IRS Taxation of Employment Termination Compensation Under Article 2(4) CIRS – CAAD Arbitration 117/2017-T

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Ethics Council of the Administrative Arbitration Center (CAAD) to form the single arbitral tribunal constituted on 27 April 2017, decides as follows:

I. REPORT

1) Procedural Framework

On 15-02-2017, A… and B…, with Tax Identification Numbers … and …, respectively, filed a request for constitution of a single arbitral tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as RJAT), with the Tax Authority and Customs Service as the Respondent.

The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and automatically notified to the Tax Authority and Customs Service on 24-02-2017. Under the terms provided in subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period and notified the parties of such appointment on 10-04-2017.

Thus, in accordance with the provision in subparagraph c) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 27-04-2017, followed by the relevant legal procedures.

2) Positions of the Parties

The Claimants filed a request for constitution of an Arbitral Tribunal with a view to declaring illegal the Personal Income Tax assessment no. 2016…, the interest calculation statement no. 2016… and the account settlement statement no. 2016…, for the year 2013.

The Claimants dispute such assessment for the following reasons:

The Claimant began his professional activity on 26.06.1995 at Bank C…, where he worked until 31.03.2002, the date on which he began working at Bank D…; later, on 14.11.2009, he began working at E…, where he worked until 28.06.2013.

When he entered into an employment contract with E…, it was stipulated in clause 7 thereof that the Bank guaranteed the seniority resulting from service provision to other credit institutions, as of the date contained in the declaration issued by the previous employer.

On the date of termination of the employment contract with E… (06.05.2013), the Claimant was paid compensation in the amount of € 89,190.00 and a settlement agreement was signed containing the following:

"Taking into consideration the applicable terms of Clause 17 of the Collective Labor Agreement of the Banking Sector and in light of the interpretation sustained in the judgments of the Central Administrative Court South of 11 May 2004 (case 06002/01) and, in particular, of 21 September 2010 (case 03478/10), both parties agree on determining the employee's seniority by counting his service time in banking entities indicated in the aforementioned clause of the Collective Labor Agreement, for the purposes of the provision in subparagraph b) of paragraph 4 of Article 2 of the Personal Income Tax Code, as amended by Article 108 of Law no. 64-B/2011, of 30 December."

Taking into account the nature of the indemnity received – compensation for termination of employment contract – Article 2, paragraph 4, subparagraph b) of the Personal Income Tax Code determines an exclusion from taxation with the limit of one and a half times the average value of regular remuneration with the character of taxable compensation earned in the last twelve months, multiplied by the number of years, or fraction thereof, of seniority or term of service with the entity making the payment.

E… considered that the average monthly remuneration for purposes of Article 2, paragraph 4, subparagraph b) of the Personal Income Tax Code included 19 years of seniority in the banking sector, corresponding to the amount of € 3,893.79, so that from the total amount received only the amount of € 15,207.99 would be subject to taxation – the amount that was declared in the income statement for the year 2013.

In the corrections made to the statement submitted by the Claimants, the Tax Authority considered incorrect the subjection to taxation of only that amount, considering that the years that should be taken into account for purposes of calculating seniority were only the 4 years of work performed at E… and not the 19 years of work in the banking sector. Accordingly, the amount that should, in its view, be declared for purposes of taxation was the amount of € 58,406.85.

The Claimant husband claims to be a member of the National Union of Banking Officers and Technicians, thereby benefiting from the Collective Labor Agreement of the Banking Sector, published in the Official Gazette no. 29, of 08 August 2016, which provides, in its clause 10, that "the seniority of the employee is determined by counting the service time rendered to other institutions that are subscribers to this Agreement and the Collective Labor Agreement of the Banking Sector now repealed" (and which were in effect in 2013).

He further claims that it does not follow from Article 2, paragraph 4, subparagraph b) of the Personal Income Tax Code that the service time relevant for purposes of calculating seniority is only the service time rendered to the entity that pays the compensation, citing case law supporting that interpretation, namely, that the concept of seniority relevant to determining the amount subject to taxation under Article 2, paragraph 4 of the Personal Income Tax Code is that which results from labor legislation, in particular from the collective regulation instrument applicable to the banking sector, where such seniority is defined as being that which the worker has for all service time rendered in Portugal in credit institutions with activity in Portuguese territory.

Finally, he requests payment of compensatory interest for having paid the disputed assessment due to an error attributable to the Tax Authority.

As for the Respondent, it argues that the seniority to be counted, for purposes of paragraph 4 of Article 2 of the Personal Income Tax Code, is the seniority with the entity making the compensation payment for termination of employment contract (4 years), and it is not necessary to consider, in the application of the aforementioned legal provision, the seniority with previous employers.

In summary, it argues as follows:

- It clearly follows from the text of the tax law that the negative delimitation of the scope of Personal Income Tax is established using as a multiplying factor the seniority with the entity making the payments in question (and not the seniority provided in a contractual clause or in a collective labor regulation instrument or even in a termination agreement).

- It follows from the literal and systematic elements that the relevant concept of "seniority with the entity making the payment" refers to the number of years with the entity with which the contract terminates – see also paragraph 10 of Article 2 of the Personal Income Tax Code. Consequently, the "entity making the payment" referred to in paragraph 4 of Article 2 must be the "employer entity" mentioned in paragraph 10 of the same legal provision, which is made explicit when in paragraph 4 the exclusion from taxation is conditioned on the non-creation of a new professional or business relationship within 24 months with the same "entity".

- Even if it were understood that the concept of "seniority" does not have its own definition for purposes of taxation in Personal Income Tax, it must always be said that it is not fulfilled in the area of law that encompasses it, that is, in labor law, as stipulated in paragraph 2 of Article 11 of the General Tax Law. In fact, the Labor Code does not contain a definition of "seniority", and among the numerous uses of the concept, with different scopes and contexts, a more coherent and systematic meaning may be discerned, one that aligns the term "seniority" with "seniority in the company" (see Articles 368, paragraph 1, subparagraph e); Article 112, paragraph 6, Article 147, paragraph 3, etc.) - which follows and supports, also by this means, the concept of seniority, for tax purposes, applied by the Tax Authority.

- Regarding the jurisprudential understanding stated in the judgment of the Central Administrative Court South of 21/09/2010, delivered in Case 03748/10, cited by the Claimants to support the illegality of the assessment act in dispute, the Tax Authority states that the same received a Scholarly Annotation - Annotation to the Judgment of the Central Administrative Court South on the seniority of the banking employee (for purposes of calculating the amount of compensation for termination of employment contract not subject to taxation, under paragraph 4 of Article 2 of the Personal Income Tax Code), by Cláudia Reis Duarte and Filipe Fraústo da Silva. In the Journal of the Bar Association, no. 1, 2012). The following is extracted from the work by the aforementioned authors: "In fact, we consider incontestable that the concept of seniority included in the factual basis of the provisions of the Labor Code that establish the aforementioned criteria for defining indemnities (or compensations) in the context of the regime for termination of employment is the seniority in the company (…)". The cited work adds further that, "the concept of seniority used by the legal provisions of the chapter of the Code relating to termination of employment and which establish criteria for defining indemnities or compensations is that of seniority in the company and that, consequently, additional periods of duration of the relationship that may have been recognized by the employer by mere effect of contractual consensus are not admissible in such definition or indemnity calculation, or even by unilateral admission, that is, that do not result directly from the application of legal or collective conventional rules that have the effect of such extension, such as for example occurs in the cases already mentioned of assignment of contractual position, transfer of ownership or operation of an enterprise, establishment or economic unit, merger, spin-off, etc. Collective agreements may add several other cases to these. This regime has a very clear reason for being: seniority in the company, as a partial mechanism for protecting longer-serving workers, has its most radical expression in the protection of the stability of their employment, placing them, relative to less senior workers, in a more favorable situation in case of termination of employment contracts promoted by the employer (…)"– bold and underlined as in original. It is further concluded in the referred work "that the doctrine resulting from the judgment under annotation does not merit our support, and we therefore tend to consider, as regards the specific question of seniority, that from the very literal nature of the legal provision itself it follows that this corresponds to the number of years or fraction of seniority with the employing entity with which the contract terminates at the source of the amounts paid (with the exception of seniority verified in other entities in a relationship of control or group with it by force of the extension of the concept operated by paragraph 10 of Article 2 of the Personal Income Tax Code). Furthermore – and even if recourse had to be made, in filling the concept in question (which we understand not to be the case in that the tax legislator was clear and enshrined in law that seniority is that verified with the entity making the payment), to labor law – the solution would still be identical, since in the Labor Code we do not find a definition of seniority and, if any we had to extract therefrom, that would be seniority in the company, and not the seniority resulting from a clause of any collective labor agreement or agreement established between the parties".

- Also the doctrine, regarding the seniority to be considered in the application of paragraph 4 of Article 2 of the Personal Income Tax Code (with full adherence to the wording as of the date of the facts, insofar as relevant here), understands that "The Tax Administration cannot be opposed to the wording of the Collective Labor Agreement of the banking sector that imposes, in the transfer of an employee between credit institutions, the counting of the seniority time verified in the previous or previous credit institutions of which he had been an employee. As, a fortiori, neither can any agreements be, which, relating to the guarantee of the benefits inherent to seniority, have been concluded between the employee and the employer entity. Without considerations that today could be provided by the subjective extension of the concept of employer entity operated by paragraph 10 of Article 2, since that is based on relationships of control or group between companies, regardless of their geographical location, we reaffirm here the well-known orientation of the Tax Administration according to which the time of seniority relevant is solely the time of seniority "acquired" with the entity with which the individual employment contract terminates, as literally follows from the law, it not seeming that there is any room for any other type of interpretation" (see Taxation 13/14, Manuel Faustino and Others, "On the meaning and scope of the new wording of Article 2, paragraph 4 of the Personal Income Tax Code").

- The Tax Authority further adds that, even if it were understood that the concept of seniority can emerge from the individual employment contract, through recognition by E… of the seniority resulting from the provision of services to other credit institutions, for all purposes, in particular tax purposes, the Claimants did not make the respective proof: in the inspection proceedings they did not demonstrate that they had been recognized by Bank E…, at the time of establishing the employment relationship, for all legal purposes, the right to seniority in previous employer entities, in particular through the submission of the individual employment contract. And they did not do so because the individual employment contract did not recognize to the Claimant the right to seniority resulting from the provision of services in other credit institutions, for purposes of economic compensation for contract termination. Indeed, the bank guarantees seniority "but only for the purposes set out in subparagraphs a), b) and c)", namely, for purposes of the E… pension fund and for the calculation of the retirement pension, with service time rendered to other entities being expressly excluded from consideration for purposes of calculating length-of-service bonuses.

The Tax Authority further invokes the decision delivered in Case no. 616/2015, stating "let it not be said that the concept of seniority that includes the provision of services to other employer entities results from clause 10 (in the case at hand, clause 15) of the Agreement for Termination of Contract because this cannot be considered an addendum to the individual employment contract (…). Particularly so because the agreement for termination of the employment contract is precisely the contract that terminates the employment relationship, which does not aim to establish conditions relating to the execution of the employment relationship, but rather to its termination."

- The Tax Authority further states that the Claimants cannot benefit from clause 17 of the Collective Labor Agreement of the banking sector, to which reference is made in the Agreement for Termination of the Employment Contract, because the Collective Labor Agreement, in its clause 2, establishes that the agreement only binds the Credit Institutions and Financial Companies that subscribed to it and the employees in their service registered in the Unions of Bankers of the Center, North and South and Islands, the Claimant not having provided proof that he was registered in the Unions of Bankers of the Center, North and South and Islands, it not being sufficient for this the document no. 9 attached to the initial request, which, in any case, only states that the Claimant benefits from the SAMS health system that all bankers benefit from.

- The Tax Authority further claims that, even if the Claimant had provided sufficient proof of his union membership, according to the Collective Labor Agreement, the Agreement (and, consequently, clause 17) would not apply to him, in that, although E… subscribed to the Collective Labor Agreement, it did so with the following reservation: "In counting service time for any purposes arising from the Collective Labor Agreement, only service time rendered to the institutions themselves that are signatories to the present reservation shall count, plus possibly service time rendered to other institutions that are signatories to the present reservation, plus possibly service time rendered to other entities or companies, but only in this case if it results from an individual agreement between them and the employee." (see Collective Labor Agreement in effect for the year 2013, Official Gazette no. 8 of 29/2/2012).

II. CASE MANAGEMENT

1. The Tribunal has jurisdiction and is regularly constituted, in accordance with Articles 2, paragraph 1, subparagraph a), 5 and 6, all of the RJAT.

2. The parties have standing and legal capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Order no. 112-A/2011, of 22 March.

3. The proceeding does not suffer from defects that would render it invalid.

III. FACTS

Before addressing the legal issues, it is necessary to set forth the factual matter relevant to understanding and deciding the case, which, having examined the documentary evidence and the administrative file (PA) attached to the case and also taking into account the facts alleged, is established as follows:

III.1. Proven Facts

- The Claimant A… worked at Bank E… between 14/11/2009 and 28/06/2013.

- In the employment contract, it was agreed, in clause 7, that:

1. The Bank guarantees to the Second Party the seniority resulting from the provision of service to other credit institutions, as of the date contained in the Declaration of Seniority issued by the previous employer, duly documented, but only for the following purposes:

a) For purposes of the E… Pension Fund, the First Party shall take into account the service time rendered to other credit institutions, with the amount of the retirement pension for presumed disability being calculated in accordance with the regime provided for in the Collective Labor Agreement of the bankers.

b) The part of the retirement pension corresponding to the service time rendered by the Second Party to the First Party shall be calculated in accordance with Clause 6 of the E… Pension Plan.

c) The service time rendered to other credit institutions prior to the signing of this contract shall also not be taken into account for the calculation of the number of length-of-service bonuses.

2. [...]"

- On 6/5/2013, the Claimant and E… signed an agreement for termination of the employment contract in which it was established, in paragraph 2 of Clause 15, the following:

"Taking into consideration the applicable terms of Clause 17 of the Collective Labor Agreements of the Banking Sector ("Collective Labor Agreement") and in light of the interpretation sustained in the judgments of the Central Administrative Court South of 11 May 2004 (Case 06002/01) and, in particular, of 21 September 2010 (Case 03478/10), both parties agree on determining the employee's seniority by counting his service time in banking entities indicated in the aforementioned clause of the Collective Labor Agreement, for the purposes of the provision in subparagraph b) of paragraph 4 of Article 2 of the Personal Income Tax Code, as amended by Article 108 of Law no. 64-B/2011, of 30 December.".

- The Claimant received, for the termination of the employment contract, an indemnity of € 89,190.00, corresponding to a seniority of 19 years.

- The aforementioned indemnity was calculated on the basis of seniority, not only with E…, but also with other employer entity(ies) where he had previously worked.

- E… considered, at the time of payment of the indemnity, that it was not subject to taxation in that it did not exceed the limit referred to in paragraph 4 of Article 2 of the Personal Income Tax Code, in the wording in effect as of the date of the facts (determination by the Tax Authority, in inspection proceedings, against Bank E…).

- Through memorandum no. …/…, of 12/04/2016, attached to the administrative file, the Claimants were notified to, if they so desired, exercise the right to be heard regarding the omission from Annex A of the income statement form 3/Personal Income Tax of the amount of € 58,406.85.

- The Claimants did not exercise the right to be heard.

- On 31/10/2016, it was decided to maintain the correction initially proposed in the draft report regarding taxable income, for Personal Income Tax purposes for the year 2013, in the amount of € 58,406.85.

- In 2013, clause 2 of the Collective Labor Agreement of the banking sector established that:

"This Collective Labor Agreement is applicable throughout the national territory, within the banking sector, and binds the Credit Institutions and Financial Companies that subscribe to it (hereinafter generically referred to as Credit Institutions or Institutions), as well as all employees in their service registered in the Unions of Bankers of the Center, North and South and Islands, represented by the signatory FEBASE – Federation of the Financial Sector and hereinafter referred to as Unions, covering 26 employers and estimated at 54,300 the employees covered."

- E… subscribed to the Collective Labor Agreement with the following reservation:

"In counting service time for any purposes arising from the Collective Labor Agreement, only service time rendered to the institutions themselves that are signatories to the present reservation shall count, plus possibly service time rendered to other institutions that are signatories to the present reservation, plus possibly service time rendered to other entities or companies, but only in this case if it results from an individual agreement between them and the employee".

- The National Union of Banking Officers and Technicians issued a declaration, on 15.12.2016, stating that the Claimant had enjoyed the services of medical-social assistance (SAMS/Officers) from 16.04.2002 to 28.06.2013.

III.2. Unproven Facts

There are no facts relevant to the decision that were determined to be unproven.

IV. ISSUE FOR DECISION

The disputed issue in this proceeding concerns whether the counting of the Claimant's seniority, for purposes of Personal Income Tax in the case of compensation for termination of the employment contract, should be done taking into account the service time previously rendered by the employee receiving the compensation with other banking institutions, or, on the contrary, only considering the work time rendered to the entity with which he terminated the employment contract, which gave rise to the right to compensation.

V. LEGAL REASONING

Article 2, paragraph 4, subparagraph b) of the Personal Income Tax Code provides that the following amounts are subject to taxation: "(…) in the part that exceeds the amount corresponding to the average value of regular remuneration with the character of taxable compensation, earned in the last twelve months, multiplied by the number of years or fraction of seniority or term of service with the entity making the payment (…)".

The key concept in this case is the concept of seniority, which the legislator used to establish the calculation that should be made to determine the amount subject to taxation in the event of the attribution to an employee of compensation for termination of the employment contract.

It therefore becomes necessary to determine what seniority the legislator intended to refer to – whether to seniority in the company that assigns the compensation, or to the seniority represented in the number of years of work in the banking sector in Portugal.

Secondly, it is important to determine whether the particular employee in this case is entitled to the application of the seniority calculation criterion provided for in the collective regulation instrument applicable to the banking sector. In that sense, it is important to assess the terms of the employment contract with E…, as well as the reservation made by this institution to the Collective Labor Agreement of the Banking Sector, thus evaluating the personal scope of the collective convention in contrast to the principle of membership.

The manner in which tax law should be interpreted is regulated in Article 11 of the General Tax Law in the following terms:

1 — In determining the meaning of tax law provisions and in characterizing the facts to which they apply, the general rules and principles for interpretation and application of laws shall be observed.

2 — Whenever tax law provisions use terms specific to other areas of law, those terms shall be interpreted in the same sense they have in those areas, unless a different meaning is directly derived from the law.

3 — If doubt persists regarding the meaning of the applicable tax provisions, the economic substance of the tax facts shall be considered.

4 — Gaps resulting from tax provisions covered by the constitutional reservation of legislative authority are not susceptible to analogical integration.

As follows from the Judgment of the Supreme Administrative Court of 23-01-2013, delivered in case no. 0968/12, "also in tax law, the fundamental principle of legal hermeneutics is based on Article 9 of the Civil Code". Thus, also in Tax Law the other interpretation techniques or canons long used in civil law can be used. In this sense, see J. L. Saldanha Sanches in the Manual of Tax Law, 3rd ed., Coimbra Editora, Coimbra, p. 147, who, regarding the interpretation of law, writes:

"1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, taking particularly into account the unity of the legal system, the circumstances under which the law was enacted and the specific conditions of the time in which it is applied.

2. However, the legislator's intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed, cannot be considered by the interpreter.

3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms".

In the case at hand, however, paragraph 2 of Article 11 of the General Tax Law is relevant, which determines how to interpret concepts used in tax law that originate in other areas of Law. In fact, tax law provisions frequently make use of terms and concepts specific to other areas of Law, in particular Administrative Law, Labor Law or Civil Law. In such cases, Article 11, paragraph 2 of the General Tax Law determines that such concepts must be interpreted in the identical sense they have in their areas of origin, except if a different meaning directly follows from the tax law.

There is no doubt that "seniority" is a concept with origins in Labor Law, and there is also no doubt that the tax legislator has not given this concept its own definition. Thus, this concept should be interpreted in the same sense it has in labor law, in that the tax legislator has not defined it for purposes of taxation in Personal Income Tax, and it does not clearly appear from tax law that it has a different meaning.

Now, although it is true that we cannot extract from the Labor Code a definition of the concept of seniority, we agree with the understanding of the judgment of the Central Administrative Court South of 21-09-2010, delivered in case no. 03748/10, that Article 11, paragraph 2 of the General Tax Law "directs reference to the terms specific to other areas of law, not only to the provisions of other laws". The same judgment states that, although the current Labor Code does not itself regulate the concept of employee seniority, it places, in the first place, collective regulation instruments as the sources of law from which norms applicable to the employment contract emerge, and it further defines in its Article 2 the forms that these may take (collective labor agreements, collective agreements and company agreements).

Thus, as correctly understood by the Central Administrative Court South in the judgment of 12-03-2013, delivered in the context of case no. 591/12, it is now unanimous in labor law that there are three sources that can establish seniority: law, the individual employment contract and collective labor regulation instruments.

In the specific case, from the Collective Labor Agreement of the banking sector results, by force of clause 17, that the seniority of the employee, for all purposes provided for in the Agreement, shall be determined by counting all years of service rendered in Portugal, in credit institutions with activity in Portuguese territory. However, it follows from Article 2 of the Collective Labor Agreement that the same only binds (i) the Credit Institutions and Financial Companies that subscribe to it and (ii) the employees in their service registered in the Unions of Bankers of the Center, North and South and Islands.

In the specific case, the Claimant provided indirect proof of his membership in the said Union – a declaration from the same stating that the Claimant had enjoyed the services of medical-social assistance between 2002 and 2013 – services which, briefly referred to as SAMS, are available only to registered members of the Union of Bankers[1]. As for that point, we find it unnecessary to require any further investigation, so we consider it proven that the Claimant was a member of the National Union of Banking Officers and Technicians.

Regarding the subscription of the Collective Labor Agreement by the entity paying compensation to the employee, it is important to know what impact the following reservation made by E… has:

"In counting service time for any purposes arising from the Collective Labor Agreement, only service time rendered to the institutions themselves that are signatories to the present reservation shall count, plus possibly service time rendered to other institutions or companies, but only in this case if it results from an individual agreement between them and the employee". (see Collective Labor Agreement in effect for the year 2013, Official Gazette no. 8 of 29/2/2012).

The Respondent alleges that the individual employment contract did not recognize to the Claimant the right to seniority resulting from the provision of services to other credit institutions, for purposes of economic compensation for contract termination and that the bank guaranteed seniority "but only for the purposes set out in subparagraphs a), b) and c)", that is, for purposes of the E… pension fund, for purposes of calculating the value of retirement, with service time previously rendered before the signing of the contract being expressly excluded from consideration for purposes of calculating length-of-service bonuses. That is, it was not recognized, in the employment contract concluded between E… and the Claimant, the relevance of seniority resulting from the provision of services to other credit institutions for purposes of calculating the amount of compensation at the time of termination of contract.

It therefore results from the foregoing that, due to the combination of (i) the reservation made by E… at the time of subscription of the Collective Labor Agreement with (ii) the restrictive provision of the employment contract concluded with the Claimant, the seniority criterion provided for in the Collective Labor Agreement is not applicable to the case at hand.

Regarding the Claimant's allegation that the more comprehensive seniority criterion results from the very agreement for termination of the employment contract, this cannot be accepted for the simple reason that the act through which a contract is terminated does not become part of that contract, serving to regulate (retroactively) the conditions for execution of a relationship (in this case, employment), limiting itself to regulate the terms of its termination.

In conclusion, since neither from the individual employment contract concluded between the Claimant and E…, nor from the Collective Labor Agreement, the relevance of seniority in the credit institutions where the Claimant had previously worked results, such seniority cannot be considered relevant for purposes of calculating the compensation for termination of the employment contract under Article 2, paragraph 4 of the Personal Income Tax Code.

In this manner, the act of additional tax assessment does not suffer from a defect of violation of law, the Tax Administration having proceeded with the correct application of Article 2, paragraph 4, subparagraph b) of the Personal Income Tax Code.

In this sense, the act of additional tax assessment is confirmed, as well as the remaining challenged acts, the Claimant's request for annulment of the same being unfounded nor, consequently, is the request for payment of compensatory interest procedurally sound.

VI. DECISION

In accordance with what is set forth above, it is decided:

- To find the request for arbitral pronouncement ungrounded and, in consequence, to maintain the Personal Income Tax assessment no. 2016…, the interest calculation statement no. 2016… and the account settlement statement no. 2016…, for the year 2013.

- To find the request for compensatory interest ungrounded;

- To condemn the Respondent to pay the procedural costs.

Value: in accordance with the provision in paragraph 2 of Article 315 of the Code of Civil Procedure, combined with subparagraph a) of paragraph 1 of Article 97-A of the Code of Tax Procedure and with paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned a value of € 28,604.71.

Costs: under the terms provided in Article 22, paragraph 4, of the RJAT and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 1,530.00, to be borne by the Respondent under the terms of Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the aforementioned Regulation.

Register and notify.

Lisbon, 27 December 2017

The Arbitrator,

Raquel Franco

[1] See the information on the website of SAMS/SBSI, from which it appears that the beneficiaries of SAMS are the persons covered by the Collective Labor Regulation Instruments (CRLI) of the banking sector that is applicable to them, with the specifications contained in the Regulation and Complementary Rules. In general terms, beneficiaries of SAMS, in accordance with contractual or regulatory provisions:

- Workers active or in retirement situations;

- Family members of the same workers active or in retirement situations.

One may also read there, in response to the question "Which bankers can be beneficiaries (general regime) of SAMS?", the following: "All banking employees in the service of Credit Institutions that are subscribers to Collective Labor Regulation Instruments that provide for medical assistance through SAMS, with the formalization of the application for registration being necessary."