21% 21% The Regional Finance Law provides that RAM can set a rate 20% lower than that applicable in Mainland Portugal 2.

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1 01 CIT 1 21% 21% The Regional Finance Law provides that RAM can set a rate 20% lower than that applicable in Mainland Portugal 2. 5% ; 2.5% (IFTZ 8 if some conditions are met) 80% of exemption of surtax (Corporate Income Tax, the Portuguese IRC tax) For SMEs 3-17% (for the first of taxable income) To obtain the effective rate of tax, it is necessary to add to the CIT: State (or Regional) Surtax: - an increase of 3% on the taxable income between 1.5 M and 7.5 M; - an increase of 5% on the taxable income between 7.5 M and 35 M; - an increase of 7% on the taxable income over 35 M. Worst-case scenario: Taxable income over 35 M State (or Regional) Surtax: 1,4% Funchal Municipality: 0,1% Municipal Surtax: - According to the company headquarters municipality, varying between 0 and 1.5%; - In Funchal Municipality the applicable tax rate is 0,5%. The effective rate on the amount above 35 M would be 6.5%, without considering the substance requirements related to the fiscal benefits ceilings on the basis of the number of employees Taxation of dividends from Portuguese shareholdings Taxation of dividends from foreign shareholdings 0% (Participation Exemption 4 ) Applicable if the participation held directly or indirectly, in the company that distributes the profits and/or reserves: a) is at least 10% of the share capital or of the voting rights, held for a minimum period of 12 months; b) the company that distributes the dividends must be subject to and not exempt from the Portuguese CIT (IRC). Note: when the participation exemption does not apply, the taxation of dividends will be according to the line 1) of this table. 0% (Participation Exemption 4 ) Applicable if the participation held directly or indirectly, in the company that distributes the profits and/or reserves: a) is at least 10% of the share capital or of the voting rights, held for a minimum period of 12 months; b) the company that distributes the dividends must be subject to and not exempt from taxation: b.1) as referred to in the parent-subsidiary Directive 5 (EU); or b.2) of identical or similar nature to the Portuguese CIT (IRC) whose applicable statutory rate is not less than 60% of the normal IRC rate, i.e. 12,6%; c) the entity that distributes the dividends can not be resident in one of the countries, territories and regions with privileged tax regimes 6. When the condition b.2) does not occur, i.e. the tax rate is less than 60% of the IRC rate, the exemption can also apply if: - at least 75% of the subsidiary income is derived from: - agricultural and/or industrial activities; or - trading and/or services not destined to the Portuguese market. - main activity of the non-resident subsidiary does not consist in carrying out the following operations: - banking operations, even if not carried out by credit institutions; - insurance operations, when the respective income result primarily from insurance relating to assets located outside the territory of residence of the subsidiary or insurance in respect of people who are not resident in that territory; - transactions relating to shares representing less than 5% of the share capital or voting rights, or any holdings in entities residing or domiciled in a country, territory or region subject to a privileged tax regime 6, or other securities, the rights on intellectual or industrial property, the provision of information on the experience acquired in the industrial, commercial or scientific sector or the provision of technical assistance; - lease of assets, except real estate in the subsidiary`s territory of residence. 21

2 Taxation of capital gains resulting from the disposal of shares of Portuguese companies Taxation of capital gains resulting from the disposal of shares of foreign companies Taxation of income from patent royalties and other rights of industry property If the participation exemption regime does not aplly, there is still a possibility of: - a tax credit for international economic double taxation, provided that the requirements of the points checked a) and c) are met; and / or - a tax credit for international juridical double taxation. When there is a double taxation agreement 7, the deduction to be made cannot exceed the tax paid abroad under the agreement. Note: When not applicable what is described above, the taxation of dividends will be according to the line 1) of this table. 0% (Participation Exemption 4 ) The participation exemption on capital gains is applicable when conditions analogous to those in line 2) of this table are verified. Here instead of the subsidiary that distributes the profits or reserves, it will be the subsidiary from which shares were disposed. The participation exemption does not apply to capital gains from the disposal of shares when the value of immovable property located in Portugal represents directly or indirectly more than 50% of the subsidiary's assets (excluding real estate affections to an activity of agricultural and/or industrial and/or commercial nature, that does not consist in the lease or the purchase and sale of real estate). 0% (Participation Exemption 4 ) The participation exemption on capital gains is applicable when conditions analogous to those in line 3) of this table are verified. Here instead of the subsidiary that distributes the profits or reserves, it will be the subsidiary from which shares were disposed. The participation exemption does not apply to capital gains from the disposal of shares when the value of immovable property located in Portugal represents directly or indirectly more than 50% of the subsidiary's assets (excluding real estate affections to an activity of agricultural and/or industrial and/or commercial nature, that does not consist in the lease or the purchase and sale of real estate). 10.5% 10.5% 2.5% Preliminary remark: The above values are indicative of the effective rate of Portuguese CIT (IRC), assuming taxable amount equal to the taxable income, i.e. without deduction of tax losses and resulting from the application of the Portuguese regime of patent box. They do not consider the surcharges mentioned in line 1) of this table. Patent Box: Only 50% of proceeds from the sale or temporary use of patents, designs or industrial models will be considered as taxable income. The costs incurred with the development of industrial property rights remain fully deductible. For the purposes of this partial exemption the following requirements must be fulfilled: - the transferee can not be resident in a jurisdiction subject to a privileged tax regime 6 ; - the transferee must use the intellectual property rights in the pursuit of a commercial, industrial or agricultural activities; and - if the transferee is a related entity, the industrial property rights can not be used to create deductible expense to the taxable entity. For the purpose of the relief of international juridical double taxation (i.e. when the income is obtained abroad and subject to withholding tax), it is also considered only 50% of such income in the calculation of the corresponding tax credit. The regime applies only to assets registered from January 1, Note: When not applicable what is described above, the taxation will be according to the line 1) of this table. 22

3 07 dividends paid to Portuguese resident Individuals (IRS): 28% (Participation Exemption 4 ); 25% Participation Exemption 4 If the company paying dividends is installed in the IFTZ 8, or is a sea or air transport company: Otherwise: Individuals (IRS): 28% (Participation Exemption 4 ); 25% Applicable if the participation held directly or indirectly, in the company that distributes the profits and/or reserves: a) is at least 10% of the share capital or of the voting rights, held for a minimum period of 12 months; b) the company that distributes the dividends must be subject to and not exempt from the Portuguese CIT (IRC). 08 Withholding tax on dividends paid to non-resident Individuals (IRS): 5%-15%*; 28%; 35% 6 (Participation Exemption 4 ); 5%-15%*; 25%; 35% 6 * Existing a double taxation agreement (DTA) 7 between Portugal and the country of residence of the beneficiary, the withholding tax may be 5% to 15% depending on the case. Participation Exemption 4 If the beneficiary is resident in a privileged tax regime 6 : Individuals (IRS): 5%-15%*; 35% 6 Companies (IRC): 5%-15%*; 35% 6 Exemption of withholding tax on profits and reserves made available to resident entities: - in the European Union (EU); - in the European Economic Area (EEA); - in a State with which Portugal has a DTA 7 ; When the beneficiary entity checks the following conditions: - it is a company subject and not exempt from a tax imposed by the Parent-Subsidiary Directive 5 (EU), or - It is a company subject and not exempt from CIT similar in nature to IRC (Portuguese CIT) with a legal rate is not less than 60% of the IRC rate; * Existing a double taxation agreement (DTA) 7 between Portugal and the country of residence of the beneficiary, the withholding tax may be 5% to 15% depending on the case. In these cases the Participation Exemption may be applicable. and - holds, directly or indirectly, at least 10% of the share capital or voting rights of the entity that distributes the profits or reserves; - the participation should be held continuously during the 12 months prior to the distribution; 23

4 09 royalties paid to Portuguese resident Individuals (IRS): 16.5% Companies (IRC): 25% 10 Withholding tax on royalties paid to non-resident Individuals (IRS): 5%-15%*; 25%; 35% 6 (Interest and Royalties Directive 9 ); 5%-15%*; 25%; 35% 6 * Existing a double taxation agreement (DTA) 7 between Portugal and the country of residence of the beneficiary, the withholding tax may be 5% to 15% depending on the case. Interest and Royalties Directive 9 It is provided the exemption of withholding tax under the Interest and Royalties Directive 9 (EU) for interest or royalties paid to corporations resident in another EU country when there is a minimum direct holding of 25%, held for at least 2 years (or in the case of both debtor and beneficiary of the income being held by at least 25% by the same company for at least 2 years). 11 Withholding tax on interest paid to Portuguese resident companies or * ; 28% * ; 25% * Applicable to interest on shareholders loans when: - the taxable entity holds directly or indirectly through companies in which it has a dominant position, more than 10% of the capital carrying voting rights of the debtor company; - has held the share, uninterruptedly, during the year preceding the date of the interest payment. If the company paying interest is installed in the IFTZ 8, or is a sea or air transport company: (if shareholders) (if shareholders) Otherwise: * ; 28% * ; 25% 24

5 12 interest paid to non-resident Individuals (IRS): 5%-15%*; 28%; 35% 6 (Interest and Royalties Directive 9 ); 5%-15%*; 25%; 35% 6 * Existing a double taxation agreement (DTA) 7 between Portugal and the country of residence of the beneficiary, the withholding tax may be 5% to 15% depending on the case. Interest and Royalties Directive 9 - See line 10) of this table Note: If the exemption its not applicable, relief on taxation may occur in the context of the application double taxation agreement 7, if one exists between Portugal and the country of residence of the beneficiary of the interest payments. If the beneficiary is a shareholder: If the shareholder is resident in a privileged tax regime 6 : Individuals (IRS): 5%-15%*; 35% 6 Companies (IRC): 5%-15%*; 35% 6 For interest paid to non-shareholders: Individuals (IRS): 5%-15%*; 28%; 35% 6 * Existing a double taxation agreement (DTA) 7 between Portugal and the country of residence of the beneficiary, the withholding tax may be 5% to 15% depending on the case payment of services provided by Portuguese resident payment of services provided by nonresident companies or Tax due in Portugal, by foreign companies or, by the disposal of shares in Portuguese companies Individuals (IRS): 11.5%; 25% (depending on the type of service provided) Individuals (IRS): 25% Companies (IRC): 25% The exemptions do not apply to participations held by: - (IRC) non-resident entities without a permanent establishment in Portugal, held directly or indirectly, in more than 25% by entities resident in Portugal, unless the conditions for the application of a Participation Exemption, equivalent to the ones in line 8) of this table are verified. Here, instead of exemption from withholding tax on profits and reserves, would be the exemption from tax due in Portugal from the sale of shares; or - (IRS and IRC) subject to a privileged tax regime 6 ; or The capital gains are also not exempt (IRS and IRC) if obtained by the sale of shares in companies resident in Portugal, whose assets consist in more than 50% on real estate located there or that, being share management holdings with a controlling position in Portuguese resident subsidiary companies, whose assets consist in more than 50% of immovable assets located in Portuguese territory. When for one of the above reasons the exemption does not apply the taxation will be in accordance to: Individuals (IRS): 28%; 35% 6 Companies (IRC): 25% 25

6 16 Exit Taxes Taxation in the sphere of non-resident shareholders, for the capital gains obtained from the liquidation of companies in Portugal: (Participation Exemption) 4 The application of the participation exemption (only for corporate shareholders) is possible when there are conditions similar to those referred to in line 3) of this table. Here instead of the entity that distributes the profits or reserves, it will be the liquidated company. When the participation exemption is not applicable, the tax on capital gains will be the following: Individuals (IRS): 14% 10 ; 28% Companies (IRC): 21% Individuals (IRS): 14% 10 ; 28% Companies (IRC): 5% Tax due by the company in Portugal for: cessation of activity in the country; or relocating the company overseas with cessation of its activity in Portugal: (Participation Exemption) 4 When conditions equivalent to those in line 3) of this table are verified. Here, instead of the company paying dividends would be the company to be liquidated. Otherwise: Companies (IRC): 21% Companies (IRC): 5% 17 Capital Duty Not applicable. 18 VAT (Value Added Tax) Normal Rate - 23% Intermediate Rate - 13% Reduced Rate - 6% Normal Rate - 22% Intermediate Rate - 12% Reduced Rate - 5% The Regional Finance Law provides that RAM can set a rate 20% lower than that applicable in Mainland Portugal 2. Access to European common market without restrictions and benefiting from VAT neutrality in trading operations, by the EU VAT system Advance tax rulings Anti-abuse Rules Applicable. General anti-abuse rule (GAAR). Transfer pricing rules between related companies in accordance to OECD's recommendations. Rules on the allocation of income to non-resident entities, participated by Portuguese companies (CFC rules), when they are subject to a privileged tax regime 6. Limits on deductibility of financing expenses to the greater of the following values, for each fiscal year: - 1 M; or - 50% of the EBITDA in 2015; 40% in 2016; 30% from 2017 on. 26

7 1 The Portuguese Corporate Income Tax (IRC) considers taxable income as the taxable profit, defined as the net annual results (the difference between income plus gains and costs plus losses), plus positive and negative asset variations during the tax period not reflected in the results, plus additions and deductions. 2 Historically the value was in accordance to the legal minimum, which until 2013 was 30% lower than the Mainland rate. The current parity, in force since 2012, is related to the financial crisis that was felt in the whole country including RAM. The goal of returning to the tax differentiation, possibly up to the previous 30%, is publicly assumed. It should be noted that the financial aid program to the RAM that demanded this parity ends in the end of Small and medium-sized enterprises: 250 employees and (annual turnover = 50 M or total assets = 43 M) 4 The participation exemption regime does not apply to entities subject to tax transparency regime, in which the companies are subject to IRS, the tax on the personal income (e.g. some professional service firms of such as law firms). 5 EU Directive List of countries, territories or regions, subjected to a privileged tax regime, according to the Portuguese authorities: For countries with which Portugal has a double taxation agreement, the conditions of the agreement prevail over the inclusion in this list. 7 Treaties for the avoidance of double taxation ratified by Portugal Industrial Free Trade Zone. 9 EU Directive on the taxation of cross-border interest and royalty payments When the liquidated company has less than 50 employees and turnover or annual balance sheet do not exceeding 10 M. 27 Link 5 Link 6 Link 7 Link 9

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