IRS Tax Benefits and EU Law: Arbitral Tribunal Annuls Discriminatory Assessment on Belgian Pension Fund

ARBITRAL DECISION

The arbitrators Fernanda Maçãs (presiding arbitrator), João Sérgio Ribeiro and Rui Ferreira Rodrigues, appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 14/4/2015, hereby agree to the following:

I. REPORT

1. A…, Tax Identification Number …, and B…, Tax Identification Number …, submitted, on 30/1/2015, a request for constitution of a collective arbitral tribunal, in accordance with the combined provisions of articles 2, subsection 1, paragraph a), and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Defendant.

2. The claim that is the object of the request for arbitral pronouncement consists of the assessment of the legality of the additional Personal Income Tax (IRS) assessment No. 2014…, resulting from the demonstration of account adjustment No. 2014…, relating to Personal Income Tax (IRS) for the year 2010, in the amount of EUR 312,415.30 and compensatory interest of EUR 35,024.16, which corresponds to the total amount of EUR 347,439.46.

2.1. The Claimants request, following the success of the claim:

A) As the primary claim: i) The annulment of the aforementioned assessment; ii) The extinction of the tax enforcement proceedings; iii) The recognition of the Claimants' right to payment of compensation for improper provision of guarantee, in accordance with the provisions of article 53 of the Tax General Law (LGT); and, iv) The condemnation of the Tax and Customs Authority to pay the costs of arbitration.

B) As the alternative claim: The referral for a preliminary ruling to the CJEU, regarding the issue relating to the incompatibility of article 21 of the Fiscal Benefits Statute (EBF) with Community Law, under the provisions of article 267 of the Treaty.

1. On 2/2/2015, the request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority.

3.1. The Claimants did not proceed with the appointment of an arbitrator, and therefore, pursuant to the provisions of paragraph a) of subsection 2 of article 6 and paragraph b) of subsection 1 of article 11 of the RJAT, the President of the Deontological Council appointed the signatories as arbitrators of the collective arbitral tribunal, who communicated their acceptance of the appointment within the prescribed time limit.

3.2. On 25/3/2015, the parties were notified of the appointment of the arbitrators and raised no objections.

3.3. In accordance with the provisions of paragraph c) of subsection 11 of the RJAT, the collective arbitral tribunal was constituted on 14/4/2015.

3.4. In these terms, the Arbitral Tribunal is regularly constituted to assess and decide the subject matter of the proceedings.

1. To support the request for arbitral pronouncement, the Claimants allege, in summary, the following:

a) The additional IRS assessment, by subjecting the income earned by the First Claimant in Belgium, in 2010, arising from the redemption of a pension savings fund, to the progressive rates provided for in article 68 of the IRS Code, with the maximum rate applicable in 2010 reaching 45.88%, and in accordance with the regime enshrined in articles 11, subsection 1, paragraph b), 15, 53 and 54 of the IRS Code, is illegal as it is contrary to the principles of non-discrimination and the freedom of movement of capital and provision of services;

b) The non-conformity with the aforementioned rules results from Portuguese legislation, in the Tax Authority's view, treating differently income resulting from supplementary pension plans depending on whether or not they are managed by an entity resident in Portugal;

c) To income paid by pension savings funds constituted and operating in accordance with national legislation, the regime provided for in article 21 of the EBF applies, and in accordance with the provisions of subsection 3 of that rule, the amounts paid, not through regular instalments, but rather through redemption (total or partial), there is a partial exclusion from IRS taxation, since: i) The taxable income is constituted by two-fifths of the income; ii) The taxation is autonomous, being applied at the rate of 20%;

In the case of income paid by pension savings funds constituted under the legislation of another Member State (in the case of Belgium), the legal provision mentioned above does not apply, and the income is subject to the general regime provided for in the IRS Code;

d) "(…)" "an individual taxpayer resident in Portugal, when receiving income from pensions arising from payments made under supplementary pension schemes is subject to differentiated taxation regimes depending on whether the pension savings plan is constituted in accordance with Portuguese legislation or not."

e) "In fact, national legislation provides for a regime of partial exclusion from taxation and a special rate of 20% applicable to income arising from pension savings plans constituted in Portugal, while at the same time taxing, without any exclusion of taxable income (except for the part of contributions attributable to the worker) and at the general progressive IRS rates, the same income when arising from savings plans constituted in another European Union country."

1. The Tax and Customs Authority submitted a reply and attached the administrative record, invoking, in summary, the following:

a) "Under the exchange of information provided for in article 26 of the Convention between Portugal and Belgium to Avoid Double Taxation and Regulate Some Other Matters in the Field of Income Taxes, signed in Brussels on 16 July 1969, hereinafter briefly referred to as the DTT, the Belgian authorities communicated to the International Relations Services Department of the Tax Authority pension income earned by the Claimant in 2010, as provided in the extract from the letter … from that Services Department;

b) "Pension income is classifiable under article 18 of the Convention to Avoid Double Taxation (DTT) concluded between Portugal and Belgium, and Portugal has exclusive competence";

c) "In light of national legislation, the tax classification of pensions (category H income), is set out in articles 11, 53 and 54 of the IRS Code";

d) "The taxpayer has the right to request reimbursement of the tax withheld at source by the Belgian tax authorities";

e) "As regards the alleged discriminatory treatment, as if the Pension Fund were resident in Portuguese territory it would only be subject to taxation of 2/5 of the income at the rate of 20%, there is no basis whatsoever for the Claimants' position";

f) "(…)" "in the present case, the regime of taxation applicable to income from pension funds resident in Portugal is different from that applicable to income from non-resident pension funds, however, it is not sufficient that, in the abstract, the taxation regime is different as regards the place of residence or the place where capital is invested (as is the case), it is necessary that this constitutes, in fact and concretely, a true obstacle to the free movement of capital";

g) "(…)" "there exists a bilateral convention to avoid double taxation concluded between the Portuguese State and the Belgian State, under the terms of which it is exclusively the responsibility of the State of residence, in this case Portugal, to tax the disputed income, and as such, and as appears in the case file, the claimant has the right to full reimbursement of the tax borne in Belgium";

h) Also for this reason, there is a neutralization of the differentiated treatment granted to income from pension funds of residents and non-residents in Portugal;

i) "(…)" "in the present case, the discriminatory treatment alleged by the Claimants is based on a mere presumption and does not go beyond the field of abstraction";

j) "(…)" "there will be no violation of the freedom of movement of capital, if, in the concrete case, the national measure pursues legitimate objectives (overriding reasons of general interest or "rule of reason") compatible with the treaty, such as the need to ensure the coherence of the tax regime or to avoid a diminution of tax revenues";

l) "In the present case, the taxation in question pursues a legitimate objective, of paramount general interest;

m) "In fact, the establishment of a taxation regime applicable to income arising from savings plans, constituted in the context of supplementary pension schemes, which subjects them to a partial exclusion from taxation and a special rate of 20% is intended to encourage individuals to invest in pension savings plans;

n) "In these terms, also for this second reason, the regime in question cannot, strictly speaking, be configured as discriminatory treatment, nor, consequently, a sufficiently characterized violation of articles 18, 56 and 63 TFEU, to the extent that discrimination is only prohibited when it is arbitrary and constitutes an obstacle to the free movement of capital (see article 65, subsection 3 of TFEU);

o) "Even if the tax regime in question constitutes differentiated treatment, depending on whether the fund's residence is located in Portugal or not, the establishment of such a tax regime is not arbitrary but rather motivated by legitimate objectives, overriding reasons of general interest, such as the public interest of the Portuguese State in guaranteeing the sustainability of the Social Security regime, through encouraging investment in supplementary private pension funds that strengthen the coherence of the national public pension system;

p) "From the entire tax regime applicable to Pension Savings Plans (PPRs) in Portugal, not only with regard to the taxable income subject to IRS and the applicable rates, but also to the tax benefits regime itself, unequivocally results the option of the State (for several legislative terms) to encourage savings in supplementary pension plans";

q) "(…) the legislation in question is justified by reasons that are based on the need to preserve the sustainability of the social security system and the strengthening of savings mechanisms, with a view to the balance of public finances."

5.1. In addition to these allegations relating to the merits of the case, the Defendant, in its reply, raised a preliminary defense, invoking:

a) The absolute incompetence of the Arbitral Tribunal to order the extinction of the tax enforcement proceedings, as this is a matter not covered, in particular by articles 2, 4, subsection 1, of the RJAT and article 2 of Ordinance No. 112-A/2011, of 22 March, nor is the Tax Authority bound by arbitral jurisdiction regarding the matter related to the tax enforcement proceedings;

b) The absolute material incompetence of the Arbitral Tribunal to recognize the Claimants' right to payment of compensation for improper provision of guarantee, insofar as "the competence of the Arbitral Tribunal is confined to the control of the legality of assessment acts, the aforementioned competence for the recognition of rights not being provided for by law".

Even if this were not so understood, according to the Defendant, the prerequisites provided for in article 53 of the Tax General Law regarding the right to compensation for improper provision of guarantee are lacking in the present case, in particular, because there is no situation that the law configures as "error attributable to the services".

"The law did not provide for objective liability, but rather liability linked to the fault of the services," attributable to the services, "in the form of intentional or negligent conduct," which "must be alleged and proved, and does not result automatically from any illegality".

"In the present case, there is no error attributable to the services in the issuance of the disputed assessment, as there is no illegality due to violation of Community Law. On the other hand, even if this were not so understood, the Defendant is bound to comply with national legislation in strict adherence to the principle of legality, and it is not possible for it to refuse the application of national law when faced with the rules in question and the interpretative judgments of the CJEU".

5.2. The Claimants, notified to respond in writing to the exception raised, came to argue, in summary, the lack of merit thereof, because the claim for extinction of the enforcement proceedings or the claim for payment of compensation for improper provision of guarantee constitute subsequent claims to the principal claim for annulment of the tax assessment. Thus, they are, as such, subsumable within the same controversial material legal relationship, invoking in this sense the Arbitral Award No. 28/2013-T, of 16 October 2013.

1. The Claimants withdrew their submission to provide statements as requested in the Initial Request, and given that there was no disputed matter on the one hand, and that the written contradiction had already been exercised regarding exceptions on the other, the holding of the first meeting of the Arbitral Tribunal was dispensed with, in accordance with and for the purposes of the provisions of article 18 of the RJAT, as none of the purposes legally assigned to it were present, and 12 October was set as the date for pronouncing the arbitral decision.

2. The Claimants and the Defendant submitted successive written arguments, maintaining, in essence, the arguments set out in the initial pleadings.

The Tax and Customs Administration further alleged, regarding the matter of fact, that the Claimants: "Come (…) to consider that certain and determined facts have been demonstrated without having presented the documentary evidence required for this, much of which is not even translated into Portuguese" (Point 16 of the arguments).

It should be noted, however, that not only does the Defendant fail to identify the facts to which it refers, but also, at the appropriate time, it did not challenge the documents in question, and further, the translation of documents in a foreign language is not a condition for these to be considered by the tribunal, as results from article 134, subsection 1, of the Code of Civil Procedure. That translation represents a mere possibility, to be verified if it is understood in the case that the documents in question require translation, or that it is necessary. Nor did the tribunal understand that such translation was necessary, nor did the Defendant request it, though it could have done so.

II. CASE MANAGEMENT

8.1. In its reply, the Defendant raised the dilatory exceptions of:

• absolute material incompetence of the Tribunal to order the extinction of the tax enforcement proceedings and

• absolute material incompetence of the Tribunal to recognize the Claimants' right to payment of compensation for improper provision of guarantee,

which it is now necessary to assess and decide.

8.1.a) Exception of absolute material incompetence of the Tribunal to order the extinction of the tax enforcement proceedings

The Claimants request that the Tribunal order the extinction of the tax enforcement proceedings instituted for collection of the tax which is the subject of the request for arbitral pronouncement.

Opposing this, the Defendant alleges that, given the provisions of paragraph a) of subsection 1 of article 2 of the RJAT, which restricts the competence of arbitral tribunals to "the assessment of the declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account," in conjunction with the provisions of article 4 of the RJAT and Ordinance No. 112-A/2011, of 22/3, which regulates the type and maximum value of disputes to which the Tax Administration is bound by the jurisdiction of arbitral tribunals, the assessment of the matter relating to the tax enforcement proceedings is not covered within the scope of the material competence of the Arbitral Tribunal.

The Defendant's position is found to be correct.

Notwithstanding the effects that any decision of the Tribunal regarding the illegality of the assessment may have on the tax enforcement proceedings, reading the aforementioned rules shows that the matter related to the tax enforcement proceedings is excluded from the Tribunal's competence.

In fact, one thing is the repercussions on the tax enforcement proceedings resulting from possible success of the Claimants' claim and consequent annulment of the assessment, quite another is the competence of the Arbitral Tribunal to order the extinction of the tax enforcement proceedings instituted, as the Claimants request.

Accordingly, the invoked exception of material incompetence of the Arbitral Tribunal is deemed to be well-founded.

8.1.b) Exception of absolute material incompetence of the Tribunal to recognize the Claimants' right to payment of compensation for improper provision of guarantee.

From the Defendant's perspective, in accordance with the provisions mentioned above, there is also no legal provision for the competence of the Arbitral Tribunal to recognize rights, in particular the right to payment of compensation for improper provision of guarantee.

Let us examine this.

Although there is no express rule in this sense, it is established case law, following the case law of the Supreme Administrative Court, that, notwithstanding the fact that the process of judicial challenge is essentially a process of mere annulment, as indeed happens within the scope of the Tax Code of Civil Procedure (articles 99 and 124), a condemnation of the Tax and Customs Authority to payment of compensatory interest and compensation for improper guarantee can be pronounced therein [in this sense, see, among others, the Arbitral Awards pronounced in cases No.: 18/2011-T and 28/2013-T (the latter still not final) and 39/2013].

In accordance with the provisions of paragraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim which is not subject to appeal or challenge binds the Tax Administration from the end of the period provided for appeal or challenge, and this must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for spontaneous compliance with decisions of tax court judgments, "restore the situation that would have existed if the tax act which is the subject of the arbitral decision had not been taken, by adopting the necessary acts and operations for that purpose".

For its part, in the legislative authorization on which the Government based itself for approving the RJAT, granted by article 124 of Law No. 3-B/2010, of 28 April, it is established as the primary directive of the institution of arbitration as an alternative form of resolution of conflicts in tax matters, that the "arbitral proceedings must constitute an alternative procedural means to judicial challenge proceedings and to an action for recognition of a right or legitimate interest in tax matters".

Faced with the foregoing, as was held in Arbitral Award No. 28/2013-T, of 16 October 2013, "[a]lthough article 2, subsection 1, paragraphs a) and b), of the RJAT uses the expression «declaration of illegality» to define the competence of arbitral tribunals operating at CAAD and does not refer to constitutive (annulling) and condemnatory decisions, it should be understood, in line with the aforementioned legislative authorization, that included in its competencies are the powers that in judicial challenge proceedings are attributed to tax tribunals in relation to acts whose assessment of legality falls within their competencies".

In the same way, although there is also no express rule in the Tax Code of Civil Procedure providing for the right to compensation for improper guarantee, the fact is that, as is emphasized in the Award we have been following, "it has been consistently understood in tax tribunals, since the entry into force of the codes of the 1958-1965 tax reform, that in judicial challenge proceedings a claim for condemnation to payment of compensatory interest can be combined with a claim for annulment or declaration of nullity or non-existence of the act, because these codes referred to the fact that the right to compensatory interest arises when, in a gracious complaint or judicial proceedings, the administration is convinced that there was a factual error attributable to the services. This regime was subsequently generalized in the Tax Code of Civil Procedure, which established in subsection 1 of its article 24 that «there shall be a right to compensatory interest in favor of the taxpayer when, in a gracious complaint or judicial proceedings, it is determined that there was an error attributable to the services from which payment of the tax debt resulted in an amount greater than that legally due». Subsequently, the Tax General Law also came to establish, in its article 43, subsection 1, that «compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services from which payment of the tax debt resulted in an amount greater than that legally due»".

In support of the solution advocated also goes article 171 of the Tax Code of Civil Procedure, which, regarding the claim for condemnation to payment of compensation for improper provision of guarantee, provides that «compensation in case of an improperly provided bank guarantee or equivalent shall be requested in the proceedings in which the legality of the executable debt is disputed».

It appears thus that not only does the judicial challenge process encompass the possibility of condemnation to payment of improper guarantee but also, in principle, is the appropriate procedural means to formulate such a claim, "which is justified by obvious reasons of procedural economy, as the right to compensation for improper guarantee depends on what is decided regarding the legality or illegality of the assessment act". "The request for constitution of the arbitral tribunal has as a corollary that it is in the arbitral proceedings that the «legality of the executable debt» will be discussed, and therefore, as results from the express tenor of that subsection 1 of the aforementioned article 171 of the Tax Code of Civil Procedure, the arbitral proceedings are also the appropriate means to assess the claim for compensation for improper guarantee." (see the cited Arbitral Award No. 28/2013-T).

Accordingly, the invoked exception of material incompetence of the Arbitral Tribunal is deemed to be without merit.

8.1.c) In accordance with the foregoing, it is declared that the tribunal, regularly constituted and materially competent to hear the present action, in declaratory proceedings.

8.2. The parties have legal personality and capacity, are shown to be legitimate and are regularly represented (articles 4 and 10, subsection 2, of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March).

8.3. The proceedings are not vitiated by any nullities.

8.4. There are no other circumstances that prevent assessment of the merits of the case.

III. MERITS

III.1. Facts

1. Established Facts

9.1. With relevance for the assessment and decision of the issues raised, preliminary and substantive, the following facts are established and proven:

a) "The First Claimant carried out his professional activity for several years in Group C…, specifically with petroleum company D…, now E…" (article 2 of the arbitral request);

b) During the years he was in the service of the aforementioned company, the First Claimant contributed monthly, together with the company itself, to a "F…" supplementary pension plan (see copy of the regulation governing the supplementary pension plan dated 1985, copy of the new regulation approved in April 1999 by C… and copy of the Regulation approved by E… S.A. dated 1 January 2007" (documents No. 1, No. 2 and No. 3, attached with the arbitral request, whose contents are given as reproduced);

c) "The plan was managed by E… S.A., a company with registered office in Brussels, Belgium (and previously by D…, S.A., a company equally resident in Belgium) - article 4 of the arbitral request;

d) The Pension Savings Plan resulted from contributions made by both the employer and the worker (see, by way of example, copy of 7 pay slips of the First Claimant, which show the monthly contribution to the "F…" (document No. 4, attached with the arbitral request, whose contents are given as reproduced);

e) "The objective of the plan was to create for all company employees a supplement for pension savings, which resulted from contributions from the company and the worker himself" (article 6 of the arbitral request);

f) The First "Claimant contributed to the pension savings fund from September 1973 to September 2002" (article 8 of the arbitral request);

g) In February 2010, the "Claimant chose to redeem the fund for its total value and received the total amount of EUR 836,619.77 (gross value)" – see copy of the documents that break down the amounts received at the time of liquidation of the plan by the Claimant [document No. 6 (attached with the arbitral request, whose contents are given as reproduced), and the administrative record];

h) "(…)" "on the amounts earned as pension income, the First Claimant bore tax through withholding at source in the total amount of EUR 91,567.68" [see copies of the supporting forms (document No. 7, attached with the arbitral request, whose contents are given as reproduced), and a statement issued by the Inspector responsible for the Belgian Tax Administration Services, confirming the amounts of tax borne in this country (document No. 8, attached with the arbitral request, whose contents are given as reproduced) and the administrative record];

i) The total amount received can be broken down as follows:

j) "In 2010, the Claimants were registered as tax residents in Portugal" (article 18 of the arbitral request);

k) "On 22 March 2010, the Claimants submitted their Model 3 tax return for the year 2010, which resulted in an amount due of IRS of EUR 15,476.71 and compensatory interest of EUR 554.60" [see copy of the assessment (attached with the arbitral request, as document No. 9, whose contents are given as reproduced) and the administrative record];

l) Under the exchange of information provided for in article 26 of the Convention between Portugal and Belgium to Avoid Double Taxation and Regulate Some Other Matters in the Field of Income Taxes, signed in Brussels on 16 July 1969 and approved by Decree-Law No. 619/70, of 15 December, hereinafter briefly referred to as the DTT, the Belgian authorities communicated to the International Relations Services Department of the Tax Authority pension income earned by the Claimant in 2010, as provided in the extract from the letter … from that Services Department (see the administrative record);

m) "(…)" "after insistence, the reply from those authorities was received by this Services Department, through a letter dated 21-10-2013 and subsequently the annexes mentioned, in which are included the 5 pension forms, written in French", which are attached as sent (docs. 1 to 5), forms whose contents are given as fully reproduced, in accordance with what results from the administrative record;

n) "The Belgian tax authorities note that, as pensions are taxed in Portugal, the taxpayer may request reimbursement of the tax withheld at source (mentioned in field 225 of the forms - administrative record)";

o) "Through a registered letter, dated 29 January 2014, the First Claimant was notified by the Finance Directorate of Lisbon to make representations regarding the draft amendment of his Model 3 IRS tax return for the year 2010, due to the correction of the amounts contained in Annex J from EUR 25,289.47 to the total amount of EUR 721,366.04" [see document No. 10 (attached with the arbitral request, whose contents are given as reproduced) and the administrative record]:

p) "At issue were the amounts earned by the First Claimant and paid by E… S.A. in 2010, in the context of the aforementioned supplementary social security regime, as a supplement for pension" (article 21 of the arbitral request);

q) The Claimant made representations in the prior hearing procedure by letter of 18.02.2014 claiming the right to a tax credit in the amount of EUR 91,567.68 which was withheld at source in Belgium, and alleged discriminatory treatment since if the Pension Fund were resident in Portuguese territory it would only be subject to taxation of 2/5 of the income at the rate of 20% (see the administrative record);

r) "Notwithstanding the objections raised by the Claimants, the Finance Directorate of Lisbon decided to maintain the decision to amend the Model 3 submitted for the year 2010, having decided to change the income contained in Annex J from EUR 25,289.47 to EUR 721,366.04" [see document No. 12 (attached with the arbitral request, whose contents are given as reproduced) and the administrative record];

s) "As a result of the corrections mentioned above, the Claimants were notified of assessment No. 2014… and account adjustment statement No. 2014…, relating to IRS for the year 2010, in the amount of EUR 312,415.30 and compensatory interest of EUR 35,024.16, which corresponds to the total amount of EUR 347,439.46, whose voluntary payment date ended on 5 November 2014" [see document No. 13, attached with the arbitral request, whose contents are given as reproduced) and the administrative record];

t) "On 9 December 2014, the Claimants were notified of the institution of tax enforcement proceedings No. …2014…, in the total amount of EUR 348,667.09, for purposes of coercive collection of the aforementioned tax act" (article 26 of the arbitral request);

u) On "23 December 2014, the Claimants presented a bank guarantee No. …-…-…, provided by Bank …, in the amount of EUR 440,342.08, to the Finance Service of Loures …, for purposes of suspension of the aforementioned proceedings" [see document No. 14 (attached with the arbitral request, whose contents are given as reproduced];

v) On 30 January 2015, the Claimants submitted a request for constitution of an arbitral tribunal for assessment of the legality of the IRS assessment for the year 2010 (see the electronic request in the CAAD system).

9.2. Justification of the Facts

The proven factual basis was based on the position assumed by the Parties and not contested, the critical analysis of the documents attached to the case file by the Claimants (documents 1 to 14 attached with the request for arbitral pronouncement), which were not challenged, as well as the contents of the administrative record.

9.3. There are no other facts with relevance for assessment of the merits of the case that have not been proven.

III.2. Matter of Law

1. A. On the Legality of the Assessment

As mentioned above, the Claimants request, as the principal claim, the annulment of the assessment on the grounds of violation of article 8 of the Constitution of the Portuguese Republic (CRP) and of articles 18, 56 and 63 of the Treaty of the European Community, and, alternatively, referral for a preliminary ruling to the CJEU regarding the issue relating to the incompatibility of article 21 of the EBF with Community Law, under the provisions of article 267 of the Treaty.

The principal claim will be assessed first, moving to assess the alternative claim only if the former is unsuccessful. Alternative claims should therefore only be taken into consideration if an earlier claim is unsuccessful [article 554, subsection 1, of the Code of Civil Procedure, applicable pursuant to the provisions of article 29, subsection 1, paragraph e), of the RJAT].

The main issue to be decided is whether the manner in which article 21 of the EBF (which refers to pension savings plans and where materially both parties frame the issue to be decided[1]) was applied by the Tax Administration is contrary to internal legal right, as well as to the Constitution of the Portuguese Republic and to the legal rules of the European Union, thus implying the illegality of the assessment act.

10.A.1. Legal Provision that Establishes the Tax Benefit in the Abstract

Article 21 of the EBF is a provision that grants tax benefits to two distinct taxpayers, within the scope of two different taxes. It thus contains two autonomous regimes for the granting of tax benefits, but still granted in the same context — that of pension savings funds and pension savings plans, as results from the heading of the provision. This circumstance will naturally justify, given the close connection that exists between them, their inclusion in the same legal provision. However, it should be borne in mind that, without prejudice to their proximity, there are contained in the provision, it should be emphasized, two distinct tax benefits.

The first, contained in article 21, subsection 1, of the EBF, concerns pension savings funds, education savings and pension/education savings that are constituted and operate in accordance with national legislation, and as a benefit exemption from corporate income tax (IRC).

Its contents are as follows: "Exempted from IRC are the earnings of pension savings funds, education savings and pension/education savings funds, which are constituted and operate in accordance with national legislation."

The second, contained in article 21, subsection 3, of the EBF, has as beneficiaries personal income tax (IRS) taxpayers to whom amounts resulting from pension savings funds are paid, without the provision requiring that these must have been constituted or even operate in accordance with national legislation. The tax benefit, in the part that is concretely relevant to the decision of the case, consists of the inclusion of the amounts paid, when there is total or partial redemption, in category E of the IRS, in the consideration of these only as 2/5 and in their autonomous taxation at a rate of 20% (article 21, subsection 3, paragraph b), subsections 1 and 2, of the EBF).

The provision in question states as follows: "3- The amounts paid by pension savings funds, even in cases of redemption due to the death of the participant, are subject to taxation in the following terms:

a) In accordance with the rules applicable to category H income of IRS, including those relating to withholding at source, when their receipt occurs in the form of regular and periodic instalments;

b) In accordance with the rules applicable to category E income of IRS, including those relating to withholding at source, in case of total or partial redemption, however, the following must be observed:

1. The taxable income is constituted by two-fifths of the income;

2. The taxation is autonomous, being applied at the rate of 20%".

We are thus, even if contained in the same provision, faced with two distinct tax benefits.

Article 21, subsection 1, of the EBF which refers solely to funds and implies an exemption from IRC is thus not relevant to the decision of the case under scrutiny. Questions of possible discrimination as against other funds will therefore not be developed, as they do not fit with the subject matter of the case.

10.A.2. On the Applicability, in the Concrete Case, of the Tax Benefit

Having concluded in the previous point that what is relevant in the present case is the second tax benefit (provided for in subsection 3 of article 21) relating to beneficiaries of redemptions made by pension savings funds, it will be decisive in this context to determine whether the Claimants can or cannot benefit from this regime.

The Tax and Customs Authority understood that this tax benefit would not be applicable to the Claimants, as it understood that it would only apply when the pension savings fund is constituted and operates in accordance with national legislation, as expressly provided by the regime contained in subsection 1 of article 21 of the Fiscal Benefits Statute (EBF).

It is necessary to verify whether this is the case, this being the central aspect to be assessed.

Let us examine this.

a) Interpretation of the Provision

As mentioned above, it results from subsection 3 of article 21 that:

"3- The amounts paid by pension savings funds, even in cases of redemption due to the death of the participant, are subject to taxation in the following terms: a) In accordance with the rules applicable to category H income of IRS, including those relating to withholding at source, when their receipt occurs in the form of regular and periodic instalments; b) In accordance with the rules applicable to category E income of IRS, including those relating to withholding at source, in case of total or partial redemption, however, the following must be observed: 1) The taxable income is constituted by two-fifths of the income; 2) The taxation is autonomous, being applied at the rate of 20%".

In accordance with the rules of interpretation of law provided for in article 9 of the Civil Code, although the interpretation of the provision should not be confined to the letter of the law (rather, it should "reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time at which it is applied" – article 9, subsection 1, of the Civil Code), the legislator prohibits, in express terms, in subsection 2 of the same article 9, that "the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed" be "considered by the interpreter".

Thus, the letter is naturally assumed as the starting point of interpretation, and from the outset it has a negative function, which, according to BAPTISTA MACHADO, is "to eliminate those meanings that have no support, or, at least, any correspondence or resonance in the words of the law"[2]. As also noted by OLIVEIRA ASCENSÃO[3], "the letter is not only the starting point, it is also an immovable element of all interpretation. That is to say that the text also functions as a limit of the search for the spirit".

That is, even if, by hypothesis, resorting to other elements of interpretation (for example the historical element or the teleological element), the interpreter concludes that the legislator intended to establish a particular legal regime, that intention is not to be considered if it does not have support in the literal element of the provision in question.

Now, from the text of article 21, subsection 3, of the EBF (a provision whose applicability is being weighed in the concrete case) there is no minimum literal indication of the application of the limit that, indeed, appears in the letter of subsection 1 of the same article.

In fact, the circumstance that this limit is found in subsection 1 solidifies the idea that it does not apply within the scope of subsection 3 of the same provision.

Indeed, as results from subsection 3 of article 9 of the Civil Code, the interpreter must presume "that the legislator established the most correct solutions and was able to express his thought in adequate terms".

Presuming that the legislator is rigorous and able to express himself, and bearing well in mind a framework that implies special attention to the letter of the law — which for the most traditional doctrine, in essential matters of taxation, such as tax benefits, must impose itself at the moment of interpretation — it should not be automatic to draw a parallel between the formulation that exists in article 21, subsection 1, of the EBF (which limits the benefit in IRC to funds that are constituted and operate in accordance with national legislation) and what results from the following subsections, in particular subsection 3. There the chosen formulation is not the same, the legislator not having opted to refer to funds with the framework of article 21, subsection 1, of the EBF, which will certainly not be unrelated to the fact that a different tax benefit granted to a different taxpayer is being addressed. Indeed, the legislator merely made reference to pension savings funds, leaving out education savings funds and mixed funds (pension/education savings). Thus, the conviction is reinforced that the formulations and regimes relating to funds will not have to be the same whether in the circumstances in which they are themselves subjects of tax benefits, or in the context in which those funds appear solely as debtors of the redemptions that will guarantee benefits to IRS taxpayers. In fact, in the context of the article under analysis, the granting of the tax benefit to the beneficiaries of pension savings plans is not made to depend on the subjection of the paying funds to IRC and the subsequent exemption flowing from it. It should thus be understood that those paying funds may, in fact, not even be subject to IRC in Portugal.

Thus, if the legislator expressly referred to that limit in the literal element of subsection 1 of article 21 of the EBF, regarding the tax benefit in IRC, it would not have failed to do so, had that been its intention, in subsection 3 of the same provision, regarding the tax benefit in IRS.

If it established this clear differentiation between the two regimes, it was not by mere oversight — the proximity between the two rules would not have allowed it to forget this mention in subsection 3, and if it wanted this limit to be common to both regimes without mentioning it repeatedly in subsection 1 and subsection 3, it would mention it in a general clause common to both rules, which would not be only in subsection 1.

Thus, the non-mention of that limit appears rather to correspond to a deliberate choice of the legislative power, which is to serve as the starting point and limit of the interpretation made of the provision.

It is true that tax benefits imply, by definition, an exception to the rule regime, translating a true ius singulare.

It is therefore certain that, as the regime of tax benefits is an exceptional regime, interpretation by analogy is forbidden that extends the benefit to other subjects not provided for in the law. In this context, it is legitimate to impose that the interpreter be prevented from extending the exemption from IRC to other funds that had not been constituted and operated in accordance with national legislation, disregarding what is expressly provided in the letter of the law. But this does not give the interpreter the right to restrict the terms of application of the tax benefit to the subjects who, under the law, are its holders.

And if respect for the aforementioned interpretative rules is always important in the interpretation of any legal rules (notably as a way of preserving the separation of legislative and executive powers), that respect becomes especially important within the scope of tax law rules. Given the connection of the content of the exception to essential matters of taxation, this stems, moreover, from the principle of tax legality, as well as from the principle of typicality which, as expressions of the principle of the Rule of Law, require that the types founding taxation be determined in such a way that the common and average taxpayer can easily grasp the normative sense of the legal provisions, without needing to be a law expert.

In this framework, it is decided in the sense of the lack of merit (as legally inadmissible and not in accordance with good rules of legal hermeneutics) of the interpretation of subsection 3 of article 21 of the EBF, defended by the Tax Administration, to the effect of restricting the application of the tax benefit in question to taxpayers who have subscribed to pension savings plans assured by funds constituted and operating in accordance with national legislation.

b) Constitutionally Adequate Interpretation (Principle of Equality)

Should there, however, be difficulties as regards the delimitation of the type of funds that would permit the granting of benefits to IRS taxpayers, with doubts persisting as to the interpretation of the provision, the meaning should be chosen that, although not flowing from other elements of interpretation, would be the meaning necessary and that would become possible by virtue of the conforming force of the Fundamental Law[4].

Indeed, the more comprehensive interpretation of article 21, subsection 3, paragraph b), of the EBF set out above is the one that best conforms, firstly, with article 13 of the CRP.

From the aforementioned provision stems that the principle of equality be respected in general, including in the taxation area. Implying that in this domain, as a rule, taxation is guided by an idea of generality and universality. The idea of uniformity also dominates in this field, that is, that taxation be carried out in accordance with the same criterion, identical for all. It should also be emphasized that the principle cannot be understood in a strictly formal sense (equality before the law), and should also be understood in its material sense (equality in the law) which translates (i) both in a horizontal dimension, that is, individuals in the same circumstances should pay the same tax, (ii) as in a vertical dimension that will lead to individuals who are in different circumstances paying different taxes according to that difference. The circumstances in which taxpayers find themselves should be assessed according to their contributive capacity. That is, starting from the income of each taxpayer (encompassing accumulated income and spent on consumption), revealed through money or goods convertible to money of which each one has.

It is also known that the principle of equality does not prevent differentiation of treatment provided it has material justification and grounds, which implies that whatever the discriminatory criterion, it will only proceed when reasons capable of justifying the discriminatory treatment are invoked.

Indeed, in the first place, when the Tax and Customs Authority refers to it being legitimate to discriminate (which results from the interpretation it maintains) between taxpayers who receive payments from pension savings funds constituted and operating in accordance with national legislation and taxpayers who receive payments from pension savings funds that are not constituted nor operate in accordance with the aforementioned legislation, it mentions, repeatedly, that what is in question is treatment different between residents and non-residents, mentioning, to that effect, various judgments of the CJEU that allude to and corroborate this distinction.

The discriminatory interpretation defended by the Tax and Customs Authority is not, however, based on the criterion of the residence of the subject who is prevented from being a holder of the tax benefit. In the present case, the limitation on the application of the tax benefit implies discrimination among residents themselves. Indeed, in the interpretation of the Tax and Customs Authority, if a resident receives payments from a pension savings fund constituted and operating in Portugal, they would benefit from the favorable tax treatment in question; a resident who receives payments from a pension savings fund that is not constituted and does not operate in Portugal would not benefit (according to the same interpretation) from that more advantageous tax treatment.

This is not therefore about the tax discrimination criterion (relating to residence) that, in certain judgments and under certain conditions, the CJEU accepts as legitimate.

On the other hand, the Tax and Customs Authority alleges (although to justify non-violation of the principle of freedom of movement of capital) that the differentiated treatment (discrimination) depending on whether the fund's residence is located in Portugal or not is justified insofar as the tax benefit in question is intended "to encourage individuals to invest in pension savings plans" (article 72 of the Arbitral Request), so as to reinforce "the coherence of the national public pension system" (article 74 of the Arbitral Request), thus promoting "the sustainability of the social security system and the strengthening of savings mechanisms, with a view to the balance of public finances" (article 76 of the Arbitral Request).

It does not appear that, also here, reasons are invoked that could justify the discriminatory treatment among resident taxpayers that the interpretation it defends implies. In truth, it is not clear, and the Defendant does not prove, that only the investment of taxpayers in pension savings funds constituted and operating in accordance with national legislation would allow the achievement of these objectives. That is, not demonstrating that investment in pension savings funds does not always contribute to the achievement of these objectives (relief of the social security system and associated contribution to the balance of public finances), regardless of whether supplementary pension funds are constituted and operated in accordance with national law or foreign law, it does not demonstrate the necessity of discrimination between taxpayers who find themselves in an equal fiscal situation.

In the present case, it is repeated, the Claimants find themselves in exactly the same circumstances as taxpayers to whom amounts are paid by pension savings funds constituted and operating in accordance with national legislation. They are equally residents in Portugal, thus having a connection with the Portuguese tax legal order that permits worldwide taxation, entirely similar to that of other residents. There being, therefore, no tenable reasons for any discrimination to be made. At the level of international tax law, so as to preserve balance in the rules for division of tax power among States, it is normally acceptable that a non-resident does not have exactly the same tax framework as a resident, and may be subject to a different taxation regime. It is not conceivable, however, that taxpayers, all residents, who find themselves in exactly the same circumstances in terms of contributive capacity, and who have income whose source is exactly the same, be the object of different treatment. It is true that tax benefits are by nature discriminatory, translating into one of those situations where there can be some discrimination (article 7, subsection 3, of the Tax General Law). However, those who are exactly in the same circumstances cannot be the object of different treatment. Especially in a framework where, as is admitted by the parties, the claimants did not even have the possibility to opt for a domestic fund (article 66 of the response of the Tax Authority).

In these terms, we cannot fail to conclude that the Tax and Customs Authority did not prove that the reasons it invokes appear to be legally apt grounds to sustain that the tax benefit in question does not apply to all taxpayers resident in Portugal who receive payments made by pension savings funds.

In this measure, the Portuguese constitutional regime regarding equality would impose a broad understanding of article 21, subsection 3, of the EBF, by virtue of the application of article 13 of the CRP.

c) Interpretation in Accordance with European Union Law

Furthermore, from article 8 of the CRP, in particular subsection 4, flows that the provisions of treaties governing the European Union be applicable in the internal order, in the terms defined by European Union law. Implying this framework a direct effect of the treaty provisions in the Portuguese legal order, including the fundamental economic freedoms. The effects of their protection lead not only to the fact that the legislation of Member States should be interpreted in accordance with these freedoms, but also that, in case of declared incompatibility between internal provisions and any of these freedoms, national legislation ceases to be able to be applied.

In the concrete case, for the reasons already stated in a), this tribunal considers that there is no opposition between the letter of the law and any of the freedoms of movement. Even, however, should there be doubts on this aspect, it would always be necessary that the interpretation made of that provision be in accordance with the fundamental economic freedoms, and all those that could possibly be called into question by the application of national legislation should be respected. It is important to emphasize in this regard that there is no (when the situation to be framed has solely a connection with Member States) order of priority among them. This is without prejudice to the fact that there have been doubts in the past about the effect that it would have, for a possible priority among various fundamental economic freedoms, the fact that the text of article 57 of TFEU says that services are considered to be the provision of services that are not regulated by the provisions relating to free movement of goods, capital and persons. It being at this moment settled (contrary to what the Tax Authority says in article 47 of the Reply) that the content of the article does not point to that freedom applying only as an alternative to the others. It was in deciding the Fidium Finanz[5] case that the CJEU considered that this provision did not establish an order of priorities between the freedom to provide services and other fundamental economic freedoms.

In the case under analysis, an interpretation of article 21, subsection 3, paragraph b), of the EBF that limited its application to taxpayers who benefited from payments from pension savings funds constituted and operating in accordance with national legislation would call into question the freedom of movement of capital and the freedom to provide services.

Although there is no definition of «movement of capital» in the Treaty, the CJEU has confirmed in various judgments, in making a non-exhaustive list of capital movements, that the terminology applied to those movements in Annex I to the Council Directive 88/361/CEE, of 24 June 1988, for the implementation of the former article 67 of the TEC, now repealed, still has some relevance. In fact, this was acknowledged by the CJEU in the Trummer and Meyer[6] case, while highlighting the circumstance that article 63, subsection 1, of TFEU reproduces to a certain extent the content of article 1 of Directive 88/361/CEE. In this context, the CJEU has decided that can be traced back to capital movements in the context of article 63 of TFEU, in particular, so-called «direct» investments[7] which have, through the acquisition of shares, the objective of participating in the management and control of a company, as well as so-called «portfolio» investments, that is, investments in the form of acquisition of securities on the capital market with the sole objective of making a financial application without intention to influence the management and control of the company[8].

The reference to the annex of the directive that has been alluded to does not, however, prevent, that constitute capital movements, under article 63, subsection 1, of TFEU, other operations not provided for there, in particular the redemptions made by the funds we are discussing. Furthermore, article 63 of TFEU assures both the freedom of movement of capital and that of payments, which is sufficiently broad to accommodate the redemptions we are discussing.

The freedom to provide services[9] prohibits discrimination against nationals of a Member State in the provision of services in another Member State[10], which would occur if the type of fund in question conditioned the benefit to be obtained by the IRS taxpayer. Although we have in mind in the first place the position of the claimants and not so much that of the funds, it is necessary that the interpretation of the provisions contemplate the provisions of the legal system considering it in its entirety. Account should therefore also be taken of the freedom to provide services.

In the case under consideration, the only way to prevent there being a restriction to these freedoms is to be faithful to the letter of the provision, not making it more restrictive.

Finally, it should be noted (although with lesser relevance in the present case, to the extent that in this action the tribunal is pronouncing on the protection of those receiving payments from pension savings funds and not of the funds themselves) that the application of the interpretation defended by the Defendant would also imply the restriction of the freedom of movement of capital on the side of the pension savings funds.

Even if it were understood that it followed from the law that the benefit should be limited to beneficiaries of funds that had been created and operated according to Portuguese legislation, and if reasons of general interest were resorted to in order to justify any restriction on fundamental freedoms, this exercise would only be conceivable with respect to the regime of taxation of the funds properly speaking. Indeed, only there would there be a comparison between residents and non-residents, a context in which these justifications are normally invoked[11]; it will no longer be acceptable to invoke, outside that context, as the Tax and Customs Authority did (article 70 of the reply), the need to ensure the coherence of the tax regime and to prevent the diminution of revenues.

With the aggravating circumstance that the argument of preventing the diminution of revenues, even in a situation where the context were correct, would certainly not be accepted, given that the CJEU has not to date endorsed this restriction. This orientation was demonstrated clearly in Manninen[12].

It should be noted that, on the basis of an identical contextualization, article 16 of the EBF, referring to pension funds and equivalents had to be amended in 2012, following the CJEU decision European Commission v. Portuguese Republic[13], where reasons of public order, such as the preservation of coherence[14] and the effectiveness of tax controls[15], were invoked so as not to limit the tax benefit to funds that had been constituted and operated in accordance with Portuguese legislation. Following that decision, the exemption regime also had to be extended to pension funds constituted in other Member States, subject to certain conditions[16].

A similar exercise would be justified with respect to the taxation of pension savings funds under IRC, within the scope of article 21, subsection 1, of the EBF. However, the effects flowing from it would not have a direct impact on the taxpayers who are beneficiaries of payments from the funds, given the independence of the regime applicable to them (reflected even in a different subsection of the provision under analysis)[17]. Furthermore, it would not be possible to make this exercise directly regarding resident taxpayers subject to worldwide taxation.

Finally, it should also be noted that from the application of the convention on double taxation concluded between Portugal and Belgium (referred to by the Defendant) there flows no specific advantage to the Claimants in Portugal, only a generic advantage being granted, solely in the source country (where any reimbursements must be claimed, and only there, upon proof of residence in Portugal). An advantage that is within reach of any taxpayer who finds himself in the same circumstances. It has, therefore, repeated, a null effect on the taxation of payments made in Portugal. Thus, although conventions may be considered to determine whether two comparable situations are or are not treated differently or whether two different situations are treated the same way, this is only possible if they have effects in the right of the State at the level at which there is supposed discrimination[18] — which is certainly not the case.

It should be added, to conclude, that even if any advantage in Portugal were recognized, the mere idea that the discrimination would be offset does not normally have acceptance as a reason that could justify the restriction on fundamental freedoms. For, already in the Avoir Fiscal[19] case, one of the first cases concerning direct taxation, this argument was rejected[20].

In this way, in light of what has been set out, the breach of law alleged by the Claimants is upheld, regarding the interpretation (defended by the Defendant) of article 21, subsection 3, paragraphs a) and b) of the Fiscal Benefits Statute, to the effect of restricting the granting of the benefits flowing from it solely to taxpayers who have subscribed to pension savings plans assured by funds constituted and operating in accordance with Portuguese legislation.

10.B. On the Claimants' Right to Payment of Compensation for Improper Provision of Guarantee, in accordance with article 53 of the Tax General Law.

The second substantive legal question to be decided is whether the Claimants have, as they claim, the right to compensation for the losses resulting from the provision of guarantee to suspend the tax enforcement proceedings.

With relevance to the decision, it results from the facts established as proven that:

• "On 9 December 2014, the Claimants were notified of the institution of tax enforcement proceedings No. …2014…, in the total amount of EUR 348,667.09, for purposes of coercive collection of the aforementioned tax act" [point x) of the facts established as proven];

• "On 23 December 2014, the Claimants presented a bank guarantee No. …-…-…, provided by Bank …, in the amount of EUR 440,342.08, to the Finance Service of Loures …, for purposes of suspension of the aforementioned proceedings" [see document No. 14 (attached with the arbitral request, whose contents are given as reproduced]" - point y) of the facts established as proven;

Article 53 of the Tax General Law, under the heading "Guarantee in case of improper provision", provides as follows:

"1. The debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be compensated wholly or partly for the losses resulting from its provision, should the debtor have maintained it for a period exceeding three years in proportion to the judgment in administrative complaint, challenge or opposition to enforcement that have as their object the debt guaranteed.

2- The time limit referred to in the previous number does not apply when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services in the assessment of the tax.

1. The compensation referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of compensatory interest provided for in the present law and can be requested in the very process of complaint or judicial challenge, or autonomously.

2. Compensation for improper provision of guarantee shall be paid by deduction from the revenue of the tax in the year in which payment was made."

From the combination of subsections 1 and 2, it is extracted that, in case of error attributable to the services in the assessment of the tax, the debtor is compensated for the losses resulting from the provision of the guarantee regardless of the time for which the debtor had to maintain it.

In the present case, the error from which the assessment whose legality is being discussed suffers results from an error of the services regarding the legal assumptions. On the other hand, the assessment which is the object of the challenge was initiated solely by the Tax Administration, and the Claimants in no way contributed to its being made, so the error is attributable solely to the Tax Administration itself.

The Claimants state that they have paid a bank guarantee in the amount of EUR 440,342.08, and therefore have the right to be compensated for that expense and also for other subsequent ones, which are proven.

Having no elements that permit the determination of the amount of compensation, the condemnation must be made by reference to the sum that was proven to have been spent plus what is to be liquidated in execution of the present award (see article 609 of the Code of Civil Procedure and article 565 of the Civil Code).

IV. DECISION

We hereby accord this Arbitral Tribunal in:

· Judging well-founded the dilatory exception of incompetence of this Tribunal to order the extinction of the tax enforcement proceedings;

· Judging without merit the dilatory exception of incompetence of this Tribunal for assessment of the claim for compensation for improper provision of guarantee;

· Judging well-founded the claim for declaration of illegality of the additional Personal Income Tax assessment No. 2014…, resulting from the account adjustment statement No. 2014…, relating to the year 2010, and in consequence, annulling the disputed assessment;

· Judging well-founded the Claimants' claim regarding the right to payment of compensation for improper provision of guarantee to suspend the tax enforcement proceedings No. …2014…, and condemning the Tax and Customs Authority to pay to the Claimants the compensation that is to be liquidated in execution of the present award.

V. VALUE OF THE CASE

In accordance with the provisions of articles 306, subsection 2, and 297, subsection 2, of the Code of Civil Procedure, article 97-A, subsection 1, paragraph a), of the Tax Code of Civil Procedure, and article 3, subsection 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at EUR 347,439.46.

VI. COSTS

Costs, to be borne by the Tax and Customs Authority, in the amount of EUR 5,814.00, in accordance with the provisions of articles 22, subsection 4, and 12, subsection 2, of the Legal Framework for Arbitration, article 2, subsection 1 of article 3 and subsections 1 to 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Schedule I attached to this legislation.

Lisbon, 18 September 2015.

The arbitrators,

Fernanda Maçãs

João Sérgio Ribeiro

Rui Ferreira Rodrigues

[1] See articles 65, 66, 72 and 75 of the Response of the Tax and Customs Authority, and article 44 of the Request.

[2] See Introduction to Law and Legitimizing Discourse, 2nd reprint, Coimbra, 1987, pp. 187 et seq.

[3] See The Law, Introduction and General Theory, Lisbon, 1978, p. 350.

[4] See Jorge MIRANDA, Manual of Constitutional Law, Volume II, Coimbra Editora, Coimbra, 2007, pp. 313-316.

[5] C-452/04, of 3 October 2006, para. 32.

[6] C-222/97, of 16 March 1999, para. 21.

[7] Test Claimants in the FII Group Litigation, C-35/11, of 13 November 2012, para. 102; Glaxo Wellcome, C-182/08, of 17 September 2009, para. 40; Idryma Typou, C-81/09, of 21 October 2010, para. 48.

[8] See European Commission v. Portuguese Republic, C‑171/08, of 8 July 2010, para. 49; Manfred Trummer and Peter Mayer, C-222/97, of 16 March 1999; Commission v. France, C-483/99, of 4 June 2002; Commission v. United Kingdom, C-98/01, of 13 May 2003; Commission v. Netherlands, joined cases C-282/04 and C-283/04, of 28 September 2006.

[9] See article 57 of TFEU.

[10] Zanotti, C-56/09, of 20 May 2010; European Commission v. Portuguese Republic, C-105/08, of 17 June 2010; X, C-498/10, of 18 October 2012.

[11] See, as examples, Bachmann, case C-204/90, of 28 January 1992; Kranhenheim, case C-157/07, of 23 October 2008; Wielockx, case C-80/94, of 11 August 1995; Danner, case C-136/00, of 3 October 2002.

[12] C-319/02, of 7 September 2004.

[13] Case C-493/09, of 6 October 2011.

[14] Case C-493/09, cited, para. 19.

[15] Case C-493/09, cited, para. 20.

[16] See article 16, subsections 7, 8 and 9, of the EBF.

[17] Except, of course, if it were understood that the fact that the regimes are part of the same article would require absolute identity, in terms of meaning, between the references made, in the various subsections of the article, to the term pension savings fund — which does not correspond to the choice made by this tribunal.

[18] See Bouanich, C-265/04, of 19 January 2006.

[19] C-270/83, 28 January 1986.

[20] See also in this sense Commerzbank, C-330/91, of 13 July 1993.