A turning point for Portuguese stamp duty on bank fees regarding financial intermediation services?


In the past couple of years, a discussion has arisen in the Portuguese Arbitration Court on whether bank fees charged in relation to certain financial intermediation services rendered to companies are subject to Portuguese stamp duty. Such services include the issuance of bonds, tender offers for bond acquisitions, and public offers for the subscription or acquisition of shares or other securities.

Focus on Council Directive 2008/7/EC

One of the main arguments is that although there is no doubt that such fees are subject to stamp duty under the domestic law provisions, the imposition of such may constitute a violation of EU law; namely, Council Directive 2008/7/EC of February 12 2008 concerning indirect taxes on the raising of capital.

This directive expressly forbids member states from subjecting capital companies to any form of indirect tax on:

  • The issuance of, the admission to quotation on a stock exchange of, making available on the market, or dealing in stocks, shares or other securities, loans raised by the issue of debentures or other negotiable securities, or any formalities relating thereto; or

  • The creation of, the issuance of, the admission to quotation on a stock exchange of, making available on the market, or dealing in such debentures or other negotiable securities.

Challenges and court decisions

A growing number of companies have started to challenge such stamp duty assessments on the ground that financial intermediation services rendered in the context of those operations are ‘related formalities’ for the effects of the directive, an interpretation that would also find support in some European Court of Justice (ECJ) decisions; namely, the cases Isabele Gielen (Case No. 299/13) and Air Berlin (Case No. C-573/16).

On this matter, the first known decisions of the Portuguese Arbitration Court were unfavorable to the taxpayers. The court considered that – independently from its undeniable importance within the context of the underlying operations, which may involve hundreds of institutional investors worldwide – financial intermediation services are not to be considered as related formalities as understood in the directive on indirect taxes on the raising of capital because their use is optional and the companies are free to perform the operations on their own without resorting to the use of them.

However, in the second half of 2022, the Arbitration Court has been deciding in a different way: instead of immediately denying the taxpayers their requests for the annulment of stamp duty assessments, it started to refer cases regarding this matter to the ECJ.

Only the Arbitration Court can say for sure what motivated such change – and maybe it is just a matter of different arbitrators, and different interpretations – but some of the cases that were brought to the Arbitration Court after those first decisions have specific contours that are capable of defying the logic of the arguments then used, which may have played a factor in the Arbitration Court’s change of view.

In effect, in some of the operations underlying the cases that the Arbitration Court referred to the ECJ, hiring financial intermediation services that gave rise to bank fees subject to stamp duty was not optional but mandatory by law.

A key decision for the ECJ

If the ECJ subscribes to the interpretation of the directive defended by the taxpayers, in the sense that the financial intermediation services are related formalities to the operations they intend to assist with, this will also be a turning point for Portuguese courts. They will have to recognise that assessing stamp duty on bank fees charged in relation to financial services rendered in the context of operations covered by the directive concerning indirect taxes on the raising of capital constitutes a violation of EU law.

For capital companies, meanwhile, stamp duty may represent a significant cost in the context of the capital operations they perform.

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