IRS Taxation of Employment Termination Compensation: Banking Sector Seniority Rules (CAAD 158/2017-T)

ARBITRAL DECISION

I – REPORT

Application

A..., taxpayer no. ..., resident at ... Street, no. ..., ..., ...-... ..., hereinafter referred to as the Claimant, filed, on 06-03-2017, pursuant to the provisions of article 2(1)(a) and article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Framework for Arbitration in Tax Matters (RJAT), a request for arbitral pronouncement, in which the Respondent is AT - Autoridade Tributária e Aduaneira (Tax and Customs Authority), with a view to the declaration of illegality and consequent annulment of the assessment notified through document number 2016..., in the amount of €15,156.36.

Grounds for the Application

To support its application, the Claimant alleges, in summary:

• The Claimant was an employee at bank "B..." between 08-06-2006 and 30-06-2012.

• Previously, in the period between 01-08-1995 and 04-06-2006, the Claimant was an employee at two banking institutions: C..., SA, which merged with D..., where she remained, and on 15 May 2005 began to provide services at E..., SA (Investment Management Company of the D... Group), until 04 June 2006.

• On 30 March 2012 and effective as of 30-06-2012, the Claimant signed an agreement rescinding her employment contract with Bank B..., receiving compensation of €62,275.00.

• For the calculation of said compensation, the banking entity "B..." accounted for all the time the Claimant had worked at the banking entities mentioned above, as is clear from clause ten of said employment contract termination agreement, namely 16 years and 11 months, based on average monthly remuneration of €3,152.08.

• The Tax Inspection Services of the Lisbon Finance Directorate understood that "the value of the compensation that exceeds the amount corresponding to one month's salary for each year or fraction of effective work performed at B..., which according to that Service was 6.07 years, would be income subject to IRS in category A, as it exceeded the limit established in article 2(4) of the IRS Code."

• The Claimant contends that the compensation received (which contemplates the entire period in which the Claimant rendered work for banking entities) is not subject to taxation (as category A income) because the "seniority" referred to in article 2(4)(b) of the IRS Code covers all the time the Claimant exercised work activity in Portuguese banking sector institutions.

• This is based on clause 17 of the Collective Labour Agreement for the Banking Sector (ACT of the Banking Sector), which, regarding worker seniority, provides as follows: "1. For all purposes provided for in this Agreement, worker seniority shall be determined by counting service time rendered on the following terms: a) All years of service rendered in Portugal in Credit Institutions with activity in Portuguese territory.

• Pursuant to article 2(1) of the ACT of the Banking Sector, this ACT binds the Credit Institutions, Financial Companies and other public or private entities that subscribe to it (...) as well as all workers in their service represented by the Unions signatory thereto."

• Bank "B..." was, at the time, as it still is, a party to the Collective Labour Agreement for the Banking Sector, an instrument of collective regulation of labour, whose last amendment was published in BTE, 1st series, no. 20, of 29 May 2011.

• In addition to B..., the other banking institutions where the Claimant rendered work, namely "C..." and D..., subscribed to the ACT of the Banking Sector, as can be verified in the attached employment contracts.

• Seniority as defined in the terms referred to in the ACT of the Banking Sector is considered for all purposes provided for in the ACT of the Banking Sector, which clearly includes the award of compensation for contract termination.

• The concept of seniority is not defined in Tax Law, which requires recourse to labour law for the determination of said concept; this is, moreover, how article 11(2) of the LGT provides: "Whenever, in tax norms, terms specific to other branches of law are employed, they must be interpreted in the same sense they have therein, unless otherwise follows from interpretation and application of the law."

• Therefore, the Claimant's seniority corresponds to all the time of service rendered in the banking sector, that is, 16.11 years, necessarily binding the Tax Authority.

Response

In its Response, the Respondent AT – Autoridade Tributária e Aduaneira (Tax and Customs Authority) contests the application, stating:

Preliminary Matter concerning the Value of the Claim

According to the provisions of article 296(1) of the CPC, applicable ex vi article 29 of the RJAT, "[e]very claim must be assigned a certain value, expressed in legal currency, which represents the immediate economic benefit of the claim."

Furthermore, article 297(1) of the same CPC provides that "[i]f by the action any certain sum of money is sought to be obtained, this shall be the value of the claim, with no opposition or contrary agreement being admissible; if by the action any benefit other than money is sought, the value of the claim is the sum of money equivalent to such benefit."

In turn, article 32(1) of the CPTA, equally applicable ex vi article 29 of the RJAT, determines that "[w]hen by the action payment of a certain sum is sought, this shall be the value of the claim"; pursuant to article 32(2) of the provision, "[w]hen by the action any benefit other than payment of a sum is sought, the value of the claim is the sum equivalent to such benefit."

Finally, and of paramount importance, being special law, article 97-A of the CPPT, applicable ex vi article 29 of the RJAT, under the heading "Value of the Claim," provides as follows: "1 - The admissible values, for purposes of costs or others provided for in the law, for actions proceeding in tax courts, are as follows: When an assessment is contested, the amount whose annulment is sought; (...)."

Thus, as the Claimant seeks the annulment of the amount to be paid in tax of €10,041.10 and compensatory interest of €1,277.25, in the total amount to be paid of €11,318.35, this shall be the value of the claim.

On the Grounds of the Challenge

Article 2(4) of the IRS Code determines the subjection to taxation, in category A, of the value of compensation paid by reason of employment contract termination "in the part that exceeds the value corresponding to the average value of regular remuneration with the character of taxable remuneration earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions in the entity owing the payment" (emphasis added).

Therefore, the law expressly and clearly stipulates that the exclusion from taxation covers only the part of the compensation that does not exceed the value corresponding to the average value of regular remuneration with the character of taxable remuneration earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions in the entity owing the payment.

The entity owing the payment which, in this case, is solely and only B....

And not, as the Claimant contends, but without legal support, seniority or exercise of functions in other employing entities;

Regardless of whether such seniority is taken into account in the calculation of compensation resulting from contractually assumed obligations by the parties in the employment contract.

In fact, as considered in the binding ruling of 10 October, issued in the context of proc. 1818/10, with concordant decision of the Deputy of the Director General:

"Since tax law specifically and expressly requires that the seniority to be accounted for is the seniority in the entity owing the compensation for cessation of employment contract, it is not to be considered in the application of article 2(4) of the IRS Code, seniority in a previous employing entity, even if the worker and the new employer entity have agreed to consider it in eventual future 'compensations'. (...)"

The tax system stands in a relationship of specialty with civil law and, likewise, with Labour Law.

Therefore, according to the provisions of article 11 of the LGT, in the absence of any margin for indefiniteness in the interpretation of the expression "seniority or exercise of functions in the entity owing the payment," there is no reason to seek contributions from other branches of Law.

In fact, according to the general discipline of article 11 of the LGT, "Whenever, in tax norms, terms specific to other branches of law are employed, they must be interpreted in the same sense they have therein, unless otherwise follows directly from the law.

For, pursuant to article 9 of the Civil Code, the legislator's intent which does not have in the letter of the law a minimum of verbal correspondence may not be considered by the interpreter, even if imperfectly expressed.

Thus, the legislator's intent which does not have in the letter of the law a minimum of verbal correspondence may not be considered by the interpreter, as provided in articles 9(2) and (3) of the Civil Code, applicable by force of both article 2(d) and article 11 of the LGT.

The letter of the law is simultaneously the starting point in the interpretive task and the limit of the interpreter, requiring that the result of the interpretation have in the letter of the law a minimum of verbal correspondence.

Now, it follows clearly from the letter of tax law that the negative delimitation of IRS taxation incidence is established using as a multiplying factor seniority in the entity owing the income in question (and not the seniority provided for in a contractual clause or in an instrument of collective labour regulation or even in a termination agreement).

It follows from the literal and systematic element that the relevant concept of "seniority in the entity owing the payment" refers to the number of years in the entity with which the contract ceases (see article 2(10) of the IRS Code);

Furthermore, even if the possible absence in tax law of a definition of "seniority," which is not conceded, could lead to the filling of this concept in the branch of law that accommodates it, that is, in labour law, as provided in article 11(2) of the LGT, the fact is that the Labour Code does not contain a definition of what is meant by "seniority," it being discerned among the numerous uses of the concept, with different amplitudes and contexts, one, more coherent and systematic, which is the one that conforms the term "seniority" to "seniority in the company" (see articles 368(1)(e), article 112(6), article 147(3), etc.).

Citing doctrine (Cláudia Reis Duarte and Filipe Fraústo da Silva, Annotation to the South Central Administrative Court Decision on the seniority of banking workers (for purposes of calculating the amount of compensation for contract termination not subject to taxation, under article 2(4) of the IRS Code), Revista da Ordem dos Advogados, no. 1, 2012), the Respondent argues that it is unquestionable that the concept of seniority included in the factual basis of the norms of the Labour Code that establish the referred criteria for defining compensations (or indemnities) within the regime of contract termination is that of seniority in the company;

The concept of seniority used by the legal provisions of the codified chapter relating to contract termination and establishing criteria for defining indemnities or compensations is that of seniority in the company and which, consequently, are not admissible, in that definition or compensation calculation, additional periods of duration of the bond that may have been recognized by the employer by mere effect of contractual agreement or, even, by unilateral admission, that is, which do not result directly from the application of legal or collective convention norms that have as a consequence such extension, such as for example occurs in the already mentioned cases of contract position transfer, transfer of ownership or operation of company, establishment or economic unit, merger, division, etc. To these cases, collective conventions may add several others;

This regime has a very clear reason for being: seniority in the company, as a partial protection mechanism for longer-serving workers, has its most radical expression in the protection of their employment stability, placing them, relative to less senior workers, in a more favorable situation in the event of contract termination initiated by the employer;

Even if it were necessary to have recourse, in filling the concept in question (which it is understood is not the case insofar as the tax legislator was clear and enshrined in the letter of the law that seniority is that verified in the entity owing the payment), to labour law — the solution would still be identical, since in the Labour Code there is no definition of seniority and, if we must extract any from it, it will be seniority in the company, and not the seniority that results from a clause of any collective labour convention or agreement established between the parties";

It is read in clause 2 of the ACT for the Banking Sector (2012) the following: "This Collective Labour Agreement is applicable throughout 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 workers in their service affiliated to the Unions of the Centre, 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 an estimated 54,300 workers covered. (...)";

For the said ACT to be applicable, it would be necessary that the workers in question be affiliated to one of the said unions and that the credit institution be a subscriber to the said Agreement;

Bank B... subscribed to the ACT (2012), having, however, made a reservation, in the following terms: "In counting service time for any purpose arising from the ACT, shall count only the service time rendered to the respective Institutions that are subscribers to this reservation, plus possibly the service time rendered to other institutions or companies, but, in this case, only if such results from an individual agreement between those and the worker."

As results from clause 7 of the employment contract entered into between the Claimant and B..., attached as doc. 3 of the PI, it is verified that the following was agreed:

"1. The Bank guarantees to the Second Party seniority stemming from the provision of service to other Credit Institutions, from 01/08/1995, documentally proven, but only for the following purposes:

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

b) The part of the retirement benefit corresponding to the service time rendered by the Second Party to the First Party shall be calculated pursuant to clause 6a of the B... Pension Plan.

c) The service time rendered to other Credit Institutions prior to the signing of this contract shall likewise not be taken into account for calculating the number of years of service."

It is thus demonstrated that the employment contract entered into between the Claimant and Bank B... does not even grant her the right she claims, that is, that seniority "acquired" in relation to previous employing entities be considered in calculating compensation for termination of the respective contract;

Therefore, when it is stated in clause ten of the contract termination agreement attached as doc. 7 of the PI that the exclusion from taxation covers the part of the compensation relating to the time exercising functions in other institutions, this is nothing more than a venire contra factum proprium, not corresponding to the tenor of the employment contract entered into previously.

Subsequent Procedure

By agreement of the Parties, the Tribunal determined the dispensation with the holding of the meeting provided for in article 18 of the RJAT, by order issued on 09-10-2017.

Having been granted to the Parties successive time periods to submit final written submissions, they chose not to do so.

II. PRELIMINARY EXAMINATION

The singular Arbitral Tribunal was duly constituted on 22-05-2017, with the Arbitrator designated by the Deontological Council of the CAAD, having complied with the respective legal and regulatory formalities (articles 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the CAAD Deontological Code), and is competent ratione materiae, in conformity with article 2 of the RJAT.

The Parties have legal standing and capacity and are duly represented.

No procedural defects were identified.

III. MATTERS TO BE DECIDED

The principal matters to be appreciated and decided in these proceedings are:

• How the term "seniority" contained in article 2(4)(b) of the IRS Code should be understood;

• How the Claimant's seniority, for purposes of that same provision, should be measured in the concrete case.

IV – FACTS ESTABLISHED AND NOT ESTABLISHED

FACTS ESTABLISHED

The following facts established are considered relevant to the decision of the case:

1st Fact: The Claimant entered into an employment contract with bank "B..." on 26 May 2006;

2nd Fact: The Claimant remained in office under that employment contract from 08-06-2006 to 30-06-2012;

3rd Fact: On 30-03-2012 and effective as of 30-06-2012, an agreement terminating the employment contract was entered into between the Claimant and bank "B...";

4th Fact: By virtue of the termination of the employment contract agreed on that date, the Claimant received from the employer, B..., as compensation for contract termination, the sum of €62,275.00;

5th Fact: The Claimant entered into an employment contract with C..., SA on 01-08-1995;

6th Fact: The Claimant remained in the service of C..., SA and its successor, D..., SA, until 15-05-2015;

7th Fact: On 15-05-2005, an agreement suspending the employment contract then existing between the Claimant and D..., SA was entered into;

8th Fact: On the same day, 15-05-2005, and by the same contractual instrument, the Claimant entered into an employment contract with Bank E..., SA, belonging to the same group of companies as Bank D..., SA;

9th Fact: The Claimant remained in the service of E..., SA until 04-06-2006;

10th Fact: Bank B... was, as of the date of termination of the employment contract with the Claimant, a signatory to the "Agreement between various credit institutions and the National Union of Banking Executives and Technicians and another," published in the Labour and Employment Bulletin, 1st series, no. 4, of 29 January 2005;

11th Fact: Clause 17 of the said "Agreement between various credit institutions and the National Union of Banking Executives and Technicians and another" provides:

Clause 17

Determination of Seniority

1 — For all purposes provided for in this agreement, worker seniority shall be determined by counting service time rendered in the following terms:

a) All years of service rendered, in Portugal, in credit institutions with activity in Portuguese territory;

b) All years of service rendered in former colonies in Portuguese credit institutions with activity in those territories and in the former credit and insurance inspectorates;

c) All years of service rendered in other foreign countries to Portuguese credit institutions;

d) All years of service rendered to entities from which they came, in the case of workers integrated into credit institutions by virtue of administrative provision and as a result of the extinction of companies and associations or of transfer to those of public services;

e) All years of service rendered in financial companies or in the formerly called "parabanking institutions."

12th Fact: The employment contract entered into between the Claimant and Bank B... includes a clause 7, on "Seniority," which provides:

Clause 7 - Seniority

• The Bank guarantees to the Second Party seniority stemming from the provision of service to other Credit Institutions, from 1/8/1995, documentally proven, but only for the following purposes:

• For purposes of the B... Pension Fund, the First Party shall take into account the service time rendered to other credit institutions, with the amount of the retirement or presumed disability pension being calculated in accordance with the regime provided for in the ACT of the bankers;

• The part of the retirement benefit corresponding to the service time rendered by the Second Party to the First Party shall be calculated pursuant to clause 6 of the B... Pension Plan;

• The service time rendered to other Credit Institutions prior to the signing of this contract shall likewise not be taken into account for calculating the number of years of service;

(...)

13th Fact: The Claimant was notified by the AT – Autoridade Tributária e Aduaneira (Tax and Customs Authority) of the draft decision to alter her 2012 IRS tax return. The notification was issued on 06-07-2016.

14th Fact: The Claimant was notified by the AT – Autoridade Tributária e Aduaneira (Tax and Customs Authority) of the decision to alter her 2012 IRS tax return. The notification was issued on 21-10-2016.

15th Fact: The Claimant was notified of a statement of account reconciliation, with issue date of 08-11-2016, which has implicit therein an assessment of Personal Income Tax, and from which results an amount to be paid of €15,156.36.

16th Fact: The statement of account reconciliation is based on the assessment of Personal Income Tax resulting from the alteration to the 2012 IRS tax return referred to in the 14th Fact Established.

The facts given as established were so based on the documentary evidence existing in the file and in the Labour and Employment Bulletin.

FACTS NOT ESTABLISHED

The following are not given as established:

1st. That the Claimant proceeded with payment of the assessed tax.

2nd. That an assessment with no. 2016..., from which results the amount to be paid in tax of €10,041.10 and compensatory interest of €1,277.25, in the total amount to be paid of €11,318.35, was notified to the Claimant.

There are no other facts given as established or not established with relevance to the decision of the case.

V – GROUNDS

Let us begin with the law.

Article 2(4) of the IRS Code states:

4 - When, in any way whatsoever, the contracts underlying the situations referred to in article 1(a), (b) and (c) cease, but without prejudice to the provisions of article 1(d) thereof, as to the benefits that continue to be owed even if the employment contract does not subsist, or if the cessation of the functions of public manager, administrator or manager of a legal person, as well as of representative of a permanent establishment of a non-resident entity, occurs, the amounts earned, in any capacity whatsoever, are always subject to taxation:

Article 2(4)(b) continues:

b) In the part that exceeds the value corresponding to the average value of regular remuneration with the character of taxable remuneration earned in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions in the entity owing the payment, in other cases (...).

The first interpretive question that arises is whether the expression "seniority in the entity owing the payment" is equivalent to time of work in the entity owing the payment.

That is, whether the seniority considered in article 2(4)(b) is, in every and any case, only the time of activity in the entity paying the compensation, or whether it can, under certain conditions, be the seniority measured from an earlier moment, incorporating one or more periods of exercise of work activity in other employing entities.

The "seniority" mentioned in article 2(4)(b) will always, in any situation, be only the time of work in the entity paying the compensation, as the Tax Administration argues, if in labour law it is not admissible to consider another concept of seniority.

The Respondent points to doctrine to the effect that this is so, i.e., that worker seniority never encompasses periods prior to the exercise of activity in the current employer entity. In other words, that "seniority" is always "seniority in the company."

However, upon analyzing the doctrinal study mentioned by the tax administration, what is extracted therefrom is, precisely, that many are the possible meanings, in labour law, for the term "seniority," and there even exists a specific expression – "seniority in the company" – to designate the strict sense that the Tax Administration defends, of duration of the labour bond with the current employer entity.

The fact that the instruments of collective regulation of labour also establish different concepts of seniority, as happens with the already referred clause 17 of the "Agreement between various credit institutions and the National Union of Banking Executives and Technicians and another," published in the Labour and Employment Bulletin, 1st series, no. 4, of 29 January 2005, is likewise to be taken into account.

Concluding that, for labour law, alongside "seniority in the company," there exist other possible meanings for the term "seniority," the provision in article 2(4)(b) of the IRS Code must be interpreted to extract the sense with which the term is employed therein. And, more specifically, it is necessary to inquire whether the meaning of the term "seniority" mentioned in article 2(4)(b) of the IRS Code admits being shaped in accordance with what is considered as "seniority" within the ambit of a particular labour law relation pursuant to the applicable labour regulation.

If the tax legislator had intended that the relevant time – for purposes of the exclusion from taxation provided for in article 2(4)(b) – was always the time of duration of the worker's activity in the company, it would have had no need whatsoever to mention "seniority."

It would be a useless and redundant repetition. To conclude that the legislator used a useless and redundant repetition would not be in accordance with what is prescribed concerning the interpretation of legal norms in article 9(3) of the Civil Code.

Therefore, the tax legislator intended to open the possibility for the seniority of the worker in the company to be something distinct from time of activity in the company.

We agree on this point with the doctrine set forth in the TCAS judgment of 11-05-2004, proc. no. 6002/01, in which it is stated: "Because seniority constitutes a labour law concept, we consider that it is in labour law that the solution to the question should be sought, knowing that it constitutes current doctrine (currently enshrined in article 11 of the LGT) that whenever terms specific to other branches of law are employed in tax norms, they must be interpreted in the same sense they have therein, unless otherwise follows directly from the law." (likewise, the TCAS judgment of 12-03-2013, proc. no. 05971/12).

The difficulties do not end here, we acknowledge, since labour law does not contain a concept of seniority. Furthermore, there is also no doubt, given the indeterminacy of the concept of seniority, that there exists a certain margin for the instruments of collective regulation of labour relations to establish the concept of seniority applicable within their ambit, which removes certainty from any legal norm that makes use of it.

But it was the option of the tax legislator to remit to a concept of labour law which is not only an indeterminate concept, but is to some extent at the disposal of the parties executing an instrument of collective regulation of labour. It is not the interpreter's role to correct the expression of the legislator, but to extract therefrom the meaning that presumably most closely approaches its intent.

As is also expounded in the already mentioned TCAS judgment, nothing prevents that in the fixing of the concept of seniority "service time and the category already attained in another or other employing entities be taken into account, so that the worker is admitted without prejudice to her seniority in the profession, since such is neither prohibited by the norms referred to in article 12(1) of the Labour Code nor by the principles of good faith, and is even at times attended to in the usages of the profession of labour and of companies."

And continuing to follow the doctrine of that Court, "having set this forth, it must be emphasized that nothing suggests or indicates that the concept 'seniority' contained in article 2(4) of the IRS Code has not been used in all its breadth, which cannot take into account service time (seniority) attained in another company as long as it has been expressly recognized in the labour contract by the entity owing the payment." Or as is stated in the judgment of that same Court of 12-03-2013, proc. no. 05971/12, "Not resulting from the norm under examination (see article 2(4) of the IRS Code) that the concept of seniority refers restrictively to service time in the entity owing the compensation for cessation of the employment contract, and nothing justifying a restrictive interpretation of the rule of taxation incidence, the broader notion of seniority arising from labour law should be accepted for calculating the amount subject to taxation in IRS."

There is no doubt that the instruments of collective regulation of labour relations are a source of labour law (see article 1 of the Labour Code). Therefore, the concept of seniority established in a collective labour agreement is a concept of seniority established in labour law.

Pursuant to clause 17 of the "Agreement between various credit institutions and the National Union of Banking Executives and Technicians and another" published in the Labour and Employment Bulletin, 1st series, no. 4, of 29 January 2005, of which it was a signatory, both at the date of entering into the employment contract and at the date of its termination, Bank B..., the entity owing the compensation for contract termination, worker seniority (covered by the agreement) encompassed all years of service rendered, in Portugal, in credit institutions with activity in Portuguese territory."

As this agreement is the source of law to which one must have recourse to fix the concept of seniority in the concrete case, the seniority relevant for the application of what is provided in article 2(4)(b) of the IRS Code cannot but be that which encompasses all years of service rendered, in Portugal, in credit institutions with activity in Portuguese territory, that is, 16 years and 11 months.

The fact that the effects of this definition of worker seniority were limited in the employment contract is not sufficient to invalidate, in our view, that, for the generality of purposes, worker seniority is that which follows from the application of the rules of the Banking Sector ACT.

Thus, the allegation of illegality of the contested IRS assessment proceeds, based on violation of law due to error in legal prerequisites.

VI. VALUE OF THE CLAIM

In its response, the Respondent contests the value of the claim attributed by the Claimant, of €15,156.36.

And it does so based on the following arguments:

• Assessment no. 2016... was issued, from which results the amount to be paid in tax of €10,041.10 and compensatory interest of €1,277.25, in the total amount to be paid of €11,318.35.

• The Claimant was notified of the assessment by means of registered letter under no. RY...PT, see print of the AT's computer databases attached as doc. 2 of this response.

• The Claimant was notified of the statement of account reconciliation which it attaches as doc. 1 of the PI, with payment deadline until 14.12.2016.

• In the event that the application is upheld (which is admitted merely as a matter of professional duty), the amounts to be paid should be annulled, that is, the amount to be paid in tax of €10,041.10 and compensatory interest of €1,277.25, in the total amount to be paid of €11,318.35.

However, what is found is the following:

If an assessment no. 2016... was issued from which results the amount to be paid in tax of €10,041.10 and compensatory interest of €1,277.25, resulting in a total amount to be paid of €11,318.35, it is not proven that such assessment was notified to the Claimant.

What is indeed proven is that a "Statement of Account Reconciliation" was notified to the Claimant, with issue date of 08-11-2016, from which results an amount to be paid of €15,156.36.

Such "Statement of Account Reconciliation" does not even identify, it is true, which tax assessment is at its base.

The Claimant deduced, and the Respondent confirmed in its response to the Claimant's application, that such statement of account reconciliation is based on an assessment of Personal Income Tax resulting from the decision to alter the model 3 form of 2012 IRS.

It is, therefore, based on the value contained in the "statement of account reconciliation," the only one that was notified to the Claimant, and in which is fixed an amount of tax to be paid of €15,156.36, that the value of the claim is fixed, for purposes of article 10(2)(e) of the RJAT.

VII. DECISION

For the grounds stated above, the application for annulment of the act of assessment of Personal Income Tax, notified to the Claimant through the document number 2016..., in the amount of €15,156.36, is judged to be well-founded.

The Respondent is condemned, pursuant to article 24(1)(b) of the RJAT, to perform all acts necessary to restore the situation that would exist had the annulled act not been performed.

Economic Utility Value of the Proceedings

The economic utility value of the proceedings is fixed at €15,156.36.

Costs

Pursuant to article 22(4) of the RJAT, the amount of costs is fixed at €918.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let this arbitral decision be registered and notified to the Parties.

Lisbon, Administrative Arbitration Center, 17 November 2017

The Arbitrator

(Nina Aguiar)