Summary
Full Decision
ARBITRAL DECISION
I - REPORT
A - IDENTIFICATION OF THE PARTIES
Claimant: A..., Tax ID Number..., with registered office at Street..., No...., ..., ...-... Lisbon, hereinafter referred to as Claimant or Taxpayer.
Respondent: Tax and Customs Authority, hereinafter referred to as Respondent or TA.
The Claimant filed a request for the constitution of an Arbitral Tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of paragraph a) of Article 2(1) and paragraph a) of Article 10(1), both of Decree-Law No. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters), hereinafter abbreviated as RJAT.
The request for constitution of the Arbitral Tribunal was accepted by the President of the Administrative Arbitration Centre (CAAD), and in accordance with the provisions of paragraph c) of Article 11(1) of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Tax Authority was notified on 28 May 2018.
The Claimant did not proceed with the appointment of an arbitrator, whereupon, pursuant to the provisions of Article 6(1) and paragraph b) of Article 11(1) of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Deontological Council appointed Arbitrator Rita Guerra Alves, who accepted the appointment in accordance with the legal provisions.
On 16 July 2018, the parties were duly notified of this appointment, and neither manifested any intention to refuse the arbitrator's appointment, in accordance with Article 11(1), paragraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.
The Singular Arbitral Tribunal was regularly constituted on 6 August 2018 to examine and decide upon the subject matter of the present dispute, and on that same day the Tax and Customs Authority was automatically notified, as appears in the respective minutes.
No witness evidence was produced, and accordingly, in the procedural sequence, both parties accepted the waiver of the meeting referred to in Article 18 of the RJAT.
The parties possess legal standing and capacity; they are properly represented (Articles 4 and 10(2) of the same statute and Article 1 of Regulatory Order No. 112-A/2011 of 22 March).
The proceedings are not affected by any defects that would invalidate them.
B - REQUEST
The Claimant petitions for a declaration of illegality of the tax assessment act for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents).
C - BASIS OF THE CLAIM
To support its request for arbitral pronouncement, the Claimant alleges, in view of the declaration of illegality of the tax assessment act for Corporate Income Tax (IRC) already described in point 1 of this decision, the following:
The Claimant maintains that the assessment act in question is based on an incorrect interpretation of the facts and an erroneous interpretation and application of the law, specifically the provisions of Articles 13 and 106 of the IRC Code (CIRC), and therefore should be annulled with all legal consequences.
It argues that the central issue to be decided concerns the non-subjection to IRC payment (including special advance payment) of companies such as A..., which are engaged in the operation of aircraft in international traffic, and which are exempt or not subject to taxation in Portugal.
The Claimant was notified of the assessment of compensatory interest, provided for in Article 102 of the IRC Code – Compensatory Interest – apparently due to late payment or failure to pay, in whole or in part, the special advance payment.
On 30 October 2017, the Claimant filed an administrative appeal against the assessment of compensatory interest due to alleged non-payment of the special advance payment for the 2016 period.
On 28 December 2017, the Claimant filed an amendment to that administrative appeal.
As there was no decision by the Tax Service, the tacit rejection of the administrative appeal occurred on 28 February 2018 (cf. Article 106 of the Tax Code and Articles 57(1) and 57(5) of the General Tax Law – LGT).
Accordingly, the deadline for filing the request for constitution of an arbitral tribunal ended on 29 May 2018 (cf. Article 10 of Decree-Law No. 10/2011 and Article 102(1), paragraph d) of the Tax Code – CPPT).
The Claimant maintains that it is a company incorporated under Dutch law with a permanent establishment in Portugal, is a non-resident air navigation company that derives profits exclusively from the operation of commercial passenger transport aircraft.
The Claimant was notified of the assessment of IRC compensatory interest for the 2016 period, which contains no element allowing it to know the substantive and factual grounds that motivated it.
The Claimant argues that the assessment in question in the present proceedings should be declared illegal due to lack of grounds, pursuant to paragraph c) of Article 99(1) of the Tax Code.
The Claimant further argues that the assessment of compensatory interest for non-payment of the special advance payment by the Claimant completely lacks foundation, both in fact and in law, as will be demonstrated hereinafter.
Furthermore, the Claimant alleges that, pursuant to Article 13 of the IRC Code, profits realised by non-resident air and maritime navigation companies arising from the operation of aircraft are exempt from IRC.
The profits earned by the Claimant in its commercial aviation activity are thus exempt from IRC and consequently from any advance payment or special advance payment of that tax.
Special advance payment is only owed in relation to profits earned by entities subject to IRC.
It argues that Article 106(11), paragraph a) of the IRC Code specifically provides that taxpayers totally exempt from IRC are relieved of the obligation to make special advance payments.
Now, the Claimant only makes sales and provides services within the scope of its commercial aviation activity, and these revenues are exempt from IRC, wherefore, by virtue of the provisions of Article 106(4) of the IRC Code, the Claimant's turnover cannot be used for the calculation of any alleged special advance payment since that turnover relates to exempt revenues.
The Claimant is not subject to any special advance payment in accordance with the provisions of Article 106(1) of the IRC Code, just as, pursuant to Article 106(4) of the IRC Code, there would be no way to calculate any advance payment and consequently any interest for alleged failure to make such payment.
The Claimant concludes by requesting the annulment of the IRC assessment for the year 2016, which should result in the annulment of the tax assessment that is the subject matter of the present appeal, with all legal consequences.
D - RESPONDENT'S REPLY
The Respondent, duly notified to that effect, filed its reply in a timely manner, in which, in summary, it alleged the following:
The substantiation of compensatory interest in this case is sufficient, clear and coherent, as it sets out the legal provision supporting it, Article 102 of the IRC Code.
Furthermore, it follows from the statement showing the calculation of such interest that it contains a reference to the amount of tax on which the compensatory interest was calculated, the rate or rates applied and the period during which such interest is payable, with indication of the starting and ending dates of the calculation.
Therefore, the minimum requirements for substantiation of the assessment of compensatory interest are met in this case.
The Respondent concludes by requesting dismissal of the claim as unsubstantiated and, consequently, absolution of the Respondent from the claim.
E - STATEMENT OF FACTS
For the examination of the issues raised, it is necessary to first present the factual matters relevant to their understanding and the decision to be rendered, based on the facts alleged and the documentary evidence produced in the proceedings.
With regard to factual matters considered relevant, this Tribunal finds the following facts to be established:
The Claimant is a company incorporated under Dutch law with a permanent establishment in Portugal, is a non-resident air navigation company that derives profits exclusively from the operation of commercial passenger transport aircraft.
The Claimant was notified of the tax assessment act for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents).
The Claimant is exempt from paying income tax on profits derived from the operation of ships or aircraft pursuant to Article 13 of the IRC Code.
The Claimant in the year 2015 earned revenues exclusively from the operation of ships or aircraft.
On 30 October 2017, the Claimant filed an administrative appeal against the IRC assessment No. 2017....
As there was no decision by the Tax Service, the tacit rejection of the administrative appeal occurred on 28 February 2018.
F - UNPROVEN FACTS
Of the facts with relevance to the decision of the case, contained in the challenge and subject to concrete analysis, those that do not appear in the factual recital above have not been proven.
G - ISSUES FOR DECISION
Considering the positions of the parties as adopted in the arguments presented by each, it is necessary to examine and decide:
(i) The declaration of illegality of the tax assessment acts for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents).
(ii) The payment of indemnification interest;
(iii) The preliminary issue of the exception of lack of jurisdiction of the arbitral tribunal.
H - THE DILATORY EXCEPTION: EXCEPTION OF LACK OF JURISDICTION OF THE ARBITRAL TRIBUNAL
The Respondent has raised the material incompetence of the present arbitral tribunal to examine and decide upon the claim at issue in the present dispute, pursuant to Articles 2(1), paragraph a) and 4(1), both of the RJAT and Articles 1 and 2, paragraph a), both of Regulatory Order No. 112-A/2011, which constitutes a dilatory exception preventing examination of the merits of the case, pursuant to the provisions of Article 576(1) and (2) of the Code of Civil Procedure (CPC) as applied by Article 2, paragraph e) of the Tax Code (CPPT) and Article 29(1), paragraphs a) and e) of the RJAT, which prevents examination of the claim and requires absolution of the Tax Authority in accordance with Articles 576(2) and 577, paragraph a) of the CPC as applied by Article 29(1), paragraphs a) and e) of the RJAT.
A dilatory exception is the lack of jurisdiction, whether absolute or relative, of the arbitral tribunal as to its material capacity to examine the acts subject to the arbitral claim, Article 577 of the CPC and Article 2 of the RJAT.
The Respondent raises the question of the lack of jurisdiction of the present arbitral tribunal, based on the present arbitral request and attached documents.
Questions concerning the determination of the jurisdiction of courts are matters of priority examination and must be examined ex officio, pursuant to Articles 13 of the Code of Administrative Court Procedure (CPTA) and 578 of the Code of Civil Procedure (CPC) by subsidiary application of Article 29 of the Legal Framework for Arbitration in Tax Matters (RJAT); it is therefore necessary, given the foregoing, to examine the present dilatory exception.
In this regard, it is necessary to determine the jurisdiction of the arbitral tribunals operating in the CAAD.
In the first place, the jurisdiction of the arbitral tribunals operating in the CAAD is limited to the matters indicated in Article 2(1) of Decree-Law No. 10/2011 of 20 January (RJAT), the first paragraph of which provides that arbitral tribunals have jurisdiction to examine claims for declaration of illegality of tax assessment and self-assessment acts.
In the second place, the jurisdiction of the arbitral tribunals operating in the CAAD is limited by the terms to which the Tax Administration has bound itself to that jurisdiction, embodied in Regulatory Order No. 112-A/2011 of 22 March, as Article 4 of the RJAT provides that "the binding of the tax administration to the jurisdiction of the tribunals constituted pursuant to this statute depends on an order of the Government members responsible for the areas of finance and justice, which shall establish, in particular, the type and maximum value of disputes covered", under which the binding to arbitral jurisdiction of the services – DGCI and DGAIEC – entities merged in the current Tax and Customs Authority, with effect from 1 January 2012, is sought.
It should be understood that the jurisdiction of arbitral tribunals "is limited to activities related to acts of assessment of taxes, being outside its jurisdiction the examination of the legality of administrative acts of total or partial rejection or revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax matters that do not involve examination of the assessment act, referred to in paragraph p) of Article 97(1) of the CPPT" (Jorge Lopes de Sousa, Commentary on the Legal Framework for Tax Arbitration in Guide to Tax Arbitration, Almedina, 2013, p. 105).
The examination of the arbitral tribunal's jurisdiction involves a judgment regarding the suitability of the remedy of special administrative action or judicial challenge proceedings for the case at hand, taking into account the provisions of Article 97 of the CPPT, which defines their respective fields of application, distinguishing between "challenges to administrative acts in tax matters involving examination of the legality of the assessment act" (paragraph d) of Article 97(1)) and "contentious proceedings against total or partial rejection or revocation of exemptions or other tax benefits, when dependent on recognition by the tax administration, as well as other administrative acts relating to tax matters that do not involve examination of the legality of the assessment act" (paragraph p) of Article 97(1)), and that, pursuant to Article 97(2), "contentious proceedings against administrative acts in tax matters that do not involve examination of the legality of the assessment act, made by the tax administration, including the central government, regional governments and their members, even when performed by delegation, is governed by the rules on proceedings in administrative courts".
To clarify this distinction between the scope of application of these remedies, which, by virtue of paragraph a) of Article 2(1) of the RJAT, is relevant to the definition of the jurisdiction of tax arbitral tribunals, it is established jurisprudence that "the use of judicial challenge proceedings or contentious proceedings (currently special administrative action, by virtue of the provisions of Article 191 of the CPTA) depends on the content of the act being challenged: if it involves examination of the legality of an assessment act, the judicial challenge procedure shall apply; if it does not involve such examination, contentious proceedings/special administrative action applies" (cf. the decision of the Supreme Administrative Court of 25 June 2009, case No. 0194/09).
In light of this second limitation of the jurisdiction of the arbitral tribunals operating in the CAAD, the resolution of the jurisdiction question depends essentially on the terms of this binding, as, even if one is dealing with a situation falling within Article 2 of the RJAT, if it is not covered by the binding, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be excluded.
In paragraph a) of Article 2 of Regulatory Order No. 112-A/2011, the following are expressly excluded from the scope of the Tax Administration's binding to the jurisdiction of the arbitral tribunals operating in the CAAD: "claims relating to the declaration of illegality of self-assessment acts, withholding at source acts and advance payment acts that have not been preceded by recourse to the administrative remedy pursuant to Articles 131 to 133 of the Tax Code and Procedure".
The express reference to the prior "recourse to the administrative remedy pursuant to Articles 131 to 133 of the Tax Code and Procedure" must be interpreted as referring to cases where such recourse is mandatory, through administrative appeal, which is the administrative remedy indicated in those Articles 131 to 133 of the CPPT, to whose terms reference is made.
In truth, it would not be understood that, where prior administrative challenge is not required "where its ground is exclusively a matter of law and the self-assessment was made in accordance with generic guidelines issued by the tax administration" (Article 131(3) of the CPPT, applicable to cases of assessment at source), the arbitral jurisdiction would be excluded because this administrative challenge, which is understood to be unnecessary, was not performed.
In the case at hand, two claims are made: the annulment of the IRC assessment act No. 2017... and its refund is requested, and the lifting of the fiscal execution No. ...2017... and the seizures respectively constituted thereunder with the numbers 2017..., 2017..., 2017... and 2018... is requested.
Additionally, the Claimant sets out as the value of the claim the amount of €1,568.42 corresponding to the IRC assessment act No. 2017....
Accordingly, it is necessary, first and foremost, to clarify whether the Claimant's claims are included in the competencies attributed to the arbitral tribunals operating in the CAAD by Article 2 of the RJAT.
Article 2(1) of the RJAT (Jurisdiction of Arbitral Tribunals and Applicable Law) provides as follows: "1 — The jurisdiction of arbitral tribunals extends to examination of the following claims:
a) The declaration of illegality of acts of assessment of taxes, self-assessment acts, withholding at source acts and advance payment acts;
b) The declaration of illegality of acts fixing the taxable base when they do not give rise to the assessment of any tax, acts determining the tax base and acts fixing patrimonial values;"
Regarding the first claim, for annulment of the IRC assessment act No. 2017..., the Respondent alleges that the Claimant, notwithstanding having made reference to and identified the circumstances which, in its view, would preclude the IRC assessment, has not formulated/specified to the Tribunal any claim tending toward the annulment of said IRC assessment.
The Claimant, in counter-argument, took the position that it clearly identified the IRC assessment act at issue in the present proceedings, having indicated the number of the corresponding assessment. Furthermore, it argues that it specified the subject of the claim by describing it as an assessment of "compensatory interest" only because this is the description appearing in the assessment document sent by the TA, especially since the assessment is entirely filled in with values of 0 and only in the compensatory interest line is the amount of €1,588.42 indicated, which therefore also corresponds to the "amount payable" of IRC.
In light of the foregoing, from the analysis of the act itself and of the arbitral request, we find that this is a statement of IRC assessment, which constitutes an act of assessment of taxes.
We find that the Claimant requests the annulment of the IRC act No. 2017... in its entirety and not only as to compensatory interest, although the value of the tax to be assessed and the value of the compensatory interest are identical.
Given the legislation and case law set out above, we conclude that statements of IRC assessment are included within the competencies of arbitral tribunals, pursuant to Article 2(1) of the RJAT, and thus the tribunal has jurisdiction regarding the claim for annulment of the IRC act No. 2017....
As for the Claimant's second claim, to lift the fiscal execution No. ...2017..., and the seizures with the numbers 2017..., 2017..., 2017... and 2018..., as a consequence of its principal claim for annulment of the IRC assessment act No. 2017....
As follows from Article 2(1) of the RJAT, the tribunal has no competencies to decide on the lifting of fiscal executions and respective seizures.
Therefore, this claim does not fall within the acts listed in Article 2(1), paragraph a) or b) of the RJAT, regarding which arbitral tribunals have competencies to decide.
In truth, there was legislative concern in excluding from the competencies of the arbitral tribunals operating in the CAAD the examination of the legality of administrative acts that do not involve examination of the legality of assessment acts, as follows, inter alia, from the general directive for the creation of an alternative to the judicial challenge process and action for recognition of a right or legitimate interest – See paragraph a) of Article 124(4) of Law No. 3-B/2010 of 28 April, which indicates among the possible objects of the tax arbitration process "administrative acts involving examination of the legality of assessment acts", a specification that can only be justified by legislative intent to exclude from the possible objects of arbitration proceedings the examination of the legality of acts that do not involve examination of the legality of assessment acts.
From paragraphs d) and p) of Article 97(1) and Article 97(2) of the CPPT, the rule is inferred that challenges to administrative acts in tax matters may be made in judicial tax proceedings through judicial challenge or special administrative action depending on whether such acts involve or do not involve examination of the legality of assessment administrative acts – it being understood that, in the concept of "assessment" in a broad sense, all acts that constitute the application of a rate to a certain tax base are encompassed, and therefore also acts of withholding at source, self-assessment and advance payment.
This is why this second request for arbitral pronouncement formulated is outside the scope of material jurisdiction of the CAAD established in the RJAT and in the Order (No. 112-A/2011 of 22 March) binding to arbitration of the Tax and Customs Authority (TA).
For this reason, it must be considered that the present tribunal has jurisdiction to decide on the first claim petitioned by the Claimant and is without jurisdiction to decide on the second claim petitioned by the Claimant.
Accordingly and in conclusion:
The Arbitral Tribunal has material jurisdiction to examine and decide the claim for annulment of the IRC act No. 2017..., subject matter of the dispute sub judice, pursuant to Articles 2(1), paragraph a) and 4(1), both of the RJAT and Articles 1 and 2, paragraph a), of Regulatory Order No. 112-A/2011.
The Arbitral Tribunal lacks material jurisdiction to examine and decide the second claim subject matter of the dispute sub judice, to lift the fiscal executions No. ...2017..., and the seizures constituted thereunder with the numbers 2017..., 2017..., 2017... and 2018..., pursuant to Articles 2(1), paragraph a) and 4(1), both of the RJAT and Articles 1 and 2, paragraph a), of Regulatory Order No. 112-A/2011.
Regarding the value of the proceedings, it is correct in view of the claim for annulment of the IRC act No. 2017... and corresponds to the value of the economic benefit of the claim, specifically that of the IRC assessment act No. 2017..., pursuant to Article 10(2), paragraph e) of the RJAT.
H - SUBSTANTIVE LAW
As previously set out, the central issue to be resolved by the present Arbitral Tribunal concerns the examination of the legality of the tax assessment act for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents).
To that end, we shall begin by determining the applicable law, giving priority, in compliance with the provisions of Articles 13 and 106 of the IRC Code, to the analysis of the defects of the assessment act.
In the present case, it amounts to, in summary, an assessment act for non-payment of Special Advance Payment, which resulted in a tax assessment of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents).
In a first analysis, we shall ascertain whether the Claimant has an obligation to make special advance payment, given that all of its revenues derive from the operation of ships or aircraft and as such are exempt from IRC pursuant to Article 13 of the IRC Code.
It follows from the established facts that the Claimant is an air navigation company, non-resident, that derives profits exclusively from the operation of commercial passenger transport aircraft, and as such is exempt from IRC, having fulfilled all the requirements of the Exemption provided in Article 13 of the IRC Code.
It should be noted that the Claimant has no other type of revenues except those arising from the operation of ships or aircraft.
Let us now examine the relevant legislation for the case, beginning with the provisions of Article 13 of the IRC Code: "Profits realized by non-resident collective persons and other maritime and air navigation entities arising from the operation of ships or aircraft are exempt from IRC, provided that reciprocal and equivalent exemption is granted to resident companies of the same nature and such reciprocity is recognised by the Minister of Finance, in an order published in the Official Gazette."
In other words, profits realized by non-resident air navigation companies arising from the operation of aircraft are exempt from IRC.
Now, from the analysis of the evidence in the present proceedings, it follows that the present Claimant has no other type of profits except sales or services arising from the operation of ships or aircraft, whereby all its profits derive from this activity and are totally exempt pursuant to Article 13.
One might raise the question of whether the Claimant possesses other profits, sales or services not deriving from the operation of ships or aircraft in the year 2015; however, this question does not arise, as in the present proceedings it is not part of the factual matters or of the challenge that the Claimant has other revenues outside the exemption provided for the operation of ships or aircraft.
It is thus concluded that all the Claimant's profits for IRC purposes derive from the operation of ships or aircraft.
Having established that the Claimant is exempt from paying IRC on its profits and has no other type of revenues besides the operation of ships or aircraft, with no IRC being assessable in Portugal, it is now appropriate to address the issue raised, specifically, whether the Claimant would be obligated to make special advance payment (SAP).
Let us therefore now examine the legal and tax regime of special advance payment (SAP), which is provided for in Article 33 of the General Tax Law (LGT) and Article 106 of the IRC Code.
SAP is an advance payment on account of a fact in the process of formation, that is, it presupposes a single-event tax fact, as opposed to periodic tax facts.
The SAP was introduced by Decree-Law No. 44/98 of 3 March, which added Article 83-A to the IRC Code, and was part of a set of fiscal policy measures directed against tax evasion and fraud, whose motivation is explained in the preamble of this statute in the following terms:
"(...) Statistics show that the incomes of collective persons subject to IRC taxation are frequently, and without any plausible reason, the subject of collection far below reality. Evasive practices of concealment of income or inflation of costs are manifestly generators of serious distortions of the principles of tax equity and justice and economic efficiency itself and damaging to the stability of tax revenues. As a result, there is an unjust distribution of the tax burden, all the more felt as many IRC taxpayers, for successive years, have contributed little or nothing to the State Budget, yet continue to enjoy, sometimes in a privileged manner, the economic and social rights provided for in the Constitution. In this context, the present statute establishes a special advance payment on account, through a new mechanism, on the incomes of years 1998 and following, for collective persons subject to IRC. The formula used for its calculation and the mechanism employed allow approximation of the moment of production of income to the moment of its taxation."
The SAP was created with the purpose of ensuring a minimum collection of tax, being this even its first designation in the discussion of the 1998 State Budget. This requirement of minimum collection arose from the finding that the great majority of enterprises did not present taxable profit and/or that this was in most cases insignificant. (Case No. 535/2015-T of the CAAD)
The incidence of SAP is based on the turnover relating to the previous tax period, pursuant to the cited Article 106-2 of the IRC Code, and payments are made during the period of formation of the tax fact. (In this sense, António Lima Guerreiro, Annotated LGT, Editor Rei dos Livros, p. 167).
The Constitutional Court pronounced itself on the nature and constitutionality of SAP in Decision No. 494/2009, case No. 595/06, of 29 September, which decided "(...) a reading of the legal regime of SAP that is attentive to its genesis and evolution leads to the conclusion that it does not obey primarily the typical logic of advance payment – that is, primarily, to ensure the public treasury regular income flows and, in second place, to protect the Tax Administration against variations in the debtor's fortune and produce a certain 'fiscal anesthesia' – but is instead indissolubly linked to the fight against tax evasion and fraud. For a long time there have been suspicions, including by the Tax Administration, regarding the incomes declared by IRC taxpayers; in particular, it was questioned whether they corresponded to the taxable income actually earned. This was evidenced by Law No. 52-C/96 of 27 December (State Budget Law for 1997), in its Article 32 (Common Provisions), which contained legislative authorization to the Government to "define a minimum taxation" and which would mark the introduction in our tax system of the SAP figure. In that provision, the fiscal instrument then established was presented as "a new type of advance payment" that aimed to achieve "greater tax justice and greater efficiency of the system", allowing the use, "where applicable, of presumptive methods. It should be noted that national doctrine is unanimous in affirming the nature of SAP as an instrument for fighting tax evasion."
And in that sense, Saldanha Sanches and Salgado de Matos understand (Taxation No. 15 - Magazine of Law and Tax Management) that: "(...) from a conceptual point of view, special advance payments are, in confirmation of their designation, true advance payments – that is, a fiscal anesthesia mechanism used by the legislator to reduce the time lag between the moment of occurrence of the fact that indicates the existence of tax capacity (the receipt of income) and the moment when payment of the tax debt is due, that creates autonomous obligations with specific deadlines and due date rules, arising at a moment prior to the final formation of the tax debt. The difference between special advance payments and general advance payments is thus not one of nature, but only of regime". "(...) Although the law does not state it expressly, the presumption of income and the minimum collection present in special advance payment aim at fighting tax evasion (...). It should be taken into account that these mechanisms may, indeed, be the only appropriate means, not – naturally – to put an end to tax evasion, but to ensure that certain taxpayers in situations of tax evasion will be obliged, at least, to make some effort to contribute to the general expenses of the political community (...).
In this manner, and by way of conclusion, we have that the legal nature of SAP, revealed by its configuration as "an instrument or guarantee of payment of the tax on account of which it is required, and not as an independent imposition" (cf. the Constitutional Court Decision cited above), as well as by the function associated with it in fighting tax evasion and fraud, inextricably links this payment to the amount of IRC calculated on the tax base determined on the basis of profit (Chapter III of the code).
Regarding advance payments, Article 33 of the General Tax Law (LGT) provides: "Pecuniary advances made by taxpayers during the period of formation of the tax fact constitute advance payment on account of the tax finally due." (our emphasis).
The calculation of Special Advance Payment is done pursuant to Article 106(2) to (4) (in force at the date of the facts), from which it results: "2 — The amount of the special advance payment equals 1% of turnover for the previous tax period, with a minimum limit of €1,000, and, when greater, equals this limit plus 20% of the amount exceeding it, with a maximum limit of €70,000. 3 – From the amount calculated pursuant to the preceding paragraph, advance payments calculated pursuant to Article 105 and made during the previous tax period are deducted. 4 — For the purposes of paragraph 2, turnover corresponds to the value of sales and services rendered."
Article 106(11) itself, paragraph a), clarifies: "11 — The following are relieved of the obligation to make special advance payment: a) Taxpayers totally exempt from IRC, even if the exemption does not include revenues subject to taxation by withholding at source with a final character;".
As we have verified, the Claimant has all of its revenues exempt pursuant to Article 13 of the IRC Code.
Given that the Claimant is totally exempt from payment of IRC on its profits, it falls within the exclusion of Article 106(11), paragraph a), whereby there is no obligation to make special advance payment.
Consequently, the Claimant only makes sales and provides services within the scope of its commercial aviation activity, and these revenues are exempt from IRC, wherefore, by virtue of the provisions of Article 106(4) of the IRC Code, the Claimant's turnover cannot be used for the calculation of any alleged special advance payment since that turnover relates to exempt revenues.
The conjunction of Article 13 and Article 106(11), paragraph a) raises no interpretive doubt; the Claimant is exempt from special advance payment.
As the Claimant has all of its revenues exempt pursuant to Article 13 of the IRC Code, no special advance payment shall be due.
Consequently, this Tribunal grants the Claimant's claim, declaring the tax assessment act for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents) to be illegal.
The Arbitral Tribunal, pursuant to Articles 608(2), 663(2) and 679 of the Code of Civil Procedure as applied by Article 29 of the RJAT, is not obliged to examine all arguments alleged by the Claimant or Respondent, when the decision rendered on the matters examined makes examination of other issues unnecessary, as is the case in the present proceedings; accordingly, examination of the remaining issues submitted for arbitral pronouncement is waived.
I - INDEMNIFICATION INTEREST
The Claimant further petitions for the payment of indemnification interest.
Given the foregoing, the assessment insofar as it is covered by the annulment results from error of fact and law attributable exclusively to the tax administration, in that the Claimant fulfilled its duty to file a tax declaration.
In truth, it has been established that the Claimant paid the contested tax in an amount higher than that which is owed. Thus, and by virtue of the provisions of Articles 61 of the CPPT and 43 of the LGT, the Claimant has the right to indemnification interest due, such interest to be calculated from the date of payment of the undue tax (annulled) to the date of issuance of the respective credit note, with the period for payment calculated from the date of commencement of the deadline for voluntary compliance with the present decision (Articles 61(2) to 61(5) of the Tax Code), all at the rate calculated in accordance with the provisions of Article 43(4) of the LGT.
Given all of the foregoing and the invoked legal provisions, it is decided to grant the Claimant's claim.
II - DECISION
Accordingly, in light of all of the foregoing, the present Arbitral Tribunal decides:
To find that the Arbitral Tribunal lacks material jurisdiction regarding the claim for lifting of the fiscal execution No. — seizures/levies constituted on credits Nos.: 2017..., 2017..., 2017... and 2018....
To find that the Arbitral Tribunal does not lack material jurisdiction regarding the tax assessment act for Corporate Income Tax (IRC) No. 2017...;
To find the claim for declaration of illegality of the tax assessment act for Corporate Income Tax (IRC) No. 2017..., corresponding to the fiscal year 2016, in the amount of €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents) to be well-founded.
To order the Respondent to refund to the Claimant that amount unlawfully assessed and paid, plus payment of accrued indemnification interest relating to the period between the date of payment of the tax and its return, as well as payment of future indemnification interest from the date of notification of this decision until complete and full payment, all pursuant to Articles 61(2) to 61(5) of the CPPT, at the legal rate calculated in accordance with the provisions of Article 43(4) of the General Tax Law (LGT) until full reimbursement.
The value of the proceedings is set at €1,568.42 (one thousand five hundred sixty-eight euros and forty-two cents), corresponding to the value of the assessment, taking into account the economic value of the proceedings, assessed by the value of the contested tax assessment, and in accordance therewith the costs are set at €306.00 (three hundred six euros), to be borne by the Respondent in accordance with Article 12(2) of the Tax Arbitration Regime, Article 4 of the Tax Arbitration Procedure Rules and Table I attached thereto – Article 10 of Article 35, and Articles 1, 4 and 5 of Article 43 of the General Tax Law (LGT), Articles 5(1), paragraph a) of the Tax Arbitration Procedure Rules, 97-A(1), paragraph a) of the CPPT and 559 of the Code of Civil Procedure).
Let notification be made.
Lisbon, 29 October 2018
The Arbitrator
Rita Guerra Alves
Text prepared by computer, pursuant to Article 138(5) of the Code of Civil Procedure (CPC), as applied by Article 29(1), paragraph e) of the Legal Framework for Tax Arbitration.
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