Process: 622/2016-T

Date: May 2, 2017

Tax Type: IRC

Source: Original CAAD Decision

Summary

In Case 622/2016-T, a company challenged the self-assessment restoration of IRC tax benefits totaling €114,473.94, relating to inland regional development benefits under Article 43(1)(a) of the Portuguese Tax Benefits Statute (Estatuto dos Benefícios Fiscais). The dispute centered on whether the applicable de minimis aid limit for the 2011 tax year was €200,000 under EU Regulation 1998/2006 or €500,000 under Portuguese Portaria 70/2011. The company had applied the reduced 15% IRC rate for entities located in interior areas and accumulated €314,473.94 in benefits during 2009-2011, exceeding the €200,000 threshold but remaining within the €500,000 limit. The claimant argued for corrective interpretation of Portaria 70/2011, maintaining it should apply the higher €500,000 limit to automatic tax benefits for regional development, consistent with the previous Portaria 184/2009. The Tax Administration subsequently agreed through an official revision order dated November 25, 2016, acknowledging the company's entitlement to the €500,000 limit and right to reimbursement, though formal revocation was pending due to the ongoing CAAD arbitration. The case illustrates the complexity of applying EU state aid rules to Portuguese automatic tax benefits and the availability of tax arbitration to challenge self-assessment corrections involving benefit restoration.

Full Decision

ARBITRAL DECISION

The arbitrators Fernanda Maçãs (arbitrator-president), Jónatas Machado and António Pragal Colaço (adjunct arbitrators), designated by the Deontological Council of the Administrative Arbitration Center to form the Arbitral Tribunal, hereby agree as follows:

I. REPORT

  1. The Claimant A…, LDA., legal entity no. …, with registered office at …, Lot …, …-… … (hereinafter, referred to only as A… OR CLAIMANT), and whose local peripheral service is the Service of …), filed on 17/10/2016 a request for ruling and constitution of an Arbitral Tribunal against the Tax and Customs Authority, hereinafter referred to as Respondent or ATA under the terms of Decree-Law no. 10/2011, of 20 January (hereinafter "Tax Arbitration Regime" or "RJAT"), specifically under the provisions of Article 10, no. 1, al. a) and of Ordinance no. 112-A/2011, of 22 March, with a view to the declaration of illegality of the act of assessment of Corporate Income Tax for the year 2011, with the number …-… of 2012 (self-assessment), through which by means of filing Form 22 of CIT the Claimant proceeded to restore tax benefits, by considering that the "de minimis" limit applicable would be 200,000.00 and not 500,000.00€, in the part in which it reflects the restoration of tax benefits recorded in field 906 of table 09 of Annex D and in field 372 of table 10 of the respective CIT Form 22.

  2. The purpose of the claim in the request for arbitral ruling consists specifically in 2011 the Claimant having proceeded to restore the amount of 114,473.94€, corresponding to the difference between the global value of tax benefits granted in the three-year period of 2009-2011 of 314,473.94 (three hundred and fourteen thousand four hundred and seventy-three euros and ninety-four cents) and the limit of 200,000.00 (two hundred thousand euros) fixed in Article 2, no. 2, of Regulation (CE) no. 1998/2006 of the Commission of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to "de minimis" aid (cf. table 09 of Annex D), requesting the annulment of this amount together with the other legal consequences arising therefrom.

  3. The request for constitution of the arbitral tribunal was accepted on 18/10/2016 by the President of the CAAD and automatically notified to the Tax and Customs Authority on the same day and subsequently notified to the ATA on 4/11/2016.

3.1. The Claimant did not proceed with the appointment of an arbitrator, whereby, under the provisions of subparagraph a) of no. 2 of Article 6 and subparagraph b) of no. 1 of Article 11 of the RJAT, the President of the Deontological Council designated the signatories as arbitrators of the collective arbitral tribunal, who communicated their acceptance of the designation within the prescribed period.

3.2. On 21/12/2016, the parties were notified of the designation of the arbitrators and neither raised any objection.

3.2. In accordance with the provision of subparagraph c) of no. 11 of the RJAT, the collective arbitral tribunal was constituted on 5/1/2017.

3.3. In these terms, the Arbitral Tribunal is regularly constituted to examine and decide on the object of the proceeding.

  1. To substantiate the request for arbitral ruling the Claimant alleges, in summary, the following:

a) The Claimant argues that the ATA, by not considering valid the limit of 500,000.00€, applicable to the tax benefit of subparagraph a) of no. 1 of Article 43 of the Statute of Tax Benefits (tax benefits relating to regional development), in the fiscal year 2011, incurs in the defect of violation of law.

b) The tax benefit of subparagraph a) of no. 1 of Article 43 of the STB (former Article 39-B of the STB added by the State Budget Law for 2007, Law no. 53-A/2006 of 29.12) which amounts to a reduction to 15% of the CIT rate for entities whose main activity is located in the "territorial areas beneficiaries" of incentives for regional development, whose map is currently listed in an Annex to Ordinance no. 1117/2009, of 30.09, is an automatic benefit within the meaning of no. 1 of Article 5 of the STB.

c) And that its regulation "ex vi" no. 7 of Article 43 of the STB, in addition to being developed in Decree-Law no. 55/2008, of 26.03, falls within the provision of the norm of no. 1 of Article 1 of Ordinance no. 70/2011, of 09.02, limiting the "de minimis" aid granted between January and December 2011 (counting all support granted between 01 January 2008 and 31 December 2011) to the amount of 500,000.00 euros, under State aid 13/2009.

d) And to this end defends that a corrective interpretation of the referred norm should be resorted to (no. 1 of Article 1 of Ordinance no. 70/2011, of 09.02), resorting to the logical element and systematic element, since the former Ordinance no. 184/2009, of 20.02, which regulated the matter, in derogation of the limit of 200,000.00 (period of 3 fiscal years) foreseen in no. 2 of Article 2 of Regulation (CE) no. 1998/2006 of the Commission, fixed in its Article 1 the limit of "de minimis" aid at 500,000.00 euros per company, during a period of three fiscal years, without paying attention to whether the benefits are automatic or subject to recognition.

e) It understands that the legislator in issuing no. 1 of Article 1 of Ordinance no. 70/2011, of 09.02, "did not take into account the fact that the de minimis limit is applied to tax benefits that are not dependent on the presentation of any complete request for aid".

f) If it were not to be understood in this manner it would result in violation of the constitutional principle of equality (Article 13 of the CRP).

  1. The ATA did not present a response nor attached the administrative file;

  2. For no reasons that would justify it the tribunal dispensed with the conduct of the first meeting provided for in art. 18 of the RJAT, which it did in exercise of the principles of the Tribunal's autonomy in the conduct of the proceeding. The Tribunal designated 5/7/2017 as the date for the rendering of the decision.

  3. The Respondent did not present arguments.

The Claimant presented its arguments on 7/3/2017, reiterating the arguments presented in previous procedural documents and bringing supervening facts to the proceedings.

In fact, the claimant brought to the proceedings a note of supervening facts, of which it became aware on 8 February 2017.

The Claimant was notified of the Order issued on 25 November 2016 by the Director of the IRC Services, within the scope of the official revision procedure, attaching the respective document to the proceedings.

According to the information endorsed in that Order, the Tax Administration accepts the arguments of the Claimant, concluding that "official revision should be carried out, under the provisions of no. 1 of Article 78 of the LGT, given that the taxpayer has the right to the reduced rate of CIT of 15% provided for in subparagraph a) of no. 1 of Article 43 of the STB and that the accumulated amount of benefits that were granted to it from 1 January 2008 to 31 December 2011 does not exceed the limit of 500,000.00 fixed in Article 1 of Ordinance no. 70/2011, of 9 February and to the reimbursement of the tax paid in excess".

However, despite what is stated as to the agreement with the request put forward by the Claimant in the official revision, the IRC Services Directorate did not revoke the act, remitting the entire proceeding to the Legal Advice and Litigation Services Directorate ("DSCJC"), in view of the existence of the present arbitral proceeding, despite in the notification appearing by order of the then Head of the IRC Services Division, in which despite the proposed decision to grant the present official revision, it is determined that the proceeding is referred to the Administrative Arbitration Center, in virtue of a request for its constitution, for purposes of annexation, under the terms of Article 13, no. 4, of the RJAT, which never happened. According to the Claimant, as the contested act has not been revoked, the utility of the dispute is maintained. The Respondent was notified to exercise its right to be heard and said nothing.

II. PRELIMINARY EXAMINATION

8.1. The parties have judicial personality and capacity, show themselves to be legitimate and are regularly represented (Articles 4 and 10, no. 2, of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).

8.2. The tribunal is competent and regularly constituted.

8.3. The proceeding does not suffer from nullities.

8.4. No exceptions were raised.

8.5. There are no other circumstances that impede examination of the merits of the case.

III. MERITS

III.1. Factual Matter

  1. Facts Found Proven

9.1. With relevance to the examination and decision of the raised questions, preliminary and on the merits, the following facts are established as proven:

  1. The Claimant is a company governed by Portuguese law, a taxpayer subject to CIT, with registered office at …, Lot …, in …, dedicating itself directly and principally to wholesale trade, the importation and exportation of medical and pharmaceutical products, activity to which corresponds the NACE code 46460;

  2. The Claimant has its registered office in the municipality of …;

  3. The claimant as for fiscal year 2008 benefited from a tax benefit resulting from the application of the reduced rate to the amount of 50,545.66 (fifty thousand, five hundred and forty-five euros and sixty-six cents), as per field 346 of table 09;

  4. The Claimant benefited in 2009 and in 2010 from tax incentives subject to the de minimis rule in the amount of 67,575.11 euros and 118,664.58 euros, respectively, totaling 186,239.69 euros, as stated in table 9 (fields 901 and 902) of Annex D – Tax Benefits - of Form 22 of 2011. In table 9, field 903 of Annex D – Tax Benefits of Form 22 of 2011, the claimant placed the value of 5,521.25 euros and in field 904, of the same Annex, the claimant placed the value of 122,713.00 euros, as per Form 22 Declaration – Annex D, submitted by the claimant as document 5;

  5. The sum of the tax incentives for CIT for regional development of the years 2008 to 2011 does not exceed the value of 500,000.00 euros;

  6. In table 9, field 905 of Annex D – Tax Benefits - of Form 22 for 2011 the claimant placed the value of 314,473.94 euros, which is the sum of all the fields indicated, 901, 902, 903 and 904, as per Form 22 Declaration – Annex D, submitted by the claimant as document 5;

  7. The Claimant restored 114,473.94 euros of tax benefits in the same CIT declaration, as per field 906, of Annex D, Form 22 Declaration, which corresponds to the difference between the limit of 200,000.00 euros and the total of the benefits received;

  8. The European Commission Communication of 07.01.2011 which addresses the extension of State aid 13/2009 until 31.12.2011 with regard to the limit of 500,000.00 per company and during 3 fiscal years (in derogation of the limit fixed in no. 2 of Article 2 of Regulation CEE 1998/2006 of the Commission of 15.12), under the heading "State aid SA.32122 (2010N). Portugal – Prolongation of the State aid scheme N…/2009 «Limited amounts of aid»", states that this extension meets the requirements of point 2.2 of the "Temporary Union Framework" and is compatible with the internal European market, and the content of the communication at http://www.ifdr.pt/;

  9. The European Commission communication referred to in the previous point (State aid no. 32122 (2010N) – Portugal), in its points (3) to (6) states: (3) In accordance with the notified extension, aid may be granted until 31 December 2011 on the condition that the beneficiary has submitted its application (application) under the "Temporary Community Framework" at the latest by 31 December 2010. (4) The aid shall not increase the amount received by the beneficiary during the period between 1 January 2008 and 31 December 2011 to a level exceeding the ceiling of € 500,000. (5) The volume of aid available during the extended period was estimated not to exceed 250 million euros. (6) The scheme shall enter into force on 1 January 2011 and shall expire on 31 December 2011, as per the content of the communication, English version, at http://www.ifdr.pt/;

  10. The Collective Arbitral Tribunal was constituted on 5/1/2017;

  11. On 6 January 2017, the Tribunal notified the Respondent to present a response;

  12. On 8 January 2017, the Claimant was notified of the Order issued on 25 November 2016 by the Director of the IRC Services, within the scope of the official revision procedure (cfr. document no. 1 attached to the proceedings by the Claimant with the arguments);

  13. In accordance with the information endorsed in that Order, the Tax Administration accepts the arguments of the Claimant, concluding, among other things, that "official revision should be carried out, under the provisions of no. 1 of Article 78 of the LGT, given that the taxpayer has the right to the reduced rate of CIT of 15% provided for in subparagraph a) of no. 1 of Article 43 of the STB and that the accumulated amount of benefits that were granted to it from 1 January 2008 to 31 December 2011 does not exceed the limit of 500,000.00 fixed in Article 1 of Ordinance no. 70/2011, of 9 February and to the reimbursement of the tax paid in excess";

  14. The tax act which is the object of the arbitral request was not revoked.

9.2. Substantiation of the Factual Matter

The factuality proven was based on the documents that were attached to the proceedings by the Claimant, as well as the procedural conduct of the Respondent, insofar as it did not offer a response nor attached the administrative file, under the terms of the provision in art. 110, nos. 6 and 7, of the CPPT.

9.3. There are no other facts with relevance to examination of the merits of the case that have not been proven.

III.2. Legal Matter

III.2.1. On the Illegality of the Tax Assessment Act Due to Defect of Violation of Law

As we have seen, the Claimant alleges, as a supervening fact, the notification of the Order issued on 25 November 2016 by the Director of the IRC Services, within the scope of the official revision procedure, where it can be read, among other things, that "the Tax Administration accepts the arguments of the Claimant, concluding that "official revision should be carried out, under the provisions of no. 1 of Article 78 of the LGT, given that the taxpayer has the right to the reduced rate of CIT of 15% provided for in subparagraph a) of no. 1 of Article 43 of the STB and that the accumulated amount of benefits that were granted to it from 1 January 2008 to 31 December 2011 does not exceed the limit of 500,000.00 fixed in Article 1 of Ordinance no. 70/2011, of 9 February and to the reimbursement of the tax paid in excess".

Such invocation does not, however, collide with the utility of the present instance, insofar as, although it has been proven that there was a proposal to grant the official revision request, this did not take place, and the act which is the object of the arbitral request remains intact, which it is necessary to examine.

Let us proceed.

The central question to be decided consists in knowing whether the limit of 500,000.00 euros per company is applicable to the case "sub judice", by way of tax benefit in CIT relating to regional development provided for in Article 43, no. 1, subparagraph a), of the Statute of Tax Benefits, in the wording in force in 2011, or whether the limit of 200,000.00 euros is applicable to the fiscal year of the Claimant of 2011.

The answer to the question sub judice requires that we begin by paying attention to the literal content of Article 43, no. 1, subparagraph a), of the STB, in the wording in force in 2011, under the heading "tax benefits relating to regional development", which provided that "companies that carry out, directly and principally, an economic activity of an agricultural, commercial, industrial or service provision nature in the interior areas, hereinafter referred to as "beneficiary areas"" would be granted, among other tax benefits, a reduction to 15% of the CIT rate, provided for in no. 1 of Article 80 of the respective Code, covering entities whose main activity is located in the beneficiary areas. This is an automatic benefit within the meaning of no. 1 of Article 5 of the STB, having been so qualified by the Decision of the CAAD in Case 74/2013 –T, of 8-12-2013.

No. 3 of Article 108 of the Treaty on the Functioning of the European Union (TFEU) (former no. 3 of Article 88 of the Treaty establishing the European Community (TEC)) establishes the obligation to notify state aid to the European Commission for verification of its compatibility with the internal market according to the criteria of no. 1 of Article 107 of the TFEU (former no. 1 of Article 87 of the TEC).

Certain categories of aid may, however, be exempted from the obligation of notification by virtue of Regulation (CE) no. 994/98. The de minimis rule was established with the purpose of exempting subsidies of reduced amount, fixing a threshold below which aid is not covered by the scope of application of no. 1 of Article 107 of the TFEU and, consequently, is not subject to the notification procedure of no. 3 of Article 108 of the TFEU.

Article 2, no. 2, of Regulation (CE) no. 1998/2006 of the Commission, of 15 December 2006, provided that aid granted in a period of three years, corresponding to three fiscal years, and not exceeding a threshold of 200,000 euros are not considered state aid within the meaning of the former no. 1 of Article 87 of the TEC (no. 1 of Article 107 of the TFEU), not requiring notification to the Commission. In parallel, Decree-Law no. 55/2008, of 26 March, in which "the necessary regulatory norms for the proper execution of the measures for encouraging accelerated recovery of Portuguese regions that suffer from problems of regional development" were established. Ordinance no. 111/2009, of 30 September, identified the municipality of … as one of the territorial areas beneficiary of the incentives to regions with problems of regional development, and, therefore, as one of the areas covered by the scope of application of Article 43 of the STB. The Claimant had expressed the intention to benefit, in the years 2008 to 2011, from the reduced rate of 15% of CIT by filling in the corresponding Form 22 declarations.

Meanwhile, economic circumstances underwent significant changes, with the situation of global crisis constituting a significant factor of disruption of the normal functioning of the Portuguese economy. In this context, the "European Commission Communication — Temporary community framework on state aid measures to support access to financing during the current financial and economic crisis" (2009/C 16/01, of 22 January) was issued, having as background the impact of the financial crisis on the real economy and the necessity of temporary measures. It thereby prescribed the use of the de minimis limit of 500,000€ (no. 4.2.2) in all aid schemes implemented or to be implemented under the de minimis rule provided for in Regulation (CE) no. 1998/2006 of the Commission, of 15 December.

In this sense, the Portuguese authorities notified the European Commission on 12 January 2009 of the new temporary scheme that they intended to adopt in order to enable the possibility of using the new de minimis limits. The Commission considered the scheme presented compatible with the Treaties, having noted that it should be applied by means of an internal administrative act. Thus Ordinance no. 184/2009 of 20.02 was approved, which provided in Article 1 that "Aid granted under Regulation (CE) no. 1998/2006 of the Commission of 15 December on de minimis aid shall have a limit of € 500,000 per company for a period of three fiscal years."

Subsequently, and in view of the persistence of a situation of acute economic crisis in our country, the European Commission Communication of 7 January 2011, C (2011) 63 final, regarding the matter "Stataid SA.32122 (2010/•) - Portugal/Prolongation of the State aid scheme N…/2009 "Limited amounts of aid" was issued. This communication formed the basis of Ordinance no. 70/2011, of 09.02, which established the limit of de minimis aid granted between 1 January 2011 and 31 December 2011 and the respective conditions of application. Its Article 1, no. 1 limited de minimis aid granted between the two dates to the amount of € 500,000 per company, although counting all support granted between 01 January 2008 and 31 December 2011, provided that the beneficiary has presented, with the organism responsible for granting the aid, a complete request for aid by 31 December 2010 under state aid no. 13/2009. For its part, no. 2 subparagraph a) of the same Ordinance no. 70/2011, of 09.02, provided that aid granted as from 1 January 2011 whose requests for aid had been presented by the beneficiaries after 31 December 2011 would again have the limit of 200,000 during a period of three fiscal years.

In light of this normative framework, the question arises as to whether the Claimant can see covered the tax benefits of which it had enjoyed in the three-year period of 2009-2011, in the global value of 314,473.94 €, within the limit of 500,000 €, not having to restore the amount of 114,473.94€, corresponding to the difference between the global value of the tax benefits granted and the limit of 200,000.00 € initially foreseen. At issue is knowing whether, in the case of benefits of automatic granting and not dependent on recognition, it can be considered that, upon expressing its intention to benefit from the aid in the income tax return, the Claimant presented, with the organism responsible for granting the aid, a "complete request for aid" by 31 December 2010 under state aid no. 13/2009.

Following the guidance adopted by the Decision of the CAAD in Case 74/2013 –T, of 8-12-2013, it should be understood that the interpretation of Article 1/1/2 of Ordinance no. 70/2011, of 09.02, should be carried out in accordance with the instrument of European Union law that it aims to implement, namely the "Temporary Union Framework". In this context, the referred European Commission Communication of 07.01.2011 – which addresses the extension of State aid 13/2009 until 31.12.2011 regarding the limit of 500,000 € per company and for 3 fiscal years (in derogation of the limit fixed in no. 2 of Article 2 of Regulation CEE 1998/2006 of the Commission of 15.12), under the heading "State aid SA.32122 (2010N) Portugal, Prolongation of the State aid scheme N…/2009 «Limited amounts of aid»" – states that this extension meets the requirements of point 2.2 of the "Temporary Union Framework" and is compatible with the internal European market (cfr. at http://www.ifdr.pt).

This European Commission communication (State aid no. 32122 (2010N) – Portugal), in its points (3) to (6) states: (3) In accordance with the notified extension, aid may be granted until 31 December 2011 on the condition that the beneficiary has submitted its application (application) under the "Temporary Community Framework" at the latest by 31 December 2010. (4) The aid shall not increase the amount received by the beneficiary during the period between 1 January 2008 and 31 December 2011 to a level exceeding the ceiling of € 500,000. (5) The volume of aid available during the extended period was estimated not to exceed 250 million euros. (6) The scheme shall enter into force on 1 January 2011 and shall expire on 31 December 2011, as per the content of the communication (English version, at http://www.ifdr.pt/)

The concepts of "submission of application" and of "complete request for aid" must be understood in terms functionally adequate to the type of aid in question, namely aid of unconditional and automatic granting or conditional and dependent on recognition, depending on the cases. In the situation under analysis, where we are faced with a benefit of automatic granting, the referred concepts must encompass the manifestation of will to enjoy the automatic benefits in question expressed in the income tax return presented by the Claimant. Moreover, the term "application" which appears in the original version of the European Commission Communication is compatible with various expressions in the Portuguese language, such as "pedido", "petição", "candidatura", "requerimento", "solicitação", "súplica", "diligência", etc. Article 1, no. 1, of Ordinance no. 70/2011, of 09.02, confers the tax benefit of extension of aid 13/2009 until 31.12.2011 – raising to 500,000 € per company for three fiscal years the de minimis limit – independently of its automatic or conditional nature and of the corresponding formalization, provided that the beneficiaries have manifested unequivocally by 31 December 2010 the intention to benefit from it. This was the case of the Claimant, which did not fail to indicate this intention when filling in the CIT Form 22 declarations, it being subsequently incumbent upon the Tax Authority to verify the requirements set forth in Article 2, nos. 1 and 2, of Decree-Law no. 55/2008, of 28 March.

Within the framework of the principles of logical-systematic and teleological-rational interpretation of tax norms, it suffices for this for it to be considered that the requirement of "complete request for aid" referred to in no. 1 of Article 1 of Ordinance no. 70/2011, of 09.02, has been met.

At issue is the adoption of generally valid principles of interpretation of instruments of internal law in accordance with European Union law. These hermeneutic principles are especially pertinent in the domain under analysis, insofar as it would not be easily understandable that, by means of a hyper-formalist and literalist interpretation of an expression contained in a national act implementing an instrument of the European Commission, the Portuguese State would frustrate the realization of European economic objectives of support for Portuguese companies in a context of special vulnerability, with a strong negative impact on the labour and social fronts.

If the European Commission, faced with the scenario of grave national economic crisis, saw fit to temporarily derogate the limit of de minimis aid and raise its threshold from 200,000 € to 500,000 €, it did so certainly because it considered that the situation of Portuguese companies justified it. The preambles of the referred European Commission Communication — Temporary community framework on state aid measures to support access to financing during the current financial and economic crisis (2009/C 16/01) demonstrate that the Commission was well aware of the broad dimension of the impact of the financial crisis on the real economy in its entirety, and the way it affected small and medium-sized enterprises and, reflexively, employment and families, imposing itself, in its view, to take short-term measures to stimulate demand, preserve jobs, contribute to restoring confidence and realize "smart investments" to favour an acceleration of growth and long-term sustainable prosperity.

Against this background, it appears that the requirement of "complete request for aid" may be fulfilled either through a formal request or by inclusion in an income tax return, depending on the circumstances, insofar as in both cases it appears unquestionable the manifestation of the intention to access the state aid legally foreseen.

It would not be reasonable to interpret this requirement from a preference for bureaucratic complexity, postponing the realization of the extrafiscal purposes underlying the aid, in cases where these may be granted to its beneficiary on the basis solely of a manifestation of will to be indicated in the income tax return.

In addition to offending the principles of interpretation of national law in accordance with European Union law and of logical-systematic and teleological-rational interpretation of the norms of both legal systems, such an understanding would end up offending the spirit and letter of fundamental legal-administrative principles, such as the principles of good administration (art. 5 of the CPA), of proportionality (art. 7 of the CPA), of justice and reasonableness (art. 8 of the CPA) and of procedural adequacy (art. 56 of the CPA). Being at issue in this context a national action within the scope of the implementation of acts of European Union law, these principles must be interpreted and applied in light of the fundamental right to good administration, enshrined in Article 41 of the Charter of Fundamental Rights of the European Union. Neither can national law be dissociated from the political-economic objectives of the European Union, nor can tax law be conceived as a branch of law isolated from the multilevel legal order globally considered.

It is concluded, therefore, that the Claimant manifested unequivocally and sufficiently the intention to use the reduced rate provided for in Article 43, no. 1, subparagraph a), of the STB, through the CIT Form 22 declarations, within the period ending on 31 December 2010, and the requirement of "complete request for aid" should be considered met under the terms and for the purposes of the provision in Article 1 no. 1 of Ordinance no. 70/2011, of 9 February, applying to it the accumulated de minimis limit of 500,000 € by reference to the period from 1 January 2008 to 31 December 2011.

In these terms the arbitral request must be granted and, following therefrom, the act of implied rejection of the request for official revision of the act of self-assessment of CIT for fiscal year 2011 must be annulled, for manifest lack of legal basis.

III.2.2. Prejudiced Questions

As the request for arbitral ruling proceeds on the basis of the defect of illegality due to error of law regarding the meaning and scope of Article 32, no. 2, of the STB, which ensures effective and stable protection of the rights of the Claimant, examination of the other defects that are imputed to the tax act in question becomes prejudiced.

In fact, it follows from the establishment of an order for examination of defects in Article 124 of the CPPT that, where one defect is judged to be well-founded that prevents the renewal of the contested act, there is no need to examine the others that are imputed to it. If it were always necessary to examine all defects it would be indifferent the order in which their examination was made.

IV. DECISION

In these terms the present Tribunal agrees to:

Find well-founded the request for declaration of illegality of the act of implied rejection of the request for official revision of the act of self-assessment of CIT for the year 2011, in the part in which it reflects the restoration of tax benefits, with the consequent annulment of the act of self-assessment, with the other legal consequences arising therefrom.

V. VALUE OF THE PROCEEDING

In accordance with the provisions of Articles 306, no. 2, and 297, no. 2 of the C.P.C., of Article 97-A, no. 1, al. a), of the C.P.P.T. and of Article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings the value of the proceeding is fixed at 114,473.94€ (one hundred and fourteen thousand, four hundred and seventy-three euros and ninety-four cents).

VI. COSTS

In accordance with the provisions of Articles 22, no. 4, and 12, no. 2, of the Legal Regime of Arbitration, in Article 2, in no. 1 of Article 3 and in nos. 1 to 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I attached to this enactment, the total value of costs is fixed at € 3,060.00, to be borne by the Respondent.

Let notification be made.

Lisbon, 2 May 2017

The arbitrators,

Fernanda Maçãs (President)

Jónatas Machado (Adjunct)

António Pragal Colaço (Adjunct)

Frequently Asked Questions

Automatically Created

What is the IRC tax benefit for inland areas under Article 43(1)(a) of the Portuguese Tax Benefits Statute (EBF)?
The IRC tax benefit for inland areas under Article 43(1)(a) of the Estatuto dos Benefícios Fiscais provides a reduced corporate income tax rate of 15% (compared to the standard rate) for entities whose principal activity is located in designated interior territorial areas eligible for regional development incentives. This is an automatic benefit under Article 5(1) EBF, meaning it does not require a formal application or recognition procedure—qualifying companies apply it directly in their annual IRC declaration (Model 22). The eligible territories are identified in the annex to Portaria 1117/2009. This benefit aims to promote economic development in less-favored inland regions of Portugal.
What de minimis aid limit applies to inland tax benefits in Portugal — €200,000 or €500,000?
The dispute concerns whether the €200,000 de minimis limit under EU Regulation 1998/2006 or the €500,000 limit under Portuguese Portaria 70/2011 applies to inland tax benefits. The general EU rule sets a €200,000 ceiling for de minimis aid over three fiscal years. However, Portaria 70/2011 (Article 1) established a €500,000 limit for aid granted between January-December 2011 (counting support from 2008-2011) under State aid scheme 13/2009, which covers regional development benefits. The claimant argued this higher limit should apply to automatic benefits like Article 43(1)(a) EBF through corrective interpretation, consistent with the previous Portaria 184/2009 that applied €500,000 without distinguishing benefit types. The Tax Administration ultimately accepted this interpretation in its official revision.
How does EU Regulation 1998/2006 on de minimis aid affect Portuguese corporate tax benefits for inland regions?
EU Regulation 1998/2006 on de minimis aid establishes that state aid not exceeding €200,000 over three fiscal years does not distort competition and is exempt from prior notification requirements under Articles 87-88 of the EC Treaty. This regulation directly affects Portuguese corporate tax benefits for inland regions by imposing a cumulative ceiling on benefits like the Article 43(1)(a) reduced IRC rate. However, Portugal can derogate from the standard €200,000 threshold through specific implementing legislation for regional development aids. The interpretative challenge arises when Portuguese ordinances (Portarias) establish higher limits—determining whether such derogations apply to automatic tax benefits or only to discretionary aid schemes requiring applications.
Can a company challenge the self-assessment repayment of tax benefits through CAAD tax arbitration?
Yes, companies can challenge self-assessment repayments of tax benefits through CAAD (Centro de Arbitragem Administrativa) tax arbitration under the RJAT regime (Decree-Law 10/2011). Article 10(1)(a) RJAT permits arbitration requests against assessment acts, including self-assessments where taxpayers correct their own declarations. In this case, the company filed arbitration on October 17, 2016, challenging its Model 22 IRC self-assessment that restored €114,473.94 in benefits (reflected in field 906 of table 09 in Annex D and field 372 of table 10). The tribunal was properly constituted under RJAT Article 11, with arbitrators designated by the Deontological Council. This demonstrates that taxpayers who self-correct based on disputed legal interpretations can seek judicial review through the arbitration system.
What happens when IRC tax benefits exceed the de minimis threshold over a three-year period in Portugal?
When IRC tax benefits exceed the applicable de minimis threshold over a three-year period, taxpayers must restore (repay) the excess amount through their annual IRC declaration. The restoration is reported in specific fields of Model 22 (Annex D, table 09, field 906 and table 10, field 372) and increases the taxable income and tax due. In this case, with accumulated benefits of €314,473.94 during 2009-2011 and applying a €200,000 limit, the company restored €114,473.94. However, if the correct limit is €500,000 as subsequently accepted by the Tax Administration, the restoration was improper. The taxpayer is then entitled to reimbursement of excess tax paid, which can be obtained through official revision procedures (Article 78 LGT) or tax arbitration, as occurred here when the IRC Services Directorate ordered revision and reimbursement.