CAAD Case 441/2018-T: General Anti-Abuse Clause Applied to SGPS Share Acquisition – Reformed Arbitral Decision

ARBITRAL AWARD

Following the learned Decision delivered by the Central Administrative Court - South ("TCAS"), on 25 February 2021, in the context of case no. 70/19.8BCLSB, which has become final, which declared the nullity of the decision rendered in the present case, a new arbitral decision is hereby rendered.

Lisbon, 23 April 2021

The Arbitrator President with the agreement of all arbitrators,

Alexandra Martins

The Arbitrators Alexandra Coelho Martins (President Arbitrator), Carla Castelo Trindade and Jorge Carita, appointed by the Deontological Council of the Administrative Arbitration Centre to form the present Arbitral Tribunal, hereby agree on the following:

ARBITRAL DECISION

I – REPORT

1. On 5 September 2018, A..., SGPS, S.A., legal entity no. ..., with registered office at Rua..., no. ..., ..., Lisbon, ...-... Lisbon (hereinafter "Claimant"), requested the establishment of an Arbitral Tribunal and submitted a petition for arbitral judgment, pursuant to the provisions of article 10.°, no. 1, paragraph a), and no. 2, of Decree-Law no. 10/2011, of 20 January, as amended (Legal Regime of Tax Arbitration, hereinafter LRTA), for assessment of the legality of the demonstration of collection of withholding tax on Personal Income Tax ("PIT") no. 2018 ... of 30.04.2018 and of the corresponding demonstrations of collection of compensatory interest nos. 2018..., 2018... and 2018 ..., relating to the year 2013.

2. The said additional PIT collection (withholding tax) resulted from the application by the Tax Authority of the general anti-abuse clause provided for in article 38.°, no. 2, of the General Tax Law ("GTL") to the acquisition by the Claimant, in May 2013, of 24.02% of the share capital of company B...- SGPS, S.A., with the Tax Administration understanding that the payment of the acquisition price of the shares should be characterized as dividends and that, as such, the Claimant failed to comply with the duty of withholding tax on PIT on profits made available, thereby incurring liability as a tax substitute, pursuant to the provisions of article 103.° of the PIT Code.

3. Not conforming to the said collection of tax and compensatory interest - primarily on the grounds that it considers the operation performed as constituting a perfectly legitimate and straightforward business reorganization - the Claimant requested the establishment of an Arbitral Tribunal pursuant to article 10.°, no. 1, paragraph a), and 2.° of the LRTA, formulating the following claims in its petition (hereinafter PI):

i) Declaration of illegality and consequent annulment of the PIT collection (withholding tax) no. 2018... of 30 April 2018, on the grounds of:

a) The failure to fulfill the concrete prerequisites for application of the general anti-abuse clause contained in article 38.°, no. 2 of the GTL; and

b) The inapplicability to the Claimant of the disregard of tax effects resulting from the application of the general anti-abuse clause to the acts in question, due to material unconstitutionality of article 38.°, no. 2, of the GTL, interpreted in the sense of being capable of producing tax effects on third parties other than the taxpayer who acted motivated to obtain the tax advantage, in light of the principles of trust and legal certainty, inherent in the principle of a democratic rule of law enshrined in article 2.° of the Constitution of the Portuguese Republic (hereinafter CRP) and of proportionality enshrined in article 18.° of the CRP.

ii) Declaration of nullity of the compensatory interest collections no. 2018..., 2018... and 2018... relating to the year 2013, in light of the annulment of the PIT collection of which it is a consequential act;

iii) Conviction of the Tax Administration to pay compensation for any costs incurred in providing unjustified guarantee in order to suspend the fiscal enforcement proceedings, pursuant to article 53.°, no. 1, of the GTL, due to error attributable to the Services in rendering the impugned tax acts, as well as the costs of the arbitral proceedings.

The petition was accompanied by 20 documents, and 3 witnesses were listed.

4. As the Claimant opted for not appointing an arbitrator, pursuant to the provisions of paragraph a) of no. 2 of article 6.° and paragraph b) of no. 1 of article 11.° of the LRTA, in the wording introduced by article 228.° of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal Dr. Alexandra Coelho Martins, Dr. Carla Castelo Trindade and Dr. Jorge Carita, who communicated their acceptance of the appointment within the applicable timeframe.

In accordance with the provisions of paragraph c) of no. 1 and no. 8 of article 11.° of the LRTA, in the wording introduced by article 228.° of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 19 November 2018.

5. On 4 January 2019, the Tax and Customs Authority (hereinafter "Respondent") submitted a reply (hereinafter "R.") in which it defended the total lack of merit of the petition for arbitral judgment.

6. On 19 February 2019, the meeting referred to in article 18.° of the LRTA was held, at which party statements were made and the two witnesses presented by the Claimant were examined.

7. Written submissions were presented by the Claimant on 12 March 2019, where it concluded by restating what was said in the arbitration request, with the entire relief sought therein to be granted.

8. The Respondent submitted written submissions on 3 April 2019, reiterating the request for total lack of merit of the present petition for arbitral judgment, as not proven, with the corresponding legal consequences.

The submissions made were taken into consideration in the assessment of factual and legal matters.

II. CASE MANAGEMENT

9. The Arbitral Tribunal was regularly constituted and is materially competent.

The proceedings are free from nullities and no issues have been raised that could prevent the tribunal from hearing the merits of the case.

The parties enjoy legal personality and capacity, are legitimate (articles 4.° and 10.°, no. 2 of the LRTA and article 1.° of Ordinance no. 112-A/2011, of 22 March), and are duly represented.

All considered, a final decision must be rendered.

III. ISSUES TO BE DECIDED

10. In light of the positions assumed and the grounds alleged by the parties in their procedural documents, the issues to be decided in the context of the present arbitral proceedings concern the assessment of the legality of the PIT collection (withholding tax) no. 2018 ... of 30.04.2018, in the amount of € 982,899.13 (nine hundred eighty-two thousand, eight hundred and ninety-nine euros and thirteen cents) and of the corresponding demonstration of collection of compensatory interest nos. 2018..., 2018... and 2018..., relating to the year 2013, in the amount of € 175,630.66 (one hundred seventy-five thousand, six hundred and thirty euros and sixty-six cents), in a total of € 1,158,529.79 (one million one hundred fifty-eight thousand, five hundred and twenty-nine euros and seventy-nine cents), in light of the following defects invoked by the Claimant:

a) Inapplicability to the Claimant, as (hypothetical) tax substitute, of the disregard of tax effects resulting from the application of the general anti-abuse clause to the acts in question, in concurrent violation of article 38.°, no. 2, of the GTL or, should it be understood otherwise, due to unconstitutionality of this provision in light of the principles of certainty and legal security and proportionality. Thus, even if the prerequisites for application of the general anti-abuse clause are met, the prerequisites on which withholding tax depends are not met;

b) Failure to meet the prerequisites for application of the general anti-abuse clause, in violation of the provisions of article 38.°, no. 2, of the GTL, in particular due to:

i. Absence of essential or primary motivation of a fiscal nature for the purchase and sale of shares in company B... - SGPS, S.A., since the establishment of the Claimant was aimed at safeguarding the shares held by individual shareholders and the shareholder position they conferred;

ii. Absence of recourse to artificious or fraudulent operation, nor abuse of the legal forms available to it to carry out the operation;

iii. Insufficiency of the existence of tax advantage obtained as a result of the purchase and sale of shares to demonstrate the verification of the means element;

iv. Absence of non-conformity of the result obtained with the ratio legis of the applicable rules, since there are no unequivocal signs in the tax legal order of an intention to tax that economic result;

In addition to the assessment of the legality of the impugned tax acts in the terms indicated above, it is also necessary, given the corresponding relief sought by the Claimant, to decide on the conviction of the Tax Administration to pay compensation for the provision of unjustified guarantee, pursuant to article 53.°, no. 1, of the GTL.

IV. FACTUAL BASIS

IV.1. PROVEN FACTS

11. With respect to factual matters, it is important to note that the Tribunal is not required to rule on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and to distinguish the proven facts from the unproven ones. All in accordance with article 123.°, no. 2, of the Code of Tax Procedure and Process (CTPP) and article 607.°, nos. 3 and 4 of the Code of Civil Procedure (CCP), applicable pursuant to article 29.°, no. 1, paragraphs a) and e), of the LRTA. In this manner, the facts pertinent to the determination of the case are selected and delineated based on their legal relevance, which is established in light of the various plausible solutions of the legal issue(s) in question (see article 511.°, no. 1, of the former CCP, corresponding to article 596.° of the current CCP).

12. Thus, taking into account the positions assumed by the parties in their respective pleadings (PI and submissions of the Claimant, Reply and counter-submissions of the Respondent), the documentary evidence attached to the case file and the testimonial evidence produced at the meeting held, the following facts relevant to the decision are considered proven:

A) THE CLAIMANT – A..., SGPS S.A.

1. The Claimant was established on 21 May 2013 as an anonymous commercial company in the form of a company holding partnership shares, with the purpose of "management of shareholdings in other companies as an indirect form of exercising economic activities", having as founding shareholders C..., D..., E..., F..., G... with share capital of EUR 50,000.00, represented by 50,000 shares with a nominal value of €1 each, distributed as follows (see Annex 2 to doc. no. 1 and doc. no. 3 attached to the PI):

Shareholder Name Number of Shares
C... 16,668
D... 13,784
E... 11,593
F... 7,954
G... 1
Total: 50,000

2. In its first year of activity, in pursuit of its corporate purpose, the Claimant acquired:

a) On 22 May 2013, a total of 7,543,660 shares of B..., SGPS, S.A., corresponding to a 24.02% interest in the capital of this company, for the total price of € 22,630,980.00 (at the rate of € 3.00 per share), to be paid over three years (see Annex 1 to doc. no. 1 and doc. 6 attached to the PI);

b) On 28 May 2013, the Claimant acquired another 29,920 shares of B... SGPS, S.A, at the rate of € 3.00 per share (see docs. 6 and 7 attached to the PI);

c) On 3 June 2013, it acquired a lot of 433,344 shares of B... SGPS, S.A., at the rate of € 2.47 per share (see docs. 6 and 8 attached to the PI);

d) On 28 June 2013, the Claimant resorted to bank credit, granted by H.../..., S.A., in the amount of € 1,070,333.00 for acquisition of the shareholdings referred to in the preceding point (see doc. no. 11 attached to the PI);

e) At 31 December 2013, the Claimant only participated in the share capital of B... SGPS, S.A. (see doc. 1 attached to the PI);

f) Since May 2013, the Claimant strengthened its shareholding in B..., SGPS, S.A., increasing from an initial holding percentage of 24.02% to 32.68% in 2017 (see docs. 9 and 10 attached to the PI);

g) The Claimant has four directors and no employees (see doc. 1 attached to the PI corroborated with party statements);

B) THE COMPANY – B...- SGPS, S.A.

a) B...- SGPS, S.A. is the company that leads Group I..., the leading Portuguese company in Information Technologies, having gone public in 2000, being a listed entity on Euronext Lisbon (https://www.bolsadelisboa.com.pt; http://www...;

b) At the time of establishment of A... – SGPS, S.A., four of the shareholders who established it held the following shareholdings in B...– SGPS, S.A. (see publications attached as doc. no. 6 to the PI and shareholder structure contained in the Report and Accounts of B... – SGPS, S.A. as of 31.12.2012, doc. no. 28 attached with the submissions):

Shareholders Number of Shares % of Share Capital
C... 2,514,997 8.01%
D... 2,079,592 6.62%
F... 1,899,799 6.05%
E... 1,749,074 5.57%

a) The said shareholders jointly held 8,243,462 shares representing 26.25% of the share capital of B...– SGPS, S.A.;

b) In the year 2011, B..., SGPS, S.A. distributed dividends, derived from the net result of the period and from free reserves and accumulated results in the total amount of € 4,082,181.22, corresponding to € 0.13 per share (see document no. 15 attached to the PI and party statements at minutes 41:55 to 44);

c) In 2012, B..., SGPS, S.A. distributed dividends, derived from the net result of the period and from free reserves and accumulated results in the total amount of € 942,041.82, corresponding to € 0.03 per share (see document no. 16 attached to the PI and party statements at minutes 41:55 to 44);

d) On 7 February 2013, B..., SGPS, S.A. announced the approval, by the Board of Directors, of the intention to propose to the General Assembly the distribution of a dividend of € 0.10 per share, in the total amount of € 3,140,139.40 (see document no. 17 attached to the PI and party statements at minutes 41:55 to 44);

e) In the General Assembly of B..., SGPS, S.A., of 25 September 2013, a distribution of results and accumulated reserves corresponding to € 0.50 per share was resolved (see document no. 18 attached to the PI and party statements, minute 43);

C) "RESTRUCTURING"

a) In May 2000, on the occasion of the listing of this company (via IPO), a group of shareholders of B...– SGPS, S.A., subscribed to a Shareholders' Agreement relating to this company, with 22 subscribing shareholders (see document no. 4 attached to the PI), under which they assumed, among others, the commitment to maintain a certain percentage of the share capital and voting rights of that company, to ensure the stability of the company and a controlling position – see document no. 4 attached to the PI;

b) Compliance with this shareholders' agreement and the necessary renewal/renegotiation thereof every three years began to raise questions generating pressure on the core group of shareholders, which, from the original 13, in 2013, had already been reduced to 6. These questions concerned:

(a) Departure of shareholders and divorces, which created pressure and financial strain on individual shareholders to acquire shares (from those departing or from spouses);

(b) Market volatility in the months preceding the renewals (every three years) of the shareholders' agreement;

– see party statements at minutes 9:00 to 16:00 and testimony of the first witness.

c) Following an embryonic attempted takeover bid that proved not viable, the establishment of the Claimant (on 21 May 2013) represented a second alternative [to the takeover bid] which aimed at the following strategic objectives:

(a) Concentrate in a holding company a significant lot of shares of B..., SGPS, S.A., as a means of strengthening the position of four reference shareholders, to reach 33.4% (one-third), as a way of ensuring indirect control of that company [B...] to those four shareholders [of the Claimant], without having to launch a takeover bid

– see party statements at minutes 47:40 to 47:55;

(b) Stabilize the maintenance of the controlling shareholder position in B..., SGPS, S.A., making it less volatile to personal vicissitudes, such as departures and divorces;

(c) Facilitate the purchase of shares resulting from such vicissitudes, through institutional means (via a corporate vehicle), and the corresponding resort to bank financing, which was more advantageous in the case of a company that combined the four shareholdings and exercised a "dominant position" over B..., SGPS, S.A.;

(d) Serve as a vehicle for other future investments,

– see docs. 11, 12 and 13 attached to the PI (bank loan contracts), party statements at minutes 9:00 to 30:00 and testimony of the second witness;

d) On 22 May 2013, the Claimant acquired from its shareholders 7,543,660 shares of B...– SGPS, S.A., corresponding to a 24.02% interest, as mentioned in paragraph a) above;

e) The acquisition of the shares of B..., SGPS, S.A. by the Claimant from its shareholders was carried out at prices similar to the stock exchange quotations of the securities – see document no. 21 attached with the Claimant's submissions;

f) In the fiscal year 2013, the Claimant received from B... SGPS, S.A. € 4,760,815.00 relating to distributed profits (dividends, distribution of reserves and accumulated results), with a withholding tax of € 1,190,203.75, resulting in a net value of € 3,570,611.25. The tax withheld was refunded to the Claimant on 1 September 2014, via the self-assessment of Form 22 filed on 30.05.2014 (see document no. 1 attached to the PI);

g) In the fiscal year 2013, the Claimant paid to its shareholders € 3,510,354.02, on account of the debt resulting from the acquisition from them of shares of B... SGPS, S.A.. At 31 December 2013, the following amounts had been paid and remained unpaid, broken down by shareholder (see document no. 1 attached to the PI):

Shareholder Amount Paid Amount Unpaid
C... € 1,166,961.20 € 6,386,186.80
D... € 970,193.96 € 5,309,379.04
E... € 556,200.00 € 3,043,800.00
F... € 816,998.86 € 4,471,020.14
TOTAL € 3,510,354.02 € 19,210,385.98

D) "INSPECTION ACTION"

v) The Tax and Customs Authority conducted an external inspection, of partial scope, commencing on 27 October 2017, pursuant to internal service orders nos. OI2017..., with reference to the fiscal year 2013, aimed at analyzing operations and financial movements made between the shareholders and the company (see document no. 1 attached to the PI - TIR, p. 6);

w) During the course of that inspection action, the application of the General Anti-Abuse Clause provided for in article 38.°, no. 2, of the GTL was projected;

x) The tax inspection services concluded, in summary, that "(…) the establishment of the company A... for parking by its shareholders of the shares of B... SGPS that they held directly, were essentially or primarily directed by artificious means and abuse of legal forms, to the reduction of taxes that would be due without the use of those means" (see document no. 1 attached to the PI);

y) Consequently, the tax inspection services proceeded to disregard and subsequently requalify as dividends, for tax purposes, the amounts paid as the acquisition price of the shares, quantifying the tax advantage improperly obtained in the total amount of € 982,899.13, to which compensatory interest of € 175,630.66 is added (see document no. 1 attached to the PI);

z) Pursuant thereto, through Office no. ..., of 09.03.2018, the Claimant was notified, pursuant to and for the purposes of article 63.°, nos. 4 and 5, of the CTPP, to exercise the right of prior hearing with regard to the draft decision on application of the General Anti-Abuse Clause (see doc. no. 1 attached to the PI);

aa) Within the legally provided timeframe, the Claimant exercised the right of prior hearing (see page 62 et seq. of doc. no. 1 attached to the PI);

bb) On 23.04.2018, the Claimant was notified of the final tax inspection report (see doc. no. 1 attached to the PI);

cc) The Claimant was notified of the demonstrations of collections of income tax withholding and inherent compensatory interest, dated 30 April 2018, in the total amount of € 1,158,529.79, which constitute such corrections, with the amount of € 82,899.13 relating to tax (collection no. 2018...), and € 175,630.66 relating to compensatory interest (collections nos. 2018..., 2018... and 2018...), with payment deadline of 07-06-2018 (see doc. no. 2 attached to the PI);

dd) Subsequently, the Claimant was cited for the fiscal enforcement proceedings no. ...2018... initiated for coercive collection of the tax acts subject to arbitral judgment. (see doc. no. 19 attached to the PI);

ee) The Claimant offered, to suspend the identified fiscal enforcement proceedings, bank guarantee. (see doc. no. 20 attached to the PI);

ff) On 5 September 2018, the Claimant requested the establishment of an Arbitral Tribunal pursuant to article 10.°, nos. 1, paragraph a), and 2.° of the LRTA seeking the annulment of the PIT collection (withholding tax) no. 2018... of 30.04.2018, in the amount of € 982,899.13 (nine hundred eighty-two thousand, eight hundred and ninety-nine euros and thirteen cents) and of the corresponding demonstrations of collection of compensatory interest no. 2018..., 2018... and 2018..., relating to the year 2013, in the amount of € 175,630.66 (one hundred seventy-five thousand, six hundred and thirty euros and sixty-six cents), in a total of € 1,158,529.79 (one million one hundred fifty-eight thousand, five hundred and twenty-nine euros and seventy-nine cents), and also the conviction of the Tax Administration to pay compensation for unjustified provision of guarantee.

13. The Tribunal's conviction as to the proven facts resulted from the examination of the documents in the case file, including the Tax Inspection Report regarding the factual elements not contradicted or impugned by the Claimant (see article 76.°, no. 1 of the GTL and 115.°, no. 2 of the CTPP), as well as from the recognition of facts resulting from the hearing of the party and witnesses and, likewise, from what results from submissions, of the PI that were accepted by the Respondent, all as specified in each of the evidentiary points outlined above.

IV.2. UNPROVEN FACTS

As mentioned, with respect to the factual matters taken as established, the tribunal is not required to rule on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish the proven facts from the unproven ones, as provided in article 123.°, no. 2, of the CTPP and article 607.°, nos. 2, 3 and 4 of the Code of Civil Procedure, applicable pursuant to article 29.°, no. 1, paragraphs a) and e), of the LRTA. In this manner, the facts pertinent to the determination of the case were, as mentioned above, selected and delineated based on their legal relevance, with no other alleged facts being relevant to the proper resolution of the procedural dispute.

V. LEGAL BASIS

V.1 Preliminary Considerations

In light of the facts proven, it is necessary to understand which controversial issues the tribunal will rule on.

i. Absence of the Claimant's Tax Obligation

The regulatory framework that in this case must be applied in order to effectuate taxation in accordance with the applicable rules in the absence of acts or legal transactions directed, by artificious or fraudulent means and abuse of legal forms, to the reduction of taxes concerns the taxation of dividends in accordance with the tax base provision contained in paragraph h) of no. 2 of article 5.° of the PIT Code. This will, in turn, involve the application of withholding tax at the liberatory rate provided for in article 71.° no. 1, paragraph c) of the PIT Code, with the nature of liberatory payment (without prejudice to the option for inclusion, pursuant to article 71.°, no. 6 and 22.°, no. 3, paragraph b) of the PIT Code), which must be effected by the entity owing the income (article 101.°, no. 2, paragraph a) of the PIT Code) at the moment of its being made available (article 7.°, no. 3, paragraph a), no. 2 of the PIT Code), without which the substitute is liable for payment of the tax not withheld pursuant to no. 3 of article 104.° of the PIT Code and no. 3 of article 28.° of the GTL.

Now, this Tribunal understands that the effectuation of taxation in accordance with the applicable rules as established by no. 2 of article 38.° of the GTL requires that the Claimant assume the role of tax substitute pursuant to the indicated tax provisions concerning taxation in PIT of dividends, thereby constituting, as such, the recipient of the assessment resulting from the disregard, for tax purposes, of abusive acts and legal transactions, inasmuch as it was the entity that emerged as the debtor owing the income and that made the values in question available. In these terms, the prerequisite of the obligation to proceed with withholding tax, as determined by articles 71.°, no. 1, paragraph c) and 101.°, no. 2, paragraph a) of the PIT Code, by virtue of the application of the anti-abuse clause and the effectuation of taxation in accordance with the applicable rules, was formed in relation to the Claimant.

In the case under analysis, this issue arises from the outset because the GAAC allows the tax authority to disregard certain legal transactions effected by A..., once its conditions are verified, and to tax the underlying economic reality in accordance with the tax base provisions mentioned above. As is known, the GAAC figure emerged within the context of the Tax Reform of December 2000, through Law no. 30-G/2000, of 29 December, which precisely conferred on article 38.°, no. 2 of the GTL the wording at the time of the facts. The GAAC emerges framed in an interventionist framework of the State in combating tax avoidance, "constituting a valve of relief breathing of the value of injustice, an appropriate instrument for combating mere financial engineering overtly violating tax equality". The application of the above-mentioned legal provision, whether at the administrative level or by the courts, must be considered carefully, constituting an instrument of last resort that aims to combat injustices and tax inequalities, as well as to defend the tax system itself.

The resolution of the issue at hand involves the determination of the result that, for the situation in the proceedings, arises from the anti-abuse provision of no. 2 of article 38.° of the GTL, which manifests itself in the normative segments relating to the ineffectiveness within the tax sphere of acts or legal transactions directed, by artificious or fraudulent means and abuse of legal forms, to the reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, or to the obtaining of tax advantages that would not be achieved, in whole or in part, without the use of those means, and to the effectuation of taxation in accordance with the applicable rules in the absence of such advantages and to the non-occurrence of the tax advantages referred to. Thus, the Tax Authority assessed the Claimant because it is the one obligated to withhold tax at the moment of payment to its shareholders, the beneficiaries of the tax advantage. The tax is due in accordance with article 5.°, no. 2, paragraph h) and 71.°, no. 1, c) of the PIT Code in effect. However, the Claimant maintains that the GAAC cannot create accessory obligations for taxpayers (such as the obligation to withhold tax on income due by another taxpayer), and that the Tax Authority should have assessed, within the GAAC application procedure, the actual beneficiaries. These are the shareholders of A..., to whose sphere the tax is owed and not to the sphere of the Claimant. The Tax Authority invokes that the correct procedure was initiated pursuant to the CTPP and that from article 38.°, no. 2 of the GTL there arises a requirement to tax the tax substitute (the Claimant) once that would be the way to assess "in accordance with the applicable rules in its absence", with the disregarded legal transaction not having occurred. In these terms, it must be recognized that, when this is at issue in the context of taxation that must be effectuated according to the applicable rules, as determined by no. 2 of article 38.° of the GTL, the functioning of the anti-abuse clause is entirely opposable to the tax substitute, and cannot fail to be covered by its provision.

Recall, in this context, that, according to article 20.° of the GTL, "tax substitution occurs when, by law's mandate, the tax obligation is demanded of a person different from the taxpayer" (no. 1) and "is effectuated through the mechanism of withholding the tax owed" (no. 2). Now, in accordance with article 18.°, no. 3 of the GTL, "the passive subject is the natural or legal person, the assets or the de facto or de jure organization that, pursuant to law, is bound to fulfill the tax obligation, whether as a direct taxpayer, substitute or liable party".

The characteristic of the tax-legal situation of substitution is the "legal character of the obligation",

as DIOGO LEITE DE CAMPOS, BENJAMIM SILVA RODRIGUES and JORGE LOPES DE SOUSA write: "the legislator obliges a subject to perform certain acts that constitute the object of a tax obligation charged to another passive subject, which fulfills the prerequisites of the tax fact. It is the tax fact realized by one person, substituted, that gives rise to the obligation. The fulfillment of another factual prerequisite leads to the substitute being obligated to fulfill the obligation"; "Tax substitution involves the fulfillment of the legal framework that determines the birth of the tax obligation for a given passive subject which is the one who fulfills the factual prerequisite. This fulfillment of the legal framework becomes a factual prerequisite for the substitute's obligation". For this reason, and as these Authors further note, "substitution requires that the active subject direct itself against the substitute to demand fulfillment of the tax obligation, insofar as law imposes it" and "once this tax obligation is fulfilled, it liberates itself from its obligation, also liberating the substituted". RUI DUARTE MORAIS also notes regarding withholding at liberatory rates that: "In these cases, the fulfillment of the tax obligation (including its accessory obligations) is the exclusive responsibility of the substitute, who is the passive subject of the tax-legal relationship, in its original capacity. Fulfillment is exhausted with the delivery of the amount withheld at the source. In the event of non-voluntary payment, coercive collection will be directed against the substitute. The substituted will only be called to enforcement as a subsidiary (in the absence of assets of the original debtor, the substitute) and only if - and to the extent that - it has received more than what would be the value of that net payment corresponding to the withholding that should have taken place (see article 28.° of the GTL)".

In these terms, by virtue of the provision of no. 2 of article 38.° of the GTL, given that the regime at issue concerns taxation of dividends by withholding with a definitive and liberatory nature (articles 5.°, no. 2, paragraph h) and 71.°, no. 1, paragraph c) of the PIT Code), it is admissible that the corrections that may be required pursuant to the anti-abuse clause and the corresponding tax assessment have the tax substitute as recipient – "substitution requires that the active subject direct itself against the substitute to demand fulfillment of the tax obligation, insofar as law imposes it" . It is understood, therefore, that no illegality censure can be made, in light of article 38.°, no. 2 of the GTL, regarding the fact that the PIT assessment (withholding tax) was made in relation to the Claimant, given that it is the one that emerges as the tax substitute. In any case, it should also be noted that no impairment results from the issuance of this PIT assessment of the specific patrimonial position of the Claimant, nor violation of the principle of contributory capacity which, in the circumstances present, materially concerns the individual shareholders.

For one cannot forget the proper functioning of tax substitution with regard to the relations between substitute and substituted which center on the "right of recourse" (in this sense) and which allow ensuring the connection of the tax applied to the substitute with the principle of contributory capacity that applies with regard to the substituted. This right of recourse is, as a rule, prior (in which case the expression recourse is, of course, improper), as it takes place by withholding at the source (article 20.°, no. 2 of the GTL), operating by deduction from the sums that the substitute must, pays or makes available to the substituted. It may, however, happen that it takes place later, as true recourse, of which an example is precisely the case of the substitute having omitted the definitive withholding at the source that was due (article 103.°, no. 3 of the PIT Code and 28.°, no. 3 of the GTL).

As has been written to this effect: "it is characteristic of tax substitution that the substitute has the duty or, at least, the faculty of deducting the amount delivered or to be delivered to the State coffers from the income it owes to the taxpayer or then may – and often, must – exercise against it the right of recourse to recover what was spent"; "[t]his element of the existence of the right of recourse, by which whoever economically bears the tax burden is the substituted party that has led to the distinction between the debtor in formal sense (substitute) of the debtor in substantial sense (substituted), since it is the latter upon whom the law has the burden corresponding to the patrimonial loss" .

Well then, this recourse is of mandatory exercise by the substitute – in this case, the Claimant – inasmuch as article 45.°, no. 1, paragraph c) of the Corporate Income Tax Code (CITC), in the wording applicable ratione temporis, determines that there are not deductible for purposes of determining taxable profit "taxes and any other charges that fall on third parties that the passive subject is not legally authorized to bear" . It should also be said that this Tribunal is not unaware that, in recent awards rendered in the CAAD on this matter, a different orientation has been adopted, with the understanding, in light of the wording of no. 2 of article 38.° of the GTL, being as follows (see, for example, the award rendered in proc. no. 379/2014-T, from which the following transcriptions are drawn):

- "the final part of article 38.°, no. 2, of the GTL (wording of Law no. 30-G/2000, of 29 December), in establishing the consequences of the application of the general anti-abuse clause

«with taxation then being effected in accordance with the applicable rules in its absence and the referred tax advantages not being produced» points decidedly in the direction that application must be effected in such a way as to allow the production of the tax advantages to be avoided";

- "since this elimination of tax advantages is the expressed objective of the general anti-abuse clause, the recipient of the application of this clause, the one in whose assets the effects of the application will be produced, cannot fail to be the one who benefited from those tax advantages";

- "Being the shareholders the beneficiaries of the referred advantages, the application of the general anti-abuse clause as it was effected does not allow avoiding those advantages, since, by imposing on the Claimant the payment of amounts equivalent to those advantages, it is only she who is imposed this burden, with the shareholders remaining in intact ownership of the patrimonial advantages obtained";

- "the correct interpretation of article 38.°, no. 2, will have generalized worth, in relation to any type of anonymous company, including those listed on the stock exchange in which the shareholder structure constantly changes, regarding which it is evident that the imposition of taxation on the company for, through its intermediation, the shareholders having created tax advantages due for themselves not to have any effect on who benefited from those advantages and later ceased to be a shareholder";

- "to this light, it is evident that the scope of that article 38.°, no. 2, in establishing as a necessary effect of the application of the general anti-abuse clause the non-production of the tax advantages, presupposes the legislative understanding that the «taxation in accordance with the applicable rules» falls on the one who obtained the advantages and not on the one who merely had participation in the acts from which they result without benefiting from those, since only thus is it possible to guarantee the intended effect of the referred tax advantages not being produced";

- "it is certain that the wording of no. 2 of article 38.° of the GTL introduced by Law no. 30-G/2000, requires that the application of the general anti-abuse clause have as its effect the non-production of the tax advantages improperly obtained, with the result that it is presupposed in this rule that, at least in cases where the tax advantages have already been produced, the recipient of the application is the one who benefits from them";

- "For this reason, in the case under consideration, the Claimant not having enjoyed any tax advantage, the possibility of it being held liable for payment of the amounts corresponding to the tax advantages improperly obtained that the Tax and Customs Authority invokes is ruled out".

With due respect, it is believed that this understanding cannot be accepted.

In the first place, in literal terms, it is important to take into account that the wording of article 38.°, no. 2 of the GTL distinguishes two phenomenologies, both at the level of hypothesis and at the level of provision: i) on the one hand, acts or legal transactions essentially or primarily directed, by artificious or fraudulent means and abuse of legal forms, to the reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose with respect to which taxation must be effected in accordance with the applicable rules in its absence, and ii) acts or legal transactions directed, by artificious or fraudulent means and abuse of legal forms, to the obtaining of tax advantages that would not be achieved, in whole or in part, without use of means, with respect to which the referred tax advantages are not to be produced.

As clarified, in terms that this Tribunal entirely agrees with, SALDANHA SANCHES on the two principal manifestations of fraud to the law in tax matters: "[i]n a first manifestation, the choice of a legal transaction or even of facts or tax-relevant legal acts, as a legal form of achieving a certain objective with less legal burden [rectius, tax burden] implies the option for certain paths to achieve certain final objectives in an alternative logic: path B was followed instead of path A, to achieve the same objective, X"; "[i]n another of its principal manifestations, we can have a set of operations in which there is no alternativity (the alternative choice would be the absence of legal transaction), which happens when, for example, operations are carried out with the sole objective of obtaining a deductible cost for reducing taxable profit". Well then, this Author explains that: "In the normative provision of no. 2 of article 38.° of the GTL those two paths are clearly prefigured", since the "first is found provided in the law when it contrasts the artificious legal transaction, with its tax relief, and "the facts, acts or legal transactions of identical economic purpose" (the normal path was abandoned for purely fiscal reasons)" and the second "is also found provided in the law when it refers to "the obtaining of tax advantages that would not be achieved, in whole or in part, without use of those means", concluding then that: "If, in the first case, the consequence is "taxation in accordance with the applicable rules in its absence", in the second we have a consequence of mere cancellation of effects, "the referred tax advantages not being produced", those which are sought to be achieved by means of the artificious legal transactions, with the artificial character of the second part, marked by the deliberate construction of the effect, being generally constituted by a deductible loss of taxable profit".

In these terms, a reading of the reference to "tax advantages" as the exclusive key to application of the anti-abuse clause is understood, with due respect, to constitute an over-interpretation of a term that possesses a well-defined and delimited meaning within the framework of the structure of no. 2 of article 38.° of the GTL. In terms of a contextual interpretation of no. 2 of article 38.° of the GTL itself, the obtaining of "tax advantages" is only one of the moments constituent of the applicability of the anti-abuse rule, as defined by its legal hypothesis, with the corresponding production of the pertinent legal consequences.

Now, precisely, in the case before us, what is at issue is rather the normative dimension subject of no. 2 of article 38.° of the GTL concerning acts or legal transactions essentially or primarily directed, by artificious or fraudulent means and abuse of legal forms, to the reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose with respect to which taxation is to be effected in accordance with the applicable rules in its absence – precisely, as was seen (no. 36), in the situation sub judice, such rules are constituted by the discipline of taxation of dividends by withholding with a definitive and liberatory nature (article 5.°, no. 2, paragraph h) and 71.°, no. 1, paragraph c) of the PIT Code), in which the fulfillment of the tax obligation is the exclusive responsibility of the substitute.

Furthermore, it is also not judged pertinent the argument that, by virtue of this repercussion upon the substitute of the consequences arising from the anti-abuse clause, the substitute will bear the burden of the tax charge corresponding to the patrimonial advantages obtained that remain in the intact ownership of the shareholders. For, as was anticipated above (no. 37), tax substitution involves, by nature, when the substitute has omitted the definitive withholding at the source that was due, the exercise of a right of recourse, which is designed to ensure precisely that the ultimate burden relating to the tax falls on the holders of contributory capacity, in this case the shareholders who are beneficiaries of the patrimonial increases that were reconfigured as dividends.

Thus, the interpretation adopted by the Tax Authority regarding article 38.°, no. 2, of the GTL, in the sense that the tax effects arising from the application of the anti-abuse clause extend not only to the beneficiaries of the tax advantage – the shareholders whose patrimonial advantages obtained were qualified for tax purposes as dividends – but also to a third party in the capacity of tax substitute – the entity that proceeded to pay those advantages – does not suffer from any material unconstitutionality due to violation of the principle of contributory capacity inferred pursuant to articles 13.° and 104.° of the CRP, insofar as that extension of effects is provided for and arises from the provision of article 38.°, no. 2, of the GTL itself. Consequently, no tax obligation resulted from the interpretation-application of that rule for the Claimant that was not in accordance with the normative framework in force at the time and that did not take into account the economic substance of the operations and parties in question. This means that everything happens as if dividends had been distributed by the Claimant, with respect to which the respective withholding was legally required and due, with that tax obligation having no different legal nature merely by virtue of the withholding being due as a result of an inspection procedure that culminated in the declaration of ineffectiveness of the legal transactions in question, with the Claimant remaining placed in the same situation that would have been applicable to it ab initio, in particular within the framework of the relationships established with the beneficiaries of the disregarded tax advantages, that is, within the framework of the relationships between substitute and substituted, in which is inserted the right of recourse of the former against the latter.

Finally, as to this point, we cannot fail to add, resorting to a synoptic perspective, of "weighing the consequences of the decision" , that the understanding in question, in a situation such as the one at hand, can have as a consequence, always with due respect, the pure and simple impossibility of application of the anti-abuse clause in cases where, as this one, the abusive scheme aims to avoid the taxation of dividend income which is effected by withholding at source on a definitive basis at the liberatory rate provided for in article 71.° no. 1, paragraph c) of the PIT Code. For, if the Tax Authority directed the assessment against the shareholders who are beneficiaries of the patrimonial increases in question, these could naturally and justifiably sustain the illegality of that assessment by invoking that the determination contained in no. 2 of article 38.° of the GTL has not been respected, requiring that taxation be effected in accordance with the rules applicable in the absence of acts or legal transactions essentially or primarily directed, by artificious or fraudulent means and abuse of legal forms, to the reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, which requires taxation by withholding at source on a definitive basis at the liberatory rate when the taxpayers do not opt for inclusion of the income in question. Thus implying a paradoxical consequence, making application impossible, in any case, of the anti-abuse clause, it is understood here that the indicated position cannot be subscribed to.

The Claimant further alleged that the interpretation of article 38.°, no. 2, of the GTL, in the sense conferred upon it by the Tax Authority, violated the principle of trust and legal security, inherent in the principle of a Democratic Rule of Law enshrined in article 2.°, of the CRP, although it did not elaborate on such violation. With respect to this principle, the Constitutional Court stated, in award no. 188/2009, of 22 April 2009, rendered in the context of case no. 505/08, that "the principle of a democratic rule of law postulates «an idea of protection of the trust of citizens and the community in the legal order and in the action of the State, which implies a minimum of certainty and security in the law of persons and in the expectations legally created for them», leading to the consideration that «the norm which, by nature, obviously in an intolerable, arbitrary or overly oppressive manner those minimums of certainty and legal security that persons, the community and the law have to respect, as essential dimensions of a democratic rule of law, will have to be understood as not consented to by the basic law» (among others, award no. 303/90, in Awards of the Constitutional Court, 17th vol., p. 65)". In turn, it follows from the jurisprudence of that Court, specifically from award no. 128/2009, of 12 March 2009, rendered in the context of case no. 772/2007, that one is only dealing with a situation of trust worthy of protection in the event that the expectations of taxpayers are "legitimate, justified and founded on good reasons".

Now, considering again the case at hand, it cannot be considered that those prerequisites are met. In fact, in the present case, the Claimant is not in the position of a "mere" third party, unconnected to the set of operations performed and the motivations underlying them, first and foremost because it was held and had been established almost entirely by the beneficiaries of the tax advantages that were disregarded via the application of the anti-abuse clause contained in article 38.°, no. 2, of the GTL. Thus, and following the position of SÉRGIO VASQUES, the trust and legal security "of one who manifestly intends to defraud the tax law does not deserve protection", in such a way that the referred unconstitutionality invoked by the Claimant is not considered to be verified.

Finally, the Claimant further stated that the interpretation of article 38.°, no. 2, of the GTL, in the sense already promptly identified, violated the principle of proportionality enshrined in article 18.°, of the CRP, although it did not elaborate on how such violation materialized. The Constitutional Court understands with respect to this principle, in particular in award no. 632/2008, of 23 December 2008, rendered in the context of case no. 977/2008 that "(…) the principle of proportionality unfolds into three sub-principles: principle of adequacy (restrictive measures of rights, freedoms and guarantees must prove themselves to be a means for the pursuit of the intended purposes, with safeguarding of other constitutionally protected rights or goods); principle of necessity (those restrictive measures must be required to achieve the purposes in view, because the legislator does not have other less restrictive means to achieve the same goal); principle of just measure, or proportionality in the strict sense (excessive measures, disproportionate to achieve the intended purposes, cannot be adopted)".

With respect to the sub-principle of adequacy it is found that the extension of the tax effects to the Claimant as a result of the application of the anti-abuse clause does not translate an ineffective or inapt measure for the achievement of the purposes intended by the interpreted rule, since that extension is suited to ensure the disregard of the improperly obtained tax advantages, ensuring that taxation is carried out in compliance with the prerequisites that would be applicable were it not for the performance of the operations carried out to obtain those benefits. As to the sub-principle of necessity or need, it is found that the legislator did not have other less restrictive means to achieve the purpose of taxation of the economic substance actually verified, which is justified from the outset by the fact that the tax disregard of the operations in question is only legally admissible with recourse to that which is considered an option of last resort of the system for purposes of ensuring the justice of taxation: the anti-abuse clause. In relation to the principle of proportionality in the strict sense, it is found that the extension of the effects of the application of the anti-abuse rule to the Claimant, as a tax substitute, does not translate an excessive measure for achieving the taxation of the patrimonial increases improperly received by their respective beneficiaries. On the contrary, and as was mentioned, this is the only interpretation that allows to pursue and effectively achieve the intended and provided effects pursuant to article 38.°, no. 2, of the GTL, since this is the solution that allows to restore the situation that existed ab initio, that is, that would exist had the operations targeted by that rule not been performed. In this manner, the alleged unconstitutionality invoked by the Claimant also lacks merit on this point.

In light of the foregoing, it is judged in accordance with the provision of no. 2 of article 38.° of the GTL that the PIT assessment (withholding tax) was made in relation to the Claimant, given that it is the one that emerges as the tax substitute.

ii. Abusive Legal Transactions

The issue to be decided is therefore whether application of the anti-abuse clause referred to in article 38.°, no. 2, of the GTL takes place in the circumstances of the case, which justifies beginning with the characterization of this figure as a mechanism of control of fraud to tax law.

The said provision of the GTL declares as "ineffective, within the tax sphere, acts or legal transactions essentially or primarily directed, by artificious or fraudulent means and abuse of legal forms, to the reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, or to the obtaining of tax advantages that would not be achieved, in whole or in part, without use of those means". And, in that case, determines that taxation be effected in accordance with the rules that would be applicable if those means had not been used, with the tax advantages intended to be obtained not being produced.

Complementarily, article 63.° of the CTPP provides a specific tax procedure for application of the anti-abuse provision and imposes on the Administration a special duty of reasoning of that decision which must necessarily include (i) the description of the legal transaction celebrated or the legal act performed and of the transactions or acts of identical economic purpose, as well as the indication of the tax base provisions applicable to them; and (ii) demonstration that the celebration of the legal transaction or practice of the legal act was essentially or primarily directed to the reduction, elimination or temporal deferral of taxes that would be due in the case of a transaction or act with identical economic purpose, or to the obtaining of tax advantages.

According to Sérgio Vasques, the general anti-abuse clause enshrined in the GTL is composed of three essential elements. "First, it is required the practice of artificious or fraudulent act or transaction and that it express abuse of legal forms, in the sense that we are dealing with transactional schemes that conceal their true purposes and to which a manifestly anomalous use is given in relation to common legal practice. Second, it is required that the sole or principal objective through those transactional schemes be to obtain a tax advantage, whatever its nature, with evident marginalization of real economic objectives. Third, it is required that the law make clear the intention to tax the goods in question, in the same terms in which they would be taxed had the taxpayer resorted to the most common legal forms and negotiation practices" (Manual of Tax Law, Almedina, 2018, p. 374).

The general sense of the rule is, in these terms, to allow the disqualification for tax purposes of any act or legal transaction practiced by the taxpayer with the sole or principal objective of obtaining a tax advantage, which may constitute fraud to tax law. The legal effect that results from the functioning of the anti-abuse clause is to consider the acts as practiced in accordance with the normal pattern of legal commerce to obtain the same economic result, with the tax obligation being determined based on the equivalent acts that could be practiced. It is required, therefore, that an artificious or fraudulent act or transaction has been practiced that represents an abuse of legal forms and that had as its sole or principal objective the obtaining of a tax advantage.

One can point to as an example of the adoption, in jurisprudence, of this analytical scheme the leading decision represented by the award of the Central Administrative Court - South of 15.02.2011, case no. 04255/10, which accepted the understanding according to which: "The provision of the rule under analysis enshrines four prerequisites for its application, which are:

1- The means element - which has to do with the form used, therefore, with the practice of certain acts or transactions directed, essentially or primarily, to the reduction, elimination or temporal deferral of taxes;

2- The result element - which aims at the tax advantage as the end of the taxpayer's activity, therefore, the reduction, elimination or temporal deferral of taxes;

3- The intellectual element - which has to do with the tax motivation of the taxpayer, therefore, with the fact that the acts or transactions practiced by the taxpayer are essentially or primarily directed to the result that is the tax advantage;

4- Normative element - which has to do with the normative-systemic disapproval of the advantage obtained, therefore, the taxpayer acts with manifest abuse of legal forms (see art°. 63, n° 2, of the Tax Code of Procedure. Tributary).

In the provision of the rule we will find the sanctioning element that translates into ineffectiveness, within the tax sphere, of the acts or legal transactions in question, which become opposable to the Tax Authority (...). The sanctioning element corresponds, therefore, to the provision of the rule under consideration, with its application depending on the cumulative verification of the prerequisites enshrined in its hypothesis".

In the tax arbitration jurisprudence of this CAAD, this dissection of article 38.°, no. 2 of the GTL into five elements is also found, as can be exemplified by the awards rendered in cases 143/2014-T and 208/2014-T, in which the following is explained: "Doctrine and jurisprudence have been deconstructing the letter of the rule pointing to five elements present in it. Corresponding one of the elements to the provision of the rule, the remaining four appear as cumulative requirements that allow assessing – as if it were a test – as to the verification of an activity characterizable as abusive tax planning", elements which consist of: "– the means element, which concerns the path freely chosen

– act or legal transaction, isolated or part of a structure of acts or legal transactions sequential, logical and planned, organized in a unitary manner – by the taxpayer to obtain the desired gain or tax advantage; – the result element, which contends with the obtaining of a tax advantage, by virtue of the choice of that means, when compared with the tax burden that would result from the practice of "normal" acts or legal transactions and of equivalent economic effect; – the intellectual element, which requires that the choice of that means be

«essentially or primarily directed[...] to the reduction, elimination or temporal deferral of taxes» (article 38.°, no. 2 of the GTL), that is, which requires not merely the verification of a tax advantage, but rather that it be assessed, objectively, whether the taxpayer «intends an act, a transaction or a given structure, only or essentially, because of the prevailing tax advantages they provide it»; – the normative element, which «has as its primary function to distinguish cases of tax avoidance from cases of legitimate tax savings, in light of the principles of Tax Law, being that only in cases in which there is demonstrated a contrary or non-legitimizing legal intention of the result obtained can one speak of that» ; – and, finally, the sanctioning element, which, presupposing the cumulative verification of the remaining elements, leads to the sanction of ineffectiveness, in the exclusive tax sphere, of the acts or legal transactions deemed abusive, «with taxation then being effected in accordance with the applicable rules in its absence and the referred tax advantages not being produced» (final part of article 38.°, no. 2, of the GTL)"."

At this point, the application of the GAAC to the legal transactions performed by the Claimant is discussed:

- Establishment of A..., SGPS (now Claimant);

- Purchase of the shareholdings of B..., SGPS, S.A., from its members;

According to the Claimant, this segmentation of the transactions to be disregarded through the GAAC violates the prerequisites of the GAAC, in particular the means element, since, "if there were any disregard, it would have to apply to all the acts and legal transactions that make up that structure".

Furthermore, the Claimant states that the Tax Authority would not have demonstrated the factuality necessary to fulfill the prerequisites for application of the GAAC and ignored the other motivations that led to the creation and maintenance of the Claimant. According to the Claimant, "the inspection services have neither facts nor motivations that allow them to support their conclusions, having favored the achievement of revenue over the discovery of material truth." The Tax Authority, for its part, considers that the structure set up by the taxpayer is abusive and meets the provision of 38.°, no. 2 of the GTL. Furthermore, the motivations that were alleged by the Claimant are neglected by the Tax Authority, saying even that "none of the reasons that the claimant pointed to as being at the base of its establishment is credible". In summary, the Tax Authority maintains that the Claimant failed to demonstrate, in the inspection actions or during the litigation, the economic rationality underlying the transactions under analysis, expressly stating that «it is manifest that the acts and legal transactions performed by the passive subjects are not typical nor normal in the management of companies carried out on the basis of simple economic-financial rationality. It is only possible to understand this succession of acts and legal transactions in the context of the pursuit of a certain fiscal result (the non-taxation of the distribution of profits). The conditions of the transaction, as well as all the acts previously practiced, are part of the logic of the scheme designed by the shareholders of A... SGPS /B... SGPS, and had as their objective the transformation of the payment of dividends into payment of the agreed price and consequent reduction of the credit recorded in the accounts.»

Having said that, the central legal issue of the case under analysis is, therefore, the application or not of the GAAC to the transactions effected by the taxpayer. Having made this framing, let us now assess, in specific terms, the indicated "result", "intellectual", "means" and "normative" elements of application of the anti-abuse clause.

Let us examine in detail each transaction identified above and let us analyze the said elements for each one. Above all, understand that the decisive vector in verifying the legitimacy of the application of the general anti-abuse clause is always the case-by-case assessment, based on the values and objectives of the tax-legal order, of the circumstances present in the fiscally relevant situation under judgment. As it is written in the cited award of the TCA South rendered in proc. no. 04255/10 "the question of determining whether some particular expedient is "purely artificial" must be resolved in the domestic courts case by case". In effect, the functioning of the general anti-abuse clause, enshrined in no. 2 of article 38.° of the GTL, always presupposes a task of concrete realization of Law in function of the factual circumstances and the material contours of the situation sub judice, with it not being viable, to its purpose, under penalty of leaving unprotected the real needs that presided over its enactment, to reduce its application to the strict and automatic subsumption of realities to abstract legal categories. Let us then move on to the analysis in particular of this structure.

iii. Application of the GAAC to Abusive Legal Transactions: Establishment of A..., SGPS (the Claimant) and the Purchase of Shares by the Claimant from the Shareholders of B..., SGPS, S.A.

Having made this framing, let us now assess, in specific terms, the indicated "result", "intellectual", "means" and "normative" elements of application of the anti-abuse clause applied to the transactions of establishment of the Claimant and its purchase of shares from the shareholders of B..., SGPS, SA.

Result element: The result concerns the advantage obtained, that is, the consequence that arises from the legal transactions practiced. Its verification occurs when, by means of the legal structure used, the "reduction, elimination or temporal deferral of taxes that would be due as a result of facts, acts or legal transactions of identical economic purpose, or the obtaining of tax advantages that would not be achieved, in whole or in part, without use of those means" is achieved.

What we see in the case under analysis is that the establishment of A... by a group of shareholders, together with the purchase of shares from those shareholders by the company resulted in a tax gain in the area of PIT, without payment of the price. Through this structure, the shareholders were able, via dividends, to receive as payment of the price of the shares the amounts which, in case of direct distribution from B..., SGPS, S.A. to their sphere, would be subject to withholding tax.

For application of the GAAC, the transaction from which the elimination, reduction or deferral of taxes results is relevant. This requirement is met. Now, the taxpayer intends, as a result, to circumvent tax law and practice a certain act or transaction with a view to obtaining a tax advantage. And by tax advantage is meant any situation in which, by virtue of the practice of certain acts, a tax burden is achieved that is more favorable than that which would result from the practice of normal acts and of equivalent economic effect, subject to taxation. In cases of application of the GAAC, the tax advantage is conditioning and determining in the taxpayer's action.

Concluding, in the result element it is intended to demonstrate that, as a result of the acts practiced, a certain tax advantage was obtained, as well as the equivalence at the level of the economic effects achieved, with those that would be obtained had the transaction considered usual been practiced.

Intellectual element: The act or transaction is reprehensible because the tax advantage influences and fully determines the taxpayer's action regarding the forms chosen, motivating their action with a view to achieving the intended fiscal result. It is verified when the acts or transactions in question have, therefore, been "essentially or primarily directed" to the obtaining of a tax advantage, this being relevant for purposes of application of the rule.

There is a problem that proves common to the various forms of manifestation of the intellectual element, which is precisely determining when and how the level of importance of the taxpayer's motivation for carrying out a certain operation exceeds the limit of the acceptable, in such a way that, when this happens, it leads to concluding by the