month following the one in which the liability for withholding tax arises. Portuguese resident company paying the income may prove, at any time, the fulfillment of the conditions for the reduced rate or exemption by presenting the applicable treaty form. ? The form to claim for exemption or reduced rate under the tax treaty no longer requires the inclusion of the amounts payable, eliminating the necessity for provisional forms in situations when for the income payable is calculated on the basis of annual sales. ? The forms will be valid for one year, as from the date of certification by the competent authority of the State of residence of the recipient, eliminating the necessity for non-resident recipients to produce a certificate for each payment. The treaty forms may be obtained through the Internet, via the Portuguese tax authority's website. Please note that in case the form is downloaded, the tax authorities continue to require that the fourth page be printed out in triplicate on the reverse side of the first three pages.

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