Portugal: State Budget Law 2012 ratified

Further to our previous announcements¹ and effective

1 January 2012

the Portuguese State Budget Law for 2012 was ratified by the President of Portugal on 30 December 2011 and has been published in the Official Gazette (Diário da República).

The impacts on the current tax procedure via Clearstream Banking are described in the following sections.

New withholding tax rates

The withholding tax rate applicable on interest and dividends paid to disclosed resident and non-resident beneficial owners is increased from 21.5% to 25%.

Furthermore, income from Portuguese securities paid to beneficial owners (whether legal entities or individuals) who are residents of a country, territory or region defined by Ministerial Order 150/2004 as a tax haven (see below) is subject to 30% withholding tax.

As a consequence, the withholding tax rates applicable as of 1 January 2012 are the following:

• 30% on fixed income and dividends paid to beneficial owners who are undisclosed or resident in tax havens;
  
• 25% on fixed-income and dividend payments made to resident and non-resident beneficial owners who disclosed their identity and holdings;
  
• 0% (tax exemption) or reduced tax rate granted by virtue of a Double Taxation Treaty (DTT) or Portuguese domestic legislation upon receipt of the required documentation within the prescribed deadlines.

Tax exemption available on dividends paid to EU/EEA Pension Funds

Following the judgment of the European Court of Justice in the case of the Commission versus Portugal (C-493/09), the State Budget Law 2012 grants tax exemption on Portuguese securities income paid to Pension Funds domiciled in other European Union (EU) Member States or in European Economic Area (EEA) countries (to the extent that the respective EEA country is in a relationship of administrative cooperation with Portugal as regards tax matters, equivalent to that established between the EU Member States) provided that the following conditions are met:

• The Pension Fund 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.
  
• The Pension Fund is managed by institutions performing Pension Plan Schemes under Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003.
  
• The Pension Fund is the final beneficiary of the income.
  
• In the case of dividends, the shares were previously held for a period of 12 months

Countries defined by Portuguese Ministerial Order as tax havens

a. Including Jersey, Guernsey, Alderney, Sark and Herm

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

1. T11081, dated 2 December 2011, and A11183, dated 7 December 2011.
2. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).