When a foreign company carries out occasional activity in Portugal, several tax questions arise: will it be taxed in Portugal? What obligations result from such activity? The concept of “occasional activity” does not have a single, universal legal definition, but in practice it rests on the idea that the company does not have in Portugal a permanent establishment nor carries out there a regular activity comparable to that of a resident company. It is precisely this type of situation that requires careful attention to the Portuguese tax framework.
Tax Residence and Permanent Establishment
First, it is important to distinguish between two main situations:
• A foreign company that does not have a permanent establishment in Portugal.
• A foreign company that has or is ultimately considered to have a permanent establishment in Portugal.
Under the Portuguese Corporate Income Tax Code (“CIRC”), a non-resident entity without a permanent establishment is subject to corporate income tax (IRC) only with respect to income obtained in Portuguese territory. However, if a permanent establishment exists, that part of the activity attributable to Portuguese territory will be subject to taxation in Portugal.
Therefore, in the case of occasional activity — that is, non-continuous activity, without permanent facilities, and without fixed resources — there may or may not be a permanent establishment, and consequently the compliance (and tax) burden in Portugal will vary.
Tax Liability in Portugal
For a foreign company without a permanent establishment in Portugal, the relevant question is whether the income is obtained in Portugal. The CIRC provides that income is considered to be obtained in Portuguese territory when attributable to a permanent establishment located there or, in certain cases, when the source or debtor has its residence or registered office in Portugal.
In many cases of occasional activity, it may be concluded that no permanent establishment exists and, therefore, taxation in Portugal will only arise if the activity is deemed to be “carried out in Portuguese territory” or if the remuneration relates to services “used” in Portugal.
If the foreign company has a permanent establishment in Portugal — even a limited one — the profits attributable to that establishment are subject to Portuguese corporate income tax, and organized accounting becomes mandatory.
Reporting Obligations and Withholding
Even when the foreign company has no permanent establishment, in certain situations there may still be reporting or withholding obligations in Portugal. For example, when a Portuguese entity pays income to a foreign company without tax residence in Portugal, that entity may have to file Form 30 (“modelo 30”) with the Portuguese Tax Authority (“Autoridade Tributária” or “AT”).
On the other hand, non-resident entities without a permanent establishment remain subject to Portuguese corporate income tax on income obtained in Portugal — under specific rules.
Thus, even if the activity is occasional and without a permanent establishment, it is important to verify:
• The nature of the income earned in Portugal.
• Whether the source of income or payment is located in Portugal.
• Whether there are withholding or reporting obligations to the AT (e.g., Form 30).
• Whether a double taxation treaty applies that could alter the treatment.
Occasional Activity – Some Practical “Thresholds”
Although there is no single legal threshold in Portugal that automatically defines “occasional activity,” some indicators exist, such as short duration, lack of permanent facilities, or mere sporadic interventions. For instance, a construction project lasting less than a certain period may not create a permanent establishment.
Consequently, a foreign company providing a single or one-off service in Portugal — without facilities, without permanent agents, and without continuous operations — may be in a situation of occasional activity and, depending on the facts, may not be subject to taxation in Portugal or may be subject only to minimal taxation. Nonetheless, it should always confirm its reporting obligations.
Practical Examples and Risks
Example 1: A foreign company sends a technician to Portugal to provide consulting services for one week, without setting up an office or hiring local staff. It is likely that no permanent establishment exists; therefore, Portuguese taxation may not be required.
Example 2: A foreign company sets up an office in Portugal, hires local staff, enters into regular contracts, and provides ongoing services. In this case, a permanent establishment most likely exists, and profits attributable to it will be taxable in Portugal.
Risk: If a company assumes that its activity is occasional but in reality maintains permanent elements (dependent agent, facilities, long duration), the AT may determine that a permanent establishment exists and tax it accordingly. Misinterpretations of “occasional activity” are common, and failure to verify or report obligations may lead to penalties or future reassessments. Therefore, proper classification is essential.
A reflexion
In summary, a foreign company carrying out occasional activity in Portugal must carefully assess whether or not a permanent establishment exists in Portuguese territory — and, consequently, whether it is subject to corporate income tax (IRC) or other tax obligations in Portugal. Even in the absence of a permanent establishment, taxation may still arise if income is “obtained in Portuguese territory” or “used” within Portugal. Withholding and reporting obligations may also apply, even in isolated situations.
Given the complexity of the rules and the absence of a single definition of “occasional activity,” it is highly advisable to seek specialized tax advice before assuming that no obligations exist in Portugal.
The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.