Summary
Full Decision
TAX ARBITRATION JURISPRUDENCE
Case No. 105/2019-T
Decision Date: 2019-09-26
IRC
Value of Claim: € 170,231.42
Subject Matter: IRC - Deductibility of Costs - Reasoning of Tax Act. Taxable Patrimonial Value.
ARBITRAL DECISION
They agree in arbitral tribunal
I – Report
- A..., S.A., with the collective person identification number ... and with tax domicile at Rua ..., ... – ..., ...-... Lisbon, hereby requests the constitution of an arbitral tribunal, under the provisions of articles 2, no. 1, paragraph a), and 10 of Decree-Law no. 10/2011, of 20 January, to assess the legality of the additional assessment in IRC, relating to the year 2015, which resulted in tax payable in the amount of € 154,440.67, plus compensatory interest in the amount of € 15,428.02, and default interest in the amount of € 362.73.
The request is based on the following grounds.
Following a tax inspection procedure initiated by the Tax Authority, relating to the financial year 2015, corrections to the taxable income for IRC purposes were determined in the amount of € 1,250,690.50, which include expenses not accepted for tax purposes in the amount of € 46,129.00, and improper deductions by application of article 64 of the IRC Code, combined with rule 16 of no. 4 of article 12 of the IMT Code, in the amount of € 714,418.92, these two corrections being the subject of the present request for arbitral pronouncement.
With respect to this first aspect, which concerns costs relating to travel and accommodation, the Tax Administration invokes that expenses, in order to be deductible, must be properly documented, with the presentation of supporting documents not being sufficient, but it also being necessary to demonstrate that they contributed to obtaining or ensuring income subject to IRC, under the terms of article 23 of the IRC Code.
However, the expenses incurred with such travel relate to a trip made to Brazil by two administrators and two employees of the company, for the purpose of holding meetings and contacting entities and persons with a view to establishing future business relationships, and therefore in the collective interest of the company, and these expenses resulted in the capture of customers who subsequently acquired real property, as is documented through the deeds of purchase and sale.
Which allows one to infer that the expenses incurred were appropriate, necessary and indispensable for obtaining income and cannot be disregarded for tax purposes.
On the other hand, the Tax Authority presented no reasoning that justifies the corrections in a congruent manner, not explaining the absence of a connection, direct or indirect, with income and gains, and thus violating the provisions of article 77 of the General Tax Law.
With respect to the improper deductions, the Claimant proceeded in conformity with the provisions of article 64, no. 3, of the IRC Code, having, to that effect, deducted the difference between the taxable patrimonial values and the effective acquisition value of the real properties transferred during the tax period.
Nevertheless, the tax inspection proceeded to correct those deductions, alleging that the tax base for IMT resulted from the application of rule 16 of no. 4 of article 12 of the IMT Code, and, in that manner, the tax not having been levied on definitive taxable patrimonial values of the real properties in question, rule no. 1 of article 64 was not applicable and, consequently, neither was the deduction referred to in paragraph b) of no. 3 of article 64 of the IRC Code.
The Claimant understands, however, that, under the terms of no. 1 of article 64 of the IRC Code, sellers and buyers of real rights over real property must adopt, for purposes of determining taxable profit for IRC purposes, normal market values, which cannot be less than the definitive taxable patrimonial values that served as the basis for the assessment of IMT, and the only legal mechanism that allows for the departure from this rule is that contained in article 139 of the IRC Code, under which the taxpayer may claim the effective price of purchase and sale.
It is concluded, thus, that the fact that the tax base for IMT resulted from the application of rule 16 of no. 4 of article 12 of the IMT Code is not relevant for purposes of determining taxable profit for IRC purposes, since the legislator did not contemplate it in the regime of article 64 of the IRC Code.
Being that, in these situations, it is not the taxable patrimonial value of the real property that serves as the basis for the assessment of IMT, so the rule provided for in no. 1 of article 64 of the IRC Code must always be complied with by the taxpayer, both with respect to the acquisition value and with respect to the transfer value. And in that sense, the central IRC services also concluded, through Binding Information no. 557, sanctioned by dispatch of 25 March 2011, from the Director of IRC Services.
The arithmetic correction made to that effect therefore constitutes an error regarding the legal assumptions that generates the annulment of the tax act.
The Tax Authority, in its reply, contends that article 23 of the IRC Code contains a general clause, by which expenses recorded in accounting are accepted for tax purposes, provided they are substantiated and indispensable, with the presentation of invoices alone not being sufficient, it also being necessary to demonstrate that the expenses contributed to obtaining or ensuring income subject to IRC. In the case at hand, with essential elements missing for assessing indispensability, specifically the identification of the users of the trips, the time periods in which they occurred and the indication of the reasons for their undertaking, it is not possible to verify the substantiation of the indispensability of the expenses, and it is the Claimant that bears the burden of proof of that requirement.
On the other hand, no defect of lack of reasoning occurred, since the Administration made known the reasons why it made the correction and the Claimant was able to understand the logical reasoning that led to the decision.
As for the deductions by application of article 64 of the IRC Code, it was found that the real properties in question were acquired through judicial auction, in which case the provisions of that article are not applicable.
Indeed, article 12 of the IMT Code determines that the tax is levied on the value stated in the act or contract or on the taxable patrimonial value of the real properties, whichever is greater (no. 1), with the exception of the situations listed in no. 4, and, among them, that of paragraph 16, by which "the value of property acquired from the State, the Autonomous Regions or local authorities, as well as that acquired through judicial or administrative auction, is the price stated in the act or contract."
This requirement is explained because in these cases the reasons for danger of tax evasion or fraud with respect to the declaration of the real value of transactions will not exist, under normal conditions, and only the declared value should be considered as taxable value, without the need to compare it with the patrimonial value. Thus, with the real properties having been acquired in a judicial auction process or in a tax enforcement process, it is important to observe and adopt the value of the contract as the acquisition value for purposes of determining taxable profit, under rule 16 of no. 4 of article 12 of the IMT Code.
It concludes with a view to the dismissal of the arbitral request.
- Following the proceedings, the meeting referred to in article 18 of the RJAT was dispensed with and the submission of optional written arguments was determined for a successive period.
The parties did not allege
- The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the Tax and Customs Authority in accordance with regulatory procedures.
Under the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable period.
The parties were duly and timely notified of that appointment and did not manifest a desire to refuse it, under the combined terms of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in conformity with what is provided in paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 26 April 2019.
The arbitral tribunal was regularly constituted and is materially competent in view of what is provided in articles 2, no. 1, paragraph a), and 30, no. 1 of Decree-Law no. 10/2011, of 20 January.
The parties enjoy legal personality and capacity, are legitimate and are represented (articles 4 and 10, no. 2, of the same statute and 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from nullities and no exceptions were invoked.
It falls to us to assess and decide.
II - Reasoning
Matters of Fact
- The relevant facts for the resolution of the case that may be considered established are the following.
A) The Claimant carries on the business of buying and selling real property and constructing buildings;
B) With respect to the financial year 2015, the Claimant was subject to an inspection procedure, under Service Order no. OI2017..., which resulted in corrections to taxable income for IRC in the amount of € 1,250,690.50, relating to the non-acceptance as expenses for tax purposes of travel expenses of administrators and employees to Brazil and the non-deduction of the difference between the taxable patrimonial values and the effective acquisition value of the real properties transferred during the tax period, by application of article 64, no. 3, of the IRC Code;
C) Not agreeing with the terms and grounds of the corrections made, the Claimant filed an administrative appeal, which was dismissed by dispatch of the Deputy Director of the Finance Directorate of Lisbon, of 16 November 2018, made under delegation of powers;
D) The Tax Inspection Report did not accept for tax purposes the foreign travel expenses recorded in account 625112 – travel and accommodation, in the amount of € 46,129.00, on the following ground:
"It is verified that expenses, in order to be deductible, must be properly documented, consisting in the necessity of substantiation of the expenses incurred and in that case the taxpayer must provide proof of the expenses incurred. For a substantiated cost to be fiscally deductible for IRC purposes, the presentation of supporting documents/invoices is not sufficient, it is necessary to demonstrate that they contributed to obtaining or ensuring income subject to IRC, under the terms of article 23 of the IRC Code";
E) In the declaration of form 22 of the IRC relating to the year 2015, the Claimant recorded, with respect to the urban real property U..., acquired on 26 March 2014, the taxable patrimonial value (€ 165,356.20), the acquisition value (€ 74,000.00) and the sale value realized on 26 January 2015 (€ 115,000.00), and, based on those values, increased in field 745 the amount of € 50,356.20 and deducted in field 772 the amount of € 91,356.20;
F) In the same declaration of form 22 of the IRC, the Claimant recorded, with respect to the urban real property U..., acquired on 23 April 2014, the taxable patrimonial value at the date of the deed (€ 1,197,850.00), later corrected to € 860,810.00, value corresponding to the evaluation subsequently requested, the acquisition value (€ 575,000.00) and the sale value realized on 3 December 2015 (€ 937,500.00), and, based on those values, increased 0.00 in field 745 and deducted in field 772 the amount of € 622,850.00;
G) The Tax Inspection Report considered that, in the case of judicial auction of real property, by force of rule 16 of no. 4 of article 12 of the IMT Code, the taxpayer must record the real properties in the inventories item at the value of their acquisition, this value being relevant in a future transfer of the real properties for purposes of determining taxable profit, there being no need to take into account the difference between the taxable patrimonial value and the acquisition value; and, in that sense, operated the correction of taxable profit in € 714,206.20, corresponding to the sum of the deductions recorded by the taxpayer in field 772 of table 07 of the declaration of form 22:
H) In the decision dismissing the administrative appeal, the Tax Authority, by reference to the information prepared by the Administrative Justice Division, maintained the grounds contained in the Tax Inspection Report to justify the corrections to taxable profit;
I) Agency B... issued two receipt invoices in the name of the Claimant, dated 22 and 25 December 2015, in the amounts of € 20,929.00 and € 25,000.00, respectively, relating to foreign travel expenses;
J) By public deed dated 23 April 2015, the Claimant acquired, in the context of insolvency proceedings no. .../11...T…, of the 2nd Court of Commerce of …, a urban real property for the value of € 1,197,850.00;
K) By public deed dated 26 March 2014, the Claimant acquired, in the context of insolvency proceedings no. .../11...T…, a urban real property for the value of € 74,000.00.
The Tribunal formed its conviction as to the proven factual basis on the basis of the documents attached to the petition and in the administrative proceedings filed by the Tax Authority. The facts contained in paragraphs J, K and L are proven by documents nos. 4, 7 and 8 attached to the initial petition.
Matters of Law
Deductibility of Costs
- The first issue that arises concerns the non-acceptance as tax-deductible expenses of travel expenses that the Claimant alleges relate to a trip made to Brazil by administrators and employees of the company for the purpose of acquiring customers for the purchase of real property.
As results from paragraph D) of the matters of fact, the Tax Administration did not admit the deductibility of these expenses on the grounds that substantiation of expenses for tax purposes depends not only on the presentation of supporting documents, but also on the need to demonstrate that these expenses contributed to obtaining or ensuring income subject to IRC, under the terms of article 23 of the IRC Code.
The Claimant invokes that the expenses were incurred in the collective interest of the company and that the tax act is tainted with the defect of lack of reasoning, since it does not explain the reasons why it was not admitted as a cost for tax purposes, mere reference to the legal provision not being sufficient.
The reasoning of tax acts, in addition to constituting a guarantee of those subject to the administration enshrined constitutionally (article 268, no. 3, of the Fundamental Law), is specially provided for in the General Tax Law, which, in its article 77, determines that reasoning may be effected in summary form, and must always contain the applicable legal provisions, the qualification and quantification of the tax facts and the operations for determining taxable income and the tax (no. 2).
As is the current jurisprudential understanding, the reasoning of the administrative or tax act is a relative concept that varies according to the type of act and the circumstances of the specific case, reasoning being sufficient when it allows a normal addressee to realize the cognitive and evaluative itinerary followed by the author of the act in rendering the decision, that is, when that person may know the reasons why the author of the act decided as it did and not otherwise.
In the case in question, and contrary to what is stated by the Claimant, the Tax Administration did not merely refer to the applicable legal provision, but stated that expenses, in order to be deductible, lack not only documentation, but also substantiation that they were incurred to obtain or ensure income subject to IRC. The Administration thus clarified, in a manner that is sufficiently clear, the reasons for the non-deductibility of the expenses, making note that tax relevance implies demonstration that the expenses were incurred in the interest of the company and making express the idea that for that purpose the presentation of invoices is not sufficient.
The invoked defect of lack of reasoning is therefore not verified.
- A distinct question is whether the expenses can be characterized as costs for tax purposes in the light of the provisions of article 23 of the IRC Code.
In the version prior to Law no. 2/2014, of 16 January, the provision, in the part that is now most relevant to consider, provided as follows:
Article 23
Expenses
1 - Expenses are those that are demonstrably indispensable for the realization of income subject to tax or for the maintenance of the source of income, in particular the following:
(…)
In filling the indeterminate concept of indispensability, to which this provision refers, doctrine and jurisprudence have established an understanding to the effect that from the "legal notion of cost provided by article 23 of the IRC Code does not result that the Tax Administration may call into question the principle of freedom of management, reviewing the goodness and opportunity of the management decisions of the company and considering that only those costs may be assumed fiscally from which direct income accrues to the company or which prove to be convenient to the company."
In summary conclusion, it must be understood that the business activity that generates deductible costs must be that which results in operations that have a purpose (and not an obligatory nexus of immediate causality) of obtaining income or the objective of maintaining the potential of a source of income production. In that sense, productive activity should not be understood in a restrictive sense, but rather in a broad sense, meaning activity related to a source of income generation for the entity that bears the costs. In seeking the meaning of the concept of business activity, it cannot be limited to mere or simple operations of production of goods or services, but presupposes a relationship with the overall economic operations of operation or with the operations or management acts that fall within the proper interest of the entity assuming the costs (see in that sense, the arbitral award rendered in Case no. 480/2016).
It is within this comprehensive scope that the new wording introduced by Law no. 2/2014, of 16 January, with effects from 1 January 2014, must be understood, which, in no. 1, now provided that "for the determination of taxable profit, all expenses and losses incurred or borne by the taxpayer to obtain or ensure income subject to IRC are deductible." As clarified in the Final Report of the Commission for the Reform of the Tax on Income of Legal Persons, of 30 June 2013, the new wording aimed to implement a greater degree of certainty in the concrete application of deductibility criteria, coming to establish as a general principle that expenses related to the activity of the taxpayer incurred or borne by it are deductible, reinforcing the idea that a connection with the business activity is sufficient, regardless of the actual contribution to income subject to taxation.
On the other hand, the elimination of the adverb "demonstrably," which appeared in the previous wording, does not allow one to conclude that expenses recorded in accounting must always be taken as costs for tax purposes, making it necessary to establish the connection between the expenses incurred or borne and the business interest.
Where there is doubt about the necessity of a particular expense, it falls to the taxpayer to collaborate with the Tax Administration by providing all elements that would allow clarifying the tax situation. Nor would it be reasonable to require the Administration to demonstrate that costs do not have a direct correlation with obtaining income when only the taxpayer is in a position to provide the documents or furnish the information that might dispel the situation of uncertainty regarding the connection of the expense with the business activity (cf. SALDANHA SANCHES, Manual de Direito Fiscal, 3rd edition, Coimbra, p. 389).
In the case under analysis, the Tax Inspection Report only refers to two invoices issued by Agency B... with the mere indication of the service provided (foreign travel expenses) and the amounts payable. And in the context of the present arbitral proceedings, the Claimant, to prove the facts alleged in articles 9, 10, 11 and 12 of the petition – in which it is stated that the charges were incurred with a trip made to Brazil by two administrators and two employees of the company, for the purpose of holding meetings and contacting entities and persons with a view to establishing future business relationships – limits itself to presenting those same invoices as they appear in document no. 4 attached to the initial petition. Upon review of the document, it is immediately concluded that the invoices in question do not allow specifying the destination and purpose of the travel, nor do they identify the persons who made the trips, making it impossible to demonstrate, in this context, that the expenses were incurred in the business interest.
With the burden of proof of the constitutive facts of the right which it claims resting on the taxpayer (article 74, no. 1, of the General Tax Law), and not having succeeded in producing the necessary proof, the request is shown to be, in this part, inconclusive.
Improper Deductions by Application of Article 64, No. 3, of the IRC Code
- Having acquired two real properties in tax enforcement proceedings, the Claimant, for the calculation of taxable profit for 2015, increased the positive difference between the taxable patrimonial value and the transfer value, under the terms of article 64, no. 3, paragraph a), and deducted the difference between the taxable patrimonial value and the acquisition value, under the terms of article 64, no. 3, paragraph a).
Thus, and as results from the matters of fact taken as established (paragraphs E) and F), with respect to one real property, the Claimant increased the value of € 50,356.20, corresponding to the difference between the taxable patrimonial value (€ 165,356.20) and the transfer value (€ 115,000.00), and deducted the value of € 91,356.20, corresponding to the difference between the taxable patrimonial value (€ 165,356.20) and the acquisition value (€ 74,000.00). With respect to another real property, the Claimant increased 0.00, as no positive difference was verified between the taxable patrimonial value (€ 860,810.00) and the transfer value (€ 937,500.00), and deducted the value of € 622,850.00, corresponding to the difference between the taxable patrimonial value (€ 1,197,850.00) and the acquisition value (€ 575,000.00). Being that, in this case, the difference in amounts recorded with respect to the taxable patrimonial value results from the fact that this value was fixed at € 1,197,850.00, at the date of acquisition, and at € 860,810.00, at the date of sale, by effect of an assessment request.
The Tax Authority understands, however, that, by force of sub-rule 16 of no. 4 of article 12 of the IMT Code, in situations where real properties are acquired through judicial auction, the value is that of the price stated in the act or contract, not fitting into normal market situations, so the taxpayer must record the acquisition value in the inventories item and take into account that value in a future transfer of the real property for the purpose of calculating taxable profit, there being no need to take into account the difference between the taxable patrimonial value and the acquisition value.
This criterion is in keeping with what is set forth in the Manual of Tax on Income of Legal Persons, published under the auspices of the Tax Authority, in which it is stated that, in the particular situation where the real property is acquired through judicial auction for a value lower than the taxable patrimonial value, no correction is made to the acquisition value in field 772 of table 07 of the declaration form 22, since, in light of the referred provision of the IMT Code, the acquisition value that is relevant is the price of the act or contract and not the taxable patrimonial value (Manual of Tax on Income of Legal Persons, edition of the Tax and Customs Authority, 2016, pp. 289-290).
To clarify the issue, it is pertinent to bear in mind, therefore, the referred provisions of articles 64 of the IRC Code and 12 of the IMT Code.
The first of these provisions, in the part that is most relevant, under the heading "Corrections to the value of transfer of real rights over real property," prescribes the following:
1 — Sellers and buyers of real rights over real property must adopt, for purposes of determining taxable profit under the terms of this Code, normal market values that cannot be less than the definitive taxable patrimonial values that served as the basis for the assessment of the municipal tax on onerous transfers of real property (IMT) or that would serve in the event of no assessment of this tax occurring.
2 — Whenever, in the onerous transfers provided for in the preceding number, the value stated in the contract is less than the definitive taxable patrimonial value of the real property, it is this value that is to be considered by the seller and buyer, for determining taxable profit.
3 — For application of the provision in the preceding number:
a) The selling taxpayer must make a correction, in the income declaration of the tax period to which the income obtained from the transfer operation is attributable, corresponding to the positive difference between the definitive taxable patrimonial value of the real property and the value stated in the contract;
b) The buying taxpayer adopts the definitive taxable patrimonial value for the determination of any taxable result in IRC with respect to the real property.
In turn, the mentioned article 12 of the IMT Code, applicable to the determination of the taxable value for purposes of that tax, has the following wording:
1 - The IMT shall be levied on the value stated in the act or contract or on the taxable patrimonial value of the real properties, whichever is greater.
2 - In the case of real properties omitted from the matrix or recorded therein without taxable patrimonial value, as well as property or rights not subject to matricial registration, the taxable patrimonial value is determined under the terms of the CIMI.
3 - To the taxable patrimonial value is added the declared value of the component parts, when the same is not included in the referred taxable patrimonial value.
4 - The provision in the preceding numbers is understood, however, without prejudice to the following rules:
(…)
- The value of property acquired from the State, the Autonomous Regions or local authorities, as well as that acquired through judicial or administrative auction, is the price stated in the act or contract;
(…).
An aspect that is important to note, first of all, is that the provisions in question have a distinct field of application.
Article 12 of the IMT Code is intended to fix the taxable value with respect to the municipal tax on onerous transfers of real property (article 2), and may be levied simultaneously with stamp tax (article 3), with the tax obligation arising at the moment when the transfer occurs.
In contrast, article 64 of the IRC Code aims to determine the corrections to be made for the calculation of taxable profit, when there is onerous transfer of real property, stipulating, in essence, the following rules: (a) sellers and buyers must adopt normal market values that cannot be less than the definitive taxable patrimonial values that served as the basis for the assessment of the municipal tax on onerous transfers; (b) when the value of the contract is less than the definitive taxable patrimonial value of the real property, it is this value that is to be considered for determining taxable profit; (c) in this latter hypothesis, that is, when the value of the contract is less than the taxable patrimonial value, the selling taxpayer makes a correction corresponding to the positive difference between the taxable patrimonial value of the real property and the value stated in the contract; the buying taxpayer adopts the definitive taxable patrimonial value for determining the taxable result with respect to the real property.
By effect of the referred rules of paragraphs a) and b) of no. 3 of article 64 of the IRC Code, in the case where there is subsequent transfer of real properties that were previously acquired, the taxpayer, in the capacity of seller, increases in field 745 of table 07 the positive difference between the taxable patrimonial value of the real property and the value of the sale contract, and, in the capacity of buyer, deducts in field 772 of table 07 the positive difference between the taxable patrimonial value of the real property and the value of the purchase contract.
It is certain that article 12 of the IMT Code establishes its own rule for fixing the taxable value with respect to real properties acquired through judicial auction, making it coincide with the price stated in the act or contract, signifying that, in that case, the general rule of no. 1 of that article is set aside, there being no need to take into account the taxable patrimonial value. That is, generally, IMT is levied on the greater of the values to be considered between the contract value or the taxable patrimonial value (no. 1). Except if the acquisition occurs in the context of a judicial auction (or in any of the other cases listed in sub-rule 16 of no. 4 of article 12), in which case there is no need to establish any comparison with the taxable patrimonial value, the taxable value for the purpose of paying the tax being understood as that of the contract price itself.
In no way is it seen what title this specific rule of determining the taxable value for IMT purposes operates to derogate no. 3 of article 64 of the IRC Code, implying the departure from the formula that is provided there for determining taxable profit in IRC when there is onerous transfer.
It is understood that in the situations contemplated in the referred rule of sub-rule 16 of no. 4 of article 12 of the IMT Code there do not subsist the reasons for danger of tax evasion or fraud with respect to the declaration of the real value of transactions, so it does not become necessary to compare the declared value with the patrimonial value (cf. JOSÉ MARIA FERNANDES PIRES, Lições de Impostos sobre o Património e o Selo, Coimbra, 2010, p. 211). However, the ratio legis that makes this solution justifiable for fixing the taxable value in IMT does not have to be transposed to the corrections to be made in the context of determining taxable profit in IRC, nor can it justify the partial revocation of no. 3 of article 64 of the IRC Code only for cases where the exception to the general rule for determining the taxable value for IMT purposes operates.
On the other hand, a combined interpretation of the provisions of article 64, no. 3, of the IRC Code and of sub-rule 16 of no. 4 of article 12 of the IMT Code cannot lead to the establishment of a meaning and scope of the law that has no minimal verbal correspondence in the rule of article 64, no. 3. For the determination of taxable profit, this rule provides for increases corresponding to the positive difference between the taxable patrimonial value and the value of the transfer of the real property, and deductions corresponding to the positive difference between the taxable patrimonial value and the acquisition value. The understanding formulated by the Tax Authority, under the pretext of a combined interpretation of rules, completely ignores these criteria and comes to regard as established another criterion, not expressed in the law, and which results from a provision that is applicable to the determination of the taxable patrimonial value for IMT purposes and not to the determination of taxable profit for IRC purposes.
Being unable to regard as valid the interpretation followed by the Tax Administration, in light of the rules of legal hermeneutics, the request is shown to be well-founded in this part.
III – Decision
Terms of the Decision
a) To dismiss the arbitral request as it relates to the correction made by the tax act in question, in the amount of € 46,129.00, relating to the non-deductibility of expenses;
b) To uphold the arbitral request as it relates to the correction made by the tax act in question, in the amount of € 714,418.92, relating to deductions from the onerous transfer of real property;
c) To annul correspondingly the assessment of compensatory interest and default interest.
Value of the Case
The Claimant indicated as the value of the case the amount of € 170,231.42, which was not contested by the Defendant and corresponds to the value of the assessment that was sought to be opposed, so the value of the case is fixed at that amount.
Costs
Under the provisions of articles 12, no. 2, and 24, no. 4, of the RJAT, and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached to that Regulation, the amount of costs is fixed at € 3,672.00, which is borne by the Claimant in the percentage of 6%, and by the Defendant, in the percentage of 94%.
Notify.
Lisbon, 26 September 2019
The President of the Arbitral Tribunal
Carlos Fernandes Cadilha
The Arbitrator Member
Ana Teixeira de Sousa
The Arbitrator Member
Adelaide Mour
Frequently Asked Questions
Automatically Created