The Portuguese Tax Authorities delivered a ruling regarding the application of the participation exemption regime to a company that is under the simplified regime for the determination of the tax base.
The participation exemption regime establishes a tax exemption for dividends, capital gains and losses generated through the sale of shares by companies which have their head office or effective management in Portugal (tax resident in Portugal). The exemption shall apply to shareholdings of 10% or more of the share capital which are effective for a minimum period of 12 months.
The Tax Authorities found that the participation exemption regime provided by article 51-C of the CIRC is not applicable to entities that are under the simplified regime as these companies are not taxed on real profits.
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