Portugal: New guidelines for completion of MOD 21-RFI
Clearstream Banking1 has updated its guidelines following the recent changes in the certification of the Double Taxation Treaties (DTT) forms (A19116) and specific requirements from its local depository BNP Paribas Securities Services.
Impact on customers
The MOD 21-RFI form (the form) is used to obtain DTT rates through relief at source or quick refund procedures and must be certified through a separate Certificate of Residence (COR).
Both the COR and the MOD 21-RFI cannot be used separately and have to be provided as one set of documents.
Standalone CORs are not accepted by our depository and will be rejected by Clearstream
Failure to provide a correctly completed MOD 21-RFI, accompanied with the appropriate certification, will result in the rejection of the form.
Completion of the form
Customers and beneficial owners completing the MOD 21-RFI form must comply with the following general rules:
- The form must be filled in capital letters, when handwritten, with words well separated;
- The form must be duly signed;
- The form should identify the beneficial owner, intended as the entity or natural person recipient of the income, unconstrained by a contractual or legal obligation to pass on the payment received to another person;
- Abbreviations should only be used if they are part of the legal name of the beneficiary (for example, Ltd);
- The form shall not be damaged or crossed out;
- The form must be accompanied with the relevant supporting documentation, when applicable.
Certification of the MOD 21-RFI
The provisions of the Law Nº 119/2019, that entered into force as from 1 October 2019, state that the certification of the DTT Forms must be done by accompanying the form with a specific certificate of residence (COR) issued by the competent tax authorities of the contracting state, confirming:
- the residency for tax purposes during the respective tax period; and
- that the recipient is liable to income tax in the country of residence.
The COR will have a validity of one year (minus one day), unless specified otherwise, and this validity will determine the validity of the Mod 21-RFI. The recipient shall immediately inform the withholding agent of any changes in respect of the assumptions under which the total or partial withholding waiver depends.
Please refer to the below possible validity periods:
When the COR is only dated by the foreign tax authorities:
Validity: date of signature + 1 year -1 day.
If signed 5 January 2019, will be valid until 4 January 2020
When the COR clearly states a year of validity
Some foreign tax authorities mention on the COR that it is valid for a specific year, for example valid for 2019.
Validity: the year stated and not the date of signature.
If signed 5 December 2019 and mentioned valid for 2019, it will be valid only until 331 December 2019.
When the COR clearly states a period of validity
Some CORs may show a period during which the BO was considered as resident.
Validity: the one stated in this period and not the date of signature.
If signed 5 December 2019 and mentioned 1 January 2019 to 31 December 2019, it will be valid until 31 December 2019.
Regarding the wording of the COR it should be acceptable if and when it includes either the express reference to “liable to income tax” or a reference to “Article 4 of the Double Tax Convention” (in both cases, liable to taxes covered by the respective Double Tax Convention).
With regard to the specific mention to Article 4, in recent discussions with the Portuguese Tax Authorities, BNP Paribas Securities Services was informed that the COR would not be rejected if the specific reference to Article 4 is not present, however, the COR must clearly indicate that it is being issued to certify the tax residency under the terms of the Double Tax Convention signed with Portugal.
This information was provided to BNP Paribas Securities Services informally and BNP Paribas Securities Services are seeking a formal confirmation from the Portuguese Tax Authorities.
Nevertheless, customers are strongly recommended to seek their own tax advice on this matter.
The Clearstream Banking document Completing Mod. 21-RFI has been updated and is available on the Tax forms to use - Portugal page on the Clearstream website.
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.