Based on Portuguese tax law, the payments to non-resident suppliers are subject to withholding tax when are considered as income obtained in Portuguese territory up to 25%.
In practical terms when a company does a payment to a non-resident supplier, the Portuguese debtor should withhold the respective amount and pay it to the Portuguese Treasury.
Tax relief (either by means of reduction of the applicable rate or full exemption) is available. For that purpose, it needs to be verified on a case-by-case (meaning country-by-country) scenario, as the applicable rate will depend on the Double Tax Treaty (DTT) entered into by Portugal.
The summary of the available DTT and respective taxation is available in the following link: https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/convencoes_evitar_dupla_tributacao/convencoes_tabelas_doclib/Tabelas.htm.
In order to trigger the DTT it is necessary for the Portuguese entity (debtor) to be provided with a 21-RFI Form duly filled in and certified by the tax authorities of the country of residency of the supplier.
Alternatively, the supplier can be provided to the Portuguese entity with a 21-RFI Form duly filled in (without the certification of the tax authorities) and also obtain a separate tax residency certificate issued by the tax authorities.
Each 21-RFI Form is valid for a period of 1 year and covers all payments made within such period.
Specifically, regarding interest, royalties and dividends paid or due by a Portuguese entity to a non-resident entity it may be possible to fully avoid any withholding tax in Portugal, based on the Council Directives (EU Directives).
In case all the requirements foreseen in the following EU Directives, namely regarding tax residency, shareholding and respective minimum detention period, etc., taxation is not applicable in Portugal and as such withholding tax can be avoided:
- EU Directive 90/435/EEC (with the changes introduced by 2011/96/EU and 2015/121) – applicable for the dividends payment (EU Directive Parent-Subsidiary)
• EU Directive 2003/49/EC – applicable for dividend and royalties’ payment (EU Directive I&R).
For the purposes of triggering the provisions of the EU Directive I&R, it is necessary that the Portuguese debtor entity is provided with a Portuguese 01-DJR Form dully filled in and certified by the tax authorities of the country of residency of the beneficiary of the income.
Regarding the EU Directive Parent-Subsidiary a tax residency certificate for the purposes of this EU Directive needs to be obtain from the tax authorities of the country of residency of the beneficiary.