Law no.119/2019, 18 September, was officially published, which amends, among others, the transfer pricing regime, namely articles 63, 130 and 138 of the Corporate Income Tax (“CIT”) Code, which establish the transfer pricing regime, the tax file obligations and the advance pricing agreements.
We highlight below the most relevant amendments to Article 63 of the CIT Code:
- The type of transactions under the scope of the article is broader and detailed, considering that restructuring transactions, such as changes in business structures, substantial termination or renegotiation of existing contracts - with special focus on situations entailing transfer of intangible or tangible assets, intangible property and compensation for emerging damages or lost profit - are now deemed as controlled transactions;
- The end of the transfer pricing methods hierarchy, which should be selected taking into account, among other, the nature of the transactions and the reliability of the available comparable information;
- Corroboration of the admissibility of selecting an “other asset valuation method, technique or model”, in the impossibility of applying the traditional transfer pricing methods, given the uniqueness of the transaction to be analyzed or the lack of comparable information;
- Reinforce of the need to include more information about the controlled transactions and related entities in the Annual Accounting Information (“IES”).
Large Taxpayers will be obliged to submit, by the fifteenth day of the seventh month after the end of their tax period, their transfer pricing documentation to the Portuguese Tax Authorities.
The maximum extension of Advance Pricing Agreements (“APA”) will change from three (3) to four (4) years.
Finally, a specific tax penalty was introduced, for failure to submit the declaration of identification of the reporting entity of the Country by Country Report (“Modelo 54”), which may vary from €500 €10,000, plus 5% for each day of delay.
The referred Law enters into force on 1st October 2019.