CAAD Arbitration 31/2019-T: IRS 2013 Tax on Employment Contract Termination Compensation - Seniority Calculation Dispute

ARBITRAL DECISION

I - REPORT

1 - OF THE PARTIES AND CONSTITUTION OF THE ARBITRAL TRIBUNAL

1.1 - A..., taxpayer number ..., married to B..., residing at Street..., no...., ..., ...-... Nazaré, hereinafter referred to as Requesters, hereby pursuant to articles 2, no. 1, paragraph a) and 10, no. 1 of the Legal Regime of Arbitration (RJAT), approved by Decree-Law no. 10/2011, of 20 January, request an arbitral decision against tax acts of the Tax Authority, namely regarding the rejection decision that fell on the Hierarchical Appeal, issued on 15 November 2017 by the Finance Director of ... in the process of gracious complaint consequent to the official assessment (additional) of IRS no. 2016... of 15/11/2016 relating to the year 2013, for declaration of illegality of the said assessment, in the amount of €22,825.22, increased by compensatory interest in the amount of €1,941.98 and account settlement in the amount of €2,779.87, in the total amount of €27,547.07.

The assessment in question is properly identified and attached to the case file (docs. nos. 2, 3 and 4).

This assessment disputed by the Requesters constitutes a second assessment, as the Tax Authority, in an inspection process, considered a different relevant seniority for purposes of applying no. 4 of article 2 of the IRS Code.

1.2 - The request for constitution of the Arbitral Tribunal was submitted by the Requester on 16/01/2019, having been accepted by the President of CAAD on 17 of the same month. The Requester chose not to designate an arbitrator, whereby, under the provisions of no. 1 of article 6 of RJAT, the signatory, Dr. José Rodrigo de Castro, was appointed by the Deontological Council of CAAD on 07-03-2019, which assignment he had accepted on 22/01/2018, of which the Parties were notified.

1.3 - By order of 27/3/2019, the President of the Deontological Council declared the arbitral tribunal constituted, determining that the legal procedures be carried out, as provided in article 17 of Decree-Law no. 10/2011, of 20 January, which was done with notification of the chief executive of the Tax and Customs Authority to proceed with the pertinent legal procedures.

1.4 - The Parties were notified of the constitution of the tribunal on that same date of 27/3/2019.

1.5 - On the date of 28/3/2019 an arbitral order was issued, determining notification of the Tax and Customs Authority (AT) to submit a response within the legal period and sending of the respective administrative file, under the terms and for the purposes of the provisions of nos. 1 and 2 of article 17 of RJAT.

1.6 - The Respondent submitted its response to the case file on 02/05/2019, which is hereby reproduced, having also sent the respective administrative file.

1.7 - On 3/5/2019 an arbitral order was issued, dispensing with the holding of the Meeting provided for in article 18 of RJAT, due to the absence of testimonial evidence and it being only a matter of law, with notification of the parties for optional written submissions until 3 June 2019, with 30 April designated as the date for the pronouncement of the decision.

1.8 - Said arbitral order was notified to the Parties on that same date of 3/5/2019.

1.9 - Written submissions were made by either party within the indicated date.

2 - OF THE CLAIM FORMULATED BY THE REQUESTER

2.1 - The Requesters presented their request for arbitral decision against the tax act of IRS assessment no. 2016... of 15/11/2016 relating to the year 2013, for declaration of illegality of the said assessment, in the amount of €22,825.22, increased by compensatory interest in the amount of €1,941.98 and account settlement in the amount of €2,779.87, in the total amount of €27,547.07, as well as against the rejection decision that fell on the Hierarchical Appeal, issued on 15 November 2017 by the Finance Director of ... in the process of gracious complaint consequent to the said official (additional) IRS assessment.

2.2 - The assessment challenged respects the taxation of the part of compensation received by termination of the employment contract, which the Tax Authority considered to be subject to taxation, with which the Requesters do not agree.

2.3 - The Requesters therefore intend to discuss whether the compensation for cessation of the employment contract (by mutual agreement) concluded between Requester A... and C..., in the amount of € 85,000.00 (eighty-five thousand euros), on 2/5/2013 (Doc. no. 5 attached to the PI) is or is not subject to taxation under IRS, namely the amount of € 70,976.17 (seventy thousand nine hundred and seventy euros and 17 cents), and it is this part that the Tax Authority considers taxable.

2.4 - The relationship established between C... and the Requester, as well as the cessation of the employment contract, originates from an employment legal relationship (subordinate employment contract), in which the banking entity assumed the position of employer entity and the Requester the position of worker on account of another.

2.5 - What is at issue is the manner of counting seniority, that is, whether only that resulting from work activity carried out at bank C... should be considered, with whom he concluded a termination agreement or, on the contrary, all time of service in the banking sector.

2.6 - It further states that in the agreement for cessation of the employment contract concluded with C... "it was defined that in calculating the part subject to taxation, for the purpose of counting seniority, an average monthly remuneration of €4,144.37 should be considered", as "one of the conditions for the Requester to cease the employment contract with C... and which, in substance, constitutes a cessation of the employment contract in the banking activity broadly considered".

2.7 - The Requester advocates a position contrary to AT, founded on tax jurisprudence (including CAAD decisions), and this is what led C... to consider the time of service rendered in banking activity for purposes of counting seniority.

2.8 - Whereupon he concludes that only part of the compensation received, in the amount of € 15,691.83 is subject to taxation in accordance with paragraph b) of no. 4 of article 2 of the IRS Code.

2.9 - The Requester states that he was an employee of D... from 13/2/1997 to 17/8/2009 (Docs. 6 and 7) and from 18/8/2009 to 31/5/2013 at C..., the date on which he concluded a contract for cessation of functions (Doc. 5).

2.9.1 - Whereby it results unambiguously, in his view, that until the cessation of the employment contract he carried out work activity in the banking sector for 17 years, and this should be the seniority to be considered for purposes of paragraph b) of no. 4 of article 2 of the IRS Code.

2.9.2 - And that, therefore, in his view, there is only taxation on the amount of € 15,691.83, because the amount of €70,976.17 "is exempt".

2.9.3 - And it refers to the Collective Labour Agreement of the banking sector (ACTV), published in the BTE, 1st Series, no. 20, of 29/5/2011, applicable, as he states to the banking sector and in force at the date of cessation of the employment contract, whose article 17 provides as follows under the heading "determination of seniority":

"1. For all purposes provided in this Agreement, the seniority of the worker shall be determined by counting the time of service rendered in the following terms:

a) All years of service rendered in Portugal, in Credit Institutions with activity in Portuguese territory".

2.9.4 - Now, as the Requester was a member of the National Union of Banking Executives and Technicians between 1/9/2004 to 31/5/2013 (Cfr. doc.9), he alleges that the said collective labour instrument applies to him - Requests to submit declaration requested from the National Union of Banking Executives and Technicians proving that he was a member of this union - declaration which he had attached to the process on 19/1/2019, from which it appears that he was a member of the National Union of Banking Executives and Technicians from 01-09-2004 until 31-05-2013.

2.9.5 - He also alleges that he was a member of the union of Bankers of the Centre between April 1997 and September 2004 (Cfr. doc. 18).

2.9.6 - He further states that at the date of cessation of the employment contract with C..., he was entitled to payment of compensation, as guaranteed by C... itself when he was hired to perform a paid activity on account and under the direction of this banking entity, considering seniority from June 1997, which was the date contained in the Declaration of Seniority issued by the previous employer, D... (clause 7, no. 1 of the Employment Contract - Doc. no. 8).

2.9.7 - Based on all the analysis carried out by the Requester, when IRS Form 3 Declaration for the year 2013 was submitted, in a timely manner (Cfr. Doc.10), the total amount of € 57,426.37 was declared therein, not including the value of the compensation received by cessation of the employment contract.

2.9.8 - And this because, in his view and in light of the provisions of paragraph b) of no. 4 of article 2 of the IRS Code, in the version in force for 2013, he would not have to declare any amount of the compensation, given the average value of his regular remuneration subject to tax, in the period of the 12 months preceding cessation of the contract, of € 4,144.37 (Cfr. Tax Inspection Report constituting Doc. 10).

2.9.9 - And they further state that both the IRS Code and the remaining tax legislation do not define the concept of seniority, because, they emphasize, this constitutes a labour law concept, wherefrom it should be considered that it is in labour law that the solution for the interpretation of the mentioned provision of the IRS Code is found.

2.9.9.1 - The Requesters refer, in support of their thesis, to what is provided in no. 2 of article 11 of the General Tax Law.

2.9.9.2 - They further state that as the current Labour Code does not regulate the concept of seniority, the Requesters refer to labour law as the primary source of rules applicable to labour law, the instruments of collective regulation, defining the forms they can take (collective contracts, collective agreements and company agreements).

2.9.9.3 - Wherefore they refer to the Collective Labour Agreement in force at the date of cessation of the contract, published in various Bulletins of Labour and Employment, with the various amendments, namely in Bulletin no. 6, of 15/2/2003 (this in the context of members affiliated with the National Union of Banking Executives and Technicians) and no. 29, of 8/8/2003, which provides that for the purposes provided in the instrument of collective regulation, the seniority of the worker is determined by counting all years of service rendered in Portugal, in Credit Institutions with activity in Portuguese territory [clause 17, number 1, paragraph a) of the said collective instrument].

2.9.9.4 - Wherefore, they conclude, that effectively, the Collective Labour Convention is a contract generating obligations for both parties. However, what distinguishes it from other contracts is the normative efficacy (which the Law attributes to it), whereby "almost the entire clauses appear, not as a set of commitments (in the manner of contracts in general), but a complex of authentic legal norms addressed to the workers and employers that fall within the representative scope of the same parties".

2.9.9.5 - In reinforcement of their thesis, they emphasize that the Collective Labour Convention should not be considered as a mere instrument of the parties that establishes rights and obligations, but has, in fact, a normative character and imposes rights and obligations, such as the counting of seniority.

2.9.9.6 - Wherefore, they conclude that "in accordance with the above, the seniority of the taxpayer must be considered from June 1997 (due to the normative efficacy of the Convention referred to above), which means that it encompasses the period when he was under the aegis of another employer entity, however, always in the context of banking activity [clause 17, number 1, paragraph a)]".

2.9.9.7 - And in reinforcement of their thesis, the Requesters cite various case law, namely:

a) - The Decision of the Central Administrative Court of the South, of 21/9/2010, issued in the context of Process no. 03748, which goes in the direction they advocate, of which the following conclusion is transcribed:

[…]

"3. And in this law, such concept being defined in the ACT applicable to the sector of activity in question (banking), which by virtue of the rule of art. 2 of LCCT constitutes an immediate source of labour law, it is the content of this concept as here found defined, that is applicable for purposes of IRS incidence".

b) - Likewise, of 11/05/2004, issued in Process no. 06002/01, of which we extract the following part:

[…]

"6. Nothing suggests or indicates that the concept of 'seniority' contained in no. 4 of article 2 of the CIRS was not used in all its amplitude, which cannot take into account the time of service (seniority) achieved in another company provided that it was stipulated in the labour contract by the debtor entity.

1. Not resulting from the law that this concept refers restrictively to the time of service with the entity debtor of compensation for cessation of the employment contract, and nothing justifying a restrictive interpretation of the incidence rule, that broader notion of seniority should be accepted for the calculation of the amount subject to taxation under IRS".

[…]

c) - Likewise, of 12/3/2013, issued in the context of Process no. 05971/12, of which the following conclusion is drawn:

[…]

"11. Not resulting from the rule under examination (cfr. art. 2, no. 4, of the CIRS) that the concept of seniority refers restrictively to the time of service with the entity debtor of compensation for cessation of the employment contract, and nothing justifying a restrictive interpretation of the incidence rule, the broader notion of seniority arising from labour law should be accepted for the calculation of the amount subject to taxation under IRS".

d) - They further state that there are also numerous CAAD decisions on this matter that are in favour of the taxpayers, referring to the following arbitration processes:

d.1. - Decision issued in November 2017 in Process no. 158/2017-T:

[…] "this agreement (ACT) being the source of law to which one must resort to establish the concept of seniority in the specific case, the relevant seniority for application of the provisions of para. b) of no. 4 of the CIRS cannot fail to be that which encompasses all years of service rendered, in Portugal, in credit institutions with activity in Portuguese territory, that is 16 years and 11 months".

d.2. - Decision issued in September 2019 in Process no. 62/2018-T:

"This last Arbitral Decision of the CAAD, to which this Singular Arbitral Tribunal adheres, says more; the same decision states that although the current Labour Code does not itself regulate the concept of worker seniority, it places, in the first place, the instruments of collective regulation, as the sources of law from which emerge, in the first line, the rules applicable to the employment contract, further defining, in its article 2, the forms these can take (collective contracts, collective agreements and company agreements). Thus, as the SAC South well understood in the decision of 12.03-2013, issued in the context of process no. 591/12, it is today unanimous in labour law that there are three sources that can establish seniority: the Law, the Individual Employment Contract and the Instruments of Collective Labour Regulation. Since we cannot extract a concept of seniority from the Law, that is, from the Labour Code, we will have to analyse, in the specific case, the Individual Employment Contract concluded or the Collective Labour Agreement in the banking sector.

Here too, the reasoning of the Arbitral Decision of the CAAD, in Process no. 512/2017-T, dated 28 February 2018, is invoked, when this Decision states: thus it will be in the instruments of collective regulation applicable to the banking sector to which the Requester was bound that we will seek the concept of worker seniority.

(…)

Accordingly, this Singular Arbitral Tribunal understands that, after proper assessment and consideration, it is to apply, for purposes of IRS incidence, in the case here under analysis, relating to the year 2013, the counting of seniority taking into account all the time of service rendered by Requester J… in banking institutions (in the banking sector)."

e) The Requesters did not pay the IRS required, which is in the execution phase, whereby a bank guarantee was provided.

3 - OF THE RESPONDENT'S RESPONSE

3.1 - The Respondent, Tax and Customs Authority (AT), explains that the Requesters' claims aim at the annulment of the additional IRS assessment act, referring to the year 2013, to which corresponds a payment of tax of € 27,547.07.

3.2 - And what is at issue is the taxation of compensation paid to Requester A... by C..., in the amount of € 86,668.00, following a termination of the employment contract with the employer entity.

3.3 - The Respondent further states that the compensation, according to the Requester, should be calculated based on the seniority of Requester A... not only at Bank C..., but also that held at the banking institution where he had previously worked.

3.4 - And what the Respondent understands and which served as the basis for the additional assessment carried out, is that the seniority to be considered for purposes of the provisions of no. 4 of article 2 of the CIRS, should be only the seniority with the entity debtor of compensation for cessation of the employment contract.

3.4 - And the Respondent understands that this is so, in light of the provisions of no. 4 of article 2 of the CIRS, according to which the amounts received are subject to taxation "(…) in the part exceeding the value corresponding to the average value of regular remuneration with the character of compensation subject to tax, received in the last twelve months, multiplied by the number of years or fraction of seniority or exercise of functions with the debtor entity (…)".

3.5 - The Respondent clarifies that it was as a result of an inspection action based on OI2016..., issued on 14/07/2016, commenced on 18/07/2016 and terminated on 06/09/2016, that it was found that, during the year 2013, Bank C... paid compensation to Requester A..., by virtue of termination of the employment contract, having accounted, for purposes of seniority, all time of service rendered in the banking sector, that is, 17 years.

3.6 - And it ascertained that with respect to the time of service rendered at Bank C..., this was only 3.79 years.

3.7 - And that, therefore, the AT understands that "the seniority to be counted, for purposes of no. 4 of article 2 of the CIRS, is the seniority of the entity debtor of compensation for cessation of the employment contract (in casu, Bank C...), and it is not appropriate to consider, in applying the said legal provision, the seniority in a previous employer entity, even if the worker and the new employer entity have agreed that it should be considered in any future 'compensations'".

3.8 - The Respondent based its action on an opinion from the CEF (Centre for Tax Studies) and information from DSIRS (Directorate for IRS Services), from which the following understanding resulted, regarding the interpretation of paragraph b) of nos. 4 and 10 of art. 2 of the CIRS:

"the amounts received by providers in the banking sector, as compensation for cessation of the employment contract, covered by the ACT, paid by the last entity to which they provide services, with the exclusion rule applicable under para. b) of no. 4 of art. 2 of the CIRS being applicable, must take into account for purposes of the respective calculation only the number of years or fraction of seniority or exercise of functions in the last debtor entity of income which, by force of the historical-systematic element inherent in the rule of the current no. 10 of the aforementioned article, corresponds to 'employer entity/patron/employer/', with the amplitude resulting from this rule" – cfr. p. 6 of the Tax Inspection Report.

Adding further: "Regarding the positions taken by AT we must emphasise that existing a recent opinion from the CEF (Centre for Tax Studies) and information issued by DSIRS (Directorate for IRS Services) no. 415/16, with order from the Director General of 21-03-2016, disclosing the understanding to be given to this rule (paragraph b) of no. 4 and no. 10 of art. 2 of the CIRS), this binds AT in its application from the date of disclosure and annuls all possible understandings to the contrary prior to that date" – cfr. p. 12 of the Tax Inspection Report.

3.9 - And the Respondent emphasises that the same understanding is already expressed in the Binding Information of 10/10/2010, process no. 1818/10 and that, for this reason, and despite the decision issued in the decisions cited by the Requester from the SAC South of 21/9/2010, process no. 03748/10 and in that of 11/05/2004, process no. 6002/01, as well as in the Decision also from the SAC South of 10/03/2013, process no. 5971/12 and the concept expressed therein of seniority, AT "cannot follow such jurisprudential understanding, as it is inconsistent with the applicable law".

3.10 - The Respondent further states that "it results clearly from the letter of the tax law that the negative delimitation of IRS tax incidence is established using as a multiplying factor the seniority with the entity debtor of the income in question (and not the seniority provided for in a contractual clause or in an instrument of collective labour regulation or even in a cessation agreement)".

3.11 - And it further states that "any interpretation that is made of the legal regime of no. 4 of article 2 of the IRS Code must take into account the anti-abuse purpose underlying it, characteristic of special clauses preventive of tax evasion, under penalty of accepting 'inter partes' agreements that provide for labour seniority and recognise merely artificial seniorities, imposing such recognition for purposes of negative delimitation of tax incidence".

3.12 - The Respondent further states that the absence in tax law of a definition of seniority would lead, in the Respondent's view, to its completion in the labour law field, as stipulated in no. 2 of article 11 of the LGT.

3.13 - However, it emphasises that the Labour Code itself does not contain a univocal definition of seniority, as it contains numerous uses of this concept, with different amplitude and contexts, being that one, it emphasizes, "more coherent and systematic, which is the one that conforms the term 'seniority' to 'seniority in the company' (cfr. article no. 6 of article 112, no. 3 of article 147, paragraph e) of no. 2 of article 368 all of the Labour Code".

3.14 - The Respondent further refers to no. 4 of article 36 of the LGT which provides that "the qualification of the legal transaction made by the parties (…) does not bind the tax administration" and even more so, the qualifications of the parties affecting contractual law.

3.15 - And concludes, thus, that the issue in question must obtain its solution in the full legal interpretation of all the legislation implied by the expression "number of years or fraction of seniority or exercise of functions with the debtor entity, contained in paragraph b) of no. 4 of article 2 of the IRS Code".

3.16 - Meaning all this, it further concludes, that the debtor entity must be the employer entity mentioned in no. 10 of article 2 of the CIRS, "which becomes explicit when in no. 4 the exclusion of taxation is conditioned to the creation of no new professional or business relationship within 24 months with the same 'entity'".

3.17 - And the Respondent refers to doctrine, citing Manuel Faustino and others, in Fiscalidade 13/14, with article "On the meaning and scope of the new wording of article 2, no. 4 of the CIRS", leaving the following passage:

"The clauses of the ACTV banking sector are not opposable to the tax administration which imposes, in the transfer of a worker between credit institutions, the counting of the time of seniority verified in the previous or previous credit institutions of which he had been a worker. As, even more so, neither are any agreements that, respecting the guarantee of benefits inherent to seniority, have been entered into between the worker and the employer entity. Without considerations that today could be provided by the subjective extension of the concept of employer entity carried out by no. 10 of article 2, as it is based on relationships of domination or group between companies, regardless of their geographic location, we reaffirm here the known orientation of the Tax Administration according to which the time of relevant seniority is only the time of seniority 'acquired' with the entity with which the individual employment contract ceases, as literally results from the law, there not appearing to be any margin for another type of interpretation"(cfr. Fiscalidade 13/14, Manuel Faustino and Others, "On the meaning and scope of the new wording of article 2, no. 4 of the CIRS").

3.18 - Regarding the decisions cited by the Requester, particularly the Decision of 21/09/2010, process no. 03748/10, the Respondent alleges that they incurred criticism from Doctrine, which, for its reasoning stands out that of Cláudia Reis Duarte and Filipe Fraústo da Silva, in Revista da Ordem dos Advogados, no. 1, 2012:

"(Cfr. Annotation to the Decision of the Central Administrative Court of the South on seniority of banking worker (for purposes of calculating the amount of compensation for cessation of the employment contract not subject to taxation, under the terms of no. 4 of article 2 of the IRS Code) […]: In fact, we consider incontestable that the concept of seniority included in the fact pattern of the norms of the Labour Code that establish the said criteria for defining compensations or indemnities in the context of the regime for cessation of the employment contract is that of seniority in the company (…)"

And that:

"the concept of seniority served by the legal provisions of the section of the code relating to cessation of the employment contract and which establish criteria for definition of compensations or indemnities is that of seniority in the company and that, consequently, are not admissible, in that definition or indemnity calculation, additional periods of duration of the relationship that may have been recognised by the employer by mere effect of contractual consensus or even by unilateral admission, that is, which do not directly result from the application of legal norms or collective conventions that have as a consequence that extension, such as for example occurs in the cases already mentioned of assignment of contractual position, transfer of ownership or operation of company, establishment or economic unit, merger, demerger, etc. To these cases, collective conventions can add several others. This regime has a very clear reason for existence: seniority in the company, as a partial mechanism for protection of older workers, has its most radical expression in the protection of the stability of their employment, placing them, relative to the less senior, in a more favourable situation in case of cessation of contracts of work promoted by the employer (…)"

To conclude, after an extensive and reasoned analysis, it is stated there that:

"the doctrine deriving from the judgment under annotation incurs our criticism as set out above, and we tend therefore to consider instead, as to the specific question of seniority, that from the very literality of the normative provision results that this corresponds to the number of years or fraction of seniority with the employer entity with which the contract ceases at the origin of the amounts paid (with the reservation of seniority verified in other entities in a relationship of domination or group with that by virtue of the extension of the concept made by no. 10 of article 2 of the CIRS). Moreover — and even if there had to be recourse, in completing the concept in question (which we understand not to be the case insofar as the legislator was clear and established in statutory law that seniority is that verified with the debtor entity), to labour law — the solution would still be identical, since in the Labour Code we do not find a definition of seniority and, if we have to derive any thereof, this will be seniority in the company, and not the seniority resulting from a clause of any collective labour convention or agreement established between the parties".

3.19 - The Respondent further emphasises that the reason that led the legislator to combine, "alternatively and inclusively, the expressions 'seniority' or 'exercise of functions' in paragraph b) of no. 4 of article 2 of the CIRS is due to the need for comprehensive normative provision, so as to capture the multiple situations generating dependent work income, respectively the employment contract and the exercise of function, public service or position".

3.20 - And the Respondent only accepts that an interpretation be made that references "seniority" to the "debtor entity" contained in the rule that has been cited and does not admit, in light of the teleological element assessed by the purpose of the exclusion of tax incidence established in the rule, that other legal instruments of a contractual nature voluntarily delimit the amplitude of that exclusion of tax incidence.

3.21 - And they base their assertion on the principle equally established in article 13 of the CRP, which would be violated with differentiated treatment in the diversity of situations, if instruments of a contractual legal nature were allowed to delimit seniority with effects on the integration of the regime of exclusion of tax incidence of paragraph b) of no. 4 of article 2 of the CIRS.

3.22 - Moreover, the Respondent emphasises, paragraph i) of no. 1 of article 165 of the CRP establishes exclusive competence of the Assembly of the Republic to legislate on "creation of taxes and fiscal system and general regime of rates and other financial contributions in favour of public entities", except authorisation to the Government.

3.23 - And it further refers to article 478 of the Employment Contract Regime, approved by law no. 7/2009, of 12 February, which expressly limits the content of instruments of collective labour regulation, providing, amongst others, that it cannot:

"a) contradict an imperative legal rule; and

b) regulate economic activities, namely periods of operation, tax regime, formation of prices and exercise of the activity of temporary work companies, including the contract of use".

3.24 - It further refers to the Decision of the SAC South, process no. 94/17.OBERLA, in which this Court ruled in the following sense and regarding the unavailability of free disposition of public credits (cfr. article 13 and no. 2 of article 266 of the CRP):

"It is also for this reason - because we are dealing with an obligation that materialises a fundamental duty of contributing to public charges, according to the principle of relative equality, measured by the contributory capacity of each tax subject - that the said unavailability of the tax credit prevails over any special legislation (…). Moreover, art. 36, nos. 2 and 3, of the L.G.T., is peremptory in establishing that the essential elements of the tax legal relationship cannot be altered by the will of the parties and that the Tax Administration cannot grant moratoriums on payment of tax obligations, except in cases expressly provided in law (cfr. art. 85, no. 3, of C.P.P.T.; ac. T.C.A. South - 2nd Section, 4/02/2016, proc. 9100/15; Diogo Leite de Campos and Others, General Tax Law commented and annotated, 4th edition, Encontro da Escrita Publisher, 2012, p.297)".

3.25 - And also on the jurisprudence set forth in the Decision of the T.C.A. South of 10/3/2013, process no. 05971/12, the Respondent makes another remark regarding the extension of the notion of "seniority" of the banking worker to that established in the ACT.

The Respondent states that in clause 2 of the ACT for the Banking Sector (2012) the following can be read:

"This Collective Labour Agreement is applicable throughout national territory, within the scope of the banking sector, and binds the Credit Institutions and Financial Companies that subscribe to it (hereinafter generically referred to as Credit Institutions or Institutions), as well as all workers in their service affiliated with the Unions of Bankers of the Centre, North and South and Islands, represented by the signatory FEBASE – Federation of the Financial Sector and hereinafter referred to as Unions, covering 26 employers and estimated at 54,300 the workers covered.(…)"

And the Respondent emphasises that what was decided in the Decision means to say that, for the said ACT to be applicable, it is necessary that the worker in question be affiliated with one of the said unions and that the credit institution be a subscriber to the said Agreement.

3.26 - It so happens, the Respondent emphasises, that in the specific case, the R. wishes to produce proof in the present proceedings of his affiliation with the National Union of Banking Executives and Technicians through the attachment of a document which states "Declaration / National Union of Banking Executives and Technicians, - legal person no. ..., with registered office at Av. ... no. ..., in Lisbon declares, for due purposes, that Mr. A... NIF..., benefited from the Medical-Social Assistance Service (SAMS/ Executives) from 01-09-2004 to 31-05-2013", dated 22/09/2016 (cfr. Doc. 9 of the P.I.).

3.27 - The Respondent concludes, however, that the Requester did not prove his affiliation with the aforementioned union, which, by itself, is a reason excluding the innovation of clause 17 of the ACT.

3.28 - And adds that Bank C... subscribed to the ACT (2012) having, however, made a reservation, in the following terms:

"In counting the time of service for any purposes arising from the ACT, only the time of service rendered to the institutions themselves signing the present reservation shall count, plus possibly the time of service rendered to other institutions or companies, but, in this case, only if it results from an individual agreement between those and the worker".

3.29 - And the Respondent states that this was not the case, as is evident from mere analysis of the clauses of the individual employment contract concluded between Bank C... and the Requester on 17/08/2009.

3.30 - On the other hand, the Respondent ascertained that the termination contract concluded on 2/05/2013 refers expressly to this issue having, then, Bank C... and the now Requester agreed that:

"In the event of legislative amendment modifying the regime set out in the present clause, or of a judicial orientation, regarding the judgments mentioned in no. 2 [SAC South of 11/05/2004, process no. 06002/01 and of 21/09/2010, process no. 03478/70] from which results a different interpretive line of the same regime, the amount of the global pecuniary compensation established in the second clause remains unchanged, and it shall in no case be required of C... that it bear, in whole or in part, the taxes or contributions that are due by the Collaborator by virtue of payment of said compensation, or that, in any other manner, compensate him for these facts".

3.31 - For which reason, it concludes, both Bank C... and the now Requester admitted and accepted the subjection of the income in question, whereby — says the Respondent — "the present challenge, in addition to embodying a contradiction with the conduct previously recommended, further evidences an attempt to take advantage of a legal interpretation advocated by some case law".

1. • OF THE SUBMISSIONS

4.1 - OF THE REQUESTER

The Requester in his submissions did not bring to the process significant new material in terms of its grounds, limiting itself to additionally refer to the decisions issued in the following processes:

a) Decision issued by CAAD (P. 321/2017-T), which contradicts the interpretation that AT makes of the rule of no. 4 of article 2 of the CIRS, from which it makes the following understanding:

"This segment of the rule seems thus to intend to consider two distinct realities (with differentiated solutions) to assess the multiplier in question:

• Number of years or fraction of seniority (understood this in general terms, without qualifying the type of seniority); or

• Number of years or fraction … of exercise of functions with the debtor entity.

For the rule adds next to the last expression (or exercise of functions with the debtor entity): "in other cases", leading to the perception that it contains two distinct mechanisms to obtain the multiplier, in the alternative, such that there are, at least, "two" cases, distinct, contained in the provision of the rule. Which must lead to different results, with the recipients of the rule following the regime that specifically is more favourable to them."

b) Decision issued in process 62/2018-T (CAAD) in which the understanding that is to apply for purposes of IRS incidence, the counting of seniority taking into account the time of service of the Requester in banking activity, was also upheld:

"This last Arbitral Decision of the CAAD, to which this Singular Arbitral Tribunal adheres, says more; the same decision states that although the current Labour Code does not itself regulate the concept of worker seniority, it places, in the first place, the instruments of collective regulation, as the sources of law from which emerge, in the first line, the rules applicable to the employment contract, further defining, in its article 2, the forms these can take (collective contracts, collective agreements and company agreements). Thus, as the SAC South well understood in the decision of 12-03-2013, issued in the context of process no. 591/12, it is today unanimous in labour law that there are three sources that can establish seniority: the Law, the Individual Employment Contract and the Instruments of Collective Labour Regulation. Since we cannot extract a concept of seniority from the Law, that is, from the Labour Code, we will have to analyse, in the specific case, the Individual Employment Contract concluded or the Collective Labour Agreement in the banking sector.

Here too, the reasoning of the Arbitral Decision of the CAAD, in Process no. 512/2017-T, dated 28 February 2018, is invoked, when this Decision states: thus it will be in the instruments of collective regulation applicable to the banking sector to which the Requester was bound and the banking institution that we will seek the concept of worker seniority.

(…)

Accordingly, this Singular Arbitral Tribunal understands that, after proper assessment and consideration, it is to apply, for purposes of IRS incidence, in the case here under analysis, relating to the year 2013, the counting of seniority taking into account all the time of service rendered by Requester J… in banking institutions (in the banking sector)."

c) It further refers to the ANNOTATION TO THE DECISION OF THE CENTRAL ADMINISTRATIVE COURT OF THE SOUTH ON SENIORITY OF THE BANKING WORKER (FOR PURPOSES OF CALCULATING THE AMOUNT OF COMPENSATION FOR CESSATION OF THE EMPLOYMENT CONTRACT NOT SUBJECT TO TAXATION, UNDER THE TERMS OF NO. 4 OF ARTICLE 2 OF THE IRS CODE)", BY CLÁUDIA REIS DUARTE AND FILIPE FRAÚSTO DA SILVA, REVISTA DA ORDEM DOS ADVOGADOS, NO. 1, 2012).

"To sustain his thesis - that the concept of seniority served by the legal provisions of the section of the code relating to cessation of the employment contract and which establish criteria for definition of compensations or indemnities is that of seniority in the company and that, consequently, are not admissible, in that definition or indemnity calculation, additional periods of duration of the relationship that may have been recognised by the employer by mere effect of contractual consensus or even by unilateral admission, that is, which do not directly result from the application of legal norms or collective conventions that have as a consequence that extension, such as for example occurs in the cases already mentioned of assignment of contractual position, transfer of ownership or operation of company, establishment or economic unit, merger, demerger, etc. - AT has resorted to the thesis defended by Dr Filipe Fraústo da Silva and Dr Cláudia Reis Duarte in the annotation to the decision of the Central Administrative Court of the South, of 21 September 2010, concluding that the interpretation adopted by the Respondent (AT) is the only one consistent with the constitutional principle of legality in matters of tax incidence, which cannot admit that in seniority with the debtor entity be considered, beyond the seniority inherent to the actual duration of the contractual relationship granted by this entity, increases resulting from legal instruments of a contractual nature, for to admit that these instruments could delimit seniorities with effects on the integration in the exclusion regime of tax incidence of no. 4 of article 2 of the CIRS would translate a notable obscuring of all the foundations of the principle of legality, notably in the combination of fiscal justice with the certainty and legal security of taxation.

However, the thesis defended by Dr Filipe Fraústo da Silva and Dr Cláudia Reis Duarte in the annotation to the decision of the Central Administrative Court of the South, of 21 September 2010 is not different from that defended by the now Requesters. As a rule, the said commentators understand that the concept of seniority served by the legal provisions of the section of the code relating to cessation of the employment contract and which establish criteria for definition of compensations or indemnities is that of seniority in the company and that, consequently, are not admissible, in that definition or indemnity calculation, additional periods of duration of the relationship that may have been recognised by the employer by mere effect of contractual consensus or even by unilateral admission, that is, which do not directly result from the application of legal norms or collective conventions that have as a consequence that extension, such as for example occurs in the cases already mentioned of assignment of contractual position, transfer of ownership or operation of company, establishment or economic unit, merger, demerger, etc.

However, they add that to these cases, collective conventions can add several others. That is, they understand that collective labour conventions can add additional periods of duration of the relationship and that regarding pecuniary compensation for cessation of the employment contract, the seniority in the banking sector (and not only in a company with which they cease the contract of work) should be considered for tax purposes.

What they defend is that additional periods of duration of the relationship, established in the employment contract, cannot be considered for tax purposes, without there being a clause in the collective labour contract that provides a differentiated way of counting contractual seniority

(…)"

As to the rest alleged, the Requester's position is already known from his P.I., whereby this Court refrains from repeating it.

4.2 OF THE RESPONDENT

The Respondent maintains the understanding and all the grounds contained in its Response, adding the following:

a) On the recent Decision of the Plenary of the Contentious Section of the STA in Appeal no. 407/18.7BALSB of 8 May 2019, it transcribes the following passage:

"(…) According to the rules established in articles 9 of the Civil Code and 11 of the LGT, as well as the principle that the own terms of other branches of law, v.g. labour law, must maintain their original meaning, it is easily found that the rule in question aims to tax the payments received by the worker when cessation of the employment contract occurs (…) and, therefore, the notion of seniority used in this tax rule will have to be related to the norms of labour law that provide for payment of any monetary amounts in case of occurrence of cessation of the labour relationship, regardless of what is stipulated by the parties in the case of cessation by mutual agreement, since labour law does not give an exact notion of what should be understood by seniority.

The cessation of the labour relationship can occur, under legal terms, in various ways, amongst others, unlawful dismissal, collective dismissal, by extinction of job position, by unsuitability, termination by worker with just cause, termination by worker with prior notice and also, as in the case of these proceedings, by mutual agreement.

Not now considering situations in which the worker also has no entitlement to any compensation for cessation of the labour relationship, v.g. termination with prior notice, it results from the Labour Code, in the version at the time, articles 366°, 372° and 379° that compensation for cessation of the employment contract corresponds to x days of base remuneration and daily supplements for each complete year of seniority, articles 391° and 392°, that compensation is fixed between x and y days of base remuneration and daily supplements for each complete year or fraction of seniority and article 396°, the worker is entitled to compensation, to be determined between x and y days of base remuneration and daily supplements for each complete year of seniority.

In all these situations of cessation of the employment contract seniority refers to the period of time in which the worker was in the service of the employer entity debtor of the compensation or indemnity to which such norms refer, it does not refer to the entire seniority of the worker since he commenced functions in his profession, regardless of the employer entity.

That is, the compensation attributed by cessation of the employment contract is calculated based on the seniority of the worker in the service of the entity debtor of the compensation, that is, by reference to seniority in the company FILIPE FRAUSTO DA SILVA and CLAUDIA REIS DUARTE in Annotation to the Decision of the Central Administrative Court of the South on seniority of the banking worker (for purposes of calculating the amount of compensation for cessation of the employment contract not subject to taxation, under the terms of no. 4 of article 2 of the IRS Code), published in Revista da Ordem dos Advogados, no. 1, 2012, page 440.

As in these norms of labour law, in the tax rule the legislator used a wording in all similar to make reference to the period of time that should be accounted for in the calculation of the tax, number of years or fraction of seniority, having added to it the clarification that such period and the referring to debtor entity - in fact the legislator clearly defined in the same article 2, no. 10 that for purposes of this tax, IRS, is considered employer entity any entity that pays or puts at the disposal remuneration constituting income from dependent work in accordance with this article, having in turn specified in the rule under analysis that seniority was reported to the debtor entity.

Moreover, clause 17 of the ACT, which the appellant invokes in its favour, only disciplines the determination or manner of calculation of seniority for the purposes provided in the same ACT, as clearly results from the body of its respective no. 1 where it refers expressly - 1. For all purposes provided in this Agreement -, it being certain that in this ACT the matter of cessation of the employment contract by mutual agreement is not regulated, namely its free revocation by the parties, as well as the form of calculation of the amounts of compensation or indemnity that may be due by the employer entity for this purpose, which may even result from the free determination by the parties, cfr. article 349°, no. 5 of the Labour Code which disciplines cessation of the employment contract by mutual agreement between the employer and the worker (moreover, as reinforcement of this understanding, no. 4 of article 140 of the ACT by ordering application of the provisions of article 17° to situations of cessation of the employment contract, restricted them to those found in no. 1 of the same article, that is, to situations in which the worker is placed in the situation of retirement for invalidity or presumed invalidity).

It is thus not coherent that one could interpret with a different meaning the expressions used to enact the rule which aims to tax compensation for cessation of the employment contract from that which serves to interpret the expressions used to enact the rules that define the manner in which the indemnity/compensation for cessation of the employment contract is fixed, since they are identical and are used with the same meaning.

Moreover and as already seen, the principle of equality being a fundamental principle of taxation does not allow tax rules to be interpreted by appeal to concepts resulting from individual employment contracts or resulting from collective labour agreements that cover only the citizens found within a certain sector of activity, only thus the interpretation of tax rules respects the unity of the legal system, cfr. Manuel Faustino, On the meaning and scope of the new wording of article 2, no. 4 of the IRS Code, Fiscalidade, no. 13/14, p. 10 (...)"

And concludes the Respondent that "The Venerable Court left it established that the understanding that the seniority to which is referred the provision of paragraph b) of no. 4 of article 2 of the CIRS respects only the seniority of the worker with the entity debtor of compensation/indemnity for cessation of the employment contract".

Terms in which it concludes that the interpretation advocated by AT does not merit censure and that, consequently, the claim should be declared inadmissible for lack of legal support.

II - SANITATION

1. • The Arbitral Tribunal is regularly constituted and is materially competent, under the terms of article 2, no. 1, paragraph a) of RJAT.
2. • The parties enjoy judicial personality and capacity, are legitimated and are legally represented, under the terms of articles 4 and 10, no. 2 of RJAT and article 1 of Regulation no. 112/2011, of 22 March.
3. • The process does not suffer from defects that invalidate its examination.
4. • In light of the documentary evidence attached to the case file, not contested by the parties, it is necessary to establish the factual matter relevant to the decision and proceed to its pronouncement.

III - FACTUAL MATTER

A) - Proven facts

The Tribunal considers the following as relevant factual matter:

1. Requester A..., NIF..., exercised functions in banking activity from 12 March 1997.

2. From 12 March 1997 to 16 August 2009, he exercised functions at D...; from 18 August 2009 to 30 May 2013, he exercised functions at C....

3. In the employment contract executed with C..., this banking entity assumed the seniority resulting from the provision of service to other credit institutions, from February 1997. For this reason, Requester A... did not receive any compensation when he ceased the employment contract with D....

4. On 2 May 2013, he formalised with C... an agreement for cessation of the employment contract, having agreed the payment of compensation in the amount of 85,068.00 €.

5. Until cessation of the employment contract with C..., on 30 May 2013, Requester A... developed work activity in the banking sector for 17 years (uninterruptedly).

6. The Requester was a member of the National Union of Banking Executives and Technicians between 1.09.2004 to 31.05.2013 (cfr. document attached to the process on 17 January 2019).

7. He was also a member of the Union of Bankers of the Centre between April 1997 and September 2004.

8 - The Requesters submitted their IRS Form 3 Declaration, relating to 2013, in which they declared as the value of compensation subject to taxation, by application of the provisions of paragraph b) of no. 4 of article 2 of the CIRS, the amount of € 15,691.83.

1. By virtue of an inspection action carried out by AT, the services proceeded to correct the amount subject to IRS to € 70,976.17, as they understood that only the period of time exercised in the last entity with whom the agreement for cessation of functions was concluded - Bank C... - was relevant for purposes of non-subjection.

2. As a consequence a corrective assessment was issued in the amount of tax payable of € 22,025.22 (including € 2,466.00 of compensatory interest), conf. Explanatory Note of Corrective Assessment, Explanatory Note of Interest Assessment and Demonstration of Account Settlement, with amount payable of € 27,547.07, taking into account that the Requesters had received a refund of € 5,521.85.

3. The Requesters submitted a gracious complaint against the corrective assessment, which was subject to a final rejection order issued on 15.11.2017, of which they were duly notified.

4. Not having accepted this decision, the Requesters submitted a hierarchical appeal on 18.12.2017, reproducing the grounds used in the complaint regarding the counting of relevant time of service.

5. Not having also succeeded, they submitted the present Arbitral Appeal on 16.01.2019, which was accepted on 17.01.2019 and which is now examined and decided.

B) - Unproven facts

There are no facts invoked that are not shown to be proven in the case file.

C) - Reasoning of proven facts

All the facts previously described and invoked by the Requester are based on documentary evidence attached to the case file, and are therefore considered proven and uncontested and are relevant to the decision to be issued.

The Respondent, however, contests the proof of the Requester's affiliation with the National Union of Banking Executives and Technicians, on the ground that allegedly the statement attached does not attest to the dates of registration and cessation of his status as a member and does not designate the number that was assigned to him as such.

However, on 17.01.2019, he attached an additional statement, whereby these doubts no longer exist.

IV - OF THE LAW

With the factual matter established, it is important to determine the law to be applied.

1 - In the present proceedings, according to gracious complaint, hierarchical appeal and, in particular, arbitral impugnation petitions, it is necessary to determine the following:

a) What is the relevant seniority for purposes of non-taxation of the compensation (or part thereof) received by cessation of functions at C....

b) Whether the seniority to be relevant should be only that of the exercise of functions at C... which paid him compensation for cessation of functions, or whether the seniority also resulting from banking activity also exercised previously at D..., that is, the entirety of banking activity.

c) What is the relevant legislation to ascertain which is the relevant seniority to which the previous paragraphs refer, that is, whether only the CIRS, or also the Collective Labour Agreement and/or the Collective Labour Convention or even the individual employment contract.

1. Hence, this is what is urgent to examine and decide.

First and foremost, it is important to become acquainted with the provision whose interpretation constitutes the controversy raised and which leads to different interpretations and, consequently, different results.

This is paragraph b) of no. 4 of article 2 of the CIRS, whose version is as follows, in force at the date of the facts:

Article 2

Income from category A

1 - Income from dependent work includes all remuneration paid or made available to its holder, coming from:

a) Work on account of another rendered under an individual employment contract or other legally equivalent to it;

(…)

4 - When, in any manner, the contracts underlying the situations referred to in paragraphs a), b) and c) of no. 1 cease, but without prejudice to the provisions of paragraph d) of the same number, regarding the payments that continue to be due even if the employment contract does not subsist, or the cessation of functions of public manager, administrator or manager of legal entity, as well as representative of a stable establishment of a non-resident entity, the amounts received, in any capacity, are always subject to taxation: (Wording given by Law no. 64-B/2011, of 30 December)

a) In their entirety, in the case of a public manager, administrator or manager of a legal entity, as well as representative of a stable establishment of a non-resident entity; (Wording given by Law no. 64-B/2011, of 30 December)

b) In the part exceeding the value corresponding to the average value of regular remuneration with the character of compensation subject to tax, received in the last 12 months, multiplied by the number of years or fraction of seniority or exercise of functions with the debtor entity, in other cases, except when in the 24 months following a new professional or business relationship is created, regardless of its nature, with the same entity, in which case the amounts shall be taxed in their entirety. (Wording given by Law no. 64-B/2011, of 30 December)

(...)

In interpreting the rule, this Tribunal cannot fail to agree with the Respondent when it states that the reason that led the legislator to combine, "alternatively and inclusively, the expressions 'seniority' or 'exercise of functions' in paragraph b) of no. 4 of article 2 of the CIRS is due to the need for comprehensive normative provision, so as to capture the multiple situations generating dependent work income, respectively the employment contract and the exercise of public function, service or position".

And one agrees also when it is stated that one can only accept that an interpretation be made that references "seniority" to the "debtor entity" contained in the rule and whose wording does not admit, in light of the teleological element assessed by the purpose of the exclusion of tax incidence established in the rule, that other legal instruments of a contractual nature voluntarily delimit the amplitude of that exclusion of tax incidence.

In fact, the reasoning of the assertion that the Respondent makes has all the justification, based on the principle equally established in article 13 of the CRP, which would be violated with differentiated treatment in the diversity of situations, if legal instruments of a contractual nature were allowed to delimit seniority with effects on the integration of the regime of exclusion of tax incidence of paragraph b) of no. 4 of article 2 of the CIRS.

The Requester argues that all time of service rendered in the Banking Sector should be relevant, either by virtue of the interpretation he makes of the rule of paragraph b) of no. 4 of article 2 of the CIRS, or by virtue of other allegedly applicable rules, supplementarily, namely rules of labour law and, also, Doctrine and profuse Jurisprudence which he invokes, as set out in the PI and his Submissions.

The Respondent, for its part, understands that only the cited tax rule of paragraph b) of no. 4 of article 2 of the CIRS should be applied, due to the absence of complete clarification on seniority of other rules, in particular of labour law, and also refers the Doctrine and to diverse Jurisprudence, being relevant from now on, that which in the context of Submissions it refers regarding the recent decision of the Plenary of the Contentious Section of the Supreme Administrative Court in Appeal no. 407/18.7BALSB of 8 May 2019, as stated in the Response and its Submissions.

And for being relevant, see the Jurisprudence established therein, which is elucidatory of the true sense and scope of the tax rule in question.

In fact, this recent Learned Decision of the Plenary of the STA brings sufficient light to a sufficiently clear interpretation of each of the types of rules in question, fiscal and labour, as it were putting a full stop to this question, in which Jurisprudence has been contradictory.

The Meritorious Counselors resort, first and foremost, to articles 9 of the Civil Code and 11 of the LGT, as guiding principles of the interpretation of the applicable rules, to separate the waters as to the meaning and purpose of each of the rules invoked as potentially applicable.

They clarify, in this manner, that other branches of law, v.g. labour law, "must maintain their original meaning", although one and the other relate and complete each other.

And they clarify further emphasizing that "the notion of seniority used in the tax rule will have to be related to the norms of labour law that provide for payment of any monetary amounts in case of occurrence of cessation by mutual agreement, since labour law does not give an exact notion of what should be understood by seniority".

And even though cessation of functions occurs for various reasons, it is stated in the Learned Decision that "in all these situations of cessation of the employment contract seniority refers to the period of time in which the worker was in the service of the employer entity debtor of the compensation or indemnity to which such norms refer, it does not refer to the entire seniority of the worker since he commenced functions in his profession, regardless of the employer entity".

It thus appears, first and foremost, to be clear that the relevant seniority of the Requester is that which refers to the period of time in which he exercised functions at C..., that is, from 18-08-2009 to 31-05-2013 - 3 years, 9 months and 13 days.

And this by virtue of the provision of no. 4 of article 2 of the CIRS, the only rule relevant for purposes of counting seniority and, consequently, of the part subject to taxation and of the part excluded.

The Learned Decision further states that the ACT (Collective Labour Agreement) "(…) disciplines the determination or manner of calculation of seniority provided in the same ACT (…) it being certain that in this ACT the matter of cessation of the employment contract by mutual agreement is not regulated (…)".

And in an even more evident manner, it is further stated therein that "It is thus not coherent that one could interpret with a different meaning the expressions used to enact the rule which aims to tax compensation for cessation of the employment contract from that which serves to interpret the expressions used to enact the rules that define the manner in which compensation/indemnity for cessation of the employment contract is fixed, since they are identical and are used with the same meaning".

And, resorting to Doctrine, the same doctrine that the Respondent cited, the Learned Decision further states that "Moreover and as already seen, the principle of equality being a fundamental principle of taxation does not allow tax rules to be interpreted by appeal to concepts resulting from individual employment contracts or resulting from collective labour agreements that cover only the citizens found within a certain sector of activity, only thus the interpretation of tax rules respects the unity of the legal system, cfr. Manuel Faustino, On the meaning and scope of the new wording of article 2, no. 4 of the IRS Code, Fiscalidade, no. 13/14, p. 10 (…)".

It is thus more than demonstrated that the answers to the questions posed are now clear, both as to the seniority of the Requester to be considered for purposes of taxation, which is only the seniority of the Requester at C..., as it is, in light of the Jurisprudence that has been cited and the Doctrine, the only relevant for purposes of application of the rule of article 2, no. 4 of the CIRS, paragraph b), without need to determine which other grounds invoked by the Requester.

Terms in which, and by virtue of what is provided in the said article 2, no. 4, paragraph b) of the CIRS, neither the decisions of the gracious complaint nor those of the hierarchical appeal merit censure and, consequently, neither do the assessments carried out.

V - INDEMNIFICATORY INTEREST

Although the Requester's legitimacy is recognised to request payment of indemnificatory interest due under the terms of the provision of article 43 of the General Tax Law, and the Tribunal is competent ratione materiae, the truth is that, no declaration of illegality of the assessment in question having been issued and consequent annulment of the amount of IRS which he claimed as improperly paid, the prerequisites provided in article 43 of the General Tax Law for legal demand of the same are not met.

VI - INDEMNIFICATION FOR PROVISION OF BANK GUARANTEE

Likewise and for the same reason, there is no basis for payment of any indemnification for the provision of a bank guarantee, since the present Appeal has not been granted.

VII - DECISION

Terms in which it is decided:

a) To declare the arbitral claim inadmissible and, consequently, to maintain in the legal order the IRS assessment challenged, as well as the Demonstration of Interest Assessment and Demonstration of Account Settlement, with indication of the total amount payable, in the amount of € 27,547.07.

b) To declare inadmissible the claim for annulment of the decisions on the gracious complaint and hierarchical appeal.

c) To declare likewise inadmissible the claim for payment of indemnificatory interest in favour of the Requester.

d) To declare inadmissible the claim for payment of indemnification for the provision of a bank guarantee.

e) To condemn the Requester to full payment of the costs of the process.

VALUE OF THE PROCESS

The value of the process is fixed at € 27,731.69, under the terms of article 97-A, no. 1, a) of CPPT, applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Processes.

COSTS

Costs to be paid in the amount of € 1,530.00, under the terms of Table I of the Regulation of Costs in Tax Arbitration Processes, to be paid exclusively by the Requesters, under the terms of articles 12, no. 2 and 22, no. 4, both of RJAT and article 4, no. 4 of the cited Regulation, since the claim was entirely inadmissible.

Let notice be given.

Lisbon