Portugal: Luxembourg SICAVs and SICAFs eligible to benefit from treaty rates
Effective
immediately
beneficial owners that are SICAVs or SICAFs1 established and registered in Luxembourg may apply for relief at source or quick/standard refund of tax withheld in excess of the reduced tax rates granted by the Double Taxation Treaty between Portugal and Luxembourg (the “DTT”).
Background
In a technical note (Process 1588/2010), the Portuguese Tax Authorities clarified that Luxembourg SICAVs are not covered by the limitation on benefits clause of article 29 of the Portugal-Luxembourg DTT, nor by the references to such limitation on benefits clause foreseen in the Protocol.
As a consequence, a SICAV shall be considered covered by article 1 (personal scope of the DTT), provided that it fulfils the requirements to be considered resident in Luxembourg for tax purposes as provided in article 4 of the same DTT.
The details of the agreement were not made public. However, the Portuguese Tax Authorities have recognised that, although income derived by a SICAV benefits from an exemption that relates to Luxembourg corporate taxes, SICAVs may still be regarded as resident for DTT purposes. This position is in line with other countries that consider SICAVs entitled to DTT benefits despite their tax treatment.
This technical position should be extended also to Luxembourg entities operating as SICAFs. However, the exclusion of fiscally transparent funds from treaty benefits remains applicable to Luxembourg Fonds communs de placement (FCPs).
Impact on customers
The above clarifications have the following practical implications:
- With regard to interest paid from Portuguese domestic debt securities, no change: SICAVs/SICAFs are already eligible for tax-exemption based on Article 17 of Decree Law 193/2005.
- With regard to dividends paid from Portuguese equities, beneficial owners that are SICAVs/SICAFs established and registered in Luxembourg can apply to benefit from the DTT reduced tax rate by providing the documentation as follows for the respective procedure:
Relief at source or quick refund:
- Position Breakdown Report (PBR) (per dividend payment);
- Form Mod. 21-RFI (completed annually by the beneficial owner and by its local tax authorities);
- Power of Attorney (if Mod 21-RFI is not completed by the beneficial owner).
Standard refund:
- Position Breakdown Report (PBR) (per reclaim application);
- Individualised Securities Registration Report (ISSR) (annually);
- Portuguese TIN Request (once);
- Form Mod. 22-RFI (completed, per reclaim application, by the beneficial owner and by its local tax authorities);
- Power of Attorney (if Mod 22-RFI is not completed by the beneficial owner) (per refund application);
- Letter of Request to Clearstream Banking for Reclaim of Portuguese Withholding Tax (per refund application).
Important note:
No reference is made to Portuguese Circular Letter 6/2009 dealing with treaty entitlement of funds and as such this technical position provides valid grounds to consider that SICAVs/SICAFs are not required to provide an additional declaration in order to benefit from the DTT (as foreseen in Circular Letter 6/2009 for all funds).
However, if the legal form is not clear from the name of the entity, we strongly recommend that, in order to confirm treaty entitlement, customers submit an additional, separate declaration that the entity was established in a corporate form with fixed (SICAF) or variable (SICAV) capital.
Further information
For further information, customers may contact the Clearstream Banking2 Tax Help Desk on:
| Luxembourg | Frankfurt | |
| Email: | tax@clearstream.com | tax@clearstream.com |
| Telephone: | +352-243-32835 | +49-(0) 69-2 11-1 3821 |
| Fax: | +352-243-632835 | +49-(0) 69-2 11-61 3821 |
or Clearstream Banking Customer Service or their Relationship Officer.
1. Sociétés d'Investissement à Capital Variable and Société d'Investissement à Capital Fixe.
2. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
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