Process: 619/2018-T

Date: July 30, 2019

Tax Type: IRC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 619/2018-T) addresses whether Special Advance Payments (Pagamentos Especiais por Conta - PEC) can be deducted from IRC tax liability generated by autonomous taxation rates. The claimant, A... SGPS S.A., challenged the Tax Authority's partial dismissal of official review requests for fiscal years 2011 and 2012, involving €11,160.26 and €47,228.16 respectively. The core legal dispute centers on whether autonomous taxation constitutes IRC collection subject to standard deductions under article 90 of the IRC Code. The claimant argues that IRC has a single collection mechanism encompassing all taxation forms, including autonomous taxation. Despite autonomous taxation's anti-abuse nature, designed to discourage certain expense categories and ensure minimum tax collection from loss-making companies, it remains fundamentally IRC collection. The claimant contends that article 90 CIRC establishes the exclusive collection framework for all IRC forms, with no separate provision governing autonomous taxation collection. Since PEC deductions apply to IRC collection generally under article 90(2), they should reduce autonomous taxation liability. The claimant emphasizes that autonomous taxation, while distinct in calculation methodology, integrates into overall IRC assessment reported in Model 22 tax returns. The decision has significant implications for corporate taxpayers managing cash flow through advance payments, particularly companies subject to autonomous taxation on specific expense categories. Subsidiarily, the claimant sought reimbursement of improperly paid tax plus compensatory interest. The case establishes important precedent regarding CAAD's material jurisdiction over self-assessments preceded by official review requests and the procedural requirements for cumulating related tax claims under article 3 RJAT.

Full Decision

ARBITRAL DECISION

I – Report

A... SGPS, S.A., (hereinafter referred to as "Claimant"), a company with tax identification number ..., with registered office at Rua ..., ..., ..., ... (...-...), came on 2018/12/07, under the provisions of articles 2 and 10 of Decree-Law No. 10/2011 of 20 January (RJAT), to request the constitution of an Arbitral Tribunal, which request was accepted and automatically notified to the Respondent.

The Respondent in these proceedings is the TAX AND CUSTOMS AUTHORITY.

The claimant opted not to nominate an arbitrator, and, under the provisions of paragraph a) of no. 2 of article 6 and paragraph a) of no. 1 of article 11 of the RJAT, the President of the Deontological Council of the Administrative Arbitration Centre (CAAD) appointed the undersigned as arbitrator of the Singular Arbitral Tribunal.

The parties were notified of the appointment of the sole arbitrator on 28/01/2019, neither of them having expressed any intention to refuse him.

The Tribunal was constituted on 18 February 2019.

The Tribunal, considering that in this case there is a process without need for specific procedural steps different from those commonly followed in the generality of arbitral proceedings, waived the holding of the meeting provided for in article 18 of the RJAT under the principles of autonomy of the Arbitral Tribunal in conducting proceedings, celerity, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), by order of 15/04/2019.

Nonetheless, the parties were notified to submit, if they so wished, written submissions both on the merits and on the question of the exception raised by the AT regarding the Tribunal's lack of jurisdiction.

The request for arbitral award has as its object the partial annulment of acts of self-assessment of Corporate Income Tax ("IRC") and decisions of partial dismissal that affected the requests for ex officio revision no. ...2016... and no. ...2016..., relating to the tax acts embodied in the self-assessments of Corporate Income Tax (IRC) for the fiscal years 2011 and 2012, to the extent corresponding to the non-deduction from the collection of IRC produced by the rates of autonomous taxation of special payments on account (PEC) in the amount of €11,160.26 with reference to the fiscal year 2011 and in the amount of €47,228.16 for the fiscal year 2012.

Subsidiarily, it requests that the AT be ordered to reimburse the improperly paid tax, plus compensatory interest.

☼

In defence of its claims, the Claimant, in accordance with its initial pleading, alleges, in summary, the following:

  1. First, it considers that the cumulation of requests for declaration of illegality of tax acts is admissible given the manifest verification of the prerequisites required by no. 1 of article 3 of the RJAT.

  2. In fact, the tax acts in question (decisions on requests for ex officio revision affecting the self-assessments of IRC for the fiscal years 2011 and 2012) are based on the same factual and legal basis, because both concern the deductibility of special payments on account ("PEC") from the collection of autonomous taxation, whereby the prerequisites for the cumulation of requests established in the aforementioned article 3, no. 1, of the RJAT are met.

  3. The Claimant also considers that the Tribunal is competent ratione materiae to hear this request for arbitral award, since, as has been almost unanimously understood both in doctrine and in the jurisprudence of the Supreme Tax Court (STA) and in the jurisprudence of CAAD, "the jurisdiction of the arbitral tribunal also includes the assessment of self-assessments when preceded by a request for ex officio revision".

  4. Within the scope of IRC, there are several taxable matters and several rates. These various regimes for determining the taxable matter and tax rates are defined in the IRC Code in Chapters III and IV, respectively.

  5. However, and notwithstanding the diversity of regimes for determining the taxable matter and applicable tax rates, the legislator defined only one form of tax collection, that contained in article 90 of the IRC Code.

  6. In fact, as clearly results from the rule of no. 1 of article 90 of the IRC Code, the collection of IRC must be carried out by the taxpayer in annual income tax returns, and likewise in substitute returns thereof, and is based on the taxable matter contained therein, or, in the absence of a declaration by the taxpayer, by the Tax and Customs Authority, based on the information available to it.

  7. In fact, beyond article 90 of the IRC Code, there is no other regulatory framework applicable in this tax that provides for another form of collection for any of the taxable matters and rates provided for in the scope of IRC.

  8. It should therefore be understood that the collection of IRC, determined in the assessment, is unique and results from the application of the various rates to the various taxable matters identified in the IRC Code.

  9. Autonomous taxation is collected together with IRC, although in a separate manner given the determination of the taxable matter directly resulting from the taxable profit determined in box 07 of the Income Statement Form 22, which stems from the fact that it is taxation of expenses embodied in a fact of single formation.

  10. In fact, article 90 of the CIRC determines all possible forms of collection of IRC, whether through direct or indirect methods, relating to box 07 or any other box of the Income Statement Form 22, and no other provision relating to the form of collection of autonomous taxation is found in the tax legislation other than that contained in the aforementioned provision.

  11. In this manner, there is no doubt that, as unanimously advocated both by arbitral tribunals and by ordinary courts, autonomous taxation is included in the collection carried out in accordance with article 90 of the CIRC.

  12. Autonomous taxation appears as an anti-abuse measure aimed at discouraging the adoption of certain behaviors by taxpayers, which are considered susceptible to affecting the taxable profit, namely through the deduction of certain expenses.

  13. Autonomous taxation provided for in the IRC Code was introduced into the Portuguese tax legal system with the primary objective of burdening the taxpayer for certain expenses incurred that presumably do not relate to the activity of the enterprise, and should be understood as a true distortion of that principle.

  14. Therefore, autonomous taxation, in addition to the objective of guaranteeing a minimum collection relative to companies presenting losses, also aims to discourage the undertaking of certain types of expenses which by their nature indicate that they are superfluous expenditures, and which as such should be "penalized".

  15. However, notwithstanding this "special" nature, the fact is that the collection of autonomous taxation is IRC collection, and autonomous taxation forms part of the principal tax in a broad sense, although it is distinct from it in a strict sense, always constituting, in any case, IRC.

  16. Therefore, being truly a tax, deductions must be permitted from its collection.

  17. In fact, neither does the state tax on added value constitute IRC in a strict sense, taxing specially a certain amount of income, and it is settled that regarding the collection thereof it is possible to make deductions.

  18. Therefore, it should equally be settled that, from the amount of collection of autonomous taxation, deductions should also be possible.

  19. Furthermore, having regard to the fact that the form of collection of IRC is unique, the collection of the tax must include all taxation provided for in the IRC Code.

  20. And it is to the value thus determined that the deductions from the collection provided for in no. 2 of article 90 of the IRC Code should be made, in particular those comprising the amount of special payments on account for the fiscal year and prior fiscal years, in accordance with paragraph c) of that rule and also pursuant to article 93 of the IRC Code.

  21. In fact, pursuant to article 93 of the IRC Code, it is established that the deduction of the amount determined in special payments on account should be made from the amount determined in the declaration referred to in article 120 (which includes the determination of autonomous taxation) of the same fiscal year to which it relates or, if insufficient, up to the sixth following fiscal year. Only on these terms will the collection of tax comply with article 90 of the IRC Code.

  22. In this line, we have available diverse and extensive jurisprudence of CAAD, in which it is clarified that, in light of what is provided for in paragraph c) of no. 2 of article 90 and no. 1 of article 93 of the CIRC, up to Law No. 7-A/2016, nothing in the literal wording of the CIRC prevents the deduction of amounts of PEC from the total collection of IRC that was determined in accordance with that no. 1 of article 90, including that derived from autonomous taxation, within the conditions provided therein.

  23. The argument cannot therefore prevail that the anti-abuse nature of autonomous taxation justifies the non-deductibility from the respective collection – for the simple, but decisive fact that such argument finds no support in any norm of the Portuguese tax legal system.

  24. And, regardless of the understanding one may have regarding the nature of autonomous taxation in the context of IRC, there is no doubt that the amount collected by means of those autonomous taxation is collected as IRC.

  25. The wording of the law in force at the date of the facts in crisis does not allow one to conclude that the deduction of special payments on account from the part of IRC collection that resulted from autonomous taxation was prohibited; indeed, this solution is still not, in sufficiently clear form, that which results from number 21 of article 88 of the CIRC.

  26. There being no rule on collection of autonomous taxation separate, it seems it must be accepted that the collection of IRC encompasses it, being included in article 90, no. 1 of the CIRC, and therefore the special payment on account referred to in paragraph c) of no. 2 is deductible.

  27. The legislator, in fact, in article 90, as to the possibility of deductions provided therein, continues not to distinguish, with respect to deductions possible from the collection of IRC, that which resulted from autonomous taxation from the remainder.

  28. In light of all the arguments and jurisprudence, there is no doubt that autonomous taxation forms part of the IRC regime and that the respective collection is carried out in accordance with article 90 of the CIRC, for which reason the amount of the special payment on account cannot fail to be deductible from the collection of autonomous taxation.

  29. And these theses are valid independently of the alleged interpretative nature of article 88, no. 21 of the CIRC, introduced by Law No. 7-A/2016, of 30 March. In fact, this norm suffers from unconstitutionality due to violation of the principle of non-retroactivity of tax legislation and the protection of confidence and legal certainty.

  30. In fact, notwithstanding the declared interpretative character of the amendment made to article 88 of the CIRC, by article 133 of Law No. 7-A/2016, of 30 March, we are, in truth, before an innovative and not interpretative norm. Although the legislator expressly qualifies a certain norm as interpretative, it may be an innovative norm.

  31. In fact, if the new no. 21 of article 88 of the CIRC, added by Law No. 7-A/2016, of 30 March, which came into force on 31.03.2016, and to which a purported interpretative character was attributed by article 135 of the aforementioned law, is considered applicable to the case sub judice, it will always be said that such norm is unconstitutional because it incurs manifest violation of the principle of prohibition of retroactivity of tax legislation, enshrined in article 103, no. 3, of the CRP (Constitution of the Portuguese Republic), as well as of the principle of protection of confidence and legal certainty, which flows from article 2 of the CRP.

  32. The relevant moment for determining the retroactive character of tax legislation, in light of what is provided for in no. 3 of article 103 of the CRP, is the moment of the occurrence of the taxable event, whereby the law will be considered retroactive that affects that event retrospectively in relation to the moment of its coming into force.

  33. In the case at hand, it is sought to make a deduction in 2011 and 2012 of the special payment on account from the collection of autonomous taxation determined in those years, whereby the taxable event relates to the years 2011 and 2012.

  34. Thus, in the present case, we would always be dealing with taxable events occurring prior to the coming into force of the new law, which is article 133 of Law No. 7-A/2016, of 30 March, which came into force on 31.03.2016.

  35. Consequently, the aforementioned article 135 of Law No. 7-A/2016, of 30 March, will be materially unconstitutional, due to violation of the principle of prohibition of retroactivity of tax legislation embodied in article 103, no. 3, of the CRP.

  36. Moreover, this norm will always be unconstitutional due to violation of the principle of protection of confidence and legal certainty, corollaries of the principle of the Democratic State of Law, enshrined in article 2 of the CRP.

  37. In fact, the prohibition of retroactivity of tax legislation constitutes precisely a special embodiment, in tax matters, of the principle of confidence and legal certainty, aiming to guarantee a measure of certainty to taxpayers with respect to compliance with tax rules and as to the possibility of planning the management of their activity from a fiscal point of view.

  38. In the case at hand, the requirements identified by the jurisprudence of the Constitutional Court for protection of taxpayer expectations are met, for which reason it must be concluded for the material unconstitutionality of article 135 of Law No. 7-A/2016, of 30 March, to the extent that it is understood that therefrom results the exclusion of the deduction of the special payment on account from the collection of autonomous taxation of the years 2011 and 2012, due to violation of the principle of protection of confidence and legal certainty, corollaries of the principle of the Democratic State of Law, enshrined in article 2 of the CRP.

  39. In the current constitutional framework, there are prohibited, in tax matters, not only false interpretative norms (innovative norms), but also true interpretative norms, when retroactive.

  40. Therefore, even if it is understood that the wording of article 135 of Law No. 7-A/2016 constitutes a true interpretative norm, from which results the exclusion of the deduction of the special payment on account from the collection of autonomous taxation of the years 2011 and 2012, such provision would always incur violation of the principle of prohibition of retroactivity of tax legislation, enshrined in article 103, no. 3, of the CRP.

  41. In summary, given the constitutional prohibition of retroactivity of tax norms, the legislator is prevented from proceeding with the authentic interpretation of those norms, to the extent that this has as a consequence the taxation of facts which, in light of one of the possible interpretations of the law interpreted, would not be subject to taxation, whereby the deduction of the special payment on account from the collection of autonomous taxation determined with reference to the fiscal years 2011 and 2012 is required.

  42. Complementarily, the Claimant petitions, in addition to the reimbursement of amounts improperly paid, the payment of compensatory interest which, in its understanding, are due under the terms of article 43, no. 1 of the LGT, because there was error attributable to the Services in the payment of tax debt in an amount superior to that legally due, since, in the situation object of the present request, it limited itself to acting in conformity with the guidelines published by the Tax Authority".

☼

For its part, the Tax Authority, notified of the arbitral request, came, summarily, to state the following:

  1. First, the AT presents a defense by exception invoking the material incompetence of the Arbitral Tribunal arising from the fact that the request for arbitral award was formulated following the dismissal of requests for ex officio revision.

  2. Ordinance (No. 112-A/2011, of 22 March) defines, in its article 2, paragraph a), that the AT is bound by arbitral claims that have as their object the assessment of claims relating to taxes whose administration is committed to it, referred to in no. 1 of article 2 of the RJAT, "with the exception of claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process".

  3. Now, the request for arbitral award sub judice is directed, albeit indirectly, to the declaration of illegality of two acts of self-assessment of tax, in this case IRC.

  4. It so happens that the claim is shown to be formulated without these acts of self-assessment having been preceded by administrative challenge "in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which necessarily determines that their assessment in arbitral proceedings is excluded.

  5. The review of acts of self-assessment of tax is only admissible in arbitral proceedings if, at a prior moment, the same have been challenged administratively, in accordance with article 131 of the CPPT, which clearly did not happen in the present case.

  6. In fact, article 2, paragraph a), of the aforementioned Ordinance literally excludes, from the scope of AT's binding to arbitral jurisdiction, "(…) claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", and the mechanism of ex officio revision provided for in article 78 of the General Tax Law (LGT) is not mentioned therein.

  7. That is, from the wording given to the cited legal provision, it is verified that the legislator opted to restrict the knowledge in arbitral jurisdiction to claims that, being related to the declaration of illegality of assessment/self-assessment acts, have been preceded by the complaint provided for in article 131 of the CPPT.

  8. It must therefore be understood that, in light of the cited constitutional and legal principles, the interpretation of the provision in Ordinance No. 112-A/2011 must be configured literally, because it is not irrelevant that the legislator in paragraph a) of article 2 of Ordinance No. 112-A/2011, having completed the expression "that have not been preceded by recourse to the administrative procedure" with the mention "in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", has intentionally delimited AT's binding to such situations, given the reasons set out.

  9. Therefore, this latter part of the provision cannot, under pain of manifest illegality/unconstitutionality, be set aside, interpreting the norm as if the specific reference to a concrete administrative procedure did not exist, with the interpreter making a clean slate of the distinction provided by the legislator.

  10. Thus, it is concluded that the constituted Arbitral Tribunal is materially incompetent to assess and decide the request object of the litigation sub judice, in accordance with articles 2, no. 1, paragraph a) and 4, no. 1, both of the RJAT and articles 1 and 2, paragraph a), both of Ordinance No. 112-A/2011, which constitutes an exception that prevents the examination of the merits of the case, in accordance with the provision in article 576, nos. 1 and 2 of the Code of Civil Procedure.

  11. Second, the Respondent also defends itself by challenge, in the following terms:

  12. The integration of autonomous taxation in the IRC Code (and IRS), gave a dualistic nature, in certain aspects, to the regulatory system of this tax, which was embodied, in particular, in the framework of paragraph a) of no. 1 of article 90 of the CIRC, in separate determinations of their respective collections, because they obey different rules.

  13. There is not a single collection of IRC, but rather two determinations, that is, two distinct calculations that, although processed, in accordance with paragraph a) of no. 1 of article 90 of the CIRC, in the declarations referred to in articles 120 and 122 of the same code, are made on the basis of different parameters, as each is embodied in the application of its own rates, provided for in articles 87 or 88 of the CIRC, to their respective taxable matters determined also in accordance with their own rules.

  14. Thus, the amount determined in accordance with paragraph a) of no. 1 of article 90 does not have a unitary character, as it contains values calculated according to different rules, to which are associated objectives also differentiated, whereby the deductions provided for in the paragraphs of no. 2 can only be made from the part of the collection of IRC with which there is a direct correspondence, so as to maintain the coherence of the conceptual structure of the regime-rule of the tax.

  15. However, it is to be noted that the coherence and adequacy of AT's understanding is based on the very nature of payments on account of tax ultimately due, which, according to the definition in article 33 of the LGT are "anticipated cash remittances that are made by taxpayers in the period of formation of the taxable event", constituting a "(…) form of bringing closer the moment of collection to that of the perception of income so as to remedy situations in which this approximation cannot be effected through withholdings at source.".

  16. Therefore, in sound logic, it only makes sense to conclude that their calculation base corresponds to the amount of IRC collection resulting from the taxable matter that is identified with the profit/income of the taxpayer's fiscal year.

  17. In fact, the taxable matter that serves as the basis for calculating autonomous taxation does not include income from external sources susceptible to double taxation in IRC and, consequently, nothing would justify that the tax credit be exercised on the amount resulting from those taxation.

  18. Special payments on account are understood as payments of IRC delivered to the State, in advance, on account of the tax ultimately due, with their calculation based on the volume of business of the taxpayer relating to the prior fiscal year (no. 2 of article 106, of the CIRC), although PEC is distinguished, in terms of calculation rules, from payments on account – as these have as their calculation base the tax collected in accordance with no. 1 of article 90 of the CIRC, relating to the immediately prior fiscal period (no. 5 of article 105 CIRC) – both regimes have in common the nature of anticipated payment of IRC.

  19. And, in fact, in certain circumstances they even mutually exclude themselves, because, from the amount resulting from the calculation of PEC, payments on account made in the prior fiscal period are deducted.

  20. In sum, the interpretation of no. 2 of article 90 in coherence with the nature and content of the deductions provided for in its paragraphs, among which PEC figures, must be made in light of the general objectives of IRC which are reduced, in their essence, to the taxation of the income of legal entities, determined in conformity with the rules of chapter III of the respective Code, whereby the Claimant cannot proceed with the claim to deduct them from the collection of IRC relating to autonomous taxation in the years 2011 and 2012.

  21. Finally, the Respondent considers that constitutional principles of non-retroactivity and protection of confidence and legal certainty in tax laws have not been violated.

  22. It will always be necessary to cite, definitively clearing up the controversial question, the content of article 133, which added number 21 to article 88 of the CIRC, with the effects provided for in article 135, both contained in the State Budget Law for 2016, published on 30.03.2016, coming into force the next day, in which it is advocated, with interpretative character, that "The collection of autonomous taxation in IRC is carried out in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions in the preceding numbers, without any deductions being made to the total amount determined."

  23. Such a norm came to clarify, positing, the understanding and practice adopted peacefully by doctrine and by taxpayers in general, which were never called into question by the AT, whereby any dissonant interpretation will be materially unconstitutional.

  24. Any interpretation that does not apply the norm contained in the State Budget Law for 2016, embodied in article 133, which added number 21 to article 88 of the CIRC, with the effects provided for in article 135, both contained in the State Budget Law for 2016, published on 30.03.2016, and which consequently permits the deduction from the part of IRC collection produced by the rates of autonomous taxation of the special payment on account made in the context of IRC (PEC),

  25. Will be materially unconstitutional, by (a) violation of the principle of legality, inherent in article 103, no. 2 of the CRP, by (b) violation of the principle of separation of powers, embodied in article 2 of the CRP, by (c) violation of the principle of protection of confidence provided for in article 2 of the CRP, and by violation of the principle of equality, in its positive formulation of contributory capacity, flowing from articles 13, no. 2 and 103, no. 2, both of the CRP.

  26. Finally, the AT considers that the Claimant's claim involving the alleged entitlement to compensatory interest cannot be sustained.

  27. Contrary to what the Claimant says, the AT did not act following generic guidelines of the AT which, moreover, nowhere indicates what those guidelines are, who and when they were issued, as the determination of tax was carried out solely and exclusively by the Claimant and without following any generic guidance from the AT, much less published guidance.

  28. On the other hand, "… even if the viability of the claim regarding the payment of interest were configurable – which it is not, as the main claim being unsuccessful, the interest claim will necessarily also be unsuccessful – in the situation apprehended in these proceedings, its calculation would have as its initial term the date on which the decision occurred that dismissed the request for ex officio revision and never any other moment".

☼

i The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), 5 and 6, no. 1, of the RJAT.

ii The parties have legal standing and capacity, show themselves to be legitimate and are regularly represented, in accordance with the provisions of articles 4 and 10, no. 2, of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March.

iii The process is not affected by nullities.

iv There is, therefore, no obstacle to the assessment of the case.

v The tribunal should prioritarily analyze the question of incompetence raised by the Tax and Customs Authority.

☼

II - Factual Matter

A - Proven Facts

a) The Claimant is the dominant company of the group of companies covered by the Special Taxation Regime for Groups of Companies (RETGS), provided for in articles 69 and following of the IRC Code, and which is composed, in addition to itself, of the companies:

• B..., SA;
• C..., Lda;
• D..., SA;
• E..., SA;
• F..., SA;
• G..., SA;
• H..., SA; and
• I..., Lda.

b) On 30.05.2012, the Claimant submitted, in relation to the IRC of the fiscal year 2011 of the above-identified business group, the competent income tax return form 22 (doc. 1);

c) The Claimant proceeded with the payment of the self-assessed tax (doc. 2);

d) On 09.04.2014, the Claimant proceeded with the substitution of the form 22 initially submitted in relation to the fiscal year 2011 (doc. 3);

e) The Tax and Customs Authority issued on 2014/04/16 the corresponding IRC collection statements, with no. 2014..., collection of interest, with nos. ... and 2014..., and account settlement, with no. 2014 ... (doc. 4);

f) Following the notification of the tax collection, interest and account settlement statement, an amount of €806.44 to be paid was determined, which was paid by the Claimant (doc. 5);

g) In the income tax return in question, the Claimant did not determine any taxable matter or collection (lines 311 and 351 of Box 09 of docs. 1 and 3);

h) In the collection statement issued by the services of the Tax and Customs Authority, no collection amount was determined (doc. 4);

i) The Claimant included the amount of €35,885.46 relating to state surtax and the amount of €48,712.38 relating to autonomous taxation in the Income Statement Form 22 - Box 10, line 365 (doc. 4);

j) The Claimant, indicated in the substitute declaration Form 22 for fiscal year 2011 as an amount to be deducted from the collection the amount of the special payment for the fiscal year 2011 in the amount of €59,842.00 - line 356 Box 10 (docs. 3 and 1);

k) The Claimant made two special payments on account, with reference to the same fiscal year 2011, one on 30/03/2011 and another on 4/11/2011, with a total value of €59,842.00 (doc. 6);

l) The special payments on account made with reference to fiscal year 2010 (respectively on 25/03/2010 and 27/10/2010) amounted to €65,694.20 (doc. 7);

m) On 30.05.2013, the Claimant submitted the income tax return form 22 for 2012 (doc. 8), having proceeded with the payment of self-assessed tax in the amount of €95,019.64 (doc. 9);

n) In the income tax return in question, the Claimant did not determine any taxable matter or collection (fields 311 and 351 of box 09 - doc. 7);

o) Nevertheless, it included in the Income Statement Form 22 - Box 10 - lines 373 and 365, respectively, the amount of €64,864.82 relating to state surtax and the amount of €47,228.16 relating to autonomous taxation (doc. 7);

p) With reference to fiscal year 2012, the Claimant made two special payments on account, in a total value of €47,401.70 (doc. 10);

q) On 16.03.2016 the Claimant submitted requests for ex officio revision of the self-assessments of IRC for 2011 and 2012 (doc. 11);

r) On 07.09.2018 the Claimant was notified of the decisions dismissing the requests for ex officio revision, with nos. ...2016... (2011) and ...2016... (2012) - (doc. 13).

s) On 6/12/2018 the Claimant filed a request for arbitral award.

B - Unproven Facts

No other facts relevant to consider in the decision on the arbitral request were proven.

C - Motivation and Reasoning as to Factual Matter

The proven factuality was based on critical analysis of the administrative process and other documents appended to the case file, the authenticity and veracity of which were not challenged by any of the parties, as well as the consensual positions of these.

III - On the Procedural Exception of the Tribunal's Lack of Jurisdiction

The Tax and Customs Authority, in its Response, raised the question of the Tribunal's lack of jurisdiction because "The request for arbitral award sub judice comes formulated following dismissal of requests for ex officio revision of acts of self-assessment of corporate income tax (IRC) relating to the years 2011 and 2012, filed on 16.03.2016, that is, in circumstances where the time limit for the gracious complaint referred to in article 131 of the CPPT had long since passed.

Now, having regard to the provisions of articles 2, no. 1, paragraph a) and 4, no. 1, both of the RJAT, and articles 1 and 2, paragraph a), both of Ordinance No. 112-A/2011, of 22 March, the exception of material incompetence of this Tribunal for assessing and deciding the above request is verified, a circumstance that requires that the Respondent Entity be absolved from the Instance [cf. articles 576, nos. 1 and 2 and 577, paragraph a) of the Code of Civil Procedure, ex vi article 29, no. 1, paragraphs a) and e) of the RJAT]."

The Claimant responded to this matter in a separate pleading in which it expresses, in summary, the understanding that the request for ex officio revision should be considered equivalent to a gracious complaint, having in mind that this means gives the Tax Authority the opportunity to assess the legality of the assessment via the administrative procedure before the question is reviewed in judicial or arbitral proceedings, which, after all, is the same thing that the law intends when it speaks of a gracious complaint.

This is a matter that has been greatly dealt with in arbitral proceedings, whereby we follow, closely, with due respect, the recent Award no. 445/2018-T, of 25 February 2019, which analyzes it with great depth.

"The jurisdiction of arbitral tribunals operating at CAAD is, in the first place, limited to the matters indicated in article 2, no. 1, of Decree-Law No. 10/2011, of 20 January (RJAT).

In a second tier, the jurisdiction of arbitral tribunals operating at CAAD is also limited by the terms on which the Tax Administration was bound to that jurisdiction by Ordinance No. 112-A/2011, of 22 March, since article 4 of the RJAT establishes that "the binding of the tax administration to the jurisdiction of tribunals constituted in accordance with the present law depends on an ordinance by the members of the Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of the disputes covered".

(…)

In paragraph a) of article 2 of this Ordinance No. 112-A/2011, there are expressly excluded from the scope of the binding of the Tax Administration to the jurisdiction of arbitral tribunals operating at CAAD "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process".

The express reference to the prior "recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" must be interpreted as reporting to cases in which such recourse is mandatory, through the gracious complaint, which is the administrative means indicated in those articles 131 to 133 of the CPPT, to the terms of which it refers. In fact, first of all, it would not be understood that, it not being necessary the prior administrative challenge "when its basis is exclusively a matter of law and the self-assessment has been made in accordance with generic guidelines issued by the tax administration" (article 131, no. 3, of the CPPT, applicable to cases of withholding at source, by virtue of the provision of no. 6 of article 132 of the same Code), one would exclude arbitral jurisdiction due to this administrative challenge, which is understood to be unnecessary, not having been made.

In the case at hand, it is requested the declaration annulment of a collection following self-assessment, following the dismissal of a request for revision of a tax act made after the elapse of the two-year period provided for in article 132 of the CPPT (which also occurs in this case).

In fact, in this article 2 there is no express reference to such acts, contrary to what occurs with the legislative authorization on which the Government based itself to approve the RJAT, which refers to "requests for revision of tax acts" and "administrative acts that involve the assessment of the legality of assessment acts".

However, the formula "declaration of illegality of assessment acts of tributes, self-assessment, withholding at source and payment on account", used in paragraph a) of no. 1 of article 2 of the RJAT does not restrict, in a merely declarative interpretation, the scope of arbitral jurisdiction to cases in which directly impugned is an act of one of those types. In fact, the illegality of assessment acts can be declared jurisdictionally as a corollary of the illegality of a second-order act, which confirms an assessment act, incorporating its illegality.

The inclusion in the competencies of arbitral tribunals operating at CAAD of cases in which the declaration of illegality of the acts indicated therein is made through the declaration of illegality of second-order acts, which are the immediate object of the impugnatory claim, results with certainty from the reference that is made to those acts in that rule being made to self-assessment, withholding at source and payment on account acts, which are expressly referred to as included among the competencies of arbitral tribunals. In fact, with respect to these acts, it is imposed, as a rule, the mandatory gracious complaint, in articles 131 to 133 of the CPPT, whereby, in these cases, the immediate object of the impugnatory process is, as a rule, the second-order act which assesses the legality of the assessment act, an act which, if it confirms it, must be annulled in order to obtain the declaration of illegality of the assessment act.

The reference that in paragraph a) of no. 1 of article 10 of the RJAT is made to no. 2 of article 102 of the CPPT, in which the challenge of acts of dismissal of gracious complaints is provided for, removes any doubts that there are covered in the competencies of arbitral tribunals operating at CAAD the cases in which the declaration of illegality of the acts referred to in paragraph a) of that article 2 of the RJAT has to be obtained following the declaration of the illegality of second-order acts.

Indeed, it was precisely in this sense that the Government, in Ordinance No. 112-A/2011, of 22 March, interpreted these competencies of arbitral tribunals operating at CAAD, when it excluded from the scope of those competencies "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which has the effect of restricting its binding to cases in which that recourse to the administrative procedure was used.

Having obtained the conclusion that the formula used in paragraph a) of no. 1 of article 2 of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second-order act, it will also embrace cases in which the second-order act is one of dismissal of a request for revision of the tax act, for no reason is seen to restrict it much more so, that, in cases in which the request for revision is made within the period of the gracious complaint, it should be equated to a gracious complaint.

The express reference to articles 131 to 133 of the CPPT made in article 2 of Ordinance No. 112-A/2011 cannot have the decisive effect of excluding the possibility of access to arbitral proceedings for a request for illegality of acts dismissing ex officio revision requests of acts of the types referred to therein.

In fact, the interpretation exclusively based on the literal tenor that the Tax and Customs Authority defends in the present process cannot be accepted, because in the interpretation of tax norms the general rules and principles of interpretation and application of laws are observed (article 11, no. 1, of the LGT) and article 9, no. 1, expressly prohibits interpretations exclusively based on the literal wording of norms by providing that "interpretation should not be limited to the letter of the law", but should, rather, "reconstitute from the texts the legislative thinking, taking above all into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied".

As to the correspondence between the interpretation and the letter of the law, it suffices "a minimum of verbal correspondence, albeit imperfectly expressed" (article 9, no. 3, of the Civil Code) which only prevents the adoption of interpretations that cannot be at all reconciled with the letter of the law, even acknowledging therein imperfection in the expression of the legislative intention.

(…) The letter of the law is not an obstacle to making declarative interpretation, which elucidates the scope of the literal tenor, nor even extensive interpretation, when one can conclude that the legislator said less than what, in coherence, it would intend to say, that is, when it said imperfectly what it intended to say….

Extensive interpretation is thus imposed by the evaluative and axiological coherence of the legal system, erected by article 9, no. 1, of the Civil Code into a primary interpretive criterion by way of the imposition of observance of the principle of unity of the legal system.

It is manifest that the scope of the requirement for prior gracious complaint, necessary to open the contentious path for challenging acts of the types referred to in articles 131 to 133 of the CPPT, has as its only justification the fact that with respect to that type of acts there is no a position taken by the Tax Administration on the legality of the legal situation created by the act, a position that may even turn out to be favorable to the taxpayer, avoiding the need for recourse to the contentious path.

In fact, beyond not seeing any other justification for that requirement, the fact that a mandatory gracious complaint is provided for for contentiousness challenge of withholding at source and payment on account acts (in articles 132, no. 3, and 133, no. 2, of the CPPT), which have in common with self-assessment acts the circumstance that there is also no position taken by the Tax Administration on the legality of the acts, confirms that this is the reason for that mandatory gracious complaint.

Another unequivocal confirmation that this is the reason for the requirement for mandatory gracious complaint is found in no. 3 of article 131 of the CPPT, in establishing that "without prejudice to the provision of the preceding numbers, when its basis is exclusively a matter of law and the self-assessment has been made in accordance with generic guidelines issued by the tax administration, the period for challenge does not depend on prior complaint, the challenge being presented within the period of no. 1 of article 102", a regime which is applicable to acts of withholding at source by referral of no. 6 of article 132 of the CPPT. In fact, in situations of this type, there has been a prior generic statement by the Tax Administration on the legality of the legal situation created with the act of self-assessment or withholding at source and it is this fact that explains why the mandatory gracious complaint ceases to be required.

Now, in cases in which a request for ex officio revision of an act of self-assessment or withholding at source is filed, the Tax Administration is provided with, through this request, an opportunity to pronounce itself on the merits of the taxpayer's claim before the latter resorts to jurisdictional means, whereby, in coherence with the solutions adopted in nos. 1 and 3 of article 131 and 3 and 6 of article 132 of the CPPT, it cannot be required that, cumulatively with the possibility of administrative assessment in the framework of that revision procedure, a new administrative assessment through gracious complaint be required.

On the other hand, it is unequivocal that the legislator did not intend to prevent taxpayers from filing requests for ex officio revision in cases of self-assessment acts, as these were expressly referred to in no. 2 of article 78 of the LGT. And to self-assessment acts, practiced by the taxpayer, are equatable, by mere declarative interpretation, acts of withholding at source which are practiced by the tax substitute, who is considered a taxpayer (article 18, no. 3, of the LGT).

In this context, the law expressly permitting that taxpayers opt for the gracious complaint or for ex officio revision of self-assessment and withholding at source acts and being the request for ex officio revision filed within the period of the gracious complaint perfectly equatable to a gracious complaint, as referred to, there cannot be any reason that can explain that access to arbitral proceedings is not possible for a taxpayer who has opted for revision of the tax act instead of the gracious complaint.

Therefore, it is to be concluded that the members of the Government who issued Ordinance No. 112-A/2011, in making reference to articles 131 to 133 of the CPPT, said imperfectly what they intended, since, intending to impose prior administrative assessment to the contentious challenge of acts of the types referred to, ended up by including reference to articles 131 to 133 which do not exhaust the possibilities of administrative assessment of such acts.

(…)

Moreover, as the revision of the tax act assures the possibility of assessment of the taxpayer's claim before access to the contentious path that is sought to be achieved with the mandatory administrative challenge, the most accurate solution, because it is the most coherent with the legislative design of "strengthening the effective and efficient protection of the rights and legally protected interests of taxpayers" manifested in no. 2 of article 124 of Law No. 3-B/2010, of 28 April, is the admissibility of the arbitral path to assess the legality of assessment acts previously assessed in revision procedure.

Moreover, containing that paragraph a) of article 2 of Ordinance No. 112-A/2011 an imperfect formula, but which contains a comprehensive expression "recourse to the administrative procedure", which potentially also references ex officio revision of the tax act, is found in the text the minimum of verbal correspondence, albeit imperfectly expressed, required by that no. 3 of article 9 for the viability of the adoption of the interpretation which consecrates the most accurate solution.

It is to be concluded, thus, that article 2, paragraph a) of Ordinance No. 112-A/2011, properly interpreted on the basis of the criteria for interpreting the law provided for in article 9 of the Civil Code and applicable to substantive and adjective tax norms, by virtue of the provision of article 11, no. 1, of the LGT, enables the submission of requests for arbitral award with respect to withholding at source acts that have been preceded by a request for ex officio revision.

This interpretation is not incompatible with the Constitution.

In fact, the Constitution does not impose that the interpretation of regulatory diplomas has to be limited to the literal tenor and, in the case at hand, as explained, properly interpreted the norms of article 2, no. 1, of the RJAT and article 2 of Ordinance No. 112-A/2011, of 22 March, it is concluded that the binding of the Tax and Customs Authority to arbitral tribunals operating at CAAD embraces cases in which self-assessment acts have been preceded by requests for ex officio revision. Therefore, the interpretation that was made did not increase the binding of the Tax and Customs Authority to arbitral tribunals beyond what is regulated, but rather defined precisely its terms, which result from the regulatory diploma.

(…)".

In this conformity, the exception of incompetence raised due to the fact that no gracious complaint was presented for the acts of self-assessment of IRC with reference to the fiscal years 2011 and 2012 which are the object of this request for arbitral award does not hold, when in its place a request for ex officio revision was presented.

IV - Substantive Law

The request for arbitral award has as its object the legal possibility of deducting the amount of special payments on account (PEC) from the value of the collection of autonomous taxation determined in the self-assessment of IRC for a given fiscal year.

That is, "is it deductible from the collection of autonomous taxation of IRC the value of IRC advanced as special payment on account"?

The established jurisprudence has been consistent in the sense that amounts relating to tax benefits, such as SIFIDE or CFEI, are deductible from the collection of autonomous taxation, given their respective legal nature resulting from the provision of article 2 of the EBF, since these are "measures of exceptional character instituted for the protection of extrascal interests of public relevance that are superior to those of the taxation itself that prevent". As regards PEC, the sense of arbitral decisions initially was the same, but, for some time now, the jurisprudential orientation points to the fact that there is no illegality in the self-assessment in which it was not possible to deduct from the collection of autonomous taxation the amount of PEC borne in the same fiscal year" (Process 34/2016-T CAAD).

The undersigned has already taken a position on the matter in processes 670/2015-T, 750/2015-T and 779/2015-T, following the thesis that defends that PEC are not deductible from the value of the collection of autonomous taxation determined in a given fiscal year. More recently, in the context of a singular arbitral tribunal, he reiterated his understanding on this matter in Process 34/2016-T, of 26 September. Decisive weight was given to personal conviction by the more recent arguments set out in Awards nos. 113/2015-T, 535/2015-T and 673/2015-T.

The most recent CAAD decisions continue to mostly defend the same vision of the law and, unless I am mistaken, neither the decision of the Constitutional Court contained in Award no. 267/2017, of 31/05, delivered in Process 466/16, modifies it.

What is at issue in the present proceedings is the deduction of PEC from fiscal years 2011 and 2012 from the collections of autonomous taxation determined in those same fiscal years.

And as there are no reasons, in its understanding, related with new legal positions on the subject, to alter that conviction, we allow ourselves to follow the theses that were explained in Award no. 34/2016-T:

" … In fact, both the AT and the Claimant understand that, in the sense, moreover, of the arbitral jurisprudence cited, the collection of IRC resulting from article 90 unequivocally includes autonomous taxation, if only because if this were not so "there would be no norm whatsoever that provided for its collection, which would amount to illegality, by violation of article 103, no. 3, of the CRP, which requires that the collection of taxes be made 'in accordance with the law'". However, although it has come to be admitted that autonomous taxation is IRC, the AT has been defending that, even if its collection is included within the scope of article 90, it should be considered that such collection corresponds to two calculations, one of which derives from the application of the normal IRC rate to the income generated during the fiscal year, and that only from that part of the collection of IRC resulting from this calculation is the special payment on account deductible.

For its part, conversely, the claimant defends that, although there are two calculations of IRC, the two collections resulting converge to a single amount of IRC collection, and that there is found in the law no impediment to the deduction of the special payment on account from that amount determined.

However, with all due respect, this will not be the decisive argument, on its own, to find the solution to this question, as, a contrario, we also do not encounter any legal provision that expressly provides for the deduction.

The answer must therefore be sought in the pertinent analysis of the ratio legis of each of these legal figures, that of autonomous taxation and that of special payment on account, a matter which CAAD jurisprudence has dealt with in quite developed theoretical terms (…).

Autonomous taxation does not incur on the income of the taxpayer, but rather on certain sundry expenses, which constitute autonomous taxable events subject to different rates depending on their respective nature (Decision of the STA no. 830/01, of 21/03/2012), which the legislator understood to do in an autonomous manner as well, with the collection of autonomous taxation being determined independently of the IRC that is due in each fiscal year, because it is not related to the achievement of a positive result, and therefore subject to taxation (Decision of the TC 310/12, of 20/6). Autonomous taxation are therefore anti-abuse measures and deterrents to fiscal evasion.

PEC, for its part, is an anticipated remittance on account of the tax relating to the normal activity of the taxpayer, calculated on the basis of the volume of business relating to the prior fiscal year, and payments are made during the period of constitution of the taxable event.

This form of payment of IRC is also related to fraud and fiscal evasion, that is, here what is relevant will be the possible decrease in the volume of business or profit, guaranteeing the State a kind of minimum collection.

"In line with this reasoning, it is further understood that, whether the special payment on account, whether autonomous taxation, pursue the same objective of fiscal evasion, they aim to prevent two distinct behaviors of taxpayers: through the first, the non-declaration of continuing income is prevented which is presumed to exist, since only thus is the continuity of activity perceived; already the latter find justification as dissuasive and compensatory measures of the transfer of income from the personal sphere or the consideration of expenses without business cause. And in this manner it is understood that it is defended that, coexisting both behaviors, the two figures of combating evasion must also coexist: a company that does not declare income bears special payment on account; a company that overloads expenses so as to minimize IRS (or to decrease/increase its fiscal profit/loss) bears autonomous taxation; a company that practices both behaviors bears special payment on account and autonomous taxation.

Therefore, autonomous taxation aims to "… prevent that through the significant incurring of charges as those provided for in article 88, distortions affecting the system and the expectation about what should be the 'normal' income of the tax are not introduced. In the case, as is equally well-known, it is a matter of discouraging the undertaking/incurring of such expenses, first and foremost because, by their nature and purposes, they can more easily be subject to diversion to consumption that, in essence, is private or corresponds to charges that do not cease to have, also as a specific and ultimate purpose, the avoidance of the tax. These are realities that, just as has been previously pointed out, present some measure of censurability already that, not violating the law directly, generate sensible and important imbalances on the general idea of justice, on the fundamental duty to contribute in proportion to one's wealth, of equality, of sacrifice, of proportionality of the measure of the tax in face of possible manifestations of wealth, of taxation of real income and of justice.

Operating in a manner different from what constitutes the essential scope of IRC – which taxes income – autonomous taxation, it is reaffirmed, taxes certain expenses or specific charges – and constitute an instrumental, accessory reality of that tax, in the just measure in that it is in function of it that they were instituted and are, therefore, capable of being recognized as having an instrumentality or accessoriness of purposes, rooted in the safeguarding of the purposes of the very tax in which they are manifested.

"It is thus held as certain that autonomous taxation does not constitute IRC in a strict sense, but is intertwined with it, and must be contained in the "other taxes" of which the final part of paragraph a) of no. 1 of article 45 of the CIRC gives us an account (wording in force in 2013).

Revelations of this link of functionality, and in the framework of the legislator's intention as a whole, emerge, for example, from the discipline of article 12 of the CIRC regarding the entities subject to the regime of fiscal transparency, by not taxing them in IRC, "except as regards autonomous taxation", a relationship which is also manifested with respect to no. 14 of article 88 of the CIRC, in the sense that autonomous taxation rates take into account whether or not the taxpayer presents a fiscal loss.

Also analyzed from another angle, it must be considered autonomous taxation in the context of specific anti-abuse norms and their similarity with the regime provided for under no. 1 of article 65 of the CIRC, ("the amounts paid or due, in any form whatsoever, to natural or legal persons resident outside the territory of Portugal and there submitted to a regime clearly more favorable, are not deductible for the purposes of taxable profit, except if the taxpayer can prove that such charges correspond to transactions actually carried out and do not have an abnormal character or an exaggerated amount".

Aiming autonomous taxation to reduce the fiscal advantage achieved with the deduction to taxable profit of the costs on which it incurs and also to combat fiscal evasion which this type of expense, by its nature, potentiates, it cannot itself, through its deduction to taxable profit as a cost of the fiscal year, constitute a factor of reduction of that diminishment of advantage intended and determined by the legislator (Decision 535/2015-T).

In what was referred, the decision which we subscribe cited the reasoning for the option, invoking the theses of Decision 113/2015-T of CAAD, on the legal nature of the figures in question, that is, "(…) PEC came to form part of the system of IRC whose collection enshrined in article 83 was designed to calculate the tax directly inciding on declared income. When there is a fiscal loss, the taxpayer still has to bear PEC; that was indeed the reason for its introduction. If a given company has successive fiscal losses, it will systematically bear the tax, as the system doubts its possibility of operating in permanently deficit situation, requiring it to satisfy provisionally (on account), a certain amount. It may be reimbursed if it proves that this situation is common in its sector of activity or if the AT verifies the regularity of its returns. This was the balance that the CIRC required to maintain a system based on the returns made by taxpayers. Already the tax resulting from autonomous taxation is grounded solely in the pursuit of fiscal evasion by income transfer and has the dissuasive and compensatory effect.

If the deduction of PEC from the collection resulting from autonomous taxation is permitted, the purposes of the system in which the norm of 83, no. 2 of the CIRC is inserted will be thwarted, for, the product of the special payment on account which should remain "stationary" in the ownership of the Public Treasury will be affected to the extinction of the taxpayer's debt resulting from autonomous taxation, thus alleviating the intended pressure to avoid fiscal evasion "declarative". There is indeed an irreconcilable conflict between the ratio of PEC – the combating of evasion or pressure for correction of returns – and the allocation of its credits to the satisfaction of other obligations than those that result from the calculation of IRC calculated on the taxable result."

Therefore, being at issue the doubt about the deductibility or not of PEC from the collection of autonomous taxation determined in a manner distinct and separate from the normal collection of the fiscal year, in the wording of article 90 of the CIRC, we understand that the matter will have been further clarified with the publication of the Budget Law for 2016.

"The new no. 21 of article 88 of the CIRC added by Law No. 7-A/2016, of 30 March, is in tune with this arbitral understanding, for it comes to establish expressly that from the amount determined of autonomous taxation no "deductions whatsoever" are "made".

On the other hand, article 135 of Law No. 7-A/2016, of 30 March, in attributing an "interpretative" nature to that new no. 21 of article 88, combined with article 13 of the Civil Code (which is the only norm that defines the concept of interpretative law), has inherent an intention to apply the new regime to prior situations in which there are no "effects already produced by performance of the obligation, by judgment final and conclusive, by settlement, even if not homologated, or by acts of similar nature".

The Claimant, however, in its submissions highlights the fact that the new law only applies going forward given that its character is innovative. If not thus understood, there would be a question of retroactive application of law in tax matters, which is constitutionally prohibited.

We think this is not the best reading of the aforementioned legal provisions. We follow on this matter what is written in the decision which we are following: BAPTISTA MACHADO teaches regarding interpretative laws: "… we can, consequently, say that laws are interpretative in nature those which, on points or questions in which the applicable legal rules are uncertain or their meaning controversial, come to consecrate a solution that courts could have adopted. It is not necessary that the law consecrate one of the prior jurisprudential currents or a strong prior jurisprudential current. All the more so because the interpretative law often arises before such jurisprudential currents manage to form. … For a new law to be truly interpretative, two requirements are therefore necessary: that the solution of prior law be controversial or at least uncertain; and that the solution defined by the new law lies within the framework of the controversy and be such that the judge or the interpreter could arrive at it without exceeding the limits normally imposed on the interpretation and application of law. If the judge or the interpreter, faced with old texts, could not feel authorized to adopt the solution that the new law comes to consecrate, then this is decidedly innovative".

"In light of this position, whose reasoning is ponderable, in face of the legislation in force in 2012 and 2013 [in this case, 2011 and 2012], the attribution of interpretative nature to no. 21 of article 88 of the CIRC that is made in article 135 of Law No. 7-A/2016, of 30 March, can be accepted, in light of the teachings of BAPTISTA MACHADO, since the solution provided therein of the non-viability of deduction of special payment on account from the global amount of autonomous taxation passes the test set out by this Author: – the solution that resulted from the literal wording of article 93, no. 1, of the CIRC was controversial, as that arbitral decision evidences and the solution defined by the new law situates itself within the framework of the controversy; – the judge or the interpreter could arrive at that solution without exceeding the limits normally imposed on the interpretation and application of law, already that restrictive interpretation is admissible when there are reasons to conclude that the scope of the legal text betrays the legislative thinking or it is necessary to optimize the harmonization of conflicting interests which two norms aim to protect".

Beyond this, it is not seen that the regime resulting from article 88, no. 21, of the CIRC encloses any contradiction, contrary to what the Claimant defends: according to this new rule, the norms of the CIRC relating to the form of collection of autonomous taxation should be interpreted as therein provided and with respect to that part of the collection of IRC no deductions are made.

However, in the specific case of special payments on account, it cannot be concluded that one is not before a truly interpretative law, because there was not consolidated jurisprudence in the sense of their deductibility from the collection resulting from autonomous taxation and, on the contrary, the solution adopted in no. 21 of article 88 could already previously be adopted by the courts, as occurred in diverse processes that took place at CAAD. Thus, it cannot be concluded that the authentic interpretation that is made in that article 88, no. 21, by virtue of article 135 of Law No. 7-A/2016, of 30 March, be violating the constitutional principle of legal certainty, concerning the part of that norm that reports to the non-deductibility of special payments on account from the collection of autonomous taxation (Decision 673/2015-T)".

And, unless I am mistaken, it is not Award no. 267/2017, of 31 May, which comes to modify this understanding.

In fact, as is quite well pointed out by Award no. 455/2018-T, of 25 February 2019,

"It is not overlooked that the Constitutional Court, in Award no. 267/2017, of 31-05-2017, declared "unconstitutional, by violation of the prohibition of creation of taxes with retroactive nature enacted in article 103, no. 3, of the Constitution, the norm of article 135 of Law No. 7-A/2016, of 30 March, to the extent that, by effect of the merely interpretative character attributed to it, it determines that the norm of article 88, no. 21, 2nd part, of the IRC Code - that number being added by article 133 of the cited Law - according to which, from the total amount resulting from autonomous taxation collected in a given year in the context of IRC, no deductions can be made of amounts paid as special payment on account in that same year, applies to fiscal years prior to 2016".

But, that decision of the Constitutional Court, as to the interpretation of ordinary law, is based on an erroneous interpretation of arbitral jurisprudence, as it considered that "there are no reasons to doubt the correctness of the characterization as innovative of the normative solution of article 88, no. 21, of the CIRC resulting from the amendment made by article 133 of the SOB 2016", invoking arbitral decisions in processes nos. 769/2014-T, 163/2014-T, 219/2015-T and 370/2015-T, when none of these decisions pronounce on the question of whether special payments on account are deductible from the collection of IRC derived from autonomous taxation.

In fact, processes nos. 769/2014-T and 219/2015-T relate to the deduction of tax benefits from the collection of IRC derived from autonomous taxation, a question which is substantially different from that which arises with respect to special payments on account, because tax benefits imply a legislative preference for the pursuit of the extrascal objectives that justify them, which override the remaining objectives of taxation.

Process no. 163/2014-T dealt with the question of the deductibility of amounts relating to autonomous taxation as charges for purposes of determining taxable profit and decided in the negative.

The only one of the aforementioned processes in which the question of the deductibility of special payments on account from the collection of IRC derived from autonomous taxation was raised, was process no. 370/2015-T, but the Arbitral Tribunal did not take cognizance of that question as it considered it moot.

On the contrary, on 31-05-2017, when the Constitutional Court handed down Award no. 267/2017, there was already arbitral jurisprudence in the sense that special payments on account are not deductible from the collection of IRC generated by autonomous taxation, in particular the decision of 30-12-2015, handed down in process no. 113/2015-T, and already after the entry into force of Law No. 7-A/2016, the following decisions, among others: of 28-04-2016, handed down in process no. 673/2015-T; of 04-05-2016, handed down in process no. 781/2015-T; of 13-05-2016, handed down in process no. 784/2015-T; of 14-06-2016, handed down in process no. 736/

Frequently Asked Questions

Automatically Created

Can Special Advance Payments (PEC) be deducted from the IRC tax liability generated by autonomous taxation rates in Portugal?
Yes, Special Advance Payments (PEC) can be deducted from IRC tax liability generated by autonomous taxation rates according to the claimant's argument. The legal basis rests on article 90 of the IRC Code, which establishes a single, unified collection mechanism for all forms of IRC, including autonomous taxation. Since autonomous taxation is collected together with IRC (though separately calculated), and article 90(2) permits deductions including PEC amounts from the tax collection, these deductions should apply to the total IRC liability encompassing autonomous taxation. No separate legislative provision excludes PEC deductions specifically from autonomous taxation collection, supporting the interpretation that all IRC collection follows the same deduction regime.
What is the legal basis for challenging IRC self-assessments related to autonomous taxation deductions through tax arbitration (CAAD)?
The legal basis for challenging IRC self-assessments related to autonomous taxation deductions through CAAD arbitration is article 2 and 10 of Decree-Law 10/2011 (RJAT - Legal Regime of Tax Arbitration). Critically, CAAD's material jurisdiction extends to self-assessments when preceded by a request for official review (revisão oficiosa), as established in doctrine, Supreme Tax Court (STA) jurisprudence, and CAAD case law. Taxpayers can cumulate related claims under article 3(1) RJAT when tax acts share the same factual and legal basis. In this case, both fiscal years involved identical legal questions regarding PEC deductibility from autonomous taxation, satisfying cumulation requirements. The arbitration request must be filed within the statutory deadline after the Tax Authority's decision on the official review request.
How do Portuguese taxpayers request official review (revisão oficiosa) of IRC self-assessments involving PEC deductions?
Portuguese taxpayers request official review (revisão oficiosa) of IRC self-assessments involving PEC deductions by submitting a formal application to the Tax and Customs Authority identifying the specific self-assessment acts, the fiscal years involved, and the legal grounds for revision. The request must clearly specify the claimed errors—in this case, the improper non-deduction of PEC amounts from autonomous taxation collection. Taxpayers should reference article 90 CIRC regarding the unified collection mechanism and article 90(2) concerning permissible deductions. The Tax Authority then issues a decision either accepting or partially/fully dismissing the revision request. If the decision is unfavorable, taxpayers can subsequently challenge it through CAAD arbitration within the applicable deadline, as occurred in this case with review requests ...2016... for fiscal years 2011 and 2012.
What are autonomous taxation rates (tributações autónomas) under Portuguese IRC and how do they interact with tax credits?
Autonomous taxation rates (tributações autónomas) under Portuguese IRC are special tax rates applied to specific expense categories independently of the company's taxable profit. They function as anti-abuse measures designed to discourage certain expenditures considered potentially unrelated to business activity or superfluous (such as vehicle expenses, representation costs, and certain benefits). These rates ensure minimum tax collection even from loss-making companies. While autonomous taxation has distinct characteristics—calculated separately based on specific expense items rather than overall taxable profit—it integrates into the IRC collection system. The interaction with tax credits like PEC is disputed: autonomous taxation appears in Model 22 tax returns alongside standard IRC, suggesting the unified collection mechanism of article 90 CIRC applies, meaning deductions including PEC should reduce total IRC liability encompassing both standard and autonomous taxation components.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when IRC overpayments result from denied PEC deductions to autonomous taxation?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) when IRC overpayments result from improperly denied PEC deductions to autonomous taxation, provided the overpayment is attributable to the Tax Authority's error rather than the taxpayer's conduct. Portuguese tax law recognizes the taxpayer's right to compensation when they bear financial prejudice from incorrect tax collection by the State. In this case, the claimant subsidiarily requested reimbursement of improperly paid tax plus compensatory interest. If the arbitral tribunal or court determines that PEC deductions should have been applied to autonomous taxation under article 90 CIRC, the resulting overpayment triggers the obligation to return the excess amount with compensatory interest calculated from the payment date until reimbursement, compensating the taxpayer for the State's temporary use of funds to which it had no legitimate entitlement.