IRC Special Payment on Account Deduction from Autonomous Taxation – CAAD Case 381/2017-T

ARBITRAL DECISION

Parties

Claimant: A…, S.G.P.S., S.A

Respondent: TAX AND CUSTOMS AUTHORITY (AT)

The arbiters José Baeta de Queiroz (chairman), Augusto Vieira and Hélder Faustino, appointed by the Deontological Council of CAAD to form the arbitral tribunal, constituted on 29-08-2017, hereby agree as follows:

I. REPORT

a) On 21-06-2017 the Claimant, NIPC PT…, with headquarters in …, …-… … (A… SGPS) filed with CAAD a request for arbitral pronouncement (PPA) requesting, pursuant to the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a collective arbitral tribunal (TAC).

THE REQUEST

b) The Claimant contests the acts of dismissal of the ex officio revision proceedings (filed on 28-05-2015) and of the subsequent hierarchical appeal (filed on 15-01-2016) which it lodged against the tax self-assessment act of Corporate Income Tax (IRC) recorded in Declaration Form 22, in section 10 – field 365 – autonomous taxation – calculation of tax in the amount of € 66,089.20, concerning the fiscal year 2010.

c) It states that "under the Special Payments on Account (PEC) heading, there subsists an accumulated amount to be deducted from the IRC collection, which amounted to € 373,000.00 in 2010 as certified and evidenced by the PECs effected, extracted directly from the finance portal..."

d) Advocating for the deduction of special payments on account (PEC) from the IRC collection of Fiscal Group B… for the fiscal year 2010, hereby including the IRC resulting from the application of autonomous taxation rates, pursuant to paragraph 2 of article 90 of the IRC Code, it formulates the following requests:

• That it be "declared illegal and annulled the dismissal of the hierarchical appeal, and likewise the dismissal of the preceding request for ex officio revision, insofar as they refused the annulment of the illegal part, in the terms discussed herein, of the IRC self-assessment in the portion produced by autonomous taxation rates, for the year 2010, thereby violating the principle of legality";

• That it be "declared illegal this self-assessment (and consequently annulled), in the part corresponding to the amount of € 66,089.20";

• That it be "recognized the right to reimbursement of this amount and, likewise, the right to compensatory interest for the payment of improperly levied tax, counted, until full reimbursement, from 31 May 2011 for € 60,141.45, and from 1 September 2011 for the remaining € 5,947.75";

• And that "alternatively, should it be considered that article 90 of the IRC Code does not apply to autonomous taxation, there should then be declared the illegality of the assessment of autonomous taxation (and consequently annulled) due to absence of legal basis for its execution (cf. article 8, paragraph 2, letter a), of the LGT, and article 103, paragraph 3, of the Constitution), with the consequent reimbursement of the same amount and payment of compensatory interest counted from the same date".

THE CAUSE OF ACTION

e) The Claimant states, firstly, that "...Fiscal Group B… has PEC available to offset against its respective collection, in an amount far superior to the collection of autonomous taxation in IRC for the fiscal year 2010, collection this which, as mentioned above, amounted to € 66,089.20".

f) Then it invokes that: "the AT's computer system prevents the Claimant from recording the value relating to said autonomous taxation rates in IRC ... expunged, i.e., deducted, within the possibilities of the IRC collection resulting from the application of these rates, from the PEC still available (starting with the oldest) to offset against the IRC collection, which resulted in an excess of tax paid by reference to the fiscal year 2010 here in question". It concludes: "the AT's computer system, through which IRC is self-assessed, does not allow taxpayers to deduct, for purposes of determining the IRC owed by them, to the IRC resulting from the autonomous taxation assessed, the PEC".

g) In its pleadings, the Claimant makes a synthesis of the context of the positions sustaining its request:

1. "...autonomous taxation has a tax fact, an object, distinct from the tax on company profit, and this implies differentiation in the application of rules, namely constitutional rules, of application of tax law in time";

2. "...notwithstanding the different tax fact or object, autonomous taxation is still IRC, concurring, with another method, to the ultimate purpose of IRC; and, consequently, as IRC its collection should be treated applying to it letter a) of paragraph 1 of article 45 of the IRC Code in the wording in force until 2013 (previously to 2010, article 42): the rule of non-deductibility of IRC collection in determining the taxable profit subject to IRC".

3. "To the collection of autonomous taxation, being IRC, applies this second norm directed also to the IRC collection: the norm of deductions from collection (article 90 of the IRC Code, namely its paragraph 2, letters b) and c) – since 2014, letters c) and d)".

h) It bases its position on various CAAD decisions, especially the one adopted in CAAD Process 775/2015-T, where it is concluded: "we understand, therefore, that paragraph 21 of article 88 of the CIRC has no interpretative character as regards the question under discussion, not applying to facts occurring before its entry into force, namely, to the facts and assessments sub judice".

OF THE COLLECTIVE ARBITRAL TRIBUNAL (TAC)

i) The request to constitute the TAC was accepted by the President of CAAD and automatically notified to the AT on 22-06-2017.

j) By the Deontological Council of CAAD, the signatories of this decision were appointed as arbiters, with the parties being notified thereof on 11-08-2017. The parties expressed no desire to refuse the appointment, pursuant to article 11, paragraph 1, letters a) and b) of RJAT and articles 6 and 7 of the Deontological Code.

k) The TAC has been regularly constituted, since 29-08-2017, to appraise and decide the object of this dispute (articles 2, paragraph 1, letter a) and 30, paragraph 1, of RJAT), an act which is documented in the communication of constitution of the TAC dated 29-08-2017, which is hereby reproduced.

l) Immediately on 29-08-2017 the AT was notified in accordance with article 17-1 of RJAT. It replied on 28-09-2017 attaching only the Administrative File (PA) composed of two computerized files, designated as PA 2 (part 1.pdf) and PA 3 (part 2.pdf). On 02-10-2017 it attached its reply.

m) In it, it raised the exception of "LACK OF MATERIAL COMPETENCE OF THE ARBITRAL TRIBUNAL RESULTING FROM THE CIRCUMSTANCE THAT THE REQUEST FOR ARBITRAL PRONOUNCEMENT WAS FORMULATED IN CONSEQUENCE OF DISMISSAL OF HIERARCHICAL APPEAL".

n) By ruling of the TAC of 23-10-2017, in light of the request for production of testimonial evidence, the unnecessariness of production of additional evidence was recognized, since the controversial questions are of law and to decide them documentary evidence attached to the proceedings suffices. The holding of the parties' meeting of article 18 of RJAT was also dispensed with due to non-existence of reasons that would confer usefulness thereon. Through this same ruling the parties were invited to submit written and successive pleadings, first the Claimant and, then, the Respondent.

o) On 04-10-2017 the Claimant replied to the matter of the exception and submitted written pleadings. On 16-10-2017 the Respondent filed counter-pleadings.

p) The Claimant in pleadings and the Respondent in counter-pleadings advocated, respectively, for the positions already assumed in the request for pronouncement and in the reply.

q) By ruling of 19-10-2017 of the TAC, notification of the final decision was scheduled for no later than 15-12-2017.

SYNTHESIS OF THE CLAIMANT'S POSITION

r) The Claimant, in disagreement with the grounds of the acts of dismissal of the requests for ex officio revision and the subsequent hierarchical appeal, begins by stating that: "...case law has understood, in an almost unanimous manner, that the IRC collection provided in (in force until 2013) article 45, paragraph 1, letter a), of the IRC Code, comprises, without need of any additional specification, the collection of autonomous taxation in IRC" and that for that reason "the IRC collection provided in the same code a few meters further on (article 90, paragraph 1, and paragraph 2, letter c) of the IRC Code, in the wording in force in 2010, letter d) in 2014) must also be understood to embrace the collection of autonomous taxation in IRC". And concludes: "wherefore the denial of deduction of PEC from the IRC collection of autonomous taxation violates letter c) of paragraph 2 of article 90 of the CIRC (previously to 2010, article 83; and since 2014 it became letter d) of the aforesaid paragraph 2 of article 90 of the CIRC)".

s) It cites multiple arbitral decisions of CAAD that support its point of view to conclude that autonomous taxation is IRC.

t) Then it inveighs against the reasons the AT invokes to deny the deductions from the IRC collection of autonomous taxation in IRC.

u) It conducts an analysis of the arbitral currents opposed to deductions from the collection of autonomous taxation which it considers minority in the case of tax benefits.

v) Then it pronounces on the amendments to the IRC Code resulting from articles 133 and 135 of Law 7-A/2016, of 30 March (Budget Law for 2016) and on the Constitutional Court decision no. 267/2017, of 31 May 2017, concluding that:

w) 1 - "It is settled case law (and AT doctrine, when it suits them) that autonomous taxation in IRC, is IRC; and that to it apply the norms of assessment of IRC contained in article 89 and following of the IRC Code";

2 – "It can, and should be concluded that article 135 of Budget Law 2016 refers only to part 1 of the new paragraph 21 of article 88 of the CIRC";

3 – "The attribution of interpretative nature to a tax norm does not by itself trigger the application of the regime of application of laws in time provided in the Civil Code";

4 – "In any case article 13 of the Civil Code and the prohibition of retroactivity contained therein only applies to interpretative norms, as opposed to false interpretative norms. And part 2 of the new paragraph 21 of article 88 of the CIRC is, supposing that it was truly the legislator's intention to attribute interpretative character to it..., a false interpretative norm".

5 – Appealing to the principles of the Constitution, it states that "where there is reasonable doubt (and it is believed there is more than that: reasonable certainty) the burden of proof on the invoked interpretative character of a tax norm, for purposes of possible immunity to the constitutional prohibition of retroactivity, lies with whoever invokes it";

6 – "Even if the norm were materially interpretative, the association to it of retroactive effect would always be tainted with unconstitutionality".

x) Still on the subject of the amendments of the Budget Law for 2016 and of Constitutional Court decision no. 267/2017, of 31 May 2017, it states: "if, notwithstanding all the reasons that ... have been enumerated, it is still understood that article 135 of Budget Law 2016 (Law no. 7-A/2016, of 30 March) attributed interpretative nature also to part 2 of the new paragraph 21 of article 88 of the IRC Code, that is, also to the normative segment 'with no deductions being effected to the total global amount [of autonomous taxation in IRC] determined', introduced by the same Budget Law 2016 (by its article 133), and that consequently the application of article 13 of the Civil Code would result, as it prescribes the retroactive application of interpretative laws, it is believed that one would then be faced with a material unconstitutionality of the said article 135 of Budget Law 2016, by violation of the prohibition of retroactivity in tax matters provided in article 103, paragraph 3 of the Constitution, whether it has been concluded, or not (and it is understood that not), to be faced with a materially interpretative law (see Constitutional Court decision no. 172/00, and also SALDANHA SANCHES in Fiscality, no. 1, January 2000, 'Interpretative Law and Retroactivity in Tax Matters, pp. 77 et seq., in particular 87 and 88, and in its Manual of Tax Law, 3rd Edition, Coimbra Editora 2007, p. 193 et seq., in particular 196, and still JÓNATAS E. M. MACHADO and PAULO NOGUEIRA DA COSTA, Course of Tax Law, Coimbra Editora 2012, p. 76), and by violation, also, of the principle of separation of powers and of the principle of independence of the judicial power". And continues by stating: "violation, therefore, also, of article 2 (Democratic rule of law, and separation and interdependence of powers, and as to this latter aspect in the case the perspective of interdependence is at issue – and consequently negation of excesses and of occupying space that does not belong to it – of the political-legislative power vis-à-vis the judicial power), of article 111, paragraph 1 (separation and interdependence of the organs of sovereignty, which is still a material limit of revision – article 288, letter j), of the Constitution), and of article 203 (independence of the courts, another material limit of revision – article 288, letter m), of the Constitution), all of the Constitution. It concludes: "on this matter the ... Constitutional Court decision no. 267/2017, of 31 May 2017, has already pronounced, which judged unconstitutional the norm here in question".

y) Finally, the TAC, article 88 of the CIRC, amended by Law no. 7-A/2016, of 30 March, expresses that it should "...be taken into account that paragraph 21 of article 88 of the CIRC is, in its entirety, a new provision, which did not exist prior to Budget Law 2016 and whose application will have to be limited to new cases - in accordance with this the arbitral decision delivered in the context of CAAD Process no. 775/2015 by Mr. Arbiters Dr. José Baeta de Queiroz, Ms. Eva Dias da Costa and Ms. Filomena Oliveira", since "as can be easily verified, article 90 of the CIRC was not amended and continues to refer to the collection of IRC".

z) Concluding that "any authentic interpretation effected by virtue of paragraph 21 of article 88 of the CIRC in the part that conduces to non-deductibility of special payments on account in autonomous taxation manifestly offends the principle of non-retroactivity in the creation of taxes, an unconstitutionality that is hereby expressly raised". "In truth, accepting the interpretative character of paragraph 21 of article 88 of the CIRC implies the non-application of paragraph 1 of article 90 of the CIRC which is the norm that determines how IRC assessment is effected and, therefore, instead of IRC assessment being effected in accordance with the norm in force in the year in question, a new law is being applied and, therefore, the principle of tax legality is being violated, as stated also in paragraph 3 of article 103 of the Constitution".

aa) With regard to the request for reimbursement and payment of compensatory interest, it invokes the regime of Administrative Circular no. 60,052, of 03.10.2006, of the Tax Justice Department, to express that "...the error from which the (self-)assessment suffers for which complaint is made results from an error of the Services regarding the legal assumptions that conditionally programmed the completion of the declaration (Form 22) of self-assessment, as mentioned above, further aggravated by the dismissal, both of the ex officio revision, and of the hierarchical appeal", concluding that "in these circumstances – error imputable to the Services – the Claimant should be recognized the right to compensation for losses resulting from the Claimant's payment of excess tax in the aforesaid amount", all the more so because "in the circumstances of this case ... the IRC self-assessment relating to autonomous taxation rates against which the respective annulment is requested herein, was the only option allowed by the then AT's computer system, which did not permit, as is known to the AT (cf., regarding another rate which suffered from the same 'computer problem', that of state surcharge, the opinion – sanctioned at higher level – of the Director of DSIRC, Helena Martins, and at p. 11 of the Information contained therein, which are hereby attached), the submission of the Form 22 IRC income declaration should the amount of this part (autonomous taxation) of the determined IRC be intended to apply any kind of deduction".

bb) In pleadings it upheld the lack of merit of the exception raised by the AT of incompetence of the TAC, based on the decision of the Southern Administrative Court (Process 08599/15) and reiterated what it had already referred to in the request for arbitral pronouncement.

SYNTHESIS OF THE RESPONDENT'S POSITION

By exception

cc) The Respondent invokes that the TAC lacks material competence because "the request for arbitral pronouncement sub judice is formulated in consequence of dismissal of hierarchical appeal as a means of administrative reaction to the dismissal of request for ex officio revision of the self-assessment act of corporate income tax (IRC) relating to the year 2010, filed, on 28.05.2015, that is, in circumstances of time in which the period for gracious claim to which article 131 of CPPT refers had already elapsed".

dd) That is, the claim appears to be "...formulated without this self-assessment act having been preceded by administrative impugnation 'in accordance with articles 131 to 133 of the Code of Tax Procedure and Process', which determines, inevitably, that its appraisal in arbitration is foreclosed", a situation excluded "...literally, from the scope of the AT's binding to arbitral jurisdiction, «(…) claims relating to the declaration of illegality of self-assessment acts, withholding at source and payments on account that have not been preceded by recourse to the administrative channel in accordance with articles 131 to 133 of the Code of Tax Procedure and Process»., without the mechanism of ex officio revision provided in article 78 of the General Tax Law (LGT) being mentioned therein".

ee) And it further states that "...if, as is to be demonstrated, the tribunal lacks competence to rule on claims preceded by requests for ex officio revision, necessarily it will also lack competence to appraise claims arising from dismissal of hierarchical appeal formulated as a consequence of dismissal of request for ex officio revision presented".

ff) It concludes: "...by virtue of what is provided in article 2, letter a) of Ordinance no. 112-A/2011, disputes that have as their object the declaration of illegality of withholding at source acts, as occurs in the situation sub judice, are excluded from the material competence of arbitral tribunals, if not preceded by gracious claim in accordance with article 132 of CPPT, regardless of whether this is mandatory pursuant to the cited provision or whether the taxpayer has opted (sibi imputat) for ex officio revision".

gg) It adds that "…the above advocated understanding, that disputes that have as their object the declaration of illegality of self-assessment acts, as occurs in the situation sub judice, are excluded from the material competence of arbitral tribunals, if not preceded by gracious claim in accordance with article 132 of CPPT, is likewise imposed by virtue of constitutional principles of the rule of law and separation of powers (cf. articles 2 and 111, both of the Constitution), as well as legality (cf. articles 3, paragraph 2, and 266, paragraph 2, both of the Constitution), as a corollary of the principle of indisposability of tax credits inherent in article 30, paragraph 2 of the LGT, which bind the legislator and all activity of the AT".

hh) And because "...the binding of the AT to the requisite arbitral protection, in which the principle of irrevocability of decisions prevails, presupposes a limitation of the situations in which it can fully decide whether or not to appeal an unfavorable judicial decision, that is, the power to choose between permanently abdicating from the collection of the tax credit or adopting behavior potentially suitable to seek its effectuation", "...it is constitutionally prohibited, by virtue of constitutional principles of the rule of law and separation of powers (cf. articles 2 and 111, both of the Constitution), as well as legality (cf. articles 3, paragraph 2, and 266, paragraph 2, both of the Constitution), as a corollary of the principle of indisposability of tax credits inherent in article 30, paragraph 2 of the LGT, the interpretation, even if extensive, that broadens the AT's binding to the arbitral protection legally established, as such necessarily presupposes the consequent dilation of the situations in which it is obligatorily subject to such regime, renouncing in that same measure resort to full judicial review [cf. article 124, paragraph 4, letter h) of Law no. 3-B/2010 and articles 25 and 27 of RJAT, which impose a restriction of remedies of the arbitral decision]."

ii) In sum, it contends that "...one should ... understand that in light of the cited constitutional and legal principles, the interpretation of what is provided in Ordinance no. 112-A/2011 must be configured literally, for it is not inconsequential that the legislator in letter a) of article 2 of Ordinance no. 112-A/2011, having completed the expression «that have not been preceded by recourse to the administrative channel» with the mention «in accordance with articles 131 to 133 of the Code of Tax Procedure and Process», has intentionally delimited the AT's binding to such situations..."

jj) It invokes in favor of its viewpoint CAAD decisions drawn from various processes, namely those numbered 236/2013-T, 48/2012-T, 51/2012-T, 73/2012-T, 236/2013-T, 603/2014-T, 669/2015-T, 584/2016-T, 671/2016-T and 8/2017-T.

By impugnation

kk) With regard to the nature of autonomous taxation in IRC, it states "…the autonomous character of these taxation, resulting from the special configuration given to the material and temporal aspects of the tax facts, imposes, in certain areas, the departure or an adaptation of the general rules of application of IRC". It adds: "In reality, the integration of autonomous taxation, in the IRC Code (and the IRS), conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, namely, within letter a) of paragraph 1 of article 90 of the CIRC, in separate determinations of their respective collections, by virtue of being subject to different rules". "And this, therefore, in one case, it is a matter of the application of the rate(s) of article 87 of the CIRC to the taxable matter determined in accordance with the rules contained in chapter III of the Code and, in another case, it is a matter of the application of the rates to the values of the taxable matters relating to the different realities contemplated in article 88 of the CIRC".

ll) It states that there is not a single IRC assessment, but rather "two distinct calculations which, although processed, in accordance with letter a) of paragraph 1 of article 90 of the CIRC, in the declarations to which articles 120 and 122 of the same code refer, are effected on the basis of different parameters, since each one is materialized in the application of its own rates, provided in articles 87 or 88 of the CIRC, to the respective taxable matters determined equally in accordance with its own rules".

mm) It invokes in favor of this viewpoint CAAD arbitral decisions Processes 769/2014-T and 113/2015-T.

nn) And because "...the assessment of autonomous taxation is effected on the basis of articles 89 and 90, paragraph 1 of the IRC Code but, applying different rules for the calculation of tax: (1) in one case assessment operates, by means of the application of the rates of article 87 to the taxable matter determined in accordance with the rules of chapter III of the Code and (2) in the other case, diverse collections are determined in accordance with the diversity of the facts that give rise to autonomous taxation", "…the amount determined in accordance with letter a) of paragraph 1 of article 90 does not have a unitary character, since it comprises values calculated in accordance with different rules, to which are associated also differentiated purposes, whereby the deductions provided in the letters of paragraph 2 can only be effected to that part of the IRC collection with which there exists a direct correspondence, so as to be maintained the coherence of the conceptual structure of the rule-regime of the tax."

oo) And concludes, in the contrary sense to what is advocated by the Claimant: "…the delimitation of the content of the expression used by the legislator in paragraph 2 of article 90 of the CIRC, 'amount determined in accordance with the preceding paragraph', and in paragraph 1 of article 105 of the CIRC, 'tax assessed in accordance with paragraph 1 of article 90', must be effected in a manner to encompass only '…the amount of IRC calculated by means of the application of the rates of article 87 to the taxable matter determined on the basis of profit and on the rates of article 87 of the Code", that is, excluding the IRC obtained by application of autonomous taxation rates referred to in article 88 of the CIRC.

pp) "Being the only (and consistent) interpretation of the expression 'amount determined in accordance with the preceding paragraph' with the nature of the deductions referred to in the letters of paragraph 2 of article 90 of the IRC Code, relating to: - credits for tax by international legal and economic double taxation (current letters a) and b)); - tax benefits (current letter c)); - special payment on account (current letter d)); - and withholding at source (current letter e))".

qq) It highlights that the common thread to all the realities reflected in the deductions referred to in paragraph 2 of article 90 of the IRC Code "resides in the fact that they concern income or expenses incorporated in the taxable matter determined on the basis of the subject's profit or anticipated payments of the tax, and are, therefore, entirely foreign to the realities that integrate the tax facts of autonomous taxation".

rr) With regard to special payments on account (PEC), it begins by stating that "by simple consequence of the preceding considerations that led to the conclusion that the deductions referred to in letters a) and b) of paragraph 2 of article 90 of the IRC Code are effected to the 'amount determined in accordance with the preceding paragraph', understood as the amount of IRC determined on the basis of the taxable matter determined in accordance with the rules contained in chapter III and the rates of article 87 of the same Code and descending to the concrete case, it is possible to extend such conclusion to the deduction relating to special payments on account".

ss) And it further states: "it suffices, for that purpose, to invoke what is provided in paragraph 9 (in the 2014 version) of the same provision, according to which «From the deductions effected in accordance with letters a), b) and c) of paragraph 2 no negative value may result»". "And that, in the absence or insufficiency of collection, determined in those terms, the special payment on account which cannot be deducted in that taxation period may be deducted up to the 4th following taxation period – cf. article 93, paragraph 1 of the CIRC". And that "...it is also possible to reach the same conclusion if one attends to the nature of the special payment on account (PEC), defined as an advance delivered to the State on account of the tax ultimately owed, which can be made in two installments (article 106, paragraph 1, CIRC) and whose calculation takes as a starting point the volume of business of the subject relating to the immediately preceding taxation period (paragraph 2)".

tt) Concluding as follows: "...the legal nature of PEC, revealed by its configuration as 'an instrument or guarantee of payment of the tribute on account of which it is exacted, and not as a tax in itself' ..., as well as by the function associated with it in combating tax evasion and fraud, binds indissolubly this payment to the amount of IRC determined on the taxable matter determined on the basis of profit (chapter III of the Code)" "resulting therefrom that the credit for the amounts delivered as special payment on account, does not constitute a credit enforceable that IRC subjects can dispose of"... "and is, therefore, manifestly devoid of any basis the claim of the now Claimant for deduction of the amount borne under special payment on account from the collection produced by autonomous taxation in the year 2010".

uu) With regard to Constitutional Court decision no. 267/2017, of 31 May 2017, it states that "the Respondent is not unaware of the Constitutional Court decision cited by the Claimant, however, the same does not have general binding force, nor does the AT agree with the tenor of the decision", adding that "...in all rigor, article 88, paragraph 21, of the CIRC, inserted by Budget Law 2016, which was declared unconstitutional in that decision, is not necessary to the resolution of this dispute..." being unnecessary, for the reason that "the article in question is harmless insofar as, at the date of the facts, the letter and, likewise, the interpretation of the norms of the CIRC referring to Autonomous Taxation and PECs per si already imposed the only plausible and legal conclusion, i.e., that deductibility from the collection produced by autonomous taxation of the PEC is not admissible", in accordance with decisions rendered in CAAD processes no. 785/2015-T and 722/2015-T.

vv) With regard to what is alleged by the Claimant that "...the Form 22 IRC declaration and its articulation with the programming of the AT's computer system impedes deduction from the collection related to autonomous taxation rates in IRC, recorded in field 365 of section 10 of Form 22 declarations (…) the PECs still to be deducted from the IRC collection, starting with the oldest", it counters that "the computer system cannot permit or enshrine what the law does not provide, i.e., the computer system and applications of the AT should be mere reflection of the legal provisions in force at each moment".

ww) Concluding: "...there exists no legal support, administrative understanding or any reason assisting the Claimant's claim, whereby, it completely lacks sense the understanding advocated by the same in this regard".

xx) It concludes by invoking the arbitral decision delivered in CAAD Process 113/2015-T, citing the part of the ruling adopted there "the Claimant's claim necessarily must lack merit since the assessed amount complies with legality, as it is based on correct interpretation of the cited norm".

yy) As to the request for compensatory interest, it states that "…the main claim lacking merit, necessarily the request for interest will also lack merit", being certain that "…in the situation presented in the case, its calculation would have as its starting date the date on which the decision occurred that dismissed the gracious claim...".

zz) It concludes by stating that "…definitively dispelling the controversial question, the tenor of article 133, which added paragraph 21 to article 88 of the CIRC, with the effects provided in article 135, both contained in the Budget Law for 2016, published on 30.03.2016, with entry into force the following day, which prescribes, with interpretative character, that «The assessment of autonomous taxation in IRC is effected in accordance with the provisions of article 89 and is based on the values and rates resulting from the provisions of the preceding paragraphs, with no deductions being effected to the total global amount determined".

aaa) It concludes by stating that "...any interpretation that does not apply the norm contained in the Budget Law for 2016, embodied in article 133, which added paragraph 21 to article 88 of the IRC Code, with the effects provided in article 135, both contained in the Budget Law for 2016, published on 30.03.2016, with entry into force the following day, which prescribes, with interpretative character, that «The assessment of autonomous taxation in IRC is effected in accordance with the provisions of article 89 and is based on the values and rates resulting from the provisions of the preceding paragraphs, with no deductions being effected to the total global amount determined.» "And that, consequently, permits deduction to the part of the IRC collection produced by autonomous taxation rates of the special payment on account effected under IRC (PEC), is materially unconstitutional, by a) - violation of the principle of legality, inherent in article 103, paragraph 2 of the Constitution, b) - violation of the principle of separation of powers, embodied in article 2 of the Constitution, c) - violation of the principle of protection of confidence provided in article 2 of the Constitution, d) - violation of the principle of equality, in its positive formulation of capacity to contribute, resulting from articles 13, paragraph 2 and 103, paragraph 2 both of the Constitution".

bbb) In counter-pleadings it maintained what was stated in the reply to the request for arbitral pronouncement.

ccc) It advocates for the maintenance in the legal order of the tax acts in question for being in compliance with the law, with the exception raised being upheld and absolution of the instance or, if not proceeding, with lack of merit of the claims and consequent absolution thereof.

II - QUESTIONS THAT THE TRIBUNAL MUST RESOLVE

First, it must appraise the alleged exception of incompetence of the TAC taking into account that the immediately impugned acts (decisions that dismissed the request for ex officio revision and the hierarchical appeal) did not result from a gracious claim procedure, but rather from an ex officio revision procedure, by initiative of the taxpayer.

Next, should the exception raised lack merit, it will be necessary to verify whether the new paragraph 21 of article 88 of the CIRC (in the case the TAC understands that PEC would always be deductible from the sum of the IRC collections assessed by application of autonomous taxation rates, as advocated by the Claimant and according to the arbitral case law it cites), is truly an interpretative law.

Finally, the TAC will address the invoked non-conformity with the legal text of the reading of the law to be adopted herein, invoked by the AT in section jjj) of the Report of this decision.

III – OF THE ALLEGED LACK OF MATERIAL COMPETENCE OF THE TAC

The AT contends that article 2, letter a) of Ordinance 112-A/2011, of 22 March, must be understood in its literalness, precluding from the scope of tax arbitral jurisdiction claims relating to the declaration of illegality of self-assessment acts that have not been preceded by claim in accordance with the referred norms of CPPT.

In fact, all of the AT's argumentation on the matter ends up reducing to sustaining that it was the legislator's intention to restrict the competence of tax arbitral jurisdiction, as regards the knowledge of illegalities of self-assessment acts, solely to situations in which there exists a claim presented in accordance with articles 131 to 133 of CPPT.

No substantial reason can be discerned among the reasons advanced by the AT for which, attentive to the conditionings and specificities proper to each of the gracious means in question, the legality of the self-assessment acts should not be cognizable in arbitration, in the same terms in which the tax courts are bound. Indeed, even a strictly literal interpretation, provided it is duly contextualized, would not lead to the result advocated by the AT, let us see.

In fact, the expression used by the norm in question is parallel to the very norm of article 131, paragraph 1 of CPPT, which should be understood as a concretization of the pacifically recognized legislative intention that the tax arbitral process constitute an alternative procedural means to the process of judicial impugnation.

The norm of letter a) of article 2 of Ordinance 112-A/2011, of 22 March, should also be understood as explained by the circumstance that, in its absence – and given the tenor of article 2 of RJAT – it would appear possible the direct impugnation of self-assessment acts, without prior administrative pronouncement.

That is, taking into account that given RJAT no prior administrative intervention appeared necessary to the arbitral impugnation of a self-assessment, the tenor of the Ordinance should be interpreted as equating – in this matter – the tax arbitral process to the process of judicial impugnation and not, as would result from the position sustained by the AT, to switch from a broader impugnability than possible in tax courts, to a more restricted one.

Thus, no reason subsists for interpreting one and the other norm differently, all the more so because the letter of the norm of Ordinance 112-A/2011, of 22 March, ends up being less restrictive than that of CPPT, insofar as it does not include the word "obligatorily", nor does it refer to "gracious claim" but to "administrative channel".

Therefore, it is possible a reading of the very letter of the law that holds that only excluded from the scope of tax arbitral jurisdiction is the knowledge of claims relating to the declaration of illegality of self-assessment acts, withholding at source and payment on account that have not been preceded by recourse to the administrative channel in terms compatible with articles 131 to 133 of CPPT.

The argumentation invoked by the AT regarding the incompetence of the arbitral tribunal thus flounders, whereby the exception in question is judged to lack merit.

IV – PROCEDURAL REQUIREMENTS

Capacity, legitimacy and representation – The parties are legitimate, enjoy legal personality and judicial capacity and are represented (articles 4 and 10, paragraph 2, of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

Principle of adversary procedure – The AT was notified in accordance with section l) of this Report. The Respondent replied to the matter of the exception raised. All procedural documents and all documents attached to the proceedings were made available to the respective counterpart in the CAAD Procedural Management System. Their attachment was always with notification of both parties.

Dilatory exceptions – The arbitral procedure is not tainted with nullities and the request for arbitral pronouncement is timely since it was presented within the period prescribed in letter a) of paragraph 1 of article 10 of RJAT, as results from the fact that the Claimant presented the request for pronouncement on 21-06-2017 and notification of the decision which fell on the request for hierarchical appeal was notified to it on 12-04-2017 (article 6 of the request for pronouncement), a date that raised no objection from the Respondent. Indeed, the AT did not put into question the timeliness of presentation of the present request for arbitral pronouncement.

V – MATTERS OF FACT PROVEN AND NOT PROVEN. GROUNDS.

With regard to matters of fact, the Tribunal need not pronounce on everything alleged by the parties; rather, it is incumbent upon it to duty to select the facts that matter for the decision and discriminate the proven matter from the unproven (in accordance with article 123, paragraph 2, of CPPT and article 607, paragraph 3 of the Code of Civil Procedure, applicable ex vi article 29, paragraph 1, letters a) and e), of RJAT).

Thus, the pertinent facts for judgment of the cause are chosen and cut out according to their legal relevance, which is established in attention to the various plausible solutions of the question(s) of law (in accordance with prior article 511, paragraph 1, of the Code of Civil Procedure, corresponding to the current article 596, applicable ex vi article 29, paragraph 1, letter e), of RJAT).

Thus, taking into consideration the positions assumed by the parties and the documentary evidence attached, the facts hereinbelow enumerated were considered proven, with relevance for the decision, indicating the respective documents (proof by documents), as grounds.

Proven Facts

1. The Claimant, as the parent company, is responsible for the self-assessment of the Corporate Income Tax ("IRC") of "Fiscal Group B…" subject to the special regime of taxation of groups of companies provided in articles 69 and following of the IRC Code, composed of itself and the companies: ▪ C…, S.A.; ▪ D…, S.A.; ▪ E…, Lda.; ▪ F…, S.A.; and ▪ G…, S.A. – in accordance with the opening of the request and page 117 of PA part 1 attached by the AT with its reply.

2. On 31 May 2011 the Claimant filed an income declaration of IRC Form 22, relating to the fiscal year 2010, having proceeded to self-assess autonomous taxation in IRC, which appear in section 10 – field 365, in the amount of € 66,089.20, a value which it paid – in accordance with articles 2, 219 and 220 of the request for arbitral pronouncement and Documents no. 1 and 6 attached with the request, combined with the AT's overall position of implicit agreement.

3. The IRC Form 22 Declaration does not allow the deduction of Special Payments on Account (PEC) from the sum of the amount resulting from the application of autonomous taxation rates provided in article 88 of the IRC Code to be reflected – in accordance with article 28 of the request and overall position of the AT in the reply and in the pleadings which considers this situation a consequence of the law.

4. On 6 October 2014 an amended IRC income declaration, Form 22, was filed, which did not alter the value mentioned in 2. – in accordance with article 3 of the request for arbitral pronouncement and Document no. 2 attached with the request.

5. Fiscal Group B… made, in the years 2006 to 2010, Special Payments on Account in the amount of € 373,000.00, which have not yet been deducted from the IRC collection – in accordance with article 19 of the request; Document no. 6 attached with the request and overall position of the AT of non-contestation in the reply and pleadings.

6. On 28 May 2015 the Claimant filed an ex officio revision against the said self-assessment relating to the year 2010. Preceded by a draft decision containing the grounds, in the course of prior hearing, it was dismissed by ruling of 30 November 2015 of the Director of the IRC Department – in accordance with article 4 of the request and Documents no. 3 and 4 attached with the request.

7. On 15 January 2016 the Claimant filed a hierarchical appeal which was dismissed by ruling of the Deputy General Director of the Tax and Customs Authority, dated 5 April 2017 and notified on 12 April 2017, through CTT Mail, by memorandum of 6 April 2017 - in accordance with page 148/151 of part 1 of the PA attached with the AT's reply, articles 5 and 6 of the request and Document no. 5 attached with the request.

8. As the essential nucleus of the grounds of the dismissal acts above referred, it appears:

[As per pages 149 and 150 of part 1 of the PA attached by the AT with its reply.]

1. On 21 June 2017 the Claimant filed with CAAD the present request for arbitral pronouncement – registration of entry in the CAAD Case Management System of the request for arbitral pronouncement.

Unproven Facts

There exists no other factuality alleged that has not been considered proven and that is relevant to the composition of the procedural dispute.

VI – MATTERS OF LAW

Does the IRC collection determined in accordance with letter a) of paragraph 1 of article 90 not have a unitary character?

We will follow in this regard what was decided in the collective arbitral decision adopted in CAAD process no. 673/2015-T, regarding an identical case, to which we adhere.

The Respondent alleges in article 96 of its reply: "the amount determined in accordance with letter a) of paragraph 1 of article 90 does not have a unitary character, since it comprises values calculated in accordance with different rules, to which are associated also differentiated purposes, whereby the deductions provided in the letters of paragraph 2 can only be effected to that part of the IRC collection with which there exists a direct correspondence, so as to maintain the coherence of the conceptual structure of the rule-regime of the tax"

But without merit. Reproducing CAAD decision no. 673/2015-T:

"This position lacks consistent foundation, nor has the Tax and Customs Authority indicated any legal provision that furnishes it with the minimum of verbal correspondence necessary for admissibility of an interpretation.

Specifically, article 105, paragraph 1, of the CIRC, in saying that «payments on account are calculated on the basis of the tax assessed in accordance with paragraph 1 of article 90 relating to the taxation period immediately preceding that in which those payments should be made, net of the deduction to which letter d) of paragraph 2 of the same article refers», refers to the totality of the tax assessed in accordance with that paragraph 1 of article 90," …

On the other hand, …, prior to the new paragraph 21 of article 88 of the CIRC, there existed no legal provision establishing the manner of assessment of autonomous taxation, whereby, under pain of unconstitutionality for violation of article 103, paragraph 3, of the Constitution, resulting from lack of legal provision of procedure of assessment, it would have to be understood that they were assessed in conformity with what is provided in paragraph 1 of article 90.

Thus, prior to Law no. 7-A/2016, the deductions provided in paragraph 2 of article 90 of the CIRC, which have as their object the «amount determined in accordance with the preceding paragraph», applied to that sole amount resulting from such determination, whenever one was not faced with one of the situations especially provided in paragraphs 4 et seq. of the same article, which have no application in the case at issue.

The deduction of special payments on account from the total value determined in accordance with that article 90, paragraph 1, letter a), also resulted from the explicit tenor of article 93, paragraph 1, of the CIRC, in the wording prior to Law no. 2/2014, of 16 January, in establishing that «the deduction to which letter c) of paragraph 2 of article 90 refers is effected to the amount determined in the declaration to which article 120 of the same period of taxation refers or, if insufficient, up to the fourth following taxation period, after the deductions referred to in letters a) and b) of paragraph 2 have been made and with observance of paragraph 7, both of article 90». (with Law no. 2/2014, of 16 January, the deduction of sums paid as special payment on account, can be deducted up to the 6th following taxation period).

The amount determined in the declaration to which article 120 refers includes the amounts relating to autonomous taxation, with no other specific declaration existing for that purpose, neither before nor after Law no. 7-A/2016.

In truth, the declarations provided in article 120 of the CIRC are prepared in a single official model approved by ministerial ruling of the Finance Minister, in accordance with articles 117, paragraph 1, letter b), and paragraph 2, of the CIRC.

Thus, in light of what is provided in letter c) of paragraph 2 of article 90 and in paragraph 1 of article 93 of the CIRC, up to Law no. 7-A/2016, nothing in the literal tenor of the CIRC prevented the deduction of the sums of special payments on account from the total IRC collection determined in accordance with that paragraph 1 of article 90, inclusively that resulting from autonomous taxation, within the conditionality provided therein.

On the other hand, the special payment on account having the nature of forced loan (in this sense, one may see CASALTA NABAIS, Tax Law, 7th edition, page 541, accompanied by the Supreme Administrative Court in decisions of 18-2-2009, process no. 0926/08, and 13-5-2009, process no. 0927/08), which creates in the legal sphere of the subject a credit against the Tax Administration, it does not appear unreasonable that it be taken into account in situations in which a credit of this Administration is generated in relation to the taxpayer.

Still further, autonomous taxation in the context of IRC, in light of the increasing breadth the legislator has been conferring on them, to be compatible with the constitutional principle of taxation of companies bearing fundamentally on their actual profit (article 104, paragraph 2, of the Constitution), must be understood as indirect forms of taxing business profits, through the taxation of certain expenses, as is inherent in letter a) of paragraph 1 of article 23-A of the CIRC in the wording of Law no. 2/2014, of 16 January, in alluding to «IRC, including autonomous taxation, and any other taxes which directly or indirectly bear on profits». The statistics of the Tax and Customs Authority mentioned above, as well as the case at issue itself, in which the Claimant had tax losses in 2012 and 2013 and in both presents only autonomous taxation of considerable value, are illustrative of the constitutionality problem that arises.

In any case, as stated in the CAAD decision delivered in CAAD process no. 59/2014-T, autonomous taxation in IRC must be considered a form of taxation of business profits:

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

(...)

«autonomous taxation bearing directly on certain expenses, within the scope of taxes originally bearing only on income, are considered distortions of the system of direct taxation of income intended by the IRC, but a value which it was legislatively considered to be more relevant than the theoretical coherence of taxes, such as the implementation of fiscal justice, imposed an option for these forms of taxation, as they are in consonance with the principles of equity, efficiency and simplicity.

(...)

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

Thus, if it is certain that autonomous taxation constitutes a different form of imposing taxes on companies, which could consist of autonomous regulation or be arranged in the Stamp Tax Code, it is equally certain that the legislative option to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in the IRC, which may be justified by their being an indirect, but, in the legislative perspective, equitable, simple and efficient, form of taxing business profits that escape the regime of taxation with direct incidence on income».

In fact, it is a fact that the imposition of any expense without counterpart on a legal person has as a corollary a potential decrease in its profit, whereby the imposition of a unilateral tax obligation, even calculated on the basis of expenses incurred, constitutes a form of indirectly taxing its profit. (One must not forget, in this context of identification of the nature of a tax, that, taking the analysis to its limit, as taught by the late Professor SALDANHA SANCHES, «the recipient of the tax is always the natural person - the taxation of the commercial company is instrumental and its taxation is always a payment on account of the tax that will later be borne by the holder of the capital of the company»)

The new article 23-A of the CIRC, introduced by Law no. 2/2014, of 16 January, in saying that «are not deductible for purposes of determining the taxable profit the following charges, even when accounted for as expenses of the taxation period: a) The IRC, including autonomous taxation, and any other taxes which directly or indirectly bear on profits», lets appear that, in the legislative perspective, the IRC and autonomous taxation are taxes which bear directly or indirectly on profits, since it is that understanding which can justify the inclusion of the expression «any other taxes», which presupposes that the IRC and autonomous taxation are also taxes of these types.

Because of this, since autonomous taxation provided in the CIRC, ultimately, are forms of taxing business profit, it is not perceived what necessarily incompatibility exists between them and the general rules that provide the manner of effecting IRC payment".

What is the regime for deduction of PEC from the IRC collection resulting from the application of autonomous taxation rates, in the course of paragraph 21 of article 88 of the IRC Code?

In accordance with Constitutional Court decision no. 267/2017 of 31 May 2017, this TAC will have to adhere to what was decided in the Collective Arbitral Decision drawn in CAAD Process 775/2015-T where it is concluded:

"We understand, therefore, that paragraph 21 of article 88 of the CIRC has no interpretative character as regards the question under discussion, not applying to facts occurring before its entry into force, namely, to the facts and assessments sub judice".

Now, it results from the facts proven that the self-assessments in question relate to the year 2010, a situation that was not consolidated in the legal order, as is verified in this case, in which the timeliness of the requests for ex officio revision and hierarchical appeal is not disputed.

It is the AT itself which in the dismissal decisions recognizes that timeliness.

The judgment of the Constitutional Court contained in decision no. 267/2017 of 31.05.2017 appears clear to us:

It is "…unconstitutional, by violation of the prohibition of creation of taxes of retroactive nature provided in article 103, paragraph 3, of the Constitution, the norm of article 135 of Law no. 7-A/2016, of 30 March, insofar as, by effect of the merely interpretative character attributed to it, it determines that the norm of article 88, paragraph 21, second part, of the IRC Code, paragraph this added by article 133 of the said law - according to which, to the total global amount resulting from autonomous taxation assessed in a given year in the context of IRC, no values paid as special payment on account in that same year may be deducted, applies to fiscal years prior to 2016".

The AT expresses three situations that would support the viewpoint that the expression "amount determined in accordance with the preceding article" (of paragraph 2 of article 90 of the IRC Code) intends to mean that PEC can only be deducted "...to the amount of IRC calculated by means of the application of the rates of article 87 to the taxable matter determined on the basis of profit and on the rates of article 87 of the Code", namely:

• credits for tax by international legal and economic double taxation (current letters a) and b));

• tax benefits (current letter c));

• explicit support of paragraph 5 of article 90 of the IRC Code (transparent entity regime);

in accordance with articles 110 and 113 to 121 of the reply.

With regard to what is stated regarding credits for international double taxation and given the tenor of articles 91 and 91-A of the IRC Code, we do not see how one can consider, even implicitly, e.g., the expression "insufficiency of collection" (paragraph 4 of article 91 of the CIRC) refers only to the IRC collection resulting from application of the rates of article 87 of the CIRC.

With regard to what is stated regarding tax benefits, namely that "the deduction of a certain percentage of an investment from the collection of a tax on profits is only effectuated if there is profit, which rewards the profitability of the investment", it will always be said that, in principle, the reasoning of deductibility of tax benefits is identical to what is adopted in this decision, having to evaluate each of the exemptive norms that in concrete confer them, which may establish differentiated operation rules.

The reference to the regime of entities subject to the transparent entity regime does not configure to have the virtuality attributed to it, since it is a special regime clearly distinct, applicable to entities that have an arrangement in the IRC Code (v.g., letter b) of paragraph 1 of article 2, letter b) of paragraph 1 of article 3 and article 6, both in the IRC Code) differentiated, in no way comparable to the entities alluded to in letters a) of paragraphs 1 of articles 2 and 3, both of the IRC Code.

In this conformity, only the request for arbitral pronouncement tending to obtain the annulment of the two decisions adopted by the AT and through which it dismissed the request for ex officio revision and hierarchical appeal, deduced against the self-assessments of IRC of the Claimant of the year 2010, can proceed. What entails, indirectly, that the self-assessments in question are not in conformity with the law, and should be as such considered and consequently annulled.

The reading of paragraph 21 of article 88 of the IRC Code adopted in this decision is materially unconstitutional, by: a) - violation of the principle of legality, inherent in article 103, paragraph 2 of the Constitution, b) - violation of the principle of separation of powers, embodied in article 2 of the Constitution, c) - violation of the principle of protection of confidence provided in article 2 of the Constitution, d) - violation of the principle of equality, in its positive formulation of capacity to contribute, resulting from articles 13, paragraph 2 and 103, paragraph 2 both of the Constitution?

The terms in which the non-conformities with the Constitution here referred to are raised do not configure as being susceptible of constituting for the TAC an obligation of detailed appraisal of the questions posed generally, beyond the reference that conclusion must be reached in the opposite sense, since the Constitutional Court, by the decision cited above, considered the reading of paragraph 21 of article 88 of the IRC Code adopted here as being the only one in conformity with the constitutional text.

As stated above, this TAC is not unaware that the Constitutional Court decision does not have general binding force, but the truth is that it is a decision of the apex judicial body, to which it falls to have the final word in appraisal of the conformity of norms, in light of constitutional principles. It would be difficult to understand, by citizens in general and by businesspeople in particular, (since in this process it concerns the tax on the income of companies) that here a reading of the law be adopted that would contradict the judgment resulting from a decision already formulated by the Constitutional Court, in a case identical to that of this process, all the more so because the degree of probability of other decisions of the same Court arising, in the same sense, will be considered superior, than in the opposite sense.

This TAC does not perceive, in the reading of the law brought into practice here, any violation of the principle of legality, inherent in article 103, paragraph 2 of the Constitution; violation of the principle of separation of powers, embodied in article 2 of the Constitution; violation of the principle of protection of confidence provided in article 2 of the Constitution and violation of the principle of equality, in its positive formulation of capacity to contribute, resulting from articles 13, paragraph 2 and 103, paragraph 2 both of the Constitution.

Reimbursement of the amounts corresponding to PEC and request for condemnation of the AT in the payment of compensatory interest

The Claimant, although it has not determined IRC collection resulting from the company's profit, succeeded in proving that it paid, by self-assessment, the values corresponding to autonomous taxation and special payments on account, in accordance with points 2 and 5 of the proven matters of fact.

Annulling, as will be annulled, the decisions which fell on the request for ex officio revision and hierarchical appeal, by non-conformity with the law, affected are the IRC self-assessment acts, resulting that the Claimant has the right to reimbursement of the amount of PEC which it can offset from the calculation of IRC resulting from autonomous taxation.

It also requests compensatory interest in accordance with the terms provided in article 43 of the LGT and article 61 of CPPT.

The Claimant understands (article 220 of the request) that the interest should be "...counted until full reimbursement, and calculated on € 60,141.45 improperly paid on 31 May 2011 (in accordance with the annex of Document no. 6), counted from that date, and interest on the remaining € 5,947.75 which should have been reimbursed by 31 August 2011 (Document no. 1, and article 104, paragraph 6, of the CIRC), counted from 1 September 2011, in a total base of incidence of interest of € 66,089.20".

The AT in its reply (article 179) states "even if the merit of the claim as to payment of interest were configured... its calculation would always have as its starting date the date on which the decision occurred that dismissed"... the ex officio revision and never the moment indicated by the Claimant.

In harmony with the provision in letter b) of article 24 of RJAT, the arbitral decision on the merit of the claim of which no appeal or impugnation is possible binds the Tax Administration from the end of the period provided for appeal or impugnation, with this, in the exact terms of the merit of the arbitral decision in favor of the subject and up to the end of the period provided for spontaneous execution of sentences of tax judicial courts, having to "restore the situation that would exist if the tax act object of the arbitral decision had not been practiced, adopting the acts and operations necessary for that effect", which is in harmony with what is provided in article 100 of the LGT (applicable by virtue of what is provided in letter a) of paragraph 1 of article 29 of RJAT) which establishes that "the tax administration is obliged, in case of total or partial merit of claim, judicial impugnation or appeal in favor of the subject, to the immediate and full restoration of the legality of the act or situation object of the dispute, comprising the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".

Although article 2, paragraph 1, letters a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals that function in CAAD, making no reference to condemnatory decisions, should be understood that the competences include the powers which, in judicial impugnation process, are attributed to the tax courts, being that the interpretation that harmonizes with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it is proclaimed, as a first directive, that "the tax arbitral process must constitute an alternative procedural means to the process of judicial impugnation and to action for recognition of a right or legitimate interest in tax matters".

The judicial impugnation process, despite being essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration in the payment of compensatory interest, as is inferred from article 43, paragraph 1, of the LGT, in which it is established that "compensatory interest is due when it is determined, in gracious claim or judicial impugnation, that there was error imputable to services from which results payment of the tax debt in amount superior to the legally owed" and from article 61, paragraph 4 of CPPT (in the wording given by Law no. 55-A/2010, of 31 December, to which corresponds paragraph 2 in the original wording), which "if the decision that recognized the right to compensatory interest is judicial, the period of payment is counted from the beginning of the period of its spontaneous execution".

Thus, paragraph 5 of article 24 of RJAT, in saying that "payment of interest is due, regardless of its nature, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process", must be understood as permitting the recognition of the right to compensatory interest in the arbitral process.

In the case at issue, it is manifest that, as a consequence of the annulment of the decisions which fell on the request for ex officio revision and the hierarchical appeal (placing in question, indirectly, the legality of the self-assessment acts), there is cause for reimbursement of the tax paid, by virtue of the said articles 24, paragraph 1, letter b), of RJAT and 100 of the LGT, since this is essential to "restore the situation that would exist if the tax act object of the arbitral decision had not been practiced".

The substantive regime of the right to compensatory interest is regulated in article 43 of the LGT, which establishes, insofar as relevant herein, the following:

Article 43

Undue Payment of Tax Obligation

1 – Compensatory interest is due when it is determined, in gracious claim or judicial impugnation, that there was error imputable to services from which results payment of the tax debt in amount superior to the legally owed.

2 – Error imputable to services is also considered to exist in cases in which, although the assessment is effected on the basis of the taxpayer's declaration, the taxpayer has followed, in its completion, the generic guidelines of the tax administration, duly published.

3 - Compensatory interest is also due in the following circumstances:

a) When the legal period for official restitution of taxes is not complied with;

b) In case of annulment of the tax act by initiative of the tax administration, from the 30th day following the decision, without the credit note having been processed;

c) When the revision of the tax act by initiative of the taxpayer is made more than one year after its request, except if the delay is not imputable to the tax administration.

4 - The rate of compensatory interest is equal to the rate of compensatory interest.

5 - In the period that elapses between the date of the end of the period of spontaneous execution of judicial decision having force of res judicata and the date of issuance of the credit note, regarding the tax that should have been reimbursed by judicial decision having force of res judicata, default interest is owed at a rate equivalent to double the rate of default interest defined in the general law for debts to the State and other public entities. (Added by Law no. 64-B/2011, of 30 December).

The illegality of the decisions adopted in the course of ex officio revision and hierarchical appeal of the self-assessments is imputable to the Tax Administration, which dismissed them by its initiative.

In the present case the regime of letter c) of paragraph 3 of article 43 of the LGT is to be applied, since, between the date on which the taxpayer made the first request to the AT regarding the non-conformity of the self-assessments (on 28 May 2015) and the date on which a dismissal decision was rendered (on 30 November 2015) the period "more than one year" did not elapse (point 6 of the proven matters of fact).

As regards the self-assessments, which were made by the Claimant, it is to be understood that the error affecting them is imputable to the Tax Administration.

However, in accordance with Jorge Lopes de Sousa, in "On the Civil Liability of the Tax Administration for Illegal Acts", Áreas Editora, Lisbon, 2010, page 52:

"In situations in which the practice of the act that defines the tax debt falls to the taxpayer (as occurs, namely, in the aforesaid cases of self-assessment, withholding at source and payment on account), as well as in those in which the act is practiced by the Tax Administration on the basis of incorrect information provided by the taxpayer and there is place for administrative impugnation (gracious claim or hierarchical appeal), the error will become imputable to the Tax Administration following the eventual dismissal of the claim presented by the taxpayer, that is, from the moment in which, for the first time, the Tax Administration takes a position on the taxpayer's situation, having at its disposal the elements necessary to render a decision with correct assumptions".

Consequently, the Claimant has the right to compensatory interest, in accordance with articles 43, paragraph 1, of the LGT and 61 of CPPT, counted from 30 November 2015, regarding the amount of € 66,089.20.

Compensatory interest is owed on the said amount, at the legal supplementary rate, in accordance with articles 43, paragraphs 1, and 35, paragraph 10 of the LGT, article 24, paragraph 1, of RJAT, article 61, paragraphs 3 and 4, of CPPT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April, from the date above indicated and until issuance of the respective credit note.

VII - JUDGMENT

In accordance with and based on the grounds set forth above, the following is decided:

• To judge the exception of incompetence of the TAC lacking merit, insofar as it contends for lack of material competence to review the dismissal decisions that fell on the request for ex officio revision and on the hierarchical appeal referred to in points 6 and 7 of the proven matters of fact.

• To judge the request for pronouncement to have merit regarding the annulment of the rulings referred to in 6 and 7 of the proven matters of fact, through which were dismissed the requests for ex officio revision and the hierarchical appeal, since paragraph 21 of article 88 of the IRC Code permits the deduction of PEC from the IRC collection resulting from application of autonomous taxation rates of fiscal years prior to 2016, as is the case.

• To annul the said decisions for not being in harmony with paragraph 21 of article 88 and letter d) of paragraph 2 of article 90, both of the IRC Code, combined with Constitutional Court decision no. 267/2017 of 31 May 2017, which entails, consequently, the illegality of the self-assessments alluded to in point 2 of the proven matters of fact, which in this conformity are also annulled.

• To judge further the requests for reimbursement of the amount of € 66,089.20 and condemnation of the AT in the payment of compensatory interest, calculated on this value and counted from 30 November 2015, until issuance of the respective credit note, to have merit.

Value of the case: in accordance with what is provided in article 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Processes (and letter a) of paragraph 1 of article 97-A of CPPT), the value of the case is fixed at € 66,089.20.

Costs: in accordance with what is provided in article 22, paragraph 4, of RJAT, the amount of costs is fixed at € 2,448.00 in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Processes, to be borne by the Respondent.

Notify.

Lisbon, 14 November 2017

The Collective Arbitral Tribunal,

José Baeta de Queiroz

Augusto Vieira

Hélder Faustino

(with declaration of dissent)

DECLARATION OF DISSENT

I do not agree with the opinion that prevailed for the reasons which I present in summary form.

The fundamental disagreement that separates us from the thesis defended in the present decision concerns, first and foremost, the nature of autonomous taxation, since we endorse the uniform and reiterated case law of the Constitutional Court on the matter. Case law initiated with the dissenting vote of the Honorable Counselor Vítor Gomes, appended to Decision no. 204/2010, in terms of which, "(…) although formally inserted in the CIRC and the amount that permits its collection is assessed in its scope and under the heading of IRC, the norm in question concerns a fiscal imposition that is materially distinct from the taxation in this cedule, (….) Indeed, we are before autonomous taxation, as the very letter of the provision says. And this makes all the difference. It is not a matter of taxing an income at the end of the taxation period, but certain types of expenses in themselves, for the understandable reasons of fiscal policy that the decision points out.".

By Decision no. 310/12, of 20 June, the Constitutional Court reformulated the doctrine of Decision no. 18/11, drawing closer to the then dissenting vote of Counselor Vítor Gomes, in the following terms:

"Contrary to what occurs in the taxation of income under IRS and IRC, in which the totality of income earned in a given year is taxed (which implies that only at the end of it can the tax rate be determined, as well as the bracket in which the taxpayer is inserted), in the case each expense effected is taxed, in itself considered, and subject to a certain rate, with autonomous taxation being determined independently of the IRC that is owed in each fiscal year, by not being directly related to the obtaining of a positive result, and therefore, subject to taxation.

Thus, and in the case of IRC, we are before an annual tax, in which not each income received per se is taxed, but rather the aggregation of all income obtained in a given year, with the law considering that the tax fact is had as verified on the last day of the taxation period (cf. article 8, paragraph 9, of the CIRC).

Now as regards autonomous taxation in IRC, the tax fact is the very carrying out of the expense, not being faced with a complex fact, of successive formation throughout a year, but faced with an instantaneous tax fact.

This characteristic of autonomous taxation directs us thus to the distinction between periodic taxes (whose tax fact is produced in a successive manner, by the passage of a given period of time, as a rule annual, and tends to repeat itself over time, generating for the taxpayer the obligation to pay tax on a regular basis) and taxes of single obligation (whose tax fact is produced in an instantaneous manner, appears isolated in time, generating on the taxpayer an obligation of payment on an avulsive basis).

In autonomous taxation, the tax fact that gives rise to the tax, is instantaneous: it is exhausted in the act of carrying out a certain expense that is subject to taxation (although the determination of the amount of tax, resulting from the application of the diverse rates of autonomous taxation to the diverse acts of carrying out expense considered, is to be effected at the end of a given taxation period). But the fact that assessment of the tax is effected at the end of a given period does not transform it into a periodic tax, of successive formation or of durable character. That operation of assessment translates itself only into the aggregation, for purpose of collection, of the set of operations subject to that autonomous taxation, whose rate is applied to each expense, with no influence of the volume of expenses effected in the determination of the rate.".

This case law was reiterated by the Plenary Decision, in Decision no. 617/2012, process no. 150/12, of 31/01/2013 and in Decision no. 197/2016, process no. 465/2015. In the same sense, also the case law of the Supreme Administrative Court set forth, among others, in the Decision of 21/03/2012, process no. 830/11, of 21/30/2012.

This orientation is followed, in general, by doctrine. For Rui Morais (Notes on IRC, Almedina, 2009, pp. 202-203) "(…) a taxation is at issue which bears on certain expenses of subjects, which are taken as constituting tax facts (…)". Casalta Nabais, referring to "(…) autonomous taxation of undocumented expenses and representation and motor vehicle expenses (…)", considers "(…) it is a matter of taxation on expense or consumption and not on income (…)". (Tax Law, Almedina, 2015, page 542). In the same sense, see Ana Paula Dourado (Tax Law, Lessons, 2015, pp. 237 et seq.).

Finally, even if doubts were admitted in this regard, the same would have to be considered overcome, let us see.

In fact, the legislator itself recognizes that "autonomous taxation" is not IRC (cf. article 23-A, paragraph 1, letter a), of the IRC Code, in the wording introduced by Law no. 2/2014, of 16 January) in saying that "(…) are not deductible for purposes of determining the taxable profit (…) the IRC, including autonomous taxation". If the tax legislator understood that the IRC included autonomous taxation, it had no need to add it after referring to the IRC in this provision, insofar as this would necessarily already include autonomous taxation, following the orientation that prevailed.

It is, on the other hand, accepted by the generality of doctrine and case law that autonomous taxation stems from the need to prevent abuses as to the recognition of certain charges or expenses and which may easily be object of diversion to private consumption or which, in some manner, are susceptible of formally configuring an expense of the legal person, but which, substantively, represent or can configure abuses in order to minimize the actual measure of the tax. It is a taxation that is explained by the need to prevent and "...prevent that, through those expenses, companies would proceed to disguised distribution of profits, especially dividends which thus would be subject to IRC as profits of companies, as well as combat fraud and tax evasion that such expenses would cause (…)" (Casalta Nabais, Idem, p. 542). In the same sense, Saldanha Sanches, Manual of Tax Law, Coimbra Editora, 2007, p. 406.

In fact, autonomous taxation configures thus, anti-abuse norms directed at rationalizing specific behaviors of taxpayers vis-à-vis the tax duty, whereby traditionally achieved a measure of tax inferior to what their effective capacity to contribute demonstrated but that, by virtue of those abusive behaviors was susceptible of being mitigated or eliminated, with evident violation or postponement of the principle of justice, of fair distribution of the fiscal burden by whoever reveals capacity to contribute.

As stated in Arbitral Decision no. 722/2015-T which we likewise follow, by appeal to the rational logical element, we have that "the total IRC collection is not a unitary reality, but composed (…)" and thus it is possible to discern, in the determination of IRC a "total collection of the tax proper, resulting from the general mechanics of IRC determination (…), which is owed on the basis of constitutional foundation based on the duty of each one (this including legal persons) to contribute to the expenses of the public in accordance with their means (article 103, paragraph 1 of the Constitution). All in respect of and compliance with the principles of justice, equality and duty to pay tax in accordance with the capacity to contribute revealed. And from which are deducted the amounts referred to in article 90 of the CIRC and in the terms and manners referred therein".

"To this general collection, rooted in this foundational order foundation, is added the specific collection, owed by autonomous taxation, which has, as was made clear, its own root, sense and foundation, which is that of discouraging the adoption of the behaviors taxed by them, listed in article 88 of the code, which configures, with is settled doctrine, an anti abuse norm".

Concluding, autonomous taxation, which bears on certain expenses, functions differently from what constitutes the essential scope of IRC, which taxes income, and, notwithstanding the systematic insertion and functional connection to IRC, the truth is that they are collected within the scope of the assessment process of this tax without, however, losing their own dogmatic root.

On the other hand, and contrary to what is stated in the present decision, there does not thus subsist any legal foundation or identity of "(…) reasoning of deductibility of tax benefits (…)" as occurs in the present decision.

Attentive to the nature and reason for being of autonomous taxation, it is not possible to admit, under pain of subversion of the order of values, the deduction of tax benefits and of special payments on account from the collection of those autonomous taxation, under pain of de-characterization of the principles which specifically are intended to be pursued, both with such incentives and with autonomous taxation.

Indeed, having the regime of autonomous taxation a [...truncated...]