Worldwide transfer pricing reference guide 2014

Portugal (continued)
Transfer pricing penalties (continued)
• If the taxpayer has stated in the Annual Tax and Accounting Return (IES) that transfer pricing documentation is prepared and despite
being notified by the tax authority to submit, it was late in its delivery then penalty related to late delivery can reach EUR 20,000 per
year and per company
• If the taxpayer does not state in the IES that transfer pricing documentation is prepared but was notified by the tax authority to submit
it then penalty for noncompliance related to omission/lack of evidence in Annual Tax and Accounting Return can reach EUR 45,000 per
year and per company
• If the taxpayer stated in the IES that transfer pricing documentation is prepared and was notified by the tax authority to submit it, but
the documentation was not prepared then penalty for noncompliance related to improper fulfillment can reach EUR 75,000 per year and
per company
• If the taxpayer stated in the IES that transfer pricing documentation is prepared but refused to submit it to the tax authority (when duly
requested), then penalty for noncompliance related to the refusal of transfer pricing documentation can reach EUR 150,000 per year
and per company
Penalty relief
The general tax penalty regime applies in Portugal. The determination of penalties will be made on a case-by-case basis.
Documentation requirements
The Portuguese transfer pricing rules require taxpayers with a turnover and other income in excess of EUR3,000,000 in the prior year to
prepare contemporaneous documentation in Portuguese language, which should provide evidence of market parity regarding the terms
and conditions agreed, accepted and practiced in the operations made with related parties, as well as the selection and utilization of the
best method. The regulations divide the documentation between relevant, supporting documentation and that which is applicable to cost
contribution arrangements and intra-group services.
The transfer pricing documentation shall include:
• 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 areas 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
Documentation deadlines
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.
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