Bank secrecy in Portugal – Better than you might think

In Portugal, the bank secrecy provisions in Decree Law No. 2/78 were introduced on January 9, 1978, following the notorious listing in a newspaper of details of individuals' bank accounts after a coup d'état. The law was primarily intended to reestablish confidence in the banking system.

There is extensive confidentiality protection under Portuguese law, but it is mainly aimed at the bank, its directors, employees, etc, from disclosing any information about your account. But there are ‘loopholes’ mainly for the tax authorities.

The government has tried to make information more freely available to the authorities, but it is constantly challenged, normally successfully. This article from The Portugal News, back in 2016, followed the attempt to challenge bank secrecy. If you are unable to click through, search for ‘Data protection against end of bank secrecy’ on the website.

How does the IMF rate bank security?

This table, produced by the IMF (International Monetary Fund), rates Portugal as ‘High Secrecy’, which may come as a surprise, but the IMF information is highly credible.

Source: IMF data

The IMF further qualifies their opinion as “The European Union (EU) is notable for measures taken to pierce banking secrecy at the international level. There are at least two reasons for this. First, the concept of a single international market requires a harmonized secrecy and disclosure duty for financial transactions. Second, because only one authorisation is required to trade in any of the member states, the “single passport,” bank secrecy needs to be synchronized, and regulatory authorities need to be able to exchange information. This practice is stretched to include exchanges of tax information. Not all member states wholly share the view that information should be freely exchanged for bank supervision purposes. Austria, Greece, Luxembourg, and Portugal have tight secrecy laws compared to other member states. Bank secrecy is only one of the areas where the idea of the unitary country conflicts with autonomy.

The IMF says Portugal has tight secrecy laws

If the IMF rates banking in Portugal so highly, who legally can gain access to your account?

Article 79 of the Banking Law reads that:

Without the specific consent of the account holder, the facts covered by confidentiality obligation may only be disclosed:

a) to the Bank of Portugal

b) to the Securities Board

c) to the Guarantee of Deposits Fund and the System of Indemnities to Investors

d) to the criminal authorities under the provisions of criminal law

e) to the tax authorities in the context of its activities

t) where there is another legal provision that expressly provides for a limitation to the confidentiality obligations.

When can the tax authorities access your bank account?

‘Bank Confidentiality’ by Neate and Godfrey is an extensive and complete study of the Portuguese banking system. You can access it here, barrocas.pt, and it is highly recommended. They say: The legislation has evolved significantly in this regard and the fact is that, considering the number of situations that can trigger the authorities' access to bank details, in practice, bank confidentiality (for tax purposes) is not such a solid concept anymore. Access to information protected by banking secrecy is, in principle, subject to prior judicial authorisation, except where the law specifically sets out the possibility of tax authorities acting and having access to that information without reliance on that authorisation. Credit institutions, finance companies and other entities shall comply with obligations concerning access to information covered by confidentiality obligations within ten days.

Portugal uses a self-assessment system where direct and indirect taxpayers are subject to reporting obligations. In other words, you can do it yourself online, but it’s highly recommended to use an accountant. Mistakes or errors can open the door for the tax authorities to audit your account. Tax audits may occur for several reasons, such as payment deadlines being missed and discrepancies being identified in tax return cross-checking procedures or risk-assessment criteria (eg, certain economic activities with higher fraud risk, discrepancies between entity turnovers when compared with similar entities).

The Portuguese banking system is a lot more secret than you may think

The IMF table, above, shows clearly that Portugal rates very highly in terms of banking secrecy. We compare with Luxembourg, Liechtenstein and Switzerland. One thing is for sure: a Portuguese bank account will be a lot less expensive than an account with a Swiss bank.

Resident in Portugal for 50 years, publishing and writing about Portugal since 1977. Privileged to have seen, firsthand, Portugal progress from a dictatorship (1974) into a stable democracy. 

Paul Luckman