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Portugal-San Marino

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Portugal Approves for Ratification the Tax Treaty with San Marino

On 31 July 2014, Portugal approved for ratification the pending income tax treaty with San Marino. The treaty was signed 18 November 2010, and is the first of its kind between the two countries.

Taxes Covered

The treaty covers Portuguese personal and corporate income taxes, and local surtax on corporate income tax. It covers San Marino general income tax on individuals, and on bodies corporate and proprietorships.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15%
  • Interest - 10%
  • Royalties - 10%

Double Taxation Relief

Portugal applies the credit method for the elimination of double taxation, while San Marino generally applies the exemption with progression method. However, in the case of dividend, interest and royalty income, San Marino applies the credit method.

Limitation on Benefits

The treaty includes a limitation on benefits article which states that the benefits of the treaty will not apply for income derived by a resident of on Contracting State from the other State if  the main purpose or one of the main purposes of any person concerned with the creation or assignment of such item of income is to take advantage of the treaty.

In addition, a company that is entitled to special fiscal treatment under the provisions of any legislation or administrative practice of either Contracting State will not be entitled to the benefits of the treaty. The same applies to income received by a resident of a Contracting state from companies that are entitled to such special fiscal treatment, or in respect of shares or other corporate rights in the capital of such companies.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

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