Taxation of an LDA in Portugal: principles, mechanisms and interactions with the manager's situation

Legal framework and points to watch out for

The taxation of a Portuguese LDA is based on rules specific to Portuguese tax law, but it cannot be analyzed in isolation when the manager or partner is a tax resident of another state, notably Portugal. France.

In practice, taxation of the company, taxation of the income received by the executive and cross-border reporting obligations interact closely.

The LDA is a legally valid and fiscally regulated structure, but it does not, on its own, neutralize the territoriality or tax residence rules applicable to the manager.

There are limits, and clearly identified risks, in the event of dissociation between legal structure and economic reality.

Each situation depends on a set of legal, tax and factual factors that need to be assessed as a whole.

A Portuguese LDA managed from abroad may, in certain cases, expose its manager or the structure itself to requalification risks, This is particularly important from the point of view of foreign, and especially French, tax authorities.

The question is therefore not limited to the legal creation of the company, but to the real structural coherence.

Frame applicable law

Visit LDA (Sociedade por Quotas)

is a company incorporated under Portuguese law, subject in principle to Portuguese corporate income tax when its registered office and its effective leadership are located on the Portugal.

There are several levels of tax rules:

Portuguese domestic tax law applicable to the company; ;
the tax law of the state of residence of the manager or partner; ;
international tax treaties for the avoidance of double taxation ;
European and international rules on permanent establishment and effective management.

In principle, a company is taxed in the state in which it is considered to be resident for tax purposes. This residence depends not only on the place of incorporation, but also on the country of incorporation. the place where strategic decisions are actually made.

The aim of the Franco-Portuguese tax treaty is to allocate the right to tax between the two countries, but it does not preclude an analysis based on the facts when the economic reality does not correspond to the legal structure.

What this structure really does

From a strictly legal and fiscal point of view, an LDA enables :

carry on business in Portugal in a recognized corporate form; ;
have a legal personality distinct from that of the manager or partners; ;
be subject to Portuguese corporation tax on profits; ;
enter into contracts, employ staff and hold assets on behalf of the company.

From a tax point of view, the company is taxed on its results according to Portuguese rules, independently, in principle, of the personal situation of its partners.

However, this structure does not automatically modify :

the executive's personal tax residence ;
the tax treatment of income received; ;
reporting obligations in its country of residence.

The distinction between company taxation and executive taxation remains central.

LDA taxation mechanisms

LDA taxation is based mainly on :

Portuguese corporation tax, calculated on taxable profit; ;
any applicable local taxes or surcharges; ;
taxation of dividend distributions ;
taxation of executive remuneration.

When income is paid to a non-Portuguese resident executive, mechanisms for withholding tax or taxation in the country of residence may apply, depending on the nature of the income and the tax treaties in force.

These mechanisms require a precise analysis of the financial flows between the company and the executive.

Limits and points of vigilance

The LDA has several structural limitations that need to be clearly identified:

it does not make it possible to artificially isolate the economic activity from the person running it; ;
it does not preclude the rules relating to the effective leadership ;
it does not exempt from cross-border reporting obligations; ;
it does not prevent the tax authorities from examining the overall coherence of the arrangement.

The main points of vigilance concern :

the actual location of strategic decisions ;
the existence or otherwise of economic substance in Portugal; ;
effective separation of personal and corporate finances; ;
consistency between the manager's remuneration and the activity carried out.

These factors play a decisive role in risk assessment.

Concrete risks

Tax requalification of the company

When effective management is deemed to be exercised from France, the company can be considered as a French resident for tax purposes.

In this case, the income may be taxed in France.

Permanent establishment status

If the activity is carried out on a regular basis from France on behalf of the LDA, a permanent establishment can be characterized, entailing partial or total taxation in France.

Double taxation

Poor coordination between tax systems can lead to economic or legal double taxation, necessitating sometimes lengthy and complex correction procedures.

Sanctions and penalties

Failure to comply with declarations or requalification may result in :

tax reminders ;
interest on arrears ;
tax penalties.

These risks arise mainly when the legal structure does not reflect the reality of the business.

When this option might make sense

The creation and operation of an LDA can be coherent when :

a real economic activity is carried out in Portugal; ;
the company has its own resources and autonomous organization; ;
strategic decisions are taken locally; ;
the manager accepts the associated administrative and reporting complexity.

Relevance is always assessed in terms of global context.

When it is not

This structure is generally unsuitable when :

the activity is carried out exclusively from France; ;
the company has no real substance; ;
the manager concentrates all operational decisions in his home country; ;
the LDA is used simply as a billing vehicle.

In these situations, the risk of being called into question is high.

The role of WizeCounsel support

WizeCounsel's role is one of analysis and clarification:

reading the applicable legal and tax framework ;
identification of points of vigilance and interactions between states ;
putting potential risks into perspective ;
help in understanding reporting obligations.

This intervention is informative and analytical. It does not constitute personalized advice or a promise of results.

F.A.Q

Is the taxation of an LDA independent of that of the manager?

No. The two levels interact, notably via remuneration and dividend flows.

Does an LDA guarantee taxation only in Portugal?

No. Taxation depends on tax residence and effective management.

Are dividends always taxed in Portugal?

No. Their taxation depends on the beneficiary's tax residence and the applicable treaties.

Can an executive work from France without tax consequences?

This depends on the scale and nature of the activity carried out from France.

Is there a universal, risk-free solution?

No. Every situation must be assessed on its own merits.