CAAD 609/2018-T: SIFIDE Tax Credits Deduction from Autonomous Taxation IRC Assessment

ARBITRAL DECISION (consult complete version in PDF)

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Raquel Franco and Carla Castelo Trindade, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Court, hereby agree to the following:

I – REPORT

1. On 3 December 2018, A..., LDA., NIPC..., with registered office at Rua..., no...., ..., ...-... ..., filed a petition for constitution of an arbitral tribunal, under the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime of Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the declaration of illegality of the self-assessment act of Corporate Income Tax (IRC), relating to the financial year 2015, to the extent corresponding to the non-deduction from the IRC tax collection of the portion produced by autonomous taxation rates on fiscal incentives in IRC, namely the benefits calculated under the System of Fiscal Incentives for Research and Business Development (SIFIDE), as well as the tacit dismissal of the administrative review claim that had that act as its object.

2. To support its petition, the Applicant alleges, in summary, that SIFIDE fiscal benefits must be deducted from the collection of autonomous taxation because:

i. they may be deducted from the IRC collection determined under Article 90 of the Corporate Income Tax Code (CIRC) and Article 4 of Law No. 55-A/2010;

ii. the collection of autonomous taxation is considered as IRC collection, being an integral part of this tax;

iii. the liquidation rules provided for in Article 90 of the CIRC are applicable to autonomous taxation;

iv. the Applicant's understanding aligns with the jurisprudence of CAAD which has already pronounced on this matter.

1. On 04-12-2018, the petition for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

2. The Applicant did not appoint an arbitrator, therefore, under the provisions of subsection (a) of paragraph 2 of Article 6 and subsection (a) of paragraph 1 of Article 11 of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who confirmed acceptance of the appointment within the applicable deadline.

3. On 24-01-2019, the parties were notified of these appointments and expressed no intention to recuse any of them.

4. In accordance with the provisions of subsection (c) of paragraph 1 of Article 11 of the RJAT, the collective Arbitral Court was constituted on 13-02-2019.

5. On 18-03-2019, the Respondent, duly notified for that purpose, presented its response defending itself by way of objection.

6. Under the provisions of subsections (c) and (e) of Article 16, and paragraph 2 of Article 29, both of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with.

7. Having been granted a deadline for the presentation of written submissions, these were submitted by the parties, commenting on the evidence produced and reiterating and developing their respective legal positions.

8. It was indicated that the final decision would be notified by the end of the deadline provided for in Article 21/1 of the RJAT.

9. The Arbitral Court is materially competent and is regularly constituted, under the terms of Articles 2, paragraph 1, subsection (a), 5 and 6, paragraph 2, subsection (a), of the RJAT.

The parties have legal personality and capacity, are entitled and are legally represented, under the terms of Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings suffer from no nullities.

Thus, there is no obstacle to the examination of the case.

Given all the foregoing, it is appropriate to render a decision.

II. DECISION

A. MATTER OF FACT

A.1. Facts found to be proven

1. The Applicant is a commercial company that develops its activity in the pharmaceutical sector, namely, in the industry and trade of pharmaceutical products and specialties, medicines, chemical products, dietary products, hygiene products, dermocosmetics and food products.

2. In 2015, the Applicant was the parent company of the A... group constituted by all companies held, directly or indirectly, by the company, namely:

• A..., SA – NIPC...;
• B..., SA – NIPC...;
• C..., SA – NIPC...;
• D..., SA – NIPC...;
• E..., SA – NIPC... .

1. In the financial year 2015, the A... group was taxed in accordance with the special tax regime for groups of companies (RETGS).

2. As the parent company of the A... group, on 25-05-2016, the Applicant submitted the Corporation Income Tax Form 22 Declaration, which was replaced on 11-05-2017.

3. The companies belonging to the A... group proceeded with the submission of their respective Corporation Income Tax Form 22 Declarations.

4. In the financial year 2015, the Applicant held SIFIDE II credits in the amount of €3,093,149.60.

5. Due to technical impossibility in completing the IRC Declaration, the Applicant was unable to deduct the amounts of SIFIDE II credit it held from the IRC collection relating to autonomous taxation.

6. In 2015, the Applicant's tax and social security situation was regularized.

7. In 2015, the Applicant's taxable profit was not determined using indirect methods.

8. Following the submission of Form 22 Declaration of the A... Group, the Applicant was notified of Liquidation Statement No. 2017..., which resulted in the amount of €285,704.18.

9. The total amount of IRC payable by the Applicant resulted from the amount payable from autonomous taxation.

10. The autonomous taxation self-assessed by the Applicant, as parent company, results from the sum of the autonomous taxation individually self-assessed by the companies that make up the group:

11. On 25-05-2016, the Applicant proceeded to pay €285,704.18.

12. On 04-05-2018, the Applicant submitted an administrative review claim to the Tax Office of ... .

13. Up to the date of submission of the arbitral petition, the Applicant had not been notified of the decision on the administrative review claim.

A.2. Facts found not to be proven

Regarding the matter of fact, there are no facts that should be considered as not proven.

A.3. Substantiation of proven and unproven matter of fact

With respect to the matter of fact, the Court does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and to distinguish between proven and unproven matters (cf. Article 123, paragraph 2, of the Tax Procedure and Process Code (CPPT) and Article 607, paragraph 3 of the Code of Civil Procedure (CPC), applicable by force of Article 29, paragraph 1, subsections (a) and (e), of the RJAT).

Thus, the facts relevant to the adjudication of the case are chosen and selected based on their legal relevance, which is established in light of the various plausible solutions to the legal question(s) (cf. former Article 511, paragraph 1, of the CPC, corresponding to the current Article 596, applicable by force of Article 29, paragraph 1, subsection (e), of the RJAT).

Therefore, taking into account the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary evidence and the case file attached to the proceedings, the facts listed above were considered proven, as relevant to the decision, bearing in mind that, as was written in the Decision of the South Tax Court of 26-06-2014, rendered in case 07148/13, "the evidentiary value of the tax inspection report (...) may have evidentiary force if the assertions contained therein are not contested".

Allegations made by the parties, and presented as facts, consisting of statements that are strictly conclusory, insusceptible of proof and whose truth must be assessed in relation to the specific matter of fact consolidated above, were not given as proven or unproven.

B. LAW

The principal question to be decided in the present proceedings, being, undoubtedly, of some complexity in its resolution, is, nonetheless, simple in its formulation, and concerns the question of whether the Applicant's Tax Group has or does not have the right to proceed with deduction, also from the IRC collection produced by the application of autonomous taxation rates, of the aforementioned credits relating to SIFIDE available in the Applicant's sphere.

The problem underlying autonomous taxation has been, in this as in other matters, the subject of heated litigation between taxpayers and the Tax Authority, a situation to which the very nature, anti-systemic even, that they carry in the framework of income taxes, where they originated, will not be strange.

Related to the problematic, reference can be made, for example, to decisions in arbitral proceedings No. 174/2016-T, 122/2016-T, 34/2016-T, 567/2016-T, 60/2017-T, 61/2017-T, 65/2017-T, 99/2017-T, 433/2017-T, 474/2017-T and 45/2018-T, among many others.

Indeed, the discussion that began with the new autonomous taxation rates introduced by Law No. 64/2008, of 5 December, and initially focused on the nature of the tax fact underlying that type of taxation, opened a deep exploratory path regarding the nature of autonomous taxation and its relationship with income taxes, in particular IRC, which passed through the problems of deductibility of the value of autonomous taxation from IRC collection, and the nature, presumptive or not, of autonomous taxation on deductible expenses, without, to date, there having been a definitive, doctrinally sustained and coherent legislative intervention to clarify the due framework of the taxation in question in the structure of income tax from which they emerge. Rather, disconnected and circumstantial legislative interventions have succeeded one another, which contribute nothing, on the contrary, to the clarification of the nature and function of such taxation.

In this context, case-by-case judicial decisions succeed equally case-by-case legislative interventions, generating a framework of uncertainty and instability where taxpayers and the Tax Authority have no other way to seek the applicable law than perpetuated litigation, with the judicial interpreter falling into the ungrateful task of, in the tangle of norms generated, serving possible justice.

Let us see then.

When one speaks of autonomous taxation, as is the case, it is convenient from the outset to keep in mind that one is dealing with a set of disparate situations, which will include, at least, three distinct types, namely:

• Autonomous taxation of certain income (e.g.: Article 72 of the current Personal Income Tax Code (CIRS), and, it is believed, that provided for in the current paragraph 11 of Article 88 of the CIRC);

• Autonomous taxation of certain deductible expenses (e.g.: paragraphs 7 and 9 of Article 88 of the current CIRC);

• Autonomous taxation of other expenses regardless of their deductibility (e.g.: paragraphs 1 and 2 of Article 88 of the current CIRC).

From a perspective of functionality/purpose/basis of autonomous taxation on expenses (excluding, therefore, autonomous taxation of income), several types have also been identified, such as:

• the discouragement of certain taxpayer behaviors tending to be associated with situations of fraud or tax evasion, as happens, for example, with autonomous taxation on undocumented expenses or payments to entities subject to privileged tax regimes;

• the fight against erosion of the tax base, as happens, in general, with autonomous taxation on deductible expenses;

• the discouragement of certain expenses with presumptively non-business causation, as happens with autonomous taxation on vehicle expenses, allowances, or representation expenses;

• the taxation of disguised distribution of income to third parties, not taxed in their sphere (fringe benefits), as happens with autonomous taxation on vehicle expenses, allowances, or representation expenses;

• the penalization for the realization of certain expenses, which do not affect the tax base, nor have underlying any distribution of untaxed income to third parties, or fraudulent or evasive potential, but which the legislator, perhaps, considered luxurious or sumptuary, as happens with autonomous taxation on certain payments to managers, administrators or partners (current Article 88/13 of the CIRC), as well as autonomous taxation on vehicle expenses to the extent that it exceeds the normal IRC rate.

These facts become important because by themselves they demonstrate the disparity and heterogeneity of situations subject to autonomous taxation, and the futility of, in the context of judicial decisions, synthesizing and seeking a proper and unified legal nature, common to all situations.

Thus, one should center the discussion on the concrete question raised by the Applicant and seek a properly founded answer for the restricted terms of what is at issue in the proceedings, which will then be to know whether or not it is possible to make deductions from the portion of IRC collection produced by autonomous taxation rates, of available fiscal benefits, within the scope of IRC.

Properly framed in these terms, the question to be resolved in the proceedings, it will still be necessary to bear in mind that the fundamental reference for the answer to be given to it will be that formulated in Article 9 of the Civil Code, according to which the legislative thought should be reconstructed from the texts, which should have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

In this context, the objective of this decision will be, not to theorize on the legal nature of autonomous taxation in general, or of any of its various types, but rather to ascertain whether the legislative thought, with a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed, was or was not, at the date of the tax fact in question in these proceedings, in the sense that it was possible to use deductions from the portion of IRC collection produced by autonomous taxation rates, of available fiscal incentives, within the scope of IRC.

It will be futile, it is thought, to seek a conceptualist basis, based on a dogmatic definition of monolithic concepts of IRC and Autonomous Taxation, drawn from norms outside the matter to be decided, professing a "scholastic ontologism" that seeks to "deduce in a purely logical way, from abstract higher concepts, others, increasingly concrete and full of content", methodologically outdated.

Rather, one will simply seek to ascertain what solution, in light of the constituted law, properly interpreted, appears to fit the specific case, not taking the answer given to the question to be decided as a finished, exact evidence with an extreme degree of rigor and exactness, but, merely, as that which, reflexively, presented itself to its subscribers as the legally better one.

The basis of the Applicant's claim is literally simple and linear and results from the finding that, in the liquidation of autonomous taxation in accordance with Article 90, paragraph 1 of the CIRC, to such liquidation the deductions provided for in its paragraph 2 will be applied, as well as, in the case and specifically, in Article 4 of Law No. 55-A/2010.

The following is the content of the norms in question:

• Article 90 of the CIRC:

"1 - The liquidation of IRC proceeds as follows:

a) When the liquidation is to be made by the taxpayer in the declarations referred to in Articles 120 and 122, it is based on the taxable matter contained therein;

b) In the absence of submission of the declaration referred to in Article 120, the liquidation is carried out by 30 November of the following year to which it relates or, in the case provided for in paragraph 2 of that article, by the end of the 6th month following the term of the deadline for submission of the declaration mentioned there and is based on the annual value of the minimum monthly remuneration or, when higher, the totality of the taxable matter of the nearest financial year that is determined;

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

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

a) That corresponding to double international taxation;

b) That relating to fiscal benefits;

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

d) That relating to withholding at source not susceptible to compensation or reimbursement under the applicable legislation.".

• Article 4 of Law No. 55-A/2010:

"1 - Taxpayers subject to IRC resident in Portuguese territory who carry out, as their main activity or not, an activity of an agricultural, industrial, commercial or services nature and non-residents with permanent establishment in that territory may deduct from the amount determined under Article 90 of the Corporate Income Tax Code, and up to its amount, the value corresponding to expenses with research and development, in the part that has not been the subject of financial participation by the State on a non-reimbursable basis, incurred in the periods of 1 January 2011 to 31 December 2015, in a double percentage:

a) Base rate - 32.5% of the expenses incurred in that period;

b) Incremental rate - 50% of the increase in expenses incurred in that period in relation to the simple arithmetic mean of the two preceding financial years, up to the limit of €1,500,000.

2 - For taxpayers subject to IRC who are SMEs according to the definition contained in Article 2 of Decree-Law No. 372/2007, of 6 November, who have not yet completed two financial years and who have not benefited from the incremental rate set in subsection (b) of the preceding paragraph, a 10% increase is applied to the base rate set in subsection (a) of the preceding paragraph.

3 - The deduction is made, in accordance with Article 90 of the Corporate Income Tax Code, in the liquidation relating to the period of taxation mentioned in the preceding paragraph.".

From a semantic-literal point of view, accepting the assumption – which is now accepted – that the liquidation of autonomous taxation is made in accordance with paragraph 1 of Article 90 of the CIRC transcribed, no other sense is possible to extract from the letter of the law than that presented by the Applicant, and by all the arbitral jurisprudence in which it is supported, being, in that restricted perspective, irrefutable the conclusion condensed in its principal arbitral petition.

Hence, the Applicant and the convergent positions with that sustained by it do not undertake any relevant effort in the sense of systematically-axiologically validating their understanding (and, when this occurs, it occurs from a case-by-case point of view, anchoring itself, above all, in the concrete type of deduction to autonomous taxation that is intended to be validated, or in certain types thereof).

Rather, such positions dedicate themselves essentially to refuting the arguments being presented in the opposite sense, closing themselves in the linear understanding that can be synthesized in the following syllogism:

a) The SIFIDE credit can be deducted from IRC collection;

b) Autonomous taxation is IRC;

c) Therefore, the SIFIDE credit can be deducted from the IRC collection generated by autonomous taxation.

It happens that legal reading, by legal (and also logical-rational) imperative, does not restrict itself, nor should it restrict itself, to the text of norms as a semantic-grammatical reality, but should instead place itself on an axiological-rational plane, anchored in all elements of legal interpretation.

Hence, in order to obtain what is the legally most correct reading of the text, it is necessary to perform certain tests at the level of the systematic structure where the norm to be interpreted fits, so as to validate, against it, and in light of the criteria of rationality, congruence and reasonableness that necessarily guide that normative structure, the interpretation literally suggested.

Thus, and first of all, a first relevant fact cannot be overlooked, which is that in Articles 89 and 90, paragraph 1 of the CIRC, the liquidation of two forms of taxation converges, relating to the same tax but radically distinct, namely, traditional IRC, or strictly speaking, and autonomous taxation.

The nature of autonomous taxation, as already mentioned, has been the subject of broad discussion in recent doctrine and jurisprudence.

One line of thinking has looked at them as a tax on expenses, which would tax certain types of expenses, in a way completely disconnected from income, to the point that some argue that they constitute a separate tax, which would only incidentally be integrated into the codes of Personal and Corporate Income Tax.

Nonetheless, the understanding that autonomous taxation on deductible expenses still integrates the regime of taxes regulated by the codes in which they are integrated, aiming, even if in a convoluted way, at income taxed by those codes, has obtained recurrent acceptance in CAAD jurisprudence.

Indeed, and as has been written elsewhere, "the complexity generated by successive changes in the architecture of the CIRC has led (...) to an atypical normative structure, in which one can discern a core corresponding to what could be called IRC strictly speaking (or in the strict sense), which the Applicant intends to exhaust all that is designated as IRC, and a periphery that integrates 'marginal' regulations, subtracted, in large part, from the logic, nature and principles of IRC strictly speaking, but which, nonetheless, still lies in the 'gravitational field' of the former.

"And it is in the process of concretizing this zone of difficult definition that all the analyzed decisions (...) operate, not being able to be properly understood without also understanding that, in fact, what all the decisions in question are doing is ascertaining what consequences the 'gravitation' around the core of IRC bring about for the matters addressed in each of them.".

In that sense, "within the hermeneutical framework outlined above, (...) by force of the historical evolution of its respective legal regime, there has been constituted a type of IRC that integrates a hard core (...) and a group of adjacent norms, which share part of the logic and regime of that, but which in many respects diverges from it.". And, further, "from the consideration of the legislative text, statically and in its historical evolution, it emerges that the legislator understood, and continues to understand, that autonomous taxation integrates IRC, if not as a tax strictly speaking, at least in terms of being part of the same unified tax regime".

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

Hence why it should not be understood that "the definition of IRC contained in Articles 1 and 3 of the CIRC" is "really superseded by a new definition of transversal/general application", as that would be an epistemological stance proper to a conceptualism that was, preliminarily, repudiated.

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

"Therefore, everything that has been said shows that the evolution of the legal regime of IRC has transformed it into a complex and multifaceted reality, at the most diverse levels, which is reflected, in the matter that concerns us in these proceedings, in that 'dual nature' of which Prof. Saldanha Sanches spoke in the passage cited in Judgment 617/2012 of the Constitutional Court.

The recognition of this duality of nature does not prejudice, however, as is understood to be implicit in both the citation in question and the jurisprudence that cites it, that it be considered that the system, despite being dual, is the same. In other words, it only makes sense to speak of a dual-natured system if the system in question, considered globally, is still the same. Otherwise one would speak not of a system of dual nature, but of two distinct systems, which, for all that has been said, is not what occurs. And, in this case, the system will be the regime of IRC, which operating sometimes by profit, sometimes by expenses, aims at and pursues the proper purposes of that tax, including, evidently, the collection of revenue for the State.".

"Finally, in the manner of conclusion, in light of all that has been said, and in favor of conceptual rigor, it may further be said that one leans toward the understanding that autonomous taxation, as it currently exists, could be configured as a 'hybrid' tax, affecting the income of individuals and legal entities, and not consumption or expense, since it would not present the main characteristics of this form of taxation".

What has just been said echoes, in some way, in the jurisprudence being produced by the Constitutional Court (TC), as happens with Judgment 197/2016, of 13-04-2016.

Indeed, recognizing that the matter of autonomous taxation is "regulated normatively in the context of income tax", the same Court confirms that it is "materially distinct from taxation under IRC", and that "we are (...) before distinct tax facts that are subject to different tax treatment", going so far as to state that "IRC and autonomous taxation are distinct taxes" and that such taxation "has nothing to do with the taxation of income and profits", statements which should be read, it is believed, cum grano salis, framing them within the limitations that contextualize them, referring them to the existence of a "tax base" consisting of "certain expenses that constitute autonomous tax facts", and "subjection to specific rates", understanding thus that autonomous taxation "has nothing to do with the taxation of income and profits attributable to the economic exercise of the company" (which does not mean that it is unrelated to income and profits in general), and that the distinction between autonomous taxation and IRC, being profound and marked, must be confined to what is necessary to safeguard the specificity of the former at the level of its respective teleology, tax base and specific rates, without prejudicing integration into the same normative structure.

Indeed, it is believed that the TC is not arguing that autonomous taxation constitutes a tax on expenses strictly speaking, completely alien and distinct from IRC, on pain of not only being contradicted by the systematic of tax law and, expressly, by the legislator itself, but also of irremediably condemning autonomous taxation to formal unconstitutionality, by violation of the provision in subsection (i) of Article 165, paragraph 1 of the Constitution, insofar as the enabling laws for the creation thereof did not license the creation of a new tax on expenses.

The TC will have in mind that autonomous taxation will be, at least, a compensatory taxation of IRC which, by being so, is also IRC (in the broad sense).

The STA itself, disagreeing, from a principle point of view, with the qualification, has already recognized that "the legislator (well or poorly and, in our view, poorly) has always considered them as IRC, including their legal regime within the scope of the respective code (at least since the aforementioned Law No. 30-G/2000, of 29 December)".

Nonetheless, and without prejudice to what has been said, one cannot, in assessing the matter in question, disregard the (emphatically affirmed by the TC) profound distinction formal and teleological between autonomous taxation in IRC and general taxation in this tax (IRC strictly speaking).

In summary: it has already been detected, on the one hand, the futility of seeking a unified concept of IRC that coherently accommodates the regime of autonomous taxation, and that, on the other hand, the methodologically most fruitful way of generating legally adequate solutions for the problematic in question passes through understanding the current IRC regime as the product of a historically explained evolution that led to the building of a structure of dual or hybrid nature, comprising a main core corresponding to traditional IRC, and an adjacent part, connected to that and forming part of the same global normative reality, with specificities of its own from which result a departure, in various and substantial aspects, from the main regime, in terms of general principles and solutions, notwithstanding that sometimes they apply, other times they are contradictory, and as such, inapplicable, with the nature proper to that 'adjacent norm' that is embodied in the so-called autonomous taxation.

Being that, as is already well known, that proper or specific nature, based on a logic foreign to the main building of traditional IRC, will be characterized, essentially, by the notes so abundantly recognized as proper to autonomous taxation, namely, both as to its form of imposition (the instantaneous character of the respective tax fact and the fact that it consists of an expense), and as to its anti-systemic ratio (the fact that some of the autonomous taxation in IRC have a facet directed directly at the income of individuals and/or a sanctioning facet, as well as an anti-abuse purpose).

Here we arrive, it is believed, at the perception of the logical deficiency that is enclosed in the syllogism outlined above, on which the position fought by the Applicant and those that sustain it are based.

Indeed, it will be true that:

a) The SIFIDE credit can be deducted from IRC collection; and that

b) Autonomous taxation is IRC.

However, as has been shown, it is considered that the integration of autonomous taxation into IRC (that is, as materially forming part of the legal regime of IRC) is only viable in a context that recognizes in it a system with a dual nature, which may for convenience be designated as IRC in the broad sense, integrating a base system corresponding to traditional IRC, or strictly speaking, and a peripheral system, autonomous, which still forming part of the same global system, has its own functional and axiological specificities, from which results the departure from the application of the norms proper to that base system, whenever such is justified in light of the coherence of the system itself (the reasons that justify its autonomy).

As the Respondent summarizes, "the integration of autonomous taxation into the CIRC (and the Personal Income Tax Code) conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, namely, in the context of Article 90/1-a) of the CIRC, in separate calculations of their respective collections, by force of obeying different rules. And that because, in one case, it is the application of the rate(s) of Article 87 of the CIRC to the taxable matter determined according to the rules contained in Chapter III of the Code and, in another case, it is the application of the rates to the values of taxable matters relating to the different realities contemplated in Article 88 of the CIRC.".

This understanding, moreover, has already had some judicial acceptance, having been considered that "autonomous taxation is calculated independently of the I.R.C. that is due in each financial year, because it is not directly related to obtaining a positive result, and therefore, is subject to taxation."

Hence, the syllogism formulated, in light of the understanding set forth, has its logical coherence undermined by the disregard of what has already been pointed out, since the concept of IRC, used in the respective premises, is not the same.

In other words, yes, autonomous taxation is IRC, but only in the broad sense, constituting a peripheral system of the taxation of income of legal entities, with its own teleology and mechanics, which justify, in certain situations, its autonomy, in relation to the aforementioned system of IRC strictly speaking.

Hence, not being – it is repeated, in light of the understanding set forth – the concept of IRC the same in both premises (the first premise is valid in the system of IRC strictly speaking, and the second in the system of IRC in the broad sense), the logical validity of the syllogism presented is compromised, not necessarily decoding falsehood to the conclusion, but, solely, the inability of the premises in question to sustain its validity.

Thus, and concluding here, one cannot, it is believed, in the path of the solution to be obtained for the question to be decided, overlook that, notwithstanding they do indeed converge, in the form of liquidation regulated in Articles 89 and 90, paragraph 1 of the applicable CIRC, autonomous taxation and IRC strictly speaking (or traditional) come, upstream, from geographies profoundly distinct, a fact that cannot fail to be properly weighed and taken into account in the solutions to be found downstream, namely, and for what matters to the case, with respect to the reading to be made of the norm of Article 90, paragraph 2 of the said Code, as well as the parallel norm of Article 4 of Law No. 55-A/2010.

Continuing the interpretive path under way downstream, one will proceed to assess the consequences of limiting such hermeneutical process to the literal layer of the object of interpretation under analysis.

As correctly pointed out by the Respondent in its response, the understanding proposed by the Applicant, according to which from the lack of distinction, at the level of the text of paragraph 1 of Article 90 of the applicable CIRC, no distinction should be made taking into account the differences, upstream, of the tax that in those terms is liquidated, would imply that at the base of calculation of the installments on account due in IRC, the values relating to autonomous taxation would also be included, and not only those relating to IRC strictly speaking.

Indeed, paragraph 1 of Article 105 of the Corporate Income Tax Code provides that: "The installments on account are calculated based on the tax liquidated under paragraph 1 of Article 90 (…)".

Now, understanding that the normative content of Article 90, paragraph 1 of the applicable CIRC forbids any distinction, for the purposes of other norms that refer to it, between the tax liquidated as autonomous taxation and the tax liquidated as IRC strictly speaking, one would have, coherently and in the same terms, to conclude that installments on account would be due based on the sum of both values, and such a solution cannot – it is believed – be held as conforming to the spirit of a reasonable legislator.

Indeed – and there being no need for great depth in this analysis, since installments on account are not the thema decidendum of this proceeding – it may always be said that such type of payments, as is recognized doctrinally and jurisprudentially, have as their basis an intention to advance the taxation that will be due finally, taking into account the taxable profit of the previous year.

In this sense, for example, it was written in the Judgment of the STA of 07-03-2007, rendered in case 0877/06, that (emphasis ours):

"From the legal definition of 'installment on account' an inevitable, necessary and essential imbrication between 'installment on account' and 'tax due finally' is drawn.

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

Which means that the 'installment on account' is, in the very terms of the law, an advance monetary delivery, made on account of the tax due finally, in the period of formation of the tax fact.

Which further means that the 'installment on account' must be assessed with reference to the accounting situation of the company at the end of the period to which the installment on account refers.

Which decisively means that, if no monetary amount is to be (in advance) delivered on account of the tax due finally, concerning the 'installment on account' period in question (to which the 'installment on account' refers) – especially due to the non-existence of taxable profit revealed by the accounting at that time –, that 'installment on account' has no substantive foundation.(...)

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

Now, (at least some) autonomous taxation, as has also been noted elsewhere, does not affect directly income, doing so in a merely mediate or indirect way, and this is the justification for, notwithstanding that they integrate the regime of IRC in the broad sense, they operate by way of expense and, consequently, are due even if the taxpayer does not present taxable profit.

Thus being, as is believed to be the case, it will be senseless to require installments on account from taxpayers who do not show taxable profit based on tax liquidated on expenses they incurred and which were subject to autonomous taxation.

This very same thing is corroborated by the distinct nature of the tax fact underlying IRC strictly speaking and autonomous taxation. Indeed, being the former a tax fact of a continuous nature and the latter a tax fact of an instantaneous nature, only with respect to the former could it make sense to discern an advance of tax (installment on account), and not as to the latter whose practice immediately generates a tax obligation.

However, and now returning to the specific case, the same literal reading on which the Applicant's claim essentially rests would, it is believed, ineluctably lead to, by parity of reasoning, that, for the purposes of paragraph 1 of Article 105 of the Corporate Income Tax Code, the IRC collection to be considered would include the collection of autonomous taxation, since that norm provides (as lapidariously as Article 90/2 of the CIRC or Article 4 of Law No. 55-A/2010) that: "The installments on account are calculated based on the tax liquidated under paragraph 1 of Article 90 (…)".

Now, this not being the case in the matter sub iudice, one may speculate that, surely, if, in coherence, the Applicant had considered that for the purposes of the referenced Article 105/1 of the applicable CIRC the collection of autonomous taxation was included, it would not fail to call attention to the fact that it had done so, that is, that it had calculated installments on account that it may have borne based also on that collection, highlighting the consequent injustice that would be to have been bearing such installments, considering that Article 105/1 of the CIRC covered the collection of autonomous taxation, and not interpret, in parallel, Article 90/2 of the same act and Article 4 of Law No. 55-A/2010, in the same way.

Being – evidently – this an insurmountably speculative argument, and, as such, insusceptible of serving as a basis, per se, for legally founded solutions, such does not prevent it from being a factor for consideration, evidencing, on the one hand, the structural instability of the insertion of autonomous taxation into IRC, as it was operated, and, on the other, the normative interconnection and the breadth of systematic perspective indispensable to the appraisal of the solutions proposed for the legal problem to be decided.

Indeed, it is understood that from a systematic perspective, the position adopted with respect to the matter to be decided, at least if in the sense fought by the Applicant, and adopted by the jurisprudence that sustains it, cannot fail to have repercussions on the position adopted with respect to the interpretation of the referenced Article 105/1 of the CIRC, since, as was pointed out above, the literality of the regimes is, precisely, the same.

Thus, from this point of view, one will have to consider, independently of what may have been the practice of either the AT or the Applicant, not only whether it makes sense that the norm of Article 105/1 of the CIRC imposes that the collection of autonomous taxation enters into the calculation of installments on account, but also the circumstance, pointed out above, that the STA has already pronounced itself to the effect that faced with the "non-existence of taxable profit (...[the]...) 'installment on account' has no substantive foundation".

In the hermeneutical path in progress, one must also consider the norm of paragraph 5 of Article 90 of the applicable CIRC, which provides that:

"The deductions referred to in paragraph 2 relating to entities to which the fiscal transparency regime established in Article 6 is applicable are imputed to their respective partners or members in accordance with the terms established in paragraph 3 of that article and deducted from the amount determined on the basis of the taxable matter that took into account the imputation provided for in the same article".

This norm directly refers to Article 6 of the same Code, which provides, as far as relevant to the case, that:

"1 - It is imputed to the partners, integrating itself, under the terms of the applicable legislation, in their taxable income for purposes of Personal Income Tax or Corporate Income Tax, as the case may be, the taxable matter, determined under the terms of this Code, of the following societies, with headquarters or effective management in Portuguese territory, even if there has been no distribution of profits:

a) Civil societies not constituted in commercial form;

b) Professional societies;

c) Societies for simple management of assets, whose majority of capital is held, directly or indirectly, for more than 183 days of the fiscal year, by a family group, or whose capital is held, on any day of the fiscal year, by a number of partners not exceeding five and none of them is a public legal entity.(...)

3 - The imputation referred to in the preceding paragraphs is made to the partners or members in accordance with the terms resulting from the constitutive act of the entities mentioned there or, in the absence of elements, in equal parts."

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

"Societies and other entities to which, under the terms of Article 6, the fiscal transparency regime is applicable are not subject to Corporate Income Tax, except as to autonomous taxation.".

Not being, moreover, the subject of entities subject to fiscal transparency regime the object of the present case, it will always be said, synthetically, that from the literal reading on which the Applicant's claim rests, that is, that autonomous taxation integrates, without limitations and for all purposes, IRC collection, it would always result in one of two equally unacceptable situations, namely:

• that entities referred to in Article 6, paragraph 1 of the CIRC, would be forced to bear the burden with autonomous taxation twice: (i) once in the sphere of the company, under the terms of Article 12 of the CIRC, which expressly provides for it, and (ii) another time under the combined terms of paragraphs 1 and 3 of Article 6 of the CIRC, which imposes that "taxable matter, determined in accordance with this Code" relating to such entities is imputed to the partners;

• or that, if such is not the case, that is, if by way of some type of interpretation the expression "taxable matter, determined in accordance with this Code" were restricted, purging it of autonomous taxation, from the combination of the aforementioned norms of paragraph 5 of Article 90, Article 6 and Article 12, with the interpretation sustained by the Applicant for paragraph 1 of Article 90, it would result that taxpayers subject to Corporate Income Tax subject to the fiscal transparency regime would be prevented, by way of the referenced Article 90, paragraph 5, from deducting from the amounts liquidated as autonomous taxation, the deductions provided for in paragraph 2 of the same article, since the latter amounts would be borne by the company, while the deductions would be only available to the partners, thus unjustifiably discriminating taxpayers subject to Corporate Income Tax subject to the fiscal transparency regime, from the remaining ones, who, on the Applicant's thesis, would have the ability to make operate the deductions provided for in paragraph 2 of Article 90, to the amounts liquidated, under the terms of paragraph 1 of the same article, as autonomous taxation.

Being certain that fiscally transparent companies are an atypical situation in the context of Corporate Income Tax, they are companies precisely not subject to Corporate Income Tax on profit/income, but subject to Corporate Income Tax in the context of autonomous taxation, one cannot fail to note not only that, on the one hand, autonomous taxation are themselves also an atypical situation in the context of income taxes (including Corporate Income Tax), but also that, on the other, the aforementioned and developed duality of IRC is evident (they are companies precisely not subject to Corporate Income Tax on profit/income [IRC strictly speaking], but subject to Corporate Income Tax in the context of autonomous taxation [IRC in the broad sense]).

Once again, we are here in a perspective of weighing the implications for the normative structure of IRC, of the interpretations proposed for the norm(s) applicable to the situation sub iudice, not being, evidently, a structuring argument, but rather an accessory one, of the solution that may be drawn.

Having arrived here, it is necessary to explore a bit more the limits of the literality of the norms at the epicenter of this litigation – Article 90, paragraphs 1 and 2 of the applicable CIRC – and their repercussions in the broader framework of the relationship between traditional IRC and autonomous taxation therein.

As set forth above, in the set of autonomous taxation, although restricted to those that integrate the regime of IRC in the broad sense, several situations of disparate origin and teleology converge.

Thus, synthetically and by way of example, autonomous taxation are found that aim, singly or concurrently, to discourage certain economically undesirable taxpayer behaviors (e.g.: excessive remuneration to managers), tax so-called fringe benefits (allowances; vehicle expenses), mitigate the tax impact of expenses of dubious complete business nature (idem), discourage behaviors with high potential for fraud (payments to entities subject to clearly more favorable tax regime) or penalize behaviors that foster the so-called underground economy (taxation of undisclosed expenses), or that are considered by the legislator as sumptuary.

The literality of the interpretation proposed by the Applicant muddies, within the narrow confines of the letter of the law, all those situations – since all of them will be liquidated under the terms of Article 90, paragraph 1 of the applicable CIRC, from which it necessarily follows that to the collection of all of them, the solution espoused by the Applicant will apply, namely, to all of them – without any discernible exception nor, much less, justified or, as far as can be conceived, justifiable – all deductions provided for in Article 4 of Law No. 55-A/2010, as well as in paragraph 2 of Article 90 of the CIRC in question would be applicable.

Now, as previously pointed out, and on other occasions, the vain glory of closing, in a unitary substantive concept, all autonomous taxation, even those that only occur within the scope of Corporate Income Tax, has been pointed out, given its teleological and functional disparity. And, here, emerges one of the main weaknesses of the argumentative structure where the position of the Applicant is lodged, also underlying the arbitral jurisprudence cited by it: that of resting on a postulate of unity of IRC and autonomous taxation, taking the whole for the part that, specifically, integrates the matter to be decided, on the one hand, and in an exclusive appraisal of the type of deduction provided for in paragraph 2 of Article 90 of the applicable CIRC, which specifically is at issue in the case sub iudice.

That is: the position sustained by the Applicant, as well as those that corroborate it, do not care at any moment to frame the appraisals made by it and to validate the application of the interpretation it proposes to the entirety of autonomous taxation and the deductions provided for in Article 4 of Law No. 55-A/2010 and in paragraph 2 of the applicable Article 90, nor to assess the implications of the application of the thesis in question to all possible deductions to all collections of all autonomous taxation abstractly encompassed by such thesis, beyond as was pointed out already, to abstain from appreciating, in a broader perspective, the consequences on the system of accepting the essentially literal reading they propose for the combination of the norms of paragraphs 1 and 2 of Article 90 of the CIRC.

The fissure in the structure supporting the position of the Applicant, as well as those that sustain it, opens up thus, against this finding, in two distinct directions: (i) on the one hand, the reading proposed by the Applicant for the norm of Article 90, paragraph 2 of the applicable CIRC does not distinguish, nor permits distinguishing, between autonomous taxation relating to deductible expenses and other types of autonomous taxation; (ii) on the other hand, from the proven matter of fact it does not result that the autonomous taxation at issue in these proceedings do not respect distinct types of autonomous taxation, such as, for example, autonomous taxation relating to undocumented expenses, bonuses and other variable remuneration of managers, administrators or partners, or payments to entities subject to a clearly more favorable tax regime.

All the arguments presented by the Applicant, and by the essential part of the arbitral jurisprudence that sustains it, regarding the nature of autonomous taxation, as still taxing income of the entities subject to it, is insufficient for the decision of the matter sub iudice, since it is not even demonstrated that exclusively autonomous taxation are at issue where the characteristics on which such arguments rest are recognized.

The argumentative structure presented by the Applicant in support of its claim thus shelters within itself the potential to harbor claims in which it is aimed to proceed with deductions under Article 4 of Law No. 55-A/2010 and paragraph 2 of Article 90 of the applicable CIRC, to autonomous taxation regarding which the consideration of the nature of autonomous taxation, as still taxing income of the entities subject to it, is not valid, such as the referenced ones relating to undisclosed expenses, payments to entities subject to privileged tax regimes or relating to management compensation.

Now, this type of result cannot be considered as intended by a reasonable legislator, given the entire systematic of IRC in the broad sense, including autonomous taxation. Indeed, it is believed that it will not be sustainable that, having gone where, legally, the legislator of the CIRC went, aiming, for example, at fighting the underground economy or transactions with the so-called (incorrectly) "tax havens", it was their intention that the respective burden of autonomous taxation could be lightened by means of the deductions provided for both in Article 4 of Law No. 55-A/2010 and in paragraph 2 of Article 90 of the CIRC.

The position that the Applicant intends to assert in the proceedings will not be limited here, however, in the entropy generated on the system.

Indeed, and even restricting the question to autonomous taxation on expenses deductible in Corporate Income Tax, such position would result in a direct violation of the principle of equality.

Indeed, as all the jurisprudence abundantly cited by the parties denotes, autonomous taxation relating to deductible expenses has underlying a presumption of "partial businessness" or non-integral, as, moreover, was recently recognized by the South Tax Court, in the Judgment of 03-03-2018, rendered in case 1294/14.0BELRS. That is, such expenses would, presumptively, contain a business purpose, which permits their deduction, but with such purpose would concur others, which, if they were exclusive, would rule out their deductibility.

Such presumptive character will justify that when the taxpayer manages to rebut the said presumption, the expenses maintain their deductible character, without subjection to autonomous taxation.

Now, in this restricted field of autonomous taxation on deductible expenses, the position sustained by the Applicant would result in a qualified inequality (insofar as more than treating as equal what is unequal, or the unequal as equal, it would treat the unequal as unequal, in the inverse measure of inequality), since in a situation in which a taxpayer declared deductible expenses that would normally be subject to autonomous taxation, but which, in concrete, would not be by the material requirements of the latter not being met (that is, by elision of the underlying presumption), as was the case, for example, in the situation addressed in arbitral proceeding 628/2014-T, and in which that same taxpayer presented a tax loss, could not proceed to any deduction, under the terms of Article 90, paragraph 2 of the CIRC, whereas another taxpayer, in the same situation (tax loss), but who assumed (implicitly or explicitly) the character partially business of the same type of expenses, thus being burdened with the corresponding autonomous taxation, could, on the thesis underlying the position of the Applicant, avail themselves of the deductions provided for in that same article.

That is, and in summary: between two taxpayers in different situations before the Corporate Income Tax system, one that would incur expenses of entirely business nature, and another that would incur the same expenses but for purposes (actually or presumably) partially foreign to business, the latter would obtain from the tax system, in the matter that concerns us, more lenient treatment, by way of behavior less conforming to the teleology of the latter.

Being true that the principle of legal and tax equality is not an absolute principle, as it admits situations of discrimination, it is also true that these situations must correspond to discriminations based on institutionalized values, generically accepted and accommodated in the order of values instituted.

Now, in the case, in which two companies in the situation described above find themselves objectively in a differentiated situation and which should, for that reason, deserve a differentiated tax treatment, in the sense of the difference, occurs, against the thesis underlying the position of the Applicant, precisely the opposite.

Within the decision topics to be considered, it will also be appropriate to make a mention of the entry into force of the wording of paragraph 21 of Article 88 of the CIRC, introduced by the Law that approved the State Budget for 2016 (Law No. 7-A/2016, of 30 March), which came to say that:

"The liquidation of autonomous taxation in Corporate Income Tax is carried out under the terms provided for in Article 89 and is based on the values and rates resulting from the provisions of the preceding paragraphs, with no deductions being made to the total amount calculated."

This norm is the subject of Article 135 of the referred Law that approved the Budget for 2016, which states that:

"The wording given by this law to paragraph 6 of Article 51, to paragraph 15 of Article 83, to paragraph 1 of Article 84, to paragraphs 20 and 21 of Article 88 and to paragraph 8 of Article 117 of the Corporate Income Tax Code has an interpretive nature.".

As is well known, the question was raised as to whether paragraph 21 of Article 88 of the CIRC, introduced by the 2016 Budget, has (as the law itself states), or not, an interpretive nature, as well as the constitutionality of such nature, with such questions having been superseded by the Judgment of the Constitutional Court that declared unconstitutional the referenced Article 135 of Law No. 7-A/2016, of 30 March.

Nevertheless, the TC itself recognizes, in its Judgment No. 107/2018, that:

"The Constitutional Court did not 'endorse' any interpretation of the law regarding the deduction of special installments on account from the amounts of autonomous taxation that make up the Corporate Income Tax collection. It did not do so, first of all, because it is not competent to determine the meaning of the law, but only to assess the constitutionality of the law with the meaning assigned to it by the courts. From this it follows that the fact that a certain interpretation of the law is unconstitutional, in the judgment of the Constitutional Court, does not imply adhesion to any alternative interpretation of the law, nor even the judgment that such interpretation, if it were to occur, is not unconstitutional; it merely means that the interpretation that is the subject of the appeal ─ and only that one ─ is unconstitutional. In any case, in Judgment No. 267/2017, the Constitutional Court did not declare unconstitutional the norm of paragraph 21 of Article 88 of the Corporate Income Tax Code ─ under which special installments on account cannot be deducted from the amounts of autonomous taxation ─, but the norm of Article 135 of Law No. 7-A/2016, of 30 March, which gives it an interpretive nature (and, by that means, under the general rules, retroactive effect). The constitutionality of the solution enshrined in paragraph 21 of Article 88 was not, in that or in the present appeal, at issue. More: what the Court declared unconstitutional was the legal imposition of a certain meaning, which in no way prevents the same meaning from being reached through jurisdictional interpretation of the law, that is, not because the legislator imposed it, but because the court in the case considers that this is the correct interpretation of the law".

On the other hand, the legislative amendment in question continues to have interest for the matter now under consideration, since the legislator in the context of the 2016 Budget chose to exclude the application of part of the provision of Article 90 of the Corporate Income Tax Code to IRC collection, to the collection of autonomous taxation in Corporate Income Tax, confirming that there is no conceptual or principle obstacle to, by way of interpretation, arriving at that same result.

Moreover, from the Corporate Income Tax Code itself, in the wording in force at the date of the tax facts, it already resulted that the regime of that tax presupposed such differentiation at the level of the referenced Article 90, in the sense that to the collection of autonomous taxation was not admissible, in principle, any deduction, resulting from the provision of paragraph 12 of Article 88, introduced by Decree-Law No. 192/2005, of 7/11, which provides that:

"From the amount of tax determined, in accordance with the provision of the preceding paragraph, the tax that may have been withheld at source is deducted, and in that case the withheld tax cannot be deducted under paragraph 2 of Article 90.".

The autonomous taxation in question should, unless better understood, be understood as being due by the entity that earns the profits, since if it were a matter of autonomous taxation of the entity that distributes profits, the question of deduction of withholding at source from the collection of autonomous taxation in question would never arise, since the withholding at source to which Article 90/2 of the CIRC refers should be considered withholding on income earned by the entity owing Corporate Income Tax, and not on income paid and withholdings made by this, and in any case, the question of withholding at source on distributed profits would never arise being deducted from the collection (whether of Corporate Income Tax or autonomous taxation), because such value is withheld from the exempt entity, not being, consequently, borne by the entity that distributes the profits and not being therefore, always saving better opinion, the withholding at source susceptible to constitute any penalization for the entity that distributes the profits.

Such circumstance that autonomous taxation now in question should be considered due by the entity that earns the profits, and not by the one that distributes them, will not prejudice its nature of autonomous taxation, and it will be to such collection of autonomous taxation, liquidated and paid by the exempt entity that did not maintain the share ownership for one year, and that earned dividends from them, that the withheld tax can be deducted - exceptionally - being, precisely, the meaning of the provision that, in that case, the withheld tax cannot be deducted under the terms of Article 90/2, the evidence that the deductions provided for in this article do not apply to the collection of autonomous taxation, since if this were not the case, the provision of Article 88/12 would be a uselessness in a dual sense, given that:

a. the deduction of tax withheld at source from the collection of autonomous taxation in question already resulted from the referenced Article 90/2, so it would make no sense to affirm it in Article 88/12;

b. if the tax withheld at source were deducted from the collection of autonomous taxation, under Article 90/2, it could never be deducted twice (for the same reason that it cannot be deducted twice from the collection of Corporate Income Tax), so the provision of Article 88/12 that, deducting the tax withheld at source from the collection of autonomous taxation, it cannot be deducted under Article 90/2 would also be a uselessness.

Thus, the said norm, in providing that from the amount of tax resulting from autonomous taxation, in the situations provided for in paragraph 11, of 25% on profits distributed by entities subject to Corporate Income Tax to taxpayers who benefit from exemption, the tax that may have been withheld at source can be deducted, will have implicit the understanding that, as a rule, to the collection of autonomous taxation, deductions were not admissible, particularly those provided for in Article 90/2 of the CIRC, which already provided for the possibility of deduction of withholding at source from the collection of Corporate Income Tax to which paragraph 1 of the same norm referred.

That is: if, as the Applicant defends and the jurisprudence in which it is sustained, it already resulted from the combination of paragraphs 1 and 2 of Article 90 of the CIRC that withholding at source was deductible from the collection of autonomous taxation, including that provided for in paragraph 11, the norm of the said paragraph 12 of Article 88, in the part in which it permitted precisely such deduction, was a useless norm, doing nothing more than reaffirm, without any sense, the general rule.

Moreover: the norm in question, of paragraph 12 of Article 88, introduced by Decree-Law No. 192/2005, of 7/11, makes a point of stating that, if the deduction of the withholding at source there provided is operated to autonomous taxation, it cannot "the withheld tax be deducted under paragraph 2 of Article 90", making evident, it is believed, in a sufficiently perceptible way, that the deductions possible under that referenced Article 90/2 were not already applicable to the collection resulting from autonomous taxation.

Indeed, the 2nd part of the norm of paragraph 12 of Article 88 under analysis aims to prevent a duplication of deduction of the withholding at source covered by it, which only makes sense if one looks at, as will be seen infra, that from the application of the norm of Article 90/1 of the CIRC a monolithic collection of Corporate Income Tax does not result, but that the referred division between the collection of autonomous taxation in Corporate Income Tax and the general collection of Corporate Income Tax was maintained in that norm, and that Article 90/2 was only applicable to the latter, and not to the former.

If it were not so, this second part of Article 88/12 of the CIRC would also lack any sense, since if, within the context of Article 90/1 of the CIRC, the collection of autonomous taxation in Corporate Income Tax merged into a single collection of Corporate Income Tax, as the Applicant intends and the jurisprudence it relies on defends, it would be evident that there could never be double deduction of withholding at source from a single, and unique, collection.

That is, and in summary, the legislator's choice in the context of the 2016 Budget to exclude the application of part of the provision of Article 90 of the Corporate Income Tax Code to IRC collection, to the collection of autonomous taxation in Corporate Income Tax, was already implicit in the Code of such tax, at the level of Article 88/12, from which it resulted, in the terms set forth, that:

• as a rule, the collection of autonomous taxation did not admit deductions; and

• Article 90/2 of the CIRC (and, consequently, Article 4 of Law No. 55-A/2010) was not applicable to the collection of autonomous taxation.

Summarizing what has been said above, it is found, first of all, that the interpretation sustained by the Applicant rests essentially on the literal content of the norms of paragraphs 1 and 2 of Article 90 of the applicable CIRC, with no substantial basis being discerned that justifies the solution in question, all the more so since the arguments on which such position rests are restricted essentially to autonomous taxation of deductible expenses and the deductions specifically at issue (SIFIDE benefit), with, on the one hand, nothing being proven with respect to, in the specific case, only such autonomous taxation being at issue (and not others), and, on the other, from the interpretation proposed it would always follow that all deductions provided for in Article 4 of Law No. 55-A/2010 and Article 90, paragraph 2 of the CIRC in question would apply to all types of autonomous taxation, including, for example, those relating to payments to entities subject to clearly more favorable taxation regimes, those relating to undisclosed expenses or compensations to managers, and none of the substantial arguments on which the position of the Applicant rests permit justifying that this happens.

On the other hand, as has been seen, if it is true that Article 90, paragraph 1 of the CIRC in question does not distinguish between the liquidation of autonomous taxation and the liquidation of traditional or strictly speaking Corporate Income Tax (on taxable profit), the truth is that, upstream, the procedure and nature of the two types of tax imposition is substantially distinct, as has been seen and as the constitutional jurisprudence on the matter gives abundant account, a situation to which one cannot, it is believed, fail to attend in the matter sub iudice.

In addition, as has also been seen, ratification of the interpretation that sustains the Applicant's claim would be, downstream, generative of notable turbulence in the normative structure of Corporate Income Tax, particularly with respect to the regimes of special installment on account and companies subject to the fiscal transparency regime.

Furthermore, as has also been analyzed, adherence to the literality of the provisions of Article 90, paragraphs 1 and 2, espoused by the Applicant, would result – it is believed – in a trampling of the principle of tax equality, among other things, constitutionally imposed.

Finally, and as has just been seen above, at the level of Article 88/12 of the applicable CIRC, it already resulted, in the terms set forth, that:

• as a rule, the collection of autonomous taxation did not admit deductions; and

• Article 90/2 of the CIRC, and consequently Article 4 of Law No. 55-A/2010, was not applicable to the collection of autonomous taxation.

For all this, it is believed that in the strict combination of the text of the two norms, the legislator said more than what it intended, a situation which, moreover, resulted not from coeval carelessness in the drafting of such norms, but rather from the historical evolution of the normative regime of Corporate Income Tax and, specifically, from the gradual introduction therein of the regime relating to autonomous taxation, without the same being coherently reflected in the content of Article 90, paragraph 2 of the same Code.

This discordance is, moreover, evident in the norm of paragraph 21 of Article 88 of the CIRC, introduced by Law No. 7-A/2016, of 30 March, which, providing that "no deductions are made to the total amount calculated" of autonomous taxation, does not even except paragraph 12 of the same article which provides, precisely, for the possibility of deductions to the autonomous taxation to which it refers.

We are, thus, faced with a situation described by the Illustrious Master Prof. Doctor Baptista Machado, in which: "Sometimes, although rarely, it will be necessary to go further and sacrifice, still in obedience to the legislative thought, part of a normative formula, or even the entirety of the norm. These are aborted legislative formulas or veritable lapses. When a normative formula is so poorly inspired that it does not even allude with minimal clarity to the hypotheses it intends to cover and, taken literally, covers others that decidedly are not in the spirit of the law, one may speak of corrective interpretation. The interpreter will resort to such a form of interpretation, of course, only when it is the only way to achieve the end intended by the legislator."

Indeed, the normative formula of Article 90, paragraph 2 of the applicable CIRC, taken literally, as the Applicant does, covers hypotheses