CAAD Ruling 511/2017-T: Autonomous Taxation vs RFAI Tax Benefit Deduction in IRC 2015

ARBITRATION DECISION[1][2]

The arbitrators José Poças Falcão (President), Amândio Silva (Deputy) and Luís Cupertino (Deputy) appointed by the Ethics Board of the Administrative Arbitration Centre (CAAD), to form the Arbitral Tribunal, constituted on 6 December 2017, agree as follows:

I. REPORT

1. On 14 September 2017, the company "A…, S.A." (hereinafter referred to as "Claimant" or "A…"), with registered office in …, …, Municipality of …, registered number … and share capital of € 13,359,850.00 (thirteen million, three hundred and fifty-nine thousand, eight hundred and fifty euros), requested the constitution of an Arbitral Tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter also referred to as "AT") is the Respondent.

2. The act which is the subject of the Tribunal's pronouncement is the rejection, by the Tax and Customs Authority, through the Finance Directorate of …, notified with effect on 12 July 2017, of the complaint against the self-assessment of IRC for the tax year 2015, with case number …2017…, filed by A… on 27 February 2017, in which it intended to exercise a deduction of € 70,941.82 of tax incentives in IRC under the Tax Support Regime for Investment (RFAI), corresponding to 50% of the collection produced by the autonomous taxation rates, calculated in the amount of € 141,883.66, as shown in Form 22 of the respective Tax Group, which it submitted, as the parent company, on 18 November 2016, in substitution of the one initially submitted on 31 May 2016, or, subsidiarily, to the extent that the levy of autonomous taxation would be improper.

3. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 15 September 2017.

4. The Claimant did not appoint an arbitrator, therefore, pursuant to subparagraph (a) of paragraph 2 of Article 6 and subparagraph (b) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Board appointed the signatories as arbitrators of the collective Arbitral Tribunal, who communicated acceptance of the appointment within the applicable period.

5. On 14 November 2017, the Parties were notified of the appointment of the arbitrators, and no objection was raised.

6. Accordingly, in compliance with the provision of subparagraph (c) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the collective Arbitral Tribunal was constituted on 6 December 2017, which on the same date was communicated to the Parties, and the relevant legal procedures were followed.

7. On 7 December 2017, the Respondent was notified to present its response, attach a copy of the administrative file and, if it wished, request the production of additional evidence, which did not occur, presenting the former, in objection, on 25 January 2018 and the latter made available the following day.

8. Given that, in the arbitration procedure, the general principles of procedural efficiency and the prohibition of useless acts apply, pursuant to subparagraphs (c) and (e) of Article 16 of RJAT, the meeting referred to in Article 18 of RJAT was dispensed with, which was notified to the Parties on 4 February 2018, on which date 10 May 2018 was also set as the deadline for the delivery and notification of the final arbitration decision, and a simultaneous period of 15 days was granted for the submission of final written arguments, on facts and law, which the Claimant submitted on 9 February 2018 and the Respondent on 26 February 2018.

9. The Parties are represented in this proceedings, respectively, by Dr. B…, attorney with office in Lisbon, representative of the Claimant and by Drs. C… and D…, legal experts appointed by the Respondent.

10. Through the request for pronouncement, the Claimant submits to the Tribunal's consideration:
    i) the legality of the rejection of the complaint, in that it disregards the recognition of the illegality of that part of the self-assessment of IRC regarding the 2015 tax year of the Tax Group A…, by improper exclusion of a deduction from the collection, or,

ii) subsidiarily, by simple improper levy of autonomous taxation and, furthermore,

iii) the legality of that part of the self-assessment of IRC relating to the 2015 tax year, more specifically the illegality with respect to the amount of € 70,941.82, or,

iv) subsidiarily, with respect to the total amount of autonomous taxation, as being improper, in the value of € 141,883.66.

1. The Claimant seeks declaration:
   i) either of the illegality of the rejection of the complaint,

ii) either of the partial illegality of the aforementioned self-assessment act – and that it be consequently annulled – pursuant to Article 2, paragraph 1, subparagraph (a), of Decree-Law No. 10/2011, more specifically regarding the part that reflects the non-deduction from the IRC collection produced by the autonomous taxation rates of the benefit under RFAI, which resulted in an amount of tax improperly levied in the 2015 tax year in the value of € 70,941.82, or,

iii) subsidiarily, to the extent that it reflects improper autonomous taxation in the value of € 141,883.66.

1. The Claimant invokes:

a) Factual Grounds:

i) The Tax Group still had, after submission of the 2015 Form 22, € 1,716,250.64 of IRC credits to offset against its collection, and it was not possible to deduct € 70,941.82, corresponding to 50% of the collection of autonomous taxation in IRC in that year, which amounted to € 141,883.66, because otherwise the AT's computer system, through which IRC is self-assessed, indicates discrepancies ("errors"), preventing submission.

ii) Considering that this goes against the right to make a deduction, also from the collection of IRC produced by the application of autonomous taxation rates, of the said RFAI.

iii) That it also states it contradicts the overwhelming arbitral case law that today qualifies autonomous taxation as IRC, as it sees absolutely nothing in the law that excludes the offset of these IRC credits for RFAI also from the part of the IRC collection produced by autonomous taxation.

iv) And in the complaint the AT rejected the petition, thus sanctioning what results from its computer system, and thereby contradicting its previous opinion on this matter.

b) Legal Grounds:

i) It is indicated that:

"Just as case law has understood, in an almost unanimous manner, that the collection of IRC provided for in (in force until 2013) Article 45, paragraph 1, subparagraph (a), of the IRC Code, comprises, without need for any additional specification, the collection of autonomous taxation in IRC, so it must also be understood that the collection of IRC provided for in the same Code a few metres further ahead (Article 90, paragraph 1, and paragraph 2, subparagraph (c), of the IRC Code, in the numbering in force since 2014) also encompasses the collection of autonomous taxation in IRC.

Whence that the denial of the deduction of RFAI from the IRC collection of autonomous taxation violates subparagraph (c) of paragraph 2 of Article 90 of the IRC Code (previously to 2014 and until 2010, subparagraph (b), and previously to 2010 Article 83 of the same Code)".

ii) A set of Arbitration Decisions are identified that support their positions, highlighting the transcription of Case No. 769/2014-T, regarding the framework of SIFIDE:

"(…) the essential question which is the subject of the present case is whether the tax credits that, in the year 2011, were recognized to the claimant, in SIFIDE proceedings, can be deducted from the collection produced by the autonomous taxation that burdened it in that fiscal year, in the part in which they cannot be deducted from the remaining IRC collection.

There is autonomous taxation provided for in CIRC (Article 88 of CIRC) and autonomous taxation provided for in CIRS (Article 73 of CIRS).

The collection provided by them constitutes collection of the respective tax, being subject to the generality of rules provided for in the codes referred to, potentially applicable.

As for IRC, in addition to the unanimity of case law, Article 23-A, paragraph 1, subparagraph (a), of CIRC, as amended by Law No. 2/2014, of 16 January, leaves no room for any reasonable doubt, corroborating what had already previously resulted from the literal tenor of Article 12 of the same Code.

(…) the decree that approved SIFIDE does not state that the credits derived from it are deductible from every IRC collection, but rather defines the scope of the deduction referred to, in its paragraph 1 of Article 4, "to the amount determined in accordance with Article 90 of the IRC Code, and to its extent".

Paragraph 3 of the same article confirms that it is to the amount determined in accordance with Article 90 of CIRC that is relevant to carry out the deduction by saying that "the deduction is made, pursuant to Article 90 of the IRC Code, in the assessment relating to the taxation period mentioned in the previous number".

Thus, the question that interests us to resolve, is, independently of the nature of the tax to which the autonomous taxation refers, to know whether the amount of autonomous taxation is "determined in accordance with Article 90 of CIRC", for, if it is, it must be concluded that, to determine the limit of the deduction, regard is had to the collection derived from autonomous taxation.

Article 90 of CIRC refers to the methods of assessment of IRC, by the taxpayer or by the Tax Authority, applying to the assessment of the tax due in all situations provided for in the Code, including additional assessment (paragraph 10).

Therefore, it also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Authority in accordance with Article 90 of CIRC, there being no other provision that provides for different terms for its assessment. Its autonomy is restricted to the applicable rates and to the respective taxable matter, but the assessment of its amount is carried out in accordance with Article 90. [pp. 8 and 9 of the arbitration decision in reference]

(…) Therefore, no legal basis is apparent, namely in light of the legislative intent that it is possible to detect, to exclude the deductibility of the SIFIDE tax benefit from the collection of autonomous taxation that results directly from the letter of Article 4, paragraph 1, of the respective decree, combined with Article 90 of CIRC." (p. 11 of the arbitration decision in reference, underlined by us)".

iii) Taking into account the specificity of deductions, it is invoked:

"As an additional point it should be noted that, contrary to what has been affirmed by AT, there is no reason to conclude that the reasoning and rationale of the decision in case No. 769/2014-T (and the case law that followed it) would apply only to SIFIDE, and not also necessarily to other credits for tax benefits or to other deductions from the IRC collection.

Indeed, if it is a fact that the SIFIDE regime itself with respect to the provision of the tax benefit of deduction from the IRC collection mentions "the amount determined in accordance with Article 90 of the IRC Code", it is to be emphasized that the regime of the Tax Support Regime for Investment ("RFAI") does exactly the same thing in its Article 3, paragraph 1, subparagraph (a), and the same applies to the regime of Extraordinary Tax Credit for Investment ("CFEI"), in its Article 3, paragraph 5, subparagraph (a).

And even when the RFAI or CFEI regime does not express itself in this way, the question is asked whether this makes any difference to what is discussed here, and the answer is negative.

Indeed, even if the provision of the tax credit is expressed in terms of "deduction from the IRC collection", as opposed to "deduction from the amount determined in accordance with Article 90 of CIRC", the final practical outcome is the same, since the amount determined in accordance with Article 90 of the IRC Code is nothing other than the IRC (one needs only to read that rule).

Whence that, given that it is understood by all who matter (AT and courts) that autonomous taxation is IRC (and it is because it is that Article 90 of the IRC Code, directed exclusively to IRC and to no other tax, applies to it), it is indifferent whether the benefit rule refers to what is calculated by application of Article 90 of the IRC Code (and therefore indirectly, but necessarily, to the IRC), as is the case with SIFIDE, RFAI and CFEI (in part)".

iv) It is also alleged:

"Arbitral case law based its conclusion on the idea – beginning with making, provisionally, a generalization by approximation – which follows, in which, moreover, the AT's IRC Department also relied and relies: the autonomous taxation relating, at least, to charges with vehicles, travel allowances and representation expenses (the overwhelmingly ones here in question – cfr. Doc. No. 9), are a substitute for (or complement to) the non-deductibility of costs in IRC, hence the nature of IRC of the collection produced by these autonomous taxation.

And it is on the basis of this conclusion, thus founded, that case law concluded that because the collection produced by these autonomous taxation was collection of IRC it was, for that very reason, subject to the regime provided for the collection of IRC in subparagraph (a) of paragraph 1 of Article 45 of the IRC Code (in the wording in force until 2013): non-deductibility of this collection in the operation of calculating taxable profit.

For the very same reason, this taxpayer asks that, consistently, it be concluded that the IRC collection constituted by these autonomous taxation is available, together with the remaining IRC collection, in the operation of the deductions from the collection provided for in Article 90 of the IRC Code, among which is the deduction of RFAI".

v) It is further stated:

"[The] special form of incidence (the so-called taxable matter) and rates applicable to the autonomous taxation of the type here in question in no way conflicted with the application of the rule that determines the irrelevance of the IRC collection in the calculation of taxable profit. Neither is it seen here, nor does the AT show, why the rule that determines the relevance of the IRC collection in the operation of RFAI acquired by taxpayers would be excluded.

…

That is, whether in the decision matrix generated in case No. 59/2014-T, or in the decision matrices (followed in many other decisions) generated in cases Nos. 80/2014-T and 187/2013-T, what stands out is this:

a) the autonomous taxation relating to charges with vehicles, representation expenses and travel allowances, are IRC (and in cases Nos. 6/2014-T and 80/2014-T was included in the same qualification the autonomous taxation on manager bonuses, which was also in question there, the same having occurred in other cases with respect also to this taxation, and likewise the autonomous taxation on indemnities to managers for cessation of duties, of which cases Nos. 659/2014-T and 697/2014-T are examples);

b) they still tax the income, as they are a substitute for the alternative measure of increasing taxable income via the non-deductibility of the expense or charge on which the autonomous taxation is levied (cfr. in particular cases Nos. 80/2014-T and 187/2013-T);

c) because they are IRC, the rule directed at the collection (tax assessed) of IRC contained in subparagraph (a) of paragraph 1 of Article 45 of the IRC Code should be applied to them;

d) extracting a more general rule, as the decision in case No. 59/2014-T does, "the autonomous taxation of which legal entities are taxpayers are considered IRC, so the rules of CIRC that do not conflict with their special form of incidence and applicable rates shall apply to them." (underlined by us).

They apply, therefore, equally, to the rule directed at the IRC collection contained in subparagraph (c) [until 2013, subparagraph (b)] of paragraph 2 of Article 90 of the IRC Code, as there is no apparent obstacle to this in "its special form of incidence and applicable rates".

…

Indeed, nowhere in the law is it excluded from these tax benefits or from the PEC the collection or parts of the IRC collection resulting from anti-tax evasion legislative measures [exclusion of costs effectively incurred by the company due to lack of the requirement of indispensability (Articles 23 and 23-A of the IRC Code), transfer pricing (Article 63 of the IRC Code), regarding real property transactions (Article 64 of the IRC Code) or as a result of transactions or direct allocation of profits earned by entities domiciled in tax havens, etc].

In none of these cases, despite the measure in question having anti-evasion objectives much more evident than those that could be associated with the more common or current autonomous taxation (and statistically more important in terms of revenue [travel allowances, representation expenses and charges with vehicles used by company employees]), the additional IRC collection attributable to these measures ceases to be what it is – IRC collection – for purposes, also, of interaction with tax benefits under IRC and, as well, for purposes of interaction with the PEC".

vi) Constitutional questions were then addressed:

"Therefore, if the AT understands that in that Article 90 of the IRC Code is not included the IRC collection resulting from autonomous taxation (calculated in accordance with Article 88), but only the IRC collection resulting from taxable profit (calculated in accordance with Article 87), it would still have to be concluded all the same that, after all, the assessment of autonomous taxation itself is, in itself, illegal, by force both of Article 8, paragraph 2, subparagraph (a), of the General Tax Code ("LGT"), and of Article 103, paragraph 3, of the Constitution of the Portuguese Republic: "No one can be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not made in accordance with law." (Article 103, paragraph 3, of the Constitution of the Portuguese Republic; underlined by us).

And by force of this illegality, the assessment of autonomous taxation in question must then be annulled, now on the basis of this other reason.

…

In a scenario in which, despite all the arguments set out above, it is understood that it is not possible to carry out the deduction of tax benefits from the amounts due to autonomous taxation, arguing that, despite autonomous taxation being IRC in its essence, its assessment is not framed in the norm of IRC assessment enshrined in Article 90 of the IRC Code (which can only be conceived as a mere theoretical hypothesis), then the Claimant requests, subsidiarily, that the self-assessment of the taxation period 2015 of the Claimant and its respective Tax Group be annulled, in the portion corresponding to autonomous taxation, by the fact that they have been assessed and collected without legal basis for the purpose".

vii) The most recent framing of the question is finally addressed:

"With the State Budget Law for 2016 (Law No. 7-A/2016, of 30 March, hereinafter referred to as "LOE 2016"), Parliament intervened in this matter at the request of the AT, and reiterated that Article 89 of the IRC Code also applied to the assessment of autonomous taxation (part 1 of the new paragraph 21 of Article 88 of the IRC Code). Inexplicably, it did not expressly reiterate that Article 90 of the IRC Code also applies to the assessment of autonomous taxation, which, given its paragraph 1, which specifies what had been announced in the preceding Article 89, is not understood.

But it did not limit itself to this. It went further and, running counter to what resulted from the peaceful judicial and AT characterization of autonomous taxation collection as IRC collection, the legislature in the LOE 2016 opted to exclude the application of part of the provision of Article 90 of the IRC Code for the collection of IRC, from the collection of autonomous taxation in IRC (part 2 of the new paragraph 21 of Article 88 of the IRC Code).

All of this is found in the new paragraph 21, added by Article 133 of LOE 2016 to Article 88 of the IRC Code:

"21 - The assessment of autonomous taxation in IRC is carried out in accordance with the terms provided for in Article 89 and is based on the values and rates that result from the provisions in the previous paragraphs (part 1), with no deductions being made to the total amount calculated (part 2).".

And it was not by here (part 2) that the legislature stopped. At the request of the AT, it further added that its legislative intervention would have an interpretative character:

"The wording given by the present law to paragraph 6 of Article 51, paragraph 15 of Article 83, paragraph 1 of Article 84, paragraphs 20 and 21 of Article 88 and paragraph 8 of Article 117 of the IRC Code have an interpretative nature." (Article 135 of LOE 2016).

…

In conclusion, and making a note on this point relating to LOE 2016:

a) It is settled case law (and AT doctrine, when it suits it) that autonomous taxation in IRC, is IRC; and that the IRC assessment rules contained in Articles 89 et seq. of the IRC Code apply to it.

b) With regard to the triangle "2016 State Budget Law, Constitution and tax benefits to encourage investments provided for in separate legislation", of which the tax benefit in question (RFAI) is an example, it was concluded, a conclusion which, with all due respect, the Claimant also makes its own, in the arbitration award of 28 April 2016, delivered in case No. 673/2015-T (Jorge Lopes de Sousa, A. Sérgio de Matos and Luís Miranda da Rocha), on its p. 32: "(...) given that the tax benefit is a quid pro quo for the adoption of the legislatively desired and incentivized behavior, it would be incompatible with the constitutional principle of trust, inherent in the principle of the democratic rule of law (Article 2 of CRP), not to recognize those behaviors the favorable tax effects provided for in the law in force at the time they occurred. Therefore, if hypothetically Law No. 7-A/2016 intended to eliminate, wholly or partially, the favorable tax effects that Law No. 49/2013 [in that case the CFEI was in question] established for taxpayers who adopted the behavior provided for therein, it would be materially unconstitutional, by violation of that principle." In the same sense pronounced the already cited awards delivered in cases Nos. 740/2015-T, 784/2015-T and 5/2016-T, with respect to the deduction of SIFIDE and RFAI from the collection of autonomous taxation.

c) And with regard to the parallel question of the deduction of the PEC from the autonomous taxation collection in IRC, also already with consideration of the 2016 State Budget Law, the arbitration award of 28 June 2016, delivered in case No. 775/2015-T (José Baeta de Queiroz, Eva Dias Costa and Filomena Oliveira) expressed itself as follows: "In the case sub judice, for all that has already been explicitly stated above, it is understood that the text of the law in force at the date of the facts in question did not allow for the conclusion that the deduction of special payments on account to the part of the IRC collection that resulted from autonomous taxation was prohibited. This is because, as we said above, the legislature nowhere pointed to this solution and, in Article 90 of CIRC, did not distinguish, with respect to the possible deductions from the IRC collection, between that which resulted from autonomous taxation and the remainder. And where the law does not distinguish, it is not for the interpreter to distinguish. Moreover, as stated above, it is understood that this solution is still not, with sufficient clarity, the one that results from paragraph 21 of Article 88 of CIRC and that, therefore, the doubt still remains. The legislature, in fact, in Article 90, as to the possibility of deductions provided for there, still does not distinguish, with respect to the possible deductions from the IRC collection, between that which resulted from autonomous taxation and the remainder. If this is what it intends to do with the new paragraph 21 of Article 88, the wording is not clear and the article is systematically poorly inserted. The legislature could and should have been clearer as to the deductions it prohibits and to the question it intends to resolve in declaring it gives an interpretative character to this – among other – new rule. We therefore understand that paragraph 21 of Article 88 of CIRC does not have an interpretative character with respect to the question under discussion, not applying to facts occurring before its entry into force, namely, to the facts and assessments sub judice".

d) It should be noted that certain statements of the AT that have been witnessed, made with the intention of giving the idea that it does not apply the paragraph 2 (deductions from collection) of Article 90 of the IRC Code to the collection of autonomous taxation, are not true. Because it does: source withholdings are (peacefully) offset from the autonomous taxation collection. And the same occurs with (normal) on-account payments, the reimbursement of which is made (cfr. Article 104, paragraph 2, of the IRC Code) whenever the set of IRC collections of the base and autonomous taxation in IRC is not sufficient. All of this is done, applies, has always been done (see the AT's calculation formula of fields 367 and 368 of table 10 of the Model 22 income declaration form).

e) The inconsistency lies in the AT's refusal to apply the same to the collection of autonomous taxation in IRC with respect to other portions equally deductible from the IRC collection. And the logical impossibility lies in the interpretation of the exact same expression in the exact same provision (paragraph 2 of Article 90 of the IRC Code: "To the amount calculated in accordance with the previous paragraph the following deductions are made…") with opposite meanings depending on whether the deductible portion, or subparagraph in question, is one or another.

f) Falling equally, apparently, into logical impossibility, LOE 2016 if on the one hand reaffirmed that Article 89 of the IRC Code applies to autonomous taxation (part 1 of the new paragraph 21 of Article 88 of the IRC Code), on the other hand excluded autonomous taxation from paragraph 2 of the following Article 90 (part 2 of the new paragraph 21 of Article 88 of the IRC Code). And to both of these prescriptions, of opposite meaning, it attributed, at first sight, and contradictorily, an interpretative character. This appearance does not withstand, however, analysis, for the reasons to be summarized below.

g) Before, however, entering into the qualitative and conceptual analysis, it is emphasized that the perspective of counting votes (or weighing the inclination of case law) up to 30 March 2016 is a first symptom that one is dealing with an innovative law as to the exclusion prescribed in part 2 of the new paragraph 21 of Article 88 of the IRC Code.

h) Moving to qualitative and conceptual analysis, as stated in the Supreme Court award uniformizing case law, delivered in case No. 075143, of 2 March 1994, citing Baptista Machado, "[i]n order for a new law to be truly interpretative, two requirements are necessary: that the solution of the prior law be controversial or, at least, uncertain; and that the solution defined by the new law fall within the framework of the controversy and be such that the judge or interpreter could reach it without exceeding the limits normally imposed on the interpretation or application of law." (underlined by us).

i) It can, and should, be concluded that Article 135 of LOE 2016 refers only to part 1 of the new paragraph 21 of Article 88 of the IRC Code, an interpretation which by the negative is authorized by the manifest incorrectness of the wording of that Article 135 (as developed above), revealing the little care the legislature had in being precise, and which by the positive is authorized by the presumption that the legislature adopted the most correct solutions and by the directive of interpretation in accordance with the Constitution (at a more advanced stage of this summary of the analysis additional basis for this interpretation of Article 135 of LOE 2016 will be presented).

j) In addition, as developed above, the assignment of an interpretative nature to a tax rule does not by itself trigger the application of the regime for the application of laws in time provided for in the Civil Code. Making concrete, and synthesizing, the regime for the application of laws in time provided for in the Civil Code (which includes by its own right its Article 13), does not apply with respect to matters that have a private regime for that purpose, in obedience to different principles, as is the case (currently) with taxes: cfr. Article 12 of LGT and Article 103, paragraph 3, of the Constitution.

l) In any case Article 13 of the Civil Code and the prescription of retroactivity contained therein only applies to interpretative rules, as opposed to false interpretative rules. And part 2 of the new paragraph 21 of Article 88 of the IRC Code is, assuming it was really the intention of the legislature to assign it an interpretative character (a matter to which we will return below), a false interpretative rule.

m) Indeed, where is the interpreted rule found, the object of the interpretation? No part of LOE 2016 results in the identification of the rule which part 2 of the new paragraph 21 of Article 88 of the IRC Code would be intended to interpret. Which constitutes yet another symptom that one is dealing with a normative novelty, as opposed to an interpretative view of an old rule.

n) Admitting, for the sake of argument, that the rule subject to interpretation is paragraph 2 of Article 90 of the IRC Code (no other possible candidate is apparent), the relevant question then becomes this: what ambiguity is detected in the reference thereto to IRC that was not also equally shared at that same time both by the preceding paragraph 1 of the same Article 90, and by the preceding Article 89?

o) That it be seen, no ambiguity or opacity: all these rules are directed to the assessment of IRC, without any ambiguity, in the post-regulation phase of the primary collection (which is obtained by the application of IRC rates to the taxable matters of IRC, in accordance with the preceding Articles 1 to 88 of the IRC Code).

p) Which leads us to yet another strong reason to consider that part 2 of the new paragraph 21 of Article 88 of the IRC Code is not interpretative for purposes of application of law in time, that is, for purposes of activating the provision of Article 13 of the Civil Code (assuming, for the sake of argument, that this is applicable in matters that have private regulation regarding the application of law in time).

q) Indeed, how can both parts, 1 and 2, of the new paragraph 21 of Article 88 of the IRC Code, be simultaneously interpretative of what Articles 89 and 90 of the IRC Code provide (both inserted in the same phase of IRC assessment, post-obtaining of the primary collection), in opposite senses? How can they be simultaneously interpretative in the sense that the IRC of Article 89 also includes autonomous taxation (part 1 of paragraph 21 of Article 88), and in the opposite sense that the IRC of Article 90, at least that of its paragraph 2, does not, include autonomous taxation?

r) They cannot, that is a logical and systemic impossibility. One of the two prescriptions, either that of part 1, or that of part 2, of the new paragraph 21 of Article 88 of the IRC Code, does not have, and does not necessarily have, by logical impossibility, an interpretative character.

s) And knowing from the overwhelming case law, accompanied by the AT, in the sense of the characterization of the collection of autonomous taxation in IRC as possessing the nature of IRC, it is easy to conclude that who in this duality of prescriptions of opposite meaning has an interpretative nature is part 1. And that therefore, and necessarily, part 2 of the new paragraph 21 of Article 88 of the IRC Code has an innovative character (against the current, in the case against the insertion of the primary collection of autonomous taxation in the IRC collection).

t) And with this the first of the qualitative reasons presented above is reinforced: the logical impossibility detected, the antinomy, is only resolved if the assignment of an interpretative nature to the new paragraph 21 of Article 88 of the IRC Code, by Article 135 of LOE 2016, is interpreted as wishing to refer to part 1, and not to part 2, of the referred paragraph 21.

u) If, despite all the reasons listed above, it is still understood that (i) Article 135 of LOE 2016 (Law No. 7-A/2016, of 30 March) assigned an interpretative nature also to part 2 of the new paragraph 21 of Article 88 of the IRC Code, that is, also to the normative segment "with no deductions being made to the total amount [of autonomous taxation in IRC] calculated", introduced by the same LOE 2016 (by its Article 133), (ii) and that this would result in the application of Article 13 of the Civil Code while it prescribes the retroactive application of interpretative laws,

v) it is believed that one would then be facing a material unconstitutionality of the said Article 135 of LOE 2016, by violation of the prohibition of retroactivity in tax matters provided for in Article 103, paragraph 3 of the Constitution, whether or not one has concluded (and it is understood that one should not), that one is facing a law that is materially interpretative (see the Constitutional Court award No. 172/00, and likewise Saldanha Sanches in Fiscalidade, No. 1, January 2000, "Interpretative Law and Retroactivity in Tax Matters, pp. 77 et seq., in particular 87 and 88, and in his Manual of Tax Law, 3rd Edition, Coimbra Editora 2007, p. 193 et seq., in particular 196, and also Jónatas E. M. Machado and Paulo Nogueira da Costa, Course of Tax Law, Coimbra Editora 2012, p. 76), and by violation, also, of the principle of separation of powers and the principle of independence of the judiciary.

x) Violation, therefore, also, of Article 2 (democratic rule of law, and separation and interdependence of powers, being that as to this latter aspect in the case at issue the perspective of interdependence – and consequently negation of excesses and occupation of space that does not belong to it – of the political-legislative power vis-à-vis the judicial power), of Article 111, paragraph 1 (separation and interdependence of the organs of sovereignty, which is still a material limit to revision – Article 288, subparagraph (j), of the Constitution), and Article 203 (independence of the courts, another material limit to revision – Article 288, subparagraph (m), of the Constitution), all of the Constitution), all of the Constitution.

z) On this matter the above-cited Constitutional Court award No. 267/2017, of 31 May 2017, already ruled, which found unconstitutional the rule in question here".

viii) Terminating the petition with a request for compensatory interest:

"The claimant paid tax in an amount higher than legally due (cfr. Doc. No. 1 in field 367 and, Doc. No. 14), so, declared the illegality of the (self-)assessment in the part here petitioned, the claimant is entitled not only to the respective reimbursement, but, also, under Article 43 of the General Tax Code ("LGT"), to compensatory interest.

Such interest calculated on € 70,941.82, or subsidiarily on € 141,883.66, counted from 31 May 2016 until complete reimbursement of that amount of tax (autonomous taxation under IRC) improperly paid.

The right to the payment of compensatory interest corresponds to the realization of a right with constitutional basis, provided for in Article 22 of the Portuguese Republic Constitution (CRP), where it is established that "the State and other public entities are jointly and severally liable, together with the holders of their organs, officials or agents, for actions or omissions taken in the exercise of their functions and because of that exercise, which result in the violation of rights, freedoms and guarantees or harm to others.".

In these terms, Article 43 of LGT, by recognizing the right to compensatory interest, merely concretizes some cases in which taxpayers are entitled to be indemnified by acts of the tax administration, without prejudice to a more generic pre-existing indemnification right".

ix) The following conclusions are presented:

"From the above, in summary, it results that either the rejection of the complaint referred to above, or the IRC self-assessment (including its autonomous taxation rates) relating to the 2015 tax year, is tainted by a material defect of violation of law, in that it should not prevent the deduction of RFAI from the part of the IRC collection corresponding to the autonomous taxation rates, starting with the oldest. Accordingly, it should:

a) be declared the illegality and annulled the rejection of the complaint to the extent that it refused the annulment of the illegal part, in the terms discussed here, of the IRC self-assessment relating to the part produced by the autonomous taxation rates, of the 2015 tax year, thereby violating the principle of legality;

b) be declared the illegality of this self-assessment (and be consequently annulled), in the part corresponding to the amount of € 70,941.82;

c) be, consequently, recognized the right to reimbursement of this amount and, as well, the right to compensatory interest for the payment of tax improperly levied, counted, until complete reimbursement, from 31 May 2016;

d) subsidiarily, if it is understood that Article 90 of CIRC does not apply to autonomous taxation, then it should be declared the illegality of the assessment of autonomous taxation (and be consequently annulled) by absence of legal basis for its carrying out (cfr. Article 8, paragraph 2, subparagraph (a), of LGT, and Article 103, paragraph 3, of the Constitution), with the consequent reimbursement of the amount of € 141,883.66, and the payment of compensatory interest also counted from 31 May 2016".

x) The means of proof of the "facts invoked consist of the aforementioned documents Nos. 1 to 15, there being, given that it is essentially a matter of legal questions, no other means of proof to produce:

Doc. No. 1 - Self-assessment of IRC (Form 22), aggregate, relating to the 2015 tax year

Doc. No. 2 - Self-assessment of IRC (Form 22), aggregate, relating to the 2015 tax year, substitution

Doc. No. 3 - Self-assessment of IRC (Form 22), aggregate, relating to the 2015 tax year, substitution

Doc. No. 4 - Rejection of the complaint

Doc. No. 5 - Certification of RFAI to be deducted from the IRC collection and attachments

Doc. No. 6 - Individual Forms 22

Doc. No. 7 - Negative debt certificates

Doc. No. 8 - Form 22, aggregate, 2016 tax year

Doc. No. 9 - Certification of the breakdown of Autonomous Taxation of 2015

Doc. No. 10 - Award delivered in case No. 769/2014-T

Doc. No. 11 - Response from DSIRC in 2013 to a taxpayer's information request regarding the use of the collection of autonomous taxation

Doc. No. 12 - Doctrinal sheet published with the AT's understanding of the increase in autonomous taxation rates when there is a tax group/RETGS applies

Doc. No. 13 - Decision in which the AT affirmed that IRC assessment rules applied to autonomous taxation

Doc. No. 14 - Proof of payment of Form 22 of the 2015 tax year

Doc. No. 15 - Concordant dispatch of the Deputy General Director, in substitution of the General Director of AT, of 5 June 2013, entered in Information from DSIRC No. 929/2013, of 24 May 2013 (deduction from the collection of the IRC surtax "state levy" of tax benefits that operate by deduction from the IRC collection)".

1. The AT, as respondent, presented a Response, from which the following stands out:

"[The] invoked factual and legal reasons are, with all due respect, far from supporting/sustaining any of the claims made, which should be dismissed.

Both case law and doctrine have abundantly addressed the characterization of the "autonomous taxation" figure in IRC (and in IRS) and the legislative evolution verified since its creation, by Article 4 of Decree-Law No. 192/90, of 09.06, to the present day.

The considerations made in this regard reveal that the figure of autonomous taxation has been used to pursue diverse objectives, which range from the original purpose of preventing evasion and fraud practices – through confidential or undocumented expenses, or payments to entities located in jurisdictions with privileged tax regimes, to the substitution of the taxation of accessory benefits in the form of representation expenses or the attribution of vehicles to workers and members of corporate bodies, in the sphere of the respective beneficiaries – to the purpose of preventing the phenomenon called "dividend washing" (cfr. paragraph 11 of Article 88 CIRC) or of burdening, by fiscal means, the payment of income considered excessive (cfr. paragraph 13 of the same rule).

…

It is thus recognized that the autonomous character of these taxation, resulting from the special configuration given to the material and temporal aspects of the taxable events, imposes, in certain areas, the exclusion or an adaptation of the general rules for the application of IRC.

In reality, the incorporation of autonomous taxation in the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, namely, in the framework of subparagraph (a) of paragraph 1 of Article 90 of CIRC, in separate assessments of the respective collections, by force of obeying different rules.

And that is so, because, in one case, it is a matter of the application of the rate(s) of Article 87 of CIRC to the taxable matter determined in accordance with the rules contained in Chapter III of the Code and, in another case, it is a matter of the application of the rates to the values of the taxable matters relating to the different realities contemplated in Article 88 of CIRC.

…

Only that, contrary to the reductive conclusion drawn from this statement that "the rule directed to the IRC collection contained in subparagraphs (b) and (c) (current (c) and (d)) of paragraph 2 of Article 90 of CIRC shall also be applied to them, as no obstacle to this is perceived in their special form of incidence and applicable rates", it is necessary that an interpretative exercise be performed in order to determine whether the regime of deductions from the IRC collection, as an integral part of the rule-system of this tax and pre-existing to its incorporation in the respective autonomous taxation, also extends to the (multiple) collections of these autonomous taxation.

As well indicated in the decision of CAAD delivered in Case No. 113/2015-T5 –

«But if that recognition [that the tax calculated by application of the autonomous taxation rates regulated in Article 88 of CIRC is also tax on the income of legal entities] can be a starting point, the solution of the case sub judicio needs to go a little deeper and ascertain what is the regime applicable to the IRC calculated through autonomous taxation rates.»

That is, it is important to determine whether the deductions provided for in paragraph 2 of Article 90 of the IRC Code are included in the areas of conflict that result from the application of the general IRC regime to the discipline of "autonomous taxation".

And the cognitive path traced, with the purpose of uncovering such conflicts, consisted of monitoring the legislative evolution of autonomous taxation, its nature and purposes and establishing its confrontation with the conceptual structure of IRC, allowing to conclude that the said autonomy of the figure of autonomous taxation in relation to this tax has always asserted itself with great intensity, from its creation by its own legislation, which defined its structural elements – taxable events and rates - naturally conditioned by the special objectives pursued.

It is thus stated, in the arbitration decision delivered in case No. 113/2015-T that being "autonomous taxation" [are] entirely alien to the pursuit of the conceptual objective of CIRC, it is necessary to conclude that there will be situations in which the general rules will not be suitable to regulate the situation, as they pursue a different purpose. It is precisely in these situations in which the pre-existing rules of CIRC contribute to the determination of real income, that their inadequacy for governing the "autonomous taxation" will be verified. In these cases of dissonance there will be such conflicts that it matters to resolve. (our underline)[»].

Continuing, in that line of reasoning, it adds that

«These conflicts result and are resolved through normative interpretation. In essence it will be necessary to resolve the apparent conflict when the legislative thought underlying the rule of the general regime of the tax on the one hand and the rule special that regulates the autonomous taxation on the other hand, is not reconcilable, i.e., from its application it would be reached a purpose not pursued by the rule in question.

This conflict in the purposes to be achieved by each of the rules is evident at the moment the so-called "autonomous taxation" were introduced into the Portuguese tax system.

It is not seen that the reform of CIRC operated in 2000-2001 introduced any significant change to the code. It only introduced the mechanism to combat expenses considered undesirable that was already contained in separate legislation, slightly expanded the scope of application but did not adapt in any way the assessment procedure. It is therefore believed that the characterization of the regime that already previously prevailed was maintained, continuing to have to perform the interpretation of the rules in order to prevent effects contrary to the legislative intent.

The successive amendments to this article did not affect in any way the (dis)balance of the system, which was maintained until the date of the facts.»

According to this interpretative thesis, whenever incompatibility is detected between the objectives inherent to the general structure of IRC and the objectives that govern autonomous taxation, the general rules that integrate the discipline of this tax are not, in principle, applicable to it.

Whence it results as evident that the incorporation of autonomous taxation in the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, namely, in the framework of subparagraph (a) of paragraph 1 of Article 90 of CIRC, in separate assessments of the respective collections, by force of obeying different rules, because, in one case, it is a matter of the application of the rate(s) of Article 87 of CIRC to the taxable matter determined in accordance with the rules contained in Chapter III of the Code, i.e., having profit as a basis and, in another case, it is a matter of the application of the rates to the values of the taxable matters relating to the different realities contemplated in Article 88 of CIRC.

It should be clarified that the assessment of autonomous taxation is carried out on the basis of Articles 89 and 90, paragraph 1, of the IRC Code but, applying different rules for the calculation of the tax:

(1) in one case the assessment operates, by the application of the rates of Article 87 to the taxable matter determined in accordance with the rules of Chapter III of the Code and

(2) in another case, various collections are calculated depending on the diversity of the facts that originate the autonomous taxation.

Whence it results that the amount calculated in accordance with subparagraph (a) of paragraph 1 of Article 90 does not have a unitary character, as it comprises values calculated in accordance with different rules, to which are associated also differentiated purposes, so that the deductions provided for in the subparagraphs of paragraph 2 can only be made to the part of the IRC collection with which there is a direct correspondence, in order to maintain the coherence of the conceptual structure of the rule-regime of the tax.

The natural consequence of the autonomous character of the amounts of IRC levied on the realities that integrate the various taxable events contemplated in Article 88, is manifested, prima facie, in the meaning attributed to the expressions used, either in provisions of the IRC code, maximally in Article 90, paragraph 2, or in other rules, which refer to: "amount calculated in accordance with paragraph 1 of Article 90" or "tax levied in accordance with paragraph 1 of Article 90" or "deduction from the IRC collection", which must necessarily take into account the systematic framework and the ratio legis of the rules in which they are used.

Thus it is that, in the context of on-account payments (Article 105, paragraph 1), the "tax levied in accordance with paragraph 1 of Article 90", which serves as the basis for calculating anticipated payments on account of IRC, which must be made during the fiscal year in which the taxable event is in formation, the only interpretation consistent with the nature of the taxable event factor that occurs successively, by the passing of a certain period of time and tend to prolong in time in a continued manner, goes in the direction of the understanding that the tax levied is resulting from the application of the rates provided for in Article 87, paragraph 1, and to the taxable matter determined in accordance with Article 15, paragraph 1, because as stated by the Constitutional Court, in award No. 310/2012, case No. 150/12 «Already with respect to autonomous taxation in IRC, the taxable event of the tax is the actual carrying out of the expense, not being faced with a complex fact, of successive formation over a year, but an instantaneous tax fact.»

…

Well then, when it comes to the deductions provided for in paragraph 2 of Article 90 of CIRC, the Claimant claims – anchoring itself, with all due respect, in a simplistic and decontextualized reading of this normative – that the expression "amount calculated in accordance with the previous paragraph" should be understood as covering the sum total of the amount of IRC, calculated on the taxable matter determined in accordance with the rules of Chapter III and the rates provided for in Article 87 of the same Code, and the amount of autonomous taxation, calculated in accordance with the rules provided for in Article 88.

Now, the result of this interpretation would imply that, in the basis of calculation of on-account payments defined in paragraph 1 of Article 105 of the IRC Code – and in terms identical to those used in paragraph 2 of Article 90, namely:

«On-account payments are calculated on the basis of the tax levied in accordance with paragraph 1 of Article 90 (…)»

–, autonomous taxation would be included.

Indeed, for the basis of calculation of on-account payments only the IRC calculated on the basis of the taxable matter determined in accordance with the rules of Chapter III and the rates of Article 87 of the respective Code is considered.

As, moreover, is understood by the AT and accepted peacefully by doctrine and taxpayers in general.

For it is to be noted that the coherence and adequacy of this understanding is based on the very nature of on-account payments of the tax due at the end, which, in accordance with the definition of Article 33 of LGT are

«anticipated monetary deliveries that are made by taxpayers in the period of formation of the tax event», constituting a «(…) form of approximation of the moment of collection to that of the perception of income in order to fill the situations in which this approximation cannot be effected through source withholdings.».

Therefore, in good logic, it only makes sense to conclude that its basis of calculation corresponds to the amount of the IRC collection resulting from the taxable matter that is identified with the profit/income of the taxpayer's fiscal year.

Thus, the delimitation of the content of the expression used by the legislature in paragraph 2 of Article 90 of CIRC, "amount calculated in accordance with the previous paragraph", and in paragraph 1 of Article 105 of CIRC, "tax levied in accordance with paragraph 1 of Article 90", should be made consistently;

That is, consequently being assigned to it, in both provisions, a univocal sense.

Which is equivalent to saying that it corresponds to the amount of IRC calculated by the application of the rates of Article 87 to the taxable matter determined on the basis of profit and the rates of Article 87 of the Code.

Being the only (and consistent) interpretation of the expression "amount calculated in accordance with the previous paragraph" with the nature of the deductions referred to in the subparagraphs in the subparagraphs of paragraph 2 of Article 90 of the IRC Code, relating to:

• tax credits for double international taxation, whether legal or economic (current subparagraphs (a) and (b));

• tax benefits (current subparagraph (c));

• special on-account payment (current subparagraph (d));

• and source withholdings (current subparagraph (e)).

And this, in light of the interconnection that, on the material level, must be established between the realities reflected by these deductions and the origin of the amount from which they are subtracted.

In reality, it should be noted that the common thread in all the realities reflected in the deductions referred to in paragraph 2 of Article 90 of CIRC lies in the fact that they relate to income or expenses incorporated in the taxable matter determined on the basis of the taxpayer's profit or anticipated payments of tax, being, for that reason, entirely alien to the realities that integrate the taxable events of autonomous taxation.

As to tax credits intended to eliminate double international taxation (legal and economic) the respective rules (Articles 91 and 91-A of CIRC), which regulate their method of calculation, specify that the income in question must have been included in the taxable matter, a magnitude which, for obvious reasons, can only be that determined on the basis of profit (Chapter III of the Code) which constitutes the central nucleus of IRC.

In truth, as referred to in points 35 and 36 of Information No. 1980/2013, from the IRC Services Department, to which the Claimant appeals in the Petition, the taxable matter that serves as the basis of calculation for autonomous taxation does not include income from foreign sources susceptible to double taxation in IRC, and therefore, nothing would justify the tax credit being exercised on the amount resulting from that taxation.

For its part, with respect to tax benefits, the tax credit or deduction from collection constitutes one of the technical modalities, among those provided for in paragraph 2 of Article 2 of the Tax Benefits Framework, that have been adopted, especially, in measures providing fiscal incentives for investment, fundamentally, for two reasons:

• (1) One, linked to the operationality of the benefit, by the transparency and simplicity of the calculation of the fiscal expense associated with it, which, as is known, represents foregone fiscal revenue (from IRC), and,

• (2) another, which concerns the philosophy underlying the benefits, that is, their indexation to the profitability of the investment, according to which

«the deduction of a certain percentage of an investment from the collection of a tax on profits only takes effect if there is profit, which rewards investment profitability».

Thus, also, for deductions from collection as title of tax benefits, the amount to which they are effected can only relate to the tax levied on the basis of the taxable matter, determined in accordance with the rules of Chapter III and the rates provided for in Article 87 of CIRC.

This, under pain of an inconsistency resulting from the subversion of the necessary interrelation that, on the material level, must exist between the objectives pursued by the benefits and the very magnitude represented by profit.

…

Extrapolating to the deduction of CFEI, Article 3, paragraph 5, subparagraph (a), of Law No. 49/2013, itself provides a clarifying answer, by prescribing that

«When the special regime for taxation of groups of companies is applied, the deduction provided for in paragraph 1: a) Is made to the amount calculated in accordance with subparagraph (a) of paragraph 1 of Article 90 of the IRC Code, on the basis of the taxable matter of the group;».

Now, the taxable matter of the group, can only be that referred to in paragraph 1 of Article 69

"Where there is a group of companies, the parent company may opt for the application of the special regime for determination of taxable matter in relation to all companies in the group.",

whose calculation obeys, among others, the special rules provided for in Articles 70 and 71, where no interference from autonomous taxation is detected which, moreover, is determined autonomously by each company belonging to the group.

Whence it results that if the legislature clarified, in the cases in which the special regime for taxation of groups of companies is applied, that the part of the IRC collection to which the deduction of the tax benefit would be made was that calculated on the basis of the taxable matter of the group, it would be poorly understood that in the cases in which the company is taxed on an individual basis the deduction of the benefit was made to the IRC collection that included the part relating to autonomous taxation.

…

To accept as legitimate the Claimant's claim would imply recognizing that the availability to enjoy these tax benefits was expanded as larger expenses subject to autonomous taxation were realized, which cannot but be qualified as an absurd result not desired by the legislature, because, in addition to being inconsistent with the nature and objectives pursued by the measures of incentives for investment, it would likewise frustrate the purpose to be pursued by autonomous taxation which, in this concrete case, is to combat tax evasion and fraud.

…

Indeed, let us reiterate that it belongs to the plane of evidence that the mechanism of autonomous taxation of the set of realities provided for in Article 88 of CIRC aims, primarily, to safeguard the general balances of the very tax system itself, the specific balances of IRC and the revenue of the very tax.

That is, it aims to prevent that through the significant assertion of charges such as those provided for in Article 88, no distortions affecting the system are introduced and the expectation about what should be the "normal" revenue of the tax does not come to naught.

In the case, as is likewise well-known, it is about discouraging the realization/assertion of these expenses, starting from the fact that, by their nature and purposes, they can more easily be subject to diversion to consumption which, in essence, are private or correspond to charges which do not cease to have, also, as a specific and ultimate purpose, the avoidance of tax.

…

With respect to the basis invoked by the Claimant (V., points 44, 123 to 131 pi) according to which the AT, through the IRC Services Department (DSIRC), has already pronounced on this matter, «at the request of (another taxpayer) having then excluded deductions from the collection of autonomous taxation only with respect to tax credits for double taxation.», this is an insistence on a hypothetical administrative understanding that does not exist.

As can be confirmed by reading the cited Information, the AT-DSIRC pronounced itself, only, on:

• the possibility of the tax credit for the elimination of double international taxation, by force of Convention in force with the source State of the income, being deducted from the sum resulting from the IRC levied in accordance with the rules of the IRC Code and from the amount of the municipal surtax levied, in accordance with the respective legislation;

• the inclusion of the state levy for purposes of application of the provisions of subparagraphs (a) and (b) of paragraph 2 of Article 91 and paragraph 1 of Article 91-A of the IRC Code; and

• the disregard of autonomous taxation in the amount calculated in accordance with paragraph 1 of Article 90 for purposes of deduction of any tax credit for double international taxation.

Given this, one cannot attribute to the AT a position on the deductions from the collections of autonomous taxation of credits for tax benefits of SIFIDE II or RFAI, since with respect to such matters no understanding was established and, therefore, it is not possible to conclude that the instructions expressed regarding the completion of the periodic income declaration form, Model 22, have been changed.

Moreover, with respect to this, reference should be made to the arbitration decision delivered within case No. 113/2015-T – which, by its relevance, will be addressed below – where it is stated that the tribunal will not examine in detail such document, because:

«(…) The consultation referred to was not made to the AT by the Claimant, did not refer specifically to the situation sub judicio and the AT did not pronounce itself on the subject matter of this case. (…)»

The Claimant also refutes (V., points 101 to 108 pi) what it designates as «an attempt to extrapolate from the transparent company regime» and concludes that Article 90, paragraph 5, contemplates an atypical situation that cannot be extrapolated to companies not covered by that regime.

However, the AT never had the intention of performing any exercise of extrapolation of the rule of Article 90, paragraph 5, to companies that are not partners of transparent entities, what is intended to be underlined is that the legislature, in this rule, provides a clear indication as to the determination of the amount to which the deductions referred to in paragraph 2 of the same article are effected.

And that indication is presented with crystalline clarity, because what it says is that the deductions referred to in Article 90, paragraph 2, relating to entities to which the transparent company regime applies, are imputed to the respective partners or members «and deducted from the amount calculated on the basis of the taxable matter in which the imputation provided for in the same article has been taken into account.»

Now, the taxable matter in which the imputed results are included is that which is determined on the basis of profit and, therefore, there remain no doubts that it is to the amount calculated in accordance with paragraph 1 of Article 90, determined on the basis of that same taxable matter, that the deductions relating to tax benefits provided for in subparagraph (b) of paragraph 2 of the same article must be made.

Differently from what is stated, it is not a matter of any illegitimate action as we will proceed to demonstrate with a simple example: a company A owns 100% of the capital of a transparent company entity B, and both had access to the tax incentives covered by SIFIDE II and RFAI. Since the transparent entity B imputes its taxable matter to company A, in accordance with Article 6, paragraph 1, it also makes to it the imputation of the deductions to which it is entitled, by title of SIFIDE and RFAI (cfr., Article 90, paragraph 5).

Well then, in accordance with this rule, company A may effect the deductions imputed by the transparent entity B to the amount of IRC calculated on the taxable matter in which the taxable matter imputed by the transparent entity is integrated, that is, that which, in accordance with Article 15, paragraph 1, has profit as its basis and, naturally, the deductions on account of SIFIDE and RFAI relating to company A itself are equally deducted from the same amount.

It would be entirely devoid of sense and the letter of the law does not consent to it, to admit that company A could effect the deductions of the tax benefits imputed by the transparent entity to the amount of IRC calculated on the taxable matter determined on the basis of profit, and that the deductions of the tax benefits that the company itself used would be made to a different amount that included autonomous taxation.

In summary, [t]here is no contradiction between the assimilation of autonomous taxation with IRC, "for purposes of procedure and method of assessment and payment rules (Articles 89 et seq. and 104 of CIRC)" affirmed, among others, in the arbitration decision delivered in case No. 79/2014-T and the understanding that the assessment carried out in accordance with Article 90, paragraph 1, is not unitary, in that it comprises multiple assessments of tax, on the one hand, the tax determined on the basis of the taxable matter determined in accordance with Article 15, paragraph 1, of the IRC Code and the rates referred to in Article 87, and, on the other, the assessments of the amounts of tax resulting from the application of the different rates and the taxable matters provided for in Article 88.

…

It is also worth noting that notwithstanding the evidence put forward by the Claimant in the arbitration petition, we do not agree with its statement that «all these judgments (…) decreed in accordance with the understanding and systematic requests of the AT (that autonomous taxation would still be IRC).», because such statement, even though convenient for it, we must admit, is totally decontextualized.

Moreover, contrary to what the Claimant wishes, the AT never defended that Autonomous Taxation is IRC, but rather that it is intertwined with IRC.

See, among others, the provisions in arbitration decisions Nos. 79/2014-T, 95/2014-T where it is provided that:

«the tribunal is not unaware of the problematization regarding the nature and characteristics of autonomous taxation, when contrasted with the tax on the income of legal entities. But the truth is that, if the sense desired by the legislature were dissident from not including it in the referred subparagraph (a) it would have provided for this. Which it effectively did not do, assimilating autonomous taxation with the tax on the income of persons for purposes of procedure and method of assessment and payment rules (Articles 89 et seq. and 104 of CIRC). And, if indeed autonomous taxation does not constitute IRC in the strict sense, it is intertwined with it, having to be contained and for the question that underlies, in the "other taxes" of which the final part of subparagraph (a) of paragraph 1 of Article 45 of CIRC gives us account.»

Without forgetting the evidence that the decisions delivered decided strictly and specifically the non-deduction of Autonomous Taxation from the IRC collection.

Whence it is to be extracted that what is sought by the Claimant will be nothing more than mere extrapolative and unfounded reasoning.

…

Let it be repeated ad nauseam, autonomous taxation, contrary to what is supported in erudite arbitral case law and in the AT's argumentation, although dealing with an IRC collection, is distinguished by not inciding on profits but, rather, on expenses incurred by the taxpayer or by third parties with whom it has relations.

Let it be insisted that in light of its teleology, autonomous taxation, as an anti-abusive fiscal instrument, would be emptied of any practical-tax content in the event the thesis defended by the Claimant in its extremely extensive and prolix discourses were accepted – which would only be conceded by mere academic exercise.

Under pain of subverting the purposes of autonomous taxation, by conferring upon it, with this interpretation, a