Portugal: Tax procedure for domestic bonds under DL193/2005 as amended by Law 83/2013 - reminder

As of 1 January 2015, all income payments deriving from Portuguese domestic bonds are subject to the provisions of DL 193/2005 as amended by Law 83/2013 ("Law 83/2013").

An exception remains for zero coupon securities issued before 1 January 2014 and redeeming in 2015 or later. Those still fall under the old regime (DL 193/2005) and holding restriction (example: ISIN PTPBTMGE0011 with redemption date on 20 March 2015). This is further to announcements A13203, dated 19 June 2014, and A14148, dated 19 November 2014.

Abolition of holding restriction

There is no holding restriction under Law 83/2013.

Beneficial owners that are not eligible for tax exemption are entitled to hold Portuguese debt securities with Clearstream Banking¹.

Applicable withholding tax rates

A tax exemption is available, after submission of the requested information by the prescribed deadlines, to the following entities:

• All non-resident entities, with the exception of those that are resident in a tax-haven country that has neither a Double Taxation Treaty (DTT) nor a Tax Information Exchange Agreement (TIEA) in place with Portugal;
• Central banks;
• Government entities;
• Supranational/international entities recognised by Portugal;
• Portuguese residents eligible for tax exemption.

Please use the following links to view lists as indicated:

• Double Taxation Treaties (DTTs) signed by Portugal;
• Tax Information Exchange Agreements (TIEAs) signed by Portugal; and
• Tax haven countries.

The codes for Portuguese tax-exempt entities are as follows:

The following reduced tax rates are available after submission of the requested information by the prescribed deadlines:

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

The maximum tax rate of 35% is applicable to:

• Residents of countries considered as tax havens by Portuguese legislation and that have no DTT or TIEA with Portugal;
• Non-disclosed beneficial owners.

Applicable withholding tax procedures

According to Law 83/2013, relief from withholding tax is available to eligible beneficial owners through Clearstream Banking by means of relief at source and quick refund procedures (for interest and redemption only), as described in the following sections.

Relief at source

In order to benefit from relief at source on income/redemption from Portuguese securities, customers of Clearstream Banking will need to ensure that we receive the following documents at the latest one business day before Payment Date, by 10:00 CET:

One-Time Certificate for Portuguese Debt Securities – DL 193/2005 amended by Law 83/2013.

The One-Time Certificate must be submitted by all customers, regardless of the residency and status of the beneficial owners, before the first applicable interest payment date and must state that the customer holds the securities, either:

• BOX 1 - Standing instruction: Exclusively for one single beneficial owner (which may be the customer or his underlying client) eligible for tax exemption. By ticking the first box, tax exemption or reduced tax rate (applicable only for disclosed beneficial owners not eligible for tax exemption) is applied by default at source on all further interest payments and no further certificates are required. If the beneficial owner is a Portuguese resident, the customer must, in order to comply with the reporting obligations, complete the beneficial owner’s data (full name, address, Tax Identification Number (TIN), type and, if applicable, legal code number) and authorise Clearstream Banking to forward these details and the total holdings to the Portuguese authorities for each interest payment made to the customer’s account.

Or

• BOX 2 - Standing instruction: Exclusively on behalf of several beneficial owners (including the customer, when applicable), being non-residents of Portugal for tax purposes and eligible for tax exemption. By ticking the second box, tax exemption is applied by default at source on all further interest payments and no further certificates are required.

Or

• BOX 3 - Instruction per payment: Exclusively on behalf of several beneficial owners (including the customer, when applicable), being non-residents of Portugal, eligible or not for tax exemption, or undisclosed beneficial owners. In addition to the One-Time Certificate, a Breakdown of Holdings must be provided, as explained below.

Or

• BOX 4 - Instruction per payment: On behalf of several beneficial owners being eligible or not for tax exemption as above but also on behalf of beneficial owners that are Portuguese residents. In addition to the One-Time Certificate, the customer is required to submit, before each interest payment, a Breakdown of Holdings and, for the beneficial owners that are Portuguese residents only, a List of Beneficial Owners, as explained below.

A One-Time Certificate that has more than one BOX ticked is not valid and will be rejected.

A Breakdown of Holdings

Customers that ticked BOX 3 or 4 in the One-Time Certificate must provide a Breakdown of Holdings, via SWIFT MT599 or CreationOnline free-format message, indicating:

• The customer’s total holding;
• The total position held on behalf of beneficial owners that are non-residents of Portugal and eligible for tax exemption;
• The total holding held on behalf of non-residents of Portugal not eligible for tax exemption and/or are undisclosed;

And, if the customer ticked BOX 4 in the One-Time Certificate:

• The total holding held on behalf of residents of Portugal eligible for tax exemption / reduced tax rate.

All these declared positions must be accurate on the relevant record date (that is, one business day before Payment Date) at 19:00 CET. If there is a discrepancy between the declared positions and the customer’s total holding visible in Clearstream Banking’s books, the application for tax exemption will be rejected and, consequently, the maximum standard tax rate will be applied.

Furthermore, if BOX 3 or 4 of the One-Time Certificate is ticked and we receive no Breakdown of Holdings by the prescribed deadline, the customer’s total holding will be considered as being undisclosed and, as a consequence, the maximum standard tax rate will be applied.

List of Beneficial Owners (BO List) for Portuguese residents only

Customers holding Portuguese debt securities on behalf of Portuguese BOs and, consequently, ticked BOX 4 in the One-Time Certificate must provide a List of Beneficial Owners.

The BO List must be completed as follows and is only needed for BOs that are Portuguese residents:

• “General Information”.
• “Breakdown of Total Holding per category of BO”.
• “List to be completed with Portuguese beneficial Owners details”: all columns of this list are to be filled in with the details of Portuguese BOs. Among these, the following columns:
  • Column E (“type of investor”): the status of the beneficial owner (individual or legal entity) is mandatory.
  • Column F (“legal basis of the exemption from withholding tax”): to be filled in with the relevant tax code. All tax codes from 1 to 8 are detailed in the box named “For Exempt Portuguese Beneficial Owners”.
  • Column G (“for code 8, complete the legal basis of the exemption from withholding tax”): to be filled in when tax code in column F is 8.
  • Column J (“tax rate to apply”): the applicable tax rate according to the status of the Portuguese beneficial owner (28% for disclosed individuals, 25% for disclosed legal entities, 0% for tax-exempt entities that completed Column F and, if applicable, Column G).

All declared positions must be accurate on the relevant record date (that is, one business day before Payment Date) at 19:00 CET. If there is a discrepancy between the positions declared in the BO List and those included in the Breakdown of Holdings submitted separately for the same event, the application for tax relief will be rejected and, consequently, the maximum standard tax rate will be applied.

Furthermore, if BOX 4 of the One-Time Certificate is ticked and we receive no BO List but only the Breakdown of Holdings by the prescribed deadline, the customer must clearly define, in the SWIFT MT599 or CreationOnline free-format message, that no Portuguese beneficial owners are holding the securities. If we receive no BO List and no Breakdown of Holdings by the prescribed deadline, the customer’s total holding will be considered as being undisclosed and, as a consequence, the maximum standard tax rate will be applied.

The new BO list is now available in the BO Upload facility under our Clearstream Banking website.

Quick refund

Important: The documentation and deadlines for quick refund applications vary according to whether the application is for a full or partial quick refund, as follows.

Full quick refund

Mod 25-RFI

This form must be provided for each quick refund application by beneficial owners exempted under Law 83/2013 or under any exemption granted by the Personal Income Tax (PIT) or by Corporate Income Tax (CIT) codes (exempt Portuguese beneficial owners).  The form, duly completed and signed by the final beneficial owner, does not need to be completed by the beneficial owner’s local tax authorities.

The form consists of a set of three similar pages and a fourth page that must be printed on the reverse side of each of the first three pages.

However, for a quick refund application, only the second page of the form with the fourth page printed on the reverse must be submitted to Clearstream Banking in order to be transmitted to the Direct Registrar² of the securities or its representative. Failure to comply with this arrangement will be sufficient reason for the Direct Registrar or its representative to refuse the quick refund application.

Note: The first page of the form with the fourth page printed on the reverse is dedicated to the Portuguese Tax Authorities and must be submitted for a standard refund application only, a service which is currently not available through Clearstream Banking. Furthermore, the third page of the form with the fourth page printed on the reverse side should remain with the beneficial owner (the claimant).

Deadline:

At the latest, five business days before the sixth month after the applicable payment date, by 10:00 CET.

Partial quick refund

For residents of Portugal not eligible for tax exemption but applying for the standard rates of 25% (legal entities) or 28% (individuals).

List of Beneficial Owners (BO List) for Portuguese residents only

This list must be submitted by the customer for each quick refund application. The template is similar to the one requested from Portuguese beneficial owners applying for relief at source and the columns are to be filled in with the requisite beneficial owner details as per the explanations provided above.

Deadline:

At the latest, on the 10th of the month (or the last business day before the 10th, if the latter is not a business day) following the month in which the interest payment was made, by 10:00 CET.

Standard refund

No standard refund is available through Clearstream Banking.

Further information

For further information, customers may contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or their Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.

2. The Direct Registrar is the Withholding Tax Agent responsible for applying and reporting the tax. For Portuguese domestic debt securities, this role is performed by our local custodian.