Fund Taxation Alert 2025-17
Portugal: CJEU provides guidance on evidence required to show eligibility for withholding‑tax exemptions for non‑resident pension funds.
CJEU provides guidance on evidence required to show eligibility for withholding‑tax
Background
Circular Letter 6/2009 sets out that for non-resident investment funds and pension funds, the application of the DTT depends on the fulfilment of all the following requirements:
- The fund is considered a “person” for the purposes of the respective DTT, and
- The fund is subject to tax imposed on a personal and unlimited basis and is not treated as fiscally transparent (that is, it must be subject to tax in its country of residence, independently of the taxation that may occur at the level of the fund participants); and
- The fund is the beneficial owner of the income received.
Recent development
The CJEU held in C‑525/24 that Portuguese rules requiring non‑resident pension funds to submit a certified declaration from their home‑state supervisory authority to obtain a withholding‑tax exemption can restrict the free movement of capital because resident and non‑resident funds are objectively comparable. Such a declaration may be justified for exemption at source only if (1) the foreign supervisory authority has the power to issue it, (2) it can be obtained within a reasonable timeframe, and (3) no equally effective, less restrictive alternative exists. Whether these conditions are met and whether the measure is proportionate is for the national court to decide.
However, the Court found that making that certified declaration the exclusive means of proof for refund claims after tax has been withheld is disproportionate. For refunds, national authorities must accept other credible evidence and may verify entitlement through existing mutual administrative‑cooperation mechanisms rather than reject claims solely because the supervisory certificate is absent.
For further details please access our EU Tax Center Newsletter.
KPMG comment
The CJEU’s decision in C‑525/24 may prompt other EU Member States to reassess national rules that impose stricter documentary requirements on non‑resident investment vehicles (investment funds, pension funds) than those applied to resident counterparts. Where substantive tax benefits are available to both residents and non‑resident entities, national authorities should avoid exclusive or unduly burdensome proof requirements for non‑residents, especially in refund procedures, because similar measures risk being found incompatible with the free movement of capital.