Post by Neves on Apr 29, 2009 2:27:30 GMT 4
Portugal: Extension of holding regime to EU-incorporated entities
Law 10/2008 of March 10 extends the tax regime applicable to Portuguese incorporated holding companies (SGPS) to EU-incorporated entities that move their seat or place of effective management into Portugal.
Different from other types of holding vehicles in Europe, the Portuguese SGPS regime has been historically established as a legal regime governed by Decree Law 459/88. Accordingly, companies wishing to pursue mere holding activities may chose to incorporate themselves either as Portuguese corporations (Sociedade Anónima) or limited liability company (Sociedade por Quotas) and are required to include within its corporate name the distinct expression "Sociedade Gestora de Participações Sociais" or "SGPS". From a tax perspective, this type of holding company benefits from a favourable tax regime covering participation exemption on dividends received and capital gains realised, stamp tax exemptions and certain withholding tax exemptions.
From January 2009, the favourable tax regime (specifically, dividends and capital gains exemption) equally applies to companies incorporated under the law of another EU member state that either have their seat or place of effective management located in Portugal, provided that the sole corporate purpose of such company is the management of participations. In addition, those companies must fulfil the strict conditions established under the legal framework applicable to SGPS.
The wording of this new provision provides therefore for an automatic assimilation of an EU holding company to an SGPS without prior consultation with the tax authorities. Nevertheless, the limitations to the actual activities performed by an SGPS require a rigorous comparison of the activities performed by a EU holding company vis-à-vis the local regime.
The objective of this extension as recognised in the explanatory memorandum to the Law is twofold. First, the measure is designed to eliminate a potential incompatibility with EU law of the non-application of the beneficial regime to EU holding companies effectively managed in Portugal. Secondly, the measure aims to stimulate investment and to create an incentive for the transfer of capital into Portugal. Some issues, however, appear to have been left open to ensure the full assimilation of an EU-holding effectively managed in Portugal to an SGPS.
Tiago Cassiano Neves (tiago.cassiano.neves@garrigues.com)
Tax lawyer of Garrigues Portugal (Lisbon office)
Law 10/2008 of March 10 extends the tax regime applicable to Portuguese incorporated holding companies (SGPS) to EU-incorporated entities that move their seat or place of effective management into Portugal.
Different from other types of holding vehicles in Europe, the Portuguese SGPS regime has been historically established as a legal regime governed by Decree Law 459/88. Accordingly, companies wishing to pursue mere holding activities may chose to incorporate themselves either as Portuguese corporations (Sociedade Anónima) or limited liability company (Sociedade por Quotas) and are required to include within its corporate name the distinct expression "Sociedade Gestora de Participações Sociais" or "SGPS". From a tax perspective, this type of holding company benefits from a favourable tax regime covering participation exemption on dividends received and capital gains realised, stamp tax exemptions and certain withholding tax exemptions.
From January 2009, the favourable tax regime (specifically, dividends and capital gains exemption) equally applies to companies incorporated under the law of another EU member state that either have their seat or place of effective management located in Portugal, provided that the sole corporate purpose of such company is the management of participations. In addition, those companies must fulfil the strict conditions established under the legal framework applicable to SGPS.
The wording of this new provision provides therefore for an automatic assimilation of an EU holding company to an SGPS without prior consultation with the tax authorities. Nevertheless, the limitations to the actual activities performed by an SGPS require a rigorous comparison of the activities performed by a EU holding company vis-à-vis the local regime.
The objective of this extension as recognised in the explanatory memorandum to the Law is twofold. First, the measure is designed to eliminate a potential incompatibility with EU law of the non-application of the beneficial regime to EU holding companies effectively managed in Portugal. Secondly, the measure aims to stimulate investment and to create an incentive for the transfer of capital into Portugal. Some issues, however, appear to have been left open to ensure the full assimilation of an EU-holding effectively managed in Portugal to an SGPS.
Tiago Cassiano Neves (tiago.cassiano.neves@garrigues.com)
Tax lawyer of Garrigues Portugal (Lisbon office)