Portugal tax haven blacklist reform: A strategic shift in corporate tax policy
The Portuguese government intends to reform the list of “non-cooperative jurisdictions for tax purposes” and bring its tax policy more closely into line with applicable European standards. Rather than maintaining its considerably broader list, Portugal intends to adopt the European Union’s list, which currently comprises 10 jurisdictions, as its benchmark. The Ecovis consultants explain the details of the reform and its impact.
According to the Ministry of Finance, the proposal on the reform of the list of tax havens pursues the following principal objectives:
- To align Portuguese tax policy with other Member States
- To acknowledge the positive developments achieved by certain jurisdictions that have adopted internationally recognised standards of tax transparency
- To ensure that the applicable criteria are more predictable and more closely aligned with those applied by the European Union and the OECD in combating tax evasion and profit shifting
We assist companies with cross-border tax matters and assess the impact of new regulations concerning tax havens.
Eloísa Ribeiro Santos, Lawyer, Tax Advisor, RBMS – Member of Ecovis International, Lisboa, Portugal
The impact of the reform on companies
The proposed reform may have significant implications for businesses and investors. Currently, transactions involving entities established in jurisdictions included on the Portuguese list may be subject to higher real estate tax and withholding tax rates, more stringent transfer pricing rules, restrictions on the deductibility of certain expenses and enhanced evidentiary requirements.
If a jurisdiction is removed from the list, these adverse tax consequences will, as a general rule, cease to apply in respect of that jurisdiction.
Pros and cons of the reform
Supporters of the proposal argue that Portugal will no longer remain an outlier by maintaining a blacklist that is significantly broader than those of other EU Member States, thereby enhancing legal certainty for businesses engaged in cross-border operations.
At the same time, some experts express concern that reducing the number of listed jurisdictions from approximately 77 to only 10 may substantially weaken Portugal’s ability to combat aggressive tax planning. They further contend that certain jurisdictions offering preferential tax regimes may cease to be subject to the enhanced anti-avoidance measures provided for under Portuguese tax legislation solely because they are not included on the EU list.
The background to the list
The European Union list, which is ordinarily reviewed twice each year, is based on criteria relating to tax transparency, fair taxation, and the implementation of international standards designed to prevent base erosion and profit shifting (BEPS).
