Summary
Full Decision
ARBITRAL DECISION [1]
Claimant – A…, Law Partnership, RL
Respondent - Tax and Customs Authority
The Arbitrator, Dr. Sílvia Oliveira, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 9 June 2016, with respect to the above-identified case, decided as follows:
1. REPORT
1.1
A…, Law Partnership, RL, Legal Entity No. …, with registered office at …, No. …, ..., in Lisbon (hereinafter referred to as the "Claimant"), filed a request for arbitral pronouncement and constitution of a singular Arbitral Tribunal, on 18 March 2016, pursuant to the provisions of Article 4 and No. 2 of Article 10 of Decree-Law No. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority (hereinafter referred to as the "Respondent") is named as respondent.
1.2
The Claimant, "(…) having been notified of the dismissal order of the Gracious Complaint (…) presented against the assessment acts relating to Personal Income Tax (…) for the year 2011 (…)" submits that "(…) such assessments are vitiated by illegality" and that "(…) the present request should be declared wholly well-founded, determining, consequently, the reimbursement of the tax (…) identified plus compensatory interest (…)".
1.3
The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of the CAAD on 21 March 2016 and notified to the Respondent on the same date.
1.4
The Claimant did not proceed with the appointment of an arbitrator, so, pursuant to the provisions of Article 6, No. 2, paragraph a) of the RJAT, the undersigned was designated as arbitrator by the President of the Deontological Council of the CAAD, on 18 May 2016, the appointment having been accepted within the time and terms legally provided for.
1.5
On the same date the parties were duly notified of this designation and did not express a desire to challenge the appointment of the arbitrator, in accordance with the provisions of Article 11, No. 1, paragraphs a) and b) of the RJAT, in conjunction with Articles 6 and 7 of the Deontological Code.
1.6
Thus, in accordance with the provision contained in paragraph c) of No. 1 of Article 11 of the RJAT, the Arbitral Tribunal was constituted on 9 June 2016, and an arbitral order was issued on the same date, in order to notify the Respondent to, in accordance with the provisions of Article 17, No. 1 of the RJAT, present a response within a maximum period of 30 days and, if it wished, request the production of additional evidence.
1.7
On 14 July the Respondent presented its Response, having defended itself through opposition and concluded that "(…) the request should be judged unfounded with the consequent absolution of the TA".
1.8
By arbitral order dated 14 July 2016, issued taking into account that both Parties were mandated to notify "(…) to pronounce themselves, within a period of 5 days, on the possibility of waiving" both the holding of the meeting referred to in Article 18 of the RJAT and the presentation of submissions.
1.9
The Respondent, on 5 September 2016, presented a request in order to pronounce itself "for the waiver of the meeting provided for in art. 18 of the RJAT, by the absence of issues to be considered that justify its holding, and for the presentation of submissions, for which it requests the setting of a time period".
1.10
The Claimant did not pronounce itself on the content of the arbitral order referred to in point 1.8., above.
1.11
Thus, taking into account both the arbitral order of 14 July 2016 and the request presented by the Respondent on 5 September 2016 (see previous point), this Tribunal decided by arbitral order dated 8 September 2016, in consonance with the procedural principles enshrined in Article 16 RJAT, of contradiction [paragraph a)] of equality of parties [paragraph b)], of the autonomy of the Arbitral Tribunal in the conduct of proceedings and in the determination of rules to be observed [paragraph c)], of cooperation and procedural good faith [paragraph f)] and of free conduct of proceedings enshrined in Articles 19 and 29, No. 2 of the RJAT, as well as taking into account the principle of limitation of futile acts, provided for in Article 130 of the Code of Civil Procedure (CPC), applicable by force of the provisions of Article 29, No. 1, paragraph e) of the RJAT, this Arbitral Tribunal decided as follows:
1.11.1
To dispense with the holding of the meeting referred to in Article 18 of the RJAT;
1.11.2
Not to dispense with the presentation of submissions and, consequently, to notify the Claimant and the Respondent to, in this order and successively, present written submissions within a period of 10 days, with the time period for the Respondent to commence from the date of notification of the joining of the Claimant's submissions or the expiry of the time period granted for that purpose (in the event that the latter does not present submissions);
1.11.3
To designate 26 October 2016 as the date for the issuance of the arbitral decision.
1.12
The Claimant was further warned that "until the date of issuance of the arbitral decision, it should proceed with the payment of the subsequent arbitral fee, in accordance with the provisions of No. 3 of Article 4 of the Regulations for Costs in Tax Arbitration Proceedings and communicate such payment to the CAAD" (which it did on 20 September 2016).
1.13
On 20 September 2016, the Claimant presented its written submissions in order to reiterate "(…) what was alleged in the request for arbitral pronouncement".
1.14
On 30 September 2016, the Respondent presented its written submissions in order to reiterate also the arguments presented in the Response, highlighting that "the request cannot succeed due to lack of legal support, with several arguments demonstrating that there is no legal basis whatsoever for the requested reimbursement" (arguments that it enumerates in its submissions).
1.15
By arbitral order dated 17 October 2016, issued "(…) in consonance with the procedural principles enshrined in Article 16 RJAT (…) and of free conduct of proceedings enshrined in Articles 19 and 29, No. 2 of the RJAT (…)", it was decided to order notification:
1.15.1
"To the Claimant to, within a period of 5 days, properly clarify the scope of the arbitral request presented, taking into consideration the periods of lapse underlying the acts that it may wish to review".
1.15.2
"To the Respondent to, if it wishes, within a period of 5 days, counted from the date of notification of the joining of the clarifications referred to in the previous point (…)" to pronounce itself on the content thereof.
1.16
As a result of the provisions of the arbitral order referred to in the previous point, "(…) the issuance of the arbitral decision, scheduled for 26 October 2016 (…)" was "(…) rescheduled for 8 November 2016".
1.17
By request presented on 25 October 2016, the Claimant came to request "(…) the extension of the time period [granted in the arbitral order identified in point 1.15.] by a further 3 (three) days to pronounce itself", and the claim was granted by arbitral order also dated 25 October 2016.
1.18
Following the arbitral order referred to in point 1.15., above, the Claimant presented a request on 28 October 2016, in order to "(…) properly clarify the scope of the arbitral request presented (…)", reiterating "(…) the content of the initial request and documents that accompanied it and also the content of the submissions made by it", in order to demonstrate and justify "(…) the right that it has to reimbursement to its legal sphere of the tax in the amount of € 5,672.43 paid by it in error resulting from an incorrect interpretation of the transparent taxation regime for non-residents (…)", concluding that the procedure adopted resulted in "(…) an improper payment and made in duplicate to the State coffers (…)", so that "since the Claimant does not have the legal obligation to proceed with the payment of the tax as it did, it has the right to reimbursement of the amount expended by it".[2]
1.19
In these terms, the Claimant proceeds to clarify further that "if it is not understood that (…) it has standing to request the reimbursement of the tax paid by withholding at source (…), the request contained in the gracious complaint that originated and is an integral part of the present arbitral proceedings should be restored", that is, "it is requested that it be corrected in the context of the assessment of Personal Income Tax of the taxpayer, B… (…) as originally requested, on penalty of duplicate collection", "(…) as had already been requested in the gracious complaint".
1.20
By request presented on 2 November 2016, the Respondent came to clarify with respect to the content of the request presented by the Claimant on 28 October 2016 that "(…) it maintains in its entirety everything it said in the RESPONSE and FINAL SUBMISSIONS", inasmuch as it understands that "the Claimant, in its capacity as tax substitute, does not have standing to request the reimbursement of an amount of tax that (…) was entirely deducted from the income paid to the substituted taxpayer, from which it results unambiguously that the tax substitute is not holder of any right or legitimate interest susceptible to legal protection as it is not a question of the payment to the State Coffers of tax in an amount exceeding the amount withheld".
1.21
Additionally, the Respondent further states that "as regards the request formulated as a subsidiary claim by the Claimant with its request of 28/10/2016 (…) it is evident that there is no legal basis that could support it, for the Claimant cannot act judicially in defence of the rights and legally protected interests of a third party", so that for the Respondent, "the Claimant's request, asking for the enlargement of its original claim with the formulation of a subsidiary claim that has as its object the tax-legal situation of a third party, should be judged unfounded on the ground of lack of standing".
2. GROUNDS FOR THE CLAIM
The Claimant supports its claim, in summary, as follows:
2.1
It begins by clarifying that "it is a company constituted on 4 August 2011, to exercise as its principal activity services of a legal nature",
being "(…) subject to the transparent taxation regime for Corporation Income Tax purposes, having imputed to its partners, in accordance with the criteria defined in Minutes No. 2, the income determined in the financial year 2011 (…)".
2.2
According to the Claimant, "in compliance with its reporting obligations (…) it proceeded with the delivery (…) of the amount withheld, with reference to the period (…) referred to, to its partner (…) B…, non-resident for tax purposes in Portuguese territory (…)"
2.3
In this context, the Claimant states that "the partner (…) presented a Personal Income Tax declaration and proceeded with its payment in the year 2011, without considering the withholding that had been made to it as a non-resident (…)", in the total amount of EUR 5,672.43.
2.4
In this sense, the Claimant argues that "we are in the presence of withholding at source effected and delivered in a timely manner to the State coffers, having in the submission of its Personal Income Tax declaration (…) been disregarded (…) because it is a taxpayer to whom the transparent taxation regime applies, and consequently, such income is not subject to withholding at source or exempt therefrom, which resulted in subjection to double taxation (i) by withholding at source and (ii) in the Personal Income Tax assessment submitted, because the amount of withholding had been reported as having been effected to the non-resident entity".
2.5
The Claimant further clarifies that "in the context of the Gracious Complaint, the now Claimant had already alleged and proved the facts above described" but "such facts were not taken into account by the Tax Authority (…)" inasmuch as it concludes that "the Withholding Guide in question (…)" does not correspond to the year 2011, a position with which the Claimant cannot agree.
2.6
In these terms, "the Claimant cannot accept the dismissal of the Gracious Complaint (…) presented against the tax act (…) identified, nor with the arguments underlying it, inasmuch as (…) they are vitiated by various defects that prevent their subsistence in the Legal Order".
2.7
Thus, the Claimant understands that "(…) the duplication of collection would always occur (…) inasmuch as (…) it understands to have demonstrated that duplicate payment of the tax occurred (i) via withholding at source (…) and which (ii) was not seen deducted in the respective Personal Income Tax assessment".
2.8
On the other hand, the Claimant reiterates that "it proceeded with the delivery – as withholding at source – within the time period legally established for that purpose, with no legal obligation, however, to assess and pay the tax (…)" so that, in this conformity, the Claimant understands that there should "(…) be reimbursement of the tax delivered in excess, because improper and in duplicate (…) on penalty of violation of law and/or duplication in the payment of tax (collection)".
2.9
Consequently, the Claimant concludes that "the success of the present request (…) should determine the reimbursement (…) of the improperly paid tax, as well as the payment of compensatory interest (…)".
3. RESPONSE OF THE RESPONDENT
3.1
The Respondent responded, maintaining that the request for arbitral pronouncement should fail, inasmuch as "it advocates for the maintenance in the legal order of the contested act, by understanding that the same constitutes a correct application of the law to the facts".
3.2
In this context, the Respondent invokes the following arguments:
3.2.1
"On 10/07/2012, the Claimant proceeded with the delivery of the Annual Declaration relating to the financial year 2011, having declared in Annex G (Special Regimes) the imputation of € 22,509.74 (80%), by participation of 80%, to the partner (…) with Tax ID No. …, without having identified in field G102 any withholding at source (…)";
3.2.2
"On 12/10/2012, the Claimant submitted, in its capacity as tax substitute, the withholding guide for Personal Income Tax No. … (208 – remuneration of members of statutory bodies of legal entities) in the amount of €5,627.43, mentioning that the withholding was due with reference to income paid in the period 2012/September, further making its payment on 17/10/2012 (…)";
3.2.3
"On 12/11/2012, the Claimant submitted the Statement No. 30 for the fiscal year 2011 No. …, indicating as beneficiary of the income (…) the Tax ID No. …, identifying the withholding guide for Personal Income Tax No. …";
3.2.4
"Subsequently, the Claimant requested the reimbursement of the amount of €5,672.43", so that "in the context of the examination of its request, and having analyzed the Annual Declaration of the Claimant, sent on 10/07/2012, it was found that the Claimant did not make any withholdings at source relating to income from the year 2011, imputed to the partner with Tax ID No. …, in accordance with the respective Annex G, field G102 (…)", "which resulted (…) in the dismissal of its claim";
3.2.5
"Therefore, it is noted that there is no disputed matter of fact, and the issue to be decided in the case is only a question of law".
3.3
In these terms, the Respondent understands that "the Claimant submitted the (…) withholding guide for Personal Income Tax in its capacity as tax substitute (…)", "having the amount delivered (…) been withheld from income paid (…)".
3.4
Notwithstanding, the Respondent verified that the Claimant "(…) did not make any withholdings at source relating to income from the year 2011 imputed to the partner Tax ID … (…)", inasmuch as "(…) that was not the tax period indicated in the respective guide (…)".
3.5
And, the Respondent adds that "(…) if there existed a withholding at source of tax on income paid in 2011 to B…, and being complete the delivery of the respective Personal Income Tax declaration model 3, it is to this taxpayer that the standing to act and the standing belong to request the reimbursement of overpaid tax" inasmuch as "(…) it is on the (…) legal sphere of the substituted taxpayer, and not on the legal sphere of the Claimant, that the alleged burden of bearing more tax than effectively due could have occurred".
3.6
Thus, the Respondent concludes that "(…) the Claimant does not prove the alleged error in the delivery of tax exceeding the amount withheld (…)" so that "faced with the factuality demonstrated, the absence of any prejudice in the patrimonial sphere of the Claimant susceptible to supporting its standing to act or even its procedural standing is evident" inasmuch as it understands that the situation described does not configure "(…) any error in the delivery of tax exceeding the amount withheld".
3.7
Consequently, the Respondent also understands that the absence of "(…) error attributable to the services, (…) there is no place for the payment of compensatory interest".
4. SANEADOR [PRELIMINARY EXAMINATION]
4.1
The request for arbitral pronouncement is timely since it was presented within the time period provided in paragraph a) of No. 1 of Article 10 of the RJAT.[3]
4.2
The parties have legal personality and capacity, are properly interested in the request for arbitral pronouncement and are duly represented, in accordance with the provisions of Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.
4.3
The Tribunal is competent with respect to the examination of the request for arbitral pronouncement formulated by the Claimant.
4.4
No exceptions were raised that need to be examined.
4.5
No nullities were found, so it is now necessary to examine the merits of the request.
5. MATTER OF FACT
5.1
Regarding Proven Facts
5.2
The following facts are considered as proved:
5.2.1
The Claimant is a company constituted on 4 August 2011 to exercise as its principal activity services of a legal nature, being subject to the transparent taxation regime for Corporation Income Tax purposes, facts indicated by the Claimant and not contested by the Respondent,
5.2.2
The Claimant, on 31 March 2012, held a General Meeting to deliberate on the Accounts of the Company for the period of 2011, at which the distribution of the net result determined was approved, in the total amount of EUR 28,137.18, by the two partners of the company, in the proportion of the percentage of each of their participations (as per document No. 2, attached with the request and administrative proceedings attached by the Respondent);
5.2.3
The Claimant proceeded with the delivery, on 10 July 2012, of the Annual Declaration relating to the financial year 2011, having declared in Annex G (Special Regimes) the imputation of EUR 22,509.74 (80%) to the partner Tax ID No. …, without having identified in field G102 any withholding at source (as per document No. 1-A, attached with the request and administrative proceedings attached by the Respondent);
5.2.4
The Claimant submitted, as tax substitute, on 12 October 2012, the withholding guide for Personal Income Tax No. … relating to "withholdings from non-residents", referring to the period of 2012/September, in the amount of EUR 5,627.43, relating to withholdings effected in the context of remuneration of members of statutory bodies (as per document No. 3, attached with the request), having delivered to the State, on 17 October 2012, the Personal Income Tax withheld (as per document No. 1 attached with the request and administrative proceedings, attached by the Respondent);
5.2.5
The beneficiary of the income identified in the previous points issued the respective receipt of the amount earned as "withdrawal on account of profit of the Company obtained in 2011", on 28 September 2012, therein mentioning the withholding at source effected at the rate of 25% (as per document No. 3, attached with the request and administrative proceedings, attached by the Respondent);
5.2.6
The Claimant submitted on 12 November 2012 Statement No. 30 (No. …) relating to the fiscal year 2011, therein indicating as beneficiary of the income above identified (see points 5.2.2. and 5.2.3.), in the amount of EUR 22,509.74 and the withholding guide for Personal Income Tax indicated in point 5.2.4., above (as per documents No. 1 and 1-A, attached with the request and administrative proceedings, attached by the Respondent);
5.2.7
The Claimant presented on 4 June 2014 a gracious complaint (No. …2015…) relating to the request for reimbursement of the amount withheld at source and delivered to the State coffers, allegedly with reference to the year 2011 (delivered via the guide No. …, above already referred to in point 5.2.4.), in the amount of EUR 5,627.43, with the objective of requesting its reimbursement on the ground of "overpaid tax" (as per documents No. 1 and 1-A, attached with the request and administrative proceedings, attached by the Respondent);
5.2.8
The Claimant was notified of Official Letter No. …, dated 2 November 2015, relating to the draft dismissal of the gracious complaint identified in the previous point, for exercise of the right to prior hearing (as per document No. 4, attached with the request and administrative proceedings, attached by the Respondent);
5.2.9
The Claimant, having not exercised the referred right to prior hearing within the time period granted, was notified of Official Letter No. …, dated 17 December 2015, relating to the decision to dismiss the gracious complaint No. …2015… (as per document No. 1, attached with the request and administrative proceedings, attached by the Respondent).
5.3
No other facts likely to affect the decision on the merits of the request were proved.
5.4
Regarding Unproven Facts
5.5
It was not considered proved that the tax contained in the withholding guide for Personal Income Tax No. …, relating to "withholdings from non-residents", referring to the period 2012/September, in the amount of EUR 5,627.43 (submitted on 12 October 2012 and the amount of which was delivered to the State on 17 October 2012), pertained to withholdings from the year 2011 (as appears from the joint analysis of all the documentation attached by the Parties to the proceedings).
5.6
No other facts were verified as unproven with relevance for the arbitral decision.
6. LEGAL GROUNDS
6.1
In the case, the Claimant's claim, supported by the provisions of Articles 132 and 99 et seq. of the CPPT, is to obtain "the reimbursement of the tax (…) identified plus compensatory interest (…)", inasmuch as it alleges to have made "(…) an improper payment and (…) in duplicate to the State coffers (…)", so that "since the Claimant does not have the legal obligation to proceed with the payment of the tax as it did, it has the right to the reimbursement of the amount expended by it".
6.2
Additionally, the Claimant came to further clarify in the request presented on 28 October 2016 that "if it is not understood that (…) it has standing to request the reimbursement of the tax paid by withholding at source (…), the request contained in the gracious complaint that originated and is an integral part of the present arbitral proceedings should be restored".[4]
6.3
On the other hand, the Respondent argues in the case that being verified that "(…) the Claimant did not make any withholdings at source relating to income from the year 2011, imputed to the partner with Tax ID … (…)", so that "(…) if there existed a withholding at source of tax on income paid in 2011 (…)" to the Tax ID above identified "(…) and being complete the delivery of the respective Personal Income Tax declaration model 3, it is to this taxpayer that the standing to act and the standing belong to request the reimbursement of overpaid tax" inasmuch as "(…) it is on the (…) legal sphere of the substituted taxpayer, and not on the legal sphere of the Claimant, that the alleged burden of bearing more tax than effectively due could have occurred".
6.4
Faced with the positions above stated and, taking into account the documentation attached to the case by both Parties, as well as the facts given as proved and unproven in the previous Chapter of this Decision, it will be important to provide a response to the following disputed question:
6.4.1
Does the Claimant have the right to be reimbursed (on the ground of allegedly delivered tax in excess) of the amount of EUR 5,672.43, relating to the Personal Income Tax withheld from its partner (whose Tax ID above was identified) with respect to profits relating to the year 2011 (and distributed in 2012 after deliberation to that effect), the amount of which tax has not been to date considered and recovered?
6.5
Thus, preliminarily, it is necessary to briefly analyze, for the purposes of the above, the regime established in 2011 with respect to companies under Transparent Taxation regime.
6.6
In this context, in general terms, Article 6 (Transparent Taxation) of the Corporation Income Tax Code established, in the version in force at the date to which the facts relate, that "the taxable income is imputed to the partners, integrating itself, in accordance with the legislation that may be applicable, in their taxable income for Personal Income Tax or Corporation Income Tax (…) purposes of the corporations hereinafter indicated, with registered office or effective management in Portuguese territory, even if there has been no distribution of profits:
(...)
b) Partnerships of professionals;
(...)".
6.7
In accordance with the provisions of No. 3 of the article referred to in the previous point, "the imputation referred to in the previous numbers is made to the partners or members in accordance with what results from the constitutional act of the entities mentioned therein (…)" being that, the provision establishes in No. 4, paragraph a) of the same article that "for the purposes of the provision of No. 1, a partnership of professionals is considered to be a partnership constituted for the exercise of a professional activity specifically provided in the list of activities referred to in Article 151 of the Personal Income Tax Code, in which all singular partners are professionals of that activity (…)".
6.8
From the above it results that the Transparent Taxation regime applies, necessarily, to resident companies in Portugal that are duly identified in No. 1 of Article 6 of the Corporation Income Tax Code, among which are partnerships of professionals, as is the case of partnerships constituted by lawyers (in accordance with the provisions of the previous point), provided that all singular partners are professionals of that activity.
6.9
In this context, the Transparent Taxation regime, for reasons of neutrality, combating tax evasion and elimination of the so-called double economic taxation of profits distributed to partners, is characterized by the imputation to the partners of the part of the profit that corresponds to them, regardless of its distribution, that is, in accordance with the provisions of the already referred Article 6 of the Corporation Income Tax Code (in the version in force at the date).
6.10
The taxable income of these companies is determined for Corporation Income Tax purposes, so that, although subject to this regime, they do not lose their status as taxpayer of the tax, remaining subject to compliance with all obligations as any other type of company, in particular, to the submission of the periodic income declaration.
6.11
For Personal Income Tax purposes, the values imputed to the partners are integrated as net income of category B, and such imputation is effected, in particular, in accordance with what results from the constitutional act of the respective entity of elements (as provided for in No. 3 of Article 6 of the Corporation Income Tax Code at the date in force).
6.12
Thus, the true characterization of the Transparent Taxation regime of the company can be defined as a situation of non-taxation for Corporation Income Tax purposes (and not of exemption from the referred tax).[5]
6.13
In the Transparent Taxation regime, the law views the income of the company subject to such regime as income of its own partners, imputing to each one the part of the profit that corresponds to them and, although considering the taxable income generated in the context of the company's activity, the law abstracts from the legal personality of this and proceeds with the imputation of such taxable income to the patrimonial sphere of the respective partners (integrating it, therefore, in their respective taxable income, for Personal Income Tax purposes, because they are singular persons).[6][7]
6.14
In the case under examination, and in accordance with the matter given as proved in Chapter 5 of this Decision, the Claimant alleges that, in its capacity as tax substitute "(…) it proceeded with the delivery – as withholding at source (…)", on 17 October 2012, of the amount of EUR 5,627.43, relating to Personal Income Tax withheld from non-resident entities, "(…) in the context of remuneration of members of statutory bodies (…)" pertaining to the year 2011 but, in accordance with the matter of fact given as proved and unproven based on the evidence presented (see points 5.2. and 5.5., above), the referred withholding at source is identified in the respective Personal Income Tax withholding guide (No. …) as pertaining to the period of September 2012, which is why it was not considered by the beneficiary of the income in his Personal Income Tax declaration relating to the year 2011.
6.15
On the other hand, considering the provision of Article 20 of the General Tax Law (LGT), in the version in force at the date to which the facts relate, "tax substitution occurs when, by imposition of law, the tax payment is required from a person different from the taxpayer", being "(…) effected through the mechanism of withholding at source of the due tax".
6.16
Thus, in accordance with the provision of Article 21 of the Personal Income Tax Code, "when, through tax substitution, this Code requires the payment in whole or in part of Personal Income Tax to a person other than that in relation to which the respective conditions occur, the substitute is considered, for all legal purposes, as principal debtor of the tax, without prejudice to the provision of Article 103" of the referred Code (emphasis added).
6.17
Now, in accordance with the provision of Article 103 of the Personal Income Tax Code, "the entity obligated to withhold is responsible for the amounts withheld and not delivered to the State coffers, the substituted taxpayer being relieved of any responsibility in its payment, without prejudice to the provision in the following numbers", being that "when the withholding is effected merely as payment on account of tax ultimately due, the responsibility for tax not withheld falls on the substituted taxpayer originarily and on the substitute subsidiarily, this latter being further subject to compensatory interest due from the end of the delivery period to the end of the period of submission of the declaration by the original responsible party or to the date of delivery of the withheld tax, if earlier.
6.18
Further in accordance with the referred Article 103 of the Personal Income Tax Code, "the substituted taxpayer is only subsidiarily responsible for the payment of the difference between the amounts that should have been deducted and those that effectively were".
6.19
Additionally, in accordance with the provision of Article 132 of the CPPT, "withholding at source is susceptible of challenge by the substitute in case of error in the delivery of tax exceeding the amount withheld" being that "the tax delivered in excess will be discounted in the following deliveries of the same nature to be made in the year of improper payment" (emphasis added).
6.20
Notwithstanding, the provision of Article 132 of the CPPT further establishes that "if the correction referred to in the previous number is not possible, the substitute wishing to challenge will file a gracious complaint to the competent regional peripheral body of the tax administration within a period of 2 years counted from the end of the period referred to therein" (emphasis added).
6.21
In the case under examination, the reasoning that the Claimant used to support the filing of the gracious complaint, the decision of dismissal of which it wishes to review (as a mechanism to obtain the reimbursement of the demanded tax), as well as the arbitral request under examination, was precisely that contained in Article 132 of the CPPT, referred to in the previous point, inasmuch as it alleges that it withheld Personal Income Tax exceeding the due amount (in excess) given that the withholding at source was improperly effected, since it was incurred with respect to income imputed in the context of the Transparent Taxation regime.
6.22
Indeed, the Claimant attempted by way of the gracious complaint and, now through the arbitral request, to obtain the return of the Personal Income Tax improperly withheld and not deducted (via statement 3) by the beneficiary of the income, on the ground that it was not possible via the mechanism of compensation of the tax delivered in excess in the following deliveries of the same nature to be made, since the time period of the "year of improper payment" had already expired.
6.23
In this context, this Arbitral Tribunal understands that the Claimant would be correct in its claim if it had unambiguously demonstrated that the tax (withholding at source of Personal Income Tax) to be recovered pertained to the year 2011.
6.24
However, taking into account the proved facts (point 5.2., above) and the unproven facts (5.5., above) of this Decision, despite the Claimant having alleged that the improper withholding for Personal Income Tax purposes pertained to the year 2011, in accordance with the evidence attached with the request, it is referenced as pertaining to the year 2012.
6.25
Thus, given the fact that it was not proved that the referred withholding at source (the reimbursement of which the Claimant petitions) was effected and delivered to the State with respect to the year 2011, this Arbitral Tribunal agrees with the position defended by the Respondent when it sustains that the Claimant does not prove the alleged error for the purposes of the provision of Article 132 of the CPPT.
6.26
In these terms, this Arbitral Tribunal understands that the Claimant does not have the right to be reimbursed of the amount of EUR 5,672.43, inasmuch as it failed to demonstrate that the Personal Income Tax evidenced by the payment guide attached to the case was effectively withheld with respect to the year 2011, thus being negative the answer to be given to the question enunciated in point 6.4.1., above.
Regarding the Right to Compensatory Interest
6.27
In general terms, in tax arbitral proceedings there may be place for the payment of compensatory interest, in accordance with the provision of Articles 43, Nos. 1 and 2, and 100 of the LGT, when it is determined that there was error attributable to the services from which resulted payment of the tax debt in an amount exceeding the legally due.
6.28
Taking into account the conclusion referred to in point 6.26., above, that the Claimant does not have the right to reimbursement of the amount of EUR 5,672.43 (object of the arbitral request), the recognition of the right to the payment of compensatory interest is prejudiced inasmuch as, faced with the provision of Article 61 of the CPPT, the requirements for the right to compensatory interest are not met (that is, it was not proved the existence of error attributable to the services from which resulted payment of the tax debt in an amount exceeding the legally due, as provided for in No. 1 of Article 43 of the LGT).
Regarding the Responsibility for Payment of Arbitral Costs
6.29
In harmony with the provision of Article 22, No. 4 of the RJAT, "the arbitral decision issued by the arbitral tribunal contains the determination of the amount and the apportionment among the parties of the costs directly resulting from the arbitral proceedings".
6.30
Thus, in accordance with the provision of Article 527, No. 1 of the CPC (by force of Art. 29, No. 1, paragraph e) of the RJAT), it should be established that the Party that has caused the costs shall be condemned to costs or, in the absence of success of the action, the one who obtained benefit from the proceedings.
6.31
In this context, No. 2 of the referred article concretizes the expression "caused the costs", according to the principle of proportional success, understanding that the defeated party causes the costs of the proceedings, in the proportion in which it is defeated.
6.32
In the case under examination, taking into account the above, the principle of proportionality requires that the entire responsibility for costs be attributed to the Claimant, in accordance with the provision of Article 12, No. 2 of the RJAT and Article 4, No. 4 of the Regulations for Costs in Tax Arbitration Proceedings.
7. DECISION
7.1
Taking into account the analysis effected in the previous Chapter of this Decision, this Arbitral Tribunal decided:
7.1.1
To judge unfounded the request for arbitral pronouncement presented by the Claimant, absolving the Respondent of the claims formulated;
7.1.2
To condemn the Claimant to payment of the costs of the present proceedings.
Value of the case: Taking into account the provision of Articles 306, No. 2 of the CPC, Article 97-A, No. 1 of the CPPT and Article 3, No. 2 of the Regulations for Costs in Tax Arbitration Proceedings, the value of the case is set at EUR 5,672.43.
Costs of the case: In accordance with the provision of Table I of the Regulations for Costs in Tax Arbitration Proceedings, the value of the costs of the Arbitral Case is set at EUR 612.00, at the charge of the Claimant, in accordance with Article 22, No. 4 of the RJAT.
Let it be notified.
Lisbon, 8 November 2016
The Arbitrator,
Sílvia Oliveira
[1] The present decision follows the orthography prior to the Orthographic Agreement of 1990, except with respect to transcriptions made.
[2] In this context, it also reiterates that "it is added the fact that the identified partner (…) has also proceeded with the submission of his Personal Income Tax declaration and payment of the same tax relating to the period in which it was placed at the disposal of the partner, because it is a taxpayer to whom the transparent taxation regime applies, without inclusion of the withholding at source suffered".
[3] In this context, taking into account that in the request for arbitral pronouncement formulated it is referred that the same is presented following the notification of the "order dismissing the gracious complaint (…) presented against the assessment acts for Personal Income Tax (…) for the year 2011 (…)", it is included therein the request to review that decision. Indeed, the gracious complaint presented on 4 June 2014 (No. …2015…, relating to withholding at source allegedly effected in 2011, in the amount of EUR 5,627.43, with the objective of requesting its reimbursement on the ground of "overpaid tax"), the decision of dismissal of which was notified to the Claimant on 17 December 2015, entails the examination of the lawfulness of the underlying act and, in that measure, is covered by the provision of paragraph e) of No. 1 of Article 102 of the Code of Tax Procedure and Process (CPPT).
Thus, taking into account the provision of No. 1 of Article 102 of the CPPT, the time period for filing judicial challenge is three months counted from the facts enumerated in that article, in particular, "from notification of the remaining acts that may be object of autonomous challenge in accordance with this Code", as well as the provision of Article 10, No. 1, paragraph a) of the RJAT which establishes that the request for constitution of an arbitral tribunal should be presented "within a period of 90 days, counted from the facts provided for in Nos. 1 and 2 of Article 102 of the CPPT, as to acts susceptible of autonomous challenge (...)" so that, taking into account the date of filing of the request for arbitral pronouncement (18 March 2016), the request is timely.
[4] As to the question of standing to request reimbursement of the tax paid by withholding at source (object of the request for arbitral pronouncement), the same is overtaken given the provision of point 4.2. of this Decision and Article 132 of the CPPT (see subsequent points of the Decision).
[5] In this regard, see J. L. Saldanha Sanches, Manual de Direito Fiscal [Manual of Tax Law], Coimbra Editora, 3rd Edition, 2007, p. 291 et seq.; F. Pinto Fernandes and Nuno Pinto Fernandes, Código do Imposto sobre o Rendimento das Pessoas Colectivas, anotado e comentado [Corporation Income Tax Code, annotated and commented], Rei dos Livros, 5th Edition, 1996, p. 93 et seq.; José Guilherme Xavier Basto, IRS: Incidência Real e Determinação dos Rendimentos Líquidos [Personal Income Tax: Real Scope and Determination of Net Income], Coimbra Editora, 2007, p. 166 et seq.; Decision of the SAT – 2nd Section, 13/3/2002, case 26823; Decision of the TCA South – 2nd Section, 29/5/2007, case 1682/07; Decision of the TCA South – 2nd Section, 14/12/2011, case 3644/09.
[6] Referring to the legal definition of partnerships of professionals contained in the current Article 6 of the Corporation Income Tax Code, Rui Morais emphasizes (in "Sobre o IRS" [On Personal Income Tax], 2nd edition, Almedina, 2008, p. 210) that "it seems (…) to result from the law that all partners must exercise (even if not exclusively) professional activity in the partnership (which excludes the existence of partners whose contribution is merely capital)" further adding, referring to the imputation rule contained in No. 3 of Article 6 of the Corporation Income Tax Code (in conjunction with the provision of Article 20 of the Personal Income Tax Code) that "the obligation of imputation exists independently of any actual distribution (…)".
[7] In this context, as referred to in Decision of the SAT of 29 February 2012 (issued in the context of case No. 0441/11), "it is beyond doubt that the imputation of the taxable income to the partners of the company subject to the transparent taxation regime must be made in accordance with the regime arising from the cited art. 5 (current art. 6) of the CIRC (…)", inasmuch as "(…) from that provision clearly results that the legislator did not intend to leave the imputation of taxable income at the disposal of the partners and that such imputation can only occur in accordance with the rules established in the constitutional pact of the company, or, in the absence thereof or of other elements, in equal parts [even considering that imputation is not confused with distribution of profits (because these may not be distributed or be distributed in a lesser amount, hence imputation of income should be made in the year to which they relate and not in the following year]" (emphasis added).
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