Tax and Customs Authority
Personal Income Tax Services
Circular-Letter No. 20171/2014 of 25 March 2014
The Circular-Letter above indicates the rates applicable and the scope of exemption from the additional local tax (Derrama Municipal) charged in respect of 2013 in the Councils of Vale de Cambra and Viana do Castelo, to replace the data showing on the table attached to the previous Circular-Letter, with No. 20170, of 14 March 2014.
For the purpose of the application of the same table and in order to dispel possible doubts, it further reaffirms that:
- The rate of additional local tax applicable to taxpayers whose turnover in the previous period exceeds €150,000.00, is the normal rate;
- The rate of additional local tax applicable to taxpayers whose turnover does not exceed €150,000.00, but is higher than the scope of exemption referred to in the corresponding table, is the reduced rate;
- Taxpayers whose turnover in the previous period does not exceed the amount indicated in the column “scope of exemption” are exempt from the additional local tax.
Tax and Customs Authority
Case No. 5684, with agreeing ruling of 6 March 2014, published on 27 March 2014
Rates – Preparation of applications and follow up of investment projects relating to agricultural production, made under the PRODER
In this binding information, the Tax Administration (“AT”) clarifies that the provision of services of preparation of applications and follow up of investment projects relating to agricultural production, made under the PRODER, does not fall within List I attached to the Value Added Tax Code (“CIVA”).
The AT considered that, for the services provided by taxpayers to be regarded as technical assistance for the purpose of the application of the reduced rate provided for in item 4.2(f) of List I of the CIVA, it is not enough that the recipients are agricultural producers, or that the services translate into the preparation of applications and the follow up of investment projects relating to agricultural production . The AT clarified that those services must necessarily, directly and unequivocally contribute to “agricultural production”.
Accordingly, the AT considered that the applicability of the reduced tax rate does not cover any services that contribute in any way to the “agricultural activity” of the taxpayer as a whole, albeit possibly considered by the latter to be technical assistance.
On the contrary, the AT considered that its applicability is limited to technical assistance services that contribute to “agricultural production”, and does therefore not cover, for instance, according to the understanding of the above-mentioned AT, a whole set of financial and agricultural management services, such as the services relating to the application of projects relating, in particular, to investment, aids or agricultural projects (afforestation, clearance, etc.).
However, the AT warned that it is important to establish, on a case-to-case basis, whether the technical assistance services are normally used in the agricultural production and contribute directly and unequivocally to the “agricultural production”, making a distinction with other services that, although they can contribute to the “agricultural activity” of the taxpayer, only contribute to the “agricultural production” indirectly.
In this manner, the AT considered that the services mentioned by the taxpayer, should be taxed at the normal 23% rate, provided for in Article 18(1)(c) of the CIVA on account of their not being provided for in any item of List I or II, attached to the CIVA.
Tax and Customs Authority Instruction Sheet (Ficha Doutrinária)
Case No. 8153/2012, with agreeing ruling of 20 of March 2014, published on 16 April 2014
Residence certificate for tax purposes of a partnerships with legal personality
In this Instruction Sheet, the AT analysed the form in which exemption from withholding tax is documented where the entity that receives the income is a partnership with legal personality, known as “limited liability partnership” (“LLP”).
In the case under consideration, the English Tax Authorities, in their reply to a request for the certification of the Mod. 21-FRI form, for the purpose of documenting the application for exemption from withholding tax, claimed that the residence certificate for tax purposes could not be issued for a United Kingdom law firm, on account of the latter having the characteristics of a partnership, subject to the tax transparency regime, but identified all of its partners and confirmed their residence for tax purposes in the United Kingdom.
Considering that the Portuguese law does not have any special rule to prove that the requirements for the application of the provisions of a CDT when we are dealing with this type of entities, the AT stated, in this connection, that the way to prove that the said requirements are fulfilled, in accordance with the provisions of Article 98 of the Corporate Income Tax Code and Article 18 of Decree-Law 42/91, of 22 January, for LLPs, is by producing a single mod. 21-RFI form, with the information common to all the recipients of the income, attaching:
- A list with the identification details of the beneficial owners of the income ;
- A declaration to the effect that the beneficiaries identified in the list attached are partners of a LLP and stating the percentage held by those partners in the capital of the LLP (this declaration may be issued by the competent authorities of the United Kingdom or, as an alternative, it may be supplied by the taxable person him or herself and, in case of doubt, its truthfulness may be proved by means of the mechanism for the exchange of information provided for in the DTC between Portugal and the United Kingdom;
- A certificate issued by the competent authorities of the United Kingdom, certifying that for the purposes of the CDT between Portugal and the United Kingdom, the LLP is not considered a UK resident and that the beneficiaries identified in the list attached are UK resident for tax purposes , in accordance with Article 4 of the CDT between Portugal and the United Kingdom, and are subject to income tax there.