Summary
Full Decision
ARBITRAL DECISION
Report
A - General
A..., a general partnership, a legal entity and taxpayer number..., with registered office at Rua..., no....–..., ...-... (hereinafter referred to as "Claimant"), submitted on 01.09.2017 a request for the constitution of an arbitral tribunal in tax matters, which was accepted, seeking, on the one hand, in immediate terms, the annulment of the partial dismissal decision of the Hierarchical Appeal no. ...2016..., relating to Corporate Income Tax (hereinafter "CIT") for 2013, and, mediately, the annulment of the act of additional CIT assessment and compensatory interest, numbered 2016..., relating to 2013, in the part in which it reflects corrections to the CIT taxable income for the tax year 2013, as promoted by the Tax and Customs Authority, with the consequent reimbursement of the amounts unduly paid and, on the other hand, the condemnation of the Tax and Customs Administration to pay compensation interest for the unduly paid tax payment obligation.
Pursuant to the provisions of section a) of article 2, subsection 2, and section b) of article 11, subsection 1, of Decree-Law no. 10/2011, of 20 January, in the wording given to it by article 228 of Law no. 66-B/2012, of 31 December (the Legal Framework for Arbitration in Tax Matters, hereinafter "LFATM"), the Deontological Council of the Administrative Arbitration Centre (CAAD) appointed the signatories as arbitrators, the Parties having been duly notified and having expressed no objection to such appointment.
By dispatch of 27.09.2017, the Tax and Customs Authority (hereinafter referred to as "Respondent") proceeded to appoint Ms. Dr. B... and Ms. Dr. C... to intervene in the present arbitral proceedings, in the name and representation of the Respondent.
In accordance with the provisions of section c) of article 11, subsection 1, of the LFATM, the Arbitral Tribunal was constituted on 28.11.2017.
On 04.12.2017, the Director General of the Tax and Customs Authority was notified to, within a period of 30 days, submit a response, attach a copy of the administrative file and, if it so wished, request the production of additional evidence.
On 19.01.2018, the Respondent submitted its Response and, on 23.01.2018, the Administrative File.
B – Position of the Claimant
The Claimant is engaged in the trade of food and consumption products.
The Claimant was subject to a tax inspection procedure under external service order no. OI2015..., which covered the tax period of 2013.
On 07.09.2015, the Claimant was notified of the tax inspection report, which resulted in corrections of an arithmetic nature to the taxable income relating to the tax year 2013 in the total amount of € 512,630.93 (five hundred and twelve thousand, six hundred and thirty euros and ninety-three cents).
These corrections concern two blocks of situations:
Error in the calculation of capital gains relating to 29 light passenger or mixed vehicles that formed part of its tangible fixed assets, because the amount of depreciation considered for tax purposes was not deducted from the acquisition value, rather than the amount of depreciation practiced (in accounting) – in the amount of € 230,431.34 (two hundred and thirty thousand, four hundred and thirty-one euros and thirty-four cents); and
Allegedly improper deduction under the heading of tax benefit resulting from net job creation (hereinafter "NJC") by violation of the requirements set out in article 19 of the Tax Benefits Scheme (hereinafter "TBS"), which amounts globally to € 282,199.59 (two hundred and eighty-two thousand, one hundred and ninety-nine euros and fifty-nine cents), relating to three distinct situations:
Unfavorable adjustment relating to workers hired under part-time work arrangements – in the amount of € 119,929.64 (one hundred and nineteen thousand, nine hundred and twenty-nine euros and sixty-four cents);
Unfavorable correction as a result of the alleged non-compliance with the requirements of the NJC benefit that occurred in 2010 but with effects in 2013 – in the amount of € 13,580.00 (thirteen thousand five hundred and eighty euros); and, finally
Unfavorable correction as a result of the alleged non-compliance with the requirements of the NJC benefit that occurred in 2012, detected in a prior inspection, but with effects in 2013 – in the amount of € 148,689.95 (one hundred and forty-eight thousand, six hundred and eighty-nine euros and ninety-five cents).
On 28.01.2016, the Claimant filed a gracious reclamation against the additional CIT assessment for 2013 no. 2015... and petitioned for its partial annulment, on grounds of illegality, as regards € 230,431.34 relating to the determination of capital gains and losses obtained from the sale of 29 light vehicles and € 275,409.59 relating to the NJC benefit, having accepted that a female worker should be disregarded.
The gracious reclamation was dismissed by the Large Taxpayers Unit.
The Claimant filed a hierarchical appeal against the dismissal of the gracious reclamation.
In the decision on the hierarchical appeal, a partial dismissal, the Respondent understood to maintain the tax act under appeal.
The Claimant maintains that there was a breach of essential legal formalities, namely: (i) the failure to suspend the Hierarchical Appeal Procedure no. ...2016... and (ii) the failure to provide the Claimant with the opportunity to exercise the right to be heard in the course of that same Hierarchical Appeal.
The controversy surrounding the amount of the NJC tax benefit for the 2013 tax year is directly related to the dispute concerning the number of jobs created in 2012, which is also the subject of arbitral appraisal. Thus, until the final judgment of that arbitral decision, relating to the 2012 tax year, the suspension of the Hierarchical Appeal Procedure no. ...2016... should have been ordered, since the issue examined in that other arbitral process – the number of jobs created in 2012 – constitutes a preliminary question.
Furthermore, the Respondent could not have dispensed with the exercise of the right to be heard in the course of the Hierarchical Appeal Procedure no. ...2016... (CIT for 2013), much less on the basis of the content of administrative instructions, specifically Circular no. 13/99, of 8 July, of the Tax Justice Services Department. It would have been possible for the Claimant, in that context, in addition to contesting the grounds underlying the partial dismissal decision of the aforementioned Hierarchical Appeal, to bring to the attention of the Respondent the pendency of an arbitral dispute that should have imposed its suspension.
With respect to the calculation of capital gains relating to 29 light passenger or mixed vehicles that formed part of its tangible fixed assets, the Claimant maintains that the amount of depreciation considered for tax purposes and not the amount of depreciation practiced should be deducted from the acquisition value, as the Respondent wishes, since, at the date of the facts, article 46, subsection 2 of the Corporate Income Tax Code (hereinafter "CITC") contained the following wording: "capital gains and losses are given by the difference between the realization value, net of the charges inherent to it, and the acquisition value minus losses due to impairment and other value corrections provided for in article 35, as well as depreciation or amortization accepted for tax purposes, without prejudice to the final part of article 30, subsection 5". The Claimant's understanding was endorsed by the Administrative and Tax Court of Sintra, in a judgment dated 4 April 2017, in the judicial appeal proceedings no. .../16...BESNT, which decided a dispute between the same parties.
Accordingly, the correction to the taxable income for the 2013 tax year should be annulled in the amount of € 230,431.34, as well as the reimbursement of the unduly paid tax in the amount of € 72,240.23, and respective compensatory interest.
With respect to the corrections corresponding to the NJC, the Claimant claims, for the 2013 tax year, a tax benefit of € 877,435.30, and the Respondent made a correction to the amount considered by the Claimant of € 282,199.59, the deduction of which was deemed improper. Already in the Hierarchical Appeal proceedings, the Respondent came to accept the creation of five jobs (instead of none, as it had previously argued), thereby recognizing that "the value of the deduction to the net result for the purpose of determining the taxable income for the tax period of 2013 under the heading of tax benefit for the enhancement of job creation that occurred in the tax period of 2012 amounts to € 33,385.85".
The corrections corresponding to the NJC, as seen in section 1.10. ii) are due to three distinct situations.
One concerns the NJC that occurred in 2010 but with effects in 2013. The issue concerns a worker who the Respondent came to recognize did not appear on the list of ineligible employees, but without attributing the effects of the enhancement to its eligibility, merely noting that in the calculation of the 2013 tax benefit made by the Tax Inspection Services the said worker was "disregarded", with the Claimant considering that the only relevant ground is that of the notified act (and not that which is contained in prior acts), which contains a contradiction in its own terms, omitting the reasons why the worker in question, being considered "eligible", is simultaneously given as "not eligible for enhancement".
Accordingly, the correction to the taxable income for the 2013 tax year should be annulled in the amount of € 6,790.00, as well as the reimbursement of the unduly paid tax in the amount of € 2,128.67 and respective compensatory interest.
Another situation concerns workers hired under part-time work arrangements. The Respondent understands that the maximum amount of the annual enhancement per job should be subject to proportional adjustment whenever a part-time work contract is involved, which has no support whatsoever in the letter or spirit of the law.
Accordingly, the correction to the taxable income for the 2013 tax year should be annulled in the amount of € 119,929.64, as well as the reimbursement of the unduly paid tax in the amount of € 37,597.94 and respective compensatory interest.
The last situation refers to the alleged non-compliance with the requirements of the NJC benefit that occurred in 2012, but with effects in 2013. In that year, the Claimant believes that 52 jobs were created, while the Respondent recognizes only the creation of 5, with no disagreement as to the number of worker entries: 226. There is no agreement, however, as to the number of exits: 221 according to the Respondent's view and 174 according to the Claimant's, a disagreement which was the subject of a request for arbitral pronouncement, which is why the Respondent should have ordered the suspension of the Hierarchical Appeal Procedure no. ...2016....
Nevertheless, in the Hierarchical Appeal proceedings, the Respondent had all the elements to verify that the workers qualified as "eligible exits" could not have been, since those workers actually had fixed-term employment contracts and one of the workers, then aged 19, contrary to what the Respondent argues, had not completed secondary education, and therefore cannot be included in the list of "eligible exits".
Accordingly, the correction to the taxable income for the 2013 tax year should be annulled in the amount of € 148,689.95, as well as the reimbursement of the unduly paid tax in the amount of € 74,241.71 and respective compensatory interest.
C – Position of the Respondent
The Respondent maintains that it could not suspend the Hierarchical Appeal Procedure no. ...2016... (CIT 2013), because, in tax matters, a suspensory effect shall only be granted to the procedure if certain requirements are met, which are not satisfied, such as, for example, the provision of a guarantee.
As to the dispensation of the exercise of the right to be heard in the course of the Hierarchical Appeal, from the request for arbitral pronouncement it appears that such exercise, if exercised, would add nothing new to what had already been said when the Hierarchical Appeal was filed, there being a legal provision for the dispensation of the taxpayer's participation when it has already been heard in any of the phases of the procedure, except in case of invocation of new facts about which it has not pronounced, which is not the case at all.
With respect to the calculation of capital gains and losses, the depreciation actually practiced and accounted for should have been taken into account, not those accepted for tax purposes. Article 46, subsection 2 of the CITC, in the part that requires attention to "depreciation or amortization accepted for tax purposes," does not dispense with the analysis of the instructions contained in schedule 31, relating to the determination of capital gains and losses [column (10), section d)], which state that in the case of light passenger or mixed vehicles not engaged in public transport services or intended to be leased in the exercise of the normal activity of the taxpayer, the depreciation actually practiced is relevant, in line with the understanding enshrined in Circular no. 6/2011 of the DSIRC.
In this respect, it is important to draw attention to the fact that section e) of article 34, subsection 1 of the CITC, subsection 1 of article 11 of Decree-Regulation 25/2009, of 14/09, and Ordinance no. 467/2010, of 07/07, established a limitation on the tax-deductible value of light passenger or mixed vehicles (€ 29,928.87 in periods prior to 2010, € 40,000.00 in the 2010 period, € 30,000.00 in the 2011 period, and € 25,000.00 in the 2012 and 2013 periods), so that depreciation calculated above those limits does not contribute to the determination of taxable income. If that is so, it makes no sense to admit that, upon the alienation of the asset, that normative scope is negated, using in the calculation of capital gains and losses accepted tax depreciation rather than depreciation practiced. To meet the objective that emerges from the law, the calculation must take into account the effective cost of acquisition (and not the limit value) and the amount of depreciation practiced in accounting (and not the respective maximum amount, recognized for tax purposes).
With respect to the NJC that occurred in 2010 but with effects in 2013, the Respondent refers to Annex VIII of the 2010 Inspection Report, where it can be read that the said worker was disregarded for the purposes of determining the tax benefit in question, and further notes that the said worker was also not included when the prior gracious reclamation procedure was concerned, which is why the decision then rendered should be maintained.
As to the adjustment relating to workers hired under part-time work arrangements, article 19, subsection 3 of the TBS establishes that the maximum amount of the annual enhancement, per job, corresponds to 14 times the guaranteed minimum monthly wage, which, under the law, presupposes full-time work, which at the date relevant to these proceedings was 40 hours per week. Thus, with respect to the determination of the tax benefit, an adjustment must be made, creating proportionality between the total benefit/full-time work contract and the "partial" benefit/part-time work contract. Indeed, the failure to adjust the guaranteed minimum monthly wage amount for the purposes of article 19, subsection 3 of the TBS would result in a skewing of the benefit amount in favor of hiring part-time workers to the detriment of hiring full-time workers, which could not have been the objective of the legislator.
With respect to the non-compliance with the requirements of the NJC benefit that occurred in 2012, but with effects in 2013, the Respondent relies on the results of the inspection action carried out on the 2012 period and understands that the appealed act should be maintained.
Because the appealed act does not suffer from any defect, it should be maintained in the legal order, and consequently there is no place for the payment of interest.
D – Conclusion of the Report and Case Management
By dispatch of the President of the Arbitral Tribunal of 27.01.2018, the meeting provided for in article 18 of the LFATM was dispensed with as unnecessary, offering a simultaneous period of 15 (fifteen) days for the submission of written arguments, with 26.4.2018 being set as the deadline for the delivery and notification of the final decision.
The Parties submitted their arguments on 16.02.2018, which reinforce the positions assumed by each of them in the pleadings filed.
The Arbitral Tribunal is materially competent, pursuant to the provisions of article 2, subsection 1, section a) of the LFATM.
The Parties enjoy legal personality and capacity and have standing pursuant to article 4 and article 10, subsection 2 of the LFATM and article 1 of Ordinance no. 112-A/2011, of 22 March.
The joinder of claims made in the present request for arbitral pronouncement, in deference to the principle of procedural economy, is justified inasmuch as article 3 of the LFATM expressly permits the possibility of "joinder of claims even if relating to different acts," when the success of the claims depends essentially on the appraisal of the same factual circumstances and on the interpretation and application of the same legal principles or rules, and also accommodates, without hermeneutical abuse, the appraisal of a claim that follows, of necessity, from the judgment that the Arbitral Tribunal endorses regarding the validity of the assessment in question.
The proceedings do not suffer from any nullity.
Factual Matters
2.1. Proven Facts
Considered proven for the purposes of appraising the merits of the case are the following facts:
The Claimant is engaged in the trade of food and consumption products (consensus of the parties).
The Claimant was subject to a tax inspection procedure under external service order no. OI2015..., which covered the tax period of 2013 (consensus of the parties).
By letter of 07.08.2015, the Claimant was notified to exercise its right to be heard on the draft corrections resulting from the external analysis of the tax inspection relating to the 2013 tax year (Administrative File I, page 62).
The Claimant exercised its right to be heard in writing, which was received by the Respondent's services on 24.08.2015 and stated that it did not intend to contest the proposed report that was notified to it (Administrative File I, pages 62-63).
On 07.09.2015, the Claimant was notified of the tax inspection report (which is fully contained in the Administrative File attached to the record), from which resulted corrections of an arithmetic nature to the taxable income relating to the 2013 tax year in the total amount of € 512,630.93 (five hundred and twelve thousand, six hundred and thirty euros and ninety-three cents) (consensus of the parties).
These corrections concern two blocks of situations: (i) error in the calculation of capital gains relating to 29 light passenger or mixed vehicles that formed part of the Claimant's tangible fixed assets and alienated in 2013, in the amount of € 230,431.34 (two hundred and thirty thousand, four hundred and thirty-one euros and thirty-four cents); and (ii) improper deduction under the heading of tax benefit resulting from NJC by violation of the requirements set out in article 19 of the TBS, in the overall amount of € 282,199.59 (two hundred and eighty-two thousand, one hundred and ninety-nine euros and fifty-nine cents) (consensus of the parties).
In the 2013 tax year, the Claimant alienated 29 light passenger or mixed vehicles that formed part of its tangible fixed assets (consensus of the parties).
The light passenger or mixed vehicles that formed part of the Claimant's tangible fixed assets and alienated in 2013 are those listed on page 37 of Annex 1 of the inspection report relating to CIT 2013 (Administrative File I – page 99).
The Claimant, in the calculation of capital gains and losses, deducted from the acquisition cost of the light passenger or mixed vehicles that formed part of its tangible fixed assets alienated in 2013 the amount of depreciation considered for tax purposes, having determined a loss of € 21,455.72 (twenty-one thousand four hundred and fifty-five euros and seventy-two cents) (consensus of the parties).
Had the Claimant deducted, in the calculation of capital gains and losses, the amount of depreciation practiced in accounting from the acquisition cost of the light passenger or mixed vehicles that formed part of its tangible fixed assets alienated in 2013, it would have determined a gain of € 208,975.62 (consensus of the parties).
The correction to the taxable income relating to capital gains for the 29 light passenger or mixed vehicles that formed part of the Claimant's tangible fixed assets and alienated in 2013 resulted in the Claimant paying, as tax, the amount of € 72,240.23 (article 142 of the request for arbitral pronouncement).
The Respondent understood that there were 2 workers (D... and E...) who, having been considered ineligible in the course of the inspection action for the 2010 period, could not be considered for the purposes of NJC in the 2012 tax year (consensus of the parties).
The Claimant accepted the ineligibility of female worker D... (article 29 of the request for arbitral pronouncement).
With respect to worker E..., the Respondent considers him "eligible," but gives him as "not eligible for enhancement" (pages 20 and 21 of document 1, attached to the record with the request for arbitral pronouncement).
The adjustment to benefits resulting from the disregard of worker E... resulted in the Claimant paying, as tax, the amount of € 2,128.67 (article 165 of the request for arbitral pronouncement).
The Respondent corrected the amount of the NJC tax benefit for the 2013 tax year, relating to workers hired under part-time work arrangements, by making an adjustment, establishing proportionality between the total benefit/full-time work contract and the "partial" benefit/part-time work contract (pages 21 to 24 of document 1, attached to the record with the request for arbitral pronouncement and article 52 of the Response).
The correction to the amount of benefits resulting from the proportional adjustment between the total benefit/full-time work contract and the "partial" benefit/part-time work contract resulted in the Claimant paying, as tax, the amount of € 37,597.94 (article 186 of the request for arbitral pronouncement).
The Respondent promoted the correction of the amount of the NJC benefit, due to the alleged non-compliance with the requirements of the NJC benefit that occurred in 2012, detected in a prior inspection, but with effects in 2013 (consensus of the parties).
The Claimant raised the intervention of an arbitral tribunal to resolve the conflict referred to in 2.1.16, which gave rise to Case no. 68/2017-T, which was heard before the CAAD (and not 174/2017-T, as the Claimant inadvertently refers to in the request for arbitral pronouncement).
The correction referred to in 2.1.16 resulted in the Claimant paying, as tax, the amount of € 74,241.71 (article 231 of the request for arbitral pronouncement).
On 14.09.2015, the Respondent issued assessment no. 2015... relating to the 2013 period, with corrections to taxable income and tax, compensatory interest, and default interest, resulting in a payable amount of 229,838.85.
The Respondent issued the statement of account adjustment relating to assessment no. 2015..., where it calculated the payable amount of € 153,737.21, with 13.11.2015 as the payment deadline (Administrative File I, page 44).
The Claimant made the required payment, in the amount of € 153,737.21 on 30.11.2015 (Administrative File I, page 44).
On 28.01.2016, the Claimant filed a gracious reclamation against the additional CIT assessment for 2013 no. 2015... and petitioned for its partial annulment, on grounds of illegality, as regards € 230,431.34 relating to the determination of capital gains and losses obtained from the sale of 29 light vehicles and € 275,409.59 relating to the NJC benefit (Administrative File I, pages 7-186).
On 24.02.2016, in the course of the gracious reclamation referred to in 2.1.24, the Claimant was notified to exercise its prior right to be heard with respect to the draft decision (Administrative File I, page 187).
The gracious reclamation mentioned in 2.1.24 was dismissed by dispatch of 17.03.2016, which was notified to the Claimant by letter of 18.03.2016 (Administrative File II, page 224).
On 19.04.2016, the Claimant filed a hierarchical appeal against the dismissal of the gracious reclamation it had filed (Administrative File II, pages 232 et seq.).
In the decision on the hierarchical appeal, the non-revocation of the appealed act was determined on 26.04.2016, which was notified to the Claimant by letter of 26.05.2017 (Administrative File II, pages 444 et seq.).
In the decision on the hierarchical appeal, reference was made to the dispensation of the Claimant's hearing because that right had already been exercised regarding the same facts (Administrative File II, page 485).
In 2012, there were 226 eligible entries (consensus of the parties).
The Respondent accepts that there were 221 eligible exits in 2012.
2.2. Unproven Facts
It has not been demonstrated why worker E..., being considered by the Claimant as eligible, should be regarded for legal purposes as "not eligible for enhancement." There are no other facts relevant to the appraisal of the merits of the case that have been given as unproven.
2.3. Reasoning for the Determination of Facts
The facts were given as proven on the basis of the documents submitted to the record by the parties and the positions assumed by them in the pleadings they filed.
Legal Matters
3.1. Questions to be Decided
It follows from what has been stated above that, in substance, these are the questions to be appraised:
Whether there was a breach of essential legal formalities:
By not ordering the suspension of the Hierarchical Appeal Procedure no. ...2016...; and
By not providing the Claimant with the opportunity to exercise the right to be heard in the course of that same Hierarchical Appeal.
Whether the Claimant, in the calculation of capital gains for the alienation in 2013 of the 29 light passenger or mixed vehicles that formed part of its tangible fixed assets, could have deducted from the acquisition value the amount of depreciation considered for tax purposes and not the amount of depreciation practiced (in accounting).
Whether worker E... should be relevant for the purposes of NJC that occurred in 2010 but with effects in 2013.
Whether the maximum amount of the annual enhancement per job should be subject to proportional adjustment when a part-time work contract is involved.
Whether the requirements of the NJC benefit that occurred in 2012, but with effects in 2013, were not complied with.
Finally, whether, should it be judged that the claim for a declaration of illegality and the consequent annulment of the assessment in question is well-founded, even if only in part, the Claimant, within the scope of the present arbitral proceedings, may obtain the condemnation of the Respondent to pay compensation interest.
3.2. Breach of Essential Formalities
The Claimant maintains in article 65 of its initial pleading that the Respondent should have ordered the suspension of the hierarchical appeal. It does so in the following terms:
Now, knowing that the AT (i) that the issue of the number of jobs created in 2012 was crucial in determining the amount of the NJC tax benefit deductible in the 2013 period and that (ii) the same had been challenged by the Claimant before the tax arbitral tribunal, the Hierarchical Appeal Procedure no. ...2016... should have been suspended until the final judgment of the arbitral decision,
The Claimant does not expressly allege that it petitioned for the suspension of the hierarchical appeal and in the request it lodged at the end of its pleading, in the customary place, there is also no reference to that request. It is to be understood that it believes that the question is merely legal and that it should have been the Respondent that, ex officio, determined that suspension.
On the subject of preliminary questions, which must suspend the decision-making processes of the Administration, article 38, subsection 1 of the Administrative Procedure Code ("APC") regulates as follows:
1 - If the final decision depends on the decision of a question that must be the subject of its own or specific procedure or that falls within the competence of another administrative body or of the courts, the body competent to make the final decision must suspend the administrative procedure, with explicit statement of grounds, until there has been a pronouncement on the preliminary question, unless failure to resolve the matter immediately would result in serious harm to public or private interests.
The aforementioned rule indeed stipulates that administrative procedures must be suspended in certain situations. In the provision of that rule it is possible to identify with clarity in which situations that effect should occur and it does not appear there is any doubt that it encompasses two hypotheses: (i) that the preliminary question must be the subject of its own or specific procedure; (ii) that the preliminary question falls within the competence of another administrative body or the courts.
In the Claimant's thesis, the question it considers preliminary is the determination "of the number of jobs created in 2012," as it did not agree with that made by the Tax Inspection Services and challenged it.
Now, this question does not have to be the subject of its own or specific procedure, as it is dealt with through the ordinary procedure of assessment, gracious reclamation, hierarchical appeal, and judicial (or arbitral) challenge.[1] And neither does it fall within the competence of another body of the Administration or the courts to appraise it. It is the responsibility of the Respondent to determine the number of jobs for the purposes of granting tax benefits, in the exercise of its powers (articles 81 and 82 of the General Tax Law), without prejudice to the possibility of challenging its decisions in the courts.
It is not seen that there would be any duty on the Respondent to suspend the hierarchical appeal, and so the allegation of this defect by the Claimant is without merit.
The Claimant also objects to its failure to be heard by the Respondent before the unfavorable decision was made, in the hierarchical appeal it filed. It maintains that "the AT could not have dispensed with the exercise of the right to be heard in the course of the Hierarchical Appeal Procedure no. ...2016... (CIT for 2013)" by not ensuring its participation in the formation of its decision. It further considers that the dispensation of its hearing was illegal because it was based on an internal instruction, namely Circular no. 13/99 of 08/07/1999, of the Tax Justice Services Department[2] (articles 78 to 97 of the request for arbitral pronouncement).
For its part, the Respondent maintains that "the Claimant was invited to pronounce itself in the course of the draft dismissal of the gracious reclamation, and did not exercise that right" and that the right to be heard in the hierarchical appeal could be dispensed with on the basis of that event (articles 18 to 26 of the Response). It adds that the circular in question does no more than reflect the legal regime established in article 60 of the General Tax Law, regarding prior hearing.
It is important to determine whether the failure to hear the Claimant constitutes in this specific case the violation of a rule that would require the annulment of the decision being challenged.
As is known, the right to be heard or right of hearing is a consequence of the right of citizens to participate in decisions of the Administration that affect them and has constitutional dignity, being provided for in article 267, subsection 5 of the Constitution of the Portuguese Republic ("CPR"). This provision of the Fundamental Law entrusts the task of ensuring the exercise of that right to special legislation. It is in this line that the General Tax Law, in its article 60,[3] establishes the principle of participation and regulates the manner of its observance by the Administration and implementation through the hearing of the citizen and the situations in which this may be dispensed with, because sufficient guarantees of participation have been satisfied.
In particular, the provision of article 60, subsection 3 of the General Tax Law permits dispensation of hearing when the taxpayer has already been heard on the facts being examined. Note that although this rule appears to refer only to hearing prior to assessment, Law no. 16-A/2002, of 31 May, which introduced this wording into article 60 of the General Tax Law, expressly gave it an interpretive character (article 13, subsection 2). In fact, in the sense of the possibility of excluding the hearing of a citizen by the Administration who has already been heard, reference may be made to the provision of article 124, subsection 1, section e) of the APC, which states that the person responsible for directing the procedure in question may not proceed with the hearing of the interested party if this party has already pronounced itself in the procedure on the issues that matter to the decision, being required to indicate, in the final decision, the reasons for the non-realization of the hearing (subsection 2 of the same article).
Given the interpretive nature of the cited rule, it is to be understood that whenever the concrete issues on which the Administration decides are the same, it may dispense with the hearing of the taxpayer. In this sense it may be seen in the doctrine by Diogo Leite de Campos[4] and in the jurisprudence the judgment of the Supreme Court of Justice of 29.06.2011[5], in which, as far as is pertinent here, it was summarized:
II - What the legislator intended to safeguard was the hearing of taxpayers in any of the phases of the procedure culminating in assessment, not requiring the same to exercise that right in each of the different procedural phases, except where new facts are invoked about which the same has not pronounced.
It has also been a requirement of administrative law doctrine[6] that the ground for the decision to dispense with hearing be made explicit, which is understandable, in view of the provision of article 124, subsection 2 of the APC, although it is not without doubt whether this approach will be accepted in Tax Law.
In the tax procedures under appraisal, it was established in the proven facts that (2.1.2) the Claimant was subject to a tax inspection procedure; (2.1.3) that by letter of 07.08.2015 the Claimant was notified to exercise its right to be heard on the draft corrections resulting from the external analysis of the tax inspection relating to the 2013 tax year; (2.1.4) that the Claimant exercised its right to be heard in writing, which was received by the Respondent's services on 24.08.2015 and stated that it did not intend to contest the proposed report notified to it; (2.1.25) that in the course of the gracious reclamation, on 24.02.2016, the Claimant was notified to exercise its prior right to be heard regarding the draft decision; (2.1.29) and that in the decision on the hierarchical appeal, reference was made to the dispensation of the Claimant's hearing because that right had already been exercised regarding the same facts.
There appear to be no doubts that the Claimant was invited to exercise its right to be heard at two distinct moments: in the tax inspection phase, even before the assessment was issued, and later in the gracious reclamation procedure. For its hearing to be required again in the hierarchical appeal, there would have to be a finding of the existence of new factual or legal arguments and the Claimant does not allege to have presented any. And that was the reason why the Respondent dispensed itself from hearing the Claimant again, as it moreover referred in the decision, at the end. It is not seen that the absence of hearing of the Claimant, in the context in which it occurred, constitutes the violation of any rule.
Neither does the Claimant's argument that the dispensation of hearing was made on the basis of an internal instruction, contained in a circular, hold. More precisely, the Respondent clarifies that the dispensation is made in accordance with the Circular and this contains no more than its interpretation of the provisions of article 60 of the General Tax Law. It is clear that that interpretation does not bind, i.e., is not Law, but it is undeniable that it is not unlawful conduct but merely the exercise of the Administrative Authority's own organizational power-duty.
The alleged breach of the dispensation of the Claimant's right to be heard is therefore without merit.
3.3. Correction to Capital Gains Relating to Alienation of Light Passenger Vehicles
As we have seen, in the 2013 tax year, the Claimant alienated 29 light passenger or mixed vehicles that formed part of its tangible fixed assets, and in the determination of capital gains and losses, it deducted from the acquisition cost the amount of depreciation considered for tax purposes, having determined a loss of € 21,455.72 (twenty-one thousand four hundred and fifty-five euros and seventy-two cents). The Respondent understands that in the calculation of capital gains and losses, the amount of depreciation actually practiced in accounting should have been deducted from the respective acquisition cost, which would have resulted in the determination of a gain of € 208,975.62 (two hundred and eight thousand nine hundred and seventy-five euros and sixty-two cents).
It is therefore necessary to clarify whether, for the purposes of determining capital gains and losses for these 29 vehicles, the accounting amortizations should be used, as the Respondent wishes, or the amortizations considered for tax purposes, as the Claimant advocates.
Let us see what article 46, subsection 2 of the CITC provides in this respect: "capital gains and losses are given by the difference between the realization value, net of the charges inherent to it, and the acquisition value minus losses due to impairment and other value corrections provided for in article 35, as well as depreciation or amortization accepted for tax purposes, without prejudice to the final part of article 30, subsection 5".
This legal provision does not appear to offer any interpretive doubt, expressly recognizing that the amount of depreciation to be deducted from the acquisition value shall be the depreciation or amortization accepted for tax purposes. It shall therefore be the amortizations accepted for tax purposes, and not those accounted for, that will be relevant for the purposes of calculating capital gains and losses for these 29 vehicles.
It is stated in the Inspection Report that "however, the instructions contained in schedule 31, relating to the determination of capital gains and losses [column (10), section d)], state that in the case of light passenger or mixed vehicles not engaged in public transport services or intended to be leased in the exercise of the normal activity of the taxpayer, the depreciation practiced is relevant".
This conclusion, reiterated by the Respondent in its Response, is based on Circular 6/2011 DSIRC which, in its point 32.1, establishes the following: "the calculation of capital gain or loss is carried out in accordance with the provision of article 46, subsection 2 of the CITC, and the depreciation practiced should be considered in its calculation formula. Given the underlying rationale for imposing limits on the recognition of expenses with this type of assets when their acquisition or revaluation value exceeds a certain amount, the interpretation most consistent with that rationale is to consider that, for the purposes of determining the respective capital gains and losses, the amount of depreciation that is relevant is that practiced in accounting".
The antinomy between the letter of article 46, subsection 2 of the CITC – which expressly invokes tax-accepted amortizations – and point 32.1 of Circular 6/2011 DSIRC, just transcribed, is clear. The contradiction between what the law prescribes and what a Circular provides must be resolved in favor of the legal prescription. Despite their generality and abstraction, circulars and other administrative instruments of equivalent purpose do not form part of the list of sources of law, since their binding force results solely from the hierarchical authority of the agents from which they emanate and the duties of obedience of the subordinates to whom they are addressed.[7] In fact, these administrative guidelines do not have as their addressees citizens, taxpayers, which is why they are not binding either for individuals or for the courts.[8]
Until the reform of the Corporate Income Tax Code carried out by Decree-Law no. 159/2009, of 13 July, the determination of capital gains and losses was governed by the provision of article 43, subsection 2, which provided as follows: "Capital gains and losses are given by the difference between the realization value, net of the charges inherent to it, and the acquisition value minus the reintegrations or amortizations practiced, without prejudice to the provision in the final part of section a) of article 29, subsection 5".
By Decree-Law no. 159/2009, of 13 July, as we have seen, the calculation method changed, becoming what is contained in the current article 46, subsection 2 of the CITC. Thus, the Respondent's claim to see in the formula for calculating capital gains and losses the depreciation actually practiced in accounting, as stated in point 32.1 of Circular 6/2011 DSIRC, and not the depreciation or amortization accepted for tax purposes, as is clearly prescribed in the aforementioned article 46, subsection 2 of the CITC, lacks any legal support and therefore cannot be accepted.
The correction in favor of the State made by the Tax Inspection as to capital gains resulting from the alienation of the 29 light passenger or mixed vehicles that formed part of the Claimant's tangible fixed assets in the amount of € 230,431.34 is therefore illegal, and consequently illegal, on the grounds of error as to the legal premises, the additional CIT assessment no. 2016..., relating to 2013, in the part relating to this same correction, which resulted in the demand for the payment of tax, now considered unduly paid, in the amount of € 72,240.23.
3.4. Correction Relating to Net Job Creation in 2010 but with Effects in 2013
Let us now appraise the Claimant's claim for "annulment of the correction to taxable income made by the AT and, consequently, of the amount of tax, which amounts to € 2,128.67, and compensatory interest, additionally assessed and paid therefor", which resulted from the exclusion of the NJC benefit for the 2013 period, relating to worker E..., in the amount of € 6,790.00. It complains of the lack of reasoning in the Respondent's decision, which does not clarify which requirements of the provision of article 19, subsections 1 and 2 of the TBS, which grants the benefit, were not met (articles 148 to 165 of the request for arbitral pronouncement).
On this subject, the Respondent alleged in these proceedings that the benefit relating to the worker in question had its source in the worker's admission in 2010 and that it had already been considered at that time that this worker did not meet the necessary requirements, and so that appraisal was reflected in the other tax years in which the benefit could have effects (articles 35 to 44 of the Response).
The issue dates back to the very Tax Inspection Report of the Respondent, where the Respondent considered that the Claimant unduly deducted for the purpose of determining the taxable income of 2013 the amount of € 282,199.58, relating to the enhancement of charges relating to job creation, due to failure to comply with all the requirements contained in article 19 of the TBS (Administrative File I, page 51). The Respondent further considered in the same document that part of the amount unduly deducted for the purpose of determining the taxable income of 2013, in the amount of € 21,331.63, referred to the net job creation of the 2010 tax year, a period that had been subject to inspection action, which resulted in corrections to the composition of the list of workers hired in that period, with those marked with "(a)" in the annex to the Tax Inspection Report being considered "ineligible" for the purposes of applying the benefit in question, which is illegible in the digital version attached to the record (Administrative File I, pages 57, 61, and 105).
In this context and as established in the proven facts, everything indicates that in the 2010 tax year, workers D... and E... were hired and were then considered ineligible in the course of the inspection action for that 2010 period (above, 2.1.12 to 2.1.14), and so, in the Respondent's understanding, could not be considered for the purposes of NJC. This is the central element for answering the question posed.
This tribunal's analysis is limited to the question of whether the costs with worker E..., hired in 2010, can be enhanced for the purposes of calculating CIT for subsequent years (2011 to 2014), when they were considered ineligible in the year of hiring. Stated differently: it is important to know whether acceptance by the Respondent of the enhancement of expenses in the year of hiring is a condition for the expenses with that worker in subsequent years to also be enhanced by 150%.
The provision that establishes the benefit in question is contained in article 19 of the TBS, which regulates as follows:
Article 19
Job Creation
1 - For the determination of taxable income of Corporate Income Tax payers and of Individual Income Tax payers with organized accounting, the charges corresponding to net job creation for young people and for the long-term unemployed, hired by indefinite-term employment contracts, are considered at 150% of the respective amount, accounted for as a cost of the tax year.
2 - For the purposes of the provision of the previous number, the following are considered:
a) "Young people" are workers with an age greater than 16 and less than 35 years, inclusive, assessed on the date of celebration of the employment contract, with the exception of young people under 23 years of age, who have not completed secondary education, and who are not attending an education-training course that allows raising the level of schooling or professional qualification to ensure completion of that level of education;
b) "Long-term unemployed" workers available for work, pursuant to Decree-Law no. 220/2006, of 3 November, who are unemployed and registered at employment centers for more than 9 months, without prejudice to fixed-term contracts having been concluded during that period for a period of less than 6 months, whose combined duration does not exceed 12 months;
c) "Charges" the amounts borne by the employer with the worker, under the heading of fixed remuneration and social security contributions borne by that same entity;
d) "Net job creation" the positive difference, in a given economic year, between the number of eligible hiring in accordance with subsection 1 and the number of exits of workers who, on the date of their hiring, were in the same conditions.
3 - The maximum amount of annual enhancement, per job, is that corresponding to 14 times the guaranteed minimum monthly wage.
4 - For the purposes of determining net job creation, workers who are part of the family unit of the respective employer entity are not considered.
5 - The enhancement referred to in subsection 1 applies for a period of five years from the beginning of the employment contract, and is not cumulative, either with other tax benefits of the same nature, or with other employment support incentives provided for in other statutes, when applicable to the same worker or job.
6 - The regime provided for in subsection 1 may only be granted once per worker hired in that entity or in another entity with which there are special relations as provided for in article 63 of the Corporate Income Tax Code.
From this regime it follows that the benefit in question is granted once per worker (subsection 6) and lasts for 5 years from the beginning of the employment contract (subsection 5). Everything indicates that the dynamics of this measure presupposes that in the year of hiring the enhancement regime is granted (subsection 6), which continues for the 5-year period, i.e., the benefit occurs, or may occur, in the year of hiring and in the four subsequent years.
It is clear that one can admit the possibility of the employer only benefiting from the enhancement in periods subsequent to hiring, when, for example, it only seeks the application of the regime later, which may happen for various reasons. However, one should not admit the hypothesis that a given employment contract does not objectively meet conditions to be eligible in a first tax year and could then be so in subsequent years. This is because the requirements on which the benefit of this incentive depends must be scrutinized with reference to the date of hiring of the worker in question.
Worker E... was hired in 2010 and in that year the Claimant was refused the benefit of the enhancement because the Respondent considered that the said worker, although not listed "on the list of "ineligible" employees (…) this fact does not imply that this worker being "eligible" was selected and confirmed by the SIT for the purposes of enhancement and determination of the tax benefit in question". The Respondent, in the appraisal it carried out regarding the 2010 tax year, disregarded worker E... concluding that "having that worker not been considered/selected "ab initio" for the purposes of determining the tax benefit in question", it will not be admissible that use may be made of it in subsequent years.
We cannot agree with this understanding. It cannot be inferred from the provisions that enshrine this benefit the necessity that there had been an enhancement in the year of hiring, regardless of the reasons that may have determined it, whether because the taxpayer did not at that time seek the application of the regime or because the Tax and Customs Authority understood that the respective requirements were not satisfied. Even if it becomes established in the legal order the rejection by the Tax and Customs Authority of the enhancement in the year of hiring, meaning the act of assessment that is made on the basis of that decision, this cannot be equivalent to the unsuitability of that benefit being enjoyed in subsequent years, if the respective requirements are objectively verified, always with reference to the year of hiring and never for a period exceeding five years from it.
As we have seen, each worker can only give rise to the benefit once in relation to an employer entity or one with which there are special relations as provided for in article 63 of the Corporate Income Tax Code (article 19, subsection 6 of the TBS), for a period of five years from the beginning of the employment contract (subsection 5 of the same provision). However, if the Respondent considers that a given worker is not eligible – as was the case with worker E... in 2010 – and if the taxpayer acquiesces to that decision, it is not precluded the right to put that judgment into question in subsequent years, even though the benefit period cannot be extended beyond 5 years from the date of hiring. Therefore, if the Claimant, with respect to the 2010 tax year, did not react contentiously against the Respondent's decision not to accept the enhanced deduction of the costs borne with the worker in question, the only consequence that can be drawn from that fact is the loss of that benefit in that same year and not its repercussion in subsequent years. The failure to react of the taxpayer means that the assessment act relating to the 2010 tax year (and the other years in which it proceeded in the same manner) become consolidated, which does not mean, unless I am mistaken, the unsuitability of the taxpayer being able to benefit from that incentive in subsequent years, should it be able to objectively benefit from it with reference to the year of hiring.
It does not follow from the record, much less from the decision on the Hierarchical Appeal, nor did the Respondent manage to demonstrate it, that the worker in question, when hired in 2010, did not meet the conditions that would allow the enhanced deduction of the costs borne by the Claimant with that worker. Thus, the correction made by the Respondent, justified only by a minimalist reference to what its decision regarding 2010 had been, is not properly reasoned, and so must be annulled, thereby vitiating the assessment that is made on the basis of it.
3.5. Proportional Adjustment of Annual Enhancement per Job in the Case of Part-Time Work Contracts
The Respondent understands that the maximum amount of the annual enhancement per job should be subject to proportional adjustment when we are in the presence of part-time work contracts, an understanding which, according to the Claimant, has no minimum support in the letter or spirit of the law.
Let us recall what article 19 of the TBS provides in this respect, insofar as it is relevant to the appraisal of this question:
Article 19
Job Creation
1 - For the determination of taxable income of Corporate Income Tax payers and of Individual Income Tax payers with organized accounting, the charges corresponding to net job creation for young people and for the long-term unemployed, hired by indefinite-term employment contracts, are considered at 150% of the respective amount, accounted for as a cost of the tax year.
3 - The maximum amount of annual enhancement, per job, is that corresponding to 14 times the guaranteed minimum monthly wage.
5 - The enhancement referred to in subsection 1 applies for a period of five years from the beginning of the employment contract, and is not cumulative, either with other tax benefits of the same nature, or with other employment support incentives provided for in other statutes, when applicable to the same worker or job.
Subsection 3 of article 19 of the TBS establishes that the maximum amount of the annual enhancement, per job, corresponds to 14 times the guaranteed minimum monthly wage. The Respondent understands that this benefit presupposes full-time work, which at the date relevant to these proceedings was 40 hours per week. Thus, with respect to the determination of the tax benefit, an adjustment must be made, creating proportionality between the total benefit/full-time work contract and the "partial" benefit/part-time work contract. In fact, the failure to adjust the guaranteed minimum monthly wage amount for the purposes of subsection 3 of article 19 of the TBS would result in a skewing of the benefit amount in favor of hiring part-time workers to the detriment of hiring full-time workers, which could not have been the objective of the legislator.
It is important to first set out the requirements on which the granting of this tax benefit depends. As is evident from subsection 1 of article 19 of the TBS, it is necessary that:
there be "net job creation," that is, that in the relevant time period the number of jobs created exceeds that of jobs eliminated;
those jobs refer to young people and the long-term unemployed, concepts defined in sections a) and b) of subsection 2 of article 19 of the TBS; and
those young people and the long-term unemployed are hired by indefinite-term employment contracts, that is, without a fixed term.
For the determination of taxable income of Corporate Income Tax payers and of Individual Income Tax payers with organized accounting, the charges corresponding to net job creation for young people and for the long-term unemployed, hired by indefinite-term employment contracts, are considered at 150% of the respective amount, accounted for as a cost of the tax year, with the maximum amount of the annual enhancement, per job, being that corresponding to 14 times the guaranteed minimum monthly wage.
As we can see, nothing in the law can lead us to conclude that the tax benefit we have been dealing with depends on the eligible employment contracts being full-time. Therefore, part-time employment contracts, as long as they are without a fixed term, are also contemplated in the provision that creates this tax benefit, which does not give rise to opposition from the Respondent. In fact, the Respondent only endorses the understanding that a proportional adjustment should be made in the maximum amount of the benefit when in the presence of employment contracts without a fixed term, but part-time.
The Respondent's point of view is understandable. However, de iure constituto, it is not seen where this conclusion can be based. It is worth recalling that taxes are created by law, which determines the taxable event, the rate, tax benefits, and the guarantees of taxpayers (article 103, subsection 2 of the CPR). We must interpret article 19 of the TBS, especially subsections 1 and 3, in the certainty that the legislator, being able to do so, chose not to distinguish between full-time employment contracts and part-time employment contracts. Therefore, where the legislator does not distinguish, the interpreter should also not distinguish.
Even if it is not shocking, de iure constituendo, the imposition of an adjustment in the case of part-time employment contracts, since, from the perspective of legislative policy, it will not be indifferent whether jobs created are part-time or full-time, the wording of article 19, as it is in force, leaves no room for that adjustment. Especially because, one would not know, in strict terms, how it could operate, whether through reduction of the percentage of enhancement of expenses – set in subsection 1 of article 19 of the TBS at 150%[9] – or, perhaps more appropriately, through the reduction of the maximum amount of annual enhancement, per job – corresponding to 14 times the guaranteed minimum monthly wage, under subsection 3 of the same article.
In fact, "the legislator did not set forth any restriction on the type of employment created and furthermore, the provisions that create tax benefits have the nature of exceptional provisions, as follows from the express content of article 2, subsection 1 of the TBS, and so must be interpreted in their precise terms, without enlargements or restrictions, so as to encompass all cases literally provided for in them and only those, as is settled jurisprudence".[10]
The correction in favor of the State made by the Tax Inspection as to the proportional adjustment of the annual enhancement to the part-time work period in the amount of € 119,929.64 is therefore illegal, and consequently illegal, on the grounds of error as to the legal premises, the additional CIT assessment no. 2016..., relating to 2013, in the part relating to this same correction, which resulted in the demand for the payment of tax, now considered unduly paid, in the amount of € 37,597.94.
3.6. Net Job Creation in the 2012 Tax Year and its Impact on the 2013 Tax Year
It is now time to analyze the reasonableness of the Claimant's challenge to the "unfavorable correction as a result of the alleged non-compliance with the requirements of the NJC benefit that occurred in 2012, detected in a prior inspection, but with effects in 2013," in the amount of € 148,689.95 (article 10 of the request for arbitral pronouncement).
The Claimant sets out its position in the following sequence of arguments: (i) the reason invoked by the Respondent for the correction of € 148,689.95 to the taxable income for the 2013 period is the non-compliance with the requirements of article 19 of the TBS in the preceding 2012 period, but the NJC determined by the Respondent is not correct; (ii) the number of "eligible exits" considered by the Respondent, with respect to 2012, was 221 when it should have been 174 (articles 187, 189, and 197 of the request for arbitral pronouncement).
For its part, the Respondent maintains that the number of eligible exits that totaled 221 was verified and not 171,[11] as was concluded in the inspection action carried out on the 2012 period (articles 63 and 68 of the Response). Let us see how it does this.
In the inspection report, the correction was reasoned as follows (Administrative File I, page 60):
In the 2012 period, the taxpayer considered that there was net job creation of 23 jobs.
From the inspection action carried out on the 2012 period (OI2014...) it was concluded that there was no net job creation, due to violation of the provision of section d) of subsection 2 of article 19 of the TBS, and so there was an increase to the taxable income for that period of the enhancement of charges borne with the workers considered, by the taxpayer, in the net job creation.
In the 2013 period, the taxpayer continued to unduly enhance the charges borne with workers considered in the net job creation for the 2012 period, in the amount of € 148,689.95 (see column "Correction 1" of page 7 of Annex 2 of this report).
In these terms, it should be increased to the taxable income for the 2013 period, the amount of € 148,689.95, relating to the enhancement of charges borne with the workers considered, by the taxpayer, in the net job creation for the 2012 period, since, according to the inspection carried out on that period, there was no net job creation.
To discern the reason for the Claimant's refusal to accept the enhancement on the part of the Respondent, let us examine the facts or premises and the rule invoked. As to the facts or premises, the reasoning just referred to is not explicit in its identification. With effort, one can understand that (i) the Claimant enhanced the expenses with certain workers; (ii) those workers are identified in column "Correction 1" of page 7 of Annex 2 of the report; (iii) those workers had indefinite-term employment or are not young people, in the sense of the applicable rule [section a) of subsection 2 of article 19 of the TBS][12]; (iv) the enhancement of expenses with those workers had already been considered improper "in the net job creation for the 2012 period." The decision taken in the invoked inspection action carried out on the 2012 tax year is not submitted.
To support the task of deciphering the premises of the decision, let us keep in mind that the requirements on which the benefit in question depends, insofar as it matters now, are the following:
Age – for the purposes of qualification as young people under section a) of subsection 2 of article 19 of the TBS;
Schooling – for the purposes of qualification as young people under section a) of subsection 2 of article 19 of the TBS, when it concerns young workers under 23 years of age.
Existence of an indefinite-term employment contract – for the purposes of subsection 1 of article 19 of the TBS.
Let us recall the wording of the cited provisions, article 19, subsections 1 and 2, section a):
1 - For the determination of taxable income of Corporate Income Tax payers and of Individual Income Tax payers with organized accounting, the charges corresponding to net job creation for young people and for the long-term unemployed, hired by indefinite-term employment contracts, are considered at 150% of the respective amount, accounted for as a cost of the tax year
2 - For the purposes of the provision of the previous number, the following are considered:
a) "Young people" are workers with an age greater than 16 and less than 35 years, inclusive, assessed on the date of celebration of the employment contract, with the exception of young people under 23 years of age, who have not completed secondary education, and who are not attending an education-training course that allows raising the level of schooling or professional qualification to ensure completion of that level of education;
To sustain the Respondent's act, it becomes necessary first to verify the facts on which the Respondent based its conclusion, that the workers in question were hired for an indefinite period or are not young people, that is, one must know the employment contracts of the workers in question, their dates of birth, and their academic qualifications.
Notwithstanding the tax inspection report contained in the Administrative File having a map in its collection of annexes, with the reference "7/7" (after page 5/7 and before page 6/7) (Administrative File I, page 104 in the numbering of the pdf file), this is completely illegible, making it impossible for this tribunal to appraise the validity of the grounds invoked.
The Claimant recognizes that in the course of the tax inspection relating to the 2012 tax year, it submitted to the Respondent a list of exits where, "by mistake, dates of the beginning of indefinite-term contracts were identified," when, "in reality, such workers had fixed-term employment contracts" (articles 191 and 192 of the request for arbitral pronouncement). The Claimant alleges having offered to the Respondent "the supporting documents for the actual existence of fixed-term employment contracts" (see copy of the Hierarchical Appeal submitted on 13 November 2015 against the decision of Gracious Reclamation no. ...2015..., relating to CIT for 2012, attached to the present record as Doc. 9, in particular "Doc. 7" [Employment contracts of eligible workers for the purposes of NJC on the date of hiring] and "Doc. 8" [Determination of NJC for 2012, relating to eligible workers in the 2012 calculation] of that Hierarchical Appeal).
Despite these allegations, the Respondent presents as argument for the correction put in question the refusal by itself of the acceptance of the enhancement with respect to the same workers in the immediately preceding tax year, of 2012, but also here, the grounds that authorize that refusal are not documented or demonstrated, preventing the tribunal from evaluating its merit, which would always have to pass through verification that that refusal occurred and that the grounds on which it was based obey the applicable parameters.
It is important to understand how the burden of proof is apportioned. In this case it was for the Claimant to allege the facts sustaining its claim to annul the act and to do so, pointing out the defects that it imputes to it. It was for the Respondent to sustain the reasoning of the act, which it also did. Although neither party was especially successful in the manner it presented its position, that burden was fulfilled. As the versions presented oppose each other, it is important to understand to whom the burden of proof fell that was not fulfilled, because the documents in which the facts are retracted are not part of the present record or are not legible.
It seems to the tribunal that not being provided in the LFATM a rule regulating the matter of the burden of proof, it should preferably seek that regulation in procedural or even procedural norms, of the tax laws, as provided by the rule of article 29, subsection 1, section a) of the LFATM.
On the subject of the burden of proof, the provision of article 100, subsection 1 of the Code of Tax Procedure and Process ("CTPP") provides that, notwithstanding being systematically incorporated in the regulation of tax procedure, has been understood as also applicable to judicial process[13] and consequently to arbitral process. According to this provision, whenever from the evidence produced there results well-founded
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