Summary
Full Decision
ARBITRAL DECISION (consult full version in PDF)
The arbitrators José Baeta de Queiroz (arbitrator-president), Luís M. S. Oliveira and João Taborda da Gama (arbitrators members), appointed by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to form the Arbitral Tribunal, constituted on 11-12-2018, agree as follows:
I. REPORT
1.1. A..., LDA., legal entity number ..., with registered office at ..., ..., ...-... Lisbon (hereinafter, the "Claimant" or "A..."), has, pursuant to the terms and for the purposes of articles 2, no. 1, letter a) and 10, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime of Arbitration in Tax Matters (hereinafter, "RJAT"), requested the constitution of a collective Arbitral Tribunal, in which the Tax and Customs Authority (hereinafter, the "Respondent" or "AT") is respondent, with a view to annulling the additional assessments of Corporate Income Tax (hereinafter, "IRC"), and corresponding interest, no. 2017... and no. 2017..., relating, respectively, to the tax years 2013 and 2014, which gave rise to an additional amount to pay under IRC (including autonomous taxation) in the amount of € 301,037.51 (2013) and € 166,459.88 (2014), to which were added interest in the amount of € 31,142.94 (2013) and € 10,533.78 (2014), all totalling € 509,174.11, and declare the illegality and annul the dismissal of the administrative claim no. ...2017... and acknowledge the right to compensation for losses resulting from the guarantee provided.
1.2. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to AT on 02-10-2018.
1.3. Pursuant to the provisions of article 6, no. 2, letter a) and article 11, no. 1, letter b) of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable period.
1.4. On 21-11-2018, the parties were duly notified of this appointment, and did not manifest a wish to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code of CAAD.
1.5. Thus, in accordance with the provisions of article 11, no. 1, letter c) of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 11-12-2018.
1.6. By order of 11-02-2019, the day 27-02-2019 was scheduled for the meeting provided for in article 18 of the RJAT.
1.7. The parties submitted submissions, and the day 10-05-2019 was set for pronouncement of the arbitral decision, a period which was subsequently extended to 31-05-2019.
II. PRELIMINARY EXAMINATION
1.8. The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2, no. 1, letter a) and 10, no. 1, of the RJAT.
1.9. The parties have legal personality and capacity, are legitimate and are duly represented (articles 4 and 10, no. 2, of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
1.10. The proceedings do not suffer from any nullities and no exceptions were raised.
1.11. Thus, there is no obstacle to the examination of the merits of the case.
III. POSITION OF THE PARTIES
2. The Claimant alleges, in summary, that:
2.1. It is a company that operates in the luxury real estate sector, being mainly dedicated to urban rehabilitation in Lisbon.
2.2. In 2007, it acquired the property designated as "..." located in the parish of ... in Lisbon and classified as a property of public interest.
2.3. On 14-02-2007, it entered into a loan agreement with mortgage with B..., S.A. ("B...") in the amount of € 16,000,000 (CPI no. ...), of which € 7,900,000 was intended for the acquisition of the "..." and € 8,100,000 for the execution of works. It was agreed (cf. clause 8 of the contract) that "[t]he loan bears interest on the outstanding capital, accrued daily and collected in arrears on a quarterly basis, being subject to quarterly adjustment, thus the contractual rate being indexed to a reference rate".
2.4. The final deadline agreed for the financing was 36 months, with the loan to be "amortised as the borrower completed the contracts for the sale and purchase of future units of the building(s), without prejudice to settling any balance, if any, by the end of the period…" (cf. clause 10 of the contract).
2.5. The rehabilitation works were completed at the end of the first semester of 2012, with the occupation permit being obtained in August of the same year.
2.6. During the period between the execution of the loan agreement and the sale of the first units, the Claimant did not carry out operational activity that would allow it to generate financial means to pay the interest on the financing granted by B....
2.7. In this context, it entered into successive amendments to the loan agreement with B..., with extensions of the period, successive changes to the interest rate and deferral of the due date for interest.
2.8. As it sold units of the "...", it made amortisations of capital and accrued interest.
2.9. On 31-12-2014, regarding the initial financing in the amount of € 16,000,000 (CPI no. ...), it owed only € 6,519,629.
2.10. The amount of € 2,020,149.06 (referring to interest of € 1,939,343.10 and stamp duty of € 80,805.96) corresponds to the amount recorded in the 2014 tax period, taking into account the various amendments to the loan agreement entered into with B..., by reason of which interest was successively deferred.
2.11. AT disregarded as a deductible expense, in the adjustment and subsequent assessment it made, the said amount of € 2,020,149.06, on the grounds that it is not supported by a valid document.
2.12. Despite various attempts to obtain an invoice or debit note issued by B..., what the Claimant was able to obtain was confirmation of the amounts owed by email and a statement regarding the Claimant's position on 31-12-2014, in addition to the loan agreement with mortgage, which is an integral part of the deed executed on 14-02-2007 and the successive modifications to the loan agreement.
2.13. By virtue of the provisions of nos. 1 and 4 of article 23 of the IRC Code, in the version in force in 2014, the need for documentary proof was clearly established, but for this purpose any document is accepted, except in cases where there is an acquisition of goods and services, listing the elements that the document proving this operation should contain.
2.14. Thus, "although the statement issued by B... does not assume the form required by AT, there is no doubt that the interest of € 1,939,343.10 and the Stamp Duty of € 80,805.96 are related to the loan agreement with mortgage in the amount of € 16,000,000.00 entered into on 14 February 2007 [...], which contains all the identifying elements of the parties required by law and also the exact delimitation of the loan then granted and its contractual conditions, and the revision of these contractual conditions is also contractualised in writing and equally complies with all the identifying requirements that generally appear in an invoice." (cf. article 101 of the Arbitration Pronouncement Request, hereinafter, "PPA").
2.15. Thus, the Claimant continues: "if the interest in question is related to the financing obtained for the purchase of the "..." and for the conservation works of the same (as can be verified in the statements issued by B... [...], where the loan number is mentioned, which in turn corresponds to the amendments to the loan agreement, which in turn correspond to the loan agreement) it is evident that there is a direct relationship between the expense, the claimant's activity and the income obtained (resulting from the sale of the units)." (cf. article 102 of the PPA).
2.16. For the Claimant "there is no doubt that the interest of € 1,939,343.10 and the Stamp Duty of € 80,805.96 are related to the loan agreement with mortgage in the amount of € 16,000,000.00 entered into on 14 February 2007 with all legal formalities (Doc. no. 5 attached to the Arbitration Pronouncement Request), which contains all the identifying elements of the parties required by law, and also the exact delimitation of the loan then granted and its contractual conditions, and the revision of these contractual conditions is also contractualised in writing and equally complies with all the identifying requirements that generally appear in an invoice." (cf. article 101 of the PPA).
2.17. And concludes: "Now, if the interest in question is related to the financing obtained for the purchase of the "..." and for the conservation works of the same (as can be verified in the statements issued by B... attached as Docs. nos. 15 and 17 to the Arbitration Pronouncement Request, where the loan number is mentioned, which in turn corresponds to the amendments to the loan agreement, which in turn correspond to the loan agreement) it is evident that there is a direct relationship between the expense, the claimant's activity and the income obtained (resulting from the sale of the units).", "(…) and AT must acknowledge the indispensability of the financial charges (…)." (cf. articles 102 and 104 of the PPA).
2.18. Thus, the amount to be deducted should only be limited in accordance with no. 1 of article 67 of the IRC Code, that is, in the circumstance of the limiting case of € 1,000,000.
2.19. Therefore, AT must acknowledge the indispensability of the financial charges in question, here duly proven, in accordance with applicable legal terms and, consequently, the adjustment made by AT to the 2014 tax year must be annulled.
2.20. Following the global financial crisis of liquidity and credit that exploded from 2008 onwards and severely affected our country for many years, the real estate and construction sectors were, alongside banking, the most severely affected.
2.21. There was real estate under construction and in stock for sale, but suddenly there were no longer buyers, largely because credit for house acquisition was severely restricted via increased interest rates and atrophying of banks' capacity to lend more, due to the many impairments that banks began to accumulate in the loans already in their portfolios.
2.22. For real estate or construction companies, with financial commitments coming due, with interest and other current charges to pay, and with apartments and shops already built or under construction facing a collapsed market, these were difficult years that inevitably, and unfortunately, led to bankruptcies and which in turn created more problems for banks' balance sheets (and results), which in turn further reinforced the credit crisis, in a vicious cycle well known to everyone in recent years.
2.23. The so-called golden visas, and with them foreign markets, including Asian (especially Asian in an initial phase), were a fundamental instrument for the recovery in recent years of the real estate sector in Portugal.
2.24. The Claimant, as well as other players in the Portuguese real estate market, especially those operating in the same segment as the Claimant, attempted to use the Asian market as an alternative market to counter the sharp drop in activity that was occurring at the time.
2.25. In the case of the Chinese market, with demand for residence visas and home purchases in Europe, reaching it from Portugal, with the resources of a small Portuguese real estate company, whose know-how and personnel know how to do is create and rehabilitate buildings, would be like looking for a needle in a haystack, it would be impossible. And even if it were, in theory, possible, it would be economically unviable.
2.26. Therefore, Portuguese real estate companies such as the Claimant had to resort to companies with the capacity to access the Chinese market in this aspect of demand for real estate abroad, companies that naturally have a solid bargaining position, because they are indispensable, vis-à-vis the potential Portuguese seller.
2.27. Specifically, the Claimant resorted to a company with origin in Cologne, Germany, "C...", specializing in real estate investment services (including investment associated with obtaining residence authorizations) and that operates in various parts of the world, one of which is Hong Kong (a world financial centre, as is known, with a special status, of Western design, relative to mainland China, or mainland China as it is called), and that is established there through "C...".
2.28. It was agreed that, in the event of sale of any of the real estate in question, a commission of 25% would be paid on the sale price, plus VAT.
2.29. And, on a larger scale, another company, "D..." (hereinafter, "D..." or "D..."), also allowed A... to access the Chinese market (see the international real estate cooperation agreement signed on 05-06-2014, where also 25% fees were established in favor of D..., with the particularity that it was this company that introduced C... to A...).
2.30. Finally, there was also intervention, on a much smaller scale, by a company with registered office in Sweden, "E..." (hereinafter, "E..." or "E..."), which is engaged, among other activities, in commercial consultancy between Asia and Europe, and which introduced to the Claimant the company "F... Ltd" (hereinafter, "F...") with registered office in Hong Kong, and it was established that, in the event of sale of real estate through this partnership, the Swedish company would charge a commission of 10%, having later indicated that half of that amount would be invoiced via Hong Kong.
2.31. These companies, naturally, must provide a comprehensive service to the potential Chinese investor, because for them as well the cultural, legal, civilizational and linguistic distance (and ignorance) that separates them from Portugal or any other European country where they think of making a real estate investment is enormous.
2.32. These companies handle everything, from A to Z, regarding the investment that the prospective Chinese buyer might consider making in Portugal: travel and accommodation for visits to real estate that are subject to potential investment, translators, properly accompanied travel within the country in question, entertainment and leisure for the days they remain in the country in question, documentation papers necessary for these trips, obtaining a residence visa, opening a bank account, documentation necessary for the execution of a public deed of acquisition of real estate if a purchase is concluded, handling of any post-sale problems, and everything else that may prove necessary in the particular case.
2.33. And naturally these companies will need to have staff not only in Hong Kong (in the case), but also (in the case) in Portugal, in order to be able to provide these services, they also need to hire and pay legal services in Portugal, hire translators, incur travel and entertainment costs for prospective buyers, and incur all other costs that may prove necessary in the operation in question to bring the real estate investment in question to a successful conclusion.
2.34. The handling of everything relating to the prospective buyer is the responsibility and risk of C..., D... or similar company working in the Chinese market: (i) all the work of representing the prospective buyer's interests was with C.../D... (and similars) and their lawyers; (ii) these entities are independent of the Claimant; (iii) the accompanying of prospective buyers by C.../D.../their lawyers included, in addition to contract negotiation, management of delays in the performance of agreed obligations and formalization of contracts, also post-sale matters such as physical delivery of the real estate, its keys, signaling of any defects, repair of defects in the real estate, and everything relating to the entry and stay of Chinese citizens in Portuguese territory, such as residence authorization, opening of bank accounts, translators, cars, meals and hotels on visits to Portugal, etc.; (iv) the Claimant does not incur any risk/expense with the coming of prospective buyers to Portugal and, on the contrary, C.../D... and similars bear the economic costs and respective risks of pre-sale and prospecting activities of potentially interested buyers and making them travel to Portugal, etc.
2.35. In the case of the Swedish group E..., there is a group with presence in Hong Kong, whose object is to facilitate business with Asia, having been proposed by this group (and naturally the Claimant did not refuse) a remuneration in percentage terms lower than the usual 20%/25% required by companies working the Chinese market. Possibly, this lower percentage is a sign that some competition is already being felt between companies of this type, which led a group with Swedish origin such as this, interested in closing deals in this market (Chinese real estate investment in Portugal), to present lower remuneration.
2.36. The Claimant took the opportunity to close the deal with a commission to be paid lower than usually practiced for deals brokered in the Chinese market.
2.37. A lower commission does not necessarily mean a higher net sale price for the Claimant after commissions. The fact that the commission is lower is reflected also, and in certain cases only, in the increased ability to offer a more attractive price to the end customer (the buyer of the real estate) without prejudice to the seller (the Claimant), because carried out at the expense of the reduction in the commission of the market prospector in China (in the case).
2.38. The said Swedish group, with branches in Hong Kong and having Chinese clients interested in the Portuguese Golden Visa, contacted the Claimant with a view to brokering the sale of the real estate in question to the Asian market, with an initial proposal of a 15% commission, already lower than the usual, but as this initial negotiation was not conducted with the appropriate representative of the Claimant, it ended up being agreed, for what matters here (the sale of apartment 30 of the "..."), a commission of 10%, negotiated through the lawyers (Dr. G..., who at the time worked in the Law Firm H...) of that company, which allowed to fully safeguard the net price that the Claimant receives in transactions comparable sales to customers from other places that are not China.
2.39. Apart from the emails exchanged and the telephone conferences held, no written contract was entered into with the Swedish group, as both parties considered that in the circumstances of the case the exchange of emails would be sufficient to set the final value of the commission due for the realization of the sale in question.
2.40. The commission was fully invoiced, in the proportion of 50%, by the parent company in Sweden and the other 50% by the partner company in China, more specifically Hong Kong, F....
2.41. AT only corrected this latter portion charged by the local partner in Hong Kong. For this reason, the amount corresponding to 5% of the sale price of the real estate in question – apartment 30 of the "..." – was invoiced by F... and paid by the Claimant to this company.
2.42. Despite the difference in the commission charged in this case compared to those agreed with C... and D..., also in this case the service and responsibilities of each party were exactly the same.
2.43. The Claimant does not incur any additional cost due to the fact that the buyer comes from China, as opposed to, for example, a Portuguese, Spanish, German, English or French buyer.
2.44. It is not easy to find in the "..." apartments that are exactly comparable to each other, since the architectural option for the rehabilitation of this historic complex consisted of the recovery of the building that contained the old Palace (which was called Building 1) and the construction of 4 more buildings (Building 2, Building 3, Building 4 and Building 5), all different from each other.
2.45. In any case, it is possible to determine that the Claimant gains more (net of brokerage charges already incurred), whenever it has the luck to hire a client from China, brought by C.../D.../F... (via E...) or similar, who is interested in one of its apartments or shop and buys it.
2.46. The Tax Inspection sought to compare the commission charged by D... with the joint sale of units S, X and U of ... (to Chinese clients) with the commission charged for the sale, also to Chinese client, of unit AS (erroneously identified by the Tax Inspection as apartment 30, but which corresponds to apartment 38), in which the Tax Inspection identified a commission of 4% on the sale price of this real estate, concluding that the commission charged by the entity residing in Hong Kong is much higher than the commission paid to an entity residing within the national territory.
2.47. However, to make a comparison, it is necessary to consider the total charges borne by the Claimant with the sale of said unit AS also to a Chinese citizen and which includes, not only the real estate brokerage commission referred to by the Tax Inspection and paid to a Portuguese entity, but also the remuneration of another party involved in the operation who is engaged in that activity, totaling € 126,590.40 (VAT included), which resulted in charges totaling € 162,900, corresponding to approximately 23% of the sale price.
2.48. The comparative exercise by the Tax Inspection did not therefore take into account all relevant costs.
2.49. Whenever companies with high financing needs invest in a real estate project, as is the case with the Claimant, by absolute imperative of survival they put all their focus on sales, as the end of construction approaches, so that they can proceed with the reimbursement of the financings and stop the counting of the respective interest. The less time the sales take, the better, since these are the critical factor upon which the success or failure of the substantial investment that has been made and accumulated without any return over previous years depends. If the Claimant (or other companies in the area) had only had access to sales to customers from China with results net of brokerage charges similar to results in sales to other geographical places, they would already be very satisfied with themselves: they had managed to get new customers for their products, at prices similar to those practiced with other customers, new customers that reduce the spectrum of sales, absolutely necessary to amortize the financings incurred, if they drag on too long in time and thereby jeopardize the company's solvency.
2.50. However, it was possible to establish a bargaining position in which, not only did it gain new customers from a new geographical area (distant from Portugal), but also managed to make sales to that new clientele generate results, net of brokerage charges, substantially higher than those usually achieved in sales to more proximate geographies (spatially and culturally).
2.51. The only service that matters to the Claimant with respect to C..., D... and similar companies such as F..., is the service of completing sales of units, so the remuneration that these receive is entirely dependent on the consummation of sales of units. There is no remuneration for client prospectors without there having been a sale.
2.52. The sales are objective and reported in the Tax Inspection Report (hereinafter, "RIT"), were made to citizens of the People's Republic of China, and no own structure in China nor any investment in an own structure in China for prospecting and capturing prospective Chinese buyers did the AT find in A... and even less did it report in its tax inspection.
2.53. It cannot be affirmed that there is no concrete evidence of the realization of services provided by C..., D... and F... and similars, in the sale of units to Chinese citizens.
2.54. Moreover, the email exchanges with the entities in question, and their respective legal service providers in Portugal show abundantly the reality of the service provided by these companies in the sale of units by A... to customers originating from China.
2.55. The activity of those companies, which is necessary to bring the prospective Chinese client to Portugal with the objective of closing one or more purchases of units in Portugal, implies the performance of a set of tasks for the benefit or assistance of the prospective Chinese buyer. In any case, whether or not these companies perform these or even other tasks, this is contractually and operationally irrelevant for the Claimant, since the remuneration of these companies only emerges if a sale is finalized with the prospective Chinese client.
2.56. The payment made depends on a final result (i.e., the consummation of the sale of units, without which nothing has to be paid), and not on an activity.
2.57. It is absurd and contrary to all the facts and respective documentation that AT had access to and reflected in its RIT, the statement that it would not be proven that the service had been performed.
2.58. As for the argument relating to the "fairness of the remuneration for services", "cost-benefit relationship" or "normal character", AT also has no basis, since, through tax inspections with which it sweeps the entire real estate sector, AT knows better than anyone that this type of remuneration, this amount of remuneration, for the brokerage of Chinese clients who provide business at the prices and results net of commissions is normal in this market.
2.59. It is very easy to understand the economic rationale: it follows from the facts that the Claimant does not run any risk or bear any cost with the prospecting of the Chinese market in search of clients for its real estate, nor with everything that follows this prospecting, including all the accompanying that is necessary to do with them. And besides this absence of cost, it has the bonus of: (i) expanding its market and thereby increasing competition in the demand for its real estate; and (ii) the supplementary bonus of always achieving prices, already net of brokerage charges, substantially better when the client comes from China, thanks to C.../D.../F....
2.60. If there is exaggeration or economic imbalance (do C..., D..., F... and similars receive too much or too little for their results in sales?) it is certainly not to the detriment of A.... The Claimant only gains with this, and even if the price of the brokerage charges it pays to companies in China were higher than it is, and thus the net sale price of apartments after brokerage charges fell to the level of sale prices to traditional customers, it would still have been worthwhile to incur this cost with C.../D.../F... and similars: it would have realized at a net sale price of brokerage charges equal to what it practices with the vast majority of other customers, money with sales absolutely essential to reimburse financings that supported the real estate project and to stop the counting of the respective interest.
2.61. Economically, the Claimant did not see its assets reduced, in substance, by the payment to the companies that broker clients from China. Indeed, sale prices are constructed backwards: they are increased by an amount sufficient to accommodate the payment of brokerage charges to C..., D..., F... and similars, in order to ensure that the amount received net by A... is not diminished compared to the net price it receives in sales to traditional customers.
2.62. The Portuguese State gains from the current (and traditional) contractual model: by increasing the sale price, the brokerage charges of C.../D.../F... and similars will be subject to Municipal Tax on Onerous Property Transfers and Stamp Duty, increasing these taxes in favor of the State, which would not happen if these two companies remunerated themselves directly from the buyer, instead of, as occurs, being paid by the seller (for this intermediate economic purpose). And it also gains additional revenue under Value Added Tax (hereinafter, "VAT"), the greater the higher the brokerage remuneration paid, because the VAT on those invoices is not deductible by the Claimant, given the nature of its activity (sale of real estate with VAT exemption without the right to deduction), as AT found in the RIT.
2.63. It makes no sense to compare brokerage services in the Chinese market with the classic service of real estate mediation. As is readily understood from the description of activities involved in the services provided by Hong Kong entities, they go far beyond "traditional" real estate mediation, so the remuneration thereof cannot be identical.
2.64. After analyzing the documentation provided by A..., the Tax Inspection Team peacefully understood that, for VAT purposes, the services in question were indeed provided by those entities and agreed with the classification given for purposes of that tax.
2.65. If the classification for VAT purposes applied in casu to the international real estate cooperation services provided by Hong Kong entities was not questioned, A... does not understand why the Tax Inspection Team comes to question the effectiveness of those services for IRC purposes.
2.66. The situation in question constitutes, at a minimum, venire contra factum proprium, since the Tax Inspection Team made an adjustment for IRC purposes, and for VAT purposes refrains from making the favorable adjustment that then and coherently was necessary in this tax.
2.67. Both article 23-A, no. 1, letter r), of the IRC Code, and article 88, no. 8 of the IRC Code, are unconstitutional in the interpretation that their normative provision, namely the concepts of "abnormal character" or "excessive amount" employed therein, would encompass expenses that are economically more than offset/compensated by an increase in the sale price of the entity that bears the expense, compared to the sale price practiced by the same in comparable operations with counterparties located in normal taxation zones, by unjustified violation of the principle of taxation, fundamentally, of the actual income of companies (article 104, no. 2, of the Constitution of the Portuguese Republic hereinafter, "CRP"), by unjustified violation of the principle of taxpayer capacity, by violation of the principle of equality and prohibition of arbitrary discrimination, and by violation of the principle of proportionality (articles 2, 13 and 18, nos. 2 and 3 of the CRP).
2.68. It makes no sense (is unjustifiable) to distrust that an expense whose beneficiary is a company located in a low-taxation zone could serve the purpose of abusively eroding the taxable base in Portugal, when that same expense is entirely offset (and even exceeded) by an increase in the sale price in that same amount (and in the case even exceeds it).
2.69. As can be seen, this effect and intent are objectively absent in this case, so in accordance with the very purpose of the norms in question, the deductibility of the cost in question should not be set aside and the highly penalizing autonomous taxation at the rate of 35% should not apply to it.
2.70. Having not paid the tax assessed by AT within the period defined for this purpose, she was notified of the institution of the respective enforcement proceedings nos. ...2017... and ...2017..., regarding which she presented guarantee, on 03-05-2017, through the constitution of a mortgage.
2.71. With the provision of guarantee to suspend the said enforcement proceedings, she incurred certain expenses that currently amount to a total of € 4,172.09.
2.72. The losses resulting or that may result from the provision of this guarantee should be reimbursed to the Claimant.
2.73. Indeed, the amount of tax in question and corresponding compensatory interest is not due, for the reasons and grounds explained above. Furthermore, the error that the assessment in question suffers, whose legality is disputed, results from error by the services in the assessment of facts and application of law to the relevant facts.
2.74. Thus, as this is error attributable to the services, the Claimant should be acknowledged as having the right to compensation for losses resulting from the provision of guarantee.
2.75. Once the IRC assessment and corresponding compensatory interest are annulled, error attributable to the services should also be deemed to have occurred for purposes of compensation for losses resulting from the provision of guarantee.
2.76. The total losses resulting from the provision of guarantee can only, obviously, be determined at the moment when it becomes possible to lift the guarantee, since only then will it be possible to make its final calculation, but for now there are costs totaling € 4,172.09. Thus, the acceptance of the PPA should determine the compensation of the Claimant for all costs incurred with the guarantee provided, without dependence on the period for which the guarantee is to be maintained, pursuant to article 53 of the General Tax Law (hereinafter, "LGT").
3. The Respondent contends, in summary, that:
3.1. The assessments in question in the present arbitration proceedings resulted from the conclusions reached in the tax inspection procedure credentialed by Service Orders nos. OI2016... and OI2016... of the tax inspection services of the Financial Authority of Lisbon, in the course of which the areas of purchases, stocks/inventories and sales were analyzed, in order to assess the credibility of the declared revenues/volume of business, as well as the margins practiced and the respective expenses.
3.2. From the deed of sale and purchase, it appears that B... granted to the Claimant, for purposes of acquisition and conservation works of the real estate, a loan in the amount of € 16,000,000, of which € 7,900,000 was intended for acquisition and € 8,100,000 for conservation works, by credit to the account of the same company with no. ..., opened in the name of the Claimant, with B....
3.3. In the following years, the Claimant focused its activity on the reconstruction of the said real estate, for subsequent sale, beginning in 2012 the commercialization of the first units, continuing through the years 2013 and 2014.
3.4. Regarding the tax periods 2013 and 2014, the inspection services collected all available information in the AT information system, as well as relevant elements from the Claimant, namely general trial balances, account statements, deeds of sale and purchase and inventories as of 31-12-2012, 2013 and 2014, as set out in the RIT.
3.5. The Claimant did not present documents issued by the Bank relating to the debit of interest, rate applied, period corresponding, or any other equally valid proof to justify the accounting of the expense, nor was the connection demonstrated with a view to obtaining or guaranteeing the revenues subject to IRC, the amounts relating to interest and Stamp Duty in the total of € 2,020,149.06 are not accepted as a fiscal expense for the 2014 period pursuant to article 23 of the IRC Code, so this value should be added to the fiscal result.
3.6. As stated in the RIT: the documents presented by the taxpayer do not correspond to the documents legally required to justify the accounting of the expense nor do they simultaneously guarantee the accounting of the revenue by the issuing entity; a simple statement is not a valid document proving that an expense was incurred, being insufficient to account for and justify the same; an expense of this nature should be justified with an invoice or debit note issued by the Bank in compliance with no. 4 of article 23 of the IRC Code.
3.7. The now Claimant also did not prove the congruence between the expense allegedly incurred within the company's activity and the connected revenue, with a view to promoting its development and achieving profit, since the annual interest of € 2,198,958.40 (€ 1,939,343.10 + € 259,615.39) accounted as an expense for the period, relating to an average loan balance of € 7,740,329 [(opening balance of € 8,961,029 + closing balance of € 6,519,629) / 2] corresponds to an annual interest rate of 28.41% (€ 2,198,958.40 / € 7,740,329) totally distant from the interest rates practiced in the capital markets in recent years.
3.8. Pursuant to no. 1 of article 65 and article 23, both of the IRC Code, the amounts paid or owed, for any reason, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime, are not deductible for purposes of determining taxable profit, unless the taxpayer can prove that such charges correspond to operations effectively carried out and do not have an abnormal character or an excessive amount. Furthermore, pursuant to no. 8 of article 88 of the IRC Code, expenses corresponding to amounts paid or owed, for any reason, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime, as defined under the Code, are subject to the autonomous taxation regime, at the rate of 35%, unless the taxpayer can prove that they correspond to operations effectively carried out and do not have an abnormal character or excessive amount.
3.9. The said legal norms aim to regulate payments to entities resident in territories with clearly more favorable tax regimes, appearing inserted in a context of combating tax evasion and fraud practices, which assume an increasingly international dimension, adopting measures designated as anti-abuse or defensive, with a view to restricting the relocation of income to territories that assure them a privileged tax regime.
3.10. We are faced with a special anti-abuse regime aimed at counteracting artificial segregation schemes of taxable incomes from the activities that generated them and erosion of taxable bases, its ratio legis offering no doubts: it is a matter of counteracting a particular kind of evasive, or even fraudulent, operations that is based on the realization of "payments" in favor of entities established in privileged fiscal territories in order to "locate" income produced and taxable in Portugal in jurisdictions of more favorable tax regime, with reduced or null taxation, also taking advantage of the limited or absent cooperation of the fiscal authorities of these jurisdictions for the provision of tax information.
3.11. The law imposes on the taxpayer the obligation to demonstrate the occurrence of the operations and the reasonableness of the payments made, establishing a clear burden of proof reversal, that is, the legislator, well aware of the difficulties in ascertaining (disclosing) operations undertaken by offshore companies, adopted the solution of burden of proof reversal, and it is therefore indispensable, pursuant to the legal norms in question, that the taxpayer debtor provide proof that such expenses correspond to real operations and that they do not have an abnormal character or excessive amount.
3.12. Once the situation of location in a low-taxation jurisdiction of the beneficiary of the payments is determined, in the case of Hong Kong, it falls to the debtor taxpayer (the Claimant), to set aside this presumption, to demonstrate the materiality of the contractual relationship by proving that the incurred expenses correspond to real operations and do not present an abnormal or excessive character.
3.13. This double proof implies the following: first, the taxpayer must demonstrate that the expenses in question correspond to real operations, endowed with legal and material existence; second, the taxpayer must prove that such expenses do not have an abnormal or excessive character, for which it is required, as a rule, to refer to comparable situations in the market, defining the normal market standard.
3.14. In the case at hand, the inspection services verified that in the years 2013 and 2014, invoices issued by entities resident in Hong Kong are accounted for, namely by D..., by F... and by I... Co., Ltd..
3.15. The tax inspection services further verified that, in 2013, in account 62256 - Other Markets, there is the issuance of payment orders abroad through B... (account no. ... belonging to taxpayer ...), whose beneficiary is D....
3.16. The payments made total € 319,550.00:
3.17. Regarding the tax period 2014, the tax inspection services noted that in the various accounts of specialized work (621) and commissions (625), 62215 - Intra-Community Market, 62255 - Intra-Community Market and 62216 – Other Markets, the invoices were issued by F... (payment of € 31,000.00, by international transfer, through B... – account no. ... belonging to taxpayer ..., whose beneficiary was F...), and the beneficial bank is from Hong Kong; I...Co., Ltd. (payment of € 40,200.00, by bank transfer, through J... to A...).
3.18. In order to assess the verification of the prerequisites for accepting the fiscal deductibility of the expenses, in light of the general rule contained in article 23 of the IRC Code, as well as the specific anti-abuse norm provided for in article 65 of the same act, the Tax Inspection proceeded to notify the Claimant to present proof documents regarding compliance with the requirements set out in this latter legal provision, as to the materiality of the operations and non-existence of their abnormal character and excessive amount.
3.19. The Claimant sent a response to the request for clarifications and the notification, however, from the analysis of the Claimant's response and the attached elements, regarding the expenses for the 2013 period, it was found that invoices issued by entities that are headquartered in Hong Kong, a country listed in Ordinance no. 292/2011, of 8 November (as applicable at the time), as being a country with a clearly more favorable tax regime, are accounted for.
3.20. As for the expenses for the 2014 period, it was equally verified that invoices issued by entities that are headquartered in Hong Kong, a country listed in Ordinance no. 292/2011, of 8 November (as applicable at the time), as being a country with a clearly more favorable tax regime, are accounted for.
3.21. From the reasoning underlying the RIT, as well as from the dispute of the factual matter above alleged, it follows that the Claimant did not prove and continues not to prove that the payments made correspond to operations effectively carried out or that, if they occurred, are normal and not of excessive value.
3.22. The Claimant intends that, by proving the effectiveness of the payment, one automatically assumes the effectiveness of the operation underlying it, which, as follows from what has been explained, does not correspond to what is required in the legal norms mentioned above. But, perhaps the Claimant thus intends to make believe, because relatively to the operations in question it has no proof to demonstrate their effectiveness and, even less, the normal character of the same.
3.23. It follows from the RIT that the commission paid to a non-resident entity subject to a privileged tax regime (Hong Kong) is much higher than the commission paid to an entity located within Portuguese territory. Establishing a comparison between the percentage of commission contracted and accepted with the entities headquartered in Hong Kong and the level of commissions practiced by resident entities, the deviation verified is of such amplitude that it allows concluding that the amount is excessive.
3.24. From the justification and elements presented by the Claimant, it is concluded that the burden that tax law requires was not met (article 23-A of the IRC Code).
3.25. The Claimant limited itself to presenting an international real estate cooperation contract entered into with one of the companies headquartered in Hong Kong, which only issued invoices in the 2013 fiscal year. Regarding the 2014 fiscal year, it presented no contract related to the companies also headquartered in Hong Kong. Nor did it present other means of proof, as requested in the notification, that would allow concluding that the services provided by Hong Kong entities were actually rendered.
3.26. The Tax Inspection found, from the Claimant's accounting elements, namely the sale deeds, general trial balances and account statements, that the commissions paid to companies headquartered in Hong Kong reached values exceeding 21%, and also regarding this issue the Claimant did not manage to provide any proof that there is no exaggeration in the amount of the intermediation. Whereby it is concluded that, not having been demonstrated that the amount charged is not excessive compared to the normal market standard followed in Portugal, this requirement has not been satisfied.
3.27. The circumstance that sales of real estate to Chinese citizens have resulted in a positive return for the Claimant does not serve as a justification for concluding that the value of commissions paid to companies headquartered in Hong Kong is adequate for the services allegedly provided.
3.28. The removal of the exclusion of deduction requires the cumulative verification of both requirements, as follows from the use of the additive coordinating conjunction "and" in article 65, no. 1 of the IRC Code, thus being sufficient the non-compliance with the latter for the exclusion of expenses to take effect.
3.29. Therefore, as the Claimant failed, as was incumbent upon it, to make the proof required under no. 4 of article 65, the expenses relating to payments made to entities headquartered in a country with a clearly more favorable tax regime cannot be considered as deductible for the calculation of taxable profit for those tax periods.
3.30. Thus, in light of the foregoing, the amounts of 2013 – € 319,550.00, and 2014 – € 120,000.00 are not accepted fiscally as expenses for the periods, pursuant to articles 23, 65 and 23-A, all of the IRC Code, regarding the commercial operations between the Claimant and the entities headquartered in Hong Kong, because not duly proven.
3.31. It is obvious from the RIT that the legal basis of the adjustment is the norm contained in articles 65/23-A of the IRC Code (2013 and 2014, respectively), and in the fact that AT considers that the prerequisites mentioned therein are not met, so that, effectively, the reason why the proposed adjustment was made relates to the location of the entity beneficiary of the payment in a country that is part of the list referred to in Ordinance no. 292/2011, of 8 November.
3.32. It follows from the testimony of witnesses K... and L..., that Chinese citizens were presented by a translator, not knowing how they arrived in national territory or had knowledge of the real estate, and that legal services provided were directly invoiced to customers. It thus stands out a clear contradiction between the testimony given and the Claimant's allegations, namely in articles 57 and 58 of the PPA, which should be duly valued.
3.33. Equally, the Claimant did not manage to explain why the percentage oscillated between 15% and 25%, regardless of the value of the real estate, the month of its sale or any other factor.
3.34. Also, it did not manage to demonstrate that there was effectively no contract, nor that the exchange of correspondence (e-mails) was sufficient for the assumption of obligations between the parties. Specifically, because the Claimant did not have a guarantee that the real estate promoters were indeed promoting its real estate and not others, given the "excess supply" referred to by the various witnesses.
3.35. As witness M... referred, in her professional activity, of long-standing in this sector of activity "there was a contract" as a "way of protecting oneself". Therefore, contrary to the Claimant's allegations, the contract was a way for real estate developers to guarantee themselves.
3.36. What was incumbent upon the Claimant to clearly explain, given the burden of proof reversal that weighs on it, was that it had no choice of the intermediary company, because, in cases where the intermediary company was not C..., the value of the commission paid was considerably lower. That is, contrary to what it intends to make believed, there was a choice, with the Claimant choosing to pay more.
3.37. The fact that the Claimant states that the bargaining power was practically non-existent when, effectively, that was not what was happening, and likewise the fact that the Claimant did not clearly and unequivocally demonstrate, as was its duty, what specific, documented services the non-resident entities performed, in order to justify the abnormal and random amounts that it accounted for as an expense, it becomes necessary to conclude as was done in the Response, arguing for the non-acceptance of the PPA and consequent maintenance of the assessments singled out in the legal order.
3.38. The legitimacy to make adjustments to the taxable profit declared by the taxpayer when the prerequisites defined in the IRC Code for purposes of deductibility of incurred costs are not shown to be met results from the law, as the principle of legality requires. The option of legislative policy to include or not certain territories in the Ordinance that provides for zones of privileged taxation does not raise any constitutional issue.
3.39. The violation of article 13 of the CRP occurs when a norm without minimal material foundation is based on unreasonable and irrational grounds.
3.40. With regard to the constitutional principle of equality, it should be noted that this, when understood as an objective limit to legislative discretion, does not forbid the law to make distinctions, rather it forbids it to adopt measures that establish discriminatory distinctions. The principle of fiscal equality presents a threefold dimension, the first two arising as an emanation of the general principle of equality, provided for in no. 1 of article 13 of the CRP. First, that principle means that all citizens are equal before tax law, so that all taxpayers who are in the same situation defined by tax law must be subject to the same tax regime. Second, the principle of fiscal equality also has a material or substantial sense, whose meaning is that the law must ensure that all citizens with equal levels of income must bear identical tax burdens, thus contributing equally to public expenditure or charges.
3.41. The principle of fiscal equality in a material sense not only forbids the legislator from adopting unequal treatment in the fiscal area that is not authorized by the CRP or that is materially unfounded, devoid of reasonable foundation or arbitrary, but also requires that the law ensure that all citizens with equal taxpayer capacity are subject to the same tax burden, thus contributing equally to public expenditure or charges. In addition to the principle of fiscal equality, in the sense of equality of citizens before tax law and equality of tax law itself, the CRP enshrines what might be called the principle of equality through the tax system, determining that this aims, alongside the satisfaction of the financial needs of the State and other public entities, at "a fair distribution of income and wealth" (article 103, no. 1 of the CRP), and also that personal income tax has the objective of "reducing inequalities" between citizens (article 104, no. 1 of the CRP).
3.42. The principle of equality is established in the Portuguese constitutional text through article 13 of the CRP, where a principle of equality before the law is established, also in taxation, comprising both generality and uniformity of taxes, so, for the reasons already set out, the manifest lack of basis of the arguments put forward by the Claimant is clear.
3.43. The norms of nos. 13 and 14 of article 88 of the IRC Code do not violate the principle of taxation of companies according to actual income, enshrined in article 104, no. 2, of the CRP. This principle reflects the taxpayer's right to be taxed on the profits actually verified, and that are variable from year to year, and not on normal profits, that is, on the profits that the company could obtain operating under normal conditions and that could exceed or fall short of actually obtained. Furthermore, this principle presupposes that the determination of taxable profit is made in accordance with the company's accounting, based on documentation and proof of the taxpayer's revenues and costs.
3.44. As has been seen, autonomous taxation does not interfere with the method intended to determine business results, nor does it imply that the taxable matter that will serve as the basis for taxation in IRC now comes to include profits or revenues that the company has not actually earned.
3.45. By identity of reasoning, the disputed dispositions do not call into question the principle of taxpayer capacity.
3.46. It is worth recalling that autonomous taxation applies to certain expenses typified in tax law that have been incurred by the company, and only to such expenses, and is not aimed at taxation of business revenues that have been earned in the respective economic year. And the legislator's objective - as mentioned - is to dissuade the realization of expenses that may have a negative repercussion on tax revenue and artificially reduce the company's own taxpayer capacity.
3.47. Similarly, as for the argument that there is a violation of the principle of proportionality regulated in article 18, nos. 1 and 2 of the CRP, the Claimant has no basis.
3.48. The IRC Code provides that a set of expenses reflected in the accounting must be subject to autonomous taxation as provided for in article 88 of that legal standard. Included in that set of expenses are the amounts paid, for any reason, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime by force of article 23-A of the IRC Code, with such payments being subject to a rate of 35% (article 88, no. 8 of the IRC Code). The application of autonomous taxation rates to certain expenses occurs in Model 22 after the calculation of the assessment of the tax. This means that taxpayers with losses may have IRC to pay given that autonomous taxation applies. The rate applicable to the expenses covered by article 88, no. 13 of the IRC Code is not added to the rate provided for taxation in IRC, for the simple reason, already explained earlier, that we are dealing there with distinct tax facts that are subject to different fiscal treatment.
3.49. Autonomous taxation does not have any cumulative effect in relation to IRC and only applies to the expenses concretely incurred and not to the business revenues subject to tax, and, therefore, it does not have the consequence that the appellant attributes to it of broadening the rate on the overall taxation relating to the company's revenues.
3.50. Autonomous taxation cannot be understood as an additional to the tax that the taxpayer must pay as IRC. And, on the other hand, the higher percentage index that is applicable to the realization of expenses (and that is susceptible to being aggravated in the case of companies with fiscal loss) is justified precisely because it is a fiscal measure penalizing the taxpayer and intended to avoid the realization of excessive and unnecessary expenses from the point of view of business interest.
3.51. The promotion of foreign investment is not constitutionally enshrined as a right, liberty and guarantee, thus not constituting an absolute principle (article 18, no. 1 of the CRP). And if it were, still that principle could suffer restrictions to safeguard other constitutionally protected rights and interests (article 18, no. 2 of the CRP), namely when the legislator's objective is linked to the combating of tax fraud and evasion and to the sustainability of the financial and fiscal system. Thus, according to what has been stated, the interpretation given to article 23-A, no. 1, letter r) and article 88, no. 8 of the IRC Code does not suffer from any unconstitutionality.
3.52. Should the Arbitral Tribunal come to accept the Claimant's claim and refuse the application of article 23-A, no. 1, letter r) and article 88, no. 8 of the IRC Code on the grounds of unconstitutionality, it is requested, by appeal to article 280, no. 3 of the CRP and article 72, no. 3 of the Law of the Constitutional Court, that it be determined to notify the Public Prosecutor's Office of the learned arbitral decision, so that it may fulfill its legal prerogatives.
3.53. The assessments in question are perfectly legal, and as such, should be maintained in the legal order.
3.54. The adjustments made by AT are in absolute compliance with the law, with no vice occurring that should dictate the annulment of the assessments. It follows from the inspection report that the conclusions reached result from the analysis of accounting records, tax returns and clarifications / elements presented by the Claimant.
3.55. The right to compensation for provision of invalid guarantee is provided for in article 53 of the LGT and regulated in article 171 of the CPPT. Article 53 of the LGT regulates the right to compensation for provision of invalid guarantee, contemplating two distinct situations: the taxpayer has the right to compensation for provision of invalid guarantee in cases where the guarantee provided has been maintained for a period exceeding three years or, regardless of the period during which it has been maintained, in cases where there was error attributable to the services in the assessment of the tax.
3.56. The legality of the assessments in question is demonstrated, and as such, there is no error attributable to the services that justifies its annulment and the attribution of the requested compensation.
3.57. Should it not be so understood, such compensation would always have to be attributed with the condition of being liquidated by execution of judgment and always with the maximum limit legally established in no. 3 of article 53 of the LGT.
IV. FACTS FOUND PROVEN
4.1. At the hearing provided for in article 18 of the RJAT, which took place on 27-02-2019, the testimonial evidence produced did not concern the matter of the financial charges now under analysis.
4.2. Thus, the factual matter given as settled by the Tribunal in this respect is based on what was alleged by the Claimant and not disputed by the Respondent, as well as on the instructing documentation of the PA (Annex V), also attached by the Claimant (Docs. nos. 5 to 17 of the PPA).
4.3. Otherwise, the facts found proven result from the Tribunal's conviction, based on the critical examination of the case documents, not disputed, and on the testimony of the witnesses presented at the judgment hearing, as these testified with impartiality and showed knowledge of the facts.
In this context, the Tribunal considers the following factuality proven, with relevance to the decision:
4.4. The Claimant is an entity with the legal nature of a limited liability company, with the corporate purpose of purchase, sale and resale of properties, civil construction and urbanizations.
4.5. The Claimant began the activity of "Purchase and sale of real estate", which corresponds to CAE2 068100, on 28-12-2005.
4.6. By public deed executed on 14-02-2007, the Claimant acquired for € 8,421,875.00, the urban property located at ... with a total property value of € 101,460.58, and identified in the company's assets as "...".
4.7. In the deed it was declared that B... granted to the Claimant (Borrower), for purposes of acquisition and conservation works on the said urban property, a loan in the amount of € 16,000,000, of which € 7,900,000 was intended for the acquisition of the property and € 8,100,000 for the execution of works.
4.8. The loan and mortgage were regulated by a supplementary document to the deed.
4.9. In the said supplementary document it was agreed (clause 8) that the loan bears interest on the outstanding capital, accrued daily and collected in arrears on a quarterly basis, being subject to quarterly adjustment, thus the contractual rate being indexed to a reference rate, which was the EURIBOR at 90 days plus 1.25%.
4.10. The loan was granted for a period of 36 months from the date of the deed, to be amortized as the Borrower/now Claimant executed the sales of future units of the building, without prejudice to the obligation to settle the balance, if any, by the end of the said 36-month period (clause 10). All payments made by the Borrower/now Claimant should be made by debiting its account with the Bank (clause 16-1) (cf. Doc. no. 5 attached to the PPA).
4.11. By private document dated 30-03-2011, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which, with relevance to the issue to be decided, they corrected the content of the tenth clause, in the sense that the period indicated therein be 48 months, and extended by more than 24 months the period of validity, therefore 72 months in total, fixing its end on 14-02-2013, and changed the differential (so-called spread) on EURIBOR at 90 days, from 1.25% to 5%, effective 14-02-2011 (cf. Doc. no. 6 attached to the PPA).
4.12. By private document dated 30-12-2011, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which they deferred to 14-02-2012 the due date of the interest payment that became due on 14-08-2011, agreed that the interest payment that would become due on 14-11-2011 would not be paid on that due date, being paid on 14-02-2012, and changed the differential (spread) on EURIBOR at 90 days, from 5% to 5.5%, effective 14-08-2011 (cf. Doc. no. 7 attached to the PPA).
4.13. By private document dated 14-08-2012, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which they deferred to 14-02-2013 the due date of the interest payments that became due on 14-08-2011, 14-11-2011, 14-02-2012 and 14-05-2012, agreed that the interest payment that would become due on 14-11-2012 would not be paid on that due date, being paid on 14-02-2013, and changed the differential (spread) on EURIBOR at 90 days, from 5.5% to 6%, effective 14-08-2012 (cf. Doc. no. 8 attached to the PPA).
4.14. By private document dated 20-06-2013, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which they modified the period of validity, from 72 to 75 months, ending on 14-05-2013, deferred to 14-05-2013 the due date of the interest payments that became due on 14-02-2013, and changed the differential (spread) on EURIBOR at 90 days, from 6% to 4%, effective 14-02-2013 (cf. Doc. no. 9 attached to the PPA).
4.15. By private document dated 21-06-2013, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which they modified the period of validity, from 75 to 99 months, ending on 14-05-2015, deferred to 14-11-2013 the due date of the interest payments that became due on 14-05-2013, and changed the differential (spread) on EURIBOR at 90 days, from 4% to 5.5%, effective 14-05-2013 (cf. Doc. no. 11 attached to the PPA).
4.16. By private document dated 28-03-2014, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14 February 2007 (CPI no. ...)", pursuant to which they deferred to 14-11-2014 the due date of the interest payments that became due on 14-11-2013 and agreed that the interest payment that would become due on 14-15-2014 would not be paid on that due date, being paid on 14-11-2014 (cf. Doc. no. 12 attached to the PPA).
4.17. By private document dated 01-04-2015, the Bank and the Claimant executed an "Amendment to the Loan Agreement concluded on 14-02-2007 (CPI no. ...)", pursuant to which they deferred to 14-05-2015 the due date of the interest payments that became due on 14-11-2014, stated that they maintain the interest rate with the differential of 4% on EURIBOR at 180 days (sic) (cf. Doc. no. 13 attached to the PPA).
4.18. In a document (letter) dated 26-02-2015, B... states: "For due purposes, we declare that the accounts below indicated in the name of A... [...] presented on 2014/12/31 the balance:"
(cf. Doc. no. 15 attached to the PPA).
4.19. In a document (electronic mail signed by N..., B...) dated 20-01-2015, it states:
"Following below amounts owed as of today:
Capital: 6,519,629.00 €
Interest: 2,034,545.85 €" (cf. Doc. no. 16 attached to the PPA).
4.20. In a document ("Declaration") dated 09-11-2016, B... declares that:
"[…] the values indicated in the letter dated 26 February 2015, relating to the position of A... […] as of 31 December 2014, refer to:
Balance of current account no. ... in the amount of 1,403.67
Outstanding capital of loan no. ... in the amount of 6,519,629.00 €
Deferred interest of loan no. ... in the amount of 1,939,343.10 € and respective Stamp Duty in the amount of 80,805.96 €."
(cf. Doc. no. 17 attached to the PPA).
4.21. There is no other documentation, contained in the RIT or attached to the Proceedings, relating to the support of the expense of € 2,020,149.06 (relating to interest of € 1,939,343.10 and Stamp Duty of € 80,805.96), whether invoice or debit note issued by B....
4.22. The Claimant reconstructed the said property, for subsequent sale, beginning in 2012 the commercialization of the first units, continuing through the years 2013 and 2014.
4.23. The Claimant carried out sales of units of the building "..." in the total amount of € 25,548,184.36.
4.24. In the years 2013 and 2014, invoices issued by entities resident in Hong Kong are accounted for, namely by:
(1) D..., in the total amount of € 319,550.00;
(2) F..., in the total amount of € 31,000.00; and
(3) I... Ltd., in the total amount of € 40,200.00.
4.25. In June 2014, an International Real Estate Cooperation Agreement was concluded between A... and D..., from which it follows, namely that (cf. Doc. no. 21 attached to the PPA):
(1) The commission charged by D... is 25% (having, however, suffered a reduction to 21.3% (cf. Doc. no. 4 attached to the PPA);
(2) D... ensures contact with international clients;
(3) D... is only remunerated if sales are realized by the claimant.
4.26. The services provided by D... were not simple real estate brokerage services (cf. testimony of witness M...).
4.27. D..., as well as the other companies working the Chinese market, bear various costs relating to prospective Chinese buyers that are not borne by "traditional" national mediators (e.g., the charges for travel and accommodation for visits to real estate that are the subject of potential investment, including hotels, car, translator, meals and other costs in Portugal
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