Advance Pricing Agreements rules amended


It was published the Ordinance No. 267/2021, of November 26th (only in Portuguese) which revises the procedures for concluding Advance Pricing Agreements on transfer pricing issues (APA), as foreseen in article 138.º of the CIT Code. The changes made are, on one hand, aligned with the ones already introduced in article 138 of the CIT Code and, on other hand, welcomes the improvements resulting from the years of experience gathered in which this instrument has been applied.

Without prejudice to the changes introduced, the negotiation of the agreement and its content, in terms of substance, remain subject to strict compliance with transfer pricing rules, as well as the rules of international law, in particular under the bilateral conventions in force aimed at eliminating the double taxation, also following the guidelines published both by the Organization for Economic Cooperation and Development (OECD) and by the European Union Joint Transfer Pricing Forum.

Bilateral or multilateral agreements can only be concluded with jurisdictions with which Portugal has signed a tax convention that includes a provision on mutual agreement procedures, pursuant to paragraph 3 of article 25 of the OECD model tax convention or in article 16 of the Multilateral Convention for the Application of Measures Relating to Tax Conventions Destined to Prevent the Erosion of the Tax Base and the Transfer of Profits (Known as BEPS MLI).

Among the changes introduced, the following stand out:

  • Greater emphasis on the presentation of information related to the value chain, including key functions, business model and market positioning/behavior;
  • The maximum duration of an APA is set on 4 years. APA’s can now cover previous years as long as the relevant facts and circumstances of these periods are identical/similar and, with reference to the date of conclusion of the APA, a period of not more than 2 years has elapsed as from the term for deliver;
  • Possibility of reducing the applicable fees (by 25%) if the taxpayer qualifies as a micro, small or medium-sized company, in accordance with the applicable regulations, and predominantly carries out international operations;
  • The follow-up and verification of compliance with the APAs is now under the responsibility of the Large Taxpayers Unit (UGC);
  • In the presence of bilateral and/or multilateral agreements, the Direção de Serviços de Relações Internacionais (DSRI) is responsible for ensuring, in articulation with the UGC, the friendly procedure for joint discussion and examination of the APAs proposal.

This Ordinance revoked Ordinance No. 620-A/2008, of July, 16th.

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