The Portuguese Supreme Administrative Court ruled that tax authorities cannot challenge transactions between two independent entities using transfer pricing rules, even if they believed the entities were related during negotiations. For these rules to apply, a relationship must exist on the date the transaction is completed.
This ruling, announced on October 2, 2024 and published on October 9, 2024 reverses a 2022 decision from the Central Administrative Court of the South regarding a 2008 sale of an industrial washing plant from Company A to Company B. Since Company B was not part of Company A’s group at the time of sale, no special relationship existed.
The court stated that the tax authority should have used the general anti-abuse clause instead of transfer pricing rules.
On September 11, 2024 the Portuguese Council of Ministers approved Bill No. 21/XVI/1, following EU Council Directive 2022/2523. It aims to implement the OECD’s Pillar Two concerning global minimum tax rules.
The bill introduces a 15% global minimum tax for multinational enterprise groups and large domestic groups with annual revenue of at least €750 million in two of the last four fiscal years. In addition, the Bill includes a qualified domestic minimum top-up tax, the undertaxed profits rule and the income inclusion rule. The law will take effect the day after it is published.
To access the details and specifics of the Bill Draft, click here.