Corporate Income Tax
Permanent Establishment
Permanent Establishment (PE) – Taxable profit
The taxable profit of a PE in Portugal of a non resident entity includes the income derived from the sale of goods and merchandising made by the head office to natural or legal persons that are resident for tax purposes in Portugal, provided that such products are identical or similar to those sold through the PE.
“The concept of permanent establishment included in the Corporate Income Tax Code is in line with BEPS and the latest version of the OECD Model Tax Convention on Income and on Capital.”
Permanent establishment – concept
Business activities derived from services, including consulting services, performed by an enterprise, through its own staff or subcontractors hired with the purposes of carrying such activities in the Portuguese territory; provided that such activities are performed for a period or periods exceeding in the aggregate 183 days in any twelve month period starting or ending in the relevant tax year are deemed to lead to the recognition of a PE in Portugal.
A PE is also deemed to be recognised in case of installations, platforms or ships in general (currently, reference is made to drilling ships) used in the prospection or exploitation of natural resources, in case the respective activity exceeds 90 days (currently, 6 months).
Dependent Agent Permanent Establishment (DAPE)
A DAPE is deemed to be recognised where a person that is not an independent agent is acting in the Portuguese territory on behalf of an enterprise and, in doing so habitually has an authority to intermediate and conclude contracts that are binding for the enterprise, that are routinely concluded without material modification by the enterprise.
A DAPE is also deemed to be recognised in case a person that is not an independent agent maintains in the Portuguese territory a stock of goods or merchandise for delivery in the name of the enterprise, even if it does not conclude contracts in respect of such goods or merchandise or has any intervention in the conclusion of such contracts).
“A broader concept of permanent establishment reinforces the measures to fight tax evasion and the shifting of profits to other jurisdictions.”
Permanent establishment – Preparatory or ancillary activities
In line with the extension of the PE concept, the use of facilities or the maintenance of a stock of merchandise with the single purpose of delivery are no longer regarded as preparatory or ancillary activities.
It is also deemed a PE a fixed place of business or a stock of goods or merchandising used or maintained by an enterprise if the same enterprise or a closely related enterprise constitute complementary functions that are part of a cohesive business operation and:
that place or stock constitutes a permanent establishment or
the overall activity resulting from the combination of the activities carried out does not have a preparatory or auxiliary character.
“Cooperatives, micro, small and medium sized companies that as a rule did not assess tax losses are no longer subject to aggravated rates of autonomous taxation.”
Autonomous taxation – Hybrids plug-in
Reduced rates of autonomous taxation (5%, 10% and 17.5%) apply only to hybrid plug-in vehicles which battery can be charged by connecting to power grid, having a minimum autonomy while working in the electric mode of 50 km, and official emissions of less than 50 gCO2/Km.
Autonomous taxation – Transitional provision applicable in 2020 and 2021
A transitional provision applies to cooperatives, as well as micro, small and medium sized companies. It foresees that the aggravated autonomous taxation (10%) is not applicable in the following circumstances:
(i) the taxpayer assessed taxable profits in one of the previous three tax years, having complied timely with the filing of the CIT return and the Annual Statement (IES) concerning the two previous tax years; or
(ii) the activity started in 2020 or 2021, or those years correspond to the first or second year of activity.
“Cooperatives, micro, small and medium sized companies can waive the need to make payments on account. In 2021 they can also request a full and immediate refund of the special payment on account that has not been offset.”
Waiving of payments on account
Cooperatives, as well as micro, small and medium-sized companies, can waive the obligation to make payments on account in 2021.
Special payment on account – Early refund
In 2021, cooperatives, as well as micro, small and medium-sized companies, can request the full and immediate refund of the special payment on account that was not yet offset.
Exclusion from public support of entities related with clearly more favourable tax regimes
The following entities are excluded from public support measures created within the context of the extraordinary and temporary COVID.19 pandemic measures:
entities with head office or place of effective management in countries, territories or regions with a more favourable tax regime, included in the list approved by Decree 150/2004, of 13 February 2004;
companies under the domain (within the meaning of Article 486 of the Company’s Code) of entities (including all sort of fiduciary structures) with head office or place of effective management in countries, territories or regions with a more favourable tax regime, included in the list approved by Decree 150/2004, of 13 February 2004; the same applies in case the respective beneficial owners is domiciled in such countries, territories or regions.
“General rates of autonomous taxations apply to hybrid plug-in vehicles failing to comply with the requirements established by law.”
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