Meet the Law - Tax

Decree-Law no. 73/2023 - Transposing Directive (EU) 2021/2101 regarding the disclosure of information on income tax by certain companies and branches

The aim of this Decree-Law is to increase companies’ transparency, contributing to greater scrutiny by investors, suppliers, customers, employees and civil society in general, with regard to income taxes borne by multinational companies operating in the European Union and particularly in Portugal.

This aim is materialised in the fact that certain companies and branches will be obliged to draw up and make publicly available a report with a set of information, namely on income tax recognised and income tax paid, broken down by each tax jurisdiction or by each Member State, regardless of where the parent company of the multinational group is established, thus also tackling tax avoidance in the field of corporate income tax, with a view of strengthening citizens' confidence in the fairness of national tax systems.

This obligation to prepare this report and make it available to the public is limited to larger entities that are not established, nor have a fixed establishment or permanent representation, in a single tax jurisdiction.

Covered entities

The following entities are covered by the subjective scope of the Decree-Law identified above:

• Final parent company (i.e. the entity that draws up the consolidated financial statements of the largest group of entities) which in a given period and in the previous period has a consolidated revenue, at the date of its balance sheet, equal to or greater than €750,000,000.00;
• Autonomous company (i.e. a company that is not part of a group of companies) that in a given period and in the previous period has a consolidated revenue, at the date of its balance sheet, equal to or greater than €750,000,000.00;
• Subsidiary companies which, being considered medium-sized or large entities under the terms and for the purposes of the Accounting Standardisation System, are controlled by a final parent company which is not governed by the law of a Member State and which has a consolidated revenue, at the date of its balance sheet, as reflected in its consolidated financial statements, which, either in the period or in the previous period, is equal to or greater than €750,000,000.00;
• Branches opened in Portuguese territory by companies that are not governed by the law of a Member State and which, either in the period or in the previous period, have a net turnover exceeding €1,000,000.00.

Uncovered Entities

The following entities are not covered by the obligation to prepare and make available this report:

• An autonomous company or an ultimate parent company and its subsidiaries when these companies, including their branches, are established, or have a fixed installation or permanent representation, only in Portugal and in no other tax jurisdiction;
• To an autonomous company or an ultimate parent company, when these companies or their subsidiaries disclose a report, pursuant to article 2 of Decree-Law no. 157/2014, of 24 October, which includes information on all their activities and, in the case of the ultimate parent company, on all the activities of all the subsidiary companies included in the consolidated financial statements.

New public report obligations

If the subjective conditions for the application of this Decree-Law are met, the aforementioned entities are obliged to publish and make accessible an information report on income tax.

In the case of final parent companies and autonomous companies, this report will refer to their income tax, while in the case of subsidiary companies and branches, the report will refer to the income tax of either the final parent company or the autonomous company, as applicable.

The report must contain information related to all the activities of the autonomous company or the ultimate parent company, including those of all the related companies consolidated in the financial statements, for the period to which the report relates. This information includes:

• Name or corporate name of the ultimate parent or autonomous company, the reporting period in question, the currency used for the presentation of the report and, if applicable, a list of all subsidiaries consolidated in the financial statements of the ultimate parent, with respect to the period to which the report relates, established in a Member State of the European Union or in tax jurisdictions included in Annexes i and ii of the Council Conclusions on the revised European Union list of non-cooperative jurisdictions for tax purposes;
• Description of the nature of its activities;
• Number of employees on a full-time equivalent basis;
• Income, calculated as follows:
  • Sum of sales and services rendered, operating subsidies, other income, imputed earnings of subsidiaries, associates and joint ventures, excluding dividends received from associates, and interest and similar income earned;
  • Income as defined in the conceptual framework for financial reporting, based on which the financial statements are drawn up, excluding value adjustments and dividends received from affiliated companies.
• Amount of profit before income tax;
• Amount of income tax recognised in the reporting period in question, which should be calculated as the current tax expense recognised in relation to taxable income for the period by companies and branches in the relevant tax jurisdiction;
• Amount of income tax paid, which should be calculated as the amount of income tax paid during the reporting period by companies and branches in the relevant tax jurisdiction;
• Amount of retained earnings at the end of the reporting period in question.

The report must be published no later than 12 months after the balance sheet date of the reporting period, on the website and in the language in which the financial statements are presented and in at least one of the official EU languages, free of charge.

Failure to prepare, publish or make available on the website the income tax information report is punishable with a fine of € 1,500 to € 30,000.

Notwithstanding this obligation, it is foreseen the possible temporary omission of one or more specific elements of the information in cases where its disclosure could seriously jeopardise the commercial position of the companies to which the report relates, and the omissions must be clearly indicated in the report together with a duly substantiated explanation of the reasons.

The omitted information will subsequently be made public, in an income tax information report to be published and made accessible within a maximum of five years from the date of the initial omission.

Finally, it is also foreseen that the collective responsibility of the members of the administrative, management and supervisory bodies to ensure that the income report is drawn up, published and made accessible.

The Decree-Law number 73/2023, of 23 of august be consulted here.