SIFIDE Tax Credits vs Autonomous Taxation in IRC: CAAD Arbitration 360/2016-T

ARBITRAL DECISION

I – REPORT

A… SA., with Tax Identification Number … and head office at …, …, covered by the local peripheral services of the Tax Authority of …, came, on 3 July 2016, invoking Articles 2, paragraph 1, subsection a), and 10, paragraphs 1 and 2, of Decree-Law No. 10/2011 of 20 January, and 1 and 2 of Order No. 112-A/2011 of 22 March, to request the constitution of an Arbitral Tribunal, with a view to reviewing the implied dismissal of the hierarchical appeal identified below, «(…) and, consequently, the express dismissal of the administrative complaint and (and in final or ultimate terms), the acts of self-assessment of Corporate Income Tax (IRC) (…) relating to the years 2012 and 2013, to the extent corresponding to the failure to deduct from the IRC collection produced by the autonomous taxation rates of fiscal incentives in IRC of the tax benefit ascertained under the Tax Incentive System for Research and Development ("SIFIDE") or, alternatively, to the extent that the autonomous taxation assessment is unlawful».

It designated as arbitrator Dr. João Taborda da Gama.

The arbitral tribunal was constituted on 12 October 2016, after the Tax and Customs Authority indicated as arbitrator Dr. João Menezes Leitão, and the Deontological Council of CAAD, in the absence of agreement (Article 6 paragraph 2 subsection b) of the Legal Regime of Tax Arbitration – RJAT -), designated as president arbitrator Councillor José Baeta de Queiroz.

The Tax Authority (AT) responded, within the legal deadline, defending itself by impugnation and attaching a copy of the administrative file.

The meeting referred to in Article 18 of the RJAT having been dispensed with, as it was considered, in this case, unnecessary, the tribunal announced that it would deliver a decision by 20 January 2017 (which it later postponed to 16 February 2017), and invited the parties to submit written arguments, which they did, maintaining, in essence, the positions previously expressed.

II – PRELIMINARY EXAMINATION

The tribunal is competent, the parties are legitimate, endowed with legal personality and capacity, and are properly represented. There are no nullities, exceptions or preliminary issues that prevent the tribunal from hearing the claim.

III – FACTUAL MATTER

1) PROVED FACTS

It is proved that:

A) On 24 February 2014 the Claimant submitted the IRC declaration Form 22 for the tax year 2012, and on 16 January 2015 a replacement declaration, having proceeded to self-assess autonomous taxation in IRC for that same year 2012, in the amount of €40,043.34, which it paid on 26 February 2014.

B) On 23 February 2015 the Claimant submitted the IRC declaration Form 22 for the tax year 2013, having proceeded to self-assess autonomous taxation in IRC for that same year 2013, in the amount of €70,565.02, which it paid on 1 June 2015.

C) On 19 May 2015 the claimant submitted an administrative complaint against the aforementioned self-assessments relating to the years referred to.

D) After being informed of the draft decision, the Claimant was notified, on 14 January 2016, of the dismissal of the administrative complaint.

E) It submitted, on 12 February 2016 a hierarchical appeal, which was not the subject of express decision within the sixty-day period provided in Article 66, paragraph 5, of the Tax Procedure and Process Code (CPPT).

F) At the time, the AT's computer system did not allow the Claimant to deduct, for the purposes of calculating the IRC owed by it, from the IRC resulting from the autonomous taxation assessed, the SIFIDE.

G) The amount of SIFIDE available for use at the end of the tax years 2012 and 2013 amounted to €741,872.56, which remained at the end of the tax year 2014.

H) The Claimant was not a debtor to the State and social security of any taxes or contributions.

I) The Claimant's tax years begin on 1 October of each year and end on 30 September of the following year.

2) SUBSTANTIATION OF FACTUAL MATTER

The tribunal's conviction was based on examination of the documents attached to the file, hereby deemed reproduced, and on statements of party not contradicted by the counterparty.

3) UNPROVED FACTS

Of those alleged, relevant to the decision, none remained unproved.

IV – ISSUES FOR DECISION

4.1. Autonomous Taxation and IRC Collection

The main issue submitted for the Arbitral Tribunal's review is whether the Claimant has the right to proceed with the deduction, also from the IRC collection produced by the application of autonomous taxation rates, of the SIFIDE tax credit, and if so, whether the IRC (self-)assessments for the years 2012 and 2013 are unlawful.

Also submitted to the Tribunal is, as a subsidiary matter, in the event that it gives a negative answer to the first issue, the question of the possible unlawfulness and consequent annulment of the assessment of autonomous taxation, due to the absence of legal basis for its assessment.

The Tribunal is further called upon to rule on the right to indemnity interest on the amounts paid as a consequence of the (self-)assessments in question.

It is therefore necessary to decide on the merits of the request for an arbitral decision on the IRC assessments sub judice and the possible right of the Claimant to indemnity interest.

We shall follow in the decision, very closely, what was decided in case No. 749/2015-T, of 15 July 2016 presided over by the same arbitrator who also acts in that capacity here.

Let us examine:

The regime of autonomous taxation in force in the years 2012 and 2013 is the result of numerous legislative amendments.

The subjection of certain expenses to autonomous taxation arose 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, autonomous taxation was included in the Corporate Income Tax Code, through Law No. 30-G/2000, of 29 December, which integrated the provision of autonomous taxation into the statute regulating the Corporate Income Tax.

Since then, the regime of autonomous taxation has undergone a process of progressive expansion, partly driven by the apparent continuous intention to increase fiscal revenue through this mechanism.

Having regard to Article 88 of the Corporate Income Tax Code, autonomous taxation applies, broadly speaking, to the following realities: undocumented expenses; vehicle costs; representation expenses; travel allowances; amounts paid to non-residents; profits distributed by entities subject to Corporate Income Tax to taxpayers who benefit from exemption; expenses or charges relating to compensation or any compensation not connected with the contractual relationship; and also expenses or charges relating to bonuses and other variable remuneration paid to managers, administrators or directors.

The State Budget Law for 2014 introduced some changes to the provision of autonomous taxation[1], which, however, were not only not particularly relevant but also do not contribute to the present discussion.

Article 23-A, paragraph 1, subsection a), of the Corporate Income Tax Code, as amended by Law No. 2/2014, of 16 January, leaves no room for any reasonable doubt. In fact, the wording of the aforementioned rule introduced by Law No. 2/2014, of 16 January, provides that "Corporate Income Tax, including autonomous taxation, and any other taxes that directly or indirectly apply to profits" are not tax deductible. The positioning of the two commas in the letter of the law, one before and the other after the expression "including autonomous taxation", contained in the current wording of the cited Article 23-A, paragraph 1, subsection a), of the CIRC, precludes the possibility of arguing that autonomous taxation is not (part of) Corporate Income Tax.

That is, in the current wording of Article 23-A, paragraph 1, subsection a) of the Corporate Income Tax Code, the legislator not only clarifies that autonomous taxation is part of Corporate Income Tax, if not as a tax strictly speaking, at least in terms of being part of the same unified tax regime, but also that they must receive the same treatment for the purposes of calculating taxable income.

Moreover, this understanding corroborates what, at the time of the facts, resulted from the literal content of Article 12 of the Corporate Income Tax Code, according to which "companies and other entities to which, in accordance with Article 6, the tax transparency regime applies, are not taxed in Corporate Income Tax, except as regards autonomous taxation", from which it is also concluded that autonomous taxation is Corporate Income Tax (it is part of Corporate Income Tax).

That is, and in summary, the legislator understood, and continues to understand, that autonomous taxation is part of Corporate Income Tax, if not as a tax strictly speaking, at least in terms of being part of the same unified tax regime.

Furthermore, in addition to everything else, it must be borne in mind that the rule of Article 45 of the CIRC is situated in a context of broad legislative discretion. That is, in defining what constitutes deductible or non-deductible charges for tax purposes, the tax legislator enjoys broad discretionary authority. Hence, it cannot be said that it is prohibited by the "nature" of autonomous taxation for the legislator to exclude it from deductible charges for tax purposes.

It is understood, in this way, that it would be legitimate for the legislator to include or exclude autonomous taxation from that category of deductible charges for tax purposes, independently of the "nature" that doctrine or jurisprudence might ascribe to it.

The question, properly situated, would then be to determine what the legislator's intention is, expressed in the legislative text, understood as a whole.

And from this perspective, the combination of the content of Article 12 of the CIRC with Article 45, paragraph 1, subsection a) of the same, will leave no great doubts as to the legislative understanding that autonomous taxation, if it does not constitute Corporate Income Tax strictly speaking, will certainly be part of the regime of that tax, and will be due on that basis.

Moreover, the result, apparently so counter-intuitive and striking, that tax payment can be due through the autonomous taxation at issue here, even in the case of the absence of a (positive) income at the end of the taxation period, is not uncommon in the Corporate Income Tax regime. In fact, in some cases of withholding at source as final payment it may occur that the holder of the income subject to that withholding has had expenses that exceed the income. Also in the case of the operationality of some of the specific anti-abuse clauses (Articles 63 to 67 of the CIRC), by virtue of the consideration of costs, it may occur that taxpayers are taxed on a fictitious taxable profit, to the extent that cost disregard may be in question, actually incurred expenses being disregarded as abusive. It is thus possible for a taxpayer to have to pay Corporate Income Tax, even if it has actually had losses. Examples that may raise the question of their compatibility with the principle of taxation according to real profit, which cannot but be resolved on a case-by-case basis.

The characteristics that doctrine has for some years been pointing out in the autonomous taxation at issue are here recognized, namely:

a) autonomous taxation only makes sense because the costs/expenses are, in the majority of situations, relevant as negative components of the taxable profit of Corporate Income Tax and it is this that motivates Corporate Income Tax taxpayers to declare as high a value as possible of these expenses to reduce the taxable basis of Corporate Income Tax, the collection and, consequently, the tax to be paid;

b) it is about treating unfavorably those expenses that, by their nature, are easily diverted from private consumption to business;

c) it is intended to discourage this type of expense in taxpayers that present negative results, but that continue to show consumption structures difficult to reconcile with the financial health of their companies;

d) to shape the tax system so that it reveals a certain balance, with a view to a better distribution of the effective tax burden among taxpayers and types of income;

e) to materialize the recognition that it is not easy to determine the exact measure of the component of some of these expenses that corresponds to private consumption.

Autonomous taxation is based on the presumption of the existence of income that may not be taxed, not only in Corporate Income Tax but also in Personal Income Tax. As explained in the decision of the Arbitral Tribunal rendered in the context of Case No. 209/2013-T, which ruled negatively on the question of the deductibility of autonomous taxation as a tax cost in Corporate Income Tax, "it is a form of, indirectly and through the expense, taxing income".

The part of the Corporate Income Tax collection that comes from autonomous taxation is calculated from the elements of the tax defined in Article 88 of the CIRC included in 'Chapter IV – Rates'. This article delimits the taxable basis of autonomous taxation, on the one hand, and, on the other hand, sets out the rates of autonomous taxation, which vary according to the nature of the taxable basis to which they apply; because they depend on the type of taxpayer (e.g., non-profit entity, exempt entities, entity that carries out as main activity a commercial, industrial or agricultural activity), and are also dependent on the actual economic performance of the Corporate Income Tax taxpayer, as they assume different percentages when a tax loss or profit is calculated. The collection resulting from autonomous taxation is a function of the taxable result, being calculated from two expressions that are the product of the taxable basis by a rate depending on the taxable result: a higher rate when a tax loss is calculated and another, lower, when the taxable result is positive.

Thus, the collection resulting from autonomous taxation cannot be determined instantaneously and immediately following the incurrence of the expense, as it depends on the result itself which is – contrary to what the AT claims and relying on the decision rendered in Arbitral Case No. 113/2015-T – of successive formation.

Also some expenses that do not coincide with the expenses that extinguish and that are subject to autonomous taxation, namely depreciation, are of continuous formation.

Given this, the essential question that needs to be resolved is whether the assessment of autonomous taxation is "assessed in accordance with Article 90 of the CIRC", for, if it is, it must be concluded that the deductions provided for in paragraph 2 of Article 90 of the Corporate Income Tax Code may also be made from the collection resulting from autonomous taxation.

The rule in question is that of Article 90 of the CIRC, with subsection a) being the one that applies to assessment made by the taxpayer (self-assessment). This was the wording of the Article resulting from Law No. 3-B/2010 and in force until 31.12.2013:

"1 — The assessment of Corporate Income Tax proceeds in the following terms

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

(...)

2 — To the amount assessed under the previous paragraph the following deductions are made, in the order indicated:

a) That corresponding to double international taxation;

b) That relating to tax benefits;

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

d) That relating to withholding at source not capable of compensation or reimbursement in accordance with applicable legislation.

3 — (Repealed by Law No. 3-B/2010-28/04, effective as of January 2011, with respect to the simplified regime - paragraph 2 of Article 92 of the aforementioned law).

4 — To the amount assessed under paragraph 1, with respect to the entities mentioned in paragraph 4 of Article 120, only the deduction relating to withholding at source when it has the nature of tax on account of Corporate Income Tax is to be made.

5 — The deductions referred to in paragraph 2 relating to entities to which the tax transparency regime established in Article 6 applies are attributed to the respective members in the terms established in paragraph 3 of that article and deducted from the amount assessed on the basis of the taxable basis that took into account the attribution provided for in the same article.

6 — When the special regime for taxation of groups of companies applies, the deductions referred to in paragraph 2 relating to each of the companies are made in the amount assessed in relation to the group, in the terms of paragraph 1.

7 — From the deductions made in accordance with subsections a), b) and c) of paragraph 2 no negative value can result.

8 — To the amount assessed under subsections b) and c) of paragraph 1 only the deductions of which the tax administration has knowledge and that can be made in accordance with paragraphs 2 to 4 are made.

9 — In cases where the provision of subsection b) of paragraph 2 of Article 79 applies, assessments are made annually on the basis of the taxable basis determined provisionally, and, in light of the assessment corresponding to the taxable basis for the entire taxation period, the difference found is to be collected or cancelled.

10 — The assessment provided for in paragraph 1 may be corrected, if appropriate, within the period referred to in Article 101, collecting or cancelling the differences found."

Thus, Article 90 of the CIRC refers to the forms of assessment of Corporate Income Tax, by the taxpayer or by the Tax Authority, and aims to determine the tax due in all situations provided for in the Code, including additional assessment.

The Corporate Income Tax Code refers, in its current version, expressly to autonomous taxation only in five articles, namely in Article 12 (when excluding autonomous taxation from the Corporate Income Tax exemption applicable to companies covered by the tax transparency regime), in Article 23-A, paragraph 1 (when making explicit that autonomous taxation is not deductible for the purposes of determining taxable income), in Article 88 (when establishing the rates and delimiting the taxable basis of autonomous taxation), in Article 117, paragraph 6 (regarding the obligation to declare entities exempt from Corporate Income Tax under Article 9, when autonomous taxation applies) and in Article 120, paragraph 9 (regarding the periodic declaration of income). There is no other express reference to autonomous taxation in the CIRC.

Moreover, the current wording differs from that which was in force until 31.12.2013 only in the novelty of Article 23-A, which comes to establish that the charges associated with autonomous taxation are not deductible for the purposes of determining taxable income, even when accounted for as expenses of the taxation period, certain charges, and the wording of subsection a) is clarifying: "Corporate Income Tax, including autonomous taxation, and any other taxes that directly or indirectly apply to profits". That is, not only does the legislator express that Corporate Income Tax includes autonomous taxation, but there are no provisions in the CIRC, in particular in the chapters dealing with scope (Chapter I), assessment (Chapter V) and payment (Chapter VI) any other express references to autonomous taxation, from which it is necessary to conclude that they are subject, generically, to the other articles provided for in the CIRC.

There was no other article in the CIRC, besides Article 90, in which the process of assessment of autonomous taxation differed from the rest of Corporate Income Tax. And, in these terms, the assessment of both – autonomous taxation and the rest of Corporate Income Tax – is single and has the same legal support.

Autonomous taxation did not result from a separate process of tax assessment.

Once it is understood that autonomous taxation is (part of) Corporate Income Tax, it is comprehensible that the assessment of Corporate Income Tax is single, including the part that comes from autonomous taxation. There is a single assessment of Corporate Income Tax that comprises two parts: the assessment of autonomous taxation and that of the rest of Corporate Income Tax, each with its own taxable basis and its own taxation rates, but both assessed in accordance with Article 90 of the CIRC. There being a single assessment, it is concluded that the part of the collection that comes from autonomous taxation is an integral part of the Corporate Income Tax collection.

On the contrary, no other article of the CIRC contained a reference to the assessment of autonomous taxation as a separate process. To accept that the collection of autonomous taxation is not included in Article 90 of the CIRC would be to accept that there is a gap in the law and, being this a tax law, it does not allow supplementation.

In this sense, goes Decision No. 775/2015-T when referring that "To accept that the assessment of autonomous taxation is outside of Article 90, paragraph 1 of the CIRC and, therefore, to exclude from its collection the deductibility of the special payment on account provided for in subsection c) of paragraph 2 and SIFIDE provided for in subsection b) of paragraph 2, would oblige the taxpayer to pay a tax whose assessment is not made in accordance with the law, contrary to paragraph 3 of Article 103 of the Constitution of the Portuguese Republic and the principle of tax legality that the General Tax Law, in its Article 8, paragraph 2, subsection a), establishes. If the Tax and Customs Authority assumed that the collection of autonomous taxation was calculated outside of Article 90 of the CIRC, it should indicate on the basis of which assessment rule it did so. There being no rule on separate assessment of autonomous taxation, it seems that one must accept that the Corporate Income Tax collection encompasses it, including itself in Article 90, paragraph 1 of the CIRC, therefore being deductible the special payment on account referred to in subsection c) of paragraph 2 and SIFIDE referred to in subsection b) of paragraph 2."

Note, moreover, that in the subsequent paragraphs of that Article 90 of the Corporate Income Tax Code the legislator was concerned with enumerating various exceptions and limits to the deductibility rule of paragraph 2. In paragraph 4, when providing that "only the deduction relating to withholding at source when it has the nature of tax on account of Corporate Income Tax is to be made", which is revealing: it is understood that it should be so, because it is in the Corporate Income Tax collection that it is intended to deduct them, or, in paragraph 7, when prescribing that from the deductions to the collection a), b) and c) of paragraph 2 no negative value can result, in a general manner and without distinguishing the collection resulting from the application of autonomous taxation rates.

In none of them and in no other rule was there any reference to any limitation on the deductibility of SIFIDE from the part of the Corporate Income Tax collection that results from autonomous taxation, therefore being necessary to conclude that it did not intend to do so.

Note, moreover, that, although Article 90 was amended by Law No. 2/2014, of 16 January, which republished the CIRC, what has been said here not only persists but, from an interpretive point of view, is even strengthened, because the legislator added some limitations and exceptions to the deductions from the collection provided for in paragraph 2 and again did not refer to the part of the collection that results from the application of autonomous taxation rates.

Therefore, Article 90 of the Corporate Income Tax Code also applies to the assessment of the amount of autonomous taxation, which is assessed by the taxpayer or by the Tax Authority, there being no other provision that provides different terms for its assessment. The autonomy of autonomous taxation is restricted to the applicable rates and the respective taxable basis, but the assessment of its amount is made in accordance with Article 90 of the Corporate Income Tax Code.

The differences between the determination of the amount resulting from autonomous taxation and the collection resulting from taxable income, rests on the determination of the taxable basis and the rates, provided for in Chapters III and IV of the CIRC, but not on the forms of assessment, which are provided for in Chapter V of the same Code and are of common application to autonomous taxation and the rest of the Corporate Income Tax collection.

Therefore, with Article 90 being located in this Chapter V, there is no legal support for making a distinction between the collection resulting from autonomous taxation and the rest of the Corporate Income Tax collection, due to the fact that the rates and the forms of determining the taxable basis are different.

And, as has been said, there is no legal support for asserting that, in the event that several calculations have to be made in a declaration to determine Corporate Income Tax, more than one self-assessment is made.

Therefore, the expression "when the assessment is to be made by the taxpayer in the declarations referred to in Articles 120 and 122, it is based on the taxable basis contained therein", contained in subsection a) of paragraph 1 of Article 90 of the CIRC, is encompassed in its literal content by the assessment of autonomous taxation, whose taxable basis must be indicated in the aforementioned declarations, as results, moreover, from the Form 22 declaration itself.

The collection is obtained by applying the rate to the respective taxable basis, therefore, in the case of Corporate Income Tax, there being several rates applicable to various taxable bases, the global Corporate Income Tax collection will be constituted by the sum of all the results of these applications.

Moreover, regardless of the calculations to be made, the self-assessment that the taxpayer or the AT must make in accordance with Articles 89, subsection a), 90, paragraph 1, subsections a), b) and c) and 120 or 122 is unitary, and based on it that the total Corporate Income Tax is calculated, whatever the taxable bases relating to each of the types of taxation underlying it.

Furthermore, one cannot see, in the possible nature of anti-abuse rules that some autonomous taxation assumes, an explanation for its removal from the respective collection, as there is no legal support for excluding deductibility from the collection provided by corrections based on rules of an indisputably anti-abuse nature.

The purpose of autonomous taxation is dual. They aim to tax real income, correcting taxable income in this way to bring it closer to that income and, at the same time, they seek to penalize taxpayers who, through certain expenses, end up reducing taxable income.

As can be read in Constitutional Court Decision 617/12, it shows its dual nature, with an aggravated rate of autonomous taxation for certain special situations that are sought to be discouraged, it creates a kind of presumption that these costs do not have a business cause and, therefore, are subject to autonomous taxation. "In summary", says the Constitutional Court, "the cost is deductible, but autonomous taxation reduces its tax advantage, since, here, the basis of taxation is not a net income, but, rather, a cost transformed – exceptionally – into the object of taxation.".

The legal regime of autonomous taxation in question only makes sense in the context of taxation in Corporate Income Tax. That is, disconnected from the legal regime of this tax, they will completely lack meaning. Their existence, their purpose, their explanation, in the end, their juridical character, is only comprehensible and acceptable within the framework of the legal regime of Corporate Income Tax. For, even if it were accepted that the taxing event is each of the individual expenses legally typified, the fact is that it is not these, qua tale, the final object of the taxation, the reality that it is intended to burden with the tax.

If this were the case, all expenses provided for, realized by all taxpayers and not just some of them, would have to be taxed.

That is, 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 thinking of the connection that, although it has varied in successive legislative amendments, autonomous taxation had and still has some connection with deductibility – and the actual deduction – of taxed expenses. They are, in essence, special rules for the deductibility of certain costs.

This circumstance, it is believed, is elucidative of the connection existing between these and Corporate Income Tax (in this case), and justificatory not only of their inclusion in the CIRC, but equally of their integration, fully, as part of the legal regime of Corporate Income Tax.

Autonomous taxation at issue is, as such, undoubtedly understood by the legislator as a way to prevent certain abusive actions, which the normal functioning of the taxation system was unable to prevent or which would be more burdensome or troublesome for the tax administration or, even, possibly, for the taxpayer.

This anti-abuse character of autonomous taxation will be not only consistent with its "anti-systemic" nature (as happens with all rules of this kind), but also with a presumptive nature.

From this perspective, as well stated in the decision rendered by the Arbitral Tribunal in case No. 187/2013-T, autonomous taxation under analysis will then have underlying a presumption of partial business character of the expenses on which it is imposed, in function of the above-pointed circumstance that such expenses are situated in a gray area that separates what is business expense, productive, from what is private expense, consumption, and that, notoriously, in many cases, the expense will even in reality have a dual nature (part business, part private).

Confronted with this difficulty, the legislator, instead of simply excluding its deductibility, or reversing the burden of proof of the relation of the expenses in question with business activity, opted for enshrining the regime currently in force.

This presumption of partial business character should, in coherence, be considered as covered by the possibility of rebuttal resulting from Article 73 of the LGT, whether by the taxpayer or by the Tax Authority, which appears to conform to adequate distribution of the burden of proof, to the extent that, as the autonomous taxation at issue imposes on expenses whose relation with the activity pursued may not, prima facie, be evident, it will be the taxpayer who will be best positioned to demonstrate that this requirement is met in concrete terms. On its part, the Tax Authority itself, if it deems it appropriate and considers that the case justifies the inherent expenditure of resources, can always demonstrate that, regarding the expenses in question, and even if autonomous taxation has been imposed on them, the general requirement of Article 23, paragraph 1 of the CIRC does not apply, namely its indispensability for the realization of income subject to tax or for the maintenance of the income-producing source.

Given all that has been set out, we consider that autonomous taxation at issue forms part of the Corporate Income Tax regime and that the respective assessment is made in accordance with Article 90 of the Corporate Income Tax Code.

4.2. As regards the Deductibility of the SIFIDE Tax Credit from the Amount Due by Autonomous Taxation

The issue that arises in this context is whether the tax credits recognized to the claimant in the year 2012 and 2013, in the scope of SIFIDE, can also be deducted from the collection produced by autonomous taxation that burdens it in that tax year, to the extent that they cannot be deducted from the rest of the collection.

To answer this question it is important to refer to Article 36 of the Tax Investment Code, as worded at the time of the facts, which provided that:

"1. Taxpayers subject to Corporate Income Tax resident in Portuguese territory who exercise, as their main activity, an activity of an agricultural, industrial, commercial and services nature and non-residents with a permanent establishment in that territory may deduct from the amount assessed in accordance with Article 90 of the Corporate Income Tax Code, and up to its limit, the value corresponding to expenses with research and development, to the extent that it has not been the subject of a non-repayable financial contribution from the State, incurred in the taxation periods from 1 January 2013 to 31 December 2015, in a double percentage (…).

2 – For Corporate Income Tax taxpayers who are SMEs according to the definition contained in Article 2 of Decree-Law No. 372/2007, of 6 November, who have not yet completed two tax years and who have not benefited from the incremental rate set in subsection b) of the previous number, a 15% increase applies to the base rate set in subsection a) of the previous number.

3 – The deduction is made, in accordance with Article 90 of the Corporate Income Tax Code, in the assessment relating to the taxation period mentioned in the previous number. (…)"

Article 37 added:

"Only taxpayers subject to Corporate Income Tax who cumulatively meet the following conditions may benefit from the deduction referred to in the previous article:

a) Their taxable income is not determined by indirect methods;

b) They are not debtors to the State and social security of any taxes or contributions, or have their payment duly assured."

In fact, that statute does not state that the credits arising from it are deductible from any and all Corporate Income Tax collection, but rather defines the scope of the deduction referring, in its paragraph 1 of Article 36, "to the amount assessed in accordance with Article 90 of the Corporate Income Tax Code, and up to its limit".

Paragraph 3 of the same article confirms that it is to the amount assessed in accordance with Article 90 of the Corporate Income Tax Code that is relevant to carrying out the deduction by stating that "the deduction is made, in accordance with Article 90 of the Corporate Income Tax Code, in the assessment relating to the taxation period mentioned in the previous number".

Thus, by mere declarative interpretation, it is concluded that the reference made in Article 36, paragraphs 1 and 3 to the "deduction (…) in accordance with Article 90 of the Corporate Income Tax Code (…)" as a way to materialize the tax benefit encompasses, literally also the Corporate Income Tax collection resulting from autonomous taxation, which is part of the single Corporate Income Tax collection.

The fact that Article 37 of the Tax Investment Code excludes the benefit when taxable income is determined by indirect methods and autonomous taxation includes situations where income is indirectly intended to be taxed (namely, by not giving relevance or discouraging facts liable to reduce it), has no relevance for this purpose, as the concept of «indirect methods» has a precise scope in tax law, which is implemented in Article 90 of the LGT (in addition to special rules), relating to means of determining taxable income, the use of which is not provided for the calculation of the taxable basis of autonomous taxation provided for in Article 88 of the CIRC.

On the other hand, if it is the need to use indirect methods that excludes the possibility of enjoying the benefit, one cannot justify this exclusion with respect to the collection of autonomous taxation, which is determined by direct methods.

Furthermore, one cannot see, in the possible nature of anti-abuse rules that some autonomous taxation assumes an explanation for its removal from the respective collection from the scope of deductibility of the SIFIDE benefit, as there is no legal support for excluding deductibility from the collection provided by corrections based on rules of an indisputably anti-abuse nature, such as those relating to transfer pricing or undercapitalization. When the legislator wants to exclude deductibility it must do so expressly.

Moreover, the fact that the deductibility of the SIFIDE tax benefit is limited to the collection of Article 90 of the CIRC, up to its limit, does not allow concluding that the tax credit is only deductible if there is taxable income, as what that fact requires is that there be Corporate Income Tax collection, which can exist even without taxable income, namely by virtue of autonomous taxation.

Thus, pointing to the literal content of Article 36 of SIFIDE in the sense that the deduction also applies to the Corporate Income Tax collection derived from autonomous taxation assessed in accordance with Article 90 of the CIRC, only by means of a restrictive interpretation can the application of that tax benefit to the Corporate Income Tax collection provided by autonomous taxation be excluded.

The viability of a restrictive interpretation meets, from the outset, an obstacle of a general nature, which is that rules creating tax benefits have the nature of exceptional rules, as follows from the express content of Article 2, paragraph 1, of the Status of Tax Benefits (EBF), whereby, in the absence of a special rule, they must be interpreted in their precise terms, as is settled case law. In the case of tax benefits, the possibility of extensive interpretation is explicitly provided for (Article 10 of the EBF), but not restrictive interpretation, whereby, as a rule, the tax benefit should not be interpreted with less amplitude than that which, in a declarative interpretation, results from the content of the rule that provides for it.

In any case, a restrictive interpretation is only justified when «the interpreter reaches the conclusion that the legislator adopted a text that betrays his thinking, to the extent that it says more than what he intended to say. Here too the ratio legis will have a decisive word. The interpreter should not be carried away by the apparent scope of the text, but should restrict this so as to make it compatible with the legislative thinking, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed thus: cessante ratione legis cessat eius dispositio (where the reason for the law ends its scope ends)»[2].

As a basis for a restrictive interpretation, it could be argued that some autonomous taxation seeks to discourage certain taxpayer behaviors liable to affect taxable income, and consequently reduce fiscal revenue, and its deterrent strength will be weakened with the possibility that the respective collection may be subject to deductions. Therefore, it is necessary to assess whether there are reasons justifying a conclusion about the incompatibility of the sense of the text of Article 36, with the ratio legis of that tax benefit. But, the discouragement of those behaviors is justified only by concerns for protection of fiscal revenue and the tax benefits granted, by definition, are «exceptional measures instituted for the protection of relevant extrafiscal public interests that are superior to those of the taxation itself that they prevent» (Article 2, paragraph 1, of the EBF). And, in the case of the SIFIDE tax benefits, the extrafiscal reasons justifying their imposition over fiscal revenues are, in the legislative perspective, of enormous importance, as inferred from the substantiation in the Report of the State Budget for 2011: "II.2.2.4.4. Tax Incentive System for Research and Development II (SIFIDE). Having in mind that one of the strengths of competitiveness in Portugal lies in the commitment to technological capacity, scientific employment and conditions of affirmation in the European space, the Draft State Budget for 2011 proposes to renew SIFIDE (Tax Incentive System for Research and Development), now in the SIFIDE version, to be in force for the periods 2011 to 2015, making it possible to deduct from the Corporate Income Tax collection for companies that invest in R&D (research and development capacity). Given the positive balance of tax incentives for business R&D, and also considering the evolution of the support system of other countries, it was decided to review and reintroduce for another five taxation periods this support system. Business R&D is a decisive fact not only of its own affirmation as competitive structures, but of productivity and long-term economic growth, a fact, moreover, expressly recognized in the Program of the XVIII Government, as well as in several recent international reports. It is in this context that, in the international panorama, the OECD has considered since 2001 Portugal as one of three countries with the most significant progress in business R&D. Being the current national system, comparatively to other systems using deduction from collection and the distinction between base rate and incremental rate, is one of the most attractive and competitive."

Being business research and development «a decisive fact not only of its own affirmation as competitive structures, but of productivity and long-term economic growth», it is understandable that preference was given to encouraging commitment to technological capacity, scientific employment and conditions of affirmation in the European space, which, in the long run result in obtaining greater fiscal revenues.

The importance that, from a legislative perspective, was recognized to this tax benefit provided for in SIFIDE, is also decisively confirmed by the fact that it is indicated as being especially excluded from the general limit to the relevance of tax benefits in Corporate Income Tax, which is indicated in Article 92 of the CIRC, as worded at the time of the facts. Therefore, it is, also by this route, certain that one is dealing with tax benefits whose justification is legislatively considered more relevant than the obtaining of fiscal revenues, being inferred from that Article 92 that the legislative intention to encourage investments in research and development provided for in SIFIDE is so firm that it goes to the point of not even establishing any limit to the deductibility of the Corporate Income Tax collection, despite this tax regime having been created and applied in a period of noted difficulties in public finances.

Thus, there is no legal basis, in particular in view of the legislative intention that it is possible to detect, for, on the basis of a restrictive interpretation, excluding the deductibility of the SIFIDE tax benefit from the collection of autonomous taxation that results directly from the letter of Article 36, paragraph 1, of the respective statute, combined with Article 90 of the CIRC.

As has been said, in establishing a tax benefit by deduction from Corporate Income Tax collection, the legislator chose to forgo the fiscal revenue that this tax could provide, to the extent of the granting of the tax benefit. For this weighing of the interests involved (fiscal revenue versus strong stimulus to investment) it is irrelevant whether that revenue comes from calculations made on the basis of Article 87 or Article 88 of the CIRC. In fact, whatever the form of calculation of that fiscal revenue, one is dealing with money whose collection the legislator considered to be less important than the pursuit of the aforementioned economic purpose. Of the two alternatives that presented themselves to the legislator regarding the encouragement of investments provided for in SIFIDE, which were, on the one hand, to keep intact the revenues from Corporate Income Tax (including those from autonomous taxation) and not see encouraged investment in research and development and, on the other hand, to realize this encouragement with loss of Corporate Income Tax revenues, the weighing that necessarily underlies SIFIDE is that of opting for the creation of the incentive with prejudice to the revenues. And, naturally, being the creation of the investment incentive better, in the legislative perspective, than the collection of revenues, it is not seen how it can be relevant that the Corporate Income Tax revenues that are lost to realize the incentive come from the general taxation of Corporate Income Tax provided for in paragraph 1 of Article 87 or from taxation at special rates provided for in paragraphs 4 to 6 of the same article, or from autonomous taxation provided for in Article 88: in all cases, the alternative is the same between creation of the incentive and collection of Corporate Income Tax revenues and the relative weighing that can be made of the conflicting interests is identical, whatever the forms of determining the amount of Corporate Income Tax from which one foregoes to create the incentive.

And, in the case of the SIFIDE tax benefit, the extrafiscal reasons justifying the incentive with loss of revenue are very strong, as it is considered that the incentivized investments are a decisive fact in the country's future competitiveness.

Therefore, it is certain that one is dealing with a tax benefit whose justification is legislatively considered more relevant than the obtaining of fiscal revenues from Corporate Income Tax, whatever the basis of its calculation, as what is at stake is always whether or not to forgo a certain sum of money to create an investment incentive.

In this context, the nature of autonomous taxation and the solutions legislatively adopted, in general, in relation to them, have no relevance for the review of this question, as this must be reviewed in light of the specific interests that clash in its weighing.

In fact, what is at issue is, exclusively, to determine the scope of SIFIDE, which establishes a regime of an exceptional nature, which aimed to pursue certain public interests, and not to contribute to the decision of any conceptual question about the nature of autonomous taxation, a matter on which there is seen neither in the text of the law nor in the Budget Report for 2011, the slightest legislative concern.

By the foregoing, converging the literal and rational elements of the interpretation of Article 4 of SIFIDE in the sense that the investment expenses provided for therein are deductible from «the amount assessed in accordance with Article 90 of the Corporate Income Tax Code, and up to its limit», it is to be concluded that they are deductible from the entirety of that collection, which encompasses, in addition to that derived from the taxation of profits in each tax period, that resulting from other positive components of the tax, namely autonomous taxation, state surcharge and Corporate Income Tax from previous taxation periods.

Thus, the deduction of SIFIDE from the Corporate Income Tax collection must be accepted, including therein necessarily the portion coming from autonomous taxation.

It is verified, however, that the computer system does not allow the deduction of SIFIDE from the part of the Corporate Income Tax collection resulting from autonomous taxation. The fact that the forms of determining the taxable basis and the rates of autonomous taxation of Corporate Income Tax are established separately and are different from those of the rest of Corporate Income Tax does not appear to be a sufficient reason, nor have legal support, for the existing computer solution.

Here we arrive, it is necessary to analyze the question of paragraph 21 of Article 88 of the CIRC, introduced by the Law that approved the State Budget for 2016 (Law 7-A/2016, of 30 March). In fact, several paragraphs were added by this Law to Article 88 of the CIRC, which refers to autonomous taxation, among them paragraph 21, according to which "The assessment of autonomous taxation in Corporate Income Tax is made in accordance with the terms provided for in Article 89 and is based on the values and rates resulting from the provision in the previous paragraphs, no deductions being made to the total amount assessed." And, in Article 135 of Law 7-A/2016, of 30 March, the legislator provides that "the wording given by the present law to paragraph 6 of Article 51, to paragraph 15 of Article 83, to paragraph 1 of Article 84, to paragraphs 20 and 21 of Article 88 and to paragraph 8 of Article 117 of the Corporate Income Tax Code has an interpretive nature."

The Tax Authority understands that the new wording of Article 88 prevents the deduction, in accordance with Article 90, of SIFIDE from the collection resulting from autonomous taxation. Given that assessments of Corporate Income Tax for the years 2012 and 2013 are at issue, it is therefore important to analyze what effect that paragraph and the interpretive character attributed by the legislator to its introduction in 2016 have on the facts in question.

The principle of non-retroactivity is in force in the national substantive codification, which is constitutionally enshrined as regards tax law. It happens that an interpretive law is not, says Article 13, paragraph 1, of the Civil Code, retroactive.

In accordance with what is prescribed there, for a new law – as is, in the case in question, paragraph 21 of Article 88 of the CIRC – to be truly interpretive two requirements are necessary: that the solution of previous law be controversial or at least uncertain: and it is a fact that the decision that this Tribunal must impose has a controversial character.

Necessary, however, is also that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or the interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law. Therefore, if the judge or the interpreter, in the face of old texts, could not feel authorized to adopt the solution that the new law comes to enshrine, then this is decidedly innovative.

It is not enough, however, that the legislator expressly confers on the new law an interpretive character for it to apply to the controversial question that had arisen before the entry into force of the new law, putatively interpretive, for the judge to be obliged to apply it to the concrete case. It is necessary that the judge felt enabled, in the face of the old text, to adopt the solution that the law now advocates. An interpretive rule, therefore, is a rule that does not alter any content or element of the interpreted rule, comes only to translate its meaning.

A rule that alters the sense, content or scope of the interpreted rule will not be interpreting, rather modifying the rule, creating a new rule, instituting new rights, duties and obligations.

It being certain that even an interpretive rule must respect rights acquired under the validity of the interpreted rule, particularly in questions as to which the prohibition of retroactivity is especially enshrined in the Constitution, as is the case in tax law, whose retroactivity is prohibited by paragraph 3 of Article 103 of the CRP.

In this context, the issuance by the legislator of an interpretive law, with retroactive effects, is only conceivable when, without any doubt, it limits itself to simply reproducing (= producing anew), albeit with another wording, the normative content interpreted, without modifying or limiting its sense or its scope. This, it is well understood, is a hypothesis of difficult conception, almost inconceivable, except on the theoretical plane, even more so when one considers that the content of a normative statement demands, in general, systematic interpretation, and cannot be defined in isolation[3].

In the case sub judice, by everything that has already been explained above, it is understood that the text of the law in force at the time of the facts in crisis did not allow concluding that it was prohibited to deduce SIFIDE from the part of the Corporate Income Tax collection that resulted from autonomous taxation.

This is because, as we have said above, the legislator at no point indicated that solution and, in Article 90 of the CIRC, did not distinguish, with respect to possible deductions from Corporate Income Tax collection, that resulting from autonomous taxation from the rest. And where the law does not distinguish it is not for the interpreter to distinguish.

We understand, therefore, that paragraph 21 of Article 88 of the CIRC does not have an interpretive character with respect to the issue under discussion, not applying to facts occurring before its entry into force, namely, to the facts and assessments sub judice.

In these terms, it is concluded that the acts of self-assessment of Corporate Income Tax relating to the years 2012 and 2013, to the extent corresponding to the failure to deduct from the part of the Corporate Income Tax collection, are vitiated by a defect of violation of law, which justifies their annulment, the same occurring with the decision on the administrative complaint, to the extent that it did not recognize this unlawfulness.

Thus, the analysis of the issue raised by the Claimant regarding the possible unlawfulness and consequent annulment of the assessment of autonomous taxation, due to the absence of legal basis for its assessment, is rendered moot.

4.3. Indemnity Interest

Finally, let us address the request formulated by the Claimant for reimbursement of the amounts that we have here already judged to have been wrongfully (self-)assessed and paid as a consequence of the (self-)assessments in crisis.

The Claimant further requests indemnity interest on the payment of wrongful Corporate Income Tax for 2012, from 26 February 2014, as to €40,043.34, and from 1 June 2015, as to €70,565.02, the dates on which it proceeded to the payment of those amounts.

In accordance with the provision of subsection b) of Article 24 of the RJAT, the arbitral decision on the merits of the request, against which no appeal or impugnation lies, binds the Tax Authority from the end of the period provided for appeal or impugnation, and the latter, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the voluntary execution of judicial tax court sentences, «restore the situation that would have existed if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose in line with the provision of Article 100 of the LGT [applicable by virtue of the provision of subsection a) of paragraph 1 of Article 29 of the RJAT] which establishes that «the tax administration is obliged, in case of total or partial success of a complaint, judicial impugnation or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject of the dispute, including the payment of indemnity interest, if appropriate, from the end of the period for execution of the decision».

Although Article 2, paragraph 1, subsections a) and b), of the RJAT uses the expression «declaration of unlawfulness» to define the competence of the arbitral tribunals operating in the CAAD, making no reference to condemnatory decisions, it should be understood that the powers are included in its competence that, in judicial impugnation proceedings, are attributed to tax tribunals, and this is the interpretation that accords with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first guideline, that «the tax arbitration process must constitute an alternative procedural means to judicial impugnation proceedings and to the action for recognition of a right or legitimate interest in tax matters».

Now, it is settled that judicial impugnation proceedings, despite being essentially a process of annulment of tax acts, admit condemnation of the Tax Authority to the payment of indemnity interest, as results from the provision of Article 43, paragraph 1, of the LGT and Article 61, paragraph 4 of the CPPT.

Thus, paragraph 5 of Article 24 of the RJAT, in stating that «payment of interest, regardless of its nature, is due, in the terms provided for in the general tax law and in the Tax Procedure and Process Code», should be understood as allowing the recognition of the right to indemnity interest in arbitral proceedings.

It is therefore necessary to assess the request for reimbursement of the amount wrongfully paid, increased by indemnity interest.

In the case in question, it is manifest that, following the unlawfulness of the assessment acts, there is place for reimbursement of the tax paid, by virtue of the aforementioned Articles 24, paragraph 1, subsection b), of the RJAT and 100 of the LGT, as this is essential to «restore the situation that would have existed if the tax act subject of the arbitral decision had not been performed».

As for interest, the substantive regime of the right to indemnity interest is regulated in Article 43 of the LGT, which establishes, to the extent relevant here, that "1 - Indemnity interest is due when it is determined, in an administrative complaint or judicial impugnation, that there was error attributable to the services from which resulted payment of the tax debt in an amount higher than that legally due. 2 – It is also considered that there is error attributable to the services in cases where, despite the assessment being made on the basis of the declaration of the taxpayer, the latter has followed, in its completion, the general guidance of the tax administration, duly published."

Now, in the case in question, the unlawfulness of the self-assessments is entirely attributable to the AT, Respondent, in light of what was above established as proved with respect to the structure of the IRC Form 22 declaration in the AT's computer system, an organization which is, naturally, entirely the responsibility of the latter, which did not allow the Claimant to carry out the self-assessment in the terms that we have here judged to be legal.

Furthermore, the maintenance of the illegal situation, i.e., the decision on the administrative complaint is also attributable to the Tax Authority, which dismissed it on its own initiative.

From the self-assessments in crisis, had the deduction of SIFIDE from the Corporate Income Tax collection associated with autonomous taxation been considered, the Claimant would not have had to proceed to the payment of tax in the amounts stated.

Consequently, the Claimant is entitled to the indemnity interest petitioned, in accordance with Article 43, paragraph 1, of the LGT and 61 of the CPPT, at the legal supplementary rate, in accordance with Articles 43, paragraphs 1, and 35, paragraph 10 of the LGT, Article 24, paragraph 1, of the RJAT, Article 61, paragraphs 3 and 4, of the CPPT, Article 559 of the Civil Code and Order No. 291/2003, of 8 April (or other(s) that alter the legal rate), from the dates referred to until full payment.

V. DECISION

Given the foregoing, it is decided to judge the arbitral request well-founded, and, consequently, to declare unlawful the (express) decisions on the administrative complaint and (implied) on the hierarchical appeal, annulling the related assessment acts, to the extent that they did not admit the deduction of SIFIDE from the Corporate Income Tax resulting from the autonomous taxation assessed, reimbursing the amounts petitioned increased by indemnity interest until full payment.

VI - VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €110,608.36.

VII – VALUE OF COSTS

The amount of costs and their responsibility are not to be fixed, by virtue of the provision in Articles 22, paragraph 4 and 12, paragraph 3 of the RJAT and 5, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings.

Let notification be made.

Lisbon, 16 February 2017.

The Arbitrators

(José Baeta de Queiroz)

(João Taborda da Gama)

(João Menezes Leitão)

(dissenting, in accordance with the dissenting vote that follows and is part of this decision)

DISSENTING OPINION

1. I dissent from the position that prevailed in the present proceedings, by which it was admitted that the deductibility of the tax benefit resulting from the Tax Incentive System for Research and Development II ("SIFIDE II"[4]) from the Corporate Income Tax collection specifically arising from autonomous taxation rates and, consequently, the unlawfulness of the implied dismissal of the hierarchical appeal, the dismissal of the preceding administrative complaint and the antecedent self-assessment acts of Corporate Income Tax of the Claimant relating to the years 2012 and 2013, to the extent relating to the failure to deduct from the collection produced by autonomous taxation rates the amounts of the SIFIDE II tax benefit assessed by the Claimant.

2. I understand, with due respect, that this position does not correspond to the correct application of Law to the case, as, in my view, it is based on unsuitable hermeneutic guidelines, disregards the teleology and the values underlying autonomous taxation, and directly confronts, with disregard for democratic sovereignty, the contrary solution that was expressly manifested by the legislator.

3. I shall focus, for the purposes of presenting the reasons that set me apart from the orientation that prevailed and that led to the present dissenting vote (Article 22, paragraph 5 of the RJAT), on the essential grounds that I judge to constitute the ratio decidendi of the applied solution.

a) Autonomous Taxation and Deduction of SIFIDE: Legitimacy of Restrictive Interpretation

1. It must be recognized from the outset that the question of the (non) deduction of SIFIDE II from the amount due by autonomous taxation necessarily involves, given the literalness of the normative statements ratione temporis applicable subject of the provisions contained in Article 36 of the Tax Investment Code (CFI) and the preceding Article 133 of Law No. 55-A/2010, of 31.12, as well as Article 90, paragraph 2, subsection b) of the Corporate Income Tax Code (CIRC), the performance of a restrictive interpretation, considering that such tax benefit is not applicable to the Corporate Income Tax collection resulting from autonomous taxation.

2. Well then, regarding the viability of this restrictive interpretation, I cannot, from the outset, support the "general obstacle" invoked in the decision that prevailed, by which the rules that create tax benefits, as exceptional rules (Article 2, paragraph 1 of the Status of Tax Benefits – EBF), must be interpreted in their precise terms, whereby, as a rule, "the tax benefit should not be interpreted with less amplitude than, in a declarative interpretation, results from the content of the rule that provides for it".

3. I find no sufficient basis for this "general" rejection of restrictive interpretation in the application of tax benefits, because Article 10 of the EBF (which transposes to the field of tax benefits the provision of Article 11 of the Civil Code on exceptional rules), by eliminating any doubt about extensive interpretation of these tax relief rules, given their well-known practical proximity to analogy, does precisely is to legitimize all interpretive modalities and, therefore, the possibility of declarative, extensive or restrictive interpretation. In this way, and having regard to the provision, in general terms, in paragraph 1 of Article 11 of the General Tax Law, I do not consider it appropriate to accept any doctrine of literal interpretation in the context of tax benefits, as in "determining the meaning of tax rules and in qualifying the facts to which they apply are observed the general rules and principles of interpretation and application of laws" – the common rules of interpretation apply entirely as regards tax benefit rules.

4. Nor do I subscribe to the maxim, invoked in relation to Article 90 of the CIRC, that where the law does not distinguish it is not for the interpreter to distinguish. As OLIVEIRA ASCENSÃO observes, O Direito. Introdução e Teoria Geral, 13th ed, Coimbra, 2005, p. 424: "Such an assertion has no truth to it, as it would lead us to be entirely subject to the letter of the law. A generic formulation may appear and then it is verified that the ratio presupposes a distinction that the text omitted. Where the law does not distinguish, we can and must distinguish if the spirit of the law leads us to do so".

5. Consequently, given the legitimacy of restrictive interpretation as a way to reconstruct legislative thinking when "the interpreter reaches the conclusion that the legislator adopted a text that betrays his thinking, to the extent that it says more than what he intended to say" (BAPTISTA MACHADO, Introdução ao Direito e ao Discurso Legitimador, Coimbra, 2000 (reprint), p. 186), I judge that it was necessary to implement, for the resolution of the case sub judice, as provided for in paragraph 1 of Article 9 of the Civil Code (interpretation "should not be limited to the letter of the law"), a restriction of the letter of the legislative provisions in question so as to establish that the deduction of SIFIDE may only aim the Corporate Income Tax collection resulting from taxable income and not the Corporate Income Tax collection resulting from autonomous taxation object of Article 88 of the CIRC.

6. It is worth citing here, in this regard, the clarifying words of the classic FRANCESCO FERRARA, Interpretação e Aplicação das Leis (in the famous translation of MANUEL DE ANDRADE, 4th ed., Coimbra, 1987, p. 149) that restrictive interpretation "takes place particularly in the following cases: 1st if the text, understood in the mode so general as it is worded, would contradict another text of law; 2nd if the law contains within itself an internal contradiction (it is the so-called argument ad absurdum); 3rd if the principle, applied without restrictions, exceeds the purpose for which it was ordained".

7. Precisely, I judge that these cases have full application to the question of the deductibility of the SIFIDE tax benefit in relation to autonomous taxation. Since sed omnia praeclara tam difficilia, quam rara sunt, I allow myself simply to cite what was written in the arbitral decision rendered in case No. 722/2015-T: "given that the regime of autonomous taxation has a deterrent function of abusive behaviors, it is not seen why logical reason that deterrent could, afterward, vanish, which would happen if it were possible to deduct from the collection of autonomous taxation tax incentives", which "would result in a strange double effect: on the one hand it could, in the limit, eliminate the collection resulting from autonomous taxation and, on the other, would afford the deduction of certain tax benefit (...) to tax that has a specifically anti-abuse function, of mitigation of behaviors fiscal and socially undesired" – from "the combination of these possibilities would result a contradictory, illegal and anti-ethical result, precisely because the same tax law would allow, within the framework of the same tax system, to relieve the taxpayer of the burden of payment of a tax that is justly due by the adoption of abusive, undesired and discouraged conducts (classification as expenses of the expenses provided for in Article 88 of the CIRC)".

8. In fact, in light of the nature and proper basis of autonomous taxation, whose characteristics, moreover, the decision duly alludes to, I consider that it is not hermeneutically acceptable, "under pain of subversion of the order of values" and of "descharacterization of the principles that are specifically intended to be pursued", the deduction of tax benefits from the collection of that taxation.

9. This interpretive solution of circumscription of the field of application of SIFIDE II to the Corporate Income Tax collection not arising from autonomous taxation rates, which, in my perspective, was necessary to extract, having regard to the systematic and teleological elements, by restrictive interpretation of the legal statements in the wordings existing at the time, came to be expressly confirmed by the legislator by virtue of the intervention carried out with Law No. 7-A/2016, of 30.3.

b) Authentic Interpretation Resulting from Law No. 7-A/2016, of 30.3

1. In fact, Law No. 7-A/2016, of 30.3 (State Budget Law for 2016), with entry into force on 1.4 (cf. Article 218 of the said Law), amended, by its Article 133, Article 88 of the CIRC, to which it added a new paragraph 21 with the following content: "The assessment of autonomous taxation in Corporate Income Tax is made in accordance with the terms provided for in Article 89 and is based on the values and rates resulting from the provision in the previous paragraphs, no deductions being made to the total amount assessed", and determined, in its Article 135, that the wording given to paragraph 21 of Article 88 "has an interpretive nature".

2. This determination that the legislative amendment carried out by the addition of paragraph 21 to Article 88 of the CIRC "has an interpretive nature" implies the necessity, to address the case sub judice, of touching on the theme of interpretive law, which constitutes, among us, a matter of positive law, because, as is well known, the Civil Code explicitly refers to the figure in Article 13, determining, in its paragraph 1, that: "An interpretive law is integrated into the law it interprets, but the effects already produced by the performance of the obligation, by judgment passed, by transaction, even if not homologated, or by acts of an analogous nature, are preserved."

3. Now, neither can I accept the position that prevailed here, which deemed the provision of paragraph 21 of Article 88 of the CIRC as innovative and, therefore, falsely interpretive.

4. To apply to the indicated legislative measure the corresponding recognizability parameter, it is necessary to keep in mind the dogmatic scheme of characterization of interpretive law. In this regard, besides the definition of interpretive law as that which seeks to clarify the meaning and scope of a prior law, determining a meaning that courts could reach through the application of the rules of interpretation of the law, it is essential to highlight that national doctrine established as negative ontological limits of the law (materially) interpretive and, therefore, as criteria of its (non) qualification, the verification of whether the new law regulates a point of Law on which doubts and divergences were raised and whether it introduces a meaning that was not hermeneutically attributable to the old law.

5. It is worth citing here, in this regard, the clarifying words of BAPTISTA MACHADO, Sobre a aplicação no tempo do novo Código Civil, Coimbra, 1968, pp. 286 and 287 on these fundamental characteristic traits of interpretive law:

"1st) It intervenes to decide a legal question whose solution was controversial or uncertain in the domain of the validity of the old law. This means, above all, that, for the new law to be able to be interpretive in its nature, there must be matter for interpretation. If the legal rule was certain in the previous legislation, or if jurisprudence practice had long attributed to it a certain meaning, which remained constant and uncontroversial, the new law that comes to resolve the respective legal problem in different terms must be considered an innovative law";

"2nd) The interpretive law, to be one, must enshrine a solution that jurisprudence, by its own means, could have reached in the domain of the previous legislation. This presupposition means, above all, that if the new law comes in fact to resolve a problem whose solution was up to then a matter of debate, but resolves it outside the framework of controversy previously established, shifting it to new ground or giving it a solution that the judge or the interpreter were not authorized to give it, it will undoubtedly be an innovative law".

1. Precisely, in the decision that prevailed, it is noted the necessity of the solution of previous law being controversial or uncertain, which was recognized, as "it is a fact that the decision that this Tribunal must impose has a controversial character", and that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or the interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law, which was not recognized, as "the text of the law in force at the time of the facts in crisis did not allow concluding that it was prohibited to deduce SIFIDE from the part of the Corporate Income Tax collection that resulted from autonomous taxation", which implies concluding that the judge or the interpreter, in the face of old texts, could not feel authorized to adopt the solution that the new law comes to enshrine.

2. I cannot subscribe to this understanding, because the inquiry as to whether the "judge" (was not) enabled, in the face of the old text, to adopt the solution that the new law advocates, is not verified immediately and simply by the concrete decision-maker, who is resolving a particular dispute already in the face of the interpretive law; it requires attending to the community of interpreters and judges and the universe of interpretations – to jurisprudence, after all – so as to verify whether that interpretive solution was possible and even propounded in the face of the old law, and it should therefore be demonstrated that the understanding of the unfeasibility of the solution advocated by the interpretive law in the face of the old text would be equally imposed on the generality of judges and judicial organs.

3. As results from the above exposition, I judge that this demonstration is not verified in the matter in question, whereby, acknowledged that the controversial character of the issue is, I do not think that it can be understood that the legislative measure subject of paragraph 21 of Article 88 of the CIRC enshrine a meaning not contained nor permitted by the normativity interpreted or outside the framework of the controversy.

4. On the contrary, I think that this intervention of the legislator, which had the purpose of fixing the meaning of a set of legal rules that raised doubts as to its scope (Article 135 of Law No. 7-A/2016), chose one of the controversial meanings resulting from the application of the prior regulation, thus having resolved a legal question, which was until then a matter of debate, giving it a solution within the framework of the controversy previously established, whereby, in accordance with the principle of separation of powers, its acceptance was imposed in the resolution of the case sub judice (Article 8, paragraph 2 of the Civil Code).

5. I understand, therefore, that the rule of paragraph 21 of Article 88 of the CIRC is materially – and not merely formally (given the self-qualifying provision contained in Article 135 of Law No. 7-A/2016) – interpretive, whereby it is integrated in the law it interprets (Article 13 of the Civil Code), applying to the facts here in question, occurred before its entry into force.

6. In these terms, the determination of paragraph 21 of Article 88 of the CIRC that no "deductions" are made to the total amount assessed, confirms the unfeasibility, which should already have been advocated in the face of the prior legal texts, of deduction from the collection of autonomous taxation rates of the amounts of the tax benefit recognized by virtue of SIFIDE II relating to the years 2012 and 2013 of the Claimant.

7. I cannot, therefore, for the reasons set out, agree with the position that prevailed.

João Menezes Leitão

(Text prepared on computer, in accordance with Article 138, paragraph 5, of the Civil Procedure Code, applicable by referral from Article 29, paragraph 1, subsection e), of the Legal Regime of Tax Arbitration, with blank verses and reviewed by us. The text adopts the spelling prior to the Orthographic Agreement)

[1] As regards legal provisions, we shall refer, whenever there is no express caveat, to the wording of the CIRC that was in force until 31.12.2013, bearing in mind the transitional provisions of Article 12 of Law No. 2/2014, of 16 January.

[2] J. Baptista Machado, Introdução ao Direito e ao Discurso Legitimador, Almedina, 1999, p. 186.

[3] Cf. Juarez Freitas, A Interpretação Sistemática do Direito, SP, Malheiros, 1995, p. 47.

[4] Law No. 55-A/2010, of 31.12 approved, by its Article 133, SIFIDE II, to be in force for the taxation periods 2011 to 2015, which came to be amended by Article 163 of Law No. 64-B/2011 of 30.12. Decree-Law No. 82/2013, of 17.6 "transferred", by its Articles 1, paragraph 2 and 5, SIFIDE II to the Tax Investment Code (Articles 33 to 40). Law No. 83-C/2013, of 31.12 amended the regulation contained in the Tax Investment Code on SIFIDE II, to be in force for the taxation periods 2013 to 2020.