Over the past few years, the institute of tax representation, provided for in Article 19 of the General Tax Law (‘GTL’), has been raising questions regarding its practical application.
Let us first look at the legal framework:
Paragraph 6 of the aforementioned article states that “Taxpayers resident abroad, as well as those who, although resident in the national territory, are absent from it for a period exceeding six months, as well as legal persons and other legally equivalent entities that cease their activity, must, for tax purposes, appoint a representative with residence in national territory” (cit.).
Paragraph 8 of the same regime provides that the appointment of a representative is merely optional in relation to taxpayers who reside in or leave the territory of a Member State of the European Union. This is evidently the case by virtue of the principle of non-discrimination on the basis of residence, which emerges from Article 18 of the Treaty on the Functioning of the European Union.
It has been held, for example, that a request for a Portuguese tax identification number (“TIN”) by a taxpayer resident in a third country gave rise to the obligation to appoint a tax representative, even though this taxpayer may not have any tax relationship in that jurisdiction.
At the limit, the rules in force, by not setting a time limit for maintaining the tax representative in Portugal, have in practice allowed the PTA to consider that the obligation would be maintained ad aeternum – which constitutes an excessively onerous burden on a taxpayer who may not even have any connection to the Portuguese territory.
In this regard, we have always maintained that this obligation to maintain the tax representative should have a maximum duration of 10 years, as this corresponds to the period for filing and preserving tax-relevant documents.
Circular Letter 90054 has recently been published, which clarifies the scope of application of the obligation to appoint a tax representative for non-residents.
It is not mandatory to appoint a tax representative in the act of registration and attribution of TIN to a national or foreign citizen, as a non-resident, with address in a third country.
Therefore, the obligation to appoint a fiscal representative will depend on the existence of a tax legal relationship, namely, in case the taxpayer
- Own a vehicle and/or a property registered/situated in Portuguese territory;
- Enter into an employment contract in Portuguese territory
- Exercising an activity as a self-employed person in Portuguese territory.
As a result, the PTA has established a more reasonable interpretation of the rules in force, which restricts the application of the obligation to appoint a tax representative, since the previous understanding led to disproportionate results for taxpayers.
In result of this new understanding, further guidance was published, i.e.. Circular Letter 90056, which correspondently alters the specific procedure applicable to residents of the UK.
In the most recent Communication of the Council of Ministers, of 15 June 2022, a further alteration to the tax representation regime is presented, determining that:
“A decree-law has been approved that removes the obligation to appoint a tax representative for taxpayers with a Portuguese TIN that are required to do so, due to residing abroad or being absent from national territory for a period exceeding six months, whenever they adhere to the regime of electronic notifications and summonses on the Finance Portal or to the electronic mailbox notification system (viaCTT). In parallel, taxpayers who, until now, were obliged to adhere to the electronic mailbox (viaCTT), may now opt, as from 1 January 2023, to receive notifications via the Portal das Finanças”
As the Decree-Law to which the press release refers to has not been published as of this date, it seems to us that this new rule will support the understanding advocated by the AT in the above-mentioned Circular Letter no. 90054, thus introducing changes in the scope of electronic notifications and summonses.
Maria Ferreira
junho 2022