Summary
Full Decision
ARBITRAL DECISION (consult full version in PDF)
The arbitrators Councillor Jorge Lopes de Sousa (arbitrator-president, designated by the other Arbitrators), Professor Doctor Tomás Cantista Tavares and Professor Doctor Jónatas Machado, designated by the Claimants and the Respondent, respectively, to form the Arbitral Tribunal, constituted on 19-07-2018, agree on the following:
1. Report
A..., Tax ID..., and his wife B..., Tax ID..., residing at Street ..., no. ..., ...-... ...;
C..., Tax ID..., and his wife D..., Tax ID..., residing at Street of ..., no. ..., ...-... ...,
E...., Tax ID..., and his wife F..., Tax ID..., residing at Street ..., no. ..., ...-... ...
(hereinafter jointly referred to as "Claimants"), have requested the constitution of an Arbitral Tribunal in accordance with Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").
A... and his wife B... impugn the following assessments:
– no. 2018..., relating to PIT for the year 2013, in the amount of 132,347.58 Euros which includes the amount corresponding to compensatory interest, (document no. 1 attached with the request for arbitral ruling, the content of which is reproduced)
– no. 2018..., relating to PIT for the year 2014, in the amount of 150,328.64 Euros, which includes the amount corresponding to compensatory interest (document no. 2 attached with the request for arbitral ruling, the content of which is reproduced) and
– no. 2018..., relating to PIT for the year 2015, in the amount of 338,791.17 Euros, which includes the amount corresponding to compensatory interest (document no. 3 attached with the request for arbitral ruling, the content of which is reproduced)
C... and his wife D... impugn the following assessments:
– no. 2018..., relating to PIT for the year 2013, in the amount of 116,149.20 Euros, which includes the amount corresponding to compensatory interest (document no. 4 attached with the request for arbitral ruling, the content of which is reproduced);
– no. 2018..., relating to PIT for the year 2014, in the amount of 148,219.62 Euros which includes the amount corresponding to compensatory interest (document no. 5 attached with the request for arbitral ruling, the content of which is reproduced) and
– no. 2018..., relating to PIT for the year 2015, in the amount of 328,908.41 Euros, which includes the amount corresponding to compensatory interest (document no. 6 attached with the request for arbitral ruling, the content of which is reproduced)
E... and his wife F... impugn the following assessments:
– no. 2018..., relating to PIT for the year 2013, in the amount of 107,723.94 Euros, which includes the amount corresponding to compensatory interest (document no. 7 attached with the request for arbitral ruling, the content of which is reproduced);
– no. 2018..., relating to PIT for the year 2014, in the amount of 128,057.34 Euros, which includes the amount corresponding to compensatory interest (document no. 8 attached with the request for arbitral ruling, the content of which is reproduced) and
– no. 2018..., relating to PIT for the year 2015, in the amount of 313,486.51 Euros, which includes the amount corresponding to compensatory interest (document no. 9 attached with the request for arbitral ruling, the content of which is reproduced).
The Respondent is the TAX AND CUSTOMS AUTHORITY (hereinafter "AT").
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the AT on 08-05-2018.
On 29-06-2018, the President of CAAD informed the Parties of the designation of the Arbitrators, in accordance with and for the purposes of the provisions in no. 7 of article 11 of RJAT.
Thus, in compliance with the requirements of no. 7 article 11 of RJAT, with the period provided in no. 1 of article 13 of RJAT having elapsed without the Parties saying anything, the Collective Arbitral Tribunal was constituted on 19-07-2018.
The AT submitted a response in which it argued that the request for arbitral ruling should be declared unfounded.
On 19-12-2018, the meeting provided for in article 18 of RJAT took place, at which witness evidence was produced and the Parties made oral arguments.
The Arbitral Tribunal was regularly constituted and is competent.
The parties have legal personality and capacity (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March) and are properly represented.
The proceedings do not suffer from nullities.
2. Statement of Facts
2.1. Proven Facts
The following facts are considered proven:
The Claimants B..., E... and D... are all siblings, children of the founder of group G..., E..., Tax ID... and of H..., Tax ID...;
B... is married to A..., constituting a family unit for PIT purposes;
E... is married to F..., constituting a family unit for PIT purposes;
D... is married to C..., constituting a family unit for PIT purposes;
E... and H... have a fourth daughter, I..., Tax ID..., married to J..., Tax ID...;
On 02-10-2006, the following companies were established by the present Claimants (by each claiming couple):
- K...- SGPS, Ltd, established by Claimants D... and her husband, C..., on 2 October 2006;
- L... SGPS, Ltd, established by Claimants E... and his wife, F..., also on 2 October 2006;
- M..., SGPS, Ltd, established by Claimants B... and her husband, A..., also on 2 October 2006;
The corporate relationships between the natural persons and the companies in the present proceedings are those summarized in the table below:
Inspection actions were carried out on the Claimants in which corrections were made related to the application of the general anti-abuse clause, provided for in no. 2 of article 38 of the General Tax Law, which are summarized in the table below:
On 25 October 2006, C... and D... sold to K... the 221,148 shares of which they were holders in the family holding – N..., SGPS - representing 10% of its respective capital, for the price of €5,490,285.35 (which corresponds to €24.83 per share (III. 1.2 A of the Tax Inspection Report);
On 25 October 2006, B... and her husband, A... sold to M... the 221,148 shares of which they were holders in the family holding - N... SGPS - representing 10% of its respective capital, for the price of €5,490,285.35 (which corresponds to €24.83 per share (III. 1.2 A of the Tax Inspection Report that substantiates the assessment issued in the name of these Claimants);
On 25 October 2006, E... and his wife, F... sold to O... the 221,148 shares of which they were holders in the family holding - N... SGPS -- representing 10% of its respective capital, for the price of €5,490,285.35 (which corresponds to €24.83 per share - III. 1.2 A of the Tax Inspection Report);
In all cases, each of the acquiring companies recorded in its respective accounting a debit to the sellers in the amount corresponding to the selling price;
In each of the share purchase and sale contracts, nothing was provided regarding the payment of the price;
The company K... proceeded, over the years, to make partial payments of the debt in the amount of € 5,490,285.35 contracted with its shareholders as a result of the aforementioned acquisition of shares of N... SGPS, as follows:
2006 - € 0
2007 - € 66,450.00
2008 - € 465,254.55
2009 - € 355,613.95
2010 - € 25,000
2011 - € 0
2012 - € 889,070.00
2013 - € 177,566.44
2015 - €1,072,849.04
In a total of € 3,298,313.98 (page 16 of the respective Tax Inspection Report), with an outstanding amount, as of 31-12-2015, of € 2,191,971.37;
The company M... proceeded, over the years, to make partial payments to its shareholders of the debt in the amount of € 5,490,285.35, contracted as a result of the aforementioned acquisition of N... SGPS shares, as follows:
2006 - 0
2007 - € 156,000.00
2008 - € 467,100.00
2009 - € 18,400.00
2010 - € 1,880.21
2011 - 0
2012 - € 683,750.00
2013- € 177,000.00
2014- 0
2015 - € 1,256,280.40
In a total of € 2,760,410.61 (page 16 of the respective Tax Inspection Report), with an outstanding amount as of 31-12-2015 of € 2,729,874.74;
The company O... proceeded, over the years, to make partial payments to its shareholders of the debt in the amount of € 5,490,285.35 contracted as a result of the aforementioned acquisition of N... SGPS shares, as follows:
2006 - 0
2007 - € 395,000.00
2008 - € 451,463.86
2009 - € 198,382.96
2010 - € 900.00
2011 - 0
2012- € 879,630.07
2013 - € 174,936.44
2014 - € 212,620.00
2015 - € 1,053,000.00
In a total of € 3,365,934.00 (page 16 of the respective Tax Inspection Report), with an outstanding amount as of 31-12-2015 of € 2,174,351.35;
The income obtained by each of the SGPS in question (K..., O... and M...) results, wholly or essentially, from the profits distributed by their investee companies, namely N... SGPS, as none of the aforementioned SGPS holds any other shareholdings;
The purchases and sales of shares were communicated to the Tax Administration, with respect to all the transactions in question, by statements submitted on 20-11-2006 (copies of said statements which are contained in documents nos. 11, 12 and 13 attached with the request for arbitral ruling, the contents of which are reproduced);
The G... Group had been undergoing restructuring since 1993, the year of the creation of N..., SA (Tax Inspection Report and testimony of witness P...);
Q... brought, on 30 January 2006, an action for investigation of paternity against ... E... (document no. 10, attached with the request for arbitral ruling, the content of which is reproduced);
The initiation of such paternity investigation proceedings was the proximate cause of the establishment of K..., O... and M... (testimony of witness P...);
The creation of such companies, in 2006, a few months after the service of summons on ... E... in such paternity investigation proceedings, and the immediate transfer to them of 30% of the capital of N... SGPS aimed, in the immediate term, to create conditions that would prevent the said R... from becoming a shareholder of the companies in the group, should she be recognized as a daughter - and therefore, heir – of the founder of the G... Group;
The establishment of the companies was carried out in accordance with legal advice to the effect that the practice of corporate acts would be an obstacle to the aforementioned R...'s entry into the companies that constituted the G... group (testimony of witness P...);
The operations carried out in 2006 were a second step in the strategy of corporate and legal reorganization of the G... group, initiated in 1993 (testimony of witness P...);
The children of ... E... (and their respective spouses) agreed on the division of the assets of the future inheritance, which are essentially shareholdings, as the assets are held by S... Imobiliária, SA, Tax ID ... (testimony of witness P...);
According to that agreement, each second-generation family will assume dominant shareholdings in certain companies in the group (those which it effectively already manages) and all will continue to participate in another company, which will hold minority shareholdings in the different operating companies (in order to continue to ensure the unity of the G... Group) (testimony of witness P ...);
The children of ... E... understood that the ownership of shareholdings in the different companies of the G... group that already belonged to them and those that would come to belong to them upon their father's death should henceforth be held by holdings, one for each family, the capital of which, in due course, will be transferred, in an orderly fashion and taking into account individual situations and preferences, to the respective children (for the third generation); (testimony of witness P...);
The names of the three holdings M..., L... and O... were chosen and constructed on the basis of the names of the children of each of the couples or, in the case of M..., the name of the eldest son (testimony of witness P...);
The three holdings M..., K... and O... were established taking into account the distribution of areas of activity of the G... group (testimony of witness P...);
The prices of the sale of shares were those at which they were recorded in accounting and that P...);
The Tax and Customs Authority carried out, in 2017, a tax inspection of each of the couples of Claimants, with the object being the years 2013, 2014 and 2015, and made corrections based on the application of the general anti-abuse clause, with identical reasoning contained in the Tax Inspection Reports, included in the administrative file, the contents of which are reproduced;
In the Tax Inspection Reports the following is stated, among other things: ( [1] )
III.1. DESCRIPTION OF ASCERTAINED FACTS
III.1.1 ESTABLISHMENT OF COMPANIES
III.1 a) Establishment of company N... SGPS, SA
On 31 December 1993 the establishment of the joint-stock company called N... SGPS, SA, was registered with the Land/Commercial Registry Office of ..., with share capital of €11,057,395.00, represented by 2,211,479 shares with a nominal value of €5.00 each, having for its corporate purpose the management of shareholdings in other companies, as an indirect form of exercising economic activities - governed under Decree-Law no. 495/86, of 30 December - with head office in ..., parish of ..., municipality of ... .
The establishment of N... SGPS was part of the reorganization of the structure of the G... Group that took place in 1993, and included, in addition to the establishment of this parent holding, a sub-holding (T..., SGPS, SA) for control of all companies with commercial activity.
Since then, and until February 2016, the share capital of this holding remained unchanged. On 26 February 2016 an increase in the capital of the company was witnessed, bringing this to €14,529,635.00.
To summarize the main corporate facts, the following table is presented, which relates to the date of the facts (years 2013, 2014 and 2015):
(...)
III.1.1 b) Establishment of company Real Estate Investments U..., SA
On 12 June 1991 the establishment of the limited liability company currently called INVESTIMENTOS IMOBILIÁRIOS V... SGPS, SA was registered with the Land/Commercial Registry Office of ... (at the time of its establishment it adopted the name W..., Ltd), having for its corporate purpose the purchase and sale of immovable property and resale of those acquired for that purpose and real estate investments, and as an accessory activity, the rental of immovable property and the provision of services related to the provision of immovable property. Its registered office was set at Street ..., no. ..., in ..., being established with share capital of €9,975.96, represented by two equal shares valued at €4,987.98 each (held by husband and wife - she, sister of B..., D... and E...), as outlined:
Later, by resolution of 04 June 2007, an increase in capital took place to €50,000.00, fully paid in cash, and at the same time, the limited liability company U... was transformed into a joint-stock company, its share capital coming to be represented by 50,000 shares, with a nominal value of €1.00 each. This information is contained in the Permanent Certificate, consulted on 09-02-2017 (see Annex 2, of 5 pages).
III.1.1 c) Establishment of company V... SGPS, SA
From the Simple Spin-off of company U..., occurring on 19 May 2011 (and registered on 24 May with the Land/Commercial Registry Office of ...) the establishment of a new joint-stock company, called V... SGPS, SA, resulted.
This new company was established with share capital of €50,000.00, represented by 50,000 bearer shares, with a nominal value of €1.00 each, having as its corporate purpose the management of shareholdings in other companies, as an indirect form of exercising economic activities; in addition to this main activity, the company may also provide technical services of administration and management to the companies in which it holds a stake or with which it has entered into a subordination contract - governed under Decree-Law no. 495/88, of 30 December.
Its registered office was set at the same location as U... (spun-off company): Street ..., no. ..., in ... .
To summarize the main corporate facts, the following table is presented:
(...)
III.1.1 d) Establishment of company M... SGPS, Ltd
On 02 October 2006, the limited liability company M... SGPS. Ltd, Tax ID..., was established, having as its corporate purpose the management of shareholdings of other companies, as an indirect form of exercising economic activities - governed under Decree-Law no. 495/88, of 30/12 - with head office on Street ..., at the place of ..., parish of ..., municipality of ..., and with share capital of €25,000.00, represented by two equal shares valued at €12,500.00 each (held by husband and wife - she, sister of D... and E...), as outlined:
On the date of establishment of M... SGPS, both shareholders were appointed managers, with the signature of one of them being sufficient to bind the company.
(...)
III.1.1 e) Establishment of company L... SGPS, Ltd
On 02 October 2006, the limited liability company L... SGPS, Ltd, Tax ID..., was established, having as its corporate purpose the management of shareholdings of other companies, as an indirect form of exercising economic activities - governed under Decree-Law no. 495/88, of 30/12 - with head office on Street ..., at the place of ..., parish of ..., municipality of ..., and with share capital of €25,000.00, represented by two equal shares valued at € 2,500.00 each (held by husband - he, brother of B... and D... - and wife), as outlined:
On the date of establishment of L... SGPS, both shareholders were appointed managers, with the signature of one of them being sufficient to bind the company.
(...)
III.1.1 f) Establishment of company K... SGPS, Ltd
On 02 October 2006, the limited liability company K... SGPS. Ltd, Tax ID..., was established, having as its corporate purpose the management of shareholdings of other companies, as an indirect form of exercising economic activities - governed under Decree-Law no. 495/88, of 30/12 - with head office on Street ..., at the place of ..., parish of ..., municipality of ..., and with share capital of €25,000.00, represented by two equal shares valued at €12,500.00 each (held by husband and wife - she, sister of B... and E...), as outlined:
On the date of establishment of K... SGPS, both shareholders were appointed managers, with the signature of one of them being sufficient to bind the company.
(...)
III.1.2 ALIENATION OF SHAREHOLDINGS OF N... SGPS
III.1.2 A) Alienation of 10% of N... SGPS to K... SGPS by C... and D...
On 25 October 2006 (only three weeks after the establishment of K... SGPS), a Share Purchase and Sale Agreement was executed (attached in Annex 7. of 2 pages), by means of which C... and D... transferred to K... SGPS the 221,148 shares of which they were holders in the family holding - N... SGPS - representing 10% of its respective share capital - for the price of €5,490,285.35 (which corresponds to €24.83 per share);
Through said agreement, the shareholders of M... SGPS alienated 10% of the capital they held in N... SGPS, for the total amount of €5,490,285.35, as demonstrated in the table below:
Thus, in the accounting of M... SGPS, a debit was recorded on 25 October 2006, to that former shareholder of N... SGPS, in the total amount of €5,490,285.35.
This debt was recorded accountingwise as a Liability by M... SGPS, in account 271112101 -Fixed Asset Suppliers - Medium and Long Term - B..., whose balances showed the following evolution since then:
It is worth noting that said Share Purchase and Sale Agreement is silent as to the payment of the price, not defining any time limit for its occurrence, nor establishing any amount or frequency for eventual payment in instalments.
This fact is not insignificant, as it reveals the true essence and purpose of the transaction in question.
It should also be noted that M... SGPS, at the time of acquisition of 10% of the capital of N... SGPS, held (and still currently holds), a share capital and equity that are trifling when compared with the debt it assumed, so the accomplishment of this transaction is devoid of any economic rationality; in reality, it was only possible given the special relationships (to which article 63 of the Corporate Income Tax Code refers) that exist between the alienators of N... SGPS and the shareholders of M... SGPS (they are the same persons).
In fact, it is not credible that, if the alienation transaction had occurred between independent persons/entities, payment periods would not have been established and there would be no guarantees for the possibility of non-compliance with the contract terms, particularly payment of the price.
A summary table of payments made by the taxpayer to A... and B... from the date of alienation of the capital stakes of N... SGPS until the end of the year 2015, which totaled €2,760,410.61, is presented below:
III.1.2 b) Summary of the evolution of the distribution of shareholdings in N... SGPS before and after the transactions described
The distributions of shareholdings in N... SGPS before and after the alienation of 10% of its capital to company U... (on 29-12-2005, by J... and I...) and 30% more of its capital to companies M... SGPS, K... SGPS and L... SGPS (on 25-10-2006, by A... and B..., C... and D... and E... and F..., respectively) are presented below in schematic form:
III.1.2 c) Family and corporate relationships between the natural persons identified
The family relationships existing between the natural persons indicated are the following:
- I..., (B..., E... and D... are all siblings, children of the founder of the G... Group, E..., Tax ID...;
- I... is married to J..., constituting a family unit for PIT purposes;
- B... is married to A..., constituting a family unit for PIT purposes;
- E... is married to F..., constituting a family unit for PIT purposes; and
- D... is married to C..., constituting a family unit for PIT purposes,
In turn, the corporate relationships between the natural persons and the companies involved can be summarized as follows:
It is thus verified that, among all these individuals, there are special relationships, as are set out in no. 4 of article 63 of the Corporate Income Tax Code, namely in subsections a) to d) of that article:
(...)
III.1.3 PROFIT DISTRIBUTION POLICY OF N... SGPS BETWEEN 2000 AND 2015
N... SGPS constitutes a sub holding of the G... Group, whose investee companies include companies X... SGPS, SA and Y..., SA - as summarized (and detailed below in the diagram):
• Z..., SA Tax ID ...- percentage held: 90%;
• X..., SA, Tax ID ...- percentage held: 89.99%
• Y..., SA, Tax ID ...-percentage held: 90%
• AA... SARL - percentage held: 90%
• BB..., SA, Tax ID ...- percentage held: 90%.
Summary tables of the Income Statements (for the period between 2011 and 2015) and Balance Sheets (for the period between 2010 and 2015) of N... SGPS are presented below, which express the economic performance and financial position of this company:
(...)
Having presented positive Net Results between 2000 and 2015 (with the sole exception of the year 2009), N... SGPS distributed to its shareholders - among which are M... SGPS, L... SGPS, K... SGPS, and U... (until 2005) and subsequently V... SGPS - a total of €37,476,662.93 between 2003 and 2015, divided among Free Reserves in the fiscal periods of 2003, 2004, 2005, 2011 and 2012 which totaled €15,246,892.88, Retained Results in the fiscal period of 2007 in the amount of €5,757,500.00, Results for the period in 2014 in the amount of €5,789,652.01, and which also redistributed results attributed by its investee companies X... SGPS and Y..., SA, in the fiscal periods of 2009, 2013, 2014 and 2015, in the global amount of €10,682,618.04, as summarized:
It is worth noting that this table presents a summary of Results distributed by N... SGPS, although the date of the decision-making by the General Meeting of the company with respect to the distribution of dividends is not coincident with the date of payment thereof to the shareholders.
Following the accomplishment of the previously described transactions, at the end of 2005 - alienation of 10% of the capital of N... SGPS to U... - and at the end of 2006 - establishment of M... SGPS, L... SGPS and K... SGPS and acquisition of 30% of the capital of N... SGPS by those companies (in the proportion of 10% for each) - N... SGPS, in addition to distributing Results for the period, Retained Results and Free Reserves, also began to carry out the annual redistribution of dividends received from its investee companies X..., SA and Y..., SA, to its shareholders (then already all legal entities, and as such, able to benefit from the elimination of the double economic taxation of profits and reserves distributed, provided for in article 51 of the Corporate Income Tax Code).
The redistribution of results of companies X..., SA and Y..., SA occurred in 2009, 2013, 2014 and 2015, and that redistribution amounted to a total of €10,682,618.04, having been decided in General Meetings held specifically for that purpose, through Minutes numbers 45 (recorded on 30 September 2009), 59, 61 and 65 (see Annexes 8, 9 and 11 to this Report).
It is verified that, in fact, N... SGPS is a highly profitable company: in the taxation periods between 2000 and 2015, it accumulated Retained Results in the amount of €193,484,817.83, of which it distributed only €10,547,500.00 as Free Reserves (in the years 2003, 2004 and 2005), when, in the taxation periods until 2005, 40% of its shareholder composition was still comprised of natural persons – J... and I..., A... and B..., C... and D... and F..., and, until 2006, 30% of its shareholder composition was still comprised of natural persons – A... and B..., C... and D... and E... and F... .
It is worth noting that the choice to distribute Free Reserves in 2003, 2004 and 2005 (instead of distributing Results for the period) was justified by N... SGPS in the respective General Meeting Minutes that decided on them, in the following manner (we hereby reproduce an excerpt from Minute no. 31 of the General Meeting of N... SGPS, recorded on 30 April 2005, by way of example):
Note that in this case, the Free Reserves to be distributed relate to the period of 2004, whose distribution decision only occurs in April 2005, and the payments on 22 November 2005.
It is worth emphasizing that the administrator of N... SGPS identified in the excerpt of the Minute reproduced above, J..., was, at the date of the decisions to distribute Free Reserves relating to the fiscal years of 2003 and 2004, also a shareholder of the company (with 10% of its respective capital), and, at the date of the decision to distribute Free Reserves relating to the fiscal year 2005, a shareholder of V... SGPS (company to which, recall, he himself alienated the aforementioned 10% of the capital he held in N... SGPS, in December 2005), having himself spoken in favor of the decision to distribute Free Reserves to the shareholders (a category to which he is directly included in 2003 and 2005, and indirectly - through V... SGPS - in 2005).
From the year 2007 onwards, once the structure had been created, through the aforementioned transactions, N... SGPS began to redistribute the profits earned and distribute the results obtained to its shareholders, almost every year (with the exception of the years 2008 and 2010), which amounted, until 2015, to €26,929,162.93, distributed among redistribution of Results earned from its investee companies (€10,682,618.04), Free Reserves (€4,699,392.88), Retained Results (€5,757,500.00) and Results for the period in the amount of €5,789,652.01 (note that, during these 9 years - 2007 to 2015 - only in 2014 were Results for the period distributed), as summarized:
It is now important to comparatively analyze the consequences at the fiscal level of the decision to distribute Results before and after the alienation of 40% of the capital held in N... SGPS by its shareholders - natural persons - to the SGPS held by them - legal entities:
a. the distribution of Free Reserves carried out in the years 2003, 2004 and 2005 in the global amount of €10,547,500.00, when 40% of the shareholders were natural persons, resulted in the payment of income in category E of PIT (income from capital), subject to taxation via withholding tax by the paying entity - N... SGPS - which amounted to a total of €1,360,050.00 of PIT withheld at source and delivered to the State, distributed as follows:
• it was verified that N... SGPS subjected to taxation via final withholding tax the totality of Results distributed to its shareholders in the years 2003 and 2004, notwithstanding, in those years, 60% of its capital was held by a legal entity (S..., SA) and the remaining 40% by natural persons;
• this means that, although it met the conditions for it, it did not take advantage of the withholding tax exemption provided for legal entities provided for in article 90 of the Corporate Income Tax Code (in the version in force in the years 2003 and 2004, which was given by Decree-Law 198/01, 03.07.01): "1 - There is no obligation to perform withholding on corporate income tax, when it has the nature of tax on account, in the following cases h) Income obtained by companies managing shareholdings (SGPS), which is owed by a company they participate in for at least one year and the participation is not less than 10% of the capital with voting rights of the participated company, either by themselves alone or together with shareholdings of other companies in which the SGPS are dominant (...)",
• however, in 2005, N... SGPS already benefited from this regime, having only subjected 40% of the distributed Results to taxation, that is, those that were paid to natural persons;
b. In turn, the distribution of Results carried out in the following years - 2007 to 2015 - which amounted to a total of €26,929,162.93 - when all shareholders were already legal entities (benefiting from the elimination of double economic taxation of distributed profits) - resulted in an "income tax saving" (PIT withheld at source relating to category E income) on the part of N... SGPS, which we can estimate at €2,695,791.55, in the set of those years, as demonstrated:
In the taxation period between 2013 and 2015, the dividends resolved to be distributed by N... SGPS totaled €14,496,244.85, as itemized by shareholder:
• the dividend received in 2013 - €1,784,663.55 - by the shareholders of N... SGPS corresponds exactly to the totality of dividends distributed in that year (according to the Minute of the General Meeting no. ..., recorded on 01-10-2013 - see Annex 8 - which decided on the redistribution of results of the investee companies X..., SA and Y..., SA);
• however, the dividend received in 2014 - €2,173,883.86 - by the shareholders of N... SGPS corresponds only to the results redistributed by the investee companies X..., SA and Y..., SA in that year (according to the Minute of the General Meeting no...., recorded on 08-09-2014 - see Annex 9), since the results for the period 2014 distributed by means of decision in Minute no. 63, of 30-06-2015 - see Annex 10 - in the amount of €5,789,652.01, were only paid to the shareholders in 2015;
• as such, the dividend received in 2015 - €10,537,697.44 - by the shareholders of N... SGPS corresponds to the sum of the dividends distributed in that year, €4,748,045.43 (according to the Minute of the General Meeting no...., recorded on 11-11-2015 - see Annex 11 - which decided on the redistribution of results of the investee companies X..., SA and Y..., SA) and the results for the period 2014 (in the amount of €5,789,652.01), which, as stated, were only paid in 2015, thus totaling €10,537,697.44.
(...)
III.2. LEGAL BASIS - THE APPLICATION OF THE GENERAL ANTI-ABUSE CLAUSE (ART. 38 NO. 2 OF THE GENERAL TAX LAW AND ART. 63 A/NO. 3 OF THE TAX PROCEDURAL CODE)
The general anti-abuse clause is provided for in no. 2 of article 38 of the General Tax Law (Law), and has the following wording (given by Law no. 30-G/2000, of 29 December):
"Acts or legal transactions are ineffective for tax purposes that are essentially or principally directed, by artificious or fraudulent means and with abuse of legal forms, at the reduction, elimination or temporal deferment of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, or at the obtaining of tax advantages that would not be achieved, wholly or partly, without using such means, taxation then being effected in accordance with the norms applicable in their absence and the aforementioned tax advantages not ensuing."
This norm consecrates in the national tax legal order a true general anti-abuse clause, that is, a legal provision that, being an instrument of assessment and concrete delimitation of cases of tax evasion, establishes the ineffectiveness before the Tax Administration of legal acts practiced with evident abuse of legal forms which lead, to the detriment of the National Treasury, to the elimination, wholly or in part, or to the temporal deferment of the taxes that would otherwise be due.
It should be noted that with the use of the broad formula "acts or transactions", the law enables an extension of the provision capable of encompassing transactional acts, voluntary non-transactional acts and even mere behaviors considered, independently of the underlying intent, as material operations.
To apply the anti-abuse norm, the procedure prescribed in subsections a) and b) of no. 3 of article 63 of the Tax Procedural Code must be observed, being essential for the substantiation of the decision, the compliance with several requirements set out therein. It is therefore important, in the case at hand, to assess the cumulative verification of such requirements, which are:
a) Description of the legal transaction celebrated or the legal act performed and of the transactions or acts of identical economic purpose, as well as the indication of the norms of incidence that apply to them;
b) The demonstration that the celebration of the legal transaction or the practice of the legal act was essentially or principally directed at the reduction, elimination or temporal deferment of taxes that would be due in case of transaction or act of identical economic purpose, or at the obtaining of tax advantages.
In turn, subsection a) of no. 3 of article 63 of the Tax Procedural Code is divided into 3 points, to be observed, also, cumulatively:
I. Description of the legal transaction celebrated or of the legal act performed
II. Description of the transactions or acts of identical economic purpose
III. Indication of the norms of incidence that apply to them
III.2.1 SUBSECTION A) OF NO. 3 OF ARTICLE 63 OF THE TAX PROCEDURAL CODE IN COMPANY M... SGPS
Let us then see, for the case under analysis, separately, the observance of these points:
III.2.1 a) Description of the legal transaction celebrated or of the legal act performed
The legal transactions in question result from a pre-planned scheme, with the interposition of M... SGPS between N... SGPS and its shareholders A... and B..., which culminates with the reimbursement of the credit arising from the alienation of its shares to that company, with the intention of avoiding the taxes to be "borne" by the shareholders resulting from the distribution of dividends.
It is a complex set of acts subject to a global architecture, in which we will find preparatory events, establishment of M... SGPS, subscription of capital in full by the shareholder of N... SGPS (and spouse), sale of the shares of N... SGPS, at a price much higher than its nominal value, (benefiting from the taxation exclusion provided for the alienation of shares held for more than 12 months) and consequent establishment of a credit in favor thereof with M... SGPS, as well as other acts with complementary characteristics, so that only in its complete view, which we will describe, the evasive design is detected:
On 02 October 2006, the limited liability company called M... SGPS was established with a share capital of €25,000.00, being held in totality by the couple A... and B... (in equal parts);
On 25 October 2006 the shareholders of N... SGPS, A... and B..., alienated the totality of the capital they held in that company (corresponding to 10% thereof) to M... SGPS, such that:
- A... and B... sold the 10% of which they were holders at the price of €24.83 per share (when the respective nominal unit value was €5.00), which totaled the amount of €5,490,285.35;
Without financial resources to pay the amount of €5,490,285.35, M... SGPS:
- acknowledges a debt to the manager-shareholders A... and B..., but does not establish any time limit for its settlement, nor any payment plan;
In parallel, N... SGPS distributes profits to the shareholder - M... SGPS (benefiting from the elimination of double economic taxation (DET) referred to in article 51 of the Corporate Income Tax Code) - which are used for amortization of said debt constituted with the manager-shareholders A... and B..., as a result of the alienation of the capital stakes of N... SGPS.
A diagram of the acts/legal transactions performed in chronological order is presented below, so that the chain of transactions is better understood:
In a preliminary analysis, we can conclude that we are in the presence of a structure, as a set of sequential, logical and planned acts and transactions, organized in a unitary manner (chained), with a view to achieving the fiscal objective aimed at: distributing dividends without subjecting them to taxation at the liberatory rate provided for in subsection c) of no. 1 of article 71 of the Personal Income Tax Code (for the year 2013) and subsection a) of no. 1 of article 71 of the Personal Income Tax Code (for the year 2015).
Such acts and legal transactions are embodied in the reimbursement to the manager-shareholders following the distribution (or redistribution) of results by company N... SGPS to company M... SGPS (benefiting from the elimination of the DET referred to in article 51 of the Corporate Income Tax Code), preceded by the alienation of the 10% stakes that shareholders A... and B... held in the share capital of company N... SGPS, on 25 October 2006, for the global amount of €5,490,285.35, to company M... SGPS, which had been established only 23 (twenty-three) days earlier, on 02 October 2006, and in which those hold the totality of the capital.
By means of the alienation of the shares to the vehicle company established - M... SGPS - the dividends of N... SGPS are made available to the shareholder, avoiding final withholding tax and benefiting from the taxation exclusion provided for alienation of shares held for more than 12 months, in subsection a) of no. 2 of article 10 of the Personal Income Tax Code in force at the time.
III.2.1 b) Description of the transactions and acts of identical economic purpose
In the case under analysis, the act with identical economic purpose to the payments made to the shareholder as reimbursement of debts would be the distribution of dividends to the same by N... SGPS - classified as income in category E, in accordance with no. 1 and subsection h) no. 2 of article 5 of the Personal Income Tax Code - and the withholding tax of such income at the liberatory rate, as stipulated by subsection c) - for the amounts attributed in 2013 - and subsection a) - for the amounts attributed in 2015 - of no. 1 of article 71 of the same Code, in accordance with the legal classification that we set out in chapter III.3.1 of this Report.
In fact, the objective being the withdrawal of profits from company N... SGPS, such aim could and should have been achieved with a simple distribution of dividends to the shareholder (natural person). Instead, one resorted to a series of legal acts, more complex and costly, which in light of the concrete economic reality, do not demonstrate their reasonableness, which clearly points to the artificious intention of their use.
It is evident that, without the use of such means, the beneficiary taxpayers would not avoid taxation, resulting from the transformation of dividends into debt reimbursement, remaining subject to tax, under general rules, as income in category E of PIT.
By using this structure, it is clear that the shareholders of the identified company, A... and B..., artificiously decided to avoid PIT taxation through the use of a set of anomalous transactions, thus achieving identical economic purpose, and avoiding in this manner the corresponding tax on income earned, calculated in compliance with the legal norms set forth below.
III.2.1 c) Indication of the norms of incidence that apply to them
The sanction, provided for in the final part of no. 2 of article 38 of the Law, where it states: "taxation then being effected in accordance with the norms applicable in their absence and the aforementioned tax advantages not ensuing", results, therefore, in the establishment of the norm itself.
Since the transformation of a distribution of dividends into a reimbursement of a debt generated by the alienation of the shares of N... SGPS to the vehicle company established – M... SGPS - had no other motivation than to take advantage of the taxation exclusion provided for in subsection a) of no. 2 of article 10 of the Personal Income Tax Code (alienation of shares held for more than 12 months), it is incumbent on the Tax Administration to consider ineffective, for tax purposes, the classification of this income as debt reimbursements and to classify them as distribution of dividends, in accordance with subsection h) of no. 2 of article 5 of the Personal Income Tax Code, subject to the liberatory rate provided for in subsection c) - for the amounts attributed in 2013 - and in subsection a) - for the amounts attributed in 2015 - of no. 1 of article 71 of the same legal instrument.
We are faced with the so-called "step by step transactions" in which a complex "facti species" is found, involving a succession of coordinated acts/transactions among themselves, the law applier should perform an integrated treatment viewing them as a single transaction, tending toward a single and final result. Well then, when this occurs, the anti-abuse provision can and should be applied to the decisive and final moment which is represented, "in casu", by the receipt of payments by the shareholder as reimbursement of debt by M... SGPS, which would be what would happen in the absence of the composite evasive transaction.
In the present case, the interposition of company M... SGPS between shareholders A... and B... and company N... SGPS - through the transmission accomplished and the consequent alteration of direct legal ownership for indirect ownership - and its abusive use, had as its objective the withdrawal of profits from N... SGPS (benefiting from the aforementioned elimination of DET) and the transformation thereof into debt reimbursement resulting from the transmission, resulting in the elimination of taxation, for PIT purposes of the said shareholder of the company under analysis and identified above, in the taxation periods of 2013, 2014 and 2015, since, without the use of the structure used, would not benefit from the taxation exclusion, remaining those flows subject to tax, as income in category E of PIT.
It should be noted that, with respect to taxation periods prior to 2013 (between 2007 and 2012), the expiration of the right to make an assessment was verified, in accordance with no. 4 of article 45 of the Law, which is why the AT is legally prevented from acting.
Thus, after the sale took place, N... SGPS began the distribution of dividends to M... SGPS (without taxation, under article 51 of the Corporate Income Tax Code), in the amounts of €246.75, €575.750, €200,042.81, €2,669.92, €541,812.60, €352,731.06, €177,566.44, €217,388.48 and €1,053,770.22, relating to the years 2006, 2007, 2009, 2010, 2011, 2012, 2013, 2014 and 2015 - the majority of such profits being transferred - €156,000, €467,100, €18,400, €1,880.21, €683,750, €177,000, and €1,256,280.40 (respectively, in 2007, 2008, 2009, 2010, 2012, 2013 and 2015), subsequently, to the shareholders A... and B..., as reimbursement of the credit formed with the transaction of alienation of the capital stakes it held in N... SGPS.
The actual dates of receipt of the amounts in question by this shareholder are indicated below, which can be clearly associated, by the analysis of extracts from the bank accounts moved, to the receipts of M... SGPS originating from N... SGPS (they occur almost always on close dates and possess similar amounts):
The existence of a coincidence of values between the receipts of M... SGPS and the payments to A... and B... is easily concluded, which clearly demonstrate the intention to eliminate the taxation of dividends distributed by N... SGPS.
Thus, it is proven that, in the year 2013, the €177,566.44 paid to A... and B... on 10 October via bank transfer, had been transferred in turn to the same account of the current account ... held by M... SGPS, only nine (9) days earlier (on 01-10-2013) by N... SGPS, in the amount of €177,566.44 - as per Annex 13 to this Report.
On the other hand, it is verified that, in the year 2015, the €266,013.46 paid to A... and B... on 10 July via a bank transfer in the amount of €300,000.00, originated from the redemption of a Fund in USD occurring on 30 June 2015, the countervalue in EUR of which was €250,000.00 (corresponding to 278,750 USD, as per supporting documents attached in Annex 19, of 3 pages) which was credited to the account of the current account... expressed in EUR of M... SGPS on that date, only ten (10) days earlier (on 29-06-2015), by N... SGPS - as per Annex 18 to this Report.
In the same manner it is verified that, in the year 2015, the €490,266.94 (corresponding to 549,151.07 USD) paid to A... and B... on 10 July via bank transfer, originated from the €578,965.46 transferred to the same account of the current account ... held by M... SGPS, only eleven (11) days earlier (on 29-06-2015), by N... SGPS - as per Annexes 18 and 20 to this Report.
Finally, it is demonstrated that, in the year 2015, the €500,000.00 paid to A... and B... on 13 November via bank transfer, originated from the €474,804.76 transferred to the same account of the current account ... held by M... SGPS on the eve (on 12-11-2015), by N... SGPS - as per Annexes 21 and 22 to this Report.
Had these amounts been paid to the shareholder in the form of profits, without the structure used, they would be subject to taxation, in accordance with the provisions of subsection h) of no. 2 of article 5 of the Personal Income Tax Code.
In these terms, M... SGPS was the vehicle company found by A... and B... that allowed them to receive dividends as if it were a debt repayment.
This abusive use of M... SGPS leads to, in light of the provisions of no. 2 of article 38 of the Law, the taxation of the dividends received by A... and B... occurring as if M... SGPS did not exist, that is, taxation should take place with the actual beneficiaries, at the time of dividend payments to M... SGPS, in the amounts and periods indicated in the following table:
III.2.2. SUBSECTION B) OF NO. 3 OF ARTICLE 63 OF THE TAX PROCEDURAL CODE IN COMPANY M... SGPS
For the fulfillment of this requirement, the tax administration must demonstrate that the celebration of the legal transaction or the practice of the legal act was essentially or principally directed at the reduction, elimination or temporal deferment of taxes that would be due in case of transaction or act of identical economic purpose, or at the obtaining of tax advantages.
With the intention of demonstrating that there was no other interest beyond the fiscal with the present transaction, we will seek to answer three requirements that we consider fundamental;
III.2.2 a) Comparison of tax advantages with economic benefit
The tax advantage of the reimbursement of the credit by company M... SGPS to its manager-shareholders, resulting from the acquisition of the stakes that it held in company N... SGPS and after the distribution of profits by the latter to M... SGPS, consisted in the withdrawal of profits from company N... SGPS without any taxation.
In the case under analysis, no economic benefit is discerned, since the path chosen by the taxpayer to obtain the desired gain or tax advantage was concretized in the following acts/transactions:
- the manager-shareholders who are shareholders proceeded to the alienation of the shares that comprised the share capital of N... SGPS, benefiting from the taxation exclusion provided for in subsection a) of no. 2 of article 10 of the Personal Income Tax Code, due to the fact that those had been held by them for more than 12 months;
- concurrently, another company was created (M... SGPS) that served as a vehicle for the acquisition of the above-mentioned shares;
- with this structure mounted, we have that when company N... SGPS distributes dividends to M... SGPS there is no tax burden given the provisions of article 51 of the Corporate Income Tax Code, and that income in M... SGPS never becomes a dividend (recall that M... SGPS never distributed profits to its shareholders), and as such, there is never taxation for PIT purposes in the sphere of the manager-shareholders, in so far as those same amounts serve for mere reimbursement of the amount owed before said manager-shareholders, which, recall, served only the purpose of buying something that already belonged to that same person.
To remunerate shareholder capital, the normal form would be the distribution of dividends (to its shareholder) paying the respective tax, and not the creation of a structure that allowed the withdrawal of such income without any taxation, through its transformation into debt reimbursement generated by a transaction effected between juridically distinct entities, but economically and in fact controlled by the same family.
III.2.2 b) Change in the taxpayer's economic position that may occur
These transactions had as their fundamental objective the distribution of dividends, made available in the years 2013 and 2015, and allowed the transformation of a financial flow that, without the alienation transaction described, and the use of the SGPS established, would reach the shareholder in the form of a dividend and, consequently, would be income subject to PIT (under the rules of category E). However, with the transactions carried out, that financial flow reaches the shareholders in the form of reimbursement of a credit, which is not considered income for PIT purposes, enabling the non-taxed transfer of profits from N... SGPS to shareholders (natural persons), through the transformation of that flow, achieved with the interposition of company M... SGPS.
In fact, companies managing shareholdings are, in accordance with the legal regime established, provided for in Decree-Law no. 459/88, of 30/12, an instrument for managing a certain type of assets, generator of added value through integrated management thereof and not a mere "safe deposit" of shareholdings of the investment holding type that aims at the mere holding of securities, in order to bill dividends and capital gains.
The activity of managing shareholdings involves an integrated and coordinated series of acts designed on a set of shareholdings that have profit as their objective. However, for such management to configure an economic activity, we should find ourselves before something more than the individual and occasional exercise by a shareholder of the rights and duties resulting from the holding of a shareholding.
Thus, in order to accomplish this active and dynamic management of the shareholdings held by the SGPS, in addition to the exercise of the social rights inherent to the shareholdings held, the legislator admits the carrying out of diverse operations by the SGPS in the pursuit of its interests and of the relationships with its investee companies, which does not appear to be the case in M... SGPS in the years under analysis. This company – M... SGPS - served essentially to receive the profits paid by N... SGPS and to allow their withdrawal by the shareholder who controls this company, now transformed into the figure of debt reimbursement. In other words, although the legislator in the preamble of Decree-Law no. 495/88, created favorable conditions to facilitate and encourage the creation of economic groups, as instruments suited to contribute to the strengthening of the Portuguese business fabric and to provide businesspeople with a legal framework that would allow them to bring together in a company their shareholdings, for purposes of their centralized and specialized management, in the present case, this objective was not achieved, but instead mere alteration of direct legal ownership for indirect ownership was carried out (since the manager-shareholders of M... SGPS continue to hold the effective power (control) over 10% of the capital and voting rights of N... SGPS) achieving through this artifice an essentially fiscal end.
III.2.2 c) Potential non-fiscal interest in the same
In the case under analysis, as demonstrated, the establishment of M... SGPS, followed by the acquisition of the 10% stake that A... and B... held in company N... SGPS, and the distribution of profits that were immediately used to reimburse the debt generated with the acquisition of N... SGPS, aimed, in the first instance, at obtaining the fiscal result - distribution of profits.
In like manner, we verify that the structuring of the transactions, in addition to being directed at obtaining the aforementioned tax advantage, was simultaneously and additionally endowed with an anomalous and artificious form, since taking into account the facts described, no other reason for these transactions is discerned than the distribution of dividends of N... SGPS to the shareholder without any taxation.
Notwithstanding that the acts and legal transactions that comprise this structure are, in themselves, valid and lawful, and correspond to the effective will of the taxpayers, no predominant economic or other substance is discerned in them.
What is decisive in the application of the General Anti-Abuse Clause is to assess whether the act or legal transaction chosen has a substance, economic or other, that can be said to be predominant in its relationship with the tax advantage (comparative) objectively resulting from that choice. Analyzing the sequence of facts, no economic substance is discerned in the transaction beyond the tax advantage.
Thus, we conclude by the existence of a preponderant fiscal motivation, which manifested itself in the forms adopted and which makes the fiscal purpose of the transaction prevail over the non-fiscal purpose.
For what is verified, in accordance with the foregoing, the conditions for application of the provisions of article 38, no. 2, of the Law and of article 63 of the Tax Procedural Code are met.
For this reason, it is incumbent on the Tax Administration to consider ineffective for tax purposes the consideration as debt reimbursement of the dividends distributed to the shareholders of M... SGPS, since this transaction was practiced with abuse of legal forms and had as its essential objective the elimination of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, or the obtaining of tax advantages that would not be achieved wholly or partly without use of such means.
In light of the foregoing, taxation should occur in accordance with the norms applicable in the absence of such structure, specifically in subsection h) of no. 2 of article 5 and in subsection c) of no. 1 of article 71 of the Personal Income Tax Code - for the amounts attributed in 2013 - and in subsection a) of no. 1 of article 71 of the Personal Income Tax Code - for the amounts attributed in 2015 - the aforementioned tax advantages not ensuing, as provided by no. 2 of article 38 of the Law.
III.2.3. COMPANIES V... SGPS, L... SGPS AND K... SGPS
In the companies V... SGPS, L... SGPS and K... SGPS, in their capacity as shareholders of N... SGPS, similar legal transactions to those we described for L... SGPS were detected, as well as the carrying out of similar legal acts, and the existence of similar transactions and acts of identical economic purpose was equally verified, namely:
alienation of the shares that comprised the share capital of N... SGPS, benefiting from the taxation exclusion provided for in subsection a) of no. 2 of article 10 of the Personal Income Tax Code, due to the fact that those had been held by them for more than 12 months;
constitution of a credit in the companies V... SGPS, L... SGPS and K... SGPS in favor of the holders of the capital of said companies, arising from the alienation of 10% of the capital of N... SGPS;
distribution of dividends by N... SGPS without any tax burden given the provisions of article 51 of the Corporate Income Tax Code;
amortization of the debt created with the shareholders/shareholders at the time of alienation of the capital stakes of N... SGPS using recourse to the dividends received from the same company.
A summary diagram of the described transactions is also attached to this Report, in Annex 24.
III.3. PROPOSED CORRECTION FOR PIT PURPOSES – YEARS 2013, 2014 AND 2015
III.3.1 TAX FRAMEWORK
Having verified, in accordance with the facts reported in the previous chapters of this Report, that the conditions for application of the provisions of article 38, no. 2, of the Law and of article 63 of the Tax Procedural Code are met, as already explained, it is incumbent on the Tax Administration to consider ineffective, for tax purposes, the classification of those dividends as income not taxed in accordance with article 51 of the Corporate Income Tax Code, classifying them as distribution of dividends to natural persons, taxed in accordance with subsection h) of no. 2 of article 5 of the Personal Income Tax Code.
In light of the foregoing, taxation should occur in accordance with the norms applicable in the absence of such structure, specifically in subsection h) of no. 2 of article 5 of the Personal Income Tax Code, the aforementioned tax advantages not ensuing, as provided by no. 2 of article 38 of the Law.
As stated in chapter III.1.4 of this Report, the amount of dividends distributed by N... SGPS to M... SGPS in the years 2013, 2014 and 2015 was €177,566.44, €217,388.48 and €1,053,770.22, respectively.
Taking into account the corporate structure of M... SGPS (which, recall, belongs wholly to the couple A... and B..., in equal parts for each of the members), the family unit they constitute was the beneficiary of the totality of those dividends.
As beneficiaries of the dividends paid by N... SGPS through the vehicle company used for that purpose - M... SGPS - it was concluded that taxpayers A... and B... earned income from capital classifiable in category E of PIT in each of the years in question (2013, 2014 and 2015), which were not declared in Annex E of their respective tax return Forms Model 3, totaling the same the following amounts:
Thus, the tax corrections will be reflected in the tax-legal sphere of the holders of income from capital (dividends) earned in their capacity as shareholders of N... SGPS, being the amount earned included in full in the collectible income of PIT of the beneficiaries, subject to the general tax rates resulting from application of the table contained in article 68 of the Personal Income Tax Code (wording given by Law no. 66-B/2012, of 31 December), with respect to the years 2013 and 2014, and subject to autonomous taxation at the rate of 28% in accordance with subsection d) of no. 1 of article 72 of the Personal Income Tax Code (wording given by Law no. 82-E/2014, of 31 December) in the year 2015.
III.3.2 SUMMARY OF PROPOSED CORRECTIONS
In summary, taxpayers A... and B... should be taxed:
in the years 2013 and 2014: for the totality of income earned, including, in addition to those already declared, the aforementioned income of category E, as described:
in the year 2015; through the application of autonomous taxation at the rate of 28%, applied to the aforementioned non-declared income of category E, as described:
Following the inspections, the Tax and Customs Authority issued the following assessments:
– With respect to A... and his wife B...,
– assessment no. 2018..., relating to PIT for the year 2013, in the amount of 132,347.58 Euros which includes the amount corresponding to compensatory interest, (document no. 1 attached with the request for arbitral ruling, the content of which is reproduced)
– assessment no. 2018..., relating to PIT for the year 2014, in the amount of 150,328.64 Euros, which includes the amount corresponding to compensatory interest (document no. 2 attached with the request for arbitral ruling, the content of which is reproduced) and
– assessment no. 2018..., relating to PIT for the year 2015, in the amount of 338,791.17 Euros, which includes the amount corresponding to compensatory interest (document no. 3 attached with the request for arbitral ruling, the content of which is reproduced);
– With respect to C... and his wife D...,
– assessment no. 2018..., relating to PIT for the year 2013, in the amount of 116,149.20 Euros, which includes the amount corresponding to compensatory interest (document no. 4 attached with the request for arbitral ruling, the content of which is reproduced
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