Summary
Full Decision
ARBITRAL DECISION [1]
The arbiters, Dr. José Pedro Carvalho (President), Dr. Carla Castelo Trindade (Member) and Dr. Sílvia Oliveira (Member), appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Collective Arbitral Tribunal, constituted on 1 June 2017, with respect to the above-identified case, decide as follows:
- REPORT
1.1. A..., with tax identification number ... and with registered office at ..., nº..., in Lisbon, here represented by the management company B..., S.A., with tax identification number ... and with registered office at ..., nº..., in Lisbon (hereinafter referred to as the "Claimant"), submitted a request for arbitral pronouncement and constitution of a Collective Arbitral Tribunal, on 22 March 2017, pursuant to the provisions of Article 4 and No. 2 of Article 10 of Decree-Law No. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as the "Respondent").
1.2. The Claimant, having been notified "of the decision to dismiss the administrative review filed in connection with the withholding tax assessment on Corporate Income Tax (IRC) No. ..., in the amount of €361,112.75, relating to the tax year 2014 (...)", came to request arbitral pronouncement "on the (il)legality of the withholding tax assessment on IRC (...) referred to and, likewise, the consequent decision to dismiss the administrative review filed, with a view to annulling the said tax acts and declaring the legal consequences (...)", that is to say, requesting that "the AT be ordered to repay the amount of €361,112.75, paid as withholding tax contested herein and the respective compensatory interest".
1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of the CAAD on 23 March 2017 and notified to the Respondent on the same date.
1.4. The Claimant did not proceed with the appointment of an arbiter, and therefore, pursuant to Article 6, No. 2, subparagraph a) of the RJAT, the undersigned were appointed as arbiters by the President of the Deontological Council of the CAAD, on 17 May 2017, with the appointment having been accepted within the legally prescribed time and terms.
1.5. On the same date, the parties were duly notified of such appointment and did not manifest any intention to refuse the appointment of the arbiters, in accordance with Article 11, No. 1, subparagraphs a) and b) of the RJAT, read together with Articles 6 and 7 of the Deontological Code.
1.6. Thus, in accordance with the provision of subparagraph c), No. 1, of Article 11 of the RJAT, the Arbitral Tribunal was constituted on 1 June 2017, with an arbitral order issued on 2 June 2017, to the effect of notifying the Respondent to "(…) within 30 days present its response and, if it wishes, request the production of additional evidence (...)" and to remit "(...) to the arbitral tribunal a copy of the administrative file within the time limit for presenting the response (...)".
1.7. On 7 July 2017, the Respondent filed a copy of the administrative file and on 10 July 2017 presented its Response, having defended itself by exception and by objection and concluded that should be "judged upheld the dilatory exception of lack of procedural requirement (absence of prior administrative review, mandatory on the matter), with the consequent absolution of the Respondent from the instance (...)", "(...) if this is not understood, should be judged upheld the dilatory exception of lack of active procedural legitimacy of the Claimant, for the reason that the issue is not here the delivery of tax exceeding the amount withheld (by the substitute), with the consequent absolution of the Respondent from the instance (...)", "(...) and if this is not understood, should be judged without merit the present request for arbitral pronouncement, maintaining in the legal order the tax assessment act and accordingly absolving the respondent entity from the request".
By arbitral order of 11 July 2017, the Claimant was notified to, "(...) within 10 days, if it wishes, comment on the matter of exception contained in the Respondent's response" and inform whether it maintained an interest in the examination of the witness listed by it, being that should it maintain such interest, it should indicate, "(...) within the same time period, which points of the initial request would be subject to such type of evidence".
By petition of 26 July 2017, the Claimant came to inform that it did not intend to comment on the matter of exception alleged by the Respondent in its Response and that "(...) in light of the documentary evidence already contained in the record, (...) waives the examination of the witness listed by it".
By arbitral order, dated 30 July 2017, considering the circumstances described above, it was decided to dispense with the holding of the meeting referred to in Article 18 of the RJAT, as well as to dispense with the presentation of arguments by the parties, with it further being established that "the arbitral decision would be issued within 30 days, with the Claimant required to, up to 10 days before the end of such period, proceed with the deposit of the subsequent arbitral fee" (which the Claimant came to effect on 1 August 2017 and communicate to the CAAD on 14 August 2017).
- CAUSE OF ACTION
The Claimant sustains its request, in summary, in the following manner:
2.1. It begins by clarifying that "it is an Open Real Estate Fund constituted in accordance with and pursuant to Decree-Law No. 316/93, of 21 September and, in the alternative, General Regime of Collective Investment Undertakings, published by Law No. 16/2015, of 24 February" and that "(...) as a real estate investment fund, it benefited from the application of the tax regime provided for in Article 22 of the Tax Incentives Statute (...), in the version that was in force until the amendments introduced to that diploma by Decree-Law No. 7/2015, of 13 January".
2.2. The Claimant alleges that the tax regime applicable to it "(...) allowed the withholding at source of income earned by the Claimant, as payment on account of IRC", being that "the tax withheld under this regime should be paid to the State by the fund's management entity by the end of the month of April of the year following that to which the withholding related (...)".
2.3. In these terms, "under this tax regime, on 24 April 2014, the Claimant submitted a declaration of withholdings at source (...) through the withholding guide No. ..., in the amount of €361,112.75" but "(...) the Claimant upon submitting the said declaration of withholding at source relating to the IRC of the year 2013 inscribed, by mere error, in the period field, the period of April 2014, that is to say the tax year 2014", "a period that corresponded to the payment deadline for withholdings at source of IRC made with reference to the year 2013", having effected payment of the said amount on 29 April 2014.
2.4. According to the Claimant, "the error (...) of inscribing in the said withholding declaration at source the period of April 2014 (...) caused the Tax and Customs Authority (...) to consider that the Claimant had not yet proceeded with the (self)assessment/withholding at source of IRC relating to the year 2013, whose income declaration Form 22 was presented on 30 April 2014 (...)".
2.5. The Claimant states that it only noticed the error described above "(...) when on 18 June 2014 the AT notified the Claimant of the IRC assessment statement No. 2014..., relating to the year 2013 (...), which showed an amount of tax to be paid equivalent to the withholding paid (...) with reference to 2014, when it should have been paid with reference to 2013 (...)".
2.6. The Claimant clarifies that "(...) it took the necessary steps for the full clarification of what occurred with the AT, with a view to the correction of the tax year to which the withholding effected related and the attribution of such payment to the value of tax to be paid notified in the IRC assessment statement relating to 2013".
2.7. Thus, "(...) on 10 September 2014 the Claimant (...) communicated the error committed and requested that the payment of the withholding at source made (...) with reference to 2014 be credited against the amount to be paid contained in the IRC assessment statement relating to the year 2013 (...)".
2.8. Notwithstanding the request made, "the Claimant was surprised by the institution of the compulsory collection proceeding No. ...2014..., relating to the assessment (...) referred to dated 20 October 2014", with the result that "(...) the identification of a debt in compulsory collection in the amount of €361,112.75, relating to the tax year 2013, increased by late payment interest and costs, making a total amount in compulsory collection of €362,828.34 (...)".
2.9. After various attempts to clarify the matter with the AT (as described in the arbitral request), on 24 November 2014, "(...) the Claimant proceeded to pay €362,828.34 (...)" but, on 9 January 2015, "(...) submitted a new request (...) requesting the repayment (...)" of that amount, paid "(...) in duplicate with reference to the tax year 2013 (...)".
2.10. In this context, the Claimant clarifies that "after more than a year had passed since the question posed to the AT (...) on 12 November 2014, (...) it received a response (...) on 4 December 2015", to the effect of being advised to the Claimant that "to regularize the situation set out, [it should] submit an IRC payment guide as a 2013 self-assessment and in the exact amount paid in the withholding guide" and that, "after this submission [it should] by the same means, send a copy".
2.11. The Claimant further clarifies that, through an email of 10 November 2016, "(...) the AT referred to the fact that for situations in which guides were improperly submitted as if they were withholdings of the payment year, [it should] be requested that the periods of the same be corrected (...)" at the address indicated, with the Claimant having proceeded in accordance with the AT's instructions.
2.12. However, the Claimant states that "(...) there was not verified, as expected, the repayment of any of the amounts of tax paid (...) with reference to the tax year 2013 (...)"; and, it was also "(...) with tremendous shock that, on 25 January 2017, the Claimant was notified of the dismissal of the administrative review presented, in the context of which the AT bases its decision (...) by alleging that the Claimant did not prove that the IRC withholding guide relating to the tax year 2014 was improperly submitted and paid (...)".
2.13. In these terms, the Claimant states that, "unable to accept the understanding advocated by the AT, and with the dragging on of this situation of negligence for almost 3 (three) years (...)", it comes to present "(...) the present request with a view to the constitution of an Arbitral Tribunal so that it pronounces on the illegality of the withholding tax assessment under analysis and the decision to dismiss the administrative review, which it does in accordance with the terms and grounds that (...)" it presents, that is to say, by alleging:
2.13.1. The "(...) excusable nature of the error (...)" committed inasmuch as, "at the time of the execution of the withholding at source of IRC relating to the tax year 2014, neither the requirements for taxation of income in relation to 2014 nor proper income subject to withholding relating to the same year were met, but rather relating to the year 2013", whereby "(...) the act of withholding at source of IRC (...) should be annulled, by virtue of being affected by illegality inasmuch as it was effected under error in the factual and legal presuppositions underlying the same and with reference to a non-existent tax fact as of the date of the withholding (...)";
2.13.2. The "(...) prohibition on double collection (...)" inasmuch as, at the moment "(...) when the tax assessment act of withholding at source came to refer to the tax year 2013, the Claimant had already proceeded with the payment of the same tax with reference to the same tax year" whereby "(...) the AT, pursuant to the principles of justice and material truth (...) should have annulled it, since the IRC relating to the year 2013 was already paid (...)," being thus "(...) affected by illegality due to the existence of a situation of (...) double collection (...)";
2.13.3. The "(...) necessary restitution of the unduly paid" resulting from the situation of double collection alleged;
2.13.4. The "(...) right to compensatory interest" inasmuch as the Claimant understands that the legal requirements for such payment are met.
- RESPONSE OF THE RESPONDENT
3.1. The Respondent responded, defending itself by exception and by objection, sustaining that "the requests (...) should be judged entirely without merit" and, consequently, "the Respondent should be absolved".
By exception
3.2. The Respondent begins its Response by invoking that "(...) as can be observed in the administrative file submitted, composed of the administrative review that preceded the request for arbitral pronouncement (...) Article 132 of the CPPT was not complied with" inasmuch as, according to the Respondent, "in the administrative review process (...) it was argued by the applicant, and considered by the AT, whether the amount paid corresponded to an IRC self-assessment, without the question of the nature of withholding at source and its imputation to period X being raised".
3.3. Indeed, the Respondent argues that "(...) the Claimant submitted the said declaration (and proceeded with its payment) when it should have effected an IRC self-assessment" whereby, "(...) consequently, that was the matter naturally considered: whether the amount paid corresponded to an IRC self-assessment (...)".
3.4. In these terms, the Respondent concludes that "(...) prior to the consideration requested of the arbitral tribunal, there was never an administrative pronouncement on the matter of withholding at source", "when such was a condition of challenge (...)".
3.5. Now, according to the Respondent, "because the AT was never raised by the Claimant regarding the consideration of withholding at source (namely whether it corresponded to the tax year 2014, as contained in the guide delivered, or to 2013, as it now argues), there is evidently a lack of a procedural requirement, which prevents the tribunal's pronouncement" whereby the Respondent understands that "(...) such a defect constitutes a dilatory exception, which entails the absolution of the Respondent from the instance (...)".
By objection and exception
3.6. Additionally, the Respondent understands that, notwithstanding "the Claimant (...) alleges that the amount paid in the assessment guide (by it delivered), which it now impugns, relates to withholdings at source of the year 2013, when in the administrative review process it referred to the amount as constituting a self-assessment and (...) declares in IRC form 22 that such amount is attributable to payments on account", "if we confine ourselves to what is now argued [(…) withholdings at source with reference to the year 2013], the claim also cannot succeed", inasmuch as "if these are withholdings at source, as alleged, we would be in a situation of tax substitution", being that "the Claimant appears in the position of substitute (...)".
3.7. In this case, the Respondent understands that "(...) it only has the right to challenge in cases in which it delivered tax exceeding that withheld (...) which is not proven, nor even alleged, which constitutes a second dilatory exception: the lack of active procedural legitimacy of the Claimant".
3.8. The Respondent thus concludes its Response, understanding that "(...) the Claimant's argument is not well-founded, there being no legal basis for its claim which must, consequently, be without merit", requesting that:
3.8.1. "Be judged upheld the dilatory exception of lack of procedural requirement (absence of prior administrative review, mandatory on the matter), with the consequent absolution of the Respondent from the instance (...)";
3.8.2. "(...) and if this is not understood, be judged upheld the dilatory exception of lack of active procedural legitimacy of the Claimant, for the reason that the issue is not here the delivery of tax exceeding the amount withheld (by the substitute), with the consequent absolution of the Respondent from the instance (...)";
3.8.3. "(...) and if this is not understood, be judged without merit the present request for arbitral pronouncement, maintaining in the legal order the tax assessment act and accordingly absolving the respondent entity from the request".
- PRELIMINARY JUDGMENT
4.1. The request for arbitral pronouncement is timely since it was presented within the time period provided for in subparagraph a) of No. 1 of Article 10 of the RJAT.[2]
4.2. The Tribunal is competent regarding the consideration of the request for arbitral pronouncement formulated by the Claimant.
4.3. The Respondent raised two dilatory exceptions, the first relating to the lack of procedural requirement due to the alleged absence of prior administrative review on the matter that is the subject of the request (withholding at source) and the second relating to the alleged lack of active procedural legitimacy of the Claimant, preliminary matters whose analysis should precede the consideration of the merits of the request, inasmuch as the latter may be compromised by the success of one of these questions (see analysis of these preliminary matters in points 6. and 7. of this Decision).
4.4. No other exceptions were raised of which there is need to take cognizance.
4.5. There are no nullities.
- FACTUAL MATTER
Of the facts proved
5.1. The following facts are considered as proved (based on the documents identified below, attached by the Claimant, as well as on the documents that form part of the administrative file attached by the Respondent):
5.1.1. The Claimant is an Open Real Estate Fund constituted in accordance with and pursuant to Decree-Law No. 316/93, of 21 September and, in the alternative, General Regime of Collective Investment Undertakings, published by Law No. 16/2015, of 24 February (fact alleged and not disputed).
5.1.2. The Claimant, as a real estate investment fund, benefited from the application of the tax regime provided for in Article 22 of the Tax Incentives Statute (TIS), in the version that was in force until the amendments introduced to that diploma by Decree-Law No. 7/2015, of 13 January (fact alleged and not disputed).
5.1.3. In the course of its activity, and pursuant to the applicable tax regime, the Claimant submitted, on 24 April 2014, a declaration of "Withholdings at source on Personal and Corporate Income Tax and Stamp Duty" through the guide No. ..., in the amount of EUR 361,112.75 (as per document No. 1 and administrative file).
5.1.4. The Claimant, upon submitting the declaration identified in the preceding point, inscribed in the "Period" field, the period of April 2014 (as per document No. 1 and administrative file).
5.1.5. The Claimant effected the payment of the amount referred to in point 5.1.3., above, on 29 April 2014 (as per documents No. 1 and 4 and administrative file).
5.1.6. The Claimant presented its income declaration Form 22 of IRC relating to the year 2013, on 30 April 2014, in which it inscribed in field 360 (Payments on Account) of Schedule 10 the amount of EUR 361,112.75 (as per document No. 5 and administrative file).
5.1.7. The Claimant was notified of the IRC assessment statement No. 2014..., relating to the year 2013, dated 18 June 2014, in which there appeared an amount of IRC to be paid, by 22 September 2014, of EUR 361,112.75 (as per document No. 6 and administrative file).
5.1.8. The Claimant, on 10 September 2014, sent an email to the Respondent (to the email dsc-dcv-ir@at.gov.pt) to the effect of informing that "(...) on 24 April 2014 it submitted the declaration of withholdings at source – code 209 – IRC – Investment Funds (...), in the amount of 361,112.75€, having proceeded with its payment on 29 April 2014 (...) when it should have effected the IRC self-assessment", requesting that "(...) this assessment be considered as the IRC payment requested by the assessment note 2014... (...)" (as per document No. 7).
5.1.9. The Claimant was notified of the compulsory collection proceeding No. ...2014..., dated 20 October 2014, relating to the compulsory collection of the IRC assessment referred to above in point 5.1.7., in the amount of EUR 361,112.75, increased by late payment interest (in the amount of EUR 438.08) and costs (in the amount of EUR 1,277.51), in the total amount of EUR 362,828.34 (as per document No. 8 and administrative file).
5.1.10. The Claimant, on 12 November 2014, requested clarifications from the Respondent, in a question placed on the e-portal (request for information/clarifications), in the same sense as those previously requested (see point 5.1.8., above) (as per document No. 9).
5.1.11. The Claimant, on 20 November 2014, again sent an email to the Respondent requesting the clarifications described above (see points 5.1.8. and 5.1.10., above) (as per document No. 10).
5.1.12. The Claimant proceeded with payment, on 24 November 2014, of the amount of EUR 362,828.34 relating to the total amount of the compulsory collection referred to above in point 5.1.9. (as per document No. 11 and administrative file).
5.1.13. The Claimant submitted, on 9 January 2015, a new request, addressed to the Finance Service of Lisbon - ..., requesting the repayment of the amount of EUR 361,112.75 paid with reference to the compulsory collection referred to in point 5.1.9., above (IRC, late payment interest and costs) (as per document No. 12).
5.1.14. The Claimant obtained a response, on the e-portal (request for information/clarifications), on 4 December 2015, to the question placed with the Respondent, on 12 November 2014, in which it is stated that "to regularize the situation set out, you should submit an IRC payment guide as a 2013 self-assessment and in the exact amount paid in the withholding guide" and that "after this submission you should, by the same means, send a copy" (as per document No. 9).
5.1.15. The Claimant, on 5 December 2016, obtained an email from the Voluntary Collection Division of the Respondent to the effect of clarifying that they had proceeded "(...) with the correction of the period of item 209 of various withholding guides (...)", namely, of the guide that is the subject of the arbitral request (No. ...), with the period indicated in this guide now relating to December/2013 and not April/2014 (as per document No. 13).
5.1.16. There having been no repayment of the amount paid by the Claimant, as requested (see point 5.1.13.), the Claimant presented on 18 October 2016, an administrative review (case No. ...2016...), requesting "the repayment of the amount paid (...) relating to the guide No. ..." (as per document No. 2).
5.1.17. The Claimant was notified of the Official Letter No. ..., of 6 December 2016 (notified on 12 December 2016), relating to the draft decision to dismiss the administrative review identified in the preceding point, and to exercise, if it so wishes, the right to prior hearing (as per document No. 3 and administrative file).
5.1.18. The Claimant did not exercise the right to prior hearing timely notified (as per document No. 3 and administrative file).
5.1.19. The Claimant was notified of the Official Letter of 25 January 2017, relating to the decision to dismiss the administrative review presented (identified in point 5.1.16., above), on the grounds that the Respondent understood that "analyzed the withholding guide at source paid (...) relating to the period of April 2014, and the IRC assessment of the year 2014 (...) it is not proven as alleged, in addition to the claimant not having presented any proof as was incumbent upon it (...)" (as per document No. 3 and administrative file).
5.2. No other facts capable of affecting the decision on the merits of the request were proved.
Of the facts not proved
5.3. The Claimant did not obtain any response to the request made by email on 10 September 2014 (see point 5.1.8., above).
5.4. No other facts were verified as not proved with relevance to the arbitral decision.
- PRELIMINARY MATTER
Of the alleged lack of procedural requirement
6.1. As already seen, the Respondent invokes that "(...) in the administrative file submitted, composed of the administrative review that preceded the request for arbitral pronouncement (...) Article 132 of the CPPT was not complied with" inasmuch as, according to the Respondent, "in the administrative review process (...) it was argued by the applicant, and considered by the AT, whether the amount paid corresponded to an IRC self-assessment, without the question of the nature of withholding at source and its imputation to period X being raised".
6.2. Thus, the Respondent argues that "(...) the Claimant submitted the said declaration (and proceeded with its payment) when it should have effected an IRC self-assessment" whereby, "(...) consequently, that was the matter naturally considered: whether the amount paid corresponded to an IRC self-assessment (...)".
6.3. In this manner, the Respondent concludes that "(...) prior to the consideration requested of the arbitral tribunal, there was never an administrative pronouncement on the matter of withholding at source", "when such was a condition of challenge (...)".
6.4. Hence, always according to the Respondent, "there is evidently a lack of a procedural requirement, which prevents the tribunal's pronouncement" being that "(...) such a defect constitutes a dilatory exception, which entails the absolution of the Respondent from the instance (...)".
With all due respect, it is considered that the Respondent's argument has no support whatsoever.
6.5. Indeed, as has been consistent case law of the STA, including on CAAD decisions, "in the judicial challenge subsequent to a decision of the AT which concerns an administrative review or request for ex officio revision of the tax act, the judicial bodies may, and must, take cognizance of all substantive illegalities that affect the tax act in question".[3]
6.6. In this manner, not being the powers of cognizance, nor the competence of the Tribunal limited by the matters dealt with in the administrative review of the tax act, the exception raised should be without merit.
- GROUNDS OF LAW
7.1. In the proceedings, for the purpose of allowing or not allowing the requests formulated by the Claimant relating to the declaration of "(…) (il)legality of the withholding tax assessment on IRC (...) referred to and, likewise, the decision to dismiss the administrative review presented, with a view to the annulment of the said tax acts and declaring the legal consequences (...)", that is to say, for the AT to be ordered to "repay the amount of €361,112.75, paid as withholding tax contested herein and the respective compensatory interest", it will be necessary to ascertain whether or not the defects that are imputed to the said tax act occur.
7.2. As already seen, the Claimant begins by alleging that "at the time of the execution of the withholding at source of IRC relating to the tax year 2014, neither the requirements for taxation of income in relation to 2014 nor proper income subject to withholding relating to the same year were met, but rather relating to the year 2013", whereby "(...) the act of withholding at source of IRC (...) should be annulled, by virtue of being affected by illegality inasmuch as it was effected under error in the factual and legal presuppositions underlying the same and with reference to a non-existent tax fact as of the date of the withholding (...)".
7.3. With regard to this allegation of the Claimant, it is considered that the same is not in accordance with the factual data ascertained.
7.4. Indeed, examining the established factual matter, it appears that the AT proceeded "(...) with the correction of the period of item 209 of various withholding guides (...)", namely, of the guide that is the subject of the arbitral request (No. ...), with the period indicated in this guide now relating to December/2013 and not April/2014.
7.5. In this manner, not referring the guide in question to the year 2014, but to the year 2013, in function of the correction made by the AT, one cannot conclude that there is verified the imputed error in the factual and legal presuppositions underlying the same and with reference to a non-existent tax fact as of the date of the withholding.
7.6. The Claimant also alleges that at the moment "(...) when the tax assessment act of withholding at source came to refer to the tax year 2013, the Claimant had already proceeded with the payment of the same tax with reference to the same tax year" whereby "(...) the AT, pursuant to the principles of justice and material truth (...) should have annulled it, since the IRC relating to the year 2013 was already paid (...)," being thus "(...) affected by illegality due to the existence of a situation of (...) double collection (...)".
7.7. As is uncontroversially understood, "there is double collection when a tax having been paid in full, another of the same nature is charged against the same or different person, relating to the same tax fact and to the same period of time (art. 205º/1 of the CPPT)", and that such a defect "may constitute grounds for illegality of the assessment, and therefore grounds for an action to challenge"[4], constituting "grounds for requesting the annulment of this second assessment act and the inherent restitution of the amount paid as a result of the monetary calculation carried out in connection with it".[5]
7.8. Now, in the case at hand, it is precisely this that is verified.
7.9. When the AT proceeded "(...) with the correction of the period of item 209 of various withholding guides (...)", namely, of the guide that is the subject of the arbitral request (No. ...), with the period indicated in this guide now relating to December/2013 and not April/2014, the assessment in question became affected by double collection, inasmuch as it came to support the collection of a tax of the same nature, relating to the same tax fact and to the same period of time, as another already paid.
7.10. The alleged double collection being verified, the assessment that is the subject of the present arbitral process should be annulled, in accordance with the jurisprudence cited, with the arbitral request succeeding.
7.11. The allegation of the AT does not hinder such conclusion, that "if we confine ourselves to what is now argued [(…) withholdings at source with reference to the year 2013], the claim also cannot succeed", inasmuch as "if these are withholdings at source, as alleged, we would be in a situation of tax substitution", being that "the Claimant appears in the position of substitute (…)", whereby "(...) it only has the right to challenge in cases in which it delivered tax exceeding that withheld (...) which is not proven, nor even alleged, which constitutes a second dilatory exception: the lack of active procedural legitimacy of the Claimant".
7.12. Pursuant to the tax regime applicable to the Claimant, in accordance with Article 22º/1 of the TIS in force at the time, the Claimant proceeded with the payment due, following, certainly, instructions that were given to it regarding the form of the declaration, inasmuch as it is evident, in light of the payment certification stamp contained in the act that is the subject of the present arbitral action, that:
7.12.1. The declaration and payment relate to the provision of point 3) of subparagraph a) of No. 1 of that Article 22º, a situation in which the Claimant is not a substitute and,
7.12.2. The tax paid in execution of the said act directly concerns it (and not a third party, as would be the case if the Claimant had the quality of a substitute) situation which, moreover, was never disputed by the AT.
7.13. Thus, the situation in the case at hand is perfectly clear, with the existence of two assessments relating to tax of the same nature, relating to the same tax fact and to the same period of time, with both assessments having been paid, a situation which, evidently, is not capable of being maintained, and which has to be corrected.
Of the repayment of the tax paid, with compensatory interest
7.14. Taking into consideration the conclusion referred to above as well as the fact that the value associated with the IRC assessment referred to above was timely assessed, the Claimant is entitled to repayment of the amounts unduly paid.
7.15. Now, with regard to the payment of compensatory interest, in accordance with the provision of No. 5, of Article 24º of the RJAT "payment of interest is due, regardless of its nature, in the terms provided for in the general tax law and in the Code of Tax Procedure and Process", from which it follows that an arbitral decision is not limited to the consideration of the legality of the tax act.
7.16. Likewise, in accordance with the provision of Article 24º, No. 1, subparagraph b) of the RJAT, it should be understood that the request for compensatory interest is a claim relating to tax acts (e.g. assessment acts), which aims to make explicit/concrete the content of the duty to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been taken, adopting the necessary acts and operations for that purpose".
7.17. As Jorge Lopes de Sousa states "it falls within the competencies of the arbitral tribunals that function in the CAAD the setting of the effects of the arbitral decision which can be defined in the process of judicial challenge, namely, the annulment of the acts whose declaration of illegality is requested, the ordering of the Tax and Customs Authority to pay compensatory interest (...)" (emphasis added).[6] [7]
7.18. Thus, in tax arbitral proceedings there may be place for the payment of compensatory interest, in accordance with the provision of Articles 43º, Nos. 1 and 2, and 100º of the LGT, when it is determined that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due.
7.19. In these terms, the right to compensatory interest will always depend on the verification of an error attributable to the services of the Respondent, from which there results payment of the tax debt in an amount greater than that legally due.
7.20. Following the illegality of the assessment act already identified above (see points 7.10. and 7.13., above) and, in accordance with the provision of subparagraph b), No. 1, of Article 24º of the RJAT (in accordance with what is established there), "the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, being that the latter must restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been taken, adopting the necessary acts and operations for that purpose", whereby there must be place for the repayment of the amount paid by the Claimant, as a means of achieving the restoration of the situation that would exist if the illegality had not been committed.
7.21. Thus, in light of what is established in Article 61º of the Code of Tax Procedure and Process (CPPT), with the requirements for the right to compensatory interest met (that is to say, with the verification of the existence of error attributable to the services from which results payment of the tax debt in an amount greater than that legally due, as provided for in No. 1, of Article 43º of the LGT), the Claimant is entitled to compensatory interest, at the legal rate, calculated on the amount paid, in execution of the tax act that is the subject of the request for arbitral pronouncement, which will be counted from the date of the decision on the administrative review presented by the Claimant, until the date of the issuance of the respective credit note, inasmuch as "the protection of the right to compensatory interest on the unduly paid is only to be recognized (...) from the moment that, for the first time, the AT had to pronounce on the situation of the taxpayer, having at its disposal the elements necessary to issue a decision with correct presuppositions" and omitted that duty".[8]
Of the responsibility for payment of arbitral costs
7.22. In accordance with the provision of Article 22º, No. 4, of the RJAT, "the arbitral decision issued by the arbitral tribunal contains the determination of the amount and the distribution among the parties of the costs directly resulting from the arbitral process".
7.23. Thus, in accordance with the provision of Article 527º, No. 1 of the Code of Civil Procedure (CCP) (by virtue of Article 29º, No. 1, subparagraph e) of the RJAT), it should be established that the party that gave rise to the costs or, there being no success in the action, whoever obtained benefit from the proceeding will be condemned to costs.
7.24. In this context, No. 2 of the said article specifies the expression "gave rise to", according to the principle of success in the action, understanding that the defeated party gives rise to the costs of the proceeding in the proportion in which it is defeated.
7.25. In the case under analysis, taking into consideration what is stated above, the principle of proportionality requires that entire responsibility for costs be attributed to the Respondent, in accordance with the provision of Article 12º, No. 2 of the RJAT and Article 4º, No. 4 of the Regulation of Costs in Tax Arbitration Proceedings.
- DECISION
8.1. Thus, in light of all that is stated above, this Arbitral Tribunal decides to judge the arbitral request as well-founded and, in consequence:
8.1.1. Annul the withholding tax assessment on Corporate Income Tax (IRC) No. ..., in the amount of EUR 361,112.75;
8.1.2. Order the Respondent to pay compensatory interest, in the terms determined above;
8.1.3. Order the Respondent to pay the costs of the present proceeding, determined below.
Value of the proceedings: Taking into consideration the provision of Articles 306º, No. 2 of the CCP, Article 97º-A, No. 1 of the CPPT and Article 3º, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is determined at EUR 361,112.75.
Costs of the proceedings: In accordance with the provision of Table I of the Regulation of Costs in Tax Arbitration Proceedings, the value of the costs of the Arbitral Process is determined at EUR 6,120.00, to be borne by the Respondent, in accordance with Article 22º, No. 4 of the RJAT.
Notify.
Lisbon, 30 September 2017.
The Arbiter-President
The Arbiter Member
The Arbiter Member
José Pedro Carvalho
Carla Castelo Trindade
Sílvia Oliveira
[1] Text prepared on computer, in accordance with Article 138º, No. 5, of the Code of Civil Procedure, applicable by reference to Article 29º, No. 1, subparagraph e), of the Legal Regime for Arbitration in Tax Matters, with blank lines and reviewed by us, and respecting the spelling prior to the Spelling Agreement of 1990, except with regard to transcriptions made, in which the spelling of the original was maintained.
[2] In this context, taking into account that the request for arbitral pronouncement includes the request for review of the decision to dismiss the administrative review (presented on 18 October 2016), notified to the Claimant on 25 January 2017, the decision to dismiss the administrative review which contains the consideration of the legality of the assessment act is covered by the provision of subparagraph e) of No. 1 of Article 102º of the Code of Tax Procedure and Process (CPPT). Thus, taking into consideration the provision of No. 1 of Article 102º of the CPPT, the time period for bringing judicial challenge is three months counted from the facts enumerated in that article, namely, "the notification of the other acts that may be subject to independent challenge in accordance with this Code", as well as that provided for in Article 10º, No. 1, subparagraph a) of the RJAT which establishes that the request for constitution of an arbitral tribunal should be presented "within 90 days, counted from the facts provided for in Nos. 1 and 2 of Article 102º of the CPPT, regarding the acts capable of independent challenge (...)", whereby, taking into account the date of filing of the request for arbitral pronouncement (22 March 2017), the request is timely (emphasis added).
[3] See Decision of the STA of 03-06-2015, issued in case 0793/14, available at www.dgsi.pt.
[4] Decision of the TCA-South of 01-07-2003, issued in case 00048/03, available at www.dgsi.pt.
[5] Decision of the TCA-North of 12-10-2006, issued in case 00313/04, idem.
[6] See Leite de Campos, Diogo, Silva Rodrigues, Benjamim, Sousa, Jorge Lopes, in "General Tax Law - Annotated and Commented", 4th Ed., 2012, page 116).
[7] On the subject of compensatory interest can be seen from the same author (Sousa, Jorge Lopes), Interest in Tax Relations, in "Fundamental Problems of Tax Law", Lisbon, 1999, page 155 et seq).
[8] Decision of the STA of 18-01-2017, issued in case 0890/16. In the same sense, in general thesis, see the Decision of the STA of 30-09-2009, issued in case 0520/09, both available at www.dgsi.pt.
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