Summary
Full Decision
ARBITRAL DECISION
I – REPORT
a) A..., NF..., resident at Rua..., no...., ..., ..., ...-... Braga, hereinafter referred to as the Claimant, submitted on 22 November 2018 a request for arbitral decision, under the Legal Framework for Arbitration in Tax Matters (RJAT), with a view to obtaining a decision on "the declaration of illegality and annulment of the Personal Income Tax (IRS) assessment relating to the 2017 tax period, contained in the assessment statement no. 2018..., of 13 August 2018, in the part ... that concerns the extraordinary surtax ...".
b) The Claimant requests the Court to (1) "declare the illegality and annul the IRS assessment for the year 2017 in the part concerning the extraordinary surtax assessment in the total amount of € 9,731.47" (2) "condemn the Public Treasury to reimburse the tax payment unduly paid as extraordinary IRS surtax for the year 2017 in the amount of € 9,731.47, plus compensatory interest at the annual legal rate of 4%, as provided for in Articles 43º and 100º of the LGT and Article 61º, no. 5, of the CPPT, pursuant to Article 24º, no. 5, of the RJAT".
c) The Tax and Customs Authority is the Respondent, hereinafter referred to as the Respondent or AT.
d) The request for constitution of the Singular Arbitral Tribunal (TAS) was accepted by the President of CAAD and automatically notified to the AT on 23-11-2018.
e) By the CAAD Deontological Council, the signatory of this decision was appointed as arbitrator. The parties were notified on 14.01.2019 and did not express any intention to refuse the appointment, pursuant to Article 11º no. 1 subsections a) and b) of the RJAT and Articles 6º and 7º of the Deontological Code.
f) The Singular Arbitral Tribunal (TAS) has been regularly constituted since 04 February 2019 to examine and decide the subject matter of this dispute (Articles 2º, no. 1, subsection a) and 30º, no. 1, of the RJAT).
g) To support the request, the Claimant invokes, regarding the "relevant legal framework" applicable to the case submitted for decision, that the "exceptional and urgent measure ... which ... consisted of the creation of a tax surtax to be applied "only to the part of taxable income that exceeds the annual value of the minimum monthly guaranteed remuneration per taxpayer"" emerged as temporary, to apply only in 2011, under no. 3 of Article 2º of Law 40/2011, of 7 September, and was established in no. 1 of Article 72-A of the IRS Code;
h) However "the validity of the extraordinary IRS surtax far exceeded – and by much – the year 2011, contrary to what was initially projected", having been maintained in the following years until the approval of Law 159-D/2015, of 30 December (extinction of the surtax on personal income tax) which entered into force on the day following its publication "and took effect on 1 January 2016", with it being established "in Article 2º, no. 1, ... that "the surtax ... would no longer apply to income earned from 1 January 2017""
i) However, regarding "income obtained in 2017, the legislator, in the opposite direction to what it had previously stated and reflected in the text of Article 2º, no. 1, of Law no. 159-D/2015, extended the validity of the surtax", having decided "... to eliminate the surtax only for taxable income inserted in the first two brackets of the table in Article 68º, no. 1, of the CIRS (as per Article 194º, no. 1, of Law no. 42/2016)";
j) And in parallel the legislator established "... a regime of gradual elimination of withholding at source of the surtax according to which (i) to the 1st and 2nd brackets would not be applicable, (ii) to the 3rd bracket would be applicable to income earned until 30 June 2017 and (iii) to the last two brackets would be applicable to income earned until 30 November 2017 (as per Article 194º, no. 2, of Law no. 42/2016)", observing, regarding the assessment of the surtax, the table in no. 3 of Article 194º of Law 42/2016.
k) "Article 194º, no. 4, of Law no. 42/2016 further determined that "the provisions of Article 3º of Law no. 159-D/2015 of 30 December" would be "applicable to the surtax provided for in this article", "namely, that the surtax would apply "to the part of the taxable income of IRS that results from aggregation under Article 22º of the IRS Code, approved by Decree-Law no. 442-A/88, of 30 November, plus income subject to the special rates contained in nos. 3, 6, 11 and 12 of Article 72º of the same Code, earned by taxpayers resident in Portuguese territory, which exceeds, per taxpayer, the annual value of the minimum monthly guaranteed remuneration" (as per Article 3º, no. 1, of Law no. 159-D/2015)".
l) And concludes that "in line with what had occurred since its introduction, in 2017 the extraordinary surtax applied to taxable income, plus, if and when it existed, some of the income subject to the special rates of Article 72º of the CIRS – e.g. net income from category A earned by non-habitual residents in high value-added activities".
m) And makes explicit that "... for there to be an assessment of the extraordinary surtax in 2017 – as in previous years – it was essential that there be taxable income in the sense of Article 22º, no. 1, of the CIRS, that is, the income "that results from the aggregation of income from various categories, earned in each year, after deductions and allowances provided for in the following sections"", "... taxable income which, however, the Claimant unequivocally did not have, or was equal to zero, in the year 2017, which results clearly from the IRS assessment statement itself when, in line no. 6, it indicates that taxable income is zero (as per document no. 1 attached), since the only income he obtained in this period in Portuguese territory concerned dependent work (category A) and derived from the exercise of an activity qualified as high value-added and, as such, was taxed at the special rate of 20% (as per Article 72º, no. 6, of the CIRS)", wherefore "there being, therefore, no aggregation (as per line no. 17 of the IRS assessment statement attached as document no. 1 and table 6A of Annex L of the Model 3 Declaration of IRS attached as document no. 3), ... under the table contained in Article 194º, no. 3, of Law no. 42/2016, the surtax rate to be applied would also be zero."
n) Thus, the Claimant objects to the assessment of the collection of surtax "... of € 9,745.40 by applying the rate of 3.21% provided for in the table of Article 194º, no. 3, of Law no. 42/2016 for taxable income exceeding € 80,640.00 to a taxable base of € 303,594.80", "taxable base which was constituted exclusively by income from dependent work earned in the exercise of a high value-added activity and subject to the special IRS rate of 20%, with the following amounts being deducted from the surtax collection of € 9,745.40 (i) the amount of € 13.93 corresponding to 2.5% of the value of the minimum monthly guaranteed remuneration per dependent who is not a taxpayer of IRS and, as well, (ii) the amount of surtax of € 7,605.00 paid in advance by means of withholding at source (as per Article 3º, nos. 2 and 8, of Law no. 159-D/2015, pursuant to Article 194º, no. 4, of Law no. 42/2016), which resulted in the amount of € 2,126.47 reflected in line no. 27 of the 2017 IRS assessment statement".
o) Discussing the Claimant on the "absence of taxable income and consequent illegality of the assessment of the extraordinary IRS surtax for 2017" states that "... in this case the AT considered as taxable income for the purposes of calculating the surtax an amount (€ 303,594.80) which comes from income from category A subject to a special rate and not aggregated", which translates into an "... error attributable to the AT's services which vitiates the assessment, since such amount does not fall within the legal definition of taxable income".
p) And the Claimant states, for the reason that "... the concept of taxable income of IRS – the tax base of the surtax – is inseparable from the concept of aggregation, as well as from the application of general and progressive tax rates (as per the column on the left side of the table of Article 68º, no. 1, of the CIRS)".
q) And adds: "in the matter of extraordinary IRS surtax, the connection between taxable income and aggregation derives – and has always been so – expressly from the text of the law". "It happens that Article 22º, no. 3, subsection b), of the CIRS excludes from aggregation "the income referred to in Articles 71º and 72º [subject to exemption rates and special rates, in that order] earned by residents in Portuguese territory, without prejudice to the option for aggregation provided therein", among which are the "net income from categories A and B earned in high value-added activities, with scientific, artistic or technical character, to be defined by regulation of the Government member responsible for the financial area, by non-habitual residents in Portuguese territory, are taxed at the rate of 20%" (as per Article 72º, no. 6, of the CIRS), the only ones that the Claimant obtained in the year 2017, and which were not aggregated for the purposes of determining IRS, having instead been subject to a special tax rate of 20%".
r) Signifying "... that, in relation to 2017, there was no taxable income for the purposes of applying the extraordinary IRS surtax rates provided for in no. 3, of Article 194º, of Law no. 42/2016".
s) Concluding that "... the assessment of the surtax relating to 2017 suffers from error as to its factual and legal assumptions (as per Article 99º, subsection a), of the CPPT, pursuant to Article 29º, no. 1, subsection a), of the RJAT)" and without dispensing with "defending the contrary would affront the fundamental canons of interpretation of law (as per Article 9º of the Civil Code, by reference to Article 11º, no. 1, of the General Tax Law ("LGT")). It would be incompatible, moreover, with the principle of tax legality (cf. Article 103º, no. 3, of the Constitution of the Portuguese Republic and Article 8º, no. 1, of the LGT), in particular, in its material aspect of typicality".
t) Wherefore "... the assessment of the extraordinary IRS surtax, in the total amount of € 9,731.47, on the income from category A obtained by the Claimant in 2017 suffers from the defect of violation of law, and should, in consequence, be annulled (as per Article 163º, no. 1, of the Code of Administrative Procedure)".
u) Notified, the Respondent replied on 11.03.2019, indicating that it was not attaching the PA, since the same would be composed solely of the disputed assessment already attached by the Claimant.
v) In the Reply, the Respondent advocates for a completely different reading of the law.
w) It begins by stating that the "... Claimant was considered a non-habitual resident in the year 2017, and, under Article 16º of the IRS Code, non-habitual residents in Portugal do not cease to be residents in Portugal, and this status allows them, instead, to be taxed differently from residents tout court (habitual), as is the case in the present case, where the taxpayer is taxed under the special rate provided for in no. 6 of Article 72º of the IRS Code".
x) Regarding the application of the surtax for the year 2017, it states that it constituted, "... in the opinion of various authors, a true tax, with a character distinct from the essential principles of IRS, having been created with a temporary scope", ".... aimed at the pursuit of public interest, in view of the economic-financial situation the Country was experiencing, requiring a consolidation effort that required the introduction of fiscal measures inserted in a broader set of measures to combat the budget deficit", having the legislator chosen "... as the priority principle of its fiscal policy social equity in order to ensure the fair distribution of fiscal effort", "wherefore, in order for the consolidation effort to be shared by all taxpayers, the distribution of effort between the public and private sectors was, in the legislator's view, achieved through direct taxes, with particular emphasis on IRS".
y) It considers that "... the legal regime in the year in question was regulated by Law no. 159-D/2015, of 30 December read together with Article 194º of Law no. 42/2016, of 28 December, instruments that determined the end of its application, not doing so immediately, but rather in phases, since this extinction consisted of reducing its rate to all income in general, with the exception of a certain income value, with only the difference of the application of three different surtax rates, according to the value of the income".
z) And regarding "the quantum of income, the only difference between Article 72ºA of the CIRS and Article 194º of Law no. 42/2016, of 28 December, read together with Law no. 159-D/2015, of 30 December, is that the latter divided the income to be taxed into 3 intervals (to make three different rates correspond to them), whereas in Article 72º-A of the CIRS there was only a single rate for the income to be taxed, however, the way to arrive at the income, i.e., on what reality of income will the surtax apply, is exactly the same; otherwise let us examine pedagogically the legal regime in force at the date of the facts (in bold and underlined):
"Article 72°-A of the IRS Code - 1 - On the part of the taxable income of IRS that results from aggregation under Article 22º plus income subject to the special rates contained in nos. 3, 4, 6 and 10 of Article 72º, earned by taxpayers resident in Portuguese territory, (…), applies an extraordinary surtax of 3.5 %."
"Article 3º of Law no. 159/D-2015 - Applicable regime by reference to no. 4 of Article 194º of Law 42/2016 «1 - The rates provided for in the previous article apply to the part of the taxable income of IRS that results from aggregation under Article 22º of the IRS Code (…), plus income subject to the special rates contained in nos. 3, 6, 11 and 12 of Article 72º of the same Code, earned by taxpayers resident in Portuguese territory (…)»".
aa) And concludes that "the legislator's command, in both situations, is very clear and symptomatic: the surtax rates apply to the taxable income that results from aggregation AND to income subject to the special rates contained in numbers 3, 6, 11 and 12 of Article 72º. There being no room in this formula for any doubt as to legal interpretation, since the legislator was precise in its command, not having used indeterminate concepts nor language that is not of immediate perception and intelligibility".
bb) Resulting that "the taxpayer's interpretation has no adherence whatsoever to normative reality, since in nos. 1 and 3 of Article 194º of Law 42/2016, which refers to Law no. 159/D-2015, the legislator states that «is applicable to taxpayers who earn in 2017 income» and «for income earned in 2017, the applicable surtax observes the following table (…)», referring to income, without concern to refer to what income that is, this because, it is inescapable, that no. 1 of Article 3º of Law no. 159/D-2015, identifies them as follows: «1 - The rates provided for in the previous article apply to the part of the taxable income of IRS that results from aggregation under Article 22º of the IRS Code approved by Decree-Law no. 442-A/88 of 30 November, plus income subject to the special rates contained in nos. 3. 6, 11 and 12 of Article 72º of the same Code, earned by taxpayers resident in Portuguese territory, which exceeds, per taxpayer, the annual value of the minimum monthly guaranteed remuneration.»"
cc) And concludes: "Now, if it were the case that this no. 1 of Article 3º of Law no. 159/D-2015 did not exist – but it does exist – then the interpreter could have difficulties in understanding what "income" the legislator intended to refer to in no. 2 of Article 2º. However, this is not the case and no. 1 of Article 3º of Law no. 159/D-2015 is revealing and insusceptible to any other interpretation. The legislator comes to specify in that provision what income that is, therefore this interpretive difficulty does not exist, and as already mentioned in Law no. 42/2016, of 28 December, the legislator decided to relieve the generality of income from this burden/tax imposed by the surtax, and, instead of saying: the rate of 3.5% applies to income burdened by the surtax, came to say: 3 variable surtax rates apply, corresponding to other intervals of income burdened by the surtax. Thus, the taxpayer's interpretation cannot be accepted when trying to exclude income subject to the special rates contained in nos. 3, 6, 11 and 12 of Article 72º of the same Code (no. 1 of Article 3º of Law no. 159/D-2015) when it is the legislator who expressly includes them, in addition to, the part of taxable income of IRS that results from aggregation under Article 22º of the IRS Code."
dd) It synthesizes the conclusion it reached as follows: "... in this case, there is no imperfection in the expression of the legislator's thought. Thus, having the surtax been calculated in accordance with the provisions of the combination of Law no. 159-D/2015, of 30 December and Article 194º of Law no. 42/2016, of 28 December, having the surtax of 3.21% been applied to the taxpayer's income for earning income exceeding € 80,640.00, there is no illegality in the disputed assessment".
ee) Regarding the request for condemnation in compensatory interest, the Respondent states that "aiming the arbitral process, under the terms defined by the RJAT, a mere control of the legality of the disputed assessment, it cannot ... determine that there was «error attributable to the services», when the tax fact is based on a legally sustained interpretation. There being no compensatory interest due for there being no error attributable to the services generating any indemnification obligation".
ff) By order of 12.03.2019 the holding of the meeting referred to in Article 18º of the RJAT was waived. Through this same order the parties were invited to submit written pleadings.
gg) The parties submitted formal written pleadings, but limited themselves to referring to the merits of the PPA and the Reply, procedural documents which they considered reproduced.
hh) By order of 28.03.2019 the date for adoption of the final decision was set for up to 23 April 2019 and the Claimant was invited to proceed with payment of the subsequent arbitration fee.
II – PRELIMINARY ISSUES
a) The parties are legitimate, possess legal personality and legal capacity and are duly represented (Articles 4º and 10º, no. 2, of the RJAT and Article 1º of Ordinance no. 112-A/2011, of 22 March).
b) Timeliness - the request for arbitral decision was submitted to CAAD on 22 November 2018. The Claimant disputes the assessment act no. 2018..., of 13 August 2018, which he received via mail on 23 August 2018, wherefore it is considered that he was notified on 27 August 2018 (Article 39º-1 of the CPPT). This act did not result in IRS to be paid, but rather in a lesser amount of IRS to be reimbursed.
c) Thus, under the combined terms of Articles 102º, no. 1, subsection b), of the CPPT and 10º, no. 1, subsection a), of the RJAT, the request for arbitral decision is timely.
d) The arbitral procedure contains no defects of nullity.
It is necessary to examine the merits.
III - MERITS
III-1- FACTUAL MATTERS
Facts Established as Proven
The following factual matters are considered established as proven:
a) The Claimant is a taxpayer subject to IRS, a non-habitual resident in the national territory and in the year 2017 held the position of services manager of B...– Sociedade Unipessoal, Lda., NIPC..., with registered office in ..., ..., ..., ...-... Braga – as per Articles 15º to 17º of the PPA, document no. 2 attached to the PPA and no objection to these facts as specified under Article 110º-7 of the CPPT;
b) It appears from table 4A, field 401 of Annex L of Model 3 of the IRS, submitted by the Claimant on 2018.04.17, that in 2017, he earned gross income from dependent work (Annex A), obtained in national territory, of 349,240.90 euros, with the activity code "802 – Senior Company Managers – from Ordinance no. 12/2010, of 7 January" – as per Article 18º of the PPA, documents nos. 3 and 4 attached to the PPA and no objection to these facts as specified under Article 110º-7 of the CPPT;
c) On 17 April 2018, the Claimant submitted his annual income statement, IRS Model 3, for 2017, which was identified by no...., containing the gross value of income from dependent work of category A mentioned above and also the value of 69,842.00 euros of IRS withholding at source and 7,605.00 euros of extraordinary surtax withholding at source – as per Articles 19º and 20º of the PPA, documents nos. 3 and 4 attached to the PPA;
d) On 23 August 2018 the Claimant received the Personal Income Tax ("IRS") assessment relating to the 2017 tax period, contained in the assessment statement no. 2018..., of 13 August 2018, where the following appears, regarding the surtax assessment:
- as per Articles 11º and 21º and document no. 1 attached to the PPA;
e) The Claimant was taxed in 2017, by way of extraordinary IRS surtax, by the amount of € 9,731.47, taxation which fell only on income from dependent work, category A, derived from high value-added activity and on which the special rate of 20% was applied, by withholding at source – as per Articles 22º and 23º of the PPA and documents nos. 1 and 3 attached to the PPA.
f) On 22 November 2018 the Claimant filed the present request for arbitral decision (PPA) – entry record in the SGP of CAAD of the request for arbitral decision.
Facts Not Established as Proven
There is no other factuality alleged that has not been considered proven and that is relevant for the resolution of the procedural dispute.
Reasoning for the Establishment of Factual Matters
Regarding factual matters, the Court does not have to pronounce on everything that was alleged by the parties; rather, it is its duty to select the facts that matter for the decision and distinguish proven from unproven matters (as per Article 123º, no. 2, of the CPPT and Article 607º, no. 3, of the CPC, applicable by reference to Article 29º, no. 1, subsections a) and e), of the RJAT).
In this manner, the facts pertinent to the judgment of the case are chosen and distinguished according to their legal relevance, which is established in view of the various plausible solutions of the legal question(s) (as per previous Article 511º, no. 1, of the CPC, corresponding to current Article 596º, applicable by reference to Article 29º, no. 1, subsection e), of the RJAT).
Thus, having regard to the positions assumed by the parties and the documentary evidence submitted, the facts listed above were considered proven, with relevance for the decision, indicating, for each point brought to the matters of proven fact, the means of proof that were considered relevant as reasoning.
III-2- LAW
The question which is the subject matter of these proceedings results only from different readings of the provisions of Article 194º of Law 42/2016, of 28 December (Budget Law for 2017) and Article 3º of Law 159-D/2015, of 30 December.
The parties do not dispute that the Claimant is considered a non-habitual resident. Nor is there any question that the income earned in Portugal is income that falls within category A of IRS, earned in high value-added activities, subject to the taxation regime of no. 6 of Article 72º of the IRS Code (special rate of 20%, with optional aggregation under no. 8 of Article 72º and subsection b) of no. 3 of Article 22º, both of the IRS Code).
III-2-As to the Merits
Defect of "violation of law" in the assessment of the IRS surtax in 2017
It is found that the Claimant, in the learned and well-structured reading he makes of the applicable legal provisions, appears to proceed from the assumption that this is the collection of IRS itself (as per, for example, Articles 67º to 70º of the PPA) and not of an extraordinary, temporary, contingent surtax of clearly conjunctural application, clearly configured as a new tax, with several differentiating elements (compared to the structure of IRS) created with the sole purpose of obtaining revenue for budget consolidation.
It will clearly be a measure of conjunctural fiscal policy, aimed at the aforementioned budget consolidation, which appears to be configured as having had a true budgetary nature.
Let us then see how this surtax was always treated alongside the validity of state budget laws.
The extraordinary IRS surtax, created by Law 49/2011, of 07 September, added Article 72ºA to the IRS Code and applied to the collective income of IRS for 2011.
This surtax was maintained
• for income from 2012, by Law 66-B/2012, of 31.12, (Budget Law for 2013);
• for income from 2013, by Law 83-C/2013, of 31.12 (Budget Law for 2014);
• for income from 2014, by Law 82-B/2014, of 31.12 (Budget Law for 2015);
• for income from 2015, by Law 159-D/2015, of 30.12 (law for extinction of the surtax from 1 January 2017);
• for income from 2016, by Law 159-D/2015, of 30.12 (law for extinction of the surtax from 1 January 2017);
• for income from 2017, by Law 42/2016, of 28 December (Budget Law for 2017).
The extraordinary surtax was initially 3.5%, applicable to income earned in 2011 through 2015.
As for income earned in 2016 the applicable surtax observed the following table:
And as for income earned in 2017, it observed the following table:
The norm that defined the scope of the surtax has observed, since its creation, the following wording, with the publication of Law 49/2011, of 07 September:
Article 72ºA of the IRS Code applicable to income earned in 2011, 2012, 2013, 2014 and 2015 No. 1 of Article 3º of Law 159-D/2015, of 30.12 applicable to income earned in 2016 and part of income earned in 2017
On the part of the taxable income of IRS that results from aggregation under Article 22º, plus income subject to the special rates contained in nos. 3, 4, 6 and 10 of Article 72º, earned by taxpayers resident in Portuguese territory, which exceeds, per taxpayer, the annual value of the minimum monthly guaranteed remuneration, applies an extraordinary surtax of 3.5 %. The rates provided for in the previous article apply to the part of the taxable income of IRS that results from aggregation under Article 22º of the IRS Code, approved by Decree-Law no. 442-A/88, of 30 November, plus income subject to the special rates contained in nos. 3, 6, 11 and 12 of Article 72º of the same Code, earned by taxpayers resident in Portuguese territory, which exceeds, per taxpayer, the annual value of the minimum monthly guaranteed remuneration.
It will be difficult not to conclude, given the comparison between the two texts, that the norm defining the scope of the extraordinary surtax has literal coincidence, regarding the central question posed in the PPA, which is whether only in the event there is taxable income aggregated in the sense of Article 22º no. 1 of the IRS Code, in the income statement (aggregation by force of law) can it be considered that this extraordinary taxation should apply to the net value, in this case, of net income from category A, earned in the exercise of high value-added activities.
It is unequivocal that the Claimant had no "taxable income", formally expressed in the IRS assessment note for 2017, since the income he earned is subject to a special rate of 20%, by withholding at source, which in essence has a liberatory effect, in that, only optionally, such income is susceptible to aggregation in IRS proceedings.
The literal element of the norm is always a very relevant element, as it delimits interpretive activity.
It cannot, however, be considered by the interpreter the legislative thought which does not have in the letter of the law a minimum of verbal correspondence, albeit imperfectly expressed. The letter is an irremovible element of interpretation, or a "limit of the search for the spirit".
"An interpretation that does not already lie within the scope of the possible literal sense is no longer interpretation, but modification of sense" (Larenz).
"(...) it must be a sense (a motivation, a set of objectives) that reasonably fits within the literal sense of the legislator's statement. Under penalty that, if this does not happen, a new norm is being created, instead of interpreting an existing norm" (Hespanha).
It does not appear to this TAS that the text of the law permits the reading, very well structured, admittedly, that the Claimant makes of the set of applicable legal provisions for IRS assessment, always reasoning as if it were assessment of IRS in its proper sense and not of an extraordinary surtax, with autonomy with respect to the IRS assessment procedure.
The text of the law, when it defined the scope of the surtax, the previous law (Article 72ºA of the IRS Code) and the law applicable here (no. 1 of Article 3º of Law 169-D/2015, of 30.12 and Article 194º of Law 42/2016, of 07 September), appears to be clear in its irremovable element, which is the literal, when it states that the "rates" (in the new law) apply "to the part of the taxable income of IRS that results from aggregation" "plus income subject to special rates", as is the case with the income referred to in no. 6 of Article 72º of the IRS Code (earned in the exercise of high value-added activities).
That is, it is not possible to accept the "legislative thought" which the Claimant perceives in the law, since it does not appear to have a minimum of verbal correspondence with no. 1 of Article 3º of Law 159-D/2015, of 30.12 and with Article 194º of Law 42/2016, of 07 September, since the interpreter has to presume that the legislator provided for the most appropriate solutions and knew how to express its thought in adequate terms.
When in no. 1 of Article 3º of Law 159-D/2015, of 30.12, it is stated that the rates apply to the taxable income that results from aggregation and then refers to "plus income subject to special rates", it appears that the legislator, took into account that this income, which "increases" the taxable income considered for IRS assessment, was not subject to mandatory aggregation in IRS proceedings, hence it chose this formulation, creating its own rule to determine the taxable base of the extraordinary surtax.
That is, if there is no relevant taxable income for IRS assessment, mandatorily aggregated, as is the case, it appears that the legislator's intention was clear to subject to this extraordinary taxation the income it indicates, namely that earned by the Claimant, even if subject to optional aggregation in terms of taxation in IRS in its proper sense.
Which means that the legislator, namely as to the scope and assessment of the extraordinary surtax, excluded the possibility of optional aggregation, which applies only to IRS assessment.
In the absence of taxable income, for the purposes of determining the final IRS collection, but with the existence of income subject to special rates, specifically indicated in the law, there do not appear to be any doubts that the surtax should apply to the same.
Add to this that the IRS assessment note, in this case, does not express the IRS collection that was assessed to the Claimant and that he bore, since it corresponds to the amount withheld at the source by his employer entity.
In this connection, the statement that there was no "taxable income" in IRS is not subscribed to, since this value corresponded to the taxable base on which the special ad valorem rate of 20% applied, the product of which corresponds to the IRS collection borne, which was 69,842.00 euros, that is, the sum of the withholdings at source that occurred during the year (subsection c) of the proven facts).
As stated above, this surtax appears to be viewed, essentially, with its own rules, from the outset as a conjunctural, temporary and extraordinary budgetary measure, even if it is difficult to understand its existence for 7 consecutive years, in a validity much longer than what is conventionally denominated as being a medium term.
The circumstance of its long validity, as a measure of budgetary consolidation fiscal policy, generally annual, does not appear to permit it to be considered as not being conjunctural, temporary and extraordinary.
Since its creation, the extraordinary surtax has had several of its own rules, different from IRS or for which references are made, as may be gathered from the already repealed Articles 72ºA and 99ºA, both of the IRS Code and from Article 2º of Law 49/2011, of 07 September.
The regime in force in 2017, which consisted of Law 159-D/2015, of 30.12 (and of Article 194º of Law 42/2016, of 28.12) also appears to present the same autonomy, with respect to the IRS Code, as may be gathered from the reading of Articles 1º and 2º of Law 159-D/2015, of 30.12 and of Article 194º of Law 42/2016, of 28.12.
A proper rule of the surtax is the one that defines the taxable base, to which the ad valorem rate is applied, in this case 3.21%, for those who earned income in 2017 from category A, exceeding 80,640.00 euros.
Thus, when "taxable income" is expressed in the table of no. 3 of Article 194º of Law 42/2016, of 28.12, the legislator will have resorted to a legal-fiscal term proper to the IRS assessment procedure, importing it into the rules of the extraordinary surtax assessment procedure, only to determine the taxable base from which the ad valorem rate begins to apply, in this case 3.21%, to then obtain the extraordinary surtax collection.
We do not find, given the above, the pointed lack of conformity in the disputed assessment, with respect to the legal norms that substantiated it, nor do we perceive, as stated above, that the reading of the law advocated by the Claimant has a minimum adhesion to its literal element, (especially to the final segment of the norm contained in no. 1 of Article 3º of Law 159-D/2015, of 30.12, which mandates increasing, - to determine the base of incidence of the ad valorem rate of 3.21%, - income subject to special rates) therefore, having regard to the obligation of the TAS to judge in respect of the principle of "duty of obedience to law" even if it considers the content of the legislative provision "unjust or immoral", the request for decision cannot possibly obtain legal acceptance.
As already stated, the extraordinary surtax assessment was based on a law of the Assembly of the Republic (Article 194º of Law 42/2016, of 28.12 and Law 159-D/2015, of 30.12), of prior publication, so we also cannot find lack of conformity, between the set of norms that regulate it, with respect to the Constitution of the Portuguese Republic (CRP), particularly the disrespect for the principle of tax legality, in the aspect of typicality, since its essential elements, namely the scope, taxable base and applicable rate, are duly expressed in law.
The manner in which the alleged lack of conformity with the CRP is invoked does not generate an obligation in the TAS to refer to more than what has been stated above.
As it is not possible to accept the reading of the law advocated by the Claimant and as the PPA is not successful, the examination of the request for reimbursement of the amount paid and likewise the request for condemnation of the AT in the payment of compensatory interest is prejudiced.
IV. DECISION
Therefore, with the grounds set out above, the request for arbitral decision is judged to be without merit, and the AT is absolved of the claim.
V - VALUE OF THE PROCESS
The value of the process is fixed at 9,731.47 €, pursuant to Article 97º-A of the Code of Tax Procedure and Process (CPPT), applicable by force of the provisions of Article 29º, no. 1, subsection a) of the RJAT and Article 3º, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).
VI – COSTS
Costs to be borne by the Claimant, in the amount of 918.00 €, as per Article 22º, no. 4 of the RJAT and Table I attached to the RCPAT.
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Lisbon, 07 April 2019
Singular Arbitral Tribunal,
Augusto Vieira
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