Although Germany is not a low-tax jurisdiction, certain holding or intermediate structures could still fall within the scope of CFC rules, potentially leading to attribution of undistributed profits to the Portuguese resident shareholder.<\/p>\n\n\n\n
Anti-abuse provisions and shareholder transactions<\/h3>\n\n\n\n
Transactions between the shareholder and the German company, such as loans or other financial arrangements, must comply with arm\u2019s length principles.<\/p>\n\n\n\n
Portuguese tax authorities may recharacterise arrangements that are considered artificial or lacking economic substance.<\/p>\n\n\n\n
Deemed employment or management income<\/h3>\n\n\n\n
If the shareholder performs management or executive functions from Portugal for the German company, remuneration may be taxable in Portugal as employment or self-employment income at progressive rates of up to 48%, plus applicable surcharges.<\/p>\n\n\n\n
The Portugal\u2013Germany tax treaty will be relevant in determining the allocation of taxing rights and relief from double taxation.<\/p>\n\n\n\n
Non-Habitual Resident (NHR) regime \/ transitional regimes<\/h3>\n\n\n\n
Although the traditional NHR regime has been phased out for new applicants as of 2024, transitional or replacement regimes may still apply.<\/p>\n\n\n\n
Historically, certain foreign-source income could benefit from favourable treatment, but current eligibility depends on specific transitional provisions.<\/p>\n\n\n\n
German exit tax considerations<\/h3>\n\n\n\n
Germany applies an exit tax (Wegzugsbesteuerung) in certain cases where individuals holding significant shareholdings in corporations cease to be German tax resident.<\/p>\n\n\n\n
This may result in a deemed disposal of shares at fair market value, triggering taxation on unrealised capital gains, with possible deferral mechanisms under EU rules.<\/p>\n\n\n\n
2. What happens to a German company\u2019s tax position if its shareholder relocates to Portugal?<\/h2>\n\n\n\nManaging dual residence<\/h3>\n\n\n\n
A German company is generally tax resident in Germany if it is incorporated there or if its place of effective management is located there.<\/p>\n\n\n\n
If the place of effective management shifts to Portugal, for example due to relocation of key decision-making, it may also be considered tax resident in Portugal. This may result in dual residence and potential double taxation on worldwide profits.<\/p>\n\n\n\n
Single residence based on the Portugal\u2013Germany tax treaty<\/h3>\n\n\n\n
The Portugal\u2013Germany tax treaty provides tie-breaker rules to resolve dual residence situations, typically based on the place of effective management.<\/p>\n\n\n\n
In practice, resolution may require coordination between the tax authorities of both countries.<\/p>\n\n\n\n
Corporate exit tax in Germany<\/h3>\n\n\n\n
If a company ceases to be tax resident in Germany, it may be subject to exit taxation (Wegzugsbesteuerung at corporate level), involving deemed disposal of assets at market value and taxation of latent gains.<\/p>\n\n\n\n Once the company is considered tax resident in Portugal, based on its place of effective management, it becomes subject to Portuguese corporate income tax (IRC) on its worldwide income.<\/p>\n\n\n\n The standard rate is 21%, potentially increased by municipal and state surcharges, leading to an effective rate of up to approximately 31.5%.<\/p>\n\n\n\n Portugal may allow a step-up in the tax basis of assets and liabilities, including goodwill, upon migration, depending on how the relocation is structured.<\/p>\n\n\n\n This ensures that only gains accrued after becoming Portuguese tax resident are subject to taxation.<\/p>\n\n\n\n Assets recognised at fair market value may be depreciated or amortised in accordance with Portuguese tax rules, generating deductible expenses over their useful life.<\/p>\n\n\n\n Dividends distributed by a Portuguese tax resident company are generally subject to a 25% withholding tax, which may be reduced under the Portugal\u2013Germany tax treaty.<\/p>\n\n\n\n As in other cases, there is typically no step-up for retained earnings accumulated prior to migration.<\/p>\n\n\n\n If a German entity transfers its place of effective management to Portugal, it may become tax resident there, potentially resulting in dual residence issues.<\/p>\n\n\n\n Within the EU, corporate mobility mechanisms such as cross-border mergers, conversions or reorganisations may facilitate restructuring. However, Portugal does not provide a simple direct re-domiciliation regime for German companies into a Portuguese entity, such as a Sociedade por Quotas (Lda).<\/p>\n\n\n\n Therefore, structuring options must be carefully assessed.<\/p>\n\n\n\n Migration may trigger tax consequences in Germany, including exit taxation and adjustments related to unrealised gains on assets and goodwill.<\/p>\n\n\n\n Relocation as an individual to another country has significant personal income tax consequences. However, if the individual is also a business owner, the business itself may effectively relocate as well, resulting in a higher level of tax complexity.<\/p>\n\n\n\n This additional corporate tax dimension requires thorough analysis of the impact of the owner\u2019s relocation on the company\u2019s legal and tax status. For that reason, moving from Germany to Portugal tax planning should be addressed well ahead of the relocation itself.<\/p>\n\n\n\n![\"moving](\"https:\/\/lamarescapela.pt\/wp-content\/uploads\/gemini_generated_image_ho52d7ho52d7ho52-scaled-e1776866594606.webp\")
<\/figure>\n\n\n\n3. What would be the German company\u2019s tax position once it has become a tax resident of Portugal?<\/h2>\n\n\n\n
Corporate Income Tax<\/h3>\n\n\n\n
Step-up for assets and liabilities<\/h3>\n\n\n\n
Depreciation and amortisation<\/h3>\n\n\n\n
Dividend withholding tax<\/h3>\n\n\n\n
4. What would be a German entity\u2019s tax position if its residence is relocated to Portugal?<\/h2>\n\n\n\n
Final remarks<\/h2>\n\n\n\n