Transfer pricing with new regulation

The transfer pricing rules in Portugal were substantially changed, namely with a significant reduction in the scope of application.

These amendments are effective for tax periods beginning on or after January 1, 2021.

January 2022

Two ordinances (267/2021 and 268/2021) were recently published that substantially changed the transfer pricing rules in force in Portugal, these changes being in force for the taxation periods starting from January 1, 2021 and that accompany the changes already introduced in article 63 of the CIRC.

Ordinance 1446-C/2001 is thus revoked, which remains valid for fiscal years beginning until January 1, 2020.

In parallel with Ordinance No. 331-D/2021, given the need to obtain disaggregated information for the purposes of fiscal control, namely with regard to transfer pricing, a profound change was made to Annex H of the IES for the purposes of reinforcement of the control of operations with related entities.

Among the changes adopted in Ordinance 268/2021, the following stand out:

a) Introduction of a dual criterion to waive the obligation to have transfer pricing documentation:

– annual income of less than 10 million euros (previously 3 million euros)

– even if this amount is exceeded, with operations with related entities whose value does not exceed 100 thousand euros, per counterparty, and 500 thousand euros as a whole.

This waiver does not apply to transactions carried out with entities residing in a jurisdiction with a clearly more favorable tax regime and also such waivers do not preclude proof that the terms and conditions practiced in the linked transactions comply with the the arm’s length principle, whenever the taxable person be notified to this effect.

b) new rules regarding the organization of the transfer pricing documentation process with the express provision (but previously accepted) of a double reporting structure including a main file (master file), a specific file (local file), and also a simplified dossier for small or medium-sized enterprises (criterion of Decree-Law 372/2007).

The ordinance includes 3 annexes with a developed structure that must comply with the transfer pricing file and the documentation, studies and other relevant elements that must be part.

c) introduction of specific rules for operations involving intangibles and restructuring operations, in line with international developments (OECD);

Finally, ordinance 267/2021 amended the rules regarding the procedures to be adopted with the advance pricing agreements (“APAs”).

This communication is of a general nature and is merely informative, not intended for any particular entity or situation, and does not replace professional advice appropriate to the specific case. Vitis will not be responsible for any damage or loss arising from decisions made based on the generic and synthetic information described here.

The text was prepared based on the best information available at the time of its edition