Portugal offers opportunities for companies looking to start operations in its market, but there are some particularities worth knowing, both in terms of cultural idiosyncrasy and legislation. To respond to some of the challenges that the current global context is offering to economies, Portugal has made changes to its tax laws over recent months, including an increase to the minimum wage and changes to withholding tax rates. The most important for international business, however, is a change to the definition of Permanent Establishment.

Law No. 75-B / 2020 of 31 December 2020 approved the State Budget for the year 2021, and also introduced important changes to the concept of Permanent Establishment of non-resident companies.

The main changes to Permanent Establishment:

Permanent Establishment prior to 2021 Permanent Establishment after 2021
3 – A building, installation or assembly site or shipyard, the coordination, inspection and supervision activities in connection with such locations or the drilling facilities, platforms or boats used for the exploration or exploitation of natural resources only constitute a permanent establishment if its duration and the duration of the work or activity exceeds six months. 3 – Permanent Establishment also includes:

a) A building, installation or assembly site or shipyard, as well as related coordination, inspection and supervision activities, when the duration of that site or the duration of those activities exceeds six months;

b) The facilities, platforms or ships used in the exploration or exploration of natural resources, when the duration of their activity exceeds 90 days;

c) Service provision activities, including consultancy services, provided by a company, through its own employees or other persons hired by the company to carry out these activities in Portuguese territory, provided that such activities are performed during a period or periods that, in total, exceed 183 days in a 12-month period beginning or ending in the tax period in question.

6 – A permanent establishment is also considered to exist when a person who is not an independent agent under paragraph 7, acts in Portuguese territory on behalf of a company and has, and usually exercises, powers of intermediation and conclusion of contracts that bind the company, within the scope of the activities. 6 – It is also considered that there is a permanent establishment whenever a person, who is not an independent agent under the terms of paragraph 7, acts in Portuguese territory on behalf of a company, whenever:

a) Have, and usually exercise, powers of intermediation and conclusion of contracts that bind the company, within the scope of its activities, namely contracts:

i) On behalf of the company;

ii) For the transfer of ownership or concession of the right to use goods belonging to that company or for which that company has the right to use; or

iii) For the provision of services by that company;

b) Usually exercise a decisive role for the signing, by the company, of contracts referred to in the previous paragraph on a routine basis and without substantial changes; or

c) Maintain a deposit of goods or merchandise in Portuguese territory for the delivery of those goods or merchandise on behalf of the company, even if that person does not usually conclude contracts in relation to those goods or merchandise or have any intervention in the conclusion of those contracts.

Local Knowledge – International Coverage

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Filipe Miguel Pedro Custodio
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All information contained in this publication is up to date on 2021. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.