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Portugal – Transfer Pricing (2025)

Portugal’s transfer pricing framework is primarily set out in the Corporate Income Tax Code (CITC) and in ministerial orders that develop its application, notably Ministerial Order n.º 268/2021 of 26 November. The arm’s length principle is explicitly enshrined in Article 63 of the CITC, which governs transactions between related entities. The preamble of Ministerial Order n.º 268/2021 refers to the OECD Transfer Pricing Guidelines (TPG) as a guiding source when applying the domestic transfer pricing framework and the arm’s length principle, given the complexity of the matter and the need to avoid double taxation and litigation.

The scope covers transactions not only between resident related parties but also transactions between a Portuguese entity and its permanent establishments abroad, between permanent establishments located in Portugal and the head office, and between permanent establishments of the same non-resident entity, as set out in Article 63.

Arm’s length principle and role of the OECD Guidelines

Portuguese law explicitly refers to the OECD Guidelines as a source of guidance. Ministerial Order n.º 268/2021 instructs that the TPG should be taken into account when applying the arm’s length principle and the transfer pricing legal framework, serving as supplementary guidance for aspects that are complex or not exhaustively regulated domestically. Therefore, application of the arm’s length principle is based on Article 63 of the CITC together with the analytical steps and criteria in the Ministerial Order, and subsidiarily with reference to the OECD TPG.

The legal definition of related parties is provided in Article 63, paragraph 4, of the CITC. A special relationship exists where one entity can exert, directly or indirectly, a significant influence over the management decisions of the other. The article specifies, inter alia: a) a company and its shareholders, or their spouses, ascendants or descendants, holding directly or indirectly at least 20 per cent of equity or voting rights; b) entities where the same owners, or their spouses, ascendants or descendants, hold directly or indirectly at least 20 per cent of equity or voting rights; c) a company and the members of its corporate bodies, or any administration, direction, management or supervisory boards, and their spouses, ascendants or descendants; d) entities where the majority of members of corporate bodies or boards are the same persons or, if different, are related by marriage, common-law marriage or direct parentage; e) entities related under a subordination agreement, parity group or any other similar agreement; f) enterprises with a control or group relationship as defined in Article 486.º of the Commercial Companies Code; g) entities whose legal relationship allows, by its terms and conditions, one entity to condition the management decisions of the other due to facts or circumstances beyond the commercial or professional relationship; h) a resident entity or a non-resident entity with a permanent establishment in Portuguese territory and an entity subject to a more favourable tax regime, resident in a country, territory or region listed in a Ministerial Order approved by the Minister of State and Finance. The arm’s length principle also applies to transactions between a Portuguese company and its foreign permanent establishments and between a non-resident entity and its permanent establishment in Portugal.

Methods and selection criteria

Article 63, paragraph 3, of the CITC lists the acceptable transfer pricing methods: the Comparable Uncontrolled Price (CUP) method, the Resale Price method, the Cost Plus method, the Profit Split method and the Transactional Net Margin Method (TNMM). The article also allows the use of any other generally accepted method, technique or valuation model when the standard methods cannot be applied due to the uniqueness of the transactions or the lack of comparable information and data, mentioning rights over real estate, share capital participations, claims and intangibles as examples.

Portugal does not impose a strict hierarchy of methods; instead taxpayers must adopt the most appropriate method. Article 6 of Ministerial Order n.º 268/2021 defines the most appropriate method as the one likely to provide the highest degree of estimation of the conditions that independent entities would have agreed upon, accepted or used at arm’s length. For commodity transactions, since domestic law lacks specific guidance, paragraphs 2.18–2.22 of the OECD TPG are used as guidance.

Comparability and arm’s length ranges

Ministerial Order n.º 268/2021 (Articles 5 and 7) identifies the relevant steps and comparability factors in alignment with Chapter III of the TPG. Comparability analysis must consider functions, assets and risks, contractual terms, economic circumstances and business strategies; where differences affect comparability, adjustments are required to eliminate their effect in accordance with Article 6 of the Ministerial Order. The use of an arm’s length range and statistical measures is permitted provided the analytical process is consistent with the arm’s length principle, as stated in Article 6.

There is no general preference for domestic comparables; domestic comparables are preferred only when the controlled transactions have terms and conditions significantly connected to specific or exclusive characteristics of the domestic market. The Portuguese tax administration does not use secret comparables.

Documentation and reporting requirements

Portugal requires transfer pricing documentation consistent with BEPS Action 13: a Master File consistent with Annex I to Chapter V of the TPG, a Local File consistent with Annex II, and a Country-by-Country Report (CbCR) consistent with Annex III. The legal basis includes Article 63, paragraph 6, and Article 130 of the CITC for documentation, and Articles 17–18 of Ministerial Order n.º 268/2021 for Master File and Local File content. CbCR rules are set out in Articles 121-A and 121-B of the CITC.

Timelines and language: Transfer pricing documentation must be prepared by the 15th day of the seventh month after the end of the taxation period. Documentation should be prepared in Portuguese, although other working languages may be accepted upon request. The same deadline applies to the filing of the transfer pricing return (Article 121 of the CITC). The CbCR must be filed by the end of the twelfth month after the end of the fiscal year to which it relates. Each constituent entity of an MNE group must identify the reporting entity by filing the appropriate form by the end of the fifth month after the fiscal year-end to which the CbCR relates (Article 121-A, paragraphs 3 and 4).

Penalties and incentives: The Portuguese General Tax Infringements Law prescribes penalties specific to transfer pricing documentation. Failure to present transfer pricing documentation or the CbCR is punished with a fine of EUR 500 to EUR 10 000, plus an additional 5% of the fine for each day of delay. Failure to present the transfer pricing return is punished with a fine of EUR 500 to EUR 10 000. Inaccuracies in information provided in the TP documentation, TP returns or CbCR attract fines between EUR 375 and EUR 22 500. These sanctions are established in Articles 116 and 117 and Article 119 of the General Tax Infringements Law.

Exemptions: The obligation to prepare the transfer pricing documentation file (Master and Local file) does not apply to taxable persons whose net turnover and other income in the previous fiscal year are less than EUR 10 million; this threshold does not apply to the transfer pricing return or to the CbCR (Article 17 of Ministerial Order n.º 268/2021).

Safe harbours and simplification measures

Portugal does not have safe harbour rules for particular industries, types of taxpayers, or transactions according to the profile. No other simplification measures are listed in the provided material. For intragroup services, Ministerial Order n.º 268/2021 provides general guidance consistent with the OECD TPG (Article 14), but there is no simplified approach for low value-adding intra-group services.

APAs and MAP; procedures and timing

Advance Pricing Agreements (APAs) are available in Portugal. The possibility to request an APA is governed by Article 138.º of the CITC and Ministerial Order n.º 267/2021 of 26 November, which regulate the APA process including rules for accessing Mutual Agreement Procedure (MAP) (Articles 20–25). An APA may cover a maximum of four fiscal years and may include fiscal years for which tax returns have already been filed provided that no more than two years have elapsed since the deadline for submitting those returns. Portugal has domestic MAP rules and procedures as set out in its MAP profile.

Adjustments, sanctions, recharacterisation, year-end adjustments and PEs

Year-end accounting adjustments are permitted or required where companies have used an arm’s length range and need to adjust a profit level indicator at year-end to comply with that range. Corresponding adjustments by companies are not allowed (Article 3, paragraph 2 of Ministerial Order n.º 268/2021 and Article 63, paragraphs 8 and 9 of the CITC). Portugal does not make secondary adjustments according to the profile provided.

Regarding attribution of profits to permanent establishments, the preamble to Ministerial Order n.º 268/2021 states that application of the arm’s length principle to transactions involving permanent establishments should consider the OECD Reports on the Attribution of Profits to Permanent Establishments published in 2008 and 2010, together with Portugal’s comments and observations to the OECD Model Tax Convention, as applicable to the specific facts and circumstances under analysis.

Other relevant aspects

Intangibles: Article 15 of Ministerial Order n.º 268/2021 provides a framework for analysing transactions involving intangibles between associated enterprises, aligned with Chapter IV of the TPG. Portugal has not expressly adopted the Hard-to-Value Intangibles (HTVI) approach defined in Chapter VI of the TPG; the TPG are nonetheless a supplementary guidance source, and there is no impediment to applying the HTVI approach within the statute of limitations (four years) where appropriate.

Financial transactions: domestic legislation does not contain specific guidance on financial transactions between related parties, but Article 63 of the CITC and Article 1 of Ministerial Order n.º 268/2021 clarify that the arm’s length principle applies to these transactions. Additional rules outside transfer pricing are relevant for financial transactions: Article 67 of the CITC limits interest deductibility in line with Directive 2011/96/EU, and Articles 68-A to 68-D address hybrid mismatch arrangements following Directive 2016/1164/EU.

Cost contribution arrangements: Ministerial Order n.º 268/2021 addresses cost contribution arrangements in Article 13, giving general guidance consistent with the OECD TPG.

Conclusion

Portugal’s transfer pricing regime is centred on Article 63 of the CITC and operationalised through Ministerial Order n.º 268/2021, which explicitly refers to the OECD TPG as a supplementary source of interpretation. The regime recognises the main OECD methods and permits other generally accepted methods when appropriate, requires selection of the most appropriate method, imposes documentation obligations consistent with BEPS Action 13 including deadlines and thresholds, and provides APA and MAP mechanisms with defined time limits. Penalties for non-compliance with documentation and reporting obligations are meaningful. For technically complex areas such as commodities, difficult-to-value intangibles, and specific types of financial transactions, domestic guidance is limited and the OECD TPG serve as the principal supplementary reference.

References

For additional information and access to the OECD country profile: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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