CAAD 611/2014-T: State Surcharge (Derrama Estadual) Application in the Azores Region Under IRC

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 611/2014-T

Subject: CIT | State surcharge | Application in the Autonomous Region of the Azores

The single-arbitrator arbitral tribunal constituted on 09-10-2014 at the CAAD – Administrative Arbitration Center pursuant to the legal regime established by Decree-Law no. 10/2011 of January 20[1], with the arbitrator designated by the respective Deontological Council from the Center's list, Nuno Maldonado Sousa, hereby renders his arbitral decision.

1. Report

1.1 Constitution of the arbitral tribunal

A... (Portugal) – …, S.A., with registered office at Avenue …, in Lisbon, with share capital of €6,000,000.00, registered at the Commercial Registry Office of Lisbon, Tax Identification Number …, filed a petition for constitution of the arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of the Legal Regime of Tax Arbitration and articles 1 and 2 of Ordinance no. 112-A/2011, of March 22, in which the Tax and Customs Authority is the respondent[2].

The petition for constitution of the arbitral tribunal was accepted by the President of the CAAD on 07-08-2014 and notified to the Tax and Customs Authority on 11-08-2014.

Pursuant to the provisions of article 6, no. 1 and article 11, no. 1, para. b) of the Legal Regime of Tax Arbitration, the Deontological Council designated as arbitrator of the single-arbitrator arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable deadline and notified the parties of such designation on 24-09-2014. In accordance with the rule contained in article 11, no. 1, para. c) of the Legal Regime of Tax Arbitration, the arbitral tribunal was constituted on 09-10-2014.

1.2 The petition of the petitioner

The petition of the petitioner contained in its initial petition, combined with the amendment to its wording requested on 24-11-2014 and decided by order of this tribunal of 05-03-2015, consists of:

a) The partial annulment of the state surcharge assessment included in the Corporate Income Tax assessment of 04-07-2013 with no. 2013 ..., relating to the fiscal year 2012

Cumulatively, it requests

b) The refund of the amount of €400.26, paid to satisfy that assessment.

Subsidiarily, in the event of rejection of this request b), it petitioned:

c) The refund of the state surcharge collected in excess, in the amount of €4,348.38.

Cumulatively with any of the above requests, it further requests

d) The payment of compensatory interest.

1.3 The position of the Tax Authority

The Tax and Customs Authority responded, arguing the legality of the assessment and defending the rejection of the petition and its grounds, understanding, regarding the merits of the matter, that neither does the Autonomous Region of the Azores hold legislative competence in tax matters to derogate the imperative national norms that regulate the Corporate Income Tax, nor is there any known norm that can be invoked to support that in that Region the determination of CIT or the state surcharge follows a specific regime.

1.4 Instruction of the case and arguments

The Tax Authority and the petitioner did not request the production of any evidence beyond the documentary evidence they submitted to the file. On 15-01-2015, the meeting provided for in article 18 of the Legal Regime of Tax Arbitration was held.

The petitioner and the Tax Authority submitted written arguments, supporting their respective positions.

1.5 Preliminary examination

The arbitral tribunal was regularly constituted and has subject-matter jurisdiction according to the provisions of article 2, no. 1, para. a) of the Legal Regime of Tax Arbitration.

The parties have legal personality and capacity (that of the Tax Authority pursuant to the provisions contained in article 4, no. 1 of the Legal Regime of Tax Arbitration and article 10, no. 2, of the same instrument and article 1, para. a) of Ordinance no. 112-A/2011, of March 22), are legitimate and are regularly represented.

1.5.1 Defect of the initial petition

In its response, the Tax Authority raised a defense by exception, invoking the nullity of the case for defect of the initial petition. It argues that "it is not possible to discern what will be the alleged main petition and what will be the hypothetical subsidiary petition"[3] (19th Tax Authority Response[4]), based on the legal grounds and especially the manner in which they are presented.

Following this line of reasoning, it concludes that it is not determined which petition should be decided and which is subsidiary, and therefore the indication of the petition is unintelligible, generating the defect of the initial petition and the nullity of the case[5].

This preliminary issue must be resolved.

First, it must be stated that, although one should not deny the application of the figure of defect of the initial petition to tax arbitral proceedings, one must observe its own specificities, especially regarding the formulation of the petition. Whereas the Code of Civil Procedure, whose paradigm is common litigation, regulates proceedings where the claims may have the same breadth as the very boundaries of Law, in tax annulment contention and, especially, in arbitral proceedings, the petition is fundamentally one for a declaration of illegality of tax assessments and other acts with similar characteristics (article 2, para. a) and b) of the Legal Regime of Tax Arbitration), and therefore the regime for presentation of the claim is viewed differently. Whereas in common civil proceedings the plaintiff is required to formulate the petition (article 552-1-e CPC) and do so with a certain degree of specificity (article 556 CPC a contrario), the Legal Regime of Tax Arbitration provides for the identification of the act subject to the petition and the identification of the petition, which is based on the erroneous qualification and quantification of tax facts, on lack of competence, on a defect in reasoning or omission of legal formalities (article 10-2-b-c of the Legal Regime of Tax Arbitration). In other words, in tax contention what is relevant with respect to the petition is that the tax act and its defect are duly identified, since we already know that in this contention the aim is to obtain the respective declaration of illegality, which leads to its nullity.

It is now necessary to understand how the declarations of the parties should be interpreted; they produce written texts from which all procedural actors must draw a certain meaning. It is thus necessary to understand whether the interpretation must comply with a very high level of conformity between the literal element and the useful meaning or whether the interpreter can in some way reconstruct the objective, the purpose of the declaration and supply some imprecision that the declaration may contain. On one hand, we would have interpretation with predominance of grammatical elements; on the other, we would privilege the teleological or purposive element.

It is believed that the wise doctrine of the Supreme Administrative Court long ago shed light on this issue: what is determinative for understanding the petition of the petitioner in annulment litigation – as is the case – is the correct identification of the acts whose legality is intended to be examined[6]. It is not therefore necessary to adopt a literal interpretation of the petition; rather, one must see which tax act the taxpayer ultimately intends to attack.

With respect to the petition for refund of amounts paid as tax, the following regime must be considered. Pursuant to the provision of article 100 of the General Tax Law[7], "the tax administration is obliged, in case of total or partial success of administrative complaints or appeals, or of judicial proceedings in favor of the taxpayer, to immediately and fully reconstitute the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided for by law." It seems clear that the taxpayer generally has the right to have refunded the amounts he has paid, relating to assessments affected by illegality, so that his patrimony is reconstituted in the amount it had at the moment preceding that payment. Obviously, it is necessary to specify the specific legal ground on which the petition is based, but this arises as a consequence of the grounds, which may even be multiple, without the petition ceasing to be only one; the reconstitution of the situation that would have existed if the illegality had not been committed. If for this purpose the taxpayer chooses to conclude his petition by combining grounds and claim in a lettered format, he may perhaps use less orthodox formulation, but this will not even be equivocal and much less unintelligible. Careful reading (perhaps more careful) will lead to the only possible conclusion: the taxpayer intends to have his situation reconstituted (this part constitutes the petition or relief), based on one or another argument (which belongs to the grounds or the various grounds).

In any case, it must be stressed that the obligation of reconstitution by the Tax Authority is subordinated by law (article 100 General Tax Law) to the very scope of success, creating a nexus of dependence between the decision and the obligation of reconstitution. Reconstitution is made to the extent that the petition is adjudged successful. There is no reconstitution without success and the measure of success defines the measure of reconstitution. The necessity of this precision is very clear in cases of partial success. When partial success occurs, how should the Tax Authority behave? The answer can only be one – in the exact terms and limits in which the decision was rendered, whether judicial or arbitral.

Let us now see the concrete case of this file.

In its Initial Petition, A... (Portugal) – …, S.A. petitioned that:

a) The tax act under challenge be annulled for lack of legal ground, in the part and amount subject to this petition, and, consequently, that the refund of the state surcharge collected in excess to the petitioner by the Tax Authority be ordered, in the amount of EUR €4,348.38 (four thousand, three hundred and forty-eight euros and thirty-eight cents).

As an alternative, in the event that that petition is not upheld, the petitioner petitioned:

b) If it is not understood in this manner, the refund of the amount of EUR €400.26 (four hundred euros and twenty-six cents) should be ordered, due to the non-existence in the legal system of the Autonomous Region of the Azores of an incidence provision that provides for the application of the state surcharge in that territory, and, therefore, the tax act under challenge should be annulled, to that extent, for lack of legal ground for that purpose.

In a petition of 24-11-2014, the petitioner requested that the petition which it initially considered subsidiary be examined as the main petition, with this one now constituting the relief it intends to be decreed in the event that the previous one does not succeed. This amendment to the wording of the petition was admitted by order of 05-03-2015.

It was noted in that decision that, following Lebre de Freitas, it is considered that through the petition the party requests from the tribunal the procedural relief adequate to protect its interest[8], and that the petition is therefore not the legal ground by which the tribunal decrees the relief but rather the concrete relief itself. It was also mentioned that in tax arbitration typical petitions are the declaration of illegality of tax assessments, of acts of determination of taxable matter when they do not result in the assessment of any tax, of acts of determination of taxable base and of acts of fixing property values (article 2 of the Legal Regime of Tax Arbitration). In any of those cases, the illegality of the acts in question generates their respective nullity, which is why it is common to request the declaration of illegality or the annulment of a certain assessment, which is ultimately the effect of the declaration of illegality of the act itself.

In the case at hand and for ease of analysis, let us examine separately the petitions that aim at annulment of the tax act from those that may be its consequence, namely the refund of amounts paid.

As to the issue of annulment, and first of all, it must be noted that the petitioner made very clear what is the object of its petition: pronouncement on the legality of the tax act of self-assessment of CIT of July 4, 2013, with no. 2013 ..., relating to the fiscal year 2012. Secondly, one must take into account that the petitioner in its initial formulation petitioned as the main request "the annulment of the tax act for lack of legal ground" (cf. para. a) and alternatively the very same "annulment of the tax act for lack of legal ground" (cf. para. b). It does not seem possible to have doubts; the petitioner intends that the annulment of the assessment be declared, in the part vitiated by illegality. Since there is substantially only one petition, it is not clear what relation of subsidiarity can be determined. There will be subsidiarity between the legal solutions that the petitioner presents, but as is known, that order is its own and the judge is not bound to observe it, and can and should seek the appropriate solution, even if it was not proposed by the parties (article 5-3 CPC).

The petitioner's petition for annulment is perfectly intelligible; there is therefore no defect of the initial petition in this part. It is inevitable to conclude that the petitioner's petition is only one and consists of the annulment of the CIT assessment, in the affected part, unmistakably identified.

The same applies, mutatis mutandis, with respect to the petition for refund of amounts paid as tax. The petitioner has the right to full reconstitution of the situation that would have existed if the assessment had not been made, if it is subsequently annulled. Knowing what is the legal ground that leads to the annulment of the underlying assessment constitutes an element distinct from the statement of the refund petition. There is therefore only one refund petition and even only one generic ground of that right was invoked (article 100 General Tax Law).

There is therefore reason to recognize that the petitioner's petition for refund of amounts paid is only one, although its success may have greater or lesser scope. And it does not appear to be unintelligible.

The Tax Authority's exception of defect of the initial petition is therefore rejected.

1.5.2 Other issues

There are therefore no nullities that vitiate the case.

Thus, there is no obstacle to the examination of the merits of the case, and a decision must be rendered.

1. Decision

2.1 Findings of fact

2.1.1 Facts deemed proven

The following facts are established in this file:

A. The petitioner is a commercial stock corporation with registered office in national territory, engaging, as results from its corporate purpose, in "1) production, commercialization, importation and exportation and the sale, wholesale or retail, of bed linen and home goods, table and kitchen textile articles, carpets and accessories for the bathroom, decoration articles, household goods, books, stationery, soaps, perfumery and cosmetic articles, games, candles, furniture and accessories and furnishings for the home. 2) The acquisition by any legal means of movable and immovable property, rights, securities, participations, shares or quota interests of other corporations, insofar as such property and rights serve the pursuit of its corporate purpose." [Initial Petition para. 6 and its document no. 2].

B. The petitioner adopted a tax period running from February 1 to January 31 of the subsequent year. [Initial Petition para. 8 and its document no. 3, pp. 15-24].

C. With respect to the fiscal year 2012, the petitioner submitted, electronically, on July 1, 2013, its respective Form 22 CIT Declaration [Initial Petition para. 9 and its document no. 3, pp. 15-24].

D. The petitioner determined the amount of CIT payable as €382,601.90. [Initial Petition para. 10 and its document no. 3, pp. 15-24, field 367 of schedule 10].

E. The petitioner paid the amount of CIT of €382,601.90. [Initial Petition para. 10 and its document no. 3, p. 26].

F. The Tax Authority corrected the value of the surcharge, changing it from €30,287.48 to €19,622.87. [Initial Petition para. 11 and its document no. 3, p. 26].

G. The correction of the value of the surcharge appears in assessment no. 2013 ... of 04-07-2013, which was notified to the petitioner. [Initial Petition para. 11 and its document no. 3, p. 26].

H. The difference resulting from the assessment in the amount of €10,663.40 was refunded to the petitioner by bank transfer made to its account. [Initial Petition para. 12 and its document no. 3, p. 26].

I. In the assessment made by the Tax Authority on 04-07-2013, it determined payment of the amount of €18,983.63 as state surcharge. [Tax Authority Response para. 3 and document no. 3, p. 26 of the Initial Petition].

2.1.2 Facts deemed not proven

No other facts with interest for the decision of the case were alleged.

2.1.3 Reasoning of the facts deemed proven

The tribunal's conviction was based on the documentary evidence in the file and on the position taken with respect to each fact by the parties in their pleadings, duly identified[10].

2.2 Matters of law

The following issues are raised in the file and will be resolved below, to the extent necessary, according to a criterion of logical precedence:

I - The fundamental issue is whether taxpayers subject to CIT with registered office in Continental Portugal and activity in the Autonomous Region of the Azores have their income subject to the incidence of the State Surcharge provided for in the Corporate Income Tax Code[11].

II - Secondly, it is important to determine whether taxpayers who have paid the aforementioned tax have the right to its refund if the respective assessment is annulled and whether compensatory interest should also be paid for the unduly paid annulled tax.

2.2.1 Application of the State Surcharge in the Autonomous Region of the Azores

On this matter and to support its position, the petitioner presented the following legal grounds that serve as a starting point for this analysis[12]:

a) The autonomous regions exercise their own tax power, falling to them to decide, by regional legislative act on fiscal matters that are not the reserved competence of the Assembly of the Republic or when they are, whenever in matters regulated such is permitted to them. This understanding is anchored in the provision of article 227-i) and j) of the Portuguese Constitution[13].

b) That the Political-Administrative Statute of the Autonomous Region of the Azores[14] recognizes its own tax competence, comprising the power to create and regulate taxes and the power to adapt national-scope taxes.

c) That the Finance Law of the Autonomous Regions[15] determines that Corporate Income Tax constitutes income for those regions, in the part relating to activities developed in the respective jurisdiction.

d) That within the scope of measures aimed at strengthening and accelerating the reduction of excessive public deficit, the state surcharge was created, affecting the taxable profit above a certain value (initially €2,000,000.00), which came to be included in the Corporate Income Tax Code.

e) That the Autonomous Region of the Azores did not create "an eventual regional surcharge" nor adapt the national system to the region's specificity.

f) That not having the Autonomous Region of the Azores adapted the national fiscal system, incorporating and adapting the state surcharge to its specificities, it must be concluded that "it was not the legislator's intent that the state surcharge have application in the Autonomous Region of the Azores[16]".

g) That the lack of regional regulation on the matter constitutes in fact a "lacuna," which prevents the collection of the state surcharge in the region.

The petitioner also supports its point of view in an alleged parallelism with the regime adopted by the Autonomous Region of Madeira, which adapted the institute of the state surcharge for application in its jurisdiction, and with arguments rooted in the rules of allocation of tax revenues to the autonomous regions.

The petitioner's thesis also has another subordinate variant, which states that even if there were an assessment of state surcharge, it should always be calculated differently from the way the Tax Authority does it. It does so by enunciating the following reasoning:

h) The revenues obtained by the taxpayer in the Autonomous Region of the Azores are determined based on the allocation of the sales volume to the Continent and to each of the two autonomous regions.

i) There must, therefore, be a calculation similar to that which is done under the general terms of CIT, allocating the taxable profit to the respective jurisdiction and then applying the brackets of the table contained in the Corporate Income Tax Code to the amount so determined, with no tax payable with respect to jurisdictions in which the taxable profit is equal to or less than €1,500,000.

With respect to these theses, the Tax Authority presents the following counter-argument:

j) That CIT has as its taxpayers commercial corporations with registered office in Portugal, as is the case of the petitioner;

k) That indeed the Finance Law of the Autonomous Regions determined the competence of the Autonomous Region of the Azores to create and regulate regional taxes and to adapt national taxes.

l) In consonance, the Political-Administrative Statute of the Autonomous Region of the Azores granted it the prerogative of adapting the national fiscal system to regional specificities.

m) The Autonomous Region of the Azores did not exercise its competence to adapt the national fiscal system with respect to the state surcharge, and its abstention from action has no derogatory effect with respect to the general regime that is of national scope.

n) That the provisions of the Finance Law of the Autonomous Regions regulate the allocation of tax revenues and not so much the concrete operations of assessment.

Now let us examine the objective regulation.

The state surcharge is regulated by the Corporate Income Tax Code, whose wording in effect for the economic year 2012[17] provided, at the level of incidence, in its article 87-A, no. 1:

1 - On the part of taxable profit exceeding €1,500,000 subject and not exempt from Corporate Income Tax determined by taxpayers resident in Portuguese territory who engage, as their principal activity, in a commercial, industrial or agricultural activity and by non-residents with a permanent establishment in Portuguese territory, apply the additional rates contained in the following table: (…).

At first glance, it seems clear that this provision has a geographic scope of regulation at the national level. However, one must see whether the bodies of the Autonomous Region of the Azores intended to regulate differently.

It is unquestionable that the Portuguese Constitution grants autonomous regions their own tax power as well as competence to adapt the national fiscal system to regional specificities, although these powers must be framed by legislative measures (article 227-1-i). The intervention of autonomous regions in tax matters occurs thus in two vectors: (i) exclusive regional legislative competence in the establishment of specifically regional fiscal regimes[18]; (ii) modification of the fiscal system of the Republic. The scope of this power of modification seems, in theory, to be able to include the extinction of taxes created by law of the Republic, especially after the constitutional revision of 1997 (subsequent to Constitutional Court Decision no. 91/84)[19], although subject to the law that frames those powers. This understanding is duly reconciled with the Political-Administrative Statute of the Autonomous Region of the Azores[20] which in its current wording clearly establishes the power over its own fiscal system (article 20-1 and 2) and the power to adapt the national fiscal system to regional specificities (article 20-1)[21].

In the case at hand, it seems unquestionable that we are not in the field of exercise of own tax power – which manifests itself in the possibility of establishing a specific fiscal regime – but possibly in the exercise of the power to adapt the fiscal system of the Republic. Let us pursue this path, with the aim of determining whether the Autonomous Region of the Azores intended to adapt the surcharge regime to the reality of its region.

The framework for the exercise of these powers was set out in 2010 in the Finance Law of the Autonomous Regions, in the version resulting from Organic Law no. 1/2010 of March 29[22], which in particular granted to the regional bodies (article 53-1-b):

The power to adapt national-scope taxes to regional specificities in terms of incidence, rate, tax benefits and taxpayer guarantees, within the limits fixed by law and pursuant to the following articles.

In turn, the adaptation of the national fiscal system to regional specificities, in terms of income tax, has as its boundaries (article 56): (i) to reduce the rates up to the limit of 30%; (ii) to grant deductions from the tax due relating to reinvested commercial, industrial and agricultural profits; (iii) to grant temporary and conditional tax benefits relating to national-scope and regional taxes, in a contractual regime, applicable to significant investment projects.

The prerogatives of the autonomous regions in this matter are in any case subordinated to the principle of coherence between the national fiscal system and regional fiscal systems (article 52-a) and to the principle of national solidarity (article 52-d), which is reciprocal and encompasses the entire nation and each of its parts, and involves the obligation of the Autonomous Regions to contribute to the balanced development of the Country and to the fulfillment of the objectives of economic policy to which the Portuguese State is bound by virtue of treaties or international agreements, namely those arising from common or coordinated policies of growth, employment and stability and from the common monetary policy of the European Union (article 8-1-2).

Note that the Autonomous Region of the Azores has been, for a long time, at least since 1999, adapting through express legislative means, the fiscal system of the Republic affecting Corporate Income Tax, pursuant to Regional Legislative Decree no. 2/99/A of January 20, namely by reducing CIT rates (article 5) and altering the regime of deductions from the tax due for reinvested profits (article 6). Note also that this adaptation is actively exercised, as evidenced by the amendments made in recent years, namely:

a) In 2010, the regime for reinvested profits that benefit from deduction from the tax due was amended (article 24 of Regional Legislative Decree no. 25/2009/A of December 30);

b) In 2011, the regime for reinvested profits that benefit from deduction from the tax due was updated, excluding from it investments in the creation of new rural tourism and residential accommodation units and expansion and reformulation of existing ones (article 23 of Regional Legislative Decree no. 34/2010/A of December 29, 2010);

c) In 2012, the regime for reinvested profits that benefit from deduction from the tax due was renewed (Regional Legislative Decree no. 3/2012/A of January 13);

d) In 2013, amendments were made to the regime of adaptation of the national fiscal system, although with no evident impact on Corporate Income Tax, and the regime for reinvested profits that benefit from deduction from the tax due was renewed (Regional Legislative Decree no. 2/2013/A of April 22);

e) In 2014, the regime for reinvested profits that benefit from deduction from the tax due was renewed and the reduction of CIT rates applicable in the Autonomous Region of the Azores was made, which became 20% (article 31 of Regional Legislative Decree no. 2/2014/A of January 29).

From what has been expounded, it seems to result without great shadow of doubt that the Autonomous Region of the Azores does not have competence to abolish taxes on Corporate Income, as its powers of adaptation of the national fiscal system are limited to the reduction of rates up to the limit of 30%, the grant of deductions from the tax due relating to reinvested profits, and the grant of temporary tax benefits, restricted to a contractual regime and applicable only to significant investment projects (article 56 of Organic Law no. 1/2010 of March 29). And it must be said in fairness that the Autonomous Region of the Azores has regularly used this prerogative of its own. But decidedly the Autonomous Region of the Azores does not have the power to reduce the rate of income tax to zero nor can it exempt companies from payment outside narrow limits. And if it cannot do so by legislative action, much less can it do so by omission, i.e., by abstaining from regulating a certain matter. The principle on this matter is unquestionably that the taxes that form part of the national fiscal system are in force throughout the Portuguese State and regional specificities must be contained in a sufficiently detailed legislative document.

This principle is obviously applicable to CIT and its state surcharge. In the Autonomous Region of the Azores, the regime contained in the Corporate Income Tax Code applies except for matters expressly regulated by its Regional Legislative Assembly, e.g., those relating to general rates and the regime of reinvested profits.

Note that adopting a different understanding with respect to the state surcharge would even violate the principle of national solidarity. As is known, the state surcharge is part of a set of additional budgetary consolidation measures aimed at strengthening and accelerating the reduction of excessive deficit and controlling the growth of public debt provided for in the Stability and Growth Program, which embodies the lines of understanding between the Portuguese Republic, the International Monetary Fund, and Institutions of the European Union. The principle of national solidarity necessarily implies the contribution of the Autonomous Regions to the fulfillment of the objectives of economic policy to which the Portuguese State is bound by virtue of treaties of the European Union and specific international agreements. The applicability of the surcharge in the autonomous regions is even a requirement of national solidarity, although in some way adapted to its own circumstances, as the Autonomous Region of Madeira chose to do. If the Autonomous Region of the Azores preferred not to adapt the national system, it can only be understood that it did not intend to introduce alterations to the general regime.

In the concrete case, the petitioner, which has its registered office in Portugal, engaged in activity subject to assessment under CIT and made its self-assessment. It is therefore subject to the rates and assessment rules expressed in the Corporate Income Tax Code, regardless of the location where its activity was conducted. The assessment challenged, therefore, presents no criticism whatsoever when made by the Tax Authority.

2.2.2 Other petitions

As is known, the obligation of reconstitution by the Tax Authority is subordinated to the very scope of success (article 100 General Tax Law), and, the petitioner's petition being rejected, its petition for refund of amounts paid and for interest are prejudiced.

1. Decision

Considering the elements of fact and law collected and set forth, the Arbitral Tribunal decides to adjudge the petitions for arbitral pronouncement to be without merit.

The petitioner is condemned to pay the costs, which are to be assessed at the proper venue.

1. Value of the case

In accordance with the provisions of article 306-2 of the Code of Civil Procedure, pursuant to article 29-1-e) of the Legal Regime of Tax Arbitration and article 97-A, no. 1-a) of the Code of Tax Proceedings, pursuant to article 3-2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €4,348.38.

1. Costs

The costs are to be borne by the party that caused them, it being understood that the defeated party caused them (article 527-1 and 2 CPC).

In this file and considering the aforementioned rule, responsibility for costs is that of the petitioner, as the defeated party.

Pursuant to article 22-4 of the Legal Regime of Tax Arbitration, the amount of costs is fixed at €612.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, which is to be borne by the petitioner.

Lisbon, April 8, 2015

The Arbitrator,

(Nuno Maldonado Sousa)

[1] In this decision designated by the abbreviated form commonly used "RJAT" (Legal Regime of Tax Arbitration).

[2] In this decision also designated by the abbreviated form "AT" as is generally used.

[3] Cf. 20th Tax Authority Response.

[4] In this document, the abbreviation "R-AT" is also used to designate the response petition referred to in article 17-1 of the Legal Regime of Tax Arbitration.

[5] Cf. 21st and 22nd Tax Authority Response.

[6] Decision of the Supreme Administrative Court of 11-02-2009, case no. 875/08, [António Calhau], available at www.dgsi.pt.

[7] In this document, the acronym LGT is used to designate the General Tax Law.

[8] José Lebre de Freitas - Code of Civil Procedure Annotated. Volume II, Coimbra, 2001, p. 223.

[9] The abbreviation "Initial Petition" is used to designate the initial petition submitted by the petitioner and "Subsequent Petition" to reference the petition bringing subsequently alleged facts to the file.

[10] Referenced in square brackets in 2.1.1.

[11] The acronym "CIRC" is used to designate the Corporate Income Tax Code.

[12] Cf. Petition for administrative complaint, by referral of 16th Initial Petition.

[13] The acronym "CRP" is used to designate the Constitution of the Portuguese Republic.

[14] Law 2/2008 of January 12, also designated simply as Law 2/2009.

[15] Organic Law 1/2007 of February 19, also designated simply as "LFRA".

[16] The acronym "RAA" is also used to designate the Autonomous Region of the Azores.

[17] Article 87-A in the cited wording was added by article 2 of Law no. 12-A/2010 of June 30, which approved a set of additional budgetary consolidation measures aimed at strengthening and accelerating the reduction of excessive deficit and controlling the growth of public debt provided for in the Stability and Growth Program (PEC).

[18] J. J. Gomes Canotilho and Vital Moreira - Constitution of the Portuguese Republic Annotated. Vol. II. 4th revised ed., Coimbra: Coimbra Editora, 2006, pp. 674-675.

[19] J. J. GOMES CANOTILHO AND VITAL MOREIRA, op cit, p. 675.

[20] Approved by Law no. 39/80 of August 5 and amended by Laws no. 9/87 of March 26, 61/98 of August 27, and 2/2009 of January 12.

[21] The previous wording, which resulted from Law no. 61/98 of August 27, only referred in its respective article 32-A, no. 1, f), that it fell to the Regional Legislative Assembly of the Azores to exercise its own tax power.

[22] Only repealed on 31-12-2013 by Organic Law no. 2/2013 of September 2 (articles 73 and 74).