Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Pedro Carvalho (President Arbitrator), José Joaquim Monteiro Sampaio e Nora and Fernando Borges de Araújo, designated at the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby decide:
I – REPORT
On 29 September 2017, A..., Tax Identification Number..., with registered office at..., filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), as amended by Article 228 of Law No. 66-B/2012, of 31 December, seeking a declaration of illegality of the act of dismissal of the request for ex officio revision submitted by the Claimant which concerned the act of self-assessment of Corporation Income Tax (IRC) of Fiscal Group B... relating to the financial year 2014, in the amount corresponding to the non-deduction from the IRC collection generated by the autonomous taxation rates of credits determined under the Extraordinary Fiscal Credit for Investment (CFEI) scheme, in the total amount of € 194,264.33, and the decision dismissing the administrative complaint which had that as its object.
To substantiate its request, the Claimant alleges, in summary, that the tax benefits of the CFEI scheme should be deducted from the collection of autonomous taxation because: (i) they may be deducted from the IRC collection determined in accordance with Article 90 of the Corporate Income Tax Code (CIRC); (ii) the collection of autonomous taxation rates is considered as IRC collection, being an integral part of this tax; (iii) the liquidation rules provided for in Article 90 of the CIRC are applicable to autonomous taxation rates and (iv) the Claimant's understanding is consistent with the jurisprudence of the Administrative Arbitration Centre (CAAD) which has already pronounced on this matter.
Subsidiarily, and in the event it is understood that the liquidation of autonomous taxation rates is not carried out under Article 90(1) of the applicable CIRC, the Claimant requests that the illegality of the liquidation of autonomous taxation rates be declared (and consequently annulled) due to absence of legal basis for its implementation, with the consequent reimbursement of the amount of € 341,517.36, and the payment of compensatory interest.
On 29-09-2017, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.
The Claimant did not appoint an arbitrator, and therefore, pursuant to the provisions of Article 6(2)(a) and Article 11(1)(a) of the RJAT, the President of the CAAD Ethics Council designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated their acceptance of the appointment within the applicable deadline.
On 21-11-2017, the parties were notified of these appointments and manifested no intention to refuse any of them.
In accordance with the provisions of Article 11(1)(c) of the RJAT, the collective Arbitral Tribunal was constituted on 14-12-2017.
On 29-01-2017, the Respondent, duly notified for this purpose, submitted its response defending itself through challenge of the petition.
Given that in arbitral proceedings the general procedural principles of procedural economy and prohibition of useless acts apply, pursuant to Articles 16(c) and (e) of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with.
A time limit having been set for the submission of written pleadings, the same were submitted by the parties, expressing themselves regarding the evidence produced and reiterating and developing their respective legal positions.
A deadline of 30 days was set for the issuance of final decision, following the submission of pleadings by the Tax Authority, which deadline was extended until the end of the deadline referred to in Article 21(1) of the RJAT.
The Arbitral Tribunal is materially competent and regularly constituted, in accordance with Articles 2(1)(a), 5 and 6(1) of the RJAT.
The parties have legal personality and capacity, are entitled and legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Administrative Order No. 112-A/2011, of 22 March.
The proceedings are not affected by any nullities.
Thus, there is no obstacle to the examination of the matter.
All matters being considered, judgment must be delivered:
II. DECISION
A. MATTERS OF FACT
A.1. Facts Established as Proven
The Claimant was, in 2014, the dominant company and responsible for the self-assessment of Corporation Income Tax (IRC) for the fiscal group (Fiscal Group B...) to which, in the taxation period of 2014, the Special Tax Regime for Groups of Companies (RETGS) was applicable, and which was composed, in the said taxation period, of itself and by the companies:
- C..., SA;
- D... SA (designation in 2014; subsequently designated as "E... SA", and currently designated as "F... SA"); and
- G... S.A.
The Claimant submitted on 28 May 2015 the IRC Declaration, Form 22, for the financial year 2014 of its fiscal group, and further submitted a substitute declaration, having determined a final amount of autonomous taxation in IRC of € 341,517.36.
To the tax resulting from the application of autonomous taxation rates in IRC, the Tax Authority's computer system flagged discrepancies ("errors") that prevented the Claimant from entering the amount relating to the said autonomous taxation rates in IRC, deducted, within the amount resulting from the application of these rates, the amounts of tax benefit recognized to the companies in the fiscal group under the Extraordinary Fiscal Credit for Investment (CFEI) scheme.
This resulted in an excess tax paid by reference to the fiscal year in question, as well as the non-reimbursement of an amount to which the Claimant understood it was entitled.
The amount of CFEI available for use by the Claimant at the end of the 2014 financial year amounted to € 802,415.24.
The said amount remained available in sufficient value at the end of the fiscal years 2015 and 2016, and in the year of acquisition of the CFEI, 2013, no utilization of it occurred either.
The Claimant understood, therefore, that it had credits available to offset against the IRC collection in the amount of € 194,264.33, which was not deducted from the autonomous taxation collection for the fiscal year 2014, because this was not allowed by the Tax Authority's computer system.
The Claimant, at the appropriate time, submitted a request for administrative complaint of the tax act of self-assessment of IRC of its Fiscal Group relating to the financial year 2014.
Following submission of the said administrative complaint request, the Claimant was notified of its dismissal on 07-07-2017.
The Tax Authority did not determine the taxable income of the Claimant's Fiscal Group and respective companies by indirect methods.
Neither the Claimant nor the companies forming part of the group at the origin of the CFEI were, at the relevant moment, entities owing the State and social security any taxes or contributions.
A.2. Facts Established as Not Proven
With relevance to the decision, there are no facts that should be considered as not proven.
A.3. Substantiation of Proven and Not Proven Factual Matters
Regarding matters of fact, the Tribunal does not have to pronounce on everything that was alleged by the parties; rather, it is its duty to select the facts that are important for the decision and to distinguish between proved and unproved matters (cf. Article 123(2) of the Code of Tax Procedure and Process (CPPT) and Article 607(3) of the Civil Procedure Code (CPC), applicable by virtue of Article 29(1)(a) and (e) of the RJAT).
Thus, the facts pertinent to the judgment of the matter are chosen and delineated according to their legal relevance, which is established in light of the various plausible solutions to the legal issue(s) (cf. former Article 511(1) of the CPC, corresponding to current Article 596, applicable by virtue of Article 29(1)(e) of the RJAT).
Thus, taking into account the positions assumed by the parties, in light of Article 110(7) of the CPPT, the documentary evidence and the administrative record attached to the case, the facts listed above were considered proven with relevance to the decision.
B. ON THE LAW
The main issue to be decided in these proceedings, which is undoubtedly somewhat complex in its resolution, is, however, simple in its formulation, and concerns, as explicitly formulated by the Claimant, whether or not the Claimant's Fiscal Group has the right to proceed with the deduction, also from the IRC collection generated by the application of autonomous taxation rates, of the said credits relating to CFEI available in the Claimant's sphere.
The perspective on approaching the problem raised is subscribed to, from the outset, entirely as formulated by the Claimant, when it refers that "As a starting point, taking into account the system function (of seeking balance), of ordering, of law" one must take into account in the interpretation "on a point of the system (...) what was decided at another point of the system", with the caveat, equally formulated by the Claimant, that "there may be particularities only relevant with respect to the point of the system in [question], which impose a different decision, precisely because only in this way will the function of system ordering (which creates order) of law be realized: treat the different differently."
Differing from the Claimant, it is held, however, that what is at issue is not whether "for purposes of deductions from the collection of tax benefits (the realities in question in this proceeding), autonomous taxation is not IRC", but whether the IRC regime, viewed from the systematic perspective that is adopted, and summarized above, points toward the deductibility of tax benefits from the IRC collection generated by autonomous taxation rates.
Hence it is concluded that "If such a particularity exists, there will be no incoherence from the system's point of view in deciding" for the non-deductibility of tax benefits from the IRC collection generated by autonomous taxation rates.
The problematic underlying autonomous taxation has been, in this as in other matters, the subject of heated contention between taxpayers and the Tax Authority, a situation which will surely not be unrelated to the proper nature, even anti-systemic, of those taxation rates, within the framework of income taxes, where they originated.
In fact, the discussion that erupted with the new autonomous taxation rates introduced by Law No. 64/2008, of 5 December, and initially focused on the nature of the taxable fact underlying that type of taxation, opened a deep exploratory path regarding the nature of autonomous taxation and its relationship with income taxes, in particular the IRC, which went through the issues of the deductibility of the value of autonomous taxation from the IRC collection, and the nature, presumptive or otherwise, of autonomous taxation on deductible expenses, without having to date been any definitive legislative intervention, doctrinally sustained and coherent, in order to clarify the proper framework of the taxation in question in the building of the income tax from which they emerge, succeeding instead disconnected and circumstantial legislative interventions, which in no way contribute, on the contrary, to the clarification of the nature and function of such taxation rates.
In this context, case-by-case judicial decisions succeed equally circumstantial legislative interventions, generating a context of uncertainty and instability where taxpayers and the Tax Authority have no other route to seek applicable law than perpetuated litigation, leaving to the judicial interpreter the ungrateful task of, in the tangle of norms generated, serving the justice possible.
Let us see, then.
When we speak of autonomous taxation, as is the case, it is convenient from the outset to be aware that we are dealing with a set of disparate situations, which will comprise, at least, three distinct types, namely:
- Autonomous taxation of certain income (e.g., Article 72 of the current Personal Income Tax Code (CIRS), and, it is believed, that provided for in current Article 88(11) of the CIRC);
- Autonomous taxation of certain deductible expenses (e.g., Article 88(7) of the current CIRC);
- Autonomous taxation of other expenses regardless of their deductibility (e.g., Articles 88(1) and (2) of the current CIRC).
From a perspective of functionality/purpose/rationale of autonomous taxation on expenses (excluding, therefore, autonomous taxation of income), several types have also been identified, such as:
- discouraging certain taxpayer behaviors tending to be associated with situations of fraud or tax evasion, as happens, for example, with autonomous taxation rates on undocumented expenses, or payments to entities subject to privileged tax regimes;
- combating erosion of the tax base, as happens, in general, with autonomous taxation rates on deductible expenses;
- discouraging certain expenditures with presumptively non-business purpose, as happens with autonomous taxation rates on vehicle expenses, allowances, or representation expenses;
- taxation of disguised distribution of income to third parties, not taxed in their sphere (fringe benefits), as happens with autonomous taxation rates on vehicle expenses, allowances, or representation expenses;
- penalization for the incurrence of certain expenses, which do not affect the tax base, nor have underlying any untaxed distribution of income to third parties, or potential fraudulent or evasive intent, but which the legislator, perhaps, considered luxurious or sumptuous, as happens with autonomous taxation on certain payments to managers, administrators or managing partners (current Article 88(13) of the CIRC), as well as autonomous taxation on vehicle expenses to the extent it exceeds the normal IRC rate.
These facts become important because by themselves they evidence the disparity and heterogeneity of the situations subject to autonomous taxation, and the futility of, in judicial proceedings, synthesizing and seeking a proper and unitary legal nature common to all situations.
Thus, the discussion should be centered on the concrete question raised by the Claimant and seek a properly substantiated answer for the restricted terms of what is at issue in these proceedings, which will be whether it is or is not possible to deduct from the portion of the IRC collection generated by autonomous taxation rates, available tax benefits under IRC.
Properly framed in these terms, the issue to be resolved in these proceedings, it is necessary to keep in mind that the fundamental reference for the answer to be given to it will be that formulated in Article 9 of the Civil Code, according to which the legislative intent should be reconstructed, from the texts, which has in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.
In this context, the purpose of this decision will not be to theorize on the legal nature of autonomous taxation in general, or of any of its various types, but rather to ascertain whether the legislative intent, with a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed, was or was not, at the date of the taxable fact in question in these proceedings, to the effect that it would be possible to use the deduction from the portion of the IRC collection generated by autonomous taxation rates, of available tax incentives under IRC.
It will be futile, it is believed, to seek a conceptualist basis, founded on a dogmatic definition of monolithic concepts of IRC and Autonomous Taxation, drawn from normation alien to the matter being decided, professing a "scholastic ontologism" that seeks to "deduce in purely logical fashion, from abstract superior concepts, others, increasingly concrete and replete with content", methodologically superseded.
The aim will be, thus, merely to ascertain which solution, in light of the constituted law, properly interpreted, appears to be due in the concrete case, not taking the answer given to the issue being decided as an accomplished, exact evidence with an extreme degree of rigor and exactness, but merely as one that, reflectively, presented itself to its signatories as the, legally, better one.
The basis of the Claimant's claim is literally simple and linear and results from the observation that, if the liquidation of autonomous taxation rates is done in accordance with Article 90(1) of the CIRC, to such liquidation will be applied the deductions provided for in its Article 90(2).
Indeed, the following is the tenor of the norms in question:
"1 - The liquidation of the IRC is carried out in the following manner:
a) When liquidation is to be done by the liable person in the declarations referred to in Articles 120 and 122, it is based on the taxable matter contained therein;
b) In the absence of submission of the declaration referred to in Article 120, liquidation is carried out by 30 November of the following year to which it relates or, in the case provided for in Article 120(2), by the end of the 6th month following the end of the deadline for submission of the declaration mentioned therein and is based on the annual amount of minimum monthly remuneration or, when higher, the total taxable matter of the nearest preceding year that is determined;
c) In the absence of liquidation in accordance with the preceding subparagraphs, it is based on the elements available to the tax administration.
2 - To the amount determined in accordance with the preceding paragraph, the following deductions are made, in the order indicated:
a) That corresponding to double international taxation;
b) That relating to tax benefits;
c) That relating to the special payment on account referred to in Article 106;
d) That relating to withholding taxes not capable of compensation or reimbursement in accordance with applicable legislation."
The Claimant invokes in its support, essentially basing its argumentation on what is set out therein, decisions issued in arbitral proceedings of the CAAD, listed by it, namely proceedings No. 769/2014-T, 219/2015-T, 369/2015-T, 370/2015-T, to the effect that the claim should succeed, and No. 697/2014-T and 113/2015-T, to the effect that it should fail (decisions all issued before the 2016 State Budget Law) and proceedings No. 637/2015-T, 673/2015-T, 740/2015-T, 749/2015-T, 784/2015-T, 5/2016-T, 31/2016-T, 360/2016-T, 530/2016-T, 630/2016-T, 576/2016-T, to the effect that the claim should succeed, and No. 722/2015-T, 727/2015-T, 785/2015-T, 302/2016-T, 587/2016-T (decisions issued after the 2016 State Budget Law).
From a semantic-literal point of view, accepting the assumption—which is now accepted—that the liquidation of autonomous taxation rates is done in accordance with Article 90(1) transcribed, no other sense is possible to draw from the letter of the law than that presented by the Claimant, and by all the arbitral jurisprudence on which it relies, being, in that restricted perspective, irrefutable the conclusion condensed in its main arbitral request.
Hence the Claimant and the positions converging with that sustained by it, from a general perspective, undertake no relevant effort to systematically and axiologically validate their understanding (when such occurs, it is from a case-by-case perspective, anchoring itself, above all, in the concrete type of deduction from autonomous taxation that is intended to be validated, or in certain types thereof).
Rather, such positions dedicate themselves essentially to refuting the argumentation that is being presented in the opposite sense, closing themselves in the linear understanding that can be synthesized in the following syllogism:
- Autonomous taxation is IRC;
- Therefore, the Tax Credit Incentive can be deducted from the IRC collection generated by autonomous taxation rates.
It is the case, however, that legal reading, by legal (and also logical-rational) imperative, does not restrict itself, nor should restrict itself, to the text of norms as a semantic-grammatical reality, but should instead place itself on an axiological-rational plane, anchored in all elements of legal interpretation.
Hence, in order to obtain what is the correct reading of the text, it is necessary to carry out certain tests at the level of the systematic building in which the norm to be interpreted is framed, in order to validate, in light thereof, and in light of the criteria of rationality, congruence and reasonableness that necessarily guide that normative structure, the interpretation literarily suggested.
Thus, and first and foremost, a first relevant fact cannot be overlooked, which is that in Articles 89 and 90(1) of the CIRC, two forms of imposition converge, relating to the same tax but radically distinct, namely, traditional IRC, or strictly speaking, and autonomous taxation rates.
And it should not be said, as the Claimant does, that "Here it is not a question of knowing what rules apply to the upstream process of determining the primary collection, (...) which is the result of the application of a given rate to a given taxable matter in compliance with certain rules (distinct for base IRC, state surcharge and autonomous taxation)".
Indeed, within the hermeneutic perspective adopted by the Claimant itself, "there may be particularities only relevant with respect to the point of the system in [question], which impose a different decision, precisely because only in this way will the function of system ordering (which creates order) of law be realized: treating the different differently."
And it is precisely this that is at issue: approaching the system in its entirety, in order to realize "the function of system ordering (which creates order)", which is only possible, precisely, by considering the particularities inherent to it whether upstream or downstream.
And such particularities, externalized in "rules that apply to the upstream process of determining the primary collection", have, naturally, a justification and rationale that is important to know and evaluate, in order to understand their respective meanings and function in the global system in which they are integrated and to ensure, to the extent possible, their full realization.
Now the nature of autonomous taxation, which justifies and results, precisely, from those "rules that apply to the upstream process of determining the primary collection", has been the subject of extensive discussion in recent doctrine and case law.
One school of thought has viewed them as a tax on expenditure, which would tax certain types of expenses, in a manner completely disconnected from income, in terms of some even arguing that they constitute a proper tax, which would only incidentally be integrated into the IRS and IRC codes.
Nevertheless, the understanding that autonomous taxation rates on deductible expenses still integrate the tax regime regulated by the codes in which they are contained, seeking, albeit in a roundabout way, the income taxed by those regimes, has obtained recurring acceptance in CAAD jurisprudence.
Indeed, and as has been written elsewhere, "the complexity generated by successive changes in the IRC architecture led (...) to an atypical normative building, in which one could discern a core corresponding to what could be called IRC proper (or in the strict sense), which the Claimant seeks to have exhaust everything designated as IRC, and a periphery that integrates 'marginal' regulations, largely withdrawn from the logic, nature and principles of IRC proper, but which, nonetheless, still lies within the 'gravitational field' thereof.
And it is in the process of concretizing this difficult-to-define zone that all the decisions analyzed (...) operate, and cannot be properly understood without also understanding that, in fact, all the decisions in question are determining what consequences the 'gravitation' around the core of IRC brings to the matters addressed in each one of them."
In that sense, "within the hermeneutic framework drawn above, (...) by virtue of the historical evolution of its legal regime, there was constituted a type of IRC that integrates a hard core (...) and a group of adjacent normations, that shares part of the logic and regime thereof, but that in many respects diverges from the same." And, further, "from consideration of the legislative text, statically and in its historical evolution, it results that the legislator understood, and continues to understand, that autonomous taxation rates integrate the IRC, if not as a tax strictly speaking, at least in terms of being part of the same unitary tax regime".
This is because "the legal regime of autonomous taxation rates in question in these proceedings only makes sense in the context of taxation under IRC. That is, disconnected from the legal regime of this tax, they will lack their principal point of reference for meaning. Their existence, their purpose, their explanation, ultimately, their juridicity, is only properly understood and acceptable within the framework of the legal regime of the IRC."
Hence, it should not "be understood that 'the definition of IRC contained in Articles 1 and 3 of the CIRC' is 'really superseded by a new definition of transverse/general application'", being that an epistemological stance proper to a conceptualism that, from the outset, is rejected.
Rather: it is the recognition of what, in light of the legal framework in force, is imposed as the most reasonable: the definitive abandonment of any definition of transverse/general application of IRC, and the recognition of the regime thereof as a complex and multifaceted reality, irreducible to a definition of that sort, which only fundamentalist abstractionism conceptualism could presume."
Therefore, "All that has been said evidences that the evolution of the legal regime of the IRC transmuted it into a complex and multifaceted reality, at the most diverse levels, which is reflected, in the matter that occupies us in these proceedings, in such 'dual nature' of which Prof. Saldanha Sanches spoke in the passage cited in Constitutional Court Decision 617/2012.
The recognition of this duality of nature does not, however, impair, as is understood to be underlying both the citation in question and the jurisprudence that cites it, that one considers that the system, despite being dual, is the same. In other words, it only makes sense to speak of a system of dual nature if the system in question, globally considered, is still the same. Otherwise, one would speak not of a system of dual nature, but of two distinct systems, which, from everything that has been said, is not what occurs. And, in this case, the system will be the regime of the IRC, which operating sometimes through profit, sometimes through expenses, aims at and pursues the purposes proper to that tax, including, evidently, the collection of revenue for the State."
Finally, "In conclusion, in light of all that has been set out above, and in favor of conceptual rigor, it may be further said that the opinion leans toward the understanding that autonomous taxation, as it currently exists, may be configured as a 'hybrid' tax, applying to the income of individuals and legal persons, and not to consumption or expenditure, since it does not present the main characteristics of this form of taxation".
What has just been said echoes, in some way, in the case law being produced by the Constitutional Court (TC), as happens with Decision 197/2016, of 13-04-2016.
Indeed, acknowledging that the matter of autonomous taxation is "regulated normatively under the heading of income tax", the same Court confirms that it is "materially distinct from taxation under IRC", and that "we are (...) before distinct taxable facts that are subject to differentiated tax treatment", even going so far as to state that "IRC and autonomous taxation are distinct taxes" and that such taxation "has nothing to do with the taxation of income and profits", statements that must be read, it is believed, with a grain of salt, placing them within the limitations that contextualize them, relating them to the existence of a "tax base" consisting of "certain expenses that constitute autonomous taxable facts", and in "subjection to specific rates", understanding in this way that autonomous taxation "has nothing to do with the taxation of income and profits attributable to the business activity of the company" (which does not mean that it is alien to income and profits in general), and that the distinction between autonomous taxation and IRC, being profound and marked, should be limited to what is necessary to safeguard the specificity thereof at the level of its respective teleology, tax base and specific rates, without prejudicing integration in the same normative building.
Indeed, it is believed that the TC is not arguing that autonomous taxation constitutes a tax on expenditure strictly speaking, completely alien and distinct from IRC, under penalty of not only being contradicted by the systematics of tax law and expressly by the legislator himself, but also of condemning autonomous taxation irremediably to formal unconstitutionality, by violation of the provisions of Article 165(1)(i) of the Constitution.
As the Claimant masters puts it, the TC will bear in mind that autonomous taxation will be, at least, a compensatory taxation of IRC that, by being so, is also IRC (in the broad sense).
Nevertheless, and without prejudice to what has been set out above, the (emphatically affirmed by the TC) profound distinction formal and teleological between autonomous taxation under IRC and general taxation under that tax (IRC strictly speaking) cannot be disregarded in the examination of the matter in question.
In summary: it was already previously detected, on the one hand, the futility of seeking a unitary concept of IRC that coherently accommodates the regime of autonomous taxation, and that, on the other, the methodologically most fruitful route to generating legally adequate solutions to the problematic in question passes through understanding the current IRC regime as the product of a historically explained evolution that led to the building of a structure of dual or hybrid nature, comprising a main nucleus corresponding to traditional IRC, and an adjacent part, connected to that and forming part of the same overall normative reality, with own specificities which result in a departure, in several and substantial respects, from the main regime, in terms of the principles and general solutions, nonetheless, at times applying, at other times being contradictory, and as such, inapplicable, with the nature proper to that such "adjacent normation" that is embodied in the designated autonomous taxation rates.
Being that, as is now well-known, that proper, or specific, nature, based on a logic alien to the main building of traditional IRC, will be characterized, essentially, by the notes abundantly recognized as proper to autonomous taxation rates, namely, both as to their form of imposition (the instantaneous character of the respective taxable fact and the circumstance that it consists of an expense), as to their anti-systemic ratio (the fact that some of the autonomous taxation rates have a component directly aimed at the income of individuals and/or a punitive component, as well as an anti-abuse purpose).
Here is reached, it is believed, the perception of the semantic fallacy contained in the syllogism set out above, on which the position advocated by the Claimant and those that sustain it is based.
Indeed, it is true that:
- Autonomous taxation is IRC;
- Therefore, the Tax Credit Incentive can be deducted from the IRC collection generated by autonomous taxation rates.
However, as has been set out, it is held that the integration of autonomous taxation in the IRC is only viable in a context that recognizes in the latter a system of dual nature, which may for convenience be designated as IRC in the broad sense, integrating a base system corresponding to traditional IRC, or strictly speaking, and a peripheral system, autonomous, which while still being part of the same overall system, has own specificities functional and axiological, from which results the departure from the application of the norms proper to that base system, whenever justified in light of the coherence of the system itself (the reasons that justify its autonomy).
Now, the syllogism formulated, in light of the understanding that has been set out, has its logical coherence undermined by the disregard for what has just been pointed out, since the concept of IRC, used in its respective premises, is not the same.
In other words, yes, autonomous taxation is IRC, but only in the broad sense, constituting a peripheral system of taxation of the income of legal persons, with own teleology and mechanics, which justify, in certain situations, its autonomy, in relation to the said system of IRC strictly speaking.
Hence, it being—it is repeated, in light of the understanding that has been set out—the concept of IRC not the same in both premises (the first premise validates itself in the system of IRC strictly speaking, and the second in the system of IRC in the broad sense), the logical validity of the syllogism presented is compromised, from which it obviously does not follow that the conclusion is false but, only, the inaptness of the premises in question to sustain its validity.
Thus, and concluding here, it cannot be, it is believed, in the path of the solution to be obtained for the issue being decided, overlooked that, while they do indeed converge, in the form of liquidation regulated in Articles 89 and 90(1) of the applicable CIRC, autonomous taxation rates and IRC strictly speaking (or traditional), they derive, upstream, from profoundly distinct geographies, a fact which cannot fail to be properly weighed and taken into account in the solutions to be found downstream, namely, and for what the case interests, with respect to the reading to be made of the norm of Article 90(2) of the said Code.
Proceeding along the interpretive path underway for the downstream effects, consideration will be given to the consequences of limiting that hermeneutic process to the literal layer of the object of interpretation being analyzed.
As the Respondent entity correctly points out in its response, the understanding proposed by the Claimant, according to which from the lack of distinction, at the level of the text of Article 90(1) of the applicable CIRC, there results that, at the level of such norm, no distinction should be made taking into account the differences, upstream, of the tax that in those terms, is liquidated, would imply that in the basis of calculation of the installment payments due in IRC, would be included, also, the amounts relating to autonomous taxation rates, and not only those relating to IRC strictly speaking.
Indeed, Article 105(1) of the IRC Code provides that: "The installment payments are calculated on the basis of the tax liquidated in accordance with Article 90(1) (…)".
Now, understanding that the normative tenor of Article 90(1) of the CIRC in question prohibits any distinction, for purposes of other norms that refer to it, between the tax liquidated as autonomous taxation and the tax liquidated as IRC strictly speaking, one would, coherently and in the same terms, have to conclude that the installment payments would be due on the basis of the sum of both amounts, and such solution cannot—it is believed—be regarded as conformable to the spirit of a reasonable legislator.
Indeed—and not being installment payments the subject matter of the present proceedings—without great depth being required in this analysis, it will always be said that that type of payments, as is doctrinally and jurisprudentially recognized, have as their basis an intent to advance the taxation that will be due finally, taking into account the taxable income of the preceding year.
In this sense, for example, it was written in the Supreme Administrative Court decision of 07-03-2007, issued in proceeding 0877/06, that (emphasis ours):
"From the legal definition of 'installment payment' there is drawn an inevitable, necessary and essential imbrication between 'installment payment' and 'tax due finally'.
In such manner that the 'title' (word of law) of the 'installment payment' is the 'tax due finally'.
Which means that the 'installment payment' is, in the very terms of the law, a pecuniary delivery made in advance, made, on account of the tax due finally, in the period of formation of the taxable fact.
Which means, further, that the 'installment payment' must be gauged with reference to the accounting situation of the company at the end of the period to which the installment payment refers.
Which decidedly means that, if no pecuniary sum is to be (in advance) delivered on account of the tax due finally, in the concerning period of formation of the taxable fact (to which the 'installment payment' refers)—most notably due to the non-existence of taxable income revealed by the accounting at that time—, such 'installment payment' lacks substantive foundation. (...)
And, thus, if there is no taxable income, there is no tax due."
Now, (at least some) of the autonomous taxation rates, as has also been indicated elsewhere, do not apply directly to income, doing so in a merely mediate or indirect manner, and that is the justification for, notwithstanding them integrating the IRC regime broadly speaking, operating through the expense route and, consequently, being due even if the liable person does not have taxable income.
Thus being, as it is believed it is, it will be devoid of sense that to taxpayers who do not have taxable income, payment of installments be required on the basis of tax liquidated on expenses they incurred and which were subject to autonomous taxation.
This is corroborated by the distinct nature of the taxable fact underlying IRC strictly speaking and autonomous taxation. Indeed, being the first a taxable fact of continuous nature and the second a taxable fact of instantaneous nature, only with respect to the first will it make sense to envision an advance on tax (installment payment), and not as to the second whose practice generates, immediately, a tax obligation.
However, and returning now to the concrete case, the same literal reading on which the Claimant's claim essentially rests would, it is believed, ineluctably lead to the fact that, by parity of reasoning, had it been considered that for purposes of Article 105(1) of the IRC Code, the IRC collection to be considered included the autonomous taxation collection, since that norm provides (as laconically as Article 90/2 of the CIRC) that: "The installment payments are calculated on the basis of the tax liquidated in accordance with Article 90(1) (…)".
Now, not being such at issue in the case sub iudice, one can speculate that, surely, if, in coherence, the Claimant had considered that for purposes of the said Article 105(1) of the applicable CIRC it included the autonomous taxation collection, it would not fail to draw attention to the fact of having done so, that is, of having calculated installment payments it may have incurred on the basis, also, of that collection, highlighting the consequent injustice that would be to have been supporting such payments, considering that Article 105(1) of the CIRC encompassed the autonomous taxation collection, and did not interpret, in parallel, Article 90(2) of the same statute, in the same manner, and that with respect to this matter, the Claimant merely considers that it will be "irrelevant what has been or has not been the practice commanded by the Tax Authority", not denying (nor confirming, it is true) that it has followed such practice.
Being—evidently—this an argument insusceptibly speculative, and, as such unsuitable to serve as the basis, per se, for legally founded solutions, such does not preclude its being a factor for consideration, evidencing, on the one hand, the structural instability of the insertion of autonomous taxation in IRC, as it was operated, and, on the other, the normative interconnection and the breadth of systematic perspective indispensable to the evaluation of the solutions proposed for the legal problem to be decided.
What is at issue here, thus, is not the consideration of a "practice commanded by the Tax Authority", but, once again, within the hermeneutic perspective adopted by the Claimant itself, to verify whether there exist "particularities only relevant with respect to the point of the system in [question], which impose a different decision, precisely because only in this way will the function of system ordering (which creates order) of law be realized: treat the different differently.", that is, to realize "the function of system ordering (which creates order)", considering the particularities proper to that system, both upstream and, now and in the case, downstream.
Indeed, it is understood that from a systematic perspective, the position that is adopted with respect to the matter being decided, at least if in the direction advocated by the Claimant, and adopted by the jurisprudence that sustains it, cannot fail to have repercussion in the position adopted with respect to the interpretation of Article 105(1) of the CIRC, since, as has been pointed out above, the literalness of the regimes is, precisely, the same.
Thus, from this point of view consideration will have to be given, regardless of what has been the practice either of the Tax Authority or of the Claimant, not only whether it makes sense that the norm of Article 105(1) of the CIRC imposes that the autonomous taxation collection enter into the calculation of installment payments, as the circumstance, pointed out above, that the Supreme Administrative Court has already pronounced to the effect that in the face of "non-existence of taxable income (...[the]...) 'installment payment' lacks substantive foundation".
In the hermeneutic path underway, the norm of Article 90(5) of the applicable CIRC in question must also be considered, which provides that:
"The deductions referred to in Article 90(2) relating to entities to which the tax transparency regime established in Article 6 applies are imputed to the respective partners or members in accordance with the terms established in Article 6(3) and deducted from the amount determined on the basis of the taxable matter that took into account the imputation provided for in the same article".
This norm directly refers to Article 6 of the same Code, which prescribes, in what is relevant to the case, that:
"1 - The taxable matter is imputed to the partners, integrating itself, in accordance with the legislation that is applicable, in their taxable income for purposes of IRS or IRC, as the case may be, of the following companies, with registered office or effective management in Portuguese territory, even if there has been no distribution of profits:
a) Civil companies not established in commercial form;
b) Professional companies;
c) Companies for simple management of assets, the majority of whose capital belongs, directly or indirectly, for more than 183 days of the financial year, to a family group, or whose capital belongs, on any day of the financial year, to no more than five partners and none of them is a legal person under public law. (...)
3 - The imputation referred to in the preceding paragraphs is made to the partners or members in accordance with what results from the constitutive act of the entities mentioned therein or, failing elements, in equal parts."
Fundamental in framing this issue is also the tenor of Article 12 of the same Code, which states that:
"Companies and other entities to which, under Article 6, the tax transparency regime applies are not taxed in IRC, except as to autonomous taxation."
Not being, also, the matter of entities subject to tax transparency regime the object of the present proceedings, synthetically it will always be said, from the outset, that from the literal reading on which the Claimant's claim is based, namely, that autonomous taxation rates integrate, without limitations and for all purposes, the IRC collection, there would always result one of two situations, equally unacceptable, namely:
- that the entities referred to in Article 6(1) of the CIRC, would be required to bear the burden of autonomous taxation rates doubly: (i) once in the sphere of the company, in accordance with Article 12 of the CIRC, which expressly provides for it, and (ii) another time in accordance with the combined Articles 6(1) and (3) of the CIRC, which imposes that "the taxable matter, determined in accordance with this Code" relating to such entities is imputed to the partners;
- or that, thus, not being so, that is, if by way of some type of interpretation the expression "taxable matter, determined in accordance with this Code" were restricted, purging from it autonomous taxation, from the combination of the above transcribed norms of Article 90(5), Article 6, and Article 12, with the interpretation sustained by the Claimant for Article 90(1), it would result that the liable persons in IRC subject to the tax transparency regime would be prevented, by way of the said Article 90(5), from deducting from the amounts liquidated as autonomous taxation the deductions provided for in Article 90(2), since these latter amounts would be borne by the company, while the deductions would only be available to the partners, thereby unjustifiably discriminating against the liable persons in IRC subject to the tax transparency regime, from the remaining ones, who, under the Claimant's thesis, would have the faculty of having the deductions provided for in Article 90(2) operate, from the amounts liquidated, in accordance with Article 90(1), as autonomous taxation.
It being certain that, as the Claimant affirms, "fiscally transparent companies are an atypical situation under IRC, they are companies precisely not subject to IRC on profit/income, but subject to IRC as to autonomous taxation.", one cannot fail to note not only that, on the one hand, autonomous taxation is, itself also, an atypical situation under income taxes (including the IRC), as that, on the other, the Claimant ends up evidencing the above-mentioned and developed duality of the IRC ("they are companies precisely not subject to IRC on profit/income [IRC strictly speaking], but subject to IRC as to autonomous taxation [IRC broadly speaking]").
Once more, we are here in a perspective of weighing the implications (the "shock waves") in the normative building of the IRC, of the interpretations proposed for the norm(s) applicable to the situation sub iudice, not being, evidently, a structuring argument, but rather an accessory one, to the solution that is to be drawn.
Having arrived here, it is necessary to explore somewhat further the limits of the literalness of the norms at the epicenter of the present dispute—Article 90(1) and (2) of the applicable CIRC—and the repercussions thereof in the broader context of the relationship between traditional IRC and autonomous taxation in that tax.
As has been set out above, in the set of autonomous taxation rates, albeit restricted to those that integrate the IRC regime in the broad sense, various situations of disparate origin and teleology converge.
Thus, synthetically and by way of example, there are found autonomous taxation rates that aim, singly or concomitantly, to discourage certain economically undesirable taxpayer behavior (e.g., excessive remuneration to managers), to tax the so-called fringe benefits (allowances; vehicle expenses), to mitigate the tax impact of expenses of dubious business entirety (idem), to discourage behavior with high potential for fraud (payments to entities subject to regimes clearly more favorably taxed) or to penalize behavior that fosters the parallel economy (taxation of undisclosed expenses), or which are considered by the legislator as sumptuous.
The literalness of the interpretation proposed by the Claimant mingles, in the narrow views of the letter of the law, all those situations—because all of them will be liquidated in accordance with Article 90(1) of the applicable CIRC, from which it necessarily follows that to the collection of all of them, the solution advocated by the Claimant will apply, that is, to all of them—without discernible exception nor, much less, justified or, even, so much as it can be conceived, justifiable—all the deductions provided for in Article 90(2) of the CIRC in question would be applicable.
Now, already above, and on other occasions, the vain glory of closing, in a unitary substantive concept, all autonomous taxation rates, even those that only occur within the IRC, has been pointed out, given their teleological and functional disparity. And, here, there emerges one of the principal fragilities of the argumentative building in which the Claimant's position is lodged, underlying also the arbitral jurisprudence cited by it: that of resting on a postulate of oneness of IRC and autonomous taxation, taking the whole by the part that, concretely, integrates the matter being decided, on the one hand, and in an exclusive evaluation of the type of deduction provided for in Article 90(2) of the applicable CIRC, which concretely is at issue in the case sub iudice.
That is: the position sustained by the Claimant, as well as those that corroborate it, do not at any moment take care to frame the evaluations by them made and to validate the application of the interpretation by them proposed to the entirety of autonomous taxation rates and the deductions provided for in Article 90(2) applicable, as well as to evaluate the implications of the application of the thesis in question, to all possible deductions to all collections of all autonomous taxation rates abstractly comprised by such thesis, beyond that, as has been pointed out already, they abstain from examining, in a broader perspective, the systematic consequences of accepting the essentially literal reading that they propose for the combination of the norms of Article 90(1) and (2) of the CIRC.
The fissure in the building substantiating the Claimant's position, as well as those that sustain it, thus opens, in light of this observation, in two distinct directions: (i) on the one hand, the reading proposed by the Claimant for the norm of Article 90(2) of the applicable CIRC does not distinguish, nor permit distinction, between autonomous taxation rates relating to deductible expenses and other types of autonomous taxation; (ii) on the other hand, from the proved matter of fact it does not result that the autonomous taxation rates in question in these proceedings do not concern distinct types of autonomous taxation, such as, for example, autonomous taxation rates relating to undisclosed expenses, bonuses and other variable remuneration to managers, administrators or managing partners, or payments to entities subject to a clearly more favorable tax regime.
Synthesizing, the school of thought in which the Claimant is inserted sustains that autonomous taxation shares the objective, purpose, spirit of the IRC of ensuring the taxation of real income, an assertion which is, manifestly, not valid for all types of autonomous taxation.
Indeed, how could it be affirmed, for example, that the autonomous taxation at 70%, contained in Article 88(2), and even the 50% provided for in Article 88(1), aims to ensure the taxation of real income? The same is to be said, in equal or even more evident manner, with respect to the autonomous taxation of 35% (which may rise to 45% in accordance with Article 88(14)), provided for in Article 88(13).
From this there results, then, that all the argumentation presented by the Claimant, and by the essential part of arbitral jurisprudence that sustains it, regarding the nature of autonomous taxation, as that taxing income of the entities subject thereto, is insufficient for the decision of the matter sub iudice, because it is not demonstrated even that exclusively autonomous taxation rates are at issue where the characteristics on which that argumentation rests are recognized.
The argumentative building presented by the Claimant in support of its claim, thus houses within itself, the potential to shelter claims in which it is intended to proceed with deductions in accordance with Article 90(2) of the applicable CIRC, to autonomous taxation rates with respect to which it is not valid to consider the nature of autonomous taxation, as that taxing income of the entities subject thereto, such as the mentioned ones, relating to undisclosed expenses, payments to entities subject to clearly privileged tax regimes or relating to management compensation.
Now, this type of result cannot be had as intended by a reasonable legislator, in light of the entire systematics of the IRC in the broad sense, including autonomous taxation rates. Indeed, it will not be sustainable that, having the IRC legislator gone where, legally, he went, in mind, for example, combating the parallel economy or transactions with the so-called (incorrectly) "tax havens", it was his intent that the respective burden of autonomous taxation could be lightened by means of the deductions provided for in Article 90(2) of the CIRC.
The entropic situation generated by the position that the Claimant intends to assert in these proceedings will not, however, stop here.
Indeed, and even restricting the question to autonomous taxation on deductible expenses under IRC, such position would result in a direct violation of the principle of equality.
Indeed, as all the abundantly cited jurisprudence by the parties evidences, autonomous taxation rates relating to deductible expenses, has underlying a presumption of "partial businessness" or non-entirety, as, for that matter, was recently recognized by the Lisbon Administrative Court of Appeal, in the Decision of 03-03-2018, issued in proceeding 1294/14.0BELRS. That is, such expenses will presumably contain a business purpose, which permits their deduction, but with such purpose there will concur others which, if they were exclusive, would exclude their deductibility.
Such presumptive character will justify that when the taxpayer succeeds in rebutting the said presumption, the expenses retain their deductible character, without subjection to autonomous taxation.
Now, in this restricted field of autonomous taxation on deductible expenses, the position sustained by the Claimant would result in a qualified inequality (in the measure that more than treating as equal the unequal, or the unequal as equal, it would treat the unequal as unequal, in the inverse measure of the inequality), since in a situation in which a taxpayer declared deductible expenses that would normally be subject to autonomous taxation, but which, concretely, would not be because the material prerequisites thereof did not occur (that is, because of rebuttal of the underlying presumption), as was the case, for example, in the situation involved in arbitral proceeding 628/2014-T, and in which that same taxpayer presented a tax loss, could not proceed with any deduction, in accordance with Article 90(2) of the CIRC, while another taxpayer, in the same situation (tax loss), but who assumed (implicitly or explicitly) the partially business character of the same type of expenses, being thereby burdened with the corresponding autonomous taxation, could, under the thesis underlying the Claimant's position, have recourse to the deductions provided for in that same article.
That is, and in summary: between two taxpayers in distinct situation before the IRC tax system, one that incurred expenses of wholly business nature, and another that incurred the same expenses but for purposes (real or presumptively) partially alien to businessness, the second would obtain from the tax system, in the matter that occupies us, a more lenient treatment, by way of a behavior less conformable to the teleology thereof.
It being true that the principle of legal and tax equality is not an absolute principle, as it admits situations of distinction, it is also true that these situations must correspond to discriminations founded on institutionalized values, generically accepted and embraced in the instituted order of values.
Now, in the case, in which two companies in the above-described situation find themselves objectively in a differentiated situation and which should, for that reason, merit a differentiated tax treatment, in the sense of the difference, the opposite occurs, in light of the thesis underlying the Claimant's position.
Within the decision-making topics to be considered, there will also be reason to make mention of the entry into force of the new wording of Article 88(21) of the CIRC, introduced by the Law that approved the State Budget for 2016 (Law No. 7-A/2016, of 30 March), which came to say that:
"The liquidation of autonomous taxation rates in IRC is carried out in accordance with the provisions of Article 89 and is based on the amounts and rates resulting from the provisions of the preceding paragraphs, with no deductions being made to the total amount determined."
This norm is the object of Article 135 of the said Law that approved the 2016 State Budget, which states that:
"The rewording given by this law to Article 51(6), Article 83(15), Article 84(1), Article 88(20) and (21), and Article 117(8) of the IRC Code is interpretive in nature."
As is well-known, the question was raised as to whether Article 88(21) of the CIRC, introduced by the 2016 State Budget, is (as the law itself says), or is not, interpretive in nature, as well as the constitutionality of such nature, and such issues were superseded by the Constitutional Court Decision which held unconstitutional the said Article 135 of Law No. 7-A/2016, of 30 March.
Nevertheless, the legislative change in question continues to have interest for the matter now in question, since, as the Claimant refers, "the legislator under the 2016 State Budget chose to preclude the application of part of the provisions of Article 90 of the IRC Code from the IRC collection to the autonomous taxation collection under IRC", confirming that there is no conceptual or principled obstacle to that, by way of interpretation, the same result be reached.
For that matter, from the IRC Code itself, in the wording current at the date of the taxable facts, there already resulted that the regime of that tax presupposed such differentiation at the level of the said Article 90, to the effect that to the autonomous taxation collection no deduction was, in principle, admissible, resulting from the provisions of Article 88(12), introduced by Decree-Law No. 192/2005, of 7/11, which provides that:
"To the amount of the tax determined, in accordance with the provisions of the preceding paragraph, is deducted the tax that may have been withheld at source, and in that case the tax withheld cannot be deducted under Article 90(2)."
The autonomous taxation in question, barring better opinion, should be understood as being due by the entity that derives the profits, since if it were a matter of autonomous taxation of the entity that distributes profits, the question of deduction of the withholding at source from the autonomous taxation collection in question would never be raised, since, barring better opinion, the witholdings at source referred to in Article 90(2) of the CIRC are witholdings on income earned by the debtor entity in IRC, and not income paid and effected by this, and in any event, the question of the withholding at source on distributed profits being deducted from the collection (whether of IRC or of autonomous taxation) would never be raised, because such amount is withheld from the exempt entity, not being, for that reason, borne by the entity that distributes the profits, not being for that reason, always barring better opinion, the withholding at source capable of constituting any penalty for the entity that distributes the profits.
Such circumstance of the autonomous taxation now in question being due by the entity that derives the profits, and not by the one that distributes them, will not prejudice its nature as autonomous taxation, and will be such autonomous taxation collection, liquidated and paid by the exempt entity that did not retain the share participations for one year, and that derived dividends from them, that may be deducted—exceptionally—the tax withheld at source, being, precisely, the sense of the provision of which, in that case, the tax withheld cannot be deducted in accordance with Article 90(2), the evidence that the deductions provided for in this article do not apply to the autonomous taxation collection, since if it were not so, the provision of Article 88(12) would be a uselessness in a dual sense, since:
- the deduction of the withholding at source from the autonomous taxation collection in question, already derived from the said Article 90(2), so that it would make no sense to affirm it in Article 88(12);
- if the withholding at source were deducted from the autonomous taxation collection, under Article 90(2), it could never be deducted twice (for the same reason that it cannot be deducted twice from the IRC collection), so that also the provision of Article 88(12) that, deducting the withholding at source from the autonomous taxation collection cannot be deducted the same in accordance with Article 90(2), would also be, a uselessness.
Thus, the said norm, in providing that to the amount of tax resulting from autonomous taxation, in the situations provided for in Article 88(11), of 25% on profits distributed by entities subject to IRC to liable persons who benefit from exemption, the tax that may have been withheld at source can be deducted, will have implicit the understanding that, as a rule, to the autonomous taxation collection, no deductions were admissible, namely those provided for in Article 90(2) of the CIRC, which already provided for the possibility of deduction of witholdings at source from the IRC collection referred to in Article 90(1) thereof.
That is: if, as the Claimant argues and the jurisprudence in which it relies, already resulted from the combination of Article 90(1) and (2) of the CIRC that witholdings at source were deductible from the autonomous taxation collection, including that provided for in the said Article 88(11), the norm of the said Article 88(12), in the part in which it permitted precisely such deduction, was a useless norm, doing no more than reassert, without any sense, the general rule.
More: the norm in question, of Article 88(12), introduced by Decree-Law No. 192/2005, of 7/11, makes a point of affirming that, should the deduction of the witholdings at source there provided for be operated from the autonomous taxation, cannot "the tax withheld be deducted in accordance with Article 90(2).", evidencing, it is believed, sufficiently perceptibly, that the deductions possible under the said Article 90(2) were not already applicable to the autonomous taxation collection.
Indeed, the 2nd part of the norm of Article 88(12) being analyzed seeks to avoid a duplication of deduction of the witholdings at source comprised therein, which only makes sense if one views, as will be seen below, that from the application of the norm of Article 90(1) of the CIRC does not result—contrary to what the Claimant sustains—a monolithic IRC collection, but that the referred distinction between the autonomous taxation collection in IRC and the general IRC collection was maintained in that norm, and that Article 90(2) only applied to the latter, and not to the former.
Otherwise, also this second part of Article 88(12) of the CIRC would entirely lack sense, since if, under Article 90(1) of the CIRC, the autonomous taxation collection in IRC merged into a single IRC collection, as the Claimant contends and the jurisprudence in which she relies defends, it would be evident that there could never be double deduction of witholdings at source to a same, and sole, collection.
That is, and in summary, the legislator's choice, pointed out by the Claimant, of "under the 2016 State Budget (...) precluding the application of part of the provisions of Article 90 of the IRC Code from the IRC collection to the autonomous taxation collection in IRC", was already implicit in the Code of such tax, at the level of Article 88(12), from which resulted already, in the terms exposed, that:
- as a rule, the autonomous taxation collection did not admit deductions; and
- Article 90(2) of the CIRC was not applicable to the autonomous taxation collection.
Summarizing what has been set out above, it is verified, from the outset, that the interpretation sustained by the Claimant rests, essentially, on the literal tenor of the norms of Article 90(1) and (2) of the applicable CIRC, with no substantial foundation being discerned that justifies the solution in question, all the more so since the arguments on which such position rests restrict themselves, essentially, to autonomous taxation on deductible expenses and to the deductions concretely at issue (CFEI benefit), and that, on the one hand, nothing is proved regarding whether, in the concrete case, only autonomous taxation of that type is at issue (and not of others), and, on the other, from the proposed interpretation there would always result that all the deductions provided for in Article 90(2) of the CIRC in question would apply to all types of autonomous taxation, including, for example, those relating to payments to entities subject to regimes clearly more favorably taxed, those relating to undisclosed expenses, or management compensation, and none of the substantial arguments on which the Claimant's position rests permit justifying that this occur.
On the other hand, as has been seen, if it is true that Article 90(1) of the CIRC in question does not distinguish between the liquidation of autonomous taxation and the liquidation of traditional or strict sense IRC (on taxable income), the truth is that, upstream, the procedure and nature of the two types of tax imposition is substantially distinct, as has been seen and as the constitutional jurisprudence on the matter gives abundant account, a situation to which, it is believed, due attention cannot fail to be given in the matter sub iudice.
It is further added that, as has also been seen, the ratification of the interpretation that sustains the Claimant's petition would be, downstream, generative of considerable turbulence in the normative building of the IRC, namely with respect to the regimes of the special installment payment and of companies subject to the tax transparency regime.
It is further added that, as has also been analyzed, adhesion to the literalness of the precepts of Article 90(1) and (2), advocated by the Claimant, would result—it is believed—in a trampling of the principle of tax equality, over and above which, constitutionally imposed.
Finally, and as has just been seen above, at the level of Article 88(12) of the applicable CIRC, there resulted already, in the terms exposed, that:
- as a rule, the autonomous taxation collection did not admit deductions; and
- Article 90(2) of the CIRC was not applicable to the autonomous taxation collection.
For all this, it is held that in the strict combination of the text of the two norms, the legislator said more than what it intended, a situation which, for that matter, resulted not from neglect coeval to the drafting of such norms, but rather from the historical evolution of the normative regime of the IRC and, concretely, from the gradual introduction therein of the regime relating to autonomous taxation, without the same being reflected, coherently, in the tenor of Article 90(2) of the same Code.
This misalignment, moreover, is evident in the norm of Article 88(21) of the CIRC, introduced by Law No. 7-A/2016, of 30 March, which, in providing that no "deductions are made to the total amount determined" of autonomous taxation, does not except Article 88(12) of the same provision that precisely provides for the possibility of deductions to the autonomous taxation referred to.
We are, thus, before a situation described by the Illustrious Master Prof. Doctor Baptista Machado, in which: "At times, albeit rarely, it will be necessary to go further and sacrifice, in obedience still to legislative intent, part of a normative formula, or even the entirety of the norm. It is a matter of aborted legislative formulas or of genuine lapses. When the normative formula is so poorly inspired that it does not even clearly allude to the hypotheses it intends to comprise and, taken literally, comprises others that decidedly are not in the spirit of the law, one may speak of corrective interpretation. The interpreter will resort to such form of interpretation, of course, only when only thereby is it possible to attain the end sought by the legislator."
Indeed, the normative formula of Article 90(2) of the applicable CIRC, taken literally, as the Claimant does, comprises hypotheses, as has been seen, that decidedly are not in the spirit of the law nor are conformable to the specifics and nature proper to the diverse autonomous taxation rates. In the case, as has been referred already, not due to poor inspiration of the norm itself, but of the successive reforms that historically introduced autonomous taxation into the IRC, without the same being correspondingly reflected in the wording of Article 90(2) of such Code.
On the other hand, systematically considered, such formula, reduced to its literalness, is generative of grave and insurmountable incoherencies, as has been seen, in addition to, as has also been seen, the applicable CIRC having already, in the norm of Article 88(12), literal evidence that the norm of Article 90(2) of the same Code would not, as a rule, be applicable to the autonomous taxation collection, carried out in Article 90(1).
Thus, taking into account the rational, historical and systematic comprehension of the norm in question, it becomes necessary to interpret correctively the norm of Article 90(2) of the applicable CIRC, in order to restrict the referral it makes to Article 90(1) of the same norm, in the reference it makes "To the amount determined in accordance with the preceding paragraph", limiting it to the amount of the IRC collection calculated by means of 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 not to the amounts determined as autonomous taxation, thus restoring to the norm its original sense, which was what corresponded to its textual wording before the introduction of autonomous taxation into the CIRC.
It is admitted that the goodness of the legislative choice referred to, implicit until the introduction of Article 88(21) of the CIRC by Law No.
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