Contingent liabilities
There are several relevant disputes pending resolution, for which the Board of Directors, supported by the opinion of its lawyers and tax advisors considers that there is enough ground for its appeal in court, assesses the outcome of each proceedings, and for those where the Board estimates that a future cash outflow may occur a provision is taken (note 20). The material cases are detailed below:
- The Portuguese Tax Authorities (PTA) have informed JMH to restate the dividends received, amounting to €10,568 thousand, from its subsidiary in the Madeira Free Zone in 2004 and 2005, considering them as interest for tax purposes. According to the PTA the said income should be subject to CIT as opposed to the dividends received that are exempt. This correction originated a tax amount in dispute of €3,065 thousand. In 2023, the Central Administrative Court has ruled in favour of JMH regarding the total amount of the above both periods;
- The PTA have claimed €989 thousand of CIT from JMH regarding an indemnity paid by the Company due to an agreement reached in arbitration court, and which the Tax Authorities considered as dealing with a payment to an entity subject to a more favourable tax regime, and therefore not accepted for tax purposes. The Board of Directors does not consider the report of the Tax Authorities to have a legal basis or validity, and has challenged it. In 2023, the Lisbon Tax Court ruled in favour of JMH regarding the total amount, closing the process.
- The PTA have informed JMH that they do not accept the capital losses associated with a liquidation of one company and the sale of another, in 2007, amounting to €24,660 thousand, which generated a correction on the Company’s tax losses in the estimated amount of €6,800 thousand. Due to favourable decisions to JMH regarding corrections of losses from previous years, the amount currently in dispute is €4,939 thousand. In 2019, the Lisbon Tax Court ruled in favour of JMH, having the Tax Authorities appealed the said decision to a higher court;
- The PTA assessed, regarding 2016 to 2019, JMH (as the head of the Tax Group in which Recheio SGPS is included), in the amount of €30,026 thousand, related to the taxation in CIT of ¼ of the results generated in internal operations of the Tax Group, in each of these years. As explained in the 2018 Group Consolidated Annual Report (and previous years), this assessment results from the application of the transitional rule included in the Portuguese State Budget of 2016 (and then in the next three Budgets). Based on the assessment of our lawyers and tax advisors, we firmly believe that there are sufficient grounds to oppose the said rules;
- The PTA assessed JMH, regarding 2020, the amount of €32 thousand and corrected tax losses in the amount of €3,200 thousand. PTA considered that the amortization of brands and some donations granted would not be accepted for tax purposes. The Board of Directors, based on the assessment of our lawyers and tax advisors, believe that there are sufficient grounds to oppose the said rules.