CAAD 503/2016-T: Autonomous Taxation Surcharge in Group Taxation (RETGS) and CFEI Deductibility Under IRC

ARBITRAL DECISION

The arbitrators Dr. Jorge Lopes de Sousa (arbitrator-president), Dr. Nuno Pinto Fernandes and Dr. Ricardo Jorge Rodrigues Pereira, appointed by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 10-11-2016, agree on the following:

1. REPORT

A… SGPS, S.A., hereinafter referred to only as "A… SGPS" or "Claimant", with registered office at Rua do …, n.º…, …-… Porto, holder of the Tax Identification Number (NIPC) n.º…, in its capacity as the dominant company of the fiscal perimeter taxed under the Special Tax Regime for Groups of Companies ("RETGS") of Group B…, filed a request for constitution of a collective arbitral tribunal, pursuant to paragraph a) of n.º 1 of article 2.º, n.º 3 of article 5.º, n.º 2 of article 6.º and article 10.º, all of Decree-Law n.º 10/2011 of 20 January (hereinafter RJAT).

The Respondent is the Tax and Customs Authority.

The Claimant seeks to have declared the illegality of the decision denying the Administrative Appeal and the illegality of the self-assessment of Corporate Income Tax (hereinafter "CIT"), relating to the tax period of 2014, arising from the submission of the Income Statement (Form 22) of CIT of the RETGS ("Form 22 of the RETGS"), with the identification…-… -…, submitted on 30-05-2015.

The Claimant requests the annulment of the Decision Denying the Administrative Appeal and, as a consequence, the reimbursement to the current Claimant, in its capacity as dominant company of the RETGS of Group B…, of the sum of Euro 633,297.04, corresponding to the difference between the amount effectively already reimbursed and that which should have been reimbursed, broken down as follows:

a) amount of Euro 621,334.61 relating to autonomous taxation levied in excess, on the basis of n.º 14 of article 88.º of the CIT Code, which provides for the increase of autonomous taxation rates by 10 percentage points for taxpayers presenting fiscal losses in the period, on the understanding that, in the case of RETGS application, and in the absence of a special rule regulating otherwise, the increase is assessed based on the result individually determined by each of the companies comprising the RETGS perimeter;

b) amount of Euro 11,962.43 relating to autonomous taxation levied in excess, on the basis of n.º 5 of article 3.º of Law n.º 49/2013, of 16 July, which, in the Claimant's understanding, provides that the CFEI is deductible from the amount determined under paragraph a) of n.º 1 of article 90.º of the CIT Code, including from the collection resulting from autonomous taxation.

The Claimant further requests reimbursement of those amounts plus compensatory interest.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the Tax and Customs Authority on 09-09-2016.

Pursuant to the provisions of paragraph a) of n.º 2 of article 6.º and paragraph b) of n.º 1 of article 11.º of the RJAT, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable period.

On 25-10-2016 the parties were duly notified of this appointment, having manifested no wish to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11.º n.º 1, paragraphs a) and b) of the RJAT and articles 6.º and 7.º of the Ethics Code.

In accordance with the provision of paragraph c) of n.º 1 of article 11.º of the RJAT, the collective arbitral tribunal was constituted on 10-11-2016.

The Tax and Customs Authority responded, defending the inadmissibility of the request for arbitral pronouncement.

By order of 15-12-2016, it was decided to dispense with the meeting provided for in article 18.º of the RJAT and that the proceedings continue with written submissions.

The parties presented arguments.

The parties possess legal standing and capacity, are entitled and are duly represented (articles 4.º and 10.º, n.º 2, of the same statute and article 1.º of Regulatory Order n.º 112-A/2011, of 22 March).

The tribunal is competent, the proceedings do not suffer from any defects and there is no obstacle to the examination of the merits of the case.

2. STATEMENT OF FACTS

2.1. Proven Facts

The following facts are considered proven:

a) The Claimant is the dominant company of the fiscal group B…, which is taxed, under CIT, in accordance with the Special Tax Regime for Groups of Companies (RETGS);

b) The Claimant, in its capacity as dominant company of the group, submitted, on 30-05-2015, the Form 22 declaration which resulted in self-assessment n.º 2015…, now contested, which contains the amount of € 1,785,705.94 relating to autonomous taxation within the scope of the RETGS;

c) From the said Form 22, a total tax to recover of € 13,530,094.21 resulted;

d) On 15-03-2016, the Claimant submitted the replacement Form 22 of the RETGS for the tax period of 2014 (a copy of which is contained in document n.º 6 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced), in which a negative consolidated fiscal result in the amount of € 12,873,551.97 was determined and a total amount of autonomous taxation of € 1,164,371.33;

e) From the replacement Form 22 of the RETGS, a total tax to recover in the amount of € 14,193,039.00 results;

f) The replacement Form 22 of the RETGS was not validated by the Tax Authority's computer system, having triggered error D8M - "Inconsistency in the value of autonomous taxation" (Document n.º 7 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced);

g) The result individually determined by each of the companies comprising the Claimant's fiscal group in 2014 is contained in the declarations that are gathered in document n.º 8 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced, being, in summary, as follows: [table of individual company results];

h) As results from the individual and RETGS Form 22 declarations, the Group led by the Claimant possessed a balance of tax benefits, which operate by deduction from the collection, capable of deduction in the tax period of 2014 in the amount of Euro 88,690.37, which correspond to tax credit determined under Extraordinary Tax Credit for Investment ("CFEI") by the following subsidiary companies, among which Mercado Urbano integrated the consolidated fiscal result as from 01-01-2014: [table of CFEI credits];

i) In the tax period of 2014, the Claimant did not deduct any amount relating to tax benefits in field 355 of table 10 of the Income Statement Form 22 of the RETGS;

j) On 30-03-2016, the Claimant filed an administrative appeal, which was denied by order dated 18-05-2016, issued by the Head of Division of the Large Taxpayers Unit;

k) The decision denying the administrative appeal manifests agreement with Information n.º …-… /2016, a copy of which is contained in document n.º 4 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced, in which the following is stated, among other things:

1. After examining the arguments raised by the Taxpayer, here Appellant, in its initial petition, the competent "Draft Decision" was prepared by this UGC, embodied in our previous Information n.º …-… /2016.

2. Through an official communication from the UGC, the Taxpayer, now Appellant, was duly notified to exercise, if it wished, its right of participation, in the form of written prior hearing, pursuant to the provision of paragraph b) of n.º 1 of article 60.º of the LGT, which in turn is combined with the provision of article 122.º of the Administrative Procedure Code ("CPA").

3. After the period granted for the exercise of its right of participation, in the form of written prior hearing, neither did the Taxpayer, here Appellant, on the one hand, present further elements beyond those that had not already been resolved in our previous "Draft Decision", nor did this UGC, on the other hand, discover any further elements capable of calling into question the conclusions previously proposed.

On these grounds,

1. Considering the permanence of the validity of the assumptions that, in fact and in law, formed the basis of our previous "Draft Decision", we are thus of the opinion as to the finality of the same, with all legal consequences.

l) In the Draft Decision that was notified to the Claimant, a copy of which is contained in document n.º 3 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced, the following is stated, among other things:

§ IV.I. On the calculation of tax

§ IV.II. On the increase in the autonomous taxation rate

§ IV.I.I.I. On the arguments of the Appellant

1. In May 2015, the Taxpayer, now Appellant, as dominant company within the scope of RETGS, submitted the consolidated income statement for the fiscal group for the tax period corresponding to the calendar year of 2014, in accordance with the provisions of article 70.º and article 117.º, both of the CIRC.

2. That income statement, in turn, led to the self-assessment n.º 2015…, of 19 August 2015, here under challenge.

3. From the said statement (and self-assessment), as autonomous taxation, within the scope of RETGS, the amount of € 1,785,705.94 (one million, seven hundred and eighty-five thousand, seven hundred and five euros and ninety-four cents) appears, which, according to the Taxpayer, here Appellant, was erroneously considered in excess, notwithstanding what is provided by the rate increase foreseen in n.º 14 of article 88.º of the CIRC.

4. The Taxpayer, now Appellant, states that the rule that imposes the increase in the autonomous taxation rate, even in situations within the scope of RETGS, has as its application requirement the existence of fiscal loss in the company that incurs the expense and charge subject to autonomous taxation and not at the level of the fiscal group itself in which it is inserted.

5. The Taxpayer, here Appellant, presents in detail the amount paid as autonomous taxation, as provided for in article 88.º of the CIRC, for each of the companies making up the Group, demonstrating that, by the error described above, there is a distortion in the tax to be paid.

6. Following this, the Taxpayer, now Appellant, stating that it always followed the instructions given by the Tax Administration regarding the method of determining autonomous taxation within the scope of RETGS, namely, as provided for in Binding Information n.º 2011…, of 30 March 2012, this type of information does not have binding force on taxpayers, that is, it binds only the Tax Administration itself.

7. Moreover, it adds that this understanding does not find reflection in the tax-legal order and, if within the scope of RETGS a differentiated regime from the general rule is enshrined, then regarding autonomous taxation the procedure should be the same.

8. It states, in summary, that, for purposes of the application or non-application of a rate increase in autonomous taxation, what is relevant is the fiscal result of the entity itself where the expenses and charges subject to autonomous taxation fall and not that of the fiscal group in which it is inserted.

9. Having said this, the Taxpayer, here Appellant, understands that, notwithstanding a situation of fiscal loss at the RETGS level, the increase in the autonomous taxation rate should not be applied to it pursuant to n.º 14 of article 88.º of the CIRC, since the companies that incurred the expenses and charges autonomously taxed did not present, for the period, any fiscal loss.

10. To reinforce this view, the Appellant attaches the arbitral decision rendered in the context of proceedings n.º 239/2014-T, of 01 September 2014, in which it is declared that the regime of rate increase is provided for only with respect to the determination of taxable profit; payments on account and special payments on account; deduction of fiscal losses; and net financing costs.

11. In this manner, according to it, because the 10 percentage point increase is not being applied to it, autonomous taxation should then be effected through the normal rates and, thus, instead of the amount of € 1,785,705.94 (one million, seven hundred and eighty-five thousand, seven hundred and five euros and ninety-four cents), initially declared (and self-assessed), should this remain at only the total value of € 1,164,371.33 (one million, one hundred and sixty-four thousand, three hundred and seventy-one euros and thirty-three cents).

12. It thus requests the annulment and, consequently, restitution of the amount of € 621,334.61 (six hundred and twenty-one thousand, three hundred and thirty-four euros and sixty-one cents), corresponding to the difference determined between the initially self-assessed amount (€ 1,785,705.94) and that which should result (€1,164,371.33).

§ IV.I.I.II. On the examination

1. In our view, the question to be determined at this point concerns knowing whether the assumption of "fiscal loss" to which n.º 14 of article 88.º of the CIRC refers, in the case of RETGS, should be reflected to this or to the concrete situation of the company that incurs the respective expense/charges, individually considered.

2. We begin by stating, settling the question completely, that, on this basis, and with interpretive nature, article 133.º of Law n.º 7-A/2016, of 30 March, amended the wording of article 88.º of the CIRC, clarifying that, "(...) when the special tax regime for groups of companies established in article 69.º is applicable, the fiscal loss determined in accordance with article 70.º is considered".

3. If there were any doubts, these are then peremptorily clarified in the sense that what is relevant is, after all, the "fiscal loss" determined at the level of the RETGS and not in the individual sphere of the entity that incurs the expenses and charges leading to the regime of autonomous taxation provided for in article 68.º of the CIRC.

4. Therefore, the Taxpayer, here Appellant, has no reason.

Continuing:

1. As if what was mentioned above were not enough, it must equally be said that, regarding this matter, there is still Binding Information, as is, moreover, mentioned by the Taxpayer, here Appellant, itself.

2. This is the doctrinal note arising from proceedings n.º 2011…, which ran its course with the Department of Services for Corporate Income Tax ("DSIRC"), having obtained an approving Decision from the Deputy Director General, of 30 March 2012.

3. In this chapter there is no alternative for these Services but to maintain the understanding expressed there, since, as is known, the Tax Administration has a hierarchically structured organization pursuant to paragraph a) of article 6.º of Decree-Law n.º 118/2011, of 31/12, understanding that the norms issued at higher levels are applied by the entire structure, with no room for any discretion.

In effect,

1. In effect, the wording of n.º 14 of article 68.º of the LGT further provides that: "The tax administration, regarding the subject of the request, cannot subsequently proceed in a manner different from the information provided, except in compliance with a judicial decision".

2. Although this rule may be understood to relate only to the specific case that is the subject of the information provided, it would make no sense for the Tax Administration to adopt different positions for facts of identical nature and that concern the same matter, under penalty of complete inconsistency before the law and taxpayers, which would certainly undermine any relationship of confidence.

3. Notwithstanding the fact that RETGS represents an optional regime of a special character by virtue of the business structure of certain taxpayers, serving solely to determine a method of determining taxable profit, and in the case of fiscal losses occurring, these will influence the rate applicable in autonomous taxation.

4. This understanding reveals consistency on the part of the legislator: the creation of the figure of autonomous taxation has as its objective to prevent taxpayers from frequently resorting to certain types of expenses, situated in a "grey area" between business purpose and private purpose, with the aim of reducing tax revenue.

5. In this manner, it is not apparent how it could be otherwise, since articulating the provision in that n.º 14 of article 88.º with n.º 1 of article 70.º, both of the CIRC, it is clear that fiscal losses are determined by the dominant company through the presentation of the "self-assessment".

6. It is well known that "self-assessment" means nothing more than the mere act of determining tax and other obligations to be paid or received by the taxpayer, seeking through it to obtain the quantum, which, in the case of RETGS, is promoted through recourse to the regime established in article 70.º and corresponds to the "algebraic sum of taxable profits and fiscal losses determined in individual declarations".

Now,

1. To consider that the reference value for determining the rate applicable in autonomous taxation is that of each company of the Group is equivalent to creating a "special system" within RETGS itself, which is already a special situation, which is obviously not sustainable and goes against the provisions of the CIRC itself.

Thus,

1. Concluding, on this point, it is abundantly clear that the request now formulated by the Taxpayer, now Appellant, cannot be declared admissible, in light of all the grounds we have set forth here.

§ IV.I.II. On the deduction of tax benefit from the autonomous taxation collection

§ IV.I.II.I. On the arguments of the Appellant

1. With respect to the tax period in question, the Taxpayer, here Appellant, determined a value of € 1,774,415.53 (one million, seven hundred and seventy-four thousand, four hundred and fifteen euros and fifty-three cents) within the scope of the tax benefit relating to "Extraordinary Tax Credit for Investment" (CFEI).

2. Due to insufficient corporate income tax collection, the Taxpayer, here Appellant, found itself unable to proceed with the deduction of this benefit and, in those terms, therefore, intends to do so now from the amount determined in autonomous taxation.

3. According to the Taxpayer, now Appellant, this operation becomes possible in that it considers that the tax determined in autonomous taxation is part of the collection determined within the scope of CIT, and is capable of deduction as occurs in article 90.º of the CIRC.

4. Similar to the previous point, the Taxpayer, here Appellant, attaches jurisprudence in order to demonstrate the prevalence of this understanding.

Therefore,

1. Also in this part it requests the annulment of the amounts that in its understanding are considered wrongly levied.

§ IV.I.II.II. On the examination

1. In this part the issue to be decided revolves around knowing whether from the autonomous taxation collection amounts relating to tax benefits can be deducted, in particular the CFEI.

2. We begin by stating, settling the question completely, that, on this basis, and with interpretive nature, article 133.º of Law n.º 7-A/2016, of 30 March, amended the wording of article 88.º of the CIRC, clarifying that no deductions are made from autonomous taxation collection.

3. If there were any doubts, these are then peremptorily clarified in the sense that no deduction can be made in the terms to which the Taxpayer, now Appellant, refers.

4. Therefore, the Taxpayer, here Appellant, has no reason.

Without prejudice,

1. We begin by determining the nature of autonomous taxation since the Taxpayer, now Appellant, argues that this is an integral part of the corporate income tax collection (CIT), and is therefore capable of deduction of tax benefits pursuant to article 90.º of the CIRC.

2. Public taxes are traditionally divided into three categories: taxes, fees and contributions, with the former being characterized from the start by their unilateral nature, serving the purpose of revenue collection.

3. It is accepted that they may equally serve purposes of social ordering and behavioral guidance, albeit indirectly, as is the case with autonomous taxation since it is required without any counterpart.

4. By focusing on facts that assume the nature of "expense" and not "income", it reveals a certain material independence in relation to income tax (in the strict sense), and is, moreover, determined autonomously, little mattering whether or not taxable income is presented at the end of the period, except as regards the rate increase in situations where expenses are incurred.

5. Its inclusion in the CIRC was due primarily to simplification issues, since underlying its determination are expenses that contribute to the determination of the tax to be paid at the end of the period.

6. With this typology, notably anti-abuse and intentional in combating tax fraud and evasion anchored in the principle of contributive capacity (through connection with the principle of taxation of actual business income), the tax legislator sought to promote, to the extent possible, the reduction of the use of these expenses that negatively affect collection and, consequently, tax revenue under income taxes.

7. Conversely from what occurs at the level of the intrinsic composition of CIT, autonomous taxation of expenses and charges, in turn, is nothing more than an instrumental and accessory reality to the attainment of the result of that income tax, to the extent that it was in function (and protection) of the same that autonomous taxation was conceived and wherein, accounts settled, its very raison d'être is rooted.

Continuing,

1. Autonomous taxation seeks its objective incidence in expenses and charges and not in income (of the burdened entity), distancing itself thereby from CIT in the strict sense, although it is instrumental and universally linked to this for purposes of an operational and functional character.

2. As a revealing feature of this nuance we underscore the legislative change accomplished in the current paragraph a) of n.º 1 of current article 23.º-A of the CIRC, where, reinforcing the position here defended, was added the expression "including autonomous taxation", which is equivalent to saying in other words that, on the one hand, autonomous taxation is part of the principal tax in the broad sense, but, on the other, is distinct from that in the strict sense.

3. Another example: in article 12.º of the same code, from the start the "operationality" and "functionality" relationship between income taxation and autonomous taxation of certain expenses or charges is emphasized, without prejudice to reiterating the distance between these same figures.

On these grounds,

1. As results from the express terms in its own initial petition, the Taxpayer, now Appellant, contests partially the tax act of "self-assessment" and, as a consequence, then requests that the amounts that correspond to it as "credit" of tax by virtue of the benefit of the tax benefit relating to CFEI be in turn deducted from the collection that is then determined and calculated via autonomous taxation of some certain expenses and charges.

Now,

1. Precisely because it is our understanding that the collection determined in autonomous taxation cannot - nor should - be confused with the collection that results in the strict scope of corporate income tax, the argument of the Taxpayer, now Appellant, cannot be admissible.

2. With respect to the autonomous taxation provided for in article 88.º of the CIRC, it is readily seen that this is determined in a distinct and autonomous manner, given the processing of CIT in the strict sense, in light of the provision in article 90.º of the same code, which is inherent to the core of strict income taxation and not to the taxation of certain expenses as occurs in the realm of autonomous taxation.

3. Although both are inserted in the determination at the broader level of taxation of businesses, they nevertheless constitute manifestly distinct and individualized procedures, since one concerns the strict collection of CIT, and the other the collection determined in autonomous taxation.

4. One cannot overlook the spirit that presided over the establishment of autonomous taxation and tax benefits, distinct realities with immediate and mediate interests equally disparate to the point of preventing their respective convergence, especially as regards the deduction from the first of the amount relating to these latter.

For that reason,

1. Weighing the interests in contention, the claim formulated by the Appellant does not deserve to proceed, since the exercise of the right to the CFEI benefit is not absolute, as it itself is accommodated by limits, including material ones, as we shall better demonstrate hereinafter.

2. The so-called CFEI tax benefit permits companies to obtain a tax benefit, under corporate income tax, and is promoted, with respect to investment expenses in assets used in the business.

3. This benefit is embodied in a tax credit capable of being used for the purposes and effects of deducting that amount from the (strict) collection of CIT (or other realities whose taxation likewise departs from taxable profit), without prejudice to that amount, in the event of insufficient collection, being "carried forward" to subsequent years.

Now,

1. In light of the CFEI regime, it is readily apparent that the amounts resulting from that tax benefit are capable of being deducted from the amounts determined pursuant to article 90.º of the CIRC, and up to the extent of that amount, always in the "self-assessment" relating to the tax period in which the accounting recognition of expenses covered by the benefit is inserted.

2. That is, for the purposes and effects of the CFEI, the deduction is made from the amount determined in those precise terms, that is, from the strict collection of CIT, connected with taxable profit and determined pursuant to article 90.º and not from the collection that results from the realities autonomously taxed pursuant to article 88.º, whose determination procedures are, it is repeated, distinct.

3. The tax legislator considered them as autonomous and distinct, when, in the CFEI, restricted to the scope of income, it only referred to the provision of article 90.º, that is, to the determination in the concrete within the scope of CIT stricto sensu and to other figures whose starting point is taxable profit and which reveal the same identity at the level of the active subject of the tax-legal relationship.

4. According to already settled jurisprudence, the autonomy of this reality is essentially linked to the facts on which it focuses and the specificities of its determination, but not, legally, in relation to the remaining portions of CIT, since in this perspective autonomous taxation does not cease to be, still, CIT in its broader conception.

5. In turn, n.º 2 of article 90.º of the CIRC dictates the manner of proceeding with the self-assessment of the tax, enumerating, exhaustively and in order, all deductions allowed from the collection determined pursuant to n.º 1 of the same provision, and this self-assessment is that which has as its basis the taxable matter defined pursuant to the CFEI regime.

6. The collection to which this rule refers when the self-assessment is to be made by the taxpayer is determined based on the taxable matter that appears in that self-assessment, with the credit in which the CFEI translates being deducted only from the collection based on the taxable matter.

7. Effectively, CIT collection is - and contrary to that of autonomous taxation - dependent on the achievement of a positive result by the company, and results from the application to it of the applicable rate, whereby it is not provided for, at any moment, to take into account the autonomous taxation which, as its own name indicates, are autonomous, that is independent of the result obtained by the company, and always owed in their entirety, since the Code provides for no deductions to the same.

8. Therefore, by here we understand that the value that flows from the CFEI cannot in any way serve as deduction from the collection that results from the spectrum of autonomous taxation of the list provided for in article 88.º, since, for these purposes, the collection determined within the scope of article 90.º is not equivalent to the collection that in turn results from the aggregate of realities under the yoke of autonomous taxation.

9. Permitting the value determined from the collection in autonomous taxation to be capable of benefiting from the effect of "deduction" of the amounts relating to the tax credit that flows from the CFEI would lead to direct confrontation with its immediate purpose, namely the discouragement of the acquisition and use of certain goods and services of consumption or mixed use.

10. Moreover, by not being inscribed in the strict composition of the concrete taxation of income, but in the inverse perspective (that of expense), autonomous taxation and the respective collection do not benefit from tax benefits whose emphasis occurs at the level of income and not at that of expense, as occurs in the well-known cases relating to tax benefits such as the one here in question.

11. It lacks absolute reasonableness to admit, in those terms, any deduction from the collection that results from autonomous taxation, when the law from the start equally does not permit that the value of the same can be deducted from the taxable profit of the period.

12. Therefore, it would be a paradox to promote the emptying of autonomous taxation collection by virtue of its reduction through benefit from amounts granted for reasons and interests that ab initio conflict with the purposes of the establishment of the first, benefiting tax-wise precisely those whom the legislator wished to "penalize" through a (secondary) mechanism that taxes expense, eliminating or reducing by indirect means any tax advantage that might be in the strict scope of income taxation and, in consequence, in the respective collection and final revenue, under penalty of "fraud against the law".

13. More grave would be it to accept tax-wise that deduction when, pursuant to the law, the legislator itself took care to underscore safeguards as to the coexistence between tax benefits and the occurrence of certain expenses and charges, as occurred, for example, in n.º 2 of the aforementioned article 88.º of the CIRC.

Indeed,

1. Following the most recent arbitral jurisprudence, it was considered that "(...) it would not be reasonable, indeed contrary to the reason that led the legislator to autonomously tax those expenses, that through their deduction from taxable profit as expenses, the basis of the existence of autonomous taxation be eliminated", having been "(...) thus certain that autonomous taxation does not constitute CIT in the strict sense but is embedded in this (CIT), and should be contained in the "other taxes" of which the final part of paragraph a) of n.º 1 of article 45º of the CIRC informs us".

2. It is equally understood that "(...) in the aim of autonomous taxation to reduce the tax advantage achieved with the deduction from taxable profit of the costs on which it focuses and still to combat tax evasion that this type of expense, by its nature, might entail, it cannot itself through its deduction from taxable profit as a cost of the period constitute a factor in reducing that diminishment of advantage intended and determined by the legislator."

3. Moreover: "(...) autonomous taxation, which focuses on charges deductible for purposes and effects of determining the basis for CIT taxation, are part of the regime and are owed by virtue of this tax, with the expenses of paying those autonomous taxation not constituting charges deductible for purposes of determining taxable profit.

4. Even more so, it should be recalled, autonomous taxation being an exceptional regime within the constitutional legal framework of income taxation and actual income, the regime should then be subject to restrictive interpretation, since it would be contrary to the spirit of the system to permit that, by virtue of the deductions to which n.º 2 of the cited article 90.º refers, be removed from autonomous taxation that anti-abuse character that presided over its implementation within the framework of the CIT system itself.

5. It must further be underscored, as a precaution, that it is equally not legitimate to state that the anti-abuse matrix of autonomous taxation does not prevent the impediment of the deduction of the value of the benefit from the collection thereof, as occurs with other specific anti-abuse provisions scattered throughout the various tax codes.

In effect,

1. Contrary to what occurs at the level of autonomous taxation, of an anti-abuse nature, of "indirect" action, in the anti-abuse provisions, "direct" (whether in the general anti-abuse clause or in sniper approach), the correlative tax treatment for the occurrence of legally foreseen facts is found circumscribed to calling to the tax base; the tax legislator understood that the action of these would be advocated within the scope of the level of determination of taxable matter and not, downstream, in the phase of collection determination.

2. In "direct" anti-abuse norms, both the tax criticism and its sanctioning are directly prescribed in the chapter of taxable matter, it being there that the tax legislator crystallized, on the one hand, its criticism and, on the other, the respective sanctioning.

3. This is what occurs, for example, at the level of legally provided norms concerning "transfer pricing", "thin capitalization", etc.

4. We have no doubts: to admit the deduction of the CFEI tax benefit from the autonomous taxation collection in the same manner as occurs with the strict collection of CIT or other tax figures immediately connected with income, one would be doing nothing more than departing from the sanctioning directive that presided over the establishment of the regime of that.

5. It would be a contradiction that this autonomous taxation (calculated in a context of potentially abusive behaviors) would be exhausted by deduction arising from an expense (tax benefits) that the State bears with a view to inducing investment and consequent development of the States themselves and companies.

6. Recall what was already said, the deduction within the scope of the CFEI tax benefit is not of absolute exercise, since its regime is guided by limits of a formal, temporal and material nature, with the latter preventing the elimination or mitigation of the collection determined under the scope of the anti-abuse mechanism that postulates the autonomy of the taxation of certain realities (of expense and not of income), to the point that, in consequence, it equally prevents the lesser tax burden from funding realities that the tax legislator considered as potentially contentious.

Thus,

1. In this part, given the foregoing, considering the impediment of the requested deduction, the request now formulated by the Taxpayer, now Appellant, should not proceed, with all legal consequences applicable to the case.

§ V. CONCLUSION

In accordance with everything previously stated, we propose that the request filed herein be denied in accordance with the tenor of the "summary table" identified at the outset of this our information, with all legal consequences.

It is further proposed that, likewise in the event of higher agreement, notification of the Taxpayer, here Appellant, be promoted in accordance with the norms inserted in articles 35.º to 41.º, all of the CPPT, through official communication to be sent by registered mail, for, if it wishes, within the period of 15 (fifteen) days, to exercise its right of participation, in the form of written prior hearing, pursuant to the provision of article 60.º of the LGT, which in turn is combined with the rule contained in article 121.º, this of the CPA, ex vi of paragraph c) of article 2.º also of the LGT.

m) The Claimant acted in accordance with the indications published by the Tax Authority in Doctrinal Note n.º 2011… of 30-03-2012, relating to binding information (reproduced in document n.º 11 attached to the request for arbitral pronouncement), in which, among other things, the following is stated:

Increase in the autonomous taxation rate in situations of determination of fiscal loss (in RETGS)

1. For purposes of application of the provision in n.º 14 of article 88.º of the CIRC, in cases where taxpayers are part of a group covered by the special tax regime for companies (RETGS), the result (taxable profit or fiscal loss) determined in the group declaration for the tax period to which any of the tax facts capable of autonomous taxation relate should be considered and not the taxable profit or fiscal loss determined by each of the companies comprising the consolidation perimeter covered by the regime.

n) The Claimant indicated in its Form 22 declaration, as expenses subject to autonomous taxation those indicated in document n.º 10 attached to the request for arbitral pronouncement, the contents of which are taken as reproduced;

o) The group of companies had, in the 2014 fiscal year, a credit of € 11,962.43 of the CFEI, which it did not deduct from the amount of autonomous taxation;

p) The companies that incurred the expenses and charges autonomously taxed in the Form 22 declaration did not present fiscal loss in the 2014 fiscal year;

q) On 16-08-2016, the Claimant filed the request for constitution of the arbitral tribunal that gave rise to the present proceedings.

2.2. Unproven Facts

There are no facts relevant to the decision that have not been proven.

2.3. Basis for the Determination of Facts

The facts were given as proven based on the documents attached to the request for arbitral pronouncement and in the administrative proceedings, with no controversy regarding them.

3. LEGAL ISSUES

N.º 14 of article 88.º of the CIRC establishes the following:

1. The rates of autonomous taxation provided for in this article are increased by 10 percentage points for taxpayers presenting fiscal loss in the period to which any of the tax facts referred to in the previous numbers relate connected with the exercise of a commercial, industrial or agricultural activity not exempt from CIT.

Law n.º 49/2013, of 16 July, approved the extraordinary tax credit for investment (CFEI), embodied in a tax benefit indicated in n.º 1 of its article 3.º in these terms:

1. The tax benefit to be granted to the taxpayers referred to in the previous article corresponds to a deduction from CIT collection in the amount of 20% of investment expenses in assets used in the business, which are made between 1 June 2013 and 31 December 2013.

The Claimant submitted the Form 22 declaration relating to the 2014 fiscal year of the group of which it is dominant company, in which it declared fiscal losses of the group.

In that declaration, the Claimant determined the autonomous taxation that it self-assessed with the 10 percentage point increase provided for in n.º 14 of article 88.º of the CIRC, notwithstanding that none of the companies that incurred the expenses and charges autonomously taxed presented fiscal losses in the 2014 fiscal year.

In that Form 22 declaration, the Claimant did not deduct any amount relating to tax benefits, although the companies that made up the group and the company Mercado Urbano that integrated the consolidated fiscal result as from 01-01-2014 had made investment expenses capable of deduction under the CFEI in the 2014 tax period in the amount of Euro 88,690.37.

The Claimant filed an administrative appeal of the self-assessments made based on those Form 22 declarations, defending, in summary:

– that, in cases of groups of companies, for purposes of the increase provided for in n.º 14 of article 88.º of the CIRC, the fiscal loss of the group is not relevant, but rather that of each of the companies that made the expenses subject to autonomous taxation, therefore, since none of the companies that made the autonomously taxed expenses presented fiscal losses, the said increase should not be applied;

– the amount of 20% of investment expenses in assets used in the business, which are made between 1 June 2013 and 31 December 2013, which may benefit from the CFEI, can be deducted from the collection produced by autonomous taxation.

The Tax and Customs Authority denied the administrative appeal.

The questions that are the subject of the present proceedings are those that were the subject of the administrative appeal.

3.1. Question of the Relevance of Losses of the Group of Companies as the Basis for the Application of the Increase in Autonomous Taxation Rates Provided for in N.º 14 of Article 88.º of the CIRC

This question consists of knowing whether, when the special tax regime for groups of companies is applicable, the fiscal losses relevant to determining this increase in autonomous taxation rates are those of the groups or those of each of the individual entities that comprise them.

The Claimant understands that it is the fiscal losses of each of the companies in the group that are relevant for this purpose, while the Tax and Customs Authority understands that it is the fiscal loss of the group that determines the increase in rates.

The question is today legislatively resolved, in the sense advocated by the Tax and Customs Authority, through the addition, made by Law n.º 7-A/2016, of 30 March, of n.º 20 to article 88.º of the CIRC, which establishes the following:

20 - For purposes of the provision in n.º 14, when the special tax regime for groups of companies established in article 69.º is applicable, the fiscal loss determined in accordance with article 70.º is considered.

Article 135.º of this Law n.º 7-A/2016, of 30 March, attributed an interpretive nature to this new wording of n.º 20 of article 88.º of the CIRC.

In accordance with article 13.º, n.º 1, of the Civil Code, «an interpretive law is integrated into the law being interpreted», whereby the interpretation effected applies as if it were contained in the interpreted rule.

However, the Claimant questions the constitutional admissibility of this interpretation, in light of the prohibition of retroactivity contained in article 103.º, n.º 3, of the CRP.

The Claimant argues, in summary, that

– the rule of n.º 20 of article 88.º of the CIT Code was not certain and unequivocal in the prior wording of article 88.º of the CIT Code, with the new norm not merely confirming in express manner the understanding that was intended to be attributed to said article, but instead effectively adding a new rule;

– this new rule did not result from the letter of the law, nor from legislative intent, nor from the purpose of the norm, nor from the systematics of the CIT Code, nor from any other form of interpretation admissible pursuant to n.º 1 of article 9.º of the Civil Code, and therefore this new Law does not embody itself in a mere interpretive law, but rather a true fiscal law with retroactive effects, which is neither accepted nor admitted.

Thus, the first question that arises is that of knowing whether n.º 20 of article 88.º of the CIRC truly has an interpretive nature or, despite the characterization given to it by article 135.º of Law n.º 7-A/2016, of 30 March, that norm should be considered innovative.

3.1.1. Interpretive or Innovative Nature of N.º 20 of Article 88.º of the CIRC

Article 135.º of Law n.º 7-A/2016, of 30 March, in attributing an «interpretive» nature to that new n.º 21.º of article 88.º, combined with article 13.º of the Civil Code (which is the only rule that defines the concept of interpretive law), has inherent therein an intention on the part of the legislator to apply the new regime to prior situations in which there are no «effects already produced by performance of the obligation, by judgment passed in final form, by settlement, even if not ratified, or by acts of analogous nature».

BAPTISTA MACHADO teaches regarding interpretive laws:

Now the reason why the interpretive law applies to facts and situations anterior to it lies fundamentally in that it, coming to consecrate and fix one of the possible interpretations of the old law with which interested parties could and should have reckoned, is not susceptible to violating secure and legitimately founded expectations. We may consequently say that those laws are interpretive in nature which, on points or questions in which the applicable legal rules are uncertain or their meaning is controversial, come to consecrate a solution that the courts could have adopted. It is not necessary that the law come to consecrate one of the prior jurisprudential currents or a strong prior jurisprudential current. All the more so since the interpretive law often emerges before such jurisprudential currents have had the opportunity to form. But, if this is the case, and if meanwhile a uniform jurisprudential current has formed that made practically certain the meaning of the old norm, then the new law that comes to consecrate a different interpretation of the same norm can no longer be considered truly interpretive (although it may be so perhaps by determination of the legislator), but innovative.

For a new law to be truly interpretive, two requirements are therefore necessary: that the solution of prior law be controversial or at least uncertain; and that the solution defined by the new law be situated within the scope of the controversy and be such that the judge or interpreter could arrive at it without exceeding the limits normally imposed on interpretation and application of the law. If the judge or interpreter, faced with old texts, could not feel authorized to adopt the solution that the new law comes to consecrate, then this is decidedly innovative.

Thus, the first question to be examined, which may be decisive, is that of knowing whether the norm of n.º 20 of article 88.º of the CIRC truly has an interpretive nature.

The expression «taxpayers presenting fiscal loss» contained in n.º 14 of article 88.º of the CIRC can, by its own literal meaning, be interpreted as referring to either the losses of the group or those of each of the companies that comprise it.

In fact, even when taxation is effected based on the taxable profit of the group, the fiscal losses of each of the companies that comprise it are nevertheless still determined, as results from article 70.º, n.º 1, of the CIRC.

On the other hand, the fact that article 88.º, n.º 14, of the CIRC makes reference to «taxpayers» and the CIRC does not indicate groups of companies among the taxpayers indicated in its article 2.º does not exclude the possibility of the interpretation of that expression encompassing them, since article 18.º, n.º 3, of the LGT attributes such designation to «a natural or legal person, property or organization de facto or de right that, pursuant to the law, is bound to performance of the tax obligation, whether as direct taxpayer, substitute or responsible party». Now, in the case of taxation of groups of companies «payment of CIT is incumbent on the dominant company», as its first instance, as results from article 115.º of the CIRC, whereby this is also, in that capacity, a taxpayer under CIT.

Furthermore, the Report for the 2011 State Budget, which introduced the said n.º 14 in article 88.º of the CIRC, is not enlightening as to the scope of the reference to «taxpayer», as it merely refers that «a rule that in more narrow terms already appeared in article 88.º of the CIT Code is broadened and it is determined, with a character of generality, that the rates of autonomous taxation undergo an elevation of 10 percentage points whenever taxpayers present fiscal losses, with which it is intended to give a clear signal of moralization in the management of companies regarding expenses such as allowances or representation expenses».

Furthermore, if it is true that the most coherent and logical position is that, taxation being unitary of income the justification for the existence of a special regime of taxation of groups of companies and there being no allusion to autonomous taxation in the Subsection of the CIRC that establishes this regime, these would not be encompassed by it, it is equally true that autonomous taxation reveals an evident, persistent and growing legislative lack of concern with the coherence of the system of taxation of businesses that should have as its foundation fundamentally actual income, by virtue of the provision of article 104.º, n.º 2, of the CRP.

And, in fact, one must admit the lack of clarity of the solution, as is demonstrated by the divergent arbitral jurisprudence on this matter, namely the decisions of 01-09-2014, rendered in proceedings n.º 239/2014-T and of 24-04-2015, rendered in proceedings n.º 659/2014-T.

In the latter, the understanding is explicitly adopted that, in cases of application of RETGS, the fiscal losses relevant for purposes of the increase referred to in n.º 14 of article 88.º of the CIRC are those of the group of which the dominant company is the «only taxpayer for purposes of CIT», as is evident in the excerpt that follows, highlighting the relevant points:

«That is: the question may be reduced to knowing, in simple terms, whether or not it is fair to penalize someone, in a situation of fiscal loss, opting, using the previous example, for acquisition of light passenger vehicles for use by its administrators, of cost above a reasonable limit.

And regarding this matter there are no specificities or exceptions to note for the case, as that of the proceedings, of companies taxed, by own option, within the scope of RETGS (articles 69º and et seq. of the CIRC).

In fact, although it occurs in this case an assessment of fiscal losses by declaration of the fiscal Group, the truth is that this occurs by own option of the taxpayer who accepted that the respective calculation would be processed not individually but through the algebraic sum of taxable profits and fiscal losses determined in individual periodic declarations so that, in the end, there would be only one taxpayer for purposes of CIT.

If from that taxation regime results, in one case or another, in a final taxation more onerous than that which could result from final individual taxation, that consequence can only be imputed to the taxpayer». ( [1] ) ( [2] )

On the other hand, it appears to be decisive for determining whether contributors could count on the interpretation adopted in Law n.º 7-A/2016, the fact of the existence of Binding Information, issued by the Tax and Customs Authority in proceedings n.º 2011…, dated 30-03-2012, to the effect that «for purposes of application of the provision in n.º 14 of article 88.º of the CIRC, in cases where taxpayers are part of a group covered by the special tax regime for companies (RETGS), the result (taxable profit or fiscal loss) determined in the group declaration for the tax period to which any of the tax facts capable of autonomous taxation relate should be considered and not the taxable profit or fiscal loss determined by each of the companies comprising the consolidation perimeter covered by the regime.

In fact, that binding information has been published since 21-06-2012 ( [3] ) and the Claimant itself asserts that it always followed the instructions of the Tax and Customs Authority (article 38.º of the request for arbitral pronouncement).

Moreover, there were already some doctrinal positions to the effect that came to be adopted in n.º 20 of article 88.º, namely that «being in question a group of companies integrated in the special tax regime, it has been understood that, for purposes of the increase in the calculation of autonomous taxation, account should be taken of the circumstance that the group presents profit or loss, and not solely the result of each of the companies. That is, if there are companies of the group with fiscal loss, but, in the overall account, the group determines consolidated taxable profit, the 10% increase should not be considered.». ( [4] )

And, revealing unequivocally that taxpayers could count on this interpretation adopted in Law n.º 7-A/2016, it is observed that the computer system itself nor even permitted that individual losses be considered for purposes of applying the increase provided for in n.º 14 of article 88.º of the CIRC, as the system refused the acceptance of the declaration, displaying an error message, as the Claimant refers to in article 20.º of the request for arbitral pronouncement.

Being thus, it could not constitute a surprise for taxpayers that, prior to Law n.º 7-A/2016, it would be understood that the group of companies should be considered a taxpayer for purposes of CIT, for purposes of n.º 14 of article 88.º, since it was the only entity that has the legal obligation to pay CIT, including that resulting from autonomous taxation: it was already said by the arbitral jurisprudence, it was already said by the Tax and Customs Authority and no dissenting voice was known at the jurisprudential or doctrinal level. In fact, the arbitral decision rendered in proceedings n.º 239/2014-T, which was the only jurisprudential decision known to the effect that the losses of the group were not relevant for purposes of article 88.º, n.º 14, of the CIRC, does not even reveal any doubt about the quality of taxpayer that the group has in CIT, but rather implicitly accepted that it was, since the only reason for which it was understood therein that the losses of the group were not relevant was the understanding that «the applicability of the special tax regime for groups of companies is restricted to the determination of taxable profit and fiscal losses» and autonomous taxation in CIT does not have as its basis of incidence taxable profit.

In light of the aforementioned positions, it is not to be ruled out the interpretive nature attributed to n.º 20 of article 88.º of the CIRC that is done in article 135.º of Law n.º 7-A/2016, of 30 March, in light of the teachings of BAPTISTA MACHADO, since the solution that results therefrom regarding the application of the increase in autonomous taxation provided for in n.º 14 of article 88.º of the CIRC in cases of taxation within the scope of RETGS passes the test stated by that Author:

– the solution that resulted from the literal meaning of article 88.º, n.º 14, of the CIRC was controversial and the solution defined by the new law is situated within the scope of the controversy;

– the judge or interpreter could arrive at that solution without exceeding the limits normally imposed on interpretation and application of the law, as have arrived the jurisprudence and doctrine referred to.

Being thus, the interpretive nature cannot be denied to the norm of n.º 20 of article 88.º of the CIRC, whereby its non-application can only result from eventual unconstitutionality.

3.1.2. Question of the Unconstitutionality of the Authentic Interpretation Effectuated by N.º 20 of Article 88.º of Law N.º 7-A/2016

The unconstitutionality raised by the Claimant is based on the alleged incompatibility of interpretive laws in tax matters with the prohibition of retroactivity in the creation of taxes, contained in article 103.º, n.º 3, of the CRP.

Article 103.º, n.º 3, of the CRP establishes that no one can be obliged to pay taxes that have a retroactive nature.

The interpretive law, integrating itself into the law being interpreted, pursuant to article 13.º of the Civil Code, necessarily has effects prior to its effectiveness, at least that of eliminating one or more of the possible interpretations of the law being interpreted. ( [5] )

The constitutional prohibition against retroactivity of norms creating tax obligations that is drawn from n.º 3 of article 103.º of the CRP aims to prevent legislative violations of the principle of legal certainty, in its aspects of certainty in the orientation of taxpayers' conduct and security of effects created by situations already occurred.

Following the lesson of BAPTISTA MACHADO, it should be understood that in situations in which the interpretation that is given in the new law comes to fix one of the possible interpretations of the old law with which interested parties could and should have counted is not susceptible to violating secure and legitimately founded expectations, whereby the reasons that justify the prohibition of retroactivity do not verify themselves.

As possible interpretations of the old law with which interested parties could and should have counted cannot be considered those that go beyond, restrictively or expansively, its literal meaning, at least as long as there are no doctrinal positions or jurisprudential practice that adopt them, they do however include, surely, those that are viable in the face of the prior legal text in a mere declarative interpretation.

As was already referred to, the literal meaning of n.º 14 of article 88.º of the CIRC permits, by mere declarative interpretation, that have in mind the concept of expanded taxpayer that results from articles 18.º, n.º 3, of the LGT and 115.º of the CIRC, corroborated by article 31.º, n.º 1 of that Law, to attribute the qualification of taxpayer to the dominant companies of the groups encompassed by RETGS, whereby the consideration of group losses as the determining fact of the increase in autonomous taxation has to be considered as an interpretation with which taxpayers could and should have counted previously.

Moreover, as the Claimant itself alleged and was given as proven, the computer system of the Tax and Customs Authority through which the submission of the periodic tax declaration for CIT is processed is programmed in the sense of considering that the increase in autonomous taxation rates should have as its reference the fiscal result determined by the group of companies subject to RETGS, marking an error when the fiscal result individually determined by each of the companies that comprise it is considered.

For that reason, since periodic CIT income declarations are submitted obligatorily by electronic means (article 120.º, n.º 1, of the CIRC), it is inevitable to conclude that the generality of CIT taxpayers could count on this interpretation that came to be made explicit by Law n.º 7-A/2016.

Even appraising the situation in light of the principle of legal certainty, inherent in the principle of the democratic rule of law, which has greater breadth than the constitutional prohibition against retroactive creation of taxes, it is clear that there is no incompatibility with an authentic interpretation that has as its effect the maintenance and not the alteration of an existing situation. In fact, the authentic interpretation in question, applied to situations such as that of the proceedings in which the taxpayer created itself the juridical situation in which it finds itself, making the self-assessments in harmony with that interpretation and making the respective payments, does not affect legal certainty, but rather reinforces it, since it has as its practical effect the consolidation legally of the existing situation.

By the foregoing, the authentic interpretation effected by n.º 20 of article 88.º of the CIRC, in the wording of Law n.º 7-A/2016, of 30 March, does not offend the constitutional prohibition of retroactive tax norms, nor the principle of legal certainty.

3.1.3. Application of the Authentic Interpretation

The interpretive norm of n.º 20 of article 88.º of the CIRC not being unconstitutional, the interpretation thereof of n.º 14 of the same article has to be considered inherent in that norm (article 13.º, n.º 1, of the Civil Code).

For that reason, the self-assessment in which this interpretation was applied is not illegal and, consequently, does not suffer from illegality of the decision on administrative appeal, in the respective part.

3.2. Question of the Deduction of the CFEI Tax Benefit from the Autonomous Taxation Collection

Articles 89.º and 90.º of the CIRC establish the following, in the wording given by Law n.º 3-B/2010, of 28 April:

Article 89.º

Competence for self-assessment

The self-assessment of CIT is made:

a) By the taxpayer itself, in the declarations referred to in articles 120.º and 122.º;

b) By the Directorate-General of Taxes, in the remaining cases.

Article 90.º

Procedure and form of self-assessment

1 - The self-assessment of CIT proceeds in the following manner:

a) When the self-assessment is to be made by the taxpayer in the declarations referred to in articles 120.º and 122.º, it is based on the taxable matter contained therein;

b) In the absence of submission of the declaration referred to in article 120.º, the self-assessment is made up to 30 November of the year following that to which it relates or, in the case provided for in n.º 2 of the said article, until the end of the 6th month following the end of the period for submission of the declaration mentioned therein, and is based on the annual value of the minimum monthly remuneration or, when higher, the entirety of the taxable matter of the most recent fiscal year that is found determined;

c) In the absence of self-assessment in accordance with the previous paragraphs, the same is based on the elements available to the tax administration.

2 – To the amount determined in accordance with the previous number the following deductions are made, in the order indicated:

a) That corresponding to international double taxation;

b) That relating to tax benefits;

c) That relating to the special payment on account referred to in article 106.º;

d) That relating to withholdings at source not capable of compensation or reimbursement pursuant to the applicable legislation.

3 – (Repealed by Law n.º 3-B/10)

4 – To the amount determined pursuant to n.º 1, regarding the entities mentioned in n.º 4 of article 120.º, only the deduction relating to withholdings at source when these have the nature of tax on account of CIT is to be made.

5 – The deductions referred to in n.º 2 relating to entities to which the regime of tax transparency established in article 6.º applies are imputed to the respective partners or members pursuant to the terms established in n.º 3 of that article and deducted from the amount determined based on the taxable matter that took into account the imputation provided for in the same article.

6 – When the special tax regime for groups of companies is applicable, the deductions referred to in n.º 2 relating to each of the companies are made in the amount determined with respect to the group, pursuant to n.º 1.

7 – From the deductions made pursuant to paragraphs a), b) and c) of n.º 2 no negative value can result.

8 – To the amount determined pursuant to paragraphs b) and c) of n.º 1 only deductions of which the tax administration has knowledge and which can be made pursuant to n.ºs 2 to 4 are made.

9 – In cases in which the provision in paragraph b) of n.º 2 of article 79.º is applicable, annual self-assessments are made based on taxable matter determined on a provisional basis, and, in light of the self-assessment corresponding to the taxable matter relating to the entire assessment period, the difference determined is to be charged or cancelled.

10 – The self-assessment provided for in n.º 1 can be corrected, if appropriate, within the period referred to in article 101.º, with the differences determined then being charged or cancelled.

These articles 89.º and 90.º of the CIRC, as well as other norms of this Code, such as those relating to the declarations provided for in articles 120.º and 122.º, apply to autonomous taxation.

From the outset, it is today settled, in the wake of numerous arbitral jurisprudence and the positions assumed by the Tax and Customs Authority, that the tax collected on the basis of autonomous taxation provided for in the CIRC has the nature of CIT. Indeed, beyond the unanimity of jurisprudence, article 23.º-A n.º 1, paragraph a), of the CIRC, in the wording of Law n.º 2/2014, of 16 January, leaves today no room for any reasonable doubt, corroborating what already previously resulted from the literal meaning of article 12.º of the same Code.

Now, article 90.º of the CIRC refers to the forms of self-assessment of CIT, by the taxpayer or by the Tax Administration, applying to the determination of the tax owed in all situations provided for in the Code, including additional self-assessment (n.º 10).

For that reason, that article 90.º also applies to the self-assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Administration, following the submission or non-submission of declarations, with no other provision foreseeing different terms for its self-assessment.

Thus, the differences between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit restrict themselves to the determination of taxable matter and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for CIT that has as its basis taxable profit and in article 88.º of the CIRC for CIT that has as its basis the taxable matter of autonomous taxation and the respective rates.

But the forms of self-assessment provided for in Chapter V of the same Code are of common application to autonomous taxation and the remaining taxable matter of CIT.

Nonetheless, the circumstance that a CIT self-assessment, made pursuant to n.º 1 of article 90.º, can contain various partial calculations based on various rates applicable to determined taxable matters, does not imply that there is more than one self-assessment, as results from the very terms of that norm in making reference to «self-assessment», in the singular, in all cases in which it is «made by the taxpayer in the declarations referred to in articles 120.º and 122.º», having «as its basis the taxable matter contained therein» (whether the matter determined based on the rules of articles 17.º and following or the matter determined based on the various situations provided for in article 88.º).

Indeed, it is not only the self-assessments provided for in article 88.º that can encompass various rate application calculations to determined taxable matters, as the same can occur in the situations provided for in n.ºs 4 to 6 of article 87.º.( [6] )

In any case, whatever the calculations to be made, it is the unitary self-assessment that the taxpayer or the Tax and Customs Authority must make pursuant to articles 89.º, paragraph a), 90.º, n.º 1, paragraphs a), b) and c), and 120.º or 122.º, and on its basis that global CIT is calculated, whatever the taxable matters relating to each of the types of taxation underlying it.

Indeed, if article 90.º were not applicable to the self-assessment of autonomous taxation provided for in the CIRC, we would have to conclude that there would be no provision foreseeing its self-assessment, which would be reduced to illegality, by violation of article 103.º, n.º 3, of the CRP, which requires that the self-assessment of taxes be made «pursuant to the law».

Further note should be made of the new norm of n.º 21 added to article 88.º of the CIRC by Law n.º 7-A/2016, of 30 March, independent of whether or not it is truly interpretive, in no way alters this conclusion, since there is established, as concerns the manner of self-assessment of autonomous taxation, that it «is made pursuant to the terms provided for in article 89.º and is based on the values and rates that result from the provision of the previous numbers».

Indeed, if it is true that this new norm comes to make explicit how the amounts of autonomous taxation are calculated (which already resulted from the very text of the various provisions of article 88.º) and that the competence belongs to the taxpayer or the Tax Administration, pursuant to article 89.º, it is equally clear that the need to use the procedure provided for in n.º 1 of article 90.º is not set aside, namely in the cases provided for in its paragraph c) in which the self-assessment falls to the Tax and Customs Authority, with «basis in the elements available to the tax administration», which will encompass the possibility of self-assessing based on autonomous taxation, if the Tax and Customs Authority has elements that prove its prerequisites.

For that reason, both before and after Law n.º 7-A/2016, of 30 March, article 90.º, n.º 1, of the CIRC applies to the self-assessment of autonomous taxation.

The 2013 CFEI was approved by Law n.º 49/2013, of 16 July, which establishes the following, as to what is pertinent here:

Article 2.º

Scope of subjective application

The following can benefit from the CFEI are taxpayers subject to CIT that exercise, as their principal activity, an activity of a commercial, industrial or agricultural nature and cumulatively meet the following conditions:

a) Have duly organized accounting, in accordance with the accounting normalization and other legal provisions in force for the respective sector of activity;

b) Their taxable profit is not determined by indirect methods;

c) Have their tax and contribution situation regularized.

Article 3.º

Tax Incentive

1 - The tax benefit to be granted to the taxpayers referred to in the previous article corresponds to a deduction from CIT collection in the amount of 20% of investment expenses in assets used in the business, which are made between 1 June 2013 and 31 December 2013.

2 - For purposes of the deduction provided for in the previous number, the maximum amount of investment expenses eligible is 5,000,000.00 EUR, per taxpayer.

3 - The deduction provided for in the previous numbers is made in the self-assessment of CIT relating to the tax period that begins in 2013, up to the extent of 70% of the collection of that tax.

4 - In the case of taxpayers that adopt a tax period not coinciding with the calendar year and with beginning after 1 June 2013, the expenses relevant for purposes of the deduction provided for in the previous numbers are those made in eligible assets from the beginning of said period until the end of the seventh month following.

5 - Where the special tax regime for groups of companies applies, the deduction provided for in n.º 1:

a) Is made from the amount determined pursuant to paragraph a) of n.º 1 of article 90.º of the CIT Code, based on the taxable matter of the group;

b) Is made up to 70% of the amount mentioned in the previous paragraph and cannot exceed, in relation to each company and per fiscal year, the limit of 70% of the collection that would be determined by the company that made the eligible expenses, had the special tax regime for groups of companies not been applied.

6 - The amount that cannot be deducted pursuant to the previous numbers can be so, in the same conditions, in the five subsequent tax periods.

7 - To taxpayers that reorganize, as a result of any operations provided for in article 73.º of the CIT Code, the provision of n.º 3 of article 15.º of the Statute of Tax Benefits applies.

Article 4.º

Eligible Investment Expenses

1 - For purposes of this regime, investment expenses in assets used in the business are considered those relating to tangible fixed assets and biological assets that are not consumable, acquired in new condition and that are put into operation or use until the end of the tax period that begins in or after 1 January 2014.

2 - Investment expenses in intangible assets subject to depreciation made in the periods referred to in n.ºs 1 and 4 of article 3.º are also eligible, in particular:

a) Expenses with development projects;

b) Expenses with elements of industrial property, such as patents, trademarks, permits, production processes, models or other assimilated rights, acquired on a paid basis and whose exclusive use is recognized for a limited period of time.

3 - Investment expenses corresponding to additions of assets verified in the periods referred to in n.ºs 1 and 4 of article 3.º and likewise those which, not relating to advances, result in additions to investments in progress initiated in those periods, are considered eligible.

4 - For purposes of the previous number, additions of assets that result from transfers of investments in progress are not considered.

5 - For purposes of n.º 1, investment expenses in assets capable of use in the personal sphere are excluded, being considered as such:

a) Light passenger vehicles or mixed vehicles, recreational boats and tourist aircraft, except when such goods are used in the operation of public transport service or are intended for rental or transfer of their respective use or enjoyment in the exercise of the normal activity of the taxpayer;

b) Furniture and comfort or decoration articles, except when used in productive or administrative activity;

c) Those incurred with the construction, acquisition, repair and expansion of any buildings, except when used in productive or administrative activities.

6 - Expenses made in assets used in activities within the scope of concession or public-private partnership agreements entered into with entities of the public sector are likewise excluded from this regime.

7 - It is considered that land is not an asset acquired in new condition, for purposes of n.º 1.

8 - Additionally, expenses relating to intangible assets are not considered eligible, whenever acquired as a result of acts or legal transactions of the eligible taxpayer with entities with which it finds itself in a situation of related parties, as defined in n.º 4 of article 63.º of the CIT Code.

9 - The assets underlying eligible expenses must be held and accounted for in accordance with the rules that determined their eligibility for a minimum period of five years or, when shorter, during the respective minimum useful life, determined pursuant to Regulatory Decree n.º 25/2009, of 14 September, amended by Law n.º 64-B/2011, of 30 December, or until the period in which the respective physical disposal, dismantling, abandonment or rendering useless occurs, observing the rules provided for in article 38.º of the CIT Code.

In the case at issue, the Tax and Customs Authority does not question that the Claimant meets the subjective and objective requirements to be able to benefit from the CFEI with respect to the investment expenses that it refers to, having denied the administrative appeal by understanding that the expenses in question cannot be deducted from the amounts that it paid in autonomous taxation, because the deduction can only be made from «CIT collection», pursuant to n.º 1 of article 3.º of Law n.º 49/2013, and that collection, in the view of the Tax and Customs Authority, is not made up of the amounts owed in autonomous taxation, but only the amount resulting from the application of the CIT rate to taxable profit.

As was referred to, it is settled in the present proceedings, including by agreement of the Parties, that article 90.º of the CIRC also refers to the self-assessment of autonomous taxation.

And, as was said, there is no legal support for affirming that, in the eventuality that multiple calculations have to be made in a declaration to determine CIT, more than one self-assessment is made.

For that reason, the expression «when the self-assessment is to be made by the taxpayer in the declarations referred to in articles 120.º and 122.º, it is based on the taxable matter contained therein», contained in paragraph a) of n.º 1 of article 90.º of the CIRC, encompasses in its literal meaning the self-assessment of autonomous taxation, whose taxable matter has to be indicated in said declarations, as results, also, from the very Form 22 declaration model (part 13).

Collection is obtained by applying the rate to the respective taxable matter, whereby, in the case of CIT, there being various rates applicable to various taxable matters, global CIT collection will be constituted by the sum of all the results of those applications.

Thus, by mere declarative interpretation, it is concluded that the reference that in article 3.º, n.º 1, of Law n.º 49/2013 is made to «deduction from CIT collection» as a form of materializing the tax benefit encompasses, literally also the collection of CIT resulting from autonomous taxation, which is part of the unitary CIT collection.

Being this the interpretation that results from the literal meaning, only by way of a restrictive interpretation can the application of the tax benefit to the collection of CIT proportioned by autonomous taxation be set aside.

The viability of a restrictive interpretation finds, from the start, a general order obstacle, which is that the norms that create tax benefits have the nature of exceptional norms, as results from the expressly stated meaning of article 2.º, n.º 1, of the EBF, whereby, in the absence of a special rule, they should be interpreted in their precise terms, in strict terms, as is settled jurisprudence. ( [7] ) In the case of tax benefits, the possibility of extensive interpretation is explicitly provided for (article 10.º of the EBF), but not of restrictive interpretation, whereby, in rule, the tax benefit should not be interpreted with lesser breadth than that which, in a declarative interpretation, results from the meaning of the norm providing for it.

In any case, a restrictive interpretation is only justified when «the interpreter arrives at the conclusion that the legislator adopted a text that betrays its thought, in that it says more than what it intended to say. Also here the ratio legis will have a decisive word. The interpreter should not allow itself to be drawn along by the apparent scope of the text, but should restrict this in terms of making it compatible with the legislator's thought, that is, with that ratio. The argument on which this type of interpretation is based is customarily expressed thus: cessante ratione legis cessat eius dispositio (where the reason for being of the law ends, its scope ends)» ( [8] ).

For that reason, one must appraise whether there are reasons that justify a conclusion on the incompatibility of the meaning of the text of article 3.º, n.º 1, with the ratio legis of that tax benefit.

The reason for being of the creation of said tax benefit is evident and was expressly referred to in the «Explanatory Memorandum» of Legislative Proposal n.º 148/XII, which came to give origin to Law n.º 49/2013:

In accordance, contributing to the success of the Economic and Financial Adjustment Program for Portugal, and with the objective of promoting competitiveness and employment, the Government commits itself to a strategy aimed at strongly stimulating direct investment in Portugal, already in 2013.

In this context, the present legislative proposal introduces in the Portuguese legal order an Extraordinary Tax Credit for Investment (CFEI) with the objective of having a strong impact on the level of business investment.

The CFEI corresponds to a deduction from CIT collection in the amount of 20% of investment expenses made, up to the extent of 70% of that collection. The eligible investment for this tax credit will have to be made between 1 June 2013 and 31 December 2013 and can reach 5,000,000.00 EUR, being deductible from CIT collection of the fiscal year, and for an additional period of up to five years, whenever that is insufficient.

Eligible for this benefit are taxpayers that exercise as their principal activity a commercial, industrial or agricultural activity, have duly organized accounting in accordance with the accounting normalization and other legal provisions in force for the respective sector of activity, their taxable profit is not determined by indirect methods and have their tax and contribution situation regularized.

The objective is manifest and undeniable: the benefit was created to stimulate investment and, through investment, to promote economic development.

Autonomous taxation, as a mechanism that deters investment in certain categories of expenses (which may serve to reduce the tax burden achieved through deduction of costs from taxable profit), creates an incentive structure opposite to that of the CFEI, which aims to stimulate investment in general.

It would not make sense, therefore, from the perspective of the legislative intent to create the CFEI, if its benefit were not applied to the collection resulting from autonomous taxation, when that collection results from the taxation of certain expenses that could serve to reduce the tax burden, which is what the mechanism of autonomous taxation seeks to prevent.

The conclusion is that, from the perspective of the ratio legis of the CFEI, the application of the benefit to the collection resulting from autonomous taxation is not only compatible but also, in a certain sense, demanded by the underlying purpose of the benefit.

On the other hand, there are practical considerations that support the same interpretation. In cases in which a company has insufficient collection from normal taxation, but has sufficient collection from autonomous taxation to absorb the benefit of the CFEI, if the benefit could not be deducted from autonomous taxation, the tax benefit would be entirely lost, not being carried forward in accordance with n.º 6 of article 3.º. This would be contrary to the purpose of the CFEI, which is to stimulate investment, for it would penalize companies whose taxable matter is concentrated in expenses subject to autonomous taxation.

For those reasons, the interpretation that restricts the application of the CFEI to the collection resulting from taxable profit in the strict sense, excluding the collection from autonomous taxation, is not justified, either from the perspective of the ratio legis of the CFEI or from practical considerations.

Therefore, the literal interpretation of article 3.º, n.º 1, of Law n.º 49/2013, which includes in «CIT collection» the collection resulting from autonomous taxation, is the interpretation that should prevail.

That being the case, the CFEI can be deducted from the collection resulting from autonomous taxation to the extent permitted by the CFEI regime itself.

Accordingly, the request of the Claimant regarding the deduction of the CFEI from the collection resulting from autonomous taxation should be granted, at least to the extent corresponding to the amount of Euro 11,962.43 that the Claimant mentions in its request.

4. DECISION

For all the foregoing reasons:

1. The illegal self-assessment relating to autonomous taxation levied based on the application of the rate increase provided for in n.º 14 of article 88.º of the CIRC, based on the group loss, is confirmed, such self-assessment being legal, since the interpretation of the provision of n.º 20 of article 88.º of the CIRC has the nature of an interpretive law and, therefore, applies retroactively, and the rate increase should indeed be determined based on the group loss, not on the individual losses of the companies that incurred the expenses and charges subject to autonomous taxation.

2. The decision denying the administrative appeal regarding the non-deduction of the CFEI from the autonomous taxation collection is reversed, and, accordingly:

a) The Claimant is granted the right to deduct from the autonomous taxation collection the amount of Euro 11,962.43, corresponding to the available CFEI credit for the 2014 tax period;

b) The Claimant is granted reimbursement of this amount, together with compensatory interest calculated in accordance with the applicable law, from the date of overpayment until the date of reimbursement.

1. The request for annulment and reimbursement of Euro 621,334.61 relating to the rate increase for autonomous taxation is denied.

Co-authored by: The Arbitral Tribunal