Process: 566/2017-T

Date: April 16, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 566/2017-T) addresses stamp duty (Imposto do Selo) exemptions on intra-group loans under Portuguese tax law. The case involves A... S.A., a holding company that received short-term loans (up to 12 months) from its subsidiary B... SGPS, in which it held 94.20% of share capital. The Tax Authority assessed €222,208.50 in stamp duty and compensatory interest for 2013-2014, arguing the exemption under Article 7(1)(g) of the Stamp Duty Code did not apply. The taxpayer contended these treasury operations qualified for exemption as they: (1) involved credit usage under GTSD Entry 17; (2) had terms not exceeding one year; (3) were exclusively for covering treasury shortfalls; and (4) occurred between entities in a dominance relationship per Article 486 of the Commercial Companies Code. The key dispute centered on interpreting Article 5 of Decree-Law 495/88 (SGPS Legal Regime). The taxpayer argued the Tax Authority incorrectly interpreted the credit prohibition, failing to consider Article 5(3), which states treasury operations benefiting an SGPS from dominated subsidiaries do not constitute 'credit granting' under banking regulations. The tribunal had to determine whether upward loans (subsidiary to parent) qualified for stamp duty exemption, the applicable GTSD entry (17.1.2 versus 17.1.4), and whether compensatory interest assessments should be annulled alongside the underlying stamp duty liquidations. This decision clarifies critical distinctions in Portuguese tax treatment of intra-group financing structures involving holding companies.

Full Decision

ARBITRAL DECISION

REPORT AND CASE MANAGEMENT

A…, S.A., a legal entity no. …, with registered office at Rua …, no. …, …-… LISBON, filed a petition for constitution of a Collective Arbitral Tribunal, pursuant to the joint provisions of Articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Tax Arbitration, hereinafter referred to as LRTA), wherein the Tax and Customs Authority (hereinafter TA) is Respondent, with a view to obtaining the annulment of the stamp duty (SD) assessment acts no. 2017…, 2017…, as well as the assessments of compensatory interest no.s 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, relating to the year 2013, and no.s 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017… and 2017…, relating to the year 2014, which total the amount of € 14,323.04, in the total value of € 222,208.50.

In accordance with the provisions of Article 11, paragraph 1(c) of the LRTA, the Arbitral Tribunal was constituted on 8 January 2018.

The TA responded by challenging the merits of the claim.

The meeting referred to in Article 18 of the LRTA was dispensed with, given the nature of the matters contained in the case file, and the parties were notified to submit written arguments.

The Arbitral Tribunal is duly constituted and has material jurisdiction, in accordance with Article 2, paragraph 1(a) of the LRTA.

The parties possess legal personality and capacity, are proper parties and are represented (Article 4 and Article 10, paragraph 2 of the LRTA and Article 1 of Regulatory Decree no. 112/2011, of 22 March).

There are no nullities, exceptions or preliminary issues that prevent the immediate examination of the merits of the case.

STATEMENT OF FACTS

Having regard to the positions assumed by the parties, in light of Article 110, paragraph 7 of the Tax Procedure and Process Code (TPPC) and the documentary evidence attached to the case file, the following facts are found to be proven, as relevant to the decision:

  • The Claimant is a holding company;

  • The Claimant is the legal successor of B…, SGPS, S.A., whose activity ceased on 11.12.2014, as a result of incorporation through merger into the Claimant;

  • In the years 2013 and 2014, B… SGPS granted loans to the Claimant;

  • At the date of the facts, the Claimant held 94.20% of the capital stock of B… SGPS;

  • The loans granted to the Claimant were recorded in account 26.61.01 – Loans, in accordance with the extracts of the respective accounts;

  • Underlying the granting of said loans are requests for the provision of funds by the Claimant, as well as the respective authorizations by B… SGPS;

  • In all requests for the provision of funds, the Claimant expressly stated the following: "(…) it becomes necessary to request from your subsidiary (…) the provision of the amount of (…) for a period of up to 12 months.";

  • And in all responses from B… SGPS to the Claimant's requests, it was stated that "(…) it was favorably granted in accordance with the terms and conditions requested";

  • Considering that the conditions were met for the application of the exemption provided for in Article 7, paragraph 1(g) of the Stamp Duty Code (SDC), B… SGPS did not assess Stamp Duty with respect to the credit grants;

  • There was no reimbursement, total or partial, of the amounts provided to the Claimant;

  • Following service orders no. OI2017… and OI2017…, issued on 16.03.2016, the Tax Inspection Services of the TA conducted an external partial inspection of the Claimant, covering the taxation periods of 2013 and 2014;

  • During this inspection procedure, the Claimant was notified, via Letter of 17.07.2017, of the Draft Inspection Report, in which the TA proposed a correction in respect of Stamp Duty in the amount of €196,826.42;

  • The Claimant exercised its right to prior hearing;

  • The TA converted the Draft Tax Inspection Report into a final report, and consequently issued the SD assessment acts sub judice.

Of the facts relevant to the decision, payment of the assessed amounts was not proven.

MATTER OF LAW

A – POSITIONS OF THE PARTIES

The main questions that arise in the present case are whether the loans granted to the Claimant are entitled to the exemption established in Article 7, paragraph 1(g) of the SDC and, if not, whether entry 17.1.2 or entry 17.1.4 of the General Table of Stamp Duty (GTSD) should be applied to the credit grant.

Claimant's Submissions

The Claimant alleges in its request for an arbitral decision as follows:

  • The financial operations carried out are entitled to the exemption established in Article 7, paragraph 1(g) of the SDC, with the conditions upon which the application of said exemption depends being met, with respect to the facts under analysis:

  • First, the existence of financial operations, arising from the GTSD itself, more specifically from entry 17, which includes "the use of credit, in the form of funds, by virtue of the grant of credit in any form";

  • Second, the existence of a period not exceeding one year, which may also be considered as met, in that "the requests for the provision of funds refer to a period of up to 12 months for reimbursement";

  • Third, being exclusively intended to cover treasury shortfalls, which is verified and was also not contested by the TA;

  • Fourth, said financial operations having been carried out for the benefit of the entity with which (the granting entity) is in a relationship of dominance or group, which was also verified, provided that:

  • At the date of the facts, the Claimant held 94.20% of the capital stock of B… SGPS;

  • Now, Article 486, paragraph 1 of the Commercial Companies Code (CCC) provides that "Two companies are considered to be in a relationship of dominance when one of them, called the dominant company, may exercise, directly or through companies or persons meeting the requirements indicated in Article 483, paragraph 2, over the other, called the dependent company, a dominant influence";

  • Furthermore, the same provision states, in subsection (a) of paragraph 2 thereof, that: "A company is presumed to be dependent on another if this one, directly or indirectly: a) Holds a majority participation in the capital;";

  • However, the TA did not understand it this way, and based the non-application of the exemption on the provisions of Decree-Law no. 495/88, of 30 December, which defines the Legal Regime for Holding Companies (SGPS), namely the provision of Article 5, paragraph 1(c), carrying out a completely erroneous interpretation of this Regime, having not even read the article in question to its conclusion;

  • Article 5, paragraph 1(c), invoked by the TA, provides that: "1 – Holding Companies are prohibited from: c) Granting credit, except to companies dominated by them, in accordance with Article 486 of the Commercial Companies Code or to companies in which they hold participations provided for in paragraph 2 of Article 1 and in subsections (b) and (c) of paragraph 3 of Article 3, without prejudice to the provisions of the following paragraph."

  • In particular, the TA did not take into account paragraph 3 of Article 5, which provides:

"3 – The operations referred to in subsection (c) of paragraph 1, carried out in accordance with the conditions established in the preceding paragraph, as well as treasury operations carried out for the benefit of the SGPS by subsidiary companies which are in a relationship of dominance or group with it, do not constitute the grant of credit for the purposes of the General Regime for Credit Institutions and Financial Companies, approved by Decree-Law no. 298/92, of 31 December".

  • In short, contrary to the TA's understanding, treasury operations carried out for the benefit of the SGPS by subsidiary companies with which it is in a relationship of dominance or group do not constitute the grant of credit;

  • Now, if these operations do not constitute "the grant of credit", then it must be concluded that the prohibition on "granting credit" found in said subsection (c) does not encompass these operations;

  • In truth, what the Legal Regime for Holding Companies sought to ensure was the need for a loan agreement for the grant of credit to its subsidiaries, as results from paragraph 2 of Article 5 under analysis, whenever the amount exceeds a certain value;

  • That is, treasury operations carried out by the subsidiary (whether SGPS or not) in a relationship of dominance or group, to the dominant company which is an SGPS, are not encompassed by subsection (c);

  • In accordance, the Claimant concludes that, contrary to the TA's understanding, at the date of the facts, all the necessary conditions for the application of the exemption provided for in Article 7, paragraph 1(g) of the Stamp Duty Code were met.

  • Subsidiarily, and without prejudice to the errors and inconsistencies into which the TA fell, as to the non-application of the Stamp Duty exemption to the facts at issue, it becomes necessary to demonstrate in what terms a (hypothetical) incidence without exemption of this Duty could occur, with respect to the facts at issue.

  • Assuming the use of credit for a period equal to or exceeding one year – in this case, a period of precisely one year – entry 17.1.2 of the GTSD would always be applicable.

  • "The tax is levied on each use of the credit, and it is at each of these moments that the period for which that specific credit is granted will be determined. This period is measured by the lapse of time between the date of the drawdown and the final date stated in the contract" (cf. José Maria Fernandes Pires, "Lessons on Property and Stamp Duties", cited, p. 479).

  • Now, focusing on the date of the drawdown and the final date contained in the requests for the provision of funds, one can only conclude that credit use for a period of one year is at issue, that is, credit use for a determined period.

  • It follows from the foregoing that Stamp Duty could only have been assessed at the rate of 0.5% on the credit granted and used during the period under inspection, for which reason the amounts of Stamp Duty in arrears could not exceed €10,185;

  • Thus, having the TA assessed the Duty by applying a clearly erroneous rule of incidence – but which allowed for greater tax revenue collection – no other solution remains than the total annulment of the disputed assessments, as the defect in question affects the entirety of the same.

Tax Authority's Submissions

For its part, the TA argues, in summary, as follows:

  • The company "B… SGPS" does not hold any participation in the entity to which it granted credit, A…, for which reason it is easily concluded that the exceptions to the prohibition on the grant of credit by B… SGPS cannot apply to the situation at hand;

  • The grant of credits by B… to A… amounts to an operation which, by virtue of its status as an SGPS, is prohibited under its own Legal Regime;

  • The exemption rules for Stamp Duty relating to financial operations apply to credit operations carried out by companies which are, naturally, legally authorized to carry them out, that is, it encompasses credits granted to the universe of subsidiary companies relative to which, according to law, these operations are not prohibited;

  • Now, in the case under analysis there is a violation of that determined by Article 5, paragraph 1(c) of Decree-Law 495/88, with the wording given by Decree-Law 318/94 of 24 December.

  • The fact that one is dealing with a factual situation itself contrary to the applicable legal framework results in the impossibility of it being recognized as having an exemption, in particular that provided for in Article 7, paragraph 1 of the Stamp Duty Code, given that, considering the circumstances of the concrete case, none of the conditions required by DL 495/88 for the possibility of the grant of credit are met;

  • In effect, if the basis of the exemption in question is a situation contrary to law, it does not appear possible that, through the exemption, it be considered as worthy of protection and with relevant extra-fiscal public interest, "superior to that of the duty itself" (cf. Article 2, paragraph 1 of the Tax Framework Law), the grant of credit expressly prohibited by law, for which reason, and in light of the foregoing, there is no place for the Stamp Duty exemption at issue, even if the requirements of Article 7, paragraph 1, letter (g) were met, (which is also not the case, as we shall see below);

  • Given the foregoing, and despite the prolix argumentation of the Claimant, which at times understands itself to be dealing with an operation of the grant of credit (art. 36 to 38 of the statement of claim), and at other times not (art. 86 and 87 of the statement of claim), the situation subject of the present case cannot be considered capable of being framed within the exemption of stamp duty provided for in Article 7, paragraph 1, letter (g) of its Code.

  • Once it is concluded that there cannot be an exemption, let us now analyze the characteristics of the operations at issue essential to determining which entry of the general table annexed to the Code is applicable to the case at hand.

  • According to the Claimant's submission, for the operations at issue, and for purposes of determining the applicable rate, only the moment of their realization and the period initially indicated should be relevant, the fact that such period was never met being entirely irrelevant;

  • Now, regardless of whether reimbursement may or may not correspond to an autonomous tax event, the fact is that this total absence of reimbursement means that the credits granted by B… to A… were never ceased to be used;

  • For "use" can be synonymous with "use", "make use of…", "take advantage" or "derive benefit" and, as the stamp duty rules are absolutely clear regarding the relevance of "use" for purposes of tax liability and calculation of the applicable rate, there is no way to ignore this circumstance;

  • Contrary to what the Claimant states, the TA did not classify those successive financial operations as a current account, but rather, considering the characteristics demonstrated, both regarding the matter of the period of use and also the purposes for which the financing was intended, the Inspection understood, and correctly so, that those operations fall within the last part of the rules referred to above, (Article 5, paragraph 1, letter (g) of the Code and entry 17.1.4 of the Table), when they mention "any other means/form in which the period is not determined or determinable".

  • We are, therefore, in accordance with the views held by António Campos Laires and Jorge Belchior Laires, in "Stamp Duty Code, Annotated and Commented", dealing with that type of "(…) contracts in which the creditor places funds or other values at the disposal of the creditor, normally up to a certain amount (credit facility), for the latter to use them as its economic needs dictate. These contracts thus have the particularity of granting the debtor the right to decide the moment at which it wishes to use the credit (…) the debtor also has the faculty of managing its debt with the creditor, through the making of partial repayments, the moment of which occurs equally as a function of its assessment of its needs. This means that, in these cases, both the amounts of credit use and the moments of its reimbursement are not determinable. (…)"

  • Now, if there was never any reimbursement, the period never ceased to run and the use persisted always.

  • Equally, regarding the alleged violation of the principle of legality in its typicality aspect, the Claimant's argument has no merit;

  • In effect, in the case at hand, there is not an irrelevance or disregard of the contract for tax purposes, but rather, and only, the finding that therefrom emerges an economic effect which substantiates in substantive terms a grant of credit, a factual situation which falls within the scope of a rule of incidence of Stamp Duty;

  • Having reached this point, and for all the foregoing, it remains to be concluded that the Tax Inspection's action was strictly lawful, which undertook the inspection procedures in compliance with the provisions of the applicable legal rules.

Given the foregoing, regarding the positions of the parties and the arguments presented, to determine whether the SD assessment acts sub judice are illegal or not, it will be necessary to verify a) what interpretation should be given to Article 7, paragraph 1(g) of the SDC and b) which entry of the GTSD is applicable to the grant of credit carried out.

Let us proceed.

ASSESSMENT

Right to Exemption – Article 7, paragraph 1(g) of the Stamp Duty Code

Article 11 of the General Tax Law (GTL) establishes the principle that the interpretation of tax law must be carried out in accordance with general principles of interpretation.

The general principles of interpretation are established in Article 9 of the Civil Code (CC), as follows:

"1. Interpretation must not be confined to the letter of the law, but must reconstruct the legislative intent from the texts, taking into account especially the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.

  1. However, the interpreter may not consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator established the most correct solutions and knew how to express its intent in adequate terms."

It is in light of the aforementioned rules that the provision of Article 7, paragraph 1(g) of the SDC should be assessed, which determines the following:

"1. The following are also exempt from the duty:

(...)

g) Financial operations, including the respective interest, for a period not exceeding one year, provided they are exclusively intended to cover treasury shortfalls and are carried out by risk capital companies (RCC) in favor of companies in which they hold participations, as well as carried out by other companies in favor of companies dominated by them or in companies in which they hold a participation of at least 10% of the capital with voting rights or whose acquisition value is not less than €5,000,000, in accordance with the last agreed balance sheet, and also carried out for the benefit of a company with which it is in a relationship of dominance or group;"

Considering the literal element of the rule, it is first necessary to reconstruct the legislative intent through the words of the law. In this manner, the following are exempt from SD:

  • Financial operations, including the respective interest;

  • For a period not exceeding one year;

  • Exclusively intended to cover treasury shortfalls;

  • Carried out:

    • By risk capital companies (RCC) in favor of companies in which they hold capital participations;

    • By other companies in favor of:

      • Companies dominated by them, in accordance with the conditions and requirements of Article 486 of the CCC;
      • Companies in which they hold, in accordance with the last agreed balance sheet, a capital participation equal to or greater than 10% of capital with voting rights or whose acquisition value is not less than €5,000,000; and
      • Companies with which it is in a relationship of dominance or group.

Thus, considering the literal element, it appears that, in light of the facts found, the company B…, SGPS, held 94.20% by the Claimant company, granted to the latter credits, exclusively intended to cover treasury shortfalls, upon written request for the provision of funds by the Claimant, for a period of up to 12 months.

In fact, it results from the documents attached to the case file that there was a grant of credit for the exclusive coverage of treasury shortfalls, for a period of up to 12 months, and it is certain that the law taxes the grant of credit regardless of the contractual form underlying it.

Nevertheless, the TA understood that the grant of credits by company B… to the Claimant did not constitute an eligible operation under Article 7, paragraph 1(g) of the SDC, not only because company B… did not have, at the date of the occurrence of the tax facts, any participation in the Claimant, but also because the grant of credit by B… SGPS to the Claimant is prohibited.

However, it is verified that company B… SGPS and the Claimant constitute entities in a relationship of dominance or are related, in accordance with the provisions of Article 486 of the CCC. Therefore, in accordance with the joint provisions of Article 5, paragraph 1(c) and paragraph 3 of Decree-Law no. 495/88, of 30 December, the grant of credit by B… SGPS to the Claimant, entities in a relationship of dominance, does not constitute a prohibited grant of credit between those entities.

In any case, taking into account the very qualification of the financial operation carried out by the TA (see Article 33 of the Response), and the requests for the provision of funds attached to the case file (doc. no. 2), considering the principle of substance over form, it is considered that the operations of credit grant carried out are configured as treasury operations.

Having in mind that, in accordance with Article 9, paragraph 1(d) of the General Regime for Credit Institutions and Financial Companies, the following are not credit grant operations: "Treasury operations, when legally permitted, between companies which are in a relationship of dominance or group;" it is concluded, also by this avenue, that the operation carried out between the Claimant and B… SGPS constitutes an operation not prohibited to SGPS.

Finally, it is important to verify whether, as the TA argues, the temporal requirement provided for in the legal basis under analysis is not met – Article 7, paragraph 1(g) of the SDC – which only provides for the right to exemption for financial operations carried out for a period not exceeding 1 year.

In this regard, it is observed that the Claimant only demonstrated that the credit was granted ab initio for a period of up to 12 months, having made no proof regarding the post-hoc verification of said legal requirement, that is, the effective reimbursement of the credit granted within the 12-month period. Now, the right to SD exemption is granted provided that the formal requirements for its obtaining are met, namely the expectation that the credit is granted for the maximum period of 12 months. The tax event underlying this right is, therefore, instantaneous, that is, it occurs from the moment when, with the legal conditions being met, the granted credit is used. However, this does not mean that the right to exemption does not continue to depend on the material verification of its requirements, in particular as concerns the period of use of the credit for the period of up to 12 months.

Considering that the Claimant failed to prove that it proceeded to reimburse the credit granted by B… SGPS within the period of up to 12 months, it is understood that the Claimant's request for annulment of the SD assessment acts identified in the case file, based on the right to exemption provided for in Article 7, paragraph 1(g) of the SDC, is without merit.

Entry 17.1.4 of the GTSD

Considering the provisions of Article 4 of the Administrative Procedure Code (APC), applicable pursuant to Article 3 of the TPPC, it is also necessary to analyze the alternative request presented by the Claimant. Thus, on page 241 of the arbitral petition, the Claimant alternatively requests the annulment of the SD assessment acts, on the grounds that the grant of credit occurred for a determined period, with entry 17.1.2 of the GTSD being applicable rather than entry 17.1.4 of the GTSD applied by the TA.

The Claimant therefore argues that the financial operations carried out can only be taxed on the basis of entry 17.1.2 of the GTSD, considering that the grant of credit was made for a determined period.

Considering inapplicable the right to SD exemption of the Claimant, in accordance with the provisions of Article 7, paragraph 1(g) of the GTSD, the TA issued the assessment acts sub judice, based on their subjection to SD, in accordance with the provisions of entry 17.1.4 of the GTSD. The TA considered that, in light of the provisions of entry 17 of the GTSD, in the absence of reimbursement and considering the purposes for which the financing was intended, the extension of the period of credit grant, initially qualified for purposes of entry 17.1.2 of the GTSD, constitutes an operation taxable by entry 17.1.4 of the GTSD, given that the grant of credit comes to be configured as "any other means/form in which the period is not determined or determinable."

Let us examine this:

In this regard, entry 17 of the GTSD provides as follows:

"17 Financial operations:

17.1

For the use of credit, in the form of funds, goods and other values, by virtue of the grant of credit in any form except in the cases referred to in entry 17.2, including the transfer of credits, factoring and treasury operations when they involve any type of financing to the transferee, adherent or debtor, it being always considered as a new grant of credit the extension of the period of the contract - on the respective value, as a function of the period: (Amended by Law no. 12-A/2010, of 30/06)

17.1.1

Credit for a period of less than one year - per month or fraction - 0.04%

17.1.2

Credit for a period equal to or greater than one year - 0.50%

17.1.3

Credit for a period equal to or greater than five years - 0.60%

17.1.4

Credit used in the form of a current account, bank overdraft or any other form in which the period of use is not determined or determinable, on the average monthly amount obtained through the sum of the amounts owed ascertained daily during the month, divided by 30 - 0.04%"

It follows from the analysis of entry 17.1 that the legislator intends "to tax the use of credit as a function of the time for which it is granted, this determining the rate to be applied, regardless of the nature of the entities granting and using such credits, granted in any form and under any means," "it being always considered as a new grant of credit the extension of the period of the contract".

In this manner, considering the facts found, it is verified that the financial operations carried out are taxable by entry 17.1, it remaining only to be determined whether the subjection of the financial operations carried out to taxation should occur in light of the provisions of entry 17.1, in accordance with entry 17.1.2 or 17.1.4 of the GTSD.

Analyzing entries 17.1.2 and 17.1.4 of the GTSD, it is verified that the financial operations carried out will be taxed by entry 17.1.2 if it is understood, as the Claimant argues, that the credit was granted for the period of up to 12 months, the period of credit grant being considered extended for the same time in the absence of reimbursement, or if, taking into account the absence of reimbursement, the period of credit use is not determined or determinable, as the TA argues.

Now, as follows from the analysis of the entries in discussion, the period to be considered for purposes of applying the rates is that which was stipulated at the date of the contract, the tax event occurring with the use of the credit. At the date of the contract, that is, of the financing requests presented by the Claimant, the period of up to 12 months was stipulated.

Having no reimbursement occurred within that period, it must be understood, in accordance with entry 17.1 of the GTSD, that there was an extension of the credit and of the period of the contract. Taking into account that there is no fact revealing that the parties involved in the financial operation altered the period of the initial contract, this period coming to be indeterminate or indeterminable, it is understood that the credit grant contract renewed itself in the same terms, that is, for the period of up to 12 months.

With the extension of the contract there arises a new tax event, and necessarily a new SD assessment. This new SD assessment should be levied on the debtor balance ascertained at that date, at the rate corresponding to the initially fixed period (or to the period fixed thereafter).

In the absence of any new fact revealing a new credit grant period different from that resulting from the documents attached (see doc. no. 2), it should be understood that the credit was granted for the same period of time, with the SD assessment being levied on the Claimant's debtor balance at the date of the extension of the credit grant period, that is, at the date of use of the non-reimbursed credit.

In truth, considering the facts found, it is verified that B… SGPS made available financial funds to the Claimant, based on express requests for financial provision always for a period of less than 12 months (see documents no. 2). It is also certain that it resulted from the facts found that the Claimant failed to reimburse the amounts made available within the scope of the present proceedings within that period. However, this does not mean that the credit was not initially granted to the Claimant for a period of up to 12 months, with the tax event of the SD being verified at the moment of the use of the credit.

The qualification of the financial operation analyzed for purposes of entry 17.1.4 of the GTSD would imply, from the outset, ignoring the express will of the parties within the scope of the transaction carried out, and the transformation of an instantaneous tax event into a continuous tax event. Taking into account the facts alleged by the TA and the facts found in the present proceedings, it is not possible to conclude that the financial operations carried out were made for an indeterminate/indeterminable period, even considering the force of the principle of substance over form in the analysis of the reality under discussion.

Finding itself bound by the principle of legality, this Tribunal concludes in favor of the alternative request submitted by the Claimant, considering that there is no evidence that the initial will of the Claimant was different from that which it expressly formalized, nor of any facts which could reconfigure the financial operation that results from the documents attached to the case file as being subsumable in entry 17.1.2 of the GTSD. Consequently, the SD assessment acts challenged on the grounds of the obligation to pay SD on the financial operations carried out, in accordance with the rate provided for in entry 17.1.4, are illegal.

DECISION

This Arbitral Tribunal therefore decides:

  1. To judge as without merit the request for a declaration of illegality and consequent annulment of the SD assessment acts relating to the years 2013 and 2014, on the grounds of the right to SD exemption provided for in Article 7, paragraph 1(g) of the Stamp Duty Code;

  2. To judge as meritorious the request for a declaration of illegality and consequent annulment of the SD assessment acts relating to the years 2013 and 2014, on the grounds of error of law;

  3. Not to condemn the TA to the payment of indemnitary interest to the Claimant, in the absence of proof of payment of the assessed amounts.

VALUE OF THE CASE

In accordance with the provisions of Article 306, paragraph 2 of the Code of Civil Procedure, Article 97-A, paragraph 1(a) of the TPPC and Article 3, paragraph 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the claim is fixed at € 222,208.50.

COSTS

In accordance with the provisions of Articles 12, paragraph 2 and 22, paragraph 4, both of the LRTA, and Article 4, paragraph 4 of the Regulations on Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at € 4,284.00, in accordance with Table I of the aforementioned Regulations, at the cost of the Respondent.

Let notice be given.

Lisbon, 16 April 2018

The Arbitrators,

(José Baeta de Queiroz)

(Magda Feliciano)

(José Ramos Alexandre)

The text of this decision was prepared by computer, in accordance with Article 131, paragraph 5 of the Code of Civil Procedure, applicable by reference in Article 29, paragraph 1, subsection (e) of Decree-Law no. 10/2011, of 20 January (LRTA).

Frequently Asked Questions

Automatically Created

What is the stamp tax (Imposto do Selo) exemption for intra-group loans under Verba 17.1.2 and 17.1.4 of the Portuguese Stamp Tax Table?
Under Portuguese stamp duty law, loans between companies in a group relationship may qualify for exemption under Article 7(1)(g) of the Stamp Duty Code if four conditions are met: (1) the transaction constitutes a credit operation as defined in GTSD Entry 17; (2) the loan term does not exceed one year; (3) the financing exclusively covers treasury shortfalls; and (4) the operation occurs between entities in a dominance or group relationship as defined in Article 486 of the Commercial Companies Code. However, upward loans (from subsidiary to parent holding company) present particular interpretative challenges under the SGPS regime (Decree-Law 495/88), which must be analyzed alongside general stamp duty provisions.
Are loans between a parent company (SGPS) and its subsidiaries exempt from Portuguese Stamp Tax?
The stamp duty treatment of loans between a parent SGPS and its subsidiaries depends critically on the loan direction and purpose. Article 5(1)(c) of Decree-Law 495/88 generally prohibits SGPS from granting credit except to dominated companies. Crucially, Article 5(3) provides that treasury operations carried out for the benefit of an SGPS by subsidiary companies in a dominance or group relationship do not constitute 'credit granting' for banking law purposes. This creates ambiguity regarding whether such upward financing qualifies for stamp duty exemption, as the Tax Authority and taxpayers often interpret this provision differently regarding tax consequences versus regulatory classification.
How does the CAAD arbitral tribunal assess stamp tax liability on short-term loans (up to 12 months) between related companies?
When stamp duty liquidation acts are annulled by CAAD arbitral tribunals, the associated compensatory interest assessments (juros compensatórios) are typically also annulled as accessory obligations. Compensatory interest under Article 35 of the Tax Procedure Code is calculated on delayed tax payments and depends on the validity of the underlying tax assessment. If the principal stamp duty obligation is deemed unlawful and annulled, there is no legal basis for compensatory interest to subsist. Therefore, in CAAD proceedings challenging stamp duty assessments, taxpayers routinely request annulment of both the primary tax liquidation and all related compensatory interest assessments as a comprehensive remedy.