The law decree in question was approved by the government at the end of April, but the details of the new legislation only emerged this week following a report published by financial newspaper Jornal de Negócios.
The law was created following the issuing of an EU directive seeking to facilitate the exchange of banking information among member states in a bid to combat tax fraud.
The information obtained from accounts held by residents in Portugal is expected to be used to investigate suspicions of tax evasion, while the details of non-residents will be passed on to their respective countries of origin.
According to Jornal de Negócios, all banking information of individual clients will be passed on to the taxman, irrespective of their bank balances.
As for companies, those who have active accounts prior to December 2015 will only see their financial details revealed to the taxman should they boast bank balances in excess of 250,000 US dollars.
Currently, the only information banks are compelled to disclose are interest or dividend payments received by their clients.
With Portugal set to provide details of non-residents to their home countries, the same will apply in return, with the taxman here set to be given information by foreign banks of Portuguese national’s bank balances abroad.
The legislation voted through in April, comes after the National Data Protection Commission (CNPD) ruled against a similar decree in February. It would appear that with this new law, the government believes it has made the necessary amendments to push through the legislation.
The CNPD decision at the beginning of the year was made after the inclusion of a stipulation in the 2016 state budget that financial institutions upload the balances of their customers to the Tax and Customs Authority’s (AT) database.
The CNPD’s veto of the proposal, which was made on 23 February is reportedly based on the argument that the Government would be infringing ordinary citizens’ rights by forcing banks to hand over this sensitive data.
At the beginning of 2015, the previous government approved legislation whereby in addition to allowing the taxman access to pension funds, retirement and insurance plans, which had been protected by bank secrecy laws, it also sought to allow foreign countries to gain access to Portuguese bank accounts.
Under this particular proposal, countries with which Portugal shares a Dual Taxation Agreement, which include most western nations, would be able to solicit access to Portuguese bank accounts or from other financial institutions.
A feature of this law is the provision that requests from abroad could be pushed through without a bank account holder being forewarned by tax officials.
According to the legislation, this type of scenario would be justifiable should the request from an international country be deemed urgent and that prior notification to bank account holders could hamper the task of investigators.
This was also seen as a move to increase bilateral cooperation, and was motivated by Portuguese tax authorities having their “goodwill” reciprocated by other countries whenever the taxman here suspects an individual or company of having undeclared income obtained in Portugal transferred to an account abroad.
Bank secrecy was relaxed back in 2009 under the previous Socialist cabinet, when the government brought in new legislation that saw the onus of proof being inverted.
This means that the taxpayer now needs to provide evidence of compliance with tax laws whenever a cloud of suspicion arises over financial history or when apparent signs of wealth emerge which are deemed incompatible with declared earnings.
Previously, roles were reversed, with the taxman first needing to justify suspicions of fraud or a fiscal crime.
The mere failure to hand in a tax declaration has since 2009 empowered the taxman to delve into the financial history of a targeted taxpayer.
Also the transfer of cash from Portuguese banks to offshore accounts now triggers an automatic alert.