Double Tax Treaty between Portugal and the United Kingdom

On the 20th of January 2026, Notice no. 1/2026/1 was published in the Diário da República, formally confirming the entry into force of the new Double Tax Treaty (“DTT”) between Portugal and the United Kingdom.

The abovementioned Notice confirms that the new provisions apply to taxable events occurring from the 1st of January 2026 onwards.

Notwithstanding, the fact that the Notice was only published in the 20th of January 2026 raises some queries on the effective entry into force of the provisions of the DTT, which should be borne in mind when interpreting the new provisions.

Against this backdrop, please find below a brief overview of the amendments introduced by the new Portugal-UK Double Tax Treaty, within the scope of international double taxation.

Key changes under the new Portugal–United Kingdom DTT

Dividends

Withholding tax rates are revised, as well as the participation requirements for access to reduced rates.
Interest

Withholding tax rates are amended, in certain situations.
Royalties

The definition of royalties is adjusted, impacting the taxation of certain income related to intellectual property and the use of equipment.
Capital Gains

Cumulative taxing rights are introduced on the disposal of shares or equity interests when such interests have derived, directly or indirectly, most of their value from real estate assets.

Other relevant provisions of the Agreement

The DTT also introduces a specific rule to address the distribution of income by UK trusts and estates to beneficiaries resident in Portugal.

In addition to the above changes, the new text of the DTT enshrines the “principal purpose test,” allowing tax authorities to deny the benefits provided under the DTT where one of the main purposes of a transaction is precisely to obtain those benefits.

KPMG will continue to monitor developments on this matter and remains available to provide any clarifications regarding this topic.