CAAD 189/2018-T: IRC 2014 Autonomous Taxation on Company Vehicles – Rebuttable Presumption Under Article 88 CIRC

ARBITRAL DECISION (consult full version in PDF)

Parties

Claimant: A...., Tax ID No...., with registered office at Street ..., No...., ...-... ...;

Respondent: TAX AND CUSTOMS AUTHORITY (AT)

I. REPORT

On 11 April 2018 the Claimant submitted to CAAD a request for arbitral ruling (PPA), requesting, under the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a single arbitral tribunal (TAS).

THE REQUEST

The Claimant intends that the TAS (a) - annul the act of dismissal of the Gracious Complaint filed against the self-assessment of corporate income tax (IRC) for 2014 due to error in the self-assessment regarding charges for light passenger vehicles; (b) – annul the tax act of additional IRC assessment No. 2016...; (c) order the reimbursement to the Claimant of the amount of €12,724.31 borne and, as well; (d) – condemn the AT to the payment of compensatory interest for the deprivation of said amount, under the terms of Article 43 of the LGT.

THE CAUSE OF ACTION

The Claimant proceeded from the following assumption: "... in deciding the present request for arbitral ruling, one should only pay attention to the 'contemporary foundation of the act', as concluded by the Arbitral Tribunal in Case No. 400/2015-T", whereby "... the immediate object of the present arbitral proceedings is therefore the content — illegal — of the decision to dismiss (partially) the Gracious Complaint filed and, consequently, the mediate object of the present proceedings is the tax act of IRC assessment..." for which reason it argues that the AT should have granted the gracious complaint it filed against the act of self-assessment of IRC for the 2014 tax year, insofar as it incorrectly assessed and paid IRC;

And for the reason that regarding charges for light passenger vehicles, generating autonomous taxation, relating to 36 light passenger vehicles, it verified that an amount was assessed and borne that was superior to what was actually due, since they are in the situation - which it denominated as being "in pool".

It adds that "... the 'pool vehicles' correspond to a set of vehicles (in this case, 36 vehicles) that are permanently stationed at the company's facilities for use for purposes exclusively and solely professional".

And because "... the norms regulating autonomous taxation (i.e., Article 88 of the IRC Code) undoubtedly embody norms of tax incidence" it concludes that "any presumption contained in a norm of tax incidence is susceptible of being rebutted, under penalty of violation of the principle of equality and the principle of taxation according to actual income, as is referenced in Article 73 of the LGT";

The Claimant objects to the fact that the AT did not even accept, in the course of the gracious complaint procedure, the principle that the norm of Article 88 of the CIRC contains a rebuttable presumption (by force of Article 73 of the LGT), even though it delivered supporting documents proving the manner of exclusively business use of the 36 vehicles, arguing that it rebutted the presumption whose burden was placed upon it.

It is in the manner described above that the Claimant justifies the attribution of "erroneous quantification" of the amount reported in the self-assessment declaration, in non-conformity with Article 73 of the LGT and Article 88 of the CIRC.

It invokes in its favor the sense and consequences of the following arbitral decisions CAAD Case Nos. 39/2012, 187/2013, 210/2013, 225/2013, 216/2013, 260/2013, 20/2014, 36/2014 and 649/2016-T.

OF THE SINGLE ARBITRAL TRIBUNAL (TAS)

The request for constitution of the TAS was accepted by the President of CAAD and automatically notified to the AT on 12-04-2018.

By the Deontological Council of CAAD, the signatory of this decision was designated as arbitrator, with the parties being notified thereof on 29.05.2018. The parties manifested no intention to refuse the designation, under the terms of Article 11, paragraph 1, subparagraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

The Single Arbitral Tribunal (TAS) has been, since 18 June 2018, regularly constituted to examine and decide the subject matter of this dispute (Articles 2, paragraph 1, subparagraph a) and 30, paragraph 1, of the RJAT).

All these acts are documented in the records contained in the CAAD Process Management System, which are hereby considered reproduced.

On 18-06-2018 the AT was notified under the terms and for the purposes of Article 17-1 of the RJAT. It responded on 03.09.2018, submitting the Administrative Process (PA) composed of 8 computerized files, designated PA0; and PA2 to PA7, all with 100 pages each and the one designated PA8 with 62 pages;

On 07.11.2018 the meeting of parties of Article 18 of the RJAT was held, with examination of witness B..., summoned by the Claimant, who testified on facts contained in Articles 66 to 77 of the request for arbitral ruling (PPA). The Tribunal notified the Claimant and the Respondent to, in that order and successively, present written arguments, within a period of 10 days, with the period for the Respondent commencing upon notification of the filing of the Claimant's arguments and in compliance with the provisions of Article 18, paragraph 2 of the RJAT, designated 10-12-2018 for the purpose of notification of the arbitral decision.

On 20.11.2018 the Claimant presented written arguments and on 04.12.2018 the Respondent presented counter-arguments. The parties maintained what they had already stated in the request and in the response.

PROCEDURAL REQUIREMENTS

Legitimacy, capacity and representation – The parties are legitimate, possess legal personality and procedural capacity and are represented (Articles 4 and 10, paragraph 2, of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).

Principle of contradiction - The AT was notified under the terms of subparagraph n) of this Report. All procedural documents and all documents attached to the proceedings were made available to the respective other party in the CAAD Process Management System (SGP). Both parties were always notified of their attachment.

Dilatory exceptions - The arbitral procedure does not suffer from defects and the request for arbitral ruling is timely once it was submitted within the prescribed period in subparagraph a) of paragraph 1 of Article 10 of the RJAT, as results from the fact that the Claimant submitted the request for arbitral ruling on 11.04.2018 and the date contained in the notification of the decision to dismiss the gracious complaint has the date of mailing, via mail, of 11 January 2018 (page 57 of PA8 submitted with the AT's response).

SUMMARY OF THE CLAIMANT'S POSITION

(in 81 articles of the PPA and 26 of the arguments)

It states that "... it has a set of 36 vehicles that are permanently stationed at its facilities for use exclusively and solely for professional purposes, that is, when the workers ... need to travel, in service of A..., to various points in the country, they can request the use of the so-called 'pool' vehicles, and that ... it implemented a rigid internal procedure, it should be said - that allows the control of the respective dates of use, the routes traveled and the purposes of said routes, thereby assessing the business nature of the use of the vehicles", concluding that "... with respect to 'pool vehicles' it is possible to entirely and unequivocally rule out personal uses that might be made of them, given that, for example, workers are required to return the vehicle to the company's facilities after completion of the tasks that necessitated the requisition of the vehicle".

Being that "... such internal procedure imposes on workers the burden of, among other things, making a formal requisition of the vehicles, which includes the time of commencement of use, the time of termination of use, the destination of the travel, and the respective purpose".

Based on the facts described above, the Claimant circumscribes the present dispute in the following manner: "regarding the 2014 tax year, the CLAIMANT proceeded to file the corresponding income tax return (IRC Form 22), on 31/7/2015, and subsequently filed an amended return on 29/7/2016". "As a result of the filing of the amended income tax return, an amount of IRC to be paid of €4,897,055.23 resulted, duly paid ...". "It happens, however, that the self-assessment mentioned above suffers from erroneous quantification with respect to ... the amount reported therein: field 365: relating to autonomous taxation", for which reason "... it filed a Gracious Complaint (due to error in the self-assessment), which was, however, dismissed (partially) by the Tax Authority". In fact, "regarding the question of autonomous taxation, the Tax Authority understands, in the draft decision to dismiss the Gracious Complaint (partial, which refers to the present request § 52 "... it is understood that No. 3 of Article 88 of the CIRC does not contain a rebuttable presumption by application of Article 73 of the LGT")".

It is with this position of the AT that the Claimant manifests disagreement and states "... the - sole - issue to be decided, and regarding which the constitution of the present Arbitral Tribunal is requested, is exclusively related to the assessment of the (il)legality of the decision to dismiss (partially) the Gracious Complaint ... with the assessment of IRC constituting the mediate object (first-instance act) of the present proceedings".

Concluding that "... the amount of €12,724.31 (relating to autonomous taxation borne by charges incurred with light passenger vehicles that are 'in pool') was erroneously subjected to autonomous taxation, since such charges possess an exclusively business nature".

From the standpoint of the application of law, it states "... we understand that Article 73 of the LGT prohibits the existence of irrebuttable presumptions in the field of norms of tax incidence ... because, as stated in Constitutional Court Ruling No. 211/2003, of 28 April 2003, '(...) an irrebuttable presumption, in this field [tax incidence], violates the constitutional principle of equality, connected to that of contributory capacity (...)', 'that is, any presumption contained in a norm of tax incidence is susceptible of being rebutted, under penalty of violation of the principle of equality and the principle of taxation according to actual income, as is referenced in Article 73 of the LGT", being certain that "... the norms regulating autonomous taxation (i.e., Article 88 of the IRC Code) undoubtedly embody norms of tax incidence".

For the reason that "... such presumption is based on the fact that the expenses/charges on which autonomous taxation falls are located in a line of intersection between what is considered private expenses and expenses with a business character".

With respect to proving the "business" nature of all 36 light passenger vehicles used "in pool", it states that "... there is strict control of the entries and exits of these vehicles, as well as the corresponding recording of entry and exit hours -, which allows for the control and confirmation of use during normal working hours and only in service of the CLAIMANT with no margin for their use during the night or weekends for personal purposes", with the "... examples of requisition forms for these vehicles constituting documentary proof of this very thing: those specific vehicles are not assigned to any specific workers, only circulate for business and professional purposes, and their use during hours other than normal working hours is expressly prohibited", for which reason "... the presumption that rests upon them must be considered rebutted, nor is it legitimate for them to be subjected to taxation if the business nature of the charges relating to light passenger vehicles is deemed proven and, consequently, to conclude that they are not subject to autonomous taxation because the presumption of non-business nature has been rebutted".

It concludes by requesting the annulment of the decision that dismissed its gracious complaint, the partial annulment of the self-assessment of IRC, in the portion of the collection of €12,734.21, and that the AT pay it compensatory interest based on Articles 43 and 100 of the LGT and Article 61 of the CPPT.

In arguments, the Claimant took a position on Part II-2 of the AT's Response under the heading "the prohibition of the Single Arbitral Tribunal deciding by resort to equity", refuting such claim and sustaining what it had already sustained in the PPA.

SUMMARY OF THE RESPONDENT'S POSITION

(in 130 articles of the response and in 126 articles of the counter-arguments)

The Respondent advocates for a different reading of the facts present here and of the law.

The Resort to Equity

It begins by stating that "in the case of motor vehicles, ... it is provided that all costs borne are taxed at the rate of 10%, meaning that even if accepted as indispensable for the formation of taxable profit, said expenses do not prevent, by force of the norm, the corresponding autonomous taxation", "and the same is to be said of the content of Article 88, Nos. 7 and 9, of the CIRC, where it is provided that even if both are deductible for purposes of Article 23 of the CIRC – and therefore considered necessary for the exclusive obtaining of the company's income –, the costs must be taxed under autonomous taxation".

It draws the following conclusion: "... the interpreter of Article 88 of the CIRC cannot fail to conclude that the legislator intended only to refer to the types of vehicles identified there", because it results "... clearly from Nos. 3, 7 and 9 of Article 88 of the CIRC that the legislator did not intend to exclude from subjection to autonomous taxation charges related to vehicles, except in situations clearly evidenced in the exception provided in the final part of No. 3 and in No. 6 of said Article 88", "in other words, the interpretation advocated by the Claimant finds not the slightest support in the letter of the law that could create in the interpreter any type of doubt in this regard", concluding that "the persistent emphasis that the Claimant places on the special nature of its commercial activity and on the context of the use of its vehicles are arguments minimally apt to set aside what the fiscal law expressly and clearly establishes: subjection to autonomous taxation ...", since "... the Claimant seeks sub-reptitiously to open recourse to equity, to justify a justice in the concrete case, in the face of the denial given to it by the principle of legality, by the absence of support in the letter of the law".

And it adds: "an equity understood here in the variant of functioning in the correction of a (supposedly) inadequate law in the concrete case", "however, not only does the fiscal law not permit equity to function as a foundation for the correction of inadequate law in the concrete case, but the RJAT clearly prohibits the arbitral tribunal from resorting to that figure".

Regarding the Presumption of "Business" Nature

Regarding the presumption of "business" nature, it recalls that "...in accordance with the wording of Nos. 3 to 6 of Article 88 of the CIRC, the charges borne with vehicles subject to the incidence of autonomous taxation encompassed both the charges deemed deductible under Article 23 of that code, as well as non-deductible charges, since, as a result of the amendments introduced by Law No. 55-A/2010, of 31 December, there ceased to be any interconnection between the regime for deductibility of charges relating to vehicles and autonomous taxation", adding that "... there is no evidence in the letter of Nos. 3 to 6 of said Article 88, nor in any other provision of the CIRC, nor has the Claimant invoked any normative provision that clarifies the allegation that the charges borne with vehicles can be subtracted from the incidence of autonomous taxation as long as a demonstration is made of its full business nature".

It further objects to the thesis defended by the Claimant, since the "...interpretive thesis of the norms that regulate autonomous taxation, developed in some arbitral jurisprudence, in particular in the decision issued in Case No. 209/2013-T, according to which the subjection to autonomous taxation of expenses referred to in Article 88 would depend on an option of the taxpayer to be formulated in the following terms: «Autonomous taxation (...) could be viewed as a type of consensual anti-abuse norm, in which the legislator proposes to the taxpayer one of three alternatives, namely: a) not to deduct the expense; b) deduct but pay autonomous taxation, dispensing both itself and the Tax Authority from discussing the question of the business nature of the expense; c) prove the full business nature of the expense, and deduct it in full, not bearing autonomous taxation.»", since "... the formulation of the range of options, ... stated, constitutes the corollary of an alleged, but unjustified, similarity detected between the regimes, as well as the concerns and purposes, of autonomous taxation and the anti-abuse clause provided in Article 65/1 [current subparagraph r) of No. 1 of Article 23-A) of the IRC Code], whose wording, at the date of the facts, was as follows «Not deductible for purposes of determining taxable profit are the amounts paid or owed, on any account, to natural or legal persons resident outside Portuguese territory and subject therein to a clearly more favorable tax regime, unless the taxpayer can prove that such charges correspond to effectively carried out operations and do not have an abnormal character or an excessive amount» which, by being a true special anti-abuse norm and not «a type of consensual anti-abuse norm», provides for the possibility of the taxpayer proving that the situation is not abusive (reversal of the burden of proof)."

And it continues stating: "furthermore, according to said interpretive thesis, autonomous taxation «would then have underlying a presumption of "partial" business nature of the expenses on which they fall, due to the aforementioned fact that such expenses are located in a gray line that separates what is business expense, productive, from what is private expense, consumption, and that, notoriously, in many cases, the expense will indeed in reality have a dual nature (part business, part private)», but "... it will always be said, in line with what is stated in arbitral decision No. 148/2016-T, that «there is no norm that establishes the possibility of option», either in Article 88 or in any other norm of the CIRC", "and because the premises on which the possibility of option is based do not have a place, since the norm of cited Article 65/1 of the CIRC is clearly an anti-abuse norm that aims to address the diversion of profits to jurisdictions with privileged tax regimes, under the cover of fictitious expenses, consequently interwoven in the logic of operation of the income tax and in the rules for determining taxable profit, whereas autonomous taxation falls on a heterogeneous set of very disparate realities – expenses or charges and income – whose justification points also to distinct purposes that both doctrine and jurisprudence have abundantly addressed".

In the case "... of autonomous taxation of charges borne with vehicles, the motivations for autonomous taxation have evolved in the direction of some diversification, which have been translated into the association of reasons of a purely fiscal nature with others of an extrafiscal nature", in particular discouragement of the burning of fossil fuels and environmental motivations.

On the other hand, "the understanding according to which the norms of Nos. 3 to 6 of Article 88 of the CIRC have underlying a presumption, would lead to the rebuttal of the same resulting in the production of an authentic 'diabolic proof', due to the practical impossibility and to carry it out".

And it concludes: "...the legislator did not establish, either explicitly nor implicitly, the possibility of avoiding autonomous taxation of charges relating to vehicles by demonstrating the full allocation of the vehicles to the activity undertaken", "but came to depend, as of 2011, in accordance with the provisions of the final part of Article 88/3 of the CIRC, on the acquisition and use of vehicles powered exclusively by electrical energy", for which reason "... given that the Claimant's claim has no support either in the letter of the law, nor in the ratio of Nos. 3 to 6 of Article 88 of the CIRC, the Respondent could not, in those circumstances, proceed to a corrective interpretation of the law that it is required to apply, once the legally defined prerequisites have been verified".

It argues that the norm of Article 88 of the IRC Code is of objective incidence, not containing "... in its wording, either explicitly, nor implicitly, any type of presumption, since the charges that are autonomously taxed there are the 'effected or borne by taxpayers'", "more specifically, the norm requires only that the taxpayers, whose principal activity is commercial, industrial or agricultural in nature, are not exempt from income tax, encompassing all costs borne with light passenger vehicles or mixed".

And it further adds that "...the concept of 'business nature' does not exist in fiscal law, as it is an isolated innovation of arbitral jurisprudence, without any reference to the source of inspiration", for which reason "... being the concept nonexistent it is to be asked if the interpreter is not attempting to integrate an alleged gap (which does not exist) in Article 88 of the CIRC, that is, to introduce the concept of business nature in order to attribute a minimum of logic precisely to the thesis of the 'presumption of business nature' of the expenses borne".

Concluding that "Article 88 of the CIRC not being susceptible of analogical integration, the concept of 'business nature' – which is not read there – must then be eradicated from the present discussion, as it finds no support in fiscal law or even in any other branch of law".

It further understands that "... the Claimant proposes, from a legal standpoint, a manifest redundancy since, under the diaphanous guise of 'business nature', it subjects the charges borne here in discussion to a double evidentiary burden". "Thus, under the terms of the provisions of Article 23 of the CIRC (wording at the date), in addition to taxpayers having to prove the indispensability of the costs contributing to the formation of taxable profit, they must equally prove the 'business nature' of the expenses subject to taxation, under the terms of the provisions of Article 88 of the CIRC".

The AT formulates the following general conclusions on the purposes of autonomous taxation: "... the essential purpose of autonomous taxation are three, namely:

The penalization of evasive or fraudulent conduct (e.g., undocumented expenses);

The prevention of erosion of the tax base for IRC purposes, imposing on certain charges that may be deducted by IRC taxpayers, but which, however, become an increase in taxation, discouraging spending on such charges;

The collection of revenue".

Regarding the Evidence Provided by the Claimant

Regarding the evidence presented by the Claimant, it states that "... NO concrete, complete and unequivocal material evidence is produced by the Claimant and, probably, nor would become feasible" for the reason that the attachment of an internal procedure for use of vehicles exclusively for business purposes, "does not result in compliance with that internal procedures", for the reason that "... it is sufficient to bring to light a very illustrative example: as is public and notorious, despite the existence of a law establishing that vehicles cannot exceed 120km/h on highways, it is certain that daily practice demonstrates that such limit is disrespected by a considerable segment of citizens", concluding that "... the control of use exclusively for professional purposes of the vehicles through the aforementioned 'internal procedure' is comparable to respect for the speed limits established in the Traffic Code", "it is not by the existence of an internal procedure that its compliance is ensured".

Regarding the documents presented (vehicle requisition form, rules for use of service vehicles and declaration of receipt and return of vehicles), it counters that the vehicle requisition forms do not have "... any identification of the vehicle in question, which makes impossible any type of control" and "on the other hand, analyzing the content of the declarations presented they are only referring to 3 vehicles among the 36 listed in the (duplicate) documents 5 and 8 attached", concluding that "... there does not exist in our legal system 'proof by sample'".

It adds that "... none of the documents 6 and 7 attached to the p.i. is minimally apt to demonstrate that the 36 vehicles can only have an exclusively professional use, since such documents are nothing more than records", being certain that "... what is at issue here is the existence of a control system", "control that is not capable of existing in forms and declarations, since in the course of professional use of the vehicles there is always room for personal use of them, without such use being revealed through forms and declarations".

Regarding the Interpretation at Odds with the Constitution

Finally, the Respondent states that "... the interpretation conveyed by the Claimant is shown to be contrary to the Constitution of the Portuguese Republic ("CRP"), in that it violates the constitutional principle of legality, evident in Article 103, No. 2 of the CRP, in its corollaries of parliamentary law reservation and typicality and the principle of legal certainty and protection of trust", given that "there is no doubt that the legislator and the law did not wish to exclude from taxation vehicles belonging to a business fleet, even though their use is restricted exclusively to professional use of the activity undertaken by the taxpayer", for which reason "... to permit that, by way of a presumption – which does not exist, it must be stressed –, taxpayers may set aside the taxation on a tax reality that was not, either implicitly nor explicitly, excluded from taxation by the legislator, is nothing more, nothing less, than to permit the frontal violation of the constitutional principles that we have been developing", "it is to instrumentalize the regime of presumptions with the purpose of, along with the facts that were excluded from taxation by the legislator, the taxpayer, by means of evidence elements, may feign the exclusion of taxation from other facts that, originally, were taxable".

It formulates the following assertion: "... Articles 88, Nos. 3 and 5 of the CIRC must be judged unconstitutional, for violation of the principles of legality (typicity and parliamentary law reservation) and legal protection and trust (Article 103, Nos. 2 and 3 of the CRP), when interpreted in the sense of harboring within itself a rebuttable presumption, capable of setting aside the taxation on charges effected or borne by taxpayers who do not benefit from subjective exemptions and who undertake, as principal activity, commercial, industrial or agricultural activity, related to light passenger vehicles, light cargo vehicles referred to in subparagraph b) of No. 1 of Article 7 of the Motor Vehicle Tax Code, motorcycles or motorscooters, whenever it is possible to prove their indispensability for the efficient functioning of companies".

In Counter-Arguments the AT States

In counter-arguments, the Respondent sustains what it had already stated in response to the request for arbitral ruling. It clarifies that "the disputed issue in the present request for arbitral ruling concerns whether the subjection to autonomous taxation in IRC of charges related to vehicles, under the terms of Nos. 3 to 6 of Article 88 of the IRC Code, is set aside when such goods are exclusively allocated to the service of the activity of the Claimant".

It further adds the following:

"There is no evidence ... in the current wording and in the ratio underlying these norms of Article 88 of the IRC Code of any purpose of discriminatory treatment of charges related to vehicles depending on whether their use is partial or full in the economic activity undertaken by the taxpayer".

It states: "... the advocated thesis adopted in arbitral decisions of the CAAD and on which the Claimant now relies, that 'this presumption of "partial business nature"' should, in consistency, be considered as encompassed by the possibility of rebuttal arising from Article 73 of the LGT, either by the taxpayer or by the Tax Administration' labors under absolute error", since "... the need to prove the invoked "business nature" of the charges borne with vehicles would occur only if the law established the presumption that the expenses do not have a business cause, but manifestly such is not the case" and for the reason that "... in the CIRC the test for deductibility of charges borne is performed based on meeting the criteria and enunciated in Articles 23 and following of the IRC Code, it being noted, however, that, under the terms of the current wording of No. 3 of Article 88 – as mentioned above – both deductible and non-deductible charges fall within the incidence of autonomous taxation".

It reiterates: "... the interpretation conveyed by the Claimant is shown to be contrary to the Constitution of the Portuguese Republic, in that it violates the constitutional principle of fiscal legality, evident in Article 103, No. 2 of the CRP, in its corollaries of parliamentary law reservation and typicity", "... Article 73 [of the LGT] does not require that the taxpayer can rebut the typifications in all cases of broad incidence (…)', in particular in the context of massified taxation, as long as they do not depart from reality and do not collide with the principle of equality", for which reason "...in the concrete case, the alleged production of evidence that the 36 service vehicles in question here are indeed exclusively allocated to the service of the company, with all due respect, has no useful effect with respect to the subjection of such vehicles to autonomous taxation, by force of the provisions of Article 88, Nos. 3 to 6, in the wording in force at the date of the relevant facts", as indeed "...the conclusive proof of an allocation integral to the activity undertaken by companies would require a daily, individual and effective control of the use of each of the 36 vehicles, a task that would prove to be so burdensome and difficult to execute that, with all probability, a serious, measured and reasonable legislator would refrain from establishing as a means of rebutting a presumption, in attention to the principles of practicability and operationality".

At the Arguments Stage, the AT Further States, Regarding the Evidence Presented by the Claimant

Regarding the evidence presented by the Claimant (documentary evidence), it states that "... if the Claimant intended to prove the exclusively business use of the 36 vehicles, then what naturally was required was that it present ALL documents relating to the 36 vehicles, and not a SAMPLE of documents relating to only 3 vehicles". And it adds "the Claimant seeks to prove facts pertaining to 2014 with documents issued in 2015!". "In fact, in the amalgam of documents embodied in the form of Documents 6 and 7, there are vehicle requisitions dated 2015, when it is well known that the use in question relates to the year 2014". "Therefore, also by this route the Claimant's claim is hopelessly condemned to failure".

Finally it states: "it is manifestly false that the Claimant implemented a rigid internal procedure", since "... the Claimant does not even possess an internal regulation or a procedures manual relating to the use of vehicles, situations in which, with rigor, one could assert the existence of an internal procedure", concluding that "... the documents of the p.i. do not constitute any internal procedure worthy of that name, being that the vehicle requisition forms are anything but a regulation or manual", adding that "... they do not constitute any control system", revealing only "that the Claimant has a data recording system", "however, a data recording system (as presented by the Claimant) IS NOT a true control system or, if preferred, is far from functioning as an efficient control technique", since "... it does not even possess the number of kilometers traveled(!) by each employee".

Regarding testimonial evidence, the Respondent states that "... in reality Ms. B... is not a witness in the true (and procedural) sense of the word", "but rather, what procedural practice designates as a 'hearsay witness'", "being all too evident and known that testimonial evidence can only be legally considered when the deponent testifies on facts that are of his direct knowledge", since "... she admitted that, after all, she was testifying based on information that was transmitted to her by another employee or collaborator of the Claimant".

On the other hand, it states that "... the testimony of the witness not only was apt to corroborate the facts alleged by the Claimant, but indeed, on the contrary, came to corroborate what the Respondent had the opportunity to state in Response", in that "... the serious weaknesses of said 'rigid internal procedure' for controlling the exclusively business use of the Claimant's vehicles were clearly proven".

Moreover, the witness "... entered into an insolvable contradiction" in that "... she states that the 'internal procedure' constitutes a control system (based on 'service vehicle requisition forms') and that the Claimant's employees are scrupulous in its compliance, however, the same witness acknowledges that those same employees violate the Traffic Code when using the same vehicles, since the Claimant was recipient of various traffic fines"

In summary regarding testimonial evidence, it states "by way of the witness's testimony the Claimant seeks to give the idea that both the tribunal and the Respondent can blindly trust the content of the p.i. documents and compliance with its internal rules on vehicle use, but at the same time does not fail to acknowledge that its diligent employees (who filled out those documents) are capable of violating true legal norms that are on a juridically much higher plane and that simultaneously protect much more relevant interests (e.g., life, physical integrity) than the mere profit-making purpose of a company, that is, in dozens or hundreds of exits of vehicles in the course of 2014 (as per documents 6 to 8 of the p.i.), the Claimant alleges that in NONE of them did a case of non-professional use occur, but at the same time admits testimonially that its diligent employees were responsible for violations of the Traffic Code regarding excess speed and poor parking!"

And it concludes: "... the existence of 'service vehicle requisition forms' is anything but a 'rigid internal procedure' for controlling business use of the vehicles and, by inheritance, a well-executed attempt at rebutting the alleged 'presumption of business nature'""

Regarding the PPA

It argues for the non-success of the request for arbitral ruling, maintaining in the legal order the self-assessment tax act and the decision being challenged, thereby absolving the respondent entity of the claim.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

The parties are in agreement as to the substantive issue that should be addressed here. This is clearly apparent in point 6 of the AT's counter-arguments and in subparagraphs c) and w) of the report of this decision, regarding the Claimant's position.

Therefore, the first and essential issue that the TAS will address consists of determining whether the "subjection to autonomous taxation in IRC of charges related to vehicles, under the terms of Nos. 3 to 6 of Article 88 of the IRC Code, is set aside when such goods are exclusively allocated to the service of the activity of companies".

Thereafter, in the event it is concluded that autonomous taxation in IRC of charges related to vehicles, under the terms of Nos. 3 to 6 of Article 88 of the IRC Code, can be set aside when such goods are exclusively allocated to the service of the activity of the company here Claimant, it must be verified whether sufficient proof was made, concretely, regarding the so-called "business nature" of the expenses. This at the level of the gracious complaint procedure.

If it is concluded that the proof made, without reasonable doubt, allows for the conclusion of the so-called "business nature" of the expenses in question, the alleged unconstitutionality invoked by the AT will be addressed.

Should the request for arbitral ruling proceed, the claims for reimbursement of the amount corresponding to the impugned IRC self-assessment and any entitlement to compensatory interest should be examined.

III. FACTUAL MATTER PROVEN AND NOT PROVEN.

GROUNDS

Regarding factual matters, the Tribunal does not have to rule on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and distinguish the proven matter from the unproven matter (as per Article 123, No. 2, of the CPPT and Article 607, No. 3 of the CPC, applicable ex vi Article 29, No. 1, subparagraphs a) and e), of the RJAT).

Thus, the pertinent facts for adjudication of the case are chosen and delimited based on their legal relevance, which is established in attention to the various plausible solutions of the question(s) of law (as per the previous Article 511, No. 1, of the CPC, corresponding to the current Article 596, applicable ex vi Article 29, No. 1, subparagraph e), of the RJAT).

Thus, taking into account the positions assumed by the parties, the documentary evidence presented and the testimonial evidence produced, the following enumerated facts were considered proven, as having relevance for the decision, indicating for each point of established factual matter, the means of evidence that were considered relevant, as grounds.

Proven Facts

1. The Claimant is a commercial company whose corporate purpose is the sale of food and consumer products, catering and beverages, as well as the prospecting, purchase, sale, leasing, management of own real property, construction, remodeling and management of properties and also the editing, publishing and distribution of newspapers and other press products, as well as the provision of customer support services – as per Article 1 of the PPA and lack of specified objection, assessed under the terms of Article 110-7 of the CPPT;

2. On 31 July 2015 and for the tax period of 2014-03-01 to 2015-02-28, the Claimant proceeded to file the corresponding first income tax return (IRC Form 22), having proceeded on 29 July 2016 to the filing of an amended return – as per Article 2 of the PPA, content of Document No. 2 attached with the PPA and lack of specified objection, assessed under the terms of Article 110-7 of the CPPT;

3. On 02 August 2016 the AT, following the returns filed by the Claimant, proceeded to issue the tax assessment statement, assessment No. 2106..., which it notified to the Claimant on an unascertained date, and where it appears in the "description" column in No. 30 "payment of self-assessment: €4,897,055.23" – as per Article 3 of the PPA, content of Document No. 3 attached with the PPA and lack of specified objection, assessed under the terms of Article 110-7 of the CPPT;

4. On 31 July 2017 the Claimant, having ascertained that it proceeded to erroneous quantification and self-assessment of IRC, filed a gracious complaint that was assigned No. ...2017..., having been notified, on an unascertained date, of the draft decision for prior hearing, which it exercised on a date also unascertained, and was notified of the final decision of partial dismissal dated 11 January 2018 – as per Articles 4 and 5 of the PPA, content of document No. 1 attached with the PPA and pages 35 to 47 of PA8 submitted by the AT with the Response.

5. Regarding the question of autonomous taxation, the grounds of the decision to dismiss that were expressed in the draft decision and in the final decision considered hereby reproduced, are as follows:

"37. In our opinion, the central issue that arises concerns the determination of the nature of the expenses subject to autonomous taxation and verifying whether those, being hypothetically considered as activity expenses, cease to be taxed under the terms of Article 88 of the CIRC, as the Claimant seeks to suggest.

1. After careful reading of the arguments in the initial petition, we find, however, that she is not correct. For,

2. We are not faced with a presumption, much less a rebuttable one, and, even if we were, still in no way is it proven in the record what would be necessary to achieve the effects sought by the Claimant. Let us see:

3. The various legislative incursions evidenced over time reveal how autonomous taxation in the context of income taxes aims to combat forms of tax evasion or business conduct that the fiscal legislator considered susceptible to causing unjustifiable erosion of the tax base of those taxes. This in a general manner.

4. In particular, regarding expenses with vehicles allocated to the activity of the company, the legislator will have sought, in a situation identified as one of difficult exact definition, and susceptible to tax evasion, a solution based on the following balance:

• To autonomously tax, as a general rule, charges relating to expenses related to light passenger vehicles or mixed vehicles, motorcycles or motorscooters effected or borne by taxpayers not subject to subjective exemption and who undertake, as principal activity, commercial, industrial or agricultural activity (No. 3 of Article 88 of the CIRC), leaving out charges relating to heavy goods and light goods vehicles;

• To except from the taxation contained in the rule defined in No. 3, charges related to light passenger vehicles, motorcycles or motorscooters, allocated to the operation of the public transportation service, intended to be leased in the normal exercise of the taxpayer's activity (No. 6 of Article 88 of the CIRC).

1. The reason for the legislator's choice was, in fact, to consider that this type of vehicle is, in the abstract, susceptible to undifferentiated use, simultaneously private and business, and therefore, becoming extremely difficult to ascertain reality, the fiscal legislator established ab initio an autonomous taxation that means, in practice, because applied jointly with the deductibility of the charge, a limitation on the deduction of these activity costs.

2. From the difficulty in establishing the real distribution between business allocation and private allocation are excluded cases in which the vehicles are, indisputably, used as an instrument of the development of an activity, being described in law as allocated to the operation of "public transportation service, intended to be leased in the normal exercise of the taxpayer's activity", as is extracted from subparagraph a) of No. 6 of Article 88 of the CIRC.

3. Being so, it does not seem appropriate that the general rule provided in No. 3 of Article 88 of the CIRC be set aside in cases different from those that are in turn provided for in subparagraph a) of No. 6, making the application of No. 3 of the same article dependent on the production of proof, to be performed case-by-case and in any sector of activity, regarding the effective allocation of the use of vehicles encompassed by the norm.

4. For if the fiscal legislator sought to design the solution for legal balance referred to above by understanding that these are situations very difficult to control rigorously (the veracity, despite the existence of accounting, of the distribution of expenses allocated to different types of vehicles, the difficulty of controlling effective use, etc.), admitting only the exception provided in No. 6, an interpretation that accepts the admissibility of proof, to be done case by case, that the vehicles are exclusively allocated to the activity of the company seems to render the wording adopted useless.

5. The admissibility of any case-by-case rebuttal, without reinforced control requirements, renders useless the objective sought by the fiscal legislator, which reduced, with exception of situations of very limited scope, the deductible amount with certain types of costs due to the difficulty of its effective control.

6. Recall the norm contained in the widely mentioned No. 3 of Article 88 of the CIRC, in the wording in force at the date of the facts in question:

"The following are autonomously taxed: charges effected or borne by taxpayers who do not benefit from subjective exemptions and who undertake, as principal activity, commercial, industrial or agricultural activity, related to light passenger vehicles, motorcycles or motorscooters, excluding vehicles powered exclusively by electrical energy, at the following rates:

a) 10% in the case of vehicles with an acquisition cost less than €25,000;

b) 27.5% in the case of vehicles with an acquisition cost equal to or greater than €25,000 and less than €35,000;

c) 35% in the case of vehicles with an acquisition cost equal to or greater than €35,000."

1. Upon careful reading of the aforementioned norm we are immediately confronted with the fact that the question of the "business nature" of the charges does not arise, for note that the law only refers to charges actually borne, with no distinction between those that are deductible by force of Article 23 of the CIRC, and those that are not.

2. More specifically, the norm requires only that the taxpayers, whose principal activity is commercial, industrial or agricultural in nature, are not exempt from income tax, encompassing all costs borne with light passenger vehicles or mixed vehicles.

3. In other words, by assuming a nature of anti-abuse matrix of special importance, that legal provision provides that regardless of whether the costs are related or not to the business activity, these are objectively autonomously taxed through the application of the respective rate.

4. Even if by mere hypothesis we admit the deductibility of those charges, these, by force of the letter of the law, that is, because they were actually incurred, would always be subject to autonomous taxation, so the question of whether or not they are of a business nature does not and never did arise.

5. Considering the above, it is understood that No. 3 of Article 88 of the CIRC does not contain a rebuttable presumption by application of Article 73 of the LCT. It is rather a norm that, having underlying a presumptive judgment of the difficulty of rigorous control of certain cases, objectively opts to typify situations of application of autonomous taxation, translated, in practice, into the reduction of the amount of expenses deductible in determining taxable income. Besides,

6. It is precisely for this reason that the fiscal legislator, in that No. 3 of Article 88 of the CIRC, did not adopt in this case a solution such as the one found, for example, in subparagraph r) of No. 1 of Article 23-A of the CIRC, or the one that was in force in the then No. 1 of Article 65 of the CIRC. Moreover, without waiving,

7. Even if the position suggested by the Claimant prevailed, as it is a matter at least doubtful, it would seem, at a minimum, reasonable that the admissibility of application of the exclusion regime would be accompanied by special care in the substantiation and representation of the factual situation that matters to us,

8. That is, even if we admitted the thesis of the possibility of rebutting the presumptive judgment underlying the provision of No. 3 of Article 88 of the CIRC, the type of evidence the Claimant invokes in the record does not conclusively establish that it represents the strict business nature of such charges. Thus,

9. Given the foregoing, by force of the reasons considered above, it seems to us that this part of the claim now made by the Claimant should not succeed."

• as per Article 6 of the PPA, Document No. 4 in annex to the PPA and pages 35 to 47 of PA8 submitted by the AT with the Response;

1. The Claimant has a set of 36 vehicles that are parked at its facilities for use "in pool" by employees who need to travel in its service to various points in the country, who may request use, subject to the fulfillment of requirements for their use assessed within the internal requisition procedure established in the company, characterized by a formal requisition, through completion and signature of a form for the indication of (i) the time of commencement of use, (ii) the time of termination of use, (iii) the destination of the travel, and the respective (iv) purpose, with the vehicle to be parked at the Claimant's lot at the end of the business day – as per Articles 24, 25, and 66 to 68 of the PPA, Documents 6 and 7 attached with the PPA and testimony of witness B...;

2. Documents Nos. 5 and 8 (list of the 36 vehicles referred to in the previous point) and Nos. 6 and 7 (documents containing the "vehicle requisition form", the "rules for the use of service vehicles" and various declarations of receipt and return of vehicles) which were attached in annex to the PPA, had already been submitted to the AT together with the request for gracious complaint referred to in No. 4 above – as per pages 66 to 85 of PA7 submitted by the AT with the response and testimony of witness B...;

3. Attached to each "vehicle requisition form" is a separate sheet that refers to the following: [form details not fully included in original document]

• as per Documents 6 and 7 attached with the PPA, pages 66 to 85 of PA7 submitted by the AT with the response and testimony of witness B...;

1. As part of the system of use of the vehicles "in pool" by the Claimant's collaborators, there is a declaration issued by the user regarding the time and date of receipt of the vehicle and the time and date of its return, identifying the vehicle, its documents and accessories, the frota card ... used and its code, the green card (insurance) and the via verde identifier – as per declarations that are part of Documents 6 and 7 attached with the PPA and pages 66 to 85 of PA7 submitted by the AT with the response;

2. During the tax period of 2014-03-01 to 2015-02-28, the 36 vehicles referred to in point 6 above, generated a total of expenses of €90,707.20, which led to an autonomous taxation at the level of IRC – Article 88 of the CIRC – of €12,724.31 – as per Articles 26 and 77 of the PPA, Documents Nos. 5 and 8 attached with the PPA and pages 66 to 85 of PA7 submitted by the AT with the response, argument and documents attached by the Claimant evaluated against the lack of specified objection, assessed under the terms of Article 110-7 of the CPPT

3. As an exceptional matter it is admissible the "non-return" of the vehicle used at the Claimant's facilities, for example, in situations where the company's needs justify it, depending on the travel to be done the following day (in particular, when a very early departure occurs for travel to a very distant location) – Articles 70 and 71 of the PPA, evaluated against the lack of specified objection, assessed under the terms of Article 110-7 of the CPPT

4. On 11 April 2018 the Claimant filed the present request for arbitral ruling (ppa) – entry record in the CAAD SGP of the request for arbitral ruling.

Unproven Facts. Grounds of the Factual Decision.

There is no other alleged factuality that has not been considered proven and that is relevant for the composition of the procedural dispute.

The testimonial evidence had minimal relevance, as it only confirmed what is inferred from the content of the documents attached by the Claimant, both at the level of documentary evidence in the course of the gracious complaint procedure and now as evidentiary support for the request for arbitral ruling.

IV. ASSESSMENT OF THE ISSUES FOR THE SINGLE ARBITRAL TRIBUNAL (TAS) TO RESOLVE

The decision to dismiss the gracious complaint is the act immediately scrutinized in this decision. It has grounds that are what can be considered here and appears in point 5 of the established factual matter. In such a way that anything that constitutes an alteration of the grounds of the appealed act should not be accepted here.

That is, post hoc grounds are irrelevant, with the acts whose legality is questioned having to be assessed as they were practiced, the tribunal not being able, when confronted with the finding of the invocation of an illegal ground as support for the administrative decision, to assess whether its action could be based on other grounds (see STÃ rulings of 10-11-98, Plenary, issued in appeal No. 32702, published in Appendix to the Official Journal of 12-4-2001, page 1207, of 19/06/2002, Case No. 47787, published in Appendix to the Official Journal of 10-2-2004, page 4289, of 09/10/2002, Case No. 600/02, of 12/03/2003, Case No. 1661/02).

Regarding the topic here in discussion (autonomous taxation), this is the part of the grounds of the immediately impugned act, which addresses the documentary evidence presented in the gracious complaint procedure, evidence that corresponds to that presented in the request for arbitral ruling:

"54. Even if the position suggested by the Claimant prevailed, as it is a matter at least doubtful, it would seem, at a minimum, reasonable that the admissibility of application of the exclusion regime would be accompanied by special care in the substantiation and representation of the factual situation that matters to us,

1. That is, even if we admitted the thesis of the possibility of rebutting the presumptive judgment underlying the provision of No. 3 of Article 88 of the CIRC, the type of evidence the Claimant invokes in the record does not conclusively establish that it represents the strict business nature of such charges".

Therefore, in all rigor, what is stated by the AT in Articles 95 to 110 of the Response and Articles 42 to 69 of the counter-arguments could not be accepted here.

On the other hand, let us not forget that "evidence has the function of demonstrating the reality of facts", as per Article 341 of the Civil Code. The evidence produced must, necessarily, be analyzed under three different perspectives: as probative activity, as a means of proof and as the result of that activity.

It appears that the grounds of the immediately impugned decision proceed from an erroneous formulation regarding the conviction created in the judge, facing the assessment of the documentary evidence presented, in that it seems that only a proof that is "conclusive" would be acceptable (in the sense of proving the facts that the proof seeks to demonstrate).

Now, according to the principle of free assessment of evidence, the power-duty that falls upon whoever judges (1) does not require of the judge an absolute certainty conviction; (2) it is sufficient that his conviction be based on a judgment of sufficient probability or verisimilitude; (3) when in the judge's mind, instead of conviction, doubt is formed about the reality of the facts to be proven - the fact cannot be given as proven, to the detriment of the party burdened, or, in doubt about the determination thereof, to the detriment of the party to whom the fact would not benefit (Articles 346 CC and 414 CPC).

This TAS, in coherence with the collegiate decision that was signed – CAAD Case 80/2014-T - adheres to the decided collegiate arbitral decisions CAAD Cases 187/2013-T and 628/2014-T, both as to the "ratio" of autonomous taxation, and as to the implications that result therefrom, since, as will be attempted to be justified below, it appears to be the reading of the law most adequate facing the constitutional principle of isonomy (material equality) and also facing the combined reading of the norms of Articles 23, 88 Nos. 3 and 6 of the IRC Code, in particular the combination of subparagraph b) of No. 6 of Article 88 of the IRC Code with subparagraph 9) of No. 3 of Article 2 and with Nos. 5 and 6 of No. 24 of the IRS Code.

It thus adheres to what is stated in the collegiate arbitral decision CAAD Case No. 628/2014-T, cited by the Claimant, which addressed a situation in all respects similar, namely:

"Thus, and in summary, what is now at issue is to determine the ratio legis of the provision of Article 81/3/a) above transcribed [current Article 88] verify if the same is based on a presumption and, in case of affirmative answer, if the same was, or was not, in this case, rebutted.

...

It has obtained recurrent acceptance in the jurisprudence of the CAAD, the understanding that autonomous taxation on deductible charges, such as those at issue in the present case, integrate, still, the regime of the taxes regulated by the codes in which they are integrated, aiming, still though in a complex manner, the income taxed by those.

...

Understanding that (...) autonomous taxation in question could be configured as a 'hybrid' tax, falling on the income of natural and legal persons, and not on consumption or expense, as they will not present the principal characteristics of this form of taxation, nor will they fall, equally, on assets, and encompassing itself in a problematic of the taxation of income regarding which the legislator understood to act at two levels (separately or simultaneously): not to accept the deductibility of some expenses, in whole or in part and/or to tax them autonomously.

...

It is understood, therefore, that, through the impositions in question, it is also aimed, at least to the same extent, to regulate the use by companies of expenses that may be necessary, in part, to the pursuit of normal activity, but which – based on a judgment of normality – will also be for the benefit of natural persons who end up enjoying them for personal and not professional purposes. Except that, not having the Tax Administration any "measuring tape" to make such separation, the legislator comes opting, for quite some time now, for the introduction in the IRC Code of this portion that already considered objectively, at the date of the facts, an imposition, at the least, similar, to IRC, even though one might consider such provision questionable (as well as the current wording, with respect to the inclusion in IRC, of autonomous taxation in Article 23-A of the IRC Code).

...

Unfavorably considered are certain expenses in which, admittedly, it is not easy to determine the exact measure of the component that corresponds to private consumption, and regarding which it is known common practice of abuse in their reporting.

...

This anti-abuse character of the autonomous taxation now in question will be not only coherent with its "anti-systemic" nature (as is the case with all norms of the kind), as with a presumptive nature, pointed out both by Prof. Saldanha Sanches as by the jurisprudence that, frequently, cites it.

...

Under the perspective that has just been presented, autonomous taxation in analysis will then have materially underlying a presumption of "partial" business nature of the expenses on which they fall, due to the above-pointed circumstance of such expenses being located in a gray line that separates what is business expense, productive, from what is private expense, consumption, and that, notoriously, in many cases, the expense will indeed in reality have a dual nature (part business, part private).

Thus, from the fact known that a certain type of expense is realized, the legislator draws the fact unknown, which is the assessment of the degree of business allocation of the product of such expenses.

And it will be this unknown fact, presumed by the legislator, that triggers and justifies the autonomous taxation in question in the present proceedings.

...

Facing the conclusion that has just been made, it is then necessary to determine if the presumption that has been identified is, or is not, susceptible of being rebutted.

To this end, Article 350/2 of the Civil Code provides: 'Legal presumptions may, however, be rebutted by proof to the contrary, except in cases where the law prohibits it.'

In coherence, Article 73 of the LGT provides: 'Presumptions established in norms of tax incidence always admit proof to the contrary.'

Facing the legal framework pointed out, it is to be concluded that the presumption of 'partial business nature' in question should, in coherence, be considered as encompassed by the possibility of rebuttal generically established in Article 350/2 of the Civil Code and Article 73 of the LGT, both by the taxpayer and by the Tax Administration, which appears, moreover, in accordance with a proportional and adequate distribution of the burden of proof, in that falling the autonomous taxation in question on expenses whose business nature is not from the start evident, it will be the taxpayer who will be better positioned to demonstrate that such requirement is verified in the concrete case. For its part, the Tax Administration itself, if so it understands and considers that the case justifies the inherent expenditure of resources, can always demonstrate that, regarding the expenses in question, and even though autonomous taxation has fallen on them, the general requirement of Article 23/1 of the CIRC is not verified, in particular its indispensability for the realization of income subject to tax or for the maintenance of the income-producing source.

...

The recognition of this presumptive nature of the autonomous taxation in question in the case at hand, under the terms stated above, will be, besides everything else, a safeguard of its constitutionality, in that there is guaranteed both the possibility of the respective full deduction by the taxpayer, or its non-deduction, depending on which side the presumption underlying them is, concretely and in each case, contradicted, thus ensuring, duly, the conformity of the legal regime in question with the principles of tax equality and contributory capacity, which would be unnecessarily (and, occasionally, as is the case, disproportionately) truncated, by the establishment of an irrebuttable presumption of the partiality of the business allocation of the expenses in question.

...

It would then remain to verify if, in fact, as stated above, that use of the motorcycles (here light passenger vehicles) in the exercise of the activity of the Claimant is demonstrated, beyond any reasonable doubt, as occurring in a context exclusively business, with no margin for its collaborators, organs of management or partners, to withdraw benefits from its availability for personal purposes.

...

Now, if it is true that in small companies, of family dimension, with greater personalization of managers and workers and knowledge by those of the needs of the latter, it is probable that there is some promiscuity in the use of motorcycles (here light passenger vehicles) for company purposes and private purposes, left to the discretion of the managers the use of the vehicles, it is understood that this will have to be considered a remote hypothesis when it concerns a company with national and multinational dimension, in which collaborators and their personal transportation needs are presumably ignored by a remote board of directors and it is credible that it has internal regulations on the generality of matters, not leaving to the discretion of anonymous collaborators the use of goods for their private purposes".

The answer to the first of the issues raised in this proceeding is thus found: "the presumption of 'partial business nature' in question (contained in the norms contained in Article 88 Nos. 3 to 6 of the CIRC) should, in coherence, be considered as encompassed by the possibility of rebuttal generically established in Article 350/2 of the Civil Code and Article 73 of the LGT, both by the taxpayer and by the Tax Administration".

It is the AT itself that acknowledges that Article 88 of the CIRC is a norm of "objective incidence", as it infers from what it states in Article 60 of the response: "... Article 88 of the CIRC, in its genesis, is nothing more than a norm of objective incidence, to which NUNO SÁ GOMES refers and which does not appear inserted in the chapter of the determination of taxable income, rates or the assessment of the tax". And it repeats in Article 62 of the Response.

The AT places emphasis on the possible lack of support in the letter of the law and lack of ratio in Nos. 3 to 6 of Article 88 of the IRC Code, of the reading of the law that has just been adopted.

We believe, however, that in the combination of the norm of subparagraph b) of No. 6 of Article 88 of the IRC Code, with that of subparagraph 9) of No. 3 of Article 2 and with those of Nos. 5 and 6 of No. 24 of the IRS Code, subsidies may be found that can help in the perception of the assertiveness of the thesis here advocated, in legal terms.

In fact, the question of the so-called "promiscuous" use of motor vehicles in the context of companies will result from the fiscal regime itself established in the norm contained in subparagraph 9) of No. 3 of Article 2 of the IRS Code which states as follows:

"Income from dependent work includes ... those resulting from personal use by the worker or member of a management organ of a motor vehicle that generates charges for the employer entity, when there is a written agreement between the worker or member of the management organ and the employer entity regarding the allocation of that motor vehicle to that party".

That is, it is within the discretion of the employer entity (in particular companies) to consider that the use of a certain vehicle registered in its name, and as such generating costs in its patrimonial sphere (Article 23 of the IRC Code)

• integrates the remuneration (in kind) of the worker or member of the management organs, by elaborating a simple private written document, allocating the vehicle to the interested party, resulting from this the taxation according to No. 5 of Article 24 of the IRS Code: "when it concerns the allocation of the use of a motor vehicle by the employer entity, the annual income corresponds to the product of 0.75% of its market value, reported to 1 January of the year in question, by the number of months of use thereof". In this case, autonomous taxation in IRC is excluded, at the level of the company, as per subparagraph b) of No. 6 of Article 88 of the IRC Code.

• does not integrate the remuneration (in kind) of the worker or member of the management organs, the company refraining from elaborating a written document (regardless of the actual and real use of the vehicle), which leads to taxation under No. 3 of Article 88 of the IRC Code.

This regime appears to enshrine, from the outset, the possibility of the management organs themselves of companies being able to decide whether or not to adopt, regarding themselves, the fiscal regime that they see fit (not the most advantageous for the company), choosing, in the majority of situations, the exclusion of taxation at the level of IRS and opting to burden the companies at the level of autonomous taxation.

That is, overloading the companies with an added cost, corresponding to autonomous taxation, which, in the present case, does not occur regarding the 36 light passenger vehicles, as is proven by the established factuality.

The charges effected or borne relating to the vehicles, to which No. 3 of Article 88 of the IRC Code refers, will be, absent a written agreement for allocation of the vehicle (regardless of actual use of the vehicle) considered

• deductible costs under Article 23 of the CIRC, certainly as transportation expenses or equivalent;

• and because it is presumed that their use will be outside the strictly business sphere (which results from a norm that the company implements in a discretionary manner: existence or non-existence of a written agreement) are taxed at the level of autonomous taxation rates.

On the other hand, when there is a written agreement for allocation of the vehicle, the charges it generates are considered

• deductible costs under Article 23 of the CIRC, because they correspond to "remuneration", though in kind, given the different classification of