The Portuguese tax authorities (PTA) issued Decree No 90054 (the Decree) on June 6 2022, which clarified the situations that trigger the mandatory appointment of a tax representative for non-resident entities and single taxpayers.
The appointment of a tax representative domiciled in Portuguese territory is required by law in certain cases in which it is determined that a non-resident (regardless of being a Portuguese citizen) must comply with the tax obligations under Portuguese law. This facilitates communication between the PTA and the non-resident taxpayer, and allows access to certain rights before the PTA.
The tax representative is generally not responsible for taxes owed by the represented taxpayer – except for VAT in certain circumstances – unless it is also the latter’s administrator for tax purposes (gestor de bens e direitos). In any case, the tax representative shall represent the taxpayer in the exercise of any rights before the PTA, such as for litigation purposes, compliance obligations and the receipt of correspondence.
Furthermore, the law sets forth that taxpayers who are tax resident in a jurisdiction of the EU or the European Economic Area (EEA) are not required to appoint a tax representative. However, this exception is sometimes disregarded by the local tax officers, who often demand the appointment of a tax representative to issue a Portuguese taxpayer number (NIF) for EU resident taxpayers.
Tax representation obligations
The Decree clarifies that the mandatory appointment of a tax representative should be limited to cases where a non-resident taxpayer was, or is expected to be, required to fulfil obligations or exercise rights before the PTA, thus establishing a legal relationship for tax purposes. The PTA also mentions that, after the attribution of a NIF to a non-resident taxpayer, the latter may establish a legal relationship for tax purposes with the PTA. The appointment of a tax representative is required in the following circumstances:
Becoming the owner of Portuguese real estate or of vehicles registered in Portugal;
Entering into an employment contract in Portugal; or
Starting an activity as a self-employed person in Portuguese territory.
As mentioned, this obligation does not apply to tax residents in EU/EEA countries.
The obligation to appoint a tax representative also applies to resident taxpayers changing their tax domicile to a jurisdiction located outside the EU and the EEA. The taxpayer will remain liable to fulfil their obligations or exercise their rights before the PTA.
Additionally, the Decree denotes that the appointment of a tax representative is not mandatory if the following criteria are cumulatively met:
The taxpayer is domiciled, for tax purposes, in Portugal, the EU or the EEA;
The taxpayer does not meet the requirements to be considered a Portuguese tax resident;
The taxpayer is not considered liable for Portuguese taxes; and
The taxpayer is not bound to the fulfilment of compliance obligations and does not intend to exercise any rights before the PTA.
In the author’s view, this statement raises certain doubts, when analysed together with the law and the remaining guidelines contained in the Decree, considering that the criteria are not cumulative. As an example, if a taxpayer is not liable for tax, is not bound to the fulfilment of compliance obligations and does not intend to exercise any rights before the PTA, they should not be required to appoint a tax representative.
In addition, taxpayers that are bound to fulfil one or more tax obligations, but are resident in the EU or EEA, should also be exempt from appointing a tax representative.
Standardisation of procedures
As a general rule, after determination that a tax representative must be appointed, the non-resident taxpayer has 15 days to comply. However, where an individual initiates a professional activity in Portugal, the tax representative must be appointed immediately upon the registration of the activity with the PTA.
A tax representative may be appointed by electronic means on the PTA’s website, or at a tax office or Citizen’s Bureau (Loja do Cidadão). Failure to appoint a tax representative, where mandatory, may be punished with a penalty ranging from €75 to €7,500. Furthermore, the non-resident taxpayer will be prevented from exercising their rights before the PTA until such appointment is concluded.
This guidance was much needed, as different approaches were commonly adopted by the local tax offices, leading to uncertainty with regard to the legal obligations of non-resident taxpayers.
Even considering the lack of clarity in certain parts of the Decree’s guidelines, it is expected that its issuance will promote the standardisation of the required procedures for non-tax residents. This will allow a higher degree of predictability for foreign entities and individuals dealing with the PTA.
