PORTUGAL Law and Practice Contributed by: Marta Pontes, Hélder Frias and José António Reymão Nogueira, Uría Menéndez
8. Tax Issues 8.1 Stamp Taxes
has previously agreed to assume this obligation towards the borrower). Contractual subordination provisions are usually included in intercreditor arrangements. Under these provisions, certain (junior) creditors agree to rank behind other (senior) creditors in the pri- ority for collecting repayment from the debtor. In the case of default or insolvency of the debtor, credit claims must be ranked according to statu- tory rules. However, the Portuguese Insolvency Code allows parties to agree on the subordina- tion of certain credit claims. However, structural subordination is not com- mon in Portugal. This is the process whereby senior creditors lend directly to a company, and junior creditors lend to a holding of the com- pany so that junior creditors only have access to the assets of the company after all the target’s direct creditors (including senior creditors) have been paid, and the remaining assets have been distributed to the company as an equity holder. 7.2 Claw-Back Risk Under Portuguese law, as a general rule, any acts detrimental to the insolvency estate carried out within two years prior to the declaration of insolvency can be clawed back, provided that the involved third party had fraudulent intent. Any act or transaction will be presumed to be detrimental, notably if executed without consid- eration. Therefore, in the context of acquisition finance, the granting of upstream and cross-stream securities is likely to trigger the application of the claw-back rule, taking into account that the existence of a corporate benefit may be harder to demonstrate, and, as such, the security may be deemed a detrimental act.
According to the Portuguese Stamp Tax Code, and as a general rule, the granting of loans is subject to stamp tax if it is considered to take place in Portugal. This is deemed to occur if the relevant agreements are executed in Portugal or the relevant loan is granted to or by a resident entity, as well as if the relevant agreements are presented in Portugal for any legal purposes. A borrower is resident in Portugal for this purpose if it has its registered office or is acting through a branch or other permanent establishment in Portugal. Stamp tax is due on loans made to a borrower resident in Portugal and on loans made by a lender resident in Portugal, unless the specific loan is exempt. This tax can represent a signifi- cant cost in financing transactions in the Portu- guese market. Stamp tax is levied on the value of the loans at a rate of up to 0.6%, depending on the loan maturity, and should be borne by the borrower. Additionally, interest and fees charged by finan- cial institutions are also subject to stamp tax at a rate of 4% (reduced to 3% for fees due for the granting of guarantees). The exemptions from stamp tax on loans are few and primarily relate to loans between financial institutions or certain multi-lateral development banks and direct shareholder loans, provided that certain conditions are met. However, neither bonds nor interest paid thereon are subject to stamp tax. As such, in addition to withholding tax payment, the use of bond-loan structures may also be more tax-efficient from a
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