🇬🇧 United Kingdom — 🇵🇹 Portugal

Tax Treaty / Double Tax Avoidance Agreement detail

The UK-Portugal Double Taxation Convention was signed on 27 March 1968 and has been in force since 1969. It is one of the older bilateral treaties still in operation and reflects the negotiating norms of the late 1960s. Despite its age, it has not been replaced, and its higher withholding rates compared to more modern treaties continue to affect cross-border investment flows. A protocol was agreed in 1994 to amend certain provisions. Dividends paid to a corporate shareholder owning at least 25% of the paying company are subject to 10% withholding; a 15% rate applies in all other cases. Portugal's domestic dividend withholding rate for non-residents is 28%, making the treaty a meaningful reduction but less generous than newer OECD-model treaties. Interest is subject to 10% withholding under the treaty, compared to Portugal's domestic 28%. Royalties face a reduced rate of 5%. The treaty pre-dates modern Limitation on Benefits provisions and lacks a comprehensive anti-abuse article. Anti-treaty shopping relies primarily on Portuguese domestic GAAR provisions and, where applicable, the OECD BEPS Multilateral Instrument (MLI). Both the UK and Portugal have signed the MLI, and certain BEPS minimum standards (including PPT—the principal purpose test) now apply to modify this treaty. The residency tie-breaking cascade follows the standard OECD approach. Portugal's Non-Habitual Resident (NHR) tax regime and its successor scheme interact with the treaty in complex ways for UK retirees and remote workers relocating to Portugal. A bilateral social security agreement co-ordinates contributions and benefits for cross-border workers post-Brexit.