IRC Tax Deductibility of Expenses: Abnormal Costs and Autonomous Taxation in CAAD Case 488/2018-T

ARBITRAL DECISION

The arbitrators Fernanda Maçãs (president arbitrator), Professor Doctor Manuel Pires and Dr. Henrique Nogueira Nunes (arbitrators members), who constitute this Arbitral Tribunal, agree:

I. REPORT

A..., S.A., collective entity no. ..., with registered office at Rua ..., no. ..., ..., ...-... Lisbon, notified, through Official Notice dated 2 July 2018, of the Administrative Justice Division, of the Financial Directorate of Lisbon, of the Order of the Deputy Financial Director of the Financial Directorate of Lisbon, dated 28 June 2018, which dismissed the amicable claim filed against the assessment act for Corporate Income Tax ("IRC") no. 2017..., issued on 20 March 2017, by the Director-General of the Tax and Customs Authority, with reference to the fiscal year 2014, from which resulted the amount to be paid of € 1,420,559.76, the assessment act for Compensatory Interest no. 2017... (in the amount of € 94,849.34) and the assessment act for Default Interest no. 2017 ... (in the amount of € 2,315.51), to which corresponds the Statement of Account Reconciliation no. 2017 ... (Compensation no. 2017...), from which resulted the amount to be paid of € 1,420,559.76, pursuant to and for the purposes of the provisions of paragraph a) of article 2, number 1 and articles 10 et seq., all of the Legal Regime of Tax Arbitration ("RJAT"), in conjunction with number 1 of article 102 of the Code of Tax Procedure and Process ("CPPIT"), applicable by force of the provisions of paragraph a) of number 1 of article 10 of RJAT, against the said Order of the Deputy Financial Director of the Financial Directorate of Lisbon, dated 28 June 2018, which dismissed the amicable claim filed, and against the assessment acts for IRC, Compensatory Interest and Default Interest, relating to the fiscal year 2014, came to submit a Request for Arbitral Pronouncement petitioning the annulment of the aforementioned tax acts on the basis of the following:

a) Lack of substantiation of the assessment acts for IRC and compensatory interest;

b) Error concerning the factual and legal premises regarding the non-acceptance as an expense of the amount of commissions paid to B... as they meet the legal prerequisites to be accepted as expenses as provided for in article 23-A, number 1, paragraph r) of CIRC;

c) Error concerning the legal and factual premises in determining the application of the rate of 35% by way of autonomous taxation on the commissions paid by the Claimant;

d) Error concerning the factual and legal premises and insufficient substantiation for the purposes of the provisions of article 77 of the General Tax Law in not accepting the loss by impairment of the land lots of ... in question in these proceedings;

e) Violation of the tax inspection procedure through violation of the inquisitorial principle and pursuit of material truth;

f) Omission of an essential legal formality regarding compensatory interest assessments; illegality of the compensatory interest assessment no. 2017 ... and the default interest assessment.

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 08-10-2018.

Pursuant to the provisions of paragraph b) of number 2 of article 6 and number 2 of article 11 of the Legal Regime of Tax Arbitration (hereinafter RJAT), as amended by article 228 of Law no. 66-B/2012, of 31 December, the Claimant designated as arbitrator Dr. Henrique Nogueira Nunes and the Tax and Customs Authority (hereinafter AT or Respondent) indicated as arbitrator, pursuant to the provisions of the aforementioned paragraph b) of number 2 of article 6 and number 3 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, Professor Doctor Manuel Pires, having been designated by both, as third arbitrator (and president arbitrator), pursuant to the provisions of the aforementioned paragraph b) of number 2 of article 6 and number 6 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, Councillor Maria Fernanda dos Santos Maçãs.

On 12-12-2018, the parties were duly notified of this designation, and did not express the intention to challenge the designation of the arbitrators, pursuant to the combined provisions of article 11, number 1, paragraphs a) and b), of RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provisions of number 7 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 03-01-2019.

The Tax and Customs Authority, notified of the request for arbitral pronouncement presented by the Claimant and notified for that purpose, in accordance with the provisions of article 17 of the Legal Regime of Tax Arbitration (RJAT), presented, on 06-02-2019, a Response.

To substantiate its request, the Claimant alleges, in summary, that it should be concluded that it was unequivocally demonstrated in these proceedings, both through the attachment of the contracts concluded with B..., as well as through the evidence produced, that the recruitment of Chinese customers for the "..." development was successful, that is, that the sales result was effectively achieved, thereby fulfilling the first of the legal requirements provided for in article 23-A, number 1, paragraph r) of CIRC.

From the same, it maintains that it was demonstrated in these proceedings that the payment of commissions as consideration for the sale of a property is a generalized form of remuneration for the success of customer recruitment for properties, there being no particularity in this case that invalidates the acceptance of this charge as normal, especially since they are supported by contracts and were paid as consideration for invoices properly identified in the Tax Inspection Report itself.

It considers, finally, that the commissions paid to B... also meet the requirement of non-excessiveness in its proper measure in that although the commissions amount to 15% or even more, they were only accepted by the Claimant in the context of the serious economic crisis that was strongly reflected in the Claimant's real estate promotion activity, which found itself confronted with the need to recruit more customers, given the small domestic demand, manifestly insufficient to meet its commitments with the banks, whose debt amounted, in 2014, to approximately 35 million, with only the increase in sales allowing the Claimant to maintain its activity and avoid insolvency.

And that it was proven that the payment of commissions of 15% or higher paid to B... cannot be compared with the commissions borne by national real estate mediation companies, as it alleges that B..., like other companies that recruited customers in the Chinese market, ensured a personalized service of customer follow-up from China, which entailed costs of disclosure of the properties, trips, accommodation, food, with none of these expenses being borne by the Claimant, which demonstrates that the properties transmitted through B... ensured a net value identical to that obtained in the sale to national customers, as these obtained discounts around 20% on the listed value of the said properties.

It concludes, thus, that the value of the commissions paid to B... also assumes, for the purposes of the provisions of article 23-A, number 1, paragraph r) of CIRC, a non-abnormal character and a non-excessive amount, whereby the correction to the expenses with the commissions paid to B... is manifestly illegal, based on error concerning the premises, both factual and legal, whereby its annulment should be determined, in accordance, moreover, with the vast jurisprudence existing on this matter that it identifies in these proceedings.

With respect to the correction relating to losses by impairment of the land lots of ..., it considers that it was confirmed by the evidence produced that the accounting value of those lots was completely out of step with its market value and even with its Tax Asset Value, a value that has been declining, setting itself, in 2014, at only € 1,691,930, which demonstrates, in its view, that the Tax and Customs Authority itself acknowledged the devaluation of those land lots.

On the other hand, it considers that it was demonstrated in these proceedings that although C... evaluated the said land lots, for accounting purposes, at € 1,233,000, for tax purposes, it only considered the Tax Asset Value of € 1,691,930, a value that is much higher than the evaluation carried out by C....

Nevertheless, it alleges that the grounds set forth in the Tax Inspection Report to withdraw validity and suitability from the value of the evaluation of the said lands determined by C... cannot be accepted, since the IRC Code determines, in its article 26, number 4, that the sale price shall be considered to be i) that contained in official elements or ii) the last ones that under normal conditions have been practiced by the taxpayer and, lastly, in case of impossibility of recourse to the first criteria, iii) those which at the end of the taxation period are current in the market, as long as they are considered suitable or subject to unequivocal control.

And that it should be concluded that the Report of C... was prepared taking into account national legislation that determines the criteria for evaluation of properties held by entities subject to supervision by CMVM - Real Estate Investment Funds - and publications by independent international entities, whereby it is clear that the "Presumed Transaction Value" of € 1,233,000.00 is not only considered a suitable value for the purposes of article 26, number 4 of the IRC Code, but is also subject to unequivocal control, that is, the market value is capable of validation, both because its value is suitable and also subject to unequivocal control.

In light of the foregoing, it considers that this correction is based not only on erroneous premises, both factual and legal, but also on insufficient substantiation for the purposes of the provisions of article 77 of the General Tax Law, whereby its annulment should be determined.

The AT, for its part, comes to defend itself through contestation. It maintains, in summary, that the mere existence of a contract, invoices or bank transfers is not sufficient, and that even the exchange of correspondence sent after the performance of the contracts, promise of purchase and sale agreements and, in some cases, after the respective deeds of purchase and sale, is not sufficient proof of the substance and effectiveness of the service executed. It is necessary, in its view, the evidence of a whole set of execution of concrete actions, activities or campaigns of disclosure of the properties in question to obtain the respective sales commission, that is, complementary justifying elements to the fiscally relevant documentation, without which founded doubts remain about the effective execution of the operations that the invoices claim to document. In summary, it alleges that there is no evidence of the actual performance of marketing and promotion services by the service provider based in Hong Kong.

With regard to the abnormal character and the excessive amount, it alleges that the price practiced of commissions ranging between 15% and 20% is excessive, when the normal market value would be 5%. In this context, it concludes that, as the Claimant produced no proof that there is no excessiveness in the amount of the commissions paid to B..., it considers that this requirement is also not met, since in its view it would be incumbent upon the Claimant to demonstrate, in the first place, that the expenses materialized in effective acts, with the mere formal existence not being sufficient, such as contracts, invoices and bank transfers; and, in the second place, that these expenses are not abnormal or excessive, proof that it considers was not made.

With respect to the correction relating to loss by impairment of the land lots located in ..., it considers that despite not calling into question the credibility of the evaluation carried out, it considers that the conditions are not met for the acceptance of the market value obtained, since the Claimant does not have the legal nature of Investment Funds, and it has not been demonstrated or justified, throughout the Evaluation Report prepared, its connection to the specific case.

It considers that the conditions are not met for the acceptance of the "presumed transaction value" proposed, since the values calculated cannot be considered suitable or subject to unequivocal control, as they have as their starting point estimates made by the evaluation company, based on averages determined in the prices practiced by companies in the real estate sector and which may vary from entity to entity, as it will be sufficient to alter one of the components of the price or even the valuation method to obtain different values. They are not based on concrete, official, previously determined data at the global level and of a precise character, and it is not possible for the AT to assess their unequivocal control.

It concludes, already in the response stage, that given the existence of an ordinance, namely ordinance 280/2014, which publishes official data regarding the value per m2 of properties and establishing the legislator as the reference, as appears from article 26, number 4, by official values, it understands that the values determined should at least have been compared with those derived from this ordinance.

On 01-03-2019, an arbitral order was issued, designating the date of 29-03-2019 to hold a meeting of the Tribunal with the parties, for the purposes of article 18 of RJAT, and then to proceed to the production of testimonial evidence listed by the parties.

At the hearing for discussion and judgment, two statements of party (D... and E...) were produced and three witnesses called and presented by the Claimant (F...; G... and H...) were examined. The Respondent dispensed with the witnesses it listed in its Response.

It was decided that the process would proceed with written submissions.

Only the Claimant presented submissions, reinforcing its position.

The Tribunal was duly constituted and is competent ratione materiae, in accordance with article 2 of RJAT.

The parties have legal personality and capacity, show themselves as legitimate and are regularly represented (cf. articles 4 and 10, number 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

No nullities in the process were identified.

A deadline was set for the delivery of the arbitral decision until 03/07/2019.

II. FACTUAL MATTER

The following facts are considered proven:

a) The Claimant began activities on 1 March 1983 and is registered in the computer system for management of taxpayer registration of the Tax and Customs Authority as pursuing the main activity of "Real estate promotion (building project development)", corresponding to the Economic Activity Code (CAE) 41100. (cf. RIT attached to PA).

b) Within the scope of its main activity, it is the promoter and owner of the "Development...", in Lisbon, aimed primarily for residential purposes. (cf. RIT attached to PA).

c) In 2014, the Claimant's turnover increased by approximately 31% resulting from the sale of 60 properties that are part of the real estate project of the Urbanization ... (cf. RIT attached to PA).

d) In 2014, approximately 80% of the sales made by the Claimant were intended for citizens residing in third countries, namely the People's Republic of China (cf. RIT attached to PA).

e) The Claimant became aware of the "Golden Visa" regime established by Law no. 23/2007, of 4 July, as amended by Law no. 29/2012, of 9 August. (cf. RIT attached to PA).

f) The said legal regime of "Golden Visa" establishes that residence authorization is granted to citizens who apply for it, once the following requirements are met:

• Acquire properties valued at equal to or greater than € 500,000.00;

• Make a capital transfer in an amount equal to or greater than € 1,000,000.00;

• Make an investment that leads to the creation of at least 10 jobs.

(cf. RIT attached to PA and statement of party D...).

g) The Claimant's activity was affected in the year of the tax correction in question in these proceedings in the context of the financial constraint that existed at the time, both due to the difficulty in accessing bank credit and honoring its commitments with the banks, and due to the great difficulty in selling the properties that form part of the developments promoted by it in the national market. (cf. Statement of party D...).

h) On 31 December 2002, the now Claimant had with I..., its main financing bank, a debt in accrued interest that amounted to € 2,993,000.00 and whose payment was to occur during the year 2013 (cf. Statement of party D...).

i) The Claimant resorted to entities recruiting from the countries of residence of its target clients, namely the People's Republic of China and the Middle East, so that, through these local recruiting companies, these clients would learn of its properties (cf. Statement of party D... and E...).

j) In this context, it became aware of the company B... (cf. Statement of party D... and E...).

k) The Claimant concluded, on 10 January 2014, an Agreement with B..., a company resident in Hong Kong, with a view to recruiting customers in the Chinese market (cf. Annex 7, of RIT).

l) As a complement to that Agreement, the Claimant concluded, on 24 March 2014, a Master Contract with the said company with a view to recruiting customers in that market (cf. Annex 7, of RIT).

m) These contracts and agreement were provided to the Tax Inspection Services during the Tax Inspection, demonstrating the customer recruitment services in the Chinese market that would be provided by the said company in consideration of which (and only in case of success), the pecuniary consideration would be calculated on the value of the sale of the housing units (cf. Annex 7, of RIT).

n) As consideration for the recruitment services provided by company B... — recruitment of customers in the Chinese market for the Claimant's properties located in the "Development ..." — the Claimant incurred commissions, which were recognized accountingly in account 62253 — Commissions - Marketing Consulting - International, and paid according to the following terms, which was acknowledged by the Tax Inspection Services (cf. RIT, page 21/423):

[Table of commission payments follows with columns for Document no., Date, Fraction, Sale Value, Date of Deed, Date of Promise Contract, Commissions Account 62253, VAT liquidated, % and Buyer]

o) The elements of evidence, namely the Agreements and Master Contract provided by the Claimant to the Tax Inspection Services allowed the latter to become aware by reference to each one of the invoices presented by the Claimant and issued by company B... of:

• the fraction to which each invoice relates;
• the transmission value of each of the fractions;
• the date of each of the purchase and sale deeds and the promise contract;
• Commissions charged by B...;
• Percentage to which each of the commissions liquidated by B... corresponds;
• Identification of each of the acquirers of the properties.

(Cf. Documents that appear in the RIT).

p) According to the whereas A of the agreement concluded between the Claimant and B..., "The Fiduciary Agent is the registered owner of 42 housing fractions located in Lot ... of the Urbanization of ..., Streets ... registered in the Property Registry Office of Lisbon under number ... of the parish of ... and registered in the property matrix of the municipality of Lisbon, parish of ... under article ..., which are part of a real estate development called "Development of ..." (cf. Annex 7 to RIT).

q) As consideration for the recruitment services provided by B..., the latter would receive a commission ("assistance fee") in the amount corresponding to 15% of the selling price of the housing units, net of taxes and fees (cf. clause 13.a), of the Agreement, - Document no. 8 attached by the Claimant and RIT attached to the proceedings).

r) Under the terms of clause 15) of the said Agreement: "The Assistance Fees defined in clause 13) will be paid to the Service Provider as soon as the Client / Lawyer transfers 50% (fifty percent) of the sale price to the Fiduciary Agent's bank account. The Service Provider will invoice the respective amounts and, after receiving payment authorization in its bank account, the Fiduciary Agent will proceed to pay the Service Provider within 5 (five) working days. A late payment fee of 0.02% (zero point zero two percent) per day of delay is agreed." (cf. Clause 15, a), of the Agreement - Document no. 4 attached by the Claimant).

s) The said "assistance fee" constitutes a success fee, being paid only if the recruited customers concluded purchase and sale contracts (acquired) the properties belonging to the Claimant and that formed part of the "Development ..." and was based on the selling value – 15% of the selling price - of the housing units, net of taxes and fees, being paid only in case of success of the recruitment. (cf. Agreement attached to the proceedings).

t) If the sale is not achieved, no compensation will be due to company B..., regardless of the efforts made and the expenses incurred by that entity in recruiting potential customers. (cf. Agreement attached to the proceedings).

u) In accordance with the fourth clause of the master contract signed between the Claimant and B...:

"THE SECOND PARTY undertakes to:

1. Achieve the following monthly objectives:

a. 3 (three) reservation or promise of purchase and sale contracts by the last day of the first month of validity of this contract;

b. 7 (seven) reservation or promise of purchase and sale contracts, by the last day of the second month of validity of this contract;

c. 11 (eleven) reservation or promise of purchase and sale contracts, by the last day of the third month of validity of this contract;

d. 15 (fifteen) reservation or promise of purchase and sale contracts, by the last day of the fourth month of validity of this contract;

e. 20 (twenty) reservation or promise of purchase and sale contracts, by the last day of the fourth month of validity of this contract;" (cf. master contract, contained in annex 7 of RIT and Document no. 8 attached by the Claimant).

v) In accordance with the third clause of the said contract, "THE SECOND PARTY undertakes to keep an updated record of potential buyers via email sent to the FIRST PARTY, providing their names and passport numbers at the time of registration notification and also indicating their legal representative in Portugal." (cf. master contract, contained in annex 7 of RIT and Document no. 8 attached by the Claimant).

w) Pursuant to the provisions of the contracts concluded between the Appellant and company B..., and as well as the invoices issued by B..., it follows that the agreed commissions were always paid as consideration for the results achieved, that is, the conclusion of promise contracts and purchase and sale deeds of the Claimant's properties (cf. Document no. 8 attached by the Claimant, and annexes 5 and 7 of RIT).

x) The Tax Inspection Services acknowledge in the Tax Inspection Report that the recruitment services of company B... were effectively provided and that the considerations were paid as a success fee (sale of properties), since in the description of the facts they state that the Claimant presented the following documents by reference to each of the sales (cf. summary table on page 21/423 of RIT that form annex 7 of the said RIT):

i) Invoices issued by company B...;

ii) The date on which they were issued;

iii) The article and fraction subject to transmission;

iv) The sale value of each of the properties;

v) The date of the deed (which were also presented) and the date of the promise contracts;

vi) The value of the commissions paid as consideration and the respective percentage value; and

vii) Identification of the buyers of each of the properties.

y) The recording of the commissions paid to B... in the "sub-account 62253 - Commissions - Marketing Consulting — International" was for the purpose of its distinction from commissions paid to national entities. (cf. testimony of witness F...).

z) In the contract signed between the Claimant and B..., it is stipulated that "Inspections of the Real Estate Units may only be carried out after a visit with the Fiduciary Agent is scheduled and confirmed. The Fiduciary Agent will provide the services of a real estate consultant to accompany the potential buyer (Client) on visits to the projects and Real Estate Units" (cf. clause 2) of the contract concluded on 10 January 2014 - Document no. 8 attached by the Claimant and RIT attached to the proceedings).

aa) The control of the visits by the Claimant was also carried out through the "(...) record of visits with potential buyers (Clients) must be made with the Fiduciary Agent via fax or email. The record must contain the names and passport numbers of the Clients." (cf. clause 3) of the contract concluded on 10 January 2014, annex 7 of RIT and Document no. 8 attached by the Claimant.

bb) In 2014, more than 200 visits were made by potential Chinese customers to apartments of the Claimant and brought by B..., with the latter being responsible for the inherent expenses with the purchase of airplane tickets, hotel accommodation expenses, meals, costs of travel of these potential customers who traveled to Portugal, not presenting any of these costs to the Claimant for payment (cf. statement of party D... and E...).

cc) All visits of potential Chinese customers recruited by B... to the Claimant's apartments were accompanied by female sellers who worked for the Claimant at the time, with the respective record of these visits being kept (cf. testimony of witnesses G... and H...).

dd) The recruitment services provided by B... to the Claimant oscillated, in the situation in question in these proceedings, between a minimum of 15% and a maximum of 20% on the sale value. (cf. RIT and statement of party D...).

ee) This constraint, combined with the much more substantial costs of the procedure for recruiting customers in China, implied the fixing of a percentage that could reach values between 15% and 20% of the sale value. (cf. statement of party D...).

ff) Commissions in the national market by companies established in Portugal do not exceed, as a rule, 5% of the sale value (cf. RIT).

gg) It results from the table contained in page 16/423 of the Tax Inspection Report that the Claimant, despite the commissions it paid to dispose of the properties that formed part of the "Development ..." managed to always obtain a positive margin and, consequently, net profit (cf. page 16/423 of RIT and Document no. 8 attached by the Claimant).

hh) The Tax Inspection Services accepted as an expense the intermediation commissions paid by the Claimant to company J..., Ltd., which equally worked the Chinese market and which collaborated with the Claimant in the years 2013 and which amounted to 15% (cf. page 18/423 of RIT - Document no. 8 attached by the Claimant and statement of party D...).

ii) In 2014, the Claimant ceased to have exclusivity with company J..., Ltd., and began to work with B... of whom it had good information about its capacity to work the Chinese market (cf. Statement of party D... and witness testimony...).

jj) The commissions paid to companies K... and L... for the international market relating to the recruitment of potential customers were 15% (cf. statement of party D...).

kk) The Claimant's Liabilities improved substantially in 2013 and 2014 as a result of the increase in its sales (cf. Testimony of witness F...).

ll) Although the invoices mentioned "marketing and advertising," they were actually sales commissions (cf. Testimony of witness F...).

mm) In compliance with Service Order no. OI2016..., issued on 2016/09/27 and pursuant to the provisions of number 1 of article 2 and paragraph b) of number 1 of article 14, both of RCPITA - Complementary Regime of Tax and Customs Inspection Procedure, an external inspection procedure was ordered for the Claimant (cf. RIT);

nn) The expenses relating to commissions, accounted for in account 62253, amounted to € 3,650,544.97 in the fiscal year 2014, resulting essentially from the sum of invoices issued by the following entities:

[Table showing commission accounts with values follows]

(Cf. RIT attached by the Respondent).

oo) With respect to each of the entities, the AT in the RIT found the following:

"-J..., LDA."

This is a taxpayer with registered office in Portuguese territory and classified, for IRC purposes, under the general taxation regime. As far as VAT is concerned, in the period under analysis, it is classified under the normal regime with quarterly periodicity. It exercises the activity listed under CAE 70220 – Other business and management consulting activities.

It was found that the vast majority of invoices issued by this entity and which appear in the accounting of A... identifies the description of the service performed, as well as the respective property (fraction, lot, nucleus and floor), with no problematic situations being detected.

It is further added that, in the invoices issued by company "J..., Ltd.", VAT was liquidated at the rate in force, in accordance with article 18.9 of CIVA, which company A... recorded in an expense account, due to the impossibility of exercising the right to deduction, pursuant to article 20.9 of CIVA, given the activity carried out."

(Cf. RIT attached by the Respondent).

pp) As a result of the analysis of the Claimant's financial statements for 2014, the Inspection Services detected the accounting of substantial amounts as commissions with the sale of properties, with emphasis on the expenses incurred relating to invoices issued by entity "B...", recognized accountingly in account 62253 – Commissions - Marketing Consulting – International, in the amount of (without VAT) € 1,700,475.49 – (Cf. RIT attached by the Respondent).

qq) The Inspection Services detected the accounting, in the Claimant's inventories, of 19 land lots for construction, located in the parish of ..., municipality of ..., acquired by deed dated 2009/05/06, which benefited from IMT exemption, pursuant to article 7 of CIMT, as they were intended for resale – (Cf. RIT attached by the Respondent).

rr) The same were recognized accountingly in sub-accounts of account 32 – Merchandise, for the total amount of € 2,523,293.85 – (Cf. RIT attached by the Respondent).

ss) During 2014, the Claimant proceeded to a revaluation of the said lots, embodied in the Evaluation Report carried out on 2014/12/19 by entity "C..., Ltd., with a "presumed transaction value" of € 1,233,000.00 being determined – (Cf. Annex 8 of RIT attached by the Respondent).

tt) As a result of the evaluation carried out, the Claimant made the accounting adjustment in the amount of € 1,290,293.85, corresponding to the difference between the respective accounting value of the lots and the evaluation value determined by C..., having recognized a loss, which is reflected accountingly in account 65201 – Losses by impairment – Land lots ... – (Cf. RIT attached by the Respondent).

uu) The Claimant added in Table 07 of the Form 22 declaration, the amount of € 448,930.00, on the understanding that the deductible adjustment could not exceed the difference between the accounting value of the lots and their respective asset values – (Cf. RIT attached by the Respondent).

vv) The revaluation of the lots of ... was made because their value did not correspond to their market value and was outdated in the balance sheet, the Claimant having considered the tax asset value as a conservative value (cf. Statement of party D... and testimony of witness F...).

ww) Following notification of the Tax Inspection Report Project, the Claimant delivered a Replacement Statement of the IRC Form 22 (declaration no. ...), which resulted in the archiving of the inspection procedure (cf. Order of the Deputy Financial Director, dated 5 April 2017 and Annex 11 of RIT, which contains the replacement statement of the IRC Form 22).

xx) The Claimant filed, on 3 May 2017, with the Financial Services of Lisbon-..., an amicable claim against the assessment acts (cf. Document no. 5 attached with PA).

yy) The Claimant was notified of the draft decision on the amicable claim and to, if it wished, and within 15 days, pronounce itself on the draft decision of amicable claim (cf. Document no. 6 attached with PA).

zz) The Claimant exercised the competent right to be heard (cf. Document no. 7 attached with PA).

aaa) Through Official Notice of 2 July 2018, of the Administrative Justice Division, of the Financial Directorate of Lisbon, the Claimant was notified of the Order of the Deputy Financial Director of the Financial Directorate of Lisbon, dated 28 June 2018, which dismissed the amicable claim filed against the assessment acts for IRC and Compensatory Interest, relating to the fiscal year 2014 (cf. Document no. 1 attached with PA).

bbb) The Claimant promoted, on 4 April 2017, the payment of the tax determined in order to avoid the institution of a tax enforcement proceeding (cf. Document no. 4 attached with PA).

Substantiation of the Determination of Factual Matter

The facts were determined as proven based on the documents attached with the request for arbitral pronouncement and with the administrative file and supported by the statements given at the hearing by the party Claimant and the witnesses examined, who confirmed the vast majority of the facts alleged by the Claimant.

All the witnesses appeared to testify with impartiality and with knowledge of the facts they mentioned, having convinced the Tribunal that they testified with impartiality and truthfulness.

It should be noted that the Tribunal does not have the duty to pronounce on all the matters alleged, but rather the duty to select only those relevant to the decision, taking into account the cause (or causes) of action that sustains the request formulated by the Claimant as plaintiff (cf. articles 596, number 1 and 607, numbers 2 to 4, of the Civil Procedure Code, as amended by Law 41/2013, of 26/6) and to record whether it considers it proven or not proven (cf. article 123, number 2, of CPPT).

According to the principle of free appraisal of evidence, the Tribunal bases its decision, in relation to the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of evidence brought to the proceedings and in accordance with its experience of life and knowledge of people (cf. article 607, number 5, of the Civil Procedure Code, as amended by Law no. 41/2013, of 26/6). Only when the probative force of certain means is pre-established in Law (e.g., full probative force of authentic documents - cf. article 371, of the Civil Code) does the principle of free appraisal not dominate the appraisal of the evidence produced.

III. LEGAL MATTER

a) Lack of substantiation of the assessment acts for IRC and compensatory interest

The Claimant alleges that the assessments are not properly substantiated, as, in its judgment, it is not sufficient to refer to the RIT, there being no even reference to it, and they should be annulled accordingly.

The jurisprudence regarding the substantiation of an assessment act sustains that: "The act will be sufficiently substantiated when the administered party, placed in the position of a normal recipient – the bonus pater familiae mentioned in article 487, number 2 of the Civil Code – may come to know the factual and legal reasons that are at its origin, in order to allow it to choose, in an informed manner, between accepting the act or initiating the legal means of challenge, and so that, in the latter circumstance, the court may also effectively exercise control of the legality of the act, assessing its legal correctness in light of its contextual substantiation".

Or, in other words, the substantiation should incorporate elements of fact and law that allow the recipient of the act to understand the decision-making and evaluative process of the AT.

In the case under judgment, it is possible to discern throughout the inspection report a quite descriptive and exhaustive set of facts and, as well, of legal norms that frame the corrections that were made.

For which reason the tribunal considers that the act is sufficiently substantiated, since it contains the minimum references to the matter of fact and law used by the AT to substantiate the practice of the tax acts in question in these proceedings.

Indeed, so much so that the Claimant showed perfect knowledge of the factual and legal framework on which the AT relied, and which motivated, moreover, an exhaustive defense presented in the tax procedure and now in the arbitral process.

In summary, the tribunal considers that, although the assessments in question do not expressly refer to the RIT, this is not sufficient to consider them to suffer from the defect of lack of substantiation, since the Claimant revealed through its conduct perfect knowledge of what was being imputed to it by the Respondent, whereby on this point the Claimant's request is unfounded.

b) Error concerning the factual and legal premises regarding the non-acceptance as an expense of the amount of commissions paid to B... as they meet the legal prerequisites to be accepted as expenses as provided for in article 23-A, number 1, paragraph r) of CIRC

The main issue under consideration in these proceedings concerns the deductibility of expenses under IRC relating to payments to company B....

This issue is not new to CAAD and has already been the subject of various arbitral decisions that pronounced themselves on the same question.

We will follow very closely the decisions issued by Arbitral Tribunals in proceedings no. 198/2017-T and 419/2017-T, which appreciated questions entirely similar to those in the present proceedings, and to whose substantiation and decision this Arbitral Tribunal adheres in its fundamental lines.

From the evidence produced in these proceedings, it follows that the Claimant managed to prove, from the perspective of the Tribunal, both the performance of the operations and the fact that they do not suffer from the defect that is imputed to them by the AT of their abnormal and/or excessive character.

It resulted from the evidence produced that the Claimant, in order to face the crisis felt in the national real estate market in the years in question in these proceedings, contracted with company B..., a company based in Hong Kong, which exercised a global activity of recruiting Chinese citizens who intended to invest in real estate in Portugal, the recruitment of Chinese customers to purchase Claimant's properties in the said year of 2014.

It also resulted from the evidence produced that a global activity of recruiting Chinese citizens for the purchase of the Claimant's properties in 2014 was carried out by company B..., which was embodied, moreover, in the sale of 15 apartments with recruitment of the said company.

This recruitment activity included actions of advertising and disclosure in China about the advantages and benefits of acquiring real estate in Portugal, payment of travel expenses, accommodation and meals, as well as other expenses related to their stay and visit to the Claimant's properties, accompaniment on visits to the properties, hiring of drivers to make the movements of Chinese citizens in Portugal, etc.

Given the evidence presented to the proceedings, there are no grounds for doubts about the performance of this activity, not only because extensive commercial documentation and correspondence exchanged between the Claimant and B... (and AT never at any time questions the lack of truthfulness of the same) relating to these activities was attached, but also because the evidence produced at the hearing was to that effect, from those who had direct contact in Portugal with these activities.

On the other hand, it is not controversial the fact that the Claimant sold a large quantity of properties to Chinese citizens, this being an indirect, but convincing, proof that there was an efficient recruitment activity in the Chinese market, as without this, it is not apparent how these Chinese citizens could have known that the Claimant had properties for sale in Portugal, considering that the latter has no presence in that country.

On the other hand, the fact that B...'s remuneration is only paid as a direct consequence of the realization of the sales ensures that there were no payments that did not have underlying the said recruitment activity.

It was also proved that in 2013 the Claimant collaborated with company J..., a Chinese company, paying it commissions of 15% on the sales to Chinese citizens that it managed to recruit, a situation entirely identical to company B..., the only difference being the fact that the latter had not at the date established any company in Portugal for the said activity, contrary to what J... did. On the other hand, with respect to the commissions paid to J..., the AT saw no illegality or incorrectness, which is not understood by absolute duality of criteria and lack of coherence with the position adopted with respect to the commissions paid to company B....

On the other hand, it was equally proved that the Claimant paid commissions of 15% to real estate mediation companies that operated in the national market, in casu, K... and L..., with respect to the sales that they managed to mediate for the international market and this was not questioned at any moment by the AT.

Thus, it is to be considered proven that the payments made by the Claimant correspond to operations effectively realized.

With respect to the abnormal character of the said expenses or their excessive amount, a defect imputed to the AT, it is important to say as follows.

The territory of Hong Kong was (and still is) included, in 2014, in the "list of countries, territories and regions with regimes of privileged taxation, clearly more favorable", which appears in Ordinance no. 292/2011, of 8 November, which amended Ordinance no. 150/2004, of 13 February.

When a particular taxpayer makes payments to a non-resident entity subject to a privileged tax regime, it must make proof that the payment was effectively made and that it has a normal character or else that it is not excessive.

In this light, we also adhere to the position expressed by the Arbitral Tribunal in proceedings no. 198-2017, which considered a case entirely similar to those in the present proceedings and of which the relevant excerpt is now transcribed:

"Concerning the normality of payments for the provision of customer recruitment services for the acquisition of properties, it is evident, as it is a regulated professional service provision activity, precisely with respect to properties (Decree-Law no. 69/2011, of 15 June), and, like any activity of a professional nature, it is remunerated. What would constitute abnormality would be the provision of services free of charge to the Claimant, with the (...) bearing the expenses of the activity.

As for the amount of commissions, it has to do with the requirement of 'non-excessiveness' and not with that of 'non-abnormality' for the purposes of those articles 65 and 23.A of CIRC.

To decide whether or not there is excessiveness, one cannot take as terms of comparison the percentages of commissions that the Tax and Customs Authority says are usually charged by real estate companies, between 3% and 5%, as the activity developed by (...) is not limited to what is normally carried out in real estate mediation, which does not involve expenses of the order of those proved to be borne by (...) (payment of trips, accommodation, meals, transport, interpreters, etc.).

On the other hand, the assessment of the requirement of non-excessiveness should be carried out taking into account the situation of the taxpayer, seeking to ascertain whether the payment should be considered excessive, from its perspective, in the context in which it has to decide to pay for the services. From this perspective, the payment will be excessive when it is demonstrated that the taxpayer could obtain the same service for a lower amount.

It follows from the evidence produced that the Claimant intended to sell the properties as quickly as possible, as it was expected that the process of construction and sale of the properties would be completed by 2010, five years after the start of the construction process, and still had not managed to sell them by 2013 and 2014, due to the situation of economic and financial crisis affecting Portugal.

(...)

In these circumstances, the payment cannot be considered excessive, as it is justified by the need to obtain recruitment services and there being no alternative at a lower price. The reasonableness of the payments made to (...) is further reinforced by the fact that the Claimant was not affected by the payments it made, as it only paid when it realized the sale of the properties and what it paid to (...) added to the selling price that the Claimant itself fixed and intended to obtain for itself."

The assessment of the requirement of non-excessiveness should be carried out taking into account the situation of the taxpayer, seeking to ascertain whether the payment should be considered excessive, from its perspective, in the context in which it has to decide to pay for the services.

From this perspective, the payment will be excessive when it is demonstrated that the taxpayer could obtain the same service for a lower amount.

It follows from the evidence produced that the Claimant intended to sell the properties as quickly as possible, given the accumulated large inventory of merchandise, as it was bearing interest charges on the loan for the construction of the properties and, as well, maintenance expenses of the said properties underlying the activity pursued.

The evidence produced also indicates that the Claimant could not obtain the recruitment of customers with payment of lower commissions with respect to the Chinese market, as the real estate mediation companies with which it collaborated in the national market did not provide it with customers in sufficient quantity for the rapid sale of the large quantity of properties it held for sale and already in 2013 the Claimant paid commissions of 15% to company J..., precisely concerning the Chinese market and which were never questioned by the AT.

In these circumstances, the payment cannot be considered excessive, as it is justified by the need to obtain recruitment services (indeed, in its nature much broader than the traditional real estate mediation services provided in the national market as proved) and there being no alternative at a lower price for services with the same volume and especially with the same result and high success rate as occurred with B....

The reasonableness of the payments made to B... is further reinforced by the fact that the Claimant was not affected by the payments it made, only paying when it realized the sale of the properties and what it paid added to the selling price that the Claimant itself fixed and intended to obtain for itself, thus ensuring the profit margin defined for the sale.

In light of the foregoing, it is concluded that the Claimant proved that the payments made to B... were not abnormal nor excessive.

It is thus concluded that the acts of assessment for additional tax and interest in crisis in these proceedings suffer from the defect of violation of law due to error in the factual and legal premises, whereby they cannot subsist in the legal order.

c) Error concerning the legal and factual premises in determining the application of the rate of 35% by way of autonomous taxation on the commissions paid by the Claimant

Concluding, as it was concluded above, that the assessment acts relating to the fiscal year 2014 suffer from the defect of violation of article 23, number 1, paragraph r) of CIRC, in the part relating to the non-deductibility of the payments made to B..., in the year 2014, in the total amount of € 1,420,559.76, for the same reasons it is necessary to confirm the illegality of the autonomous taxation assessment based on number 8 of article 88 of CIRC, in the amount of € 595,166.42.

In light of the foregoing, the annulment of the assessment is justified, with respect to IRC in the part corresponding to this correction, as well as the autonomous taxation, pursuant to article 163, number 1 of the Code of Administrative Procedure, subsidiarily applicable, by force of the provisions of article 2, paragraph c) of the General Tax Law.

d) Error concerning the factual and legal premises and insufficient substantiation for the purposes of the provisions of article 77 of the General Tax Law in not accepting the loss by impairment of the land lots of ... in question in these proceedings

As results from the evidence produced, the revaluation of the lots of ... was made because their value did not correspond to their market value and was outdated in the balance sheet, the Claimant having considered the tax asset value as a conservative value, that is, that the deductible adjustment for tax purposes could not (should not) exceed the difference between the accounting value of the lots and their respective asset values of the lots.

When the initial value of inventories exceeds their net realizable value, the taxpayer should consider an impairment loss and reduce the value of the inventories to their net realizable value, since the assets should not be recorded at amounts exceeding the amount estimated to be received from their sale. The value of the impairment thus corresponds to the difference between the cost of the inventories and their net realizable value.

In fiscal terms, matters concerning inventories are provided for in articles 26 to 28 of the IRC Code and is very similar, moreover, to the rules used in accounting standardization.

The AT in the Tax Inspection Report does not come to deny that in this case there was a situation of devaluation in the balance sheet of the Claimant with respect to those assets, that is, that there was an effective devaluation of the value for which the asset was recorded in its balance sheet.

One reaches this conclusion easily by comparing the tax asset value of the said lots with their accounting value, the latter recording a value much higher than the former and in a context of acknowledged crisis in the sector in the year in question.

What the AT comes to say, and it is in this perspective that the Tribunal will pronounce itself, is that despite not calling into question the credibility of the evaluation report of company C... which determined the market value of the land lots, it considers that the same does not comply with the provisions of article 26, number 4 of the IRC Code.

Let us see.

In accordance with the provisions of article 26, number 4 of the IRC Code, "Sale prices shall be deemed to be those contained in official elements or the last ones that under normal conditions have been practiced by the taxpayer or those which, at the end of the taxation period, are current in the market, provided they are deemed suitable or subject to unequivocal control."

The legislator determines that the sale price shall be considered to be i) that contained in official elements; ii) the last ones that under normal conditions have been practiced by the taxpayer and, lastly, in case of impossibility of recourse to the first criteria, iii) those which at the end of the taxation period are current in the market, provided they are deemed suitable or subject to unequivocal control.

(Bold and underlined by the Tribunal)

The law had the concern to establish, alternatively, a set of criteria for determining the market value.

With respect to the first of the criteria — the last values contained in official elements — the same does not exist, as neither the Claimant nor the AT in the tax inspection report invoke any "official" source to determine that value.

Already in the Response stage the Respondent came to say that, given the existence of an ordinance, namely ordinance 280/2014, which publishes official data regarding the value per m2 of properties and establishing the legislator as the preference, as appears from article 26, number 4, by official values, the Claimant should have compared the determined values with those derived from this ordinance.

However, the said Ordinance determines the average construction value per square meter, for the purposes of article 39 of the Municipal Property Tax Code, which in turn provides for the base value of built-up properties. However, in this case, these are land lots for construction, with no buildings erected on them, whereby it is admitted not to be this Ordinance applicable, as moreover, the law itself - article 26, number 4 of CIRC - does not mandate its application and could have done so easily if that were the legislator's intention.

With respect to the second criterion - the last values that under normal conditions have been practiced by the taxpayer - recourse to the same is also not possible, in that the Claimant did not transact any property in the municipality of ..., as is moreover acknowledged by the AT in the RIT.

There remains thus the last of the criteria – the market value – which, however, should be suitable or subject to unequivocal control.

There remain no doubts, therefore, that according to law the market value should be suitable or subject to unequivocal control, that is, the law expressly establishes an alternative between suitability and unequivocal control.

Now, in the present case the Tribunal considers that at least the first of those criteria - the one of suitability – is met, since it is a value resulting from an evaluation by an independent third-party entity to the Claimant, accustomed to making valuations of properties in a regulated context (Real Estate Investment Funds), the article 15 of whose legal regime providing that "The valuation of a property should be carried out with the aim of providing the managing entity and the participants with objective and rigorous information regarding the best price that could be obtained, should the property be disposed of at the time of valuation, under normal market conditions," precisely what was sought to be obtained.

On the other hand, the fact that the valuation methodology implied, as is acknowledged by the AT in the Tax Inspection Report itself, that "The market research used by the evaluation entity and apparent in the Report focused on the analysis of the market value of 5 land lots, marketed in the same parish by companies "M...", "N..." and "O...", as well as the market value of 5 semi-detached houses, of type T3, whose market value was calculated with recourse to entities: "P...", "O...", "Q..." and "R..."," demonstrates that the Report of company C... was based on data provided by various companies in the real estate mediation sector, which demonstrates, in the view of this Tribunal, the solidity of the elements gathered by the Report of C... in the suitable effort it made to determine the market value of the land lots in question in these proceedings.

It is further added that the Tax Inspection Services, despite not calling into question the credibility of the work carried out, came to deny the value that the Claimant managed to determine without, however, proposing a different value or an alternative and objective methodology.

The AT itself has already acknowledged that the valuation or comparative market method as potentially considered was admissible in a case in which the situation was one of impairment in inventories having as its object a company whose corporate purpose is the purchase and sale of properties and resale of those acquired for that purpose, a situation identical to the one in question in these proceedings, in the Binding Information issued in proceedings no. 2019... when in point 18 of that same information it admits and we quote: "18. According to information from the company "Two other properties, located on the opposite side of the same street, with similar characteristics, in better condition of preservation and with conditions of immediate habitability, were equally being placed for sale, both at the price of € 85,000.00 (eighty-five thousand euros), as can be seen from the attached sheets." 19. Everything leads to conclude that we are faced with an acquisition of a property at a value above its market value. 20. It is admissible to consider that only in the taxation period of 2018 were diligences undertaken to sell the property, since until August of that year the property was occupied by the tenant. Only after that date, that is, after the vacation, was the property placed for sale in real estate mediation agencies and the need was verified to reduce the selling price from € 100,000.00 to € 85,000.00, this being the estimated value of sale and current in the market, since, as the company mentions, two other properties, located on the opposite side of the same street, with similar characteristics, were placed for sale at this value."

It should be clarified that in the situation, and by reviewing the said Binding Information, one is left precisely with the idea that those other two properties did not belong to that company, but in that case such method was considered suitable by the AT.

In light of the foregoing, the Claimant's request proceeds as to this correction.

Issues of Knowledge Rendered Moot

Proceeding with the request for arbitral pronouncement on the basis of a defect of violation of law, which provides effective protection of the interests of the Claimant, the knowledge of the remaining defects imputed by the Claimant is rendered moot, as it is unnecessary (article 130 of CPC).

On the Request for Indemnificatory Interest

In accordance with the provisions of paragraph b) of article 24 of RJAT, the arbitral decision on the merits of the claim, against which no appeal or challenge is available, binds the Tax Administration from the end of the deadline provided for appeal or challenge, and must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the deadline provided for the spontaneous performance of the sentences of tax courts, "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for that purpose," which is in line with what is provided for in article 100 of the General Tax Law [applicable by force of the provisions of paragraph a) of number 1 of article 29 of RJAT], which establishes that "the tax administration is obliged, in case of total or partial success of an amicable claim, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation that is the object of the dispute, including the payment of indemnificatory interest, if applicable, from the end of the deadline of the execution of the decision."

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

The judicial challenge process, although it is essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration in the payment of indemnificatory interest, as can be inferred from article 43, number 1 of the General Tax Law, in which it is established that "indemnificatory interest is due when it is determined, in an amicable claim or judicial challenge, that there was error attributable to the services as a result of payment of the tax debt in an amount higher than that legally due," and from article 61, number 4 of CPPT (as amended by Law no. 55-A/2010, of 31 December, to which corresponds number 2 in the original wording), that "if the decision that recognized the right to indemnificatory interest is judicial, the deadline for payment counts from the beginning of the deadline for its spontaneous performance."

Thus, number 5 of article 24 of RJAT, when it says that "the payment of interest, regardless of its nature, is due, pursuant to the provisions of the general tax law and the Code of Tax Procedure and Process," should be understood as permitting the recognition of the right to indemnificatory interest in the arbitral process.

In the case at hand, it is clear that, following the illegality of the assessment acts and their annulment, there is ground for payment of indemnificatory interest, to the extent of the undue payment, since the assessment is attributable to the Tax Administration, which, on its own initiative, practiced it without legal support.

Consequently, the Claimant has the right to indemnificatory interest, pursuant to articles 24, number 5, of RJAT, 43, number 1, of the General Tax Law, and 61 of CPPT, to be determined by the Tax and Customs Authority in the performance of this accord.

IV. DECISION

It is therefore agreed in this Arbitral Tribunal to:

a) Judge the request for arbitral pronouncement to be entirely well-founded;

b) Judge the dismissal of the amicable claim to be illegal, and in this sequence,

c) Determine the annulment of the additional IRC assessment no. 2017..., relating to the fiscal year 2014, an amount that includes the liquidated compensatory interest of € 94,849.34 and default interest of € 2,315.51;

d) Judge as well-founded the restitution of the amount paid by the Claimant, plus indemnificatory interest;

e) Judge the consideration of the remaining issues raised to be rendered moot.

V. VALUE OF THE MATTER

In accordance with the provisions of articles 315, number 2, of CPC and 97-A, number 1, paragraph a) of CPPT and article 3, number 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the matter is fixed at € 1,420,559.76.

Lisbon, 3 July 2019

Fernanda Maçãs (President Arbitrator)

Professor Doctor Manuel Pires

Dr. Henrique Nogueira Nunes

Text prepared by computer, pursuant to article 131, number 5 of the Civil Procedure Code, applicable by remission of article 29, number 1, paragraph e) of RJAT.

The preparation of this arbitral decision is governed by the spelling prior to the 1990 Spelling Agreement.

DISSENTING VOTE

According to my understanding, the decision should be one of rejection of the request, with the respective consequences, with the following substantiation:

1. By force of article 23-A, number 1, paragraph r) of the Corporate Income Tax Code (CIRC), the burden of proving the non-existence of the "excessive amount" of the commissions in question fell ineluctably upon the Claimant and the latter failed to produce the due proof. The Tribunal should have been apprised of the non-excessive level of the commissions charged, given that such could not be considered either negligible or notorious, but rather subject to controversy. For this, it would become necessary something that could lead to free motivated, objective, controllable, sufficient conviction of the rightness of the merit, an exigency all the greater the greater the impact on the decision, with a global, macro-considered substantiation not being sufficient, even if it existed. The testimony and statements of the Claimant's collaborators (indeed, given the time elapsed, revealing excellent and coincident memories even in details), all, applying similitude, do not [meet the standard of] at arm's length, as well as circumstances pressing for action—the urgent need for services broader than the usual ones and with attainment of desired results—did not satisfy what was sought, also because one could not establish the necessary causality with the concrete levels presented (15%-19.9%, net of all taxes and fees), but only that the circumstances required higher levels facing what is usually done (3% to 5%). Mere affirmations are also not sufficient that no lower levels were found or that they were paid to other intermediaries at 15% (something indicated, which could be of importance—an invoked acceptance of the rate of 15% paid to another agent—is not even found, including in the indicated location). Equally, the repercussion of the commission on the selling price is irrelevant to what is sought, since the excessive character does not cease to be so because of that circumstance, its relevance being only within the scope of the weight of the expense for the payer. Given all the above, it is not possible to make a positive valuation of what was presented, since there is no evidence and, a fortiori, the so-called clear and convincing evidence, leading to objective verisimilitude, which should lead to the decision, should eliminate the doubt in sufficiently acceptable degree. The opposite occurred, as is apparent in the case. Thus, plausibility did not have demonstrated basis, reasonable doubt was not overcome, the so-called preponderance of evidence did not operate with respect to doubtful or uncertain facts. Equality or similarity verified with other operations accepted of the same type and in the same circumstances, if demonstrated, would eliminate the non-acceptance of very high levels facing the normal, and one cannot, one repeats, exceptional circumstances necessarily lead to generating certainty of concrete unusual levels, given the failure of the indispensable quantitative, and not merely qualitative, elements of comparison. Given, therefore, the non-existence of proof on the part of the Claimant, noting the absence of elements in the indicated sense, what was invoked would have to be considered not proven, given the inversion of the burden of proof.

2. Article 26, number 4 of CIRC, by remission of article 28, number 2 of the same Code, establishes the elements to resort to for the determination of the value of the land. Considering what is provided therein, one finds, in the case now judged, in particular, the non-resort, without presenting any explanation and, a fortiori, justification, to the "official elements" clearly existing in separate legislation or codified, relying instead on an element of a special character that does not correspond to the nature of the entity in question, as well as to another criterion and to support from elements not understood in the cited norm, being evident not to discern the necessity of mention with specification, by the remissive norm, of the applicable norms. It is an object of general knowledge that what is provided in mandatory law cannot be set aside, whether one considers it imperfect, whether the result established in it is close to the result of the application of another criterion, placed as appropriate, or for any other reason that the applicator judges that it has, by understanding that it has elements leading to a solution more adapted to what is sought to be resolved than that established by law.

03.07.2019

(Manuel Pires)