CAAD 455/2018-T: IRC Autonomous Taxation, Payments on Account & Tax Collection Deduction Rules

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Counselor Jorge Lopes de Sousa (arbitrator-president, appointed by the other Arbitrators), Dr. Filomena Salgado de Oliveira and Dr. José Rodrigo de Castro, appointed by the Claimant and the Defendant, respectively, to form the Arbitral Tribunal, constituted on 03-12-2018, agree as follows:

1. Report

A..., S.A., hereinafter referred to only as "A..." or "Claimant", with registered office at Street ... no. ..., ...-... ..., ..., holder of the Collective Person Identification Number (NIPC) ..., registered in the competent Commercial Registry office under the same number (hereinafter referred to as "Claimant") has, pursuant to Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), requested the constitution of an Arbitral Tribunal.

The Claimant requests:

• The annulment of the decision rejecting the request for revision of the tax act no. ...2017...;

• The partial annulment of the Corporate Income Tax (IRC) assessment act no. 2014...;

• That reimbursement of the sum of €54,735.31 be ordered as title of tax paid unduly in the tax period of 2013, relating to autonomous taxation paid in excess;

• Condemnation of the Tax and Customs Authority to payment of compensatory interest.

The Defendant is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 14-09-2018.

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

On 12-11-2018 the parties were duly notified of this appointment and did not manifest intention to refuse the appointment of the arbitrators, pursuant to the combined articles 11, subsection 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision of paragraph c) of article 11, subsection 1 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 03-12-2018.

The Tax and Customs Authority responded, raising exceptions of incompetence of the Arbitral Tribunal on the grounds that the request for arbitral pronouncement was submitted following a request for official revision and to appreciate the request for condemnation to payment of a sum, and defending the unfoundedness of the request.

By order of 03-07-2018 the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the proceedings continue with simultaneous written pleadings.

The Parties submitted pleadings.

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

The Parties are duly represented and have judicial personality and capacity, are legitimate and are represented (articles 4 and 10, subsection 2, of the same diploma and article 1 of Order no. 112-A/2011, of 22 March).

The proceedings are not affected by nullities.

It is important to first address the question of incompetence raised by the Tax and Customs Authority.

2. Matters of Fact

2.1. Proven Facts

• The Claimant is a Portuguese legal entity, whose principal corporate purpose consists of the manufacture of other components and accessories for motor vehicles;

• The Claimant is subject to the general regime of taxation under Corporate Income Tax and its tax period coincides with the calendar year;

• The Claimant has its tax situation regularized;

• On 07-05-2014, the Claimant submitted Model 22 of Corporate Income Tax for the tax period of 2013, which was identified with code ..., in which a tax loss of €2,680,911.66 (two million, six hundred and eighty thousand, nine hundred and eleven euros and sixty-six cents) was determined and a total amount of autonomous taxation of €54,735.31 (fifty-four thousand, seven hundred and thirty-five euros and thirty-one cents) (document no. 2 attached to the request for arbitral pronouncement, the content of which is considered reproduced);

• The Claimant did not deduct any amount relating to special payments on account in field 356 of the aforementioned declaration;

• As at 31-12-2013, the Claimant had a balance of special payments on account to be deducted in the amount of €290,954.63 (two hundred and ninety thousand, nine hundred and fifty-four euros and sixty-three cents), as set out in the table that follows:

(document no. 6 attached to the request for arbitral pronouncement, the content of which is considered reproduced)

• On 28-12-2017, the Claimant submitted a request for revision of the self-assessment effected with the aforementioned Model 22 declaration, requesting its annulment insofar as special payments on account were not deducted from the collection of autonomous taxation, requesting reimbursement of the sum of €54,736.31 (document no. 3 attached to the request for arbitral pronouncement, the content of which is considered reproduced);

• The aforementioned revision request was rejected (document no. 1 attached to the request for arbitral pronouncement, the content of which is considered reproduced);

• The rejection decision manifests agreement with an opinion in which, among other things, the following is stated:

2 - Opinion

2.1 - It was not apparent that, on the same grounds, a Gracious Complaint had been filed (Art.68° et seq. of CPPT), or even Judicial Challenge (Art.99° et seq. of CPPT).

2.2 - The company / claimant in question [A..., S.A. (NIF:...)], has legitimacy to submit the Revision Request, now under analysis, pursuant to the provisions of Art.9°, of CPPT and Art. 65°, of LGT.

2.3 - Now as to the legality and timeliness of the same / present Revision Request [framed by the company in question (recall), in n°1 Art.78º, of LGT, more specifically on the grounds of "Error Attributable to Services" (see p.f. point 1.1, of this opinion)], we must set out the following:

2.3.1 - Art.78°, n°1, of LGT, provides that Revision of Tax Acts, by the entity that performed them, may be carried out, at the initiative of the taxpayer, within the Gracious Complaint Period and on the grounds of any "Illegality", or may be carried out, at the initiative of the Tax / Fiscal Administration (even if at the request of the taxpayer), within 4 years after assessment, or at any time, if the tax is not paid, on the grounds of "Error Attributable to Services", provided that:

2.3.1.1 - Taking into account the position of AT, in similar situations, the one being analyzed [position of AT to which (as is known), this Service is bound], we do not perceive, regarding the Assessment (and completion), of the aforementioned D.R. "IRC/M.22-2013" (moreover, currently in force), relating to the company / claimant in question (repeated: "...", submitted on 07/05/2014), any "illegality", or even "Error Attributable to Services" (contrary to what was invoked / alleged, by the company / claimant in question), let us see:

B.1 - For AT, the collection from autonomous taxation, differs from the remaining collection of IRC, to the extent that the former ("collection from autonomous taxation"), pursues several quite specific objectives, such as the purpose of preventing tax evasion and fraud practices (whether through confidential or undocumented expenses, or through payments made to entities located in jurisdictions with privileged tax regimes, or by concealing / covering up payments / attributions of benefits / additional remuneration, in the form of representation expenses, or through the attribution of vehicles to workers and/or members of corporate bodies);

B.2 - For AT, the "PECs - IRC/2013", are only deductible from the collection of IRC/2013, based on the taxable income, which corresponds to the profit / income of the year, subject (in turn), to the "general rates" (let us say), of Art.87°, of CIRC/2013 [in opposition, therefore, to the collection of IRC/2013, based on the amounts of expenses / charges / payments, subject to "Autonomous Taxation Rates" (Art.88° of CIRC/2013), as these are a sort of separate reality, due to their very specific purposes (as already referred to)];

B.3 - For AT, the provision of Art.12", of CIRC/2013 ("Companies subject to the fiscal transparency regime are not taxed on IRC, except for autonomous taxation"), as it were reinforces the aforementioned specific / separate character of the collection of autonomous taxation, which [as moreover the name itself indicates, as well as the respective representation / location indicates, at the level of Table 10 ("Tax Calculation"), of D.R. "IRC/M.22-2013" (representation / location that, moreover, is peacefully accepted, at least in a general way, by all users of the same D.R. M.22)], is not susceptible to any type of deduction;

B.4 - For AT, therefore, the rule contained in the aforementioned, n° 21, of Art. 88°, of CIRC/2016 ("for autonomous taxation of IRC, no deductions are made"), was already (as referred to), at least in a generic form (despite not unanimous), accepted and adopted, when the previous wording, of the same Art.88°, of CIRC was in force [namely, when its respective wording was in force, during the year under analysis (2013)], so it is not a question of any "new rule" (i.e., in force only for the year 2016 and onwards), but rather of an interpretive rule / law, that is, with retroactive character (moreover, constitutionally permitted, in situations such as the one described here), and that (also add):

B.4.1 - Art.135°, of the State Budget Law for 2016 (Law n°7-A/2016, of 30/03), by qualifying as "Interpretive Law" [therefore with retroactive character, constitutionally permitted (as already referred)], the aforementioned n° 21, of Art. 88°, of CIRC/2016, does nothing more than to cement / consolidate, an understanding that was fundamentally already previously adopted and accepted, at least in a generic form (as already referred);

B.5 - AT further reinforces that:

B.5.1 - Although in tax matters, the constitutional principles of legality and prohibition of retroactivity of law [provided for (as already referred) in Art. 103°, of CRP], impose some restrictions on the legislature, there is no generic constitutional prohibition of interpretive tax laws [therefore, with retroactive character (as already referred)];

B.5.2 - The constitutional admissibility of interpretive laws in tax matters (as well as in relation to any norms of a fiscal nature), should be assessed based on the matters to which they relate and the respective normative content, since the constitutional prohibition of retroactivity of tax law is limited (only) to the matters of incidence (objective, subjective, temporal and territorial) of the tax [matters which (moreover) do not appear to be properly in question, in this analysis];

B.5.3 - Since the creation of the legal-fiscal figure of "Autonomous Taxation", in the early 1990s, through its legislative evolution, it was always peaceful that "Autonomous Taxation", did not admit (nor do they admit), any deduction, and (emphasize), the aforementioned Art.135°, of the State Budget Law/2016, by qualifying as "Interpretive Law" (therefore, with retroactive character), the aforementioned n°21, of Art.88°, of CIRC/2016, does not depart (the same Art. 135°, of the State Budget Law/2016), from the solutions, that were already being firmly established, both by Law and by the legal-tax practice, so the content of the same/aforementioned, n°21, of Art 88°, of CIRC/2016, cannot be classified / qualified, in any way, as an "innovative solution", and it should also be added:

B.5.3.1 - It is unquestionable that both those who judge and those who interpret, in the face of "previous legislation" [therefore, prior to 2016 (well understood)], could not feel authorized to adopt another solution, other than the solution / rule, recommended by the content, of the aforementioned, n° 21, of Art. 88°, of CIRC/2016;

2.3.1.2 - Thus, that is, taking into account what has been stated up to here (i.e., in point 2.3.1.1 and its sub-points, of this opinion), we understand that the same / aforementioned provision, in n°1, of Art. 78°, of LGT, cannot be invoked, by the company in question, in the Revision Request, now under analysis.

3 - Conclusion

3.1 - In this way, it is our understanding to propose rejection of this Revision Request, to the extent that it does not fall within the invoked (by the taxpayer), n° 1 of Art. 78°, of LGT.

3.2 - It is further proposed that the same company in question [A..., S.A. (NIF:...)], be notified of this Opinion / Draft Rejection, in order to exercise (if it so wishes, naturally), its respective Right of Hearing, as provided for in paragraph b), of n°1, of Art.60°, of LGT.

• On 14-09-2018, the Claimant submitted the request for arbitral pronouncement which gave rise to the present proceedings.

2.2. Unproven Facts

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

2.3. Justification for the Establishment of Matters of Fact

The proven facts are based on documents submitted by the Claimant and statements by the Claimant that are not contested by the Tax and Customs Authority.

There is no controversy regarding matters of fact.

3. Question of the Arbitral Tribunal's Incompetence to Appreciate Requests for Declaration of Illegality of Self-Assessment Acts Preceded by Official Revision

The Tax and Customs Authority argues, in summary, that the request for arbitral pronouncement sub judice is formulated following the rejection of a request for official revision of a self-assessment act for corporate income tax (IRC) relating to the year 2013, formulated on 28-12-2017, when the gracious complaint period referred to in article 131 of the Code of Procedural and Tax Procedure (CPPT) had already elapsed, and that article 2, paragraph a) of Order 112-A/2011, of 22 March, through which the Tax and Customs Authority became bound by arbitral jurisdiction, excludes claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to administrative remedies pursuant to articles 131 to 133 of the CPPT.

The Claimant responded, arguing that the request for official revision should be considered equivalent to a gracious complaint, as it provides the opportunity for the Tax and Customs Authority to appreciate the legality of the self-assessment before the matter is submitted to the appreciation of the Arbitral Tribunal.

The competence of arbitral tribunals operating within CAAD is, first and foremost, limited to the matters indicated in article 2, subsection 1, of Decree-Law no. 10/2011, of 20 January (RJAT).

In a second instance, the competence of arbitral tribunals operating within CAAD is also limited by the terms on which the Tax Administration became bound to that jurisdiction by Order no. 112-A/2011, of 22 March, since article 4 of the RJAT establishes that «the binding of the tax administration to the jurisdiction of tribunals constituted pursuant to this law depends on an order of the Government members responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered».

In light of this second limitation on the competence of arbitral tribunals operating within CAAD, the resolution of the question of competence depends essentially on the terms of this binding, since, even if one is in a situation that can be framed under that article 2 of the RJAT, if it is not covered by the binding, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be excluded.

In paragraph a) of article 2 of this Order no. 112-A/2011, there are expressly excluded from the scope of the Tax Administration's binding to the jurisdiction of arbitral tribunals operating within CAAD the «claims relating to the declaration of illegality of self-assessment acts, withholding tax acts and payment on account acts that have not been preceded by recourse to administrative remedies pursuant to articles 131 to 133 of the Code of Procedural and Tax Procedure».

The express reference to the preceding requirement of «recourse to administrative remedies pursuant to articles 131 to 133 of the Code of Procedural and Tax Procedure» must be interpreted as reporting to cases where such recourse is mandatory, through the gracious complaint, which is the administrative remedy indicated in those articles 131 to 133 of the CPPT, to whose terms reference is made. In fact, first of all, it would not be understood that, where administrative challenge is not necessary «when its grounds are exclusively a matter of law and the self-assessment was carried out in accordance with generic guidelines issued by the tax administration» (article 131, subsection 3, of the CPPT, applicable to withholding tax cases, by virtue of the provision in subsection 6 of article 132 of the same Code), the arbitral jurisdiction would be excluded because such administrative challenge, which is understood to be unnecessary, was not carried out.

In the case at hand, annulment of an assessment following self-assessment is requested, following rejection of a request for revision of a tax act made after the two-year period provided for in article 132 of the CPPT had elapsed.

Thus, it is important, first and foremost, to clarify whether the declaration of illegality of acts rejecting requests for revision of the tax act, provided for in article 78 of the LGT, is included in the competences attributed to arbitral tribunals operating within CAAD by article 2 of the RJAT.

In fact, in this article 2 there is no express reference to these acts, contrary to what occurs with the legislative authorization on which the Government based itself to approve the RJAT, which refers to «requests for revision of tax acts» and «administrative acts that entail appreciation of the legality of assessment acts».

However, the formula «declaration of illegality of tax assessment acts, self-assessment acts, withholding tax acts and payment on account acts», used in paragraph a) of subsection 1 of article 2 of the RJAT does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases where an act of one of those types is directly challenged. In fact, the illegality of assessment acts can be jurisdictionally declared as a corollary of the illegality of a second-degree act that confirms an assessment act, incorporating its illegality.

The inclusion in the competences of arbitral tribunals operating within CAAD of cases in which the declaration of illegality of the acts indicated therein is effected through the declaration of illegality of second-degree acts, which are the immediate object of the challenging claim, results with certainty from the reference made in that rule to self-assessment acts, withholding tax acts and payment on account acts, which are expressly referred to as included among the competences of arbitral tribunals. In fact, regarding these acts, gracious complaint is imposed as a rule necessary for challenge, in articles 131 to 133 of the CPPT, so that, in these cases, the immediate object of the challenging proceedings is, as a rule, the second-degree act that appreciates the legality of the assessment act, an act which, if it confirms it, must be annulled in order to obtain the declaration of illegality of the assessment act. The reference made in paragraph a) of subsection 1 of article 10 of the RJAT to subsection 2 of article 102 of the CPPT, which provides for the challenge of acts rejecting gracious complaints, removes any doubts that the competences of arbitral tribunals operating within CAAD cover cases in which the declaration of illegality of the acts referred to in paragraph a) of that article 2 of the RJAT must be obtained following the declaration of the illegality of second-degree acts.

Moreover, it was precisely in this sense that the Government, in Order no. 112-A/2011, of 22 March, interpreted these competences of arbitral tribunals operating within CAAD, by excluding from the scope of these competences the «claims relating to the declaration of illegality of self-assessment acts, withholding tax acts and payment on account acts that have not been preceded by recourse to administrative remedies pursuant to articles 131 to 133 of the Code of Procedural and Tax Procedure», which has the effect of restricting its binding to cases where recourse to administrative remedies was used.

Having obtained the conclusion that the formula used in paragraph a) of subsection 1 of article 2 of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second-degree act, it will also cover cases in which the second-degree act is the rejection of a request for revision of the tax act, since there is no reason to restrict it, especially since, in cases where the revision request is made within the gracious complaint period, it should be equated with a gracious complaint.

The same applies to the decision on hierarchical appeal, expressly indicated in paragraph a) of subsection 1 of article 10 of the RJAT as the initial term of the period for submission of a request for constitution of the arbitral tribunal.

The express reference to articles 131 to 133 of the CPPT made in article 2 of Order no. 112-A/2011 cannot have the decisive scope of preventing the possibility of appreciating claims of illegality of acts rejecting requests for official revision of acts of the types referred to therein.

In fact, the exclusively literal interpretation defended by the Tax and Customs Authority in the present proceedings cannot be accepted, since in the interpretation of tax norms the general rules and principles of interpretation and application of laws are observed (article 11, subsection 1, of the LGT) and article 9, subsection 1, expressly prohibits interpretations exclusively based on the literal wording of the norms by providing that «interpretation should not be limited to the letter of the law», but rather should «reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied».

As to the correspondence between interpretation and the letter of the law, it is sufficient «a minimum of verbal correspondence, even if imperfectly expressed» (article 9, subsection 3, of the Civil Code) which will only prevent interpretations that cannot be reconciled with the letter of the law in any way, even acknowledging therein imperfections in the expression of legislative intent.

For this reason, the letter of the law is not an obstacle to declarative interpretation, which explains the scope of the literal wording, nor even extensive interpretation, when it can be concluded that the legislator said less than what, in coherence, it intended to say, that is, when it said imperfectly what it intended to say. In extensive interpretation «it is the valuation of the norm itself (its "spirit") that leads to the discovery of the need to extend the text thereof to the hypothesis that it does not cover», «the expansive force of the legislative valuation itself is capable of leading the provision of the norm to cover hypotheses of the same type not covered by the text».

Extensive interpretation, thus, is imposed by the evaluative and axiological coherence of the legal system, erected by article 9, subsection 1, of the Civil Code as a primary interpretive criterion through the imposition of observance of the principle of unity of the legal system.

It is manifest that the scope of the requirement for prior gracious complaint, necessary to open the contentious avenue of challenge of acts of the types referred to in articles 131 to 133 of the CPPT, has as its sole justification the fact that regarding this type of acts there is no statement by the Tax Administration on the legality of the legal situation created with the act, a position that could even be favorable to the taxpayer, avoiding the need for recourse to the contentious avenue.

In fact, besides not perceiving any other justification for this requirement, the fact that gracious complaint is necessary for contentious challenge of withholding tax acts and payment on account acts (in articles 132, subsection 3, and 133, subsection 2, of the CPPT), which have in common with self-assessment acts the circumstance that there is also no statement by the Tax Administration on the legality of the acts, confirms that this is the raison d'être of that necessary gracious complaint.

Another clear confirmation that this is the raison d'être of the requirement for necessary gracious complaint is found in subsection 3 of article 131 of the CPPT, by establishing that «without prejudice to the provisions of previous subsections, when its grounds are exclusively a matter of law and the self-assessment has been carried out in accordance with generic guidelines issued by the tax administration, the period for challenge does not depend on prior complaint, and the challenge must be presented within the period of subsection 1 of article 102», a regime which is applicable to withholding tax acts by referral of subsection 6 of article 132 of the CPPT. In fact, in situations of this type, there was a prior generic pronouncement by the Tax Administration on the legality of the legal situation created with the self-assessment or withholding tax act and it is this fact that explains why the necessary gracious complaint ceases to be required.

Now, in cases where a request for official revision of a self-assessment or withholding tax act is formulated, the Tax Administration is provided, with this request, an opportunity to pronounce itself on the merits of the claim of the taxpayer before the latter resorts to the jurisdictional avenue, so that, in coherence with the solutions adopted in subsections 1 and 3 of article 131 and 3 and 6 of article 132 of the CPPT, it cannot be required that, cumulatively with the possibility of administrative appreciation within the scope of this official revision procedure, a new administrative appreciation through gracious complaint be required.

On the other hand, it is unquestionable that the legislator did not intend to prevent taxpayers from formulating requests for official revision in cases of self-assessment acts, since these were expressly referred to in subsection 2 of article 78 of the LGT. And to self-assessment acts, performed by the taxpayer, are equivalent, by mere declarative interpretation, withholding tax acts which are performed by the withholding party, who is considered a taxpayer (article 18, subsection 3, of the LGT).

In this context, the law expressly allowing taxpayers to opt for gracious complaint or official revision of self-assessment and withholding tax acts and the request for official revision being formulated within the gracious complaint period being perfectly equivalent to a gracious complaint, as referred to, there can be no reason whatsoever that could explain that a taxpayer who has opted for revision of the tax act instead of gracious complaint cannot access the arbitral avenue.

For this reason, it is to be concluded that the Government members who issued Order no. 112-A/2011, by making reference to articles 131 to 133 of the CPPT, expressed imperfectly what they intended, for, intending to impose prior administrative appreciation to the contentious challenge of acts of the types referred to, they ended up including reference to articles 131 to 133 that do not exhaust the possibilities of administrative appreciation of these acts.

Moreover, it should be noted that this interpretation, not being limited to the literal wording, is particularly justified in the case of paragraph a) of article 2 of Order no. 112-A/2011, as its defects are evident: one is to associate the comprehensive formula «recourse to administrative remedies» (which references, besides gracious complaint, hierarchical appeal and revision of the tax act) with the «expression pursuant to articles 131 to 133 of the Code of Procedural and Tax Procedure», which has potential restrictive scope to gracious complaint; another is to use the formula «preceded» by recourse to administrative remedies, reporting to «claims relating to the declaration of illegality of acts», which obviously would be much better reconciled with the feminine word «preceded» (in Portuguese: "precedidas" rather than "precedidos").

For this reason, beyond the general prohibition of interpretations limited to the letter of the law that is in article 9, subsection 1, of the Civil Code, in the specific case of paragraph a) of article 2 of Order no. 112-A/2011 there is a special reason for not justifying great enthusiasm for a literal interpretation, which is the fact and the wording of that rule being manifestly defective.

Furthermore, by providing revision of the tax act the possibility of appreciation of the claim of the taxpayer before access to the contentious avenue that is intended to be achieved with necessary administrative challenge, the most accurate solution, because it is the most coherent with the legislative design of «strengthening effective and actual protection of rights and legally protected interests of taxpayers» manifested in subsection 2 of article 124 of Law no. 3-B/2010, of 28 April, is the admissibility of the arbitral avenue to appreciate the legality of assessment acts previously appreciated in a revision procedure.

And, because it is the most accurate solution, it must be presumed to have been normatively adopted (article 9, subsection 3, of the Civil Code).

On the other hand, containing that paragraph a) of article 2 of Order no. 112-A/2011 an imperfect formula, but which contains a comprehensive expression «recourse to administrative remedies», which potentially also references the revision of the tax act, there is found in the text the minimum of verbal correspondence, although imperfectly expressed, required by that subsection 3 of article 9 for the viability of the adoption of the interpretation that enshrines the most accurate solution.

It is to be concluded, thus, that article 2, paragraph a) of Order no. 112-A/2011, duly interpreted on the basis of the criteria for interpretation of law provided for in article 9 of the Civil Code and applicable to substantive and procedural tax norms, by virtue of the provision in article 11, subsection 1, of the LGT, enables the submission of requests for arbitral pronouncement regarding withholding tax acts that have been preceded by a request for official revision.

This interpretation is not incompatible with the Constitution.

In fact, the Constitution does not require that the interpretation of normative instruments be limited to the literal wording and, in the case at hand, as has been explained, duly interpreted the norms of article 2, subsection 1, of the RJAT and of article 2 of Order no. 112-A/2011, of 22 March, it is concluded that the binding of the Tax and Customs Authority to arbitral tribunals operating within CAAD covers cases in which self-assessment acts were preceded by requests for official revision. For this reason, the interpretation made did not increase the binding of the Tax and Customs Authority in relation to what is regulated, but rather defined exactly its terms, which result from the regulatory instrument.

On the other hand, by interpreting and applying legal norms, this Arbitral Tribunal is performing the function that is constitutionally assigned to it (articles 202, subsection 1, 203 and 209, subsection 2, of the CRP), so there is no way of perceiving how there can be a violation of the principles of separation of powers, the rule of law and legality, since what has been decided by this tribunal evidences precisely the perfect realization of these principles: the National Assembly authorized the Government to legislate (article 124 of Law no. 3-B/2010, of 28 April); the Government, in the exercise of legislative powers, issued the RJAT; the Administration, through two Government members, issued Order no. 112-A/2011, of 22 March; the Arbitral Tribunal interpreted and applied the aforementioned normative instruments.

On the other hand, as regards access to judicial protection, it is perfectly guaranteed by this avenue, since the matter is placed before an Arbitral Tribunal, an organ absolutely independent of both Parties, which gave them the opportunity to argue what they deemed appropriate for the defense of their positions on the question of incompetence, which weighed their reasons and applied its interpretation of the applicable legal regime in a thoroughly reasoned decision: it is precisely this that constitutes the essence of the right of access to justice, the possibility of obtaining a decision from an independent organ that,

This exception of incompetence derived from not having submitted a gracious complaint of the withholding tax acts is thus without merit.

Essentially in this sense, regarding self-assessment acts, the judgment of the Central Administrative Court South of 27-04-2017, handed down in case no. 08599/15, can be seen.

4. Question of Incompetence to Appreciate the Request for Condemnation to Reimbursement of the Sum of €54,735.31 as Title of Tax Paid Unduly

In accordance with the provision of paragraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the Tax Administration from the expiration of the period set for appeal or challenge, and this must, in the exact terms of the procedural success of the arbitral decision in favor of the taxpayer and until the expiration of the period set for voluntary execution of sentences of tax judicial tribunals, «restore the situation that would exist if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose», which is in line with the provision of article 100 of the LGT [applicable by virtue of the provision in paragraph a) of subsection 1 of article 29 of the RJAT] which establishes that «the tax administration is obliged, in case of total or partial success of complaint, judicial challenge or appeal in favor of the taxpayer, to immediate and full restoration of the legality of the act or situation that was the subject of the dispute, including the payment of compensatory interest, if applicable, from the expiration of the period for execution of the decision».

Although article 2, subsection 1, paragraphs a) and b), of the RJAT uses the expression «declaration of illegality» to define the competence of arbitral tribunals operating within CAAD, making no reference to condemnatory decisions, it should be understood that the powers that, in judicial challenge proceedings, are attributed to tax tribunals are included in its competences, and this is the interpretation that harmonizes with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it is proclaimed, as the first guideline, that «the tax arbitral process should constitute an alternative procedural means to judicial challenge proceedings and to actions for recognition of a right or legitimate interest in tax matters».

Judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admit condemnation of the Tax Administration to payment of compensatory interest, as can be inferred from article 43, subsection 1, of the LGT, in which it is established that «compensatory interest is due when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due» and article 61, subsection 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to subsection 2 in the original wording), which «if the decision recognizing the right to compensatory interest is judicial, the payment period is counted from the beginning of the voluntary execution period».

Thus, subsection 5 of article 24 of the RJAT, by saying that «payment of interest, regardless of its nature, is due pursuant to the provisions set out in the general tax law and in the Code of Procedural and Tax Procedure», should be understood as allowing recognition of the right to compensatory interest in the arbitral process.

Since payment of compensatory interest depends on an amount to be reimbursed, which is its calculation base, it must be concluded that the competence of arbitral tribunals operating within CAAD covers condemnation to payment of sums unduly paid following annulment of the assessment or self-assessment acts that were the basis for the payment.

This exception is thus without merit.

5. Matters of Law

5.1. 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 given to them by Law no. 2/2014, of 16 January, in force in the year 2014:

Article 89

Competence for Assessment

Assessment of IRC is carried out:

a) By the taxpayer himself, in the declarations referred to in articles 120 and 122;

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

Article 90

Procedure and Form of Assessment

1 - Assessment of IRC is carried out as follows:

a) When assessment is to be carried out by the taxpayer in the declarations referred to in articles 120 and 122, it is based on the taxable income contained therein;

b) In the absence of presentation of the declaration referred to in article 120, assessment is carried out by 30 November of the following year or, in the case provided for in subsection 2 of that article, by the end of the 6th month following the expiration of the period for presentation of the declaration referred to therein and is based on the annual value of the minimum monthly remuneration or, when greater, the totality of the taxable income of the closest year that is determined;

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

2 - To the amount determined in accordance with the previous subsection 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 special payment on account referred to in article 106;

e) That relating to withholding taxes not subject to compensation or reimbursement pursuant to applicable law.

3 – (Repealed)

4 - To the amount determined in accordance with subsection 1, regarding the entities referred to in subsection 4 of article 120, only the deduction relating to withholding taxes when these have the nature of tax on account of IRC is to be made.

5 - The deductions referred to in subsection 2 concerning entities to which the fiscal transparency regime established in article 6 is applicable are attributed to the respective partners or members pursuant to the terms established in subsection 3 of that article and deducted from the amount determined on the basis of the taxable income that has taken into account the attribution provided for in the same article.

6 - When the special regime for taxation of corporate groups is applicable, the deductions referred to in subsection 2 relating to each of the companies are made in the amount determined in relation to the group, pursuant to subsection 1.

7 - From the deductions made in accordance with paragraphs a), b) and c) of subsection 2 no negative value can result.

8 - As regards taxpayers covered by the simplified regime for determination of taxable income, to the amount determined in accordance with subsection 1 only the deductions provided for in paragraphs a) and e) of subsection 2 are to be made.

9 - From the deductions made in accordance with paragraphs a) to d) of subsection 2 no negative value can result.

10 - To the amount determined in accordance with paragraphs b) and c) of subsection 1 only the deductions of which the fiscal administration has knowledge and which can be made pursuant to subsections 2 to 4 are made.

11 - In cases where the provision of paragraph b) of subsection 2 of article 79 is applicable, annual assessments are made on the basis of taxable income determined on a provisional basis, and, in light of the assessment corresponding to the taxable income relating to the entire taxation period, the difference determined is collected or annulled.

12 - The assessment provided for in subsection 1 may be corrected, if applicable, within the period referred to in article 101, collecting or annulling the differences determined.

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

In fact, it is today settled, following numerous arbitral jurisprudence and the positions assumed by the Tax and Customs Authority, that the tax collected on the basis of autonomous taxation provided for in the CIRC has the nature of IRC. Moreover, beyond the jurisprudence, article 23-A, subsection 1, paragraph a), of the CIRC, in the wording of Law no. 2/2014, of 16 January, today leaves no room for any reasonable doubt, corroborating what previously resulted from the literal tenor of article 12 of the same Code.

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

For this reason, that article 90 also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Administration, following the presentation or not of declarations, there being, with force in the year 2014, no other provision that provides for different terms for its assessment.

Thus, in the year 2013, the differences between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are restricted to the determination of the taxable income and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for the IRC based on taxable profit and in article 88 of the CIRC for the IRC based on the taxable income 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 taxable income of IRC.

However, the circumstance that a self-assessment of IRC, carried out pursuant to subsection 1 of article 90, can contain several partial calculations, based on various rates applicable to certain taxable income, does not imply that there is more than one assessment, as results from the very terms of that rule when it refers to «assessment», in the singular, in all cases in which it is «made by the taxpayer in the declarations referred to in articles 120 and 122», being «based on the taxable income contained therein» (whether determined on the basis of the rules of articles 17 et seq. or 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 various calculations of application of rates to certain taxable income, as the same can occur in the situations provided for in subsections 4 to 6 of article 87.

In any case, whatever calculations are to be made, the self-assessment that the taxpayer or the Tax and Customs Authority must make pursuant to articles 89, paragraph a), 90, subsection 1, paragraphs a), b) and c), and 120 or 122, is unitary, and it is on the basis of it that the overall IRC is calculated, whatever the taxable income matters relating to each of the types of taxation underlying it.

Moreover, if this 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 2013, provided for its assessment, which would lead to illegality, by violation of article 103, subsection 3, of the CRP, which requires that the assessment of taxes be made «pursuant to law».

Reference should also be made to the new provision of subsection 21 added to article 88 of the CIRC by Law no. 7-A/2016, of 30 March, regardless of whether or not it can be qualified as truly interpretive, which does not alter this conclusion in any way, as therein it is established, with respect to the form of assessment of autonomous taxation, that it «is carried out pursuant to the terms provided for in article 89 and is based on the values and rates resulting from the provision of the previous subsections». In fact, if it is true that this new provision comes to make explicit how the amounts of autonomous taxation are calculated (which already followed from the text of the various provisions of article 88) and that the competence lies with the taxpayer or the Tax Administration, pursuant to article 89, it is also clear that the need to use the procedure provided for in subsection 1 of article 90 is not removed, particularly in cases provided for in its paragraph c) in which assessment is the responsibility of the Tax and Customs Authority and based «on the elements available to the fiscal administration», which will include the possibility of assessing on the basis of autonomous taxation, if the Tax and Customs Authority has elements proving their assumptions.

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

For this reason, whether before or after Law no. 7-A/2016, of 30 March, and Law no. 114/2017, of 29 December, article 90, subsection 1, of the CIRC is applicable to the assessment of autonomous taxation.

5.2. Applicability of the Deductions Provided for in Subsection 2 of Article 90 of the CIRC to the Collection of IRC Resulting from Autonomous Taxation

For what has been 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, so that, under penalty of unconstitutionality by violation of subsection 3 of article 103, due to assessment not being carried out «pursuant to law», application of the procedure provided for in article 90 of the CIRC had to be made.

Since the collection of IRC, whether resulting from taxable profit or resulting from autonomous taxation, is determined through the assessment procedure provided for in article 90 of the CIRC, the deductions provided for in subsection 2 of the same article are potentially applicable to such collection, which refer to «the amount determined in accordance with the previous subsection», without any distinction regarding the nature of the types of IRC collection that are included in that amount.

For this reason, the literal wording of subsection 2 of article 90 of the CIRC does not result in any obstacle to the application of deductions to the part of the amount determined pursuant to subsection 1 derived from autonomous taxation.

As is referred to in the judgment of the Constitutional Court no. 267/2017, of 31-05-2017, handed down in case no. 466/16, «the autonomy of the taxation in question as to its incidence base, as to the applicable rates and even as to the time of payment, by itself, does not determine – neither logically nor juridically – the irrelevance of the collection obtained with autonomous taxation within the scope of determination of the collection of IRC itself – a matter generally regulated in article 90, subsection 1, of the CIRC –, in particular as to the integration of that into the latter and, consequently, as to the admissibility of consideration of the value of the cited collection for purposes of realization of the deductions legally provided for in article 90, subsection 2, of the CIRC. Such matter, in the absence of a specific norm to the contrary – such as the one that, for example, came to be enshrined in article 88, subsection 21, of the CIRC – is a matter of the legislative configuration of IRC itself, including the relevance or irrelevance, for purposes of determination of the final IRC collection, of the amounts paid as title of autonomous taxation».

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

21 - The assessment of autonomous taxation in IRC is carried out pursuant to the terms provided for in article 89 and is based on the values and rates resulting from the provision of the previous subsections, with no deductions made to the overall amount determined.

In the final part of this provision, the scope of application of the deductions provided for in article 90, subsection 2, of the CIRC to the collection of IRC derived from taxable profit is restricted.

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

21 - The assessment of autonomous taxation in IRC is carried out pursuant to the terms provided for in article 89 and is based on the values and rates resulting from the provision of the previous subsections, with no deductions made to the overall amount determined, even if these deductions result from special legislation.

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

However, the Constitutional Court, in the cited judgment no. 267/2017, already affirmed the unconstitutionality of that article 135 insofar as, by effect of the merely interpretive character attributed to it, it excludes the possibility of deduction from the overall amount resulting from autonomous taxation assessed in a given year for IRC purposes of deductions permitted in fiscal years prior to 2016.

This decision of the Constitutional Court was based on subsection 3 of article 103 of the CRP, which establishes that no one can be obliged to pay taxes of a retroactive nature, from which the Constitutional Court understood to result that «the legislature cannot create taxes of such a nature or introduce in 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 in tax matters, in particular the amount due as title of a certain tax and previously defined in reason of the verification of all relevant facts in light of the law applicable before the establishment of the new legal consequences».

For this reason, in line with this jurisprudence, the constitutionality of the restrictive interpretation of subsection 2 of article 90 of the CIRC, so as to exclude the possibility of deductions from the collection of IRC resulting from autonomous taxation, depends on it being required to have already been made in light of the regime prior to that Law no. 7-A/2016, since it is constitutionally inadmissible the retroactivity unfavorable 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 subsection 21 of article 88 of the CIRC, by excluding the possibility of deductions from the overall amount of autonomous taxation «even if these deductions result from special legislation» clarifies, with an interpretive character (in this part without constitutional problems, as it is a matter of 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 was already being peacefully and repeatedly explained by arbitral jurisprudence.

For this reason, being constitutionally inadmissible, for what the Constitutional Court referred to in the cited judgment, that this new law come to exclude the possibility of deductions admissible in light of the legislation in force until the entry into force of Law no. 7-A/2016, the question that arises, to solve the questions of legality of the self-assessment and subsequent assessment and of the decision on the request for official revision that are raised in the present proceedings, is whether, before this law, the restrictive interpretation that came to be made explicit in it should already be made, should restrictions already be made to the application of the deductions provided for in subsection 2 of article 90 of the CIRC to the part of the collection of IRC resulting from autonomous taxation.

In fact, the fact that the letter of subsection 2 of article 90 points to the application of deductions to the collection resulting from autonomous taxation, that deductibility did not exclude the possibility of restrictive interpretation, if «the interpreter reaches the conclusion that the legislator adopted a text that betrays its intent, to the extent that it says more than what it intended to say. Also here the ratio legis will have a decisive word. The interpreter should not allow itself to be carried away by the apparent scope of the text, but should restrict it so as to make it compatible with the legislative intent, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed as follows: cessante ratione legis cessat eius dispositio (where the raison d'être of the law ends its scope ends)».

It may, however, be ventured the possibility of a restrictive interpretation based on the fact that some autonomous taxation, particularly some of those that have «expenses» or «charges» as their incidence base, aim to discourage certain behaviors of taxpayers capable of affecting the taxable profit, and, consequently, decreasing tax revenue, and its discouraging force will be attenuated with the possibility that the respective collection may be subject to deductions.

However, as was legislatively recognized by the wording given to subsection 21 of article 88 by Law no. 114/2017 (here with interpretive force constitutionally irreproachable in light of article 103, subsection 3, of the CRP), there is special legislation from which result deductions from the collection derived from autonomous taxation, which are necessarily situations in which legislatively preference was given to satisfaction of the interests justifying deductions in relation to those aimed at with autonomous taxation, which occurs with the rules on tax benefits deductible from IRC collection.

On the other hand, the nature of anti-abuse norms, intended to prevent fraud and tax evasion, does not exclude the possibility of deductions from the collection of IRC that with the application of these norms will be determined, which is manifest regarding the collection provided by corrections based on norms of an indisputably anti-abuse nature, such as, for example, those relating to transfer pricing or undercapitalization and also the corrections resulting from application of the general anti-abuse norm provided for in article 38, subsection 2, of the LGT.

Furthermore, it is also evident that the anti-abuse nature of some of the autonomous taxation aimed at discouraging expenses and preventing tax evasion could not serve to justify the non-deduction of tax benefits from all IRC collection resulting from autonomous taxation, since the one provided for in subsection 11 of article 88 of the CIRC does not apply to expenses or charges, but rather to «profits», being a form of complementary or alternative profit taxation in relation to that provided for the generality of income. Furthermore, autonomous taxation provided for in subsection 8 of article 88 does not have underlying any intention of discouraging the performance of the operations it refers to, but rather imposing special evidentiary duties on taxpayers in situations where more favorable taxation of the recipients of expenses can raise questions about the reality and normalcy of operations, since autonomous taxation is excluded «if the taxpayer can prove that they correspond to effectively carried out operations and do not have an abnormal character or an exaggerated amount».

To this is added that, even as regards some autonomous taxation applying to expenses, it would not be compatible with the constitutional principles of proportionality and equality to impose taxation on the grounds of a hypothetical legislative intent to discourage the use of motorcycles for certain activities for which they are indispensable, as occurs 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 in the scope of that discouraging intent the payment itself of the «taxes inciding upon their possession or use», referred to in the final part of subsection 5 of article 88, which should even be coercively ensured by the Tax and Customs Authority, in the case where the taxpayer feels discouraged to effect that payment.

Thus, the understanding that all autonomous taxation aims to tax expenses or discourage or sanction behaviors, which can result from a first cursory analysis, encounters, in a more incisive perception, an incontrovertible 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 this tax in its purest form and closest to its roots as a tax on profit obtained by legal entities. In that sense, autonomous taxation is nothing more than mechanisms assisting the central axis of IRC, which is to tax profits permitting the deduction of expenses in which taxpayers must incur with a view to the realization of taxable income».

As is also referred to in the judgment of CAAD handed down in case no. 59/2014-T, autonomous taxation under IRC should be considered a form of business income taxation:

«The Preamble contained in Bill 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 room for doubt that it is a conscious and intended amplification of the previously existing deviations, as it was understood that they were necessary, in sum, to offset other distortions resulting from significant fraud and tax evasion and thus increase the equity of the distribution of the tax burden among citizens and companies».

(...)

«autonomous taxation directly applying to certain expenses, within taxes that originally applied only to income, are considered deviations of the system of direct income taxation that IRC aimed at, but a value that legislatively was considered to be more relevant than the theoretical coherence of taxes, such as the implementation of tax 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 remains 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 proper to this tax, that do not conflict with its special form of incidence.

Thus, if it is true that autonomous taxation constitutes a different way of imposing taxes on companies, which could be contained in autonomous regulation or be arranged in the Stamp Tax 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 by being an indirect form, but, in the legislative perspective, equitable, simple and efficient, way 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 breadth that the legislator has been giving to them, to be compatible with the constitutional principle of taxation of companies focusing fundamentally on their real income (article 104, subsection 2, of the CRP), should be understood as indirect forms of taxing business income, through taxation of certain expenses and charges that reveal tax capacity, or even, in the cases of autonomous taxation provided for in subsections 8 and 11 of article 88, as complementary forms of directly taxing income, in situations where it will presumptively be generated, without taxation, in the legal sphere of third parties.

Moreover, it is a fact that the imposition of any expense without consideration on a legal entity has as a corollary a potential decrease in its income, so that the imposition of a unilateral tax obligation, even calculated on the basis of realized expenses or borne charges, 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, by saying that «the following charges are not deductible for purposes of determining taxable profit, even when accounted for as period expenses: a) IRC, including autonomous taxation, and any other taxes that directly or indirectly apply to profits», suggests that, in the legislative perspective, IRC and autonomous taxation are taxes that directly or indirectly apply to profits, as this understanding can justify that the expression «any other taxes» is included, which presupposes that IRC and autonomous taxation are also taxes of these types, are taxes that directly or indirectly apply to actual or presumed profits.

For this reason, being autonomous taxation provided for in the CIRC, ultimately, indirect forms of taxing business income, there is no way of seeing that there is necessarily incompatibility between them and the general rules that provide the form of carrying out IRC assessment.

In any case, 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 subsection 2 of article 90, to some extent, does not correspond to legislative intent, in particular if it can be concluded that the reason justifying some or some of the deductions is only compatible with its application to the collection of IRC resulting from taxable profit.

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

In fact, at least in these cases in which deductions result from special law, the possibility of excluding them will necessarily be excluded by means of a restrictive interpretation of subsection 2 of article 90, as this special law, precisely because it is special, imposes its application, since special laws override general laws in their specific fields of application.

It is in this light that the Claimant's claim to make deduction of special payments on account from the collection of IRC resulting from autonomous taxation must be appreciated.

5.3. Question of the Deductibility from the Sums Due as Title of Autonomous Taxation of the Sums Paid as Title of Special Payments on Account

The special payments on account that the Claimant intends to deduct were made in the fiscal year 2013.

Article 93 of the CIRC was amended by Law no. 2/2014, of 16 January, and the new wording applies «to special payments on account relating to taxation periods commencing on or after 1 January 2014» (article 12, subsection 1, of this Law).

Article 93 of the CIRC, in the wording in force in 2013, resulting from Decree-Law no. 159/2009, of 13 July, established the following:

Article 93

Special Payment on Account

1 – The deduction referred to in paragraph c) of subsection 2 of article 90 is made to the amount determined in the declaration referred to in article 120 of the same taxation period to which it relates or, if insufficient, until the fourth following taxation period, after the deductions referred to in paragraphs a) and b) of subsection 2 have been made and with observance of subsection 7, both of article 90.

2 – In case of cessation of activity in the same taxation period or until the third taxation period following the one to which the special payment on account relates, the part that could not have been deducted pursuant to the previous subsection, when existing, is reimbursed by request of the taxpayer, directed to the chief of the finance service office of the area of the registered office, actual management or permanent establishment where the accounting is centralized, presented within 90 days of the date of cessation of activity.

3 - Taxpayers can also, without prejudice to the provision of subsection 1, be reimbursed of the part that was not deducted under the same provision provided that the following requirements are met:

a) They do not deviate, in relation to the taxation period to which the special payment on account to be reimbursed relates, by more than 10%, downward, from the average of the profitability ratios of companies in the sector of activity in which they operate, to be published by order of the Minister of Finance;

b) The situation that gave rise to the reimbursement is considered justified by inspection made at the request of the taxpayer formulated within 90 days of the expiration of the period for presentation of the periodic declaration relating to the same taxation period.

With Law no. 2/2014, of 16 January, this article came to have the following wording:

Article 93

Special Payment on Account

1 - The deduction referred to in paragraph d) of subsection 2 of article 90 is made to the amount determined in the declaration referred to in article 120 of the same taxation period to which it relates or, if insufficient, until the 6th following taxation period, after the deductions referred to in paragraphs a) to c) of subsection 2 have been made and with observance of subsection 9, both of article 90.

2 - In case of cessation of activity in the same taxation period or until the 6th taxation period following the one to which the special payment on account relates, the part that could not have been deducted pursuant to the previous subsection, when existing, is reimbursed by request of the taxpayer, directed to the chief of the finance service office of the area of the registered office, actual management or permanent establishment where the accounting is centralized, presented within 90 days from the date of cessation of activity.

3 - Taxpayers can also, without prejudice to the provision of subsection 1, be reimbursed of the part that was not deducted under the same provision at the end of the period established therein, by request of the taxpayer, directed to the chief of the finance service office of the area of the registered office, actual management or permanent establishment where the accounting is centralized, presented within 90 days from the expiration of that period.

As has already been referred to, before the new subsection 21 of article 88 of the CIRC, added by Law no. 7-A/2016, of 30 March, there was no legal provision that established the form of assessment of autonomous taxation, so that, under penalty of unconstitutionality by violation of article 103, subsection 3, of the CRP, derived from lack of legal provision for assessment procedure, they would have to be understood to be assessed in accordance with the provision of subsection 1 of article 90.

Thus, before Law no. 7-A/2016, the deductions provided for in subsection 2 of article 90 of the CIRC, which target the «amount determined in accordance with the previous subsection», applied to that single amount resulting from such determination, whenever one was not in one of the situations specially provided for in subsections 4 and following of the same