After the disclosure of the final report BEPS by the Organization for Economic Cooperation and Development was introduced in Portugal by the Law no. 7-A/2016, 30.03, which approved the State Budget for 2016, a new declarative obligation for resident companies, corresponding to the “Country-By-Country Reporting” (CBCR), for communication to the Portuguese Tax Authorities (PTA) of the financial and fiscal information related to worldwide groups.

In this sense, it was added to the Portuguese Corporate Income Tax Code (CIRC) the article 121-A, stablishing the entry into force of this obligation in 2016. The deadline for the presentation of this documentation to the PTA is on the twelfth month following the end of the tax period. The deadline for electronic communication of the reporting entity as well as the country or jurisdiction of this entity is until the end of the tax period of it refers to.

However, considering that the technical conditions to allow the electronic compliance of this obligation were not meet yet, the Portuguese Government, through Dispatch 254/2016-XXI, of 12 December, decided to extend the deadline to inform the PTA about the group’s reporting entity with reference to the fiscal year 2016 until the next 31st of May, 2017.

The Portuguese Regime of the CBCR provides that entities with tax residence in Portugal must submit, for each tax period, a statement of financial and tax information by country or by tax jurisdiction, whenever the following cumulative conditions are met:

• The entities should be required to prepare consolidated financial statements
• The entities should hold and control, directly or indirectly, one or more entities with fiscal residence or permanent establishment located in other countries or jurisdictions or, where they have one or more permanent establishments
• The amount of the consolidated income mentioned in the financial statements relating to the prior period of the reporting should be equal or higher than €750 million
• The entities should not be held by one or more resident entities already required to present the CBCR, nor be held by one or more non-resident entities which are required, directly or through a designated entity, to present a similar declaration of CBCR in another country or tax jurisdiction with which Portugal has celebrated an agreement for automatic exchange of information.

Is also required to entities with tax residence in Portugal to submit this CBCR declaration by country or tax jurisdiction, provided that the following cumulative conditions are met:

• The resident entities should be held or controlled, directly or indirectly, by non-resident entities that are not required to submit the CBCR declaration or in relation to which there is not in force an agreement for automatic exchange of information of this nature
• The entities that own or control them would should be subject to the presentation of the CBCR declaration if they would have tax residence in Portugal
• It shouldn´t be evidence that another entity of the group, resident in Portugal or in another country or tax jurisdiction with which there is an agreement for automatic exchange of information, has been designated as group’s reporting entity to present the CBCR declaration.

The CBCR Declaration also includes the following elements aggregated by country or tax jurisdiction of residence of the group’s entities or by location of permanent establishments:

• Gross income, detailed by those arising from related entities and from independent entities
• Results before corporate income tax
• Tax amounts due and paid on profits including the withholding taxes
• Equity, by each item, at the end of the tax period
• Number of full-time employees at the end of the tax period
• Not tangible assets value, except cash and equivalents
• List of the entities resident in each different country or tax jurisdiction, including the permanent establishments, specifying the main activities that are carried out by each one
• Any other information and explanation that may be considered relevant

Moreover, for CBCR purposes, it is considered that an entity is part of a group whenever one of the following conditions is met:

• Any company included in the consolidated financial statements or, in case of the securities representing the capital of the company would be traded on a regulated market, would be included
• Any company that has been excluded from the consolidated financial statements based on its size or materiality
• Any permanent establishment of a company mentioned above, as long as this company prepares individuals financial statements to their permanent establishment for regulatory, tax, financial or management purposes.

In order to get an effective and consistent implementation of this documentation, the OECD has promoted the conclusion of a multilateral instrument that enables the automatic exchange of these “Country by Country Reports” based on standard forms. Nevertheless, arrangements to automatic exchange of information, in respect of which there is record of systematic failure, duly notified by the Portuguese Tax Authorities to the group’s reporting entities are not considered as valid agreements for automatic exchange of CBCR information.