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Portugal kicks off 2015 with the implementation of new tax measures


New tax measures have been introduced in Portugal including amendments to the Corporate Income Tax Code and reforms for green taxes. The Budget Law for 2015 has also been published. Taxand Portugal provides an overview of the key tax updates which could impact multinationals.

Key measures published in the Budget Law for 2015:

Corporate tax rate reduction
The Budget Law provides for the reduction of the standard CIT rate from 23% to 21%. The reduction of the CIT rate was projected given that the CIT reform (approved back in 2014) includes a programmatic rule for the gradual lowering of the CIT rate to reduce the standard corporate tax rate to 21% in 2015 and, in the longer term, to achieve a reduction of the rate to between 17% and 19% by 2016.

Further reductions, however, depend on the evolution of the economic and financial situation and are further analysed by a committee monitoring the implementation of the CIT reform.

VAT changes include:

  • Clarifying procedure for VAT recovery from bad debts and irrecoverable debts by requiring certification by chartered accountant
  • Option for VAT simplified cash accounting regime set for month of October each year
  • Adoption of a flat rate scheme for farmers following judgment of the European Court of 8 March 2012 that the prior farmers special regime was not complying with VAT Directive 2006/112/EC

FATCA implementation in Portugal
The Budget Law for 2015 includes rules for identifying bank accounts, which are to be reported under the FATCA agreement to the Portuguese tax authorities. This includes rules setting the terms of the information exchange under the FATCA agreement between the Portuguese and US tax authorities.

The rules cover the following key points:

  • Identification of reporting Portuguese financial institutions
  • Identification of reportable accounts
  • Threshold exemptions
  • Due diligence process
  • Currency conversion rules
  • Timetable for reporting
  • Automatic communication to US authorities
  • Penalties
  • Supporting legislation and guidance

Law amending CIT Code
Following the ECJ decision on SCA Holding (C-40/13), the CIT law provides for group taxation on horizontal structures of Portuguese companies held by at least 75% by a common EU/EEA based parent company. Taking the proposed rule into consideration, Portuguese resident companies which are members of an economic group may opt to be taxed under the special tax regime of group taxation, not only if they are held in at least 75% by a Portuguese-resident or EU/EEA-resident dominant company, but also where such participations are attributable to a Portuguese permanent establishment of a common EU/EEA company. The rules apply from 1 January 2015 onwards.

Green tax reform
The Green Tax Reform Law reflects the work and recommendations of the Green Taxes Reform Commission embodied on a report released on 15 September 2014. The proposed changes are mainly intended to contribute to the eco-innovation and efficiency in the employment of natural resources, decrease external energetic dependency and introduce more sustainable production and consumption standards. 

Your Taxand contacts for further queries are:
Fernando Castro Silva
T. +351 218 913 232

Tiago Cassiano Neves
T. +351 218 913 232

Taxand's Take

Multinationals with operations in Portugal should investigate these recent tax updates to stay abreast of developments and remain compliant. Many of the tax measures will generally apply from 1 January 2015, therefore multinationals need to act now to ascertain the impact on their businesses moving forward. It is also important to note that there are various new tax regimes in the pipeline for 2015 including an authorisation for the government to establish a REIT regime and an authorisation to introduce FTT, under the scope of Portuguese stamp tax – watch this space!

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