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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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Portugal: double taxation agreement, Article 22: Elimination of double taxation

(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof), Portuguese tax payable under the laws of Portugal and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Portugal (excluding, in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Portuguese tax is computed.

(2) For the purposes of paragraph (1) of this Article, the term `Portuguese tax payable` shall be deemed to include any amount which would have been payable as Portuguese tax but for the exemption or reduction of tax granted under -

(a) any of the following provisions, that is to say:

(i) Agricultural Tax Code (Decree Law 45104 of 1st July, 1963) Article 350   


(ii) Industrial Tax Code (Decree Law 45103 of 1st July, 1963)  

Articles 14 Heads 21 and 22

18 Heads 8 and 9

20

83

(iii) Code of the Tax on Income from Movable Capital (Decree Law 44561 of 10th September, 1962)  

Articles 21 Head 2

22

(iv) Complementary Tax Code (Decree Law 45399 of 30th November, 1963)  

Articles 8 Sub-head (1)(q)

35

85 Head 15

(v) Decree Law 46492 of 18th August, 1965  

Article 27

so far as they were in force on, and have not been modified since, the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character;

(b) any other provision which may subsequently be made granting an exemption or reduction which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character. Provided that relief from United Kingdom tax shall not be given by virtue of this sub-paragraph in respect of income from any source if the income arises in a period starting more than ten years after the exemption from, or reduction of, Portuguese tax was first granted in respect of that source.

(3) United Kingdom tax payable under the laws of the United Kingdom and in accordance with this Convention, whether directly or by deduction, on income or capital gains derived from sources within the United Kingdom by a resident of Portugal shall be allowed as a deduction from the Portuguese tax payable in respect of that income but the deduction shall not however exceed the smaller of:

(a) the fraction of the United Kingdom tax corresponding to the fraction of such income or capital gains charged to Portuguese tax; or

(b) the proportion of the Portuguese tax before any such deduction which the amount of such income or capital gains charged to Portuguese tax bears to the total income or capital gains chargeable to Portuguese tax.

(4) Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other Contracting State and the profits so included are profits which would have accrued to that enterprise of the other Contracting State if the conditions made between each of the enterprises had been those which would have been made between independent enterprises, the amount of such profits included in the profits of both enterprises shall be treated for the purpose of this Article as income from a source in the other Contracting State of the enterprise of the first-mentioned Contracting State and credit shall be given accordingly in respect of the extra tax chargeable in the other Contracting State as a result of the inclusion of the said amount.

(5) For the purposes of this Article, profits or remuneration for personal (including professional) services performed in one of the Contracting States shall be deemed to be income from sources within that State, and the services of an individual whose services are wholly or mainly performed in ships or aircraft shall be deemed to be performed in the Contracting State in which is situated the place of the effective management of the enterprise operating the ships or aircraft.