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As a result of recent reforms, gift and inheritance tax, municipal property tax and property transfer tax have been abolished. Instead, the Portuguese government has introduced municipal real property tax, which is payable on property, and municipal transfer tax, payable on the transfer of property. The reforms aim to reduce rates and prevent tax evasion and avoidance.
The Supreme Court was recently asked to decide whether a company may demand that another company with a similar name forfeit the right to use the name, even if such use has been accepted for a number of years. The Court of Appeals had found that the rights relating to a company name are analogous to trademark rights and had applied the same time limit for objections on this basis.
The 2008 Budget aims to encourage small and medium-sized enterprises (SMEs) by introducing a new form of tax relief that allows a 3% tax deduction on share capital paid up by shareholders when incorporating SMEs or increasing their capital share. However, the relief is unlikely to solve Portugal's thin capitalization problems, and could even prove detrimental.
Portuguese companies wishing to take advantage of a double taxation treaty have long struggled with the requirement to obtain certification of the necessary Portuguese tax form by the tax authorities of the other signatory state; failure to submit the form or comply with a withholding requirement can mean greatly increased tax liability. However, a proposal in the 2008 Budget may make compliance easier.
The Budget Law 2007 has introduced important tax benefits in strategic sectors of the economy. A tax reduction of between 5% and 10% applies to enterprises in rural areas targeted for economic regeneration, while a regime to eliminate double taxation of outbound dividends paid by entities in Portuguese-speaking countries in Africa will be a considerable investment incentive.
The European Commission has issued a formal request to Portugal to amend its tax legislation on outbound dividend payments to companies. However, changes to the withholding tax rules in the 2007 Budget still appear to discriminate between inbound and outbound payments, leaving the tax authorities exposed to future legal challenges.
A change in the regulations on the taxation of dividends is intended to eliminate the tax advantages resulting from the sale of shares immediately before the payment of a dividend to an entity which benefits from a favourable tax regime. A standardized withholding tax rate on dividends applies, regardless of whether the beneficiary is resident in Portugal for tax purposes.
Changes to the Corporation Tax Code in the 2006 Budget altered the tax treatment of the transfer of a company's head office from Portugal to another country. However, many consider that, by creating a fiscal obstacle to such a transfer, the new measures restrict the freedom of establishment established in the EC Treaty.
Including: Patents, Utility Models and Topographies of Semiconductor Products; Designs and Models; Trademarks; Company Names and Logos; Copyright.
The government has finally enacted amendments to the Code of Copyright and Related Rights and the Industrial Property Code to transpose the EU Enforcement of IP Rights Directive. Although silent on certain problems, such as the need to train magistrates on specific industrial property issues, they include helpful measures, such as the right to apply for periodic penalty payments against infringers.
In 2006 the government created a fast-track system for purchasing registered trademarks as part of its programme to simplify company registration. The system now allows applicants to purchase a pre-registered trademark without incorporating a company, but may limit the potential value of a trademark as a marketing tool.
The Lisbon Court of Appeals was recently asked to rule on, among other issues, the correct interpretation of the term 'trade name'. Some experts maintain that the expression covers not only an establishment's trade name (ie, its brand name or logo), but also its corporate name.
The publication in a magazine of the ending of a popular book led the Portuguese Authors' Society to sue the magazine publisher for copyright infringement and damages for loss of sales. The Supreme Court accepted the publisher's fair use defence in respect of infringement, but changes to the Copyright Code to protect the normal exploitation of a work will give rights holders a stronger case in the future.
The National Registry of Legal Entities has registered hundreds of trademarks, which are now available to any person wishing to incorporate a company and register the company name as a trademark under a new fast-track system. However, for all its advantages of time and cost, granting trademarks in this way may suggest that registration is immediately definitive, which is far from the case.
A recent decision to file criminal complaints against unidentified individuals for sharing music files was the first such action to be taken against peer-to-peer network users. The outcome of the investigations will clarify whether a person who allows others to download copyrighted material is breaking Portuguese law, but broader questions remain over the recording industry's approach to copyright issues.
Originally established as an area for the duty-free importation of goods, the Madeira Free Trade Zone is now also an international centre for shipping and offshore financial services and trusts. If approved by the Portuguese Parliament, an extension of the zone's tax regime will allow companies incorporated in the zone before 2014 to benefit from favourable corporate tax rates until 2020.