CAAD Ruling on Deducting SIFIDE Tax Benefits from IRC Autonomous Taxation (567/2016-T)

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Daniel Taborda and Magda Feliciano, appointed by the Deontological Council of the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby agree:

I – REPORT

On 19 September 2016, A… S.A., NIPC…, with registered office at Street…, Building…, Coimbra, 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 Regime for Arbitration in Tax Matters (RJAT), as amended by article 228 of Law no. 66-B/2012, of 31 December, seeking declaration of illegality of the act dismissing the administrative claim filed by the Claimant on 25-05-2016, which concerned the acts of self-assessment of Corporate Income Tax (IRC) relating to the fiscal year 2013, where autonomous taxation of €38,022.44 was calculated, and fiscal year 2014, in which autonomous taxation of €24,870.59 was calculated.

To support its request, the Claimant alleges, in summary, that SIFIDE tax benefits should be deducted from the collection of autonomous taxation because (i) expenses incurred and accepted within the scope of SIFIDE may be deducted from the IRC collection calculated pursuant to article 90 of the IRC Code; (ii) the collection of autonomous taxation is considered as IRC collection, these being an integral part of this tax; (iii) the rules of calculation provided for in article 90 of the IRC Code are applicable to autonomous taxation and (iv) the Claimant's understanding follows the line of jurisprudence of CAAD which has already ruled on this matter.

On 20-09-2016, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.

The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to paragraph a) of article 6(2) and paragraph a) of article 11(1) of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable time period.

On 16-11-2016, the parties were notified of these appointments and expressed no intention to challenge any of them.

In accordance with the provisions of paragraph c) of article 11(1) of the RJAT, the collective Arbitral Tribunal was constituted on 06-12-2016.

On 23-01-2017, the Respondent, duly notified for such purpose, filed its response defending itself solely by way of impugnation.

Given that the principles of procedural economy and prohibition of useless acts apply to the arbitral proceedings, pursuant to paragraphs c) and e) of article 16 of the RJAT, the meeting referred to in article 18 of the RJAT was dispensed with, as was the presentation of arguments.

A period of 45 days was set for issuance of the final decision.

The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with articles 2(1)(a), 5 and 6(1) of the RJAT.

The parties have legal capacity and standing, are legitimate and are properly represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Regulation 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 merits of the case.

Having considered all the above, it behoves us to deliver

II. DECISION

A. FACTS

A.1. Facts Deemed Proven

1. The Claimant is a joint-stock company whose business purpose consists of engineering activities and manufacture of apparatus and equipment for communications and is subject to the general regime for IRC taxation.

2. The Claimant filed, on 28-05-2014, Model 22 declaration of IRC, relating to the fiscal year 2013, having at that moment proceeded to self-assessment of autonomous taxation in the amount of €38,022.44.

3. The Claimant filed, on 29-05-2015, Model 22 declaration of IRC, relating to the fiscal year 2014, having at that moment proceeded to self-assessment of autonomous taxation in the amount of €24,870.59.

4. In the IRC declarations for 2013 and 2014 only collections of autonomous taxation were calculated.

5. In the self-assessments of 2013 and 2014, the following amounts/balances were calculated as expenses incurred within the scope of the System of Fiscal Incentives for Research and Business Development II ("SIFIDE II"):

6. The accumulated balances and allocations of the periods in question could not be deducted from the IRC of 2013 and 2014 due to insufficient IRC collection.

7. The Claimant possessed collection of autonomous taxation in the amount of €38,022.44 in 2013 and €24,870.59 in 2014.

8. The Tax Authority's system did not authorize deduction of expenses incurred within the scope of SIFIDE from the Claimant's autonomous taxation collection.

9. Model 22 declaration of IRC and the Tax Authority's computer system prevented the Claimant from deducting the tax benefits from the collection derived from the application of autonomous taxation rates in IRC, entered in field 365 of table 10 of the declarations of 2013 and 2014.

10. Not in agreement with the IRC assessments of 2013 and 2014, the Claimant filed an Administrative Claim seeking to annul both assessments.

11. On 01-07-2016, the Claimant was notified of the dismissal of the Administrative Claim.

12. From the decision of the said claim, the following appears, among other things:

i. "the deductions provided for in article 90(2) of the IRC Code – tax benefits – are only applicable to the amount of IRC collection calculated on the basis of taxable matter, being incapable of application to the amount calculated as autonomous taxation";

ii. "the only legally admitted deduction, to the amounts calculated as autonomous taxation, is that provided for in article 12 thereof (article 88 of the IRC Code, to autonomous taxation calculated in accordance with article 11 of the same legal provision, a deduction relating to tax withheld at source which, being deducted in these terms, cannot be considered for purposes of article 90(2)".

1. The amount of IRC assessed in the year 2013 and 2014, which was restricted to the collection of autonomous taxation, has been fully paid.

2. The taxable profit of the Claimant, in the fiscal year 2013 and 2014, was not assessed by the Tax Authority using indirect methods.

3. The Claimant is not an entity owing any taxes or contributions to the State and Social Security.

4. The Claimant was not an entity owing any taxes or contributions to the State and Social Security with reference to the fiscal years 2013 and 2014.

A.2. Facts Deemed Not Proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Basis for the Proven and Not Proven Facts

With regard to the facts, the Tribunal does not need to rule on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and distinguish between proven and not proven facts (see article 123(2) of the Tax Code of Procedure and Process and article 607(3) of the Civil Procedure Code, applicable ex vi article 29(1)(a) and (e) of the RJAT).

In this way, the facts relevant to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions to the legal question(s) (see former article 511(1) of the Civil Procedure Code, corresponding to current article 596, applicable ex vi 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 Tax Code of Procedure and Process, the documentary evidence and the administrative proceedings attached to the case file, the facts listed above were considered proven, with relevance to the decision.

B. ON THE LAW

The principal issue to be decided in the present proceedings, being, without doubt, of some complexity in its resolution, is, however, simple in its formulation, and concerns the question of whether it is, or is not, possible to deduct from the part of IRC collection produced by autonomous taxation rates, available fiscal incentives, for IRC purposes.

The problematics underlying autonomous taxation has been the subject of heated dispute between taxpayers and the Tax Authority, a situation to which the proper nature, indeed antisystemic, that characterizes it within the framework of income taxes, where it originated, is not at all unrelated.

Effectively, 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 tax event underlying that type of taxation, opened a deep exploratory path concerning the nature of autonomous taxation and its relationship with income taxes, in particular the IRC, which addressed the issues of the deductibility of autonomous taxation from IRC collection, and the nature, presumptive or not, of autonomous taxation regarding deductible expenses, without to date having been any definitive legislative intervention, doctrinally sustained and coherent, to clarify the proper framework of the taxation in question, within the income tax structure from which it emerges.

In this context, casual judicial decisions succeed equally casual legislative interventions, generating a frame of uncertainty and instability where taxpayers and the Tax Authority have no other way of seeking applicable law than perpetuated litigation, with the burden of interpretation falling on the judicial interpreter the ungrateful task of, in the tangled normative framework generated, serving the justice possible.

Let us proceed, then.

When speaking of autonomous taxation, as is the case here, it is convenient from the outset to bear in mind that various disparate situations are at issue, which will encompass, at least, three distinct types, namely:

• Autonomous taxation of certain income (e.g.: article 72 of the current IRS Code);
• Autonomous taxation of certain deductible expenses (e.g.: article 88(7) of the current IRC Code);
• Autonomous taxation of other expenses regardless of their deductibility (e.g.: articles 1 and 2 of article 88 of the current IRC Code).

This fact becomes important because it alone evidences the disparity and heterogeneity of situations subject to autonomous taxation, and the futility of attempting in judicial decisions to synthesize and seek a unitary legal nature common to all situations.

In this manner, the discussion should be focused on the concrete issue raised by the Claimant and a properly founded answer sought for the restricted terms of what is at issue in the proceedings, which will be then to determine whether it is, or is not, possible to deduct from the part of IRC collection produced by autonomous taxation rates, available fiscal incentives for IRC purposes.

Properly framed in these terms, the question to be resolved in the proceedings, it is further necessary to keep in mind that the fundamental reference for the answer to be given thereto will be that formulated in article 9 of the Civil Code, according to which the legislative thought must be reconstructed, from the texts, which has in the letter of the law a minimum of verbal correspondence, albeit imperfectly expressed.

In this framework, the aim of the present decision will be, not that of theorizing about the legal nature of autonomous taxation in general, or any of its various types, but rather that of ascertaining whether the legislative thought, with a minimum of verbal correspondence in the letter of the law, albeit imperfectly expressed, was or was not, at the date of the tax event in question in the proceedings, possible to deduct from the part of IRC collection produced by autonomous taxation rates, available fiscal incentives for IRC purposes.

It will be futile, it is believed, to seek a conceptualist basis, grounded in a dogmatic definition of monolithic concepts of IRC and Autonomous Taxation, taken from normation extraneous to the matter to be decided, professing a "scholastic ontologism" that seeks "to deduce in purely logical fashion, from abstract superior concepts, others, ever more concrete and full of content"[1], a methodologically outdated approach, aiming at a final unitary concept of Autonomous Taxation, aggregating legal realities of disparate nature and teleology, and which might serve as a validating source for all solutions to the various problems that the matter in question raises.

Rather, one will seek merely to ascertain what solution, given the law as constituted and duly interpreted, appears suitable for the concrete case, not taking the answer given to the question to be decided as a finished, exact evidence with an extreme degree of rigor and precision, but, merely, as that which, reflectively, presented itself to its authors as the, juridically, better[2].

With respect to the matter sub iudice, the Claimant considers that "the fiscal benefits recognized within the scope of SIFIDE should be deducted from the collection of autonomous taxation insofar as, being the expenses incurred and accepted within the scope of SIFIDE deductible from IRC collection calculated pursuant to article 90 of the IRC Code, these must also be deducted from the collection of autonomous taxation, as the latter is considered as IRC collection, autonomous taxation is an integral part of this tax and the rules of calculation provided for in article 90 of the IRC Code are applicable to autonomous taxation," concluding that the "Tax Authority's understanding is based on an incorrect interpretation of the facts and an erroneous interpretation and application of the law, more specifically the provisions of article 133 of Law no. 55-A/2010 of 31 December (State Budget Law for 2011) and article 90 of the IRC Code".

The Claimant invokes, in support thereof, the arbitral decisions delivered in arbitral cases no. 769/2014-T, 219/2015-T, 369/2015-T, 370/2015-T, and 637/2015T, all of CAAD[3].

The basis of the Claimant's claim is literally simple and linear and results from the observation that, where the assessment of autonomous taxation is carried out pursuant to article 90(1) of the applicable IRC Code, the deductions provided for in its article 90(2) will apply to such assessment.

Effectively, the following is the content of the provisions in question:

"1 - The assessment of IRC is carried out in the following terms:

a) When the assessment must be made by the taxable 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 filing of the declaration referred to in article 120, the assessment is effected up to 30 November of the following year to which it relates or, in the case provided for in article 120(2), until the end of the 6th month following the deadline for filing the declaration mentioned therein and is based on the annual value of the minimum monthly remuneration or, when higher, the totality of the taxable matter for the nearest fiscal year determined;

c) In the absence of assessment in accordance with the preceding paragraphs, it is based on the elements available to the tax administration.

2 - To the amount calculated in accordance with the preceding article the following deductions are made, in the order indicated:

a) That corresponding to international double taxation;

b) That relating to fiscal benefits;

c) That relating to special payment on account referred to in article 106;

d) That relating to withholdings at source not capable of compensation or refund in accordance with applicable law."

From a semantic-literal point of view, accepting the premise – which is now accepted – that the assessment of autonomous taxation is carried out pursuant to article 90(1) of the IRC Code as transcribed, no other reading is possible than that presented by the Claimant, and the conclusion condensed in its principal arbitral request is irrefutable.

However, legal reading, by legal (and also logical-rational) imperative, is not limited to, nor should be limited to, the text of the norms as semantic-grammatical reality, but should rather be placed 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 conduct certain tests at the level of the systematic structure within which the norm to be interpreted is situated, in order to validate, in light thereof, and in accordance with the criteria of rationality, congruence and reasonableness which necessarily guide that normative structure, the interpretation literally suggested.

Thus, and first of all, as rightly pointed out by the Respondent entity, "the assessment of autonomous taxation is effected in accordance with articles 89 and 90(1) of the IRC Code but applying different rules for the calculation of the tax:

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

(2) in the other case, various collections are calculated depending on the variety of facts that give rise to autonomous taxation."

In other words, at the outset, a first relevant fact cannot be overlooked, which is that in articles 89 and 90(1) of the IRC Code, two radically distinct forms of taxation – relating to the same tax – converge, namely, traditional IRC, or stricto sensu, and autonomous taxation.

Effectively, and as has been had the opportunity to write elsewhere[4], "the complexity generated by successive alterations in the architecture of the IRC Code has led (...) to an atypical normative structure, in which one can discern a core corresponding to what might be called IRC tout court (or in strict sense), which the Claimant intends to exhaust everything designated by IRC, and a periphery which integrates "marginal" regulations, withdrawn, in large part, from the logic, nature and principles of IRC tout court, but which, nevertheless, still lie within the "gravitational field" of that.

And it is in the process of actualizing this difficult to define zone that all the decisions analyzed (...) operate, and these 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 bring to the matters addressed in each of them."

In that sense, "within the hermeneutic framework outlined above, (...) by force of the historical evolution of its legal regime, a type of IRC has been constituted which integrates a hard core (...) and a group of adjacent normations, which share part of the logic and the regime thereof, but which in many respects differs therefrom." And, further on, "from consideration of the legislative text, statically and in its historical evolution, it appears that the legislator understood, and continues to understand, that autonomous taxation integrates the IRC, if not as a tax stricto sensu, at least in terms of being part of the same unitary fiscal regime."

This is because "the legal regime of autonomous taxation in question in the proceedings only makes sense in the context of IRC taxation. That is, disconnected from the legal regime of this tax, they would lack their principal point of reference. Their existence, their purpose, their explanation, in short, their juridicity, is only properly understandable and acceptable within the framework of the legal regime of IRC."

Hence, it is not understood that "the definition of IRC contained in articles 1 and 3 of the IRC Code" is "truly superseded by a new definition of transversal/general application," this being an epistemological stance characteristic of a conceptualism that is outright rejected.

On the contrary: it is the recognition of what, given the legal framework in force, imposes itself as the most reasonable: the definitive abandonment of any definition of transversal/general application of IRC, and the recognition of its regime as a complex and multifaceted reality, irreducible to a definition of that kind, which only fundamentally abstractionist conceptualism could presuppose."

"Everything that has been said evidences that the evolution of the legal regime of IRC has transformed 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, prejudice, as is understood to be implicit in both the citation in question and the jurisprudence citing it, that one considers the system, despite being dual, to be the same[5]. In other words, it only makes sense to speak of a dual-natured system if the system in question, considered globally, is still the same. Otherwise one would not speak of a system of dual nature, but of two distinct systems, which, by all that has been said, is not what occurs. And, in the present case, the system will be the IRC regime, which operating sometimes by profit, sometimes by expenses, pursues the objectives proper to that tax, including, evidently, the raising of revenue for the State."

"In conclusion, given all that has been expounded, and in favor of conceptual rigor, it will further be said that one tends toward the understanding that autonomous taxation, as it currently exists, may be configured as a "hybrid" tax[6], impacting on the income of natural and legal persons, and not on consumption or expenses, as it does not present the principal characteristics of this form of taxation."

All that has been said echoes, in some form, in the jurisprudence being produced by the Constitutional Court (TC), of which Constitutional Court Decision 197/2016, of 13-04-2016[7], constitutes the last published chapter.

Effectively, recognizing that the matter of autonomous taxation is "regulated normatively within the scope of income tax," the Constitutional Court confirms that the same "is materially distinct from taxation in IRC," and that "we are (...) faced with distinct tax events and which are subject to differentiated tax treatment," going so far as to affirm that "IRC and autonomous taxation are distinct taxes" and that such taxation "has nothing to do with income taxation and profits," statements which must be read cum grano salis, framing them within the limitations that contextualize them, referring them to the existence of a "tax base" consisting of "certain expenses that constitute autonomous tax events," and in the "subjection to specific rates," thereby understanding that autonomous taxation "has nothing to do with taxation of income and profits attributable to the economic operation of the business" (which does not mean it is unrelated to income and profits in general), and that the distinction between autonomous taxation and IRC, being profound and marked, must be limited to the necessary to safeguard the specificity thereof at the level of its teleology, tax base and specific rates, without prejudicing integration within the same normative structure.

Effectively, it is believed that the Constitutional Court is not defending that autonomous taxation constitutes a tax on expenses stricto sensu, completely unrelated and distinct from IRC, lest it be contradicted both by the systematics of tax law[8] and, expressly, by the legislator itself[9], as well as irremediably condemn autonomous taxation to a formal unconstitutionality, by violation of the provision in paragraph i) of article 165(1) of the Constitution[10], insofar as the authorizing laws for the creation thereof did not license the creation of a new tax on expenses[11].

Nevertheless, and without prejudice to what has been expounded, one cannot, in the examination of the matter in question, disregard the (emphatically affirmed by the Constitutional Court) profound formal and teleological distinction between autonomous taxation in IRC and general taxation in this tax (IRC stricto sensu).

In summary: it has previously been 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 productive way of generating legally adequate solutions for the problem in question is to understand the current IRC regime as the product of a historically explained evolution that led to the building of a structure of a dual or hybrid nature, comprising a principal core corresponding to traditional IRC, and an adjacent part, connected with it and forming part of the same overall normative reality, with specificities of its own which result in a departure, in various and substantial aspects, from the principal regime, in terms of the principles and general solutions, despite sometimes applying, sometimes being contradictory, and thus inapplicable, with the proper nature of that "adjacent normation" which is embodied in the designated autonomous taxation.

Being that, as is already well known, that proper or specific nature, grounded in a logic foreign to the principal structure of traditional IRC, will be characterized, essentially, by the notes amply recognized as peculiar to autonomous taxation, namely, both as to its form of imposition (the instantaneous character of its tax event and the circumstance that it consists in an expense), and as to its antisystemic ratio (the fact that some autonomous taxation has a facet directed directly to the income of natural persons and/or a sanctionatory facet, as well as an anti-abuse purpose).

Thus, and concluding here, one cannot, it is believed, in the path of the solution to be obtained for the issue to be decided, fail to note that, despite the fact that autonomous taxation and IRC stricto sensu (or traditional) do indeed converge, in the form of assessment regulated in articles 89 and 90(1) of the applicable IRC Code, they derive, upstream, from profoundly distinct geographies, a fact which cannot fail to be duly weighed and taken into account in the solutions to be found downstream, namely, and for what matters in the case, with respect to the reading to be made of the norm of article 90(2) of the said Code.

Proceeding in the interpretive path underway downstream, one will now examine the consequences of limiting such hermeneutic process to the literal layer of the object of interpretation under analysis.

As the Respondent entity rightly 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 IRC Code, it follows that, at the level of such norm, no distinction should be made taking into account the differences, upstream, of the tax which in those terms is assessed, would imply that in the basis for calculating payments on account due in IRC, would also be included values relating to autonomous taxation, and not merely those relating to IRC stricto sensu.

Effectively, article 105(1) of the IRC Code provides that "Payments on account are calculated on the basis of the tax assessed in accordance with article 90(1) (...)."

Now, if one were to understand that the normative content of the norm of article 90(1) of the IRC Code in question forbids any distinction, for purposes of other norms that refer to it, between the tax assessed as autonomous taxation and the tax assessed as IRC stricto sensu, one would have, coherently and in the same terms, to conclude that payments on account would be due based on the sum of both values, and this solution cannot – it is believed – be considered as in accordance with the spirit of a reasonable legislator.

Effectively – and payments on account not being thema decidendum of the present proceedings – without great depth being required in this analysis, it will always be said that payments on account, as is doctrinally and jurisprudentially recognized, have as their basis an intention of advancing the taxation that will be due finally, based on the taxable profit of the previous year.

In this sense, for example, it was written in the Supreme Administrative Court Decision of 07-03-2007, delivered in case 0877/06[12], that (emphasis ours):

"From the legal definition of 'payment on account' is derived an inevitable, necessary and essential intertwining between 'payment on account' and 'tax ultimately due.'

Such that the 'title' (word of the law) of the 'payment on account' is the 'tax ultimately due.'

Which means that the 'payment on account' is, in the very terms of the law, an advance payment, made, on account of the tax ultimately due, in the period of formation of the tax event.

Which further means that the 'payment on account' must be measured with reference to the accounting situation of the business at the end of the period to which the payment on account refers.

Which decidedly means that, if no pecuniary amount is to be (in advance) delivered on account of the tax ultimately due, in the relevant period of formation of the tax event (to which the 'payment on account' refers) – most especially due to the nonexistence of taxable profit revealed by the accounting at that time –, such 'payment on account' has no substantive foundation. (...)

And, thus, if there is no taxable profit, there is no tax ultimately due."

Now, (at least some autonomous taxation, as has been indicated elsewhere already[13], does not impact directly on income, doing so in a merely mediate fashion, this being the justification for, despite the same integrating the IRC regime broadly construed, operating through the expense and, consequently, being owed even where the taxable person presents a loss (as is the case with the present Claimant).

Thus being, as it is believed to be, it will be devoid of meaning that to taxpayers presenting no taxable profit, payment on account would be required based on tax assessed on expenses which they incurred and which were subject to autonomous taxation.

This same is corroborated by the distinct nature of the tax event underlying IRC stricto sensu and autonomous taxation. Effectively, where the first is a tax event of continuous nature and the second a tax event of instantaneous nature, only with respect to the first will it make sense to discern an advance of tax (payment on account), and not with respect to the second whose practice immediately generates a tax obligation.

In the hermeneutic path being followed, consideration must also be given to the norm of article 90(5) in question, which provides that:

"The deductions referred to in article 90(2) relating to entities to which the transparent fiscal regime established in article 6 applies are imputed to the respective partners or members in the terms established in article 6(3) and deducted from the amount calculated on the basis of taxable matter having taken into account the imputation provided for in the same article."

This norm directly refers to article 6 of the same Code, which prescribes, for what is relevant to the case, that:

"1 - Is imputed to the partners, integrating itself, in accordance with applicable legislation, in their taxable income for purposes of IRS or IRC, as the case may be, the taxable matter, determined in accordance with this Code, of the following companies, with registered office or effective management in Portuguese territory, even if there has been no distribution of profits:

a) Civil partnerships not formed in commercial form;

b) Professional partnerships;

c) Simple asset management partnerships, the majority of whose capital is owned, directly or indirectly, for more than 183 days of the fiscal year, by a family group, or whose capital is owned, on any day of the fiscal year, by no more than five partners and none of them is a public legal entity. (...)

3 - The imputation referred to in the preceding articles is made to the partners or members in the terms resulting from the bylaws of the entities mentioned therein or, in the absence of elements, in equal shares."

Fundamental in framing this question is the content of article 12 of the same Code, which states that:

"The partnerships and other entities to which, in accordance with article 6, the transparent fiscal regime applies are not subject to IRC tax, except as to autonomous taxation."

Not being, once more, the issue of entities subject to the transparent fiscal regime the object of the present case, synthetically it will always be said, from the outset, that from the reading on which the Claimant's claim is based, that is, that autonomous taxation integrates, without limitations and for all purposes, the taxable matter of IRC, two equally unacceptable situations would always result, namely:

• that the entities referred to in article 6(1) of the IRC Code would be obliged to bear double the burden of autonomous taxation: once in the sphere of the partnership, in accordance with article 12 of the IRC Code, which expressly provides for it, and another time in accordance with the combined articles 6(1) and (3), 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, that is, if by way of some interpretation the expression "taxable matter, determined in accordance with this Code" were restricted, expunging it of 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 IRC taxable persons subject to the transparent fiscal regime would be prevented, by way of the said article 90(5), from deducting from the amounts assessed as autonomous taxation, the deductions provided for in article 90(2) thereof, since these latter amounts would be borne by the partnership, while the deductions would only be available to the partners, thereby unjustifiably discriminating the IRC taxable persons subject to the transparent fiscal regime from the remaining, which, in the Claimant's thesis, would have the faculty to effect the deductions provided for in article 90(2) to the amounts assessed, in accordance with article 90(1) thereof, as autonomous taxation.

Having reached this point, it is necessary to explore somewhat further the limits of the literality of the norms at the epicenter of the present dispute – articles 90(1) and 90(2) of the applicable IRC Code – and its repercussions within the broader framework of the relationship between traditional IRC and autonomous taxation in that tax.

As was expounded above, within the set of autonomous taxation, even if restricted to those integrating the IRC regime broadly construed, various situations of disparate origin and teleology converge.

Thus, by way of example, there are autonomous taxation which aim, in isolation or concurrently, to discourage certain economically undesirable behaviors (e.g.: excessive compensation to managers), to tax the so-called fringe benefits (allowances; vehicle expenses), to mitigate the fiscal repercussion of expenses of dubious full business character (idem), to discourage behaviors with high potential for fraud (payments to entities subject to clearly more favorable tax regime) or to penalize behaviors fostering the so-called parallel economy (taxation of confidential expenses).

The literality of the interpretation proposed by the Claimant miscegena, in the narrow view of the letter of the law all those situations – because all of them will be assessed in accordance with article 90(1) of the applicable IRC Code.

Now, previously, and on other occasions, the vain aspiration of enclosing, in a unitary concept, all autonomous taxation, even those that only occur within the scope of IRC, has been pointed out, given their teleological and functional disparity. And, here, one of the principal weaknesses of the argumentative structure upon which the Claimant's position rests emerges: that of being grounded in a postulate of uniqueness of autonomous taxation in IRC, characterized by the fact that they are still taxation of income/profit, as a substitute for the prohibition of deduction of certain expenses from taxable profit, as is implicit in the arbitral jurisprudence cited by it.

Now, this, among others, is a characteristic recognized for a certain type of autonomous taxation: autonomous taxation relating to deductible expenses.

The breach in the structure supporting the Claimant's position opens, in light of this observation, in two distinct directions: on the one hand, the reading proposed by the Claimant for the norm of article 90(1) of the applicable IRC Code does not distinguish, nor permit to distinguish, between autonomous taxation relating to deductible charges and other types of autonomous taxation, such as those relating to confidential expenses; on the other hand, from the proven facts it does not appear that the autonomous taxation in question in the present proceedings do not respect distinct types of autonomous taxation, such as, for example, autonomous taxation relating to undocumented expenses, bonuses and other variable compensation or payments to entities subject to a clearly more favorable tax regime.

From what has been said, it results, from the outset, that all the argumentation presented by the Claimant, relating to the nature of autonomous taxation, as still taxing income is inconsequential for deciding the matter sub iudice, because it is not even demonstrated that autonomous taxation of that type (and not others) are at issue; on the other hand, from the interpretation proposed it would always follow that the deductions provided for in article 90(2) of the applicable IRC Code in question would be made to all types of autonomous taxation, including, for example, those relating to payments to entities subject to clearly more favorable tax regimes and those relating to confidential expenses, and none of the substantive arguments on which the Claimant's position rests permit justifying that this occur.

On the other hand, it further results that the argumentative structure presented by the Claimant in support of its claim harbors within it the potential to shelter claims – which, indeed, given the facts deemed proven, might even be the case of the Claimant – in which it is aimed to proceed to deductions in accordance with article 90(2) of the applicable IRC Code, to autonomous taxation relating, for example, to confidential expenses or payments to entities subject to a clearly more favorable tax regime.

Now, this type of claim cannot be considered as intended by a reasonable legislator, given the entire systematics of IRC broadly construed, including autonomous taxation. Effectively, it will not be sustainable that, having gone where, juridically, the legislator of the IRC Code went, with a view to, for example, combating the parallel economy or transactions with the so-called (incorrectly[14]) "tax havens," it was his intention that the respective burden of autonomous taxation could be lightened by means of the deductions provided for in article 90(2) of the IRC Code.

The systemic entropy generated by the position that the Claimant seeks to enforce in the proceedings will not stop here, however.

Effectively, and even restricting the question to autonomous taxation on charges deductible in IRC, this position would result in a direct violation of the principle of equality.

Effectively, as all the abundantly cited jurisprudence by the parties denotes, autonomous taxation relating to deductible charges has underlying it a presumption of "partial" or non-integral "business character." That is, such expenses will presumably contain a business purpose, which permits their deduction, but to such purpose will concur others, which, if they were exclusive, would preclude their deductibility[15].

Such presumptive character will justify that when the taxpayer succeeds in rebutting the said presumption, the expenses maintain their deductible character, without subjection to autonomous taxation[16].

Now, in this restricted field of autonomous taxation on deductible expenses, the position sustained by the Claimant would result in a qualified inequality (insofar as 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), already in a situation in which a taxpayer declared deductible charges which would normally be subject to autonomous taxation, but which, in concreto, would not be because the material prerequisites thereof were not met (that is, due to rebuttal of the underlying presumption), as was the case, for example, in the situation in question in arbitral case 628/2014T, and in which that same taxpayer presented a tax loss, he could not proceed to any deduction in accordance with article 90(2) of the IRC Code, whereas another taxpayer, in the same situation (tax loss), but who assumed (implicitly or explicitly), the partially business character of the same type of charges, thus being burdened with the corresponding autonomous taxation, could, in the thesis underlying the Claimant's position, avail himself of the deductions provided for in that same article.

That is, and in summary: between two taxpayers in distinct situations before the IRC tax system, one incurring expenses of entirely business nature, and another incurring the same expenses but for purposes (really or presumedly) partially foreign to business character, the second would obtain from the tax system, in the matter that occupies us, more lenient treatment, via a behavior less in accordance with the teleology thereof.

Now, as is well known, the principle of equality is one of the fundamental constituent principles of tax law, and nothing, at least in light of the criterion of the reasonable legislator, permits concluding that, in the regime under analysis, the legislator intended to directly affront that principle, dispensing a benefit in function of a factor contradictory with the teleology of the system.

Effectively, in the tax field, the principle of equality is but a specific expression of the general principle of equality of citizens before the law, provided for in article 13 of the Constitution, which comprises a dual facet of formal equality (equality before the law, general and abstract), and a material facet (prohibiting arbitrary discrimination), and the principle in question may be seen in two distinct planes, namely:

• That of horizontal equality – according to which equal income, capital or consumption should correspond equal measure of tax;

• That of vertical equality according to which different income, capital or consumption should correspond different tax, in the measure of the difference.

It thus follows, from the general principle of equality, the prohibition of arbitrary discrimination, extensible to tax law under pain of violation of the very idea of Rule of Law, and the prohibition of all forms of taxation (or exemption) discriminatory or arbitrary, unacceptable in light of the values of legal and substantive equality.

The idea of generality of taxation, it is true, does not prevent the establishment of regimes of differentiated taxation, nor the establishment of exemptions, deductions or increases in tax, provided that they are grounded in values and purposes of public order which are superior to those which determined the creation of the tax itself. That is, differentiation based on perceived values is not prevented, but discrimination grounded in realities not consented by the proper fundamental order is prevented.

Being true that the principle of legal and fiscal equality is not an absolute principle, as it admits situations of distinction, it is also true that these situations must correspond to discriminations grounded in institutionalized values, generally accepted and embraced in the order of values instituted.

Now, in the case, in which two businesses in the situation described above find themselves objectively in differentiated situation and which should, therefore, deserve differentiated tax treatment, in the sense of the difference, there occurs, given the thesis underlying the Claimant's position, precisely the contrary.

In this manner, always in the case should there intervene a factor of interpretation in accordance with the Constitution of the norms in question, especially article 90(2) of the IRC Code.

Within the topics for decision to be considered, it will fall, finally, to make a mention of the entry into force of the new wording of article 88(21) of the IRC Code, introduced by the Law approving the State Budget for 2016 (Law no. 7-A/2016, of 30 March), which came to say that:

"The assessment of autonomous taxation in IRC is effected in accordance with the terms provided in article 89 and is based on the values and rates that result from the provisions of the preceding articles, with no deductions being made to the overall amount calculated."

This norm is the object of article 135 of the same referred Law approving the 2016 State Budget, which states that:

"The wording given by the present law to article 51(6), article 83(15), article 84(1), articles 88(20) and 88(21) and article 117(8) of the IRC Code has an interpretative nature."

Thus arises the question of whether article 88(21) of the IRC Code, introduced by the 2016 Budget, has (as the law itself states), or not, an interpretative nature.

Granting that one is, without doubt, in a borderline situation, one will tend to grant to the norm in question the character that the law itself that expressly creates it expressly confers upon it.

Effectively, following the doctrine of the illustrious Master Prof. Dr. Baptista Machado, for a law to be interpretative it is necessary:

a. that there be a controvertible or uncertain question in the law in force;

b. that the legislator establish an interpretative solution that resolves the uncertainty that the interpreter or judge would reach based on the normative previously to the legislative amendment.

Now, the application made of these principles goes, precisely, in the sense that the Law in question is, in fact, of an interpretative nature.

Effectively, prior to the entry into force of the law in question (article 88(21) of the IRC Code), the question of whether deductions provided for in article 90(2) of the IRC Code were, or were not possible to the amounts assessed, in accordance with article 90(1), relating to autonomous taxation, was a controvertible question, so much so that there were several disputes between the Tax Authority and taxpayers in that respect, a fact which is public, notorious.

Effectively, for a question to be controvertible, it will not be necessary, and indeed is not the case, that there be a divergence between judicial decisions, it sufficing that there be differing application of the controversial law by any legal operator, and the controversy being capable of being, even, of essentially doctrinal nature.

On the other hand, and with respect to the second of the enumerated requirements, it is not considered that the solution given by the legislator must necessarily be one of those proposed by those involved in the controversy nor, much less, that it must adhere to the grounds thereof. Effectively, the interpretative intervention of the legislator is not intervention in a case between parties, in which he arbitrates in favor of one or the other of those involved in the controversy. Rather, such interpretative intervention is objective – that is, it is placed vis-à-vis the Law as it was and as it became – and it is the clarification of a will proper to the legislator.

Hence, for a law to be considered interpretative, in addition to the existence of a controversy in the terms set out above, it is necessary only that the solution be one of the objectively possible, within the framework of the Law existing prior to the interpretative intervention, regardless of whether, in one or another case, or even in all, it is one sustained by those involved in the controversy.

That is: for the law to be interpretative, it suffices that the solution given correspond to a possible one to be given, already in light of the legal text prior to such Law.

Now, as will be seen next, this is what occurs in the case.

Summarizing what has been said above, it is verified, from the outset, that the interpretation sustained by the Claimant rests, essentially, on the literal content of the norms of articles 90(1) and 90(2) of the applicable IRC Code, with no substantial grounds being discerned to justify the solution in question, all the more so because the arguments on which the Claimant's position rests are essentially relating to autonomous taxation on deductible charges, being that, on the one hand, nothing is proven regarding, in the concrete case, autonomous taxation of that type (and not others) being at issue, and, on the other, from the interpretation proposed it would always follow that the deductions provided for in article 90(2) of the IRC Code in question would be made to all types of autonomous taxation, including, for example, those relating to payments to entities subject to clearly more favorable tax regimes and those relating to confidential expenses, and none of the substantive arguments on which the Claimant's position rests permit justifying that this occur.

On the other hand, as was seen, if it is true that article 90(1) of the IRC Code in question does not distinguish between the assessment of autonomous taxation and the assessment of traditional or stricto sensu IRC (on taxable profit), the truth is that, upstream, the procedure and the nature of the two types of tax imposition is substantially distinct, as was seen and as constitutional jurisprudence on the matter gives abundant account, a situation to which it cannot, it is believed, fail to be attended in the matter sub iudice.

It further accrues that, as was also seen, the ratification of the interpretation sustaining the Claimant's petition would be a generator of notable turbulence in the normative structure of IRC, particularly with respect to the regime of special payment on account and of partnerships subject to the transparent fiscal regime.

Finally, as was also analyzed, the adherence to the literality of the provisions of articles 90(1) and 90(2), advocated by the Claimant, would result – it is believed – in a trampling upon the principle of tax equality, in addition to everything else, constitutionally imposed.

For all of this, it is believed that in the combination of the text of the two norms, the legislator said more than it intended, a situation which, moreover, resulted not from contemporary carelessness in the drafting of such norms, but rather from the evolution of the normative regime of IRC and, specifically, from the gradual introduction thereof of the regime relating to autonomous taxation, without that being coherently reflected in the content of article 90(2) of the same Code.

We are thus, faced with a situation described by the Illustrious Master Prof. Doctor Baptista Machado, in which "Sometimes, although rarely, it will be necessary to go further and sacrifice, still in obedience to the legislative thought, part of a normative formula, or even the totality of the norm. These are aborted legislative formulas or true oversights. When the normative formula is so poorly inspired that it does not even allude with minimal clarity to the hypotheses it intends to encompass and, taken literally, encompasses others which decidedly are not in the spirit of the law, corrective interpretation may be spoken of. The interpreter will resort to such form of interpretation, of course, only when by such means alone is it possible to achieve the aim intended by the legislator. Revocatory or abrogant interpretation will take place only when between two legal provisions there exists an insurmountable contradiction"[17].

Effectively, the normative formula of article 90(2) of the applicable IRC Code, taken literally, as does the Claimant, encompasses hypotheses, as was seen, which decidedly are not in the spirit of the law nor are in accordance with the specificities and proper nature of autonomous taxation. In the case, as was referred to already, not by poor inspiration of the norm itself, but of the reforms themselves that were introducing autonomous taxation in IRC, without those being correspondingly reflected in the wording of article 90(2) of such Code.

In this manner, it becomes necessary to interpret correctively the norm of article 90(2) of the applicable IRC Code, in order to restrict the reference it makes to article 90(1) of the same norm, in the reference it makes "To the amount calculated in accordance with the preceding article," limiting it to the amount of IRC collection calculated through the application of the rates of article 87 to the taxable matter calculated in accordance with the rules of Chapter III of the Code, and no longer to the amounts calculated as autonomous taxation, thus restoring to the norm its original sense, which was that which corresponded to its textual wording prior to the introduction of autonomous taxation in the IRC Code.

Notwithstanding that this be a decidedly exceptional type of interpretation, as proper doctrine holds, it will always be noted that, in the case, the interpreter is faced with the alternative of opting for it, or for yet another type of interpretation even more exceptional, that is, revocatory or abrogant interpretation of article 135 of the Law approving the 2016 State Budget, which conferred an interpretative character on the addition of article 88(21) to the IRC Code.

That is: between a corrective interpretation and an abrogant interpretation, one opts, in addition to all else that was said, for the former.

Here having arrived, as a final note, it is necessary to return, precisely, to the issue of the interpretative character – or not – of the addition of article 88(21) of the IRC Code, proclaimed by article 135 of the Law approving the 2016 State Budget.

Before all else, it should be noted that once more the lack of legislative skill is evidenced here, a symptom of a merely reactive law-making activity which, casually, seeks to address the problems that it itself, in the first place, generates.

Effectively, it is evident that the addition of article 88(21) to the IRC Code does not have – in itself – an interpretative nature, insofar as with respect to article 88 no celeuma was raised, in the matter added, which it was necessary to address. The controversy, as has just been seen, resided in article 90(2), and it is with respect to the interpretation thereof as results from the introduction of article 88(21) that the alteration to the IRC Code introduced by Law no. 7-A/2016, of 30 March will be interpretative. That is to say, it is with respect to the normative content of article 90(2) that the Law approving the 2016 State Budget is interpretative, insofar as it imposes that it be read prior to its entry into force, in the same manner as it became – without doubt – to be read after that same entry into force.

In this manner, and if one did not reach the above-mentioned conclusion, according to which a corrective interpretation of article 90(2) of the applicable IRC Code is the legally most adequate solution for the case, one would always reach the same conclusion by way of the interpretative character of the alteration to the IRC Code introduced by Law no. 7-A/2016, of 30 March, insofar as, existing a prior controversy and being that solution one of the possible, and that which results from the Law which expressly takes itself as interpretative, always would such solution be that which would comply to be assumed.

It is concluded, given all that has been expounded, that the arbitral petition should be ruled against.

Note, in conclusion, that the basis of the present decision, and the basis of the defense of the Tax Authority in the arbitral proceedings, do not coincide with the basis of the act of decision of the administrative claim filed by the Claimant.

This is not, reserving respect due to other opinions, in the case, a reason for annulment of such act.

Effectively, and from the outset, it has been peacefully understood, also, that:

"In matters of law, the tribunal is not bound by the allegations of the parties, nor even as to the legal characterization of the facts effected by them, and enjoys freedom in the investigation, interpretation and application of Law (article 664 of the Civil Procedure Code)."[18]

On the other hand, and as jurisprudence has also been:

"Notwithstanding the implications that the statement of grounds may eventually have on the substance of the decision, it is necessary to distinguish the formal aspect, that which is relevant in complying with the imperative of grounds, from the material aspect, which in the structure of the act respects above all the existence of the real prerequisites which support the substantive decision."

That is, the formal grounds, impressed in the compliance with the imperative to state grounds, may be correct or incorrect, contending only with the validity of the act if, and insofar as, it crystallizes the factual and legal prerequisites of the act and these are not in conformity with the law, embodying itself in an error of fact and/or law.

It further accrues that article 2 of the RJAT, takes as the reference for the competence of arbitral tribunals, primary acts ("acts of tax assessment, self-assessment, withholding at source and payment on account"), being secondary acts only relevant as references for the timeliness of the impugnatory claim, as results from article 10(1)(a) of that Regime, which imposes that requests for constitution of an arbitral tribunal be filed within 90 days, counted from the facts provided for in articles 102(1) and (2) of the Tax Code of Procedure and Process.

Hence, in the first place, one is in the present proceedings to examine the legality of the act of self-assessment of IRC of the Claimant (direct object of the competence of arbitral tribunals), being the legality of the secondary act of administrative claim – whose principal function is to guarantee the timeliness of the Claimant for impugning the arbitral tribunal on the primary act – merely reflexive or derived from the legality thereof.

Thus, the eventual annulment of the act of decision of the administrative claim, for incorrect grounds, when – as is the case – it is concluded that the illegalities alleged as to the primary act are not verified, would always result in a useless act, and as such prohibited, already since, bound by res judicata, the Tax Authority would not do more in the new act than necessarily confirm what was decided in the arbitral proceedings, which moreover is reflected in the regime of article 163(6) of the new Code of Administrative Procedure.

C. DECISION

In these terms, this Arbitral Tribunal decides to rule against the arbitral petitions filed and, in consequence, to maintain the tax acts that are the object of the present arbitral action and to condemn the Claimant in the costs of the proceedings, as set forth below, having taken into account amounts already paid.

D. Case Value

The case value is fixed at €61,895.93, in accordance with article 97-A(1)(a) of the Tax Code of Procedure and Process, applicable by force of paragraphs a) and b) of article 29(1) of the RJAT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The amount of the arbitration fee is fixed at €2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, once the petition was entirely ruled against, in accordance with articles 12(2) and 22(4), both of the RJAT, and article 4(4) of the said Regulation.

Let notification be made.

Lisbon, 13 March 2017

The Presiding Arbitrator

(José Pedro Carvalho - Rapporteur)

The Arbitrator Member

(Daniel Taborda)

The Arbitrator Member

(Magda Feliciano)

Dissenting, in accordance with the vote that follows and is part of the present decision

DISSENTING VOTE

In line with what has been defended in the present decision, it is considered that, given the law as constituted, applicable to the concrete case and duly interpreted, it is not possible to accept any answer to the question to be decided as a finished, exact evidence with an extreme degree of security.

In fact, the antisystemic nature of autonomous taxation rates, to which is added the disparity and heterogeneity of situations subject to this type of taxation and the necessary weighing of the principle of tax equality, determines that the interpreter faces a difficult task.

In this context, and precisely because of this context, we cannot follow the conclusions of the present decision, as we believe that the solution should be sought in the rules of interpretation of the law. In truth, following J. Baptista Machado[1], we believe that "in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter must opt in principle for that sense which best and most immediately corresponds to the natural meaning of the verbal expressions used, and especially their technical-legal meaning, in the assumption (not always exact) that the legislator knew how to correctly express his thought." To this interpretive orientation is added that, although in matters of interpretation the prevalence of spirit over the letter of the law is imposed, "However, the legislative thought cannot be considered by the interpreter which does not have in the letter a minimum of verbal correspondence, albeit imperfectly expressed."[2]

Thus, attentive to the natural limits in the search for interpretive sense and to the proper nature of the fiscal matter interpreted, similar to what has already been defended in decision 744/2015, of 3.05.2016, it is understood that the norm provided for in article 90(1) and 90(2)(d) of the IRC Code, applicable to the facts under analysis, should be interpreted in the sense of considering that IRC collection encompasses autonomous taxation rates, which are also IRC or as is admitted in the decision being voted upon integrate the IRC "if not as a tax stricto sensu, at least in terms of being part of the same unitary fiscal regime."

Now, having in mind that IRC collection includes the expenses, costs and charges object of autonomous taxation[3], then, attentive to the provisions of article 90(2)(c) of the IRC Code, the fiscal benefits in question must be deducted from the IRC collection calculated, which encompasses the autonomous taxation rates owed.

In fact, the assessment of IRC (and autonomous taxation rates) is regulated by article 90(1)(a) of the IRC Code, according to which "When the assessment must be made by the taxable person in the declarations referred to in articles 120 and 122, (...) the IRC assessment is based on the taxable matter contained therein."

In the absence of any norm providing for a different form of assessment applicable to autonomous taxation rates, their assessment should be carried out in the terms mentioned, not being possible for us, even considering the systematic and historical elements of the norm, to adhere to another interpretation. In truth, we cannot identify in the IRC Code any special norm applicable to the assessment of autonomous taxation that permits us to conclude the inapplicability of the general norm established in article 90 of the IRC Code.[4]

Moreover, it does not seem to us possible to evaluate the hybrid nature of autonomous taxation rates, their historical purposes, or other scenarios resulting from the current interpretation of the norm, in order to opt for a corrective interpretation of the norm, since we do not see how to extract or relate the interpretation proposed in the decision with the legal text in question, given the absence of legal basis applicable to the form of assessment of autonomous taxation rates. Also, we cannot follow the conclusion underlying the present decision, by way of the alteration to the IRC Code effected by Law no. 7-A/2016, of 30 March, as, there being no legal basis previously applicable specifically to the assessment of autonomous taxation, there is, also in our view, no norm specifically interpreted, in which the so-called interpretative norm may be integrated, or at least, the perception regarding the interpreted norm is quite difficult.

I therefore rely on the most recent CAAD Decisions, namely in cases 784/2015, 5/2016, 769/2014, 219/2015, 369/2015, 370/2015 and 637/2015.

This is what it behooves me to say.

For which reasons I vote dissenting.

Magda Feliciano

[1] Arthur Kaufman, "Philosophy of Law", 3rd Edition, Calouste Gulbenkian Foundation, p. 44.

[2] "It is precisely in argumentations pedantically exact, thought with an extreme degree of rigor and precision, that we frequently have the impression that something, in some way, does not make sense."; idem, p. 89.

[3] Note that there is, equally, CAAD jurisprudence in the opposite sense, and reference may be made to the decisions in arbitral cases:

• 174/2016T, available at: https://caad.org.pt/tributario/decisoes/decisao.php?s_processo= 174%2F2016&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=2234;

• 122/2016T, available at: https://caad.org.pt/tributario/decisoes/decisao.php?s_processo= 122%2F2016&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=2210;

• 34/2016T, available at: https://caad.org.pt/tributario/decisoes/decisao.php?s_processo= 34%2F2016&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=2123.

[4] See, for all, the arbitral decision in case 94/2014T, available at www.caad.org.pt.

[5] Hence the reference to an IRC in strict/broad sense, reflective of such duality.

[6] Integrating such system of dual nature, already alluded to above.

[7] Available at http://www.tribunalconstitucional.pt/tc/acordaos/20160197.html.

[8] See, for example, that for purposes of IRS autonomous taxation is only owed by taxpayers who possess or must possess organized accounting (article 73(2)), and not by those opting for the simplified regime. Naturally, if autonomous taxation were strictly a tax on expenses, completely unrelated and distinct from the income taxes in which it is inserted, nothing would justify that individual business taxpayers, subject to the simplified regime, not have their expenses taxed autonomously.

[9] See articles 12, 23-A(1)(a) and 88(21), all of the current IRC Code, and where it expressly results that IRC includes autonomous taxation.

[10] "It is the exclusive competence of the Assembly of the Republic to legislate on the following matters, except as authorized to the Government:(...) i) Creation of taxes" (emphasis ours).

[11] See, for all, the pioneering Law 101/89, of 29-12, which, in article 25(3), authorized the Government to "autonomously tax in IRS and IRC," and not to create a new tax on expenses.

[12] Available at www.dgsi.pt.

[13] "(...) one will always, in the final analysis, be having in mind an income, present or future, which the legislator tolerates taxing less (by force of the consideration of the deducted expense), in exchange for immediate taxation, when the expense is incurred, aiming then, in this perspective, the autonomous taxation to which we refer, albeit mediatedly, the income of the taxable person.

Such taxation will be, from this point of view, a form (convoluted, it is true) of, indirectly and through the expense, still indirectly taxing the income (effective or potential/future) of legal persons." (see p. arbitral 94/2016T, already cited).

[14] Unless better advised, the expression "tax haven" will be an incorrect translation of the English expression "tax haven," where "haven" means "shelter," and not "paradise," which might be a possible translation of "heaven," but not of "haven."

[15] That is: for example, the charge for a light passenger vehicle which is at the service of a business, but occasionally, effectively or presumedly, be subject to private use by an employee or third party, will be subject to autonomous taxation.

[16] See in this sense, for example, the arbitral decisions in cases 628/2014T and 704/2015T (the latter, at the date, still not published).

[17] Introduction to Law and Legitimizing Discourse, Almedina, 20th reprint, 2012, p. 186.

[18] See Administrative Court Decision of 05-06-2013, delivered in case 0433/13, available at www. dgsi.pt.

[1] In Introduction to Law and Legitimizing Discourse, Almedina, Coimbra, 1991, pp. pag.182

[2] See article 9(2) of the Civil Code.

[3] Although autonomous taxation rates are not deductible for purposes of determining taxable profit, in accordance with the provisions of article 23-A(1)(a) of the IRC Code.

[4] For which reason article 88(21) was subsequently added to the IRC Code, which will be analyzed in section B.