Summary
Full Decision
ARBITRAL DECISION
I - REPORT
1 – A..., SGPS, S.A., NIPC..., with registered office at Rua ..., n.º..., ..., ..., ...-... ..., filed on 06/07/2018 a request for constitution of an arbitral tribunal, pursuant to the provisions of paragraph a) of no. 1 of article 2, paragraph a) of no. 2 of article 5 and no. 1 of article 6, all of the Legal Regime for Tax Arbitration (RJAT), with a view to, directly, assessing the illegality of the dismissal of the administrative claim no. ...2018... which took place before the Tax Authority Office of ... and, mediately, assessing the partial illegality of the self-assessment act of Corporate Income Tax (IRC) relating to the tax year 2015, in the part corresponding to the non-deduction from the respective tax collection relating to autonomous taxation of the tax benefit ascertained under the CFEI - Extraordinary Tax Credit for Investment. It further requests that, subsidiarily, should it be understood that article 90 of the IRC Code does not apply to autonomous taxation, the illegality of the collection of autonomous taxation be declared, due to absence of legal basis, with the consequent reimbursement of its value and payment of compensatory interest.
2 – The request for constitution of the arbitral tribunal was made without the Claimant having exercised the option of appointing an arbitrator, coming to be accepted by His Excellency the President of the CAAD and automatically notified to the Tax Authority on 09/07/2018.
3 – Pursuant to the provisions of no. 2 of article 6 of the RJAT, by decision of His Excellency the President of the Ethics Council, duly communicated to the parties within the legally applicable time limits, on 28/08/2018, the arbitrators of the Collective Tribunal were appointed, which was thus constituted: Judge José Poças Falcão, President arbitrator and auxiliary arbitrators Professor Doctor Susana Fernandes Costa and licentiate Arlindo José Francisco, who communicated to the Administrative Arbitration Ethics Council their acceptance of the appointment within the legally stipulated time limit.
4 - The tribunal was constituted on 17/09/2018 in accordance with the provisions contained in paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December.
5 – With its request, as already mentioned, the Claimant seeks the declaration of illegality of the dismissal of the administrative claim no. ...2018... and consequently the declaration of illegality of the IRC self-assessment act, including autonomous taxation rates, to the extent corresponding to the non-deduction from the respective tax collection relating to autonomous taxation of the tax benefit ascertained under the CFEI, or subsidiarily the annulment of the collection of autonomous taxation as undue.
6 – It supports its point of view, in summary, on the fact that the Tax Authority's IT system does not permit the deduction of IRC credits resulting from ascertained autonomous taxation, the CFEI, such IRC credits from CFEI being more than sufficient to compensate, through their use, the collection of autonomous taxation in IRC for the tax year 2015 in question.
7 – It considers that in the collection of autonomous taxation there is no problem for it not to be treated as IRC collection, now for some situations to be IRC collection and not for others is not justified.
8 – The great majority of arbitral jurisprudence goes in the direction of considering the collection of IRC from autonomous taxation on an equal footing with IRC, in the sense of applicability to the same of the deductions of the CFEI, in its case.
9 – Article 90 of the CIRC applies to the liquidation made by the taxpayer and no other is found that refers to the liquidation of autonomous taxation and the remainder of IRC, therefore, in these terms, it can only be concluded that article 90 applies to both, IRC and autonomous taxation.
10 – The question which it seeks, in summary, to have clarified, is whether the claimant has the right to proceed with the deduction of the CFEI to the IRC collection produced by the application of autonomous taxation rates, which the majority of arbitral jurisprudence has been accepting this right and that the claimant sees nothing in the law that prevents it.
11 – For its part, the Respondent understands that the invoked reasons of fact and law are far from substantiating and supporting any of the claims formulated, which should be dismissed.
12 – It considers that the legal nature of autonomous taxation has a nature different from that of IRC, in that while the latter applies to profits, autonomous taxation applies to expenses of the taxpayer or of third parties who maintain a relationship with him, whereby, in certain fields, they involve the removal or an adaptation of the general rules of application of IRC.
13 – Also the amount ascertained pursuant to paragraph a) of no. 1 of art. 90 does not have a unitary character, as it comprises values calculated according to different rules, which are associated with also differentiated purposes, whereby the deductions provided for in the paragraphs of no. 2 of the aforementioned article, can only be made to the part of the IRC collection with which there is a direct correspondence, so as to maintain the coherence of the structure.
14 – The CFEI has underlying the philosophy that the benefit constitutes a prize whose amplitude varies with the profitability of investments, as the higher the profit/taxable matter of IRC, the greater the capacity to make the deduction, thus verifying an inseparable link between the amount of the tax credit for investment and the part of the IRC collection calculated on the taxable matter based on profit and, unless this is the case, 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 the taxable matter and the collection - profit would be subverted.
15 - It is manifest that autonomous taxation has a special configuration in its material and temporal aspects of the triggering facts which imposes, in certain fields, the removal or an adaptation of the general rules of IRC.
16 - Concluding that on the collection produced by autonomous taxation, it is not possible to make any deduction, namely the CFEI, under penalty of, understanding it in the opposite sense, subverting the genesis, teleological and hermeneutic of the entire tax legal system underlying autonomous taxation.
II – SANCTION
The tribunal was regularly constituted and is competent in terms of subject matter, in accordance with article 2 of the RJAT.
The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented in accordance with articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
With the response, the Tribunal issued an Order dispensing with the meeting provided for in article 18 of the RJAT, unless express objection is made, within a period of five days, by either party, since no witnesses were listed nor were there exceptions or prior issues to be assessed.
It granted a period of 20 days for simultaneous submissions by the parties, fixing the date for the issuance of the decision as 14 February 2019.
The parties said nothing regarding the dispensation of the meeting provided for in article 18 of the RJAT and only the claimant produced submissions, which essentially sought to reinforce its point of view on the matter in question.
Thus, the case being free from nullities, it behoves us to decide.
III - GROUNDS
Questions to be settled:
The claim subject of the present request for arbitral pronouncement consists in the declaration of illegality of the decision dismissing the administrative claim and, consequently, the declaration of illegality of the IRC self-assessment act, including autonomous taxation rates, to the extent corresponding to the non-deduction from the IRC collection produced by the autonomous taxation rates of the Extraordinary Tax Credit for Investment ("CFEI"), in the amount of € 1,674,834.12, relating to the tax period of 2015.
That is, the question of the application (or otherwise) of the provisions of article 90 of the IRC Code to autonomous taxation provided for in article 88 of the IRC Code, as well as to the CFEI, is to be submitted to the Tribunal's consideration.
Subsidiarily, should it be understood that article 90 of the IRC Code does not apply to autonomous taxation, the declaration of illegality of the collection of autonomous taxation (and consequently to be annulled) due to absence of legal basis for its implementation, with the consequent reimbursement of the amount paid and payment of compensatory interest.
1 - Factual Matter:
The relevant factual matter proven on the basis of the elements attached to the case file is the following:
a) On 31 May 2016, the now Claimant filed the IRC declaration model 22 of its fiscal group relating to the tax year 2015, having proceeded to self-assess autonomous taxation in IRC for that same year, in the amount of € 371,577.61.
b) In the aforementioned declaration, it determined taxable matter in the amount € 112,384.90, which resulted in a final recoverable value of € 1,017,422.76.
c) The value of autonomous taxation applied to the expenses declared by the Claimant, on behalf of the group of companies, in the respective fields of table 11 of model 2 timely filed.
d) On 4 January 2018, it filed an administrative claim against the aforementioned self-assessment, which came to be dismissed, as per notification of 13 May 2018.
e) The claimant had an amount of CFEI available in the tax year 2015 of € 1,674,834.12, duly certified, which the Tax Authority's IT system did not permit to be deducted from the IRC relating to autonomous taxation.
f) The Tax Authority did not proceed to determine the group's IRC by indirect methods, and the companies that are part of it had their tax status regularized with the Tax Authority and Social Security.
g) The claimant paid the self-assessed tax in the amount of € 371,577.61.
The facts considered proven with relevance for the case file result from the documents submitted by the parties and administrative proceedings which were not put in question by them, with the dispute being confined, as is clear from the pleadings, to the interpretation and application of the law to the same.
It is not considered that there are unproven facts of relevance for the case file.
2 – Legal Matter
2.1 Illegality of the dismissal of the administrative claim of the respective self-assessment
The Claimant seeks the restitution of the amount of € 371,577.61 paid, relating to autonomous taxation, on the grounds that said amount should be absorbed by the CFEI, available at the time in the amount of € 1,674,834.12 which was duly certified, and for that purpose, seeks that the illegality of the tacit dismissal of the aforementioned administrative claim be declared and, consequently, the declaration of illegality of the IRC self-assessment acts, given that the non-deduction from the collection produced by autonomous taxation of the CFEI supports this illegality.
The Claimant seeks that the Tribunal assess the application of article 90 of the CIRC to autonomous taxation provided for in article 88 of the aforementioned Code, in what concerns CFEI, given its understanding that these should be deducted from the collections produced by autonomous taxation and, in the event that illegality comes to be declared, the reimbursement of the amount in question accompanied by compensatory interest provided for in article 43 of the LGT.
First of all, let us see that, as jurisprudence has understood, the Courts do not have to assess all the arguments formulated by the parties (as per, Judgment of the Plenary of the 2nd Section of the STA, of 7 June 95, case 5239, in DR – Appendix of 31 March 97, pages 36-40 and Judgment STA – 2nd Sec – of 23 April 97, DR/AP of 9 October 97, p. 1094). This understanding is contained in the provisions of articles 607-2 and 3 of the CPC and 123-1st part of the CPPT, when they impose only on the Judge (or the Tribunal) that, after identifying the parties and the object of the dispute and enumerating the questions to be decided, ground the decision by discriminating proven and unproven facts and indicate, interpret and apply the corresponding norms for its final conclusion (decision).
This understanding is also contained in the RJAT (DL no. 10/2011, of 20 January and amendments) in article 22-2 of the RJAT, by providing that "(…) the provisions of article 123, first part, of the CPPT are applicable to the arbitral decision, regarding the judicial sentence (…)".
The object of the dispute centers on the assessment of the question of the consideration or disregard of the collection arising from autonomous taxation for purposes of the limit of deductions provided for in article 90 of the CIRC (tax periods of 2015), namely the CFEI.
Let us now examine the wording of article 90 of the IRC Code with the heading "procedure and form of assessment":
"1 — The assessment of IRC is processed as follows:
a) When the 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 contained therein;
b) In the absence of submission of the declaration referred to in article 120, the assessment is made by 30 November of the year following that to which it relates or, in the case provided for in no. 2 of that article, until the end of the 6th month following the end of the deadline for submission of the declaration mentioned therein and is based on the greater of the following amounts: (As amended by Law no. 114/2017, of 29 December)
1) The taxable matter determined, based on the elements available to the tax authority, in accordance with the rules of the simplified regime, with application of the coefficient of 0.75; (Added by Law no. 114/2017, of 29 December)
2) The entire taxable matter of the nearest tax period found to be determined; (Added by Law no. 114/2017, of 29 December)
3) The annual value of the minimum monthly remuneration. (Added by Law no. 114/2017, of 29 December)
c) (Repealed by Law no. 114/2017, of 29 December)
2 — The following deductions are made to the amount ascertained pursuant to the preceding number, 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 the special payment on account referred to in article 106;
e) That relating to withholdings at source not susceptible to compensation or reimbursement under applicable legislation.
3 — (Repealed)
4 — To the amount ascertained pursuant to no. 1, concerning the entities mentioned in no. 4 of article 120, only the deduction relating to withholdings at source shall be made when these have the nature of an installment of IRC tax.
5 — The deductions referred to in no. 2 concerning entities to which the fiscal transparency regime established in article 6 applies are imputed to the respective partners or members under the terms established in no. 3 of that article and deducted from the amount ascertained on the basis of taxable matter which has taken into account the imputation provided for in the same article.
6 — Where the special regime for taxation of groups of companies applies, the deductions referred to in no. 2 relating to each of the companies are made in the amount ascertained concerning the group, pursuant to no. 1.
7 — (Repealed by Law no. 82-C/2014, of 31 December)
8(*) — Concerning taxpayers covered by the simplified regime for determining taxable matter, to the amount ascertained pursuant to no. 1 only the deductions provided for in paragraphs a) and e) of no. 2 are to be made.
9(*) — From the deductions made pursuant to paragraphs a) to d) of no. 2 no negative value can result.
10 — To the amount ascertained pursuant to paragraphs b) and c) of no. 1 only the deductions of which the tax authority is aware and which can be made pursuant to nos. 2 to 4 are made.
11 — In cases where the provisions of paragraph b) of no. 2 of article 79 apply, assessments are made annually based on taxable matter determined provisionally, and, regarding the assessment corresponding to taxable matter relating to the entire assessment period, the difference ascertained is to be collected or cancelled.
12 — The assessment provided for in no. 1 can be corrected, if applicable, within the time limit referred to in article 101, with the differences ascertained then being collected or cancelled".
Jurisprudence uniformly understands that the tax levied based on autonomous taxation provided for in the CIRC has the nature of IRC.
Indeed, article 23-A no. 1, paragraph a), of the CIRC, in the wording of Law no. 2/2014, of 16 January corroborates what previously resulted from the literal tenor of article 12 of the same Code.
Article 90 of the CIRC refers to the forms of assessment of IRC, by the taxpayer or by the Tax Authority, applying to the calculation of the tax owed in all situations provided for in the Code, including additional assessment. Therefore, this article also applies to the assessment of the amount of autonomous taxation, which is calculated by the taxpayer or by the Tax Authority, following the submission or non-submission of declarations.
On the other hand, no. 21 was added to article 88 of the IRC Code by Law no. 7-A/2016, of 30 March, which came to provide that: "the assessment of autonomous taxation in IRC is carried out in the terms provided for in article 89 and is based on the values and rates resulting from the provisions of the foregoing numbers, with no deductions being made to the global amount ascertained, even if such deductions result from special legislation".
This norm, whether or not it is truly interpretative, "establishes, regarding the form of assessment of autonomous taxation, that it 'is carried out in the terms provided for in article 89 and is based on the values and rates resulting from the provisions of the foregoing numbers'. Indeed, if it is true that this new norm comes to clarify how the amounts of autonomous taxation are calculated (which already resulted from the text of the various provisions of article 88) and that competence falls to the taxpayer or to the Tax Authority, pursuant to article 89, it is also clear that the need to use the procedure provided for in no. 1 of article 90 is not dispensed with, particularly in the cases provided for in its paragraph c) in which assessment falls to the Tax Authority, with "basis the elements available to the tax authority", which seems unquestionably to include the possibility of assessing based on autonomous taxation, if the Tax Authority has elements proving its requirements. Therefore, both before and after Law no. 7-A/2016, of 30 March, article 90, no. 1 of the CIRC applies, in the terms referred to, to the assessment of autonomous taxation, that is, with calculation in an autonomous and distinct manner from that processed pursuant to the cited article 90", as referred to in the judgment of the CAAD of case no. 727/2015-T.
Autonomous taxation arose with a view to preventing, as much as possible, expenses that negatively affect tax revenue, avoiding hidden distribution of profits, combating tax evasion, with autonomous taxation being calculated independently of IRC, with the triggering event of the tax being the expense itself.
Prior to this taxation, there existed in the CIRC a concept of non-deductible expenses, with the legislator coming to consider it more efficient to apply autonomous taxation to certain expenses related to areas more susceptible to tax evasion (allowances, representation expenses, vehicle expenses, etc.). In this manner, it does not seem reasonable, but rather contrary to the reason which led the legislator to autonomously tax certain expenses and then allow deductions from the collection thus ascertained, in the concrete case the CFEI. If this were to be done, it would be a way of eliminating the basis for autonomous taxation.
In fact, autonomous taxation aims at combating tax evasion and, at the same time, contributing to the collection of revenue that would otherwise not be possible and, being revenue ascertained on specific expenses which, as such, remain outside the determination of taxable matter subject to the assessment provided for in article 90 of the CIRC, the revenue thus ascertained has a nature different from that of IRC, while the latter applies to profits, it applies to expenses and it would be incongruous to consume benefits with such revenue, which are measures of an exceptional character aimed at protecting relevant extrafiscal public interests superior to those of taxation, it would be like simultaneously removing the raison d'être of autonomous taxation and tax benefits.
From this perspective, it is understood that the deductions that no. 2 of article 90 of the CIRC provides, in the concrete case the CFEI, should only occur to the IRC collection that applies to profits ascertained through the exercise of the activity and with which they have a direct correspondence, in that sense the legislator added no. 21 to article 88 of the CIRC which came to reinforce the interpretation that we have been defending of the provisions in force, even before this legislative intervention.
Regarding the CFEI in question here, article 3, no. 5 paragraph a) of Law 49/2013, clarifies "where the special regime for taxation of groups of companies applies, the deduction provided for in no. 1 paragraph a) is made to the amount ascertained pursuant to paragraph a) of no. 1 of article 90 of the CIRC, based on the taxable matter of the group. The norms regulating the deduction of tax benefits such as CFEI can only be contemplated, given the purposes to which they are bound and the manner in which they operate, in the structure of the general regime of IRC.
In seeking to have the CFEI deducted from the collection produced by autonomous taxation which in the tax year 2015 burdened it, we find that the norms regulating CFEI, combined with article 90 of the CIRC, prevent such a procedure.
Thus, we agree with the judgment of the CAAD of case no. 727/2015-T, in referring to the following:
"Indeed, given that the regime of autonomous taxation has a disincentivizing function of abusive behaviors, there is no logical reason why this disincentive could then fade away, which would occur if it were possible to deduct tax incentives from the collection of autonomous taxation, as the Claimant seeks. This possibility would result in a strange double effect: on the one hand, it could, in the limit, eliminate the collection resulting from autonomous taxation and, on the other, it would enable the deduction of certain tax benefit (in the case, SIFIDE and CFEI are in question) to tax which has a specifically anti-abuse function, of mitigation of fiscally and socially undesired behaviors. Finally, following the doctrine of Arbitral Award no. 722/2015-T, it would be concluded, it is reaffirmed, by the illegality of the deductibility of SIFIDE and CFEI from the collection of autonomous taxation, without need to resort to the interpretative character given by article 135 of Law no. 7-A/2016, of 30 March (State Budget for 2016) to no. 21 of article 88 of the CIRC, which now has the following content: "21 – The assessment of autonomous taxation in IRC is carried out in the terms provided for in article 89 and is based on the values and rates resulting from the provisions of the foregoing numbers, with no deductions being made to the global amount ascertained."
In the thesis that is supported, the legislator, when adding this no. 21 to article 88 of the CIRC with the mentioned content, merely came to adopt and reinforce the interpretative sense that already resulted from the applicable provisions, as was demonstrated by the reasoning above. Which dispenses with the retroactive application of that norm".
We further conclude, as in the judgment of the CAAD of case no. 587/2016-T, that "it becomes necessary to interpret correctively the norm of article 90, no. 2 of the applicable CIRC, so as to restrict the reference it makes to no. 1 of the same norm, in the reference it makes 'To the amount ascertained pursuant to the foregoing number', limiting it to the amount of the IRC collection calculated by applying the rates of article 87 to taxable matter ascertained in accordance with the rules of chapter III of the Code, and not to amounts ascertained as autonomous taxation, thus returning to the norm its original meaning, which was what corresponded to its textual wording before the introduction of autonomous taxation into the CIRC".
To the amount ascertained from autonomous taxation, there is no place for any deduction, be it CFEI or other tax benefit, wherefore both the dismissal of the administrative claim and the self-assessment in question do not suffer from any illegality and for that reason should remain in the legal order.
2.2 – Right to Compensatory Interest
The Claimant Group requests that the Respondent be condemned to reimburse the tax unduly paid, plus compensatory interest.
The declaration of illegality of the assessment in question in the present case being unfounded, the request for condemnation of the Tax Authority to reimburse the amount paid and to pay compensatory interest is also unfounded.
IV – DECISION
Thus the Tribunal decides:
a) To judge unfounded the request for declaration of illegality and annulment of the decision dismissing the administrative claim no. ...2018...;
b) To judge unfounded the request for declaration of illegality of the IRC self-assessment for 2016;
c) To judge prejudiced the request for recognition of the Claimant's right to reimbursement of those amounts and, as well as, the right to compensatory interest;
d) To judge prejudiced, in the aforementioned terms, by the assessment and decision of the main request the request formulated in the following terms: "(…) should it be understood that article 90 of the CIRC does not apply to autonomous taxation, then the illegality of the collection of autonomous taxation shall be declared (and consequently be annulled) due to absence of legal basis for its implementation (cf. article 8, no. 2, paragraph a), of the LGT, and article 103, no. 3 of the Constitution), with the consequent reimbursement of the same amounts and the payment of compensatory interest counted from the same date (…)".
e) To fix the value of the case at € 371,577.61, considering the provisions contained in articles 299 no. 1 of the CPC, 97-A of the CPPT and 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings.
V - COSTS
Pursuant to article 22, no. 4 of the RJAT, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 6,120, to be borne by the Claimant, in accordance with article 22 no. 4 of the RJAT.
Notify.
Lisbon, 18 April 2019
The Collective Tribunal
Judge José Poças Falcão
President
Doctor Suzana Fernandes da Costa
Auxiliary Arbitrator
Lic. Arlindo José Francisco
Auxiliary Arbitrator
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