Summary
Full Decision
ARBITRAL DECISION
I – REPORT
A…, S.A., legal entity nº…, with registered office in …, parish …, … (hereinafter referred to as "Claimant"), following notification of the statement of assessment for Corporate Income Tax (IRC) nº 2017…, of 6 September 2017, relating to the financial year 2013, the corresponding statement of account reconciliation and the statement of assessment for compensatory interest nº 2017 … (doc. 1 presented with the arbitral petition and pp. 57 et seq. of admin. file 10), hereby, pursuant to the provisions of subparagraph a) of paragraph 1 of article 2 and article 10, both of Decree-Law nº 10/2011, of 20 January, requests the constitution of an Arbitral Tribunal with a view to the declaration of illegality and partial annulment of the above-identified acts.
The Respondent is the Tax and Customs Authority (hereinafter referred to as "TA" or "Respondent").
The request for constitution of the arbitral tribunal was accepted by the Honourable President of the Administrative Arbitration Centre (CAAD) and automatically notified to the Respondent in accordance with the regulatory terms.
Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of Decree-Law nº 10/2011, of 20 January, as amended by article 228 of Law nº 66-B/2012, of 31 December, the Deontological Council of CAAD appointed as arbitrators of the collective arbitral tribunal Judge José Poças Falcão, Professor Doctor Paulo Jorge Nogueira da Costa and Doctor Maria Cristina Aragão Seia, who communicated acceptance of the assignment within the legal timeframe.
On 20-02-2018, the Parties were duly notified and did not manifest, within the legal terms and timeframe, any wish to challenge the appointment of the arbitrators (article 11, paragraph 1, subparagraphs a) and b) of the Legal Framework for Tax Arbitration (RJAT), in conjunction with articles 6 and 7 of the Deontological Code).
In accordance with the provision in subparagraph c), of paragraph 1, of article 11 of RJAT, the Arbitral Tribunal was constituted on 12-03-2018.
II – PRELIMINARY RULING
This Arbitral Tribunal is materially competent.
No exceptions were raised.
The Parties possess legal personality and judicial capacity, have legitimate interest in the arbitral pronouncement, and are duly represented, in accordance with the provisions of articles 4 and 10 of RJAT and article 1 of Ordinance nº 112-A/2011, of 22 March.
No irregularities are present, therefore the merits must be examined.
III. MERITS
FACTUAL MATTERS
Proven Facts
The Tribunal considers the following facts as proven:
The Claimant, previously designated B…, S.A. and, prior to that, C…, S.A., is a company whose principal activity consists of the wholesale trade of cellulose pulp and paper and their derivatives and related products, as well as products and materials directly and indirectly used in their production.
In the financial year 2013, the Claimant was the parent company of a group of companies – the D… Group – for the purpose of applying the Special Tax Regime for Groups of Companies ("RETGS") in IRC.
The Claimant, in the periods from 2009 to 2012, considered the acquisition of tangible fixed assets installed in its industrial hubs at … and … to be relevant investment for RFAI.
On 27 December 2013, an increase of € 74,950,000.00 was made to the share capital of E…, S.A. ("E…"), currently designated F…, S.A. (NIF…), through the issuance of 74,950,000 new registered shares, with a nominal value of € 1.00 each, entirely subscribed by the Claimant – cf. doc. nº 2 attached with the arbitral petition.
Of this amount, the sum of € 58,656,876.00 was contributed in kind, with assets from its tangible fixed assets and inventories valued at € 44,502,254.00 and € 14,154,622.00 respectively having been transferred by the Claimant; that is, the set of tangible fixed assets acquired in the years 2009, 2010, 2011 and 2012 that comprised the investment relevant for the purpose of benefit from RFAI.
The Claimant came to directly hold 99.94% of the shares of E…, with the remaining 0.06% remaining in the ownership of the previous sole shareholder, G…, SGPS, S.A. – currently designated H…, SGPS, S.A. (NIF…).
E… is included within the scope of the D… Group subject to RETGS in the financial year 2013.
The Group presented, as per the statement filed on 14.11.2016, identified with nº …, taxable income in the amount of € 95,263,336.99.
The Claimant invoked in the said statement the right to deduct from the tax an amount of tax credit of € 28,931,380.90, corresponding to part of a total of tax benefits in the amount of € 29,616,937.80 resulting from the carry-forward of tax credits constituted and not used by the Group in prior periods and tax credits constituted in 2013 by the companies that make up the same.
Under the service order nº OI2015…, of 4 December 2015, the Division for Inspection of Non-Financial Companies II of the Large Taxpayers Unit ("LTU") carried out an internal and partial inspection procedure on group D…, S.A. (cf. p. 5 of RIT - p. 10 et seq. of admin. file 10).
By means of letter nº…, of 11 May 2017, the LTU notified the Claimant of the draft inspection report ("PRIT"), in which the TA proposed an increase of € 19,135,808.51 to the tax due by the D… Group for the financial year 2013 (p. 20 et seq. of admin. file 2).
The TA challenged the tax credit for RFAI fiscal benefit, that is, the carry-forward from prior periods and the consequent use in 2013, on the grounds that the Claimant did not comply with the provision of article 2, paragraph 3, subparagraph c) of RFAI: the obligation to maintain "in the enterprise and in the region for a minimum period of five years the assets which are the object of investment".
The Claimant exercised, in writing, the right to a hearing, on 5 June 2017 regarding the corrections proposed in the PRIT (p. 25 et seq. of admin. file 2).
On 1 September 2017, the final inspection report ("RIT") was prepared, and the TA determined the increase of the overall amount of € 19,135,808.51 to IRC due by the D… group for the financial year 2013, corresponding to (cf. p. 4 of RIT - p. 10 et seq. of admin. file 10):
(i) € 17,727,402.35 for the allegedly improper carry-forward and deduction in 2013 of a tax credit relating to the Tax Support Scheme for Investment ("RFAI") constituted between the financial years 2009 and 2012;
(ii) € 1,408,406.16 by way of penalty for the transfer of assets that were the object of investment eligible for RFAI purposes, corresponding to € 1,293,658.70 as fiscal benefit improperly deducted in 2013 (line 22 – reinstatement of fiscal benefits – of the IRC assessment statement for 2013, doc. nº 1 attached with the arbitral petition) and € 114,747.46 as compensatory interest at the increased rate of 9%, provided as of the date of the facts in article 5 of RFAI.
The Claimant was notified of the statement of assessment for Corporate Income Tax (IRC) nº 2017…, of 6 September 2017, relating to the financial year 2013, with a final payment date of 08.11.2017, the corresponding statement of account reconciliation and the statement of assessment for compensatory interest nº 2017… (doc. 1 presented with the arbitral petition and pp. 57 et seq. of admin. file 10).
On 26 September 2017, the now Claimant requested from the Director-General of the TA, under article 64, paragraphs 1, subparagraph a), and 2, of the Supplementary Regime of Tax Inspection Procedure ("RCPIT"), the approval of the conclusions contained in the RIT (cf. doc. nº 3 attached with the arbitral petition).
As of the date of presentation of this arbitral petition, the Director-General of the TA had not yet pronounced on the same.
The Claimant was served, on 28.11.2017, with notice of the institution of a tax enforcement proceeding for coercive collection of the assessment now being challenged (doc. 7 attached with the arbitral petition).
The Claimant provided, on 07.12.2017, a bank guarantee (nº…, issued by Bank I…, SA) in order to obtain suspension of the tax enforcement proceedings instituted (docs. 8-10 attached with the arbitral petition).
Unproven Facts
There are no facts relevant to the decision of the case that have not been proven.
1.3. Reasoning regarding the factual matters
The facts were established as proven on the basis of documents presented by the parties and contained in the administrative file, as well as the positions of the parties, it being noted that no effective disagreement regarding the factual matters emerges from the positions taken by Claimant and Respondent, the disagreement being confined to matters of law.
MATTERS OF LAW
§1. Issues to be decided
A - On the legality of the additional assessment as regards the correction made in the amount of € 1,408,406.16
In the arbitral petition, the Claimant partially contests the legality of assessment nº 2017… of 06.07.2017 relating to IRC for the financial year 2013. The said additional assessment was based on the RIT prepared by the Tax Inspection Services (SIT) under the Service Order nº OI 2015…, with the dispute in the present proceedings concerning the part relating to the correction made by way of penalty for the transfer of assets that were the object of RFAI benefit, in the overall amount of € 1,408,406.16 (being € 1,293,658.70 relating to tax in arrears and € 114,747.46 relating to compensatory interest at the increased rate of 9%).
In the 2013 Group Statement, presented on 14.11.2016, the Claimant deducted from the assessed tax a tax credit resulting from carry-forward of tax credits constituted and not used in prior periods and tax credits constituted in 2013 by the companies of the Group.
The TA considers that this is not admissible, since the Claimant, during the year 2013, transferred to its subsidiary E… SA a set of tangible fixed assets acquired in the years 2009, 2010, 2011 and 2012 that comprised the investment relevant for determining the RFAI fiscal benefit, in violation of article 2, paragraph 3, subparagraph c) of Law 10/2009.
According to this legal provision, the investment made in 2009 and considered eligible at the time as relevant investment for RFAI, cannot cease to be the property of the company and/or, while continuing to be part of the company's assets, be allocated to an establishment in a region different from that in which it was initially installed during the years 2009, 2010, 2011, 2012 and 2013 (considering here that the IRC taxation periods coincide with the calendar year as occurs with the D… group in these years). It falls to be decided.
The Tax Support Scheme for Investment (RFAI), was approved by Law nº 10/2009, of 10 March, whose article 2, paragraph 1, provides that "[t]he RFAI 2009 is applicable to IRC taxpayers" who exercise, as their principal activity, some of the activities described in the respective subparagraphs a) and b).
Article 2, paragraph 3, of the same legal text establishes that "[t]hose IRC taxpayers may benefit from the tax incentives provided for in this scheme who cumulatively fulfill the following conditions: a) Have regularly organized accounting, in accordance with accounting standardization and other legal provisions in force for their respective sector of activity; b) Their taxable profit is not determined by indirect methods; c) Maintain in the enterprise and in the region for a minimum period of five years the assets which are the object of investment; d) […]; f) Effect relevant investment that provides for the creation of jobs and their maintenance until the end of the deduction period set out in paragraphs 2 and 3 of article 3".
The TA takes the view that it is within the legal and tax sphere of each of the taxpayers that the requirements for the constitution of the RFAI tax credit are verified, and that it is also within that legal and tax sphere that the requirements for the maintenance of the RFAI fiscal benefit are verified.
The concept of IRC taxpayer, invoked in the provisions transcribed above, is defined in article 2 of the Corporate Income Tax Code (CIRC) as follows:
"a) Commercial or civil companies in commercial form, cooperatives, public enterprises and other legal entities of public or private law, with registered office or effective management in Portuguese territory;
b) Entities without legal personality, with registered office or effective management in Portuguese territory, whose income is not subject to personal income tax (IRS) or IRC directly in the ownership of natural or legal persons;
c) Entities, with or without legal personality, that do not have registered office or effective management in Portuguese territory and whose income obtained therein is not subject to IRS".
Thus, it follows from paragraphs 1 and 3 of article 2 of RFAI that the taxpayer who benefits from the tax incentives is the IRC taxpayer.
On the other hand, it follows from subparagraph c), of paragraph 3, of article 2 of RFAI the requirement that the assets that are the object of investment be maintained in the enterprise (and in the region), for a minimum period of five years.
The legislator does not, therefore, use the concepts of IRC taxpayer and enterprise indistinctly, and it should be presumed that the tax legislator adopted the most accurate solution and was able to express itself correctly, in accordance with the provision of article 9, paragraph 3, of the Civil Code.
With regard to the legal requirement contained in subparagraph c), of paragraph 3, of article 2 of RFAI, the concept that is relevant is that of enterprise, which is why interpretive effort is justified to determine whether, in the case sub judice, the minimum five-year period for maintenance "in the enterprise" of the assets that are the object of investment was, or was not, respected.
To this end, the interpreter must apply the provisions of article 11 of the General Tax Law (LGT), which provides as follows:
"1 - In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.
2 - Whenever tax norms employ terms proper to other branches of law, these must be interpreted in the same sense that they have therein, unless otherwise directly follows from the law.
3 - If doubt persists about the meaning of the rules of incidence to be applied, account must be taken of the economic substance of the tax facts.
4 - […]".
In referring to "general rules and principles of interpretation and application of laws", paragraph 1 of article 11 of LGT refers us to article 9 of the Civil Code, which provides as follows:
"1. Interpretation must not be confined to the letter of the law, but must reconstitute the legislative thought from the texts, taking especially into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.
2. However, the interpreter cannot take into account legislative thought that does not have a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed.
3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most accurate solutions and was able to express its thought in adequate terms".
Paragraph 1 of article 9 recognizes the importance of the unity of the legal system, thus pointing out the relevance of systematic coherence in legal interpretation.
The RFAI, in its original version, contained no definition of enterprise for the purpose of its application, although it referred to European Union law for the definitions of "enterprises in difficulty" and "micro, small and medium enterprises" [Article 2, paragraph 3, subparagraph e), and paragraph 4)].
With respect to "micro, small and medium enterprises", the RFAI provided for the application of Annex I of Commission Regulation (EC) nº 800/2008, of 6 August 2008, whose article 1 contained the following definition of enterprise:
"An enterprise is any entity which, regardless of its legal form, exercises an economic activity. These include, in particular, entities which exercise a craft or other activities on an individual or family basis, partnerships or associations which regularly exercise an economic activity".
That is, according to the EU legislator, what is decisive in the concept of enterprise is not the form it may take, but rather its purpose – the exercise of an economic activity.
As stated in the Supreme Court of Justice ruling nº 4056/03.6TBGDM.S1, of 11 March 2010, "[t]he concept of enterprise, the basic cell of the modern economy, may be defined as follows: it is an organization of persons and assets that has as its object the exercise of an economic activity in a market economy. Breaking down this concept into the following elements: (i) organizational element; (ii) personal element; (iii) patrimonial element; (iiii) teleological element (…). Collective enterprises – as opposed to individual enterprises – are those that are linked to a legal structure endowed with collective personality. Such legal structure may take various forms: (i) commercial companies, (ii) cooperatives and (iii) public enterprises, etc.".
In the same sense, the Supreme Court of Justice, in its ruling nº 8/2016, of 15 April 2016, states that "[b]asically, the enterprise constitutes a stable organization of means with a view to pursuing an economic activity (…) That is, a "stable organizational complex", of "persons and assets", for "the exercise of economic activities"".
Legal doctrine has emphasized the distinction that exists between the concept of company and the concept of enterprise.
According to Coutinho de Abreu, "(…) the idea of non-identity [between company and enterprise] is confirmed at various moments in corporate life. Thus, for example, the exercise of the business activity for which the company is formed is normally subsequent to that formation (the company precedes the enterprise); the social patrimony, even after the enterprise is formed, need not be exhausted in this (the patrimony of the company may comprise assets and values not allocated to the enterprise); the company may carry out transactions having as their object the respective enterprise (selling it, leasing it, etc.); the company may survive its enterprise (e.g., in case of dissolution, the company remains until the end of liquidation, and the enterprise may become extinct before that term, or the company may become extinct before it (with the enterprise continuing in the ownership of another subject)"[1].
As José Engrácia Antunes refers, "[t]he group of companies – also called group enterprise or multi-company enterprise – constitutes the typical organizational form of the large enterprise of our time"[2].
Also according to José Engrácia Antunes, "[a]n area where the legislator has traditionally assumed a position marked by realism, neutrality and transparency in the treatment of legal forms of exercise of business activity, it can be stated that Tax Law also early on gave particular attention to the phenomenon of corporate groups, moving gradually but consistently toward a "economic vision" of the multi-company enterprise ("wirtschaftliche Betrachtung") and elevating this to an autonomous object of imputation of legal-tax norms, beyond the mere individual consideration of the entities integrated within its perimeter"[3].
As the North Central Administrative Court decided in ruling nº 00010/00, of 18 June 2009, with reference to the Supreme Administrative Court ruling of 2 February 2005, "in the absence of a legal definition of the concept of commercial or industrial activity, for tax purposes, doctrine and jurisprudence have come to understand as applicable the economic concept of commerce and industry (…) [it seems] to reside in the idea, in the concept, of enterprise, whereas, in the broad sense, an organization of persons and capital that pursues a certain aim of economic matrix, tending toward, profit, the decisive and preponderant element in establishing a valid, operative notion, from the point of view of tax law, of commercial and industrial activity".
Understanding the concept of enterprise in the terms set out, there is no reason to identify the term "enterprise", used by the legislator in subparagraph c), of paragraph 3, of article 2 of RFAI, with "unitary enterprise", "company" or "legal entity", and to exclude the "multi-company enterprise" or "group enterprise".
The interpretation of the term "enterprise", used in the said legal provision, in a way that also encompasses the multi-company enterprise presents itself as the most coherent in light of the unity of the legal-tax system, considering, first of all, the Special Tax Regime for Groups of Companies (RETGS).
Although the TA maintains that "[t]ax groups are a tax fiction for the purpose of applying RETGS that the legislator introduced to allow for a maximization of a set of tax realities in IRC", but that "it is not the groups that make the investment in formal terms but rather the enterprises" (nº 112 of the Response), this does not prevent the interpreter from considering the existence of this legal regime and attributing relevance to it when seeking a systematically coherent interpretive solution, quite the contrary.
In fact, it would not be understood that the legislator, on the one hand, recognized the legal-tax relevance of groups of companies, with an intention to guarantee tax neutrality, and on the other hand, used in RFAI a concept of "enterprise" in a sense that rejected such legal-tax relevance.
It should be noted that the collection of IRC to which the RFAI credit is deducted is that determined by the entity that makes the relevant investment (article 3, paragraph 1, subparagraph a), of RFAI), although, in the case of application of RETGS, the provision of paragraph 6, of article 90, of CIRC must be observed.
This is a relevant aspect in that in the case of a (single) group enterprise or multi-company enterprise, regardless of its formal ownership, the collection to which the credit may be deducted is only one – the collection of the tax group in which the entity that made the investment eligible for RFAI purposes is integrated.
As the South Central Administrative Court states in ruling nº 05376/12, of 30 April 2014, "[t]he RETGS is dominated by a logic of joint taxation, that is, the group of companies is taxed in the context of IRC, tendentially by its aggregate result, as if it were a single company (…) each company does not lose its legal personality nor does it cease to be a subject of its own tax relationships by virtue of becoming part of a group of companies, because, on the one hand [there is] the legal independence of the grouped companies, which remain formally as entities with their own legal-organizational and patrimonial individuality; on the other hand, [there is] the economic unity of the whole, which effectively behaves in the market as [if] it were a single enterprise".
As José Engrácia Antunes states, [f]or the tax legislator, the economic-material substance of this modern form of organization of the enterprise (multi-company enterprise) thus supersedes its pure legal-formal organization: notwithstanding the legal individuality of its constituent elements, it is the group as a whole, and not the individual companies that comprise it, which becomes the fundamental point of reference in the calculation of taxable income and in the determination of certain tax rights and obligations"[4].
The individual collection of IRC ceases to exist, without more, when companies are integrated into the RETGS perimeter.
Another relevant manifestation of the unitary logic of the group is the IRC payment regime in RETGS provided for in article 115 of CIRC, according to which responsibility is not exclusive to the parent company (in this case, the Claimant), but rather extends, jointly and severally, to all other companies in the group (for example, E…).
This means that the payment of IRC determined by the group is not the exclusive responsibility of the taxpayer who makes the eligible investment and originally holds the assets (in this case, the Claimant), but rather of all companies that are part of its perimeter (including E…).
In those terms, if at the level of IRC the group is treated as a single tax unit – prevailing the reasoning of group enterprise or multi-company enterprise – there is no valid reason why this should cease to apply at the level of RFAI.
It is also important to understand the purpose of the obligation to maintain the eligible assets in the enterprise for a minimum five-year period.
It results from the very nature and purposes of RFAI that the relevance of the eligible investment depends on a certain stability thereof, first and foremost because the benefit in question applies to "productive investment" and not to what is merely speculative.
This stability, combined with the objective of regional development underlying the system of incentives, justifies that the legislator stipulated that the assets should be allocated to the operation of the enterprise for a determined period.
For the purpose of eligibility for RFAI, a direct and essential connection (article 2, paragraph 2, subparagraph a), vi), of RFAI) was required of the investment in assets to a productive activity really exercised in a region of the Country.
A "productive investment" in the "operation of the enterprise" presupposes – because it is inherent to the notion of enterprise – a productive activity, which, by the very nature of things, is not a reality that is exhausted at a moment.
The pursuit of the objective intended by the State with the aid granted under RFAI would, to a large extent, be compromised if the investment could be freely relocated to a different region or transferred to another organizational complex destined to a different economic activity (enterprise).
One would be encouraging, from the tax point of view, an investment devoid of productive character and unfit to generate any benefit for the region.
This is the reason why the legislator set a period for the maintenance in the enterprise and in the region of the assets that are the object of investment (cf. subparagraph c), of paragraph 3, of article 2, of RFAI).
It is, therefore, in light of the unity of the legal system, and taking into account the nature, purpose and manner of operation of the benefit, that the obligation to maintain eligible assets in the enterprise and in the region for five years, which at the date of the facts was provided for in subparagraph c), of paragraph 3, of article 2, of RFAI, must be understood.
In the case sub judice, a formal change in the ownership of the assets occurred, which does not, however, result in their removal from the sphere of the multi-company enterprise, which remain allocated to a particular economic activity, covered by RFAI, it being verified that both companies were integrated in a group – headed by the Claimant – for the purpose of RETGS.
That is, the assets that are the object of investment – listed in Annex II of the RIT – remained within the same productive complex and destined to the same economic purpose.
In other words, the assets that are the object of investment remained in the enterprise (multi-company or group).
In the case sub judice, the transfer of assets from the Claimant to E…, within the context of the increase in the latter's capital, did not prejudice the purpose of preserving the investment assets in the same economic unit – regardless of its organization in the form of a unitary or multi-company enterprise (as is the case) – which the legislator of RFAI sought to safeguard with the obligation of maintenance in the enterprise (and in the region) provided for in the said subparagraph c), of paragraph 3, of article 2.
In fact, the assets continued to be integrated in the complex of means allocated to the economic activity of the D… group in general and, in particular, in the cellulose pulp production industrial establishment at … .
There was, therefore, no violation of the provision in subparagraph c), of paragraph 3, of article 2 of RFAI, and there is no occasion for the application of article 5 of RFAI.
It is concluded, therefore, that the correction made by the TA to the group's IRC with reference to 2013 lacks legal foundation, and consequently, the additional assessment of IRC and compensatory interest above identified must be annulled in the corresponding part, i.e., € 1,408,406.16 (including IRC of € 1,293,658.70 and increased compensatory interest of € 114,747.46) and compensatory interest of € 104,570.26, in the total of € 1,512,976.42.
B - Compensation for the provision of improper guarantee.
The Claimant further submits a request for compensation for the improper provision of a bank guarantee in the enforcement proceedings.
As provided in subparagraph b) of article 24 of RJAT, the arbitral decision on the merits of the claim for which no appeal or challenge is available binds the Tax Authority as from the end of the period provided for appeal or challenge, and the latter, in the exact terms of the decision of the arbitral decision in favor of the taxpayer and until the end of the period provided for spontaneous execution of the sentences of the tax courts, "restore the situation that would exist if the tax act that is the object of the arbitral decision had not been made, adopting the necessary acts and operations for that purpose".
The norm contained in subparagraph b) of article 24 of RJAT is, furthermore, coherent with the provision in article 100 of LGT [applicable by virtue of the provision in subparagraph a) of paragraph 1 of article 29 of RJAT] which establishes that "the tax authority is obliged, in the event of total or partial success of a complaint, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation that is the subject of the dispute, including the payment of indemnity interest, if applicable, as from the end of the period for execution of the decision".
Although article 2, paragraph 1, subparagraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating in the CAAD, without reference to judgments condemning the administration, it should be understood that the competencies include the powers that in judicial challenge proceedings are attributed to the tax courts, being this the interpretation that is in tune with the sense of the legislative authorization on which the Government based itself to approve RJAT, in which it proclaims, as the first guideline, that "the tax arbitral process must constitute an alternative procedural means to judicial challenge proceedings and to the action for the recognition of a right or legitimate interest in tax matters".
Thus, although judicial challenge proceedings are essentially proceedings of mere annulment (articles 99 and 124 of CPPT), the tax authority may be condemned therein to pay indemnity interest and compensation for the provision of improper guarantee.
Regarding the request to condemn the Respondent to pay compensation for improper provision of guarantee, article 171 of CPPT establishes that "compensation in the event of improperly provided guarantee shall be requested in the proceedings in which the legality of the enforceable debt is contested" and that "compensation must be requested in the complaint, challenge or appeal or in case its foundation is subsequent, within 30 days of its occurrence".
It is, thus, unequivocal that judicial challenge proceedings embrace the possibility of condemnation to pay compensation for the provision of improper bank guarantee.
In the case sub judice, the Claimant provided a bank guarantee, issued by Bank I…, S.A. with nº … and in the amount of € 26,022,893.31.
Under paragraphs 1 and 2 of article 53 of LGT, "[t]he debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be compensated totally or partially for the damage resulting from its provision, if it has been maintained for a period exceeding three years in proportion to success in administrative appeal, judicial challenge or opposition to enforcement which have as their object the debt guaranteed", the three-year period not being applied "when it is verified, in a gracious complaint or judicial challenge, that there was an error attributable to the services in the assessment of the tax".
In the present case, the additional assessment is affected by an error – illegality in the broad sense – which is exclusively attributable to the services of the TA.
Thus, proceeding with the request for arbitral pronouncement, the right of the Claimant is recognized to be compensated by the TA for the provision of the improper bank guarantee in the enforcement proceedings.
Concluding that the Claimant is correct in the present proceedings, it should be indemnified by the Respondent for the damage resulting from the provision of improper guarantee in the tax enforcement proceeding nº …2017…, in accordance with the terms provided for in articles 53 of LGT and 171 of CPPT, as shall be determined in the course of execution of this judgment.
§ 2. Other issues raised in the proceedings
The examination of the other issues raised in the proceedings is deemed moot.
IV. DECISION
It is hereby decided by this Arbitral Tribunal:
To find the arbitral petition well-founded and, consequently, to declare illegal and partially annul the act of assessment of IRC nº 2017…, of 6 September 2017, relating to the financial year 2013, in the amount of € 1,408,406.16 (including IRC of € 1,293,658.70 and increased compensatory interest of € 114,747.46), as well as the act of assessment of compensatory interest nº 2017…, in the corresponding portion in the amount of € 104,570.26, in a total of € 1,512,976.42;
To find the request to condemn the Respondent to pay compensation for the provision of improper bank guarantee in the tax enforcement proceeding nº …2017… well-founded, in accordance with the terms provided for in articles 53 of LGT and 171 of CPPT, as shall be determined in the course of execution of the judgment.
V. VALUE OF THE PROCEEDINGS
In accordance with the provision in article 306, paragraph 2, of CPC, article 97-A, paragraph 1, subparagraph a), of CPPT and article 3, paragraph 2, of the Rules on Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 1,512,976.42 (one million five hundred and twelve thousand nine hundred and seventy-six euros and forty-two cents).
VI. COSTS
Pursuant to article 22, paragraph 4, of RJAT, the amount of costs is fixed at €20,196.00 (twenty thousand one hundred and ninety-six euros), in accordance with Table I attached to the Rules on Costs in Tax Arbitration Proceedings, to be borne by the Respondent.
Let notice be given.
Lisbon, 28 May 2018
The Collective Arbitral Tribunal,
José Poças Falcão
(Presiding Arbitrator)
Paulo Jorge Nogueira da Costa
(Deputy Arbitrator)
Maria Cristina Aragão Seia
(Deputy Arbitrator)
[1] On Entrepreneurship (Enterprises in Law), Thesis Collection, Almedina, 1999, pp. 216-217.
[2] Groups of Companies - Structure and Legal Organization of the Multi-Company Enterprise, 2nd edition, Almedina, Coimbra, 2002
[3] Ibid., pp. 201-202.
[4] Op cit., p. 202.
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