Process: 115/2018-T

Date: March 18, 2025

Tax Type: Outros

Source: Original CAAD Decision

Summary

This CAAD case (115/2018-T) involves the Extraordinary Contribution on the Pharmaceutical Industry (CEIF) for Q1 and Q2 2017, addressing whether the Tax and Customs Authority (AT) is bound by arbitral jurisdiction for CEIF disputes. The claimant, a pharmaceutical company, sought annulment of CEIF self-assessments totaling €211,723.26 and reimbursement with compensatory interest. The AT raised exceptions arguing lack of material jurisdiction, claiming CEIF is a contribution rather than a tax, and therefore falls outside RJAT arbitral scope. The initial October 2018 arbitral decision accepted this exception, ruling the tribunal lacked jurisdiction. However, the taxpayer appealed to the Constitutional Court and challenged the decision in the Central Administrative Court of the South. In January 2025, the Administrative Court annulled the arbitral decision for improper pronouncement, ordering CAAD to render a new decision not based on lack of material jurisdiction. The Court determined that when the AT is not subject to arbitration for a specific levy, the correct procedure is to acquit the respondent from the suit for not being subject to arbitral jurisdiction, rather than dismissing for lack of tribunal jurisdiction. This reformed March 2025 decision addresses the reconstitution of the dissolved arbitral tribunal and clarifies that arbitral tribunals have competence for concrete review of unconstitutionality when assessing tax act legality, distinguishing this from abstract constitutional review reserved for the Constitutional Court. The case establishes important precedent regarding the binding nature of arbitral jurisdiction over AT for different types of pharmaceutical sector levies.

Full Decision

ARBITRAL TAX JURISPRUDENCE

Case no. 115/2018-T

Decision Date: 18 March 2025

Other Matters

Value of Claim: €211,723.26

Subject: Extraordinary Contribution on the Pharmaceutical Industry. Lack of binding of the Tax and Customs Authority to arbitral jurisdiction – Reform of the arbitral decision (attached).

Replaces the arbitral decision of 16 October 2018.

ARBITRAL DECISION

Case no. 115/2018-T

The arbitrators Advisor Jorge Manuel Lopes de Sousa (arbitrator-president, appointed by the other Arbitrators), Professor Doctor Rui Duarte Morais and Professor Doctor Fernando Borges de Araújo, appointed by the Claimant and Respondent, respectively, to form the Arbitral Tribunal, constituted on 05-06-2018, agree as follows:

1. REPORT

A... LDA, with the unique identification number for legal entities and registered at the Commercial Registry Office of Lisbon ..., with registered office at Rua ..., no. ..., ...-..., Lisbon (hereinafter referred to as the "Claimant"), requested the constitution of an Arbitral Tribunal in accordance with Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

The Claimant requests the annulment of the self-assessment acts of the Extraordinary Contribution on the Pharmaceutical Industry (hereinafter "CEIF") for the first quarter of 2017 and the second quarter of 2017 self-assessed by the Claimant and of the decision to reject the administrative objection that upheld them.

The Claimant further requests the condemnation of the Tax Administration to reimburse the amount paid by the Claimant and to pay, in accordance with article 43 of the LGT, compensatory interest.

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

The Claimant appointed Professor Doctor Rui Duarte Morais as Arbitrator, in accordance with the provisions of article 6, no. 2, subparagraph b), of the RJAT.

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the AT on 15-03-2018.

In accordance with the provisions of subparagraph b) of no. 2 of article 6 and no. 3 of the RJAT, and within the period provided for in no. 1 of article 13 of the RJAT, the highest-ranking official of the Tax Administration service appointed Professor Doctor Fernando Borges de Araújo as Arbitrator.

The Arbitrators appointed by the Parties agreed to appoint Advisor Jorge Lopes de Sousa as arbitrator-president, who accepted the appointment.

In accordance with the provisions of no. 7 of article 11 of the RJAT, the President of CAAD informed the Parties of this appointment on 15-05-2018.

Thus, in compliance with the provisions of no. 7 of article 11 of the RJAT, after the period provided for in no. 1 of article 13 of the RJAT elapsed without the Parties making any statement, the Collective Arbitral Tribunal was constituted on 05-06-2018.

The AT submitted a response raising the exceptions of "unsuitability of, both the Respondent and the Tribunal itself, to proceed with appreciation of the Claimant's claim" because the unconstitutionality of norms is at issue, of "lack of passive legitimacy", of "lack of material jurisdiction of the tribunal" because the Claimant seeks appreciation of the unconstitutionality of norms and because the tax is a contribution and not a tax.

The AT further contends that the arbitral pronouncement request should be adjudged unfounded.

By order of 13-07-2018 it was decided to dispense with the holding of the meeting provided for in article 18 of the RJAT and that the case proceed with optional submissions.

The Parties submitted submissions.

By decision of 16-10-2018, an arbitral decision was rendered finding the exception of lack of material jurisdiction of the Arbitral Tribunal well-founded.

Following an appeal to the Constitutional Court, filed by the Taxpayer, that Court decided "not to find unconstitutional the norm determining that the scope of arbitral jurisdiction encompasses claims relating to taxes, not including other taxes whose administration is assigned by law to the Tax and Customs Authority, arising from article 2, subparagraph 4), of Order no. 112-A/2011, of 22 March".

After the taxpayer challenged the arbitral decision in the Central Administrative Court of the South, this Court, by judgment of 23-01-2025, "annulled the arbitral decision due to defect of improper pronouncement" and "ordered the return of the files to CAAD for a new decision to be rendered that is not one of lack of material jurisdiction".

The decision of the Central Administrative Court of the South was based on the understanding that

"as the Arbitral Pronouncement Request has as its object a claim in relation to which the Tax and Customs Authority is not subject to the arbitration regime (because it is a tax, but not a tax administered by it), the correct course would be to acquit the respondent from the suit for not being subject to arbitral jurisdiction regarding the object of the claim, as an unnamed dilatory exception (articles 24, no. 3 and 29, subparagraph e) of the RJAT and 576, nos. 1 and 2, 577 and 578 of the CPC)".

The arbitral tribunal was regularly constituted.

Since the Central Administrative Court of the South states that the "arbitral tribunal should render a new decision that is not one of lack of material jurisdiction", referring to the Arbitral Tribunal that rendered the challenged decision (as is apparent from the article in question), the question is decided as to whether the Arbitral Tribunal dissolved, in accordance with article 23 of the RJAT, may reconstitute itself to render a new decision.

It is necessary to previously appreciate the exceptions raised, beginning with that of jurisdiction, in accordance with the provisions of article 13 of the CPTA, subsidiarily applicable, by virtue of the provisions of article 29, no. 1, subparagraph c), of the RJAT.

2. QUESTION OF JURISDICTION TO APPRECIATE THE UNCONSTITUTIONALITY OF NORMS

What was decided in the arbitral decision of 16-10-2018 on the question of jurisdiction to appreciate the unconstitutionality of norms is maintained, which was not the subject of appeal or challenge.

The AT argues, in summary, that the claim of the now Claimant aims at "not the appreciation of the legality of the assessment acts, but the appreciation of the constitutionality of the norms underlying the assessment acts (not the act itself)" and that "the AT is not bound by arbitral jurisdiction that does not pertain to the appreciation of the legality of the assessment act".

As a "preliminary question", the AT further contends that the administration is obligated to act in conformity with the principle of legality, not being able to refuse appreciation of norms on the ground of unconstitutionality, without a declaration having general binding force, which it understands has as a consequence that the application by the AT of unconstitutional norms is not unlawful.

It is manifest that the application of an unconstitutional norm in a tax act implies the illegality thereof, as it constitutes a defect of violation of law, for purposes of article 163, no. 1, of the Code of Administrative Procedure, subsidiarily applicable, by virtue of the provisions of article 2, subparagraph c), of the LGT.

On the other hand, when the appreciation of the legality of an act that applied an unconstitutional norm is at issue, one is not faced with abstract review of unconstitutionality (whose knowledge is the exclusive competence of the Constitutional Court, in its own proceedings, as results from the provisions of article 281 of the CRP), but rather with concrete review of unconstitutionality, imposed on all Courts by article 204 of the CRP, which establishes that "in cases submitted for judgment, the courts cannot apply norms that infringe the provisions of the Constitution or the principles enshrined therein".

Moreover, the competence of the arbitral tribunals functioning in CAAD to appreciate the unconstitutionality of norms is explicitly referred to in article 25, no. 1, of the RJAT which establishes that "the arbitral decision on the merits of the claim filed that terminates the arbitral proceedings is subject to appeal to the Constitutional Court in the part in which it refuses to apply any norm on the ground of its unconstitutionality or which applies a norm whose unconstitutionality has been raised".

For this reason, the restrictions on the non-application of unconstitutional norms that may be imposed on the AT do not extend to the Courts.

This exception of lack of jurisdiction is therefore unfounded.

3. QUESTION OF THE BINDING OF THE TAX AND CUSTOMS AUTHORITY TO ARBITRAL TRIBUNALS FUNCTIONING IN CAAD TO APPRECIATE THE LEGALITY OF SELF-ASSESSMENT ACTS OF CONTRIBUTIONS

The CEIF was created by article 168 of Law no. 82-B/2014 of 31 December (State Budget Law for 2015) and amended by Law no. 7-A/2016, of 30 March.

It was maintained in force for the years 2016, 2017 and 2018, by articles 2 of Law no. 159-C/2015, of 30 December, 141 of Law no. 42/2016, of 28 December, and 281 of Law no. 114/2017, of 29 December, respectively.

In accordance with article 1, no. 2, of the CEIF, "the contribution is levied on the volume of sales and aims to ensure the sustainability of the national health service (NHS) in terms of spending on medicines".

3.1. Positions of the Parties

The AT raises this question of lack of jurisdiction on the grounds that its binding to arbitral jurisdiction as effected by Order no. 112-A/2011, of 22 March, does not include appreciation of claims relating to contributions, but only to taxes, as results from the literal wording of no. 1 of its article 2.

Furthermore, the tax and customs authority argues that the CEIF is a contribution and not a tax, invoking doctrinal positions in support of this thesis.

The Tax and Customs Authority further contends that "if this is not understood, such interpretation would be not only unlawful, but manifestly unconstitutional, as it violates the constitutional principles of the rule of law and the separation of powers (cf. articles 2 and 111, both of the CRP), as well as legality (cf. articles 3, no. 2, and 266, no. 2, both of the CRP), as a corollary of the principle of indisponibility of tax credits inherent in article 30, no. 2 of the LGT, which bind the legislator and all activity of the AT".

The Claimant responded in its submissions, concluding as follows:

(i) Article 2 of Order no. 112-A/2011, of 22 March, should be interpreted to the effect that the scope of arbitral jurisdiction encompasses appreciation of claims relating to taxes whose administration is assigned to the AT, with the exception of the cases listed in the subparagraphs of said article 2, thus also covering claims relating to "contributions" administered by it, as is the case with the contribution in question in the present case.

(ii) The interpretation of article 2 mentioned that restricts the scope of arbitral jurisdiction to claims relating to taxes, even if other taxes whose administration is assigned by law to the AT are at issue, is unconstitutional, as it flagrantly violates the principle of equality, combined with the principle of effective judicial protection, enshrined, respectively, in articles 13 and 20 of the Constitution, which is hereby invoked for all purposes.

(iii) Since a choice between two possible interpretations of the same provision is at issue, the Court should opt, within the framework of an interpretation consistent with the Constitution, for that which ensures its conformity with the constitutional principles of equality and effective judicial protection, that is, by the interpretation of article 2 of Order no. 112-A/2011 to the effect that the scope of the AT's subjection to the jurisdiction of arbitral tribunals encompasses all taxes whose administration is assigned to it, including taxes with the nature of contributions.

3.2. Appreciation of the Question

Article 124 of Law no. 3-B/2010, of 28 April, which authorized the Government to legislate to institute arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, established as a possible scope of arbitration "assessment acts of taxes, including self-assessment, withholding at source and advance payments, determination of taxable base, when they do not give rise to assessment, total or partial rejection of administrative objections or requests for revision of tax acts, administrative acts that involve appreciation of the legality of assessment acts, acts of determination of patrimonial values and rights or legitimate interests in tax matters".

Decree-Law no. 10/2011 (RJAT), issued under the legislative authorization, did not extend the scope of tax arbitral jurisdiction to all types of disputes permitted by the legislative authorization, limiting the competence of arbitral tribunals to "declaration of illegality of tax assessment acts, self-assessment, withholding at source and advance payment acts", to "declaration of illegality of acts of determination of taxable base, acts of determination of taxable matter and acts of determination of patrimonial values" and to "appreciation of any question, of fact or law, relating to the draft assessment decision, whenever the law does not provide for the power to file the claim referred to in the preceding subparagraph".

Law no. 64-B/2011, of 30 December, further restricted the scope of tax arbitration, eliminating the possibility of resorting to arbitration for declaration of illegality of acts of determination of the taxable base when they give rise to assessment of any tax, and for appreciation of any question, of fact or law, relating to the draft assessment decision.

However, article 4, no. 1, of the RJAT, in establishing that "the binding of the tax administration to the jurisdiction of tribunals constituted in accordance with the present law depends on an order of the Government members responsible for the areas of finance and justice", came to admit that the scope of tax arbitration could be restricted in accordance with the binding.

It was in concretization of this legislative intent that Order no. 112-A/2011, of 22 March, was issued, which defined the "scope of binding" and the "terms of binding" as follows:

Article 1

Binding to CAAD

By virtue of this order, the following services of the Ministry of Finance and Public Administration are bound to the jurisdiction of arbitral tribunals functioning, in accordance with Decree-Law no. 10/2011, of 20 January, in CAAD — Administrative Arbitration Center:

a) The Directorate General of Taxes (DGCI); and

b) The Directorate General of Customs and Special Consumption Taxes (DGAIEC).

Article 2

Scope of Binding

The services and bodies referred to in the preceding article are bound to the jurisdiction of arbitral tribunals functioning in CAAD which have as their object appreciation of claims relating to taxes whose administration is assigned to them referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:

a) Claims relating to declaration of illegality of self-assessment, withholding at source and advance payment acts that have not been preceded by resort to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process;

b) Claims relating to acts of determination of taxable matter and acts of determination of the taxable base, both by indirect methods, including the decision of the review procedure;

c) Claims relating to customs duties on imports and other indirect taxes levied on goods subject to import duties; and

d) Claims relating to tariff classification, origin and customs value of goods and tariff quotas, or whose resolution depends on laboratory analysis or steps to be taken by another Member State within the scope of administrative cooperation in customs matters.

Article 3

Terms of Binding

1 – The binding of the services and bodies referred to in article 1 is limited to disputes of a value not exceeding €10,000,000.

2 – Without prejudice to the requirements provided for in Decree-Law no. 10/2011, of 20 January, the binding of the services referred to in article 1 is subject to the following conditions:

a) In disputes of a value equal to or greater than €500,000, the arbitrator-president must have exercised public functions of magistracy in tax tribunals or possess the degree of master in Tax Law;

b) In disputes of a value equal to or greater than €1,000,000, the arbitrator-president must have exercised public functions of magistracy in tax tribunals or possess the degree of doctor in Tax Law.

3 – In case of impossibility of appointing arbitrators with the characteristics referred to in the preceding paragraph, it falls to the president of the Deontological Board of CAAD to appoint the arbitrator-president.

From this legislation and regulations it is concluded that there was a concern to limit the scope of tax arbitration:

– in subparagraph a) of no. 4 of article 124 of the legislative authorization law, the possibility was admitted of including therein the generality of disputes relating to tax assessment (including those carried out by taxpayers) and determination of patrimonial values that may be appreciated in judicial challenge proceedings and the recognition of rights and legitimate interests in tax matters;

– in article 2 of the RJAT the recognition of rights and legitimate interests in tax matters was not included in tax arbitration and it was established in article 4 that the binding of the Tax Administration, which amounts to defining the scope of arbitrability of disputes should be effected by order;

– with Law no. 64-B/2011, it was imposed that the order indicate the type and maximum value of disputes, which has as a corollary that not all disputes covered by article 2, no. 1, of the RJAT;

– Order no. 112-A/2011, of 22 March, limited binding to services of the state Tax Administration and to tribunals "which have as their object appreciation of claims relating to taxes whose administration is assigned to them", with various exceptions.

The legislative intent to restrict the scope of tax arbitration in relation to what was permitted by the legislative authorization clearly results from these acts and is explained by the justified doubts that, at the beginning of tax arbitration, were raised about the possible inadequate functioning of an innovative means of resolution of disputes in tax matters, well evident in the concerns felt by Advisor Santos Serra, President of the Deontological Board of CAAD at the presentation session of the new tax arbitration regime, which took place in Lisbon, on 14-12-2010:

Thus, and from the start, it is necessary that the tax arbitration regime now established manage to dispel fears that, by way of arbitration, the parties may circumvent the legal impositions that fall upon them, and that they make a dead letter of the principles of legality and equality among taxpayers in tax matters, with the differentiated negotiating capacity of the parties overriding the principle of taxation in accordance with their real capacity to contribute.

The awareness of risks as grounds for the limitations of the scope was expressly explained by Professor Doctor Sérgio Vasques (who was performing the functions of Secretary of State for Tax Affairs at the time Decree-Law no. 10/2011, of 20 January, and Order no. 112-A/2011, of 22 March, were issued), in text published in CAAD Newsletter no. 1:

Tax arbitration, as contemplated in the Tax Arbitration Regime, came to present a narrower scope in relation to what appeared in the legislative authorization of the state budget for 2010, due to the awareness that this was, and continues to be, an innovative experience not without its risks. It was also with caution that Order no. 112-A/2011, of 22 March, through which the tax administration was bound to the regime, imposed various limits starting from attention to the specificity and value of the matters at issue, in this way associating the Tax Administration to this mechanism of alternative dispute resolution in the strict terms and conditions established in the Order.

In disputes in the field of tax law, what is at stake is the primordial public interest of a Rule of Law state, which is the obtaining of revenues indispensable to the proper functioning of the state as a whole, which justifies that cautions be taken in the binding.

Tax arbitration may come to be a widespread alternative means of resolution of tax disputes, but, before repeated proof is given of the quality and impartiality of its decisions, the need to protect public interest and to ensure the effectiveness of the essential principles of legality and tax equality that inform it in this field recommended in 2011 and recommends now that one proceed with caution, without excessive enthusiasm, not leaving to the discretion of citizens the free and unlimited option for this means of dispute resolution.

Such caution is especially advisable when, for reasons of expedition, one chose to restrict the means of challenge and appeal of arbitral decisions and, therefore, the feasibility of correction of possible errors in judgment that are harmful to the public interest is less than in tax tribunals.

For this reason it was justified in 2011 and remains justified today that there be limitations on access to tax arbitration, in order to reconcile the use of this optional means of access to justice with the state obligation to protect public interest, ensure tax legality and equality and the collection of revenues indispensable for the functioning of the state.

In this light, article 4, no. 1, of the RJAT, in establishing that the scope of binding would be defined by order of the Government members responsible for the areas of finance and justice, grants them a discretionary power to define the extent of the binding in the manner they understand best advances the set of public interests whose realization is at issue, a definition that cannot, naturally, dispense with evaluation of the verification of the existence of the conditions of a material and human order necessary for the implementation of this new regime.

In this context, in which there was a clear intent to restrict the initial scope of tax arbitration in relation to the breadth permitted by the legislative authorization law, being well known that the Constitution of the Portuguese Republic (CRP) and the General Tax Law (LGT) refer to various types of taxes, which they designate as "taxes", "fees" and "financial contributions" [articles 165, no. 1, subparagraph i), of the CRP and 3, nos. 2 and 3, of the LGT], the inclusion of the word "taxes" in the expression "appreciation of claims relating to taxes whose administration is assigned to them" contrasting with the more comprehensive reference to "assessment acts of taxes" that was used in subparagraph a) of no. 4 of article 124 of Law no. 3-B/2010 (legislative authorization) to define the scope of authorization, must be interpreted as the precise expression of the restriction intended to be effected.

In truth, given that the legislative intent was to restrict the scope of arbitral jurisdiction, if a restrictive expression was used to indicate the scope of the restriction, it must be presumed, presuming that the legislator knew how to express his thought in adequate terms (as required by no. 3 of article 9 of the Civil Code), that it was intended to restrict in the precise terms, if there are no reasons that impose the conclusion that there was some deficiency in the expression of legislative thought. A norm with restrictive scope should, in principle, be interpreted in strict terms and not broadly, as the broadening of its scope will be presumptively contrary to the legislative thought that legal interpretation aims to reconstruct (article 9, no. 1, of the Civil Code).

On the other hand, using the Constitution and the Law specific designations to classify the various types of taxes, it must also be presumed that, for the purpose of defining the competences of arbitral tribunals, it was intended to refer to the classification that was legislatively adopted in relation to each tax and not to that which the interpreter might consider most appropriate, based on considerations of a doctrinal nature. The classification of special taxes, namely to determine whether they should or should not be treated constitutionally as taxes is, frequently, a complex task, as is well evidenced by the some sixty pages of the Opinion of Professor Doctor Casalta Nabais attached to the record and abundant case-law of the Constitutional Court. There is no reason to believe, in terms of reasonableness, that the legislator, which must be presumed to have adopted the most correct solution, chose to impose inquiries with that level of difficulty for the definition of the competence of arbitral tribunals, rather than opting for clear identification of the taxes to which it intended to refer through the designation legislatively considered adequate.

Furthermore, it cannot be accepted, in view of the presumption that the legislator knew how to express his thought in adequate terms (article 9, no. 3, of the Civil Code), that the CEIF was assigned the designation of "contribution" if it was legislatively intended that it be considered as a "tax" and not as one of the "other financial contributions in favor of public entities" to which articles 165, no. 1, subparagraph i) of the CRP and article 3, no. 2, of the LGT refer. The expression of thought in adequate terms is necessarily made through correct expression and not through another that dissimulates it.

Thus, in good hermeneutics, it is to be concluded that article 2 of Order no. 112-A/2011, when it refers to "taxes", is referring only to taxes to which such designation is legally assigned (such as VAT, corporate income tax and personal income tax) and those which, although they have another designation, the law itself explicitly considers "taxes" (as is the case with "special contributions", which no. 3 of article 4 of the LGT identifies and expressly considers "taxes"). And, in parallel, that article 2 is not referring to taxes which by law are denominated as "fees" or "financial contributions in favor of public entities" that do not fall within the definition of the said "special contributions", even if, after in-depth analysis of their characteristics by the tribunal previously defined as competent, one may conclude from its characteristics, they should be considered as special taxes, namely for purposes of application of the constitutional requirements relating to taxes (as may be the case with CEIF, in light of the Opinion of Professor Doctor Casalta Nabais attached to the record).

In the case of CEIF, it is manifest that one is not faced with a "special contribution" falling within the concept defined in no. 3 of article 4 of the LGT, as it is not based "on the obtaining by the taxpayer of benefits or increases in the value of his assets as a result of public works or the creation or expansion of public services or the special wear and tear of public assets occasioned by the exercise of an activity", and therefore there is no minimum literal support for it to be considered, from the legislative perspective, one of the "taxes" to which article 2 of Order no. 112-A/2011 refers.

On the other hand, from the relegation of the definition of the scope of binding to an enactment of regulatory nature, it may be inferred that, underlying the restriction intended to be effected, there will also be pragmatic reasons related to the creation of practical conditions for implementation of the new regime, which are normally reserved for enactments of an executive nature, such as those relating to the availability of human resources of the Tax Administration with adequate training to represent it adequately in tax proceedings that require more specialized training. In this case, from the limitations to the scope of arbitral jurisdiction that are made in subparagraphs c) and d) of article 2 of Order no. 112-A/2011, regarding disputes related to customs matters, it may be discerned that there will be reasons of that type underlying these restrictions on arbitrability of disputes.

As the discretionary power to define the scope of binding has been assigned to the Government members indicated in article 4, no. 1, of Order no. 112-A/2011 and not to the arbitral tribunals, the latter cannot substitute themselves for the former in defining the scope of arbitral jurisdiction. First, because the tribunals do not possess knowledge of all elements of an operational nature that may have led the Government members who issued Order no. 112-A/2011. And second, because it was to those Government members and not to the arbitral tribunals that the law assigned the power to define the scope of binding.

For the above reasons, there are no grounds to accept the Claimant's thesis that article 2 of Order no. 112-A/2011 should be "interpreted to the effect that the scope of arbitral jurisdiction encompasses appreciation of claims relating to taxes whose administration is assigned to the AT, with the exception of the cases listed in the subparagraphs of said article 2, thus also covering claims relating to "contributions" administered by it".

On the contrary, the correct interpretation, grounded in the literal wording of article 2 and in the interpretative rules contained in no. 3 of article 9 of the Civil Code, but also taking into account the "circumstances in which the law was enacted and the specific conditions of the time in which it is applied" (article 9, no. 1, of the Civil Code), is that it was intended to restrict the binding of the Tax and Customs Authority to arbitral tribunals functioning in CAAD to disputes in which taxes legislatively classified as taxes or explicitly as such considered are at issue, with the exceptions listed in that norm.

For the above reasons, applying what was decided by the Central Administrative Court of the South, "as the Arbitral Pronouncement Request has as its object a claim in relation to which the Tax and Customs Authority is not subject to the arbitration regime (because it is a tax, but not a tax administered by it), the correct course is to acquit the respondent from the suit for not being subject to arbitral jurisdiction regarding the object of the claim, as an unnamed dilatory exception (articles 24, no. 3 and 29, subparagraph e) of the RJAT and 576, nos. 1 and 2, 577 and 578 of the CPC)".

3.3. Questions of Unconstitutionality Raised Regarding the Binding of the Tax and Customs Authority to Arbitral Tribunals Functioning in CAAD

Regarding the questions of unconstitutionality raised by the Claimant regarding the question of the binding of the Tax and Customs Authority to arbitral tribunals functioning in CAAD, these have already been appreciated by the Constitutional Court in the judgment rendered on appeal from the arbitral decision rendered in the present case.

The Constitutional Court decided

"Not to find unconstitutional the norm determining that the scope of arbitral jurisdiction encompasses claims relating to taxes, not including other taxes whose administration is assigned by law to the Tax and Customs Authority, arising from article 2, subparagraph a), of Order no. 112-A/2011, of 22 March"

As the judgment of the Constitutional Court has become final, the decision is of mandatory application (articles 205, no. 2, of the Constitution of the Portuguese Republic and 2 of the Law on Organization, Functioning and Procedure of the Constitutional Court).

For this reason, it must be considered established that the delimitation of the scope of arbitral jurisdiction arising from article 2, subparagraph a), of Order no. 112-A/2011, of 22 March, understood as encompassing claims relating to taxes, not including other taxes whose administration is assigned by law to the Tax and Customs Authority, is not unconstitutional.

4. QUESTIONS OF PREJUDICED KNOWLEDGE

In accordance with the above, the unnamed exception of lack of binding of the Tax and Customs Authority to arbitral jurisdiction is to be adjudged well-founded, as the Claimant's claim concerns a tax not included in the binding of the Tax and Customs Authority to arbitral tribunals functioning in CAAD.

As this unnamed exception is to be adjudged well-founded, which has as a consequence the acquittal of the Tax and Customs Authority from the suit (articles 24, no. 3 and 29, subparagraph e) of the RJAT and 576, nos. 1 and 2, 577 and 578 of the CPC), knowledge of the remaining questions raised in the case is prejudiced.

5. DECISION

In these terms, the members of this Arbitral Tribunal agree in:

A) Adjudging well-founded the unnamed exception of lack of binding of the Tax and Customs Authority to arbitral jurisdiction;

B) Acquitting the Tax and Customs Authority from the suit.

6. VALUE OF THE CASE

In accordance with the provisions of art. 306, no. 2, of the CPC and 97-A, no. 1, subparagraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of €211,723.26.

Lisbon, 18-03-2025

The Arbitrators

(Jorge Lopes de Sousa)

(Rui Duarte Morais)
(dissenting in accordance with attached statement)

(Fernando Araújo)

DISSENTING OPINION

I cannot subscribe to the position that prevailed regarding the (lack of) material jurisdiction of this arbitral tribunal, for the reasons I shall briefly set out.

Under section 3.1 (position of the parties), the prevailing decision summarizes the Claimant's argument in favor of asserting the tribunal's jurisdiction, transcribing what appears in no. 69 of the submissions presented by it.

However, such "conclusions" refer only to what appears in nos. 43 et seq. of such procedural document, in which the Claimant argues that "Even if it were considered that CEIF was a financial contribution, which is admitted only out of professional obligation and without conceding, the present arbitral tribunal constituted under the aegis of CAAD would in any case have jurisdiction (…)".

Before that (nos. 11 et seq. of its submissions), the Claimant presents the reasons why it considers CEIF to have the nature of a tax (and not a financial contribution), concluding, under no. 42, "Whereby, as CEIF is a tax and not a financial contribution, it appears that the arbitral tribunal has jurisdiction."

It should also be said that the systematic arrangement of the Claimant's submissions closely follows that of its initial request. The reasons why the Claimant understands CEIF to be a tax are developed in nos. 42 to 68 of such request.

Thus, there would be two questions to appreciate: first, whether CEIF should be qualified as being a tax, and a conclusion to this effect would necessarily dictate the conclusion that the Arbitral Tribunal has jurisdiction to appreciate the defects of legality that the Claimant attributes to the assessments challenged.

Now, the prevailing decision did not analyze the question of the legal nature of CEIF (whether it should be qualified as a tax or as a financial contribution), limiting itself to stating that "using the Constitution and the Law specific designations to classify the various types of taxes, it must also be presumed that, for the purpose of defining the competences of arbitral tribunals, it was intended to refer to the classification legislatively adopted in relation to each tax and not to that which the interpreter might consider most appropriate, based on considerations of a doctrinal nature" and that it cannot be concluded that "the legislator, which must be presumed to have adopted the most correct solution, chose to impose inquiries with that level of difficulty for defining the competence of arbitral tribunals, rather than opting for clear identification of the taxes to which it intended to refer through the designation legislatively considered adequate".

I understand that these statements are insufficient to support the decision rendered. In my view, this Arbitral Tribunal was obliged, as a prerequisite for its decision regarding material jurisdiction, to inquire into and substantively conclude whether the characterizing features of the tax in question lead to its qualification as a tax or as a financial contribution.

The second question, which arises in this case as subsidiary in relation to the former, consists of whether, having previously concluded that CEIF is a financial contribution, the Arbitral Tribunal would have jurisdiction to appreciate its legality.

I also cannot subscribe to the prevailing position regarding this question for the reasons stated in Arbitral Decision 312/2015-T, which I subscribed to, in which, moreover, the Claimant relies heavily to sustain what it has argued on this point.

I must add that the position I assumed at that time was not shaken by the "new" arguments (in the sense of arguments not contained in previous arbitral decisions) in the prevailing decision, relating to the restrictive intent that was present when binding the AT to CAAD jurisdiction through Order no. 112-A/2011, of 22 March. Even accepting such intent as a reality, the fact is that the question of the competence of Arbitral Tribunals to appreciate the legality of financial contributions administered by the AT did not arise at the time, because this entity did not administer any taxes with this designation or that could be so qualified. That is, it is a question that the legislator could not have foreseen, on which it could not have exercised a choice, which prevents an interpretation based on legislative intent. Within the framework of an objectivist (updated) interpretation, there are arguments, which I consider determinative, to the effect that the relevant legal norms should be understood to mean recognition of the competence of Arbitral Tribunals to appreciate the legality of assessments of financial contributions, arguments which I dispense myself from referring to because, essentially, they appear in the already mentioned Arbitral Decision 312/2015-T.

Rui Duarte Morais

Frequently Asked Questions

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What is the Extraordinary Contribution on the Pharmaceutical Industry (CEIF) and who is subject to it in Portugal?
The Extraordinary Contribution on the Pharmaceutical Industry (CEIF) is a special levy imposed on pharmaceutical sector entities operating in Portugal. Established by specific legislation, CEIF applies to companies engaged in pharmaceutical manufacturing, wholesale, and retail activities. The contribution is calculated based on sector-specific criteria and operates on a quarterly self-assessment basis. Entities subject to CEIF must calculate and pay the contribution for each quarter, filing declarations with the Tax Authority. The legal framework distinguishes CEIF from traditional taxes, classifying it as a 'contribution' (contribuição) rather than a tax (imposto), which has significant implications for dispute resolution mechanisms and jurisdictional questions regarding arbitral tribunals under the RJAT regime.
Can the Portuguese Tax Authority (AT) be subject to tax arbitration jurisdiction for CEIF disputes under the RJAT?
The binding of the Portuguese Tax Authority to tax arbitration jurisdiction for CEIF disputes is contested and depends on the legal classification of CEIF. Under RJAT (Decree-Law 10/2011), arbitral jurisdiction encompasses claims relating to 'taxes' (impostos) administered by the AT, as per Article 2(4) of Order 112-A/2011. The AT argues that CEIF, being classified as a 'contribution' rather than a tax, falls outside arbitral jurisdiction scope. The Constitutional Court ruled that excluding non-tax levies from arbitral jurisdiction is not unconstitutional. However, the Central Administrative Court of the South clarified that when AT is not subject to arbitration for specific levies, the proper procedural response is acquittal from suit for lack of subjection to arbitral jurisdiction (an unnamed dilatory exception under Articles 24(3) and 29(e) RJAT), rather than dismissal for lack of tribunal material jurisdiction. This distinction is crucial for determining how CEIF disputes should be resolved.
What happens when a CAAD arbitral decision is reformed due to lack of jurisdictional binding of the Tax Authority?
When a CAAD arbitral decision is reformed due to lack of jurisdictional binding of the Tax Authority, several procedural consequences follow. First, if an administrative court annuls the arbitral decision on appeal, it may order the case returned to CAAD for a new decision, as occurred in this case where the Central Administrative Court of the South annulled the October 2018 decision in January 2025. The court specified that the new decision must not be based on lack of material jurisdiction. Second, the annulment raises the question of whether a dissolved arbitral tribunal (dissolved under Article 23 RJAT after rendering its initial decision) can reconstitute to issue the reformed decision. Third, the proper procedural approach shifts from dismissing for lack of tribunal jurisdiction to acquitting the respondent (AT) from the suit for not being subject to arbitral jurisdiction regarding the specific claim object. This procedural correction ensures proper classification of jurisdictional defects and preserves taxpayers' rights to appropriate judicial review channels when arbitration is unavailable.
How does the self-assessment (autoliquidação) process work for the CEIF in Portugal?
The self-assessment (autoliquidação) process for CEIF in Portugal requires pharmaceutical entities to independently calculate, declare, and pay the contribution on a quarterly basis. Under this system, taxpayers must: (1) determine the taxable base according to CEIF legislation for each quarter; (2) apply the applicable rates to calculate the contribution due; (3) file a declaration with the Tax Authority by the legal deadline; and (4) make payment of the calculated amount. The self-assessment acts are considered tax acts subject to challenge, as they determine the taxpayer's obligation. When taxpayers believe the self-assessment is incorrect or based on unconstitutional norms, they may challenge these acts through administrative complaint (reclamação graciosa) within the statutory period. If the AT rejects the complaint (as occurred in this case for Q1 and Q2 2017), the taxpayer may seek judicial review. The self-assessment mechanism shifts initial calculation responsibility to the taxpayer but does not eliminate the right to contest the legal basis or calculation methodology through available dispute resolution channels.
What are the legal grounds for challenging CEIF self-assessments through gracious complaint (reclamação graciosa) and tax arbitration?
Challenging CEIF self-assessments involves a two-stage process: gracious complaint (reclamação graciosa) followed by potential arbitration or judicial review. First, taxpayers must file an administrative complaint with the AT within the legal deadline, contesting the self-assessment acts and providing grounds (e.g., incorrect calculation, unconstitutional legal basis, misapplication of law). The AT reviews the complaint and issues a decision either accepting or rejecting it. If rejected, taxpayers may pursue arbitration under RJAT, requesting annulment of both the self-assessment acts and the rejection decision, plus reimbursement with compensatory interest under Article 43 LGT. However, jurisdictional limitations apply: arbitration is only available for 'taxes' administered by AT, not for all levies. When challenging CEIF assessments, taxpayers may argue: (1) violation of constitutional principles (equality, proportionality, capacity to pay); (2) incorrect legal interpretation; (3) miscalculation of the contribution; or (4) procedural defects. The tribunal has competence for concrete constitutional review (assessing whether applied norms violate the Constitution in the specific case) but not abstract review, which remains the Constitutional Court's exclusive domain under Article 281 CRP.