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Portugal enacts disclosure rules on abusive planning
Decree-Law 29/2008, of February 25, 2008 introduces disclosure rules on abusive tax planning schemes by requiring the disclosure of certain information by tax intermediaries (promoters) and taxpayers concerning transactions, the exclusive or predominant aim of which is to gain a tax advantage.
As regards the scope of the schemes subject to disclosure, the rule covers schemes or arrangements that bear one of the following hallmarks:
- schemes involving entities located in low-tax jurisdictions. The term "low-tax jurisdiction" includes an entity located in one of the listed tax havens (the current list covers 83 jurisdictions), an entity located in a country in which no corporate income tax is payable or the tax paid is equal to or less than 60% of the applicable standard corporate income tax rate or an entity that benefits from a partial or total tax exemption;
- schemes involving financial and insurance transactions that are capable of triggering the recharacterisation of the income or alter the beneficiary, namely, financial leases, hybrid financial instruments, derivatives or contracts on financial instruments; and
- schemes involving the use of tax losses.
However, tax planning schemes offered on condition that the identity of the promoters is kept confidential or that are subject to contractual protection (partial or total) for the benefit of the promoter are always subject to the disclosure rules.
A promoter, who is involved in designing, structuring, or implementing any tax planning scheme is required to notify the scheme to the Portuguese tax authorities within 20 days after the month in which the tax planning scheme was first proposed to the client. In the case of tax planning schemes developed in-house (without the involvement of a local promoter) or by promoters established outside Portugal, the disclosure must be made by the client/beneficiary by the end of the month following the one in which the scheme is adopted.
The information, which must be provided to the tax authorities using official forms (yet to be published), includes:
a detailed description of the tax planning scheme, covering the contracts, corporate structure, as well as the type of intended tax advantage;
a legal provision to which the tax advantage refers; and
the promoter's name, address, and tax identification number.
A promoter need not disclose the identity of clients to or for whom a tax planning scheme was proposed or adopted.
Failure by promoters to comply with the disclosure requirements (including additional requests for information) attracts penalties ranging from EUR5,000 and EUR100,000 (legal entities) or EUR1,000 and EUR50,000 (individuals). If the disclosure requirements must be met by the client (the beneficiary of the tax planning scheme), the applicable penalties are reduced to 500 and EUR80,000 (legal entities) or EUR250 and EUR40,000 (individuals). Please note that promoters and/or clients may be further penalized with the forfeiture of any tax reliefs and the publication of the penalty at their expense.
The tax disclosure rules, which enter into force on May 15, 2008, apply to all tax planning schemes still in progress on that date or in which a promoter continues to provide any support, advice or assistance in the tax area concerning its implementation.