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Paulo Núncio |
Miguel Pimentel |
The Portuguese budget law for 2011 introduced several amendments to Portuguese corporate and personal income taxation. One of those amendments concerns the taxation of capital gains realised by non-residents.
As a measure to attract foreign investment, Portuguese tax law exempts capital gains realised by non-resident entities and individuals from the disposal of certain types of securities as well as certain warrants and derivatives negotiated in regulated markets.
Such exemption, however, has been applicable only if the following requirements were met: the seller is not owned, directly or indirectly in more than 25% by a Portuguese resident company/individual; the gains derived do not relate to shares or corporate rights in resident companies whose assets consist in more than 50% of Portuguese-located immovable property or holding companies, when such companies are in a control relationship with resident companies whose assets consist in more than 50% of Portuguese-located immovable property. Non-resident individuals and companies, not qualifying for the exemption, are taxed, respectively, at a 20% and 25% rate.
The budget law for 2011, which was effective on January 1, introduced an additional requirement: the regime will only benefit entities and individuals who are residents of a country or territory with which Portugal has entered into a double tax treaty or a tax information exchange agreement (TIEA).
Strictly connected to this regime, Portugal, following the OECD's recommendations, has recently signed several TIEAs with so-called tax havens jurisdictions that are blacklisted under domestic law. Such agreements will enter into force once all the necessary approval and ratification procedures are fulfilled by the contracting parties.
Among those jurisdictions are Andorra, Antigua and Barbuda, Belize, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Guernsey, Gibraltar, Isle of Man, Turks and Caicos, Liberia, Jersey, Saint Lucia and St. Kitts and Nevis.
The TIEAs with Andorra and Cayman Islands were ratified by Portugal in March. It is expected that, during 2011, the majority of (if not all) the TIEAs mentioned above will enter into force, triggering the capital gains exemption, where applicable.
As a consequence, it is also expected that during 2011 the lower tax jurisdictions blacklist will be amended to introduce several EU-law based modifications (for instance, reference is made to the Luxembourg holdings of 1929, and Cyprus is also blacklisted) as well as to exclude those jurisdictions which have now signed TIEAs with Portugal.
Capital gain taxation is levied on the positive balance of gains and losses realised in a given fiscal year. For companies and individuals adopting the regular fiscal year (from January 1 to December 31) the assessment date is December 31. As such, as the TIEAs are entering into force, the capital gain exemption should be available for all gains and losses realised throughout 2011 by residents of such jurisdictions, even if realisation occurs before the applicable agreement enters into force.
Paulo Núncio (paulo.nuncio@garrigues.com) & Miguel Pimentel (miguel.pimentel@garrigues.com)
Garrigues – Taxand
Tel: +351 231 821 200
Fax: +351 231 821 290
Website: www.garrigues.com
