Portugal removed Cyprus from black list

Portugal’s Ministry of Finance published amendments to the country’s tax haven list (“blacklist”) on 8 November 2011, resulting in the removal of Cyprus from the list (as well as Luxembourg 1929 holding companies)

The elimination of Cyprus, which is effectively immediately, was made to bring Portugal into full compliance with the relevant EU directives, such as the mutual assistance directive in the field of direct taxation. Portugal’s legislation had been in breach of EU law by including Cyprus – an EU member state – in its blacklist and thus treating Cyprus in a discriminatory manner.

Removal of Cyprus from the black list will have the following effects:
• Portugal’s CFC rules should generally not apply to Cypriot companies;
• Payments made by Portuguese entities to Cyprus entities will be generally deductible for Portuguese tax purposes;
• Cyprus entities will be able to benefit from Portugal’s capital gains tax exemption under the normal rules;
• Interest income and capital gains from registered debt securities generally will be exempt from Portuguese tax; and
• The real estate tax payable by Cyprus owners and/or acquirers of Portuguese property will apply at the standard rates.