Summary
Full Decision
ARBITRAL AWARD
The arbitrators Counsel Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. António Alberto Franco and Dr. A. Sérgio de Matos (arbitrator-members), appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 10-11-2016, agree as follows:
1. Report
A…, S.A., taxpayer number…, with registered office at … no. …/…, at Km…, …, … - … …(hereinafter "Claimant"), applied for the constitution of an Arbitral Tribunal with a view to the annulment of the statement of assessment of IRC and compensatory interest and settlement of accounts, relating to the tax year 2014, together with other legal consequences, in particular reimbursement of amounts paid, indemnification interest and compensation for costs incurred or to be incurred for purposes of suspension of the tax enforcement proceedings, namely with the provision of security.
The PORTUGUESE TAX AND CUSTOMS AUTHORITY is the Respondent.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Portuguese Tax and Customs Authority on 18-08-2016.
Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable timeframe.
On 25-10-2016 the parties were duly notified of this appointment, having manifested no intention to refuse the appointment of the arbitrators, pursuant to articles 11, no. 1, paragraphs a) and b) of RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 10-11-2016.
The Portuguese Tax and Customs Authority defended that the request should be judged unfounded.
On 18-01-2017, a hearing was held in which testimonial evidence was presented and it was decided that the proceedings continue with written submissions.
The parties submitted their arguments.
The arbitral tribunal was duly constituted, pursuant to the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January, and is competent.
The parties are duly represented, possess legal personality and capacity, are legitimate and are represented (articles 4 and 10, no. 2, of the same decree-law and article 1 of Order no. 112-A/2011, of 22 March).
The proceedings are not affected by nullities, no exceptions have been raised and there is no obstacle to the examination of the merits of the case.
2. Factual Matters
2.1. Proven Facts
Based on the elements contained in the proceedings and in the administrative procedure attached to the case file, the following facts are considered proven:
a) The Claimant engages in the activity of "Sale of light motor vehicles" – CAE 45110;
b) On 25-09-2014, the Claimant, entered into, by public deed, a dation in payment contract, with a view to partial regularization of a debt owed to Bank B… (B…);
c) In this context, it transferred a set of immovable properties to the legal sphere of B…, including an urban property, composed of a plot of land, intended for industrial purposes, located at…, in the parish of …, Municipality of Setúbal, registered in the matrix under article … and property description no…, to which the price of € 898.600,00 was assigned;
d) In an assessment carried out by the Portuguese Tax and Customs Authority, the tax value of € 2.369.460,00 was assigned to the said property;
e) On 28-01-2015, the Claimant submitted a request for proof of the price actually practiced in the transfer, pursuant to the review procedure provided for in no. 1 of article 139 of CIRC (document no. 13 attached with the request for arbitral award, whose content is hereby reproduced);
f) On 16-06-2015, a meeting was held in the said review procedure, in which it was decided to request certain documents from the Claimant (document no. 14 attached with the request for arbitral award, whose content is hereby reproduced);
g) On 07-07-2015, a new meeting was held in the review procedure, with the expert appraisers not reaching agreement (document no. 15 attached with the request for arbitral award, whose content is hereby reproduced);
h) On 10-07-2015, the expert appraisers appointed by the taxpayer and by the Tax Administration submitted their reports which are contained in document no. 16 attached with the request for arbitral award, whose content is hereby reproduced);
i) In the report of the Expert Appraiser appointed by the taxpayer, the following is stated, among other matters:
B) Regarding attempts to commercialize the building
11. Despite all the evidence, it is necessary to clarify that, prior to the dation in payment transaction which occurred, on various occasions, A… undertook attempts to commercialize the property in question.
12. It is important to note here the contact established with company C… with a view to the sale of the property, which would prove entirely unsuccessful given the conditions of the real estate market.
13. Consequently, following the absence of other proposals presented by other entities, the property was designated as the object of the dation in payment transaction, with a view to the partial regularization of the debt owed to B….
14. In this regard, it is necessary to make certain comments, as it is important not to overlook that, following the economic and financial crisis existing at the time of the transaction, the real estate market sector recorded a substantial devaluation of property values, prompted by a gradual loss of confidence of consumers and international investors.
15. In this sequence, there was a significant increase in bad debt, which, in the specific case of mortgage credit, resulted in an increase in properties transferred in dation in payment, by judicial sale in enforcement proceedings or in tax enforcement.
16. Faced with the scenario described above, like various companies, the D… Group faced a situation of lack of liquidity, which, consequently, sustained the solution found by A… in designating the property in question as the object of the dation in payment, since the same was constituted as the only asset held by the company which in fact possessed some liquidity to meet the liabilities accumulated by the company.
17. In this context, it is important to note that, even so, in view of the economic situation experienced at that time, the assessment carried out on the property by B… amounted to a reasonable and market value.
18. Therefore, consequently, the dation in payment transaction of the same was configured as the most appropriate alternative for purposes of regularization of the debt of A… to B…, resulting in significant relief from the interest due to that financial institution.
19. In light of the above, once proof of the effective price is provided, the value of € 898.600 should be considered for purposes of the determination of IRC.
j) In the report of the Expert Appraiser appointed by the Portuguese Tax and Customs Authority, the following is stated, among other matters:
3. Regarding the analysis carried out and the contradictory debate
This procedure aims to assess the reality of the price practiced in the onerous transfers of immovable property through the provisions of articles 91 and 92 of the General Tax Law, applicable by virtue of the legal reference made by the current article 139, no. 5 of CIRC, with the company bearing the burden of presenting proof that permits this conclusion.
Having analyzed the elements presented by the complainant, in three distinct moments:
> EG 2015…, on 28 January 2015, request for proof of price, art. 139 CIRC;
> EG 2015…, on 5 March 2015, response to letter…, of 23 February 2015;
And
> EG 2015…, on 24 June 2015, response to notification in minutes no. …/15, of 16 June 2015;
> The following documents were made available:
– Photocopy of the public deed of the dation in payment contract, executed on 25 September 2014, and property register of the property with article…, identified above;
– Photocopy of accounting extracts of accounts 431 - Land and Natural Resources and statement of calculation of the tax loss;
– Photocopy of correspondence established between A… and B…;
– Authorization for access to banking information of A… and its respective administrators, required by no. 6 of article 139 of CIRC.
– Loan contract no. …, of 26 June 2013, executed between A… and B…, SA;
– The same contract with amendments of "Dation in Payment", of 25 September 2014;
– Analytical trial balances for the months of June/2013, September/2014 and December 2014;
– Accounting extract of the B… loan account, for the same periods;
– Explanation/documentation of the accounting record of the loan contracts.
It must be noted that from the tax authority registry - Tax Administration and from all the documentation presented, the following facts were verified/analyzed:
– A…, SA, A…, engages in the activity of sale of motor vehicles, CAE 045110, since 1 January 1986.
– The dation in payment for partial regularization of the loan…, of 26 June 2013, executed between A… and B…, was constituted by various properties, as per the deed of dation in fulfillment, of which the following table was prepared:
(...)
– Tangible fixed assets are part of the company's assets that are expected to be used for more than one period in the production or supply of goods and services, leasing to third parties or for administrative purposes, with the aim of obtaining future economic benefits.
– And while within the scope of POC the recognition of incorporeal assets, current tangible fixed assets, was normally carried out at acquisition cost or production cost, under SNC the recognition is at fair value.
– The property in question, "…", on 30 September 2014, was recorded as a tangible fixed asset, account 431- Land and natural resources (measurement), in the amount of €4.540.000,00 (recognition).
– A… did not have the property assessed by an independent appraiser. In fact, the assessment in this procedure was requested by B….
– A… did not actively promote the sale of the property in order to assess the normal market value.
– On 25 September 2014, the complainant, with a view to the partial regularization of a debt owed to B…, B…, in the amount of €5.004.652,33, transferred a set of properties to which B… assigned the price of €2.074.833,60.
– Due to the dation in payment transaction the contract between A… and B… no. … was amended and altered for the amount of the debt of €3.209.517,14, which could be reconstructed, with the available elements, in the following table:
[...]
– The present transfer of properties is related to the execution of dation in payment of part of the loan…, borrowed from B… on 26 June 2013, and respective financial charges.
– Pursuant to article 23, nos. 1 and 2 paragraph a) of CIRC, all expenditures and losses incurred or borne by the taxpayer to obtain or secure income subject to IRC are deductible, namely financial charges.
It is verified from the analysis of the trial balances/2013, of the IES/2013 no…and from the summary table prepared from these that...
...that A… obtained loans whose funds it granted, in whole or in part, to third parties, even though there is a relationship of dominance between these and A….
– Without this having been recognized as income in the financial statements as the "price" of this provision of financing, pursuant to article 63 of CIRC, as a way to nullify the expenditure that did not contribute to the obtaining of the profit of its operating activity and as a guarantee of the basic principle of article 23 of CIRC (financial charges - €322.780,48 and financial revenues - €279,36, as reported in the IES/2013)
– In the same way the dation in payment of this/these property/properties for amortization/renegotiation of the above-mentioned loan, in which the price is lower than VTP, cannot be accepted in view of the above stated.
– That is, this "price"/expenditure incurred in financial charges is not accepted as an expenditure of the period, because from the perspective of the company's activity, there were no need for loan financing resources. Only A… resorted to this financing to grant it to third parties. And, there would have been no need for this dation, and above all to accept the "price" fixed by the financing company, B…, being the "fair value" of the property recognized by A… in the amount of €4.540.000,00.
4 Conclusion
Loans were granted obtained from related entities, without financial charges having been levied pursuant to article 63 of CIRC and Order no. 1446-C/2001, of 21 December.
Since the dation of this property is related to the above described and because unequivocal proof of the declared price was not presented, in the same way the differential between the price and the VPT is not accepted.
For which reason, with respect to the property in question, it is considered that article 64 of CIRC should be applied, with alteration of the fiscal result declared by the rule provided for in the article by the complainant in the part relating to the transfer of the property previously described, for purposes of the assessment of IRC for the tax year 2014.
k) On 30-07-2015, the Head of Division, substituting for the Deputy Director of Finance of the Tax Service of Lisbon, issued a decision in the review procedure referred to, a copy of which appears in document no. 15 attached with the request for arbitral award, whose content is hereby reproduced, in which it is stated, among other matters, the following:
B. Decision
Based on the above and on the elements contained in the proceedings, the review request and the positions of the expert appraisers involved in the contradictory debate, which are hereby fully reproduced, which were addressed above, it is incumbent upon us to decide:
Article 64 of CIRC establishes that:
"1 - The transferors and acquirors of real rights over immovable property must adopt, for purposes of determining taxable profit (...), normal market values that cannot be lower than the definitive tax values of the property that served as the basis for the assessment of the municipal tax on onerous transfers of immovable property (IMT) (...).
2 - Whenever, in the onerous transfers provided for in the previous number, the value contained in the contract is lower than the definitive tax value of the property, it is this value that must be considered by the transferor and acquiror, for determining taxable profit (...)."
Notwithstanding what is established in this provision, the legislator does not restrict, in any way, the possibility of the transferor, should he wish, to prove that the price actually practiced in the transfers of real rights over immovable property was lower than the tax value of the property that served as the basis for the assessment of the IMT, as determined in no. 1 of article 139 of the same statute.
Such proof must be carried out in a procedure initiated by request addressed to the competent Director of Finance and is governed by the provisions of articles 91 and 92 of the General Tax Law (G.T.L.) (nos. 3 and 5 of article 139 of CIRC).
The taxpayer transferor intends to prove that the price actually practiced in the transfer corresponding to the urban property, composed of a plot of land, intended for industrial purposes, called …, registered in the urban property matrix, in the parish of …, under article…, was lower than the tax value set in accordance with the rules established in the Code of the Municipal Tax on Onerous Transfers of Immovable Property.
The complainant alleges that, by public deed executed on 25.09.2014, she entered into a dation in payment contract, whose price assigned to the transferred property corresponded to the amount of € 898.600,00, a value lower than its Tax Value of € 2.369.460,00.
The reference made in no. 5 of article 139 of CIRC to the procedural means of articles 91 and 92 of the G.T.L. encompasses the necessity of promoting a meeting of expert appraisers, with the purpose of obtaining agreement on the price actually paid by the acquiror of the immovable property, based not only on elements resulting from access to banking secrecy, but also on the examination of the special or normal market conditions that surrounded the transfer.
The burden of proof that the price actually practiced in the transfer of the property was lower than the VTP rests with the taxpayer.
Proof that the actual price corresponds to the value contained in the contract depends, therefore, on justification of the abnormal market conditions in which the transfer took place, from which resulted the fixing of a price lower than the definitive VTP of the immovable property.
Having regard to all arguments presented and documents exhibited, it is verified that the taxpayer, nor his expert appraiser, demonstrated that the price actually practiced in the transfer in question was lower than the VTP established, as required by no. 1 of article 139 of CIRC.
This position is also defended by the Public Treasury's Expert Appraiser, as stated in his report: "(...) unequivocal proof of the declared price was not presented (...) for which reason, with respect to the property in question, it is considered that the rule provided for in article 64 of CIRC should be applied (...)".
In light of the above, within the scope of CIRC, for purposes of determining the taxable matter for the tax year 2014, I maintain the definitive tax value that served as the basis for the assessment of the Municipal Tax on Onerous Transfers of Immovable Property (IMT), pursuant to no. 1 of article 64 of CIRC, with the suspension of the assessment ceasing in the part corresponding to the value of the positive difference provided for in no. 2 of article 64 of CIRC - Field 416 of Table 11 of Form 22 of the tax year 2014- pursuant to what is provided in no. 4 of the same article.
l) On 10-09-2015, Service Order no. OI2015…, was issued for tax inspection of the Claimant;
m) In the said inspection, a Tax Inspection Report was prepared, a copy of which appears in document no. 21 attached with the request for arbitral award, whose content is hereby reproduced, in which it is stated, among other matters, the following:
III.1 - Description of facts and grounds
1 - On 25 September 2014 the taxpayer entered into a deed of dation in payment with B…, NIF: …, through which they transferred the following described properties:
[...]
2 - As a result of the general assessment carried out pursuant to article 15-A (article added by Law no. 60-A/2011 of 30/11) and assessment carried out following the change of intended use of the property communicated by the taxpayer, the following tax values were assigned (Annex II):
[...]
Through the said letters, the taxpayer was informed that he could request a second assessment pursuant to article 76 of CIMI, within 30 days of the notifications (should he not agree with the stated value). A right which the taxpayer did not exercise.
III.2 - Merely arithmetic corrections
1 - From the above stated, we can verify that, after the assessment, there exists a positive difference between the value contained in the contract and the tax value of one of the properties subject to transfer, as demonstrated:
[...]
2 - Thus, by force of article 64 of the Code of the Tax on Income of Legal Entities (CIRC), the positive difference of value in the amount of €1.470.860,00 contributes to the determination of taxable profit of the company in the tax year 2014, unless the taxpayer proves that the price actually practiced in the transfer of the property was lower than the tax value of the property that served as the basis for the assessment of the Municipal Tax on Onerous Transfers of Immovable Property (no. 1 of article 139 of CIRC).
3 - In this sense, the taxpayer submitted on 28-01-2015 the Review Request pursuant to no. 1 of article 139 of CIRC, in which it raises the examination of the tax value of the property (Annex IV).
From the review procedure - Request for Proof of Actual Price in the Transfer of Properties, it resulted that:
> "...The taxpayer, nor his expert appraiser, did not demonstrate that the price actually practiced in the transfer in question was lower than the VTP established, as required by no. 1 of article 139 of CIRC ...";
4 - As there was no agreement between the expert appraiser of the taxpayer and the expert appraiser of the Public Treasury, it was decided by the competent body of the Tax Administration that, for purposes of determining the taxable matter for the tax year 2014, to maintain the definitive tax value that served as the basis for the assessment of the Municipal Tax on Onerous Transfers of Immovable Property (IMT), pursuant to no. 1 of article 64 of the IRC Code, with the suspension of the assessment ceasing in the part corresponding to the value of the positive difference provided for in no. 2 of article 64 of CIRC, in accordance with the decision communicated to the taxpayer on 03-08-2015 (Annex V).
5 - Thus, as stated above, we will proceed with the merely arithmetic correction of the taxable matter in the amount of €1.470.860,00, for which reason the taxable profit presented by the taxpayer of €2.406.620,42 will be altered to €3.877.480,42, determined pursuant to article 17 and nos. 2 and 3 of paragraph a) of article 64, both of CIRC.
n) As a result of the inspection, an IRC assessment relating to the tax year 2014 with no. 2016…, in the amount of € 403.193,94, was issued, which includes the compensatory interest assessments nos. 2016 … and 2016…, with values of € 94,28 and € 8.306,87, respectively, as well as the Statement of Settlement of Accounts with document no. 2016… (documents nos. 1, 2 and 3, attached with the request for arbitral award, whose contents are hereby reproduced);
o) In the years 2013 and 2014 there was a significant economic crisis in the automobile and real estate sectors that aggravated the financial difficulties of the Claimant (testimony of witness F…);
p) The Claimant communicated to B… that it was not in a position to pay the debt and proposed its restructuring, in which it included the dation in payment of various properties, which had already been the subject of mortgages connected with loans made by the bank to the group of which the Claimant was a part (testimony of witness F…);
q) Following instructions from the Portuguese Central Bank for the separation of credit and rating sections, B… obtained assessments from independent external entities for the properties it receives through dation in payment, having a panel of appraisers for that purpose, accepting the values resulting from those assessments (testimony of witnesses F… and G…);
r) In property assessments, two values are always determined, one being the value of immediate sale and another the normal commercial value, with the former being lower than the latter (testimony of witness G…);
s) The first external assessment obtained by B… for the property referred to was in the amount of € 883.700;
t) Subsequently, B… obtained an external assessment of the property, which was carried out by an independent company, H…, Lda, in which the immediate sale value (ISV) of € 898.600,00 was assigned to the property (document no. 8, attached with the request for arbitral award, whose content is hereby reproduced);
u) H…, is an entity accredited with the CMVM with the identification of its qualified appraisers, among which the undersigned, I… and also, J…, as registered with the CMVM, which appears in document no. 9 attached with the request for arbitral award, whose content is hereby reproduced;
v) The value was determined by the said company, using two methods, taking into account the market values of similar properties in the vicinity of the property referred to and the residual value of the land and construction potential, with the values found being similar (testimony of witness J…);
w) The tax value determined through the formula provided for in the IMI often does not determine the market value, as this has greater elasticity, depending on the will of the buyer and seller and, in the case of building land, the said formula does not take into account whether or not there are infrastructures and they do not exist in the case of the land in question, which devalues the land (testimony of witness J…);
x) In the area where the said land is located, there has been almost no construction since 2010 onwards (testimony of witness J…);
y) It was for this value of € 898.600,00 that B… agreed to accept the property in exchange for the settlement of debt (document no. 10 attached with the request for arbitral award, whose content is hereby reproduced and testimony of witness F…);
z) B… devotes to immediate sale the properties it receives in dation in payment, seeking to alienate them as quickly as possible, as it does not engage in the commercialization of properties as a business and, therefore, always considers for purposes of dation in payment the immediate sale value that was determined by the external appraising unit (testimony of witness F…);
aa) The Claimant, in 2013, had initiated contact and diligences with a real estate agency "C…", external appraising entity, which assessed the property at € 1.500.000,00 (document no. 11 attached with the request for arbitral award, whose content is hereby reproduced);
bb) This specialized independent entity, C..., stated the following: "There are various lands and subdivisions available for the implementation of industrial units, some of municipal initiative. It is therefore considered that the land has low liquidity" (document no. 11 attached with the request for arbitral award);
cc) The property has been for sale since January 2015 for the amount of € 900.000,00, was the subject of sales promotion actions for that amount and found no buyer, although it is for sale at an agency for € 1.200.000,00 as a price for negotiation (testimony of witness F… and witness …);
dd) On 21-07-2016, the Claimant submitted the request for constitution of the arbitral tribunal which gave rise to the present proceedings.
2.2. Unproven Facts
It was not proven that the Claimant paid the assessed amount, nor that it provided security to suspend any tax enforcement proceedings connected with the IRC and compensatory interest assessments being challenged.
2.3. Reasoning for the determination of factual matters
The proven facts are based on documents attached by the Claimant with the request for arbitral award and on the administrative proceedings, in addition to testimonial evidence.
The witnesses examined appeared to testify with impartiality and with knowledge of the facts they stated.
3. Legal Matters
Article 64 of CIRC establishes that "the transferors and acquirors of real rights over immovable property must adopt, for purposes of determining taxable profit in accordance with this Code, normal market values that cannot be lower than the definitive tax values of the property that served as the basis for the assessment of the municipal tax on onerous transfers of immovable property (IMT) or that would have served in the case of there being no assessment of this tax" (no. 1) and that "whenever, in the onerous transfers provided for in the previous number, the value contained in the contract is lower than the definitive tax value of the property, it is this value that must be considered by the transferor and acquiror, for determining taxable profit" (no. 2).
Article 139, no. 1, of CIRC establishes that "the provision of no. 2 of article 64 is not applicable if the taxpayer proves that the price actually practiced in the transfers of real rights over immovable property was lower than the tax value of the property that served as the basis for the assessment of the municipal tax on onerous transfers of immovable property".
In this same article a special procedure is provided for the taxpayer to prove that the price actually practiced in the transfers of real rights over immovable property was lower than the tax value of the property that served as the basis for the assessment of the municipal tax on onerous transfers of immovable property, establishing, among other matters, the following:
3 – The proof referred to in no. 1 must be carried out in a procedure initiated by request addressed to the competent Director of Finance and submitted in January of the year following that in which the transfers occurred, if the tax value is already definitively established, or within 30 days of the date on which the assessment became definitive, in the remaining cases.
4 – The request referred to in the previous number has suspensive effect on the assessment, in the part corresponding to the value of the positive difference provided for in no. 2 of article 64, which, in the event of total or partial rejection of the request, falls within the competence of the Directorate-General for Taxation.
5 – The procedure provided for in no. 3 is governed by the provisions of articles 91 and 92 of the General Tax Law, with the necessary adaptations, with the provision of no. 4 of article 86 of the same law being equally applicable.
6 – In the event of submission of the request for demonstration provided for in this article, the tax administration may access the banking information of the requester and of the respective administrators or managers relating to the tax period in which the transfer occurred and to the previous tax period, and to this end the corresponding authorization documents must be appended.
In the case at hand, the Claimant used this procedure, submitting proof with a view to demonstrating that the value for which the property was transferred, through dation in payment, was lower than the tax value of the property, being, in particular, € 896.600,00.
The documentary proof presented corroborates the Claimant's thesis and a convincing explanation was given for accepting a price considerably lower than the tax value, determined through the formula provided for in CIMI.
Specifically, the difficult financial situation in which the Claimant found itself and the need to regularize its situation with B… and the fact that the latter only acquires properties at prices that are practicable in immediate sale, reasonably explain why the Claimant accepted a price considerably lower than the tax value.
On the other hand, the assessment carried out by an independent entity, taking into account the concrete factors relevant to the determination of the market price, appears to be more suitable for determining the real market price than the abstract formula provided for in CIMI, as was convincingly explained by witness J….
Finally, the fact that B… has not been able to sell the land for € 900.000,00 for approximately 2 years, despite having carried out promotional actions, clearly indicates that the value of € 896.600,00, determined in the assessment, is not lower than the real market value.
Thus, it is to be concluded that the Claimant provided documentary proof in the review procedure, which was corroborated by testimonial evidence, that the price actually practiced in the transfer of the land referred to in the case file was € 896.600,00.
Therefore, the decision of the review procedure, the correction made in the inspection procedure and the IRC assessment being challenged are vitiated by a defect of violation of law, due to error concerning the factual presuppositions, in addition to violation of articles 64 and 139 of CIRC.
These defects justify the annulment of the assessment, in accordance with the provision of article 163, no. 1, of the Administrative Procedure Code, applicable as a subsidiary matter pursuant to article 2, paragraph c), of the GTL.
The compensatory interest assessments, having as a presupposition the IRC assessment, are vitiated by the same defect, and therefore their annulment is likewise justified.
3.1. Issues of prejudicial knowledge
As the request for arbitral award is to be judged well-founded on the basis of the defect of error concerning factual presuppositions, the examination of the remaining issues relating to the legality of the IRC and compensatory interest assessments becomes prejudicial, as it would be futile.
4. Compensation for undue security and reimbursement of IRC and compensatory interest, with indemnification interest
It was not proven that the Claimant paid the assessed amounts of IRC and compensatory interest, nor that it provided security to suspend any tax enforcement proceedings which has as its object their coercive collection.
Therefore, the requests for reimbursement of amounts of IRC and compensatory interest, indemnification interest and compensation for undue security are unfounded.
5. Decision
In accordance with the above, the members of this Arbitral Tribunal agree to:
a) Judge the request for arbitral award well-founded;
b) Annul the IRC assessment no. 2016 … and the compensatory interest assessments nos. 2016 … and 2016 …;
c) Judge unfounded the requests for reimbursement of amounts of IRC and compensatory interest, indemnification interest and compensation for undue security.
6. Valuation of the dispute
In accordance with the provisions of article 306, no. 2, of the CPC of 2013, article 97-A, no. 1, paragraph a), of the CPPT and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the dispute is set at € 403.193,94.
7. Costs
Pursuant to article 22, no. 4, of RJAT, the amount of costs is set at € 6.732,00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Portuguese Tax and Customs Authority.
Lisbon, 23-02-2017
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(António Alberto Franco)
(A. Sérgio de Matos)
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