Portugal: AG opposes share-by-share holding test for dividend relief

A dispute over 2003 dividends

The Portuguese bank sought a full deduction for dividends received from four Portuguese companies in 2003. The tax authority allowed only 50%, arguing that the bank had not held all the relevant shares for at least a year. The reference asks how the holding-period condition interacts with Articles 3 and 4 of Directive 90/435/EEC.^[1]

The relevant historical threshold

Article 27 of Law 32-B/2002 amended Article 46 of Portugal’s Corporation Tax Code. Its holding condition required a direct participation of at least 10%, or an acquisition value of at least EUR20 million, held for an uninterrupted year before distribution or retained until that year was completed. The text also required the distributor to be resident and subject to the specified tax, and excluded beneficiaries within the tax-transparency regime. These are historical conditions, not today’s participation-exemption rules.^[1][2]

Status first, relief second

Kokott distinguishes qualifying as a parent company from determining the relief on its dividends. In her view, once the qualifying holding satisfies the minimum period, the directive does not permit a further requirement to age each individual share before fully deducting the associated dividend. She also considers the Court able to address the domestic case because Portuguese law extended the directive’s approach to internal situations.^[1]

Await the Court’s judgment

The analysis is relevant to groups tracking participation-exemption disputes, but it neither awards relief nor changes current filing obligations. Any actual position still requires the applicable law and period, holding history and procedural facts. The Court’s eventual answer remains to be seen.^[1]