The Portuguese Transfer Pricing legislation constitutes part of the Corporate Income Tax Law, being currently set forth in Article 632 of the Corporate Income Tax Code and regulated by Ministerial Order No. 268/2021, dated November 26, 2021, and is based on the Arm’s Length Principle as set forth in the OECD Guidelines. 

The preamble of Ministerial Order No. 268/2021 states that the OECD Transfer Pricing Guidelines should be considered to apply the Transfer Pricing legal framework and market conditions. 

Portugal recently updated its Transfer Pricing Regulations to incorporate the guidance required by the OECD Transfer Pricing Guidelines for Multinational Entities and Tax Administrations 2017. 

Related Parties

There is a special relationship when one entity directly or indirectly influences the management of the other significantly. From 2014 onwards, any of the following conditions should be met to define the relationship as a related party: 

  • One entity participates in at least 20% of the share capital or voting rights of another directly or indirectly. 
  • Both entities are owned by the same legal entity by at least 20% directly or indirectly. 
  • One entity and the members of its corporate entities or any administration, management, boards of directors, or supervisory entities in which most administrative boards are constituted by the same persons. 
  • Related entities under a subordination agreement. 
  • Entities in a control relationship as provided for in Article 486 of the Commercial Companies Code. 
  • Entities whose legal relationship allows, by its terms and conditions, the control of the management and decisions of the other derived from facts beyond the commercial scope or professional relationship itself. 
  • Transactions between a resident entity and others in a low or no tax zone. 

Transfer Pricing Methods

Given that Portugal applies the OECD Transfer Pricing Guidelines for Multinational Enterprises and Multinational Administrations, the methods to be adopted to determine an Arm’s Length Price are as follows: 

  • Comparable Uncontrolled Price Method. 
  • Cost Plus Method. 
  • Resale Price Method. 
  • Profit Split Method. 
  • Transactional Net Margin Method. 

Other methods are duly applicable in certain circumstances in a subsidiary manner. 

Transfer Pricing Documentation

The filing of the Transfer Pricing documentation is generally not mandatory, except for large taxpayers. However, the Transfer Pricing analysis and documentation are required to avoid penalties. 

If tax authorities request the Transfer Pricing documentation, the taxpayer would normally have a predefined deadline to respond. 

In Ordinance No. 268/2021, the Portuguese tax legislation adopts the two-tier approach for documentation: Master File and Local Report. Conversely, both documents must be jointly filed when the Tax Administration so requires. 

Obliged Entities to File the Documentation

The obligation to prepare documentation relating to a given tax period now only applies to Portuguese companies with a total annual income of €10 million or more in the year to be reported. 

Country-by-Country Report

Article 121-A of the CIT Code (Clave de Identificação Tributária – Tax Identification Code) establishes the Country-by-Country Report for multinational groups, as recommended by the OECD in BEPS Action 13. 


There are no specific sanctions applicable in cases of excessive tax avoidance. Conversely, there is a wide range of general administrative sanctions for tax violations. 

The General Regime of Tax Offenses also establishes the maximum penalty, which is €165,000 in cases of willful misconduct and €45,000 in cases of negligence. 

Source: Autoridade Tributária e Aduaneira (ATA)

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