With the fast pace of change happening on the global tax landscape, where tax authorities require more granular information with electronic tax submissions, it’s not surprising to see another country embarking on their digital journey. Portugal is now following in the footsteps of other nations by changing the way in which stamp duty is declared. This was initially due to be introduced for the January 2020 return but was postponed to April 2020 and then delayed further due to COVID-19 until January 2021.
Stamp duty is the oldest tax in Portugal, and one of the oldest taxes still in existence in Europe, having been created by Royal Decree in 1660. Since its creation, few changes have been made to the Settlement and Exemption’s control system. Contrary to what happen with other taxes, little progress has also been made regarding the verification of the amounts paid versus actually delivered to the State and the tax benefits granted. The current system is unable to control the settlement of stamp duty as there is no declaration or settlement system that allows the tax assessment and benefits to be efficiently verified.
The aim of the new system is for the tax authority to obtain both accurate data on the real amounts due for statistical and control purposes. Ordinance no. 339/2019 of October 1, sets up and approves the official model of the Monthly Stamp Duty Declaration, as well as the obligation of the Monthly Stamp Duty Declaration’s electronic submissions for all transactions, even those exempt from stamp duty.
Required information
These changes introduced the obligation for insurers to collect, disclose and submit additional information in their Monthly Stamp Duty Declaration. This information is required for a successful submission, and includes:
- Policyholder’s tax ID: Tax ID issued by the policyholder’s country of residence
- Policyholder’s country code: The code of the policyholder’s country of residence which should be the country issuing the policyholder’s tax ID
- Territoriality: The exact location where the insurance premium has been issued from i.e. inside or outside the Portuguese territory
- Insured risk’s location in Portugal: The postcode of the area or region where the risk is located i.e. continent (mainland)/Azores/Madeira, since the Portuguese tax authorities require the stamp duty to be filed regionally.
What lies ahead?
Postponement of the new requirements to January 2021 gives insurers more time to prepare their systems to gather the mandatory information required and ensure complete and accurate reporting.
Law Decree no. 119/2019 revokes the “offsetting” mechanism relating to the tax delivered in previous periods which allowed insurers to deduct the amount overpaid against future liabilities. Instead, it stipulates that whenever there are changes to the amounts previously declared insurers must submit a Replacement Declaration. If the previously declared tax is higher than that actually due, the Tax and Customs Authority will reimburse the excess amount until the end of the second month following the submission of the replacement declaration. This is providing that it has been delivered within one year and does not contain any filling errors. If the Replacement Declaration results in an amount higher than that previously paid, fines for missing tax may be imposed in addition to the payment of the difference.
This Law Decree also provides the possibility for insurers to file a Gracious Claim whenever there is an improper settlement. This mechanism should be used to request a refund of negative amounts for policies declared prior to January 2021.
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