The Corporate Income Tax Reform (“CIT Reform”) represents one of the most ambitious tax initiatives undertaken by the Portuguese Government. On January 16 2014, Law no. 2/2014introduced a set of measures that aim to raise the competitiveness of the Portuguese tax system, to foster investment in the country and to reinstate Portugal’s position in the European context.
The CIT Reform sets out a worldwide participation exemption regime, applicable to capital gains and dividend payments inbound and outbound, as opposed to its very limited preceding regime (which was basically applicable to holdings in EU-companies and, provided some conditions were met, to holdings in subsidiaries established in Portuguese speaking countries).
Under the new regime companies qualify for the participation exemption regime whenever a minimum participation of 5% in the share capital or voting rights (formerly, 10%) is held for at least 24 months (formerly 12 months).
The CIT Reform was enacted on the basis of a broad political consensus achieved between the governing coalition and the opposition Socialist Party, thus giving investors greater confidence as to its implementation and stability in the coming years.
