Taxation of dividends
| Nature of the investor |
Distribution of dividends |
| Conditions |
Withholding Tax |
|
Individuals |
Resident |
- |
20% |
|
Non-resident |
- |
20%(a) |
|
Companies |
Resident
|
Resident |
Holding period < 1 year and acquisition cost less than M€20 or less than 10% participation |
20% |
|
Holding period > or = 1 year and a minimum acquisition cost of M€20 or a minimum 10% participation |
Exempt |
|
Holding companies (SGPS) and Venture Capital Companies (SCR) |
Holding period < 1 year |
20% |
|
Holding period > or = 1 year |
Exempt |
|
CIT exempt entities (Pension Funds and Venture capital funds) |
- |
Exempt |
|
Mutual Funds |
- |
20% |
|
Non-resident |
Resident in EU |
Holding period > or = 1 year and a minimum acquisition cost of M€20 or a minimum 10% participation |
Exempt |
|
Other |
20% (a) |
|
Switzerland |
Holding period > 2 year and a minimum 25% participation |
Exempt |
|
Other |
10%-15% (b) |
|
Resident in other countries |
- |
20% (a) |
| (a) The tax rate may be reduced under the provisions of a Double Tax Treaty entered into between Portugal and the country in which the beneficiary of the income is resident. |
| (b) According to the application of the Double Tax Treaty entered into between Portugal and Switzerland and depending on the percentage of the share capital held. |
Dividends paid to Portuguese resident individuals are subject to withholding tax at a rate of 20%. As a general rule, the tax withheld is deemed as the final tax due.
Notwithstanding, Portuguese resident individuals may elect to include the dividends in the income subject to the marginal Personal Income Tax rates. In this case, the withholding tax would have the nature of a payment on account for the final tax due.
In case a Portuguese resident individual makes such an election, only 50% of the total amount of the dividend will be considered for tax purposes.
If a Portuguese resident individual makes such an election, he would also have to include in the income subject to the marginal Personal Income Tax rates other income that, as a general rule, would only be subject to withholding tax (e.g. interest).
As for individuals, the payment of dividends to companies resident in the Portugal is subject to a 20% withholding tax rate, which is considered as a payment on account for the final tax due.
Companies holding a participation that meets certain requirements, namely as regards the percentage or the acquisition cost of the participation (10% or € 20.000.000, respectively) and a minimum holding period of 1 year, may benefit from a withholding tax exemption.
Dividends received must be included in the taxable profit of the company and would consequently be taxed at the general rate of 25%, increased by a municipal surcharge of up to 1.5%, depending on the municipality where the company is located.
However, according to the Portuguese participation exemption regime, companies are able to exempt part (50%) or totally provided the above-mentioned requirements to benefit from the withholding tax exemption are met (the requirement regarding the 1 year minimum holding period may be met after the dividend’s distribution).
The dividends paid to investment funds incorporated and ruled according to the Portuguese law are subject to a definitive withholding tax rate of 20%.
Withholding tax on dividends will not be mandatory for entities which benefit from a Corporate Income Tax exemption, namely, pension funds and venture capital funds.
This exemption is not applicable, whenever these entities hold their participations for less than one year. In this case, the dividends will be subject to an autonomous taxation, at a tax rate of 20%.
Generally, dividends paid to non-resident investors, whether individuals or corporate entities, are subject to a 20% withholding tax rate.
In case the investor is a resident in a country with whom Portugal has entered into a Double Tax Treaty (DDT), the withholding tax rate may be partially reduced under the provisions set out therein.
Moreover, in case of companies resident in a EU Member State, the dividends received may be exempt from withholding tax in Portugal, if the requirements above-mentioned as regards Portuguese resident companies are met, namely in respect to the percentage or the acquisition cost of the participation and the minimum holding period.
This exemption may also be applicable to the dividends paid to a Swiss company. In this case, the minimum holding percentage is 25% and the minimum holding period is two years.
Taxation of capital gains deriving from the disposal of shares
| Nature of the investor |
Capital-gains obtained from the disposal of shares |
| Conditions |
Final Rate |
|
Individuals |
Resident |
Holding period < or = 1 year |
10% |
|
Holding period > 1 year |
Exempt (a) |
|
Non-resident |
- |
Exempt (b) |
|
Companies |
Resident
|
Resident |
Holding period < 1 year |
26.5% |
|
Holding period > 1 or = year |
13.25% (c) |
|
Holding companies (SGPS) and Venture Capital Companies (SCR) |
Holding period < 1 year |
26.5% |
|
Holding period > or = 1 year |
Exempt (d) |
|
CIT exempt entities (Pension Funds and Venture capital funds) |
- |
Exempt |
|
Mutual funds |
- |
10% |
|
Non-resident |
Not resident in a tax haven |
- |
Exempt (b) |
|
Resident in a tax haven |
- |
25% |
| (a) This exclusion of taxation does not apply when the capital gains result from shares in companies whose assets consist in more than 50% of real estate located in Portugal. |
| (b) This exemption is not applicable to entities held in more than 25%by Portuguese entities and when the assets of the company whose participation is disposed consist in real estate assets in more than 50%. |
| (c) In case the reinvestment regime is applicable, capital-gains should be considered only in 50% of its value. |
| (d) Except when the participation has been acquired to a related entity or to an entity resident in a tax haven for less that 3 years, or if the seller results from the transformation of a company that benefited from a different tax treatment regarding capital gains and less than 3 years have elapsed since the transformation. |
The positive difference between capital gains and losses deriving from the disposal of shares by resident individuals in Portugal are subject to a special 10% tax rate. However, the individual may elect to include the capital gain in the income subject to the marginal Personal Income Tax rates.
If a Portuguese resident individual makes such an election, he would also have to include in the income subject to the marginal Personal Income Tax rates all other capital gains.
Capital gains deriving from the disposal of shares held for more than 12 months are not subject to taxation. This rule is not applicable to capital gains derived from the disposal of shares of a company which 50% of its assets is composed, directly or indirectly, by real estate located in Portugal.
Capital gains derived by Portuguese resident companies are subject to taxation at the general rate of 25%, increased by a municipal surcharge of up to 1.5%, depending on the municipality where the company is located.
However, only 50% of the positive difference between the capital gains and losses deriving from the disposal of shares will be taxed whenever the sales proceeds are reinvested (provided certain requirements are met).
The negative difference between the capital gains and losses is only tax deductible on half of its value.
Capital gains or losses obtained by venture capital companies, venture capital investors and pure holding companies (which take the form of an SGPS) should not be considered for tax purposes, provided the participation is held for more than one year.
However, capital gains obtained by these entities are taxable whenever:
· the participation has been acquired to a related party in the previous 3 years;
· the participation has been acquired for less than 3 years to an entity resident in a tax haven;
· the seller results from the transformation of a company that benefited from a different tax treatment regarding capital gains and less than 3 years have elapsed since the transformation.
The positive difference between capital gains and losses obtained by investment funds incorporated and governed according to the Portuguese law is subject to an autonomous taxation at a tax rate of 10%.
On the other hand, capital gains derived by pension funds and venture capital funds (incorporated and governed according to the Portuguese law) are exempt from taxation.
Under the Portuguese domestic rules, capital gains are exempt from taxation in Portugal if the investor (whether an individual or a corporate entity) has no permanent establishment therein to which the capital gain should be attributed and, additionally, none of the following situations are met:
· the non-resident company is held in more that 25% by an entity resident in Portugal;
· the non-resident individual or company is resident in a tax heaven;
· the disposed participation relates to (i) a Portuguese resident real estate company (a company in which more than 50% of its assets consist of real estate located in Portugal) or (ii) a resident company holding such a real estate company.
Nevertheless, in cases where these requirements are not met, capital gains may still be exempt from taxation under a relevant DTT entered into between Portugal and the country where the individual or company are resident.
Moreover, capital gains derived by a non-resident individual from the disposal of shares held for more than 12 months are not subject to taxation.
If the capital gains obtained from the disposal of shares by non-residents in Portugal are not covered by the exemptions set above, they will be subject to a tax rate of 10% in case of individuals, or 25% in case of companies.