CAAD Rules SIFIDE Tax Credit Can Be Deducted from IRC Autonomous Taxation (312/2018-T)

Arbitral Decision

The arbitrators Cons. Jorge Lopes de Sousa (president-arbitrator), Dr. Raquel Franco and Prof. Doctor Jorge Bacelar Gouveia (member-arbitrators) designated by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Court, constituted on 12-09-2018, agree as follows:

1. Report

A..., S.A., hereinafter referred to only as "A..." or "Claimant", holder of the Tax Identification Number (NIPC)..., with registered office at ..., ...-..., ..., came, in accordance with Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Court.

The Claimant seeks the annulment of the decision dismissing the Administrative Claim No. ...2018..., as well as the partial annulment of the Corporate Income Tax (IRC) assessment No. 2016..., issued on 24-06-2016, arising from the submission of the Income Declaration (Form 22) of IRC with identification No. ... subsequently replaced by the Substitute Income Declaration (Form 22) of IRC with identification No. ..., thereby determining the reimbursement of the amount of €436,162.67 (four hundred and thirty-six thousand, one hundred and sixty-two euros and sixty-seven cents) as tax paid unduly in the tax period of 2015, relating to autonomous taxation assessed in excess, based on the provisions of Article 38, No. 1, of the Tax Code for Investment, as well as on Article 90, No. 1, lit. a) of the IRC Code.

The Claimant also requests compensatory interest calculated on the amount to be reimbursed.

The respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 06-07-2018.

Pursuant to Article 6, No. 2, lit. a) and Article 11, No. 1, lit. b) of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council designated as arbitrators of the collective arbitral court the signatories, who communicated acceptance of the assignment within the applicable period.

On 23-08-2018 the parties were duly notified of this designation, and neither manifested the intention to refuse the designation of the arbitrators, in accordance with Article 11, No. 1, lits. a) and b) of the RJAT and Articles 6 and 7 of the Code of Ethics.

Thus, in accordance with Article 11, No. 1, lit. c) of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral court was constituted on 12-09-2018.

The Tax and Customs Authority submitted a Response in which it defended the inadmissibility of the claims.

By order of 17-10-2018, the meeting provided for in Article 18 of the RJAT was dispensed with and it was decided that the proceedings would continue with written submissions.

The Parties submitted submissions.

The arbitral tribunal was duly constituted, in accordance with Articles 2, No. 1, lit. a), and 10, No. 1, of Decree-Law No. 10/2011, of 20 January, and is competent.

The Parties are duly represented, possess legal personality and capacity and are legally entitled (Articles 4 and 10, No. 2, of the same decree-law and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings are not affected by nullities.

2. Factual Matters

2.1. Proven Facts

The following facts are considered proven:

• The Claimant is a public limited company subject to Corporate Income Tax (IRC) assessment;
• The Claimant submitted on 31 May 2016 the periodic income declaration (Form 22) of IRC, relating to the financial year 2015 (document No. 6 attached to the request for arbitral ruling, whose content is hereby reproduced);
• Subsequently, on 25-09-2017, the Claimant delivered a substitute Form 22 relating to the financial year 2015, with identification number ... (document No. 7 attached to the request for arbitral ruling, whose content is hereby reproduced);
• The Claimant determined a loss for tax purposes in the amount of €1,389,419.73 and a total amount of autonomous taxation of €436,162.67 (field 365 of Table 10 of document No. 7);
• In Schedule 07 of Annex D to said substitute declaration, the amount of €2,782,160.28 relating to balance of SIFIDE and SIFIDE II not deducted in prior periods and the allocation for the period of €967,122.11 is indicated among the tax benefits that operate through deduction from the IRC collection, indicating that the amount of €3,749,282.39 is carried forward to subsequent periods (fields 709, 710 and 712), in addition to the balance of €186,564.24 relating to RFAI (fields 713 and 716);
• In the tax period of 2015, the Claimant did not deduct any amount relating to tax benefits in field 355 of the Income Declaration Form 22;
• On 24-06-2016, the Tax and Customs Authority issued assessment No. 2016..., considering autonomous taxation in the amount of €436,162.67, withholdings at source in the amount of €581.25, payment of self-assessment in the amount of €435,581.42 (document No. 2 attached to the request for arbitral ruling);
• On 31-01-2018, the Claimant filed an administrative claim against the assessment seeking its partial annulment, on the ground that it did not consider the "possibility of deducting SIFIDE from the collection of autonomous taxation, as an integral component of the IRC collection, based on the provisions of No. 1 of Article 38 of the Tax Code for Investment and lit. a) of No. 1 of Article 90 of the IRC Code, with a view to the reimbursement of the amount relating to autonomous taxation assessed in excess, that is, the amount of Euro 436,162.67";
• The administrative claim was dismissed by decision of 03-04-2018, in the terms set out in document No. 1 attached to the request for arbitral ruling, whose content is hereby reproduced, in which it states, among other things, the following:

§ IV.II. On the calculation of tax

§ IV.II.I. Deduction of tax benefits from autonomous taxation collection

§ IV.II.I.I. On the arguments of the claimant

1. Contesting the IRC assessment identified above, the Claimant states that it proceeded to submit the Income Declaration Form 22 IRC for the period of 2015, which it subsequently replaced with the submission of a substitute declaration with identification number....

2. In the said period, it determined a loss for tax purposes in the amount of €1,389,419.73 and a total amount of autonomous taxation in the value of €436,126.67.

3. In the substitute declaration submitted, it declared that it was the holder of the following tax benefits capable of deduction from collection: SIFIDE 2014: 2,782,160.28; SIFIDE 2015: 967,122.11, RFAI: 186,564.24.

4. Being that in the tax period in question it did not deduct any amount relating to the indicated tax benefits.

5. Now, with respect to the deduction of tax benefits that operate by deduction from collection, the Claimant has been following the procedure of deducting tax benefits from the IRC collection, not considering as such the collection of autonomous taxation.

6. However, the Claimant became aware of arbitral case law in which the deductibility of tax credits assessed under SIFIDE to the collection of autonomous taxation is validated, as an integral part of the IRC collection and subject to the rules for IRC assessment.

7. If this is the case, as it believes, then the Claimant considers there to be a gross error in its IRC self-assessment, which distorted, in a materially significant manner, the tax payable.

8. In effect, under No. 1 of Article 38 of the CFI, taxpayers may deduct the amount assessed under SIFIDE from the amount of the IRC collection.

9. Now, No. 4 of the said article allows the deduction of SIFIDE in subsequent fiscal years, if it could not be deducted in the year to which it relates, due to insufficient collection.

10. In light of the foregoing, the question that needs to be resolved is whether the amount of autonomous taxation is assessed under Article 90 of the IRC Code, for if it is, it must be concluded that the deduction to be made with reference to those must have as reference, in addition to the IRC collection strictly speaking and state surcharge, the collection arising from autonomous taxation.

11. On this question, the Claimant cannot fail to point out that Article 90 of the IRC Code establishes the terms by which assessment should be conducted, whether carried out by the taxpayer or by the Tax Authority, with such terms being applicable to the determination of tax due in all situations provided for in the respective Code.

12. In this sense, as there is no provision in the IRC Code that provides for specific terms for the assessment of autonomous taxation, it must necessarily be concluded that Article 90 of the IRC Code also applies to the amounts assessed under that head.

13. The autonomy of autonomous taxation is limited to the rates applicable and the respective taxable base, but the assessment of its amount is carried out under Article 90 of the CIRC.

14. Therefore, the Claimant does not see any margin for any understanding other than that to the collection of autonomous taxation Articles 90, No. 2, lits. b) and c) of the IRC Code apply.

15. Even if, by mere reasoning, it were admitted that, despite autonomous taxation being in its essence IRC, its assessment does not fall within the framework of the IRC assessment norm enshrined in Article 90 of the CIRC, then the self-assessment of IRC in the portion relating to autonomous taxation would have to be considered null, by the simple fact that there is no other norm establishing the terms by which assessment should proceed.

16. Now, as things stand as outlined, it seems evident that to the IRC assessed in the manner described, the deductions corresponding to international legal double taxation, tax benefits and special payments on account must be made, in the order indicated, without any restrictions, as they are not provided for in the law.

17. And regarding the limitation inherent in the final part of Article 88, No. 21, of the CIRC, in the wording introduced by the State Budget Law for 2016 - Law No. 7-A/2016, of 30 March - it cannot be interpreted otherwise than in obedience to the constitutional principles enshrined in tax matters and to the requirements of legality imposed by Article 11 of the Civil Code.

18. And on this matter the Constitutional Court recently pronounced itself in Decision No. 267/2017, reported by Judge-Counsellor Pedro Machete, in terms that raise no doubt whatsoever.

19. It is, therefore, according to the said decision, unconstitutional, by violation of the prohibition on the creation of taxes with retroactive nature established in Article 103, No. 3, of the Constitution, the provision of Article 135 of Law No. 7-A/2016, of 30 March, in the part in which, by virtue of the merely interpretative character attributed to it, it determines that the provision of Article 88, No. 21, 2nd part, of the IRC Code - number added by Article 133 of said Law - according to which, to the global amount resulting from autonomous taxation assessed in a given year under IRC, the amounts paid as special payments on account in that same year cannot be deducted, applies to tax years prior to 2016.

20. In light of the foregoing, the Claimant considers that the amount of tax payable in the financial year 2015 should be corrected, considering it deductible from the amount of autonomous taxation assessed in that year the amount of €436,162.67, relating to part of SIFIDE 2014.

21. The Claimant also considers that compensatory interest is due under No. 1 and 2 of Article 43 of the LGT, insofar as having recorded the payment of tax in an amount greater than legally due, this was due to error attributable to the services.

22. In effect, the Claimant, in the present situation, acted in accordance with the guidance published by the Tax Authority and with what was provided in the income declaration form 22 of IRC itself.

§ IV.II.I.II. On the assessment

1. Having examined the Claimant's submission, we find that the question that emerges from its arguments is whether the amount paid as autonomous taxation should be understood as an integral part of the IRC collection, for purposes of deducting SIFIDE.

2. The examination of this question will, however, only make sense, in terms of the useful effect of the decision to be given, if there exists in the Claimant's ownership a tax credit under SIFIDE.

3. Now, with respect to SIFIDE, the amount available to the Claimant for purposes of deduction from collection effectively amounts to 3,749,282.39, as can be verified by reading Schedule 07 of Annex D of the Income Declaration Form 22 IRC.

1. In the quest for an answer to the question of whether the amount paid as autonomous taxation should be understood as an integral part of the IRC collection, for purposes of deducting tax benefits, it is necessary to address the evolution of the figure of autonomous taxation, its nature and characteristics, as well as the purposes for which it was instituted within IRC.

1. We must go back to 1990 to find the first legislative intervention aimed at subjecting certain expenses to autonomous taxation, which occurred with the publication of Decree-Law No. 192/90, of 9 June.

2. This legislative initiative was intended to penalize the realization by companies of confidential or undocumented expenses.

3. This provision was subject to various subsequent amendments that successively increased the rate of taxation provided therein.

4. Subsequently, with the "Income Taxation Reform", approved by Law No. 30-G/2000, of 29 December, Decree-Law No. 192/90, of 9 June, was repealed and Article 69-A (now Article 88) was added to the IRC Code and Article 75-A (now Article 73) was added to the Personal Income Tax Code, through which, in addition to providing, as was already the case with said Decree-Law 192/90, of 9 June, autonomous taxation of undocumented expenses, such taxation was extended, in Personal Income Tax and IRC, to representation expenses and vehicle expenses.

5. Having regard to Article 88 of the IRC Code (in the wording in force at the date of the facts), which establishes the different autonomous taxation rates, we find that they are subject to them and under the conditions provided therein, undocumented expenses, vehicle charges, representation expenses, travel allowances, expenses relating to compensation for travel by the worker's own vehicle, amounts paid to entities resident outside Portuguese territory and subject there to more favorable tax regime, profits distributed by entities subject to IRC to taxpayers who benefit from exemption, expenses or charges relating to indemnifications or any compensation due not related to the contractual relationship, expenses or charges relating to bonuses and other variable compensation paid to managers, administrators or partners.

6. It is unanimously recognized by arbitral case law that autonomous taxation has the nature of IRC and is due under IRC.

7. Evidence of what has just been stated is provided by the doctrine contained in the CAAD decision, case No. 209/2013, where it was made clear that "the legal regime of the autonomous taxation in question only makes sense in the context of taxation under IRC", that "its existence, its purpose, its explanation, in essence its legal validity, is only understandable and acceptable within the legal framework of the IRC regime".

8. In this regard it is stated in the said decision that the expenses subject to autonomous taxation are not the final object of taxation, for "if it were, they would, obviously, be taxed in all expenses incurred by all taxpayers, and not only by some of them".

9. This allows us to verify that autonomous taxation, in addition to being "strongly linked to the subjects of income taxation, incide, in the case at hand, on deductible expenses, which enables us to observe the strong connection existing between them and IRC and justification not only of its inclusion in the CIRC, but equally of its integration of full right, as part of the legal framework of IRC";

10. For its part, in the CAAD decision, case No. 210/2013-T16, it was considered that autonomous taxation was an "indirect mechanism of income taxation aimed at preventing the loss of tax revenue through tax evasion or confusion of business and private spheres".

11. It was concluded in the said judgment, therefore, that despite being obtained through the taxation of certain expenses that reduce taxable profit, it is still possible to see therein a form of taxation of that same taxable profit that is characteristic of the objectives underlying IRC.

12. Finally, in the CAAD decision, case No. 163/2014, it is stated that when "[one speaks] of autonomous taxation in Personal Income Tax or IRC, not because they are a tax different from any of these, but because they are calculated by applying a rule different from the general rules of taxation applicable to the determination of amounts due under those taxes. But, insofar as it concerns us, autonomous taxation in IRC being involved, it follows linearly from this norm that the tax to be assessed and collected is considered IRC".

13. Reference is also made to the 2001 tax reform, which introduced, as mentioned, autonomous taxation in the IRC Code, to note that the legislator considered that "the system of taxation of companies exclusively based on taxable profit generated situations of fiscal inequity that it was intended to mitigate or eliminate by effecting a 'broadening of the tax base'", through the addition to direct taxation, which continues to be the essence of the system of taxation of companies, of situations of indirect taxation, through the application of the tax also to certain expenses that were understood to be causes of that inequity, because they were presumably connected with situations of "tax evasion and fraud" "which frequently allows those who earn the most income not to pay taxes or to bear them in terms much lower than what is required of them".

14. It should be noted that the legislator cannot have been unaware of this reiterated and uniform case law mentioned above, in the recent amendment to the IRC Code, effected by Law No. 2/2014, of 16 January, to establish that autonomous taxation is not a tax cost [Article 23-A, No. 1, lit. a)].

15. While it is true that autonomous taxation has the nature of IRC, one cannot overlook, however, that it taxes expense and not income, burdens certain charges incurred by companies and is determined in a completely independent manner from IRC.

16. In fact, contrary to what happens in the taxation of income under Personal Income Tax and IRC, in which the aggregate of income earned in a given year is taxed (which implies that only at the end of the same can the tax rate be determined, as well as the bracket into which the taxpayer falls), in autonomous taxation each expense incurred is taxed, considered in itself, and subject to a certain rate, with autonomous taxation being determined independently from the IRC that is due in each fiscal year, by not being directly related to the obtaining of a positive result and therefore susceptible to taxation.

17. For while in IRC - as in Personal Income Tax - the taxable base is only effectively known at the end of the tax period and constitutes the synthesis of several operations with tax relevance, autonomous taxation inciding on the said charges becomes irreversible from the moment in which the taxpayers incur them, and cannot be annulled by way of subsequent profits or any other vicissitudes. In simplistic terms: once the expense (fact) is made, the presuppositions of the tax (objective incidence, subjective and rate) are satisfied instantaneously and irremediably.

18. Thus, in the case of IRC, we are faced with an annual tax, in which each income received is not taxed per se, but rather the aggregation of all income obtained in a given year, with the law considering that the tax event is verified on the last day of the tax period (see Article 8, No. 9, of the IRC Code).

19. Already with respect to autonomous taxation in IRC, the tax event is the very realization of the expense, not being faced with a complex fact, of successive formation over the course of a year, but with an instantaneous tax fact (although the determination of the amount of tax resulting from the application of the various taxation rates to the various acts of expense realization considered is to be effected at the end of a given tax period).

20. For this reason, Sérgio Vasques (see Manual of Tax Law, Almedina, 2011, p. 293, note 470) calls attention to the circumstance that income taxes contemplate elements of single obligation, such as Personal Income Tax liberatory rates or IRC autonomous taxation rates.

21. In light of what we have been saying, we can, from now on, enumerate some characteristics relating to autonomous taxation, thus preparing the way for the solution to be presented to the question before us, which is to inquire into the legal admissibility of making deductions of tax benefits from the collection of autonomous taxation.

22. Thus, a first characteristic that emerges from autonomous taxation concerns the fact that it incides on both deductible and non-deductible charges in the context of IRC, being determined and due independently of the existence or non-existence of taxable matter.

23. Another element that defines it is reflected in the circumstance that, despite "only [making] sense in the context of taxation under IRC", they represent an exception to the principle of taxation of legal entities in accordance with actual real profit.

24. It should also be noted that the tax event of autonomous taxation is the very realization of the expense, not being faced with a complex fact, of successive formation, although, as already mentioned, its determination is carried out at the end of the tax period.

25. This leads us, finally, to emphasize that, although the assessment of autonomous taxation is carried out at the end of a given period, this does not transform it into a periodic tax, insofar as such operation consists only in the aggregation, for collection purposes, of the aggregate of operations subject to such taxation.

26. Regarding the role played by autonomous taxation within IRC, of the purposes pursued by the legislator with its introduction in this tax, there are several references made in doctrine and case law in this regard.

27. Thus, on this subject Casalta Nabais states that "[it is] a taxation (on expense or consumption and not on income) that is explained by the need to prevent and avoid that, through these expenses, companies proceed to disguised distribution of profits, especially dividends which would thus only be subject to IRC as profits of the company, as well as to combat tax fraud and evasion occasioned by such expenses not only in relation to Personal Income Tax or IRC, but also in relation to the corresponding contributions, both from employers and workers, to social security".

28. Already Saldanha Sanches, with respect to autonomous taxation provided for in Article 88, No. 3, of the CIRC, wrote that "in this type of taxation, the legislator seeks to answer the admittedly difficult question of the tax regime of expenses that are found in the zone of intersection of the personal sphere and the business sphere, so as to avoid remuneration in kind more attractive for exclusively fiscal reasons or the disguised distribution of profits".

29. For Rui Morais, the objective would have been to try to prevent that, through these expenses, "the taxpayer uses for non-business purposes goods that generated fiscally deductible costs (... ); or that remuneration is paid to third parties with evasion of the taxes that would be due by them (...). The realization of such expenses implies an additional fiscal burden for those who incur them because the law presumes that, in this way, another person ceases to pay tax".

30. With respect to the understanding that case law has expressed on this matter, highlight the judgment of the Supreme Administrative Court, case 830/11, of 21.03.2012, where it was stated that "ultimately, the legislator will have created the autonomous taxation rates with a view to penalizing the realization of certain expenses, since, not knowing who is the respective beneficiary, it becomes necessary to prevent them from constituting remuneration to persons whose identity is unknown. From the legislator's perspective, these expenses should be taxed in the person/company bearing the cost, given the impossibility of doing so in the person receiving the amounts. If this were not the case, we would be accepting as a cost this type of expense, without there being able, given its confidential nature, taxation of income earned by its beneficiaries, whether under Personal Income Tax or under IRC".

In a recent judgment of the Supreme Administrative Court, it was held that "autonomous taxation aims, (...) that the company make an adjustment between its financial resources and its business objectives, discouraging it from adopting behaviors that, benefiting persons other than the company, increasing either its assets or the well-being or social reputation of these, leads to a diminution of its tax-paying capacity".

It has been especially arbitral courts that have frequently addressed this matter, with a significant number of decisions scalpelizing the main characteristics and purposes of autonomous taxation.

Worthy of note is the arbitral decision rendered in case No. 210/2013, where it was written that "(...) autonomous taxation does not serve only one objective, but rather two:

• Some aim to prevent erosion of the tax base in the context of IRC, causing taxation to incide on charges that may be deducted by IRC taxpayers, but which, if deducted, become an aggravation of taxation, thus intending to serve as a disincentive to the expense on such charges;

• Others aim to penalize presumptively evasive or fraudulent conduct".

"In effect, beyond the case of autonomous taxation that incides on non-deductible expenses and whose provision is justified as an anti-evasion mechanism, also in the case of autonomous taxation that incides on deductible expenses the legislator's will is present to prevent erosion of the tax base through the realization of expenses which, although they cannot be wholly prohibited by the IRC system because, in some cases, they may even be necessary for the realization of taxable income and/or the maintenance of the source of production, are expenses that share among themselves a risk of non-business character, that is, a risk of not being realized for business purposes, but rather for extra-business or private purposes. In such cases, the legislator thus opts to accept their deductibility, but burdening it with autonomous taxation. In fact, we are, in both cases, before a mechanism whose ultimate objective is to contribute to the "normalization" of taxation in the context of IRC, that is, to the functioning of this tax in its purest form and closest to its roots as a tax on profit obtained by legal entities. In that sense, autonomous taxation is nothing more than mechanisms auxiliary to the central axis of IRC, which is to tax profits allowing the deduction of expenses in which taxpayers must incur in order to realize taxable income.

It is thus, nothing more than a mechanism of indirect income taxation, which aims to prevent the loss of tax revenue through tax evasion or confusion of business and private spheres.

Specifically, with respect to autonomous taxation inciding directly on certain expenses, within taxes that originally incided only on income, they are considered distortions of the system of direct income taxation that was intended with IRC, but a value that legislatively was considered to be more relevant than the theoretical coherence of taxes, as is the implementation of fiscal justice, imposed a choice for these forms of taxation, because they are in consonance with the principles of equity, efficiency and simplicity.

(...)

But this indirect taxation is not ceasing to be carried out within the framework of IRC, as results from the inclusion of autonomous taxation in the respective Code, which has as a corollary the application of the general norms proper to this tax, that do not conflict with its special form of incidence.

Thus, if it is true that autonomous taxation constitutes a different form of imposing taxes on companies, which could be contained in autonomous regulation or be arranged in the Tax Stamp Code, it is also no less true that the legislative option to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in IRC, which could be justified by being an indirect form, but, from the legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income".

1. For its part, in the arbitral decision rendered in case No. 697/2014, it was reasoned that "(...) the mechanism of autonomous taxation of the aggregate of realities provided for in Article 88 of the CIRC aims, primarily, to safeguard the general equilibriums of the tax system itself, the specific equilibriums of IRC and the revenue of the tax itself. That is, it aims to prevent that through the significant reporting of charges as provided for in Article 88, one does not introduce distortions affecting the system and the expectation about what should be the "normal" revenue of the tax does not turn out to be disappointed. In the case, as is equally known, what is involved is discouraging the realization/reporting of such expenses, not least because, by their nature and purposes, they can be more easily subject to diversion to consumption which, in essence, are private or correspond to charges which, also, have as specific and ultimate purpose, the avoidance of tax".

2. In addition to what has been transcribed here about what has been the understanding of doctrine and case law regarding the objectives pursued by autonomous taxation, it is important to add that this tax assumes a clear anti-abuse nature, since with it one intends to prevent an abusive use of certain expenses and distribution of dividends and combat fraud against norms aimed at achieving the real income of taxpayers, thus pursuing the objective of achieving the tax-paying capacity revealed by real income.

3. The considerations made in this regard reveal that the figure of autonomous taxation has been instrumentalized for the pursuit of diverse purposes, ranging from the original purpose of preventing practices of evasion and fraud - through confidential or undocumented expenses, or payments to entities located in jurisdictions with privileged tax regimes, to the replacement of taxation of fringe benefits in the form of representation expenses or attribution of vehicles to workers and members of governing bodies, in the sphere of their respective beneficiaries - to the purpose of preventing the phenomenon designated as "washing of dividends" (see No. 11 of Article 88 of the IRC Code) or of burdening, through taxation, the payment of income considered excessive (see No. 13 of the same provision).

From what we have been saying, it is important to highlight the autonomous character of these taxation, resulting from the special configuration given to the material and temporal aspects of the tax events, which imposes, in certain domains, the departure from or an adaptation of the general rules of application of IRC. In this manner, having regard to the purposes of the taxation, to the purposes that justified its integration in the IRC Code, as well as to its mechanics of determination distinct from said tax, it is legitimate to consider that autonomous taxation, although placed within the framework of the IRC assessment process, are nonetheless "[in] accordance with a root and dogmatic of their own which lead to the fact that the total collection of the tax is not a unitary reality but a composite one".

In this way, we can identify, on the one hand, the collection of IRC strictly speaking, determined in accordance with the determination rules of this tax, concretely, the application of the rates of Article 87 of the IRC Code to taxable matter determined according to the rules contained in Chapter III of the code. On the other, we can discern "the specific collection, owed by autonomous taxation, which has (...) a root, a sense and its own basis, which is to discourage the adoption of the behaviors taxed by it".

Aiming autonomous taxation to reduce the fiscal advantage achieved with the deduction to taxable profit of the costs on which it incides and also to combat the tax evasion that some of these expenses, by their nature and strength, they cannot themselves, through the consideration of their amount for purposes of deduction of benefits, constitute a factor in reducing this diminution of advantage intended and determined by the legislator.

Using the words of the CAAD decision rendered in case No. 722/2015, we conclude that "having the regime of autonomous taxation a discouraging function of abusive behaviors, it is not seen for what logical reason such discouragement could, then, evaporate, which would occur if it were possible to deduct from the collection of autonomous taxation, fiscal incentives, as the Claimant intends.

This possibility would result in a dual strange effect: on the one hand it could, in the limit, eliminate the collection resulting from autonomous taxation and, on the other, would provide for the deduction of a certain tax benefit (...) from tax that has a specifically anti-abuse function, of mitigation of fiscal and socially undesired behaviors.

From the combination of these possibilities would result a contradictory, illegal and unethical result, precisely because the same tax law would allow, within the same tax system, to relieve the taxpayer of the burden of payment of a tax that is precisely due by the adoption of abusive, undesired and discouraged conduct (relevation as expenses of the expenses provided for in Article 88 of the CIRC)".

Having reached this point, it is important finally to highlight that the interpretation of No. 2 of Article 90, carried out in coherence with the nature and content of the deductions provided for in its paragraphs, must be made in light of the general objectives of IRC, which are reconditioned, in their essence, to the taxation of income of legal entities, determined in conformity with the rules of Chapter III of the respective code.

Under this lens, in the case of deductions of tax benefits from collection (lit. a) of No. 2 of Article 90), the amount to which these are made can only respect the tax assessed on the basis of taxable matter, determined on the basis of the rules of Chapter III and the rates provided for in Article 87 of the IRC Code.

This, under penalty of an incoherence resulting from the distortion of the necessary connection that, on the material level, must exist between the objectives pursued by the benefits and the very magnitude represented by profit.

In effect, when it is benefits for investment - as is the case with SIFIDE, RFAI and CFEI - there is an underlying philosophy that the benefit constitutes a prize whose amplitude varies depending on the profitability of the investments, because the higher the profit/taxable matter of IRC the greater will be the capacity to make the deduction.

There is therefore an indissoluble connection between the amount of the tax credit for investment and the part of the IRC collection calculated on the basis of taxable matter based on profit.

If it were not so, the necessary articulation that, on the material level, must exist - between the objectives pursued by the tax benefits and their impact on the very magnitude that serves as the basis for calculating taxable matter and collection - profit, would be subverted.

Another example of what we intend to demonstrate is found in the case of the deduction relating to the credit for international double taxation, provided for in lit. a), of No. 2 of Article 90 of the IRC Code.

In effect, such deduction is only possible to carry out when the taxable matter subject to tax has included income obtained abroad, in accordance with the provisions of Article 91, No. 1 of the IRC Code.

However, the tax base of autonomous taxation does not include income, but only the value of certain expenses, thus not being possible, at the level of this figure, to speak of income obtained abroad included in taxable matter.

Which leads us irremediably to the finding that, in the case of the credit for international double taxation, the deduction can only be made from the IRC collection, arising from the application of the rates provided for in Article 87 to taxable matter, determined on the basis of the rules of Chapter III.

The same applies with respect to the deduction relating to withholdings at source, provided for in lit. d) of No. 2 of Article 90 of the IRC Code.

Being that, in this case, the law expressly prevents the realization of the deduction provided for in lit. d) of No. 2 of Article 90 from the amount assessed under autonomous taxation.

In this sense, No. 12 of Article 88 of the IRC Code provides that "from the amount of tax determined, in accordance with the provisions of the previous number, the tax that may have been withheld at source is deducted, and in that case the tax withheld cannot be deducted under No. 2 of Article 90".

For its part, under No. 11 of Article 88 of the IRC Code, "profits distributed by entities subject to IRC to taxpayers who benefit from total or partial exemption are autonomously taxed, at the rate of 25%, comprising, in this case, capital income, when the shares to which the profits relate have not remained in the ownership of the same taxpayer, uninterrupted, during the year prior to the date of their being placed at disposal and are not to be maintained for the time necessary to complete that period".

Therefore, the amount possibly withheld at source in the situation provided for in No. 11 of Article 88 is deducted from the assessment of autonomous taxation, by application of No. 12 of Article 88, and not by virtue of Article 90, No. 2, lit. d), all of the IRC Code.

Fact which constitutes a clear reflection of the indissoluble connection of the nature and content of the deductions provided for in its paragraphs of No. 2 of Article 90 with the general objectives of IRC.

The considerations we have been making regarding the deductions provided for in No. 2 of Article 90 find explicit support in the provisions of No. 5 of Article 90, both of the IRC Code - through which the legislator provides a clear indication that the amount of tax assessed, to which the deductions referred to in No. 2 of the same article are made, does not include the amount corresponding to autonomous taxation.

In effect, in the regime of fiscal transparency, the taxable matter generated by the entities encompassed by it is imputed to the respective partners "integrating itself in their taxable income for purposes of Personal Income Tax or IRC", with the deductions provided for in No. 2 of Article 90 of the IRC Code to be imputed to the respective partners, being deducted from the amount of collection determined on the basis of the taxable matter that has been imputed to them under Article 6 of the IRC Code.

1. Now, since, under Article 12 of the IRC Code, the companies encompassed by this regime are not taxed in IRC, except with respect to autonomous taxation, it is verified, therefore, that the IRC collection determined with respect to each of the partners does not include any value relating to autonomous taxation, with payment of such being attributable exclusively to the companies.

2. In this manner, it is here expressly determined the impossibility of deducting from autonomous taxation the deductions provided for in No. 2 of Article 90 of the IRC Code, insofar as those do not integrate the collection that each of the partners will determine by applying the rate to the taxable matter that has been imputed to them, under the regime of fiscal transparency.

3. Proceeding from the assumption that the norms contained in a codification obey, as a rule, a unitary thinking, then it must be admitted that the legislator intended similar solutions for other entities subject to IRC.

4. Consequently, there are no reasons for significant differences, at the level of deductions from collection, between companies subject and not subject to the fiscal transparency regime.

5. Finally, it should be emphasized that the understanding we have reached regarding the inadmissibility of deduction of tax benefits from the collection of autonomous taxation is in consonance with the new No. 21 added to Article 88 of the IRC Code by Law No. 7-A/2016, of 30 March, in establishing that to the amount determined of autonomous taxation "no deductions are [made]".

6. We find that, in this case, the legislator limited itself to embracing, clarifying it, a solution that the courts, with resort to the rules in force and by application of the criteria of legal hermeneutics were in a position to extract from the applicable regime.

• On 05-07-2018, the Claimant submitted the request for arbitral ruling which gave rise to the present proceedings.

2.2. Facts Not Proven

There are no facts relevant to the decision of the case that have not been proven.

2.3. Reasoning for the Determination of the Factual Record

The proven facts are based on the documents submitted by the Claimant.

The Tax and Customs Authority did not submit an administrative file.

There is no dispute about the factual record.

3. Legal Matters

The Claimant determined a fiscal loss in the financial year 2015, but was assessed collection of autonomous taxation in the amount of €436,162.67.

The Claimant filed an administrative claim defending, in summary, that, having a tax benefit amount of SIFIDE available in that financial year, the same should be deducted from the collection of autonomous taxation, under Article 38, No. 1, of the Tax Code for Investment (hereinafter "CFI") and lit. a) of No. 1 of Article 90 of the CIRC.

The essential question which is the subject of the present proceedings is whether the amounts deductible from the tax benefits provided for in SIFIDE I and SIFIDE can be deducted from the IRC collection derived from autonomous taxation, in the year 2015.

To resolve this question it is also important to assess the relevance of subsequent laws, to which an interpretative nature has been attributed.

3.1. Applicability of Articles 89 and 90 of the CIRC to the Calculation of Autonomous Taxation

Articles 89 and 90 of the CIRC establish the following, in the wording resulting from Law No. 2/2014, of 16 January, and Law No. 82-C/2014, of 31 December, in force in the year 2015:

Article 89

Competence for Assessment

Assessment of IRC is carried out:

a) By the taxpayer itself, in the declarations referred to in Articles 120 and 122;

b) By the Tax and Customs Authority, in other cases.

Article 90

Assessment Procedure and Form

1 - Assessment of IRC is carried out as follows:

a) When assessment is to be made by the taxpayer in the declarations referred to in Articles 120 and 122, it is based on the taxable matter shown therein;

b) In the absence of submission of the declaration referred to in Article 120, assessment is carried out by 30 November of the following year to that to which it relates or, in the case provided for in No. 2 of the said article, by the end of the 6th month following the end of the period for submission of the declaration mentioned therein and is based on the value of the annual minimum monthly remuneration or, if higher, the totality of taxable matter of the nearest financial year that is determined;

c) In the absence of assessment under the previous paragraphs, the same is based on the elements available to the tax administration.

2 - To the amount determined under the previous number the following deductions are made, in the order indicated:

a) That corresponding to international legal double taxation;

b) That corresponding to international economic double taxation;

c) That relating to tax benefits;

d) That relating to special payment on account referred to in Article 106;

e) That relating to withholdings at source not capable of compensation or reimbursement under the applicable legislation.

3 - (Repealed)

4 - To the amount determined under No. 1, in relation to the entities mentioned in No. 4 of Article 120, the deduction relating to withholdings at source is only to be made when these have the nature of tax on account of IRC.

5 - The deductions referred to in No. 2 relating to entities to which the fiscal transparency regime established in Article 6 is applicable are imputed to the respective partners or members under the terms established in No. 3 of that article and deducted from the amount determined on the basis of taxable matter that has taken into account the imputation provided for in the same article.

6 - When the special regime for taxation of groups of companies is applicable, the deductions referred to in No. 2 relating to each company are made in the amount determined in relation to the group, under the terms of No. 1.

7 - (repealed by Law No. 82-C/2014, of 31 December)

8 - In relation to taxpayers covered by the simplified regime of determination of taxable matter, to the amount determined under No. 1 only the deductions provided for in lits. a) and e) of No. 2 are to be made.

9 - From the deductions made under lits. a) to d) of No. 2 a negative value cannot result.

10 - To the amount determined under lits. b) and c) of No. 1 only deductions are made of which the tax administration has knowledge and which can be made under No.s 2 to 4.

11 - In cases in which the provision of lit. b) of No. 2 of Article 79 is applicable, assessments are made annually on the basis of taxable matter determined on a provisional basis, and, in relation to the assessment corresponding to taxable matter relating to the entire assessment period, the difference determined is charged or cancelled.

12 - The assessment provided for in No. 1 can be corrected, if applicable, within the period referred to in Article 101, with the differences determined being charged or cancelled.

The said Articles 89 and 90 of the CIRC, as well as other norms of this Code, such as those relating to declarations provided for in Articles 120 and 122, are applicable to autonomous taxation.

In fact, it is now settled, following abundant arbitral case law and the positions assumed by the Tax and Customs Authority, that the tax collected on the basis of autonomous taxation provided for in the CIRC has the nature of IRC. Moreover, apart from case law, Article 23-A, No. 1, lit. a), of the CIRC, in the wording of Law No. 2/2014, of 16 January, leaves no room for any reasonable doubt, corroborating what previously resulted from the literal tenor of Article 12 of the same Code.

Now, Article 90 of the CIRC refers to the forms of assessment of IRC, by the taxpayer or by the Tax Authority, being applicable to the determination of tax due in all situations provided for in the Code.

For this reason, that Article 90 also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Authority, following the submission or not of declarations, there being, with force in the year 2015, no other provision that provides for different terms for its assessment.

Thus, in the year 2015, the differences between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are restricted to the determination of taxable matter and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for the IRC that has as its basis taxable profit and in Article 88 of the CIRC for the IRC that has as its basis the taxable matter of autonomous taxation and the respective rates.

But the forms of assessment provided for in Chapter V of the same Code are of common application to autonomous taxation and to the remaining taxable matter of IRC.

However, the circumstance that an IRC assessment, made under No. 1 of Article 90, can contain various partial calculations, based on various rates applicable to certain taxable matter, does not imply that there is more than one assessment, as results from the very terms of that norm by making reference to "assessment", in the singular, in all cases in which it is "made by the taxpayer in the declarations referred to in Articles 120 and 122", having "as its basis the taxable matter shown therein" (whether that determined on the basis of the rules of Articles 17 and following or that determined on the basis of the various situations provided for in Article 88).

Moreover, it is not only the assessments provided for in Article 88 that can encompass various calculations of application of rates to certain taxable matter, as the same can occur in the situations provided for in No.s 4 to 6 of Article 87.

In any case, whatever the calculations to be made, the assessment that the taxpayer or the Tax and Customs Authority must make under Articles 89, lit. a), 90, No. 1, lits. a), b) and c), and 120 or 122 is unitary, and it is on the basis of it that the overall IRC is calculated, whatever the taxable matter relating to each of the types of taxation that underlies it.

Moreover, if this Article 90 were not applicable to the assessment of autonomous taxation provided for in the CIRC, we would have to conclude that there would be no provision that, in 2012, provided for its assessment, which would lead to illegality, by violation of Article 103, No. 3, of the CRP, which requires that assessment of taxes be made "under the terms of the law".

Reference should also be made to the new provision of No. 21 added to Article 88 of the CIRC by Law No. 7-A/2016, of 30 March, regardless of whether or not it can be qualified as truly interpretative, does not alter this conclusion in any way, since there it is established, with respect to the form of assessment of autonomous taxation, that it "is carried out under the terms provided for in Article 89 and is based on the values and rates that result from the provisions of the previous numbers". In effect, if it is true that this new provision comes to make explicit how the amounts of autonomous taxation are calculated (which already followed from the very text of the various provisions of Article 88) and that competence rests with the taxpayer or the Tax Authority, under the terms of Article 89, it is also clear that the need to use the procedure provided for in No. 1 of Article 90 is not waived, namely in the cases provided for in its lit. c) in which assessment falls to the Tax and Customs Authority, on "the basis of the elements available to the tax administration", which will include the possibility of assessing on the basis of autonomous taxation, if the Tax and Customs Authority has elements that prove its presuppositions.

The same applies with the wording given to that No. 21 of Article 88 by Law No. 114/2017, of 29 December.

For this reason, both before and after Law No. 7-A/2016, of 30 March, and Law No. 114/2017, of 29 December, Article 90, No. 1, of the CIRC is applicable to the assessment of autonomous taxation.

3.2. Applicability of the Deductions Provided for in No. 2 of Article 90 of the CIRC

to the IRC Collection Resulting from Autonomous Taxation

From what has been stated, at least until Law No. 7-A/2016, of 30 March, there was no legal provision that indicated any special assessment procedure for the IRC resulting from autonomous taxation, so, under penalty of unconstitutionality by violation of No. 3 of Article 103, since assessment is not made "under the terms of the law", the procedure provided for in Article 90 of the CIRC had to be applied.

Being the IRC collection, both that resulting from taxable profit and that resulting from autonomous taxation, determined through the assessment procedure provided for in Article 90 of the CIRC, the deductions provided for in No. 2 of the same article are potentially applicable to such collection, which refer to "the amount determined under the previous number", without any distinction regarding the nature of the types of IRC collection that are included in that amount.

For this reason, from the literal wording of No. 2 of Article 90 of the CIRC, no obstacle results to the application of the deductions to the part of the amount determined under No. 1 derived from autonomous taxation.

As is stated in the judgment of the Constitutional Court No. 267/2017, of 31-05-2017, rendered in case No. 466/16, "the autonomy of the taxation in question regarding its incidence base, regarding the applicable rates and even regarding the moment of payment, by itself, does not determine – either logically or legally – the irrelevance of the collection obtained with autonomous taxation within the determination of the collection of IRC itself – a question regulated, in general, in Article 90, No. 1, of the CIRC – namely regarding the integration of that into the latter and, consequently, regarding the admissibility of consideration of the value of said collection for purposes of the realization of the deductions legally provided for in Article 90, No. 2, of the CIRC. Such question, in the absence of a specific norm to the contrary – as for example the one that came to be established in Article 88, No. 21, of the CIRC – relates to the very legislative configuration of IRC, in which is included the relevance or irrelevance, for purposes of determination of final IRC collection, of the amounts paid under autonomous taxation".

In fact, only with Law No. 7-A/2016, of 30 March, which added to Article 88 of the CIRC a No. 21, did a provision exist in which the possibility of application of the deductions provided for in No. 2 of Article 90 of the CIRC to the amount determined with autonomous taxation is precluded, establishing as follows:

21 - Assessment of autonomous taxation in IRC is carried out under the terms provided for in Article 89 and is based on the values and rates that result from the provisions of the previous numbers, with no deductions being made to the global amount determined.

In the final part of this norm, the scope of application of the deductions provided for in Article 90, No. 2, of the CIRC is restricted to the IRC collection derived from taxable profit.

Law No. 114/2017, of 29 December, came to reaffirm the exclusion of the applicability of the deductions provided for in No. 2 of Article 90 of the CIRC to the IRC collection resulting from autonomous taxation by establishing as follows:

21 - Assessment of autonomous taxation in IRC is carried out under the terms provided for in Article 89 and is based on the values and rates that result from the provisions of the previous numbers, with no deductions being made to the global amount determined, even if such deductions result from special legislation.

This No. 21 of Article 88 of the CIRC was attributed an interpretative nature, by Article 135 of Law No. 7-A/2016 and by Article 233 of Law No. 114/2017, respectively.

However, the Constitutional Court, in the cited judgment No. 267/2017, has already affirmed the unconstitutionality of that Article 135 in the part in which, by virtue of the merely interpretative character that it attributes to the 2nd part of No. 21 of Article 88 of the CIRC, it precludes the possibility of deduction from the global amount resulting from autonomous taxation assessed in a given year under IRC of deductions allowed in tax years prior to 2016.

This decision of the Constitutional Court was based on No. 3 of Article 103 of the CRP, which establishes that no one can be required to pay taxes that have a retroactive nature, from which the Constitutional Court understood that it results that "the legislator cannot create taxes with such nature or introduce in existing taxes modifications that, with retroactive effects, aggravate them" and that "what is at stake is the prohibition of establishing new legal consequences that constitute ex novo or aggravate situations already defined, in particular the amount due as a certain tax and previously defined by reason of the verification of all facts relevant in light of the law applicable before the establishment of new legal consequences".

For this reason, in line with this case law, the constitutionality of the restrictive interpretation of No. 2 of Article 90 of the CIRC, so as to exclude the possibility of deductions from the IRC collection resulting from autonomous taxation, depends on it already having to be made in light of the regime prior to that law No. 7-A/2016, since it is constitutionally inadmissible the retroactive unfavorable application to taxpayers of tax norms from which results the obligation to pay taxes.

It should be noted, however, from the outset, that the new wording given by Law No. 114/2017 to No. 21 of Article 88 of the CIRC, in precluding the possibility of deductions from the global amount of autonomous taxation "even if such deductions result from special legislation" clarifies, with interpretative nature (in this part without problems of constitutionality, as it is a matter of retroactive favorability to taxpayers), that there existed special legislation from which resulted that deductions be made to the amount of autonomous taxation, thus coming to recognize, with the legislative authority of an authentic interpretation, what had already been reiterated by arbitral case law.

For this reason, being constitutionally inadmissible, for what the Constitutional Court stated in the cited judgment, that this new law comes to preclude the possibility of deductions admissible in light of the legislation in force until the entry into force of Law No. 7-A/2016, the question that arises, in order to resolve the questions of legality of the assessment and of the decision on the administrative claim that are raised in the present proceedings, is whether, prior to this law, a restrictive interpretation should already have been made that came to be made explicit therein, should already have been made restrictions to the application of the deductions provided for in No. 2 of Article 90 of the CIRC to the part of the IRC collection resulting from autonomous taxation.

In fact, the fact that the letter of No. 2 of Article 90 points toward the application of the deductions to the collection resulting from autonomous taxation such deductibility does not exclude the possibility of restrictive interpretation, if "the interpreter reaches the conclusion that the legislator adopted a text that betrays his thought, insofar as it says more than what he intended to say. Here too the ratio legis will have a decisive word. The interpreter should not be carried away by the apparent scope of the text, but should restrict it so as to make it compatible with the legislative thinking, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed thus: cessante ratione legis cessat eius dispositio (where the reason for the law ends its scope ends)".

As a basis for a restrictive interpretation could, in a first analysis, be ventured the fact that some autonomous taxation, namely some of those that have as their incidence base "expenses" or "charges", aim to discourage certain behaviors of taxpayers susceptible of affecting taxable profit, and consequently reducing tax revenue, and their discouraging force will be attenuated with the possibility of the respective collection being subject to deductions.

However, as was legislatively recognized by the wording given to No. 21 of Article 88 by Law No. 114/2017 (here with force interpretative constitutionally beyond reproach in light of Article 103, No. 3, of the CRP), there is special legislation from which result deductions to the collection derived from autonomous taxation, which are necessarily situations in which legislatively preference was given to the satisfaction of the interests that justify the deductions in relation to those pursued with autonomous taxation, which occurs with the norms on tax benefits deductible from the IRC collection.

On the other hand, the nature of anti-abuse norms, aimed at preventing fraud and tax evasion, does not exclude the possibility of deductions from the IRC collection determined with the application of those norms, which is manifest in relation to the collection provided by corrections based on norms of an indisputably anti-abuse nature, such as, for example, those relating to transfer pricing or under-capitalization and also corrections resulting from the application of the general anti-abuse norm provided for in Article 38, No. 2, of the LGT.

Still on the other hand, it is also evident that the anti-abuse nature of some of the autonomous taxation that aim to discourage expenses and prevent tax evasion could not serve to justify the non-deduction of tax benefits to all IRC collection resulting from autonomous taxation, as that provided for in No. 11 of Article 88 of the CIRC does not incide on expenses or charges, but on "profits", being a form of complementary or alternative taxation of profit in relation to that provided for for the generality of income. Furthermore, autonomous taxation provided for in No. 8 of Article 88 does not have underlying any intention to discourage the realization of the operations to which it refers, but rather to impose special probative duties on taxpayers in situations where the more favorable taxation of the recipients of the expenses can raise doubts about the reality and normality of the operations, as autonomous taxation is precluded "if the taxpayer can prove that they correspond to operations actually carried out and do not have an abnormal character or an excessive amount".

To this is added that, even in relation to some autonomous taxation that incides on expenses, it would not be compatible with the constitutional principles of proportionality and equality to impose taxation on the basis of a hypothetical legislative intention to discourage the use of motorcycles for certain activities for which they are indispensable, as occurs with motorcycle shows, or for which they have evident adequacy, with their use corresponding to manifest good business management, and it would be especially inconceivable to include within the scope of that discouraging intention the very payment of "taxes inciding on their possession or use", to which the final part of No. 5 of Article 88 refers, which should even be ensured coercively by the Tax and Customs Authority, in the case that the taxpayer feels discouraged to make that payment.

Thus, the understanding that all autonomous taxation aims to tax expenses or discourage or sanction behaviors, which can result from a first cursory analysis, encounters, on a more incisive perception, an insurmountable lack of correspondence with reality, being more coherent, as a global explanation, the idea that we are "before a mechanism whose ultimate objective is to contribute to the "normalization" of taxation in the context of IRC, that is, to the functioning of this tax in its purest form and closest to its roots as a tax on profit obtained by legal entities. In that sense, autonomous taxation is nothing more than mechanisms auxiliary to the central axis of IRC, which is to tax profits allowing the deduction of expenses in which taxpayers must incur in order to realize taxable income".

As is also stated in the CAAD judgment rendered in case No. 59/2014-T, autonomous taxation in IRC should be considered a form of taxation of business income:

"The Explanatory Memorandum contained in Bill No. 46/VIII, which led to Law No. 30-G/2000, of 29 December, which greatly expanded the situations of autonomous taxation, leaves no room for doubt that it is a conscious and intended expansion of the previously existing distortions, as it was understood that they were necessary, in summary, to compensate for other distortions resulting from significant fraud and tax evasion and thus increase the equity of the distribution of the tax burden among citizens and companies".

(...)

"autonomous taxation directly inciding on certain expenses, within taxes that originally incided only on income, are considered distortions of the system of direct income taxation that was intended with IRC, but a value that legislatively was considered to be more relevant than the theoretical coherence of taxes, as is the implementation of tax justice, imposed a choice for these forms of taxation, as they are in consonance with the principles of equity, efficiency and simplicity.

(...)

But this indirect taxation is not ceasing to be carried out within the context of IRC, as results from the inclusion of autonomous taxation in the respective Code, which has as a corollary the application of the general norms specific to this tax, which do not conflict with its special form of incidence.

Thus, while it is true that autonomous taxation constitutes a different form of imposing taxes on companies, which could be contained in autonomous regulation or be arranged in the Tax Stamp Code, it is also no less true that the legislative option to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in IRC, which could be justified by being an indirect form, but, from the legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income".

In fact, autonomous taxation in the context of IRC, in light of the growing amplitude that the legislator has been giving it, in order to be compatible with the constitutional principle of taxation of companies inciding fundamentally on its real income (Article 104, No. 2, of the CRP), should be understood as indirect forms of taxing business income, through the taxation of certain expenses and charges that reveal tax-paying capacity, or even, in the cases of autonomous taxation provided for in No.s 8 and 11 of Article 88, as complementary forms of directly taxing income, in situations where it will presumably be generated, without taxation, in the legal sphere of third parties.

Moreover, it is a fact that the imposition of any expense without counterpart to a legal entity has as a corollary a potential decrease in its income, so the imposition of a unilateral tax obligation, even if calculated on the basis of expenses incurred or charges borne, constitutes a form of indirectly taxing its income.

The new Article 23-A of the CIRC, introduced by Law No. 2/2014, of 16 January, by saying that "the following charges are not deductible for purposes of determining taxable profit, even when accounted for as period expenses: a) IRC, including autonomous taxation, and any other taxes that directly or indirectly incide on profits", gives an indication that, from the legislative perspective, IRC and autonomous taxation are taxes that directly or indirectly incide on profit, as this understanding can justify the inclusion of the expression "any other taxes", which presupposes that IRC and autonomous taxation are also taxes of these types, are taxes that directly or indirectly incide on actual or presumed profits.

For this reason, being autonomous taxation provided for in the CIRC, ultimately, indirect forms of taxing business income, it is not seen that there is necessarily incompatibility between them and the general rules that provide for the form of making IRC assessment.

In any case, a restrictive interpretation can only result, in light of the wording of the CIRC prior to Law No. 7-A/2016, from the conclusion that the text of No. 2 of Article 90, in some measure, does not correspond to the legislative thinking, namely if it can be concluded that the reason justifies some or some of the deductions, only being compaginable with its application to the IRC collection resulting from taxable profit.

And, naturally, in light of the constitutional prohibition of the retroactive application of the exclusion of global deductibility to situations prior to Law No. 7-A/2016, the deductions will be applied when they result from the special legislation to which the wording of No. 21 of Article 88 introduced by Law No. 114/2017 refers.

In fact, at least in those cases in which the deductions result from special law, the possibility of precluding them through a restrictive interpretation of No. 2 of Article 90 will be necessarily precluded, as it is this special law, precisely because it is special, that imposes its application, as special laws override general laws in their specific domains of application.

It is in light of this that it is important to assess each of the situations in which the Claimant intends to make deduction from the IRC collection resulting from autonomous taxation.

3.3. Deductibility of Investment Expenses Provided for in SIFIDE from the IRC Collection Derived from Autonomous Taxation

SIFIDE - System of Tax Incentives for Research and Development Enterprise was created by Law No. 40/2005, of 3 August, with force provided for the years 2006 to 2010, but was reformed by Article 133 of Law No. 55-A/2010 of 31 December to be in force until 2015 as System of Tax Incentives for Research and Development Enterprise II (SIFIDE II).

Subsequently, it was amended by Articles 163 and 164 of Law 64-B/2011 of 30 December, and transferred to Articles 33 to 40 of the Tax Code for Investment, republished by Decree-Law No. 82/2013, of 17 June.

Articles 33, 35, 36 and 38