Decree-Law 453/99 of 5 November ("DL 453/99") established the legal regime relating to Securitization in Portugal and regulates the incorporation and activity of Securitization funds ("FTC's") Securitization companies ("STC's").
Decree-Law 219/2001 ("DL 219/2001") establishes the tax regime relating to DL 453/99. DL 219/2001 conceptually establishes the (i) tax neutrality treatment of FTC's and STC's and (ii) tax competitive character of the securities to be issued by the FTC's and STC's (the "Securities").
Non-Portuguese resident holders of securities
Income (including income resulting from the secondary sale of Securities) is exempt from Portuguese Corporate Income Tax ("IRC") and Portuguese Individual Income Tax ("IRS") provided that such income is attributable to entities non-resident in Portugal and without a permanent establishment in Portugal to which such income is attributable. Such exemption is not applicable in the event that it is possible to establish an effective connection between the recipient of the income and Portugal (e.g. 25% or more of the share capital of the recipient is held by a Portuguese resident entity) or in the event that it is possible to establish a connection between the recipient and a jurisdiction or territories included in a list to be published by the Minister of Finance.
Income derived from the holding of Securities by Portuguese resident entities is subject to the Portuguese general tax regime applicable to bonds.
The difference between the transfer value of receivables to be securitized and the accounting value of receivables transferred must be included in the taxable income of the assignors (the originators) of the receivables as follows: (i) if such difference is positive, it will be considered as a profit in the year during which the transfer was completed; (ii) if such difference is negative, it will be deemed as a cost in the year during which the transfer of receivables took place, except in cases where the assignor (the originator) acquires any right over the profits of the assignee (the FTC or STC), in which event the cost must be rolled-over and considered in equal fractions for the tax years comprised between the transfer of receivables and the date on which such receivables are due.
The income referred to above is exempt from IRC in, inter alia, the event that the recipient of such income (the assignor (originator)) is an entity non-resident in Portugal and without a permanent establishment in Portugal to which such income is attributable, except when such non resident entity is a company in which 25% or more of share capital is directly or indirectly held by Portuguese resident entities or by entities resident in a State or territory included in a list to be published by the Minister of Finance.
There is no withholding tax in relation to income generated on the transfer of receivables from the assignor (the originator) to the FTC or STC.
Value added tax ("VAT")
Pursuant to DL 219/2001 the provision of services relating to the management and administration of FTC's and STC's, as well as depository operations, as defined in DL 453/99, are exempt from VAT.
An important innovation relates to the possibility of the assignee of the receivables (the FTC or STC) settling VAT due from obligors of receivables transferred to the FTC or STC (under Article 71 of the VAT Code) in the event of bankruptcy of such obligors.
DL 219/2001 establishes an exemption from stamp tax in relation to (i) the transfer of receivables, including repurchase by the assignor (originator); (ii) facilities granted (including interest payments) by credit institutions and financial companies to FTC's and STC's; and (ii) commissions charged to the assignor (originator), as defined in DL 453/99, as well as the activities of the depository.
Companies managing FTC's and STC's must keep an updated registry identifying investors, as well as income paid to each investor. Non-Portuguese resident entities benefiting from IRC and IRS exemption(s) (as referred to above) must prove to the Portuguese Tax Authorities that they are not resident in Portugal.