CAAD 110/2018-T: SIFIDE Tax Credits Deduction Against Autonomous Taxation in IRC

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (President Arbitrator), João Taborda da Gama and Carla Castelo Trindade, appointed at the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby agree:

I – REPORT

On 14 March 2018, A... SGPS, S.A., NIPC..., with registered office at ..., lot ..., ..., ...-... Lisbon, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (RJAT), as amended by article 228 of Law No. 66-B/2012, of 31 December, seeking a declaration of illegality of the act of dismissal of the gracious claim presented by the Claimant which concerned the act of self-assessment of Corporate Income Tax (IRC) of Tax Group B... for the financial year 2012, to the extent corresponding to the non-deduction from the collection of IRC of the amount produced by the autonomous taxation rates of fiscal incentives in IRC, namely the fiscal benefits calculated within the scope of the System of Fiscal Incentives for Research and Business Development (SIFIDE), in the total amount of €621,061.76.

To support its request, the Claimant alleges, in summary, that SIFIDE fiscal benefits should be deducted from the collection of autonomous taxation rates because: (i) they can be deducted from the IRC collection as determined under article 90 of the IRC Code; (ii) the collection of autonomous taxation rates is considered as IRC collection, being an integral part of this tax; (iii) the settlement rules provided for in article 90 of the IRC Code are applicable to autonomous taxation rates and (iv) the Claimant's understanding follows the line of CAAD jurisprudence which has already pronounced on this matter.

Subsidiarily, and in the event it is understood that the settlement of autonomous taxation rates is not carried out under article 90/1 of the IRC Code as applicable, the Claimant requests that the illegality of the settlement of autonomous taxation rates be declared (and consequently annulled) due to absence of legal basis for its implementation, with the consequent reimbursement of the amount of €341,517.36, and the payment of indemnity interest.

On 14-03-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

The Claimant proceeded to appoint an arbitrator, having indicated the Hon. Dr. João Taborda da Gama, pursuant to article 11/2 of the RJAT. Pursuant to paragraph 3 of the same article, the Respondent indicated as arbitrator the Hon. Dr. Carla Castelo Trindade.

The arbitrators indicated by the parties were appointed and accepted their respective responsibilities.

By order of 18-04-2018, and following the request presented by the arbitrators designated by the parties for the president arbitrator to be designated by the Deontological Council, the now Reporter was appointed president arbitrator, pursuant to article 6, paragraph 2, subparagraph b) of Decree-Law No. 10/2011, of 20 January, who, within the applicable period, also accepted the responsibility.

On 07-02-2018, the parties were notified of the said designations and did not express any intention to challenge any of them.

In accordance with the provision of subparagraph c) of paragraph 1 of article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 10-05-2018.

On 11-06-2018, the Respondent, duly notified for this purpose, presented its defence by way of objection.

Given that the general procedural principles of procedural economy and prohibition of performing useless acts apply to the arbitral process, pursuant to subparagraphs c) and e) of article 16 of the RJAT, the holding of the meeting referred to in article 18 of the RJAT was dispensed with, as well as the presentation by the parties.

It was indicated that the final decision would be presented by the deadline referred to in article 21/1 of the RJAT.

The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to articles 2, paragraph 1, subparagraph a), 5 and 6, paragraph 1, of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March.

The case does not suffer from any nullities.

Thus, there is no obstacle to the examination of the case.

All things considered, it behoves us to rule

II. DECISION

A. MATTERS OF FACT

A.1. Facts taken as proven

The Claimant was, in 2012, the parent company and responsible for the self-assessment of Corporate Income Tax (IRC) of the tax group (Tax Group B...) to which, in the taxation period of 2012, the Special Tax Regime for Groups of Companies (RETGS) was applicable, and which was composed, in the said taxation period, of itself and by the following companies:

• C..., S.A.;
• D..., SGPS, S.A.;
• E..., S.A.;
• F..., S.A.;
• G..., S.A.;
• H...– Consultancy, Development and Operation of Information Systems, S.A. (which in 2009 incorporated by merger the following companies: I...–, S.A.; J..., S.A.; K..., S.A.; L..., S.A. and which on 28 June 2011 changed its name to M..., S.A.);
• N..., SGPS, S.A.;
• O..., S.A.;
• P..., S.A.;
• Q...–, S.A;
• R..., S.A.;

The Claimant filed on 29 May 2013 the IRC declaration Model 22 for the financial year 2012 of its tax group, having also presented a substitute declaration in which it calculated a final amount of autonomous taxation rates in IRC of €621,061.76.

In the calculation of the tax resulting from the application of autonomous taxation rates in IRC, the AT's computer system flagged divergences ("errors") that prevented the Claimant from entering the value relating to the said autonomous taxation rates in IRC, deducted, from the amount resulting from the application of these rates, the amounts of fiscal benefits recognized to the companies of the tax group under SIFIDE.

This resulted in an excess tax paid by reference to the fiscal year in question.

The amount of CFEI available for use by the Claimant at the end of the financial year 2012 amounted to €3,300,552.07.

On 30 May 2013, the Claimant proceeded to pay the amount calculated as autonomous taxation rates.

The Claimant, in a timely manner, presented a request for gracious claim of the tax act of self-assessment of IRC of its Tax Group for the financial year 2012.

Following presentation of the said gracious claim request, the Claimant was notified of its dismissal on 27-12-2017.

The AT did not calculate the taxable income of the Claimant's Tax Group and respective companies by indirect methods.

Neither the Claimant, nor the companies forming part of the group at the origin of SIFIDE were, at the relevant moment, entities indebted to the State and social security for any taxes or contributions.

A.2. Facts taken as not proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Reasoning for the matters of fact proven and not proven

Regarding matters of fact, the Tribunal does not have to rule on everything that was alleged by the parties, but rather its duty is to select the facts that matter for the decision and to differentiate the proven matter from the not proven (cf. article 123, paragraph 2, of the Tax Code of Procedure and Process [CPPT] and article 607, paragraph 3 of the Code of Civil Procedure [CPC], applicable ex vi article 29, paragraph 1, subparagraphs a) and e) of the RJAT).

Thus, the facts pertinent to the judgment of the case are chosen and delimited according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (cf. previous article 511, paragraph 1, of the CPC, corresponding to the current article 596, applicable ex vi article 29, paragraph 1, subparagraph e) of the RJAT).

Thus, taking into account the positions assumed by the parties, in light of article 110, paragraph 7 of the CPPT, the documentary evidence and the administrative file attached to the case, those facts listed above were considered proven, with relevance for the decision.

B. ON THE LAW

The main question to be decided in the present case, although undoubtedly of some complexity in its resolution, is nonetheless simple in its formulation, and concerns, as the Claimant explicitly formulates it, whether or not the Claimant's Tax Group has the right to proceed with the deduction, also from the IRC collection produced by the application of autonomous taxation rates, of the said credits relating to SIFIDE available in the Claimant's sphere.

The Claimant invokes in its favour, anchoring, essentially, its argumentation in what is therein stated, decisions handed down in arbitral proceedings of CAAD, as listed by it[1], namely proceedings No. 769/2014-T, 219/2015-T, 369/2015-T, 370/2015-T, in the sense of the admissibility of the request, and No. 697/2014-T, in the sense of inadmissibility (all decisions handed down before the 2016 Budget Law), and proceedings No. 637/2015-T, 673/2015-T, 740/2015-T, 744/2015-T, 775/2015-T, 784/2015-T, 5/2016-T, in the sense of the admissibility of the request (these decisions handed down after the 2016 Budget Law).

The issues underlying autonomous taxation rates have been, in this as in other matters, the subject of heated litigation between taxpayers and the Tax Authority, a situation which will certainly not be unrelated to the very nature, indeed anti-systemic, of which they are invested, within the framework of income taxes, where they germinated.

Indeed, the discussion that was triggered with the new autonomous taxation rates introduced by Law No. 64/2008, of 5 December, and initially focused on the nature of the underlying taxable fact for that type of taxation, opened a deep exploratory path regarding the nature of autonomous taxation rates and their relationship with income taxes, in particular IRC, which passed through the issues of the deductibility of the value of autonomous taxation rates from the IRC collection, and the nature, presumptive or otherwise, of autonomous taxation rates on deductible expenses, without there having been, to date, any definitive legislative intervention, doctrinally sustained and coherent, in order to clarify the proper framework of the taxation in question in the structure of the income tax from which they emerge, instead succeeding conjunctural and disconnected legislative interventions, which in no way contribute, on the contrary, to the clarification of the nature and function of such taxation.

In this framework, ad hoc judicial decisions succeed equally ad hoc legislative interventions, creating a context of uncertainty and instability where taxpayers and the Tax Authority have no other way to seek the applicable law than perpetuated litigation, devolving upon the judicial interpreter the ungrateful task of, in the maze of norms generated, serving the possible justice.

Let us see, then.

When speaking of autonomous taxation rates, as is the case, it is convenient from the outset to bear in mind that what is at issue is a set of disparate situations, which will include, at least, three distinct types, namely:

• Autonomous taxation of certain income (e.g.: article 72 of the current CIRS, and, it is believed, that provided for in the current paragraph 11 of article 88 of the IRC Code);

• Autonomous taxation of certain deductible expenses (e.g.: paragraph 7 of article 88 of the current IRC Code);

• Autonomous taxation of other expenses regardless of their respective deductibility (e.g.: paragraphs 1 and 2 of article 88 of the current IRC Code).

From a functional/purposive/foundational perspective of autonomous taxation on expenses (excluding, therefore, autonomous taxation of income), several types have also been identified, such as:

• discouraging certain taxpayer behaviour tending to be associated with situations of fraud or tax evasion, as happens, for example, with autonomous taxation rates on undocumented expenses, or payments to entities subject to privileged tax regimes;

• combating the erosion of the taxable base, as happens, in general, with autonomous taxation rates on deductible expenses;

• discouraging certain spending with presumptively non-business purpose, as happens with autonomous taxation rates on vehicle expenses, allowances, or representation expenses;

• taxation of disguised distribution of income to third parties, not taxed in their sphere (fringe benefits), as happens with autonomous taxation rates on vehicle expenses, allowances, or representation expenses;

• penalisation for incurring certain expenses, which do not affect the taxable base, nor have underlying any distribution of untaxed income to third parties, or fraudulent or evasive potential, but which the legislator, perhaps, considered luxurious or sumptuary, as happens with autonomous taxation rates on certain payments to managers, administrators or directors (current article 88/13 of the IRC Code), as well as autonomous taxation on vehicle expenses insofar as they exceed the normal IRC rate.

These facts become important because they in themselves evidence the disparity and heterogeneity of situations subject to autonomous taxation rates, and the futility of, in case law, synthesizing and seeking a proper and unitary legal nature, common to all situations.

Thus, the discussion should be centred on the concrete question posed by the Claimant and seek a properly founded answer, for the restricted terms of what is at issue in the case, which will be to know whether or not the Claimant's Tax Group has the right to proceed with the deduction, also from the IRC collection produced by the application of autonomous taxation rates, of the said credits relating to SIFIDE available.

Properly framed, in these terms, the question to be resolved in the case, it is still necessary to bear in mind that the fundamental reference for the answer to be given to it will be that formulated in article 9 of the Civil Code, according to which the legislative intent should be reconstructed, from the texts, which has in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

In this framework, the purpose of the present decision will be, not to theorise on the legal nature of autonomous taxation rates in general, or any of its various types, but rather to ascertain whether the legislative intent, with a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed, was, at the date of the taxable fact in question in the case, in the sense of it being possible to use the deduction from the IRC collection produced by autonomous taxation rates, of fiscal incentives, in the context of IRC, available.

It will be useless, it is believed, to seek a conceptualist base, grounded in a dogmatic definition of monolithic concepts of IRC and Autonomous Taxation Rates, drawn from normation external to the matter to be decided, professing a "scholastic ontologism" that seeks "to deduce in a purely logical way, starting from superior abstract concepts, others, increasingly concrete and full of content"[2], a methodologically outdated approach.

What will be sought, thus, is merely to ascertain what solution, in light of the constituted law, duly interpreted, appears to be due for the concrete case, not taking the answer given to the question decided as finished evidence, exact and with an extreme degree of rigour and exactitude, but, merely, as that which, reflectively, presented itself to its signatories as the juridically better one[3].

The basis of the Claimant's claim is literally simple and linear and results from the observation that, if the settlement of autonomous taxation rates is carried out in accordance with article 90, paragraph 1 of the IRC Code, such settlement will apply the deductions provided for in its paragraph 2.

Indeed, the following is the content of the norms in question:

"1 - The settlement of IRC proceeds as follows:

a) When settlement is to be made by the taxpayer in the declarations referred to in articles 120 and 122, it is based on the taxable matter contained therein;

b) In the absence of submission of the declaration referred to in article 120, settlement is carried out by 30 November of the following year to which it relates or, in the case provided for in paragraph 2 of the said article, by the end of the 6th month following the end of the deadline for submission of the declaration mentioned therein, and is based on the annual minimum monthly remuneration or, when greater, the totality of the taxable matter of the closest financial year which is determined;

c) In the absence of settlement in accordance with the preceding subparagraphs, it is based on the elements available to the tax administration.

2 - To the amount calculated in accordance with the preceding number, the following deductions are made, in the order indicated:

a) That corresponding to double international taxation;

b) That relating to fiscal benefits;

c) That relating to the special payment on account referred to in article 106;

d) That relating to withholdings at source not susceptible to compensation or reimbursement under applicable legislation."

From a semantic-literal perspective, accepting the presupposition – which is now accepted – that the settlement of autonomous taxation rates is carried out in accordance with paragraph 1 of article 90 transcribed, no other meaning is possible to extract from the letter of the law than that presented by the Claimant, and by all the arbitral jurisprudence in which it is supported, being, in that restricted perspective, irrefutable the conclusion condensed in its main arbitral request.

Thus the Claimant and positions converging with that sustained by the same do not, from a general point of view, undertake any relevant effort in the sense of systematically-axiologically validating their understanding (and, when such occurs, it is from a casuistic point of view, anchoring itself, above all, in the concrete type of deduction from autonomous taxation that is sought to be validated, or in certain types thereof).

Rather, such positions dedicate themselves, essentially, to refuting the argument that is being presented in the opposite sense, closing themselves off in the linear understanding that can be summarized in the following syllogism:

• Autonomous taxation is IRC;

• Therefore SIFIDE can be deducted from the IRC collection generated by autonomous taxation rates.

Now, it occurs that legal reading, by legal (and also logical-rational) imperative, must not limit itself to the text of the norms as a semantic-grammatical reality, but must instead place itself at an axiological-rational level, anchored in all elements of legal interpretation.

Thus, in order to obtain what is the correct reading of the text, it is necessary to carry out certain tests at the level of the systematic edifice in which the norm to be interpreted is framed, so as to validate, in light of the same, and in light of the criteria of rationality, congruence and reasonableness that necessarily guide that normative structure, the interpretation literally suggested.

Thus, and from the outset, a first relevant fact cannot be overlooked, which is that in articles 89 and 90, paragraph 1 of the IRC Code, two forms of taxation converge, relating to the same tax but radically distinct, namely, traditional IRC, or stricto sensu, and autonomous taxation rates.

The nature of autonomous taxation rates has been the subject of broad discussion in recent doctrine and jurisprudence.

One school has viewed them as a tax on expense, which would tax certain types of spending, in a manner completely disconnected from income, to the point where some even argue that they constitute a separate tax, which only casually would be integrated in the IRS and IRC codes.

Nevertheless, the understanding has obtained recurring acceptance in CAAD jurisprudence[4] that autonomous taxation rates on deductible expenses still integrate the regime of income taxes regulated by the codes in which they are integrated, aiming, even if in a convoluted manner, at the income taxed by those.

Indeed, and as it had the opportunity to write elsewhere[5], "the complexity generated by the successive alterations in the architecture of the IRC Code led (...) to an atypical normative edifice, in which one can discern a core corresponding to what might be called IRC tout court (or in the strict sense), which the Claimant wishes to exhaust everything designated by IRC, and a periphery that integrates 'marginal' regulations, removed, in large part, from the logic, nature and principles of IRC tout court, but which, nonetheless, still lie in the 'gravitational field' of the latter.

"And it is in the process of concretizing this zone of difficult definition that all decisions analyzed (...) operate, and cannot be properly understood without also understanding that, in fact, what all such decisions are doing is ascertaining what consequences the 'gravitation' around the core of IRC brings for the matters addressed in each of them."

In that sense, "within the hermeneutic framework outlined above, (...) by force of the historical evolution of its respective legal regime, a type of IRC was constituted that integrates a hard core (...) and a group of adjacent regulations, which shares part of the logic and regime of that, but which in many respects diverges therefrom." And, further on, "from the consideration of the legislative text, statically and in its historical evolution, it results that the legislator understood, and continues to understand, that autonomous taxation rates integrate IRC, if not as a tax stricto sensu, at least in terms of being part of the same unitary fiscal regime".

This is because "the legal regime of autonomous taxation rates in question in the case only makes sense in the context of taxation in the context of IRC. That is, disconnected from the legal regime of this tax, they will lack their main referent of meaning. Their existence, their purpose, their explanation, fundamentally, their juridicity, are only properly understandable and acceptable within the framework of the legal regime of IRC."

Hence, it is not understood that "the definition of IRC contained in articles 1 and 3 of the IRC Code" is "actually superseded by a new transversal/general application definition", as this is an epistemological stance peculiar to a conceptualism that has been summarily repudiated.

On the contrary: it is the recognition of what, in light of the legal framework in force, imposes itself as most reasonable: the definitive abandonment of any transversal/general application definition of IRC, and the recognition of the regime thereof as a complex and multifaceted reality, irreducible to a definition of that kind, which only a fundamentally abstractionist conceptualism can presuppose."

Thus, "All that has been said shows that the evolution of the legal regime of IRC transmuted it into a complex and multifaceted reality, at the most diverse levels, which is reflected, in the matter that concerns us in these proceedings, in such 'dual nature' of which Prof. Saldanha Sanches spoke in the passage cited in Constitutional Court Decision 617/2012.

The recognition of this duality of nature does not prejudice, however, as is understood to be underlying both the citation in question and the jurisprudence that cites it, that it be considered that the system, despite being dual, is the same[6]. In other words, it only makes sense to speak of a dual-natured system, if the system in question, globally considered, is, still, the same. Otherwise one would speak not of a system of dual nature, but of two distinct systems, which, for all that is being said, will not be what occurs. And, in this case, the system will be the regime of IRC, which, operating sometimes by profit, sometimes by expenses, aims at and pursues the purposes proper to that tax, including, evidently, the raising of revenue for the State."

Finally, "By way of conclusion, in light of all that has been expounded, and in favour of conceptual rigour, it will be further said that it leans towards the understanding that autonomous taxation rates, as they currently exist, may be configured as a "hybrid" tax[7], affecting the income of natural persons and legal entities, and not on consumption or expense, as they do not present the main characteristics of this form of taxation".

What has just been said echoes, in a certain way, in the jurisprudence that has been produced by the Constitutional Court (TC), as happens with Decision 197/2016, of 13-04-2016[8].

Indeed, recognizing that the matter of autonomous taxation rates is "regulated normatively in the context of income tax", the Constitutional Court confirms that the same "is materially distinct from taxation in IRC", and that "we are (...) faced with distinct taxable facts that are the subject of differentiated tax treatment", going so far as to state that "IRC and autonomous taxation are distinct taxes" and that such taxation "has nothing to do with the taxation of income and profits", assertions that should, it is believed, be read cum grano salis, framing them within the limitations that contextualize them, referring them to the existence of a "taxable base" consisting of "certain expenses that constitute autonomous taxable facts", and in "subjection to specific rates", thus understanding that autonomous taxation "has nothing to do with the taxation of income and profits attributable to the company's economic exercise" (which does not mean it is alien to income and profits in general), and that the distinction between autonomous taxation and IRC, being profound and marked, should be limited to what is necessary to safeguard the specificity thereof at the level of its respective teleology, taxable base and specific rates, without prejudicing its integration in the same normative edifice.

Indeed, it is believed that the Constitutional Court is not defending that autonomous taxation constitutes a tax on expense stricto sensu, completely alien and distinct from IRC, under pain of not only being contradicted by the systematics of fiscal law[9] and, expressly, by the legislator itself[10], but also of irremediably condemning autonomous taxation rates to formal unconstitutionality, by violation of the provision in subparagraph i) of article 165, paragraph 1 of the Constitution[11], insofar as the authorizing laws for the creation thereof did not license the creation of a new tax on expense[12].

The Constitutional Court will bear in mind that autonomous taxation will be, at least, a compensatory taxation of IRC which, by being so, is IRC (in the broad sense) also.

Nevertheless, and without prejudice to what has been expounded, one cannot, in the examination of the matter in question, disregard the (emphatically affirmed by the Constitutional Court) profound distinction in form and teleology between autonomous taxation in IRC and general taxation in this tax (IRC stricto sensu).

In sum: it was previously detected, on the one hand, the futility of seeking a unitary concept of IRC that coherently accommodates the regime of autonomous taxation rates, and that, on the other hand, the methodologically most fruitful path for generating legally adequate solutions for the problematic in question is to understand the current IRC regime as the product of a historically explained evolution that led to the building of a structure of dual or hybrid nature, comprising a main nucleus corresponding to traditional IRC, and an adjacent part, connected with that and forming part of the same global normative reality, with own specificities from which results a departure, in various and substantial aspects, from the main regime, in such terms that the general principles and solutions, notwithstanding, sometimes apply, other times are contradictory, and as such, inapplicable, with the own nature of that such "adjacent regulation" that is embodied in the so-called autonomous taxation rates.

And, as is already well known, that own nature, or specific nature, resting on a logic foreign to the main edifice of traditional IRC, will be characterized, essentially, by the notes abundantly recognized as proper to autonomous taxation rates, namely, both as to their form of imposition (the instantaneous character of their respective taxable fact and the circumstance that it consists in an expense), and as to their anti-systemic ratio (the fact that some of the autonomous taxation rates have a facet directed directly to the income of natural persons and/or a sanctionary facet, as well as an anti-abuse purpose).

Here, it is believed, we arrive at the perception of the semantic fallacy contained in the above-mentioned syllogism, on which is based the position upheld by the Claimant and those that sustain it.

Indeed, it is true that:

• Autonomous taxation is IRC;

• Therefore SIFIDE can be deducted from the IRC collection generated by autonomous taxation rates.

However, as has been expounded, it is considered[13] that the integration of autonomous taxation rates in IRC is only viable in a context that recognizes in that a system of dual nature, which for convenience may be designated as IRC in the broad sense, integrating a base system corresponding to traditional or stricto sensu IRC, and a peripheral, autonomous system, which while still forming part of the same overall system, has own functional and axiological specificities, from which results the departure from the application of norms proper to that base system, whenever this is justified in light of the coherence of the system itself (the reasons that justify its autonomy).

As the Respondent summarizes, "the integration of autonomous taxation rates in the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, in particular, in the framework of subparagraph a) of paragraph 1 of article 90 of the IRC Code, in separate calculations of the respective collections, because they obey different rules, because, in one case, it is the application of the rate(s) of article 87 of the IRC Code to the taxable matter determined according to the rules contained in Chapter III of the Code, i.e., based on profit, and in another case, it is the application of the rates to the values of the taxable matters relating to the different realities contemplated in article 88 of the IRC Code."

Now, the syllogism formulated, in light of the understanding that was expounded, has its logical coherence undermined by disregarding what has just been pointed out, given that the concept of IRC used in the respective premises is not the same.

In other words, yes, autonomous taxation is IRC, but only in the broad sense, constituting a peripheral system of the taxation of the income of legal entities, with own teleology and mechanics, which justify, in certain situations, its autonomy, in relation to the said stricto sensu IRC system.

Hence, not being – it is repeated, in light of the understanding that was expounded – the concept of IRC the same in both premises (the first premise is valid in the stricto sensu IRC system, and the second in the broad sense IRC system), the logical validity of the syllogism presented is compromised, which obviously does not result in the falsity of the conclusion but, solely, in the unfitness of the premises in question to sustain its validity.

Thus, and concluding here, it cannot, it is believed, in the wake of the solution to obtain for the question to be decided, obliterate that, notwithstanding they indeed converge, in the form of settlement regulated in articles 89 and 90, paragraph 1 of the IRC Code as applicable, autonomous taxation rates and stricto sensu (or traditional) IRC, come from, upstream, from profoundly distinct geographies, a fact which cannot fail to be duly weighed and taken into account, in the solutions to be found downstream, in particular, and for what matters to the case, as regards the reading to be made of the rule of article 90, paragraph 2 of the said Code.

Proceeding downstream along the interpretive path in progress, we will now assess the consequences of limiting that hermeneutic process to the literal layer of the object of analysis.

As the Respondent entity correctly points out in its response, the understanding proposed by the Claimant, according to which the lack of distinction, at the level of the text of paragraph 1 of article 90 of the IRC Code as applicable, results in that, at the level of such rule, no distinction should be made taking into account the differences, upstream, of the tax which in those terms is settled, would imply that in the basis of calculation of payments on account owed in IRC, the values relating to autonomous taxation rates would also be included, and not only those relating to stricto sensu IRC.

Indeed, paragraph 1 of article 105 of the IRC Code provides that: "Payments on account are calculated based on the tax settled in accordance with paragraph 1 of article 90 (…)".

Now, understanding that the normative content of article 90, paragraph 1 of the IRC Code in question bars any distinction, for purposes of other norms that refer to it, between the tax settled by way of autonomous taxation and the tax settled by way of stricto sensu IRC, one would have to, consistently and in the same terms, conclude that payments on account would be owed in function of the sum of both values, and such solution cannot – it is believed – be considered as conforming to the spirit of a reasonable legislator.

Indeed – and not being payments on account the subject matter of the present case – without requiring much depth in this analysis, it will still be said that such type of payments, as is doctrinally and jurisprudentially recognized, are based on an intention of advancement of the taxation that will be owed finally, taking into account the taxable profit of the preceding year.

In this sense, for example, it was written in the Superior Administrative Court (STA) Decision of 07-03-2007, handed down in case 0877/06[14], that (underlined by us):

"From the legal definition of 'payment on account' results an inevitable, necessary and essential imbrication between 'payment on account' and 'tax owed finally'.

In such manner that the 'basis' (word of the law) of 'payment on account' is the 'tax owed finally'.

Which means that 'payment on account' is, in the very terms of the law, a pecuniary delivery made in advance, made, on account of the tax owed finally, in the period of formation of the taxable fact.

Which also means that 'payment on account' must be assessed by reference to the company's accounting situation at the end of the period to which the payment on account relates.

Which decidedly means that, if no pecuniary amount is to be (in advance) delivered on account of the tax owed finally, in the concerning period of formation of the taxable fact (to which the 'payment on account' relates) – particularly due to the non-existence of taxable profit revealed by the accounts, at that time –, such 'payment on account' has no substantive foundation.(...)

And, thus, if there is no taxable profit, there is no tax owed."

Now, (at least some) of the autonomous taxation rates, as has also been indicated elsewhere[15], do not directly affect income, doing so only in a merely mediate or indirect manner, which is the justification for, notwithstanding the same integrate the regime of broad sense IRC, operate via the route of expense and, consequently, be owed even if the taxpayer presents no taxable profit.

Thus, it will be devoid of sense to require from taxpayers who present no taxable profit, payment on account based on tax settled on expenses incurred and that were the subject of autonomous taxation.

This is corroborated by the distinct nature of the taxable fact underlying stricto sensu IRC and autonomous taxation rates. Indeed, as the first is a taxable fact of continuous nature and the second is a taxable fact of instantaneous nature, only as regards the first can the advance of tax (payment on account) make sense, and not as regards the second, whose performance generates, immediately, an obligation of tax[16].

However, and returning now to the concrete case, the same literal reading on which the Claimant's claim is essentially based would, it is believed, lead ineluctably to, by identity of reason, it had to be considered that, for purposes of paragraph 1 of article 105 of the IRC Code, the IRC collection to be considered included the collection of autonomous taxation rates, given that that rule provides (as lapidariously as article 90/2 of the IRC Code) that: "Payments on account are calculated based on the tax settled in accordance with paragraph 1 of article 90 (…)".

Now, not being such in question in the case sub iudice, one can speculate that, surely, if, in consistency, the Claimant had considered that for purposes of the said article 105/1 of the IRC Code as applicable it included the collection of autonomous taxation rates, it would not fail to point out the fact that it had done so[17], that is, that it had calculated payments on account that it may have borne based, also, on that collection, highlighting the consequent injustice that it would have been bearing such payments, considering that article 105/1 of the IRC Code encompassed the collection of autonomous taxation rates, and did not interpret, in parallel, article 90/2 of the same act, in the same way.

Being – evidently – this an argument insuperable with speculation, and, as such, not susceptible to serving as the basis, per se, for legally founded solutions, this does not prevent it from being a factor for consideration, evidencing, on one hand, the structural instability of the insertion of autonomous taxation rates in IRC, as was operated, and, on the other, the regulatory interrelation and the comprehensiveness of systematic perspective indispensable to the evaluation of the solutions proposed for the legal problem to be decided.

Indeed, it is understood that from a systematic perspective, the position that is adopted regarding the matter to be decided, at least if in the sense upheld by the Claimant, and adopted by the jurisprudence supporting it, cannot fail to have a reflection on the position that is adopted regarding the interpretation of the said article 105/1 of the IRC Code, given that, as was pointed out above, the literality of the regimes is, precisely, the same.

Thus, from this point of view, it will be necessary to consider, regardless of what has been the practice of either the AT or the Claimant, not only whether it makes sense for the rule of article 105/1 of the IRC Code to impose that the collection of autonomous taxation rates enter into the calculation of payments on account, but also the circumstance, pointed out above, that the STA has already pronounced itself to the effect that faced with the "non-existence of taxable profit (...[the]...) 'payment on account' has no substantive foundation".

In the course of the hermeneutic path in progress, one must also consider the rule of paragraph 5 of article 90 of the IRC Code as applicable, which provides that:

"The deductions referred to in paragraph 2 relating to entities to which the transparent fiscal regime established in article 6 applies are imputed to the respective partners or members in accordance with the terms established in paragraph 3 of that article and deducted from the amount calculated on the basis of the taxable matter that has taken into account the imputation provided for in the same article".

This rule directly refers to article 6 of the same Code, which prescribes, in what is relevant to the case, that:

"1 - Imputed to the partners, being incorporated, in accordance with the terms of applicable legislation, in their taxable income for purposes of IRS or IRC, as the case may be, the taxable matter, determined in accordance with this Code, of the following companies, with head office or actual management in Portuguese territory, even if there has been no distribution of profits:

a) Civil companies not incorporated under commercial form;

b) Professional companies;

c) Simple asset administration companies, the majority of whose capital is owned, directly or indirectly, for more than 183 days of the fiscal year, by a family group, or whose capital is owned, on any day of the fiscal year, by no more than five partners, none of whom is a legal entity under public law.(...)

3 - The imputation referred to in the preceding numbers is made to the partners or members in accordance with the terms that result from the constitutive act of the entities mentioned therein or, in the absence of elements, in equal parts."

Fundamental in framing this question is also the content of article 12 of the same Code, which states that:

"Companies and other entities to which, in accordance with article 6, the transparent fiscal regime applies are not taxed in IRC, except as regards autonomous taxation rates."

While also the matter of entities subject to the transparent fiscal regime is not the object of the present case, summarily it will always be said, from the outset, that from the literal reading on which the Claimant's claim is based, that is, that autonomous taxation rates integrate, without limitations and for all purposes, the IRC collection, there would always result one of two situations, equally unacceptable, namely:

• that the entities referred to in article 6, paragraph 1 of the IRC Code, would be obliged to bear the burden of autonomous taxation rates twice: (i) once in the sphere of the company, in accordance with article 12 of the IRC Code, which expressly provides for this, and (ii) another time in accordance with the combined paragraphs 1 and 3 of article 6 of the IRC Code, which imposes that "the taxable matter, determined in accordance with this Code" relating to such entities is imputed to the partners;

• or that, thus, not being so, that is, if by way of some interpretation the expression "taxable matter, determined in accordance with this Code" were restricted, purging it of autonomous taxation rates, from the combination of the above-transcribed rules of paragraph 5 of article 90, of article 6 and of article 12, with the interpretation sustained by the Claimant for paragraph 1 of article 90, it would result that IRC taxpayers subject to the transparent fiscal regime would be prevented, by way of the said article 90, paragraph 5, from deducting from the amounts settled by way of autonomous taxation, the deductions provided for in paragraph 2 of the same article, given that these latter amounts would be borne by the company, while the deductions would only be available to the partners, thus discriminating without justification IRC taxpayers subject to the transparent fiscal regime, from the remaining ones, which, in the thesis of the Claimant, would have the faculty of making operative the deductions provided for in paragraph 2 of article 90, to the amounts settled, in accordance with paragraph 1 of the same article, by way of autonomous taxation.

Being certain that fiscally transparent companies are an atypical situation in the context of IRC, being companies precisely not subject to IRC on profit/income, but subject to IRC in the context of autonomous taxation rates, one cannot fail to note not only that, on the one hand, autonomous taxation rates are, themselves also, an atypical situation in the context of income taxes (including IRC), as that, on the other, it is evident the above-mentioned and developed duality of IRC (companies precisely not subject to IRC on profit/income [stricto sensu IRC], but subject to IRC in the context of autonomous taxation rates [broad sense IRC]).

Once more, we are here in a perspective of weighing the implications in the edifice of norms of IRC, of the interpretations proposed for the applicable rule(s) to the situation sub iudice, this is not, evidently, a structuring argument, but rather an accessory one, of the solution to be drawn.

Having arrived here, it behoves us to explore a little further the limits of the literality of the norms at the epicentre of the present dispute – article 90, paragraphs 1 and 2 of the IRC Code as applicable – and the repercussions thereof in the broader framework of the relationship between traditional IRC, and autonomous taxation rates in that tax.

As was expounded above, in the set of autonomous taxation rates, even if restricted to those that integrate the regime of IRC in the broad sense, various situations of disparate origin and teleology converge.

Thus, summarily and by way of example, there are autonomous taxation rates that aim, isolatedly or concurrently, to discourage certain economically undesirable taxpayer behaviour (e.g.: excessive remuneration to managers), to tax so-called fringe benefits (allowances; vehicle expenses), to mitigate the fiscal impact of expenses of enterprise character of entirely dubious integrity (id.), to discourage behaviour with high potential for fraud (payments to entities subject to clearly more favourable tax regime) or to penalize behaviour that fosters the so-called parallel economy (taxation of confidential expenses), or that are deemed by the legislator to be sumptuary.

The literality of the interpretation proposed by the Claimant muddies, in the narrow confines of the letter of the law, all those situations – because all of them will be settled in accordance with article 90, paragraph 1 of the IRC Code as applicable, from which necessarily follows that to the collection of all of them, the solution upheld by the Claimant will apply, that is, to all of them – without exception perceptible, nor, much less, justified, or, even, insofar as can be conceived, justifiable – all the deductions provided for in paragraph 2 of article 90 of the IRC Code in question would be applicable.

Now, already above, and on other occasions, has the vain glory of closing, in a substantive unitary concept, all autonomous taxation rates, even those that only occur within the scope of IRC, been pointed out, given its teleological and functional disparity. And, here, one of the main fragilities of the argumentative edifice in which the Claimant's position is housed, also underlying the arbitral jurisprudence cited by it, emerges: that of resting on a postulate of uniqueness of IRC and autonomous taxation rates, taking the whole for the part that, concretely, integrates the matter to be decided, on the one hand, and in an exclusive valuation of the type of deduction provided for in paragraph 2 of article 90 of the IRC Code as applicable, which concretely is at issue in the case sub iudice.

That is: the position sustained by the Claimant, as well as those that corroborate it, do not care at any moment to frame the valuations by it made and to validate the application of the interpretation by it proposed to the entirety of autonomous taxation rates and the deductions provided for in paragraph 2 of article 90 as applicable, as well as to assess the implications of the application of the thesis in question, to all possible deductions to all collections of all autonomous taxation rates abstractly encompassed by such thesis, beyond, as has been pointed out already, refraining from examining, in a broader perspective, the systematic consequences of accepting the essentially literal reading that they propose for the combination of the rules of paragraphs 1 and 2 of article 90 of the IRC Code.

The fissure in the edifice supporting the Claimant's position, as well as those that sustain it, thus opens, in light of this finding, in two distinct directions: (i) on the one hand, the reading proposed by the Claimant for the rule of article 90, paragraph 2 of the IRC Code as applicable, does not distinguish, nor allows distinguishing, between autonomous taxation rates relating to deductible expenses[18] and other types of autonomous taxation; (ii) on the other hand, from the matter of fact proven, it does not result that the autonomous taxation rates in question in the present case do not relate to distinct types of autonomous taxation, such as, for example, autonomous taxation rates relating to undocumented expenses, bonuses and other variable remuneration of managers, administrators or directors, or payments to entities subject to a clearly more favourable tax regime.

The entire argument presented by the Claimant, and by the essential part of the arbitral jurisprudence that sustains it, regarding the nature of autonomous taxation rates, as taxation of income of entities subject to that, is insufficient for the decision of the matter sub iudice, because it does not even demonstrate that only autonomous taxation rates with the characteristics on which such argument rests are exclusively at issue.

The argumentative edifice presented by the Claimant in support of its claim thus harbours within itself the potential to shelter claims, in which the aim is to proceed with deductions in accordance with paragraph 2 of article 90 of the IRC Code as applicable, to autonomous taxation rates regarding which the consideration of the nature of autonomous taxation rates, as taxation of income of entities subject to that, is not valid, such as those referred to, relating to confidential expenses, payments to entities subject to privileged tax regimes or relating to management compensation.

Now, this type of result cannot be considered as intended by a reasonable legislator, in light of all the systematics of broad sense IRC, including autonomous taxation rates. Indeed, it will not be sustainable that, having gone where, juridically, the legislator of the IRC Code went, in view, for example, of combating the parallel economy or transactions with so-called (incorrectly[19]) "tax havens", it was his intention that the respective burden of autonomous taxation, could be lightened by means of the deductions provided for in paragraph 2 of article 90 of the IRC Code.

The position upheld by the Claimant will not stop here, however, regarding the systematic entropy generated thereby.

Indeed, and even restricting the question to autonomous taxation rates on deductible expenses in IRC, such position would result in a direct violation of the principle of equality.

Indeed, as all abundantly cited jurisprudence of the parties denotes, autonomous taxation rates relating to deductible expenses have underlying a presumption of "partial empresariality" or non-integral, as was moreover recently recognized by the Southern Administrative Court of Appeal, in Decision of 03-03-2018, handed down in case 1294/14.0BELRS. That is, such expenses will contain, presumptively, an entrepreneurial purpose, which allows their deduction, but with such purpose will concur others, which, if they were exclusive, would preclude their deductibility[20].

Such presumptive character, will justify that when the taxpayer manages to rebut the said presumption, the expenses maintain their deductible character, without subjection to autonomous taxation[21].

Now, in this restricted field of autonomous taxation rates on deductible expenses, the position sustained by the Claimant would result in a qualified inequality (in the measure in which more than treating as equal the unequal, or the unequal as equal, it would treat the unequal as unequal, in the reverse measure of the inequality), since in a situation where a taxpayer declared deductible expenses that would normally be subject to autonomous taxation, but that, in concreto, would not be due to the substantive requirements thereof not being met (that is, due to rebuttal of the underlying presumption), as was the case, for example, in the situation at issue in arbitral case 628/2014-T[22], and in which that same taxpayer presented a tax loss, could not proceed with any deduction, in accordance with article 90, paragraph 2 of the IRC Code, while another taxpayer, in the same situation (tax loss), but that assumed (implicitly or explicitly), the character of partial empresariality of the same type of expenses, being, therefore, burdened with the corresponding autonomous taxation, could, in the thesis underlying the Claimant's position, make use of the deductions provided for in that same article.

That is, and in sum: between two taxpayers in distinct situations before the IRC tax system, one that incurred expenses of an entirely entrepreneurial nature, and another that incurred the same expenses but for purposes (really or presumptively) partially foreign to the entrepreneurial character, the second would obtain from the tax system, in the matter that concerns us, a more lenient treatment, by way of behaviour less conforming to the teleology thereof.

Being true that the principle of legal and fiscal equality is not an absolute principle, for it admits situations of discrimination, it is also true that these situations must correspond to discriminations founded on institutionalized values, generically accepted and endorsed in the order of values instituted.

Now, in the case, in which two companies in the situation described above are objectively in a differentiated situation and which should, therefore, merit a differentiated tax treatment, in the direction of the difference, it occurs, in light of the thesis underlying the Claimant's position, precisely the opposite.

Within the decision-making topics to consider, and as is widely referred to by the Claimant, it will also be necessary to make a mention of the entry into force of the new wording of paragraph 21 of article 88 of the IRC Code, introduced by the Law approving the State Budget for 2016 (Law No. 7-A/2016, of 30 March), which came to say that:

"The settlement of autonomous taxation rates in IRC is carried out in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers, with no deductions being made from the total amount calculated."

This rule is the subject of article 135 of the said Law approving the 2016 Budget, which states that:

"The wording given by the present law to paragraph 6 of article 51, to paragraph 15 of article 83, to paragraph 1 of article 84, to paragraphs 20 and 21 of article 88, and to paragraph 8 of article 117 of the IRC Code has an interpretative nature."

As is well known, the question has been raised as to whether paragraph 21 of article 88 of the IRC Code, introduced by the 2016 Budget, has (as the law itself says), or not, an interpretative nature, as well as the constitutionality of such nature, and these questions were surpassed by the Constitutional Court Decision that found unconstitutional the said article 135 of Law No. 7-A/2016, of 30 March.

Nevertheless, the legislative amendment in question continues to be of interest for the matter now in question, given that the legislator in the context of the 2016 Budget opted to remove the application of part of the provision of article 90 of the IRC Code for the collection of IRC, to the collection of autonomous taxation in IRC, confirming that there is no conceptual or principle obstacle to, by way of interpretation, arriving at that same result.

Moreover, from the IRC Code itself, in the wording in force at the date of the taxable facts, it already resulted that the regime of that tax presupposed such differentiation at the level of the said article 90, in the sense that to the collection of autonomous taxation rates, no deduction was admissible, in principle, resulting such from the provision of paragraph 12 of article 88, introduced by Decree-Law No. 192/2005, of 7/11, which provides that:

"From the amount of tax determined, in accordance with the provision of the preceding number, is deducted the tax that may have been withheld at source, in which case the withheld tax cannot be deducted under paragraph 2 of article 90."

The autonomous taxation in question, unless there is a better opinion, should be understood as being owed by the entity that obtains the profits, since if it concerned the autonomous taxation of the entity that distributes profits, the question of deducting the withholding at source from the autonomous taxation collection in question would never arise, since withholdings at source to which article 90/2 of the IRC Code refers should be considered withholdings on income obtained by the entity owing IRC, and not on income paid and withholdings made by the latter, and in any case, the question of the withholding at source on distributed profits being deducted from the collection (either of IRC or autonomous taxation) would never be posed, because such value is withheld from the exempt entity, not being, consequently, borne by the entity that distributes the profits, and not being, thus, always subject to better opinion, the withholding at source susceptible of constituting any penalty for the entity that distributes the profits.

Such circumstance that the autonomous taxation now in question should be considered as owed by the entity that obtains the profits, and not by the one that distributes them[23], will not prejudice its nature as autonomous taxation, and it will be to such collection of autonomous taxation, settled and paid by the exempt entity that did not maintain the shareholdings for one year, and that obtained dividends therefrom, that can be deducted – exceptionally – the tax withheld at source, being, precisely, the purpose of the provision that, in that case, the withheld tax cannot be deducted in accordance with article 90/2, the evidence that the deductions provided for in that article do not apply to the collection of autonomous taxation rates, since if it were not so, the provision of article 88/12 would be a futility in a dual sense, given that:

• the deduction of the tax withheld at source from the collection of autonomous taxation in question already resulted from the said article 90/2, so it would not make sense to affirm it in article 88/12;

• if the tax withheld at source were deducted from the collection of autonomous taxation, under article 90/2, it could never be deducted twice (for the same reason that it cannot be deducted twice from the collection of IRC), so the provision of article 88/12 that, by deducting the tax withheld at source from the collection of autonomous taxation, it cannot be deducted the same under article 90/2, would also be, itself, a futility.

Thus, the said rule, by providing that from the amount of tax resulting from autonomous taxation, in the situations provided for in paragraph 11, of 25% on profits distributed by entities subject to IRC to taxpayers who benefit from exemption, can be deducted the tax that may have been withheld at source, will have implicit the understanding that, by rule, to the collection of autonomous taxation rates, no deductions were admissible, namely those provided for in article 90/2 of the IRC Code, which already provided for the possibility of deducting withholdings at source from the IRC collection to which paragraph 1 of the same rule referred.

That is: if, as the Claimant defends and the jurisprudence in which it is sustained, there already resulted from the combination of paragraphs 1 and 2 of article 90 of the IRC Code that withholdings at source were deductible from the collection of autonomous taxation rates, including that provided for in paragraph 11, the rule of the said paragraph 12 of article 88, insofar as it allowed precisely such deduction, was a useless rule, doing nothing more than to reaffirm, without any purpose, the general rule.

More: the rule in question, of paragraph 12 of article 88, introduced by Decree-Law No. 192/2005, of 7/11, makes the point of affirming that, if the deduction of the withholdings at source therein is operated from autonomous taxation, the "withheld tax cannot be deducted under paragraph 2 of article 90.", showing, it is believed, sufficiently perceptibly, that the deductions possible under that said article 90/2 were not already applicable to the collection resulting from autonomous taxation rates.

Indeed, the 2nd part of the rule of paragraph 12 of article 88 under analysis aims to prevent a duplication of deduction of the withholdings at source covered by it, which only makes sense if one views, as will be seen infra, that from the application of the rule of article 90/1 of the IRC Code does not result – contrary to what the Claimant sustains – a monolithic collection of IRC, but that the said division between the collection of autonomous taxation rates in IRC and the general collection of IRC was maintained in that rule, and that article 90/2 only applied to the latter, and not to the former.

Otherwise, this second part of article 88/12 of the IRC Code would also lack any sense whatsoever, since if, under article 90/1 of the IRC Code, the collection of autonomous taxation rates in IRC merged into a single IRC collection, as the Claimant intends and the jurisprudence in which it trusts defends, it would be evident that there could never be double deduction of withholdings at source from a single, and unique, collection.

That is, and in sum, the legislator's option in the context of the 2016 Budget to remove the application of part of the provision of article 90 of the IRC Code for the collection of IRC, to the collection of autonomous taxation in IRC, was already implicit in the Code of that tax, at the level of article 88/12, from which it resulted, in the terms exposed, that:

• by rule, the collection of autonomous taxation rates did not admit deductions; and

• article 90/2 of the IRC Code was not applicable to the collection of autonomous taxation rates.

Summarizing what has been said above, it is found, from the outset, that the interpretation sustained by the Claimant rests, essentially, on the literal content of paragraphs 1 and 2 of article 90 of the IRC Code as applicable, with no substantial foundation perceptible that justifies the solution in question, all the more so because the arguments on which such position rests restrict themselves, essentially, to autonomous taxation rates on deductible expenses and to the deductions concretely at issue (SIFIDE benefit), being that, on the one hand, nothing is proven regarding, in the concrete case, only autonomous taxation rates of that type being at issue (and not of others), and, on the other, from the interpretation proposed would always result that all the deductions provided for in article 90, paragraph 2 of the IRC Code in question would be made to all types of autonomous taxation rates, including, for example, those relating to payments to entities subject to clearly more favourable taxation regimes, those relating to confidential expenses or the compensation to directors, and none of the substantial arguments on which the Claimant's position rests allows justifying that this happen.

On the other hand, as has been seen, if it is true that article 90, paragraph 1 of the IRC Code in question does not distinguish between the settlement of autonomous taxation rates and the settlement of traditional or stricto sensu IRC (on taxable profit), the truth is that, upstream, the procedure and nature of the two types of tax imposition is substantially distinct, as has been seen and as the constitutional jurisprudence on the matter gives abundant account, a situation which cannot, it is believed, be ignored in the matter sub iudice.

Add to this that, as has also been seen, the ratification of the interpretation sustaining the Claimant's petition would be, downstream, a generator of considerable turbulence in the edifice of norms of IRC, in particular as regards the regimes of payment on account, and of companies subject to the transparent fiscal regime.

Add further that, as was also analyzed, adherence to the literality of the precepts of article 90, paragraphs 1 and 2, as upheld by the Claimant, would result – it is believed – in a trampling of the principle of fiscal equality, beyond anything else, constitutionally imposed.

Finally, and as was just seen, at the level of article 88/12 of the IRC Code as applicable, it already resulted, in the terms exposed, that:

• by rule, the collection of autonomous taxation rates did not admit deductions; and

• article 90/2 of the IRC Code was not applicable to the collection of autonomous taxation rates.

For all these reasons, it is believed that in the strict combination of the text of the two rules, the legislator said more than what he intended, a situation which, moreover, resulted not from coeval carelessness of the drafting of such rules, but rather from the historical evolution of the normative regime of IRC and, concretely, from the gradual introduction therein of the regime relating to autonomous taxation rates, without the same being reflected, coherently, in the content of article 90, paragraph 2 of the same Code.

This mismatch, moreover, is evident in the rule of paragraph 21 of article 88 of the IRC Code, introduced by Law No. 7-A/2016, of 30 March, which, providing that no "deductions are made from the total amount calculated" of autonomous taxation rates, does not except paragraph 12 of the same article which precisely provides for the possibility of deductions from the autonomous taxation to which it refers.

We are, thus, faced with a situation described by the Illustrious Master Prof. Doctor Baptista Machado, in which: "Sometimes, although rarely, it will be necessary to go further and sacrifice, in obedience still to the legislative intent, part of a normative formula, or even the totality of the rule. These are aborted legislative formulas or veritable oversights. When the normative formula is so poorly inspired that it does not even allude with minimum clarity to the hypotheses it intends to encompass and, taken literally, encompasses others that decidedly are not in the spirit of the law, one may speak of corrective interpretation. The interpreter will resort to such form of interpretation, of course, only when it is only by this means that it is possible to achieve the aim envisaged by the legislator."[24]

Indeed, the normative formula of article 90, paragraph 2 of the IRC Code as applicable, taken literally, as the Claimant does, encompasses hypotheses, as has been seen, that decidedly are not in the spirit of the law nor are in conformity with the specificities and proper nature of the various autonomous taxation rates. In the case, as has been referred to already, not due to poor inspiration of the rule itself, but of the successive reforms that historically introduced autonomous taxation rates in IRC, without the same being reflected, correspondingly, in the wording of article 90, paragraph 2 of such Code.

On the other hand, systematically considered, such formula, reduced to its literality, is a generator of serious and insurmountable incoherencies, as has been seen, in addition to, as has also been seen, the IRC Code as applicable having already, in the rule of paragraph 12 of article 88, literal evidences that the rule of article 90/2 of the same Code would not, by rule, be applicable to the collection of autonomous taxation rates, carried out in paragraph 1 of the article.

Thus, having in account the rational, historical and systematic understanding of the rule in question, it becomes necessary to interpret correctively the rule of article 90, paragraph 2 of the IRC Code as applicable, so as to restrict the referral it makes to paragraph 1 of the same rule, in the reference it makes "From the amount calculated in accordance with the preceding number", limiting it to the amount of the IRC collection calculated by the application of the rates of article 87 to the taxable matter calculated in accordance with the rules of Chapter III of the Code, and not to the amounts calculated by way of autonomous taxation, thus restoring to the rule its original meaning, which was what corresponded to its textual wording before the introduction of autonomous taxation rates in IRC.

It is admitted that one may question the propriety of the legislative option referred to, implicit until the introduction of paragraph 21 of article 88 of the IRC Code by Law No. 7-A/2016, of 30 March, and from then on explicit, as regards the inadmissibility of other types of deduction, beyond that provided for in paragraph 12 of the same article 88, to the collection of other types of autonomous taxation. Nevertheless, it is believed that such option, now expressed in the said article 88/21 of the IRC Code, is contained within the space of legislative discretion, not offending the fundamental content of any constitutional provision applicable to the case.

In light of the expounded, and believing that, in light of the law applicable to the taxable fact in question in the present arbitral action, the deduction in accordance with paragraph 2 of article 90 of the IRC Code from the collection of autonomous taxation rates carried out in accordance with paragraph 1 of the same article was not admissible, the arbitral request should fail.

Note, in conclusion, that the reasoning of the present decision, and the basis of the AT's defence in arbitral proceedings, do not fully coincide with the reasoning of the act deciding the gracious claim presented by the Claimant.

Such is not, subject to the respect due to other opinions, in the case, a reason for annulment of such act.

Indeed, from the outset, it has been peacefully understood, also, that:

"In matters of law, the court is not bound by the allegations of the parties, nor even as regards the legal qualification of the facts made by them, and enjoys freedom in the investigation, interpretation and application of the Law (article 664 of the CPC)."[25]

On the other hand, and as has also been jurisprudence:

"Despite the implications that the statement of reasoning may possibly have in the substance of the decision, a distinction must be made between the formal aspect, that which matters in compliance with the imperative of reasoning, and the material aspect, which in the structure of