Tax Treaty Case Law around the Globe 2022

4.1. Introduction

This case handles the issue of a withholding tax exemption, on dividends accrued to non-resident entities in the national territory. It concerns a trust resident in Canada, and its entitlement to the bilateral tax treaty between Canada and Portugal. It also concerns beneficial ownership and the burden of proof on beneficial ownership. It was judged in the second instance, by the South Central Administrative Court, by appeal of the tax authorities.

4.2. Facts of the case

In the Court of First Instance, the following facts were proven: A is a mutual fund, operating through a trust. In 2007, A was resident in Canada, for the purposes of article 4 of the Canada-Portugal Income Tax Treaty (1999). In 2007 and 2008, A delivered its income tax return in Canada. It held participations in an entity with the head office in the Portuguese territory (thus, resident in Portugal). As a consequence of those participations, the Portuguese entity paid dividends to A in the amount of EUR 2,733,494.37.

Those dividends were submitted to withholding tax in the Portuguese territory (EUR 546,698.87).

In 2009, taxpayer B S.A. asked for the reimbursement of the withholding tax on dividends, i...