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Portugal: Tax Authorities Change NHR Activity Control Mechanisms

In on October 14, 2019 by NEWCO

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After having recently published a new list of “high value added activities” applicable to non-habitual residents (NHR) that register as of 2020, the Portuguese Tax Authorities have now decided to change the manner in which they control how these activities are performed.

The changes were communicated in a circular issued on 8 October by the Taxations and Customs Authority (AT).

Previous procedure:

Up until today, the AT had adopted an administrative procedure involving prior recognition that took place simultaneously with the request for registration as a non-habitual resident. This procedure, however, was very lengthy and did not rule out a subsequent control by the AT with respect to compliance with the underlying pre-requisites for such an authorization.

New procedure:

From now on, any NHR who wishes to benefit from the personal income tax regime applicable to the activities recognized as being of high added value need only refer to the respective framework in the duly filled out annual income declaration, without any need to obtain prior recognition by the AT for the invoked activity.

This new procedure shall not prevent the AT from subsequently requiring the non-habitual resident to prove that he or she actually exercises the activity in question. It allows for the worker to be called to submit proof that he or she actually performs the activity, namely an employment or supply of services contract, proof of registration in a Professional Association, document proving that he or she has an administrative position, declaration attesting to the beginning of the activity, in the case of independent workers, or other official documents that serve as proof that he or she exercises the invoked activity.

Special tax regime for NHR

The non-habitual resident tax regime was created in 2009 in order to attract qualified professionals to Portugal with respect to high value added activities and intellectual property, industrial or know-how activities, as well beneficiaries of pensions obtained abroad.

Among other things, this regime allows net revenue from categories A and B earned by non-habitual residents in Portuguese territory in high value added activities to be taxed at a special rate of 20%, as well as allowing category B revenue obtained from abroad from those same activities to be exempt from taxation in Portugal, as long as certain requirements have been met.

About NEWCO

NEWCO is a one-stop-shop for businesses and individual persons who wish to invest or move to Portugal. With three decades of experience in implementing foreign investment in Portugal, we offer all services pertaining to business establishment and administration, accounting and personal and corporate tax compliance, along with providing support during change of residence and personal integration into the country. Please contact us to find out more about the services we offer to non-habitual residents of Portugal.

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Portugal: Changes to various tax codes

In on October 8, 2019 by NEWCO

Calendario fiscal Portugal

The law 119/2019 has introduced changes to various tax codes in Portugal. Here are some of the most relevant changes for Portuguese companies with international activity.

Personal Income Tax

Income from previous years – Corrected return

Whenever it is possible to carry over income from previous years the taxpayer may alternatively submit corrected returns pertaining to the years in question, the limit being the fifth year immediately prior to the year of the payment or the year when the income was made available.

This option shall not apply to income that depends on a court decision in order to be paid or made available.

When counting the expiry deadline, the taxation fact shall be considered verified during the year when the payment was made or when the income was made available.

Payments to non-residents

In order to avoid the obligation to pay withholding tax on personal income (e.g. income from work, return on capital, or pensions), if a taxpayer’s fiscal residence is in a country with which Portugal has signed a convention to prevent double taxation, the beneficiary of the income must submit an official form accompanied by a document issued by the relevant authorities of the respective country of residence, attesting to his or her fiscal residence during the period in question and his or her requirement to pay income tax in that country.

Corporate Income Tax:

Income and gains: Bonds and other subordinated debentures

The amount of the reduction, total or partial, of the value of the outstanding principal from subordinated bonds or other subordinated debentures shall be considered issuer income as long as the holder is not entitled to receive dividends or voting rights at general shareholder meetings and the securities cannot be converted into shares.

Payments to non-residents

In order for non-residents to be exempt from or reimbursed for withholding tax on their income, it shall be necessary to submit an official form accompanied by a document issued by the relevant authorities of the respective country of residence, attesting to the taxpayer’s fiscal residence during the period in question and his or her requirement to pay income tax in that country.

Taxation documentation process: Major Taxpayers

Taxpayers whose tax situation must be followed up on by the Major Taxpayers Unit shall be obliged to follow a taxation documentation process and submit documentation pertaining to the transfer price policies they have adopted, no later than 15 July.

Transfer Prices

Corporate restructuring or reorganization operations are now explicitly included in the definition of operations that are subject to transfer price rules if they are conducted with related entities.

The taxpayer may adopt other analysis methods or techniques whenever the transfer price methods cannot be used because of the unique or singular characteristic of the operations or the lack or scarcity of reliable comparable information and data.

Prior agreements on transfer prices have changed from three to four years in terms of maximum validity period.

Concept of Turnover

The concept of “turnover” is defined as being the amount of sales and services rendered, including rent from investment properties. This definition is valid for the purposes of the Corporate Income Tax Code and legislation pertaining to any other taxes that directly or indirectly apply to pro

VAT:

Payment

Taxpayers are now obliged to make VAT payments no later than the 15th day of the second subsequent month (monthly regime) or no later than the 20th day of the second subsequent month (quarterly regime), while the time periods for submitting periodical returns remain the same.

Decree -Law no. 198/2012:

The deadline for submitting invoices and supporting documents involving delivery of goods and rendering of services is now the 12th day of the month that follows the month in which the invoice was issued.

Information that is communicated regarding invoices shall be kept until the end of the fifteenth year subsequent to the year to which the invoices pertain and must be destroyed within a period of six months after this period has elapsed.

Tax Courts:

An arbitration ruling can now be appealed to the Supreme Administrative Court when it opposes another arbitration ruling regarding the same fundamental question of law (in addition to a decision rendered by the Central Administrative Court or by the Supreme Administrative Court).

Failure to submit the document pertaining to the adopted price transfer policy, along with failure to submit a communication, within the legal time period, of the identification of the declarant entity or the financial declaration and tax return on a country-by-country basis regarding the entities of a multi-national group shall be subject to a fine of €500 to €10,000, accrued by 5% per day of delay in complying with the obligation.

Check the main relevant dates for fiscal obligations in Portugal in our updated  Tax Calendar.

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New table of high value-added activities for NHR in Portugal

In on September 5, 2019 by NEWCO

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Ordinance 230/2019 of 23 July has updated the list of value-added activities that are relevant to the tax regime for non-habitual residents (NHR) of Portugal. This is an in-depth revision of the table that had been in effect since 2010, in order to align the activities listed in it with the needs of the national labour market, due to the demand for specialized skills and the recruiting difficulties that have been experienced, in addition to aligning the table with the codes of the Portuguese Classification of Professions (PCP).

Tax regime for non-habitual residents of Portugal

The tax regime for non-habitual residents was created in 2009, at a time when because of the need to promote Portugal’s growing international profile, the government decided it was the right time to use the international taxation instruments available to it to attract professionals working in high added-value activities to Portugal.

Among other aspects, this regime allows for net income from categories A and B earned in Portuguese territory by non-habitual residents while performing high value-added activities to be taxed at a special rate of 20%, as well as stipulating that category B income earned abroad from those same activities shall be exempt from taxation in Portugal, as long as certain conditions have been met.

List of value-added activities

Accordingly, January 2010 saw the approval of a table with a list of activities that served as the basis for the tax regime for non-habitual residents. This table was based on the economic activities codes (EAC), but did not directly correspond to them. The new Ordinance has now adopted a model that directly corresponds with and is based on the Portuguese Classification of Professions (PCP), which allows for more immediate clarification of interpretive doubts regarding the scope and range of each of the activities listed in the table, given that for each professional code there is a description of the duties that are considered examples of professions that have been included and excluded.

As such, anyone who asks to be registered as a non-habitual resident in Portugal as of 1 January 2020 (except if they make the request by 31 March with reference to 2019) shall be subject to the following activities table:

I – Professional activities (PCP codes):

112 – General director and executive manager of a company
12 – Directors of administrative and commercial services
13 – Directors of production and specialized services
14 – Directors of hotel, restaurant, commercial and other services
21 – Specialists working in physical sciences, mathematics, engineering and similar technical fields
221 – Physicians
2261 – Dentists and stomatologists
231 – Teachers at universities and higher learning establishments
25 – Specialists in information and communication technologies (ICT)
264 – Authors, journalists and linguists
265 – Creative artists and performing artists
31 – Intermediate level science and engineering technicians and professionals
35 – Information and communication technologies technicians
61 – Market oriented farmers and qualified agricultural and livestock workers
62 – Market oriented qualified forestry, fisheries and hunting workers
7 – Qualified industrial, construction workers and craftsmen, including qualified workers in the fields of metallurgy, metalworking, food processing, wood manufacturing, clothing production, handicrafts, printing, manufacture of precision instruments, jewellers, artisans, electricity and electronics workers.
8 – Operators of installations and machines and assembly workers, namely fixed installations and machine operators.

The workers included in the aforementioned professional activities shall possess at least a level 4 qualification on the European Qualifications Framework or a level 35 on the International Standard Classification of Education, or they must have five years of duly proven professional experience.

II – Other professional activities:

Administrators and managers of companies that promote production investment, provided they are allocated to eligible projects and have contracts granting tax benefits signed in accordance with the Investment Tax Code approved under Decree-Law no. 162/2014 of 31 October.

For more information regarding the tax regime for non-habitual residents of Portugal, please contact us.

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Register of Beneficial Owners – Changes to the Regulations

In on August 28, 2019 by NEWCO

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The regulations governing the Register of Beneficial Owners in Malta – “Companies Act (Register of Beneficial Owners) Regulations” have been changed in order to transpose some provisions provided for in the fifth EU Anti-Money Laundering Directive (AMLD 5), relating to money laundering and terrorism prevention, into Maltese law.

The main changes relate to the obtaining and updating of information about the beneficial owners, on the one hand, and the general public’s access to such information, on the other.

Beneficial owners to take partial responsibility

In the first situation mentioned above, the responsibility for the provision and updating of information will now be shared by the company and by the beneficial owners themselves. To date, this responsibility lay with the companies, with the beneficial owners being required to provide the requested mandatory information. On 12 July 2019, the responsibility began to be shared by the company and the beneficial owners; the latter must now inform the former and provide the relevant details immediately, with no requirement for the company to request such information beforehand. Beneficial owners who fail to provide the required information adequately and in timely fashion are liable to be fined.

General public given access to information

Starting in January 2020, the general public will be able to access the information about the beneficial owners of Maltese companies. Currently, this information can only be accessed by the relevant national authorities, some other qualified people and anyone invoking arguments related to money laundering or the funding of terrorism. Starting from next year, the general public will be able to access the following data about each beneficial owner:

  • Name
  • Month and year of birth
  • Nationality
  • Country of residence
  • Nature and extent of the economic interest held

Access to these details may be refused under certain exceptional circumstances, particularly in cases where it can be proven that the beneficial owner could be exposed to a disproportionate level of risk, a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or in cases where the beneficial owner is a minor or is legally incapacitated.

Reinforcement of RoC supervisory powers

In order to ensure that the information remains adequate, updated and relevant, the Registrar of Companies (RoC) has been given the power to question and check, on companies’ premises, if necessary, the effective ownership of said companies, as long as it has reason to suspect that the information submitted to it is incorrect or out of date. Additionally, certain qualified people and the authorities with responsibilities in the fight against money laundering and the funding of terrorism must report any discrepancies detected between the information held and that contained in the Register of Beneficial Owners. The RoC will take the necessary measures to ensure such discrepancies are rectified and may even explicitly mention them on the Register of Beneficial Owners until such time as they are corrected. In cases where discrepancies are confirmed and the RoC corrects them, the people responsible for the company will be liable for a fine, the maximum amount of which is €10,000 each.

For more information about these regulations or any other question about Maltese companies, please contact us: info@newco.pro.

 

 

 

 

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NEWCO Founding Partner awarded Portuguese Bar Association Medal of Honour

In on May 21, 2019 by NEWCO

Fundador NEWCO

Renowned Madeiran lawyer and NEWCO founding partner Paulo Gouveia e Silva has this week been awarded the Portuguese Bar Association’s Medal of Honour at a commemorative ceremony to mark National Lawyers’ Day, held in Santarém.

The Portuguese Bar Association’s Medal of Honour distinguishes lawyers who, through merit, conduct and professional practice, have contributed significantly towards the dignity and prestige of the legal profession, or who, through the Portuguese Bar Association, in particular within its framework, have contributed significantly to the reinforcement and prestige of the Bar, as well as to distinguish national and foreign citizens who have provided relevant services in the defence of the rule of law or advocacy.

Paulo Gouveia e Silva holds a degree in Law from Coimbra University’s Faculty of Law. He was Deputy Public Prosecutor in Ponta do Sol and Sintra; the Officer Responsible for Records and Public Notary even before the 25 April Revolution in 1974, and had his own practice. 

In 1992 he founded SMS -Advogados, which in 2009 merged with Abreu Advogados, of which he became a partner.

He has been a member of the Advisory Board of Abreu Advogados since 2014.

He is also a member of the Union Internationale des Avocats (UIA), a member of “Eurojuris Portugal” – part of “Eurojuris International”, and a speaker in seminars and author of articles published in UIA Congresses.

During the ceremony, which took place at the São Francisco Convent in Santarém, Paulo Gouveia e Silva also received the Commemorative Medal of 50 years’ enrolment in the Bar Association.

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NEWCO receives “SME Excellence 2018” award

In on May 3, 2019 by NEWCO

NEWCO excelência 2018

After being awarded as SME Leader for several years, NEWCO has now won the award for “SME Excellence 2018”, granted by the Institute Supporting Small and Medium-Sized Enterprises and Innovation (IAPMEI) to the group of small to medium sized companies that evidence the best annual performance standards.

NEWCO PME Excelência 2018The SME Leader distinction is a seal of approval for companies, attributed by IAPMEI in partnership with Turismo de Portugal (the Portuguese Tourist Board) and a group of partner banks. The aim is to honour the merit of Portuguese SMEs that distinguish themselves through top level performance, based on a series of demanding criteria related to economic indicators and the highest rating grades.

This award has distinguished NEWCO’s rigorous and innovative management, together with the quality of its economic performance and underlying risk profile.

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NEWOFFICE – your office in Malta with shared services

In on March 20, 2019 by NEWCO

Office in Malta

Office in Malta

Now that we’ve opened our NEWOFFICE in Malta, our clients can set up their new office in Malta quickly and more efficiently. In addition to corporate start-up and business services in Malta, NEWCO now offers office space in Malta with shared services for customers who want to set up their office in Malta with the highest levels of productivity and flexibility possible.

Services offices in Malta

Located in Valletta bay near the Cruise Port and with easy access to the centre of Valletta, NEWCO’s versatile offices with shared services allow our clients to focus on growing their international businesses. Here, our clients have the continual support of our team, from setting up their office in Malta and assistance with all the necessary outsourcing services for the day to day running of the office, to fulfilling all the applicable accounting, fiscal and legal requirements of their Malta company.

Professional solutions to help you set up a Malta company

Aware of the importance of substance and effective management when setting up a Malta company, clients use NEWCO’s services when setting up and managing their business in Malta, complying with accounting and tax requirements, payroll management, legal and tax advice and recruitment, the latter of which is carried out in partnership with renowned, experienced service providers.

Furnished offices in Malta with shared services

Our shared services office in Malta, which are located in Valletta Bay, provide flexibility and efficiency for customers who want to set up a Malta company. The offices are furnished and have telephones, Wi-Fi, air conditioning and padlocked lockers. Included in the use of these offices are reception services, mail collection, weekly cleaning, use of the meeting room for 1 hour per week, utility charges and an initial stationary kit.  In addition to these advantages is the new company’s proximity to the NEWCO team, who can provide any outsourcing services necessary to manage their Malta company.

New office in Malta

Registered Office Plus service

While companies are still in their initial stages of the operation in Malta, clients can benefit from the Registered Office Plus service, which, in addition to access to a furnished office and meeting room a few hours a week, gives the option of complementary services and flexible solutions that can be used by different employees working in Malta.

Relocation Services for expatriates and families

Thanks to the partnerships established with reputable companies in their respective sectors, in addition to helping set up office in Malta and getting companies off the ground quickly, NEWCO also provides the services necessary to hire or relocate workers to Malta. This service includes helping them find accommodation or purchase a house, obtain visas or legalise documents, write-up employment contracts and all the necessary personal assistance services to ensure that all employees and families settle in Malta as easily as possible.

NEWCO provides external services to support investment in Portugal, Madeira and Malta. With 3 decades of experience, NEWCO clients can trust that they know how to interpret and systematise relevant information in matters of taxation, overcome the barriers and bureaucracies of investments in a new market and comply with all accounting, legal and tax regulations, allowing their clients to focus on growing their business.

Download the NEWOFFICE Malta Brochure to find out more about our serviced offices in Malta.

Check also our NEWOFFICE Madeira and learn more about more about our serviced offices in Madeira.

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Fitch affirms Malta at ‘A+’ with a stable outlook

In on February 13, 2019 by NEWCO

Malta

Shortly after Moody’s recent reaffirmation of Malta’s rating ‘A3’, credit rating agency Fitch has once more affirmed Malta’s sovereign credit rating at ‘A+’ with a stable outlook. The agency underlines the robust economic growth, strong budget performance and sound and well capitalized banking sector.

Strong private and public consumption is driving growth

Fitch credit rating report attributes the ‘A+’ rating to Malta’s high income per capita, strong governance and human development indicators relative to peers, robust economic growth, and a large net external creditor position, amongst others. The rating agency acknowledges that the strong private and public consumption is driving growth, with private consumption supported by low interest rates and strong employment and wages. It notes that such strong growth has not led to overheating as reflected in the absence of macro imbalances and the inflation rate, which remained contained.

Malta’s budget performance stronger than similarly rated countries

Fitch further notes that Malta’s budget performance has been stronger than similarly rated countries and is on an improving trend. It acknowledges that Malta’s fiscal policy outlook is anchored by the Government’s commitment to a structural fiscal balance net of IIP revenues, with IIP revenues ringfenced for investment purposes.

Fitch commends the rapid fall in public debt and expects the debt-to-GDP ratio to continue declining owing to the low interest payments, strong nominal GDP growth and recurrent primary surpluses. It also acknowledges the Government’s commitment to reduce guarantees, noting that they fell to 9.5 per cent of GDP at the end of 2017, down from 13.5 per cent in 2016.

Banking in Malta remains sound and well capitalised

On the financial sector, Fitch acknowledges that banking in Malta remains sound and well capitalised while on external trade, Fitch notes Malta’s current account surplus driven by the growing services trade sectors. It further expects the trade surplus to be sustained in the coming years.

Source: www.financemalta.org

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Malta implements EU measures on tax avoidance

In on February 11, 2019 by NEWCO

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In June 2016, the European Council published the EU Directive 2016/1164, later modified by EU Directive 2017/952, that set the rules against tax avoidance practices with direct impact in the functioning of the internal market.

This so called Anti Tax Avoidance Package set forth a set of measures aimed at a more just and efficient taxation through the implementation of anti-abuse mechanisms targeting multinational companies and cross-border operations, in line with the conclusions and recommendations outlined in the G20 and OECD Base Erosion and Profit Shifting Project.

In line with the deadlines for implementation defined in the Directive, Malta has published on the 11th of December 2018 Regulation 411 of 2018, which transposes the Directive into the internal legislation.

Besides amending the General Anti Abuse Rule (GAAR), the following rules shall apply to Maltese companies as of the 1st of January 2019:

Interest Limitation Rule:

Exceeding borrowing costs (the amount by which the deductible borrowing costs – interest expenses on all forms of debt, other costs economically equivalent to interest and expenses incurred in connection with the raising of finance – of a taxpayer in terms of the Income Tax Act, were it not for the provisions of this Rule, exceed taxable interest revenues and other economically equivalent taxable revenues that the taxpayer receives) shall be deductible in the tax period in which they are incurred only up to thirty per cent (30%) of the taxpayer’s EBITDA.

The taxpayer may carry forward, without time limitation, exceeding borrowing costs and, for a maximum of five (5) years, unused interest capacity, which cannot be deducted in the current tax period.

Notwithstanding the general rule above, the taxpayer may deduct exceeding borrowing costs up to three million euro (€3,000,000), in addition to other derogations foreseen in the law. Learn +

Controlled foreign company Rule (CFC):

An entity, or a permanent establishment of which the profits are not subject to tax or are exempt from tax shall be treated as a controlled foreign company where the following conditions are met:

(a) in the case of an entity, the taxpayer by itself, or together with its associated enterprises holds a direct or indirect participation of more than fifty per cent (50%) of the voting rights, or owns directly or indirectly more than fifty per cent (50%) of capital or is entitled to receive more than fifty per cent (50%) of the profits of that entity; and

(b) the actual corporate tax paid on its profits by the entity or permanent establishment is lower than the difference between the tax that would have been charged on the entity or permanent establishment under the Income Tax Acts (as computed according to the Income Tax Acts) and the actual corporate tax paid on its profits by the entity or permanent establishment.

Where an entity or permanent establishment is treated as a controlled foreign company, there shall be included in the tax base the non-distributed income of the entity or permanent establishment arising from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage. Learn +

Exit Taxation:

This rule shall come into force on 1st January, 2020.

A taxpayer shall be subject to tax on capital gains that are to be calculated at an amount equal to the market value (the amount for which an asset can be exchanged, or mutual obligations can be settled between willing unrelated buyers and sellers in a direct transaction) of the transferred assets, at the time of exit of the assets, less their value for tax purposes, in any of the following circumstances:

(a) a taxpayer transfers assets from its head office in Malta to its permanent establishment in another EU Member State or in a third country in so far as Malta no longer has the right to tax capital gains from the transfer of such assets due to the transfer;

(b) a taxpayer transfers assets from its permanent establishment in Malta to its head office or another permanent establishment in another EU Member State or in a third country in so far as Malta no longer has the right to tax capital gains from the transfer of such assets due to the transfer;

(c) a taxpayer transfers its tax residence from Malta to another EU Member State or to a third country, except for those assets which remain effectively connected with a permanent establishment in Malta;

(d) a taxpayer transfers the business carried on by its permanent establishment from Malta to another EU Member State or to a third country in so far as Malta no longer has the right to tax capital gains from the transfer of such assets due to the transfer.

A taxpayer may however defer the payment of an exit tax under certain circumstances. Learn +

Impact on maltese companies

Interpretation guidelines are expected to be published soon by the Maltese authorities, so that Maltese firms potentially affected by these rules may adapt and operate with the certainty and stability that characterizes this jurisdiction. NEWCO is fully available to clarify and assist clients wishing to understand the impact of these rules in their international operations.

 

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The new Tonnage Tax Regime in Portugal

In on January 31, 2019 by NEWCO

Blog_SHIPPING

This year promises to be a year of change in the maritime transport sector of Portugal.

For decades the International Shipping Register of Madeira (RIN-MAR) was the only competitiveness factor that Portugal could leverage to invigorate the Portuguese merchant marine fleet. Despite all the obstacles and difficulties that it has faced, both in terms of legislation and operations, RIN-MAR has been able to prevent restriction of the number of commercial vessels to fly the Portuguese flag to the dozen or so ships registered in the Portuguese Conventional Register.  The operational and fiscal advantages granted to vessels and their crew registered with RIN-MAR, together with the tax regime available within the scope of the International Business Centre of Madeira for maritime transport companies have kept Portugal on the map as regards countries that should be considered by national and international shipowners, and they have resulted in a gradual increase in the number of ships that fly the Portuguese flag to a total of 523 commercial vessels registered with the RIN-MAR at the start of 2019.

It is expected that the legislative changes introduced over the course of 2018 will bring new vigour to this sector, adding to the advantages of the IBCM that will continue to be available, at least until end 2027.

Introduction of the tonnage tax in Portugal

In fact, in 2018 the European Commission approved the creation of a new tonnage tax regime for Portugal, together with the publication of Decree-Law 92/2018 of 13 November, which implemented a special regime that determines taxation base in accordance with ship tonnage, a specific tax and contribution regime for crew members, along with a simplified register of ships and vessels.

Under this Decree-Law, companies with their head office or permanent management in Portugal that are in the business of transporting goods or passengers or involved in some related activities can benefit from the special regime that determines the taxation base.

Tax calculation

Under this special regime, the taxation base is calculated by applying the following daily values to each eligible vessel:

Net tonnage Daily taxation base per 100 net tonnes
Up to 1,000 net tonnes € 0.75
Between 1,001 and 10,000 net tonnes € 0.60
Between 10,001 and 25,000 net tonnes € 0.40
Greater than 25,001 net tonnes € 0.20

There is expected to be a 50% and 25% reduction in the taxation base determined during the first two years of business, along with a 10% to 20% reduction for vessels with a net tonnage greater than 50,000 net tonnes that fulfil some environmental requirements.

The taxation base that is thereby determined shall be subject to the general tax rate stipulated in the Corporate Income Tax Code, which is currently 21% on mainland Portugal, 20% in Madeira and 16.8% in the Azores. Specific conditions have been determined for deducting costs and losses, carrying forward tax losses and calculating the special payment on account; however, opting for this regime does not hinder application of the Corporate Income Tax Code in relation to other matters, namely with regard to general rules related to transfer prices, autonomous taxation, settlement and payment rules, among others.

Taxation and contribution regime of crew members

Similar to the benefits granted to crew members of ships registered with the RIN-MAR, this legislation seeks to provide personal income tax exemption and a special contribution regime for crew members of ships or vessels registered in the conventional Portuguese register or in another Member State of the European Union or EEA and which are used by entities that opt for this special regime for determining taxation base.

Such crew members shall be covered by the general social security regime and shall be entitled to parental, unemployment, illness, occupational illness, disability, old age and death benefits, subject to a contribution rate of 6% (4.1% paid by the employer and 1.9% by the crew member).

In order to benefit from personal income tax exemption the crew member must remain aboard the ship at least 90 days during each taxation period.

Eligibility and application requirements

Payers of corporate income tax may opt for the tonnage tax regime if their head office or permanent management is located in Portugal and their main commercial activity is related to maritime transport of goods and people and they legally exercise it, and the simplified regime for taxation base determination does not apply to them.

The regime only applies to income from activities performed using ships that fly the flag of an EU or EEA member State, ships that are strategically and commercially managed from an EU or EEA Member State (presupposes control and risk of the maritime activity) and that are used to perform the activities listed in the legislation, namely the transport of goods and passengers and some additional activities, such as the sale of products for onboard consumption, the supply of services directly related to the activity, returns on short term investment of working capital, advertising and marketing of advertising spaces onboard ships, shipbrokerage, strategic, commercial, technical, operational and crew management, among others.

Shipowners and charterers can benefit from this regime, including those who have ships registered outside the EU under certain conditions.

Fifty percent (50%) of the crews must be made up of members who are Portuguese, from EU and EEA Member States, or countries whose official language is Portuguese.

Duration of the regime and period for remaining within it

The tonnage tax shall be valid for 10 years and it may be renewed for identical periods, provided that the European Commission authorises the renewal. The minimum period for remaining within this regime is 5 years and the option may be selected at the start of the activity or by the end of the taxation period during which the special regime is to be applied.

Tonnage Tax and the IBCM and RIN-MAR

Taxpayers who opt for this special regime shall not receive any other tax benefits or incentives of the same type. As such, the reduced Corporate Income Tax rate provided for within the scope of the International Business Centre of Madeira (IBCM) shall not apply to income that is subject to this special regime.

Notwithstanding, companies that opt for this special regime may still benefit from all other tax benefits applicable to companies licensed within the scope of the IBCM. Here is a list of those companies: http://www.newco.pro/pt/regime-fiscal-madeira

Likewise, companies that opt for this special regime may also register their ships with the RIN-MAR, which is a reliable and efficient register that offers all the guarantees and security that shipowners seek.

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