Beneficial owners eligible for tax relief - Portuguese equities - securities held in CBF

29.04.2022

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

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.

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 DTT signed between their country of residence and Portugal only if such application is expressly mentioned in the respective DTT (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:

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. 

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).

Non-resident of Portugal availing themselves the privileges and immunities enshrined in an international agreement or chart (central banks, government agencies and international/supranational organisations recognised by Portuguese law)

Exemption of withholding tax is available through relief at source to beneficial owners that are central banks, government agencies and international/supranational organisations recognised by Portuguese law.

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.

Portuguese residents eligible for tax exemption:

Relief at source is available to the following beneficial owners that are residents of Portugal for tax purposes and 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.

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.

EU/EEA pension funds

Relief at source is available to a beneficial owner that is a EU/EEA pension fund (other than Liechtenstein) on income not attributable to a Portuguese-situs Permanent Establishment. Those pension funds are eligible to exemption if they satisfy following conditions:

  • It secures exclusively retirement, disability and survivors' insurance, pre-retirement or anticipated retirement, post-employment healthcare benefits, and, when ancillary to such benefits compensation for 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.

If relief at source has not been obtained, a partial reclaim of withholding tax is available through Clearstream Banking via the quick refund procedure. Full quick refund (0%) is not available. EU/EEA pension funds can only benefit from the DTT rates.

Non-resident of Portugal, a DTT country, nor otherwise eligible for tax exemption but requesting the application of a reduced tax rate (25% or 28% rate);

Relief at source is available at the reduced rates of 25% or 28% respectively to non-resident corporate entities or individuals that cannot apply for exemption nor DTT rates. 

If relief at source has not been obtained, a reclaim of the relevant amount of withholding tax is available through Clearstream Banking via the partial quick refund procedure. Full quick refund (0%) and DTT rates are not available.

Resident in Portugal, not eligible for tax exemption but requesting the application of a reduced tax rate (25% or 28% rate).

Relief at source is available at the reduced rates of 25% or 28% respectively to Portuguese corporate entities or individuals that cannot apply for exemption.

If relief at source has not been obtained, a reclaim of the relevant amount of withholding tax is available through Clearstream Banking via the partial quick refund procedure. Full quick refund (0%) is not available.

Standard refund for all above mentioned beneficial owners: The standard refund process is still being analysed with the Portuguese tax authorities. Further information will be provided at a later stage.