CAAD 620/2017-T: State Surcharge (Derrama Estadual) IRC – Temporal Application of Article 87-A CIRC and Law 12-A/2010

Arbitral Decision

The arbiters Adm. Councillor Jorge Lopes de Sousa (arbitral president), Dr. Mariana Vargas and Dr. Augusto Vieira (arbiter members), appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 07-02-2018, agree as follows:

1. Report

A..., S.A., NIPC..., with headquarters at Rua..., no...., ...–... Lisbon, at the date of the facts designated B..., S.A. (hereinafter designated as "Claimant"), came pursuant to paragraph a) of no. 1 of Article 2 and Articles 10 and following of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters or "RJAT"), to submit a request for arbitral pronouncement seeking the declaration of illegality of the corporate income tax (IRC) collection act embodied in the collection statement no. 2013..., in the account settlement statement dated 27-05-2013 and no. 2013..., and in the statement of interest collection nos. 2013..., 2013... and 2013..., notified to the Claimant on 29-05-2013 and relating to the 2010 financial year.

The Claimant further requests reimbursement of the amount paid with indemnity interest.

The AUTHORITY FOR TAX AND CUSTOMS is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Authority for Tax and Customs on 28-11-2017.

Pursuant to the provisions of paragraph a) of no. 2 of Article 6 and paragraph b) of no. 1 of Article 11 of RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbiters of the collective arbitral tribunal the signatories, who communicated acceptance of the assignment within the applicable deadline.

On 18-01-2018 the parties were duly notified of this appointment, having not manifested the will to refuse the appointment of the arbiters, pursuant to the combined provisions of Article 11, no. 1, paragraphs a) and b) of RJAT and Articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of paragraph c) of no. 1 of Article 11 of RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 07-02-2018.

On 15-03-2018, the Authority for Tax and Customs submitted a response in which it raised the following exceptions:

– of lapse of the right of action;

– of lack of material jurisdiction of the Arbitral Tribunal to assess the decision of official revision, as well as the request for condemnation of the Authority for Tax and Customs to calculate IRC according to a determined calculation of the state surcharge;

– of lis pendens or the need for suspension of the present proceedings until a decision is issued in the context of a judicial review process.

The Authority for Tax and Customs further argued that the request should be judged unfounded.

By order of 15-03-2018, a hearing was dispensed with and it was decided that the case would proceed with written pleadings.

The parties submitted pleadings.

The arbitral tribunal was regularly constituted, in accordance with the provisions of Articles 2, no. 1, paragraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January.

The parties are properly represented, enjoy legal personality and capacity and have standing (Articles 4 and 10, no. 2, of the same decree and Article 1 of Order no. 112-A/2011, of 22 March).

The case does not suffer from any nullities.

It is necessary to assess prioritarily the exceptions raised by the Authority for Tax and Customs, beginning with those of lack of jurisdiction (Article 13 of the Code of Procedure in Administrative Courts).

However, for its assessment it is convenient to establish the factual basis.

2. Facts

2.1. Proven Facts

• The Claimant is subject to the general tax regime, for IRC purposes, adopting a tax period comprised between 1 January and 31 December of each year.

• On 26-05-2012, the Claimant proceeded with the submission of the [substitute] income declaration for IRC relating to the 2010 financial year, in which it determined an amount of state surcharge of € 895,971.80 (document no. 2, attached with the request for arbitral pronouncement, whose content is deemed to be reproduced).

• Following an inspection action, initiated by the Authority for Tax and Customs, for this period, the Claimant was notified on 29-05-2013 of the additional IRC collection no. 2013... and also of the account settlement statement dated 27/05/2013 and no. 2013..., and of the statement of interest collections nos. 2013..., 2013... and 2013..., acts which resulted in the final (official) determination of the tax due for the financial year and the correction of the amount of state surcharge payable to € 1,429,770.22;

• On 23-05-2017, the Claimant submitted a request for official revision of the said collection no. 2013..., in which it requested that "the state surcharge created by Law no. 12-A/2010, of 20 June, apply only to 'the part of taxable profit corresponding to the period elapsed from its entry into force'", which, strictly speaking, means that it applies, in the concrete case, to exactly half of the quantum considered in the determination of the IRC collected" (document no. 3 attached with the request for arbitral pronouncement, whose content is deemed to be reproduced);

• By official letter of 03-08-2017, the Claimant was notified of the draft dismissal of the request for official revision, on the basis of Information no. .../2017, which forms part of document no. 4 attached with the request for arbitral pronouncement, whose content is deemed to be reproduced, in which, among other things, the following is stated:

III. PROCEDURAL REQUIREMENTS

1. Having examined the present file, we are immediately able to verify that there is no reason, that is to say, exception, neither dilatory nor peremptory, capable of obstructing the examination of the merits of this case, given that:

• The Claimant has tax personality and capacity, under the terms provided for in Articles 15 and 16, both of the General Tax Law (LGT), as well as in Article 3 of the Code of Tax Procedure and Process (CPPT), all combined with the provisions of Article 5 of the Commercial Companies Code (CSC);

• The present procedure of official revision of a tax act under analysis is equally suitable to react against the tax collection act above identified, under the terms provided for in no. 1 of Article 78 of the LGT;

• The Claimant is an interested party in the procedure, having standing for its submission under the terms provided for in Article 18 of the LGT and no. 1 of Article 9 of the CPPT;

• The application on which the present request for official revision of a tax act is based is, in effect, timely, as it was submitted on 25 May 2017, in consonance with the established in the mentioned Article 78 of the LGT; and

• Finally, it is also verified that we are not aware of any of the circumstances provided for either in paragraphs a) and b) of no. 2 of Article 56 of the LGT, or in no. 2 of Article 68 and in nos. 3 and 4 of Article 111, all of the CPPT.

(...)

IV. ANALYSIS OF THE REQUEST

1. Having examined the content of the initial petition submitted by the Claimant, and considering that, in the file, the issue is to determine whether the tax act to be reviewed suffers or not from the defects of illegality attributed to it, we then assess the merit of the arguments brought to our attention here. This pari passu with the itinerary followed by the petitioner.

That said,

IV.I. On the calculation of tax

IV.I.I. On the state surcharge

IV.I.I.I. Of the arguments of the Claimant

1. The Claimant begins by explaining that in the income declaration "Form 22", as a substitute, it determined a value of € 895,971.80 (eight hundred ninety-five thousand, nine hundred seventy-one euros and eighty cents) as state surcharge.

2. By virtue of an administrative tax inspection procedure, in which corrections were made to the taxable matter, the value of the state surcharge was increased to € 1,429,770.22 (one million, four hundred twenty-nine thousand, seven hundred seventy euros and twenty-two cents).

3. However, the Claimant understands that, in view of the effective date of Law no. 20-A/2010, of 30 June, which added Article 87-A to the Corporate Income Tax Code (CIRC), under the heading "State Surcharge", the value of this tax should apply only to income obtained after 1 July 2010, under penalty of being a retroactive law and therefore unconstitutional under no. 3 of Article 103 of the Constitution.

4. The problem arises with periodic taxes, according to it, since the underlying obligation is constituted over a period of time which, in the concrete case, only one of its parts is subject to the new law.

5. The Claimant further adds that periodic taxes "presuppose a renewal of the tax facts that succeed in a certain period of time", whereby it cannot be understood that the taxable event is instantaneous.

6. Faced with this situation, the Claimant understands that, although we are facing a retroactivity of the third degree, the pro rata temporis rule should be applied, following the doctrinal interpretation of the provisions of no. 2 of Article 12 of the LGT.

IV.I.I.II. Assessment

1. In our view, the relevant question here at issue concerns knowing the moment in which the fact that generates the obligation to pay tax as state surcharge is verified.

Let us see:

1. The state surcharge, established by Law no. 12-A/2010, of 30 June, entered into force on 1 June of the same year, was approved within a set of measures whose objective was "(...) to strengthen and accelerate the reduction of the excessive deficit and the control of the growth of public debt provided for in the Stability and Growth Programme (PEC)", having been added to the CIRC a set of rules providing for the conditions of its collection and the form of payment."

2. The nature of this tax is defined by the fact that its collection is determined as a function of the value of taxable profit, presenting itself therefore as necessarily linked to the amount of income obtained for purposes of the corporate income tax.

3. To confirm this statement, no. 1 of Article 87-A of the CIRC provides that "(...) on the part of the taxable profit exceeding € 1,500,000 subject to and not exempt from corporate income tax (. . .), the additional rates contained in the following table apply (. . .)".

4. Similarly to what happens with IRC itself, the state surcharge is a tax of successive formation in that its taxable base is constructed from facts occurring over a determined period of time.

However,

1. The legislator understood it necessary to establish a moment in which the tax subject is bound by the obligation to collect the tax, that is, to establish the tax legal relationship which is constituted with the tax fact, as established by Article 36 of the LGT.

2. As mentioned previously, the state surcharge was added to the CIRC by Law no. 12-A/2010, of 30 June, establishing the requirements for its determination, collection and forms of payment, whereby the general considerations on its nature and taxable event fall to the rules provided for in the said Code (as well as the remaining tax legislation), in particular, Article 8 whose heading is "tax period", where, in its no. 9 "the taxable event is considered to occur on the last day of the tax period", in other words, the obligation to pay the tax is constituted at that moment.

Therefore,

1. Having regard to the fact that Law no. 12-A/2010, of 30/06, entered into force before the moment of verification of the taxable event, we understand that the tax is due in full, that is, not subject to being divided and determined proportionally, given that we are faced not with a tax of single obligation, but of successive formation.

2. This understanding is supported by the very position of the Constitutional Court ("TC"), which we shall analyze below, which stated at various times that it was not the intention of the legislator that the principle of non-retroactivity would encompass what is considered to be improper or inauthentic retroactivity.

3. The main jurisprudence of the TC regarding improper retroactivity arises in the context of the analysis of autonomous taxation whose logical construction is based on the premise that it corresponds to a reality of a distinct nature, constituting itself as an indirect and instantaneous tax that taxes expenditure and not income.

4. Concomitantly, in this case regarding autonomous taxation, each expenditure represents an autonomous taxable event to which the taxpayer is subject, whether or not it has taxable income under corporate income tax at the end of the respective tax period, distancing itself from "autonomous taxation" from the corporate income tax itself and that same taxable event which gives rise to the autonomous and instantaneous tax, that is, it is exhausted in the act of realization of certain expenditure although the determination of the amount of tax will be carried out at the end of a determined tax period.

5. As established in the Constitutional Court Decision no. 85/2013, "(...) what is relevant, in view of the constitutional principles stated, is not the moment of collection of a tax, but rather the moment in which the act occurs that determines the payment of that tax. It is this act that will give rise to the constitution of a tax obligation, whereby it is at that time, in obedience to the principle of legality, in the aspect founded by the principle of protection of legitimate expectations, that it is required, as a preventive measure, that the law that provides for the creation or aggravation of that tax is already in force, so that the citizen can equate the tax consequences of his conduct."

6. Regarding the principle of non-retroactivity embodied in our Fundamental Law, the TC says, in Decision no. 617/2012, of 19 December 2012, that "(...) has followed the understanding that this prohibition of retroactivity, in the field of tax law, is only directed at authentic retroactivity, encompassing only those cases in which the taxable fact that the new law intends to regulate has already produced all its effects under the old law, excluding from its scope of application the situations of retrospectivity or improper or inauthentic retroactivity, that is, those situations in which the law is applied to past facts but whose effects still persist in the present, as happens when the tax rules that produced an aggravation of the tax position of taxpayers in relation to tax facts that did not occur entirely under the old law and continue to form themselves, still in the course of the same tax year, in the validity of the new law."

7. In the case of IRC, it is stated in the same decision: "(...) we are faced with an annual tax, in which each income received is not taxed per se, but rather the combination of all income obtained in a determined year, the law considering that the taxable event is deemed to occur on the last day of the tax period (cf. Article 8, no. 9, of the CIRC)."

8. In our view, this perspective is perfectly applicable to the determination of the state surcharge since, as mentioned above, this tax assumes a nature of successive formation through what constitutes its taxable base.

Proceeding,

1. In turn, in Decision no. 399/2010, of 27 October 2010, the TC affirms that the doctrine distinguishes various levels of retroactivity: maximum degree if "the circumstance that the new law intends to apply to past and already fully consolidated taxable facts; it will have an intermediate degree of retroactivity the law applicable to previous taxable facts but whose effects are still produced at the moment of entry into force of the new law."

2. Regarding the problem of changing the tax rate during the tax year, the legislator intending its application to income earned during the year, even before the entry into force of the law, "(...) the following opinions can be conceived, in summary: i) the income tax is qualifiable as a periodic tax whereby the tax period only stabilizes at the end of the tax year, on 31 December of each year, with retroactivity thus ruled out; ii) the change in the tax rate can only be applied to income from the following year, under penalty of retroactivity, since the tax rate must be defined at the initial moment of the tax year and, therefore, on 1 January of each year; iii) a pro rata temporis application of the new rate is admissible, that is, only to income earned after its entry into force (See NUNO SÁ GOMES, Manual of Tax Law, Vol. II, 1997, p. 417 to 420)."

Therefore,

1. The definition of a taxable fact and the moment in which it occurs becomes very relevant to the assessment of retroactivity since the LGT establishes, in no. 1 of Article 36, that "(...) the tax legal relationship is constituted with the taxable fact" and, in turn, as mentioned previously, the CIRC determines that this same fact is verified on the last day of the tax period.

2. Thus, it is stated in the same Decision, the taxable fact is not confused with the legal relationship and, therefore, regarding the rules under assessment, considering "the doctrinal option set out in iii), the taxable fact can be isolated at the moment of receipt of income individually considered."

3. Consequently, "(...) one case in which the taxable fact that the new law intends to regulate has already produced all its effects under the old law and another case in which the taxable fact occurred under the old law, but its effects, namely those relating to collection and payment, are not yet entirely exhausted will not necessarily have the same constitutional disvalue, since the first situation is from the point of view of the possible affectation of the taxpayer's legal situation more serious than the second. And these two cases are also differentiated from a third in which the taxable fact that the new law intends to regulate in its entirety did not occur entirely under the old law, rather continues to form in the validity of the new law, as happens in the present case."

4. In the opinion of the TC judges, "(...) from the preparatory works of the 1997 constitutional revision it is derived, on the one hand, that the legislator of the revision only intended to include, in no. 3 of Article 103 of the Constitution, the prohibition of authentic retroactivity, proper or perfect of tax law, which is not contradicted by the letter of the rule, since the constitutional text only refers to retroactive nature tout court. On the other hand, (...), that it was not intended to integrate into the rule the situations in which the taxable fact that the new law intends to regulate did not occur entirely under the old law, rather continuing to form in the validity of the new law, at least when direct taxes relating to income are concerned (as is clearly the case in the present case).

5. Given this, the state surcharge must, therefore, apply to the entire financial year, contrary to what the Claimant intends.

6. The Claimant's claim cannot, therefore, be sustained.

V. CONCLUSION

In accordance with the above exposition, we propose that the revision request formulated in the present case be dismissed in accordance with the content of the "summary table", beginning with that better identified in the opening of this opinion, with all legal consequences.

• By order of 29-08-2017, issued by the Head of the Division of the Unit of Large Taxpayers, the request for official revision was dismissed (document no. 5 attached with the request for arbitral pronouncement, whose content is deemed to be reproduced);

• On 27-11-2017, the Claimant submitted the request for arbitral pronouncement which gave rise to the present case.

2.2. Facts Not Proven and Justification of the Determination of the Facts

There are no material facts for the decision of the case that have not been proven.

The proven facts are based on the documents attached by the Claimant with the request for arbitral pronouncement and in the administrative file.

There is no controversy over the facts.

3. Question of Lack of Material Jurisdiction of the Arbitral Tribunal to Assess the Decision of Official Revision

The Authority for Tax and Customs argues, in summary, the following:

– the Claimant, on 26-05-2012, proceeded with the substitute income declaration for IRC relating to the 2010 financial year, in which it determined an amount of state surcharge of € 895,971.80;

– following a subsequent inspection action for this period it was notified on 29-05-2013 of the additional IRC collection no. 2013... and account settlement statement, dated 27-05-2013 and no. 2013..., and in the statement of interest collections nos. 2013..., 2013... and 2013...;

– the Claimant submitted on 23-05-2017 a request for official revision of the additional collection;

– the Claimant states that part of the value of the state surcharge determined as a result of the corrections made by the Authority for Tax and Customs to the taxable profit of the company is being contested through the judicial review of those corrections;

– binding the Authority for Tax and Customs to arbitral protection presupposes a limitation of the situations in which it can fully decide whether or not to lodge an appeal from an unfavorable judicial decision, that is, the power to choose between definitively abandoning the collection of the tax credit or adopting the behavior potentially adequate to pursue it;

– it is constitutionally forbidden, by virtue of the constitutional principles of the rule of law and the separation of powers (cf. Articles 2 and 111, both of the Constitution), as well as the right of access to justice (Article 20 of the Constitution) and legality [cf. Articles 3, no. 2, 202 and 203 of the Constitution and also Article 266, no. 2, of the Constitution], in its corollary of the principle of indisposability of tax credits inherent in Article 30, no. 2 of the LGT, an interpretation that expands the binding of the Authority for Tax and Customs to arbitral protection as legally fixed;

– respect for the will expressed in the binding to tax arbitration, being a factor of certainty and legal security represents, also, the effectuation of the consequences intended by the exercise of action of the parties in dispute, which cannot be isolated from the aforementioned regulatory provisions of constitutional protection, under penalty of such presupposing an (unconstitutional) power of the interpreter-judge in delimiting the powers of the State in the privatization of the exercise of justice, especially when the systematic possibility of appeal in tax arbitrations is not admitted;

– whereby, an interpretation that determines that Article 2 of RJAT includes the assessment of the arbitral requests formulated here by the claimant would appear to be unconstitutional, when the letter and spirit of the rule do not permit it;

– in the concrete case, the Claimant determined a certain value of state surcharge and did not resort, in time, to the gracious complaint provided for in no. 1 of Article 131 of the CPPT which, in the case, was necessary since the Claimant would also raise factual issues, as is demonstrated by the official revision submitted;

– official revision, under the terms of Article 78 of the LGT, cannot replace the gracious complaint provided for in Article 131 of the CPPT, especially when recourse thereto is made beyond the 2-year deadline provided for in that article;

– the Arbitral Tribunal has no jurisdiction to assess and decide the question of whether the dismissal of the request for official revision violated, or not, Article 78 of the LGT and whether the prerequisites for the application of such a mechanism were, or not, properly applied by the Authority for Tax and Customs.

In the case at issue, there was a self-assessment and, subsequently, an additional collection, which replaced it.

Only in relation to the self-assessment can the need for gracious complaint arise, under the terms of Article 131 of the CPPT and Article 2 of Order no. 112-A/2011, of 22 March.

In the case at issue, an act of additional collection is being contested, whereby there is no requirement for prior gracious complaint.

On the other hand, the formula "declaration of illegality of acts of collection of taxes, self-assessment, retention at source and payment on account", used in paragraph a) of no. 1 of Article 2 of RJAT does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases in which an act of one of those types is directly contested. In truth, the illegality of collection acts can be declared jurisdictionally as a corollary of the illegality of a second-degree act, which confirms a collection act, incorporating its illegality.

The inclusion in the competencies of arbitral tribunals operating at CAAD of cases in which the declaration of illegality of acts referred to therein is made through the declaration of illegality of second-degree acts, which are the immediate object of the contested claim, results with certainty from the reference that in that rule is made to acts of self-assessment, retention at source and payment on account, which are expressly referred to as included among the competencies of arbitral tribunals. Indeed, with respect to these acts it is imposed, as a rule, the necessary gracious complaint provided for in Articles 131 to 133 of the CPPT, whereby in these cases the immediate object of the contested proceeding is, as a rule, the second-degree act that assesses the legality of the collection act, an act which, if it confirms it, must be annulled to obtain the declaration of illegality of the collection act. The reference that in paragraph a) of no. 1 of Article 10 of RJAT is made to no. 2 of Article 102 of the CPPT, in which the challenge of acts dismissing gracious complaints is provided for, dispels any doubts that cases in which the declaration of illegality of acts referred to in paragraph a) of that Article 2 of RJAT has to be obtained in the sequence of the declaration of illegality of second-degree acts are encompassed in the competencies of arbitral tribunals operating at CAAD.

The Authority for Tax and Customs argues that "it is constitutionally forbidden, by virtue of the constitutional principles of the rule of law and the separation of powers (cf. Articles 2 and 111, both of the Constitution), as well as legality (cf. Articles 3, no. 2, and 266, no. 2, both of the Constitution), as a corollary of the principle of indisposability of tax credits inherent in Article 30, no. 2 of the LGT, the interpretation, even if extensive, that expands the binding of the Authority for Tax and Customs to arbitral protection as legally fixed, as such necessarily presupposes the consequent expansion of the situations in which it is obligatorily submitted to such a regime, renouncing in that same measure the full jurisdictional appeal [cf. Article 124, no. 4, subparagraph h) of Law no. 3-B/2010 and Articles 25 and 27 of RJAT, which imposes a restriction on appeals from the arbitral decision]".

But the Constitution does not impose that the interpretation of regulatory diplomas must be confined to the literal tenor and, in the case at issue, as explained, properly interpreted the rules of Article 2, no. 1, of RJAT and Article 2 of Order no. 112-A/2011, of 22 March, it is concluded that the binding of the Authority for Tax and Customs to arbitral tribunals operating at CAAD encompasses cases in which acts of self-assessment were preceded by requests for official revision. Therefore, the interpretation that was made did not increase the binding of the Authority for Tax and Customs in relation to what is regulated, but rather defined exactly the binding that results from the regulatory decree, properly interpreted.

On the other hand, in interpreting and applying legal rules, this Arbitral Tribunal is performing the function constitutionally attributed to it (Articles 202, no. 1, 203 and 209, no. 2, of the Constitution), whereby there is no way to envision how there could be a violation of the principles of separation of powers, the rule of law and legality, as the decided by this tribunal evidences, precisely, its perfect concretization: the Assembly of the Republic authorized the Government to legislate (Article 124 of Law no. 3-B/2010, of 28 April); the Government, in the exercise of legislative powers, issued the RJAT; the Administration, through two members of the Government, issued Order no. 112-A/2011, of 22 March; the Arbitral Tribunal interpreted and applied the referred regulatory diplomas. It is, manifestly, the concretization of the principle of separation of powers.

As for the invocation of the principle of indisposability of tax credits, defined in Article 30, no. 2, of the LGT, in which it is stated that "the tax credit is indisposable, only being able to set conditions for its reduction or extinction with respect for the principle of equality and tax legality", it would certainly be a lapse, since in deciding on its jurisdiction the Arbitral Tribunal is not committing any act of disposition of any credit.

Furthermore, the principle of indisposability of tax credits applies to the Administration and not to the Courts, as understood by the Constitutional Court, in the wake of the generality of the doctrine. ([1])

Different from this is the possible annulment of an illegal collection, but that has nothing to do with the availability of any credit, but rather with the right to contentious challenge of harmful acts, which is constitutionally ensured (Article 268, no. 4, of the Constitution) and is a fundamental right of taxpayers in a rule of law state (Articles 2 and 20, no. 1, of the Constitution).

Thus, the interpretation of paragraph a) of Article 2 of Order no. 112-A/2011 that is adopted here, rather than being materially unconstitutional, is the only one that ensures its constitutionality, in view of the provisions of Articles 103, no. 2, 112, no. 5, 165, no. 1, paragraph i), and 198, paragraph b), of the Constitution, as mentioned above. That is, it is this interpretation in conformity with the Constitution, in which one recognizes in the rule "a meaning which, although not apparent or not resulting from other elements of interpretation, is the necessary meaning and what becomes possible by virtue of the conforming force of the Fundamental Law. And there are diverse paths that, for this purpose, are followed and diverse results to which one arrives: from extensive or restrictive interpretation to reduction (eliminating the unconstitutional elements of the rule or the act)." ([2])

There is therefore no lack of jurisdiction of the Arbitral Tribunal to assess decisions dismissing requests for official revision that assess the legality of both acts of self-assessment and acts of additional collection.

In this sense, see the decision of the Central Administrative Court of the South of 27-04-2017, issued in case no. 08599/15.

On the other hand, in the case at issue, the obstacle to jurisdiction that could exist if the decision of the request for official revision did not entail the assessment of the legality of the additional collection act does not occur.

In truth, if the decision of official revision was limited to assessing whether the requirements for the use of the procedural means provided for in Article 78 of the LGT were met, one would be faced with an act in tax matters that did not assess the legality of a collection act, whose legality could not be assessed in judicial challenge proceedings, as results from paragraph d) of no. 1 of Article 97 of the CPPT, and consequently could not be assessed in arbitral proceedings, whose field of application is limited to that of judicial challenge proceedings.

But that is not what occurred, as the Authority for Tax and Customs did not limit itself to verifying whether the prerequisites on which the possibility of revision depends were met and even expressly declared that these prerequisites were met:

III. PROCEDURAL REQUIREMENTS

Having examined the present file, we are immediately able to verify that there is no reason, that is to say, exception, neither dilatory nor peremptory, capable of obstructing the examination of the merits of this case, given that:

• The Claimant has tax personality and capacity, under the terms provided for in Articles 15 and 16, both of the General Tax Law (LGT), as well as in Article 3 of the Code of Tax Procedure and Process (CPPT), all combined with the provisions of Article 5 of the Commercial Companies Code (CSC);

• The present procedure of official revision of a tax act under analysis is equally suitable to react against the tax collection act above identified, under the terms provided for in no. 1 of Article 78 of the LGT;

• The Claimant is an interested party in the procedure, having standing for its submission under the terms provided for in Article 18 of the LGT and no. 1 of Article 9 of the CPPT;

• The application on which the present request for official revision of a tax act is based is, in effect, timely, as it was submitted on 25 May 2017, in consonance with the established in the mentioned Article 78 of the LGT; and

• Finally, it is also verified that we are not aware of any of the circumstances provided for either in paragraphs a) and b) of no. 2 of Article 56 of the LGT, or in no. 2 of Article 68 and in nos. 3 and 4 of Article 111, all of the CPPT.

Thus, one is faced with an act of decision on the request for official revision in which the verification of the requirements of revision is not questioned and the legality of the collection act is assessed, in points 17 to 39 of Information no. .../2017, which forms part of document no. 4 attached with the request for arbitral pronouncement.

Therefore, the possible obstacle invoked by the Authority for Tax and Customs that this Arbitral Tribunal exceeds its jurisdiction by having to assess the application of Article 78 of the LGT does not occur: this application, in this case, was made and it is not a matter of controversy that the requirements of that application were met, whereby it is a matter on which this Arbitral Tribunal does not have to pronounce itself.

The exception of lack of jurisdiction of the Arbitral Tribunal to assess the legality of the decision dismissing the request for official revision, which maintained the additional collection, is thus unfounded.

4. Question of Lack of Jurisdiction to Assess the Request for Condemnation of the Authority for Tax and Customs to Calculate IRC According to a Determined Calculation of the State Surcharge

In the legislative authorization on which the Government based itself to approve the RJAT, granted by Article 124 of Law no. 3-B/2010, of 28 April, it is proclaimed, as a primary guiding principle of the institution of arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, that "the tax arbitral process must be an alternative procedural means to the judicial challenge procedure and to the action for the recognition of a right or legitimate interest in tax matters".

The judicial challenge procedure is a procedural means that has as its object an act in tax matters, aiming to assess its legality and decide whether it should be annulled or its nullity or non-existence declared, as results from Article 124 of the CPPT.

From the analysis of Articles 2 and 10 of RJAT, it is verified that the competencies of arbitral tribunals operating at CAAD only included questions of the legality of collection acts or acts of determination of the taxable matter and second-degree acts that have as their object the assessment of the legality of acts of those types, acts whose assessment is inserted in the scope of judicial challenge proceedings, as results from paragraphs a) to d) of no. 1 of Article 97 of the CPPT.

That is, it is found that the legislator did not implement in the legislative authorization concerning the part in which the extension of the competencies of arbitral tribunals was foreseen questions that are assessed in tax courts through action for recognition of a right or legitimate interest.

But, in harmony with the intention underlying the legislative authorization to create an alternative means to the judicial challenge procedure, it should be understood that, regarding requests for declaration of illegality of acts of the types referred to in its Article 2, arbitral tribunals operating at CAAD have the same competencies that courts have in judicial challenge proceedings, within the limits defined by the binding that the Authority for Tax and Customs came to make through Order no. 112-A/2011, of 22 March, under Article 4, no. 1, of RJAT.

Although the judicial challenge procedure has as its primary object the declaration of nullity or non-existence or the annulment of acts of the types referred to, it has been peacefully understood that condemnations of the Tax Authority to pay indemnity interest and compensation for wrongful guarantee can be rendered therein.

In truth, despite there being no express rule to that effect, it has been peacefully understood in tax courts, since the entry into force of the codes of the tax reform of 1958-1965, that a request for condemnation for payment of indemnity interest can be combined in judicial challenge proceedings with the request for annulment or declaration of nullity or non-existence of the act, as in those codes it is stated that the right to indemnity interest arises when, in gracious complaint or judicial proceedings, the administration is convinced that there was error of fact attributable to the services. This regime was subsequently generalized in the Code of Tax Procedure and Process, which established in no. 1 of its Article 24 that "there shall be a right to indemnity interest in favor of the taxpayer when, in gracious complaint or judicial proceedings, it is determined that there was error attributable to the services", then in the LGT, in whose Article 43, no. 1, it is established that "indemnity interest is due when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due" and, finally, in the CPPT in which it was established, in no. 2 of Article 61 (to which corresponds no. 4 in the version given by Law no. 55-A/2010, of 31 December), that "if the decision recognizing the right to indemnity interest is judicial, the period for payment is counted from the beginning of the period for its spontaneous execution".

Thus, similarly to what happens with tax courts in judicial challenge proceedings, this Arbitral Tribunal is competent to assess requests for reimbursement of amounts paid and for payment of indemnity interest.

It is also unequivocal that in judicial challenge proceedings it is possible to assess requests for condemnation for payment of compensation for wrongful guarantee provision, Article 171 of the CPPT establishes that "compensation in case of bank guarantee or equivalent wrongfully provided shall be requested in the proceedings in which the legality of the executable debt is contested" and that "compensation must be requested in the complaint, challenge or appeal or, in case its ground is subsequent, within 30 days of its occurrence".

Thus, the judicial challenge procedure encompasses the possibility of condemnation for payment of wrongful guarantee and is even, in principle, the appropriate procedural means for formulating such request, which is justified by evident reasons of procedural economy, as the right to compensation for wrongful guarantee depends on what is decided regarding the legality or illegality of the collection act.

The request for constitution of the arbitral tribunal has as a corollary the discussion of the "legality of the executable debt" now taking place in the arbitral proceedings, whereby, as results from the express tenor of that no. 1 of the referred Article 171 of the CPPT, it is also the arbitral proceedings that are appropriate to assess the request for compensation for wrongful guarantee.

But, in the absence of any legal provision that allows concluding otherwise, the scope of judicial challenge proceedings and arbitral proceedings is restricted to questions of the legality of acts of the types referred to in Article 2 that are encompassed by the binding that was made in Order no. 112-A/2011, not being able, in particular, to define the terms in which annulatory judgments that may be rendered are to be executed.

In truth, as the Authority for Tax and Customs argues, the competency to execute the judgments rendered by arbitral tribunals operating at CAAD falls, in the first place to the Authority for Tax and Customs itself, as results from the express tenor of no. 1 of Article 24 of RJAT in stating that "the arbitral decision on the merits of the claim of which no appeal or challenge may be made binds the tax administration from the end of the deadline provided for appeal or challenge, this administration having to...".

On the other hand, should there be disagreement between the Authority for Tax and Customs and the tax subjects regarding the manner of execution of judgments, it is the tax courts that are competent for its assessment, since competencies in judgment execution proceedings are not conferred on arbitral tribunals operating at CAAD and arbitral tribunals dissolve following the arbitral decision, as results from Article 23 of RJAT.

Thus, it is concluded that the Authority for Tax and Customs is right in arguing that this Arbitral Tribunal has no competency to assess the request for calculation of the state surcharge.

However, this lack of competency to assess one of the requests, there being others for which this Arbitral Tribunal is competent (the requests for annulment of the additional collection and the order dismissing the gracious complaint), has only the consequence that the request for which the Tribunal lacks competency is considered "without effect", as is inferred from what, although for another purpose, is referred to in no. 4 of Article 186 of the CPC, in alluding to situations in which "one of the requests is left without effect due to lack of jurisdiction of the court".

Thus, the exception of lack of jurisdiction as to the said request for condemnation of the Authority for Tax and Customs to calculate IRC according to a determined calculation of the state surcharge is founded, whereby the Authority for Tax and Customs is absolved of the instance as to this request, without prejudice to the examination of the remaining requests.

5. Question of Lapse of the Right of Collection

The formula "declaration of illegality of acts of collection of taxes", used in paragraph a) of no. 1 of Article 2 of RJAT does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases in which an act of one of those types is directly contested, as the illegality of collection acts can be declared jurisdictionally as a corollary of the illegality of a second-degree act, which confirms a collection act, incorporating its illegality, as moreover evidenced by Article 10, paragraph a), of RJAT, in providing for the counting of the deadline for submission of request for constitution of arbitral tribunal from the moments in which acts of second or third degree susceptible to autonomous challenge are practiced [in which are included "the dismissal, express or tacit and total or partial, of complaints, appeals or requests for revision or amendment of collection", to which refers paragraph d) of no. 2 of Article 95 of the LGT].

The Claimant submitted on 23-05-2017 a request for official revision of the additional collection of IRC no. 2013..., which was dismissed by order notified to the Claimant by official letter issued on 30-08-2017 (documents nos. 3 and 5 attached with the request for arbitral pronouncement, whose contents are deemed to be reproduced).

The request for arbitral pronouncement was submitted by the Claimant on 28-11-2017.

As results from the opening of the request for arbitral pronouncement, this refers to "Administrative Procedure for Official Revision no. ...2017...", whereby it is unequivocal the interpretation that, with the request for arbitral pronouncement, the Claimant intends to challenge the decision rendered in that procedure, maintaining in the legal order the act of additional collection.

Moreover, the Authority for Tax and Customs perfectly perceived that the act which is the immediate object of the request for arbitral pronouncement is that of dismissal of the request for official revision, as is unequivocally concluded from the facts of having attached to the file the administrative proceedings relating to the official revision and not that of additional collection and having expressly pronounced itself on the decision of that proceeding.

In accordance with the provisions of Article 10, no. 1, paragraph a) of RJAT, the deadline for submission of request for constitution of arbitral tribunal is of "90 days, counted from the facts provided for in nos. 1 and 2 of Article 102 of the Code of Procedure and Process in Tax Matters, as to acts susceptible to autonomous challenge".

The act of dismissal of request for official revision is susceptible to autonomous challenge [Article 95, no. 2, paragraph d) of the LGT and Article 97, no. 1, paragraph d), of the CPPT], whereby it is from its notification that the deadline for challenging the collection act, which was confirmed therein, is counted.

In the case at issue, the request for constitution of arbitral tribunal was submitted before the expiration of the 90-day deadline following notification of the decision dismissing the request for official revision, whereby it must be concluded that it was timely submitted.

The exception of lapse of the right of action is thus unfounded.

6. Questions of Lis Pendens and Suspension of the Instance Due to Pending Judicial Challenge Proceedings

The Claimant filed a judicial challenge to the additional collection of IRC no. 2013... and intends that the Arbitral Tribunal determine that the state surcharge apply only to half of the quantum considered in the determination of the IRC collected.

The Authority for Tax and Customs argues that lis pendens occurs between the present proceedings and the judicial challenge proceedings, which it does not identify, despite being a party thereto.

As results from Articles 580 and 581 of the CPC, subsidiarily applicable, by force of the provisions of Article 29, no. 1, paragraph e), of RJAT, the exception of lis pendens presupposes the repetition of a cause, it being considered that there is repetition when there is between the two proceedings identity as to the parties, the claim and the cause of action.

In the case at issue, it has not been proven what is the object of the judicial challenge proceedings, in particular that the defect attributable to the act is invoked in competency cause of action in the present proceedings, but it results from the request for official revision and the request for arbitral pronouncement that the defect attributed to the additional collection act in the present proceedings was not attributed to it in the judicial challenge proceedings, as the Claimant invokes that it was the knowledge of the content of the arbitral decision rendered, at CAAD, on 23/01/2017, in case no. 432/2016-T, that led it to request official revision.

In any case, as results from the provisions of Articles 3, no. 2, and 13, no. 4, of RJAT, it is permitted to tax subjects to challenge the same collection act, with distinct grounds, through, cumulatively, judicial challenge and arbitral proceedings.

Thus, from the start, it not being proven that the collection act was challenged in the judicial challenge proceedings to which the Authority for Tax and Customs alludes with the same grounds that are used in the present arbitral proceedings, it cannot be considered demonstrated that lis pendens occurs.

For the same reason that the aforementioned cumulation of proceedings is possible, the suspension of the instance in the present proceedings is not justified.

The exception of lis pendens is thus unfounded and the request for suspension of the instance is dismissed.

5. Matters of Law

Law no. 12-A/2010, of 20 June, approved a "set of additional budgetary consolidation measures aimed at strengthening and accelerating the reduction of excessive deficit and the control of the growth of public debt provided for in the Stability and Growth Programme (PEC)". Among those measures, was included the creation of a state surcharge on the part of taxable profit exceeding € 2,000,000, which was accomplished through the addition to the CIRC of Articles 87-A, 104-A and 105-A, which establish the following:

Article 87-A

State Surcharge

1 - On the part of taxable profit exceeding (euro) 2,000,000 subject to and not exempt from corporate income tax determined by tax subjects resident in Portuguese territory who exercise, as a principal activity, an activity of a commercial, industrial or agricultural nature and by non-residents with a permanent establishment in Portuguese territory, an additional rate of 2.5% applies.

2 - When the special regime for taxation of groups of companies is applicable, the rate referred to in the previous number applies to the taxable profit determined in the periodic individual declaration of each of the companies in the group, including that of the parent company.

3 - The tax subjects referred to in the previous numbers must proceed with the collection of the additional surcharge in the periodic income declaration to which Article 120 refers.

Article 104-A

Payment of State Surcharge

1 - The entities that exercise, as a principal activity, an activity of a commercial, industrial or agricultural nature and non-residents with a permanent establishment must proceed with the payment of the state surcharge as follows:

a) In three additional payments on account, in accordance with the rules established in paragraph a) of no. 1 of Article 104;

b) Until the last day of the deadline set for the sending of the periodic income declaration to which Article 120 refers, for the difference existing between the total value of the state surcharge calculated therein and the amounts paid on account under Article 105-A;

c) Until the day of sending of the substitute declaration to which Article 122 refers, for the difference existing between the total value of the state surcharge calculated therein and the amounts already paid.

2 - Reimbursement to the tax subject shall take place, for the respective difference, when the value of the state surcharge determined in the declaration is lower than the value of additional payments on account.

3 - The rules for payment of state surcharge not referred to in this article shall apply to the rules for payment of corporate income tax, with the necessary adaptations.

Article 105-A

Calculation of Additional Payment on Account

1 - The entities obliged to make payments on account and special payments on account must make the additional payment on account in cases in which in the previous tax period state surcharge was due under the terms referred to in Article 87-A.

2 - The value of additional payments on account due under the terms of paragraph a) of no. 1 of Article 104-A equals 2% of the part of taxable profit exceeding (euro) 2,000,000 relating to the previous tax period.

3 - When the special regime for taxation of groups of companies is applicable, additional payment on account is due by each of the companies in the group, including the parent company.

The substantive question that is the object of the case is to know whether this state surcharge, in the year 2010, applies to all taxable profit that comes to be determined on the last day of the financial year (31-12-2010, in the case of the Claimant, whose financial year coincides with the calendar year).

In the opinion of the Claimant, the state surcharge can only apply to the part of taxable profit corresponding to the period occurring from 1 July 2010, the date of entry into force of Law no. 12-A/2010.

The Authority for Tax and Customs understands that the state surcharge should apply to the taxable profit of the entire 2010 financial year.

Article 20 of that Law no. 12-A/2010 includes special rules on its entry into force, the first being that "this law enters into force the day following its publication, except as provided in the following numbers".

The referred rules on state surcharge are not encompassed by any of the rules of the following numbers, whereby its entry into force occurred on 01-07-2010.

In the absence of a special rule on the application in time of this rule, the rules on the application of tax law over time are to be applied, which consist of nos. 1 and 2 of Article 12 of the LGT. ([3])

Under no. 1 of this Article 12, "tax rules apply to facts occurring after their entry into force, no retroactive taxes being able to be created".

But for taxable facts that extend over time, which began before entry into force and extend beyond it, the rule of no. 2 of the same Article 12 applies, which establishes that "if the taxable fact is of successive formation, the new law only applies to the period elapsed from its entry into force".

This rule appears to have consecrated the thesis defended by ALBERTO XAVIER on the admissibility of "retroactivity of the 3rd degree", which occurs when the fact has not "been entirely verified in the shadow of the old law, rather continues to produce itself concretely in the temporal domain of the new law. The situation is particularly relevant in the field of periodic taxes that presuppose a continued action over the period to which they relate". The retroactivity of the 3rd degree would not be for ALBERTO XAVIER a true retroactivity, and it is necessary to divide the income "pro rata temporis" ([4]) applying the new law to the proportion of the period of formation of the taxable fact that elapsed in its validity.

It is to this rule of proportionality, essentially, that the thesis defended by the Claimant is reducible, in understanding that the state surcharge should apply based on half of the taxable profit of 2010.([5])

As this retroactivity of the 3rd degree is accepted by the Claimant, it is unnecessary to assess its admissibility in view of the prohibition of creation of retroactive taxes, which is contained in Article 103, no. 3, of the Constitution, as such question is not a matter of controversy (the Authority for Tax and Customs even argues that it is constitutionally acceptable to apply the new law to all taxable profit of 2010).

The taxable fact that generates the state surcharge is the taxable profit from IRC, which is a complex fact that forms over the financial year, not being, therefore, an instantaneous taxable fact, but rather of successive formation, for purposes of no. 2 of Article 12 of the LGT.

Thus, by force of this no. 2, as to the 2010 financial year, the state surcharge is only applicable to taxable profit that forms from 01-07-2010, applying the principle "pro rata temporis".

Applying this principle, it is found that the period of the year 2010 that elapsed until 30-06-2010 is of 181 days while that which elapsed from 01-07-2010 is of 184 days, whereby the application of the rule of proportionality translates to being relevant for the determination of the 2010 state surcharge the percentage of 50.41% (184/365) of the part of taxable profit exceeding € 2,000,000.

In these terms, the impugned additional collection decision suffers from illegality, due to error on the legal presuppositions regarding the calculation of the state surcharge, which justifies its partial annulment, in accordance with Article 163, no. 1, of the Code of Administrative Procedure, subsidiarily applicable, by force of the provisions of Article 2, paragraph c), of the LGT.

6. Request for Reimbursement of Amount Paid and Indemnity Interest

The Claimant formulates a request for reimbursement of the amount wrongfully paid, as well as for payment of indemnity interest.

6.1. Possibility of Assessment in Tax Arbitral Proceedings of Requests for Reimbursement of Tax Paid and Indemnity Interest

In accordance with the provisions of paragraph b) of Article 24 of RJAT, the arbitral decision on the merits of the claim of which no appeal or challenge may be made binds the Tax Administration from the end of the deadline provided for appeal or challenge, this administration having to, in the exact terms of the merit of the arbitral decision in favor of the tax subject and up to the end of the deadline provided for the spontaneous execution of sentences of tax judicial courts, "restore the situation that would exist if the tax act subject of the arbitral decision had not been carried out, adopting the necessary acts and operations for this purpose", which is in harmony with the provisions of Article 100 of the LGT [applicable by force of the provisions of paragraph a) of no. 1 of Article 29 of RJAT] which establishes that "the tax administration is obliged, in case of total or partial merit of a complaint, judicial challenge or appeal in favor of the tax subject, to immediate and full restoration of the legality of the act or situation subject of the dispute, including the payment of indemnity interest, if applicable, from the end of the deadline for execution of the decision".

Although Article 2, no. 1, paragraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the competency of arbitral tribunals operating at CAAD, not making reference to condemnatory decisions, it should be understood that the competencies that in judicial challenge proceedings are attributed to tax courts are encompassed in its competencies, being this the interpretation that is in harmony with the meaning of the legislative authorization on which the Government based itself to approve the RJAT, in which it is proclaimed, as a first guiding principle, that "the tax arbitral process must be an alternative procedural means to the judicial challenge procedure and to the action for the recognition of a right or legitimate interest in tax matters".

The judicial challenge procedure, despite being essentially a procedure for annulment of tax acts, admits condemnation of the Tax Administration for payment of indemnity interest, as is inferred from Article 43, no. 1, of the LGT, in which it is established that "indemnity interest is due when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due" and Article 61, no. 4 of the CPPT (in the version given by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the initial version), that "if the decision recognizing the right to indemnity interest is judicial, the deadline for payment is counted from the beginning of the deadline for its spontaneous execution".

Thus, no. 5 of Article 24 of RJAT, in stating that "payment of interest, regardless of its nature, is due, in the terms provided for in the general tax law and in the Code of Tax Procedure and Process", should be understood as permitting the recognition of the right to indemnity interest in the arbitral proceedings.

On the other hand, as the right to indemnity interest depends on the right to reimbursement of amounts wrongfully paid, which are its basis for calculation, the possibility of recognition of the right to indemnity interest implicitly includes the possibility of assessment of the right to reimbursement of those amounts.

It is thus necessary to assess the request for reimbursement of amounts wrongfully paid and for payment of indemnity interest.

6.2. Right to Reimbursement

For what was stated, the request for arbitral pronouncement is well-founded, to the extent that it was considered by the Authority for Tax and Customs, in the additional collection, to determine the state surcharge, more than 50.41% of the part of the taxable profit of the Claimant exceeding € 2,000,000.00.

As a result of the partial illegality of the collection act, there is place for reimbursement of illegally paid tax, by force of the referred Articles 24, no. 1, paragraph b), of RJAT and 100 of the LGT, as such is essential to "restore the situation that would exist if the tax act subject of the arbitral decision had not been carried out".

For the above stated, the request for reimbursement in that part of the additional collection proceeds.

The measure of reimbursement depends on the calculation of the state surcharge which, for what was stated in point 4 of this decision, does not fall within the competencies of this Arbitral Tribunal.

6.3. Indemnity Interest

No. 1 of Article 43 of the LGT recognizes the right when it is determined in a gracious complaint proceeding or judicial challenge that there was error attributable to the services.

The request for revision of the tax act is equivalent to a gracious complaint when it is submitted within the deadline of the administrative complaint, referred to in no. 1 of Article 78 of the LGT, as referred to in the decision of the Supreme Administrative Court of 12-7-2006, issued in case no. 402/06.

As is also referred to in the same decision, "in cases of official revision of collection (when not made at the request of the taxpayer, within the deadline of administrative complaint, situation which is equivalent to that of a gracious complaint) (...) there is only a right to indemnity interest under the terms of Article 43, no. 3, of the LGT".

This regime is justified by the lack of diligence of the taxpayer in submitting a gracious complaint or request for revision within that deadline, as is provided for in no. 1 of Article 78 of the LGT.

In these cases, the taxpayer has no right to indemnity interest from the date of wrongful payment, but only from the date on which one year has elapsed since the submission of the request for revision of the tax act, under the terms of the referred paragraph c) of no. 3 of Article 43 of the LGT.

In the case at issue, the rule against which the existence of the right to indemnity interest must be assessed is paragraph c) of this no. 3 of Article 43 of the LGT, which establishes that they are due "when the revision of the tax act by the initiative of the taxpayer takes place more than one year after the request thereof, unless the delay is not attributable to the tax administration".

As results from the established factual basis, the request for official revision was submitted on 23-05-2017 and the decision was notified to the Claimant by official letter of 03-08-2017.

Thus, as more than one year has not elapsed between the date of submission of the request for official revision and its decision, the Claimant has no right to indemnity interest, whereby this request is unfounded.

7. Decision

In these terms, the members of this Arbitral Tribunal agree to:

1. Judge unfounded the exceptions of lapse of the right of action, lack of material jurisdiction of the Arbitral Tribunal to assess the decision of official revision and lis pendens, raised by the Authority for Tax and Customs;

2. Dismiss the request for suspension of the instance formulated by the Authority for Tax and Customs;

3. Judge founded the exception of lack of material jurisdiction to assess the request for condemnation of the Authority for Tax and Customs to calculate IRC according to a determined calculation of the state surcharge;

4. Judge partially well-founded the request for arbitral pronouncement, declaring illegal the additional collection of IRC no. 2013..., relating to the 2010 financial year, to the extent that therein it was considered, to determine the state surcharge, more than 50.41% of the part of the taxable profit of the Claimant exceeding € 2,000,000.00.

5. Condemn the Authority for Tax and Customs to reimburse the Claimant for the amount paid in excess by the Claimant, to be determined in execution of the judgment;

6. Judge unfounded the request for indemnity interest and absolve the Authority for Tax and Customs of this request.

8. Value of the Case

In accordance with the provisions of Article 305, no. 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of € 714,885.11.

9. Costs

Under the terms of Article 22, no. 4, of RJAT, the amount of costs is set at € 10,404.00, under the terms of Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, charged to the Claimant and the Authority for Tax and Customs in the percentages of 1% and 99%, respectively.

Lisbon, 30-04-2018

The Arbiters

(Jorge Lopes de Sousa)

(Mariana Vargas)

(Augusto Vieira)

[1] Decision no. 177/2016, of 29-3-2016, case no. 126/15.

[2] JORGE MIRANDA, Manual of Constitutional Law, Volume II, 4th ed., Coimbra, 2000, pages 267/268.

[3] In this line, see the decisions of the Plenary of the Supreme Administrative Court of 16-09-2015, issued in cases nos. 01292/14 and 01504/14, and of 02-12-2015, issued in case no. 0734/15.

[4] ALBERTO XAVIER, Manual of Tax Law, I, page 197 et seq.

In the retroactivity of the 1st degree "the fact occurred entirely under the shadow of the old law, having already produced all its effects under that same law. The new law intends to withdraw from the same facts distinct legal effects". "Here the retroactivity is frontal and patent, not raising any doubts of qualification".

In the retroactivity of the 2nd degree "the fact also occurred entirely under the shadow of the old law, approaching thereby the retroactivity of the 1st degree. But it differs from this because its effects did not entirely exhaust themselves in the shadow of the old law, rather continue to produce themselves in the temporal domain of the application of the new law". "What is relevant to 'fix' the rule temporarily applicable is the moment in which the taxable fact occurred and not that in which the rule is concretely applied".

[5] It is also this interpretation of Article 12, no. 2, of the Constitution that is put forward by the Authority for Tax and Customs, as can be seen from Article 85 of the Response.