CAAD Ruling 27/2019-T: Stamp Tax on Multilateral Interchange Fees and ATM Card Transaction Commissions Under Article 7(1)(e) CIS

ARBITRAL TAX JURISPRUDENCE

Process No. 27/2019-T

Date of Decision: 2019-08-14

Value of Claim: € 56,650.14

Subject Matter: IS – article 7, no. 1, letter e) of the CIS – Multilateral Interchange Rate and Commissions on Operations Carried Out with Bank Cards in Automatic Teller Machines.

ARBITRAL DECISION

I – REPORT

1. On 14 January 2019, A..., NIPC ..., with registered office at Rua ..., ..., in Lisbon, hereinafter referred to as the "Claimant", requested the constitution of an arbitral tribunal and filed a petition for arbitral pronouncement, pursuant to letter a) of no. 1 of article 2 and letter a) of no. 1 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), with a view to declaring illegal the act of additional assessment of Stamp Tax no. 2018..., of 9 September 2018, with reference to the year 2015, and corresponding assessments of compensatory interest, all in the total amount of € 88,915.32 (eighty-eight thousand, nine hundred and fifteen euros and thirty-two cents), with partial annulment of said act, in the part corresponding to the multilateral interchange rate and commissions on operations carried out with bank cards in Automatic Teller Machines, in the amount of € 56,650.14 (fifty-six thousand, six hundred and fifty euros and fourteen cents) and corresponding compensatory interest, as well as recognition of the right to indemnificatory interest.

2. The Claimant is represented, in the present proceedings, by its legal representatives, Dr. B... and Dr. C..., and the Respondent, the Tax and Customs Authority (hereinafter referred to as AT), is represented by legal advisors, Dr. D... and Dr. E....

3. Once the formal regularity of the petition presented was verified, pursuant to letter a) of no. 2 of article 6 of the RJAT and as the Claimant did not appoint an arbitrator, the undersigned was appointed by the President of the Deontological Council of CAAD, who accepted the position within the legally prescribed period.

4. The present tribunal was constituted on 26 March 2019, at the headquarters of CAAD, located at Av. Duque de Loulé, no. 72 A, in Lisbon, as evidenced by the communication of the singular arbitral tribunal attached to the present file.

5. The Respondent, after being notified to do so, filed its response on 9 May 2019.

6. As there was no need for additional evidence production, beyond what is already incorporated in the file, and as there was no indication that the parties needed to correct their respective procedural documents, with the process containing all elements necessary for the pronouncement of the decision, for reasons of economy and procedural speed, and the prohibition of useless acts, the Tribunal deemed it appropriate to waive the holding of the meeting referred to in article 18 of the RJAT, by order issued on 16 May 2019, granting therein successive periods of 10 days for the Claimant and the Respondent, in that order, to submit their respective written submissions.

7. In that same order, the Tribunal, in compliance with no. 2 of article 18 of the RJAT, set 26 September 2019 as the date for pronouncement of the arbitral decision, having warned the Claimant that it should proceed with payment of the subsequent arbitral fee, pursuant to no. 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

8. Following this, on 27 May 2019, the Claimant submitted written submissions, and the Respondent submitted its submissions on 3 June 2019.

II. THE CLAIMANT'S ARGUMENTS

The Claimant supports its petition for a declaration of illegality of the act of additional assessment of Stamp Tax no. 2018..., of 9 September 2018, with reference to the year 2015, and corresponding assessments of compensatory interest, all in the total amount of € 88,915.32 (eighty-eight thousand, nine hundred and fifteen euros and thirty-two cents), requesting partial annulment of said act, in the part corresponding to the multilateral interchange rate and commissions on operations carried out with bank cards in Automatic Teller Machines, in the amount of € 56,650.14 (fifty-six thousand, six hundred and fifty euros and fourteen cents) and corresponding compensatory interest, as well as recognition of the right to indemnificatory interest, based on various defects, namely:

a) Defect of form – lack of grounds for assessment – by violation of article 77 of the General Tax Law (LGT), on the grounds that "the Demonstration of Stamp Tax Assessment [and compensatory interest] expressed in the Assessment absolutely omits the applicable legal provisions and the characterization and quantification of the tax facts to which they apply."

b) Defect of lack of a norm of incidence of Stamp Tax regarding the Multilateral Interchange Rate and commissions on operations carried out with bank cards in Automatic Teller Machines (item 17.3.4 TGIS), on the grounds that "(...) the Interchange Rate and commissions on operations carried out with bank cards in ATM are not based on any provision of services between financial institutions, which means that they are excluded from the scope of the norms of incidence of Stamp Tax, ..."

c) Defect of violation of the exemption from Stamp Tax pursuant to letter e) of no. 1 of article 7 of the Stamp Tax Code, due to the non-existence of a valid restriction in 2015, as the Claimant understands that it should be applicable to Interchange Rates and commissions for the use of Automatic Teller Machines.

The Claimant argues that, as the Interchange Rates and commissions for the use of Automatic Teller Machines do not fall within the operations provided for in no. 7 of article 7 of the IS Code, they should not be affected by such restrictive provision.

d) Defect of erroneous quantification of the tax base, arising from the fact that AT "having proceeded with the calculation of Stamp Tax allegedly missing by multiplying the rate of 4% by the total of Interchange Rates and fees relating to the use of Automatic Teller Machines charged monthly (cf. pp. 112 and 113 of the Report) led to an undue expansion of the amount of the tax, in manifest contravention of the rules governing the corresponding calculation."

e) Defect of illegality of compensatory interest in the part corresponding to the adjustment relating to Interchange Rates and fees for the use of Automatic Teller Machines under the terms already raised, due to lack of grounds, as the Claimant cannot "discern what the value of the adjustment underlying is, i.e., the value on which such interest was calculated."

f) Finally, it requests payment of indemnificatory interest, pursuant to no. 1 of article 43 of the General Tax Law.

III. THE RESPONDENT'S RESPONSE

The Respondent, in its response, invoked, in summary, the following:

1. Rebuttals of the Respondent's Arguments

The Respondent counters the Claimant's arguments, in particular regarding the defects invoked, as follows:

a) Regarding the defect of form – lack of grounds for assessment – by violation of article 77 of the General Tax Law (LGT), the Respondent states that "(...) it results directly and clearly from the text of the final inspection report (RIT) that the Claimant was requested, on 01.06.2017, for clarifications and documentation (...)" regarding the assessment of Stamp Tax pursuant to the norm of incidence 17.3.4 of the TGIS and/or respective exemption, in which "(...), in response to what was requested, the Claimant stated that it had not assessed any amount of tax on these operations, and that it would not make the requested breakdown as it understood that those operations were exempt by application of art. 7 of the Stamp Tax Code. However, it indicated with respect to the Multilateral Interchange Rate (TMI), the total commissions charged by it in 2015, being € 637,602.11 (p. 97 of the RIT); and with regard to commissions charged by it on operations carried out in its ATMs, it quantified, in 2015, a total of commissions in the amount of € 778,651.16 (p. 98 of the RIT).

Concluding thus, the Respondent, on this defect, that "[t]hus, given the foregoing and the provision in article 77, no. 1 of the LGT and article 63, no. 1 of RCPITA, since the RIT contains clear, sufficient and coherent grounds and the calculation of compensatory interest results directly from the application of the norm, the Claimant's arguments cannot receive any acceptance."

b) Regarding the defect of lack of a norm of incidence of Stamp Tax regarding the Multilateral Interchange Rate and commissions on operations carried out with bank cards in Automatic Teller Machines (item 17.3.4 TGIS), the Respondent argues that "they are, in fact, and in an evident and common-sense manner (however much the Claimant denies it), provisions of financial services, subject to IS, pursuant to the norms of subjective and objective incidence already cited [article 1 and 2, no. 1 letter b) of the CIS and item 17.3.4 of the TGIS], since they constitute '(...)financial service, and for the amount of the taxable matter shall participate, only, the operations subject to financial counterparts by the users/customers. In summary and in practice, operations carried out by cards in automatic teller machines for which users bear costs, in favor of the Claimant' should be taxed," therefore subject to tax.

c) Regarding the defect of violation of the exemption from Stamp Tax pursuant to letter e) of no. 1 of article 7 of the Stamp Tax Code, the Respondent understands that "(...) the interpretation of that exemption norm was, at minimum, ambiguous, as there was case law stating that the catalytic element – to which interest, commissions charged, guarantees provided or the (mere) use of (it) refer – was the credit granted. And thus being, it is not forbidden for the legislator to resort to the mechanism of interpretative law to clarify ambiguous solutions, as is well known. Therefore, there is no retroactivity of the Law: solely and only an interpretative norm, clarifying the meaning intended by the legislator, faced with the doubts (demonstrably existing) that arose in the interpretation of the legal provision."

Concluding, on this defect, that "[f]or all the foregoing, the exemption provided for in letter e) of no. 1 of article 7 of the CIS does not benefit the Respondent, therefore its claim should fail."

d) Regarding the alleged defect of erroneous quantification of the tax base, the Respondent manifests the understanding that "(...) the burden of proof rests with A..., pursuant to art. 74, no. 1 of the LGT, and, as this has not been met to date, no illegality can be attributed to the contested assessment."

e) Regarding the defect of lack of grounds for the assessments of compensatory interest in the part corresponding to the adjustment relating to Interchange Rates and fees for the use of Automatic Teller Machines, the Respondent considers that this cannot occur, as "the assessment of compensatory interest is umbilically linked to the existence of a concrete assessment of tax, and the delay in the assessment of tax gives rise to compensatory interest. Therefore, being associated with the additional assessment of tax, whose grounds are contained in the RIT that was properly notified to the Claimant, it is not foreseeable how the omission of specific reference to compensatory interest in this same document can lead to the conclusion that the defect of lack of grounds applies to compensatory interest."

f) Regarding the request for payment of indemnificatory interest, the Respondent understands that this should fail, similarly to what was petitioned.

2. Final Position

... ultimately arguing for the dismissal thereof, concluding that "(...) the Claimant's claim cannot proceed, as there is no defect in the assessment of stamp tax impugned, which should, therefore, remain in force in the legal order, with all legal effects."

IV. CLARIFICATION OF LEGAL STATUS

The Tribunal is competent and is regularly constituted, pursuant to letter a) of no. 1 of article 2 and articles 5 and 6, all of the RJAT.

The parties have legal capacity and standing, are legitimately represented, and the process is free of nullities.

V. FACTUAL MATTERS

1. With respect to the factual matters, it is important, first of all, to note that the Tribunal need not pronounce on everything alleged by the parties; rather, its duty is to select the facts that matter for the decision and distinguish proven facts from unproven facts, all in accordance with article 123, no. 2, of the Code of Tax Procedure and Process (CPPT) and article 607, nos. 3 and 4 of the Code of Civil Procedure (CPC), applicable by virtue of article 29, no. 1, letters a) and e), of the RJAT.

2. Thus, the relevant facts for judgment of the case are selected and defined according to their legal relevance, which is established in light of the various plausible solutions to the legal question(s) (cf. article 511, no. 1, of the former CPC, corresponding to article 596 of the current CPC).

3. Thus, taking into account the positions assumed by the parties in their respective pleadings (petition for arbitration constitution and Claimant's submissions, Response and Respondent's submissions), the documentary evidence attached to the file, the following facts are deemed proven as relevant to the decision:

a. Facts Proven

The following facts are deemed proven as relevant to the decision:

A. The present Claimant is a credit institution that qualifies as a permanent establishment in Portugal, referred to in article 5 of the Code of Income Tax on Legal Persons (CIRC), of the A... UK, with head office and effective management in the United Kingdom.

B. As a branch of a credit institution based in the United Kingdom, the Claimant is duly registered for the conduct of banking and financial activities in Portugal, with the national supervisory entities, namely, the Bank of Portugal and the Securities Market Commission.

C. It has as its primary objective the development of banking activity, in particular in the provision of commercial banking services, investment banking and leasing activity.

D. Following Service Order no. OI2017..., of 18.05.2017, and by order of the Head of the Division for Inspection of Banks and Other Financial Institutions (DIBIF) of the Unit of Large Taxpayers, by subdelegation of powers (Order no. 518/2018 of the DR, 2nd series, no. 8, of 13.01.2016) issued on 02.03.2016, the Tax and Customs Authority conducted a general inspection action against the Claimant, concerning the tax period 2015.

E. On 25 June 2018, the Claimant was notified of the Draft Report of Tax Inspection, in which the intention to make corrections to the Stamp Tax assessed by the Claimant in the year 2015 is manifested, in the amount of € 56,650.14 (fifty-six thousand, six hundred and fifty euros and fourteen cents), relating to the multilateral interchange rate and commissions on operations carried out with bank cards in Automatic Teller Machines (item 17.3.4 of the General Table of Stamp Tax), and in the amount of € 22,711.14 (twenty-two thousand, seven hundred and eleven euros and fourteen cents) relating to the merchant service fee (item 17.3.4 of the said table), plus compensatory interest, all in a total of € 88,915.32 (eighty-eight thousand, nine hundred and fifteen euros and thirty-two cents), and for, if it so wishes, to exercise the right to prior hearing afforded to it under article 60 of the General Tax Law.

F. The Claimant did not exercise the right to hearing afforded to it.

G. The Claimant was notified, on 31 August 2018, of the Report of Tax Inspection, which results, as relevant to the present proceedings, in the following:

"Thus, having the Bank informed that, in the tax period 2015, it did not assess Stamp Tax on the commissions Multilateral Interchange Rate and commissions on operations carried out with bank cards in Automatic Teller Machines, charged by it in that period, the Tax Inspection Services, based on the monthly breakdown of these commissions charged in 2015 – information provided by the A... Branch – proceeded to determine the Stamp Tax missing.

Thus, given the foregoing, regarding the Multilateral Interchange Rate, the Stamp Tax determined by the Tax Inspection Services, amounted to € 25,504.10, as a result of applying the rate of 4%, provided for in item 17.3.4 of the TGIS, to the tax base (in the total amount of € 637,602.11) of the commission entitled Multilateral Interchange Rate [also known as Multilateral Interchange Fee], as summarized, by month of charging, in the table below:

As a result of applying the rate of 4% provided for in item 17.3.4 of the TGIS, to the tax base (in the total amount of € 778,651.16) of the commissions on operations carried out with bank cards in Automatic Teller Machines [also designated as automatic teller machines or ATM], the Stamp Tax determined by the Tax Inspection Services, amounted to € 31,146.04, as summarized, by month of charging, in the table below:

Thus, the Stamp Tax determined by the Tax Inspection Services, with the commissions designated as Multilateral Interchange Rate (€ 25,504.10), and with the commissions charged on operations carried out with bank cards carried out in Automatic Teller Machines (€ 31,146.04) amounted to the overall amount of € 56,650.14, as summarized in the table below:

This correction is made under the terms and with the grounds referred to above."

H. The Claimant was notified of the act of additional assessment of Stamp Tax no. 2018..., of 9 September 2018, with reference to the year 2015, and corresponding assessments of compensatory interest, all in a total of € 88,915.32 (eighty-eight thousand, nine hundred and fifteen euros and thirty-two cents) – cf. Doc. no. 1 attached with the petition for constitution of the arbitral tribunal.

I. On 9 October 2018, the Claimant proceeded to pay the act of assessment referred to in H above. – cf. Doc. no. 2 attached with the petition for constitution of the arbitral tribunal.

J. On 14 January 2019, the Claimant filed the petition for constitution of the present Arbitral Tribunal.

b. Facts Deemed Not Proven

There are no facts deemed not proven, as all facts relevant to the assessment of the claim have been deemed proven.

VI - ON THE LAW

A. DEFECT OF LACK OF GROUNDS

1. The Claimant seeks, through the present proceedings, to obtain a declaration of illegality of the acts of additional assessment of Stamp Tax no. 2018..., of 9 September 2018, with reference to the year 2015, and corresponding assessments of compensatory interest, all in a total of € 88,915.32 (eighty-eight thousand, nine hundred and fifteen euros and thirty-two cents), requesting partial annulment of said act, in the part corresponding to the multilateral interchange rate and commissions on operations carried out with bank cards in Automatic Teller Machines, in the amount of € 56,650.14 (fifty-six thousand, six hundred and fifty euros and fourteen cents) and corresponding compensatory interest, invoking, for such purpose, first, the defect of lack of grounds.

2. In this regard, the Claimant argues that the demonstration of assessment of Stamp Tax embodied in the assessment in question "absolutely omits the legal provision under which it was presumably issued, as well as the characterization and quantification of the tax facts in question. Thus violating, directly and unequivocally, articles 36, no. 2 of the CPPT, 77 of the General Tax Law (LGT) and 153 of the Code of Administrative Procedure (CPA)."

Let us see if it is correct.

3. Article 77 of the LGT, cited by the Claimant, provides under the heading "Grounds and Efficacy":

"1 - The decision of procedure is always grounded by means of a brief statement of the reasons of fact and law that motivated it, and the grounds may consist of a mere declaration of agreement with the grounds of earlier opinions, information or proposals, including those contained in the report of tax inspection.

2 - The grounds of tax acts may be set out in summary form, but must always contain the applicable legal provisions, the characterization and quantification of the tax facts and the operations for determining the taxable matter and the tax.

3 – (...)

4 – (...)

5 - (...)

6 - The efficacy of the decision depends on notification."

4. The legal requirement for grounds for procedure decisions and tax acts aims to give taxpayers knowledge of the cognitive, evaluative and volitional process of the respective author, and, consequently, to allow them to either accept or challenge them.

5. The Administration has, pursuant to article 268 of the Constitution of the Portuguese Republic and articles 152 and 153 of the Code of Administrative Procedure (CPA), the duty to ground administrative acts in general, in a clear, sufficient and coherent manner, and the grounds must "be expressed, through a brief statement of the factual and legal grounds of the decision, and may consist of a mere declaration of agreement with the grounds of earlier opinions, information or proposals, which in that case form an integral part of the respective act" (no. 1 of article 153 of the CPA).

6. See, by way of example, what is supported in the headnote of the Decision of the Supreme Administrative Court rendered in process no. 01674/13, of 12.03.2014, in this regard:

"I - The Tax Administration has the duty to ground impugned assessment acts in accordance with the principle embodied in art. 268 of the CRP and accepted in arts. 125 of the CPA and 77 of the LGT.

II - The act will be sufficiently grounded when the administrated party, placed in the position of a normal recipient – the bonus pater familiae spoken of in art. 487 no. 2 of the Civil Code – can come to know the factual and legal reasons that are at its origin, so as to allow him to opt, in an informed manner, between accepting the act or triggering legal means of challenge, and so that, in the latter circumstance, the court may also exercise effective control of the legality of the act, assessing its legal correctness in light of its contextual grounds.

III - This means that the grounds, even if made by reference or in very synthetic form, cannot fail to be clear, coherent and to encompass the aspects, of fact and of law, that allow knowledge of the cognitive and evaluative path pursued by the Administration for the determination of the act. (...)"

7. In fact, the grounds of acts in tax matters that affect the rights and interests of taxpayers are provided for in the aforementioned article 77 of the LGT, which allows the grounds of acts to be made in the notification of the same, or at an earlier moment.

8. Thus, it is legitimate for AT to ground the act of additional assessment of tax in the Report of Tax Inspection when this has taken place.

9. In fact, on this matter, the decision of CAAD, rendered in process 109/2012-T, clarifies:

"Indeed, the legislator intended the grounds to consist of mere agreement with the grounds of the report of tax inspection, whereby the act impugned in that part does not suffer from any defect."

10. Furthermore, no. 6 of article 77 of the LGT provides that "the efficacy of the decision depends on notification," a requirement that also follows from article 36 of the CPPT and no. 3 of article 268 of the CRP. This means that acts in tax matters that affect rights and interests with legal protection must be notified to the taxpayer, as a condition of their efficacy.

11. Clarifying, with interest, the mentioned arbitral decision, which the present Tribunal follows:

"Now, the fact that this legal requirement of notification of the act is also provided for in the norm that establishes the duty of grounds does not mean, in our opinion, that notification of the act must be accompanied by grounds, as the Claimant contends.

Add to this that the purpose of the imposition of this legal duty of grounds was achieved, as it is clear from all procedural documents in the file that the Claimant became aware of the grounds that are at the basis of the impugned act, in that its argument against the impugned act was only possible because the Claimant knows the factual and legal reasons that support the act."

12. This position has long been sustained by the case law of our superior courts, as is the case of the Decision of the Supreme Administrative Court, rendered under process no. 0667/10, of 06.10.2010, in the following terms:

"The case law of our Superior Courts has established the understanding that an act is sufficiently grounded when it is possible to extract from it the cognitive path followed by the agent for its execution.

It is also widely accepted that resorting merely to formulaic statements that do not adequately clarify the motivational reasoning of fact and law that presided over the act of the administration does not satisfy the legal requirement of grounds.

The point is that the grounds must meet the needs of clarification of the taxpayer, informing it of the cognitive and evaluative path of the assessment act, allowing it to know the reasons, of fact and of law, that determined its execution.

Add to say, in the wake of the Decision of the Supreme Administrative Court of 11.12.2007, appeal 615/04, in www.dgsi.pt 'that the law requires only a brief statement of the grounds of the decision to be grounded; that therefore the content required of the grounding statement should not be a "maximum"; and that the degree of grounds must be adequate to the specific type of the act and the circumstances in which it was carried out, so as to satisfy the difference existing between the position of the Tax Administration and that of the taxpayer'."

13. ... and the case of the Decision of that same Superior Court rendered under process no. 01173/14, of 09 September 2015, according to which:

"I - AT has the legal duty to ground assessment acts (cf. art. 268 of the CRP, as well as arts. 21 of the CPT, 125 of the CPA and 77 of the LGT).

II - The grounds, even if made by reference or in summary form, cannot fail to be clear, coherent and to contemplate the aspects, of fact and of law, that allow knowledge of the cognitive and evaluative path pursued by the Administration for the determination of the act."

14. In light of the foregoing, with respect to the invoked defect of lack of grounds, the present Arbitral Tribunal considers that the impugned act is not affected by it, as it was properly grounded in the Report of Tax Inspection, through which it is possible in a clear, expressed, coherent and certain manner to understand why such act was executed, in no way preventing the Claimant from properly presenting the present petition, as readily results from its reading.

B. ALLEGED LACK OF A NORM OF INCIDENCE AND EXEMPTION FROM STAMP TAX

15. Now, the second issue that arises in the case in question concerns the interpretation of the norms contained in item 17.3.4 of the TGIS and article 7, letter e), of the Stamp Tax Code (CIS) in order to determine whether the multilateral interchange rate and the commission on operations carried out with bank cards in Automatic Teller Machines are subject to (and exempted from) or not Stamp Tax (IS).

16. It should be stated from the outset that, in the present proceedings, as will be seen below, the Arbitral Tribunal closely followed the argumentation and legal grounds presented in the arbitral decision rendered under Proc. no. 348/2016-T, of which the undersigned was a member, with appropriate adaptations, as well as the extensive case law on this same matter already rendered by CAAD.

17. The Claimant understands that the interchange rates and fees relating to the use of Automatic Teller Machines are not provisions of services between financial institutions, considering that they are not "owed and paid as a result of an agreement under which the parties undertake to render a specific service and the latter is associated with such rates. Rather, the Interchange Rates constitute a practical mechanism and reasonably manageable control to appropriately distribute and allocate among the financial institutions involved the technical charges incurred with the operationalization of the platform on which transactions are conducted," whereby "they are excluded from the scope of incidence of Stamp Tax," and on the other, setting the "academic" hypothesis of being considered provisions of financial services, it considers that they would be exempt from tax, given the provision in letter e) of no. 1 of article 7 of the respective Code, and the restriction of no. 7 of the same legal provision cannot be applied to them, given that it only has effects from 2016, by virtue of its introduction through the State Budget Law for that year, Law no. 7-A/2016, of 30 March, under penalty of violation of the constitutionally enshrined principle of prohibition of retroactivity of tax laws.

18. AT rebuts the Claimant's arguments, mentioning, on one hand, that the rates and commissions in question in the present proceedings constitute, in fact, provisions of financial services, considering that they are "(...) interbank fee payments, contractualized, borne by customers of each bank, who bear annuities for the mere holding of a debit card, with banks being beneficiaries of such fees and effectively bearing such costs their customers," and on the other, regarding the doubts about the interpretation of the wording of letter e) of no. 1 of article 7 of the CIS and its interpretation, the Respondent argues that, with the introduction of no. 7 to article 7 of the CIS, by Law no. 7-A/2016, of 30 March, "came its author (the legislator) to clarify what it intended (...) [the] provision in letter e) of no. 1 applies only to guarantees and financial operations directly intended for the granting of credit, in the context of the activity carried out by the institutions and entities referred to therein," authentic interpretation, which "in the case sub judice nor the difficulty of its linear application is visualized, considering that there is an express norm explaining its meaning, a meaning this that even before this legislative intervention could be achieved."

19. Now, in essence, the Claimant argues that the interchange rates and fees relating to the use of Automatic Teller Machines are covered by the regime of tax exemption referred to in article 7, no. 1, letter e), of the CIS, which exempts from tax "the interest and commissions charged, the guarantees provided and, likewise, the use of credit granted by credit institutions, financial companies and financial institutions."

20. The Respondent, for its part, understands that such norm only contemplates interest and commissions related to credit granting operations in which credit institutions and financial institutions intervene and that such clarification was made by no. 7 of article 7, added by Law no. 7-A/2016, of 30 March, to which an interpretative nature was attributed (article 154).

Let us see, then, who is correct.

I) – OF THE STAMP TAX CODE, THE GENERAL TABLE OF STAMP TAX AND ITS HISTORICAL EVOLUTION –

21. The Stamp Tax Code was approved by Law no. 150/99, of 11 September) providing in its article 1 under the heading "objective incidence":

"1 — Stamp tax applies to all acts, contracts, documents, titles, books, papers and other facts provided in the General Table.

2 — Operations covered by the incidence of value-added tax and not exempt from it are not subject to tax."

22. Complementarily, item 17.2.4 of the TGIS provided for the subjection to tax, at the rate of 4% of "Other commissions and counterparts for financial services"; which with Law no. 7-A/2016, of 30 March, came to provide, now in item 17.3.4 "[O]ther commissions and counterparts for financial services, including fees relating to payment operations based on cards."

23. It is included, thus, in this item of the TGIS, as clarified in the decision of the Collective Tribunal rendered under Proc. no. 496/2017-T:

"(...) the fees charged for operations in Automatic Payment Terminals (APT), being necessarily "payment operations based on cards," became expressly and clearly subject to said item 17.3.4; as for the use of automatic teller machines (ATM), this likewise became clear when there are fees charged on payment operations carried out in them (a "Payment operation" being defined in point 26) of article 2 of Regulation (EU) no. 2015/751, as "an act performed by the payer or on his behalf, or by the payee of the funds to be transferred, regardless of the underlying obligations existing between the payer and the payee").

That is: whatever the qualification of that interchange fee and commissions on automatic payment or cash withdrawal operations, no doubts remain as to its subjection, today, to the payment of Stamp Tax, by intervention of the legislator in 2016(...)."

24. In fact, and notwithstanding, this norm of incidence, provided in article 6 of the CIS, under the heading "other exemptions," the exemption from stamp tax, in its letter e), the interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and purpose filled the types of credit institutions and financial companies provided for in community legislation, some and others domiciled in the Member States of the European Union, or in any State complying with the principles deriving from the Code of Conduct approved by Resolution of the Council of the European Union, of 1 December 1997;

25. ...and in its letter f), the commissions charged by credit institutions to other institutions of the same nature or entities whose form and purpose filled the types of credit institutions provided for in community legislation, domiciled in the Member States of the European Union, or in any State, provided that it likewise complies with the principles deriving from the Code of Conduct approved by Resolution of the Council of the European Union, of 1 December 1997.

26. Now, with Law no. 30-C/2000, of 29 December, this norm underwent an alteration, with the introduction of no. 2 with the following provision:

"The provision in letters e) and f) applies only to financial operations directly intended for the granting of credit, in the context of the activity carried out by the institutions and entities referred to therein."

27. With the new wording, given to no. 2 of article 6 of the CIS, the legislator determined that the exemptions provided for in these two letters be restricted "to financial operations directly intended for the granting of credit."

28. Article 30 of Law no. 32-B/2002, of 31 December (State Budget for 2003) subsequently abolished no. 2 of art. 6 of the CIS, in the wording introduced by article 37, no. 1, of Law no. 30-C/2000, of 29 December, with nos. 3 and 4 of the previous wording becoming nos. 2 and 3 of the new wording. Merging, on the other hand, into a single letter, e), the previous letters e) and f), now providing as follows:

"e) Interest and commissions charged and, likewise, the use of credit granted by credit institutions and financial companies to venture capital companies, as well as to companies or entities whose form and object fill the types of credit institutions and financial companies provided for in community legislation, some and others domiciled in the Member States of the European Union, or in any State, with the exception of those domiciled in territories with a privileged tax regime to be defined by order of the Minister of Finance."

29. Indeed, this amendment allowed this single letter to now provide for the exemptions previously provided for in letters e) and f) of that legal provision.

30. Subsequently, with the Heritage Reform, which occurred with the approval of Law no. 287/2003, of 12 November, the provision in letter e) of no. 1 of article 6 of the CIS became, then, letter e) of no. 1 now of article 7, which subsequently underwent alterations in its wording, introduced by Law no. 107-B/2003, of 31 December, also providing for exemption for "guarantees provided."

31. Wording that has been maintained since then.

32. It happens that Law no. 7-A/2016, of 30 March, in its article 152, introduced no. 7 to article 7 of the CIS, with the attribution of an interpretative character to the same, by article 154 of that statute, determining that:

"The provision in letter e) of no. 1 applies only to guarantees and financial operations directly intended for the granting of credit, in the context of the activity carried out by the institutions and entities referred to therein."

33. Now, as is learnedly referred to in the arbitral decision rendered under Proc. no. 218/2018-T, regarding this matter:

"The historical evolution of article 7, no. 1, letter e), of the CIS shows that only in its original version, which reported the exemption to the granting of credit and the charging of commissions by credit institutions, and subsequently, with the addition of a no. 2 to that article by Law no. 30-C/2000, which restricted the scope of the exemption to financial operations directly intended for the granting of credit, is that the scope of application of the exemption was circumscribed to credit operations (objective incidence) and to credit institutions (subjective incidence).

34. Such legal provision would expand, thus, in the first place, the exemption from stamp tax, then limited to credit, including its respective interest, granted by credit institutions and financial companies to entities of the same nature, to credit, including its respective interest granted by credit institutions and financial companies, to venture capital companies, then regulated by Decree-Law no. 319/2002, of 29 December.

35. And, secondly, to commissions charged by credit institutions and financial companies to financial companies and venture capital companies.

36. It was, thus, expressly and not merely tacitly eliminated the limitation of the exemption to operations directly intended for the granting of credit, in the context of the activity carried out by credit institutions and financial companies.

37. The legislator would harmonize the assumptions of the exemption of letter e) with those of letter f) of the aforesaid article 7 of the CIS: just as the exemption of letter e), the exemption of letter f) would now cover operations in which exclusively intervening were credit institutions, financial companies and venture capital funds and not only operations in which the recipient was a credit institution. Standardizing the regimes into one, obvious reasons of simplicity and clarity required that they no longer appear in separate letters, which was done.

38. Thus being, the reason for the merger of the letters has to do with the standardization of the assumptions of exemption from stamp tax of credit granted and interest charged, with those of commissions charged in operations in which exclusively intervening were credit institutions and financial companies.

39. The meaning of the precept goes in the same direction.

40. In fact, the expression "as well as," which means "likewise," "also" and "in the same manner," used in the new wording of letter e), unequivocally means the exemption of interest and commissions charged applies in identical terms to the use of credit.

41. As is referred to and well, in the arbitral decision rendered in Proc. no. 218/2018-T, which the present Tribunal follows:

"With the consolidation of the verbal formula "interest and commissions charged and, likewise, the use of credit granted by credit institutions and financial companies," resulting from the new wording given by Law no. 32-B/2002, and the concomitant elimination of no. 2, it became clear that the norm addresses two distinct purposes: on the one hand, the charging of interest and commissions, and on the other, the granting of credit."

42. It draws attention to the uniformity of the assumptions of exemption from stamp tax of credit granted and interest charged as of commissions charged, in operations in which exclusively intervening were credit institutions and financial companies, having no restrictive scope.

43. In summary, the exemption of article 7, no. 1, letter e), of the Stamp Tax Code was not restricted, prior to the coming into force of Law no. 7-A/2016, of 30 March, to operations directly intended for the granting of credit in the context of the activity carried out by credit institutions, financial companies and other financial institutions.

44. That restriction was only expressly reinstituted by Law no. 7-A/2016, of 30 March.

45. Now, and according to the provision in letter e) of no. 1 of article 7 of the CIS, which we take up here, the following are exempt from tax:

"Interest and commissions charged, guarantees provided and, likewise, the use of credit granted by credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and object fill the types of credit institutions, financial companies and financial institutions provided for in community legislation, some and others domiciled in the Member States of the European Union or in any State, with the exception of those domiciled in territories with a privileged tax regime, to be defined by order of the Minister of Finance."

46. In turn, no. 7 of the same precept has the following content:

"The provision in letter e) of no. 1 applies only to guarantees and financial operations directly intended for the granting of credit, in the context of the activity carried out by the institutions and entities referred to therein."

47. The wording of letter e) was given, as we have seen, by Law no. 107-B/2003, of 31 December, and no. 7 was added, by article 152 of Law no. 7-A/2016 of 30 March (State Budget Law for 2016), having in turn article 154 qualified the said no. 7 as an interpretative norm.

48. As is known, interpretative law integrates itself into the interpreted law (article 13 of the Civil Code), applying to situations and facts prior to it. However, by setting one of the possible interpretations of the prior law with which the interested parties could and should have counted, and a solution that courts could have adopted, it is not susceptible to violating the secure expectations and legitimately founded by citizens.

49. The problem emerges when the legislator designates a norm as "interpretative law" when in fact what is at issue is an innovative law, this being, in many situations, a disguise of retroactivity of new law.

50. For Baptista Machado a new law is truly interpretative if two requirements are met: "that the solution of prior law be controversial or at least uncertain; and that the solution defined by the new law is within the framework of the controversy and is such that the judge or interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law. If the judge or interpreter, in face of old texts, could not feel authorized to adopt the solution that the New Law comes to establish, then this is decidedly innovative."

51. The new law came to establish a meaning that, at least, after the amendments introduced by Law no. 32-B/2002, is clearly innovative. So much so that the new law came precisely to reintroduce a wording for this no. 7 of article 7 of the CIS very similar to the wording that had been instituted by the State Budget Law for 2001, for the then article 6 of the CIS and which was in force until being expressly revoked by Law no. 32-B/2002 (State Budget Law for 2003).

52. In the sense of the innovative character of no. 7 of article 7 of the CIS, it is repeated that, if at first moment, that of Law no. 30-C/2000, the legislator intended to restrict the exemption of the then article 6, no. 1, letter e), to operations directly intended for the granting of credit.

53. Now, at a second moment, that of Law no. 32-B/2002, the same legislator wished to abolish that limitation, restoring the prior regime, through the express revocation of no. 2 of article 6 of the CIS.

54. Finally, at a third moment, through the amendments introduced by Law no. 107-B/2003, the legislator expanded even further this exemption, in the sense of covering, among other operations, commissions charged by financial institutions.

55. The literal tenor of the expression "as well as," which inequivocally has an amplifying and not restrictive scope of the 1st part of article 6, no. 1, letter e), cannot extract from the intention of the legislator of article 36, no. 1, of Law no. 107-B/2003, to restore the exclusion of exemption of commissions to operations directly related to the granting of credit that had been revoked the previous year, by Law no. 32-B/2002.

56. Such interpretation is moreover incompatible with the general meaning of the new wording of article 7, no. 1, letter e), of the CIS, which goes in the direction of expanding the exemption to commissions charged by financial institutions to other financial institutions.

57. The State Budget Law for 2016 came, in this manner, to restrict the field of application of the exemption from stamp tax provided for in letter e) of no. 1 of article 7 of the CIS, and, being designated by the legislator as interpretative, will be applied from the coming into force of the interpreted norm. Taxpayers will thus be confronted with the imposition of a tax burden, only bounded by the lapse of the tax, with which they did not count nor could in principle foresee, according to the rules of hermeneutics applicable.

58. And it is not argued in the sense of the non-innovative character of Law no. 7-A/2016, by case law of the superior tax courts, initiated by Decision of the Central Administrative Court South, of 21 September 2010, Proc. no. 2754/08, and confirmed, although with oscillations of grounds, by later and recent Decisions of the Supreme Administrative Court, in particular among others that of 18 January 2016, Proc. no. 0835/16, of 15 June 2016, Proc. no. 770/15, of 9 June 2016, Proc. no. 01630/15, and of 3 November 2016, Proc. no. 0976/16.

59. In summary, for the reasons set forth above, it is considered that Law no. 7-A/2016, through the joint interpretation of its articles 152 and 154, came to delimit the material scope of the exemption provided for in article 7, no. 1, letter e), of the CIS, in an innovative manner. Those precepts, by instituting a wording that did not appear in the legal order since 2003, must be considered retroactive and, as such, unconstitutional, by violation of the principle of protection of confidence and legal security.

II. LAW NO. 7-A/2016 AND THE PROHIBITION OF RETROACTIVITY OF TAX LAW (ARTICLE 103, NO. 3, OF THE CRP).

60. Even if it were understood that we are faced with a truly authentic interpretative norm (substantive and not purely formal interpretative law), the legitimacy of the interpretative reach of article 7, no. 1, letter e), of the CIS conferred by articles 152 and 154 of Law no. 7-A/2016 would always be struck by unconstitutionality, by violation of the prohibition contained in article 103, no. 3, of the CRP.

Let us see.

61. Since the constitutional revision of 1997, express constitutional consecration is given to the principle of non-retroactivity of taxes, saying in no. 3 of article 103 of the CRP that "no one may be required to pay taxes that have not been created pursuant to legislation, that are retroactive in nature or whose assessment and collection are not made pursuant to law."

62. As Nuno M. Morujão refers, "the majority fiscal doctrine that focuses specifically on the problem of interpretative norms does not oppose them, provided these are "authentic" interpretative norms."

63. However, for other authors, "in the tax field, as there is an express constitutional norm prohibiting retroactivity, it matters little to assess whether the interpretative law is in a substantive sense or only in a formal sense (in the case of being an innovative law)."

64. Saldanha Sanches, in annotation to Decision of the Constitutional Court no. 275/98, of 09/03/1998 (Proc. no. 370/97), ponders that "the constitutional change must be interpreted as a kind of criticism by the legislator of constitutional case law: the constitutional legislator, by changing the law and by adding a further guarantee in the constitutional text, is implicitly stating that in this field constitutional case law has not granted effective protection of fundamental rights of the taxpayer," concluding that "it does not seem to us that interpretative law can have a place in tax matters: if until now what was at issue were falsely interpretative laws, the constitutional revision came to prevent the retroactive effects of any norm, in tax matters, including those caused by interpretative norm."

65. Similarly, Jónatas Machado and Paulo Nogueira da Costa refer that interpretative norms "do not have only a declarative nature, producing constitutive effects. In that they bind courts to a specific interpretation, among several abstractly possible and already accepted by other courts, they necessarily imply a retroactive application of the interpreted law."

66. The aforementioned doctrine goes, in essence, towards the case law established, among others, in Decision of the Constitutional Court no. 172/2000, Proc. no. 762/98, relating to the constitutionality of article 28, no. 7, of Law no. 10-B/96, of 23 March, on the deductibility of municipal levy as a cost of IRC exercise. It should be noted that the meaning of the Decision is not contradicted by the dissenting opinions, which differ only on the grounds of the decision.

67. That Decision would consider interpretative laws that retroactively bind the interpreter to be incompatible with the prohibition of the creation of retroactive taxes introduced by the Fourth Revision.

68. Being certain, for the Constitutional Court, that authentically interpretative laws do not truly undermine the prior concrete expectations of their recipients, in the case where the interpretation made binding was already known and was even applied. However, even in those cases, the interpretative binding that such laws entail, by becoming the exclusive legal criterion for the application of the previous text of the law, in cases where constitutional law prohibits its retroactivity, modifies the relation of the State, emitter of norms, with its recipients.

69. The exclusion by the interpretative law of other interpretations pursued, following that Decision, leads to that the State may afterwards prevent the Law it created from functioning through its intrinsic logic communicable to the recipients of the norms, allowing an imperative and immediate power to interfere in legal interpretation that alters the framework of the relevant elements of legal interpretation, with the consequent frustration of the constitutional principle of non-retroactivity of taxes.

70. In this measure, the Decision would continue, one could understand that the interpretative law, even if authentic, when claiming to be in force for the period before its issuance, pursuant to no. 1 of article 13 of the Civil Code, alters the context of self-binding of the organs of application of Law to Law and, consequently, affects the security of the recipients of the norms protected by a (constitutional) prohibition of retroactivity.

71. There would be, consequently, in this latter situation, a guarantee of stronger security inherent to the prohibition of retroactivity.

72. In the present case, there did not exist, before the issuance of the interpretative norm, any doctrinal or even jurisprudential current that sustained the position it adopted, and the grounds of the impugned act cannot be considered as such, it is evident.

73. In that measure, regarding the new no. 7 of article 7 of the Stamp Tax Code, the interpretation given to letter e) of the prior no. 1, by article 152, with the reach of article 154, both of Law no. 7-A/2016, cannot be considered genuinely authentic. The authenticity of interpretation is a prerequisite for application of any formally interpretative norm.

74. In fact, the only doctrinal orientation prior to the coming into force of Law no. 7-A/2016, in the sense that commissions exempt pursuant to letter e) of no. 1 of article 7 of the Stamp Tax Code, is that on which the impugned assessments were grounded, whereby it cannot be considered, except if it is legitimized in practice legislatively, by the issuance of norms only formally interpretative, if the disputes between the Tax Administration and taxpayers are resolved.

75. Even if it were, as results from the case law of the Constitutional Court, the interpretative norm contained in the said article 154, by implying retroactive tax, would always violate no. 3 of article 103 of the CRP, whereby, pursuant to its article 204, could not be applied in the case sub judice.

76. The Claimant is thus correct, regarding the defect of violation of the:

"Exemption from Stamp Tax pursuant to letter e) of no. 1 of article 7 of the Stamp Tax Code by non-inclusion in no. 7 of the same article."

77. It is recognized, contrary to the understanding of the Respondent, that the exemption in question does not apply only to financial operations directly intended for the granting of credit, in the context of the activity carried out by credit institutions, but even to other financial operations that do not have that framework and final scope.

78. What was only subsequently established, after the execution of the tax acts in question in the present proceedings, in the seat of legislative amendment, without admissible retroactivity.

79. The law is new, and applies only prospectively.

80. The wording of letter e) of no. 1 of art. 7 of the CIS, in force at the time of occurrence of the impugned acts, already exempted such operations, whose right to their application by this means is recognized.

81. In the scope of CAAD, in addition to Proc. no. 348/2016-T, of 2 May 2017, which we have been following, it is also important to refer in favor of the thesis defended here, Proc. no. 303/2017-T of 10 November 2017, Proc. no. 352/2017-T, of 5 February 2018, Proc. no. 441/2017-T, of 20 December 2017, Proc. no. 527/2017-T, of 20 April 2018, Proc. no. 796/2017-T, of 26 July 2018, Proc. 103/2018-T, of 13 November 2018 and Proc. no. 218/2018-T, of 13 December 2018.

82. Finally, it is important not to forget the case law of the Constitutional Court, given the summary Decision taken in Proc. no. 404/2017, of 14 July 2017, as well as Decision of the Constitutional Court no. 664/2017, of 4 October 2017, establishing the "... innovative character of the normative solution resulting from the joint application of nos. 1, letter e) and 7, of article 7 of the Stamp Tax Code established following the amendment introduced to that Code by article 152 of Law no. 7-A/2016."

83. For all the foregoing, AT is not correct in not considering the multilateral interchange rates and commissions on operations carried out with bank cards in Automatic Teller Machines charged by the Claimant, exempt from Stamp Tax, in conformity with the provision in article 7, no. 1, letter e), of the CIS.

84. Thus the petition for declaration of illegality of the additional assessments of Stamp Tax and respective compensatory interest, which is the object of the arbitral petition, proceeds, due to error of law as to the meaning and reach of the mentioned precepts, with the consequent annulment of the same.

VII - PREJUDICED MATTERS

85. The petition for arbitral pronouncement proceeding based on the defect of illegality due to error of law as to the meaning and reach of article 7, no. 1, letter e), of the CIS, which ensures effective and stable protection of the Claimant's rights, the examination of the other defects is rendered moot, as to the erroneous quantification of the tax base and the lack of grounds for the assessment of compensatory interest (invoked in letters d) and e) of points II and III above, regarding the positions of the parties), which are attributed to the tax act in question.

86. In fact, from the establishment of an order of examination of defects, in article 124 of the CPPT, that once a defect is judged to proceed which prevents the renewal of the impugned act, there is no need to examine the others attributed to it. If it were always necessary to examine all defects it would be indifferent the order in which their examination was made.

VIII - INDEMNIFICATORY INTEREST

87. The Claimant alleges that, if it prevails in the present action and considering the assessments of Stamp Tax and compensatory interest to be illegal, AT should pay indemnificatory interest, pursuant to article 43 of the LGT.

88. According to the provision in article 24, no. 1, letter b) of the RJAT "[a] decision on the merits of the claim to which no appeal or challenge applies binds the tax administration from the end of the period provided for appeal or challenge, and this, in the exact terms of the finding of the arbitral decision in favor of the taxable person and until the end of the period provided for voluntary execution of sentences of tax judicial courts, alternatively or cumulatively, as appropriate:

[...]

b) Restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the necessary acts and operations for that purpose.

[...]."

89. In the same sense, article 100 of the LGT provides that "[t]he tax administration is obliged, in case of full or partial finding of merit of complaints or administrative appeals, or of a judicial proceeding in favor of the taxpayer, to the immediate and complete restoration of the situation that would exist if the illegality had not been committed, including payment of indemnificatory interest, under the terms and conditions provided for in law."

90. Doctrine and case law have defended that the fixing of the effects of its decisions falls within the scope of the competencies of arbitral tribunals, in the same terms provided for judicial challenge, in particular, as regards condemnation to indemnificatory interest or condemnation for indemnification for undue guarantee (cf. Carla Castelo Trindade (2016), Legal Regime of Tax Arbitration Annotated, 121 and Jorge Lopes de Sousa (2013), "Commentary on the Legal Regime of Tax Arbitration," 116).

91. In fact, in the legislative authorization granted to the Government for approval of the RJAT, contained in article 124 of Law no. 3-B/2010, of 28 April, the intention of a true alternative character is undoubtedly proclaimed between the judicial process and the tax arbitration process, reading there that "the tax arbitration process should constitute an alternative procedural means to the process of judicial challenge and the action for recognition of a right or legitimate interest in tax matters."

92. Thus, although article 2, no. 1, letters a) and b), of the RJAT uses the expression "declaration of illegality" to define the competency of tax arbitral tribunals, not making express reference to constitutive (annulling) decisions and condemnatory decisions, it should be understood, in harmony with the above-mentioned legislative authorization and