CAAD Case 545/2018-T: RFAI and RGIC Tax Benefits and State Aid in Corporate Income Tax 2015

ARBITRAL DECISION

The arbitrators José Baeta de Queiroz, Nuno Pombo and Jónatas Machado, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the arbitral tribunal, agree on the following:

1. Report

A – General

1. A..., SGPS, S.A., a joint-stock commercial company with registered office at Rua ..., ..., ..., ...-... Lisbon, holder of the Unique Number for Legal Entities and registered in the Commercial Registry Office ... (hereinafter referred to as the Claimant), filed on 05.11.2018 a request for constitution of an arbitral tribunal in tax matters, which was accepted, aiming, on the one hand, and in mediate terms, at the declaration of illegality and consequent annulment of the self-assessment of Corporate Income Tax ("CIT") for the tax year 2015 (relating to the Form 22 of CIT identified with the number...) and, as well, in immediate terms at the decision dismissing the administrative claim duly presented by it.

1.1. In accordance with the provisions of paragraph a) of article 6(2) and paragraph b) of article 11(1) of the Legal Framework for Arbitration in Tax Matters, approved by Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter LFATM), the Deontological Council of the Administrative Arbitration Center (CAAD) appointed the undersigned as arbitrators, and the Parties, after being duly notified, raised no objection to such appointment.

1.2. By order of 15.11.2018, the Tax and Customs Administration (hereinafter referred to as the Respondent) appointed Ms. C... and Ms. D... to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

1.3. In accordance with the provision of paragraph c) of article 11(1) of the LFATM, the Collective Arbitral Tribunal was constituted on 16.01.2019.

1.4. On the same date 16.01.2019, the head of the Respondent's service was notified to, if willing, present a response within a period of 30 days, request the production of additional evidence and attach to the file a copy of the administrative proceedings.

1.5. On 20.02.2019, the Respondent presented its Reply and attached the administrative proceedings.

B – Position of the Claimant

1.6. The Claimant is a Portuguese joint-stock commercial company, with headquarters and effective management in national territory, whose corporate purpose consists of the management of shareholdings as an indirect form of exercising economic activities.

1.7. In the tax year 2015, the Claimant was subject to the special taxation regime for groups of companies provided for in articles 69 to 71 of the Corporate Income Tax Code (hereinafter "CITC"), assuming the status of parent company, with B..., S.A. (hereinafter referred to as "B..."), legal entity number ..., with registered office at Rua..., no. ..., Porto, ..., assuming the status of subsidiary company.

1.8. B... is a Portuguese commercial company whose corporate purpose consists of the design, construction and operation of electronic communications networks and their respective equipment and infrastructures, as well as the management of technological assets owned or held by third parties and the provision of related services, being classified under the economic activity code (hereinafter "EAC") 61900, corresponding to "other telecommunications activities".

1.9. For CIT purposes, B... has organized accounting, being subject to the general taxation regime, and presenting no outstanding tax debts or social security debts.

1.10. In the tax year 2015, B... made an investment of €8,361,937.97 (eight million three hundred and sixty-one thousand nine hundred and thirty-seven euros and ninety-seven cents) aimed at the expansion of fixed and mobile networks in the Northern, Central, Alentejo regions and the Azores and Madeira archipelagos.

1.11. In the tax year in question, B..., S.A. determined tax benefits in the total amount of €1,586,193.80 (one million five hundred and eighty-six thousand one hundred and ninety-three euros and eighty cents), under the Tax Regime for Investment Support (hereinafter "TRIS").

1.12. Neither B... nor the Claimant recorded in the CIT Form 22 tax declarations for the tax year 2015 the tax benefits in the total amount of €1,586,193.80 (one million five hundred and eighty-six thousand one hundred and ninety-three euros and eighty cents), mentioned above, and therefore did not deduct them from the CIT assessment.

1.13. In order for the A... Group to benefit from such deduction, the Claimant – in its capacity as parent company – filed an administrative claim regarding the CIT self-assessment for the tax year 2015, which was dismissed.

1.14. The reason for the dismissal of the mentioned administrative claim is strictly formal, being based solely on the circumstance that EAC 61900 is not provided for in Ordinance no. 282/2014, of 30 December, even though all other requirements provided for in the Tax Code for Investment (hereinafter "TCI") are shown to be satisfied.

1.15. The Claimant does not agree with the Respondent's position that the activity carried out by B..., corresponding to EAC 61900 – "other telecommunications activities" – is not eligible for the tax incentive provided for in articles 22 to 26 of the TCI (TRIS).

1.16. Pursuant to article 22(1) of the TCI: "TRIS is applicable to CIT taxpayers that carry out an activity in the sectors specifically provided for in article 2(2), taking into account the economic activity codes defined in the ordinance provided for in article 2(3), with the exception of activities excluded from the sectoral scope of application of the RGAR and the GBER".

1.17. In turn, from paragraph g) of article 2(2) of the TCI it follows that the telecommunications sector is eligible for the purposes of the tax incentive in question: "The investment projects referred to in the preceding paragraph must have their object included, in particular, in the following economic activities [...]: g) defense, environment, energy and telecommunications [...]".

1.18. In article 2(3) of the TCI it is stated: "By ordinance of the Government members responsible for the areas of finance and economy, the economic activity codes (EAC) corresponding to the activities referred to in the preceding paragraph are defined".

1.19. In the Claimant's view, the correct interpretation of these provisions, after assessing the different hermeneutical elements, allows for two conclusions: the first is that the objective scope of TRIS is limited to the economic activities listed in article 2(2) of the TCI (which includes the telecommunications sector); the second, that the ordinance to be issued by the Government – referred to in article 2(3) of the TCI – would aim only to make explicit the EACs that the pursuit of those economic activities may assume.

1.20. Thus, in the Claimant's understanding, neither could the ordinance to be issued by the Government define EACs that were not related to the economic activities listed in article 2(2) of the TCI, nor could it fail to define (at least some) EACs relating to those sectors of activity.

1.21. Furthermore, TRIS aims to promote the competitiveness of the Portuguese economy – a priority assumed by successive Governments, through investment in sectors that favor innovation, which is why it cannot be accepted that the mentioned ordinance intended to discriminate against one of the economic sectors with the most pronounced investment in innovation, as is the case with telecommunications.

1.22. Thus, when the legislator wrote that the telecommunications sector falls within the objective scope of TRIS [article 22(1) and article 2(2), paragraph g), of the TCI], it can only be concluded that the legislator intended for the entire sector to be able to benefit from that incentive.

1.23. Over the approximately 8 years and 4 months that TRIS has been in force, its objective scope has changed. It initially covered only part of the telecommunications sector – next-generation broadband networks – then, for a short period of about 6 months, it did not cover any activity in the telecommunications sector, and finally it was expanded to cover the entire telecommunications sector, and not just next-generation broadband networks.

1.24. It so happens that Ordinance no. 282/2014, of 30 December – the ordinance which, under article 2(3) of the TCI, identifies the EACs – is completely silent regarding the telecommunications sector. However, from this silence cannot be inferred the unsuitability of applying TRIS to investments made in the telecommunications activity sector, under penalty of article 2(2) of the TCI becoming meaningless with respect to such matter.

1.25. Indeed, as the mentioned ordinance does not include any reference to an EAC relating to the telecommunications sector, it is concluded that the Government intended to encompass all the EACs provided for in section 61 of the EAC Rev. 3 of the National Institute of Statistics.

1.26. In the Claimant's judgment, a different conclusion would inevitably conflict with the Fundamental Law, making it necessary, therefore, to adopt an interpretation in accordance with the Constitution.

1.27. The scope of application of tax benefits is a matter of the relative legislative competence of the National Assembly, which may delegate such competence to the Government through a legislative authorization law, in which the object, sense, extent and duration of the authorization must be defined – article 165(2) of the Constitution of the Portuguese Republic (CPR) – which must be respected by the authorized decree-law to be issued by the Government following the authorization law – article 112(2) of the CPR.

1.28. Thus, the Ordinance in question cannot govern the matter relating to the scope of application of tax benefits, as it would be invading the scope of relative legislative competence of parliament, suffering, for this reason, from organic unconstitutionality.

1.29. Ordinance no. 282/2014, of 30 December is a true administrative regulation; the norms contained therein have unmistakably regulatory nature, and cannot innovate – whether by restricting or expanding – the scope of application of article 2(2) of the TCI; the reading that by Ordinance no. 282/2014, of 30 December the eligible activities for the purpose of granting the tax benefit in question can be fixed violates articles 165(1), paragraph i), and 103(2) of the CPR, as well as articles 199(1), paragraph c), and 112(5) of the CPR.

1.30. As the tax benefit in question, in the amount of €1,586,193.80 (one million five hundred and eighty-six thousand one hundred and ninety-three euros and eighty cents), cannot be deducted in the 2015 tax period due to insufficient assessment, it may be deducted in the ten subsequent tax periods, pursuant to article 23(3) of the TCI.

C – Position of the Respondent

1.31. The Respondent begins by clarifying that the decision dismissing the administrative claim was based on the fact that the activity carried out by B... was not included in the list of activities covered by TRIS, a sine qua non condition for it to access the mentioned tax benefit, which is why there was never an analysis of whether the remaining requirements for access to the mentioned tax benefit were satisfied, and it is certain that those other requirements are also not met.

1.32. The Respondent draws attention to the fact that the applicable legal framework is not limited to Portuguese law, and Ordinance no. 282/2014, of 30 December is in accordance with community law.

1.33. TRIS, which is established in Chapter III of the TCI (articles 22 to 26), constitutes a state aid scheme with regional purpose approved in accordance with Regulation (EU) no. 651/2014 of the Commission, of 16 June 2014, which declares certain categories of aid compatible with the internal market, in application of articles 107 and 108 of the Treaty on the Functioning of the European Union (TFEU), published in the Official Journal of the European Union, no. L 187, of 26 June 2014 (General Block Exemption Regulation or GBER).

1.34. In addition to the GBER, the guidelines on state aid with regional purpose for 2014-2020, published in the Official Journal of the European Union no. C 209, of 23 July 2013 (RGAR), must also be observed, as they may bring (and do bring in the present situation) restrictions to such aid.

1.35. Pursuant to article 22(1) of the TCI, this regime is only "applicable to CIT taxpayers that carry out an activity in the sectors specifically provided for in article 2(2), taking into account the economic activity codes defined in the ordinance provided for in article 2(3), with the exception of activities excluded from the sectoral scope of application of the RGAR and the GBER", thus referring the sectoral scope of application of the tax benefits for productive investment, of a contractual nature, established in article 2 of the TCI.

1.36. The provisions of the TCI relating to TRIS must always be read and understood in light of the rules of the GBER and the RGAR applicable to this type of aid, as is expressly stated in article 1 of the legislative authorization law for approval of the TCI (Law no. 44/2014, of 11 July): "This law grants the Government legislative authorization to approve a new Tax Code for Investment, repealing Decree-Law no. 249/2009, of 23 September, and adapting the tax benefit regimes for investment and capitalization of companies to the new European rules applicable regarding state aid for the period 2014-2020".

1.37. An equal requirement for adaptation is reiterated in paragraphs a) and c) of article 2(3) of the legislative authorization law for approval of the TCI: "a) Adapt the regime to the European provisions regarding state aid for the period 2014-2020" and "c) Define the regional and sectoral scope of application of the benefit in accordance with European rules and the national map of state aid with regional purpose".

1.38. The previous Ordinance no. 1542/2009, of 29 December, published under article 2(3) of the TCI (approved by Decree-Law no. 249/2009, of 23 September and republished by Decree-Law no. 82/2013, of 17 June), included in paragraph g) of article 1(1) the headings "Environment, energy and telecommunications – class 3511 and 3521, group 353, subclass 36001 and sections 37 to 39 and 61 of the EAC", but this aimed only to delimit the scope of application of tax incentives to investment of a contractual nature, that is, it did not apply to TRIS.

1.39. Ordinance no. 1452/2009 also already warned of the fact that the granting of tax benefits to investment projects that had as their object the economic activities mentioned in the decree-laws that regulate it was subject to verification, for each project, of compatibility with the applicable community provisions, by virtue of articles 107 and 108 of the TFEU.

1.40. Furthermore, the sectoral scope of application of tax incentives for TRIS investments originally defined by Law of the National Assembly – article 13 of Law no. 10/2009 – did not include the telecommunications activity sector, but only investments in the context of next-generation broadband networks.

1.41. With the integration of TRIS into the TCI, carried out by Decree-Law no. 82/2013, of 17 June, the scope of application defined in article 27(1) of that Code was limited to "CIT taxpayers that carry on, as their main activity, an activity in the agricultural, forestry, agro-industrial and tourism sectors and also in the extractive or manufacturing industry, with the exception of the steel, shipbuilding and synthetic fibers sectors, as defined in article 2 of Regulation (EC) no. 800/2008 of the Commission, of 6 August", that is, investments in broadband networks were excluded.

1.42. According to article 22(1) of the TCI, TRIS is applicable to CIT taxpayers that carry out an activity in the sectors specifically provided for in article 2(2), taking into account the EACs defined in the ordinance provided for in article 2(3), with the exception of activities excluded from the sectoral scope of application of the Guidelines on state aid with regional purpose for 2014-2020 (RGAR) and the GBER.

1.43. The designations of activities contained in the mentioned article 2(2) of the TCI are heterogeneous and do not have a degree of precision sufficiently precise for them to be considered sufficient to, per se, justify the application of the benefit in concrete cases, which is why the legislator, through article 2(3) of the same article, referred to a specific ordinance for the specification of the EACs of the activities benefiting from the incentive, there being, moreover, no direct correspondence between the activities listed in article 2(2) and the sectors of EAC-Rev.3, as occurs, in particular, with "Telecommunications".

1.44. The legislator defined the range of sectors of activity – in article 2(2) and article 22(1) of the TCI – but did so in a conditioned manner, establishing that, in the delimitation of the activities carried out by taxpayers, "the economic activity codes defined in the ordinance provided for in article 2(3)" must be "taken into account", having regard to the need to align national law with community law, given the applicable rules of the GBER and the RGAR, as is moreover determined by the legislative authorization law.

1.45. Regulation (EU) no. 651/2014 of the Commission, of 16-06-2014 declares certain categories of aid compatible with the internal market, in application of articles 107 and 108 of the Treaty, in article 52, relating to aid for broadband infrastructure, provides that:

"1 - Aid for investment in the development of broadband networks must be compatible with the internal market, within the meaning of article 107(3) of the Treaty, and must be exempt from the notification requirement provided for in article 108(3) of the Treaty, provided that they meet the conditions established in this article and in Chapter I.

2 - Eligible costs must be as follows:

a) Investment costs for the installation of a passive broadband infrastructure;

b) Investment costs in civil engineering works related to broadband;

c) Investment costs for the installation of basic broadband networks; and

d) Investment costs for the installation of next-generation access networks ('NGA').

3 - The investment must be located in areas where there are no infrastructures of the same category (basic broadband networks or NGA networks), nor is it probable that such type of infrastructure will be developed under commercial conditions within three years from the date of publication of the planned aid measure, which must also be subject to verification through an open public consultation.

4 - Aid must be granted on the basis of an open, transparent and non-discriminatory selection process respecting the principle of technological neutrality.

5 - The network operator must offer the widest possible active or passive wholesale access, in accordance with article 2, point 139, of this regulation, under equitable and non-discriminatory conditions, including physical unbundling in the case of NGA networks. Such wholesale access must be offered for at least seven years, and the right of access to ducts and poles must not be limited in time. In the case of aid for the construction of ducts, these must be sufficiently large to accommodate various cable networks and different network topologies.

6 - Wholesale access prices must be based on the pricing principles established by the national regulatory authority and on reference values practiced in other comparable, more competitive areas of the Member State or the Union, taking into account the aid received by the network operator. The national regulatory authority must be consulted on access conditions, including pricing, and, in case of conflict between access seekers and the subsidized infrastructure operator.

7 - Member States must implement a monitoring and recovery mechanism if the amount of aid granted to the project exceeds 10 million EUR." (Respondent's underlining)

1.46. In turn, the Guidelines on state aid with regional purpose for 2014-2020 (2013/C 209/01) state in its point 12, regarding the scope of application of aid with regional purpose that:

"Aid for investment with regional purpose to broadband networks may be considered compatible with the internal market if, in addition to the general conditions established in these guidelines, they also comply with the following specific conditions:

i) aid is granted only to regions where networks of the same category do not exist (either basic broadband or NGA) and where neither is likely to be developed in the near future;

ii) the subsidized network operator offers active and passive wholesale access under equitable and non-discriminatory conditions with the possibility of effective and complete unbundling;

iii) aid must be awarded on the basis of a competitive selection process in accordance with point 78, paragraphs c) and d), of the Guidelines on broadband networks." (Respondent's underlining)

1.47. In the Partnership Agreement that Portugal proposes to the European Commission, called Portugal 2020, with a view to applying the European Structural and Investment Funds within the framework of the Union's strategy (2014-2020), it states that:

"In the case of ICT infrastructures, and in particular Broadband and High-Speed Broadband, the high level of investment carried out in recent years, partially supported by resources from the European Investment Bank (EIB), as well as by structural funds in areas of market failure, allows Portugal to have communications infrastructures among the most advanced in Europe, both at the level of fixed networks, where, according to Eurostat data, the percentage of households with access to next-generation networks is among the highest in Europe (including in areas of lower population density), and at the level of mobile networks where the indicators of coverage, availability and data speed are also among the highest in Europe. Recent investments in next-generation networks and LTE auctions (4th generation mobile) have reinforced this trend, both for fixed and mobile communications, although there still remain some residual coverage gaps in areas with lower population density (especially in rural and remote areas), which are still far from achieving the targets of the European Digital Agenda and the Digital Portugal Agenda, with no evidence that the market per se will provide an adequate response." (Respondent's underlining)

1.48. Thus, in view of the provisions of community law, respecting its primacy, of hierarchical superiority over national law, by virtue of article 8 of the CPR, there is no reason to consider that the telecommunications sector should be enshrined in Ordinance 282/2014, quite the contrary.

1.49. Ordinance no. 282/2014 does not invade the field of scope of TRIS tax incentives, because the enabling rules – article 2(2) and (3) and article 22(1) of the TCI – are rules of conditional application created by a decree-law that executes a legislative authorization that does not specify the eligible sectors of activity, subordinating them only to the relevant European legislation on state aid.

1.50. The thesis defended by the Claimant is unconstitutional, as the understanding that the telecommunications sector must be contemplated within the scope of sectors of activity permitted for access to the tax benefit of TRIS violates the primacy of community law provided for in article 8 of the CPR.

1.51. And if it were otherwise, there would always be a gap, which is not susceptible to analogical integration because the scope of application of a tax benefit is at issue – cf. Article 11(4) of the General Tax Law.

1.52. The Respondent further understands that it cannot, without further ado, be considered that the remaining rules and conditions on which the application of the tax incentives for investment provided for in TRIS depends are satisfied.

1.53. Pursuant to article 74(1) of the GTL, "the burden of proof of facts constitutive of the rights of the tax administration or of taxpayers falls on whoever invokes them", however, the Claimant, even if it offers lists, does not present any evidence corroborating everything it alleges, particularly since, in the tax year 2015, B..., S.A.:

(i) made investments of €8,361,937.97 aimed at the expansion of fixed and mobile networks in the Northern, Central, Alentejo regions and the Azores and Madeira archipelagos, having excluded the Algarve, Greater Lisbon and Setúbal Peninsula regions;

(ii) that the assets subject to investment are concentrated in its ownership and remain since 2015 in the mentioned regions;

(iii) that the investment represented a commitment to technological evolution, procedural and control improvement and, as well, to the expansion of high-speed access network coverage; and

(iv) that it determined the need to hire, on an indefinite-term basis, an employee for the IT area, who remains in office.

1.54. The data contained in the tables constituting document no. 6, presented by the Claimant with the request for arbitral decision, do not permit verification of compliance with the proof requirements referred to in article 7(1) of Ordinance no. 297/2015.

1.55. With the burden of proof falling to the Claimant, it is entirely impossible to infer that all the requirements and prerequisites of TRIS are satisfied, which must be assessed not only in light of the provisions of the pertinent norms of the TCI but also of Ordinance no. 297/2015, which defines the special control procedures for the amount of state aid with regional purpose referred to in article 23(7) of the Tax Code for Investment, which is why the request for arbitral decision should also for this reason be dismissed.

D – Conclusion of Report and Case Management

1.56. By order of 22.02.2019, the arbitral tribunal understood it advisable to dispense with the meeting referred to in article 18 of the LFATM, having invited the Parties, if willing, to submit written arguments.

1.57. The Claimant submitted its arguments on 20.03.2019, reproducing the legal arguments already included in the request for arbitral decision.

1.58. The Claimant refutes the Respondent's assertion that A... "(…) does not present evidence corroborating everything it alleges", as when presenting the administrative claim, the Claimant made available all the necessary evidence to demonstrate the costs in question, which is why this is a posteriori reasoning.

1.59. However, the Claimant understands that the decision dismissing the administrative claim duly presented by it was due solely and exclusively to the lack of mention in Ordinance no. 282/2014, of 31 December of B...'s EAC [EAC 61900 ("other telecommunications activities")], and it is not admissible to base, now, the decision dismissing the administrative claim on other grounds, necessarily supervening to the pronouncement of such decision.

1.60. The Claimant further argues that the principle of interpretation in accordance with the Law of the European Union does not legitimate the derogation of legal norms [in this case, article 2(2), paragraph g), of the TCI] by regulatory norms (in this case, Ordinance no. 282/2014, of 30 December).

1.61. It further states that if one were to admit that the Government's intention in 2015 was to exclude from the scope of application of TRIS (articles 22 and 23 of the TCI) investments in activities in the telecommunications sector, it would have had to use the legislative route, revoking wholly or partly the provision of paragraph g) of article 2(2) of the TCI, being not permitted, in light of the constitutional rules that govern the sources of positive Portuguese law, to seek to achieve that effect through the approval of a regulatory measure implementing that legal provision, and the question at hand concerns only Government choices and not limitations imposed by the European legal regime.

1.62. With its arguments, the Claimant attached to the file a Legal Opinion authored by Professor Dr. Suzana Tavares Da Silva.

1.63. The Respondent submitted its arguments on 22.04.2019, reiterating therein what it had already argued with the Reply, in particular that the tax benefit in question constitutes state aid, hence the need to invoke the European legal framework on the matter for its analysis.

1.64. It further considered that it does not constitute a posteriori reasoning, as the Claimant argues, its conclusion that the remaining requirements on which access to the tax benefit in question depends are not satisfied.

1.65. The Respondent understands, on the one hand, that the burden of proof falls on whoever invokes the fact, that is, it would always be for the Claimant to demonstrate that the remaining requirements on which the application of the tax benefit depends are met and, on the other, that the self-assessment acts and the dismissal of the administrative claim are distinct and autonomous acts, performed at different times by different entities, and with distinct grounds.

1.66. The Arbitral Tribunal is materially competent, pursuant to the provisions of article 2(1), paragraph a) of the LFATM.

1.67. The Parties have legal personality and capacity, have standing pursuant to article 4 and article 10(2) of the LFATM, and article 1 of Ordinance no. 112-A/2011, of 22 March, and are duly represented.

1.68. The proceedings do not suffer from any defect.

2. Findings of Fact

2.1. Proven Facts

2.1.1. The Claimant is a Portuguese joint-stock commercial company, with headquarters and effective management in national territory, whose corporate purpose consists of the management of shareholdings as an indirect form of exercising economic activities.

2.1.2. In the tax year 2015, the Claimant was subject to the special taxation regime for groups of companies provided for in articles 69 to 71 of the CITC, assuming the status of parent company, with B... assuming the status of subsidiary company.

2.1.3. B... is a Portuguese commercial company whose corporate purpose consists of the design, construction and operation of electronic communications networks and their respective equipment and infrastructures, as well as the management of technological assets owned or held by third parties and the provision of related services.

2.1.4. B... is classified under EAC 61900, corresponding to "other telecommunications activities".

2.1.5. For CIT purposes, B... has organized accounting and is subject to the general taxation regime.

2.1.6. B... presented no outstanding tax debts or social security debts on 31.12.2015 and 28.12.2015, respectively.

2.1.7. In the tax year 2015, B... made an investment of €8,361,937.97 (eight million three hundred and sixty-one thousand nine hundred and thirty-seven euros and ninety-seven cents) aimed at the expansion of fixed and mobile networks in the Northern, Central, Alentejo regions and the Azores and Madeira archipelagos.

2.1.8. In the tax year in question, B..., S.A. determined tax benefits in the total amount of €1,586,193.80 (one million five hundred and eighty-six thousand one hundred and ninety-three euros and eighty cents), under the Tax Regime for Investment Support (TRIS).

2.1.9. Neither B... nor the Claimant recorded in the CIT Form 22 tax declarations for the tax year 2015 the tax benefits in the total amount of €1,586,193.80 (one million five hundred and eighty-six thousand one hundred and ninety-three euros and eighty cents), mentioned above, and therefore did not deduct them from the CIT assessment.

2.1.10. The Claimant – in its capacity as parent company – filed on 01.06.2018 an administrative claim regarding the CIT self-assessment for the tax year 2015.

2.1.11. The Claimant, with the administrative claim referred to, on 02.01.2010, presents as fulfilled, offering, when relevant, the supporting documents, the requirements necessary for the granting of the benefit.

2.1.12. The administrative claim regarding the CIT self-assessment for the tax year 2015 was, by order of 30.07.2018, dismissed.

2.1.13. The reason for the dismissal of the mentioned administrative claim is based solely and exclusively on the circumstance that EAC 61900 is not provided for in Ordinance no. 282/2014, of 30 December:

2.2. Unproven Facts

There are no facts relevant for the determination of the merits of the case that have been determined as unproven.

2.3. Justification for the Determination of Findings of Fact

The facts were determined as proven based on the critical assessment and evaluation of the documents attached to the file by the Parties and the positions assumed by them in the pleadings presented.

3. Legal Issues

3.1. Question to be Decided

It follows from what has been said above that the question to be determined is, in essence, whether, in light of the applicable norms, the activity carried out by B... – "other telecommunications activities", corresponding to EAC 61900 – is or is not eligible for the tax incentive provided for in articles 22 to 26 of the TCI (TRIS).

3.2. Discussion of the Legal Question

3.2.1. The Tax Regime for Investment Support (TRIS) was first introduced by Law no. 10/2009, of 10 March, which, in accordance with article 18(2), entered into force on 1 January 2009 – establishing in its article 2 that: "1 - TRIS 2009 is applicable to CIT taxpayers that carry out, as their main activity, an activity: a) In the agricultural, forestry, agro-industrial, energy and tourism sectors and also in the extractive or manufacturing industry, with the exception of the steel, shipbuilding and synthetic fibers sectors, as defined in article 2 of Regulation (EC) no. 800/2008 of the Commission, of 6 August; b) In the context of next-generation broadband networks".

3.2.2. The mentioned Law no. 10/2009, of 10 March was subsequently repealed by Decree-Law no. 82/2013, of 17 June, which, in accordance with article 10, entered into force on 18 June 2013 – which gave the following wording to article 27(1) of the TCI: "TRIS is applicable to CIT taxpayers that carry out, as their main activity, an activity in the agricultural, forestry, agro-industrial and tourism sectors and also in the extractive or manufacturing industry, with the exception of the steel, shipbuilding and synthetic fibers sectors, as defined in article 2 of Regulation (EC) no. 800/2008 of the Commission, of 6 August", at that time the General Block Exemption Regulation (GBER). Between 1 January 2009 – the date when TRIS was introduced in the Portuguese legal order – and 17 June 2013 – the last day before the entry into force of the amendment introduced by Decree-Law no. 82/2013, of 17 June – TRIS was applicable only to next-generation broadband networks.

3.2.3. This Decree-Law no. 82/2013 was amended by Decree-Law no. 162/2014, of 31 October – which approved the new Tax Code for Investment (TCI) – whose wording is applicable to tax periods beginning on or after 1 January 2014. The same takes as its reference point the new General Block Exemption Regulation (GBER), Regulation (EU) no. 651/2014 of the Commission, of 16 June 2014, which, under article 109 of the TFEU, declares certain categories of aid compatible with the internal market, in application of articles 107 and 108 of the Treaty. Presently TRIS is part of Chapter III of the TCI.

3.2.4. TRIS is a fiscal policy instrument that aims to promote productive investment through the granting of a set of tax benefits, such as a deduction from CIT assessment, exemption/reduction of Municipal Property Tax, exemption/reduction of Municipal Tax on Onerous Property Transfers and exemption from Stamp Duty. TRIS aims to promote the competitiveness of the Portuguese economy – a priority not only of the Government that approved Decree-Law no. 162/2014, of 31 October, but of other preceding and succeeding Governments – through investment in sectors that favor innovation. In the preamble of this diploma it is stated that it aims at the "promotion of competitiveness and investment, which has been a Government priority since the beginning of the legislature".

3.2.5. Pursuant to article 22(1) of the TCI: "TRIS is applicable to CIT taxpayers that carry out an activity in the sectors specifically provided for in article 2(2), taking into account the economic activity codes defined in the ordinance provided for in article 2(3), with the exception of activities excluded from the sectoral scope of application of the RGAR and the GBER".

3.2.6. In turn, article 2 of the TCI provides, in its paragraph 2, that "Investment projects referred to in the preceding paragraph must have their object included, in particular, in the following economic activities, respecting the sectoral scope of application of the guidelines on aid with regional purpose for the period 2014-2020, published in the Official Journal of the European Union, no. C 209, of 23 July 2013 (RGAR) and of the GBER:

"a) extractive industry and manufacturing industry;

b) tourism, including activities of interest to tourism;

c) information technology activities and related services;

d) agricultural, aquacultural, piscicultural, agropastoral and forestry activities;

e) research and development activities and high technological intensity activities;

f) information technologies and audiovisual and multimedia production;

g) defense, environment, energy and telecommunications;

h) shared services center activities".

3.2.7. Immediately following, paragraph 3 establishes that "By ordinance of the Government members responsible for the areas of finance and economy, the economic activity codes (EAC) corresponding to the activities referred to in the preceding paragraph are defined".

3.2.8. Article 2(2) of the TCI identifies the economic activities that, in the abstract, are eligible for the purposes of TRIS. It is thus verified that if between 18 June 2013 – the date of entry into force of the amendment introduced by Decree-Law no. 82/2013, of 17 June – and 31 December 2013 – the last day before the entry into force of the amendment introduced by Decree-Law no. 162/2014, of 31 October – TRIS was not applicable to next-generation broadband networks, nor to any other activity included in the telecommunications sector, it is undeniable that from 01.01.2014 – the date of entry into force of the amendment introduced by Decree-Law no. 162/2014, of 31 October – onwards, TRIS became applicable, in the abstract, to the entire telecommunications sector.

3.2.9. However, it is important to note that the list of activities contained in article 2(2) of the TCI is not exhaustive, as it is said that investment projects "must have their object included, in particular, in the following economic activities". On the other hand, it is observed that their concrete eligibility depends, in practice, on respect for the sectoral scope of application of the guidelines on aid with regional purpose for the period 2014-2020, published in the Official Journal of the European Union, no. C 209, of 23 July 2013 (RGAR) and of the GBER, and on approval, by Ordinance of the Government members responsible for the areas of finance and economy, of the EACs corresponding to the activities referred to.

3.2.10. In light of the present regulatory framework, it is relevant to question whether the Government is obligated to specify EACs corresponding to all activities listed in article 2(2) of the TCI. In the case we are dealing with, it is verified that within the scope of the tax regime for investment support, the literal content of the provisions in question, by alluding to the eligibility of investment projects related to different areas of activity, expressly mentions the activity of telecommunications, followed by the mentioned generic reference to the definition of corresponding EACs in a Government Ordinance.

3.2.11. From such regulatory data it would apparently follow that the telecommunications sector is eligible for the purposes of the tax incentive in question [cf. article 2(2), paragraph g), of the TCI]. However, it is undeniable that Ordinance no. 282/2014, of 30 December, does not define any EAC corresponding to telecommunications, thus raising the question of what margin of discretion the Government would have in this matter. It is therefore important to inquire whether, despite recognizing some margin of discretion for the Government in choosing eligible EACs, it could refrain from choosing at least one EAC for each of the economic sectors referred to in article 2(2) of the TCI, thereby excluding the telecommunications sector.

3.2.12. As will be demonstrated hereinafter, the answer to this question must be in the affirmative. Indeed, to benefit from the incentives established in TRIS it is necessary that the EACs to be specified by Ordinance respect the sectoral scope of application of the guidelines on aid with regional purpose for the period 2014-2020, published in the Official Journal of the European Union, no. C 209, of 23 July 2013 (RGAR) and of the GBER. If they do not do so, they will not be accepted as valid under European Union law, even if they concern activities, such as telecommunications, contained in article 2(2) of the TCI.

3.2.13. The express legal reference to the RGAR and the GBER permits sustaining the presumption, of undoubted hermeneutical and methodological relevance – which must be accepted by national courts – that the Portuguese State intended above all, in the exercise of its legislative and regulatory competences, to fully comply with all obligations resulting from the spirit and letter of the RGAR and the GBER. It will be the responsibility of national courts to carry out an interpretation of the norms of the TCI and TRIS that permits effectuating and optimizing, as much as possible, the literal content and purpose of the mentioned European instruments, all the more so as this results from the very legal and regulatory norms in question.

3.2.14. The non-inclusion of an EAC relating to telecommunications could seem surprising in light of the importance of the sector in the investment plans of the European Union and the country. Indeed, the Digital Agenda presents undoubted relevance, both at European and national level. As the Claimant observes, there are few economic sectors where investment in innovation is as pronounced as in telecommunications. In 2014 the same is reported to have produced approximately 1.6% of the total Gross Added Value (GAV) in Portugal. As is equally underlined by the Claimant, the commitment to the digital economy is not only that of the Portuguese Government but also of the European Union. See, for example, the European Commission's communication entitled "A Digital Agenda for Europe", where it states:

"The objective of this agenda is to define a roadmap that maximizes the social and economic potential of ICT, with emphasis on the Internet, a fundamental resource of economic and social activity […] the ICT sector is directly responsible for 5% of European GDP, but contributes to a much higher percentage of overall productivity growth (20% directly from the ICT sector and 30% from investments in these technologies). The reason is related to the high levels of dynamism and innovation inherent to the sector and the role the sector plays in changing how other sectors conduct their activities […]. More must be done to ensure the deployment and access to broadband for all, at increasingly higher speeds, through both fixed and wireless technologies, and to facilitate investment in new very fast, open and competitive Internet networks, which will be the arteries of the future economy. Our action should focus on providing the right incentives to stimulate private investment."

3.2.15. This tribunal does not contest – nor would it have reason or means to do so – the strategic importance of the telecommunications/ICT sector for the European economy. However, from this it does not necessarily follow that when the fiscal legislator makes a generic reference of TRIS to article 2(2) of the TCI, where there is a reference to the telecommunications sector, this means the sector and all of it must necessarily be within the objective scope of TRIS. But even if that were the legislator's understanding, it would always have to be reconciled with European Union law.

3.2.16. The centrality of telecommunications in the framework of European integration is an undeniable reality for several decades. The European Economic Community, on the initiative of the Commission, began to take active interest in electronics, innovation and telecommunications mainly in the 1980s of the twentieth century, seeing in them a strategic sector for technological development and economic growth. Telecommunications then existed in a context strongly dominated by national monopolies. The Commission's main objective – largely driven by the deregulation policies carried out by the United States in the 1980s – was to reduce the "costs of non-Europe" in the telecommunications sector, encouraging research and development, defining technical and infrastructural standards at the European scale and opening the sector to the initiative and competition of private enterprises. The emphasis was placed on issues such as liberalization, privatization, deregulation and control of abuse of dominant position and concentrations.

3.2.17. The simple fact that the European Union continues to show strong interest in the development of the telecommunications sector today does not necessarily imply a generic authorization for the granting of state aid to the same. On the contrary, the development of the sector depends, above all, on ensuring non-distorted competition – particularly with regard to public monopolies or state aid. Precisely because the telecommunications sector has, for several decades, been considered strategic at the European level, free competition without distortions must be the rule and state aid must be the exception.

3.2.18. This does not mean that there cannot be some margin for state aid in the telecommunications domain. However, the course of action to be adopted is not entirely at the disposal of Member States. European authorities have encouraged Member States to ensure the deployment and access to broadband for all – at increasingly higher speeds – through stimulation of private investment. They do so, however, in accordance with the principles established regarding free competition in the internal market, under articles 107 to 109 of the TFEU and the secondary law that proceeds to their respective execution and concretization, among which the principle of the prohibition of aid (Beihilfenverbot) assumes centrality.

3.2.19. Pursuant to article 3 of the Treaty on European Union (TEU), the establishment of the competition rules necessary for the functioning of the internal market is part of the exclusive competence reserve of the European Union. This is where the rules governing state aid are located, implementing articles 107 to 109 of the TFEU. In accordance with article 2(1) of the TFEU, in matters of exclusive EU competence, only the EU may legislate and adopt legally binding acts, with Member States only able to legislate when authorized by the EU or in order to implement acts of the Union. This means that all national legislation and regulation in these matters can only execute European norms. It is in this institutional and regulatory context that the TCI, TRIS and Ordinance no. 282/2014, of 30 December must be interpreted and applied.

3.2.20. In state aid matters, not only the general principle of the primacy of European Union law applies – with its more restricted corollary of primacy of application – but also that of respect for the scheme of distribution of competences between the Union and the Member States defined by the Treaties. In this domain the principle of loyal cooperation applies (e.g. article 4(3) of the TEU) – the European refraction of the principle pacta sunt servanda – according to which Member States must adopt all measures that enable compliance with the obligations resulting from the primary and secondary law of the European Union and refrain from all conduct that threatens the pursuit of the Union's objectives.

3.2.21. The principle of loyal cooperation implies, in particular, the duty of each Member State to issue, interpret and apply all legal acts – normative and individual – in a manner to guarantee the full force and effectiveness of European Union law. The national legislator (parliamentary or executive) and the administration must execute the legally binding norms issued by the competent European institutions and refrain from violating them, under penalty of the State incurring a breach of European Union law and liability.

3.2.22. National judicial bodies, in their capacity as European courts in a broad sense, are responsible for ensuring the full effectiveness of European legal norms, and must disapply the national law that is contrary to them or, whenever that is possible, interpret and apply it in accordance with European Union law. In other words, national law should only be disapplied when its interpretation and application in accordance with European Union law is not possible.

3.2.23. This is embodied in the principles, closely related, of primacy of application of European Union law and interpretation of national law in accordance with European Union law. If the former is concerned with the existence of contradictions between national law and European Union law at the regulatory level, the latter is situated at the interpretive level, excluding an interpretation of national law that, although compatible with its literal content, is incompatible with European Union law.

3.2.24. A national norm that can be interpreted and applied in accordance with European Union law remains applicable. Only the interpretation that is incompatible with it will be rejected. For its part, the principle of primacy of application leads to the non-application of national norms that are entirely incompatible with European Union law. The duty of European interpretation of national law applies to all its norms, regardless of whether they were intended to effect European Union law.

3.2.25. The Court of Justice of the European Union (CJEU) speaks, in this regard, of a general obligation to interpret national law in accordance with European Union law that is immanent to the respective primary law. This principle requires that such interpretation take into account, not only the sense of each of the national regulatory acts considered in isolation, but that it adopt a global perspective on the relationship they establish with each other and with European Union law. This means, in this case, that interpretation in accordance with European Union law of the norms contained in article 112 of the Constitution, the TCI, TRIS and Ordinance no. 282/2014, of 30 December, must take into account the regulatory relationship that the same diplomas establish among themselves and with the RGAR, the GBER and articles 107 to 109 of the TFEU.

3.2.26. To the extent that they relate to the European matter of state aid, both the TCI, as well as TRIS contained therein, and Ordinance no. 282/2014, must be considered, above all, as instruments of execution, effectuation and application of the principles and rules contained in the RGAR, the GBER and articles 107 to 109 of the TFEU, translating the corresponding limitations on national budgetary and fiscal sovereignty. That is, far from viewing Ordinance no. 282/2014 as a norm of execution only of article 2(2) of the TCI, Ordinance no. 282/2014 and article 2(2) of the TCI should be read as norms of execution and concretization of the principles and rules of the RGAR and the GBER, always in accordance with articles 107 to 109 of the TFEU.

3.2.27. In this context, it is important to keep in mind the "Guidelines on state aid with regional purpose for 2014-2020 (RGAR)", where the Commission makes clear the guidelines that must be followed in this domain:

"Aid with regional purpose can only play an effective role if it is used sparingly and in a proportionate manner and if it focuses on the most disadvantaged regions of the European Union".

And it is further clarified:

"The importance attributed to the positive effects of aid is likely to vary depending on the derogation from article 107(3) of the Treaty applied, which means that greater distortion of competition may be accepted in the case of regions more disadvantaged covered by article 107(3), paragraph a), of the Treaty, than in those covered by article 107(3), paragraph c)"

3.2.28. A little further on, the RGAR refers specifically to the broadband area, without ever going so far as to expressly refer to the telecommunications area as a whole, saying:

"1. SCOPE OF APPLICATION AND DEFINITIONS

1.1. Scope of application of aid with regional purpose

1. Aid for investment with regional purpose to broadband networks may be considered compatible with the internal market if, in addition to the general conditions established in these guidelines, they also comply with the following specific conditions: i) aid is granted only to regions where networks of the same category do not exist (either basic broadband or NGA) and where neither is likely to be developed in the near future; ii) the subsidized network operator offers active and passive wholesale access under equitable and non-discriminatory conditions with the possibility of effective and complete unbundling; iii) aid must be awarded on the basis of a competitive selection process in accordance with point 78, paragraphs c) and d), of the Guidelines on broadband networks".

3.2.29. In this line, Regulation (EU) no. 651/2014 of the Commission in its Section 10, provides for the granting of aid to broadband infrastructures. But nowhere is there a generic authorization for state aid in the telecommunications sector. In fact, even with regard to investments specifically in the broadband domain, Regulation (EU) no. 651/2014 of the Commission is quite restrictive. There it is said, among other things, that

"eligible costs include investment costs for the installation of a passive broadband infrastructure, civil engineering works related to broadband, installation of basic broadband networks and installation of next-generation access networks ('NGA')."

3.2.30. It is further added that the investment must be located in areas where no infrastructures of the same category (basic broadband networks or NGA networks) exist, nor is it probable that such type of infrastructure will be developed under commercial conditions within three years from the date of publication of the planned aid measure, which must also be subject to verification through an open public consultation. It is also provided, for example, that aid must be granted on the basis of an open, transparent and non-discriminatory selection process respecting the principle of technological neutrality.

3.2.31. The GBER, as is the case with other European Union regulations, contains general and abstract norms in force throughout the European Union, having the value of law in a material sense in the legal orders of Member States, enjoying primacy over internal law and binding legal persons. It is binding in all its elements (e.g. form, purposes, means) and directly applicable in all Member States, requiring no incorporation in internal law or interposition of national legislative or regulatory acts. In fact, any attempt at incorporation or interposition before a EU regulation may even be illegal, unless expressly or implicitly required by it. It is ready to be properly interpreted, executed and applied to concrete cases.

3.2.32. It is important to note that the TCI and, within it, TRIS contain fiscal norms with a strong European characterization. From this it follows that the hermeneutical and methodological canons relevant to their interpretation and application should be sought not necessarily in constitutional law or civil law – as a classical approach to the problem would suggest – but in European Union law itself, always relevant when dealing with national norms that intend to execute or concretize its provisions or constitute a threat to its primacy. In the concrete case, the TCI and TRIS should be interpreted in accordance with European public policies and the corresponding norms on state aid.

3.2.33. Articles 107 to 109 of the TFEU, relating to state aid, constitute a keystone of competition law which, together with the fundamental freedoms of movement of workers, goods, services and capital, structures the internal market. They seek to create a regulatory framework that responds to the tendency of Member States to grant benefits to local companies or in a manner to attract companies from outside, favoring certain competitors, sectors or regions, with a view to creating or maintaining jobs.

3.2.34. Even if the fundamental freedoms were ensured and agreements between companies, abuse of dominant position and contractions were prohibited, this would be of little or no benefit – as a safeguard of the internal market – if Member States had broad freedom to grant aid to companies, sectors or regions. In other words, the European Union could never become an internal market.

3.2.35. Because this is so, European Union law has developed a broad concept of state aid. Article 107(1) of the TFEU provides:

"1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market."

3.2.36. A general rule of incompatibility of aid with European Union law is thus established, adopting broad concepts of "state aid", "aid" and "State", so as to encompass all modalities of use of public resources. This orientation disregards the form and name of the aid, the institutional structure through which it is granted. It does not require that there be a direct and current distortion of competition, being satisfied with the indirect or potential character thereof. Such a broad concept naturally results from a teleological and systematic reading of competition law norms that structure the internal market.

3.2.37. In this sense, the definition of EACs by Ordinance no. 282/2014, of 30 December, is not merely executive and complementary to article 2(2) of the TCI. It constitutes, above all, and in articulation with the TCI, an instrument of execution and concretization of the guidelines on state aid with regional purpose for the period 2014-2020, published in the Official Journal of the European Union, no. C 209, of 23 July 2013 (RGAR) and of the GBER, being ultimately subject to articles 107 to 109 of the TFEU. This understanding must be articulated with the so-called cascade principle (Kaskadenprinzip), valid within the European legal system, according to which, in a series of hierarchically structured legal acts, the legally superior legal acts determine the sense of interpretation and application of the legal acts that are immediately subordinate to them.

3.2.38. It is thus understood that the Government may refrain from specifying EACs with respect to activities listed in article 2(2) of the TCI – without being able to speak of illegality by omission – if the guidelines on state aid with regional purpose for the period 2014-2020, published in the Official Journal of the European Union, no. C 209, of 23 July 2013 (RGAR) and the GBER, expressly referred to in that same article, oppose this, being the activity of the national legislator and administration ultimately subject to articles 107 to 109 of the TFEU. The parameter for controlling the legality – both negative and positive – of the Government's action in specifying EACs is given, not only by the TCI and TRIS, but above all, by the European Union law that they aim to observe, execute and concretize.

3.2.39. What is at issue, in the final analysis, is not only ensuring that Ordinance no. 282/2014 executes article 2(2) of the TCI, but ensuring that both article 2(2) of the TCI and Ordinance no. 282/2014, of 30 December, conform to the sense, scope and limits of the legal regime of the European Union on state aid, which bind the legislative, executive and judicial powers of the Member States. More important than ensuring the purposiveness of legal norms is ensuring that neither legal norms nor regulatory provisions are interpreted and applied with a sense contrary to the normative objectives of European Union law.

3.2.40. In the case at hand, it cannot be concluded in any way that the non-inclusion of any EAC corresponding to the activity of telecommunications means that all should be considered included, even if implicitly, extending TRIS to all telecommunications matters (e.g. wired, wireless, satellite) and not just broadband. Given the exceptional nature of state aid, as clearly results from the TFEU, the RGAR and the GBER, it would be difficult to sustain that the absence of a provision of an EAC for the telecommunications sector would presume that all EACs corresponding to it are included. On the contrary, as seen earlier, even the acceptance of state aid in the specific domain of broadband is heavily conditioned.

3.2.41. Article 22(1) of TRIS, in declaring that regime applicable to CIT taxpayers that carry out an activity in the sectors specifically provided for in article 2(2) of the TCI, taking into account the EACs to be defined by the ordinance provided for in article 2(3), expressly excepts activities excluded from the sectoral scope of application of the RGAR and the GBER. That is, the very literal content of articles 2(2) and 2(3) of the TCI places the definition of EACs under the reserve of conformity with European Union law and the decision of the Government members responsible for the areas of finance and economy. Hence it cannot be said, in any case, that there is an expectation worthy of protection that EACs be defined that do not properly fit within the RGAR and the GBER.

3.2.42. These Government members, having a seat and active participation in the Council of the European Union and the Council of Ministers, the national executive legislator, are in a position of privileged institutional adequacy to be able to conform, know, interpret and properly apply the norms of European law on state aid, specifying EACs in the manner that best serves national interest and is in accordance with the spirit and letter of article 107 of the TFEU, the RGAR and the GBER, preventing situations of violation of the Treaties and liability.

3.2.43. Thus, this is not a transfer of legislative competences to low-ranking administrative officials, calling into question the classical understanding of the principle of separation of powers, to the extent that the Government members referred to, in addition to being bound by a supranational normative standard, constitute not only the national executive legislator, but also – in a European institutional framework characterized by functional unfolding – the Council, the institution to whom the TFEU assigns, above even the Commission, the function of guaranteeing that aid granted by Member States does not distort the conditions of competition in the internal market.

3.2.44. Furthermore, although the CJEU and the Commission have, respectively, a definitive and decisive role in the control of state aid, it should be noted that Competition Commissioner Margarethe Vestager has been drawing attention to the growing and increasingly demanding importance of Member States' action in safeguarding the integrity of the internal market and in preventive control of state aid – as is the case in other domains of European competition law – highlighting the role that should be played by economic and tax administration, in a perspective of shared responsibility and institutional cooperation.

3.2.45. In light of the foregoing, a non-formalistic interpretation of the pertinent norms, attentive to the substance of material and institutional reality, will hardly permit sustaining that articles 2(2) and 2(3) of the TCI proceed to a true and proper delegalisation of the matter addressed therein, in terms that article 112(5) of the CPR – with the corresponding requirements of legality and typicality – seeks to proscribe. What actually happens is that that provision refers the executive members responsible for the definition of EACs to a supranational normative standard endowed with normative primacy over national legislation and regulation.

3.2.46. It is important to note that a delegalising law fulfills, at once, a function of lowering grade, through the revocation of the existing legal discipline, and a function of devolution/authorization of material discipline by administrative regulation. Now, in the concrete case, neither of these functions is truly present. Articles 2(2) and 2(3) of the TCI, in pointing to the RGAR and the GBER, expressly refer to a higher normative degree and to a pre-existing material discipline, endowed with primacy and direct bindingness with respect to all States of the Union, and one cannot speak of delegalisation for the purposes of article 115(5) of the CPR. In other words, the provision in question does not aim to promote the adoption of innovative discipline or contrary to a previous regulation of higher level, but rather to prevent its occurrence.

3.2.47. By expressly referring the activity of definition of EACs to the RGAR and the GBER, article 2(2) and (3) of the TCI, far from admitting the retraction of the domain of law, is simply recognizing and effectuating the normative primacy of EU law in this matter – on a par with the corresponding subordinate character of national legislation and regulation – and, as well, the duty that impends on Member States, in a framework of loyal cooperation, to prevent and suppress any distortions to the competitive functioning of the internal market potentially generating breach and liability.

3.2.48. That duty – inherent to the principle of effectiveness of European Union law – finds expression in article 8(4) of the CPR, according to which "the provisions of the treaties governing the European Union and the norms issued by its institutions, in the exercise of their respective competences, are applicable in the domestic order, in accordance with the terms defined by European Union law, with respect for the fundamental principles of the democratic rule of law." Considering that these fundamental principles are today widely enshrined and consolidated in the TEU, the TFEU and the Charter of Fundamental Rights of the European Union, it is in these and in light of these instruments, and within the normative and institutional system structured by them – and not within the scope of national law – that the ultimate criteria of interpretation, application and effectuation of EU secondary law and national law subordinate to them must be discerned, and it is therefore not possible to assign any unconstitutionality to Ordinance no. 282/2014. It acts within the margin of discretion that was committed to the Government, fully framed by article 2(2) of the TCI, the RGAR, the GBER and, as we will see in the following point, by the pertinent Legislative Authorization.

3.2.49. Regarding Decree-Law no. 162/2014, of 31 October, which approves the TCI, being an authorized decree-law, and for that reason materially conditioned, it could more easily be said that it suffers from the vice of excess of authorization, since the respective delegating law, Law no. 44/2014, of 11 July, makes no reference to the telecommunications sector. It makes reference yes, right in article 1, when dealing with its subject matter, to the need to approve a new TCI that adapts "to the new European rules applicable regarding state aid for the period 2014-2020".

3.2.50. In article 2(2) of Law no. 44/2014, of 11 July, it provides that the authorization aims to adapt the regime to the European provisions on state aid for the period 2014-2020, namely to the provisions contained in the GBER – where telecommunications are not mentioned – and to the rules provided for in the national map of state aid with regional purpose. This apparent excess of authorization is of great importance, as we are situated in a domain – that of state aid – where the activity of the national legislator must be limited to ensuring the effectiveness of European Union law, and cannot legitimize expectations to the contrary. In the concrete case, it becomes even more pressing to interpret the relevant legal norms in their entirety in accordance with EU law.

3.2.51. The