What is an SGPS and what is it for?
The SGPS is the Portuguese holding company, governed by the Código do IRC. Its corporate purpose is the management of shareholdings in other companies: centralising ownership of subsidiaries, receiving dividends and organising the group's divestments.
It is the functional equivalent of the Spanish ETVE, but with a broader exemption regime and fewer activity requirements. The investee companies do not have to be in Portugal: you can use an SGPS to hold shareholdings in Spain, in other EU countries or outside the EU.
Holding company in Portugal: the participation exemption
The main advantage of a holding company in Portugal is the participation exemption under article 51 of the Código do IRC. In practice, the dividends the SGPS receives from its investees and the capital gains obtained from selling shareholdings are 100% exempt.
This means that the profit obtained from selling a subsidiary, or the dividends distributed each year, are not taxed in the Portuguese holding company. Deferral and exemption allow capital to be reinvested without intermediate tax leakage.
Compared with other regimes that only exempt a percentage or require consolidation, Portugal applies the full exemption when the requirements are met.
Requirements to apply the exemption
These requirements are assessed at the time the dividend is received or the capital gain is realised, so it is advisable to plan the structure before buying or selling.
Key points
- A shareholding of at least 10% of the capital or voting rights, or an acquisition value exceeding EUR 20 million.
- A minimum holding period of 12 months in the investee's capital.
- The investee must be subject to a tax equivalent to IRC (EU companies meet this).
- The investee cannot be domiciled in a territory considered a tax haven.
Advantages compared with other countries
Portugal competes directly with other European jurisdictions to attract holdings. Its participation exemption, its network of double taxation treaties and its EU membership make it especially useful for groups with interests between Spain and the rest of Europe.
Unlike Andorra (10% corporate tax) or Dubai (9% corporate tax), the Portuguese exemption allows dividends and capital gains from operating subsidiaries to be taxed at a zero rate in the holding company, not just at a reduced rate.
In addition, the double taxation treaty between Spain and Portugal prevents double taxation when you distribute profits from the SGPS to Spain.
What the SGPS requires to be set up
Setting up an SGPS follows the same process as any Portuguese company: obtaining the NIF, reserving the company name, public deed and registration with the Autoridade Tributária. The usual timeframe is 4 to 8 weeks.
Setting up an SGPS requires a corporate purpose of holding stakes, a seat in Portugal, organised accounting and share capital in line with the project. Registration usually takes 4 to 8 weeks.
