PORTUGAL Trends and Developments Contributed by: João Riscado Rapoula and Hugo Leonardo, VdA
EC concerning indirect taxes on the raising of capital (as opposed to straight bank loans, where stamp tax would be due over the principal amount at a rate of up to 0.6%). However, according to the Portuguese law, stamp tax may be levied on the security package (if any) at a maximum 0.6% rate over the maximum secured amount. Further, stamp tax is usually due at a 4% rate on commissions for financial services. The stamp tax on financial fees was challenged in an arbitration tax court, and the matter was referred to the ECJ. On 19 July 2023, the ECJ issued a ruling (Case C-335/22) stating that Article 5 (2)(a) of Council Directive 2008/7/EC must be interpreted as precluding national legislation that provides for the imposition of stamp tax on fees for financial intermediation services provided by a bank in connection with the placement of securities (bonds and commercial paper), regard - less of whether the provision of such financial services is a legal requirement or merely optional. On the same day, the ECJ also issued a ruling (Case C-416/22) stating that the same provision of Council Directive 2008/7/EC must be interpreted as precluding national legislation that provides for the imposition of stamp tax on fees for financial intermediation services provided by a bank in connection with: • an offer for the cash purchase of securities; • the placement and subscription of securities; or • a public offer for subscription of shares, regardless of whether the provision of such financial services is a legal requirement or merely optional. In the previous case, C-656/21, the ECJ had empha - sised that in light of the objectives pursued by Council Directive 2008/7/EC, a broad interpretation of Article 5 is required to ensure the practical effects aimed at by the prohibitions it lays down are achieved. Thus, the tax prohibition shall apply whenever taxation is imposed on a transaction forming part of another overall transaction that relates to the raising of capital even if the underlying transaction itself would not (at least directly) be covered as it is not expressly men - tioned in the Directive.
These decisions may provide a basis for recovering stamp tax imposed on commissions charged by finan - cial institutions in bond issuances and other capital- raising operations over the last four years, with the Portuguese arbitration courts following the ECJ case law (Case No 791/2024-T, of 14 January 2025). Fur - thermore, they may have a broader impact as they could potentially extend to the taxation of security created to guarantee obligations arising from bond issuances and other capital-raising operations. Regarding the specific question of stamp tax on guar - antees in the context of a bond issuance, the issue has been brought before national courts, and a Por - tuguese arbitration court has referred to the ECJ the question of whether those guarantees are covered by the prohibition laid down under Council Directive 2008/7/EC. It will be interesting to monitor these developments as Portugal may be closer to having zero stamp tax in the overall capital-raising operation, significantly reducing the cost of capital raised in debt issuances. Withholding tax of foreign funds (AllianzGI-Fonds AEVN case law) – the story continues (and the law remains unchanged) Under the current national law, foreign collective investment vehicles (CIVs) investing in Portugal are subject to WHT on dividends paid by Portuguese companies, which results in a clear disadvantage compared to resident CIVs, which are not subject to CIT on the same dividends. Considering this discrimination, several CIVs have been challenging the WHT applied to Portuguese- sourced dividends based on a breach of EU law (in line with litigation in other member states). These cases have been brought before Portuguese tax arbitration courts by several CIVs that have claimed for the appli - cation of a full exemption (pari passu with Portuguese CIVs). This litigation was initially filed before tax arbitration courts in Portugal, one of which requested a prelimi - nary ruling on whether the difference in treatment was in breach of the free movement of capital and there - fore incompatible with EU law.
503 CHAMBERS.COM
Powered by FlippingBook