Opinion of the Advocate General — ECLI:EU:C:2023:584
Date: 2023-07-13
Language of the case: Portuguese
Subject matter: Right of establishment;Free movement of capital;Approximation of laws;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Portugal

Translation C-340/22 – 1 
Case C-340/22 
Request for a preliminary ruling 
Date lodged: 
24 May 2022 
Referring court: 
Tribunal Arbitral Tributário (Centro de Arbitragem 
Administrativa – CAAD) (Portugal) 
Date of the decision to refer: 
24 May 2022 
Applicant: 
Cofidis 
Defendant: 
Autoridade Tributária e Aduaneira 
  
[…] 
CENTRO DE ARBITRAGEM ADMINISTRATIVA (CENTRE FOR 
ADMINISTRATIVE ARBITRATION) 
CAAD: Tax arbitration 
[…] 
Matter: additional solidarity tax on the banking sector; reference for a preliminary 
ruling. 
 
ARBITRATION RULING 
[…] 
1 COFIDIS, established at Espaço Berna, Av. de Berna, n.º 52, 6.°, 1069-046, 
Lisbon, a legal person […] (‘the applicant’), requests that an arbitration tribunal 
be constituted, […] to give a ruling on the annulment of the decision dismissing 
the action for review which it brought in relation to the notice of self-assessment 
to the additional solidarity tax on the banking sector (adicional de solidariedade 
EN 
REQUEST FOR A PRELIMINARY RULING OF 24. 5. 2022 – CASE C-340/22 
 
2  
sobre o sector bancário; ‘the ASSB’) due on the liabilities recorded in the first 
half of 2020. 
2 The applicant bases its application on the following arguments: 
The ASSB is a special tax which applies to the banking sector and which is 
different from the tax on the banking sector (contribuição do sector bancário; ‘the 
CSB’). 
The ASSB is a tax which is not subject to any exemptions and all revenue from 
the tax is allocated to the Fundo de Establização Financeira da Segurança Social 
(Social Security Financial Stabilisation Fund; ‘the FEFSS’); this infringes the 
general principle of non-allocation of revenue laid down in the Lei de 
Enquadramento Orçamental (General Budget Law; ‘the LEO’). 
Revenue from the ASSB is not specifically and separately itemised in the State 
budgets or in the supplementary budgets for 2020, and therefore it is not possible 
to determine with certainty and clarity the character, nature and classification of 
such revenue, which infringes the principle of specification of the budget 
enshrined in the LEO and in the Constitution of the Portuguese Republic (‘CRP’). 
The ASSB is based on a complex chargeable event which taxes the half-yearly 
average of the final monthly balances reflected in the accounts for the first half of 
2020. Each of those balances is independent of the others and is determined by 
means of a calculation the reference period for which begins and ends each month, 
which means that the ASSB did not enter into force until after the chargeable 
event occurred. Even taking into consideration the fact that the chargeable event 
did not occur until such time as it was possible to calculate the half-yearly 
average, in other words, at the end of the sixth month, the ASSB would also have 
entered into force once the chargeable event had occurred. In those circumstances, 
the ASSB is unconstitutional because it leads to real or true retroactive effect, 
which is prohibited by the CRP. Supposing, at most, that the chargeable event did 
not occur until 2021, the ASSB would, nevertheless, still be unconstitutional since 
it amounts to a case of sham retroactive effect, given that taxable persons in the 
banking sector had the expectation that they would not have a new tax levied on a 
chargeable event which was already liable to the CSB, without any public interest 
existing which would override that expectation, since the basis for that tax was not 
to meet needs arising as a result of the pandemic but rather to mitigate tax 
expenditure associated with the exemption of financial transactions from VAT. 
Should the ASSB be categorised as a levy, it must be noted that no State benefit 
exists which would justify, even vaguely, the applicant’s liability to the tax, in 
view of the fact that the revenue derived from it is allocated exclusively to the 
FEFSS, the sole purpose of which is to fund the protection mechanisms 
guaranteed by social security and intended for natural persons resident in Portugal, 
which means that the applicant, in its capacity as a branch of a foreign bank, will 
never be eligible for social security benefits. 
COFIDIS 
 
3 
If the ASSB is categorised as a tax, it is important to point out that its structure 
infringes the principle of ability to pay. That is due to the fact that the objective 
basis of assessment for the tax includes the main supplements to the balance sheet 
and the tax is applied in a non-equitable manner to a particular category of taxable 
persons who ultimately bear, at sectoral level, a burden which should be imposed 
on all taxpayers, since the tax is levied only on the banking sector despite the fact 
that other sectors exist which also benefit from the VAT exemption and which 
also contribute to that tax expenditure. 
In accordance with Articles 18 TFEU and 49 TFEU, any restrictions on the 
freedom of establishment of nationals of an EU Member State in the territory of 
another Member State are prohibited, while Article 54 TFEU provides that 
companies or firms formed in accordance with the law of a Member State and 
having their registered office, central administration or principal place of business 
in a Member State are to be treated in the same way as natural persons who are 
nationals of Member States. The freedom of establishment prohibits any national 
measures liable to impede or render less advantageous the formation and 
operation of undertakings and the creation of agencies, branches or subsidiaries in 
a Member State by companies which have their registered office or are established 
(resident) in another Member State. 
The ASSB is levied on liabilities after deduction, as the case may be, of the 
liability items which form an integral part of own funds and deposits covered by 
the Fundo de Garantia de Depósitos (Deposit Guarantee Fund) and the Fundo de 
Garantia do Crédito Agrícola Mútuo (Mutual Agricultural Credit Guarantee Fund) 
(or another equivalent fund). Branches do not have legal personality and carry out 
directly, in whole or in part, operations inherent in the activity of the non-resident 
credit institution of which they form part, which means that they have no capital 
or funds of their own, according to how those items are treated and entered in the 
accounts for the purposes of credit institutions resident in Portugal. 
In accordance with the rules governing the ASSB, in the case of branches, the 
relevant liabilities for the purposes of application of that tax include all debts to 
the parent company and its other branches, such that all those debts are treated as 
debts to third parties, without any distinction whatsoever, and are of no relevance 
to the free capital. Even if it were accepted that a branch could recognise as its 
own the capital allocated to it, the fact is that such branches would continue to 
suffer discriminatory treatment when compared with resident credit institutions, 
given that there is a broad set of items which ‘in accordance with the applicable 
accounting rules’ could be ‘recognised as own funds’, which are present in 
resident credit institutions but not in branches and which the latter do not have 
because they may be issued only by entities with legal personality, including, inter 
alia, convertible bonds, profit-sharing bonds, redeemable preference shares or 
contingent convertible bonds. 
Really, the legal rules governing the ASSB preclude branches of non-resident 
credit institutions from deducting own funds from liabilities, thereby placing them 
REQUEST FOR A PRELIMINARY RULING OF 24. 5. 2022 – CASE C-340/22 
 
4  
at a disadvantage as compared with resident branches which are taxed on their 
‘net’ liabilities and not on their ‘gross’ liabilities. Since branches and resident 
credit institutions are in an objectively comparable situation and no overriding 
reasons in the general interest exist which would justify the discrimination 
concerned, it must be concluded that the ASSB is incompatible with the freedom 
of establishment. 
Furthermore, Directive 2014/59/EU of the European Parliament and of the 
Council of 15 May 2014 establishing a framework for the recovery and resolution 
of credit institutions and investment firms laid down general criteria at European 
level for setting and calculating contributions from credit institutions to national 
financing arrangements for resolution measures and to the financing of the Single 
Resolution Fund. The ASSB is a sui generis tax which is not provided for in the 
Directive and which breaches the European harmonised rules as regards the 
system of taxation of the banking sector, the resolution measures and the 
financing of those measures though the taxation of liabilities in that sector. And 
that is aside from the fact that the levying of the ASSB on the applicant leads to 
the irreparable overlapping of taxation which is contrary to the FEU Treaty and 
Directive 2014/59/EU, in particular because it creates a restriction on access to the 
market through infringement of the fundamental freedoms. Firstly, because the 
EU legislature excluded the option for Member States to impose levies on 
branches of banks established in other Member States, laying down the principle 
that such entities must be taxed on the basis of their registered office and not the 
source of their revenue. Secondly, because the applicant’s liabilities are subject to 
double taxation: they are taxed twice in Portugal as a result of application of the 
CSB and the ASSB, and again in France by means of the contributions provided 
for in the Directive. 
Lastly, the ASSB breaches the principle of free, equal and undistorted 
competition, which underlies European Union law, since credit institutions which 
are resident in other Member States and which have a branch in Portugal bear an 
additional levy which is detrimental to their position in the European market and 
undermines the harmonisation objectives of Directive 2014/59/EU. 
3 The defendant […] lodged a defence […] seeking a declaration that the 
application for arbitration is inadmissible, based on the arguments outlined below: 
The ASSB is an indirect tax the purpose of which is to offset the exemption from 
VAT of most financial transactions and it is inextricably linked to the historical 
context of the COVID-19 pandemic for the purposes of offsetting the costs of 
responding to the crisis created by the pandemic. The allocation of the revenue 
from the ASSB to the FEFSS has its legal basis in the Lei de Bases da Segurança 
Social (Framework Law on Social Security) and in the LOE, which provides, by 
way of exception to the principle of non-allocation, that tax revenue is to be 
ringfenced for the funding of social security and its different systems and sub-
systems. 
COFIDIS 
 
5 
The ASSB was adopted in the context of the Supplementary Budgets for 2020, 
including the estimate of the corresponding revenue in statement X – Social 
Security Revenue by economic classification, heading 06 – Current Transfers – 
Statement, such that the tax rate is duly identified and respects the principle of 
annuality. 
The chargeable event which creates liability to the ASSB is the time of approval 
of the accounts and not the end of the financial year. The important point as far as 
the prohibition of retroactive taxation is concerned is not the time when the tax is 
calculated but rather the time when the act occurs which gives rise to payment of 
the tax, because that is the act which creates the tax liability. According to the 
case-law of the Supremo Tribunal Administrativo (Supreme Administrative Court, 
Portugal) on the CSB, it is not a question of a continuous chargeable event but 
rather a chargeable event which occurs in the legal system when the liabilities are 
approved and in the year in which that approval occurs (even though those 
liabilities correspond to the financial year preceding the year in which they are 
approved). That being so, when the rules governing the ASSB entered into force, 
the event giving rise to payment of the tax had not yet occurred, meaning that 
there is no retroactive application. 
The ASSB is not a discriminatory tax on the grounds that it does not affect other 
sectors of activity that are exempt from VAT. Unlike what occurs in relation to 
most VAT exemptions, which are based on reasons of economic, social and 
environmental policy, in the case of financial services an exemption from VAT is 
due to the difficulty involved in determining the basis of assessment for a 
significant number of the transactions concerned. That exemption is offset in part 
by the taxation of documented legal transactions (imposto do selo), although the 
rates of that tax are substantially lower than the average rate of VAT and its scope 
excludes other transactions in which credit institutions are involved, in particular 
financial transactions and financial leasing. The VAT exemptions constitute 
exceptions to the principle of equality which entail a loss of tax revenue, distortion 
and inequality between operators but also inequality in the distribution of fiscal 
effort. Thus, the introduction of the ASSB serves the aim of fiscal justice and not 
the aim of penalisation of the banking sector. 
The rules governing the ASSB do not lead to discriminatory treatment based on 
the nationality of credit institutions and therefore those rules do not infringe the 
freedom of establishment laid down in Articles 18 TFEU, 26 TFEU and 49 TFEU. 
Branches of credit institutions resident in other Member States are not prohibited 
from deducting their own funds, for such branches may categorise the funds 
transferred to them by their parent companies as liabilities or as own funds on the 
basis of whether, inter alia, they carry interest or are permanent in nature. 
Branches and other taxable persons liable for the ASSB are subject to the same 
rules on accounting and on the determination of the basis of assessment for the 
REQUEST FOR A PRELIMINARY RULING OF 24. 5. 2022 – CASE C-340/22 
 
6  
tax, irrespective of their nationality, so that the non-deduction of own funds, 
where the branch does not have such funds, does not lead to different treatment. 
The ASSB is not a means of financing resolution measures or the Single 
Resolution Fund, since it does not fall within the scope of Directive 2014/59/EU; 
this explains why the legislature disregarded the European legislative framework 
flowing from that Directive and its transposition into national law. Given that the 
ASSB has no connection with national financing arrangements for resolution 
measures, no double taxation situation arises. 
4 The relevant facts for the purposes of assessment of the present case are set out 
below: 
a) The applicant is the branch in Portugal of Cofidis, S.A., a French credit 
institution having its registered office and effective management in France. 
b) Since 1996, Cofidis, S.A. has been present in Portugal through the applicant. 
c) On 11 December 2020, the applicant carried out a self-assessment to the 
ASSB in relation to the annual average of the final monthly liability balances 
reflected in the accounts for the first half of 2020, and it filed the appropriate 
return using standard form 57. 
d) After filing the return, an assessment notice was issued for an amount of 
ASSB equal to EUR 364 229.67, which was paid in full by the applicant. 
e) On 5 January 2021, the applicant submitted an application for review in 
relation to the ASSB self-assessment notice. 
f) On 21 May 2021, the divisional head of the Central Department of the Tax 
Justice Division of the Major Taxpayers Unit gave a decision dismissing that 
application in the context of his delegated powers 
g) On 23 August 2021, the applicant lodged this application for arbitration. 
5 A number of the complaints put forward by the applicant against the ASSB self-
assessment notice are based on an assessment of the compatibility of that tax with 
European Union law, in particular with the fundamental freedom of establishment 
enshrined in Article 49 TFEU and with Directive 2014/59/EU of 15 May 2014. 
6 The ASSB was established by Article 18 and Annex VI of Lei n.º 27-A/2020, de 
24 de Julho, que aprovou o Orçamento Suplementar para 2020 (Law No 27-
A/2020 of 24 July approving the supplementary budgets for 2020). 
That tax was created with the aim of strengthening the financing arrangements for 
the social security system through the allocation to the FEFSS of the revenue 
obtained through collection of the tax, as is apparent from Article 1(2) and 
Article 9 of Annex VI. 
COFIDIS 
 
7 
In accordance with Article 1(2) of Annex VI, the creation of the ASSB and its 
exclusive application to the banking sector was justified as a form of offsetting the 
exemption from VAT of most financial services and transactions, thereby placing 
the tax burden borne by the financial sector on an equal footing with that levied on 
other sectors. 
7 Pursuant to Article 2(1) of Annex VI, the following are taxable persons liable to 
the ASSB: (a) credit institutions resident in Portugal, (b) subsidiaries in Portugal 
of credit institutions resident in other States, and (c) branches in Portugal of credit 
institutions resident in other States. 
For the purposes of application of the ASSB, ‘credit institutions, subsidiaries and 
branches’ mean the entities defined in points u), w) and ll) of Article 2A of the 
Regime Geral das Instituições de Crédito e Sociedades Financeiras (General Rules 
on Credit Institutions and Financial Companies), adopted as an annex to Decree-
law No 298/92 of 31 December. 
8 As regards the objective scope, Article 3 of Annex VI stipulates that the ASSB is 
levied on the adjusted liabilities and the notional value of off-balance sheet 
derivative financial instruments, both of which are determined for accounting 
purposes at the end of the financial year. That article provides, inter alia, as 
follows: 
Article 3 
Objective scope 
The additional solidarity tax on the banking sector is levied on: 
a) liabilities calculated and approved by taxable persons after deduction, as 
appropriate, of liability items which form an integral part of own funds, deposits 
covered by the guarantee of the Deposit Guarantee Fund, the Mutual Agricultural 
Credit Guarantee Fund or a deposit guarantee scheme officially recognised in 
accordance with Article 4 of Directive 2014/49/EU of the European Parliament 
and of the Council of 16 April 2014 on deposit guarantee schemes or considered 
to be equivalent pursuant to Article 156(1)(b) of the General Rules on Credit 
Institutions and Financial Companies, within the limits stipulated in the 
applicable legislation, and deposits made in the Central Bank by agricultural 
credit banks belonging to the integrated agricultural credit scheme in accordance 
with Article 72 of the Regime Jurídico do Crédito Agrícola Mútuo e das 
Cooperativas de Crédito Agrícola (Legal Rules governing Mutual Agricultural 
Credit and Agricultural Credit Cooperatives), adopted as an annex to Decree-law 
No 24/91 of 11 January; 
b) the notional value of off-balance sheet derivative financial instruments 
determined by taxable persons. 
Article 4 of Annex VI contains the following definition of liabilities: 
REQUEST FOR A PRELIMINARY RULING OF 24. 5. 2022 – CASE C-340/22 
 
8  
Article 4 
Determination of the basis of assessment 
1 – For the purposes of Article 3(a),’ liabilities’ shall mean all items entered in 
the balance sheet which, irrespective of their form and type, represent a debt to 
third parties, with the exception of the following: 
a) items which, in accordance with the applicable accounting rules, are treated 
as own funds; 
b) liabilities connected with the recognition of obligations derived from defined 
benefit schemes; 
c) deposits covered by the Deposit Guarantee Fund and the Mutual 
Agricultural Credit Guarantee Fund, only to the extent that they are covered by 
those funds; 
d) liabilities derived from the valuation of derivative financial instruments; 
e) deferred revenue, disregarding any such revenue corresponding to debit 
transactions; and 
f) liabilities in respect of assets which have not been derecognised in 
securitisation transactions. 
2 – for the purposes of Article 3(a), the following rules shall apply: 
a) the value of own funds, including tier 1 own funds and tier 2 own funds, 
includes the positive items which are entered in the accounts for the purposes of 
their calculation in accordance with Part II of Regulation (EU) No 575/2013 of 
the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending 
Regulation (EU) No 648/2012, taking into account the transitional provisions laid 
down in Part X of that Regulation, which, at the same time, come within the 
concept of liabilities as defined in the previous paragraph; 
b) deposits covered by the guarantee of the Deposit Guarantee Fund, the 
Mutual Agricultural Credit Guarantee Fund or a deposit guarantee scheme 
officially recognised in accordance with Article 4 of Directive 2014/49/EU of the 
European Parliament and of the Council of 16 April 2014, or considered to be 
equivalent pursuant to Article 156(1)(b) of the General Rules on Credit 
Institutions and Financial Companies, within the limits stipulated in the 
applicable legislation, shall be taken into account only up to the amount actually 
covered by those Funds. 
9 Accordingly, the question that arises in connection with the compatibility of the 
ASSB with the fundamental freedom of establishment enshrined in Article 49 
COFIDIS 
 
9 
TFEU concerns whether taxable persons may deduct from their liabilities, as 
determined and approved, the value of own funds and certain liability items which 
they take into account for the purposes of the calculation of tier 1 and tier 2 own 
funds, in accordance with the provisions of Part II of Regulation (EU) 
No 575/2013 of the European Parliament and of the Council of 26 June 2013, an 
option which is open to resident credit institutions but not to branches of non-
resident credit institutions, in so far as they correspond to instruments which may 
be issued only by entities with legal personality. 
10 As regards compatibility with Directive 2014/59/EU of 15 May 2014, it is 
necessary to determine, essentially, whether it is permissible for branches of 
financial institutions resident in other EU Member States to be taxed in Portugal 
under a national scheme like the ASSB, which is levied on adjusted liabilities and 
the notional value of off-balance sheet derivative financial instruments and the 
revenue from which is not allocated to national financing arrangements for 
resolution measures or to the financing of the Single Resolution Fund. 
REFERENCE FOR A PRELIMINARY RULING 
11 Consequently, uncertainties have arisen in these proceedings concerning the 
interpretation of provisions of European Union law on which it does not appear 
that the Court of Justice of the European Union has already given a specific 
ruling. 
The disagreements between the parties concerning the correct interpretation of 
European Union law are well known and the applicant has also requested, in the 
alternative, that questions be referred to the Court of Justice for a preliminary 
ruling. 
The Court of Justice has repeatedly and uniformly held that arbitration tribunals 
may submit references for a preliminary ruling on the interpretation of EU law. In 
the absence of an act clair and where such questions are necessary for the proper 
determination of the case, a reference for a preliminary ruling must be made, 
regard being had to the fact that the decisions of arbitration tribunals cannot be the 
subject of an ordinary appeal concerning the substance of the application. 
It follows in addition from the case-law of the Court of Justice that also in cases 
heard by national courts in which the compatibility of provisions of national law 
with provisions of EU law is called into question the Court of Justice continues to 
have jurisdiction to provide the national courts with the criteria for interpretation 
of EU law that they need in order to carry out a proper interpretation and 
assessment of such compatibility. 
12 In the light of the foregoing considerations, this Tribunal decides to stay the 
proceedings and, in accordance with Article 267 TFEU and Article 272(1) of the 
[Código de Processo Civil (Code of Civil Procedure)], to refer the following 
questions to the Court of Justice for a preliminary ruling: 
REQUEST FOR A PRELIMINARY RULING OF 24. 5. 2022 – CASE C-340/22 
 
10  
1 – Does Directive 2014/59/EU of 15 May 2014 preclude the taxation in a 
Member State of branches of financial institutions resident in another Member 
State of the European Union, pursuant to legislation such as the Portuguese 
national rules governing the additional solidarity tax on the banking sector, which 
is levied on the adjusted liabilities and notional value of off-balance sheet 
derivative financial instruments and from which the revenue collected is not 
allocated to national financing arrangements for resolution measures or to the 
financing of the Single Resolution Fund? 
2 – Does the freedom of establishment enshrined in Article 49 TFEU preclude 
national legislation such as that laid down in the Portuguese national rules 
governing the additional solidarity tax on the banking sector, which permits the 
deduction from the liabilities, as determined and approved, certain liability items 
which are taken into account for the purposes of the calculation of tier 1 and tier 
2 own funds, in accordance with the provisions of Part II of Regulation (EU) 
No 575/2013 of the European Parliament and of the Council of 26 June 2013 on 
prudential requirements for credit institutions and investment firms and amending 
Regulation (EU) No 648/2012, taking into account the transitional provisions laid 
down in Part IX of that Regulation, which may be issued only by entities with 
legal personality, in other words, which may not be issued by branches of non-
resident credit institutions? 
[…] 
Lisbon, 24 May 2022. 
The arbitrators, 
Carla Castelo Trindade 
Armando Oliveira 
Arlindo José Francisco