Portuguese withholding taxes under the scrutinizing eye of the EU Commission
Assume buying a residence in Portugal. To finance your acquisition you can either take up a loan from a Portuguese bank or any other bank resident in other EU Member States. Interest paid to Portuguese banks will not be subject to a 20 % withholding tax, this will however be the case once the interests are paid to a non-Portuguese financial institution.
According to the Commission, the application of withholding taxes on outbound interest results in a higher tax burden for foreign banks, which in turn, restricts the freedom to provide services and the free movement of capital. The Commission has therefore sent Portugal a formal request to amend its tax legislation. The request is so far in the form of a reasoned opinion, which the Portuguese government has to answer within two months. If Portugal does not reply satisfactorily, the Commission may refer the matter to the ECJ.
Read the press release.
