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Mutual Funds - 1998 (1st Semester)


IV - TAXATION

Taxation of Portuguese mutual funds has the following characteristics:

  1. The income obtained in Portuguese territory and not considered capital gain is taxed through the withholding system. Dividends and interests are subject to a rate of 25% and 20%, respectively.
  2. The income obtained outside Portuguese territory and not considered capital gain is subject to a rate of 25%.
  3. Total net capital gain, regardless of being obtained in Portugal or abroad, is subject to a rate of 10%.
  4. Incomes obtained by funds of funds derived from investments in Portuguese mutual funds are tax exempt.

If the investor is an individual, whether resident or non-resident, the income distributed by mutual funds is tax-free, if obtained outside a commercial, industrial or agricultural activity, since the fund has already been taxed. For the same reason, the difference between the redemption’s value and the subscription’s value is not taxed.

Total income obtained by resident companies is taxed by the Corporate Income Tax rate of 36% and municipal tax if applicable. Investors can deduct in their tax declaration the proportional amount that the fund has already paid. In the special case of funds of funds, income obtained only counts in 40% and no deduction can take place.

If the unit-holder is a tax-free entity, the fund manager company must return the amount retained corresponding to the units these entities subscribed, except if income derives from a fund of funds.

Total income obtained by non-resident companies is tax free.

Personal Equity Plans and Retirement Plans are tax exempt if certain legal rules of portfolio allocation are complied. So, taxation takes place when the investor receives the respective income, being the amount subject to taxes and the respective rate determined as a function of the holding period of the investment.


Contacts:

CMVM - Comissão do Mercado de Valores Mobiliários

Divisão de Intermediários Financeiros

Avenida Fontes Pereira de Melo, 21

1056-801 LISBOA

Phone: (351.1) 317 70 00
Fax: (351.1) 353 70 77
E-mail cmvm@cmvm.pt