Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. Alexandra Coelho Martins (President Arbitrator), Dr. Nuno Pombo and Dr. Maria Alexandra Mesquita (Member Arbitrators), appointed by the Ethics Council of the Administrative Arbitration Centre ("CAAD") to form this Arbitral Tribunal, constituted on 1 August 2018, agree as follows:
REPORT
A..., Lda., a legal entity number ..., with registered office at ..., n.º...–..., ...-... Lisbon, hereinafter referred to as the "Claimant", filed a request for constitution of a Collective Arbitral Tribunal and arbitral pronouncement, pursuant to articles 2, n. 1, paragraph a), 5, n. 3, paragraph a), 6, n. 2, paragraph a), 10, n. 1, paragraph a) and n. 2, all of the Legal Framework for Arbitration in Tax Matters ("RJAT"), approved by Decree-Law n. 10/2011, of 20 January, with a view to declaring the illegality of the Corporate Income Tax ("IRC") tax act for the year 2015, embodied in assessment n. 2018..., of 8 January 2018, in the respective compensatory interest calculation statement n. 2018..., and in the account reconciliation statement n. 2018..., corresponding to offset n. 2018..., these of 11 January 2018, in the total amount of € 296,070.13, on the grounds of article 99, paragraph a) of the Code of Tax Procedure and Process ("CPPT"), concerning "erroneous qualification and quantification of income, profits, patrimonial values and other tax facts".
The Tax Authority and Customs Authority ("AT") is the Respondent.
The Claimant requests the annulment of said tax act and the condemnation of the AT to refund the amount paid, plus the respective indemnity interest referred to in articles 43 of the General Tax Law ("LGT") and 61 of the CPPT.
As the basis for the request, the Claimant alleges that the AT did not fulfil the burden of proof that lay with it, failing to demonstrate the requirements for the application of article 88, n. 1 of the IRC Code, which concern the existence of the operations to which the expenses relate, that is, the occurrence of an effective expense, and also the fact that its beneficiary is not known nor knowable, which does not occur in this case.
It argues that the difference, corresponding to € 557,959.54, between the cash balance and current account deposits reflected by its accounting and the amount verifiably existing in its bank accounts, was due to the fact that, by oversight, it failed to deduct the sums loaned to its shareholder, as evidenced by loan receipts, and therefore such amount cannot be framed as undocumented expense. Only expenses that lack any documentary support whatsoever are covered by autonomous taxation, not those "not properly documented", as affirmed by the jurisprudence of the superior courts.
It further states that in case of well-founded doubt about the existence and quantification of the tax fact, the provisions of article 100 of the CPPT are applicable, and the impugned act should be annulled.
On the other hand, having the AT acknowledged that there was no proper bank reconciliation, it cannot avail itself of the presumption of truthfulness provided for in article 75 of the LGT and use the values recorded in the accounting to tax the Claimant, since, in case of discrepancy, the accounting, in the corresponding segment, cannot be considered as evidence. The AT should in such circumstances have sought to reconstitute the Claimant's actual situation so as to determine taxation based on its factual situation.
Finally, the Claimant considers that the AT made a legal error, since the correct classification of the facts established in the tax inspection report would be that of distribution of profits to its shareholder, pursuant to article 5, n. 2, paragraph h) of the Personal Income Tax Code ("IRS"), subject to a rate of 28% and not 50%.
It concludes for the illegality of the 2015 IRC assessment and the inherent compensatory interest, since there was no delay in the assessment of this tax.
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and followed its normal procedure, namely with notification to the AT.
In accordance with articles 5, n. 3, paragraph a), 6, n. 2, paragraph a) and 11, n. 1, paragraph a), all of the RJAT, the Ethics Council of CAAD appointed as arbitrators of the Collective Arbitral Tribunal the signatories, who communicated acceptance of the assignment within the applicable timeframe.
The parties, duly notified of such appointment, did not object, in accordance with the combined provisions of articles 11, n. 1, paragraphs b) and c) and 8 of the RJAT and 6 and 7 of the CAAD Code of Ethics.
The Collective Arbitral Tribunal was constituted on 1 August 2018, as communicated by the President of the Ethics Council of CAAD.
The Respondent submitted a reply and attached the administrative file ("PA"), arguing for the dismissal and consequent absolution of all claims.
The Respondent emphasizes that the loan receipts were issued after the Claimant was confronted to justify the fact, identified during the inspection action, that its accounting reflected a cash and current account deposit balance that did not exist in reality. Such receipts were only issued in October 2015 and also recorded in that date, although dated earlier, the alleged loans being made to the managing shareholder Dr. B..., who, however, had approved the accounts of previous years, without any reference to the loans, which were of significant value. In these circumstances, such attempt at post hoc regularization lacks credibility and does not reflect the actual operations that occurred in the company, leading to the conclusion that financial means did not leave the company, at the time they did, in the form of loans.
With no accounting record of a profit distribution or advance on account of profits, the proper classification is the exit of liquid means from the company without any supporting document. The meaning of "undocumented expenses" refers to exits of financial means from business assets through movement of the cash account or bank accounts without documentary support.
Furthermore, the requirement that the beneficiary of the expenses be not known nor knowable does not result from contemporary law (article 88, n. 1 of the IRC Code) which, by OECD recommendation, no longer adopts the concept of confidential expenses to which the jurisprudence cited by the Claimant refers. The current law, with a deterrent and sanctioning function for certain behaviors, is satisfied with the exit of funds generated by the activity of the enterprise for known or unknown purposes, but without documentary support.
According to the AT, the norm in question does not make autonomous taxation dependent on accounting recording as expenses of undocumented expenses, providing only that, where such is the case, the non-deductibility of expenses, in accordance with article 23-A, n. 1, paragraph b), be compatible with autonomous taxation.
With no plausible justification for the amounts "diverted" from business activity, at the time they were, in the amount of € 557,959.54, nor legal title or fiscally relevant document proving their use, or accounting record supporting them, they fall within the concept of undocumented expenses.
As unnecessary, the Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT and ordered notification of the parties for optional written submissions, in accordance with the dispatch of 2 October 2018.
The Claimant submitted submissions essentially referring to the arguments set out in the request for arbitral pronouncement, with the AT choosing not to submit any submissions.
PRELIMINARY MATTER
The Tribunal was regularly constituted and is competent ratione materiae, given the nature of the subject matter of the case (cf. articles 2, n. 1, paragraph a) and 5 of the RJAT).
The request for arbitral pronouncement is timely, as it was submitted within the timeframe provided in paragraph a) of n. 1 of article 10 of the RJAT.
The parties have legal standing and capacity, have legitimacy, and are properly represented (cf. articles 4 and 10, n. 2 of the RJAT and article 1 of Ordinance n. 112-A/2011, of 22 March).
The case does not suffer from any nullities, with no exceptions having been raised.
REASONS
FACTS
Facts relevant to the decision require consideration of the following facts deemed proved:
A. A..., Lda., the Claimant herein, is a limited liability company constituted in 1999 and classified under CAE 86906 – Other activities of human health – cf. Tax Inspection Report, also referred to as "RIT", attached with the request for arbitral pronouncement ("ppa" – document 2) and with the PA.
B. An external inspection action was carried out on the Claimant, pursuant to service orders n.ºs OI2016..., OI2016... and OI2016..., concerning the years 2012, 2013 and 2014, with the partial scope of IRS and Stamp Tax Withholding, notified in December 2016 – cf. RIT.
C. In June 2017, the Claimant was notified of the expansion of the scope of this inspection action, with the first two service orders coming to also include Value Added Tax ("VAT") and the third VAT and IRC – cf. RIT.
D. In October 2017, the Claimant was notified of service order n.º OI2017..., relating to the year 2015, with the partial scope of IRC, VAT and IRS Withholding – cf. RIT.
E. Following this inspection action, the Claimant was notified of the Draft Inspection Report, in relation to which it exercised its right to prior hearing. The AT maintained the proposed corrections, proceeding with notification in December 2017 of the final Tax Inspection Report, the contents of which are entirely reproduced herein and from which the following reasoning is extracted, with relevance to the matter under discussion in this arbitral case (cf. RIT):
"III – DESCRIPTION OF FACTS AND REASONS FOR PURELY ARITHMETIC CORRECTIONS
III.1. – INTRODUCTION
[...]
As a result of the information provided, Dispatch DI2015... was opened, pursuant to which the managing shareholder of the company, Dr. B..., was visited at the premises of the consulting office where he provides services, located [...], on 2015-09-09, in order to gather some elements related to the company A..., Lda., in which he exercises management.
The action aimed to carry out a physical count of the cash of that company.
A "Statement/Count Form" was prepared as shown in annex 1, in which the managing shareholder was asked about:
Description of cash operation
Persons responsible for cash:
- Having responded that – "Receptionists C... and D..."
Physical location and existence of other places where there are values relevant to the cash count:
- Having responded that – "At the reception of the consulting office"
Physical count of values in cash: zero euros.
[...]
In the trial balance presented relating to the situation on 2015-08-31, the Cash account showed a balance of € 498,411.08 and current account deposits showed a balance of € 137,058.47.
[...]
To clarify the balance that was recorded in cash [...], the managing shareholder of the taxpayer was heard in a statement form.
He was thus questioned about (annex 4):
"1 – What was the destination of the amount of € 498,411.08 that were recorded in cash on 31-08-2015 given that, according to the physical count carried out on 09-09-2015, the cash value was nil? In the event the destination is justified by a loan, you are hereby notified within 5 (five) days to send a copy of the loan contracts to these services and to the above-identified process.
2 – What was the destination of the amount of € 127,568.66 recorded as cash withdrawal resulting from the record of € 209,870.32 exit on 2014-01-31 minus the correction of € 82,301.66 recorded as debit on 2015-01-31?"
Having stated:
"1 – Money used by the managing shareholder that the company loaned to him and the trial balance will no longer be correct.
2 – Only by speaking with the accounts technician and it will probably be from house construction expenses."
Following the statements made, the taxpayer sent by postal mail (entry n.º 2015... of 2015-11-02) some additional clarifications that are transcribed (annex 4):
"2. Within the scope of question n.º 1 contained in the Statement Form signed on that occasion, the Certified Accounts Technician of this Contributor was requested to clarify why the amount of 498,411.08 € was recorded in the Cash account, as this Company, in accordance with previously made statements, did not possess, nor ever possessed, physical cash balances.
-
The aforementioned Certified Accounts Technician reported that all movements (entries and exits) went through that account and that it would proceed to correct it.
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From the detailed analysis of the movements made, it was found that that account recorded all accounting operations, with more exits than entries, exits that also embodied loans made by the Company to the shareholder, on a loan basis, and that were evidenced by documents of which we enclose copies of the same duly signed.
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The Certified Accounts Technician was requested to make the appropriate corrections so that the accounting reflects its actual patrimonial position, which was done.
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Within the scope of Question n.º 2 contained in the Statement Form, it is reported that the company acquired in 2001 a plot of land for Construction valued at € 157,121.34, a value that appears in the respective deed of purchase and sale executed.
-
It was found that the amount of € 74,818.68 was incorrectly recorded in the Land item (c/4311), in accordance with the fixed assets inventory dated 31 December 2014,
-
and that in the real estate item (c/4322) the amount of € 82,301.66 was recorded, a value belonging to the Land item.
-
This accounting error had no expression, however, in the List of Tangible Fixed Asset Inventory, List issued on 31/12/2014 which is attached, in which it can be verified that in the LAND item in 2001 the amount of € 157,121.34 is recorded.
-
Having detected this inaccuracy, it was promptly corrected, the passage of this transfer in the cash account, which in truth does not involve any financial movement, resulting from the fact that any movement went through that account.
-
This explains why in that Cash account there is no correspondence in terms of financial flows."
Attached to these clarifications, the taxpayer sent copies of various loan receipts, dated from 2012-01-31 to 2014-11-30, in the total amount of € 659,128.98, in accordance with the following tables:
[Tables with loan receipt details for 2012, 2013, and 2014]
All loan receipts are similar, only changing the amount. Thus, all refer to "Amount paid to the Borrower Mr. Dr. B..., Managing Shareholder, Taxpayer n.º..., ... the amount of ..., on a loan basis, amount which he receives and from which he acknowledges and confesses himself to be a debtor.
The Loan is due as soon as one of the parties denies it with a minimum advance notice of 30 days, in accordance with the provisions of Article 1148 n. 2 of the Civil Code.
In accordance with the provisions of Article 1145 of the same Code, the parties agree that the loan is not of an onerous nature, and is not therefore subject to the payment of any interest."
All these loan receipts were recorded by crediting the Cash account (11.1 – Cash A) and debiting a shareholders account (26.8.5.1 – Shareholders/Partners – Other operations – Partners loan contract).
When recording the loan receipts, the taxpayer transferred the balances that were recorded in bank accounts ("12.3 – Current Account Deposits – Bank E...", "12.4 – Current Account Deposits – E... – Account..." and "13.1.2 – Term Deposits – I.... – Term Deposit"), to the cash account.
Although these loan receipts were recorded in the years 2012 and 2014, analyzing the Saf-t files of the accounting, it can be verified that the recording of the loan receipts and the transfers of the balances of the bank accounts to the cash account, in the years 2012, 2013 and 2014, was only carried out in October 2015 (those of 2013 and 2014 on 20 October and those of 2012 on 27 October) (annex 5).
Also in October 2015, the taxpayer proceeded to submit replacement declarations of the IES's previously submitted for the years 2012 to 2014.
Comparing the initially presented IES's and the replacement IES's, it can be seen that the differences relate to the company's assets (namely transferring values of cash and bank deposits to the shareholders account) [...]
[...] the difference from the first declaration to the second declaration in each of the years consists in the decrease of the value in the cash and bank deposits item and in the increase of an equal amount in the shareholders/partners item.
Being heard in a statement form (annex 6), F..., manager of the office where accounting was executed in the years 2012 to 2015 on "when you had, and in what way did you have, knowledge of the loan contracts that were recorded in the firm A..., Lda. in the years 2012, 2013 and 2014?" to which she replied "It was in October 2015. The drafts of the same were sent to us by email by Dr. G... in October 2015. Following the email with the drafts, the contracts were prepared and recorded. After this recording, we were informed that Dr. B... intended to change certified accountants. Attached is the correspondence exchanged both for the preparation of the loan contracts and for the change of accountant."
The correspondence presented (annex 6) corroborates the statements made, namely the exchange of emails with a view to the preparation and recording of the loan receipts in October 2015.
However, as will be explained further on, this alteration of accounting in years already closed and with approved accounts cannot be taken into account, so we must depart from the values existing on 2014-12-31 (values validated by account approval), annex 7, and update with the movements recorded between January 2015 and the count date.
[Table 7 showing account balances and movements]
Attention is drawn to the fact that after the accounts for the year 2014 were approved, the accounting was altered with the recording, in the years 2012 to 2014, of the aforementioned loan receipts, which is why the accounting does not reflect the balances of the previous table in the accounts on 2015-08-31.
Thus, as a result of the corrections made to the accounting, namely the recording of these loan receipts, the trial balance on 2015-08-31 (already after the year was closed) came to show a cash balance of € 16,754.67 and current account deposits a balance of € 137,058.47.
It should be noted that cash and bank accounts should be analyzed together because in the recording made by the taxpayer, there is no correct distinction between cash and banks. Firstly because there are receipts by bank transfer, and that did not go through cash, but that are recorded in a first phase in cash and only afterwards are transferred to the bank account.
Then, because before the recording of the aforementioned loan receipts, the taxpayer had recorded in the 2015 year the transfer of the balances of the accounts "12.3 – Current Account Deposits – Bank E...", "12.4 – Current Account Deposits – E... – Account ..." and "13.1.2 – Term Deposits – I.... – Term Deposit" to the Cash account. However, when recording the loan receipts in October 2015, that transfer of balances from bank accounts to the cash account is recorded in 2012 and 2014 and removed from the 2015 accounting.
Also the recording, in January 2015, of the amount of € 82,301.66 referring to the correction of the land value is made as a credit (exit) from the "12.4 – E... – Account..." account. However, in the reversal of this entry, the debit (entry) is not made through this account but through the cash account.
There being no correct distinction in the recording of entries and exits in cash and banks, the amount in cash and banks must be analyzed as a whole.
Of the total amount of € 695,018.01 of the Cash and Bank accounts, only the amount of € 137,058.47 (€ 3,507.44 existing in H... and € 133,551.03 in J...) was able to be verified (annex 8).
There is thus a differential of € 557,959.54 (€ 695,018.01 - € 137,058.47) that should have been in the possession of the taxpayer but in reality at the time of the physical cash count was not found in that location.
III.2. ANALYSIS OF FACTS
- Amount recorded in cash and bank deposits
Given the recording in 2012, 2013 and 2014 of the loan receipts presented and the transfer to the cash account of the balances of the bank accounts, which in reality did not exist, the trial balance on 2015-08-31, presented on 2017-10-31, showed a balance in the cash account of € 16,754.67 and in the current account deposits a balance of € 137,058.47.
However, as already previously mentioned and proven, although the loan receipts were dated from 2012, 2013 and 2014, in reality they were prepared in October 2015 (in accordance with statements from the manager of the office where the accounting was prepared and corroborated by the emails exchanged, annex 6) and also recorded in October 2015 (in accordance with the Saf-t files of the accounting), more specifically on 20 October those of 2013 and 2014 and on 27 October those of 2012.
Moreover, it should be noted that when recording the loan receipts in the years 2012 to 2014, these years were already closed and the accounts were approved.
The accounts for the years 2012 to 2014 were approved at Ordinary General Meetings held on 2013-03-28 (minutes n.º 15), 2014-03-31 (minutes n.º 16) and 2015-03-31 (minutes n.º 17), respectively, annex 10. In the accounts approved at those dates, there was no reference to any loan receipts.
In accordance with the aforementioned minutes, the shareholders B... and K... were present at those General Meetings. In the minutes of those General Meetings it is stated that "After being duly analyzed, the balance sheet presented a positive result in the amount of... was approved unanimously".
By the loan receipts exhibited, the alleged loans were made to the managing shareholder Dr. B..., exactly one of the shareholders who was present at the General Meetings and who, in accordance with the respective minutes, duly analyzed and approved the balance sheet.
If what is described in the contracts were true, it is not understood how from 2012 the accounts, which did not include the loan receipts, and which therefore the balance sheets did not reflect the situation of the company, were duly analyzed and approved precisely by the shareholder who would have benefited from the alleged loans and who would have perfect knowledge of their existence and not being reflected in the company's situation, with the aggravating factor of values as significant as € 448,128.98, € 101,000.00 and € 110,000.00, in 2012, 2013 and 2014, respectively.
In view of this, one can only conclude that, at the time of approval of the accounts for 2012 to 2014, the loan receipts did not exist.
Furthermore, if there had been a loan to shareholders, the same would be subject to stamp duty in accordance with n.º 1 of article 1 and paragraph b) of n.º 1 of article 2 of the Stamp Tax Code (CIS).
The General Table of Stamp Duty (TGIS), under the heading "17 – Financial Operations", in the item "17.1 For the use of credit, in the form of funds, goods and other values, by virtue of the granting of credit in any form except in the cases referred to in item 17.2, including the assignment of credit, factoring and treasury operations when involving any type of financing to the assignee, adherent or debtor, always considering as new credit granting the extension of the contract period - on the respective value, depending on the term:" defines further on, in items 17.1.4 to 17.1.4, the applicable rate and the method of determining the tax owed.
It is concluded thus that the use of credit by shareholders is subject to stamp duty, the "credit granting entity" being the passive subject of tax, in accordance with paragraph b) of n.º 1 of article 2 of the CIS, this entity being also competent for the assessment and payment as provided for in articles 23, 41 and 44 of the same law.
However, from consultation with the information system of the Tax Authority and Customs Authority (AT), it was found that the taxpayer did not pay any stamp duty in 2012, 2013 and 2014 relating to the loan receipts presented.
The only stamp duty payment relating to loans, and which the taxpayer attributes to these loan receipts, was made on 2016-02-19, relating to the period of January 2016 (not being relevant to the case under review, as it does not relate to the periods and amounts under consideration).
The facts ascertained, in particular:
-
The statements made by the manager of the office where the accounting was executed until the end of 2015, that it was in October 2015 that the drafts were sent to her to prepare the loan receipts (annex 6);
-
The correspondence exchanged in October 2015, relating to the sending of the drafts of the loan receipts (annex 6);
-
The recording of the accounting entry of the loan receipts, in accordance with the Saf-t being carried out in October 2015 (although they were entered with dates from 2012 to 2014) (annex 5);
-
The submission of replacement declarations of the IES's on 22 October 2015, with the n.ºs..., ..., ..., for the years 2012, 2013 and 2014, respectively;
-
Although the loan receipts were dated from 2012 to 2014, stamp duty was paid only in February 2016 relating to the period of January 2016;
-
The accounts for the years 2012 to 2014, which did not include the recording of the loan receipts, were approved by all shareholders, including the managing shareholder who allegedly benefited from the loans;
demonstrate that until October 2015 the loan receipts presented did not exist and that they were prepared only in October 2015, after the cash count had already been carried out.
For all that has been previously described, it is demonstrated that financial means, contrary to what the taxpayer intended to show with the presentation of the loan receipts, did not leave the company in the form of loans, that is, the loan receipts presented do not reflect the actual operations that occurred in the company and therefore the recording of the same cannot be taken into account, just as the accounting alterations in 2012, 2013 and 2014 that occurred after the closure and approval of the accounts and after the cash count carried out by the AT cannot be considered.
III.3. CONCLUSION
The taxpayer began its activity in 1999, with the following being verified:
-
This company operates with a service provider (Dr. B...);
-
In January 2014, an exit of financial means from the company was recorded in the amount of € 127,568.66 (€ 209,870.32 - € 82,301.66) that has no documentary support whatsoever;
-
It practices a profit retention policy, hence the accumulation of the same in carried forward results and reserves throughout the various years of the company's existence (between 2000 and 2014 it obtained net results exceeding € 970,000.00 and only on 2015-06-29 were profits of € 100,000.00 distributed);
-
Bank deposits/cash grow as carried forward results and reserves also grow, since, in accounting terms, the former are the counterpart of the latter, that is, the carried forward results and reserves are reflected in an asset of the company expressed in accounts 11 and 12.
In the accounts of carried forward results and reserves, profits or losses determined in the previous year and shown in the net result account for the period are transferred at the beginning of the following year;
-
In 2014, in the accounting, bank deposits/cash showed a balance of € 607,600.93, notwithstanding subsequent and retrospective alterations to the accounting following the cash count;
-
In accordance with the accounting records, in the period from January 2015 to the date on which the cash count was carried out, there was an increase in financial means in the amount of € 87,417.08, so that, on the date of the cash count, the taxpayer's financial liquid means should be € 695,018.01;
-
That is, despite the accounting showing a recorded balance in cash and current account deposits in the amount of € 695,018.01, what is a fact is that from the elements provided, only the amount of € 137,058.47 existing in current account deposits of H... and J... was verified;
-
There is thus a difference of € 557,959.47 that is not in the possession of the taxpayer. This amount should be in bank deposits and/or cash (company assets), but it was effectively not found in the company;
-
When confronted with this fact, the taxpayer attempted to make corrections to the cash and bank balance, which was shown accounting and fiscally, through the preparation of loan receipts and the filing of annual declarations of accounting and tax information for the various fiscal years through documents which, as demonstrated in this report, cannot be considered;
-
It should be noted that the tax declarations initially submitted reflected the values shown in the accounting, being the latter approved by the respective shareholders in general meeting, as shown in the respective accounting and tax information declarations.
-
Therefore, the AT cannot recognize validity to the values recorded in the replacement tax declarations, filed after the cash count, and when the taxpayer was confronted to justify the values shown in banks and in cash.
It should be noted that in accordance with n.º 3 of article 17 of the CIRC, the accounting must:
-
Be organized in accordance with accounting standards and other applicable legal provisions for the respective activity sector;
-
Reflect all operations carried out by the taxpayer and be organized so that the results of the operations and patrimonial variations subject to the general IRC regime can be clearly distinguished from those of the remainder.
In accordance with n.º 5 of article 121 of the CIRC, the elements contained in the declarations of accounting and tax information must agree exactly with those obtained in the accounting or keeping of records.
For the reasons stated above, the substitute accounting and tax elements filed by the taxpayer after the cash count and after being confronted with the accounting and tax values reflected in the cash and bank accounts will not be considered.
Thus, as there is no accounting record of a distribution of profits or advance on account of profits, from the analysis carried out, liquid means left the company without any documentary support, with the moment of exit being the period between 2015-01-01 and the date on which the cash count was carried out and the bank balances validated.
III.4. CORRECTIONS TO BE MADE
III.4.1 – Year 2014
As previously explained, the recording in January 2014 of the exit of financial means from the company in the amount of € 127,568.66 has no documentary support whatsoever.
The situation in question only has a framework in the figure of undocumented expense which in the case under analysis translates into the effective exit of values existing in cash or bank deposits, namely banknotes or metal coins of legal tender, national or foreign checks or postal vouchers. These movements of exit of funds necessarily translate into payments, and/or the acquisition of goods and/or services, and/or also a liberality or set of liberalities.
In fact, the situation in question constitutes an expense: "1. Act of spending money, of disbursing. 2. Amount that is spent, amount to be paid to another" (Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon).
The autonomous taxation of undocumented expenses translates into an anti-abuse measure, see the Constitutional Court Judgment n.º 18/2011, of 12 January 2011, Case n.º 204/2010, which we now cite: "The tax logic of the regime [non-consideration as a cost – which does not now arise – and autonomous taxation] is based on the existence of a presumed prejudice to the Public Treasury, for it is not possible to prove, due to lack of documentation, whether there was payment of VAT or other taxes that were due in relation to the transactions carried out, or whether income was declared for the purposes of incidence of income tax from profits that third parties came to earn through the commercial relations maintained with the taxpayer of the tax. Furthermore, autonomous taxation, not directly affecting a profit, will have inherent the idea of discouraging a practice which, in addition to affecting equality in the distribution of public charges, may involve situations of criminal illegality or lesser fiscal transparency"
In accordance with n.º 1 of article 88 of the Code of Corporate Income Tax (CIRC), "Undocumented expenses are taxed autonomously, at the rate of 50%, without prejudice to their non-consideration as expenses in accordance with paragraph b) of n.º 1 of article 23-A", and number 14 of the same article further states, "The autonomous taxation rates provided for in this article are increased by 10 percentage points for taxpayers presenting tax loss in the period to which any of the tax facts referred to in the preceding numbers apply related to the exercise of an activity of a commercial, industrial or agricultural nature not exempt from IRC."
In the case under analysis, only the autonomous taxation rate of 50% will apply, since the taxpayer presented tax profit in the year [...].
III.4.2 – Year 2015
It follows from n.º 1 of article 75 of the General Tax Law (LGT), the legal presumption of truthfulness of the data recorded in the accounting:
"1 - It is presumed to be true and in good faith (...), as well as the data and calculations recorded in its accounting or records, when these are organized in accordance with commercial and tax legislation, without prejudice to the other requirements on which the deductibility of expenses depends."
In accordance with this presumption, together with all the facts previously described, there is a difference in financial means of € 557,959.54 that is not in the possession of the taxpayer.
The Personal Income Tax Code (CIRS) only allows the presumption of distribution of profits or advance on account of profits for values that are entered in any current account of the shareholders (article 6).
In the case under consideration, after the count was carried out and following the presentation of the alleged loan receipts to attempt to justify the exit of funds, the values of the receipts are recorded in the "26.8.5.1 – Shareholders/partners – Other operations – Partners loan contract" account.
However, as already mentioned earlier, these entries cannot be taken into account since they are made after the years are closed and the respective accounts are approved and were only prepared and recorded on 20 (years 2013 and 2014) and 27 (year 2012) October 2015 after the taxpayer was confronted with the difference between the values recorded in the cash and bank deposit accounts and the balances actually existing.
In view of these facts, the presumption established in article 6 of the CIRS cannot be considered in the case under consideration.
Moreover, only the managing shareholder can have knowledge of the destination given to the value recorded and that was not effectively in the possession of the taxpayer.
As mentioned in relation to the year 2014, the situation under consideration only has a framework in the figure of undocumented expense.
Having previously explained the framework of undocumented expense, we spare ourselves from repeating, reiterating what was already said on this matter in relation to the year 2014 in point III.4.1.
Since the taxpayer also presented a tax profit in the year 2015, only the autonomous taxation rate of 50% will apply, there being no amount to be added in terms of taxable matter, since no expense was recorded as the counterpart of the said monetary outflow.
Thus, it is proposed that the company be subject to an autonomous taxation rate of 50% (n.º 1 of article 88 of the CIRC), in relation to the divergence determined in the balance of cash and bank deposits, for the reasons already previously stated:
-
Cash and bank deposit divergence – € 557,959.54 (undocumented expenses)
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Autonomous taxation rate – 50% (n.º 1 of article 88 of the CIRC)
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Tax to be paid – € 278,979.77"
[...]
IX. RIGHT TO HEARING
[...]
From the analysis of the submissions presented, it was concluded that the taxpayer contests the proposed corrections based on two points:
-
The amount of € 557,959.54 was loaned to the managing shareholder and the fact that, by oversight, it proceeded late with the accounting record of the loans does not allow concluding that the same did not exist and even less that that amount be qualified as undocumented expenses;
-
That undocumented expenses are those that have no documentary support whatsoever and that, in the case under analysis, the expenses that the inspection services intend to tax autonomously have corresponding documentation in the loan receipts executed throughout the years 2012 to 2014.
[...]
For all that has been previously said and demonstrated, until October 2015 the loan receipts dated from 2012 to 2014 did not exist, they were only prepared and recorded in October 2015.
Thus, it was not a delay in the recording of the loan receipts but rather their non-existence until October 2015, that is, the loan receipts presented do not reflect the actual operations that occurred in the company. Moreover, it can be said that, contrary to what the taxpayer alleges, there was no delay in the recording of the loan receipts since as demonstrated the receipts dated 2013 and 2014 were recorded on 20 October 2015, those dated 2012 were recorded on 27 October 2015, but in accordance with the email exchange until 28 October 2015 the receipts had not yet been signed (they were signed on 28 October 2015 or on a later date).
Regarding point 2), the taxpayer invokes the existence of the alleged loan receipts as documents supporting the exit of financial means from the company and therefore considers that the expenses that are intended to be taxed are documented, and are not therefore subject to autonomous taxation that applies to undocumented expenses.
As explained throughout this report, at the time of the cash count carried out on 09 September 2015, a difference of € 557,959.54 was detected that was not in the possession of the taxpayer. For the reasons duly explained, the moment of exit is considered to be the period between 2015-01-01 and the date of the count (09 September 2015).
The taxpayer alleges that the exit of these financial means has documentary support in the loan receipts presented.
As has also been demonstrated, the loan receipts were prepared only in October 2015 (and not in 2012, 2013 and 2014 as the taxpayer intended to demonstrate), that is, at a date later to the date of the cash count and the shortfall detected, so that when the financial means actually left the company, there was no documentary support.
Therefore, this exit of financial means in 2015 in the amount of € 557,959.54 without any documentary support falls within the concept of undocumented expense, a situation subject to autonomous taxation in accordance with article 88 of the CIRC, which totals € 278,979.77 in tax.
[...]
whereby the tax corrections relating to the years 2014 and 2015, proposed and referred to in chapter III, become final in the following amounts:
[...]
- 2015
IRC – Autonomous taxation on undocumented expenses: € 278,979.77"
F. This Report was subject to, on 16 December 2017, a concordant dispatch from the Chief of Division, by sub-delegation from the Deputy Director of Finance of the Finance Directorate of Lisbon – cf. RIT.
G. The Claimant was notified of assessment n.º 2018..., of 8 January 2018, relating to IRC for the period 2015, in the total amount of € 296,070.13, including compensatory interest, the compensatory interest calculation statement n.º 2018..., and the account reconciliation statement n.º 2018..., of 11 January 2018, with the payment deadline of the said total amount set at 19 February 2018 – cf. document 1 attached with the ppa.
H. The Claimant, on 19 February 2018, made payment of the total amount of € 296,070.13 resulting from said assessments of IRC and compensatory interest – cf. document 3 attached with the ppa.
I. In disagreement with the identified IRC assessment (autonomous taxation) and, as well, with the inherent assessment of compensatory interest, the Claimant submitted to CAAD, on 21 May 2018, the request for constitution of the Collective Arbitral Tribunal that gave rise to this case.
REASONING
The facts relevant to the judgment of the case were selected and delimited according to their legal relevance, in light of the plausible solutions to the legal questions, in accordance with the combined application of articles 123, n.º 2 of the CPPT, 596, n.º 1 and 607, n.º 3 of the CPC, by referral from article 29, n.º 1, paragraphs a) and e) of the RJAT.
Regarding the facts proved, the conviction of the arbitrators was based essentially on the positions assumed by the parties and on critical analysis of the documentary evidence attached to the case.
FACTS NOT PROVED
It was not proved that the divergence existing between the balance of the cash account and the amount existing in the current account deposits would result from accounting oversights of the Claimant derived from the failure to deduct values loaned to its managing shareholder (cf. articles 61, 62 and 83 of the ppa).
With relevance to the decision, there are no other alleged facts that should be considered as not proved.
ON THE LAW
2.1. Delimitation of Issues to be Decided
The fundamental issue to be assessed concerns the qualification, as undocumented expenses, of the divergence in the amount of € 557,959.54 determined in the balance of cash and bank deposits, given the reality resulting from the physical count of cash and the sums deposited in the Claimant's accounts at credit institutions, and consequent subjection to autonomous taxation at the rate of 50%, in accordance with article 88, n.º 1 of the IRC Code.
2.2. Legal-Tax Framework
Current article 88, n.º 1 of the IRC Code provides as follows:
"Article 88
Autonomous taxation rates
1 — Undocumented expenses are taxed autonomously, at the rate of 50%, without prejudice to their non-consideration as expenses in accordance with paragraph b) of n.º 1 of article 23-A.
[…]"
This discipline had as its antecedent the taxation of the then so-called "confidential or undocumented expenses", which was initiated by article 4 of Decree-Law n.º 192/90, of 9 June, at the autonomous rate of 10%, increased to 25% by article 29 of Law n.º 39-B/94, of 27 December (State Budget Law – "LOE" – for 1995).
Article 6 of Law n.º 30-G/2000, of 29 December, added article 69-A to the IRC Code which, under the heading "Autonomous taxation rates", came to integrate this matter in this code, providing for its taxation at the aggravated rate of 50%, under its n.º 1. It was simultaneously repealed, by article 7, n. 11 of that Law (n.º 30-G/2000), the standalone rule contained in article 4 of the cited Decree-Law n.º 192/90.
Later, with Law n.º 67-A/2007, of 31 December (LOE for 2008), the reference to confidential expenses was eliminated, and article 81 (current article 88) of the IRC Code came to contemplate only "undocumented expenses", maintaining the rate of 50%.
The elimination of confidential expenses from the list of facts subject to autonomous taxation, while maintaining the same taxation regime under the category of undocumented expenses, of which the former are a subset, merely removed a redundancy, as the confidential expense is also an undocumented expense, and "it is doubtful that the distinction between the two figures had any relevance in our tax regime while it existed", as well noted in arbitral decision n.º 7/2011, of 20 September 2012 (point 12).
Furthermore, it should be noted that the secret or undisclosed nature of the beneficiary of the expense, which could be invoked as a requirement of confidential expenses (although it was not the only possible interpretation), has no correspondence in the category of undocumented expenses. Thus, it appears to be irrelevant for the qualification of an expense as undocumented, in light of current article 88, n.º 1 of the IRC Code, the concealment, knowability or disclosure of its beneficiary.
In fact, even in the previously distinguished subcategory of confidential expenses, the jurisprudential definition contained in the Judgment of the Plenary of the Supreme Administrative Court ("STA"), of 18 February 2009, in case n.º 600/08, referred objectively to the nature of the expense – "confidential expenses are expenses not specified or identified as to their nature, origin and purpose" – and not to the knowledge or lack of knowledge of the entitled beneficiary of the expense. The previous Judgment of the Plenary of the STA, of 24 October 2007, issued in case n.º 488/07, stated in consonant sense, in the context of one of the (many) cases relating to "self checks", that "being the destination of these checks unknown, they should be considered confidential and/or undocumented expenses", despite being able to know their beneficiary[1].
In this context, it is also worth noting, regarding the requirements of autonomous taxation, that this applies to distinct types of expenses, with different objectives.
As the STA Judgment of 27 September 2017, case n.º 146/16, emphasizes, it is necessary to "keep in mind the type of autonomous taxation in question [...], since, as we shall see below, under this denomination fall realities with distinct teleology and purpose, which call for different treatment. Immediately, because alongside autonomous taxation on expenses, the most frequent, there is also autonomous taxation on income. But also, and essentially, because there are autonomous taxation that can be deducted for purposes of determining taxable profit and others insusceptible of deduction" – in the same sense see the STA Judgment of 21 March 2012, case n.º 830/11.
In this context, considerations regarding certain types of autonomous taxation may not be relevant and valid in relation to other types of autonomous taxation.
The aforementioned judgment further states that autonomous taxation, "initially provided as a means of combating tax evasion and fraud, particularly confidential and undocumented expenses, related to fiscally non-deductible charges; subsequently, in pursuing the achievement of fiscal revenue, its scope was progressively expanded to expenses whose justification from a business point of view appears doubtful and to expenses that may constitute an attribution of untaxed income to third parties, in relation to which deductibility was only admitted if accompanied by autonomous taxation." It continues: "the ratio legis appears to be, not only to avoid the erosion of the tax base and consequent reduction of fiscal revenue, but also to tax (in the sphere of those who distribute them) income that could otherwise not be taxed in the legal sphere of its beneficiaries."
Thus, contrary to what the Claimant argues, undocumented expenses do not have to be expenses that, in accounting terms, affect the result of the period by reducing it, in particular by constituting deductible expenses. There are, in fact, some situations in which the fiscal deduction of the expense is a prerequisite for the incidence of certain types of autonomous taxation, but in the specific case of undocumented expenses this does not happen. In fact, conversely, as referred to in the aforementioned STA Judgment, undocumented expenses relate to fiscally non-deductible charges[2].
It is worth recalling that the concepts of expense and cost are not synonymous, neither from an accounting point of view, nor from the tax perspective which, in addition to the relationship of partial dependence of IRC on accounting expressed in article 17 of the Code of this tax, confers on expenses a specific treatment, as results from the analysis of its articles 23 and 23-A.
Expenses are exits of financial resources or monetary disbursements of an entity or organization and may refer to costs or other realities, such as, for example, investments. That is, there are expenses that are not related to (or qualifiable as) costs. And, on the other hand, if as a rule costs presuppose a financial outlay, i.e., an expense, this does not mean that there are not multiple costs that have no associated expense, at least directly, such as depreciation and amortization, impairment losses or provisions, among many others.
The hypothesis of incidence contained in article 88, n.º 1 of the IRC Code subjects to autonomous taxation "expenses" and not "costs", without prejudice to the same disbursement being able to fulfill simultaneously both concepts, of expense and cost. As stated in that rule, the fact that the expense is not considered as fiscally deductible cost under article 23-A, n.º 1, paragraph b) of the IRC Code (which determines the non-deduction, as a negative component of taxable profit, of undocumented expenses) does not prejudice autonomous taxation.
It should also be noted the understanding endorsed in STA Judgment n.º 837/15, of 22 February 2017, in which financial charges (interest) paid to a banking entity resulting from financing contracted by the taxpayer were discussed. Although the nature of the expenses was identified and, as well, its beneficiary (the financial institution), the STA considered that, having not been proved the origin and purpose of the same [i.e., of the interest borne] "indispensable element for ruling out their qualification as confidential expenses", and it falling to the taxpayer the burden of "proof of the facts alleged that make up the cause of action (cf. article 74, n.º 1 of the General Tax Law and article 342, n.º 1 of the Civil Code)", such expenses were subject to autonomous taxation.
That Supreme Court understands that the fact that the taxpayer paid certain sums to a bank as title of interest and charges on a loan contracted with it can only be relevant in tax terms if such loan was made to pursue the activity to which the taxpayer is dedicated. "For this it is necessary to know what loan it is, when it was obtained, what was made of the financial means that the bank in fulfillment of the loan contract provided". It is not sufficient "that one knows that such expenses were paid to the bank and that such expenses appear in a document – the bank statement, because we continue to know nothing about the connection of the expense to the activity pursued".
Regarding the analysis of a question of retroactivity in the tax field (which is not under discussion in this case) the Constitutional Court also pronounces itself on autonomous taxation of undocumented expenses, doing so in the following manner:
"article 81 of the same Code [current article 88 of the IRC Code], considering the wording prior to Law n.º 64/2008, established rates of autonomous taxation, aiming in particular, on the one hand, in the situation provided for in n.ºs 1 and 2, undocumented expenses, which are taxed at the rate of 50% (without prejudice to their non-consideration as cost in accordance with article 23) [...]
In the cases of n.ºs 1 and 2, we are faced with expenses that are included in the company's accounting, and may have been relevant to the formation of income, but are not documented and cannot be considered as costs, and which, for this reason, are penalized with a taxation of 50%. The tax logic of the regime is based on the existence of a presumed prejudice to the Public Treasury, because it is not possible to prove, due to lack of documentation, whether there was payment of VAT or other taxes that were due in relation to the transactions carried out, or whether income was declared for the purposes of incidence of income tax from profits that third parties came to earn through the commercial relations maintained with the taxpayer of the tax. Furthermore, autonomous taxation, not directly affecting a profit, will have inherent the idea of discouraging a practice which, in addition to affecting equality in the distribution of public charges, may involve situations of criminal illegality or lesser fiscal transparency."
Similarly, Constitutional Court Judgment n.º 197/2016, of 13 April 2016, states that "[t]he introduction of the autonomous taxation mechanism is justified, on the other hand, by being reported to expenses whose tax regime is difficult to discern because they are found in an "intersection zone of the private sphere and the business sphere" and aims to prevent and avoid that, through these expenses, companies proceed to the covert distribution of profits or assign income that may not be taxed in the sphere of their respective beneficiaries, also having the objective of combating fraud and tax evasion (SALDANHA SANCHES, Manual of Tax Law, 3rd edition, Coimbra, p. 407)", considering that "autonomous taxation has inherent the idea of discouraging a practice which, in addition to affecting equality in the distribution of public charges, may involve situations of lesser fiscal transparency [...] (regarding autonomous taxation, see also Constitutional Court Judgment n.º 310/2012, of 20 June 2012.
It results from the above considerations that autonomous taxation has various purposes beyond the revenue-raising, with emphasis in the case of undocumented expenses, the prevention of fraud and tax evasion (anti-abuse) and the sanctioning or penalizing function, associated with the fact that probably, or in the great majority of cases, those expenses have connection with the distribution of income that will not be taxed in the sphere of the beneficiaries (although they should be), or that escape taxation in VAT, presuming the inherent prejudice to the Public Treasury and inequality in the distribution of public charges, in addition to, possibly, being able to relate to unlawful actions, particularly illegal corruption practices.
2.3. Concrete Analysis
The Claimant begins by invoking as an essential element of the concept of undocumented expenses for purposes of autonomous taxation that the recipient not be identified or knowable, a position which, for the reasons set out above, is not accepted. Such interpretation would only be admissible in relation to the notion, more restricted, of confidential expenses that ceased to be applicable following its elimination from the legal text, by the LOE for 2008. It is not, thus, required, nor does it constitute an attribute of the concept of undocumented expenses, the lack of knowledge of the beneficiary of the same.
On the other hand, with regard to the alleged lack of demonstration by the AT of the actual occurrence of an expense, the Claimant itself ends up confirming not only the divergence of values determined between the balance of cash and bank deposits and the sums that were effectively at its disposal, but also provides the explanation that it was an actual exit of monetary values from the assets of the company in the course of the years 2012 to 2014. The arbitral decision that the Claimant invokes to support the thesis that the occurrence of an expense was not proved provides that "it is intrinsic to the concept of confidential or undocumented expense that an expense be effectively carried out which, in the case under consideration would have to translate into an actual exit of monetary values" (arbitral decision in case n.º 54/2013-T, of 6 September 2013), so this statement, rather than contradicting the occurrence of an expense, seems to confirm its verification: an exit of monetary values.
In this context, as the Respondent argues, the meaning of undocumented expenses relates to exits of financial means from business assets, through movement of the cash account or bank accounts (where those financial means were recorded), deprived of documentary support.
Established that the divergence of values between the balance of cash and bank deposits and the sums effectively at its disposal, it will necessarily follow the verification of an exit of monetary values from the company, and the question that arises is whether this exit can be considered documented and justified as carried out under loan receipts issued post hoc, in October 2015, however dated 2012, 2013 and 2014, with the objective of regularizing the accounting divergence identified by the AT in 2015, in the course of the inspection procedure.
In accordance with the legal definition, a loan is the "contract by which one party lends to the other money or other fungible thing, the second being obliged to return another as much of the same kind and quality" (article 1142 of the Civil Code). Being a real contract quoad constitutionem, i.e., which is only completed with the delivery of the thing[3], it is indispensable, in addition to a document signed by the borrower (formal requirement provided in article 1143 of the Civil Code), the demonstration of the financial flows associated with each of the 41 receipts issued, and the dates on which the same occurred, because only if the delivery of the loaned object is proved will the contract be valid. If such delivery is not proved, the contract is null for lack of subject matter, in accordance with article 280 of the Civil Code.
However, the Claimant does not accompany the loan receipts with any allegation or evidence element that evidences the financial flows associated, in their respective amounts, a burden that fell to it, as they concern facts relating to the cause of action (the existence and validity of the loans as justifying cause of the divergence of the balances of the availability accounts, cash and bank deposits) – in conformity with articles 74, n.º 1 of the LGT and 342, n.º 1 of the Civil Code.
Furthermore, it would also be important to take into account the purpose and destination of the loans to the shareholder, as the legal capacity of the Claimant to enter into legal transactions with this configuration would depend on the same being related to its activity [of the Claimant], to the pursuit of its purpose and social interest and not strictly personal of its shareholder(s). In the absence of any justification for the alleged loans, these would likewise not have validity due to lack of legal capacity of the Claimant to enter into them, in light of article 6 of the Code of Commercial Societies ("CSC").
On the other hand, it is recalled that following the jurisprudence relating to "self-checks" it has been established the understanding that expenses are considered undocumented with respect to which their nature, origin or purpose is not expressed, which, regardless of the allegation of loans, is found in the situation at hand, being completely unknown, not even having been invoked, any purpose or destination for this exit of company funds, which in total amounts to a value exceeding half a million euros.
For the reasons stated, the Claimant lacks grounds when it argues that the AT did not fulfil the burden of proof of the prerequisites for the application of article 88, n.º 1 of the IRC Code, in particular with regard to the existence of the disbursements. In fact, the AT satisfied this burden by identifying the lack of correspondence, which the Claimant does not deny, between the accounting records of the assets (availability) it held, which are contained in the accounting and financial reporting documents of closed years and duly approved in general meeting by the company's shareholders and the reality it found in the course of the inspection procedure, which necessarily entails that exits of financial means exceeding half a million euros have occurred that were not accounted for, without knowing their destination, fulfilling the prerequisites typified in the rule of incidence of autonomous taxation.
Circumstances that the Claimant attempted to remedy "ex post facto". To this end, it invokes the execution of loan contracts with its shareholder, partly relating to previous years (2012 to 2014), redoing the accounting and replacing tax declarations. However, the truthfulness and substance of the facts from which these post hoc rectifications, relating to closed accounting periods, derive, are yet to be demonstrated, as they are not accompanied by the corresponding financial flows which, in the case of real contracts, constitute an inescapable requirement of validity, in addition to the fact that they relate to periods already closed, based on documents that did not exist at the time.
Regarding the allegation that the AT cannot avail itself of the presumption of truthfulness provided for in article 75 of the LGT, in the segment of the discrepancy, it should be noted that the Claimant confirmed that the funds were not in its possession and that they left the company. It is, thus, consensual that an disbursement occurred, in the sense of an exit of financial means. The disagreement of the Claimant concerns the cause of the exit and its undocumented character, not with the occurrence of an expense or diminution of its assets. There is no obligation to reconstitute any other "actual situation", since the actual situation is precisely that: the Claimant being deprived of financial means that belonged to it in value corresponding to € 557,959.54. The classification of this situation as likely to constitute a case of undocumented expenses does not result already from the application of a rule of reversal of the burden of proof (presumption of article 75 of the LGT), but from the failure to fulfill a legal requirement – formal – on the part of the Claimant and the failure to satisfy the burden that lay with it to demonstrate the destination and purpose of the fund exits verified.
Likewise, the allegation of legal error relating to the recommended application of the regime provided for in article 5, n.º 2, paragraph h) of the IRS Code, concerning the distribution of profits to the shareholder, is also unfounded. Indeed, such classification would depend on prerequisites not found in the situation at hand, in particular a prior deliberation of the Claimant, taken by the competent bodies, relating to the application of results, or the application of the presumption contained in article 6, n.º 4 of the same Code, based on an accounting record (entries in shareholder current accounts) that was, at the time, non-existent.
Finally, it is understood that the application of article 88, n.º 1 of the IRC Code is not incompatible with the principle of taxation (fundamentally) by actual profit, which does not constitute an absolute principle and must be articulated with the other principles that make up the axiology of the tax system, in particular that of effective equality in the distribution of tax charges, promoted by the application of the aforementioned rule.
2.4. Compensatory Interest
Compensatory interest forms part of the tax legal relationship and constitutes an accessory thereof, with article 35, n.º 1 of the LGT providing that the same is owed "when, due to fact attributable to the taxpayer, the assessment of part or all of the tax owed or the payment of tax to be paid in advance, or withheld or to be withheld within the scope of tax substitution, is delayed" (see also article 30, n.º 1, paragraph d) of the LGT).
In the situation sub iudice, compensatory interest applies to the IRC tax debt, whose validity, for the reasons stated, is confirmed. The conduct of the Claimant, which did not proceed with the autonomous taxation that was necessary, suffers from illegality and deserves censure, as the circumstances in which it occurred are attributable to it.
Not having other autonomous defects been raised by reference to the acts of assessment of compensatory interest, the claim for its invalidity, on the part of the Claimant, is unfounded, the prerequisites for its assessment being met, in accordance with the aforementioned article 35 of the LGT.
In light of what has been stated, it is concluded that the IRC and compensatory interest tax acts subject to this action do not suffer from the defects raised by the Claimant, whereby they should be maintained.
2.5. On the Right to Indemnity Interest
In these terms, the legal conditions or requirements constitutive of the right to indemnity interest are not met, there having been no "error attributable to the services" from which payment of tax debt resulted in an amount greater than that legally owed, in accordance with the provision of article 43, n.º 1 of the LGT, whereby the claim of the Claimant is also unfounded in this respect.
Finally, it is important to note that the relevant issues submitted to the consideration of this Tribunal were known and assessed, those whose decision was prejudiced by the solution given to others not having been.
DECISION
In light of the above, the arbitrators of this Arbitral Tribunal agree as follows:
-
To declare unfounded the claim for annulment of the tax acts of IRC and compensatory interest assessments above identified, relating to the year 2015;
-
To declare unfounded the claim for condemnation of the AT to refund the sums paid and to payment of indemnity interest in accordance with article 43 of the LGT,
with all legal consequences.
The value of € 296,070.13 is established for the case in accordance with the provisions of articles 3, n.º 2 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, n.º 1, paragraph a) of the CPPT and 306, n.ºs 1 and 2 of the CPC, the latter by referral from article 29, n.º 1, paragraph e) of the RJAT.
Costs in the amount of € 5,202.00, to be borne by the Claimant, in conformity with Table I attached to the RCPAT, and with the provisions of articles 12, n.º 2 and 22, n.º 4 of the RJAT, 4, n.º 5 of the RCPAT and 527, n.ºs 1 and 2 of the CPC, by referral from article 29, n.º 1, paragraph e) of the RJAT.
Lisbon, 12 February 2019
[Text prepared by computer, in accordance with article 131, n.º 5 of the CPC, applicable by referral from article 29, n.º 1 paragraph e) of the RJAT]
The Arbitrators,
Alexandra Coelho Martins
Nuno Pombo
Maria Alexandra Mesquita
[1] Jurisprudence on the subject of confidential and/or undocumented expenses has been prolix and with some fluctuations, in particular that raised with the attribution of "self-checks". Without concerns for exhaustiveness, cf. STA Judgments of 26 September
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