Summary
Full Decision
ARBITRAL DECISION
I. Report
On 15-06-2016, the company "A..., S.A.", NIPC..., submitted a request for constitution of a singular arbitral tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework of Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (AT) is the respondent.
The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and automatically notified to the AT on 01-07-2016.
In accordance with the provisions of paragraph a) of article 6, section 2 and paragraph b) of article 11, section 1 of RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned arbitrator to the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable time period, and notified the parties of this appointment on 16-08-2016.
Thus, in accordance with the provisions of paragraph c) of article 11, section 1 of RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 31-08-2016, following the pertinent legal procedures.
II. Positions of the Parties
a) The Applicant's request and respective grounds
The subject matter of the request for arbitral pronouncement by the Tribunal comprises (i) the self-assessment act for Corporate Income Tax (IRC) of the Fiscal Group B... relating to the fiscal year 2014, to the extent corresponding to the non-deduction from the IRC assessment of the IRC produced by the autonomous taxation rates of the fiscal benefit identified within the Fiscal Incentive System for Research and Business Development ("SIFIDE") and the PEC, which resulted in an amount of tax illegally assessed of €56,919.79, (ii) the order of 23 December 2015 from the Director of Finance of... which rejected the administrative appeal filed by the Applicant on 4 November 2015 and (iii) the implied rejection of the hierarchical appeal filed on 22 January 2016 by the Applicant in response to the express rejection of the administrative appeal. In the alternative, the Applicant requests that the autonomous taxation in its entirety be declared illegal due to absence of legal basis for its implementation. In any case, the Applicant petitions for the reimbursement of the illegally paid tax and the payment of compensatory interest.
On 25 May 2015, the applicant filed the IRC declaration Form 22 relating to the fiscal year 2014 of the respective fiscal group, having assessed an amount of autonomous taxation in IRC of €56,919.79 (cf. Docs. Nos. 1 and 2 attached with the request for arbitral pronouncement).
Upon filing the said declaration, the Applicant encountered the fact that the AT's computer system did not permit the entry of the value corresponding to the IRC autonomous taxation rates deducted from the amounts of fiscal benefit recognized to the companies of the fiscal group in question under SIFIDE and the amounts of PEC accumulated within the group.
The amount of SIFIDE, attributed/obtained, available for use at the end of fiscal year 2014 amounted to €161,658.57 (cf. certification accompanied by Declarations from the SIFIDE Certification Commission attached as doc. No. 5 with the request for arbitral pronouncement).
As for PEC, the accumulated amount to be deducted from the IRC assessment in 2014 amounted to €23,507.22 (cf. certification and proof of PEC payments obtained directly from the finance portal attached as Docs. Nos. 6 and 7 with the request for arbitral pronouncement).
In summary, the Fiscal Group had IRC credits and PEC available to offset against the respective assessment, in an amount exceeding the assessment of autonomous taxation in IRC for fiscal year 2014 (which amounted to €56,919.79), but was unable to proceed with the offset because this was not permitted by the AT's computer system.
The IRC was not assessed through indirect methods, but rather from the filing of declaration form 22.
The company forming part of the fiscal group at the origin of SIFIDE was not then, nor is it currently, an entity owing any taxes or contributions to the State and social security (cf. certificates attached as Doc. No. 9 with the request for arbitral pronouncement).
The question posed by the Applicant to this Tribunal is, therefore, whether the Fiscal Group B... has, or does not have, the right to proceed with the deduction - also from the IRC assessment produced by the application of autonomous taxation rates - of the said SIFIDE and PEC.
In favor of the possibility of deduction, the Applicant presents the following arguments:
Case law has understood, in a practically unanimous manner, that the IRC assessment provided for in (as in effect until 2013) article 45, section 1, paragraph a) of the IRC Code, comprises, without need for any additional specification, the assessment of autonomous taxation in IRC, and therefore should be understood that the IRC assessment provided for in article 90, sections 1 and 2, paragraphs b) and c) of the IRC Code, as amended in effect in 2013, also covers the assessment of autonomous taxation in IRC.
Accordingly, the denial of the deduction of SIFIDE or PEC from the IRC assessment of autonomous taxation violates paragraphs b) and c) of section 2 of article 90 of the IRC Code (prior to 2010, article 83; and from 2014, paragraphs c) and d) of said section 2 of article 90 of the IRC Code).
The Applicant also cites extensive case law to the effect that SIFIDE is deductible from the assessment of autonomous taxation and argues that there is no reason to conclude that the reasoning and rationale of the decision in case No. 769/2014-T (and case law following from it) would apply only to SIFIDE, and not also to other credits from fiscal benefits or other deductions from the IRC assessment.
Indeed, even if the provision of the tax credit is expressed in terms of "deduction from the IRC assessment," as opposed to "deduction from the amount assessed in accordance with article 90 of the IRC Code," the final practical result is the same, since the amount assessed in accordance with article 90 of the IRC Code is nothing other than IRC.
From the analysis of the various arbitral decisions issued concerning this matter (for example, cases No. 80/2014-T and No. 187/2013-T), the Applicant draws, summarily, the following conclusions:
a) The autonomous taxation relating to vehicle expenses, representation expenses, travel allowances, management bonuses and management compensation for cessation of functions constitutes IRC;
b) This taxation still taxes income, as it is a substitute for the alternative measure of increasing taxable income via the non-deductibility of the expense or charge on which the autonomous taxation is levied (cf. in particular cases Nos. 80/2014-T and 187/2013-T);
c) Because they are IRC, the norm addressing the assessment (tax assessed) of IRC contained in paragraph a) of section 1 of article 45 of the IRC Code should apply to them;
d) Extracting a more general rule, as the decision issued in case No. 59/2014-T does, "the autonomous taxation of which legal entities are subject is considered IRC, and therefore the norms of the IRC Code that do not conflict with its special form of incidence and applicable rates shall apply to it."
e) The norm addressing the IRC assessment contained in paragraphs c) and d) (until 2013, paragraphs b) and c)) of section 2 of article 90 of the IRC Code therefore also applies to it, as no obstacle to this is perceived in "its special form of incidence and applicable rates."
b) The Respondent's Position
The AT considers that the integration of autonomous taxation into the Code of IRC (and Personal Income Tax) conferred a dualistic nature on the normative system of this tax, which was embodied, in particular, within the framework of paragraph a) of section 1 of art. 90 of the IRC Code, in separate assessments of the respective tax collections, by virtue of them being subject to different rules. And this is so because, in one case, it concerns the application of the rate(s) of art. 87 of the IRC Code to the taxable matter determined according to the rules contained in Chapter III of the Code and, in another case, it concerns the application of the rates to the values of the taxable matters relating to the different realities contemplated in art. 88 of the IRC Code.
That is, there is not a single IRC assessment, but rather two calculations; that is, two distinct calculations that, although processed in accordance with paragraph a) of section 1 of art. 90 of the IRC Code, in the declarations referred to in articles 120 and 122 of the same code, are made on the basis of different parameters, since each materializes in the application of its own rates, provided for in articles 87 or 88 of the IRC Code, to the respective taxable matters determined equally in accordance with its own rules.
Specifically regarding the deduction of SIFIDE, the AT considers that, as it is a benefit for investment, it constitutes a premium whose scope varies with the profitability of the investments, since the higher the profit/taxable matter of IRC the greater the capacity to effect the deduction. There is, therefore, an inseparable connection between the amount of the tax credit for investment and the part of the IRC assessment calculated on the taxable matter based on profit and, unless this were so, the necessary articulation that, in material terms, must exist between the objectives pursued by fiscal benefits and their impact on the very magnitude that serves as the basis for calculating the taxable matter and the assessment—profit—would be subverted.
Thus, the norms that regulate the deduction of fiscal benefits, in this case SIFIDE, are integrated by the way they operate and by the purposes attached to the benefits, in the structure of the general IRC regime, and therefore are not reconcilable with the ratio legis of autonomous taxation nor with their respective triggering facts, and proof thereof is that the legislator itself took care to mark this dividing line in art. 3, section 5, paragraph a) of Law No. 49/2013.
That is, in summary: the values that express the fiscal benefit in the context of SIFIDE are deducted "from the amounts assessed in accordance with article 90.0 of the Code of IRC, and up to its concurrence" and in the assessment relating to the taxation period in which the eligible expenses for this purpose are realized and that, in the absence or insufficiency of assessment assessed in these terms, the expenses that cannot be deducted in the fiscal year in which they are realized "may be deducted up to the 6th immediate fiscal year following."
The assessment referred to in article 90 when the assessment must be made by the taxpayer (situation that occurs in this case) is determined on the basis of the taxable matter that appears in that assessment/self-assessment [cf. article 90, section 1, paragraph a) of the IRC Code], and the credit that constitutes SIFIDE is deducted only from the assessment thus determined, that is, from the assessment determined on the basis of the taxable matter; with respect to autonomous taxation, these are assessed in an autonomous and distinct manner from the assessment processed in accordance with article 90 of the IRC Code.
As for PEC, the AT understands that its legal nature, revealed by its configuration as "an instrument or guarantee of payment of the tax for which it is required, and not as a tax in itself," as well as by the function associated with it in combating tax evasion and fraud, inseparably links this payment to the amount of IRC assessed on the taxable matter determined on the basis of profit (Chapter III of the Code).
From this it follows that the credit for the amounts paid as special payment in advance does not constitute an enforceable credit that IRC taxpayers may dispose of, and, consequently, "if the deduction of PEC from the assessment resulting from autonomous taxation were to be permitted, the purposes of the system in which the norm of 83-2-e IRC [current art. 90, section 2, paragraph c)] is inserted would be frustrated, since the product of the special payment in advance that should remain 'standing still' in the ownership of the Public Treasury would be applied to the extinction of the debt of the taxpayer resulting from autonomous taxation, thereby reducing the intended pressure to avoid tax evasion."
In summary, the interpretation of section 2 of art. 90 in coherence with the nature and content of the deductions provided for in its paragraphs, among which PEC appears, must be made in light of the general objectives of IRC which are reduced, in their essence, to the taxation of the income of legal entities, determined in accordance with the rules of Chapter III of the respective code, and is therefore manifestly devoid of any basis the claim of the now Applicant for deduction of the amount borne in the context of special payment in advance from the assessment produced by autonomous taxation in the years 2012 and 2013.
As for the amendment made by the State Budget Law for 2016, the AT states that "regardless of the attribution of the interpretive spirit [the interpretation of the law] it would always have to be made as was correctly decided in cases No. 785/2015-T: "(…) it is established there, regarding the manner of assessment of autonomous taxation, that it "is carried out in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding sections"". The AT understands that, if it is true that this new norm comes to clarify how the amounts of autonomous taxation are calculated and that the competence belongs to the taxpayer or the Tax Administration, it is also clear that it does not eliminate the need to use the procedure provided for in section 9 of article 90, specifically in the cases provided for in its paragraph c) in which the assessment is the responsibility of the Tax and Customs Authority, with "basis in 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 assumptions. For this reason, both before and after Law No. 97-A/2016, of 30 March, article 90, section 9 of the IRC Code is applicable to the assessment of autonomous taxation, that is, with assessment in an autonomous and distinct manner from that processed in accordance with said article 90."
The AT concludes that the Applicant's claim is without merit, that is, SIFIDE should not be deductible from the assessment produced by Autonomous Taxation (regardless of the existence or not of section 21 of article 88 of the IRC Code). The AT extends the same conclusion to the case of special payments in advance, invoking for this purpose the provisions of section 7 (in the 2013 version) of article 90, according to which "From the deductions made in accordance with paragraphs a), b) and c) of section 2, a negative value may not result," and that, in the absence or insufficiency of assessment determined in these terms, the special payment in advance that cannot be deducted in that taxation period may be deducted up to the 6th taxation period following – as provided in section 1 of article 93 of the IRC Code. In any case, the AT also considers it possible to reach the same conclusion if one considers the nature of the special payment in advance (PEC), defined as being an advance paid to the State on account of the final tax due, which may be made in two installments (art. 106, section 1, IRC Code) and whose calculation takes as its starting point the turnover of the taxpayer relating to the previous taxation period (section 2), to which is added the fact that the institution of PEC, by Decree-Law No. 44/98, of 03.03, which added art. 83-A to the Code of IRC, is inscribed in a set of fiscal policy measures directed against tax evasion and fraud, and therefore the very legal nature of PEC, revealed by its configuration as "an instrument or guarantee of payment of the tax for which it is required, and not as a tax in itself," as well as by the function associated with it in combating tax evasion and fraud, inseparably links this payment to the amount of IRC assessed on the taxable matter determined on the basis of profit (Chapter III of the Code). From this it would result that the credit for the amounts paid as special payment in advance does not constitute an enforceable credit that IRC taxpayers may dispose of, and, consequently, if the deduction of PEC from the assessment resulting from autonomous taxation were to be permitted, the purposes of the system in which the norm of 83-2-e IRC [current art. 90, section 2, paragraph c)] is inserted would be frustrated, since the product of the special payment in advance that should remain "standing still" in the ownership of the Public Treasury would be applied to the extinction of the debt of the taxpayer resulting from autonomous taxation, thereby reducing the intended pressure to avoid "declarative" tax evasion.
III. Factual Matters
1. Proven Facts
The following facts are considered proven:
a) The Applicant was, in 2014, the dominant company of a group of companies (Group B...) subject to the special regime for taxation of groups of companies (RETGS);
b) The Applicant filed, on 25-05-2015, its consolidated IRC declaration Form 22 relating to fiscal year 2014, and at that time proceeded to self-assess the said tax;
c) Through the self-assessment made, the Applicant assessed an amount of autonomous taxation in IRC of €56,919.79;
d) The value of the IRC self-assessed, including autonomous taxation, has been paid;
e) The IRC declaration model contained in the AT's computer system did not permit the Applicant to deduct, within the limits of the IRC assessment, including autonomous taxation, the amounts of fiscal benefit recognized to the companies of the fiscal group B... under the Fiscal Incentive System for Research and Business Development (SIFIDE);
f) The amount of SIFIDE, attributed/obtained, available for use at the end of fiscal year 2014 amounted to €161,658.57;
g) Similarly, the AT's computer system did not permit the Applicant to deduct, within the limits of the IRC assessment, including autonomous taxation, the amounts corresponding to special payments in advance;
h) As for PEC, the accumulated amount to be deducted from the IRC assessment in 2014 was €23,507.22;
i) On 04.11.2015 the applicant filed an administrative appeal against the self-assessment relating to fiscal year 2014;
j) The administrative appeal was rejected by order of 23.12.2015 from the Director of Finance of...;
k) The Applicant filed a hierarchical appeal of the rejection of the administrative appeal on 22.01.2016
l) The company forming part of the fiscal group at the origin of SIFIDE was not, in 2014, an entity owing any taxes or contributions to the State and social security.
2. Unproven Facts
There are no facts relevant to the decision that have not been proven.
3. Grounds for Determination of Factual Matters
The facts were considered proven based on the documents attached with the request for arbitral pronouncement, on the administrative proceeding and on the facts stated by the Parties in their respective procedural documents regarding which there is no controversy.
4. Legal Grounds
The essential question to which it is important to respond in the present proceeding is whether, as well as the PECs deductible in that fiscal year, they may be deducted from the assessment produced by autonomous taxation that burdened that fiscal year.
The principal question submitted for the Tribunal's consideration is to assess whether the Applicant, as managing company of the so-called Group B..., has the right to proceed with the deduction, also from the IRC assessment produced by the application of autonomous taxation rates, of the fiscal credits that, in the year 2014, were recognized to it under SIFIDE and PEC, and, if in the affirmative, whether the self-assessment of IRC of the same fiscal year is illegal.
In the alternative, should a negative answer be given to the first question, it is also important to respond to the question of the possible illegality and consequent annulment of the assessment of autonomous taxation, due to the absence of legal basis for its assessment.
Finally, the Tribunal is also called upon to pronounce on the right to compensatory interest on the amount paid as a consequence of the self-assessment in question.
The subjection of certain expenses to autonomous taxation emerged with Decree-Law No. 192/90, of 2 June, in a context of penalizing the taxation of confidential or undocumented expenses incurred by companies. Subsequently, with the 2000 tax reform, autonomous taxation was extended to representation expenses and vehicle expenses and, over time, to a heterogeneous set of realities as provided for today in the IRC Code in Chapter IV relating to rates, together with the State Surcharge.
To respond to the questions posed to this Arbitral Tribunal, it is important, first and foremost, to determine whether, regardless of the nature of the tax to which autonomous taxation refers, the respective amount is "assessed in accordance with article 90 of the IRC Code." If it is, it must be concluded that, in order to determine the limit of deductions that are permissible under this tax, attention must be paid to the assessment derived from autonomous taxation.
Article 90 of the IRC Code refers to the forms of assessment of IRC, by the taxpayer or by the AT, applying to the assessment of the tax due in all situations provided for in the Code. Thus, it also applies to the assessment of the amount of autonomous taxation, since there is no other provision that provides for different terms for its assessment. Its autonomy is restricted, moreover, to the applicable rates and the respective taxable matter—which does not justify, in our view, that a distinction should be made between the assessment derived from autonomous taxation and the remaining IRC assessment.
Neither does the argument that the anti-abuse nature of autonomous taxation would justify the non-deductibility from its respective assessment hold—for the simple, but decisive reason that such an argument finds no support in any norm of the Portuguese tax legal system.
Let us recall that, in accordance with the provisions of article 11 of the General Tax Law (LGT), in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed, and that, in accordance with article 9 of the Civil Code, (1) "interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied"; (2) "the interpreter may not, however, consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed" and that (3) "in determining the meaning and scope of the law, the interpreter shall presume that the legislator established the most appropriate solutions and knew how to express its intent in adequate terms."
Now, currently, within the scope of the IRC Code, we find references to autonomous taxation in art. 12 (excluding autonomous taxation from the IRC exemption applicable to entities covered by the tax transparency regime), in art. 23-A, section 1 (explicitly stating that autonomous taxation is not deductible for purposes of determining taxable profit), in art. 88 (establishing the rates and delimiting the taxable matter of autonomous taxation), in art. 117 section 6 (regarding the declaration obligation of entities exempt from IRC under art. 9, when there is autonomous taxation) and in art. 120 section 9 (regarding the periodic income declaration).
Article 23-A establishes that certain charges are not deductible for purposes of determining taxable profit, even when recorded as expenses of the taxation period, including "IRC, including autonomous taxation, and any other taxes that directly or indirectly affect profits."
The part of the IRC assessment that derives from autonomous taxation is calculated based on the elements of the tax defined in article 88 of the IRC Code, inserted in Chapter IV – Rates, which delimits the taxable matter of autonomous taxation, on the one hand, and, on the other hand, enumerates the rates of autonomous taxation. The assessment that derives from autonomous taxation is a function of the taxable result, calculated based on two expressions that are the product of the taxable matter by a rate dependent on the taxable result: a higher rate when a tax loss is assessed and another, lower, when the taxable result is positive.
As for article 12, it provides that "companies and other entities to which, in accordance with article 6, the tax transparency regime is applicable, are not taxed in IRC, except as regards autonomous taxation"—thus presenting autonomous taxation as a subset of IRC.
From the analysis of these norms, it appears to us that, regardless of the understanding that one may have as to the nature of autonomous taxation in the context of IRC—a discussion that does not need to be raised to respond to the concrete question that arises here—there is no doubt that the amount collected by way of that autonomous taxation is collected as IRC. Resorting to what is said, in this regard, in the Judgment rendered in case 775/2015-T, "(…) autonomous taxation is inseparable from the subjects of the respective income tax, and more specifically, from the economic activity carried out by them, which is even more evident when one considers the connection that, although it has varied in successive legislative changes, autonomous taxation had and still has some connection with the deductibility—and the actual deduction—of the expenses taxed. This circumstance, it is believed, elucidates the interweaving existing between them and IRC (in this case), and justifies not only their inclusion in the IRC Code, but also their integration, as a matter of right, as part of the legal regime of IRC."
Considering—as one does—that autonomous taxation is integrated into the IRC regime, it is important then to determine what is deductible from its respective assessment. Now, on this aspect, again one resorts to the words used in the Arbitral Judgment rendered in case 775-2015-T:
"Understanding that autonomous taxation is (part of) IRC, it is understood that IRC assessment is unique, including the part that derives from autonomous taxation.
There is a unique IRC assessment that comprises two parts: the assessment of autonomous taxation and that of the remaining IRC, each with taxable matter determined in its own manner and with its own taxation rates, but both assessed in accordance with art. 90 of the IRC Code. Having a unique assessment, it is concluded that the part of the assessment that derives from autonomous taxation is an integral part of the IRC assessment.
On the contrary, no other article of the IRC Code contains a reference to the assessment of autonomous taxation as a distinct process. To accept that the assessment of autonomous taxation is not included in art. 90 of the IRC Code would be to accept that there is a gap in the law and, being this a tax law, does not permit integration. And thus, the Tax and Customs Authority may well have erred in not permitting the deduction of the amounts relating to PEC that the Applicant had the right to deduct from the assessment.
To accept that the assessment of autonomous taxation is outside art. 90 section 1 of the IRC Code and, therefore, to remove from its assessment the deductibility of PEC provided for in paragraph c) of section 2, would be to oblige the taxpayer to pay a tax whose assessment is not made in accordance with the law, contrary to section 3 of art. 103 of the Constitution of the Portuguese Republic and the principle of tax legality that the General Tax Law, in its art. 8, section 2, paragraph a), establishes."
From which follows an identical conclusion: that, there being no norm on assessment of autonomous taxation distinct from that which regulates the general assessment of IRC, it must be accepted that the IRC assessment encompasses it, being included in article 90, section 1 of the IRC Code and being, therefore, deductible the special payment in advance referred to in paragraph d) of section 2 and SIFIDE, included in paragraph c), relating to fiscal benefits, and whose deductibility results directly from its legal regime. In the same direction points the absence of limits to the deductibility of these realities from the assessment resulting from autonomous taxation—which the legislator could have done, just as it did when enumerating various exceptions and limits to the rules of deductibility of section 2 of article 90 of the IRC Code.
It is important now to consider the amendment introduced by the Law that approved the State Budget for 2016 (Law 7-A/2016, of 30 March), specifically regarding the introduction of section 21 of article 88 of the IRC Code.
In fact, several sections were added to article 88 of the IRC Code by this Law, which refers to autonomous taxation, among them section 21, according to which "The assessment of autonomous taxation in IRC is carried out in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding sections, no deductions being made to the overall amount assessed."
And, in article 135, the legislator provides that "the wording given by this law to section 6 of article 51, to section 15 of article 83, to section 1 of article 84, to sections 20 and 21 of article 88 and to section 8 of article 117 of the Code of IRC has an interpretive nature."
The AT understands that the new wording of article 88 prevents the deduction, in accordance with article 90, of special payments in advance from the assessment that results from autonomous taxation. However, it must be noted that article 90 was not amended, it continues to refer to the IRC assessment and, for all that has been said above, the assessment that results from the application of the norms of article 88 is IRC assessment. What section 21 of article 88 prohibits is that, to this assessment, deductions be made until such time as, once the global IRC assessment is determined, the deductions of article 90 are effected. Note that, if the legislator wished, in fact, to prohibit the deductions provided for in article 90 from being made to the part of the IRC assessment that results from autonomous taxation, it could have done so directly instead of amending article 88—but it did not.
In the present case, as the taxation period corresponding to the year 2014 is at issue, it is important to analyze what effect the amendment introduced by the State Budget Law for 2016 has and, above all, the interpretive character that was attributed to it.
In accordance with the provisions of article 13, section 1 of the Civil Code (CC), "an interpretive law is integrated into the interpreted law, however, the effects already produced by the performance of the obligation, by a judgment that has become final, by settlement, even if not approved, or by acts of an analogous nature are preserved."
The most relevant effect that the legislator derives from the characterization of a norm as interpretive is, therefore, that of its application over time, specifically, its non-application, in such cases, of the principle of non-retroactivity of law. Being that an effect, it is necessary, however, that one first proceed with the identification of the characteristics that make a given norm an interpretive norm and that, from this perspective, differentiate them from innovative norms.
In the words of J. Baptista-Machado, "the reason why interpretive law applies to facts and situations prior to it is fundamentally that it, coming to consecrate and establish one of the possible interpretations of the LA with which the interested parties could and should count, is not susceptible to violating safe and legitimately founded expectations. We can consequently say that those laws are of an interpretive nature which, on points or questions where the applicable legal rules are uncertain or their meaning is controversial, come to consecrate a solution that the courts could have adopted. It is not necessary that the law come to consecrate one of the previous case law currents or a strong previous case law current. All the more so since interpretive law often emerges before such currents of case law even form. (...) For a new law to be truly interpretive, two requirements are therefore necessary: that the solution of prior law be controversial or at least uncertain and that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law. (...)".[1]
The function of interpretive law is, therefore, to establish one of the possible interpretations of the prior law, with which the interested parties could legitimately count in the face of controversy or uncertainty generated by the prior law, without it therefore being able to be considered that safe and legitimately founded expectations are violated—hence the admission that effects be produced regarding past facts.[2]
A law assumes the nature of interpretive law when it contains an express declaration to that effect or when such declaration appears in its respective preamble. However, this absence does not prevent a law from being qualified as interpretive, as Oliveira Ascensão observes "If the source expressly determines nothing, the interpretive character may still result from the text, when the tacit reference of the new source to a pre-existing normative situation is evident. We see no reason to require that the interpretive character be expressly affirmed, when retroactivity need not be."[3]
For a new law—as is, in the present case, section 21 of article 88 of the IRC Code—to be truly interpretive, two requirements are necessary: (i) on the one hand, that the solution of prior law be controversial or at least uncertain; (ii) on the other hand, that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law. Thus, if the judge or interpreter, in the face of old texts, could not feel authorized to adopt the solution that the new law comes to establish, then this is decidedly innovative.[4]
An interpretive norm, therefore, is one that does not alter any content or element of the interpreted norm, comes only to translate its meaning—being, therefore, obliged to respect acquired rights under the vigency of the interpreted norm, particularly in questions regarding which the prohibition of retroactivity is especially provided for, as is the case of the matter of the principle of non-retroactivity of tax law, provided for in section 3 of article 103 of the Constitution.
Now, returning to the concrete case, it has already been said that it is understood that the text of the law before this amendment did not permit the conclusion that deduction of special payments in advance and SIFIDE from the part of the IRC assessment resulting from autonomous taxation was prohibited. On the other hand, this solution does not yet result clearly from section 21 of article 88 of the IRC Code. Thus, regarding the scope of the deductions provided for in article 90, there continues to be no reason to consider the assessment of autonomous taxation excluded.
In summary, regarding the effect of the amendment made by the State Budget Law for 2016, this Tribunal understands that section 21 of article 88 of the IRC Code does not have an interpretive character in respect to the question under discussion, not applying to facts occurring before its entry into force, in particular, to the taxation period and facts occurring therein corresponding to the year 2014.
In this sense, it is concluded that the self-assessment act for IRC relating to fiscal year 2014 which is the subject of the present proceeding, insofar as it concerns the non-deduction from the part of the assessment produced by autonomous taxation rates of the fiscal benefit corresponding to SIFIDE and PEC, which resulted in an amount of tax illegally assessed of €56,919.79, as well as the act rejecting the administrative appeal and the implied rejection of the hierarchical appeal, suffer from the defect of violation of law, which justifies their annulment. The analysis of the question raised by the Applicant regarding the illegality and consequent annulment of the assessment of autonomous taxation due to the absence of legal basis for its assessment is thus rendered moot.
Regarding the request for compensatory interest filed by the Applicant: the right to compensatory interest is provided for in article 43 of the LGT, which establishes, for what is relevant here, that "Compensatory interest is due when it is determined, in administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due" and that "Error attributable to the services is also deemed to exist in cases in which, although the assessment is made on the basis of the taxpayer's declaration, the latter has followed, in its completion, the generic guidelines of the tax administration, duly published."
In the case at hand, the illegality of the self-assessment is entirely attributable to the AT, in light of what was proven above regarding the structure of the IRC Form 22 declaration in the AT's computer system, an organization that is, naturally, entirely the responsibility of the AT, which did not permit the Applicant to effect the self-assessment in the terms that were here judged to be legal. Moreover, the maintenance of the illegal situation, that is, the decision on the administrative appeal and the hierarchical appeal (even though the latter was implicit) is attributable to the Respondent, which rejected it on its own initiative.
Consequently, the Applicant has the right to compensatory interest, in accordance with art. 43, section 1 of the LGT and 61 of the CPPT, calculated on €56,916.82 illegally paid on 27.05.2015 and counted from this date, and on the remaining €2.97 that should have been reimbursed by 31.08.2015 in accordance with the provisions of article 104, section 6 of the IRC Code, counted from 01.09.2015.
Decision
In light of the foregoing, it is decided to deem the Applicant's principal requests wholly well-founded and, in consequence:
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Annul, as illegal, the self-assessment in question;
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Condemn the Respondent to reimburse the Applicant the amount of tax illegally paid;
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Condemn the Respondent to pay the Applicant compensatory interest at the legal supplementary rate, counted from 27.05.2015 for €56,916.82 and from 01.09.2015 for €2.97, until full and complete payment.
The value of the proceeding is fixed at €56,919.79 (fifty-six thousand, nine hundred and nineteen euros and seventy-nine cents) in accordance with the provisions of articles 3, section 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, section 1, paragraph a) of the CPPT and 306 of the CPC.
The amount of costs is fixed at €2,142.00 (two thousand one hundred and forty-two euros), under the provisions of article 22, section 4 of RJAT and Table I attached to RCPAT, to be borne by the Respondent, in accordance with the provisions of articles 12, section 2 of RJAT and 4, section 4 of RCPAT.
Let notification be made.
Lisbon, 26 February 2017,
The Arbitrator,
Raquel Franco
Text prepared by computer, in accordance with article 131, section 5 of the Code of Civil Procedure, applicable by referral of article 29, section 1, paragraph e) of RJAT.
[1] J.Baptista Machado, Introduction to Law and the Discourse of Legitimacy, 11th reprint, Almedina, Coimbra, 1999, pp. 246-247.
[2] On whether this application should be considered true retroactivity or not, cf. J.Baptista Machado, Introduction to Law and the Discourse of Legitimacy, p. 247. The Author takes the position of the second position, contrary to what happens, for example, with J. de Oliveira Ascensão, relying on the formula used by article 13, section 1, of the Civil Code—"interpretive law is integrated into the interpreted law."
[3] J. de Oliveira Ascensão, The Law—Introduction and General Theory, 13th rev. ed., Coimbra, Almedina, 2011, p. 562.
[4] J.Baptista Machado, Introduction to Law and the Discourse of Legitimacy, 11th reprint, Almedina, Coimbra, 1999, pp. 246-247.
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