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Portugal Requires Master and Local Files—Finally

28th December 2021

More and more countries are officially aligning their transfer pricing documentation with OECD Guidelines. The latest to join the fold? Portugal. A ministerial order, released in November, has replaced guidance dating all the way back to December 2001. The guidance focuses on transfer pricing documentation requirements. Effective January 1, 2016, Portugal did begin to require the OECD BEPS Action 13 country-by-country report, but not the master file and local file.  The transfer pricing documentation required in the 2001 ministerial order did cover much of the same information that BEPS Action 13 recommends, but now the country wants the real thing. Starting with tax periods after January 1, 2021, multinational taxpayers will have to complete the master and local files, along with the country-by-country report. The good news? Not every company has to prepare documentation. Portugal exempts taxpayers with annual revenues less than EUR 10 million, those that are reporting on individual controlled transactions in amounts of less than EUR 100,000 each, and combined transactions of less than EUR 500,000. For taxpayers who meet certain requirements, there’s a simplified file. A second ministerial order was published regarding advanced pricing agreements, or APAs as they’re known. For APAs, the news is pretty straightforward: Portugal’s new guidance establishes processes and procedures and mandates an APAs maximum term of four years. That may not seem long in contract terms, the government does allow for the possibility of applying the APA retroactively to previous fiscal years.