Stamp Tax on Pension Fund Management Fees: CAAD Ruling 183/2017-T on Article 7(1)(f) and Tariff 17.3.4

ARBITRAL DECISION

The arbitrators Dr. Maria Manuela Roseiro (Arbitrator-President designated by the other Arbitrators), Dr. Joaquim Silvério Mateus and Prof. Dr. Manuel Pires, designated respectively by the Claimant and the Respondent, to form the Arbitral Court, constituted on 20 June 2017, agree as follows:

REPORT

1. The Claimant, with tax identification number [NIPC]…, "A… - Pension Fund Management Company, SA", with registered office at …, …-…, in Lisbon, presented on 20 March 2017 a request for constitution of a collective arbitral court, in accordance with the combined provisions of Articles 2, No. 1, paragraph a), and 10 of Decree-Law No. 10/2011 of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (ATA) is the Respondent.

2. The Claimant requests appraisal of the legality of the stamp duty levy, No. 2016…, relating to item 17.3.4 of the General Schedule of Stamp Duty and for the financial year 2013, in the amount of €125,600.53, plus €16,283.58 in compensatory interest, for a total of €141,884.11, with declaration of respective annulment and condemnation to payment of indemnifying interest.

3. On 21 March 2017 the request for constitution of the arbitral court was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority.

4. Given that the Claimant expressed in its request for arbitral ruling the intention to designate an arbitrator in accordance with paragraph b) of No. 2 of Article 6 of the aforementioned RJAT, in compliance with the provision of Article 10, No. 2, paragraph g) of Decree-Law No. 10/2011 of 20 January, the constitution of the arbitral court proceeded in accordance with the provision of paragraph b) of No. 2 and No. 3 of Article 6 and Nos. 2, 4, 5 and 6 of Article 11 of the RJAT, with the parties proceeding to designate their respective arbitrator, Dr. Joaquim Silvério Mateus, indicated by the Claimant, and Professor Dr. Manuel Pires, indicated by the Respondent, who in turn, in compliance with the provision of Article 3, No. 2, paragraph b) of Regulation No. 112-A/2011 of 22 March, designated as Arbitrator-President Dr. Manuela Roseiro.

5. The Parties were informed of such designation on 30 May 2017, in accordance with and for the purposes of the provision of No. 7 of Article 11 of the RJAT, and after the period laid down in No. 1 of Article 13 of the RJAT, the collective Arbitral Court became regularly constituted on 20 June 2017 to appraise and decide the subject matter of the case, as was then communicated to the Parties.

6. Following an arbitral order for the purposes of No. 1 of Art. 17 of the RJAT, the Respondent presented its Reply and the administrative file on 14 and 15 September 2017, respectively.

7. With the agreement of the Parties, the tribunal decided to dispense with the meeting provided for in Article 18 of the RJAT as well as submission of arguments, indicating as the date for communication of the arbitral decision 15 December 2017. In an order that extended the time limit for delivery of the arbitration award under No. 1 of Article 21 of the RJAT, the date of the decision was postponed to 15 January 2018.

8. The Request for Ruling

The Claimant contends, in summary (our responsibility for the summary):

Before the entry into force of the Stamp Duty Code, approved by Law No. 150/99 of 11 September, financial operations that were not subject to value added tax (VAT), or even when subject to VAT, were exempt from it, were subject to the provisions of the General Schedule of Stamp Duty approved by Decree No. 21,916 of 28/11/1932.

In the wording in force at that date, credit openings, loans and bank guarantees were covered by Articles 1, 54 and 94 of the aforementioned Schedule, regardless of whether these operations were, or were not, carried out or intermediated by credit institutions or financial companies or mere private individuals, and Article 120-A applied only to financial operations listed therein, "carried out by or with intermediation of credit institutions or financial institutions" - namely in paragraphs e) and d), all commissions charged, including for guarantees provided – thus excluding non-financial operations even if carried out by credit institutions or financial companies as well as materially financial operations carried out or intermediated by mere private individuals.

In the new Stamp Duty Code (approved by Law No. 150/99), the content of Article 120-A of the previous Schedule was wholly integrated into items 17.3.1, 17.3.2, 17.3.3 and 17.3.4 of the new General Schedule, with item 17.3.4 corresponding to paragraph c) of 120-A, while Articles 1 and 54 of the previous Schedule were integrated into items 17.1 and 17.2 and the content of Article 94 into item 10 of the new General Schedule.

The universe covered by the previous Article 120-A was enlarged because it ceased to be limited to credit institutions or financial companies that carried out or intermediated financial operations, covering "operations carried out by or with the intermediation of any financial institution" (28th).

Financial institutions were considered to be, in particular, those provided for in Article 13, No. 4 of the RGICSF as well as insurance companies themselves (notwithstanding that they are excluded from the application of the RGICSF), already so qualified by Article 8 of Decree-Law 102/94 of 24/4.

Pension funds (exempt from corporate income tax in accordance with No. 1 of Article 16 of the EBF) and their respective management companies came to be expressly qualified as financial institutions only with the wording given by Decree-Law No. 66/2004 of 24 March to paragraph e) of No. 1) of Article 30 of the Securities Code.

Until the aforementioned amendment of the Securities Code by Decree-Law No. 66/2004, management companies, considering they were not formally financial institutions, never levied stamp duty on item 17.3.4 of the General Schedule of Stamp Duty relating to commissions charged to the pension funds they administered.

Article 120-A of the old Schedule did not exempt from stamp duty the granting of credit and the charging of commissions relating to operations carried out or intermediated exclusively by credit institutions and financial companies and only No. 2, paragraph b), first part, in the wording given by Article 1 of Law No. 24/94 of 18 July, exempted from stamp duty interest charged by credit institutions, financial companies or other entities legally equated to institutions, companies or entities of the same nature, all domiciled in Portuguese territory.

With the new Stamp Duty Code (approved by Law No. 150/99), the exemption came to cover, in addition to interest, the granting of credit and commissions, ceasing to depend on the intervening institutions in the operations being domiciled in Portuguese territory.

Before the wording given by Decree-Law No. 287/2003, No. 1 of Article 6 of the Stamp Duty Code provided, in paragraph e), the exemption of interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation, all domiciled in the Member States of the European Union, or in any State complying with the principles arising from the Conduct Code (…) and in paragraph f), commissions charged by credit institutions to other institutions of the same nature or entities, whose form and object equally filled the types of credit institutions provided for in EU legislation, domiciled in Member States of the European Union, or in any State, provided that the principles arising from the Conduct Code (…) were equally complied with.

The extension of the exemption to credit (interest and commissions) would constitute an incentive to banking activity and the extension of the exemption to commissions charged for non-credit financial operations would contribute to tax neutrality, avoiding cascading taxation of financial services, discouraging external outsourcing even if it were more efficient.

Regarding pension funds, the possibility of subjecting outsourcing to stamp duty, cumulatively with outsourcing subject to item 17.3.4 of the General Schedule, would encourage the management company to directly ensure, for tax reasons only, any services that were outsourced.

Although the exemptions in paragraphs e) and f) of No. 1 of Article 7 of the Stamp Duty Code only apply, respectively, to the granting of credit and interest charged by credit institutions and financial companies to entities of the same nature and to commissions charged by credit institutions to other credit institutions, not covering commissions charged to pension funds by management companies, these also were not subject to stamp duty liability because they were not legally qualified as financial institutions (which only occurred with the amendment of Article 30 of the Securities Code by Decree-Law 66/2004).

The restriction introduced by the State Budget Law for 2001 (Law No. 30-C/2000 of 29/12) to the exemption provided for in paragraphs e) and f) of No. 1 (cf. No. 2 of Article 6 then added), to operations directly intended for credit granting within the scope of activity developed by the entities mentioned in those paragraphs, means that the legislator wished to limit the said exemption referred to in paragraph e) to the use of credit and interest charged in case credit is granted by credit institutions and financial companies to entities of the same nature, when the credit granted should be used outside the statutory object of the borrowing entities, credit institutions or financial companies.

This limitation of the said exemption to credit and its respective interest, covering only the granting of credit, traditional activity of credit institutions, and not equally covering commissions charged outside the scope of this activity, was a step back relative to the options of Law No. 150/99, but did not affect pension fund management companies because these (qualified as financial institutions only with Decree-Law 66/2004) were not subject to stamp duty.

The repeal of the said No. 2 of Article 6 by the State Budget Law for 2003 is not innocuous, because the new wording of paragraph e) extended the stamp duty exemption, previously limited to credit, and came to include commissions charged by credit institutions and financial companies to venture capital companies.

The expression "as well as" means that both interest and commissions charged are exempt from stamp duty, as well as the use of credit granted by credit institutions and financial companies to venture capital companies, as well as to companies whose form and object filled the types of credit institutions and financial companies provided for in EU legislation and not that only operations are exempt, including granting of credit and interest and commissions charged, directly intended for the granting of credit within the scope of activity developed by credit institutions and financial companies (…).

This interpretation is the appropriate one especially because the object of activity of venture capital companies is the acquisition of own and third-party capital with a view to development and not the granting of credit, which is forbidden to them (Articles 2 and 7, Nos. 1 and 2, of Decree-Law 319/2002), and to understand that No. 2 of Article 6 of the Stamp Duty Code (in the wording given by the State Budget Law for 2001) remains in force would render the amendments to the article useless, subjecting venture capital companies to tax.

With the State Budget Law for 2004, Article 7, No. 1, paragraph e) came to cover interest and commissions charged and, as well, the use of credit granted by credit institutions, financial companies and financial institutions to venture capital companies and to other companies whose form and object filled the types of credit institutions, financial companies and financial institutions provided for in EU legislation, all domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes (…) and also guarantees provided.

That is, the exemption was extended to all types of financial institutions provided for in national and EU legislation and came to cover guarantees provided by credit institutions, financial companies and financial institutions to entities of the same nature.

Having pension funds and management companies, and venture capital funds and their respective management companies, become formally financial institutions from Decree-Law No. 66/2004 of 24 March onwards, the management commissions of pension funds and venture capital funds came to be covered by the stamp duty levy of item 17.3.4 but also covered by the exemption of paragraph e) of No. 1 of the then Article 7 of the Stamp Duty Code.

Even if it is considered that pension fund management companies, venture capital companies and venture capital fund management companies have the capacity to grant credit, the object of activity of financial institutions that are neither credit institutions nor financial companies is not the granting of credit (thus not being covered by the RGICSF), so the limitation of the exemption to operations directly intended for credit granting would render the extension carried out by the State Budget for 2004 useless, resting on the purported survival of a repealed rule, and further noting that the tax administration did not additionally levy the tax in question between 2004 and 2012 against pension fund management companies.

Nor can it be understood that the wording given to No. 7, added to Article 7 of the Stamp Duty Code by Article 154 of Law No. 7-A/2016 (State Budget Law for 2017), has an interpretative character, because we are dealing with a rule not materially interpretative (as provided for in Article 13, No. 1 of the Civil Code) but only formally interpretative since the existing rule required no interpretation.

Furthermore, interpretative rules are incompatible with the constitutional principle prohibiting the creation of retroactive taxes (Constitutional Court Decision No. 172/2000).

Therefore, the application of the law carried out by the Tax Administration suffers from illegality and unconstitutionality.

9. The Reply

The Respondent replies, in summary (our responsibility for the summary):

The argument invoked by the Claimant that it would be contradictory for the exemption rule to be restricted to credit granting activity when it covers entities prohibited from granting credit, such as pension fund management companies, does not hold because these do not suffer the absolute legal prohibition on granting credit imputed by the Claimant, and may carry out credit granting operations, although in legally bounded terms [Article 36 of Decree-Law No. 12/2006 of 20 January prohibits them when acting on their own account from "(...) granting credit, except for mortgage credit, to their employees" (paragraph b) of No. 1) and when acting as managers of pension funds, "granting credit, unless it is mortgage credit or credit to participants in accordance with the terms provided for in the pension fund's constitutive contract".]

As to the principal question - the possible exemption from stamp duty of operations carried out by pension fund management companies because covered by Article 7 of the Stamp Duty Code, in the wording in force at the date of the facts - the Claimant makes an incorrect interpretation and application of the law to the facts because, as argued in the Decision of the Administrative Court of Justice of 15 June 2016 (Case No. 0770/15), expressing moreover repeated case law, "[t]he exemption granted by Article 7, No. 1 paragraph e) of the Stamp Duty Code, in the wording of Decree-Law No. 287/2003, altered by Law No. 107-B/2003, has as its catalysing element – to which the interest, commissions charged, guarantees provided or (its) mere use refer – credit granted in accordance with the terms mentioned in the same normative provision".

This interpretation is confirmed by the introduction of No. 7 to Article 7 of the Stamp Duty Code (Article 152 of Law 7-A/2016 of 30 March, which approved the State Budget for 2016) a rule there (Article 154) qualified as interpretative.

Qualification accepted by the Administrative Court of Justice when, considering this rule, it decided in the judgment of 29/06/2016 (Case 01630/15) that "[t]here is no doubt whatsoever that the concrete situation of this case falls precisely within the legal regime of the Interpretative Law provided for in Article 13° of the Civil Code, since Interpretative Law is not recognized as deviating regarding the duality of interpretations made of such rule, the legislator opted for one of them, and did not introduce any "novelty" in the actual text of the rule".

The linguistic reading of the phrase is to be rejected, as well as arguments based on historical and teleological elements, and the theses defended in case law which appears as dominant should be accepted and the clarity with which the legislator affirmed, through authentic interpretation, its intention and that courts cannot contradict under penalty of violation of the principle of separation of powers.

10. Subject Matter of the Request

The Request for arbitral ruling has as its subject matter fundamentally the following questions:

Legality of the Stamp Duty levy carried out by the Respondent, under the provision of Article 1, No. 1 of the Stamp Duty Code and item 17.3.4 of the General Schedule of Stamp Duty, on amounts charged by the Claimant to pension funds managed by it, with the scope of incidence of this taxation at issue, as well as the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code in force at the date of the tax situation (2013).

Constitutionality of the application to the case of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code in the interpretation resulting from No. 7 of the same article, added only by Law No. 7-A/2016 (which approved the State Budget for 2017), whose Article 154 attributed an interpretative character to the new wording, with the issue being whether it is not a retroactive application of a tax rule, in violation of Article 103, No. 3 of the Constitution and the constitutional principles of legal certainty and trust.

11. Determination of Questions of Law

The parties have legal personality and capacity, show themselves to be entitled to be parties and are regularly represented (Articles 4 and 10, No. 2 of the RJAT and Article 1 of Regulation No. 112-A/2011 of 22 March).

The tribunal is competent and is regularly constituted.

The proceedings do not suffer from any defects of procedure.

No other circumstances exist that would prevent examination of the merits of the case.

GROUNDS

12. Established Facts

The Claimant is a Pension Fund Management Company (Request and Reply).

In compliance with Service Order 012016… of 13-04-2016 and following a warning letter sent through official letter No. …, of 18-04-2016, the Claimant was, during the period between 3 May and 23 June 2016, subject to a tax audit of limited scope in the area of Stamp Duty by the tax inspection services of the Respondent, with the objective of verifying the tax treatment of Pension Fund management commissions under Stamp Duty (exemption under Article 4 of Decree-Law No. 20/86 of 13 February and paragraph e) of No. 1 of Article 7 of the Stamp Duty Code combined with item 17.3.4 of the General Schedule of Stamp Duty") (Tax Audit Report, points II-1 and II-2).

The draft Tax Audit Report concluded that "In light of the provision of No. 1 of Article 1 and item 17.3.4 of the general schedule, both of the Stamp Duty Code, management and administration commissions charged by Managing Entities to their respective funds are subject to stamp duty, not benefiting from the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code, duly listed in point III of this report, so that the amount of unpaid tax amounts to €125,600.53 in the year 2013" (cf. Tax Audit Report, points I and III-2).

The draft Tax Audit Report was notified on 26 June 2016 (official letter No. …) to the Claimant, so that it could exercise the right to prior hearing, which it did through a document filed at the Finance Department on 12 October 2016, registration No. 2016… (Final Tax Audit Report, point IX).

Considering that the Claimant's arguments did not result in facts capable of altering the corrections made, the content of the draft was maintained in the final Tax Audit Report with the proposal referred to in paragraph c), and received the agreement of the Finance Director on 30 September 2016.

The Claimant was notified of Stamp Duty levy No. 2016… relating to the year 2013, in the amount of €125,600.53, plus compensatory interest in the amount of €16,283.58, for a total of €141,884.11, to be paid by 10 January 2017 (document No. 1 attached by the Claimant).

Payment was made on 19 December 2016 (Document No. 1 attached by the Claimant).

This Request for arbitral ruling was presented on 20 March 2017.

13. Unestablished Facts

There are no unestablished facts relevant to the decision of the case.

14. Basis of the Evidence

The evidence established was based on the documents submitted by the Claimant (Request for arbitral ruling and documents attached to the case with the request) and by the Respondent (Reply and administrative file).

15. Application of Law

15.1. The Scope of Incidence of Stamp Duty in Item 17.3 of the General Schedule

The stamp duty levy subject to appraisal in the present case relates to the financial year 2013 and results from the application to the situation at issue – commissions charged by the Claimant in its Pension Fund management activity – of item 17.3.4 of the General Schedule of Stamp Duty.

The normative segment applied falls within item 17.3, which applies to "Operations carried out by or with intermediation of credit institutions, financial companies or other entities legally equated to them and any other financial institutions - on the amount charged".

Item 17.3 is subdivided as follows:

• 17.3.1 - "Interest from, in particular, discount of letters of credit and Treasury bills, loans, credit accounts and credit without settlement" (rate 4%);

• 17.3.2 - "Premiums and interest on letters received, letters to be received on behalf of another, drafts drawn on national places or any transfers" (rate 4%);

• 17.3.3 - "Commissions for guarantees provided" (rate 3%);

• 17.3.4 - "Other commissions and consideration for financial services" (rate 4%).

All the items cited above are included in item 17 - Financial Operations, which also covers item 17.1 relating to "use of credit in the form of funds, goods or other values (…), including assignment of credit, factoring and treasury operations involving financing to the assignee" and item 17.2 relating specifically to use of credit by virtue of the granting of credit to consumers.

Item 17, as a whole, corresponds to Articles 1 (credit opening), 54 (supplies, loans, acknowledgment and establishment of debt) and 120-A (financial operations) of the Schedule of Stamp Duty in force before the tax reform that occurred in 2000 which led to the approval of the Stamp Duty Code.

The wording of Article 120-A then qualified as financial operations those operations carried out by or with intermediation of credit institutions or financial companies or other entities legally equated to them.

The heading of this Article 120-A of the Schedule had been altered from "Banking Operations" to "Financial Operations" by Decree-Law No. 162/94 of 4 June, which also adapted the text of the provision to the operations listed, when carried out by or with intermediation of credit institutions or financial companies, taking into account the realities provided for in the new legal regime governing financial companies, Decree-Law No. 298/92 of 31 December.

In earlier wordings, the article referred (since the version of the General Schedule approved by Decree No. 21,916 of 28 November 1932) to "banking operations", initially covering only "drafts on foreign countries, gold guides issued, foreign currencies and notes and public securities or negotiable securities sold" and "interest charged for discount of letters of credit and Treasury bills, loans on pledges, credit accounts and supplies, credit in settlement and all default interest, premiums and interest on letters received, letters to be received on behalf of another, national drafts issued or any transfers and in general all commissions charged (…)".

The rule was subject to successive alterations, not only as to incidence but also as to exemptions provided for.

Reference should be made, for example, to the exclusion from taxation of banking operations carried out between banking establishments, between exchange houses or between these and banking establishments, in accordance with the exemption provision provided for in Decree-Law No. 32,321 of 14/10/1942.

This provision was repealed by Decree-Law No. 223/91 of 18 June, which altered the wording of Article 120-A, providing in paragraph b) of No. 2 the exemption from stamp duty for "Interest owed by credit institutions or parabank institutions to institutions of the same nature, both domiciled in Portuguese territory, as well as exchange operations carried out between the same institutions".

And in the reformulation carried out by Law No. 24/94 of 18 July, it came to read: "Interest owed by credit institutions, financial companies or other entities legally equated to them to institutions, companies or entities of the same nature, all domiciled in Portuguese territory. The same exemption benefits exchange operations carried out between the same entities or between these and others of the same nature domiciled abroad, as well as the sale of foreign currency to commercial or civil companies in commercial form, to public enterprises and to individual entrepreneurs with organized accounting, intended for the payment of imported goods and services, within the scope of their activity".

But with the State Budget for 1995 (approved by Law No. 39-B/94 of 27 December) it came to provide: "Interest owed by credit institutions, financial companies or other entities legally equated to them to institutions, companies or entities of the same nature, all domiciled in Portuguese territory".

Before the 2000 Reform, the taxation of financial operations (Article 120-A of the Schedule) applied to: "a) Interest charged, in particular, for discount of letters of credit and Treasury bills, loans, credit accounts and supplies and credit in settlement, on the respective amount; b) Premiums and interest on letters received, letters to be received on behalf of another, drafts drawn on national places or any transfers and in general all commissions charged, with the exception of commissions relating to guarantees provided; c) Commissions relating to guarantees provided, on the respective amount d) Interest and commissions relating to financing granted to entities resident in national territory by credit institutions and financial companies based and established abroad or by branches, subsidiaries or agencies abroad of credit institutions, financial companies and other entities legally equated to them, with head office on national territory, on the respective amount and e) Commissions relating to guarantees provided by the entities referred to in the previous paragraph, on the respective value.

15.2. The Stamp Duty Exemption Provided for in Paragraph e) of Article 7 of the Stamp Duty Code

At the date of the situation subject to the present case (financial year 2013) Article 7 of the Stamp Duty Code provided that the following were exempt from stamp duty: "Interest and commissions charged, guarantees provided and, as well, the use of credit granted by credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and object filled the types of credit institutions, financial companies and financial institutions provided for in EU legislation, all domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by order of the Minister of Finance" (paragraph e) of No. 1).

The exemptions provided for by Article 120-A of the Schedule prior to the 2000 Reform, in the case of operations carried out or intermediated by credit institutions or financial companies (or, from the entry into force of the State Budget Law for 1995, other entities legally equated to them) did not cover operations of granting credit or charging of commissions, but only interest owed by credit institutions, financial companies or other entities legally equated to them to institutions, companies or entities of the same nature, all domiciled in Portuguese territory (No. 2, paragraph b), first part, of Article 120-A, in the wording given by the State Budget Law for 1995).

With the new Stamp Duty Code, approved by Law No. 150/99 of 11 September, this exemption came to include other situations in addition to interest and defined the subjective universe in a way that came to undergo several wordings.

Thus in the initial version of the Code, paragraphs e) and f) of Article 6 were as follows: e) Interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation, all domiciled in Member States of the European Union, or in any State complying with the principles arising from the Conduct Code approved by Resolution of the Council of the European Union of 1 December 1997;

f) Commissions charged by credit institutions to other institutions of the same nature or entities whose form and object filled the types of credit institutions provided for in EU legislation, domiciled in Member States of the European Union, or in any State complying with the principles arising from the Conduct Code approved by Resolution of the Council of the European Union of 1 December 1997.

This wording was altered by Law No. 176-A/99 of 30/12, which approved the State Budget for 2001, coming to provide: "e) Interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation, all domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes to be defined by order of the Minister of Finance; f) Commissions charged by credit institutions to other institutions of the same nature or entities whose form and object filled the types of credit institutions provided for in EU legislation, domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes to be defined by order of the Minister of Finance" (bold and underlined by us).

The State Budget Law for 2001 also added a No. 2 to Article 6, saying that "the provision of paragraphs e) and f) only applies to financial operations directly intended for the granting of credit, within the scope of activity carried out by the institutions and entities referred to in those paragraphs".

This provision was, however, eliminated in the wording of Article 6 adopted by Law No. 32-B/2002 of 30 December (State Budget for 2003).

This same State Budget Law for 2003 altered the wording of paragraph e) of the then Article 6 of the Stamp Duty Code, which came to integrate the exemption previously provided for in paragraph f), with the following wording:

"e) Interest and commissions charged and, as well, the use of credit granted by credit institutions and financial companies to venture capital companies, as well as to companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation, all domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes to be defined by order of the Minister of Finance".

In the new wording of the Stamp Duty Code, approved by Decree-Law No. 287/2003 of 12 November [which, using the legislative authority granted by Law No. 26/2003 of 30 July, carried out the Reform of Taxation of Property], the text of the previous Article 6 comes to correspond to Article 7, maintaining the content of paragraph e): "Interest and commissions charged and, as well, the use of credit granted by credit institutions and financial companies to venture capital companies, as well as to companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation, all domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by order of the Minister of Finance" (bold and underlined by us).

The text of paragraph e) of Article 7 was further altered by the State Budget Law for 2004 (Law No. 107-B/2003 of 31/12) coming to provide: "Interest and commissions charged, guarantees provided and, as well, the use of credit granted by credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and object filled the types of credit institutions, financial companies and financial institutions provided for in EU legislation, all domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by order of the Minister of Finance (underlined and in italics by us).

15.3. The Situation in the Present Case and the Interpretations at Issue

The question to be decided in the present case is whether the factual situation established – payment of commissions by a pension fund to its respective management company – is subject to the incidence of tax under the provision of Article 1, No. 1 and item 17.3.4 of the General Schedule of Stamp Duty and whether it is not covered by the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code in force at the date of the tax situation (2013).

The Claimant is a pension fund management company, subject to the regime provided for in Decree-Law No. 12/2006 of 20 January, with its activity being subject to supervision by the Institute of Insurance of Portugal (Article 4) and also by the Securities and Exchange Commission.

Pension funds may be managed either by companies established exclusively for that purpose, designated in the same instrument as management companies, or by insurance companies that legally operate the "Life" branch and have an establishment in Portugal (Articles 32 and 33 of Decree-Law 12/2006) management companies exercise the functions assigned to them by law, and may also exercise, autonomously, activities necessary or complementary to the management of pension funds, notably within the scope of pension plan management. In the capacity of administrator and manager of the fund and its legal representative, managing entities are responsible for performing all acts and operations necessary or appropriate for the proper administration and management of the fund, with the management contract/management regulation to specify the maximum remuneration of the managing entity.

There is no disagreement between the Parties regarding either the characterization of the Claimant, Pension Fund Management Company, or the Pension Fund to which the tax was levied, as entities liable to be covered by the concept of "financial institution" at issue both in the rule of incidence (item 17.3) and in the rule of exemption at issue in the present dispute (Article 7, paragraph e) of the Stamp Duty Code).

The disagreement that exists refers rather to the application of the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code to commissions charged to Pension Funds by their respective Management Companies as consideration for their respective administration.

The Claimant considers that due to the fact that item 17.3 (previously 17.2) of the General Schedule ceased to be limited to credit institutions or financial companies that carried out or intermediated financial operations, covering operations carried out by or with the intermediation of any financial institution, interest, commissions and other consideration charged by insurance companies and by pension fund management companies (thus qualified as such expressly with the amendment of Article 30 of the Securities Code by Decree-Law No. 66/2004 of 24 March) came to be subject to stamp duty.

It acknowledges that the exemptions in paragraphs e) and f) of No. 1 of Article 7 of the Stamp Duty Code in the initial version only applied to the granting of credit and interest charged by credit institutions and financial companies to entities of the same nature and to commissions charged by credit institutions to other credit institutions, excluding credit granted and interest charged by credit institutions, financial companies to other financial institutions, without the nature of credit institutions or financial companies and commissions charged by financial companies and other financial institutions and the commissions themselves charged by credit institutions to financial companies and other financial institutions, regardless of whether they were directly, or not, related to the granting of credit.

But it emphasizes that in any case the exemption would not cover commissions charged to pension funds by their respective management companies because these were not subject to stamp duty liability because they were not legally qualified as financial institutions (they would only become so with the amendment of Article 30 of the Securities Code by Decree-Law 66/2004).

On the other hand, it considers decisive that the restriction introduced regarding the application of paragraphs e) and f) of No. 1 by No. 2 of Article 6 (added by the State Budget for 2001) to operations directly intended for credit granting within the scope of activity developed by the entities referred to in those paragraphs was repealed by the State Budget for 2003, with the new wording of paragraph e) extending the stamp duty exemption previously limited to credit, coming to cover commissions charged by credit institutions and financial companies to financial companies and venture capital companies.

In this way it argues that the reading to be made of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code is not that only operations are exempt from tax, including commissions charged, directly intended for credit granting within the scope of activity developed by credit institutions and financial companies (…) but rather that interest and commissions charged are exempt from stamp duty, and the use of credit granted by credit institutions and financial companies is also exempt, to venture capital companies as well as to companies whose form and object filled the types of credit institutions and financial companies provided for in EU legislation (…).

It further alleges that it is this interpretation that makes sense with respect to venture capital companies [whose object is not the granting of credit - which is forbidden to them - but the acquisition of own and third-party capital with a view to development (Articles 2 and 7, Nos. 1 and 2 of Decree-Law No. 319/2002)] as well as to pension funds and management companies and venture capital funds and management companies, whose object is also not the granting of credit.

That is, it argues that the exemption of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code covers any commissions charged by pension fund management companies to the funds managed by them.

Against this position, the Respondent opposes the interpretation that the commissions covered by the provision invoked regarding the application of exemption from the levied tax - paragraph e) of No. 1 of Article 7 of the Stamp Duty Code - are only those relating to credit granted (it being that both venture capital companies and pension fund management companies may grant credit although with the limitations provided for in the instruments regulating their respective activities).

The Respondent considers that this interpretation is legally enshrined after the addition by the legislator of a No. 7 to Article 7 of the Stamp Duty Code - clarifying that the "provision of paragraph e) of No. 1 only applies to guarantees and financial operations directly intended for the granting of credit, within the scope of activity exercised by the institutions and entities referred to in that paragraph" - a rule introduced by the State Budget for 2016 with an interpretative character (Articles 152 and 154 of Law No. 7-A/2016 of 30 March).

In support of its positions it invokes uniform case law of the Administrative Court of Justice.

15.4. Case Law Invoked by the Respondent

The Respondent invokes case law from superior courts, reproducing excerpts from some decisions of the Administrative Court of Justice. This tribunal must consider to what extent the doctrine defended in them is useful for the present case, in particular regarding the similarity of the factual situation compared to that which is the subject of the present case.

Taking into account the decisions invoked by the Respondent and other decisions published on the website of the Institute of Legal and Judicial Studies, it is concluded that during the years 2016 and 2017, the Administrative Court of Justice delivered, on the matter, at least the decisions of 15 June 2016 (Appeal No. 0770/15), 29 June 2016 (Appeal No. 01630/15), 3 November 2016 (Appeal No. 0976/16), 18 January 2017 (Appeal No. 0835/16) and 15 February 2017 (Appeal No. 0669/16).

In all these decisions the appraisal of the legality of Stamp Duty levies carried out in tax inspections was at issue, on commissions charged by financial institutions in operations that they had carried out as insurance brokers. But in all these appeals – decided at first instance in favor of the legality of the levy - the request was for judicial appraisal of the scope of the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code.

The question was identified several times as that of determining specifically whether the exemption invoked covers any and all commissions charged between financial institutions or whether "the exemption rule provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code only aims to exempt strictly financial operations, (...)".

Indeed, given that these decisions were rendered in cases in which the stamp duty regime applicable to commissions charged by Banks in the exercise of insurance brokerage activity was discussed, discussing whether they fell within the scope of item 17.3.4 (previously 17.2.4) or item 22 of the General Schedule of Stamp Duty, the different collective panels carried out an in-depth analysis of the philosophy and evolution of the regime for taxation of financial activities in a broad sense.

It is believed that the various decisions express unanimity on the following aspects:

Item 17 of the General Schedule of Stamp Duty covers, albeit without distinguishing, "financial operations in a broad sense" and "financial operations in a strict sense", although the Schedule presents segmentation of operations distributed by various items;

Not all and any commissions are those shown to be covered by the exemption rule of Article 7, No. 1, paragraph e) of the Stamp Duty Code but only those relating to or connected with credit granting operations,

The insurance brokerage commissions at issue in the present case are, in the economy of the instrument, perfectly autonomous (item 22) in relation to commissions arising from credit granting or other financial operations and are not covered by either item 17 of the General Schedule or by the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code.

It is worth noting that in the rejection of application of the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code, the doctrine was accepted that only strictly financial activities enjoy the exemption legally established, and that being the commission for insurance brokerage not a commission arising from credit granting, the claimant cannot benefit from the said exemption.

In this reasoning, the scope of the exemption provided for in the said paragraph e) is considered to be only relative to strictly financial activity, and given the wording of the paragraph itself (chain between interest, guarantees, commissions and use of credit) coinciding with credit granting activity and acts related to it.

For this reason, the same Administrative Court of Justice peacefully considered that No. 7 added to Article 7 of the Stamp Duty Code by Law No. 7-A/2016 of 30 March (which approved the State Budget for 2016) should have been qualified as an interpretative rule.

15.5. The Thesis that All Interpretative Tax Law is Materially Retroactive

In case No. 633-2016-T, decided on 17 May 2017 in the context of CAAD, it was decided that Law No. 7-A/2016, through the combined interpretation of its Articles 152 and 154, came to delimit the material scope of the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code in an innovative manner, and that because those provisions establish a wording that had not been in the legal order since 2003 they must be considered retroactive and therefore unconstitutional due to violation of the principle of protection of trust and legal certainty.

And it was further sustained that "even if we were dealing with a genuinely interpretative rule (material and not purely formal interpretative law)" the legitimacy of the interpretative scope would find an obstacle in Article 103, No. 3 of the Constitution" because "even in such cases, the interpretative binding that such laws entail, by becoming the exclusive legal criterion for the application of the previous text of the law, in cases in which the constitutional law prohibits its retroactivity, modifies the relationship of the State, as the issuer of rules, with its addressees" "by excluding other interpretations upheld, following that decision further, creates a situation where the State may afterwards prevent the Law it created from functioning through its intrinsic logic communicable to the addressees of the rules, allowing an imperative and immediate power to intervene in legal interpretation which alters the framework of elements relevant to legal interpretation, with the consequent frustration of the constitutional principle of irretroactivity of taxes", because "interpretative law, even if authentic, in purporting to apply to the period prior to its issuance, in accordance with No. 1 of Article 13 of the Civil Code alters the context of self-binding of the bodies applying the Law to the Law and consequently affects the security of the addressees of the rules protected by a (constitutional) prohibition of retroactivity" violation of [Article 103, No. 3 of the Constitution by implying retroactive taxation always violates No. 3 of Article 103 of the Constitution".

This decision was upheld by the Constitutional Court (case No. 519/17) in Decision No. 404/2017 of 14 July 2017, which adhered to the thesis of the innovative and not interpretative character of the rule contained in No. 7 added to Article 7 of the Stamp Duty Code by Law No. 42/2006 of 28/12, concluding that:

"In the case at hand, however, there are no reasons to set aside the characterization as innovative of the normative solution resulting from the combination of Nos. 1, paragraph e) and 7 of Article 7 of the Stamp Duty Code, enshrined following the amendment introduced to that Code by Article 152 of Law No. 7-A/2016. The appealed decision properly grounded such innovative character. Thus the Constitutional Court should not correct the interpretation of the rule refused to be applied by the lower court nor reverse the judgment of unconstitutionality thereby made" as it considered that "even if such interpretation could be regarded as contested, notably on the basis of the existence of judicial decisions with a different sense from that adopted in the appealed decision, the doctrine followed in Decision No. 267/2017 would be applied for the grounds therein set forth: from the perspective of the Constitution, in order for a normative discipline self-qualified as merely interpretative to be considered constitutive of new law and as such substantially retroactive, it is a sufficient condition to verify that to the rule interpreted in its original version could have been imputed by courts a sense which following the interpretative rule was necessarily excluded."

Now, that other learned Decision No. 267/2017 of the Constitutional Court took into account in particular the following considerations:

• "in determining the existence of a substantially retroactive interpretative law, one cannot from a constitutional perspective abstract from the reciprocal positions of the legislator and the judiciary as to the fixing of applicable law",

• "the legislator cannot overstep such limits nor neutralize or empty the corresponding power of control of the courts recorded in Article 204 of the Constitution by way of affirmation in the capacity of formal author that the legal rule approved by itself has a scope that is merely declarative or clarifying and not innovative"

• "The Constitution does not recognize the legislator competence for the authentic interpretation of legal rules."

• "if such is the case, the interpretation or clarification formally enshrined by the new law cannot but be constitutive in nature and the retroactivity inherent in the same law to have a substantial character",

And took into account that

"It can therefore be said that from the perspective of the Constitution, in order for a normative discipline self-qualified as merely interpretative to be considered constitutive (of new law) and as such substantially retroactive, it is sufficient to verify that to the rule interpreted in its original version could have been imputed by courts a sense which following the interpretative rule was necessarily excluded (see the decisions of the German Constitutional Court of 2.5.2012 and of 17.12.2013, in BVerfGE 131, 20 [37-38] and 135, 1 [16-17], respectively)",

Concluding that:

"In truth, and as the appealed decision rightly notes, that which represented a certain jurisprudential understanding regarding the admissibility of deductions from the global amount of corporation income tax collection, including in this the value of autonomous taxation – as affirmed in the decisions of CAAD delivered in cases Nos. 769/2014-T, 163/2014-T, 219/2015-T and 370/2015 – ceased to be admissible in light of the cited No. 21. Hence it is unequivocal the substantially retroactive character of that provision, understood as interpretative law."

In sum, the interpretation adopted in the decisions briefly synthesized above leads to the conclusion that the enactment of interpretative laws in tax matters would be constitutionally prohibited.

Such interpretation, learnedly sustained, nevertheless raises great reservations for us, and trust and security as well as the principles of tax certainty and equality may likewise be put at risk with such a position.

Indeed in any situation where divergent solutions coexisted – with doctrine and/or case law in opposite senses – the legislator would be prevented from producing an interpretative rule even if the interpretative rule aimed to enshrine the dominant thesis…. But that understanding so restrictive would allow any minority position, even if isolated and eccentric, to lead through the impossibility of clarification by the legislative power to subsequent doctrinal or jurisprudential adherences merely opportunistic creating diversity of treatment in the face of situations resolved previously and even peacefully accepted until then….

This danger seems to us to emerge from the learned dissenting opinion delivered by Counselor Lino Ribeiro in the same Constitutional Court Decision No. 267/2017. Beyond questioning the classification of the rule under consideration in the case at hand as innovative, it confronts the problem itself of the infeasibility of retroactive application of interpretative rules in tax matters, putting into question the restrictive interpretation that won out and opposing opposite vision, of which we reproduce the following excerpts:

"(...) it does not seem to me that the constitutional principle of prohibition of retroactivity has such an absolute character that it prevents the existence of interpretative tax laws. As results from the text of the Decision the Constitutional Court excludes from the scope of application of that principle the situations of retrospectivity or improper retroactivity which immediately means that the constitutional rule does not rule out any and all type of retroactivity. Tax irretroactivity is a manifestation of the principle of legal certainty or trust inscribed in the principle of the rule of law (Article 2 of the Constitution). Hence in certain cases there is need to properly evaluate and weigh the private interest of taxpayers with the public interest justifying tax increases with a certain degree of retroactivity. Thus in the so-called cases of false or improper retroactivity the degree of confidence raised in taxpayers and the relevance of the same cannot fail to be weighed at the level of proportionality. "In the case of interpretative tax rules – those aimed at solving the uncertainty of prior law positioned within the framework of the controversy with a content that the judge or interpreter could reach it without exceeding the typical limits imposed on the interpretation and application of law – it cannot be said that the confidence of taxpayers in the sense of the rule interpreted generates legitimate expectations of its continuity in the legal order. If the rule is controversial the only expectation that exists is that the legislator solves it. If he does so by opting for one of the possible understandings which had even already been followed by case law it cannot be said that there is intolerable frustration arbitrary or excessively oppressive of the trust deposited in the interpreted rule."

"Now the expectation in the maintenance of one of the interpretations made by the arbitral case law cannot be confused with expectations generated by the law itself. If the rule was doubtful and if controversy was created regarding the dimension of application of the same the expected was that the legislator would come to resolve the uncertainty in one of the possible senses probably in the sense that the same had always been applied that as we have seen was the more correct interpretation. Thus as Batista Machado argues "if perchance it can be said that variations and changes in case law with respect to the interpretation of a rule of law at least insofar as this rule was never considered certain have no retroactive effect then neither will interpretative law in the terms defined above be substantially retroactive" (Introduction to Law and Legitimating Discourse Almedina p. 247)".

This arbitral tribunal adheres to the position of the learned dissenting opinion in Decision No. 275/2017 of the Constitutional Court therefore considers that if in the present case one reaches the conclusion that there existed an interpretation prior to the addition of No. 7 of Article 7 uniform or at least sufficiently strong as not to create an expectation in opposite sense one should decide that there is no unconstitutionality by violation of Article 103 of the Constitution or violation of the constitutional principles of certainty and trust.

Let us then see what interpretation this tribunal assigns to the Stamp Duty rules in force in 2013 (year of the factual situation under appraisal in the present case) and whether the doctrine within the case law of the Administrative Court of Justice is effectively applicable to the present case.

15.6. Classification of Commissions Charged to Pension Funds by Pension Fund Management Companies

15.6.1. The Claimant's Interpretation and Questions to be Clarified

As already noted the Claimant invokes in sum that:

Item 17.3 covers all "operations carried out by or with the intermediation of any financial institution" including interest commissions and other consideration charged by pension fund management companies;

The wording given by the State Budget Law for 2001 to Article 6 (corresponding to the current Article 7) of the Stamp Duty Code which came to cover commissions charged by credit institutions and financial companies to financial companies and venture capital companies included a restriction to the exemption provided for in paragraphs e) and f) of No. 1 by No. 2 of Article 6 of the Stamp Duty Code in the sense of its application to operations directly intended for credit granting within the scope of its activity but this provision was repealed by the State Budget Law for 2003,

Therefore it should be understood that the current paragraph e) of No. 1 of Article 7 of the Stamp Duty Code (in the numbering given by Decree-Law No. 287/2003 of 12 November when the Property Reform occurred and with amendments of the State Budget Law for 2004) exempts from stamp duty any commissions charged by credit institutions financial companies and financial institutions to entities of the same nature in which are included pension funds and their respective management companies;

If not understood this way the extension of the universe of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code operated by the State Budget Law for 2004 would be useless because it would not cover venture capital companies nor pension funds nor their respective management companies whose object of activity is not credit granting but rather the acquisition of own and third-party capital with a view to development.

Regarding the interpretation of the provision in item 17.3.4 of the General Schedule several questions arise for us particularly as to the qualification of the amounts charged by Pension Fund Management Companies as remuneration for their respective activity and what its tax classification is as well as the relationship between items 17.3.4 and 17.3.3 of item 17.3 of the General Schedule.

15.6.2. Judicial Case Law (Tax Litigation) – Its Relevance for the Present Case

The decisions referred to in point 15.3 distinguish between financial activities in a broad and in a strict sense considering insurance brokerage included in the first but not in the second of the concepts and conclude that the situations subject of the disputes submitted to judgment were subject specifically to item 22.2 and not to 17.3.4.

Acknowledging that the direct subject of the decisions of the Administrative Court of Justice and Commercial Court cited by the Respondent is not the tax classification of commissions charged to pension funds by their respective management companies we have seen how those decisions contain considerations repeatedly made on the exemption enshrined in paragraph e) of Article 7 of the Stamp Duty Code not covering all types of commission.

And while not forgetting the difference of situations subject of dispute adoption of considerations such as those contained in the decision of the Commercial Court of 21 September 2010 in Appeal 02754/08: "(…) Indeed it does not seem to us to make any sense to establish an autonomy between interest commissions charged and guarantees provided on one hand and the use of credit granted on the other it being that only with respect to this could it be connected dependently from the credit granting and financial companies and institutions institutions or entities observant in form and object of the types of credit institutions and companies and financial institutions beneficiary institutions"" concluding: "Thus we also consider that the provision in question refers to interest to the commissions charged to guarantees provided or to the mere use in all cases by reference to credit granted in accordance with the terms stipulated in the normative under analysis (…)" (cf. Decision of the Administrative Court of Justice of 15/06/2016 in case 0770/15) seems to signify a position of the superior courts in the sense that the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code presupposes (and presupposed) a connection between the use of credit and other results obtained derived from its granting.

These decisions revealing a uniform position of the case law of the Administrative Court of Justice start from a separation between strictly financial activity and insurance activity not carrying out however regarding the coverage by the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code a more detailed analysis of the various financial operations provided for in Item 17.3 of the General Schedule in particular regarding the scope of operations provided for in item 17.3.4 "other commissions and consideration for financial services" and in the relationship with paragraph e) of No. 1 of Article 7 of the Stamp Duty Code.

We will then try to take into account other elements that will allow us to decide the question which is the subject of the present case.

15.6.3 Arbitral Case Law of CAAD

In the context of CAAD the question which is the subject of the present dispute was already analyzed at least in the arbitral decisions delivered in cases 348/2016-T (2/5/2017) 633/2016-T (19/05/2017) 667/16-T (20/06/2017) 9/2017-T (30/08/2017) and 303/16-T (10/11/2017). All of them concluded although the latter with an extensive dissenting opinion by the application to the management commissions charged to pension funds of the exemption provided for in paragraph e) of No. 1 of Article 7 of the Stamp Duty Code before the introduction of No. 7 of the same article by which the attribution of an interpretative character to this provision would configure a case of retroactivity in violation of No. 3 of Article 103 of the Constitution and of the principles constitutionally protected of trust and legal certainty.

The grounds of the various decisions present common points in some cases reproducing previous arguments so we will highlight only some excerpts.

The decision delivered in case No. 348/2016-T considers that the interpretation that the Tax Administration made of paragraph e) in the wording resulting (when the State Budget Law for 2003) from the merger with the previous paragraph f) - as if the rule said that "Interest and commissions charged are exempt from tax as well as the use of credit granted by credit institutions and financial companies to venture capital companies as well as to companies whose form and object filled the types of credit institutions and financial companies provided for in EU legislation all domiciled in Member States of the European Union or in any State with the exception of those domiciled in territories with privileged tax regimes to be defined by order of the Minister of Finance in operations directly intended for credit granting within the scope of activity developed by the previously referred entities" (cf. point 95 of the decision) - did not have legal support and was absurd even because the object of venture capital companies is not credit granting but the acquisition of own and third-party capital instruments in activities of high development potential" unable to use credit obtained to grant credit (points 96 to 98). If not covered by the exemption they would be subject to stamp duty making the repeal of No. 2 of Article 6 useless. Moreover it is considered the limitation advocated by the Tax Administration of the exemption to operations directly intended for credit granting within the activity developed would render the alteration of the subjective universe of the beneficiaries of the exemption of paragraph e) of No. 1 of Article 6 introduced by No. 1 of Article 36 of Law No. 107-B/2003 by extending to financial institutions that were not credit institutions and financial companies including pension funds and venture capital funds completely useless.

In the decision in case 633/2016-T (CAAD) it is considered that in the original wording of Article 6 of the Stamp Duty Code (Law No. 150/99 of 11 September) the connection between interest and credit granting seemed evident (cf. points 47 and 63) but the same did not occur with respect to commissions (paragraph f) and it could be understood that all commissions provided for in item 17 would be covered (cf. point 46) and that it would be for this reason that the legislator felt the need in 2000 to clarify the scope of the provision through the inclusion of a No. 2 in Article 6 of the Stamp Duty Code clarifying that the exemptions provided for in these two paragraphs restrict to "financial operations directly intended for credit granting" (cf. point 48) falling outside the scope of exemption "commissions charged by credit institutions or financial companies to other credit institutions when only indirectly related to credit granting such as the case of commissions charged for the provision of financial services that do not integrate a concrete credit operation as well as the credit itself granted by credit institutions and possibly financial companies to other credit institutions when the credit was intended to be used outside the scope of activity of the borrowing credit institutions" (point 49).

But it is said of the decision "from the moment that by express will of the legislator that No. 2 was repealed and the fusion of paragraphs e) and f) in a single paragraph e) the provision lost homogeneity with the consequent erosion of the credit granting catalyzing element. Loss of homogeneity that is accentuated by the alterations introduced by Law No. 107-B/2003 going in the same sense the reason for being that presided as we have seen to the successive alterations that the provision underwent". (underlined by us). And it is concluded "the exemption of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code did not restrict previously to the entry into force of Law No. 7-A/2016 to operations directly intended for credit granting within the scope of activity developed by credit institutions financial companies and other financial institutions only having again been expressly instituted by Law No. 7-A/2016". (cf. points 63 to 66 of the cited decision).

Against the thesis of the Tax Administration that despite the elimination (by Law No. 32-B/2002 of 31/12 which approved the State Budget 2003) of No. 2 of Article 6 of the Stamp Duty Code the limitation of the exemption to operations directly intended for credit granting within the scope of activity developed by credit institutions and financial companies would be maintained the said decision emphasizes that the situation changed profoundly with the suppression of the said No. 2 of Article 6 through the introduction of two innovations:

• the merger in a single paragraph – e) – the two previous paragraphs e) and f);

• the extension of the exemption to commissions and interest charged and credit used by venture capital companies within the scope of operations carried out between venture capital companies and credit institutions or financial companies would result from the remodeling of the venture capital investment regime meanwhile operated by Decree-Law No. 319/2002 of 29 December which this latter legislative instrument would strongly stimulate namely through new tax incentives.

From the alterations carried out results the harmonization of the premises of the exemption which comes to cover operations in which are exclusively intervenient credit institutions financial companies and venture capital funds and not only operations in which the addressee is a credit institution it being that there was no intention to incorporate into the new paragraph e) of No. 1 the expressly repealed No. 2 of Article 6.

With the wording given by Law No. 107-B/2003 of 31 December paragraph e) of No. 1 of Article 6 was extended the scope of the exemption in the objective plane to guarantees provided and in the subjective plane to the types of financial institutions provided for in EU legislation in which are included pension funds regulated in Directive No. 2003/41/EC of the European Parliament and of the Council and not exclusively credit institutions and financial companies regulated in the RGICSF.

Then the said decision ends by concluding (point 63) that the historical evolution of the provision points to that in the original version and still with the wording given by Law No. 30-C/2000 of 29/12 which added a No. 2 to Article 6 the exemption had clearly as catalyzing element the credit granted in the terms mentioned in such normative including with respect to commissions charged by virtue of the restriction introduced by No. 2 of Article 6. It considers however (No. 64) that "from the moment that by express will of the legislator that No. 2 was repealed and the merger of paragraphs e) and f) in a single paragraph e) the provision lost homogeneity with the consequent erosion of the credit granting catalyzing element. Loss of homogeneity that is accentuated by the alterations introduced by Law No. 107-B/2003 going in the same sense the reason for being that presided as we have seen to the successive alterations that the provision underwent".

For these reasons it concludes that the exemption of paragraph e) of No. 1 of Article 7 of the Stamp Duty Code did not restrict previously to the entry into force of Law No. 7-A/2016 to operations directly intended for credit granting within the scope of activity developed by credit institutions financial companies and other financial institutions with the restriction having again been instituted by Law No. 7-A/2016.

Position contrary to that which won out in the various decisions is however expressed by the dissenting opinion of one of the members of the panel that considered case 303/2017-T (whose decision followed by majority the position of previous CAAD decisions on the matter).

From the position expressed in the said dissenting opinion we highlight the following aspects:

Regarding the exegesis of the expression "and as well" of Article 7 1 e) it is considered that the comparison of the relevant rules in the 1999 Stamp Duty Code and in the State Budget Law of 2003 causes much of the argumentation expended in various decisions to crumble considering that the various assignments of meaning to the connective sound elaborate when we realize that the same arose from simple will to merge two nearby paragraphs and it can be admitted at most that the expedient of use of the connective generated an unnecessary ambiguity.

After analysis of the evolution of the wording of the provision it concludes that the current Article 7 1 e) of the Stamp Duty Code intends only to convey that the exemption regime is identical for several operations that began by being provided for in separate paragraphs.

In the legislative evolution carried out it also sees the justification for not effecting the interpretation a contrario sensu (which has had acceptance in various decisions) based on the elimination of No. 2 of Article 6 of the Stamp Duty Code which had been introduced by the State Budget Law of 2001 recalling that at the moment when that No. 2 is eliminated by the State Budget Law of 2003 the regime applied only to credit institutions and financial companies and not to "financial institutions" (provision added only by the wording given with Law No. 107-B/2003 of 31 December).

And it suggests the hypothesis that the legislator confronted with the reality of credit institutions and financial companies but not confronted yet with the broader reality of financial institutions presumed that these would necessarily be dedicated in appreciable and direct degree to credit granting operations making the explicit restriction introduced by No. 2 of Article 6 of the Stamp Duty Code unnecessary. And it would be in this way justifiable that the legislator had overlooked any need for an explicit restriction to the scope of exemptions when including "financial institutions" in paragraph e) of No. 1 of Article 6 notwithstanding that the direct connection to credit granting operations was not so necessary or evident.

On the other hand it notes notwithstanding the repeal of the previous specific reference to the restriction of the scope of application of the exemption (the previous "only applies to financial operations directly intended for credit granting within the scope of activity carried out by the institutions and entities referred to") no new provision was created incompatible with the preceding rule (to use the expression of Article 7 2 of the Civil Code).

And because "nothing in the articles of the State Budget Law of 2003 or in its preparatory works allowed to conclude that there was a repealory intention relative to the previous No. 2 of Article 6 of the Stamp Duty Code and much less allowed to glimpse a 'mens legislatoris' as to what would happen at that moment of tacit repeal" and faced with various interpretation hypotheses concludes that the solution of the eventual controversy through Law No. 7-A/2016 of 30 March with the adoption of an authentic interpretation of Article 7 of the Stamp Duty Code does not show violation of the principle of trust given the "inexistence of legitimate expectation relating to the prevalence of a single interpretation among the various possible and conflicting interpretations".

From the dissenting opinion there is also retained the observation that the previous Article 120-A of the General Schedule referred exclusively to financial operations carried out by credit institutions or financial companies or with intermediation of them (Law No. 75/93 Article 31 4 and Decree-Law No. 162/94 of 4 June) and the "commissions" to which paragraphs c) d) and e) of that Article 120-A referred were exclusively those relating to guarantees provided or to financing granted – nothing comparable to the reference in the new Item 17.3.4 introduced by Law No. 150/99 to "other commissions and consideration for financial services".

15.6.4. Doctrinal References

Despite the various decisions cited above making reference to the existence of controversies on the interpretation of the provisions at issue we have not identified doctrinal citations on the question which is the subject of the present dispute.

The administrative doctrine (Circular 7/2009) cited in the invoked case law and which reaches being referred to by the Administrative Court of Justice (cf. judgment in Appeal No. 0976/16 point 4.1.) as having been accepted by economic operators refers specifically to the question of taxation of commissions charged by credit institutions in insurance brokerage activity and not concretely to commissions for provision of pension fund management services.

Thus we will consider that the conclusion contained in that Circular that "The exemption rule provided for in Article 7 No. 1 paragraph e) of the Stamp Duty Code aims only to exempt strictly financial operations promoted within the scope of banking activity and financial intermediation by credit institutions and financial companies in accordance with the provisions of items 10 and 17 of the General Schedule" still leaves to interpret the scope of the concept of operations strictly financial and to what extent they are provided for in item 17.

Carlos Lobo in an article published on taxation of financial operations analyzes the evolution of taxation in stamp duty cautioning that any analysis of the scope of incidence of this tax implies a comprehensive appraisal of its doctrine of taxation and its own reasonableness and that "for each tax unit present in Stamp Duty it will be important to carry out a weighing of its own taxation model directly arising from the original philosophy of the tax type in question and subsequently it becomes necessary to carry out a second degree inquiry in light of the common models of principles and rules that sustain a composite and comprehensive tax in a unified model".

It distinguishes various realities typified taxation and stopping specifically in financial operations seems to distinguish: interest provision of guarantees commissions and consideration for financial services as service provision and use of credit as revelation of a wealth contributive capacity but in any case emphasizes several times the connection between the first situations and credit granting.

16. Position in the Appraisal of the Present Dispute

It is accepted without need to deepen specifically on that subject that we are dealing with entities qualified as financial institutions and that the activity of pension fund management is covered by the VAT exemption in accordance with paragraph g) of No. 27 of Article 9 of the VAT Code and is covered by item 17.3.4 of the General Schedule.

It is therefore a matter of deciding whether the amounts charged by pension fund management companies charged as management commissions while subject to taxation in stamp duty will be covered by the stamp duty exemption provided for in paragraph e) of Article 7 of the Stamp Duty Code.

Having the exemption rule been subject during its validity to inclusion and subsequent suppression of a number (No. 2 of the previous Article 6 in the previous wording of the Stamp Duty Code) that delimited its content restrictively should the interpretation be imposed that the regime rule becomes the opposite of that referred to in the repealed rule or should the solution continue to be sought on the basis of the set of remaining rules of the system and their respective evolution?

That is if it is reached the conclusion that number 2 in question (first included and then suppressed from Article 6 of the Stamp Duty Code) was neither so indispensable in itself – is the case if concluding that it only clarified without innovation the existing regime before its emergence – and that its repeal may signify the fall of a rule in certain measure redundant that at most fulfilled an objective of clarification it will be lawful to interpret the existing rules and their respective evolution without overvaluing either its emergence or its disappearance in a certain context (the moment of the merger of two paragraphs liable to cause interpretation doubts) of the said number 2 of Article 6 of the Stamp Duty Code.

Thus if it is certain that to cover only operations related to credit operations the formulation "Interest and commissions charged and as well the use of credit granted by credit institutions and financial companies to venture capital companies as well as to companies or entities whose form and object filled the types of credit institutions and financial companies provided for in EU legislation all domiciled in Member States of the European Union or in any State with the exception of those domiciled in territories with privileged tax regimes to be defined by order of the Minister of Finance" is not the best and that it would be much more unequivocal if it first referred to the use of credit and then to interest and commissions charged the interpretation to be made cannot fail to take into account the evolution of the wording of the provision not highlighting only the emergence (State Budget Law 2001) and disappearance (State Budget Law 2003) of No. 2 of the ex-Article 6 of the [...]