Portuguese Participation Exemption Regime

The regime applies to: direct or direct and indirect minimum 5% participations in share capital or in voting rights, held for a minimum period of 24 months.

The subsidiary should meet the "subject to tax" test, implying a minimum 13.8% nominal corporate income tax rate for subsidiaries in non-EU countries (alternative activity tests may apply).

In case of dividends not entitled to exemption, a credit for the underlying tax paid by eligible direct or indirect subsidiaries, as well as a credit for juridical double taxation on withholding tax applied to the dividends, may be granted.

This exemption applies to participations in Portuguese companies in the conditions referred (e.g., minimum 5% participation, for at least 24 months), provided that the shareholder is resident in the EU, EEA or in a Treaty Country.

No minimum participation level or holding period is needed, and minor exceptions apply (e.g., shareholders in black-listed jurisdictions).

Portuguese companies may opt to disregard profit/losses assessed by permanent establishments abroad (minor exclusions apply).

Portugal has an extensive Double Tax Treaty network, which allows for the reduction of the withholding tax applied on income obtained abroad or paid to investors.

Companies licensed to operate in the Madeira International Business Centre may benefit from a 5% corporate income tax rate, until 2020, on income obtained abroad, while also benefitting from the general Portuguese CIT regime, such as the participation exemption above.

Portuguese has a top-line patent regime, providing a 50% relief on gross income, while no restrictions exist on the deduction of costs.

High qualified professionals moving to Portugal may benefit from the so-called non-habitual resident regime, which allows for a 20% personal income tax rate regarding employment income, combined with several exemptions on foreign sourced income.

The "Golden Visa", a special residence card for investors, grants free movement within the Schengen area to non-EU nationals.