tax notes international - Tuck School of Business - Dartmouth College

PORTUGAL
Extension of Portuguese Holding Regime
The proposal would extend the tax regime applicable
to Portuguese incorporated holding companies
(Sociedade Gestora de Participações Sociais, or SGPS)
to foreign EU-incorporated entities that move their
statutory seat or place of effective management into
Portugal. The objective of this amendment is twofold.
First, the measure is designed to eliminate a potential
incompatibility with EU law regarding the nonapplication
of this beneficial regime to foreign EU holding
companies effectively managed in Portugal. Second,
the measure aims to stimulate investment and to create
an incentive to transfer capital into the Portuguese territory.
Under the proposal, the more favorable regime for
participation exemption on dividends received and
capital gains realized that is applicable to SGPSs
would apply equally to companies incorporated under
the law of another EU member state that have their
statutory seat or place of effective management located
within Portuguese territory and that have as their sole
corporate purpose the management of participations in
other companies provided the conditions established
for SGPSs under the Portuguese legal framework are
met. 2
Under the current applicable legal framework, the
activities defined as holding activities include only:
mere holding of investments in which at least 70 percent
of the total investments must be in companies in
which the holding company owns directly or indirectly
a minimum of 10 percent of the share capital with voting
rights for more than one year 3 ; rendering of technical
services and/or management services to companies
in which the holding company holds directly or indirectly
a qualified participation; and lending of funds
and providing cash management to subsidiaries and
other qualifying holdings (that is, minimum direct or
indirect holding of 10 percent). Also, the holding company
is restricted to acquiring or holding real estate
unless the real estate is used for the premises of its
head office or of its subsidiaries.
2
The legal framework of SGPSs is contained in Decree Law
495/88 as amended by Decree Law 318/94, Decree Law 378/
98, and Law 109-B/2001. Article 32 of the Tax Benefits Statute
incorporates the tax regime applicable to SGPSs.
3
The holding company may nonetheless invest in mere passive
holdings (that is, less than 10 percent of the voting rights) if:
the amount does not exceed 30 percent of the investments made
in other holdings; the value of each passive holding is not less
than €5 million; the purchase results from the target company’s
merger or demerger; and the holding company has formalized a
managerial subordination agreement with the target company,
under which the management of the subordinated company’s
business activities is entrusted to the holding company.
Other Amendments
The proposal would reduce the minimum amount of
special advance corporate tax payments, which is essentially
meant to function as a minimum tax, to
€1,000. The amount of the advance corporate tax payment
is basically equal to 1 percent of annual turnover
capped with a limit of €70,000 and payable in two or
three installments.
When VAT return shows a credit balance, the excess
input tax may be carried forward or a refund may be
requested if the credit balance during a period of 12
calendar months exceeded €250. The bill proposes a
reduction to €3,000 (from the previous €11,250) of the
minimum excess input VAT necessary to request a refund
before the 12-month period elapses.
The bill would allow the government to establish a
reverse charge rule for VAT payers covering the supply
of goods and services within public procurement contracts
of a value equal to or greater than €5,000 when
the acquirer of the goods or services is the Portuguese
state or other public entities.
The bill would extend the tax credit available
against personal income tax for acquisition of personal
computers and related equipment to cover expenses
from the acquisition of next-generation broadband
equipment. The tax credit would remain equal to 50
percent of the acquisition costs of the taxpayer with a
limit of €250.
Russia
♦ Paulo Núncio and Tiago Cassiano Neves,
Garrigues, Lisbon
Court Dismisses Claim for Back Taxes
Against Ernst & Young
The Moscow Arbitration Court on January 27
quashed a RUB 390 million claim for back taxes
against Ernst & Young’s Russian subsidiary, Ernst &
Young Vneshaudit, according to a January 27 report by
RIA Novosti, the state news agency.
Further details on the court’s decision were not
available.
The company had challenged a December 29, 2007,
decision of the Moscow Tax Inspectorate ordering it to
pay RUB 390 million in profits taxes, VAT, and fines
and penalties for 2004. The tax authorities accused the
company of underreporting its 2004 profits of RUB
10.5 million by RUB 630.3 million.
Ernst & Young Vneshaudit had deducted that sum
as expenses for consulting services performed by its
parent company in Cyprus. The authorities said those
406 • FEBRUARY 2, 2009 TAX NOTES INTERNATIONAL
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