RFAI Tax Benefit Deduction in IRC: Right to Carry Forward Unused Investment Credits (CAAD 263/2017-T)

The arbitrators José Baeta de Queiroz (presiding arbitrator), Magda Feliciano and Luis Manuel Pereira da Silva, appointed by the Ethics Board of the Administrative Arbitration Centre to form the arbitral tribunal, constituted on 28 June 2017, agree as follows:

REPORT AND CLARIFICATION

A…, S.A., legal entity…, with registered office in …, …, …, with share capital of € 104.391.080,00 (hereinafter "Claimant"), belonging to the Tax Service of …, duly notified of the assessment notices for the deduction of Corporate Income Tax (IRC) and compensatory interest for 2014 and the account adjustment statement, hereby requests the annulment of the assessment acts nos. 2017 …, relating to IRC for 2014, and 2017 …, relating to compensatory interest.

The Claimant thus seeks the declaration of illegality of the aforementioned IRC assessment acts and the corresponding compensatory interest.

The Tax and Customs Authority, hereinafter TA, responded by contesting the admissibility of the request for arbitral pronouncement, on the grounds that it is unproven.

The meeting provided for in article 18 of the Legal Regime for Tax Arbitration (RJAT) was dispensed with, and the proceedings proceeded to written submissions.

The Arbitral Tribunal was duly constituted and is competent.

The parties possess legal personality and capacity, are legitimate (articles 4 and 10(2) of the same instrument and 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

The proceedings do not suffer from nullities that invalidate it, nor are there exceptions or preliminary matters that must be considered and that could prevent consideration of the merits of the case.

FACTS

A. Proven Facts

The following facts are considered proven:

• The Claimant is engaged in mining activities in the mines of …;

• In the tax years 2011, 2012, 2013 and 2014, the Claimant fulfilled all formal and material requirements to benefit from the tax benefit arising from the Tax Regime for Investment Support (RFAI);

• In 2011 the benefit arising from RFAI was fixed at €8.771.595,38;

• In 2012, the benefit arising from RFAI was fixed at €5.305.308,21;

• Based on the value of the Claimant's tax collection in the tax years 2011 and 2012, it was not possible to deduct the total value of the tax benefit determined in accordance with the RFAI either in 2011 or in 2012;

• The Claimant carried forward the amounts not deducted in 2011 and 2012, relating to the tax benefit arising from RFAI, to the following years;

• In 2013, the Claimant carried forward and deducted the remaining amounts relating to the tax benefit arising from RFAI to the 2013 tax collection, proportionally and taking into account the remaining benefits determined in 2013 and the legally carried forward amounts;

• The Claimant reported in its Model 22 Declaration for IRC as the amount to be carried forward for 2013 with reference to RFAI for 2011 and 2012 the total amount of €7.849.225,59, corresponding to €5.302.625,07 for 2011 and €2.546.600,52 for 2012, having deducted in that 2013 tax year the amount of €3.179.117,59 relating to 2011, carrying forward the excess;

• In 2014, the Claimant carried forward and deducted the remaining amounts of RFAI from 2011 and 2012 that had not been deducted either in those years or in 2013, further deducting the portion of the RFAI benefit from 2013 that had been carried forward to the following years;

• The Claimant reported in its Model 22 Declaration for IRC for 2014 as the amount to be carried forward for 2014, corresponding to the RFAI benefit from 2011, 2012 and 2013, not deducted in such years, the total amount of €4.870.956,67, having determined a benefit of €3.655.476,00 regarding RFAI for 2014 and having, in fact, deducted in that 2014 tax year the amount of €5.443.767,81, carrying forward to 2015 the amount of €3.082.664,86.

• At the end of 2015 the Claimant was subject to an inspection action for the 2013 tax year in respect of IRC in which the TA sustained a correction to the value of the relevant investment for purposes of determining the RFAI tax benefit with reference to 2013 and, accordingly, a correction to the amount of such benefit, to which the Claimant did not object, and a correction to the total value and apportionment of the deduction of tax benefits to the 2013 tax collection;

• On 28 October 2016, following the correction carried out as part of the inspection procedure for 2013 and 2014, the Claimant filed a replacement Model 22 Declaration for IRC for 2014;

• In accordance with the replacement declaration, the Claimant recorded as the amount to be carried forward for 2014 with reference to RFAI for 2011, 2012 and 2013, the total amount of €4.780.777,72, having determined a benefit regarding RFAI for 2014 of €2.169.814,33;

• The Claimant deducted in that 2014 tax year the entire amount relating to RFAI from prior years and carried forward to 2015 the amount of €2.169.814,33, that is, the RFAI for 2014.

• At the end of 2016, the Claimant was notified of a Draft Inspection Report for 2014, in accordance with which the total value and apportionment of the deduction of tax benefits to the 2014 tax collection is corrected;

• On 14 December 2016, the Claimant exercised the right of prior hearing;

• By decision issued in arbitral proceedings no. 285/2016-T of 10 January 2017, the IRC assessments and compensatory interest for 2013 were annulled, this decision having become final;

• The Claimant was notified to proceed with payment of the additional IRC assessment act for 2014 and the respective compensatory interest assessment, by 9 March 2017;

• The Claimant proceeded, within the prescribed period, with payment of the amount determined in the assessment acts already identified.

2. Justification for the determination of the facts

The facts were considered proven on the basis of the documents submitted with the request for arbitral pronouncement and with the administrative proceedings.

No relevant facts failed to be proven for consideration of the merits of the request.

LAW

Position of the Claimant

In this regard, the Claimant alleges in its request for constitution of the Arbitral Tribunal, in summary, the following:

• The key issue in this case is solely whether it is possible for the Claimant to carry forward in 2014 the value of the tax benefit arising from RFAI for the years 2011 and 2012, to the extent that deduction in the respective years was not entirely possible due to the application of article 92 of the IRC Code;

• The Claimant does not intend to dispute the subjection of the RFAI benefit in 2011 and 2012 to the limit of article 92 of the IRC Code, which moreover would only be relevant in those years and was not challenged by the Claimant or is affected by its claim herein;

• According to the provisions of article 3(1) of RFAI, to IRC taxpayers resident in Portuguese territory or who have a permanent establishment therein, who carry on as their main activity a commercial, industrial or agricultural activity that make, in the tax year in question, investments considered eligible, certain tax benefits are granted, including, the deduction from the IRC tax collection, and up to 25% of the same, of the following amounts, for investments made in regions eligible for support within the framework of incentives with a regional purpose: (i) 20% of the relevant investment, for investment up to the amount of €5.000.000; (ii) 10% of the relevant investment, for investment of value exceeding €5.000.000;

• Accordingly, article 3(3) of RFAI provides that when the deduction of eligible investments under this regime cannot be made in full due to insufficient tax collection, the amount still not deducted may be deducted, on the same terms, in the assessments for the four following tax years.

• In fact, since RFAI limits the deduction from the IRC tax collection to 25% of the same, but establishes that such deduction corresponds to 20% or 10% of the relevant investment, the permission for "carry-forward" aimed to ensure that the fact that, in the year in which the investments are made, the taxpayer determines an amount of tax collection that does not allow the full deduction in question does not restrict the application of the benefit in question, which may still have effect in the four following years;

• Without the rule of article 3(3) of RFAI, the objective of investment incentive underlying RFAI would not achieve real practical impact;

• In fact, until such time as the investments made would lead to a substantial increase in the IRC tax collection, such investments would have minimal fiscal relevance, and therefore incentives would not be created for companies to make new investments with short to medium-term effects.

• Now, it is precisely the opposite effect that RFAI aims to trigger, embodying an instrument of counter-cyclical tax policy which, through the promotion of business investment in certain regions and job creation, aimed to contribute to the revitalization of the national economy;

• Having article 92 of the CIRC provided that the amount of tax assessed could not be less than 90% of that which would be fixed without the deduction of tax benefits, then the deduction of the RFAI tax benefit could no longer exceed 10% of the tax collection;

• Applying this rule to the benefit established in RFAI, if the deduction from the IRC tax collection fixed under that regime is in an amount exceeding 10% of the same, then the latter is shown to be insufficient for the realization of such deduction, as article 3(3) of RFAI presumes.

• In fact, and contrary to what appears the TA intends to convey in its Final Inspection Report, as a result of the application of article 92(1) of CIRC, the Claimant was prevented from actually deducting the total value of the tax benefit arising from RFAI, both in 2011 and in 2012.

• This means that the interpretation, both from an immediately literal perspective, but also systematic, of article 3(3) of RFAI, can only lead to one conclusion, namely: that the deduction in the four following years of the value that cannot be deducted in the year concerning the relevant investments due to insufficient tax collection also applies when such insufficiency results from the limitation established in article 92 of CIRC.

• Furthermore, if there were to be considered the existence of doubts in the interpretation of the provisions of article 3(3) of RFAI and article 92 of CIRC — which could only be admitted by way of absurdity, without conceding — it would always be possible to resort to the rules of interpretation of the Civil Code set out in its article 9, to which article 11 of the General Tax Law ("LGT") refers, and to the special rules concerning tax benefits.

• Specifically, according to those rules, interpretation should not be confined to the letter of the Law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied;

• Now, according to the Report of the State Budget for 2005 (approved by Law no. 55-B/2004, of 30 December), which introduced the rule of article 92 of CIRC (then article 86), this article constitutes a "limit to the reduction of the effective tax rate through the use of tax benefits" (cited).

• Additionally, also in the Report of the State Budget for 2011 (approved by Law no. 55-A/2010, of 31 December), which reduced the limit to 10%, "it points to an effective tax rate of 22.5%".

• It follows from the aforementioned article 10 of the Tax Benefits Statute, that the rules on tax benefits, as exceptional rules (insofar as they deviate from the general rule of taxation), are not susceptible to analogous integration or restrictive interpretation, admitting only extensive interpretation — see also article 11 of the Civil Code.

• Therefore, even if it could not be immediately concluded from the letter of the Law the possibility of carry-forward of the RFAI tax benefit in the terms sustained — which is admitted merely as a matter of professional obligation, without conceding — because it is manifest that the legislative intent underlying article 3(3) of RFAI is to permit the taxpayer to use the tax benefit to which it is entitled in subsequent years, up to the limit of four, when it cannot use it in prior years — without recourse to any analogy, but rather on the basis of extensive interpretation — it should be concluded that the application of article 92 of the IRC Code gives rise to a situation of insufficient tax collection;

• An understanding entirely similar was also adopted in proceedings no. 369/2015-T, no. 370/2015-T and no. 285/2016-T, in which the arbitral tribunal again sustains that the subjection of RFAI to the limit of article 92 of CIRC may determine the occurrence of a situation of insufficient tax collection, which should permit the taxpayer, under article 3(3) of RFAI, to carry forward the remaining value to subsequent years;

• Specifically, the rules arising from article 92(1) of the IRC Code and article 3(3) of RFAI, interpreted in the sense of preventing the carry-forward of the RFAI tax benefit to subsequent tax periods in the case where it was due to the application of the limit of article 92 of CIRC that the taxpayer could not fully deduct the benefit determined in that year — denying the occurrence of a situation of insufficient tax collection, as provided for in article 3(3) of RFAI — are shown to be unconstitutional through violation of the principle of equality, embodied in article 13 of the Constitution, unconstitutionality which is hereby directly invoked.

• Finally, it is also worth noting that the denial of the possibility of carrying forward the value of the benefit not used in the year in which it was determined as a result of insufficient tax collection caused by the application of the rule of article 92(1) of the IRC Code also implies an evident and intolerable violation of the principle of proportionality, which is a facet of article 2 of the CRP and established in article 266(2) of the same constitutional document as a guiding and limiting principle of the TA's actions;

• All things considered, the Claimant cannot accept the correction proposed by the TA and now contested insofar as by it the TA denies relevance to the value of the RFAI benefit for 2011 and 2012 that could not be utilized in those years, preventing its consideration and carry-forward to subsequent years, and denies the deduction from the 2014 tax collection of the value of €4.780.777,72 concretely declared and made by the Claimant and corresponding to part of the benefit from 2011, 2012 not used in those years and that was not carried forward and deducted in 2013, as well as part of RFAI from 2013 equally not deducted in that year, which is shown to be lawful and must be accepted.

Position of the TA

• The Claimant invoked in the model 22 declaration for IRC for 2014 the right to deduct a tax credit as title of RFAI, of €7.849.225,59 (2011: €5.302.625,07 and 2012: €2.546.600,52), relating to prior periods, but which corresponds to the values of tax benefits not deducted in those years by virtue of the calculation of the result of the assessment, under article 92 of the IRC Code, however, according to the TA it is not possible, in this specific case, to utilize values of RFAI that, with reference to prior years, have not had any effect at the level of deduction, due to the force of the legal command of that provision;

• In fact, the non-deduction of the aforementioned amounts does not derive from insufficient tax collection, but rather from the application of the regulation that governs the result of the assessment of deductions for tax benefits;

• It being certain that article 3(3) of the 2009 RFAI determined that "When the deduction referred to in the preceding number cannot be made in full due to insufficient tax collection, the amount still not deducted may be deducted, on the same terms, in the assessments of the four following tax years.", that is, it can be deducted, but to the amount referred to in subparagraph a) of article 3(1) of the same article, i.e. to the amount determined in accordance with the rules of article 90(1) of the IRC Code;

• That is, the tax collection to which subparagraph a) of article 3(1) of RFAI refers is that which results from the IRC assessment act, processed under subparagraph a) of article 90(1) of the respective Code, which consists in the application of the tax rate to the taxable base;

• The legislator of RFAI made no reference in article 3(3) of RFAI, with respect to insufficient tax collection, that the same could also arise from the calculation of the result of the assessment as provided for in article 92, the regulation introduced in the IRC Code in 2005, with the purpose of reducing the impact on the tax collection of deductions made as title of tax benefits;

• For this reason, it would be difficult to understand that, on the one hand, there was concern to reduce the effect of tax benefits in the calculation of the IRC owed to the State and, on the other, that this effect was neutralized, allowing the values not deducted in a certain taxation period could be deducted in future years, through the carry-forward mechanism;

• Thus, RFAI for 2011 and 2012 will only be included in the set of tax credits for tax benefits deductible in 2014 if, and only insofar as, due to insufficient tax collection, it was not possible to use it in determining the IRC for 2011 and 2012, such does not occur as is well demonstrated in the summary of IRC assessments for the periods 2011 and 2012;

• Besides, the value that the company claims as a RFAI tax credit carried forward from the years 2011 and 2012 is nothing more than the tax paid as a result of the assessment under the terms provided for in article 92 of the IRC Code;

• By accepting carry-forward to the following taxation periods the increase in "result of the assessment", which in this specific case will relate to the use [excessive in accordance with article 92 of CIRC] of RFAI, it would render useless the article itself, since it would first be limiting the impact of the use of the benefit on the tax to be paid, and later, with the permission of carry-forward, invalidate the limitation itself which is the objective contained in the rule;

• Furthermore, the Claimant also labors under error in the considerations made in article 55 of the Request for arbitral pronouncement, regarding the interpretation of the rules on tax benefits, for, although it is true that "it follows from article 10 of the Tax Benefits Statute, that the rules on tax benefits, as exceptional rules (insofar as they deviate from the general rule of taxation), are not susceptible to analogous integration", nothing in the letter of that rule authorizes the conclusion that restrictive interpretation is ruled out by that rule, since it is only stated that extensive interpretation is admitted;

• As is well recalled, in the Decision of the Arbitral Tribunal of the CAAD, delivered in proceedings no. 400/2015, "The rules that create tax benefits have the nature of exceptional rules, as follows from the express tenor of article 2(1) of the Tax Benefits Statute (EBF), and therefore must be interpreted in their precise terms, without expansions or restrictions, so as to embrace all cases literally provided for therein and only those, as is settled case law."

• Thus being, it is not correct to assert that the TA's interpretation, in the sense that article 92 of CIRC could restrict the application of RFAI, involves an inadmissible restrictive interpretation of this tax regime, which merely considered that the rules of RFAI are valid in themselves, and must be interpreted according to the exact meaning of the words used;

• Being so, the non-deduction from the tax collection, in 2011 and 2012, of the amount of tax benefits relating to RFAI, as an effect of the calculation of the result of the assessment, cannot be attributed to insufficient tax collection, properly speaking, for what occurred was the product of the effect of a regulation with the objective of minimizing the effect of the "erosion" in the tax collection caused by the cumulation of tax benefits;

• Thus, and with all due respect, we understand that the allegations of the Claimant cannot at all proceed, because they make an interpretation and application of the legal rules applicable to the case at hand that is notoriously incorrect;

• Therefore, all the arguments raised by the Claimant fail, and the TA made a correct subsumption of the facts to the law, acting in the strict performance of its duties and obligations legally bound.

Given the positions of the parties, the main issue that arises in the present proceedings concerns determining whether the acts of additional IRC assessment and compensatory interest, which are the object of this petition, are or are not valid, considering the interpretation that should be given to the provisions of articles 92(1) of the IRC Code (CIRC) and 3(3) of RFAI, approved by Law no. 10/2009, of 10 March.

Let us see what should be understood.

A – INTERPRETATION OF ARTICLE 3(3) OF RFAI AND ARTICLE 92 OF THE IRC CODE

It results from article 11 of the General Tax Law (LGT) that the interpretation of tax law must be carried out according to the general principles of interpretation.

The general principles of interpretation are established in article 9 of the Civil Code (CC), in the following terms:

"1. Interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

1. The interpreter cannot, however, consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator established the most appropriate solutions and knew how to express its intent in adequate terms."

Thus, taking into account the aforementioned principles, it is important to consider the provision of article 3(3) of RFAI, applicable at the date of the relevant facts, according to which:

"Article 3

Tax Incentives

1 - To IRC taxpayers resident in Portuguese territory or who have a permanent establishment therein, who carry on as their main activity a commercial, industrial or agricultural activity covered by article 1(1) of this Decree-Law that make, in 2009, investments considered relevant, the following tax benefits are granted:

a) Deduction from the IRC tax collection, and up to 25% of the same, of the following amounts, for investments made in regions eligible for support within the framework of incentives with a regional purpose: i) 20% of the relevant investment, for investment up to the amount of €5.000.000; ii) 10% of the relevant investment, for investment of value exceeding €5.000.000;

(…)

2 - The deduction referred to in subparagraph a) of the preceding number is made in the assessment relating to the taxation period beginning in 2009.

3 - When the deduction referred to in the preceding number cannot be made in full due to insufficient tax collection, the amount still not deducted may be deducted, on the same terms, in the assessments of the four following tax years."

In turn, article 92 of the IRC Code provides as follows:

"Article 92

Result of the assessment

1 — For entities that carry on, as their main activity, a commercial, industrial or agricultural activity, as well as non-residents with a permanent establishment in Portuguese territory, the tax assessed under article 90(1), net of the deductions provided for in subparagraphs a) to c) of article 90(2), cannot be less than 90% of the amount that would be determined if the taxpayer did not benefit from tax benefits and the regime provided for in article 43(13).

2 — The following tax benefits are excluded from the foregoing:

a) Those of a contractual nature;

b) The system of incentives for business research and development II (SIFIDE II), provided for in the Fiscal Code of Investment;

c) Tax benefits in free trade zones provided for in articles 33 et seq. of the Tax Benefits Statute and those operating by rate reduction;

d) Those provided for in articles 19 and 32-A of the Tax Benefits Statute;

e) The tax regime for investment support (RFAI), provided for in the Fiscal Code of Investment.

f) The regime for deduction of retained and reinvested profits (DLRR), provided for in the Fiscal Code of Investment; (added by Decree-Law no. 162/2014, of 31/10)

g) The conventional remuneration regime for share capital provided for in article 41-A of the Tax Benefits Statute. (added by Decree-Law no. 162/2014, of 31/10)

h) The incentive for cinematographic production provided for in article 59-F of the Tax Benefits Statute. (Wording of Decree-Law no. 22/2017, of 22 February and Rectification Declaration no. 13/2017, of 13 April)".

Thus, considering the literal element of the rule contained in article 3(3) of RFAI, it is understood that when the deduction from the tax collection relating to eligible investments cannot be made in full due to insufficient tax collection, the amount still not deducted may be deducted, on the same terms, in the assessments for the four following tax years.

In turn, article 92(1) of the IRC Code determines that the IRC assessed cannot be less than 90% of the tax that would be due, should tax benefits not be deducted, excluding from the calculation of such limit the benefits arising from RFAI.

Consequently, from the literal interpretation of those rules, it results that article 3(3) of RFAI permits taxpayers to deduct from the IRC tax collection up to 25% of relevant investments, whereas article 92 of the IRC Code limits the right to deduction to a maximum of 10%, establishing nothing regarding the right to carry forward unused deductions.

From the historical and teleological point of view, it results from the Report of the State Budget for 2011, that article 92 constitutes "a provision that was already subject to review in the State Budget Law for 2010, at which time the percentage in question was raised from 60% to (…) 75%, pointing to an effective taxation of 18.75%. (…) Raising to 90% the percentage below which tax benefits are disregarded (…) points to an effective taxation rate of 22.5% (…)".

In turn, as results from article 1 of RFAI, this regime is created as a system of tax incentives for investment in certain sectors of activity, aimed at contributing to the promotion of investment and competitiveness and to the maintenance of a fiscal context favorable to investment.

It results, thus, from the consideration of the historical and teleological element of the rules under analysis that the meaning imparted to the special regime for investment support aims to create a set of tax incentives, which includes the right to carry forward the right to deduction expressly established in article 3(3) of RFAI.

Taking into account, also, the provision of article 9(3) of the CC, it should be presumed that the legislator established the most appropriate solution to achieve the intended objective of encouraging investment and knew how to express its intent in adequate terms.

In fact, although the rule establishing such tax benefits is an exceptional rule, the interpretation of the rule in the terms referred to does not exceed the irremovable limits of the letter of the law, the interpretation defended being merely declarative.

For this reason, considering the interpretative elements of the rules, it is understood that the right to carry-forward established in RFAI, in case of insufficient tax collection, should be interpreted in the sense of attributing to the taxpayer the possibility of enjoying the tax benefit, making its integral utilization possible, through carry-forward.

In any event, and even if doubts existed with respect to the interpretation of the rules under analysis, it should be understood, in that case, that the rules in question would be conflicting rules. Being the rule established in article 3(3) of RFAI, a rule specifically created to regulate the legal-tax regime of such tax incentives, in the sense that it creates the right to carry-forward, the limitation on the right to carry-forward resulting from article 92 of the IRC Code could not prevail over the rule resulting from article 3(3) of RFAI, which precisely aims to prevent the birth of the tax obligation with its normal content, which falls within standard taxation, with an exceptional nature and extrafiscal foundation.[1]

In fact, and following the position defended in Decision no. 369/2015-T, of 25 January 2016, "An interpretation of the law, not expressly imposed by the legal text, that restricts the "utilization" of the tax benefits in question would harm the credibility of the "legislative promises" in tax matters, would be, in short, contrary to the principle of confidence, inherent in the idea of the Rule of Law.

In the confrontation between these two objectives, it is the law itself that indicates what must prevail. The public interests that determine the creation of a tax benefit are, by nature, superior to those of taxation that prevent it.

This is even more manifest with respect to tax incentives for investment, since they constitute a true public promise, in the sense that to taxpayers who adopt certain behaviors, supposedly of the greatest economic and social interest, a certain "tax reward" is guaranteed.

Thus, following the sense of the decisions delivered in proceedings no. 693/2014-T of CAAD, in proceedings 369/2015-T and 370/2015-T, it is concluded that the tax benefit resulting from RFAI in respect of IRC can only be utilized insofar as it does not put at risk the limit provided for in article 92(1) of the IRC Code, the portion that is not used in the year of investment being able to be used for deduction from the IRC tax collection in the subsequent years, up to the limit provided for in article 3(3) of RFAI.

Consequently, the act of additional IRC assessment and compensatory interest sub judice referring to the 2014 tax year must be annulled, due to a defect of violation of Law, recognizing the right to indemnity interest of the Claimant, since the illegality of the assessment act is attributable to error on the part of the Respondent, under the terms provided for in article 43(1) of the LGT and article 61(4) of the CPPT.

DECISION

Accordingly, this Arbitral Tribunal agrees to:

• Find the claim for declaration of illegality of the IRC assessment act and corresponding compensatory interest identified in the proceedings, in the amount of €1.455.276,23 (one million, four hundred and fifty-five thousand, two hundred and seventy-six euros and twenty-three cents), to be well-founded;

• Order the Tax and Customs Authority to refund to the Claimant the amount of tax paid, plus indemnity interest;

• Order the Respondent to pay the costs of the present proceedings, being the losing party.

VALUE OF THE PROCEEDINGS

In accordance with the provision of article 315(2) of the CPC and article 97-A(1), subparagraph a), of the CPPT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €1.455.276,23 (one million, four hundred and fifty-five thousand, two hundred and seventy-six euros and twenty-three cents).

COSTS

Under article 22(4) of the RJAT, the amount of costs is fixed at €19.584,00 (nineteen thousand, five hundred and eighty-four euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Let notification be made.

Lisbon, 3 November 2017

The Arbitrators

(José Baeta de Queiroz)

(Magda Feliciano)

(Luis Manuel Pereira da Silva)

(The text of the present decision was prepared by computer, in accordance with article 131(5) of the Code of Civil Procedure, applicable by referral of article 29(1), subparagraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), its drafting being governed by the spelling prior to the Orthographic Agreement of 1990.)

[1] General Theory of Tax Benefits, Cadernos de Ciência e Técnica Fiscal, Nuno Sá Gomes, pp.