Debt securities - rates, eligibility, availability of relief etc. - Portugal - securities held in CBF

29.04.2022

Withholding Tax - Law 83/2013 clarified by Circular Letter 4/2014

Standard rate of withholding tax:

35%

Holding requirements / restrictions:

No

Note: For details regarding debt securities subject to DL 193/2005 refer to Debt Securities subject to DL 193/2005 - Portugal

Market specifics

Legal obligations impacting CBF tax services

In relation to debt securities within the scope of Decree-Law No 193/2005 of 7 November 2005, as amended (hereinafter “Special Debt Securities’ Regime”, CBF undertakes the role and responsibilities of a Direct Registrar Entity1, affiliated with Interbolsa.

CBF, as a T2S In-CSD, cannot benefit from the Article 17 regime granted only for the ICSDs. Full tax calculation and reporting requirements apply to CBF customers, as described below.

CBF account structure 

By default, the main and sub-accounts of CBF customers are flagged as B (blocked). Settlement is not allowed on Portuguese securities, as long as a valid NIF has not been allocated to the respective settlement accounts. 

When the NIF is obtained and/or validated by CBF (which can take up to seven business days) all its main and sub-accounts are set up to N (non-exempt = taxable) and settlement can be allowed. 

To be exempt from Portuguese withholding tax on interest from debt securities, customers must segregate debt securities held for exempt and non-exempt investors into at least two separate securities accounts, one taxable and one exempt. Such segregation is mandatory as per the Portuguese law requirements. To facilitate it, a new CBF customer subaccount “xxxx204” was proactively opened by CBF for each customer. However, the segregation may be done based on any other CBF account or sub-account. The usage of the sub-account xxxx204 stays at the full discretion of the account holder. Customers can hold debt securities for:

  • Exempt investors (for whom the certification procedure has been fulfilled): 
    • In a single “exempt” account (“S” account); or
    • In an omnibus “exempt” account (“X” account). OR 
  • Non-exempt investors in another “non-exempt” account (“N” account) including undisclosed positions taxed at maximum tax rate (35%) or disclosed beneficiaries providing information to allow the application of the reduced tax rates (25% or 28% tax applicable, respectively, to corporates and individuals).

Availability of relief

Debt securities subject to
Law 83/2013

Holding restriction

Withholding tax rate

Relief at source

Quick
refund

Standard
refund

No

35%

DTT/TIEA residents eligible for tax exemption

  

Yes

Yes

No

Credit institutions, financial companies, pension funds, insurance companies domiciled in an OECD Member State or in a DTT country

  

Yes

Yes

No

Collective Investment Vehicles (CIVs) domiciled in an OECD Member State or in a DTT country

  

Yes

Yes

No

Central banks, public law agencies, public law entities or International/Supranational organisations recognised by the Republic of Portugal

  

Yes

Yes

No

Portuguese residents eligible for tax exemption

  

Yes

Yes

No

Portuguese residents not eligible for tax exemption but applying for reduced tax rate

  

Yes

Yes

No

Relief at source of withholding tax is available only if the appropriate documentation is submitted to Clearstream Banking. A quick refund is available if a relief at source has not been obtained by the eligible beneficial owner. The standard refund process is still being analysed with Portuguese tax authorities. Further information will be provided at a later stage.

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1. For purposes of Decree-Law No 193/2005 of 7 November 2005, a “Direct Registrar Entity" is defined as an entity with whom the investor’s accounts of qualifying debt securities integrated in a CSD or ICSD are opened