Summary
Full Decision
ARBITRAL DECISION (consult complete version in PDF)
I – REPORT
1. On 10 September 2018, A... S.A., NIPC..., with registered office at ... no...., Km..., ..., ...-... ..., filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, referred to in abbreviated form as RJAT), seeking the declaration of illegality of the Corporate Income Tax (IRC) assessment act no. 2018..., the interest demonstration act no. 2018..., as well as the statement of account adjustment act no. 2018..., all relating to the fiscal year 2013, in the total amount of € 144,075.02.
2. To substantiate its request, the Claimant alleges, in summary, the absence of factual and legal grounds for the corrections made to its taxable income, on the grounds that:
i. The Claimant acknowledges that the personnel expenses in question relate to the period of 2012, but clarifies that precisely for this reason they were accounted for in an account of retained earnings, thus not affecting the net result of the 2013 tax period;
ii. The Tax Authority must proceed with the ex officio correction of the tax result of the tax period to which the expenses relate;
iii. In light of the arguments presented and, in particular, the constitutional principle of taxation on actual profits, the correction made to its taxable income for the 2013 fiscal year relating to expenses from previous periods should be cancelled, on the grounds that the State Treasury was not prejudiced in the collection of the IRC ultimately due, considering the two tax periods of 2012 and 2013;
iv. Alternatively, the expenses totalling € 175,812.78 should be ex officio attributed to the 2012 tax period, which will result in the reimbursement of the amount of € 46,590.37;
v. The unsecured loans were granted by the Claimant to the subsidiary companies with the objective of contributing to the maintenance of the appreciation of its investment in those companies;
vi. Therefore, the financial charges borne by it are deductible under the terms of article 23 of the IRC Code.
3. On 11-09-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the AT (Tax Authority).
4. The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph a) of paragraph 1 of article 11 of the RJAT, the President of the CAAD Deontological Council designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable period.
5. On 31-10-2018, the parties were notified of these designations, and manifested no intention to challenge any of them.
6. In accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 20-11-2018.
7. On 19-12-2018, the Respondent, duly notified for this purpose, filed its reply defending itself by exception and by objection.
8. Pursuant to the provisions of subparagraphs c) and e) of article 16, and paragraph 2 of article 29, both of the RJAT, the holding of the meeting referred to in article 18 of the RJAT was waived.
9. Having been granted a period for the submission of written pleadings, the same were presented by the parties, pronouncing themselves on the evidence produced and reiterating and developing their respective legal positions.
10. It was indicated that the final decision would be notified by the end of the period provided for in article 21/1 of the RJAT.
11. The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with the terms of articles 2, paragraph 1, subparagraph a), 5 and 6, paragraph 2/a), of the RJAT.
The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with the terms of articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
The proceeding is not affected by any nullities.
Thus, there is no obstacle to the examination of the case.
Having considered all matters, it is necessary to render
II. DECISION
A. FACTUAL MATTER
A.1. Facts Established as Proven
1. The Claimant is engaged, and was engaged in 2013, in the activity of manufacturing radio and communication equipment and apparatus (radio transmitters, telegraphy and telephony), studies, projects, marketing, installation and maintenance of telecommunications, electrical and electromechanical equipment and construction of public and private works.
2. The Claimant is, and was at the time of the facts, a taxpayer subject to IRC, with headquarters and effective management in Portugal.
3. Within the scope of service orders no. 012017.../..., the Claimant was subject to an external tax inspection of general scope relating to the 2013 tax period and of partial scope, in the area of IRC and VAT, relating to the 2014 tax period.
4. In due course, the Claimant was notified to exercise, if it so wished, its right to be heard regarding the corrections proposed by the Tax Authority, which it exercised within the legal periods.
5. On 26 April 2018, the Claimant was notified, through office no. ..., of 24 April 2018, of the tax inspection report, which maintained, without any alteration, the corrections set out in the draft inspection report.
6. Under the terms of the report, two corrections were determined by the Tax Authority to the Claimant's IRC taxable income relating to the 2013 tax period, namely:
i. € 175,812.78 relating to expenses from previous periods;
ii. € 246,810.11 relating to non-deductible financial charges.
7. The Tax Inspection Report (RIT) states, among other things, the following:
a. The "taxpayer deducted in section 07 of Form 22 declaration, line 704 as negative patrimonial variations not reflected in the net result of the period (article 24), the amount of € 175,812.78.";
b. "this amount is related to personnel expenses of the Angola branch, relating to the 2012 fiscal year, which by mistake were not recorded in that fiscal year";
c. "pursuant to paragraph 1 of article 18 of the CIRC, because it is not considered an expense of the 2013 fiscal year, should be added to the net result of the fiscal year, in section 07 of Form 22 tax return declaration, the sum of € 175,812.78, because it relates to expenses from prior fiscal years";
d. From "the analysis carried out on the accounting elements of the 2013 fiscal years [...] it was found that the taxpayer resorts to financing through third-party capital, namely bank financing";
e. "the taxpayer, in 2013 [...], at the same time that it bore financial charges, namely interest, resulting from loans that it contracted, granted loans to associated companies and other entities, and was not remunerated for the value of the loans granted to the associated companies";
f. "the totality of the said charges are not directly related to the activity of the taxpayer, whose corporate purpose, as previously referred to, consists of the manufacture of radio and communication equipment, studies, projects, marketing, installation and maintenance of telecommunications, electrical and electronic equipment and construction of public and private works";
g. Because "they are not related to the activity of the taxpayer, the requirement of indispensability of the totality of the financial charges accounted for by the taxpayer is not met, as established in article 23 of the CIRC";
h. Therefore "the totality of the financial charges borne by the taxpayer shall not be accepted for tax purposes, but only part of the same".
8. On 8 June 2018, the Claimant settled the amount of the assessment made on the basis of the said RIT, in the amount of € 144,075.02, whose payment deadline was 11 June 2018.
9. In the 2012 tax period, the Claimant determined in its respective Form 22 IRC declaration:
i. taxable profit in the amount of € 978,951.27;
ii. IRC collection in the amount of € 244,737.82;
iii. municipal levy in the amount of € 14,684.27.
10. The said amounts were entirely borne through IRC self-assessment, resulting in a paid amount of € 103,521.09.
11. The Claimant resorted to financing through third-party capital, namely bank financing, which was accounted for in the various sub-accounts of SNC account 25 (Financing Obtained), whose final credit balances in 2013 and 2014 were as follows:
[table]
12. The Claimant bore the following financial charges in the fiscal years 2013 and 2014:
[table]
13. The Claimant granted unsecured loans to companies in which it held shareholdings, in the fiscal years 2013 and 2014, as shown in the table below:
[table]
A.2. Facts Established as Not Proven
With relevance to the decision, there are no facts that should be considered as not proven.
A.3. Justification of the Proven and Not Proven Factual Matter
With respect to the factual matter, the Tribunal need not pronounce itself on everything alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish the proven matter from the not proven matter (cf. article 123, paragraph 2, of the CPPT and article 607, paragraph 3 of the CPC, applicable by virtue of article 29, paragraph 1, subparagraphs a) and e), of the RJAT).
Thus, the facts pertinent to the judgment of the case are chosen and delimited in function of their legal relevance, which is established in consideration of the various plausible solutions of the question(s) of law (cf. former article 511, paragraph 1, of the CPC, corresponding to the current article 596, applicable by virtue of article 29, paragraph 1, subparagraph e), of the RJAT).
Thus, taking into account the positions assumed by the parties, in light of article 110/7 of the CPPT, the documentary evidence and the procedural file attached to the case, the facts listed above were considered as proven, with relevance to the decision, taking into account that, as written in the Decision of the TCA-South of 26-06-2014, rendered in case 07148/13, "the evidential value of the tax inspection report (...) may have probative force if the assertions contained therein are not contested".
Allegations made by the parties and presented as facts, consisting of assertions that are strictly conclusive, incapable of proof and whose truthfulness must be ascertained in relation to the specific factual matter above consolidated, were neither given as proven nor as not proven.
B. ON THE LAW
a. on matters of exception
i. on the extinction of the right of action
The Respondent begins its defence by arguing the extinction of the right of action, on the grounds that, in summary, the Claimant should be deemed to have been notified of the additional IRC assessment act no. 2018..., on 19-05-2018, and, in the Respondent's view, the period provided for in subparagraph a) of paragraph 1 of Article 10 of the RJAT should begin to count from the following day.
The Respondent is not correct, however.
Indeed, the said article 10/1/a) of the RJAT provides, as far as relevant to the case, that:
"1 — The request for constitution of an arbitral tribunal is presented:
a) Within the period of 90 days, counted from the facts provided for in paragraphs 1 and 2 of article 102 of the Code of Tax Procedure and Process".
With article 102/1/a) of the CPPT providing that:
"1 - The objection shall be presented within the period of three months counted from the following facts:
a) End of the period for voluntary payment of tax payments legally notified to the taxpayer;".
In turn, article 110/1 of the CIRC states that:
"In cases of assessment made by the Tax and Customs Authority, the taxpayer is notified to pay the tax and interest that are due, within the period of 30 days from the notification."
Thus, the period for the exercise of the right of action, whose extinction was argued, should begin to count from the day following the end of the payment period for the assessment in question.
Based on the notification date indicated by the Respondent itself, the end of the legal period for voluntary payment by the Claimant would fall on 19-06-2018.
Hence, counting from the following day, the period for submission of the arbitral request ended only on 18-09-2018.
Even taking as a basis the payment period — incorrectly — indicated by the AT, of 11 June 2018, the counting for submission of the arbitral request would only begin on 12 June 2018.
That period would end on 10 September 2018, so that at the time of the submission of the arbitral request, the Claimant's right of action had not, in any case, become extinct.
No inconsistency or violation of the principles of good faith and/or proportionality is detected, nor is it understandable, contrary to what the Respondent alleged, since the period for voluntary payment does not result from the "Statements of Account Adjustment", but from the law, and it should be noted that the arbitral decision cited by the Respondent in support of its position judged the issue of timeliness raised by it to be without merit.
In light of the foregoing, the exception in question should be rejected.
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ii. on the incompetence of the arbitral tribunal ratione materiae
Next, the Respondent argues "the incompetence of the Collective Arbitral Tribunal, with a view to ruling on the request filed by the Claimant, to effect the allocation to the 2012 fiscal year of the charges that were disallowed in 2013, inasmuch as the examination of such matter goes beyond the competences reserved to it by law, namely in Article 2, paragraph 1, Article 4, paragraph 1 of the RJAT and of Ordinance no. 112-A/2011, of 22 March.".
Upon examination of the request filed by the Claimant, the following is found to be its content:
"i) To find as proven the present arbitral opinion request and, consequently, to annul the IRC assessment demonstrations no. 2018..., interest assessment demonstration no. 2018... and statement of account adjustment demonstration no. 2018..., all associated with offsetting no. 2018..., by reason of the absence of factual or legal grounds for the corrections made to the Claimant's taxable income relating to the 2013 fiscal year, by violation of the provisions, namely, of articles 18 and 23 of the CIRC;
ii) As a consequence of the annulment of the said IRC assessment demonstrations, interest assessment demonstration and statement of account adjustment:
a) to render a decision ordering the reimbursement of the amounts improperly paid by the Claimant, on account of IRC in the 2013 fiscal year, in the amount of € 144,075.02; or, should it be otherwise understood, which is raised hypothetically without conceding,
b) alternatively, as regards the correction relating to expenses from prior periods, to determine the ex officio attribution of the expense of € 175,812.78 to the 2012 tax period with the consequences arising therefrom at the level of IRC and municipal levy reimbursement in favor of the Claimant, which are computed at € 46,590.39;
iii) To render a decision ordering the payment of compensatory interest that is due under the terms of article 43 of the LGT and article 61 of the CPPT."
As has been recurring case law of the superior courts of the state tax jurisdiction "In the interpretation of procedural documents, the criteria imposed by the principles of modern procedure and likewise by the constitutional principle of effective judicial protection must be observed, whereby the court must extract from the wording given to the request in the initial petition the meaning most favorable to the interests of the petitioner, establishing, even by resorting to the figure of the implicit request, what the true claim for legal protection is."
As appears from the reading of the request filed, and as the Claimant itself clarified in the course of the opportunity to respond afforded to it, regarding the matter of exception, the request filed consists of the annulment of the additional assessment that is the subject of the present arbitral action, and related acts, the requests being filed in ii) the "presumed logical consequences" that the Claimant attributes to the success of the annulment request filed.
Furthermore, because they are not autonomous requests, the content of the said presumed logical consequences has no bearing on the value of the case.
Therefore, without prejudice to the Tribunal, hereinafter, drawing the logical consequences it deems appropriate, given what is decided, the same should be judged to be competent to judge the annulment request filed by the Claimant, and the exception in question should accordingly be rejected.
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iii. on the suitability of the procedural remedy
Additionally, the Respondent argues that "the request filed by the Claimant with a view to the Respondent allocating the charges not considered in the 2013 fiscal year to the 2012 fiscal year (...) does not constitute the procedural remedy adequate with a view to scrutinizing the Claimant's claim, reason for which it is a matter of the use of an improper procedural remedy, which constitutes a dilatory exception preventing consideration of the merits of the case, under the terms of article 577 of the CPC, which gives rise to the dismissal of the defendant from the instance under the terms of paragraph 1 of article 278 of the CPC".
Applying mutatis mutandis what was stated with regard to the preceding exception, and concluding, consequently, that there is not an autonomous request filed by the Claimant, but merely the explication of the consequences which it presumes to be inherent in the success of the annulment request filed, it should also be concluded that the exception in question is without merit, with the present procedural remedy being judged as suitable for the examination of the annulment request filed by the Claimant.
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b. on the merits of the case
i. on the correction relating to the specialization of fiscal years
As follows from the factual matter established as proven, the Claimant deducted in section 07 of Form 22 declaration, line 704, as negative patrimonial variations not reflected in the net result of the period the amount of € 175,812.78.
It is further verified, and is consensual between the parties, that such amount is related to personnel expenses of the Angola branch of the Claimant, relating to the 2012 fiscal year.
It is equally consensual, and that the said amount was not accounted for in the 2012 fiscal year through error on the part of the Claimant.
In view of such circumstances, all contained in the RIT, the AT proceeded with the disallowance of the said amount, by application of the provisions of article 18 of the CIRC, adding it to the taxable profit of the Claimant and assessing the corresponding tax.
Regarding this matter, it has been recurring case law of the STA that:
"III - The principle of specialization of fiscal years aims to tax the wealth generated in each fiscal year and hence the respective revenues and costs are accounted for as they are obtained and incurred, and not as the respective receipt or payment occurs.
IV - However, this principle should tend to conform to and be interpreted in accordance with the principle of justice, with constitutional and legal conformity (articles 266, paragraph 2 of the CRP and 55 of the LGT), in order to permit the attribution to a fiscal year of costs relating to prior fiscal years, provided that it does not result from voluntary and intentional omissions, with a view to effecting the transfer of results between fiscal years."
As written in the Decision of the STA of 09-05-2012, rendered in case 0269/12:
"It is also established case law of this Supreme Court that the rigidity of this principle must be mitigated or tempered with the invocation of the principle of justice, in situations where, with all periods for revision of the tax act already surpassed and with no prejudice to the State, injustice unjustified to the taxpayer should be avoided.".
In summary, the Decision of 02-03-2016, rendered in case 01204/13, also of the STA, states that:
"It is important to understand that:
1) the attribution of a revenue or a cost to a specific fiscal year follows an economic criterion and not a financial criterion.
and,
2) that the principle of specialization of fiscal years is not rigid but should tend to conform to and be interpreted in accordance with the constitutional principle of Justice.".
It is thus established that the principle of periodization of taxable profit, contained in article 18 of the CIRC, should tend to conform to and be interpreted in accordance with the principle of justice, with constitutional and legal conformity (articles 266, paragraph 2 of the CRP and 5/2 of the LGT), in order to permit the attribution to a fiscal year of costs relating to prior fiscal years, provided that it does not result from voluntary and intentional omissions, with a view to effecting the transfer of results between fiscal years.
As there are admittedly no voluntary and intentional omissions, with a view to effecting the transfer of results between fiscal years, and with the AT itself recognizing, on the contrary, that the situation at issue results from error on the part of the Claimant, it must be concluded that the correction in question was made in violation of the provisions of article 18 of the IRC, interpreted in accordance with the case law cited, and therefore should be annulled, with the arbitral request succeeding in this respect.
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ii. on the correction relating to financing to subsidiary companies
The second issue that arises in the present arbitral proceeding is the assessment of the legality of the corrections made by the AT, relating to the 2013 fiscal year of the Claimant, with respect to financial expenses attributable to gratuitous financings by it to subsidiary companies, in which it held shareholdings between 38% and 49% of the share capital.
In accordance with the justification set out by the AT, and underlying the corrections in question, the same are based on the provisions of article 23, paragraph 1/c) of the CIRC, in the version applicable to the said period, with the AT, in summary, having understood that these are not charges relating to third-party capital applied in the exploitation of the economic activity of the Claimant.
The wording of the rule in question is as follows:
"1 - Expenses are those that are proven to be indispensable for the realization of income subject to tax or for the maintenance of the productive source, namely: (...)
c) Of a financial nature, such as interest on third-party capital applied in exploitation, discounts, premiums, transfers, exchange differences, expenses with credit operations, collection of debts and issuance of bonds and other securities, reimbursement premiums and those resulting from the application of the effective interest method to financial instruments valued at amortized cost;".
The matter in question has been the subject of extensive examination and discussion, at both the case law and doctrinal level, and in any event, it is considered that the starting point for the examination of any question that presents itself to be decided relating to the matter in question should be, as formulated in the Decision of the STA of 04-06-2014, rendered in case 01763/13, that "the relevance or otherwise of certain expenses as costs of the fiscal year would always have to be seen in concreto, case by case, in function of the particular business context in which they develop and the purposes they pursue".
Having said this, "it is well-established case law of the S.T.A. that in light of article 23 of the C.I.R.C., costs with interest on bank loans contracted by a company and applied in gratuitous financing of its associated companies should not be considered as fiscally relevant".
Indeed, repeatedly, the STA has affirmed that "In light of article 23 of the CIRC, costs with interest and stamp duty on bank loans contracted by a company and applied in gratuitous financing of its associated companies should not be considered as fiscally relevant." and that "The financial charges borne by it resulting from supplements and supplementary contributions made to associated companies in a gratuitous manner, the company not being an SGPS nor covered by the group taxation regime, cannot be considered as costs fiscally deductible because they are not indispensable for the realization of benefits of the company subject to tax or for its maintenance as a productive source thereof in accordance with article 23 of the CIRC in the version in force at the date of the facts".
This understanding has been reaffirmed by that Superior Court, over the years and to the present, namely in the decisions of 19-04-2017 and 28-02-2018, rendered, respectively, in cases 0925/16 and 01206/17.
"II - With the company maintaining itself autonomously as a taxpayer subject to IRC and the companies associated with it likewise autonomous and likewise taxpayers in IRC, the financial charges borne by it resulting from supplements and supplementary contributions made in favor of the companies associated with it cannot be considered as an indispensable cost for purposes of deductibility in IRC in accordance with the provisions of article 23 of the CIRC because they are foreign to the exercise of its activity.";
- "I - It being true that the appellant is a partner of the subsidiary company and can make supplementary contributions to it, should it meet the legal requirements, which is not in issue here, in its legal sphere the decision to make the supplementary contribution is not an exercise of its business activity because it does not have as its object, also, the management of shareholdings.
II - The parassocial agreement that it concluded and in fulfillment of which it came to make the supplementary contributions does not alter/expand the corporate purpose of the appellant, and, because it does not obtain legal framework within this, is not development of the corporate activity of the appellant.
III - It is not a question of assessing the merits of the acts of management carried out by the appellant, but of verifying that, whatever financial operations it performs, outside its corporate purpose, are not an act of management of its business activity, therefore it cannot bring to this the costs that this financial operation produces.
IV - The strengthening of the capital of the subsidiary company through supplementary contributions made by the appellant are not an exercise of the business activity of the appellant, therefore the costs that incur with these or because of the performance of such contributions are not costs deductible in IRC in light of article 23 of the CIRC.".
For its part, relevant doctrine emerged, in various contexts, in a critical manner in relation to the aforementioned case law, arguing that gratuitous financings by one company to another, a subsidiary thereof, may still be considered as an exercise of the business activity of the former.
In arbitral proceeding 695/2015T of the CAAD, doctrine and prior case law on the matter is reviewed, an analysis to which, for brevity, reference is made.
In summary, in the said arbitral decision, regarding the concept of assets and productive source, it is concluded that regarding the question "Does a subsidiary company that borrows and transfers those funds to participated entities, charging them zero interest, or interest below that paid, develop its own activity or activity of others (i.e., perform management acts alien to its interest)?", it should be considered that "the deductibility of interest borne by the parent company will depend on the fact that such financings contributed to, according to normal management rules, increase the expectation of future benefits or maintain the productive source (financial asset)".
It was thus understood in that case that when the parent company finances the subsidiaries (its financial assets), in the accounting of the parent company "the allocation of funds to subsidiaries has as its counterpart the increase in the value of the investment accounted for in the account "41-Financial Investments". The productive source that is financed, in which the position of the investor is strengthened is, in the first instance, the set of financial assets" of the parent company.
Further it was judged that "the productive source materializes legally and accountingly in the assets of the [parent company], which concentrates legally, economically and financially the characteristics of a productive source of the [parent company]: it is a set of assets previously acquired by this entity, which grants it rights over the subsidiaries, and from which revenue is expected in the sphere of the acquirer.".
Still in the arbitral decision in question, it ended up being concluded that: "… the AT corrects only the differential in interest and not the totality of the interest paid by the [parent company]. …, this tax adjustment logic appears to be misaligned. If one wished to question the differential in prices (interest rates) paid and charged, it would be the transfer pricing rules that should be applied, and not those of article 23 of the CIRC".
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Having weighed the various arguments of the opposing positions presented above, there is a tendency toward the understanding that financings by a company to a subsidiary thereof, as a rule, should be regarded as falling within the scope of the business activity of the former, insofar as they do not constitute a liberality.
Indeed, as a rule, it is believed that the financial "health" of the subsidiary company will be of sufficient importance for the parent company to see the satisfaction of the financing needs of those as being in its own interest.
On the other hand, the good economic performance of the subsidiary company is capable of generating IRC-taxable gains for the parent company, either at the level of the increase in the economic value of the shareholdings, with the consequent increase in the assets and financial strength of the parent company, and all the advantages, in terms of market, that follow from this, or at the level of the eventual generation of dividends and/or capital gains.
Thus, it is not believed that one should question that the provision of financial resources by a parent company to a subsidiary thereof is, as a rule, foreign to the business interest of the former.
With respect to the existence and quantification of the interest rate applied, with the said arbitral decision rendered in proceeding 695/2015T of the CAAD, it is believed that the question should be, in the situations at hand, assessed in light of the transfer pricing regime, regulated in article 63 of the CIRC, and not in light of the necessity of expenses, regulated in article 23 of the same Code.
Nevertheless, and as seen, in light of the version in force in 2013 of the applicable rule (article 23/1/c) of the CIRC then in force), the case law of the STA on the matter is clear and reiterated, to the effect that "the financial charges (...) borne resulting from supplements and supplementary contributions made in favor of the associated companies cannot be considered as an indispensable cost for purposes of deductibility in IRC under the provisions of article 23 of the CIRC because they are foreign to the exercise of its activity.".
Indeed, it is believed that the tax problem of the granting of loans by parent companies to subsidiary companies, in situations such as those in the present case, resides, not in the lack of business interest in the operation, but rather in the possibility of those interests being pursued in an abusive manner, permitting the transfer of results between the companies involved, in a manner not permitted by law, and that, for that matter, article 63 of the CIRC expressly refers to such situations, by including in its provisions "financial operations".
Nevertheless, the courts in general, and also the arbitral tribunals, it is believed, are bound by the duty to take "into consideration all cases that merit analogous treatment, in order to obtain a uniform interpretation and application of the law." (article 8/3 of the Civil Code).
On the other hand, and in accordance with article 25/2 of the RJAT, "The arbitral decision on the merits of the claim filed which terminates the arbitral proceeding is also susceptible to appeal to the Supreme Administrative Court when it is in opposition, regarding the same fundamental question of law, with a decision rendered by the Central Administrative Court or by the Supreme Administrative Court.".
Thus a decision, in the matter at issue, that goes against the case law established by the STA on the matter, with there being, as there is, identity of the facts and of the law to be applied to them, between the present case and those already judged either by the STA or by the Central Administrative Courts, would not only be susceptible to appeal under the terms of the said article 25/2 of the RJAT, but, with a high degree of probability, liable to be revoked by that High Court.
Thus, and in summary, it is not believed that this Tribunal would have any utility, on the contrary (it would give rise to additional unnecessary procedural processing), in concluding otherwise, with respect to the corrections now in question, relating to the 2013 fiscal year, than the repeatedly reaffirmed by the superior state courts, namely, that the financial charges borne by the Claimant with the financing of its subsidiaries find no accommodation, as regards their deductibility, in the provisions of article 23 of the applicable CIRC, because it is not found that the corporate purpose of the Claimant encompasses the holding and management of shareholdings.
Thus, in this respect, the arbitral request should be rejected.
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The Claimant requests that, with the success of the annulment request, the AT be ordered to reimburse the tax improperly paid, as well as to pay compensatory interest on such amount, until reimbursement.
Article 43, paragraph 1, of the LGT establishes that compensatory interest is due when it is determined that there was error attributable to the services resulting in payment of the tax debt in an amount superior to that legally due.
In this case, the error affecting the partially annulled assessment is attributable to the Tax and Customs Authority, which carried out the assessment act on its own initiative, without the necessary factual and legal support.
The Claimant thus has the right to be reimbursed for the amounts it paid (in accordance with the provisions of articles 100 of the LGT and 24, paragraph 1, of the RJAT) by virtue of the partially annulled act and, further, to be indemnified for the improper payment through the payment of compensatory interest by the Respondent, from the date of payment of the amounts, until reimbursement, at the legal default rate, in accordance with articles 43, paragraphs 1 and 4, and 35, paragraph 10, of the LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.
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C. DECISION
Under these terms, this Arbitral Tribunal judges the arbitral request filed as partially successful and, consequently:
a) Judges the exceptions argued by the Respondent as without merit;
b) Partially annuls the IRC assessment act no. 2018..., the interest demonstration act no. 2018..., as well as the statement of account adjustment act no. 2018..., all relating to the 2013 fiscal year, insofar as they relate to the correction which, in violation of article 18 of the applicable CIRC, determined the increase of the amount of € 175,812.78 to the taxable profit of the Claimant, because it relates to expenses from prior periods;
c) Condemns the respondent to reimburse the tax improperly paid by the Claimant, by virtue of the partial annulment referred to in the preceding subparagraph, plus compensatory interest, in accordance with the terms indicated above;
d) Condemns both parties to the costs of the proceeding, in the proportion of their respective non-success, fixing the amount of € 1,787.00 to be borne by the Claimant and € 1,273.00 to be borne by the Respondent.
D. Value of the Proceeding
The value of the proceeding is fixed at € 144,075.02, in accordance with article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and of paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
E. Costs
The arbitration fee is fixed at € 3,060.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the parties in the proportion of their respective non-success, fixed above, since the request was partially successful, in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 5, of the said Regulation.
Notify accordingly.
Lisbon, 17 May 2019
The President Arbitrator
(José Pedro Carvalho)
The Vogal Arbitrator
(Suzana Fernandes da Costa)
The Vogal Arbitrator
(A. Sérgio de Matos)
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