Summary
Full Decision
ARBITRATION TRIBUNAL DECISION
The arbitrators Councillor Maria Fernanda Maçãs (presiding arbitrator), Dr. Ricardo Rodrigues Pereira and Dr. Hélder Faustino (arbitrators), appointed by the Deontological Board of the Administrative Arbitration Centre to form the Arbitral Tribunal, agree as follows:
I. REPORT
1. On 4 May 2018, the commercial company A..., S.A., NIPC..., with registered office in ..., ..., Lisbon (hereinafter, Claimant or A...), filed a request for constitution of an arbitral tribunal, under the combined provisions of articles 2, no. 1, paragraph a), and 10, nos. 1, paragraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (hereinafter, briefly designated RJAT), as amended by article 228 of Law no. 66-B/2012, of 31 December, with a view to this tribunal's pronouncement regarding:
- Declaration of illegality and partial annulment of the Stamp Duty assessment act no. 2017..., relating to the year 2014, from which results a total amount payable of €1,091,166.48, corresponding to €962,652.80 in tax and €128,513.68 in compensatory interest; and
- Reimbursement of Stamp Duty overpaid, in the amount of €566,066.36, plus indemnity interest at the legal rate, from the date of payment of the tax until the date of its full reimbursement.
The Claimant attached 18 (eighteen) documents and listed 3 (three) witnesses, having not requested the production of any other evidence.
The Respondent is AT – Tax and Customs Authority (hereinafter, Respondent or AT).
2. In essence, the Claimant alleges a defect consisting of violation of law, due to erroneous interpretation and application of the provision contained in article 7, no. 1, paragraph g), of the Stamp Duty Code, and the consequent annullability of the aforesaid Stamp Duty assessment, to the extent applicable.
2.1. As the Claimant itself summarised at the end, in the request for arbitral pronouncement, the challenge to the disputed Stamp Duty assessment is based essentially on the following arguments which we now cite:
"A) Given the factual situation and legal framework presented above, the Claimant cannot agree with the correction made by the Tax Authority regarding Stamp Duty for the period 2014, which resulted in assessment no. 2017..., subject of this request for arbitral pronouncement.
B) This correction resulted from the understanding of the Tax Authority that the credit balances between B... (SGPS), S.A. and the Claimant in the period under analysis were subject to, and not exempt from, Stamp Duty.
C) Now, with due respect, the Claimant cannot agree with the correction carried out nor with the subsequent assessment, as it understands that it has been fully demonstrated that the requirements for the application of the exemption provided for in paragraph g) of no. 1 of article 7 of the Stamp Duty Code are met with respect to part of the balances relating to the financial operations identified above.
D) The application of the said exemption provision from Stamp Duty depends on the satisfaction of the following prerequisites:
– The carrying out of financial operations for the benefit of a company with which it is in a relationship of control or group;
– The carrying out of financial operations for a period not exceeding one year;
– The circumstance that the financial operations are exclusively intended to cover treasury shortfalls.
E) The Tax Authority did not contest the satisfaction of the first requirement, but considered that insufficient proof had been made that the financial operations in question were carried out within a maximum period of one year nor that they were intended exclusively to meet treasury shortfalls.
F) Now, the Claimant cannot but disagree with the interpretation of the exemption provision in question and with the conclusion reached by the Tax Authority that the satisfaction of its prerequisites was not demonstrated.
G) Firstly, because, given the factual elements presented above and the evidence attached, the Claimant understands that it has been unequivocally demonstrated, as regards part of the financial operations in question, that the time interval between the moment of each financial movement's outflow and the moment of its respective return did not exceed one year.
H) In fact, in accordance with an allocation of financial movements according to the age of debts, resulting from the supplementary rule of no. 1 of article 784 of the Civil Code, part of the financial operations in question meets the second prerequisite of the exemption, which requires the carrying out thereof within a maximum period of one year.
I) With respect to the third requirement, it is necessary first to elaborate on the concept of "treasury shortfalls", which is not defined by the exemption provision.
J) As explained above, in accordance with the rules for interpretation of tax provisions, specifically nos. 2 and 3 of article 11 of the LGT, in the absence of a definition of the concept of "treasury shortfalls" in tax law or in other branches of law, account must be taken of the economic substance of the tax facts.
K) Now, the Tax Authority considers that we are in a situation of treasury shortfall when Working Capital Needs are superior to Working Capital, that is, when the short-term funds available in a company are insufficient to meet obligations with reference to the same time horizon.
L) However, this understanding is overly reductive and restrictive. Let us see,
M) The Claimant recognises that there are various perspectives in economic-financial literature for defining the concept of "treasury shortfalls", but considers that it has presented sufficient evidentiary elements to demonstrate that, regardless of these conceptual variations, it has demonstrated that the financial operations in question were carried out exclusively to meet treasury shortfalls of B....
N) Note that the scope of the concept of treasury shortfall in this case should take into account the scope of activity of B..., which is an SGPS.
O) Believing that it has succeeded in proving the existence of effective treasury shortfalls at the level of B... and that the financial operations carried out by it in favour of that entity were intended exclusively to cover them, the Claimant understands that the necessary conditions are met for the purposes of applying the exemption provided for in paragraph g) of no. 1 of article 7 of the Stamp Duty Code.
P) In fact, taking into account all the factual and legal framework presented above, the now Claimant considers that the prerequisites of the said Stamp Duty exemption are unequivocally met with respect to part of the operations that were subject to correction by the Tax Authority, specifically as regards operations to which corresponds the amount of tax payable of €566,127.83, a value which is requested in this request."
2.2. The Claimant concludes the request for arbitral pronouncement as follows:
"Wherefore, in light of the grounds set out above, it is requested that Your Excellency be pleased to:
i) Find this arbitral action proven and, consequently, partially annul the aforesaid assessment statement, for suffering from error regarding the prerequisites of fact and law, due to the erroneous interpretation and application of the provisions of article 7, no. 1, paragraph g) of the Stamp Duty Code;
ii) As a consequence of the annulment of the Stamp Duty assessment identified above, issue a decision ordering the reimbursement of the amount of €566,066.36, relating to the Stamp Duty for the period 2014, unduly paid by the Claimant;
iii) Issue a decision ordering the payment of indemnity interest as may be due under article 43 of the LGT and article 61 of the CPPT, as a result of the damages caused by the voluntary payment of the Stamp Duty assessment identified above."
3. The request for constitution of an arbitral tribunal was accepted by the President of CAAD and followed its normal procedure with notification to AT on 10 May 2018.
4. The Claimant did not appoint an arbitrator, so, under the provisions of article 6, no. 2, paragraph a) and article 11, no. 1, paragraph a) of the RJAT, the President of the Deontological Board of CAAD appointed as arbitrators of the collective Arbitral Tribunal the undersigned, who communicated acceptance of the assignment within the applicable time period.
4.1. On 25 June 2018, the Parties were notified of this appointment, having not manifested any intention to refuse the appointment of the arbitrators, under the combined provisions of article 11, no. 1, paragraphs b) and c), of the RJAT and articles 6 and 7 of the CAAD Deontological Code.
4.2. Accordingly, in compliance with the provisions of article 11, no. 1, paragraph c) of the RJAT, the Collective Arbitral Tribunal was constituted on 16 July 2018.
5. On 20 September 2018, the Respondent, duly notified for that purpose, presented its Response in which it specifically challenged the arguments raised by the Claimant, concluding that the present action was unfounded, with its consequent dismissal of the claim.
5.1. In essence and also briefly, it is important to highlight the most relevant arguments on which the Respondent based its Response:
For the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code to be applicable, it was necessary not only for the subjective prerequisite (the existence of a certain type of relationship between the entities involved) to be met, which is not challenged by either party in the proceedings, but also the temporal requirements (period not exceeding one year) and purpose requirements (exclusive purpose of covering treasury shortfalls), whose demonstration the Claimant failed to effect either during the inspection action or in this process.
With respect to the temporal requirement, the Claimant failed to prove, for each financial inflow and its respective outflow, the period of time that elapsed between them, that is, whether between the moment of entry of each financial movement into the company, allegedly lacking financing, and the moment of its respective return to the financing entity the period provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code was not exceeded.
Since, with respect to the time requirement, particularly in situations of indefinite duration as occurs in the situation sub judice, it is necessary to determine for each financial operation both the date of use of the credit and its date of repayment; in practical terms, for each financial inflow there must be a corresponding outflow, and this must be carried out within a maximum period of one year for this prerequisite of the exemption to be met.
Thus, the arguments presented by the Claimant in this regard as (partial) proof that the operations do not exceed the one-year period cannot be accepted, since the explanation advanced continues to weigh balances in a global manner; that is, they do not allow verification of whether the amounts specifically loaned in each concrete financial operation were repaid before one year had elapsed from their loan.
With respect to the purpose requirement, the elements that the Claimant presents do not at all permit conclusion regarding the treasury situation of B... when the funds were made available by the Claimant, or at best, allow verification that the financial movements that occurred did not occur within a framework of treasury shortfall thereof.
Notwithstanding the Stamp Duty Code not defining the concept of "treasury shortfalls", it is commonly accepted that they exist when the short-term funds available in a company (assets) are insufficient to meet commitments/obligations (liabilities) with respect to the same time horizon, that is, when the existing Working Capital is less than the Working Capital Needs.
The notion of treasury operations is thus associated with short-term financial applications, which may be defined as outflows of funds by application of treasury surpluses and inflows of funds, aimed at covering the negative difference between the needs resulting from the company's activity as against its responsibility to third parties and the resources suitable for financing this activity.
Furthermore, treasury shortfalls, necessarily defined as punctual needs that a certain entity faces in order to meet payments it must make, are, as a rule, certain as to their amount and determinable as to their period, that is, the entity that punctually faces these shortfalls knows the amount it needs and the time during which it must meet them, not using this strategy in a reiterated manner, understood as a usual practice.
Wherefore, it cannot but be concluded that the Claimant advocates in the arbitral request a scope exceeding the meaning of treasury shortfall referred to, altering its configuration, so as to encompass situations excluded from this reality.
In effect, not included in the concept of financial shortfalls are those resulting from the fact that B... is willing to help financially a subsidiary of its own, and it is precisely this situation that generates the negative balance determined by B.... Since, in this situation one is not faced with a fact generating treasury shortfalls, as this only occurs with respect to current payments resulting from responsibility assumed towards third parties; differently, in the financing granted, what is at issue is the making available of funds to third parties, a situation quite distinct from that. Being otherwise, moreover, a contradiction, as it implies that an entity that has treasury shortfalls is ceding to other entities funds that it does not have.
In sum, the Claimant should have demonstrated that each of the referred financial flows was intended exclusively to overcome treasury shortfalls of the beneficiary company, which it failed to do.
5.2. The Respondent did not request the production of evidence and proceeded to attach the administrative file (hereinafter, PA) to the record.
6. By order of 8 October 2018, the Parties were notified of the designation of the date for the holding of the meeting referred to in article 18 of the RJAT and for the hearing of the witnesses listed by the Claimant.
7. On 13 November 2018, the meeting referred to in article 18 of the RJAT took place – in which the matters contained in the respective minutes are dealt with, which are hereby given as entirely reproduced and 15 January 2019 was set as the deadline for issuing the arbitral decision – and testimonial evidence was also produced.
8. Both Parties submitted written submissions, in which they reiterated the positions previously assumed in their respective pleadings.
II. CASE MANAGEMENT
The Arbitral Tribunal was regularly constituted and is competent ratione materiae, given the nature of the subject matter of the proceedings (cf. articles 2, no. 1, paragraph a) and 5 of the RJAT).
The request for arbitral pronouncement is timely, as it was presented within the period provided for in article 10, no. 1, paragraph a), of the RJAT.
The parties have legal personality and capacity, have standing and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from any nullities, and no exceptions or preliminary matters have been raised that would prevent the consideration of the merits, nor any that this Tribunal is required to rule upon.
III. GROUNDS
III.1. FACTS
§1. FACTS FOUND PROVEN
The following facts are considered proven:
a) The Claimant is a commercial company, established on 2 August 1991, whose object is the commerce and industry activities in foodstuffs and all types of goods included in the hypermarket and supermarket branch, including the sale of medicines not subject to medical prescription, and the operation of fuel supply stations, purchase, sale, purchase for resale, construction, leasing, operation and administration of real estate intended for the installation of hypermarkets, supermarkets, shopping centres, fuel supply stations, as well as real estate intended for office and residential purposes. [cf. documents nos. 2 and 4 attached to the P.I. and PA]
b) On 31.12.2014, the capital of the Claimant, valued at €77,500,000.00, represented by 15,500,000 shares with a nominal value of €5.00 each, was held 99.99997% by B..., SGPS, S.A. (hereinafter, B...), NIPC... – company that controls the operational companies of Group C... in Portugal, supporting their activities and, when necessary, financing them – and 0.00003% by D..., S.A., NIPC.... [cf. documents nos. 2 and 4 attached to the P.I., PA and statements of witnesses E..., F... and G...]
c) The Claimant is part of Group C... which opted for the application of the Special Taxation Regime for Groups of Companies (RETGS) and in which the dominant company is H..., S.A. (hereinafter, H...), NIPC.... [cf. documents nos. 2 and 4 attached to the P.I. and PA]
d) In compliance with Service Order no. OI2017... issued by the Large Taxpayers Unit on 20.10.2017, the Claimant was subject to an internal inspection action, with partial scope, relating to the period 2014 and aimed at determining and assessing Stamp Duty owed on financial operations carried out between the Claimant and its related entities that take the nature of credit in current account. [cf. documents nos. 2 and 4 attached to the P.I. and PA]
e) As a result, the respective Draft Tax Inspection Report was drawn up, which is hereby given as entirely reproduced, in which the following conclusions of the inspection action were set out [cf. document no. 2 attached to the P.I. and PA]:
"From the internal inspection procedure carried out (...), with reference to the 2014 tax period, an amendment resulted in Stamp Duty (IS), in the amount of €978,972.24, presented below.
(...)
Amendment regarding Stamp Duty – IS
Financial movements in favour of B... (SGPS), S.A.
In the 2014 tax period, the existence of financial movements in favour of B... (SGPS), S.A. (hereinafter B...), corresponding to the granting of funds, in the total amount of €145,037,399.66, was detected, which are subject to Stamp Duty (IS) as results from the combination of no. 1 of art. 1 of the Stamp Duty Code (Código do Imposto do Selo – CIS) with entry 12.1.4 of the General Table of Stamp Duty (Tabela Geral do Imposto do Selo – TGIS).
The obligation to assess the tax and deliver it to the State treasury rests with the entity granting the credit, in this case A... (tax subject), in accordance with what is provided for in paragraph b) of no. 1 of art. 2, combined with arts. 23 and 41, all of the CIS, and the tax burden rests with the user of the credit, in this case B..., under the terms of paragraph f) of no. 3 of art. 3 of the same Act.
Given that, from the analysis of the elements presented by the tax subject, it was not proven that the conditions for the exemption provided for in paragraph g) of no. 1 of art. 76 of the CIS were cumulatively fulfilled, in particular the one requiring that B... be in a situation of treasury shortfall (this being the exclusive purpose of the funds granted), the financial operations in question cannot benefit from it.
With the scope of the tax determined and no exemption existing for these operations, A... should have assessed the IS owed on them, which it did not do, which is why the assessment and levying of the outstanding tax is now proceeded with, in the amount of €978,972.24 (...)."
f) The Claimant was notified, through letter no. ..., of 09.11.2017, from the Tax Inspection Services/Large Taxpayers Unit, of the aforesaid Draft Tax Inspection Report and to, if it wished, exercise the right of hearing. [cf. document no. 2 attached to the P.I. and PA]
g) The Claimant exercised the aforesaid right of hearing, under the terms set out in document no. 3 attached to the request for arbitral pronouncement and hereby given as entirely reproduced, having primarily sought to demonstrate:
- the existence of balances which did not constitute financial operations subject to Stamp Duty, relating to obligations satisfied in the context of Corporate Income Tax (IRC) by H..., as the dominant company of the RETGS, but attributable to the Claimant as corresponding to the part of the tax attributable to it, requesting, therefore, the disregard of the same from the tax base considered by the Tax Inspection Services for the purposes of Stamp Duty; and
- the application of the exemption provided for in paragraph g) of no. 1 of article 7 of the Stamp Duty Code, with respect to the balances relating to financial operations liquidated within the period of one year.
h) The Claimant was notified, through letter no. ..., of 27.11.2017, from the Tax Inspection Services/Large Taxpayers Unit, of the Tax Inspection Report (hereinafter, RIT), which is hereby given as entirely reproduced, in which the elements brought by it were considered and the arguments it raised were partially accepted within the scope of the exercise of the right of hearing, and consequently the amendment regarding Stamp Duty initially proposed, valued at €978,972.24, was partially annulled by €16,319.44, having been fixed at the amount of €962,652.80. [cf. document no. 4 attached to the P.I. and PA]
i) The aforesaid amendment regarding Stamp Duty was based essentially on the following grounds set out in the RIT which we extract here [cf. document no. 4 attached to the P.I. and PA]:
"In the case under consideration, the constitutive facts of the right that A... seeks to assert are based on the demonstration of the existence of the prerequisites of a tax exemption situation for the financial operations in question, under the terms of paragraph g) of no. 1 of art. 7 of the CIS, with such obligation of demonstration resting on the tax subject (cf. no. 1 of art. 74 of the LGT).
(...)
Regarding the first prerequisite invoked by the tax subject, relating to operations for a period not exceeding one year, no proof is made by it that the financial operations in question, with respect to each financial inflow and its respective outflow, was carried out within a maximum period of one year, and for that reason its thesis that all the prerequisites inherent to the exemption from taxation are met cannot be accepted.
(...)
In truth, no element was invoked by A..., and much less proven, regarding the time interval that elapsed between the moment of entry of each financial movement into the company allegedly lacking financing, and the moment of its respective return to the financing entity. (...)
With respect to the second prerequisite invoked by the tax subject, relating to operations carried out for the benefit of a company with which it is in a relationship of control or group, the Tax Inspection does not raise any objections in this respect, (...).
As for the third prerequisite invoked by the tax subject, relating to the exclusive destination of each financial flow to cover treasury shortfalls of the entity lacking financing, A... merely theorises about the concept of treasury shortfalls, (...).
Based on the extract contained in Annex 1, the tax subject selected a set of financial movements in favour of B..., which it designated as "material transactions", for which it carried out a specific analysis, evidenced in the table on page 5 of Annex 2, with an indication of the purpose of each of them as a way of demonstrating that they are intended to meet treasury shortfalls.
From the analysis of this table, it appears that the financial movement from A... to B... constitutes only the "Movement A", which is followed by a "Movement B", through which B... transfers the same funds or funds of lower/higher amount to H... (the dominant company of the fiscal group that both integrate) or to two other related entities, I..., S.A. (hereinafter I...), NIPC..., and J..., S.A. (hereinafter J...), NIPC....
It is therefore found that the tax subject bases its argument on the understanding that there are treasury shortfalls in the sphere of the beneficiaries of the funds, namely B..., H..., I... and J..., depending on the transaction, from which would inevitably result the satisfaction of the prerequisite under analysis.
However, since the financial movements granted by A... to B... are in question, for the purposes of applying to them the exemption provided for in paragraph g) of no. 1 of art. 7 of the CIS, and specifically the satisfaction of the third prerequisite, it is only relevant to assess whether or not there are treasury shortfalls in the sphere of B..., which in any case constitutes the first beneficiary of the funds.
In this way, only the movements identified by the tax subject as "Movement A" in the table on page 5 of Annex 2 are relevant, regardless of whether, by means of subsequent movements by B... ("Movement B" of that table), the actual beneficiaries of all or part of the funds are other related entities.
Considering further that there is no contract through which it is established that the credit granted by A... to B... will necessarily be granted by the latter to H..., to I... or to J..., the treasury shortfalls found in the sphere of the same, even if they were demonstrated, are not relevant for the application of the exemption invoked for the financial operations established between A... and B....
In addition, to demonstrate the satisfaction of this prerequisite, the tax subject merely presented the elements contained in Annex 3, which do not permit conclusion regarding the treasury situation of B... when the funds were made available by A..., something that would always be relevant data to assess whether the financial movements verified occurred or not in a framework of shortfall thereof.
Notwithstanding the CIS not defining the concept of "treasury shortfalls" to be used to assess the right to the exemption in question, it is understood that these exist when the short-term funds available in a company (assets) are insufficient to meet commitments/obligations (liabilities) with reference to the same time horizon, that is, when the existing Working Capital (FM) is less than the Working Capital Needs (NFM).
Specifically, the evaluation of a situation of treasury shortfall of a certain entity is based on the concept of the treasury situation, which refers to the comparative analysis between FM and NFM, from a short-term perspective.
In these circumstances, it was not possible for AT to follow the methodology of daily determining the treasury situation of B... and comparing it with the average monthly balance of the funds granted, since the necessary information was not made available by the tax subject during the inspection action.
On the other hand, as to the exclusive character of the financing to meet treasury shortfalls, the tax subject says nothing. And it should have demonstrated that each of the referred financial flows was intended exclusively to overcome treasury shortfalls of the beneficiary company, but it did not. In fact, it is not enough to allude to the purpose of the transactions or the nature of the financial movements to thereby attempt to assert the idea that they were intended exclusively to meet treasury shortfalls of the entity lacking funding. (...)
In sum, with the prerequisites of the exemption from taxation in Stamp Duty, provided for in paragraph g) of no. 1 of art. 7 of the CIS, not being met, as they were not demonstrated by the tax subject, who had that burden (cf. no. 1 of art. 74 of the LGT), the exemption situation from tax does not occur, and the respective assessment should be issued and notified.
(...)
Accordingly, it is considered that the granting of funds by A... to B... constitutes operations of credit utilisation subject to IS, under the terms of entry 17.1 of the TGIS (by reference of no. 1 of art. 1 of the CIS).
(...)
Given that the operations take the nature of credit in current account and the period for which the credit was granted is not determined or determinable, we have that:
– entry 17.1.4 of the TGIS subjects to IS the utilisation of credit in the form of current account, bank overdraft or other, of indefinite or indeterminable duration of utilisation, at the rate of 0.04%, on the average monthly obtained through the sum of the sums in debt determined daily, during the month divided by 30;
– the tax obligation is considered constituted on the last day of each month, in accordance with the provisions of paragraph g) of no. 1 of art. 5 of the CIS.
From the application of the rules set out in the CIS above, the average sums in debt for each month were determined to assess the outstanding IS. The calculations inherent to this determination appear in Annex 4, with IS being owed by A... of €978,972.24, thus distributed across the 12 months of the year:
(...) new calculation of the outstanding tax was carried out in Annex 5.
In view of the foregoing, taking into account the allegations brought by A... in the right of hearing, as well as the elements presented, it is determined that the initially proposed correction of €978,972.24 is partially annulled by €16,319.44, becoming €962,652.80, an amount thus distributed across the 12 months of the year:
j) Consequently, the Claimant was notified of the Stamp Duty assessment no. 2017..., valued at €962,652.80, of the compensatory interest assessments nos. 2017..., 2017..., 2017..., 2017..., 2017..., 2017... and 2017..., with a total value of €128,513.68 and of the demonstration of Stamp Duty assessment no. 2017..., in the total amount of €1,091,166.48, with a payment deadline of 07.02.2018. [cf. document no. 1 attached to the P.I. and PA]
k) On 07.02.2018, the Claimant made full and timely payment of the aforesaid amount of €1,091,166.48. [cf. document no. 5 attached to the P.I.]
l) From March 2011 onwards, the Claimant became part of the short-term financing system – cash pooling system – existing in Group C... and centralised in K..., S.A., through which the entities that form part of it can obtain and grant short-term financing, that is, with a period of less than one year, although no contract for centralised treasury management underlying it was found to exist. [cf. Annex 2 of the RIT (document no. 4 attached to the P.I. and PA)]
m) In the accounting of the Claimant, specifically in the account "268900004 – Group loans – Other operations" – which includes debtor and creditor balances between A... and B... – and regarding the year 2014, a beginning balance of €76,686,559.41 is recorded on 01.01.2014, relating to financial operations of A... in favour of B... [cf. document no. 6 attached to the P.I. and PA]
n) During the course of 2014, financial operations were carried out by A... in favour of B..., fully recorded in the aforementioned account "268900004 – Group loans – Other operations", in the total amount of €142,688,619.05, distributed monthly as follows [cf. document no. 6 attached to the P.I. and PA]:
Month Amount (€)
January 253,000.00
February 120,552,000.00
March 162,399.66
April 124,000.00
May 81,000.00
June 20,534,567.96
July 94,000.00
August 195,883.81
September 60,000.00
October 279,883.81
November 170,000.00
December 181,883.81
o) The aforesaid financial movements existing between the Claimant and B..., throughout 2014, were carried out within the scope of the aforementioned cash pooling system [cf. Annex 2 of the RIT (document no. 4 attached to the P.I. and PA)]
p) During the course of 2014, B... made diverse transfers of funds to entities related to it, specifically those indicated below [cf. Annex 3 of the RIT (document no. 4 attached to the P.I. and PA) and documents nos. 11, 12, 14 and 15 attached to the P.I.]:
DATE BENEFICIARY AMOUNT (€)
02.01.2014 H... 15,000.00
10.01.2014 J... 40,000.00
23.01.2014 H... 199,000.00
31.01.2014 H... 103,000.00
03.02.2014 H... 120,444,000.00
13.02.2014 J... 15,000.00
24.02.2014 H... 25,000.00
27.02.2014 H... 2,500.00
23.05.2014 H... 25,000.00
04.06.2014 H... 2,474,000.00
12.06.2014 H... 19,002,000.00
17.06.2014 H... 17,000.00
05.08.2014 J... 43,000.00
03.10.2014 H... 472,000.00
15.10.2014 J... 42,000.00
15.10.2014 I... 15,000.00
16.10.2014 H... 101,000.00
q) On 5 January 2015, a so-called "Credit Transfer Agreement" was celebrated, between H..., B... and A..., under the terms contained in document no. 7 attached to the request for arbitral pronouncement and hereby given as entirely reproduced (the document contains a drafting lapse in its clause regarding the identification of the intervening companies – cf. PA), by which, to the extent relevant here: B... transferred to A..., at its respective nominal value and with reference to the date of 31.12.2014, the credit it held over H... valued at €48,000,000.00; and compensation was effected between the advances of €136,800,000.00 owed by A... to B... and the amounts payable by the latter to A..., with effect as of 31.12.2014.
r) On 16 January 2015, B... transmitted to L... a bank transfer order, in the amount of €4,785,000.00, by debit from its account no. ... and to the credit of account no. ..., there domiciled and held by A..., mentioning as value-date 29.12.2014. [cf. document no. 8 attached to the P.I.]
s) At the same time, A... carried out a bank transfer to B..., in the amount of €45,000.00, by debit from account no. ..., held by it, and to credit in account no. ..., held by B..., both domiciled in L.... [cf. document no. 8 attached to the P.I.]
t) The amount of €4,785,000.00 referred to in the proven fact r) was recorded in the accounting of the Claimant, specifically in the aforementioned account "268900004 – Group loans – Other operations", on 31.01.2015. [cf. document no. 9 attached to the P.I.]
u) The repayments of amounts by B... to A... were made according to the FIFO (first in, first out) accounting method, without there being exact correspondence between the financial inflows and outflows existing between the two companies. [statements of witnesses E..., F... and G...]
v) On 4 May 2018, the request for constitution of an arbitral tribunal was presented which gave rise to these proceedings. [cf. CAAD case management information system]
§2. FACTS NOT PROVEN
With relevance to the assessment and decision of the case, there are no facts that have not been proven.
§3. REASONING ON FACTUAL MATTERS
The factual elements relevant to the decision of the case were selected and delimited according to their legal relevance, in light of the plausible solutions to the legal questions, under the combined application of articles 123, no. 2, of the CPPT, 596, no. 1 and 607, no. 3, of the CPC, applicable ex vi article 29, no. 1, paragraphs a) and e), of the RJAT.
With respect to the factual matter proven, the conviction of the Tribunal was based on the facts alleged by the Parties, whose correspondence to reality was not disputed and therefore admitted by agreement, on the critical analysis of the documentary evidence in the record, including the administrative file, and also on the testimonial evidence produced.
Regarding the statements given by the witnesses listed by the Claimant – E..., at the time of the facts, Accounting Director of the Claimant, F..., at the time of the facts, accountant of the Claimant and G..., at the time of the facts, Treasury Director of the Claimant, who testified in a clear, objective and impartial manner regarding the facts to which they were examined (factual matters contained in articles 11 to 25, 38 to 40, 47, 50 to 55, 58 to 65, 78 and 84 to 87 of the request for arbitral pronouncement), with direct knowledge thereof, which was revealed and proven by the detailed manner in which they explained them, so that their statements deserve total credibility – the same corroborated, in essence, the factual situation alleged by the Claimant, on which they testified.
III.2. LAW
§1. DELIMITATION OF SUBJECT MATTER
The question on the merits submitted to this Tribunal's consideration relates to the incidence of Stamp Duty on the financial operations existing between the Claimant and A... during 2014, in light of the exemption provision contained in article 7, no. 1, paragraph g), of the Stamp Duty Code.
The Claimant raises, in this context, errors of fact and law with respect to two points.
The first relates to the satisfaction of the temporal requirement provided for in the cited provision, namely that the financial operations should be for a period not exceeding one year.
The second concerns the satisfaction of the requirement relating to the purpose of such financial operations, which should be exclusively intended to cover treasury shortfalls.
Finally, the Tribunal must pronounce itself on the claims for reimbursement of the amount of Stamp Duty unduly paid and payment of indemnity interest.
§2. ON THE MERITS
A. INTRODUCTION
This case seeks to determine whether or not the prerequisites for the application of the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code are satisfied.
The AT seeks to assert the right to tax the mentioned financial operations and, to that extent, advocates the lawfulness of the disputed Stamp Duty assessment.
For its part, the Claimant seeks to assert its right to exemption from such taxation, under the indicated provision of the Stamp Duty Code.
Before we proceed, it is important to clarify to whom the burden of proof of satisfying the prerequisites for the application of the cited provision, which provides for the Stamp Duty exemption in question, is legally assigned.
In this regard, article 74, no. 1, of the LGT provides as follows:
"The burden of proof of the facts constitutive of the rights of the tax authority or of taxpayers rests with whoever invokes them."
Subsuming the concrete case to this provision, given what the AT and the Claimant seek to assert in these proceedings, we have that the AT will bear the burden of proving the existence of a taxable credit utilisation operation without Stamp Duty relief.
For its part, the Claimant will bear the burden of proving the prerequisites for the exemption from such taxation resulting from the provision of article 7, no. 1, paragraph g), of the Stamp Duty Code.
The case law of the STA (Supreme Administrative Court) has repeatedly affirmed this understanding, an example being the judgment of 16.01.2008, delivered in case no. 0381/07, in whose summary one can read the following:
"III – It is incumbent upon the Administration merely to bear the burden of proof of the satisfaction of the respective indicia or prerequisites of taxation, that is, the legal prerequisites of its action and, on the other hand, it falls to the taxpayer to prove the existence of the tax facts that it alleges as the basis of its right."
In the same sense, among others, one may consult the judgment of 29.04.2004, delivered in case no. 01680/03 and the judgment of 14.01.2015, delivered in case no. 01480/03.
B. THE INCIDENCE OF STAMP DUTY ON FINANCIAL OPERATIONS
Article 1, no. 1, of the Stamp Duty Code provides as follows:
"Stamp Duty is levied on all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of assets."
Under the terms of entry 17.1 of the TGIS, Stamp Duty is owed:
"17.1. For the utilisation of credit, in the form of funds, merchandise and other values, by virtue of the granting of credit in any capacity except in the cases referred to in entry 17.2, including credit transfers, factoring and treasury operations when they involve any type of financing to the transferee, adherent or debtor, always being considered as a new granting of credit the extension of the period of the contract – on the respective value, depending on the period:
17.1.1. Credit with a period of less than one year – for each month or fraction … 0.04%
17.1.2. Credit with a period of one year or more … 0.50%
17.1.3. Credit with a period of five years or more … 0.60%
17.1.4. Credit utilised in the form of current account, bank overdraft or any other form in which the period of utilisation is not determined or determinable, on the average monthly obtained through the sum of the sums in debt determined daily, during the month, divided by 30 … 0.04%"
As referred to in the judgment of the Central Administrative Court South, dated 03.12.2015, delivered in case no. 06974/13, "entry no. 17 of the General Table of Stamp Duty (T.G.I.S.), subjects the scope of Stamp Duty to financial operations taking into account their economic substance and disregarding the legal form underlying the contracts, revealing an increasing concern with the principle of tax equality.
The tax on credit utilisation provided for in the referred entry 17.1 of the T.G.I.S. applies to all financial operations carried out by any entity, and for any purpose, from which results the making available of credit in the form of funds, merchandise and other values, encompassing in its scope, both acts of taking up of funds made available in national territory to entities not domiciled there, and operations of this nature carried out in favour of entities domiciled there, even if the taxable fact – the drawing of the funds – must be considered located outside national territory.
(...)
Already entry 17.1.4, set out above, taxes the utilisation of credit in the form of current account, bank overdraft or other, of indefinite or indeterminable duration of utilisation, being subject to the rate of 0.04% on the average monthly obtained through the sum of the sums in debt determined daily, during the month, divided by 30. (...) In this entry, the incidence of tax derives from the subject favoured by the credit operation benefiting from an increase in financial liquidity at a current moment, with the collateral passive situation – the charge or debt – being distributed over a medium or long period (with the tax rate varying precisely as a function of this "pro rata temporis"), with the legislator considering sufficient for taxation purposes this "sudden apparent enrichment" resulting from instantaneous monetary availability."
With respect to financial operations, we encounter the following objective exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code:
"1. The following are also exempt from tax:
(...)
g) Financial operations, including the respective interest, for a period not exceeding one year, provided they are exclusively intended to cover treasury shortfalls and carried out by venture capital companies (SCR) in favour of companies in which they hold interests, as well as those carried out by other companies in favour of companies dominated by it or companies in which they hold at least 10% of the voting capital or whose acquisition value is not less than €5,000,000, in accordance with the last approved balance sheet, and also carried out for the benefit of a company with which it is in a relationship of control or group."
This provision thus provides for the following requirements, whose cumulative satisfaction depends on its application:
a) Period not exceeding one year;
b) Exclusive purpose of covering treasury shortfalls;
c) Carrying out by certain entities discriminated therein.
C. CONCRETE ANALYSIS
In the concrete case, it is important to assess whether or not the first two requirements, set out above, of which the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code depend are satisfied, that is, whether the financial operations are (i) for a period not exceeding one year and (ii) have as their exclusive purpose covering treasury shortfalls, since, with respect to the third requirement, the parties are in agreement as to its satisfaction.
C.1. REGARDING THE PERIOD OF THE FINANCIAL OPERATIONS
As results from proven fact m), in the accounting of the Claimant, specifically in the account "268900004 – Group loans – Other operations" and regarding the year 2014, a beginning balance of €76,686,559.41 is recorded on 01.01.2014, relating to financial operations of A... in favour of B....
It was also proven that, during the course of 2014, financial operations were carried out by A... in favour of B..., fully recorded in the aforementioned account "268900004 – Group loans – Other operations", in the total amount of €142,688,619.05, distributed monthly in the manner described in proven fact n).
On the other hand, it was further established that on 5 January 2015, a so-called "Credit Transfer Agreement" was celebrated, between H..., B... and A..., by which, to the extent relevant here: B... transferred to A..., at its respective nominal value and with reference to the date of 31.12.2014, the credit it held over H... valued at €48,000,000.00; and compensation was effected between the advances of €136,800,000.00 owed by A... to B... and the amounts payable by the latter to A..., with effect as of 31.12.2014 (cf. proven fact q)).
It was also considered proven that on 16 January 2015, B... transmitted to L... a bank transfer order, in the amount of €4,785,000.00, having as beneficiary A..., mentioning as value-date 29.12.2014 (cf. proven fact r)), an amount which was recorded in the accounting of the Claimant, specifically in the aforementioned account "268900004 – Group loans – Other operations", on 31.01.2015 (cf. proven fact t)); at the same time, A... carried out a bank transfer to B..., in the amount of €45,000.00 (cf. proven fact s)).
Finally, on this point, it is important that we bear in mind that it was proven that the repayments of amounts by B... to A... were made according to the FIFO (first in, first out) accounting method, without there being exact correspondence between the financial inflows and outflows existing between the two companies (cf. proven fact u)).
It is our understanding that the AT's statement that, as regards this requirement, on which (among others) the exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code depends, the Claimant made no proof "that the financial operations in question, with respect to each financial inflow and its respective outflow, was carried out within a maximum period of one year", considering that the Claimant invoked, and much less proved, any element "regarding the time interval that elapsed between the moment of entry of each financial movement into the company allegedly lacking financing, and the moment of its respective return to the financing entity".
However, contrary to what emerges from the AT's statements in this regard, we understand that the satisfaction of the requirement under analysis does not require that there be exact correspondence between the financial inflows and outflows between the entity lacking financing and the financing entity; in fact, examining the provision in question, we do not find any element that, directly or indirectly, points in that direction and, as it flows from the provisions of article 9 of the Civil Code (applicable ex vi article 11, no. 1, of the LGT and article 29, no. 1, paragraph a), of the RJAT), the interpreter cannot consider the legislative thinking which does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed (no. 2), and in determining the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and was able to correctly express its thinking (no. 3).
Thus, nothing prevents the repayment of amounts by the entity lacking financing to the financing entity from being carried out, as happens in the concrete case, according to the FIFO (first in, first out) accounting method and, therefore, without exact correspondence between the financial inflows and outflows existing between the two entities.
Accordingly, we consider that the Claimant succeeded in proving that part of the amounts financed to B... were repaid by the latter within a period not exceeding one year; specifically:
a. beginning balance on 01.01.2014: €76,686,559.41 (1)
b. financial operations of A... in favour of B... (2014): €142,688,619.05 (2)
c. repayments made by B... to A... (2014): €184,800,000.00 (3)
d. (3) – (1): €108,113,440.59 (4)
e. (2) – (4): €34,575,178.46.
The beginning balance (1) was not considered as having been repaid within the period of one year, as indeed the Claimant itself expressly recognises and accepts in the request for arbitral pronouncement.
Regarding the amount of repayments made by B... to A... during 2014, we considered only the amounts of €136,800,000.00 and €48,000,000.00, having excluded the amount of €4,740,000.00 (€4,785,000.00 – €45,000.00), for the following reasons: this latter amount only appears recorded in the accounting of the Claimant, specifically in the account "268900004 – Group loans – Other operations", on 31.01.2015 (cf. proven fact t)), with no evidence in the record that would allow us to conclude that the Claimant's claim that the value-date of the bank transfer in question was 29.12.2014 was, in any way, effectuated.
With respect to the value-date, it will not be unimportant to make a brief excursus to bring to attention Decree-Law no. 18/2007, of 22 January, which establishes the value date of any movement of sight deposits and transfers carried out in euros, determining its effect on the period for the making available of funds to the beneficiary, whose article 3, paragraph d), provides that "value-date" means the date from which the transfer or deposit becomes effective, capable of being moved by the beneficiary and the eventual counting of interest resulting from the credit or debit balances of deposit accounts begins.
Regarding the management of bank accounts, we have, on the one hand the date of the movement which is that when the operation is carried out by the account holder (for example, a transfer to another account) and, on the other hand, the value-date which is that from which the movement produces effects on the account, and this can be different from the date of the movement.
Returning to the concrete case, nothing having been proven to the effect that the value-date of the bank transfer in question was, effectively, different from the date of its realisation and the date of accounting of this operation being 31.01.2015, we cannot consider the aforesaid amount in the calculation of the amounts repaid by B... to A... during the 2014 tax period.
Since the repayments made by B... to A... were according to the FIFO accounting method, the total amount of these repayments made in 2014 (3) began by being allocated to the beginning balance in debt (1); the remainder (4) was, in turn, allocated to the repayment of the financial operations of A... in favour of B..., in 2014 (2), from which resulted the final balance of €34,575,178.46, an amount which was not repaid during the 2014 tax period, corresponding to €12,691,559.41 to loans granted by A.. in the month of February 2014 and the remainder to loans granted by the same in the remaining months of 2014.
In conclusion, in the 2014 tax period, financial operations were carried out for a period not exceeding one year between the Claimant and B... in the amount of €108,113,440.59, and as regards these, we consider the requirement under analysis satisfied for the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code.
C.2. REGARDING THE PURPOSE OF THE FINANCIAL OPERATIONS
Now turning to the analysis of the final one of the stated requirements on which the application of the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code depends, relating to the purpose of the financial operations and, according to which, these should aim exclusively at covering treasury shortfalls.
As is judiciously stated in the judgment delivered on 25.11.2013, in case no. 76/2013-T of CAAD, this provision "speaks of operations "exclusively intended to cover treasury shortfalls" and not primarily (or any other synonym) intended for this purpose".
In the same sense, we find the judgment delivered on 03.07.2018, in case no. 31/2018-T of CAAD, where it is stated that excluded from the scope of application of the tax exemption in question are those other operations that have as their object not only treasury shortfalls, but also financing needs.
It is therefore necessary to verify whether the financial operations carried out by the Claimant in favour of B... aimed, with exclusive character, to cover treasury shortfalls of B....
As was proven, from March 2011 onwards, the Claimant became part of the short-term financing system – cash pooling system – existing in Group C... and centralised in K..., S.A., through which the entities that form part of it can obtain and grant short-term financing, that is, with a period of less than one year, although no contract for centralised treasury management underlying it was found to exist (cf. proven fact l)).
It was further proven that the referred financial movements existing between the Claimant and B..., throughout 2014, were carried out within the scope of the aforementioned cash pooling system (cf. proven fact o)).
It was also proven that during 2014, B... made diverse transfers of funds to entities related to it, specifically those indicated in proven fact p).
In light of this factual situation which was proven, it is necessary that we begin by making an approach, necessarily brief, to centralised treasury management (cash pooling), aimed at grasping its main lines.
As is explained by José Fernando Abreu Rebouta (Fiscal Contextualisation of Centralised Treasury Management (cash pooling) in International Environment, II Post-Graduation in Tax Law, Faculty of Law of the University of Porto, October 2005, pp. 3, 4 and 6 to 8): "Treasury management centres or centralised treasury management aim at the consolidated management of the treasury of various companies in a group of companies through one of these companies or through a company specifically established or intended for that purpose, or in short, to allow the relating of debit balances and credit balances at a financial institution. This type of operation allows the compensation of the debit balance of some of the companies by the credit balance of the remainder. In addition, the treasury management centre can resort to the funds generated to finance the companies in the group.
For that purpose, three alternative approaches arise, so the constitution of the referred centres depends on the celebration of one of three of the following "cash-pool" conventions:
1) "Notional cash-pooling";
2) Cash concentration "Zero-balancing";
3) Treasury advances.
2.2.1. Notional cash pooling (merger of account balances for interest calculation)
With Notional cash pooling, there is the equivalent of a virtual merger of account balances for interest calculation, that is, the funds are not moved but the Financial Institution (the Bank) will combine the balances of the different bank accounts and will charge/pay interest on the aggregate sum of the balances.
At the end of each day the balances of all accounts are related in a virtual manner. This relating is possible through the establishment of "mother-daughter" relations of the different bank accounts with the "mother" bank account, which assumes a virtual role.
(...)
2.2.2. Cash concentration (zero balancing)
In this modality, the centralisation of treasury is operated by account of the centralising entity established with the Bank, being a holder one of the companies in the group (the centralising entity). Based on the framing of the centralised treasury contract, actual transfers of capital are made to the global account, that is, the funds are physically directed to a single aggregate bank account. In this modality the so-called zero balancing option is the most common, as all bank accounts are placed at zero in the transfer movement to the global account, consequently the debit balances are covered by a reverse transfer movement from the global account in favour of the debit bank account.
(...)
2.2.3. Treasury advances
Depending on the needs, participating companies can obtain funds from other companies, including the centralising entity. These funds may come from treasury surpluses of other companies in the group or from recourse to credit negotiated in a global manner.
The centralisation of treasury operations is also carried out intragroup, without financial intermediation by the bank in the financial sense, although the funds are deposited in a credit institution, which carries out transfers by general order of the various entities involved in the centralised management agreement. Thus, the legal relationship established is necessarily between the debit and credit entities of the capital and interest, that is, directly between participating companies and the participating and centralising entity. These transfers of balances between group entities, constitute financings obtained/granted, with credit utilisation/granting occurring. This transfer of balances between group entities, constitute financings obtained/granted, with credit utilisation/granting occurring. This transfer of balances between group entities, constitute financings obtained/granted, with credit utilisation/granting occurring. (...)
The idea of treasury operations is normally associated with that of short-term financial applications. However, the correct management of the availability of a company, or of a group of companies, implies that monetary surpluses may be applied or placed in other companies that need them, either in an ephemeral manner or, also, in a lasting manner."
Returning to the concrete case, it is important to note that in the bank documents relating to the financial flows between the Claimant and B... and between the latter and other related entities, contained in Annex 3 of the RIT (cf. document no. 4 attached to the P.I. and PA), express reference is made to cash pooling as a description of the operations to which they relate.
However, the mere invocation that the transfers of amounts are carried out within the scope of a cash pooling agreement does not constitute sufficient proof for the demonstration that the credits granted are intended to meet treasury shortfalls of the beneficiary(ies), since, as is obvious, this may or may not have adherence to reality; indeed, it is well understood that this should be so as cash pooling does not exhaust itself exclusively in the suppression of treasury shortfalls of the beneficiary company(ies). In effect, as José Fernando Abreu Rebouta explains (op. cit., p. 3), "centralised treasury management can gain material advantages by eliminating debit and credit balances. In addition to the material advantages that respect (i) reduction of interest associated with debit accounts and (ii) overdraft commissions and similar, formal and qualitative advantages can be summarised, such as (i) the strengthening of the company's financial statements, by reducing the level of bank loans, (ii) strengthening of negotiating capacity with the financial institution and (iii) strengthening of the company's and group's attractiveness to the capital market. Finally, withholding tax on interest can also be minimised/optimised."
In order to support its position that the financial operations in question are exclusively intended to cover treasury shortfalls of B..., the Claimant essentially puts forward the argument that B..., as an SGPS, has as its corporate object the management of shareholdings in other companies, as an indirect form of exercising economic activities; thus, in accordance with what is provided for in Decree-Law no. 495/88, of 30 December, B... did not exercise a commercial activity, merely managing its shareholdings and providing residual and accessory services to its subsidiaries. In this way, the Claimant argues that "the scope of the concept of treasury shortfall provided for the purposes of applying the Stamp Duty exemption provided for in paragraph g) of number 1 of article 7 of the respective Code should take into account the scope of activity of B... as an SGPS – i.e., provision of services and financing to its subsidiaries".
In the absence of any legal definition, specifically within the scope of tax legislation, we must resort to business finance and accounting in order to delineate what should be understood by treasury shortfall.
Conceptually, a company is in financial equilibrium if it has the capacity (treasury liquidity) to timeously settle its financial commitments, or, put more simply, if it has the monetary means to pay, duly and in time, the amount owed to its creditors.
In financial language, in such a situation of solvency, it is said that the company has positive net treasury; in the opposite sense, if it does not have this capacity, the company is in a situation of treasury shortfall, called in financial language negative net treasury.
Net treasury (TL) is defined as the difference between functional working capital (FMF) and working capital requirements (NFM).
Working capital requirements (NFM) correspond to the financing needs of the company's operating cycle, that is, the company's current activity linked to its object, that is, payments that the company must make before receiving from its debtors.
Functional working capital (FMF) corresponds to the portion of permanent capital (equity and medium and long-term liabilities) that finances cyclical activities, that is, the company's operating cycle.
If FMF is greater than or equal to NFM, this means that the existing working capital is sufficient to finance the financing needs of the operating cycle, so treasury is balanced or even has surpluses, which in that case may/should be applied, so as to generate a return.
Conversely, if FMF is less than NFM, this means that the existing working capital is not sufficient to finance the financing needs of the operating cycle, so treasury is unbalanced, that is, there is a treasury shortfall that the company must meet under pain of entering a situation of failure to perform its financial obligations.
The situation of treasury shortfall may have a permanent or punctual character, that is, the company's activity may not be able to generate treasury funds (liquidity) sufficient to timely meet its payments:
a) in a permanent manner, being a structural situation, which means that working capital must be increased, by increasing the volume of permanent capital that finances the company (increase in share capital, ancillary contributions, advances, medium and long-term financing, etc.), that is, the company has a capital structure insufficient to meet the current financing needs inherent to its operating cycle;
b) in a punctual manner, being a temporary situation, which means that at certain times or seasons there must be a reinforcement of treasury by resorting to short-term loans, with the adjustment being made naturally in the company's current operating cycle.
In sum, treasury shortfall should be assessed by the insufficiency of available funds to meet short-term commitments, that is, those of less than one year, and at the date of the recourse to financing, the shortfall must exist, that is, the short-term commitment must be in the company's accounting records.
Reverting to the concrete case, it is incontroverest, as it flows from the respective legal regime to which it is subjected, that B..., as an SGPS, may grant credit to companies that are dominated by it under the terms of article 486 of the Commercial Companies Code or to companies in which it holds participations provided for in no. 2 of article 1 and in paragraphs b) and c) of no. 3 of article 3 of Decree-Law no. 495/88, of 30 December (cf. its article 5, no. 1, paragraph c)), with it that in the latter case, the granting of credit will only be permitted up to the amount of the value of the participation contained in the last approved balance sheet, unless the credit is granted through advance contracts (cf. article 5, no. 2); on the other hand, B... itself may be a beneficiary of treasury operations carried out by companies it has shareholdings in that are with it in a relationship of control or group (cf. article 5, no. 3).
In this way, we have that financial operations for a period not exceeding one year, provided they are exclusively intended to cover treasury shortfalls, carried out by SGPS in favour of their subsidiaries (descendant operations), as well as operations of the same nature, carried out for the benefit of SGPS by companies that are with them in a relationship of control or group (ascendant operations), benefit from the Stamp Duty exemption provided for in article 7, no. 1, paragraph g), of the Stamp Duty Code.
That said. Although it was proven that during 2014, B... transferred funds to entities related to it, which were to a large extent derived from the transfers of amounts made to it by A... (as referred to in the RIT, as a result of the analysis of the table on page 5 of its Annex 2, "it is found that the financial movement from A... to B... constitutes only the "Movement A", which is followed by a "Movement B", through which B... transfers the same funds or funds of lower/higher amount to H... (...) or to two other related entities, I..., S.A. (...) and J..., S.A. (...)" – cf. document no. 4 attached to the P.I. and PA), this does not appear sufficient to conclude that the financial operations carried out by A... in favour of B... had as their exclusive purpose covering treasury shortfalls of B....
Since nothing was demonstrated in the record regarding the treasury situation of B... when the granting of funds by the Claimant began, something which would indisputably be relevant data to assess whether the financial flows in question occurred or not in a framework of treasury shortfall of that company. There does not exist, specifically, any document (of a contractual or other nature) from which it follows that the amounts transferred by A... to B... would necessarily be granted by the latter to other entities related to it, particularly because this would be an obligation (for example, to make advances or ancillary or supplementary payments) previously
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