CAAD 273/2018-T: IRC Interior Tax Benefit, RFAI Deduction Against Autonomous Taxation Assessed

Arbitral Decision

The arbitrators Cons. Jorge Lopes de Sousa (arbitrator-president), Dr. Pedro Miguel Bastos Rosado and Dr. Isaque Marcos Lameiras Ramos (arbitrator-members) appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Court, constituted on 06-08-2018, agree as follows:

1. Report

A..., S.A., NIPC ... (formerly named B..., S.A. and C..., S.A.), which had its registered office in ..., ..., ...-... ..., registered at the CRC of ..., incorporated by merger into the company D..., S.A., NIPC ... (formerly named E..., S.A.), and represented hereby by this entity, with registered office in ..., ..., ...-... ..., (hereinafter referred to as the "Applicant"), has, under the terms of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), requested the constitution of an Arbitral Court.

The Applicant seeks:

• Declaration of illegality of the Decision to Reject the Official Revision Request No. ...2016... of the Directorate of Income Tax Services (hereinafter Corporate Income Tax - IRC), and annulment insofar as it rejected the Applicant's claim to apply the reduced IRC rate of 10% in 2012, by application of the Fiscal Regime for Interior Areas;

• Declaration of illegality of the Decision to Reject the Official Revision Request No. ...2016... of the Directorate of IRC Services, and annulment insofar as it rejected the Applicant's claim to deduct tax benefits from the Fiscal Regime for Investment Support (hereinafter, abbreviated as "RFAI") available to the collection of Autonomous Taxation in 2011 (in the amount of €16,960.63) and to the collection of Autonomous Taxation in 2012 (in the amount of €19,586.00);

• Declaration of illegality of the self-assessment of IRC for 2012 insofar as the reduced IRC rate of 10% was not applied, by application of the Fiscal Regime for Interior Areas;

• Declaration of illegality of the self-assessments of IRC for 2011 and 2012 insofar as the deduction of the value of tax benefits from RFAI available to the amount of Autonomous Taxation collections was not permitted, in the amounts of, respectively, €16,960.63 and €19,586.00;

• Ordering the AT to reimburse the Applicant the sum of €36,546.63 unduly paid as Autonomous Taxation collection (€16,960.63 paid in 2011 + €19,586.00 paid in 2012); and,

• Ordering the AT to pay to the Applicant compensatory interest calculated on the said sum of €36,546.63.

The Respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority and Customs Authority on 30-05-2018.

Under the terms of article 6(2)(a) and article 11(1)(b) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable deadline.

On 16-07-2018 the parties were duly notified of this appointment and manifested no intention to challenge the appointment of the arbitrators, in accordance with the combined terms of article 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in conformity with the provision of article 11(1)(c) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 06-08-2018.

The Tax and Customs Authority submitted a Response, in which it raised the objection of "lack of material jurisdiction of the arbitral tribunal arising from the fact that the request for arbitral pronouncement was formulated following rejection of a request for official revision" and argued for the inadmissibility of the claims.

By decision of 01-10-2018 the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the proceedings should proceed with written submissions.

The Parties submitted arguments.

The arbitral tribunal was regularly constituted in accordance with the provisions of articles 2(1)(a) and 10(1) of Decree-Law No. 10/2011, of 20 January.

The Parties are duly represented and enjoy legal personality and capacity, are entitled and are represented (articles 4 and 10(2) of the same act and article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities.

It is necessary to consider the issue of lack of jurisdiction raised as a priority (article 13 of the CPTA applicable under article 29(1)(c) of the RJAT).

2. Objection of Lack of Material Jurisdiction of the Arbitral Tribunal Arising from the Circumstance that the Request for Arbitral Pronouncement was Formulated Following Rejection of a Request for Official Revision

The Tax Authority and Customs Authority argues, in summary, that article 2(a) of Ordinance 112-A/2011, of 22 March, by which the Tax Authority and Customs Authority became bound by arbitral jurisdiction excludes claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative route, through a gracious objection, in accordance with article 131 of the Code of Tax Procedure and Process.

Upon examination, it may be said that the jurisdiction of arbitral tribunals in tax matters functioning in CAAD is, first, limited to the matters indicated in article 2(1) of Decree-Law No. 10/2011, of 20 January (RJAT).

In a second place, the jurisdiction of arbitral tribunals functioning in CAAD is also limited by the terms in which the Tax Administration was bound to that jurisdiction by Ordinance No. 112-A/2011, of 22 March, since article 4 of the RJAT establishes that "the binding of the tax administration to the jurisdiction of tribunals constituted under the terms of this law depends on an ordinance of the members of the Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered".

In view of this second limitation on the jurisdiction of arbitral tribunals in tax matters functioning in CAAD, the resolution of the jurisdiction question depends essentially on the terms of this binding commitment, since, even if one is dealing with a situation which falls within article 2 of the RJAT, if it is not covered by the binding commitment the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be excluded.

In article 2(a) of this Ordinance No. 112-A/2011, expressly excluded from the scope of the binding of the Tax Authority to the jurisdiction of arbitral tribunals functioning in CAAD are "claims relating to the declaration of illegality of self-assessment acts, withholding at source acts and advance payment acts that have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process".

The express reference to the preceding "recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" should be interpreted as relating to cases in which such recourse is mandatory, through the gracious objection, which is the administrative means indicated in those articles 131 to 133 of CPPT, to whose terms reference is made. In fact, from the outset, it would not be understood that, when prior administrative challenge is not necessary "when its grounds are exclusively a matter of law and the self-assessment has been made in accordance with generic guidelines issued by the tax administration" (article 131(3) of CPPT, applicable to cases of withholding at source, by virtue of article 132(6) of the same Code), one would exclude arbitral jurisdiction because such administrative challenge, which is deemed to be unnecessary, has not been undertaken.

In the case in question, declaration of illegality of a self-assessment act is sought, following rejection of a request for revision of tax acts made after the expiry of the two-year period provided for in article 132.

Thus, it is important, first, to clarify whether the declaration of illegality of acts rejecting requests for revision of the tax act, provided for in article 78 of the General Tax Law (LGT), is included in the powers granted to arbitral tribunals functioning in CAAD by article 2 of the RJAT.

In fact, in this article 2 there is no express reference to these acts, unlike what happens with the legislative authorization on which the Government based itself to approve the RJAT, which refers to "requests for revision of tax acts" and "administrative acts which involve appraisal of the legality of assessment acts".

However, the formula "declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and advance payment acts", used in article 2(1)(a) of the RJAT does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases in which directly challenged is one act of those types. In fact, the illegality of assessment acts may be declared jurisdictionally as a corollary of the illegality of a second-level act, which confirms an assessment act, incorporating its illegality.

The inclusion within the powers of arbitral tribunals functioning in CAAD of cases in which the declaration of illegality of the acts indicated therein is effected through the declaration of illegality of second-level acts, which are the immediate subject of the impugning claim, results with certainty from the reference which in that norm is made to self-assessment acts, withholding at source acts and advance payment acts, which are expressly referred to as included among the powers of arbitral tribunals. With effect, in relation to these acts it is imposed, as a rule, the necessary gracious objection, in articles 131 to 133 of CPPT, whereby, in these cases, the immediate subject of the impugning proceedings is, as a rule, the second-level act which appraises the legality of the assessment act, an act which, if it confirms it, must be annulled in order to obtain the declaration of illegality of the assessment act. The reference which in article 10(1)(a) of the RJAT is made to article 102(2) of CPPT, in which is provided the challenging of acts rejecting gracious objections, removes any doubt that within the powers of arbitral tribunals functioning in CAAD are included cases in which the declaration of illegality of the acts referred to in article 2(a) of the RJAT must be obtained following the declaration of illegality of second-level acts.

Indeed, it was precisely in this sense that the Government, in Ordinance No. 112-A/2011, of 22 March, interpreted these powers of arbitral tribunals functioning in CAAD, in excluding from the scope of those powers "claims relating to the declaration of illegality of self-assessment acts, withholding at source acts and advance payment acts that have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which has the effect of restricting its binding to cases in which such recourse to the administrative route was used.

Once the conclusion is reached that the formula used in article 2(1)(a) of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second-level act, it will also include cases in which the second-level act is that of rejection of a request for revision of the tax act, since no reason is seen to restrict this, especially since, in cases in which the revision request is made within the period of the gracious objection, it should be treated as equivalent to a gracious objection. ([1])

The same applies to the decision on hierarchical appeal, expressly indicated in article 10(1)(a) of the RJAT as the starting point of the period for submission of a request for constitution of the arbitral tribunal.

The express reference in article 2 of Ordinance No. 112-A/2011 to articles 131 to 133 of CPPT cannot have the decisive effect of excluding the possibility of examining claims for illegality of acts rejecting requests for official revision of acts of the types referred to therein.

In fact, the interpretation based exclusively on the literal wording which the Tax Authority and Customs Authority defends in the present proceedings cannot be accepted, since in the interpretation of tax rules the general rules and principles of interpretation and application of laws are observed (article 11(1) of the LGT) and article 9(1) expressly prohibits interpretations based exclusively on the literal wording of rules by providing that "interpretation must not be confined to the letter of the law", but should rather "reconstitute from the texts the legislative thinking, having regard above all to the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied".

As for the correspondence between the interpretation and the letter of the law, it is sufficient to have "a minimum of verbal correspondence, even if imperfectly expressed" (article 9(3) of the Civil Code) which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even recognizing in it imperfections in the expression of legislative intent.

For this reason, the letter of the law is not an obstacle to declarative interpretation, which explains the scope of the literal wording, nor even extensive interpretation, when it can be concluded that the legislator said less than what, in coherence, it would intend to say, that is, when it said imperfectly what it intended to say. In extensive interpretation "it is the very assessment of the rule (its 'spirit') that leads to the discovery of the need to extend the text of this to a hypothesis which it does not cover", "the expansive force of the very legal assessment is capable of leading the provision of the rule to cover hypotheses of the same type not covered by the text". ([2])

Extensive interpretation is thus imposed by the evaluative and axiological coherence of the legal system, established by article 9(1) of the Civil Code as a primary interpretative criterion by way of the imposition of observance of the principle of unity of the legal system.

It is manifest that the scope of the requirement of prior gracious objection, necessary to open the contentious route for challenging acts of the types referred to in articles 131 to 133 of CPPT, has as its only justification the fact that in relation to this type of acts there is no statement of position by the Tax Administration on the legality of the legal situation created by the act, a position which may even turn out to be favorable to the taxpayer, avoiding the need for recourse to the contentious route.

In fact, beyond the fact that no other justification for this requirement is envisaged, the fact that a necessary gracious objection is provided for challenging acts of withholding at source and advance payment (in articles 132(3) and 133(2) of CPPT), which have in common with self-assessment acts the circumstance that there is also no statement of position by the Tax Administration on the legality of the acts, confirms that this is the reason for the requirement of that necessary gracious objection.

Another unequivocal confirmation that this is the reason for the requirement of necessary gracious objection is found in article 131(3) of CPPT, in establishing that "without prejudice to the provisions of the preceding paragraphs, when its grounds are exclusively a matter of law and the self-assessment has been made in accordance with generic guidelines issued by the tax administration, the period for challenging does not depend on prior objection, and the challenge should be presented within the period of article 102(1)", a regime which is applicable to withholding at source acts by reference to article 132(6) of CPPT. In fact, in situations of this type, there was a prior generic statement of position by the Tax Administration on the legality of the legal situation created by the self-assessment or withholding at source act and it is this fact that explains why the necessary gracious objection ceases to be required.

Now, in cases in which an official revision request is formulated for a self-assessment or withholding at source act, the Tax Administration is provided, with this request, an opportunity to express itself on the merits of the claim of the taxpayer before the latter resorts to the jurisdictional route, whereby, in coherence with the solutions adopted in articles 131(1) and (3) and 132(3) and (6) of CPPT, it cannot be required that, cumulatively with the possibility of administrative appraisal within the framework of that official revision procedure, a new administrative appraisal be required through gracious objection. ([3])

On the other hand, it is unequivocal that the legislator did not intend to prevent taxpayers from formulating official revision requests in cases of self-assessment acts, since these were expressly referred to in article 78(2) of the LGT and in article 54(2) of the same Law the applicability to self-assessment and withholding at source of the taxpayer guarantees provided for in (1), which includes official revision, is established.

And to self-assessment acts, carried out by the taxpayer, are equivalent, by mere declarative interpretation, those of withholding at source which are carried out by the substitute taxpayer, who is considered a taxpayer (article 18(3) of the LGT).

In this context, since the law expressly allows taxpayers to opt for gracious objection or official revision of self-assessment and withholding at source acts and since the request for official revision formulated within the period of the gracious objection is perfectly equivalent to a gracious objection, as mentioned, there cannot be any reason which can explain why access to the arbitral route cannot be granted to a taxpayer who has opted for revision of the tax act instead of the gracious objection.

For this reason, it is to be concluded that the members of the Government who issued Ordinance No. 112-A/2011, in making reference to articles 131 to 133 of CPPT, expressed imperfectly what they intended, since, in seeking to impose prior administrative appraisal to contentious challenging of acts of the types referred to, they ended up including reference to articles 131 to 133 which do not exhaust the possibilities of administrative appraisal of those acts.

Moreover, it is to be noted that this interpretation, not confined to the literal wording, is particularly justified in the case of article 2(a) of Ordinance No. 112-A/2011, due to the evident imperfections therein: one, is to associate the comprehensive formula "recourse to the administrative route" (which references, in addition to the gracious objection, hierarchical appeal and revision of the tax act) to the "expression in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which has potential restrictive scope limited to the gracious objection; another is to use the formula "preceded by" recourse to the administrative route, referring to "claims relating to the declaration of illegality of acts", which, obviously, would be much better reconciled with the feminine word "preceded".

For this reason, beyond the general prohibition on interpretations limited to the letter of the law which is contained in article 9(1) of the Civil Code, in the specific case of article 2(a) of Ordinance No. 112-A/2011 there is a special reason for there not being great enthusiasm for a literal interpretation, which is the fact that the wording of that rule is manifestly defective.

Furthermore, in ensuring that revision of the tax act provides the possibility of appraisal of the taxpayer's claim before access to the contentious route which is intended to be achieved with the necessary administrative challenge, the most correct solution, because it is the most coherent with the legislative design to "strengthen the effective and actual protection of the rights and legally protected interests of taxpayers" manifested in article 124(2) of Law No. 3-B/2010, of 28 April, is the admissibility of the arbitral route to examine the legality of assessment acts previously appraised in a revision procedure.

And, because it is the most correct solution, it must be presumed to have been normatively adopted (article 9(3) of the Civil Code).

On the other hand, since that article 2(a) of Ordinance No. 112-A/2011 contains an imperfect formula, but which contains a comprehensive expression "recourse to the administrative route", which potentially also references revision of the tax act, there is found in the text the minimum verbal correspondence, although imperfectly expressed, required by that article 9(3) for the viability of the adoption of the interpretation which consecrates the most correct solution.

It is to be concluded, thus, that article 2(a) of Ordinance No. 112-A/2011, properly interpreted based on the criteria for interpretation of law provided for in article 9 of the Civil Code and applicable to substantive and procedural tax rules, by virtue of article 11(1) of the LGT, enables the submission of requests for arbitral pronouncement in relation to withholding at source acts which have been preceded by a request for official revision.

As for the allegation of the Tax Authority and Customs Authority that this interpretation is also imposed by force of the constitutional principles of the rule of law and separation of powers (cf. articles 2 and 111, both of the CRP), as well as legality (cf. articles 3(2) and 266(2), both of the CRP), as a corollary of the principle of indisposability of tax credits inherent in article 30(2) of the LGT, which bind the legislator and all activity of the AT, it appears that it has no foundation.

In fact, the Constitution does not impose that the interpretation of normative instruments be confined to the literal wording and, in the case in question, as explained, when properly interpreted the rules of article 2(1) of the RJAT and article 2 of Ordinance No. 112-A/2011, of 22 March, it is concluded that the binding of the Tax Authority and Customs Authority to arbitral tribunals functioning in CAAD covers cases in which self-assessment acts have been preceded by requests for official revision. For this reason, the interpretation made did not increase the binding of the Tax Authority and Customs Authority in relation to what is regulated, but rather defined exactly its terms, which result from the regulatory instrument.

Moreover, in interpreting and applying legal rules, this Arbitral Tribunal is performing the function constitutionally assigned to it (articles 202(1), 203 and 209(2) of the CRP), whereby it is not seen how there can be a violation of the principles of separation of powers, rule of law and legality, since what is decided by this tribunal evidences, precisely, the perfect concretization of those principles: the National Assembly authorized the Government to legislate (article 124 of Law No. 3-B/2010, of 28 April); the Government, in the exercise of legislative powers, issued the RJAT; the Administration, through two members of the Government, issued Ordinance No. 112-A/2011, of 22 March; the Arbitral Tribunal interpreted and applied the normative instruments referred to.

As regards the principle of legality, it translates into compliance with the law, as interpreted by the courts, which is imposed on the interpretations of other state bodies (article 205(2) of the CRP). It is precisely the application of legality that is made in recognizing the jurisdiction of arbitral tribunals to examine claims for declaration of illegality of self-assessment acts preceded by access to the administrative route through a request for official revision.

As for the invocation of the principle of indisposability of tax credits, defined in article 30(2) of the LGT, it appears to us to be misplaced. In fact, according to this provision, "the tax credit is indisposable, being able to fix conditions for its reduction or extinction only with respect for the principle of equality and tax legality". Now, in this matter, the Arbitral Tribunal limits itself to deciding on its (material) jurisdiction to examine a dispute and does so in the exact same terms as any Courts, notably the Administrative and Tax Courts, resorting to procedural rules and not to rules of tax incidence which underlie the principle of indisposability of tax credits.

Moreover, the Tax Authority and Customs Authority does not even identify which credit of which it is the holder that is the subject of disposition by the Arbitral Tribunal.

Furthermore, the principle of indisposability of tax credits applies to the Administration and not to the Courts, as understood by the Constitutional Court, following the generality of the doctrine. ([4])

Thus, this objection of lack of jurisdiction based on the non-presentation of a gracious objection to the self-assessment does not succeed.

Essentially in this sense, regarding self-assessment acts, may be seen the judgment of the Central Administrative Court South of 27-04-2017, delivered in case No. 08599/15.

As regards the questions of unconstitutionality raised by the Tax Authority and Customs Authority, may be seen the judgment of the Constitutional Court No. 244/2018, of 11-05-2018, delivered in case No. 636/2017, in which it was understood that "it does not declare unconstitutional the rule which considers requests for official revision equivalent to situations in which there was 'recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process', for purposes of interpretation of article 2(a) of Ordinance No. 112-A/2011, such situations being, for this reason, covered by the jurisdiction of arbitral tribunals functioning in CAAD".

3. Factual Matters

3.1. Proven Facts

The following facts are considered proven:

• The Applicant A..., S.A., NIPC ... was formerly named B..., S.A. and C..., S.A., which was incorporated by merger into the company D..., S.A., NIPC ... (formerly named E..., S.A.);

• For the fiscal year 2012, D..., S.A. determined a non-exempt taxable income of €2,040,796.09 (field 346 of Table 09 of the Replacement IRC Return Form 22 No. ... attached as document No. 3 with the request for arbitral pronouncement, the content of which is reproduced);

• D..., S.A. applied a rate of 25% IRC in that fiscal year, determining a collection of €510,199.02 (Field 351 of Table 10 of the statement referred to);

• Subsequently, D..., S.A. became aware of the binding information referred to in document No. 8 attached with the request for arbitral pronouncement, the content of which is reproduced;

• The Applicant began its activity, for tax purposes, on 01-10-2007 (document No. 16 attached with the request for arbitral pronouncement, the content of which is reproduced);

• D..., S.A. develops its main activity of an industrial nature in the municipality of ... since 2009;

• In 2008 the registered office of the company was in ..., District of ... (Permanent Certificate of D..., S.A., which is contained in document No. 9 attached with the request for arbitral pronouncement, the content of which is reproduced);

• On 08-05-2008, C..., S.A. entered into a Memorandum of Understanding with the Municipality of ... which provided for the transfer of land for the construction and installation of the industrial unit in the region (document No. 11 attached with the request for arbitral pronouncement, the content of which is reproduced);

• On 18-06-2008, the general assembly of C..., S.A. resolved to change the registered office (document No. 10 attached with the request for arbitral pronouncement, the content of which is reproduced);

• The Municipal Council of ... resolved to transfer land to C..., S.A. from September 2008 onwards (document No. 12 attached with the request for arbitral pronouncement, the content of which is reproduced);

• The beginning of construction of the C..., S.A. industrial unit occurred in 2009 (copy of Building License issued by the Municipality of ... in May 2009, which is contained in document No. 13 attached with the request for arbitral pronouncement, the content of which is reproduced);

• On 26-11-2009, the investment contract was entered into between C..., S.A. and F..., EPE (F...) which is contained in document No. 14 attached with the request for arbitral pronouncement, the content of which is reproduced);

• The Ministry of Economy, Innovation and Development granted, on 28-05-2010, to the Applicant Industrial Exploitation License No. .../2010 which authorized it to develop the activity of manufacturing paper and cardboard and manufacturing paper articles for domestic and sanitary use in ... (document No. 15 attached with the request for arbitral pronouncement, the content of which is reproduced);

• In the tax periods between 2008 and 2011, D..., S.A. did not come to benefit from that reduced rate of 10% IRC under the fiscal benefits regime for interior areas, either because it did not determine taxable profit in the period (2008 and 2009) or because, having determined it, it used reportable tax losses which resulted in the absence of taxable income (2010 and 2011) (article 46 of the request for arbitral pronouncement, not challenged);

• On 28-03-2016, D..., S.A. submitted the official revision request for the self-assessments relating to the fiscal years 2011 and 2012, which came to have the No. ...2016..., in which it requested that in relation to that fiscal year:

▪ The reduced rate of 10% would be applicable to the taxable income determined in 2012, in the amount of €2,040,796.09 and, for this reason, that the collection which had been initially declared, of €510,199.02, would be changed;

▪ Insofar as the said benefit was then limited to a maximum amount of €200,000, and since D..., S.A. did not benefit from the application of that regime in the four tax periods prior to 2012, the collection of that fiscal year would be reduced by that maximum amount of €200,000, resulting in a correction to €310,199.02 (that is, €510,199.02 – €200,000 = €310,199.02);

▪ The use of tax benefits used in the tax period against the IRC collection would be corrected and reduced to the stated €310,199.02 of collection determined;

▪ The deduction of tax benefits to the collection of state surtax and autonomous taxation collections;

(document No. 5 attached with the request for arbitral pronouncement, the content of which is reproduced);

• In relation to the tax periods 2011 and 2012, D..., S.A. was unable, given that the computer system for submitting the periodic income return for IRC purposes did not permit it, to proceed with the deduction of any tax benefits to the Autonomous Taxation collection of those fiscal years;

• Among the tax benefits capable of being used and deducted in those fiscal years by D..., S.A. are those relating to RFAI not yet used in the amount of €38,859.39 for 2011 and €569,548.49 for 2012 – (declaration of Tax Consultant demonstrating the existence and availability of RFAI credits for the fiscal years in question which is contained in document No. 17 attached with the request for arbitral pronouncement, the content of which is reproduced, not challenged);

• In the fiscal years 2011 and 2012, D..., S.A. determined Autonomous Taxation collection of €16,960.63 in 2011 (field 365 of Table 10 of document No. 2 attached with the request for arbitral pronouncement, the content of which is reproduced) and €19,586 in 2012 (field 365 of Table 10 of document No. 3 attached with the request for arbitral pronouncement, the content of which is reproduced in annex);

• In relation to the fiscal year 2011, D..., S.A. requested, in its Official Revision Request, that to said Autonomous Taxation collection of €16,960.63 be deducted tax benefits relating to RFAI available, at the time, in an amount greater than the collection;

• In relation to the fiscal year 2012, D..., S.A. requested, in its Official Revision Request, that be deducted to said Autonomous Taxation collection of €19,586.00 the tax benefits relating to RFAI available, at the time, in an amount greater than the collection;

• In relation to the fiscal year 2012, D..., S.A. requested, in its Official Revision Request, a reimbursement in the amount of €72,722.21, and such amount included €53,136.21 paid as State Surtax (€19,586.00 + €53,136.21 = €72,722.21), an amount which, however, has already been reversed by the AT, granting the company's claim, whereby in the present action is only at stake, as regards 2012, the said amount of €19,586.00;

• On 06-03-2018, the Applicant was notified of the decision rejecting the official revision request, issued on 21-02-2018, in which the decision it was considered pointless to pronounce on the deduction to the state surtax collection, since it had already been implemented;

• The decision rejecting the official revision request is based on information, a copy of which is contained in document No. 1 attached with the request for arbitral pronouncement, the content of which is reproduced, in which is stated, among other things, the following:

2.1 Fiscal Benefits Regime for Interior Areas – fiscal year 2012

The Applicant disagrees with the position of the AT regarding the non-application, in the fiscal year 2012, of the IRC rate of 10% provided for in article 43(1)(b) of the Fiscal Benefits Statute (EBF), because the period established in this rule has been exceeded.

The applicant argues that, in 2007 only was the then company C... constituted and the mandatory cadastral notification of its formal commencement of activity fulfilled. However, it considers that the applicant/C... "installed itself" in fact only in 2008 (and not 2007) in ... since it understands that the legislator, in introducing the concept of "installation" for the purpose of the fiscal benefit being applicable, obviously did not intend to refer solely and formalistically to the date of constitution of the company (or transfer of the registered office of the company) or notification of commencement of activity merely for the purpose of fulfilling cadastral obligations. It was only in May 2008 that a memorandum of understanding was signed with the Municipality of ... for the transfer of land which would permit the construction of the industrial unit which was subsequently implemented in September of that year, having subsequently submitted the building license application for the industrial unit to the municipality only issued in 2009, which permitted the construction of the industrial unit. Thus it considers that in 2012 the "Fiscal Regime for Interior Areas" was still applicable to the applicant and, for this reason, the reduced IRC rate of 10% was applicable.

2.2 - Of the failure to consider the autonomous taxation levied in 2011 and 2012 as collection for purposes of application of article 90(2) of the IRC Code.

Regarding this matter the applicant reiterates that there is today clear jurisprudence and doctrine in the sense of its legality.

3. Analysis of the right to a hearing

3.1 - Fiscal Benefits Regime for Interior Areas – fiscal year 2012

Before anything else, we recall the content of the rule in question in the present proceedings. Thus, article 43 of the EBF, before the repeal made by article 146(1) of Law No. 64-B/2011, of 30 December (Budget Law for 2012), provided:

"1 - To companies which exercise, directly and as a principal activity, an economic activity of an agricultural, commercial, industrial or service provision nature in interior areas, hereinafter called 'beneficiary areas', the following tax benefits are granted:

a) The IRC rate provided for in article 60(1) of the respective Code is reduced to 15%, for entities whose principal activity is located in beneficiary areas;

b) In the case of installation of new entities, whose principal activity is located in beneficiary areas, the rate referred to in the previous paragraph is reduced to 10% during the first five fiscal years of activity-"

It follows directly from the letter of the law that, in the case of establishment of new entities, whose principal economic activity is located in the beneficiary areas of interior incentives, the time interval for application of the IRC rate of 10% under article 43(1)(b) of the EBF is limited to the "first five fiscal years of activity".

That is, for these new companies which place their principal activity in the beneficiary areas of interior incentives, the counting of the period during which they can enjoy an IRC rate of 10% begins in the fiscal year in which they declare the commencement of activity.

The mention in the text of the law of "installation of new entities" has a sense much broader than that intended by the applicant, referring to the establishment, installation, birth of new companies in the beneficiary areas, whose principal activity is developed therein, constituting themselves as true catalysts for the economic recovery of those Portuguese regions suffering from problems of interior areas.

Now, in the case in question, and as the applicant itself acknowledges, the commencement of activity occurred indisputably in 2007, the fiscal year in which the applicant's constitution was published on 05 September 2007 (Portal of the Ministry of Justice) and in which the commencement of activity was declared, for tax purposes, with reference to 01 October 2007, and not in 2008 as the applicant argues.

Therefore, in the fiscal year 2012, the applicant cannot benefit from the reduced IRC rate of 10% provided for in article 43(1)(b) of the EBF, by force of law.

3.2 - Of the nature and purpose of autonomous taxation and of the Impossibility of application of article 90(2) of CIRC

The applicant comes insisting that the amount paid as autonomous taxation determined under article 88 of CIRC can take advantage of the deductions to collection referred to in article 90(2) of the IRC Code, namely the deduction of tax benefits.

Regarding this question, it is important never to lose sight of the fact that the rules applicable to autonomous taxation should not be contrary to the spirit which determines them, being necessary to assess the intention of the legislator, expressed in the legislative text, understood as a whole.

We recall that we have to go back to the year 1990 to find the first intervention by the legislator in the sense of subjecting certain expenses to autonomous taxation, which occurred with the publication of Decree-Law No. 192/80, of 9 June, whose article 4 provided that "expenses which are confidential or undocumented incurred in the exercise of commercial, industrial or agricultural activities by taxpayers subject to PIT who possess or should possess organized accounting or by taxpayers subject to IRC not covered by articles 5 and 9 of the respective Code are taxed autonomously in PIT or IRC, as the case may be, at a rate of 10%, without prejudice to the provision of article 41(1)(h) of CIRC."

This rule was the subject of various subsequent legislative amendments which successively increased the taxation rate provided for therein. Thus, the said rate started at 10% in the original version of Decree-Law No. 192/90, of 9 June, having passed to 25% with the Law which approved the State Budget for 1995 (cf. article 29 of Law No. 3-B/94, of 27 December), was raised to 30% (or, in the case where expenses are incurred by taxpayers subject to IRC, totally or partially exempt or who do not exercise, as principal activity, commercial, industrial or agricultural activities, to 40%) with the Law which approved the State Budget for 1997 (cf. article 31 of Law No. 52-C/96, of 27 December), rates which were further increased, respectively, to 32% and 60%, with the Law which approved the State Budget for 1999 (cf. article 31 of Law No. 87-B/98, of 31 December).

Subsequently, with the "Reform of income taxation", approved by Law No. 30-G/2000, of 29 December, Decree-Law No. 192/90, of 9 June, was repealed, and article 69-A (currently article 88) was added to the IRC Code and article 75-A (currently article 73) to the PIT Code, by which, in addition to providing, as was already the case with Decree-Law 192/90, of 9 June, autonomous taxation of undocumented expenses, such taxation was extended to representation expenses, vehicle expenses and expenses corresponding to amounts paid to non-resident entities subject to a more favorable tax regime. This rule was also the subject of various subsequent legislative amendments which successively extended the scope of expenses subject to this type of taxation and aggravated the respective rates.

Through successive legal amendments, the legislator has been widening the scope of autonomous taxation, having come to include, with the 2010 State Budget Law, charges relating to indemnities paid to managers, administrators or directors when these cease functions, and also charges relating to bonuses and other variable remuneration paid to managers, administrators or directors when these exceed certain thresholds. The report of the State Budget for 2010 justifies these measures as a way to ensure "a more just distribution of tax burdens and a gradual moralization of corporate remuneration policies". As doctrine has recognized, these are, in this case, autonomous taxation mechanisms which depart from the initial design of combating tax fraud and evasion - as happened with undocumented expenses, but which fit within the objective of limiting/preventing the realization of excessive and/or unnecessary expenses from the point of view of business interest which artificially negatively affect the taxable income of companies and reduce tax revenue.

Now, like all anti-abuse rules, autonomous taxation owes its existence to evasive and fraudulent behaviors of taxpayers in tax matters and to the need to establish appropriate means of reaction in order to ensure compliance with the principle of equality in the distribution of tax burden and in the pursuit of satisfaction of the financial needs of the State and other public entities (cf. article 103(1) of the CRP).

That is, aiming autonomous taxation to reduce the tax advantage achieved with the deduction of expenses on which it incurs, and further to combat tax evasion which this type of expenses, by their nature, potential, giving it an anti-abuse character, it would be contrary to the intention of the legislator implicit in the determination of autonomous taxation already in 1990 and to the spirit of the system, to allow that, by force of the deductions referred to in article 90(2) of the IRC Code, be removed from autonomous taxation that anti-abuse character which presided over its implementation in the IRC system. It has always been the understanding of the Services the impossibility of proceeding to any deduction to the collection produced by autonomous taxation, under pain of subverting all the teleology which was present in its genesis and emptying of content the very rules of IRC calculation.

The deductions provided for in article 90(2) of the IRC Code, when applied to autonomous taxation, neutralize the objectives pursued by them, since if the intention is to penalize (or prevent) certain type of excessive and/or unnecessary expenses from the point of view of business interest which skillfully diminish the taxable matter of IRC and its collection, it makes no sense - and is even contradictory - to allow that this collection of autonomous taxation be emptied with deductions which aim directly and exclusively at the tax relief of taxable matter and of the IRC collection to which it pertains.

In order to evidence this autonomy and purely by way of example let us see the case of autonomous taxation of undocumented expenses, expenses which, while they may originate in situations of diverse nature, by their very essence (confidential or undocumented), can hardly be known by the AT as to the identity of the recipient of the income.

Thus, the choice of the legislator was, from the beginning of this regime, to subject from the outset to taxation, by means of the application of an autonomous rate which will be, at least, equivalent to that which would be applicable if that income were taxed under income tax and other mandatory contributions. That is, the legislator, facing the impossibility/difficulty of knowing the basis of that expense/charge and the recipient of the confidential expense, and aware that this entity will, almost certainly, conceal the income which it thereby acquired, chose to tax those amounts in the sphere of the company, avoiding the tax exclusion of that income.

Now, having regard to the teleology present in the genesis of autonomous taxation, it is illogical and legally indefensible to consider the tax levied on autonomous taxation relating to these undocumented expenses (which we have here used as an extreme example due to its eminently evasive nature), as IRC collection under article 90(1) of CIRC, and consequently covered by deductions to collection, destroying thus the anti-abuse sense which is inherent to them. For, on raising this possibility of deduction, e.g. to advance payments of special contributions made throughout the year, which we remind have the objective of bringing closer the moment of production of income subject to tax, of the moment of its taxation (taxation of income throughout the year and not only when the collection is determined at the end of each tax period), we would be seriously transgressing the choice of the legislator to autonomously tax those undocumented expenses in the sphere of the company which carries them out in order to avoid the tax exclusion of that income in the sphere of the recipient and to recover some of the tax which failed to be paid by the recipient of the income. In the final analysis it could be verified that the advance payments made would be used, not in function of the IRC collection determined on the basis of taxable matter under article 15 of CIRC, but rather entirely in function of a sum of autonomous taxation relating to various charges/expenses borne by the company and legally typified in article 88 of CIRC, removing all the purpose and rationality underlying the creation of this rule, of discouraging the realization of such expenses by companies and of combating fraud and tax evasion which such expenses occasion, not only under IRC and PIT, but also in relation to the corresponding Social Security contributions (paying entity and entity receiving income). There would not be the desired transfer of tax responsibility of the recipient of the "income" to the sphere of who pays that type of expenses which, traditionally, are used also outside the scope of business activity or have some remuneratory component in their genesis.

That is, also by here is verified that the nature and purpose of autonomous taxation are irreconcilable with the deduction, to the corresponding tax, of the deductions to collection provided for in article 90(2) of the IRC Code.

Reference is also made to the introduction of article 88(21) of the IRC Code by the 2016 State Budget Law, mainly when it refers that to the taxation of autonomous taxation in IRC no deductions shall be made, attributing to it also interpretative nature, this constitutes only one more argument among all the others which support the understanding which had been defended and applied, both by the AT and by taxpayers subject to IRC and PIT in general, regarding this question. This will also be the intention of the legislator since, once again, through Law No. 114/2017, of 29 December 2017 (State Budget Law for 2018), it altered, with interpretative nature, article 88(21) of CIRC. It is to be noted that, with autonomous taxation in force since 1990, only very recently (cases of 2014 and 2015) with the intervention of the arbitral tribunal (CAAD) have controversial decisions arisen, some in the sense that advance payments and tax benefits could be deducted to the collection of autonomous taxation, and others in the opposite sense, the legislator having fixed the sense with which the rule in general had already been applied since its creation.

Still with reference to the question sub judice (should autonomous taxation be considered for purposes of application of article 90(2) of the IRC Code?), it is important to recall the legal provisions in question, in the wording in force in 2011 to 2012:

The paragraphs (1) and (2) of article 90 and paragraph (1) of article 15, both of CIRC provided:

(...)

That is, the taxation of IRC (IRC collection) to which article 90 of CIRC refers, when what is at issue is a self-assessment, as occurs in the present proceedings, is determined based on the taxable income determined in the exact terms defined by article 15 of IRC which appears in that taxation/self-assessment (cf. (a) of article 90(1) of CIRC: "is based on the taxable income contained therein"), with the tax credits resulting from tax benefits whose legislation so permits (SIFIDE and RFAI for example), the credit for double international taxation or even the special advance payment, deducted only to the collection determined on the basis of taxable income (cf. article 90(2) of CIRC: "To the amount determined under the preceding paragraph") and not to another tax which does not have as its basis the taxable income, as the applicant has been arguing.

Now, as we mentioned earlier, autonomous taxation, although provided for in CIRC and levied together with IRC for collection purposes, has nothing to do with the taxation of income and the profits attributable to the fiscal year of the company, since they apply to certain expenses which constitute autonomous tax facts which the legislator, for reasons of fiscal policy, wished to tax separately by subjection to a predetermined rate which has no relation to the volume of business of the company (judgment of the STA of 12 April 2012, Case No. 77/12). It applies to certain expenses typified in tax law which have been made by the company, and only to those expenses, and does not aim at the taxation of business income which have been obtained in the respective tax period, but rather to discourage the realization of expenses which may have a negative impact on tax revenue and artificially reduce the very taxpaying capacity of the company.

It is also to be emphasized the fact that the legislator categorically defines the concept of taxable income applicable in the IRC code in its article 15, and in the case of commercial companies in commercial form, is obtained by deduction from taxable profit, determined under the terms of articles 17 et seq. of CIRC, of the amounts corresponding to tax losses, under article 52 of CIRC and of tax benefits which may exist that consist of deductions in that profit. That is, even by way of purely literal interpretation of article 90 of CIRC it follows that only to the collection determined on the basis of taxable income, perfectly defined by the legislator without margin for doubt (see article 15 of CIRC), should the deductions provided for in article 90(2) of CIRC be made.

4 - Conclusion

With reference to the applicant's claim dealt with in the draft decision, in deducting to the collection composed by the sum of IRC itself and state surtax, the tax benefits to which the applicant is entitled, under the provision of article 90(2)(b) of CIRC, we find that such claim is there entirely implemented in the determination of IRC relating to the periodic return of income relating to the replacement of the tax period 2012 submitted by the applicant on 2014-05-30 which gave rise to the IRC reimbursement No. 2014 ... in the amount of €67,477.62. It appears, in accordance with what was sought by the applicant in the present proceedings, that tax benefits in the amount of €563,335.23 (field 355 of table 10 of the income return form model 22) have been deducted to the collection corresponding to the sum of IRC (€510,199.02) with state surtax (€53,136.21), under the provision of article 90(2)(b) of CIRC, whereby we abstain from pronouncement in the present proceedings due to supervening uselessness of the dispute.

With respect to the remaining matters petitioned by the applicant in the official revision request in question, namely as to the application, in the fiscal year 2012, of the IRC rate of 10% under article 43(1)(b) of the EBF and of the autonomous taxation levied in 2011 and 2012 under article 88 of CIRC being able to take advantage of the deductions to collection referred to in article 90(2) of the IRC Code, the decision of rejection contained in the draft decision is maintained.

By the foregoing, the official revision request in question should be Rejected.

• On 29-05-2018, the Applicant submitted the request for arbitral pronouncement which gave rise to the present proceedings.

3.2 Unproven Facts

It was not proven that the Applicant met all the requirements demanded to be able to benefit from the tax benefits which are at issue, namely those provided for in article 43(2)(b) and (c) of the EBF and in article 2(3)(d) of RFAI.

It was also not proven whether the amounts which in document No. 17 attached with the request for arbitral pronouncement, whose content is reproduced, are indicated as "benefit for carryforward" until the years 2015 and 2016 came or not to be used for deduction to the IRC collection of one or more of the fiscal years subsequent to 2012.

3.3. Grounds for the Determination of Factual Matters

The proven facts are based on documents submitted by the Applicant and contained in the administrative file, the Tax Authority and Customs Authority having not challenged the facts alleged.

The facts considered unproven are justified by the fact that no allegation or evidence was presented that the conditions referred to therein are satisfied.

4. Legal Matters

4.1. Question of Tax Benefit for Interior Areas

The Applicant formulated a request for official revision, seeking recognition of a tax benefit for interior areas, in the fiscal year 2012, under article 43(1)(b) of the Fiscal Benefits Statute (EBF).

Article 43 of the EBF, in the wording resulting from the republication made by Decree-Law No. 108/2008, of 26 June, came to be repealed by Law No. 64-B/2011, of 30 December.

Before the republication, the text of this article was contained in article 39-B, added by Law No. 53-A/2006, of 29 December, which was amended by Law No. 67-A/2007, of 31 December.

In the wording of this Law, article 43(1)(b) of this article, which is here at issue, established the following:

1 - To companies which exercise, directly and as a principal activity, an economic activity of an agricultural, commercial, industrial or service provision nature in interior areas, hereinafter called 'beneficiary areas', the following tax benefits are granted:

b) In the case of installation of new entities, whose principal activity is located in beneficiary areas, the rate referred to in the previous paragraph is reduced to 10% during the first five fiscal years of activity;

The Applicant understands, in summary, that, although C..., S.A. was constituted in 2007, it only "installed itself" later, after the Municipality of ... in September 2008 transferred the land which would permit the construction of the industrial unit and the building license for the industrial unit was issued in 2009.

The Tax Authority and Customs Authority, however, understood, in its decision on the official revision request, the following:

– "for these new companies which place their principal activity in the beneficiary areas of interior incentives, the counting of the period during which they can enjoy an IRC rate of 10% begins in the fiscal year in which they declare the commencement of activity";

– "the 'installation of new entities' has a sense much broader than that intended by the applicant, referring to the establishment, installation, birth of new companies in the beneficiary areas, whose principal activity is developed therein, constituting themselves as true catalysts for the economic recovery of those Portuguese regions suffering from problems of interior areas";

– "the commencement of activity occurred indisputably in 2007, the fiscal year in which the applicant's constitution was published on 05 September 2007 (Portal of the Ministry of Justice) and in which the commencement of activity was declared, for tax purposes, with reference to 01 October 2007, and not in 2008 as the applicant argues".

Thus, the thesis of the Tax Authority and Customs Authority comes down to the fact that the "installation of new entities" occurs with the constitution and declaration of commencement of activity and not with the creation of the practical conditions necessary for the development of productive activity.

The Applicant understands, in summary, the following:

– article 43(1)(b) of the EBF does not refer to the criterion of formal commencement of activity notification by a company, requiring that there be effective activity, which only occurred in 2009;

– the text of (1) and (b) point in this sense in referring to "companies which exercise, directly and as a principal activity, an economic activity" and "installation of new entities, whose principal activity";

– there is no presumption that the "commencement of activity" formal corresponds to "installation" and, if one existed, would be rebuttable, by force of article 73 of the LGT;

– in this case, "not even the address of the registered office of D..., S.A. was located in ...";

– the period of investment began in November 2008, following the contract with F... and the commencement of activity only occurred in 2009, after obtaining the industrial exploitation license.

It appears to be clear that the Applicant is correct.

In fact, on one hand, the letter of the rules referred to, which is the first element of interpretation to be considered, clearly points in the direction that the tax benefit depends on the actual exercise of an economic activity, which must be the principal one, whereby, before such exercise, it cannot benefit from the tax benefit nor is it justified to consider that the period during which it can benefit from it is running.

On the other hand, the raison d'être of the tax benefit corroborates the interpretation which results from the literal wording, since, it being a tax benefit intended to encourage investments in the interior of the country, it cannot be sufficient for its obtaining the mere presentation of a declaration of commencement of an activity stated as sole or principal, without being followed by a real investment and an effective principal economic activity.

For this reason, if companies could only benefit from the tax benefit with the exercise of an activity, the moment of commencement of that effective exercise cannot but be relevant for the determination of the five years during which they could benefit from this tax benefit.

Thus, the interpretation defended by the Tax Authority and Customs Authority, beyond not having consistent textual support, since the law makes no reference to the moment of submission of the declaration of commencement of activity, does not accord with the legislative intention underlying the creation of that tax benefit, whereby to the literal argument is added the rational argument.

From another perspective, the solution to which the interpretation of the Tax Authority and Customs Authority leads would be manifestly incorrect and, for this reason, it must be presumed not to have been enshrined in the law, as is required by article 9(3) of the Civil Code.

By the foregoing, the self-assessment relating to the fiscal year 2012 as well as the decision on the official revision request suffer from a defect of violation of law, as to this tax benefit, which justifies its annulment, in the respective part, under the terms of article 163(1) of the Administrative Procedure Code, subsidiarily applicable under articles 2(c) of the LGT and 29(1)(d) of the RJAT.

4.2. Question of Deduction of RFAI Values to Autonomous Taxation Collection

The Tax and Customs Administration rejected the official revision request in what concerns the request for deduction of values which in the fiscal years 2011 and 2012 the Applicant had available that were in conditions to benefit from RFAI.

To solve this question it is also important to consider the relevance of later laws, to which interpretative nature was attributed.

4.2.1. Applicability of Articles 89 and 90 of CIRC to the Calculation of Autonomous Taxation

Articles 89 and 90 of CIRC establish the following, in the wording in force in the years 2011 and 2012 (resulting from Law No. 3-B/2010, of 28 April):

Article 89

Jurisdiction for taxation

Taxation of IRC is made:

a) By the taxpayer itself, in the declarations referred to in articles 120 and 122;

b) By the Directorate-General of Taxation, in the remaining cases.

Article 90

Procedure and form of taxation

1 - The taxation of IRC proceeds as follows:

a) When taxation is to be done by the taxpayer in the declarations referred to in articles 120 and 122, is based on the taxable income contained therein;

b) In the absence of submission of the declaration referred to in article 120, taxation is made up to 30 November of the following year to that to which it relates or, in the case provided for in (2) of the said article, up to the end of the 6th month following the end of the period for submission of the declaration mentioned therein and is based on the annual value of the minimum monthly remuneration or, when higher, the entire taxable income of the closest fiscal year which is found determined;

c) In the absence of taxation under the preceding paragraphs, it is based on the elements of which the tax administration has knowledge.

2 – To the amount determined under the preceding paragraph are made the following deductions, in the order indicated:

a) That corresponding to international double taxation;

b) That relating to tax benefits;

c) That relating to special advance payment referred to in article 106;

d) That relating to withholdings at source not capable of compensation or reimbursement under applicable legislation.

3 – (Repealed)

4 – To the amount determined under (1), regarding the entities mentioned in article 120(4), only is the deduction relating to withholdings at source made when these have the nature of tax on account of IRC.

5 – The deductions referred to in (2) relating to entities to which the tax transparency regime established in article 6 applies are imputed to the respective members or partners under the terms established in (3) of that article and deducted from the amount determined based on the taxable income which took into account the imputation provided for in the same article.

6 – When the special regime of taxation of groups of companies is applicable, the deductions referred to in (2) relative to each company are made in the amount determined relating to the group, under the terms of (1).

7 – From the deductions made under (a), (b) and (c) of (2) no negative value can result.

8 – To the amount determined under (b) and (c) of (1) only are made the deductions of which the tax administration has knowledge and which can be made under (2) to (4).

9 – In cases where the provision of article 79(2)(b) applies, taxation is made annually based on the taxable income determined provisionally, and, in relation to the taxation corresponding to the taxable income for the entire taxation period, the difference determined is to be charged or cancelled.

10 – The taxation provided for in (1) can be corrected, if necessary, within the period to which article 101 refers, the differences determined then being charged or cancelled.

The said articles 89 and 90 of CIRC, as well as other rules of this Code, such as those relating to the declarations provided for in articles 120 and 122, are applicable to autonomous taxation.

In fact, it is today settled, following numerous arbitral jurisprudence and positions taken by the Tax Authority and Customs Authority, that the tax levied based on autonomous taxation provided for in CIRC has the nature of IRC. Moreover, beyond the jurisprudence, article 23-A(1)(a) of CIRC, in the wording of Law No. 2/2014, of 16 January, leaves today no margin for any reasonable doubt, corroborating what previously resulted from the literal wording of article 12 of the same Code.

Now, article 90 of CIRC refers to the forms of taxation of IRC, by the taxpayer or by the Tax Administration, applying to the determination of the tax due in all situations provided for in the Code.

For this reason, article 90 applies also to the taxation of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Administration, following the submission or not of declarations, with there being, with force in the years 2011 and 2012, no other provision that provides for different terms for its taxation.

Thus, in the years 2011 and 2012, the differences between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are limited to the determination of the taxable matter and the applicable rates, which are those provided for in Chapters III and IV of CIRC for IRC which is based on taxable profit and in article 88 of CIRC for IRC which, in turn, is based on the taxable matter of autonomous taxation and the respective rates.

But the forms of taxation which are provided for in Chapter V of the same Code are of common application to autonomous taxation and to the remaining taxable matter of IRC.

However, the circumstance that an IRC taxation, made under article 90(1), may contain several partial calculations, based on several applicable rates to certain taxable matters, does not imply that there is more than one taxation, as results from the very terms of that rule in making reference to "taxation", in the singular, in all cases in which it is "done by the taxpayer in the declarations referred to in articles 120 and 122", having "as basis the taxable income contained therein" (whether that determined based on the rules of articles 17 et seq., or that determined based on the various situations provided for in article 88).

Moreover, it is not only the taxation provided for in article 88 of CIRC that may encompass various calculations of application of rates to certain taxable matters, the same can happen in the situations provided for in (4) to (6) of article 87 of the same legal compendium ( [5] )

In any event, whatever calculations are to be made, the taxation which the taxpayer or the Tax Authority and Customs Authority are to make under articles 89(a), 90(1)(a), (b) and (c), and 120 or 122, is unitary, and it is on the basis of it that the global IRC is calculated, whatever the taxable matters relating to each of the types of taxation which underlies it.

Moreover, if this article 90 were not applicable to the taxation of autonomous taxation provided for in CIRC, we would have to conclude that there would be no rule which, in 2011 and 2012, provided for its taxation, which would be reduced to illegality, by violation of article 103(3) of the CRP, which requires that taxation of taxes be made "under the terms of the law".

It should also be noted that the new rule of (21) added to article 88 of CIRC by Law No. 7-A/2016, of 30 March, regardless of whether or not it can be qualified as truly interpretative ([6]), in no way alters this conclusion, since there it is established, as to the form of taxation of autonomous taxation, that it "is made under the terms provided for in article 89 and is based on the values and rates which result from the provision of the preceding paragraphs". With effect, if it is certain that this new