New Ruling: Cash Liquidation from Foreign Trusts (Now) Subject to Stamp Tax?
A new binding tax ruling issued by the Portuguese tax authorities introduces a significant — and controversial — departure from previous interpretations regarding the taxation of cash distributions arising from the termination of foreign trusts.
Summary of the New Ruling
The ruling (attached) confirms the following positions:
Distributions from the liquidation of foreign trusts (e.g., Y Sub-Fund and F Trust) to Portuguese tax resident beneficiaries (who are not the settlors) are considered gratuitous transfers for Portuguese Stamp Tax purposes.
Participations in foreign companies (e.g., Malta-resident entities) are not subject to Stamp Tax, provided the companies have no Portuguese nexus (no seat, effective management, or permanent establishment in Portugal).
However, cash distributions resulting from the termination of such trusts are considered taxable, even when: (i) the funds are held in non-Portuguese financial institutions (e.g., Isle of Man), (ii) and are transferred directly to foreign bank accounts (e.g., Ireland) held by the Portuguese-resident beneficiary.
Key Issue: Cash Transfers vs. Deposits
The ruling introduces a technical and novel distinction between:
Cash “deposited” in a foreign bank (considered outside the scope of Portuguese taxation), and
Cash “transferred” via a bank credit operation, which the authorities now characterize as a scriptural movement, not a deposit.
As a result, the Portuguese Tax Authorities conclude that because the cash is not held in a deposit account at the moment of the trust's liquidation, it does not benefit from the territoriality exemption, and becomes taxable solely due to the beneficiary’s Portuguese residency (fallback rule).
Why This Is Problematic
Kore Partners respectfully disagrees with this interpretation, which we consider legally fragile, particularly due to the following concerns:
Misapplication of 2023 Crypto-Related Amendments. The ruling appears to stretch the 2023 legislative changes that brought cryptoassets within the stamp tax net to extend the concept for traditional cash transfers — despite no change in statutory language or intent that would support such an extension. The Law excludes from territoriality: “monetary values (…) deposited in institutions with headquarters, effective management or permanent establishment outside Portugal”. “Monetary values” has always meant cash held in foreign accounts.
Break from Precedents & Erosion of the Territoriality Principle. Earlier tax rulings consistently upheld that foreign trust liquidations involving non-Portuguese assets and beneficiaries (not the original settlors) were not subject to Portuguese Stamp Tax. Historically, stamp tax required a clear Portuguese connection — whether through real property, credits, shares, bank location, or presence.
Formalistic Interpretation of Cross-Border Transfers. Treating a transfer from a trustee’s account in the Isle of Man to a beneficiary’s Irish account as not involving a deposit is a technical and economically unrealistic distinction with limited legal basis. This interpretation appears inconsistent with the broader legislative and systemic use of the term "valores monetários" (“monetary values”) across the Stamp Tax Code. In fact, a contextual and systemic interpretation points strongly in the opposite direction.
Next Steps
Kore Partners will continue to monitor developments and will support clients in navigating the implications of this ruling. We anticipate this interpretation may be challenged in Courts. If you have questions about this ruling or how it may affect your estate planning or trust structures, please reach out to your Kore Partners contact or email us at kore@korepartners.com.
© Kore Partners, 2025
This briefing provides for general information and is not intended to be an exhaustive statement of the law. Although we have taken care to provide accurate information, this should not replace legal advice tailored to your specific circumstances. This briefing is intended for the use of clients and selected recipients. Queries or comments regarding this, including joining our mailing list, can be directed to kore@korepartners.com