On 18 September 2019, the Portuguese Government officially published the Law no.119/2019. The new law has changed the following provisions:

Corporate income tax:

  • The procedure whereby non-resident companies may waive all or part of the withholding tax on income from Portuguese sources or receive a refund has been simplified. It will now be necessary to submit a standard form to be approved together with a document issued by the competent authorities of the State of residence confirming tax residence and being subject to income tax.
  • The definition of “turnover” is expanded to cover the volume of sales, the services provided and the rents of investment property.

Transfer pricing:

  • The definition of transactions has been broadened and detailed in accordance with transfer pricing rules, considering that restructuring transactions (e.g. changes in business structures, substantial termination or renegotiation of existing contracts – with special focus on situations entailing transfer of intangible or tangible assets) are now deemed as controlled transactions.
  • The hierarchy in the selection of the transfer pricing method has been abolished and taxpayers may use methods other than those specified in the applicable transfer pricing methods for transactions with unique characteristics or where information on comparable transactions between independent parties is lacking.
  • Large taxpayers will be required to prepare and submit transfer pricing documentation to the Portuguese tax authorities by the 15th day of the 7th month following the end of the tax year
  • The extension of penalties for failing to submit transfer pricing documentation and CbC reports to also apply for CbC notifications, which include penalties of EUR 1,000 to EUR 20,000 plus 5% per day of delay; and
  • An increase in the maximum validity period of advance pricing agreements (APAs) from 3 years to 4 years, as well as related provisions for the exchange of information on APAs with other jurisdictions.

This Law 119/2019 came into force on 1 October 2019, and takes effect on 1 January 2020.