WWW.CUATRECASAS.COM NEWSLETTER I TAX I 1/9 CONTENTS NEWSLETTER TAX LAW I MAY 2017 I NATIONAL LEGISLATION 2 II ADMINISTRATIVE INSTRUCTIONS 4 III INTERNATIONAL CASE LAW 5 IV NATIONAL CASE LAW 7 NEWSLETTER I TAX WWW.CUATRECASAS.COM NEWSLETTER I TAX I 2/9 NEWSLETTER TAX LAW I NATIONAL LEGISLATION Parliament Law no. 14/2017, of 3 May Amends articles 63-A and 64-B of the General Tax Law, imposing the publication of data concerning transfers and remittance of funds to countries, territories and regions with more favourable tax regimes and increasing the reporting obligations to be made in the annual report on the development of combat against tax fraud and evasion, to be prepared by the Government and presented at the Parliament. Ministry of Foreign Affairs Notice no. 46/2017, of 9 May Announces the entry into force of the Convention between the Portuguese Republic and Federal Democratic Republic of Ethiopia for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income. Parliament Resolution of the Parliament no. 78/2017, of 6 January, published in May 2017 Approves the Agreement between the Portuguese Republic and the Federation of Saint Kitts and Nevis on Information Exchange in Tax Matters. Presidency of the Republic Presidential Decree no. 37/2017, of 16 May Ratifies the Agreement between the Portuguese Republic and the Federation of Saint Kitts and Nevis on Information Exchange in Tax Matters, approved by the Resolution of the Parliament no. 78/2017. Ministry of Foreign Affairs Notice no. 54/2017, of 22 May Announces the approval and ratification of the Convention between the Portuguese Republic and the Principality of Andorra for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to Taxes on Income and its entry into force on April 23, 2017. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 3/9 Parliament Resolution of the Parliament no. 86/2017, of 22 May Recommends that the Government eliminates the existing discrimination for Personal Income Tax (“PIT”) purposes on the exercise of parental responsibilities. Parliament Law no. 22/2017, of 23 May Amends the Stamp Duty Code, approved as annex to Law no. 150/99, of 11 September, clarifying which entity has the economic interest regarding card-based payment transactions. Ministry of Finance Ordinance no. 169/2017, of 25 May Amends the Annex of Ordinance no. 302-A/2016, of 2 December, which approved the structure and contents of the file to be used for the compliance with the reporting obligations provided for in Article 17(b) and (c), of Annex I to Decree-Law no. 64/2016, of 11 October, in the context of the Financial Information Reporting Regime. Ministry of Finance Secretary of State for Tax Affairs Order no. 170/2017, of 29 May Extends the deadline for compliance with the obligation set forth in article 121-A of the Corporate Income Tax (“CIT”) Code until October 31, 2017. Governmenet Decree-Law no. 53/2017, of 31 May Amends the Vehicle Tax Code, dematerializing the reporting procedures to all taxpayers. Ministry of Finance Order no. 180/2017, of 31 May Approves the new form (“Modelo 18”) and respective filling instructions for compliance of the obligation to provide information to the Tax Authorities ontitles aimed at providing extra-salary compensation. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 4/9 II ADMINISTRATIVE INSTRUCTIONS Tax and Customs Authority Binding Information, published on May 2017 Case no. 235/2017 Clarifies that the transitory rule foreseen in article 244 of the Law that approved the State Budget for 2017 shall be interpreted as allowing, for investments made in 2016 between EUR 5M and EUR 10M, taxpayers to benefit in 2017 from the incentive laid down in the amendment of article 23 of the Investment Tax Code made by Law no. 42/2016, of 28 December, provided that the same was not integrated in 2016. Tax and Customs Authority Tax Management Area - VAT Circular no. 30189, of 2 May 2017 Revokes Circular no. 30174, of 26 August 2015, and lays down the requirements for the application of the exemption provided for in article 9(1), of the Value Added Tax (“VAT”) Code, in what concerns professional activities in the area of non-conventional therapies, listing the professionals to whom this exemption shall apply. Also clarifies several aspects related to compliance with ancilliary obligations, as well as other temporary aspects concerning the application of these exemptions. Tax and Customs Authority Department of Excise Tax and Vehicle Tax Services – Tax on Alcohol and Alcoholic Beverages Division Circular no. 35 076, of 2 May 2017 Sets the procedures to be adopted in the exportation and shipping of non-alcoholic beverages, light plastic bags and other tobacco products, under a tax suspension regime, as well as in the exportation of non-alcoholic beverages exempt under article 87-B of the Excise Tax Code. Tax and Customs Authority Director General’s Office Circular no. 5/2017, of 4 May 2017 Clarifies which tax benefits, considering the State Budget for 2017 and the Order no. 103/2017-XXI, issued by the State Secretary for Tax Affairs’s, on March 31, 2017, are in force during the year of 2017. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 5/9 Tax and Customs Authority Department of Customs Regulation Services – Movement of Goods Division Circular no. 15587/2017, of 5 May 2017 Announces that, following several corrections published in Official Journal of the European Union no. 101, L series, of 13 April 2017, the following Regulations were republished: i) Commission Delegated Regulation no. 2015/2446, of 28 July 2015, which supplements Regulation no. 952/2013 of the European Parliament and of the Council, detailing certain provisions of the European Union Customs Code; ii) Commission Implementing Regulation no. 2015/2447, of 24 November 2015, establishing implementing rules for certain provisions of Regulation no. 952/2013 of the European Parliament and of the Council, which approved the Union Customs Code; and iii) Commission Delegated Regulation no. 2016/341, of 17 December 2015, which supplements Regulation no. 952/2013 of the European Parliament and of the Council concerning transitority rules for certain provisions of the European Union Customs Code where the relevant electronic systems are not yet operational, and amends Delegated Regulation no. 2015/2446. Tax and Customs Authority Department of Customs Regulation Services - Customs Regimes’ Division Circular no. 15586/2017, of 8 May 2017 Determines the waive of guarantee in what concerns VAT with regards to national import and export authorisations (that do not involve other Member States) for customs warehousing, end-use or inward processing regimes, determining that the guarantee provided will only cover potential customs debts. This waive of guarantee related to VAT shall only be applied if the holder of the authorisation/regime does not have any social security or tax debts and has not been convicted for any tax crime in the past 3 years. Tax and Customs Authority Department of Corporate Income Tax Services– Assessment Division Circular no. 20196/2017, of 22 May 2017 Discloses the rates of Municipal Surtax to be charged in 2017, applicable to the taxable profit of 2016, replacing the rates previously published by Circular no. 20195/2017, of 19 April. III INTERNATIONAL CASE LAW Court of Justice of the European Union Grand Chamber WWW.CUATRECASAS.COM NEWSLETTER I TAX I 6/9 Judgement of 16 May, 2017 Case no. C-682/15 In the decision in question, the Court of Justice of the European Union ruled that a Member State may determine the application of pecuniary penalties to an entity which refuses to cooperate within an information exchange process between tax authorities. Nevertheless, the Court also considered that the information must be «foreseeably relevant» to compel a Member State to provide information to another. Therefore, the «foreseeable relevancy» is a condition of legality of the decision of a Member State to apply an injunction to an entity as well as to the determination of the penalty that shall be applied for the noncompliance of the said request. Court of Justice of the European Union First Section Judgement of 17 May, 2017 Case no. C-68/15 In the decision in question, the Court of Justice of the European Union considered that the freedom of establishment and article 5 of the Directive 2011/96/EU (“Parent Subsidiary Directive”) shall be interpreted as not being contrary to a national legislation that taxes both resident and non-resident entities when such entities pay dividends that are not included in the final taxable result, due to the application of tax benefits laid down by national legislation (“fairness tax”), insofar the assessment of the taxable basis does not benefit residents in detriment of non-residents. However, the Court of Justice of the European Union ruled that article 4(1)(a) of the abovementioned Directive (read in conjunction with article 4(3) thereof) must be interpreted as precluding national legislation that subjects to tax the distribution of profits by a parent company, received from its subsidiary, after the year in which they were received, provided that such taxation exceeds the 5% ceiling laid down in the Directive. Court of Justice of the European Union First Section Judgement of 17 May, 2017 Case no. C-365/16 In the decision in question, the Court of Justice of the European Union ruled that article 4(1)(a) of the Parent Subsidiary Directive must be interpreted as precluding a tax measure providing for the levy of a tax when the parent company distributes dividends and the taxable basis of assessment is the amount of the dividends distributed, including those coming from that company’s non-resident subsidiaries. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 7/9 IV NATIONAL CASE LAW Constitutional Court Judgement no. 171/2017, of 5 April 2017, published in May 2017 Case no. 550/2016 In the decision in question, the Constitutional Court deemed unconstitutional article 5(1), of Law no. 64/2008, of 5 December, for infringement of article 103(3), of the Constitution of the Portuguese Republic, in the part that determines the application of the tax increase provided for in article 81(3)(a) of the CIT Code, in what concerns to autonomous taxation of representation expenses and charges related to passenger cars applied to all transactions carried out since 1 January 2008. In this context, the Constitutional Court ruled that the principle of prohibition of retroactivity would be breached insofar as the confidence of taxpayers would be excessively damaged by the retroactive application of the new law, as the taxpayers would not have had the chance to conform their acts according to such reality. Moreover, the Constitutional Court also noted that, being the purpose of autonomous taxation to discourage expenditure that the legislator assumes to be unnecessary, there would be no justification for the existence of an onerous regime published on December and applicable on previous expenses, since it is impossible to adapt conducts which have already occured. Constitutional Court Judgement no. 211/2017, of 2 May 2017 Case no. 285/15 In the decision in question, the Constitutional Court deemed unconstitutional the provision set out in article 44(2), of the PIT Code (as amended by Law no. 64-B/2011, of 30 December, and prior to the amendments introduced by Law no. 82-E/2014, of 31 December), in the interpretation according to which, for purposes of determining earnings subject to PIT regarding capital gains arising from the sale of real estate, an irrefutable presumption of income is established, in breach of the ability to pay principle provided for in articles 103(1) and 13 of the Constitution of the Portuguese Republic. Supreme Administrative Court 2.º Section – Full Section Judgement no. 3/2017, of 29 March 2017, published in May 2017 Case no. 1521/15 In the decision in question, the Supreme Administrative Court has unified jurisprudence, setting the interpretation of article 270(2), of the Insolvency and Corporate Recovery Code, as meaning that the exemption set forth therein shall not only apply to sales and exchanges of companies and undertakings, but also to sales and exchanges of real estate comprising WWW.CUATRECASAS.COM NEWSLETTER I TAX I 8/9 the assets of a company, provided that such operations are included in an insolvency or payment plan, or occur within the liquidation of the insolvent estate. Supreme Administrative Court Judgement of 19 April, 2017, published in May 2017 Case no. 01320/16 In the decision in question, the Supreme Administrative Court deemed as partially illegal an ofical assessment of CIT insofar as it had applied autonomous taxation to expenses unsuficiently documented by the taxpayer, since such insufficiency cannot be considered as legally equivalent to the total absence of documentation. Thus, the insufficiency of documentation may only lead to the undeductability of the expenses, but not to the autonomous taxation of the same. South Central Administrative Court Judgement of 27 April 2017, published in May 2017 Case no. 154/08.8BELRS In the decision in question, the South Central Administrative Court ruled that the monetary value of a construction work may not, by itself, constitute sufficient grounds for the Tax Authorities to classify the construction as “major repairs” for purposes of depreciation. Therefore, the tax authorities are responsible for demonstrating that the construction work carried out resulted in an increase of the real value or probable duration of the asset and, failing to do so, the taxpayer may deduct all the costs of the repairs in the year in which they were incurred. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 9/9 CONTACTS CUATRECASAS, GONÇALVES PEREIRA & ASSOCIADOS, RL Sociedade de Advogados de Responsabilidade Limitada LISBOA Praça Marquês de Pombal, 2 (e 1-8º) I 1250-160 Lisboa I Portugal Tel. (351) 21 355 3800 I Fax (351) 21 353 2362 email@example.com I www.cuatrecasas.com PORTO Avenida da Boavista, 3265 - 5.1 I 4100-137 Porto I Portugal Tel. (351) 22 616 6920 I Fax (351) 22 616 6949 firstname.lastname@example.org I www.cuatrecasas.com This Newsletter was prepared by Cuatrecasas, Gonçalves Pereira & Associados, RL for information purposes only and should not be understood as a form of advertising. The information provided and the opinions expressed herein are of a general nature and should not, under any circumstances, be a replacement for adequate legal advice for the resolution of specific cases. Therefore, Cuatrecasas, Gonçalves Pereira & Associados, RL is not liable for any possible damages caused by its use. Access to the information provided in this Newsletter does not imply the formation of a lawyer-client relationship or of any other sort of legal relationship. This Newsletter is published free of charge and may not be copied or distributed without formal prior consent. If you do not wish to continue receiving this Newsletter, please send an e-mail to email@example.com.