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Portuguese withholding tax increase approved - 9/11/2012


Portuguese withholding tax increase approved

As previously mentioned in our Operational Tax News dated 27 September 2012, the Portuguese government had presented to the Parliament a set of measures which included relevant legal amendments in the field of taxation.

These new legal provisions, which introduce significant changes as regards the Portuguese tax framework, have been finally approved.

Updated tax rates for withholding tax

The new withholding rate for investment income obtained by non-resident entities arising from Portugal has now been set at 26,5% (compared to 25% previously).

As expected, payments to privileged non-residents have also been affected. In these cases, withholding taxation has been raised to 35% (compared to 30% previously), except when the real identity of the beneficial owner is fully disclosed.

For further details notably regarding the new stamp duty rate on real estate, please refer to the tax alert issued by our Portuguese colleagues.

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%.

If you have any queries regarding the above, please do not hesitate to contact us.

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