Debt Securities subject to DL 193/2005 - Portugal

21.12.2015
Debt securities subject to DL 193/2005Holding restrictionWithholding tax rateRelief at sourceQuick
refund
Standard
refund
Yes35%
Non-residents of Portugal eligible for tax exemptionYesYesNo
Central banks and government agenciesYesYesNo
International/Supranational organisations recognised by Portuguese lawYesYesNo
Portuguese residents eligible for tax exemptionYesYesNo

For domestic debt securities subject to DL 193/2005:

Beneficial owners eligible for exemption from tax:

  • Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005;
  • International / Supranational organisations recognised by the Portuguese state;
  • Central banks and government agencies;
  • Portuguese residents eligible for tax exemption. The codes for Portuguese tax-exempt entities are the following:

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

7.

Art. 26 of EBF – Stock Savings Funds (FPA).

8.

Other legislation.

Beneficial owners applying for reduced tax rate:

Beneficial owners, residents and non-residents, may apply for the following reduced tax rates after submission of the requested information by the prescribed deadlines:

  • 25% for disclosed legal entities;
  • 28% for disclosed individuals.

Beneficial owners taxed at maximum tax rate:

  • Non-disclosed beneficial owners.

Debt securities – Decree-law 193/2005

 

At least one business day before the record date of the respective payment, by 10:00 CET.

Debt securities – Decree-law 193/2005

 

The deadline for reclaiming withholding tax via the quick refund procedure through Clearstream Banking depends on the fiscal residency of the beneficial owner, as follows:

  • For non-residents of Portugal entitled to full quick refund of withholding tax under the application of the Special Debt Regime: at the latest by 10:00 CET 80 calendar days following the day on which the interest payment was made; or
  • For residents of Portugal entitled to full quick refund of withholding tax under the application of the 2008 State Budget Law: at the latest 10:00 CET on the 10th of the month (or the last business day prior to the 10th, if the latter is not a business day) following the month in which the interest payment was made.

2. Domestic debt securities subject to DL 193/2005

Tax exemption

  • Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005;
  • Central banks and government agencies;
  • International/supranational organisations recognised by the Portuguese state;
  • Portuguese residents eligible for tax exemption.

Standard tax rates

  • Beneficial owners not applying for tax exemption.

Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005

The following beneficial owners that are not resident of Portugal for tax purposes are eligible for tax exemption based on the provisions of DL 193/2005:

  • Entities (individual and corporate) that are not resident in a tax-haven country, according with Ministerial Order 292/2011 of 8 November 2011 (An updated tax haven list can be found on the government's website);
  • Institutions for which less 20% owned by entities resident in Portugal.

For income and redemption on debt securities subject to DL 193/2005, relief of withholding tax 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.

Withholding Tax - Decree-law 193/2005 – Article 17

Standard rate of withholding tax:35%Holding requirements / restrictions:Yes

Market specifics - holding restriction

According to Article 17 of Decree-Law 193/20051, the following final beneficial owners are not entitled to hold Portuguese debt securities through Clearstream Banking:

  • Residents for tax purposes in a country or territory considered as a tax haven under Portuguese legislation, except central banks and government agencies resident in those countries;
  • Residents of Portugal subject to Portuguese withholding tax; or
  • Non-resident institutions of which more than 20% owned by entities resident in Portugal.

Tax exemption at source is available to a beneficial owner that is:

  • Non-resident of Portugal, not resident for tax purposes in a tax-haven country or territory;
  • Central bank or government agency resident or not in a tax-haven country or territory;
  • Resident of Portugal recognised as tax-exempt under Portuguese legislation; or
  • Non-resident institution of which less than 20% is owned by entities resident in Portugal.

Customers that hold the securities for eligible beneficial owners but do not provide Clearstream Banking with the relevant documentation will not be able to benefit from the exemption, and will be recorded as “undisclosed” and will consequently be taxed at maximum rate.

1. Domestic bonds subject to RL 193/2005

Click on the image to view the diagram showing the availability of relief at source and/or reclaim of withholding tax on income from Portuguese domestic bonds subject to DL 193/2005.

Eligible beneficial owners

Relief at source

Quick Refund

Standard Refund

Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005

Yes

Yes

No

Residents of Portugal recognised as exempt under Portuguese legislation

Yes

Yes

No

Supranational organisations recognised by Portuguese law

Yes

Yes

Yes

Central banks and government agencies

Yes

Yes

No

Full relief at source of withholding tax is available only if the appropriate documentation is submitted to Clearstream Banking.

A full quick refund is available if a full immediate refund has not been obtained by a beneficial owner eligible for exemption.

A full standard refund is not available through Clearstream Banking.

1. Domestic bonds subject to DL 193/2005

Eligible beneficial owners

Rate applicable at source

Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005

0%

Residents of Portugal recognised as exempt under Portuguese legislation

0%

Supranational organisations recognised by Portuguese law

0%

Central banks and government agencies

0%

1. Domestic bonds subject to DL 193/2005

All customers holding such bonds must submit:

Before the first trade:

And to apply for tax exemption:

Before the first interest payment of the respective calendar year:

Before each interest payment:

  • List of beneficial owners – Domestic Portuguese Debt Securities subject to DL 193/2005.

Debt securities – Decree-law 193/2005

At least one business day before the record date of the respective payment, by 10:00 CET.

1. Domestic bonds subject to DL 193/2005

Eligible beneficial owners

Effective rate of tax
after refund

Tax
refund available
a

Non-residents of Portugal eligible for tax exemption as per the restrictions of Article 17 of DL 193/2005

0%

35%

Residents of Portugal recognised as exempt under Portuguese legislation

0%

35%

Supranational organisations recognised by Portuguese law

0%

35%

Central banks and government agencies

0%

35%

a. Expressed as a percentage of the gross interest amount.

1. Domestic bonds subject to DL 193/2005

All customers holding such bonds must submit:

Before the first trade:

And to apply for full quick refund:

If the beneficial owner is a non-resident of Portugal:

For the first quick refund application of the respective calendar year:

For each quick refund application:

  • Form Mod 19-RFI;
  • List of beneficial owners – Domestic Portuguese Debt Securities subject to DL 193/2005.

If the beneficial owner is a resident of Portugal:

For each quick refund application:

  • Position Breakdown Report;
  • Statement of Beneficial Ownership for Exempt Beneficiaries of Debt Securities and Equities Resident in Portugal.

Debt securities – Decree-law 193/2005

The deadline for reclaiming withholding tax via the quick refund procedure through Clearstream Banking depends on the fiscal residency of the beneficial owner, as follows:

  • For non-residents of Portugal entitled to full quick refund of withholding tax under the application of the Special Debt Regime: at the latest by 10:00 CET 80 calendar days following the day on which the interest payment was made; or
  • For residents of Portugal entitled to full quick refund of withholding tax under the application of the 2008 State Budget Law: at the latest 10:00 CET on the 10th of the month (or the last business day prior to the 10th, if the latter is not a business day) following the month in which the interest payment was made.