Portugal - The Feared Austerity Budget Enters into Force

Abstract

This article provides an overview of the main tax changes introduced by the Portuguese State Budget for 2012.

The Portuguese State Budget for 2012 (the budget) is, most likely, the most ruthless piece of legislation approved in the roughly 40 years of Portugal's democracy. Nevertheless, the harshness of the measures came as no surprise to those who have been following developments in regard to Portugal's economic and financial performance. In addition to the anticipated measures aimed at raising tax revenue, the budget introduced some interesting rules for cross-border transactions and businesses, which range from mere clarifications to substantive changes. Therefore, both residents and non-residents doing business in Portugal should take these developments into consideration in order to better plan their future activities. This note focuses on measures that are relevant from a cross-border perspective; other measures are only briefly summarized. While the former are elaborated on topically, the latter are touched on using a tax-by-tax approach. Also, given its nature, this note is essentially descriptive. Remarks are, nevertheless, provided whenever they seem necessary to understanding the modifications introduced or when such modifications are questionable from a dogmatic or praxis standpoint. The note concludes with some overall critical remarks.

Keywords: Taxation, Tax law, European taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24