With the aim of adopting the 15-point Action Plan that has been developed by the OECD/ G20 countries to address the BEPS issues, Portugal has approved or been involved in a set of initiatives to put such an action plan into practice.
For instance, within the scope of Action 5, associated with harmful tax practices, Portugal transposed Directives 2015/2376/EU of December 8, 2015 and 2016/881/EU of May 25, 2016 on mandatory automatic exchange of information in the taxation area into Portuguese law (Law 98/2017 of August 24).
Under these new legal provisions, the mandatory automatic exchange of tax information mechanism is now also applied to advance pricing agreements (APA) and to tax rulings related to multinational groups of companies.
Concerning Action 13, related to the transfer pricing documentation and country-by-country reporting, Portugal has already introduced a rule that anticipates the obligation of multinational groups to submit electronic country-specific declarations into its national legislation for tax periods beginning on or after January 1, 2016, disclosing detailed financial and tax-related information to the Portuguese tax authority.
To allow the taxpayers to comply with this obligation, a new reporting model (Model 54) has been approved by the Portuguese government through Ministerial Order 367/2017 of December 11, 2017.
On the other hand, in order to set Action 15 in motion, Portugal, together with more than 80 jurisdictions from all continents and with various levels of development, has signed the Multilateral Convention to implement tax treaty-related measures to prevent BEPS (MLI).
The MLI predicts specific measures that can be implemented by governments to reduce the differences in existing international tax rules by transposing results from the BEPS Action Plan into bilateral tax treaties worldwide. The MLI modifies the way thousands of bilateral tax treaties concluded to eliminate double taxation are applied, without creating opportunities for non-taxation or for tax evasion. It also establishes minimum standards to address treaty shopping abuses and to improve dispute resolution mechanisms, while providing the flexibility to accommodate specific tax treaty policies.
In a recent development (associated with the signature of MLI and with tax treaty updates), Portugal has been recognized by OECD, in the “Making Dispute Resolution More Effective – MAP Peer Review Report, Portugal” published on August 31, 2018, as complying with most of the minimum standards foreseen in Action 14 to ensure that treaty-related disputes under the mutual agreement procedure (MAP) are resolved in a timely, effective and efficient manner. In any case, OECD also identified certain issues in this report that need to be addressed by Portugal to be fully compliant with such minimum standards.
OECD recommended the amendment and update of several of its tax treaties to make the provision related to MAP compliant with the requirements set under Action 14 (e.g. by following the 2015 version of article 25 of OECD Model Tax Convention).
Moreover, it is recommended that Portugal should adopt further measures to enhance the prevention of tax disputes, namely those related to APA (for instance, Portugal should allow the roll-back of bilateral APAs).
In any case, OECD acknowledged in this report that Portugal is working to overcome such deficiencies.