Decree-Law 192/05 issued on 7 November 2005 provides for amendments affecting the taxation of dividends. (a) Background. The law amending the Budget Law for 2005 (see TNS-356 (2005)) included an authorization for the government to enact changes to the income tax laws designed to counter situations of dividend stripping (also known as dividend washing). The discrepancy between the withholding tax rate for dividends paid to resident (15%) and non-resident (25%) shareholders, coupled with the exemption on capital gains realized by non-residents, led to a number of dividend stripping transactions. The authorization also covered the measures to eliminate the differences on...