Summary
Full Decision
ARBITRAL DECISION
The Arbitrators Judge José Pedro Carvalho (Presiding Arbitrator), Prof. Dr. Nuno Cunha Rodrigues and Prof. Dr. Maria do Rosário Anjos (Arbitrator Members), appointed by the Deontological Council of the Administrative Arbitration Centre, to form the collective arbitral tribunal, constituted on 06-02-2019, decide as follows:
I – REPORT
A) THE PARTIES AND CONSTITUTION OF THE ARBITRAL TRIBUNAL
1. A..., native of ..., Germany, of German nationality, taxpayer number ... (hereinafter referred to as 1st Claimant), and B..., native of ..., Poland, of German nationality, taxpayer number ... (hereinafter referred to as 2nd Claimant), married to each other under the separation of property regime, both residents in..., no...., ..., Germany, filed a request with the Administrative Arbitration Centre for the constitution of a collective arbitral tribunal, in coalition regime, under the combined provisions of articles 2, no. 1, subparagraph a), 3, no. 1, 5, no. 3, subparagraph a), and 10, nos. 1, subparagraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (hereinafter RJAT), with a view to the declaration of illegality and consequent annulment of the following tax assessment acts for Personal Income Tax:
a. Personal Income Tax assessment no. 2018..., dated 05/07/2018, relating to the fiscal year 2017, notified to the 1st Claimant, in the amount of € 567,702.14 (five hundred and sixty-seven thousand, seven hundred and two euros, fourteen cents);
and,
b. Personal Income Tax assessment no. 2018..., dated 05/07/2018, relating to the fiscal year 2017, notified to the 2nd Claimant, in the amount of € 588,032.54 (five hundred and eighty-eight thousand, thirty-two euros, fifty-four cents).
2. The request for constitution of the Arbitral Tribunal was filed by the Claimants on 26-11-2018, was accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority on 03-12-2018. The Claimants chose not to appoint an arbitrator, so, pursuant to article 6, no. 1 of the RJAT, the herein signatories were appointed, by the Deontological Council of the Administrative Arbitration Centre, on 05-02-2015, as Arbitrators to form the collective arbitral tribunal, which was constituted on 02-02-2019, in accordance with the provisions of article 11, no. 1, subparagraph c), of the RJAT, as worded by article 228 of Law no. 66-B/2012, of 31 December. On 06-02-2019 an arbitral order was issued to the Tax and Customs Authority (TA) to submit a response within the legal period, pursuant to articles 17, nos. 1 and 2 of the RJAT.
3. On 12-03-2019, the defendant TA submitted its response accompanied by the administrative proceedings (PA), which are deemed fully reproduced herein.
4. On 15-03-2019, an arbitral order was issued, whose grounds are deemed fully reproduced, dispensing with the holding of the meeting provided for in article 18 of the RJAT, given the absence of witness testimony to be produced and the evident nature of the issues raised by the parties, which are exclusively matters of law, so the proceedings were in conditions to proceed to written submissions, optional, and final decision. Accordingly, in the same order, the arbitral tribunal granted the parties the possibility of presenting their written submissions, fixing a period of ten days, equal and successive, for that purpose. In the same order the parties were notified of the probable deadline for issuing the arbitral decision, until the end of the period set in article 21 of the RJAT and the period for payment of the subsequent fee, to be effected up to 10 days before the deadline for issuing the decision.
5. The Claimants filed their written submissions on 26-03-2019 and the defendant filed submissions on 09-04-2019. On 21-05-2019 the claimants submitted a request to attach two Arbitral Decisions, specifically, the arbitral decision issued on 18-04-2019 in proceeding no. 600/2018-T, and the decision issued by the 2nd Tax Litigation Section of the Supreme Administrative Court (STA), in proceeding no. 09011.0 BEALM, both addressing subject matter deemed identical to that discussed in the present case.
6. The Claimants paid the subsequent fee on 07-06-2019.
B) THE REQUEST FORMULATED BY THE CLAIMANT:
7. The present request for declaration of illegality has as its object the tax assessment act for Personal Income Tax no. 2018..., dated 05/07/2018, relating to the year 2017, in the amount of € 567,702.14 (five hundred and sixty-seven thousand, seven hundred and two euros, fourteen cents), notified to the 1st Claimant, and the tax assessment act for Personal Income Tax no. 2018..., dated 05/07/2018, relating to the year 2017, in the amount of € 588,032.54 (five hundred and eighty-eight thousand, thirty-two euros, fifty-four cents), notified to the representative of the 2nd Claimant, attached to the case file.
8. From the perspective of the Claimants, these tax acts are vitiated by breach of law, which justifies the present request for declaration of illegality, with a view to their partial annulment. In fact, the 1st Claimant and the 2nd Claimant understand that, in determining their taxable income, the TA did not apply the rule contained in article 43, no. 2, of the Personal Income Tax Code (CIRS), which provides for the reduction to half of the gain resulting from capital gains generated by the onerous alienation of the right of ownership that both held, in equal parts, over the urban property located in ..., called "... of the ... Development", ..., in …, described in the Property Register of …, under no...., parish of ..., registered in the respective urban property register of the said parish, under article ....º. The understanding of the TA, underlying the challenged acts, is based on an interpretation and application of no. 2, of article 43 of the CIRS, to the effect of excluding from the limitation of the incidence of tax at 50% (fifty percent) the capital gains resulting from the onerous alienation of real rights over immovable property located in Portugal, realized by a taxpayer resident in another Member State of the European Union, limiting such incidence of tax solely to taxpayers resident in Portuguese territory, constitutes a violation of the current article 63 of the Treaty on the Functioning of the European Union (hereinafter referred to by the acronym "TFEU"), which corresponds to article 56 of the Treaty establishing the European Community, as it translates into a discriminatory tax regime for residents of another Member State of the European Union. It alleges, in short, that article 43, no. 2 of the CIRS, in establishing a differentiated regime for taxation of capital gains realized by residents and non-residents in national territory, establishes an unacceptable discrimination in light of the provisions of article 56 of the Treaty of the European Union, when applied to residents of another member state who realize capital gains arising from the alienation of immovable property located in Portugal. Thus, the Claimants understand that the challenged assessment is illegal, as it originates from the application of the provisions of article 43, no. 2 of the CIRS, which resulted, in the present case, in the application of the Personal Income Tax rate on the entire capital gain and not only on 50%, solely because the Claimants, being residents of another Member State of the European Union, do not meet the presupposition provided for in the legal norm in question.
9. They invoke, in support of their understanding, diverse case law, both arbitral and from our superior courts, as well as from the Court of Justice of the European Union (hereinafter CJEU).
C – THE RESPONSE OF THE DEFENDANT
10. The defendant TA, duly notified for this purpose, submitted its response in a timely manner in which it seeks the maintenance in the legal order of the challenged acts as corresponding to a correct application of law to the controversial material reality. It is the understanding of the TA that the allegations of the Claimant cannot succeed, given the amendment to article 72 of the CIRS, effected by Law no. 67-A/2007, of 31/12, namely the addition of nos. 7 (current no. 9) and 8 (current no. 10). Thus, no. 8 (current no. 10) of article 72 of the CIRS is peremptory, to the effect that all income obtained in that year (whether in Portugal or abroad) must be included. The same is stated in no. 1 of article 15 of the Personal Income Tax Code: being persons resident in Portuguese territory, Personal Income Tax applies to all their income, including that obtained outside that territory. As such, the TA understands that for purposes of taxation at the rate of article 68, that is, as a resident, it was necessary to have filled in fields 9 (option for the rates of article 68 of the Personal Income Tax Code) and 11 (total income obtained abroad). This means that the legal framework (as well as the declaration obligation) is no longer that which existed at the date of the CJEU case law invoked here by the Claimants, taking into account that the law was amended by the addition of nos. 7 and 8 (current 9 and 10) to article 72 of the Personal Income Tax Code by Law no. 67-A/2007, of 31/12. The TA further emphasizes that the article which the Claimant seeks to have applied to her (article 43, no. 2 of the Personal Income Tax Code) is included in chapter II of the Personal Income Tax Code which is headed "Determination of taxable income". For purposes of incidence (regarding the matter of capital gains) the relevant articles are 9 and 10 of the Personal Income Tax Code. Thus, the provision in no. 2 of article 43 of the Personal Income Tax Code cannot be applicable to the case under analysis here. In sum, it appears from what has been alleged by the TA that it considers that the fact that the holders of capital income (capital gains) are residents or not in Portugal places them in an objectively different situation, not by the simple fact that they are in a situation of different residence, but rather by what such represents in terms of the tax legal regime established by Portuguese law. In fact, the TA recognizes that when dealing with resident taxpayers, the positive balance determined with respect to capital gains - which are subject to mandatory inclusion - is relevant for purposes of taxation at the general Personal Income Tax rates, in only 50% of its value. According to the provision in no. 1 of article 15 of the CIRS, being persons resident in Portuguese territory, Personal Income Tax applies to all their income, including that obtained outside that territory. That is, it follows unequivocally from the tax regime just explained that resident and non-resident taxpayers are not, in any way, in an identical situation, from the perspective of the annual taxation of their income, in Personal Income Tax. In the case at hand, the Claimants, being, as they are, non-resident taxpayers, and not opting for taxation as a resident, the assessment was made to them in accordance with the provisions of article 72, no. 1, of the CIRS, which determines the application of a proportional rate of 25% to the value of capital gains realized, in this case with the onerous alienation of real rights over immovable property.
11. Finally, the TA alleged that, should this not be understood in this manner, a preliminary reference should be made to the CJEU. As set out above, the legal framework (as well as the declaration obligation) is no longer that which existed at the date of the Decision of the Court of Justice of the European Communities, taking into account that the law was amended by the addition of nos. 7 and 8 (current 9 and 10) to article 72 of the Personal Income Tax Code by Law no. 67-A/2007, of 31/12. In fact, the TA alleges that, following the decision handed down in Decision C-443/06 of the Court of Justice of the European Communities of 2007 out 11 (Hollmann), the national legislature proceeded to adapt the national legislation to the decision there endorsed, adding to article 72 of the Personal Income Tax Code, by Law no. 67-A/2007, of 31/12, no. 7 (current no. 9) and no. 8 (current no. 10) the content of which at the time of the facts was as follows:
"9 - Residents of another Member State of the European Union or of the European Economic Area, provided that, in the latter case, there is an exchange of information in tax matters, may opt, with respect to the income referred to in subparagraphs a) and b) of no. 1 and in no. 2, for the taxation of that income at the rate which, in accordance with the table provided for in no. 1 of article 68, would be applicable if earned by residents in Portuguese territory."
12. Now, the TA considers that for purposes of determining the rate referred to in the previous number all income is taken into consideration, including that obtained outside this territory, under the same conditions that are applicable to residents. On this assumption, the decision handed down in Decision Hollmann refers to situations occurring under the wording prior to Law no. 67-A/2007, of 31/12, of article 72 of the Personal Income Tax Code. The TA further alleges that it was the Claimants who chose the tax regime, and that they did not opt for the general rates of article 68 of the CIRS - with respect to income subject to final withholding - article 72, no. 7 of the CIRS chose, freely and consciously, the taxation described, in general terms, in the preceding article. A regime of choice which had (and has) the effect of neutralizing any discriminatory treatment afforded to non-residents in Portugal in relation to residents, in the matter of taxation of capital gains in the case of alienation of real rights over immovable property. It concludes by seeking the legality of the Personal Income Tax assessments challenged and the dismissal of the arbitral request and, should it be understood differently, it understands that the Arbitral Tribunal should find unproven the hypothesis of a clear act or clarified act, so it must necessarily consider that there are sufficient doubts that prevent the acceptance of the Claimant's understanding without prior consultation of the CJEU, so that it may exercise its own competencies, in accordance with the Treaties.
II - PROCEDURAL REQUIREMENTS
13. The Arbitral Tribunal is regularly constituted. It is materially competent, pursuant to article 2, no. 1, subparagraph a) of the RJAT.
14. The herein 1st Claimant and 2nd Claimant, in the capacity of plaintiffs, may form a coalition in the present tax arbitral proceeding, as may their requests be cumulated, pursuant to articles 104 of the Code of Tax Procedure and Process, and 3, no. 1, of the RJAT, since the conditions for the admissibility of a coalition of plaintiffs are met - the identity of the nature of the tax, of the factual and legal grounds invoked, as well as the tribunal's competence to decide.
15. The Parties enjoy legal personality and capacity, are legitimate and are legally represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Administrative Order no. 112/2011, of 22 March).
16. The proceeding is not vitiated by defects that would invalidate it.
17. Taking into account the documentary evidence attached to the case file, it is necessary to establish the factual matter relevant to understanding the decision, which is fixed as follows.
III – DECISION ON FACTUAL MATTER
A) Established Facts
18. As relevant factual matter, the present tribunal considers the following facts as established:
a) The Claimants (1st and 2nd Claimant), married to each other under the separation of property regime, are residents in Germany, in the city of ....
b) In the year 2017, the Claimants sold the quotas-parts, in the proportion of 50% (fifty percent) each, which they held in co-ownership with respect to the urban property, intended for housing, located in ..., called "... of the ... Development", ..., in …, described in the Property Register of …, under no...., parish of ..., registered in the respective urban property register of the parish of..., under article ....º, for the price of € 4,823,000.00 (four million, eight hundred and twenty-three thousand euros), in accordance with the copy of the public deed of purchase and sale executed on 05/12/2017, at the Notarial Office of ...;
c) This property was purchased by the Claimants in June 1998, for the total price of € 251,394.14 (two hundred and fifty-one thousand, three hundred and ninety-four euros, fourteen cents);
d) On 07/05/2018, the 1st Claimant and the 2nd Claimant individually submitted the Personal Income Tax Return - Form 3, relating to income earned in 2017, which was accompanied by a single annex - Annex G - under the heading "Capital Gains and other Increases in Wealth", in accordance with copies of the Personal Income Tax Returns and Annexes G attached to the case file as documents nos. 4 and 5, in annex to the arbitral request.
e) In these tax returns, the operation of transmission of the property with the registration article ....º, above identified in c), was exclusively reported in the respective quotas-parts;
f) In said returns, the Claimants declared their status as non-residents, fitting themselves, each of them, as "Non-Resident" in Portugal and indicating in the respective section 8B (field 04) their "Residence in a country of the EU or EEA", and also indicating, in field 06, the country with code 276, corresponding to Germany;
g) Still in the aforementioned Personal Income Tax Returns - Form 3, the 1st Claimant and the 2nd Claimant indicated the Tax Identification Number of their tax representative (TIN...), indicating the respective section 8B, field 05, and requested taxation under the general regime, indicating field 07 of the same section 8B;
h) In Annexes G of the aforementioned Personal Income Tax Returns, the 1st Claimant and the 2nd Claimant entered, in section 4 ["Onerous Alienation of Real Rights over Immovable Property, article 10, no. 1, subparagraph a), of the CIRS"], the values, dates and other elements hereinafter transcribed: "Section 4 ["Onerous Alienation of Real Rights over Immovable Property, article 10, no. 1, subparagraph a), of the CIRS"] of Annex G of the Personal Income Tax Return - Form 3 submitted by the 1st Claimant (Doc. no. 4); Section 4 ["Onerous Alienation of Real Rights over Immovable Property, article 10, no. 1, subparagraph a), of the CIRS"] of Annex G of the Personal Income Tax Return - Form 3 submitted by the 2nd Claimant (Doc. no. 5)";
i) Each of the Claimants was notified of the Personal Income Tax Assessment Statement issued by the TA, on the income declared relating to the year 2017, in the person of their representative;
j) The 1st Claimant was notified of the Personal Income Tax assessment no. 2018..., dated 05/07/2018, relating to the year 2017, in the amount of € 567,702.14 (five hundred and sixty-seven thousand, seven hundred and two euros, fourteen cents), in accordance with the copy of the Personal Income Tax Assessment Statement constituting Doc. no. 1 in annex to the Arbitral Request;
k) In this Personal Income Tax assessment, the TA fixed the total value of capital gains realized by the onerous alienation of the quota-part of 50% (fifty percent), belonging to the 1st Claimant, over the property above identified, at € 2,027,507.66 (two million, twenty-seven thousand, five hundred and seven euros, sixty-six cents);
l) The 2nd Claimant was notified of the Personal Income Tax assessment no. 2018..., dated 05/07/2018, relating to the year 2017, in the amount of € 588,032.54 (five hundred and eighty-eight thousand, thirty-two euros, fifty-four cents);
m) In this latter tax assessment, the TA equally fixed the total value of capital gains realized by the sale of the quota-part of 50% (fifty percent), belonging to the 2nd Claimant, over the property better identified in article 8, at € 2,100,116.21 (two million, one hundred thousand, one hundred and sixteen euros, twenty-one cents);
n) In both Personal Income Tax assessments, issued by the TA, the name of the representative of the 1st Claimant and the 2nd Claimant is indicated, as well as the domicile in Portugal of that representative, to which the said assessments were sent;
o) The TA determined as taxable income of each of the Claimants the entire capital gains realized with the sale of the identified property,
p) With respect to the 1st Claimant, the entire amount of € 2,027,507.66 (two million, twenty-seven thousand, five hundred and seven euros, sixty-six cents), on which it assessed tax at the rate of 28%, in the amount of € 567,702.14 (five hundred and sixty-seven thousand, seven hundred and two euros, fourteen cents), as appears from the Personal Income Tax assessment act attached to the case file;
q) Regarding the 2nd Claimant, the entire amount of € 2,100,116.21 (two million, one hundred thousand, one hundred and sixteen euros, twenty-one cents), on which the TA assessed tax at the rate of 28%, in the amount of € 588,032.54 (five hundred and eighty-eight thousand, thirty-two euros, fifty-four cents), as appears from the Personal Income Tax assessment act attached to the case file;
r) The TA considered the entire capital gains determined in determining taxable income for each of the Claimants, on which it assessed tax at the rate of 28%;
s) The tax assessments were paid on 09/08/2018, the amount of € 567,702.14 (five hundred and sixty-seven thousand, seven hundred and two euros, fourteen cents) was paid by the 1st Claimant, and the amount of € 588,032.54 (five hundred and eighty-eight thousand, thirty-two euros, fifty-four cents), paid by the 2nd Claimant, in accordance with proof of payment/certifications which are attached to the Arbitral Request, as Docs. nos. 6 and 7;
t) On 26-11-2018 the Claimants filed the present arbitral request.
B) UNPROVEN FACTS
19. With relevance to the decision, there are no facts that should be considered as unproven.
C) GROUNDS FOR THE ESTABLISHED FACTS
20. The facts above described were established based on the documentary evidence that the claimants attached to the case file and the position of the TA, which accepted as true the facts supported by the documentary evidence presented (cf. articles 3 to 5 of the Response). Thus, the facts listed above are considered established, with relevance to the decision, supported by documentary evidence and consensually recognized and accepted by the parties.
V – DECISION ON FACTUAL MATTER: grounds for the decision on the merits
21. Having established the factual matter, it is necessary to address the question of law raised by the Claimant.
At issue in the present case is determining whether, in the case of capital gains resulting from the alienation of immovable property, the differentiated tax regime applicable to residents and non-residents in national territory, as it results from the provisions of the CIRS. In fact, the legislature introduced in the CIRS a limitation of tax incidence, for residents, which burdens only 50% of the balance of capital gains. The question is whether the non-application of this principle to non-residents, when they reside in another Member State of the EU, in the exact terms provided for residents, constitutes a situation of discrimination in the field of freedom of movement of capital, inadmissible in light of article 63 of the Treaty on the Functioning of the European Union.
To this end, the TA invoked the necessity of making a preliminary reference to the CJEU. Thus, it is necessary to decide this question first, which is necessarily preliminary.
A) Regarding the Question of Preliminary Reference:
22. The thema decidendum in the present proceeding refers to the regime of autonomous taxation inciding on real estate capital gains, earned by non-residents in Portuguese territory but residents in the territory of another State of the European Union (in this case, in Germany), arising from the combined provisions of articles 10, no. 1, subparagraph a), 13, no. 1, 18, no. 1, subparagraph h), 43, nos. 1 and 2 and 72, no. 1, subparagraph a), all of the Personal Income Tax Code (CIRS). At issue, specifically, is determining whether, in light of the provision in article 43, no. 2, of the Personal Income Tax Code, the positive balance determined as capital gains, in the year 2017, should or should not be considered in only 50% of its value, since the Claimants are residents in Germany.
For the claimants, the amount determined as capital gains should be considered in only 50% of its value, as they understand that the provision in article 43, no. 2, of the Personal Income Tax Code is also applicable to non-residents in Portugal, but residents in a Member State of the European Union. They invoke in support of this understanding diverse case law from the Supreme Administrative Court (STA) and arbitral, both anchored in the jurisprudence of the Court of Justice of the European Union (CJEU), namely, in proceeding C-443/06, on 11 October 2007 (case Hollmann). To this end, the Claimants allege, in their arbitral request the following:
"28º
On this question of law, we will closely follow the arbitral jurisprudence of the Administrative Arbitration Centre in the arbitral decisions issued:
(i) In Proceeding no. 45/2012-T, of 05/07/2012 (Presiding Arbitrator, Dr. ALEXANDRA COELHO MARTINS, Arbitrator-Adjuncts, Dr. ROGÉRIO FERNANDES FERREIRA and Dr. LUÍSA ANACORETA);
(ii) In Proceeding no. 127/2012-T, of 14/05/2013 (Arbitrator, Dr. CONCEIÇÃO PINTO ROSA);
(iii) In Proceeding no. 748/2015-T, of 27/07/2016 (Arbitrator, Prof. Dr. MARIA DO ROSÁRIO ANJOS);
(iv) In Proceeding no. 89/2017-T, of 05/07/2017 (Arbitrator, Dr. ALBERTO AMORIM PEREIRA);
(v) In Proceeding no. 644/2017-T, of 30/05/2018 (Arbitrator, Dr. JOSÉ NUNES BARATA);
(vi) In Proceeding no. 520/2017-T, of 04/06/2018 (Arbitrator, Dr. JORGE CARITA); and
(vii) In Proceeding no. 617/2017-T, of 22/06/2018 (Arbitrator, Dr. MIGUEL DURHAM AGRELLOS),
All available at www.caad.org.pt, because we agree with that jurisprudence and identify ourselves fully with it, arbitral decisions that decided in the same direction on the subject, with respect to the same question of law that is raised in the present arbitral proceeding, and the unchanged general regime of the CIRS which framed and grounded the cited jurisprudence is maintained.
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The question of law has also been decided uniformly by the Supreme Administrative Court (Tax Litigation Section of the Supreme Administrative Court) in the Decisions issued:
(i) In Proceeding no. 0439/06, of 16/01/2008 (Rapporteur, Counselor JORGE DE SOUSA);
(ii) In Proceeding no. 01031/10, of 22/03/2011 (Rapporteur, Counselor ISABEL MARQUES DA SILVA);
(iii) In Proceeding no. 01374/12, of 30/04/2013 (Rapporteur, Counselor ISABEL MARQUES DA SILVA); and
(iv) In Proceeding no. 01172/14, of 03/02/2016 (Rapporteur, Counselor FONSECA CARVALHO),
All available at www.dgsi.pt.
30º
This question of law was also subject to preliminary reference by the Supreme Administrative Court (Decision issued in Proceeding no. 0439/06, of 28/09/2006, Rapporteur, Counselor JORGE DE SOUSA), and upon it the Court of Justice of the European Union (Fourth Section) ruled, in the Decision issued in Proceeding C-443/06, of 11/10/2007 ("Decision Hollmann", Rapporteur, R. SILVA DE LAPUERTA), available at www.curia.europa.eu, a copy of which is attached as Doc. no. 8, community jurisprudence which was accepted by the Supreme Administrative Court, in the aforementioned Decision, issued in Proceeding no. 0439/06, of 16/01/2008 (Rapporteur, Counselor JORGE DE SOUSA), where the following was expressed (cf. Doc. no. 8):
"Article 56 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which subjects capital gains resulting from the alienation of immovable property situated in a Member State, in the case at hand in Portugal, when that alienation is carried out by a resident of another Member State, to a higher tax burden than that which would apply, in relation to this same type of transaction, to capital gains realized by a resident of the State in which the property is situated.(…)" – (See: articles 28 to 30 of the PA)
23. Within this framework, the Claimants conclude that the regime for taxation of capital gains, arising from the provisions of articles 10 and 43, no. 2 of the CIRS, is incompatible with European law, it not being possible to consider such incompatibility remedied by the addition to article 72 of the Personal Income Tax Code of its nos. 7 and 8 (current nos. 9 and 10), by Law no. 67-A/2007, of 31 December (OE 2008), since a situation of discrimination in the treatment of residents and non-residents persists, to the detriment of the latter, even if they reside in a country of the EU.
24. The defendant, for its part, understands that the legal framework, as well as the declaration obligation, is no longer that which existed at the date of the issuance of the aforementioned decision by the CJEU, taking into account the aforementioned legislative amendment to article 72 of the Personal Income Tax Code; thus, according to the defendant, the Hollmann decision refers to situations occurring under the wording of article 72 of the Personal Income Tax Code prior to that introduced by Law no. 67-A/2007, of 31 December.
The defendant further states that the issue sub judice does not correspond to the so-called clarified act, by the decision issued in the Hollmann decision, since the referenced legislative amendment has not yet been subject to review by the CJEU, in a preliminary reference proceeding, for purposes of reviewing compliance with the combined provisions of articles 18, 63, 64 and 65 of the TFEU. In sum, the defendant understands that the Arbitral Tribunal should consider that the aforementioned jurisprudence is not binding, in view of the current national legal framework, as well as finding unproven the hypothesis of a clear act or clarified act, so it necessarily must consider that there are sufficient doubts that prevent the acceptance of the understanding advocated by the Claimant, without prior consultation of the CJEU. Thus, the defendant contends that the Arbitral Tribunal should suspend the present arbitral proceeding and refer the issue at hand to the CJEU, via preliminary reference, pursuant to the provision in article 267 of the TFEU.
It is necessary to assess and decide.
25. Having considered everything, we have no doubt that the requirements for admissibility of the preliminary reference to the CJEU, provided for in article 267 of the TFEU, are not met, and, given the extensive jurisprudence in this matter, since the case at hand does not constitute "a new or differentiated case to be decided within a wholly or partially new framework". Furthermore, the CJEU itself has already pronounced on the discriminatory character of an option regime such as the one at issue here, in the Gielen decision, issued on 18/03/2010, in proceeding C-440/08, and the theory of the clear act is applicable in this case, contrary to what has been alleged by the TA, as will be better clarified below.
26. Article 19, no. 3 of the TEU provides as follows:
"3. The Court of Justice of the European Union shall act in accordance with the provisions of the Treaties:
a) On appeals brought by a Member State, an institution or natural or legal persons;
b) Acting as a Court competent to give preliminary rulings, at the request of national courts, on the interpretation of Union law or on the validity of acts adopted by Union institutions;
c) In the other cases provided for by the Treaties.
Article 267 of the TFEU provides as follows:
"The Court of Justice of the European Union shall be competent to give preliminary rulings on:
a) The interpretation of the Treaties;
b) The validity and interpretation of acts adopted by Union institutions, bodies or agencies.
Whenever a question of this kind is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a preliminary ruling thereon.
Whenever a question of this kind is raised in proceedings pending before a national court or tribunal against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.
If such a question is raised in proceedings pending before a national court or tribunal relating to a person in custody, the Court shall act with the minimum of delay."
27. The first question that arises here concerns the competence to submit preliminary references to the CJEU, which belongs to the courts of the Member States of the European Union; however, the quality of court is not defined in any of the Treaties of the Union, such concept being interpreted by the CJEU.
Regarding arbitral tribunals, whenever they meet the requirements listed in the jurisprudence of the CJEU – the legal origin of the body that submitted the reference, its permanence, the compulsory character of its jurisdiction, the adversarial nature of the proceedings, the application by that body of the rules of law and its independence –, this Tribunal has not hesitated to qualify them as courts for purposes of the provision in article 267 of the TFEU. In the preamble of the legal instrument establishing the RJAT the following is stated: "In cases where the arbitral tribunal is the final instance for deciding tax disputes, the decision is subject to preliminary reference in compliance with §3 of article 267 of the Treaty on the Functioning of the European Union."
Furthermore, this question is today settled in light of the jurisprudence of the CJEU, set forth in the "Ascendi" decision, issued on 12/06/2014, in proceeding C-377/13, in which the CJEU concluded that arbitral tribunals in tax matters, constituted under the auspices of CAAD, are qualified as courts of a Member State, for purposes of article 267 of the TFEU.
Thus, it is currently unquestionable that Portuguese arbitral tribunals in tax matters are qualified as courts of a Member State and, therefore, they are permitted the possibility of submitting preliminary references to the CJEU, provided that such appears necessary and appropriate in light of the basic requirements for implementing the preliminary reference.
It happens, however, that in the case at hand it is not clear what the necessity is for making such a reference. As clearly results from the jurisprudence of the CJEU on this question, "the preliminary reference is an instrument of judicial cooperation (…) by which a national judge and a community judge are called, within the scope of their own competencies, to contribute to a decision that ensures the uniform application of Community Law throughout the Member States" (Schwarze decision, of 01/12/1965, proceeding no. 16/65).
Thus, a preliminary question, within the framework of the preliminary reference proceeding, is understood to be any question that a national court considers necessary to resolve a pending dispute; such preliminary questions submitted to the CJEU may be, on the one hand, of validity or of interpretation and, on the other hand, of mandatory or optional preliminary reference. Whenever the preliminary question is raised within the framework of a proceeding pending before a national court whose decisions are not subject to judicial remedy provided for in national law, the preliminary reference is mandatory. If ordinary appeal lies from the decision of the national court, under national law, then the preliminary reference is in principle optional.
The arbitral decisions issued by arbitral tribunals in tax matters constituted under the auspices of CAAD are, as a rule, not subject to appeal on the merits; in fact, the possibility of appeal is limited to cases of violation of constitutional norms (appeal to the Constitutional Court) or failure to respect the jurisprudence of the Central Administrative Court or the Supreme Administrative Court (appeal by opposition of decisions to the Supreme Administrative Court). It happens, however, that, as decided by the CJEU (Cilfit decision, of 06/10/1982, proceeding C-283/81), the aforementioned obligation to refer does not occur "when, the preliminary question being one of interpretation, (a) jurisprudence already exists on the matter – and provided that any new framework does not create any real doubt as to the possibility of applying that jurisprudence to the concrete case – or (b) whenever the correct mode of interpretation of the legal norm in question is unequivocal, or (c) the preliminary question is neither necessary nor relevant to the judgment of the dispute before the national court."
28. In the concrete case, two of the three listed exceptions to the obligation to make a preliminary reference to the CJEU are met. On the one hand, there is extensive jurisprudence on this matter, as is evidenced by the various arbitral decisions issued by arbitral tribunals in tax matters constituted under the auspices of CAAD, cited by the Claimant.
On the other hand, there are also no doubts about the correct interpretation of the legal norms at issue in these proceedings; in fact, the norms are perfectly clear and, therefore, it is not a matter of interpreting them, but rather of applying them, which is the competence of the Arbitral Tribunal, and the theory of the clear act has full applicability here.
The CJEU itself has already had the opportunity to pronounce on all the questions that the defendant raises at the level of community law.
Thus, regarding the existence of an option regime identical in all respects to the one introduced in article 72 of the Personal Income Tax Code, by Law no. 67-A/2007, of 31 December, the CJEU pronounced itself in the Gielen decision, issued on 18/03/2010, in proceeding C-440/08, to which we referred above.
It is true that, as the defendant points out, that aforementioned Decision has as its underlying subject the freedom of movement of persons, and not the freedom of movement of capital, where the matter under discussion in the present case is situated.
Notwithstanding, what is stated there is transposable to the matter relating to the freedom of movement of capital, particularly where it is stated that "the Court of Justice clarified that, in the presence of a fiscal advantage whose benefit is refused to non-residents, a difference in treatment between these two categories of taxpayers can be characterized as discrimination, within the meaning of the TFEU Treaty, when there is no objective difference in situations capable of justifying differences in treatment, in this respect, between the referred categories of taxpayers (decisions, already referred to, Talotta, no. 19 and jurisprudence cited, and Renneberg, no. 60)."
Now, this second question, relating to the existence or not of an "objective difference in situations capable of justifying differences in treatment" in the matter at hand, was also already addressed by the CJEU in the Decision issued in proceeding C‑184/18, where it can be read that "there is no objective difference in the situations of these two categories of taxpayers (...) that justifies the inequality of tax treatment as regards the taxation of capital gains realized by them as a result of the alienation of immovable property situated in Portugal. Consequently, the situation in which non-resident taxpayers find themselves, (...) is comparable to that of resident taxpayers."
Furthermore, from the aforementioned Gielen Decision it clearly results that it is the body making the preliminary reference that is competent to determine, in particular, whether the applicable regime "is linked to the personal capacity of the taxpayers", and that understanding of the fact that the community jurisprudence in the matter is sufficiently clear in this regard is equally confirmed by the jurisprudence of the STA, which in the Decision of 20-02-2019, issued in proceeding 0901/11.0BEALM 0692/17, decided a question identical to that which is raised in the proceeding sub iudice, without making any preliminary reference.
In these terms, we conclude that there is no foundation for proceeding with the requested preliminary reference to the CJEU which, therefore, is denied.
It remains, then, to address the question of law raised in the present proceedings.
B) The Question of Law to be decided in the present proceedings
29. Having resolved the question relating to the preliminary reference, it is found that the main question to be decided is, thus, whether the differentiation, established by national legislation, in article 43, no. 2 of the CIRS, for residents and non-residents in national territory, of the basis of incidence in Personal Income Tax of capital gains derived from the onerous alienation of real rights over immovable property is or is not incompatible with the freedom of movement of capital provided for in article 63 of the Treaty on the Functioning of the European Union. The question arises, naturally, for non-residents in Portugal who reside in another Member State of the EU, by virtue of the prohibition of discrimination, whether the generic prohibition, as it results from the provision in article 18 of the Treaty, or the prohibition of any restriction (direct or indirect) to the freedom of movement of capital, as such discrimination translates into a less favorable tax regime for non-residents.
30. In the case under consideration in the present proceedings, it was established that the TA considered, for purposes of determining taxable income and consequent Personal Income Tax assessment to the Claimants, non-residents in Portugal but in another Member State of the EU, in the case in Germany, the entire capital gain realized in the alienation of the property identified in the proceedings. That is, in the case of the present proceedings, the application of the regime stipulated in no. 2 of article 43 of the Personal Income Tax Code was declined, according to which: "The balance referred to in the preceding number, regarding transmissions made by residents provided for in subparagraphs a), c) and d) of no. 1 of article 10, positive or negative, is only considered in 50% of its value". (emphasis ours)
The TA understands that such discipline is only applicable to taxpayers that are subject to the specificities of the internal regime for taxation of individuals, in force in Portugal, based on the principle of inclusion and progressivity. In that context, the TA alleges that the Claimants could benefit from the same benefit and that if that does not occur it is not because they are non-residents, but rather because they do not opt for inclusion and application of the normal taxation regime applicable to residents. Now, we cannot accept such an argument, as it would require an impossible condition to be imposed on the Claimants, as well as on all European citizens resident in another country of the EU, as they could never be in a position to submit themselves to such a condition. In other words, following the TA's understanding, only residents can, in fact, benefit from the provision of article 43, no. 2 of the CIRS. Indeed, that is precisely what constitutes the discrimination.
31. As the Claimants rightly allege, the issue at hand was already reviewed by the Court of Justice of the European Union (CJEU), in the Decision, of 11 October 2007, issued in proceeding C-443/06, designated "Hollmann Decision". Following this Decision, the Portuguese Supreme Administrative Court (STA) concluded that "no. 2 of article 43 of the Personal Income Tax Code, (…) which limits the incidence of tax to 50% of capital gains realized only for residents in Portugal, violates the provision of art. 56 of the Treaty Establishing the European Community, in excluding from that limitation capital gains that were realized by a resident of another Member State of the European Union."
The jurisprudence invoked by the Claimants is not questioned by the TA, although it defends a different interpretation, by considering that the introduction, by the State Budget Law for 2008 (Law no. 67-A/2007 of 31 December) of the possibility for the non-resident to opt for taxation in accordance with the rates provided for in article 68 of the CIRS, although in that case, all income is considered, including that earned outside national territory. This regime, contained in article 72 of the CIRS, restores the equality of treatment between residents and non-residents, so that, from the TA's point of view, any discrimination would be resolved. It should be noted that nos. 9 and 10 of article 72 of the CIRS were introduced with the State Budget Law for 2008. The TA thus alleges that in addition to the general regime which remained unchanged, the national legislature established, by means of Law no. 67-A/2007, of 31 December, subsequent to the jurisprudence of the Hollmann Decision, an optional regime, allegedly, for equalization of non-residents with residents, with the objective of avoiding the differentiated treatment of non-resident community taxpayers and from the European economic space who realize real estate capital gains in Portugal.
32. Having arrived here, it will be important to assess whether this amendment has resolved the cause underlying the discriminatory treatment between residents and non-residents, when the latter are residents in some EU state.
The principle of non-discrimination, provided for in the Treaty, is a fundamental principle in the construction of the European Union, imperative since the inception of the European project, and should be read as an imposition of equal treatment between European citizens, regardless of their nationality or residence. This principle is, furthermore, well established in the jurisprudence of the Court of Justice, which over the past decades has been asserting it with clarity and determination. Also the jurisprudence of the STA has been firm in the decisions issued in this matter, as well as the arbitral jurisprudence already issued in this matter.
Within this framework, it offers no doubts that the provision in no. 2 of article 43 of the CIRS objectively constitutes a discrimination in treatment between residents and non-residents. The TA itself, the defendant entity, in the present case, is conscious of this discrimination, as is apparent from the analysis of the briefs attached to the case file.
Notwithstanding, the TA alleges that the introduction of the option for taxation under the general regime of the rates provided for in article 68 of the CIRS restores the necessary equality of treatment, it being sufficient for the taxpayer to opt for taxation in those terms. From this it concludes that, if discrimination existed in the case of the present proceedings, such was due exclusively to the decision of the Claimant, by not exercising the legal option at their disposal. According to the TA, this equalization option, to which the TA refers, allows non-residents in Portugal, but residents in one of the Member States of the EU, the option for taxation of that income under conditions similar to those applicable to residents in Portugal, eliminating any discrimination. Will this be sufficient for us to conclude that there is no violation of the principle of non-discrimination?
If so, why would the Portuguese legislature not have opted for the pure and simple elimination of the reference to "residents", in the text of article 43, no. 2 of the CIRS, with such adjustments as might be necessary? It would have been simpler and would have resolved the problem without room for any doubt.
33. It is the understanding of this arbitral tribunal that the solution adopted by the Portuguese legislature does not guarantee, as the TA alleges, the elimination of the discrimination resulting from no. 2 of article 43. Nos. 8 and 9 of article 72 of the Personal Income Tax Code (version introduced by Law no. 66-B/2012 of 31 December – State Budget Law for 2013) provide:
"8 – Income provided for in nos. 4 to 7 may be included by option of the respective holders resident in Portuguese territory.
9- Residents of another Member State of the European Union or of the European Economic Area, provided that, in the latter case, there is an exchange of information in tax matters, may opt, with respect to income referred to in nos. 1 and 2, for the taxation of that income at the rate which, in accordance with the table provided for in no. 1 of article 68, would be applicable if earned by residents in Portuguese territory.
10 - For purposes of determining the rate referred to in the preceding number all income is taken into consideration, including that obtained outside this territory, under the same conditions as are applicable to residents."
Now, such a regime, it is judged, does not resolve the question.
This very clearly results from the Hollmann decision, on the exclusive application to residents in Portugal of the limitation of Personal Income Tax incidence to 50% of real estate capital gains, provided for in no. 2 of article 43 of the respective Code, and its non-conformity with the provision in article 56 of the Treaty Establishing the European Community (current article 63 of the TFEU). It should be noted that the CJEU, in the Decision issued in proceeding C‑184/18, has stated that even with respect to non-residents in the EU space, such limitation will not be acceptable.
The question under consideration must also take into account the principles of the primacy of European law and the prevalence of the interpretation of the CJEU over law from a community source, as indeed results from the provision in no. 4 of article 8 of the Constitution of the Portuguese Republic (CRP).
Within this framework, it should be said that the Hollmann jurisprudence, issued by the CJEU, concluded that the national norm, contained in no. 2 of article 43 of the Personal Income Tax Code, violates article 63 of the TFEU (former art. 56 of the TEU), as it is discriminatory in character (less favorable) to non-residents and is, in consequence, restrictive of the freedom of movement of capital between Member States. This interpretation is, therefore, unequivocal and clear.
The decision issued in the aforementioned Decision is based on the following argumentative topics:
"- An operation of liquidation of an immovable investment constitutes a movement of capital, the Treaty providing a specific norm prohibiting all restrictions on movements of capital;
- In the case of the sale of immovable property located in Portugal, where capital gains are realized, non-residents are subject to a higher tax burden than that applied to residents, finding themselves, therefore, in a less favorable situation than the latter;
- In fact, while a non-resident is taxed at a rate of 25% on the entire capital gains realized, the consideration of only half of the taxable matter corresponding to capital gains realized by a resident allows the latter to systematically benefit, to this end, from a lower tax burden, whatever the tax rate applicable on all their income, since the taxation of the income of residents is subject to a table of progressive rates whose highest bracket is 42%;
- This regime makes the transfer of capital less attractive for non-residents and constitutes a restriction on movements of capital prohibited by the Treaty;
- The discrimination of the national norm is not justifiable by the objective of avoiding penalty to residents (which are subject to a table of progressive rates that may be much higher and are taxed on a worldwide basis, unlike non-residents, which are taxed at the proportional rate of 25%, without inclusion), because, as noted above, being the highest bracket 42%, it always leads, under the same conditions, to a more onerous taxation of the non-resident, taking into account the reduction to 50% of the taxable income of the resident, there being no objective difference that justifies this inequality of tax treatment with respect to the taxation of capital gains, between the two categories of taxpayers."
34. Further to this, as correctly stated in arbitral decisions nos. 45/2012-T and 127/2012-T, considering the provision in article 43, no. 2 of the CIRS, we encounter a discriminatory regime incompatible with Community Law, by violation of article 63 of the TFEU. This understanding has been maintained in various subsequent arbitral decisions, as invoked by the Claimants. Understanding that, in turn, confirmed by the jurisprudence of the STA. For in the eyes of the arbitral jurisprudence cited by the Claimants and corroborated by our superior courts, the equalization option, introduced in the Portuguese tax system, following the issuance of the Hollmann Decision, contained in nos. 8 to 10 of article 72 of the Personal Income Tax Code, in force at the date of the tax fact, does not allow dismissing the discrimination judgment of the CJEU on the restrictive provision of no. 2 of article 43 of the Personal Income Tax Code to resident taxpayers.
First and foremost, it must be noted that the solution introduced by the legislature to remedy the discrimination contained in the aforementioned national norm does not ensure that the balance determined between capital gains and losses realized in the same year, regarding transmissions made by non-residents provided for in subparagraphs a), c) and d) of no. 1 of article 10, positive or negative, is only considered in 50% of its value, as is the case with residents, by virtue of the provision in art. 43/1 and 2 of the CIRS.
In fact, the regime in nos. 9 and 10 of art. 72 of the CIRS does not provide for the basis of incidence, but only the rate applicable to the income referred to in nos. 1 and 2 of the same art. 72, and it is therefore true, as reiterated by the defendant in arbitral proceedings, that such a regime does not entail the taxation of all income earned by non-residents, but only capital gains.
In effect, from the regime in question, no change in the basis of incidence results, the income taxed being the same, and there being provided only a change in the rate applicable, which ceases to be that of nos. 1 and 2 of that art. 72, and becomes that resulting from art. 68, no. 1 of the CIRS (which means, from the outset, that such a rate may be lower than that enshrined in nos. 1 and 2 of that art. 72 - provided that the average rate is less than 28% - or higher).
However, thus being, how it is, the discrimination proscribed by the Hollmann Decision continues to occur, between residents and non-residents.
For if nos. 9 and 10 of art. 72 provide for the rate, and not the basis of incidence, the latter is not changed by the option enshrined in those norms, that is: the basis of incidence will be - whether or not the option provided for in those norms is exercised - the same, which means that whether they exercise such option or not, non-residents will not, in any case, see the balance determined between capital gains and losses realized by them in the same year, regarding transmissions provided for in subparagraphs a), c) and d) of no. 1 of article 10, positive or negative, be considered only in 50% of its value.
Thus, if as the TA understood in the tax act sub iudice, art. 43, no. 2 of the CIRS is not applicable to non-residents, for purposes of their taxation under no. 1 of art. 72, the same norm will continue to not be applicable, should the same exercise the option enshrined in no. 9 and 10 of the same article 72, because such norms, as stated, do not change the basis of incidence of tax, but only the rate to be applied to it.
To be specific, as no. 10 of art. 72 only provides for the application of the norms applicable to residents, for purposes of determining the rate, and not for purposes of determining the taxable basis, the capital gain, under such a regime, will be relevant, at 50% solely for purposes of calculating the income that will determine the rate to be applied under art. 68, no. 1 of the CIRS, but the rate thus determined will continue to be applied to 100% of the capital gains, since, according to the TA, art. 43, nos. 1 and 2, of the CIRS will not be applicable to non-residents, as it only applies to residents, and does not result, as seen, from nos. 9 and 10 of art. 72 the application of those norms (nos. 1 and 2 of art. 43 of the CIRS), for purposes of determining the taxable basis.
Now, this understanding precisely translates the discrimination in treatment between resident and non-resident censured by the Hollmann decision, since residents will always pay the rate resulting from art. 68, no. 1 on 50% of capital gains, while non-residents will pay either that rate, determined in accordance with the rules applicable to residents, or 28%, always on 100% of capital gains.
To this is added another observation that results from the complexity of the functioning of the tax, aggravated by the "option for inclusion" of all income obtained in the other country, in addition to other relevant issues associated with the principle of territoriality provided for in article 15 of the CIRS, to the conditions of personalization and the progressivity of tax, hardly compatible with an appropriate consideration of values earned in another member state, in the current state of community law. Which amounts to saying that the legislative amendment made rests on presuppositions tainted by the intention to maintain a more onerous taxation on non-residents, even if they reside in the EU space, which appears unacceptable in the eyes of the aforementioned CJEU jurisprudence.
In other words, the TA has not demonstrated (nor could it) that the option for inclusion, as a form of equalization, as introduced in nos. 9 and 10 of article 72 of the CIRS, is sufficient to exclude the discrimination at issue.
Furthermore, as we said above, doubt would always remain as to the reason that led the legislature not to opt for the direct elimination of the discrimination contained in the norm of article 43, no. 2 of the CIRS. The TA alleges that the solution adopted in article 72, nos. 8 to 10 is sufficient, as for residents in Portuguese territory, this income is also subject to inclusion. Now, such an argument does not seem appropriate as it does not take into account all the other conditions of taxation inherent in the functioning of a tax with the characteristics of personal income tax and evidences an intention of taxation based on income earned in the other country (when included) while well knowing that it is a reality not comparable, easily falsified by all a reality of basis that escapes the fiscal sovereignty of the Portuguese state.
We have no doubt, from what is stated above, that the solution adopted by the Portuguese legislature does not eliminate the discriminatory character in the treatment of residents and non-residents, in the matter of capital gains resulting from the alienation of property.
35. In this sense, a reference must be made to another Decision of the CJEU, in which the Tribunal pronounced on a question similar to that resulting in the present case, regarding the assessment of the option introduced by the Portuguese legislature. Thus, the CJEU pronounced itself, in the Decision, of 18 March 2010, issued in proceeding C-440/08, designated "Gielen Decision", in a situation identical to the one we now appreciate, with the sole difference that in this proceeding the violation of article 49 and not article 63 of the TFEU was at issue.
Now, in this Decision, the CJEU emphasizes that "the equalization option allows a non-resident taxpayer, (…) to choose between a discriminatory tax regime and another supposedly non-discriminatory regime".
It further considers, the CJEU in the same Decision, that such an option is not capable of excluding all discriminatory effects of the first of these two tax regimes, adding that "the recognition of an effect of such a nature to said choice would have the consequence (…) of validating a tax regime that would continue, in itself, to violate article 49 TFEU by reason of its discriminatory character."
Concluded, therefore, the CJEU that "the Treaty is opposed to a national regulation that discriminates against non-resident taxpayers in the grant of a tax benefit (…) despite that such taxpayers may choose, with respect to that benefit, the regime applicable to resident taxpayers".
As correctly noted in Arbitral Decision no. 45/2012-T, the consequences of what is stated above, in accordance with the CJEU jurisprudence above referred to, may possibly result in a more favorable taxation of real estate capital gains earned by non-residents in Portugal, who reside in the European Union, than by residents, as, in addition to benefiting in the same way from the reduction to 50% of the basis of Personal Income Tax incidence, they are subject to a taxation rate, which will, in the majority of cases, be lower than the progressive rates of residents, in accordance with the table provided for in no. 1 of article 68 of the Personal Income Tax Code, to which is added the fact that the latter must include all their income. However, this is a consequence of direct taxation being a domain of the competence of the Member States, being for them to resolve on the internal plane this type of discrepancies. One thing is certain and unavoidable, in the current stage of Community Law, there is no principle or norm that prevents positive discrimination of non-residents against residents, but it is clear the prohibition of discrimination of non-residents, in the terms above explained.
This understanding has, since 2011, been upheld by the STA, as extracted from the jurisprudence of the Decision of 22 March 2011, issued in proceeding no. 1031/10, which annulled the assessment act issued by the TA, which "in light of the taxpayers' declaration, assessed them the tax it considered due (as indeed always occurs in Personal Income Tax): at the rate provided for non-residents (25%, under article 72, no. 1 of the Personal Income Tax Code) and on the total amount of the capital gain realized and not only on 50% of this value (article 43, no. 2 of the Personal Income Tax Code), thus ignoring the community jurisprudence and that of this Supreme Court which accepted it (cf. the Decision of 16 January 2008, rec. no. 439/06) regarding the incompatibility of that legal provision, thus applied, with the (then) article 56 of the TJCE (current article 63 of the Treaty on the Functioning of the European Union), thus subjecting in this manner, as came to happen, to have that part of the challenged assessment annulled, given the primacy of community law."
36. Furthermore, in the Decision of the STA of 20-02-2019, issued in proceeding 0901/11.0BEALM 0692/17, a question entirely identical to that now at hand was already decided, with the Supreme Court deciding in the sense of taxation of 50% of capital gains, concluding to its application to non-residents, without the option of no. 9 of art. 72 being exercised.
Now, courts in general, and also arbitral tribunals, it is judged, are bound by the duty to "take into consideration all cases that deserve similar treatment, in order to obtain a uniform interpretation and application of law." (art. 8/3 of the Civil Code).
On the other hand, and pursuant to art. 25/2 of the RJAT, "The arbitral decision on the merits of the claim made which terminates the arbitral proceeding is also subject to appeal to the Supreme Administrative Court when it is opposed, on the same fundamental question of law, to a decision issued by the Central Administrative Court or by the Supreme Administrative Court."
Hence, a decision, in the matter sub iudice, that goes against the jurisprudence issued by the STA in the matter, there being, as there is, identity of facts and law applicable to these, between the present case and the one already judged by the STA, would be, not only subject to appeal in accordance with the aforementioned art. 25/2 of the RJAT, as, with a high degree of probability, capable of being revoked by that High Court.
Thus, and in sum, we believe it would have no utility, on the contrary (it would give rise to additional and unnecessary procedural processing), for this Tribunal to conclude otherwise, with respect to the corrections now at issue than that affirmed by the STA.
37. To this end, we also adhere to the jurisprudence set forth in the recent arbitral decision, issued in proceeding no. 74/2019-T, which we now cite:
"Finally, the defendant TA observes that, following the issuance of the Hollmann Decision, an equalization option was introduced in the Portuguese tax system with which it was intended to dismiss the discrimination judgment of the CJEU on the restrictive provision of no. 2 of article 43 of the Personal Income Tax Code applicable to resident taxpayers.
Thus, Law no. 67-A/2007, of 31 December (State Budget Law for 2008), introduced nos. 7 and 8 of article 72 of the Personal Income Tax Code establishing an optional equalization regime of non-residents (these to be residents of another Member State of the European Union or of the European Economic Area) with residents.
Subsequently, given the reorganization carried out by Law no. 66-B/2012, of 31 December, these provisions became nos. 9 and 10, providing at the date of 2017 the following:
"9
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