IRS Deductible Expenses: Arbitral Tribunal Rules on Additional Tax Assessment (CAAD 435/2014-T)

ARBITRAL DECISION

I – REPORT

A – PARTIES

A..., resident at Avenue ... Monte Estoril, appearing as head of the estate with the NIF ..., opened by the death of her mother B..., hereinafter referred to as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes, by means of Decree-Law No. 118/2011, of 15 December) hereinafter referred to as Respondent or AT.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was regularly constituted on 23-06-2014, to appreciate and decide the object of the present proceedings, and was automatically notified to the Tax and Customs Authority on 23-06-2014, as stated in the respective minutes.

The Claimant did not proceed to appoint an arbitrator, whereupon, pursuant to the provisions of Article 6, No. 1 and Article 11, No. 1, letter b) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council designated His Excellency Dr. Paulo Ferreira Alves, the appointment having been accepted as legally provided.

On 06-08-2014 the parties were duly notified of this designation, and did not manifest any will to refuse the designation of the arbitrators, in accordance with Article 11, No. 1, letters a) and b), of the Rules and Regulations of Arbitration Tribunals (RJAT) and Articles 6 and 7 of the Deontological Code.

In accordance with the provision of Article 11, No. 1, letter c) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the sole arbitral tribunal is regularly constituted on 16-07-2014.

It is materially competent, in accordance with Articles 2, No. 1, letter a), and 30, No. 1, of Decree-Law No. 10/2011, of 20 January.

On 17-10-2014, the meeting provided for in Article 18 of the RJAT took place, in which the representatives of the claimant and the respondent were given the floor.

The parties possess legal personality and capacity, are legitimate and are legally represented (Articles 4 and 10, No. 2, of the same diploma and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings do not suffer from vices that would invalidate them.

B – REQUEST

1. The Claimant hereby seeks a declaration of illegality of the order that partially granted the administrative appeal of the additional tax assessment No. 2013 ... of Personal Income Tax relating to the year 2013, which set total tax to be paid at €10,458.07 (ten thousand four hundred and fifty-eight euros and seven cents).

C – CAUSE OF ACTION

1. To support its request for arbitral pronouncement, the Claimant alleged, with a view to declaring the illegality of the order that partially granted the administrative appeal of the additional tax assessment No. 2013 ... of Personal Income Tax relating to the year 2013, in summary, the following:

2. The declaration of illegality of acts determining the taxable base which consisted in not having recognized as deductible expenses to the gross rental income declared by the taxpayer, whose estate the Claimant represents in accordance with Article 41, No. 1 of the Personal Income Tax Code (CIRS), certain charges whose payment was made and whose proof of necessity was presented.

3. The tax resulting from the assessment act now challenged, in the amount of €10,458.07, has been paid.

4. The claimant maintains that she was notified on 17 October 2013 by the Cascais Tax Service..., and was informed that as a result of discrepancies identified in the Form 3 tax return for the year 2012 relating to her mother, who had since passed away, it was determined, by decision on that same date of the head of that Service, to proceed with a correction of €23,980.56 to the declared value, which would give rise to the assessment of the corresponding tax.

As a result of the above-mentioned correction, the Cascais Tax Service... proceeded on 31 October 2013 to assessment No. 2013 ..., from which resulted tax to be paid of €10,458.07.

The Claimant, on 12 November 2013, filed an administrative appeal pursuant to Article 140 of the CIRS, which was entered under No. ...2013..., having presented a set of supporting documents for maintenance and upkeep expenses relating to the immovable property listed in the return, the value of which she understood should be deducted from the gross income declared by virtue of Article 41 of the CIRS.

The claimant was subsequently notified by means of Official Letter No. ..., of ... November 2013, that the administrative appeal she had presented was partially granted, in accordance with order of 27 of that month, so a correction document would be prepared.

The claimant maintains that the notification sent did not contain information about which costs were accepted and which were refused, nor about their respective grounds, limiting itself to presenting a table with the total amount that was taken into account with respect to each floor of the buildings in question, which, according to the respondent's position, prevented her from the normal exercise of the right of hearing, in response to the decision of the Tax Authority.

The claimant maintains that she requested that information, which was provided, first by email of 23 December 2013 and, subsequently, by Official Letter No. ..., of ... January 2014, from the same Tax Service, which enclosed a more complete proposed decision and reiterated the decision already previously communicated, through a new order of identical tenor, dated ... January 2014.

The Claimant alleges that she does not accept the understanding of the Cascais Tax Service... regarding the documents presented. On 10 February 2014 she filed a hierarchical appeal of this last decision, pursuant to Article 66 of the Code of Administrative Tax Procedure (CPPT).

The claimant was subsequently notified by Official Letter No. ..., of 13 May 2014, from the same Tax Service, that the Directorate of Finances of Lisbon had returned her appeal to that service, with a view to revoking the order of 9 January 2014, which had decided on the partial granting of the administrative appeal she had presented on 12 November 2013 and the consequent repetition of the notification for the exercise of the right of prior hearing, and the notification further stated that the hierarchical appeal was filed away.

By means of another official letter No. ..., of 13 May 2014, the Claimant maintains that she was indeed notified of the revocation of the aforesaid order of 9 January 2014 of the Head of the Cascais Tax Service... and invited to exercise the right of hearing with respect to the order of the same entity of 27 November 2013.

The claimant alleges that on 29 May 2014 she delivered her response to the Cascais Tax Service... for the exercise of the legal right of hearing, reproducing the arguments already previously presented in the petition for hierarchical appeal now filed away and again attaching the supporting documentation she deemed necessary.

And she was again notified by Official Letter No. ... from the Cascais Tax Service..., of 30 May 2014, that by order of the same date, her administrative appeal of 12 November 2013 had been again partially granted, having recognized some additional costs in light of the documentation presented, although others continued to be refused.

The Claimant, on 23 April 2014, chose to pay the tax in question.

The Claimant confines the vices of illegality to the following expenses:

a) Municipal Property Tax (IMI) borne by the taxpayer in 2012;

b) Cost of supply and installation of kitchen equipment on the 2nd floor Apt. of the building listed as Article 79;

c) Water supply invoices from...;

d) Work accident insurance;

e) Charges for payment of Social Security contributions for the doorwoman and cleaning employee of the building.

Furthermore, the claimant maintains that in rejecting a part of the expenses relating to the rental income obtained by the taxpayer in the year 2012, the proof of which was produced, this was based on a misinterpretation (or miscalculation) of the documents by whoever examined the appeal, or resulted from assessment criteria devoid of adequate legal foundation, or presents no justification or grounds for the refusal of expenses, the reason for non-acceptance of the same being unknown.

In these terms, the claimant alleges that it is an act vitiated by erroneous quantification of the taxable income of the taxpayer and by absence of grounds, situations which constitute grounds for challenge as provided in Article 99 of the CPPT, applicable to the present proceedings by virtue of Article 10, No. 2, c) of Decree-Law No. 10/2011.

D – RESPONDENT'S REPLY

1. The Respondent, duly notified for that purpose, timely presented its reply in which, in brief summary, alleged the following:

The respondent understands that the allegations in letters a) through h) of point 3 of the Initial Petition should be disregarded, since their content relates to acts not subject to these proceedings or already revoked.

The respondent alleges that the act subject to these proceedings is the act identified in letter k) of that item, as indeed expressly acknowledged by the claimant in point 5 of the Initial Petition.

A request which, according to the respondent, consists in the condemnation of the AT to consider the expenses and charges set out in table 4 of Annex F of the Personal Income Tax return, relating to the year 2012.

The respondent alleges that in light of the provision of Article 41, the expenses incurred must be directly related to the source generating the income, that is, to each immovable property, duly individualized. Where it is not possible to establish an unequivocal relationship/correspondence between the expenses allegedly incurred and the immovable property generating rental income, they cannot, by manifest lack of legal support, be admitted.

In the case at hand, the Claimant did not clearly demonstrate that the expenses presented were directly related to the rented immovable properties.

The respondent argues that for expenses to be deductible, pursuant to Article 41 of the CIRS, they must unequivocally identify the rented immovable property to which they relate, and must be, if applicable, and as is the case here, allocated or divided in accordance with the pro-rata share of the respective area/floor generating the income – and this, notably, with respect to IMI and condominium expenses. And in the event that doubts remain, these expenses cannot be valued pursuant to Article 41 of the CIRS.

As to the question of IMI, in the case at hand the Claimant did not clearly demonstrate that the expenses presented were directly related to the rented immovable properties.

As to the supply and installation of kitchen equipment, the respondent understands that only "maintenance and upkeep expenses" are deductible; tenant requirements are not deductible.

As to water supply invoices, the respondent understands that this is not granted; the amount of expenses could only be considered in the exact proportion in which it can be allocated to the rented areas, that is, those generating the income – as required by Article 41 of the CIRS.

As to work accident insurance, the respondent alleges that pursuant to the policy attached to the record, it states that it was modified with effect from September 2012, that is, if it were to be accepted, it could only be with reference to 4/12 months, and further states that it does not follow from the record that the workers were insured to provide service in the rented areas, or in the common areas. The respondent maintains that they may simply provide services and assistance to others, or to the taxpayer whom the Claimant now represents here.

For the rest, both the policy and the invoice are issued in the name of someone other than the Claimant.

As to contributions for Social Security, the respondent alleges that whether Social Security contributions be characterized as a tax, or whether they be characterized as a benefit for the worker, or "insurance premium," or even a fee, whenever it would be possible to comprehend only and solely the part that belongs to the worker to pay.

Based on its grounds, the respondent concludes its position by alleging that based on the Arbitral Request and the documents presented by the claimant, there is no error in calculation, oversight, or violation of legal provision, wherefore the request for arbitral pronouncement should be judged unfounded, absolution of the respondent from the claim, as is right and justice.

E – FACTUAL FOUNDATION

1. Before entering into the appreciation of these questions, it is necessary to present the factual matters relevant to their understanding and decision, which was effected on the basis of documentary evidence and taking into account the alleged facts.

2. In matters of fact relevant, this tribunal accepts the following facts as established:

3. The claimant was notified on 17 October 2013 by the Cascais Tax Service... that as a result of discrepancies identified in the Form 3 tax return for the year 2012 of her mother, who had since passed away, it was determined, by decision of the head of that Service, to proceed with a correction of €23,980.56 to the declared value, which would give rise to the assessment of the corresponding tax.

4. As a result of the above-mentioned correction, the Cascais Tax Service... proceeded on 31 October 2013 to assessment No. 2013 ..., from which resulted tax to be paid of €10,458.07.

5. Tax which was assessed by the claimant on 23 April 2014.

6. The Claimant, on 12 November 2013, filed an administrative appeal pursuant to Article 140 of the CIRS, which was entered under No. ...2013....

7. The claimant was notified by means of Official Letter No. ..., of 28 November 2013, that the administrative appeal was partially granted.

8. The claimant was notified by Official Letter No. ..., of 9 January 2014, from the same Tax Service, which enclosed a complete proposed decision and reiterated the decision already previously communicated, through a new order of identical tenor, dated 9 January 2014.

9. The Claimant, on 10 February 2014, filed a hierarchical appeal of this last decision, pursuant to Article 66 of the CPPT.

10. The claimant was notified by Official Letter No. ..., of 13 May 2014, from the same Tax Service, that the Directorate of Finances of Lisbon had returned her appeal to that service, with a view to revoking the order of 9 January 2014 which had decided on the partial granting of the administrative appeal she had presented on 12 November 2013 and the consequent repetition of the notification for the exercise of the right of prior hearing, and the notification further stated that the hierarchical appeal had been filed away.

11. The claimant was notified of official letter No. ..., of 13 May 2014, about the revocation of the aforesaid order of 9 January 2014 of the Head of the Cascais Tax Service... and invited to exercise the right of hearing with respect to the order of the same entity of 27 November 2013.

12. The claimant, on 29 May 2014, delivered to the Cascais Tax Service... her response for the exercise of the legal right of hearing.

13. The claimant was notified by Official Letter No. ... from the Cascais Tax Service..., of 30 May 2014, that her administrative appeal of 12 November 2013 had been again partially granted.

14. The claimant is co-owner of urban immovable properties located in Lisbon, corresponding to land registry articles ..., ..., ... and also to the autonomous unit with article... G, the latter in Cascais.

F – UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, contained in the challenge, all those which are the object of concrete analysis were not proven, except those not stated in the factuality described above.

G – QUESTIONS TO BE DECIDED

1. Given the positions assumed by the parties in the arguments presented, the following constitutes a central question to be resolved, which must therefore be appreciated and decided:

a. The one alleged by the Respondent, and of official knowledge, of the exception of incompetence of the arbitral tribunal to know of the arbitral request.

b. The one alleged by the Claimant, declaration of illegality of the order that partially granted the administrative appeal of the additional tax assessment No. 2013 ... of Personal Income Tax relating to the year 2013.

H – EXCEPTION OF INCOMPETENCE OF THE ARBITRAL TRIBUNAL TO KNOW OF THE REQUEST

1. The questions of determination of the competence of tribunals are of priority knowledge and official knowledge and determine the absolute incompetence of the tribunal by reason of the subject matter and hierarchy, in accordance with Article 13 of the Code of Administrative Tax Procedure and Article 578 of the Code of Civil Procedure by subsidiary application, provided for in Article 29 of the RJAT.

2. The incompetence, whether absolute or relative, of the Arbitral Tribunal as to its material capacity to appreciate the acts which are the object of the arbitral pretension constitutes a dilatory exception (Article 577 of the CPC and Article 2 of the RJAT).

3. It is therefore necessary, given the above, to appreciate the present dilatory exception, and if the said dilatory exception is found to exist, the knowledge of the questions raised by the Claimant in its Initial Petition would be precluded.

4. In the present Arbitral Proceeding, the impropriety of the procedural means and the incompetence of the arbitral tribunal to know of the request is raised by the respondent, basing its position in the sense that arbitral contentious matters are contentious matters of mere annulment, aiming at mere "declaration of legality."

5. The respondent furthermore maintains that the request formulated by the claimant for condemnation of the AT to perform an allegedly due act must be formulated by way of special administrative action, provided for in Article 46 of the Administrative Procedure Code (CPTA).

6. The claimant states, regarding its request for constitution of the present arbitral tribunal, that it subsists in knowing of the request to challenge the order of the Head of the Cascais Tax Service..., of 30 May 2014, which partially granted the administrative appeal that the Claimant opportunely presented to that service, of the assessment No. 2013 ... of 31 October 2013, relating to the Personal Income Tax for the year 2012 of the author of the estate above identified.

7. And the claimant concludes by requesting the Arbitral Tribunal to declare the illegality of the order above identified, in the matters contained in the present petition, for the grounds indicated and any others that the tribunal may see fit to supply, condemning the Tax Authority to accept as deductible expenses to the gross income contained in the Form 3 return for 2012 presented by the taxpayer those referred to in the present request.

8. The claimant placed as the object of its request, in the filing of the request for arbitral pronouncement as its pretension, Articles 2, No. 1, letters a) and b), and placed as the target act of the pronouncement the notification of the partial granting of the administrative appeal No. ...2013... of the Cascais Tax Service..., by order of 30-05-2014, official letter No. ....

9. In order to verify the competence of the Tribunal, it is necessary to know which tax administrative act is the object of the arbitral process or whose declaration of illegality the Claimant seeks.

10. The crux of the claimant's request given the formulation of the initial petition and the request consists in the appreciation of the legality of the act of partial granting or denial of the administrative appeal, and the subsequent appreciation of the assessment act.

11. It is therefore necessary to appreciate the question of the competence of this Arbitral Tribunal to appreciate the legality of the act of partial granting or denial of the administrative appeal with respect to the assessment act.

12. In accordance with the current regime set out in Article 124 of Law No. 3-B/2010, of 28 April (State Budget for 2010), which authorized the Government to legislate with a view to establishing arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, so that the tax arbitral process would constitute an alternative procedural means to judicial review proceedings and to action for recognition of a right or legitimate interest in tax matters.

13. Article 4, No. 1 of Decree-Law No. 10/2011, of 20 January, which created the Legal Regime of Arbitration in Tax Matters, as amended by Law No. 64-B/2011, of 30 December, imposes the voluntariness of subjection to arbitral jurisdiction, the binding of the AT depending on regulation, established by Ordinance 112-A/2011 of 22 March, which in its Article 1 binds the General Directorate of Taxes and the General Directorate of Customs and Special Consumption Taxes to the jurisdiction of the arbitral tribunals functioning in accordance with the Legal Regime of Arbitration in Tax Matters.

14. The competence of arbitral tribunals functioning at CAAD is, in the first place, limited to the matters indicated in Article 2, No. 1, of the RJAT. In a second line, the competence of arbitral tribunals functioning at CAAD is also limited by the terms in which AT bound itself to that jurisdiction, which are concretized in Ordinance No. 112-A/2011, of 22 March, since Article 4 of the RJAT establishes that "the binding of the tax administration to the jurisdiction of the tribunals constituted in accordance with this law depends on an ordinance of the members of Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered."

15. In light of this second limitation of the competence of arbitral tribunals functioning at CAAD, the resolution of the question of competence depends essentially on the terms of this binding, since, even if one is faced with a situation that can be framed within that Article 2 of the RJAT, if it is not covered by the binding provided for in the ordinance above mentioned, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be excluded.

16. Attention should be paid to the fact that the scope of the legislative authorization given by Article 124 of Law No. 3-B/2010 of 28 April has not been exhausted, which provided that the arbitral process constitutes not only an alternative procedural means to judicial review proceedings, but also to action for recognition of a right or legitimate interest in tax matters (Nos. 2 and 4, letters a and b) of the cited Article 124), since the latter part was not subject to regulation.

17. In this way we can extract another restriction to the scope of competence of arbitral tribunals which results from the fact that the request for recognition of rights and legitimate interests in tax matters only falls within the circle of competence of arbitral tribunals in cases where it is underlying a declaration of illegality of a tax assessment act or acts that fix the taxable base or profit.

18. In matters of binding and its respective object, bearing in mind the provision of Article 2 of Ordinance No. 112-A/2011, of 23 March, the General Directorate of Taxes has only come to accept the jurisdiction of the arbitral tribunal, provided that the necessary administrative appeal provided for in Articles 131 to 133 of the CPPT takes place as a prerequisite for judicial review in cases of self-assessment, withholding at source, and advance payments, which may be considered justified in light of the subsidiary application of the norms of tax process and procedure operated by Article 29 of the RJAT as well as the characterization of arbitration as an alternative procedural means to judicial review proceedings.

19. As is well known, the competence of the tribunal is determined by the request of the plaintiff and by the cause of action on which it is based, expressed in the initial petition, since it does not depend on either the legitimacy of the parties or the merits of the action, as is the uniform understanding in doctrine and jurisprudence (cf., among others, Manuel de Andrade, Elementary Notions of Civil Procedure, 1979, p. 91; Miguel Teixeira de Sousa, Declaratory Competence of Common Courts, p. 36; and Decisions of the Court of Cassation of 12/1/94, 2/7/96 and 3/2/97, in the Portuguese Law Journal (BMJ), respectively, Nos. 433, p. 554, 459/444 and 364/591, of 5/2/2002, in the Case Law – Court of Cassation -, year X, volume I, p. 68, of 18/3/2004, in case No. 04B873, of 13/5/2004, in case No. 04A1213 and of 10/4/2008, in case No. 08B845, these three latter available at www.dgsi.pt; of the Tribunal of Conflicts, of 20/10/2011, decided in case No. 13/11, available at the same site, and of this Court of Appeal of 7/11/2000, Case Law, year XXV, volume V, p. 184).

20. Regarding the competence of Arbitral Tribunals, Counselor Lopes de Sousa tells us: "Although in letter a) of No. 1 of Article 2 of the RJAT only explicit reference is made to the competence of arbitral tribunals to declare the illegality of assessment acts, acts defining the amount to be paid by the taxpayer, this competence also extends to acts of the second and third degrees that appreciate the legality of these primary acts, in particular acts refusing administrative appeals and acts refusing hierarchical appeals filed from the decisions of these appeals. In fact, this conclusion is drawn unequivocally from letter a) of No. 1 of Article 10 of the RJAT, which makes express reference to No. 2 of Article 102 of the CPPT (which deals with the refusal of an administrative appeal) and to 'the decision of the hierarchical appeal.'" (Jorge Lopes de Sousa, in Commentary to the Legal Regime of Tax Arbitration, Guide to Tax Arbitration, Almedina, 2013, p. 121).

21. However, he adds that "The competence of arbitral tribunals functioning at CAAD being limited, with regard to assessment acts, self-assessment, withholding at source and advance payments, to the declaration of their illegality and its consequences, only acts refusing administrative appeals or hierarchical appeals or requests for appeal of tax acts will be included in that competence in cases where these second degree or third degree acts actually knew of the legality of assessment acts, self-assessment, withholding at source and advance payments and not also when those acts refrained from such knowledge, because it was understood that there was some obstacle to it (such as, for example, non-compliance with time limits or lack of legitimacy, or lack of competence." (ibidem, p. 123).

22. As the same author observes, the possibility of appreciating the legality of primary acts through the appreciation of the legality of second degree acts is confirmed in the provision of Article 2 of the RJAT for the appreciation of pretensions relating to self-assessment acts, withholding at source and advance payments (with respect to which the necessary administrative appeal is required, in Articles 131 to 133 of the CPPT), it being certain that in these cases, the immediate object of the impugnatory process is, as a rule, the second degree act that appreciates the legality of the assessment act, and that, if it confirms the latter, it must be annulled, in order to obtain the declaration of illegality of the assessment act.

23. This limitation is explained because "in the case in which the second or third degree act knows of the legality of the assessment act, the refusal of the administrative appeal that confirms the act makes its respective illegalities its own, which means that from the appreciation of the illegality of the second or third degree act there follows the illegality of the assessment act. This effect does not occur in cases where the second or third degree act only appreciated a preliminary question whose solution prevented the appreciation of the legality of the primary act, because in this case, the possible illegality of the second or third degree act only has as a corollary that the legality of the primary act should be appreciated, not implying its illegality" (idem, ibidem).

24. The rule is that the challenge of administrative acts in tax matters should be made in the judicial tax process through judicial review or special administrative action (letters d) and p) of No. 1 and No. 2 of Article 97 of the CPPT) depending on whether these acts involve or do not involve the appreciation of the legality of administrative assessment acts. There are exceptions to this division of the fields of application of judicial review proceedings and special administrative action, such as, for example, the challenge of acts refusing administrative appeals (special provision No. 2 of Article 102 of the CPPT).

25. But with regard to arbitral tribunals functioning at CAAD this exception will be irrelevant, since it results from letter a) of No. 1 of Article 2 of the RJAT that, in relation to assessment, self-assessment, withholding at source and advance payment acts, only the declaration of their illegality is included in its competence, and not the appreciation of the legality of acts that do not involve such appreciation.

26. The decisions refusing administrative appeals cannot be appreciated in themselves, in particular those that did not know of the merits of the assessment act which is the object of the appeal, because what is intended through the challenge of the administrative appeal decision is to appreciate the legality of the underlying assessment act, and not the administrative appeal decision that did not know of the merits of the taxpayer's pretension.

27. Indeed, Article 2 contains no express reference to these acts, unlike what happens with the legislative authorization on which the Government based itself to approve the RJAT, which refers to "requests for review of tax acts" and "administrative acts that involve the appreciation of the legality of assessment acts."

28. However, the formula "declaration of illegality of assessment acts of taxes, self-assessment, withholding at source and advance payment acts," used in letter a) of No. 1 of Article 2 of the RJAT does not restrict, in a mere declaratory interpretation, the scope of arbitral jurisdiction to cases in which an act of one of those types is directly challenged. In fact, the illegality of assessment acts can be declared jurisdictionally as a corollary of the illegality of a second degree act that confirms an assessment act, incorporating its illegality.

29. The formula used in letter a) of No. 1 of Article 2 of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second degree act; it will also cover cases in which the second degree act is that of refusing a request for revision of the tax act, since no reason is seen to restrict it.

30. In cases in which the second or third degree act knows of the legality of the assessment act, the refusal of the administrative appeal or hierarchical appeal that confirms that act makes its respective illegalities its own, whereby from the appreciation of the illegality of the second or third degree act there follows illegality of the assessment act.

31. The proper means to challenge acts that do not involve the appreciation of the legality of assessment acts and which are also not acts determining the taxable base or taxable income, is not judicial review, but rather special administrative action, in accordance with letter p) of No. 1 of Article 97 of the CPPT and Articles 46 et seq. of the CPTA.

32. In light of what is established in Article 24 of the RJAT, regarding the effects of the arbitral decision favorable to the taxpayer, it is noted that arbitral decisions have, in practice, a constitutive effect, since the declaration of illegality of the acts are associated with obligations of execution identical to those provided for for judicial annulment decisions, including the performance of an act due in substitution of the one declared illegal and the reconstruction of the situation that would have existed if that act had not been performed (...), they impose on the AT that it eliminate from the legal order that act, annulling it.[1]

33. Judgment decisions or other decisions that explicitly impose on the tax administration the adoption of conduct are not provided for, with the exception of the condemnation of the payment of indemnifying interest and tax indemnification.

34. As written in Arbitral Case 17/2012-T, assessment, in the strict sense, is the last phase of the administrative procedure for tax assessment, regulated in Articles 59 to 64 of the CPPT, constituted by a series of acts intended to obtain a final legal result, the amount of tax to be delivered to the State's treasury[2]. Therefore, assessment hoc sensu is the phase that translates into the application of the tax rate to the taxable base already determined, the preparatory acts not being separately challengeable, but being able to be called into question when challenging the definitive, final act, in obedience to the principle of unitary challenge expressed in Article 54 of the CPPT[3].

35. In these terms, we understand that the order deciding the administrative appeal appreciated the legality of the assessment, whereby the Tribunal considers itself competent to know of the request for arbitral pronouncement.

36. And, in doing so, we will bear in mind that, acting as an alternative to judicial review, "the real object of the challenge is the assessment act and not the act that decided the appeal, whereby it is the vices of the former and not of this order that are truly in question" (cf. Decision of 18-05-2011, in case 156/11, citing other case law of the Court of Administrative Cassation (STA), among others, Decision of 28/10/2009, in case 595/09, added: «in cases in which the administrative appeal is expressly refused, the object of the judicial review proceeding is, formally and directly, the act of refusal, which maintained the assessment which was the object of the appeal, but the real object of the challenge, the act whose legality is in question to ascertain, is the assessment act which was maintained by the act of refusal of the appeal»).

37. Effectively, what is intended is the declaration of illegality of the decision of the Tax Administration that maintained the legal status of the Claimant, taxpayer.

38. Now, from the careful reading of the initial petition and evaluation of the attached documents as means of proof, the following conclusions emerge regarding the act which is the object of the present arbitral process: it is the challenge of the order of the Head of the Cascais Tax Service..., of 30 May 2014, which partially granted the administrative appeal of the additional tax assessment No. 2013 ... of Personal Income Tax relating to the year 2013, regarding the expenses not accepted for purposes of determining the taxable base.

H – MATTER OF LAW

1. Given the positions assumed by the parties in the pleadings presented, the central question to be resolved by this arbitral tribunal consists in deciding by the declaration of legality of the additional tax assessment act No. 2013 ... of Personal Income Tax relating to the year 2013 and of the order that partially granted or denied the administrative appeal for that same act.

2. Given the position assumed by the parties, and the facts proven, it falls to the present tribunal to decide on the deductibility of the expenses presented by the claimant, relating to rental income taxed under Category F of Personal Income Tax, in accordance with Article 41 of the CIRS, regarding the following specific situations:

3. Municipal Property Tax (IMI) borne by the taxpayer in 2012;

4. Cost of supply and installation of kitchen equipment on the 2nd floor Apt. of the building listed as Article 79;

5. Water supply invoices from ...;

6. Work accident insurance;

7. Charges for payment of Social Security contributions for the doorwoman and cleaning employee of the building.

8. In effect, the base article, which we will fundamentally focus on, is Article 8 and Article 41 of the CIRS, and in order to analyze all the above situations, it will first be necessary to examine what is meant by rental income and subsequently what deductions are permitted by virtue of that Article 41.

9. Article 8 of the CIRS tells us that rental income comprises the rents of urban immovable property paid or placed at the disposal of their respective holders, and further tells us that the following are considered as rents: a) The amounts relating to the cession of the use of the immovable property or part thereof and to the services related to that cession.

10. It results from Article 41, No. 1, as amended by Law No. 66-B/2012, of 31 December, that the following are deductible from rental income:

11. From the gross income referred to in Article 8, the maintenance and upkeep expenses incumbent on the taxpayer, borne by him and proven by documents are deducted, as well as the municipal property tax and the stamp duty that applies to the value of the immovable properties or part of immovable properties whose income is subject to taxation in the fiscal year.

12. From this No. 1 result two categories of deduction of charges borne, the first refers to maintenance expenses and upkeep expenses, and the second to the deduction of IMI and stamp duty borne by the lessor.

13. Article 104, No. 1 of the Constitution of the Portuguese Republic expressly provides for the taxation of personal income as the main indicator of the taxpayer's contributory capacity, so as to obtain a fair distribution of tax burdens, being necessary to calculate net or taxable income.

14. The principle of contributory capacity implies, for income tax, the so-called principle of net income, according to which only the amount of net income constitutes (true) income for the payment of taxes, that is, that from each category of income the expenses specific to its obtaining be deducted. This means that, in principle, all expenses necessary for the production or obtaining of certain income, as a negative expression of contributory capacity, should be excluded from that income.[4]

15. A principle that imposes an adequacy of the tax to the economic possibilities of the taxpayer.

16. Furthermore, Article 4, No. 1 of the General Tax Law (LGT), which provides that "taxes are based essentially on contributory capacity, revealed, in accordance with the law, through income or its use and patrimony, as well as Article 6, No. 1, letter b) of the same diploma, "the patrimonial situation, including the legitimate charges, of the family unit."

17. Effectively, in accordance with the said constitutional principle, in the present case, there must be a correspondence between the rents and the contributory capacity of the taxpayer, for which it is necessary to take into account in its calculation the charges and expenses necessary to obtain an increase in patrimony.

18. Before the above, it is elementary to combine both Articles 8 and 41 mandatorily, resulting that only expenses directly connected to the cession of the use of the immovable property are deductible from rental income.

19. What is intended to be taxed is not the gross income from rents, but rather the patrimonial increase resulting from rents minus the charges that the taxpayer had to incur to obtain that rental income.

20. Two important concepts result from that article, first the concept of maintenance expenses and the concept of upkeep expenses, concepts which must be reconciled with the requirements for deduction from gross income imposed by the same article, respectively, that the expenses be proven by documents and directly connected to the immovable property from which the income results.

21. Neither the CIRS nor the LGT defines maintenance and upkeep expenses, whereby it is necessary to resort to the norms of interpretation of laws.

22. On the interpretation of tax norms, for the case sub iudice, Article 11 of the General Tax Law tells us, which establishes the essential rules for the interpretation of tax laws:

23. Article 11

Interpretation

i. In determining the meaning of tax norms and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

ii. Whenever specific terms of other branches of law are employed in tax norms, they must be interpreted in the same sense that they have there, unless otherwise directly provided by law.

iii. If doubt persists about the meaning of the norms of incidence to be applied, the economic substance of the tax facts should be considered.

iv. Gaps resulting from tax norms covered by the legislative reserve of the Assembly of the Republic are not susceptible to supplementation by analogy.

v. To this provision, it is also necessary to resort to the general principles for the interpretation of laws, to which No. 1 of Article 11 of the LGT refers, which are established in Article 9 of the Civil Code, which establishes the following:

1. Article 9

Interpretation of Law

i. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, having especially in account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

ii. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

iii. In fixing the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms.

1. Given the legal foundation already set out, and attending to the articles transcribed and enumerated, the interpretation of the concept of maintenance expenses and upkeep expenses should be made in the following sense.

2. Maintenance expenses are those that relate to the day-to-day operations of the building, such as, by way of example, a) energy, water, maintenance of elevators, cleaning, doormen, and all current administration expenses.

3. As to upkeep expenses, these are those that relate to the state and functioning of the building itself, and which are not included in the concept of maintenance expenses, such as repair work, general, periodic, and including those that maintain or increase the value of the building, and add new assets, such as swimming pools, gymnasiums, elevators, among others, and in particular those that provide a level of habitability identical to that existing at the date of execution of the rental agreement.

4. It results from Article 8, No. 2, letter a), in which it is written that included in the concept of rents are "services related to that cession," that is, services made available to the tenant, related to the cession of use of the immovable property and that fall within the concept of maintenance and upkeep expenses.

5. All services made available to the tenant, and which are paid for by him, constitute rents, thus obviously, all maintenance and upkeep expenses for those services must be accepted.

6. Such services must be connected to the building itself, from the most common and basic cleaning services to the maintenance of elevators and doormen. These are services that the tenant enjoys, and that are charged to him by the lessor typically in proportion to his use.

7. Also included in this concept of services are other luxury amenities, such as Wi-Fi, gymnasiums, swimming pools and SPAS, although considered as luxuries, as they are services made available to the tenant related to the cession of use of the immovable property, and charged to him, therefore all maintenance and upkeep expenses must be accepted.

8. There should be included in the concept of maintenance expenses all those necessary, including in these concepts the expenses incurred by the owner and lessor, such as the renewal of equipment attached to the immovable property, and this includes kitchen and bathroom equipment.

9. This is due to the fact that kitchen and bathroom equipment is an integral part of the building.

10. In the case sub-judice, most of the questions relate to the immovable property with Article 79, it thus falls to ascertain the state of the immovable property, however what is said about this immovable property can be applied to the remaining immovable properties here in question.

11. Given the factuality, it is verified that the immovable property is in a regime of vertical property ownership (not horizontal), each unit being valued for IMI purposes, but without being determined who the legitimate owners of each unit are, being that the claimant, as an heir, is legitimate owner of 50% of the immovable property and respectively 50% of each of the twelve units or dwellings. She is not owner of 100% of any of the units.

12. Therefore, none of the expenses presented, even if borne in total by the claimant, can be accepted in 100%, having to be in her proportion.

13. It is also verified that in two of those units of that immovable property, they are not rented, whereby with respect to those two units of the 12 existing, rental income was not obtained (specifically the ...Apt. and ...Apt.).

14. Thus the expenses and the IMI borne on these two units cannot be accepted, in accordance with Articles 8 and 41.

15. Thus, it is verified that the claimant being owner of 50% of 12 units, and only 10 units obtaining rental income, only 83% (10/12) of the charges are susceptible to being accepted, and in the case of the claimant as she only holds 50% of the aforementioned, she can only deduct 50% of those 83%.

16. Given the above, it falls to this arbitral tribunal to analyze individually each of the situations identified, and bearing in mind that the claimant is owner of an immovable property in a regime of vertical property ownership (not horizontal), being that all expenses relating to the building should only be considered in proportion to the claimant's ownership. And this includes specific expenses for the rented units of the immovable property, which should be viewed in the same proportion of ownership.

REGARDING THE MUNICIPAL PROPERTY TAX (IMI) BORNE BY THE CLAIMANT IN 2012

1. The claimant paid IMI in the amount of €3,891.69, with the following breakdown of amounts:

i. Relating to the immovable property with Article... the amount €3,096.37 (corresponding to 50% of the total amount assessed of €6,192.75).

ii. Relating to the immovable property with Article... the amount €547.15 (corresponding to 50% of the total amount assessed of €1,094.29).

iii. Relating to the immovable property with Article... the amount €171.92 (corresponding to 50% of the total amount assessed of €343.84).

iv. And from the autonomous unit with Article... G the amount €76.25 (corresponding to the total amount of tax assessed).

1. AT only recognized as deductible expense to gross income the amount of €1,992.16, corresponding to:

i. €1,716.01 from the immovable property with Article 79,

ii. €122.55 regarding the immovable property Article 419,

iii. €147.79 regarding the immovable property with Article 103

iv. €6.11 regarding the autonomous unit with Article... G.

1. Regarding the deductibility of Municipal Property Tax from patrimonial income, Article 41, No. 1 of the CIRS tells us, which establishes the basis:

1 - From the gross income referred to in Article 8, the maintenance and upkeep expenses incumbent on the taxpayer, borne by him and proven by documents are deducted, as well as the municipal property tax and the stamp duty that applies to the value of the immovable properties or part of immovable properties whose income is subject to taxation in the fiscal year.

1. In other words, IMI paid in that year on rented immovable properties is subject to deduction.

2. Given the above, verified that the IMI borne by the taxpayer is accepted for deduction from gross income of Category F, the question that arises and falls to this tribunal to decide consists in determining what are the correct amounts for deduction.

3. As already stated regarding the immovable property with Article 79, only 10 of the 12 dwellings obtained rental income.

4. In these terms, the correct application of Article 41, No. 1, regarding the IMI charges can only be incurred with respect to 10 of the 12 dwellings and with respect to the proportion that the claimant holds of the immovable property, respectively 50% of 83% (10/12).

5. The total IMI of the immovable property was €6,192.75, the part corresponding to the respondent was €3,096.37 - corresponding to 50%.

6. Thus of this amount, only 83% can be considered, thus given what was said, must be accepted as deduction for purposes of Category F, regarding the immovable property with Article 79, the amount of €2,569.99, which can be calculated in two ways: (6,192.75*83%)50%, or (6,192.7550%)*83%.

7. As to the immovable property with Article 419, it is composed of two shops and three dwellings (one on each floor) and the declared income refers to the rental of the two shops and the 1st floor.

8. It is verified that the claimant holds 50% of the immovable property in vertical property ownership, whereby only her part 50% of the IMI paid in total can be deducted.

9. As to the IMI paid, only the amount of €122.55 was considered by the AT, against the amount paid of €547.15 (corresponding to 50% of the total amount assessed of €1,094.29).

10. Thus, bearing in mind what was already said regarding the immovable property with Article 79, it is verified that only part of the immovable property is rented, whereby only part of the IMI can be deducted, pursuant to Article 41, No. 1.

11. As the immovable property is in vertical property ownership, composed of 5 units, only 3 can be considered as they are the only ones rented, thus only 60% (3/5) of the tax can be considered, whereby of the €1,094.29, only €656.57 is accepted for purposes of deduction and as the claimant only holds 50%, the amount to be deducted is €328.28. That is: (1,094.29*60%)*50%.

12. As to the immovable property with Article 103, it raises no question regarding the deduction of IMI paid. Therefore, the position of the AT is maintained, regarding the deductibility of IMI in the amount of €147.79.

13. As to the autonomous unit of Article... G, in a regime of horizontal property ownership, the claimant is the sole owner and assessed the tax of €76.25.

14. The unit is rented, whereby the income obtained is Category F, and thus the IMI must be accepted as a deduction in accordance with Article 41, No. 1, in the amount of €76.25.

15. As to the IMI the illegality is declared of the assessment act and official revision, and the Municipal Property Tax must be legally accepted as deductible from Category F income of the claimant in the year 2012, with respect to each immovable property from which the said income is obtained, in the specific amount of €2,569.99 as to Article..., €328.28 as to Article..., €76.25 as to Article..., and €147.79 as to Article 103, which totals €3,149.31.

REGARDING THE COST OF SUPPLY AND INSTALLATION OF KITCHEN EQUIPMENT ON THE... FLOOR APT. OF THE BUILDING WITH ARTICLE 79

1. Regarding the expenses for the supply and installation of a kitchen on the... floor Apt. of the immovable property with Article 79, only the amount of €223.60 was recognized, corresponding to half of the installation cost, in the amount of €427.70, proven by the cash sales document No. 101-33103/2012 from company C..., Ltd.

2. But the cost of the material and equipment itself installed was not, in turn, considered, in the amount of €1,263.88, proven by invoice No. 367/0000111998 from D...

3. As to the cost of material and equipment in the amount of €1,263.88, proven by invoice No. 367/0000111998 from D..., this expense was not considered for purposes of deduction under Article 41.

4. It is a matter that, as is proven by the documents attached, the installation costs relate to the material and equipment corresponding to invoice No. 367/0000111998, charged by two distinct entities, which resulted in the installation of a kitchen on the... apt of the immovable property with Article 79.

5. The place of transport and installation is Street... in Lisbon, as per document.

6. As already mentioned, the renovation of kitchen furnishings are accepted as maintenance expenses.

7. The kitchen of a home, being a fundamental and common instrument for daily use, is composed of the material that comprises it (cabinets, appliances), which is indeed subject to maintenance and upkeep, even if that maintenance results from the implementation of new kitchen material.

8. Furthermore, it is stated that in accordance with Article 1074, No. 1 of the Civil Code, "It is incumbent upon the lessor to execute all conservation work, ordinary or extraordinary, required by the laws in force or by the purpose of the contract, unless otherwise agreed."

9. It is verified that the expenses with the material and the expenses with the installation and transport, meet the requirements for deductibility under Article 41, No. 1, as they are intended for the maintenance and upkeep of the immovable property incumbent on the taxpayer.

10. Thus the charges borne by documents No. 101-33103/2012 and No. 367/0000111998 must be accepted in full.

11. In accordance with what has already been written, with respect to the immovable property Article 79, the claimant only possesses 50% of the immovable property, and consequently is only owner of 50% of the rented unit, whereby the expenses can only be accepted in that same proportion, regarding that unit.

12. Thus only the amount of €845.79 is accepted ((€1,691.58=€427.70+€1,263.88)*50%).

13. Given the above, the illegality is declared of the assessment act and official revision, regarding the deductibility of the expense above referred to with Article 79 in accordance with Article 41, No. 1 of the CIRS, an expense legally deductible from Category F income of the claimant in the year 2012 in the amount €845.79.

REGARDING THE WATER SUPPLY INVOICES FROM EPAL

1. The taxpayer presented invoices concerning water supply by EPAL to the immovable property with Article 79, in the total amount of €74.09.

2. As already stated, the expenses for water and electricity are covered by the concept of maintenance expenses of Article 41, No. 1, whereby must be accepted.

3. In accordance with what has already been written, regarding the immovable property Article 79, the claimant only possesses 50% of the property, whereby the expenses can only be accepted in that same proportion.

4. However, since 1 of the units is not generating rental income, and is used by one of the heirs, this expense cannot be considered with respect to that unit. As for the other vacant unit, as it has no use it likewise did not contribute to the value of this expense.

5. Thus, in accordance with what has already been said, regarding these expenses, only 50% of 92% (11/12), of the building is accepted.

6. Only the expense in the amount of €33.71 is accepted ((€74.09*91%)*50%).

7. Given the above, the illegality is declared of the assessment act and official revision, regarding the deductibility of the water supply expense from the immovable property with Article 79 in accordance with Article 41, No. 1 of the CIRS, an expense legally deductible from Category F income of the claimant in the year 2012 in the amount €33.71.

REGARDING THE WORK ACCIDENT INSURANCE

1. The premium paid for work accident insurance for the employees providing service to the immovable property with Article 79, doorwoman and cleaning employee, contracted with Lusitânia Insurance Company, SA, in the amount of €356.69, was not recognized as a deductible expense.

2. There must be a causal nexus between the expenses incurred and the immovable property in question.

3. In the case of work accident insurance expenses, the claimant failed to demonstrate that causal nexus between the insurance and the immovable property, that is, it is not proven that the insurance taken out relates to the work performed in the building.

REGARDING THE CHARGES FOR PAYMENT OF SOCIAL SECURITY CONTRIBUTIONS OF THE DOORWOMAN AND CLEANING EMPLOYEE OF THE BUILDING

1. The challenged order did not accept the expenses for Social Security contributions of the doorwoman and cleaning employee of the immovable property with Article 79, in the amount of €5,214.24, of which the taxpayer bore 50% - €2,607.12.

2. There must be a causal nexus between the work performed and the immovable property. Being that it was not raised by either of the parties that the services were provided in any of the units, it is taken as proven that the services were performed in the common areas of that immovable property.

3. First, we will verify if the expenses incurred with the doorwoman and cleaning employee are accepted in accordance with Article 41, No. 1 of the CIRS, that is, if their salary is deductible from the gross income of rental income.

4. Thus, we arrive at the conclusion that, given what has already been said regarding maintenance expenses, the expenses with doorwomen and employees, specifically through hiring as employer or through hiring by another means, are both accepted.

5. We have arrived at an affirmative conclusion that the costs with the doorwoman and cleaning employee must be accepted as deductions, in the sense of being maintenance and upkeep expenses incumbent on the owner or owners of the immovable property, in this case the taxpayer.

6. There is no doubt that the salary of the doorwoman is a "maintenance and upkeep expense," since her functions can be both maintenance (cleaning) and upkeep (minor repairs).

7. And thus, the salary of the doorwoman and cleaning employee is composed of all contributions and benefits provided by the Employer, whether mandatorily by legislation or facultatively.

8. Being the contributions to Social Security on the part of the Employing Entity mandatory, for the ultimate benefit of the worker, the same must effectively be understood as an integral part of the salary.

9. Unless we see what the Labor Code tells us:

10. Given the above, the contributions or contribution rate are an integral part of the salary, and thus an integral part of the expenses, and as written, the salaries of the doorwoman and cleaning employee, provided that it is proven and the causal nexus with the immovable property of the income is established, these expenses are included in the concept of maintenance and upkeep expenses.

11. Furthermore, it is stated that they constitute a mandatory expense as an employing entity that is owner of a building in vertical property ownership, in which it carries out an activity of maintenance and upkeep of the immovable property.

12. Therefore, being an integral part of the cost that the taxpayer has with the doorwoman and/or cleaning employee, through the payment of the salary, and being that salary accepted as "maintenance and upkeep expenses," it must therefore be accepted the cost in its entirety, because it is a mandatory expense, and the salary should be understood as a whole, and not only the part as the AT does of the direct payment to the worker.

13. It must be accepted, and in accordance with what has already been written, regarding the immovable property Article 79, the claimant only possesses 50% of the property, with respect to 83% (only 10 of 12 units are covered), whereby the expenses can only be accepted in that same proportion.

14. Thus only the expense in the amount of €2,163.90 is accepted ((€5,214.24*50%)*83%).

15. Given the above, the illegality is declared of the assessment act and official revision, regarding the deductibility of the expense of Social Security contributions of the doorwoman and cleaning employee of the immovable property with Article 79 in accordance with Article 41, No. 1 of the CIRS, an expense legally deductible from Category F income of the claimant in the year 2012 in the amount €2,163.90.

J – DECISION

Therefore, given all the above, the present Arbitral Tribunal decides as follows:

I. Judgment is rendered for the claimant regarding the request for declaration of partial illegality of the tax acts relating to Personal Income Tax, No. 2014 004227450, by reason of violation of law, by error regarding the legal assumptions, which justifies the partial declaration of its illegality and annulment, and the subsequent acceptance of the deductibility of expenses in accordance with Article 41, No. 1 of the CIRS for Category F income of the claimant in the year 2012 in the total amount of €6,192.71.

II. The value of the case is fixed at €10,458.07, based on the value of the assessment challenged, taking into account the economic value of the case as measured by the value of the tax assessments challenged, and in accordance with this the costs are fixed in the respective amount of €918.00 (nine hundred and eighteen euros), charged to the claimant (41% of €918.00: €376.38) and respondent (59% of €918.00: €541.62) proportionally regarding the value of the request and the value of the annulment in accordance with Article 12, No. 2 of the Tax Arbitration Regime, Article 4 of the Rules of the Administrative Tax Procedure Court (RCPAT) and Table I annexed to the latter. – No. 10 of Article 35, and Nos. 1, 4 and 5 of Article 43 of the LGT, Articles 5, No. 1, letter a) of the RCPT, 97-A, No. 1, letter a) of the CPPT and Article 559 of the CPC).

Let it be notified.

Lisbon, 10 November 2014.

The Arbitrator

Paulo Renato Ferreira Alves

[1] Jorge Lopes de Sousa, in Commentary to the Legal Regime of Tax Arbitration, Guide to Tax Arbitration, Almedina, 2013.

[2] In this sense, the Decision of the Court of Administrative Cassation (STA), No. 0188/09, of 9 September 2009.

[3] This principle has some exceptions, being that acts determining the taxable base can be separately challenged. See Alberto Xavier, Concept and Nature of the Tax Act, pp. 140 to 191.

[4] In this regard, José Casalta Nabais, The Fundamental Duty to Pay Taxes, pp. 520 and 521.