Tax Treaty Case Law around the Globe 2012

Portugal: The Meaning of Royalties and Payments for Software

19.1. Introduction

To write this chapter, the author has used a word processor. The case considered here was downloaded from a website that stores all the decisions of Portuguese courts. The research preceding the writing required the use of an

Internet browser, which enabled the access to the catalogues of online libraries. Articles were downloaded and some of them were later read on a tablet.

Modern life relies on computerized programs, procedures or algorithms (and related data) that instruct a machine on how, when and where to perform a certain action (in the broad sense of the term). When John Wilder Turkey coined the term “software” approximately 60 years ago, he was far from predicting the role that it would play in daily life, or that there would be a heated debate about the cross-border tax treatment of those informatics procedures and algorithms.

In fact, and in order to benefit from those programs, the acquirer normally must pay some consideration. In most jurisdictions, these amounts are considered taxable income. When a cross-border payment is made, some questions arise. Is the amount taxable? Who should be taxed?...