I INTERNATIONAL LEGISLATION

Council

Decision (EU) 2016/1392, of 12 July 2016, published in August 2016

Authorises the signing, on behalf of the European Union, of the Amending Protocol to the Agreement between the European Community and the Principality of Monaco providing for measures equivalent to those laid down in the Savings Directive and its provisional application from 1 January, 2017. 

Council

Amending Protocol to the Agreement between the European Community and the Principality of Monaco, published in August 2016

Amends the Agreement between the European Community and the Principality of Monaco that establishes measures equivalent to those laid down in the Savings Directive, concerning the automatic exchange of financial account information drawn up by the OECD - Organisation for Economic Cooperation and Development. 

II NATIONAL LEGISLATION

Ministry of Finance

Decree-Law no. 41/2016, of 1 August 

Amends the Personal Income Tax Code (PIT), the Corporate Income Tax Code (CIT), the Value Added Tax Code (VAT), the VAT Rules applicable to intra-Community transactions, Decree-Law number 185/86, of 14 July, the Stamp Duty Code, the Property Tax Code and the Car Circulation Tax Code, implementing the majority of the amendments authorised by the 2016 State Budget Law.

Parliament 

Resolution of the Parliament no. 182/2016, of 17 June, published on 5 August 2016 

Approves the Convention between the Portuguese Republic and the Democratic Republic of São Tomé and Príncipe for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, signed in São Tomé on 13 July 2015.

Presidency of the Republic

Decree issued by the President of the Republic no. 52/2016, of 5 August 

Ratifies the Convention between the Portuguese Republic and the Democratic Republic of São Tomé and Príncipe for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, signed in São Tomé on 13 July 2015, approved by Resolution of the Parliament no. 182/2016, of 17 June.

Parliament

Resolution of the Parliament no. 183/2016, of 17 June, published on 5 August 2016 

Approves the Agreement between the Portuguese Republic and the United States of America to Increase Tax Compliance and Implement the Foreign Account Tax Compliance Act (FATCA), signed in Lisbon on 6 August 2015. 

Presidency of the Republic

Decree issued by the President of the Republic no. 53/2016, of 5 August 

Ratifies the Agreement between the Portuguese Republic and the United States of America to Improve Tax Compliance and Implement the Foreign Account Tax Compliance Act (FATCA), signed in Lisbon on 6 August 2015, approved by Resolution of the Parliament no. 183/2016, on 17 June 2016.

Ministry of Finance

Ordinance no. 218/2016, of 9 August 

Approves, within the context of the Accounting Standards System for the Public Administration (ASS-PA), a simplified regime of public accounts applicable to entities of a small dimension and low budgetary risk. 

Presidency of the Council of Ministers

Resolution of the Council of Ministers no. 42/2016, of 14 July 

Approves the Capitalize Program, a strategic programme to support the capitalisation of companies, the rebound of investment and the recovery of the economy. 

Parliament

Law no. 23/2016, of 19 August 

First amendment to the special regime applicable to deferred tax assets deriving from the non-deduction of costs and negative equity variation due to impairment losses on credits and post-employment benefits or long-term employee benefits, approved in the annex to Law number 61/2014, of 26 August, defining the temporal application of the regime.

Parliament

Law no. 24/2016, of 22 August 

Creates a reimbursement regime of fuel taxes for freight transport companies, amending the Special Excise Duty Code and the General Regime of Tax Infringements. 

Ministry of Finance

Decree-Law no. 47/2016, of 22 August 

Amends Article 50-A of the CIT Code, relating to the regime applicable to earnings from patents and other intellectual property rights, in order to ensure that the underlying tax benefits apply solely to income concerning research and development activities of the beneficiary taxpayer.

Parliament

Parliament’s Resolution no. 192/2016, of 17 June, published on 22 August 2016 

Approves the Convention between the Portuguese Republic and the Republic of Côte d’Ivoire for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, signed in Lisbon on 17 March 2015.

Presidency of the Republic

Decree issued by the President of the Republic no. 61/2016, of 22 August 

Ratifies the Convention between the Portuguese Republic and the Republic of Côte d’Ivoire for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, signed in Lisbon on 17 March 2015. 

III ADMINISTRATIVE INSTRUCTIONS

Tax and Customs Authority

Binding Information concerning Case No. 2014 002462, of 12 May 2016, published on August 2016

Derecognition of doubtful debt by Article 41 of the CIT Code – tax consequences

Amends the interpretation set out in the order of the Director-General, Case 2013 001629, of 28 January 2014, clarifying that doubtful debt in default for more than two years in respect of which a full impairment loss has been recognised and which therefore has a monetary value of zero, can be removed from the balance sheet. 

For this purpose, the debt must be in a situation of total impairment, i.e. appropriate measures for recovery have been taken and evidence gathered that concludes that there are no longer reasonable expectations of recovery of the debt.

It also clarifies that information must be included in the tax file on the derecognised debts, which must include, among others, the following elements: identification of the customer, identification of the invoice, amount of the assessed impairment losses (deductible and non-tax deductible), information on applicable (if any) debt waivers, assignment of credits and other vicissitudes, supporting documents of the implemented recovery measures and of their results and other relevant information.

Tax and Customs Authority

Area of Collection - Office of the Deputy Director-General

Circular Letter no. 90 023/2016, of 1 August 2016 

Informs that, in view of the new wording of Article 16.10 of the PIT Code, from 2 August 2016 (inclusive) the registration of a taxpayer as a non-habitual resident must be made exclusively through the Portuguese Tax Authorities website, also clarifying the procedure to be adopted for this purpose. 

Tax and Customs Authority

Binding Information concerning Case No. 205 25 10 – 169/2016, of 1 August 2016, published on 8 August 2016

Temporary admission of a leased vehicle with a licence plate from another Member State 

Clarifies that, for the purposes of the temporary admission of a leased vehicle regime, a person established within national territory may not lease a vehicle, registered in another Member State of the European Union, for temporary use in Portugal, even when the purpose of the aforementioned lease is to provide a means of transport for returning to Portugal for employees of the company that are working in that other Member State. 

Tax and Customs Authority

VAT Management Area – Office of the Deputy Director-General

Circular Letter no. 30182/2016, of 10 August 2016 

Clarifies the amendments made to VAT Code and ancillary legislation by Decree-Law no. 41/2016, of 1 August, particularly with regard to standardisation of the legal deadline for compliance with the obligation to submit the beginning of activity statement, the annualisation of flat-rate compensation, the specifications of the invoices issued by retailers subject to special regime applicable to the small-sized retailers, the equivalence, for VAT purposes, of recognised operators and registered operators, as well as with regard to the specific procedure for granting direct VAT benefit to international organisations recognised by Portugal but established outside the European Community. 

IV INTERNATIONAL CASE LAW

Court of Justice of the European Union

Judgment of 28 July 2016, published on 1 August 2016 Case C-332/15

In this Judgment, rendered in the context of a request for a preliminary ruling, the Court of Justice of the European Union declared that the VAT Directive does not preclude national legislation which provides for a statute of limitation period for exercising the right to deduct, provided that the principles of equivalence and effectiveness are observed.

It also mentions that the VAT Directive must be interpreted as allowing the Tax Authorities to refuse the right to deduct VAT when proof is made as to the fraudulent failure to comply with the applicable formal obligations underlying the VAT deduction right. 

Court of Justice of the European Union

Judgment of 2 June 2016, published on 9 August 2016 Case C-252/14 

In this Judgment, rendered in the context of a request for a preliminary ruling, the Court of Justice of the European Union held that Article 63 of the Treaty on the Functioning of the European Union (TFEU) does not preclude national legislation under which the dividends distributed by a resident company to a non-resident pension fund are subject to withholding tax over the gross amount of the payment, whereas dividends paid to resident pension funds are taxed based on a presumed amount at a fixed-rate that seeks to tax, throughout several tax periods, said dividends under the ordinary tax regime.

However, the Court of Justice considers that Article 63 of the TFEU precludes a national legislation under which professional expenses directly link to the receipt of dividends by non-resident pension funds are not relevant for tax purposes, when these expenses are taken into account within the assessment of the taxable income of resident pension funds.

V NATIONAL CASE LAW

Adminstrative Arbitration Centre

Tax Arbitration Court

Arbitration Decision of 23 May 2016, published on August 2016 Case no. 543/2015-T

In the decision in question, the Arbitration Court considered that income deriving from the sale of properties, previously divided into plots under a contractual arrangement with a Municipal Council which clearly aimed at the enhancement of their value, may not be considered a gain (PIT Category G), in the fortuitous, occasional and residual meaning provided for in the PIT Code.

For this reason, the income earned in such circumstance is considered to arise from urban planning activities and the operation of lot projects, covered by Category B of PIT (business and professional income), not being required that the taxpayer exercises said activity on a habitual basis. 

Administrative Arbitration Centre

Tax Arbitration Court

Arbitration Decision of 17 June 2016, published on August 2016 Case no. 631/2015-T

In the decision in question, the Arbitration Court considered that supplementary capital contributions are not covered by the concept of “equity holdings” within the meaning of Article 32.2 of the Tax Benefit Statute, being qualified as “other equity items”.

The Arbitration Court also considered that the financing costs incurred with the realization of supplementary capital contributions in subsidiaries are of the interest of a holding company, as they secure the financial solvency of its assets, increase their potential as source of income, being therefore costs related to the activity of the holding company itself. 

For this reason, the Arbitration Court concluded that these costs meet the indispensability requirement provided for, on the date of the events, in Article 23 of the CIT Code, for which reason they can be deducted for tax purposes.