PORTUGAL AS A PLATFORM OF INVESTMENT January 2017
1 - CONTEXTUALIZATION ONTEXTUALIZATION 1
PORTUGAL AS AN INVESTMENT PLATFORM Portugal has been implementing several tax measures, with an increasing tone on international taxation, with the aim of: Improving the country s competitiveness Attracting foreign investment 1. Non-Habitual Resident Regime 2. Golden Visa regime 3. Corporate Income Tax Code reform 4. Expanding tax treaty network 5. Renewal of Madeira holding tax regime 6. Renewed tax regime applicable to Investment Funds 7. Simplification of bureaucratic procedures
1- CONTEXTUALIZATION Environment and economic business contextualization Attractive schemes at the level of individuals Attractive schemes at the level of companies International relations and strategic positioning 2
2 - THE HE PORTUGUESE GOLDEN VISA 3
2 - THE HE PORTUGUESE GOLDEN VISA Purpose obtain a fully valid residency permit in Portugal revitalization of the Portuguese economy Validity valid for an initial period of 1 year then renewed for subsequent periods of 2 years. General Conditions Keep the investment for a minimum period of 5 years Funds for investment should come from abroad Entry in Portugal with a valid Schengen visa Absence of references in the Portuguese Immigration and the Schengen services Absence of conviction of relevant crime Minimum stay in Portugal: 7 days during the first year and 14 days during each subsequent period of two years 9
2 - THE HE PORTUGUESE GOLDEN VISA Investment activity performed directly by an individual or through a company for a minimum period of 5 years: Capital transfer in an amount equal or above 1 Million Creation of 10 jobs Purchase of real estate in an amount equal or above 500.000 4
2 - THE HE PORTUGUESE GOLDEN VISA LEGISLATIVE AMENDMENTS - BROADENING Investment activity performed directly by an individual or through a company for a minimum period of 5 years: Investments regarding scientific investigation min. 350.000 Investments in supporting artistic production min. 250.000 Investments in recovering or maintening national cultural patromony min. 250.000 Investments in urban rehabilitation work min. 350.000 Capital transfer for strengthening the capitalisation of small and mediumsized enterprises min. 500.000 5
2 - THE HE PORTUGUESE GOLDEN VISA 20% reduction of the minimum amount of investment, when such investment is applied in a low density territory Conditions Investment activities where the average is less than 100 local inhabitants per km2, or Where the local average gross domestic product (GDP) per capita is below 75% of the national average GDP per capita. Exceptions -Are not concerned: The simple capital transfer in an amount equal or above 1.000.000 and The capital transfer in an amount equal or above 500.000 for investment in the acquisition of participation units. 6
2 - THE HE PORTUGUESE GOLDEN VISA Resident permit for third country citizens to invest in Portugal Condition of the investment in Portuguese territory : Kept for 5 years (from the obtention of the residence permit) + Remain in Portugal 7 days per year 7
2 - THE HE PORTUGUESE GOLDEN VISA The filling for the granting or renewal of the Golden Visa must be made personally by the applicant The applicant must present: Statement which declares that the investments conditions are fulfilled Declaration of non debt issued by the Portuguese Tax Authorities and by the Portuguese Social Security The forms of proof, according to the type of investment activity 8
2 - THE HE PORTUGUESE GOLDEN VISA The right to family reunification is granted to the citizen with a valid residency permit 9 It concerns: The familly members living outside the Portuguese territory and that have lived with that citizen in another country; The familly members that depend or cohabitate with the citizen Those who have legally entered in the Portuguese territory and are dependent or live together with that citizen. The concept of family members includes underage descendants, and those who are: Legal of age; Dependent of the couple or of one of the spouses; Single; and Studying in an educational establishment in Portugal, or abroad.
3 - THE HE NON ON-HABITUAL RESIDENT TAX 10
3 - THE HE NON ON-HABITUAL RESIDENT TAX What are the qualifying requirements? Tax residence in Portugal: Stays in Portugal superior than 183 days per year; ; or, Have her/his his habitual abode in Portugal Not taxed as Portuguese resident in any of the previous five years 11
3 - THE HE NON ON-HABITUAL RESIDENT TAX What is the procedure? Steps Locations Deadlines Documents Responses 1.º: Obtaining the NIF and registration as a tax resident in Portugal Tax Office (Serviço de Finanças) Until the 31th of December of the year in which the individuals become tax resident Copy of a rental or purchase contract of a property Instant 2.º: Application for registration as non-habitual tax resident Direcção de Serviços de Registo de Contribuintes Until the 31th of March of the following year All documents certifying the change of residence and declaration from the individual that, during the last 5 years, the conditions required to be considered as tax resident in Portugal were not met Approximately 4 to 6 months 12
3 - THE HE NON ON-HABITUAL RESIDENT TAX Benefit extension 10 years (suspendable) Ancillary Obligations Complete the IRS tax return (Annex L) 13
3 - THE HE NON ON-HABITUAL RESIDENT TAX Tax regime applicable to Portuguese sourced income earned by Non-Habitual Residents Income source Income type Liable to tax vis-à-vis exemption in the Personal Income Tax Code Tax rates(2016) Income from employment Liable to tax 20% ('high added value')* Income from personal services Liable to tax 20% ('high added value')* Portugal Interest and dividends Liable to tax 28%* Capital gains (movable and immovable) Liable to tax 28%* Income from immovable property Liable to tax 28%* Pensions Liable to tax 48% + up to 5% * Option to consolidate the tax assessment so that the general personal income tax code tax rates are applicable
3 - THE HE NON ON-HABITUAL RESIDENT TAX Tax regime applicable to foreign sourced income earned by Non-Habitual Residents Income source Income type Income from employment Liable to tax vis-à-vis exemption in the Personal Income Tax Code Exempt if: i) Taxed at the source state according to the DTC; or ii) Taxed at the source state and not earned in Portugal (when there is no DTC) Foreign Income from personal services activities related to high added value services providing such as those ones with a scientific, artistic or technical nature; or the provision of information linked with the expertise acquired in the industrial, commercial or scientific sector. (Interest, Dividends) Capital gains Income from immovable property Pensions Exempt if: i)taxed at the source state according to the DTC; or ii) taxed in another country or region according to a Double Tax Convention, (when there is no DTC), If they are not included in the list of tax havens and the earnings do not derive from Portugal. Exempt if: i) Taxed in the source statesg DTC; or ii) They have not been earned in Portugal
HE PORTUGUESE PARTICIPATION EXEMPTION EGIME, AND CAPITAL GAINS EXEMPTION FOR NON-RESIDENT ENTITIES 4 - THE 16
4 - THE HE PORTUGUESE PARTICIPATION EXEMPTION IRC The new regime of «Participation-exemption» One of the most attractive regime in Europe Cumulative criteria: Detention of 5% of the share capital or voting rights A minimum 24 months uninterrupted detention period 17 Exemption : dividends + capital gains
4 - THE HE PORTUGUESE PARTICIPATION EXEMPTION 18 Aplication of the regime subject to the verification of the following cumulative conditions: The Portuguese company holds a shareholding not lower than 5% of the share capital or of the voting rights of the entity distributing the dividends or originating a capital gain or loss; Shareholding is kept for a minimum period of 24 months, uninterruptedly (as for dividends, the shareholding may be kept for a lower period and kept afterwards for the time required in order to complete the mentioned 24 months period); The entity that distributes the dividends, or whose shareholding is sold, must be subject and not exempt of IRC or other corporate tax, at a rate not lower than 60% of the applicable IRC rate (i.e., 12,6% in 2015) this condition might not be fulfilled as long as certain conditions are met; The entity that distributes the dividends, or whose shareholding is sold must not be resident or domiciled in a country, territory or region subject to a more favourable tax regime included in the Portuguese black list.
4 - THE HE PORTUGUESE PARTICIPATION EXEMPTION Restriction to the application of the regime: Not applicable when referring to capital gains or losses deriving from the sale of shareholdings and the value of the real estate owned by the participated company represents more than 50% of the respective assets, only considering for this purpose the real estate acquired in or after January 1, 2014 (except real estate affected to na agricultural, industrial or commercial activity that does not correspond to renting or buying and selling real estate). 19
4 - THE HE PORTUGUESE PARTICIPATION EXEMPTION Qualifying entities: Permanent establishments located in Portugal of entities resident in an European Union ( EU ) Member State, European Economic Area ( EEA ) or State with whom Portugal has signed a Double Tax Treaty foreseeing administrative cooperation, as long as, in this last case: (i) such State is not included in the Portuguese black list, and (ii) the entity is, in its residency State, subject and not exempt from corporate tax. 20
5 MADEIRA ADEIRA S INTERNATIONAL BUSINESS CENTER
5 MADEIRA ADEIRA S INTERNATIONAL BUSINESS CENTER Madeira s International Business Center, which corresponds to Madeira s free trade zone, was created in the 80s with the aim of attracting international investment, in order to boost economic growth and social development in that region. Madeira s free trade zone encompasses a special tax regime, which has been authorized by the European Commission as legal regional State Aid. It offers fiscal benefits to companies incorporated therein or companies that will be incorporated until December 2020, as well as to their shareholders, which may be enjoyed until December 2027.
5 MADEIRA ADEIRA S INTERNATIONAL BUSINESS CENTER Wide list of tax benefits granted to the corporations and its shareholders: 1. Corporations can benefit from a 5% Corporate Income Tax rate, instead of the current normal rate of 21% applicable to corporations not registered under this scheme. 2. Companies registered under the CINM regime are entitled to 80% exemption from stamp duty on documents, contracts and other public acts in case they are performed with nonresident entities in Portugal or that those entities are not registered under the CINM regime. 3. Companies registered under the CINM scheme will be granted an 80% exemption from IMI (Real State Tax) and IMT (Real Estate Transfer Tax) that is due on the acquisition of Immovable Property needed and destined for the company s establishment therein, as well as from other municipal taxes. 4. Companies that carry out industrial activities will be able to claim a deduction of 50% from the IRC. 5. Exemption on Personal Income Tax (PIT) or Corporate Income Tax (CIT) until 31 December 2027 for all partners and shareholders of entities authorized to carry out activities within Madeira Free Trade Zone, who are not residents in Portugal regarding certain income.
5 MADEIRA ADEIRA S INTERNATIONAL BUSINESS CENTER Requirements to meet: 1. Companies registered under the CINM regime shall meet one of the following requirements: i. Creation of one to five jobs in the first six months of activity, and an investment of minimum 75.000 through the acquisition of fixed, tangible or intangible assets, in the first two years of activity; or ii. Creation of six or more jobs in the first six months of activity. 2. Companies that carry out industrial activities will be able to claim a deduction of 50% from the IRC (corporate income tax), provided that they meet at least two of the following conditions: i. Contribute to the modernization of the regional economy through technological innovation of products and manufacturing processes or business models; ii. Contribute to the diversification of the regional economy through the performance of new activities with high added value; iii. Promote the hiring of highly qualified human resources; iv. Contribute to the improvement of environmental conditions; v. Create at least 15 jobs, for a minimum period of five years.
6 INHERITANCE AND DONATIONS 23
5 INHERITANCE NHERITANCE AND DONATIONS Direct descendant or ascendant spouse 0% Other 10% 24
7 THE NETWORK OF CONVENTIONS TO AVOID DOUBLE TAXATION 25
6 THE HE NETWORK OF CONVENTIONS TO AVOID DOUBLE TAXATION 77 Conventions concluded 12 Africa 12 America 26 19 Asia 34 Europe
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