CAAD 304/2013-T: Deductibility of Autonomous Taxation in IRC – Corporate Tax Arbitration Ruling

Arbitral Decision

CAAD: Tax Arbitration

Case no. 304/2013 – T

Subject: Deductibility of autonomous taxation

I. REPORT

1. Bank A, SA, (hereinafter referred to as the Claimant), corporate person no. ..., with registered office..., requested, on 24 December 2013, the constitution of an arbitral tribunal, pursuant to the provisions of articles 2, no. 1, al. a) and 10, no. 1, al. a) of Decree-Law no. 10/2011, of 20 January (hereinafter, Legal Regime of Tax Arbitration or LRTA) and articles 1 and 2 of Administrative Order no. 112-A/2011, of 22 March, with a view to declaring the partial illegality of self-assessment acts for corporate income tax (IRC) for the period of 2010, in the part corresponding to the non-recognition for tax purposes of expenses with autonomous taxation which corresponds to an improperly levied tax in the total amount of € 29,458.56.

2. On 30 May 2013, the Claimant filed a complaint for administrative review of the aforementioned self-assessment acts.

3. Having more than four months passed since the submission of the official review petition, the Claimant presumed the tacit rejection, pursuant to no. 1 of article 57 of the General Tax Law, and requested, under article 10, no. 1, al. a), of the LRTA, the constitution of the arbitral tribunal.

4. In the request, the Claimant chose not to appoint an arbitrator.

5. Pursuant to no. 2 of article 6 of the LRTA, the Ethics Council of the Arbitration Centre appointed the undersigned as arbitrator.

6. On 8 July 2014, the meeting provided for in article 18 of the LRTA was held, with the parties agreeing to submit written pleadings.

7. The tribunal is regularly constituted to hear and decide on the subject matter of the case.

8. The pleadings supporting the Claimant's request for arbitral pronouncement are, in summary, as follows:

Claimant's Pleadings

7.1 The Claimant filed income tax returns model 22, for the tax year 2010.

7.2 In that tax return, the Claimant calculated and declared the following amounts as autonomous taxation:
i) autonomous taxation on vehicle expenses in the amount of € 72,537.95;
ii) autonomous taxation on representation expenses, which generated the amount of € 12,941.16;
iii) autonomous taxation on allowances and compensation for travel in the employee's own vehicle in the amount of € 211.02;
iv) autonomous taxation on confidential or undocumented expenses in the amount of € 25,474.23.

7.3 In determining taxable profit, the Claimant did not deduct these expenses for tax purposes.

7.4 Thus, the subject matter of this case is the recognition of the tax deductibility of these autonomous taxation amounts.

7.5 As a result of the deductibility of these autonomous taxation amounts in determining the IRC and Municipal Surcharge, the tax payable is reduced by a total of € 29,458.56.

7.6 To support the deductibility of autonomous taxation, the Claimant presents the following arguments:

The legal nature of autonomous taxation is not confused with income tax (IRC) or company profit, but rather it applies to expenses.

First, if we look at the legislative evolution, we see that autonomous taxation was created by article 4 of Decree-Law no. 192/90 (a different statute from the Corporate Income Tax Code), with the objective of taxing at 10% undocumented expenses. Only 10 years later, with Law no. 30-G/2000, of 29 December, was the decision made to include the provision of autonomous taxation in the statute regulating the IRC, without, in the opinion of the Claimant, that alone changing one bit its nature: it continued not to be IRC.

According to the general doctrine widely cited, autonomous taxation, unlike income tax on corporations, does not apply to its profit, but rather to expenses.

7.7 The jurisprudence of the Constitutional Court and Supreme Administrative Court is to the same effect:

In the judgment of the Supreme Administrative Court of 6 July 2011, rendered in case no. 0281/11, it is stated: "In the present proceedings, it is not a matter of income tax (as occurred in the aforementioned judgment 399/2010), but rather autonomous taxation on expenses. As the appellant correctly states, 'autonomous taxation taxes expenses and not income, they are indirect taxes and not direct taxes, which penalize certain expenses incurred by the company and are calculated in a completely independent manner from the IRC and Surcharge owed in the fiscal year, not even relating to the achievement of a positive result. In truth, the autonomous taxation provisions contained in the IRC Code could be inscribed in another code or in an autonomous statute' (Conclusion VII of the pleadings)."

To the same effect, see also the judgments of the Supreme Administrative Court, of 14 June 2012, rendered in case no. 0757/11, and of 21 March 2012, rendered in case no. 0830/11.

The Constitutional Court in Judgments nos. 310/2012, 382/2012 and 617/2012, distinguishes IRC from autonomous taxation: "Thus, in the case of IRC, we are dealing with an annual tax, where not each income received is taxed individually, but rather the aggregation of all income obtained in a given year, the law considering that the taxable event is deemed to occur on the last day of the tax period (see Article 8, no. 9 of the Corporate Income Tax Code). Whereas with respect to autonomous taxation in IRC, the taxable event is the carrying out of the expense itself, not a complex fact, of successive formation over a year, but an instantaneous taxable event."

Furthermore, the Judgment of the CAAD, rendered in case no. 7/2011-T: "We can consider it settled that autonomous taxation affects the expense of the passive subject (taxpayer) and not its income. In doing so, the legislator is abandoning the rule of taxation of accrual income and net income – if the non-deductibility of undocumented expenses is inherent to net income taxation, autonomous taxation of such expenses does not observe this rule and has purposes different from the taxation of accrual income" (p 30). "Although it limits the taxation of accrual income and net income, and therefore does not consist of a direct method of taxation (a method that must be the rule, given article 104, no. 2 of the Constitution), the taxation of expenses likewise does not constitute an indirect method of taxation, because it is not taxing the income of the passive subject incurring such undocumented expenses (and others)" (p 32).

7.8 Considering their nature as a tax on expenses, we should apply to autonomous taxation the general rule of deductibility of tax expenses provided for in article 23, no. 1, al. f), of the Corporate Income Tax Code.

Indeed, in the result determined by accounting, any and all tax is treated as an expense that is not distinguished from all other expenses for purposes of its integration in the calculations of said result (see, in the Official Chart of Accounts – OCA – in force until 2009, the cost account 63, entirely dedicated to taxes that do not apply to profit; and in the System of Normalization of Accounting – SNA – in force since 2010, the expense sub-account 681, entirely dedicated to taxes as well).

The IRC Code does not rule out this treatment: taxes supported by a passive subject of IRC are deductible, to the same extent and on the same basis as the generality of expenses or charges – see article 23, no. 1, al. f) of the Corporate Income Tax Code.

The exceptions to this deductibility rule are expressly provided for in al. a) and c) of no. 1 of the current article 45 (former 42) of the Corporate Income Tax Code. What is clearly drawn from the IRC Code is that whenever the legislator does not want a certain charge to be fiscally deductible in determining profit subject to IRC, it says so expressly: this is the case with undocumented expenses, with the contribution on the banking sector, with IRC and any other taxes that directly or indirectly affect profits, etc.

Moreover, the inclusion of tax charges with autonomous taxation in the exception that prevents fiscal deductibility of IRC, equating them for this purpose (inclusion in the exception of non-deductibility) to IRC: see the wording of the new article 23-A, no. 1, al. a) of the IRC Code introduced by Law no. 2/2014, of 16 December, proves that until 2014, autonomous taxation was deductible.

Indeed, instead of excepting (as had been done until 31.12.2013) "[the] IRC and any other taxes that directly or indirectly affect profits", the scope of this exception is expanded with effect from 2014, now excepting another tax as well – autonomous taxation – which, unlike those taxes provided for in the wording in force until 2013, does not apply to profits: "[the] IRC, including autonomous taxation, and any other taxes that directly or indirectly affect profits."

7.9 The Claimant further alleges that the doctrinal controversy that existed regarding the (non-)deductibility of the municipal surcharge and the manner in which it was settled also confirm that with respect to charges with autonomous taxation the exception provided for in al. a) of no. 1 of article 45 (previously 42) of the Corporate Income Tax Code does not apply to the tax rule of deductibility of taxes.

1. In turn, the Respondent Tax Authority and Customs presented a response, in which it defended itself in the following terms:

8.1 By exception of lack of timeliness of the request

The Respondent alleges that the Claimant, in compliance with the provision in al. b) of no. 2 of article 10 of Decree-Law 10/2011, of 20 January (hereinafter LRTA), identifies as the tax act subject to the request for arbitral pronouncement the "self-assessment act for IRC and resulting surcharge for the fiscal year 2010".

Thus, the immediate object of the request is, unquestionably, that self-assessment act.

The request formulated acknowledges and is absolutely consistent with this evidence: the Claimant petitions (solely) that the tribunal declare the (partial) illegality of that self-assessment, its consequent annulment and the reimbursement of the amount it quantifies and qualifies as having been improperly paid, plus indemnity interest.

However, the legally defined period for challenging assessment/self-assessment acts in arbitration has been exceeded, given that article 10 of the LRTA establishes, regarding assessment/self-assessment acts, that the period for presenting the request for arbitral pronouncement is 90 (ninety) days, referring, as to the moment of commencement of counting, to what is provided for in article 102, nos. 1 and 2 of the Code of Tax Procedure and Process (CTPP).

Taking into account the combined provisions of articles 104, no. 1, al. b) and 120, no. 1 of the Corporate Income Tax Code, we have that the deadline for payment of the tax in question in the proceedings occurred on 30.05.2011 (a date, in this case, coinciding with the moment of presentation/submission of the self-assessment act).

Thus, it is concluded that the request for the constitution of the arbitral tribunal filed on 24.11.2013 is untimely and the tribunal cannot take cognizance of it.

8.2 By substantive objection

First, the Respondent argues that, even admitting in theory the deductibility of autonomous taxation, as concerns non-deductible taxation, it will never be admissible to allow its deductibility insofar as they would constitute a tax charge on expenses not indispensable "for the realization of income subject to tax or for the maintenance of the source of income", and therefore do not fall under al. f) of no. 1 of article 23.

Regarding the nature of autonomous taxation, it should be noted that neither the jurisprudence nor the doctrine widely cited by the Claimant speak to the effect that autonomous taxation is not, at least formally, IRC, nor do they advocate its deductibility to taxable profit, either by its exclusion from al. a) of no. 1 of article 45 of the Corporate Income Tax Code, or by its inclusion in al. f) of no. 1 of article 23 of the Corporate Income Tax Code.

Indeed, the jurisprudence of the Constitutional Court (judgments nos. 310/2012, 382/2012 and 617/2012), deals exclusively with the application of autonomous taxation rates, from the perspective of the prohibition of retroactivity, limiting itself to the issue of rules of application of law in time, but never suggesting that it is any "tax" distinct from IRC, only addressing the distinct taxable events on which the respective rates apply.

On the other hand, the jurisprudence of the Supreme Administrative Court cited focuses on the issue of retroactive application of the amendment of autonomous taxation rates (judgments nos. 0281/11 and nos. 0757/11) and on the regime of fiscal transparency (judgment no. 0830/11 states: "It is thus evidenced that autonomous taxation constitutes fiscal realities completely different from the fiscal transparency regime both because autonomous taxation does not affect income, but rather expense as such, and because each expense is regarded as constituting an autonomous taxable event"), once again placing emphasis on the specificity of autonomous taxation in its manner of calculation in relation to income taxation, without in any of the judgments "jumping" to the conclusion, as the Claimant now advocates, that such taxation is not IRC and that it is not permissible to include it in al. a) of no. 1 of article 45 of the Corporate Income Tax Code.

Finally, the decision of the arbitral panel rendered in case no. 7/2011-T addresses autonomous taxation by comparison with taxation by indirect methods, without drawing from it the inferences that the Claimant now advocates.

Contrary to what the Claimant intends, autonomous taxation is not any distinct tax, despite the differences noted by the jurisprudence regarding the facts on which it applies. As Sérgio Vasques states (see Manual of Tax Law, Almedina, 2011, p. 293, note 470), the income tax contemplates, also, elements of sole obligation, such as the liberatory rates of personal income tax or the autonomous taxation rates of IRC.

The reason for autonomous taxation contends, on the one hand with an incentive for taxpayers to reduce their expenses as much as possible and, on the other, with the purpose of discouraging recourse to certain types of expenses that are conducive to concealed payments and, ultimately, to recover some tax that would otherwise not be collected. Thus, being this the objective of autonomous taxation – to reduce the fiscal advantage achieved with the deduction of the costs on which it applies, in addition to combating tax evasion -, it cannot be the same, through deduction to taxable profit as a cost of the fiscal year, constitute a factor in reducing that diminishment of advantage intended and determined by the legislator.

It is further alleged that the amendment introduced by Law no. 2/2014, of 16 January, which came to add to al. a) of no. 1, corresponded to the adoption of its best interpretation, and therefore became, indeed, unnecessary to invoke it to decide the concrete controversy evidenced by the case file.

It is not correct to assert that autonomous taxation is removed, either from the function and nature of IRC, or even from the calculation of taxable profit, given that autonomous taxation, by its nature, is functionally interwoven in IRC and because there is a rule that makes the autonomous taxation rate dependent on the circumstance of whether or not the passive subject presents a fiscal loss.

As to the purposes of autonomous taxation, as Saldanha Sanches refers (in "Manual of Tax Law", 3rd Edition, Coimbra Editora, 2007, p. 406 to 408): "In this type of taxation (autonomous taxation), the legislator seeks to respond to the admittedly difficult issue of the tax regime found in the zone of intersection of the personal sphere and the business sphere, in order to avoid in-kind remuneration more attractive for exclusively fiscal reasons or the concealed distribution of profits. The rule presents a characteristic similar to what we will find in the legal sanction against undocumented costs, with an increase in the rate when the situation of the passive subject does not correspond to a situation of fiscal normality. If in the declaration of the passive subject there is no profit, the cost may be subject to negative valuation: for example we have a rate of 15% applied when the passive subject had losses in the two previous fiscal years and a light passenger vehicle was purchased for more than € 40,000.00 (article 81, no. 4)."

With this provision, the system shows its dual nature, with an increased rate of autonomous taxation for certain special situations that it seeks to discourage, such as the purchase of vehicles for business purposes or vehicles in principle too expensive when losses exist.

There is created here, a kind of presumption that these costs do not have a business purpose and, therefore, are subject to autonomous taxation. In summary, the cost is deductible, but autonomous taxation reduces its fiscal advantage, since the base of incidence is not net income, but rather a cost transformed – exceptionally – into an object of taxation.

The same explanation can be found for autonomous taxation created for payments made to regions under privileged tax regime.

Therefore it is concluded that autonomous taxation, beyond not being able to be formally considered a tax distinct from IRC, also materially does not have absolute autonomy, rather being, as demonstrated, functionally linked to the calculation of real income.

In sum, inasmuch as autonomous taxation aims to reduce the fiscal advantage achieved with the deduction to taxable profit of the costs on which it applies and also to combat the tax evasion that this type of expenses, by their nature, promotes, it cannot itself through its deduction to taxable profit as a cost of the fiscal year constitute a factor in reducing that diminishment of advantage intended and determined by the legislator.

Nothing further having been argued or requested, it is now appropriate to render a decision.

II. REASONING

FACTUAL MATTER

Facts determined to be proven:

1- On 30-05-2010 the Claimant proceeded to self-assess IRC and resulting surcharge for the fiscal year 2010 through submission of Model 22 declaration.

2- On 30 May 2012, it filed an amended declaration replacing the model 22 declaration filed.

3- In the aforementioned IRC self-assessment for fiscal year 2010, the Claimant also proceeded to self-assess autonomous taxation provided for in article 88 of the Corporate Income Tax Code, in the total amount of € 111,164.36.

4- The non-recognition for tax purposes of expenses with autonomous taxation in that same fiscal year had an impact of € 29,548.56 in terms of IRC and surcharge borne.

5- The Claimant paid the tax due.

6- On 30 May 2013, the Claimant filed a complaint for administrative review of the aforementioned IRC self-assessment and surcharge, manifesting the intent that expenses with autonomous taxation of 2010 be considered deductible for tax purposes.

7- Pursuant to the provision in article 57, no. 5 of the General Tax Law, tacit rejection of the administrative complaint was formed on 30 September 2013.

The decision on the factual matter proven was based on the documents attached to the case file and on the non-opposition of the Tax Authority and Customs to facts invoked by the Claimant.

There are no proven facts of relevance to the decision of the case.

Issues for consideration:

A) On the exception of lack of timeliness of the request

B) On the Merits: on the deductibility of amounts paid as autonomous taxation for purposes of calculating taxable profit.

A) On the exception of lack of timeliness of the request

The Respondent alleges that having been exceeded the period for direct challenge of the tax self-assessment act (i.e., the primary act), the "timeliness" of the request could only be based on the existence of some means of administrative challenge of the self-assessment act where a decision had been rendered denying/rejecting, in whole or in part, the claims formulated therein by the passive subject of taxation (which would constitute a secondary-level act). Concretely, the Claimant administratively challenged the self-assessment act with respect to which a presumption of rejection was formed. However, despite having made allusion to and identified the circumstances, the Claimant did not formulate/specify to the tribunal any request tending to its annulment.

In the response, the Claimant alleges that the request for lack of timeliness formulated by the Tax Authority and Customs is unconstitutional, as it violates both the constitutional principle of access to courts for protection of rights, provided for in articles 20, no. 1, and 268, no. 4, of the Constitution, and the constitutional principle of protection of legitimate expectations (which is derived from article 2 of the Constitution – rule of law), the interpretation of the provisions in articles 2, 10, no. 1, al. a) and no. 2, al. b), of the LRTA, in an interpretation contrary to its declaratory interpretation, that for purposes of the reaction period of 90 days that opens with the express rejection of the administrative complaint, the subject matter of the case and the arbitral claim could not be, respectively, the tax act and the request for declaration of its illegality.

Now, from the analysis of the request for arbitral pronouncement there remain no doubts that the Claimant seeks the partial annulment of the 2010 IRC self-assessment, with the grounds described above.

As JORGE LOPES DE SOUSA refers, "…being the essential purpose of the judicial challenge process the legal elimination of an act in tax matters, provided that the challenger identifies it and identifies the defects that it believes affect it, it can be understood that there is an implicit request for annulment or declaration of nullity or non-existence of that act. The essential thing will be that the intention of the challenger is perceptible."[1]

Thus, the exception of lack of timeliness raised by the Respondent is without merit.

B) On the Merits: On the deductibility of amounts paid as autonomous taxation for purposes of calculating taxable profit.

It is incumbent, in summary, to verify whether autonomous taxation on expenses with vehicles, representation expenses, allowances and compensation for travel in the employee's own vehicle and confidential or undocumented expenses are deductible to taxable profit.

The Claimant alleges that, being autonomous taxation an indirect tax that applies to expenses, it should be deducted to taxable profit. This conclusion results from the interpretation itself, a contrario, of al. a) of no. 1 of article 45 of the Corporate Income Tax Code which establishes that the following are not deductible: "The IRC and any other taxes that, directly or indirectly, affect profits".

To the contrary, the Respondent argues that we are dealing with a non-deductible charge, pursuant to article 45, no. 1, al. a) of the Corporate Income Tax Code.

For proper framing of the issue, it is necessary to clarify the nature of autonomous taxation and, once its framework is defined, to verify whether it falls within the set of charges deductible in determining taxable profit for purposes of IRC.

On the nature of autonomous taxation

The understanding of the exact nature and functioning of autonomous taxation must, from the outset, take into account the legislative evolution of this figure which, as is known, has been, since its creation, subject to successive amendments.

a) Legislative evolution

The figure of autonomous taxation appears, for the first time, in Law no. 2/88, of 26 January (State Budget Law for 1998), which gives new wording to article 4 of Decree-Law no. 375/74, and aimed at the application of a rate on confidential expenses, in the following terms:

Amendment to Decree-Law no. 375/74, of 20 August, regarding the regime of undocumented expenses

Article 27 of Decree-Law no. 375/74, of 20 August, shall have the following wording:

Art. 27 - 1 - Commercial or industrial companies, as well as companies with properly organized accounting that engage in agricultural, forestry or livestock operations, which incur confidential or undocumented expenses are subject, for this type of expenses, to the rate of enhanced industrial contribution of 20%.

2 - The carrying out of expenses referred to in the preceding number which exceed 2% of total billing constitutes an infraction punished with a fine of equal amount.

With the entry into force of the Corporate Income Tax Code, approved by Decree-Law no. 442/88, of 30 November, that provision was repealed.

The following year, autonomous taxation of confidential expenses is reintroduced into our legal system by article 4 of Decree-Law no. 192/90, of 9 June:

Art. 4 Confidential or undocumented expenses carried out in the course of commercial, industrial or agricultural activities by passive subjects of personal income tax who have or should have organized accounting or by passive subjects of IRC not covered under articles 8 and 9 of the respective Code are taxed autonomously in personal income tax or IRC, as the case may be, at a rate of 10% without prejudice to the provision of al. h) of no. 1 of article 41 of the Corporate Income Tax Code.

Subsequently, Law no. 39-B/94, of 27 December, increased the taxation rate to 25%, in addition to its non-deductibility. The following year, Law no. 52-C/96, of 27 December, increased the autonomous taxation rate to 30% and amended no. 2 with the following wording: "The rate referred to in the preceding number shall be raised to 40% in cases where such expenses are incurred by passive subjects of IRC, totally or partially exempt, or who do not carry on, as their principal activity, activities of a commercial, industrial or agricultural nature."

With the State Budget Law for 1999 (law 87-B/98, of 31 December), the rates were increased from 30% to 32% and from 40% to 60%.

In 2000, law no. 3-B/2000, of 4 April, extended the scope of application of autonomous taxation to representation expenses and expenses related to light passenger vehicles, in the following terms:

"Article 4

1 - ...

2 - ...

3 - Representation expenses and expenses related to light passenger vehicles incurred by passive subjects of personal income tax who have or should have organized accounting in the course of commercial, industrial or agricultural activities, or by passive subjects of IRC not exempt and who carry on, as their principal activity, activity of a commercial, industrial or agricultural nature, are taxed autonomously in personal income tax or IRC, as the case may be, at a rate of 6.4%.

4 - Expenses related to light passenger vehicles are considered to include, in particular, allowances, rents or leases, insurance, maintenance and conservation expenses, fuel and the municipal tax on vehicles.

5 - Excluded from the provision of no. 3 are expenses related to vehicles allocated to the operation of public transport service or intended to be leased in the normal course of the passive subject's activity.

6 - Representation expenses are considered to include, in particular, expenses incurred on receptions, meals, trips, outings and shows offered in the Country or abroad to clients or suppliers or to any other persons or entities."

With the so-called Tax Reform Law, Law no. 30-G/2000, of 29 December, the legislator decided to repeal article 4 of Decree-Law no. 192/90, of 9 June, and introduce article 69-A[2] to the Corporate Income Tax Code, with the following wording:

"1 - Confidential or undocumented expenses are taxed autonomously, at the rate of 50%, without prejudice to the provision of al. h) of no. 1 of article 41.

2 - The rate referred to in the preceding number is raised to 70% in cases where such expenses are incurred by passive subjects totally or partially exempt, or who do not carry on, as their principal activity, activities of a commercial, industrial or agricultural nature.

3 - Are taxed autonomously, at a rate corresponding to 20% of the highest applicable normal rate, representation expenses and expenses related to light passenger vehicles, pleasure boats, tourism aircraft, motorcycles and scooters, incurred or borne by non-exempt passive subjects who carry on, as their principal activity, activities of a commercial, industrial or agricultural nature.

4 - Expenses related to light passenger vehicles, pleasure boats, tourism aircraft, motorcycles and scooters are considered to include, in particular, allowances, rents or leases, insurance, maintenance and conservation expenses, fuel and taxes affecting their possession or use.

5 - Excluded from the provision of no. 3 are expenses related to light passenger vehicles, pleasure boats, tourism aircraft, motorcycles and scooters, allocated to the operation of public transport service, intended to be leased in the normal course of the passive subject's activity, as well as allowances related to vehicles with respect to which the agreement provided for in no. 8 of al. c) of no. 3 of article 2 of the Personal Income Tax Code has been celebrated.

6 - Representation expenses are considered to include, in particular, expenses incurred on receptions, meals, trips, outings and shows offered in the Country or abroad to clients or suppliers or to any other persons or entities.

7 - Shall be subject to the regime of nos. 1 or 2, as the case may be, the rates applicable being, respectively, 35% or 55%, expenses corresponding to amounts paid or owing, on any basis, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime, as defined pursuant to the Code, unless the passive subject can prove that such charges correspond to operations actually carried out and do not have an abnormal character or an exaggerated amount

8 - Excluded from the provision of no. 3 are the passive subjects to whom the regime provided for in article 46-A applies.

In the following years, the rates and basis of incidence of vehicle expenses and representation expenses were successively amended by Laws nos. 109-B/2001, of 27 December, 32-B/2002, of 30 September and 107-B/2003, of 31 December; Law no. 55-B/2004, of 30 December subjects autonomous taxation to allowances and travel expenses in one's own vehicle; Decree-Law no. 192/2005, of 7 November, added nos. 11 and 12 which subject autonomous taxation to profits distributed to entities totally or partially exempt from IRC.

Law no. 64/2008, of 5 December, amended the wording of nos. 3 and 4 which now provide as follows:

Are taxed autonomously, excluding vehicles powered exclusively by electrical energy:

a) At a rate of 10%, deductible charges relating to representation expenses and those related to light passenger or mixed vehicles, motorcycles or scooters, incurred or borne by passive subjects not exempt from a subjective perspective and who carry on, as their principal activity, activities of a commercial, industrial or agricultural nature; [Wording given by Law no. 64/2008, of 5 December]

b) At a rate of 5%, deductible charges, borne by the passive subjects mentioned in the preceding number, relating to light passenger or mixed vehicles whose homologated levels of CO2 emissions are less than 120g/km, in the case of those powered by gasoline, and less than 90g/km, in the case of those powered by diesel, provided that, in both cases, a certificate of conformity has been issued. [Wording given by Law no. 64/2008, of 5 December]

4 - Are taxed autonomously, at the rate of 20%, deductible charges, borne by the passive subjects mentioned in the preceding number, relating to light passenger or mixed vehicles whose acquisition cost exceeds € 40,000, when the passive subjects present fiscal losses in the two fiscal years prior to the one to which the aforementioned charges relate.

Law no. 3-B/2010, of 28 April, amended no. 4, eliminating the reference to acquisition cost exceeding € 40,000.00 and now indicating the acquisition cost exceeding the amount set forth in al. e) of no. 1 of article 34 of the Corporate Income Tax Code.

The evolution of the autonomous taxation regime[3] up to 2010 allows us, from now on, certain conclusions.

Originally, the autonomous taxation regime aimed only at confidential expenses which, by their nature, are expenses not deductible for purposes of IRC.

Subsequently, autonomous taxation came to apply to deductible or partially deductible charges, such as light passenger vehicles or allowances for travel.

Finally, there is a significant increase both in the charges subject to autonomous taxation and in the applicable rates. The case of vehicles is paradigmatic: the type of expense is the same but the rates and basis of incidence present successive and, it should be stressed, significant variations. However much the objectives of the rules remain from their origin, the intention of increasing revenue is undeniable. As CASALTA NABAIS refers[4], "with the passage of time, the function of these autonomous taxation forms which, meanwhile became extraordinarily diversified and increased in value, progressively altered to become progressively one of obtaining (more) tax revenue."

Having described the substantive regime of autonomous taxation to which the Claimant was subject, the moment has come to assess whether we are dealing with a tax different from IRC; whether it is direct or indirect tax or even an anti-avoidance rule.

Let us examine what doctrine and jurisprudence think about the issue.

b) The nature of autonomous taxation in jurisprudence and doctrine

The description of the thinking and evolution of our superior courts on autonomous taxation was already dealt with, with mastery and eloquence, in the Judgment of the CAAD, of 20 September 2012, Case no. 7/2011, in the following terms:

1. The judgment of the 2nd Section of the Supreme Administrative Court of 21 March 2012 (2nd section, case 830/11, of 21.3.2012, Reporting Judge Fernanda Maçãs) regarding taxation of confidential expenses and its relationship with the fiscal transparency regime and interpretive laws, tells us that "autonomous taxation, although formally inserted in the Corporate Income Tax Code, has always had its own treatment, since it does not apply to income, whose formation is taking place throughout the year, but rather to certain scattered expenses that represent autonomous taxable events subject to different rates than those of IRC". This judgment was rendered regarding article 12 of the Corporate Income Tax Code, in the wording that was in force at the time of the facts: "The companies and other entities to which, pursuant to article 5, the fiscal transparency regime applies, are not taxed in IRC". But from this non-taxation in IRC of entities benefiting from the fiscal transparency regime, autonomous taxation is excluded, as is the case with confidential expenses.

2. It is recognized by the jurisprudence of the Supreme Administrative Court (2nd section, case 830/11, of 21.3.2012, Reporting Judge Fernanda Maçãs) that under the designation of autonomous taxation are hidden very diverse realities, including, pursuant to no. 1 of the (then) article 81 of the Corporate Income Tax Code, confidential or undocumented expenses, which are taxed autonomously, at the rate of 50%, which will be raised to 70%, in cases of expenses carried out by passive subjects totally or partially exempt from IRC, or who do not carry on, as their principal activity, activities of a commercial, industrial or agricultural nature (no. 2 of the [then] article 81) and which are not considered as a cost in the calculation of income subject to tax in IRC (whereas representation expenses and those related to light passenger vehicles, pursuant to the provision in the (then) article 81, no. 3 of the Corporate Income Tax Code their costs are fiscally accepted even if within certain limits).

3. Also the Constitutional Court pronounced itself on the diverse realities covered by autonomous taxation. In judgment no. 18/116, the Constitutional Court tells us: "However, article 81 of the same Code, considering the wording prior to Law no. 64/2008, established autonomous taxation rates, aiming namely, on the one hand, in the situation provided for in nos. 1 and 2, undocumented expenses, which are taxed at the rate of 50% (without prejudice to their non-consideration as a cost pursuant to article 23), and, on the other hand, in the situations provided for in nos. 3 and 4, deductible charges as costs, which were taxed at 5%, in general, and at 15% when concerning expenses relating to light passenger or mixed vehicles whose acquisition cost exceeds € 40,000, when borne by passive subjects presenting fiscal losses in the two fiscal years prior to that to which the said charges refer." For the Constitutional Court, the regime has a "penalizing" purpose and of "discouraging practices" that may "involve situations of criminal illegality or lesser fiscal transparency".

4. We can assert that the penalty thus appears associated with an anti-avoidance purpose, and that the avoidance cannot be circumvented (i.e., it cannot be demonstrated that the beneficiary of the undocumented expenses declared those income for tax purposes). Thus, continues the Court in the same judgment: "In the case of nos. 1 and 2, we are dealing with expenses that are included in the company's accounting, and may have been relevant to the formation of income, but are not documented and cannot be considered as costs, and which, therefore, are penalized with 50% taxation. The fiscal logic of the regime is based on the existence of a presumable loss for the Public Treasury, because it is not possible to verify, due to lack of documentation, whether there was payment of VAT or other taxes that were owed regarding the transactions carried out, or whether income was declared for purposes of the income tax regarding the proceeds that third parties may have come to earn through the commercial relationships maintained with the passive subject of taxation. Furthermore, autonomous taxation, not directly affecting a profit, will have inherent the idea of discouraging a practice that, in addition to affecting equality in the distribution of public charges, may involve situations of criminal illegality or lesser fiscal transparency."

5. The Constitutional Court, in the cited judgment no. 18/11, further tells us that the other facts subject to autonomous taxation correspond to "charges demonstrably indispensable for the realization of income" and that therefore the prohibition of retroactive application of the new law does not apply, as such charges would have been incurred regardless of the applicable tax regime: this means that autonomous taxation also falls on charges that correspond to the core of the concept of real income, net income and compliance with accounting obligations. This argument of the Constitutional Court, regarding the retroactive application of tax law to autonomous taxation (and this matter of application of law in time does not fall within the scope of this decision), is of interest to us to emphasize that the Court recognizes that this regime constitutes a limitation on the taxation of real income (which is guaranteed by article 104, no. 2 of the Constitution).

6. More than that, judgment no. 18/11 of the Constitutional Court comes to say that autonomous taxation aims to discourage the deduction of expenses to which companies are entitled, but which affect tax revenue. This latter argument is an illegitimate interpretive argument in Tax Law. All tax rules in the strict sense have as their objective the obtaining of revenues, and this objective cannot self-justify itself, for it itself is limited by the basic constitutional tax principles of Rule of Law States: the principle of capacity to contribute and taxation of real income as a rule.

7. But the truth is that the Constitutional Court tells us the following:

"For its part, nos. 3 and 4 of article 81 refer to charges deductible as costs for purposes of IRC, that is, to charges that have demonstrably been indispensable for the realization of income, in light of what article 23, no. 1, of the Corporate Income Tax Code establishes, the taxation provided for in these provisions being explained by a legislative intention to incentivize companies to reduce as much as possible the expenses that negatively affect tax revenue.

The new wording given to nos. 3 and 4 of article 81 by Law no. 60/2008 came to reinforce this perspective, differentiating various possible situations, which are taxed, as the case may be, at the rate of 5%, 10% or 20%, with which it is intended not only to discourage the carrying out of expenses but to stimulate companies to opt for solutions that are more advantageous from the perspective of public interest. Thus one understands the exclusion of taxation regarding the purchase of vehicles exclusively powered by electrical energy, as stated in the 2nd part of the body of no. 3, and the provision of more favorable treatment for charges borne with the purchase of less polluting vehicles (al. b) of no. 3), and more severe treatment for larger expenses, as referred to in no. 4 of this article 81.

In this context, being at issue charges which, by nature, are indispensable for the realization of income or gains that are subject to tax, it is not acceptable to allege that the challenger would have incurred expenses, from the perspective of the continuation of the previously existing legal regime, which it would no longer incur if it could meanwhile count on an aggravation of the taxation rate."

1. In different sense, in a dissenting vote, Judge Vítor Gomes comes to argue that the retroactive application of more severe autonomous taxation constituted a case of retroactivity prohibited by no. 3 of article 103 of the Constitution, because "[a]lthough formally inserted in the Corporate Income Tax Code and the amount it allows to collect is liquidated within its scope and as IRC, the rule in question concerns a tax imposition that is materially distinct from taxation under this heading (...). Indeed, we are dealing with autonomous taxation, as the very wording of the provision says. And that makes all the difference. It is not a matter of taxing income at the end of the tax period, but certain type of expenses in themselves, for the understandable reasons of tax policy that the judgment points out. The manifestation of wealth on which this portion of taxation will fall (the fact revealing capacity to contribute that is sought to be achieved) is the simple carrying out of such expense, at a determined moment. Each expense is, for this purpose, an autonomous taxable event, to which the taxpayer becomes subject, whether or not it comes to have taxable income in IRC at the end of the period. In this manner, the aggravation of the rate will aggravate the situation of the passive subject at a moment in which the taxable event is a thing of the past (the representation expenses were paid to their beneficiaries, charges with light passenger vehicles were borne or incurred, etc.). It is certain that this portion of tax only comes to be liquidated at a later moment and together with IRC. However, the determination of the value overall of the taxable matter subject to the incidence of autonomous taxation rates at the end of the tax period is the mere sum of the diverse expenses of that nature, to which the now aggravated rate is applied. That operation of determining the taxable amount for this purpose does not reflect an autonomous taxable event of successive formation, but the mere aggregation of the values on which the rate of the tax applies. (...) The taxable event of tax in IRC is determined by relation to the end of the tax period (no. 9 of article 8 of the Corporate Income Tax Code), but autonomous taxation now in question does not share this presupposition, because it does not affect income (article 1 of the Corporate Income Tax Code) but expense as such."

2. To the same effect as this dissenting vote, tells us the Supreme Administrative Court, in the cited case no. 830/11, judgment of 21.3.2012: autonomous taxation, "although being a form of taxation provided for in the Corporate Income Tax Code, has nothing to do with income taxation, but rather with the taxation of certain expenses, which the legislator understood, for the reasons pointed out above to do in an autonomous manner.

Autonomous taxation does not affect income, but rather expense as such, both because each expense is regarded as constituting an autonomous taxable event subject to different rates than those of IRC. And although confidential expenses only come to be taxed together with IRC, the truth, however, is that the taxable matter subject to the incidence of autonomous taxation rates is the mere sum of the diverse portions of expense".

And continues the Supreme Administrative Court: "In essence, the legislator will have created autonomous taxation rates with a view to penalizing the carrying out of certain expenses, since, not knowing who is the respective beneficiary, the need arises to prevent the same from constituting remuneration to persons whose identity is unknown. If it were not so, we would be accepting as a cost this type of expenses, without there being, given their confidential nature, taxation of the income earned by their beneficiaries, whether under personal income tax or under IRC."

1. In recent judgment (no. 310/12, of 20 June, Reporting Judge João Cura Mariano), the Constitutional Court comes to reformulate the doctrine of judgment no. 18/11, moving closer to the then dissenting vote of Judge Vítor Gomes and to the judgment of the Supreme Administrative Court no. 830/11, all cited in the preceding paragraphs.

"Contrary to what happens in the taxation of income under personal income tax and IRC, in which the aggregate of income earned in a determined year is taxed (which implies that only at the end of the same can the tax rate be ascertained, as well as the bracket in which the taxpayer falls), in the case of autonomous taxation each expense carried out, considered in itself, and subject to a determined rate, is taxed, with autonomous taxation being ascertained independently of the IRC owed in each fiscal year, because it is not directly related to the achievement of a positive result, and therefore capable of being taxed.

Thus, and in the case of IRC, we are dealing with an annual tax, in which not each income received is taxed individually, but rather the aggregation of all income obtained in a determined year, the law considering that the taxable event is deemed to occur on the last day of the tax period (see article 8, no. 9, of the Corporate Income Tax Code).

Already as regards autonomous taxation in IRC, the taxable event is the carrying out of the expense itself, not being a complex fact, of successive formation over a year, but an instantaneous taxable event.

This characteristic of autonomous taxation refers us, thus, to the distinction between periodic taxes (whose taxable event occurs in a successive manner, by the passage of a determined period of time, as a rule annual, and tends to repeat itself in time, generating for the taxpayer an obligation to pay tax with regular character) and taxes of sole obligation (whose taxable event occurs instantaneously, arises isolated in time, generating on the taxpayer an obligation to payment with an avulsed character).

In autonomous taxation, the taxable fact that gives rise to the tax, is instantaneous: it is exhausted in the act of carrying out a determined expense that is subject to taxation (although, the determination of the amount of tax, resulting from the application of the diverse rates of autonomous taxation to the diverse acts of carrying out expenses considered, is to be carried out at the end of a determined tax period). But the fact that the liquidation of the tax is carried out at the end of a determined period does not transform it into a periodic tax, of successive formation or of a lasting character. That operation of liquidation translates itself only in the aggregation, for purposes of collection, of the aggregate of operations subject to that autonomous taxation, to which the rate is applied to each expense, with no influence from the volume of expenses carried out in the determination of the rate."

1. It is known that autonomous taxation is not equivalent to the non-deductibility of the cost of undocumented expenses and therefore the latter does not postulate the former, as results from the elementary principles of taxation of accrual income (net income) according to organized accounting."

The generality of doctrine does not depart substantially from the understanding of the courts. As RUI MORAIS refers, "it is a matter of taxation that applies to certain expenses of passive subjects, which are regarded as constituting taxable facts. It is difficult to discern the nature of this form of taxation and, moreover, the reason why it appears provided for in the codes of income taxes." (RUI DUARTE MORAIS, Notes on IRC, Almedina, 2009, pp. 202-203).

To the same effect, JOSÉ ALBERTO PINHEIRO PINTO asserts that "it is not strictly speaking IRC – which aims to tax the income of legal persons and not expenses incurred by them -, but the replacement of an "implicit" income taxation of natural persons, which is considered not directly enforceable". Also CASALTA NABAIS considers that it is "a taxation on expenses and not on income" (CASALTA NABAIS, Tax Law, 6th Ed., p. 614).

In sum, the jurisprudence of the superior courts and doctrine consider that autonomous taxation are autonomous taxable events that affect expenses. Thus, although formally inserted in the Corporate Income Tax Code, they concern a taxation distinct from income tax.

In truth, we could even fictionally revoke the Corporate Income Tax Code and publish a statute that taxes accounting expenses, as happens with vehicle expenses provided for in the current no. 3 of article 88, or, as we have seen, the taxation of confidential expenses (which are not deductible for purposes of IRC, pursuant to now al. b) of no. 1 of article 23-A).

Moreover, in this context, the eventual deductibility of autonomous taxation is not incompatible with the existence of rules that depend on the existence of fiscal losses, as provided for in no. 9 of article 88 of the Corporate Income Tax Code, in force at the date. In determining taxable profit, the verification of fiscal loss, entails the increase of deductible charges (larger fiscal loss) and concomitantly of autonomous taxation to be paid. Moreover, the "absurd conclusion of the existence of situations in which the passive subject would come to be more prejudiced by the fact of having more deductible charges[5]" occurs independently of the deductibility of autonomous taxation. Indeed, being, for example, the vehicle charge deductible, the fact of having more vehicles, will prejudice it in the sense of greater payment of autonomous taxation.

Moreover, the objectives of these rules do not aim to ensure the fiscal truth of the passive subject bearing income tax and autonomous taxation. Such fiscal regularity would be ensured by the rules of non-deduction of such expenses, pursuant to article 45 of the Corporate Income Tax Code (now 23-A). Autonomous taxation aims to tax the fiscal advantages that third parties could obtain, bringing us thus closer to the figure of liability by tax substitution about which the already cited Judgment of the CAAD of 20 September 2012, Case no. 7/2011, tells us.

In conclusion, there is no umbilical connection between the Corporate Income Tax Code and autonomous taxation.

c) Do autonomous taxation constitute specific anti-avoidance rules?

Without prejudice to the foregoing, we can still question whether, attending to their purposes, autonomous taxation are specific anti-avoidance rules that can be overcome, pursuant to article 73 of the General Tax Law?[6]

Specific anti-avoidance clauses aim to combat tax evasion in specific behaviors or practices, in risk situations, through the creation of rules that create rebuttable or irrebuttable presumptions, inversions of the burden of proof, non-recognition of certain costs. (SALDANHA SANCHES, The Limits of Tax Planning, Coimbra Editora, 2006, p. 199). There is, therefore, a comprehensive concept of specific anti-avoidance rules that operate both against the risk of tax avoidance and against tax fraud itself.

In the case, it is accepted by the generality of doctrine and jurisprudence that autonomous taxation aims to prevent abusive practices of remuneration of workers, managers and partners/shareholders of the company. As SALDANHA SANCHES refers, "In this type of taxation, the legislator seeks to respond to the admittedly difficult issue of the tax regime of expenses found in the zone of intersection of the personal sphere and the business sphere, so as to avoid in-kind remuneration more attractive for exclusively fiscal reasons or the concealed distribution of profits. The rule presents a characteristic similar to that which we will find in the legal sanction against undocumented costs, with an increase in rate when the situation of the passive subject does not correspond to a situation of fiscal normality." (SALDANHA SANCHES, Manual of Tax Law, 3rd Ed., Coimbra Editora, 2007, p. 406). "It is a taxation that is explained by the need to prevent and avoid that, through such expenses, companies proceed to the concealed distribution of profits, especially dividends which, thus, would be subject to IRC as profits of the company, as well as to combat fraud and tax evasion that such expenses occasion…"(CASALTA NABAIS, Idem, p. 614).

Given the content of article 88 of the Corporate Income Tax Code, we can conclude that it is an anti-avoidance rule of an irrebuttable nature. Indeed, from the legal provisions does not result that to the taxpayer be admitted the proof of the complete business purpose of the expenses or of a practice that did not have as its main objective the obtaining of a fiscal advantage. They are rules that function without any administrative intervention in which the law, in a clear and imperative manner, establishes the effects of determined facts or acts carried out by the passive subject.[7]

On the deductibility for purposes of IRC of autonomous taxation

Having defined the nature of autonomous taxation, it is incumbent to verify whether, given the rules for determining taxable profit provided for in the Corporate Income Tax Code, autonomous taxation are a deductible charge.

a) Deductible expenses in the Corporate Income Tax Code

Pursuant to no. 1 of article 17 of the Corporate Income Tax Code, taxable profit corresponds to the algebraic sum of the net result of the period, with the positive and negative changes in assets verified in the same period and not reflected in that result, determined on the basis of accounting and eventually corrected, pursuant to the Code (article 17 of the Corporate Income Tax Code).

In defining the rules for calculating taxable profit, the legislator was especially careful with the definition of expenses that can be fiscally deducted.

First, article 23 (in the wording in force at the date) only accepts as expenses those which are demonstrably indispensable for the realization of income subject to tax or for the maintenance of the source of income.

That is, in this case, autonomous taxation can only be deducted if the respective fiscal expenses are also deductible. Otherwise, we are dealing with an expense that is not indispensable for the obtaining of income.

Moreover, article 45 systematizes a set of limitations of diverse origins and reasons – whether by the very configuration of the tax or by the verification of frequent or abusive practices that distort results and which, in this manner, are sought to be prevented.

First, article 45, no. 1, al. a) establishes that the IRC and any other taxes that directly or indirectly affect profits are not deductible. That is, IRC is not deductible which seems logical: the tax to be paid should not be deducted from the same tax.

The question will be whether autonomous taxation constitute a tax that directly or indirectly affect profits. Given the foregoing on the nature of autonomous taxation, the answer is negative.

Thus, we can assert that in a literal interpretation of al. a) of no. 1 of article 45, there is no impediment to autonomous taxation being deductible to taxable profit.

The law does not limit itself, however, only to the letter of the law.

This is exactly what is affirmed in article 11, no. 1 of the General Tax Law: "In determining the meaning of tax rules and in qualifying the facts to which they apply are observed the general rules and principles of interpretation and application of laws".

For such, we should resort to other available elements of legal interpretation, such as extra-literal elements: the historical, the systematic and the teleological, to which article 9 of the Civil Code points.

In systematic terms, the constitutional rules and the principle of accrual income itself seem to require that autonomous taxation should be taxed, under penalty of violation of the principle of taxation of real income. Indeed, the non-deductibility of an actual expense of the passive subject should be duly sustained by fundamental tax objectives that legitimize a derogation from the principle of taxation of real income.

To assess such objectives, it is necessary to attend to the purposes that sustained the creation of the autonomous taxation regime.

We recall, thus, the argument presented by the Respondent: "inasmuch as autonomous taxation aims to reduce the fiscal advantage achieved with the deduction to taxable profit of the costs on which it applies and also to combat tax evasion that this type of expenses, by their nature, promotes, it cannot itself through deduction to taxable profit as a cost of the fiscal year constitute a factor in reducing that diminishment of advantage intended and determined by the legislator."

Saving better opinion, the deduction to taxable profit does not compromise the objectives and purposes of autonomous taxation and constitutes, in this concrete case the guarantee of respect for the principle of capacity to contribute. Let us see.

As a preliminary matter, it must be taken into account that, by its intrinsic nature, any deduction of tax to taxable profit, reduces the fiscal burden to be borne by the taxpayer. The deduction of taxes on assets or the stamp tax reduces the effective rate of tax of the passive subject. This does not constitute any diminishment or violation of the objectives and purposes of the deducted tax but only the operationalization of the deduction of expenses borne for calculating taxable profit.

Assuming this premise, it is undeniable that the deduction of autonomous taxation reduces the effective taxation of the company but will it compromise the purposes of combating fiscal evasion and undue fiscal advantage of third parties? We do not believe so and, it should be said, neither does the Respondent allege so.

First, the deduction of autonomous taxation does not eliminate the fiscal burden borne by the taxpayer: the tax owed as a result of autonomous taxation will always be clearly superior to the eventual reduction of IRC obtained with its deduction.

Second, in this concrete case, it was not demonstrated that the eventual deduction compromises the purposes of combating tax evasion and anti-avoidance of the rule. As we have seen, the numerous amendments to the regime allow one to conclude that autonomous taxation aims not only to combat tax evasion but configures a mechanism of tax substitution or even to collect more tax revenue.

This latter objective is, of course, not a legitimate reason to found the derogation of the principle of taxation of real income.

Third, constituting autonomous taxation an exceptional regime within the constitutional framework of income taxation, should be subject to restrictive interpretation and fit within the aggregate of tax rules provided for in our legal order, namely as to the calculation of taxable profit of passive subjects of IRC who exercise as their principal activity an activity of a commercial, industrial or agricultural nature.

Lastly, the non-recognition for tax purposes, at the seat of the IRC passive subject, of a fiscal charge that aimed, essentially, to penalize the eventual benefits obtained by third parties, would constitute a clear violation of the principles of justice and proportionality.

Thus, expenses with autonomous taxation relating to charges deductible for purposes of IRC should be deducted to taxable profit, pursuant to article 17 and 23 of the Corporate Income Tax Code, namely expenses with vehicles, representation expenses, allowances and compensation for travel in the employee's own vehicle.

As for the request for indemnity interest, being clear the recognition of the illegality of the tax act, this (illegality) is, naturally, imputable to the Tax Administration after the tacit rejection of the administrative complaint filed.

Thus the claimant is entitled to payment of indemnity interest pursuant to article 43-1 of the General Tax Law and 61 of the Code of Tax Procedure and Process, in the part corresponding to the tax act declared illegal.

III. DECISION:

The factual matter is as transcribed above.

The tribunal is competent and the parties are legitimate.

In view of the foregoing, it is decided:

• Not to uphold the exception of lack of timeliness of the request;

• To uphold in part the request for declaration of partial illegality and consequent partial annulment of the self-assessment act for the year 2010, to the extent corresponding to the non-recognition of expenses with autonomous taxation relating to charges deductible for purposes of IRC, to which corresponds the value of € 22,707.88 of IRC and Municipal Surcharge improperly levied.

• To order the Respondent to pay indemnity interest, computed from 30 September 2013, the date of the tacit rejection of the administrative complaint.

The case is assigned the value of € 29,458.56 (value indicated and not contested), and the corresponding arbitration fee value of € 1,530.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings.

Costs to be borne by the Tax Authority and Customs and by the Claimant, in proportion to the extent of their defeat.

Notify.

Lisbon, 9 February 2015

(Amândio Silva)

[1] JORGE LOPES DE SOUSA, Code of Tax Procedure and Process, Vol. 1, 2006, p. 782.

[2] By virtue of the renumbering of the Code, this article became article 91, with the amendments introduced by Decree-Law no. 198/2001, of 31 July and article 88 with the reform of the Corporate Income Tax Code, approved by Decree-Law no. 159/2009, of 13 July.

[3] We would further add that article 88 would be further amended by Law no. 64-B/2011, of 30 December and by Law no. 2/2014, of 16 January.

[4] CASALTA NABAIS, "Investing and Taxing: a symbiotic relationship? In Studies in Honor of Professor Doutor Alberto Xavier, Vol. I, Almedina, 2013, p. 761.

[5] Judgment of the CAAD, of 27 June 2014, Case no. 59/2014.

[6] To this effect, decided the learned Judgment of the CAAD, of 24 February 2014, Case no. 209/2013-T.

[7] Similarly, the rules limiting expenses with the onerous transfer of capital shares provided for in nos. 3 to 5 of article 23 of the Corporate Income Tax Code (in the version prior to Law no. 2/2014, of 16 January) operate.