Summary
Full Decision
ARBITRAL AWARD
The arbitrators Judge José Poças Falcão (presiding arbitrator), Professor Doctor Luís Menezes Leitão and Dr. José Carreira (arbitrator members), appointed by the Deontological Council of CAAD to form the Arbitral Tribunal, constituted on 30-11-2015, hereby agree as follows:
REPORT
A…, LDA. – abbreviated as A… – legal entity no. … with registered office at Rua …, no.…, …, to which corresponds the Tax Service of … (code…) (hereinafter, "Claimant"), under the provisions of Articles 10.º, no. 1, subparagraph a), and 2.º, no. 1, subparagraph a), both of Decree-Law no. 10/2011, of 20 January, which establishes arbitration as an alternative means of jurisdictional resolution of disputes in tax matters (hereinafter "RJAT"), and of Order no. 112-A/2011, of 22 March, has requested the constitution of an Arbitral Tribunal, waiving the right to appoint an arbitrator.
Object of the Request
The Claimant requests that this Tribunal declare unlawful and annul the tax act of additional assessment of Withholding Tax on Corporate Income Tax (IRC) and respective compensatory interest, identified with no. 2010…, relating to the tax year 2008, which resulted in tax payable in the amount of € 155,138.80 and further condemn the Respondent (AT) to payment of indemnification for providing undue guarantee, with all further legal consequences.
Summary of the Grounds of the Request – The Alleged Facts
The Claimant alleges, in essence:
It carries out activities in the production and commercialization of covers, foams, upholstery and metal structures for automobile seats (C.A.E. …– R3), and is classified, for IRC purposes, under the Special Tax Regime for Groups of Companies (hereinafter "RETGS"), as the parent company.
The consolidation perimeter of its group also includes the companies B… S.A., legal entity no.…, C…SA, D… Lda. and E…, Unipessoal Lda., all jointly designated hereinafter as the "Group".
Through Official Letter no.…, of 12 February 2010, the Claimant was notified that a tax audit would be initiated, which began on 10 March 2010 and ended on 25 November 2010.
Subsequently, on 2 December 2010, through Official Letter no.…, the Claimant was notified of the Draft Conclusions of the Audit Report.
Later, on 21 February 2011, the Claimant was notified of the Tax Audit Report (hereinafter "Final Report"), which proposed technical corrections to the taxable matter for the year 2008 (no corrections being made to the year 2007).
These corrections were of two different types: on one hand, a correction was made regarding transfer pricing in the amount of € 2,171,001.90 and, on the other, a correction was made regarding royalties in the amount of € 142,561.50.
The AT then decided to proceed with the issuance of two separate assessments.
The assessment act now being challenged (the Assessment) results from the correction made regarding royalties.
The Claimant was notified of the Assessment on 30 December 2010, which resulted in an amount payable of € 155,138.80, with a payment deadline of 31 January 2011.
On the same date, the Claimant was notified of the "Statement of Compensatory Interest Assessment", Compensation no. 2012…, with reference to the calculation of compensatory interest.
On 10 February 2011, the Claimant filed an administrative complaint regarding the Assessment.
Subsequently, without proceeding to payment of the Assessment, the Claimant provided, on 27 April 2011, a bank guarantee in the amount of € 197,029.05 (one hundred ninety-seven thousand twenty-nine Euros and five cents), for purposes of suspending the fiscal execution process no. …2011…, instituted by the Tax Service of … – cf. Document no. 2 which is hereby attached and deemed fully reproduced for all legal purposes.
The Claimant was notified by the AT, on 27 December 2011, of the draft dismissal of the complaint filed, and exercised its right of reply in prior hearing, which was sent to the AT on 6 January 2012.
Notwithstanding the arguments advanced by the Claimant therein, the AT maintained the understanding set forth in the Final Report, having notified the Claimant, through Official Letter received on 20 February 2012, of the decision dismissing the administrative complaint filed.
Not accepting either the Assessment or the arguments on which the AT based its decision to dismiss, the Claimant filed, on 28 March 2012, a hierarchical appeal of the decision dismissing the administrative complaint, which appeal was dismissed, as confirmed by Official Letter notified to the Claimant on 17 June 2015, that is, 1176 days later (!).
Nevertheless, the Claimant understands that the correction made, as better identified in the Final Report, is not acceptable, and therefore comes to present this request for arbitral pronouncement.
The Assessment has as its object the legal requalification of the payments made by the Claimant to the German company F… (hereinafter referred to as "F…"), under a contract between them concluded on 15 February 2008, designated "G…" (hereinafter referred to as "contract" and attached to the Final Report as Annex I)[1] – cf. Document no. 3 which is hereby attached and deemed fully reproduced for all legal purposes.
In the Claimant's view, these payments correspond to the consideration paid for services rendered to it by F…, whereas in the AT's view, they correspond to the consideration paid for the cession of industrial property rights from F… to the Claimant (emphasized by us) or, as stated by the AT on page 12 of the Final Report, for "(…) the cession of the right to use and exploit the product (emphasized by us) (…)".
In particular, the AT states the following (pages 8 to 11 of the Final Report):
"In accordance with point 1 of the contract concluded between F… and A… [Claimant], the latter company accepts transferring to the former plans and documents necessary for the manufacture of metal structures for various vehicles of Group H…, resulting from design and development carried out by F…";
"Point 3 of the contract clarifies that this is a full transfer, as it states that all rights over such plans and documents were fully transferred to A… [Claimant], including all documents that permit the use and exploitation of the product";
"F…, as a result of the experience acquired by virtue of its presence in this sector of activity, transferred this knowledge to A…, so we are faced with a cession of know-how from F… to A… [Claimant]";
"Since, in the situation under analysis, there is a transfer of technology [as is clear from the expressions 'A… agrees to transfer the results' and 'Results were transferred', with the definition of results being 'plans and documents necessary for the manufacturing of the metal frames (…) which result from design and development carried out by faz' – contained in points 1 and 3 of the contract] and not merely the application of technology, the contractual object must be qualified as a know-how transfer";
"In effect, A… [Claimant] acquired the right to use the technology, of confidential content, which F… holds, as a result of design and development work carried out in Germany";
"(…) in accordance with point 1 of the contract in question, the design and development activities were carried out in Germany by F…, which is thereby the legitimate holder of the technology whose transfer is the object of the transfer to A… [Claimant]. Future improvements made by A… or by F… shall be the property of A… [Claimant], in accordance with point four of the contract";
"(…) it should be noted that the fact that the price was set as a lump sum, based on the cost of activities developed by F…, plus a margin of 5% plus financial costs inherent thereto, that is, the absence of a direct relationship between the amount to be paid by A… [Claimant] and the amount of sales of that entity, may be explained by the fact that it concerns technology relating to a phase prior to the production process proper (…) if it were a provision of services, one would expect a connection between the amounts paid and the number of hours of work spent, which did not occur".
In the course of the audit process, the Claimant described the Project G… as including "the development and production of metal structures of the … for the H… platform …(…, …,…)", and that "A… received from F… technical design and specific development know-how regarding the aforementioned metal structures", attaching the aforementioned contract and its amendment – cf. Annex II to the Final Report.
But the Claimant further stated that – a citation which the AT preferred to disregard – "while the license agreement covers the provision of know-how and technical support within the scope of the production phase of the metal structures, Project G… comprises support throughout the entire design and technical development process carried out before the phase of initiating series production of the same (…)" – cf. same Annex II (emphasis of the Claimant).
Now it is in determining exactly what this support constituted that we must seek the true nature of the Contract.
To this end, it becomes essential to identify the exact content of F…'s intervention in the execution of the Contract, i.e., to clarify the type of services and activity to which Project G… was intended:
Following a project awarded to the Claimant by Group H…, it was tasked with producing the metal structures for the seats and backrests of the front of the new models of …, of…, of … and of …(hereinafter, and using the terminology of the Contract, also referred to as "Products");
All of these new automobiles were subject to the same platform developed entirely by H… (platform G…, hence the designation given to this contract);
To manufacture the Products in accordance with the specifications imposed by Group H…, the Claimant needed to install new assembly lines;
The installation of new assembly lines involves a process of extremely high complexity, as it requires, among other aspects, the following:
Development of new tools, suitable for the manufacturing process of the Products – for example, tools that can be placed on welding robots – definition of riveting or bolting processes;
It should be noted that these tools are then ordered from suppliers other than F…, who manufacture them according to the specifications provided and who sell them directly to the Claimant;
The definition of the different work stations that comprise an assembly line and their respective layout: for example, where the bolting station is placed, or the riveting station, through which the pieces produced at each of these assembly stations circulate, where raw materials enter and what is the cadence of operation between the different work stations, some manual and others robotic;
Once all these processes have been defined, a complex set of specifications (plans and documents, to use the terminology of the Contract) is drawn up that specifies and describes all these development processes – for example, it describes how pieces should be bolted or how the riveting station should function, or through where the different pieces that will make up the Products should circulate or, furthermore, how workers should operate the equipment and work stations placed on the assembly lines;
After this phase, which corresponds to the development phase of the Project, follows an installation phase. During this phase, new equipment and tools are received, which are properly validated according to the client's specifications, final adjustments are made and they are installed on the assembly line, each in its place;
During this phase as well, training is provided to the Claimant's workers who will operate the equipment and they are given the necessary instructions for operating their respective work stations;
It is the specifications of this equipment and the instructions for the operation of the assembly lines that comprise the plans and documents (in the terminology of the Contract, the "Information") that F… transfers to the Claimant (in the terminology of the Contract, the "Results");
Once installation is completed, production begins. During this phase, there is regular monitoring to ensure that the new assembly lines function perfectly and that the Products meet the client's specifications.
Now, it was to obtain support in all these phases of Project G… that the Claimant turned to F… or, put another way, the Claimant did not contract with F… for the latter to send it some plans and documents, of confidential content, with which the Claimant, alone, would then proceed to design and develop tools and equipment for the installation of new assembly lines in the automotive sector; it contracted with it for F… to apply its know-how and technology in the design and development of all the processes necessary for the installation of new assembly lines, so that the Claimant could carry out its activity, which is to manufacture the Products for Group H….
It is also appropriate to clarify some aspects, which seem essential to the Claimant for the correct qualification of the payments it made to F…:
The assembly lines, the tools, the plans and documents that define and instruct the different manufacturing processes are the exclusive property of the Claimant, with F… holding no rights over them;
The tools, processes and plans necessary for the manufacture of the Products ordered by Group H… are specific to this Project G… and must be specifically and exclusively developed for that project – in other words, everything is developed and made to measure for this project;
In this entire process, F… intervenes in the following manner:
Creates a work team whose function is to support the Claimant in defining all aspects inherent to the development phase – design and development of the tools and equipment necessary for the manufacture of these Products;
Identifies suppliers capable of building these tools and equipment, to whom it falls to build them and sell them to the Claimant;
Sends this work team to Portugal to (a) validate the equipment produced by the third parties, (b) support the Claimant in installing this equipment and tools on the new assembly lines, (c) support the Claimant in training workers whose function is to operate this equipment, showing them how they should do it and leaving the Claimant with a series of plans and documents that demonstrate this and describe the specifications of this same equipment and tools; (d) support the Claimant in the course of the production startup process, helping it to correct any failures or, for example, to fine-tune the robots to the new production.
Naturally, as a service provider, F… is responsible for the respective results, which is why the second paragraph of point 3 of the contract establishes that "F… is liable for any hidden defect of the Results and for any legal claim concerning its ownership".
For these services, F… charges an amount equivalent to their respective costs, direct or indirect, plus 5%, and since it does not hold any rights over any of the processes developed for Project G…, it has no right to receive any other payments, including royalties and licensing fees – cf. point 3 of the Contract.
The AT contends that the form of payment does not indicate a provision of services, since there is no connection between the amounts paid and the number of hours spent (cf. article 29.º above).
The AT is mistaken. Although the contract does not provide for payment based on a value for each hour of work, the truth is that it requires payment of all costs, direct and indirect, incurred by F…, including the salaries of workers assigned to the Project, for the period during which it runs.
Thus, for example, if a worker is assigned to the project for 3 months, the Claimant will pay, among other costs, the amount corresponding to the salaries for those months of work (thus, the hours worked in those months) plus 5%.
Naturally, if that worker is assigned to the project for only 2 months, the Claimant will necessarily pay less.
It can thus be verified, with relative ease, that the form of payment indicates a clear connection between the working time assigned to Project G… and the amount of values owed by the Claimant.
It suffices, moreover, to note the fact that the price paid by the Claimant to F… is based on the actual cost of services rendered (direct and indirect).
In effect, Project G… represented the involvement of various F… workers, of different technical specialties, who traveled to Portugal and were there on various occasions.
After framing this matter in legal and tax-legal terms, specifically in light of the distinction between income derived from the application of capital, potentially generating royalties, and income derived from work and the provision of services, potentially generating commercial earnings (profits), the Claimant proceeds to analyze the contract in question, with a breakdown of the various services provided and determination of the nature of the payments made, and also bearing in mind that between Portugal and Germany a Convention to Avoid Double Taxation in the Matter of Taxes on Income and Capital was concluded, which was approved by Law no. 2/82, of 3 June (hereinafter, "Tax Treaty Portugal-Germany"), a Convention that applies to the case at hand, as the AT itself did not fail to recognize on page 12 of the Final Report.
The Claimant concludes that it is wrong to conclude, as stated by the AT, that "the contractual object must be qualified as a 'know-how' transfer" (to use the AT's terms on page 11 of the Final Report), and that the assessment in question should be annulled due to a defect of violation of law.
Regarding the assessment and the interest, the Claimant further alleges and concludes by its illegality due to lack of reasoning, being therefore voidable insofar as it is founded on the issuance of obscure documents, with coded information, impossible to understand.
Thus and according to the Claimant, in accordance with the Statement of Compensatory Interest Assessment incorporated in the Statement of Withholding Tax Assessment, the Claimant would be a debtor of compensatory interest, in the following terms:
· compensatory interest, accrued on the base value of € 134,295.00, at the rate of 4%, regarding the period from 23.09.2008 to 31.12.2010, in the amount of € 11,950.41;
· compensatory interest, accrued on the base value of € 8,266.50, at the rate of 4%, regarding the period from 21.01.2009 to 31.12.2010, in the amount of € 626.89.
Thus, from the Interest Assessment only result the base values, the time periods, the rate and the type of interest accrued, without it being understood why the various types of calculated interest would have accrued, or what justifies that they would have accrued in the different periods indicated, or even still, what the basis is for having considered the base values contained in the Assessment.
The Interest Assessment would thus be absolutely unintelligible – not only for the average person but also for someone with technical knowledge and accustomed to analyzing this type of tax acts – lacking absolutely in reasoning.
The provision of no. 5 of Article 39.º of the General Tax Law (hereinafter, "GTL"), was not observed, which establishes that the assessment must always clearly show the principal amount of the debt and the compensatory interest, explaining clearly its calculation and distinguishing them from other debts owed.
The Assessment thus suffers also from the defect of lack of reasoning, due to violation of the provision of no. 9 of Article 35.º of the GTL, being voidable, in accordance with Article 163.º of the Code of Administrative Procedure ("CAP") ex vi Article 2.º, subparagraph c) of the GTL.
Constitution of the Tribunal
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the Tax and Customs Authority.
In accordance with the provisions of subparagraph a) of no. 2 of Article 6.º and subparagraph b) of no. 1 of Article 11.º of the RJAT, in the wording introduced by Article 228.º of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable period.
The parties were duly notified of this appointment and did not manifest a will to refuse the appointment of the arbitrators, in accordance with the combined provisions of Article 11.º, no. 1, subparagraphs a) and b) of the RJAT and Articles 6.º and 7.º of the Deontological Code.
Thus, in conformity with the provision of subparagraph c) of no. 1 of Article 11.º of the RJAT, in the wording introduced by Article 228.º of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 30-11-2015.
Response of the AT
In the Response, the AT raised the following issues: (i) preterition of a formality prescribed in Article 59.º of the CPPT, (ii) untimeliness of the request for official review, (iii) non-fulfillment of the requirements for consideration of the request for official review, (iv) abuse of right due to contradiction between the request for official review and the request for arbitral pronouncement and the conduct previously assumed by the Claimants. The AT further defended the lawfulness of the assessment and the absence of error attributable to the services.
The meeting provided for in Article 18.º of the RJAT was held and, on 8-7-2016, the witness enrolled, I…, was examined in hearing with sound recording, and examination of the other witnesses was waived (See respective minutes).
Final arguments were submitted in writing and the parties, in essence, reiterated the positions they had explained in their respective pleadings.
Due to various circumstances of the process, there were, in light of the provision of Article 21º-2 of the RJAT, extensions of the deadline provided for in Article 21º-1 of the RJAT for the pronouncement and notification of the final decision to the parties.
Preliminary Ruling
The arbitral tribunal is regularly constituted and is materially competent, in view of the provision of Articles 2.º, no. 1, subparagraph a), and 10.º, no. 1, of Decree-Law no. 10/2011, of 20 January.
The parties possess legal personality and capacity and are legitimate and legally represented (Articles 4.º and 10.º, no. 2, of the same decree and Article 1.º of Order no. 112-A/2011, of 22 March).
The process is not vitiated by nullities.
The preliminary questions and/or exceptions raised by the Respondent, Tax and Customs Authority (AT), will be considered as a priority, immediately after the determination of the facts.
2. Facts
2.1. Proven Facts
The judge (or arbitrator) does not have the duty to pronounce on all the matters alleged, but rather has the duty to select only those relevant to the decision, taking into account the cause (or causes) of action that support(s) the claim filed by the plaintiff (cf. Articles 596.º, no.1 and 607.º, nos. 2 to 4, of the Civil Procedure Code, in the wording of Law no. 41/2013, of 26/6) and to record whether it considers it proven or not proven (cf. Article 123, no. 2, of the Tax Procedure Code).
In this case the Tribunal considers the following facts to be proven:
a) The Claimant carries out activities in the production and commercialization of covers, foams, upholstery and metal structures for automobile seats (C.A.E. …–…), and is classified, for IRC purposes, under the Special Tax Regime for Groups of Companies (hereinafter "RETGS"), as the parent company;
b) The Claimant is classified, for IRC purposes, under the Special Tax Regime for Groups of Companies (hereinafter "RETGS"), as the parent company;
c) The consolidation perimeter of its group also includes the companies B… S.A., legal entity no.…, C… SA, D… Lda. and E…, Unipessoal Lda., all jointly designated hereinafter as the "Group";
d) Through Official Letter no.…, of 12 February 2010, the Claimant was notified that a tax audit would be initiated, which began on 10 March 2010 and ended on 25 November 2010;
e) Subsequently, on 2 December 2010, through Official Letter no.…, the Claimant was notified of the Draft Conclusions of the Audit Report;
f) And later, on 21 February 2011, the Claimant was notified of the Tax Audit Report (hereinafter "Final Report"), which proposed technical corrections to the taxable matter for the year 2008 (no corrections being made to the year 2007);
g) These corrections were of two different types: on one hand, a correction was made regarding transfer pricing in the amount of € 2,171,001.90 and, on the other, a correction was made regarding royalties in the amount of € 142,561.50;
h) The AT then decided to proceed with the issuance of two separate assessments;
i) The assessment act now being challenged (the Assessment) results from the correction made regarding royalties;
j) The Claimant was notified of the Assessment on 30 December 2010, which resulted in an amount payable of € 155,138.80, with a payment deadline of 31 January 2011;
k) On the same date, the Claimant was notified of the "Statement of Compensatory Interest Assessment", Compensation no. 2012…, with reference to the calculation of compensatory interest;
l) On 10 February 2011, the Claimant filed an administrative complaint regarding the Assessment;
m) Subsequently, without proceeding to payment of the Assessment, the Claimant provided, on 27 April 2011, a bank guarantee in the amount of € 197,029.05 (one hundred ninety-seven thousand twenty-nine Euros and five cents), for purposes of suspending the fiscal execution process no. …2011…, instituted by the Tax Service of …;
n) The Claimant was notified by the AT, on 27 December 2011, of the draft dismissal of the complaint filed, and exercised its right of reply in prior hearing, which was sent to the AT on 6 January 2012;
o) The AT maintained the understanding set forth in the Final Report, having notified the Claimant, through Official Letter received on 20 February 2012, of the decision dismissing the administrative complaint filed;
p) Not accepting either the Assessment or the arguments on which the AT based its decision to dismiss, the Claimant filed, on 28 March 2012, a hierarchical appeal of the decision dismissing the administrative complaint, which appeal was dismissed, as confirmed by Official Letter notified to the Claimant on 17 June 2015;
q) The present request for arbitral pronouncement was filed with CAAD on 15-9-2015;
r) The Assessment has as its object the legal requalification of the payments made by the Claimant to the German company F… (hereinafter referred to as "F…"), under a contract between them concluded on 15 February 2008, designated "Project G…)" (hereinafter referred to as "Contract" and attached to the Final Report as Annex I)[2];
s) Once Project G… was awarded to the Claimant, it was F…'s responsibility to develop the specifications to be used in the manufacture of the new tools and equipment necessary for the installation of the assembly lines that produced the backrests and seats of the front of the different automobiles of Group H…;
t) The technology necessary to develop these specifications belongs to F… and was not transferred to the Claimant; on the contrary, such technology was transferred directly from F… to third-party suppliers, who incorporated it into these tools and equipment and sold them to the Claimant;
u) The Claimant paid the price of these tools and equipment directly to these suppliers, having had no access to the technology used in their manufacture;
v) The payments made by the Claimant in execution of the aforementioned contract correspond to the consideration paid for services rendered to the Claimant by F… (not being the consideration paid for the cession of industrial property rights from F… to the Claimant or, as stated by the AT on page 12 of the Final Report, consideration for "(…) the cession of the right to use and exploit the product (…)"];
x) The AT states the following (pages 8 to 11 of the Final Report):
"In accordance with point 1 of the contract concluded between F… and A… [Claimant], the latter company accepts transferring to the former plans and documents necessary for the manufacture of metal structures for various vehicles of Group H…, resulting from design and development carried out by F…";
"Point 3 of the contract clarifies that this is a full transfer, as it states that all rights over such plans and documents were fully transferred to A… [Claimant], including all documents that permit the use and exploitation of the product";
"F…, as a result of the experience acquired by virtue of its presence in this sector of activity, transferred this knowledge to A…, so we are faced with a cession of know-how from F… to A… [Claimant]";
"Since, in the situation under analysis, there is a transfer of technology [as is clear from the expressions 'A… agrees to transfer the results' and 'Results were transferred', with the definition of results being 'plans and documents necessary for the manufacturing of the metal frames (…) which result from design and development carried out by faz' – contained in points 1 and 3 of the contract] and not merely the application of technology, the contractual object must be qualified as a know-how transfer";
"In effect, A… [Claimant] acquired the right to use the technology, of confidential content, which F… holds, as a result of design and development work carried out in Germany";
"(…) in accordance with point 1 of the contract in question, the design and development activities were carried out in Germany by F…, which is thereby the legitimate holder of the technology whose transfer is the object of the transfer to A… [Claimant]. Future improvements made by A… or by F… shall be the property of A… [Claimant], in accordance with point four of the contract";
"(…) it should be noted that the fact that the price was set as a lump sum, based on the cost of activities developed by F…, plus a margin of 5% plus financial costs inherent thereto, that is, the absence of a direct relationship between the amount to be paid by A… [Claimant] and the amount of sales of that entity, may be explained by the fact that it concerns technology relating to a phase prior to the production process proper (…) if it were a provision of services, one would expect a connection between the amounts paid and the number of hours of work spent, which did not occur".
z) In the course of the audit process, the Claimant described Project G… as including "the development and production of metal structures of the …for the H… platform … (…, …,…)", and that "A… received from F… technical design and specific development know-how regarding the aforementioned metal structures", attaching the aforementioned contract and its amendment – cf. Annex II to the Final Report.
aa) But the Claimant further stated that "(...)while the license agreement covers the provision of know-how and technical support within the scope of the production phase of the metal structures, Project G… comprises support throughout the entire design and technical development process carried out before the phase of initiating series production of the same (…)" – cf. same Annex II;
bb) F… dealt directly with suppliers, transmitted to them the necessary specifications and these suppliers then sold the tools and equipment in finished state to the Claimant, who paid them directly to these suppliers;
cc) The tools and equipment acquired by the Claimant from the suppliers were specific to Project G…, serving no other purpose;
dd) Once these tools and equipment were acquired by the Claimant, it was F…'s responsibility to validate them on-site (at the Claimant's factory);
ee) For this purpose, F… brought to Portugal several teams of people - composed on average of 8 people who regularly traveled to the Claimant's facilities to oversee the installation of these tools and equipment on the respective assembly lines;
ff) To these tools and equipment are added robots acquired and paid for directly by the Claimant to third-party suppliers, such as J… (J…), which F… took care to validate and install on the same assembly lines;
gg) For the work carried out by F…, the Claimant paid an amount equivalent to the costs incurred by F…, plus a margin of 5%;
hh) Although Contract G… was formalized on 8 February 2008, the award by Group H… and the development of the project had already begun in prior years;
ii) F… further ensured that the Claimant's employees received appropriate training for the operation of these robots, these tools and this equipment;
jj) Upon completion of this process, the Claimant began the manufacture of the Products - the backrests and seats - which it sold to Group H…;
kk) Subsequently, because the existing assembly lines did not allow satisfaction of the increased demand seen, the Claimant requested F… support in installing additional assembly lines, for both seats and backrests...
ll) ...being this the reason for the conclusion, on 27-5-2009, of the amendment ["Amendment no. 1 to the Project G…"] to the initial contract, always maintaining the nature of services rendered by F… under the initial contract (See Annex 1, pages 8 and 9, of the TIR);
mm) In order to suspend the fiscal execution process instituted as a result of the failure to pay the amount of tax resulting from the Assessment, the Claimant provided a bank guarantee.
2.2. Unproven Facts
There are no other material facts, proven or unproven.
2.3 Reasoning
In accordance with the principle of free evaluation of evidence, the Tribunal bases its decision, regarding the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of proof brought to the process and in accordance with its life experience and knowledge of people (cf. Article 607.º, no. 5, of the Civil Procedure Code, in the wording of Law 41/2013, of 26/6). Only when the probative force of certain means is pre-established in law (e.g. the full probative force of authentic documents - cf. Article 371.º of the Civil Code) does the principle of free evaluation of evidence not prevail in the evaluation of the evidence produced.
In this case, in addition to the administrative investigation file, the position of the parties in their respective pleadings and the other documents attached, the testimony given by witness I…, economist and executive of the Claimant company since 2004, was also relevant and, in some way, decisive, who, with direct knowledge of the facts and technical knowledge, testified in a manner to clarify the Tribunal, in spontaneous and convincing terms, namely regarding the reality of the matters alleged in Articles 34.º to 38.º of the arbitral petition, that is, regarding the exact content of F…'s intervention (the German company F…) with respect to the execution of the described and documented Contract.
In fact, this witness detailed work carried out by F… as services of conception – design and technical specifications – interaction with suppliers of the equipment and tools that constitute A…'s new manufacturing lines, training of its operators and monitoring of the assembly and initial operation process of the manufacturing lines.
It should be noted in this regard that according to the Respondent, the TIR (tax inspection report) had only based itself on the contract in its initial formulation and object (Article 134.º of the response), whereas the description of the facts by the witness, in conjunction with the "amendment" mentioned in ll) of the list of proven facts, was particularly relevant for the proof of the facts listed above, namely in subparagraphs bb) to ll).
3. Matters of Law
3.1. Object of the Process
The main tax issue object of the proceedings concerns the dispute between the parties regarding the obligation or not to withhold at source pursuant to the Convention to Avoid Double Taxation in the Matter of Taxes on Income and Capital, concluded between Portugal and Germany (cf. Law no. 12/82, of 3 June – Article 12.º) – abbreviated "Tax Treaty".
More specifically: the challenged assessment has as its object the legal requalification, as "royalties", of the payments made by the Claimant to the German company F… (hereinafter referred to as "F…"), under a contract between them concluded on 15 February 2008, designated "Project G…" (hereinafter referred to as "Contract" and attached to the Final Report as Annex I)[3] – cf. Document no. 3 attached to the petition for arbitral pronouncement.
It is a matter, in this case, of determining whether the contract in question qualifies or can qualify as a technology transfer or know-how transfer contract – in which case it is subject to withholding at source in light of Article 12.º of the Tax Treaty – or, on the contrary, whether it is a technical assistance contract with associated provision of services, not subject to withholding at source.
In the Claimant's view, these payments correspond to the consideration paid for services rendered to it by F…, whereas in the AT's view, they correspond to the consideration paid for the cession of industrial property rights from F… to the Claimant or, as stated by the AT on page 12 of the Final Report of the Inspection, for "(…) the cession of the right to use and exploit the product (…)".
It is essentially a matter, more specifically, of determining whether, as alleged or justified by the AT, the Claimant "(...)failed to withhold at source and did not pay to the State's coffers tax in the amount of €142,561.50, which is owed, as a definitive matter, in accordance with subparagraph a) of no.1 and no. 3 of Article 88.º of the IRC, by virtue of income relating to royalties having been obtained in Portuguese territory, in accordance with sub-subparagraph 1) of subparagraph c) of no. 3 of Article 4.º of the IRC and given that they do not fall within the exclusion from taxation provided in no. 4 of Article 4.º of the IRC".
Preliminarily the AT raises the question of the untimeliness of the request (emphasized by us) for arbitration on the understanding that, although a dismissal of an administrative complaint and a hierarchical appeal did occur, the 90-day period provided for in Article 10.º-1/a) of the RJAT was not affected by the aforementioned challenges.
Obviously, one will begin by considering the grounds of the exception of untimeliness.
3.2 The (Un)timeliness of the Request for Arbitral Pronouncement
The Respondent AT alleges, in support of the exception, "(...) that Article 10.º of the RJAT establishes, regarding assessment/self-assessment acts, that the period for presenting a request for arbitral pronouncement is 90 (ninety) days, referring, as to the moment the counting begins, to what is provided for in Article 102.º, nos. 1 and 2 of the Code of Tax Procedure and Process (CPPT). Having in mind the statement of assessment attached by the Claimant, we have that the payment deadline for the amounts of tax at issue in the proceedings occurred on 2011-01-31. Now, the request intended for the constitution of the arbitral tribunal was presented on 2015-09-15, that is, more than 4 years after the one in which the deadline would terminate (...)".
Let us see:
The periods for presentation of a request for arbitral pronouncement are as follows:
a) 90 days counted from the end of the voluntary payment period for assessments, self-assessments, withholding at source and payments on account [first-degree acts] or counted from the notification of the decision or the end of the legal period for decision of the hierarchical appeal [second or third-degree acts] [Article 2.º-1/a) and 10.º-1/a) of the RJAT and Articles 102.º-1 and 2 of the CPPT;
b) 30 days counted from the notification of acts fixing the taxable matter when they do not give rise to assessment of any tax, of acts determining the taxable base and of acts fixing patrimonial values [Article 2.º-1/b) and 10.º-1/b of the RJAT].
Arbitral Tribunals do not have competence to know of defects proper to second or third-degree acts (acts of dismissal of administrative complaints, hierarchical appeals or requests for official review whose basis is not connected to the illegality of the "first-degree act").
That is: what is always and only challengeable is the lawfulness of the first-degree act.
The express dismissal of an administrative remedy will only be arbitrable insofar as it itself entails consideration of the lawfulness of the first-degree act that the taxpayer actually intends to challenge.
Such that it will be the first-degree act (additional assessment by the AT or self-assessment, for example, as is the case) the object of the request for arbitral pronouncement, whether or not there have been acts dismissing administrative remedies for consideration of the lawfulness of that act (complaint or hierarchical appeal).
The act of dismissal of the administrative complaint or hierarchical appeal will be important markers also for assessing the timeliness of the presentation of the request for arbitral pronouncement insofar as the counting of the 90-day period will only begin from the notification of the decision of the complaint or the end of the legal period of the hierarchical appeal.
One cannot, in our view, confuse the material scope of arbitration (Article 2.º of the RJAT) with the date from which the request for arbitral pronouncement can be filed (Article 10.º of the RJAT).
On the other hand, this is also an approach to the question of the appealability, through arbitration, of second or third-degree acts. The problematic of second and third-degree acts in tax arbitration is connected, it is believed, with at least two distinct questions: a first one, to know whether, having an administrative remedy been pursued, the object of the arbitral process will be the decision to be rendered by the Tax Administration – in the course of an administrative complaint, hierarchical appeal or request for official review – or, on the contrary, the assessment, self-assessment, withholding at source or payment on account act; a second one, which interconnects questions of competence and questions of period, and which is to know whether the tribunal will have competence – and if so, to what extent – to consider a first-degree act when the request is presented in the course of a dismissal of an administrative complaint, hierarchical appeal or request for official review previously presented.
Regarding the first question, it was already within the scope of judicial challenge was debatable whether, faced with an express decision of an administrative complaint, hierarchical appeal or request for official review, the taxpayer challenged directly the assessment act previously complained of, appealed or revised (the first-degree act) or the decision itself (of dismissal) of complaint, appeal or request for official review which, in turn, considered the (un)lawfulness of the challenged act - the second-degree act. The Supreme Administrative Court (STA) came to pronounce on the question, in an award dated 18 May 2011, rendered in the course of process no. 0156/11, admitting that "(…) the real object of the challenge is the assessment act and not the act that decided the complaint, so it is the defects of that and not of this decision that are truly in question(…)."
"(…) the challenge is not, therefore, limited by the grounds invoked in the administrative complaint, being able to have as its basis any illegality of the tax act.(…)"
This is the first matter that must be clear: the object of the arbitral process is the assessment act.
A question different from this but interconnected is whether the request for arbitral pronouncement was presented within the period. Here it seems that the arbitration legislator was, it is believed, clear in compartmentalizing questions of competence and questions of periods.
Thus, as to the competence or material scope, the object of arbitration is, as concluded, consideration of the illegality of assessment acts. As to the period, the taxpayer may resort to arbitration immediately upon notification of the acts of assessment of taxes, self-assessments, withholding at source and payments on account or, having resorted to the administrative route, after notification of the decision dismissing the administrative complaint or the appeal or still upon formation of the express dismissal.
This answer is found, in turn, in the aforementioned Article 10.º of the RJAT.
From this rule one cannot or should never draw the competence for direct consideration of second-degree acts, as it is a rule that concerns solely and exclusively the dies a quo of the period for presentation of the request for arbitral pronouncement. It is a rule that concerns therefore the moment from which the counting of the period for requesting the constitution of the arbitral tribunal begins.
In fact, Article 2.º, no. 1, subparagraph a) of the RJAT, determines that arbitral tribunals have competence to consider "the declaration of illegality of acts of assessment of taxes, self-assessments, withholding at source and payments on account". There is, therefore, no reference to acts of dismissal of administrative complaints, hierarchical appeals or requests for official review, i.e., no mention is made of the arbitrability of decisions of dismissal, express or implied, of the prior administrative remedies used. There is not, nor did there need to be.
It is understood in this regard that second or third-degree acts may always, it is reaffirmed, be arbitrable, insofar as they themselves entail, and only to this extent, the (un)lawfulness of the assessment acts in question. The basis of this understanding will be a teleological interpretation, specifically because subparagraph a) of no. 1 of Article 10.º explicitly refers to the "decision of hierarchical appeal" and the fact that the second or third-degree act is considering the assessment, self-assessment, withholding at source or payment on account act object of arbitration.
It is thus advocated here an interpretation according to which the defects proper to acts of dismissal of administrative complaints, hierarchical appeals or requests for review of the tax act are not arbitrable because they escape the material scope of tax arbitration. In other words, these acts of dismissal may only be "brought" to arbitral jurisdiction, under the strict condition that they themselves have considered the (un)lawfulness of the tax act that the taxpayer, truly and actually, intends to challenge through arbitration.
In this sense, see, for example, the arbitral decision rendered in the course of process no. 272/2014-T, of which the following extracts are transcribed:
"(…) 65 - The dismissal of an administrative complaint embodies, within the framework of judicial challenge, the case provided for in no. 2 of Article 102.º of the CPPT, raising the question of whether, given the competences legally committed to arbitral tribunals, they will be competent to, in any circumstances, consider acts of dismissal of administrative complaints.
66 - Being the competence of arbitral tribunals, which function with CAAD, circumscribed and limited, as already mentioned above, to the declaration of illegality of acts of assessment of taxes, self-assessments, withholding at source and payments on account, the consideration of acts of dismissal of administrative complaints, by the aforementioned tribunals, must be conditioned to the effective knowledge that such acts had of the lawfulness of the assessment acts with which they are related.
67 - The decision to dismiss the administrative complaint, rendered in the aforementioned circumstances, reaffirms the lawfulness of the assessment act in question and confirms it again, as it had been initially configured.
68 - The dismissal of the administrative complaint is an injurious act susceptible of challenge by the interested party, which, insofar as it proceeds to the reaffirmation of the underlying primary assessment act and of which it is inseparable, cannot fail to have its consideration committed to arbitral tribunals, which, as mentioned, have their competences fundamentally focused on the declaration of illegality of acts of assessment of taxes (…)"
Subsuming:
From the proven facts matter it results that (cf. above, list of proven facts):
" (...)
j) The Claimant was notified of the Assessment on 30 December 2010, which resulted in an amount payable of € 155,138.80, with a payment deadline of 31 January 2011;
k) On the same date, the Claimant was notified of the "Statement of Compensatory Interest Assessment", Compensation no. 2012 …, with reference to the calculation of compensatory interest;
l) On 10 February 2011, the Claimant filed an administrative complaint regarding the Assessment;
m) Subsequently, without proceeding to payment of the Assessment, the Claimant provided, on 27 April 2011, a bank guarantee in the amount of € 197,029.05 (one hundred ninety-seven thousand twenty-nine Euros and five cents), for purposes of suspending the fiscal execution process no. …2011… 0, instituted by the Tax Service of …;
n) The Claimant was notified by the AT, on 27 December 2011, of the draft dismissal of the complaint filed, and exercised its right of reply in prior hearing, which was sent to the AT on 6 January 2012;
o) The AT maintained the understanding set forth in the Final Report, having notified the Claimant, through Official Letter received on 20 February 2012, of the decision dismissing the administrative complaint filed;
p) Not accepting either the Assessment or the arguments on which the AT based its decision to dismiss, the Claimant filed, on 28 March 2012, a hierarchical appeal of the decision dismissing the administrative complaint, which appeal was dismissed, as confirmed by Official Letter notified to the Claimant on 17 June 2015;
q) The present request for arbitral pronouncement was filed with CAAD on 15-9-2015
That is: the Claimant was notified on 30-12-2010 of the assessment for payment until 31-1-2011.
Filed an administrative complaint on 10-1-2011, therefore within the period, according to Article 70.º of the CPPT.
From the dismissal of the administrative complaint, notified on 20-2-2012, filed a hierarchical appeal to the Minister of Finance on 28-3-2012, therefore timely.
Complying with the respective formalities, the decision, unfavorable to the Claimant, was notified to it on 17-6-2015 and the present request for arbitral pronouncement (judicial challenge) was filed with CAAD on 15-9-2015.
In light of the above, the timeliness of the arbitral request is clear.
The exception thus fails.
3.3 On the Merits of the Request
The essential issue object of the proceedings is to determine whether, as alleged or justified by the AT, the Claimant "(...)failed to withhold at source and did not pay to the State's coffers tax in the amount of €142,561.50, which is owed, as a definitive matter, in accordance with subparagraph a) of no.1 and no. 3 of Article 88.º of the IRC, by virtue of income relating to "royalties" having been obtained in Portuguese territory, in accordance with sub-subparagraph 1) of subparagraph c) of no. 3 of Article 4.º of the IRC and given that they do not fall within the exclusion from taxation provided in no. 4 of Article 4.º of the IRC".
In the Claimant's view, this is payments that correspond to provision of services by F…, whereas in the AT's view, they, by contrast, will correspond to the consideration paid for the cession of industrial property rights from F… to the Claimant or, as stated by the AT (page 12 of the Final Report of the Inspection), for "(…) the cession of the right to use and exploit the product (…)".
This dispute regarding the qualification of the contract, essential for purposes of taxation, in view of the evidence produced, offers no doubt: the parties concluded not a know-how transfer contract but rather a technical assistance contract, involving provision of services.
Alberto Xavier (in International Tax Law, 2014, 2nd edition, pages 687 et seq.) basing himself on extensive literature and the comments to Article 12.º of the model convention, recognizing that these are complex contracts that often become confused, states that "(...)the know-how contract has as its object the transfer of pre-existing technological information not disclosed to the public, in itself considered, in the form of the temporary or definitive cession of rights, so that the acquirer may use it on its own account, without the transmitter intervening in the application of the ceded technology or guaranteeing its result" and that "by contrast, the service provision contract has as its object the execution of services that presuppose, on the part of the service provider, a technology, which however, is not intended to be transferred, but merely applied to the specific case through ideas, conceptions and advice based on a detailed study of a project".
As to the consideration, Alberto Xavier further clarifies (Op. cit.) that in know-how contracts "(...)it takes the form of a lump sum or a percentage of invoicing, production or profit" and in service provision contracts "it is set essentially based on the cost demonstrated by criteria relating to the work developed, such as the number of hours spent".
And in this same line is the case law as can be seen from the illustrative summary of the award of the TAC rendered in process no. 04075/10, of 18-6-2013, published at www.dgsi.pt, which concludes, quoting, "(…) the 'Know-how contract' has as its object the transfer of pre-existing technological information not disclosed to the public, in themselves considered, in the form of temporary or definitive cession of rights, so that the acquirer may use it on its own account and without the transmitter intervening in the application of the ceded technology or guaranteeing its result. By contrast, the technical service provision (engineering) contract has as its object the execution of services that presuppose, on the part of the service provider, a technology, which, however, is not intended to be transferred, but rather merely applied to the specific case through ideas, conceptions and advice based on a detailed study of a project. In other words, in the know-how contract technology is transferred, whereas in the technical service provision (engineering) contract technology is applied. For tax purposes, the remuneration of 'Know how' (royalties) constitutes capital income, since it aims to remunerate a previously accumulated technological capital that is made available to the beneficiary, whereas the remuneration of technical service provision should be considered a sale price of the service in itself considered and not the remuneration of a production factor or of a technology whose transmission is not, in itself, the object of the contract.
Moreover, the provision of services that is the object of a technical assistance contract does not have an autonomous and independent character, but rather is complementary or accessory to another operation provided for in the same contract or in a separate contract. In fact, in certain cases the transmission of information (Know how) is not exhausted in the mere cession of rights, but rather additionally requires a continued activity of service provision, permanent or periodic, by which the technological information is fully made available to the assignee. Now, it is precisely in these cases that the figure of "technical assistance" occurs. "Technical assistance" is distinguished from technical service provision (engineering), as while in the latter case the provision of services constitutes itself as the principal object of the contract in question, in the former the provision of services is merely instrumental with respect to the principal object of the contract which consists of the transmission of technological information (Know how). In the technical service provision contract the parties want the execution of a certain service in itself and not "assistance" in the acquisition of technological information; in the "technical assistance" contract the parties want technological information, which is combined with the provision of a complementary or instrumental service (…)".
Subsuming
It results from the list of proven facts that, once Project G… was awarded to the Claimant, it was F…'s responsibility to develop the specifications to be used in the manufacture of the new tools and equipment necessary for the installation of the assembly lines that produced the backrests and seats of the front of the different automobiles of Group H…, the technology necessary to develop these specifications belonging to F…, not having been transferred to the Claimant; by contrast, such technology was transferred directly from F… to third-party suppliers, who incorporated it into these tools and equipment and sold them to the Claimant, with the Claimant paying the price of these tools and equipment directly to these suppliers and having had no access to the technology used in their manufacture.
On the other hand, the payments made by the Claimant in execution of the aforementioned contract corresponded to the consideration paid for services rendered to it by F… [not being the consideration paid for the cession of industrial property rights from F… to the Claimant or, as stated by the AT on page 12 of the Final Report, consideration for "(…) the cession of the right to use and exploit the product (…)"], with F… being the one who dealt directly with suppliers, transmitting to them the necessary specifications, it being they (suppliers) who then sold the tools and equipment, in finished state, to the Claimant, who paid them directly to these suppliers;
Furthermore, the tools and equipment acquired by the Claimant from the suppliers were specific to Project G…, serving no other purpose.
That is: in this case, F… did not limit itself to transferring technology so that A… would apply it as it saw fit, on the responsibility of the latter. It rather used technological knowledge that it held, to apply it to a specific project, developing the work necessary to the implementation of new automobile seat manufacturing lines and assuming responsibility for any defects, as results from the contract.
The remuneration was not fixed based on the benefits – invoicing, profits… - of A… but rather based on the costs incurred by F…, plus 5% and plus financial costs (cf. contract). Now the costs incurred are the result of the number of hours of work, hourly rates, material resources used, trips made, among others; which fits perfectly within the notion of "cost demonstrated by criteria relating to the work developed".
It should be noted that it makes no sense to say that it was not based on hours of work as, when using the expression "… as the number of hours spent" one is doing no more than emphasizing one of the main components of the work developed in service provision contracts. It also makes no sense to say that in the contract in question the remuneration is a lump sum as what the contract does is fix a preliminary sum that will be subject to a final amount based on the costs incurred plus margin.
It should further be noted that it is not strange – quite the contrary – that, in a business group, operating in a high-technology sector like automobiles, with various units in several countries, it is practice to have technical resources, namely at the engineering level, which belonging to one company in the group are made available to provide services to other companies in the group. It is a matter of making the best use of highly specialized technical resources with high costs. In this matter, it must be taken into account that the automotive industry is, notably, very demanding in terms of quality standards, as any equipment failure has high image costs and often results in very high compensatory indemnities in case of accident.
In this light, it appears quite reasonable and in accordance with industry practices, that in a project for the manufacture of new automobile seat models A… resorted to another company in the K… group, in this case F…, to provide it technical engineering services.
So much suffices to conclude the lack of basis for the AT's requalification of the contract as a know-how cession or transfer due to the absence of the aforementioned and necessary typical elements respective.
That is: revealing the contract the typical elements of a technical assistance contract with associated service provision, both the Convention to Avoid Double Taxation (Tax Treaty) concluded between Portugal and Germany (Law no. 12/82, of 3 June) [which only permits taxation of royalties, which in this case do not exist, in Portugal - cf. Article 12.º of the Tax Treaty], and the non-fulfillment of the requirements provided for in the IRC (subparagraph a) of no.1 and no. 3 of Article 88.º of the IRC sub-subparagraph 1) of subparagraph c) of no. 3 and Article 4.º of the IRC, 2010 wording), the additional assessment reveals itself to be unlawful due to the lack of its respective material and legal grounds.
Thus the request for declaration of illegality and consequent annulment of the tax act of additional assessment of Withholding Tax on Corporate Income Tax (IRC) and respective compensatory interest, identified with no. 2010…, relating to the tax year 2008, which resulted in tax payable in the amount of € 155,138.80, shall succeed.
4. Undue Provision of Guarantee – Indemnification
The Claimant provided a bank guarantee intended to ensure payment and suspend execution in the part now challenged, of the additional assessment, now object of arbitral challenge.
The GTL provides:
Article 53.º
Guarantee in Case of Undue Provision
1 - The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be indemnified in whole or in part for damages resulting from its provision, should it have maintained it for a period exceeding three years in proportion to the favorable ruling in administrative complaint, challenge or opposition to execution having as its object the debt guaranteed.
2 - The period referred to in the foregoing number does not apply when it is verified, in administrative complaint or judicial challenge, that there was error attributable to the services in the assessment of the tax.
3 - The indemnification referred to in no. 1 has as its maximum limit the amount resulting from the application to the value guaranteed of the rate of indemnificatory interest provided for in this law and may be requested in the very process of complaint or judicial challenge, or autonomously.
4 - Indemnification for provision of undue guarantee shall be paid by deduction from the receipt of the tax of the year in which payment was made.
The Tribunal understands that the assessment is vitiated, in this part, by error attributable to the Services insofar as the taxpayer will obtain a favorable ruling in the challenge and the basis for annulment is not attributable to it.
It is thus inapplicable, in this case, the 3-year period to which reference is made in no. 1 of the aforementioned Article 53.º of the GTL.
Being public and well-known that for the service of provision of bank guarantee fees/commissions are paid to Banks based on, namely, the risk, value and period of the guarantee, it must be concluded that the Claimant bore [and certainly continues to bear] charges for the maintenance of the guarantees.
Having provided the guarantees for the value of the assessments object of this challenge, interest, costs and other accruals (Cf. Article 199.º-6 of the CPPT) and having obtained a favorable ruling in this action, it has the right to be indemnified for damages caused by guarantee that would not be due.
That is: it is recognized that the requirements conferring on the Claimant the right to indemnification in accordance with the aforementioned Article 53.º of the GTL are met.
Certainly the quantification of the indemnity was not specified.
However, this would not necessarily have had to be alleged as whoever requires indemnification does not need to indicate the exact amount of damages – Cf. Article 569.º of the Civil Code.
The liquidation of the indemnification must thus be processed in the course of execution of judgment and having present the limitations of its quantum provided for in Article 53.º-3 of the GTL.
5. Decision
In these terms the members of this Arbitral Tribunal agree to:
a) Adjudge the request for arbitral pronouncement to succeed and declare unlawful the tax act of assessment of Withholding Tax on Corporate Income Tax (IRC) and respective compensatory interest, identified with no. 2010…, issued by the Tax and Customs Authority (hereinafter "AT"), relating to the tax year 2008;
b) Annul the aforementioned assessment;
c) Adjudge the request for indemnification for damages resulting from the provision of the bank guarantee provided by the Claimant to obtain, in accordance with the law, the suspension of execution of the assessment and interest to succeed;
d) Condemn the Tax and Customs Authority to payment of indemnification to the Claimant, in accordance with and within the limits provided for in Article 53.º of the GTL and to be liquidated in execution of judgment, resulting from the success of the request to which the foregoing subparagraph refers; and
e) Condemn the Tax and Customs Authority in the costs of this process.
6. Value of the Process
In accordance with the provision of Article 306.º, no. 2 of the CPC and Article 97.º-A, no. 1, subparagraph a) of the CPPT and Article 3.º, no. 2 of the Regulation of Costs in Tax Arbitration Processes, the value of the process is fixed at € 155,138.00.
7. Costs
In accordance with Article 22.º, no. 4 of the RJAT, the amount of costs is fixed at €3,672.00 in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Processes, to be borne by the Tax and Customs Authority.
Lisbon, 18-10-2016
The Collective Arbitral Tribunal,
(José Poças Falcão)
(Luís Menezes Leitão)
(José Carreira)
[1] The Contract includes an amendment signed on 27 May 2009, by which F… committed itself to provide to the Claimant additional services relating to equipment and also complementary services of design and project development, all relating to the platform….
[2] The Contract includes an amendment signed on 27 May 2009, by which F… committed itself to provide to the Claimant additional services relating to equipment and also complementary services of design and project development, all relating to the platform….
[3] The Contract includes an amendment signed on 27 May 2009, by which F… committed itself to provide to the Claimant additional services relating to equipment and also complementary services of design and project development, all relating to the platform G….
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