Summary
Full Decision
THE PARTIES
Claimant: "A", Tax ID …, with domicile at …
Defendant: Tax and Customs Authority
Subject Matter: Capital Gains - Onerous Transfer of Shares - Exclusion from Taxation by Retention for More Than 12 Months
ARBITRAL DECISION
I - Subject Matter of the Request and Procedural Conduct
On 23 July 2014, the Claimant submitted a request for arbitral pronouncement, requesting:
i) As primary claim, a declaration of illegality and consequent annulment of the Personal Income Tax (IRS) assessment note and corresponding compensatory interest No. 2014 ...;
ii) Alternatively, the partial annulment of the contested assessment note, so as to reflect the special regime for determining gains and losses in the onerous transfer of equity stakes in micro or small enterprises.
By decision of the President of the Deontological Council, the arbitrators of the collective arbitral tribunal were appointed, which was constituted on 25 September 2014.
The Tax and Customs Authority (hereinafter to be referred to, in abbreviated form, as AT) submitted its Response on 29 October.
The arbitral hearing (article 18 of the RJAT) was initially scheduled for 24 November and subsequently changed to 11 December.
On 5 December the parties waived the said arbitral hearing.
On 10 December, the request submitted by AT to join to the case file the arbitral decision 453/2014-T, whose subject matter is similar to the present disputed case, was accepted.
By order of 19 December and in the exercise of the inquisitorial principle, the Arbitral Tribunal directed a set of questions to the Claimant, with the purpose of clarifying the underlying factual matter (section f) of article 16 of the RJAT).
On 13 January the AT contested the order of the Arbitral Tribunal, alleging that the questions and clarifications requested constituted an expansion of the cause of action due to the evidential deficit that had supported the Claimant's request for arbitral pronouncement.
The AT considered itself faced with an insolvable violation of the principle of equality of the parties. Therefore, it requested revocation of the order.
On 15 January the Claimant provided the clarifications it deemed appropriate, having also attached some documents which, in its understanding, would support the responses presented.
Following which the AT, reinforcing the protest previously presented, requested, on 22 January, the withdrawal of such documents.
On 23 January, the Claimant expressed its disagreement with AT's pretension.
II – Preliminary Matters
The parties have legal capacity and standing.
The Arbitral Tribunal was regularly constituted and is competent.
The proceedings do not suffer from any nullity. No exceptions were raised by the parties that would obstruct the appraisal of the merits of the case.
Preliminary Question
A preliminary question was raised by AT, in the following terms:
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On 13 January the AT submitted a request in which it defended the illegality of the order issued by the Tribunal on 19 December 2014 in which the latter requested from the Claimant certain specified elements;
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And requested the revocation of the aforementioned order;
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On 15 January the Claimant came to respond to what was requested in the order of 19 December;
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Notified of the AT, the latter, in its request of 21 January, reaffirming what it had argued in the request of 13 January, requested that the documents attached by the Claimant be withdrawn, adding that in any case it challenged those documents;
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On 23 January the Claimant came to attach a request responding to AT's request;
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In relation to the order admitting the request of 23 January, the Defendant came, in a request also of 23 January, to request the withdrawal of the Claimant's request, on the grounds that the admission of the same constituted "manifest violation of the principle of equality between the parties";
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In a request of 12 February, the AT criticized the Tribunal's actions for violation of the principle of procedural expedience and due diligence. It did not, however, formulate any request;
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The AT is right in this respect, for the decision on the requests of 13 and 21 January was not inserted in due time. Indeed, this Arbitral Tribunal deliberated collectively on the same. However, the decision it reached was not inserted at an opportune moment in the CAAD procedural management platform;
-
It is therefore necessary, following what was requested by AT, to render a pronouncement on:
a) The request of 23 January;
b) The AT's requests of 13 and 21 January
Assessment
a) Regarding the request of 23 January
The AT is not right as to the violation of the principle of equality of the parties. The AT was always notified in due time to render a pronouncement on the documents and requests of the Claimant.
In the request under analysis, the Defendant says it will not pronounce on the substance of what the Claimant argues, for such is not shown to be necessary. It protests, however, against the form of the request to which it responds, on the grounds that it is "the contradiction of the contradiction" and that there is an "illegality by manifest violation of the principle of equality of the parties".
It is not right in this respect: the AT was notified of the Mr. P.'s request and responded in the manner it saw fit; it did not pronounce on the substance, for such was shown to be unnecessary, but it pronounced itself for the withdrawal for the reasons it states. It therefore had equal treatment and equal opportunity as Mr. P.
As for the question of joining to the case file the Mr. P.'s Request, as the AT itself recognizes in its substance, the request in question adds nothing to what is at stake in the case file, namely as to the question of joining the request and documents. Its permanence in the case file, as the AT itself recognizes, does not prejudice the knowledge of the merits in substance. Its withdrawal for mere reasons of form would introduce more formalities and diligences in a process intended to be simple.
Consequently, the Tribunal decides to maintain in the case file the Mr. P.'s request of 23 January 2015.
b) Regarding the requests of 13 and 21 January
Having the parties waived the hearing of article 18 of the RJAT, the Tribunal issued the order of 19 December, directed to the Claimant and notified to both parties.
The AT came to pronounce on this order, by request of 13 January, requesting its revocation.
The Claimant came, on 15 January, to present its responses to the questions posed and attached documents.
The parties being notified of the joining of the aforementioned requests, came to pronounce themselves:
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The AT in a request of 22 January, requesting the withdrawal of the documents and, subsidiarily, challenging for all legal purposes the documents attached.
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The Claimant, on 23 January, opposing the rejection of what was requested by AT.
Concluding:
Not having the hearing provided for in article 18 of the RJAT been held, the Tribunal considered it necessary to complement the instruction of the proceedings and requested from the Claimant, under the inquisitorial principle, the information and documents to which the order of 19 December refers (cf. art. 6 "duty of procedural management" and art. 7 "principle of procedural cooperation", both of the Civil Procedure Code).
In view of the arguments put forward by AT, and with the utmost respect for the learned jurisprudence cited, it is important to note that:
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In the report of the Legal Framework for Tax Arbitration (Dec. Law No. 10/2011 of 20 January) it is stated "... in order to confer on tax arbitration the necessary procedural expedience, a process without special formalities is adopted, in accordance with the principle of autonomy of the arbitrators in conducting the proceedings...";
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In section c) of the aforementioned article 18 of the RJAT, it is provided that it constitutes a principle of the arbitral process "The autonomy of the arbitral tribunal in conducting the proceedings and in determining the rules to be observed with a view to obtaining, within a reasonable time, a pronouncement on the merits of the claims formulated", and in its section e) it further states that the arbitral tribunal has powers to "Free assessment of the facts and determination of the procedures for producing evidence necessary, in accordance with the rules of experience and the free conviction of the arbitrators".
All of this is in keeping with the principles of officiality and inquisition that inspire the tax proceedings: article 13 of the CPPT - V. Lopes de Sousa, Cod. Proc. Tributário, vol. I, 2011, p. 173, annotation to this article.
On the scope of the inquisitorial principle, article 99 of the General Tax Law, Annotated and Commented, by Diogo Leite Campos et al., 2012, p. 859, pronounces itself, where it reads in note 2 that "the inquisitorial principle applies to all tax courts that have jurisdiction over the factual matter".
For the foregoing reasons, the two aforementioned requests are rejected, and the response and joining of the documents are admitted.
As for the Merits of the Case
III - Factual Framework
A. Facts Considered Proven
In light of the allegations and the documents introduced into the proceedings, the following is taken as proven:
i) The Claimant was a co-holder of shares (total nominal value of €18,300) representing the share capital (€49,850) of "B, S.A.";
ii) On 13 March 2009 a promise contract for sale and purchase of the said equity stake was executed with "C, S.A.", with it being agreed that the promised contract would be executed within the following 365 days;
iii) On 12 March 2010 the promised contract for sale and purchase of the equity stake was executed for the price of €2,160,000, to be paid over time and in different tranches, the last of which would fall due on 30 November 2010 (as provided in the second clause);
iv) The shares were delivered without any encumbrances or charges and without any limitation as to their free disposal (No. 2 of the first clause);
v) In accordance with Nos. 1 and 2 of the third clause, respectively, "with the execution of this contract the transfer of the shares is effected" and "in case of non-payment of the price of the shares, the sellers may not waive ownership and require the delivery of the titles";
vi) In the fourth clause the sellers declare that "from the date of execution of the promise contract until the execution of the definitive contract, the management of the company was limited to mere current management";
vii) The purchaser recorded the deposit paid with the execution of the promise contract (€108,000) in an account of "advance for account of financial investments", in accordance with its respective Simplified Business Information (IES) of 2009;
viii) From that IES it further appears that, from note 16 of the Annex to the Balance Sheet and Statement of Results (ABDR), the purchaser identifies another equity stake of 49% in the share capital of a group company. This equity stake is recorded in the ABDR at the value of €80,602.40;
ix) On 26 March 2010 the purchaser submitted the model 4 declaration, in which it identifies the acquisition of all shares representing the share capital of "B, S.A.";
x) From the purchaser's IES of 2010 it is ascertained, according to line A5106 of the Balance Sheet, the holding of financial equity stakes recorded by the equity method at the value of €2,800,505.57 (contrasting with the value of €80,602.40 recorded in the previous year);
xi) The purchaser failed in its obligation to timely payment of the price, which resulted in the interposition of a legal action by the sellers, which was concluded by transaction and stipulation of a new payment schedule. The purchaser paid only €65,000 provided for in the settlement agreement, failing in the rest;
xii) From the internal inspection procedure carried out by AT, notification resulted, on 21 March 2014, of the proposal to correct the taxable income of the Claimant, increasing it by the capital gain (€699,086.75) arising from the onerous transfer of "B" shares;
xiii) The right to prior hearing, notified to AT on 31 March 2014, was exercised by the Claimant's representative;
xiv) According to the subsequent final report that was notified to the Claimant, AT analyzed the grounds presented by the latter at the prior hearing, having decided to maintain the previous correction proposal;
xv) The statement of account adjustment No. 2014 ... in the amount of €155,639.60 was notified, as Personal Income Tax (IRS) and compensatory interest resulting from the said capital gain, together with the reversal of the IRS refund from the previous assessment (year 2010) and corresponding compensatory interest;
xvi) In the year 2010 the Claimant only disposed of the shares held in "B", having not undertaken any other onerous transfer operations of equity stakes.
B. Facts Not Proven
The Arbitral Tribunal considers that the following facts alleged were not, in light of the information and documentation introduced into the proceedings, proven:
i) The "B" shares were delivered to the purchaser at the time of execution of the promise contract, with the purchaser taking possession of them.
We are dealing with bearer securities, although the Claimant alleges that the same were physically delivered upon the signing of the promise contract, no objective data capable of supporting such an allegation was presented.
Moreover, the promise and promised contracts are silent on this physical transfer of the securities. In fact, the definitive contract states that non-payment of the price will result in the return of the securities (under threat that these will be cancelled and new securities issued), which suggests that the physical delivery of the shares would not have occurred previously.
It should also be noted that the promise contract does not regulate the consequences arising from failure to meet the deadline for execution of the definitive contract, which would be expected, if not even required, if the purchaser had been given possession of the securities and - as we shall analyze in the next point - entrusted with the practice of current or extraordinary management acts of the company, insofar as the non-realization of the promised contract would be capable of leaving an indelible legal uncertainty, both among the parties and for third parties dealing with "B".
Lastly, the settlement agreement executed between the parties on 1 February 2012 states, in its third clause, that as of the date of execution of the promise contract the "effective possession of the shares, with all the rights and duties inherent therein" occurred.
Although the declaration of the parties made through this private document, we understand that the same presents itself as an isolated fact incapable of negating the absence of any other facts demonstrative of real and effective possession, particularly due to the lack of externalization of the practice of management acts by the purchaser.
ii) With the execution of the promise contract, the purchaser became responsible for the current management of "B", acting, in economic and factual terms, as the holder of the rights and duties inherent to the exercise of the right of ownership.
Again, no documentary evidence was presented regarding the management of "B" in the period between the execution of the promise and promised contracts.
Not only did the parties not agree or regulate the terms of the transfer, in whole or in part, of company management in the scope of the promise contract, but the real and effective practice of management acts by the purchaser has not been demonstrated.
Additionally, neither was proof exhibited of the knowledge, by third parties knowledgeable of "B", of what was agreed by the parties and capable of proving the management of that company by the purchaser after the execution of the promise contract.
And, as we have seen, the sellers explicitly stated that "from the date of execution of the promise contract until the execution of the definitive contract, the management of the company was limited to mere current management", which demonstrates that current management remained in the sphere of the sellers.
iii) "B" is capable of being qualified as a micro or small enterprise within the meaning of Decree-Law No. 372/2007, of 6 November.
The Claimant made available the balance sheet for the year 2009, from which the value of €65,673.76 is derived, without updating that information for the year 2010. And it did not present the statement of results that would allow knowing the volume of business.
No support was likewise presented as to the number of employees of "B".
The condition of micro or small enterprise could be satisfied through certification by IAPMEI (which did not happen) or through the declaration provided for in No. 5 of article 3 of the Annex to the said legislation, although the Claimant stated it was in a position to issue such a declaration (reported to the facts occurring in 2010), it did not.
IV - Summary of the Legal Grounds Alleged by the Parties
A. The Claimant's Understanding
The purchaser took possession of the shares at the time of execution of the promise contract, on 13 March 2009, and was entrusted with the practice of various management acts.
This economic and material transfer of the equity stake constitutes the delivery of the right of ownership subsequently (and formally) acquired at the execution, already on 12 March 2010, of the promised contract.
Therefore, the fiscal capital gain would be taxable in the year 2009 and not in the year 2010, as provided in section a) of No. 3 of article 10 of the IRS Code.
For which reason the assessment of the corresponding tax could only be notified by 31 December 2013, in respect of the general four-year period fixed in the statute of limitations regulated in article 45 of the General Tax Law (LGT).
Even if the onerous transfer were considered to have occurred in 2010, the taxation of the capital gain would be barred by the ex nunc effect of the changes introduced by Law No. 15/2010, of 26 July.
This legislation revoked the rule that, since the enactment of the IRS Code, exempted from taxation fiscal capital gains arising from the onerous transfer of shares held by their holder for more than 12 months.
This revocation cannot apply to legal positions constituted at a moment prior to the entry into force of the new law, under penalty of violation of the principle of non-retroactivity of tax law. This principle is endowed with the constitutional protection provided for in No. 3 of article 103 of the Constitution.
Added to this are the rules of succession of law in time, contained in article 12 of the LGT and which, once again, consecrate the principle that the new law only applies for the future.
In the case of periodic taxes which, as occurs with IRS, are characterized by the successive formation of the taxable fact until its occurrence on the last day of the financial year, No. 2 of the cited norm of the LGT maintains the restriction on the applicability of the new law to facts occurring from its entry into force.
In the case under dispute, the taxable fact is embodied and exhausted at a single moment: the onerous transfer of the shares. Indeed, a capital gain has the nature of an extraordinary operation (income-increment), not falling within the figure of income arising from the repeated exercise of a given economic activity (income-product).
Although IRS presents itself as a tax of a periodic nature, the same results from the aggregation of income of a set of categories, which may result from the practice of economic activities in a continuous temporal manner or, as occurs with capital increments to which figure capital gains apply, an operation of single effect.
Each operation of onerous transfer of shares constitutes an autonomous taxable fact. When several operations of this nature are realized, the corresponding results, positive and negative, are aggregated at the end of the financial year. If a positive overall result is ascertained, the same will be subject to taxation through application of a special rate or, by option of the taxpayer, inclusion with other income and application of the respective marginal and progressive rate.
Constituting the taxable event generating the tax obligation the onerous transfer of the shares, we are not dealing with a taxable fact of successive and complex formation, but rather with taxable facts individually born at the moment of onerous transfer (principle of realization).
The said Law No. 15/2010 does not contain any transitional provision as to its applicability in time, being, consequently, applicable the general principle according to which the new law is not applicable to taxable facts of an instantaneous nature and already formed before its entry into force, under penalty of being in the presence of the figure of authentic retroactivity.
To this effect, see the ruling of the Supreme Administrative Court (STA) of 4 December 2013.
The Claimant did not dispense with empowering its legal representative with power of attorney, who signed the exercise of the right to prior hearing. However, the final report of the inspection procedure was notified to the Claimant, instead of its legal representative as prescribed in article 40 of the Code of Tax Procedure and Process (CPPT), with everything passing as if the final report had not been notified to the taxpayer. An omission of essential formalities of the tax procedure, given the guarantees relationship that the same encloses, and which determines the invalidity of the subsequent tax assessment act.
Lastly, and without dispense, "B" constitutes a micro or small enterprise within the meaning of Decree-Law No. 372/2010, of 6 November, which grants the taxpayer the possibility of reducing, to 50%, the annual positive balance of capital gains and losses determined in 2010.
In spite of the absence of certification by "B", it does not fall to the taxpayer to prove the facts constitutive of the said tax benefit, being sufficient to challenge the performance of AT always when this, as occurs, does not respect the principle of legality.
B. The Defendant's Understanding
As to the first ground invoked by the Claimant, the taxable fact did not occur in 2009, given that the delivery of the assets subject to the promise contract did not occur, as a concept economically equivalent to the onerous transfer.
It is worth clarifying that delivery configures, as an autonomous taxable fact, a presumption in favor of AT, with the purpose of preventing the parties from postponing the tax assessment, by means of delaying the execution of the underlying contract.
The Claimant does not present adequate proof to verify the presumption established in favor of AT, proving incapable of concretizing the elements capable of demonstrating, unequivocally and substantially, the exit of the assets from its patrimonial sphere.
The Claimant confines itself to a promise contract, from which neither the physical delivery of the shares nor the subsequent exercise, by the purchaser, of the rights and duties arising from the ownership of "B" is apparent.
Moreover, the settlement agreement confines itself to a legal action arising from the breach of the obligation to pay the price.
The IES of 2009 and 2010, together with the model 4 declaration submitted by the purchaser, converge to demonstrate that the economic and translative effects occurred, in 2010, with the execution of the promised contract.
As for the ground of violation of the principle of non-retroactivity of tax law, the absence of a transitional regime serves to demonstrate the legislative intent to encompass all onerous transfers occurring in 2010.
And it should not be forgotten the historical element, contained in the fact that Law No. 15/2010, of 26 July, revoked the exception regime in force since 1989, regarding the benefit of exclusion from taxation, under IRS, of gains arising from the onerous transfer of shares held for more than 12 months.
The legislation in question is not retroactive (for applying to future facts), but rather retrospective (for affecting mere expectations founded on past facts).
It is true that at the time the promised contract was executed, the fiscal regime in force consisted of the exemption from taxation of the underlying fiscal capital gain. However, IRS presents itself as a periodic tax, of complex and temporally successive formation, with it being peacefully recognized by jurisprudence and doctrine that the taxable fact is verified on 31 December.
The Constitutional Court, in its ruling No. 399/2010, considers that IRS is based on taxable facts of successive formation, which are completed on the last day of the year. Being a matter of the taxation of annual income, in which not each income is taxed per se, but rather the aggregation of all income earned in a given year.
The taxable event generating the tax obligation, which triggers the rule of incidence and subsequent subjection to IRS, occurs on 31 December and not on the date of onerous transfer of the shares. There is no collision with article 12 of the LGT, given that we are dealing with inauthentic or improper retroactivity - retrospectivity - which affects facts not entirely verified under the old law.
The applicability, without more, of No. 2 of the cited norm would lead to an impracticable pro rata temporis segregation of annual income, contradicting the proper nature of IRS as a periodic tax of successive formation over time, in addition to conditioning future legislative options (the right to variability of the tax system).
The periodicity of IRS implies the aggregation of all taxable events and income obtained up to 31 December of a given year. We are dealing with a "principle of annuality" embodied in a "temporal arc" and whose "unitary thinking" encompasses the totality of income, as appears from the dissenting opinion in arbitral decision 135/2013-T.
Already on the chapter of the failure to notify the final report to the Claimant's legal representative, it is not understood how such an omission can result in the omission of essential formalities and, as such, capable of affecting the legality of the tax act.
So much so that the Claimant, in article 72 of its request for arbitral pronouncement, acknowledges being faced with a mere irregularity, which in no way diminished the guarantees legally attributed to it, as confirmed by the timely submission of the request for arbitral pronouncement.
Finally, the capital gain in question cannot be considered at 50% of the corresponding value, because beyond not having any certification of the quality of micro or small enterprise, the Claimant did not present the evidentiary elements that would allow it to demonstrate the fulfillment of the material requirements on which the said certification would depend.
As it falls to the Claimant to allege and prove the factuality (micro or small enterprise) on which depends the constitution of the claimed right (reduction to 50% of the annual taxable balance of gains), the Claimant confined itself to silence, not presenting any document capable of proving the substantive requirements which, at the date to which the onerous transfer of the equity stake relates, would have allowed the application of the special regime for determining the fiscal capital gain.
V - Law
a) Statute of Limitations for the Right to Assessment
Based on the evidence underlying the disputed case, it is necessary to conclude that the "B" shares were transferred by the parties in 2010 and not in 2009, as the Claimant contends.
For the reasons set out above with respect to the appraisal of the factual matter, there is a temporal coincidence - in March 2010 - in the legal and economic transfers of the equity stake in "B". And insofar as the economic effects of the onerous transfer of the shares did not materialize in 2009 when the promise contract was signed, but rather in 2010 at the time of execution of the promised contract, there is no application of the regime contained in No. 3 of article 10 of the IRS Code.
Indeed, and as the Defendant rightly points out, this rule translates a principle of substance over form, making taxation fall on the reality and economic effects intended by the parties, whenever such precedes mere formalization of the operation, under penalty of offering the parties the possibility of postponing, in the limit sine die, the taxation inherent to an operation whose intended economic effects had long since been consolidated.
It would have been incumbent on the Claimant to present suitable evidentiary means to prove this economic substance, which it manifestly failed to achieve, as appears from the matter that the Tribunal considers as not proven.
Terms in which the tax act does not suffer from statute of limitations, given that it was notified to the Claimant within the four-year period established in article 45 of the LGT.
b) Non-retroactivity of Tax Law
Having resolved the statute of limitations issue, the crux of the disputed question can be encompassed in the following question: what is the applicable law to the onerous transfer of shares effected on 12 March 2010?
This implies the analysis of a set of prior and concurrent questions:
i) Does the taxable fact occur at the moment of onerous transfer of the shares or on 31 December?
ii) Is the taxable fact constituted by income according to the rules of each category or by aggregated income of all categories?
iii) Does the application of the new law constitute authentic retroactivity or mere retrospectivity?
iv) Does the taxable fact refer to the sale or to the determination of the annual balance of that category of income? This question remains in cases where a single operation is realized in a given year?
v) Does the rule of incidence confuse itself with the rule of quantification of the tax obligation?
vi) Does the LGT present itself, by legislative will, as the document condensing the structural principles or is it merely a piece of ordinary legislation?
vii) Does the General Tax Law impose the law ex nunc or can it be derogated by any subsequent law?
From the Claimant's perspective, the taxable fact is solely constituted by the alienation of the shares, being exhausted at that moment, consolidating in the sphere of the taxpayer the right to taxation by the law in force at the date of said alienation. The application of the legislation published 4 months after the date of occurrence of the facts would be tainted with illegality and unconstitutionality by violation, respectively, of article 12 of the LGT and 103 of the Constitution.
For the Defendant, the taxable fact cannot be dissociated from the nature of IRS as a periodic tax. By spanning periods of a year, IRS is composed of a set of complex facts - given the rules inherent to the various categories of income - and of successive formation in time, culminating on 31 December with the aggregation of all categories and assessment of the tax at their respective progressive marginal rates.
It is necessary to decide.
Article 10 of the IRS Code - in the wording in force at the date of the alienation - has the following content:
"1 - Capital gains consist of the gains obtained that, not being considered business and professional income, capital income or real property income, result from:
(…)
b) Onerous alienation of equity stakes, including their redemption and amortization with capital reduction, and of other securities (…)
2 - The following are excluded from the provisions of the preceding number capital gains arising from the alienation of:
a) Shares held by their holder for more than 12 months
(…)
12 - The exclusion established in No. 2 does not cover capital gains arising from shares of companies whose assets are constituted, directly or indirectly, in more than 50%, by real property or real rights over real property situated in Portuguese territory".
Law No. 15/2010, of 26 July, which entered into force on the day following publication, altered the wording of that rule in the following terms:
"2 - (Repealed)
12 - (Repealed)"
Concomitantly, article 72 was altered to:
"4 - The positive balance between the capital gains and losses, resulting from the operations provided for in sections b), e), f) and g) of No. 1 of article 10, is taxed at the rate of 20%"
Whence it is concluded that the said Law No. 15/2010 is silent as to any special rules for the application of law in time, notwithstanding the fact that such a question was addressed in the framework of the parliamentary debate that preceded its approval.
Article 12 of the LGT provides that:
"1 - Tax rules apply to facts subsequent to their entry into force, and no retroactive taxes can be created.
2 - If the taxable fact is of successive formation, the new law applies only to the period elapsed from its entry into force.
(our emphasis)
3 - The provisions of the preceding number do not cover rules which, although integrated in the process of determining the taxable base, are designed to develop the rules of tax incidence."
We begin our appraisal with the moment at which the taxable fact occurs. A chapter in which we immediately avail ourselves of ruling No. 85/2010 of the Constitutional Court, which dealt with the tax non-deductibility - under IRC - of 50% of the annual balance between capital gains and losses determined by onerous transfer of equity stakes.
Specifically, Law No. 32-B/2002, of 30 December, altered the existing tax rule, proceeding to restrict, to half, the tax deductibility of the annual negative balance arising from the onerous transfer of equity stakes by IRC taxpayers.
Terms in which the question arose as to what regime would apply to capital stakes acquired at a moment prior to the entry into force of the said law, but disposed of after that entry into force. All of this within the framework of a periodic tax, of complex and successive formation, whose taxable fact occurs on the last day of the financial year (as per No. 9 of article 8 of the IRC Code).
A factuality analogous to the disputed situation, for which reason the ruling of the Constitutional Court merits reading when it states that:
"With regard to the issue of the prohibition of retroactivity, it seems clear that the hypothesis of any retroactive application of the provisions of article 42, No. 3, of the CIRC, in the concrete case and in accordance with what is prohibited by No. 3 of article 103 of the Constitution - proper or authentic retroactivity, that is, application of new law to facts prior to the entry into force of the new law - cannot arise. In fact, on the one hand, the taxable event - the alienation - unquestionably occurs during the validity of the new law. On the other hand, it is not sustainable to affirm the existence of a complex legal-tax fact of successive formation. In fact, it is not enough that there is a prior acquisition and a later alienation for it to be affirmed that there is a single fact, although complex. If it were so, any acquisition that, in the future, near or distant, gave rise to an alienation would be a complex fact, notwithstanding that the first seller and the second buyer are different, notwithstanding that the content of the contract is diverse in the first and second alienation, notwithstanding that a more or less prolonged lapse of time occurs between such operations. The mere casual intermediation of a person (in the case, the first purchaser/second seller) cannot be a sufficiently capable element of producing the union of facts which are legally distinct, either from the point of view of the parties, or, above all, from the point of view of their substance.
(our emphasis)
The same question arises again in Ruling No. 137/2014 of the Constitutional Court, whose theme to be decided centered on the changes brought by the same Law No. 32-B/2002, of 30 December. This time, with regard to the tax non-deductibility of losses determined by companies managing equity stakes (SGPS) in the onerous alienation of capital stakes acquired before the entry into force of this Law (No. 2 and 3 of article 32 of the Statute of Tax Benefits).
It should be noted that in this ruling the issue is no longer the tax deductibility of the annual balance (negative) of the various capital gains and losses resulting from onerous transfers carried out by the IRC taxpayer throughout the financial year, but rather the tax non-deductibility of certain operations of alienation of capital stakes, i.e. the non-recognition, for purposes of calculating the annual balance, of the loss obtained in a given operation.
The Constitutional Court remained faithful to its previous understanding, citing ruling No. 85/2010 and deciding that:
"Also in the present case, it is to be concluded that the rule under review does not violate the constitutional prohibition of authentic retroactivity (article 103, No. 3, of the CRP): the taxable fact - the onerous transfer - unquestionably arises during the validity of the new law, and the existence of a complex legal-tax fact of successive formation cannot be affirmed, when the equity stakes are acquired at a moment prior to the entry into force of the law creating the non-deductibility of losses for the determination of taxable profit of SGPS companies. Nor is it relevant that the holding of capital stakes for a period not less than one year is consumed before the existence of the rule of non-deductibility of losses".
It should be noted that an identical understanding - as to the moment of production of the taxable fact - already appeared in the ruling of 20 May 2009 of the STA (process No. 0204/09). This judgment dealt with the restriction of the deductibility of losses obtained (in 2003) in the alienation of capital stakes acquired in a previous financial year. A case entirely coincident with the factual matter on which, in the following year, the Constitutional Court pronounced itself in its ruling No. 85/2010.
The STA tells us that "we are not dealing with a complex taxable fact. The taxable fact here relevant is indeed the sale. (…) Retroactivity would presuppose that there was a complex fact of successive formation, which has no support in the hypothesis of the case".
(our emphasis)
At first sight, it might be understood that the jurisprudence of the Constitutional Court has no bearing on the disputed case. After all, it would be merely a question of revealing the obvious: the absence of a causal nexus between the moments of acquisition and transfer of capital stakes, when what is at stake in the case is not the applicability of the law in force at the date of acquisition of the capital stakes, but rather the applicability of the old or new law in the very financial year in which the alienation occurs.
We believe, however, that the reasoning has its emphasis in fixing the moment at which the taxable event occurs: the onerous transfer of the capital stakes, and it is at this moment that the taxable fact occurs, which will govern whether or not there is subjection to tax, which in no way is confused with the rule for quantifying an income subject to tax, by way of adding gains and losses for purposes of determining a given positive or negative balance, since that balance can only be composed of taxable gains and deductible losses.
In other words, the assessment of tax on a given balance requires prior subjection to that tax of the operations previously realized (and that contribute to the formation of that balance), with some of these operations being excluded from the determination of the balance, as occurs with the exclusion from taxation of capital gains - and, it is well to remember, of losses - arising from the alienation of shares held for more than 12 months.
Now, absent a causal relationship between the acquisition and alienation of a capital stake - to the point that one and the other do not present themselves as an act of complex or successive formation in time - there will, a fortiori, be reason to extend this reasoning to the alienation of different capital stakes occurring during the validity of the old law.
Indeed, if each alienation does not present a causal relationship with the preceding acquisition, the several operations of alienation of different capital stakes do not entail, among themselves, any causal relationship.
It should be noted that the Constitutional Court maintains a uniform jurisprudence over time, encompassing both the deduction of losses in the annual negative balance, as well as the deduction of losses that are subtracted from the annual balance (positive or negative).
Jurisprudence that is posterior to ruling 399/2010, which dealt with the unconstitutionality of Laws No. 11/2010, of 15 June and No. 12-A/2010, of 30 June, which modified the IRS brackets and the corresponding marginal rates.
Here there is no doubt that the Constitutional Court characterized IRS as a periodic tax and of complex and successive formation in time, for which reason "the taxable fact that the new law intends to regulate in its entirety did not occur entirely under the old law, but continues to form during the validity of the new law, as occurs in the present case".
The Constitutional Court continues that "the legal relationship source of the tax obligation is based on stable situations that extend over time".
And "pursuant to article 22, No. 1, of the CIRS, the income subject to IRS is that which results from the aggregation of income of the various categories earned in each year, after the deductions and allowances have been made. That is, it is an annual tax, in which each income received is not taxed per se (although withholding at source may, at times, obscure this reality), but the aggregation of all income received in a given year. This means that only at the end of the year 2010 can the tax rate be determined, as well as the bracket in which the taxpayer falls".
(our emphasis)
Ruling No. 399/2010 focuses on the succession of law in time with respect to the definition of income brackets and their corresponding marginal and progressive rates, rejecting temporal division of the taxable fact and enshrining its birth at the end of the financial year.
Having come here, what should we conclude as to the birth of the taxable fact arising from a capital gain obtained with the onerous transfer of capital stakes?
First, IRS - despite its designation as a single tax - is incident on the annual value of income of the various taxable categories (ex vi of No. 1 of article 1).
Each of these income categories is governed by an autonomous rule, with respect to:
(i) The moment at which the income is considered obtained.
By way of example, it suffices to note the different moments at which income of categories A and B are considered obtained (respectively, payment and exigibility of VAT). Or still capital income, which may be considered earned, depending on the case, in payment, maturity or determination.
(ii) The rules and criteria for quantifying income.
Once again by way of example, let us note the specific deductions intended for taxation by net income whose scope varies depending on the different categories.
It is precisely this systematic division that the IRS Code embraces: first, the rule of incidence (subjection to tax) of a taxable fact is fixed, followed by the criteria for quantifying the taxable income of each category.
Finally, it should be noted the rules for aggregating the taxable income of the different categories.
Now, preventing their aggregation, by means of the non-communicability of losses of certain categories (contrasted with the possibility of carrying over those losses to future income of that category), or avoiding aggregated taxation of income, through the establishment of liberatory rates, special and autonomous, with or without option for aggregation.
Let us apply this structural organization of the IRS Code to gains or losses resulting from the onerous transfer of capital stakes.
Starting with incidence, and in accordance with section a) of No. 1 of article 9, gains of capital gains constitute capital increments subject to IRS (category G), provided they are not considered as income of other categories. Indeed, a capital gain constitutes the product of an irregular operation and not anticipated by the taxpayer at the moment of acquisition of the asset. In short, an occasional and unexpected gain (blown in by the wind, in Anglo-Saxon parlance).
In contrast to the repeated practice of buy and sell operations of assets, which is capable of being framed in category B, since the assets no longer constitute fixed assets, but rather inventory acquired for the purpose of subsequent resale.
Article 10 defines, in its No. 1, the concept of taxable capital gain, which is headed by section b): "Onerous alienation of equity stakes, including their redemption and amortization with capital reduction, and of other securities (…)".
Now, the moment at which the gain subject to tax is considered obtained is stated in No. 3 of article 10 as referring to the date "of the practice of the acts provided for in No. 1", with it being clear that the taxable event occurs at the moment the capital stakes are subject to onerous transfer.
Having clarified that the birth of the taxable event - the onerous transfer of the capital stakes - is consistent with the jurisprudence of the Constitutional Court, we can proceed to the rules for quantifying the corresponding income.
Also here the variability of the rules embodied in the IRS Code is noteworthy, because while it is true that the rules for quantifying the tax obligation differ depending on the different categories of income, it is no less true that it is within the scope of the gains that make up category G that such differences are magnified.
Thus, pursuant to article 43, gains and losses resulting from the various operations subject to tax are added for purposes of determining a positive or negative balance.
That balance is not, however, unique for capital gains determined by the taxpayer. Indeed, the onerous transfer of capital stakes is segregated from other income equally qualified as capital gains. From this division result two relevant consequences for capital gains that do not arise from onerous transfer of capital stakes: (i) the positive or negative value of the balance is considered in 50% and (ii) such income is subject to mandatory aggregation and consequent assessment of the tax at the marginal rates provided for different income brackets.
For gains and losses resulting from the onerous transfer of capital stakes a diametrically opposite end is reserved: (i) the positive or negative balance is recognized at its full value and (ii) such balance is taxed at a special rate, that is, it is subtracted from the aggregation rule.
And while it is true that the taxpayer is permitted the option for aggregation, it should be noted that non-aggregation constitutes the supplementary regime and - until the 2015 Tax Reform - the exercise of this option implied the aggregation of capital income. Moreover, the option was a necessary condition for the carrying forward (for the two following years) of the negative balance.
In light of the foregoing, we conclude that, although IRS presents itself as a periodic tax, it encloses different taxable events generating subjection to tax depending on the various income categories.
In the case of onerous transfer of capital stakes, the taxable event that determines the exigibility of the tax (and subsequent quantification of the taxable income) refers, precisely, to the date of that transfer act.
We will thus have, in a given financial year, as many taxable events as there are onerous transfers of capital stakes, which will be aggregated for purposes of determining a positive or negative balance, which, if positive, will be subject to a special rate, except if the taxpayer opts for aggregation.
We thus have that a tax of a periodic nature, such as IRS, is compatible with - and in fact is composed of - income of instantaneous formation and others of successive formation.
Indeed, some income is - by the nature of its taxable event - of successive formation in time. It suffices to note the income of categories A, B, F or H, in which the income and respective deductions succeed each other in time, with the tax being assessed on the basis of the brackets and marginal rates that result from the aggregation of these categories.
Conversely, capital gains arise from operations individually realized - instantaneous - in which each taxable event presents itself as autonomous and complete, i.e. without the requirement of any fact or subsequent occurrence, with it being that, as we have seen, the determination of the annual balance is relevant only in the context of assessment of the tax obligation.
And not having a preceding taxable event, there is no obligation capable of quantification.
This means that the alienation of the shares of "B", realized in March 2010, constitutes an autonomous and complete taxable event, which in no way requires any event subsequent to the entry into force of the new law, under penalty of a rule for quantifying a tax obligation and/or assessment of the tax by means of application of a special rate of 20% (by subtraction from mandatory aggregation), transforming itself into an authentic rule of incidence (taxable event).
And in the disputed situation it is necessary to highlight the fact that the Claimant realized only one gain, arising from only one onerous transfer of capital stakes, for which reason it would not be understood that that unique operation would be relevant to the determination of an annual balance, since both would reduce to the same reality and identical amount.
In fact, the existence of a single operation reinforces the instantaneous nature of the taxable event, insofar as it removes any meaning and relevance to the temporal domain of the new law, there not subsisting any fact, reality or moment which - after the validity of the new law - presents itself as necessary to complete the taxable event (onerous transfer of the capital stakes) occurred under the old law.
It is insisted that the quantification of the tax obligation, to be carried out at the end of the year and under the new law, cannot be extended to a taxable event - the onerous transfer - temporally verified in the period of validity of the old law.
We thus have that the application of the new law to a taxable event wholly under the old law does not lead back to the concept of third-degree retroactivity (retrospectivity, in accounting language). Moreover, when we are dealing with the practice of a single operation realized in March 2010. But we would always say that even if that were not the case - and several operations of alienation occurred under the old and new laws - each taxable event would be integrated into the law in force at the respective date of occurrence, identifying none of the obstacles that support a supposed impracticability in the quantification of taxable income, given the simplicity inherent to restricting the determination of the final balance to operations occurring under the new law.
It is an argument which, in addition to not being sustainable, could not be wielded with the purpose of overcoming the principle of non-retroactivity embraced within the constitutional framework, in the IRS Code and in the LGT.
It should also be noted that the statute of limitations rule provided for in No. 4 of article 45 of the LGT does not remove the consideration of each onerous transfer as constituting an instantaneous and autonomous taxable fact. The said rule postulates that, in periodic taxes, the statute of limitations is counted "from the end of the year in which the taxable fact occurred". This does not mean that the taxable fact occurs at the end of the year. Rather, it denotes that, absent this rule, the statute of limitations would be counted from the moment of occurrence of each taxable fact, which explains the need for insertion of this exceptional rule, to the effect of forcing the counting of the statute of limitations - in periodic taxes - from the last day of the year in which the respective taxable fact occurred.
In short, this statute of limitations rule merely reinforces the compatibility of a periodic tax with the combination of both successive and instantaneous taxable facts, in which the former are completed on the last day of each financial year, while the latter occur on the date of realization of the underlying economic operation.
So much so that the counting of the statute of limitations period of Value Added Tax and withholding at source (as liberatory) begins on the first day of the following calendar year (as per the cited No. 4 of article 45 of the LGT). This is an exception that does not prejudice the consideration of these taxes as taxes of a single obligation.
Having come here, it is worth noting that this understanding is once again aligned with the jurisprudence, this time of the Supreme Administrative Court (STA), which in its rulings of 4 December 2013 (process No. 1582/13) and of 8 January 2014 (process No. 1078/12), decided on the non-applicability of the new law to instantaneous and prior taxable facts to its entry into force, as occurs with the alienation of capital stakes.
It is worth noting that these decisions result from appeals filed by AT, a fact which allows us to ascertain the jurisprudential alignment of the superior and first instance courts. In addition, there is unanimity in the STA decisions.
In the ruling of 4 December 2013 we can read that "the same principle of legality cannot but prevent tax law from providing for the past, with retroactive effects, providing for the taxation of acts practiced when it still did not exist, under penalty of allowing the State to impose certain consequences on a reality that subsequently occurred, without its actors having been able to adapt their actions in accordance with the new rules".
This question is, by no means, of little importance, given the fact that the Claimant alienated the capital stakes in March 2010, a date on which any intention to alter the legislative regime governing the taxation of capital gains or losses was manifestly unknown. For which reason the concern with "washing" the capital gain, sometimes invoked as grounds justifying retroactive (or retrospective) application, lacks sense. Indeed, this alienation had been promised in 2009, with the obligation to execute the promised contract by March 2010 (as in fact occurred). All of this during the validity of the old law.
The said judgment continues that "in the context of IRS, art. 10, No. 1, section b) of the Code places in the field of incidence of taxation capital gains of equity stakes and securities, with this incidence presupposing the realization of the capital gain, that is, its onerous alienation. And it is this onerous alienation the taxable event".
"With regard to the moment at which the tax is due […] the rule of No. 3 of article 10 applies, which establishes, as a general rule, that gains are considered obtained at the moment of the practice of the acts provided for in No. 1". That is, the taxable event refers to the moment of the act that "realizes" the capital gain. It will be said, in general terms, that the relevant moment is thus that of the alienation of the asset in which taxable capital gains were determined, or an operation equivalent to it".
The STA further emphasizes that "now, it is clear that in the case of capital gains of equity stakes, with the taxable event being their onerous alienation, we are not dealing with a complex taxable fact, of successive formation throughout a year, but with an instantaneous taxable fact".
"The taxable fact giving rise to the tax is exhausted in the realization of the capital gain (Note that tax on capital gains was already held to be of a single obligation - cf. Ac. of the STA of 18.1.1995, P. 18287)".
As we emphasized above, the rule for quantifying the taxable income does not confuse itself with the rule of incidence, i.e. with the rule of subjection to tax, which precedes the quantification of the tax obligation and without which the latter cannot operate (due to lack of taxable income and, therefore, capable of quantification).
Here too we align with the STA, for which "to this understanding does not oppose the circumstance of being taxed 'the balance determined between the capital gains and losses realized in the same year', since what is at stake in art. 43, No. 1 of the CIRS is, alongside the rules governing the determination of the gain subject to tax, the determination of the taxable base with respect to income resulting from capital gains".
The STA then lists the comparability between the determination of the annual balance of the various operations realized in the financial year and the assessment of autonomous taxes, noting that it is "in our view, a situation similar to autonomous taxes under IRC, where it was concluded that 'the fact that the assessment of the tax is effected at the end of a certain period does not make it a periodic tax, of successive formation or of a lasting character. That operation of assessment amounts only to the aggregation, for purposes of collection, of the set of operations subject to that taxation [...]" [cf. Ac. of the Constitutional Court No. 310/2012].
Concluding the STA that "also in capital gains resulting from the alienation of equity stakes the tax is incident on operations that are produced and exhausted in an instantaneous manner, with the taxable event arising isolated in time. Simply there is an annual consolidation of capital gains and losses for purposes of determining the taxable base, on which will be applied the special rate or which will be aggregated with income of other categories".
It is true that the determination of the annual balance is based on the sum of capital gains and deduction of losses determined in the financial year. The positive balance will be taxed at a special rate or through aggregation, while the negative balance may or may not be carried forward for the two following financial years.
Conversely, autonomous taxation consists of the addition of expenses that share a given nature, to whose total value tax is assessed at a determined rate.
These are, however, differences in the arithmetic for determining the taxable base, which in no way contends with the fact that - in both cases - we are dealing with rules for quantifying the tax obligation, as a consequence of the subjection to tax of a given operation (rule of incidence) arising from the qualification of that operation as a taxable fact (taxable event).
The alignment with the sense of the STA's decision is even more forceful when it emphasizes that "the similarity with autonomous tax situations is even greater when, as here, the taxpayer does not opt for aggregation".
And applying a special rate to the annual balance, the applicability of ruling No. 399/2010 of the Constitutional Court is definitively ruled out, insofar as there is no income bracket or marginal and progressive rate, whose applicability depends on the successive formation of a given income stream.
Moreover, it should not be forgotten that, in the disputed case, the Claimant realized a single operation in 2010, with the need to determine any annual balance during the validity of the new law falling away. Not only does such a calculation not occur, but, above all, it is an operation for quantifying a taxable base arising from a taxable fact that occurred during the validity of the old law.
Finally, the arbitral decision of the CAAD in Process No. 135/2013-T provides an additional contribution, namely, by pointing out that "(…) it is certain that there is express law that gives us the solution of the case sub judice, art. 12, No. 2, of the LGT: if the taxable fact is of successive formation, the new law applies only to the period elapsed from the entry into force. (…) That is, art. 12, No. 2, of the LGT provides that, in periodic taxes (i.e., with respect to taxable facts of successive formation), the taxation period be severed, applying the old law to the taxable events occurring before the legislative change and the new law to the subsequent ones".
We also transcribe that "The legal rules that govern taxation must ensure that whoever practices an act potentially generating a tax obligation can 'be certain' of the fiscal consequences resulting therefrom. The first condition for such is, obviously, that the law governing such obligations be known, be the one in force at that moment (...) The thesis that the taxable event of the tax, in periodic taxes, only occurs on the last day of the year, has as implicit consequence the acceptance of a certain degree of retroactivity of tax law (the so-called improper or 3rd degree retroactivity) (...) We know that such 'degree' of retroactivity is considered constitutionally permissible by our jurisprudence. But for such retroactive application to exist, it is necessary that there be a 'dictum' legislating to require such (...) Now, this does not happen in the present case, because the general rule contained in No. 2 of art. 12 of the LGT is designed, precisely, to prevent situations of retroactivity of tax law (albeit 'moderated'), whenever the legislator does not determine, specially, otherwise (...) Art. 12, No. 2 of the LGT is, thus, a rule fully in accordance with the constitutional principles that govern taxation, it is even, the one which, on this specific issue, will best translate such principles, by preventing the occurrence of situations of retroactive application of tax law".
And this arbitral judgment continues, in line with the jurisprudence of the STA:
"(...) Although the taxable base (capital gains on securities) to be taxed in IRS corresponds to the balance of gains and losses realized by the taxpayer throughout the year, the fact is that, in the concrete case, there was only one single alienation in 2010: namely the taxable fact, in abstracto of successive formation, was 'exhausted' in a single transaction (...) Since capital gains obtained with the alienation of equity stakes are subject to autonomous taxation (at a proportional rate, not taking into account the elements of personalization that, by principle, should be present in the taxation of all income, should IRS be a true single tax - we are dealing with one of the translations of the dual character of this tax), no difficulties arise with respect to the other operations that the assessment (understood the term in a broad sense) of the tax implies, when carried out with observance of the provisions of No. 2 of art. 12 of the LGT(...) Making it impracticable the application of the provision (art. 12, No. 2, of the LGT) in cases like the present would mean, 'ignoring' its existence, which is forbidden to any Court (...) In summary, it is understood that nothing prevents the application of the provisions of No. 2 of art. 12 of the LGT, of the general rule contained therein, which - it is repeated - the legislator understood not to remove in Law No. 15/2010 (...)".
We now encounter a new ground arguing for the non-applicability of the new law to the taxable fact that precedes it.
Indeed, even if we were to support the thesis of the complex legal-tax fact and of successive nature, we could not fail to take into account the provisions of No. 2 of article 12 of the LGT, under which "if the taxable fact is of successive formation, the new law applies only to the period elapsed from its entry into force".
There is doctrine that highlights the fact that the LGT does not have the nature of a reinforced law, so we would be dealing with ordinary law, governed by the principles of succession of law in time (the new law derogates the old law) and of hierarchy (the special law derogates the general law).
However, as results from the preamble of the LGT, "the tax reform of direct taxation of 1989 was not preceded by the establishment of a general tax law that would clarify the fundamental principles of the tax system, the guarantees of taxpayers and the powers of the tax administration".
It was intended "the concentration, clarification and synthesis in a single diploma of the fundamental rules of tax law (…)", so as to allow "(…) the standardization of the criteria for application of tax law, on which (…) the stability and coherence of the tax system depends".
For which reason "the present law does not limit itself to the systematization and improvement of existing rules (…)".
And "in title I, the present law, in accordance with these objectives, proceeds to define the fundamental principles of the tax order, embracing the norms of the fiscal Constitution and clarifying the rules for application of tax laws in time and space".
It is, precisely, in Chapter I that the rule of succession of law in time embodied in the cited article 12 is situated.
The LGT was, naturally, approved in the exercise of an authorization law, whose purpose centered on the publication of "(…) a general tax law from which the great substantive principles governing tax law emanate (…)".
Above all "the general tax law will aim to deepen the constitutional tax norms and those with relevance in tax law (…)".
Given the foregoing, it is clear that the LGT was given a status of superordination over the rest of ordinary legislation, whenever the latter provides to the contrary.
In both the formal and material planes, the LGT configures the implementation of the constitutional imperative, with it not being permitted for any subsequent ordinary legislation to derogate it.
It should be noted that this does not elevate the LGT to a pedestal of inalterability. However, it will be required that the legislation through which such subsequent amendments are made be of a nature and content similar. That is, that such legislation aim at the establishment of the fundamental legal-tax relationship.
In other words, that the meaning and scope of the modifying rule be on a plane equivalent to that of the LGT.
Thus, it is clear the non-applicability of the principles by which the new law prevails over the old law and the special law derogates the general law.
Concretely, Law No. 15/2010, of 26 July, does not derogate No. 2 of article 12 of the LGT.
As to the argument that the legislator intended, in this case, that the new law apply to all onerous transfers of capital stakes realized in any temporal line of 2010, it must be countered that the legislator did not conform such intention in the legislative text, neither expressly, nor even tacitly.
Moreover, the same legislator structured, through the LGT, the fundamental framework of obedience and conformance of legal-tax relationships, being unnecessary to discuss whether the LGT has or not the status of a reinforced value law, since in the material and substantive planes, there is no doubt that the LGT possesses such a nature, insofar as, it is insisted, it was its role to positivize the principles of the fiscal Constitution.
And since the taxable fact presents itself as instantaneous, being completed under the old law, the new law would have to except No. 2 of article 12 of the LGT,
since in that case, there would be no doubt that the legislator intended, through a later and special law, to dispense the new law from compliance with the principle of non-retroactivity of tax law.
VI - Decision
Applying the above considerations to the case sub judice, the illegality of the assessment resulting from the retroactive application of the tax regime approved by the said Law No. 15/2010, of 26 July, is immediately evident.
The onerous transfer of the capital stakes occurred in March 2010. This operation of alienation constitutes, pursuant to No. 3 of article 10 of the IRS Code, the moment at which the taxable fact occurs, which presents itself as single and instantaneous, not having the nature of a complex act and/or of successive formation.
For which reason, at the date of the realization of the fiscal capital gain, which constitutes the taxable event generating the taxation, the regime of exclusion from taxation embodied in No. 2 of article 10 of the IRS Code was in force.
This rule is combined with Nos. 1 and 2 of article 12 of the LGT, which prevents the application of the new law to taxable facts entirely verified during the validity of the old law.
Thus, and contrary to what the Defendant understands, Law No. 15/2010 was permitted only the taxation of operations carried out after its entry into force.
The direction of this decision follows the jurisprudence of the Constitutional Court and the STA with regard to the moment of occurrence of the taxable fact, and of the STA with respect to the same thema decidendum.
An alignment that contributes to the uniform interpretation and application of law, reinforcing the corresponding unity of meaning, as postulated in No. 3 of article 8 of the Civil Code.
Nor would it be comprehensible that an arbitral tribunal, as an alternative means of jurisdictional resolution of conflicts in tax matters and that decides de iure constituto, could depart from the jurisprudence of the superior judicial courts.
The analysis of the other grounds and claims adduced by the Claimant is prejudiced.
Terms in which the Arbitral Tribunal decides:
a) To judge the request for arbitral pronouncement as well founded; and
b) To annul the tax assessment act for IRS and corresponding compensatory interest.
Amount: €115,639.60 (one hundred and fifteen thousand, six hundred and thirty-nine euros and sixty cents)
Costs by the Defendant in the amount of €3,060.00 (three thousand and sixty euros)
Let the parties be notified.
Lisbon, 27 February 2015
The Collective Arbitral Tribunal
Manuel Luís Macaísta Malheiros (President)
José Rodrigo de Castro (Reporting Arbitrator)
José Luís Ferreira (Reporting Arbitrator)
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