Tax Alert | Guidance on the application of Advance Pricing Agreements

Tax Alert | Guidance on the application of Advance Pricing Agreements

January 10, 2022

1. Background

More than 10 years after the initial regulation of the procedures for the conclusion of Advance Pricing Agreements (APA), the Portuguese Government, on 26 November, carried out a review of this regulation through the publication of Ministerial Order no. 267/2021, including not only the changes historically introduced in article 138 of the Corporate Income Tax (CIT) Code, dedicated exclusively to this matter, but also all the experience acquired with the application of these agreements.

The APA’s main objective is to provide companies with a basis of legal certainty and assurance, by establishing in advance the methods to be used in determining transfer prices in transactions carried out with related entities, respecting the arm’s length principle, while avoiding, at the same time, double taxation when they are bilateral or multilateral.

Additionally, please note that the negotiation of the agreement and its content, in terms of substance, remains subject to strict compliance with the transfer pricing rules contained in article 63 of the CIT Code, as well as the international law rules, namely the bilateral conventions aimed at mitigating double taxation in force, also following the guidelines published both by the Organization for Economic Cooperation and Development (OECD) and by the European Union Joint Transfer Pricing Forum.

2.  Brief description of the main changes introduced

Specifically, this review covered mainly:

  1. The clarification and detail of the several stages of the process of concluding an APA (two stages: preliminary stage and proposal stage)
  2. The establishment, for the preliminary assessment request, of a maximum period of three months before the end of the deadline for submission of the proposal for an agreement, which must correspond to a period of six months before the beginning of the first taxation period that is intended to be seen. covered by the agreement;
  3. The introduction of the possibility of extinguishing the evaluation procedure of the APA proposal in cases duly listed in the text of the Ministerial Order. In some of these cases, the Portuguese Tax Authorities (PTA) may be required to reimburse the taxpayers in 25% of the fee for entering into the agreement;
  4. The proposed agreement is signed by the entities involved in the operations covered, which cannot claim or appeal the content of the agreement;
  5. Harmonization of the maximum term of validity of APAs with the changes introduced in article 138 of the CIT Code (four years);
  6. The provision of the possibility of APA covering previous tax periods provided that the facts and relevant circumstances of these periods are identical or similar and the date of execution of the agreement has not elapsed more than two years after the deadline for the respective delivery;
  7. A 25% reduction in the rate of signing the agreement for micro, small and medium-sized companies;
  8. In cases of renewal, the process of concluding an APA follows the same procedures as for the initial proposal, with the waiver of the preliminary assessment stage now being clarified.

For more details, please see the annex attached.

3. Entry into force

The Ministerial Order enters into force on November 27, 2021.

How can we help?

As transfer pricing service providers, Nexia will be able to support your Company or Group, not only in the preparation of your documentation and fulfilment of your declarative tax obligations, but also in the negotiation of APA with the Competent Authorities, on a local or global basis, benefiting for this purpose from Nexia International network, to which we belong.

If you wish to sign an APA or you have any questions about the application or implications of these changes, please do not hesitate to contact our tax experts.


The information presented above is not intended to be an exhaustive analysis of all the changes to the current legal regime, but rather a selection of those that we believe to be the most relevant, and does not preclude consultation of our Company and / or legislation to which it refers.

For more information contact: Catarina Breia (+351 91 7575 832 or from our Tax Department.


2022-01-10T11:03:17+00:00 Janeiro 10th, 2022|Nexia internacional|