Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Nina Aguiar and Nuno Pombo, designated by the Ethics Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby agree as follows:
ARBITRAL DECISION (consult full version in PDF)
I – REPORT
On 12 March 2018, A..., holder of TIN..., and B..., residents in ..., ..., ..., ..., submitted a request for the constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the declaration of illegality of the personal income tax (IRS) assessment act relating to the year 2014, corresponding to assessment notice No. 2017–..., in the amount of € 68,965.94.
To support their request, the Claimants allege, in summary, that:
The exemption provided for in No. 4, Article 2 of the Personal Income Tax Code (CIRS) is not applicable only to compensations for patrimonial damages arising from the termination of employment contracts;
Such interpretation is restrictive and has no minimal correspondence in the letter of the law, and is therefore legally inadmissible;
The compensations and indemnities provided for in the Labour Code do not constitute compensations for patrimonial damages, being calculated according to the seniority of workers;
The IDC (indemnification for contractual severance) that the Claimant received is covered by the legal exemption provided;
The act subject to this arbitral action is illegal and as such should be declared for the proper legal effects, under penalty of violation of the Constitutional principles of typicality and legality (Articles 165 and 103 of the Portuguese Constitution).
On 14-03-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).
The Claimants did not appoint an arbitrator; therefore, pursuant to the provisions of subparagraph a) of No. 2 of Article 6 and subparagraph a) of No. 1 of Article 11 of the RJAT, the President of the Ethics Council of the CAAD designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable time limit.
On 04-05-2018, the parties were notified of these designations and did not express any intention to refuse any of them.
In accordance with the provision of subparagraph c) of No. 1 of Article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 24-05-2018.
On 28-06-2018, the Respondent, duly notified for this purpose, submitted its response defending itself by way of objection.
Notified to submit documentation, as protested in their initial petition, the Claimants presented a written pleading commenting on the Respondent's response.
The written pleading in question was considered impertinent, since its content did not interfere with procedural conduct; in light of the principle of preservation of acts, the written pleading was permitted to remain in the case file.
Pursuant to subparagraphs c) and e) of Article 16 and No. 2 of Article 29, both of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was waived.
Having been granted a time limit for the presentation of written arguments, these were presented by the parties, commenting on the evidence produced and reiterating and developing their respective legal positions.
It was indicated that the final decision would be notified by the deadline set in Article 21/1 of the RJAT.
The Arbitral Tribunal is substantively competent and is regularly constituted, in accordance with Articles 2, No. 1, subparagraph a), 5 and 6, No. 1 of the RJAT.
The parties have standing and legal capacity, are legitimately represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.
The proceedings do not suffer from any nullities.
Thus, there is no obstacle to the assessment of the case.
Having considered all of the foregoing, it is necessary to render:
II. DECISION
A. FACTUAL MATTER
A.1. Facts Established as Proven
Claimant A..., born on 8 October 1955, exercised from 06 May 1977 the functions of Air Traffic Controller (CTA), subject to an individual employment contract regime, with the then General Directorate of Civil Aviation, whose functions are now performed by the company "C..." (C...).
Under Article 27 of Decree-Law No. 503/75, of 13 September, the age limit for the exercise of operational functions by Air Traffic Controllers was 52 years, a situation that was subsequently altered by Decree-Law No. 154/95, of 1 July, raising it to 55 years, and by Law No. 5/2009, of 29 January, raising it to 57 years, and later by Decree-Law 50/2017, of 24 May, raising it to 58 years.
When the current Claimant reached the operational age limit, the employment relationship in question did not terminate.
The current Claimant continued to exercise the functions of Air Traffic Controller, in accordance with Clause 11 of the Company Agreement concluded between C... and SINCTA, which provided as follows:
"1 — The CTAs admitted to the Company up to 31 December 1994, who on the date of entry into force of this Agreement had already made themselves available to extend functions between the ages of 52 and 55, shall be entitled to an indemnification for contractual severance paid at the moment such severance occurs, the amount of which shall be calculated taking into account the following formula:
IDC = € 2,696.30 × number of months of contractual extension counted between the date on which the CTA completed 52 years of age and the date on which functions ceased
IDC = indemnification for contractual severance
2 — The granting of the indemnification for contractual severance provided for in the preceding number shall apply equally to CTAs who have entered the Company's staff rolls between 1 January 1995 and 30 September 2007 and who have at least 20 years of service on the date they reach 52 years of age.
3 — In the case of CTAs referred to in the preceding number who do not have 20 years of service on the date they reach 52 years of age, they shall be assigned an IDC value calculated by the ratio between their respective service time and the aforementioned 20 years of service.
4 — CTAs admitted to the Company's staff by 30 September 2007, as well as those who entered between 30 September 2007 and the day before the date of entry into force of the legal instrument referred to in No. 1 of Clause 8, that is, 2 February 2009, and which set 57 years as the age limit for the exercise of operational functions, who make themselves available for the extension of such functions until the aforementioned age limit, shall also have the right, from the age of 55, to receive the indemnification for contractual severance, in accordance with the terms provided for in No. 1.
5 — CTAs referred to in Nos. 1, 2 and 4 of this Clause shall equally have the right to receive the indemnification for contractual severance (IDC), who have or come to make themselves available for the exercise of functions of organic management, instruction, training or advisory functions until the age of 65.
6 — The provisions of the preceding number shall also apply to CTAs referred to in No. 3 of this Clause, in accordance with the terms and conditions provided therein.
7 — The provisions of No. 4 shall apply equally to CTAs who come to enter the Company's staff rolls on a date after the date of entry into force of the legal instrument referred to in No. 1 of Clause 8, that is, 2 February 2009.
8 — CTAs referred to in the preceding number, and to whom 57 years is applied as the age limit and who make themselves available for the exercise of functions of organic management, instruction, training or advisory functions until the age of 65, shall have the right, from 57 years of age, to receive the corresponding indemnification for contractual severance.
9 — In the event of death of a CTA, the credit emerging from the indemnification for contractual severance due shall be paid to the respective heirs, according to the number of months of actual exercise of extension of functions that occurred.
10 — The value of the indemnification for contractual severance, provided for in No. 1, as well as the value of the advance referred to in No. 12, shall be annually updated, as of 1 July of each year, based on the average inflation rate published by INE.
11 — In the calculation of IDC values provided for in this Clause, all and any absences from work shall be deducted, except for vacation days and rest days.
12 — Should the CTA wish, they may request quarterly advances from the Company in the amount of € 8,088.90, on account of the indemnification for contractual severance referred to in the preceding numbers, this option being subject to being changed at the request of the CTA, once only.
13 — CTAs who have declared their adhesion to the extension of operational functions between ages 55 and 57, in accordance with No. 4 of Clause 33, and who fail to ensure the inherent actual performance of work, shall be subject to a pecuniary penalty in the amount of € 8,088.90, which shall be annually updated based on the average inflation rate published by INE as of 1 July of each year.
14 — The pecuniary penalty referred to in the preceding number shall not be applied should the failure to provide actual work have been motivated by reasons of health.
15 — The right to receive IDC for CTAs provided for in No. 1 of this Clause is conditioned upon verification, in January of each year, of an accumulated percentage of adhesions of not less than 40, which, if not occurring, determines the suspension of the provisions of No. 1, for renegotiation, while the advances provided for in No. 12 continue to be paid."
Between the moment the current Claimant reached the operational age limit and June 2014 (the moment when they permanently terminated their employment relationship with C...), the Claimant received and earned their monthly remuneration for work performed for C....
In 2014, the employment relationship that united the current Claimant and C... permanently terminated.
On the date the current Claimant's employment relationship terminated, they had exceeded the operational age limit, thereby meeting the requirements provided for in the Company Agreement that gave them the right to receive compensation.
After that date (2014), the current Claimant no longer had any other type of contractual relationship, of a professional or business nature, with C..., in particular in the 24 months following the termination of the employment bond, nor subsequently.
The current Claimant received the aforementioned compensation, in the amount of € 175,967.41, on 25-06-2014.
C... did not subject that amount, for purposes of taxation in IRS (including the additional tax), to withholding at source, nor did it include it in the annual tax return for the 2014 tax year, sent to the beneficiary.
During the year 2014, the current Claimant earned, paid by C..., with NIPC..., a total amount of € 242,070.53, which was subject to withholding at source in IRS in the amount of € 26,582.00, as well as withholding of IRS additional tax in the amount of € 993.00.
The Claimants submitted, on 31-05-2015, the annual tax return Form 3 for IRS, with No...., relating to the year 2014, having recorded as income from dependent work (in accordance with the annual tax return sent by the employer entity), paid by C..., the sum of € 66,103.12, with the aforementioned deductions.
Since the amount of € 175,967.41 was not included, the Claimants were notified by the Tax Office of ..., on 16-10-2017, to replace the 2014 IRS return, in order to include in Annex A (income from dependent work) the aforementioned amount of € 175,967.41, in the following terms:
On 27-10-2017, the Claimants proceeded as notified, having submitted the replacement return with identification....
On the same date, they also sent an exposition to the Tax Office, in the form of a right to be heard, in which they stated "they are proceeding with the presentation of the replacement return not because they believe the Tax Authority is correct, on the contrary, it is the Claimant's intention to judicially challenge such decision, but solely and only so as not to be further penalized with the payment of additional amounts".
The replacement return resulted in assessment No. 2017..., which resulted in tax payable in the amount of € 64,298.34, plus € 6,200.82 for compensatory interest, € 957.85 for compensatory interest for improper receipt, and also € 10,790.65, relating to the reversal of the previous assessment, totaling € 82,247.66.
The assessment was issued on 08-11-2017, with the Claimants making payment within the voluntary payment period on 17.12.2017.
A.2. Facts Established as Not Proven
With relevance to the decision, there are no facts that should be considered as not proven.
A.3. Reasoning for the Proven and Not Proven Factual Matter
Regarding the factual matter, the Tribunal need not pronounce on everything that was alleged by the parties; rather, it falls upon it to have the duty to select the facts that matter for the decision and to distinguish the proven matter from the unproven matter (cf. Article 123, No. 2 of the Code of Tax Procedure and Process (CPPT) and Article 607, No. 3 of the Code of Civil Procedure (CPC), applicable by virtue of Article 29, No. 1, subparagraphs a) and e), of the RJAT).
Thus, the facts relevant for the judgment of the case are selected and delimited according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (cf. former Article 511, No. 1 of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29, No. 1, subparagraph e), of the RJAT).
Thus, taking into account the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary evidence and the administrative procedure file attached to the case record, the above-listed facts were considered proven, with relevance to the decision.
Allegations made by the parties, presented as facts, consisting of strictly conclusive statements, incapable of proof and whose truthfulness must be determined in relation to the concrete factual matter above established, were neither established as proven nor as not proven.
B. ON LAW
The main issue that arises in this arbitral action is to determine whether the compensation received by the Claimant upon the termination of their employment relationship with C... should or should not be exempt from IRS, in light of the provisions of Article 2, No. 4, subparagraph b) of the CIRS applicable, the content of which is as follows:
"When, in any form, the contracts underlying the situations referred to in subparagraphs a), b) and c) of No. 1 terminate, but without prejudice to the provisions of subparagraph d) of the same number, as regards benefits that continue to be due even if the employment contract does not subsist, or when the exercise of functions as public administrator, administrator or manager of a legal entity, as well as representative of a permanent establishment of a non-resident entity, ceases, the amounts earned, for any reason, are always subject to taxation: (...)
b) In the part exceeding the value corresponding to the average value of regular remuneration with the character of remuneration subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions with the debtor entity, in other cases, except when in the 24 months following a new professional or business bond is created, regardless of its nature, with the same entity, in which case the amounts shall be taxed in full."
This same issue has already been subject to examination by the Supreme Administrative Court in the Decisions of 31-05-2017, rendered in proceeding 0801/16, and more recently, of 11-10-2018, rendered in proceeding 179/12.9BEPDL.
As stated in the first of those Decisions, in an understanding that was corroborated by the second:
"3.3. The disputed question implies that it be determined whether the sum earned by the claimant in the year 2008, when their contract with C... terminated, is or is not covered by the tax exemption referred to in Article 2, No. 4, b) of the CIRS, or whether it is subject to IRS as the state contends.
It is established that between the claimant spouse and the company C... an individual employment contract was concluded that is subject to the clauses of the "Company Agreement".
It is therefore covered by Clause 11 of the aforementioned Agreement, from which results, under the title of indemnification for contractual severance, that:
"1. CTAs admitted to the Company up to 31 December 1994, who on the date of entry into force of this Agreement had already made themselves available to extend functions between the ages of 52 and 55, shall be entitled to an indemnification for contractual severance paid at the moment such severance occurs, the amount of which shall be calculated taking into account the following formula:
IDC = € 2,696.30 × Number of Months of Contractual Extension, counted between the date on which the CTA completed 52 years of age and the date on which functions ceased.
IDC = Indemnification for Contractual Severance.
-
The granting of the indemnification for contractual severance provided for in the preceding number shall apply equally to CTAs who have entered the Company's staff rolls between 1 January 1995 and 30 September 2007 and who have at least 20 years of service on the date they reach 52 years of age.
-
In the case of CTAs referred to in the preceding number who do not have 20 years of service on the date they reach 52 years of age, they shall be assigned an IDC value calculated by the ratio between their respective service time and the aforementioned 20 years of service.
-
CTAs admitted to the Company's staff by 30 September 2007, as well as those who entered between 30 September 2007 and the day before the date of entry into force of the legal instrument referred to in No. 1 of Clause 8, that is, 2 February 2009, and which set 57 years as the age limit for the exercise of operational functions, who make themselves available for the extension of such functions until the aforementioned age limit, shall also have the right, from 55 years of age, to receive the indemnification for contractual severance, in accordance with the terms provided for in No. 1.
-
CTAs referred to in Nos. 1, 2 and 4 of this Clause shall equally have the right to receive the indemnification for contractual severance (IDC), who have or come to make themselves available for the exercise of functions of Organic Management, Instruction, Training or Advisory Functions up to the age of 65.
-
The provisions of the preceding number shall also apply to CTAs referred to in No. 3 of this Clause, in accordance with the terms and conditions provided therein.
-
The provisions of No. 4 shall apply equally to CTAs who come to enter the Company's staff rolls on a date after the date of entry into force of the legal instrument referred to in No. 1 of Clause 8, that is, 2 February 2009.
-
CTAs referred to in the preceding number, and to whom 57 years is applied as the age limit and who make themselves available for the exercise of functions of Organic Management, Instruction, Training or Advisory Functions until the age of 65, shall have the right, from 57 years of age, to receive the corresponding indemnification for contractual severance.
-
In the event of death of a CTA, the credit emerging from the indemnification for contractual severance due shall be paid to the respective heirs, according to the number of months of actual exercise of extension of functions that occurred.
-
The value of the Indemnification for contractual severance, provided for in No. 1, as well as the value of the advance referred to in No. 12, shall be annually updated, as of 1 July of each year, based on the average inflation rate published by INE.
-
In the calculation of IDC values provided for in this Clause, all and any absences from work shall be deducted, except for vacation days and rest days.
-
Should the CTA wish, they may request quarterly advances from the Company in the amount of € 8,088.90, on account of the indemnification for contractual severance referred to in the preceding numbers, this option being subject to being changed at the request of the CTA, once only.
-
CTAs who have declared their adhesion to the extension of operational functions between ages 55 and 57, in accordance with No. 4 of Clause 33, and who fail to ensure the inherent actual performance of work, shall be subject to a pecuniary penalty in the amount of € 8,088.90, which shall be annually updated based on the average inflation rate published by INE as of 1 July of each year".
No. 1 of this Clause establishes that CTAs admitted to the Company up to 31 December 1994 who had made themselves available on the date of entry into force of this Agreement to extend functions shall be entitled to an indemnification for contractual severance paid at the moment such severance occurs.
It is the Company Agreement that affirms, in this No. 1, that the controllers shall be entitled to an indemnification for contractual severance, paid at the moment such severance occurs.
However, despite the Company Agreement calling it an indemnification for contractual severance, it does not seem to us to have the same nature of an indemnification and not to occur due to contractual severance but rather to potentially occur at the moment of contractual severance.
In fact, No. 8 establishes that CTAs referred to in the preceding number and to whom 57 years is applied as the age limit and who make themselves available for the exercise of functions of Organic Management, Instruction, Training or Advisory Functions until the age of 65, shall have the right, from 57 years of age, to receive the corresponding indemnification for contractual severance.
For these the right to the so-called indemnification for contractual severance shall exist once they make themselves available for the exercise of functions of Organic Management, Instruction, Training or Advisory Functions until the age of 65 and shall have such right from 57 years of age, even though the said severance may occur only at age 65.
No. 9 of the same Clause establishes that, in the event of death of a CTA, the credit emerging from the indemnification for contractual severance due shall be paid to the respective heirs, in function of the number of months of actual exercise of extension of functions that occurred.
No. 5 of the same Clause establishes that entitled to receive such amount are workers who have or come to make themselves available for the exercise of functions of Organic Management, Instruction, Training or Advisory Functions up to the age of 65.
No. 10 of the same Clause establishes that the value of the Indemnification for contractual severance, provided for in No. 1, as well as the value of the advance referred to in No. 12, shall be annually updated, as of 1 July of each year, based on the average inflation rate published by INE.
According to No. 11, in the calculation of IDC values, all and any absences from work shall be deducted, except for vacation days and rest days.
Pursuant to No. 12, the CTA who wishes may request quarterly advances from the Company in the amount of € 8,088.90, on account of the aforementioned indemnification, this option being subject to being changed at the request of the CTA, once only.
No. 13 establishes a pecuniary penalty for CTAs who have declared their adhesion to the extension of operational functions and who fail to ensure the inherent actual performance of work, which shall be annually updated based on the average inflation rate published by INE, as of 1 July of each year.
We can therefore conclude that the receipt of the monetary sum is, as the state contends, subject to a condition of verification of the extension of functions, beyond the age at which the worker is legally permitted to retire.
This right is acquired with the acceptance of this condition which consists of the extension of functions and only becomes effective because of this extension, being able, namely, to be received in advance by the worker or even upon death of this individual, with its updating still being provided for.
3.4. Article 2 of the CIRS (in the version applicable at the time) established that:
"1 - Income from dependent work is deemed to be all remuneration paid or placed at the disposal of its holder, arising from:
a) Work performed for another under an individual employment contract or another legally equivalent to it;
b) Work performed under a service acquisition contract or another of identical nature, under the authority and direction of the person or entity occupying the position of active subject in the legal relationship resulting from it;
c) Exercise of function, service or public office;
d) Situations of pre-retirement, pre-pension or reserve, with or without performance of work, as well as benefits granted, regardless of the title, before the requirements set out in the mandatory social security regimes applicable for the transition to retirement are met, or, even if the employment contract does not subsist, if shown to be subordinate to the condition of being due until such requirements are met, even if, and in any of the previously foreseen cases, they are due by pension funds or other entities, that substitute the entity originally liable.
2 - The remuneration referred to in the preceding number includes, in particular, salaries, wages, emoluments, gratuities, percentages, commissions, participations, subsidies or bonuses, attendance fees, emoluments, participations in fines and other accessory remuneration, even if periodic, fixed or variable, of a contractual nature or not.
3 - (...)
4 - When, in any form, the contracts underlying the situations provided for in subparagraphs a), b) and c) of No. 1 terminate, but without prejudice to the provisions of subparagraph d) of the same number, as regards benefits that continue to be due even if the employment contract does not subsist, or when the exercise of functions as manager, administrator or manager of a legal entity ceases, the amounts earned, for any reason, are always subject to taxation in the part exceeding the value corresponding to one and a half times the average value of regular remuneration with the character of remuneration subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions with the debtor entity, except when in the 24 months following a new professional or business bond is created, regardless of its nature, with the same entity, in which case the amounts shall be taxed in full.
5 - For purposes of the preceding number, a new business bond is also deemed to be created when commercial relations or service provision relations are established with the entity with which labor relations or membership of a corporate body ceased, by a company or other entity in which at least 50% of its capital is held, individually or together with any elements of the respective family group, by the beneficiary or by a plurality of beneficiaries of the amounts received, except if the aforementioned commercial relations or service provision relations represent less than 50% of sales or service provisions made in the fiscal year.
6 - The regime provided for in No. 4 shall not apply to amounts relating to rights accrued during the aforementioned contracts or situations, in particular remuneration for work performed, vacation, vacation bonuses and Christmas bonuses
7 - The amounts referred to in No. 4 shall also be taxed in full when the taxpayer has benefited, in the last five years, from the total or partial non-taxation provided therein.
(…)".
One concurs with the decision referred to when it affirms that according to doctrine, "generically this norm establishes a negative delimitation of incidence with respect to indemnifications for the extinction of the employment contract or cessation of the exercise of functions of members of corporate bodies with a maximum limit, conditioned downstream by facts that determine its non-application, in particular the fact that in the 24 months following a new professional or business bond was created, regardless of its nature, with the same entity or another entity that with it is in a relationship of control or group, regardless of their geographic location" (Cf., in this sense, Manuel Faustino, Taxation 13/14, p. 5 et seq. and Rui Duarte Morais, On IRS, 3rd ed. Almedina, p. 54/55).
One also concurs that, under Article 2, No. 4 of the CIRS, the limit of non-subjection is the value corresponding to one and a half times the average value of regular remuneration with the character of remuneration subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions with the employer entity, the excess being taxed according to the general rules.
One concurs with the decision of this Supreme Court, of 09-03-2016, P. 0449/15, cited by the decision referred to when it affirms that:
"Generically, this norm establishes a negative delimitation of incidence with respect to indemnifications for the extinction of the employment contract or cessation of the exercise of functions of members of corporate bodies, with a maximum limit, conditioned downstream by facts that determine its non-application, in particular the fact that in the 24 months following a new professional or business bond was created, regardless of its nature, with the same entity or another entity that with it is in a relationship of control or group, regardless of their geographic location (Cf., in this sense, Manuel Faustino, Taxation 13/14, p. 5 et seq. and Rui Duarte Morais, On IRS, 3rd ed. Almedina, p. 54/55).
The limit of non-subjection is the value corresponding to one and a half times the average value of regular remuneration with the character of remuneration subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions with the debtor entity, the excess being taxed according to the general rules.
As Rui Duarte Morais emphasizes (Op. cited, p. 54.), the intention of the legislator reveals here a dual motivation: in the first place, to attend to the fact that the indemnity amount will be necessary to the worker to ensure their subsistence during the period of unemployment that, in most cases, will follow.
On the other hand, it will take into account that the receipt of such a sum, generally relatively substantial, will have a triggering effect on the tax rate: the income obtained in that year will be exceptionally high, so it will be taxed at high rates given the progressivity of the tax.
And because this non-subjection of indemnifications was susceptible to fraud through the manipulation of legal forms by taxpayers (termination of contracts by workers in exchange for an untaxable indemnification, who then became service providers to their former employer, or, for example, dismissal, receiving untaxable indemnification and subsequent conclusion of a new contract with another company in the same group), the legislator introduced anti-abuse clauses, examples of which are contained in No. 4 and No. 10 of Article 2, whose application is questioned in the present appeal".
The decision referred to affirms that:
"From the proven matter it results that the employer entity, C..., and the Claimant spouse were subject to the Company Agreement concluded and which expressly provides for an indemnification for contractual severance.
However, as we have already mentioned, it is not an indemnification for contractual severance but rather a right that is acquired with the acceptance of the obligation to continue to provide work after the controller reaches 52 years of age.
That is, that right depends on the extension of functions and only becomes effective because of this extension, being able, namely to be received in advance by the worker or even upon death of this individual, with its updating still being provided for.
It becomes irrelevant that the Company Agreement calls it an indemnification for contractual severance.
Such a sum, earned in case of extension of functions after the age limit for retirement, is dependent on the extension of functions that the aforementioned Clause 11 refers to, with the CTAs continuing to earn their salary during that period.
The aforementioned sum constitutes a counterpart for work performed and can be received at the moment of cessation of functions or even before.
With the prerequisites of Article 2, No. 2 of the CIRS having been met, such amount is subject to IRS as assessed."
Finding no reason to diverge from the jurisprudence exposed, especially given the identity of the factual matter and the legal question, any divergence would give rise to the appeal provided for in Article 25/2 of the RJAT, within which the Supreme Administrative Court would reaffirm what it has already stated, and in light of the duty of uniform interpretation and application of Law, enshrined in Article 8/3 of the Civil Code, one can only conclude that the compensation received by the Claimant upon the termination of their employment relationship with C... is subject to taxation, the taxation action subject to this arbitral action therefore being maintained, and the claim filed being dismissed.
In their anomalous petition, presented after the Respondent's response and subsequently in written arguments, the Claimants contended, in sum, that in assessing the legality of the assessment subject to this arbitral action, the Tribunal would be bound to judge solely in light of the content of the notification directed to them and contained in point 13 of the proven facts, which, in the Claimants' view, constituted the grounds for the said assessment.
With all due respect, it is understood that the Claimants have no merit.
In fact, and as results from the proven factual matter, the assessment in question was issued on the basis of the replacement return voluntarily submitted to the Tax Authority by the Claimants.
Now, as was stated in the Decision of the Regional Administrative Court–North of 18-12-2014, rendered in proceeding 00651/05.7BEBRG:
"In this case, as already mentioned above with respect to a different defect, the Tax Authority merely proceeded with the assessment, in other words, the determination of the amount of tax to be paid on the basis of the values declared by the taxpayers in their respective (replacement) income tax return in IRS proceedings.
Put differently, the grounds underlying the tax act put in question, that is to say the facts and legal reasons that led to the assessment in question, need not have been brought to the knowledge of the taxpayers since it is they who, in the first instance, utilize them when fulfilling their declarative obligations, and this is so established and consistent with reality in so far as it is precisely that which is evidenced in the initial petition of the present challenge, which demonstrates that the claimants are equipped with the essential elements to be able to "attack" the assessment, which is only made possible by the knowledge they manifest (and previously declared before the Tax Authority) of the concrete facts considered by the Tax Authority, allowing them to argue based on the knowledge they reveal of the Tax Authority's evaluative criteria regarding those facts, in order to discuss them and present other evaluative criteria and, finally, in light of the legal norms invoked, to go on to discuss their violation in this case.
Save for a different opinion, the Claimant confuses erroneously and/or lack of grounds with disagreement with the content of such grounds, which are two absolutely distinct realities, since, from the content of the initial petition, it can be inferred that, as to the vice of lack of grounds imputed to the assessment in question, the claimant adduces arguments pertaining not to the absence of formal grounds, but to its disagreement with the substantive grounds.
Now, in this context what mattered was to know whether the Administration made known the motives that led it to act in the manner in which it did and the reasons on which it based its action—a question that lies within the scope of the formal validity of the act—a different situation is that which falls within the scope of the substantive validity of the act, that is to say, it is to know whether those motives correspond to reality and whether, corresponding, they are sufficient to legitimize the concrete administrative action.".
In other words, and in sum, the grounds for the assessment in question are the replacement return presented by the Claimants themselves, who, in doing so, prevented the Tax Authority from instituting, as was communicated to them, the procedure for amendment of their 2014 IRS return, under the terms of No. 4 of Article 65 of the IRS Code, where, there indeed, the Tax Authority could provide the grounds that it considered appropriate to the case, distinct from the replacement return presented by the Claimants.
Thus, and in light of the foregoing, nothing more remains for this Tribunal than to judge the present arbitral action as dismissed, absolving the Respondent of the claim.
C. DECISION
Therefore, this Arbitral Tribunal decides to judge the arbitral claim filed entirely dismissed and, in consequence, absolves the Respondent of the claim and condemns the Claimants in the costs of the proceedings, taking into account amounts already paid.
D. Value of the Proceedings
The value of the proceedings is set at € 68,965.94, in accordance with Article 97-A, No. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of No. 1 of Article 29 of the RJAT and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
E. Costs
The value of the arbitration fee is set at € 2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimants, since the claim was entirely dismissed, in accordance with Articles 12, No. 2, and 22, No. 4, both of the RJAT, and Article 4, No. 4, of the aforementioned Regulation.
Notify the parties.
Lisbon, 24 November 2018
The Presiding Arbitrator
(José Pedro Carvalho)
The Arbitrator Vogal
(Nina Aguiar)
The Arbitrator Vogal
(Nuno Pombo)
Frequently Asked Questions
Automatically Created