Taxation of Financial Products

GOVERNMENT BONDS

RESIDENT

If the invested capital is tied up for a minimum period of five years and the remuneration is due at the end of the contractual period, the income from the government bonds may benefit from a special regime.


This regime establishes that if the amounts paid in the first half of the term of the contracts represent at least 35% of their total, it’s excluded from taxation:

1/5 of the income

if the redemption, advance, redemption or any other form of anticipation of availability, as well as the maturity, takes place between the fifth and eighth year of the contract;

3/5 of the income

if the redemption, advance, redemption or any other form of anticipation of availability, as well as the maturity, takes place after eight years of the contract;

If the taxpayer opts to aggregate this income with the taxpayer’s other income on the IRS declaration, its value is added to the other income to determine the applicable IRS rate.

In any case, these bonds can generate two types of income:

- interest - income from government bonds is considered as capital income and is subject to a tax rate of 28%. It is declared in Annex E, Table 4.A, with Code E20:

Anexo E quadro 4.A código E20

The aggregation option may be used in the case of a resident holder, but the income will be subject to the general IRS rates.


- capital gains – you must fill theAnnex G, Table 9 with the Code G10 in the event of the disposal or redemption of the debt securities:

Anexo G quadro 9 código G10

NOT RESIDENT

Income derived from the above-mentioned securities in the Portuguese territory is exempt from IRS. This exemption applies to the income that qualifies as capital income or as capital gains for IRS purposes, including, in particular, gains obtained from the transfer of securities, as well as the payments upon maturity of the coupon or upon the realization of mutual or equivalent repo transactions. This exemption applies only to non-residents.

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