Summary
Full Decision
ARBITRAL DECISION
REPORT
A…, taxpayer no. …, with tax domicile at Street …, no. …, …-… …, hereinafter referred to as "Claimant", hereby submits, pursuant to articles 2º, no. 1, paragraph a), and 10º, no. 1, paragraph a), of the Legal Regime of Arbitration in Tax Matters (RJAT), approved by Decree-Law no. 10/2011, of 20 January, a petition for arbitral decision in which the Tax and Customs Authority is the Respondent (hereinafter "Respondent" or "TA"), which aims at the annulment of the act of assessment of Personal Income Tax (hereinafter "IRS") identified with the number 2016… and reconciliation of accounts with the number 2016… relating to the year 2012.
The petition for constitution of an arbitral tribunal, corresponding to registration no. 4036, was validated and accepted by the Esteemed President of CAAD on 21 March 2017, and was notified to the Respondent on 24 March 2017.
The Claimant opted not to appoint an arbitrator, and the Deontological Council, pursuant to no. 1 of article 6º and no. 1 of article 11º of the RJAT, appointed the undersigned as arbitrator of the sole arbitrator tribunal, who accepted the appointment within the legally stipulated period.
The parties were duly notified of the appointment of the arbitrator on 11 May 2017 and did not manifest any intention to challenge the same.
The sole arbitrator tribunal was thus constituted on 29 May 2017, in accordance with the provisions of paragraph c) of no. 1 of article 11º of the RJAT.
On 29 May 2017, the Respondent was notified of the order issued by the arbitral tribunal, pursuant to no. 1 of article 17º of the RJAT, to submit a response, request the production of additional evidence, and remit the administrative file.
As the Respondent neither submitted a response nor remitted the administrative file within 30 days, on 14 July 2017, the arbitral tribunal issued the following order: i) notification of the Tax Office of Matosinhos –… to remit to the arbitral tribunal a copy of the administrative file, pursuant to no. 5 of article 110º of the Tax Procedure and Process Code, by virtue of no. 1 of article 29º of the RJAT; b) notification of the Claimant and Respondent to pronounce themselves on the value of the arbitration proceeding, pursuant to paragraph e) of no. 2 of article 10º of the RJAT and no. 3 of article 305º of the Civil Procedure Code, by virtue of no. 1 of article 29º of the RJAT.
The Tax Office of Matosinhos – … was notified on 17 July 2017.
The Claimant pronounced on the value of the case in a petition filed on 20 July 2017.
On 25 July 2017, the Tax Office of Matosinhos –… reforwarded the petition to the Tax Office of Porto – ….
The Tax Office of Porto – …, in turn, on 26 July 2017, reforwarded the petition to the Tax Inspection of the Tax Directorate of Porto, because the administrative file had been prepared by that tax directorate, pursuant to service order no. OI2015….
Given the failure to comply with the order referred to above, the arbitral tribunal issued a new order on 18 September 2017, with the following tenor: i) notification of the Tax Directorate of Porto, Division of Support and Planning of Tax Inspection, to comply with urgency with the order of the arbitral tribunal of 14 July 2017 regarding the attachment to the file of a copy of the administrative file; ii) notification of the Claimant to indicate on which facts contained in the petition for arbitral decision witness examination should focus; iii) scheduling of 29 September at 14:30 hours for the holding of the first meeting, pursuant to article 18º of the RJAT, in which the examination of the witnesses listed would proceed, followed by oral arguments.
The Claimant submitted a petition requesting that the testimony of the witnesses listed in its petition for arbitral decision be conducted by teleconference from Porto, pursuant to no. 4 of article 119º of the Tax Procedure and Process Code ("CPPT"), by virtue of no. 2 of article 29º of the RJAT.
Following the above petition, the arbitral tribunal issued an order: i) notifying the Respondent to, in observance of the principle of contradiction, pronounce itself within 10 days on hearing the witnesses by teleconference; ii) if the Claimant does not object, notifying the esteemed counsel of the Claimant to communicate to the tribunal the identification of the witnesses to be presented and their respective Skype address; iii) rescheduling the meeting to 18 October 2017, at 14:30 hours.
In compliance with the order of 18 September 2017, the tax directorate attached to the file, on 28 September 2017, a copy of the administrative file.
On the same date, the Claimant attached to the file the list of facts that would be subject to witness examination.
On 18 October 2017, at 15 hours, the meeting of the constituted arbitral tribunal took place at CAAD – Administrative Arbitration Center, in Lisbon, with the attendance of the esteemed counsel of the Claimant and the Representative of the Respondent. The latter requested provisional suspension of the proceeding for 10 days, given that the TA services would be re-examining the application of the provisions of no. 2 of article 38º of the General Tax Law to the Claimant. Upon being heard, the esteemed counsel of the Respondent, who did not object to the suspension, the arbitral tribunal decided to suspend the arbitral proceeding for 10 days.
After the lapse of the 10-day suspension period, without the Respondent having communicated any alteration to the assessment acts sub judice, the arbitral tribunal scheduled 17 November 2017, at 14:30 hours, for the holding of the meeting pursuant to article 18º of the RJAT.
However, the esteemed counsel of the Claimant came to request the rescheduling of the meeting as he would be absent from the country, and the arbitral tribunal scheduled the meeting for 12 December 2017, at 14:30 hours.
The counsel of the Claimant reiterated the request for witness examination by teleconference, and the arbitral tribunal, through an order of 18 November 2017, granted the Respondent a 10-day period to pronounce on the same.
For its part, the representative of the Respondent requested rescheduling of the meeting due to overlap with another proceeding at CAAD, and the arbitral tribunal rescheduled the meeting to 12 December 2017 at 10:00 hours.
On 12 December 2017, at 10 hours, the meeting of the constituted arbitral tribunal took place, with the attendance of the esteemed counsel of the Claimant, Dr. B…, and Drs. C… and D…, representatives of the Respondent.
In the aforementioned meeting, witness examination was conducted by teleconference, via Skype, with audio recording of the testimony given. The witnesses examined were E…, on articles 13.2 to 21.2 of the petition for arbitral decision, F…, on articles 13.2 to 28.2 of the petition for arbitral decision, G…, on articles 22.2 to 28.2 of the petition for arbitral decision, and H… on articles 22.2 to 28.2 of the petition for arbitral decision.
Upon completion of witness examination, the Tribunal notified the Claimant and the Respondent to, in that order and successively, submit written arguments within 10 days, with the Respondent's period to begin upon notification of the Claimant's arguments. In compliance with article 18º, no. 2 of the RJAT, the arbitral tribunal scheduled 29 January 2018 for the issuance of the arbitral decision, advising the counsel of the Claimant that, until the date of issuance of the arbitral decision, payment of the subsequent arbitration fee should be made.
The esteemed counsel of the Claimant submitted written arguments on 29 December 2017, in which he reiterated the arguments supporting the dismissal of the petition and the inapplicability of the general anti-abuse clause, reiterating his interest in acting within the scope of the present petition for arbitral decision.
The representatives of the Respondent submitted written arguments on 18 January 2018, in which they reiterated the verification of the prerequisites provided for in no. 2 of article 38º of the General Tax Law, for application of the general anti-abuse clause and the corrections for purposes of assessment of personal income tax, considering the underlying inspection report fully reproduced in the present file. They challenged the witness evidence submitted to the present file, based on direct or indirect interest revealed by the witnesses, because a similar action with the same petition and cause of action was pending, or because there existed an economic relationship between the company whose holdings were disposed of or family relationships existed. They concluded, therefore, that the prerequisites provided for in no. 2 of article 38º of the General Tax Law were met, which required the application of the CGAA and the implementation of corrections for purposes of income tax assessment, and therefore the arbitral petition should be judged dismissible as unproven, and consequently the Respondent absolved, with the appropriate legal consequences.
CLAIMS OF THE PARTIES
A. Claim of the Claimant
The Claimant seeks to have declared the illegality of the act of additional assessment of IRS and subsequent reconciliation of accounts, because the prerequisites for application of no. 2 of article 38º of the General Tax Law ("GTL") are not met, because they suffer from defects of reasoning and defects of violation of law by breach of the provisions of articles 268º, no. 3 of the Constitution of the Portuguese Republic ("CRP"), 153º, no. 2 of the Administrative Procedure Code ("APC"), 77º of the GTL, and 63º, no. 3, of the CPPT, by unconstitutionality resulting from violation of the principles of taxpaying capacity, provided for in articles 104º, no. 1 of the CRP and article 4º, no. 1 of the GTL, principle of equality, provided for in article 13º of the CRP, principle of legislative reserve in tax matters, provided for in article 165º, no. 1, paragraph i), of the CRP, principle of protection of private property, provided for in article 62º, no. 1, of the CRP, and principle of separation of powers, provided for in article 111º, no. 1 of the CRP.
Consequently, it requests the annulment of the said act, with all legal consequences.
B. Claim of the Respondent
In the present petition for arbitral decision, the Respondent did not submit a response. The failure to submit a response shall be valued by the arbitral tribunal pursuant to no. 6 and 7 of article 110º of the CPPT, by virtue of article 29º of the RJAT.
The representatives of the Respondent submitted written arguments on 18 January 2018, in which they reiterated the verification of the prerequisites provided for in no. 2 of article 38º of the General Tax Law, for application of the general anti-abuse clause and the corrections for purposes of personal income tax assessment, concluding that the arbitral petition should be judged dismissible as unproven, and consequently the Respondent absolved, with the appropriate legal consequences.
SANITATION
The arbitral tribunal is properly constituted.
The parties have legal personality and capacity, are legitimate, and are legally represented (articles 3º, 6º, and 15º of the Tax Procedure and Process Code, by virtue of paragraph a) of no. 1 of article 29º of the RJAT).
Indeed, as alleged by the Claimant, the Additional Assessment and the Reconciliation of Accounts constitute harmful decisory acts of the Tax Authority, susceptible to contentious challenge, and the arbitral tribunal has competence to assess the legality of "(…) acts of assessment of taxes (…)", pursuant to paragraph a) of no. 1 of article 2º of the RJAT.
In the case at hand, we are faced with an act of assessment of taxes, which resulted from the requalification by the TA of a legal transaction carried out by the Claimant, whose legality is discussed in the file.
Thus, although the Additional Assessment and the Reconciliation of Accounts resulted from the correction of a loss realized with the transfer of equity interests, which did not generate additional tax payable, such correction is disagreed with by the Claimant, who has the right to react against such a tax act before the TA and before the courts. In this manner, it is concluded that the Claimant has interest in acting, which, it should be noted, was not challenged by the Respondent.
In light of the foregoing, there is no doubt for the Arbitral Tribunal regarding the active legitimacy of the Claimant, resulting from his interest in acting, to request the annulment of the act of assessment of IRS and the respective reconciliation of accounts.
The question of the value of the arbitration proceeding shall be decided after the establishment of the facts.
No nullities are verified, nor have the parties alleged any exceptions that prevent the examination of the merits of the question.
MATTER OF FACT
Facts Found Proven
Regarding the matter of fact, the Tribunal does not have to pronounce on everything alleged by the parties, and it is incumbent upon it to select the facts that matter for the decision and to distinguish the facts proven from those not proven (cf. no. 2 of article 123º of the CPPT and no. 3 and 4 of article 607º of the Civil Procedure Code, applicable by virtue of paragraphs a) and e) of no. 1 of article 29º of the RJAT).
In this manner, the facts relevant to the judgment of the case are chosen in function of their legal relevance, which is established in regard to the various plausible solutions of the legal question.
Thus, taking into consideration the positions assumed by the parties, the documentary evidence produced, and the administrative file attached to the file, the following facts are considered proven as relevant for the decision of the case:
1. I…, SGPS, SA (I… SGPS) is a joint-stock company, with tax identification number and taxpayer number …, whose corporate purpose is the management of equity interests as an indirect form of conducting business activity:
2. I… SGPS was constituted on 1 July 1998, with initial share capital of €6,000,000.00, represented by 1,200,000 shares with a nominal value of €5.00, by the following shareholders:
| Shareholders | Participation in Capital | Number of Shares | Percentage |
|---|---|---|---|
| E… | €1,375,000.00 | 275,000 | 23% |
| J… | €1,375,000.00 | 275,000 | 23% |
| F… | €1,375,000.00 | 275,000 | 23% |
| K… | €1,200,000.00 | 240,000 | 20% |
| L… | €675,000.00 | 135,000 | 11% |
| Total | €6,000,000.00 | 1,200,000 | 100% |
3. On 21 May 2012, an increase in the share capital of I… SGPS was approved in the amount of €3,000,000.00, by incorporating share premiums (€2,992,787.38) and incorporating legal reserves (€7,212.62), with the share capital of I… SGPS rising from €6,000,000.00 to €9,000,000.00, and the nominal value of shares from €5.00 to €7.50:
| Shareholders | Participation in Capital | Number of Shares | Percentage |
|---|---|---|---|
| E… | €2,062,500.00 | 275,000 | 23% |
| J… | €2,062,500.00 | 275,000 | 23% |
| F… | €2,062,500.00 | 275,000 | 23% |
| K… | €1,800,000.00 | 240,000 | 20% |
| L… | €1,012,500.00 | 135,000 | 11% |
| Total | €9,000,000.00 | 1,200,000 | 100% |
4. On 12 June 2012, I… SGPS disposed of its entire holding in M… BV, the principal asset of the company, for the price of €61,896,457.74, which was received in:
[table content omitted in translation as it contains specific financial details with redacted reference numbers]
5. Pursuant to deliberation of the general assembly, I… SGPS distributed dividends to its shareholders in 2012:
[table content omitted in translation as it contains specific financial details with redacted reference numbers]
6. On 24 October 2012, a reduction in the share capital of I… SGPS was approved in the value of €8,520,000.00, by reduction of the nominal value of shares from €7.50 to €0.40, with the share capital of I… SGPS decreasing from €9,000,000.00 to €480,000.00, with the objective of promoting "the freeing of excess capital (…)" and "Direct attribution to shareholders of the freed amount, in the total amount of 8,520,000.00 Euros".
The share capital of I… SGPS came to be represented in the following terms:
| Shareholders | Participation in Capital | Number of Shares | Percentage |
|---|---|---|---|
| E… | €110,000.00 | 275,000 | 23% |
| J… | €110,000.00 | 275,000 | 23% |
| F… | €110,000.00 | 275,000 | 23% |
| K… | €96,000.00 | 240,000 | 20% |
| L… | €54,000.00 | 135,000 | 11% |
| Total | €480,000.00 | 1,200,000 | 100% |
7. On 2 November 2012, a contract of donation was executed between F…, taxpayer number …, acting as donor, and the Claimant, his son, acting as donee, for the donation of 13,750 shares of I… SGPS.
8. As I… SGPS is not a company listed on the Stock Exchange, the value of the gratuitous transfer of shares was calculated in accordance with the rules of paragraph a) of no. 3 of article 15º of the Stamp Tax Code ("STC"), and the shares were attributed the taxable value of €170,637.50.
9. The aforementioned donation between ascendant and descendants was exempt from Stamp Tax, pursuant to paragraph e) of article 6º of the STC.
10. On 23 November 2012, the General Assembly of I… SGPS approved a special balance sheet as of 30 September 2012, authorizing the Board of Administration to proceed with the acquisition of own shares.
11. The aforementioned acquisition of own shares received a favorable opinion from the Official Auditor, N…, Company of Official Auditors, pursuant to an opinion dated 10 December 2012.
12. According to the Inspection Report, the engagement with the Official Auditor for the certification service of the interim balance sheet as of 30 September 2016 was made with a date prior to 30 October 2012 (cf. page 11 of the Inspection Report; page 131 of the Administrative File).
13. On 18 December 2012, the Board of Administration of I… SGPS deliberated the acquisition of own shares from the Claimant, and the contract for the purchase and sale of shares was executed on 20 December 2012, the date on which 13,750 shares held by the Claimant in I… SGPS were disposed of to the company itself, which acquired them as own shares, for the value of €598,125.00, which was paid on that date to the Claimant.
14. On 4 July 2013, O…, sister of the Claimant and donee of the same number of shares of I… SGPS, submitted a petition to the tax office Porto-…, requesting the revision of the taxable value of the donation, presenting a calculation demonstration of the taxable value of the shares transferred pursuant to paragraph a) of no. 3 of article 15º of the STC, which would amount to €2,133,175.00.
15. The tax office verified that there had been an error in the determination of the taxable value, as the calculation formula had considered that the number of shares representing the share capital was 15,000,000 and not 1,200,000. Upon detection of the error, the taxable value was corrected and communicated to the taxpayer(s) in October 2014, with the taxable value in the new assessment being €2,133,175.00.
16. The Claimant entered in box 8 of Annex G of his IRS Declaration form 3 the following amounts:
[table content omitted in translation as it contains specific financial details with redacted reference numbers]
17. However, considering the taxable value of the acquisition of shares gratuitously (€2,133,175.00) determined pursuant to the cited article 15º of the STC, relevant for purposes of calculating gains or losses for IRS purposes, and the correct realization value (€598,125.00), the loss calculated by the Claimant, for purposes of IRS resulting from that transfer, should have been:
[table content omitted in translation as it contains specific financial details with redacted reference numbers]
18. The aforementioned transaction was subject to analysis by the TA through internal tax inspection, with service order no. OI2015…, which began on 1 October 2015 and culminated on 4 February 2016, with notification to the Claimant of the Draft Corrections to the Inspection Report, through Letter no. …/… of 5 February 2016 for exercise of the right to be heard.
19. The Claimant exercised his right to be heard on 11 March 2016, having requested the examination of witnesses.
20. In light of the provisions of no. 3 of article 54º of the GTL and no. 3 of article 60º of the Supplementary Regime of Tax and Customs Inspection Procedure ("SRCTIAP"), the Tax and Customs Authority notified the Claimant, through letter no. …/… of 17 March 2016, to appear on 31 March 2016 with the witnesses for the corresponding statement of declarations to be made and the new facts brought in the witness testimony to be taken into account in the reasoning of the decision of the inspection procedure.
21. The Claimant was notified of the conclusions of the inspection procedure, pursuant to letter no. 2016… of 31 October 2016 and a second notification, pursuant to letter no. 2016…, dated 17 November 2016.
22. The additional assessment and reconciliation of accounts were notified to the Claimant on 14 December 2016, by registered mail with acknowledgment of receipt.
23. On 20 March 2017, the present petition for arbitral decision was filed.
Facts Not Proven
The following facts were not proven:
1. The donation to the Claimant aimed to initiate a process of generational succession in the ownership and management of I… SGPS in favor of the third generation of the P… Family (in which the Claimant is integrated).
There are no other facts with relevance for the decision that have not been found proven.
Reasoning of Facts Proven and Not Proven
The facts were found proven on the basis of the Tax Inspection Report, the documents in the administrative file, and other documents attached to the file.
The testimony of the witnesses heard did not succeed in proving facts capable of influencing the decision of the case, which were not already corroborated by other means of evidence, notably documentary evidence.
Regarding the matter of fact not proven, this was thus considered as a result of the absence of probative elements capable of, unequivocally, corroborating it.
MATTER OF LAW
Of the Alleged Violation of the Duty of Reasoning
A preliminary point prior to the analysis of the verification of the prerequisites for application of the general anti-abuse clause is the need to analyze whether, as alleged by the Claimant, the Inspection Report does not fulfill the requirements of reasoning provided for in articles 153º, no. 2, of the APC, 77º, no. 1, of the GTL, and 63º, no. 3, paragraph a), of the CPPT, which would determine the annullability of the Additional Assessment, pursuant to article 163º, no. 1, of the APC, by virtue of article 29º, no. 1, paragraph d), of the RJAT.
The Claimant alleges in the petition for arbitral decision that there is a contradiction in the grounds for application of the CGAA as set out in the Inspection Report, insofar as there would be a contradiction between what is alleged in the intellectual and sanctioning elements, as against what is alleged in the other elements, which would not allow a normal recipient to fully understand the factual and legal reasons for the TA's decision, compromising its right of defense.
The duty of reasoning of a decision is a constitutional requirement (no. 3 of article 268º of the CRP), implemented, among others, by the provisions of article 77º of the GTL.
Article 77º establishes the duty of reasoning of tax acts "by means of a brief exposition of the factual and legal reasons that motivated it, and the reasoning may consist of a mere declaration of agreement with the grounds of previous opinions, information, or proposals, including those that are part of the tax inspection report".
It being provided that, pursuant to no. 2 of the same provision, "The reasoning of tax acts may be carried out in a summary manner, and must always contain the applicable legal provisions, the characterization and quantification of the tax facts, and the operations for determining the taxable matter and the tax".
However, as Rui Duarte Morais teaches, "The reasoning of the act should also be accessible, (…). The reasoning must also be exhaustive, that is, the verification of all the prerequisites upon which the law makes the legality of the act in question dependent must be alleged. (…) The content and depth required of the reasoning necessarily depend on the specific case. It is normally stated that the reasoning must be expressed, clear, congruent, and sufficient. What is required is – using a habitual saying of our jurisprudence – that the reasoning allows a normal recipient to understand the cognitive and evaluative path contained in the act, so that one can understand the reason why the decision was made this way and not another. (…) This will consist, essentially, in the demonstration of the verification in the specific case of the hypothesis of the legal norm, with no place for motivation of the concrete content of the decision (explanation of the reasons why the decision was made in that sense and not another), because, as a rule, the decision (the only possible one) to be taken results directly from the law. Hence the express provision, in no. 2 of article 77º of the GTL of a simplified reasoning."
In a similar manner to that cited by this author, to distinguish tax acts for which simplified reasoning is admissible from situations in which the law establishes the obligation of reasoning with "special density" as are those provided for in no. 3 to 5 of article 77º of the GTL, and we add, those provided for in no. 3 of article 63º of the CPPT.
As summarized in a recent ruling of the Supreme Administrative Court, "Jurisprudence and doctrine have established the understanding that an act is sufficiently reasoned when it is possible to extract from it the cognitive path followed by the agent for its practice. (See in this sense, above all the ruling of this Court of 23/05/2012 taken in appeal 0870/11, in which the now reporting magistrate intervened as assistant, and also the rulings of 01.04.1992, AD of 22.02.1995, page 590, of 28.5.87, in AD 315, 367, of 12.02.87, in AD 317, 581, of 11.05.89, in AD 335, 1398, of 19.05.88 in AD 325, 38, of 25.10.88, in AD 327, 37, and of 10.01.1989, in AD 339, 303, all cited in the Administrative Procedure Code, annotated and commented by José Manuel Botelho, Pires Esteves, and José Cândido de Pinho, 2nd edition, pages 396 et seq.). It should be added, following the Ruling of the Supreme Administrative Court of 11.12.2007, appeal 615/04, at www.dgsi.pt that the degree of reasoning must be appropriate to the concrete type of act and the circumstances in which it was practiced, in order to satisfy the divergence between the position of the Tax Administration and that of the taxpayer. And the defect of lack of reasoning of administrative acts, as has been emphasized by doctrine and jurisprudence, is of a formal and not substantive nature, the act suffering from lack or insufficiency of reasoning when it does not externalize clearly, sufficiently, and congruently the factual and legal reasons that determined it and its decisory sense."
Now, in the face of the alleged contradictions of the Inspection Report regarding the verification of the elements of the general anti-abuse clause, it is necessary to ascertain whether the TA fulfilled the duty of reasoning provided for in no. 2 of article 77º of the GTL and no. 3 of article 63º of the CPPT.
As mentioned above, for the reasoning to be sufficient, clear, and precise, it should allow a normal recipient to understand the cognitive and evaluative path contained in the act, so that one can understand the reason why the decision was made this way and not another.
Indeed, according to the jurisprudence consistent in the superior courts, for the duty of reasoning to be considered fulfilled, it is sufficient that the Claimant has understood the cognitive and evaluative path contained in the act, in a manner that allows him to contest it either through the gracious appeal or through the contentious route, which occurred with the submission of the present petition for arbitral decision.
It follows from all that is set out in the petition for arbitral decision and written arguments, as well as in the administrative file, that the Claimant's right of defense was not frustrated by the manner in which the duty of reasoning was exercised by the Respondent in the Inspection Report.
Therefore, the defect of lack of reasoning invoked by the Claimant is dismissed.
Of the Legal-Tax Framework of the Transaction and of the Application of the General Anti-Abuse Clause
As appears from the Inspection Report, the Respondent considers that the tax acts practiced by the Claimant that gave rise to the assessment sub judice were abusive, intending to apply to them the General Anti-Abuse Clause (CGAA), established in no. 2 of article 38º, no. 2 of the General Tax Law.
The said clause establishes the following:
"Acts or legal transactions that are essentially or primarily directed, through artificial or fraudulent means and with abuse of legal forms, at the reduction, elimination, or temporal deferral of taxes that would be due as a result of facts, acts, or legal transactions of identical economic purpose, or at the obtaining of tax advantages that would not be achieved, wholly or in part, without the use of such means, are ineffective within the tax scope, the taxation then being effected in accordance with the norms applicable in their absence and the said tax advantages not being produced."
The CGAA is complemented by the provisions of article 63º of the CPPT (as amended by Law no. 64-B/2011, of 30 December) relating to the special procedure to be adopted by the TA for application of the said clause:
"1. The assessment of taxes based on the anti-abuse provision contained in no. 2 of article 38º of the general tax law follows the terms provided for in this article. (…)
3. The reasoning of the plan and of the decision to apply the anti-abuse provision referred to in no. 1 necessarily contains:
a) The description of the legal transaction concluded or of the legal act executed and of the transactions or acts of identical economic purpose, as well as the indication of the rules of scope applicable to them;
b) The demonstration that the conclusion of the legal transaction or practice of the legal act was essentially or primarily directed at the reduction, elimination, or temporal deferral of taxes that would be due in the case of a transaction or act with identical economic purpose, or at the obtaining of tax advantages. (…)".
Thus, as emerges from the above provisions, the application of the general anti-abuse clause has as a requirement the practice by the taxpayer of an artificial legal transaction or with abuse of legal form, having as its sole or determining purpose the avoidance of taxation that would be due if that same taxpayer had used a transaction or act with equivalent economic substance.
As a way of delimiting legitimate tax planning from abusive tax planning, which is aimed at being combated with this general anti-abuse rule, see an excerpt from the arbitral decision in proceeding no. 363/2016-T, of the panel presided by Judge-Counselor Jorge Lopes de Sousa:
"In the definitions elaborated by Saldanha Sanches: legitimate tax planning 'consists of a technique of reduction of the tax burden by which the taxpayer renounces a certain conduct because this is linked to a tax obligation or chooses, among the various solutions provided to it by the legal order, that which, by intentional action or omission of the tax legislator, is accompanied by fewer tax charges'; while illegitimate tax planning 'consists of any conduct of undue reduction, by contravening principles or rules of the legal-tax order, of the tax charges of a given taxpayer'.
Within the framework of tax planning, we can thus distinguish situations in which the taxpayer acts contra legem, extra legem, and intra legem.
When he acts contra legem, his conduct is frontal and unequivocally unlawful, as it directly violates tax law, and constitutes tax fraud capable, moreover, of being subject to counter-offensive censure or criminal prosecution.
Conduct extra legem occurs when the taxpayer abusively exploits the law to reach a more favorable tax result, although it does not directly violate it. He adopts 'a conduct that has as its exclusive or principal purpose circumventing one or more legal-tax norms, in order to achieve the reduction or elimination of the tax charge'. It being that from such norm or norms one must detect an attempt to circumvent 'a clear intention to tax affirmed by the structural principles of the system'. This type of conduct is commonly designated as 'tax law fraud', but, as Saldanha Sanches alerts, intending to better illustrate and distinguish these situations from those of tax fraud, also designated as 'abusive avoidance of tax charges', 'abusive tax avoidance', or also 'tax avoidance'.
Only conduct intra legem appears to be legitimate – and thus legitimate tax planning or non-abusive – Obtaining a tax savings does not constitute conduct prohibited by law, provided that the conduct does not fit within the above-mentioned extra legem conduct."
Thus, for us to be faced with abusive tax planning, according to the doctrinal construction, which has been followed by the jurisprudence of the superior courts and by the arbitral tax jurisprudence of CAAD, five elements should be verified:
1. The Means Element – "(…) corresponds to the route chosen by the taxpayer to obtain the desired gain or tax advantage, i.e., the act(s) or legal transaction(s) whose structure is determined according to a given tax result." The means used by the taxpayer should constitute an abuse of legal forms.
2. The Result Element – "What matters is only to demonstrate that the taxpayer, by his acts (whose characteristics were referred to in the previous requirements), achieved the verification of a certain tax advantage and the equivalence of economic effects with those of the normal act practiced."
3. The Intellectual Element – There is a preponderant fiscal motivation that manifests itself in the forms adopted and which makes the fiscal purpose of the transaction prevail over the non-fiscal purpose.
4. The Normative Element – Which concerns the normative-systemic disapproval of the structure assembled and the advantage obtained, that is, the taxpayer acts with manifest abuse of legal forms.
5. The Sanctioning Element – "The sanctioning element corresponds to the establishment of the CGAA depending on the verification of the aforementioned elements that fulfill the provision of the same" and consists of the ineffectiveness, within the tax scope, of the acts or legal transactions in question, depending on the cumulative verification of the other elements.
Corresponding this last element to the establishment of the norm, the remaining four appear to be cumulative requirements, which will allow assessing whether the verification of an activity characterizable as abusive tax planning.
Elements, whose verification the Respondent claims to have demonstrated in the Tax Inspection Report and whose non-verification is defended by the Claimant in the petition for arbitral decision and written arguments.
Let us see, then, each of these elements and their verification in the case sub judice.
The Means Element
The means element is translated, therefore, into the route chosen by the taxpayer to obtain a gain or tax advantage, which constitutes an abuse of legal forms.
According to doctrine, it is not sufficient that the act or legal transaction is determined according to a tax result, requiring that it be endowed with an "anomalous, unusual, artificial, complex, or even contradictory form."
According to other cited authors, "For abuse of legal forms to be confirmed, the following is required: 1. That unusual, inadequate forms or transactions have been chosen for the purposes to which the facts or transactions are destined, aiming to evade the tax system; 2. That the parties substantially achieve, from an economic point of view, the same result they would have obtained had they adopted the legal form corresponding to normal economic relations; 3. That the legal disadvantages of the form adopted have no significance, or have only diminished significance."
It is thus a matter of assessing whether, in the specific case, there is an incongruity between the form chosen by the Claimant and the purpose for which such form is employed.
In the case sub judice, the Respondent alleges that "(…) the transaction intended by the taxpayers consisted of the sale of shares of I… SGPS to the company itself by F…, as a way of distributing to the shareholder the income obtained by the company with the sale of the holding in RLEG, noting that, to avoid the taxation that would result therefrom, the following succession of acts was adopted:
- The shareholder F…, on 2/11/2012, makes a donation exempt from Stamp Tax to her children O… and A… of 10% of the shares she held in I… SGPS;
- On 20/12/2012, the donees transfer the shares to the company itself, calculating a loss, only possible because of benefiting from the acquisition value of the shares, corresponding to the taxable value that would serve as the basis for the assessment of Stamp Tax if it were due – See Inspection Report at pages 13 et seq."
For its part, the Claimant alleges that "it does not understand how the 'means' invoked by the TA — the donation of shares to the Claimant followed by the alienation of the same to I… SGPS — could result in a distribution to F… of the 'income obtained from the sale of the holding in RLEG'. Indeed, according to the Claimant, the tax advantage obtained (the loss obtained with the sale of shares to I… SGPS) depended on an essential condition that was always verified, that is, the type of equity interests donated taking the form of shares not listed on a regulated market. The Claimant considers that, as I… SGPS has always adopted the form of a joint-stock company, never having been listed on a regulated market, there would be no artificiality to point to the purpose of the element determinant for the alleged success of the tax plan of the succession of acts: the corporate type of I… SGPS. He further adds that there was no departure from the typical effects produced by the act of donation, as F…, the donee, would have, out of intent of liberality and at the cost of her patrimony, disposed gratuitously of the shares of I… SGPS in favor of the Claimant. Concluding that the Respondent would not have made the proof of the abusive nature of the transaction, as was required of it, pursuant to article 74º, no. 1, of the GTL.
In light of the foregoing, there must be an analysis of the extent to which the means element of the CGAA is or is not verified.
Recall the succession of acts that led to the assessment in question:
1. Donation by F… of 13,750 shares held in I… SGPS to the Claimant;
2. Sale by the Claimant of 13,750 shares of I… SGPS to the company (own shares).
In tax terms, these two legal transactions had the following tax impacts:
1. The donation of shares made to the Claimant benefited from an exemption from Stamp Tax, pursuant to paragraph e) of article 6º of the STC, and from non-subjection to IRS pursuant to no. 6 of article 12º of the IRS Code;
2. The donation of shares, although exempt, implied the obligation to report to the TA and the valuation of the shares in accordance with the formula provided for in paragraph a) of no. 3 of article 15º of the STC;
3. The Claimant sold the shares to I… SGPS for the price of €598,125.00. The valuation value (€2,133,175.00), referred to above, was considered as the acquisition cost of the shares, pursuant to paragraph b) of no. 1 of article 45º of the IRS Code, realizing a loss of €1,535,050, which was reported in his IRS Declaration form 3 of 2012.
The Respondent alleges that the intended purpose would be the sale of shares of I… SGPS by F… to the company itself, as a way of distributing to her the income obtained with the sale of the holding in RLEG, and not the donation of shares to her son, now Claimant.
However, the transactions actually carried out were a donation by F… to her son, now Claimant, carried out gratuitously, and a sale of those same shares carried out by the Claimant to I… SGPS.
Both legal transactions were formalized and produced the so-called "normal" effects, with the donation operating a gratuitous transfer of shares executed by F… in favor of the Claimant and the sale of those same shares executed by the Claimant to I… SGPS operating the onerous transfer of shares in favor of the company.
It does not appear from the contracts formalized between the parties that the effects of the legal transactions concluded were altered by the imposition of suspensive or resolutive clauses or others capable of discharacterizing the said transactions.
For the legal transactions concluded to be considered artificial or fraudulent aiming at the obtaining of a tax advantage, it would have to be proven that the transaction aimed at by the Claimant was, in fact, the purchase and sale of shares of I… SGPS carried out by F… to I… SGPS in order to distribute to the shareholder the income obtained by that company with the sale of the holding in RLEG.
Despite the existence of indications that this acquisition of own shares was being contemplated by the company I… SGPS even before the donation, it failed to prove that the legal transactions concluded were, in substance, a purchase and sale of shares of I… SGPS, carried out by F… to I… SGPS. First and foremost, even if the donation were disregarded and the direct sale carried out by F… to the company were considered, there would always be lacking a fundamental element characterizing the purchase and sale contract – the price or consideration of the transaction – which, according to the Inspection Report, was received by the Claimant.
On the other hand, as the Claimant rightly alleges, all other prerequisites for application of tax norms, namely for application of the formula provided for in article 15º of the Stamp Tax Code, were pre-existing, not resulting from any action or omission by the Claimant.
In this measure, the tribunal considers that the Respondent did not succeed in proving the artificial or fraudulent character and with abuse of legal forms of the legal transactions of donation and purchase and sale carried out with shares of I… SGPS.
Of the Result Element
Another of the elements that should be verified as a prerequisite for application of the CGAA is the result element.
"In this result element, it matters only to demonstrate that the taxpayer, by his acts (…) achieved the verification of a tax advantage and the equivalence of economic effects with those of the normal taxed act."
The Respondent alleges that "(…) the economic effect intended resided in the financial intake that the transfer of shares to the company could provide to F…. It being that such effect could be obtained by the direct sale of the shares by F… to I… SGPS or as was planned by the same and other participants, by the prior donation to descendants of the same shares and subsequent transfer of the donees to the company. Such hypotheses, as will be seen hereinafter, imply distinct tax frameworks, while basically providing the absence of tax charge in the situation adopted by the taxpayer and taxation in IRS, as gain income (Category G), in equivalent transaction" – (emphasis in original) cf. Inspection Report.
The Claimant contends that, "(…) from the succession of acts in question, no financial intake results in the sphere of F…, but rather in that of the Claimant: it was not the latter who received the price of the sale of own shares, but rather the Claimant, beneficiary of the donation. That is, such acts do not produce effects equivalent to the direct sale of the shares of I… SGPS by F…."
In support of this position, he cites the opinion of Professor Doctor Gustavo Courinha in which he maintains that: "Well, in this regard it should be noted that there does not exist in substance a legal transaction of economic effect equivalent to that of a direct onerous alienation of shares by the donor when, in the transactions implemented and now contested, no accessory clauses or legal terms are perceived capable of materially transforming a donation of shares followed by their sale (by the donee) into a direct onerous alienation by the donor. (…) Thus, and in strict dogmatic accuracy, it is the very requirement of result – in this economic aspect – that is not even verified." — cf. pages 20 and 21 of the Opinion attached to the file. Therefore, in the opinion of the Claimant, the Respondent would not have succeeded in demonstrating the alleged economic equivalence of the operations, as was required of it pursuant to article 74º, no. 1, of the GTL.
Indeed, in the case at hand, the ultimate tax advantage is the non-taxation, neither of the donation of shares, in the sphere of the donee, nor of the taxation for IRS purposes of the sale of those same shares to the company, in a short period of time.
However, for the donation by F… of the shares held in I… SGPS to the Claimant, followed by the sale by the latter of the same shares to the company, to have an economic effect equivalent to that of the sale of the shares by F… to I… SGPS, the latter would have had to receive the price of such sale or, at least, be relieved of the realization of an obligation with economic value equivalent to that of the sale.
Indeed, the donation of shares caused a decrease in the patrimony of the donor, corresponding to the economic value of the donated shares, and an increase in the patrimony of the Claimant, in the same amount, while the alienation of shares by the Claimant to I… SGPS represents a financial intake in the sphere of the latter.
To demonstrate an economic result equivalent to that of the purchase and sale of shares of I… SGPS by F…, it would have had to be demonstrated that the financial intake from such sale occurred in her sphere and not in that of the Claimant, which was not proven in the Inspection Report, nor in the present proceeding.
As the equivalence between the normal legal transaction which, according to the Respondent, should have been practiced – the transfer of shares of I… SGPS carried out by F… to the company itself – and the acts/legal transactions practiced by the Claimant – donation of shares of I… SGPS carried out by F… to the Claimant, followed by the onerous transfer of those same shares by the Claimant to the company – has not been demonstrated, the verification of the result element of the CGAA is considered not demonstrated, as required by article 74º, no. 1, of the GTL and article 63º, no. 3, paragraph a) of the CPPT.
Of the Intellectual Element
The intellectual element translates into a "preponderant fiscal motivation that manifests itself in the forms adopted and which makes the fiscal purpose of the transaction prevail over the non-fiscal purpose."
The intellectual element corresponds to the motivation of the taxpayer, requiring that the fiscal purpose prevail over the non-fiscal purpose.
Resulting in the choice of an act equally suitable for the production of a certain economic effect in comparison with another, which would not have such an advantageous tax treatment.
According to doctrine, "it is not sufficient for the analysis of the acts or legal transactions in question to result in the obtaining of a fiscally advantageous result and an equivalent non-fiscal result", being required that "the choices and forms adopted by the taxpayer be fiscally directed (tax driven), and that the former (fiscal result) prevail over the latter (non-fiscal result)".
According to the Inspection Report, "The taxpayer has the possibility of choosing, from among the various legally admissible options, the option less burdened by taxes, provided that the tax savings is not the sole or principal purpose of the act to be practiced or of the legal transaction to be concluded, as happened in this case. The fiscal motivation of the taxpayer was based on the fact that the acts or transactions practiced were essentially directed at the absence of taxation."
The Respondent further adds in the same Inspection Report that: "The analysis of the contours of the operations carried out by F… does not allow discerning the existence of any economic or other motivation that justifies the donation of shares. Thus:
- There was no purpose of making the son A… participate in the capital of the Company, of providing him with future income in terms of dividends, because the shares donated to him were, immediately thereafter, alienated.
- There was never an intention to change the shareholder structure of the company, that is, for the donees to become participants in I… SGPS, because on the date the donation occurred, 2 November 2012, the acquisition of own shares by the Company was already planned, and because after this acquisition, the shareholder structure (in terms of percentages of participation in the capital) remained exactly the same as existed before the donation of the shares. As mentioned, the engagement with the Official Auditor for the certification service of the accounts for the interim balance sheet as of 30 September (whose purpose was to determine the value at which the company would acquire its own shares, as stated in the respective minutes) occurred on a date prior to 30 October, as appears from this date's email exchanged with the Official Auditor."
Concluding "(…) that the realization of the exempt donation between mother and children had only fiscal motivations, that is, to allow, by virtue of the application of the formula provided for in paragraph a) of no. 3 of article 15º of the Stamp Tax Code (…), increasing the acquisition value to be used in calculating the gain obtained with the sale of the shares, preventing the existence of any taxation. On the other hand, considering the combined effect of the donation of shares with the sale of those same shares to I… SGPS, it is concluded that, in the end, the taxpayer A… received the amount of €598,125.00. Thus being, it would be concluded that what was truly intended to be donated was the money resulting from the sale of the shares and not the latter. (…) Therefore, if the operation of acquisition of own shares by I… SGPS would always happen and the intention of the donor was only to deliver money to the donees, already disposing at the time of the donation of the necessary amount for the realization of the donation, it is also concluded from this that the reason for the choice of the donation of shares over the donation of money aimed only at avoiding taxation, for IRS purposes, of the gain that would result from the direct alienation of these shares to I… SGPS.(…)"
The Claimant, for its part, underlines that "(…) in the thesis conveyed in the Inspection Report, up to the end of the part relating to the result element, the objective of the succession of acts in question would consist of obtaining by F… a financial intake resulting from the sale of the shares to I… SGPS. Surprisingly, in the part relating to the intellectual element, still in the thesis of the TA, the objective of the operation changed: The donation of shares to the Claimant followed by the sale of own shares would no longer be to provide liquidity to F…, but rather to donate money to the Claimant. (…) But regardless and without prejudice to that, if F… had donated money to the Claimant, it is not apparent what taxation would have been due, since such an act would be exempt from Stamp Tax, pursuant to article 6º, paragraph e), of the Stamp Tax Code (STC). Thus, it is not understood what "fiscal motivation" could have led to the donation of the shares of I… SGPS, when the putative "normal operation", in the thesis of the TA — direct donation of money — would also not entail the payment of any tax. Thus, the execution of the succession of acts in analysis cannot have been based on an exclusive or preponderant fiscal motivation, because there was no tax to avoid.(…)".
Regarding the intellectual element properly speaking, that is, with respect to fiscal motivation, there must be assessment of whether the same is preponderant in the face of the non-fiscal purpose.
In this regard, Gustavo Lopes Courinha teaches that "It can be assessed whether the forms chosen (means) are fiscally directed to the fiscal and non-fiscal equivalent effect (results), whether or not they were motivated by such purpose, either under an objective perspective or subjective.", but that the objective perspective was expressly embraced in Portugal by the regime contained in article 63º of the CPPT. (…) The proof of fiscal motivation in these General Clauses is made (…), with recourse to facts or elements of evidence that allow the interpreter (judge) to extract, with reasonable assurance and, according to criteria of reasonableness and normalcy, the conclusion that the taxpayer attributed to the forms adopted a preponderant fiscal purpose. (…) The elements of evidence submitted for assessment should be sufficient so that, in light of logical appraisal and experience criteria, one can conclude by the existence of this requirement. The fact that the CGAA suffices with the use (…) of those objective elements does not prevent the taxpayer from demonstrating, in identical terms, precisely, the contrary, i.e., the existence of a preponderant non-fiscal motivation(…)".
Having reached this point, it is necessary to decide on the verification of the intellectual element of the CGAA, that is, whether there are objective elements of evidence from which results a preponderant fiscal motivation as against non-fiscal motivation for the conclusion of the legal transactions.
However, this fiscal motivation does not exclude the existence of an economic or other motivation that could justify the donation of shares. For purposes of verification of the intellectual element of the CGAA, this motivation (fiscal) must be preponderant in the face of the remaining motivations. Faced with two legal transactions of equivalent economic effect, the taxpayer is not obliged to choose the fiscally more onerous transaction.
However, in the case at hand, as mentioned in the previous elements, the existence of a legal transaction of economic effect equivalent to the donation of shares followed by the sale of the same to the company remained undemonstrated. Indeed, the sale of shares carried out by F… to I… SGPS cannot be considered, from the point of view of the Claimant, as a transaction of economic effect equivalent to that of the donation of shares followed by the sale of the same to the company.
Of the Normative Element
According to the doctrine that has been cited, the normative element translates into the nonconformity of the result obtained with the ratio legis, spirit, and purpose of the law, principles of the codes and of the tax system.
In this sense, Gustavo Lopes Courinha maintains that "The fiscal disregard of such acts or transactions will only succeed when, combining all the above-mentioned requirements, it is demonstrated that the fiscal effect obtained (always in regard to the non-fiscal effects equally obtained) merits a judgment of disapproval by the Law".
This task should be carried out by the TA, which will have to demonstrate that the intention of the applicable norms or essential principles of a given sector of taxation are contrary to acceptance of the result. Demonstration, which may be carried out in a direct manner, by the search of the preparatory documents of the same, reports of working groups, etc., or indirectly by recourse to constitutional principles that govern the tax system. It is thus a matter of demonstrating by recourse to all possible interpretive methods that, despite the letter of the law permitting that the legal transaction(s) assure the tax effects sought by the taxpayers, the intention of the law or of the law prevents their obtaining and permits concluding for subjection to tax.
In the case at hand, the Claimant alleges that the Respondent in the Inspection Report merely invokes the tax norms applicable to the allegedly abusive "scheme", with such invocation proving nothing about the verification or non-verification of the normative element, since it does not justify in what manner the acts carried out merit the disapproval of the Law. Thus, according to the Claimant, the Respondent would not have proven the verification of the normative element in the case at hand as was required of it, pursuant to article 74º, no. 1, of the GTL. Reason by which only can be concluded that the Respondent in issuing the Additional Assessment, without proving the verification of the normative element of the CGAA, violated the provisions of no. 2 of article 38º and no. 1 of article 74º of the GTL.
In the Inspection Report it is stated on page 19, fols. 134 of the Administrative File, that "Through the scheme described above, F… obtained income from gains resulting from the sale of shares, of which she disposed in advance through their donation to her children, removing such income from taxation through the stipulation of no. 6 of article 12º of the IRS Code, combined with paragraph e) of article 6º of the Stamp Tax Code. No. 6 of article 12º of the IRS Code provides that: "IRS does not apply to capital gains from gratuitous transfers subject to stamp tax, nor to those expressly provided for in a norm of negative scope delimitation of this tax." On the other hand, paragraph e) of article 6º of the Stamp Tax Code stipulates that, descendants are exempt from stamp tax in gratuitous transfers subject to item 1.2 of the general table (free acquisition of goods) of which they are beneficiaries."
Indeed, neither in the Inspection Report nor in the written arguments did the Respondent succeed in demonstrating the verification of the normative element.
It was not sufficient for the Respondent to invoke the applicable normative to the situation at hand; it would have to prove in what manner the legal transactions practiced, despite being comprehended in the letter of the law, extravasated the intention of the legislator or of the law.
Thus, the Respondent did not prove the verification of the normative element in the case at hand as was required of it, pursuant to article 74º, no. 1, of the GTL.
Of the Sanctioning Element
The sanctioning element corresponds to the establishment of the norm, that is, the verification of the aforementioned elements cumulatively, which fulfill the provision of the norm, the application of the CGAA reaches with the legal sanction its objective – the combating of tax avoidance – by way of the denial of the fiscal effects sought to be obtained.
Thus, pursuant to no. 2 of article 38º of the GTL and paragraph b) of no. 3 of article 63º of the CPPT, such acts or legal transactions shall be ineffective from a tax point of view, the taxation being effected in accordance with the tax norms applicable in their absence and the said tax advantages not being produced.
In the Inspection Report, the Respondent concludes that "the proven cumulative existence of the four previous prerequisites justifies the ineffectiveness of the legal transactions in question, that is, the disregard of the donation of shares by F… to her children (…) and A… and subsequent sale by these to I… SGPS [I… SGPS], proceeding to the taxation of the transaction sought by the taxpayer, that is, the direct transfer, by F… to I… SGPS of those same shares."
Now, upon reaching this element of the CGAA, it becomes clear that the Respondent intends to disregard the donation made to the Claimant, considering that the transfer of shares was made directly by F… to I… SGPS, abandoning the thesis of the distribution of profits of I… SGPS to F….
In this manner, with respect to the IRS of 2012 of the Claimant, the correction proposed in the Inspection Report, of a merely arithmetic nature, was the disregard of the amount of losses declared in Category G of IRS – €2,073,350.68.
However, as mentioned above, as the four elements of the CGAA, identified above, are not verified, the establishment of the norm cannot operate.
Of the Value of the Proceeding
With respect to the determination of the value of the proceeding, the Claimant indicated the value of €0 (zero euros).
Questioned about the attribution of €0 to the proceeding, the Claimant came to allege that the Demonstration of Assessment of IRS, identified with the assessment number 2016 … (Additional Assessment) and the Demonstration of Reconciliation of Accounts with the reconciliation number 2016… relating to the year 2012 (Reconciliation of Accounts), whose annulment he requested, had their origin in the correction of a loss obtained with the transfer of equity interests, which did not originate additional tax payable, nor additional value to be reimbursed by the Tax Authority (TA), given the Claimant's initial IRS assessment. He further adds that the act of assessment sub judice reduces the negative tax base (net loss calculated), with immediate reflection in the legal-tax sphere of the Claimant. Subsidiarily, if the Arbitral Tribunal should thus not consider it, the Claimant requests that the "Value to be reimbursed" contained in the Additional Assessment be considered, a value that corresponds to €638.45.
The Respondent did not pronounce on the value of the proceeding within the contradiction period granted, nor subsequently in the response phase or in written arguments.
It is thus necessary to decide.
The determination of the value of the litigation should be made in accordance with the provisions of article 97º-A of the CPPT, subsidiarily applicable by force of paragraph a) of no. 1 of article 29º of the RJAT and no. 2 of article 3º of the Regulation of Costs in Tax Arbitration Proceedings (RCPTA).
Thus, pursuant to article 97º-A of the CPPT,
"1. The allowable values (…), for actions that take place in the tax courts, are the following:
a) When the assessment is challenged, the amount whose annulment is sought;
b) When the act of fixing the assessable matter is challenged, the contested value;
c) When the act of fixing patrimonial values is challenged, the contested value; (…)
2 – In cases not provided for in the previous numbers, the value is fixed by the judge, taking into account the complexity of the proceeding and the economic condition of the challenger, having as maximum limit the value of the jurisdiction of the 1st instance of the judicial courts.(…)"
As Jorge Lopes de Sousa refers, "Thus, when it is a matter of the declaration of illegality of the assessment, the value of the case corresponds to the amount whose annulment is sought. (…) Whenever it is not possible to fix the value of the case in accordance with the options referred to, no. 2 of article 97º-A of the CPPT provides that the value shall be "fixed by the judge, taking into account the complexity of the proceeding and the economic condition of the challenger, having as maximum limit the value of the jurisdiction of the 1st instance of the judicial courts". It should be noted, in this context, that in arbitral proceedings the value of the economic utility of the petition should always be indicated, even if provisional, in accordance with the provisions of paragraph e) of no. 2 of article 10º of the RJAT (…)".
Now, in the case at hand, the value of the case should correspond to the value of the economic utility of the petition, that is, the amount of the correction of the IRS assessment, in case the present petition for arbitral decision is judged to be well-founded.
In such terms, the value of the present petition for arbitral decision should be fixed at €638.45 (six hundred thirty-eight euros and forty-five cents), corresponding to the amount of the correction of the loss of the Claimant.
DECISION
In such terms, this arbitral tribunal decides:
1. To judge well-founded the petition for declaration of illegality of the IRS assessment number 2016 … and reconciliation of accounts with the number 2016 … relating to the year 2012, on the grounds of violation of the prerequisites for application of the provisions of no. 2 of article 38º of the General Tax Law;
2. To condemn the Respondent in procedural costs.
VALUE OF THE CASE
In accordance with the provisions of no. 1 and no. 2 of article 306º of the Civil Procedure Code and paragraph a) of no. 1 and no. 2 of article 97º-A of the CPPT, applicable by force of paragraphs a) and b) of no. 1 of article 29º of the RJAT and no. 2 of article 3º of the Regulation of Costs in Tax Arbitration Proceedings (RCPTA), the value of €638.45 (six hundred thirty-eight euros and forty-five cents) is fixed for the proceeding.
COSTS
Pursuant to no. 2 of article 12º and no. 4 of article 22º, both of the RJAT, and no. 4 of article 4º of the aforementioned Regulation, the value of the arbitration fee is fixed at €1,224.00 (one thousand two hundred twenty-four euros), in accordance with Table I of the RCPTA, to be charged to the Respondent, given the well-foundedness of the petition for annulment of the tax act subject to the file.
Let this arbitral decision be notified to the parties.
Lisbon, 2 March 2018
The Sole Arbitrator,
(Vera Figueiredo)
Text prepared by computer, pursuant to no. 5 of article 131º of the Civil Procedure Code, applicable by referral of paragraph e) of no. 1 of article 29º of the RJAT, written according to the spelling of the Portuguese Language Orthographic Agreement, approved by Resolution of the Assembly of the Republic no. 26/91 and ratified by Presidential Decree no. 43/91, both of 23 August.
Frequently Asked Questions
Automatically Created