Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Prof. Doctor Fernando Borges de Araújo and Prof. Doctor Jorge Júlio Landeiro de Vaz, appointed by the Deontological Council of the Administrative Arbitration Center to constitute the Arbitral Tribunal, constituted on 15-05-2014, hereby agree as follows:
- Report
A, SGPS, S.A., legal entity no. …, registered in the Commercial Registry Office of … under the same number, with registered office at …, (hereinafter "A SGPS" or "Claimant"), filed, pursuant to articles 2, no. 1, paragraph a), and 10, nos. 1 and 2, of Decree-Law no. 10/2011 of 20 January and articles 1 and 2 of Order no. 112-A/2011 of 22 March (hereinafter "RJAT"), a request for constitution of an Arbitral Tribunal.
The Respondent is the TAX AND CUSTOMS AUTHORITY.
The Claimant, in its capacity as the dominant company of Fiscal Group B, filed its consolidated Form 22 Corporate Income Tax return relating to the fiscal years 2011 and 2012, wherein it self-assessed the autonomous taxes for those same years, filed administrative appeals which were dismissed and seeks that the illegality of the dismissals of the administrative appeals and partially of the self-assessments of Corporate Income Tax relating to the fiscal years 2011 and 2012, in the amounts of € 1,094,069.77 and € 809,582.51, respectively, be declared, with the consequent reimbursement of those amounts and payment of compensatory interest.
The Tax and Customs Authority filed a counter-response, reiterating what was stated in its reply.
The Arbitral Tribunal was duly constituted and is competent.
The parties have legal standing and capacity and are legitimate (arts. 4 and 10, no. 2, of the same instrument and art. 1 of Order no. 112-A/2011, of 22 March).
No nullity is apparent.
- Statement of Facts
2.1. Proven Facts
The following facts are considered proven:
a) The Claimant is the dominant company of group B, which included, in 2011, among others, the following companies:
• C, S.A.;
• D, S.A.;
• E, S.A.;
• F, S.A.;
• G, S.A.;
• H, S.A.;
• I, S.A.;
• J, Lda.;
• L, S.A.;
• M, S.A.
b) On 30-05-2012, the Claimant filed Form 22 Return relating to the group of companies, relating to the fiscal year 2011, in which it self-assessed the autonomous taxes, in the total amount of € 4,847,332.37 – field 365, of table 10 of the return;
c) The autonomous taxes relating to the aforementioned companies were calculated by applying to the expenses and charges indicated in the table that follows, to which was added an increase of ten percentage points provided for in article 88, no. 14, of the CIRC, notwithstanding that none of these companies incurred tax losses in 2011:
d) Without such increase of rates by 10 percentage points, the autonomous taxes in question would have been only € 1,874,985.50, and not € 2,969,055.27, therefore the difference, with respect to the fiscal year 2011, is € 1,094,069.77;
e) On 30-05-2013, the Claimant filed Form 22 Return relating to the group of companies, relating to the fiscal year 2012, in which it self-assessed the autonomous taxes, in the total amount of € 5,192,691.74 – field 365, of table 10 of the return;
f) Among the taxes were autonomous taxes in a total of € 1,858,579.11, relating to the following companies that were part of its Fiscal Group in 2012:
• C, S.A.;
• D, S.A.;
• E, S.A.;
• F, S.A.;
• G, S.A.;
• I, S.A.;
• L, S.A.;
• M, S.A.
g) The autonomous taxes relating to the aforementioned companies were calculated by applying to the expenses and charges indicated in the table that follows, to which was added an increase of ten percentage points provided for in article 88, no. 14, of the CIRC, notwithstanding that none of these companies incurred tax losses in 2012:
h) Without such increase of rates by 10 percentage points, the autonomous taxes in question would have been only € 1,048,996.60, and not € 1,858,579.11, therefore the difference, with respect to the fiscal year 2012, is € 809,582.51;
i) The Claimant filed administrative appeals against the self-assessments of autonomous taxes aforementioned, appeals that came to have the numbers …2012… (relating to the fiscal year 2011) and …2013… (relating to the fiscal year 2012);
j) The administrative appeals referred to in the preceding paragraph were dismissed by orders of the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit;
k) On 19-12-2013, the Claimant was notified of the order dismissing the administrative appeal relating to the self-assessment relating to the year 2012;
l) On 24-12-2013, the Claimant was notified of the order dismissing the administrative appeal relating to the self-assessment relating to the year 2011;
m) The Claimant paid the Corporate Income Tax self-assessed in the years 2011 and 2012, having indicated in fields 368 of tables 10 of Form 22 returns relating to those years Corporate Income Tax in amounts greater than the differences referred to in paragraphs d) and h);
n) On 21-06-2012, following a binding ruling with no. 2011 …, was published on the Internet, on the page of the Tax and Customs Authority, a "Doctrinal Note", in which it is stated that such ruling had an Order of the General Director of 30-03-2012, note in which, among other things, it is stated the following:
"6. For purposes of applying the provisions of no. 14 of article 88 of the CIRC, in cases where the taxpayers are part of a group covered by the special regime for taxation of groups of companies (RETGS), should be considered the result (taxable income or tax loss) calculated in the group's return relating to the taxation period to which any of the facts subject to autonomous taxation relate and not the taxable income or the tax loss calculated by each of the companies that make up the consolidation perimeter covered by the regime."
o) At the times when the Claimant filed Forms 22 relating to the years 2011 and 2012, the electronic data transmission system through which the periodic Corporate Income Tax return filing is processed was configured to the effect of considering that the increase of autonomous taxation rates should have reference to the tax result calculated by the group of companies subject to RETGS to the detriment of the tax result calculated individually by each of the companies that make it up, being the Claimant unable to carry out the self-assessments without taking into account the global loss of the group of which it is the dominant company;
p) On 07-03-2014, the Claimant filed the request for constitution of an arbitral tribunal that gave rise to the present proceeding.
2.2. Unproven Facts
There are no facts with relevance to the decision of the case that have not been proven.
2.3. Grounds for the Decision on the Statement of Facts
The facts were considered proven on the basis of the documents attached with the request for constitution of the arbitral tribunal and the statements of the Parties, there being no dispute concerning any of them.
As to the impossibility, in the years 2012 and 2013, of the Claimant carrying out the self-assessments without considering, for purposes of the increase provided for in no. 14 of article 88 of the CIRC, the global loss of the group, by obstacle of the computer system, the fact is considered proven by having been alleged by the Claimant and not having been contested by the Tax and Customs Authority, despite being a fact that, necessarily, is within its knowledge.
As to the publication of the doctrinal note, it appears from:
- Legal Reasoning
3.1. Loss Relevant for Purposes of Autonomous Taxes in Cases of Taxation under the Special Regime for Taxation of Groups of Companies
The first question raised by the Claimant is whether, in cases of taxation under the special regime for taxation of groups of companies, the tax loss relevant for purposes of increasing the rates of autonomous taxation is that of the company in relation to which the facts that serve as the basis for such autonomous taxes occur or is the global loss of the group.
The Claimant contends that autonomous taxes are not Corporate Income Tax and that, for purposes of such taxes, regarding the increase of rates provided for in no. 14 of article 88 of the CIRC, account must be taken of the tax losses of each of the companies included in the group of companies, such increase only occurring when the company to which the facts giving rise to the autonomous taxes relate presents a tax loss.
The Tax and Customs Authority contends that, for purposes of such increase, only the tax losses of the group are relevant.
Article 88 of the CIRC establishes the following, in its no. 14:
Article 88
"14 - The rates of autonomous taxation provided for in this article are increased by 10 percentage points for taxpayers that present a tax loss in the taxation period to which any of the facts referred to in the preceding numbers relate."
3.1.1. Autonomous Taxes as Taxation in the Ambit of Corporate Income Tax
"In the determination of the meaning of tax rules and in the classification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed" (article 11, no. 1, of the LGT), which constitutes a referral to article 9 of the Civil Code.
Article 9 of the Civil Code establishes the following:
Article 9
Interpretation of Law
1 – The interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.
2 – However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.
3 – In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express its intent in adequate terms.
Thus, what must be done is to seek to reconstruct the legislative intent, based on the interpretive elements indicated in this article 9.
The starting point of interpretation is the letter of the law.
In the absence of other elements that would lead to the choice of a less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, in the assumption (imposed by no. 3 of article 9 of the Civil Code, which stands until it is demonstrated that it is not correct) that the legislator knew how to express its intent in adequate terms.
In the initial drafting of the CIRC, approved by Decree-Law no. 442-B/88, of 30 November, no express or implicit reference was made to autonomous taxes, within the ambit of Corporate Income Tax.
Only with Law no. 101/89, of 29 December, which approved the State Budget for 1990, was a first reference made to autonomous taxes within the ambit of Corporate Income Tax, through the legislative authorization contained in no. 3 of its article 15, which provided the following:
Law no. 101/89, of 29 December
Article 15
3 - The Government is authorized to tax autonomously in Personal Income Tax or Corporate Income Tax, as the case may be, at a rate increased by 10% and without prejudice to the provisions of paragraph h) of no. 1 of article 41 of the CIRC, the confidential or undocumented expenses carried out in the course of commercial, industrial or agricultural activities by Personal Income Tax taxpayers who possess or should possess organized accounting or by Corporate Income Tax taxpayers not covered in articles 8 and 9 of the respective Code.
Implementing this legislative authorization, the Government approved Decree-Law no. 192/90, of 9 June in which it included, outside the codes of the Personal Income Tax and the Corporate Income Tax, a rule on autonomous taxes that established the following:
Decree-Law no. 192/90, of 9 June
Article 4
The confidential or undocumented expenses carried out in the course of commercial, industrial or agricultural activities by Personal Income Tax taxpayers who possess or should possess organized accounting or by Corporate Income Tax taxpayers not covered in articles 8 and 9 of the respective Code are taxed autonomously in Personal Income Tax or Corporate Income Tax, as the case may be, at a rate of 10% without prejudice to the provisions of paragraph h) of no. 1 of article 41 of the CIRC.
As results from the literal tenor of this rule, reference is made to autonomous taxes in Personal Income Tax or Corporate Income Tax, not because they are a tax different from any one of these, but because they are calculated by applying a rule different from the general rules of taxation applicable to the determination of the amounts due within the ambit of such taxes.
But, for what matters here, being the autonomous taxation in Corporate Income Tax, results linearly from this rule that the tax to be assessed and collected is considered Corporate Income Tax, whereby, for matters not regulated here, everything provided for Corporate Income Tax and that is necessary to apply shall be applicable to it (for example, for purposes of the periods for filing returns, competence for assessment, creditworthiness privileges, means of appeal, etc.).
Law no. 52-C/96, of 27 December, amended this article 4 of Decree-Law no. 192/90, but maintained the same reference to autonomous taxation in Corporate Income Tax, establishing the following:
Law no. 52-C/96, of 27 December
1 - The confidential or undocumented expenses carried out by Personal Income Tax taxpayers who possess or should possess organized accounting in the course of commercial, industrial or agricultural activities, or by Corporate Income Tax taxpayers, are taxed autonomously in Personal Income Tax or Corporate Income Tax, as the case may be, at a rate of 30%, without prejudice to the provisions of paragraph h) of no. 1 of article 41 of the Corporate Income Tax Code.
Law no. 87-B/97, of 31 December, again amended no. 1 of such article 4, giving it the following wording:
Law no. 87-B/97, of 31 December
1 - The confidential or undocumented expenses carried out by Personal Income Tax taxpayers who possess or should possess organized accounting in the course of commercial, industrial or agricultural activities, or by Corporate Income Tax taxpayers, are taxed autonomously in Personal Income Tax or Corporate Income Tax, as the case may be, at a rate of 32%, without prejudice to the provisions of paragraph h) of no. 1 of article 41 of the Corporate Income Tax Code.
Law no. 3-B/2000, of 29 of 4 April, added a no. 3, to the same article 4, with the following wording:
Law no. 3-B/2000, of 29 of 4 April
3 - The representation expenses and charges related to light passenger vehicles carried out by Personal Income Tax taxpayers who possess or should possess organized accounting in the course of commercial, industrial or agricultural activities, or by Corporate Income Tax taxpayers not exempt and who carry on, as a main activity, activities of a commercial, industrial or agricultural nature, are taxed autonomously in Personal Income Tax or Corporate Income Tax, as the case may be, at a rate of 6.4%.
Law no. 30-G/2000, of 29 December, repealed the aforementioned article 4, but included in the CIRC a set of autonomous taxes, through the addition of an article 69-A with the following content:
Article 69-A
Rate of Autonomous Taxation
1 - Confidential or undocumented expenses are taxed autonomously, at the rate of 50%, without prejudice to the provisions of paragraph h) of no. 1 of article 41
2 - The rate referred to in the preceding number is raised to 70% in cases where such expenses are carried out by taxpayers totally or partially exempt, or who do not carry on, as a main activity, commercial, industrial or agricultural activities.
3 - Are taxed autonomously, at a rate corresponding to 20% of the highest normal rate, representation expenses and charges related to light passenger vehicles, recreational boats, tourist aircraft, motorcycles and motor scooters, carried out or borne by taxpayers not exempt and who carry on, as a main activity, commercial, industrial or agricultural activities.
4 - Are considered charges related to light passenger vehicles, recreational boats, tourist aircraft, motorcycles and motor scooters, in particular, the depreciations, rents or leases, insurance, maintenance and conservation expenses, fuels and taxes incidental to their possession or use.
5 - Are excluded from the provisions of no. 3 the charges related to light passenger vehicles, recreational boats, tourist aircraft, motorcycles and motor scooters, assigned to the operation of the public transportation service, intended to be leased in the normal exercise of the taxpayer's activity, as well as the depreciations related to vehicles with respect to which the agreement provided for in no. 8 of paragraph c) of no. 3 of article 2 of the Personal Income Tax Code has been entered into.
6 - Are considered representation expenses, in particular, the charges incurred with receptions, meals, trips, excursions and entertainment offered in the Country or abroad to clients or suppliers or to any other persons or entities.
7 - Are subject to the regime of nos. 1 or 2, as the case may be, being the applicable rates, respectively, 35% or 55%, the expenses corresponding to amounts paid or due, in any title, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime, as defined in accordance with the Code, unless the taxpayer can prove that such charges correspond to actually carried out operations and do not have an abnormal character or an exaggerated amount.
8 - Are excluded from the provisions of no. 3 the taxpayers to whom the regime provided for in article 46-A is applicable.
Although express reference is not made here that these autonomous taxes are Corporate Income Tax, this results, on the one hand, from the inclusion of this article in the CIRC (in parallel with the inclusion in the Personal Income Tax Code of a similar article 75-A); on the other hand, from the fact that nos. 1 to 3 of this article 69-A clearly aim to replace the previous nos. 1 and 3 of article 4 of Decree-Law no. 192/90.
It is true that the inclusion of these autonomous taxes bearing directly on expenses and not on the income of legal entities in a Code intended primarily to establish the general regime for taxation of the income of legal entities generates, at least apparently, a situation of distortion of the scope of incidence of the tax, which ceases to bear directly only on profits to come to bear directly also on certain expenses.
But, the Explanatory Memorandum contained in Legislative Proposal no. 46/VIII, which gave rise to Law no. 30-G/2000, of 29 December, which greatly expanded the situations of autonomous taxes, leaves no room for doubt that it is a deliberate and intended expansion of the previously existing distortions, as it was understood that they were necessary, in short, to compensate for other distortions resulting from significant fraud and tax evasion and, thus, to increase the fairness of the distribution of the tax burden among citizens and businesses.
In fact, it is stated in the aforementioned Legislative Proposal:
"The current model of taxation of income was established in 1988, based on the tax on the income of individuals (Personal Income Tax) and the tax on the income of legal entities (Corporate Income Tax), and corresponded to the adoption of solutions with identical bases to those which are common in OECD countries, which we certainly do not intend to change.
However, reasons of a pragmatic nature determined already some distortions of the principles defined, which the practice of subsequent years came, in numerous situations, to aggravate.
Moreover, the evolution of the country has introduced changes in economic and social reality, partly as a result of the impact of the European Union and of the dynamics of deepening the integration process, with repercussions on the fabric of relations and institutes that are the subject of tax laws.
There exists in Portuguese society a widespread feeling that the tax system does not equitably distribute the tax burden among citizens, being borne by the most compliant, among them, workers on behalf of others, the greatest share of tax effort, whilst tax evasion and fraud maintain a significant presence that often allows those who earn the most to pay no taxes or to bear them in terms far below what is required of them.
- Therefore, the Government, following the preparation of technical studies and reports prepared under the aegis of previous Governments, in particular of the XIII Government, as well as the work carried out by the Tax Reform Coordination Structure (ECORFI), which was created in January 2000, in addition to the debate that these issues have raised, understood that the time had come to submit to the Parliament a broad reform of the Portuguese tax system.
The intention is with these measures to fulfill a pact of tax fairness with citizens, based on the broadening of the tax base, intensifying the fight against fraud and tax evasion and reducing the tax effort of compliant taxpayers, within the framework of the general principles of fairness, efficiency and simplicity that should frame the tax system."
In light of this explanation, it becomes clear that, from the legislative perspective, autonomous taxes bearing directly on certain expenses, within the ambit of taxes which originally bore only on income, are considered distortions of the system of direct taxation of income that was intended by the Corporate Income Tax.
But, it also follows from this explanation that a value that legislatively was considered to be more relevant than the theoretical coherence of taxes, such as the implementation of tax fairness, imposed a choice for these forms of taxation, as they were in keeping with the principles of fairness, efficiency and simplicity.
That is, it was understood that the system of taxation of businesses exclusively on the basis of taxable income generated situations of tax inequity that was sought to mitigate or eliminate by carrying out a "broadening of the tax base", through the addition to direct taxation, which continues to be the essence of the system of taxation of businesses, of situations of indirect taxation, through the application of the tax also to certain expenses that it was understood should be causes of such inequity, as they were presumably connected with situations of "evasion and tax fraud" "that often allows those who earn the most to pay no taxes or to bear them in terms far below what is required of them".
With this legislative choice of "broadening the tax base" of Corporate Income Tax, its base of incidence was expanded in relation to that contained in article 3, but that was precisely what was intended, in light of the aforementioned Explanatory Memorandum.
Subsequent amendments were introduced to the aforementioned article 69-A, by Law no. 32-B/2002, of 30 December, by Law no. 107-B/2003, of 31 December, by Law no. 55-B/2004, of 30 December, by Decree-Law no. 192/95, of 7 November, Law no. 67-A/2007, of 31 December, by Law no. 64/2008, of 5 December, by Law no. 100/2009, of 7 September, by Law no. 55-A/2010, of 31 December, by Law no. 64-B/2011, of 30 December, and by Law no. 2/2014, of 16 January, with clear tendency for the expansion of autonomous taxes, which evidences that, repeatedly, the tax legislator has shown itself indifferent with respect to the possible distortions of the system of taxation of businesses that autonomous taxes may imply.
Moreover, the great concerns with the coherence of taxes that trouble the Claimant were never shared by our tax legislator, which, for a long time, has maintained a tax in which it includes, under a common denomination, an amalgam of disconnected situations of taxation, which is the Stamp Duty, only perceptibly justified by the simplicity and efficiency of revenue collection, and explicitly recognizes, in the aforementioned Legislative Proposal, that, for reasons of a pragmatic nature, there were "distortions of the principles defined, which the practice of subsequent years came, in numerous situations, to aggravate".
But, this indirect taxation ceases not to be carried out within the ambit of Corporate Income Tax, as results from the inclusion of autonomous taxes in the respective Code, which has as a corollary the application of the general rules proper to this tax, which are not in conflict with its special form of incidence.
Thus, if it is true that autonomous taxes constitute a different form of making taxes bear on businesses, which could consist of autonomous regulation or be arranged in the Stamp Duty Code, it is also no less true that the legislative choice to include such taxes in the CIRC reveals an intention to consider such taxes as inserted in Corporate Income Tax, which can be justified by being an indirect form, but, from the legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income.
It is concluded, thus, that both as regards article 4 of Decree-Law no. 192/90, of 9 June, in which, in all its versions, it referred that autonomous taxes were in "in Personal Income Tax or Corporate Income Tax" and not that another tax, as after its inclusion in the CIRC, the autonomous taxes of which legal entities are taxpayers are considered Corporate Income Tax, whereby they shall be applicable the rules of the CIRC that are not in conflict with its special form of incidence and applicable rates.
In this light, Law no. 109-B/2001, of 27 December, when it said, in the wording given to article 12 of the CIRC, that "companies and other entities to which, in accordance with article 6, the regime of tax transparency is applicable are not taxed in Corporate Income Tax, save as to autonomous taxes", clearly based itself on the assumption, which explicitly resulted from the various wordings of article 4 of Decree-Law no. 192/90 and the integration of autonomous taxes in the CIRC carried out by Law no. 30-G/2000, that these taxes were a form of taxation of legal entities in Corporate Income Tax, as that is the only justification for the new wording given to article 12 of the CIRC to have made an express reference that the exclusion from taxation in Corporate Income Tax of entities to which the tax transparency regime is applicable in Corporate Income Tax does not extend to autonomous taxes.
This conclusion which could already be drawn with certainty, at least from Law no. 109-B/2001, that autonomous taxes are included within the ambit of Corporate Income Tax and the general rules of this tax are potentially applicable to them is confirmed with the new article 23-A, no. 1, of the CIRC, in the wording introduced by Law no. 2/2014, of 16 January, when it says that "are not deductible for purposes of determining taxable income" "Corporate Income Tax, including autonomous taxes".
In fact, it results from the express tenor of the aforementioned article 12 of the CIRC that autonomous taxes are included in Corporate Income Tax, specifically for the purpose of excluding from deduction to taxable income the amounts spent on their payment.
On the other hand, although this express reference to the inclusion of autonomous taxes was only inserted with this Law no. 2/2014, it is certain that such inclusion already existed previously, if only because this Law did not alter the scope of Corporate Income Tax, specifically articles 1 and 3, to which the Claimant attaches special relevance to the determination of what is Corporate Income Tax.
Thus, it must be concluded that the legislator repeatedly expressed its intention to tax in the ambit of Corporate Income Tax the expenses carried out by legal entities for which autonomous taxation is provided and that there is no textual support in the rules relating to such taxes to conclude that the expenses with the payment of such taxes are not considered Corporate Income Tax.
3.1.2. Autonomous Taxes and the Special Regime for Taxation of Groups of Companies
From the previous finding that autonomous taxes are taxation in Corporate Income Tax does not necessarily follow that they are relevant within the ambit of the special regime for taxation of groups of companies, as this regime does not constitute a general form of taxation in the ambit of Corporate Income Tax.
In fact, as results from the provisions of article 69, no. 1, of the CIRC, in the wording given by Decree-Law no. 159/2009, of 13 July, the specialty of that regime relates to the "determination of the taxable amount in relation to all companies of the group".
Although this formula "determination of the taxable amount" is abstractly comprehensive of all types of taxable amount on which Corporate Income Tax bears, article 70 of the same Code, relating to the "determination of the taxable income of the group", specifies that "for each of the taxation periods covered by the application of the special regime, the taxable income of the group is calculated by the dominant company, through the algebraic sum of the taxable incomes and tax losses calculated in the periodic individual returns of each of the companies belonging to the group".
Thus, it results clearly from this article 70 of the CIRC that the applicability of the special regime for taxation of groups of companies is restricted to the determination of taxable income and tax losses. On the other hand, even when this special regime is applicable, autonomous relevance continues to be given to the tax losses of each of the companies of the group, as shown by article 71 of the same Code, when it establishes various rules that constitute the "specific regime of deduction of tax losses".
Now, although autonomous taxes in Corporate Income Tax are considered Corporate Income Tax, it is manifest that their base of incidence is not taxable income.
Therefore, it must be concluded that there is no legal basis for extending to the incidence and determination of the rates of autonomous taxes the special regime for taxation of companies of groups, which is limited to the determination of taxable income and tax losses of groups of companies for purposes of taxation in Corporate Income Tax, in the part in which it bears directly on income.
Thus, the increase of the rates of autonomous taxes provided for in no. 14 of article 88 of the CIRC occurs only when the company that is part of the group in relation to which the fact that is the basis for the autonomous taxes occurs presented a tax loss in the taxation period to which such facts relate.
This means that the decisions dismissing the administrative appeals are defective due to violation of law, by erroneous interpretation of article 88, no. 14, of Corporate Income Tax, when they understood that what is relevant for purposes of the increase provided for in article 88, no. 14, of the CIRC is the global loss of the group of companies and not that of each of the companies to which the autonomous taxes are attributable.
- Reimbursement of the Amount Paid
The Claimant paid the Corporate Income Tax that it self-assessed in the years 2011 and 2012, having indicated in fields 368 of tables 10 of Forms 22 relating to those years Corporate Income Tax in amounts greater than the differences between the autonomous taxes owed with and without the increase provided for in no. 14 of article 88 of the CIRC.
Thus, having been paid in excess the amount of € 1,903,652.28 (€ 1,094,069.77 relating to the fiscal year 2011 and € 809,582.51 relating to the fiscal year 2012), the Claimant is entitled to be reimbursed, as follows from the duty to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been carried out" which is imposed on it by art. 24, no. 1, paragraph b), of the RJAT, in harmony with the provision in art. 100 of the General Tax Law.
- Compensatory Interest
The Claimant further requests that the payment of compensatory interest be determined, relating to the amount that should be reimbursed to it, counted from 01-09-2012 as to the amount of € 1,094,069.77 (fiscal year 2011) and from 01-09-2013 as to the amount of € 809,582.51 (fiscal year 2012), until full reimbursement.
The Claimant indicates these dates as the initial terms for counting the compensatory interest as they are the term of the dates for official reimbursement of the tax (article 259 of the request for arbitral ruling).
The Tax and Customs Authority contends that no compensatory interest is owed, as it was the Claimant who carried out the self-assessments, and that, if it is owed, it will only be due from the dates when the decisions of the administrative appeals are notified.
Article 43, nos. 1 and 2, of the LGT establishes that "compensatory interest is owed when it is determined, in administrative appeal or judicial challenge, that there was an error attributable to the services from which results payment of the tax debt in an amount greater than that legally owed".
In the case at hand, it was the Claimant who carried out the self-assessments, but, as was proven, the computer system through which it is mandatory to file Form 22 (articles 117, nos. 1, paragraph b), 2 and 3, and 120 of the CIRC) did not allow the Claimant to file the returns without taking into account the global loss of the group, for purposes of the increase provided for in article 88, no. 14, of the CIRC.
Thus, it is necessary to conclude that the errors affecting the returns and self-assessments resulting therefrom are exclusively attributable to the Tax Administration, whereby it must be concluded that an error attributable to the services occurs for the purposes of no. 1 of article 43 of the LGT and that the Claimant, being entitled to reimbursement of Corporate Income Tax in any of those years, was wrongfully deprived of the corresponding amounts from the dates when the reimbursements should have been made, which were the end of the 3rd month immediately following that of the filing of the returns.
In the case at hand, as the returns were to be filed by the end of May of the year following that to which they related, in accordance with no. 5 of article 120 of the CIRC, the Claimant is entitled to compensatory interest at the legal default rate counted from 01-09-2012 as to the amount of € 1,094,069.77 (fiscal year 2011) and from 01-09-2013 as to the amount of € 809,582.51 (fiscal year 2012), until full reimbursement, in accordance with articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, 61, nos. 2, 3, 4 and 5, of the CPPT, and art. 559 of the Civil Code and Order no. 291/2003, of 8 April.
Thus, the request for compensatory interest formulated by the Claimant is justified.
- Decision
In these terms, the members of this Arbitral Tribunal agree in:
a) To find the request for arbitral ruling meritorious;
b) To declare the illegality of the orders dismissing the administrative appeals nos. …2012… and …2013… and to annul such orders;
c) To declare the partial illegality of the self-assessments of autonomous taxes in the fiscal group of which the Claimant A, SGPS, S.A. is the dominant company, relating to the fiscal years 2011 and 2012, in what respects the amounts of € 1,094,069.77 and € 809,582.51, respectively, in a total of € 1,903,652.28 and to annul the aforementioned self-assessments insofar as they are defective by illegality;
d) To condemn the Tax and Customs Authority to reimburse to the Claimant the amount of € 1,903,652.28, increased by compensatory interest at the legal rate counted from 01-09-2012 as to the amount of € 1,094,069.77 (fiscal year 2011) and from 01-09-2013 as to the amount of € 809,582.51 (fiscal year 2012), until full reimbursement.
- Value of the Proceeding
In accordance with the provisions of art. 315, no. 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings the value of the proceeding is set at € 1,903,652.28.
- Costs
In accordance with art. 22, no. 4, of the RJAT, the amount of costs is set at € 25,092.00 in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.
Lisbon, 01-09-2014
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(Fernando Borges de Araújo)
(Jorge Júlio Landeiro de Vaz)
Frequently Asked Questions
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