Delegate: Wouldn’t the company distribute the cash prior to the sale?
Training course provider: I’m going to say no, because I’ve been in this corporate finance business a long time. Very good question. Very good question. I’m going to say no. The question was: realistically wouldn’t this company distribute this cash prior to doing the deal? I know nothing (I know we’ve got some tax people in the room), I know nothing about corporate tax here in Portugal. Why do I think the answer is no? Why wouldn’t the company distribute this cash prior to doing the deal? Let me ask you a different question, and I need a tax expert now. What’s the tax on dividends in Portugal?
Delegate: Actually in Portugal that should not be a problem since you’re a holding company you pay no taxes.
Training course provider: So you can distribute that cash out without paying…
Delegate: Depending on the time of the year…
Training course provider: OK, alright, a very long way of answering “Why wouldn’t you distribute that cash out?” In Portugal… in Portugal, no reason why you wouldn’t distribute that cash out. It depends on the tax rate… the answer is it depends on the tax rate dividends versus capital. And what I’m hearing from you guys is dividends versus capital is the same tax rate.
Delegate: What dividends are sent to some entities yes.
Training course provider: OK. Dividended out to a corporate entity if it’s a corporate who is selling.
Delegate: It depends on the percentage of the stake and the time of the holding period…
Training course provider: And we’re knowing now why these tax people earn all their money because they know all this sort of stuff. What you have to do is look at the shape of the transaction, it needs lots of advice. Does that advice come cheap? Because there’s lots of value involved isn’t there? You’re saving people big tax bills. What we need to look at is the structure of the transaction, we need to look at the tax on that 8m dividended out, versus if we sell. Sometimes where the capital gains tax rate is lower than the dividend… the tax on dividends… then you’d go that route. It depends on the advice from your tax lawyer. Great people to have on board.
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