Tax and Customs Authority

Biding Information concerning Case No. 2013 0001012 of 30 April

Tax treatment of transition adjustments in the cases of termination of the activity and merger or division operations carried out during the implementation of the transitional arrangements

Following the transitional tax scheme established to avoid imputation to a single tax period of the effects on equity of the adjustments resulting from the adaptation of the assessment rules relating to the taxable profit for corporate income tax purposes, which were triggered following the introduction of the Accounting Standard System and that, under the transitional scheme, are to be deferred for a five-year period, the Tax Administration rules on the tax treatment of transition adjustments relevant for tax purposes in exceptional circumstances, such as the termination of the activity or corporate restructuring operations (in particular, divisions and mergers).

In cases of termination of the activity under the terms of article 8(5) of the corporate income tax code, adjustments which are pending taxation or deduction should be taxed or deducted in the tax period in which the activity is terminated.

Moreover, in case of merger or division in which the contributing company is dissolved and the tax neutrality regime set forth in article 74 of the corporate income tax code applies, the adjustments for the purposes of the determination of the taxable profit relating to adjustments not yet taxed or deducted are to be made by the beneficiary company, under the same regime that was being followed by the contributing company. Where the tax neutrality regime is not applicable, it is for the split or merged company to make the necessary adjustments in the taxation period in which the termination of its activity occurs.

Tax and Customs Authority

VAT Tax Management Area – Office of the Sub-director

Circular letter No. 30145/2013, of 17 May

This circular letter adapts the new rules on the location of the lease operations relating to transport means (recreational boats), other than short term leases, arising from Decree-Law No. 197/2012 of 24 August, to transactions governed by Decree-Law No. 347/85 of 23 August – i.e., transactions carried out between the autonomous regions of Azores and Madeira and between these autonomous regions and mainland Portugal -, for the purposes of determining the applicable tax rate (i.e., the rate applicable in mainland Portugal or, otherwise, the rates in force in each such autonomous region).