Portugal“The 21st Century Hub for International Investments”

PORTUGAL: AGATEWAY TO

INVESTMENT

AROUND THE WORLD

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More than 600 years doing business and building a

relationship with the World - Africa, Brazil,

Macao, India, Japan, China and East Timor

HISTORIC

PERSPECTIVE

Historical Portuguese Presence in the world during the Discoveries age

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HISTORIC

PERSPECTIVE

Today Portugal has a deep understanding of these countries’

environment in various dimensions:

• Linguistic

• Cultural

• Legal (some of the legal systems

of these countries are based on

the Portuguese Law)

• Portuguese Speaking Countries

(spread out for nine countries):

A 240 million people

Portuguese

speaking market

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Type of

income

Brazil Cape Verde Mozambique Guinea-Bissau

Dividends 10/15% 10% 15% 10%

Interest 15% 10% 10% 10%

Royalties 15% 10% 10% 10%

Double Tax Treaties (Portuguese Speaking Countries)

• Portugal has already entered into DTT s with Brazil, Cape Verde, Mozambique and Guinea-

Bissau

• However, there are several other DTT s being negotiated (namely the first DTT to be

concluded by Angola) and on the verge of being approved and entering into force. In

September 2011, the DTT with East Timor was also negotiated.

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Portuguese African Countries have competitive measures

focused on the attraction of foreign investment:

• New private investment laws

• Establishing relevant tax exemptions

to entities investing in such countries

(e.g. Angola and Mozambique)

• Huge potential in different areas of

activity: Energy, Infra-structures,

Telecommunications, Real Estate,

Tourism and Agriculture

• Strong economic growth expected in the

following years

• Political stability consolidation in course

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Type of

income

South Africa Algeria India Morocco Tunisia Macao

Dividends 10%/15% 10%/15% 10%/15% 10%/15% 15% 10%

Interest 15% 15% 10% 12% 15% 10%

Royalties 10% 10% 10% 10% 10% 10%

Double Tax Treaties (other Countries)

• Portugal has also entered into DTT s with South Africa, Algeria, India, Morocco, Tunisia and

Macao

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Type of

income

IRPJ / CSL (income taxes)

(Brazil)

Another Taxes

(Brazil)

Withholding Tax

(Brazil)

Corporate Income Tax

(Portugal)

Dividends Not subject to corporate income

taxation in Brazil. However,

dividend payment is not

deductible to taxable profit

(does not allow tax saving)

Not applicable Not applicable 95% of the dividends are not subject

to taxation (article 23 (2) of PT-

BRA Double Tax Treaty)

(effective taxation at a 1,325% rate)

Share capital

remuneration

Borrower may deduct to the

taxable profit the interest paid

to the shareholders

Not applicable 15% withholding tax Interest subject to a 26,5% general

CIT rate, with a 15% deduct on

account of the withholding taxation

which occurred in Brazil

(corresponds to an effective CIT

rate of 11,5%)

Focusing on Brazil

• Portugal has entered into a quite advantageous DTT with

Brazil

• Dividends are not subject to taxation in Brazil and the DTT

foresees a competitive rule on double taxation elimination

WHAT IS DIFFERENT

ABOUT PORTUGAL?

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Type of

income

IRPJ / CSL (income taxes)

(Brazil)

Another Taxes

(Brazil)

Withholding Tax

(Brazil)

Corporate Income Tax

(Portugal)

Interest on

shareholders

loans

Borrower may deduct to the

taxable profit the interest paid to

the shareholders

Not applicable 15% withholding tax Interest subject to a 26,5% general

CIT rate, with a 15% deduct on

account of the withholding taxation

which occurred in Brazil

(corresponds to an effective CIT rate

of 11,5%)

Royalties The Brazilian entity may deduct

to the taxable profit the royalties

paid to the shareholders

CIDE: 10% rate

PIS: 1,65% rate

COFINS: 7,6% rate

(liability of the Brazilian

entity)

15% withholding tax

(to which will accrue

ISS with a rate

between 2% and

5%)

Royalties subject to a 26,5% general

CIT rate, with a 15% deduct on

account of the withholding taxation

which occurred in Brazil

(corresponds to an effective CIT rate

of 11,5%)

Focusing on Brazil

• CIT rates in Portugal are lower and Portuguese entities are

entitled to a tax credit correspondent to the tax paid in Brazil

WHAT IS DIFFERENT

ABOUT PORTUGAL?

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Brazil Cape

Verde

Mozambique Guinea-

Bissau

Angola São Tome and

Principe

East

Timor

DTT - - Negotiated

Social

Security

- - - - -

Economic

Cooperation - - - -

Turism - - -

Industry - - -

Reciprocal

Investment

Protection

Other treaties with Brazil and African Countries

• Portugal also has agreements with these countries on other

matters

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Dividends distributed by Portuguese Speaking African

Countries

• Dividend distributions made by PSAC are exempted of

Corporate Income Tax

Angola

(no DTT)

Mozambique

(DTT)

• Portuguese entity and Angolan entity must be subject to

corporate income tax

• Portuguese entity must held a minimum of 25% of the

Angolan entity share capital for at least 2 years

• Dividends are exempted from Portuguese Tax

• Portuguese entity and Mozambican entity must be subject to

corporate income tax

• Portuguese entity must held a minimum of 25% of the

Mozambican entity share capital for at least 2 years

• Dividends are exempted from Portuguese Tax

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Portuguese holding companies tax regime

• Examples on dividend distribution from Brazil, Angola and

Mozambique:

Brazil

(DTT)

Angola

(no DTT)

Mozambique

(DTT)

• Participation of at least 10%

• No withholding tax in Brazil

• 95% of the dividends are not subject to

taxation (DTT)

• SGPS exempted from capital gains

in Portugal

• Participation of at least 25%

• Participation hold for at least 2 years

• SGPS exempted from capital gains

in Portugal

• Participation of at least 25%

• Participation hold for at least 2 years

• SGPS exempted from capital gains

in Portugal

Hold CoHold CoHold Co

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Madeira s International Business Center

• Entities licensed in Madeira are entitled to benefit from EU Directives and Regulations and

DTT s entered into by Portugal

• Qualified income of entities licensed to carry out an industrial, commercial or shipping

activity and other services shall be liable to CIT at a 4% rate until December 31st, 2011 and

5% thereafter, until December 31st, 2020

• Entities who intend to benefit from this regime is required to create jobs (subject to certain

plafonds) and to invest in fixed assets

• No Municipal surcharge applicable

Ideal for trading activities: low direct and indirect taxation, state-of-the-art

infrastructure, efficient local support services, low operational costs, safety and quality

of life.

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WHAT IS DIFFERENT

ABOUT PORTUGAL?

Individuals – Non-habitual resident tax regime

• Applicable for ten years to individuals who are likely to establish a permanent or a temporary

residence in Portugal

• Flat income tax rate of 20% for some Portuguese source employment income and a tax

exemption for almost all foreign source income

• Nonresident individuals are eligible to benefit from this regime if

(i) Became resident, for tax purposes in the Portuguese territory

(ii) Were not taxed under the rules of the PIT Code as residents for tax purposes in Portugal

for the previous five years, and

(iii) Develop high added value activities of a scientific, artistic or technical nature (e.g.

engineers, computer technology and data processing activities, news service activities,

scientific investigation activities and company’s top executive employees)

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PORTUGAL: THE 21ST

CENTURY HUB FOR

INTERNATIONAL

INVESTMENTS

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Through VdAtlas, our international platform for the provision of

legal services, we support our clients abroad

We are already present in Angola and Mozambique in association

with local firms combining their local capabilities with VdA’s

know-how to provide clients with legal services of a very high

standard

In Brazil, we have been working for more than 30 years with our Best

Best Friends in relevant investment transactions and providing legal

advice to European companies investing in the Brazilian market. Now,

we partner with our Brazilian colleagues advising Brazilian companies

in their investments in Europe, Africa, Asia and other

Portuguese speaking countries

Mozambique

Angola

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CONTACTSTiago Marreiros Moreira

Tax Partner and Partner in charge of VdAtlas

Vieira de Almeida & Associados, Sociedade de Advogados, R.L.

E-mail: tm@vda.pt

T: + 351 213 11 485

Avenida Duarte Pacheco, n.º 26

1070-110 Lisboa Portugal

A RIGHT TO

EXCELLENCE

O DIREITO

À EXCELÊNCIA

www.vda.pt