Given that China is not generally considered a low-tax jurisdiction, CFC exposure is often limited, but may still arise in cases involving preferential regimes, holding structures or passive income arrangements.<\/p>\n\n\n\n
Anti-abuse provisions and shareholder transactions<\/h3>\n\n\n\n
Transactions between the shareholder and the Chinese company, such as loans, services 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 Chinese 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\u2013China tax treaty will be relevant in determining taxing rights and elimination of 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, foreign-source income could benefit from favourable treatment, but current eligibility depends on specific transitional provisions.<\/p>\n\n\n\n
Chinese exit tax considerations<\/h3>\n\n\n\n
China does not operate a comprehensive personal exit tax system comparable to some jurisdictions.<\/p>\n\n\n\n
However, individuals may face ongoing tax obligations on China-sourced income, and strict tax residency rules may continue to apply depending on domicile, family ties and duration of stay.<\/p>\n\n\n\n
2. What happens to a Chinese company\u2019s tax position if its shareholder relocates to Portugal?<\/h2>\n\n\n\nManaging dual residence<\/h3>\n\n\n\n
A Chinese company is generally tax resident in China 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\u2013China tax treaty<\/h3>\n\n\n\n
The Portugal\u2013China 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 considerations<\/h3>\n\n\n\n
China does not generally impose a formal corporate exit tax on companies ceasing residence.<\/p>\n\n\n\n
However, certain reorganisations, transfers of assets or indirect transfers of Chinese assets may trigger taxation under Chinese anti-avoidance rules.<\/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\u2013China 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 Chinese entity transfers its place of effective management to Portugal, it may become tax resident there, potentially leading to dual residence issues.<\/p>\n\n\n\n Portugal does not provide a straightforward mechanism for re-domiciling a Chinese company into a Portuguese legal entity, such as a Sociedade por Quotas (Lda). Therefore, restructuring options, such as incorporating a new Portuguese entity, using holding structures or reorganising the group, should be carefully evaluated.<\/p>\n\n\n\n Migration may trigger tax consequences in China depending on the structure adopted, including potential application of anti-avoidance rules, taxation of asset transfers or indirect transfer rules relating to Chinese assets.<\/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 China 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\/china.webp\")
<\/figure>\n\n\n\n3. What would be the Chinese 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 Chinese entity\u2019s tax position if its residence is relocated to Portugal?<\/h2>\n\n\n\n
Final remarks<\/h2>\n\n\n\n