The duality of the GAARs of Portugal and Angola
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The duality of the GAARs of Portugal and Angola

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Tax planning

João Riscado Rapoula and Luís Maria of Vieira de Almeida & Associados conduct an in-depth analysis of the Portuguese and Angolan general anti-abuse rules, with a particular focus on the similarities and differences

The Angolan GAAR

Before the approval of Law No. 21/20, of July 9, the Angolan General Tax Code only set forth a (simple) provision that stated that “the ineffectiveness of legal acts or arrangements does not prevent taxation at the time it should legally occur if the economic effects intended by the parties have already been produced, unless declared legally or judicially.” In other words, the Angolan General Tax Code did not provide for a general anti-abuse rule (GAAR), leaving the door open for potentially abusive tax planning schemes by taxpayers.

The current version of the Angolan GAAR, provided for in Article No. 26 of the General Tax Code, states that “actions that have been carried out, under any circumstances, with the aim of obtaining a tax advantage through the abuse of legal forms, taking into account all the relevant facts and circumstances, are disregarded for tax purposes, and taxation is carried out in accordance with the rules applicable to business or acts that correspond to the substance or economic reality and do not produce the intended tax advantages.”

In addition, the Angolan General Tax Code clarifies that an action is considered to be an abuse of a legal form “when it is not carried out for valid economic reasons that reflect the economic substance of the act”.

The Portuguese GAAR

By comparison with Portuguese legislation (which remains an important reference point due to the historical ties between the countries), it is important to mention that Portugal also had a legislative amendment to its GAAR set forth in Article No. 38 of the General Tax Law that was due to the transposition into Portuguese legislation of the First Anti-Tax Avoidance Directive by Law No. 32/2019, of May 3.

The previous version of the Portuguese GAAR read: “Actions or legal transactions that are essentially or principally aimed, by artificial or fraudulent means and with abuse of legal forms, to reduce, eliminate or defer taxes that would be due as a result of facts, acts or legal transactions with the same economic purpose, or aimed at obtaining tax advantages that would not be achieved, in whole or in part, without the use of such means, in which case taxation is carried out in accordance with the rules applicable in their absence and the aforementioned tax advantages are not produced.”

Currently, the Portuguese GAAR sets forth that “constructions or series of constructions that, having been carried out with the main purpose or one of the main purposes of obtaining a tax advantage that frustrates the object or purpose of the applicable tax law, are carried out with abuse of legal forms or are not considered genuine, taking into account all the relevant facts and circumstances, are disregarded for tax purposes, and taxation is carried out in accordance with the rules applicable to business or acts that correspond to the substance or economic reality and the intended tax advantages are not produced.”

Under the Portuguese GAAR regime, a construction or series of constructions is not genuine if it is not performed for valid economic reasons that reflect its economic substance.

Similarities and differences

With that said, there are some similarities between the Portuguese and Angolan GAARs, notably regarding the requirement for a valid economic reason that should reflect the substance of the actions and arrangements, and that both determine that taxation is carried out in accordance with the rules applicable to business or acts that correspond to the substance and/or economic reality of the acts and arrangements.

The main difference lies in the fact that the Portuguese GAAR expressly tackles “constructions or series of constructions”, as opposed to the Angolan GAAR, which mentions “actions that have been carried out”, so one may argue that the Portuguese GAAR wording is most suitable to approach any type of behaviour by the taxpayer, regardless of its nature, as well as step-by-step transactions.

Therefore, it is clear in the Portuguese law that the core of the GAAR’s substantial requirement lies in the economic element (“a construction”), while the Angolan law is based on a legal element (“an act or an action”). The Portuguese GAAR is based on the principle of substance over form, which means that regardless of the act or business and the cause, in Portugal, the tax authorities will never be restricted by a particular legal classification. Thus, a given legal act can be taxed according to what its true economic reality corresponds to.

This being said, the authors take the view that the current wording of the Angolan GAAR may have similarities to elements of the previous and the current wording of the Portuguese GAAR.

The application of the Angolan GAAR is in a very incipient and still ‘legally restricted’ phase. Nonetheless, it is not expected that the application of the Angolan GAAR will diverge from the best practices adopted around the world in matters related to BEPS, since Angola has been a member of the BEPS project since 2016. Many OECD member countries – such as Portugal – have shifted their approach to focus more on the economic reality behind the actions and not so much on the legal actions that are carried out, seeking to clarify the interpretation of the GAAR, and standardise and simplify its application. Regarding this matter, Angola still has a long way to go.

Nevertheless, given the very proactive approach of the Angolan General Tax Authority (AGT) during recent times, the authors believe that in the event of application of the GAAR, the AGT may resort to the fact that the wording of the GAAR mentions “actions”, as a plural, and may consider that it is not bound to look solely at one act or arrangement as opposed to a whole transaction, even if it is carried out in the steps as mentioned above and reflects some kind of abuse of legal forms.

Final thoughts on the Portuguese and Angolan GAARs

All in all, despite their similarities, the Portuguese and the Angolan GAARs are not quite the same; however, their application may, in the authors’ understanding, be subject to the same principles and arguments, as the Angolan GAAR successfully sets forth:

  • A means element – acts that have been carried out, under any circumstances;

  • A final purpose element – acts carried out with the aim of obtaining a tax advantage;

  • An intellectual element – the acts have been carried out for the purpose, or one of the main purposes, of obtaining a tax advantage;

  • A legal element – the GAAR is only applied to cases where the legislator’s intention is clear to tax a certain fact; and

  • A penalty element – the ineffectiveness of legal acts or arrangements, as well as the fact that their effects are disregarded for tax purposes and there is a reconstruction of the acts of identical economic substance and taxation in accordance with the applicable tax legislation.

The challenge ahead will be to ascertain what the AGT’s position will be regarding the criteria and grounds for the application of Angola’s GAAR.

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