PORTUGAL Law and Practice Contributed by: Tânia de Almeida Ferreira, João Pedro Albuquerque, Filipe Gomes da Silva and Pedro Neves, CCA Law Firm
liability generally requires that the unlawful advantage involved be at least EUR15,000. Tax fraud becomes aggravated where specific quali - fying circumstances are present, such as the use of complex concealment mechanisms, falsified docu - mentation or structures involving entities established in clearly more favourable tax jurisdictions. Although distinct concepts, tax evasion and tax avoid - ance are not defined in a single statutory provision. Tax evasion generally refers to unlawful conduct aimed at reducing or eliminating a tax liability, such as the concealment of income, omission of taxable transac - tions or falsification of information. It may give rise to administrative penalties or criminal liability under the General Regime for Tax Infringements (RGIT), notably in cases of tax fraud or abuse of trust. By contrast, tax avoidance concerns the use of lawful arrangements to reduce or defer tax liabilities within the limits of the law, meaning that lawful tax plan - ning is permitted provided the arrangements in ques - tion reflect economic substance or a valid business purpose. However, arrangements deemed artificial or non-genuine and primarily designed to obtain undue tax advantages may be challenged under the Portu - guese General Anti-Abuse Rule (GAAR). In cross-border situations, substance and functional analysis are central to the assessment of potentially abusive structures. Particular attention must be giv - en to treaty-based anti-abuse provisions introduced through the Multilateral Instrument (MLI), including the Principal Purpose Test (PPT), which applies to most of Portugal’s DTTs. In practice, the analytical approach under the PPT is broadly aligned with the principles underpinning the domestic GAAR, focusing on the purpose and economic substance of the arrange - ments at stake. 5.2 Anti-Avoidance Mechanisms Portugal relies on a combination of general and spe - cific anti-avoidance provisions, many of which were introduced by EU Law or international treaties, includ - ing (among others):
• the Domestic GAAR; • the interest barrier provision; • Controlled Foreign Companies provisions; • exit taxation provisions; • anti-hybrid mismatch provisions; and • transfer pricing provisions and documentation obligations. These substantive provisions are rounded out by extensive audit and monitoring powers vested in the PTA. Through audits, targeted inspections and risk- based analysis (including cross-border exchange of information), the PTA actively identifies and challenges aggressive tax structures. While some regimes are relatively recent – eg, the anti- hybrid mismatch provisions, introduced following the transposition of Anti-Tax Avoidance Directive ATAD II in 2020 – their practical application requires a detailed understanding of the tax treatment of the relevant arrangements in other jurisdictions. In practice, the operation of these provisions depends significantly on the availability of cross-border information and the accurate identification of mismatches between legal systems. As such, the extent to which the PTA will actively invoke and enforce these provisions remains to be seen. Treaty-based anti-abuse provisions, namely those included in the MLI – which introduced additional anti avoidance provisions and the PPT – also apply in every DTT concluded by Portugal. 5.3 Blacklists and Non-Cooperative Jurisdictions Portugal maintains a list of jurisdictions considered to have clearly more favourable tax regimes (blacklisted jurisdictions). It should be noted that the country’s domestic blacklist currently includes approximately 75 jurisdictions (following the recent removal of Hong Kong, Liechtenstein and Uruguay), whereas the EU’s list of non-cooperative jurisdictions comprises only about ten jurisdictions, reflecting different legal bases, assessment criteria and policy objectives. Transactions involving listed jurisdictions may trigger higher withholding rates, limitations on cost deduc - tion and exemptions, and enhanced reporting require -
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