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Nevertheless, Portuguese law properly allowed certain free transfers (gifts) under the stamp duty law to be properly taxed. This assessment could apply to contributions of a Portuguese agent to a trust, in which the trust is considered a non-resident partner and the transferred assets are considered to be established in Portugal. These circumstances were the exception rather than the rule. Historically, transfers to trustees or distributions of directors in Portugal were not subject to income tax. Income tax involves a specific measure (work, investment, consideration) of the beneficiary. Portugal has not ratified the Hague Convention on the Recognition of Foreign Trusts nor should it do so in the near future. Foreign trusts exist as agreements, although they are generally unknown and do not have civil legislation to deal with them in a targeted and comprehensive manner. The analysis of the applicable legal framework must take into account the key characteristics of the trust, including the obligations of the parties and the impact on the trust. In this context, foreign trusts are subject to the general provisions of the Portuguese Civil Code relating to international private affairs.

Under these rules, a trust must be interpreted as a bilateral agreement that gives rise to reciprocal obligations for the parties concerned (the administrator and the agent). Yes, yes. In the 2015 budget, Portugal began to formally recognize trusts in current legislation. These statutes define trusts as “tailored fiduciary structures” and are now subject to evaluation. Pension funds are considered “public pensions” and are collective and not tailored. They have always been assessed by Category H (pensions), not in the categories mentioned above. The tax treatment of pension funds has not changed. (1) Distributions under the trust fund, which is considered to be capital income (class E) paid to a beneficiary based in Portugal, are taxed at 28% under the Income Tax Code (CIRS). Income paid by a unit established in a legal order of law is taxed at 35% and not at the normal rate; 2. Distributions on the dissolution of the trust are: a. As capital gains (class G), if the beneficiary residing in Portugal is the headquarters of the trust which, according to the CIRS, is taxed at the current rate of 28%.

However, the liquidation of a trust is not subject to capital gains tax if the beneficiary is different from the lessor; B. Qualified as a gift if the beneficiary residing in Portugal is not the agent of the trust and is taxed at a general rate of 10% according to the stamp tax code (only if the income, either in cash or in wealth, must be considered resident in Portugal). c. A beneficiary who is related to the settlor (spouse, ascendant or descendant) may benefit from an exemption from this tax.