NEWSLETTERS

Fiscal Representation

The Portuguese fiscal administration as well as fiscal legislation, have suffered large scale and profound alterations since 2001. Besides the alterations made to the notorious “Offshore” companies in respect of the old Contribuição Autárquica (council rates), presumed income (IRC), and at a later stage the IMT, other novelties were introduced on other levels.

Based on so many reasons, and taking foreign models as an example, the practice of fiscal representation in Portugal started to be applied to all those who are not resident in national territory. This means that all tax paying persons resident abroad holding any sort of interest in Portuguese territory, from holding a property, a car or even a bank account, are obliged under the terms of Article 19 number 4 of the General Tax Law (Lei Geral Tributária) to appoint a resident fiscal representative.

ARTICLE 19º I - The fiscal domicile of the tax paying person is, except as may otherwise be provided: a) For individuals, the place of their normal residence; b) For companies, the place of its head office or of its effective management or if neither of the previous exists, a permanent representation in Portugal. II - It is compulsory, under the terms of the law, the communication of the fiscal domicile by the tax paying person to the tax administration. III - It will have no effect the alteration of the domicile whilst it is not communicated to the tax administration. IV - The tax paying person resident abroad, as well as, the one resident in national territory who is absent for a period superior to six months, as well as companies and other legally equivalent entities who stop their activity, must, for tax purposes, appoint a representative with address in the national territory. V - Regarding less the penalties applicable, it will depend on the appointment of the representative under the terms of the previous number, the exercise of the tax paying person rights therein referred towards the tax administration, including those of contest, appeal or refutation. VI - The tax administration may officially rectify the fiscal domicile of the tax paying person if in possession of such elements that indicates such an alteration.

Who is regarded as a "non resident"?
The non resident is any person that does not live in national territory for a period of 6 months or more, or any company with head office abroad.

Who is the fiscal representative?
The fiscal representative may be an individual or a company as long as resident in Portugal or in such case as a company, with head office in national territory.

The fiscal representative is nominated by a non resident and will receive all correspondence addressed by the Tax Department to the non resident person. The fiscal representative should then to contact the tax paying non resident and inform them of the correspondence contents.

The fiscal representative must inform the Tax Department if there is, or not, any agent without power of attorney (gestor de bens ou direitos) acting in representation of the tax paying non resident person. In such event that this agent exists, the fiscal representative must identify them, under penalty of legal presumption, subject to proof of the contrary, that the fiscal representative, is himself that agent, under the terms of article 27, number 1 and 3, of the General Tax Law (Lei Geral Tributária). In such event that this legal presumption takes effect, and the fiscal representative is held as a presumed agent, then he can be notified in the capacity of joint responsible for the tax debts of the non resident represented.

General Tax LawARTICLE 27ºResponsibility of managers of assets or rights for non residents I - The managers of assets and rights for non residents with no permanent representation in the Portuguese territory are jointly responsible in regards to them and between themselves of all payments and taxes of the non resident regarding the exercise of their activity of representation.. II - For the purpose of this article, it is considered managers of assets or rights al those individuals or companies that assume or undertake, by any mean, the management of business of the non resident entity in Portuguese territory, acting in the interest and on behalf of that entity. III - The fiscal representative of the non resident, when it is a different person from the manager of assets or rights, must obtain his identification and report to the tax administration, as well as to inform in such event when this manager does not exist, presuming that he is manager of assets or rights in the lack of such information, except as otherwise may be provided.

Nowadays, in order to obtain a fiscal number for a non resident person or entity, it is necessary first to appoint a fiscal representative. Before this system was introduced, in order to obtain the fiscal number, the person requesting it, when not for them selves, merely indicated whether or not the applicant was a resident in Portugal, and the field regarding the fiscal representation would not appear in the print-out issued by the Tax Department. Once this situation was recognised by the Tax Department and with the alteration of their computer system, it is frequently found that the person who requested the fiscal number in the past, is now considered to be the fiscal representative whether or not they accepted or indeed even understood that they were assuming such a position. The practical consequence of this situation, is that this person will now receive all the correspondence of the Tax Department – from notifications to request of the payment of the IMI, to fines , to cheques for the return of overpayments, as well as assuming all the duties that come with such a position.

A misconception, is that companies with head Office in regions or Countries designated as “white listed”, for example United Kingdom, Malta or Delaware, do not require fiscal representation – but the law considers all non resident companies equally with no special mention to the location of the head office abroad, therefore it is still mandatory to appoint a fiscal representative.