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Portugal: Portuguese corporate tax changes for 2015


Tiago Cassiano Neves

Portugal has approved (at year-end) a set of tax measures for 2015, which include the Budget Law, Personal Income Tax Code Reform, Green Taxes Reform and a Law amending the Corporate Income Tax Code. This note describes the most relevant corporate tax measures for 2015.

CIT rate

For 2015 there will be a reduction of the standard corporate income tax (CIT) rate from 23% to 21%. The municipal and state surtaxes are maintained for FY15.

Further reductions of CIT rates to achieve by 2016 the 2014 proposed target rate of between 17% and 19% are dependent on the evolution of the economic and financial situation and will be analysed by a committee monitoring the implementation of the CIT reform. There was also an initial intention to phase out the municipal and state surtaxes by 2018 but, at this stage, there is no timetable for those reductions.

Horizontal tax grouping

Following the ECJ decisions in joined cases C-39/13, C-40/13 and C-41/13 of June 12 2014, the Portuguese CIT provides for group taxation on horizontal structures of Portuguese companies with at least a 75% holding by a common EU/EEA based parent company.

For 2015 onwards, Portuguese resident companies which are members of a 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 an EU/EEA-resident dominant company, but also where such participations are attributable to a Portuguese permanent establishment of a common EU/EEA company. For EEA countries, the common parent needs to be resident in a country with administrative cooperation in the field of taxation equivalent to the one provided within the EU.

Other CIT measures

Several amendments and clarifications are included in the 2014 CIT Reform:

  • The participation exemption rules for dividends when applied to third countries (that is, countries outside of the EU/EEA) made reference to the requirement that such countries be bound by exchange of information mechanism "equivalent" to that which existed within the EU. The new provisions clarify that this refers merely to a tax treaty with an exchange of information mechanism in place (which is the case with almost all tax treaties concluded by Portugal);

  • The rules for inbound dividends are also slightly adjusted to reflect the latest changes in the Parent Subsidiary Directive (Directive 2014/86/EU) designed to neutralise the tax consequences of hybrid mismatch arrangements. The provisions provide that Portugal will tax (pick-up) in all instances such profits to the extent that such profits are tax deductible by the subsidiary distributing the dividends;

  • The difference in treatment that existed between WHT exemption on domestic situations (one year holding period) and cross-border (two year holding period) was eliminated and the rules for 2015 onwards establish that domestic (internal) dividend distributions to access the WHT exemption will also have to comply with the two year holding period to be paid without WHT;

  • New rules are included providing for tax deductibility of expenses related to preferred shares without voting rights (including expenses related to the issuance) that are accounted as debt based on applicable accounting rules – IFRS or Portuguese GAAP;

  • Following last year's special measures relating to deferred tax assets for financial institutions, there are new revised rules for impairment losses for the banking sector;

  • As regards the opt-in foreign branch exemption mechanism established in 2014, new rules provide that when assigning or transferring assets from the head office to the foreign PE (which opted for the exemption method), the value for the purposes of taxation will be the market value at the time of the internal transfer. The new rules also provide that the exit tax mechanism for deferral of the "exit tax amount" may be applicable for the transfer of assets and liabilities out of Portuguese tax jurisdiction to a foreign PE (which opted for the exemption method);

  • Since 2014 internal reorganisations in which shareholding of the company is changed from direct to indirect ownership benefited from an automatic carve-out of the anti-loss-trafficking rules. The new rules provide now that those internal reorganisations include any transfers of companies in group relationship under the current CFC rules; and

  • The phase-in provision for the interest barrier rules for 2015 provides that the net financial costs of Portuguese resident companies are deductible in FY2015 only up to the greater of the following thresholds: (i) €1 million; or (ii) 50% of the EBITDA as adjusted for tax purposes. Under that phase-in provision, the EBITDA limit will be reduced to 40% in 2016 and to 30% from 2017 onwards. Companies reporting under a tax group regime may continue to apply the relevant thresholds at group level.

Tiago Cassiano Neves (

Garrigues – Taxand

Tel: + 351 231 821 200

Fax: +351 231 821 290


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