Ministerial Order no. 268/2021, published last November 26, revised the Portuguese regulations on transfer pricing, revoking the former Ministerial Order no. 1446-C/2001, of December 21, almost 20 years later. The new rules came into force one day after its publication, with the exception of chapter IV related to documentation requirements, which will be enforced for fiscal years beginning in or after January 1, 2021.
This revision emerge from the domestic legislation changes and international developments, verified both at OECD and European Union Joint Transfer Pricing Forum levels.
The former ministerial order has been significantly restructured and the following aspects should be briefly highlighted:
Obligation: the compliance obligation of preparing transfer pricing documentation is now applicable to Portuguese taxpayers who have reached, in the fiscal year under analysis, a total annual income equal to or greater than 10 million Euros and, cumulatively, have reported controlled transactions amounting to, in the same period, at least 100 thousand Euros per entity or 500 thousand Euros in total (considering the respective market value).
Structure: it is expected that the documentation process will have a dual structure reflected in the preparation and maintenance of a Master File and a Local File, aligned with the international guidelines on this matter, both written in Portuguese language. Furthermore, a Simplified File may be prepared by taxpayers qualified as small or medium-sized companies in accordance with Decree-Law no. 372/2007, of November 6 that meet the above-mentioned requirements, such File must be prepared in Portuguese language as well.
Complementary recommendations: specific guidelines have been included regarding the application of the arm's length principle to i) cost sharing agreements, ii) intra-group services, iii) transactions involving intangibles, and iv) restructuring transactions, with such guidelines revealing to be new for the latter two types of transactions.
Methods: despite the methods to be adopted in transfer pricing analysis remaining the same, it is important to mention the broadening given to "other methods", with asset valuation methods now being explicitly accepted, particularly when the transactions are related to real rights over real estate assets, shares in unlisted companies, credit rights or intangibles.
Correlative adjustments: it has been described the procedures to be adopted and the requirements to be met for the correlative adjustment mechanisms, aiming to adopt the best international practices for profits adjustments between related entities, as well as the fact that Law 120/2019, of September 19, has introduced new instruments for handling tax litigation cases involving European Union member states.
Ministerial Order no. 267/2021 was also published on November 26, revoking the former Ministerial Order no. 620-A/2008, of July 16, which revises the regulation on procedures for concluding an Advance Pricing Arrangements (APA), under article 138 of the CIT Code. This revision follows not only the changes already introduced in article 138, namely in terms of its maximum validity period, but also the improvements resulting from the experience obtained with the application of this legal instrument.
It should also be highlighted the existence of other relevant changes at technical level, whose careful analysis is deemed essential. Conceito remains at your disposal to clarify any question regarding transfer pricing matters.
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