Transfer pricing in Portugal

Transfer pricing in Portugal at a glance

Regulation Type OECD
Are there specific transfer pricing regulations? Yes
Submission deadline 15th day of the seventh month after the corresponding tax year-end
Submission deadline upon request 10 days
Annual update required Yes
Official language requirements Portuguese (English sometimes accepted)
Potential impact of penalties €500 up to €10,000

Portuguese tax law

Rules for transfer pricing in Portugal are based upon:

  • Article 63 and Article 138 of the Corporate Income Tax Code
  • Ministerial Order (Portaria) #1446-C/2001
  • Ministerial Order (Portaria) #620-A/2008

OECD

The Portuguese transfer pricing rules are in line with the OECD Transfer Pricing Guidelines. Only for the priority of methods the national regulations in Portugal deviate from the OECD Guidelines.

Methods

Accepted methods

Accepted methods are:

  • the comparable uncontrolled price method
  • the resale price method
  • the cost plus method
  • the profit split method (contribution analysis or residual analysis)
  • the transactional net margin method
  • any other method appropriate to the specific facts and circumstances of each transaction

Priority of methods

In Portugal there is a hierarchy in which method should be used, namely the best-method rules applies in Portugal. This implies that a taxpayer is expected to use the method or methods most suitable to each case, thus explaining not only the reason why a certain method is considered as the most appropriate to test whether or not the controlled transactions comply with the transfer pricing rules, but also why other methods are rejected.

Documentation requirements

Information that should be included in the documentation:

  • Related party status, according to the definition presented in Article 63 of the Corporate Income Tax Code (a company subject to a substantially favorable tax regime or included in the Portuguese offshore blacklist is considered to be a related party, regardless of any other related party criteria)
  • Characterization of a taxpayer’s activity and that of the related parties with whom it engages in commercial and /or financial transactions
  • Identification of all intercompany transactions (volumes, terms and conditions) for the year under analysis, as well as for the previous two years, or for the period that they occurred (if less)
  • A functional analysis for each relevant transaction
  • Technical studies focusing on essential are as of business
  • A description of the method used and evidence of how the prices are calculated
  • Information about Portuguese comparables (geographical comparability requirement)
  • The legal entity’s organization structure
  • All intercompany contractual agreements and unrelated party agreements

Language

Officially all documentation should be provided for in Portuguese. English, however, is generally accepted when prior approval has been requested for. 

Requirements to prepare documentation annually

In Portugal, the documentation must be prepared by the 15th day of the seventh month after the corresponding tax year-end. However, the tax authority may, and does, ask for documentation on transactions at any time after they take place.

Submission deadline upon request by tax authorities

Upon request, the documentation must be provided for within 10 days.

Advance Pricing Agreements

General 

Since 2008 it it possible to obtain unilateral, bilateral or multilateral Advance Pricing Agreements (APA’s).

Terms

Portuguese APA’s can’t be obtained for a period of three years, however, upon written request this period can be extended.

Penalties

Specific transfer pricing penalties (from €500 up to €10,000) apply for failure to present transfer pricing documentation within the time frame determined by the tax authorities. Should the taxpayer be subject to a transfer pricing adjustment, no further specific penalties apply.

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