The recent ruling of Spain’s Audiencia Nacional acquitting the artist Shakira of tax fraud charges, and ordering the Spanish State to return more than €60 million in fines, interest and proceedings-related payments, is an illustrative foreign precedent, not directly binding in Portuguese law, but it brings back to the centre of the European tax debate an old question with direct implications for tax structuring for artists and athletes in Portugal: how far can a tax authority go, on the argument that the underlying performance is personal in nature, in disregarding the corporate structure through which an entertainer or sportsperson professionally organises their activity?
Under Portuguese tax law, a company may legitimately invoice income derived from the image, performance and personal output of artists and athletes. The Portuguese Corporate Income Tax Code (CIRC, Article 4(3)(d)), the legislative preamble to Decree-Law 37/95, Article 12(3) of the Personal Income Tax Code (CIRS), the OECD Model Tax Convention (Article 17(2)), and EU law all expressly contemplate this. Portugal’s post-ATAD General Anti-Avoidance Rule (GAAR) only applies to non-genuine arrangements lacking economic substance.
Can a company invoice an artist’s or athlete’s personal performance under Portuguese tax law?
The answer is affirmative and rests on the express wording of the Portuguese Corporate Income Tax Code, reinforced by the legislative preamble that introduced the current regime. Article 4(3)(d) of the CIRC deems Portuguese-source, for purposes of corporate income tax liability of non-resident entities, the “income derived from the exercise in Portuguese territory of the activity of professional entertainers or sportspersons”.
The legislator’s intent was set out expressly in the preamble to Decree-Law 37/95, which introduced this wording: the income derived from the activity of entertainers and sportspersons in Portuguese territory should be taxed in Portugal, “whether earned directly by such professionals or obtained through corporate income tax taxpayers controlled by them”. The same diploma amended the Personal Income Tax Code accordingly: Article 12(3) of the CIRS today excludes from IRS the entertainer’s or sportsperson’s income whenever it is taxed under corporate income tax pursuant to Article 4(3)(d) of the CIRC. The Portuguese legal order therefore, not only admits but expressly anticipates the interposition of a company, including one controlled by the artist or athlete themselves, that earns the income and submits it to corporate income tax.
The same logic is confirmed by the tax transparency regime set out in Article 6 of the CIRC. When the Portuguese legislator decided that certain professional services companies, formed exclusively by professionals registered with professional orders and deriving at least 75% of their income from the personal activity of their partners, should be treated as fiscally transparent, it did so expressly, exhaustively and in a calibrated manner. Outside that perimeter, the company retains autonomous tax personality and its income is taxed under corporate income tax. This legislative choice gives effect to the constitutional principles of legality and typicity in tax law (Articles 103(2) and 165(1)(i) of the Portuguese Constitution), repeatedly affirmed by the Constitutional Court.
To this we may add the targeted mechanisms of Article 88 of the CIRC (autonomous taxation of specific corporate expenses, undocumented expenses, vehicles, representation expenses, bonuses), which the Supreme Administrative Court (STA) and the Constitutional Court have characterised as single-obligation taxes on specific expenses, designed to prevent evasion and the disguised distribution of profits, rather than as a generalist “mini-General Anti-Avoidance Rule”. These surgical rules reinforce the legislative choice to respect corporate form and to attack only specifically identified behaviour.
The limits of the Portuguese General Anti-Avoidance Rule and the case law of the CAAD and STA
Portugal’s General Anti-Avoidance Rule (GAAR), set out in Article 38(2) of the General Tax Law (Lei Geral Tributária, LGT) in its post-ATAD wording introduced by Law 32/2019, disregards for tax purposes “arrangements or series of arrangements which, having been carried out with the principal purpose or one of the principal purposes of obtaining a tax advantage that frustrates the object or purpose of the applicable tax law, are carried out with abuse of legal forms or are not regarded as genuine”. The provision itself defines as “non-genuine” the arrangements not carried out for valid commercial reasons that reflect economic substance. Doctrine and case law decompose the rule analytically, rather than as a closed statutory enumeration, into cumulative elements: existence of an arrangement, principal or one of the principal purposes being the obtention of a tax advantage that frustrates the law’s purpose, abuse of legal forms or absence of valid commercial reasons reflecting economic substance, and re-characterisation according to substance.
The case law of the Centro de Arbitragem Administrativa (CAAD), Portugal’s tax arbitration centre, has consistently insisted on this evidentiary burden. CAAD ruling 317/2019-T, of 15 January 2020, systematises the GAAR around three essential elements: artificiality or abuse of forms, an essentially tax-driven purpose, and a clear legislative intention to tax the substance, and makes its application contingent on case-by-case appraisal of concrete factual evidence. The Supreme Administrative Court, in its ruling of 16 February 2022 (Proc. 0299/13.2BEPNF 0460/17), explicitly approximates the Portuguese concept of “artificial or fraudulent means” to the EU “wholly artificial arrangements” standard of Cadbury Schweppes, and affirms that legitimate tax planning consists in choosing, among lawful alternatives, the fiscally least burdensome one. The Central Administrative Court of the South, in its ruling of 22 June 2023 (Proc. 102/22.2 BEFUN), enumerates the requirements for GAAR application: existence of a tax advantage that would not arise absent the arrangement, artificiality or abuse of forms, and disapproval by the legal system as fraud on the law.
In structuring scenarios involving corporate vehicles held by individual professionals, including entertainers and sportspersons, the implication is uniform: the personal nature of the underlying performance does not, on its own, satisfy the GAAR’s evidentiary requirements. The Tax Authority must demonstrate concretely the artificiality of the arrangement, the absence of substantive business reasons, and the predominantly tax-driven purpose frustrating the spirit of the law.
Article 17(2) of the OECD Model Tax Convention on Income and on Capital confirms this reading at the international level. The provision, replicated in the bilateral conventions signed by Portugal, expressly allows that “income in respect of personal activities exercised by an entertainer or a sportsperson in that capacity accruing not to the entertainer or sportsperson but to another person may be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised”. Paragraphs 11 et seq. of the Commentary on Article 17 expressly address so-called rent-a-star companies, distinguishing arrangements with substance, entirely legitimate, from those that lack it.
At the EU law level, the case law of the Court of Justice from Cadbury Schweppes (Case C-196/04) onwards is clear: the creation of a subsidiary in another Member State cannot, in itself, found a presumption of fraud, and an anti-abuse measure is only compatible with the freedom of establishment if directed at “wholly artificial arrangements which do not reflect economic reality and whose purpose is to escape the legislation”. The personal nature of the underlying performance does not satisfy this threshold on its own.
The Madeira International Business Centre (MIBC) regime for talent companies
For artists, athletes, creative professionals and international talent that structure professionally the exploitation of their image, performance, related rights and associated commercial activities, the Madeira International Business Centre (MIBC), also known by its Portuguese acronym CINM (Centro Internacional de Negócios da Madeira), is a regional State aid regime authorised by the European Commission under Article 107(3)(a) of the Treaty on the Functioning of the European Union.
Under the regime in its successive iterations (Regime III: 3% in 2007-2009, 4% in 2010-2012, 5% from 2013; Regime IV currently in force through 2027 at 5%), licensed companies benefit from a reduced corporate income tax rate on profits resulting from activities effectively and materially carried out in the Autonomous Region of Madeira. The reduced rate is subject to taxable-base ceilings indexed to jobs created and maintained in the Region, alongside minimum investment requirements in tangible or intangible fixed assets within the regional territory.
Recent case law of the Court of Justice and the General Court of the European Union, including the Portugal v Commission line and decisions concerning specific beneficiaries (Millennium BCP Participações, TA and others), has emphasised that only profits genuinely linked to activities effectively and materially carried out in Madeira qualify for the reduced rate. Deviant applications, use of the reduced rate for profits not generated by real regional activity, have been qualified as implementation of existing aid in breach of the compatibility conditions, triggering recovery obligations.
For talent companies, this substance threshold defines both the opportunity and the boundary. A licensed MIBC company that actually performs from Madeira the central functions of international image-rights exploitation, sponsorship and endorsement management, audiovisual and phonographic rights administration, career management, tour organisation and event production, with real personnel, premises and decision-making in the Region, falls squarely within the regime’s design. It is also exactly the corporate-substance scenario contemplated by Article 4(3)(d) of the CIRC and Article 17(2) of the OECD Model. By the same token, a vehicle without real regional activity will fail not only the GAAR substance test but also expose the operator to State aid recovery proceedings.
The legally precise characterisation is therefore the following: using the MIBC to structure international talent income is not, in itself, abusive; it is admissible if, and for as long as, the substance, employment and territoriality conditions of the regime are strictly observed.
Frequently Asked Questions
Can an artist or athlete invoice their income through a company in Portugal?
Yes. The Portuguese Corporate Income Tax Code (CIRC) expressly recognises this possibility through Article 4(3)(d), reinforced by the preamble to Decree-Law 37/95 and by Article 12(3) of the Personal Income Tax Code (CIRS). The company retains autonomous tax personality and its income is taxed under corporate income tax (currently 19%), at the general applicable rate or, where conditions are met, at the reduced MIBC rate (5%) or Madeira rates (13,3%).
Can the Portuguese Tax Authority apply the General Anti-Avoidance Rule (GAAR) to these structures?
Only where the conditions of Article 38(2) of the General Tax Law (LGT), in its post-ATAD wording, are satisfied, namely, an arrangement carried out with the principal purpose or one of the principal purposes of obtaining a tax advantage that frustrates the law’s purpose, accompanied by abuse of legal forms or absence of valid commercial reasons reflecting economic substance. The Supreme Administrative Court (ruling of 16 February 2022) has aligned this standard with the EU “wholly artificial arrangements” doctrine. The personal nature of the underlying performance does not satisfy these requirements on its own.
What is the tax advantage of licensing a talent company in the MIBC?
The application of a reduced corporate income tax rate of 5% on profits resulting from activities effectively and materially carried out in the Autonomous Region of Madeira, conditional on the fulfilment of substantive requirements as to job creation and investment in the Region.
Is the MIBC regime compatible with EU law?
Yes. As a regional State aid regime authorised by the European Commission under Article 107(3)(a) TFEU. EU case law has, however, made clear that the compatibility decision depends on strict observance of the substance conditions; deviant applications are qualified as illegal aid and trigger recovery obligations.
What changed with the recent Spanish ruling in the Shakira case?
The Audiencia Nacional‘s ruling, an illustrative foreign precedent, not directly binding in Portuguese law, reinforces the evidentiary burden borne by tax administrations when characterising tax residence and, by extension, when substantively re-characterising international corporate structures. The decision aligns with the European principle that corporate legal form may only be disregarded upon concrete demonstration of artificiality, not by mere inference drawn from the personal nature of the underlying performance.
This material is provided for general informational and academic discussion purposes only and does not constitute legal, tax, accounting, investment, regulatory, or other professional advice. It should not be relied upon as a substitute for obtaining specific advice from qualified legal and tax advisers in the relevant jurisdiction.
The analysis herein reflects a general interpretation of Portuguese, European Union, and international tax principles as of the date of writing, including references to Portuguese legislation, OECD materials, administrative practice, arbitral decisions, and judicial authorities. Laws, regulations, administrative interpretations, and case law may change and may be applied differently depending on the particular facts and circumstances of each case.
References to foreign judicial decisions, including the recent Spanish proceedings involving Shakira, are included solely for comparative and illustrative purposes. Such decisions are not binding under Portuguese law and should not be interpreted as determinative of any Portuguese tax, corporate, or anti-abuse analysis.
Any corporate or tax structuring involving artists, athletes, image rights, performance income, international operations, or the Madeira International Business Centre (MIBC/CINM) regime requires a case-by-case assessment of legal, operational, accounting, and economic substance factors. The application of the Portuguese General Anti-Avoidance Rule (GAAR), State aid rules, tax residence principles, transfer pricing rules, beneficial ownership requirements, controlled foreign company rules, anti-hybrid provisions, and international reporting obligations depends on the specific factual matrix of each arrangement.
No representation or warranty, express or implied, is made as to the completeness, accuracy, reliability, or current validity of the information contained herein. To the maximum extent permitted by law, the author(s) disclaim any liability arising directly or indirectly from reliance on this material or from any action or omission taken on the basis of it.
Readers should seek independent professional advice before implementing any structure, transaction, or tax position discussed in this material.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
