Main changes in the Portuguese Tax Law for 2014

Transcription

1 Portugal Tax Update Main changes in the Portuguese Tax Law for 2014 The Corporate Income Tax ( CIT ) Reform and the State Budget Law for 2014 have entered into force and include changes that will significantly increase the competitiveness of Portugal for foreign investors Corporate Income Tax (CIT) Reduction of the CIT rate The CIT rate was reduced from 2% to 2% in State Surcharge A new bracket was introduced for state surcharge purposes: this new bracket applies to taxable profits in excess of,000,000, which is now taxable at the rate of 7% instead of % (previously, the state surcharge was due at % over the taxable profit between 1,00,000 and 7,00,000 and at % over the taxable profit exceeding 7,00,000). Autonomous taxation The autonomous taxation rates applicable to expenses with passenger vehicles were increased in the following terms: (i) 10% applicable to expenses with vehicles with an acquisition cost below 2,000, (ii) 27.% applicable to expenses with vehicles with an acquisition cost between 2,000 and,000 and (iii) % applicable to expenses with vehicles with an acquisition cost of,000 or higher (previously the applicable rates were 10% or 20%, depending on whether the acquisition cost of the vehicle was below or above the threshold established by the Portuguese Government, respectively). Simplified taxation regime for small businesses A new simplified taxation regime was created for small businesses which, among other requirements, have total income and total assets below 200,000 and 00,000, respectively. Index CIT PIT Extraordinary solidarity contribution Social Security Tax Benefits Investment Tax Code VAT Stamp Duty Contribution over the Energy Sector General Tax Law Page KPMG & Associados Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

2 The tax basis is determined by the application of coefficients between 0,04 and 1,00 depending on the type of income (sales, services, capital income, property income and capital gains), with a minimum tax basis of 60% of the annual guaranteed minimum salary 97. Tax losses Tax losses assessed after 1 January 2014 can be carried forward for 12 years (previously the carry-forward period was years). The deduction of tax losses is now limited to 70% of the taxable profit (previously 7%). Limitation of the deductibility of interest and other financing expenses The previous,000,000 threshold for the deduction of net interest and other financing expenses was reduced to 1,000,000. Any amount of net financial expenses that exceeded the tax deductibility thresholds can be carried forward for years. A specific concept of EBITDA for tax purposes was also established in the law. A final remark regarding the transitional regime in force in 201 (whereby the EBITDA threshold would be gradually reduced from 70% in 201 to 0% in 2017), which was kept in force in Participation exemption A global participation exemption regime was adopted regarding dividends obtained by Portuguese entities (previously only applicable to dividends from Portugal, Portuguese speaking African countries or EU countries), excluding tax havens, provided some requirements are met, namely: i. the beneficiary holds at least % of the share capital or voting rights, and the participation has been continuously held throughout the two years prior to the distribution of the profits or is maintained during that period; the company which distributes the profits is subject and not exempt from CIT, to a tax referred to in Council Directive 2011/96/EU, of 0 November (Parent-Subsidiary Directive), or a tax of a similar nature whose rate is not lower than 60% of the CIT rate, or, if this requirement is not met, if most of its profits are derived from a business activity not directed to the Portuguese market or its assets are not qualified as passive assets (e.g. intellectual property, shareholdings below %). Under this regime, and subject to similar conditions, capital gains and losses from the sale of shares are not taxable / tax deductible. Notwithstanding this general rule, the exemption will not apply whenever the assets of the company whose shares are being sold are composed, in more than 0%, by real estate assets located in Portugal. This participation exemption regime also foresees an extension of the exemption previously applicable to dividends derived in Portugal by EU resident shareholders, to non-resident shareholders that are resident in a country with which Portugal has entered into a Double Taxation Agreement, to the extent the following requirements are met: i. the non-resident shareholder is subject and not exempt of one of the income taxes referred to in article 2 of the Parent-Subsidiary Directive, or of an income tax that is similar to the Portuguese CIT, as long as the statutory tax rate applicable is not lower than 60% of the Portuguese CIT rate; i the non-resident shareholder holds directly, or directly and indirectly, a participation in the Portuguese company s share capital or voting rights of at least % and that participation has been held continuously during the 24 months that preceded the dividend distribution; and the Double Tax Treaty foresees an administrative cooperation mechanism regarding taxation similar to the one established within the EU. Participation exemption - foreign permanent establishments An optional participation exemption regime is now available for profits and losses of foreign permanent establishments, although the regime will not apply to profits of the permanent establishment up to the amount of the losses that have been deducted for tax purposes in the previous 12 tax years. 2 Main changes in the Portuguese Tax Law for 2014

3 Tax Group Relief Regime The minimum holding requirement for a Company to be part of a tax group was reduced from 90% to 7%. Patent box Income derived from patents and other certain intangible assets registered after 1 January 2014 can now benefit from a special tax regime whereby it is only taxable on 0% of its amount. Amortization of intangible assets The acquisition cost of certain intangible assets with no defined useful life period is now amortized for tax purposes during a 20-year period. This regime only applies to intangible assets acquired after 1 January Personal Income Tax (PIT) Employment income Health and life insurance premiums granted to employees and family members are no longer deemed as taxable income for personal income tax purposes, provided that they are granted to all employees. Business and professional income Simplified taxation regime The threshold for the application of the simplified tax regime is increased from 10,000 to 200,000. The tax basis is determined by the application of coefficients between 0,10 and 0,9 depending on the type of income. Surcharge on personal income The.% surcharge foreseen for 201 was maintained in As in 201, the surcharge is due over the taxable income that exceeds, per taxpayer, the annual minimum wage amount, and is levied over the income subject to the general PIT rates (as well as over some types of income subject to special rates, such as employment and professional income earned by non habitual residents). Extraordinary solidarity contribution (CES) The extraordinary solidarity contribution in force 201 continues in force in 2014, at the same rates (between.% and 0%). As in 201, this contribution applies to pensions and cash lifetime benefits due by any reason (regardless of their designation or nature) to retirees or pre-retirees. It is now expressly foreseen that this contribution does not apply to the repayment of capital (either received as a pension / lifetime benefit payment or through redemption) of voluntary saving plans exclusively funded and subscribed by the individual. Social Security Board members Contributions for social security by board members are now due over the total remuneration received in each entity where they perform their activity and the basis for the contribution is no longer capped at, Tax Benefits Madeira Free Trade Zone The deadline for the licensing of entities operating in the Madeira Free Trade Zone was extended until 0 June 2014, although subject to the approval of the EU Commission. Open-ended Real Estate Investment Funds, Pension Funds and Retirement Savings Funds The acquisition and ownership of real estate assets by open-ended or close-ended public subscription Real Estate Investment Funds, Pension Funds and Retirement Savings Funds, is no longer exempt from Municipal Property Tax (MPT) and Municipal Property Transfer Tax (MPTT), being subject to these taxes at half of the normal rates. Main changes in the Portuguese Tax Law for 2014

4 Retained earnings reinvestment tax benefit ( DLRR ) The DLRR corresponds to a CIT credit, up to 2% of the CIT assessed, of 10% of the retained profits that are reinvested in eligible assets (the maximum amount of retained profits that are eligible for this regime is,000,000). The DLRR is not applicable to investments that have been considered for other tax benefits of the same nature and is only applicable to small and medium-sized companies. Investment Tax Code Research & Development Tax Benefits System (SIFIDE II) Below are some of the main changes introduced in the regime: i. expenses incurred with third-parties R&D projects are no longer eligible; i expenses with the acquisition of patents mainly used in R&D activities are only eligible for small and medium-sized companies; expenses incurred with personnel allocated to R&D activities with a doctor degree are considered in 120% of their amount; v. the carry-forward period was extended from 6 to 8 years. Value Added Tax (VAT) Invoicing exemption VATable persons that carry out financial and insurance operations that are exempt from VAT under the Portuguese VAT rules, are not required to issue invoices whenever the acquirer is a VATable person established or domiciled in another EU Member State. Recovery of VAT on bad and irrecoverable debts New rules were introduced for the recovery of VAT on bad debts and on "irrecoverable debts that were outstanding as at 1 December 2012: i. the VAT deduction under the VAT regime for the recovery of "irrecoverable debts now excludes the possibility of applying the bad debts VAT regime; i the recovery of VAT on credits outstanding for more than 6 months and "irrecoverable debts foreseen in the Portuguese VAT Code must be carried out within a maximum period of 2 years counted from the first day of the following year; the recovery of VAT on "irrecoverable debts depends on the communication to the acquirer of the goods or services (when the latter is a VATable person) of the total or partial cancelation of the invoice, in order to allow the adjustment of the VAT initially deducted by the latter. Azores VAT rates The VAT rates applicable in the Azores were increased from 4%, 9% and 16%, to %, 10% and 18%, respectively. Cash accounting VAT scheme The right to deduct the VAT incurred by VATable persons not covered by the cash accounting VAT scheme, regarding supplies of goods and services carried out by VATable persons covered by such scheme, arises on the date of the invoice issuance, being the deduction reported on the VAT return of the period in which the invoice was received or in the following period. Regime applicable to goods in circulation The exemption from the regime applicable to goods in circulation was extended to the transportation of goods derived from aquaculture and goods that are obviously destined to agricultural, beekeeping, forestry, aquaculture or livestock production, and goods legally assimilated to urban solid waste, hospital waste, among others. The option to issue global transport documents was extended to the cases where the goods to be delivered in each destination are not known in the moment the transportation is initiated, and not only when the receivers of the goods are unknown upon the beginning of the transportation. 4 Main changes in the Portuguese Tax Law for 2014

5 The transport document may now assume the form of a simplified invoice; now it is also possible for this document to be issued by a third party in the name and on behalf of the sender, upon prior agreement. Exemption of VAT on sales to exporters This exemption was extended to the sales of goods in the amount of 1,000 or higher, to any exporter that has its head-office, permanent establishment, domicile or VAT register in Portuguese territory, whenever the goods are dispatched and transported in the same condition outside the EU by the latter or by a third party on its behalf (previously, only the sales of such goods to a Portuguese exporter could benefit from this VAT exemption). Stamp Duty Exemptions Funding operations between the holding company and its subsidiaries, for less than one year, to cover treasury needs, are now exempt to the extent the share capital participation is at least 10% or its acquisition value is at least,000,000; this exemption also applies if there is a group or control relationship between the parties. Lands destined for housing purposes The ownership of plots of land for housing purposes with property tax value over 1,000,000 are now subject to Stamp Duty at a rate of 1%. Contribution over the Energy Sector A contribution over the energy sector is due, at the rate of 0.8%, over the net accounting value of the fixed assets or regulatory assets (whichever is higher). This contribution is not deductible for CIT purposes. General Tax Law Binding ruling requests The following decisions of the Portuguese Tax Authorities regarding binding ruling requests may now be challenged before the Courts: i. decisions arguing the inexistence of the assumptions to issue the binding ruling or the refusal to accept the urgency nature of the request; i decisions arguing the refusal to issue the binding ruling due to special technical complexity; and decisions where the legal and tax framework underlying the binding ruling are not in line with the binding ruling request. Tax Authorities generic guidelines The Portuguese Tax Authorities are now obliged to review and adjust its guidelines to the Case Law of the Higher Courts. Contacts Luís Magalhães Head of Tax lmagalhaes@kpmg.com Alexandra Martins Indirect Tax Américo Coelho Jorge Taínha Michael Santos Hugo Carvalho Pedro Marques Tax FS alexandramartins@kpmg.com antoniocoelho@kpmg.com jtainha@kpmg.com masantos@kpmg.com Tel +(1) Fax +(1) hcarvalho@kpmg.com pedromarques@kpmg.com The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 201 KPMG & Associados Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International). Main changes in the Portuguese Tax Law for 2014