Transfer pricing in Portugal at a glance
|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
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.
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.
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
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
Since 2008 it it possible to obtain unilateral, bilateral or multilateral Advance Pricing Agreements (APA’s).
Portuguese APA’s can’t be obtained for a period of three years, however, upon written request this period can be extended.
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.