EU case law broadens Portuguese WHT recovery opportunities

Recent EU case law continues to reshape withholding tax (WHT) recovery opportunities for foreign investors receiving Portuguese-source dividends. The strongest claims arise where non-residents bear a definitive WHT burden that comparable Portuguese recipients can avoid, credit, or recover. The opportunity now extends to loss-making companies, investment funds, and EU or European Economic Area (EEA) pension funds.

The starting point remains Sofina (C-575/17), where the Court of Justice of the European Union (CJEU) held that final WHT imposed on loss-making non-resident companies may restrict the free movement of capital where comparable resident companies can obtain a refund. Credit Suisse Securities (Europe) (C-601/23) confirmed that a source state cannot impose unrecoverable WHT on non-residents where resident companies in deficit can recover it.

For Portugal, the central issue is whether domestic rules create an unjustified asymmetry in timing, evidence, loss use, or access to refund mechanisms.

The main EU law arguments can be summarised as follows:

• Loss-making companies – WHT should not become definitive merely because the recipient is non-resident, if a resident company in a comparable loss position would recover the tax;

• Investment funds – following AllianzGI-Fonds AEVN (C-545/19), EU investment funds may challenge Portuguese WHT where comparable Portuguese undertakings for collective investment (UCIs) would benefit from exemption under Article 22 of the Tax Benefits Statute (Estatuto dos Benefícios Fiscais, or EBF); and

• Proof requirements – evidence rules may be justified by fiscal supervision but must be proportionate, workable in practice, and open to equivalent alternative evidence.

Portugal generally applies 25% WHT to dividends paid to non-resident corporate recipients, subject to treaty relief and domestic exemptions. EU or EEA taxpayers may also use statutory refund mechanisms where WHT exceeds the Portuguese tax due under the general rules.

The main routes are:

• Article 94(8) of the Corporate Income Tax Code (the CIT Code) – a general refund route for qualifying EU or EEA taxpayers where WHT exceeds the notional Portuguese CIT liability, assessed by reference to global income and directly related Portuguese-source costs; and

• Articles 95(2) and 95(3) of the CIT Code – a dividend-specific refund mechanism where the payer and recipient are subject to, and not exempt from, CIT or a comparable tax.

These procedures typically require action within two years from the end of the relevant tax year. Where they are unavailable, taxpayers may consider Article 132 of the Tax Procedure and Process Code and broader EU law claims within the applicable limitation period.

The AllianzGI-Fonds AEVN judgment creates a separate recovery path for non-resident investment funds. The case concerned a German UCI that received Portuguese dividends subject to 25% WHT, while comparable Portuguese UCIs could benefit from an exemption under Article 22 of the EBF. The CJEU held that Article 63 of the Treaty on the Functioning of the European Union (TFEU) precludes that difference in treatment where the situations are objectively comparable.

The opportunity arises where a foreign fund is denied the domestic UCI exemption because it was not incorporated or resident in Portugal. Reviews should cover undertakings for collective investment in transferable securities and comparable alternative investment funds that received Portuguese dividends in open years, suffered WHT at source, and could not obtain full effective relief abroad.

Article 16 of the EBF exempts income of qualifying Portuguese pension funds and extends relief to qualifying EU or EEA pension funds, subject to material and documentary conditions. Claims from non-resident pension funds may therefore arise where relief was denied solely on evidentiary grounds.

In Santander Renta Variable España Pensiones (C-525/24), the CJEU examined whether Portugal’s evidence requirements were compatible with Article 63 of the TFEU. Tax authorities may require proof, but the requirement must be proportionate and reflect whether the foreign authority can issue the requested certificate within a reasonable period.

Funds that paid Portuguese WHT because they could not obtain the specific certificate required under Article 16 of the EBF should reassess whether alternative evidence was available, whether the Portuguese Tax and Customs Authority considered it, and whether EU mutual assistance mechanisms could have verified the conditions.

Affected taxpayers should review historical Portuguese dividend WHT with a focus on limitation periods, evidence, and comparability. Priority cases are those where WHT became final while a resident company, Portuguese UCI, or comparable EU/EEA pension fund would have obtained an exemption or recovery.

Key workstreams include:

• Map exposures – identify Portuguese-source dividends, WHT suffered, applicable treaty rates, and the investor’s tax profile in each year;

• Assess the legal route – distinguish between Article 94(8) claims, dividend-specific refund claims, investment fund claims under Article 22 of the EBF, pension fund claims under Article 16 of the EBF, and residual EU law challenges;

• Build the evidence file – gather financial statements, tax residence certificates, proof of regulatory status, fund documentation, and correspondence with foreign supervisory authorities;

• File promptly – start with an administrative review request where appropriate and escalate to judicial or arbitration proceedings if the Portuguese Tax and Customs Authority rejects the claim or remains silent; and

• Test comparability – for funds, focus on whether a Portuguese UCI or pension fund would have obtained an exemption or refund in materially similar circumstances.

Portugal’s WHT framework is not automatically incompatible with EU law. However, recovery opportunities remain significant where non-residents bear a heavier effective burden than comparable domestic taxpayers. Following AllianzGI-Fonds AEVN and Santander Renta Variable España Pensiones, claims denied to investment and pension funds based on residence, incorporation, or rigid evidentiary requirements should be reassessed, particularly where reliable alternative evidence establishes the required material conditions.