Tax Treaty Case Law around the Globe 2021

S. 249Portugal: Discrimination of Permanent Establishments

Ana Paula Dourado

S. 250I. Introduction

Taxation of resident and non-resident companies in Portugal follows the standard pattern in OECD countries: unlimited tax liability of resident companies covering business income abroad; and limited tax liability of non-resident companies to income accrued in the Portuguese territory. This is also the standard regime applicable to financial institutions.

However, Article 30 paragraph 1 of the Portuguese Statute of Tax Benefits (STB) exempts from corporate income tax any interest or gains paid by resident financial institutions in respect of funding granted by a non-resident financial institution. The exemption is granted as long as the interest or gains are not attributable to a permanent establishment of those non-resident financial institutions situated in the Portuguese territory.

The regime previously mentioned was introduced in the last decade (2011) in the context of the Portuguese sovereign debt crisis. It aims at fostering foreign credit but discriminates against non-residents with permanent establishments in the Portuguese territory since interest or gains paid by permanent establishments of ...