CAAD 290/2018-T: IRS Withholding Tax on Shareholder Loans (Suprimentos) and Supplementary Contributions Under Article 5(2)(p) CIRS

ARBITRAL DECISION - CAAD

The arbitrators Fernanda Maças (presiding arbitrator), Nuno Cunha Rodrigues and Maria do Rosário Anjos, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the present Arbitral Tribunal, constituted on 28-08-2018 decide as follows:

I. REPORT (consult full version in PDF)

A) The Parties and Procedural Course

1. A..., LDA, a private limited company, legal entity no. ..., with registered office in ..., ..., hereinafter referred to as the "Claimant", filed a request for constitution of an Arbitral Tribunal, under the terms set forth in Article 2, Section 1, subsection a) and Article 10 of Decree-Law no. 10/2011, of 20 January (RJAT), to challenge the decision rejecting the administrative review, issued by the Head of the Tax Services of ..., as well as the withholding tax assessments on income tax of individuals (IRS), with numbers 2013 ... (document no. 2013...) and 2013... (document no. 2013...), relating to the tax years 2010 and 2011, and corresponding compensatory interest assessments, in the total amount of €258,788.64.

2. The request for constitution of the Arbitral Tribunal was filed by the Claimant on 18-06-2018, having been accepted by the President of CAAD on 19-06-2018, and notified to the Tax Authority (AT) on the same date, under the terms and for the purposes legally provided. The Claimant opted not to appoint an arbitrator, wherefore, under the terms set forth in subsection a) of Section 2 of Article 6 and subsection b) of Section 1 of Article 11 of the RJAT, the Deontological Council appointed, on 30-08-2018, as presiding arbitrator Counsellor Maria Fernanda dos Santos Maças and, as member arbitrators, Professor Doctor Nuno Cunha Rodrigues and Professor Doctor Maria do Rosário Anjos, to constitute the arbitral tribunal. All communicated their acceptance within the applicable period and the collective arbitral tribunal was constituted on 28-08-2018.

3. On 30/08/2018, an arbitral decision was rendered directing the Tax Authority and Customs Authority (AT) to submit its reply within the legal period, under the terms and for the purposes set forth in Sections 1 and 2 of Article 17 of the RJAT. The Respondent joined to the record its reply and the respective Administrative File (PA), on 30-10-2018, the contents of which are hereby considered fully reproduced.

4. On 12-10-2018, an arbitral decision was rendered, immediately notified to the parties, scheduling the meeting provided for in Article 18 of the RJAT, to be held on 13-12-2018 at 10:15 hours, intended for examination of witnesses indicated by the parties and resolution of subsequent procedural issues. On 10-12-2018, the Claimant waived the production of the witness testimony indicated, by motion filed on 10-12-2018. Thus, in light of the motion filed and the position of the parties evidenced in the pleadings, considering that the nature of the disputed question appears to be exclusively one of law, an arbitral decision was rendered on 11-12-2018 cancelling the scheduled date for the meeting and, further, setting a period of 15 days, equal and successive, for the parties to submit their arguments. The probable date for the delivery of the arbitral decision was indicated as 27/02/2019, subsequently extended to 23-04-2019, as per decision rendered on 25-02-2019, considering that the calculation of the six-month period to deliver an arbitral decision, as provided in the RJAT, does not include interruptions for judicial holidays provided by law that benefit the parties, wherefore, in the case of the present record, the necessity for extension of the decision period is justified, under the terms, moreover, provided in Section 2 of Article 21 of the RJAT.

B) The Claims Formulated

1. In summary, the Claimant bases its arbitral petition on the illegality of the decision rejecting the administrative review and of the assessments challenged, on the grounds of error in the qualification and quantification of the tax fact, with the consequent violation of law, due to error in the factual and legal assumptions.

From the Claimant's perspective, the decision rejecting the administrative review and the assessments challenged are illegal because they found the existence of economic advantage for the shareholder, arising from the repayment of credits (acquired below their nominal value), which, in the case, did not occur. Thus, from the Claimant's perspective, taxation under IRS (as the AT claims) should only occur in the case where the acquisition value of the credits exceeds their respective acquisition cost, in which case an economic advantage would be verified. In the Claimant's case, that economic advantage did not occur, wherefore it is manifestly illegal to tax the transaction performed. There is manifest error of fact and law, since the tax acts challenged are based on the assumption of the existence of an economic advantage that, in fact, did not occur.

C – The Respondent's Reply

1. In its reply, the AT argues for the legality of the assessments challenged and, in summary, defended the understanding already sustained in the inspection report and in the tax acts challenged. In summary, the AT alleges that the shareholder of the Claimant (identified in the petition) assumed the coverage of losses of the Claimant, which obligated him to inject into the company sufficient capital to cover such losses. However, as he was a creditor of the company, he merely effected an accounting entry, reducing liabilities by increasing equity. What means, from the AT's perspective, that he received the advances previously made, proceeded to the acquisition of shares of the company (which admittedly was in a weakened financial position). As occurred with the advances, the acquisition of shares was effected at a value substantially inferior to the nominal value.

For the AT, no specific allocation of any amount to shares and to advances was made, preventing knowledge of the real acquisition value of one and the other.

It concludes, considering that there was receipt of such advances, here reflected in the mobilization of its balance to cover losses and other supplementary contributions, wherefore there is an evident compensation between the credits corresponding to the advances and the obligation, assumed by the said shareholder, to inject capital (which he did not do) to cover the losses of the Claimant and other supplementary contributions. The economic advantage, evident to the AT, results from the (concealed) receipt of the advances, acquired at a value much inferior to their nominal value.

It argues for the legality of all tax acts challenged and, finally, for the dismissal of the petition.

C) Procedural Requirements

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

The process does not suffer from defects that would invalidate it.

In these terms, it is necessary to establish the relevant factual matter and render the appropriate legal decision.

The question to be decided consists, essentially, in determining whether the transaction performed resulted or did not result in economic advantage susceptible to taxation as claimed by the AT.

II. Factual Matter

A) Proven Facts:

1. For the purposes of deciding the present record, the following facts are considered proven:

a. The Claimant is a private limited liability company under Portuguese law that has as its object the agricultural exploration of Farm ... and others that may be acquired.

b. At the date of the facts, the Claimant was subject to the general regime of Corporate Income Tax (IRC) and the normal VAT scheme with quarterly periodicity.

c. The Claimant was subject to a tax inspection for the years 2009, 2010 and 2011, conducted by the Tax Inspection Services (SIT), having been notified on 11-11-2013 of the Draft Tax Inspection Report (RIT).

d. In said Draft RIT, the SIT proposed corrections to the amounts of withholding taxes in category E, under IRS, in the amounts of €226,022.84 and €6,208.90, for the tax periods 2010 and 2011, respectively.

e. The Claimant exercised its right to be heard, manifesting its disagreement with the proposed corrections.

f. On 12-12-2013, the Claimant was notified of the RIT, in which the announced corrections to the amounts of withholding taxes, mentioned in subsection d) of this probative matter, were confirmed.

g. In the RIT, the reasoning, regarding the corrections at issue in the present record, is contained in the following explanatory table:

[Table content as per original]

h. Further regarding the reasoning of the corrections made in connection with IRS withholding tax, appearing on pages 40 et seq. of the RIT, the following:

[Content as per original]

i. Further regarding said corrections, appearing on pages 51 et seq. of the RIT, the following conclusion:

[Content as per original]

j. Having analyzed all the content of the RIT, regarding the question of corrections made in connection with IRS withholding taxes, as well as what is contained in Articles 3 to 6 of the Reply submitted by the AT, it is proven that:

a) shareholder B... assumed the coverage of losses of the Claimant, which obligated him to inject capital into the company, sufficient to cover the losses evidenced in the accounting;

b) however, as he was a creditor of the company, he merely effected an accounting entry, reducing liabilities by increasing equity.

c) what means that the acquisition of the share mentioned in the record occurred by mere accounting entry, that is, the shareholder received the share on account of the advances previously made;

d) no monetary or other transfers of value occurred between the accounts of the Claimant and shareholder B....

k. The Claimant, not conforming to the tax assessments issued, filed, on 6-06-2014, an Administrative Review, which was dismissed on 15-03-2018, by decision notified to the Claimant on 20-03-2018.

l. On 18-06-2018, the Claimant filed the present arbitral petition to challenge the assessments in dispute (withholding tax assessments under IRS for 2010 and 2011), in which it petitions for their annulment, with all legal consequences, including the reimbursement of the amount paid as unduly assessed and paid tax, in the amount of €258,788.64, plus indemnification interest.

m. The Claimant provided a bank guarantee on 09-05-2014, in the amount of €330,742.81, issued by Bank C..., as results from the contents of document no. 5, attached to the arbitral petition, which contains:

[Content as per original]

B) Unproven Facts

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

C) Reasoning for the Proven Facts

1. The Tribunal need not pronounce on all details of the factual matter alleged by the parties, with its duty being to select the facts relevant to the decision and to distinguish the matter it deems proven and declare that which it considers unproven (see Article 123, Section 2 of the CPPT and Article 607, Section 3 of the CPC, applicable by operation of Article 29, Section 1, subsections a) and e), of the RJAT).

In the present case, the factual matter is supported by the documents joined to the record by the Claimant and those contained in the Administrative File (PA) joined by the Respondent, with emphasis on the Tax Inspection Report (RIT) joined to the record.

Moreover, the factual matter stated does not appear to be disputed and is accepted as true by the parties, which differ only as to the sense of the legal decision.

Thus, taking into account the positions assumed by the parties, in light of Article 110, Section 7 of the CPPT, the documentary evidence joined to the record by the Claimant and that contained in the Administrative File itself, the facts enumerated above were considered proven, with relevance to the decision.

III. On the Merit of the Petition:

1. The question that arises in the present record concerns whether the amount determined by the Inspection Services fits within the legal framework of Article 5, Section 2, subsection p) of the IRS Code, classifying the amounts in question in category E, as the AT Respondent contends, by concluding it is a receipt of advances, or whether, on the contrary, as the Claimant argues, such situation cannot fit within capital income, since there was no, on the part of shareholder B..., receipt of the credits acquired, reason for which the accounting operations performed by the Claimant, through which advances were used to cover losses and make supplementary contributions, cannot be framed under IRS.

2. In other words, the AT Respondent alleges that shareholder B... would have used advances that were received by him for subsequent delivery to the Claimant to cover losses and make supplementary contributions. Such receipt would have, in the understanding of the AT Respondent, translated into the obtaining of an economic advantage reflected, also according to the AT Respondent, in a capital income that had repercussions in the sphere of the Claimant's shareholder B....

This supposed receipt resulted, in the AT Respondent's understanding, from two distinct facts having occurred.

Thus, in a first moment, the operations in question consisted of the presumed reimbursement of the advances to the sphere of shareholder B... for, in a second moment, the same shareholder B... to proceed with the presumed entries of the same financial availabilities to cover losses and make supplementary contributions in the Claimant.

It is important to decide whether the assessment challenged is illegal.

1. It is therefore necessary to verify whether the requirements provided in the legal incidence norm of Article 5, Section 2, subsection p), of the IRS Code, invoked by the AT Respondent, are met.

Let us see.

The IRS Code in effect in the years 2010 and 2011 provided as follows regarding the articles in discussion:

Article 5
Capital Income

1 - Capital income shall be considered as fruits and other economic advantages, whatever their nature or denomination, whether pecuniary or in kind, proceeding, directly or indirectly, from patrimonial elements, goods, rights or legal situations, of a moveable nature, as well as from their respective modification, transmission or cessation, with the exception of gains and other income taxed in other categories.

2 - The fruits and economic advantages referred to in the preceding number include, in particular:

(...)

p) Any other income derived from the mere application of capital;

Article 7
Moment from which Category E income becomes subject to taxation

1 - The income referred to in Article 5 becomes subject to taxation from the moment it matures, maturity is presumed, is placed at the disposal of its holder, is liquidated or from the date of the determination of its respective amount, as the case may be.

2 - In the case of loans, deposits and credit openings, it is considered that interest, including partially presumed interest, matures on the stipulated date, or, in its absence, on the date of reimbursement of the capital, except as to fully presumed interest, whose maturity is considered to take place on 31 December of each year or on the date of reimbursement, if earlier.

(...)

Article 71
Liberatory Rates

4 - The following income obtained in Portuguese territory by non-residents are subject to withholding at the liberatory rate of 21.5%:

(...)

b) Any capital income not referred to in Section 1;

1. Regarding Article 5 of the IRS Code, and as well noted in the decision of the South Administrative Court of Justice (TCA Sul), of 20 December 2012, case 03410/09, "the definition of 'capital income', implanted, by Law 30-G/2000 of 29.12., in Article 5, Section 1 IRS Code, conveys and incorporates a rule of incidence so broad, extended, that is capable of encompassing any situation, involving moveable values, that is not taxed in another of the categories in which IRS operates."

That is why "are susceptible to integrate the said legal provision, 'economic advantages', regardless of nature or denomination, pecuniary or in kind, proceeding, directly or indirectly, from patrimonial elements, goods, rights or legal situations, as well as, from their respective modification, transmission or cessation".

In the present case, the AT Respondent presumes that the advances of shareholder B... of supplementary contributions in two moments.

In a first moment, the operations in question consisted of the presumed reimbursement of the advances to the sphere of shareholder B... for, in a second moment, the same shareholder B... to proceed with the presumed entries of the same financial availabilities.

1. We must therefore analyze whether the transformation of advances into loss amortization and supplementary contributions implied an economic advantage for shareholder B... that, at some moment, was placed at his disposal (see Articles 5, Section 1 and 7, Section 1 of the IRS Code). Here, it is important to observe that the Tax Administration had the burden of alleging and proving facts from which such conclusion could be extracted (see Article 74 of the LGT).

However, the argumentation contained in the RIT and set forth in the probative matter does not contain objective facts capable of demonstrating that the amount in question (the value of the advances) was effectively placed at the disposal, at some moment, of shareholder B....

At stake, for the AT Respondent, are "(…) income derived from the mere application of capital" (see Article 5, Section 2, subsection p) of the IRS Code).

1. One could discuss whether the transformation of advances into losses and supplementary contributions constitute income derived from the mere application of capital.

But, for such to occur, it is necessary to prove that the supposed income was placed at the disposal of the shareholders or holders, and there is no presumption provided for in the IRS Code that is applicable to this case (see Article 6 of the IRS Code).

1. Now in accordance with Article 7, Section 1 of the IRS Code, the income referred to in Article 5 becomes subject to taxation from the moment it matures, maturity is presumed, is placed at the disposal of its holder, is liquidated or from the date of the determination of its respective amount, as the case may be. In view of the nature of individual income tax and the conception of income as patrimonial accretion adopted, the taxation aimed at by the norm in question is the existence, even if by presumption, of economic-financial flows from the company to the shareholder (which accounting implies recording as debits in their respective accounts), since only in this case is the existence of patrimonial accretion and contributory capacity evidenced, which, as is well known, constitutes the assumption and criterion of taxation.

2. In fact, Article 5, Section 1, subsection p) of the IRS Code determines that income derived from the mere application of capital are considered as capital income, knowing that these only become subject to taxation from the moment they mature, maturity is presumed, are placed at the disposal of their holder, are liquidated or from the date of the determination of their respective amount, as the case may be (see Article 7, Section 1 of the IRS Code).

3. Now, in the present case, the AT Respondent did not prove that the value of the advances had, at some moment, matured; or maturity was presumed; or was placed at the disposal of its holder; or was liquidated or the respective amount was determined (see Article 7, Section 1 of the IRS Code).

The AT Respondent did not demonstrate that the advances of shareholder B..., which were transformed for purposes of covering losses and making supplementary contributions, corresponded to the obtaining of an economic advantage for shareholder B..., susceptible of being considered as capital income in light of the provision of Article 5, Section 2, subsection p) of the IRS Code in effect at the time.

It is understood, strictly speaking, that such income was never placed at the disposal of shareholder B... since what occurred was, solely and only, the accounting transformation, in the strict sphere of the Claimant, of the advances into coverage of losses and supplementary contributions.

Note that such accounting alteration, verified in the Claimant, and regarding the value of the advances of shareholder B..., does not preclude that, in the future, he may be taxed for those amounts.

For example, shareholder B... may later be reimbursed by the value of the supplementary contributions into which part of the advances were transformed.

What is certain is that the AT Respondent had the burden of proving the existence of the legal (binding) requirements of its action, that is, it was incumbent upon it to prove that the facts that integrate the legal basis for assessing the tax exist, demonstrating the existence and content of the tax fact.

That is, the Tax Administration had the burden of demonstrating that there was a first moment in which shareholder B... was reimbursed, by the Claimant, for the value of the advances he had at his disposal, having, at that moment, total freedom to reallocate those advances. It happens that no accounting evidence was proven of entry into the sphere of shareholder B... of the value, total or partial, of the advances in question.

Not even evidence was presented, by the AT Respondent, that such value entered bank accounts of shareholder B... or was, in any way, delivered to him.

1. One cannot, thus, consider that we are dealing with income derived from the mere application of capital, for purposes of the provisions of Articles 5, Section 2, subsection p) and 7, Section 1 of the IRS Code, which are not, consequently, subject to the provisions of Article 71, Section 4, subsection b) of the IRS Code.

Since what was at issue was not income derived from the mere application of capital, there is no, for the Claimant, any tax obligation, which vitiates the assessment challenged with the defect of violation of law, determining its annulment.

1. Finally, the Claimant petitions for compensation for losses resulting from the (undue) provision of a bank guarantee in the amount of €330,742.81, by applying to this value, from 9 May 2014, the successive rates of indemnification interest, in accordance with the provisions of Articles 54 and 43 of the LGT and 171 of the CPPT.

2. As results from subsection m) of the proven factual matter, on 14-05-2014, the Claimant provided the bank guarantee that is contained in document no. 5, attached with the arbitral petition, to suspend inevitable tax execution, to be instituted in case of non-payment of the tax amounts determined by corrections made by the AT within the scope of an inspection process, as clearly appears from the record.

Now, in accordance with the provision of subsection b) of Article 24 of the RJAT, the arbitral decision on the merit of the claim to which no appeal or objection applies binds the tax administration from the end of the period provided for appeal or objection, this being obligated, in the exact terms of the procedural success of the arbitral decision in favor of the taxpayer and until the end of the period provided for spontaneous execution of decisions of tax courts, to "restore the situation that would exist if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose.

It also results from the Legislative Authorization Law on which the Government based itself to approve the RJAT, granted by Article 124 of Law no. 3-B/2010, of 28 April, as a primary directive of the institution of arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, that "the tax arbitration process must constitute an alternative procedural means to the judicial review process and to the action for recognition of a right or legitimate interest in tax matters".

Although Article 2, Section 1, subsections a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in the CAAD and does not refer to constitutive (annulment) and condemnatory decisions, it should be understood, in harmony with said legislative authorization, that their competencies include the powers that in judicial review proceedings are attributed to tax courts in relation to acts whose legality assessment falls within their competencies.

Despite judicial review being essentially a mere annulment process (Articles 99 and 124 of the CPPT), in it may be rendered a condemnation of the tax administration to the payment of indemnification interest and compensation for undue guarantee.

1. In fact, despite there being no express provision in that sense, it has been peacefully understood in tax courts, since the entry into force of the codes of the 1958-1965 tax reform, that in a judicial review process a petition for condemnation to payment of indemnification interest may be combined with the petition for annulment or declaration of nullity or non-existence of the act, since in those codes reference is made to the fact that the right to indemnification interest arises when, in administrative review or judicial proceedings, the administration is convinced that there was error of fact imputable to the services. This regime was subsequently generalized in the Code of Tax Procedure, which established in Section 1 of its Article 24 that "there shall be a right to indemnification interest in favor of the taxpayer when, in administrative review or judicial proceedings, it is determined that there was error imputable to the services", then, in the LGT, in whose Article 43, Section 1, it is established that "indemnification interest is due when it is determined, in administrative review or judicial review, that there was error imputable to the services resulting in payment of the tax debt in an amount greater than legally due" and, finally, in the CPPT in which it was established, in Section 2 of Article 61 (to which corresponds Section 4 in the wording given by Law no. 55-A/2010, of 31 December), that "if the decision recognizing the right to indemnification interest is judicial, the payment period is calculated from the beginning of the period of its spontaneous execution".

Regarding the petition for condemnation to payment of compensation for provision of undue guarantee, Article 171 of the CPPT establishes that "compensation in case of bank guarantee or equivalent unduly provided shall be requested in the proceeding in which the legality of the debt to be executed is disputed" and that "compensation must be requested in the review, review or appeal or, if its ground is subsequent, within 30 days after its occurrence".

Thus, it is unequivocal that the judicial review process encompasses the possibility of condemnation to payment for undue guarantee and is even, in principle, the appropriate procedural means to formulate such petition, which is justified by evident reasons of procedural economy, since the right to compensation for undue guarantee depends on what is decided regarding the legality or illegality of the assessment act.

The petition for constitution of the arbitral tribunal and for arbitral decision has as a corollary that it will be in the arbitral proceedings that the "legality of the debt to be executed" will be discussed, wherefore, as results from the express contents of that Section 1 of the said Article 171 of the CPPT, the arbitral proceedings are also the appropriate means to evaluate the petition for compensation for undue guarantee.

Moreover, the combination of petitions relating to the same tax act is implicitly presupposed in Article 3 of the RJAT, when speaking of "combination of petitions even if relating to different acts", which makes it evident that the combination of petitions is also possible regarding the same tax act, and the petitions for compensation by indemnification interest and condemnation for undue guarantee are susceptible to being encompassed by such formula, wherefore an interpretation in this sense has, at the very least, the minimum of verbal correspondence required by Section 2 of Article 9 of the Civil Code.

1. The regime of the right to compensation for undue guarantee is contained in Article 52 of the LGT, which establishes the following:

"Article 53
Guarantee in Case of Undue Provision

1. The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be compensated wholly or partly for losses resulting from its provision, if he has maintained it for a period exceeding three years in proportion of success in administrative appeal, review or opposition to execution that have as their object the guaranteed debt.

2. The period referred to in the preceding number does not apply when it is determined, in administrative review or judicial review, that there was error imputable to the services in the assessment of the tax.

3. The compensation referred to in number 1 has as its maximum limit the amount resulting from applying to the guaranteed value the rate of indemnification interest provided in this law and may be requested in the administrative review itself or judicial review proceedings, or autonomously.

4. Compensation for undue provision of guarantee shall be paid by deduction from the revenue of the tax of the year in which payment was made."

5. Returning now to the concrete case at hand, it is manifest that the errors underlying the VAT and compensatory interest assessments are imputable to the Tax Authority and Customs Authority, since the corrections were undertaken on its initiative and the Claimant contributed in no way to such errors being made. For this reason, the Claimant has, in this case, the right to compensation for costs incurred with the provision of the bank guarantee. However, it formulates its petition as a petition for indemnification interest for the provision of undue guarantee.

Now, there is no support in tax laws for the attribution of late payment or indemnification interest in cases of compensation for undue guarantee provision. As the Supreme Administrative Court has understood it, "the right to compensation for undue provision of guarantee does not in any situation entail the right to indemnification and/or late payment interest, under Articles 43 and 102 of the LGT, being limited, solely, to the value corresponding to the costs actually incurred with the provision thereof, even with the limit provided in Section 3 of the aforementioned Article 53 of the LGT".

In this sense we also find, the arbitral jurisprudence produced at the CAAD, from which we highlight, among others, that contained in Arbitral Decision no. 409/2014-T, of 08-01-2015.

On the other hand, it does not fall within the competence of this Arbitral Tribunal, which is restricted, under Article 2 of the RJAT, to resolving a dispute in tax matters, to decide whether or not there is a right to interest based on the general regime of extracontractual civil liability.

Thus, as was well decided in the Arbitral Decision rendered in case no. 409/2015, already mentioned above, there being no elements that permit determining the amount of compensation, the condemnation shall have to be made with reference to what comes to be liquidated in execution of the present decision [Articles 609, Section 2, of the Civil Procedure Code and 565 of the Civil Code, applicable in this sense under Article 2, subsection d) of the LGT]. For this reason, the petition for payment of interest must be judged without merit.

IV - Decision:

In these terms, and with the reasoning set forth, it is decided:

a) To uphold the arbitral petition and, in consequence, annul all tax acts challenged, including the official assessments of IRS, identified with numbers 2013 ... (document no. 2013...) and 2013... (document no. 2013..., relating to the tax years 2010 and 2011, and corresponding compensatory interest assessments, in the total amount of €258,788.64.

b) To judge as without merit the petition for indemnification interest for the bank guarantee provided;

c) To condemn the AT Respondent in the costs of the proceeding.

V - Value of the Case:

The value is set at €258,788.64 (two hundred fifty-eight thousand seven hundred eighty-eight euros and sixty-four cents), under the terms of Article 97-A, Section 1, subsection a) of the CPPT, applicable by reference of Article 29, Section 1, subsections a) and b), of the RJAT and Article 3, Section 2, of the Regulation of Costs in Tax Arbitration Proceedings.

VI - Costs:

Pursuant to Article 22, Section 4, of the RJAT, and under the terms of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at €4,896 (four thousand eight hundred ninety-six euros) charged to the Respondent Tax Authority and Customs Authority.

Let it be notified.

Lisbon, 15 March 2019

The Arbitrators

(Fernanda Maças)

(Maria do Rosário Anjos)

(Nuno Cunha Rodrigues)