Press Release: Direct taxes: The Commission requests Portugal to end discrimination against non-Portuguese service providers

The European Commission has sent Portugal a formal request to amend its legislation concerning the tax rules according to which non-resident entities providing services in Portugal are subject to a withholding tax based on the gross amount of their income, whereas domestic providers are taxed only on their net profits. The Commission considers that these rules are incompatible with the EC Treaty, which guarantees the free provision of services. The request is in the form of a ‘reasoned opinion’ under Article 226 of the EC Treaty. If Portugal does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the Court.