1. The Tax Identification Number
1.1 Introductory notes:
1.2 Application for registration
1.3 The importance of the NIF
2. The Tax Domicile
3. Tax representatives
3.1. Mandatory appointment
3.2 Duties of the Tax Representative
3.3 Resignation of the Tax Representative
3.4 Liability of the Tax Representative and Distinction from Managers of Assets or Rights
3.4.1 The Forensic Mandate
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1. Preliminary note: The Tax Identification Number
1.1 Introductory notes:
The Tax Identification Number (hereinafter NIF) was originally established and regulated by Decree-Law no. 463/79, of November 30
More recently, Decree-Law no. 14/2013, of January 28, harmonized the regime applicable to the TIN, as well as the conditions for its attribution, respective effects and management.
Within the scope of this law, it is worth highlighting article 3, according to which “The TIN is mandatory for natural and legal persons or legally equivalent entities who, under the terms of the law, are subject to compliance with obligations or wish to exercise their rights with the Tax and Customs Administration (AT).” 1.2.
1.2 Application for registration
The competence to issue the NIF lies with the Tax Authority (hereinafter referred to as AT) and, as a rule, the application must be made at the request of the interested citizen, their representative or business manager, by verbally declaring all the relevant identifying elements for the respective registration (see articles 5, 6(1) and 8(1)).
If the applicant for registration for the purposes of assigning a TIN is a foreign national who wishes to register as a resident under the terms of tax legislation, they must present the following documents at the time of registration:
a) Civil identification document or other legally equivalent document;
b) Residence permit or equivalent document.
If the applicant for registration for the purposes of assigning a TIN is a foreign national who wishes to register as a non-resident under the terms of tax legislation, they must present the following documents at the time:
a) Civil identification document or other legally equivalent document;
b) Power of attorney or mandate contract representing the tax representative;
c) Tax and civil identification document of the tax representative
(see art. 10)
1.3 The importance of the NIF
In practical terms, the importance of having a NIF is revealed by the fact that you can do almost nothing in Portugal without one.
According to Article 29(1) of Decree-Law no. 14/2013, of January 28, “It is mandatory to mention the TIN on all declarations, reports, tax delivery notes, applications, petitions, exhibitions, complaints, appeals, or any other documents that are or should be submitted to the Tax Administration services.”
Under the terms of Article 31(1) of the aforementioned Decree-Law, documents that do not mention the TIN will be rejected or considered not to have been submitted.
On the other hand, Article 30(1) and (2) of the aforementioned Decree-Law stipulates that
“Public services or any other public or private entities shall, when fulfilling their tax obligations, require taxpayers to provide proof of their TIN” (practically all relevant services provided by public services or public or private entities necessarily require the identification of a TIN).
and that
“Income subject to withholding tax, even if exempt from it, may not be paid or made available to the respective holders by the competent authorities without prior proof of their TIN.”
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2. Tax residence
Under the terms of Article 19(1)(a) of the General Tax Law (hereinafter referred to as the LGT), the “tax residence of the taxable person is, unless otherwise provided, for natural persons the place of habitual residence”.
In this context, the most relevant defining criterion of habitual residence is laid down in the C.I.R.S. (for the purposes of personal income tax), and according to Article 16(1) of the C.I.R.S., namely subparagraphs a) and b), “Persons who, in the year to which the income relates, are resident in Portuguese territory: a) Have stayed there for more than 183 days, consecutive or interpolated, in any 12-month period beginning or ending in the year in question; b) Having stayed there for less time, have, on any day of the period referred to in the previous subparagraph, a dwelling in conditions that suggest a current intention to maintain and occupy it as a habitual residence (...)”
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3. Tax representatives
3.1. Obligation to appoint
As explained in 1.2 above, under the terms of Article 19(6) of the L.G.T., “taxable persons resident abroad, as well as those who, although resident in the national territory, are absent from it for a period of more than six months, as well as legal persons and other legally equivalent entities which cease their activity, must, for tax purposes, appoint a representative resident in the national territory”.
Accordingly, Article 130(1) of the C.I.R.S. states that “Non-residents who obtain income subject to IRS, as well as those who, although resident in Portugal, are absent from the country for a period of more than six months, must, for tax purposes, appoint a natural or legal person with residence or registered office in Portugal to represent them before the Tax and Customs Authority and guarantee compliance with their tax obligations.”
Recently, by means of Circular Letter no. 90054 of 2022-06-06, the Tax Authority clarified that the obligation to appoint a tax representative exists when at least one of the following situations is met:
a) owning a vehicle or property registered in Portuguese territory;
b) entering into an employment contract in Portuguese territory;
c) being self-employed in Portuguese territory.
This obligation does not apply, and is optional, in the case of non-residents or residents who are absent under the terms mentioned for member states of the European Union or the European Economic Area bound by administrative cooperation in the field of taxation equivalent to that established within the European Union. (cfr. no. 8 of art. 19 of the L.G.T. and no. 2 of art. 130 of the C.I.R.S.).
The importance of appointing a tax representative is, as a rule,
a) the fact that under the terms of Article 19(7) of the L.G.T., “the exercise of the rights of taxable persons referred to therein before the tax administration, including those of complaint, appeal or challenge, is dependent on the appointment of a representative under the terms of the previous paragraph”, and
b) the fact that it is mandatory if they earn income subject to IRS. (cf. the aforementioned paragraph 1 of article 130 of the IRS Code)
If they fail to comply with this obligation, without prejudice to the other consequences already mentioned, under the terms of Article 124(1) of the R.G.I.T. “Failure to appoint a person with residence, registered office or effective management in the national territory to represent, before the tax administration, entities not resident in this territory, as well as those that, although resident, are absent from the national territory for a period of more than six months, with regard to obligations arising from the legal-tax relationship, when mandatory, as well as the appointment that omits the express acceptance by the representative, is punishable by a fine of € 75 to € 7,500.”
Under the terms of Article 124(2) of the R.G.I.T., “The tax representative of a non-resident, if he is a person other than the manager of the assets or rights, who, whenever requested, fails to obtain or submit to the tax authorities the identification of the manager of the assets or rights, shall be punishable by a fine of €75 to €3,750.”
3.2 Duties of the Tax Representative
As already mentioned, tax representatives serve to ensure the tax obligations - namely ancillary - of the taxpayer before the AT, either through an active stance or by informing the taxpayer, and to exercise the taxpayer's rights before the AT.
Pursuant to Article 130(3) of the CIRS, the appointment of the tax representative must be made in the declaration of commencement of activity, changes or registration of the taxpayer number, which must expressly state the representative's acceptance, as well as when registering for the purpose of assigning a TIN by a foreign citizen who wishes to register as a non-resident under the terms of the tax legislation.
With regard to ancillary duties, we can distinguish between documentary and non-documentary.
With regard to obligations of a documentary nature, these are predominantly relevant, due to the fact that most duties take the form of documents, which translate a reality that should (or ought to) correspond to reality.
In this context, and merely by way of example, with reference to the C.I.R.S. and the C.I.R.C., the following ancillary obligations that fall to taxable persons stand out: To submit declarations (of the start, cessation or alteration of activity) -Cfr. Arts.112 To have and keep organized accounts - Cfr. Arts. 117 C.I.R.S. and 123 C.I.R.C.;; To have and keep record books - Cfr. Arts. 116 C.I.R.S. and 124 C.I.R.C.;; To issue invoices and/or receipts - Cfr. Arts. 115 C.I.R.S. and €125 C.I.R.C.;; To provide information and clarification - Cfr. Art. 59 L.G.T.;;
On the other hand, he will be responsible for receiving correspondence sent by the Tax Authority, as he is considered to be domiciled at the representative's address (cf. no. 3 of art. 23 of Decree-Law no. 14/2013, of January 28).
As for the non-documentary ancillary duties, they essentially refer to the duty of collaboration inherent in the legal-tax relationship, with special burdens and onus on the taxpayer's side.
3.3 Resignation of the Tax Representative
Under the terms of Article 19(9) of the L.G.T. and Article 130-A(1) of the C.I.R.S., “The representative may resign from the representation in general terms, by means of written communication to the represented party, sent to the latter's last address”.
Sounds simple enough.
However, the problems related to renouncing representation are crystal clear in Circular Letter no. 90 026 of February 7, 2019.
This is because, although Article 19(10) of the L.G.T. states that “The resignation becomes effective in relation to the Tax and Customs Authority when it is communicated to it, and the latter must, within 90 days of that communication, make the necessary changes, provided that at least one year has elapsed since the appointment or a new tax representative has been appointed” and Article 130-A(2) of the C.I.R.S. states that “The resignation becomes effective in relation to the Tax and Customs Authority when it is communicated to it, and the Tax and Customs Authority must, within 90 days of that communication, make the necessary changes, provided that at least one year has elapsed since the appointment or a new tax representative has been appointed”. which states that “The resignation becomes effective in relation to the Tax and Customs Authority when it is communicated to it, and the latter must, within 90 days of that communication, make the necessary changes”, as well as the above regarding the communication sent to the last address, it is certain that A.T. believes that only the registered letter with acknowledgment of receipt is the appropriate means, as it ensures effective knowledge on the part of the represented party.
("10. The representative must inform the AT of the resignation from representation at any Tax Office or Citizen's Bureau (here exclusively for individual taxpayers), and for this purpose must provide proof that the communication of resignation has been sent to the represented party, by means of a copy of the letter (if a foreign language has been used, it must be translated and certified) and the originals of the registration of the letter and the acknowledgement of receipt proving that it has been received.”)
What if the represented party doesn't want to pick up the letter?
Then, in a more onerous way, we can consider separate judicial notification (cf. articles 256 ff. of the CPC).
But what if the defendant has changed their address without notifying the court?
Then it's certain that notices to the last known addresses of residence will not prove that the defendant actually knew.
This makes it impractical to prove actual knowledge.
3.4 Liability of the Fiscal Representative and the Distinction between the Fiscal Representative and Asset or Rights Managers
Within the scope of the C.I.R.S., as already mentioned, the tax representative has the obligation to fulfill the ancillary tax duties.
However, he will only be liable for their tax infringements if he is, cumulatively, the manager of the assets or rights of the non-resident or absent taxpayer under the terms set out above.
In fact, Article 27(1) of the L.G.T. states that “- Managers of assets or rights of non-residents without a permanent establishment in Portuguese territory are jointly and severally liable in relation to them and to each other for all contributions and taxes of the non-resident relating to the exercise of their position”. For this purpose, “natural or legal persons who assume or are entrusted, by any means, with the management of the business of a non-resident entity in Portuguese territory, acting in the interest and on behalf of that entity” are considered to be such persons (cfr. no. 2 of art. 27 of the L.G.T.).
The Higher Courts have ruled in this regard on a number of occasions, and we would like to highlight part of the summary of the Judgment handed down by the Central Administrative Court South, in case 711/11.5BELRS, dated 03-05-2018, (handed down taking into account article 27(3) of the L.G.T., which has since been repealed by Law 82-E/2014, of December 31), which is transcribed below in the following terms:
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(...)
3. The tax representative corresponds to the formal link between the taxpayer and the Tax Administration, which is necessary due to the physical distance between the taxpayer and the Tax Administration, precisely because the designation in question is only required for taxpayers who are not resident in national territory. The tax representative is burdened with the responsibility for complying with the various ancillary obligations (e.g. declaratory obligations) of the taxpayer himself, but this does not in itself constitute the main obligation to pay tax. This non-obligation to pay tax is easy to understand, as the representative does not, in principle, have any means of controlling the production or transfer of income to the non-resident, precisely because their intervention is only formal. The representative, by definition and as such, has no involvement in the collection of income and the management of assets by the non-resident taxpayer, but is merely the interlocutor between the latter and the tax authorities, for exclusively formal purposes.
4. In turn, the managers of assets or rights are all those natural or legal persons who assume or are entrusted, by any means, with the management of the business of a non-resident entity in Portuguese territory, acting in the interest of and on behalf of that entity (cfr.art.27, no.2, of the L.G.T.). The legislator was therefore clear in delimiting the subjective scope of this provision. It is not any person who has a close relationship with a non-resident taxpayer who is jointly and severally liable for their tax debts, but only the person who takes over or is in charge of the non-resident's business and who acts in the interest of and on behalf of that entity. There is thus an appeal, at the same time, to the rules of business management (see article 464 et seq. of the Civil Code), applicable when “a person assumes the management of another's business in the interest and on behalf of its owner, without being authorized to do so”, and also to the rules of the mandate, as “a contract by which one of the parties undertakes to perform one or more legal acts on behalf of the other” (see article 1157 et seq. of the Civil Code). In any of the cases to which the legislator refers, the intention to burden the “manager of assets or rights” with tax liability becomes clear, as soon as their ability to intervene in the actual “management” of the fulfillment of tax obligations is equally clear.
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In the absence of the exercise of functions as manager of assets or rights, it is advisable that this fact is expressly stated in the document through which the functions of tax representative are assumed (as well as the fact that it is not known whether third parties exercise them).
However,
If the non-resident citizen is self-employed and subject to VAT,
a) the tax representative must also be subject to VAT in Portugal;
b) the tax representative will be jointly and severally liable for the payment of VAT to the State (see Article 30(3) of the VAT Code).
3.4.1 Regarding the Forensic Mandate
As stated in the Ruling of the South Central Administrative Court in case 336/12. 8BELRS, dated 28/01/2021, and in accordance with opinions issued by the Portuguese Bar Association, “In the institute of the mandate with power of attorney, this constitutes a mere act of granting representative powers, that is, it is a unilateral and receptive legal transaction in which the attorney is invested with a power (the power of representation), which does not bind him to the action, that is, it does not oblige him to perform the acts, it only allows him to do so. Nor does it add to the agent any kind of burden or consequence arising from the performance of the business which is not provided for in the respective mandate.”
Therefore, unlike the mandate criterion set out in the case transcribed in 3.4 above, it is not because a Power of Attorney is granted to a Lawyer to act on his behalf that, per se, he is considered, namely for the purposes of the provisions of article 27 of the L.G.T:, as a Manager of assets or rights” .
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