Tax residence and fiscal domicilei Corporate residence
Companies are deemed to be resident in Portugal for tax purposes if their head office or place of effective management (regardless of the head office's jurisdiction) is located on Portuguese territory. These two criteria are often met simultaneously, providing consistency under tax law. However, where this is not the case, the place of effective management is the decisive factor.
According to Portuguese case law, the place of effective management is defined as the place where the management decision-making takes place, and where adequate substance (in the form of both people and real estate) exists.
Resident companies are taxed on their worldwide income. Non-resident companies are taxed on their Portuguese-source income.ii Branch or permanent establishment
In general terms, domestic branch profits are taxed on the same basis as corporate income. Nevertheless, there are some differences in tax treatment (general administrative expenses incurred by the head office may be allocated to the branch, and there may be certain restrictions concerning the deductibility of certain expenses charged by the head office to the branch).
All income is included in the tax base, regardless of its geographical source, provided that such income is attributable to the permanent establishment located in the Portuguese territory. All allowable items of expenditure, deductions and credits are also taken into account, regardless of the source of the income to which such items relate, with the same requirement mentioned above.