Transfer Pricing – Advance Pricing Agreements: rules amended

26/11/21

In brief

Decree 267/2021, of 26 November, revokes Decree 620-A/2008, of 16 July. It amends the rules on the procedures related with the conclusion of Advance Pricing Agreements (APA), as foreseen in Article 138 of the CIT Code.


In detail

Decree 267/2021, of 26 November, revokes Decree 620-A/2008, of 16 July. It amends the rules on the procedures related with the conclusion of Advance Pricing Agreements (APA), as foreseen in Article 138 of the CIT Code.

This Decree is aligned with the amendments introduced in Article 138 of the CIT Code. In addition, it also improves the rules applicable to APA following a period of 10 years of experience since its introduction. Its essence remains unchanged – it aims at providing legal certainty and assurance derived from a correct use of transfer pricing rules, while at the same time avoiding double taxation when an APA is bilateral or multilateral, in view of the guidelines issued by OECD as well as by the European Union Joint Transfer Pricing Forum.

It is recalled that bilateral or multilateral APA can only be concluded with jurisdictions with which Portugal concluded a tax treaty that includes a provision on mutual agreement procedure (either through a tax treaty based on OECD model tax convention or through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS commonly known as BEPS MLI).

We highlight some of the main changes introduced:

  • The request for a preliminary assessment must be filed in writing up to 3 months prior to the term to deliver the proposed APA.
  • The maximum duration term of an APA is set at 4 years in all cases; in addition, an APA can include prior tax years, provided that the relevant facts and circumstances of those years are identical / similar, and, with reference to the date of conclusion of the APA, a period of not more than 2 years has elapsed as from the term for deliver.
  • If an APA results in a reduction of the taxable income already reported, the tax authorities of other jurisdictions should be consulted in advance; in Portugal, any adjustments shall be effective by means of a replacement CIT return.
  • There is the possibility of a reduction of the applicable fees in case the taxpayer qualifies as a micro, small or medium sized company, as per the applicable legislation, and carries out mainly international transactions.
  • The unit of large taxpayers (UGC) is responsible to monitor and verify the compliance with the terms of the APA. This responsibility lies with the Tax Department of International Affairs, together with UGC, in case of bilateral and multilateral APA.
  • There is an increased focus on the presentation of information on the value chain, including key functions, business model and market behavior.
  • Clarifications were made in respect of the waive of the corresponding adjustment (in case of unilateral APA).




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2021 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.
 

Contact us

Rosa Areias

Rosa Areias

Tax Lead Partner, PwC Portugal

Tel: +351 225 433 101

Leendert Verschoor

Leendert Verschoor

Tax Partner – Transfer Pricing, PwC Portugal

Tel: +351 917 887 221

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