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Portugal: a holding company location PwC’s International Tax Services professionals can help you construct effective cross-border strategies and manage your global structural tax rate

Contents

Holding companies location Overview of the portuguese tax regime Madeira international business centre International agreements concluded by Portugal

Portugal: a holding company location

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Holding companies location

1.

2.

Holdings (SGPS): applicable to nonEU sourced income (25% on other income). Trading companies: applicable to non-Portuguese sourced income, on given thresholds, depending on the number of jobs created (25% on the excess). Except for shareholder loans. Under Interest & Royalties Directive, 5% withholding tax until 30 June 2013, nil from 1 July 2013 onwards.

3. Dividends received from companies

resident in Portugal, EU, European Economic Area, Portuguese Speaking African Countries and East Timor.

4.

Restrictions may apply to interest incurred for the acquisition of shareholdings. For further information please see next page.

Cyprus

Denmark

Ireland

Luxembourg

Malta

Netherlands

10%

25%

12.5% (trading) 25% (non-trading)

28.8%

35% 5% (under refund system)

20% 25%

WHT on dividends

No

No (> 10% ownership: EU Directive/ Treaty)

No (EU Directive / Treaty / NonTreaty with conditions)

No (EU Directive / Treaty)

No

No (EU Directive)

WHT on interest

No

No

No

Yes

Yes

Yes

Tax Rate

No (EU Directive / No Treaty subject to (conditions apply) conditions) Yes (> 10% ownership; EU Directive / Treaty) Yes (> 10% ownership; EU Directive / Treaty)

Portugal (Madeira International Business Center)

Spain

UK

Switzerland

30%

25%

7.83%

No (EU Directive)

No (EU Directive)

No (Treaty)

No (EU -Swiss Savings Directive / Treaty)

No

No 2)

No (EU Directive)

No (EU Directive)

No

Yes

Yes

Yes

Yes

Yes (10% / 12 monts)

Yes

Yes

Yes

Yes

Yes 3)

Yes

Yes

Yes

4% / 5%

1)

Capital gains exemption

Yes

Dividend exemption

Yes

CFC rules

No

Yes

No

No

No

Yes (limited)

No

Yes (non-EU subsidiaries)

Yes

No

Deduction for interest

Yes

Yes (restricted under thin cap rules)

Yes

Yes

Yes

Yes

Yes 4)

Yes

Yes

Yes

Capital duty

0.6% (authorised share capital)

No

No

No

No

No

No

Yes (capital reductions / liquidations)

No

1% (exemptions available)

VAT (Standard)

15%

25%

23%

15%

18%

19%

22%

18%

20%

8%

Personal Income Tax

Up to 35%

Up to 55.4%

20% 41%

Up to 41.34%

Up to 35%

Up to 52%

Up to 46.5% 20% non-habitual residents

Up to 56%

Up to 50%

Up to 40.26%

Please note that the information presented is generic and may depend on several conditions, which are not exhaustively mentioned.

Portugal: a holding company location

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Overview of the portuguese tax regime Corporate income tax rate • The CIT rate is 25%, and a local surcharge up to 1.5% may apply. • A state surtax applies as follows: - 3% on taxable profits (before offset of tax losses) between EUR 1.5 million to EUR 10 million; - 5% to taxable profits (before offset of tax losses) exceeding EUR 10 million. • A municipal surtax up to 1.5% of the taxable profits (before offset of tax losses) may apply. Exemptions on dividends • Dividends distributed by Portuguese/EU/EEA subsidiaries, under qualifying participation regime (minimum 10% participation, held at least 1 year). • Dividends distributed by Portuguese Speaking African Countries or East Timor subsidiaries (minimum 25% participation, held for at last 2 years). • Dividends distributed by Brazilian subsidiaries, under Portugal/Brazil Double Taxation Treaty (95% exemption). Exemptions on capital gains (shareholdings)

• Capital gains realised by non-resident entities (with conditions). • Capital gains realised by Portuguese holdings (SGPS) on the sale of shares: - held for at least 1 year, from incorporation or acquisition from third party; - held for at least 3 years if acquired from associated enterprises (and other circumstances). • Capital losses or financial expenses (interest, exchange expenses) borne on the acquisition of shares disallowed as tax deductible expense by SGPS in certain conditions. • 50% relief from taxation in case of reinvestment of sales proceeds. Portugal: a holding company location

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Overview of the portuguese tax regime Corporations Withholding Taxes Dividends: • Domestic law (non-resident companies): 25%; • EU Parent-Subsidiary Directive / EEA: 0%; • Double Taxation Treaties: typically, 10% or 15%; • Distributed to Swiss companies (25% participation, held for 2 years): 0%. Interest: • Domestic law (non-resident companies): 25 %; • Interest and Royalty Directive: 5% (nil after 30 June 2013); • Double Taxation Treaties: typically, 10% or 15%. CFC do not apply to subsidiaries in EU/EEA. Thin capitalisation rules do not apply in case of indebtedness towards EU parties. No net worth tax.

Portugal: a holding company location

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Overview of the portuguese tax regime Individuals Tax rate: • Marginal tax rates between 11.5% and 46.5%; • Solidarity surtax of 2.5% on excess of taxable income above EUR 153,300 – applicable in 2012 and 2013. Dividends: • Domestic law (non-resident companies): 25%; • Double Taxation Treaties: typically, 10% or 15%. Inheritance / gift tax: • Income deemed outside Portugal is not subject; • No taxation in case of ascendants and descendants; • Otherwise, 10%. Non-habitual residents: • Exemption from taxation of foreign source (conditions apply); • Flat tax rate of 20% on income derived from qualified activities.

No wealth tax.

Portugal: a holding company location

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Madeira international business centre Holding companies (SGPS) • CIT rate of 4% (5% in 2013-2020) on non-EU sourced income

• CIT rate of 25% on the excess (see slide “Portuguese tax regime” – exemptions do apply). • No withholding tax on loan interest, royalties and service fees (conditions apply).

Operational companies • CIT rate of 4% (5% in 2013-2020) on non-Portuguese sourced income, limited to thresholds of income depending on the number of jobs created, as follows:

• No withholding tax on dividends to EU or EEA under EU ParentSubsidiary Directive. • VAT rates of 5%, 12% and 22%.

Number of jobs created

Thresholds of income (Euro)

1-2

2 millions

• Exemption from Stamp Duty, Municipal Property Tax and Property Transfer Tax assigned to company’s purpose.

3-5

2.6 millions

• Low cost substance requirements.

6-30

16 millions

31-50

26 millions

51-100

40 millions

Over 100

150 millions

• Access to EU Directives and Regulations and to most Double Taxation Treaties.

• Start of activity within 6 months upon issuance of license and (i) creation of 6 jobs or (ii) creation of 1 to 5 jobs and CAPEX ≥ EUR 75,000 in the first 2 years of activity

Portugal: a holding company location

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International agreements concluded by Portugal Country

DTT

CSS

Albania Andorra

x

Angola

x

Algeria

x

AMPPI

Country

DTT

CSS

x

Colombia

x

x*

Congo, Rep. of x

Costa Rica

x

Croatia

x

Cuba

x x* x

Argentina

x

Australia

x

Cyprus

x

Czech Republic

x

x

x

x

Austria

x

Bahrein

x

Denmark

Barbados

x

Dominican Republic

Belgium

x

Bolivia

x

East Timor

x*

Bosnia and Herzegovina

x

Egypt

x x

x

x x* x

Brazil

x

x

x

El Salvador

Bulgaria

x

x

x

Estonia

x

x

Canada

x

x

Finland

x

x

Cape Verde

x

x

x

France

x

x

Chile

x

x

x

Gabon

China

x

x

Germany

Portugal: a holding company location

x

x*

Ecuador x

AMPPI

x*

x x

x

x

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International agreements concluded by Portugal Country

DTT

CSS

Greece

x

x

Guinea-Bissau

x

x

Hong Kong

x

Hungary

x

India

x

Indonesia

x

Iceland

x

Ireland

x

Israel

x

Italy

x

Japan

x

Kuwait

x

Latvia

x

x

x

DTT

Malawi

x

Malta

x

CSS

AMPPI

x x

x

Mexico

x

x

Moldova

x

x

Morocco

x

x

x

x

Mozambique

x

x

x

x

Netherlands

x

x

Norway

x

x

Oman

x

Pakistan

x

x

Panama

x

x

Paraguay

x*

x

x

Peru

x*

x

x

x

x

Lithuania

x

x

Luxembourg

x

x

Macao

x

Portugal: a holding company location

Country

Mauritius

Libya Liechtenstein

AMPPI

x

x

Philippines x

x

x

Poland

x

Qatar

x

Romania

x

x

x

x x

x

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International agreements concluded by Portugal Country

DTT

Russia

x

San Marino

x

Sao Tome and Principe Saudi Arabia

CSS

x

AMPPI

Country

x

United Arab Emirates

x

x

Serbia

x

Senegal

x

Singapore

x

Slovakia

x

x

x

Slovenia

x

x

x

South Africa

x

South Korea

x

Spain

x

x

Sweden

x

x

Switzerland

x

x

Tunisia

x

x

Turkey

x

Ukraine

x

DTT

CSS

x

United Kingdom

x

x

United States of America

x

x

Uruguay

x

x*

Uzbekistan

x x

Venezuela

x

Vietnam

x

Zimbabwe

AMPPI

x

x

x

x

x x

x

x

DTT - Double Taxation Treaty CSS - Convention on Social Security AMPPI - Agreement on Mutual Promotion and Protection of Investments (some DTT, CSS and AMPPI may not yet be in force) * To be in force under the Ibero-American Social Security Agreement

Portugal: a holding company location

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www.pwc.com/tax Jaime Carvalho Esteves, Tax Lead Partner [email protected] +351 213 599 601 Lisbon Palácio Sottomayor Rua Sousa Martins, 1 - 4º 1069-316 Lisboa Tel: +351 213 599 680 Fax: +351 213 599 995 Oporto o’Porto Bessa Leite Complex Rua António Bessa Leite, 1430 - 5º 4150-074 Porto Tel: +351 225 433 000 Fax: +351 225 433 499

Last update: April 2012 This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers – Sociedade de Revisores Oficiais de Contas will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice. © 2012 PricewaterhouseCoopers – Sociedade de Revisores Oficiais de Contas, Lda.. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers – Sociedade de Revisores Oficiais de Contas, Lda., which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.