Stamp Duties ("RIS/TGIS")
The RIS/TGIS is the one Code in the entire Portuguese Tax System, which manages to obtain the same reaction from every analyst: they all dislike it: it is old, it is outdated, it is complex, it has no clear connecting elements, it is difficult to interpret in many of its provisions, it does not take into account the increasing dematerialization of commercial transactions.
SCOPE OF APPLICATION
Created in 1926, the RIS Code was subject to a great number of changes, none of which was meant to deal with its scope of application. That was left for the TGIS, a chart, which is attached to the RIS Code, and which contains the description of the acts and transactions subject to stamp duties.
In general, the RIS Code applies to documents, books, papers, acts and products (hereinafter globally referred to as "Acts"). It can cover these elements whenever a connection exists with the Portuguese territory or with a Portuguese resident taxpayer, in which case it may cover Acts executed outside the Portuguese territory.
Likewise, there is no general provision in the RIS Code to deal with the entity, which is under the duty to pay the stamp duty. In general, that will be the person who has a greater interest in, or most benefits from, the applicable Act.
PAYMENT OF TAX
Stamp Duties become due the moment a given document, book, paper, act or product is executed. In all cases, where the stamp duty actually translates into the cancellation of a stamp, such cancellation must be made upon completion of the relevant Act.
In other cases, an entity is specifically mentioned under the applicable provision of the TGIS as having the duty to collect and deliver the tax to the competent authority.
The TGIS has 170 articles, each one dealing with the taxation of a given document, book, paper, act or product. Some of these articles have, in time, been terminated, whereas others have been introduced (leading to articles being sub-divided into sections A, B, C and so forth.
The list below is a simple example of some of the Acts, which are subject to stamp duties:
In general, all private written contracts are subject to a stamp duty of Esc. 685,00 (approximately USD 3,8).
ACTS OF A FINANCIAL NATURE
There are several articles dealing with Acts of a financial nature, including, but not limited to loans and other credit facilities. As an overview, one can mention as follows:
- Credit facilities granted to Portuguese resident entities, including those granted by non-resident credit institutions, are subject to a tax of 0,5%, with the exception of those lasting for periods of less than 6 days, in which case no duty is payable. It may be argued that this tax can only be levied if the facility is granted by means of a written agreement;
- Loans granted to companies by their respective shareholders (resident or non-resident) are subject to a tax of 0,5%, with the exception of those lasting for periods of less than 180 days, in which case no duty is payable. Also, it may be argued that this tax can only be levied if the loan is granted by means of a written agreement;
- Guarantees and similar pledges are subject to a tax of 0,5%, with the exception of those attached to a credit facility or a loan, in which case no duty is payable on the said guarantee;
- General financial operations, including commissions charged by financial institutions (3% tax) and interest payments made by Portuguese residents in connection with loans granted by resident or non-resident credit institutions (4% tax).
On a general comment, it should be noted that many of the transactions to which a given Act relates must, by law, be executed through a notarial deed. Such is the case, for example, of the sale of participations in private limited companies. Whenever that is the case, further stamp duties are levied on the deed itself.
The contents of this Article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Miguel Teixeira de Abreu: Abreu, Cardigos & Partners, Lisbon, Portugal.