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Andorra-Portugal

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Tax Treaty between Andorra and Portugal to Enter into Force

The income tax treaty between Andorra and Portugal will enter into force on 23 April 2017. The treaty, signed on 27 September 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Andorran corporate income tax, personal income tax, tax on income of non-residents, and capital gains tax on immovable property transfers. It covers Portuguese personal income tax, corporate income tax, and surtaxes on corporate income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for a period of at least 12 months ending the date entitlement to the dividends is determined; otherwise 15%
  • Interest - 10%
  • Royalties - 5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares listed on a recognized stock exchange of one or both of the Contracting States where such shares do not represent 25% or more of the capital of the listed company).

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entitlement to Benefits

Article 28 (Entitlement to Benefits) includes a number of provisions regarding entitlement to the benefits of the treaty, including that:

  • The treaty does not prevent the application of domestic anti-avoidance provisions;
  • The treaty does not prevent the application of domestic controlled foreign company (CFC) rules;
  • The benefits of the treaty will not be granted to a resident of Contracting State if it is not the beneficial owner of the income derived from the other State;
  • The provisions of the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of those provisions by means of such creation or assignment;
  • If an item of income is only taxable in a Contracting State under the treaty, it may still be taxable in the other State if it has not been subject to tax in the first-mentioned State; and
  • If an item income is taxed in a Contracting State by reference to the amount remitted or received in that State and not by reference to the full amount, then any reduction or exemption from tax provided for the income by the treaty in the other State will be limited to the amount taxed by the first-mentioned State.

Effective Date

The treaty applies from 1 January 2018.

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