GG Thinks: Portugal's Tax Blacklist Is Still Out Of Balance

Portugal's recent Ordinance 292/2025/1 (Portaria) removes Hong Kong, Liechtenstein, and Uruguay from the list of "jurisdictions with clearly more favorable tax regimes." These jurisdictions had not appeared on the EU's black or grey lists of non-cooperative jurisdictions for several years — a factor that likely led the Portuguese Tax Authorities to accept their formal requests for removal from the national list.

This is a welcome update: the review mechanism is active, the list is evolving, and jurisdictions can in fact be delisted. Considering that several Chinese-controlled groups operate in Portugal through structures headquartered in Hong Kong — a sophisticated and long-established financial hub — this development is particularly positive.

However, the list still includes a number of jurisdictions — islands in the Caribbean, Indian, and Pacific Oceans, as well as several in Europe, Africa, the Middle East, and Central America, to name a few. Under Ordinance 150/2004 (as amended) and Article 63-D of the Portuguese General Tax Law, any link to a listed jurisdiction automatically triggers a presumption — or even an assumption — of tax abuse, without giving the taxpayer an opportunity to prove otherwise. This mechanism raises serious doubts about compliance with constitutional principles of equality and proportionality. In practice, Portugal's approach remains stricter than the more flexible standards applied under EU instruments, and the rationale for maintaining such a blacklist deserves closer scrutiny. The consequences are extensive: higher tax rates, non-deductibility of expenses, aggravated autonomous taxation, application of CFC rules, reversal of the usual burden-of-proof principles, limited access to benefits and exemptions, and stricter withholding and documentation requirements.

Even so, legitimate business activities may involve listed jurisdictions for reasons entirely unrelated to tax avoidance. It is worth noting that several of these jurisdictions — such as the United Arab Emirates (UAE) — are parties to Double Taxation Treaties and/or Bilateral Investment Treaties with Portugal. This raises a question: how can a presumption of tax avoidance that triggers higher taxation be reconciled with treaties designed to promote and protect investment by Portuguese residents abroad, including in the UAE? Given the heavy evidentiary burden and the risk of penalties, many taxpayers are effectively discouraged from maintaining valid cross-border structures.

The blacklist regime raises issues under two constitutional principles:

1. Equality / Non-Discrimination. Taxpayers with economically similar arrangements may be treated differently solely because of territorial connection, without any meaningful individualized assessment.

2. Proportionality. The presumption of abuse is overly broad, capturing low-risk or non-abusive situations. More balanced tools - such as rebuttable presumptions or safe harbors - could target genuine abuse more precisely.

By contrast, EU-level instruments — including the EU list of non-cooperative jurisdictions — allow for greater nuance in assessment, contestation, and procedural fairness. Aligning the Portuguese regime with these standards would reduce legal risk and promote closer compliance with both constitutional and EU law principles.

For multinational groups, financial services, holding companies, and other affected sectors, this rigid presumption regime may discourage legitimate cross-border investment or even push structures toward greater opacity — simply to avoid being labelled abusive and subjected to higher tax rates.

In this context, practitioners, taxpayers with cross-border interests, and policymakers should treat the 2025 Ordinance as a beginning, not an end. The real task ahead is to reform the legal architecture of the blacklisting regime — not merely to adjust its content. Each stakeholder has a role to play in challenging and reshaping this framework so that it better upholds the fundamental principles that should guide it.

Taxpayers and legal advisors should continue to advocate for stronger procedural safeguards, genuine opportunities for rebuttal, and greater transparency in the criteria applied. They should also challenge — and, when necessary, litigate against — tax administration decisions that rely on blanket presumptions without adequate individual assessment.

On the side of regulators and legislators, a move toward more flexible rules should be considered — allowing taxpayers to present counter-evidence, establishing safe-harbor mechanisms, and limiting presumptions to cases of clear and significant risk. Such measures would help ensure compliance with constitutional principles of equality and proportionality and bring the Portuguese framework more closely in line with EU standards.

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