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 21). The material cases are detailed below:
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). The Management, based on the assessment of their lawyers and tax advisors, believes that there are grounds for their position and has therefore contested these processes. Regarding the case related to 2018, the Lisbon Tax Court issued an unfavourable decision to JMH, which was subsequently appealed. As for the case related to 2017, after the Tax Court ruled against JMH, JMH appealed to the Supreme Administrative Court, which upheld JMH’s position and declared unconstitutional the respective tax law of 2017’s State Budget. On the other hand, PTA appealed to the Constitutional Court, and although that appeal was denied, the Public Prosecutor’s Office, as required, also appealed to the same Court, which appeal was admitted, and therefore JMH continues to pursue its defence;
The PTA assessed JMH, regarding 2020 and 2021, the amount of €65 thousand and corrected tax losses in the amount of €5,400 thousand. PTA considered that the amortization of brands and some donations granted would not be accepted for tax purposes. The Management, based on the assessment of our lawyers and tax advisors, believe that there are sufficient grounds to oppose the said rules.