Pillar 2 Dashboard: Portugal

On September 2, 2025, Portugal issued Ordinance No. 290/2025/1| which includes the format for the Pillar 2 registration form (Form 62).

On November 8, 2024, the law to transpose the EU Minimum Tax Directive was published in the Official Gazette.

On October 30, 2024, the Portuguese President promulgated the law enacting the EU Minimum Tax Directive.

On October 22, 2024, Decree No. 13/XVI of the Portuguese Parliament was issued to approve a law to introduce, an Income Inclusion Rule (IIR) and an Undertaxed Profits Rule (UTPR), as well as a Qualified Domestic Minimum Top-up Tax (QDMTT), which allows Portugal to collect top-up taxes on low-taxed Portuguese entities of both foreign and domestic groups.

The law applies for tax years beginning on or after 1 January 2024 for the IIR and QDMTT, and tax years beginning on or after 1 January 2025 for the UTPR.

On September 11, 2024, the Portuguese Council of Ministers approved a law to implement the EU Minimum Tax Directive into domestic law.

On July 10, 2024, the Portuguese government issued a draft law to transpose the EU Minimum Tax Directive into domestic law. The public consultation is open until 31 July 2024.

GLOBE APPLICATION

General

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.

As noted below, there are significant aspects of the first three sets of OECD Administrative Guidance that are included in the Law. Further Regulations may be expected to implement the outstanding aspects.

Administrative Guidance

Aspects of the First Set of OECD Administrative Guidance included in the Law are:

-Rebasing monetary thresholds in the GloBE Rules (Article 1.1)

-Forex hedge election (Article 2.2)

-Excess negative tax carry-forward guidance (Article 2.7)

-Substitute loss carry forwards (Article 2.8)

-Equity investment inclusion election (Article 2.9)

-Allocation of taxes arising under a Blended CFC Tax Regimes (Article 2.10)

-The extension of the taxable distribution method election to insurance investment entities (Article 3.1)

-Exclusion of Insurance Investment Entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity (Article 3.2)

-Extension of definition of restricted tier 1 capital (Article 3.3)

-Portfolio shareholding election (Article 3.5)

-Transitional Rules (Article 4)

There are therefore some omissions including:

-The debt release election

-Excluded Dividends – Asymmetric treatment of dividends and distributions

The Second Set of OECD Administrative Guidance is generally included, with the following reflected in the Law:

-Tax Credits Guidance (MTTCs)

-SBIE – foreign rules

-SBIE – operating leases

-SBIE – impairment losses

-QDMTT Safe Harbour

-UTPR Safe Harbour

The Transitional CbCR Safe Harbour aspects of the Third Set of OECD Administrative Guidance are included, including:

-Transitional CbCR – Purchase Accounting Adjustments (consistent reporting condition, goodwill impairment adjustment)

-Transitional CbCR – JVs

-Transitional CbCR – Same Financial Statements/Local Financial Statements for Statutory Reporting

-Transitional CbCR – Adjustments to Qualified Financial Statements/Dividend Misatches

-Transitional CbCR – MNEs not required to file CbC Reports

-Transitional CbCR – Qualified Financial Statements for PEs

-Transitional CbCR – Treatment of Taxes on income of PEs, CFCs, and Hybrid Entities

-Transitional CbCR – Treatment of hybrid arbitrage arrangements

No aspects of the Fourth Set of OECD Administrative Guidance are included.

It should be noted that in a number of cases (eg for implementing the Blended CFC rules and the excess negative loss carry forward provisions), the Law simply directly transposes the provisions of the OECD Administrative Guidance into domestic Law, rather than attempting to redraft the rules domestically.

Safe Harbour and Penalty Relief Guidance

Article 4 of the Introductory provisions provides for the Transitional CbCR Safe Harbour. As noted above the December 2023 amendments in the OECD Administrative Guidance are generally included.

Articles 23(8)/(9) of the Law provides that the OECD QDMTT Safe Harbour is to apply in Portugal. It does not provide detailed rules for its application but does apply the rules as determined internationally.

The Transitional UTPR Safe Harbour is included in Article 3 of the Introductory provisions to the Law.

Article 41 of the Law applies the Simplified Calculations rules as agreed between IF members.

The Simplified Calculations for Non-Material Constituent Entities are specifically provided for in Article 42 of the Law.

More generally, Article 28 of the Law provides that the Safe Harbours agreed internationally between IF members are to apply in Portugal.

ELECTIONS

Elections in the OECD Model Rules

All of the elections included in the OECD Model Rules and the EU Minimum Tax Directive are provided in the Law, including:

-Excluded Entity Election (Article 2(4) of the Law)

-Stock-Based Compensation Election (Article 12(3) of the Law)

-Election to use the Realization Method (Article 12(8) of the Law)

-Election to Spread Capital Gains (Article 12(9) of the Law)

-Consolidation Election (Article 12(12) of the Law)

-Unclaimed Accrual Election (Article 18(7) of the Law)

-GloBE Loss Election (Article 19 of the Law)

-Prior Year Adjustment Election (Article 21(3) of the Law)

-De minimis Election (Article 26 of the Law)

-Substance-Based Income Exclusion Election (Article 24(1) of the Law)

-Taxable distribution Election (Article 39 of the Law)

-Tax transparency Election (Article 38 of the Law)

-Distribution Tax Regime Election(Article 36 of the Law)

-Safe Harbour Elections (Article 28 of the Law).

Elections in the Administrative Guidance

Elections included in the OECD Administrative Guidance that are included in the Law include the:

-Foreign Exchange Hedge Election (Article 12(19) of the Law)

-Portfolio Shareholding Election (Article 12(18) of the Law)

-Excess Negative Tax Carry-Forward Election (Article 17(6) of the Law)

-Equity Investment Inclusion Election/Qualified Ownership Interest Election (Article 12(20) of the Law)

New Elections

There are no new elections in the Law.

DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.

The main options relate to the design of the QDMTT.

The key difference with the OECD model rules is the Law extends the GloBE rules to include large scale, purely domestic groups.

The OECD Model Rules allow flexibility as to how to apply the UTPR. Portugal’s approach is to apply a UTPR top-up tax rather than a denial of deduction.

As such the carry forward provisions in Article 2.4.2 of the Model Rules for UTPR amounts not sufficient to provide for the additional cash tax expense are not relevant and these rules are not included in the Law.

DOMESTIC MINIMUM TAX

General

Article 7 of the Law applies a domestic minimum tax from January 1, 2024.

QDMTT Design Features

The amount of top-up tax under the QDMTT is based on the calculation of excess profits for GloBE purposes under Article 23 of the Law. However, there are a number of adjustments:

Firstly, Article 7(1) of the Law applies it irrespective of the shareholdings in the group entities located in Portugal.

This reflects the OECD Administrative Guidance that provides that Top-up Tax that is subject to the QDMTT is based on the whole amount of the jurisdictional Top-up Tax calculated, irrespective of the ownership interests held in the Constituent Entities located in the QDMTT jurisdiction by any Parent Entity of the MNE Group.

Article 7(2) of the Law extends this and provides that just as for Constituent Entities, Top-up Tax under a QDMTT in respect of Joint Ventures is the whole amount, irrespective of the fact that the UPE would only be subject to tax on its share of the Top-up Tax arising from Joint Ventures or JV subsidiaries.

Secondly, it applies the QDMTT to stateless entities or permanent establishments (with a place of business activity in Portugal)

Under the OECD Administrative Guidance, a domestic minimum tax does not need to apply to Stateless Constituent Entities or permanent establishments to be a QDMTT. However, jurisdictions can impose a QDMTT on these entities when they are created under the domestic Law of the jurisdiction (or where a permanent establishment has a place of business in the QDMTT jurisdiction).

Tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules must be excluded, as provided in the OECD Administrative Guidance. This is included in Article 7(4) of the Law.

This preserves Portugal’s primary right to tax income accruing to a Portuguese member entity which is also a CFC. If there were no statutory derogation from the general GloBE rules for the calculation of the domestic minimum tax, and the CFC tax paid by the controlling company abroad were included in the included taxes of the Portuguese CFC, the effective tax rate would be increased. Therefore, excluding the CFC tax from the Portuguese CFCs covered taxes allows Portugal to tax low-taxed income at a higher rate than would be the case under an IIR.

Article 7(4) also prevents the pushdown of tax to hybrids, PEs and for taxes on distributions (aside from Portuguese withholding tax on distributions).

Whilst the July 2024 OECD Administrative Guidance does permit local accounting standards to be used for QDMTT purposes, Portugal simply adopts the default GloBE rules. As such the accounting standard of the UPE is used unless Article 11 applies such that the accounting standard used in the preparation of the financial statements of the constituent entity can be used for QDMTT purposes if:

1. it is disproportionate to determine the net profit or loss for the constituent entity on the basis of the UPE accounting standard;
2. it is an acceptable or authorised accounting standard;
3. the information contained in the financial statements is reliable; and
4. permanent differences of more than EUR 1 million are conformed with the UPEs accounting standard.

Article 7(8) of the law provides that in no case may constituent entities subject to the QDMTT be liable to an amount of tax due in Portugal in relation to the year that is less than the amount that would be due to Portugal, by reference to the same entities, and in relation to this year, under the IIR (determined, for this purpose as if the IIR were effectively and fully applied to them, under the terms of the Portuguese domestic law, including additional tax) and, if this occurs, the difference is settled and paid, under the QDMTT.

Registration

Article 46 of the Law requires an in-scope group to register with the Portuguese Tax Authority within 9 months after the end of the financial year tax (regardless of whether this period ends on a business day or not), in which:

-The group of which the constituent entity is a member becomes covered by the Portuguese GloBE rules; or,

-There are changes to any of the information in the registration declaration.

In the transition year, the registration deadline is extended to 12 months after the end of the relevant financial year.

Filing

The relevant aspects of the submission of a GloBE Information Return (GIR) are included, as provided in the EU Directive.

The proposed approach is that every Constituent Entity located in Portugal will have an obligation to file a GIR in Portugal. However, this obligation can be discharged if the GIR is filed by:

-The Ultimate Parent Entity, or

-The Designated Filing Entity.

Where the GIR is being filed by either the Ultimate Parent Entity or the Designated Filing Entity, the Constituent Entity, must file a notification with the Revenue.

The notification must contain:

-Details of the entity that is filing the GIR, and

-The jurisdiction in which such an entity is located.

Where the GIR is filed by the Designated Local Entity it needs to outline the Constituent Entities that it is filing on behalf of.

The GIR must be filed no later than 15 months after the end of the fiscal year (with an 18-month deadline for the Transition Year).

Article 46 Law also requires submission of an additional self- assessment return (a ‘GloBE Tax Return’) by the GIR filing deadline.

Payment

Article 48 of the Law provides that the top-up tax payable is due by the deadline for filing the GloBE tax return.

Penalties

Article 51 of the Law provides for a fine of EUR 5,000 to EUR 100,000, plus 5% for each day of delay, for late filing or a failure to file the GIR or GloBE tax return.

On September 2, 2025, Portugal issued Ordinance No. 290/2025/1| which includes the format for the Pillar 2 registration form (Form 62).