Profits/dividends distributed by a Portuguese company to its shareholders who are natural persons shall be taxed in accordance with the Personal Income Tax Code (28%) unless they are not resident in Portugal and the company is licensed to operate within the scope of the International Business Centre of Madeira or a double taxation treaty is applied.
Profit or dividends distributed by a Portuguese company to shareholders that are legal persons, are exempt, provided that:
- They are residents:- of Portugal or any other European Union Member State;- of another Member State of the European Economic Area provided that administrative cooperation is guaranteed with respect to taxation in terms equivalent to those established in the European Union;- of a State with which Portugal has signed a currently valid agreement for avoiding double taxation and allowing for exchange of information;
- Are subject to and not exempt from Corporate Income Tax (Portuguese companies), a tax mentioned in the Parent-Subsidiary Directive (companies resident in the EU) or a tax that is identical or similar to Corporate Income Tax, provided that the rate applicable to the entity is not less than 60% (12.6%) of the corporate income tax rate (other cases);
- They hold, directly or indirectly, a participation that is no less than 10% of the shareholder capital or the voting rights of the Portuguese company;
- They hold a participation in the Portuguese company in a manner that has been uninterrupted during the 12 months prior to the distribution date;
This exemption does not apply in cases where:
- The entity which makes the profits and reserves available has not complied with the reporting obligations laid down in the Legal Framework of the Central Registry of the Effective Beneficiary;
- The actual beneficiary(s) of the Portuguese company declared under the terms of the Legal Framework of the Central Registry of the Effective Beneficiary have their residence in a tax haven, unless they prove that the company benefiting from such income is not part of a construction or series of constructions considered not genuine, taking into account all the relevant facts and circumstances (a construction or series of constructions is considered not genuine to the extent that it is not carried out for valid economic reasons and does not reflect economic substance).
If the Portuguese company is licensed within the scope of the International Business Centre of Madeira, the respective partners or shareholders (including natural/individual persons), provided that they are not residents of Portugal or of tax havens, pay no tax on profits made available to them, including amortization of shares without reducing capital, provided that such profits derive from income that has benefitted from a reduced tax rate.
