CAAD 440/2018-T: Deduction of RFAI, CFEI and SIFIDE Tax Benefits Against Autonomous Taxation in IRC 2015

ARBITRAL DECISION

I. Report

1. On 05-09-2018, company A..., S.A. filed an application for the establishment of a singular arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), with a view to declaring the illegality and consequent annulment of the self-assessment of Corporate Income Tax (IRC) for the fiscal year 2015.

2. Pursuant to article 6(1) of the RJAT, the Deontological Council of the Arbitration Centre appointed the undersigned arbitrator, notifying the parties.

3. The tribunal is regularly constituted to examine and decide the subject matter of the proceedings.

4. The allegations supporting the Claimant's request for arbitral decision are, in summary, as follows:

4.1 The Claimant is a Portuguese limited company with registered office and effective management in national territory, whose corporate purpose consists, namely, of drying, storage, processing and marketing of rice and maize.

4.2 In the fiscal year 2015, the Claimant benefited from tax incentives granted under the following schemes:

i.) System of Tax Incentives for Research and Development ("R&D") Business II ("SIFIDE II");

ii.) Tax Regime Supporting Investment ("RFAI");

iii.) Extraordinary Tax Credit for Investment ("CFEI").

4.3 Specifically, in the fiscal year 2015, the Claimant had tax benefits in the global amount of €779,860.86.

4.4 On 30 May 2016, the Claimant filed its Model 22 IRC income declaration for the taxation period of 2015, having ascertained in field 351 of table 10 an IRC collection of €53,772.79.

4.5 From the tax benefits listed above, the Claimant deducted from the IRC collection of fiscal year 2015 the amount of €53,772.79.

4.6 Consequently, tax benefits remained undeducted in the amount of €726,088.07 (€779,860.86 – €53,772.79).

4.7 In turn, in field 365 of table 10 of the Model 22 IRC of fiscal year 2015, the Claimant ascertained autonomous taxation in the amount of €26,697.49.

4.8 It so happens that the form of Model 22 IRC of fiscal year 2015 – approved by Dispatch No. 1823/2016, of 20 January 2016 – made it impossible to deduct tax benefits from the collection of autonomous taxation, which made it impossible to deduct, in that fiscal year, SIFIDE II, RFAI and CFEI in the global amount of €26,697.49.

4.9 This amount was also not deducted from the IRC collection of previous fiscal years (2012 to 2014) and subsequent years (2016 and 2017).

4.10 On 9 April 2018, the Claimant filed an administrative review application, within which it requested, accordingly, the annulment of the self-assessment of IRC for fiscal year 2015, but obtained no response from the AT to the administrative review application filed.

4.11 Autonomous taxation is an IRC tax rate – as evidenced by its systematic location in the CIRC – which represents a reflexive taxation mechanism under this tax, applying to certain expenses of taxpayers.

4.12 The notion that autonomous taxation constitutes a component of IRC also results from article 23-A(1)(a) of the CIRC, which stipulates the non-deductibility from taxable profit of "IRC, including autonomous taxation".

4.13 If IRC includes autonomous taxation for purposes of non-deductibility from taxable profit, it is not understood how it could not include the same autonomous taxation with regard to the procedure of liquidation and consequent deduction of tax benefits, pursuant to article 90(1) and (2) of the CIRC.

4.14 A similar conclusion follows from article 12 of the CIRC, which provides that "companies and other entities to which, pursuant to article 6, the transparent taxation regime applies are not subject to IRC, except as to autonomous taxation".

4.15 The notion that autonomous taxation is an integral part of IRC has been the dominant position of the AT in situations where, prior to the reform of IRC effected by Law No. 2/2014, of 16 January, taxpayers raised the question of the deductibility of autonomous taxation from taxable profit.

4.16 It therefore considers that the tax collected based on the autonomous taxation provided for in the CIRC has the nature of IRC.

4.17 In this context, it is irrelevant that the IRC collection strictly speaking is ascertained pursuant to article 90 and autonomous taxation pursuant to article 88 of the CIRC, since the latter provision merely defines the different rates of autonomous taxation applicable and not any mechanism for liquidation of the tax.

4.18 Whence it is necessary to conclude that article 90 of the CIRC refers to the forms of liquidation of IRC, whether by the taxpayer or by the AT, applying to the ascertainment of tax due in all situations provided for in the CIRC, including autonomous taxation, with no other provision even existing that provides for different terms for its liquidation.

4.19 If article 90 of the CIRC were not applicable to the liquidation of autonomous taxation provided for in the respective CIRC, it would have to be concluded that there would be no provision governing its liquidation in fiscal year 2015.

4.20 Now, it follows from article 103(3) of the Constitution that "no one can be obliged to pay taxes [...] whose liquidation and collection are not carried out in accordance with the law".

4.21 Therefore, such an interpretation would affront the Fundamental Law and, by way of consequence, would determine the annulment of autonomous taxation in its entirety, which is hereby invoked for purposes of article 70(1)(b) and 72(2) of Law No. 28/82, of 15 November, and cannot fail to be examined by this Esteemed Arbitral Tribunal.

4.22 Thus, as article 90(2) of the CIRC provides that deductions are made "to the amount ascertained pursuant to the preceding paragraph" and paragraph (1) of the same provision refers to the operation of IRC liquidation, which includes autonomous taxation, from which the collection results, deductions cannot fail to be made to this amount as listed in the various paragraphs of article 90(2) of the CIRC.

4.23 Consequently, in cases where the amount of tax benefits exceeds the collection resulting from taxable profit, the remainder of the deductible tax credit shall also be deducted from the collection resulting from autonomous taxation and up to the extent thereof.

4.24 It is therefore the case that, concluding that the IRC collection, resulting from taxable profit and autonomous taxation, is ascertained pursuant to article 90 of the CIRC, there can be no doubt that the deductions provided for in paragraph (2) of the said provision apply indistinctly to such collection, given that they relate "to the amount ascertained pursuant to the preceding paragraph".

4.25 It should be added that the possibility of deduction of SIFIDE II, CFEI and RFAI is the interpretation that best accords with the very nature of tax benefits.

4.26 As autonomous taxation is an instrument of IRC aimed at preventing taxpayers from evading the payment of tax due and, indeed, as tax benefits override the objective of revenue collection, it would be systematically incoherent to prevent the deduction of tax benefits from autonomous taxation in order to protect a revenue collection objective that the legislator removed, in favour of extrafiscal motivations, when creating the tax benefits themselves.

4.27 As autonomous taxation is a means of preventing taxpayers from avoiding IRC taxation of certain situations – thus constituting a means of protection of tax revenue – it is not perceived how such taxation can override the deductibility of this tax benefit which, by virtue of its exceptional nature, prevails over such revenue collection purpose.

4.28 Taking into account the legislator's purpose of privileging incentives in business R&D, there is no legal basis for excluding the deductibility of the SIFIDE II tax benefit from the collection of autonomous taxation that results directly from articles 36(1) of the Investment Tax Code (republished by Decree-Law No. 82/2013, of 17 June) and 38(1) of the new Investment Tax Code (approved by Decree-Law No. 162/2014, of 31 October).

4.29 Furthermore, the interpretation now advocated, by allowing SIFIDE II to apply to taxpayers who, although having tax losses, bear IRC as autonomous taxation, increases the number of potential beneficiaries and, consequently, appears more apt to promote the extrafiscal objectives underlying its creation, translating thereby into the most appropriate solution in light of article 9(1) of the Civil Code.

4.30 On the other hand, with regard to the deductibility of tax benefits relating to CFEI and RFAI, the Claimant understands that the foregoing regarding SIFIDE II applies mutatis mutandis, with no reasons existing to prevent the adoption of a different position.

4.31 There is thus no basis preventing the deductibility of SIFIDE II, CFEI and RFAI from IRC, such that the corresponding expenses are deductible from the totality of the IRC collection, namely that resulting from autonomous taxation, and the tax acts and tax-related acts now challenged should be annulled, with the further legal consequences.

4.32 Article 135 of the State Budget Law for 2016, which attributed an interpretative nature to the new wording of paragraph 21 of article 88 of the CIRC, is materially unconstitutional by reason of violation of the principle of prohibition of retroactivity provided for in article 103(3) of the Constitution, when interpreted to mean that in fiscal years prior to the entry into force of that law, the right to deduction from the IRC collection (derived from autonomous taxation) of tax benefits is excluded.

4.33 Thus, it is established that article 88(21) of the CIRC, in the wording of article 135 of the State Budget Law for 2016, is not applicable to the fiscal year in question (fiscal year 2015), such that this regime is not apt to prevent the deduction of SIFIDE II, CFEI and RFAI, as tax benefits, from the collection derived from autonomous taxation.

4.34 It should be emphasized that the Claimant has unduly borne, by reason of autonomous taxation, the amount of €26,697.49 relating to fiscal year 2015.

4.35 In the present case, the Model 22 IRC of fiscal year 2015 was completed by the Claimant in accordance with the form provided by the AT, which does not allow any deductions from autonomous taxation, which determined an incorrect liquidation of the amount of tax for such fiscal year and constitutes a situation of error attributable to the AT services.

4.36 Given that the tax act that is the basis of the present proceedings is subject to the defect of violation of law, as extensively demonstrated, the Claimant is entitled to the payment of compensatory interest, on the basis of error attributable to the AT services, on the amount of €26,697.49, from 31 May 2016 until the issuance of the corresponding tax credit note.

1. In turn, the Defendant Tax and Customs Authority presented its reply, in which it defended itself, in summary, in the following terms:

5.1 The figure of autonomous taxation has been used to pursue diverse objectives, ranging from the original purpose of preventing practices of evasion and fraud – through confidential or undocumented expenses, or payments to entities located in jurisdictions with privileged tax regimes, to the substitution of taxation of ancillary benefits in the form of representation expenses or allocation of vehicles to workers and members of governing bodies, in the sphere of their respective beneficiaries – to the purpose of preventing the phenomenon designated "dividend washing" (cf. article 88/11 of the CIRC) or of burdening, through taxation, the payment of remuneration considered excessive (cf. paragraph 13 of the same provision).

5.2 The autonomous character of these taxation systems, deriving from the special configuration given to the material and temporal aspects of the taxable events, imposes, in certain domains, the exclusion or an adaptation of the general rules of application of IRC.

5.3 The integration of autonomous taxation into the CIRC (and into the Personal Income Tax Code) conferred a dualistic nature, in certain aspects, on the normative system of this tax, which was embodied, notably, in the context of article 90(1-a) of the CIRC, in separate ascertainments of the respective collections, by virtue of obeying different rules.

5.4 And this is so because, in one case, it is a matter of applying the rate(s) of article 87 of the CIRC to the taxable matter determined in accordance with the rules contained in Chapter III of the code and, in another case, it is a matter of applying the rates to the values of taxable matters relating to the different situations contemplated in article 88 of the CIRC.

5.5 That is, there is not a single liquidation of IRC, but rather two ascertainments; that is, two distinct calculations which, although carried out, pursuant to article 90(1-a) of the CIRC, in the declarations referred to in articles 120 and 122 of the same code, are effected on the basis of different parameters, as each materializes in the application of its own rates, provided for in articles 87 or 88 of the CIRC, to their respective taxable matters determined equally in accordance with their own rules.

5.6 The integration of autonomous taxation into the CIRC (and into the Personal Income Tax Code) conferred a dualistic nature, in certain aspects, on the normative system of this tax, which was embodied, notably, in the context of article 90(1-a) of the CIRC, in separate ascertainments of the respective collections, by virtue of obeying different rules, because, in one case, it is a matter of applying the rate(s) of article 87 of the CIRC to the taxable matter determined in accordance with the rules contained in Chapter III of the Code (i.e., on the basis of profit) and, in another case, it is a matter of applying the rates to the values of taxable matters relating to the different situations contemplated in article 88 of the CIRC.

5.7 The liquidation of autonomous taxation is effected on the basis of articles 89 and 90(1) of the CIRC, but applying different rules for the calculation of the tax:

• In one case, liquidation operates through the application of the rates of article 87 to the taxable matter ascertained in accordance with the rules of Chapter III of the Code; and

• In the other case, diverse collections are ascertained, depending on the diversity of facts that give rise to autonomous taxation.

5.8 The amount ascertained pursuant to article 90(1-a) does not have a unitary character, as it comprises values calculated in accordance with different rules, to which are associated purposes also differentiated, such that the deductions provided for in the paragraphs of paragraph (2) can only be effected to the part of the IRC collection with which there is a direct correspondence, so as to maintain the coherence of the conceptual structure of the standard regime of the tax.

5.9 In overall terms, the IRC collection, ascertained pursuant to articles 89 and 90(1), has a composite, divisible nature:

• On the one hand, between the tax collection properly speaking, resulting from the general structure of ascertainment of IRC, which is due with constitutional basis grounded in the general duty of each (including collective entities) to contribute to public expenditure according to their means (article 103(1) of the Constitution), to which the amounts referred to in article 90(2) are deducted, in the terms and manner referenced therein; and

• On the other, the sum of the collections of autonomous taxation which incorporate their own sense and grounds and which, for that reason, should not be subject to confusion.

5.10 This interpretation is consistent with a reading of the relevant provisions of the CIRC that attends to the general elements of interpretation (historical, systematic and teleological) and which the legislator has now fixed through the interpretative norm of article 88(21) (added by Law 7-A/2016, of 30 March), conferring explicit evidence on the autonomy of the impositions provided in that normative, with the aim of ensuring certainty and equality in the application of the law.

5.11 Following the integration of autonomous taxation into the CIRC, through Law 30-G/2010, of 29 December, the legislator does not seem to have felt the need to explicitly clarify, in a comprehensive manner (i.e., in all provisions where they manifest), the consequences of the coexistence of two forms of taxation within the IRC system, confining itself to providing for the situations in which the exemption from IRC did not extend to autonomous taxation.

5.12 This translated into an amendment made to the wording of article 12 of the CIRC, in order to clarify, with an interpretative character, that companies and other entities covered by the transparent taxation regime are not subject to IRC, except as to autonomous taxation.

5.13 In addition, it was also established (cf. the then article 109(6) of the CIRC, now 117) that the obligation to file the periodic income declaration covers entities exempt from IRC, when they are subject to autonomous taxation.

5.14 It was thus left to the care of the interpreter and the applicator of the law the task of, when necessary – notably for certain purposes such as the deductions provided for in article 90(2) of the CIRC or the calculation of installment payments – identifying the relevant part of the IRC collection, extracting from the applicable provisions a useful, literally possible meaning, that permits a solution that is coherent and in accordance with the nature and functions assigned to each component of the tax.

5.15 For the basis of calculation of installment payments only IRC ascertained on the basis of taxable matter is considered, determined in accordance with the rules of Chapter III and the rates of article 87 of the respective code.

5.16 The coherence and appropriateness of this understanding are grounded in the very nature of installment payments of the tax ultimately due.

5.17 It only makes sense to conclude that the respective basis of calculation corresponds to the amount of the IRC collection resulting from taxable matter that is identified with the profit/income of the taxpayer's fiscal year.

5.18 Thus, the delimitation of the content of the expression used by the legislator in article 90(2) of the CIRC, "amount ascertained pursuant to the preceding paragraph", and in article 105(1) of the CIRC, "tax liquidated pursuant to paragraph 1 of article 90", must be done in a coherent manner.

5.19 Which is to say that it corresponds to the amount of IRC calculated by applying the rates of article 87 to taxable matter determined on the basis of profit and the rates of article 87 of the code.

5.20 The common trait to all situations reflected in the deductions referred to in article 90(2) of the CIRC resides in the fact that they relate to income or expenses incorporated in the taxable matter, determined on the basis of the taxpayer's profit or advance payments of the tax, being, for that reason, entirely extraneous to the situations that form the taxable events of autonomous taxation.

5.21 There is an inseparable link between the amount of the tax credit for investment and the part of the IRC collection calculated on taxable matter based on profit and, failing this, one would subvert the necessary articulation that, on the material level, must exist – between the objectives pursued by tax benefits and their impact on the very magnitude that serves as the basis for the calculation of the taxable matter and the collection – profit.

5.22 Both article 92(1) and article 105(1) of the CIRC refer to "tax liquidated pursuant to paragraph 1 of article 90" and on their content, both the Defendant and taxpayers in general have always based the calculations provided for in such provisions – result of liquidation and installment payments, respectively – on the part of the IRC collection that has taxable matter determined on the basis of profit, which reveals that a different scope cannot be attributed to identical expressions, depending on whether the effect is intended to be favorable or unfavorable to the taxpayer.

5.23 If the legislator clarified, in cases where the special regime for taxation of groups of companies is applied, that the part of the IRC collection to which the deduction of the tax benefit would be effected was the one calculated on the basis of taxable matter of the group, it would be poorly understood that in cases where the company is taxed individually the deduction of the benefit be made to the IRC collection that included the part relating to autonomous taxation.

5.24 The collection to which article 90° refers, when liquidation is to be effected by the taxpayer (situation that occurs in the present proceedings), is ascertained on the basis of the taxable matter contained in that liquidation/self-assessment [cf. article 90°(1-a) of the CIRC], and the credit in which SIFIDE translates is deducted only from the collection thus ascertained, that is, the collection ascertained on the basis of taxable matter [as provided in article 5-a) of the Law governing SIFIDE, which expressly prevents credits arising therefrom from being deducted when taxable profit is determined by indirect methods].

5.25 The autonomous character of these taxation systems is manifest, deriving from the special configuration given to the material and temporal aspects of the taxable events, which impose, in certain domains, the exclusion or an adaptation of the general rules of application of IRC.

5.26 There are diverse reasons which prevent the deduction of tax benefits, especially, and insofar as it concerns us, SIFIDE, from the amount of collections of autonomous taxation.

5.27 And the reasons relate, in the first place, to the autonomy of the collections ascertained on the basis of the values and rates referred to in article 88, as is now expressed in paragraph 21 of the same article, as well as to the interaction it establishes between the taxable base of IRC, constituted by profit, and the nature and objectives of the tax benefits in question, from which it follows that the legislator, in adding this paragraph 21 to article 88 of the code, does nothing more than adopt and clarify the interpretation that already resulted from the relevant legal provisions.

5.28 Given the different nature and ground of the collections of autonomous taxation, only through mischaracterization and subversion of the principles underlying the taxation of business income could it be admitted, as the Claimant claims, that deductions of tax benefits, such as SIFIDE, be effected.

5.29 The State Budget for 2016 added paragraph 21 to article 88 of the CIRC, attributing to it an interpretative nature determining that "the liquidation of autonomous taxation in IRC is effected pursuant to the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, with no deductions being made to the global amount ascertained."

5.30 Therefore, if there were any doubts, they would be dispelled by that normative.

5.31 The very interpretative effect conferred by that Law would, per se, be unnecessary, since no other interpretation would be capable of being made having regard to the teleology and legal hermeneutics of the norms in question, which confers total legality, constitutionality and, above all, authenticity on that interpretative character.

5.32 The norm (article 135 of Law 7-A/2016, of 30 March) that attributes an interpretative character merely fixes an understanding that already had support in the letter and ratio of the law and the norms governing tax benefits have an exceptional nature and not a special nature.

5.33 It cannot be concluded that the norm of article 88(21), to the extent that it clarifies the impossibility of making any deductions to the amount of collections of autonomous taxation, is intended to establish the understanding that has always prevailed in matters of deductions from the IRC collection and which was only called into question by virtue of some recent arbitral jurisprudence.

5.34 The claims adduced rest on a construction with no legal support whatsoever, leaning on some forced attempt at interpretation that would abrogate the current normative, terms in which all the arguments put forward by the Claimant should thus fail, in totum.

5.35 Given that there is no error attributable to the services in the liquidation of the tax in the present proceedings, the Claimant should not be recognized as having any right to compensatory interest.

1. On 18-12-2018, an arbitral dispatch was issued, dispensing with the meeting provided for in article 18 of the RJAT, unless the parties requested it.

2. The parties did not request the holding of the meeting provided for in article 18 of the RJAT.

II – Facts Established

1. On the basis of the documents attached to the proceedings, the following facts are established:

8.1 The Claimant is a Portuguese limited company with registered office and effective management in national territory, whose corporate purpose consists, namely, in the pursuit of activities of drying, storage, processing and marketing of rice and maize.

8.2 In the fiscal year 2015, the Claimant benefited from tax incentives granted under the following schemes:

• System of Tax Incentives for Research and Development ("R&D") Business II ("SIFIDE II")
• Tax Regime Supporting Investment ("RFAI")
• Extraordinary Tax Credit for Investment ("CFEI")

8.3 Specifically, in the fiscal year 2015, the Claimant had tax benefits in the global amount of €779,860.86, as detailed below:

8.4 On 30 May 2016, the Claimant filed its Model 22 IRC income declaration for the taxation period of 2015, having ascertained in field 351 of table 10 an IRC collection of €53,772.79.

8.5 From the tax benefits listed above, the Claimant deducted from the IRC collection of fiscal year 2015 the amount of €53,772.79.

8.6 Tax benefits remained undeducted in the amount of €726,088.07.

8.7 In field 365 of table 10 of the Model 22 IRC of fiscal year 2015, the Claimant ascertained autonomous taxation in the amount of €26,697.49.

8.8 The form of Model 22 IRC of fiscal year 2015 made it impossible to deduct tax benefits from the collection of autonomous taxation, which made it impossible to deduct, in that fiscal year, SIFIDE II, RFAI and CFEI in the global amount of €26,697.49.

8.9 This amount was also not deducted from the IRC collection of previous fiscal years (2012 to 2014) and subsequent years (2016 and 2017).

8.10 On 9 April 2018, the Claimant filed an administrative review application, within which it requested the annulment of the self-assessment of IRC for fiscal year 2015.

8.11 To date, the Claimant has not obtained a response from the AT to the administrative review application filed.

III – Facts Not Established

1. No facts of interest to the decision of the case remained unestablished.

IV – On the Law

1. The following issues are to be examined:

A) On the illegality of the IRC self-assessment declaration

B) On the right to compensatory interest

These issues will be examined as follows:

A) ON THE ILLEGALITY OF THE IRC SELF-ASSESSMENT DECLARATION

1. Article 23 of the Investment Tax Code (approved by Decree-Law 162/2014, of 31 October) states with regard to RFAI:

"1 - The following tax benefits are granted to IRC taxpayers provided for in paragraph 1 of the preceding article:

a) Deduction from the IRC collection ascertained pursuant to paragraph (a) of paragraph 1 of article 90 of the Personal Income Tax Code, of the following amounts from the relevant applications:

1. In the case of investments made in eligible regions pursuant to paragraph (a) of paragraph 3 of article 107 of the Treaty on the Functioning of the European Union contained in the table provided for in paragraph 1 of article 43:

i) 25% of relevant applications, in relation to investment made up to the amount of (euro) 5,000,000.00;

ii) 10% of relevant applications, in relation to the part of investment made exceeding the amount of (euro) 5,000,000.00;

1. In the case of investments in eligible regions pursuant to paragraph (c) of paragraph 3 of article 107 of the Treaty on the Functioning of the European Union contained in the table provided for in paragraph 1 of article 43, 10% of relevant applications;

b) Exemption or reduction of IMI, for a period of up to 10 years from the year of acquisition or construction of the property, with respect to buildings used by the promoter in the context of investments constituting relevant applications, pursuant to article 22;

c) Exemption or reduction of IMT with respect to acquisitions of buildings constituting relevant applications pursuant to article 22;

d) Exemption from Stamp Duty with respect to acquisitions of buildings constituting relevant applications pursuant to article 22"

Pursuant to article 38(1) of the same Act, with regard to SIFIDE II:

"1. IRC taxpayers resident in Portuguese territory who carry on, as their main activity, an activity of an agricultural, industrial, commercial or services nature and non-residents with a permanent establishment in that territory may deduct from the amount of the IRC collection ascertained pursuant to paragraph (a) of paragraph 1 of article 90 of the Personal Income Tax Code, and up to its extent, the value corresponding to research and development expenses, to the extent that they have not been the subject of financial participation by the State on a non-refundable basis, incurred in taxation periods beginning between 1 January 2014 and 31 December 2020, in a dual percentage:

a) Base rate - 32.5% of expenses incurred in that period;

b) Incremental rate - 50% of the increase in expenses incurred in that period in relation to the simple arithmetic average of the two preceding fiscal years, up to the limit of (euro) 1,500,000.00.

As provided for in article 3, paragraphs 1 and 5, of Law 49/2013, of 16 July (Extraordinary Tax Credit for Investment):

Article 3
Tax Incentive

1 - The tax benefit to be granted to the taxpayers referred to in the preceding article corresponds to a deduction from the IRC collection in the amount of 20% of investment expenses in assets related to operations, which are carried out between 1 June 2013 and 31 December 2013.

(…)

5 - Applying the special regime for taxation of groups of companies, the deduction provided for in paragraph 1:

a) Is made to the amount ascertained pursuant to paragraph (a) of paragraph 1 of article 90 of the Personal Income Tax Code, on the basis of the taxable matter of the group;

b) Is made up to 70% of the amount mentioned in the preceding paragraph and cannot exceed, in relation to each company and for each fiscal year, the limit of 70% of the collection that would be ascertained by the company that made the eligible expenses, if the special regime for taxation of groups of companies were not applied.

(…)

As provided for in article 90(1) of the CIRC (in the wording in force until 31 December 2017):

"1 — The liquidation of IRC is processed as follows:

a) When liquidation is to be effected by the taxpayer in the declarations referred to in articles 120 and 122, it is based on the taxable matter contained therein;

b) In the event of non-filing of the declaration referred to in article 120, liquidation is effected by 30 November of the following year to which it relates or, in the case provided for in paragraph 2 of the said article, by the end of the 6th month following the end of the deadline for filing the declaration mentioned therein and is based on the annual amount of minimum monthly remuneration or, when greater, the totality of the taxable matter of the closest fiscal year found to be determined;

c) In the absence of liquidation pursuant to the preceding paragraphs, the same is based on the elements available to the tax administration".

The article 88 of the same Act further provides (wording in force until March 2016):

"1— Undocumented expenses are taxed autonomously, at the rate of 50%, without prejudice to their non-consideration as expenses pursuant to paragraph (b) of paragraph 1 of article 23-A.

2 — The rate referred to in the preceding paragraph is raised to 70% in cases where such expenses are incurred by taxpayers totally or partially exempt, or who do not carry on, as their main activity, activities of a commercial, industrial or agricultural nature and also by taxpayers who derive income falling within article 7.

3 — The following are taxed autonomously: expenses incurred or supported by taxpayers who do not benefit from subjective exemptions and who carry on, as their main activity, an activity of a commercial, industrial or agricultural nature, relating to light passenger vehicles, light cargo vehicles referred to in paragraph (b) of paragraph 1 of article 7 of the Vehicle Tax Code, motorcycles or motorcycles, excluding vehicles powered exclusively by electrical energy, at the following rates: (Amended by Law No. 82-C/2014, of 31 December, applicable to taxation periods beginning on or after 1 January 2015)

a) 10% in the case of vehicles with an acquisition cost of less than (euro) 25,000;

b) 27.5% in the case of vehicles with an acquisition cost equal to or greater than (euro) 25,000 and less than (euro) 35,000;

c) 35% in the case of vehicles with an acquisition cost equal to or greater than (euro) 35,000.

4— (Revoked)

5 — Expenses relating to light passenger vehicles, motorcycles and motorcycles are considered as those relating to, in particular, depreciation, rents or leases, insurance, maintenance and conservation, fuel and taxes inciding on their possession or use.

6 — The following are excluded from the provisions of paragraph 3: expenses relating to:

a) Light passenger vehicles, motorcycles and motorcycles, used in the operation of public transport services, intended to be leased in the exercise of the taxpayer's normal activity; and

b) Motor vehicles for which the agreement provided for in item 9) of paragraph (b) of paragraph 3 of article 2 of the Personal Income Tax Code has been concluded.

7 - Expenses deductible as representation expenses are taxed autonomously at the rate of 10%, considered as such, in particular, expenses incurred on receptions, meals, trips, outings and shows offered in the Country or abroad to clients or suppliers or to any other persons or entities.

8 — The following are subject to the regime of paragraph 1 or paragraph 2, as the case may be, with the applicable rates being, respectively, 35% or 55%, expenses corresponding to amounts paid or due, for any reason whatsoever, to natural or legal persons resident outside Portuguese territory and there subject to a clearly more favorable tax regime, as defined in accordance with the Code, unless the taxpayer can prove that they correspond to actually performed operations and do not have an abnormal character or an exaggerated amount.

9 — The following are furthermore taxed autonomously, at the rate of 5%, deductible expenses relating to daily allowances and compensation for travel in the employee's own vehicle, in the service of the employer entity, not invoiced to clients, recorded for any reason whatsoever, except to the extent that there is taxation in the sphere of the Personal Income Tax in the sphere of the respective beneficiary, as well as non-deductible expenses pursuant to paragraph (f) of paragraph 1 of article 45 supported by taxpayers presenting a tax loss in the taxation period to which the same relate.

10 — (Revoked)

11— The following are taxed autonomously, at the rate of 23%, profits distributed by entities subject to IRC to taxpayers benefiting from total or partial exemption, including, in this case, capital income, when the shares to which the profits relate have not remained in the ownership of the same taxpayer, in an uninterrupted manner, for the year preceding the date of their placing at the disposal and are not to be maintained for the time necessary to complete that period.

12 — To the amount of the tax determined, in accordance with the provisions of the preceding paragraph, the tax that may have been withheld at the source is deducted, in which case the withheld tax cannot be deducted under paragraph 2 of article 90.

13 — The following are taxed autonomously, at the rate of 35%:

a) Expenses or charges relating to indemnifications or any other compensation owed not related to the achievement of previously defined productivity objectives in the contractual relationship, when the cessation of functions of a manager, administrator or partner occurs, as well as expenses relating to the part exceeding the value of remuneration that would have been earned by the exercise of such positions up to the end of the contract, when a contract is terminated before its end, regardless of the method of payment, whether this is effected directly by the taxpayer or there is a transfer of the inherent responsibilities to another entity;

b) Expenses or charges relating to bonuses and other variable remuneration paid to managers, administrators or partners when these represent a portion greater than 25% of annual remuneration and have a value greater than (euro) 27,500, unless their payment is subject to the deferment of a portion not less than 50% for a minimum period of three years and conditioned to the positive performance of the company over that period.

14— The rates of autonomous taxation provided for in this article are raised by 10 percentage points for taxpayers who present a tax loss in the period to which any of the taxable facts referred to in the preceding paragraphs relate, related to the exercise of an activity of a commercial, industrial or agricultural nature not exempt from IRC.

15— The rates of autonomous taxation provided for in paragraphs 7, 9, 11 and 13, as well as the provisions of the preceding paragraph, do not apply to taxpayers to which the simplified regime for determining taxable matter applies.

16— The provisions of this article do not apply with respect to expenses or charges relating to a permanent establishment located outside Portuguese territory and relating to activities exercised through it.

17 - In the case of light passenger vehicles that are plug-in hybrids, the rates referred to in paragraphs (a), (b) and (c) of paragraph 3 are, respectively, 5%, 10% and 17.5%. (Added by Law No. 82-D/2014, of 31/12)

18 - In the case of light passenger vehicles powered by LPG or CNG, the rates referred to in paragraphs (a), (b) and (c) of paragraph 3 are, respectively, 7.5%, 15% and 27.5%. (Added by Law No. 82-D/2014, of 31/12)"

However, through the entry into force of Law No. 7-A/2016, of 30 March, paragraph 21 was added to article 88 of the CIRC, where it states:

"21 - The liquidation of autonomous taxation in IRC is effected pursuant to the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, with no deductions being made to the global amount ascertained".

Referring to article 135 of the State Budget Law for 2016:

"The wording given by this law to paragraph 6 of article 51, to paragraph 15 of article 83, to paragraph 1 of article 84, to paragraphs 20 and 21 of article 88 and to paragraph 8 of article 117 of the Personal Income Tax Code has an interpretative nature".

It so happens that the Constitutional Court, through Judgment No. 267/2017, whose decision was published in the Official Gazette No. 133/2017, Series II of 2017-07-12, ruled unconstitutional the norm of article 135 of Law No. 7-A/2016, of 30 March (State Budget for 2016), to the extent that, as a result of the merely interpretative character attributed thereto, it determines that the norm of article 88(21), second part, of the Personal Income Tax Code (CIRC) - that number added by article 133 of the cited Law - according to which, to the global amount resulting from autonomous taxation liquidated in a given year in the scope of IRC, the values paid under special advance payment (PEC) in that same year cannot be deducted, applies to fiscal years prior to 2016.

The esteemed Constitutional Court Judgment states the following:

"It is certain that such reservation does not collide with the power of the legislator, in the exercise of its own competencies, to alter or clarify the meaning of a previous legal norm and, by way of consequence, to determine a possible correction or modification of the jurisprudence relating to such norm. The concept of interpretative law embraces precisely such possibility. However, in doing so, the legislator must act within the framework of the constitutional order, respecting the constitutional limits deriving from the principle of legal certainty and protection of legitimate reliance regarding substantive retroactivity. It should be added that the legislator cannot exceed such limits nor neutralize or empty the corresponding power of control of the courts provided for in article 204 of the Constitution, by way of the assertion, as the formal author, that the legal norm approved by it has a merely declarative or clarifying scope and not an innovative one. The Constitution does not recognize in the legislator the competence for authentic interpretation of legal norms. Recalling the lesson of BATISTA MACHADO (supra n. 7), the law legally qualified as interpretative does not cease to be a manifestation of the same legislative competence that is the source in organic sense of the interpreted law. Because it is thus, the ultimate decision on the constitutive or declarative scope of a certain interpretative law belongs to the courts. It is they who, in the exercise of jurisdiction, interpret the interpretative law and determine whether the same innovates in relation to preexisting law or merely clarifies it. Competence to the courts of the jurisdictional function a iurisdictio, it is clear that the exclusion or imposition of one or more jurisdictional interpretations of a certain legal norm already realized or clearly admissible by determination of a later law limits the scope of the first: among the multiple declarations of the law of which such law was capable, some have ceased ex vi legis to be admissible. To the extent of such limitation, a modification of the law occurs that the courts can declare. And if it is thus, the interpretation or clarification formally enshrined in the new law cannot fail to assume a constitutive nature and the retroactivity inherent in the same law to have a substantive character. It can therefore be said that, from the perspective of the Constitution, for a normative discipline self-qualified as merely interpretative to be considered constitutive (of new law) and, as such, substantially retroactive, it suffices to verify that to the norm interpreted in its primitive version could have been attributed by the courts a meaning which, following the interpretative norm, became necessarily excluded (cf. the decisions of the Bundesverfassungsgericht of 2.5.2012 and 17.12.2013, in BVerfGE 131, 20 [37-38] and 135, 1 [16-17], respectively). Indeed: 'The clarifying discipline is constitutive even in cases where it aims to exclude the interpretation [of the preexisting law] made by a common court, even if it is not a superior court, regarding past situations. The legislator confers on the law a constitutive retroactive efficacy, to the extent that it seeks to clarify for the past, by way of a law with a univocal meaning, a certain statement that originated, as to the applicable law, an apparently non-univocal understanding or, at least, an application thereof that is not uniform. [] What is decisive is that the legislator intends to correct or exclude a given interpretation [made by the courts].' (cf. BVerfGE 135, 1 [18-19]) That is precisely the effect of article 135 of the State Budget 2016, in qualifying as an interpretative law paragraph 21 added by article 133 to article 88 of the CIRC. In truth, and as is well pointed out in the decision now appealed, that which represented a certain jurisprudential understanding as to the admissibility of deductions to the global amount of the IRC collection, including in it the value of autonomous taxation - as upheld in the decisions of the CAAD issued in the context of proceedings Nos. 769/2014-T, 163/2014-T, 219/2015-T and 370/2015 - ceased to be admissible in light of the cited paragraph 21. Hence the unmistakable character of the substantively retroactive nature of that provision, understood as interpretative law. Given the burdensome content for taxpayers of the new legal solution - as it tends to aggravate the quantum due as IRC - the claim that the same applies to fiscal years prior to the fiscal year of its entry into force shows itself to be flagrantly incompatible with the constitutional prohibition of retroactive taxes (cf. article 103(3) of the Constitution)".

It should also be noted what the CAAD Judgment No. 5/2016-T states with regard to the application of this norm:

"From the analysis of this norm we can draw the following conclusions:

i) It does not alter the legal regime of SIFIDE or RFAI;

ii) It is not intended to be an authentic interpretation of norms contained in SIFIDE or RFAI;

iii) The provision contained in SIFIDE remains valid for deductions 'to the amount ascertained pursuant to Article 90 of the Personal Income Tax Code';

iv) The provision contained in RFAI remains valid for deductions 'to the IRC collection';

v) The nature of 'autonomous taxation rates' is not altered;

vi) The procedure and form of liquidation are not altered;

vii) Deductions to the amount of autonomous taxation ascertained are now expressly prohibited, which does not prevent deductions to the IRC collection (which includes the result of autonomous taxation) provided for in SIFIDE and RFAI from being made.

(…)

Thus, the norm contained in paragraph 21 of article 88 of the CIRC, to which an interpretative nature was attributed, does not prevent amounts from being deducted from the IRC collection (that is, from the totality of the collection ascertained by application of article 90 of the CIRC) under SIFIDE and RFAI. Indeed, the interpreter and applier of the law may disagree with the legislator's choices, which he cannot do is alter the legislative solutions adopted. Now the legislator refers in RFAI to deduction 'from the IRC collection' and in SIFIDE refers to deduction 'to the amount ascertained pursuant to Article 90 of the Personal Income Tax Code', which, in both cases, is manifestly distinct from 'deduction from the taxable matter of IRC'. The legislator could, both in RFAI and in SIFIDE, have adopted this solution; the truth is that he did not, and it is not the role of the interpreter to correct the legislator's hand. As José de Oliveira Ascensão states, '[h]owever desirable an alteration of the normative system may appear, that alteration belongs to the sources of law, not to the interpreter. The latter grasps the meaning of the source as it objectively presents itself at the present moment, does not oppose any other meaning to it. Weighty reasons of certainty and defense against arbitrariness underpin this conclusion'. Thus, in order for the deductions provided for in RFAI and SIFIDE to cease to be made to the IRC collection (to which autonomous taxation also contributes) the legislator, if so inclined, must alter the special legal regimes that provide for them."

It should also be noted, on the other hand, as stated in the Constitutional Court Judgment cited above, that the majority of arbitral jurisprudence has defended the understanding advocated by the Claimant.

As stated in CAAD Judgment No. 45/2018-T:

"To this paragraph 21 of article 88 of the CIRC an interpretative nature was attributed, by article 135 of Law No. 7-A/2016 and by article 233 of Law No. 114/2017, respectively. However, the Constitutional Court, in the cited judgment No. 267/2017, has already affirmed the unconstitutionality of that article 135 to the extent that, as an effect of the merely interpretative character attributed to the second part of paragraph 21 of article 88 of the CIRC, it excludes the possibility of deduction to the global amount resulting from autonomous taxation liquidated in a given year in the scope of IRC of deductions permitted in fiscal years prior to 2016. This decision of the Constitutional Court was based on paragraph 3 of article 103 of the Constitution, which establishes that no one can be obliged to pay taxes which have a retroactive nature, from which the Constitutional Court understood that 'the legislator cannot create taxes of such nature or introduce in existing taxes modifications which, with retroactive effects, aggravate them' and that 'what is at issue is the prohibition of establishing new legal consequences that constitute ex novo or aggravate situations already defined, namely the quantum due as IRC and previously defined in view of the verification of all relevant facts in light of applicable law before the establishment of new legal consequences'. Therefore, following this jurisprudence, the constitutionality of the restrictive interpretation of paragraph 2 of article 90 of the CIRC, so as to exclude the possibility of deductions to the IRC collection resulting from autonomous taxation, depends on it already being to be made in light of the regime prior to that Law No. 7-A/2016, since it is constitutionally inadmissible the retroactive unfavorableness to taxpayers of tax norms from which the obligation to pay taxes results. It should be noted, however, from the outset, that the new wording given to paragraph 21 of article 88 of the CIRC by Law No. 114/2017, by excluding the possibility of deductions to the global amount of autonomous taxation 'even if such deductions result from special legislation' clarifies, with an interpretative nature (in this part without constitutional problems, as it is a matter of retroactive favorableness to taxpayers), that there was special legislation from which it resulted that deductions be made to the amount of autonomous taxation, coming thus to recognize, with the authority of a legislative interpretation, what had already been patiently and repeatedly explained by majority arbitral jurisprudence (as was justified and is justified in view of the difficulties manifested by the Tax and Customs Authority in article 127 of its allegations, in which it confesses that, for it, it is a matter of 'incomprehensible and unintelligible theses'). Therefore, being constitutionally inadmissible, for the reasons stated by the Constitutional Court in the cited judgment, that this new law come to exclude the possibility of deductions admissible in light of legislation in force until the entry into force of Law No. 7-A/2016, the question that arises, to resolve the questions of legality of liquidation and the decision on the administrative review which are raised in the present proceedings, is whether, before this law, the restrictive interpretation that came to be clarified therein should already be made, whether restrictions should already be placed on the application of the deductions provided for in paragraph 2 of article 90 of the CIRC to the part of the IRC collection resulting from autonomous taxation. In truth, the fact that the wording of paragraph 2 of article 90 points to the application of the deductions to the collection resulting from autonomous taxation, that deductibility did not exclude the possibility of a restrictive interpretation, if 'the interpreter arrives at the conclusion that the legislator adopted a text that betrays his thinking, to the extent that it says more than what he intended to say. Also here the ratio legis will have a decisive word. The interpreter should not let himself be driven by the apparent scope of the text, but should restrict it so as to make it compatible with the legislative thinking, that is, with that ratio. The argument on which this type of interpretation rests is usually expressed as follows: cessante ratione legis cessat eius dispositio (where the reason for the law ends, its scope ends)'. As a foundation for a restrictive interpretation could, at first analysis, be suggested the fact that some autonomous taxation, namely some of those based on 'expenses' or 'charges', aim to discourage certain taxpayer behavior capable of affecting taxable profit, and, consequently, reducing tax revenue, and its deterrent force will be attenuated with the possibility of the respective collection being subject to deductions. However, as was legislatively recognized by the wording given to paragraph 21 of article 88 by Law No. 114/2017 (here with an interpretative force constitutionally irreproachable in light of article 103(3) of the Constitution), there is special legislation from which deductions to the collection derived from autonomous taxation result, which are necessarily situations in which legislation gave preference to the satisfaction of the interests justifying the deductions in relation to those aimed at with autonomous taxation, which occurs with the norms on deductible tax benefits to the IRC collection. On the other hand, the nature of anti-abuse norms, intended to prevent fraud and tax evasion, does not exclude the possibility of deductions to the IRC collection that with the application of such norms is determined, which is manifest with respect to the collection provided by corrections based on norms of indisputably anti-abuse nature, such as, for example, those relating to transfer pricing or undercapitalization and also corrections resulting from the application of the general anti-abuse norm provided for in article 38(2) of the General Tax Law. Still furthermore, it is also clear that the anti-abuse nature of some autonomous taxation aiming to discourage expenses and prevent tax evasion could not serve to justify the non-deduction of tax benefits from the entire IRC collection resulting from autonomous taxation, since the one provided for in paragraph 11 of article 88 of the CIRC does not apply to expenses or charges, but rather to 'profits', being a form of complementary or alternative profit taxation in relation to that provided for the generality of income. Furthermore, autonomous taxation provided for in paragraph 8 of article 88 does not have underlying any intention to discourage the performance of the operations to which it refers, but rather to impose on taxpayers special probative duties in situations in which the more favorable taxation of the recipients of expenses can raise doubts about the reality and normality of operations, since autonomous taxation is ruled out 'if the taxpayer can prove that they correspond to actually performed operations and do not have an abnormal character or an exaggerated amount'. Furthermore, even with respect to some autonomous taxation applying to expenses, it would not be compatible with constitutional principles of proportionality and equality to impose taxation on the basis of a hypothetical legislative intention to discourage the use of motorcycles for certain activities for which they are indispensable, as occurs with motorcycle shows, or for which they have evident suitability, their use corresponding to manifest good business management and would be especially inconceivable to include within the scope of that discouraging intention the very payment of 'taxes inciding on their possession or use', referred to at the end of paragraph 5 of article 88, which should even be ensured coercively by the Tax and Customs Authority, in case the taxpayer feels discouraged from making such payment. Thus, the understanding that all autonomous taxation aims to tax expenses or discourage or sanction behavior, which may result from a cursory analysis, encounters, in a more incisive perception, an insurmountable lack of correspondence with reality, being more coherent, as a global explanation, the idea that we are 'faced with a mechanism whose ultimate objective is to contribute to the "normalization" of taxation in the scope of IRC, that is, to the functioning of this tax in its purest form and closest to its roots as a tax on profit obtained by collective entities. In that sense, autonomous taxation is nothing more than a mechanism assisting the central axis of IRC, which is to tax profits while allowing the deduction of expenses in which taxpayers must incur with a view to realizing taxable income'."

The CAAD Judgment No. 428/2017-T further states:

"(…) what is at issue is to interpret the scope of the special legislation that is SIFIDE II, it is not permissible to attribute relevance, for this purpose, to the norm of paragraph 21 of article 88 of the CIRC, added by Law No. 7-A/2016, of 30 March, to the extent that it states that no 'deductions are made to the global amount ascertained', despite the purported interpretative nature attributed thereto (which implies its unconstitutionality, due to retroactivity, as understood by the Constitutional Court in judgment No. 267/2017, of 31-05-2017). Indeed, there is no sign, either in Law No. 7-A/2016, or in the Report of the Budget for 2016, or in its discussion, that with the addition to article 88 of the CIRC of a general norm prohibiting deductions to the global amount ascertained of autonomous taxation, it was intended to interpret restrictively the expression 'deduct to the amount ascertained pursuant to article 90 of the Personal Income Tax Code' contained in a special norm of an individual legislation, such as SIFIDE II. And, in the absence of an unequivocal intention to the contrary, the rule applies that general law does not alter special law (article 7(3) of the Civil Code), which is justified by the fact that 'the general regime does not include consideration of the particular conditions that justified precisely the issuance of the special law'. Furthermore, the said SIFIDE II rules are intended to encourage IRC taxpayers to make investments in the period between 01-01-2011 and 31-12-2015, such that, given the tax benefit is a counterpart to the adoption of legislatively desired and encouraged behavior, it would be incompatible with the constitutional principle of reliance, inherent in the principle of democratic rule of law (article 2 of the Constitution), not to recognize these behaviors the favorable tax effects provided for in the law in force at the time they occurred. In truth, the interpretation of the law effected here was something taxpayers had reason to reasonably expect, as evidenced by the already abundant and majority arbitral jurisprudence adopting this interpretation, with the recognition of constitutionality granted thereto by the Constitutional Court in judgment No. 267/2017, of 31-05-2017. For this reason, if hypothetically Law No. 7-A/2016 intended to eliminate, totally or partially, the favorable tax effects that SIFIDE II promised to taxpayers who, with justified reliance, adopted the behavior provided therein, it would be materially unconstitutional, by violation of that principle. By the foregoing, with the literal and rational elements of the interpretation of article 4 of SIFIDE II converging to the effect that the investment expenses provided therein are deductible to 'the amount ascertained pursuant to article 90 of the Personal Income Tax Code, and up to its extent', it is to be concluded that they are deductible to the totality of that collection, which encompasses, in addition to that derived from the taxation of profits in each fiscal period, that which results from special advance payment and other positive components of the tax, namely autonomous taxation, state surcharge and IRC from previous taxation periods."

Also stated in CAAD Judgment No. 193/2017-T:

"Note, moreover, that in the following paragraphs of that article 90 of the Personal Income Tax Code the legislator was concerned to enumerate several exceptions and limits to the rules of deductibility of paragraph 2. In paragraph 4, when it provides that 'the deduction relating to withholdings at source is only to be made when these have the nature of a tax in account of IRC', which is revealing: it is understood that this is so, because it is to the IRC collection that it is sought to deduct them, or, in paragraph 7, when it prescribes that from the deductions to the collection a), b) and c) of paragraph 2 cannot result, in a general manner and without distinguishing the collection resulting from application of autonomous taxation rates, a negative value. In none of them and in no other provision was there any limitation to the deductibility of SIFIDE to the part of the IRC collection resulting from autonomous taxation, being, therefore, unavoidable the conclusion that it did not intend to do so. It should be noted, moreover, that although article 90 was altered with Law No. 2/2014, of 16 January, which republished the CIRC, what is said here not only endures but, from an interpretative point of view, is even reinforced, since the legislator added some limitations and exceptions to deductions to the collection provided for in number 2 and again did not refer to the part of the collection resulting from the application of autonomous taxation rates. For this reason, article 90 of the Personal Income Tax Code also applies to the liquidation of the amount of autonomous taxation, which is ascertained by the taxpayer or by the Tax Administration, there being no other provision that provides for different terms for its liquidation. The autonomy of autonomous taxation is restricted to the applicable rates and their taxable matter, but the ascertainment of its amount is effected pursuant to article 90 of the Personal Income Tax Code. The differences between the determination of the amount resulting from autonomous taxation and the collection resulting from taxable profit, rest on the determination of the taxable matter and the rates, provided for in Chapters III and IV of the CIRC, but not on the forms of liquidation, which are provided for in Chapter V of the same Code and are of common application to autonomous taxation and the remainder of the IRC collection. For this reason, as article 90 is inserted in this Chapter V, no legal support is seen for making a distinction between the collection proceeding from autonomous taxation and the remainder of the IRC collection, because of the fact that the rates are distinct and the forms of determination of the taxable matter are distinct. And, as stated, there is no legal support to assert that, in the event that several calculations have to be made in a declaration to determine the IRC, more than one self-assessment should be effected. For this reason, the expression 'when liquidation is to be effected by the taxpayer in the declarations referred to in articles 120 and 122, it is based on the taxable matter contained therein', contained in paragraph (a) of paragraph 1 of article 90 of the Personal Income Tax Code, includes in its literal meaning the liquidation of autonomous taxation, whose taxable matter has to be indicated in the said declarations, as results, moreover, from the declaration itself Model 22. The collection is obtained by applying the rate to the respective taxable matter, such that, in the case of IRC, there being diverse rates applicable to diverse taxable matters, the global IRC collection will be constituted by the sum of all the results of such applications. It should be added that, independently of the calculations to be made, the self-assessment that the taxpayer or the AT must make pursuant to articles 89(a), 90(1), paragraphs (a), (b) and (c) and 120 or 122 is unitary, and based on it that global IRC is calculated, whatever the taxable matters relating to each of the types of taxation that underlie it. Furthermore, the possible anti-abuse nature that some autonomous taxation assumes cannot be seen as an explanation for its exclusion from the respective collection, since there is no legal support for excluding the deductibility to the collection provided by corrections based on norms of an indisputably anti-abuse nature. The purpose of autonomous taxation is dual. It aims to tax actual income, correcting in this way the taxable income to bring it closer to that actual income and, at the same time, seeks to penalize taxpayers who, through the performance of certain expenses, end up reducing taxable income."

See also CAAD Judgment No. 784/2015-T:

"The legislation that approved SIFIDE does not state that credits arising therefrom are deductible from any and all IRC collection, but rather defines the scope of the deduction alluded to, referring, in paragraph 1 of article 4, 'to the amount ascertained pursuant to article 90 of the Personal Income Tax Code, and up to its extent'. Paragraph 3 of the same article 4 confirms that it is to the amount ascertained pursuant to article 90 of the CIRC that is relevant to effect the deduction by stating that 'the deduction is made, pursuant to article 90 of the Personal Income Tax Code, in the liquidation relating to the taxation period mentioned in the preceding paragraph'. Thus, by mere declarative interpretation, it is concluded that article 4, paragraph 1, of SIFIDE II, in establishing the deduction 'to the amount ascertained pursuant to article 90 of the Personal Income Tax Code, and up to its extent', implies the deduction to the amount of autonomous taxation ascertained pursuant to that article 90. The fact that article 5 of SIFIDE II excludes the benefit when taxable profit is determined by indirect methods and in autonomous taxation there are included situations in which it is sought indirectly to tax profits (namely, not giving relevance or discouraging facts capable of reducing them) has any relevance for this purpose, since the concept of 'indirect methods' has a precise scope in tax law, which is concretized in article 90 of the General Tax Law (beyond special norms), relating to means of determining taxable profit, whose use is not foreseen for calculating the taxable matter of autonomous taxation provided for in article 88 of the CIRC. On the other hand, if it is the necessity of using indirect methods that excludes the possibility of enjoying the benefit, one cannot justify that exclusion with respect to the collection of autonomous taxation, which is determined by direct methods. Furthermore, the possible anti-abuse nature that some autonomous taxation assumes cannot be seen as an explanation for its exclusion from the respective collection from the scope of deductibility of the SIFIDE II benefit, since there is no legal support for excluding the deductibility to the collection provided by corrections based on norms of an indisputably anti-abuse nature, such as, for example, those relating to transfer pricing or undercapitalization. On the other hand, the fact that the deductibility of the SIFIDE II tax benefit is limited to the collection of article 90 of the CIRC, up to its extent, does not permit the conclusion that the tax credit is only deductible if there is taxable profit, since what that fact requires is that there be IRC collection, which may exist even without taxable profit, namely by reason of autonomous taxation. Thus, pointing the literal meaning of article 4 of SIFIDE II to the effect that deduction applies also to the IRC collection derived from autonomous taxation ascertained pursuant to article 90 of the CIRC, only by way of a restrictive interpretation can the application of the tax benefit to the IRC collection provided by autonomous taxation be excluded. The viability of a restrictive interpretation finds, from the outset, an obstacle of a general nature, which is that the norms creating tax benefits have the nature of exceptional norms, as results from the express wording of article 2(1) of the Tax Benefits Statute, such that, in the absence of special rules, they must be interpreted in their precise terms, as is settled jurisprudence. In the case of tax benefits, there is expressly provided the possibility of extensive interpretation (article 10 of the Tax Benefits Statute), but not of restrictive interpretation, such that, as a rule, the tax benefit should not be interpreted with less scope