The Portuguese Controlled Foreign Company (CFC) Rule corresponds to Article 66 of the CIT Code.
This Article 66 was modified according the Directive (EU) 2016/1164 of 12 July 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market (ATAD 1) [see Portuguese Law 32/2019, of 3 May].
According number 1 of the Article 66, the CFC regime applies to non-resident profit/income subjected to a clearly more favourable tax regime and if the Portuguese resident entity detains, directly or indirectly, at least 25% of the capital, of the voting rights or of the rights over the income or property elements of said non-resident entity.
This CFC regime is not applicable when the non-resident entity is resident or establish in another European Union Member State or in an Economic European Space Member State that is subject to the tax administrative cooperation equivalent to the one established at the European Union level and if the taxpayer demonstrates that the existence and operation of the entity correspond to valid economic reasons and it develops an economic activity of agriculture, commerce, industry or services, using people, equipment, assets and facilities.