PORTUGAL Law and Practice Contributed by: Manuel Requicha Ferreira and Diana Avillez Caldeira, Cuatrecasas
The bonds must be integrated in a centralised system managed by an entity resident for tax purposes in Por- tugal (ie, Interbolsa), an international clearing system managed by an entity located in another EU member state (such as Euroclear and Clearstream Luxem- bourg) or an EEA member state, provided it is bound by an administrative co-operation agreement for tax matters similar to the one established within the EU or integrated with other centralised systems. In this last case, the competent government member must authorise the application of the special tax regime. The Court of Justice of the European Union ruled that the Portuguese domestic CIT rules imposing withhold- ing tax over interest obtained by non-residents were in breach of EU Law, because the withholding tax is based on the gross amount of the interest, whereas resident financial institutions (only) pay tax on their net income (decision of 13 July 2016 on Brisal – Auto Estradas do Litoral SA, KBC Finance Ireland v Fazenda Publica – Case C-18/15). While it was expected that this decision would determine tax rules, this has not been the case to date. The reimbursement of the principal and other pay- ments to the lender is not subject to Portuguese with- holding tax. 4.2 Other Taxes, Duties, Charges or Tax Considerations Value Added Tax (VAT) Financial transactions are, as a rule, exempt from VAT under domestic VAT law. This exemption notably cov- ers the granting and negotiation of credit, the respec- tive administration and management by the entity granting the credit, the negotiation and granting of security and guarantees, and transactions (includ- ing negotiation) related to the deposit of funds, cur- rent accounts, payments, transfers, collection and cheques. The VAT treatment of bank commissions and fees is determined on a case-by-case basis, depending on their particular features, although those commissions corresponding to the foregoing transactions are in principle VAT-exempt.
Conversely, other commissions or fees charged by the banks – eg, for consultancy, certain structuring and settlement services – are in principle out of scope of the exemption and are hence liable to VAT taxation. Where these fees are charged by non-resident banks to Portuguese VAT taxpayers, Portuguese VAT will apply by means of the “reverse charge mechanism”. Financial transactions subject to, but exempt from VAT, are subject to stamp duty. Stamp Duty Portuguese stamp duty is due on a number of speci- fied taxable events when deemed to have occurred in Portugal, encompassing several transactions, con- tracts, acts and documents outlined in the stamp duty chart, including financial transactions. However, no stamp duty is levied over transactions subject to and not exempt from VAT – eg, certain services provided by banks, as referred to in the foregoing. The granting of credit is subject to stamp duty, levied over the principal at rates that vary depending on the term during which the credit is used, as follows: • credit for less than one year – 0.04% per month or a fraction thereof; • credit for one or more years – 0.5%; and • credit for five or more years – 0.6%. Extension of the term of the contract constitutes the granting of new credit, which leads to additional taxation, with stamp duty borne by the borrower. No stamp duty, however, applies in the case of funding obtained through the issue of bonds over the principal or interest (see the discussion of taxation of interest later in this section). The granting of security is also subject to stamp duty whenever it is: • granted in the Portuguese territory; • for the benefit of a Portuguese-resident entity; or • designed to produce legal effects, except if it is (i) materially related to a taxable stamp duty event and (ii) granted simultaneously with the latter.
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