Portugal Adopts Global Minimum Tax: They will be subject to a minimum tax rate of 15% as of 2024

On November 8, Portugal adopted the Global Minimum Tax Regime (GIMR) with the publication of Law 41/2024, which transposed Directive (EU) 2022/2523 on OECD Pillar II.

This regime is part of an international effort to combat tax avoidance by ensuring that large multinational groups pay a global minimum tax rate, regardless of the jurisdiction in which they operate. The main objective is to ensure that these groups contribute fairly to the tax systems of the countries where they generate profits, minimizing profit shifting practices to low or zero tax jurisdictions.

Application of the regime

This regime applies to groups of multinational companies and large national groups with consolidated annual income of 750 million euros or more in at least two of the last four tax years. In general terms, the companies covered are subject to a supplementary tax whenever it is found that their constituent entities are subject to an effective tax rate of less than 15%.

Main axes of the scheme

The RIMG is structured along three lines:

• The Income Inclusion Rule (IIR), according to which the parent entity of a multinational group is obliged to pay a complementary tax on the profits of any of its constituent entities that are subject to a tax rate of less than 15% in other countries. Thus, if a subsidiary of a multinational company is paying a tax rate of less than 15% in another jurisdiction, the parent entity must make up the difference through a supplementary tax
• The Undertaxed Profits Rule (UTPR) which aims to ensure that if a country does not properly apply the IIR, another country where the company has operations can apply the tax on the profits that have not been properly taxed, preventing multinationals from escaping minimum taxation by transferring their operations to other jurisdictions
• The Portuguese Qualified National Complementary Tax (ICNQ-PT), according to which entities that are classified in Portugal as subject to low taxation will have to pay an additional complementary tax on excess profits. This measure applies both to entities located in Portugal and to transparent entities or permanent establishments that do not pay minimum taxes in other jurisdictions

Exclusions and exceptions

Although this regime has a broad scope, there are several exclusions and exceptions and it does not apply to the following entities:

• Public entities, international organizations, non-profit organizations, pension funds and investment funds, subject to compliance with certain conditions
• Entities which, although belonging to multinational groups, only hold assets or make investments for the benefit of the aforementioned exempt entities

Reporting obligations

The RIMG imposes strict reporting obligations on the business groups covered. Companies must submit a detailed declaration by country or jurisdiction, including income, pre-tax profits and the amount of effective tax paid in each territory. 

Entry into force

The regime enters into force on January 1, 2024, in most of its provisions, although some specific rules only apply to tax years beginning on or after January 1, 2025. This regime does not exempt the observance of transitional provisions in relation to the mechanisms targeted.

You can find Law 41/2024 of November 8 here