Tax Benefits Code Amendment (TBC)

Tax Benefits Code Amendment (TBC)

Law no. 43/2018 – Tax Benefits Code Amendment (TBC)

The Tax Benefits Code (TBC), approved by the Decree-Law no o 215/89, of 1st July, has been amended by Law no. 43/2018, of 9 August, published in the Official Gazette, which extended, amended and terminated certain tax benefits.

  1. A. Tax benefits that had their application period extended until 31 December 2019, while further extensions will be subject to annual evaluation:
  • Article 28: External loans and rents from imported equipment;
  • Paragraph b) of article 51: National merchant shipping companies – Paragraph a) will remain in force until specific tax legislation for the maritime transport sector is approved (Tonnage Tax);
  • Article 52: Regional winemakers;
  • Article 53: Companies managing integrated waste management systems;
  • Article 54 : Sports, culture or leisure associations;
  • Article 63: Personal Income Tax credits;
  • Article 64: VAT – Transfer of goods and services provided without charge.
  1. B. Amendment of the following articles of the TBC and extension of their applicability until 31 December 2019, also subject to annual evaluations from that point onwards.
  • Article 15 -A: Disclosure of the use of tax benefits;
  • Article 19 -A: Deductions on partnerships of social impact titles;
  • Article 20: Incentives to long term savings;
  • Article 29: Financial services of Public Institutions;
  • Article 30: Swaps and loans from non-resident financial institutions;

Introduction of a limitation to the applicability of this tax benefits, when:

  1. i) The beneficiaries of the income obtained are resident in a country, jurisdiction or territory with a more favorable tax regime; or
  2. ii) When the non-resident entities without permanent establishment in Portuguese territory are held directly or indirectly, in more than 25%, by resident entities, except when those entities are resident in another EU Member State, in a country from the European Economic Area bound to tax cooperation obligations similar to the ones established within the European Union, or in a State with which Portugal has concluded a double tax treaty that is in force and foresees the exchange of information.
  • Article 31: Deposits with non-resident credit institutions.

Limitation to the applicability of this tax benefit, when:

  1. i) The beneficiaries of the income obtained are resident in a country, jurisdiction or territory with a more favorable tax regime; or
  2. ii) When the non-resident entities without permanent establishment in Portuguese territory are held directly or indirectly, in more than 25%, by resident entities, except when those entities are resident in another EU Member State, in a country from the European Economic Area bound to tax cooperation obligations similar to the ones established within the European Union, or in a State with which Portugal has concluded a double tax treaty that is in force and foresees the exchange of information.
  3. C. Law nr. 43/2018, of 9 August, also terminates the applicability of the following tax benefits:
  • Article 19: Job creation benefit – termination produces effects from 1 July 2018.
  • Article 26: Stock saving plans – termination produces effects from 1 July 2018.
  • Article 47: Buildings to which the tourist utility status has been granted – termination produces effects from 1 January 2019.
  • Article 50: Underground parking – termination produces effects from 1 January 2019.

These changes will entry into force on the day following their publication and will produce effects as from 1 July 2018, with the exceptions mentioned above.

Elsa Rodrigues

Elsa Rodrigues

Founding Partner/Lawyer

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