Portugal - Legislation implementing Anti-Tax Avoidance Directive is adopted
On 3 May 2019, Law 32/2019, which transposes the EU ATAD into domestic law, was gazetted. The main changes are the following.
(i) Interest limitation rule
Portugal applies an interest limitation rule under which the taxpayer is allowed to deduct its net financing expenses up to: 30% of the tax EBITDA or EUR 1 million. The Law introduces in-depth definitions of "financing expenses" and "net financing expenses", and their computation/interaction with the concept of tax EBITDA in order to comply with ATAD's provisions.
(ii) CFC rules
New criteria to define a "CFC" based on its effective tax rate are introduced: A "CFC" is considered any non-resident entity whose effective tax rate is below 50% of the tax that would be due in Portugal.