CAAD Decision 205/2019-T: Stamp Tax on Financial Operations – Arbitral Decision Reform on Excess Taxable Value

ARBITRAL TAX JURISPRUDENCE

Arbitral Tax Decision

Case No. 205/2019-T

Date of Decision: 2019-09-30

Request Value: € 2,594.63

Subject Matter: IS – Financial Operations – Replaces Arbitral Decision of 30 September 2019 – Reform of Arbitral Decision (attached to decision)

REFORMED ARBITRAL DECISION

Following a request presented by the Claimant seeking reform of the arbitral decision in question regarding costs, and clarification thereof with respect to the determination of the concrete excess of the taxable amount that should be considered, which was judged to be well-founded, a new arbitral decision is hereby rendered.

I – STATEMENT OF FACTS

1. On 21 March 2019, A..., LDA., with registered office at Av. ..., ..., ..., in Lisbon, holder of tax identification number ..., (hereinafter Claimant), filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2, paragraph 1, subparagraph a), and 10, paragraph 1, subparagraph a), and paragraph 2, of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (hereinafter, abbreviated as RJAT), as amended by articles 228 and 229 of Law No. 66-B/2012, of 31 December and by articles 9 of Law No. 118/2019, of 17 September and 17 of Law No. 119/2019, of 18 September, with a view to this tribunal's ruling concerning:

• Assessment of the legality of the additional Stamp Tax assessment No. 2009..., and likewise, of the compensatory interest assessment No. 2009..., for the year 2005, with consequent annulment.

• Condemnation of the Tax Authority to reimburse the amounts unduly borne by the Claimant, plus compensatory interest due under article 43 and 100 of the General Tax Law (LGT) and article 61 of the Tax Procedure and Procedural Code (CPPT).

• Reform of the additional Stamp Tax assessment No. 2009..., and likewise, of the compensatory interest assessment No. 2009..., for excess of the taxable amount, with all legal consequences.

1. The request for constitution of an arbitral tribunal was accepted by the President of CAAD and followed its normal course with notification to the Tax Authority on 27 March 2019.

2. The Claimant did not proceed with the appointment of an arbitrator, whereupon, pursuant to article 6, paragraph 2, subparagraph a) and article 11, paragraph 1, subparagraph a) of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the Arbitral Tribunal, who communicated acceptance of the appointment within the applicable period.

3.1. On 14 May 2019, the Parties were notified of such appointment, having manifested no intention to refuse the appointment of the arbitrators, pursuant to combined provisions of article 11, paragraph 1, subparagraphs b) and c), of the RJAT and articles 6 and 7 of the Deontological Code of CAAD.

3.2. Thus, in accordance with the provisions of article 11, paragraph 1, subparagraph c) of the RJAT, the Arbitral Tribunal was constituted on 3 June 2019.

1. In essence, the Claimant alleges that:

a) The Claimant was previously named B..., S.A., being at that time the sole shareholder of the company C..., S.G.P.S., S.A. and this, in turn, holder of the entirety of the capital of the companies D..., S.A., E..., S.A. and F..., S.A.

b) The company C..., S.G.P.S., S.A. maintained with these 3 (three) companies (D..., S.A., E..., S.A. and F..., S.A.), dominated by it, respectively, three loan contracts and current accounts.

c) On 27 December 2005, the company C..., S.G.P.S., S.A. was dissolved, pursuant to article 141 of the Commercial Companies Code (CSC) and liquidated through global transfer of its assets to its sole shareholder, the Claimant.

d) Consequently, there was a transfer of assets and liabilities of the company C..., S.G.P.S., S.A. to the sphere of the Claimant, holder of the totality of the capital thereof, pursuant to article 148 of the CSC, among which, those resulting from the loan contracts concluded with the companies D..., S.A., E..., S.A. and F..., S.A.

e) The cumulative requirements upon which the application of the Stamp Tax exemption provided for in subparagraph h) of article 7 of the Stamp Tax Code are met: (i) that the financial operations were carried out by capital holders to entities in which they hold directly a stake in the capital of at least 10% and (ii) that this stake not less than 10% has remained in their ownership for 1 (one) consecutive year.

f) In fact, notwithstanding the company C... S.G.P.S., S.A. having been dissolved and liquidated, there was a transfer of the whole of the assets and liabilities of its patrimony to the sphere of the Claimant, holder of the capital thereof, pursuant to article 148 of the CSC.

g) Given the continuity of the exercise of activity by the Claimant, we are not dealing with a new participation.

h) This interpretation is in line with the general principle of fiscal neutrality envisaged by the legislator, whenever we are dealing with operations whose economic substance is identical to merger, division and asset transfer operations.

i) Having regard to the continuity of the exercise of activity, the period of ownership of the shareholdings should not fail to be computed through the transfer of the whole of the assets and liabilities of the patrimony of company C... S.G.P.S., S.A. to the sphere of the Claimant.

j) Given the regime applied to the group of companies of which both the Claimant and the company C... S.G.P.S., S.A., as well as the respective subsidiary companies were a part, since the principle of neutrality is linked to the correction of distortions, in this case, in the context of treatment of operations aimed at restructuring or rationalizing the activity of enterprises, as a decisive way for their competitiveness in the business fabric, greater efficiency and speed, the substance of these operations should be sought regardless of the form in which they are clothed.

k) With the operation of global transfer of assets by the company C... S.G.P.S., S.A. to the Claimant, should, having regard to a teleological and systematic interpretation, and also by virtue of the principle of equality, be considered that the period of counting of ownership of the shareholdings of the subsidiary companies by the Claimant reports back to the beginning of ownership of the shareholdings by the company subsequently liquidated and dissolved, resulting in the Stamp Tax exemption and, consequently, the illegality of the assessment in question and respective compensatory interest, which should be annulled.

l) Alternatively, the Stamp Tax assessment in question and the respective compensatory interest assessment should be subject to partial annulment due to excess of the quantified taxable amount.

m) The excess in question is due to the interpretation of the term "use of credit", as the tax generating event of Stamp Tax on financial operations.

n) In fact, the tax generating event of Stamp Tax on financial operations is the use of credit and not the existence of a current account within the scope of a loan contract.

o) By calculating as taxable amount of the Stamp Tax assessment based on the accounting entries of the Claimant in accordance with the balance of the current account that the Claimant came to hold on 27 December 2005, which merely reflected the balance transferred from the accounting of the company C..., S.G.P.S., S.A., as a result of its liquidation and distribution, the assessment is unlawful.

p) Namely, when considering as taxable value those resulting from the transfer of the creditor position under the loan contract with the dissolution of company C... S.G.P.S., S.A. to the Claimant, the Tax Authority does not take into account the "use of credit", that is, the delivery of any amount by the Claimant to its subsidiary companies.

q) Thus, the base balances used by the Tax Authority are much higher, evidencing a manifest excess of the taxable amount, which should reflect the sums actually delivered by the Claimant to the companies it holds stakes in. That is, the daily balances that do not reflect any delivery of credit by the Claimant to the subsidiary companies should be purged.

r) If the Tax Authority does not accept the principle of continuity of economic activity and the respective fiscal neutrality of the operation of transfer of the whole of the assets of the dissolved company to the Claimant, neither can it claim to tax an operation of use of credit contracted precisely with a company subsequently liquidated and dissolved.

s) Whereby the inclusion of this initial balance necessarily determines an error in all calculations carried out thereafter.

1. On 8 July 2019, the Defendant, duly notified for such purpose, filed its Response, having concluded by the lack of merit of the present action, based, in summary, on the following arguments:

a) The decisive element for the financial operations in question to be excluded from the exemption provided for in article 7, subparagraph g) of the Stamp Tax Code resides in non-compliance with the temporal requirement, i.e., the period of ownership of the shareholdings acquired by the Claimant, following the dissolution and liquidation through global transfer of assets of a company of which it was the sole shareholder, occurring on 27 December 2005.

b) As mentioned in the tax audit report, regarding company C... S.G.P.S., S.A. the dissolution and closure of liquidation were recorded, with accounts approved on 27 December 2005.

c) And, contrary to what occurs, for example, with a merger, where dissolution without liquidation of the absorbed entities allows maintenance of activity through the absorbing entity, thus subsisting the life cycle of these companies, although in a new form, in the person of the new company, with the verification of the closure of liquidation such continuity is not observed, with the dissolved and liquidated company being considered extinct.

d) In fact, the registration of closure of liquidation has as a consequence the extinction of the legal and judicial personality of the company (see article 160 of the Commercial Companies Code).

e) In the situation at hand, the liquidation of C... S.G.P.S., S.A., was effected through global transfer of all assets, active and passive.

f) The choice of this solution allowed the patrimony to remain intact and the social creditors' interests to be safeguarded, who saw their interests protected (see, among others, article 163 of the Commercial Companies Code).

g) Thus, the asset represented by all the current accounts that C... S.G.P.S., S.A. held against its subsidiary companies also ended up being transferred to the Claimant, previously named B..., S.A..

h) Thus, the loan contracts in current account arrangement concluded between the Claimant and the now-dominated companies, following the dissolution and distribution of C..., S.G.P.S., S.A., D..., S.A., E..., S.A. and F..., S.A., and, still, the respective interest, would be exempt from Stamp Tax, if they were:

• for a period not exceeding one year;
• carried out by companies holding capital;
• in favor of companies in which they hold directly a stake in the capital not less than 10% and the stake has remained in their ownership for one consecutive year;
• intended exclusively to cover treasury shortfalls.

i) With the dissolution and liquidation of company C... S.G.P.S., S.A., and global transfer of assets thereof to the Claimant the legal personality of the former did not perdure in some way in the latter, thus inexisting any continuity in its operation.

j) That is, no novation of C... S.G.P.S., S.A., occurs in the person of the company acquiring its assets, as would occur in the case of a merger by incorporation where dissolution of the incorporated company is verified without its liquidation.

k) Thus, although the requirements for recognition of the exemption were initially present in the period when C... S.G.P.S., S.A. was in operation, they ceased to be verified with the closure of liquidation.

l) Nor does the allegation of the Claimant that it can only be taxed with respect to the credit it actually granted to the companies in which it holds stakes, with the credit which its subsidiary companies obtained from a company subsequently liquidated and dissolved being excluded from the application of the tax liability rule, stand.

m) Firstly, this position is based on the premise that the rights and obligations of the liquidated and dissolved company were not transferred to it, that the original contractual relationship is deemed terminated.

n) In fact, it should be understood that in the taxation of credit used in the form of a current account, the moment of its granting or the quality of the original creditor and debtor subjects involved in the conclusion of that contract are not relevant, rather for the application of the tax generating event rule what is relevant is the occurrence of the tax event at the end of each month and which reflects the position at a given moment of a credit/debit relationship that extends over time, with the taxable amount resulting from the monthly average of the credit used.

1. By dispatch of 19 July 2019, the Parties were notified of the decision of the Arbitral Tribunal to dispense with the holding of the meeting referred to in article 18 of the RJAT, and invited to submit written pleadings, with 30 September 2019 being set as the deadline for rendering the arbitral decision.

2. The Parties submitted written pleadings.

II – PRELIMINARY EXAMINATION

The Arbitral Tribunal was regularly constituted and is competent ratione materiae, given the nature of the object of the proceedings (see articles 2, paragraph 1, subparagraph a) and 5 of the RJAT).

The request for arbitral ruling is timely, as it was presented within the period provided for in article 10, paragraph 1, subparagraph a), of the RJAT.

The Parties have legal personality and capacity, have standing and are regularly represented (see articles 4 and 10, paragraph 2 of the RJAT and article 1 of Order No. 112-A/2011, of 22 March).

The proceedings are not affected by any defects, with no exceptions or preliminary issues having been invoked that would prevent examination of the merits, of which this Tribunal must rule.

III – LEGAL REASONING

III-1. FINDINGS OF FACT

§1. Facts Established

The following facts are considered established as relevant to the decision to be rendered in these proceedings:

a) The Claimant was previously named B..., S.A., being at the time the sole shareholder of company C..., S.G.P.S., S.A.;

b) The company C..., S.G.P.S., S.A., in turn, was the holder of the entirety of the share capital of companies D..., S.A., E..., S.A. and F..., S.A., companies that at the time of the facts were part of the group of companies in which the parent company was B..., S.A., the former name of the Claimant;

c) The company C..., S.G.P.S., S.A. maintained with these three companies, D..., S.A., E..., S.A. and F..., S.A., dominated by it, respectively, three loan contracts in current account arrangement, which were exempt from Stamp Tax under article 7, subparagraph g) of the Stamp Tax Code, in the version in force at the time of the facts;

d) On 27 December 2005, the company C..., S.G.P.S., S.A. was dissolved, pursuant to article 141 of the CSC and liquidated through global transfer of its assets to its sole shareholder, the Claimant;

e) There was thus a transfer of assets and liabilities of the patrimony of company C..., S.G.P.S., S.A. to the sphere of the Claimant, holder of the entirety of the shares representing the capital thereof, pursuant to article 148 of the CSC, among which, those resulting from the loan contracts concluded with companies D..., S.A., E..., S.A. and F..., S.A.;

f) Consequently, the Claimant assumed all rights and obligations of the dissolved company, C..., S.G.P.S., S.A, including the loan contracts in current account arrangement maintained with companies D..., S.A., E..., S.A. and F..., S.A., with initial balances of € 16,745,823.00, € 10,218,322.23 and € 9,137,882.39, respectively;

g) After 27 December 2005, there were subsequent financial flows between the Claimant and its subsidiary companies (see Documents No. 3, No. 4 and No. 5 attached with the case file);

h) Specifically, between the Claimant and its subsidiary company F..., S.A., it results from Document No. 3 attached with the case file that:

• On 27 December 2005, the accounting of the Claimant showed a balance of € 9,137,882.39, exactly equal to that which appeared on that date in the assets of company C..., S.G.P.S., S.A;

• On 30 December 2005, company F..., S.A. used credit for the first time in the amount of € 1,695.96 in the account it came to maintain directly with the Claimant under the financing contract entered into between these two entities;

• On the following day, on 31 December 2005, the Claimant again delivered to company F..., S.A. an amount of € 995,801.31;

• The borrower company F..., S.A. paid the Claimant the amount of € 73,237.67, on 29 December 2005, as well as the amount of € 4,200,000.00 at the end of 2005, thus paying the total amount of € 4,273,237.67.

i) With respect to the credit contracted by F..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.), a total amount of € 3,275,740.40 was amortized, whereby, having regard to the value that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 9,137,882.39, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2005 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A. in the amount of € 5,862,141.99;

j) As between the Claimant and its subsidiary company E..., S.A., in accordance with Document No. 4 attached with the case file:

• On 27 December 2005, the creditor balance appearing in the loan contract originally maintained between C..., S.G.P.S., S.A. and company E..., S.A. was equal to € 10,218,322.23;

• However, only on 30 December and 31 December 2005, the beneficiary of the credit, borrower company E..., S.A., used credit in the amounts of € 8,611.21 and € 2,593,868.61, respectively.

k) It further results from Document No. 4 attached with the case file that at the end of 2005, the credit granted by the Claimant to its subsidiary company E..., S.A. was completely amortized;

l) On the other hand, with respect to the credit contracted by E..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.), it is verified that a total amount of € 5,122,287.27 was amortized, whereby, having regard to the value that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 10,218,322.23, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2005 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A. in the amount of € 5,096,034.96;

m) Finally, with respect to the operations carried out under the credit line contract maintained between the Claimant and company D..., S.A., it results from Document No. 5 attached with the case file that:

• On 27 December 2005, the Claimant's accounting showed a balance of € 16,745,823, exactly equal to that which appeared on that date in the assets of company C..., S.G.P.S., S.A. (so much so that until 26 December 2005 there was no balance, which, as evidenced by analysis of the Claimant's accounting, stood at "zero", nor does this amount correspond to any withdrawal on that same date);

• On 28 December 2005, company D..., S.A. used credit for the first time in the amount of € 3,000,000;

• Meanwhile, on 30 December 2005, the Claimant again delivered to company D..., S.A. an amount of € 23,883.28;

• However, on 28 December 2005, company D..., S.A. had reimbursed the Claimant in the amount of € 18,885.30 as amortization of the credit meanwhile granted by the latter;

• Company D..., S.A. carried out further amortization in the amount of € 10,500,000.00 on 31 December 2005.

n) In this sense, it results from Document No. 5 attached with the case file that at the end of 2005, the credit granted by the Claimant to its subsidiary company D..., S.A. was completely amortized;

o) On the other hand, with respect to the credit contracted by D..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.), a total amount of € 7,495,002.10 was amortized whereby, having regard to the value that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 16,745,823, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2005 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A. in the amount of € 9,250,821;

p) The Claimant was subject to a general scope tax audit concerning the year 2005, following service order OI2008...;

q) On 15 March 2009, the Claimant was notified of Stamp Tax assessment No. 2009... and Compensatory Interest assessment No. 2009..., resulting from the said tax audit, in the amounts of € 2,311.66 and € 282.97, respectively;

r) These amounts were paid by the Claimant within the voluntary payment period;

s) Notwithstanding, the Claimant did not accept the assessments in question, whereby it filed, on 6 August 2009, a Grace Reclamation against the aforementioned assessments, which argued for the illegality of the assessments in question, defending, in summary, that the Claimant was exempt from Stamp Tax and, even if this were not the case, the assessments would always be illegal by virtue of a manifest excess of taxable amount;

t) On 26 May 2010, following the Dispatch of the Director of Services (by subdelegation), the Tax Authority came to propose the rejection of the Grace Reclamation against Assessment No. 2009... under Stamp Tax and Compensatory Interest Assessment No. 2009...;

u) The Claimant exercised the right to be heard in a request presented on 11 June 2010;

v) On 2 July 2010, the Claimant was notified of the dispatch rejecting the Grace Reclamation filed;

w) The Claimant filed, on 29 July 2010, an Hierarchical Appeal, which came to be rejected, maintaining in entirety the understanding originally advocated by the Tax Authority, by dispatch issued by the Director of Services (by subdelegation), on 18 February 2018 and notified on 21 December 2018;

x) The Claimant, not accepting the decision rejecting the Hierarchical Appeal, filed the request for constitution of an Arbitral Tribunal.

§2. Unproven Facts

No facts of relevance to the assessment and decision of the case remain unproven.

§3. Reasoning for the Established Facts

The facts pertinent to the judgment of the case were selected and defined according to their legal relevance, in light of the plausible solutions of the legal questions, pursuant to the combined application of articles 123, paragraph 2, of the Tax Procedure and Procedural Code (CPPT), 596, paragraph 1 and 607, paragraph 3, of the Code of Civil Procedure (CPC), applicable under article 29, paragraph 1, subparagraphs a) and e), of the RJAT.

Regarding the substantive factual matter established, the Tribunal's conviction was based on the facts articulated by the Parties, the accuracy of which was not put in question, and on critical analysis of the documentary evidence contained in the file, including the administrative proceedings.

III.2. LEGAL MATTERS

The central issue to be resolved aims to determine whether the financial operations effected under loan contracts in current account arrangement established between the Claimant and the companies in which it holds stakes, in the period between 27 December and 31 December 2005, fall within the scope of the exemption provisions of subparagraphs g) and h), paragraph 1, of article 7 of the Stamp Tax Code, given that the said loan contracts were assumed by the Claimant on 27 December 2005, following the dissolution and liquidation through global transfer of assets of a company of which it was the sole shareholder.

III.2.1. ON THE INAPPLICABILITY OF THE EXEMPTION PROVIDED FOR IN ARTICLE 7, SUBPARAGRAPH H) OF THE STAMP TAX CODE IN THE VERSION APPLICABLE AT THE TIME

Pursuant to the combined provisions of subparagraph h) with subparagraph g), both of article 7 of the Stamp Tax Code, in the version applicable at the time:

"1 – The following are also exempt from the tax:

(...)

g) Financial operations, including the respective interest, for a period not exceeding one year, provided they are intended exclusively to cover treasury shortfalls and carried out by venture capital companies (VCC) in favor of companies in which they hold stakes, as well as those carried out by holding companies (SGPS) in favor of companies dominated by them or in companies in which they hold stakes provided for in paragraph 2 of article 1 and in subparagraphs b) and c) of paragraph 3 of article 3 of Decree-Law No. 495/88, of 30 December, and also those carried out for the benefit of the holding company that with it is in a relationship of control or of group.

h) Financial operations, including the respective interest, referred to in the preceding subparagraph, when carried out by holders of capital to entities in which they hold directly a stake in the capital not less than 10% and provided that this stake has remained in their ownership for one consecutive year or since the incorporation of the subsidiary company, provided that, in the latter case, the stake is maintained during such period. (...)"

That is, pursuant to subparagraph g) financial operations carried out by venture capital companies (VCC) and by holding companies (SGPS) in favor of dominated companies or in which they hold stakes benefit from exemption, and financial operations carried out for the benefit of an SGPS by companies that with it are in a relationship of control or of group, provided the following cumulative requirements are met:

(i) the period of the operations does not exceed one year; and

(ii) they are intended exclusively to cover treasury shortfalls.

Given the factuality described, only the non-compliance with the first of the requirements necessary for benefit from this exemption is at issue in the proceedings, namely, the period of ownership for one consecutive year by the Claimant of the stakes in companies D..., S.A., E..., S.A., and F..., S.A., previously held by C..., S.G.P.S., S.A., prior to its dissolution, liquidation and distribution.

In fact, as appears from the Tax Audit Report [Section III-2)]:

"[...] the taxpayer, by force of the dissolution of ... [C..., SGPS, S.A.], came to hold stakes in the companies [...] in the percentage of 100%. If the first requirement is duly satisfied, as for the second we cannot affirm the same, given that we are dealing with companies already incorporated, where it is required that ownership of the stake be maintained for at least one consecutive year, and from which it follows that only after the lapse of such period, which constitutes a prerequisite for the application of the exemption, can the exemption be considered applicable."

Thus, the decisive element for the financial operations in question to be excluded from the exemption provided for in subparagraph h), paragraph 1 of article 7 of the Stamp Tax Code, resides in non-compliance with the temporal requirement, that is, the period of ownership of the stakes acquired by the Claimant, following the dissolution and liquidation through global transfer of assets of a company of which it was the sole shareholder, occurring on 27 December 2005.

It should also be noted that, as referred to in the Tax Audit Report, it is provided in article 11 of the Tax Benefits Statute (EBF) that:

"The right to tax benefits must be dated to the date of verification of the respective requirements, even if dependent on declarative recognition by the tax administration or agreement between it and the beneficiary person, save when the law provides otherwise."

The Claimant argues that:

"The analysis of the matter, conducted in this manner, proves superficial, in that it disregards its true nature, imprinting a solution that offends the general principle of fiscal neutrality, in light of the principle of fiscal neutrality, this acquisition should be considered as original, counting for such purpose the period that precedes the extinction of company C... S.G.P.S., S.A., since the economic reality of one situation and the other are identical."

The Claimant further argues that both the principle of prevalence of substance over form inherent in paragraph 3 of article 11 of the LGT, as well as a systematic and teleological interpretation of the law, lead to the conclusion that, given the continuity of activity by the Claimant, the regime of fiscal neutrality should apply as provided for in the tax regime of mergers, divisions, asset transfers and exchanges of shares, provided for in articles 67 and following of the Corporate Income Tax Code.

Let us examine this.

The Claimant does not dispute that it acquired ownership of the stakes in the capital of the borrower companies under article 148, paragraph 1 of the CSC, on the date of transfer of the whole of the assets of the dissolved company.

As mentioned in the Tax Audit Report, the dissolution and closure of liquidation were recorded, with accounts approved on 27 December 2005.

And, contrary to what occurs, for example, with a merger, where dissolution without liquidation of the absorbed entities allows maintenance of activity through the absorbing entity, thus subsisting the life cycle of these companies, although in a new form, in the person of the new company, with the verification of the closure of liquidation such continuity is not observed, with the dissolved and liquidated company being considered extinct.

In fact, registration of the closure of liquidation has as a consequence the extinction of the legal and judicial personality of the company (article 160 of the CSC).

In the case at hand, the liquidation of C..., S.G.P.S., S.A., was effected through global transfer of all assets, active and passive.

The choice of this solution allowed the patrimony to remain intact and the social creditors' interests to be safeguarded, who saw their interests protected (see, among others, article 163 of the CSC).

Thus, the asset represented by all the current accounts that C..., S.G.P.S., S.A. held against its subsidiary companies also ended up being transferred to the Claimant, previously named B..., S.A..

Now, the loan contracts in current account arrangement concluded between the Claimant and the now-dominated companies, following the dissolution and distribution of C..., S.G.P.S., S.A., D..., S.A., E..., S.A. and F..., S.A., and still, the respective interest, would be exempt from Stamp Tax, if they were:

• for a period not exceeding one year;
• carried out by companies holding capital;
• in favor of companies in which they hold directly a stake in the capital not less than 10% and the stake has remained in their ownership for one consecutive year;
• intended exclusively to cover treasury shortfalls.

Only that, as has been seen, with the dissolution and liquidation of company C..., S.G.P.S., S.A, and global transfer of its assets to the Claimant the legal personality of the former did not perdure in some way in the latter, thus inexisting any continuity in its operation.

That is, no novation of C..., S.G.P.S., S.A., occurs in the person of the company acquiring its assets, as would occur in the case of a merger by incorporation where dissolution of the incorporated company is verified without its liquidation.

Thus, although the requirements for recognition of the exemption were initially present in the period when C..., S.G.P.S., S.A. was in operation, they ceased to be verified with the closure of liquidation.

And the requirements now required after the global transfer of assets in order that the Stamp Tax exemption be recognized are not deemed to be satisfied, given the absence of ownership of the stakes for the period of one year.

Thus, in the period in question (between 27 December 2005 and 31 December 2005), as the requirements set forth in the exemption rules are not met the loan contracts in current account arrangement concluded with companies D..., S.A., E..., S.A., and F..., S.A., are subject to Stamp Tax under entry 17.1.4 of the respective General Table and are not exempt therefrom.

As to the invocation by the Claimant of the principle of fiscal neutrality, this does not have application here.

First and foremost by reason of the fact that, as regards Stamp Tax, there does not exist a provision similar to that existing in the Corporate Income Tax Code.

In fact, having regard to the fact that the result achieved through interpretation using the systematic and teleological elements must have a minimum of support in the literal wording of the interpreted rule, it becomes necessary to recognize that the requirements typified in subparagraph h) of paragraph 1 of article 7 of the Stamp Tax Code, upon which the application of the exemption depends, require that "a stake in the capital not less than 10% and provided that this has remained in their ownership for one consecutive year".

There being no reference to the contractual form or legal instrument through which the acquisition of ownership of the stake must be effected and, likewise, the legislator does not refer to a neutrality regime that would allow the date of acquisition of the stakes by the Claimant to be dated to the date on which they were originally acquired by the dissolved and liquidated company, similar to what is provided for in article 18-A of Decree-Law No. 442-B/88, of 30 November and in the new article 47-A of the Corporate Income Tax Code.

Moreover, the circumstance that dissolution with liquidation of one of the companies involved has been verified also prevents the application of such principle.

In fact, the tax regime provided for in articles 73 to 78 of the Corporate Income Tax Code has its field of application circumscribed to merger, division, asset transfer operations, an operation by which a company transfers, without being dissolved, one or more branches of its activity to another company, and exchange of shares.

That is, the provision for the tax neutrality regime does not include dissolution with liquidation operations.

Which expressly appears in Circular No. 8/2004 of the DSIRC referred to by the Claimant.

In this administrative instruction the understanding regarding the form of counting the periods of ownership of shareholdings when the shareholdings are acquired by virtue of the carrying out of a merger, division or asset transfer operations and exchanges of shares to which the tax neutrality regime provided for in articles 67 and following of the Corporate Income Tax Code is applicable is disclosed, but, simultaneously, it clarifies that this rule is only valid in such situations, by establishing that:

"For purposes, specifically, of the application of the regimes for elimination of double economic taxation of distributed profits (article 46) and of distribution (article 75), the application of this principle is not expressly provided for, with respect to counting the period of ownership of the stakes received as a consequence of carrying out a merger, division, asset transfer or share exchange operation."

Whereby it follows that the tax neutrality regime, as regards counting the periods of ownership of shareholdings is associated exclusively with corporate restructuring operations covered by the special taxation regime in the Corporate Income Tax Code and, therefore, is limited to the situations typified in such Code.

Given this, it makes no sense, due to lack of legal support and violation of the principle of legality, the Claimant's pretension to transpose to subparagraph h) of paragraph 1 of article 7 of the Stamp Tax Code the effects in terms of counting the period of ownership of shareholdings of the tax neutrality regime provided for in the Corporate Income Tax Code for operations therein specifically defined and where the liquidation operation through global transfer provided for in article 148 CSC does not fall.

Thus being, no violation of the principle of equality occurs, as the Claimant contends.

It is further important to recall that the rules establishing tax benefits are not susceptible of analogical integration as prescribed by article 10 of the EBF.

As has been the unanimous understanding of doctrine and case law [see, among others, the decisions of the STA of 23-11-2011 (Case No. 0592/11), which we closely follow here], in matters of tax benefits, as in matters of tax incidence or definition of legal types of crimes (fiscal or otherwise), there are, by definition, no gaps, for the situations not provided as exempt from tax (as those not subject to tax or not described as crimes) are, quite simply, outside the scope of the exemption rule (or of incidence, or punitive, as the case may be), by virtue of the special force that the principle of legality, in its aspect of typicity (tax – articles 103, paragraph 2 of the Constitution and criminal – article 29, paragraph 1 of the Constitution) assumes in these domains.

Analogical integration is therefore forbidden in such matters by virtue of the constitutional principle of legality, with the concordant statements of the ordinary legislator in that sense – contained, in the tax domain, in articles 11, paragraph 4 of the LGT and (current) 10 of the EBF, being mere corollaries of such constitutional rules.

It is therefore constitutionally impermissible for the judge to fill a supposed gap existing in a tax exemption rule, with the ordinary principle of substance over form not being able to have application here to the detriment of the constitutional principle of legality.

And although it is not constitutionally forbidden the possibility of extensive interpretation – as, moreover, the final part of article 10 of the EBF expressly admits – for this to operate it has as a prerequisite the necessary demonstration that the legislator said less than he intended.

Now, given what has been set forth, there is nothing but to conclude that the omission, whether in the case of dissolution and distribution, whether also for purposes of Stamp Tax was intentional, nothing corroborating the thesis of the Claimant that it was in the mind of the legislator also the situation under analysis to be exempt.

III.2.2. ON THE EXCESS OF THE QUANTIFIED TAXABLE AMOUNT

Pursuant to article 1 of the Stamp Tax Code, this tax is levied on all acts, contracts, documents, titles, books, papers, and other facts provided for in the General Table, including gratuitous transfers of property, excepting operations subject to Value Added Tax.

Already article 9 of the Stamp Tax Code provides that the taxable value of the tax is that which results from the respective General Table.

In the case at hand, Entry No. 17 of the General Table, which provides as objective tax incidence hypothesis on financial operations "use of credit", by virtue of granting credit in any form.

That is, the material aspect of the objective element associated with the tax generating event of Stamp Tax in question is the act of using credit.

As emphasize SILVÉRIO MATEUS and CORVELO DE FREITAS: "the tax event typified in this entry is the granting of credit, that is, the use of credit based on legal transaction of granting credit, whose essential elements translate into the delivery of a present good against the promise of future restitution." [Taxes on Patrimony and Stamp Tax, 2005, annotation to Entry No. 17 of the General Table].

[...]

It is not the financing contract, let it be stressed, but the act that is embodied in the use of the credit granted in any kind of loan contract (see Opinion No. 629, of 11 August 2005, issued by the Department of Legal Services and Litigation).

On the other hand, article 5 of the Stamp Tax Code establishes the temporal criterion of the tax: the tax obligation is deemed constituted in credit operations at the moment they are carried out or, if the credit is used in the form of a current account, bank overdraft or any other means in which the period is not determined or determinable, on the last day of each month, as is the case.

What confirms the aspects of the tax incidence rule outlined above, ratifying the true material criterion of Stamp Tax.

Furthermore, pursuant to Entry No. 17.1.4 of the General Table, when the period of use of the credit is not determined or determinable, as in the situation of the Claimant, the taxable value of Stamp Tax shall be the monthly average of credit used in the form of a current account, obtained by summing the balances in debit assessed daily during the month, divided by 30, on which a tax rate of 0.04% is applied.

These are the objective aspects of the tax incidence rule of Stamp Tax that must guide any interpretation of the tax events that concretize such a hypothesis.

It is likewise necessary to emphasize that these normative components that complete the hypothesis of tax incidence of Stamp Tax (material aspect, temporal, territorial, quantitative, subjective) each have a function that cannot be disregarded in the interpretation of the tax events that concretize the rule now being analyzed.

Parallel to the specific composition of the determination of the tax debt, marking the content of the object of the tax relationship, the taxable value also has the virtue of attesting the material aspect expressed in the composition of the normative antecedent.

Necessarily, the taxable value must reflect a quantity that adequately measures the materiality of the tax event.

This is why the taxable value of any tax must have a direct relationship with its material criterion.

All of this to conclude in the sense that the taxable value of the Stamp Tax assessment now in question will have to correspond to the materiality that we noted above, that is, the use of credit.

Moreover, when examining the core of the material aspect of Stamp Tax which is the subject of the assessment in question, and being Tax Law a branch of superimposed law, which constantly uses the concepts present in the various branches of law (see article 11 of the LGT),

And because the Stamp Tax Code does not define the concept of use of credit or loan contract, let it be restated, objective aspects of the tax incidence rule, it appears as an indispensable task to ascertain the sense in which these expressions were used in Civil Law, in order to compare the definition with the essential of the provision of the tax generating event of Stamp Tax in question.

Thus, pursuant to article 1142 of the Civil Code, the loan contract is that in which one party lends to the other money, or fungible thing, the latter being obligated to return another of the same kind.

"The loan implies transfer of ownership, not because the function of the contract is aimed at such end, but because the 'translatio domini' is indispensable – as a means or legal instrument – for the enjoyment of the thing which it is intended to provide to the borrower, given the fungible nature thereof." (see ANTUNES VARELA in Annotated Civil Code, vol. II, p. 601),

The same is to say, in the loan it is presumed the delivery of the thing: "the loan is, by its nature, a real contract, in the sense that it is only completed by delivery (lending) of the thing" (ibidem).

It is this contract that underlies the incidence of Stamp Tax defined in Entry No. 17 of the General Table.

With these premises established, covering the entire scope of the hypothesis of tax incidence of the tax which is the subject of the assessment in question, let us return to the present situation.

From examination of the Tax Audit Report, it is verified that the Tax Authority calculates Stamp Tax on the value used in the form of a current account on the last day of each month.

As set forth above, the contracts supporting the financial operations which supposedly embody the tax generating events of the Stamp Tax assessed result from the transfer of the creditor position under the loan contract with the dissolution of company C..., S.G.P.S., S.A. to the Claimant.

It is the Tax Authority itself which states, pursuant to the Tax Audit Report that, "with the dissolution, liquidation and consequent distribution of ACE, which occurred on 2005-11-27 (although the correct date and assumed by the Tax Administration in the same report is 2005-12-27), all the current accounts that this held in its subsidiary companies were transferred to the taxpayer.".

In such terms, the Tax Authority calculated the taxable amount of the Stamp Tax assessment in question based on the entries in the accounting of the Claimant in accordance with the balance of the current account that the Claimant came to hold on 27 December 2005, which merely reflected the balance transferred from the accounting of company C..., S.G.P.S., S.A. as a result of its liquidation and distribution.

However, it is not possible to establish an equivalence between the balance of an account that transferred to the ownership of the Claimant and the amounts actually delivered by the Claimant in a direct relationship between it and the three companies it dominated.

Being only these that are subsumed under the material criterion of the tax generating event of Stamp Tax.

In fact, it seems elementary the thought that the fact of the existence of a transfer of creditor position does not imply that the Claimant itself financed the whole amount transferred to its accounting. Quite the contrary.

The mere transition of the balance of an account (from the liquidated company, C..., S.G.P.S., S.A.) to another (of the Claimant) reveals only the assignment of contractual position where the creditor of that balance came to be the Claimant.

But this does not carry out the hypothesis of tax incidence of Stamp Tax which embodies the delivery of money.

If it was not the Claimant who delivered those amounts, therefore, it was not the Claimant who financed the companies in which it holds stakes.

Consequently, only the material aspect of the tax, the use of credit, can be taken into account in the Stamp Tax assessment.

Now, the balance that "appeared" in the Claimant's accounting does not reveal the delivery of credit to the companies in which it holds stakes, but rather, let it be restated, the transfer of patrimony of company C..., S.G.P.S., S.A..

Reminding of what was set forth above based on the legislation that regulates the incidence of Stamp Tax which is the subject of the assessment in question, the subsumption of the tax-legal rule requires, as a material aspect of the hypothesis of incidence, the delivery of the thing.

The subsumption to the rule of tax incidence of Stamp Tax only occurs at the moment in which the borrower uses the financed credit, whereas the lender delivers to the borrower the object of the loan.

In fact, this is the ratio legis expressed by the legislator of the Stamp Tax Code when, with respect to the reform of taxation on patrimony, expressly states in the preamble of said law that "deserving special emphasis is the change in the philosophy of taxation of credit, which came to be based on its use and no longer on the conclusion of the respective legal transaction of granting", marking a trend toward conferring on taxation an economic and real reach rather than formal, what has as consequence the essentiality of this tax as a taxation on operations which, regardless of their materialization, reveal income or wealth.

A correct interpretation, therefore, should include a teleological mechanism in order to assess the scope of the rule in the sense intended and valued by the legislator of the Stamp Tax Code.

In the situation underlying the assessment in question, the amounts of deliveries to companies D..., S.A., E..., S.A. and F..., S.A. do not equivalent to the amounts that simply migrated from the account of the liquidated company, C..., S.G.P.S., S.A., to the Claimant, as results from the accounting entries dated 27 December 2005.

In truth, the base balances used by the Tax Authority are much higher, evidencing a manifest excess of the taxable amount, which, as referred to previously, should reflect the sums actually delivered by the Claimant to the companies in which it holds stakes.

Specifically, the Tax Authority considered in the corresponding financial operations carried out under loan contracts in current account arrangement maintained between the Claimant and companies D..., S.A., E..., S.A. and F..., S.A., the initial balance of € 16,745,823.00, € 10,218,322.23 and € 9,137,882.39, respectively.

Which merely reflect the result that, by virtue of the assignment of position between C..., S.G.P.S., S.A. and the Claimant on 27 December 2005, transferred to the assets of the Claimant.

As if these were the amounts actually financed by the Claimant.

Using this starting point, founded, let it be restated, on amounts that do not correspond to any delivery by the Claimant to the companies in which it holds stakes, the Tax Authority proceeds to calculate the taxable amount by computing the daily balance reflected in the accounting entries of the Claimant.

Including that initial balance, which necessarily determines an error in all calculations carried out thereafter.

That is, given that Stamp Tax is levied on credit used in the form of a current account, the Claimant can only be taxed with respect to the credit it actually granted to the companies in which it holds stakes and not on credit that its subsidiary companies obtained from a company subsequently liquidated and dissolved.

Now, if the Tax Authority does not accept, in the case at hand, the principle of continuity of economic activity and the respective fiscal neutrality of the operation of transfer of the whole of the assets of the dissolved company to the Claimant, neither can it claim to tax an operation of use of credit contracted precisely with a company subsequently liquidated and dissolved.

Since Stamp Tax is levied solely on the actual use of credit and not on the contracting thereof.

Therefore, there must be a clear and unambiguous distinction between the credit that the Claimant actually granted in the form of a current account and the credit that had been granted by the company meanwhile dissolved, since the Claimant cannot be taxed under Stamp Tax on operations contracted with another entity, even if all rights of the dissolved company transferred to the legal sphere of the Claimant.

Thus, distinctly distinguishing the Tax Authority the dissolved entity and the Claimant, it cannot merely for purposes of taxation under Stamp Tax fictionally consider that the whole of the credit on which taxation is based was actually granted by the Claimant, given that such interpretation does not correspond to reality.

Let us see,

On 27 December 2005, the accounting of the Claimant showed a balance of € 9,137,882.39, exactly equal to that which appeared on that date in the assets of company C..., S.G.P.S., S.A. (so much so that until 26 December 2005 there was no balance, which, as evidenced by analysis of the Claimant's accounting, stood at "zero", nor does this amount correspond to any withdrawal on that same date.

Balance that does not correspond to any delivery by the Claimant to company F..., S.A., whereby it should be differentiated from the balance that is established in the accounting of the Claimant at the time of first use of credit by company F..., S.A. actually granted by the Claimant,

And which should be purged from the taxable value of the assessment in question.

On 30 December 2005, company F..., S.A. used credit for the first time in the amount of € 1,695.96 in the account it came to maintain directly with the Claimant under the financing contract entered into between these two entities.

On 31 December 2005, the Claimant again delivered to company F..., S.A. an amount of € 995,801.31.

Therefore, the calculation base of the Stamp Tax assessed should have considered the movements that occurred only from 27 December 2005, considering the creditor balance that existed from then on, only relating to amounts actually delivered by the Claimant in the direct relationship with company F..., S.A.

Thus, verifying for example the actual use of credit in the month of December 2005, we ascertain that the total sum is € 997,497.27 (€ 1,695.96 + € 995,801.31) being, therefore, only this the amount truly delivered by the Claimant to company F..., S.A..

Since Stamp Tax is levied on the use of credit, it is inexorable that the quantitative criterion of the tax necessarily observe the material criterion of the rule, conforming to it.

Thus, Stamp Tax should have been calculated on the sum of the balances in debit assessed daily from 27 December 2005.

Notwithstanding, the Tax Authority considered as taxable amount the average of the daily balances of the month of December 2005 appearing in the accounting of the Claimant in the amount of € 1,408,963.07 which reflect all the amount transferred at the time of assignment of contractual position, but which in no way reveal the amounts that it made available to the subsidiary company, F..., S.A.

Note that the reimbursements made by the borrower company, F..., S.A. to the Claimant in the amount of € 73,237.67, on 29 December 2005, nor that carried out at the end of 2005, in the total amount of € 4,200,000.00 are not ignored.

However, it should be assumed that such transfers serve, first, to cover the credit directly contracted with the Claimant, with amounts delivered in excess serving to amortize the previously incurred debt with the company meanwhile liquidated and dissolved.

Whereby such payments are intended for amortization, first, of the debt incurred with the Claimant and, second, when the payment exceeds such amount in debt should be used for amortization of the balance transferred to the account of the Claimant as a result of the assignment of contractual position.

All operations of use of credit by this subsidiary company of the Claimant can be assessed in the Map of Recording of Transactions [see Document No. 3 attached with the case file] which does not differ in data regarding entries and exits of capital, in the cash flow of the financing operation, but rather in the accounting of the daily balance of this account, based on the balance taken as the starting point which, naturally, has as consequence a significant reduction in taxation under Stamp Tax.

Through analysis of the document in question it is possible to verify that at the end of 2005, the credit granted by the Claimant to its subsidiary company F..., S.A. was completely amortized.

On the other hand, with respect to the credit contracted by F..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.) we verify that a total amount of € 3,275,740.40 was amortized, whereby, having regard to the amount that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 9,137,882.39, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2005 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A. in the amount of € 5,862,141.99.

The same logic applies to the other two companies.

It is emphasized, however, that it is not possible to consider for purposes of the taxable value of Stamp Tax of the assessments now being claimed the balance of the accounts resulting from the loan contract contracted by companies D..., S.A., E..., S.A. and F..., S.A. with company C..., S.G.P.S., S.A.

But only that contracted directly in the relationship maintained between them and the Claimant, corresponding to amounts actually delivered by the Claimant.

Now, in analyzing the movements of the current account of the loan contract in which company E..., S.A. is the borrower, we have that on 27 December 2005, at the time of liquidation of company C..., S.G.P.S., S.A., the Claimant assumed the position of creditor of a balance of € 10,218,322.23, and it is on this balance that the Tax Authority calculates the taxable value of the tax assessed which is the subject of the present arbitral proceedings, even if only in compliance with the temporal aspect of the tax.

Notwithstanding, in this case also the two current accounts titled by the Claimant against company E..., S.A. should be separated, (i) one originating from the assignment of contractual position resulting from the liquidation of company C..., S.G.P.S., S.A. and (ii) the other where the Claimant directly delivers to company E..., S.A. the amounts agreed in the loan contract which it comes to maintain with it from 27 December 2005 onward.

Using this parallel, we have that on 27 December 2005, the creditor balance appearing in the loan contract originally maintained between C..., S.G.P.S., S.A. and company E..., S.A. was equal to € 10,218,322.23.

However, only on 30 December and 31 December 2005, the beneficiary of the credit, borrower company E..., S.A., used credit in the amounts of € 8,611.21 and € 2,593,868.61, respectively, under the credit line contract maintained between it and the Claimant.

In fact, it will be these amounts combined with the amortizations effected that constitute the reference amount that should be considered as the starting point to determine the balance of the current account which is the subject of the Stamp Tax assessment eventually due by the Claimant.

Also in this sense, let it be said that, as in the previous situation, all amounts reimbursed by E..., S.A. shall only be deducted up to the amount of the balance resulting from the loan contracted with the Claimant, with the amounts transferred in excess serving to amortize the original debt incurred by E..., S.A. with C..., S.G.P.S., S.A..

The Tax Authority, in fixing the taxable amount of Stamp Tax assessed in the months of 2005, erroneously considered the balance that transferred to the patrimony of the Claimant by simple assignment of contractual position, without this embodying the realization of the tax generating event, the actual use of credit.

It happens that until 30 December 2005, one could not speak of any use of credit, therefore, the amount of € 10,218,322.23 taken into account for the calculation of the balance-value for the assessment of the Stamp Tax supposedly due could never have served as a base for the assessment of the tax.

Equally, all operations relating to use of credit in current account arrangement contracted with the Claimant by E..., S.A, are disposed in the map of flow of entries and exits of credit and respective balance (see Document No. 4).

Thus, it is possible to verify that at the end of 2005, the credit granted by the Claimant to its subsidiary company E..., S.A. was completely amortized.

On the other hand, with respect to the credit contracted by E..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.) we verify that a total amount of € 5,122,287.27 was amortized, whereby, having regard to the amount that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 10,218,322.23, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2005 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A. in the amount of € 5,096,034.96.

Finally, with respect to the operations carried out under the credit line contract maintained between the Claimant and company D..., S.A., it is possible to ascertain that on 27 December 2005, the Claimant's accounting showed a balance of € 16,745,823, exactly equal to that which appeared on that date in the assets of company C..., S.G.P.S., S.A. (so much so that until 26 December 2005 there was no balance, which, as evidenced by analysis of the Claimant's accounting, stood at "zero", nor does this amount correspond to any withdrawal on that same date),

Balance that, once more, does not correspond to any delivery by the Claimant to company D..., S.A., whereby it should be differentiated from the balance that is established in the accounting of the Claimant at the time of first use of credit by company D..., S.A. actually granted by the Claimant.

And which, as in the case of the remaining subsidiary companies, should be purged from the taxable value of the assessment in question.

In such terms, on 28 December 2005, company D..., S.A. used credit for the first time in the amount of € 3,000,000.00 in the account it came to maintain directly with the Claimant under the financing contract entered into between these two entities.

Meanwhile, on 30 December 2005, the Claimant again delivered to company D..., S.A. an amount of € 23,883.28.

However, on 28 December 2005, company D..., S.A. had reimbursed the Claimant in the amount of € 18,885.30 as amortization of the credit meanwhile granted by the latter,

Having carried out further amortization in the amount of € 10,500,000 on 31 December 2005, with part of the reimbursement being intended, first, to amortize the credit incurred with the Claimant, with the amount reimbursed in excess being applied to amortization of the debt originally incurred by D..., S.A. with company C..., S.G.P.S., S.A..

Being so, the creditor balance that the Claimant held with company D..., S.A., on 31 December 2005 was of zero value, by virtue of the amortization carried out by D..., S.A., precisely on such date.

Therefore, the calculation base of the Stamp Tax assessed now in question must consider the movements that occurred only from 27 December 2005, considering the creditor balance that existed from then on, only relating to amounts actually delivered by the Claimant in the direct relationship with company D..., S.A., and taking into account all amortizations carried out.

Likewise, all operations relating to use of credit in current account arrangement contracted with the Claimant by D..., S.A, are disposed in the map of flow of entries and exits of credit and respective balance (see Document No. 5 attached with the case file.).

Thus, it is possible to verify that at the end of 2005 the credit granted by the Claimant to its subsidiary company D..., S.A. was completely amortized.

On the other hand, with respect to the credit contracted by D..., S.A. with the company subsequently liquidated and dissolved (C..., S.G.P.S., S.A.) we verify that a total amount of € 7,495,002.10 was amortized whereby, having regard to the amount that appeared in the Claimant's accounting on 27 December 2005, namely, a balance of € 16,745,823.00, referring to the balance that transferred to the Claimant from the assets of company C..., S.G.P.S., S.A, there existed on 31 December 2006 a debtor balance relating to credit contracted with C..., S.G.P.S., S.A., in the amount of € 9,250,821.00.

By all the foregoing, the amounts that appear in Annex 3 of the Tax Audit Report must be subject to correction, namely:

[Calculation table showing adjustment to taxable amount]

Which results in a difference between assessed tax and actually due tax, namely:

[Corrected tax amounts]

By all the foregoing, the Claimant's request should be granted.

IV – DECISION

In these terms, this Arbitral Tribunal decides:

a) To judge as without merit the request for a declaration of illegality of the Stamp Tax assessment No. 2009... and of the compensatory interest assessment No. 2009..., with all legal consequences.

b) To judge as well-founded the arbitral request formulated and, in consequence, to order the reform of the Stamp Tax assessment No. 2009... and of the compensatory interest assessment No. 2009..., for flagrant excess of the taxable amount, in the amount of € 2,191.