IRC Fiscal Neutrality in Simple Demerger: Branch of Activity Requirement – CAAD 269/2014-T

ARBITRAL AWARD

The arbitrators, Jorge Lino Ribeiro Alves de Sousa (arbitrator president), Jaime Carvalho Esteves and João Menezes Leitão, who constitute this Arbitral Tribunal, hereby agree as follows:

I. REPORT[1]

1. A…, SA, collective person no. …, with registered office in …, …-… … (hereinafter the Claimant), filed on 18.03.2014, under the terms of article 10 of Decree-Law no. 10/2011, of 20 January, as amended (Legal Framework for Tax Arbitration, hereinafter LFTA), a request for arbitral decision, in which the Tax and Customs Authority (hereinafter, the Respondent or TCA) is required regarding the tax act of additional assessment of Corporate Income Tax (CIT) and compensatory interest no. 2013 …, relating to the tax year 2009, in the amount of €408.111,13.

2. In the request for arbitral decision, under the terms of article 6, no. 2, paragraph b) and in accordance with article 10, no. 2, subparagraph g) and article 11, no. 2, all of the LFTA, the Claimant designated as arbitrator Mr. Dr. Jaime Carvalho Esteves. In turn, pursuant to the terms of paragraph b) of no. 2 of article 6 and no. 3 of article 11 of the LFTA, the Respondent designated as arbitrator Mr. Dr. João Menezes Leitão. At the request of the arbitrators designated by the parties, under the terms of the second part of paragraph b) of no. 2 of article 6 of the LFTA, the President of the Deontological Board of CAAD designated as arbitrator president Mr. Counsellor Jorge Lino Alves de Sousa.

Under the terms of no. 7 and no. 8 of article 11 of the LFTA, as communicated by the President of CAAD, the Arbitral Tribunal was constituted on 04.06.2014.

1. In its request for arbitral decision (hereinafter initial petition or IP), the Claimant requested the annulment of the tax act of additional assessment of CIT and compensatory interest no. 2013 …, relating to the tax year 2009, in the amount of €408.111,13, on the grounds of the occurrence of the following defects: i) error as to the factual and legal prerequisites in the tax qualification of the simple division operation that occurred; ii) violation of the principle of material truth; iii) defect in reasoning. It further requested the conviction of the Respondent "to pay the aforementioned sum of €408.111,13 already paid by the claimant, plus compensatory interest calculated from the date of payment (18/12/2013)".

2. The TCA presented a response, petitioning for the rejection of the request for arbitral decision on the grounds that the defects pointed out by the Claimant to the contested act do not occur.

3. On 16.9.2014, as appears from the competent minutes, testimonial evidence was produced, with examination of witnesses B…, C…, D… and E… called by the Claimant and witness F… called by the Respondent. The parties dispensed with the holding of oral arguments. The arbitral tribunal set the date for final decision until 28.11.2014, which was subsequently extended under no. 2 of art. 21 of the LFTA.

4. The arbitral tribunal is competent to judge the request for arbitral decision (art. 2, no. 1, paragraph a) of the LFTA), the parties enjoy legal personality and capacity and have standing (arts. 4 and 10, no. 2 of the LFTA and art. 1 of Ordinance no. 112-A/2011, of 22 March), and no nullities occur nor were exceptions raised, so nothing prevents judgment on the merits.

II. QUESTIONS TO BE DECIDED

1. Having regard to the positions taken and the grounds alleged by the parties in the context of this arbitral process, as they emerge from the IP of the Claimant and the response of the Respondent, the questions to be decided, having regard to the legal provisions applicable ratione temporis to the facts (year 2009)[2], concern the appreciation of the following defects imputed to the additional CIT assessment contested:

i) error as to the factual and legal prerequisites in the qualification of the division operation that occurred with respect to the neutral tax treatment regime applicable under the terms established in articles 67, no. 2, paragraph a) and no. 4 and 68, no. 1 of the CIT Code (articles 73, no. 2, paragraph a) and no. 4 and 74, no. 1 of the CIT Code as redrafted by Decree-Law no. 159/2009, of 13 July);

ii) violation of the principle of material truth;

iii) violation of the duty to provide reasons.

III. DECISION ON FACTS

1. With respect to factual matters, in light of the various allegations in the IP, it is important to observe, preliminarily, that the relevant factuality is delimited according to the various plausible solutions of the question(s) of Law that should be considered controversial (to use the apt formulation that appeared in no. 1 of art. 511 of the former Code of Civil Procedure), so that the tribunal does not have to rule on all allegations made, but rather select the facts that are effectively relevant for the decision and distinguish the proven facts from the unproven facts (cfr. art. 123, no. 2, of the CPA and art. 607, nos. 3 and 4, of the CPC, applicable ex vi article 29, no. 1, paragraphs a) and e), of the LFTA).

The choice of pertinent facts is assessed by their legal relevance, which is provided by their respective connection with each of the plausible solutions of the questions of Law. These are thus the terms in which, having regard to the legal questions to be decided listed above (see above no. 7), the delimitation of the pertinent factual matter is subsequently made.

a) Proven Facts

1. Having examined the documentary evidence presented, the administrative tax procedure attached (hereinafter, ATP) and the testimonial evidence produced, the Tribunal establishes the facts that are considered proven as follows:

I. A…, SA is a commercial joint-stock company, with share capital of €1.036.000,00, whose corporate purpose is the "manufacture of ovens, mechanisms and accessories for the baking industry" (cfr. permanent certificate at pages 25 et seq. of ATP), with main CAE of "manufacture of machines for the food, beverage and tobacco industries" and secondary CAE of "Wholesale trade of other machinery and equipment" (cfr. Tax Inspection Report at page 3 of ATP).

II. The Management of A…, SA company drew up the simple division project, dated 12 December 2008, which is attached in ATP (at pages without numbering), of which the following is stated:

• "The division to be carried out involves the separation of part of the assets of A…, SA, more specifically the separation of parts of capital in the subsidiary G…, SA to constitute with it a new company managing share participations, in the form of a joint-stock company".

• A…, SA "holds 77,545 shares of the capital of G…, SA, each with a nominal value of 5 euros, with registered office at …, parish of …, and municipality of …, tax identification no. ….

It is intended to legally separate the assets composed of the participation in G…, SA to constitute with it a new company managing share participations".

• "The assets intended to be separated from the assets of A…, SA to constitute with them a new company are 77,545 bearer shares, representing capital of G…, SA, each with a nominal value of 5 euros, with registered office at …, parish of …, and municipality of …, tax identification no. …, being valued according to the cost method, and recorded on the balance sheet of A…, SA, for the amount of 464,000 euros.

The Division intended to be carried out has as objectives to make autonomous the assets of A…, SA which are not related to the main activity of the company, which is the production of ovens and machines for the baking industry, creating a new company whose purpose will be the management of share participations".

• "The active and passive assets to be transferred translate into:

Active assets:

• 77,545 shares of the capital of G…, SA, each with a nominal value of 5 euros, with registered office at …, parish of …, and municipality of …, tax identification no. …, with the accounting value of 464,000 euros.

The shares to be transferred are materialized in:

• 4 certificates of 10,000 shares each with nominal value of 5 euros, with numbers 1 to 40,000;

• 36 certificates of 1,000 shares each with nominal value of 5 euros, with numbers 50,001 to 86,000;

• 15 certificates of 100 shares each with nominal value of 5 euros, with numbers 11,001 to 116,500;

• 9 certificates of 5 shares each with nominal value of 5 euros, with numbers 119,801 to 119,845.

The assets to be transferred to the new company are those resulting from the balance sheet, with reference to the date of 30 September 2008, duly approved by the shareholders of A…, SA.

The assets to be transferred are not subject to registration.

With a view to taking advantage of the neutral tax treatment provided for in art. 68 of the code of tax on the income of collective persons, the assets objects of transfer shall be recorded in the accounting of the new company, with the same values they had in the accounting of the dividing company".

III. The division was deliberated in the General Assembly of the Claimant on 2 February 2009, in accordance with minutes no. 28 which are attached at unnumbered pages of ATP, of which it appears that the "shareholder and President of the Board of Administration H…" presented to the assembly "a set of considerations regarding the intention of the company to reduce the scope of its business, making autonomous the assets of A…, SA, which are not related to the main activity of the company creating a new company whose purpose will be the management of share participations of other companies", with which "it frees itself from the assets not allocated to its activity, on a permanent basis, through a simple division of assets composed of share participations in another company, forming with the separated assets a new company, which will have as its sole purpose the management of share participations of other companies".

IV. The division, in the form of "simple division, through separation of part of its assets to constitute another company managing share participations", was registered in the commercial register by Reg. no. …/…, the share capital of the Claimant becoming €1.036.000 (cfr. permanent certificate at pages 25 et seq. of ATP).

V. With the simple division of the dividing company A… SA, the separation and transfer to I…, SA (hereinafter I… SGPS) of the share participation held in G…, SA occurred, which corresponded to 64.62% of its share capital, an operation that occurred with simple transfer of the share participations held in G…, SA to the beneficiary company (factuality recognized in arts. 35 to 38, 47 to 49 and 165, 166 and 168 of the IP and accepted by the Respondent in art. 4 of the response).

VI. No other material or human means were transferred with the division to the company resulting from the division (factuality recognized in art. 63, as well as in art. 186 of the IP, and accepted by the Respondent in art. 4 of the response).

VII. In addition to what is referred to in nos. II and III, the separation of the share participation resulting from the division was motivated by the intention to prevent G…, SA, given the difficult economic circumstances it was experiencing, with a decline in sales, from affecting the image and financial situation of the Claimant (testimony of witnesses called by the Claimant B… and C…).

VIII. In the three-year periods of 2006-2008 and 2009-2011, H…, J… and K… were members of the Board of Administration of the Claimant (cfr. permanent certificate at pages 25 et seq. of ATP) and were, equally, in the four-year period of 2009-2012, administrators of I… SGPS (cfr. Tax Inspection Report at pages 4-5 of ATP).

IX. I… SGPS, in its activity, used a room with desk, computer, files and employees of the Claimant for secretarial services (testimony of witnesses called by the Claimant B…, C…, D… and E…).

X. Under Service Order no. OI…, notified to the Claimant on 11.6.2013, an external tax inspection action was carried out to the Claimant (cfr. the Dispatch which is at pages, without page number indication, of ATP).

XI. In the context of the inspection action, the Claimant was notified to present and provide the following elements and clarifications (cfr. the notification appearing at page 30 of ATP):

"The simple division registered on 08/05/2009 in the Commercial Registry Office of …, does not meet the provisions of paragraph a) of no. 2 and no. 4 of article 73 of the CIT Code, as there is no autonomous economic unit, with a set of personal and material means, in which the same constitute a business organization necessary for the development of the activity, which is transferred and which is intended to continue in the beneficiary, with the consequent implications for the non-verification of the requirements for the existence of neutral tax treatment in this operation.

Consequently, should the aforementioned tax treatment not apply, with respect to the transfer of the share participation from A…, SA to I…SGPS, it should be subject to the general tax regime, with the application, in particular of the provisions of no. 3, paragraph d) of article 46 of the CIT Code, determining the corresponding gains and losses in the sphere of the dividing or transferring company, A…, SA.

Article 46, no. 3, paragraph d) of the CIT Code states that in case of division the value of realization is considered "the market value of the elements of fixed assets transferred as a result of those acts", as of the date to which those operations refer.

Thus, it is requested that you indicate, with substantiation, what the market value of the 64.62% participation in the capital of G…, SA, Tax ID …, being that value reported as of the date of the division operation".

XII. The Claimant responded to the aforementioned notification, through the communication which is at pages 31 to 34 of ATP, which is hereby reproduced, of which the following steps are highlighted:

• "1-In the year 2009 a division was carried out, with the constitution of a new SGPS, through separation of its capital participation assets of 64.62% in G…, S.A.

2-We will not discuss at this juncture the question of the neutral tax treatment of this operation. Note that the State considers the activity of the SGPS as business for tax purposes, but for the purposes of division, does not consider it as such. In fact, the division carried out ensured in the company resulting from the division the same capital participation that the shareholders held in the dividing company, among which the existence of own shares of 10% of the share capital stands out. Thus, as a result of the division A… SA continued as shareholder of the new company in 10%. Therefore the participation "transferred" to third parties was 58.158%, making no sense to determine gains with a transfer from A…, S.A. to itself".

• "4-With regard to the supposed market value of G…, SA it will be important to state the following:

4.1-In order to determine what the possible market value was at the time of the Division, for negotiation purposes an appraisal study was carried out by our Official Auditor (which is attached), with reference to the date of 31.12.2008, establishing a value for the company of approximately 3,735,000 euros".

• "5-Having regard to the expectations of the Administrations of A…, S.A. and of G…, S.A., which predicted less favorable times for G… the separation through division of the participation in G…, SA intended to withdraw such participation from the sphere of A…, because if G… had serious economic difficulties, this would affect the life of A…, SA itself, in particular at the level of its financing.

Therefore, for the Administration of A…, SA, the value that best reflects the market value of G…, SA, as of 31.12.2008, is a value not exceeding its accounting value of 3,574,093 (sic)".

XIII. The Claimant did not exercise the right to be heard with respect to the draft tax inspection report that was sent to it by Dispatch no. …. of 26.9.2013 (cfr. indication of the Tax Inspection Report at page 24 of ATP and dispatch at unnumbered pages of ATP).

XIV. The inspection procedure carried out culminated in the Tax Inspection Report appearing at pages 1 to 24 of ATP, the content of which is hereby reproduced, and from which the following is transcribed with relevance to the decision:

• "Reason for inspection procedure: "The simple division operation between A…, SA and I…, SGPS, SA, does not benefit from neutral tax treatment, because it does not comply with the provisions of no. 4 of article 73 of the CIT Code. Since the companies involved treated this operation as benefiting from the neutral tax treatment regime, provided for in article 73 and et seq. of the CIT Code, there was a need to make the due corrections in the sphere of A…, SA" (point II.2.).

• "The simple division operation carried out separates from the assets of A…, S.A., the share participation that this company holds in G…, S.A., Tax ID … and constitutes a new company managing share participations, I… SGPS, SA, Tax ID ….

In A… SA only remain the financial investments in mutual guarantee companies, L…, SA, Tax ID … and M…, SA, Tax ID …, in the total amount of 5,600.00 € and in the company N…, SA, Tax ID …., in the amount of 13,400.00 €.

The division does not determine the dissolution of the dividing company, so A… SA will retain its legal existence, with its assets now composed of the set of assets that are the object of separation.

With the division no material and human means are transferred, limited to the separation of the share participation it held in G…, S.A. and which represents 64.62% of its share capital" (point III.1.1.1).

• "Although from the accounting and commercial perspective, the operation under analysis conforms to the figure of simple division, in the context of this inspection procedure, it falls to verify whether from the tax perspective the said operation was covered by the special treatment regime provided for in articles 67 and 68 of the CIT Code, in the version that was in force in 2007 (which currently correspond, since 2010-01-01, to articles 73 and 74 of the code republished by Decree-Law no. 159/2009, of 13 July). This is because it is not sufficient that the operation be qualified as a simple division from the accounting point of view and commercial legislation, for it to be automatically assigned the special nature that leads to the non-taxation for CIT purposes of the operation through which the transfer of the separated assets occurred, that is, to neutral tax treatment" (point III.1.1.2).

• "the concept of division adopted in the CIT Code is determining for the purposes of applying the special regime of neutral tax treatment, that is, to benefit from this regime it is essential that, in the operation in question, the structural characteristics that the legislator established are shown to be fulfilled";

"The legislator understood (...) to replace the criterion of separation of one or more parts of the assets, with the criterion of separation of lines of business, maintaining at least one of its lines of business, to circumscribe the scope of application of the regime.

It is settled understanding that, with this legislative amendment [article 99 of Law no. 53-A/2006, of 29/12], the tax concept becomes more restricted than the commercial concept, and that for the former only become eligible the operations through which, with the other ordering requirements satisfied, lines of business are separated and not merely parts of assets and at least one of the lines of business is maintained in the dividing company";

"the legislator wished to restrict the treatment in terms of neutral tax treatment of partial division to the essential function of means of business reorganization of functional units, excluding operations of mere transfer of share participations. The simple or partial division relevant in terms of neutral tax treatment came to be characterized by the need to satisfy a certain filter which is precisely the idea of a line of business. In these terms, the parts of assets transferred in partial division must have a qualified configuration, as they cannot constitute just any asset, but must embody a line of business".

• "it is now important to verify whether the elements transferred from A…, SA to I...., SGPS, SA configure a line of business, now:

1. (...) to configure a line of business it is necessary that in the contributing company there exist a specific and autonomous organization of material and human means dedicated to the specialized management of share participations, a condition that does not occur in A..., SA;

2. It is necessary that the assets already be grouped in the assets of the dividing company so as to form an organizational unit, it not being sufficient that they may come to be grouped in the beneficiary company so as to form an economic unit".

• "In the division operation under study these conditions are not verified, because in the dividing company there is no autonomous organization whatsoever relating to the management of parts of capital, which is transferred to I...., SGPS, SA by virtue of the division";

"(...) in this operation it was assumed that an asset corresponds to a line of business, however, (...) to be considered a line of business it is necessary to have specialized management, carried out by an autonomous department with its own material and human means. In the case at hand it is merely a transfer of a single asset element, part of the capital of the company G..., which do not suppose autonomous economic exploitation.

It should be noted that no material or human means intended for the management of share participations were transferred.

Thus, it cannot be accepted that the division implies the separation of a line of business, maintaining at least one line of business, because there is no autonomous economic exploitation, with a set of personal and material means, in which the same constitute a business organization necessary for the development of the activity, which is transferred and which is intended to continue in the beneficiary, so that the provisions of paragraph a) of no. 2 and no. 4 of article 73 of the CIT Code are not fulfilled, with the consequent implications for the non-verification of the requirements for the existence of neutral tax treatment in this operation.

Consequently, in the present case the aforementioned tax treatment not applying, with respect to the transfer of the share participation from A..., SA to I… SGPS, it should be subject to the general tax regime, with the application, in particular of the provisions of no. 3, paragraph d) of article 46 of the CIT Code (former 43 of the CIT Code), determining the corresponding gains and losses in the sphere of the dividing or transferring company A..., SA" (point III.1.1.2).

XV. Consequently, corrections were made to the taxable matter for 2009 of the Claimant in the amount of €2.129.551,73 "resulting from gains taxed, due to the non-applicability of the special regime of neutral tax treatment to the operations that gave rise to them" (cfr. the Tax Inspection Report at page 2 of ATP and correction document no. … at pages without page number indication, of ATP).

XVI. The Claimant was subject to the additional assessment of CIT and compensatory interest no. 2013 …, relating to the tax year 2009, in the amount of €408.111,13, in accordance with documents nos. 1 to 3 attached to the IP.

XVII. The Claimant proceeded on 18.12.2013 to the payment of the tax and compensatory interest resulting from the assessment identified in the previous point, in accordance with doc. no. 4 attached to the IP.

b) Unproven Facts

1. With relevance to the decision, the following facts alleged in the IP are considered unproven:

i) that "on 30 April 2009 A…, S.A. operated in various business sectors" (art. 26), in particular in the "activity of lighting and manufacture of components for luminaries" (arts. 32 and 162 of the IP);

ii) that the operation "occurred without any change to the constitutive act of the dividing company A..., SA" (arts. 37 and 167 of the IP).

c) Substantiation of the Decision on Facts

1. The Tribunal's conviction regarding the facts given as proven resulted from the documents joined to the proceedings by the Claimant, from the documents in the ATP, from the recognition of facts assumed in the procedural documents of the parties, and, in the cases in which it appears indicated, from the testimony of witnesses, all as specified in the points of the factual matter enumerated above.

With respect to the fact in no. VII of the probative matter, relating to it also being a motivation for the division to avoid that the situation of the Claimant be affected by the difficult economic condition, with a decline in sales, which G... was experiencing, it was given as proven on the basis of the testimony of witnesses B…, Official Auditor of the Claimant since 2001-2002, and C…, Official Accounting Technician and Financial Director of the Claimant for several years, as well as Official Accounting Technician of I… SGPS and G..., who stated, with certainty and conviction, that G... had an "abrupt decline in sales" in 2008, that "the activity of G... was considered as a risk activity", so it was intended to "shield A… from possible negative effects of the activity of G..." (testimony of B…) and that, given the adverse economic situation that G... was experiencing, A..., SA decided to separate the participation in that company to avoid affecting its image and financial situation (testimony of C…).

With respect to the fact object of no. IX of the probative matter, it was given as proven in view of the testimony of witnesses B…, …, D… and E…, in the following terms:

• witness B… stated that "after the division everything continued the same" and made reference to "a room where matters of G... were usually discussed"; furthermore she mentioned only, in generic terms, without indication of concrete circumstances, that, after the division, "administrative services continue to be shared", "information technology continues to be shared", "everything continues the same as it continued";

• witness C…, in a more precise manner, made reference to a physical space "made autonomous", "with desk" "a room", "with computer", "with files and data"; "that space continued to be used after the division by I… SGPS", "I myself and other people who work in I… already did some service in A…SA tending to the administration of the share participation in A… and we continued after the division to do so in the name of I…", "secretarial services, correspondence preparation of dossiers, of financial analysis elements, of commercial analysis that were provided to A… previously and afterwards came to be managed by I… SGPS";

• witnesses D… and E…, administrative employees of the Claimant for several years, the latter since 1974, stated that, at times, they perform tasks for I… SGPS, with the first exemplified with the preparation "occasionally" of correspondence for the SGPS ("once in a while, make one or two letters for the SGPS").

Let it be clarified that the factuality referred to in this no. IX constitutes the only matter that is deemed demonstrated, having regard to the means of evidence produced (the indicated testimonial evidence), with respect to the allegation that "the material means used in the management of the participation (human, computer, logistical and administrative means) resulted from participation between the new company and the dividing company (art. 65 and 66 of the IP) and that "I… SGPS shared human, logistical, administrative and computer resources with the dividing company" (art. 182 of the IP).

1. Regarding the factuality given as unproven sub i), the testimony of witnesses B… and C…, the only means of evidence presented as to that matter, proved to be inconclusive.

Thus, witness B…, when questioned as to whether the management of that participation generated a differentiated activity from the industrial activity, made reference only to the fact that the participation in G... had as a dedicated person Dr. K… [administrator of the Claimant, as per the proven fact in no. VIII] who had "a questioning function, of raising problems, of providing for the definition of strategies", a questioning function which translated into "the monitoring of the accounts of G..., receives interim balance sheets, speaks with the accountant, may have meetings with me, how are things going", concluding, at the end of her testimony, that this questioning function was performed "while Administrator of the company that is a shareholder of G...". For her part, witness C… stated that Dr. K… came to dedicate herself "specifically with more time to the management of G... from the moment the SGPS was constituted", but that before, in A… "it was more generic", "was not as dedicated to that", "since the management was joint" "did not have that so dedicated function".

These testimonies, in themselves contradictory, are insufficient to demonstrate the performance by the Claimant of the "activity of lighting and manufacture of components for luminaries", so this factuality is judged unproven.

1. As for the unproven fact sub ii), concerning the operation having occurred "without any change to the constitutive act of the dividing company A..., SA" (arts. 37 and 167 of the IP), it was concluded from the commercial certificate attached at pages 25 et seq. of ATP (as well as indicated in the division project attached at unnumbered pages of ATP) that the share capital of the Claimant, as a consequence of the division, became €1.036.000,00, thus verifying its reduction in relation to the prior capital of €1.500.000,00. It is therefore proven in no. IV of the probative matter the aforementioned alteration of the share capital.

2. It is further clarified that the decision on factual matters cannot be based on generic allegations and formulations, of law or conclusory, but concerns facts – as such concrete and specific – pertinent to the resolution of the legal questions to be decided. In consequence, allegations about "segmentation of the line of activity", as well as about the embodiment of mere holding of share participations as development by the company holding it of the activity of the company participated in, cannot be subject to probative judgment, as they constitute conclusory matter and/or legal integration.

IV. ON THE LAW

a) On the error in the qualification of the simple division operation

1. Having enunciated the factual matter given as proven, we shall now proceed to the appreciation of the defects pointed out by the Claimant to the contested tax act (see above no. 7), beginning with the invoked "error in the qualification of the simple division operation".

The Claimant's allegations regarding this alleged error in the factual and legal prerequisites in the "qualification of the simple division operation" (arts. 11 and et seq. of the IP) can be summarized in the following points:

i) "the share participations in question entered the asset sphere of "I… SGPS" by way of the constitutive act, as a result of a simple division operation, originating (and continuing) a new line of business" (art. 12);

ii) "having regard to the nature of the line of business transferred, the specificity of its management and the sharing of resources, there occurred in the operation on merit a separation of the line of business which in the sphere of I… SGPS has conditions to be defined as an autonomous line of business and thus benefit from the neutral treatment of art. 75 of the CIT Code [recte 73]" (art. 69);

iii) "the I… SGPS by separation of the share participations held in G..., came to constitute a new line of business, continuing the line of business that was exercised in the dividing company" (art. 175);

iv) "considering "(....) the (i) nature of the asset transferred to the SGPS, and (ii) the fact that the administrators are common, we can conclude that there occurred the separation of a line of business which in the SGPS has conditions to subsist as an autonomous line of business, thus being met consequently all the legal prerequisites for it to benefit from the neutral tax treatment regime provided for in article 73 of the CIT Code" (art. 212).

1. For its part, the Respondent, in its response, sustains, in summary, the following:

i) "to configure a line of business it is necessary that in the contributing company there exist a specific and autonomous organization of material and human means dedicated to the specialized management of share participations, a condition that did not occur in A..., SA" (art. 92);

ii) "And it is necessary that the assets already be grouped in the assets of the dividing company so as to form an organizational unit, it not being sufficient that they may come to be grouped in the beneficiary company so as to form an economic unit, since the qualification as a line of business of a certain combination of elements is assessed always from the perspective of the contributing company and never from the perspective of the beneficiary company" (art. 93);

iii) "In the simple division operation between A..., SA and I...., SGPS, SA, the aforementioned criteria are not met, because in the dividing company there is no autonomous organization whatsoever relating to the management of parts of capital, which is transferred to I...., SGPS, SA, by virtue of the division" (art. 94);

iv) "not only is it (...) the Claimant itself that assumes that formally no material and human means intended for the management of share participations were transferred, as (...) it results that, were it not for the sharing of means between the beneficiary company and the dividing company, the beneficiary company would have no resources whatsoever to carry out its activity, thus not constituting an autonomous economic exploitation" (art. 101).

1. Having set out the essential arguments invoked by the parties, it now falls to resolve the question of the application to the simple division operation sub judice of the regime of neutral tax treatment which was at that time the object of articles 67 and et seq. of the CIT Code.

Let it be noted first that simple division is the operation by which a company separates part of its assets to constitute with it another company (cfr. art. 118, no. 1, paragraph a) of the Commercial Companies Code – CCC).

Under the terms of no. 1 of art. 124 of the same CCC, "only the following elements may be separated for the constitution of the new company: a) Participations in other companies, whether they constitute the entirety or part of those possessed by the company to be divided, for the formation of a new company whose exclusive purpose consists in the management of share participations; b) Assets that in the assets of the company to be divided are grouped so as to form an economic unit". From this imperative disposition results a limitation of the assets objects of separation in the scope of simple division, which thus must be either parts of the assets that form an economic unit or share participations functionalized to the formation of a new company whose exclusive purpose consists in the management of share participations.

It is unquestionable, in light of the facts referred to in nos. II to V of the probative matter, that the operation sub judice constitutes a simple division by separation of share participations to constitute a company managing share participations (SGPS), in conformity with the provisions of paragraph a) of no. 1 of art. 118 and paragraph a) of no. 1 of art. 124, both of the CCC.

The application to a simple division operation of the special regime of neutral tax treatment, at that time provided for in arts. 67 and et seq. of the CIT Code (current arts. 73 and et seq. of the CIT Code), implies, however, the satisfaction of the specific requirements laid down by the legislator.

1. Now, the subsumption of a simple division operation to the aforementioned neutral tax treatment regime involved, as of the date of the facts (2009), the verification of the qualification prerequisites established in art. 67, no. 2, paragraph a) and no. 4 of the CIT Code, where it was respectively provided that:

• "Division is considered the operation by which": "A company (dividing company) separates one or more lines of its activity, maintaining at least one of the lines of business, to constitute with them other companies (beneficiary companies) or to merge them with already existing companies, by the attribution to its shareholders of parts representative of the share capital of the latter companies and, possibly, of a sum in cash not exceeding 10% of the nominal value or, in the absence of nominal value, of the accounting value equivalent to the nominal of the participations that are attributed to them";

• "For the purposes (...) of paragraph a) of no. 2, a line of business is considered the set of elements that constitute, from the organizational point of view, an autonomous economic unit, that is, a set capable of functioning by its own means, which may include the debts contracted for its organization or operation".

As clearly appears from the comparison of the provisions set out in these tax dispositions with the delimitation made by art. 124, no. 1 of the CCC of the elements that may be the object of separation in simple division, the neutral tax treatment regime does not include, in its scope of application, simple division by simple transfer of share participations for the constitution of a company managing share participations, being directed only at the separation of asset portions that constitute a "line of business". The tax law, under the terms provided for in art. 67 of the CIT Code, thus restricts the neutral tax treatment regime to the cases in which the object of simple division is a "line of business", excluding the simple separation of share participations.

This conclusion is further imposed by the historical element of interpretation. It should be recalled that paragraph a) of no. 2 of art. 67 of the CIT Code, in the wording prior to Law no. 53-A/2006, of 29.12, characterized simple division, for purposes of defining the scope of application of the neutral tax treatment regime, without any recourse to the concept of a line of business, as "the operation by which: a) A company (dividing company) separates one or more parts of its assets to constitute with them other companies (beneficiary companies) (...)". It is with article 99 of Law no. 53-A/2006, of 29.12, that the simple division operation, in the context of the neutral tax treatment regime, comes to be characterized, as we have seen, as the operation by which the dividing company separates one or more lines of its activity, maintaining at least one of the lines of business, to constitute with them other companies, and it is established that, in this notion of division, a line of business is understood as the set of elements that constitute, from the organizational point of view, an autonomous economic unit, that is, a set capable of functioning by its own means.

It should be noted that the national legislator thus intended to follow the notion adopted by European regulation, given that, following Directive 2005/19/CE of the Council of 17 February 2005, which amends Directive 90/434/CEE relating to the common tax treatment applicable to mergers, divisions, contributions of assets and exchanges of shares between companies of different Member States, which introduced the figure of partial division, the so-called Mergers Directive (now Directive 2009/133/CE of the Council, of 19 October 2009, relating to the common tax treatment applicable to mergers, divisions, partial divisions, contributions of assets and exchanges of shares between companies of different Member States and to the transfer of the seat of a SE or SCE from one Member State to another) defines "Partial division" as the "operation by which a company transfers, without being dissolved, one or more lines of its activity to one or more already existing or new companies, leaving at least one of the lines of business in the contributing company, by the attribution to its shareholders, according to a proportionality rule, of titles representative of the share capital of the beneficiary companies of the elements of assets and liabilities and, possibly, of a cash payment not exceeding 10% of the nominal value or, in the absence of a nominal value, of the accounting value of those titles" (paragraph c) of art. 2) and characterizes "line of business" as the "set of elements of assets and liabilities of a department of a company, which constitute, from the organizational point of view, an autonomous exploitation, that is, a set capable of functioning by its own means".

In these terms, given the provisions of paragraph a) of no. 2 and no. 4 of art. 67 of the CIT Code, it is indispensable for the integration of a simple division operation in the neutral tax treatment regime objects of arts. 68 and et seq. of the CIT Code that the separation of a line of business be verified, of a set of elements that constitute, from the organizational point of view, an autonomous economic unit, that is, a set capable of functioning by its own means.

1. The requirement, for the purposes of applying the provisions specific to the special regime of neutral tax treatment, that simple division imply the separation of a line of business, with maintenance of another line of business in the dividing company, presupposes, from the outset, the pre-existence in the dividing company of an autonomous economic unit, of a distinct set capable of functioning by its own means, which is thus what will constitute the object of separation. As noted by RAÚL VENTURA[3]: "it is essential that in the assets of the dividing company the assets already be grouped so as to form an economic unit, it not being sufficient that, after the division, they may come to be so grouped".

In this manner, the idea, which seems to arise in the Claimant's argumentation (see above no. 15)[4], cannot be accepted that it is sufficient, to apply the neutral tax treatment regime to a simple division operation, that the conditions be verified in the sphere of I… SGPS, therefore of the beneficiary company, to constitute an autonomous line of business.

In truth, in coherence with the principle founding the neutral tax treatment regime of the conservation of the enterprise, it is imperative that, prior to the realization of simple division, there exist an "autonomous economic unit", which constitutes the object of separation (as well as, indeed, that it remain in the dividing company, after the simple division, a line of business).

For this reason, as rightly noted by RAÚL VENTURA[5], the provision of paragraph b) of no. 1 of art. 124 of the CCC "starts from the supposition of existence in a company of different economic units" – and the same applies entirely to the provisions of paragraph a) of no. 2 of art. 67 of the CIT Code.

Hence the argument presented by the Claimant (and, to some extent, also invoked in the Legal Opinion joined to the proceedings) cannot be accepted, that the understanding that a line of business requires "on the one hand a organizational separation of material and human means between the dividing company and the beneficiary company, and on the other, requires autonomy of asset means" leads to "a negative discrimination with respect to small companies, in which often the structure of human capital ensures the exercise of the activity of the contributing company and the beneficiary company" (arts. 123 and 124 of the IP). The tax regulation at issue does not discriminate between large and small companies; it does differ between companies with plurality of lines of business and companies with a single line of business – precisely, only for the former does it make sense to apply the objective of separation and restructuring of business units, in a logic of continuity, which underlies and which teleologically constitutes the special neutral tax treatment regime.

1. Furthermore, the requirement that, in simple division, for purposes of the neutral tax treatment regime, there be verified the separation of a set of elements that constitute, from the organizational point of view, an autonomous economic unit, that is, a set capable of functioning by its own means, implies that operations consisting solely in the separation of isolated elements of the assets, of mere singular assets, are outside this field. It is imperative that the asset portion to be separated does not reduce to the transfer of individual asset elements, but constitutes, from the outset, an economic unit.

For this reason, differently from what is written in the Legal Opinion joined to the proceedings, the neutral tax treatment regime of simple division does not attend to "mere continuation of prior investments", but rather concerns the continuation of autonomous and functionally operative business entities. As such, in the asset separation object of the simple division subject to the neutral tax treatment regime what must be at stake is the transfer of asset elements that constitute an autonomous economic unit, therefore, a business unit.

In truth, in light of the legal determinations applicable ratione temporis, appearing in paragraph a) of no. 2 and no. 4 of art. 67 of the CIT Code, for integration in the neutral tax treatment regime of a simple division operation it is necessary that the asset portions transferred assume a qualified configuration, and cannot be limited to a single asset, good or particular asset element, but must embody a line of business.

Effectively, as a line of business, as the law states, involves a "set of elements", it follows that a singular asset element does not assume such nature. On the other hand, as the line of business, also under the terms of the law, is not only a "set of elements", but must constitute "from the organizational point of view, an autonomous economic unit, a set capable of functioning by its own means", it also follows that it is not sufficient to encounter a plurality of assets, but it is necessary that this plurality present a certain structuring, that assumes an organization, that emerges as a whole capable of functioning with autonomy, "by its own means".

1. The separation, in the context of a simple division operation, of a share participation, even if with a view to the constitution of a company managing share participations (the only possibility admitted by paragraph a) of no. 1 of art. 124 of the CCC), does not in itself involve a line of business, being simply the transfer of an asset element from the ownership of the dividing company.

In truth, the characteristics set out above of the legal-tax figure, legislatively enshrined, of the "line of business", as an organized economic unit, make it impossible to recognize such nature in a mere set of share participations.

This conclusion has, it should be said, even been the subject of jurisprudence of the Court of Justice, albeit with respect to another European regulation that analogously resorts to the concept of "line of business", the Capital Contributions Directive (now Directive 2008/7/CE of the Council, of 12 February 2008, relating to the indirect taxes levied on meetings of capital), which provided for more favorable treatment for purposes of capital contributions taxation when "one or more capital companies deliver to the entirety of their respective assets, or one or several lines of their activity, to one or more capital companies in the course of constitution or already existing". By its judgment of 13 December 1991, Muwi Bouwgroep, C-164/90, the Court of Justice, after noting that the legal hypothesis envisaged in the cited provision "is that in which a company delivers to another various elements which, whether they constitute the entirety of the assets, or merely are a part, form a set capable of functioning in an autonomous manner" (no. 22), declared that "the delivery of a batch of shares which a company possesses of another company and which represents 100% of that company does not constitute the delivery of a line of business of the first company" in the meaning of the cited provision.

In this manner, being at issue solely and simply in a simple division operation the transfer of share participations, the necessary prerequisites for the configuration of a line of business are lacking, under the terms and for the purposes of paragraph a) of no. 2 and no. 4 of art. 67 of the CIT Code.

Let it be clarified that this conclusion, contrary to what is understood in the Legal Opinion joined to the proceedings, does not represent the use by the tax law "of criteria to evaluate the existence of a division that represent a derogation from the commercial law rules". Without it being necessary to elaborate here the fact, well known, that the tax system, given its particular principles and values, frequently resorts to particular and specific concepts (cfr. art. 11, no. 2, in fine of the General Tax Law), it suffices to note that the "tax concept of division" perfectly adopts the characterizations of commercial law regarding the object of separation in simple division, as appears established in paragraphs a) and b) of no. 1 of art. 124 of the CCC: what occurs is that, as rightly noted in this Legal Opinion, as "there exist, in our legal system, two tax regimes applicable to mergers, divisions and contributions of assets for purposes of CIT, namely, the general regime and the neutral tax treatment regime", the mere separation of share participations object of paragraph a) of no. 1 of art. 124 of the CCC is subject to the general regime while in the case of paragraph b) of no. 1 of art. 124 the taxable person can, if he wishes, resort to the special neutral tax treatment regime.

1. It is noted, however, by the Respondent, in its response (art. 83), that it constitutes understanding of the Tax and Customs Authority, according to Dispatch of 30.01.2008 of the Deputy Director-General relating to Process no. 330/2007, that: "The mere separation of share participations does not reduce to a fiscally relevant simple division operation for purposes of the neutral tax treatment regime, as it does not embody, in itself, a line of business. However, if together with the participations there is verified the transfer of other asset elements that configure, together, an infrastructure associated with the management of those participations, in functional interaction with the titles, we will be faced with a true line of business, which may thus constitute, an object of separation in the context of a fiscally relevant partial division for purposes of the regime of articles 67 and et seq. of the CIT Code".

This understanding is deemed correct in light of the provisions of paragraph a) of no. 2 and no. 4 of art. 67 of the CIT Code, as one cannot exclude that, in certain circumstances, the management of share participations involves the existence of a set of elements that constitutes from the organizational point of view, an autonomous economic unit.

The question which then falls to be clarified concerns verifying, in light of the situation object of the proceedings, whether there is verified the transfer, in the context of the division carried out, of a set of elements that constitute from the organizational point of view, an autonomous economic unit, therefore whether there occurred the separation of a line of business.

1. Now, in this respect, it results from the facts given as proven that the division was limited exclusively to the separation, in the assets of the Claimant, of the share participation held in G...

Indeed, observe:

• under the terms of the division project (cfr. proven fact under no. II), the "division which it is intended to carry out involves the separation of part of the assets of A..., SA, more specifically the separation of parts of capital in the subsidiary G..., SA"; "The assets which it is intended to separate from the assets of A..., SA to constitute with them a new company are 77,545 bearer shares, representative of capital of G..., SA";

• in the corporate deliberation indicated in no. III of the probative matter it was declared that the company "frees itself from the assets not allocated to its activity, on a permanent basis, through a simple division of assets composed of share participations in another company, forming with the separated assets a new company, which will have as its sole purpose the management of share participations of other companies";

• it is proven under no. V that, with the simple division of the dividing company A..., SA, there occurred the separation and transfer to I…SGPS exclusively of the share participation, corresponding to 64.62% of its respective share capital, held in G..., SA;

• it is further proven under no. VI that no other material or human means were transferred with the division to the beneficiary company.

The sole asset object of the asset separation was thus the share participation held in G..., with nothing else being detected in the factual situation under consideration that would permit considering present an autonomous economic unit.

The non-existence of the separation of an autonomous economic unit as a set capable of functioning by its own means is also concluded from the fact that it was given as proven that, after the division, I… SGPS used, in its own activity, the means of the Claimant (cfr. the fact given as proven under no. IX). Now, and without the need to discuss hic et nunc whether the occasional use of means of the Claimant legitimates the idea of "sharing of resources" and the consistency of the idea of "shared mandates" in the face of the fact that the same persons are simply common administrators of both the dividing and beneficiary companies (cfr. the fact object of no. VIII of the probative matter), it falls to recognize that a "sharing of resources" between the dividing company and the beneficiary company, resources which are all in the ownership of the dividing company, without any transfer to beneficiary company, is foreign to the embodiment of the separation of an asset portion capable of functioning by its own means.

Thus, as at the base of the characterization of a line of business there is found, not the particular motivation that presides over the division (cfr. the fact given as proven under no. VII), but rather the economic, asset and material consistency of the asset separation, it is incumbent to conclude that the simple division operation at issue is limited simply to "separately legally the assets composed of the participation in G..., SA to constitute with it a new company managing share participations" (cfr. the fact given as proven under no. II), not involving, therefore, a line of business.

Now, as the neutral tax treatment regime applicable to simple division does not encompass the isolated transfer of assets, but requires that the transferred assets be configured as a line of business, the position expressed in the Tax Inspection Report, which is at the basis of the contested assessment act, is entitled to reasons and legal grounds, under the terms of which the operation carried out does not fulfill the prerequisites required for purposes of applying the neutral tax treatment regime, as it does not subsume to the provisions of art. 67, no. 2, paragraph a) and no. 4 of the CIT Code, taking into account that the "simple or partial division relevant in terms of neutral tax treatment came to be characterized by the need to satisfy a certain filter which is precisely the idea of a line of business" and that the "case at hand is nothing more than a mere transfer of a single asset element, part of the capital of G..., which do not suppose an autonomous economic exploitation" (cfr. the fact given as proven under no. XIV).

Consequently, the question raised by the Claimant of error in the factual and legal prerequisites in the qualification of the simple division operation carried out must be judged unfounded, so the alleged violation of law does not occur in the correction to the taxable matter for 2009 of the Claimant resulting from the gains determined with the transfer of the share participation in G..., SA to the new company I…SGPS.

In truth, the sole asset transferred by the simple division operation at issue corresponded to the share participation held in G..., SA, whose gain resulting from its transfer the Claimant expressly qualifies as a gain, given by the difference (positive) between the value of realization of the transferred element, corresponding to its market value, in accordance with the provision of, at that time, art. 43, no. 3, paragraph d) of the CIT Code, and its acquisition value.

b) Violation of the principle of material truth

1. It is now appropriate to consider the defect pertaining to the alleged violation of the principle of material truth.

The Claimant argues, in this respect, that the TCA did not comply with art. 58 of the General Tax Law (GTL), by not having undertaken all the necessary steps to discover material truth. More specifically the Claimant considers (arts. 234 and 235 of the IP) that the TCA did not develop steps "in order to determine: a) the type of tasks developed in the beneficiary company; b) the identification of the persons who exercise the activity; c) the means used in the exercise of the activity by the beneficiary company; d) the (non)indispensability of a fixed human resources framework; e) autonomy vis-à-vis the dividing company; f) the interpretative model followed by the CJEU and the Supreme Administrative Court with respect to the concept of line of business; g) the concept of line of business adopted in the Mergers, Divisions and Acquisitions Directive; h) as well as did not apply, as is required of it, the principle of neutral tax treatment", as well as "did not request the elements susceptible of revealing the characteristics regarding the method of exercise of corporate activity in the beneficiary company". According to the Claimant, "with this information obtained", the TCA "would have reached the conclusion that the transfer of the shares of G... to I… SGPS would configure, from the economic point of view, the transfer of an autonomous line of business" (art. 247 of the IP).

1. As emerges from what above was set out regarding the requirements exigible for a simple division operation to benefit from the neutral tax treatment regime, it does not appear, given the Tax Inspection Report that is referred to in no. XIV of the probative matter, that the TCA did not undertake "all the necessary steps to satisfy the public interest and the discovery of material truth".

This is because the procedural steps required by the principle of the inquisitorial function are justified and serve to ascertain the facts that are relevant to the administrative decision in light of the legal determinations which it falls to the tax administration to satisfy. Now, those facts are, in this case, those which concern the determination, beyond the separation of share participations, of other asset elements capable of embodying a line of business under the terms cited of art. 67, no. 2, paragraph a) and no. 4 of the CIT Code, which, as is observed from point no. XIV of the probative matter, was duly verified by the TCA, which concluded as to their non-existence.

Precisely, it is not possible to consider, with respect to the elements cited above (no. 24) which are invoked by the Claimant, that there exists an omission of investigatory steps for the following reason: i) with respect to the vectors referred to in paragraphs f), g) and h) the matter is strictly legal or conclusory; ii) the elements concerning the exercise of the activity of the beneficiary (paragraphs a), c) and d)), to admit its consistency, do not serve to demonstrate the presence of a line of business as object of separation in the dividing company, so do not affect the conclusions of the Tax Inspection Report; iii) finally, the elements referred to in paragraphs b) and e) were even the subject of consideration in the inspection procedure, as concluded from the identification of the members of the Administration and the reference that "in the dividing company there is no autonomous organization whatsoever relating to the management of parts of capital" which appear in the Tax Inspection Report given as reproduced in no. XIV of the probative matter.

Moreover, one cannot forget that the GTL also consecrates, in no. 1 of art. 59, the duty of collaboration which requires the taxpayer to cooperate actively with the tax administration for the purpose of discovering the truth – now, as is observed from the facts given as proven under nos. XII and XIII the Claimant did not raise in the procedure the elements now invoked, having even declared not to intend "to discuss at this juncture the question of the neutral tax treatment of this operation".

The principle of the inquisitorial function and the search for material truth requires that the TCA undertake, without subordination to the initiative of the taxpayer, all steps relevant to the ascertainment of the factual reality pertinent to its respective decision, but does not impose on the TCA that it proceed officially to investigatory steps not requested which do not assume, in terms conjecturably, relevance to the procedural decision.

In these terms, the imputed defect of violation of the principle of material truth object of art. 58 of the GTL is unfounded.

c) Violation of the duty to provide reasons

1. Finally, the Claimant alleges the existence of a defect of lack of reasons, with violation of articles 77 of the GTL, 268, no. 3 of the Constitution, 123, 124 and 125 of the Administrative Procedure Code.

According to what may be gathered from the allegations of the Claimant (arts. 290 and 291 of the IP), the defect of lack of reasons would rest on the fact that the TCA established that, for the concept of line of business, "it would be necessary specialized management carried out by an autonomous department with its own human and material means", which leads the Claimant to question "Why does the TCA state this assertion if in the case at hand the division only contemplated the attribution to the beneficiary entity of a batch of shares of only one entity?" and to conclude, notwithstanding recognizing that the TCA "makes a generous theoretical approach on the subject with which we are concerned, relating to the conditions of application of the neutral tax treatment regime" (art. 299 of the IP), that the TCA "does not give reasons in compliance with the legal framework for the technical requirement, in the case at hand, of professionalized management of the participations of G..." (art. 297 of the IP).

As results from the excerpts of the Tax Inspection Report reproduced in no. XIV of the probative matter, the reasoning concerning this point is assessed by the following considerations: i) "it is now important to verify whether the elements transferred from A..., SA to I...., SGPS, SA configure a line of business, now: 1. (...) to configure a line of business it is necessary that in the contributing company there exist a specific and autonomous organization of material and human means dedicated to the specialized management of share participations, a condition that does not occur in A..., SA; ii) "In the division operation under study these conditions are not verified, because in the dividing company there is no autonomous organization whatsoever relating to the management of parts of capital, which is transferred to I...., SGPS, SA by virtue of the division".

Without the need for further elaboration, it is manifest that the pointed defect of lack of reasons does not occur, appearing in the Tax Inspection Report, in conformity with the provisions of art. 77 of the GTL, the reasons which permit understanding the cognitive and evaluative itinerary followed for the administrative decision.

Truly, what is at issue in this allegation of the Claimant, as results from the cited art. 247 of the IP, is not a problem of reasoning of the tax act, but rather a question of disagreement with what was decided by the Administration.

In these terms, the imputed defect of violation of the duty to provide reasons is unfounded.

V. COMPENSATORY INTEREST

1. Given that, under the terms set out above, the contested tax act does not suffer from the defects that are imputed to it in the request for arbitral decision, the request for a declaration of its illegality being thus unfounded, the request for compensatory interest necessarily fails, which is raised as a consequence of the alleged illegalities.

VI. DECISION

For these reasons, this Arbitral Tribunal decides:

a) to judge unfounded the request for declaration of illegality object of the arbitral decision and, in consequence, to maintain the tax act of additional assessment of Corporate Income Tax (CIT) and compensatory interest no. 2013 …, relating to the tax year 2009, contested in the proceedings, absolving the Tax and Customs Authority from the claim;

b) to judge unfounded the request for compensatory interest, absolving the Tax and Customs Authority from the claim;

c) to condemn the Claimant to pay the entirety of procedural costs, by virtue of the provisions of no. 3 of art. 12 of the LFTA.

VII. VALUE OF THE CASE

In accordance with the provisions of article 306, no. 2, of the CPC of 2013, article 97-A, no. 1, paragraph a), of the CPA and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings the case is assigned the value of €408.111,13.

Lisbon, 5 January 2014

The Arbitrators

(Jorge Lino Alves de Sousa)

(Jaime Carvalho Esteves)

(João Menezes Leitão)

[1] The spelling resulting from the Orthographic Agreement of the Portuguese Language of 1990 is adopted, having been updated accordingly the wording appearing in the citations made.

[2] As a consequence, the numbering of the Corporate Income Tax Code (CIT Code) existing at the date will be used in the text, taking into account that Decree-Law no. 159/2009, of 13 July, which carried out the renumbering of the Code (art. 7, no. 1), applies only to the tax periods that begin in, or after, 1 January 2010 (art. 9). It should be noted, however, that the parties frequently resort to the new numbering, so it will be encountered in the citations made.

[3] RAÚL VENTURA, Merger, Division, Transformation of Companies, Coimbra, 1990, p. 392.

[4] The position of the Claimant is not entirely clear, as both seems to invoke that it is sufficient for the application of the neutral tax treatment regime that there come to be constituted, with the separation of share participations, an autonomous line of business in the beneficiary company (see arts. 85, 114, 115 of the IP) as it refers to the "continuation of an autonomous line of business", "the succession of the line of business that was previously developed in the dividing company (management of share participation)" (arts. 153 to 155, 175 of the IP).

[5] Ob. cit., p. 392.