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HMRC internal manual

Double Taxation Relief Manual

Portugal: double taxation agreement, Article 10: Dividends

(1) Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

(2) Dividends paid by a company which is a resident of one Contracting State to a resident of the other Contracting State who is subject to tax in that other State in respect thereof, may be taxed in the first-mentioned State and according to the law of that State but the tax so charged shall not exceed:

(a) 10 per cent of the gross amount of the dividends if:

(i) the recipient is a company which is a resident of Portugal which controls directly at least 25 per cent of the voting power in the company paying the dividends; or   


(ii) the recipient is a company which is a resident of the United Kingdom which holds directly at least 25 per cent of the capital of the company paying the dividends;  

(b) in all other cases, 15 per cent of the gross amount of the dividends.

(3) The term `dividends` as used in this Article means income from shares `jouissance` shares or `jouissance` rights, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident and, in the case of the United Kingdom, includes any item (other than interest or royalties relieved from United Kingdom tax under Article 11 or Article 12 of this Convention) which under the law of the United Kingdom is treated as a distribution of a company and, in the case of Portugal includes, in addition to profits attributed to members of a partnership, profits attributed under an arrangement for participation in profits (conta em participacão).

(4) If the recipient of dividends does not bear tax at a rate exceeding 20 per cent in respect thereof in the Contracting State of which it is a resident and owns 10 per cent or more of the class of shares in respect of which the dividends are paid then paragraph (2) shall not apply to the dividends to the extent that they can have been paid only out of profits which the company paying the dividends earned or other income which it received in a period ending twelve months or more before the relevant date. For the purposes of this paragraph the term `relevant date` means the date on which the recipient of the dividends became the owner of 10 per cent or more of the class of shares in question. Provided that this paragraph shall not apply if the shares were acquired for bona fide commercial reasons and not primarily for the purpose of securing the benefit of this Article.

(5) The provisions of paragraphs (1) and (2) shall not apply if the recipient of the dividends, being a resident of a Contracting State, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 shall apply.

(6) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company to persons who are not residents of that other State, or subject the company’s undistributed profits to a tax on undistributed profits even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.