CIT – Amendments to Transfer Pricing rules

In brief

Decree 268/2021, of 26 November, revokes Decree 1446-C/2001, of 21 December, amending the transfer pricing rules applicable on transactions between a PIT or a CIT taxpayer, and any other entity, following Article 63 of the CIT Code.

In detail

Decree 268/2021, of 26 November, revokes Decree 1446-C/2001, of 21 December, amending the transfer pricing rules applicable on transactions between a PIT or a CIT taxpayer, and any other entity, following Article 63 of the CIT Code.

The Decree is in line with the amendments introduced in Article 63 of the CIT Code, in what concerns the requirements to prepare transfer pricing documentation. This is guided by the arm’s length principle and by the adoption of the most appropriate method to determine the transfer pricing, considering the most recent developments at OECD level.

Obligation to prepare the Transfer Pricing documentation file

• Taxpayers with an annual income lower than EUR 10 million, with reference to the tax year to which the obligation concerns, are not required to prepare and organize the transfer pricing documentation file;
• Taxpayers with an annual income exceeding EUR 10 million are also not required to prepare transfer pricing documentation in respect of transactions with associated parties whose amount in the year concerned does not exceed, per entity, EUR 100,000, and EUR 500,000 in total, considering the respective market value.

Master File / Local File or Simplified file

• There is a restructuring of the contents of the transfer pricing documentation; it now expressly foresees a double structure that includes the preparation and maintenance of a Master File (“Dossier Principal”) and a Local File (“Dossier Específico”), both aligned with international guidelines;
• Taxpayers that are small or medium sized companies, as per Decree-Law 372/2007, of 6 November, are required to keep a simplified documentation file (“Dossier Simplificado”) concerning the transfer pricing policy adopted; this obligation only arises if the taxpayer is not covered by the Article 17 of the Decree, that waives the need to prepare the transfer pricing documentation.

Supplementary guidelines

• The Decree introduces guidelines on the application of the arm’s length principle on cost sharing agreements, intragroup services, transactions with intangibles and restructuring operations.
• In addition, there are now rules including detailed requirements and necessary procedures to initiate a mutual agreement procedure.

This Decree enters into force on 27 November 2021. Chapter IV, concerning the requirements for the preparation of the transfer pricing documentation file, is applicable to tax years starting on or after 1 January 2021.

The Decree includes other amendments that are relevant from a technical perspective. Further analysis is recommended.

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