Portugal “The 21 st Century Hub for International Investments”
P ORTUGAL : A GATEWAY TO INVESTMENT AROUND THE WORLD
More than 600 years doing business and building a H ISTORIC relationship with the World - Africa, Brazil, P ERSPECTIVE Macao, India, Japan, China and East Timor 3 Historical Portuguese Presence in the world during the Discoveries age
Today Portugal has a deep understanding of these countries’ H ISTORIC environment in various dimensions: P ERSPECTIVE • Linguistic • Cultural • Legal (some of the legal systems of these countries are based on the Portuguese Law) • Portuguese Speaking Countries (spread out for nine countries): A 240 million people Portuguese speaking market 4
Double Tax Treaties (Portuguese Speaking Countries) W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Portugal has already entered into DTT s with Brazil, Cape Verde, Mozambique and Guinea- Bissau Type of Brazil Cape Verde Mozambique Guinea-Bissau income Dividends 10/15% 10% 15% 10% Interest 15% 10% 10% 10% Royalties 15% 10% 10% 10% • However, there are several other DTT s being negotiated (namely the first DTT to be concluded by Angola) and on the verge of being approved and entering into force. In September 2011, the DTT with East Timor was also negotiated. 5
Portuguese African Countries have competitive measures W HAT IS DIFFERENT focused on the attraction of foreign investment: ABOUT P ORTUGAL ? • New private investment laws • Establishing relevant tax exemptions to entities investing in such countries (e.g. Angola and Mozambique) • Huge potential in different areas of activity: Energy, Infra-structures, Telecommunications, Real Estate, Tourism and Agriculture • Strong economic growth expected in the following years • Political stability consolidation in course 6
Double Tax Treaties (other Countries) W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Portugal has also entered into DTT s with South Africa, Algeria, India, Morocco, Tunisia and Macao Type of South Africa Algeria India Morocco Tunisia Macao income Dividends 10%/15% 10%/15% 10%/15% 10%/15% 15% 10% Interest 15% 15% 10% 12% 15% 10% Royalties 10% 10% 10% 10% 10% 10% 7
Focusing on Brazil W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Portugal has entered into a quite advantageous DTT with Brazil • Dividends are not subject to taxation in Brazil and the DTT foresees a competitive rule on double taxation elimination Type of IRPJ / CSL (income taxes) Another Taxes Withholding Tax Corporate Income Tax income (Brazil) (Brazil) (Brazil) (Portugal) Dividends Not subject to corporate income Not applicable Not applicable 95% of the dividends are not subject taxation in Brazil. However, to taxation (article 23 (2) of PT- dividend payment is not BRA Double Tax Treaty) deductible to taxable profit (effective taxation at a 1,325% rate) (does not allow tax saving) Share capital Borrower may deduct to the Not applicable 15% withholding tax Interest subject to a 26,5% general remuneration taxable profit the interest paid CIT rate, with a 15% deduct on to the shareholders account of the withholding taxation which occurred in Brazil (corresponds to an effective CIT rate of 11,5%) 8
Focusing on Brazil W HAT IS DIFFERENT ABOUT P ORTUGAL ? • CIT rates in Portugal are lower and Portuguese entities are entitled to a tax credit correspondent to the tax paid in Brazil Type of IRPJ / CSL (income taxes) Another Taxes Withholding Tax Corporate Income Tax (Brazil) (Brazil) (Brazil) (Portugal) income Interest on Borrower may deduct to the Not applicable 15% withholding tax Interest subject to a 26,5% general shareholders taxable profit the interest paid to CIT rate, with a 15% deduct on loans the shareholders account of the withholding taxation which occurred in Brazil (corresponds to an effective CIT rate of 11,5%) Royalties The Brazilian entity may deduct CIDE: 10% rate 15% withholding tax Royalties subject to a 26,5% general to the taxable profit the royalties PIS: 1,65% rate (to which will accrue CIT rate, with a 15% deduct on paid to the shareholders COFINS: 7,6% rate ISS with a rate account of the withholding taxation (liability of the Brazilian between 2% and which occurred in Brazil entity) 5%) (corresponds to an effective CIT rate of 11,5%) 9
Other treaties with Brazil and African Countries W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Portugal also has agreements with these countries on other matters Brazil Cape Mozambique Guinea- Angola São Tome and East Verde Bissau Principe Timor DTT - - Negotiated Social - - - - - Security Economic - - - - Cooperation Turism - - - Industry - - - Reciprocal Investment Protection 10
Dividends distributed by Portuguese Speaking African W HAT IS DIFFERENT Countries ABOUT P ORTUGAL ? • Dividend distributions made by PSAC are exempted of Corporate Income Tax Angol a Mozambique (no DTT) (DTT) • • Portuguese entity and Angolan entity must be subject to Portuguese entity and Mozambican entity must be subject to corporate income tax corporate income tax • • Portuguese entity must held a minimum of 25% of the Portuguese entity must held a minimum of 25% of the Angolan entity share capital for at least 2 years Mozambican entity share capital for at least 2 years • Dividends are exempted from Portuguese Tax • Dividends are exempted from Portuguese Tax 11
Portuguese holding companies tax regime W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Examples on dividend distribution from Brazil, Angola and Mozambique: Brazil Angol a Mozambique (no DTT) (DTT) (DTT) Hold Co Hold Co Hold Co • • • Participation of at least 10% Participation of at least 25% Participation of at least 25% • • • No withholding tax in Brazil Participation hold for at least 2 years Participation hold for at least 2 years • • SGPS exempted from capital gains • SGPS exempted from capital gains 95% of the dividends are not subject to taxation (DTT) in Portugal in Portugal • SGPS exempted from capital gains in Portugal 12
Madeira s International Business Center W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Entities licensed in Madeira are entitled to benefit from EU Directives and Regulations and DTT s entered into by Portugal • Qualified income of entities licensed to carry out an industrial, commercial or shipping activity and other services shall be liable to CIT at a 4% rate until December 31st, 2011 and 5% thereafter, until December 31st, 2020 • Entities who intend to benefit from this regime is required to create jobs (subject to certain plafonds) and to invest in fixed assets • No Municipal surcharge applicable Ideal for trading activities: low direct and indirect taxation, state-of-the-art infrastructure, efficient local support services, low operational costs, safety and quality of life. 13
Individuals – Non-habitual resident tax regime W HAT IS DIFFERENT ABOUT P ORTUGAL ? • Applicable for ten years to individuals who are likely to establish a permanent or a temporary residence in Portugal • Flat income tax rate of 20% for some Portuguese source employment income and a tax exemption for almost all foreign source income • Nonresident individuals are eligible to benefit from this regime if (i) Became resident, for tax purposes in the Portuguese territory (ii) Were not taxed under the rules of the PIT Code as residents for tax purposes in Portugal for the previous five years, and (iii) Develop high added value activities of a scientific, artistic or technical nature (e.g. engineers, computer technology and data processing activities, news service activities, scientific investigation activities and company’s top executive employees) 14
P ORTUGAL : THE 21 ST CENTURY HUB FOR INTERNATIONAL INVESTMENTS 15
Through VdAtlas , our international platform for the provision of legal services, we support our clients abroad We are already present in Angola and Mozambique in association Angola with local firms combining their local capabilities with VdA’s know-how to provide clients with legal services of a very high Mozambique standard In Brazil , we have been working for more than 30 years with our Best Best Friends in relevant investment transactions and providing legal advice to European companies investing in the Brazilian market. Now, we partner with our Brazilian colleagues advising Brazilian companies in Europe, Africa, Asia and other in their investments Portuguese speaking countries 16 16
C ONTACTS Tiago Marreiros Moreira Tax Partner and Partner in charge of VdAtlas Vieira de Almeida & Associados, Sociedade de Advogados, R.L. E-mail: tm@vda.pt T: + 351 213 11 485 Avenida Duarte Pacheco, n.º 26 1070-110 Lisboa Portugal 17
www.vda.pt O D IREITO A R IGHT TO À E XCELÊNCIA E XCELLENCE
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