CAAD Arbitration 45/2018-T: IRC Autonomous Taxation, SIFIDE II and RFAI Tax Benefits Deduction to Tax Liability

ARBITRAL DECISION

The arbitrators Counsel Jorge Lopes de Sousa (arbitrator-president), Dr. Henrique Nogueira Nunes and Prof. Dr. Maria do Rosário Anjos (arbitrators-members) appointed by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Court, constituted on 16-04-2018, agree as follows:

1. Report

A..., S.A., with headquarters at Rua do ... no...., ..., ...-... ... (hereinafter designated as "Claimant"), legal entity number ..., came, pursuant to Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Court.

The Claimant intends that the illegality of the decision partially denying the administrative complaint no...2017..., in the part where it denied the Claimant's request concerning the deduction of tax benefits relating to SIFIDE II and RFAI, as well as the IRC assessments no. 2015... and no. 2017..., relating to the periods 2014 and 2015, be declared.

The Claimant further requests the reimbursement of the amounts of € 33,591.02, relating to the financial year 2014 and € 83,423.92, for reference to the financial year 2015, totaling € 117,014.94, and the automatic correction of the inherent declaratory effects.

The Claimant further requests "payment of compensation for damages caused and corresponding compensatory interest".

The Respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.

The application for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority and Customs Authority on 05-02-2018.

Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the assignment within the applicable timeframe.

On 27-03-2018 the parties were duly notified of this appointment, and neither party expressed an intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11 no. 1 subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 16-04-2018.

The Tax and Customs Administration submitted a Response in which it defended the inadmissibility of the claims.

By order of 17-05-2018 the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the case would proceed with written submissions.

The Parties submitted written arguments.

The arbitral tribunal was duly constituted in accordance with the provisions of articles 2 no. 1 subparagraph a), and 10 no. 1, of Decree-Law no. 10/2011, of 20 January, and is competent.

The Parties are duly represented and enjoy personality and judicial capacity, are legitimate and are represented (articles 4 and 10 no. 2, of the same decree-law and article 1 of Ordinance no. 112-A/2011, of 22 March).

The case does not suffer from nullities.

2. Factual Matters

2.1. Established Facts

The following facts are considered established:

• The Claimant is a limited company subject to and not exempt from taxation for IRC purposes;

• The Claimant submitted, on 29 May 2015, the periodic income statement (Form 22) of IRC, relating to the financial year 2014 (document no. 4 attached to the request for arbitral decision, whose content is reproduced);

• The Claimant calculated an IRC tax of € 314,167.97 and deducted from it the amount of € 65,188.44, as title of tax benefits not deducted in previous periods;

• On 30 May 2016, the Claimant submitted a periodic income statement (Form 22) of IRC relating to the financial year 2015 (document no. 5 attached to the request for arbitral decision, whose content is reproduced);

• In the periodic income statement (Form 22) of IRC for the financial year 2014, the Claimant did not take into account the amount of the tax credit relating to SIFIDE II - System of Fiscal Incentive for Research and Business Development (SIFIDE II), relating to that financial year, in the amount of € 282,570.55, having considered that tax credit only in the periodic income statement (Form 22) of IRC for the financial year 2015;

• The Claimant submitted, on 26 May 2017, a substitute periodic income statement (Form 22) of IRC for the financial year 2015, aimed at disregarding the SIFIDE II tax credit relating to the financial year 2014 and the consideration of the tax credit relating to SIFIDE II calculated in 2015, in the amount of € 447,962.46 (document no. 6 attached to the request for arbitral decision, whose content is reproduced);

• Still with reference to the financial year 2015, the Claimant calculated, within the scope of its activity, a tax benefit relating to the Tax Regime for Support of Investment ("RFAI") in the amount of € 313,154.41;

• In the substitute periodic income statement (Form 22) of IRC for the financial year 2015, delivered on 26 May 2017, the Claimant calculated an IRC tax of € 193,964.36, deducting from it the amount of € 193,964.36, as title of tax benefits not deducted in previous periods;

• In the financial years 2014 and 2015, the Claimant bore autonomous taxation in the amounts of € 70,122.95 and € 83,423.62, respectively, and such amounts were not included in the amount of the tax for purposes of the deduction of tax benefits;

• The calculation formula followed by the electronic data transmission system does not consider as IRC tax the amounts paid as autonomous taxation, thereby making impossible a higher deduction of tax credits (namely SIFIDE II and RFAI);

• The Claimant filed, on 29 March 2017, an administrative complaint, aimed at the correction of what it considers to be errors committed, namely regarding the consideration of the tax benefit relating to SIFIDE II in the financial year 2014 (the year in which the respective expenses were made) and the deduction of tax benefits to the IRC tax broadly defined, in the financial years 2014 and 2015 (document no. 2 attached to the request for arbitral decision, whose content is reproduced);

• On 7 November 2017, the Claimant was notified of the final decision on the administrative complaint filed, which granted the Claimant's claims regarding the consideration of the tax benefit relating to SIFIDE II in the amount of € 282,570.55, in the financial year in which such benefit was actually calculated, i.e., 2014; and denied the request for deduction of tax benefits to the IRC tax (including that derived from autonomous taxation), in the financial years 2014 and 2015 (document no. 1 attached to the request for arbitral decision, whose content is reproduced);

• The decision denying the administrative complaint refers to the reasoning of the opinion contained in the draft decision in the administrative file, whose content is reproduced, in which the following is stated, among other things:

OPINION

I – INTRODUCTION

1. The tax acts of IRC assessment relating to the years 2014 (in which it calculated the amount to be reimbursed of € 2,164,528.07), and 2015 (in which it did not calculate amount to pay or additional amount to be reimbursed in relation to what resulted from the 1st statement delivered for that tax year - reimbursement of € 193,964.36), are being complained of, based on the following allegations:

• the self-assessment made in the periodic income statement of 2014 did not take into account the amount of the tax credit relating to the tax benefit resulting from the incentive called SIFIDE II, provided for in articles 35 et seq. of the Tax Code for Investment – CFI, approved by Decree-Law no. 162/2014, of 31.10, in the amount of € 282,570.55, justified by a certificate statement issued by the competent certifying commission dated 10.02.2016 (points 7 to 11 and 18 to 31 of the initial application),

• the amounts of the IRC tax in the tax years 2014 and 2015 considered for the deductions provided for in article 90 of the IRC Code (CIRC), namely those relating to tax benefits, did not take into account the values relating to autonomous taxation, of € 70,122.95 and € 83,423.62, for purposes of deduction of credits resulting from benefits with SIFIDE II, in 2014 and 2015, and RFAI in 2015 (indicated in the substitute statement delivered on 06.07.2016) - points 12 to 16 and 32 to 133 of the initial application.

1. The complainant petitions for recognition of the right to deduction of the tax credit resulting from SIFIDE II in the assessment of the tax for the year 2014, and the computation in the assessment of the tax for the years 2014 and 2015 of the autonomous taxation borne.

II - OF THE PROCEDURAL REQUIREMENTS

1. Pursuant to articles 9 and 68 of the CPPT the complaint filed is the appropriate means and the complainant has legitimacy for the act.

2. As for timeliness, it is the understanding of the services (cf. opinion sanctioned by order of the Director-General of the Tax Authority and Customs Authority of 20.10.2014 within the scope of administrative process no. .../14) that, if the taxable person has not requested the issuance of the SIFIDE II certificate statement before submitting the periodic income statement for the year in which it carried out the R&D expenses, it can benefit from the benefit through an administrative complaint, within a period of 2 years after submission of the periodic income statement.

3. In the case of these proceedings:

a) the certificate statements of the tax credit sought in 2014 and 2015 were issued by the Certifying Commission for Tax Incentives for R&D in business of the Ministry of Economy, respectively, on 10.02.2016 and 20.04.2017, recommending the award of tax credit of € 282,570.55 and € 447,962.46, as copies attached to the application for this complaint under documents 3 and 4;

b) the first periodic income statement for the year 2014 was submitted by the complainant on 29.05.2015 and that of 2015 on 30.05.2016, that is, they were submitted at a time prior to the issuance of the respective certificate statements of the tax credit;

c) this complaint was filed on 29.05.2017.

1. Therefore, considering what has been stated above in the opinion issued in administrative process no. .../14 and the provision in no. 1 of article 131 of the CPPT, it is concluded that this complaint is timely in relation to the two periods of taxation to which it refers.

2. With consultation of the Judicial Tax Dispute System (SICJUT), in compliance with the provision in article 68 no. 2 of the CPPT, it is verified that the complainant has not filed judicial challenge with the same object.

III - OF THE ASSESSMENT OF THE CLAIM

1. With regard to the recognition of the alleged right to a tax credit under the incentive called SIFIDE II, provided for in articles 35 et seq. of the CFI, to be deducted from the IRC tax for the year 2014, the elements in the file show that the complainant submitted the periodic income statement on 29.05.2015 entering only the balance of the credit of the same benefit not deducted in the previous period, of € 65,188.44, and that the certificate statement was issued by the Certifying Commission for Tax Incentives for R&D in business of the Ministry of Economy on 10.02.2016, recommending the award of a tax credit of € 282,570.55, as copy attached to the application for this complaint under document 3.

2. With consultation of the computerized database of the AT regarding the system for control of tax benefits, for purposes of the provision in articles 14 nos. 5 to 7 of the Statute of Tax Benefits, and of article 39 of the Tax Code for Investment, it was verified that the taxable person now complaining did not appear as a debtor to the State and Social Security of any contributions, taxes or fees.

3. In light of the above, the request is to be granted in this part, the amount of the benefit recommended by the Certifying Commission in the corresponding certificate statement, of € 282,570.55, being to be taken into account as a deduction from the IRC tax in the calculation of the IRC assessed in relation to 2014, in accordance with the applicable legal regime, and notwithstanding the provision in article 7 of the Statute of Tax Benefits.

4. With regard to the request to compute autonomous taxation in the IRC tax in the tax years 2014 and 2015, insofar as the latter would integrate the IRC tax, to broaden the scope of deduction of tax benefits, the AT understands that the sum of the values of autonomous taxation is not considered IRC tax, and thus benefits are not subject to deduction. The arbitral decisions invoked by the taxpayer were made according to the understanding adopted in each case and are binding only within the limits of the cases in which they were made.

5. The assessment of autonomous taxation is, like the assessment of IRC, carried out by the taxable person, in the statements referred to in articles 120 and 122 of the CIRC, or by the AT, in the remaining cases, but the amount of autonomous taxation is not calculated in accordance with article 90 of the CIRC.

6. Autonomous taxation aims at the taxation of specific and different realities, with an anti-abuse purpose, to prevent the realization of the expenses on which they incide, and have a specific character of taxing each expense made according to a certain rate, being calculated independently of the IRC which is due in each financial year, independently of whether there is IRC to pay, and may even result in an aggravation of autonomous taxation of some expenses in case of a negative fiscal result.

7. Hence, if it were possible to deduct from autonomous taxation the values of tax incentives, the anti-abuse purpose would be nullified.

8. Thus, contrary to the provision in article 12 and in subparagraph a) of no. 1 of article 23-A of the CIRC, there is no reference to autonomous taxation in nos. 1 and 2 of article 90 of the same decree-law. That which makes it impossible for them to be deducted as an expense in the assessment of taxable profit and prevents the value of autonomous taxation from being considered for purposes of the deductions provided for in no. 2 of the aforementioned article 90.

9. It should be noted that the reference to autonomous taxation in the provision of subparagraph a) of no. 1 of article 23-A of the CIRC indicates that these are a different type of tax from IRC, because if they were not there would be no need to distinguish them.

10. Symptomatically, the values in which the tax benefit is concretized under RFAI and SIFIDE II are deducted, according respectively to no. 1 of article 23 of the CFI, "from the IRC tax calculated in accordance with subparagraph a) of no. 1 of article 90 of the CIRC" and, with no. 1 of article 38 of the CFI, "from the amount of the IRC tax calculated in accordance with subparagraph a) of no. 1 of article 90 of the CIRC, and up to its extent", and in the assessment relating to the following periods of taxation referred to in no. 3 of article 23 and no. 4 of 38, in case of insufficiency of tax.

11. Now, the tax referred to in article 90, when the assessment must be made by the taxpayer, as is the case in these proceedings, is calculated on the basis of the taxable matter calculated according to subparagraph a) of no. 1 of article 90 of the CIRC within the scope of the assessment/self-assessment expressed therein.

12. Thus, the law regulating SIFIDE II and RFAI itself expressly prevents the credits arising therefrom from being deducted from another tax category, and, as the complainant claims, that the sum of autonomous taxation can have the deductions listed in no. 2 of article 90 of the CIRC made to it.

13. On the other hand, the organization of Table 10 and the instructions of the periodic income statement Form 22 and its instructions, approved by Order no. 15632/2014, of the Secretary of State for Tax Affairs (published in the Official Journal no. 250/2014, 2nd series, of 29.12), in force from 01.01.2015, indicate that no deduction is made to the sum of autonomous taxation to be entered in field 365, namely those mentioned in no. 2 of article 90 of the CIRC and identified in fields 353, 375, 355 and 356, which are deducted only from the total tax (field 378) which is composed of the sum of IRC proper (field 351) and the state surtax (field 373).

14. Furthermore, the amendment to article 88 CIRC made by article 133 of Law no. 7-A/2016, of 30.03 – State Budget Law for 2016, which introduced no. 21, according to which the assessment of autonomous taxation is made in accordance with article 89 of the CIRC, makes no reference to article 90 CIRC, therefore no deductions can be made in the assessment of autonomous taxation in accordance with article 90.

15. This amendment has an interpretive nature, pursuant to article 135 of that Law, and, in accordance with no. 1 of article 13 of the Civil Code, "the interpretive law is integrated into the interpreted law", being therefore of immediate application, as if the legal provision had always existed in these terms.

16. Finally, with regard to the allegation of Decision no. 267/2017 of the Constitutional Court, the AT, being subject to the principle of legality (cf. articles 266 no. 2, of the Constitution of the Portuguese Republic – CRP, and 55 of the LGT), cannot fail to apply a norm because it believes it to be unconstitutional, unless the Constitutional Court has already declared the unconstitutionality of that same norm with binding general force (cf. article 281 of the CRP) or if there is a norm that violates directly applicable and binding constitutional norms, such as those relating to rights, freedoms and guarantees (cf. article 18 no. 1, of the CRP). The courts have declared this not to be the case when the application of a norm possibly violating the principle of non-retroactivity of tax law is at issue.

IV - CONCLUSION

In light of the foregoing, we are of the opinion that the complaint in question should be

• granted as regards the request for consideration of the amount of the tax credit relating to the benefit arising from the SIFIDE II incentive, provided for in articles 35 et seq. of the Tax Code for Investment, of € 282,570.55, in the calculation of the IRC assessed in relation to the tax year 2014; and

• denied as regards the request that the amounts of the IRC tax in the tax years 2014 and 2015 considered for purposes of the deductions provided for in article 90 of the CIRC take into account the amounts relating to autonomous taxation in those years, for purposes of deduction of credits arising from benefits with SIFIDE II, in 2014 and 2015, and RFAI, in 2015.

• On 05-02-2018, the Claimant filed the request for arbitral decision which gave rise to this case;

2.2. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

2.3. Reasoning for the Establishment of Factual Matters

The proven facts are based on the documents attached by the Claimant and which appear in the administrative file.

There is no controversy regarding the factual matters.

3. Legal Matters

The Tax and Customs Administration denied the administrative complaint regarding the request for determination of the amounts of the IRC tax in the tax years 2014 and 2015, considered for purposes of the deductions provided for in article 90 of the CIRC, to consider the amounts relating to autonomous taxation in those years, for purposes of deduction of credits arising from benefits with SIFIDE II, in 2014 and 2015, and RFAI, in 2015.

The essential issue that is the subject of this case is whether the deductible amounts of tax benefits provided for in SIFIDE II and RFAI can be deducted from the IRC tax derived from autonomous taxation, in the years 2014 and 2015.

To resolve this issue, it is also important to assess the relevance of subsequent laws, to which an interpretive nature was attributed.

3.1. Applicability of Articles 89 and 90 of the CIRC to the Calculation of Autonomous Taxation

Articles 89 and 90 of the CIRC establish the following, in the wording of Law no. 2/2014, of 16 January, in force in the year 2012:

Article 89

Competence for Assessment

The assessment of IRC is carried out:

a) By the taxable person itself, in the statements referred to in articles 120 and 122;

b) By the Tax Authority and Customs Authority, in the remaining cases.

Article 90

Procedure and Form of Assessment

1 - The assessment of IRC proceeds as follows:

a) When the assessment is to be made by the taxable person in the statements referred to in articles 120 and 122, it is based on the taxable matter contained therein;

b) In the event of failure to submit the statement referred to in article 120, the assessment is made by 30 November of the year following the one to which it relates or, in the case provided for in no. 2 of the said article, until the end of the 6th month following the end of the deadline for submission of the statement mentioned therein, and is based on the value of the minimum monthly remuneration or, when higher, the totality of the taxable matter of the closest financial year which is determined;

c) In the absence of assessment under the preceding subparagraphs, it is based on the elements available to the fiscal administration.

2 - To the amount calculated under the preceding number, the following deductions are made, in the order indicated:

a) That corresponding to international legal double taxation;

b) That corresponding to international economic double taxation;

c) That relating to tax benefits;

d) That relating to the special payment on account referred to in article 106;

e) That relating to withholding at source not capable of compensation or reimbursement under the applicable legislation.

3 – (Revoked)

4 - To the amount calculated under no. 1, in relation to the entities mentioned in no. 4 of article 120, only is the deduction relating to withholding at source when it has the nature of a tax on account of IRC to be made.

5 - The deductions referred to in no. 2 relating to entities to which the fiscal transparency regime established in article 6 applies are allocated to the respective partners or members in the terms established in no. 3 of that article and deducted from the amount calculated on the basis of the taxable matter that has taken into account the allocation provided for in the same article.

6 - When the special regime for taxation of groups of companies applies, the deductions referred to in no. 2 relating to each of the companies are made in the amount calculated in relation to the group, under the terms of no. 1.

7 - From the deductions made under subparagraphs a), b) and c) of no. 2 no negative value can result.

8 – To the amount calculated under subparagraphs b) and c) of no. 1 only are the deductions made which the fiscal administration has knowledge of and which can be made under nos. 2 to 4.

9 – In cases where the provision in subparagraph b) of no. 2 of article 79 applies, annual assessments are made on the basis of the taxable matter determined with a provisional character, and, in light of the assessment corresponding to the taxable matter relating to the entire assessment period, the difference identified is collected or cancelled.

10 – The assessment provided for in no. 1 can be corrected, if necessary, within the period referred to in article 101, then collecting or cancelling the differences identified.

The said articles 89 and 90 of the CIRC, as well as other norms of this Code, such as those relating to the statements provided for in articles 120 and 122, are applicable to autonomous taxation.

In fact, it is now settled, following abundant arbitral jurisprudence and the positions taken by the Tax Authority and Customs Authority, that the tax levied on the basis of autonomous taxation provided for in the CIRC has the nature of IRC. Moreover, in addition to the jurisprudence, article 23-A no. 1, subparagraph a), of the CIRC, in the wording of Law no. 2/2014, of 16 January, leaves no margin today for any reasonable doubt, corroborating what previously resulted from the literal wording of article 12 of the same Code.

Now, article 90 of the CIRC refers to the forms of assessment of IRC, by the taxable person or by the Tax Administration, applying to the calculation of the tax due in all situations provided for in the Code.

Therefore, that article 90 also applies to the assessment of the amount of autonomous taxation, which is calculated by the taxable person or by the Tax Administration, following the submission or non-submission of statements, and there is, in force in the year 2014, no other provision that provides for different terms for its assessment.

Thus, in the year 2014, the differences between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are limited to the determination of the taxable matter and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for IRC which is based on taxable profit and in article 88 of the CIRC for IRC which is based on the taxable matter of autonomous taxation and the respective rates.

But, the forms of assessment provided for in Chapter V of the same Code are of common application to autonomous taxation and to the remaining IRC taxable matter.

However, the circumstance that an IRC assessment, made under the terms of no. 1 of article 90, may contain several partial calculations, based on various applicable rates to certain taxable matters, does not imply that there is more than one assessment, as results from the very terms of that norm when it refers to "assessment", in the singular, in all cases in which it is "made by the taxable person in the statements referred to in articles 120 and 122", having "as basis the taxable matter contained therein" (whether that determined on the basis of the rules of articles 17 et seq. or that determined on the basis of the various situations provided for in article 88).

Moreover, it is not only the assessments provided for in article 88 that can encompass several calculations of application of rates to certain taxable matters, as the same can occur in the situations provided for in nos. 4 to 6 of article 87.

In any event, whatever calculations are to be made, it is a unitary assessment that the taxable person or the Tax Authority and Customs Authority must make under the terms of articles 89, subparagraph a), 90, no. 1, subparagraphs a), b) and c), and 120 or 122, and on the basis of it that global IRC is calculated, whatever the taxable matters relating to each of the types of taxation underlying it.

Moreover, if article 90 were not applicable to the assessment of autonomous taxation provided for in the CIRC, we would have to conclude that there would be no provision that, in 2012, provided for its assessment, which would amount to illegality, by violation of article 103, no. 3, of the CRP, which requires that the assessment of taxes be made "in accordance with the law".

It should also be mentioned the new provision of no. 21 added to article 88 of the CIRC by Law no. 7-A/2016, of 30 March, regardless of whether or not it is qualifiable as truly interpretive, in no way alters this conclusion, as it establishes, regarding the form of assessment of autonomous taxation, that it "is carried out in accordance with the terms provided in article 89 and is based on the values and rates resulting from the provision of the preceding numbers". In fact, if it is true that this new provision comes to make explicit how the amounts of autonomous taxation are calculated (which already resulted from the very text of the various provisions of article 88) and that competence lies with the taxable person or the Tax Administration, in accordance with article 89, it is also clear that it does not remove the need to use the procedure provided for in no. 1 of article 90, namely in cases provided for in its subparagraph c) where assessment is the responsibility of the Tax Authority and Customs Authority, with "basis in the elements available to the fiscal administration", which will include the possibility of assessing on the basis of autonomous taxation, if the Tax Authority and Customs Authority has elements proving its requirements.

The same applies to the wording given to that no. 21 of article 88 by Law no. 114/2017, of 29 December.

Therefore, both before and after Law no. 7-A/2016, of 30 March, and Law no. 114/2017, of 29 December, article 90, no. 1, of the CIRC is applicable to the assessment of autonomous taxation.

3.2. Applicability of the Deductions Provided for in No. 2 of Article 90 of the CIRC to the IRC Tax Resulting from Autonomous Taxation

As stated, at least until Law no. 7-A/2016, of 30 March, there was no legal provision that indicated any special procedure for assessment of IRC resulting from autonomous taxation, therefore, at the risk of unconstitutionality by violation of no. 3 of article 103, as the assessment is not made "in accordance with the law", the procedure provided for in article 90 of the CIRC had to be applied.

Since the IRC tax, both that resulting from taxable profit and that resulting from autonomous taxation, is calculated through the assessment procedure provided for in article 90 of the CIRC, the deductions provided for in no. 2 of the same article are potentially applicable to that tax, which relate to "the amount calculated under the preceding number", without any distinction regarding the nature of the types of IRC tax that are included in that amount.

Therefore, from the literal wording of no. 2 of article 90 of the CIRC, no obstacle results to the application of the deductions to the part of the amount calculated under the terms of no. 1 derived from autonomous taxation.

As stated in the Decision of the Constitutional Court no. 267/2017, of 31-05-2017, delivered in case no. 466/16, "the autonomy of the taxation in question as to its basis of incidence, as to the applicable rates and even as to the moment of payment, by itself does not determine – neither logically nor legally – the irrelevance of the tax obtained with autonomous taxation within the scope of the calculation of the tax of IRC itself – a matter regulated, in general, in article 90, no. 1, of the CIRC – namely as to the integration of the latter into the former and, consequently, as to the admissibility of consideration of the value of the said tax for the purpose of carrying out the deductions legally provided for in article 90, no. 2, of the CIRC. That question, in the absence of a specific norm to the contrary – such as that which, for example, came to be enshrined in article 88, no. 21, of the CIRC – relates to the very legislative configuration of IRC, in which is included the relevance or irrelevance, for purposes of calculating the final IRC tax, of the amounts paid as autonomous taxation".

In fact, only with Law no. 7-A/2016, of 30 March, which added to article 88 of the CIRC a no. 21, did there come to exist a provision in which the possibility of application of the deductions provided for in no. 2 of article 90 of the CIRC to the amount calculated with autonomous taxation is excluded, establishing the following:

21 - The assessment of autonomous taxation in IRC is carried out in accordance with the terms provided in article 89 and is based on the values and rates resulting from the provision of the preceding numbers, no deductions being made to the overall amount calculated.

In the final part of this provision, the scope of application of the deductions provided for in article 90, no. 2, of the CIRC is limited to the IRC tax derived from taxable profit.

Law no. 114/2017, of 29 December, came to reaffirm the exclusion of the applicability of the deductions provided for in no. 2 of article 90 of the CIRC to the IRC tax resulting from autonomous taxation by establishing the following:

21 - The assessment of autonomous taxation in IRC is carried out in accordance with the terms provided in article 89 and is based on the values and rates resulting from the provision of the preceding numbers, no deductions being made to the overall amount calculated, even if such deductions result from special legislation.

To this no. 21 of article 88 of the CIRC an interpretive nature was attributed, by article 135 of Law no. 7-A/2016 and by article 233 of Law no. 114/2017, respectively.

However, the Constitutional Court, in the aforementioned Decision no. 267/2017, already affirmed the unconstitutionality of that article 135 in the part in which, by effect of the merely interpretive character that it attributes to the 2nd part of no. 21 of article 88 of the CIRC, it excludes the possibility of deduction from the overall amount resulting from autonomous taxation assessed in a given year in IRC of deductions allowed in tax years prior to 2016.

This Decision of the Constitutional Court was based on no. 3 of article 103 of the CRP, which establishes that no one can be required to pay taxes that have a retroactive nature, from which the Constitutional Court understood it to follow that "the legislature cannot create taxes with such a nature or introduce into existing taxes modifications that, with retroactive effects, aggravate them" and that "what is at issue is the prohibition of establishing new legal consequences that constitute ex novo or aggravate situations already defined, namely the amount due as a certain tax and previously defined in light of the verification of all relevant facts under the applicable law before the establishment of the new legal consequences".

Therefore, in line with this jurisprudence, the constitutionality of the restrictive interpretation of no. 2 of article 90 of the CIRC, so as to exclude the possibility of deductions from the IRC tax resulting from autonomous taxation, depends on whether it should already have been made in light of the regime prior to that Law no. 7-A/2016, as it is constitutionally inadmissible the unfavorable retroactivity to taxpayers of tax norms from which results an obligation to pay taxes.

It should be noted, however, from the outset, that the new wording given by Law no. 114/2017 to no. 21 of article 88 of the CIRC, by excluding the possibility of deductions from the overall amount of autonomous taxation "even if such deductions result from special legislation" clarifies, with interpretive nature (in this part without problems of constitutionality, as it is retroactivity favorable to taxpayers), that there was special legislation from which resulted that deductions be made to the amount of autonomous taxation, thus coming to recognize, with the legislative authority of an authentic interpretation, what had been patiently and repeatedly explained by the majority arbitral jurisprudence (as was justified and is justified in light of the difficulties manifested by the Tax Authority and Customs Authority in article 127 of its arguments, in which it admits that, for it, this is a matter of "incomprehensible and unintelligible theses").

Therefore, being constitutionally inadmissible, for what the Constitutional Court stated in the cited Decision, that this new law come to exclude the possibility of deductions admissible under the legislation in force until the entry into force of Law no. 7-A/2016, the question that arises, to resolve the questions of legality of the assessment and of the decision of the administrative complaint that are raised in this case, is whether, before that law, the restrictive interpretation that came to be made explicit in it should already have been made, should restrictions have already been placed on the application of the deductions provided for in no. 2 of article 90 of the CIRC to the part of the IRC tax resulting from autonomous taxation.

In fact, the fact that the wording of no. 2 of article 90 points toward the application of the deductions to the tax resulting from autonomous taxation that deductibility, did not exclude the possibility of restrictive interpretation, if "the interpreter arrives at the conclusion that the legislator adopted a text that betrays its thought, insofar as it says more than what it intended to say. Here too the ratio legis will have a decisive word. The interpreter should not allow himself to be carried away by the apparent scope of the text, but should restrict it so as to make it compatible with the legislative thought, that is, with that ratio. The argument on which this type of interpretation rests is usually thus expressed: cessante ratione legis cessat eius dispositio (where the reason for being of the law ends the law's scope ends)".

As a basis for a restrictive interpretation one could, in an initial analysis, venture the fact that some autonomous taxation, namely some of those which have as a basis of incidence "expenses" or "charges", aim to discourage certain behaviors of taxpayers capable of affecting taxable profit, and, consequently, reducing tax revenue, and its deterrent force will be attenuated with the possibility of the respective tax being subject to deductions.

However, as was legislatively recognized by the wording given to no. 21 of article 88 by Law no. 114/2017 (here with interpretive force constitutionally unimpeachable in light of article 103, no. 3, of the CRP), there is special legislation from which results that deductions be made to the tax derived from autonomous taxation, which are necessarily situations in which legislatively preference was given to satisfaction of the interests that justify the deductions in relation to those pursued with autonomous taxation, which occurs with the provisions on tax benefits deductible from IRC tax.

On the other hand, the nature of anti-abuse provisions, intended to prevent fraud and tax evasion, does not exclude the possibility of deductions from the IRC tax that with the application of those provisions is determined, which is manifest in relation to the tax provided by corrections based on provisions clearly of an anti-abuse nature, such as, for example, those relating to transfer pricing or undercapitalization, and also the corrections resulting from the application of the general anti-abuse provision provided for in article 38, no. 2, of the LGT.

Furthermore, it is also evident that the anti-abuse nature of some of the autonomous taxation which aim to discourage expenses and prevent tax evasion could not serve to justify the non-deduction of tax benefits from the entire IRC tax resulting from autonomous taxation, as the one provided for in no. 11 of article 88 of the CIRC does not apply to expenses or charges, but rather to "profits", being a form of taxation of profit complementary or alternative in relation to that provided for the generality of income. Moreover, the autonomous taxation provided for in no. 8 of article 88 does not have underlying any intention to discourage the carrying out of the operations to which it refers, but rather to impose on special taxpayers special probative duties in situations where the more favorable taxation of the recipients of the expenses can raise doubts about the reality and normality of the operations, as autonomous taxation is excluded "if the taxable person can prove that they correspond to operations actually carried out and do not have an abnormal character or an exaggerated amount".

Furthermore, even in relation to some autonomous taxation which apply to expenses, it would not be compatible with the constitutional principles of proportionality and equality to impose taxation based on a hypothetical legislative intention to discourage the use of motorcycles for certain activities for which they are indispensable, such as happens with motorcycle spectacles, or for which they have evident suitability, their use corresponding to manifest good business management, and would be especially inconceivable to include within the scope of that discouraging intention the very payment of "taxes inciding on their possession or use", to which the final part of no. 5 of article 88 refers, which should even be ensured coercively by the Tax Authority and Customs Authority, in case the taxpayer feels discouraged from making that payment.

Thus, the understanding that all autonomous taxation aim to tax expenses or discourage or sanction behaviors, which may result from a cursory initial analysis, encounters, in a more incisive perception, an insurmountable lack of correspondence with reality, being more coherent, as a global explanation, the idea that we are "faced with a mechanism whose ultimate objective is to contribute to the "normalization" of taxation under IRC, that is, to the functioning of that tax in its purest form and closest to its roots as a tax on profit obtained by legal entities. In that sense, autonomous taxation are nothing more than auxiliary mechanisms of the central axis of IRC, which is to tax profits allowing the deduction of expenses in which taxable persons must incur in order to achieve taxable income".

As is also stated in the Decision of CAAD delivered in case no. 59/2014-T, autonomous taxation in IRC should be considered a form of taxation of business income:

"The Statement of Reasons contained in Proposal no. 46/VIII, which gave rise to Law no. 30-G/2000, of 29 December, which greatly expanded the situations of autonomous taxation, leaves no margin for doubt that this is a conscious and intended amplification of previously existing distortions, as it was understood that they were necessary, in short, to compensate for other distortions resulting from significant fraud and tax evasion and thus increase the equity of the distribution of the tax burden between citizens and companies".

(...)

"autonomous taxation directly affecting certain expenses, within the scope of taxes which originally affected only income, are considered distortions of the direct income taxation system that IRC aimed for, but a value that was legislatively considered to be more relevant than theoretical coherence of taxes, such as the implementation of fiscal justice, imposed a choice for these forms of taxation, as they are in line with the principles of equity, efficiency and simplicity.

(...)

But, this indirect taxation continues to be carried out within the scope of IRC, as results from the inclusion of autonomous taxation in the respective Code, which has as a corollary the application of the general norms specific to that tax, which do not conflict with its special form of incidence.

Thus, while it is true that autonomous taxation constitute a different form of imposing taxes on companies, which could be contained in autonomous regulation or be arranged in the Tax Stamp Code, it is also true that the legislative choice to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in IRC, which can be justified because they are an indirect form, but, from a legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income".

In fact, autonomous taxation under IRC, in light of the growing scope that the legislator has been giving them, in order to be compatible with the constitutional principle of taxation of companies fundamentally affecting their actual income (article 104, no. 2, of the CRP), should be understood as indirect forms of taxing business income, through the taxation of certain expenses and charges that reveal capacity to pay, or even, in the cases of autonomous taxation provided for in nos. 8 and 11 of article 88, as complementary forms of directly taxing income, in situations in which it will presumably be generated, without taxation, in the legal sphere of third parties.

Moreover, it is a fact that the imposition of any expense without counterpart to a legal entity has as a corollary a potential decrease in its income, therefore the imposition of a unilateral tax obligation, even if calculated on the basis of expenses realized or charges borne, constitutes a form of indirectly taxing its income.

The new article 23-A of the CIRC, introduced by Law no. 2/2014, of 16 January, in saying that "are not deductible for purposes of the determination of taxable profit the following charges, even when accounted for as expenses of the taxation period: a) IRC, including autonomous taxation, and any other taxes that directly or indirectly affect profits", lets it be understood that, from a legislative perspective, IRC and autonomous taxation are taxes that directly or indirectly affect actual or presumed profits, as that understanding can justify the inclusion of the expression "any other taxes", which presupposes that IRC and autonomous taxation are also taxes of these types, are taxes that directly or indirectly affect actual or presumed business income.

Therefore, as autonomous taxation provided for in the CIRC are, ultimately, indirect forms of taxing business income, it is not seen why there would necessarily be incompatibility between them and the general rules that provide for the form of carrying out IRC assessment.

In any event, a restrictive interpretation can only result, in light of the wording of the CIRC prior to Law no. 7-A/2016, from the conclusion that the text of no. 2 of article 90, in some measure, does not correspond to legislative thought, namely if it can be concluded that the reason justifying some or some of the deductions, only is compatible with its application to the IRC tax resulting from taxable profit.

And, naturally, in light of the constitutional prohibition of retroactive application of the overall exclusion of deductibility to situations prior to Law no. 7-A/2016, the deductions will be applied when they result from the special legislation referred to in the wording of no. 21 of article 88 introduced by Law no. 114/2017.

In fact, at least in these cases in which the deductions result from special law, the possibility of excluding them by way of a restrictive interpretation of no. 2 of article 90 will necessarily be excluded, as it is that special law, precisely because it is special, that imposes its application, as special laws override general laws in their specific domains of application.

It is in this light that it is important to assess each of the situations in which the Claimant intends to make a deduction from the IRC tax resulting from autonomous taxation.

3.3. Deductibility of Investment Expenses Provided for in SIFIDE II from the IRC Tax Derived from Autonomous Taxation

SIFIDE - System of fiscal incentives in research and business development was created by Law no. 40/2005, of 3 August, with anticipated validity for the years 2006 to 2010, but was reformed by article 133 of Law no. 55-A/2010 of 31 December to be in force until 2015 as System of fiscal incentives in research and business development II (SIFIDE II).

Subsequently, it was amended by articles 163 and 164 of Law no. 64-B/2011 of 30 December, and transferred to articles 33 to 40 of the Tax Code for Investment, republished by Decree-Law no. 82/2013, of 17 June.

Articles 33, 35, 36 and 38 of the Tax Code for Investment were amended by Law no. 83-C/2013 (articles 211 and 212), increasing the period of validity until 2020 (in no. 1 of that article 36).

Subsequently, Decree-Law no. 162/2014, of 31 October, approved a new Tax Code for Investment, in which it integrated SIFIDE II.

Regarding the scope of the deduction, article 4, nos. 1 to 3, of Law no. 40/2005, establish the following, in what is relevant here:

Article 4

Scope of the Deduction

1 - IRC taxable persons resident in Portuguese territory who engage, as a principal or not, in an activity of an agricultural, industrial, commercial and services nature and non-residents with a permanent establishment in that territory can deduct from the amount calculated under the terms of article 83 of the IRC Code, and up to its extent, the value corresponding to expenses with research and development, in the part that has not been the subject of financial participation by the State as a grant, realized in the taxation period beginning on 1 January 2006, in a double percentage:

a) Base rate - 32.5% of expenses realized in that period; (Amended by Law no. 10/2009, of 10 March)

b) Incremental rate - 50% of the increase in expenses realized in that period in relation to the simple arithmetic average of the two preceding financial years, up to the limit of (euro) 1,500,000. (Amended by Law no. 10/2009, of 10 March)

2 - The deduction is made, under the terms of article 83 of the IRC Code, in the assessment relating to the taxation period mentioned in the preceding number.

3 - Expenses which, due to insufficiency of tax, cannot be deducted in the financial year in which they were realized may be deducted up to the 6th immediate financial year.

Article 4, nos. 1, 3 and 4, of SIFIDE in the wording of Law no. 55-A/2010 establishes the following, in what is relevant here.

Article 4

Scope of the Deduction

1 - IRC taxable persons resident in Portuguese territory who engage, as a principal or not, in an activity of an agricultural, industrial, commercial and services nature and non-residents with a permanent establishment in that territory can deduct from the amount calculated under the terms of article 90 of the IRC Code, and up to its extent, the value corresponding to expenses with research and development, in the part that has not been the subject of financial participation by the State as a grant, realized in the taxation periods from 1 January 2011 to 31 December 2015, in a double percentage:

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

b) Incremental rate - 50% of the increase in expenses realized in that period in relation to the simple arithmetic average of the two preceding financial years, up to the limit of (euro) 1,500,000.

(...)

3 - The deduction is made, under the terms of article 90 of the IRC Code, in the assessment relating to the taxation period mentioned in the preceding number.

4 - Expenses which, due to insufficiency of tax, cannot be deducted in the financial year in which they were realized can be deducted up to the sixth immediate financial year.

(...)

In the case at hand, the Tax and Customs Authority did not question that the Claimant meets the subjective and objective requirements to be able to benefit from SIFIDE, having denied the administrative complaint on the understanding that the expenses in question cannot be deducted from the amounts paid as autonomous taxation, as the deduction can only be made from the IRC tax resulting from the application of the IRC rate to taxable profit.

As stated, article 90 of the CIRC also refers to the assessment of autonomous taxation.

And, as was also said, there is no legal support for asserting that, in the eventuality of having to make several calculations in a statement to determine IRC, more than one assessment is made.

The said decrees which approved SIFIDE and SIFIDE II do not state that the credits provided therein are deductible from every and any IRC tax, but rather define the scope of the deduction by referring, in nos. 1 of its article 4, to "the amount calculated under the terms of article 83 of the IRC Code, and up to its extent" and "the amount calculated under the terms of article 90 of the IRC Code, and up to its extent".

No. 2 of article 4 of that first decree and no. 3 of the same article 4 of the second decree confirm that it is to the amount which is calculated under the terms of article 90 of the CIRC that is relevant to carry out the deduction in saying, with the updating resulting from the said renumbering, that "the deduction is made, under the terms of article 90 of the IRC Code, in the assessment relating to the taxation period mentioned in the preceding number".

Thus, by mere declarative interpretation, it is concluded that article 4, no. 1, of SIFIDE II, in establishing the deduction "from the amount calculated under the terms of article 90 of the IRC Code, and up to its extent", implies the deduction from the amount of autonomous taxation which is calculated under the terms of that article 90.

The fact that articles 5 of SIFIDE I and SIFIDE II exclude the benefit when taxable profit is determined by indirect methods and autonomous taxation includes situations in which the aim is indirectly to tax profits (namely, by not giving relevance or discouraging facts capable of reducing them) has no relevance for this purpose, as the concept of "indirect methods" has a precise scope in tax law, which is concretized in article 90 of the LGT (in addition to special norms), referring to means of determining taxable profit, whose use is not provided for in the calculation of the taxable matter of autonomous taxation provided for in article 88 of the CIRC. On the other hand, if it is the need to make use of indirect methods that excludes the possibility of enjoying the benefit, one cannot justify that exclusion in relation to the tax of autonomous taxation, which is determined by direct methods.

On the other hand, the fact that the deductibility of the SIFIDE I and SIFIDE II tax benefit is limited to the tax of article 90 of the CIRC, up to its extent, does not allow concluding that the tax credit is only deductible if there is taxable profit, as what that fact requires is that there be IRC tax, which can exist even without taxable profit of the financial year, namely due to autonomous taxation and other positive components of the tax.

Thus, pointing the literal wording of articles 4 of SIFIDE I and SIFIDE II toward the application of the deduction also to the IRC tax derived from autonomous taxation calculated under the terms of article 90 of the CIRC, only by way of a restrictive interpretation can the application of the tax benefit to the IRC tax provided by autonomous taxation be excluded.

The viability of a restrictive interpretation encounters, from the outset, an obstacle of a general nature, which is that norms creating tax benefits have the nature of exceptional norms, as results from the express wording of article 2, no. 1, of the EBF, therefore, in the absence of a special rule, should be interpreted in their precise terms, as is settled jurisprudence. In the case of tax benefits, the possibility of extensive interpretation is explicitly provided for (article 10 of the EBF), but not of restrictive interpretation, therefore, in general, the tax benefit should not be interpreted with lesser amplitude than that which, in a declarative interpretation, results from the wording of the norm that provides for it.

In any event, as stated, a restrictive interpretation is only justified when "the interpreter arrives at the conclusion that the legislator adopted a text that betrays its thought, insofar as it says more than what it intended to say".

Now, even in relation to autonomous taxation aimed at discouraging expenses, the discouragement of behaviors is justified only by concerns of protecting tax revenue and the tax benefits granted are, by definition, "exceptional character measures instituted for the protection of relevant extrafiscal public interests that are superior to those of the taxation itself which they prevent" (article 2, no. 1, of the EBF).

And, in the case of the tax benefits of SIFIDE I and II, the reasons of an extrafiscal nature that justify their overlap with tax revenues are, from a legislative perspective, of enormous importance, as it is understood that the capacity for research and development is a decisive factor for the competitiveness of companies and the country, as well as of productivity and long-term economic growth, which is stated with clarity in the reasoning of Proposal no. 5/X and in the Report of the State Budget for 2011:

Proposal no. 5/X

The capacity for research and development (R&D) of companies is a decisive factor not only of their own assertion as competitive structures, but also of productivity and long-term economic growth, a fact which, moreover, is expressly recognized in the Program of the XVII Government, as well as in recent international reports, namely in the conclusions of the report of the Organisation for Economic Co-operation and Development (OECD) "Tax Incentives for Research and Development", 2003, and in the report of the European Commission on "Monitoring Industrial Research", 2004.

(...)

It is therefore important to restore, as provided for in the Government Program, the fiscal incentives for the promotion of business R&D in cooperation with Universities and other research Institutions, which will have a fundamental role in the implementation of the Technological Plan. The target set, of tripling R&D activities by companies working in Portugal, is only possible with increased public support for companies that effectively want to bet on scientific and technological innovation as the central axis of their competitiveness strategies. Support in the form of a tax incentive will have increasing importance, not only because it is a faster way for companies wishing to intensify their investments in an organized and continuous manner, but also because it allows leveraging the effects of financial support. In the financial support measures for R&D in consortium between companies and research institutions of QCA 3 (POCTI and POSI) a component of reimbursable support was introduced, which represents a significant step in the involvement of companies in the results of projects. The restoration of SIFIDE, by allowing deduction of part of the reimbursements to be made to the financing entities, is a fair reward for an involvement that is to be increasing.

II.2.2.4.4. System of Fiscal Incentives in Research and Business Development II (SIFIDE)

Given that one of the assets of competitiveness in Portugal passes through the bet on technological capacity, in scientific employment and in the conditions of assertion in the European space, the Proposed State Budget for 2011 proposes to renew SIFIDE (System of Fiscal Incentives in Research and Business Development), now in the version SIFIDE II, to be in force in the periods 2011 to 2015, enabling the deduction from the IRC tax for companies that bet on R&D (capacity for research and development).

Given the positive balance of fiscal incentives to business R&D, and also considering the evolution of the support system in other countries, it was decided to revise and reintroduce for five more taxation periods this support system. The R&D of companies is a decisive factor not only of their own assertion as competitive structures, but also of productivity and long-term economic growth, a fact which, moreover, is expressly recognized in the Program of the XVIII Government, as well as in several recent international reports.

It is in this context that, in the international panorama, the OECD has considered since 2001 Portugal as one of the three countries with the most significant advance in business R&D. Being that the current national system, compared to other systems using deduction from the tax and the distinction between base rate and incremental rate, is one of the most attractive and competitive.

As research and development of companies is "a decisive factor not only of their own assertion as competitive structures, but also of productivity and long-term economic growth", it is understood that preference has been given to the incentive to invest in technological capacity, in scientific employment and in the conditions for assertion in the European space, which, in the long term, lead to obtaining higher tax revenues.

The importance which, from a legislative perspective, was recognized for this tax benefit provided for in SIFIDE I and SIFIDE II, is decisively confirmed by the fact that it is indicated as being especially excluded from the general limit to the relevance of tax benefits in IRC, which is indicated in article 92 of the CIRC (to which corresponds article 86, in the wording prior to the renumbering carried out by Decree-Law no. 159/2009, of 13 July).

Therefore, it is safe to say that we are faced with tax benefits whose justification is legislatively considered more relevant than the obtaining of tax revenues, inferring from that article 92 (previous article 86) that the legislative intention to encourage the investments in research and development provided for in SIFIDE I and SIFIDE II is so firm that it goes to the point of not even establishing any limit to the deductibility of the IRC tax, despite that this tax regime, from 2010 onwards, was created and applied in a period of notorious difficulties in public finances.

Thus, there is no legal ground, namely in light of the legislative intention which it is possible to detect, to, on the basis of a restrictive interpretation, exclude the deductibility of the SIFIDE I and SIFIDE II tax benefit from the tax of autonomous taxation which results directly from the wording of article 4, no. 1, of the respective decree, combined with article 90 of the CIRC.

On the other hand, the eventual limitation of the application of the tax benefit to companies that presented taxable profit would amount to a very strong restriction of its field of application, already as, as is a public fact, a large part of companies, in the periods of validity of SIFIDE I and SIFIDE II, especially from the aggravation of the economic crisis in 2008, presented tax losses, although paid IRC through other means.

In fact, according to statistics published by the Tax Authority and Customs Authority, in the year 2011, more than half of the IRC statements presented negative net value and in the taxation period 2011 only 26% of taxable persons presented Assessed IRC (Table 7), and about 71% of taxable persons made IRC payments (Table 8), through the Special Payment on Account, or other positive components of the tax (Autonomous Taxation, Surtax, State Surtax, IRC from previous taxation periods, etc.).

Therefore, the applicability of the tax benefit to companies which, although they presented tax losses, paid IRC, including as title of autonomous taxation, greatly expanded the number of companies potentially beneficiaries and, consequently, is more compatible with the legislative intention underlying SIFIDE I and SIFIDE II than that defended by the Tax Authority and Customs Authority.

This is, therefore, the manifestly most correct solution and which, for being so, must be presumed to have been legislatively enshrined (article 9, no. 3, of the Civil Code).

On the other hand, as stated, one must not forget that autonomous taxation aim to protect or increase tax revenues and that the tax benefits granted are, by definition, "exceptional character measures instituted for the protection of relevant extrafiscal public interests that are superior to those of the taxation itself which they prevent" (article 2, no. 1, of the EBF).

That is, in the case at hand, by establishing a tax benefit by deduction from IRC tax, the legislator chose to dispense with the tax revenue which that tax could provide, to the extent of the granting of the tax benefit. For this weighting relative to the interests at issue (tax revenue versus strong stimulus to investment) it is indifferent that that revenue comes from calculations made on the basis of article 87 or article 88 of the CIRC. In fact, whatever the form of calculation of that tax revenue, one is faced with money whose collection the legislator considered to be less important than the pursuit of the referred economic purpose.

Of the two alternatives that were available to the legislator regarding the incentive to the investments provided for in SIFIDE I and SIFIDE II, which were, on the one hand, to keep intact the revenues from IRC (including those from autonomous taxation) and not to see the investment incentivized and, on the other hand, to carry out that incentive with loss of IRC revenues, the weighting which necessarily underlies SIFIDE I and SIFIDE II is that of the choice for the creation of the incentive with detriment to the revenues. And, naturally, being the creation of the investment incentive preferable, from a legislative perspective, to the collection of revenues, it is not seen how it can be relevant that the IRC revenues which are lost to carry out the incentive come from the general taxation of IRC provided for in no. 1 of article 87 or from taxation at special rates provided for in nos. 4 to 6 of the same article, or from autonomous taxation provided for in article 88: in all cases, the alternative is the same between creation of the incentive and collection of IRC revenues and the relative weighting which can be made of the conflicting interests is identical, whatever the forms of determining the amount of IRC of which one dispenses to create the incentive.

And, in the case of the SIFIDE I and SIFIDE II tax benefit, the reasons of an extrafiscal nature referred to legislatively that justify the incentive with loss of revenue are very strong, as it is considered that the incentivized investments are a decisive factor in the country's future competitiveness, which is fundamental for the very increase of tax revenues.

Therefore, it is safe to say that we are faced with a tax benefit whose justification is legislatively considered more relevant than the obtaining of tax revenues from IRC, whatever the basis of its calculation, as what is always at issue is dispensing with or not a certain amount of money to create an investment incentive.

In this context, the nature of autonomous taxation and the solutions legislatively adopted, in general, in relation to them, have no relevance for the assessment of this question, as this must be assessed in light of the specific interests that are in conflict in its weighting.

In fact, what is at issue is, exclusively, determining the scope of SIFIDE I and SIFIDE II, which establishes a regime of an exceptional nature, which aimed to pursue certain public interests, and not to contribute to the decision of any conceptual question about the nature of autonomous taxation, a matter on which neither in the text of the law nor in the preparatory works is there the slightest legislative concern seen.

For the same reason that what is at issue is to interpret the scope of the decree of a special nature which is SIFIDE I and SIFIDE II, no relevance can be attributed, for this purpose, to the provision of no. 21 of article 88 of the CIRC, added by Law no. 7-A/2016, of 30 March, in the part in which it states that no "deductions are made to the overall amount calculated", despite the purported interpretive nature attributed to it (which implies its unconstitutionality, by retroactivity prejudicial to taxpayers, as understood by the Constitutional Court in Decision no. 267/2017, of 31-05-2017).

In fact, there is no sign, neither in Law no. 7-A/2016, nor in the Report of the Budget for 2016, nor in its discussion, that with the addition to article 88 of the CIRC of a general provision prohibiting deductions from the overall amount calculated of autonomous taxation, it was intended to restrictively interpret the expression "deduce from the amount calculated under the terms of article 90 of the IRC Code" which appears in special provisions of separate decrees, such as SIFIDE I and SIFIDE II.

And,