Summary
Full Decision
Arbitral Decision
The arbitrators Counselor Jorge Lopes de Sousa (arbitrator-president), Professor Doctor Luísa Anacoreta and Professor Doctor Vasco Valdez (arbitrators members), appointed by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Court, constituted on 17-12-2018, agree as follows:
1. Report
A..., S.A., hereinafter referred to as "A..." or "Claimant", legal entity number..., with registered office at..., ..., ... ...-... ..., parent company and responsible for self-assessment of Corporate Income Tax ("CIT") of the fiscal group (Fiscal Group B...), for the tax year 2014, has, pursuant to articles 2, paragraph 1, letter a), and 10, paragraphs 1 and 2, of Decree-Law no. 10/2011 of 20 January (hereinafter "RJAT"), and articles 1 and 2 of Ordinance no. 112-A/2011 of 22 March, requested the Constitution of an Arbitral Court, with a view to declaring the illegality of the CIT self-assessment, including autonomous taxation rates, of fiscal group B..., relating to the year 2014, as regards the amount of autonomous taxation rates in CIT of € 366,582.03, with its consequent annulment, by improper exclusion of deductions from the tax.
The Claimant may also request "the reimbursement to the claimant of this amount, plus compensatory interest at the legal rate counted, until full reimbursement, from 1 September 2015 regarding the amount of € 365,999.48 and from 1 February 2017 with respect to the remaining € 582.55".
The Claimant further requests "subsidiarily, should it be understood that article 90 of the CIRC does not apply to autonomous taxation, then the illegality of the assessment of autonomous taxation (and be consequently annulled) should be declared due to lack of legal basis for its implementation (see article 8, paragraph 2, letter a), of the LGT, and article 103, paragraph 3, of the Constitution), with the consequent reimbursement, on the same terms evidenced under the main application, of the amount of € 366,582.03, and the payment of compensatory interest counted from 1 September 2015 regarding the amount of € 365,999.48 and from 1 February 2017 with respect to the remaining € 582.55".
The Respondent is the TAX AUTHORITY AND CUSTOMS SERVICE.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority and Customs Service on 08-10-2018.
Pursuant to the provisions of letter a) of paragraph 2 of article 6 and letter b) of paragraph 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable deadline.
On 27-11-2018 the parties were duly notified of this appointment, and neither manifested any intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, paragraph 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance with the provision of letter c) of paragraph 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 17-12-2018.
The Tax Authority and Customs Service submitted a response in which it argued that the application should be ruled unfounded.
By order of 29-01-2018 it was decided to dispense with the meeting provided for in article 18 of the RJAT and pleadings.
The arbitral tribunal was regularly constituted, in accordance with the provisions of articles 2, paragraph 1, letter a), and 10, paragraph 1, of Decree-Law no. 10/2011, of 20 January.
The parties are duly represented, have legal personality and capacity, and have standing (articles 4 and 10, paragraph 2, of the same decree and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from nullities.
2. Factual Matters
2.1. Proven Facts
The following facts are considered proven:
a) In the year 2014, the Claimant was the parent company of a group of companies to which the Special Tax Treatment Scheme for Groups of Companies ("RETGS") was applicable, and which in said tax period was composed of itself and the companies:
• C…, S.A. (currently designated D..., S.A.);
• E…, Lda;
• F…, S.A.;
• H…, S.A. (currently designated H..., S.A.);
• I..., S.A. (currently designated J..., S.A.);
• K...., S.A. (K...);
• L..., S.A.;
• M..., Lda.; and
• N..., S.A.
b) On 29 May 2015, the present Claimant submitted the CIT tax return Form 22 for the tax period 2014, for the fiscal group of companies of which it is the parent company (document no. 1 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
c) Subsequently, on 23-10-2016, the Claimant further submitted a replacement declaration (Document no. 2 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced), having self-assessed autonomous taxation in CIT for that same year 2014, in the final amount of € 366,582.03 (Field 365, Table 10);
d) The claimant had available tax credits for use in 2014 that were not deducted, namely:
– credits under the System of Tax Incentives for Research & Development ("SIFIDE"), in the total amount of € 993,405.42, distributed among credits calculated and not deducted in the tax period of 2012 (€ 97,800.48), credits calculated and not deducted in 2013 (€ 685,010.88) and credits calculated and not deducted, with reference to the tax period of 2014 (€ 210,594.06) (document no. 3 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
– the amount of € 706,061.46, as Extraordinary Tax Credit for Investment ("CFEI") generated in the tax period of 2013 (document no. 4 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
e) The Claimant understands that the aforementioned credits can be deducted from the tax of autonomous taxation in CIT calculated in that same year, in the amount of € 366,582.03 (documents nos. 2 and 5 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
f) On that basis, the Claimant submitted a gracious complaint regarding the tax act of CIT self-assessment of its fiscal group for the year 2014;
g) On 13-07-2018, the Claimant was notified of the rejection of the gracious complaint (document no. 6 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
h) The decision rejecting the gracious complaint manifests agreement with an opinion whose contents are taken as reproduced, in which it states, among other things, the following:
Upon analysis of the concrete situation, the following should be noted.
As the position adopted by the case law of the Supreme Administrative Court (STA) states, "under the designation of autonomous taxation, there are very diverse realities, including, in accordance with paragraph 1 of (then) article 81 of the CIRC, undisclosed or undocumented expenses, which are taxed autonomously, at the rate of 50%, which will be raised to 70%, in the cases of expenses incurred by taxable persons totally or partially exempt, or who do not exercise, as a main activity, commercial, industrial or agricultural activities (paragraph 2 of [then article 81), and which are not considered as cost in the calculation of taxable income for CIT purposes."
In sum, some doctrine and the case law of the national superior courts and of the Constitutional Court consider that autonomous taxation constitutes independent tax factors that apply to expenses, so that despite being formally included in the CIT Code, they relate to taxation distinct from the income tax.
Indeed, as SALDANHA SANCHES states, "in this type of taxation, the legislator seeks to respond to the admittedly difficult question of the tax treatment of expenses that is found in the zone of intersection between the personal sphere and the business sphere, in order to prevent remuneration in kind more attractive for purely tax reasons or hidden distribution of profits. The rule presents a characteristic similar to that which we find in the legal sanction against undocumented costs, with a rate increase when the situation of the taxable person does not correspond to a situation of fiscal normality."
In these terms, "it is a form of taxation that is explained by the need to prevent and avoid that, through such expenses, companies proceed to disguised distribution of profits, especially dividends that would thus be subject to CIT as profits of the company, goods such as combating tax fraud and evasion that such expenses cause (...)".
As stated in Arbitral Decision no. 722/2015-T, of 28 June 2016 (reiterated, among others, in Arbitral Decision no. 443/2016-T), autonomous taxation taxes the expense and not the income, a position which is assumed in the Judgment no. 204/2010 of the Constitutional Court, according to which, referring to autonomous taxation, it is affirmed that "although formally included in the CIRC and the amount that permits its collection is liquidated within its scope and as title of CIT, the rule in question relates to a tax imposition that is materially distinct from taxation in this category. Indeed, we are dealing with autonomous taxation (...) and that makes all the difference. It is not about taxing an income at the end of the tax period, but certain types of expenses in themselves, for understandable reasons of tax policy".
And it adds that "thus, the fact revealing tax capacity that is intended to be achieved is the simple realization of such expense, at a given moment. Each expense is, for this purpose, an autonomous tax fact, to which the taxpayer is subject, whether or not they have taxable income for CIT purposes at the end of the period, it being irrelevant that this portion of tax only comes to be liquidated at a later moment and jointly with the CIT.
In the same sense, it has also been recognized by CAAD case law, dated 2017-11-09, "there is not even controversy between the Parties regarding the application of article 90 of the CIRC to the liquidation of autonomous taxation, the divergence being limited to the manner of proceeding with liquidation, as the Tax Authority and Customs Service understands, if we understand correctly, that various taxes are calculated depending on the diversity of facts that give rise to autonomous taxation and the deductions provided for in the clauses of paragraph 2 can only be made to the part of the CIT tax with which there is direct correspondence, understanding that it does not occur in relation to the CIT tax that results from autonomous taxation"
It also emphasizes that "it is today settled, following numerous arbitral case law (...) and the positions adopted by the Tax Authority and Customs Service, that the tax levied on the basis of autonomous taxation provided for in the CIRC has the nature of CIT."
In light of the above, it was concluded that the tax from autonomous taxation has a different root, which cannot, on pain of subversion of the order of values, permit the deduction of tax benefits, on pain of mischaracterization of the principles that are specifically intended to be pursued.
Indeed, since the regime of autonomous taxation has a function of discouraging abusive behaviors, there is no logical reason why such discouragement could then vanish, which would occur if it were possible to deduct from the autonomous taxation tax, tax incentives, as the claimant argues, because this possibility would result in a double strange effect, that is, on the one hand it could, in the limit, eliminate the tax resulting from autonomous taxation and, on the other hand, it would facilitate the deduction of certain tax benefit (in the concrete case, SIFIDE and CFE are at stake) from a tax, which has a specifically anti-abuse function, of mitigation of fiscally and socially undesirable behaviors.
From the combination of these possibilities would result a contradictory, illegal and unethical result, precisely because the same tax law would allow, within the framework of the same tax system, to relieve the taxpayer of the burden of paying a tax that is rightfully owed due to the adoption of abusive, undesired and discouraged conduct (relief as expenses of the expenses provided for in article 88 of the CIT Code).
Insofar as autonomous taxation corresponds to a way of preventing certain abusive situations, we therefore have to inquire into their consideration for the purpose of the aforementioned deductions.
In that sense, it seems to us that it would be contrary to the spirit of the system to allow that, by force of the deductions referred to in paragraph 2 of article 90 of the CIT Code, autonomous taxation be deprived of that anti-abuse character that presided over its implementation in the CIT system.
Thus, autonomous taxation should not be considered for the purposes of the deductions referred to in paragraph 2 of article 90 of the CIT Code, especially since, being related to CIT, they do not form part of the concept of tax.
From the analysis of Table 10 of the tax return form 22, it is verified that Tax Benefits are integrated in deductions from the tax and only from field 358 onwards is the tax to be paid to the State or to be recovered calculated.
Thus, and in summary, as stated in the CAAD judgment in case no. 241/2017-T, of 19/01/2018:
"In the case, since SIFIDE deductions are tax benefits, and given the provision of paragraph 1 of article 2 of the Statute of Tax Benefits which establishes that 'Tax benefits are considered to be measures of an exceptional nature instituted for the protection of relevant extra-fiscal public interests that are superior to those of the taxation they prevent', we must assess, in the particular case, which is the 'taxation that they prevent', and considering the preamble of Decree-Law no. 292/97, of 22 October, which establishes a regime of fiscal incentives for research and business development, a forerunner of SIFIDE, in the preamble of this legal instrument it is stated 'to introduce a tax credit for investment in R&D, from which CIT taxable persons may benefit who exercise as a main activity a commercial, industrial or agricultural activity, and which will result in a deduction from the tax of that levy', so that the fact that this tax credit is intended for profit-making entities, as well as being a forerunner to paragraphs 3 to 6 of article 4 of Decree-Law no. 192/90, added by Law no. 3-B/2000, of 4 April, which now provide for autonomous taxation of 'representation expenses and charges relating to light passenger vehicles', when previously only autonomous taxation of 'undisclosed or undocumented expenses' was provided for (paragraphs 1 and 2 of article 4 of Decree-Law no. 192/90), it follows that SIFIDE deductions, in the sense that profits generated by Research and Development activities may be taxed at an effective tax rate lower than the general rate of CIT, may only be made to the tax determined in accordance with letter a) of paragraph 1 of article 90 of the CIRC (based on the taxable matter determined in accordance with article 15 of the CIRC), with SIFIDE deductions not being admissible to autonomous taxation taxes.
Given the above, it is thus concluded, by the illegality of the deductibility of SIFIDE to the autonomous taxation tax, without the need to resort to the interpretative character given by article 135 of Law no. 7-A/2016, of 30 March (Budget for 2016), to article 21 of article 88 of the CIT Code, according to which "the liquidation of autonomous taxation in CIT is effected in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the overall amount calculated."
In these terms, this Arbitral Court understands that the Claimant has no right, for the reasons set out above, with respect to the possibility of deducting the tax benefit in question (relating to SIFIDE) from the tax from autonomous taxation relating to the CIT for the years in question, terms in which the Claimant's application is unfounded, and the rejection of the gracious complaints corresponding to them is to be upheld".
i) The information system of the Tax Authority and Customs Service does not permit deduction of amounts of tax benefits from the tax derived from autonomous taxation;
j) The Tax Authority and Customs Service did not determine the taxable profit of Fiscal Group B... and the respective companies by indirect methods (Documents nos. 1 and 2, for the Fiscal Group, and Document no. 10, for individual tax return forms 22).
k) Neither the claimant nor the companies that are part of the group at the origin of SIFIDE were entities owing the State and social security any taxes or contributions (certificates forming part of document no. 11 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);
l) In 2014, the Claimant's fiscal group obtained "Total to recover" of € 70,359.77 (field 368, Table 10 of tax return form 22 which is part of document no. 2 attached to the request for arbitral pronouncement);
m) On 25-10-2018, the Claimant submitted the request for arbitral pronouncement that gave rise to the present proceedings.
2.2. Facts Not Proven
There are no facts relevant to the decision of the case that have not been proven.
2.3. Justification for the Determination of Factual Matters
The proven facts are based on the documents provided by the Claimant and which are also part of the administrative file.
As to the fact relating to the information system of the Tax Authority and Customs Service, it is accepted by the latter, which understands this to be the appropriate functioning (articles 119 to 121 of the response).
3. Legal Matters
The question that is the subject of the proceedings is whether investment expenses that benefit from SIFIDE and CFEI can be deducted from the amounts owed as title of autonomous taxation in CIT for the year 2014.
3.1. Applicability of Articles 89 and 90 of the CIRC to the Calculation of Autonomous Taxation
Articles 89 and 90 of the CIRC establish the following, in the wording of Law no. 2/2014, of 16 January, in force during the year 2014:
Article 89
Competence for Liquidation
The liquidation of CIT is effected:
a) By the taxable person itself, in the returns to which articles 120 and 122 refer;
b) By the General Tax Directorate, in other cases.
Article 90
Procedure and Form of Liquidation
1 - The liquidation of CIT proceeds in the following terms:
a) When liquidation is to be effected by the taxable person in the returns to which articles 120 and 122 refer, it is based on the taxable matter contained therein;
b) In the absence of submission of the return referred to in article 120, the liquidation is effected by 30 November of the following year or, in the case provided for in paragraph 2 of said article, until the end of the 6th month following the end of the deadline for submission of the return mentioned therein, and is based on the annual amount of the minimum monthly remuneration or, when greater, the totality of the taxable matter of the nearest preceding year that is determined;
c) In the absence of liquidation in accordance with the preceding clauses, it is based on the elements available to the tax administration.
2 - The following deductions are made to the amount calculated in accordance with the preceding paragraph, in the order indicated:
a) That corresponding to double international taxation;
b) That relating to tax benefits;
c) That relating to the special payment on account referred to in article 106;
d) That relating to withholding taxes not susceptible to compensation or reimbursement in accordance with applicable legislation.
3 - (Repealed by Law no. 3-B/2010)
4 - For the amount calculated in accordance with paragraph 1, as to the entities mentioned in paragraph 4 of article 120, only the deduction relating to withholding taxes is to be made when these have the nature of tax on account of CIT.
5 - The deductions referred to in paragraph 2 concerning entities to which the tax transparency regime established in article 6 is applicable are attributed to their respective members in accordance with the terms established in paragraph 3 of that article and deducted from the amount calculated based on the taxable matter that has taken into account the attribution provided for in said article.
6 - When the special tax treatment regime for groups of companies is applicable, the deductions referred to in paragraph 2 relating to each of the companies are made to the amount calculated as to the group, in accordance with paragraph 1.
7 - From the deductions made in accordance with clauses a), b) and c) of paragraph 2, no negative value can result.
8 - As to taxable persons covered by the simplified regime for determining the taxable matter, to the amount calculated in accordance with paragraph 1 only the deductions provided for in clauses a) and e) of paragraph 2 are to be made.
9 - From the deductions made in accordance with clauses a) to d) of paragraph 2, no negative value can result.
10 - As to the amount calculated in accordance with clauses b) and c) of paragraph 1, only deductions of which the tax administration is aware and which can be made in accordance with paragraphs 2 to 4 are made.
11 - In cases where the provision of clause b) of paragraph 2 of article 79 is applicable, annual liquidations are made based on the taxable matter determined on a provisional basis, and, in relation to the liquidation corresponding to the taxable matter for the entire liquidation period, the difference found is to be collected or annulled.
The aforementioned articles 89 and 90 of the CIRC, as well as other provisions of this Code, such as those relating to the returns provided for in articles 120 and 122, are applicable to autonomous taxation.
In fact, it is today settled, following numerous arbitral case law and the positions adopted by the Tax Authority and Customs Service, that the tax levied on the basis of autonomous taxation provided for in the CIRC has the nature of CIT. Moreover, in addition to case law, article 23-A, paragraph 1, clause a), of the CIRC, in the wording of Law no. 2/2014, of 16 January, leaves today no room for any reasonable doubt, corroborating what previously resulted from the literal content of article 12 of the same Code.
Now, article 90 of the CIRC refers to the forms of liquidation of CIT, by the taxable person or by the Tax Administration, applying to the determination of the tax owed in all situations provided for in the Code, including additional liquidation (paragraph 10).
Therefore, article 90 also applies to the liquidation of the amount of autonomous taxation, which is determined by the taxable person or by the Tax Administration, following the submission or non-submission of returns, there being no other provision that provides for different terms for its liquidation.
Thus, the differences, in the year 2014, between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are limited to the determination of the taxable matter and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for CIT based on taxable profit and in article 88 of the CIRC for CIT based on the taxable matter of autonomous taxation and the respective rates.
However, the forms of liquidation provided for in Chapter V of the same Code are of common application to autonomous taxation and to the remaining taxable matter of CIT.
However, the fact that a CIT self-assessment, effected in accordance with paragraph 1 of article 90, may contain several partial calculations based on several rates applicable to certain taxable matters does not imply that there is more than one liquidation, as results from the very terms of that rule when it refers to "liquidation", in the singular, in all cases in which it is "made by the taxable person in the returns referred to in articles 120 and 122", having "as basis the taxable matter contained therein" (whether determined based on the rules of articles 17 and following, or determined based on the various situations provided for in article 88).
Moreover, it is not only the liquidations provided for in article 88 that may include several calculations of application of rates to certain taxable matters, as the same may occur in the situations provided for in paragraphs 4 to 6 of article 87.
In any case, whatever calculations are to be made, it is a unitary liquidation that the taxable person or the Tax Authority and Customs Service must effect in accordance with articles 89, clause a), 90, paragraph 1, clauses a), b) and c), and 120 or 122, and based on it that the overall CIT is calculated, whatever the taxable matters relating to each of the types of taxation that underlie it.
Moreover, if this article 90 were not applicable to the liquidation of autonomous taxation provided for in the CIRC, we would have to conclude that there would be no provision whatsoever that provided for its liquidation, which would lead to illegality, by violation of article 103, paragraph 3, of the CRP, which requires that the liquidation of taxes be made "in accordance with the law".
Let it also be noted that the new provision of paragraph 21 added to article 88 of the CIRC by Law no. 7-A/2016, of 30 March, regardless of whether or not it can be qualified as truly interpretative, in no way alters this conclusion, since it establishes, as to the form of liquidation of autonomous taxation, that it "is effected in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs". Indeed, if it is true that this new provision comes to clarify how the amounts of autonomous taxation are calculated (which already followed from the very text of the various provisions of article 88) and that the competence lies with the taxable person or the Tax Administration, in accordance with article 89, it is also clear that it does not exclude the need to use the procedure provided for in paragraph 1 of article 90, namely in the cases provided for in its clause c) where liquidation falls to the Tax Authority and Customs Service, based on "elements available to the tax administration", which will encompass the possibility of liquidating based on autonomous taxation, if the Tax Authority and Customs Service has elements that prove its assumptions.
The same applies to the wording given to said paragraph 21 of article 88 by Law no. 114/2017, of 29 December.
Therefore, both before and after Law no. 7-A/2016, of 30 March, and Law no. 114/2017, of 29 December, article 90, paragraph 1, of the CIRC is applicable to the liquidation of autonomous taxation.
It is thus prejudiced, from the outset, the knowledge of the subsidiary application that the Claimant makes conditional on the understanding that article 90 of the CIRC does not apply to autonomous taxation.
3.2. Applicability of the Deductions Provided for in Paragraph 2 of Article 90 of the CIRC to the CIT Tax Resulting from Autonomous Taxation
From what was stated, at least until Law no. 7-A/2016, of 30 March, there was no legal provision that indicated any special procedure for liquidation of CIT resulting from autonomous taxation, so that, on pain of unconstitutionality for violation of paragraph 3 of article 103, on the grounds that liquidation was not effected "in accordance with the law", the procedure provided for in article 90 of the CIRC had to be applied.
Since the CIT tax, both that resulting from taxable profit and that resulting from autonomous taxation, is determined through the liquidation procedure provided for in article 90 of the CIRC, the deductions provided for in paragraph 2 of the same article are potentially applicable to such tax, which refer "to the amount calculated in accordance with the preceding paragraph", without any distinction as to the nature of the types of CIT tax included in that amount.
Therefore, from the literal content of paragraph 2 of article 90 of the CIRC, no obstacle results to the application of deductions to the part of the amount calculated in accordance with paragraph 1 derived from autonomous taxation.
As stated in the Judgment of the Constitutional Court no. 267/2017, of 31-05-2017, rendered in case no. 466/16, "the autonomy of the taxation in question as to its base of incidence, as to the applicable rates, and even as to the moment of payment, does not by itself determine – neither logically nor legally – the irrelevance of the tax obtained with autonomous taxation within the scope of the determination of the tax of CIT itself – a matter generally regulated in article 90, paragraph 1, of the CIRC –, particularly as to the integration of that in the latter and, consequently, as to the admissibility of consideration of the value of said tax for the purpose of performing the legally provided deductions in article 90, paragraph 2, of the CIRC. Such question, in the absence of a specific norm to the contrary – such as that which, for example, came to be established in article 88, paragraph 21, of the CIRC – is a matter of the very legislative configuration of CIT, therein included the relevance or irrelevance, for the purposes of determining the final CIT tax, of the amounts paid as title of autonomous taxation".
In fact, only with Law no. 7-A/2016, of 30 March, which added to article 88 of the CIRC a paragraph 21, did a provision come into existence that excludes the possibility of applying the deductions provided for in paragraph 2 of article 90 of the CIRC to the amount calculated with autonomous taxation, establishing the following:
21 - The liquidation of autonomous taxation in CIT is effected in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the overall amount calculated.
In the final part of this provision, the scope of application of the deductions provided for in article 90, paragraph 2, of the CIRC is restricted to the CIT tax derived from taxable profit.
Law no. 114/2017, of 29 December, came to reaffirm the exclusion of the applicability of the deductions provided for in paragraph 2 of article 90 of the CIRC to the CIT tax resulting from autonomous taxation by establishing the following:
21 - The liquidation of autonomous taxation in CIT is effected in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the overall amount calculated, even if such deductions result from special legislation.
To this paragraph 21 of article 88 of the CIRC was attributed an interpretative nature, by article 135 of Law no. 7-A/2016 and by article 233 of Law no. 114/2017, respectively.
However, the Constitutional Court, in the cited judgment no. 267/2017, has already affirmed the unconstitutionality of that article 135 in the part where, by effect of the merely interpretative character that it attributes to the 2nd part of paragraph 21 of article 88 of the CIRC, it excludes the possibility of deduction to the overall amount resulting from autonomous taxation liquidated in a given year in CIT of deductions permitted in tax years prior to 2016.
This decision of the Constitutional Court was based on paragraph 3 of article 103 of the CRP, which establishes that no one can be obligated to pay taxes that have a retroactive nature, from which the Constitutional Court understood that "the legislator cannot create taxes with such nature or introduce in existing taxes modifications that, with retroactive effects, aggravate them" and that "what is at stake is the prohibition of establishing new legal consequences that constitute ex novo or aggravate fiscal situations already defined, namely the amount owed as title of certain tax and previously defined in light of the application of all relevant facts in light of the law applicable before the establishment of the new legal consequences".
Therefore, in line with this case law, the constitutionality of the restrictive interpretation of paragraph 2 of article 90 of the CIRC, so as to exclude the possibility of deductions to the CIT tax resulting from autonomous taxation, depends on whether it should already have been done in light of the regime prior to that law no. 7-A/2016, since it is constitutionally inadmissible the retroactive application unfavorable to taxpayers of tax norms resulting in the obligation to pay taxes.
It should be noted, however, from the outset, that the new wording given by Law no. 114/2017 to paragraph 21 of article 88 of the CIRC, by excluding the possibility of deductions to the overall amount of autonomous taxation "even if such deductions result from special legislation" clarifies, with an interpretative nature (in this part without problems of constitutionality, as it is a matter of retroactive application favorable to taxpayers), that there was special legislation from which it resulted that deductions would be made to the amount of autonomous taxation, thus coming to recognize, with the legislative authority of an authentic interpretation, what had already been repeatedly explained by the majority arbitral case law.
Therefore, since it is constitutionally inadmissible, as the Constitutional Court stated in the cited judgment, that this new law would exclude the possibility of deductions admissible in light of the legislation in force until the entry into force of Law no. 7-A/2016, the question that arises, to solve the issues of legality of the liquidation and of the decision of the gracious complaint that are raised in the present proceedings, is whether, before this law, the restrictive interpretation that in it came to be made explicit should already have been made, whether restrictions should already have been placed on the application of the deductions provided for in paragraph 2 of article 90 of the CIRC to the part of the CIT tax resulting from autonomous taxation.
In fact, the fact that the letter of paragraph 2 of article 90 points towards the application of deductions to the tax resulting from autonomous taxation by that deductibility did not exclude the possibility of a restrictive interpretation, if "the interpreter reaches the conclusion that the legislator adopted a text that betrays its thought, insofar as it says more than what it intended to say. Also here the ratio legis will have a decisive word. The interpreter should not be led astray by the apparent reach of the text, but should restrict it so as to make it compatible with legislative thought, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed as follows: where the reason for the law ceases, its scope ceases (where the reason for being of the law ends, its scope ends)".
As a basis for a restrictive interpretation could, in a first analysis, be advanced the fact that some autonomous taxation, specifically some that have as their base of incidence "expenses" or "charges", aims to discourage certain taxpayer behaviors susceptible to affecting taxable profit, and consequently reducing tax revenue, and its deterrent force will be attenuated with the possibility of the respective tax being subject to deductions.
However, as was legislatively recognized by the wording given to paragraph 21 of article 88 by Law no. 114/2017 (here with force that is constitutionally unobjectionable in light of article 103, paragraph 3, of the CRP), there is special legislation from which deductions result to the tax derived from autonomous taxation, which are necessarily situations in which legislatively preference was given to the satisfaction of the interests that justify the deductions in relation to those aimed at with autonomous taxation, which occurs with the rules on deductible tax benefits.
On the other hand, the nature of anti-abuse norms, intended to prevent fraud and tax evasion, does not exclude the possibility of deductions to the CIT tax that with the application of such norms will be determined, which is manifest in relation to the tax provided by corrections based on norms of indisputably anti-abuse nature, such as those relating to transfer pricing or undercapitalization and also the corrections resulting from the application of the general anti-abuse norm provided for in article 38, paragraph 2, of the LGT.
Furthermore, it is also evident that the anti-abuse nature of some of the autonomous taxation aimed at discouraging expenses and preventing tax evasion could not serve to justify the non-deduction of tax benefits to all the CIT tax resulting from autonomous taxation, since the one provided for in paragraph 11 of article 88 of the CIRC does not apply to expenses or charges, but rather to "profits", being a form of complementary or alternative profit taxation in relation to that provided for in general revenues. Moreover, the autonomous taxation provided for in paragraph 8 of article 88 does not have underlying any intention to discourage the performance of the operations to which it refers, but rather to impose on taxpayers special probative duties in situations in which the more favorable taxation of the recipients of the expenses may raise doubts about the reality and normality of the operations, since autonomous taxation is excluded "if the taxable person can prove that they correspond to operations effectively realized and do not have an abnormal character or an exaggerated amount".
To this is added that, even in relation to some autonomous taxation that applies to expenses, it would not be compatible with the constitutional principles of proportionality and equality to impose taxation on the basis of a hypothetical legislative intention to discourage the use of motorcycles for certain activities for which they are indispensable, as occurs with motorcycle shows, or for which they have evident suitability, their use corresponding to manifest good business management, and it would be especially inconceivable to include in the scope of that deterrent intention the very payment of "taxes inciding on their possession or use", to which the final part of paragraph 5 of article 88 refers, which should even be ensured coercively by the Tax Authority and Customs Service, in the case that the taxpayer feels discouraged from effecting that payment.
Thus, the understanding that all autonomous taxation aims to tax expenses or discourage or sanction behaviors, which may result from a cursory first analysis, encounters, in a more incisive perception, an unavoidable lack of correspondence with reality, being more coherent, as a global explanation, the idea that we are "facing a mechanism whose ultimate objective is to contribute to the 'normalization' of taxation in CIT, that is, to the functioning of this tax in its purest form and closest to its roots as a tax on profit obtained by legal entities. In that sense, autonomous taxation is nothing more than auxiliary mechanisms of the central axis of CIT, which is to tax profits allowing the deduction of expenses in which taxable persons have to incur with a view to the realization of taxable revenues".
As is also stated in the judgment of CAAD rendered in case no. 59/2014-T, autonomous taxation in CIT should be considered a form of taxation of business revenues:
"The Explanatory Memorandum contained in Legislative Proposal no. 46/VIII, which gave rise to Law no. 30-G/2000, of 29 December, which greatly expanded the situations of autonomous taxation, leaves no room for doubt that it is a conscious and intended amplification of previously existing distortions, it being understood that they were necessary, in sum, to compensate for other distortions resulting from significant fraud and tax evasion and, thus, increase the equity of the distribution of tax burden among citizens and companies".
(...)
"autonomous taxation directly inciding on certain expenses, within taxes that originally incided only on revenues, are considered distortions of the system of taxation of revenues intended by CIT, but a value that legislatively was considered to be more relevant than the theoretical coherence of taxes, such as the implementation of tax justice, imposed an option for these forms of taxation, for being in line with the principles of equity, efficiency and simplicity.
(...)
But this indirect taxation continues to be effected within the scope of CIT, as results from the inclusion of autonomous taxation in its respective Code, which has as a corollary the application of the general rules peculiar to this tax, which do not contend with its special form of incidence.
Thus, if it is true that autonomous taxation constitutes a different form of imposing taxes on companies, which could appear in autonomous regulation or be included in the Stamp Tax Code, it is also no less true that the legislative option to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in CIT, which can be justified by being an indirect form, but, in the legislative perspective, equitable, simple and efficient, of taxing business revenues that escape the regime of taxation with direct incidence on revenues".
In fact, autonomous taxation in CIT, in light of the increasing scope that the legislator has been giving it, to be compatible with the constitutional principle of taxation of companies inciding fundamentally on their real revenue (article 104, paragraph 2, of the CRP), should be understood as indirect forms of taxing business revenues, through the taxation of certain expenses and charges that reveal tax-paying capacity, or even, in the cases of autonomous taxation provided for in paragraphs 8 and 11 of article 88, as complementary forms of directly taxing revenues, in situations in which they will presumably be generated, without taxation, in the legal sphere of third parties.
Moreover, it is a fact that the imposition of any expense without counterpart to a legal entity has as a corollary a potential decrease in its revenue, so that the imposition of a unilateral tax obligation, even if calculated based on expenses realized or charges borne, constitutes a form of indirectly taxing its revenue.
The new article 23-A of the CIRC, introduced by Law no. 2/2014, of 16 January, in stating that "are not deductible for the purposes of determining taxable profit the following charges, even when recorded as expenses of the tax period: a) CIT, including autonomous taxation, and any other taxes that directly or indirectly apply to profits", gives an inkling that, in the legislative perspective, CIT and autonomous taxation are taxes that apply directly or indirectly to profits, since it is this understanding that can justify the inclusion of the phrase "any other taxes", which presupposes that CIT and autonomous taxation are also taxes of these types, are taxes that directly or indirectly apply to real or presumed profits.
Therefore, since autonomous taxation provided for in the CIRC, ultimately, constitute indirect forms of taxing business revenue, it is not seen that there is necessarily incompatibility between them and the general rules that provide for the form of effecting CIT liquidation.
In any case, a restrictive interpretation can only result, in light of the wording of the CIRC prior to Law no. 7-A/2016, from the conclusion that the text of paragraph 2 of article 90, in some measure, does not correspond to legislative thought, particularly if it can be concluded that the reason that justifies some or some of the deductions only is compatible with its application to the CIT tax resulting from taxable profit.
And, naturally, in light of the constitutional prohibition of the retroactive application of the global exclusion of deductibility to situations prior to Law no. 7-A/2016, deductions shall be applied when they result from the special legislation to which the wording of paragraph 21 of article 88 introduced by Law no. 114/2017 refers.
In fact, at least in these cases in which deductions result from special law, the possibility of excluding them by way of a restrictive interpretation of paragraph 2 of article 90 will be ruled out, since it is that special law, precisely by being so, that imposes its application, since special laws are superimposed on general laws in their specific domains of application.
It is in this light that each of the situations in which the Claimant seeks to effect deduction to the CIT tax resulting from autonomous taxation should be assessed.
3.3. Deductibility of Investment Expenses Provided for in SIFIDE to the CIT Tax Derived from Autonomous Taxation
SIFIDE - System of Tax Incentives for Research and Business Development was created by Law no. 40/2005, of 3 August, with envisioned validity for the years 2006 to 2010, but was reformed by article 133 of Law no. 55-A/2010 of 31 December to be in force until 2015 as System of Tax Incentives for Research and Business Development II (SIFIDE II).
Subsequently, it was amended by articles 163 and 164 of Law 64-B/2011 of 30 December, and transferred to articles 33 to 40 of the Fiscal Code of Investment, republished by Decree-Law no. 82/2013, of 17 June.
Articles 33, 35, 36 and 38 of the Fiscal Code of Investment were amended by Law no. 83-C/2013 (articles 211 and 212), extending the validity period until 2020 (in paragraph 1 of that article 36).
In 2014, the System of Tax Incentives for Research and Business Development II (SIFIDE II) approved by article 133 of Law no. 55-A/2010, of 31 December, and amended by article 163 of Law no. 64-B/2011, of 30 December, was in force.
This instrument establishes the following, in its articles 4 and 5:
Article 4
Scope of the Deduction
1 - Taxable persons resident in Portuguese territory who exercise, as a main activity, an activity of an agricultural, industrial, commercial and services nature and non-residents with a permanent establishment in that territory may deduct from the amount determined in accordance with article 90 of the CIT Code, and up to its limit, the value corresponding to expenses with research and development, in the part that has not been subject to financial aid from the State as a grant, realized in the tax periods from 1 January 2011 to 31 December 2015, in a double percentage:
a) Base rate - 32.5% of expenses realized in that period;
b) Incremental rate - 50% of the increase in expenses realized in that period in relation to the simple arithmetic average of the two preceding years, up to the limit of (euro) 1,500,000.
2 - For taxable persons who are SMEs in accordance with the definition contained in article 2 of Decree-Law no. 372/2007, of 6 November, who have not yet completed two years and who have not benefited from the incremental rate fixed in clause b) of the preceding paragraph, an increase of 10% is applied to the base rate fixed in clause a) of the preceding paragraph.
3 - The deduction is made, in accordance with article 90 of the CIT Code, in the liquidation relating to the tax period mentioned in the preceding paragraph.
4 - Expenses that, due to insufficient tax, cannot be deducted in the year in which they were incurred may be deducted up to the sixth immediately following year.
5 - For the purposes of the preceding paragraphs, when in the year of commencement of enjoyment of the benefit there is a change in the tax period, the annual period that begins in that year must be considered.
6 - The incremental rate provided for in clause b) of paragraph 1 is increased by 20 percentage points for expenses relating to the hiring of doctorate holders by companies for research and development activities, the limit provided for in the same clause becoming (euro) 1,800,000.
7 - To taxable persons who reorganize, as a result of concentration acts as defined in article 73 of the CIT Code, the provisions of paragraph 3 of article 15 of the Statute of Tax Benefits apply.
Article 5
Conditions
Only the following taxable persons may benefit from the deduction referred to in article 4:
a) Their taxable profit is not determined by indirect methods;
b) They are not debtors to the State and social security of any taxes or contributions, or have their payment duly assured.
In the case in question, the Tax Authority and Customs Service does not dispute that the Claimant meets the subjective and objective requirements to benefit from SIFIDE, having rejected the gracious complaint on the understanding that the expenses in question cannot be deducted from the amounts paid as title of autonomous taxation, because the deduction can only be made to the CIT tax resulting from the application of the CIT rate to taxable profit.
As stated, article 90 of the CIRC also refers to the liquidation of autonomous taxation.
And, as has also been said, there is no legal support to affirm that, in the event that several calculations have to be made in a return to determine CIT, more than one self-assessment would be effected.
The instrument that approved SIFIDE does not state that the credits arising from it are deductible to any and all CIT tax, rather it defines the scope of the deduction by referring, in paragraph 1 of article 4, "to the amount determined in accordance with article 90 of the CIT Code, and up to its limit".
Paragraph 3 of the same article 4 confirms that it is to the amount that will be determined in accordance with article 90 of the CIRC that is relevant to implement the deduction by stating that "the deduction is made, in accordance with article 90 of the CIT Code, in the liquidation relating to the tax period mentioned in the preceding paragraph".
Thus, established that CIT includes autonomous taxation [as results from the express content of article 23-A, paragraph 1, clause a), of the 2014 CIRC], by mere declarative interpretation it is concluded that article 4, paragraph 1, of SIFIDE II, in establishing the deduction "to the amount determined in accordance with article 90 of the CIT Code, and up to its limit", implies the deduction from the amount of autonomous taxation that is determined in accordance with that article 90.
The fact that article 5 of SIFIDE II excludes the benefit when taxable profit is determined by indirect methods and in autonomous taxation situations are included in which it aims to indirectly tax profits (namely, not giving relevance or discouraging facts susceptible to reducing them) has no relevance for this purpose, since the concept of "indirect methods" has a precise scope in tax law, which is implemented in article 90 of the LGT (in addition to special norms), referring to means of determining taxable profit, whose use is not provided for to calculate the taxable matter of autonomous taxation provided for in article 88 of the CIRC.
On the other hand, if it is the need to use indirect methods that excludes the possibility of enjoying the benefit, the exclusion of this in relation to the tax from autonomous taxation, which is determined by direct methods, cannot be justified.
Moreover, no explanation for its exclusion from the respective tax of the scope of deductibility of the SIFIDE II benefit can be seen in the eventual anti-abuse nature assumed by some autonomous taxation, since there is no legal support for excluding the deductibility to the tax provided by corrections based on norms of indisputably anti-abuse nature, such as those relating to transfer pricing or undercapitalization and those resulting from the application of the general anti-abuse clause contained in article 38, paragraph 2, of the LGT.
On the other hand, the fact that the deductibility of the SIFIDE II tax benefit is limited to the tax of article 90 of the CIRC, up to its limit, does not permit concluding that the tax credit is only deductible if there is taxable profit, since what that fact requires is that there be CIT tax, which can exist even without taxable profit, namely by force of autonomous taxation.
Thus, pointing the literal content of article 4 of SIFIDE II to the effect that the deduction also applies to the CIT tax derived from autonomous taxation and determined in accordance with article 90 of the CIRC, only by way of a restrictive interpretation could the application of the tax benefit to the CIT tax provided by autonomous taxation be excluded.
The viability of a restrictive interpretation encounters, from the outset, an obstacle of a general nature, which is that the norms that create tax benefits have the nature of exceptional norms, as results from the express content of article 2, paragraph 1, of the EBF, so that, in the absence of a special rule, they must be interpreted in their precise terms, as is settled case law.
In the case of tax benefits, the possibility of extensive interpretation is explicitly provided (article 10 of the EBF), but not restrictive interpretation, so that, as a rule, the tax benefit should not be interpreted with less amplitude than that which, in a declarative interpretation, results from the content of the norm that provides for it.
In any case, a restrictive interpretation is only justified when "the interpreter reaches the conclusion that the legislator adopted a text that betrays its thought, insofar as it says more than what it intended to say. Also here the ratio legis will have a decisive word. The interpreter should not be led astray by the apparent reach of the text, but should restrict it so as to make it compatible with legislative thought, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed as follows: where the reason for the law ceases, its scope ceases".
As a basis for a restrictive interpretation the fact could be advanced that some autonomous taxation aims to discourage certain taxpayer behaviors susceptible to affecting taxable profit, and consequently reducing tax revenue, and its deterrent force will be attenuated with the possibility of the respective tax being subject to deductions. In fact, it is manifest that some autonomous taxation do not aim to discourage expenses, as is the case of those relating to transactions with residents outside Portuguese territory and subject there to a clearly more favorable tax regime (paragraph 8 of article 88 of the CIRC) or taxation of distributed profits (paragraph 11 of the same article).
However, when discouragement of behaviors is intended, it is justified only by concerns to protect tax revenue and the tax benefits granted are, by definition, "measures of an exceptional nature instituted for the protection of relevant extra-fiscal public interests that are superior to those of the taxation they prevent" (article 2, paragraph 1, of the EBF).
And, in the case of SIFIDE tax benefits, the reasons of an extra-fiscal nature that justify their superposition to tax revenues are, in the legislative perspective, of enormous importance, it being understood that the capacity for research and development is a decisive factor for the competitiveness of companies and the country, as well as of productivity and economic growth in the long term, which is referred to with clarity in the justification of Legislative Proposal no. 5/X and in the Report of the State Budget for 2011:
Legislative Proposal no. 5/X
The capacity for research and development (R&D) of companies is a decisive factor not only of their own assertion as competitive structures, but of productivity and economic growth in the long term, a fact, moreover, expressly recognized in the Program of the XVII Government, as well as in recent international reports, notably in the conclusions of the report of the Organisation for Economic Co-operation and Development (OECD) "Tax Incentives for Research and Development", 2003, and in the report of the European Commission on "Monitoring Industrial Research", 2004.
(...)
It is therefore important to restore, as provided in the Government Program, fiscal incentives for the dynamization of business R&D in cooperation with Universities and other research institutions, which will play a fundamental role in the implementation of the Technological Plan. The goal pointed out, of tripling R&D activities by companies working in Portugal, is only possible with a redoubling of public support for companies that effectively want to invest in scientific and technological innovation as a central axis of their competitiveness strategies. Support in the form of tax incentive will have increasing importance, not only because it is a more expedite form for companies that want to intensify their investments in an organized and continuous manner, but also because it allows leveraging the effects of financial support. In the measures of financial support for R&D in a consortium between companies and research institutions of QCA 3 (POCTI and POSI), a component of reimbursable support was introduced, which represents a significant step in the involvement of companies in the results of projects. The restoration of SIFIDE, by allowing the deduction of part of the reimbursements that will be made to the financing entities, is a just reward for an involvement that is intended to be increasing.
II.2.2.4.4. System of Tax Incentives for Research and Business Development Entrepreneurial II (SIFIDE)
Given that one of the advantages of competitiveness in Portugal passes through the investment in technological capacity, in scientific employment and in the conditions of assertion in the European space, the Proposal of State Budget for 2011 proposes to renew SIFIDE (System of Tax Incentives for Research and Business Development Entrepreneurial), now in the SIFIDE II version, to be in force in the periods 2011 to 2015, enabling the deduction from CIT for companies that invest in R&D (research and development capacity).
Given the positive balance of fiscal incentives for business R&D, and also considering the evolution of the support system of other countries, it was decided to review and reintroduce for another five tax periods this support system. Company R&D is a decisive factor not only of their own assertion as competitive structures, but of productivity and economic growth in the long term, a fact, moreover, expressly recognized in the Program of the XVIII Government, as well as in various recent international reports.
It is in this context that, in the international panorama, the OECD has considered Portugal since 2001 as one of the three countries with the most significant advance in business R&D. Since the national system in force, compared to other systems that use deduction from tax and the distinction between base and incremental rate, is one of the most attractive and competitive.
Since research and development of companies is "a decisive factor not only of their own assertion as competitive structures, but of productivity and economic growth in the long term", it is understandable that preference was given to the incentive to invest in technological capacity, in scientific employment and in the conditions of assertion in the European space, which, in the long term are conducive to the obtaining of greater tax revenues.
The importance that, in the legislative perspective, was recognized for this tax benefit provided for in SIFIDE II is decisively confirmed by the fact that it is indicated as being specially excluded from the general limit to the relevance of tax benefits in CIT, which is indicated in article 92 of the CIRC.
Therefore, it is certain that we are dealing with tax benefits whose justification is legislatively considered more relevant than the obtaining of tax revenues, inferring from that article 92 that the legislative intention to encourage investments in research and development provided for in SIFIDE II is so firm that it goes to the point of not even establishing any limit to the deductibility of the CIT tax, despite this tax regime having been created and applied in a period of notorious difficulties in public finances.
Thus, no legal ground is seen, particularly in light of the legislative intention that can be detected, to, on the basis of a restrictive interpretation, exclude the deductibility of the SIFIDE II tax benefit from the autonomous taxation tax that directly results from the letter of article 4, paragraph 1, of its instrument, combined with article 90 of the CIRC.
On the other hand, the eventual limitation of the application of the tax benefit to companies that presented taxable profit in 2014 would result in a very strong restriction of its field of application, since, as is public knowledge, the vast majority of companies in that year and in the preceding ones presented tax losses, although it paid CIT by other means.
In fact, according to statistics published by the Tax Authority and Customs Service, in the years 2011 to 2014, more than half of the CIT returns did not record taxable profit, and less than 1/3 of taxpayers paid tax based on CIT liquidated based on taxable profit, most of the CIT payments being made "via the Special Payment on Account, or other positive components of the tax (Autonomous Taxation, Municipal Surcharge, CIT from prior tax periods, etc.)".
Therefore, it is manifest that the applicability of the tax benefit to companies that, although presenting tax losses, paid CIT, including as title of autonomous taxation, strongly broadened the number of potentially beneficiary companies and, consequently, is better compatible with the legislative intention underlying SIFIDE II than that defended by the Tax Authority and Customs Service.
It is therefore the manifestly most correct solution and which, by being so, must be presumed to have been legislatively established (article 9, paragraph 3, of the Civil Code).
On the other hand, as stated, one cannot overlook that autonomous taxation aims to protect or increase tax revenues and that tax benefits granted are, by definition, "measures of an exceptional nature instituted for the protection of relevant extra-fiscal public interests that are superior to those of the taxation they prevent" (article 2, paragraph 1, of the EBF).
That is, in the case in question, in establishing a tax benefit by deduction from CIT, the legislator chose to forgo the tax revenue that this tax could provide, to the extent of the granting of the tax benefit. For this weighing of the interests at stake (tax revenue versus strong stimulation of investment) it is immaterial whether that revenue comes from calculations made based on article 87 or article 88 of the CIRC. In fact, whatever the form of calculation of that tax revenue, we are dealing with money whose collection the legislator considered to be less important than the pursuit of the economic purpose referred to.
Of the two alternatives that faced the legislator regarding the incentive to the investments provided for in SIFIDE II, which were, on the one hand, to keep intact the revenues from CIT (including those from autonomous taxation) and not see investment incentivized and, on the other hand, to implement that incentive with loss of CIT revenues, the weighing that necessarily underlies SIFIDE II is the choice to create the incentive with prejudice to revenues. And, naturally, if the creation of the investment incentive is better, in the legislative perspective, than the collection of revenues, it is not seen how it can be relevant that the CIT revenues that are lost to implement the incentive come from the general taxation of CIT provided for in paragraph 1 of article 87 or from taxation at special rates provided for in paragraphs 4 to 6 of the same article, or from autonomous taxation provided for in article 88: in all cases, the alternative is the same between creation of the incentive and collection of CIT revenues and the relative weighing that can be made of the conflicting interests is identical, whatever the forms of determining the amount of CIT that is forgone to create the incentive.
And, in the case of the SIFIDE II tax benefit, the reasons of an extra-fiscal nature that justify the incentive with loss of revenue are very strong, since it is considered that the incentivized investments are a decisive factor in the future competitiveness of the country, which is fundamental for the very increase of tax revenues.
Therefore, it is certain that we are dealing with a tax benefit whose justification is legislatively considered more relevant than the obtaining of tax revenues from CIT, whatever the basis of its calculation, since what is at stake is always whether or not to forgo a certain amount of money to create an investment incentive.
In this context, the nature of autonomous taxation and the solutions legislatively adopted, in general, in relation to them, have no relevance for the appraisal of this question, since it must be appraised in light of the specific interests that clash in its weighing.
In fact, what is at stake is exclusively determining the scope of SIFIDE, which establishes a regime of an exceptional nature, which aimed to pursue determined public interests, and not contributing to the decision of any conceptual question about the nature of autonomous taxation, a matter on which is not seen either in the text of the law or in the preparatory works, the least legislative concern.
For the same reason that what is at stake is interpreting the scope of the special nature instrument that is what establishes SIFIDE, cannot be given relevance, for this purpose, to the provision of paragraph 21 of article 88 of the CIRC, added by Law no. 7-A/2016, of 30 March, in the part where it refers that no "deductions are made to the overall amount calculated", despite the alleged interpretative nature that was attributed to it (which implies its unconstitutionality, by retroactivity prejudicial to taxpayers, as the Constitutional Court understood in judgment no. 267/2017, of 31-05-2017).
Indeed, there is no sign, neither in Law no. 7-A/2016, nor in the Report of the Budget for 2016, nor in its discussion, that with the addition to article 88 of the CIRC of a general norm prohibiting deductions to the overall amount calculated of autonomous taxation, it was intended to interpret restrictively the expression "deduct from the amount determined in accordance with article 90 of the CIT Code" that is contained in special norms of separate instruments, such as those that provide for SIFIDE.
And, in the absence of an unequivocal intention to the contrary, the rule applies that general law does not alter special law (article 7, paragraph 3, of the Civil Code), which has its justification in the fact that "the general regime does not include consideration of the particular conditions that precisely justified the issuance of the special law".
Moreover, it was the legislator itself who, recently, through Law no. 114/2017, of 29 December, came to recognize expressly and unequivocally, with explicit interpretative intention declared in its article 233 (constitutionally admissible to the extent that it is not unfavorable to taxpayers), that there are special norms from which it should follow that deductions would be made to the amount calculated with autonomous taxation, by giving new wording to paragraph 21 of article 88 of the CIRC with the following content:
21. The liquidation of autonomous taxation in CIT is effected in accordance with the provisions of article 89 and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the overall amount calculated, even if such deductions result from special legislation.
Thus, if it is true that this norm clarifies that it is legislative intention that no deductions be made to the overall amount calculated with autonomous taxation, it is also true that in it is recognized that it resulted from special legislation that deductions would be made, being that precisely the case of the norms that provide for tax benefits by deduction from CIT.
But, if from such special norms it resulted that deductions would be made to the overall amount calculated of autonomous taxation, it is manifest that it is not compatible with the constitutional principle of the prohibition of retroactivity of norms that create taxes (article 103, paragraph 3, of the CRP) the exclusion of that result by a later law, to all those who, relying on those special laws in which they trusted, created the conditions to obtain the deductions announced legislatively as a result for their investments.
The thesis defended by the Tax Authority and Customs Service that the deduction of a certain percentage of an investment from the tax of an imposto on profits is only effected if there is profit to the extent that it rewards the profitability of the investment has no support in the letter of the law, rather conflicts with the express content of paragraph 6 of article 90 of the CIRC in which it is established that "when the
Frequently Asked Questions
Automatically Created