Autonomous Taxation on Company Vehicles: Business Use Presumption in IRC (CAAD 497/2016-T)

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Pedro Galego and Marcolino Pisão Pedreiro, appointed by the Deontological Council of the Administrative Arbitration Centre to form an Arbitral Tribunal:

I – REPORT

On 5 August 2016, A…, SGPS, S.A., taxpayer no.…, with registered office at Rua... no.…, …, …-… …, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011 of 20 January, which approved the Legal Regime of Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012 of 31 December (hereinafter, abbreviated as RJAT), seeking a declaration of partial illegality of the Corporate Income Tax (IRC) assessment act No. 2016…, from which results a tax payable in the amount of €517,538.20, relating to the tax year 2012, of which it seeks the annulment of €80,576.82, as well as of the decision rejecting the request for revision of tax act with no. …2016…, which had that assessment act as its subject.

To support its request, the Applicant alleges, in summary, that it improperly determined and bore, under the heading of Autonomous Taxation, the amount of €80,576.82, relating to expenses incurred with light passenger vehicles or mixed vehicles, which should not have been subject to taxation given their essentiality and indispensability for obtaining the Applicant's taxable income and their exclusively "business" character, given that the vehicles in question would have no private use whatsoever.

On 08-08-2016, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

The Applicant failed to appoint an arbitrator, and therefore, pursuant to the provisions of paragraph a) of Article 6, paragraph 2, and paragraph a) of Article 11, paragraph 1, of the RJAT, the President of the Deontological Council of the CAAD appointed the undersigned José Pedro Carvalho and Pedro Galego, as well as Nuno Oliveira Garcia, as arbitrators of the collective arbitral tribunal, who accepted the appointment within the applicable deadline.

On 19-10-2016, the parties were notified of these appointments and neither manifested any intention to challenge them.

In accordance with the provision in paragraph c) of Article 11, paragraph 1 of the RJAT, the collective Arbitral Tribunal was constituted on 08-11-2016.

On 12-12-2016, the Respondent, duly notified for this purpose, filed its answer defending itself by exception and by substantive challenge.

On 24-01-2017, the hearing referred to in Article 18 of the RJAT was held, where witnesses presented by the Applicant were examined.

On 17-03-2017, the undersigned Marcolino Pisão Pedreiro was appointed as arbitrator by the Deontological Council of the CAAD, in replacement of the previously appointed Nuno Oliveira Garcia, who requested and was granted an excuse.

A deadline having been granted for the submission of written arguments, these were submitted by the parties, pronouncing themselves on the evidence produced and reiterating and developing their respective legal positions.

A deadline of 30 days was set for the rendering of final decision, following the submission of arguments by the Respondent.

The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraph 1, letter a), 5, and 6, paragraph 1, of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Administrative Order No. 112-A/2011 of 22 March.

The proceedings are not affected by nullities.

Thus, there is no obstacle to the consideration of the case.

Everything being considered, it is necessary to render

II. DECISION

A. MATTERS OF FACT

A.1. Facts taken as proven

1. The Applicant submitted the Income Declaration (Form 22) in the context of Corporate Income Tax (IRC), referring to the tax period 2012, relating to the group of companies of which it is the parent company, and to which the Special Regime for Taxation of Company Groups ("RETGS") was applicable, which it did on 21 May 2013.

2. Following the submission of the aforementioned declaration, assessment No. 2013…, dated 12 June 2013, was issued, which, as a result of inspection actions carried out by the tax administration, was replaced by assessment act No. 2014…, dated 23 December 2014, from which resulted a payable amount of €585,773.32.

3. The Applicant, on 23 March 2016, requested the revision of the aforementioned tax act, in the part relating to autonomous taxation on representation expenses, and charges relating to light passenger vehicles, requesting the restitution of the amounts self-assessed for this purpose.

4. The draft decision was notified to the Applicant on 12 April 2016, and it duly exercised its right to prior hearing.

5. In the exercise of the right to prior hearing, the Applicant requested that the tax administration pronounce itself on the question of whether the expenses incurred by the Applicant with light passenger vehicles were undertaken with the aim of obtaining income and resulted from the pursuit of the company's normal activity and did not constitute a private benefit for the individuals who used the vehicles.

6. In the final decision on the official revision request, it appears, among other things, that the "business nature of the charges borne with light passenger vehicles does not constitute a relevant matter to be addressed in the proceedings."

7. The Applicant's request was partially accepted, with €68,235.12 being annulled, relating to autonomous taxation on representation expenses.

8. With respect to autonomous taxation on the charges borne with light passenger vehicles, the request for revision was rejected, and the amount paid for this purpose amounted to €80,576.82.

9. For the purpose of implementing the decision on the revision request, in the part that was accepted, assessment act No. 2016…, from which resulted a payable tax of €517,538.20, was issued.

10. Group B… was created in 1992 and is a relevant group in the field of media and entertainment in Portugal, with a strong presence in the main segments of media and production of audiovisual content.

11. Group B… develops its activity in seven distinct areas, namely:

i. Television, through …, including the channels …, +…, … and …;

ii. Radio, through Radio channels …, …, …, … and …, and the online radio website …;

iii. Audiovisual production;

iv. Phonogram publishing;

v. Organization of events, fundamentally musical or cultural;

vi. Internet, through … and other group platforms;

vii. Corporate services.

1. In 2012, Group B… was headed, in Portugal, by the Applicant.

2. With reference to the tax year 2012, Group B… incurred charges with light passenger vehicles whose value amounted to €2,849,013.00.

3. The distribution of said charges among the different companies that made up the Group dominated by the Applicant was as follows:

[table content preserved as shown in original]

1. Group B…, in the normal development of its activity, makes use of its own vehicle fleet, in which light passenger vehicles are included, and those vehicles are necessary for obtaining its revenues.

2. The companies in the Applicant's group that incurred charges with vehicles were the following:

i. C…;

ii. D…;

iii. E…;

iv. F…;

v. G…; and

vi. H….

1. The business activity carried out by companies C…, D…, E…, F…, G… and H… requires, with regularity, the displacement of employees to different points of the country.

2. With respect to C…, employee displacements are necessary to ensure the journalistic coverage of events of public interest.

3. C… offers its viewers information in two daily newspapers and a morning news programme from Monday to Friday, the collection of which content requires the displacement of employees to the places where the events whose coverage it seeks to ensure have occurred.

4. These teams also follow up daily on … news.

5. Within the scope of G…'s activity, a significant part of productions occur in studio, but there is also the need to cover certain events of national scope, requiring the displacement of employees.

6. D… is dedicated to audiovisual production and has the need to displace employees when its activity is not entirely carried out in studio, requiring exterior filming.

7. D… is one of the largest audiovisual producers in the Iberian Peninsula and the largest national, standing out in the area of fiction in Portuguese language, with more than 800 hours of content produced in 2012.

8. E… and F… are suppliers of technical means for D… and C…'s productions and providers of scenery construction services, having the need to displace employees within the context of the productions in which they participate, which do not occur at their installations but at those of their clients or in the exterior.

9. H… provides human resources services, accounting, financial management and treasury services, and general services and procurement to all entities of Group B…, sometimes having the need to displace employees in a professional context.

10. With respect to the vehicles referred to in the autonomous taxation in question in the present arbitral proceeding, the following allocations were established in the organization of the group headed by the Applicant:

[table content preserved as shown in original]

1. The transport or displacement of persons and equipment within the scope of the reports carried out by C… was not possible to be accomplished using public transportation.

2. The vast majority of vehicles listed in the table at point 26 above are characterized, indicating in a very visible manner the entity to which they belong and their purpose, with a view to their identification by the public.

3. Furthermore, the overall vehicle fleet of the entities that make up Group B… includes vehicles of various categories – from light to heavy, passenger to cargo or vehicles specific to the media universe.

4. The carrying out of exterior reports by C… always requires the displacement of two persons – the reporter and the cameraman – occasionally requiring the displacement of a sound technician or an assistant, and occasionally an interviewee or guest to the report location.

5. Within the scope of the production of programs or other content throughout the country, which frequently occurs outside the Greater Lisbon or Porto area, it is normally necessary to mobilize a team of technicians and actors.

6. G… uses two all-terrain vehicles in reports and coverage of events held in locations of difficult access.

7. The choice of vehicle models in the Applicant's Group is the exclusive responsibility of the purchasing team, obeying, among other things, the following criteria:

i. Luggage compartment volume – for the purpose of transporting equipment or various materials;

ii. Luggage compartment height – in the case of vehicles used by reporting or filming teams, so that they can accommodate filming equipment;

iii. Capacity – in the case of vehicles used by reporting or filming teams, it may be necessary to transport three or more persons;

1. The logistical management of service vehicles in the Applicant's group is the exclusive responsibility of the Department of Procurement and Corporate Central Services, common to the various entities that compose it, which manages the inspection, maintenance and repair plans of said vehicles.

2. Additionally, that Department also carries out the management of fuel consumption of the vehicles – based on "fleet" plans – as well as access to motorways or expressways, through "green via" devices and is responsible for the duplicate key of each vehicle, with the key in use as well as all documentation relating to it being under the responsibility of the parking facility management or the vehicle user.

3. As a rule, service vehicles are not assigned to any specific employee, there being a pool of available vehicles that are requisitioned by employees who need them within the scope of their functions and returned after use.

4. There are service vehicles allocated to reporting activities that are (or were) allocated to a specific employee – as a rule the cameraman – with the vehicle model being selected based on the reporting equipment that employee uses.

5. The allocation of vehicles to specific drivers as referred to in the preceding number [suggestion: had] in view:

i. The need for service vehicle users to be forced to remove and replace their equipment in the vehicle they use so as to obtain time and cost savings, particularly when there are multiple displacements daily;

ii. Increase the level of responsibility of service vehicle users.

1. In the past, reporting vehicles were managed under a free fleet logic, in which there was no assignment of a vehicle to a specific employee, but rather a pool of available vehicles for employees who needed them within the scope of their functions.

2. The reversal of procedures for the allocation of said vehicles to specific employees was related to the high amounts of expenses with maintenance and conservation of vehicles, resulting from carelessness and neglect in their use, with the consequent unavailability of vehicles for service.

3. Employees who use service vehicles must, as a rule, subscribe to a terms of use agreement, in which the respective policy is expressed, including that service vehicles are to be used solely within the scope of the activity of the companies to which they belong, and their use for personal purposes is not permitted, except when duly authorized, with point 6 of the terms of use of service vehicles stating that "The vehicle provided is intended exclusively to be used in the service of the company, and by authorization may be used for private purposes."

4. After completion of the work for which the vehicles were requisitioned, the requesting employee is obligated to return them, and the corresponding keys, to the installations of the respective entities.

5. Entries and exits of vehicles from the parking facilities of the entities in question are, as a rule, recorded by the security team that controls the park in which the vehicles are parked.

6. The security team is also, as a rule, responsible for completing a database with that information, to which is added the identification of the driver, with a control map being formulated from that data.

7. The generality of the vehicles in question remain at the installations of the entities in question, except when, for operational reasons, it is not possible or convenient to return them on the day they are taken out.

8. When the project or task to which vehicles have been allocated involves filming outside the metropolitan areas of Lisbon or Porto, which require overnight stays outside those areas, or filming that occurs during the night, or on weekends and/or holidays, the employees who use the vehicles may not return them on the same day they take them out.

A.2. Facts taken as not proven

1. It would not be possible for D… to develop its activity in economically adequate terms if it did not possess the 29 vehicles used directly in production, the 3 scene cars or the 2 vehicles used for transport of props.

2. The authorization referred to in point 41 of the proven facts was never granted.

A.3. Reasoning of proven and not proven matters of fact

With respect to matters of fact, the Tribunal does not have to pronounce on everything alleged by the parties; rather, it is its duty to select the facts that matter for the decision and distinguish proven facts from those not proven (cf. Article 123, paragraph 2, of the CPPT and Article 607, paragraph 3 of the CPC, applicable ex vi Article 29, paragraph 1, letters a) and e), of the RJAT).

Thus, the facts pertinent to the judgment of the case are chosen and selected according to their legal relevance, which is established in light of the various plausible solutions of the question(s) of law (cf. previous Article 511, paragraph 1, of the CPC, corresponding to the current Article 596, applicable ex vi Article 29, paragraph 1, letter e), of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary and testimonial evidence and the administrative file attached to the record, the facts enumerated above were considered proven, with relevance to the decision.

For the determination of the facts contained in points 10 to 12, 15, and 17 to 46, the testimony of the witness examined was considered, who testified on the same, as they stand proven, revealing direct knowledge and in a coherent manner, with no reasons to question their truthfulness.

With respect to the facts taken as not proven, the judgment is based essentially on the lack of sufficient evidence regarding them.

Thus, with respect to the fact not proven at point 1, there is no evidence attesting to it, and the testimonial evidence examined only referred generically to the need for light vehicles for D…'s activity, but not in sufficiently precise terms so that it can be stated, with sufficient certainty and beyond any reasonable doubt, that such need covers equally "the 29 vehicles used directly in production, the 3 scene cars or the 2 vehicles used for transport of props."

With respect to point 2 of the facts taken as not proven, it is also considered that the evidence produced regarding it does not permit, with sufficient certainty and beyond any reasonable doubt, to state that the authorization in question was never granted.

In fact, although the witness examined stated that, to her knowledge, the authorization in question was never granted, it is not possible to exclude that, without her knowledge, it may have occurred.

B. MATTERS OF LAW

i. Exception

Prior to discussion of the merits of the case, the AT raises the question of the material incompetence of the arbitral tribunal resulting from the circumstance that the request for arbitral pronouncement was formulated following the rejection of a request for official revision of a tax act.

The Respondent argues, then, that the request for arbitral pronouncement sub judice is formulated following the rejection of a request for official revision of a self-assessed act of corporate income tax (IRC) relating to the year 2012, formulated on 23 March 2016, that is, in circumstances where the informal appeal deadline referred to in Article 131 of the CPPT had already expired, so that, in light of the provisions of Articles 2, paragraph 1, letter a) and 4, paragraph 1, both of the RJAT, and Articles 1 and 2, letter a), both of Administrative Order No. 112-A/2011 of 22 March, the material incompetence of the present Arbitral Tribunal to consider and decide the request would be verified.

The AT bases its understanding essentially on Article 2/a) of Administrative Order 112-A/2011 of 22 March, which excludes from the disputes cognizable by arbitral tribunals functioning at the CAAD, "claims relating to the declaration of illegality of self-assessment acts, withholding at source and advance payment acts that have not been preceded by recourse to the administrative procedure in accordance with Articles 131 to 133 of the Code of Tax Procedure and Process."

The Respondent understands, in light of this norm, that it should be understood in the literal sense in which it reads it, proscribing from the scope of tax arbitral jurisdiction claims relating to the declaration of illegality of self-assessment acts that have not been preceded by informal appeals in accordance with the provisions of the CPPT referred to there.

The entire argument of the Respondent on the matter, however, ultimately reconditions itself to sustaining that it was the legislator's intention to restrict the competence of tax arbitral jurisdiction regarding knowledge of illegalities of self-assessment acts solely to situations in which an appeal exists presented in accordance with Articles 131 to 133 of the CPPT, because that is what, in its reading, says the text of the norm being interpreted.

With all due respect, no substantial reason is discerned, among the reasons offered by the Respondent, which explains the rationality of the understanding it sustains. Indeed, no substantial reason is apparent – and the Respondent presents nothing in that sense – for why, given the conditions and specificities peculiar to each of the informal remedies in question, in the same terms that tax tribunals are bound, knowledge of the legality of self-assessment acts that are the subject of a request for official revision, presented beyond the informal appeal deadline, should not be cognizable in arbitral proceedings.

On the other hand, even a literal reading of the norm in question, provided it is duly contextualized, does not inexorably lead to the result defended by the Respondent in the record.

In fact, the expression used by the norm of letter a) of Article 2 of Administrative Order 112-A/2011 of 22 March is parallel to the norm itself of Article 131/1 of the CPPT, which should be understood as a concretization of the assumed, and peacefully recognized, legislative intention that the tax arbitral process constitutes an alternative procedural means to the judicial impugnation process.

The norm in question should also be understood as explained by the circumstance that, in its absence – and given the content of Article 2 of the RJAT – it would appear possible to directly impugn self-assessment acts without prior administrative pronouncement.

That is, taking into account that given the RJAT no prior administrative intervention was configured as necessary to arbitral impugnation of a self-assessment, the content of the Administrative Order should be interpreted as equating – in this matter – the tax arbitral process with the judicial impugnation process and not, as would result from the position sustained by the Respondent, go from 80 to 8, taking a broader impugnability than that possible in Tax Courts, and transmuting it into a more restricted one.

Thus, no reason is seen – and, once again, no aid is provided by the Respondent in that sense – for interpreting one and the other norm differently, all the more so that the letter of the norm of Administrative Order 112-A/2011 of 22 March, ultimately turns out to be less restrictive than that of the CPPT, in that it does not integrate, as this does, the expression "mandatorily," nor does it refer to "informal appeal" but to "administrative procedure," a concept notoriously broader than that. Hence, a reading of the letter of the law itself is possible which is contained in the sense that only knowledge is removed from the scope of tax arbitral jurisdiction of claims relating to the declaration of illegality of self-assessment acts, withholding at source and advance payment acts that have not been preceded by recourse to administrative procedure in terms compatible with what is understood as admissible in light of Articles 131 to 133 of the CPPT, which knowably includes the procedure for official revision of the tax act[1].

And this is the reading that is subscribed to, following the Decision rendered in proceeding 48/2012T of the CAAD, and subsequent arbitral jurisprudence, as well as the doctrine that has been formed[2], and it is not apparent, in that the interpretation carried out is contained in the letter of the law, that any violation of any constitutional provision may result from it, especially of the indicated Articles 2, 3, paragraph 2, 111 and 266, paragraph 2, all of the Constitution of the Portuguese Republic (CRP).

Thus, and in view of all that has been set forth, with the Respondent not having reason on this matter, the exception of incompetence of the Arbitral Tribunal should be judged without merit.

ii. On the merits of the case

The questions that arise in the present record are, first, whether the norm on which the autonomous taxation contested by the Applicant is based has underlying a presumption, if, in the affirmative case, it will be legally possible to rebut such presumption, and, finally, if, in the specific case, the Applicant succeeded in doing so.

Let us proceed then.

The autonomous taxation in question in the present record, was incurred on charges of the Applicant, with depreciations, insurance, maintenance and conservation and fuel, relating to motorcycles.

In this regard, Article 88 of the CIRC in effect during the 2011 tax year provided, insofar as relevant here, that:

"3 — The following are taxed autonomously, excluding vehicles powered exclusively by electric energy:

a) At a rate of 10%, the deductible charges relating to representation expenses and those related to light passenger vehicles or mixed vehicles, motorcycles or motorcycles, made or incurred by taxable persons not subject to subjective exemption and who exercise, as their principal activity, activity of a commercial, industrial or agricultural nature;(...)

5 — Charges related to light passenger vehicles, motorcycles and motorcycles are considered to include, in particular, depreciations, rents or leases, insurance, maintenance and conservation, fuel and taxes incidental to their possession or use.

6 — Excluded from the provision of paragraph 3 are charges related to light passenger vehicles, motorcycles and motorcycles, assigned to the operation of public transportation service, intended to be leased in the exercise of the normal activity of the taxable person, as well as depreciations related to vehicles as to which the agreement provided for in paragraph 9) of letter b) of paragraph 3 of Article 2 of the Income Tax Code has been entered into."

In the year 2012, the wording of the aforementioned norm became the following, which also applied in the year 2013:

"3 – The following are taxed autonomously at a rate of 10% the charges made or incurred by taxable persons not subject to subjective exemption and who exercise, as their principal activity, activity of a commercial, industrial or agricultural nature, related to light passenger vehicles or mixed vehicles whose acquisition cost is equal to or less than the amount fixed pursuant to letter e) of paragraph 1 of Article 34, motorcycles or motorcycles, excluding vehicles powered exclusively by electric energy.

5 – Charges related to light passenger vehicles, motorcycles and motorcycles are considered to include, in particular, depreciations, rents or leases, insurance, maintenance and conservation, fuel and taxes incidental to their possession or use.

6 – Excluded from the provision of paragraph 3 are charges related to light passenger vehicles, motorcycles and motorcycles, assigned to the operation of public transportation service, intended to be leased in the exercise of the normal activity of the taxable person, as well as depreciations related to vehicles as to which the agreement provided for in paragraph 9) of letter b) of paragraph 3 of Article 2 of the Income Tax Code has been entered into."

This wording was in effect until 2015, when it took the following form:

"3 - The following are taxed autonomously the charges made or incurred by taxable persons who do not benefit from subjective exemptions and who exercise, as their principal activity, activity of a commercial, industrial or agricultural nature, related to light passenger vehicles, light cargo vehicles referred to in letter b) of paragraph 1 of Article 7 of the Vehicle Tax Code, motorcycles or motorcycles, excluding vehicles powered exclusively by electric energy, at the following rates:

a) 10% in the case of vehicles with an acquisition cost of less than €25,000;

b) 27.5% in the case of vehicles with an acquisition cost equal to or greater than €25,000, and less than €35,000;

c) 35% in the case of vehicles with an acquisition cost equal to or greater than €35,000.

5 - Charges related to light passenger vehicles, motorcycles and motorcycles are considered to include, in particular, depreciations, rents or leases, insurance, maintenance and conservation, fuel and taxes incidental to their possession or use.

6 - Excluded from the provision of paragraph 3 are charges relating to:

a) Light passenger vehicles, motorcycles and motorcycles, assigned to the operation of public transportation service, intended to be leased in the exercise of the normal activity of the taxable person; and

b) Motor vehicles as to which the agreement provided for in paragraph 9) of letter b) of paragraph 3 of Article 2 of the Income Tax Code has been entered into."

Prior to 2010, Article 81 of the CIRC had the following wording, in the part now relevant, corresponding to Article 88, transcribed above:

"3 – The following are taxed autonomously, excluding vehicles powered exclusively by electric energy:

a) At a rate of 10%, the deductible charges relating to representation expenses and those related to light passenger vehicles or mixed vehicles, motorcycles or motorcycles, made or incurred by taxable persons not subject to subjective exemption and who exercise, as their principal activity, activity of a commercial, industrial or agricultural nature; (...)

5 – Charges related to light passenger vehicles, motorcycles and motorcycles are considered to include, in particular, write-downs, rents or leases, insurance, maintenance and conservation expenses, fuel and taxes incidental to their possession or use.

6 – Excluded from the provision of paragraph 3 are charges related to light passenger vehicles, motorcycles and motorcycles, assigned to the operation of the public transportation service, intended to be leased in the exercise of normal activity of the taxable person, as well as write-downs related to vehicles as to which the agreement provided for in paragraph 8) of letter b) of paragraph 3 of Article 2 of the Income Tax Code has been entered into."

In sum, what is at issue is to ascertain the ratio legis of the provision of Article 88/3 of the CIRC/2012, transcribed above, verify whether it is based on a presumption and, in the affirmative case, whether it was, or was not, rebutted in casu.

When speaking of autonomous taxation, as is the case, it is convenient from the outset to bear in mind that what is at issue is a set of disparate situations, which will encompass, at least, three distinct types, namely:

• Autonomous taxation of certain income (e.g., Article 72 of the current CIRS);

• Autonomous taxation of certain deductible charges (e.g., paragraph 7 of Article 88 of the current CIRC);

• Autonomous taxation of other charges independently of their deductibility (e.g., Articles 1 and 2 of Article 88 of the current CIRC).

This clarification becomes important because it is understood that, given the disparity and heterogeneity of the situations subject to autonomous taxation, it will be in this context not only unnecessary but even counterproductive to attempt to synthesize and seek a proper and unified legal nature common to all those situations.

The nature of the specific autonomous taxation in question in the record has been the subject of extensive discussion in recent doctrine and jurisprudence.

One current has looked at them as an expenditure tax, which would tax certain types of expenses in a manner completely divorced from income, in such terms that there is even those who sustain that they constitute a proper tax, which would only be incidentally integrated in the codes of IRS and IRC.

Nevertheless, recurring acceptance has been obtained in the jurisprudence of the CAAD[3], the understanding that autonomous taxation on deductible charges, such as those in question in the present record, still integrate the regime of taxes regulated by the codes in which they are integrated, aiming, albeit in a convoluted manner, at the income taxed by those.

Naturally, whoever considers the autonomous taxation now occupying us a proper tax, distinct from the IRC and directly incident on the expenditure, will conclude that the norm under interpretation will not integrate any presumption, formulating directly the object of its incidence – the expenditure.

That has not been the understanding, however, of the Tax and Customs Authority, which for some time now has sustained, for example[4], that "autonomous taxation does not substantively constitute a type of tax distinct from the IRC, as, for example, is the rate," with which "the characteristics that make it a distinct and special tax in relation to the IRC," therefore "autonomous taxation is not and never was a special autonomous tax," and that "from a teleological, systematic and functional perspective, (...) autonomous taxation must be considered an addition to the IRC," basing the AT such conclusions on the understanding that the purpose of autonomous taxation "is undoubtedly accessory to the taxation of income," it not being "correct to state that autonomous taxation disassociates itself, either from the function and nature of the IRC, or even from the determination of taxable profit."

Also the Constitutional Court[5], has recognized that the matter of autonomous taxation is "regulated normatively in the seat of income tax," notwithstanding stating that it "is materially distinct from taxation in IRC," and that "we are (...) facing distinct tax facts and that are subject to different tax treatment," thus contradicting the AT's thesis because "autonomous taxation cannot be understood as an addition to the tax that the taxpayer must pay under the heading of IRC," and even going so far as to say that "the IRC and autonomous taxation are distinct taxes" and that such taxation "has nothing to do with the taxation of income and profits," statements that will have to be read, it is believed, cum grano salis, placing them within the limitations that contextualize them, referring them to the existence of a "tax base" consisting of "certain expenses that constitute autonomous tax facts," and in "subjection to specific rates," thus understanding that autonomous taxation "has nothing to do with the taxation of income and profits attributable to the company's economic exercise" (which does not mean it is unrelated to income and profits in general), and that the distinction between autonomous taxation and the IRC, being profound and marked, should be limited to what is necessary to safeguard the specificity of that at the level of its respective teleology, tax base and specific rates, without prejudicing its integration in the same normative framework.

In effect, it is believed, the TC is not defending that autonomous taxation constitutes a tax on expenditure stricto sensu, completely unrelated and distinct from the IRC, under pain of not only being contradicted by the systematics of tax law[6] and expressly by the legislator itself[7], but also of irretrievably condemning autonomous taxation to a formal unconstitutionality, for violation of the provision in letter i) of Article 165/1 of the CRP[8], in that the authorizing laws for the creation of those did not license the creation of a new tax on expenditure[9].

In fact, and as has been written elsewhere[10], "the complexity generated by successive alterations in the architecture of the CIRC has led (...) to an atypical normative building, in which one can discern a core corresponding to what might be called IRC tout court (or in the strict sense), which the Applicant intends to exhaust everything designated as IRC, and a periphery that integrates "marginal" regulations, largely subtracted from the logic, nature and principles of IRC tout court, but which, nevertheless, still situate themselves in the "gravitational field" of that.

And it is in the process of concretizing this difficult-to-define zone that all the decisions analyzed (...) operate, not being able to be properly understood without also understanding that, in fact, what all the decisions in question are doing is determining what consequences the "gravitation" around the IRC core brings to the matters addressed in each of them."

In that sense, "within the hermeneutical framework drawn above, (...) by force of the historical evolution of its respective legal regime, there constituted a type of IRC that integrates a hard core (...) and a group of adjacent rules, which partake of part of the logic and regime of that, but which in many aspects diverges from them." And, further on, "from the consideration of the legislative text, statically and in its historical evolution, it results that the legislator understood, and continues to understand, that autonomous taxation integrates the IRC, if not as a tax stricto sensu, at least in terms of being part of the same unitary tax regime."

This is because "the legal regime of autonomous taxation in question in the record only makes sense in the context of taxation under the IRC. That is, divorced from the legal regime of this tax, they will lack their principal referent of meaning. Their existence, their purpose, their explanation, ultimately, their juridicity, is only properly understandable and acceptable within the framework of the IRC's legal regime."

Hence, that is not understood that "the definition of IRC contained in Articles 1 and 3 of the CIRC" is "really superseded by a new transversal/general application definition," being such a stance an epistemological posture proper to a conceptualism which one repudiates from the outset.

On the contrary: it is the recognition of that which, in light of the current legal framework, imposes itself as the most reasonable: the definitive abandonment of any definition of transversal/general application of IRC, and the recognition of its regime as a complex and multifaceted reality, irreducible to a definition of that kind, which only fundamentally abstractionist conceptualism could presuppose."

"Everything that has been said evidences that the evolution of the IRC's legal regime has transmuted it into a complex and multifaceted reality, at the most diverse levels, which is reflected, in the matter that occupies us in this record, in that "dual nature" of which Prof. Saldanha Sanches spoke in the passage cited in Decision 617/2012 of the TC.

The recognition of this duality of nature does not prejudice, however, as it is understood to underlie both the citation in question and the jurisprudence that cites it, that one consider that the system, despite being dual, is the same[11]. Said differently, it only makes sense to speak of a dual-natured system if the system in question, globally considered, is still the same. Otherwise, one would speak not of a system of dual nature, but of two distinct systems, which, by everything that is being said, will not be what occurs. And, in casu, the system will be the IRC regime, which operating now by profit, now by expenses, aims at and pursues the purposes proper to that tax, including, evidently, the raising of revenue for the State."

In this framework, it is thought that the most correct understanding will be that autonomous taxation in question can be configured as a "hybrid" tax, incident on the income of natural and legal persons, and not on consumption or expenditure, as they will not present the principal characteristics of this form of taxation, nor will they be incident equally on property, and fitting into a problematic of income taxation with respect to which the legislator understood to act at two levels (separately or simultaneously): not to accept the deductibility of some expenses, in whole or in part and/or to tax them autonomously.

The autonomous taxation now in question in the record will also integrate, moreover, the list of specific anti-abuse norms, with manifest similarity to, for example, the norm of the former Article 65/1 of the CIRC, which provided that:

"The following are not deductible for the purpose of determining taxable profit: amounts paid or owed, for any reason, to natural or legal persons resident outside Portuguese territory and subject there to a clearly more favorable tax regime, unless the taxable person can prove that such charges correspond to effectively carried out operations and do not have an abnormal character or exaggerated amount."

That is, in the cases to which the autonomous taxation borne by the Applicant in the record relates, the legislator could have opted for a regime similar to that established in the transcribed norm, purely and simply prohibiting the respective deductibility, or conditioning it in the same terms of that norm, or in others that it deemed adequate.

Instead, the legislator opted not to go so far, staying the legal regime of IRC on the charges in question at a level short of that, by allowing the deductibility of the charges in question, against the immediate payment of a part of taxable profit that, present or future, will be affected by such deduction.

Nevertheless, the similarity of the regimes is still undeniable, as well as the concerns and purposes underlying them.

What has just been said thus has underlying it the observation that autonomous taxation, including those in question in the record, owes a great deal of its raison d'être to the circumstance that it will be objectively unfeasible to tax fully on a rigorous basis, under the IRS, in the potential beneficiaries of the expenses subject to those (which would be equivalent to a taxation of fringe benefits as it was conceived and applied in Australia and New Zealand). It is not thus ignored that autonomous taxation of the type that occupies us here has a facet directed directly to the income of natural persons. Just as they have, for that matter, a sanctioning facet – in the sense of imposing an unfavorable treatment[12] – with respect to the type of expenses that trigger them. However, these facets do not empty, nor, much less, make impossible, another facet, equally (if not more) relevant, indissolubly interlinked with income, in the case, of legal persons.

It is understood, then, that, by way of the impositions in question, it is also intended, at least in the same measure, to regulate the use by companies of expenses that may be necessary, in part, to the pursuit of normal activity, but which – on the basis of a judgment of normality – will also be for the benefit of natural persons who end up enjoying them in their personal and not professional capacity. Only that, the Tax Authority not having any "measuring tape" to make such a separation, the legislator opts, already for quite some time, for the introduction into the IRC Code of this portion which it already considered objectively, at the time of the record, an imposition at least similar to the IRC, even if such provision is considered questionable (as well as the current wording, regarding the inclusion in the IRC, of autonomous taxation in Article 23-A of the IRC Code).

There are thus recognized here those characteristics that doctrine has been pointing out to autonomous taxation in question for some years now, such as:

a) Autonomous taxation only makes sense because costs/expenses count as negative components of taxable IRC profit. This is what motivates IRC taxable persons to report as high a value as possible of those expenses to decrease the taxable matter of the IRC, the tax collected, and consequently the tax to be paid;

b) It is intended to discourage this type of expense in taxable persons who present negative results but which, regardless, continue to show consumption structures little or not compatible with the financial health of their companies;

c) It is, in more general thesis, a matter of modeling the tax system so that it reveals a certain balance with a view to better distribution of the effective tax burden among taxpayers and types of income;

d) Certain expenses are considered unfavorably in which, recognizably, it is not easy to determine the exact measure of the component that corresponds to private consumption, and with respect to which the general practice of abuse in their reporting is known.

Although, lately[13], the AT has sought to add to the above list a dimension of extra-fiscality (green taxation), pointing out that "autonomous taxation also constitutes an instrument of tax policy that acts as a disincentive to the use of light passenger vehicles or mixed vehicles, motorcycles and motorcycles powered by fuels of fossil origin, due to the negative externalities they cause," it is not apparent that such is a ground for the imposition of autonomous taxation, but rather of the exclusion of certain vehicles from its incidence.

In fact, from the outset, historically, it was not the creation and development of autonomous taxation now in question that was motivated by the pursuit of ecological objectives, but rather the relief of those regarding some vehicles that had such motivation.

On the other hand, underlying such relief, it appears to be, not so much a proscription of fuels of fossil origin, because if that were so all vehicles not using such fuels would have the same treatment, on one hand, and all vehicles using them would equally, at least insofar as corresponding to their respective level of pollution, also have the same treatment.

It is thus framed the exception of electric vehicles from subjection to autonomous taxation more as a specific and casuistic measure, also by its historical context, related to promotion of the industry and commerce of vehicles powered by electricity, than as a structured measure for defense of environmental quality[14].

Better or worse, autonomous taxation now in question should thus be understood as a way to prevent certain abusive actions, which the "normal" functioning of the taxation system was incapable of preventing, and other ways of combating such actions, including ways more burdensome for the taxpayer, were possible.

This anti-abuse character of autonomous taxation now in question will be not only coherent with its "anti-systemic" nature (as happens with all norms of the kind), but also with a presumptive nature, pointed out both by Prof. Saldanha Sanches and by jurisprudence which often cites him.

Under the perspective that has just been set forth, autonomous taxation in analysis will then materially have underlying a presumption of "partial" business nature of the expenses on which it is incident, in function of the aforementioned circumstance that such expenses situate themselves on a grey line that separates what is business expense, productive, from what is private expense, consumption, and, notoriously, in many cases, the expense will effectively in reality have a dual nature (part business, part personal).

Confronted with such difficulty[15], the legislator, instead of simply removing its deductibility, or inverting the burden of proof of the business nature of the expenses in question (imposing, for example, the demonstration that "they do not have an abnormal character or exaggerated amount," for example, as it does in Article 88/8, and did in Article 65/1, both of the CIRC[16]), chose to establish the currently effective regime, which, nevertheless, has precisely the same ground, the same purpose, and the same type of result, as other forms used in other situations typical of the regime (in the case) of the IRC.

Thus, from the known fact that a certain type of expenses is incurred, the legislator draws the unknown fact, which is the assessment of the degree of business allocation of the product of such expenses.

And it will be this unknown fact, presumed by the legislator, that triggers and justifies the autonomous taxation in question in the present proceeding. In fact, it was by presuming that the expenses on which that autonomous taxation is incident have, as a rule, a mixed allocation, whereby there is unjustified benefit in their full deduction, that the legislator began, in a first phase, by limiting the percentage of those it admitted as deductible. Subsequently, for reasons that will matter little to the case, but which may pass through budgetary order constraints, on one hand, and the need to ensure the taxation of possible benefits that individuals could derive from those expenses, the legislator adopted the current model of autonomous taxation of the expenses now occupying us. But such did not exclude, rather complemented, that primitive motivation of adequately taxing the income of legal persons, distorted by the deduction of expenses that the legislator presumes of allocation not entirely business. That is: the budgetary purposes and, possibly, of taxation of fringe benefits, that may assist the current regime of autonomous taxation occupying us, do not exclude, rather rest on, the aforementioned presumption of "partial business nature" of the expenses on which they fall (and, complementarily, in the distortion of the taxation of the income of legal persons resulting from it).

This understanding is not only compatible but is a consequence of what the AT has sustained in arbitral proceedings, stating, for example[17], that "The raison d'être of autonomous taxation is not found in simply collecting more tax, but aims primarily to discourage recourse to the type of expenses that tax them, which, by their nature, are conducive to payment of concealed income, and, ultimately even, to allow recovery of some tax that ceased to be paid by the beneficiary of the income, transferring responsibility for this from the latter's sphere to that of those who pay that income, (...) What confers on them a clear anti-abuse nature, manifestly accessory/complementary to taxation according to the taxable capacity revealed by income, even if only apparently at the expense of taxation of actual income (read: based on accounting), because what is intended with them is precisely to prevent abusive use of certain expenses and distribution of dividends and in fraud of norms aimed at reaching the actual income of taxable persons," being "precisely their anti-abuse function that legitimates autonomous taxation in light of the principle of taxable capacity."

Also the recent jurisprudence of the TC, already cited[18], has stated that "The introduction of the autonomous taxation mechanism is justified, on the other hand, by virtue of reporting to expenses whose tax treatment is difficult to discern because they are found in a "zone of intersection of the private sphere and the business sphere" and aims to prevent and avoid that, through those expenses, companies proceed to hidden profit distribution or assign income that may not be taxed in the sphere of their respective beneficiaries, and also aiming to combat fraud and tax evasion," having "implicit the idea of demotivating a practice which, apart from affecting equality in the distribution of public charges, may involve situations of lesser tax transparency, (...) explained by a legislative intention to stimulate companies to reduce as far as possible the expenses that negatively affect tax revenue," confirming that "the legislator thus opted to subject the expenses to autonomous taxation as an alternative and more effective form than the non-deductibility of the expense for the purpose of determining taxable profit," "intending (...) to reduce, by the incidence of the tax, the tax advantage that results for companies from the realization of expenses that are deductible but do not have a business cause" and "to avoid the realization of excessive and unnecessary expenses from the point of view of business interest" which "being excessive and not justified from the point of view of business, have unfavorable effects for obtaining tax revenue," thus aiming at "penalizing certain type of expenses that, being excessive, are not justified by business reasons" and "compensate for the prejudicial result that, through the reduction of taxable profit, the expense entails for the public treasury."

The TC thus leaves no doubt that it is intrinsic to autonomous taxation, "to stimulate taxpayers to avoid the realization of excessive expenses that, unjustifiably, may affect economic results and cause a decrease in tax revenue," paying attention a censure "from the point of view of taxation," of "the realization of expenses that unnecessarily determine a reduction of taxable income" (underlined in original).

One is thus surprised in a manner believed to be clear, in constitutional jurisprudence, an axio-normative justification plan underlying the regime in question, directly related to the unnecessariness or unjustifiability of the expense subject to autonomous taxation, in such terms that, it is believed, not being verified, beyond any reasonable doubt, such unnecessariness or unjustifiability, the normative ground sustaining that type of taxation will fail.

Given the conclusion that has just been reached, that autonomous taxation occupying us encloses a presumption that the expenses that subject it are, partially, unnecessary or unjustifiable from the point of view of business, it is now necessary to ascertain whether the presumption thus encountered is, or is not, susceptible to being rebutted.

In this regard, Article 350/2 of the Civil Code provides:

"Legal presumptions may, however, be rebutted by proof to the contrary, except in cases where the law prohibits it."

In coherence, Article 73 of the LGT provides:

"Presumptions enshrined in the norms of tax incidence always admit proof to the contrary."

For the provision of this latter norm to operate, it is necessary, evidently, that a norm of tax incidence is in question.

Now, in the case, the norm in question will, without doubt, be a norm of objective tax incidence, as the Respondent itself, for that matter, recognizes[19], as had been recognized by the dissenting vote rendered in arbitral proceeding 628/2014T[20], as it provides that certain facts – the expenses with certain goods that are presumed of mixed allocation (business and personal), as has already been seen – imply a certain tax obligation.

The Respondent, although recognizing, as stated, that it is facing a norm of incidence, seeks to remove the applicability, arguing that "on the one hand, it does not contain in its wording the expression "it is presumed," nor, on the other, does it proceed to tax based on fictions of income or of the taxable matter."

Now, with all due respect, neither one nor the other of those arguments should proceed.

In fact, and with respect to the first of those, it will suffice to note that presumptions contained in norms of incidence, as a rule, do not contain the expression "it is presumed," or equivalent[21].

With respect to the second of the arguments presented by the Respondent, which develops it, arguing that "the charges that (...) are taxed autonomously are those "made or incurred by taxable persons," (...) are the charges that accounting-wise are recorded in the accounts of the Applicant and that concurred, in the capacity of indispensable costs, for the formation of taxable profit," whereby "the norm in question did not create fiction of a certain amount to be taxed under the heading of charges with light passenger vehicles or mixed vehicles" or "created fiction of the respective tax base," the same is only compatible, although the Respondent does not assume it expressly, with the understanding that autonomous taxation is a tax on expenditure.

In fact, only by considering that autonomous taxation exhausts its imposing ground in the expenditure in which the respective tax fact is based, may one conclude that it exhausts itself in "the charges that accounting-wise are recorded in the accounts of the Applicant and that concurred, in the capacity of indispensable costs, for the formation of taxable profit."

On the contrary, by considering that the purpose of autonomous taxation "is undoubtedly accessory to the taxation of income," that it is not "correct to state that autonomous taxation disassociates itself, either from the function and nature of the IRC, or even from the determination of taxable profit," and, above all, that what "is intended with them is precisely to prevent abusive use of certain expenses and distribution of dividends and in fraud of norms aimed at reaching the actual income of taxable persons," being "precisely its anti-abuse function that legitimates autonomous taxation in light of the principle of taxable capacity," that is, in sum, that autonomous taxation is, still and ultimately, taxation on income, and not on expenditure, as was seen above, one will necessarily have to conclude that the charges that integrate the tax fact are nothing more than the known fact, from which the legislator draws the unknown fact, which is the income of the legal person (in the case), legitimating the taxation, affected by the presumed partial business nature (incomplete, unjustified, unnecessary) of the charges in question.

Given the foregoing, it must be concluded that the presumption of "partial business nature" in question should, in coherence, be considered as covered by the possibility of rebuttal generally enshrined in Article 350/2 of the Civil Code and Article 73 of the LGT[22], which, for that matter, appears to be in accordance with a proportional and adequate distribution of the burden of proof, in that inciding autonomous taxation in question on expenses of full business nature not obviously at the outset, it will be the taxpayer who will be better positioned to demonstrate that such requirement is verified concretely.

Thus, autonomous taxation whose charge the Applicant seeks to subtract from its taxable profit, may be viewed as a kind of consensual anti-abuse norm, in which the legislator proposes to the taxpayer that it deduct the expense under the general terms, accepting the percentage of business nature fixed forfaitively, embodied in the payment of autonomous taxation, as compensation for the erosion of the tax base resulting from an expense that the normality of things reveals will not, as a rule, have an exclusively business allocation, without prejudice to, by force of the general norms applicable to presumptions, analyzed above, as well as of the principles proper to tax law, including, as the Respondent itself recognizes[23], the "principle of the economic substance of tax facts, which requires that taxation, whenever possible, be based on the economic reality underlying tax facts," the taxpayer being able to prove, concretely, the effective full business nature of the expense, and consequently deduct it fully, not bearing autonomous taxation[24], being that in cases in which autonomous taxation is incident exclusively on deductible charges[25], excluding, therefore, non-deductible ones, the taxpayer may still, not deduct[26] the expenses subject to such taxation, if deductible, the presupposition of such autonomous taxation not being verified (on deductible charges)[27].

It should be noted here, even in function of some confusion that may be generated, that the full business nature spoken of here does not identify with the business nature to which Article 23 of the CIRC refers. Rather, the fulfillment of the requirements of Article 23 of the CIRC, regarding the charges in question, is a presupposition of the deductibility of the charge and, in the case that autonomous taxation is incident on deductible charges, of autonomous taxation itself.

In fact, and for example, in requiring in the norm of Article 88/3/a) of the CIRC in effect until the 2011 tax year, that the "charges (...) relating to representation expenses and those related to light passenger vehicles or mixed vehicles, motorcycles or motorcycles" are deductible so as to subject them to autonomous taxation, naturally the legislator was referring back to the general criterion of Article 23 of the CIRC, as a requirement for autonomous taxation in question to operate, not being able, it is believed, under pain of violation, moreover, of the principle of typicity of tax law, to make such autonomous taxation incident on non-deductible charges, which, for that matter, is coherent with the proper nature of that which, as has already been seen and is consensually recognized, drinks one of its principal grounds in the need to, in the words of the TC, above cited, eliminate "the tax advantage that results for companies from the realization of expenses that are deductible but do not have a business cause," or, in the words of the Respondent in the record[28], avoid the "erosion of the tax base under the IRC," an advantage and erosion that do not take place, in the case of non-deductible expenses.

Hence, from the outset, the "business nature" (partial) presumed by autonomous taxation in question is special, in relation to the business nature of Article 23, which they presuppose.

Said differently, and making explicit the normative articulation between the regimes in question, generally and as a rule, the fulfillment of the criteria of Article 23 of the CIRC confers on the taxpayer the right to fully deduct from taxable profit the corresponding expenses.

However, with respect to deductible expenses subject to autonomous taxation, such right is burdened with the obligation to bear the corresponding autonomous taxation, fundamentally because the legislator, as was seen above, understands that, within the framework of normality, which also underlies the regime of Article 23 of the CIRC, such expenses are clothed with special characteristics that indicate incomplete business nature, unlike what happens with the generality of expenses that meet the assumptions of the aforementioned Article 23 of the CIRC, in such terms that their non-deductibility as a rule is not justified, because it is granted that a more or less significant part, always on the plane of the normality of things where the legislator positions itself, of the expense will, in fact, be businessly necessary, but in terms, equally, that it is not justified, for the reasons already seen above, that the deduction of the expense affects tax revenue in the terms that result from deduction in accordance with the aforementioned Article 23, without the intervention of autonomous taxation.

Thus, in order to justify the non-incidence of autonomous taxation on the charges in question, the taxpayer must, not attempt to demonstrate the verification of the assumptions of that Article 23, but rather demonstrate beyond any reasonable doubt that, concretely, expenses of the kind in question, which it seeks to deduct fully without subjecting to autonomous taxation, had exclusively business allocation.

Hence, the proof to be made, in order to rebut the presumption of partial business nature now in question, is distinct from the proof underlying the general regime of Article 23 of the CIRC, and the abundant jurisprudence and doctrine produced in that respect[29] is not applicable, implying the demonstration, beyond any reasonable doubt, not merely of the relationship of the expenses with the activity pursued by the taxable person, which, for that matter, it presupposes, but of which, as stated, concretely, the expenses in question had exclusively business allocation, without which, on the plane of the normality of the company's functioning, any margin of the designated grey zone of business expense, productive, and private expense, consumption, is detected, and any doubt must be resolved to the detriment of the taxpayer, by force of the proper functioning of the rules of the burden of proof[30].

The considerations presented by the Respondent in its Answer[31] do not thus proceed, according to which we would be facing "a manifest redundancy, as it would require it to a double burden of proof, this under the aegis of the same tax code, under a same tax," because "beyond having taxpayers to prove the indispensability of the costs concurring to the formation of taxable profit," they have "equally to prove the business nature of the expenses target of taxation, pursuant to the provision of Article 88 of the CIRC," whereby "it would be legitimate to attempt, then, two (absurd) conclusions, alternative between them: The first, that, pursuant to and for the purposes of Article 23 of the CIRC, whenever taxpayers proved the indispensability of a cost, for its part subject to autonomous taxation, they would be automatically excluded from taxation of Article 88 of the CIRC, because business nature already leaned on indispensability; The second, that, whenever taxpayers failed to prove the business nature of an expense – previously accepted as a fiscal cost for the purposes of determining taxable profit – would see the aforementioned cost be corrected and added to Q07 of their Form 22, because, if an expense is not had as pursuing business aims, the aforementioned cost cannot, under pain of incoherence, be considered indispensable for its productive source."

For that matter, no incoherence will surely be pointed out to the regime of Article 88/8 of the CIRC, in the current wording, in requiring of the taxpayer the burden of proof that the expenses there in question correspond to "effectively realized operations and do not have an abnormal character or exaggerated amount," in that if such operations had not been realized and/or had abnormal character or exaggerated amount, they would also not be deductible.

That is, here, as there, the special proof necessary to remove autonomous taxation does not confuse itself with the proof necessary to fulfill the general requirements of Article 23 of the CIRC.

This recognition of the presumptive nature of autonomous taxation in question in the record, in the terms set forth above, will, apart from everything else, it is believed, be a safeguard of its constitutionality, in that both the possibility of full deduction by the taxpayer is guaranteed, and its non-deduction, depending on which side the presumption underlying them is, concretely and in each case, infirmed, thus properly ensuring the conformity of the legal regime in question with the principles of tax equality and of taxable capacity, which would be unnecessarily (and occasionally disproportionately) truncated by the establishment of an irrebuttable presumption of the partiality of the business allocation of the expenses in question.

In effect, and at the limit, the question of the possibility or not of rebutting the presumption of partial business nature on which autonomous taxation now occupying us rests, reconditions itself to the answer to a more prosaic and evident question, which is to know whether there exists, and what is, the material ground, inherent to a reasonable legislator, for a taxpayer who, in function of his concrete activity has an inescapable need to use certain types of vehicles, possibly even specially modified and adapted to such activity, and who has implemented a system, within the framework of his business organization, that excludes, from the point of view of the regularity and lawfulness of its normal functioning, private (non-business) use of the aforementioned vehicles, to be burdened with autonomous taxation, with the characteristics, nature and grounds of that now occupying us.

The absence of such ground, and the imposition, in those circumstances, of a taxation which, not being, ultimately, as was seen, a tax on expenditure or property, is accordingly, in some form, a tax on income in which it is inserted, could not, it is believed, fail to result in a deficit of constitutionality, not only in light of the already mentioned principles of tax equality and taxable capacity, but also in light of principles relating to freedom of economic initiative, competition, and even private property, in that, without any justifiable ground[32], additional tax burden would be imposed on certain economic activities, which cannot be rationally exercised in another way, thereby prejudicing its free development, considerations which will not have been unrelated to the binding information of the AT of 14-09-2006, rendered in proceeding 2879/2005, where it was considered that it was intended to exclude from the scope of the application of the (then) Article 81/3 of the CIRC vehicles used in the exercise of normal activity of the taxable person (in the case of that information, vehicles used by hotel units in transfers) and which, despite the scant reasoning and the different historical context does not fail to evidence some sensitivity of the AT to what has just been said, all the more so that, to date, the information in question has not been revoked.

Having reached here, it becomes necessary, then, to assess whether, concretely, the presumption of the norm of Article 81, paragraph 3 of the CIRC in effect at the date of the tax fact, above determined, was, or was not, rebutted.

As was written in the dissenting vote rendered in arbitral proceeding 628/2014T of the CAAD, cited by both parties, which in that part, and as a general thesis, is subscribed to, "the admissibility of application of the regime of exclusion" of autonomous taxation in question should be "accompanied by special care in verification of the factual situation."

Examined such situation, in light of such criterion, it is thought that the evidence produced is incapable of grounding a judgment of rebuttal of the presumption in question.

Thus, notwithstanding it being proven that:

• Group B…, in the normal development of its activity, makes use of its own vehicle fleet, in which light passenger vehicles are included, and such vehicles are necessary for obtaining its revenues; and that

• The business activity carried out by companies C…, D…, E…, F…, G… and H… requires, with regularity, the displacement of employees to different points of the country, whether to ensure journalistic or radiophonic coverage (G…) of events, or for purposes of audiovisual production (D…), or for supply of goods or services (E…, F… and H…);

the fact is that such will be the normal situation of any IRC taxable person that has vehicles of the type referred to.

In fact, the need for light passenger vehicles for the displacement of employees necessary to exercise the activity corresponds to the normality of things, and cannot fail to be considered as underlying the material ground of the presumption in question, and therefore covered by the ratio legis of the same, not constituting such facts, in that manner, ground for its rebuttal.

Also the circumstance that it is proven that to the vehicles to which the autonomous taxation in question in the present arbitral proceeding refers, were, in the organization of the group headed by the Applicant, established the allocations contained in point 26 of the proven facts, and that the choice of vehicle models, the logistical management of service vehicles, and corresponding management of fuel consumption in the Applicant's Group is the exclusive responsibility of the procurement and central corporate services team, obeying certain criteria oriented in function of the nature of the activities to which they are intended, including those of allocation of vehicles to specific drivers, does not interfere with the judgment in question, given that such situation will correspond to the normality of things, that is, the natural thing in an IRC subject that possesses light passenger vehicles, will be to have them allocated to relevant uses within the framework of the exercise of its economic activity, structuring itself organizationally in the manner it deems convenient to obtain the efficiency it deems necessary in such management.

For that matter, it is considered that the judgment of business nature underlying the presumptions in question is of an objective nature, that is, formulated in light of the factual situation as it configures itself in its entirety with legal relevance, and not of a subjective nature, attending solely to the purpose or intention of the taxable person(s) involved.

The circumstances that some transports or displacements of persons and equipment, namely within the scope of reports carried out by C…, is not possible to be accomplished using public transportation, and that they imply, sometimes, the displacement of 3 or 4 persons, as well as some displacements taking place to locations of difficult access (in the case of commercial radio), also appear irrelevant to the question under analysis, from the outset because it does not exclude the possibility of using other forms of transportation not covered by autonomous taxation, and then because it does not cover the totality or even the majority of the vehicles in question. It is added that these are, also, circumstances common to the generality of taxable persons subject to autonomous taxation in question, and that add nothing regarding the totality of the use of the vehicles exclusively within the business framework.

The fact that the vast majority of vehicles to which autonomous taxation refers are characterized, indicating in a very visible manner the entity to which they belong and their purpose, with a view to their identification by the public, by itself and in the specific case, adds nothing, as, apart from other things, such may tend to an increased interest in additional use of the vehicles, beyond their principal function, as a form of publicity or dissemination of brands.

In the case, it is verified that also, as a rule, service vehicles are not assigned to any specific employee, there being a pool of available vehicles, with the key in use as well as all documentation relating to them being under the responsibility of the parking facility management or the vehicle user, and being requisitioned by employees who need them within the scope of their functions and returned after use.

Further, it is verified that after completion of the work for which vehicles were requisitioned, the requesting employee is obligated to return them, and the corresponding keys, to the installations of the respective entities, that entries and exits of vehicles from the parking of the entities in question are, as a rule, recorded by the security team that controls the park in which the vehicles are parked, that, also as a rule, that team is also responsible for completing a database with that information, to which is added the identification of the driver, with a control map being formulated from that data, and that the generality of the vehicles in question remain at the installations of the entities in question, except when, for operational reasons, it is not possible or convenient to return them on the day they are taken out.

These latter facts, indicating already a system of control of the use of vehicles covered by it, in such terms as to ensure the exclusivity of that within the framework of the business activity for which they were acquired, assumes relevance from the perspective of rebutting the presumption above detected.

Nevertheless, in the terms that it was possible to ascertain and given as proven, it is thought that the factual body in question is not susceptible to, beyond any reasonable doubt, affirming the totality of the business allocation of the vehicles to which the autonomous taxation now contested refers, such deficiency that possibly may even result from the circumstance that the implementation of the system in question was not, notoriously, intended with that demonstration.

In fact, it is considered that the proof to be made, as developed above, should be in the sense of demonstrating, beyond any reasonable doubt, not merely the relationship of the expenses with the activity pursued by the taxable person, but of which, concretely, the expenses in question had exclusively business allocation, without which, on the plane of the normality of the company's functioning, any margin of the designated grey zone of business expense, productive, and private expense, consumption, is detected.

Now, in the case, it is considered that the proven facts, above referred, are not sufficient for, with the necessary certainty, such a judgment can be made, and as has been noted, any doubt must be resolved to the detriment of the taxpayer, by force of the proper functioning of the rules of the burden of proof.

In fact, and from the outset, the factual framework pointed out draws a rule, a normality, but does not exclude, as is proven, other situations.

It is added that such framework applies, as contextually produced, to the activity of C…, and with lesser intensity, to that of G…, losing consistency with respect to the activity of the remaining companies, which do not carry out news reports.

On the other hand, and even within those two entities (C… and G…), it is not credible that all vehicles have as exclusive justification the carrying out of news reports, so that, given the size of the vehicle park, it is not credible that all of them are covered by the controls and utilization criteria exposed, and it is by no means possible for this tribunal to determine, even, which ones are and which ones are not.

It cannot equally fail to be noted that the allocation of vehicles made by the Applicant's Group itself, and contained in point [...], includes a significant group of vehicles intended for "multiple purposes," which it is not possible to specify.

It is added [... truncated ...]