International double taxation is an obstacle to trade relations and to the free movement of goods, services, people and capital. The need to eliminate this obstacle has become more acute in the current context, dominated by new technologies and by the internet. By regulating the right of the countries involved to levy taxes, it is possible to avoid the relocation of income and capital to other countries merely for tax purposes and boost (economic and other) ties between the countries in question.

Over the years, Portugal has signed fifty-two double tax treaties for the avoidance of double taxation on income tax, following the OECD Model Convention, with some reservations which are aimed essentially at ensuring a broader concept of permanent establishment and seek to raise the level of taxation in the source country with regard to dividends, interest and royalties. As a rule, the method used in the concluded treaties is that of the ordinary tax credit, although it should be noted that in some of the treaties, provision has been made for a matching credit or tax-sparing credit.

By circular issued on 13 March 2009 (No. 20137), the International Relations Services Department of the Directorate- General of Taxation again released the official list of all the international double tax treaties entered into by Portugal. An updated list has recently been made available in the internet site of the Portuguese tax authorities (www.portaldasfinancas.gov.pt).  

The reason behind this release is that traders need up-to-date information about the existing agreements and the legal instruments which preceded their publication, the date on which they came into force and easy access to the rates of tax for situations where withholding tax is partially waived.

The treaties concluded by Portugal in accordance with this OECD model come into play only when those paying the income have the necessary forms for this purpose (21-RFI to 24-RFI), duly completed and authenticated by the respective tax authorities. These forms replaced the old forms (7-RFI to 18-RFI) in 2008. However, according to Circular No. 5/2008, of 7 March, issued in the meantime by the International Relations Services Department of the Directorate-General of Taxation, the Portuguese and

Spanish versions of forms (7-RFI to 18-RFI) will remain in force until the new forms in these two languages have been approved, in view of the fact that internal legislation obliges the respective tax authority to certify only documents drawn up in Spanish.

The following table lists the treaties for the avoidance of double taxation entered into by Portugal and published by the tax authorities, as it stands in the Portuguese tax authorities’ internet site, at the present date:

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