Stamp Duty

Stamp Duty

Generally, both loans and guarantees are subject to Stamp Duty, at a variable rate depending on the maturity of the loan and/or guarantee, as follows:

  • Loans – 0.04% (monthly), 0.5% or 0.6% applicable on credit granted for less than one year, one year or more, or five years or more, respectively;
  • Credit used in the form of a current account, bank overdraft or any other form in which the term of use is not determined or determinable, on the monthly average obtained by summing up the outstanding amounts, calculated on a daily basis, during the month divided by 30 – 0.04%;
  • Interest paid to financial institutions – 4%;
  • Any fees or commissions paid for financial services – 4% (except for commissions for guarantees provided, applying a rate of 3%).

At the level of Stamp Duty, some exemptions are available:

  • Shareholder loans – loans granted by the direct shareholder of the borrower for a minimum term of 1 year may benefit from a Stamp Duty exemption, (i) provided that the shareholder directly holds a minimum participation in the capital of the borrower of 10% and (ii) provided that this holding is kept for a minimum period of one year prior to the execution of the shareholder loan. If the borrower was incorporated by the lender, the one year holding period may be complied with after the granting of the loan;
  • Short-term (up to one year) loans granted to cover treasury needs by a holding company to its subsidiary or vice-versa or by a parent company to its subsidiary (where a minimum 10% stake is held uninterruptedly for at least one year);
  • Guarantees that are ancillary to the financing transaction (granting of loans) are exempt from Stamp Duty, provided that the guarantee is granted simultaneously with the secured loan, even if in a different instrument or title.

Withholding Tax

A withholding tax of 25% applies on interest paid by a Portuguese entity to a non-resident lender (other than a non-resident financial institution). The withholding tax may be reduced or fully eliminated pursuant to a double tax treaty, provided certain conditions are complied with.

In addition, no withholding tax is applicable under the Interest and Royalties Directive, if the lender is able to claim the benefits of the directive. The withholding tax exemption applies provided that the lender has a direct holding of at least 25% of the share capital or voting rights of the borrowers for at least two consecutive years, or vice-versa. The withholding tax exemption also applies if both the borrower and the lender are directly held by a common shareholder holding at least 25% of the share capital or voting rights of each company, for a minimum period of two consecutive years.

Limits on the deductibility of net financing expenses

Portugal does not have thin capitalization rules. However, the Corporate Income Tax Code foresees an interest barrier rule, which sets the limits for the deductibility of net financing expenses. In 2023, the net financing expenses are deductible up to the greater of the following limits:

  • € 1 Million; or
  • 30% of EBITDA (Earnings before Interest, Taxes, Depreciations and Amortizations, with some tax adjustments).

Deduction of Tax Losses

According to the Portuguese Corporate Income Tax Code, tax losses incurred by resident companies or permanent establishment of non-resident companies may be carried forward without any time limitation. However, tax losses carried-forward may only be deducted up to 65% of the annual taxable profits.