Summary
Full Decision
ARBITRAL DECISION
The arbitrators José Baeta de Queiroz, Rui Duarte Morais and Nuno Miguel Morujão agree as follows:
I - REPORT
Constitution of the arbitral tribunal and procedural conduct
A…, S.A., with registered office at …, no…, …, Lisbon, legal entity no… (hereinafter A… or Claimant), submitted, in accordance with legal requirements, a request for arbitral decision, with the Tax and Customs Authority as Respondent.
The Collective Arbitral Tribunal, designated by the Deontological Council of CADD, was constituted on 09/11/2017.
The Tax and Customs Authority timely submitted a response, concluding that the request should be dismissed.
On 05/01/2018, the meeting referred to in article 18 of the RJAT was held, and witnesses were subsequently examined, whose testimony was recorded.
The parties submitted written submissions, in which they sustained their initial positions.
Requests for arbitral decision
The principal request is for annulment of Corporate Income Tax (IRC) assessment no. 2017…, interest assessments no. 2017… and 2017…, and account settlement statement no. 2017…, concerning the tax year 2012, which originated from corrections made by the Tax Authority.
The Claimant also petitions for recognition of its right to be indemnified as a result of an improperly furnished guarantee.
Position of the parties
Regarding the main issue underlying the present dispute, the divergence between Claimant and Respondent is straightforward to identify: given that maximum depreciation rates applicable to wind turbines and photovoltaic panels were not provided for in the law at that time, specifically in Decree-Law no. 25/2009, the companies controlled by the Claimant, pursuant to article 31(3) of the Corporate Income Tax Code and article 5(3) of Decree-Law no. 25/2009, adopted, for accounting and tax purposes, a useful life period of 16 years as they considered it reasonable "having regard to the expected useful life of those assets", and therefore depreciated such equipment at a rate of 6.25%.
The Tax Authority, having determined that the expected utility period for wind turbines and photovoltaic panels was 20 years, disregarded part of the expenses in this regard reported by the companies controlled by the Claimant, which resulted in the additional assessment now challenged.
The Claimant further considers that the acceptance of the depreciation periods advocated by the Tax Authority is "clearly unconstitutional, insofar as it is disproportionate, resulting in the Claimant and its subsidiaries being penalised compared to other energy-producing entities" (referring to hydroelectric energy producers, whose equipment is legally depreciable, for tax purposes, over 16 years when, in reality, their useful life periods are much longer than those of wind turbines and photovoltaic panels), a position that the Tax Authority refutes.
Regarding the alleged violation of the principle of prior participation, the Claimant argues that: (i) "the draft report contained only the justification for corrections made to the group's declaration, with the justification for individual corrections made in the sphere of each company being referred to in the respective final inspection reports, which were not attached to the draft report"; (ii) B… Ltd was never notified of the draft report or the final inspection report for 2012; (iii) the Tax Authority only attached to the final report copies of all individual reports of the various group companies.
The Tax Authority, for its part, states that: (i) the letters concerning notifications of the draft report and final report were returned to the sender with the indication "item not claimed" from the postal service; (ii) consultation of the postal service website confirms that there was no redirection of the correspondence sent by it, a situation beyond its control; (iii) given the provisions of article 43 of the Supplementary Regime of Tax and Customs Inspection Procedure, such notifications are presumed to have been received.
II - PRELIMINARY MATTERS
The request for arbitral decision is timely, the parties have legal personality and capacity, are legitimate and are properly represented.
The arbitral tribunal is competent to hear the request for arbitral decision submitted by the Claimant.
No exceptions were raised that require consideration.
There are no nullities that prevent consideration of the merits.
III - FINDINGS OF FACT
§ 1 - Proven facts
The following facts are considered proven:
The Claimant has been, since 2006, the parent company of a group of companies ("C… Group") taxed under the Special Tax Regime for Groups of Companies (RETGS).
The controlled companies generally have as their object the production and sale of energy through the exploitation of renewable energy projects, specifically wind and solar energy.
The Corporate Income Tax declarations submitted by some of the companies controlled by the Claimant were subject to inspection by the Tax Authority, which was followed by an external inspection action against the Claimant, regarding Corporate Income Tax for 2012, concerning the results of C… Group.
The following corrections to the taxable income calculation of companies controlled by the Claimant (subject to the RETGS, in which the Claimant holds the status of taxpayer) are at issue:
Company | Correction
D…, Ltd. ("D…") | 1,392,899.30 €
E…, Ltd. ("E…") | 1,442,267.49 €
F…, Ltd. ("F…") | 124,201.97 €
G…, Ltd. ("G…") | 77,652.71 €
H…, Ltd. ("H…") | 344,214.98 €
B…, Ltd. ("B…") | 224,654.86 €
I…, Ltd. ("I…") | 403,088.53 €
The companies in question recorded in their tangible fixed assets equipment intended for electricity production: wind turbines and/or photovoltaic panels (in the case of I…);
Given that this type of equipment did not appear in the tables attached to Decree-Law no. 25/2009, the above-mentioned companies classified them, for tax purposes, under code 1230 – Hydroelectric power plant equipment, having depreciated them at a rate of 6.25%, i.e., considering an expected useful life period of 16 years;
According to the suppliers of the equipment in question, the useful life period for wind turbines was 20 years and for photovoltaic panels was 25 years;
There are national and international studies concluding that the useful life periods are those indicated in the previous paragraph, studies on which the Tax Authority relied to consider those to be the applicable depreciation periods.
The production of energy from renewable sources (wind and sun) by the above-mentioned companies is carried out under contracts ensuring guaranteed remuneration for a period of 15 years, commencing from the beginning of electricity supply to the grid.
Based on available data relating to energy prices in the free market, it is reasonable to assume that, once this period ends, a sharp decline in profitability will occur or even the inability of the wind and solar parks of the companies controlled by the Claimant to generate sufficient revenue to cover the costs inherent to their maintenance.
The sector of wind and solar energy production is one of the most dynamic and therefore most affected by the phenomenon of technological obsolescence.
Manufacturers of wind turbines and, in particular, of photovoltaic panels, after a few years, cease producing the equipment they had previously made available, replacing them with others which are generally much more efficient.
For the same reason, there is no secondary market for resale of this type of equipment, which means that they do not have significant residual value upon dismantling.
Due to their technical obsolescence and the atmospheric conditions to which they are subjected, wind turbines installed by one of the group companies in the … Wind Park are being dismantled 14 years after their commissioning, having no significant residual value.
The solar panels installed at the power plant located in … present serious operating problems after 7/8 years of installation, with great difficulties in repairing them given that the equipment available on the market, being technologically more advanced, is not fully compatible with those installed in such power plant.
Hydroelectric power generation installations have much longer useful life periods than those of wind turbines and photovoltaic panels.
In 2014, the Commission for Green Tax Reform, appointed by the Government, suggested fixing the depreciation period for wind and photovoltaic equipment between 12.5 years and 25 years.
The wind turbines and photovoltaic panels used by the companies controlled by the Claimant were tested in Northern European countries.
The environmental conditions under which such tests are conducted differ greatly from those in the locations where such equipment operates in Portugal because, in particular, the average temperature is much higher in the locations where most solar panels are installed (e.g. Alentejo) and the characteristics (irregularity and "currents") of the wind in the locations (mountain ridges) where most wind turbines are installed are very different.
For these reasons, the physical wear of such equipment, operating in Portugal, is much greater than that which occurs under operating conditions in Northern Europe.
Suppliers only guarantee the repair/replacement of parts of wind turbines and photovoltaic panels for periods much shorter than those they indicate as corresponding to the useful life of such equipment.
The draft report notified to the Claimant for purposes of prior hearing contained only the justification for corrections made to the group's declaration, with the justification for individual corrections made in the sphere of each company being referred to in the respective final inspection reports, which were not attached; the Tax Authority attached to the final report copies of all individual reports of the various group companies.
In order to obtain the suspension of fiscal execution proceedings no. …2017…, originating from the assessment now challenged, the Claimant presented bank guarantee no. …, issued up to the maximum amount of € 1,628,536.34, by Bank J….
Since 2015, several of the companies belonging to the RETGS dominated by the Claimant (specifically, G…, Ltd., F…, Ltd., E…, Ltd. and H…, Ltd.) requested the Tax Authority to apply a useful life of 20 years, substantiating this duration, for tax purposes, regarding wind turbines (… Park, … Parks, among others), and the Tax Authority authorized the requested application, with express mention that the applicants should correct the depreciation amounts excessively recorded in previous fiscal years.
The facts established as proven in A) to H) and W) are contained in the inspection report and documentation filed with the case, and are not contested.
The facts established as proven in X), Y) and Z) are contained in information and tax inspection reports filed with the case.
The proof of the remaining facts results from the documentation filed with the case and the witness testimony heard, in particular that of K… and L… (particularly relevant regarding the facts established as proven in I) to P) and in S) to V)), whom, in the opinion of the arbitral tribunal, testified truthfully and clearly.
IV - ISSUE TO BE DECIDED
IV.a) Regarding the controversy concerning the useful life period of the equipment and respective depreciation:
The central issue to be decided is not, contrary to what the Claimant asserts, that of determining "in what manner (or, if preferred, within what limits) expenses for depreciation (accounting) of equipment intended for electricity production (specifically, wind turbines and photovoltaic panels) can be accepted for tax purposes", but rather that of determining whether the correction made by the Tax Authority (fixing the useful life period of the equipment in question, wind turbines and photovoltaic panels, at 20 years, rather than the 16 years considered by the companies controlled by the Claimant) is or is not properly substantiated.
This statement does not alter the cause of action alleged by the Claimant, as it continues to be the error in the factual and legal premises in which the Tax Authority may have incurred by not accepting the depreciation rates used as reasonable. It only identifies the issue to be decided more rigorously, given that, under the law, depreciation rates used by taxpayers must be accepted provided the Tax Authority considers them reasonable, having regard to the expected useful life period.
The dispute in question arises from the fact that, having the Claimant adopted the depreciation rate of 6.25%, corresponding to sixteen years, for its wind and photovoltaic energy production equipment, the Tax Authority rejected this rate, replacing it with that of 5%, corresponding to twenty years.
The legislator of article 31(2) of the Corporate Income Tax Code and article 5(3) of Decree-Law no. 25/2009, of 14 September, refrained from fixing depreciation rates for assets such as those at issue here, stipulating, however, that "for assets for which depreciation or depreciation rates are not fixed in the tables (…), the rates considered reasonable by the Tax and Customs Authority are accepted, having regard to the expected useful life period of those assets".
If the "useful life period" considered by the Tax Authority as accepted is different, higher, and as such exclusive (given that maximum limits are at issue) from the rates chosen by the taxpayer, and such decision is substantiated, the burden of proof will pass to the taxpayer, by virtue of article 74(1) of the General Tax Law, requiring it to prove the Tax Authority's error in not accepting the rates it had chosen.
In this case, the tribunals called upon to intervene would not be responsible for choosing between the rate chosen by the taxpayer and that considered by the Tax Authority.
In fact, the dispute then would not involve such a choice, but rather only the verification of the legality of the Tax Authority's action. And that legality is determined by compliance with the law regarding the non-acceptance of the rates chosen by the taxpayer.
If the legislator did not fix the rates, nor assigned that task to the Administration, then once the rates of the taxpayer's choice are rejected, substantively, there is no other guideline than respect for the sole orientation given by the legislator: the period of expected utility, to be established through a motivated and prudent judgment, formulated based on available technical information. This is the legislator's command.
Arbitral tribunals judge in accordance with established law, and are prohibited from resorting to equity – article 2(2) of the RJAT.
The period of expected useful life is an elastic concept, because it depends on numerous factors, which vary from case to case.
Equipment used in ideal conditions naturally is expected to have a longer useful life than equipment subjected to extreme conditions. Market conditions are also varied and variable, influencing the economic useful life of the asset. Equipment manufactured by different producers will be more or less robust, will benefit from better or worse support, will be of more or less advanced design and, therefore, will not become obsolete simultaneously.
What matters is the period of expected useful life, objectively assessed, without regard to the taxpayer's expectation of gains, as is the case with that invoked by the Claimant in view of the announced termination of the subsidised tariff.
The Claimant's exposition may be compatible with accounting regulations, but not necessarily with the relevant tax regulations.
In our case, the Administration, based on information from suppliers, studies and credible opinions, because issued by specialised and accredited entities, did not accept as reasonable the rate chosen by the Claimant, corresponding to a useful life of 16 years.
According to the technical sources collected by it, a minimum useful life limit of 20 years for wind turbines and 25 years for photovoltaic panels was determined.
This limit, translated into maximum depreciation rates (or, if preferred, minimum useful lives) which, in accordance with the general logic of the depreciation and depreciation tables in the Decree-Law, is established for each type of asset, objectively considered, independently of the taxpayer in question and its specific accounting choices.
What is not at issue are the accounting depreciation amounts that each company decides to record, but rather whether they exceed the tax-admissible limit, which must be equal for all taxpayers. There may perhaps be considerable reasons justifying different accounting policies in different entities regarding the same type of assets, but this does not mean that the limit of tax-admissible depreciation is tailored to each one, which would infringe the principle of tax equality.
Thus, the following considerations do not concern the taxpayer's accounting, but rather the comparison between the depreciation amounts it considered, as regards certain asset items (wind turbines and photovoltaic panels), for accounting and tax purposes, and the tax-admissible limit.
The argument derived from the fact that the equipment is tested under conditions better than those in which its locations are situated does not hold, as it does not follow therefrom that the manufacturers ignored less favorable installation conditions when defining the useful life period of the equipment.
The fact that in a park of a company in the Claimant's group, due to its technical obsolescence and the atmospheric conditions to which they are subjected, wind turbines are being dismantled 14 years after their commissioning, and that solar panels installed in a power plant present serious operating problems after 7/8 years of installation, with great difficulties in repairing them given that equipment available on the market, being technologically more advanced, is not fully compatible with those installed in such power plant, also does not mean that they have reached their useful life, but only that its owner made a choice aimed at minimizing costs or increasing yield.
In any case, regarding wind turbines, having been proven that several of the companies in the RETGS dominated by the Claimant requested the Tax Authority to apply a useful life of 20 years for their wind parks (substantiating this duration technically), any argument now invoked to the effect of fixing the useful life for tax purposes at 16 years is necessarily weakened. Because the useful life limit tax-admissible does not correspond to accounting useful life, and while this may vary, that must be equal for all taxpayers.
Thus, regarding wind turbines, the Tax Authority acted in accordance with the law it was required to apply.
However, regarding photovoltaic panels, having the Tax Authority corrected the Claimant's tax depreciation – based on the respective accounting depreciation based on a useful life of 16 years – not by reference to the useful life of 25 years obtained from technical sources, but rather on the basis of a useful life of 20 years, which is not technically substantiated, it is concluded that, regarding these assets, the Tax Authority did not respect the applicable legal command (article 31(3) of the Corporate Income Tax Code and article 5(3) of Decree-Law no. 25/2009), and the additional Corporate Income Tax assessments (due to excess tax-admissible depreciation) are vitiated by lack of substantiation.
In summary, regarding photovoltaic panels, the Tax Authority did not act as required by law.
In light of the above:
a) Regarding wind turbines, the illegality of the Administration's action not having been demonstrated, error in the factual and legal premises not having been demonstrated, the challenge to the assessment on this basis is dismissed;
b) Regarding photovoltaic panels, the correction underlying the assessment not being properly substantiated, not being based on technical criteria, is unlawful, and therefore the Claimant's challenge to the assessment succeeds.
IV.b) Regarding procedural defect: lack of substantiation and failure to grant the right to prior hearing:
The Claimant alleged the existence of a formal defect in the inspection procedure that resulted in the Corporate Income Tax and interest assessments.
Specifically, it states that the draft report incorporating the proposed corrections to be made regarding Corporate Income Tax, in the sphere of the group, regarding the 2012 tax year, "contained only the justification for corrections made to the group's declaration, with the justification for individual corrections made in the sphere of each company being referred to in the respective final inspection reports, which were not attached to the draft report", adding that, "(…) it is unaware of the substantiation of part of the corrections of part of the individual corrections that support the values determined in the draft report notified to it (…)" since the company participating in the group, B… Ltd, was never notified of any proposed corrections or any final inspection report, and therefore neither the controlled company nor the controlling company (Claimant) were aware of the origin and did not have the opportunity to comment on the value of the proposed corrections.
However, it was proven that the letters concerning notifications of the draft report and final report were sent by registered mail with delivery confirmation, although returned to the sender with the indication from the postal service "item not claimed". Additionally, consultation of the postal service website confirms that there was no redirection of the correspondence sent by the Tax Authority, a situation that is necessarily beyond the Tax Authority's control.
Article 43(1) of the Supplementary Regime of Tax and Customs Inspection Procedure provides: "taxpayers are presumed notified (…) contacted by registered mail in which the letter sent to their tax address was returned with the indication that it was not collected, was refused or that the addressee is absent on uncertain grounds".
Thus, for all purposes, the taxpayer is presumed to have been notified, and therefore it is not entitled to object to the failure to provide substantiation and the failure to grant the right to prior hearing.
Moreover, the defect invoked by the Claimant is not, strictly speaking, a lack of substantiation of the tax act, but only a lack of notification of such substantiation. Such notification is considered to have been effected, as set out above.
IV.c) Regarding constitutionality: violation of the principle of equality and taxation based on actual profit:
The Claimant further argues that the Administration is, in this case, violating the constitutional principle of equality and taxation based on actual profit.
Let us examine this.
Regarding equality, the Claimant points out the difference between, on the one hand, the depreciation and reinstatement rate of 20 years for wind turbines and photovoltaic panels, considered by the Administration, and, on the other hand, the rate of 16 years established by the legislator for hydroelectric power plant equipment. The Claimant states that "in the present case, the Tax Authority is unjustifiably violating the constitutional principle of equality", adding that "the application of the depreciation and amortisation rates proposed by the Tax Authority for wind turbines and photovoltaic panels is clearly unconstitutional, insofar as it is disproportionate, resulting in the Claimant and its subsidiaries being penalised compared to other energy-producing entities". That is, the Claimant argues that the Tax Authority, in the present case, acts in a manner incompatible with equality, with an unjustified difference of criterion, in a disproportionate manner.
The Claimant is not arguing the normative unconstitutionality, abstractly considered, of Decree-Law no. 25/2009. Rather, it complains of concrete application that violates the principle of equality.
The Tax Authority's concrete action in question consists of having issued an additional tax assessment, having considered that the Claimant had exceeded the permitted limit of tax-deductible depreciation for certain assets (wind turbines and photovoltaic equipment), based on the useful life it (the Tax Authority) considered reasonable for tax purposes, having regard to the expected useful life period of those assets (cf. article 5(3) of Decree-Law no. 25/2009).
Such concrete action would violate the principle of equality only if, in identical concrete situations, regarding asset items (because note that what is at issue is not differentiation between taxpayers, but rather differentiation between assets), it had considered reasonable, for tax purposes, a different useful life period for different taxpayers. But that is not what the Claimant argues.
What it says is that the Tax Authority acted inconsistently with the useful life periods provided for by law for other equipment, with which it establishes affinity, since both serve energy production.
Bearing in mind, on the one hand, that i) "useful life is (a) the period during which an entity expects an asset to be available for use; or (b) the number of units of production or similar that an entity expects to obtain from the asset" (cf. par. 6 of NCRF no. 7), which has little or nothing to do with the type (in itself) of production to which certain equipment is intended, and bearing in mind, on the other hand, that ii) it was not demonstrated that this difference is, in fact, unjustified, such alleged difference/inconsistency could in any case never be attributed to the Tax Authority's conduct, for the simple reason that it was not the author of Decree-Law no. 25/2009. Furthermore, what is at issue is not differentiation of the tax treatment of taxpayers, but rather differentiation of the treatment of certain assets, regardless of who their owners are.
Consequently, it was not demonstrated that the Tax Authority's action violated the principle of equality, and therefore this alleged constitutional defect does not occur.
The Claimant finally invokes violation of the constitutional principle of taxation based on actual profit, without, however, presenting any substantiation for this.
Under the constitutional command of article 104(2) of the Portuguese Constitution, fiscal law takes accounting profit as the "value" from which the determination of taxable profit should depart, i.e., it establishes a model of partial dependence between accounting profit and tax profit.
However, these two "views" of profit do not correspond to each other, so the values of accounting profit and tax profit will scarcely coincide. Not because they correspond to substantially diverse realities, but only because the evaluation perspective (the specific interests involved) that presides over the quantification of each differs.[1]
The recipients of information regarding accounting profit and tax profit differ, as do the applicable constitutional parameters for each. In accounting, the importance of translating the individual economic and financial position and performance of the entity stands out, whereas in the tax domain, the applicable rules aim, among other things, at tax equality. This demands objectivity and limits that are equal for all taxpayers. As Nina Aguiar notes, "the flexibility of accounting rules, however appropriate for the determination of business income and assets for purposes of financial measurement and commercial accounting law, is traditionally viewed as incompatible with a series of requirements of tax law, specifically the principle of tax equality according to contributive capacity and tax legality, in its sense of the need for certainty and objectivity in taxation".[2]
In the specific domain of depreciation, "although accounting may accept a high degree of freedom in determining what the useful life period is, tax law imposes restrictions. This is understandable, even to prevent taxpayers from opting for excessively short depreciation periods in order to anticipate the effect of the tax consideration of these costs. The Decree-Law (…) fixes what useful life period is to be considered".[3]
The depreciation rates provided for in Decree-Law no. 25/2009 are precisely the translation of the limits that, as a rule, taxpayers cannot exceed for purposes of determining taxable profit (exceptions being admitted, such as acceptance of criteria that better reflect the economic reality of the entity, upon prior application, cf. article 30(3) of the Corporate Income Tax Code).
That is, tax depreciation stems, first, from accounting depreciation, and this results from the specific condition of the company. But tax-admissible depreciation consists only of the amounts comprised within the limits fixed in Decree-Law no. 25/2009 (minimum and maximum useful life), depending on the type of assets in question, considered objectively. Based on different specific conditions, different companies may have, for equal assets, distinct accounting depreciation (and corresponding useful lives). And for different companies, those different accounting depreciations may be tax-admissible, provided they respect the tax limits. Any companies are, therefore, subject to the same tax rules, in honour of equality, which means that their depreciation will be accepted if, and insofar as, they are compatible with the interval of rates / useful lives, minimum and maximum, of the equipment in question, fixed in law.
In this case, what is at issue is filling the void (at the time of the events), of limits of tax deductibility, for assets for which useful lives were not established in the Decree-Law, so as to ascertain whether the depreciation considered by the taxpayer is fully accepted for tax purposes.
Consequently, it was not demonstrated that the Tax Authority's action violated the principle of taxation based on actual profit, and therefore this alleged constitutional defect does not occur either.
In summary, considering that the tribunal finds the Tax Authority's concrete action to be partially in accordance with the applicable law, and given that the constitutionality of that law is not challenged, it results that, in this case, the Tax Authority's action was compatible with the Constitution.
IV.d) Regarding indemnification for improperly furnished guarantee:
As a result of the foregoing regarding the controversy concerning the useful life period of the equipment and respective depreciation (in IV.a) above), this tribunal considers that, regarding wind turbines, the corrections made are lawful, but that, regarding photovoltaic panels, the correction made is unlawful.
Nevertheless, given that the result is annulment of the challenged act, in its entirety, the Claimant must be indemnified for expenses incurred with the guarantee that it was forced to furnish to avoid execution of its assets with a view to collecting an amount illegally assessed.
V - DECISION
The requests for annulment of the Corporate Income Tax assessment no. 2017…, interest assessments no. 2017… and 2017…, and account settlement statement no. 2017…, concerning the tax year 2012, in the part resulting from corrections to the taxable matter resulting from non-acceptance of the depreciation rates practised by the companies controlled by the Claimant regarding wind turbines, are dismissed;
The requests for annulment of such assessments proceed in the part resulting from corrections to the taxable matter resulting from non-acceptance of the depreciation rates regarding photovoltaic panels, practised by company I…, Ltd., (correction to taxable profit in the amount of € 403,088.53) proceed.
This tribunal having no elements that permit quantification of the partial annulment, the challenged assessments are annulled in their entirety, it being incumbent upon the Tax Authority to redraw them in accordance with the above decision.
The Tax Authority is condemned to indemnify the Claimant for expenses incurred with the furnishing of the guarantee referred to in paragraph w) of the above findings of fact.
VI - VALUE OF THE CASE
Taking into account the provisions of article 306(2) of the Code of Civil Procedure, article 97-A(1) of the Code of Procedure before the Tax Courts, and article 3(2) of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is set at € 1,283,578.72.
VII - COSTS
The costs of the case, in the amount of € 17,442.00, are, in accordance with articles 22(4) of the RJAT and 4(4) of the Costs Regulation in Tax Arbitration Proceedings, the responsibility of the Respondent.
Let notice be given.
Lisbon, 16 April 2018
The Arbitrators
José Baeta de Queiroz
Rui Duarte Morais
(with statement of dissent)
Nuno Miguel Morujão
STATEMENT OF DISSENT
I voted in favour of this arbitral decision, although not agreeing with part of its reasoning regarding the issue of depreciation quotas for wind turbines. I consider that the "margin of appreciation" that the filling in of indeterminate concepts (in this case, expected useful life period) always implies should be attributed to the applicator of the law who, in cases of self-assessment, is the taxpayer and not the tax administration.
Accordingly, the "choice" of the taxpayer can only not be accepted (as the law states) by the Tax Authority when it is not sufficiently substantiated.
My decision to vote in line with the majority position resulted from the fact that, as some of the companies controlled by the Claimant had requested the Tax Authority's acceptance of a useful life period of twenty years, relevant for purposes of tax consideration of depreciation expenses, substantiating such claim technically, the arguments (the substantiation) now presented by the Claimant to defend the consideration of a useful life period of 16 years are, logically, much weakened, as indeed is emphasised in the arbitral decision. That is, I did not consider the taxpayer's choice to consider an expected useful life period of 16 years for the equipment (wind turbines) in question to be sufficiently substantiated.
Rui Duarte Morais
[1] Cf. Morais, R. D., Apontamentos ao IRC, Almedina, 2007, p. 62.
[2] Cf. Aguiar, N., "A lei fiscal e os juízos contabilísticos discricionários", in O SNC e os juízos de valor – Uma perspetiva crítica e multidisciplinar, Almedina, 2013, pp. 299-300.
[3] Cf. Morais, R. D., Apontamentos ao IRC, Almedina, 2007, p. 108.
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