Summary
Full Decision
ARBITRATION DECISION
A…, with Tax Identification Number …, resident in …, no. …- …, …-… Lisbon, having been notified of the supplementary income tax assessment (IRS) no. 2017 … and respective Compensatory Interest, in the total amount of € 75,311.52 and of the Account Settlement Note no. 2017…, in the amount payable of € 72,647.28, until 27/02/2017, following a tax inspection action (doc.1), filed a request for the constitution of an arbitral tribunal and for an arbitral ruling against the said assessment, requesting the consequent reimbursement of the 2013 IRS overpaid and of the indemnificatory interest at the legal rate.
I - INTRODUCTION AND CASE MANAGEMENT
The additional IRS assessment partially challenged originates from corrections made by the Tax Authority with respect to the calculation of seniority for the purpose of calculating the value of the indemnification subject to tax.
The Claimant timely presented a petition for arbitral challenge against the said additional assessment, under the terms of Articles 2 and 10 of the RJAT - Legal Regime of Arbitration in tax matters, approved by Decree-Law no. 10/2011, of January 20.
No prior administrative complaint was filed.
The controversial issue lies in the fact that the Claimant worked for two different banking entities and the Tax Authority (AT) understands that only the service time counted in the last debtor entity and with which she concluded an agreement for termination of functions is relevant for counting her seniority and, therefore, for calculating the indemnification for termination of functions, and consequently the value of the indemnification not subject to IRS.
The decision regarding the corrections made by the Tax Authority, in the amount of € 242,913.42, was notified to the Claimant by Official Letter no. 0I2016…, of 27/12/2016.
Not accepting this understanding, the Claimant filed the present request for Arbitral Appeal on 03/05/2017, timely, pursuant to paragraph a) of Article 10 of Decree-Law no. 10/2011, of January 20.
The Respondent is the (AT) - Tax Authority and Customs Service.
The Claimant did not designate an arbitrator, and CAAD proceeded with the designation of Dr. José Pedro Carvalho as Presiding Arbitrator and as arbitrator members, Dr. Ana Teixeira de Sousa and Dr. José Rodrigo de Castro, all on 29/06/2017.
The collective arbitral tribunal was constituted on 14/07/2017.
The parties are legitimate and are duly represented and the case is proper.
II - REPORT
Having presented a brief account of the initial history of the case under analysis, it is important to know the relevant facts for the purposes of applying law to facts.
III - FACTS
III.I - Proven Facts
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The Claimant was subject to an administrative procedure of tax inspection, of an internal nature, with no. OI2016…, in light of alleged anomalies detected in income subject to taxation, relating to the year 2013 and regarding the value of the indemnification paid by B…, due by termination of the employment contract, as it considered the Claimant's seniority to be 25 years, whereas the Claimant exercised functions at that banking entity for 8 years.
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Following the said agreement for termination of functions, concluded on 23/08/2013 between B… and the Claimant, with effect as of 31/12/2013, the former paid to the latter, by way of global pecuniary compensation for the revocation of the employment contract, the gross amount of € 186,947.10.
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The seniority of the Claimant considered by B… in the Contract Revocation Agreement was that corresponding to all service time rendered by her in the Banking Sector.
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Given that the Claimant had only exercised functions at B… for 8 years, from 01/01/2006 to 31/12/2013, the Respondent, not agreeing with this understanding, notified the Claimant to voluntarily proceed to correct her 2013 IRS declaration, increasing the value of the indemnification subject by € 125,061.42, based on the application of the value of average monthly remuneration of € 7,357.74 X 8 years, which would determine a value of exempt indemnification of € 58,882.08 and an indemnification to be taxed of € 129,665.02, from which resulted, considering the amount of indemnification paid by B…, of € 188,547.10, an indemnification to be taxed of € 125,061.42, given that the Claimant had already declared in Declaration Form 3 of 2013 IRS as subject indemnification the amount of € 4,603.60, that is:
Ø € 188,547.10 - (€ 129,665.02 - € 4,603.60) = € 125,061.42
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From the declaration of the Claimant's IRS, regarding the year 2013, submitted by the Taxpayer, it follows that in that fiscal year income from Category A was declared in the amount of € 122,826.48, relating to payments made by B…, which include the indemnification of € 4,603.60.
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From the Inspection Report (pg. 10) it appears that this amount of € 4,603.60 was considered by the Inspection in the following terms:
| Indemnification Paid | Years of Service | Average Monthly Remuneration | Exempt Indemnification | Indemnification Taxed |
|---|---|---|---|---|
| (a) | (b) | (c) | (d=b×c) | (e=a-d) |
| € 188,547.10 | 25 | € 7,357.74 | € 183,943.50 | € 4,603.60 |
- Considering that the taxpayer omitted part of the income earned in the said Declaration Form 3, the Tax Inspection proceeded to determine the income it considered omitted, in the following terms:
| Indemnification Paid | Date of Entry to B… | Date of Exit from B… | Service Time | Exempt Indemnification | Indemnification to Be Taxed | Indemnification to Be Taxed |
|---|---|---|---|---|---|---|
| (a) | (f) | (g) | (h=g-f) | (i=h × c*) | (j=a-i) | (k=j-e**) |
| € 188,547.10 | 01-01-2006 | 31-12-2013 | 8 years | € 58,882.08 | € 129,665.02 | € 125,061.42 |
Taking into account that: *c = € 7,357.74 (Average Monthly Remuneration); **e = € 4,603.60 (Indemnification Taxed)
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The Tax Inspection concluded that the taxable part of the indemnification earned was € 129,665.02 and not the amount of € 4,603.60 declared by the Claimant in Form 3 of 2013 IRS, but because she declared the latter, it considered that the amount of € 125,061.42 remained to be taxed.
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As the Claimant did not make any regularizations, as per the notification made to her, she was then notified, for purposes of prior hearing, of the Conclusions of the Tax Inspection Report on 15/2/2013, which had been subject to a statement of agreement by the Director of the UGC, of 13/2/2013.
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She was further notified that from the arithmetic corrections to taxable matter and/or tax, without resorting to indirect assessment, whose grounds are contained in the report itself, she would later be notified of the respective assessment, as well as of the appropriate means of defense, which occurred through Official Letter no. …, of 27/12/2016, which informed her that, pursuant to Article 65, no. 4 of the IRS Code, the Claimant's income for the year 2013 was altered to € 242,913.42, as well as of the supplementary IRS assessment no. 2017 … and respective Compensatory Interest, in the total amount of € 75,311.52, of which she could file a complaint or challenge within the terms and deadlines established in Articles 140 of the IRS Code and 70 and 102 of the CPPT - Tax Procedure and Process Code, and of the Account Settlement Note no. 2017…, in the amount payable of € 72,647.28, until 27/02/2017.
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In the period between September 18, 1989 and December 31, 2005, the Claimant was an employee at C… (formerly Bank D…).
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The Claimant was an employee at the banking institution "B…", between 01-01-2006 and 31-12-2013.
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In Clause 7 of the employment contract between the Claimant and Bank B…, the latter guarantees to her the seniority arising from service rendered to other Credit Institutions, since 18/09/1989, documentarily proven, for the following purposes:
a) For purposes of the B… Pension Fund, the First Party (the Bank) shall take into account the service time rendered to other Credit Institutions, with the amount of the retirement pension for presumed invalidity calculated according to the regime provided for in the ACTV of bankers.
b) The part of the retirement corresponding to the service time rendered by the Second Party (the Claimant) to the First Party (the Bank) shall be calculated under the terms of Clause 6 of the B… Pension Plan.
c) Service time rendered to other Credit Institutions prior to the signing of this contract shall also not be taken into account for calculating the number of longevities.
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From the same contract, it also appears (Clause 13) that: "In the event of omission, the ACTV for the Banking Sector shall apply, with the exceptions contained in the BTE, 1st Series, no. 42, of 15/11/94 and general labor law".
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From the Agreement for Termination of Functions at B…, for Revocation of the employment contract, concluded between this institution and the Claimant on 23/08/2013, but with effect as of 31/12/2013, it appears, in nos. 2 and 4 of Clause 15 - Taxes and Contributions, that:
"1. …
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Taking into account the applicable terms of Clause 17 of the ACT of the Banking Sector (ACT) and in light of the interpretation sustained in the judgments of the Central Administrative Court South of May 11, 2004 (P.º 06002/01) and, in particular, of September 21, 2010 (P.º 03478/10), both parties acknowledge their agreement in the determination of the Seniority of the Employee by counting his service time in banking entities indicated in the said clause of the ACT, for purposes of Article 2, no. 4, paragraph b) of the Personal Income Tax Code, as amended by Article 108 of Law no. 64-B/2011, of December 30".
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…´
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For purposes of the last part of no. 2, and with respect to the amount of compensation provided for in no. 1 of the second clause, the Employee expressly declares that he is not covered by the provisions of no. 7 of Article 2 of the IRS Code, that is, that in the last 5 years he has not benefited from the regime of total or partial exclusion from taxation provided for in paragraph b) of no. 4 of the same provision.
-
…"
III.II - Unproven Facts
Apart from facts contradictory or incompatible with facts given as proven, nothing else remained to be proven, with interest for the proper decision of the case.
III.III - Reasoning for Proven and Unproven Facts
With respect to the factual matter, the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and discriminate the proven from the unproven matter (see Article 123, no. 2, of the CPPT and Article 607, no. 3 of the CPC, applicable pursuant to Article 29, no. 1, paragraphs a) and e), of the RJAT).
In this manner, the relevant facts for the judgment of the case are chosen and delimited according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (see former Article 511, no. 1, of the CPC, corresponding to the current Article 596, applicable pursuant to Article 29, no. 1, paragraph e), of the RJAT).
Thus, taking into account the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary evidence and the administrative file joined to the proceedings, the facts listed above were considered proven, with relevance to the decision.
Allegations made by the parties, and presented as facts, consisting of strictly conclusive statements, not susceptible to proof and whose veracity is to be assessed in relation to the concrete factual matter above established, were neither given as proven nor unproven.
Regarding the value of the compensation for termination of the employment contract paid by the Bank, from Declaration Form 10 delivered by Bank B…, it appears that the indemnification paid was € 188,547.10, this value being consistent with that declared in Form 3 of IRS by the Claimant, but it is not what appears in the below-mentioned Clause 2, no. 1 of the Contract Revocation Agreement and transferred to the Claimant, which would have been € 186,947.10 and not € 188,547.10.
In these circumstances, taking into account that the Respondent, in arbitral proceedings, did not contest the amount indicated by the Claimant, and in light of the rules of burden of proof, the said amount was considered proven.
IV - OF THE ARBITRAL CHALLENGE
Because the Claimant did not accept the result of the notifications made to her, specifically for additional payment of the amount of € 72,647.28, as she considers that it suffers from a calculation error regarding seniority and, consequently the calculation of the value of the indemnification paid to her and to be taxed, she filed the present Arbitral Appeal.
V - OF THE LAW
Thus, it is important to clarify, in light of the law and Jurisprudence, the following:
1. Of the applicable tax law norms regarding termination of employment contract
Article 2, no. 2, paragraph b) and its nos. 4 to 7 of the IRS Code, in effect on the date of revocation of the employment contract concluded between this institution and the Claimant on 23/08/2013, but with effect as of 31/12/2013, establish the tax rules inherent to indemnifications subject to IRS taxation.
With respect to the situation in question, it is from no. 4 and paragraph b) of no. 2 of Article 2 that the applicable tax rule results, to determine the Claimant's seniority on the date of termination of functions and, consequently, the taxable indemnification, given the amount paid.
As for seniority and taxable value, which is the relevant tax part in the case at hand, it follows from the said paragraph b) that "In the part exceeding the value corresponding to the average value of regular remuneration with the character of compensation subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or of performance of functions in the debtor entity, in other cases, except when (…)".
From which it is concluded that, for application of this tax rule, it is important to know:
a) the average value of regular remuneration with the character of compensation subject to tax, earned in the last twelve months - normally 14 remuneration periods;
b) The number of years or fraction of seniority in the entity owing the indemnification - with whom, therefore, the agreement for termination of work was concluded;
c) Similarly, the number of years of performance of functions in other cases - that is, in the case of public functions.
The rule of Article 11 of the LGT - General Tax Law, on interpretation of tax rules, is also cited, which in the Tribunal's view shall be applicable when the tax legislator has not defined a particular concept - as is the case with seniority.
2. Of the eventual application of other rules for purposes of counting seniority
With respect to rules of the Labor Code, the Respondent notes that there is no regulation therein about seniority, but only through collective regulation are the criteria for indemnifications (compensations) and the procedures and notice periods regulated.
And as for the invoked Clause 17 of the ACT - Collective Labor Agreements of the Banking Sector, on Determination of seniority, the Respondent understands that beyond the indemnification regime by substitution of reinstatement arising from the illegality of dismissal, such instruments do not apply to compensations/indemnifications by expiration of the employment contract (…).
The Claimant, in turn, argues that having always worked in the Banking Sector, first at C… (formerly Bank D…), from 18/09/1989 to 31/12/2005, and then at B…, from 01-01-2006 to 31/12/2013, it is the sum of all this time, of 24 years and 4 months, that should be considered as seniority in service on the date of termination of the contract at this last banking institution.
The Claimant sustains this understanding on the fact that Bank B… is a party to the Collective Labor Agreement of the Banking Sector (ACT), an instrument of collective labor regulation, whose last amendment was published in the BTE, 1st Series, no. 20, of May 29, 2011.
And that also the previous banking institutions where she worked, Bank D… and C…, subscribed to the ACT of the Banking Sector, as per their respective employment contracts attached to the file.
And that, thus being, and by force of what is contained in no. 1 of Clause 2 of the ACT of the Banking Sector, namely that "This Collective Labor Agreement binds the Credit Institutions, Financial Societies and other public entities that subscribe to it (…) as well as all workers in their service represented by the signatory Unions", compliance with this rule shall be mandatory.
And further that, according to the Claimant, also by what is provided in Clause 17 of the ACT of the Banking Sector, regarding the seniority of the worker, in the following terms: "1. For all purposes provided for in this Agreement, the seniority of the worker shall be determined by counting the service time, rendered in Portugal, in Credit Institutions with activity in Portuguese territory", seniority is global in the banking sector.
The Claimant further argues that for this reason Bank B…, taking into account what is determined in the said instrument of collective labor regulation, as a source of law, considered, in counting service time, all service time rendered by her in the Banking Sector, by force of Clause 17 of the Banking Sector ACT and in light of the interpretation sustained in the Judgment of the Central Administrative Court South, of 11/5/2004 (Process 06002/001) and, in particular, of 21/09/2010 (Process 03478/10), as set forth in no. 2 of Clause 15 of the Agreement.
The Claimant acknowledges that the concept of seniority is not defined in Tax Law, which therefore requires recourse to what is provided in labor laws, in light of no. 2 of Article 11 of the LGT, when it states: "Whenever, in tax rules, terms proper to other branches of law are employed, they must be interpreted in the same sense as they have there, unless otherwise derived from interpretation and application of the law".
Wherefore she considers that the Tax Authority and the Lisbon Tax Services made a restrictive interpretation of the rule of Article 2, no. 4 of the IRS Code, limiting the rights of the appellant to the service time rendered in the entity where she terminated her employment contract.
And stating that the meaning of seniority is clear, even considering that collective regulation instruments, among others, present various qualifiers to labor seniority, the Tax Authority says that "the truth is that the Labor Code does not define what seniority is nor presents a univocal qualification of it, but there is clearly prevalent the notion of 'seniority in the company', including regarding termination of the employment contract".
And the Respondent refers to Article 339 of the Labor Code of 2009, which interpreting the expression "indemnification" also as "compensation", regarding termination of the employment contract, states that collective labor regulation instruments may regulate the criteria for definition of indemnifications (compensations) and the procedures and notice periods, and may also regulate the values of indemnifications (compensations), but in this case, within the limits fixed in the Code - matters excluded from the parties in employment contracts.
With respect to the invoked Clause 17 of the Collective Labor Agreements of the Banking Sector, which refers to "Determination of seniority", the Respondent concludes that compensations/indemnifications for expiration of the employment contract, for dismissal for objective causes, for termination of the contract by the worker based on an unlawful act of the employer, or for agreement of distrate/revocation of the employment contract, are excluded from the normative effects emerging from this clause, as they do not integrate all the effects provided for in such instruments.
And reinforces its understanding with the understanding that "the legal regime of Article 2, no. 4 of the IRS Code underlies a clear anti-abuse purpose, characteristic of special clauses preventive of tax evasion - a purpose that has special reason to be, as agreements would not in any case be acceptable that disposed about labor seniority recognizing merely artificial seniorities and imposing such recognition for purposes of negative delimitation of the incidence of tax".
The Tribunal understands that based on the norms embodied in Labor Law and in the ACT, alone, they may only be called upon if some imperativeness derives therefrom.
See also what is referred to in the mentioned
"Clause 17 of the ACT
Determination of Seniority
- For all purposes provided for in this Agreement, the seniority of the worker shall be determined by counting the service time rendered as follows:
a) All years of service, rendered in Portugal, in credit institutions with activity in Portuguese territory;
….
But see what Jurisprudence understands
3. Of the Jurisprudence
Various judgments were cited by the parties, of which we provide a summary of the following:
The Claimant refers to the Jurisprudence of the Judgments of the Central Administrative Court South, Processes no. 06002/01, of 11/05/2004, no. 03748/10, of 21/09/2010 and 05974/12, of 12/03/2013, which she says defend her position.
The Respondent, in turn, bases her understanding on what is provided in no. 4 of Article 2 of the IRS Code, which is the imperative rule and which has, namely, the character of an anti-abuse rule, to prevent the improper use of other applications.
And that in the entity owing the indemnification, Bank B…, the service time rendered by the Claimant was only 8 years, being irrelevant any agreement that may have been concluded with the employer entity, in the sense of considering in future "indemnifications", by employment contract or arising from collective regulation instruments.
As for Jurisprudence regarding seniority, the Respondent refers to the content of the Judgment of the Central Administrative Court South, of 12/03/2013, P.º 05971/12, on seniority of the banking worker, from which it is extracted that the Tribunal considers it incontestable "that the concept of seniority in the fattispecie of the rules of the Labor Code that establish the said criteria for definition of indemnifications (or compensations) within the regime of termination of the employment contract is that of seniority in the company (…)".
And that neither are relevant any contractual consensuses or unilateral admissions that do not result directly from the application of legal rules or collective conventions that have the consequence of extending seniority.
And that with respect to the extension of the concept of seniority, the Respondent refers to no. 10 of Article 2 of the IRS Code, which is the only one that permits counting seniority in previous employing entities provided they are in a relationship of dominance or group, as they fall within the concept of employing entity.
With respect to the cited judgment of the Central Administrative Court South, in Process no. 06002/01, of 11/05/2004, cited by the Claimant, the Tribunal held the challenge to be well-founded on the grounds that "the new company A… continued part of the activity previously developed by (F…), giving continuity to a part of the productive organization that was previously pursued by it, which resembles a true transfer of establishment (case in which transferred workers do not lose seniority)", wherefore "it would be unjust to give a restrictive interpretation to the concept of seniority so as not to take into account the service time rendered at that F… when the employment contract itself safeguarded that worker's right" - which the Respondent comments in the sense that:
"although detecting in the said rule its own sense of the concept, they then obscured it for, without realizing the absurdity in which they fell, justify with no. 2 of Article 11 of the LGT the search for a so-called less restrictive sense".
Also with respect to the judgment of the Central Administrative Court South of 10/03/2013, P.º 05971/12, the Respondent objects to what was decided by extending the notion of seniority of the banking worker to what is established in the ACT.
Finally, as to the arbitration decision handed down in Process P.º 616/2015-T, it is stated therein that "as for the application of collective conventions, the basic delimiting rule consists in the so-called 'principle of double affiliation' (see Article 496 of the Labor Code) which establishes, in summary, that instruments of collective labor regulation apply only to workers affiliated with a union association that, directly or indirectly, have participated in collective bargaining and who render work to an employing entity that also participated in the same bargaining. Thus it is necessary, on one hand, that the employer be a member of the employer association that is a party or have been a party itself, and on the other hand, that the worker be affiliated with a signatory union. For this reason, in the case at hand, the ACT is applicable only to workers who are affiliated with the unions that are parties to it, with the remaining workers not being covered by its scope of application".
And the Respondent states that the Claimant did not prove her affiliation to any of the mentioned unions, which, in itself, is a reason excluding the invocation of Clause 17 of the ACT of the banking sector.
Quid Juris?
The Tribunal recognizes that according to the tax rule of Article 2, no. 4 of the IRS Code, the calculation of the value of the indemnification not subject to tax takes into account "the average value of regular remuneration with the character of compensation subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority or of performance of functions in the debtor entity, in other cases (…)"
And that the sense of this rule, although it seems clear and without ambiguous interpretations, this Tribunal, a priori, considers that seniority could result from the following understanding:
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Number of years or fraction of seniority in the debtor entity (the last where she worked);
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Number of years or fraction of seniority in performance of functions (in the public sector of the State).
But should seniority always be considered in this manner? Service time or performance of functions in the last entity - the debtor, or in the case of the banking sector, all service time rendered in other credit institutions?
This is the relevant question.
Regarding the Judgments cited by the parties, they are hereby given as entirely reproduced, as well as the references made to them by the parties.
The Tribunal brings to bear the Judgment of the Central Administrative Court South, P.º 03748/10, of 21/09/2010, which it is important to consider what is expressed therein, in particular in the following sense: "the tax legislator not having defined for this purpose the concept of seniority of the worker, we must resort to the content of this concept as it exists in labor law, it being known that it is established doctrine (now enshrined in Article 11 of the LGT) that whenever tax rules employ terms from other branches of law, they must be interpreted in the same sense as they have there, except if otherwise directly derives from the law".
And further in the same Judgment it is stated that "labor law provides a broad concept of seniority by permitting that service time and category already achieved in other employing entities be taken into account, so that it be recognized without prejudice to the seniority acquired there, as such is not prohibited by law (see Articles 129, no. 1, paragraph j), and 396 of the Labor Code) nor by principles of good faith, being a practice regarded in some instruments of Collective Labor Regulation and in the customs of the profession of work and enterprises".
And further there it is stated that "the controversial issue rests on the problem of knowing what seniority should be taken into account in the case where seniority prior to admission to the company has been established between the employing entity and the worker, it being necessary, first and foremost, to clarify that, as appears to be unanimous in labor law, there are three sources that could establish this seniority, namely (having as background the principle of freedom of contract - see Article 405 of the Civil Code):
1- The Law;
2- The Individual Employment Contract;
3- Instruments of Collective Labor Regulation".
The Tribunal now refers to the recent Judgment of the Plenary of the Labor Court Section, relating to an Appeal for Uniformization of Jurisprudence, for alleged contradiction between judgments, Process 0666/16, of 25/01/2017, which resolves the question of seniority to be considered when the worker performs functions in two banking institutions.
It is stated in the Learned Judgment, in the part that matters for the proceedings, that "In 2012, Clause 2 of the ACT of the Banking Sector established that: This Collective Labor Agreement is applicable throughout the national territory, within the banking sector, and binds the Credit Institutions and Financial Societies that subscribe to it (hereinafter generically called Credit Institutions or Institutions), as well as all workers in their service affiliated with the Unions of Bankers of the Center, North and South and Islands, represented by the signatory FEBASE-Federation of the Financial Sector and hereinafter called Unions, covering 26 employers and estimated at 54,300 the workers covered (…)".
It further states that "the R… was not, on the date of conclusion of the employment contract … nor on the date of payment of the indemnification, affiliated with any of the Bankers' unions …"
And further on… it further states that "the R… not being affiliated with the Union of Bankers of the Center, North and South and Islands (neither on the date of conclusion of the employment contract (…) nor on the date of payment of the indemnification (…) and not having, on the other hand, been issued any Extension Order (Article 514 of the Labor Code), the only seniority to be considered in the calculation of the indemnification for termination of the employment contract shall be the seniority of the R… in B…."
And further that "as this is the only amount that the employing entity was obliged to pay under the rules of labor law, it is only that amount that is not subject to IRS, pursuant to no. 4 of Article 2 of the IRS Code: that is, the amount of indemnification received shall be subject to tax, in the part exceeding the value corresponding to the average value of regular remuneration with the character of compensation subject to tax, earned in the last 12 months, multiplied by the number of years or fraction of seniority in the employing entity - debtor (that is … years at B….)".
And concludes by noting that "It is, then, a question of determining the concept of 'seniority' for purposes of negative delimitation of the incidence of IRS in the indemnification for termination of employment contract, pursuant to the provisions of Article 2, no. 4 of the IRS Code".
…
Now, what is noted from the content of the Employment Contract concluded between the Claimant and B… on 14/12/2005, is that in its various Clauses it refers to the ACTV for the Banking Sector, whether regarding the Group in which it falls, as well as working hours, deductions and the vacation period.
As for seniority, it is stated in Clause 7 that the Bank guarantees to the Second Party the seniority arising from service rendered to other Credit Institutions, since 18/09/1989, documentarily proven, but only for the following purposes:
a) For purposes of the B… Pension Fund, the First Party (the Bank) shall take into account the service time rendered to other Credit Institutions, with the amount of the retirement pension for presumed invalidity calculated according to the regime provided for in the ACTV of bankers.
b) The part of the retirement corresponding to the service time rendered by the Second Party (the Claimant) to the First Party (the Bank) shall be calculated under the terms of Clause 6 of the B… Pension Plan.
c) Service time rendered to other Credit Institutions prior to the signing of this contract shall also not be taken into account for calculating the number of longevities.
And finally, in the relevant part, Clause 13 is transcribed - Applicable Norms, in which it is stated: "In the event of omission, the ACTV for the Banking Sector shall apply, with the exceptions contained in the BTE, 1st Series, no. 42, of 15/11/94 and general labor law".
On the other hand, as for the Agreement for Revocation of the Employment Contract, concluded on 23/8/2013, between the Claimant and B…, the following are transcribed, as relevant, nos. 2 and 4 of Clause 15 - Taxes and Contributions:
"1. …
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Taking into account the applicable terms of Clause 17 of the ACT of the Banking Sector (ACT) and in light of the interpretation sustained in the judgments of the Central Administrative Court South of May 11, 2004 (P.º 06002/01) and, in particular, of September 21, 2010 (P.º 03478/10), both parties acknowledge their agreement in the determination of the Seniority of the Employee by counting his service time in banking entities indicated in the said clause of the ACT, for purposes of Article 2, no. 4, paragraph b) of the Personal Income Tax Code, as amended by Article 108 of Law no. 64-B/2011, of December 30".
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…´
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For purposes of the last part of no. 2, and with respect to the amount of compensation provided for in no. 1 of the second clause, the Employee expressly declares that he is not covered by the provisions of no. 7 of Article 2 of the IRS Code, that is, that in the last 5 years he has not benefited from the regime of total or partial exclusion from taxation provided for in paragraph b) of no. 4 of the same provision.
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…"
VI - From the totality of the facts mentioned and given as proven and the legal provisions cited, this Tribunal concludes the following:
As has been widely reaffirmed by jurisprudence "It is exclusively in light of the reasoning expressed by the Tax Authority when it made the additional assessment (…) that the legality of this tax act should be assessed." (Judgment of the Supreme Administrative Court of 23-09-2015, Process 0134/11).
From the reading of the Tax Inspection Report, it results without margin for doubt that the additional assessment, now subject of the present arbitral action, is based on the understanding that for purposes of the exemption provided for in the IRS Code, now in question, the seniority that results from a conventional source, namely from ACT, cannot be relevant.
The Claimant bases her claim, in sum, on the understanding that, by force of the ACT for the banking sector, the amount paid to her under the terms provided in the agreement for termination of the employment contract she maintained with B…, was that which was owed to her.
Thus, within the framework of the jurisprudence cited by her, the non-taxation provided for in paragraph b) of no. 4 of Article 2 of the CIRC applicable will encompass seniority as it results from the Labor Law, broadly considered, understanding that "in labor law, there are three sources that could establish this seniority, namely (having as background the principle of freedom of contract - see Article 405 of the Civil Code):
1- The Law;
2- The Individual Employment Contract;
3- Instruments of Collective Labor Regulation."[1]
Resulting, based on the alleged mandatory application of the ACT for the banking sector, that the seniority to be considered for purposes of termination of her employment contract shall be that corresponding to the service time rendered by her in the banking sector, should the indemnification calculated on this basis be entirely excluded from taxation in IRS.
First and foremost, with regard to the said jurisprudence, this Tribunal judges that it cannot be accepted without reservations, as, having implicit therein that the seniority to be considered for purposes of the rule of paragraph b) of no. 4 of Article 2 of the CIRC applicable, may result, even before collective regulation instruments, from the Individual Employment Contract, ends up completely emptying the restrictive purpose of the rule in question, in that the parties at any time could, pursuant to their freedom of contract, alter the contract, so as to broaden the concept of seniority (providing, for example, that each year of work counts as 2 or 3 of seniority), it not being understandable, thus, that the employment contract could be the source of the "seniority" provided for in no. 4 of Article 2 of the IRS Code due to the complete variability and randomness as well as possible discrimination that such would imply.
It is further the case that the rule of the IRS Code in question, with the restriction in question, aims to ensure some equality in that same restriction, aiming at the scope of non-subjection being tendentially equal for all workers, in light of an objective criterion, which would be incompatible with the permission of broadening the same by way of contract, at least by individual contract.
The position of the Claimant, and of the jurisprudence that sustains it, seems to place the emphasis on the scope of the breadth of the obligation of payment of the debtor entity, and the correlative right of the IRS taxpayer, when it shall not be clear that this is what is underlying the rule in question. This rule does not intend to assure that the entire amount to which the worker is entitled by force of termination of the employment contract is not taxed, but intends to limit objectively the non-subjection of such income to IRS, in light, as stated, of an objective criterion, tending to assure equality in taxation.
While understanding the concern to ensure that there are no workers prejudiced, in cases of change of employing entity, without receiving any compensation in the termination of the relationship with the first entity, which would benefit from the non-subjection in question, it seems that such situations shall be safeguarded by Law, and the Tax Authority recognizes it (see information cited in the Tax Inspection Report, in the assessment of the right to hearing), based on Article 285 of the Labor Code, and should not, in any case, such situations found benefits unjustified for other workers, by force of conventional changes (singular or collective) to the concept of seniority.
Nevertheless, in the situation sub judice it will not be a case of application of the jurisprudence cited by the Claimant, as the assumptions for the application of the Collective Convention on which she bases her claim are not demonstrated, based on that jurisprudence.
Indeed, the employment contract entered into between the Claimant and B… does not provide, directly, that the seniority for purposes of compensation for termination of the employment contract is that resulting from the ACT, and the very provision for application of the ACT to cases omitted suggests that the requirements for its binding application to the parties are not met, hence the need for the specific provisions for application, contained in the said employment contract.
Thus, an essential premise of the thesis advocated by the Claimant is lacking, namely that the parties in the employment contract – the Claimant and B… – were obliged, by force of the ACT for the banking sector, to calculate the compensation for seniority, on termination of the employment contract, in accordance therewith.
Therefore, the present arbitral action should be entirely dismissed as to the main claim and as to the ancillary claim (for indemnificatory interest) as the assumption of the Claimant's thesis is not demonstrated, namely the binding application of the ACT, as occurred in the arbitral process 616/2015T, of CAAD, where one can read:
"as for the application of collective conventions, the basic delimiting rule consists in the so-called 'principle of double affiliation' (see Article 496 of the Labor Code) which establishes, in summary, that instruments of collective labor regulation apply only to workers affiliated with a union association that, directly or indirectly, have participated in collective bargaining and who render work to an employing entity that also participated in the same bargaining. Thus it is necessary, on one hand, that the employer be a member of the employer association that is a party or have been a party itself, and on the other hand, that the worker be affiliated with a signatory union. For this reason, in the case at hand, the ACT is applicable only to workers who are affiliated with the unions that are parties to it, with the remaining workers not being covered by its scope of application.
It will only be otherwise if the scope of the collective convention has been extended, after its entry into force, by an extension order, to all workers.
Extension orders, regulated in Article 514 of the Labor Code, are issued by the Ministry of Labor and establish that, regardless of the fulfillment of the criterion of double affiliation of workers, the collective convention in force may be applied, in whole or in part, to employers and workers within the scope of the economic sector and occupational activity defined in that instrument. Extension orders, by force of the provisions of Article 516, no. 2 of the Labor Code, must be published in the Bulletin of Labor and Employment.
Now, just as was proven above, the Claimant was not, neither on the date of conclusion of the employment contract – 2006 – nor, further, on the date of payment of the indemnification - 2013 - affiliated with the Unions of Bankers of the Center, North and South and Islands.
On the other hand, the ACT was not the subject of any extension order that would make possible its application to workers not affiliated with the signatory unions. For this reason, the norms contained in the ACT are not, in the concrete case, a source of law that can be used for purposes of determining the concept of seniority at issue.".
Here, as in the cited process, it is considered that there is no, in the concrete case, any contradiction of judgments, as the Supreme Administrative Court affirmed in the Judgment of 25-01-2017, in Process 0666/16, already cited.
DECISION
Based on the foregoing, it is decided:
a) To hold entirely without merit the arbitral claims filed, absolving the Respondent from the claim;
b) To condemn the Claimant in the costs of the proceeding, as fixed below.
| VII - Value of the Proceeding |
|---|
| The value of the case is fixed at € 72,647.28, as results from the proceedings and documents attached, pursuant to the provisions of Articles 305 and 306 of the CPC, 97-A, no. 1, paragraph a) of the CPPT, applicable pursuant to Article 29, no. 1, paragraph a) of the RJAT and Article no. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings. |
| IX - OF COSTS |
| Pursuant to Articles 12, no. 2 and 22, no. 4, of the RJAT and Table II of the Regulation of Costs in Tax Arbitration Proceedings, the costs to be paid entirely by the Claimant are those owed pursuant to no. 1 of Article 4 of the said Regulation, in the amount of €2,448.00. |
| The Parties shall be notified. |
| Lisbon, November 20, 2017. |
| The Presiding Arbitrator, |
| _____________________________ |
| (José Pedro Carvalho) |
| The arbitrator members, |
| _________________________________ |
| (José Rodrigo de Castro) |
| _________________________________ |
| (Ana Teixeira de Sousa) |
[1] See Judgment of the Central Administrative Court - South of 12-03-2013, cited.
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