Summary
Full Decision
ARBITRAL DECISION
I – REPORT
A, legal entity no. ..., with registered office in …, hereinafter designated as Claimants, filed a request for establishment of an arbitral tribunal in tax matters and a request for an arbitral ruling, pursuant to the provisions of articles 2nd no. 1 a) and 10th no. 1 a), both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT), requesting the declaration of illegality of the supplementary assessment of Corporate Income Tax no. 2013 ..., of 14 January 2013, relating to the year 2009, and corresponding supplementary assessments of default interest, in the total amount of EUR 669,043.36.
The request for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 17-03-2014.
Pursuant to the provisions of subsection a) of no. 2 of article 6th and subsection b) of no. 1 of article 11th of the RJAT, in the wording introduced by article 228° of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of their appointment within the applicable period.
On 02-05-2014, the parties were duly notified of this appointment, and did not express any intention to refuse the designation of the arbitrators, in accordance with the combined provisions of article 11th no. 1 subsections a) and b) of the RJAT and articles 6° and 7th of the Deontological Code.
Thus, in accordance with the provisions of subsection c) of no. 1 of article 11th of the RJAT, in the wording introduced by article 228° of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was established on 19-05-2013.
The Tax and Customs Authority responded to the initial request submitted, arguing that the claim should be dismissed as unfounded.
Given that in this case none of the purposes legally entrusted to it are present, the meeting provided for in article 18th of the RJAT was dispensed with.
The parties submitted arguments, reaffirming and developing the positions previously sustained.
The arbitral tribunal was duly established and is materially competent, in light of the provisions of articles 2nd, no. 1, subsection a), and 30th, no. 1, of Decree-Law no. 10/2011, of 20 January.
The parties have legal personality and capacity, are legitimate and are represented (articles 4th and 10th, no. 2, of the same statute and article 1st of Order no. 112-A/2011, of 22 March).
The proceeding is not affected by nullities and no exceptions were raised.
Thus, there is no obstacle to examining the merits of the case.
Having considered all matters, it is necessary to deliver
II. DECISION
A. FACTUAL MATTERS
A.1. Facts found to be proven
1- The Claimant - previously named B – is a joint-stock commercial company, with registered office and effective management in the national territory, subject to the general regime for purposes of Corporate Income Tax, whose corporate purpose includes the food products industry and its respective commercialization, as well as the development of agricultural activities and any similar, related or connected activities.
2- In the context of a merger by incorporation, pursuant to article 97th, no. 4, subsection a), of the Commercial Companies Code, completed on 28 April 2009, the Claimant incorporated company C, which conducted the same economic activity as the Claimant.
3- On 15 June 2012, the Claimant filed an IRC Model Declaration 22, relating to the year 2009, within which it deducted, in the respective field 355, of table 10, the total amount of €1,130,225.72 as tax benefits.
4- In this connection, the Claimant, among other tax benefits, deducted the tax benefit granted, under the SIFIDE, to the company it had incorporated in the aforementioned merger completed on 28 April 2009, in the total amount of EUR 617,014.66, as detailed below:
i. €393,729.07, relating to the amount of the tax benefit granted to company C, within the SIFIDE, relating to the year 2007 and not deducted from the IRC collection of that company;
ii. €223,285.59, relating to the amount of the tax benefit granted to company C, within the SIFIDE, relating to the year 2008 and not deducted from the IRC collection of that company;
5- On 13 September 2012, in compliance with service order no. OI..., of 10 April 2012, the Services of the Tax Inspection Division II of the Finance Directorate of ... initiated a tax inspection action against the Claimant, of general scope, concerning the year 2009.
6- The aforementioned tax inspection action was instituted by reason of the merger within which the Claimant incorporated company C.
7- By Official Letter no. ..., of 27 November 2012, from the Tax Inspection Services of the Finance Directorate of ..., the Claimant became aware of the draft corrections to the final report of tax inspection, relating to the year 2009, from which it appeared that there was an alleged improper deduction of tax benefits granted within SIFIDE, on the grounds of the non-transferability of the aforementioned tax benefits, in light of the provisions of article 15th of the Tax Benefits Statute.
8- From the content of the draft corrections to the final tax inspection report, corrections were thus made to the taxable income for Corporate Income Tax in the total amount of €617,014.66.
9- To sustain its position, the Tax Administration, without disputing the classification of the corporate transaction described above as a merger by incorporation, nor the eligibility of the expenses in question for SIFIDE, considered that, notwithstanding the fact that the global transfer of the assets of C to the Claimant had occurred within the scope of the aforementioned merger, the Claimant could not benefit from the tax benefits of which C was the holder, since the conditions for inter vivos transferability of tax benefits set forth in article 15th, nos. 2 and 3, of the Tax Benefits Statute were not met.
10- On 12 December 2012, the Claimant exercised its right to prior hearing, contesting the position taken by the Tax Administration.
11- Upon completion of the tax inspection action, the Claimant was notified, through Official Letter no. …, of 8 January 2013, from the Tax Inspection Services of the Finance Directorate of ..., of the respective final report, from which it appeared that the understanding set forth in the aforementioned draft corrections was confirmed as final, in the following terms:
"The aforementioned law [Law no. 40/2005, of 3 August] is intended to establish the Tax Incentives System for Research and Development Activities (SIFIDE), with the scope of the deduction set forth in its article 4th of Law no. 40/2005, of 3 August.
In accordance with that article, the deduction is made to the amount determined in accordance with article 83rd, no. 2, subsection d) [now article 90th, no. 2/c)] of the Corporate Income Tax Code, that is, it is a deduction from the Corporate Income Tax collection up to its amount.
[ ... ]
In the present case, regarding SIFIDE for 2007 and 2008 [ ... ] A has in its tax file a schedule with the calculation of the amount deducted in 2009, within the scope of SIFIDE, in the amount of € 635,581.85 [ ... ].
From this tax credit deducted from the Corporate Income Tax collection of 2009, in the amount of €635,581.85, part of this value, more specifically the amount of €617,014.66 are relating to tax credit granted to company "C, SA" NIPC … (incorporated company) and the remaining €18,567.19 were granted to A as can be seen in the declarations issued by … (Annex II). That is, a tax credit relating to SIFIDE was deducted from the Corporate Income Tax collection of A, which had been granted to C (incorporated company), which ceased to exist on the date of the merger, 2009/04/28.
[ ... ]
In the case under analysis, a merger by incorporation occurred, with the incorporated company (C) being dissolved and the global transfer of its assets to the incorporating company (A) taking place.
It is for us to determine whether there exists or not the possibility of transfer of tax benefits in the case of a merger by incorporation.
Article 15th, no. 1 of the Tax Benefits Statute (EBF) establishes [ ... ] that "the right to tax benefits, without prejudice to the provisions of the following subsections, is non-transferable inter vivos [ ... ].
In no. 3 of the same legal provision, an exception to the rule contemplated in no. 1 is admitted, stating that "the right to tax benefits granted, by act or tax contract, to individuals or legal entities is transferable inter vivos, by authorization of the Minister of Finance, provided that the conditions for the benefit are met in the transferee and the protection of the public interests pursued by the benefit is ensured"[ ... ].
On this matter, dispatch no. 184/2010-XVIII was issued by the Secretary of State for Tax Affairs, which contains the following "(. . .) I reject the request for transferability of tax benefits granted under the SIFIDE program, regulated by Law no. 40/2005, of 3 August (. .. ) because it expressly contradicts the provisions of no. 1 of article 15th of the Tax Benefits Statute and does not fall within any legally admitted exception"[ ... ].
In this regard, the Judgment of the Superior Tax Court (TCAS), case no. 04172/10 of 2012/04/12, at www.dgsi.pt, also states the following:
[ ... ]
• SIFIDE is classified as a mixed tax benefit and has an automatic character, since its granting does not depend on a prior case-by-case appraisal with a view to the corresponding recognition by the Tax Authority and amounts to a deduction from the collection of research and development expenses incurred that had not been the subject of state financial contribution [ ... ].
• Nothing in the aforementioned Law [Law no. 40/2005, of 3 August] requires any prior case-by-case appraisal, nor any act of recognition of the benefit by the Tax Authority, therefore, as the benefit enjoyed does not depend on any express authorization from the Minister of Finance, it is unquestionably an automatic benefit, not falling within the exception to the principle of non-transferability contemplated in no. 3 of article 15 of the EBF [ ... ].
• Given the mixed and automatic nature of the tax benefit in question, the exceptions enshrined in nos. 2 and 3 of article 15th of the EBF to the principle of inter vivos non-transferability are not directly applicable to it, resulting from this that the right to effect the deduction provided for in article 4th of Law no. 40/2005, of 3 August, is not transferable from the incorporated company to the incorporating company, within the scope of a merger[ ... ].
• Consequently, it is necessary to conclude that regarding the benefits enshrined in SIFIDE, the rule of non-transferability applies, since they do not fall within the exceptions of no. 2 and no. 3 of article 15th of the EBF.
In view of the above, and regarding the year 2009, it is proposed that a correction be made to the tax in the amount of €617,014.66".
12- As a result of the corrections arising from the aforementioned final tax inspection report, the total amount of Corporate Income Tax and default interest of €669,043.36 was additionally assessed, in accordance with the supplementary assessment of Corporate Income Tax and default interest no. ..., of 14 January 2013, and the adjustment no. 2013 ..., of 16 October 2013, whose voluntary payment period ended on 13 December 2013.
13- Not accepting the aforementioned tax act and intending to challenge its legality, the Claimant chose not to make the respective voluntary payment, and as a result, a tax execution proceeding no. ..., was instituted, aimed at the coercive collection of the aforementioned tax debt.
14- On 17 January 2014, the Claimant provided bank guarantee no. …, issued by BANCO …, on 16 January 2014, in the amount of EUR 841,423.61, with a view to suspending the aforementioned tax execution proceeding.
A.2. Facts found not to be proven
With relevance for the decision, there are no facts that should be considered as not proven.
A.3. Grounds for the proven and non-proven factual matters
With respect to the factual matters, the Tribunal need not pronounce on everything that was alleged by the parties, but rather it is its duty to select the facts that matter for the decision and to distinguish proven from non-proven matters (see article 123rd, no. 2, of the Code of Tax Procedure and Process and article 659th, no. 2 of the Code of Civil Procedure, applicable by virtue of article 29th, no. 1, subsections a) and e), of the RJAT).
Thus, the facts relevant for adjudication of the case are selected and determined in accordance with their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (see article 511th, no. 1, of the Code of Civil Procedure, applicable by virtue of article 29th, no. 1, subsection e), of the RJAT).
Thus, having regard to the positions taken by the parties, the documentary evidence and the administrative file attached to the proceedings, the facts listed above were found to be proven, with relevance for the decision, moreover being consensually recognized and accepted by the parties.
B. LAW
The question posed by the Claimant is, in summary, whether the tax benefit of SIFIDE, created by Law no. 40/2005, of 3 August, is transferred to the incorporating company or whether, as the Respondent argues, the principle of non-transferability of tax benefits provided for in article 15th of the Tax Benefits Statute is applicable.
B1. Nature and regime of SIFIDE
The Tax Incentives System for Research and Development Activities (SIFIDE) was created by Law no. 40/2005, of 3 August, and permits Corporate Income Tax subjects resident in Portuguese territory who conduct, as a principal activity, an activity of an agricultural, industrial, commercial or service nature and non-residents with permanent establishment to deduct from the collection, up to its amount, the value corresponding to research and development expenses to the extent that such expenses have not been the subject of state financial contribution, at a double percentage rate: a) base rate – 20% of expenses incurred in that period; and b) incremental rate - 50% of expenses incurred in that period in relation to the simple arithmetic mean of the two preceding years, up to the limit of €75,000.
Expenses that cannot be deducted in the year they were incurred due to insufficient collection may be deducted up to the sixth immediately following year (no. 2 of article 4th).
In article 3rd of the aforementioned statute, the categories of expenses relating to research and development activities that are deductible are described. In order to be able to benefit from this tax incentive, taxpayers must comply with the conditions and obligations provided for in articles 5th to 7th: among others, non-taxation by indirect methods, absence of debts to the State, properly organized accounting and a tax documentation process that documents the calculation of the benefit and the compliance with the other requirements.
Plainly, in light of the characteristics briefly described, it can be concluded that we are dealing with a tax relief measure "of an exceptional character established for the protection of superior non-fiscal public interests relevant to taxation itself that prevent[ ... ]"(article 2nd no. 1 of the Tax Benefits Statute).
Given the respective conditions, SIFIDE is an automatic tax benefit (article 5th no. 1 of the Tax Benefits Statute), as it does not require prior recognition, and has a mixed nature, as it incorporates not only objective requirements relating to the type and nature of eligible expenses (articles 3rd and 4th of Law no. 40/2005) but also subjective requirements that regard the conditions and nature of the beneficiaries (articles 5th to 7th).
We further note that the statute that creates and regulates SIFIDE, Law no. 40/2005, of 3 August, is silent as to the possibility of transfer of this tax benefit to third parties.
For proper classification, it is necessary to analyze whether, in light of the merger by incorporation of the company that originally benefited from the tax incentive, the incorporating company may deduct the portion of the benefit still not utilized due to insufficient collection.
B2. Merger in Commercial Law
For proper understanding of the tax effects of a merger, we must first consider its classification in commercial law (article 97th and following of the Commercial Companies Code).
Article 97th, no. 1 of the Commercial Companies Code establishes that two or more companies, even of different types, may merge by their combination into a single company. In the form of merger by incorporation, the merger is carried out through the global transfer of the assets of one or more companies to another and the attribution to the shareholders of those companies of shares, stock or quota interests of the latter (no. 4).
As emphasized by legal scholars, merger aims at the concentration of economic activities with a view to maximizing productive factors and optimizing the resources of the merged companies.
With the commercial registration of the merger, the objective and subjective effects of the merger operate, namely: (i) extinction of the incorporated companies or, in the case of establishment of a new company, all merged companies, with their rights and obligations being transferred to the incorporating company or to the new company (subsection a) of article 112th of the Commercial Companies Code); (ii) the shareholders of the extinct companies become shareholders of the incorporating company or of the new company.
That is, the commercial registration has a constitutive effect since it is from this date that all rights and obligations are transferred to the new company or incorporating company and the incorporated companies cease to exist.
The unification in a single entity of the assets and legal positions of the merged entities is more than any onerous transmission of assets because what is involved is the integration in a single entity of the rights and obligations of the entities involved in the merger.
The exact nature of the merger and its effects has been the subject of heated doctrinal and jurisprudential discussion with two theses in confrontation: the Germanic construction of the transfer (transmission) of all assets of one company to the other and the thesis of merger as an act modifying the companies involved and their transformation through a process of economic concentration.
In favor of the thesis of transmission of assets is the very letter of the law when it says "…transferring all of its rights and obligations…" - subsection a) of article 112th of the Commercial Companies Code.
In this sense, RAUL VENTURA states, "Adopting the concepts and terminology set forth by Inocêncio Galvão Teles, Law of Successions – Fundamental Notions, 4th ed., "legally, succession or transmission occurs when a person becomes invested with a right or obligation or a set of rights and obligations that belonged to another person, with the rights and obligations of the new subject being considered the same as those of the previous subject and treated as such." (…)"
Now, "In order to completely deny the transmission of rights and obligations – whether by universal title or by singular title – it is necessary either to demonstrate that no company ceases to exist and they – and only they – continue to be holders of such rights and obligations or to completely set aside the legal personality of the companies. Above I considered the first of these propositions indemonstrable and also objected to the second. Maintaining the technique of collective legal personality of companies and recognizing the extinction of the incorporated company or of the companies participating in the merger by establishment of a new company, the transmission of assets and obligations is inevitable. They belonged to one subject and pass to belong to another, but continue to be the same rights and obligations; the transmission is perfectly characterized." (RAUL VENTURA, Merger, Scission, Transformation of Companies, Commentary to the Commercial Companies Code, 2nd Reprint of the 1st Ed. of 1990, pp. 235-237)
On the other hand, another part of the legal scholarship considers that "Terminologically, the wording of article 112th subsection a) is unfortunate in assuming that the assets of the incorporated or merged companies are transmitted to the incorporating company or to the new company. It is unfortunate because transmission is not the concept that best expresses what occurs in a merger. Indeed, the notion of transmission corresponds to the legal effect by which a legal situation, recorded in a particular sphere, is transferred to another legal sphere. (…) This is not what happens in the context of merger. Strictly speaking, because it is an act modifying the companies, the rights and obligations are not transmitted from one company to another. Such legal situations remain unchanged throughout the entire process, at the end of which they are held by the incorporating company or by the new company, not because they have been transmitted from one legal sphere to another but rather because the legal spheres of the companies – where such legal situations are recorded – have been united in a new unity". (DIOGO COSTA GONÇALVES, Commercial Companies Code Annotated, Coordination by António Menezes Cordeiro, 2009, p. 389).
Without overlooking the importance of the doctrinal debate and its effects in the most varied legal relationships existing between the companies subject to merger and third parties, it is necessary, in this case, to determine the exact scope and tax effects of the merger. As determined in no. 2 of article 11th of the General Tax Law, even if terms and concepts from other branches of law are applied, we must, in the first place, determine whether their meaning and scope does not arise from the tax law itself.
This is, in our opinion, the case.
B3. Tax effects of merger
As a general rule, we can state that Tax Law, given its purposes, recasts merger or scission as a transmission of assets. This results, first of all, from nos. 1 and subsection d) of no. 3 of article 43rd of the Corporate Income Tax Code (in force at the time, now article 46th) which taxes the gains or losses resulting from the onerous transmission of elements of fixed assets, at whatever title it operates. For this purpose, the realization value of the elements of fixed assets transmitted as a consequence of those acts of merger or scission is considered to be the market value.
In the same sense, subsection g) of no. 5 of article 2nd of the Transfer Tax Code subjects to taxation "transmissions of immovable property by merger or scission of the companies referred to in the preceding subsection e), or by merger of such companies among themselves or with a civil company" (wording in force at the time).
In derogation of this general rule, articles 67th to 72nd of the Corporate Income Tax Code (now 73rd to 78th) provide for a special regime applicable to mergers, scissions, asset contributions and exchanges of equity interests of resident companies. The objective of this regime, which results from the transposition of Directive no. 90/934/CEE, is to ensure the neutrality of these operations of reorganization of productive units, by meeting certain conditions.
Thus, no. 1 of article 68th of the Corporate Income Tax Code (in force at the time) provides that "in determining the taxable income of merged or scinded companies or of the contributing company, in the case of asset contribution, any result derived from the transfer of the equity elements as a consequence of the merger, scission or asset contribution is not taken into account, nor are the provisions established and accepted for tax purposes relating to credits, inventories and obligations and charges subject to transfer considered as income or gains, in accordance with no. 2 of article 34th".
In no. 1 of article 67th, the legislator gives us the definition of merger, for purposes of application of this regime. Merger is considered to be:
a) The global transfer of the assets of one or more companies (merged companies) to another already existing company (beneficiary company) and the attribution to the shareholders of those companies of shares representing the capital of the beneficiary company and, where applicable, cash amounts not exceeding 10% of the nominal value or, in the absence of nominal value, of the book value equivalent to the nominal value of the equity interests attributed to them;
b) The establishment of a new company (beneficiary company), to which the assets of two or more companies (merged companies) are globally transferred, with the shareholders of these being attributed shares representing the capital of the new company and, where applicable, cash amounts not exceeding 10% of the nominal value or, in the absence of nominal value, of the book value equivalent to the nominal value of the equity interests attributed to them;
c) The operation by which a company (merged company) transfers the entire set of assets and liabilities that make up its assets to the company (beneficiary company) that holds all of the shares representing its capital.
Also from the definition of merger, it is clear that, for Tax Law, merger is viewed from the perspective of transmission of assets from one company to another. Indeed, the concept of merger is broader than that provided for in the Commercial Companies Code, by classifying as merger the transfer of the entire set of assets and liabilities of a wholly controlled company to the controlling company (subsection c)).
In order to benefit from this regime, the incorporating company must observe the following conditions (nos. 3 and 4 of article 68th in force at the time): (i) The equity elements subject to transfer are recorded in its accounting with the same values that they had in the accounting of the merged, scinded companies or of the contributing company; (ii) The determination of results relating to the equity elements transferred is made as if no merger, scission or asset contribution had occurred; (iii) The write-downs or depreciation on the elements of fixed assets transferred are carried out in accordance with the regime that had been followed in the merged, scinded companies or in the contributing company.
That is, there will be no Corporate Income Tax liability on the assets transmitted if the incorporating company or new company maintains the same tax recording of the value and depreciation policy of the assets.
It is also admitted that tax losses may be transferred to the new company or incorporating company, by request of the taxpayer to the General Directorate of Taxes (now the Tax and Customs Authority).
We quote, as to the nature of this regime, the Judgment of CAAD, Case no. 83/2013-T, "The characterization of the 'special regime applicable to mergers, scissions and asset contributions' is not unanimous. Various doctrinal analyses, in particular on the issue of transfer of losses, defend the character of structural tax relief rather than a tax benefit. Jurisprudence has also analyzed the issue, finding divergent positions. Thus, in addition to the jurisprudence that considers that the transfer of losses constitutes a tax benefit (for example, Judgments of the Superior Tax Court of 05/07/2006, rec. 142/06; of 12/07/2006, rec. 1003/05; of 6/11/2008, rec. 40/08) there are several judgments showing openness to the doctrine that argues it is a structural tax relief (e.g., Judgment of 16/06/2010, rec 103/10), even when that issue is not determinant for the decision in this case. This Judgment (rec 103/10), after summarizing the doctrine on the issue, states: "In any case, as stated, it is also questionable whether we are dealing with a true tax benefit, considering that the very nature of the regime in question (the special regime applicable to mergers, scissions, asset contributions and exchanges of equity interests) is aimed at the principle of fiscal neutrality (in accordance, moreover, with the neutrality regime provided for in Directive 90/434/CEE)."
In any case or doctrine followed, the neutrality regime has a special and extraordinary nature, therefore it is only applicable in accordance with the terms and conditions expressly provided in the Corporate Income Tax Code. Otherwise, or if the respective requirements are not met, the asset transmissions carried out – because this is the tax meaning of merger – shall be taxed.
Thus, in this case, since the succession of tax benefits in the act of merger is not expressly provided for in the special neutrality regime, to these benefits shall apply the general rules of the Tax Benefits Statute regarding their transmission.
In this sense, the Judgment of CAAD, Case no. 83/2013-T, stated that "Even if the Respondent had indeed the conditions to benefit from the advantages provided for in articles 67th and of the Corporate Income Tax Code (wording in 2007) –relating to the regime of fiscal neutrality in case of mergers, scissions and asset contribution, interpolation ours, it cannot be overlooked that such tax reliefs – whether they constitute tax reliefs of a structural character or tax benefits – are expressly provided in the Corporate Income Tax Code.
And among those advantages is not provided for the succession of the beneficiary companies in acts of merger and/or scission in the ownership of tax benefits that would have been granted by law to the scinded companies, taking into account the conditions met by those same companies".
B4. Transmission of Tax Benefits
As mentioned above, Law no. 40/2005, of 3 August, which creates SIFIDE, is silent as to the possibility of transmission in case of corporate modification, therefore we must have regard to the provisions of article 15th of the Tax Benefits Statute on "transmission of tax benefits".
No. 1 of the Tax Benefits Statute establishes two principles: "on the one hand, the principle of non-transferability of the right to tax benefits inter vivos; on the other, the principle of non-transferability of the same right mortis causa provided that the conditions of the benefit are met in the transferee and the benefit is not of a strictly personal nature, as would be the case, for example, with benefits granted to the disabled, to pensioners, etc." (CASALTA NABAIS, Tax Law, 2010, 6th Ed., p. 442).
The principle of inter vivos non-transferability has two exceptions: the first, set forth in no. 2 of article 15th, of immediate application, provides for the transferability of the right to tax benefits that are inseparable from the regime applicable to certain property (such as, for example, benefits granted to rehabilitated urban real estate intended for housing); the second, set forth in no. 3 of article 15th establishes that the right to tax benefits granted, by act or tax contract, to individuals or legal entities is transferable by authorization of the Minister of Finance, provided that the conditions for the benefit are met in the transferee and the protection of the public interests pursued by the benefit is ensured.
Now, in this case, neither of the exceptions provided for is applicable.
Indeed, having regard to the mixed nature of the tax benefit provided for in SIFIDE, we cannot classify it within the exception of no. 2 of article 15th as it is not a right inherent in the legal regime of certain property, accompanying them in their transmissions.
On the other hand, the automatic character of the tax benefit (it operates upon verification of the respective conditions) excludes it from the exception of no. 3 of article 15th which refers to tax benefits that depend on recognition by administrative act or tax contract (see NUNO SÁ GOMES, Idem, p. 250).
In conclusion, in this case, the SIFIDE tax benefit is not transferable within the scope of the merger by incorporation operation as it does not fall within the exceptions legally provided to the principle of inter vivos non-transferability of tax benefits.
Could it, however, be considered that the merger operates in terms analogous to a transmission mortis causa (as invoked by the Claimant), thus applying the provisions of the second part of no. 1 of article 15th of the Tax Benefits Statute?
Having regard to the nature of merger, notwithstanding the doctrinal divergences already exposed, it appears unanimous for the generality of commercial scholarship that merger does not constitute a transmission mortis causa. As RAÚL VENTURA states, "It is known that the typical case of succession by universal title is succession upon the death of an individual, but in order for company merger to imply universal succession it is not necessary to equate the extinction of company(ies), which in that case occurs, to the phenomenon of succession mortis causa. It is sufficient that the legislator organizes the merger as a transmission of assets in the terms referred to above. That is: succession upon death is the typical case of universal succession, but not necessarily the only one." (RAUL VENTURA, Merger..., p. 236). If we accept that merger is an act modifying the company, even here universal succession is not accepted. The extinctive effect is not the cause of the transmission of assets but rather its consequence (DIOGO COSTA GONÇALVES, Idem, pp. 389 and 391).
Regardless, we further note that tax law also does not, at any point, equate merger to transmission mortis causa, which allows us to conclude, in accordance with NUNO SÁ GOMES[2], that there is no succession of tax benefits but rather their extinction and the possible creation in the sphere of the new entity of the tax benefit, if the requirements provided for in the law are met. The tax relevance of merger is, for Tax Law, the act of transmission of assets between the companies and not the subsequent moment of possible extinction of the legal personality of the incorporated companies.
In conclusion, the provisions of the second part of no. 1 of article 15th of the Tax Benefits Statute are not applicable to merger as it is not a transmission mortis causa.
C. DECISION
In these terms, this Arbitral Tribunal decides:
a) To dismiss as unfounded the claim for declaration of illegality of the supplementary assessment of Corporate Income Tax no. 2013 ..., of 14 January 2013, relating to the year 2009, and the corresponding supplementary assessments of default interest, in the total amount of EUR 669,043.36;
b) To order the Claimant to pay the costs of the proceeding, in the amount of €9,792.00, taking into account the amount already paid.
D. Value of the proceeding
The proceeding is assigned the value of €669,043.36, in accordance with article 97th-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subsections a) and b) of no. 1 of article 29th of the RJAT and no. 2 of article 3rd of the Regulation of Costs in Tax Arbitration Proceedings.
E. Costs
The amount of the arbitration fee is €9,792.00, by virtue of Table I of the Regulation of Costs in Tax Arbitration Proceedings, in accordance with articles 12th, no. 2, and 22nd, no. 4, both of the RJAT, and article 4th, no. 4, of the cited Regulation.
Notify.
Lisbon
11 November 2014
The collective tribunal,
(Jorge Lopes de Sousa, substituting for
Jorge Lino Ribeiro Alves de Sousa)
(Amândio Silva)
(José Pedro Carvalho)
[1] "Therefore, the transmission of the right to tax benefits depends on the legal regimes established for each case, with the general principles provided for in article 13th (now 15th) of the Tax Benefits Statute being applied subsidiarily." NUNO SÁ GOMES, General Theory of Tax Benefits, Tax Science and Technology Journals (165), p. 250.
[2] NUNO SÁ GOMES, General Theory of Tax Benefits, Journals of Tax Science and Technology, Lisbon, 1991, p. 242.
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