Portugal

This report analyses the implementation of the AEOI Standard in Portugal with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.

The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.

Overall findings

AEOI legal framework

Portugal’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Portugal’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Portugal’s Interested Appropriate Partners (CR2).

Overall determination on the legal framework: In Place

Effectiveness of AEOI in practice

Portugal’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). Portugal is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

Overall rating in relation to the effectiveness in practice: On Track

General context

Portugal commenced exchanges under the AEOI Standard in 2017.

In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Portugal:

• enacted Decree-Law No. 64/2016, of 11 October (as amended by Decree-Law No. 83/2017); and

• introduced several Ministerial Orders.

Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.

With respect to the exchange of information under the AEOI Standard, Portugal:

• is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017;

• has in place European Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation as amended by Directive 2014/107/EU;

• has in place European Union agreements with five European third countries;1 and

• put in place a bilateral agreement.2

Table 1 sets out the number of Financial Institutions in Portugal that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially, because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Portugal requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts are required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Portugal’s administrative compliance strategy, which is analysed in the subsequent sections of this report.

Table 1. Number of Financial Institutions reporting and Financial Accounts reported
	Number
Financial Institutions reporting Financial Accounts in 2021	150
Financial Accounts reported in 2021	2 002 395

Table 2 sets out the number of exchange partners to which information was successfully sent by Portugal in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Portugal’s exchanges in practice, which is also analysed in subsequent sections of this report.

Table 2. Number of exchange partners to which information was successfully sent
	2018	2019	2020	2021
Number of exchange partners to which information was successfully sent	66	69	71	76

In order to provide for the effective implementation of the AEOI Standard, in Portugal:

• the Portuguese Tax Authority (PTA) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Portugal’s exchange partners;

• technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by requiring all Reporting Financial Institutions to register in order to access the Automatic Exchange of Information portal and report information to the PTA. This portal allows for the validation of the information reported by the Reporting Financial Institutions against the XML Schema; and

• the Common Transmission System (CTS), and in the European Union (EU) the Common Communication Network (CCN), are used for the exchange of the information, along with the associated file preparation and encryption requirements.

It should be noted that the review of Portugal's legal frameworks implementing the AEOI Standard concluded with the determination that Portugal’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Portugal’s implementation of the AEOI Standard in practice.

Findings and conclusions on the legal frameworks

The detailed findings and conclusions on the AEOI legal frameworks for Portugal are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex C).

CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.

Determination: In Place

Portugal’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).

SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.

Findings:

Portugal has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.

Findings:

Portugal has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.

Findings:

Portugal has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.

Findings:

Portugal has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.

Determination: In Place

Portugal’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Portugal’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Portugal and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).

SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.

Findings:

Portugal has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.

Recommendations:

No recommendations made.

SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.

Findings:

Portugal put in place its exchange agreements without undue delay.

Recommendations:

No recommendations made.

SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.

Findings:

Portugal’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.

Recommendations:

No recommendations made.

Assessed jurisdiction’s comments on the assessment of its legal frameworks

No comments made.

Findings and conclusions in relation to effectiveness in practice

The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Portugal are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).

CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for Jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.

Rating: On Track

Portugal’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Portugal is encouraged to continue its implementation process to ensure its ongoing effectiveness.

SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:

• an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:

  • be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);

  • include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;

  • include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and

• effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;

• effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;

• strong measures to ensure that valid self-certifications are always obtained for New Accounts;

• effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and

• effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.

Findings:

In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Portugal implemented all of the requirements in accordance with expectations. The key findings were as follows:

• Portugal has implemented a three-pillar overarching strategy in order to ensure compliance with the AEOI Standard. This is comprised of: (i) risk assessment; (ii) education and assistance for Reporting Financial Institutions; and (iii) a supervisory and enforcement system. Portugal’s compliance strategy is therefore based on a risk assessment. Portugal’s risk assessment takes into account a wide range of information sources, such as news articles and external publications, reports and questionnaires submitted by Portuguese Financial Institutions, information received from other exchange partners and discussions with financial regulators. Portugal’s strategy also facilitates compliance and incorporates a credible approach to enforcement. Portugal intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.

• Portugal has worked effectively to understand its population of Financial Institutions, utilising various relevant information sources, including the Foreign Financial Institution list for FATCA purposes, information obtained from Reporting Financial Institutions and financial supervisors, as well as information provided by exchange partners. Portugal is taking action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. Portugal intends to keep its understanding of its Financial Institution population up to date on a routine basis.

• The PTA is responsible for implementing Portugal’s compliance strategy and has the necessary powers and resources to discharge its functions. It has effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities. In particular, Portugal’s compliance activities range from cooperative engagement with the industry to questionnaires, desk-based audits and onsite visits. The equivalent of seven full time staff have been assigned within the PTA to monitor and ensure compliance by Reporting Financial Institutions. These staff also have access to IT systems and tools to conduct risk assessments. Four auditors carry out reviews and audits exclusively on compliance with the AEOI Standard. Overall, the PTA appears to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities.

• Portugal is effectively enforcing the requirements, including through the inspection of records of Reporting Financial Institutions. Sanctions have been applied to Reporting Financial Institutions that have not been compliant with their obligations contained in the domestic rules. It also appears that effective action is being taken to address the circumvention of the requirements, ensure self-certifications are obtained as required and to follow up on undocumented accounts.

• Portugal will also keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.

Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.

Table 3. Activities undertaken
Activity type	Activities undertaken
Communication and outreach	Portugal has carried out substantial communication and outreach activities, such as: (i) creating a dedicated space on the PTA’s taxpayer portal for Reporting Financial Institutions which contains user guides and examples of XML files; (ii) publication of answers to Frequently Asked Questions; (iii) two dedicated electronic mailboxes for financial institutions to directly contact PTA officials; and (iv) holding meetings and briefing sessions with financial institutions, industry associations and regulators.
Verifying that Financial Institutions are reporting as required	Portugal has carried out substantial verification activities to ensure that Financial Institutions are reporting as required. Financial institutions are required to register with the PTA for purposes of complying with the AEOI Standard. A Financial Institution that does not maintain Reportable Accounts in a particular year is obligated to file a nil return. The PTA cross-checks the FATCA Foreign Financial Institution list, information obtained from Reporting Financial Institutions and financial supervisors, as well as information provided by exchange partners to verify that Financial Institutions are reporting as required. Portugal has found many investment entities that had not registered with the PTA. It has followed up with them to ensure that these entities comply with their obligations under the AEOI Standard. While the verifications are still ongoing, interim results led to the conclusion that reportable accounts that these entities maintained had been reported by custodial institutions.
Verifying whether the information reported is complete and accurate	Portugal has sent standardised questionnaires to Financial Institutions which asked questions regarding the procedures that the Institutions have put into place to address their obligations under the AEOI Standard. The PTA has conducted a significant number of desk-based checks to verify whether the information being reported is complete and accurate. Furthermore, Portugal has conducted some onsite visits. It accordingly identified some issues, commonly concerning missing or incorrect TIN or date of birth information, or cases in which Financial Institutions, when the client was already an Account Holder, did not request self-certifications when opening new accounts. It is following up on these issues with a view to ensuring future compliance.
Enforcement	Following the activities mentioned above, Portugal has imposed sanctions on non-compliant Reporting Financial Institutions, both with respect to failure to register and failure to report complete and accurate information.

With respect to the Financial Account information collected and sent by Portugal, the presence of the key data points of the Tax Identification Numbers and dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts. These are key data point for exchange partners to effectively utilise the information.

Furthermore, eight of Portugal’s exchange partners (representing 10% of its partners) highlighted issues with respect to the information received, such as missing or invalid Tax Identification Numbers. Follow-up discussions confirmed that Portugal is aware of these issues and is seeking to improve the situation. Portugal indicated in particular that additional measures have been recently put in place, including warnings to Financial Institutions when improbable values (e.g. empty, spaces, non-alphanumeric characters) are reported for Tax Identification Numbers. More generally, many of the exchange partners that received a significant number of records from Portugal indicated that they achieved a success rate when matching the information received from Portugal with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.

Based on these findings it was concluded that, overall, Portugal is meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. It was also noted that there is room for improvement with respect to addressing the issues raised by its exchange partners. Portugal is therefore encouraged to continue its implementation process accordingly, including by addressing the recommendation made.

Recommendations:

Portugal should continue to address the issues raised by its exchange partners.

SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires Jurisdictions to:

• use all appropriate measures available under the Portugal’s domestic law to address errors or non-compliance notified to the Portugal by an exchange partner; and

• have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the Portugal of the exchange partner.

Findings:

In order to collaborate on compliance and enforcement, Portugal implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. In particular, Portugal received notifications from two partners (representing 3% of its partners) and successfully processed and resolved the issues raised by these exchange partners in a timely manner. It appears that Portugal will also notify its partners of errors or suspected non-compliance it identifies when utilising the information received.

Figure 1. Notifications received

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Portugal is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

Recommendations:

No recommendations made.

CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.

Rating: On Track

Portugal’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Portugal is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).

Findings:

Three exchange partners highlighted particular issues with respect to preparation and format of the information sent by Portugal (representing 4% of its partners). These generally related to validation errors. More generally, none of Portugal’s exchange partners reported rejecting more than 25% of the files received due to the technical requirements not being met. This is a relatively low amount when compared to other jurisdictions. It was noted that Portugal has already successfully addressed most of the issues.

Figure 2. Technical issues raised by Portugal exchange partners

Based on these findings it was concluded that, overall, Portugal is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to preparing and validating the information in accordance with the CRS XML Schema and associated requirements. Portugal is encouraged to continue its implementation process accordingly, including in relation to the area highlighted.

Recommendations:

Portugal should work with its exchange partners to address the issues raised.

SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.

Findings:

In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Portugal linked to the CTS and the CCN, which is used for exchanges within the EU.

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Portugal is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.

Findings:

Feedback from Portugal’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by Portugal and therefore with respect to Portugal’s implementation of this requirement.

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to exchanging the information in a timely manner. Portugal is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.

Findings:

Feedback from Portugal’s exchange partners did not raise any concerns with respect to Portugal’s use of the agreed transmission methods and therefore with Portugal’s implementation of this requirement.

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Portugal is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending Jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.

Findings:

Two exchange partners highlighted delays in the sending of status messages by Portugal, representing 2% of its partners. It was noted that Portugal appears to be successfully addressing the issues to ensure that status messages are sent in accordance with the requirements.

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to the receipt of the information. Portugal is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, Jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.

Findings:

Portugal appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Portugal’s exchange partners and therefore with respect to Portugal’s implementation of this requirement.

Based on these findings it was concluded that Portugal is fully meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Portugal is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

Assessed jurisdiction’s comments on the assessment of effectiveness in practice

No comments made.

Notes

← 1. Andorra, Liechtenstein, Monaco, San Marino and Switzerland.

← 2. With Hong Kong (China).