Stamp Tax on Pension Fund Management Fees: CAAD Ruling on CIS Art. 7(1)(e) Exemption

ARBITRAL DECISION

I – REPORT

1. On 27 June 2016, A…, S.A., NIPC…, with headquarters at Av…, no…, in Lisbon, hereinafter referred to as "Claimant", requested the constitution of an arbitral tribunal and filed a request for arbitral pronouncement, pursuant to subparagraphs a) and b) of paragraph 1 of Article 2 and subparagraph a) of paragraph 1 of Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), with a view to declaring the illegality of the acts of additional levy of Stamp Duty No. 2015…, in the amount of € 79,879.79, relating to the year 2011; 2015…, in the amount of € 81,629.88, relating to the year 2012; No. 2015…, in the amount of € 87,995.29, relating to the year 2013 and No. 2015…, in the amount of € 92,684.48, relating to the year 2014; as well as the levies of compensatory interest Nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 12,156.47, relating to the year 2011; 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 9,566.09, relating to the year 2012; 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 6,744.57, relating to the year 2013; 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, in the total amount of € 3,405.79, relating to the year 2014, making up the total sum of € 374,062.36 (three hundred and seventy-four thousand, sixty-two euros and thirty-six cents). Within the scope of that request for arbitral pronouncement, it requested the annulment of the decision denying the administrative appeal filed and finally requested the annulment of the impugned levies and the recognition of the right to indemnity interest.

2. The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and was notified to the Respondent on 17 June 2016.

3. Having verified the formal regularity of the request submitted, pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 of the RJAT, and as the Claimant did not proceed to appoint an arbitrator, the undersigned were appointed by the President of the Deontological Council of CAAD and accepted the position within the legally stipulated period.

4. This tribunal was constituted on 13 September 2016.

5. As no exceptions were raised, there being no need for production of additional evidence beyond that which is already documentarily incorporated in the record, no need appearing for the parties to correct their respective procedural pleadings, and the process having all the necessary elements for rendering the decision, for reasons of procedural economy and expedience, the prohibition of useless acts, the Tribunal, pursuant to the principles of tribunal autonomy in case management, and to promote expedience, simplification and informality thereof, decided by order of 5 November 2016 to dispense with the holding of the meeting provided for in Article 18 of the RJAT. In that same order, the Tribunal, in compliance with the provisions of paragraph 2 of Article 18 of the RJAT, set 13 March 2017 as the date for rendering the arbitral decision. That date was extended to 13 May by order of 10 March 2017.

6. The parties submitted written pleadings.

II. The Claimant sustains its request, in summary, as follows:

The Claimant sustains the request for annulment of the acts of additional levy of Stamp Duty No. 2015…, in the amount of € 79,879.79; 2015…, in the amount of € 81,629.88; No. 2015…, in the amount of € 87,995.29 and No. 2015…, in the amount of € 92,684.48, relating respectively to the years 2011, 2012, 2013 and 2014, all in the total amount of € 342,189.44 (three hundred and forty-two thousand, one hundred and eighty-nine euros and forty-four cents), as well as the respective levies of compensatory interest, in the amount of € 4,872.92 (four thousand, eight hundred and seventy-two euros and ninety-two cents), all in a total of € 374,062.36 (three hundred and seventy-four thousand, sixty-two euros and thirty-six cents) because they are affected by illegality, due to error in the factual and legal premises, insofar as:

a) The Claimant understands, as an introductory matter, that "the Tax Authorities invented a subjective incidence where it does not exist (…) and disapplied an exemption (…) from a norm that was expressly repealed in 2002 [and that] persists to this day."

b) Indeed, the Claimant considers that, being "a pension fund management company (hereinafter "SGFP") (…) it is governed by the provisions of Decree-Law No. 12/2006, of 20 January, which approved the Framework for Constitution and Operation of Pension Funds and Managing Entities (hereinafter "DL 12/2006"); (…).", whereby, in this sense, on the topic of "the subjective incidence of stamp duty, when commissions charged by SGFPs to pension funds are involved." It states "(...) the tax norms do not contain the definition of what should be understood by "credit institutions", "financial companies or equivalent entities" or "other financial institutions". As the DS IMT Information correctly points out (…), it is necessary to verify whether pension funds and SGFPs "are included in any of the modalities of financial entities referred to" in the aforementioned Item 17.3. To carry out this analysis, the DS IMT Information correctly invokes paragraph 2 of Article 11 of the LGT, noting that this norm is important "in the field of legal-tax interpretation" at issue here."

c) The Claimant understands in this respect that "(...) in fact, the subjective incidence norm contained in Item 17.3 includes the concepts of (i) credit institution, (ii) financial company or other entities legally equivalent to it and (iii) financial institution, whose meaning must be interpreted in the light of Banking, Financial and Insurance Law, as provided in paragraph 2 of Article 11 of the LGT. This is because the tax norms do not contain the definition of these concepts, which are specific to that other branch of law."

d) The Claimant further states regarding this matter that "there is another essential aspect that is worth focusing on from the outset (…): we are dealing with subjective incidence norms which, as such, are subject to the principle of tax legality." Thus, it adds, that "this principle requires that the norms of incidence be clear, precise and with a high degree of determination, conferring no administrative discretion in the completion of their concepts.", whereby "[i]t is not admitted, in this way, the use of indeterminate concepts in norms of subjective tax incidence(…)".

e) According to the Claimant, "SGFPs [are not] credit institutions, (ii) financial companies or other entities legally equivalent to them or (iii) financial institutions." for purposes of the concepts provided for in Item 17.3 of TGIS, as it considers that the "concept of credit institution, [can be assessed in] Decree-Law No. 298/92, of 31 December, which approved the General Framework for Credit Institutions and Financial Companies (hereinafter "RGICSF")." Furthermore, in this context it mentions that, "the RGICSF is, for historical reasons, the fundamental diploma of the Portuguese banking and financial system. In fact, it is this diploma that establishes the legal architecture, in particular at the level of the definitions contained therein, of Banking and Financial Law, which results from continued maturation resulting from: (i) European legislative evolution; (i) Intervention of the Bank of Portugal, as the main regulator of the Portuguese financial system (…). Now, the RGICSF contains the definition of "credit institution", more precisely in its Article 3."

f) Thus, and as regards the concept of "financial company" and "other legally equivalent entities", the Claimant states that "[a]lso in this case, the RGICSF contains the answer, in its Article 6, paragraph 1.", and then after transcribing the article in question, concludes that "neither SGFPs nor pension funds can be qualified as "financial companies".

g) As regards the concept of "financial institution" contained in Item 17.3, the Claimant understands that "[i]t is [also] the RGICSF that contains the definition of "financial institution"", namely in subparagraph z) of Article 2-A, a norm which "includes in the concept of "financial institutions" the (i) "Companies managing share participations subject to supervision by the Bank of Portugal, including financial companies and mixed financial companies", which evidently does not include SGFPs nor pension funds (nor does the Tax Authorities, naturally) defend the opposite.".

h) In truth, according to the Claimant, "[i]n the final part of the norm, Article 2-A, subparagraph z), of the RGICSF states that the following are "financial institutions" (iii) payment institutions and (iv) Companies managing collective investment schemes in the sense of point 6 of Article 199-A".", whereby, "[i]t is enough to consult the respective definition of this type of entities, provided for in the RGICSF, to conclude that SGFPs and Pension Funds are not, also, included there.".

i) Indeed, "[i]n the most important part of the norm, it is stated that the following are "financial institutions" (ii) "Companies whose principal activity consists of the exercise of one or more of the activities enumerated in points 2 to 12 and 15 of the list contained in Annex I to Directive 2013/36/EU, of the European Parliament and of the Council, of 26 June", a Directive that is commonly known as CRD IV – Capital Requirements Directive (and which hereinafter shall be referred to as "CRD IV Directive").

j) The Claimant continues, alluding to the fact that: "(…) the activity of SGFPs and pension funds is not the "participation in issuance of securities", nor the "provision of services connected" with that issuance (point 8), and much less are these their principal activities. In fact, point 8 of Annex I covers entities that assist in the issuance of securities, an activity that in Portugal can be exercised, for example, by credit institutions, as provided for in subparagraph f) of paragraph 1 of Article 4 of the RGICSF, which provides that these institutions can carry out the operations of "Participation in issuances and placements of securities and provision of related services"; Similarly, it is absurd to claim that the principal activity of SGFPs is "Portfolio management or portfolio management advice" (point 11), since the activity of SGFPs has nothing to do with "portfolio management" activity, which is provided for in Articles 323-A et seq. and 335 and 336 of the Securities Code ("CVM") and, for example, in subparagraph h) of Article 4 of the RGICSF."

k) "Let us be clear: the principal activity of SGFPs is the management of the pension fund, having nothing to do with the above. To this end, it is sufficient to read the functions of SGFPs which are listed in Article 33 of DL 12/2006."

l) The Claimant further states that "[i]t is also added that Article 2-A, subparagraph z) of the RGICSF replicates the definition of "financial institutions" contained in Article 4, paragraph 1, point 26) of Regulation (EU) No. 575/2013, of 26 June (hereinafter "Regulation 575/2013"). In fact, Article 4, paragraph 1, point 26), of Regulation 575/2013 establishes the following definition: "Financial institution": an undertaking which is not an institution, whose principal activity is the acquisition of shareholdings or the exercise of one or more of the activities enumerated in Annex I, points 2 to 12 and 15, of Directive 2013/36/EU, including a financial company, a mixed financial company, a payment institution, as defined in Directive 2007/64/EC of the European Parliament and of the Council, of 13 November 2007, on payment services in the internal market, and an asset management company, but excluding insurance undertakings and mixed insurance undertakings, as defined in Article 212, paragraph 1, point g) of Directive 2009/138/EC"." Concluding, thus, the Claimant that "this definition excludes from the concept of "financial institution" the "insurance undertakings and mixed insurance undertakings, as defined in Article 212, paragraph 1, point g) of Directive 2009/138/EC [also known as the "Solvency II" regime]"."

m) The Claimant further invokes that "[t]he reason why the CRR Regulation excludes these companies from the concept of "financial institution" results from the fact that these entities are related to another branch of the financial system, the insurance sector (which traditionally also includes the matter of pension funds). Thus, the activities carried out by entities in the insurance sector are governed exclusively by the rules of the Solvency II regime, transposed in Portugal by Law No. 147/2015, of 9 September, which in particular approved the Legal Framework for Access and Exercise of Insurance and Reinsurance Activity (hereinafter "RJASR") and by DL 12/2006 with regard to companies managing pension funds, and not by the RGICSF or by the European legislation of the banking sector. In this way, the definition of "financial institution" that appears in the RGICSF, and also in Regulation 575/2013, since the former is the replica of the latter, never covers entities of the insurance sector. This is why, moreover, SGFPs are supervised by ASF and not by the Bank of Portugal!"

n) The Claimant further argues, in a complementary way, regarding this matter: "[f]or this reason, and contrary to what the Tax Authorities argue, SGFPs and pension funds are not qualified as "financial institutions" under the legal definition in existence, whether for purposes of Domestic Law or European Law."

o) Furthermore, it states that: "[w]hen the legislator wished to integrate in the concept of "financial institution" other entities that are not so qualified under the terms of the RGICSF, it established exactly that in an express norm. This was what happened with insurance companies which, as mentioned above, are excluded from that concept provided for in the RGICSF.(…) And this is what effectively did not happen with SGFPs and pension funds, in relation to which no similar norm was established." In this context, the Claimant considers that "the interpreter cannot ignore this legal reality nor the model of action used by the legislator when it seeks to extend the concept of "financial institution", contained in the RGICSF, to other entities not covered by it." In truth, "the legislator, understanding that the concept of "financial institution" is a specific concept, which is defined in law (that is, in Article 2-A, subparagraph z), of the RGICSF) and that it is not advisable to create conceptual confusion, ended up changing this qualification, with paragraph of Article 47 of the RJASR now stipulating that "Insurance companies are financial companies whose exclusive object is the exercise of insurance activity, as well as operations directly resulting therefrom, with the exclusion of any other commercial activity". That is, in the legal framework in force, the legislation stopped qualifying insurance companies as "financial institutions", with the legislator now qualifying them as "financial companies".

p) It adds that "currently, it is the RJASR itself that establishes the distinction between, on the one hand, financial institutions and, on the other hand, insurance companies", whereby [w]e draw two conclusions from this which, in our view, are definitive: (i) the concept of financial institution is what appears in the RGICSF and (ii) the legislator opted to stop qualifying insurers as financial institutions. We arrive, therefore, at the conclusion that SGFPs and pension funds are not expressly covered, in Banking, Financial and Insurance Law, by the concept of "financial institutions" that flows from these branches."

q) "In fact, the definition of "financial institution" has always appeared in the RGICSF, since its original version, approved in 1992 by Decree-Law No. 298/92, of 31 December (see the definition contained in Article 13, paragraph 4, in the original version). That is, when the tax legislator, in the reform of Stamp Duty carried out in 1999, added the reference to "other financial institutions" in item 17.3 of TGIS, in view of what was enshrined in Article 120-A of the previous table (…), the definition of "financial institution" mentioned above already existed in Banking Law."

r) The Claimant further states that "by being subject to supervision by the ISP (cause) they should be qualified as financial institutions (effect) or the opposite, that is, if because they are financial institutions they are subject to this supervision", the Claimant understands that: "[t]he first hypothesis cannot proceed, for the simple fact that there are other realities – such as insurance brokers, who can even be natural persons!!! – that are subject to supervision by the ISP (current ASF) and that no one, as far as is known, would qualify as a financial institution for purposes of the incidence norm under analysis. As for the second hypothesis, it tells us nothing about the qualification, as it assumes that SGFPs are financial institutions (cause) to then state that from this it follows that they are subject to supervision (effect). Now, it is exactly this cause that the Tax Authorities would have to demonstrate, which means that this reasoning suffers from the vice of begging the question."

s) With respect to the provision of subparagraph f) of paragraph 1 of Article 3 of Law No. 25/2008, of 5 June, regarding the concept of "financial institutions", the Claimant refers to this norm "[e]stablishes its own definition of "financial entities", which is different from "financial institutions". (…) the concept of "financial entities" established in this Article 3 includes many realities that not even the most extravagant interpretation could ever include them in the incidence norm provided for in Item 17.3 as "financial institution". The Claimant considers that "(…) the purpose of this Law 25/2008 is to establish "preventive and repressive measures to combat money laundering and the financing of terrorism". That is, this Law has a very specific scope that has nothing to do with the general definitions established for purposes of Banking and Financial Law.".

t) Furthermore, it states that the reference by the Respondent to recital No. 4 of Directive 2003/41/EC, to find a definition for the concept of financial institution, must take into account that "(…) the said "recital" does not entail any definition. On the contrary, the Directive itself (2003/41/EC) contains its own definitions and in none of these definitions does it refer to the concept of "financial institutions"." According to what the Claimant believes, "this Directive makes no classification or establishes any definition of the concept of financial institution. The truth is that, if it is true that professional pension plans were harmonized at the European level, through this Directive, it is also true that another very different thing are the entities that manage them and that vary from country to country, not being the subject of harmonization through a Directive… whereby no inference can be drawn from this Directive as to the nature or classification of SGFPs or pension funds. This very fact stands out from what is provided for in subparagraph c) of paragraph 2 of its Article 16 (…)". So much so that, "the Directive does not harmonize the entities that manage the plans, it itself does not list "who" or "what" these entities are." Explaining that "[i]t is for this reason that the norm cited refers to "financial institutions or similar bodies" and the reference to "financial institutions" appears only in a mere "recital"."

u) The Claimant further states regarding this matter that: "It is correct to affirm that DL 12/2006 transposed Directive No. 2003/41/EC into the internal legal order. However, it must be taken into account that only nine(!) of its articles result from the transposition of the aforementioned Directive… whereby, the fact that this DL 12/2006 carries out the transposition of the Directive does not mean, without more, that the latter is its basis – in fact, the Directive is the basis of those nine articles. In fact, it is expressly stated in Article 32 of DL 12/2006 that the management of pension funds can only be carried out by managing companies provided for in the same diploma or by insurance companies that legally exploit the "life" branch and have an establishment in Portugal.", to conclude in the sense that: "[t]hus, it is demonstrated that, contrary to many other areas of the financial sector, SGFPs are still a reality exclusively subject to national legislation, except with regard to professional pension plans, whereby it is not possible to resort to European law to draw inferences about its legal nature of a national legal construction."

v) The Claimant mentions, in parallel, further regarding this topic that: "Article 30 of the CVM has as its sole purpose to determine the investors who need less protection (information) in their relationship with financial intermediaries.". In fact, by checking that norm, the Claimant clarifies that "The designation contained in subparagraph f) of "other authorized and regulated financial institutions" results from a mere terminological imprecision in the transposition of the Directive. In fact, Annex II of the MiFID Directive (Directive 2004/39/EC) lists the same entities that are considered "qualified investors", but excludes SGFPs and pension funds from the scope of "other authorized and regulated financial institutions", whereby we are faced with a deficient transposition of the norm in question." whereby, "As can be seen, the Directive places pension funds and SGFPs outside the concept of "other authorized and regulated financial institutions", while Article 30 of the CVM, which constitutes its transposition, switches the subparagraphs by mere oversight."

w) The Claimant further alludes that "In fact, we are dealing with a norm of tax incidence, whose defining character must be certain, objective and "designed in law in a sufficiently determined form". In truth, according to the Claimant "(…)there may be a temptation to view the concept of "financial institution" as being an "indeterminate concept", which the legislator inserted in Item 17.3 to subsume a variety of entities whose activity is, more or less, related to financial activity. In this view, it would be up to the interpreter to "choose" which entities are or are not part of the concept, subjecting them to Stamp Duty. This thesis is supported by the fact that the legislator makes reference, in Item 17.3, to "any other financial institutions".", however, the Claimant rejects this interpretation, as it understands, on the one hand, that:"(…) the expression "any other financial institutions" could also simply mean that the concept of "financial institution" is broader and includes the previous concepts of the same norm. In fact, "credit institutions" and "financial companies" are also qualified as "financial institutions" by virtue of the legal definition contained in Article 2-A, subparagraph z), of the RGICSF. Thus, the legislator merely wished to highlight that reality, that is, "any other financial institutions, in addition to credit institutions and financial companies, that fall under the respective legal concept"., " on the other hand, it considers that "if the legislator actually wished to use an indeterminate and comprehensive concept, it could have done so differently, using for example "financial entities" or "entities that operate in the financial sector" or even "entities that practice the activities contained in (…)".", on the other hand, further notes that "there is a legal definition of "financial institutions" that does not include either SGFPs or pension funds. If the legislator intended to use an indeterminate concept and, by incompetence, used a concept that was legally defined, that is a reality that is beyond the reach of the interpreter. In fact, the interpreter cannot presume that the legislator is incompetent, but must instead presume that he was reasonable, as dictated by paragraph 3 of Article 9 of the Civil Code. It is therefore the case that the concept of "financial institution" contained in Item 17.3 should be interpreted with the meaning that the concept has in the law as stated, that is, in the RGICSF, where it is defined." assessing, finally, that "given that this is a norm of subjective tax incidence.(…) the use of an indeterminate concept (…)would result in an obvious unconstitutionality, by violation of the principle of tax legality and the principle of typicity and also the principles of equality and legal certainty."

x) Concludes, in this way, that "the interpretation made by the Tax Authorities of the subjective incidence norm contained in Item 17.3, beyond being illegal, is also unconstitutional, by violation of the constitutional principles mentioned above."

y) The Claimant further argues, a second illegality based on the understanding that "the commissions charged by the Claimant are subject to Stamp Duty (which is not conceded), then it will be necessary to conclude that the exemption provided for in Article 7, paragraph 1, subparagraph e), of the CIS applies.", by considering that "[i]n any case (non-subjection or subjection with application of the exemption), the result is inexorably the same: the illegality of the impugned levies. This conclusion is the only one that, once again, is in line with the principle of tax legality and with the rules of legal hermeneutics."

z) The Claimant clarifies, regarding this matter, that "if the Tax Authorities consider that SGFPs and pension funds qualify as "other financial institutions" for purposes of the incidence norm, it is difficult to discern why they refuse to apply the exemption provided for in subparagraph e). In fact, the exemption as it appears in the law does not seem to contain any difficulty of application, and it is certain that it was applied for decades by the entire financial sector without problems of note".

aa) In fact, "the CEF assumes that the delimitation of the aforementioned exemption appears in paragraph 2 of Article 37 of the LOE 2001, which is why it was assumed that this delimitation [that] continues to be applicable to the present (since no norm revoked that provision of the LOE 2001). (…). "

bb) The Claimant further alludes that "this material delimitation of the scope of application of the exemption does not appear in paragraph 2 of Article 37 of the LOE 2001 but was, in fact, introduced in the very wording of paragraph 2 of the then Article 6 of the CIS! That is, contrary to what the CEF Opinion and the DS IMT Information state, it is not paragraph 2 of Article 37 of the LOE 2001 that established the delimitation of the exemption contained in subparagraphs e) and f) of paragraph 1, but rather paragraph 2 of the then Article 6 of the CIS. (…) .

cc) According to the Claimant, this norm, "delimits the scope of the financial operations that should benefit from the exemption provided for in subparagraphs e) and f) in paragraph 1 of that article, in forms very different from the original version, establishing a new requirement of applicability. That is, it is absolutely clear that it was the express intention of the tax legislator to restrict the material scope of these Stamp Duty exemptions provided for in those subparagraphs for the financial operations (interest, credit opening and commissions) that were in a direct relationship with the credit granting activity carried out by the entities provided for there."

dd) In truth, "[i]n no part is it stated that this exemption should be limited to commissions directly intended for credit granting.", whereby, the Claimant understands that "[t]he interpretation advocated by the Tax Authorities with respect to subparagraph e) of paragraph 1 of Article 7 of the CIS also violates, the constitutional principle of equality and the principle of typicity of tax law, since it restricts the application of a legally provided exemption, on the basis of the application of a norm repealed on 31.12.2002."

ee) The Claimant further argues in the sense that "There is yet one final argument that can be put forth and that helps refute the thesis that the Tax Authorities espoused in the Report. This argument results from the amendments that Law No. 7-A/2016, of 30 March (which approved the State Budget Law for 2016, hereinafter "LOE 2016"), recently introduced to Article 7, of the CIS. (…) As easily verified, the wording given by the tax legislator to this new paragraph 7 of Article 7 of the CIS presents numerous similarities with the wording that had been instituted by the LOE 2001 for the then paragraph 2 of Article 6 of the same Code and which, as demonstrated above, was in force during 2 years until it was repealed by the LOE 2003. However, the legislator did not limit itself, with the LOE 2016, to resurrect a formula that had already been used about 15 years ago for the purpose of imposing a reduction in the scope of the Stamp Duty exemption provided for in subparagraph e) of paragraph 1 of Article 7 of the CIS. Through Article 154 of the LOE 2016, the legislator provided that, in particular, the wording given to the new paragraph 7 of Article 7 of the CIS had an interpretive character. (…) And let it not be said that the interpretive character given by the legislator by Article 154 of the LOE 2016 to the new paragraph 7 of Article 7 of the CIS will now come to "rescue" the Tax Authorities, erasing any and all illegality committed in the meantime, in particular in the tax procedure that preceded the levies of stamp duty and compensatory interest contested by the Claimant. This is because, never too much to remember, Article 103, paragraph 3, of the CRP (a norm resulting from the Constitutional Amendment of 1997) provides that "[n]obody can be obliged to pay taxes that have not been created in accordance with the Constitution, that are retroactive in nature or whose assessment and collection are not carried out in accordance with the law".

ff) "Now, having regard to the above explanations concerning the distinction between an innovative law and an interpretive law (to which reference is made as a matter of economy), the Claimant understands that there is no way to deny the innovative character of paragraph 7 added by Article 152 of the LOE 2016 to Article 7 of the CIS and, as such, we are faced with a case in which a new law will apply (by means of the interpretive character conferred on it by Article 154 of the LOE 2016) to facts fully occurred (e.g. in the years 2011 to 2014) at a time prior to its publication. As is evident, the norm that confers interpretive character suffers from the vice of unconstitutionality insofar as it is patently contrary to the aforementioned prohibition of retroactivity of tax law."

gg) The Claimant further mentions that "[f]inally, the Claimant believes that the legislative intervention carried out in the LOE 2016 is not based on reasons of overriding public interest, and it is not known, moreover, what public interests should be protected to such an extent as to justify the institution and maintenance of a situation that causes an unfair, disproportionate and unbalanced distribution of tax burdens among the various taxpayers (…). In light of the constitutional principles enunciated, having the facts that gave rise to the tax obligation here impugned already occurred and on which the new law pronounces (between 2 and 5 years after), the reasons that presided over the establishment of the rule prohibiting retroactivity in this field are fully present, imposing the need to avoid that the LOE 2016 recently published causes unreasonable financial damage to the Claimant, due to the impossibility in which it finds itself, bound to such facts already occurred, to foresee and provide for the tax consequences determined by a clearly innovative law. Thus, Articles 152 and 154 of the LOE 2016 cannot, under pain of violation of the prohibition imposed by Article 103, paragraph 3, of the CRP, delimit the scope of the exemption in subparagraph e) of paragraph 1 of Article 7 of the CIS, with respect to management commissions charged by the Claimant to pension funds in years prior to its entry into force, and as such, the Tax Authorities will not be able to avail themselves of the apparent "cover" given by those innovative norms to justify, from then on, the maintenance in the legal order of the stamp duty levies and compensatory interest now contested under pain of flagrant unconstitutionality."

hh) In fact, the Claimant understands that "the restriction of the exemption advocated by the Tax Authorities also violates the Directives on "capital raising". (…) Thus, the prohibition of applying indirect taxes on these entities flows from Article 5, paragraph 1, subparagraph a) of the aforementioned Directive 3008/7/CE, combined with Directive 2003/41/CE (see pages 57 and 58).But even if it is understood that Directive 3008/7/CE is not applicable, still the taxation under Stamp Duty would violate the provision of Article 11 of DL 12/2006, which prevents the assets of pension funds from being liable for any other obligations, beyond those listed in that law (see pages 58 and 59 of the MVGA Opinion)."

ii) The Claimant adds further, with interest that, "[s]ince this Decree-Law transposes Directive 2003/41/CE into the internal order, the violation of that Article 11 constitutes a violation of the Directive itself and, by that route, of the Constitution itself (Article 8 of the CRP)."

jj) Concluding in the sense that "[t]he incidence of Stamp Duty on the commissions involved here also violates the principle of non-discrimination prevailing in European Law."

III. In its Reply, the Respondent invoked, in summary, the following:

a) The Respondent refutes the arguments of the Claimant, stating from the outset that "the SP alleges, in sum, that the impugned Stamp Duty levies would suffer from the vice of violation of law, invoking also the violation of Union Law." (…) In fact, the Claimant is not correct, starting with the reasons amply evidenced in the Final Report of the Tax Inspection, which is given as fully reproduced for all legal purposes."

b) The Respondent begins its reply by providing a legal framework for the contested levies, mentioning for this purpose the provision of Article 1 of the Stamp Duty Code, to conclude that "[a]s noted in the RIT, paragraph 2 of the same Article 1 of the CIS provides that operations subject to value added tax and not exempt from it are not subject to stamp duty, the RIT having concluded that the operations were exempt from VAT."

c) In fact, as regards the framing of the commissions charged by management companies to pension funds, the Respondent argues that "(…) as correctly stated in the RIT, it is relatively settled that they are exempt from VAT under subparagraph g) of paragraph 27 of Article 9 of the CIVA, whether in the case that the management of pension funds is carried out by life insurance companies or in the case that management is carried out by companies established exclusively for such purpose. (…) For its part, item 17.3.4 of the General Table of Stamp Duty, insofar as it is relevant here, provides for the subjection to IS, at the rate of 4% of "Other commissions and considerations for financial services". Complementarily, it states, as regards this aspect, the provision of Article 7 of the CIS, mentioning that "(…) the wording of subparagraph e) was given by Law No. 107-B/2003, of 31 December, and paragraph 7 was added by Law No. 7-A/2016 of 30 March, with an interpretive character, thus integrating itself in the interpreted norm."

d) With respect to the argument made by the Claimant that it is not, and cannot be considered "a financial institution or equivalent entity", the Respondent invokes in its defense that "it is important to note that, as is well known, only what a priori falls within the norms of incidence of the tax is exempt.", further alluding to the fact that "in the scope of the inspection procedure in which the impugned levies are based, the here Claimant did not even discuss its qualification as a financial institution or equivalent. Rather, it opted to invoke, from the outset, the exemption granted by Decree-Law No. 20/86, of 13 February. An argument that it has since abandoned..."

e) The Respondent continues its thesis in the sense that "[t]hus, notwithstanding the indignation with which it appears to rebel against the qualification as a financial institution or equivalent entity, it is found that, at a first moment, it accepted without any restriction that subjective qualification."

f) Now, in truth, the Respondent confirms "[i]n fact, in the RIT, A… Fundos was characterized as a company managing pension funds, governed by the provisions of Decree-Law No. 12/2006, of 20 January, "(…) whereby, "With respect to its framing under Stamp Duty, A… Fundos, as a Managing Company argues that the exemption that has its origin in an extensive interpretation of Art. 4 of DL No. 20/86, of 13/2 "There are exempt from stamp duty […] the operations concerning certificates representing units of participation of mobile investment schemes."

g) The Respondent understands that "results from the combination of the norms provided for in Article 1 of the CIS and items 17.3 and 17.3.4, stamp duty is imposed on operations carried out by or with intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions, with "other commissions and considerations for financial services" being taxed at 4%. Thus, item 17.3 excludes from its field of incidence financial operations that are not carried out by or with the intermediation of the entities referred to therein, whereby the incidence undoubtedly operates only in cases where the said operations are carried out by or with the intermediation of those entities.". In this way, and consequently, it is essential to "resolve the question of incidence, we must know whether Pension Funds and Companies Managing Pension Funds are included in the expression referred to in the norm in question. It follows from Article 11 of the LGT, that the concept fiscally relevant to "credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions" for purposes of the norm of incidence in question – and therefore, of the correlative exemption norm - should be the one that prevails in financial law, in particular in banking and insurance law, both national and community."

h) Now, "[t]he framework for constitution and operation of pension funds and the respective managing companies appears, as already mentioned, in Decree-Law 12/2006, of 20 January, which transposed into our legal order the Directive No. 2003/41/EC, of the European Parliament and of the Council, of 3 June, relating to the activities and supervision of institutions carrying out professional pension schemes. As set forth in the information of the DSIMT, it follows from the preamble of the national diploma that the objective was to establish a unitary treatment of pension funds, with the legislator extending the principles and regulatory provisions contained in the directive for professional pension schemes to pension funds "of the third pillar of social protection" (individual pension schemes). Under the terms of the aforementioned decree-law, pension funds are managed by specialized and professional entities, established in the form of a joint-stock company exclusively for that purpose, designated by SGFP, or by insurance companies that legally exploit the "life" branch and have an establishment in Portugal."

i) In this context, the Respondent understands that "the Managing Entity, as the legal representative of the Fund and responsible for its proper administration, is responsible in particular for selecting and negotiating the investments that should form part of the fund's assets, in accordance with the defined policy, representing the associates, participants, contributors and beneficiaries in the exercise of their rights; collecting contributions; guaranteeing the payments due to beneficiaries, etc.", continuing in the sense that "[a]s regards the supervision of these entities, it is currently divided between the Institute of Insurance of Portugal (ISP) and the Securities Market Commission (CMVM): the supervision of the management of pension funds is the responsibility of the ISP, encompassing pension funds and their respective managing entities; the commercialization of contracts of individual membership in open pension funds is subject to supervision by the CMVM. On the qualification of companies managing pension funds as financial institutions, note that, when the activity of management is exercised by life insurers, there is no room for doubt in that qualification, in accordance with the provision of Article 8 of DL 94-98, of 17 April, which transposed Directive No. 2005/68/EC. As for Managing Entities established specifically for that purpose, they are also pacifically considered as financial institutions subject accordingly to supervision by the ISP, although of special regime, given that the regulation of their activity is not contained in the General Framework of Credit Institutions and Financial Companies, but rather in special legislation to which paragraph 3 of Article 6 of this same Framework refers. Such evidence is attested by the terms of subparagraph f) of paragraph 1 of Article 3 of Law No. 25/2008, of 5 June, which expressly provides that companies managing pension funds are financial entities."

j) In this regard, the Respondent further argues in the sense that "(…) European law transposed by Decree-Law 12/2006, converges in the same interpretive direction, as the criterion that presided over the preparation of Directive No. 2003/41/EC was that, given the importance and influence that these entities assume in the achievement of the single market in financial services, it was considered " (... ) urgent to draw up a directive on prudential supervision of institutions carrying out professional pension schemes, since these important financial institutions, which have a key role to play in the integration, efficiency and liquidity of financial markets, are not subject to a coherent Community legal framework that allows them to take full advantage of the benefits of the internal market. " (emphasis ours) – cf. recital four of the Directive. In the same sense, see the definition contained in paragraph 1 of Article 4 of Regulation (EU) No. 575/2013 of 2013-06-26, of the European Parliament and of the Council, according to which a financial institution is an undertaking that is not an institution, whose principal activity is the acquisition of shareholdings or the exercise of one or more activities enumerated in Annex I, points 2 to 12 and 15 of Directive 2013/36/EU."

k) In this sense, the Respondent considers that "the activities mentioned are subsumable, for example, to points 8 to 11 of Annex I of Directive 2013/36/EU, of 2013-06-26, of the European Parliament and of the Council which refers to "Participation in issuances of securities and provision of services connected with that issuance", applicable to open Funds, and to "Portfolio management", and it is certain that it is the exercise of one or more of these activities that, at the community level, qualify a given entity as a financial institution."

l) The Respondent further invokes that "(…) under subparagraphs e) and f) of paragraph 1 of Article 30 of the Securities Code (CVM), both SGFPs and Funds are qualified, alongside other financial institutions, institutional investors, being factually indisputable their effective relevance as institutional investors."

m) In fact, the Respondent explains that "[h]aving further in view the qualification of companies managing pension funds, it is important to take into account the General Framework for Credit Institutions (RGICSF),(…)", in particular in the provision of subparagraphs z) and kk) of Article 2-A and Article 4. "we are led to conclude that the Claimant meets the requirements to be qualified as a "financial company", a category in which financial institutions defined in subparagraph z), sub-item ii) also fall.And so it is that, in Article 6 (Types of Financial Companies), the legislator expressly removed from the RGICSF, by providing in paragraph 3: "For the purposes of this diploma, insurance companies, companies managing pension funds and investment companies in securities and real estate are not considered financial companies." (our emphasis), from which it follows that it does not disqualify them as financial companies, but rather removes them from the prudential regime and from supervision by the Bank of Portugal.". Further stating that, "[i]n fact, despite paragraph 3 of Article 6 of the RGICSF having expressly referred to a specific regime, it is undeniable that the core of its functions resembles some of the activities exercised by entities subject to the general regime."

n) The Respondent mentions that "[o]pposing this, the Claimant (Article 88 of the PI) states that it is merely a clarification because companies managing pension funds (SGFP) belong to another branch of the financial sector, which, while true, if account is taken of prudential supervision, does not invalidate that, in terms of the nature of the activity exercised, and it is that which is relevant for qualifying companies and institutions as financial, it falls within this category. It further advances the Claimant (Article 105 of the PI) that "the principal activity of SGFPs is the management of the pension fund, having nothing to do with the above", i.e., with portfolio management, forgetting the provision of paragraph 4 of Article 32 of Decree-Law No. 12/2006; And likewise, that Pension Funds, in the definition given by APFIPP (Portuguese Association of Investment Funds, Pensions and Assets), are autonomous assets intended exclusively for the financing of pension schemes, that is, they constitute a set of assets whose sole purpose is to provide future payment of benefits provided for in the respective plan.", further assessing, regarding this matter, that "[n]aturally, the composition of the assets that make up Pension Funds, whose management is ensured by SGFPs, in accordance with an investment policy that is safe and efficient and guided by the principle of the "prudent manager", comprises, in addition to real property, investments in portfolios of securities or other types of financial applications, resulting from the application of the funds delivered to them by the contributing entities and/or participants. Now, this implies that SGPFs operate in financial markets with the status of qualified investor, under the terms provided for in subparagraph e) of paragraph 1 of Article 30 of the Securities Code."

o) With regard to the transposition of Directive No. 2003/41/EC, of the European Parliament and of the Council, of 3 June, in contrast to the position of the Claimant, the Respondent understands that "it is important to clarify that the legislator gave public notice that it carried out, with this diploma,[Decree-Law No. 12/2006, 20.01] the transposition of the Directive and thus communicated it officially to the European Commission, which in its Report on certain essential aspects of Directive 20013/41/EC relating to the activities and supervision of institutions carrying out professional pension schemes (IRPPP Directive) indicates that "By 2007, all Member States had already notified their implementation measures…"."

p) The Respondent further considers that "[t]he scope of application of the Directive covers Pension Funds and SGFPs, as results from paragraph 1 of Article 2, according to which "…is applicable to institutions carrying out professional pension schemes. Whenever, under national legislation, these institutions do not have legal personality, the Member States shall apply this directive to these institutions or, subject to paragraph 2, to the authorized entities responsible for their management and acting on their behalf."". Furthermore, "[i]n the preamble of the Directive, both in Recital 4, in the explanation of the objectives that presided over its publication, it is stated that the institutions carrying out professional pension schemes are "financial institutions that have a key role to play in the integration, efficiency and liquidity of financial markets" as well as in Recital 19 it is made explicit that "The institutions carrying out professional pension schemes are providers of financial services …" "

q) Concluding in the sense that "(…) there is no doubt that SGFPs fall within the body of item 17.3, whether as financial companies or as institutions, in the light of the qualification made in compliance with the criteria of the RGICSF and the applicable European law, as is corroborated by Directive 2003/41/EC and by other instruments of national and European law legislation, to which reference is made in the Opinion of the DS IMT."

r) The Respondent further assesses that "[c]orroborating all of the above, from the letter of the law, that is, from the fact that item 17.3 expressly provides for "any other financial institutions", also follows the intent of the legislator for the definition to be understood in the broadest sense. Indeed, it must be noted that the legislator of the CIS, certainly aware of the diversity of operators in the financial market and its foreseeable evolution, due to the deepening of the internal market for financial services in the European Union, resorted to a broad formulation of the body of item 17.3 that allows framing any entities that are legally considered equivalent to financial companies and those that are qualified as financial institutions. It is sufficient, in this respect, to compare with the wording of item 120-A of the TGIS, whose preamble was as follows: "Operations enumerated below carried out by or with intermediation of credit institutions or financial companies" to conclude that the subjective scope was significantly expanded."

s) The Respondent further understands that "[t]he objective nature requirement of incidence is also met, which allows the framing of management commissions in the sub-item 17.3.4, because they fall within the category "other commissions and considerations for financial services".

t) Concluding "without doubt, that the operations carried out by or with the intermediation of companies managing pension funds, on behalf and for account of the funds, are considered materially financial, whereby the managing companies are subsumable in the notion of "any other financial institutions", contained in item 17.3 of TGIS, for purposes of subjection to taxation under Stamp Duty. In this way, the objective element provided for in the incidence norm is met, with the commissions charged by managing companies as remuneration for the administration and management of pension funds constituting the consideration for financial services under the terms and for the purposes of Item 17.3.4 of TGIS."

u) The Respondent concludes its thesis, noting that "[i]n this respect, it is incumbent on the levy, collection and delivery of the assessed tax to the state coffers by the SGFP, in its capacity as a taxpayer, in accordance with the provision of Article 2 of the CIS, the burden falling on the fund itself, as the holder of the economic interest. In sum, as concluded by the DSIMT, which is here fully reproduced, the commissions sub judice cumulatively meet the objective and subjective elements provided for in Item 17.3.4 of TGIS, and in accordance, are subject to stamp duty by virtue of the provision of paragraph 1 of Article 1 of the CIS."

v) With respect to the "alleged violation of law by applicability of the exemption in Article 7 of the CIS", the Respondent understands it to be pertinent to note that "[t]he Claimant intends, in the present request for arbitral pronouncement, to put forward, in second line, the argument that the commissions charged to pension funds by the respective managing company would be provided for in the exemption norm currently contained in Article 7, paragraph 1, subparagraph e) of the CIS. (…) Being that, as stated, the wording of subparagraph e) was given by Law No. 107-B/2003, of 31.12, and paragraph 7 was added by Law No. 7-A/2016 of 30.03, with an interpretive character, thus integrating itself in the interpreted norm." Now, relying on the Opinion of the CEF No. 25/2013, the Respondent considers it prudent to note that "the present [that is, the wording given by Law No. 107-B/2003] wording of this normative has undergone successive alterations, from the revision of the stamp duty code and its respective table by Law No. 150/99, of 11 September, until its stabilization with the wording given by Law No. 107-B/2003, of 31 December. In fact, in the original version of the revised code, the content of the current subparagraph e) was divided into two subparagraphs - subparagraph e) and subparagraph f) (In the wording given by Law No. 150/99 "e) The interest charged and the use of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and object fulfill the types of credit institutions and financial companies provided for in Community legislation, all of them domiciled in the Member States of the European Union, or in any State complying with the principles resulting from the Code of Conduct approved by the Resolution of the Council of the European Union of 1 December 1997. f) The commissions charged by credit institutions to other institutions of the same nature to entities whose form and object fulfill the types of credit institutions provided for in Community legislation, domiciled in the Member States of the European Union, or in any State complying with the principles resulting from the Code of Conduct approved by the Resolution of the Council of the European Union of 1 December 1997) - whose wording, in 2000, was the subject of an amendment, in its final part, which replaced the reference to the Code of Conduct with domiciliation in territories with a privileged tax regime to be defined by ministerial order of the Minister of Finance (see paragraph 1 of Article 37 of Law No. 30-C/2000, of 29 December)."

w) "In fact, Law 30-C/2000, the State Budget Law for 2001, [gave new wording] to Article 6, subparagraphs e) and f), relating to interest charged and the use of credit granted, as well as commissions charged, by the credit institutions provided for there were only covered by the exemption with respect to financial operations directly intended for credit granting, within the scope of the activity exercised by the institutions and entities referred to in those subparagraphs. Thus, as reasonably set forth in the Opinion of the CEF: "in that same Law, there was also a delimitation of the material scope of the exemption granted by subparagraphs e) and f) of Article 6 (current Article 7), by establishing, in paragraph 2 of Article 37, that "The provisions of subparagraphs e) and f) apply only to financial operations directly intended for credit granting, within the scope of activity exercised by the institutions and entities referred to in those subparagraphs", but, such, however, according to the Respondent "(…)does not detract from the clear delimitation of the material scope of the exemption, granted by subparagraphs e) and f) of the previous Article 6 and current Article 7, only to financial operations directly intended for credit granting."

x) "In truth, Law No. 32-B/2002, of the State Budget for 2003, [which carried out] the concomitant repeal of paragraph 2 of Article 6 (by means of replacing the wording with the one previously contained in paragraph 3) is perfectly capable of being read in the way that the Tax Authorities – as well as, of course, the Courts, (…) note (…) that it does not appear rational to establish an autonomy between interest, commissions charged and guarantees provided on the one hand and the use of credit granted, on the other; Since it is only with respect to credit granting that it is possible to connect with the credit institutions and companies or financial institutions granting and from the companies or entities observing, in form and in object, the types of credit institutions and financial companies and financial institutions, beneficiaries of the exemption norm."

y) Complementarily, the Respondent understands that "(…) as emphasized by the TCAS and the STA, it seems incomprehensible that the legislator would refer to interest, commissions charged and guarantees provided, as realities with independent existence, for purposes of tax exemption; This would result, as the here Claimant intends, that all and any of them, regardless of what they were, would be exempt, provided they were reported on operations between company and entity with location observing what was determined in the norm. Drawing on the argument of the Superior Courts, such interpretation (greatly broadening the scope of the exemption of interest, commissions and guarantees) would make even more incomprehensible the tax treatment given to the use of credit, for here it would be restricted, and only here, the exemption to financial operations concluded between those institutions. Whereby, in this sense, the TCAS and the STA concluded that the systematic and rational elements impose that the exemption norm refers, to interest, to commissions charged, to guarantees provided or to mere use, in all cases, by reference to credit granted under the terms of the provision in the normative."

z) "Returning to the historical element, it is perfectly legitimate to think that the aggregation of the subparagraphs, as well as the change of wording to use the expression "and likewise, the use of credit granted" will have been motivated by the legislator's conviction that paragraph 2 would become redundant. In fact, subparagraph e) went on to provide "interest and commissions charged and likewise, the use of credit granted", with the literal element of interpretation pointing to such a connection to credit granting. As already contained in the RIT, it should be understood that when the legislator mentions "and likewise, the use of the credit granted", it identifies and delimits the intrinsic relationship existing between those clearly identified realities and the credit, and does so in the sense that the latter should be considered as the essential and prior element in relation to the others. Thus, [the Respondent understands that] the ground used by the legislator to justify the recognition of the exemption with respect to interest, commissions charged and guarantees provided will be the same for credit, by and when those are ancillary to it, that is, only the interest, commissions and guarantees that result from the prior existence of a credit granted that is with those directly and intrinsically related fall within the legal provision. In fact, there is no interest without prior granting of credit."

aa) The Respondent states, regarding this matter, that "[t]he same reasoning should be applied with respect to other operations: commissions, guarantees, "and likewise, the use of credit granted" of which they have resulted."

bb) It concludes in the sense that "[t]he limit to the exemption desired by the legislator, before and after the new wording given to the subparagraphs is the same, that is, the exemption provided for in the current subparagraph e), paragraph 1, of Article 7 of the CIS is only applicable to commissions provided for in item 17 when they are directly linked to credit granting operations, within the scope of the activity exercised by the institutions and entities referred to in that normative."

cc) Moreover, the Respondent adds, finally, that "[t]he Claimant further imputes to the interpretation adopted by the Tax Administration the violation of European Union Law, namely of the "Capital Raising" Directive and of the principle of non-discrimination. Without reason, (…), because, "[i]n the present process, we are dealing with the taxation of stamp duty on management commissions charged to Pension Funds by managing companies, with these commissions being calculated on the basis of a percentage applied to the global net value of the fund. However, according to Article 5, paragraph 1, subparagraph a) of Directive 2008/7/EC, Member States shall not subject capital companies to any form of indirect tax on "Capital Contributions", and this prohibition led to the repeal of item 26 of TGIS, by Law No. 3-B/2010, of 28 April. It is not discernible any real or apparent similarity between the taxation of capital contributions in a capital company and the taxation of a management commission of the Pension Fund and, perhaps, for this reason, the Claimant itself downplays this argument (cf. Article 524 of the ppa) to invoke Article 11 of Decree-Law No. 12/2006, alleging that the provision of this normative prevents the assets of pension funds from being liable for any other obligations, beyond those listed in that law. Taking into account the aforementioned Article 11 (Patrimonial Autonomy) and (…) [h]aving in mind that stamp duty levied on the remuneration of management of the Pension Fund, by effect of repercussion, is integrated into the respective amount, which is considered as a charge of the Fund, it is not seen how it can constitute a violation of the principle of patrimonial autonomy instituted by Article 11 of Decree-Law No. 12/2006."

dd) Finally, as regards the request for payment of indemnity interest, the Respondent notes that "for all the reasons stated above, it is understood that the acts of stamp duty levy do not suffer from a vice that should dictate their annulment.(…) indemnity interest is not due."

IV. Dismissal

The Tribunal is competent and is properly constituted, under the terms of subparagraph a) of paragraph 1 of Article 2 and of Articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, appear to be legitimate, are properly represented, and the process does not suffer from any nullities.

V. Factual Matters

For the conviction of the Arbitral Tribunal, with respect to the facts established, the documents attached to the record and the administrative process were relevant, which proved to be suitable for the facts under discussion in the present case.

a. Facts Established

With interest for the decision, the following facts are established:

A. The herein Claimant is a company managing pension funds;

B. Between the years 2011 and 2014, the Claimant exercised, while SGFP, its activity of managing several pension funds, in particular, A… Fund of Company Managing Pension Funds, S.A.;

C. Throughout that time period, the Claimant charged monthly commissions to the pension funds, as consideration for the provision of its management services, which total the amount of € 8,554,736.02 (eight million five hundred and fifty-four thousand, seven hundred and thirty-six euros and two cents);

D. At the time of charging these commissions, the Claimant understood that, under the terms of the Stamp Duty Code (hereinafter, "CIS") and the General Table of Stamp Duty (hereinafter, "TGIS"), it was not required to levy Stamp Duty on the same;

E. The Claimant was subject to an Inspection Procedure conducted by the Large Taxpayers Unit, which was commissioned by Service Order No. OI2015…, OI2015…, OI2015…, OI2015… of 30-01-2015, with the activity code…, relating to the tax years 2011, 2012, 2013 and 2014, a partial scope procedure, focusing only on Stamp Duty;

F. The service orders were opened with the objective of verifying the tax treatment of the management commissions of the Pension Funds under Stamp Duty (exemption of Article 4 of Decree-Law 20/86, of 13 February and subparagraph e) of paragraph 1 of Article 7 of the CIS combined with item 17.3.4 of TGIS);

G. The Claimant was notified, first, through Official Memorandum No. …, of 02.04.2015, and then, through Official Memorandum No…., of 30.04.2015, to comment on the Draft Report of the Tax Inspection, in which it was proposed to make corrections under Stamp Duty that amounted to € 342,189.44 (three hundred and forty-two thousand, one hundred and eighty-nine euros and forty-four cents) (see Document No. 3 attached with the initial petition);

H. The basis for the Draft Report of the Tax Inspection came from Information No. I2014…, of the Tax and Customs Services Directorate and the Opinion No. 25/2013 of the Tax and Customs Studies Center. (see Document No. 3, 4 and 5 attached with the initial petition);

I. On 22 May 2015, the Claimant exercised the right to prior hearing that was available to it. (see Document No. 6 attached with the initial petition);

J. On 15 July 2015, the Claimant was notified of the Final Tax Inspection Report, which maintained the corrections advanced in the aforementioned Draft. (see Document No. 7 attached with the initial petition);

K. Later, the Claimant was notified of the demonstration of the assessment of Stamp Duty and compensatory interest No. 2015…, in the amount of € 79,879.79, relating to the year 2011; 2015…, in the amount of € 81,629.88, relating to the year 2012; No. 2015…, in the amount of € 87,995.29, relating to the year 2013; and No. 2015…, in the amount of € 92,684.48, relating to the year 2014; as well as the assessments of compensatory interest Nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 12,156.47, relating to the year 2011; 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 9,566.09, relating to the year 2012; 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, in the total amount of € 6,744.57, relating to the year 2013; 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, in the total amount of € 3,405.79, relating to the year 2014). (see Document No. 8 attached with the initial petition);

L. On 14 October and 15 December 2015, the Claimant proceeded to pay the acts of assessment of Stamp Duty impugned here. (see Document No. 9 attached with the initial petition);

M. On 26 January 2016, the Claimant filed an administrative appeal against the acts of assessment of Stamp Duty identified in K above. (see Document No. 10 attached with the initial petition);

N. On 28 March 2016, the Claimant was notified of the decision denying the Administrative Appeal, through Official Memorandum No. … of 2016.03.23 of the Management and Tax Assistance Division (DGAT) of the Large Taxpayers Unit (UGC) of the Tax and Customs Authority. (see Document No. 11 attached with the initial petition);

O. On 27 June 2016, the Claimant filed a request for constitution of the present arbitral tribunal.

b. Facts Established as Not Proven

There are no facts established as not proven, because all the facts relevant to the assessment of the request have been established.

VI- On the Law

1. The central question that arises in the case sub judice boils down to the interpretation of the norms contained in Article 17.3.4 of the General Table and Article 7, subparagraph e), of the Stamp Duty Code (CIS) - former Article 6 - in order to determine whether the commissions for management, administration and other commissions charged by managing entities to the respective pension funds are subject to Stamp Duty (IS), not benefiting from the exemption provided for in subparagraph e) of paragraph 1 of Article 7 of the CIS.

2. As stated, according to the Tax Authorities, the aforementioned exemption is not applicable to all commissions covered by item 17.3.4, but only to those that are directly linked to credit granting operations, within the scope of activity exercised by the institutions and entities referred to in that normative. More precisely, only the interest, commissions and guarantees that result from the prior existence of a credit granted that is with these directly and intrinsically related fall within the legal provision of that norm.

3. Let us examine this.

A)1- Meaning and Scope of Article 17.3.4 of the General Table

1. It is necessary to begin by determining whether the requirements of an objective and subjective nature are met for subjection to stamp duty with framing in item 17.3.4 of TGIS.

2. The aforementioned provision subjects to tax, at the rate of 4%, "the commissions charged and considerations for financial services in operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions"(bold ours).

3. For purposes of subjection to tax, the legislator elects a single criterion: the circumstance that commissions and considerations for financial services are charged by certain types of entities, provided that these are financial operations, since non-financial operations in general are subject to VAT and not to IS. The type of operations that are concretely covered is given to us by the norms that define the competence of the entities referred to.

4. The Claimant alleges that it is not covered by the incidence of the norm insofar as the General Framework for Credit Institutions and Financial Companies (RGICSF), approved by Decree-Law No. 298/92, of 31 December, expressly provides, in Article 6, paragraph 3, that entities managing pension funds "are not considered financial companies".

5. This argument does not, however, have the scope that the Claimant seeks to derive from it.

6. In fact, note that the legislator of the RGICSF, in taking care to explicitly state that this statement applies exclusively for purposes of that diploma, does not exclude that entities managing pension funds may be considered financial institutions in other contexts and for other purposes. In this sense, Carlos Costa Pina (Financial Institutions and Markets, Coimbra, 2005, p. 249) affirms that this limitation of the concept of financial companies is merely formal, only for the purpose of the application of the RGICSF: in truth, insurance companies and companies managing pension funds are materially financial institutions, comprising, as such, two relevant institutional subsectors of the financial sector: the insurance sector and the pension funds sector, since their purpose consists of carrying out operations that are materially and formally financial[1]. A situation that is not foreign to the verified tendency of "the progressive disappearance of barriers and distinctions between the three traditional financial sectors (banking, securities and insurance)[2]", with the consequent merger of interests and activities among the various types of institutions in the financial area, especially between monetary and non-monetary financial institutions, and the appearance of new concepts such as universal banking, bancassurance, or assurfinance, etc., which tend to express formulas of collaboration among financial institutions with different but similar objects competing with each other.

7. In the absence of an express definition of a concept of financial institution, it was always admitted the existence of a concept in the strict sense (the one contained in the RGICSF-monetary financial institutions) along with a broad concept (non-monetary financial institutions[3]). This distinction finds support both in the understanding of the financial sector in a broad sense, which comprises the banking, securities and insurance subsectors, as well as in national and European Union legislation.

8. In Portuguese law we do not find a definition of "financial institution", with the legislator limiting itself, following what happens at the level of European Union Law, in various instances, to list entities which it qualifies on a case-by-case basis as "credit institutions", "financial companies" and "financial institutions", for purposes of application of a particular regime.

9. Under and for the purposes of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, of 26 June, the term "Financial Institution" means: "an undertaking which is not an institution, whose principal activity is the acquisition of shareholdings or the exercise of one or more activities enumerated in Annex I, points 2 to 12 and 15 of Directive 2013/36/EU[4], including a financial company, a mixed financial company, a payment institution within the meaning of Directive 2007/64/EC of the European Parliament and of the Council, of 13 November 2007, on payment services in the internal market, and an asset management company, but excluding insurance undertakings and mixed insurance undertakings, within the meaning of Article 212, paragraph 1, point g) of Directive 2009/138/EC."

10. In point 27. An "Entity in the financial sector" comprises:

a) An institution;

b) A financial institution;

c) An auxiliary services company included in the consolidated financial situation of an institution;

d) An insurance company;

e) An insurance company of a third country;

f) A reinsurance company;

g) A reinsurance company of a third country;

h) A company managing shareholdings in the insurance sector;

i) (…)".

1. For purposes of application of the regime of Directive 2009/138/EC of the Parliament and of the Council of 25 November, relating to access to the activity of insurance and reinsurance and its exercise (Solvency II) (recast), in Article 13, under the heading "Definitions", point 25, the term "Financial Institution" means any of the following entities:

a) A credit institution, a financial institution or an auxiliary banking services company, as defined, respectively, in points 1, 5 and 21 of Article 4 of Directive 2006/48/EC;

b) Insurance companies, reinsurance companies or companies managing shareholdings in the insurance sector as defined in subparagraph f) of paragraph 1 of Article 112;

c) An investment company or a financial institution, as defined in point 1 of paragraph 1 of Article 4 of Directive 2004/39/EC:

d) (…)".

1. From this, it appears that a company managing shareholdings in the insurance sector falls, in the view of this Regulation, under "entities in the financial sector" and, consequently, in a broad concept of financial institution.

2. For its part, in Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003[5], relating to the activities and supervision of institutions carrying out professional pension schemes, we find various references in the sense of framing these entities in the concept of financial institution in a broad sense.

3. In Recital (1) it can be read that the objective is the creation of "a true internal market for financial services", with important progress having already been made "towards the creation of this internal market, which allows financial institutions to develop activities in other Member States and ensure a high level of consumer protection for financial services" (Recital (2).

4. Also Recital (4) reaffirms the idea that we are dealing with "financial institutions" that provide relevant "financial services", which requires a harmonized legal framework with respect to prudential supervision of such entities.

5. The aforementioned Recital has the following content:

"The Action Plan for financial services considers urgent the drawing up of a directive on prudential supervision of institutions carrying out professional pension schemes, since these important financial institutions, which have a key role to play in the integration, efficiency and liquidity of financial markets (…)".

1. This directive was transposed into Portuguese law through Decree-Law No. 12/2006, of 20 January, which regulates the constitution and operation of pension funds and of the entities managing pension funds, with its Article 32 providing that "[p]ension funds may be managed either by companies established exclusively for that purpose, referred to in this Decree-Law as managing companies, or by insurance companies that exploit the "Life" branch and have an establishment in Portugal."

2. Paragraph 4 of the same provision provides that "[t]he managing entities carry out all their acts on behalf and for common account of the associates, participants, contributors and beneficiaries and, in the capacity of administrators of funds, may negotiate securities or real estate, make bank deposits in the name of the fund and exercise all rights or carry out all acts that directly or indirectly are related to the fund's assets." However, these managing entities are also prohibited from certain activities, when they act as managers of pension funds, such as acquiring own shares, contracting loans, except when justified by unequivocal need for liquidity of the pension fund, and granting loans, with the exception of mortgage loans to its workers (Article 36, paragraph 2, of Decree-Law No. 12/2016, according to the wording given by Law No. 147/2015, of 9 September).

3. As regards the prudential rules to be observed, Article 38, paragraph 2, of Decree-Law No. 12/2006, according to the wording given by Article 4 of Law No. 147/2015, of 9 September, which establishes the legal framework for access to and exercise of insurance and reinsurance activity, as well as the procedural regime applicable to special crimes in the insurance sector and pension funds and to misdemeanors whose processing is the responsibility of the Insurance and Pension Funds Supervisory Authority, provides that:

"The provisions of the legal framework for access and exercise of insurance and reinsurance activity, approved by Law No. 147/2015, of 9 September, relating to the following shall apply to companies managing pension funds, with the necessary adaptations:

a) Control of holders of qualified holdings;

b) Registration of persons who effectively manage the company, supervise it or are responsible for key functions;

c) Qualification and propriety requirements of persons who effectively manage the company, supervise it, are responsible for key functions or exercise key functions;

d) Accumulation of positions and incompatibilities;

e) Registration of parasocial agreements;

f) Unlawful use of denomination."

1. With respect to prudential rules, it is important to note that companies managing pension funds are also required "to have an available solvency margin sufficient in relation to all their activities"[6] (Article 45 of Decree-Law No. 12/2006 - according to the wording given by Law No. 147/2015), a margin determined as a function of the commitments assumed established under Article 46 of the same diploma.

2. For its part, under the terms of Article 7 of the Bylaws of the Insurance and Pension Funds Supervisory Authority (ASF) (approved by Decree-Law No. 1/2015 of 6 March), the responsibilities of this Authority include, in particular, "to supervise and regulate insurance, reinsurance, insurance mediation and pension funds activity, as well as related or supplementary activities" [paragraph 1 subparagraph a)].

3. The entities managing pension funds not only approximate to the similar managing companies operating in the insurance and reinsurance sector from the point of view of the formal and material requirements of their activity, but are also equally subject to supervision by the ASF (cf. in particular, Articles 17, 19, 20, 24, 30, 32, and 38, paragraph 2, of DL No. 12/2006, according to the wording introduced by Article 4 of Law No. 147/2015).

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