Debt securities – rates, eligibility, availability of relief etc. – Portugal – CBF
Withholding Tax – Law 83/2013 clarified by Circular Letter 4/2014
Aggravated rate of withholding tax: | 35% | Holding requirements / restrictions: | No |
Note: For details regarding debt securities subject to DL 193/2005 refer to Debt Securities subject to DL 193/2005 - Portugal
Market specifics
Legal obligations impacting CBF tax services
In relation to debt securities within the scope of Decree-Law No 193/2005 of 7 November 2005, as amended (hereinafter “Special Debt Securities’ Regime”, CBF undertakes the role and responsibilities of a Direct Registrar Entity1, affiliated with Interbolsa.
CBF, as a T2S In-CSD, cannot benefit from the Article 17 regime granted only for the ICSDs. Full tax calculation and reporting requirements apply to CBF clients, as described below.
CBF reporting obligations
Clearstream Banking has an obligation to report to its clients who hold an own asset account and who are Portuguese residents all transactions and income paid and respective tax withheld. This reporting is sent on a yearly basis by 20 January of the year following the year of transaction/payment. If there is nothing to report, no nil reporting will be sent.
CBF account structure
By default, the main and sub-accounts of CBF clients are flagged as B (blocked). Settlement is not allowed on Portuguese securities, as long as a valid tax identification number (número de identificação fiscal, NIF) has not been allocated to the respective settlement accounts.
When the NIF is obtained and/or validated by CBF (which can take up to seven business days) all its main and sub-accounts are set up to N (non-exempt = taxable) and settlement can be allowed.
To be exempt from Portuguese withholding tax on interest from debt securities, clients must segregate debt securities held for exempt and non-exempt investors into at least two separate securities accounts, one taxable and one exempt. Such segregation is mandatory as per the Portuguese law requirements. To facilitate it, a new CBF client subaccount “xxxx204” was proactively opened by CBF for each client. However, the segregation may be done based on any other CBF account or sub-account. The usage of the sub-account xxxx204 stays at the full discretion of the account holder. Clients can hold debt securities for:
- Exempt investors (for whom the certification procedure has been fulfilled):
- In a single “exempt” account (“S” account); or
- In an omnibus “exempt” account (“X” account). OR
- Non-exempt investors in another “non-exempt” account (“N” account) including undisclosed positions taxed at maximum tax rate (35%) or disclosed beneficiaries providing information to allow the application of the standard tax rates (25% or 28% tax applicable, respectively, to corporates and individuals).
Availability of relief
Debt securities subject to | Holding restriction | Withholding tax rate | Relief at source | Quick | Standard |
No | 35% | ||||
DTT/TIEA residents eligible for tax exemption | Yes | No | Yes | ||
Credit institutions, financial companies, pension funds, insurance companies domiciled in an OECD Member State or in a DTT country | Yes | No | Yes | ||
Collective Investment Vehicles (CIVs) domiciled in an OECD Member State or in a DTT country | Yes | No | Yes | ||
Central banks, public law agencies, public law entities or International/Supranational organisations recognised by the Republic of Portugal | Yes | No | Yes | ||
Portuguese residents eligible for tax exemption | Yes | No | No | ||
Portuguese residents not eligible for tax exemption but applying for standard tax rate (28% or 25%) | Yes | No | No |
Relief at source of withholding tax is available only if the appropriate documentation is submitted to Clearstream Banking. A quick refund is not available. The standard refund is available to non-resident beneficial owners eligible to full exemption.
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1. For purposes of Decree-Law No 193/2005 of 7 November 2005, a “Direct Registrar Entity" is defined as an entity with whom the investor’s accounts of qualifying debt securities integrated in a CSD or ICSD are opened