Process: 103/2018-T

Date: November 13, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 103/2018-T) addresses the Stamp Tax (Imposto do Selo) treatment of payment card transaction fees charged by financial institutions. The taxpayer, a credit institution, challenged additional Stamp Tax assessments totaling €1,873,393.61 for 2014, relating primarily to Merchant Service Charges (MSC), Multilateral Interchange Fees (MIF), and interbank commissions for ATM usage. The Tax Authority argued these commissions constitute taxable events under Article 1 of the Stamp Tax Code (CIS) and item 17.3.4 of the General Stamp Tax Table (TGIS), as they represent remuneration for financial services. The Authority contended that since these services are VAT-exempt under Article 9(27)(c) of the VAT Code, they fall within the Stamp Tax scope per Articles 1(1) and 1(2) CIS. The taxpayer contested this interpretation, arguing the charges should not be subject to Stamp Tax. The case also involved temporal application of tax law principles, specifically whether legislative changes affecting these transactions should apply retroactively. Additionally, the taxpayer claimed compensation for providing an unwarranted bank guarantee of over €2 million to suspend enforcement proceedings. The tribunal addressed fundamental questions regarding the taxation of modern payment systems, the boundary between VAT exemption and Stamp Tax liability for financial intermediation services, and procedural rights in tax arbitration, including the right to indemnification for guarantees provided during disputes ultimately resolved in the taxpayer's favor.

Full Decision

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president, designated by the other Arbitrators), Prof. Doctor António Menezes Cordeiro and Prof. Doctor Sérgio Vasques, designated by the Claimant and Respondent, respectively, to form the Arbitral Tribunal, constituted on 06-06-2018, agree as follows:

1. Report

A..., S.A., company with the unified registration and legal person number..., with registered office at Rua ..., no..., in Porto (...-...) (hereinafter designated as "Claimant"), has requested the constitution of an Arbitral Tribunal pursuant to Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

The Claimant seeks the declaration of illegality of the aforementioned tax act no. 2017..., embodied in the additional assessment Stamp Duty (IS) no. 2017..., of 12-01-2017 and respective compensatory interest assessments, of the same date, all relating to the year 2014, and likewise, the decision dismissing the gracious complaint no. ...2017... .

The Claimant further requests indemnification for the provision of unwarranted guarantee.

The Respondent is the TAX AND CUSTOMS AUTHORITY (hereinafter "AT").

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to AT on 14-03-2018.

On 15-05-2018, the President of CAAD informed the Parties of the designation, in accordance with and for the purposes of article 11, no. 7 of RJAT.

Thus, in compliance with article 11, no. 7 of RJAT, the period provided in article 13, no. 1 of RJAT having expired without the Parties raising any objection, the Collective Arbitral Tribunal was constituted on 06-06-2018.

AT presented a response in which it argued that the request for arbitral pronouncement should be judged dismissible.

By order of 10-07-2018 it was decided to dispense with the holding of the meeting provided for in article 18 of RJAT and that the case should proceed with optional submissions.

The Parties submitted submissions and attached documents.

The arbitral tribunal was regularly constituted.

The parties have legal capacity and standing; they are legitimate (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

The case does not suffer from any nullities.

2. Factual Matters

2.1 Proven Facts

The following facts are considered proven:

  • The Claimant is a credit institution whose business object consists of exercising, as main activity, "Other Monetary Intermediation" and, as secondary activity, "Factoring Activities";

  • Under the OI2016..., relating to the 2014 tax year, an external general scope inspection action was carried out by the Division of Inspection of Banks and Other Financial Institutions of the Unit of Large Taxpayers on the Claimant's accounting records for the 2014 tax year;

  • This inspection action resulted in corrections to the Stamp Duty assessed by the Claimant in the total amount of € 1,873,393.61, namely:

    (i) Correction in the amount of € 6,768.36, referring to tax relating to the Contest 200 contos - Universe prize;

    (ii) Correction in the amount of € 448,273.60, concerning tax on other commissions and counterparties for financial services – merchant service fee;

    (iii) Correction in the amount of € 1,418,351.65, concerning other commissions and counterparties for financial services – multilateral interchange rate and interbank commissions charged for the use of ATMs, whether for payments or withdrawals with cards (Tax Inspection Report contained in document no. 1 attached with the request for arbitral pronouncement, whose content is given as reproduced)

  • The corrections made gave rise to the assessment of Stamp Duty no. 2017..., in the amount of € 1,873,393.61 and assessments of compensatory interest nos. 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017... and 2017..., in the total amount of € 179,427.14, all in the total amount of € 2,052,820.75 (document no. 2 attached with the request for arbitral pronouncement, whose content is given as reproduced);

  • With a view to the coercive collection of that sum, a tax execution proceeding no. ...2017... was instituted by the Finance Service of Porto-..., after which the Claimant provided the bank guarantee no. .../2017, from Bank B..., S.A., dated 20-03-2017, with a view to suspending that tax execution proceeding (document no. 3 attached with the request for arbitral pronouncement, whose content is given as reproduced);

  • Of the corrections made by the tax inspection services, the Claimant does not contest the one referring to the Stamp Duty assessed on the Contest 200 contos - Universe prize, in the amount of € 6,768.36, plus respective compensatory interest;

  • In the Tax Inspection Report, the following conclusions are formulated on the correction in the amount of € 448,273.60:

II.2.2 - Other Commissions and counterparties for financial services - merchant service fee (no. 1 of article 1, no. 1 of article 9 and no. 1 of article 22, all of CIS and item 17.3.4 of TGIS) - €448,273.60.

(...)

e) From the conclusive summary

Given the foregoing, we conclude that:

  1. The MSC is a commission charged by the entity providing the automatic payment service (the A...) to the beneficiary of the transfer (the merchant), on sales settled by bank card, in order to remunerate the A... on payment operations based on cards (with underlying transfer of funds from the customer/final consumer account to the merchant account);

  2. The A... does not proceed to liquidate any tax on the MSC;

  3. Bank of Portugal itself (the supervisory entity) considers the MSC a commission;

  4. The MSC being subject to VAT, is exempt therefrom, as it falls within sub-item c) of item 27) of article 9 of CIVA;

  5. Being exempt from VAT, the MSC is subject to Stamp Duty, pursuant to no. 1 and no. 2 of article 1 of CIS;

  6. Pursuant to item b) of no. 1 of article 2 of CIS - "Subjective scope", the tax passive subjects are "Entities granting credit and guarantee or creditors of interest, premiums, commissions and other counterparties", being incumbent on them by no. 1 of articles 23, 41, 43 and no. 1 of article 44, all of CIS, their assessment and delivery to the State coffers;

  7. In accordance with item g) of no. 3 of article 3 of CIS, in "...other financial operations carried out by or with the intermediation of credit institutions, companies or other financial institutions...", the party bearing the tax burden is the customer (in this case the merchants using the Automatic Payment Service);

  8. On the other hand, under item h) of no. 1 of article 5 of CIS, the tax obligation arises in "...operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally assimilated thereto, at the moment of collection of interest, premiums, commissions and other counterparties ...";

  9. Pursuant to no. 1 of article 9 of CIS, the taxable amount of Stamp Duty is that which results from TGIS;

  10. No. 1 of article 22 of CIS refers the tax rates to be applied to TGIS;

  11. The MSC commission fits fully within item 17.3.4 of TGIS, as it is a commission charged by the entity providing the automatic service (the A...) to the merchant;

  12. This commission is not covered by the exemption provided for in item e) of no. 1 of article 7 of CIS.

Given the foregoing, insofar as, as mentioned above, the A... understands that there exists "absence of taxation of the MSC either under VAT or under IS", and once, as demonstrated above, the A... should have assessed Stamp Duty relating to the MSC commissions charged to Merchants for the use of Automatic Payment Terminals, it was, under the principle of collaboration set out in nos. 1 and 4 of article 59 of the General Tax Law and principle of cooperation enshrined in articles 9 and 48 of the Complementary Regime of Tax and Customs Inspection Procedure (RCPITA), the A... invited to calculate the amount of Stamp Duty to be assessed monthly concerning these commissions.

In effect, insofar as the various elements (data/information) that enable the calculation are in the possession of the A..., a request was made, through notification of 2016-09-27, for the breakdown, by month of collection, of the value of Stamp Duty that (the A...) would have calculated, on the basis of the rate of 4% provided for in item 17.3.4 of TGIS, had it not considered that the commissions "Merchant Service Fee" were (i) exempt from Stamp Duty under article 7 of its Code or (ii) outside the scope of application and/or subjection of this tax.

However, the Bank did not provide the breakdown, by month of collection, of the value of Stamp Duty that it would have calculated (had it not considered the respective commissions as exempt from Stamp Duty under article 7 of its Code or outside the scope of application and/or subjection of this tax), arguing that "Given the exclusion of taxation, under Stamp Duty, of the MSC pursuant to Item 17.3.4 of TGIS, the legislation does not provide for any obligation to prepare the requested calculations".

Thus, having informed the Bank that (i) in 2014 it did not assess Stamp Duty on the "Merchant Service Fee" commissions charged to merchants for use of TPAs and, invited to effect the Stamp Duty calculation in default, it informed that (ii) "Given the exclusion of taxation, under Stamp Duty, of the MSC pursuant to Item 17.3.4 of TGIS, the legislation does not provide for any obligation to prepare the requested calculations", no other solution remains to the Tax Inspection Services than, on the basis of the monthly breakdown of "Merchant Service Fee" commissions charged - information which was provided by the A... to the Tax Inspection Services -, to proceed to the calculation of the respective Stamp Duty to be assessed.

Given the foregoing, on the basis of the monthly information of "Merchant Service Fee" commissions charged made available by the Bank, the Tax Inspection assessed Stamp Duty in default, in the amount of € 448,273.60, as a result of the application of the rate of 4%, provided for in item 17.3.4 of the General Table of Stamp Duty (TGIS), on the taxable base of the commission entitled "Merchant Service Fee", in the total value of 11,206,839.10.

In order to comply with the provision of no. 1 of article 44 of CIS, the Stamp Duty assessed in default should have been delivered to the State coffers by the 20th day of the month following that in which the tax obligation was constituted.

The Stamp Duty assessed in default, broken down monthly by month of collection, is presented in the table below.

  • In the Tax Inspection Report, the following conclusions are formulated on the correction in the amount of € 1,418,351.65:

III.2.3. Other commissions and counterparties for financial services - Multilateral interchange rate and interbank commissions charged for the use of ATMs whether for payments or withdrawals with cards (no. 1 of article 1, no. 1 of article 9 and no. 1 of article 22, all of CIS and item 17.3.4 of TGIS) - €1,418,351.65

(...)

From the conclusive summary

Given the foregoing, we conclude that:

  1. The MIF (Multilateral Interchange Fee) commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards are commissions charged between banks [ATM holders or bank card issuers];

  2. The A... did not proceed to assess any Stamp Duty on the MIF commissions or on the interbank commissions charged for the use of Automatic Teller Machines in operations (as described above) carried out with bank cards;

  3. The MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations (as described above) carried out with bank cards being subject to VAT, are exempt therefrom, pursuant to sub-item c) of item 27) of article 9 of CIVA;

  4. Being exempt from VAT, the MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations (as described above) are subject to Stamp Duty, pursuant to no. 1 and no. 2 of article 1 of CIS;

  5. Pursuant to item b) of no. 1 of article 2 of CIS - "Subjective scope", the tax passive subjects are "Entities granting credit and guarantee or creditors of interest, premiums, commissions and other counterparties", being incumbent on them by no. 1 of articles 23, 41, 43 and no. 1 of article 44, all of CIS, their assessment and delivery to the State coffers.

  6. In accordance with item g) of no. 3 of article 3 of CIS, in "...other financial operations carried out by or with the intermediation of credit institutions, companies or other financial institutions...", the party bearing the tax burden is the customer (in this case the other financial institution or credit institution);

  7. On the other hand, under item h) of no. 1 of article 5 of CIS, the tax obligation arises in "...operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally assimilated thereto, at the moment of collection of interest, premiums, commissions and other counterparties..."...";

  8. Pursuant to no. 1 of article 9 of CIS, the taxable amount of Stamp Duty is that which results from TGIS;

  9. No. 1 of article 22 of CIS refers the tax rates to TGIS;

  10. The MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations with cards (as mentioned above) fit fully within item 17.3.4 of TGIS;

  11. The commissions mentioned above are not covered by the Exemption provided for in item e) of no. 1 of article 7 of CIS.

Given the foregoing, insofar as, as mentioned above, the A... having been questioned as to whether, for the 2014 tax year, Stamp Duty was assessed on the value of the commissions mentioned above and, in response, the A... clarified that those commissions were excluded from taxation under Stamp Duty, and once, as demonstrated above, the A... should have assessed Stamp Duty relating to these commissions, it was, under the principle of collaboration set out in nos. 1 and 4 of article 59 of the General Tax Law and principle of cooperation enshrined in articles 9 and 48 of the Complementary Regime of Tax and Customs Inspection Procedure (RCPITA), the A... invited to calculate the amount of Stamp Duty to be assessed monthly concerning these commissions.

In effect, insofar as the various elements (data/information) that enable the calculation were in the possession of the A..., we requested that it effect a "breakdown, by month of collection, of the value of Stamp Duty that the A... would have calculated, on the basis of item 17.3.4 of TGIS, had it not considered that the commissions (...) [mentioned above] were (i) exempt from Stamp Duty under article 7 of its Code or (ii) outside the scope of application and/or subjection of this tax".

However, the Bank did not provide the breakdown, by month of collection, of the value of Stamp Duty that it would have calculated (had it not considered the respective commissions as exempt from Stamp Duty under article 7 of its Code or outside the scope of application and/or subjection of this tax), arguing that "Given the exclusion of taxation, under Stamp Duty, (...) [of the Multilateral Interchange Fee, Interchange Fee relating to service payments and Interchange Fee relating to withdrawals] pursuant to Item 17.3.4 of TGIS, the legislation does not provide for any obligation to prepare the requested calculations.".

Thus, having informed the Bank that (i) in 2014 it did not assess Stamp Duty on the commissions in question and, invited to effect the Stamp Duty calculation in default, it stated that (ii) "the legislation does not provide for any obligation to prepare the requested calculations...", no other solution remains to the Tax Inspection Services than, on the basis of the monthly breakdown of the commissions (mentioned above) charged in 2014 - information which was provided by the A... to the Tax Inspection Services -, to proceed to the calculation of Stamp Duty to be assessed.

Given the foregoing, on the basis of the monthly information of the commissions (mentioned above) charged in 2014, Stamp Duty in default was assessed, in the amount of € 1,418,351.65, as a result of the application of the rate of 4%, provided for in item 17.3.4 of TGIS, on the taxable base of the commissions (better identified above and in the table below) charged by the A..., in the total value of € 35,458,790.86.

In order to comply with the provision of no. 1 of article 44 of CIS, the Stamp Duty assessed in default should have been delivered to the State coffers by the 20th day of the month following that in which the tax obligation was constituted.

  • On 10-07-2017, the Claimant filed a gracious complaint against the aforementioned assessment, a gracious complaint which was instituted under no. ...2017...;

  • On 13-11-2017, the Claimant was notified of the draft decision dismissing the gracious complaint, which was converted into final decision (documents nos. 4 and 5 attached with the request for arbitral pronouncement, whose contents are given as reproduced);

  • An operation in an Automatic Payment Terminal (APT) is carried out as follows («Automatic Payment Terminals and Automatic Teller Machines», Notebook no. 10, Bank of Portugal, page 7):

    • The cardholder issues a payment order relating to the settlement of a purchase (debt) to the merchant, through the use of his card in the APT and entry of the secret code (authentication);

    • The information is transmitted by the acquirer to the card issuer, requesting authorization;

    • The card issuer provides a "guarantee" of payment through an authorization;

    • The acquirer pays the merchant and charges him a commission (merchant service fee);

    • The acquirer is then reimbursed by the card issuer and pays him a commission (multilateral interchange fee or multilateral interchange fee);

    • The card issuer charges the cardholder the value of the transaction;

  • The acquirer is the entity that acquires the credit of merchants who accept payments with credit and debit cards. The acquirer contracts with the merchant the acceptance of payments with cards of the brands it represents and obtains from the card issuer authorization to carry out the transaction by the customer holding the card («Automatic Payment Terminals and Automatic Teller Machines», Notebook no. 10, Bank of Portugal, pages 7-8);

  • Subsequently, the card-issuing Bank settles the credit with the acquirer;

  • Any operation in APT comprises, in particular, the prior provision of equipment availability/rental services, with the merchant paying for equipment rental and, at a later stage, for transmission service, management, line rental fees, registrations, connection fees and commissions for other additional services;

  • The value of merchant service fees charged in amounts less than € 0.125 amounts to a sum not less than € 11,781.00, with SIBS being unable to provide detail of transaction to transaction, in isolation, given the volume of information involved, notwithstanding the Claimant's request in that regard (documents nos. 6 and 7 attached with the Claimant's submissions and assertion thereof, not contested);

  • The value of merchant service fees charged to exempt customers amounted to € 159,044.00 (document no. 6 attached with the Claimant's submissions, not contested);

  • The value of multilateral interchange fees charged in amounts less than € 0.125 amounts to a sum not less than € 2,250,130.00 (document no. 6 attached with the Claimant's submissions, not contested);

  • The value of multilateral interchange fees charged to exempt customers amounts to not less than € 1,097,516.00 (document no. 6 attached with the Claimant's submissions and assertion thereof, not contested);

  • The value of multilateral interchange fees self-charged amounts to not less than € 2,412,489.00 (document no. 6 attached with the Claimant's submissions, not contested);

  • The Claimant provided a bank guarantee to suspend the tax execution proceeding instituted for collection of the assessed amounts (document no. 3 attached with the request for arbitral pronouncement);

  • On 12-03-2018, the Claimant presented the request for arbitral pronouncement which gave rise to the present case.

2.2 Unproven Facts and Justification of Factual Determination

The exact amount of merchant service fees and multilateral interchange fees charged in amounts less than € 0.125 was not proven.

The facts were proven on the basis of the documents referred to and statements by the Claimant not contested by the Tax and Customs Authority.

3. Substantive Law

The Tax and Customs Authority made corrections to the Stamp Duty assessed by the Claimant in the year 2014, understanding that it should have assessed Stamp Duty, applying item 17.3.4 of TGIS, within the scope of its activity regarding the "Merchant Service Fee" (MSC) and the multilateral interchange rate and interbank commissions charged for the use of ATMs, whether for payments or withdrawals with cards.

The Claimant argues in the present case, in summary, that there should be no Stamp Duty payment concerning these fees and that, if there were, it would not be on it that the obligation to assess falls.

3.1 Issue of Non-Existence of Liability in the Claimant's Sphere

The first issue raised by the Claimant is whether it can be held responsible for payment of Stamp Duty.

The Claimant argues, in summary, that if we are dealing with operations subject to Stamp Duty, the Claimant is not the holder of the economic interest, with the holders of that economic interest being:

– the merchants, in the case of the Merchant Service Fee (MSC), insofar as they benefit economically from the operation being processed through the payment terminal made available by the Claimant, thus obtaining, immediately, the guarantee of payment for the good or service provided by them;

– the merchants, in the case of the Multilateral Interchange Fee (MIF), in the case of an APT operation, insofar as the MIF is part of the MSC;

– the cardholders, in the case of an ATM operation, since in this case, it is the card-issuing bank that pays the acquiring bank (Claimant) the Multilateral Interchange Fee;

– the present situation configures a case of substitution without retention, not being, consequently, applicable article 28 of LGT, which provides that the tax substitute is responsible for amounts retained and not delivered;

– the Claimant merely effected the discount, and only that amount, did not retain any amounts as tax, with the discounted amounts, in nominal values, corresponding to the value of the merchant service fee;

– the impugned tax act would be illegal, insofar as it results in burdening the Claimant with the tax burden, in violation of article 3, no. 3, item g), of CIS, as well as article 28 of LGT.

The Tax and Customs Authority argues in the present case that Stamp Duty is not required from the Claimant in the context of tax substitution, but rather because it is a passive subject of the tax, pursuant to article 2, no. 1, item c), of CIS.

However, the Tax Inspection Report does not refer to item c), but rather to item b) of no. 1 of article 2 of CIS, so that, as substantive reasoning a posteriori is not relevant ([1]), it is on the basis of this legal substantiation that we must assess whether the Claimant is a passive subject of the tax.

This article 2, no. 1, item b), of CIS establishes that "the following are passive subjects of the tax (...) entities granting credit and guarantee or creditors of interest, premiums, commissions and other counterparties".

In the Tax Inspection Report it is stated that the Claimant had the duty to assess and deliver to the State Stamp Duty "pursuant to item b) of no. 1 of article 2 of CIS - "Subjective scope", the passive subjects of the tax are "Entities granting credit and guarantee or creditors of interest, premiums, commissions and other counterparties", being incumbent on them by no. 1 of articles 23, 41, 43 and no. 1 of article 44".

The Claimant, in the request for arbitral pronouncement, does not even question the framing of its situation in these norms, expressly acknowledging in its article 20 that "indeed, the Claimant will be the passive subject of the tax, pursuant to the provision of item c) of no. 1 of article 2 of CIS".

Thus, being a passive subject of the tax, it is incumbent on the Claimant to assess the tax, by virtue of the provision of no. 1 of article 23 of CIS, provided it is in one of the situations in which Stamp Duty is due.

It is not relevant, therefore, to determine whether the Claimant is a passive subject in the capacity of direct contributor or substitute (two of the categories provided for in no. 3 of article 18 of LGT) in order to exclude subjective scope, since, in any case, regardless of knowing who holds the economic interest in the operation, it is on the Claimant that the burden of assessment falls and it is only to it and not to the cardholders or merchants that the Tax and Customs Authority can demand payment of the tax. ([2])

On the other hand, in accordance with item h) of article 5 of CIS, in operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally assimilated thereto the tax obligation is considered to arise at the moment of collection of commissions and counterparties, so that the Tax and Customs Authority could demand payment of Stamp Duty.

It results from this regime that we are, in the relations between the Claimant and the entities to whom it charges commissions or counterparties, not in a situation of tax substitution (which is effected through withholding at source of the tax assessed by the substitute, pursuant to article 20 of LGT) but rather in a situation in which it is admitted (and legally intended) the economic repercussion of the tax, being this, for ease of collection, demanded from whoever is not the holder of the economic interest, but is in a situation where it is possible for him to transfer the burden to the sphere of the holder of the economic interest within the scope of his private relations with this party, remaining within the availability of the passive subject to effect or not this transfer, through the inclusion or not of the value of the tax in the prices of goods he transmits to him or of the services he provides to him. ([3])

In situations of this type, "the only party responsible to the State for the lack of tax assessed is, in case of divergence between the person who appears as passive subject and the one who appears as holder of the economic interest that bears the tax burden, the passive subject, and not the repercussed party or the holder of that economic interest (arbitral award in proceeding no. 496/2017-T).

Thus, neither item g) of no. 3 of article 3 of CIS nor article 28 of LGT is an obstacle to the demand for tax from the Claimant (if it is found that taxation should exist).

For the foregoing reasons, the assessed liquidation does not suffer from the defect that the Claimant attributes to it, by hypothetical violation of the norms on subjective scope of Stamp Duty.

3.2 Issue of the Merchant Service Fee (MSC)

The Tax and Customs Authority understood in the Tax Inspection Report, on the objective scope of Stamp Duty on the MSC that:

  • The MSC is a commission charged by the entity providing the automatic payment service (the A...) to the beneficiary of the transfer (the merchant), on sales settled by bank card, in order to remunerate the A... on card-based payment operations (with underlying transfer of funds from the customer/final consumer account to the merchant account);

  • The A... does not proceed to liquidate any tax on the MSC;

  • Bank of Portugal itself (the supervisory entity) considers the MSC a commission;

  • The MSC being subject to VAT, is exempt therefrom, as it falls within sub-item c) of item 27) of article 9 of CIVA;

  • Being exempt from VAT, the MSC is subject to Stamp Duty, pursuant to no. 1 and no. 2 of article 1 of CIS;

  • item h) of no. 1 of article 5 of CIS establishes that the tax obligation arises in "...operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally assimilated thereto, at the moment of collection of interest, premiums, commissions and other counterparties ...";

  • pursuant to no. 1 of article 9 of CIS, the taxable amount of Stamp Duty is that which results from TGIS;

  • no. 1 of article 22 of CIS refers the tax rates to be applied to TGIS;

  • the MSC commission fits fully within item 17.3.4 of TGIS, as it is a commission charged by the entity providing the automatic service (the A...) to the merchant;

  • this commission is not covered by the exemption provided for in item e) of no. 1 of article 7 of CIS.

3.2.1 Error of Interpretation of No. 2 of Article 1 of CIS

The Claimant understands that there is "erroneous interpretation of no. 2 of article 1 of CIS" because one cannot extract from article 1, no. 2, of CIS that operations that are exempt from VAT are necessarily subject to Stamp Duty, but only that the same operation cannot be cumulatively taxed under VAT and Stamp Duty.

This statement that from article 1, no. 2, of CIS one can only conclude that the same operation cannot be cumulatively taxed under VAT and Stamp Duty is true. The Claimant is right on this statement and point, which is acknowledged by the Tax and Customs Authority in article 57 of its response.

However, as the Tax and Customs Authority also states, "it is not only this article that is invoked to summon taxation" and "it is also referred by the inspection services to no. 1 of the same article (the norm of objective scope), supplemented with reference to item 17.3.4 of TGIS, which embodies the aforementioned no. 1 of article 1 of CIS, with the further addition that it does not benefit from the exclusion provided for in no. 2 of the same article, as it is an operation exempt from VAT".

It appears clear that the interpretation that the Tax and Customs Authority defends here is correct.

In fact, by saying "being exempt from VAT, the MSC is subject to Stamp Duty, pursuant to no. 1 and no. 2 of article 1 of CIS", it is immediately clear that the reasoning is not restricted to no. 2, since reference is made to no. 1, which establishes that "stamp duty applies to all acts, contracts, documents, securities, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of assets".

For this reason, the adequate interpretation is that the Tax and Customs Authority did not understand that operations were subject to Stamp Duty merely because they were not taxed under VAT, but rather that, in addition to this condition (negative delimitation of scope), the subjective scope resulting from provision in the General Table was necessary.

Confirming that this is the correct interpretation, one notes that the Tax and Customs Authority makes efforts in the following points to demonstrate, invoking norms of CIS, that there is grounds for taxation, including a norm of the General Table, which is item 17.3.4.

For this reason, properly interpreting the Tax Inspection Report, the error of interpretation of law that the Claimant invokes does not occur.

3.2.2 Error of Framing of the MSC in Item 17.3.4

Item 17.3.4 provides for the payment of Stamp Duty concerning "other commissions and counterparties for financial services".

The Claimant argues that "we are not dealing with a counterparty for a financial service and that the MSC does not have the same cause as the commissions for the provision of services related to automatic payment terminals, within which VAT is assessed" and that "the amount received by the acquirer does not constitute a commission, as we are not even in the presence of a service provision".

The Tax and Customs Authority, in the Tax Inspection Report, understood that the MSC falls within this item because it is a "commission": "the MSC commission fits fully within item 17.3.4 of TGIS, as it is a commission charged by the entity providing the automatic service (the A...) to the merchant".

The Bank of Portugal is the public entity, with regulatory powers, to which it is incumbent to "regulate, supervise and promote the proper functioning of payment systems" (article 14 of Law no. 5/98, of 31 January), so that the terminology it discloses naturally assumes relevant interpretative relevance when dealing with legal concepts it discloses related to the activity of banking institutions, in harmony with the provision of article 11, no. 3, of LGT, which establishes that "whenever fiscal norms employ terms peculiar to other branches of law, these should be interpreted in the same sense which they have therein, unless something else results directly from the law".

In any case, there is no reason why, if this is the concept publicly disclosed of "commission" by the supervisory entity, another meaning peculiar to tax law should be used, without providing an alternative specific definition.

In harmony with what was disclosed by the Bank of Portugal on the definition of concepts peculiar to banking and financial activity, the concept of "commission" "corresponds to a percentage of the value of a transaction as a form of remuneration for intermediation services". ([4])

The Bank of Portugal expressly uses the term "commission" to designate the "merchant service fee", namely on page 7 of no. 10 of the Bank of Portugal Notebooks, "Automatic Payment Terminals and Automatic Teller Machines", in the July 2014 edition ([5]) (the year to which the assessment act relates), which is invoked in this proceeding by both Parties.

In the case in question, pursuant to the automatic payment service contract presented by the Claimant to the Tax Inspection, referred to on page 40 of the Tax Inspection Report, the MSC "is calculated through a percentage stipulated by the Bank on billing with multibanco cards, Clause 10 of the General Conditions of said contract determines that "the Bank will charge the merchant, for the provision of this service, the following values and amounts", which shows that we are dealing with the typical form of remuneration of commissions and the Claimant itself considers that the MSC is charged as consideration for "service provision".

Moreover, in light of the Legal Regime governing access to the activity of payment institutions and the provision of payment services, approved by Decree-Law no. 317/2009, of 30 October (which transposed Directive no. 2007/64/EC, of the European Parliament and of the Council, of 13 November 2007, on payment services in the internal market), clarifies that "payment services" are the activities enumerated in article 4, which include the "execution of payment operations, including the transfer of funds deposited in a payment account opened with the payment service provider of the user or of another payment service provider" and "the execution of payment operations through a payment card or similar device" constitute "payment service" [article 4, items c) and d) sub-item ii)], in the concept of "payment service provider" are included credit institutions [articles 2, item i) and 7], so that, already in light of the regulation in force in 2014, the very operation of payment by the Claimant to the merchant (with discount of the commission that constitutes the MSC), embodies a "payment service".

Thus, the MSC aims to remunerate the financial service provided by the Claimant by effecting payment to the merchant, making available to him the sum in question, less the MSC, this reality not being negated by the fact that it may be understood that, in civil law terms, there occurs an assignment of receivables.

Therefore, it is to be concluded that, even before Law no. 7-A/2016, of 30 March, altered the wording of item 17.3.4 of TGIS (which was "Other commissions and counterparties for financial services"), the commission that constituted the MSC was already taxed under Stamp Duty, with the addition of the expression "including fees relating to card-based payment operations" having clarifying intent, expressly assumed with the attribution of interpretative nature. ([6])

On the other hand, as the Claimant receives a commission for the financial service provided to the merchant, there underlies the taxation under Stamp Duty a situation in which contributive capacity is revealed, which is the availability of the amount received.

Moreover, the taxation in question does not necessarily have to affect, as the burden can be transferred to the patrimonial sphere of its merchant clients, through repercussion.

In any case, there does not occur the alleged unconstitutionality of that item 17.3.4 by violation of the principle of contributive capacity, as the taxation of companies does not have to be effected solely on the basis of profit, as inferred from the text of no. 2 of article 104 of CRP, by establishing that "the taxation of companies is fundamentally based on its actual income".

3.2.3 Issues Connected with the Alterations Introduced by Law No. 7-A/2016, of 30 March

For what has been stated, the taxation of the MSC within item 17.3.4 has support exclusively in the legislation in force in 2014, so that the alterations introduced by Law no. 7-A/2016, of 30 March, are not relevant for the assessment of this issue.

For this reason, the consideration of the issues raised regarding those alterations is rendered moot, as it is useless (article 130 of CPC).

3.2.4 Quantitative Reduction of the Correction Relating to the MSC

The Claimant argues that, if the MSC is understood to be subject to Stamp Duty, the correction should be reduced to cases where the amount to be paid is less than 0.125, as the rate to be paid, pursuant to item 7.3.4, will be 0 (zero), by rounding (amount less than 0.005 €).

However, the Claimant does not invoke any regulatory support for the rounding it refers to, nor is any rounding provided for in the assessment of Stamp Duty.

The request regarding this quantitative correction is therefore without merit, due to lack of legal basis.

3.2.5 Quantitative Reduction for Non-Subjection to Stamp Duty of MSC Charged to Exempt Entities

The Claimant argues that, pursuant to article 6 of the Stamp Duty Code, the State and its public bodies, legal entities of public utility and IPSSs are exempt from Stamp Duty, and also, pursuant to article 66-A, no. 12, of the Tax Benefits Statute (EBF), cooperatives are exempt from Stamp Duty. Therefore, the Claimant understands that it did not have to assess Stamp Duty concerning the MSC charged to these entities.

As results from the express wording of articles 6 of CIS and 66-A, no. 12, in the version in force in 2014, these are subjective exemptions that apply under Stamp Duty, "when this constitutes their burden".

The Tax and Customs Authority opposes this claim because "the burden of stamp duty falls on the holder of the economic interest in each of the operations and not on its customers, with payment operators being unable to repercuss this burden on them".

However, in light of the legislation in force in 2014, the tax constitutes burden of the holders of the economic interest in the situations referred to in article 1, among which are included those provided for in the General Table, and the customer was the holder of the economic interest in non-specified financial operations carried out by or with the intermediation of credit institutions, companies or other financial institutions [article 3, nos. 1 and 3, item g), of CIS]. Only with Law no. 22/2017, of 23 May, was it established that holders of the economic interest are "in card-based payment operations, provided for in item 17.3.4 of the General Table of Stamp Duty, credit institutions, financial companies or other entities legally assimilated thereto and any other financial institutions to whom these are owed" [item h) of no. 3 of article 3].

Thus, this claim by the Claimant has grounds, so the request for arbitral pronouncement is well-founded, in the respective part (correction relating to MSC charged in the amount of € 159,044.00, to which corresponds Stamp Duty at the rate of 4% in the amount of € 6,361.76).

3.3 Issue of Illegality of Stamp Duty Assessment on the Multilateral Interchange Rate and Commissions Charged on Operations Carried Out with Cards in Automatic Teller Machines

The MIF (Multilateral Interchange Fee) commissions and the interbank commissions charged for the use of Automatic Teller Machines (ATM or multibanco) in operations with bank cards are commissions charged between banks [ATM holders or bank card issuers].

Within the scope of procedures originating from payment of purchases in Automatic Payment Terminals, described in point K of the factual matters established, after payment by the acquirer to the merchant, the acquirer is reimbursed and pays him a commission (multilateral interchange fee or multilateral interchange fee).

As mentioned in the Tax Inspection Report, based on information taken from the "Interbank Fee Schedule of the MB Payment System" ([7]) "on the other hand, where a payment (for example, water, electricity, or any other good and/or service) is made through ATMs, a commission is charged by the ATM-holding Bank to the card-issuing Bank by the service provided; and, equally, when a customer of a bank proceeds to withdraw cash in an automatic teller (or ATM) belonging to another Bank [ATM-holding Bank], the latter charges a commission to the card-issuing bank for the service provided with that operation. These are, therefore, the interbank commissions charged for the use of ATMs in payment operations with cards, withdrawals of cash, balance inquiries or account statements, mobile phone top-ups, etc.".

The Claimant did not proceed to assess any Stamp Duty on the MIF commissions nor on the interbank commissions it charged for the use of Automatic Teller Machines in operations carried out with bank cards.

The Tax and Customs Authority made a correction regarding these commissions, by understanding that they also fall within item 17.3.4 of TGIS, saying the following, in conclusion:

  • The MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations (as described above) carried out with bank cards being subject to VAT, are exempt therefrom, pursuant to sub-item c) of item 27) of article 9 of CIVA;

  • Being exempt from VAT, the MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations (as described above) are subject to Stamp Duty, pursuant to no. 1 and no. 2 of article 1 of CIS;

  • Pursuant to item b) of no. 1 of article 2 of CIS - "Subjective scope", the passive subjects of the tax are "Entities granting credit and guarantee or creditors of interest, premiums, commissions and other counterparties", being incumbent on them by no. 1 of articles 23, 41, 43 and no. 1 of article 44, all of CIS, their assessment and delivery to the State coffers.

  • In accordance with item g) of no. 3 of article 3 of CIS, in "...other financial operations carried out by or with the intermediation of credit institutions, companies or other financial institutions...", the party bearing the tax burden is the customer (in this case the other financial institution or credit institution);

  • On the other hand, under item h) of no. 1 of article 5 of CIS, the tax obligation arises in "...operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally assimilated thereto, at the moment of collection of interest, premiums, commissions and other counterparties..."...";

  • Pursuant to no. 1 of article 9 of CIS, the taxable amount of Stamp Duty is that which results from TGIS;

  • No. 1 of article 22 of CIS refers the tax rates to TGIS;

  • The MIF commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations with cards (as mentioned above) fit fully within item 17.3.4 of TGIS;

  • The commissions mentioned above are not covered by the Exemption provided for in item e) of no. 1 of article 7 of CIS.

3.3.1 Error of Interpretation of No. 2 of Article 1 of CIS

The Claimant also argues regarding this correction that there is error of interpretation of no. 2 of article 1 of CIS, because one cannot extract from article 1, no. 2, of CIS that operations that are exempt from VAT are necessarily subject to Stamp Duty, but only that the same operation cannot be cumulatively taxed under VAT and Stamp Duty.

As stated in point 3.2.1, this statement that from article 1, no. 2, of CIS one can only conclude that the same operation cannot be cumulatively taxed under VAT and Stamp Duty is true.

However, for what is stated in that point, the correct interpretation of that part of the Tax Inspection Report is that the Tax and Customs Authority did not understand that operations were subject to Stamp Duty merely because they were not taxed under VAT, but rather that, in addition to this condition (negative delimitation of scope), the subjective scope resulting from provision in the General Table was necessary.

Reference is thus made to what was stated in that point 3.2.1, which has full application here.

For this reason, this correction relating to MIF commissions (Multilateral Interchange Fee) and the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards does not suffer from this defect that the Claimant attributes to it.

3.3.2 Error of Framing of the MIF Commissions and Interbank Commissions Charged for the Use of Automatic Teller Machines in Operations with Bank Cards in Item 17.3.4

As stated, the Tax and Customs Authority understood that the MIF (multilateral interchange fee) commissions and the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards fall within item 17.3.4 of TGIS.

These are amounts charged between financial entities from whose concerted activity results the availability to their customers of the possibility of making payments in Automatic Payment Terminals and carrying out various operations in Automatic Teller Machines (multibanco).

The Claimant alleges, in summary, that the amounts in question result from interbank collaboration convention of reciprocal cooperation and are intended to distribute costs, borne by any and all banking institution, associated with the technology used to make available to its customers automated operations and that "whether in operations conducted on APT support or on ATM support, the fact is that, among banks, there is no specific legal link, but merely the practice of material cooperation acts, sustained by the interbank collaboration convention of reciprocal cooperation celebrated by and among all banking entities".

The Claimant further argues that, if it is understood that the aforementioned fees remunerate services carried out between banking entities, "only net compensation could be relevant and not all multilateral streams of interbank fees".

The Claimant further argues that, being in the presence of facts occurring in 2014, it cannot have applied to it subsequent legislative amendments, in particular those introduced by Law no. 7-A/2016, of 30 March (Budget Law for 2016)., by virtue of the constitutional prohibition of retroactivity of norms that create taxes (article 103, no. 3, of CRP).

In the version in force in 2014, item 17.3.4 of TGIS established the following:

17 - Financial Operations:

(..)

17.3.4 - Other commissions and counterparties for financial services ... 4%.

Law no. 7-A/2016 gave this item the following wording:

17.3.4 - Other commissions and counterparties for financial services, including fees relating to card-based payment operations ... 4%

Article 154 of the same Law attributed interpretative nature to this new wording.

Subsequently, Law no. 22/2017, of 23 May, came to add item h) to no. 3 of article 3 of CIS establishing the following:

3 - For the purposes of no. 1, the holder of the economic interest is considered to be:

h) In card-based payment operations, provided for in item 17.3.4 of the General Table of Stamp Duty, credit institutions, financial companies or other entities legally assimilated thereto and any other financial institutions to whom these are owed;

In light of the wording in force in 2014, it appears that the commissions in question, charged between banking entities, were not classifiable within item 17.3.4 of TGIS.

In fact, reference was made to "financial operations" and "other commissions and counterparties for financial services" and article 3, no. 3, item g) of CIS established that "the holder of the economic interest is considered to be" "in other financial operations carried out by or with the intermediation of credit institutions, companies or other financial institutions, the customer thereof".

From the set of these norms, it was inferred that the "financial operations" to which item 17.3.4 referred would be those which are practiced between these and their customers, who are the holders of the economic interest which, in this type of acts subject to stamp duty, constituted the basis for imposition of the tax burden, pursuant to article 3.

Being thus, there would be no basis for taxing the commissions and counterparties charged between banking entities to distribute among themselves the expenses necessary to support the functioning of the automatic payment system (MIF), as it is evident that in those interbank payments there was no relevance whatsoever of the interest of customers.

On the other hand, as regards the use of bank cards, credit institutions were prohibited from "charging any direct expenses for the performance of banking operations in automatic teller machines" (article 2 of Decree-Law no. 3/2001, of 5 January). That is, if it is true that as regards operations in automatic teller machines (multibanco), there was provision of financial services to customers of banking institutions, it is also true that for the provision of these there could be no commissions or counterparties classifiable within item 17.3.4.

In this context, it is to be concluded that item 17.3.4, in the wording in force in 2014, did not encompass the MIF nor the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards.

Being thus, it must be concluded that the legislative amendments introduced by Law no. 7-A/2016 and by Law no. 22/2017 cannot be applied to the situation in question, by virtue of the constitutional prohibition of retroactivity of the creation of taxes.

In fact, article 103, no. 3, of CRP establishes that no one can be obliged to pay taxes that have retroactive nature.

The interpretative law, integrating itself into the law being interpreted, pursuant to article 13 of the Civil Code, necessarily has effects prior to its entry into force, at least that of eliminating one or more of the possible interpretations of the law being interpreted. ([8])

The constitutional prohibition of retroactivity of the norms creating tax obligations inferred from no. 3 of article 103 of CRP aims to prevent legislative violations of the principle of legal certainty, in its aspects of certainty in the orientation of the conduct of taxpayers and security of the effects created by situations already occurred.

It may be understood, following the teachings of BAPTISTA MACHADO, that in situations where the interpretation that is given in the new law comes to fix one of the possible interpretations of the old law with which the interested parties could and should have counted is not susceptible to violate safe and legitimately founded expectations, so that the reasons justifying the prohibition of retroactivity are not verified. As interpretations possible of the old law with which interested parties could and should have counted cannot be considered those that overstep, restrictively or extensively, its literal wording, at least as long as there are no doctrinal positions or jurisprudential practice adopting them, but do include those that are viable in light of the previous legal text in a mere declarative interpretation.

It is essentially in this sense that the Constitutional Court has recently decided, as can be seen from award no. 644/2017, whose jurisprudence is reaffirmed in award no. 92/2018:

As explained in Award no. 267/2017, due to the integration of the interpretative law into the law being interpreted as provided for in article 13, no. 1, of the Civil Code, one can in a certain sense speak of a formal retroactivity inherent to every interpretative law: there is retroactivity, because such law applies to facts and situations prior, and the same retroactivity is "formal", since the law, "coming to enshrine and fix one of the possible interpretations of the [prior law – whose meaning and scope could not have been considered certain –] with which interested parties could and should have counted, is not susceptible to violating safe and legitimately founded expectations" (cfr. Batista Machado, Introdução ao Direito e ao Discurso Legitimador, Almedina, Coimbra, 1983, p. 246). Differently, if the new law is intended to apply to facts and legal situations previously regulated by a certain law, then the latter is modified, violating expectations as to its continuity, and such law, insofar as it innovates in relation to the prior law, will be substantial or materially retroactive (cfr. idem, ibidem, p. 247).

From the perspective of protecting the confidence of the recipients of the law, it is relevant that the formally retroactive interpretative law only declares the pre-existing law; whereas the substantially retroactive interpretative law, by modifying the pre-existing law, constitutes new law. It may happen – and does happen with some frequency – that the legislator expressly declares or qualifies as "interpretative" certain provision of a new law, even when that provision is actually innovative. A law that modifies the pre-existing law – that is to say, that constitutes new law – under the guise of "interpretative law" will necessarily violate any prohibition of retroactive laws valid for its field of material application.

In the case in question, there is a situation in which the new law to which interpretative nature was attributed is truly innovative, so that article 154 of Law no. 7-A/2016 is materially unconstitutional, by being incompatible with the prohibition of retroactivity contained in article 103, no. 3, of CRP, by providing for a retroactive application of the amendment that that Law introduced in item 17.3.4 of TGIS.

For this reason, by virtue of the provision of article 204 of CRP, which establishes that "in cases submitted to judgment courts cannot apply norms that violate the provisions of the Constitution or the principles contained therein", the application of that article 154 must be refused, as well as of the new wording of item 17.3.4.

With the possibility of applying the new legislation being ruled out, it is to be concluded, for what has been stated, that the MIF and the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards cannot be classified within item 17.3.4 of TGIS, in force in 2014.

For the foregoing, the correction relating to the MIF and the interbank commissions charged for the use of Automatic Teller Machines in operations with bank cards is illegal, as it suffers from the defect of violation of law, which justifies the annulment of the assessment, in the respective part (correction in the amount of € 1,418,351.65).

Thus, the consideration of the remaining issues relating to this correction is rendered moot.

4. Indemnification for Unwarranted Guarantee

The Claimant provided guarantee to suspend the tax execution proceeding instituted for coercive collection of the impugned assessment and makes a request for indemnification, pursuant to article 53 of LGT.

Article 171 of CPPT establishes that "indemnification in case of bank guarantee or equivalent being unjustifiably provided shall be requested in the proceeding in which the legality of the executable debt is contested" and that "indemnification must be requested in the complaint, impugnation or appeal or in case its grounds are subsequent within 30 days after its occurrence".

Thus, it is unequivocal that the judicial review proceeding encompasses the possibility of condemnation to payment of unwarranted guarantee and is even, in principle, the appropriate procedural means to lodge such request, justified by obvious reasons of procedural economy, as the right to indemnification for unwarranted guarantee depends on what is decided on the legality or illegality of the assessment act.

The request for constitution of the arbitral tribunal and for arbitral pronouncement has as a corollary that it becomes in the arbitral proceeding that the "legality of the executable debt" will be discussed, so that, as results from the express wording of that no. 1 of the referred article 171 of CPPT, it is also the arbitral proceeding that is appropriate to consider the request for indemnification for unwarranted guarantee.

The regime of the right to indemnification for unwarranted guarantee is contained in article 53 of LGT, which establishes the following:

Article 53

Guarantee in Case of Improper Performance

  1. The debtor who, to suspend execution, offers bank guarantee or equivalent shall be indemnified wholly or partially for damages resulting from its provision, should he have maintained it for a period longer than three years in proportion to success in administrative appeal, judicial impugnation or opposition to execution that have as their object the debt guaranteed.

  2. The period referred to in the preceding number does not apply when it is found, in gracious complaint or judicial impugnation, that there was error attributable to the services in the assessment of the tax.

  3. The indemnification referred to in number 1 has as its maximum limit the amount resulting from applying to the value guaranteed the rate of indemnificatory interest provided for in this law and may be requested in the very proceeding of complaint or judicial impugnation, or autonomously.

  4. Indemnification for improper provision of guarantee shall be paid by offset against the tax revenue of the year in which payment was made.

In the case in question, it is manifest that the errors affecting the corrections underlying the impugned assessment are attributable to the Tax and Customs Authority, as the corrections were its initiative and the Claimant in no way contributed to those errors being committed.

Therefore, the Claimant has the right to indemnification for the guarantee provided, proportionally to the success of the request for annulment of the assessment.

As there are no elements allowing the determination of the exact amount of indemnification, the condemnation will have to be made with reference to what comes to be assessed in execution of the present award, in harmony with the provision of article 609, no. 2, of the Code of Civil Procedure, subsidiarily applicable by virtue of the provision of article 29, no. 1, item e), of RJAT.

5. Decision

In these terms, the Arbitral Tribunal agrees to:

  • Judge the request for arbitral pronouncement partially well-founded;

  • Annul the Stamp Duty (IS) assessment no. 2017..., of 12-01-2017 and respective compensatory interest assessments nos. 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017... and 2017..., in the parts in which they are based on the corrections referred to in points 3.2.5 (Stamp Duty in the amount of € 6,361.76) and 3.3.2 (Stamp Duty in the amount of € 1,418,351.65);

  • Dismiss the Tax and Customs Authority from the request for annulment of the assessment in the remaining part;

  • Judge the request for indemnification for unwarranted guarantee partially well-founded and condemn the Tax and Customs Authority to pay to the Claimant, in the proportion in which the request for annulment of the assessment is judged well-founded, the indemnification that comes to be assessed in execution of the present award, on the basis of the expenses incurred by the Claimant to suspend the tax execution proceeding instituted for coercive collection of the assessed amount.

6. Value of the Case

In harmony with the provision of articles 306, no. 2, of CPC and 97-A, no. 1, item a), of CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 2,046,052.39.

7. Communication to the Office of the Public Prosecutor

Once the application of article 154 of Law no. 7-A/2016, of 30 March, was refused, on the grounds of unconstitutionality, as well as the new wording of item 17.3.4, which introduced in TGIS, notify the Office of the Public Prosecutor General, for the purposes of article 280, no. 5, of CRP.

Lisbon, 13-11-2018

The Arbitrators

(Jorge Lopes de Sousa)

(António Menezes Cordeiro), with the caveat that, materially and in my view, payment services do not necessarily have a financial nature: a point which is not relevant for the present concrete case.

(Sérgio Vasques)

[1] In this sense, among many, see the award of the Supreme Administrative Court of 06-07-2016, proceeding no. 01436/15.

[2] It is irrelevant for this purpose to know whether, after effecting payment, the Claimant has or does not have recourse against the holder of the economic interest.

[3] As referred to in the award of the Central Administrative Court of South of 30-04-2013, delivered in proceeding no. 04457/11, following DIOGO FEIO, Tax substitution and withholding at source: the specific case of income taxes:

"Tax repercussion of the tax is thus verified, given that "the subject directly determined by law to pay the tax is not truly the holder of the wealth to be taxed, but merely a subject on whom it is easier to execute collection" Diogo Feio, Tax substitution and withholding at source: the specific case of income taxes, Coimbra Editora, 2001, p. 93.. "The actual taxpayer is then the subject who, despite not being provided for in the tax law rule, actually bears the amount owed" Diogo Feio, Tax substitution and withholding at source: the specific case of income taxes, Coimbra Editora, 2001, p. 96. In tax repercussion, "[e]verything happens only between two private subjects, with the removal of the active subject from the tax legal relationship" Diogo Feio, Tax substitution and withholding at source: the specific case of income taxes, Coimbra Editora, 2001, p. 93".

[4] "Bilingual Glossary", available at https://www.bportugal.pt/glossario/c.

[5] Available at
https://www.bportugal.pt/sites/default/files/anexos/pdf-boletim/10_terminais_de_pagamento_e_caixas_automaticos.pdf

[6] This conclusion is reinforced by legislation subsequent to 2014, in particular Regulation (EU) no. 2015/751, of the European Parliament and of the Council, of 29 April 2015, on interchange fees applicable to card-based payment operations, as is clarified in the arbitral decision delivered in proceeding no. 756/2016-T.

And, if it is true that this is legislation that was not in force in 2014 and that, for this reason, could not define the legal framework applicable to the situation in question, it is also equally true, as stated in the award delivered in arbitral proceeding no. 496/2017-T, that "given the structural immutability of the card payment system, it was not the 2015 regulation that created ex novo the notions that the "acquirer" provided a "payment service", having limited itself, in this particular, to setting forth a situation contractually defined" and that "the provisions of the Claimant before and after the entry into force of Regulation (EU) no. 2015/751 – in terms of the functioning of the electronic payment system

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) treatment of Merchant Service Charges (Taxa de Serviço do Comerciante) in Portugal?
In Portugal, Merchant Service Charges (MSC) are generally subject to Stamp Tax when they represent commissions charged by financial institutions to merchants for payment card acceptance services. According to the Tax Authority's interpretation in this case, MSC fits within item 17.3.4 of the General Stamp Tax Table as a commission for automatic payment services. Since these services are VAT-exempt under Article 9(27)(c) of the VAT Code, they fall within the Stamp Tax scope pursuant to Articles 1(1) and 1(2) of the Stamp Tax Code. The tax obligation arises at the moment of collection of the commission (Article 5(1)(h) CIS), with the merchant typically bearing the economic burden as the customer of the service (Article 3(3)(g) CIS), while the financial institution acts as the taxpayer responsible for assessment and payment.
How does Portuguese tax law apply to Multilateral Interchange Fees (Taxa Multilateral de Intercâmbio) and interbank commissions for Stamp Tax purposes?
Portuguese tax law treats Multilateral Interchange Fees and interbank commissions for ATM services as potentially taxable under Stamp Tax when they constitute remuneration for financial intermediation services. The Tax Authority's position is that these fees, when charged for ATM withdrawals or payments using cards, represent commissions for financial services that fall within the Stamp Tax scope under item 17.3.4 of TGIS. The legal framework considers these transactions as operations carried out by or with the intermediation of credit institutions (Article 3(3)(g) CIS). The taxable amount corresponds to the commission value, and the tax obligation arises upon collection of these fees. However, the temporal application of tax law becomes critical, as changes in legislation or administrative interpretation may affect whether these fees were properly taxable during the relevant period, requiring analysis of transitional rules and retroactivity principles.
What are the rules on temporal application of tax law (aplicação da lei fiscal no tempo) in Portuguese Stamp Tax disputes?
Yes, taxpayers can claim compensation for undue guarantees (indemnização pela prestação de garantia indevida) in CAAD arbitral proceedings. When tax authorities issue assessments that are subsequently annulled or declared illegal, taxpayers who provided bank guarantees or other security to suspend enforcement proceedings may be entitled to indemnification for the costs incurred. This right derives from the principle that taxpayers should not bear financial losses resulting from unlawful tax assessments. The compensation typically covers guarantee commission costs, bank fees, and other directly related expenses for the period the guarantee was maintained. In this case, the taxpayer provided a bank guarantee exceeding €2 million to suspend tax execution proceedings and specifically requested such compensation in the arbitral petition, demonstrating that CAAD's jurisdiction extends beyond merely declaring assessments illegal to include consequential financial remedies.