Proposed increase of domestic withholding tax - 27/09/2012
The Portuguese Government recently presented to the Parliament a set of austerity measures to be included in the proposed 2013 budget law.
One of the most relevant draft bill provisions is an increase of the rate of withholding tax on capital income from 25 % to 26,5 % (respectively from 30% to 35% in case of payments to privileged non-residents), which follow a previous increase last 1 January as detailed in our Operational Tax News dated 15 February 2012.
Please note, however, that local exemptions exist and remain applicable on interest from registered government bonds and registered corporate bonds.
Consequences for the Luxembourg funds
Luxembourg SICAV have, in principle, access to the Luxembourg-Portugal Double Tax Treaty (DTT). The domestic Portuguese taxation may potentially be reduced to the treaty rate of 15% further to the application of this DTT. Luxembourg FCP do not have access to the DTT and can only rely on the local exemption in order to escape the taxation at 26,5%.
For further details on the proposed tax austerity measures, please refer to the alert issued by our Portuguese colleagues.
We follow up the proposal and will keep you updated in case of developments.
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