Beneficial owners eligible for tax relief - Portuguese equities

14.06.2019

The following types of beneficial owner are recognised in Portugal as eligible for obtaining tax relief on dividends:

  • Residents of Double Taxation Treaty (DTT) countries;
  • Portuguese residents eligible for tax exemption;
  • Central banks and government agencies;
  • Supranational organisations recognised as such by Portuguese law;
  • EU/EEA pension funds.

Residents of Double Taxation Treaty (DTT) countries

Relief at source of withholding tax on dividends from Portuguese equities is available to a beneficial owner that qualifies for the benefit of a reduced tax rate in accordance with the DTT concluded between its country of residence and Portugal.

If relief at source has not been obtained, a reclaim of the relevant amount of withholding tax is available through Clearstream Banking via the quick refund procedure.

A partial standard refund of withholding tax is available through Clearstream Banking if the required certification has not been provided prior to the relief at source or quick refund deadlines. The customer can apply for partial standard refund on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.

Additional eligibility criteria for special categories of DTT residents

1. Funds / Trusts:

Following Circular Letter 6/2009 and in order to benefit from the reduced tax rates granted by the applicable DTT, non-resident Collective Investment Vehicles (that is funds and trusts) must comply with the following eligibility criteria:

  • Non-resident trusts can benefit from the application of the regime established in the DT signed between their country of residence and Portugal only if such application is expressly mentioned in the respective DT (e.g. the treaty concluded by Portugal with the U.S.A. and Canada). In such cases, proof must be provided of the fulfilment of the requirements and conditions set out in the respective treaty, including proof that the trust is the beneficial owner of the income.
  • For non-resident investment funds and pension funds, the application of the DTT depends on the fulfilment of all the following requirements:
    • The fund is considered a “person” for the purpose of the respective DTT, and
    • The fund is subject to tax imposed on a personal and unlimited basis and is not treated as fiscally transparent (that is, it must be subject to tax in its country of residence, independently of the taxation that may occur at the level of the fund participants); and
    • The fund is the beneficial owner of the income received.

Trusts and funds applying for tax relief must provide additional Declarations to prove their eligibility to obtain the DTT rates.

2. Luxembourg SICAVs and SICAFs:

In the technical note Process 1588/2010, the PTA clarified that Luxembourg SICAVs are not covered by the limitation on benefits clause of article 29 of the Portugal – Luxembourg DTT, nor by the references to such limitation on benefits clause foreseen in the Protocol. As a consequence, a SICAV shall be considered covered by article 1 (personal scope of the DTT), provided that it fulfils the requirements to be considered resident in Luxembourg for tax purposes as provided in article 4 of the same DTT.  This technical position should be extended also to Luxembourg entities operating as SICAFs.
The documentation requirements for tax relief are similar to the ones for DTT residents.

The exclusion of fiscally transparent funds from treaty benefits remains applicable to Luxembourg Fonds Commun de Placement (FCPs).

Portuguese residents eligible for tax exemption:

The following beneficial owners that are residents of Portugal for tax purposes are eligible for tax exemption based on the following provisions of the Portuguese legislation:

1.

Art. 97 of CIRC (Corporate Income Tax Code) – Exemption from withholding tax.

2.

Art. 9 of CIRC – State, Autonomous Regions, local authorities, their associations governed by public law and social security federations and institutions.

3.

Art. 10 of CIRC – General Public Interest Companies, Charities and other non-governmental social entities.

4.

Art. 16 of EBF (Tax Incentives Statute) – Pension Funds and assimilated funds.

5.

Art. 21 of EBF – Retirement Savings Funds (FPR), Education Savings Funds (FPE), Retirement and Education Savings Funds (FPR/E).

6.Art. 22, No. 10 of EBF (Tax Incentives Statute) – Tax Regime applicable to Portuguese Collective Investments Vehicles)

7.

Art. 23 - A of EBF – Venture Capital Investment Funds.

8.

Other legislation.

Tax exemption is available as follows:

  • A full relief at source; or
  • A full quick refund, if a full relief at source has not been obtained.

A full standard refund is not available through Clearstream Banking.

Central banks and government agencies

Exemption of withholding tax is available to beneficial owners that are central banks or government agencies, resident or not for tax purposes in a tax-haven country or territory as follows:

  • A full relief at source; or
  • A full quick refund, if a full relief at source has not been obtained.

A full standard refund is not available through Clearstream Banking.

Supranational organisations

Exemption of withholding tax is available to beneficial owners that are international / supranational organisations recognised as such by the Portuguese law as follows:

  • A full relief at source; or
  • A full quick refund, if a full relief at source has not been obtained.

A full standard refund is not available through Clearstream Banking.

EU/EEA pension funds

Exemption of withholding tax on dividends from Portuguese equities is available to a beneficial owner that is a pension fund if it satisfies the following conditions:

  • It grants exclusively the payment of retirement benefits (including pre-retirement or anticipated retirement), post-employment health benefits and, when provided on an ancillary basis, payment on death; and
  • It is managed by institutions performing Pension Plan Schemes under Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003; and
  • It is the final beneficiary of the income; and
  • It has previously held the securities uninterrupted for a period of at least 12 months.

Tax exemption is available as a full relief at source.

Full quick refund and full standard refund are not available through Clearstream Banking.