Worldwide transfer pricing reference guide 2014

Portugal (continued)
Statute of limitations on transfer pricing assessments
In Portugal, assessment is possible during the four years after the end of the assessment year. All Portugal-based companies have
a statutory obligation to keep available (at the Portuguese establishment or premises) and in good order, their transfer pricing
documentation for the relevant year for a 10-year period.
Return disclosures/related party disclosures
The main disclosure requirements at this level are contained in annexes A, B, C and H (transfer pricing annexes) of the Annual Tax and
Accounting Return which include (on a yearly basis) the following information:
• Identity of the related entities
• Amount of transactions conducted with each of the related parties
• Confirmation that proper contemporaneous (annual) transfer pricing documentation is prepared on a timely basis and is
currently retained
The deadline for the submission of such return corresponds to the 15th day of the seventh month after the corresponding tax year
end. Taxpayers have to state in good faith in this annual return that they have complied with the contemporaneous documentation
requirements and its preparation. Misleading information may result in criminal proceedings.
Transfer pricing-specific returns
There are no specific transfer pricing returns. As mentioned above, transfer pricing information is disclosed on the IES in its transfer
pricing annexes.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
Since January 2004, entities resident in blacklisted offshore countries or territories are deemed related parties for transfer pricing
purposes. Additionally, in 2007, the Portuguese tax authority began making positive adjustments to taxpayers’ taxable profits as a result
of tax audits. These adjustments are based on a benchmark computed from the financial information available on an internal database
called MGIT.
With respect to the comparables analysis performed by the tax authority, the following issues are relevant:
• Entities with a recurrent loss situation are excluded from the comparables final sample
• Comparables identification is not disclosed in the final sample
• A transaction is considered arm’s length only if it is within the computed interquartile range
• Only the median of the interquartile range of the benchmark is considered when tax adjustments are made
More recently, special emphasis is being put on the quality of comparables, namely on royalty CUP analysis. Head office interest charged
to branches is the most recent area of scrutiny and adjustments. Cross-border restructuring is also an area of intense scrutiny in
Portugal as well as intercompany financial operations.
The likelihood of an annual tax audit in general is medium, as is the likelihood that transfer pricing will be reviewed as part of that audit.
The likelihood that, if transfer pricing is reviewed as part of the audit, the transfer pricing methodology will be challenged is high.
APA opportunity
An APA program was included in the Portuguese Corporate Income Tax Code in 2008 (Article 138). Ministerial Order 620–A/2008
allows taxpayers to negotiate the following types of APAs:
• Unilateral — when the parties of the agreement are DGCI and one or more taxpayers of Individual Income Tax (IRS) or Corporate Income
Tax (IRC) that are mentioned in Article 2 of the Ministerial Order
• Bilateral or multilateral — besides entering into an agreement between DGCI, IRS and IRC taxpayers, the taxpayer has also signed an
agreement with one or several tax authorities, under the mutual agreement procedure predicted in a convention, intended to avoid
double taxation on income taxes
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