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IN167 - Portugese Double Taxation Treaties – Including Specific Limitation of Benefits

Background
 
Companies licensed to operate within the legal framework of the Free Trade Zone of Madeira are Portuguese companies. The double taxation treaties concluded between Portugal and its treaty partners generally therefore apply to Portuguese companies registered in Madeira.   Specific limitations apply to some of the benefits that are available. Dixcart recommends that detailed information is obtained, concerning the benefits and any possible restrictions that might exist under individual double taxation treaties. Advice should be requested prior to action being taken.   Specific Limitation of Benefits (as denoted by * in the table below)

A list of the countries involved and the specific limitation of benefits in relation to Portugal’s double taxation treaties are detailed below:

  • Brazil
Protocol reference to Article 24 states: “the benefits of this Convention are not granted to any person entitled to fiscal benefits pertaining to income tax in accordance with the tax instruments and other measures related to the Free Trade Zone of Madeira”. Madeira companies clearly do not therefore benefit from the terms and conditions of the respective Convention.  
  • Canada
 According to Article 27.3 of the Convention, a company or entity entitled to or benefiting from legislation and other measures relating to the tax-free zones of Portugal will, for the purposes of the Convention, not be deemed as Portuguese resident. However, this restriction does not include companies actively involved in selling goods or services other than those of a financial or insurance nature i.e. banks, insurance companies, dealers in securities etc. Such a provision may therefore limit the use of companies benefiting from the taxation regime of the Free Trade Zone of Madeira.  
  • Netherlands
Protocol II.4 states that countries listed in the ECOFIN agreement of December 1st 1997, and residents of Portugal benefiting from tax measures deemed harmful by the EU Code of Conduct for Business Taxation, will not be entitled to the benefits of Chapter 3: Taxation of Income (Articles 6-22) of the Convention.  
  • Spain
Protocol 3 states that the tax reductions or exemptions arising from Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 13 (Capital Gains) of the Convention will not apply should such items of income be derived from Spain by a Portuguese resident company where less than 50% of the beneficial owners are Portuguese residents. This is not however the case if the Portuguese resident company in Portugal, provides a substantial business activity beyond the mere holding of securities or other assets.        
  • Sweden
Article 27 states: A Portuguese resident company’s income or dividends paid, will be excluded from provisions of the Convention regarding an exemption or reduction in tax, should such a company derive its income primarily from other states where such income bears a “significantly lower” tax than income similarly derived in Portugal. This limitation applies to companies actively involved in banking, shipping, financing, insurance or being an administrative headquarters/co-ordination centre to a group of companies carrying out business primarily in other states. Such a provision may therefore limit the use of companies benefiting from the taxation regime of the Free Trade Zone of Madeira.  
  • USA

The benefits of the Convention are not extended to include persons benefiting from legislation and other measures relating to the tax-free zone of Madeira. This is in line with Paragraph 6 of Article 17: Limitation of Benefits of the Convention.

Additional Information
For further information regarding Portuguese double taxation treaties please speak to your usual Dixcart contact, or John Dias or Carlos Lourenco at the Dixcart office in Madeira.

Summary Table: Double Taxation Treaties with Portugal

 
  DIVIDENDS INTEREST ROYALTIES
 
 
TAXES
    
 
ALGERIA 10 % a)
15 % b)		 15 % 10 % a)      
a)When the company controls 50 % or more of the share capital
b) All other cases
 
AUSTRIA 15 % 10 %

10 % a)
5 %   b)      
a)When the company controls 50 % or more of the share capital
b) All other cases
 
BELGIUM 15 % 15 % 10 %
 
 
 
BRAZIL*  

10 % a)
15 % b)

 15 % 15 %
a)When the company controls 25 % or more of the share capital for a period of 2 years
b) All other cases
 
BULGARIA 10 % a)
15 % b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
CANADA*   10 % a)
15 % b)  		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
CAPE VERDE   10 % 10 % 10 %
 
CHILE                 10 %  a)
15 %   f)              		 5 %  b)
10 %  c)
15 %   f)            		 5 % d)
10 % e)            
a)When the company controls 25 % or more of the share capital
b)Listed bonds
c)Banks and insurance companies and a sale on credit paid by the purchaser of machinery and equipment to a beneficial owner that is the seller of the machinery and  equipment;
d) Of the gross amount of the royalties for the use of, or the right to use, any industrial, commercial or scientific equipment;
e)All other royalty cases
f) Other cases
 
CHINA 10 % 10 % 10 %  
 
CUBA 5 %  a)
10 %  b)		 10 % 5 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
CZECH REPUBLIC 10 %  a)
15 %  b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
DENMARK       0 % a)
10 % b)    		 10 %       10 %      
a)Investment complies with EU Parent Subsidiary Directive (EU Directive 90/435)
b) All other cases
 
ESTONIA 10 % 10 % 10 %
 
 
 
FINLAND 10 % a)
15 % b)		 15 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
FRANCE 15 % 12 % a)
10 % b)		 5 %
a) For the majority of the cases
b) Loans issued in France after 01.01.65
 
GERMANY     15 %     10 %  a)
15 %  b)  		 10 %    
a) When paid by banks
b) All other cases
GREECE   15 %   15%   10 %  
 
 
HUNGARY     10 %  a)
15 %  b)    		 10 %       10 %      
a) Dividends  paid after 31.12.96
b) All other cases
ICELAND   10 %  a)
15 %  b)  		 10% 10%
a) When the company controls 25% or more of the share capital.
b) All other cases
INDIA       10 % a)
15 % b)    		 10 %       10 %      
a)When the company controls 25 % or more of the share capital
b) All other cases
 
INDONESIA   10 % 10 % 10 %
 
IRELAND 15 % 15 % 10 %
 
ISRAEL 5% a)
10% b)
15% c)		 10% 10%
a)When the company controls 25% or more of the share capital (excludes partnerships)
b) When the company controls 25% or more of the share capital and the income of the paying company is less than the standard Israeli tax rate
c) All other cases
 
ITALY 15 % 15 % 12 %
 
LATVIA 10 % 10 %
10 %
 
 
LITHUANIA 10 % 10 % 10 %  
 
LUXEMBOURG     15 %     10 % a)
15 % b)		 10%
a)When payable to a
     financial institution       
b) All other cases
 
MACAU   10 %   10 %   10 %
 
 
 
MALTA       10 % a)
15 % b)    		 10 %       10 %      
a)When the company controls 25 % or more of the share capital
b) All other cases
 
MEXICO 10 % 10 % 10 %  
 
MOROCCO 10 % a)
15 % b)		 12 % 10 %
a)     Dividends paid after 31.12.96
 b)  All other cases
 
MOZAMBIQUE 15 % 10 % 10 %
 
NORWAY 10 %  a)
15 %  b)		 15 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
THE NETHERLANDS*   10 %     10 %     10 %    
 
 
 
PAKISTAN 10 % a)
15 % b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b)     All other cases
 
POLAND 10 % a)
15 % b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
ROMANIA 10 % a)
15 % b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b)All other cases
 
RUSSIA 10 % a)
15 % b)		 10 % 10 %
a)When the company controls 25 % or more of the share capital
b)All other cases
 
SINGAPORE   10 % 10 % 10 %
 
 
SLOVAKIA 10 % a)
15 % b)		 10 %  10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
SLOVENIA 5 % a)
15 % b)		 10 %  5 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
SOUTH KOREA       10 %  a)
15 %  b)    		 15 %       10 %      
a)When the company controls 25 % or more of the share capital
b) All other cases
 
SPAIN* 10 % a)
15 % b)  		 15 % 5 %  
a)When the company controls 25 % or more of the share capital
b) All other cases
 
SWEDEN*
 10 % 10 % 10 %  
 
SWITZERLAND         10 % a)
15 % b)      		 10 %         5 %        
a)When the company controls 25 % or more of the share capital
b) All other cases
 
TUNISIA 15 % 15 % 10 %  
 
TURKEY 5 % a)
15 % b)		 10 % c)
15 % d)    		 10 %
a)When the company controls 25 % or more of the share capital
b) All other cases
c)On loans for periods > 2 years
d) On loans for periods < 2 years
 
UKRAINE       10 % a)
15 % b)    		 10 %       10 %      
a)When the company controls 25 % or more of the share capital
b) All other cases
 
UNITED KINGDOM

10 % a)
15 % b)

 10 % 5 %
a)When the company controls 25 % or more of the share capital
b) All other cases
 
UNITED STATES OF AMERICA*
5% a)
15 % b)		 10 % 10 %
a) When a company resident in a contracting state controls 25% or more of the share capital for an uninterrupted period of 2 years of company paying dividends after 31Dec 1999
b) All other cases
 
 
VENEZUELA 15 % a)
10 % b)		 10 % 10% c)
12% d)
a)Before 31.12.96
b) After 01.01.97
c) Technical assistance only
d) Royalties in general