LDA in Portugal: what are the risks of tax requalification in France?

Legal framework and points to watch out for

The ownership or operation of a Portuguese LDA by a French tax resident may, in certain cases, result in a risk of tax requalification in France. This risk arises when the tax authorities consider that the company is, in fact, managed or operated from France, or that it constitutes a mere extension of the manager's personal business.

The legal framework is based on precise criteria: place of effective management, economic reality, substanceand compliance with reporting obligations.

The LDA is a legally recognized structure, but it does not in itself neutralize French tax territoriality rules.

Risks are neither automatic nor systematic, but exist in identifiable and documented situations.

An overall analysis of the context is essential to assess the relevance and limitations of this structure.

Frame applicable law

Visit LDA (Sociedade por Quotas) is a Portuguese company, subject in principle to corporate income tax in Portugal, when its registered office and effective management are located there.

From the French point of view, several legal systems may come into play:

The rules of tax residence of companies, based in particular on the place of effective management.
The notion of’permanent establishment, This is the result of both domestic law and international tax treaties.
The provisions relating to’abuse of right and legal fictivity, when the structure does not correspond to an autonomous economic reality.
French reporting requirements for foreign holdings.

Visit tax treaty between the France and the Portugal is designed to avoid double taxation, but it does not preclude reclassification if the material criteria are not met.

In principle, the company's formal location is not sufficient: the analysis is based on facts.

What this structure really does

In strictly legal terms, a Portuguese LDA allows :

Carry on business in Portugal under a recognized corporate form.
Have a legal personality distinct from that of its associate(s).
To be subject to Portuguese commercial, social and tax law, when the activity is actually carried out there.
Employ local staff, enter into contracts with customers and suppliers, and operate its own material resources.

In practice, these effects imply :

A real business located in Portugal.
A autonomous organization of the company.
The ability to demonstrate that strategic decisions are taken outside France.

The structure does not, in itself, modify an executive's personal tax situation or automatically exclude French taxation.

Limits and points of vigilance

The LDA has several important limitations from the French point of view:

It does not make the personal tax residence of the manager.
It does not neutralize French rules relating to the place of effective management.
It does not dispense with declarations of foreign shareholdings.
This does not prevent the French authorities from examining the reality of the activity carried out.

Areas of particular concern include :

Concentration of decision-making in France.
Lack of human or material resources in Portugal.
Using the company simply as a billing structure.
Confusion between the company's accounts and those of the partner.

These factors do not automatically lead to requalification, but they are classic warning signs.

Concrete risks

Tax requalification of the company

The company may be considered as resident in France for tax purposes if the effective management is located there.

In this case, corporate income tax could be levied in France on worldwide earnings.

Permanent establishment status

When the activity is carried out from France on behalf of the LDA, a permanent establishment may be considered, resulting in partial or total taxation in France.

Double taxation

In the absence of proper coordination or sufficient documentation, competing impositions can arise, necessitating lengthy and uncertain correction procedures.

Sanctions and penalties

Depending on the circumstances, tax penalties, interest and surcharges may be applied in the event of failure to file declarations or requalification.

These risks arise mainly when the structure is dissociated from operational reality.

When this option might make sense

Holding or operating an LDA can be consistent when:

An economic activity is effectively developed in Portugal.
Strategic decisions are made locally.
The company has its own human, technical and commercial resources.
The manager accepts the complexity of declarations associated with a cross-border structure.
The project is part of a real international professional context.

Relevance is based on the overall coherence between structure, activity and personal situation.

When it is not

This option is generally unsuitable when :

The business is conducted exclusively from France.
The company has no real substance.
The manager retains full operational control from France.
The LDA is used solely as a billing tool.
Reporting obligations are ignored or downplayed.

In these situations, the risk of a challenge is significantly increased.

The role of WizeCounsel support

WizeCounsel takes on the role of’analysis and clarification :

Reading the applicable legal framework.
Identification of points of vigilance under French and international law.
Putting potential risks into perspective, with no promises or prescriptive recommendations.
Helps you understand the interactions between corporate structure and personal situation.

Our intervention is limited to providing information and analysis, without replacing the advice of a lawyer or chartered accountant.

F.A.Q

Does an LDA automatically protect against taxation in France?

No. Protection depends on the reality of the activity and the actual place of management.

Does the simple fact of being a partner in an LDA pose a tax problem?

In principle, no, but there are reporting obligations.

Is a Portuguese address enough to avoid requalification?

No. The authorities examine the facts, not just the formal elements.

Is telecommuting from France a risk?

It may become so if the activity is mainly carried out from France.

Does the France-Portugal tax treaty prevent any challenges?

No. It provides a framework for double taxation situations, but does not rule out a reclassification based on the facts.