WWW.CUATRECASAS.COM NEWSLETTER I TAX I 1/7 CONTENTS TAX LAW NEWSLETTER I MARCH 2017 I NATIONAL LEGISLATION 2 II ADMINISTRATIVE INSTRUCTIONS 3 III INTERNATIONAL CASE LAW 4 IV NATIONAL CASE LAW 5 V OTHER INFORMATION 6 NEWSLETTER I TAX LAW WWW.CUATRECASAS.COM NEWSLETTER I TAX I 2/7 TAX LAW NEWSLETTER I NATIONAL LEGISLATION Ministries of Finance and Environment Ordinance no. 88/2017, of 28 February First amendment to Ordinance no. 286-B/2014, of 31 December, which regulates the contribution levied on lightweight plastic carrier bags, ruling the circulation in Mainland Portugal of lightweight plastic carrier bags between tax warehouses under a duty suspension regime. Ministry of Finance Ordinance no. 90-A/2017, of 1 March Approves the forms and their completion instructions for taxable persons who are married or cohabiting and that intend to exercise the joint taxation option for the purposes of the Additional Property Tax (“AIMI”), along with for undivided estates intending to avoid being deemed legal persons for the purpose of the AIMI. Parliament Law no. 9/2017, of 3 March Authorises the Government to create the public service of electronic notifications associated to a sole digital address, with the possibility of the sole digital address being equivalent to the tax domicile, standardising the notification for both tax and social security purposes. Under the terms of the authorisation, documents sent through the public electronic notifications service to the electronic tax domicile are to be considered as being made on the fifth day after their receipt at the sole digital address or electronic mailbox of the recipient. Ministry of Finance Ordinance no. 96/2017, of 7 March Amends the deadline for submission of tax form Model 48, intended for taxpayers holding shares acquired in the context of tax neutral transactions provided for in the Personal Income Tax (“PIT”) Code and transferring their tax residence to another Member State of the European Union or of the European Economic Area. The new deadline for the submission of this form is 31 August. Presidency of the Republic Decree-Law no. 27/2017, of 21 March Ratifies the Convention between the Portuguese Republic and Montenegro for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes WWW.CUATRECASAS.COM NEWSLETTER I TAX I 3/7 on Income, signed in Lisbon on 12 July 2016, and approved by the Parliament’s Resolution no. 50/2017 on 27 January 2017. Parliament Law no. 10-A/2017, of 29 March Adopts a transitory measure for reduction of the special payment on account (pagamento especial por conta), under which this payment, in the tax periods starting on 2017 and 2018, benefits from a reduction of EUR 100 on the amount determined pursuant to Article 106 of the Corporate Income Tax (“CIT”) Code, also providing for an additional reduction of 12.5% in the final amount. Office of the State Secretary for Tax Affairs Decision no. 2608/2017, of 29 March Approves the amendments to the CIT tax return Model 22, its annexes and completion instructions. II ADMINISTRATIVE INSTRUCTIONS Tax and Customs Authority Decision no. 11412, of 14 March Informs that the supply and assembly of equipment such as cooling plants, cold stores and other refrigeration facilities constitute construction work services for the purpose of application of the reverse charge mechanism for Value Added Tax (“VAT”) purposes, whenever such equipment are installed in real estate assets and thereto attached on a permanent basis. Tax and Customs Authority Decision no. 11432, of 16 March Clarifies that the product “Gluten Free Shellfish Preparation” can benefit from the application of the reduced VAT rate insofar as the product in question is subject to a special preparation process that reduces any risk of contamination by or presence of gluten, making it a gluten-free product suitable for the diet of celiac. Tax and Customs Authority Department of Customs Regulation Services Circular no. 15775/2017, of 17 March Discloses instructions for the application of Regulation (EU) No 649/2012, of 4 July 2012, whose purpose is to implement the Rotterdam Convention on the Prior Informed Consent WWW.CUATRECASAS.COM NEWSLETTER I TAX I 4/7 Procedure in the import and export of certain hazardous chemicals and pesticides in international trade. Tax and Customs Authority Department of Customs Taxation Services Circular no. 15576/2017, of 24 March Discloses the average exchange rates for determining the customs value to be used from 1 April onwards. III INTERNATIONAL CASE LAW Court of Justice of the European Union Judgment of 8 March 2017 Case C-448/15 In the Judgment in question, rendered in a preliminary ruling submitted by the Court of Appeal of Brussels, the Court of Justice of the European Union (“CJEU”) stated that Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States must be construed to the effect that Article 5 (1) does not preclude legislation of a Member State to withhold tax on dividends paid by a subsidiary established in that Member State to a collective investment undertaking established in another Member State and therein subject to CIT at a zero rate, provided that all of its profits are paid to its shareholders, since such an entity does not constitute a ‘company of a Member State’ for the purposes of the abovementioned Directive. Court of Justice of the European Union Judgment of 8 March 2017 Case C-14/16 In the Judgment in question, rendered in the context of a preliminary ruling from the Conseil d’État (Council of State, France), the CJEU stated that Article 49 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 11 of Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States, must be interpreted as precluding national legislation which, in the case of a cross-border merger, makes the granting of the tax advantages applicable to such an operation under that directive subject to a process of prior approval under which, in order to obtain that approval, the taxpayer must show that the operation concerned is justified for economic reasons, that it does not have as its main objective, or as one of its main objectives, tax evasion or tax avoidance and that its terms make it possible for the deferred capital gains to be taxed in the future, whereas in the case of a domestic merger such a deferral is granted without the taxpayer being made subject to such a process. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 5/7 IV NATIONAL CASE LAW Supreme Administrative Court Case no. 13/17 Judgment of 8 March 2017 In the decision in question, the Supreme Administrative Court (“STA”) decided that the fees charged by banking institutions pursuing the activity of insurance mediation are not covered by the exemption from Stamp Duty provided for in Article 7.1 (e) of the Stamp Duty Code, being the Stamp Duty rate applicable to these fees the one provided for in paragraph 22.2 of the General Chart of Stamp Duty. Supreme Administrative Court Case no. 227/16 Judgment of 8 March 2017 In this Judgment, the STA considered that the method required by Circular No. 7/2004, of 30 March, for purposes of allocation of interest expenses to the shares held by a holding company, represents an indirect and presumptive method of allocation of those expenses, in breach of Articles 87 to 90 of the General Tax Law and is therefore illegal. Supreme Administrative Court Case no. 298/13 Judgment of 8 March 2017 In the decision in question, the STA held that the current Article 56 of the TFEU precludes the previous version of the provision of Article 80.2 (c) of the CIT Code, under which nonresident financial institutions were taxed on the gross income derived from interest received in Portugal without the possibility to deduct business expenses directly related to the activity in question, thus precluding the taxation of the net income, whereas such an opportunity was given to resident financial institutions. South Central Administrative Court Case no. 3110/15.6BESNT Judgment of 9 March 2017 In this decision, the Court decided that an administrative offence is not committed, for failure to pay taxes, by a taxpayer who timely and fully paid the payment on account that assessed by reference to the CIT that, at the date of that payment, was determined based on the previous tax period, even if, subsequently, following the submission of a replacement CIT tax return Model 22, the amount of tax determined with regard to that preceding year is higher and, consequently, the amount of the payment on account to be paid would also be higher. WWW.CUATRECASAS.COM NEWSLETTER I TAX I 6/7 Administrative Arbitration Centre Arbitration Decision of 6 January 2017, published March 2017 Case no. 317/2016-T In this decision, the Tax Arbitration Court concluded, with regard to the adjustments system for VAT concerning bad debts, that there is no need to inform the acquirer of the goods of the adjustment made by the supplier when the acquirer has ceased its activity for VAT purposes. The Tax Arbitration Court held that, in a situation where bad debts resulting from the expiry of an enforcement procedure due absence of seizable assets of the debtor, the legal reference to the electronic record of enforcements, in Article 78.7 (a) of the VAT Code, corresponds simply to a way of demonstrating the expiry of the enforcement due to the absence of seizable assets, notwithstanding the existence of other mechanisms for the taxpayer to demonstrate this (particularly in a situation in which the possibility of entering the expiry of the enforcement into the electronic records was not available). V OTHER INFORMATION Press release from the Office of the Minister for Finance, of 29 March Following the publication of Law no. 10-A/2017, of 29 March, which reduces the amount of the special payment on account, clarifies that taxpayers that opt for the payment in two instalments and have already paid the first instalment without considering the new Law, may deduct the excess amount paid in the first instalment from the amount of the second instalment (to be paid up to 31 October in the cases of the tax period matches the calendar year). Alternatively, taxpayers may claim the excess amount paid, within 30 days from 30 March 2017 (date of entry into force of the new Law). Automatic Income Tax Return – informative leaflet An informative leaflet on the Automatic Income Tax Return for 2016 has been made available on the Tax Authorities website. 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