IRC 1996 Corrective Tax Assessment: Prior Self-Assessments Must Be Considered in Additional Liquidation (CAAD 225/2015-T)

ARBITRAL DECISION[1],[2]

The arbitral tribunal functioning with a sole arbitrator constituted at CAAD – Administrative Arbitration Centre pursuant to the legal regime established by Decree-Law No. 10/2011 of 20 January, for which the arbitrator designated by the respective Deontological Council, Nuno Maldonado Sousa from the Centre's list, hereby renders the following arbitral decision.

1. Report

1.1 Identification of the parties and constitution of the arbitral tribunal

A...-…, S.A., with registered office at Rua..., No...., ..., ...-... Lisbon, with capital of €76,000,000.00, NIF..., filed a request for constitution of the arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of the RJAT and articles 1 and 2 of Regulation No. 112-A/2011 of 22 March, against which the Tax and Customs Authority is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 01-04-2015 and was notified to the AT on the same day.

Pursuant to the provisions of article 6, No. 1 and article 11, No. 1, paragraph b) of the RJAT, the Deontological Council designated the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of this designation on 26-05-2015. In accordance with the rule set forth in article 11, No. 1, paragraph c) of the RJAT, the arbitral tribunal was constituted on 15-06-2015.

This arbitral tribunal extended the period for issuance and notification to the parties of the arbitral decision by 2 months from the end of the initial period, which occurred on 10-02-2016, pursuant to article 21-2 of the RJAT. At the first meeting with the Parties it again extended that period by two months, commencing from the end of the 1st extension, on 10-04-2016, during judicial holidays.

1.2 Identification of the challenged acts, summary of the Claimant's claim, its grounds and defects attributed to the acts

In its Initial Petition the Claimant requested the annulment of the corrective assessment of CIT of 28/04/2000, No...., relating to the financial year 1996 as well as the decisions of the administrative complaint and the hierarchical appeal which it successively filed.

It argues that in the corrective assessment now challenged, the AT did not take into account all previous self-assessments relating to the year 1996, resulting from its initial income declaration for that year and the two substitution declarations subsequently submitted, the tax assessed in which was paid.

The defect pointed out by the Claimant to the challenged act is thus error as to the factual assumptions.

In summary, the Claimant seeks annulment of the corrective assessment No.... for its CIT of 1996 and consequently annulment of the decisions rejecting the administrative complaint and the hierarchical appeal which it filed. It also requests restitution of the amount of €9,431.27[3], corresponding to tax which it claims to have "unduly paid into the State treasury", together with compensatory interest.

Alternatively, the Claimant requests recognition of the prescription of the tax debt resulting from the additional assessment of CIT No...

1.3 Summary of the AT's position

The Tax and Customs Authority submitted its Response sustaining the legality of the assessment and defended the lack of merit of the claim and its grounds, arguing that the assessment is correct since the Claimant, when it was issued, had already been reimbursed the amount of 8,781,702$00, corresponding to a self-assessment it made and whose payment, which it satisfied, was annulled. This movement influences the value of the previous assessments in the manner expressed in the corrective assessment. It also states that the Claimant has not yet paid the amount of 1,410,298$65 (equivalent to €7,034.54) whose obligation resulted from its substitution declaration form 22 of 02/09/1997, which gave rise to assessment No....

It concludes by defending its absolution from the claims.

2. Procedural Matters

2.1 Amendment of the claim

On 01-04-2016 the Claimant also requested that the AT be ordered to pay it compensation for the issuance of a guarantee which it considered undue.

The AT expressed its view that this amendment to the claim should be rejected.

By order of 26-04-2016 this arbitral tribunal rejected the Claimant's request for successive cumulation as untimely, being inadmissible to do so at the stage of the proceedings in which it was made (article 171-2 CPPT).

2.2 Instruction of proceedings and arguments

On 05-04-2016 the first meeting of the arbitral tribunal with the parties took place and thereat witness evidence was produced, with examination of the witness presented by the Claimant.

Documents were attached to the Initial Petition and to the Response of the AT. The AT attached the administrative file.

Written arguments were presented by the Claimant and by the AT, as agreed by both.

2.3 Procedural clarification

The arbitral tribunal was regularly constituted and has jurisdiction ratione materiae pursuant to the rules set forth in article 2, No. 1, paragraph a) of the RJAT.

The Parties have legal personality and capacity (that of the AT being according to the rules set forth in article 4, No. 1 of the RJAT and 10, No. 2 of the same instrument and article 1, paragraph a) of Regulation No. 112-A/2011 of 22 March), are properly interested parties and are regularly represented.

There are no irregularities that vitiate the proceedings.

Thus, there is no obstacle to examination of the merits of the case and a decision is required.

2.3.1 Procedural objections: Prescription and lack of interest in proceeding

In articles 84 to 93 of its Initial Petition the Claimant invokes prescription of the tax obligation, arguing that its period is 10 years (article 34 CPPT, in the version then in force), which commences at the beginning of the year following the taxable event. Although the administrative complaint and the hierarchical appeal interrupt the running of the prescription period, this interrupting effect ceases to occur if the proceedings are stayed, by a cause not attributable to the taxpayer, for more than one year.

The Claimant concludes that the debt is prescribed as from 01/01/2008, based on the following elements:

a) The administrative complaint was filed on 04/10/2000;

b) The administrative complaint was stayed for more than one year by a cause not attributable to the Claimant, "as results from the draft decision itself and its annexed documents".

The AT (articles 11 to 21 of its Response) expressed its view that this claim lacks merit.

In general, prescription does not affect the validity of the tax act which was performed before it occurs. The invalidity of the act is assessed in relation to the situation which existed at the moment of its performance and prescription is not one of the defects which typically viattes its original validity; prescription removes the legal effect from a tax act which was valid. It is in this line of approach that this institute is regulated in a particular manner in tax law, which does not consider prescription as a basis for challenge but rather as grounds for opposition to enforcement (article 204-1-d CPPT), which may be raised ex officio (article 175 CPPT).

Nonetheless, legal doctrine[4] and case law[5] have understood that prescription may be raised in proceedings for judicial challenge, when it is intended to avoid the performance of useless acts, particularly when its declaration renders it entirely unnecessary to analyse the validity of the act, since even if the decision on the challenge recognizes its validity, the tax act will no longer produce legal effects, since its collection in enforcement proceedings will fail, with the recognition of prescription which is required, in accordance with what has been explained.

The raising of prescription in judicial tax challenge is always subject to special requirements, namely (i) that the declaration of prescription entirely eliminates the effects of the act, for if part of it is not affected by prescription, it will be necessary to determine the validity of the unaffected part and the act of review will no longer be useless[6]; (ii) that the proceedings reveal all facts necessary to the determination of prescription[7], in particular the suspensive or interrupting facts, duly detailed so that responsibility for their occurrence can be assessed.

In the present case the Claimant did not attach a copy of the administrative complaint proceedings completely organized, from its filing to its final rejection decision, with all its vicissitudes, offering only as evidence for this purpose "the draft decision and the annexed documents". Moreover, the administrative file does not permit this tribunal to understand the progress of the administrative complaint step by step, since its organization is not arranged in a manner to reveal it.

In the absence of elements permitting this tribunal to determine with certainty the facts interrupting prescription, it is not possible for this tribunal to decide on its occurrence, which would be required if complete data were known, to prevent the performance of useless acts, which are prohibited (article 130 CPC).

3. Decision

3.1 Factual matters

The manner in which the factual matters were pleaded by the parties did not facilitate their understanding, forcing the tribunal to resort to extensive attached documentation, not always organized and with reduced legibility. The speed of understanding was also hindered by the indiscriminate indication of values in escudos and in euros, requiring constant calculations to find the equivalence. The evidence was also impeded by the method of referencing used, since the documents attached (using the term documents in accordance with the legal regime set forth in articles 362 to 379 of the Civil Code) were not individually referenced, as is forensic practice, preventing understanding of which specific document the party intended to use to support its assertion. Also included in the collection of attached elements are various printouts from IT systems, presumably in their majority from the AT's own system. It should be noted that documents must be signed by their author (article 373 Civil Code) and that mere printouts clearly cannot constitute a means of proof.

From the instruction of the proceedings the following proven factual matters and list of alleged facts not proven as indicated below result.

3.1.1 Facts considered proven

The following facts were established in this case:

A. The Claimant presented on 28-04-1997 an income declaration form 22, relating to CIT of the financial year 1996 and determined the taxable income of 164,708,512$00, the taxable base of 70,152,144$00, assessed CIT of 25,254,772$00 and in which it entered the value of withholding taxes of 8,781,702$00 and calculated the CIT payable at Esc.: 16,473,070$00 and the value of municipal tax at 2,525,477$00 and the total payable of 18,998,547$00. (articles 13 and 14 Initial Petition: Administrative File, pages 63-72, fields 401, 409, 448, 449, 452 and 459; article 34 Response of AT)

B. On 02/09/1997 the Claimant presented a substitution declaration form 22, relating to CIT of the financial year 1996 and in it entered the value of assessed CIT of 43,246,461$00, the amount of 8,701,702$00 of withholding taxes, the CIT payable of 15,466,212$00 and the total payable of 19,790,858$00. (article 14 Initial Petition: Administrative File, pages 87-99, fields 448, 449, 452 and 459; article 38 Response of AT)

C. With the date inscribed of 19/05/1999 the Claimant presented a second substitution declaration to form 22 and in it entered no value of withholding taxes and entered the value of assessed CIT of 43,246,461$00, the CIT payable of 4,457,056$00 and the total payable of 8,781,702$00, which on that date it delivered to the Public Treasury through document No.... (articles 16 and 17 Initial Petition: document 4, Annex I, pages 45-58, fields 448, 449, 450, 452 and 459; article 37 Response of AT. The payment is documented on page 46).

D. The Claimant paid, by reference to the financial year 1996, CIT and municipal tax in the amount totalling 47,571,107$00 (equivalent to €237,283.68), corresponding to the addition of the following payments:

a. On 28/04/1997 the Claimant paid 18,998,547$00 (equivalent to €94,764.35). (article 21 Initial Petition and article 47 Response of AT)

b. On 01/09/1997 the Claimant paid the amount of 19,790,858$00 (equivalent to €98,716.38) through document No..... (articles 9 and 21 Initial Petition: Administrative File, page 104; article 47 Response of AT)

c. On 19/05/1999 through document No...., it delivered the sum of 8,781,702$00 (equivalent to €43,802.94); (articles 9, 16 and 17 Initial Petition: document 4, Annex I; article 40 Response of AT).

E. By letter of 27/05/1999 the Claimant requested in writing from the General Directorate of Taxes the reimbursement of the assessed tax of Esc.: 8,781,702$00 invoking "No. 4 of article 12-A of Decree-Law 42/91 of 22 January". (article 15 Initial Petition: document 9).

F. On 17/04/2000, in the context of the CIT reimbursement procedure, a cheque No...., in the amount of 8,781,702$00, was issued in favour of the Claimant by the Income Collection Service Directorate, which related to "the cancellation of payment No.... of 03/04/2000" which was sent to the Head of the Finance Department of the ... Fiscal Area of …, so that "compensation of existing debts in that finance department" would be "carried out" (article 22 Initial Petition: document 4, Annex II, pages 60-61).

G. On 31/05/2000 cheque No.... in the amount of 8,781,702$00 was delivered to the Claimant at the Finance Department of the ... Fiscal Area of Porto. (article 23 Initial Petition: document 4, Annex II, pages 62-63).

H. Following a tax inspection action by the AT, the Claimant was notified by official letter of 18-09-2000 of the corrective assessment of CIT of 28/04/2000, No...., relating to the financial year 1996, in which the amount payable was determined as 11,355,052$00, which included compensatory interest of 2,977,348$00 and provided for the deduction of the amount of previous assessments of 38,789,405$00. (articles 1, 32 and 34 Initial Petition: document 1; article 6 Response of AT)

I. The alterations made to the taxable base of the financial year 1996 resulted from the corrections referred to in the Tax Inspection Report, a document contained in the administrative file, which is hereby given in full reproduction (article 7 Response of AT: Administrative File, pages 7-26).

J. On 04/10/2000 the Claimant filed an administrative complaint of the corrective assessment No.... of CIT of 1996, to which was assigned the process number ... (...), pursuant to the document attached to the Initial Petition with No. 2, which is hereby given in full reproduction, based in particular on:

1. Finally, in determining the amount of previous assessments to be entered in line 23 of the demonstration table of the tax assessment contained in the collection note, the services took into account only the values of assessed tax delivered in the initial income declaration of the period and in the substitution declaration delivered on 28 April and 2 September 1997, in the amount of 38,789,405$00.

K. By official letter of 25/07/2006 the Claimant was notified that by order of 21/02/2005 the administrative complaint with process number ... (...) was granted. (article 39 Initial Petition: document 3, page 30)

L. By official letter of 25/07/2006 the Claimant was notified that on 04/07/2006 the payment receipt No...., was issued, to correct the assessment No.... of 28/04/2000, and that it should await the demonstration note of the corrected assessment. (articles 60/12 Initial Petition: document 3, page 30)

M. The AT subsequently expressed that the communication of the granting of the administrative complaint "was an error in the notification issued on 25/07/2006". (article 66 Initial Petition: document 5, page 67).

N. The Claimant was notified of the decision rejecting the administrative complaint by order of 15/11/2013 (article 4 Initial Petition: document 5, page 67)

O. On 22/12/2013 the Claimant filed a hierarchical appeal of the order of 15/11/2013 which rejected the administrative complaint with process number ..., pursuant to the document attached to the Initial Petition with No. 2, which is hereby given in full reproduction, based in particular on: (article 4 Initial Petition: document 6, page 98)

1. The aforementioned corrective assessment constitutes, as stated above, the subject of the Administrative Complaint from whose rejection this appeal is now made.

2. The amount of assessed tax resulted from disregarding the amount of €43,802.94 [8,781,702$00],

3. In effect, in the calculation of tax in the aforementioned corrective assessment, the AT services did not take into account the Substitution Declaration submitted by the Appellant on 19/03/1999 and the corresponding self-assessment of tax performed through Payment Slip No....

P. By official letter of 21/01/2015 the Claimant was notified of the rejection of the hierarchical appeal. (article 5 Initial Petition: document 7, page 107)

Q. The Claimant was never notified of the assessment No.... of 20/04/2000. (article 46 Initial Petition)

3.1.2 Facts considered not proven

The following assertions of factual matters are not considered proven, for the reasons indicated:

In article 19 of the Initial Petition it is stated that the "AT issued the additional assessment No.... of 16/10/1999, in the amount of 1,410,298$65 and compensatory interest of 76,503$93, totalling 1,486,803$00". For proof of this assertion document No. 8 is referenced, which is in fact a summary table prepared by the Claimant itself and which has no probative capacity. For this reason, it is not possible to establish these elements.

In articles 9i and 21 of the Initial Petition the Claimant asserts having paid the amount of "1,410,298$65 (equivalent to €7,034.54) relating to tax determined under the additional assessment No...., of 16/10/1999". For proof, reference is made to the "printout attached as Annex III of document No. 4". For its part the AT argues that this payment was not made (articles 42-45 and 59 Response of AT). As stated above, the printout is not considered to be a suitable means of proof, all the more so since the Claimant's own accounting obligations do not allow dispensing with such a movement being properly documented. Note that the Claimant does not even specify its assertion, indicating when and how the alleged payment occurred. The tribunal is not convinced of the actual existence of this payment, which would have required actual delivery of a means of payment (cheque, bank transfer, etc.), mere accounting entry not being sufficient.

In article 35 of the Response of AT it is stated that "The income declaration form 22, presented on 1997-04-28, gave rise to assessment No...., with resulting tax payable in the amount of €7,034.54", referenced for proof to the document, demonstration of the CIT assessment attached as 3. Document No. 3 is in fact a printout from the system, of doubtful legibility and without probative force in accordance with what has already been mentioned. It is thus not possible to make the correspondence between the income declaration mentioned here and the number of the assessment which is said to have been given rise to by it.

In article 38 of the Response of AT it is stated that "The substitution declaration form 22, presented on 1997-09-02, gave rise to assessment No...., from which resulted tax payable in the amount of 1,410,298$65". In article 39 of the Response of AT it is stated that "From the second substitution declaration, resulted assessment No...., with tax payable in the amount of 8,781,702$00". In none of these articles is any proof referenced so that the numbering indicated for the assessments can be verified. It is also not possible here to make the correspondence between the income declarations mentioned here and the numbers of the assessments which are said to have been given rise to by them.

In articles 48 and 54 of the Response of AT it is stated that the amount paid by the Claimant on 1999-05-19 through slip ... in the amount of 8,781,702$00 (corresponding to €43,802.94), relating to self-assessment, was not considered in the challenged assessment because its value was refunded to the Claimant on 2000-06-03. In none of these articles is any proof referenced that can support the grounds which it is intended were followed in the delivery of that amount to the Claimant. It is thus not possible to establish that part of the AT's assertion.

3.1.3 Grounds for the proven factual matters

The tribunal's conviction rested on the documentary evidence contained in the case file and the position taken regarding each fact by the Parties in the pleadings, duly identified in 3.1.1.

Also taken into account in assessing points F) and G) was the testimony of witness B..., certified public accountant of the Claimant, who testified with direct knowledge of the subject matter, having participated in the operations reported.

3.2 Legal matters

3.2.1 Substantive issue:

The heart of the dispute which this tribunal is bound to resolve consists in determining how the previous assessments made by the Claimant should be reflected in the challenged assessment and how the payments made for satisfaction of those determinations should be considered in them.

For this it is necessary to (i) determine with precision what the assessment and payment actually consist of; (ii) what the legal regulation existing on the matter is; (iii) establish the legal significance of the proven facts; (iv) and finally determine the correctness of the challenged assessment.

In general terms through the assessment "the tax is determined by applying the rate to the taxable base, unless there are deductions to the assessment, in which case the assessment also includes this latter operation"[8]. The assessment in turn can take the form of normal assessment or special assessment, such as the consequential assessment which occurs when this operation follows its own procedure, not common, as happens in situations of application of anti-avoidance clauses (see articles 62 and 63 of the CPPT) and the additional assessment,[9] which occurs when, after the tax has been assessed, the AT corrects the assessment made by the taxpayer (this is the situation provided for in articles 99-1 and 90-12 of the currently applicable CIT Code). The additional assessment thus appears as the result of correction made by the AT.

For its part through payment, which is the taxpayer's perspective of collection, "the tax is received into the State treasury, either through voluntary collection if there is spontaneous payment by the taxpayer of the assessed amount, or through coercive collection if it is necessary to resort to seizure of the assets necessary to satisfy the tax debtor's obligation"[10].

From what has just been stated it is clear that the assessment and payment are perfectly distinct and successive phases of the dynamics of tax. In the assessment phase the amount payable is determined through technical operations. In the collection phase, where payment is included, only operations are carried out in which the assessed amounts are collected.

Payment is a consequence of a particular assessment and in each of the operations in which the assessment develops – whether it be self-assessment, assessment by the AT or additional assessment also by the AT – it appears that payments of previous assessments are not taken into account in it.

Once an assessment is made it becomes an executable administrative act, which will be dealt with in the collection phase, without any specific defects of the assessment being able to be opposed to it, as is evident from the regime of opposition to enforcement, which constitutes in itself the coercive form of collection. Indeed, with a particular assessment in effect in the legal order, the proper bodies of the AT will promote that collection to which the taxpayer can only oppose by invoking situations which are foreign to the determination of the tax, as is evident from the list in article 204 of the CPPT, very especially from its No. 1-i.

In conclusion, it can be said that payment of a particular assessment is irrelevant to another assessment. In the latter only the taxable base is determined and applying the rate to it, the tax is computed, to which any assessable deductions which are permitted are made. In cases of additional assessment there will only be the need to determine the corrections to be made, so that subsequently, in the subsequent collection phase, the AT acts "collecting or annulling the differences determined" (article 77-9 of the CIT Code in effect in 1996).[11]

With regard to the additional assessment, it may further be said that its additional nature seems to result above all from the result which it is intended to have, which accrues to the tax already assessed and not so much from the manner in which the calculation operations are performed. As is evident from the generality of models used, the AT performs anew all calculations necessary to the determination of the tax and subtracts from this the value of previous assessments, which have not been annulled (irrespective of payment).

The legal regime applicable to assessment and in effect in 1996 is actually consistent with what has just been stated. Article 71, in its No. 2, regulated that in the assessment the following deductions should be made, in the order indicated, without referring in any of them to payments of previous assessments:

a) The one relating to economic double taxation of distributed profits;

b) The one corresponding to international double taxation;

c) The one corresponding to the assessment of Municipal Tax;

d) The one relating to tax benefits;

e) The one relating to withholding taxes not subject to offset or reimbursement under applicable law.

At that time provision was also made for additional assessment in cases of examination of the accounts of the taxable person (article 77-2-b), with the necessary correction being made and subsequently collection or annulment of the differences determined (article 71-9).

Let us now see which proven facts are relevant for application of the regime set forth.

The following CIT assessments were made for the Claimant relating to the financial year 1996:

It is necessary to determine whether any of these declarations was subject to annulment.

In articles 48 and 54 of the Response of AT it is stated that the amount paid by the Claimant on 1999-05-19 through slip ... in the amount of 8,781,702$00 (corresponding to €43,802.94), relating to self-assessment, was not considered in the challenged assessment because its value was refunded to the Claimant on 2000-06-03. In the assessment of factual matters it has already been stated that it was not considered proven what the grounds for this reimbursement were. In any event, refunding an amount paid does not mean annulling an assessment act; refunding can be a consequence of that annulment but does not constitute in itself the revocation of the act performed. Moreover, that annulment was not even invoked.

And if the AT did not timely collect the assessment in question by the means at its disposal, that omission cannot be imputed to the Claimant. The premise of the system is that assessments be autonomously collected, it not being legitimate for the taxpayer to dispute the legality of the assessment at that phase.

Thus it must be considered that in the period prior to the additional assessment of 28-04-2000 assessments were made by the Claimant whose total payable amounted to 47,571,107$00, which value was subject to collection in its entirety. This was the value which the AT should have subtracted in the rubric "amount of previous assessments" and not merely 38,789,405$00. By proceeding as it did it committed error as to the factual assumptions, which constitutes illegality which vitiates the act under article 99-a) of the CPPT. Annulment is therefore ordered of the challenged assessment, to the extent that it results from the addition to the "amount of previous assessments" indicated in the assessment, of the value of €43,802.94 (corresponding to 8,781,702$00), resulting from the difference between 47,571,107$00 and 38,789,405$00.

3.2.2 Other claims

Pursuant to article 100 of the General Tax Law "the tax administration is obliged, in case of complete or partial success of administrative complaints or appeals, or of judicial proceedings in favour of the taxable person, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, under the terms and conditions provided for by law.". It appears clear that the taxpayer has the right to have refunded the amounts which it has paid, relating to assessments affected by illegality, so that its assets are restored in the amount that it had in the moment prior to that payment.

It is necessary, however, to evaluate whether this Arbitral Tribunal enjoys jurisdiction to recognize this right for it or to order the AT to do so. For this it is important to bear in mind that (i) with the RJAT it was intended to strengthen effective protection of the rights and legally protected interests of taxable persons (preamble to Decree-Law No. 10/2011 of 20 January); (ii) the binding character of arbitral decisions for the AT extends to the exact terms of those same decisions (article 24-1 RJAT); (iii) the obligation of restoration by the AT is subject to the scope of success of the claim (which may be complete or partial) (article 100 General Tax Law).

The first interpretive element cited prevents any system being conceived which would hinder or make difficult the arbitral decision achieving its objective, which is the definition of law in the concrete case. Protection of the rights of taxable persons is not satisfied with less, i.e., the decision must produce all consequences necessary to obtain legality. It cannot be conceived that with the illegality of the tax act declared, the taxable person still has to resort to another instance to see its right to restoration of the situation declared.

On the other hand, the second element leads to consider that since arbitral decisions are binding for the AT in their exact terms (article 24-1 RJAT), this means that they must contain all elements necessary for the AT to be able, with complete exactness, to restore legality and for this it is indispensable that the decision contain the precise limits and terms in which it judges.

The third element illustrates in fact this necessity of exactness or precision of the decision. By affirming that the obligation of restoration by the AT is subject to the scope of success of the claim, the law (article 100 General Tax Law) creates a nexus of dependence between the decision and the obligation of restoration. Restoration is made to the extent that the claim is judged successful. There is no restoration without success and the measure of success defines the measure of restoration. The necessity of this precision is crystal clear in cases of partial success. When partial success occurs how should the AT behave? The answer can only be one – in the exact terms and limits in which the decision was rendered, whether judicial or arbitral.

It results from the foregoing that the decision on restoration must be taken by the arbitral tribunal when it is requested to review the matter.

In this case the Claimant requests restitution of the amount of €9,431.27 (with the countervalue of 1,890,799$87), corresponding to tax which it claims to have "unduly paid into the State treasury", together with compensatory interest.

From the proven factual matters it results that the Claimant made the following payments:

It is verified that all payments made by the Claimant were not only not intended to pay the challenged assessment but were intended to satisfy the previous assessments which it itself made (see facts A, B and C), and for this reason it is not seen why they would be undue. As previously stated, while assessments are not annulled – and nothing indicates that they were – they constitute executable acts of the Administration which must be complied with by taxpayers, in this case by the Claimant.

It is believed that the payments which the Claimant proved to have made were due in law, there being nothing to be refunded to it, which is why the request for restitution is rejected and consequently the request for payment of interest is also rejected.

4. Decision

Considering the factual and legal elements collected and set forth, this arbitral tribunal decides:

a) To judge the petition for annulment of the additional assessment of CIT of the financial year 1996 as successful, to the extent that it results from the addition to the "amount of previous assessments" indicated in the assessment, of the value of €43,802.94 (corresponding to 8,781,702$00), and orders the AT to act accordingly.

b) To judge the petition for restitution of the amount of €9,431.27 and compensatory interest as unsuccessful, absolving the AT of this claim.

The Claimant and the AT are ordered to pay costs according to their defeat, which shall be calculated in the proper place.

5. Value of the case

In accordance with article 306-2 of the Civil Procedure Code, by reference to article 29-1-e) of the RJAT and article 97-A, No. 1-a) of the CPPT by reference to article 3-2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €56,638.76.

6. Costs

Pursuant to article 22-4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,142.00.

The costs are borne by the party responsible for them, being understood that the defeated party bears responsibility for them, proportionally to the extent of their defeat (articles 527-1 and 2 of the Civil Procedure Code). In this case and considering the aforementioned rule, responsibility for costs is borne by the Claimant in the proportion of 17.7% and by the AT in the proportion of 82.3%, corresponding to the first the amount of €379.49 and to the second the amount of €1,762.51.

Lisbon, 13 June 2016

The Arbitrator,

(Nuno Maldonado Sousa)

[1] In this document the following acronyms, abbreviations and initials are used, with the meaning indicated:

• AT: Tax and Customs Authority
• Civil Code: Civil Code
• CPC: Civil Procedure Code
• CPPT: Code of Tax Procedure and Process
• DL: Decree-Law
• General Tax Law: General Tax Law
• NIF: Tax Identification Number
• Response of AT: Response of the Tax and Customs Authority
• Initial Petition: Initial Petition of the Claimant
• RJAT: Legal Regime for Arbitration in Tax Matters established by Decree-Law No. 10/2011 of 20 January

[2] In this document, values are referred to in euros, marked with the symbol "€" preceding the numerals, and in escudos, marked with the symbol "$", as the centesimal divisor.

[3] Which corresponds to the countervalue in escudos of 1,890,799$87.

[4] See JORGE LOPES DE SOUSA - Code of Tax Procedure and Process: annotated and commented. Vol. II. 6th ed., Lisbon: Áreas Editora, 2011, pp. 109-111.

[5] See in this sense the Decision of the Supreme Administrative Court of 02-12-2015, case 01364/14 [ANA PAULA LOBO], at www.dgsi.pt.

[6] See JORGE LOPES DE SOUSA, work and place cited.

[7] See the Decision of the Supreme Administrative Court of 02-12-2015, cited.

[8] See JOSÉ CASALTA NABAIS - Tax Law. 6th ed., Coimbra: Almedina, 2010, p. 39.

[9] See JOSÉ CASALTA NABAIS, op. cit., p. 310.

[10] See JOSÉ CASALTA NABAIS - Tax Law. 6th ed., Coimbra: Almedina, 2010, p. 39.

[11] In its current wording; No. 12 of article 90 was renumbered by article 2 of Law No. 2/2014 of 16 January, which carried out the reform of taxation of companies, amending the Corporate Income Tax Code. It was previously article 83-10 and article 99 was then article 91, in the version resulting from Decree-Law 198/2001 of 3 July. In the version in effect until 2001 the articles in question were article 71 and article 77.