CAAD 249/2018-T: Job Creation Tax Benefits (Art. 19 EBF) and International Double Taxation Credit (Art. 91 CIRC) in IRC Assessment

Arbitral Decision (consult complete version in PDF)

The arbitrators Counsellor Maria Fernanda Maçãs (arbitrator president), Dr. Ricardo Rodrigues Pereira and Dr. Ana Teixeira de Sousa (arbitrator members), designated by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, agree as follows:

I. REPORT

1. On 15 May 2018, the commercial company A..., S.A., NIPC..., with registered office in ..., ..., Lisbon (hereinafter, Claimant), filed a request for constitution of an arbitral tribunal, under the combined provisions of Articles 2, no. 1, letter a), and 10, nos. 1, letter a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (hereinafter, briefly designated RJAT), with the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December, with a view to this tribunal's pronouncement on:

• Declaration of illegality and partial annulment of the additional corporate income tax (IRC) assessment no. 2018..., relating to the year 2013, from which results a sum to be paid of €229,755.24, of the compensatory interest assessments nos. 2018... and 2018..., in the total amount of €45,823.39 and the respective statement of account settlement, which determined a total sum to be paid of €427,126.03; and

• Restitution of the amounts of tax and compensatory interest wrongfully paid, plus indemnity interest at the legal rate, from the date of payment until the date of full reimbursement.

The Claimant attached 5 (five) documents and listed 2 (two) witnesses, not having requested the production of any other evidence.

The Respondent is AT – Tax and Customs Authority (hereinafter, Respondent or AT).

1. In essence, the Claimant alleges a defect of violation of law, due to erroneous interpretation and application of the rules contained in Article 19 of the Tax Benefits Statute and Articles 90, no. 2, letter a), and 91 of the IRC Code and the consequent annullability, to the extent applicable, of the said IRC assessment and respective Statements of Compensatory Interest Assessment and Account Settlement.

2.1. As results from the request for arbitral pronouncement, the Claimant bases the challenge of the disputed tax acts, essentially, on the following arguments:

The Claimant is the parent company of a group of companies, taxed according to the RETGS (Special Tax Regime for Groups of Companies), and all corrections made in the sphere of the Claimant, as parent company (which are at issue in this proceeding), result exclusively (with the exception of the assessment of the Municipal Surcharge of the Group) from corrections made in the sphere of the subsidiary company "B..., SA".

The Claimant contests the corrections made to the tax benefit of net job creation, in the amount of €253,045.30.

In this context, the Claimant begins by expressing its disagreement with the correction described in section III.1.1.3.2 of the RIT, from which it results that the AT does not accept the deduction of the tax benefit because it considers that the Claimant "overstated expenses with young people who, in periods prior to the period under analysis, benefited from other employment support incentives, specifically, the incentive for hiring young people seeking their first employment".

The legislator did not include any negative delimitation for the purpose of assessing the benefit of net job creation, related to the cumulation of the benefit with other benefits; instead, no. 5 of Article 19 of the EBF provides for the impossibility of cumulation of the increase, under IRC, with other benefits of the same nature for the same employee.

If the legislator had intended to exclude the said employees from eligibility for the purpose of calculating net job creation, it would have done so expressly, as it did in nos. 4 and 6 of Article 19 of the EBF.

The AT did not question the applicability of this regime to the jobs in question, but only the calculation of the increase of the benefit in question.

Thus, there is no doubt that employees who enjoy other employment support incentive benefits are eligible for the purpose of calculating net job creation.

The legislator clearly states that the increase provided for in no. 1 of Article 19 of the EBF is not cumulative with other benefits of the same nature, thus referring to the simultaneous application of these benefits, since the eligibility of these employees for the purpose of applying the benefit in question was not prohibited.

In this context and with reference to the 2013 fiscal year, for the same worker and job, the Claimant does not cumulate any benefits of the same nature.

In conclusion, in this regard, the Claimant argues that the rule contained in no. 5 of Article 19 of the EBF does not permit the cumulation of the increase in expenses, provided for in the job creation benefit, in the same application period as other benefits of the same nature, but does not negatively delimit the possibility of applying the job creation tax benefit after the end of these benefits, within the remaining time period provided for in law.

Thus, the Claimant considers that the corrections made by the AT, with reference to the 2013 tax period, as a result of the disregard of the job creation benefit after application of the exemption from Social Security contributions, should be annulled in their entirety, with the consequent reimbursement of the amounts wrongfully paid.

On the other hand, also in the same context, the Claimant contests the correction described in section III.1.1.3.4 of the RIT, from which it follows that the AT does not accept the full deduction of the tax benefit in question because it considers it to be associated with young people who were working part-time.

The Claimant understands that the law does not determine any type of limitation to the nature of employment contracts, nor the minimum working hours relevant for the purpose of applying this regime, beyond those expressly provided for in Article 19 of the EBF; specifically, it does not provide for any rule that limits this benefit based on daily, weekly or monthly hours worked by employees eligible for these purposes.

In the same context, the Claimant challenges the correction to which section III.1.1.3.5 of the RIT refers, relating to the increase with expenses associated with positions of posted workers who, although maintaining their employment relationship with the Claimant, their respective remuneration came to be paid by a third party, for whom the AT assumes a zero weekly working hours.

The AT made this correction by concluding that in the Single Report – a subsidiary obligation to which the Claimant is bound – no remuneration value was mentioned in connection with workers contributing to the calculation of the tax benefit here subject to correction; however, one of the requirements that obliges such disclosure is not met: the remuneration of these workers is not paid by the Claimant.

But it is not because there is no evidence of payment of remuneration to expatriate employees in the Single Report or because they are expatriates that the employment relationship with the Claimant does not subsist and that the latter ceases to have expenses with eligible jobs, for five years, for the purpose of the tax benefit provided for in Article 19 of the EBF.

Thus, since such jobs were considered as eligible entries at the time of hiring the respective workers, and this tax benefit is valid for five years from the date of indefinite-term hiring, the Claimant has legitimacy to deduct the expenses incurred with such jobs, at 50%, in accordance with the provisions of Article 19 of the EBF; such expenses relate to Social Security contributions paid during the 2013 fiscal year, by virtue of the employment contracts enduring, despite the situation of expatriation of such employees.

The Claimant, in this same context, further contests the correction made by the AT, set forth in section III.1.1.3.6 of the RIT, as a result of the latter's understanding that the Claimant erroneously considered, as ineligible departures, employees who were benefiting from the incentive for hiring young people seeking their first employment.

The Claimant understands that these departures are not eligible because the corresponding employment contracts were not considered eligible in prior periods for the purpose of job creation; thus, if they were not considered as eligible entries at the time of job creation, they cannot be considered as departures for the purpose of the same regime.

Being a tax benefit, the taxpayer may or may not benefit from the regime; if it chose not to benefit regarding such jobs, at the time of their creation, the same jobs cannot be relevant at the time of cessation.

Moreover, if such correction is to be maintained, then such jobs (like all those that the Claimant has always excluded in prior fiscal years and in the fiscal year itself, by considering them ineligible) should have been considered as relevant entries in their respective fiscal years, with the entire tax benefit in question having to be recalculated, with retroactive effects; the AT, despite being alerted to this possibility, did not wish to undertake such calculation.

Finally, in this regard, the Claimant contests the correction set forth in Section III.1.1.3.7 of the RIT, relating to the amount associated with job creation for 14 workers who, in the 2012 fiscal year, were disregarded from this benefit.

The Claimant confirms that, with reference to the 2012 fiscal year, a correction was made, relative to the information initially set out in the self-assessment of IRC for that fiscal year, to the number of jobs created for this purpose; from that correction it resulted that, in 2012, the Claimant considered, in excess and by oversight, 14 jobs not eligible for the purpose of calculating the tax benefit in question. This correction was accepted by the Claimant and the corresponding tax was duly regularized.

In this context, the Claimant agrees with the correction to the 2013 fiscal year, but only as to the jobs disregarded in 2012, still in effect, and not others; that is, the AT is correcting in the 2013 fiscal year any 14 jobs and not those it identified in 2012 as being ineligible.

Thus, the Claimant does not agree with the value determined relating to the corrections made in the 2013 fiscal year, since the correction encompasses eligible jobs still in effect for the purpose of this tax benefit in the 2013 fiscal year; therefore, the correction to be made in 2013 must be restricted to the benefit associated with the jobs excluded in 2012 and which remain in effect in 2013, which amount to 9 (nine).

In another respect, the Claimant challenges the following corrections made to the deduction from collection of the foreign tax credit for international double taxation: (i) €82,749.76 – withholdings suffered in 2013, relating to services invoiced and taxed in 2011; and (ii) €306,403.83 – withholdings suffered in 2013, relating to services invoiced and taxed in 2012.

The Claimant provides services of various kinds to clients resident and non-resident in Portuguese territory, proceeding with the respective invoicing. It happens that its clients do not always proceed with payment of their respective services in the fiscal year in which they were invoiced.

In this context, in fiscal years in which income associated with services provided to entities not tax-resident in Portuguese territory is invoiced, they are not always subject to withholding at the source in the source country, since such withholding only operates upon the respective payment; on the other hand, part of such services are subject to withholding at source in the country of residence of the Claimant's clients.

In this way, the Claimant proceeds to deduct from collection the withholding at source made by its clients, under the provisions of Article 91 of the IRC Code, in the fiscal year of payment of the respective services since it is in that period that the withholding is made.

The Claimant does not accept the correction in question – based on the AT's understanding that the Claimant does not have the right to deduct from collection withholdings suffered abroad in fiscal years subsequent to those in which the income was taxed – because the procedure adopted does not harm the Portuguese State and because it could never anticipate the deduction from collection of a potential withholding at source, which might never even materialize; in fact, only in the fiscal year in which it suffers the withholding at source does it acquire the right to benefit from the tax credit for the purpose of eliminating international double taxation, since until then double taxation has not occurred.

Furthermore, regarding withholdings suffered in 2013, but relating to services provided in the year 2011, the Claimant is no longer in a position to activate any mechanism that will restore its tax situation, so the AT should have refrained from the correction in question or should have officially promoted the respective correction to the 2011 fiscal year and proceeded with the reimbursement of IRC paid in excess in that same fiscal year.

The Claimant concludes by petitioning the payment of indemnity interest, since it made the payment of the aforesaid amounts of tax and compensatory interest, to be calculated from the date of payment until effective and full reimbursement.

1. The request for constitution of an arbitral tribunal was accepted by the President of CAAD and followed its normal procedure with notification to the AT, on 22 May 2018.

2. The Claimant did not proceed with the nomination of an arbitrator, so, under the provisions of Article 6, no. 2, letter a) and Article 11, no. 1, letter a) of the RJAT, the President of the Deontological Council of CAAD designated as arbitrators of the collective Arbitral Tribunal the signatories, who communicated acceptance of the assignment within the applicable period.

4.1. On 5 July 2018, the Parties were notified of this designation and did not express willingness to refuse the designation of the arbitrators, in accordance with the combined provisions of Article 11, no. 1, letters b) and c), of the RJAT and Articles 6 and 7 of the CAAD Deontological Code.

4.2. Thus, in accordance with the provisions of Article 11, no. 1, letter c) of the RJAT, the Collective Arbitral Tribunal was constituted on 25 July 2018.

1. On 1 October 2018, the Respondent, duly notified for this purpose, filed its Reply in which it specifically challenged the arguments put forward by the Claimant, having concluded by the unfoundedness of the present action, with its consequent dismissal of the claim.

5.1. In essence and also briefly, it is important to extract the more relevant arguments on which the Respondent based its Reply:

Regarding the corrections to the tax benefit provided for in Article 19 of the EBF, one resulted from the fact that B..., S.A. overstated expenses with young people who, in periods prior to the period under analysis, benefited from other employment support incentives (specifically, the incentive for hiring young people seeking their first employment), during the period of validity of the benefit, violating the provision of no. 5 of that Article 19; that is, it benefited from the job creation benefit and from employment creation support incentives and rules, so it benefited, albeit in a time-distributed manner, from undue cumulation of benefits.

Upon admission of an employee and meeting the conditions provided for in no. 1 of Article 19 of the EBF, the taxpayer must choose whether it opts for the tax benefit or another employment creation support incentive; thus, if within the 5-year period, counting from the contract's validity, the taxpayer benefits from any other employment creation incentive, with a term shorter than 5 years, it cannot benefit from the provisions of Article 19 of the EBF, after benefiting from another incentive, for the remaining period.

The AT advocates that no. 5 of Article 19 of the EBF has nothing to do with the calculation of net job creation, as this is determined by the conditions defined in nos. 1, 2, 4 and 6 of the same article; however, no. 5 prevents the cumulation of the benefit provided for in this article with others of identical nature during the period of validity of said benefit. According to the AT, it follows from the reading of no. 5 that cumulation occurs during the period of validity of the benefit, that is, within the 5-year time horizon and not only in the period in which it is temporally coincident.

Thus, by virtue of the legal impossibility of cumulation provided for in no. 5 of Article 19 of the EBF, if during the period of validity of the tax benefit (5 years from the creation of the job) other employment support incentives provided for in other statutes are granted to that worker or job, the taxpayer will not be able to avail itself of that tax benefit; from this it follows that, if the company benefits from other employment support incentives provided for in other statutes that have an associated term shorter than 5 years, it will not be able to, for that worker or job, even if partially, avail itself for the remaining period of the tax benefit provided for in Article 19 of the EBF.

Another of the corrections to the tax benefit in question resulted from the fact that B..., S.A. overstated expenses with young people who, in the period under analysis, were working part-time, without adjusting the maximum amount of annual increase per job, provided for in no. 3 of Article 19 of the EBF, in proportion to the reduction of the normal period of effective work.

It is the AT's understanding that, in hiring part-time workers, the maximum limit of annual increase, provided for in Article 19 of the EBF, must be adjusted in proportion to the reduction of the normal period of work, for two reasons: in light of the principle of unity of the legal system, the rules defining the tax incentive must be interpreted taking into account the regulations governing financial incentives (granted by Social Security) with identical purposes and similar assumptions and which in this respect adopted the rule provided for in Article 185 of the Labour Code; and the non-adjustment of the amount of the minimum monthly remuneration for the purpose of Article 19 of the EBF would result in a bias of the benefit amount in favor of hiring part-time workers to the detriment of hiring full-time workers, an effect that goes against the objectives pursued with the application of this measure. According to the AT, we are not faced with analogical integration, but only with the meaning to be given to no. 3 of Article 19 of the EBF – a tax rule regulating the maximum limit of the increase – being a situation of interpretation and application of the law and not a situation of analogical integration of gaps.

The AT further points out that B..., S.A. proceeds with adjustments to the maximum amount of annual increase per job, provided for in no. 3 of Article 19 of the EBF, in proportion to the period of work actually performed in that year, in cases where the employee leaves the company in the middle of the year and is still within the 5-year period of validity of the benefit.

Another of the corrections made in this regard results from the fact that B..., S.A. overstated expenses with young people who, in the period under analysis, were expatriated and for whom no proof was presented regarding the number of hours worked, so it was considered that the weekly working hours of these employees is zero.

Another correction results from the fact that B..., S.A. erroneously considered that in the 2013 fiscal year there was net creation of 10 jobs, because in that fiscal year there was no net creation of jobs (the number of eligible entries was 83, less than the number of eligible departures corrected to 85).

B..., S.A. considered as ineligible departures, in the fiscal year in question, 12 employees who were benefiting from the incentive for hiring young people seeking their first employment; according to the AT, these departures are eligible because at the date of their respective admission these employees met the conditions defined in no. 1 of Article 19 of the EBF to have access to the tax benefit in question.

Furthermore, in the prior hearing right exercised in the context of the inspection procedure on the corporate group of which the Claimant is parent company, the latter accepted the correction under analysis.

Another correction was made, within the scope in question, resulting from the fact that B..., S.A. had overstated 14 jobs in net job creation in 2012, corrected in a prior inspection procedure, with effects in the 2013 fiscal year, a period that is within the time horizon of the validity of the tax benefit.

The AT maintains that this undue overstatement of 14 jobs does not have to be associated with the 14 jobs identified in 2012, since, in 2013, what has to be corrected is the overstatement of 14 jobs created in 2012.

5.2. The Respondent did not request the production of evidence and attached the administrative file (hereinafter, PA) to the case.

1. By order of 27 October 2018, the Parties were notified of the designation of the date for the holding of the meeting referred to in Article 18 of the RJAT and for the examination of witnesses listed by the Claimant.

2. On 11 December 2108, the meeting referred to in Article 18 of the RJAT took place – in which what appears in the respective minutes was handled, which is hereby entirely reproduced, the Claimant being notified to clarify the calculation formula of the value of the action indicated in the request for arbitral pronouncement and to pronounce on the maintenance of the claim set forth in section ii) of Article 195 of the request for arbitral pronouncement; 25 March 2019 was then set as the deadline for the issuance of the arbitral decision –, and testimony was also produced.

3. On 17 December 2018, the Claimant filed a request in which:

(i) Clarified the method of calculating the value attributed to the present action, which it essentially did by stating that "that amount of €394,302.51 corresponds to the amount of tax and compensatory interest contested within the scope of the present request, reduced by the value of the corrections and corresponding interest accepted, in light of the impact that the corrections made by the AT – and from which resulted tax and interest to be paid in the total amount of €427,126.03 – had on the aforesaid Group" of which the Claimant is the parent company;

(ii) Regarding the requested annulment of the correction indicated in section ii) of Article 195 of the request for arbitral pronouncement, it came to request "the reduction of the request in that part, that is, so as to withdraw from the scope of the Tribunal's appreciation, and the final decision to be rendered, the correction relating to the Foreign Tax Credit for International Double Taxation, resulting from income invoiced and taxed in the year 2012, in the total amount of €306,403.83, with the further legal consequences."

(iii) Following such reduction of the request and by understanding that "the value of the economic utility of the request will also, and necessarily, have to be reduced", it argued that the value of the present action should be €19,386.76, which results from the proportional reduction of the value of the request previously determined, taking into account the amount of tax and compensatory interest now contested.

1. Both Parties submitted written pleadings, in which they reiterated the positions previously assumed in their respective documents.

II. CASE MANAGEMENT

1. The Arbitral Tribunal was regularly constituted and is competent ratione materiae, given the configuration of the subject matter of the case (cf. Articles 2, no. 1, letter a) and 5 of the RJAT).

The request for arbitral pronouncement is timely, because presented within the period provided for in Article 10, no. 1, letter a), of the RJAT.

The parties have legal personality and capacity, have standing and are regularly represented (cf. Articles 4 and 10, no. 2 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).

The case is not affected by nullities, and no exceptions have been invoked that preclude knowledge of the merits and of which we must know.

§1. OF THE REDUCTION OF THE CLAIM

1. The Claimant, with reference to the 2013 fiscal year, requested the annulment of the following corrections:

i) correction in the amount of €82,749.76, relating to withholdings suffered in 2013, but relating to income invoiced and taxed in 2011, for violation of the constitutionally enshrined principles of proportionality and tax justice;

ii) correction in the amount of €306,403.83, relating to withholdings suffered in 2013, but relating to income invoiced and taxed in 2012, for violation of the constitutionally enshrined principles of proportionality and tax justice, and should accordingly be filed as dismissed by supervening futility of litigation the PRAT.

As stated above, by means of a request filed on 17 December 2018, the Claimant came to request, regarding the correction indicated in ii), "the reduction of the request in that part, that is, so as to withdraw from the scope of the Tribunal's appreciation, and the final decision to be rendered, the correction relating to the Foreign Tax Credit for International Double Taxation, resulting from income invoiced and taxed in the year 2012, in the total amount of €306,403.83, with the further legal consequences."

It must be assessed.

1. Article 264 of the CPC (applicable ex vi Article 29, no. 1, letter e), of the RJAT) provides that if there is agreement of the parties, "the claim and the cause of action may be altered or extended at any time, in first or second instance, unless the alteration or extension unreasonably disturbs the instruction, discussion and judgment of the dispute".

For its part, it follows from the provisions of no. 2 of Article 265 of the CPC (applicable ex vi Article 29, no. 1, letter e), of the RJAT) that the "claimant may, at any time, reduce the claim".

Thus, since nothing prevents the Respondent's reduction of the claim, the same is granted, in the exact terms petitioned, with the legal consequences.

§2. OF THE AMOUNT IN CONTROVERSY

1. As equally emphasized above, following said reduction of the claim and by understanding that "the value of the economic utility of the request will also, and necessarily, have to be reduced", the Claimant argued that the value of the present action should be €19,386.76, which results from the proportional reduction of the value of the request previously determined, taking into account the amount of tax and compensatory interest now contested.

It must be assessed.

1. In determining the amount in controversy one must take into account the moment in which the action is brought, except where there is a counterclaim or intervention as principal, as follows from the provision of Article 299, no. 1, of the CPC (applicable ex vi Article 29, no. 1, letter e), of the RJAT).

As flows from what is established in Article 259, no. 1, of the CPC (applicable ex vi Article 29, no. 1, letter e), of the RJAT), the instance is initiated by the bringing of the action and this is considered brought, instituted or pending as soon as the respective initial petition is received in the office, that is, in the case of tax arbitration proceedings, as soon as the request for constitution of the Arbitral Tribunal is received in the office of CAAD.

Therefore, as states Jorge Lopes de Sousa (Guide to Tax Arbitration, revised and updated, 2nd edition, Almedina, Coimbra, 2017, p. 153), "modifications in value that may result from the revocation, ratification, reform or conversion of the tax act whose illegality was raised or from withdrawal or reduction of claims are irrelevant.

Neither shall eventual extensions of the original claim that are to be considered admissible, for being development or consequence of the original claim (Article 265, no. 2, of the CPC), such as, for example, increase derived from indemnity interest or indemnification for undue guarantee, imply any alteration to the amount in controversy."

In the present case, the amount of €394,302.51 was indicated in the request for arbitral pronouncement as being the value of the economic utility of the claim, which (as the Claimant explained in its aforesaid request of 17 December 2018) "corresponds to the amount of tax and compensatory interest contested within the scope of the present request, reduced by the value of the corrections and corresponding interest accepted, in light of the impact that the corrections made by the AT – and from which resulted tax and interest to be paid in the total amount of €427,126.03 – had on the aforesaid Group" of which the Claimant is the parent company.

Thus, the amount in controversy is fixed at €394,302.51, and the Claimant's claim for alteration thereof is dismissed.

III. SUBSTANTIVE ANALYSIS

III.1. OF FACT

§1. PROVEN FACTS

1. The following facts are considered proven:

a) The Claimant is a Portuguese limited company that, in the 2013 fiscal year, was covered by the Special Tax Regime for Groups of Companies (RETGS), provided for in Articles 69 to 71 of the IRC Code, as parent company of a group of companies. [cf. PA]

b) The said group of companies subject to taxation under RETGS, in the 2013 fiscal year, in addition to the Claimant, encompassed the following companies [cf. PA]:

• B..., S.A., with TIN...;

• C..., S.A., with TIN...;

• D..., S.A., with TIN...; and

• E..., SGPS, S.A., with TIN....

c) The companies belonging to the aforementioned group of companies have adopted since 01.06.2012 a fiscal year different from the calendar year, beginning on 1 June and ending on 31 May of each year. [cf. PA]

d) The Claimant filed, in IRC and with reference to the 2013 fiscal year, Statements Model 22 both individual and group, which present the following values [cf. PA]:

[TABLE PRESENT IN ORIGINAL]

e) B..., S.A. is engaged in the activity of providing professional consulting services in the areas of management, finance, economics, accounting, human resources and vocational training, information technology and information systems, outsourcing, marketing, administration, organization and advisory on the development, implementation and monitoring of business structures, valuation of businesses, companies, moveable and immoveable assets, and activities related to those previously mentioned. [cf. PA]

f) Under Service Order no. OI2016..., issued on 20.12.2016 and with an order dated 27.12.2016, the company B..., S.A. was subject to an internal and partial scope inspection procedure, relating to the 2013 fiscal year, directed at the analysis of IRC and VAT. [cf. PA]

g) Following that inspection action, the respective Tax Inspection Report (RIT) was prepared, which is hereby entirely reproduced, from which the following segments are important to extract [cf. PA]:

"III.1. — IRC — CORPORATE INCOME TAX

III.1.1. Tax benefit for job creation

III.1.1.1. B... proceeded with the deduction in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, of the amount of €1,187,084.91, for the purpose of determining the taxable income of the 2013 period (...).

In accordance with Annex D (Tax Benefits) delivered together with the said statement, the tax benefits deducted relate to

2013 Increase in job creation (art. 19 of EBF) €1,060,619.19

(…)

The statement of calculation of the increase in job creation is attached in Annex 3, for the 2013 period (…).

III.1.1.2. Article 19 of the Tax Benefits Statute (EBF), in its number 1, provides that "For the determination of taxable income for IRC taxpayers ..., expenses corresponding to the net creation of jobs for young people and for the long-term unemployed, admitted by indefinite-term employment contract, are considered at 150% of their respective amount, recorded as an expense of the fiscal year."

Number 2 of the said article defines some concepts for the purpose of applying this article. Thus, letter a) defines the concept of "Young people"; letter b) defines the concept of "Long-term unemployed"; letter c) defines the concept of "expenses" and letter d) defines the concept of "net job creation". Thus, "Expenses" constitute the amounts borne by the employing entity with the worker, as payment of fixed remuneration and Social Security contributions charged to the same entity. "Net job creation" is the positive difference, in a given fiscal year, between the number of eligible hirings pursuant to no. 1 and the number of departures of workers who, at the date of their respective admission, were in the same conditions."

In accordance with number 3 of the said article, "The maximum amount of the annual increase, per job, is the equivalent of 14 times the guaranteed minimum monthly remuneration." In 2013, the guaranteed minimum monthly remuneration was €485.00, in accordance with Decree-Law no. 143/2010, of 31 December. (…) Thus, the maximum amount of annual increase per job in the 2013 period amounts to €6,790.00. (…)

Pursuant to number 5 of the said article, "the increase referred to in no. 1 applies for a period of five years from the commencement of the employment contract, and is not cumulative, either with other tax benefits of the same nature, or with other employment support incentives provided for in other statutes, when applicable to the same worker or job."

Number 4 of the said article states that "for the purpose of determining net job creation, workers who are part of the family group of the respective employing entity are not considered."

Finally, number 6 of the said article states that "the regime provided for in no. 1 may only be granted once per worker admitted to that entity or another entity with which there are special relationships within the meaning of Article 63 of the IRC Code."

III.1.1.3. Period of 2013

From the analysis carried out on the statement of calculation of the increase in job creation for the 2013 period, attached in the said Annex 3, we verified the following situations:

III.1.1.3.1. B... overstated expenses with young people who, in the period under analysis, were: a: benefiting from other employment support incentives, specifically, the incentive for hiring young people seeking their first employment and long-term unemployed, regulated by Decree-Law no. 89/95, of 6 May.

Such incentive, for hiring young people seeking their first employment and long-term unemployed, is expressed in the temporary exemption from payment of Social Security contributions, in the part relating to the employing entity.

The employees who benefited from this employment support incentive in the period under analysis are identified in Annex 5 and the increase in job creation relating to these employees amounts to €51,212.68.

It should be noted that Annex 5 is an excerpt from Annex 3, which covers only, as we mentioned, the employees who in the period under analysis cumulated benefits with other employment support incentives. (…)

III.1.1.3.2. B... overstated expenses with young people who, in periods prior to the period under analysis, benefited from other employment support incentives, specifically, the incentive for hiring young people seeking their first employment, during the period of validity of the benefit.

The employees who benefited from this employment support incentive in periods prior to the period under analysis are identified in Annex 6 and the increase in job creation relating to these employees amounts to €114,695.54.

(…)

B... confirmed that 32, of the 34 employees mentioned above, benefited from the incentive for hiring young people seeking their first employment in periods prior to the period under analysis. Only 2 of these employees, (…) did not benefit from the incentive for first employment. The increase in job creation relating to these 2 employees amounts to €1,692.85.

III.1.1.3.3. Regarding the situations identified in the two previous paragraphs, we must state the following:

Pursuant to number 5 of Article 19 of the EBF, previously cited, the increase relating to job creation is not cumulative with other employment support incentives provided for in other statutes, when applicable to the same worker or job.

The Doctrinal Note relating to Proceeding no. 1145/07, with order of 26/05/2008, from the Legal Substitute of the Director-General of Taxes, to whose understanding the Tax Administration is bound, pursuant to number 1 of Article 68-A of the LGT and Article 55 of the CPPT, provides in point 3 the following:

"After analyzing other tax benefits and employment support incentives, it is verified that the tax benefit provided for in no. 1 of Article 17 of the EBF" is not cumulative, when applied to the same worker or job, with the incentives provided for in the following statutes, since they contain employment creation support incentives and rules:

• Decree-Law no. 89/95, of 6 May;

• Decree-Law no. 34/96, of 18 April;

• Joint Order no. 561/2001, of 22 June;

• Law no. 53-A/2006, of 29 December, Article 41;

• Tax Benefits Statute, Article 39-B.

However, this benefit of no. 1 of Article 17 of the EBF is already cumulative, since it is a vocational training incentive, with that provided for in Decree-Law no. 51/99, of 20 February."

Now, the employment creation support incentives and rules provided for in the statutes – Decree-Law no. 89/95, of 6 May and Decree-Law no. 34/96, of 18 April – listed in the Doctrinal Note mentioned above, relate to the incentive for hiring young people seeking B... cumulated in the period under analysis and in periods prior to the period under analysis with the tax benefit provided for in Article 19 of the EBF.

The cumulation of the tax benefit for job creation provided for in Article 19 of the EBF with the incentive for hiring young people seeking their first employment and long-term unemployed (which, as we have seen, is expressed in the exemption from payment of Social Security contributions for a maximum of 3 years), when applicable to the same worker or job, violates the provision of number 5 of Article 19 of the EBF.

Only during the year 2010, within the framework of exceptional employment and hiring support measures and by virtue of Article 115 of the State Budget Law (LOE) for 2010, was the tax benefit for job creation provided for in Article 19 of the EBF cumulative with other employment support incentives provided for in other legal statutes when applicable to the same job.

Therefore, by virtue of the legal impossibility of cumulation provided for in number 5 of Article 19 of the EBF, if during the period of validity of the tax benefit (5 years from the creation of the job) other employment support incentives provided for in other statutes (such as the benefit enshrined in Decree-Law no. 89/95) are granted to that worker or job, the taxpayer will not be able to avail itself of that tax benefit. From this it follows that, if the company benefits from other employment support incentives provided for in other statutes that have an associated term shorter than five years, it will not be able for that worker or job, even if partially, to avail itself for the remaining period of the job creation tax benefit enshrined in Article 19 of the EBF.

In fact, this behavioral pattern called "benefit dragging", in which the same job created initially enjoys the exemption from social contributions (for the 36 months legally permitted) and subsequently the tax benefit for job creation for the remaining period of duration of this benefit (remaining 24 months), not only corresponds to undue cumulation of the two benefits for the same job (albeit distributed over time), but also, regarding the tax benefit for job creation, avails itself of a taxable event that occurred 36 months ago, disregarding the express requirements of Article 19 of the EBF.

In fact, the employment relationship (indefinite-term contract) occurred 36 months ago and it is for that same date that the corresponding balance is assessed to determine net job creation, a requirement legitimizing its eligibility in the tax benefit for job creation provided for in Article 19 of the EBF.

Still regarding the 2 employees, (…), mentioned above, whom B... responded did not benefit from the first employment incentive, it is verified that the latter did not furnish proof that such was not the case, which would have been possible, for example, through the Social Security contributions made by the employing entity in the three years following the admission of the said employees, which (…) occurred on 05-07-2008 and (…) on 01-11-2008.

It should be noted that pursuant to Article 74 of the General Tax Law (LGT), the burden of proof of the facts constituting the rights of the tax administration or taxpayers rests on whoever invokes them. Being faced with a tax benefit granted to the taxpayer, it is the latter who must prove that it is in a position to benefit from it.

Also, Article 7 of the EBF, in the wording in force at the time of the facts, provides that "All persons, singular or collective, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the Tax and Customs Authority, the Regional Directorate of Tax Affairs and other competent entities, to control the verification of the assumptions of the respective tax benefits and the compliance with the obligations imposed on the beneficiaries of the right to benefits." From this it follows that the taxpayer has the obligation to provide all elements necessary for verification by the Tax and Customs Authority to carry out its inspection work.

Therefore, the situation of these employees will not be considered.

In light of the foregoing, a correction is proposed in the amount of €165,908.22 [€165,908.22 = €51,212.68 + €114,695.54], to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, pursuant to number 5 of Article 19 of the EBF and the Doctrinal Note relating to Proceeding no. 1145/07, with order of 26/05/2008, from the Legal Substitute of the Director-General of Taxes, for the purpose of determining taxable income for the 2013 period.

III.1.1.3.4. B... overstated expenses with young people who, in the period under analysis, were working part-time, without adjusting the maximum amount of annual increase per job, provided for in number 3 of Article 19 of the EBF, in proportion to the reduction of the normal period of effective work.

The employees who were working part-time in the period under analysis are identified in Annex 8 and the increase in job creation relating to these employees amounts to €27,881.79.

Annex 8 is an excerpt from Annex 3, which covers only, as we mentioned, the employees who in the period under analysis worked part-time. (…)

In accordance with the understanding of the Tax Authority's Tax Studies Centre, sanctioned on 7 December 2010, by the Sub-director-general of Taxes, substituting the Director-General (Proceeding no. 48/2010), in hiring part-time workers, the maximum limit of annual increase, provided for in Article 19 of the EBF, must be adjusted in proportion to the reduction of the normal period of work, for a twofold reason:

• 1st, in light of the principle of unity of the legal system, the rules defining the tax incentive must be interpreted taking into account the regulations governing financial incentives (granted by Social Security) with identical purposes and similar assumptions (previously, Law no. 103/991, now Ordinance no. 125/2010) and which in this respect adopted the rule provided for in the Labour Code (Cf. Art. 185 of the Labour Code approved by Law no. 99/2003, of 27/08);

• 2nd, the non-adjustment of the minimum monthly remuneration amount for the purpose of Article 19 of the EBF would result in a bias of the benefit amount in favor of hiring part-time workers to the detriment of hiring full-time workers, an effect which certainly contradicts the objectives pursued with the application of this measure.

The maximum amount of annual increase per job in the 2013 period, as we mentioned previously, amounts to €6,790.00.

After adjusting the maximum limit of annual increase in proportion to the reduction of the normal period of work, for the employees identified in Annex 8, the corrected increase in job creation amounts to €15,541.75.

In light of the foregoing, a correction is proposed in the amount of €12,340.04 [€12,340.04 = €27,881.79 - €15,541.75], to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, pursuant to number 3 of Article 19 of the EBF and the understanding of the Tax Authority's Tax Studies Centre sanctioned on 7 December 2010, by the Sub-director-general of Taxes, substituting the Director-General (Proceeding no. 48/2010), for the purpose of determining taxable income for the 2013 period.

III.1.1.3.5. B... overstated expenses with young people who, in the period under analysis, according to the company's statements, were expatriated.

The employees who were expatriated in the period under analysis are identified in Annex 9 and the increase in job creation relating to these employees amounts to €39,425.13.

(…)

B... responded that the weekly working hours indicated are theoretical and were applied in the months in which these employees were working in Portugal. It added that these workers only generated Social Security contributions and that they do not appear in the Single Report.

The Labour Code regulations created a single obligation, charged to employers, to provide annual information on the company's social activity, with content and submission deadline regulated in Ordinance no. 55/2010, of 21 January and Ordinance no. 108/2011, of 14 March. The model of the Single Report published in the Ordinance referred to (no. 55/2010) is composed of 6 Annexes: Annex A relates to the personnel table; Annex B, to the flow of entry and/or departure of workers; Annex C, to the annual vocational training report; Annex D, to the annual report of health and safety service activities; Annex E, strikes and Annex F information on service providers. There is also Annex O which deals with generic information about the entity.

In the said Annex O, in accordance with the instructions for completing the Single Report, in the section "III — People employed", section "2. Posting of Workers abroad, throughout the year", subsection "2.1. Number of workers posted", should here be considered the number of workers of the entity who were working abroad, posted to an establishment of its own or another entity, in some period of the year of reference of the report being remunerated by the originating entity and maintaining with it the employment relationship, subsection "2.2. Number of postings", should here be considered the total number of times workers of this entity were working at an establishment of its own or another entity, throughout the year of reference of the report, being remunerated by the originating entity and maintaining with it the employment relationship. The number of postings may be greater than or equal to the number of posted workers.

In Annex A — Personnel Table, in section I — Local unit (establishment), subsection "1. Number of persons employed by the local unit on 31 October", should here be indicated the number of persons employed by the local unit on 31 October of the year of reference of the report considering, namely, employees (TCO), unpaid family workers, the employer(s) when exercising functions in the Company/Entity (e.g. owner/managing partner), active members of cooperatives. Exclude only persons absent for more than one month, relative to the reference date indicated (31 October).

Based on the instructions for completing the Single Report, in the part relating to Annex A and B...'s response, we conclude that the employees in question do not appear in the Single Report because they were absent from the company for more than one month, relative to 31 October 2013.

On the other hand, from the instructions for completing the Single Report, in the part relating to Annex O of the Single Report, we extract that employees posted to work abroad should be an integral part of this Report, if remunerated by B... and maintaining with it an employment relationship. The company provided no information in this respect.

In the notification it is requested proof of the weekly working hours of the employees under analysis. B... provides no proof regarding the number of hours worked by these employees, regarding the entity that processes the salary of these employees, regarding the entity that bears the expenses of these employees and especially regarding what employment relationship B... has with these employees. As to this last point, it should be noted that if the entity does not have an employment relationship with these employees it is not entitled to the tax benefit of which it intends to be a beneficiary.

Once again, pursuant to Article 74 of the LGT and Article 7 of the EBF, which we mentioned earlier, the taxpayer has the obligation to provide all elements necessary for verification by the Tax and Customs Authority to carry out its inspection work.

In view of the absence of proof of the hours worked by these employees and other evidence that would allow us to validate the assumptions for granting the benefit, we will consider that the weekly working hours of these employees is zero.

In light of the foregoing, a correction is proposed in the amount of €39,425.135 to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod22, pursuant to numbers 1 and 3 of Article 19 of the EBF and the understanding of the Tax Authority's Tax Studies Centre sanctioned on 7 December 20101 by the Sub-director-general of Taxes, substituting the Director-General (Proceeding no. 48/2010), for the purpose of determining taxable income for the 2013 period.

III.1.1.3.6. From the analysis carried out on the statement of net job creation for the 2013 period attached in Annex 11, (…), in accordance with which 10 jobs were created, B... considered as ineligible departures, from this period, employees who were benefiting from the incentive for hiring young people seeking their first employment. The 12 employees in question (…)

For the purpose of determining net job creation, in accordance with the provision of letter d) of number 2 of Article 19 of the EBF, previously cited, account must be taken of number 1 of this article. It is in number 1 that the conditions of eligibility for access to the benefit are defined. Cumulation with other employment support incentives is not a condition of (non)eligibility of access to the benefit, but the impossibility of increase of the benefit, during the period in which cumulation occurs, pursuant to number 5 of the said article.

Given this, these departures are eligible because at the date of their respective admission, these employees met the conditions defined in number 1 of the said article to have access to the benefit.

It is concluded from the foregoing that there was no net job creation in the 2013 period, since the number of eligible entries was 83, less than the number of eligible departures corrected to 85 (= 73 + 12).

Attached in Annex 12, an excerpt from Annex 3, which includes the employees selected for increase in the 2013 period. The increase in job creation relating to these employees amounts to €54,724.02.

In light of the foregoing, a correction is proposed in the amount of €54,724.02, to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, pursuant to numbers 1 and 2 of Article 19 of the EBF, for the purpose of determining taxable income for the 2013 period.

III.1.1.3.7. From the analysis carried out on the statement of net job creation for the 2012 period, carried out in compliance with Service Order no. 012016..., issued on 05-04-2016 and with an order sanctioned on the same date, we concluded in section III.1.1.4 of the respective Final Report that net job creation in the corrected 2012 period is 80 jobs, instead of 94 jobs determined by the taxpayer. Therefore, there is an excess of 14 jobs, selected for increase with reference to the 2012 period, which are improper.

Attached in Annex 13, an excerpt from Annex 3, which includes the employees corresponding to 14 jobs in excess, selected for increase with reference to the 2012 period. The increase in job creation relating to these employees amounts to €91,116.25.

In light of the foregoing, a correction is proposed in the amount of €91,116.25, to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, pursuant to numbers 1 and 2 of Article 19 of the EBF for the purpose of determining taxable income for the 2013 period.

III.1.1.3.8. B..., for the employee (…), considered two employment contracts with right to benefit. Attached in Annex 14, the excerpt from Annex 3, which summarizes this situation. The increase in job creation relating to the duplication of this employee's contracts amounts to €1,256.01.

Number 6 of Article 19 of the EBF provides that "the regime provided for in no. 1 may only be granted once per worker admitted to that entity or another entity with which there are special relationships within the meaning of Article 63 of the IRC Code."

In light of the foregoing, a correction is proposed in the amount of €1,256.01, to the deduction made by B... in field 774 — "Tax Benefits" of table 07 of the income statement IRC/Mod.22, pursuant to number 6 of Article 19 of the EBF, for the purpose of determining taxable income for the 2013 period.

III.1.1.3.9. Regarding the 2013 period, the following is summarized in the table below, the increase in job creation corrected by the foregoing:

[TABLE PRESENT IN ORIGINAL]

(…)

III.1.2. International Legal Double Taxation

Article 91 of the IRC Code, in the wording in force until 31 December 2013, establishes in its number 1 that the deduction corresponding to international double taxation is only applicable when taxable income has included foreign-source income and corresponds to the lesser of the following amounts:

a) Income tax paid abroad;

b) Fraction of the IRC, calculated before the deduction, corresponding to income that in the country in question may be taxed, net of expenses directly or indirectly incurred for its obtaining.

Number 2 of the said article provides that, when there is a convention to eliminate double taxation concluded by Portugal, the deduction to be made pursuant to the previous number may not exceed the tax paid abroad pursuant to the terms provided by the convention.

As of 1 January 2014, with the wording given by Law no. 2/2014, of 16 January (IRC Reform Law), Article 91 came to have the following wording:

Article 91

Foreign Tax Credit for International Legal Double Taxation

1 — The deduction referred to in letter a) of no. 2 of Article 90 is only applicable when taxable income has included foreign-source income and corresponds to the lesser of the following amounts:

a) Income tax paid abroad;

b) Fraction of the IRC, calculated before the deduction, corresponding to income that in the country in question may be taxed, plus the adjustment provided for in no. 1 of Article 68, net of expenses directly or indirectly incurred for its obtaining.

2 — When there is a convention to eliminate double taxation concluded by Portugal, the deduction to be made pursuant to the previous number may not exceed the tax paid abroad pursuant to the terms provided by the convention.

3 — The deduction provided for in no. 1 is determined by country considering all income from each country, with the exception of income attributable to a permanent establishment of residents situated outside Portuguese territory whose deduction is calculated separately.

4 — Without prejudice to the limitation provided for in the previous number, whenever it is not possible to make the deduction referred to in no. 1, due to insufficient collection in the tax period in which the foreign-source income was included in the taxable base, the remaining amount may be deducted from the collection of the following five tax periods, with the limit provided for in letter b) of no. 1 corresponding to the foreign-source income included in the taxable base and after the deduction provided for in the previous numbers.

From the above, we emphasize that, in accordance with the preamble of number 1 of Article 91 of the IRC Code, the deduction corresponding to international legal double taxation (IDDT) is only applicable when taxable income has included foreign-source income.

In accordance with the Doctrinal Note relating to Proceeding no. 3489/2005, with order of 15/10/2007, from the Legal Substitute of the Director-General of Taxes, the right to deduction of the foreign tax credit for international double taxation is born at the moment when the income is included in the tax base, that is, in the period in which income obtained outside national territory and corresponding costs incurred were recognized in the accounting, in accordance with the principle of specialization of fiscal years.

The said Doctrinal Note continues that when the payment of income and respective withholding at source occurs in a fiscal year different from that in which the income is recorded in the tax base:

• if payment is made still within the deadline for submission of the respective income statement: the tax credit should take place in the same;

• otherwise, the taxpayer should proceed with the filing of a replacement statement (within the period of 1 year from the end of the legal deadline) or claim graciously (when this deadline is exceeded) from the self-assessment of the fiscal years to which the income relates.

From the above we also emphasize that, in accordance with number 2 of Article 91 of the IRC Code, when there is a convention to eliminate double taxation concluded by Portugal, the deduction to be made pursuant to the previous number may not exceed the tax paid abroad pursuant to the terms provided by the convention.

Thus, if a Convention exists and is applicable, what is determined in this number takes effect.

This means, namely, that if there is no place for taxation in the source State in light of what the Convention provides, there is also no place for tax credit pursuant to number 1 of Article 91 of the IRC Code, by virtue of what number 2 provides.

III.1.2.1. Period of 2013

B... proceeded with the deduction from collection, in field 353 — "International Legal Double Taxation (IDDT — Article 91)" of Table 10 of the income statement IRC/Mod.221 for the purpose of calculating tax for the 2013 period, of the amount of €298,169158. (…)

According to this calculation the amount to be deducted would be €418,369.81, while the amount deducted, as we already mentioned, was €298,169.58, corresponding to the collection of the fiscal year, in accordance with the provision of numbers 2 and 9 of Article 90 of the IRC Code.

We proceeded with the analysis of the statement of calculation of IDDT for this period and verified that:

III.1.2.1.1. B... calculated as the amount to be deducted relating to IDDT of 2013 the amount of €389,153.59, relating to income obtained abroad in prior periods, (…).

This income was recorded in the accounting in the fiscal periods of 2011, 2012 (5 months) and 2012.

As we mentioned previously, the deduction corresponding to international legal double taxation is only applicable when taxable income has included foreign-source income.

Now, this income was recorded in the accounting in prior periods and was included in the taxable base of prior periods, so the tax credit for international legal double taxation relating to such income cannot be deducted in this period, constituting an improper deduction pursuant to number 1 of Article 91 of the IRC Code.

• if payment is made still within the deadline for submission of the respective income statement: the tax credit should take place in the same;

• otherwise, the taxpayer should proceed with the filing of a replacement statement (within the period of 1 year from the end of the legal deadline) or claim graciously (when this deadline is exceeded) from the self-assessment of the fiscal years to which the income relates.

Pursuant to the combined provisions of number 1 of Article 91 with number 1 of Article 18 (principle of specialization of fiscal years) both of the IRC Code, and taking into account that the Tax Administration, pursuant to number 1 of Article 68-A of the LGT and Article 55 of the CPPT, is bound by the understanding set forth in this Doctrinal Note, a correction is proposed in the amount of €389,153.59 to the deduction calculated by B... relating to IDDT of the 2013 period.

III.1.21.2. B... calculated as the amount to be deducted relating to IDDT of 2013 the amount of €401.69, relating to income obtained in Cape Verde in the 2013 period, (…).

Since 15 December 20001 the Convention to Avoid Double Taxation (CDT) in the matter of income taxes and prevent tax evasion concluded between the Portuguese Republic and the Republic of Cape Verde has been in force.

In accordance with Article 7 (Profits of enterprises) of the said CDT, the competence for taxation of income from provision of services obtained by B... in this territory does not belong to the source State (Cape Verde) but to the State of residence (Portugal).

As we mentioned previously, if there is no place for taxation in the source State in light of what the Convention provides, there is also no place for tax credit pursuant to number 1 of Article 91 of the IRC Code, by virtue of what number 2 provides.

In light of the foregoing, a correction is proposed in the amount of €401.69 to the deduction calculated by B... relating to IDDT of the 2013 period.

III.1.2.1.3. B... calculated as the amount to be deducted relating to IDDT of 2013 the amount of €191.82, (…).

(…) B... responded that the amount of tax withheld and deducted relates to Expert fees in Court Proceedings (…).

From analysis of the said documents we verify that they relate to receipt of fees from the expert (…) in legal proceedings, paid by IGFEJ — Financial Management and Court Equipment Institute, IP.. Regarding the amount to be deducted of €137.80, we verified that it relates to F... and not to B... and relates to the 2012 fiscal period. For both this amount to be deducted and the other of €54.02, the company did not send the invoices issued, justifying the income obtained. As to the tax withheld, this tax was withheld in Portugal.

In light of the foregoing, we are not faced with facts that fit within Article 91 of the IRC Code, so a correction is proposed in the amount of €191.82 to the deduction calculated by B... relating to IDDT of the 2013 period.

III.1.2.1.4. Regarding the 2013 period, the following is summarized in the table below the deduction relating to IDDT corrected by the foregoing:

[TABLE PRESENT IN ORIGINAL]

(…)

III.1.2.3. Finally, the following summarizes the corrections to the calculation of tax relating to the periods of 2013 (…):

[TABLE PRESENT IN ORIGINAL]

(…)

III.3. In conclusion

III.3.1. In the matter of IRC

III.3.1.1. In light of the foregoing, the following are the corrections to the Calculation of Taxable Income in the periods under analysis:

[TABLE PRESENT IN ORIGINAL]

(…)

III.3.1.2. In light of the foregoing, the following are the corrections to the Calculation of Tax in the periods under analysis:

[TABLE PRESENT IN ORIGINAL]

(…)"

h) As results from what is set forth in the mentioned RIT, B..., S.A. was notified of the respective draft RIT, through memorandum no. ..., of 16.10.2017, as per registered letter no. RD...PT, received on 17.10.2017 and to, if it so wished, exercise the prior hearing right, which B..., S.A. did, having put forward the following arguments which are important to retain here, which were subject to the assessment that is also referred to below [cf. PA]:

"IX.2. In the context of the exercise of the prior hearing right, the taxpayer expressed itself in the following terms:

IX.2.1. Tax benefit for job creation:

IX.2.1.1. B... fully accepts the corrections proposed in sections III.1.1.3.1 and III.1.1.3.8 relating to the 2013 fiscal year, in the global amount of €52,468.69 (…).

IX.2.1.2. B... fully contests the corrections proposed in sections 111.1.1.3.2 (relating to the 2013 fiscal year) (…), in the respective amount of €114,695.54 (…).

It bases its challenge essentially on the fact that the AT accepted its procedure in prior periods and is not accepting it for the fiscal years under analysis. It understands that Article 19 of the EBF only prevents cumulation of this benefit with other benefits of the same nature if this is simultaneous, that is, if it coincides at the same moment in time.

Regarding the two employees, (…), it attaches documents proving the contributions paid to Social Security, justifying that these employees never benefited from exemption from Social Security contributions.

IX.2.1.3. B... fully contests the corrections proposed in sections III.1.1.3.4 (relating to the 2013 fiscal year) (…), in the respective amount of €12,340.04 and (…).

It declares that the AT does not substantiate the proposed correction and that it merely presented an understanding of the Tax Authority's Tax Studies Centre. It considers that the proposed correction has no legal basis and that gaps in the law are not susceptible to analogical interpretation.

IX.2.1.4. B... fully contests the corrections proposed in sections III.1.1.3.5 (relating to the 2013 fiscal year) (…), in the respective amount of €39,425.13 (…).

It declares that the AT does not substantiate the proposed correction and that it merely concluded that because the expatriate employees do not appear in the Single