Portugal

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Portugal

1. Tax authority and relevant transfer pricing is not yet adopted in the Portuguese legislation; however, the
transfer pricing documentation prepared locally addresses all
regulation/rulings
of the relevant topics covered in the master and local files.

a) Name of tax authority The part of Action 13 of the OECD BEPS Action Plan devoted
to the CbC reports has been introduced in Portugal.
Portuguese Tax and Customs Authority
(Autoridade Tributária e Aduaneira)

b) Relevant transfer pricing section reference 3. Transfer pricing documentation

• Name of transfer pricing regulations/rulings and effective
date of applicability
Article 63 of the Corporate Income Tax Code articulates the
arm’s-length principle and provides guidance about transfer
pricing (TP) in Portugal. An updated Article 63 of the Corporate
Income Tax Code came into force on 16 January 2015 following
the publication of Law No. 2/2014.
A detailed APA procedure, setting out the APA submission
requirements, process and fees, was implemented by Ministerial
Order 620-A/2008 on 16 July 2015 (which came into force on
17 July 2015) and is currently foreseen in Article 138 of the
Corporate Income Tax Code.
Furthermore, a general anti-avoidance provision applies to
all simulated transactions, and the rules embodied in the thin
capitalization, CFCs and anti-tax-haven regimes may be used
in the general context of transfer pricing.
The new articles 121-A and 121-B added to the Corporate
Income Tax Code introduced an obligation for multinational
groups to submit CbC reports.
• Section reference from local regulation
requirements
a) Applicability
• Does your country have transfer pricing documentation
guidelines/rules?
Yes. The Portuguese transfer pricing rules require taxpayers
with turnover and other income in excess of EUR3 million in the
prior year to prepare contemporaneous documentation in the
Portuguese language, which should provide evidence of market
parity regarding the terms and conditions agreed to, accepted
and practiced in the operations made with related parties, as
well as evidence that the best method was selected and used.
• Does transfer pricing documentation have to be prepared
annually?
Yes.
b) Materiality limit/thresholds
• Transfer pricing documentation
EUR3 million in net sales and other operating revenue in the
previous tax year.

Point 4 of Article 63 of the Corporate Income Tax Code. • Economic analysis

Not applicable.

2. OECD Guidelines treatment/reference • BEPS master and local files

Portugal is a member of the OECD. The Portuguese regulations Not available.

and tax practice follow the OECD Guidelines.
• CbCR
Business restructurings are specifically addressed in the
Portuguese transfer pricing regulations as activities that must Consistent with OECD requirements (i.e., group consolidated
rely on the arm’s-length principle; however, the approaches revenue of EUR750 million).
stated in Chapter IX of the OECD Guidelines are likely to affect
the transfer pricing audit activity.

The master file concept established in the EU Code of Conduct

on transfer pricing documentation for associated enterprises

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Portugal
c) Specific requirement(s)
• Treatment of domestic transactions
There is a documentation obligation for domestic transactions.
• Local language documentation requirement
The law mandates the use of Portuguese in TP documentation.
• Safe harbor availability
None specified.
d) BEPS Action 13 implementation overview
• Has your country adopted/implemented BEPS Action 13 for
transfer pricing documentation in your local regulations?
Portugal adopted the global minimum standard included in
Action 13 of the OECD BEPS project for the international
automatic exchange of CbC reports.
• Coverage in terms of master and/or local files
Not applicable.
• Effective/expected commencement date
CbCR rules apply to fiscal years starting on or after 1
January 2016. Master file/local file rules have not been
introduced, and it is hard to foresee when they will be.
• Material differences from OECD report template/format
The BEPS Action 13 TP documentation format has not been
adopted in Portugal. Full local TP documentation (combining
information from both the master file and local file in terms
of contents) should be prepared.
• Sufficiency of BEPS Action 13 format report to achieve
penalty protection
The BEPS Action 13 format report is not sufficient to
achieve penalty protection. There is no indication of
Portugal adopting BEPS Action 13 for TP documentation,
which is why only full TP documentation prepared following
the local rules can serve as a penalty protection. Only the
CbCR part has been adopted.
• CbCR notification and CbC report submission requirement
There is a CbCR notification requirement in Portugal. The
deadline for preparation/submission for the CbCR notification
is the end of the fifth month following the fiscal year-end.
The deadline for submission of the CbC report is the end of
the 12th month following the fiscal year-end.
EY Worldwide Transfer Pricing Reference Guide 2017-2018
4. Transfer pricing return/related party
disclosures
a) Related party disclosures/transfer pricing-related
appendices
The main disclosure requirements at this level are contained in
annexes A, B, C and H (transfer pricing annexes) of the Annual
Tax and Accounting Information Return (Informação Empresarial
Simplificada, or IES), which include (on a yearly basis) the
following information:
• Identity of the related entities
• Amount of transactions conducted with each of the related
parties
• Confirmation that proper contemporaneous (annual)
transfer pricing documentation is prepared on a timely
basis and is currently retained
The deadline for the submission of such return corresponds
to the 15th day of the 7th month after the corresponding tax
year-end. Taxpayers have to state in good faith in this annual
return that they have complied with the contemporaneous
documentation requirements. Misleading information may result
in tax penalties and criminal proceedings.
Multinational groups engaged in activities in the Portuguese
territory with aggregated turnover exceeding EUR750 million
in the reporting period are obligated to submit the CbC report.
It should be completed on an aggregated basis (per jurisdiction)
and should contain information about allocation of revenues
(separating those received in intragroup transactions from
those received in third-party transactions), profits, employees,
earnings before tax, amounts of taxes due and paid, as well
as other information. The CbC report should be submitted to
the tax authorities by the end of the 12th month of the year
following the reporting year.
b) Transfer pricing-specific returns
Only the appendices referred to above (within the IES).
5. Transfer pricing documentation/disclosure
timelines
a) Filing deadline
• Corporate income tax return
31 May (end of the fifth month following the fiscal year-end).

• Other transfer pricing disclosures/return
15 July (7 months and 15 days after tax year-end).
• CbCR notification
The end of the fifth month following the fiscal year-end.
• CbC report preparation/submission
The end of the 12th month of the year following
the reporting year.
b) Documentation preparation deadline
Transfer pricing documentation should be prepared
contemporaneously. The statutory deadline to have a
final transfer pricing documentation ready is by the
15th day of the 7th month following the fiscal year-end.
c) Documentation submission deadline
• Is there a statutory deadline for submission of transfer
pricing documentation?
No. It should only be submitted upon request.
• Time period/deadline for submission on tax authority
request
The taxpayer is normally given 10 days’ notice to submit the
transfer pricing documentation once requested by the tax
authorities in an audit or inquiry.
6. Transfer pricing methods
a) Applicability
• International transactions
Yes.
• Domestic transactions
Yes.
b) Priority/preference of methods
The transfer pricing methods described in the Portuguese
legislation are based on the OECD Guidelines and therefore
do not introduce significant changes to the widely accepted
methods recognized among transfer pricing administrators
and practitioners.
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In fact, Portuguese rules also state (in paragraphs 1 and 2 of
Article 4 of the Transfer Pricing Ministerial Order) that the
most appropriate method should be applied to a controlled
transaction or to a series of transactions to determine whether
those transactions comply with the arm’s-length principle.
This principle reflects a best-method rule. This implies that
a taxpayer is expected to use the method or methods most
suitable to each case, explaining not only the reason a certain
method is considered the most appropriate to test whether the
controlled transactions comply with the transfer pricing rules,
but also why other methods are rejected.
7. Benchmarking requirements
a) Local vs. regional comparables
Local comparables are required. In the absence (or insufficiency)
of purely local comparables, Iberian comparables may be
included; if these prove scarce, European comparables may
be accepted.
b) Single-year vs. multi-year analysis
Single-year analysis of the tested-party results is required.
Single-year tested-party results are normally compared with
multi-year comparables’ range.
c) Use of interquartile range
Interquartile range calculations are used following general
statistics rules for respective calculations.
d) Fresh benchmarking search every year vs. roll-forward/
update of the financials
Fresh benchmarking is required.
e) Simple vs. weighted average
There is a preference for the weighted average for arm’s-length
analysis.
f) Other specific benchmarking criteria, if any
Local independence threshold/criteria (20%) should be used in
benchmarking studies.
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8. Transfer pricing penalties/relief
a) Penalty exposure
• Consequences of failure to submit/late submission and/or
incorrect disclosures
Failure to comply with documentation requirements may result
in a possible shift of the burden of proof.
Under the General Regime of Tax Infringements (RGIT),
penalties for late filing of transfer pricing documentation apply.
Article 117/6 of the RGIT establishes specific transfer pricing
penalties up to EUR10,000 (per year and per taxpayer) apply
for failure to present transfer pricing documentation within
the period determined in the request made by the Portuguese
Tax Authorities plus 5% for each day of delay in fulfilling this
obligation.
Other general penalties reaching as high as EUR150,000 may
be applied by the Portuguese Tax Authorities, depending on the
circumstances, if the entity refuses to provide information or if
the entity provides incorrect or incomplete information.
Furthermore, possible income tax adjustments and
compensatory interest can also be assessed if applicable.
In addition, special penalties are foreseen for late submission
of the CbC report that may reach up to EUR10,000 per year
and per taxpayer plus 5% for each day of delay in fulfilling this
obligation.
• If an adjustment is sustained, can penalties be assessed?
Transfer pricing adjustments are subject to the general
tax penalty regime. A late-payment interest penalty is also
applicable for transfer pricing adjustments at the rate of
4% per year.
• Is interest charged on penalties/payable on refund?
Refer to the section above.
b) Penalty relief
The general tax penalty regime applies in Portugal. The
determination of penalties will be made on a case-by-case basis.
Taxpayers can challenge adjustments (if any) and tax
assessments in court.
EY Worldwide Transfer Pricing Reference Guide 2017-2018
9. Statute of limitations on transfer pricing
assessments
In Portugal, an assessment is possible during the four
years after the end of the assessment year. All Portugal-
based companies have a statutory obligation to keep their
transfer pricing documentation available (at the Portuguese
establishment or premises) and in good order for the relevant
year for a 10-year period.
10. Likelihood of transfer pricing scrutiny/
related audit by local authority
• Likelihood of transfer pricing-related audits
(high/medium/low)
The likelihood of an annual tax audit, in general, is medium, as
is the likelihood that transfer pricing will be reviewed as part of
that audit.
• Likelihood of transfer pricing methodology being challenged
(high/medium/low)
The likelihood is high that the transfer pricing methodology will
be challenged if transfer pricing is reviewed as part of the audit.
• Likelihood of an adjustment if transfer pricing methodology
is challenged (high/medium/low)
The likelihood of an annual tax audit, in general, is medium, as
is the likelihood that transfer pricing will be reviewed as part of
that audit.
• Specific transactions/industries/situations, if any, more
likely to undergo audit
Special emphasis is being put on the quality of comparables
— namely, on the royalty CUP analysis. Head-office interest
charged to branches is the most recent area of scrutiny and
adjustment. Limited-risk commissioner structures have been
increasingly challenged recently. Cross-border restructurings
are also under intense scrutiny, as well as intercompany
financial transactions.
11. APA opportunity
• Availability (unilateral/bilateral/multilateral)
An APA program was included in the Portuguese Corporate
Income Tax Code in 2008 (Article 138). Ministerial Order
620-A/2008 allows taxpayers to negotiate the unilateral,
bilateral and multilateral APAs.