Stamp Tax on Pension Fund Management Fees: CAAD Ruling 279/2017-T on Clause 17.3.4 TGIS

ARBITRAL DECISION

I – REPORT

1. A… SA, with Tax Identification Number … and registered office at Rua …, nº …, …-…, a taxpayer subject within the jurisdiction of the Tax Authority Service of …, hereinafter designated as "Claimant", filed a request for the constitution of an Arbitral Tribunal, pursuant to Article 2(1)(a) of Decree-Law No. 10/2011, of 20 January (RJAT) and Ordinance No. 112-A/2011, of 22 March, for the purpose of challenging and declaring illegal the ex officio assessment of Stamp Tax identified with number 2017…, in the amount of €26,616.56, plus compensatory interest in the amount of €3,604.64, in a total amount of €30,221.20, for the year 2013.

2. The challenged assessment was issued by the Tax Authority (AT) following an internal tax inspection procedure, with partial scope, ordered for the year 2013, through service order No. OI2016…, of 13 July, with the aim of verifying the tax classification of pension fund management commissions under Stamp Tax (IS), as set forth in the Tax Inspection Report (RIT) attached to the pleadings as document No. 2 annexed to the arbitral petition (PA), and which forms part of the administrative file held by the AT.

3. The disputed assessment is based on the conclusions set forth in the RIT and on the interpretation of the norm contained in item 17.3 of the General Table of Stamp Tax (TGIS), according to which "operations carried out by or through the intermediation of SGFP/Insurance Companies, on behalf of and for the account of the Funds, are considered operations carried out by or through the intermediation of credit institutions, financial companies or other legally equivalent entities and any other financial institutions, for purposes of taxation under stamp tax." In this manner, the RIT concluded that the objective element provided for in the tax incidence rule is satisfied, since the commissions charged by the Insurance Company/SGP as remuneration for the administration and management of the fund are financial services, within the meaning and for the purposes of Item 17.3.4 of the TGIS.

The Claimant takes a different view and supports its arbitral petition, among other grounds, on the basis of violation of law and violation of the principle of non-retroactivity of tax law.

1. The request for constitution of the Arbitral Tribunal was filed by the Claimant on 21-04-2017; on the same date it was accepted by His Excellency the President of CAAD and automatically notified to the AT on 28-04-2017, in accordance with the legally prescribed terms and conditions. The Claimant opted not to appoint an arbitrator, and therefore on 14-06-2017, His Excellency the President of the Deontological Council of CAAD designated as sole arbitrator Professor Doutora Maria do Rosário Anjos, listed in the CAAD List of arbitrators in tax matters, who accepted the appointment. In these terms, pursuant to the decision issued and contained in the pleadings, this sole arbitral tribunal was constituted on 30-06-2017.

2. On 04-07-2017 an arbitral decision was issued requiring the Tax Authority and Customs Authority (AT) to submit a response within the legal time frame, in accordance with the terms and conditions provided for in Articles 17(1) and (2) of the RJAT. The Respondent submitted its response to the pleadings on 19-09-2017, the contents of which are hereby fully reproduced, in which it reiterates the position set forth in the RIT, upholds its conclusions, and argues for the legality of the disputed Stamp Tax assessment.

3. On 27-09-2017, in light of the position of the parties as evidenced in the pleadings, an arbitral decision was issued inviting the parties to pronounce themselves on the possibility of dispensing with the holding of the meeting provided for in Article 18 of the RJAT, as unnecessary, given that the question to be decided concerns exclusively matters of law, the facts are not disputed, there is no testimonial evidence to be presented, and final arguments may be submitted in writing. By motion filed on 29-09-2017, the Claimant expressed its favorable position regarding the dispensation of the meeting. By motion filed in the pleadings on 04-10-2017, the Respondent expressed its favorable position regarding the dispensation of the meeting as well as the submission of written arguments. Taking into account the position assumed by the parties in the foregoing motions, on 16-10-2017 an Arbitral Decision was issued dispensing with the holding of the meeting provided for in Article 18 and the submission of written arguments, with the proceedings advancing to final decision, indicating that the issuance of the final decision within thirty days thereafter was foreseeable. By arbitral decision of 16-11-2017, this date was extended until 30-11-2017, as it was not possible to complete the arbitral decision within the initially indicated time frame, nevertheless within the time frame provided for in Article 21 of the RJAT.

B) THE CLAIM FORMULATED BY THE CLAIMANT:

1. In summary, the Claimant bases its claim alleging that the assessment suffers from a material defect of violation of law and should be annulled with the consequent reimbursement of all amounts of tax paid, plus indemnificatory interest at the legal rate, calculated from the date of payment until the date of full reimbursement. It bases its position on Article 17.3 of the TGIS. It presents the evolution of the fiscal legal regime applicable to the provision of fund management and administration services for pension funds, invoking the provisions of Article 120-A of the Stamp Tax Regulation, approved by Decree 12,700, of 20 November 1926, in force until 1999, and its subsequent evolution, as set forth in the arbitral petition which are hereby fully reproduced. In this regard, it further invokes the General Regime of Credit Institutions and Financial Companies (RGICSF), approved by Decree-Law No. 298/92, of 31 December, discussing the different types of institutions of a financial nature, concluding that in accordance with Article 32(1) of Decree-Law No. 12/2006, of 20 January, which regulates the constitution and functioning of pension funds and pension fund management entities, insurance companies and pension fund management companies qualify as financial institutions (non-monetary).

The Claimant alleges that, although the Stamp Tax Code does not contain a concept of financial services, the Value Added Tax Code (CIVA) considers certain banking and financial operations exempt from VAT, which under various administrative instructions are also extended to commissions charged by Pension Fund Management Entities to Pension Funds. Thus, using these concepts contained in the CIVA, since the CIS does not adopt its own concept, it concludes that these commissions do not have the nature of financial services. Therefore, it concludes that the commissions charged by a pension fund management company to the funds it manages are subject to Stamp Tax in accordance with item 17.3.4 of the TGIS. Nevertheless, and notwithstanding what is alleged by the AT, it concludes that the exemption provided for in Article 7(1)(e) of the CIS is fully applicable to the commissions in question in these proceedings. Centering its analysis on this norm of Article 7 of the CIS and the subjective exemption provided therein and on the evolution of the legal regime established therein, it alleges that from Law No. 107-B/2003, of 31 December (Budget Law for 2004) onwards, this exemption became applicable also to financial institutions. The understanding underlying the assessment is based on the Budget Law for 2016, which added a paragraph 7 to Article 7 of the CIS, which restricts the material scope of the stamp tax exemption provided for in that norm, with the exemption provided in paragraph (e) now applying only to financial operations directly intended for the granting of credit, within the scope of the activity exercised by the institutions and entities referred to in those paragraphs, and to which an interpretative character was assigned to that norm. In this regard, it invokes the principle of non-retroactivity of tax law, in confrontation with the introduction of norms of an interpretative nature, concluding that "the justification for the 'interpretative law' to apply to situations and facts prior to its enactment lies in the fact that it comes to establish and fix one of the possible interpretations of the old law, with which the interested parties could and should have reckoned, and is not, therefore, capable of violating safe and legitimately founded expectations."

In this manner, it concludes that "the application of the new law (introduced by the Budget Law 2016) carried out by the Tax Inspection and evidenced in the RIT and in the position that the AT considers as correct is based on a subjective incidence not contained in the law, displacing an exemption (…) from a norm that was expressly repealed in 2002 [and which] persists to this day."

Therefore, it is its understanding that the disputed assessment suffers from the material defect of violation of law and should be declared illegal, annulled, and, consequently, the Claimant should be reimbursed with the amount of tax already paid, plus indemnificatory interest calculated at the legal rate from the date of tax payment until the date of its full reimbursement.

C – THE RESPONDENT'S RESPONSE

1. In its response, filed in the pleadings, the Respondent reiterated the arguments and conclusions set forth in the RIT and, consequently, argued for the legality of the disputed assessment. To assess its legality, the essential point is what is set forth in the conclusions of the RIT, which essentially concludes that:

This is, in essence, the reasoning underlying the disputed assessment.

It should be noted that in its response, the AT further developed the matter in debate, defending the understanding that the legislator's intention has always been, and remains, to limit the application of the exemption norm to the granting of credit and to the interest and commissions associated therewith. It thus understands that no broadening of the material scope of the exemption occurred through the repeal of paragraph 2 of Article 6 of the CIS, contrary to what the Claimant argues. Thus, it understands that "the elimination of paragraph 2 and renumbering of paragraphs 3 and 4 of Article 6 as a repeal act, since it does not manifestly appear that the legislator wished to dispose in a sense different from the previous one. One should only consider that the legislator's intention did not need any norm to clarify its meaning. The limitation of the exemption desired by the legislator, before and after the new wording of the paragraphs is the same, that is, the exemption is only applicable to the commissions provided in item 17 when they are directly linked to credit granting operations, within the scope of the activity exercised by the institutions and entities referred to in that provision."

Furthermore, the Respondent invokes case law of the higher courts to support the interpretation defended by the AT. As regards the analysis of the Budget Law for 2016 and the norm contained in paragraph 7 of Article 7 of the CIS, which according to the Respondent's understanding is nothing more than a mere interpretative norm, as clearly results from the law itself.

It finally concludes that being the AT subject to the principle of tax legality, by virtue of Article 266(2) of the Constitution, Article 8 of the General Tax Law and Article 3(1) of the Administrative Procedure Code, the Respondent's position could not be other than that set forth in the RIT, "the AT not being able to disapply norms on the basis of unconstitutionality."

II - PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is duly constituted. The Parties enjoy legal personality and capacity, are legitimate, and are legally represented (see Articles 4 and 10(2) of the RJAT and Article 1 of Ordinance No. 112/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate them, so all procedural requirements for the arbitral tribunal to adjudicate the claim are met.

1. Taking into account the documentary evidence filed in the pleadings and the allegations of the parties, it is necessary to establish the material facts relevant to the decision.

III – Facts

A) Proven Facts

1. As material facts relevant, the present tribunal considers the following facts as established:

a) The Claimant is a joint stock company engaged in insurance and reinsurance activity in the Life Branch, for which it obtained proper authorization from the Institute of Insurance of Portugal (ISP) - (see RIT attached to the pleadings as Doc 2 annexed to the arbitral petition and which forms part of the Administrative File held by the Respondent);

b) As set forth in the RIT, the Claimant, in addition to the Life Branch, is also engaged in Pension Fund Management activity, being structured according to the following business areas: (i) Insurance Contracts - Risk Products; (ii) Insurance Contracts - Financial Products; (iii) Investment Contracts; (iv) Pension Fund Management - (See RIT attached to the pleadings);

c) In compliance with Service Order No. O12016…, of 13 July 2016, from the Finance Directorate of Lisbon, the Claimant was subject to an internal tax inspection, with partial scope, for purposes of Stamp Tax, for the year 2013; - See RIT attached to the pleadings);

d) This Inspection had the objective of verifying the tax classification of Pension Fund management commissions under Stamp Tax (RIT . doc2);

e) The RIT contains, among others, with particular relevance for the Decision, the following conclusions:

• In addition to being an insurance company in the Life Branch, it is simultaneously a pension fund management company, which is governed by the provisions of Decree-Law No. 12/2006, of 20 January, which regulates the constitution and functioning of pension funds and pension fund management entities and transposes into the national legal order Directive No. 2003/41/EC, of the European Parliament and of the Council, of 3 June, relating to the activities and supervision of institutions for occupational retirement provision.

• Thus, and in the case in question, the taxpayer A…, as the creditor of the management commission, is the taxpayer of Stamp Tax [Article 2(1)(b) of the CIS]. Pursuant to Article 3(1) read in conjunction with paragraph (g) of Article 3(3) of the CIS, the tax constitutes a charge on each of the Funds managed by A…, as the holder of the economic interest, the taxable value being the value of the respective commission, as provided for in Article 9(1) and Article 22(1), both of the CIS, read in conjunction with Item 17.3.4 of the TGIS.

• in section III.2 of the tax inspection report, the following "Accounting-Tax Analysis": "A… is the entity responsible for the management of five Pension Funds;

• In accordance with the terms contained in each of the management contracts/management regulations, A… directly charges each of the Pension Funds referred to above a management commission for the administration of the funds.

• The management remuneration is invoiced by A… in accordance with the clauses of the management contracts/management regulations signed between the contracting parties.

• By issuing the invoice for management remuneration, A… recognizes the revenue from the commissions, with reference to each quarter/year, credited to the sub-accounts of account 79001-"Revenue FPs", as a counterpart to the account of each of the funds.

f) Taking into account that the Claimant did not assess Stamp Tax on the amounts of invoiced commissions, and considering the balances these presented as of 31-12-2013, the AT proceeded to assess the respective Stamp Tax, at the rate of 4%, and issued the respective assessment, in the total amount of €26,616.56, increased by the amount of €3,604.64 in compensatory interest, as detailed in the RIT;

g) The Claimant was previously notified of the Draft RIT and invited to pronounce itself in a prior hearing, having chosen not to do so;

h) The assessments were issued with payment deadline of 09-03-2017, and were duly notified to the Claimant;

i) On 15-02-2017, the Claimant paid the amounts mentioned in the previous paragraph, as evidenced by the receipt attached to the arbitral petition as contained in doc. No. 3 attached to the arbitral petition.

j) On 21-04-2017 the Claimant filed a request for constitution of this Arbitral Tribunal to challenge the ex officio assessments of Stamp Tax and respective compensatory interest.

B) UNPROVEN FACTS

1. There are no facts relevant to the decision that should be considered as unproven.

C) REASONING OF THE PROVEN FACTS

1. The facts described were proven on the basis of the documentary evidence that the Claimant filed in the pleadings, confirmed by the administrative file held in the pleadings by the AT, with emphasis on the Tax Inspection Report (RIT). Thus, each of the facts proven is based on the documentary evidence referenced, to which is added the proper consideration of the positions assumed by the parties. With this framework, the facts listed above were considered proven, with relevance to the decision and consensually recognized and accepted by the parties.

The facts considered proven are based, concretely, on the documents filed with the arbitral petition, with emphasis on the RIT. Thus, the facts proven in a) to g) are proven by the RIT, attached to the PA and to the arbitral petition, as document No. 2. The facts mentioned in h) and i) are proven by documents Nos. 1 and 3.

IV. Dismissal of Defects

1. The Tribunal is competent and duly constituted, in accordance with paragraph (a) of Article 2(1) and Articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate, are regularly represented, and the proceedings do not suffer from nullities.

V – ON THE LAW: reasoning of the substantive decision

1. The central issue in debate relates to the interpretation of the norms contained in item 17.3.4 of the TGIS and Article 7, paragraph (e), of the CIS. It is necessary to determine whether the management, administration and other commissions charged by the Claimant, as a pension fund management entity, are subject to Stamp Tax (IS), and do not benefit from the exemption provided for in paragraph (e) of Article 7(1) of the CIS.

No divergence is found between the parties as to the factual situation present, described in detail in the RIT, but solely and exclusively as to the interpretation and consequent application of the aforementioned norms, in the version resulting from the Budget Law for 2016.

The AT considers that the exemption provided for in Article 7, paragraph (e) is not applicable to all commissions covered by item 17.3.4, but only to those that are directly linked to credit granting operations, within the scope of activity exercised by the institutions and entities mentioned therein. From this perspective, only interest, commissions and guarantees resulting from the granting of credit would be covered by the legal norm. The Claimant takes a different view, arguing for the application of that exemption regime.

This is the question to be decided.

1. To reach the answer to this question, it is necessary, in the first place, to analyze the legal requirements for the subjective incidence of the tax and, in the second place, to examine the application of Article 7, paragraph (e) of the CIS and the Stamp Tax exemption that the Claimant understands to be applicable.

Let us proceed:

1. It follows from the norm provided for in item 17.3.4 of the TGIS, which defines the objective and subjective incidence, inserted in item 17 relating to financial operations, the following:

(…)

"17.3 Operations carried out by or through the intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions - on the value charged;

(…)

17.3.4 - 'Other commissions and consideration for financial services, including fees relating to card-based payment operations (Wording of Law No. 7-A/2016, of 30 March) – 4%'"

Pursuant to the letter of the law, for purposes of tax liability, the legislator establishes as the incidence criterion the circumstance that the commissions and consideration for financial services are charged by certain types of entities: financial companies or other entities legally equivalent to them.

Indeed, the Claimant and Respondent are in agreement on this point, as can be concluded from the analysis of their respective pleadings filed in the proceedings. On the other hand, as the Claimant correctly notes, in Article 26 of the arbitral petition, "it is undoubtedly the case today that insurance companies and pension fund management companies qualify as financial institutions (non-monetary)". The Claimant falls within this category.

Having established this, the crucial question now is to determine whether we are dealing with financial operations, since non-financial operations in general are subject to VAT and not to Stamp Tax. To determine what types of operations are concretely covered, it is necessary to take into account the norms that define the competence of the entities referred to.

Given that the CIS does not present a concept of financial services, reference must be sought in some related enactment for the necessary guidance to ascertain the nature of the consideration received as a Pension Fund Management Company. In this regard, the Arbitral Decision in case 348/2016-T, of 02-05-2017, addressed an identical question to that presented for consideration in these proceedings. Considering the understanding set forth in this Arbitral Decision, to which full adherence is given, the following excerpt is extracted and quoted:

"10. In the absence of an express definition of the concept of a financial institution, it has always been admitted that there exists a concept in the strict sense (the one contained in the RGICSF-monetary financial institutions) alongside a broad concept (non-monetary financial institutions). This distinction finds support, both in the understanding of the financial sector in the broad sense, which comprises banking, securities, and insurance subsectors, as well as in national and European Union legislation.

1. In Portuguese law we do not find a definition of 'financial institution', the legislator limiting itself, in line with what occurs at European Union level, in various instances, to list entities that it qualifies on a case-by-case basis as 'credit institutions', 'financial companies' and 'financial institutions', for purposes of applying a given regime.

2. Pursuant to and for purposes of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, of 26 June, 'Financial Institution' means: 'an undertaking that is not a credit institution whose principal activity is the acquisition of shareholdings or the pursuit of one or more of the activities listed in Annex I, points 2 to 12 and 15 of Directive 2013/36/EU[4], including a financial holding company, a mixed financial holding company, a payment institution within the meaning of Directive 2007/64/EC of the European Parliament and of the Council, of 13 November 2007, on payment services in the internal market, and an asset management company, but excluding insurance holding companies and mixed insurance holding companies, within the meaning of Article 212(1)(g) of Directive 2009/138/EC.'

3. In point 27. A 'Financial sector entity' includes:

(…)

h) An insurance holding company; (…)".

1. For purposes of applying the regime of Directive 2009/138/EC of the Parliament and of the Council of 25 November, relating to the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (codification), in Article 13, under the heading 'Definitions', point 25., 'Financial institution' means any of the following entities:

a) A credit institution, a financial institution or an auxiliary insurance service provider, as defined respectively in points 1, 5 and 21 of Article 4 of Directive 2006/48/EC;

b) Insurance undertakings, reinsurance undertakings or insurance holding companies as defined in Article 112(1)(f);

c) An investment firm or a financial institution, within the meaning of Article 4(1) point 1 of Directive 2004/39/EC; (…)".

1. It is concluded from the foregoing, in harmony with the cited arbitral decision, that an insurance holding company falls within the category of 'financial sector entities' and, consequently, within a broad concept of financial institution. The same conclusion flows from Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003[1], relating to the activities and supervision of institutions for occupational retirement provision, in which it is possible to find various references to the effect of classifying these entities within the concept of financial institution in the broad sense.

2. This Directive was transposed into Portuguese law through Decree-Law No. 12/2006, of 20 January, which regulates the constitution and functioning of pension funds and pension fund management entities. Article 32 of this legal instrument provides that "pension funds may be managed either by companies constituted exclusively for that purpose, designated in this Decree-Law as management companies, or by insurance companies that exploit the 'Life' branch and have an establishment in Portugal."

Furthermore, there are multiple norms provided therein regarding prudential regulation applicable to this type of pension fund management entity, which, without need for further development or inquiry, leads us to classify the Claimant in this category, for all legally prescribed purposes, including those arising from item 17.3.4 of the TGIS.

In summary, both in light of European Union law and in light of internal law, in the transposition of European Directives, pension fund management entities carry out operations that are materially and formally financial, approximating by the characteristics of their activity insurance and reinsurance companies. Whence the natural conclusion of their classification within the broad concept of an institution that operates in the financial system.

1. Returning to item 17.3.4 of the TGIS, the legislator refers to operations "carried out by or through the intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions". The final part of this explicitly points to a larger set of financial institutions than that composed of credit institutions and financial companies, whereby it is concluded that the Claimant, as an insurance company authorized to operate as a pension fund management company, meets the legal type provided for therein.

2. Having resolved this first question, it is necessary to analyze the regime provided for in Article 7, paragraph (e), of the CIS, which provides that:

(…)

"e) The 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 purpose meet the types of credit institutions, financial companies and financial institutions provided for in community legislation, all domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by ordinance of the Minister of Finance;" (Wording of Law No. 107-B/2003, of 31 December).

As we have seen, for the AT the exemption here provided occurs only when the interest and commissions charged and the guarantees provided are associated with credit granted. The Claimant defends the contrary position, this consisting of the point of discord regarding the (il)legality of the Stamp Tax assessments and compensatory interest here contested.

1. Because the tax at issue concerns activity carried out in the year 2013, it is necessary to take due account of the version of this provision in force at the time of the tax event and, subsequently, to ascertain the consequences possibly arising from the Budget Law for 2016, with the introduction of paragraph 7, to which the legislator attributed merely interpretative character. Is this the case? Are we dealing with a "disguise" with the objective of circumventing the principle of non-retroactivity of tax law, enshrined in Article 103(3) of the Constitution?

Setting aside the analysis of collateral matters and without impact on the substantive decision, it is necessary to determine whether or not the tax exemption sought by the Claimant is applicable and the merely interpretative or, on the contrary, innovative and, to that extent retroactive, nature of the provision introduced with the Budget Law of 2016. The decision of the case depends on the analysis of these questions.

Let us see, then, what is the legally correct answer to these two questions.

1. Beginning with the analysis of the exemption provided for in paragraph (e) of Article 7 of the CIS, there is no doubt that it is an exemption of a mixed nature (objective and subjective), since it covers all operations provided for therein ("interest and commissions charged, guarantees provided, and likewise, the use of credit granted by credit institution" – objective exemption) provided that they are carried out by certain entities in accordance with what has already been stated above (credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and purpose meet the types of credit institutions, financial companies and financial institutions – objective exemption).

In essence, it is the application of this norm that generated the controversy between the Respondent and Claimant, precisely as regards the type of entities covered and the nature of the operations benefiting from the exemption, and which gives rise to the present dispute.

Let us see, then, what the subjective scope (which entities are covered) and objective (which concrete operations are subject to tax) is.

1. As regards the subjective scope, we have already concluded above (points 17 to 20 of this decision) that pension fund management companies are integrated into the concept of financial institutions, with no reason to exclude them. This is an interpretation of the concept in the broad sense, it might be said, but the only one that appears compatible with the course of the legislator, resulting from both the understandings of European Union Law and what results from our internal law, in the area of transposition and, also, in other areas of application of tax law. It is not clear why such concept would be restricted, only and solely, for purposes of applying the stamp tax exemption. Moreover, at no moment did the legislator intentionally reveal such a design. Therefore, by force of the principles of legal certainty and legal security and of the unity of the fiscal system itself, it should be understood that the same concept of financial institution should have "a meaning and scope uniform throughout the Code and General Table and not a meaning and scope different, broader in case of incidence rules and more restrictive in exemption rules" (See Arbitral Decision of 2-05-2017, in case No. 348/2016-T). The same applies to financial operations, or financial services, referred to in item 17.3.4 of the General Table.

In this regard, the comment inserted in a final note of the aforementioned Arbitral Decision of 2-05-2017 is particularly assertive, which we pass to quote:

"The Circular of the Directorate-General of Taxes No. 7/2009, of 15 April, to sustain the non-application to insurance companies of the exemption of Article 6 (now 7), paragraph 1, paragraph (e), of the Stamp Tax Code, regarding the commissions charged by credit institutions in the exercise of insurance mediation activity, would sustain the concept of financial institutions referred to in that legal provision to cover only strictly financial institutions, in which such insurance companies are not included. That is what would result, according to that Circular, from insurance companies not falling within the concept of financial intermediary or financial company. Only in the broad sense could insurers be considered financial institutions. But this would not prevent, pursuant to sub-item 17.3.4 of the General Table, the subjection to stamp tax of the commissions they charged. The commissions charged to such entities by other financial institutions would not, however, be exempt because insurance companies are not strictly financial institutions. There would thus be two distinct concepts of financial institution in the Stamp Tax Code, for purposes of the incidence of commissions charged and exemption of commissions borne, in the broad sense, when it comes to expanding the incidence of stamp tax, in the strict sense, when it comes to limiting it through the recognition of exemptions. It should be noted, moreover, contrary to what such administrative direction seems to presuppose, that the economic burden of the tax is borne, pursuant to Article 3(3)(o) of the Stamp Tax Code, not by the insurance company, but by the mediating credit institution, to which the former must withhold the tax." – See Cited Arbitral Decision, note [9].

1. As stated above, the application of the exemption to the commissions charged to the funds by the management companies depends on both being considered as financial institutions, both the management companies and the funds. As regards the former, we have seen that they are integrated into the broad sense of financial companies, and the same conclusion results as regards the funds, since in light of Article 2(c) of Decree-Law No. 12/2006, as amended by Law No. 147/2015, of 9 September, the latter is defined as "autonomous assets exclusively devoted to the realization of one or more pension plans and/or health benefit plans, and may also simultaneously be devoted to the financing of an equivalent mechanism in accordance with Law No. 70/2013, of 30 August". This understanding appears to be accepted by the AT itself, since in the RIT such funds are qualified as financial institutions: "(…) pursuant to the cited Decree-Law, Pension Funds are managed by specialized and professional entities, constituted in the form of a joint stock company, exclusively, for that purpose, designated by SGFP. (…)" and, further, in the wake of the approach concerning the supervision to which such entities are subject, the RIT further adds: "Pension Fund Management entities are peacefully considered as financial institutions, subject accordingly to supervision by the ASF (…)" – See Article 7 of the Response filed in the pleadings - Transcription of the RIT at pp. 3 et seq.

2. Indeed, various legislative instruments point in the same direction, so that in both cases it is a matter of entities recognized as financial institutions. And, such is the case that paragraph (e) of Article 30(1) of the Securities Code defined as qualified investors both pension funds and management companies. Also, Article 32(4) of Decree-Law No. 12/2006, of 20-06, came to recognize that the management company acts on joint account and on behalf of the funds, with the acts performed by it being reflected in the sphere of the funds, which is relevant for purposes of their classification as financial institutions. In summary, pension funds are integrated into the broad concept of financial institutions, for purposes and effects of the subjective incidence provided for in item 17.3.4 of the TGIS.

3. It is now necessary to analyze the second question (objective exemption), that is, to determine whether the scope of the exemption norm is restricted, within the universe of financial services, only to typically banking operations and services or to other financial operations, such as the commissions charged by pension fund management entities to their respective funds. Now, in light of the letter of the law, set forth in the incidence rule of item 17.3.4 TGIS, we have seen that the legislator did not limit himself to including only banking services, but the entire universe, today much broader, of financial services. But the literal (grammatical) element is only the starting point for the refined interpretation of the legal norm, which does not dispense with the invocation of the other elements of legal hermeneutics.

Thus, the historical element may aid in a better interpretation of the presently applicable norm. In this regard, full adherence is given to the case law of the aforementioned Arbitral Decision[2], which presents an interesting summary of the historical evolution of the legal regime in question, which we proceed to quote: "…with the ground that the incidence of paragraph (c) of Article 120-A of the General Table depends on the operations that gave rise to the charging of commissions being carried out or intermediated by credit institutions or financial companies, it would clarify that the commissions charged to pension funds by management companies were not subject to stamp tax of paragraph (c) of Article 120 of the General Table. (…). Consulting Article 120-A, paragraph 2, of the General Table of Stamp Tax, for example, in the wording of 1979 in which the wording of Decree-Law No. 16732 of 1929.04.13 was still maintained, it is observed that financial operations subject to stamp tax – recorded in only 2 items – did not benefit from any exemption. Only later were exemptions provided, but only limited to interest, as follows: 'Interest on loans granted for the acquisition of own housing is exempt from tax, as are those owed by credit institutions or parabanking institutions to institutions of the same nature' (wording of paragraph 1 of Article 120-A given by Decree-Law No. 154/84, of 16.05).

(…)

'The Decree-Law 223/91, which amended Articles 13, 15, 27-A, 94, 120-A, 120-B, 141 and 145 of the General Table of Stamp Tax, approved by Decree 21,916 of 28 November 1932, in addition to interest, provide for other exemptions, but there is no reference to commissions. Subsequently, paragraph 2, paragraph (b), first part, of Article 120-A, in the wording given by Article 1 of Law No. 24/94, of 18 July, adapting the previous paragraph 1 to the new terminology introduced by the RGICSF, would exempt from stamp tax the interest charged by credit institutions, financial companies or other entities legally equivalent to institutions, companies or entities of the same nature, all domiciled in Portuguese territory. (…) In summary, pursuant to paragraph (e), paragraph 1 of Article 6, in the original numbering of Article 1 of Law No. 150/99, of 11 September, exempt from stamp tax were the interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and purpose met the types of credit institutions and financial companies provided for in community legislation, all domiciled in Member States of the European Union, or in any State complying with the principles arising from the Code of Conduct approved by Council Resolution of the European Union, of 1 December 1997. Paragraph (f) of that paragraph 1 would broaden the exemption to commissions charged by credit institutions to other institutions of the same nature or entities whose form and purpose met the types of credit institutions provided for in community legislation, domiciled in Member States of the European Union, or in any State, provided that likewise complying with the principles arising from the Code of Conduct approved by Council Resolution of the European Union, of 1 December 1997. With this amendment, the stamp tax exemption, previously limited to interest, would now also cover the granting of credit and interest and commissions charged, in the terms defined in those paragraphs (e) and (f) of paragraph 1 of Article 6, which appeared to be a clear incentive for financial activity, with the consequent mitigation of cascade taxation which, unlike VAT, characterizes this type of taxes (it should be noted that the revision of stamp tax with a view to ensuring greater neutrality of the tax and taxation of commissions charged was provided for in Council of Ministers Resolution No. 119/97, of 14 July, which contained the general lines for the reform of stamp tax (see also the Report 'Structure the tax system for developed Portugal', published by the Ministry of Finance, Coimbra, 1998, pp. 282 and 283). The framing of stamp tax exemptions for financial operations in which only credit institutions and financial companies intervened would consist of separate paragraphs, since the requirements of the exemptions applicable respectively to the use of credit and to interest and commissions charged were distinct: in the first case, the exemption benefited credit institutions and financial companies, in the second case, exclusively credit institutions.

The exemption of those paragraphs (e) and (f) of paragraph 1 of Article 6 of the Stamp Tax Code, however, as previously stated, applied only respectively to the granting of credit and interest charged by credit institutions and financial companies to entities of the same nature, that is to say other credit institutions and financial companies and to commissions charged by credit institutions to other credit institutions and not to financial companies and other financial institutions. (…)

However, Article 37 of Law No. 30-C, of 29 December 2000 (Budget for the year 2001), introduced to Article 6 of the Stamp Tax Code, the following amendments:

"e) Interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and purpose meet the types of credit institutions and financial companies provided for in community legislation, all domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes to be defined by ordinance of the Minister of Finance;

f) Commissions charged by credit institutions to other institutions of the same nature or entities whose form and purpose meet the types of credit institutions provided for in community legislation, domiciled in Member States of the European Union, or in any State, with the exception of those domiciled in territories with privileged tax regimes to be defined by ordinance of the Minister of Finance.

2 - The provisions of paragraphs (e) and (f) apply only to financial operations directly intended for the granting of credit, within the scope of the activity exercised by the institutions and entities referred to in those paragraphs. [...]".

1. As results from the foregoing, with the wording given to paragraph 2 of Article 6 of the Stamp Tax Code, in the version introduced by the Budget Law for 2001, the legislator determined that the exemptions provided in these two paragraphs be restricted "to financial operations directly intended for the granting of credit". Thus, the exemption would only apply to commissions of item 17 when they were directly linked to credit granting operations, within the scope of the activity exercised by the institutions and entities referred to in the preceding paragraphs. The exemption in question would thus be limited to credit, its respective interest and commissions associated with the contract, for the purpose of financing the traditional activity of credit institutions, the granting of credit clearly limiting the meaning and scope of the exemptions of paragraphs (e) and (f) of paragraph 1. However, this version was only to last for a short time.

2. In any case, the succession of amendments to this regime did not stop there, particularly with respect to the operations under analysis, which moreover prompted multiple clarifications over the years regarding its interpretation. However, the AT, even during the validity of the amendments introduced by the Budget Law for 2001, never adopted the understanding that the exemptions of paragraphs (e) and (f) apply only to operations directly related to the granting of credit within the scope of the activity carried out by credit institutions and financial companies.

3. With the Budget Law for 2003[3], paragraph 2 of Article 6 of the CIS then in force was abolished, with the previous paragraphs 3 and 4 becoming paragraphs 2 and 3 of the new wording, and paragraphs (e) and (f) were transformed into a single paragraph [paragraph (e)], which now again exempted from tax the interest and commissions charged, as well as the use of credit granted by credit institutions and financial companies to venture capital companies, substantially broadening the exemption regime, namely, applying it to commissions and interest charged and credit used by venture capital companies within the context of operations carried out between venture capital companies and credit institutions or financial companies. It should be recalled that, as they are not credit institutions, venture capital companies did not benefit from the benefits provided for in the previous wording of those paragraphs, now coming to benefit from the exemption.

4. All these successive legislative amendments transmit clearly a conscious intention of the legislator to regulate fiscally the activities in question. There is no doubt, therefore, that with the last amendment introduced and referred to in the previous point, the legislator's intention was to exempt those operations from Stamp Tax incidence. This version, moreover, came to promote the uniformization of the requirements for the stamp tax exemption of credit granted and interest charged with that of commissions charged in operations in which only credit institutions and financial companies were involved. In the same sense as what is argued goes the letter of the provision.

5. The AT's interpretation on this question, seeking to limit the exemption to operations directly intended for the granting of credit within the scope of the activity carried out, finds no legal support, besides which the object of venture capital companies is not the granting of credit but the acquisition of equity instruments. It is concluded, therefore, from the historical evolution of the provision that only during the validity of the wording given by Article 37 of Law No. 30-C of 29 December did the exemption have credit granted as a catalyzing element. It is thus concluded that the exemption of Article 7, paragraph 1, paragraph (e), of the Stamp Tax Code was not restricted, before the entry into force of Law No. 7-A/2016, to operations directly intended for the granting of credit within the scope of the activity carried out by credit institutions, financial companies and other financial institutions, as is argued in the inspection report on which the assessment was based.

6. Having reached this point, it remains to determine the meaning and scope of Law No. 7-A/2016, namely, to determine whether the norm introduced in paragraph 7 added to the aforementioned Article 7, is merely interpretative or not, since the decision of the case depends on this conclusion as regards its possible retroactive application, as the Claimant seeks.

There is no doubt that, in accordance with paragraph (e) of Article 7(1) of the CIS, exempt from tax are "the 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 purpose meet the types of credit institutions, financial companies and financial institutions provided for in community legislation, all domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by ordinance of the Minister of Finance."

However, paragraph 7 of the same provision, introduced with the Budget Law for 2016, states that "The provision of paragraph (e) of paragraph 1 applies only to guarantees and financial operations directly intended for the granting of credit, within the scope of the activity exercised by the institutions and entities referred to in that paragraph".

Thus, it is noted that the current wording of paragraph (e) corresponds to that resulting from Law No. 107-B/2003, of 31 December. Truly innovative is what results from its paragraph 7, which was added by Article 153 of Law No. 7-A/2016 of 30 March (Budget Law 2017), but which Article 154 of the same Budget Law qualified as an interpretative norm.

Is this the case?

1. An interpretative law is understood to be integrated into the law interpreted (Article 13 of the Civil Code), applying to previous situations and facts. However, as the Claimant correctly emphasizes, it can only be considered as an interpretative norm if it fixes one of the possible interpretations of the preceding law with which the interested parties could and should have reckoned, and a solution the courts could have adopted. If this is not the case, the new law, even if the legislator attributes to it an interpretative nature, cannot apply to facts occurring at a time prior to its entry into force, under penalty of permitting the possibility of enacting interpretative norms to be used to circumvent the principle of non-retroactivity of tax law, with manifest evasion of constitutional law, permitting the serious offense of the legitimate expectations of taxpayers.

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

1. According to Baptista Machado[4] a new law is truly interpretative if two requirements are met: "that the solution of the preceding law is controversial or at least uncertain; and that the solution defined by the new law lies within the framework of the controversy and is such that the judge or interpreter could have reached 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".

2. Applying these criteria (wise and lapidary) to the case at hand after all the exposition and considerations set forth throughout this decision, it appears clear that the newly introduced norm (paragraph 7), came to establish an innovative solution, different from that which prevailed until then. Equally, it has also been demonstrated that 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 is this that the new law came precisely to reintroduce a wording for this paragraph 7 of Article 7 of the CIS very similar to the wording that had been instituted by the Budget Law for 2001 for the then Article 6 of the CIS, which remained in force until it was expressly repealed by Law No. 32-B/2002 (Budget Law for 2003). All the legislative course described was weighed and conscious, so it is not, a certain possible meaning that the previous version already contemplated. It is, rather, to not consider covered by the exemption operations that up to then were exempt.

The norm is, therefore, clearly innovative, in the sense of translating a substantive change of regime (loss of the benefit of exemption), in accordance with the legitimate option of change in fiscal policy in this matter. Now, the legislative option is entirely legitimate provided it applies only and solely to the future, applying only to tax events occurring after the entry into force of the new law. Any other understanding would be to permit the flagrant violation of the principle of non-retroactivity of tax law expressly and unequivocally enshrined by our Constitution, which is unacceptable in light of the principle of protection of legitimate expectations, tax legality and the rule of law itself, which imposes on organs of sovereignty scrupulous respect for the Constitution.

1. In summary, the Budget Law for 2016 came in this way to restrict the field of application of the exemption from stamp tax provided for in paragraph (e) of Article 7(1) of the CIS, revealing a legislative option different from that which applied in the immediately preceding law. To that extent the new version introduced with the Budget Law for 2016 is innovative. Now, by being designated by the legislator as interpretative, the desired consequence is its application from the validity of the interpreted norm. Which amounts to saying that it may apply retroactively. But if this were to be understood, its application would necessarily violate the principle of non-retroactivity of tax law, since taxpayers will thus be confronted with the imposition of a tax burden, limited only by the statute of limitations for the tax, with which they had not reckoned. This constitutes manifest violation of law, by violation of the principle of non-retroactivity, established in Article 12 of the General Tax Law and in Article 103(3) of the Constitution of the Portuguese Republic.

2. The Respondent invokes case law of the higher courts that have already pronounced themselves on this question. However, upon analysis of the Decisions mentioned by the Respondent, it is evident that the aforementioned case law does not cover, directly or indirectly, pension fund management commissions charged to the funds by management companies and, in general, commissions or other consideration resulting from the provision of financial services, subject to item 17.3.4. The commissions to which the case law invoked refers are commissions charged for the exercise of insurance mediation activity, taxed under item 22.2, which is distinguished from the provision of financial services covered by item 17.3.4, both of the TGIS.

Quoting, once more, the Arbitral Decision rendered in case No. 348/2016-T: "The stamp tax on such commissions has a nature distinct from that referred to in item 17.3.4 of the General Table: in fact, as stated in the Decision of 15 June 2016 previously cited, such commissions are not the consideration for any financial service but a service that, although related to a financial activity, in this case, insurance activity, and, therefore, exempt from VAT under paragraph 29, now 28, of the VAT Code and subject to specific regulation in Decree-Law No. 144/2006, is not materially a financial service, even when provided by a credit institution, as Article 11 of that Decree-Law admits. (…)

That tax is not, contrary to what is provided in that sub-item 17.3.4, an indirect tax, but a direct tax, falling on the gross profit of the mediator, through the withholding system effected by the insurance company. This is what directly results from the aforementioned paragraph (o) of Article 3(3) of the Stamp Tax Code, which considers that tax a charge on the mediator and not on the insurance company, which merely deducts the tax in the commissions paid to the mediator. In summary, mediation commissions, in addition to their cause being the exercise of an activity substantially not financial, are not, according to that case law, charged to the client of the mediator, which is why they are not subject to stamp tax of item 17.3.4 nor are they covered by the exemption of Article 6 [now Article 7, paragraph 1, paragraph (e)], of the Stamp Tax Code. It is not, therefore, legitimate to extrapolate from that case law on the meaning and scope of the mentioned provision to the case at hand and in order to exclude from the stamp tax exemption the commissions charged by virtue of the exercise of pension fund management activity. Nor can that case law be invoked as a consolidated jurisprudential current establishing an unequivocal meaning that clearly resulted from the old law and which the new law had limited itself to embracing.'"

1. In conclusion, for all the reasons set forth, it is considered that Law No. 7-A/2016 came, through the joint interpretation of its Articles 152 and 154, to delineate the material scope of the exemption provided for in Article 7, paragraph 1, paragraph (e), of the CIS, in an innovative manner. Those provisions, in instituting a wording that has not been part of the legal order since 2003, must be considered retroactive and, as such, illegal by violation of law and the Constitution, by violation of the principle of protection of legitimate expectations and legal certainty inspiring the principle of non-retroactivity of tax law.

Even if it were understood that we are dealing with a genuine interpretative norm (material and not merely formal interpretative law), the legitimacy of the interpretative scope of Article 7, paragraph 1, paragraph (e), of the CIS conferred by Articles 152 and 154 of Law No. 7-A/2016 would always be tainted by unconstitutionality, by violation of the prohibition contained in Article 103(3) of the Constitution. As correctly stated by Jónatas Machado and Paulo Nogueira da Costa[5], interpretative norms "do not have solely a declarative nature, producing constitutive effects. To the extent that they bind the courts to a given interpretation, among several in the abstract possible and already adopted by other courts, they imply, inevitably, a retroactive application of the interpreted law". In this sense, is the case law of the Constitutional Court Decision No. 172/2000, case 762/98, which, on the question of possible retroactivity of an interpretative norm, considered that "interpretative laws that retroactively bind the interpreter are incompatible with the prohibition of creation of retroactive taxes."

For the Constitutional Court, laws that are authentically interpretative do not, truly, shake the concrete prior expectations of their addressees, in the event the made-binding interpretation is already known and has even been applied. However, even in such cases, the interpretative binding that such laws entail, by becoming the exclusive legal criterion for the application of the preceding text of the law, in cases where constitutional law prohibits its retroactivity, modifies the relationship of the State, emitter of norms, with its addressees. Thus, the exclusion by the interpretative law of other interpretations advocated, following that same Decision, leads to the State being able thereafter to prevent the Law it created from functioning through its intrinsic logic communicable to the addressees of the norms, permitting that interfere in legal interpretation an imperative and immediate power that alters the framework of elements relevant to legal interpretation, with the consequent frustration of the constitutional principle of non-retroactivity of taxes.

1. To that extent, returning to the case at hand, even if the new law were qualified as interpretative, we would always arrive at the same conclusion, since in seeking to apply for the period prior to its issuance, in accordance with paragraph 1 of Article 13 of the Civil Code, it alters the context of self-binding of the organs of application of Law to the Law in force at the time of the tax event and, consequently, affects the security of the addressees of the norms protected by a (constitutional) prohibition of retroactivity.

2. In the present case, before the enactment of the interpretative norm, there did not exist any doctrinal or even jurisprudential current sustaining the position that came to be adopted, and it cannot be considered as such, manifestly, the reasoning of the contested act. To that extent, with respect to the new paragraph 7 of Article 7 of the Stamp Tax Code, the interpretation given to paragraph (e) of the previous paragraph 1, by Article 152, with the scope of Article 154, both of Law No. 7-A/2016, cannot be considered genuinely authentic. The genuineness of the interpretation is a prerequisite for the application of any and all formally interpretative norm.

3. For all of the foregoing, the Tax Authority is not correct in not considering the commissions charged by the Claimant exempt from Stamp Tax in accordance with Article 7(1)(e) of the CIS. Since this was the understanding underlying the contested assessments, it is necessary to decide on their illegality and consequent annulment.

4. Therefore, this Tribunal decides, in favor of the procedence of the petition for declaration of illegality of the additional Stamp Tax assessments and compensatory interest, subject to the arbitral petition, by violation of law resulting from error regarding the prerequisites of applicable law, as to the meaning and scope of the aforementioned provisions, with the consequent annulment thereof.

As regards the petition for indemnificatory interest:

1. The Claimant alleges that, if it prevails in the present action and the Stamp Tax assessments and compensatory interest are deemed illegal, the AT should pay indemnificatory interest, in accordance with Article 43 of the General Tax Law.

2. Article 43(1) of the General Tax Law establishes that indemnificatory interest is due when it is determined that there was an error imputable to the services resulting in payment of the tax debt in an amount greater than legally due. In this case, the errors affecting the assessments (of tax and interest) are imputable to the Tax Authority and Customs Authority, which committed the illegal assessment acts, following an inspection procedure, all at its own initiative.

3. In accordance with Article 24(1)(b) of the RJAT, the arbitral decision on the merits of the claim, which is not subject to appeal or challenge, binds the tax administration from the end of the period provided for appeal or challenge, the administration being required, in the exact terms of the procedence of the arbitral decision in favor of the taxpayer and until the end of the period provided for the voluntary execution of the decisions of tax courts, alternatively or cumulatively, as the case may be, to "restore the situation that would have existed if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose."

4. In the same sense, Article 100 of the General Tax Law provides that "the tax administration is obligated, in the event of total or partial procedence of claims or administrative appeals, or judicial proceedings in favor of the taxpayer, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of indemnificatory interest, in the terms and conditions provided for in the law".

5. Doctrine and case law of the higher courts and arbitral courts have held that it falls within the scope of the competence of arbitral tribunals to determine the effects of their decisions, in the same terms provided for judicial review, namely, as regards conviction in indemnificatory interest or conviction for indemnification for undue guarantee.[6] Indeed, this is what results from the legislative authorization law granted to the Government for approval of the RJAT, contained in Article 124 of Law No. 3-B/2010, of 28 April, which states the intention of true alternativism between judicial proceedings and tax arbitral proceedings, reading therein that "the tax arbitral process must constitute an alternative procedural means to judicial review and the action for recognition of a right or legitimate interest in tax matters".

6. It should not be said that the circumstance that Articles 2(1)(a) and (b) of the RJAT use the expression "declaration of illegality" to define the competence of tax arbitral tribunals, not making express reference to constitutive (annulling) and condemnatory decisions, prevents conviction in indemnificatory interest. This must be understood, in harmony with the legislative authorization and, obviously, with the effects attributed to arbitral decisions provided for in Article 24(1)(b) of the RJAT, ensuring the full restoration of the situation that would have existed if the act had not been performed.

7. It should be noted that, although judicial review proceedings are essentially proceedings of mere annulment – as provided for in Articles 99 and 124 of the Code of Tax Procedure – this does not prevent a conviction of the tax administration in the payment of indemnificatory interest and indemnification for undue guarantee from being handed down therein, and therefore the same conclusion is necessary in the context of tax arbitral proceedings.

8. In the case of the present proceedings, as has been demonstrated, the additional Stamp Tax assessments and compensatory interest contested suffer from illegality imputable to the Respondent, which, at its own initiative, performed them without legal support.

9. The Claimant thus has the right to payment of indemnificatory interest, in accordance with Article 43(1) of the General Tax Law, with respect to the amount of tax and interest improperly paid, calculated from the date on which such amounts were improperly paid until the date of the processing of the respective credit note.

VI - DECISION

Therefore, this Arbitral Tribunal decides:

a) Judge the arbitral petition as meritorious and annul the tax acts of assessment of tax and compensatory interest contested in the proceedings, in the total amount of €30,221.20;

b) Consequently, of the annulment, condemn the Respondent to reimburse the tax improperly paid by the Claimant in compliance with the assessments now annulled, plus indemnificatory interest from the date of payment of the annulled assessments until the date of processing of the respective credit note, in accordance with paragraph 1 of Article 43 of the General Tax Law, in the terms fixed above.

c) Condemn the Respondent in payment of arbitral costs.

VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €30,221.20 in accordance with Article 97-A(1)(a) of the Code of Tax Procedure, applicable by virtue of paragraphs (a) and (b) of Article 29(1) of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

COSTS

The arbitration fee is fixed at €1,836.00 in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, payable in accordance with Articles 12(2) and 22(4), both of the RJAT, and Article 5 of the aforementioned Regulation.

Notify.

Lisbon, 30 November 2017

The Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] As amended by Directives No. 2011/61/EU of the European Parliament and of the Council, of 8 June, and 2013/14/EU of the European Parliament and of the Council of 21 May 2013. Decree-Law No. 124/2015 of 7 June, relating to the activities and supervision of these entities, which effected its partial transposition into the internal legal order.

[2] See Arbitral Decision of 02-05-2017, in Proc. 348/2016-T.

[3] See Law No. 32-B/2002, of 31 December 2002.

[4] See Baptista Machado, J. (2010) Introduction to Law and Legitimizing Discourse, 18th Reprint. Almedina, pp. 245 et seq.

[5] See Jónatas Machado, Paulo Nogueira da Costa (2012) Course in Tax Law, Almedina, 2012.

[6] See Carla Castelo Trindade (2016), Annotated Legal Regime of Tax Arbitration, pp. 121 and Jorge Lopes de Sousa (2013), "Commentary on the Legal Regime of Tax Arbitration", pp. 116.