New requirements for listed companies regarding intercompany transactions
Tax Alert
With the publication of Law No. 50/2020, which transposes into Portuguese legislation the Directive (EU) 2017/828 of the European Parliament and of the Council, it were introduced several amendments to the Securities and Exchange Code ("Código dos Valores Mobiliários" or "CVM"), to the legal requirements governing collective investment undertakings ("Regime Geral dos Organismos de Investimento Coletivo") and to the Legal Framework of Credit Institutions and Financial Companies ("Regime Geral das Instituições de Crédito e Sociedades Financeiras") regarding listed companies long term shareholders rights.
Among other amendments introduced, the following obligations are now foreseen for listed companies in relation to certain transactions with related parties, namely:
• have an internal procedure approved by the management body, with a prior binding opinion of the supervisory body, through which it periodically checks whether the transactions carried out with related parties are within the scope of the current activity and respect market conditions, with the related parties not participating in the verification process in question.
• transactions that do not comply with these requirements will be the subject to deliberation of the management body, preceded by an opinion from the supervisory body, and public disclosure of detailed information when their value is equal to or greater than 2,5% of the company’s consolidated assets (or 2,5% of the company’s individual assets if the company does not prepare consolidated accounts), except if any exemption applies.
• the public disclosure of transactions entered into between a related party of the company and a subsidiary of the company, when they are not carried out within the scope of its current activity and under market conditions, their value is equal to or greater than 2.5% of the consolidated assets of the company and if no exemption is applicable.
• Companies are exempt from previous obligations in relation to the following transactions:
o Transactions carried out between the company and its subsidiaries, provided that they are in a controlling relationship with the company and no related party to the company has interests in that subsidiary;
o Transactions related to the directors' remuneration, or to certain elements of that remuneration;
o Transactions carried out by credit institutions based on measures designed to guarantee their stability, adopted by the competent authority in charge of prudential supervision within the meaning of European Union law;
o Transactions proposed to all shareholders on the same terms in which the equal treatment of all shareholders and the protection of the company's interests are ensured.
It should be noted that these new obligations are independent of the need to prepare the Transfer Pricing documentation process under article 63 of the CIT Code.
To clarify any question, do not hesitate to contact us.
Among other amendments introduced, the following obligations are now foreseen for listed companies in relation to certain transactions with related parties, namely:
• have an internal procedure approved by the management body, with a prior binding opinion of the supervisory body, through which it periodically checks whether the transactions carried out with related parties are within the scope of the current activity and respect market conditions, with the related parties not participating in the verification process in question.
• transactions that do not comply with these requirements will be the subject to deliberation of the management body, preceded by an opinion from the supervisory body, and public disclosure of detailed information when their value is equal to or greater than 2,5% of the company’s consolidated assets (or 2,5% of the company’s individual assets if the company does not prepare consolidated accounts), except if any exemption applies.
• the public disclosure of transactions entered into between a related party of the company and a subsidiary of the company, when they are not carried out within the scope of its current activity and under market conditions, their value is equal to or greater than 2.5% of the consolidated assets of the company and if no exemption is applicable.
• Companies are exempt from previous obligations in relation to the following transactions:
o Transactions carried out between the company and its subsidiaries, provided that they are in a controlling relationship with the company and no related party to the company has interests in that subsidiary;
o Transactions related to the directors' remuneration, or to certain elements of that remuneration;
o Transactions carried out by credit institutions based on measures designed to guarantee their stability, adopted by the competent authority in charge of prudential supervision within the meaning of European Union law;
o Transactions proposed to all shareholders on the same terms in which the equal treatment of all shareholders and the protection of the company's interests are ensured.
It should be noted that these new obligations are independent of the need to prepare the Transfer Pricing documentation process under article 63 of the CIT Code.
To clarify any question, do not hesitate to contact us.