Stamp Tax on Pension Fund Management Fees: CAAD Arbitration Decision 633/2016-T

ENGLISH TRANSLATION

The Arbitrators José Baeta de Queiroz (Arbitrator President), Diogo Leite de Campos and Leonardo Marques dos Santos, designated by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby

Arbitral Decision

I. Report

1. On 23 October 2016, A… - Pension Funds Management Company, S.A., with registered office in …, … in Lisbon (hereinafter "Claimant"), requested the constitution of an arbitral tribunal and proceeded with a request for arbitral pronouncement, in accordance with article 2 and article 10 of Decree Law No. 10/2011, of 20 January (hereinafter "RJAT") with the purpose of: the declaration of illegality and annulment of tacit rejection of a gracious complaint, as well as the acts of assessment of Stamp Duty (hereinafter also identified as "SD") and compensatory interest No. 2015…, No. 2015…, No. 2015…, and No. 2015…, and, likewise, the condemnation of the Tax and Customs Authority (hereinafter "TCA" or "Respondent"), to the payment of the amount expended by the Claimant with the constitution and maintenance of the bank guarantee No. …, in costs and in the payment of appropriate attorney's fees. Subsidiarily, the Claimant further requests the partial annulment of the assessments identified above, in the part relating to compensatory interest.

2. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and notified to the Respondent on 24 October 2016.

3. In view of the regularity of the request, in accordance with the provisions of paragraph a) of item 2 of article 6 of RJAT, and the Claimant not having proceeded with the appointment of an arbitrator, the undersigned signatories were designated and accepted the position in accordance with legal requirements.

4. The present tribunal was constituted on 20 January 2017.

5. No exceptions having been raised, there being no need for additional evidence beyond that present in the case file, there being no requirement for the parties to correct their procedural submissions; and the proceedings containing the necessary elements for the issuance of the decision, the Tribunal, in the exercise of its principles of autonomy in the conduct of proceedings, the promotion of speed, simplification and informality, decided, by order of 23 February 2017, to dispense with the holding of the meeting provided for in article 18 of RJAT. In that same order it invited the parties to submit written arguments.

6. By order of 6 April 2017 and in observance of the provisions of item 2 of article 18 of RJAT, it set 19 May 2017 as the date for the issuance of the arbitral decision.

II. The Claimant's Petition:

The Claimant bases its petition on the following terms stated in summary form:

On the Framework

a) The present Claimant submitted a gracious complaint regarding the SD assessments identified above, presuming its rejection in accordance with paragraph d) of item 1 of article 102 of the Code of Tax Procedure and Process (hereinafter "CPPT") and paragraph a) of item 1 article 10 of RJAT;

b) The Claimant submits that the annulment of the acts of additional assessment of Stamp Duty and, consequently, the tacit rejection of the gracious complaint - are vitiated in the following terms:

On the Law:

c) What is at issue in the present proceedings is the tax treatment of management commissions of Pension Funds in respect of Stamp Duty; whether the said commissions are, or are not, exempt from the payment of Stamp Duty in accordance with the provisions of article 4 of Decree-Law No. 20/86, of 13 February and paragraph e) of item 1 of article 7 of the Stamp Duty Code (hereinafter "SDC") combined with item 17.3.4 of the General Table of Stamp Duty (hereinafter "GTSD").

d) The TCA considered that the management commissions of Pension Funds are not exempt from Stamp Duty and that, simultaneously, they relate to financial services, subject to tax in accordance with Item No. 17.3.4 of the GTSD.

e) The TCA refers to information No. I2014…, of 10 November 2014, from the Service Directorate for Municipal Tax on Onerous Property Transfers, Stamp Duty, Single Vehicle Circulation Tax and Special Contributions (DSIMT) and to Opinion No. 25/2013 of the Tax and Customs Studies Centre within the Administrative proceedings.

f) From the TCA's perspective, as stated by the Claimant, interest, commissions and guarantees would only be exempt from Stamp Duty if they were charged or provided in credit utilization operations granted by credit institutions.

g) This understanding of the TCA would be illegal by violation of the provisions of paragraph e) of item 1 of article 7 of the SDC and collides with the administrative doctrine prevailing within the TCA regarding the subject matter under analysis, set out in the Order of 17 March 1999, issued by the Deputy Director General of Taxes.

On the Exemption of Paragraph e) of Item 1 of the Stamp Duty Code:

h) The understanding defended by the TCA, to the effect that "(…) interest, commissions and guarantees would only be exempt from Stamp Duty if they were charged or provided in credit utilization operations granted by credit institutions" bears no correspondence whatsoever with the wording of paragraph e) of item 1 of article 7 of the SDC.

i) The Claimant submits that the wording of the rule given by article 30 of Law No. 32-B/2002, of 29 December, whereby it was established that the exemption covers: "interest and commissions charged and, guarantees provided and, likewise, the utilization of credit granted by (…)" does not permit the conclusion that only interest, commissions and guarantees linked to credit granting are covered.

j) The preposition "and likewise" that links the first three operations to the fourth operation must necessarily have a proper and useful effect and meaning.

k) The financial operations referred to in paragraph e) of item 1 of article 7 of the SDC form part of the universe of financial operations referred to in item 17 of the GTSD, and it is certain that the interpretative activity of the rule passes through comparing the rule of incidence with the rule of exemption.

l) The Claimant submits that in the wording of item 17 GTSD, in the initial version of the SDC given by Law No. 150/99, of 11 September, which was maintained when article 30 of Law No. 32-B/2002, of 30 December, merged the previous paragraphs e) and f) of item 1 of article 6 of the SDC and suppressed item 2 thereof; it is verified that item 17 was subdivided into two major areas:

• a first group of operations referred to in items 17.1 to 17.1.4;

and

• another group integrated in items 17.2 to 17.2.4.

m) In the first group of operations (Items 17.1 to 17.1.4) there were included operations of credit granting in any form, regardless of the modality, the term, whether the grantor was or was not a credit institution, a financial company or another financial institution and regardless of who was the beneficiary of that credit.

n) In the second group of operations (items 17.2 to 17.2.4) there were included operations of a financial services nature such as commissions and other consideration, and also interest on credit granted.

o) Attending to the body of item 17.2, the financial operations mentioned there were "those carried out by or with intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions".

p) The structure and wording of item 17 lead to the conclusion that the wording of paragraph e) of item 1 of the previous article 6 SDC was structured in consonance with the said item 17, which continues to be verified after the amendments to the SDC, whether by the said paragraph e) of item 1 of article 7 of the SDC or by item 17 itself.

q) In relation to the first part of the cited paragraph e) of item 1 of article 7 SDC it was not necessary to delimit the charging of interest and commissions as to their participants, given that such delimitation was already concretized in the rule of incidence; that is, in the cited item 17.2 (current item 17.3) which determined that such operations were those executed by or with intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions.

r) In relation to credit granting, the second part of paragraph e) had to indicate which the granting agents and beneficiaries/users were, given that if it did not do so, all types of credit referred to in items 17.1 to 17.1.4 (current 17.1 and 17.2) would be covered.

s) In the wording that has been in place since 2002, paragraph e) of item 1 of article 7 of the SDC benefits the operations stated therein when their respective authors and beneficiaries are legal entities whose activity is situated in the intermediate phase of the economic circuit of financial operations.

t) To combine the wording of the said paragraph e) with item 17 it is sufficient to make reference to interest, commissions and guarantees because in item 17 it is consigned that these are operations carried out between institutions, whereas in the second part of the said paragraph, as to the utilization of granted credit, it is already necessary that the rule expressly assume it so that only operations carried out between the institutions mentioned in the rule are covered.

u) In the case of Stamp Duty, in the majority of instances the legal taxpayer is not the de facto taxpayer, that is, who economically bears the tax.

v) In financial operations most directly related to the situation at hand, it is noted that the Law considers as legal taxpayers the entities granting credit and guarantee or creditors of interest, premiums, commissions or other consideration, the de facto taxpayer being the client of financial institutions, the credit user and who is obligated to provide guarantee.

w) When the relationship is not between the service provider or grantor and the final consumer, but the final consumer assumes an intermediate nature of the circuit, that is, when the user of the service or beneficiary is in the middle of the circuit and he himself will use these services, what is demonstrated is that the Law tends to relieve him from the burden of the tax, which he could not immediately recover and which would financially increase his activity.

x) When providing the exemption, the State does not lose the tax, since when this intermediate operator relates to his own clients, final consumers, he will then proceed to its assessment.

y) This conclusion justifies various exemptions enshrined in the SDC, among which that which was provided in paragraph e) of item 1 of article 7, reinforcing the interpretation in the sense that the commissions referred to in its first part are those that are charged by the financial institutions referred to in the second part, among which are institutions of the same nature, among which pension funds are found.

z) As to the historical element of the interpretation of the rules, there is an evolution of the legislation in the sense of relieving some operations contracted between credit institutions, particularly with the entry into force of Law No. 150/99, of 11 September.

aa) The wording of paragraphs e) and f) of item 1 of article 6 of the SDC already approximated, in the part of interest to the exempt tax facts, to the wording of Law No. 30-C/2000, and this second law came to alter the final part of the initial wording of the two paragraphs, coming to exclude entities domiciled in territories with more favorable tax regime. With the new wording it was also clarified which financial operations should benefit from the exemption.

bb) The rules in question were not stabilized (paragraphs e) and f) of item 1 of article 6 of the SDC). The wording given by Law No. 30-C/2000 was again amended by article 30 of Law No. 32-B/2002, which gave new wording to article 6 of the SDC, merging the previous paragraphs e) and f) into a single paragraph identified as paragraph e).

With Law No. 32-B/2002 the text of article 6 of the SDC came to be as follows:

cc) "interest and commissions charged and, likewise, the utilization of credit granted by credit institutions and financial companies to venture capital companies as well as to companies or entities whose form and object fill the types of credit institutions, financial companies and financial institutions provided for in community legislation, one and the other domiciled in the Member States of the European Union or in any state, with the exception of those domiciled in territories with privileged tax regime, to be defined by Ordinance of the Ministry of Finance".

dd) With Law No. 32-B/2002, the previous item 2 was suppressed from article 6, the old item 3 passing to its place.

ee) In 2003 there occurred the reform of property taxation, with the publication of Decree-Law No. 287/2003, of 12 November, through which the SDC was republished. With that republication, the wording of paragraph e) of item 1 of article 7 became equal to that which was conferred by Law No. 32-B/2002 to the same paragraph, which in that version was integrated in article 6.

ff) Subsequently, the wording that is still in effect today was approved, which was effected through article 36 item 1 of Law No. 107-B/2003, of 31 December, which came to give new wording to paragraph e) of item 1 of article 7 of the SDC, with the exemption coming to include bank guarantees and coming to include financial institutions alongside credit institutions and financial companies.

gg) The Claimant submits, thus, that neither the CEF opinion nor the inspection report correctly analyzed the evolution suffered by the wording of the provisions in question, limiting itself to invoking that the spirit of the cited item 2 of article 6 continued to have application after being eliminated.

hh) The Claimant considers that it is not for the interpreter to effect, by interpretative means, the repristination of a revoked rule.

ii) The rule in question was eliminated more than 12 years ago and constitutes the sole basis presented by the TCA for launching the additional assessments.

jj) The wording of Law No. 32-B/2002 adopted the content of the previous paragraphs e) and f) of item 1 of article 6 of the SDC, in the wording that had been given by Law No. 30-C/2000, with the scope that was provided in item 2 of that article.

kk) The wording given by Law No. 32-B/2002 the financial operations directly intended for credit granting and, beyond these operations, also includes right from the start of the new wording interest and commissions, without opposing any limitation to it.

ll) It should be stressed that the amendment of paragraph e) of item 1 of article 7 of the SDC, effected by article 36 of Law No. 107-B/2003, of 31 December, had as its objective to extend the exemption to bank guarantees and, above all, to extend the scope of the exemption to financial institutions.

mm) Portuguese tax law came to not discriminate, as concerns the exemption in Stamp Duty, the various modalities of financial institutions, including pension funds and their respective managing entities which, in light of Directive No. 2003/41/EC, of the European Parliament and of the Council, of 3 June, came to have that qualification.

nn) As results from the above stated, Pension Funds and Pension Funds Management Companies assume, in accordance with the applicable national and European legislation, the quality of financial institutions.

oo) The limitation invoked by the TCA to base its understanding was revoked with the wording conferred to article 6 (current article 7) of the SDC by Law No. 32-B/2002, of 30 December.

pp) In that measure, the TCA invokes in its benefit legislation expressly revoked.

qq) Thus, within the scope of operations carried out between credit institutions, financial companies and other financial institutions, the exemption covers credit granting, interest and consideration for financial services, regardless of whether such operations are intended (or not) directly for credit granting within the scope of the activity developed by credit institutions or pursue other purposes pursued by financial institutions.

rr) The wording of the current article 7 of the SDC no longer limits the exemption to operations directly intended for credit granting within the scope of the activity developed by credit institutions, financial companies and other financial institutions.

ss) The limitation of the exemption invoked by the tax administration ceased to be in force from the 2003 fiscal year.

tt) The previous regime prior to Law No. 30-C/2000 was thus restored.

uu) The clear objective of the legislator was to defer the taxation of credit granting and financial services to the moment of their acquisition by final consumers, who are here, private individuals.

vv) In this sense, it can only be understood that all commissions relating to financial services, charged between financial institutions, are covered by the exemption provided in paragraph e) of item 1 of article 7 of the SDC, in so far as there is no limitation in the law to that objective scope.

ww) It is clear that in light of the revocation of item 2 of article 37 of the State Budget Law for 2001 by article 30 of the State Budget Law for 2003, paragraph e) of item 1 of article 7 of the SDC should be interpreted in the sense that all interest, commissions charged and guarantees provided are exempt from Stamp Duty, provided that they relate to operations carried out between credit institutions, financial companies and financial institutions.

On Non-Retroactivity

xx) Only in the year 2016 was a new item 7 added to article 7 of the SDC, restricting the scope of application of the exemption provided in paragraph e) of item 1 of article 7 of the SDC, designated by the legislator as an interpretative rule, which violates the constitutional principle of non-retroactivity of tax law.

yy) The decisions taken by the TCA violated the orientation adopted in the order of the Deputy DG of the DTA of 17 March 1999, which constitutes an autonomous cause of illegality of the tax acts. All the more so since such generic orientation is not subject to a period of lapse — maintaining itself until its revocation – referring to item 5 of article 68 of the LGT.

zz) An order in which it was understood that the commissions charged by the societies managing pension funds were not covered by the incidence of Stamp Duty.

aaa) All activities listed in § 2 of article 199-A of the General Regime of Credit Institutions and Financial Companies (hereinafter "GRCIF") are not financial activities properly speaking.

bbb) Pension fund management companies are financial institutions.

ccc) Having Directive No. 2003/41/EC been transposed into internal law by Decree-Law No. 12/2006, it is required the material European qualification of pension funds as a type of institution.

ddd) The principle of neutrality, in respect of Stamp Duty, between direct investment and investment through collective investment vehicles, would support the position of the Claimant.

eee) Auxiliary financial operations, being instrumental operations of financial services, must be considered as financial operations, since their connection with the activities properly speaking financial is of a teleological order.

fff) Such operations are not included in the scope of objective incidence of item 17.3.4 of the GTSD.

ggg) The wording of article 6 of the SDC, given by item 2 of article 37 of Law No. 30-C/2000, was amended by Law No. 32-B/2002, giving more ample wording to the exemption rule which, once renumbered, came to integrate paragraph e) of item 1 of article 7 of the SDC, coming to cover interest and commissions.

hhh) The management commissions paid by pension funds to their respective managing companies are covered by the exemption provided in paragraph e) of item 1 of article 7 of the SDC.

III. Position of the Respondent

The TCA sustains the legality of the assessments, in terms that are indicated in summary form:

a) The TCA remits the learned response to the final report of Tax Inspection;

b) The wording of paragraph e) was given by law No. 107-B/2003, of 31 December, and item 7 was added by law No. 7-A/2016 of 30 March, with interpretative character thus integrating itself in the interpreted rule.

c) The services provided by Pension Funds Management Companies (hereinafter "PFMC"), within the scope in question, cannot be qualified as merely auxiliary.

d) The activities exercised are qualifiable only as materially financial.

e) The Claimant meets the requirements provided for in the General Regime of Credit Institutions and Financial Companies (hereinafter "GRCIF"), and in Directive No. 2003/36/EU, to be qualified as a financial company.

f) The nucleus of its functions resembles functions exercised by companies subject to the general regime.

g) As to the nature of the activity exercised – which is the relevant one – PFMCs are financial companies.

h) PFMCs are subsumable within the body of item 17.3 whether as financial companies or as institutions.

i) The requirements of incidence are met that permit the framing of management commissions in sub-item 17.3.4 in the category of commissions and consideration for financial services.

j) The TCA defends the inapplicability of the order of 17 March on the ground that it does not constitute a generic orientation.

k) Being fiscal benefits subject to exceptional regime derogating from taxation-rule, one cannot fill an apparent gap in the exemption.

l) The interpretation made by Superior Courts – TCAS, case No. 02754/08, on 21/09/2010; STA, case 0770/15, on 15.06.2016, support the interpretation defended.

m) The interpretative character is underlying the rule, directly attributed by law (cited STA, case 01630/15 of 06/29/2016).

n) There is no violation of European Union Law.

o) The Claimant does not demonstrate having proceeded to the payment of the amount assessed. Having only constituted a bank guarantee, whereby the request for indemnitory interest is unfounded.

p) The Claimant is a financial institution that dedicates itself to the constitution, administration, management and representation of Pension Funds, in accordance with articles 32 and following of Decree-Law No. 12/2006, of 20 January, which regulates the constitution and operation of pension funds and pension fund management companies, in the meantime altered and republished by Law No. 147/2015, of 9 September.

q) Within the scope of its activity, the Claimant charges the Pension Funds under its management commissions that remunerate the provision of services of management and administration of the Pension Funds, in accordance with Chapter I of Title IV of Decree-Law No. 12/2006.

r) The Claimant was notified of four notes of tax assessment.

IV. Clearing

The Tribunal is competent and is regularly constituted, in accordance with paragraph a) of item 1 of article 2 and articles 5 and 6 of RJAT.

The parties have legal capacity and standing, show themselves legitimately represented and the proceedings do not suffer from nullities.

V. Matter of Fact

For the conviction of the Arbitral Tribunal, relative to the proven facts, the documents attached to the case file and the Administrative proceedings were relevant, which showed themselves adequate as to the facts in discussion in the present case.

A. Facts Established as Proven

a) The Claimant is a Pension Funds Management Company (PFMC);

b) Between 2011 and 2014 the Claimant charged the pension funds under its management and administration commissions that remunerated the services provided;

c) The Claimant understood that, in accordance with the SDC and its respective GTSD, it would not have to assess Stamp Duty on the said commissions;

d) The Claimant was subject to an Inspection Procedure carried out by the Finance Directorate of Lisbon and authorized by Service Orders No. OI2015…, OI2015…, OI2015… and OI2015… of 30.03.2015;

e) The Claimant was notified to pronounce itself on the draft report through office No. …, of 09.09.2015, having exercised its right to prior hearing;

f) The final report maintained the corrections proposed in the draft report;

g) The Claimant proceeded to the provision of bank guarantee in order to, jointly with the presentation of gracious complaint, prevent the coercive collection of Stamp Duty;

h) The Claimant presented a gracious complaint, having taken advantage of the presumption of tacit rejection to present the present request for arbitral pronouncement.

i) The Claimant did not voluntarily pay the assessed tax, having had tax executions Nos. …2015…, …2015…, …2015… and ….2015… instituted against it.

To suspend the said executions the Claimant provided, on 23 December 2015, a bank guarantee up to the limit of € 1,539,273.82.

B. Facts Not Proven

Of the facts alleged, relevant to deciding the case, none remained unproven.

VI. Deciding

The Problem to Decide

The Facts

1. As referred to, the Claimant dedicates itself to the constitution, administration, management and representation of Pension Funds, in accordance with articles 32 and following of Decree-Law No. 12/2006, of 20 January, which regulates the constitution and operation of pension funds and pension fund management companies, in the meantime altered and republished by Law No. 147/2015, of 9 September.

2. Within the scope of its activity, the Claimant charges the Pension Funds under its management commissions that remunerate the provision of services of management and administration of the Pension Funds, in accordance with Chapter I of Title IV of Decree-Law No. 12/2006.

3. The Claimant was notified of four notes of tax assessment (No. 2015…; No. 2015…, No. 2015… and No. 2015…), relating to the fiscal years 2011, 2012, 2013 and 2014, with the total value of € 1,217,837.73 (one million two hundred seventeen thousand eight hundred thirty-seven euros and seventy-three cents).

4. The period for voluntary payment of the four assessment notices ended on 11 December 2015.

5. The Claimant presented a gracious complaint of the said assessment notices – together with the request for arbitral pronouncement.

6. In accordance with and for the purposes of paragraph a) of item 1 of article 10 of RJAT and paragraph d) of item 1 of article 102 of CPPT the tacit rejection of the Gracious Complaint occurred.

The Law

1. The resolution of the case sub judice rests on the interpretation of items 17.3.4 of GTSD and paragraph a) of item 1 of 7 of the SDC - previous article 6 - with the purpose of determining whether management commissions, administration and other commissions charged by managing entities to their respective pension funds are subject to SD, not benefiting from the exemption provided in paragraph e) of item 1 of article 7 of the SDC.

2. According to the TCA, the exemption mentioned is not applicable to all commissions covered by item 17.3.4, but only to those directly linked to credit granting operations, within the scope of activity exercised by the institutions and entities referred to in that provision. Thus, only interest, commissions and guarantees resulting from the prior existence of granted credit that with these is found direct and intrinsically related would fit in the legal provision of that rule.

Item 17.3.4 of GTSD

1. Item 17.3.4 subjects to tax, at the rate of 4%, "commissions charged and consideration for financial services in operations carried out by or with the intermediation of credit institutions, financial companies or other entities legally equivalent to them and any other financial institutions".

2. It is necessary that these be financial operations, given that non-financial operations are subject to and not exempt from VAT and not subject to SD. The type of operations that in the concrete case are covered is given by the rules that define the competence and nature of the entities referred to.

3. The legislator of GRCIF was careful to make explicit that the provision of item 3 of the respective article 6 is valid exclusively for the purposes of that diploma. It does not exclude, therefore, that the entities managing pension funds may be considered financial institutions in other contexts and for other purposes. In this sense, writes Carlos Costa Pina (Institutions and Financial Markets, Coimbra, 2005, p. 249), that this limitation of the concept of financial companies is merely formal, solely for the purposes of application of GRCIF: in truth, insurance companies and pension fund management companies are materially financial institutions, comprising, as such, two relevant institutional subsectors of the financial sector: the insurance sector and the pension funds sector, since their object consists of the performance of operations materially and formally financial. In the absence of the express definition of a concept of financial institution it has always been admitted the existence of a concept in strict sense (that contained in GRCIF-monetary financial institutions) alongside a broad concept (non-monetary financial institutions). This distinction finds support, whether in the understanding of the financial sector in a broad sense, which comprises the banking, securities and insurance subsectors, whether in the national and European Union legislation.

4. In Portuguese law we do not find a definition of "financial institution", with the legislator limiting himself, in line with what happens at the level of European Union Law, to enumerating entities which he qualifies casuistically as "credit institutions", "financial companies" and "financial institutions", for the purposes of application of a determined regime.

5. In accordance with and for the purposes of point 26) of article 4 of Regulation (EU) No. 575/2013, of the European Parliament and of the Council, of 26 June, "Financial Institution" means: "an undertaking that is not an institution, whose principal activity is the acquisition of holdings or the performance of one or more activities enumerated in Annex I, points 2 to 12 and 15 of Directive No. 2013/36/EU[1], including a financial company, a mixed financial company, a payment institution within the meaning of Directive No. 2007/64/EC, of the European Parliament and of the Council, of 13 November 2007, on payment services in the internal market, and an asset management company, but excluding the insurance group management companies and mixed insurance group management companies, within the meaning of paragraph g) of item 1 of article 212 of Directive 2009/138/EC."

6. Point 27, however, determines that a "Financial Sector Entity" comprises:

"a financial institution; an auxiliary services company included in the consolidated financial situation of an institution; an insurance company; a third country insurance company; a reinsurance company; a third country reinsurance company; an insurance group management company; (…)".

1. For the purposes of the regime of Directive No. 2009/138/EC, of the Parliament and of the Council of 25 November, relating to the access to the activity of insurance and reinsurance and its exercise (Solvency II) (recast), in article 13, under the heading "Definitions", point 25), "Financial Institution" means any of the following entities:

A credit institution, a financial institution or an auxiliary banking services company, within the meaning, respectively, of points 1), 5) and 21) of article 4 of Directive No. 2006/48/EC; insurance companies, reinsurance companies or insurance group management companies within the meaning of paragraph f) of item 1 of article 112; an investment company or a financial institution, within the meaning of point 1 of item 1 of article 4 of Directive 2004/39/EC:(…)".

1. An insurance group management company falls, in accordance with this Regulation, within "financial sector entities" and, therefore, within a broad concept of financial institution.

2. In Directive No. 2003/41/EC, of the European Parliament and of the Council of 3 June 2003[2], relating to the activities and supervision of the institutions for the realization of professional pension plans, there are several references in the sense of the framing of these entities within the concept of financial institution in a broad sense.

3. This Directive was transposed into Portuguese law through Decree-Law No. 12/2006, of 20 January, which regulates the constitution and operation of pension funds and the entities managing pension funds. Its article 32 provides that "[p]ension funds may be managed either by companies constituted exclusively for that purpose, designated in this decree-law by managing companies, or by insurance companies that operate the "Life" branch and have establishment in Portugal."

4. As regards the prudential rules to be observed, item 2 of article 38 of Decree-Law No. 12/2006, according to the wording given by article 4 of Law No. 147/2015, of 9 September, provides that:

"The provisions of the legal regime for access and exercise of insurance and reinsurance activity, approved by Law No. 147/2015, of 9 September, shall apply to pension fund management companies, with the necessary adaptations, relating to: control of holders of qualified holdings; registration of persons who effectively direct the company, supervise it or are responsible for key functions; qualification and propriety requirements for persons who effectively direct the company, supervise it, are responsible for key functions or exercise key functions; accumulation of positions and incompatibilities; registration of shareholders' agreements; unlawful use of denomination".

1. By virtue of the provision of article 7 of the Statutes of the Supervisory Authority for Insurance and Pension Funds (ASF) (approved by Decree-Law No. 1/2015, of 6 March), the duties of this (in particular) "to supervise and regulate insurance, reinsurance, insurance brokerage and pension funds activity, as well as related or complementary activities" [item 1 paragraph a)].

2. PFMCs not only approach their peer insurance and reinsurance sector managing companies, from the point of view of the formal and material requirements of their activity, but are equally subject to supervision by ASF (cfr. in particular, 17, 19, 20, 24, 30, 32, and item 2 of article 38 of Decree-Law No. 12/2006, according to the wording introduced by article 4 of Law No. 147/2015).

3. In European Union law, the entities managing pension funds carry out operations materially and formally financial, approaching through the characteristics of their activity insurance and reinsurance companies. Hence their framing within the broad concept in the sense of institution that operates in the financial system results.

4. We proceed to determine which the sense of financial institution received by the legislator in item 17.3.4 of the GTSD.

5. The legislator, after referring to "credit institutions, financial companies or other entities legally equivalent to them", adds and "any other financial institutions", pointing to a wider set of financial institutions than that composed of credit institutions and financial companies, under penalty of such reference showing itself devoid of meaning.

6. It results from the wording of the provision that pension fund management companies meet the type of any other financial institutions provided for in item 17.3 of the GTSD[3].

Paragraph e) of Item 1 of Article 7 of the SDC

1. For the Respondent the exemption here provided has place only when interest and commissions charged and guarantees provided are associated with granted credit.

2. The exemption provided in paragraph e) of item 1 of article 7 of the SDC assumes mixed nature, in part objective and in another part subjective. It is objective in as much as it covers all the operations provided for therein. It is subjective in as much as the exemption of such operations restricts itself to those carried out between determined entities: credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and object fill the types of credit institutions, financial companies and financial institutions.

3. Subjective scope - The application of this rule to the case "sub judice" presupposes that pension fund management companies may be qualified as credit institutions, financial companies and financial institutions, on the one hand, and that, on the other hand, pension funds may be qualified as "venture capital companies, as well as companies or entities whose form and object fill the types of credit institutions, financial companies and financial institutions."

4. We have already concluded above that pension fund management companies integrate the broad concept of financial institutions, whereby this point will not be newly developed.

5. In any case, as referred to, the application of the exemption to commissions charged to funds by managing companies depends on considering as financial institutions, both the managing companies that charge management commissions, and the funds that should pay them.

6. According to paragraph c) of article 2 of Decree-Law No. 12/2006, in the wording given by Law No. 147/2015, of 9 September, "Pension Fund" means: "autonomous patrimony exclusively intended for the realization of one or more pension plans and or health benefits plans, and may also be simultaneously intended for financing a mechanism equivalent in accordance with Law No. 70/2013, of 30 August".

7. The qualification as financial institutions in a broad sense, both of pension funds and of managing companies, rests however, both on paragraphs e) and f) of item 1 of article 30 of the Securities Code, as well as on European legislation, namely item 2 of article 3 of Directive No. 2005/60/EC, of the European Parliament and of the Council, of 26 October 2005, which expressly include in the same concept of financial institution pension funds and their respective managing companies. Regarding this point, it is, moreover, the very TCA, in opinion No. 25/2013, of 28.06.2013 of the Tax and Customs Studies Centre which at point 38 seems to defend that funds (since it refers to Venture Capital Funds) may fall within the qualification of financial institution, by considering that these are included in the list of entities described in item 2 of article 3 of Directive No. 2005/60/EC.

8. From these legal provisions results that being financial institutions subject to the intervention of the Securities Market Commission, in accordance with paragraph d) of item 1 of article 359 of the Securities Code, all qualified investors referred to in paragraphs a) to f) and among these qualified investors figure pension funds.

9. Such qualification also results from, in accordance with item 4 of article 32 of Decree-Law No. 12/2006, of 20 June, the managing company acting not only by common account but in the name of the funds[4], whereby the acts practiced by that cannot fail to be directly reflected in the sphere of the funds, for purposes of their qualification as financial institutions. Similar situation is that of investment funds, which are had as financial institutions, as such, subject to CIT, as is, moreover, recognized by item 1 of article 22 of the EBF. It results, thus, whether from the legislation of the European Union or the Portuguese that pension funds integrate the broad concept of financial institutions being equivalent to their respective managing entities, in the terms and for the purposes of the subjective incidence provided for in item 17.3.4 of the GTSD.

10. We further stress that the reference to "entity", in the context of paragraph e) of item 1 of article 7 of the SDC, refers to tax personality and not to legal personality. As results, inclusively, from item 1 of article 16 of the EBF, pension funds are exempt from CIT (in accordance with and with the limitations provided for in law). In this manner, it shall always be mentioned that the exemption presupposes subjection to tax, that is, it is the tax law itself that recognizes the treatment of funds as "entity". This principle flows moreover from various provisions of tax legislation, of which we highlight, for example, paragraph b), of item 1 of article 2.

11. Objective scope - The question that arises is to know whether the scope of the exemption rule restricts itself to operations and services typically banking from which would be excluded in particular commissions charged by pension fund managing entities to their respective funds.

It is necessary to interpret the rule.

1. Interpretation – It should be stressed that initially there was not provided in the rule inscribed in the Table annexed to the Regulation of Stamp Duty relating to "banking operations" any exemption for the operations identified therein.

2. Reading item 2 of article 120-A of the Regulation of Stamp Duty, for example, in the wording of 1979 in which the wording of Decree-Law No. 16732, of 13 April 1929, was still maintained, it is observed that the financial operations subject to Stamp Duty – inscribed in only 2 numbers – did not benefit from any exemption.

3. Only later, in the wording of 1984, exemptions were provided, but only those circumscribed to interest, in the following terms: "Interest on loans granted for the acquisition of own housing is exempt from tax, as well as that owed by credit institutions or parabanking institutions to institutions of the same nature" (wording of Decree-Law No. 154/84, of 16 May).

4. In Decree-Law No. 223/91, which amended articles 13, 15, 27-A, 94, 120-A, 120-B, 141 and 145 of the GTSD, approved by Decree No. 21916 of 28 November 1932, beyond interest, other exemptions are provided, but there is no reference to commissions.

5. With the approval of the SDC and the annexed table by Law No. 150/99, of 11 September, with the heading "Other Exemptions", paragraphs e) and f) of article 6 of the SDC provided:

"e) Interest charged and the utilization of credit granted by credit institutions …"

"f) Commissions charged by credit institutions …"

1. That is: in accordance with paragraph e) of item 1 of article 6, in the original numbering of article 1 of Law No. 150/99, of 11 September, exempt from SD were interest charged and the utilization of credit granted by credit institutions and financial companies to institutions, companies or entities whose form and object filled the types of credit institutions and financial companies provided for in community legislation, one and the other domiciled in the Member States of the European Union, or in any State fulfilling the principles derived from the Code of Conduct approved by Resolution of the Council of the European Union, of 1 December 1997.

2. Paragraph f) of that item 1 would expand the exemption to commissions charged by credit institutions to other institutions of the same nature or entities whose form and object filled the types of credit institutions provided for in community legislation, domiciled in the Member States of the European Union, or in any State, provided it was equally fulfilling the principles derived from the Code of Conduct approved by Resolution of the Council of the European Union, of 1 December 1997.

3. Thus, the exemption of SD, previously limited to interest, would come to also cover credit granting and interest and commissions charged, in the terms defined in those paragraphs e) and f) of item 1 of article 6.

4. The framing of SD exemptions of financial operations in which exclusively credit institutions and financial companies intervened would consist of separate paragraphs. For the presuppositions of the exemptions applicable respectively to credit utilization and to interest and commissions charged would be distinct: in the first case, the exemption benefited credit institutions and financial companies; in the second case, exclusively credit institutions.

5. The connection between interest and credit granting seemed evident; but the same did not happen in relation to commissions, and it could be understood that all commissions provided for in item 17 would be covered. So much so that the legislator felt the necessity to in 2000 clarify the scope of the provision.

6. Indeed, article 37 of Law No. 30-C/2000, of 29 December - Series I A - State Budget for the Year 2001, came to introduce in article 6 of the SDC, approved by Law No. 150/99, of 11 September, various amendments.

7. With the new wording, given to item 2 of article 6 of the SDC, the legislator, making an interpretation of paragraphs e) and f), clarified that the exemptions provided for in these two paragraphs restrict themselves "to financial operations directly intended for credit granting". Repeating, the legislator came to say expressly that the application of the exemption rule was limited precisely to credit granting and to interest and commissions linked to it, in such manner that the exemption would only be applicable to commissions of item 17 when they were directly linked to credit granting operations, within the scope of the activity exercised by the institutions and entities referred to in article 6 of the SDC.

8. Outside the scope of the exemption there remained, thus, commissions charged by credit institutions or financial companies to other credit institutions, when only indirectly related to credit granting, as is the case of commissions charged for the provision of financial services that did not integrate a concrete credit operation, as well as credit itself granted by credit institutions and possibly financial companies to other credit institutions, when the credit was intended to be used outside the scope of the activity of the borrowing credit institutions.

9. The exemption in question would thus be limited to credit and respective interest with a view to the financing of the traditional activity of credit institutions, credit granting.

10. Meanwhile, article 30 of Law No. 32-B/2002, of 31 December, came to suppress item 2 of article 6, in the wording introduced by item 1 of article 37 of Law No. 30-C/2000. In conformity, items 3 and 4 of the previous wording would, in the new wording, become items 2 and 3.

11. Thus, the limitation of the exemption to operations directly intended for credit granting, within the scope of activity developed by the entities referred to in paragraphs e) and f) of item 1 of article 6, was eliminated.

12. Following, article 30 of Law No. 32-B/2002, of 31 December (State Budget for 2003, merged into one sole paragraph [the e)], the previous paragraphs e) and f).

13. The referred new paragraph e) came to exempt from tax interest and commissions charged, as well as the utilization of credit granted by credit institutions and financial companies to venture capital companies[5], as well as to companies whose form and object filled the types of credit institutions and financial companies provided for in community legislation; provided that one and the other domiciled in the Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regime, to be defined by ordinance of the Ministry of Finance.

14. The first substantial innovation introduced in article 6 of the SDC would result from the remodeling of the regime of investment in venture capital in the meantime operated by Decree-Law No. 319/2002, of 29 December, which this latter legislative instrument would strongly stimulate, namely through new tax incentives.

15. That innovation would consist in the expansion of the exemption to commissions and interest charged and to credit used by venture capital companies within the scope of operations carried out between venture capital companies and credit institutions or financial companies. For not being credit institutions, venture capital companies did not benefit from the benefits provided for in the previous wording of those paragraphs.

16. On the other hand, the exemption would come to cover commissions charged by credit institutions and financial companies to financial companies, including venture capital companies.

17. The legislator would harmonize the presuppositions of the exemption of paragraph e) with those of paragraph f): just as the exemption of paragraph e), the exemption of paragraph f) would come to cover operations in which were exclusively intervening credit institutions, financial companies and venture capital funds and not just operations in which the recipient was a credit institution. Uniformizing the regimes in one sole, obvious reasons of simplicity and clarity imposed that they cease to consist of separate paragraphs, which was done.

18. Therefore, the reason for the merger of the paragraphs has nothing to do with the incorporation in the new paragraph e) of item 1 of the expressly revoked item 2 of article 6, but with the uniformization of the presuppositions of the exemption of stamp duty on credit granted and interest charged with those of commissions charged in operations in which were exclusively intervening credit institutions and financial companies.

19. The expression "utilization of credit" does not limit retroactively the scope of the exemption to interest and commissions previously referred to, in the sense of only covering interest and commissions relating to credit operations.

20. Item 1 of article 36 of Law No. 107-B/2003, of 31 December (State Budget for 2004), would give new wording to paragraph e) of item 1 of article 6, which would come to exempt from Stamp Duty guarantees provided, interest and commissions charged and, likewise, the utilization of credit granted by credit institutions, financial companies and financial institutions to venture capital companies to other companies whose form and object fill the types of credit institutions, financial companies and financial institutions provided for in community legislation, one and the other domiciled in the Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regime, to be defined by ordinance of the Ministry of Finance.

21. With this amendment, the objective scope of the exemption would be expanded to guarantees provided and in the subjective plane to the types of financial institutions provided for in community legislation, in which are included pension funds regulated in Directive No. 2003/41/EC, of the European Parliament and of the Council, and not exclusively credit institutions and financial companies regulated in GRCIF.

22. The historical evolution of the provision points in a clear manner that only in the original version and, subsequently, between the period in which the wording given by article 37 of Law No. 30-C/2000, of 29 December (which added item 2 to article 6) was in effect, the exemption had clearly as catalyzing element the credit granted in the terms mentioned in that provision. As concerns in particular commissions charged the exemption could only apply to those which had underlying them operations intended for credit granting, by force of the restriction introduced in the mentioned item 2 of article 6.

23. From the moment in which by express will of the legislator that item 2 was revoked and the merger of paragraphs e) and f) is made in a single paragraph e), the provision lost homogeneity, with the consequent erosion of the catalyzing element of credit granting. Loss of homogeneity that is accentuated with the amendments introduced by Law No. 107-B/2003, going in the same direction the reason for being that presided, as we saw, the successive amendments which the provision underwent.

24. For the reasons exposed we cannot fail to conclude that the exemption of paragraph e) of item 1 of article 7 of the SDC did not restrict itself, prior to the entry into force of Law No. 7-A/2016, to operations directly intended for credit granting within the scope of activity developed by credit institutions, financial companies and other financial institutions.

25. That restriction only came to be expressly instituted again by Law No. 7-A/2016.

Law No. 7-A/2016 and the Principles of Protection of Confidence and Legal Certainty

1. Paragraph e) of item 1 of article 7 of the SDC exempts from tax diverse facts.

2. Item 7 of the same provision clarifies the content of paragraph e) of item 1.

3. The wording of paragraph e) was given, as we saw, by Law No. 107-B/2003, of 31 December, and item 7 was added, by article 152 of Law No. 7-A/2016 of 30 March (State Budget Law for 2016), having in turn article 154 qualified item 7 as an interpretative rule.

4. In accordance with the Civil Code, interpretative law integrates itself in the law interpreted (article 13 of the Civil Code), applying itself to situations and facts prior. By fixing one of the possible interpretations of the previous law with which the interested parties could and should count, and a solution that the courts could have adopted, it is not susceptible to violate the sure and legitimately founded expectations of the citizens.

5. In any case, within the scope of Tax Law, namely having in consideration the impositive and ablative nature of its rules, retroactivity, inclusively of interpretative rules, is especially protected by the Constitution of the Portuguese Republic.

6. Additional problems arise yet when the legislator designates a rule as "interpretative law" when in truth what is at issue is an innovative law, being, in many situations, a disguise of the retroactivity of the new law.

7. Only in very restricted cases, and by means of a casuistic analysis and by means of the application of criteria of proportionality will the prohibition of retroactivity not be applicable to interpretative rules.

8. Applying the criteria exposed to the case at hand, the explanation made above appears clear as to the uncertain character of the solution of law contained in the rule at hand, at least in the sense which the TCA wishes to attribute to it. In like manner, it has also been demonstrated that the new law came to consecrate a new sense. In the sense of the innovative character of item 7 of article 7 of the SDC, it is repeated that, if in a first moment, that of Law No. 30-C/2000, the legislator intended to restrict the exemption of the then paragraph e) of item 1 of article 6 to operations directly intended for credit granting, in a second moment, that of Law No. 32-B/2002, the same legislator wanted to abolish that limitation, reestablishing the previous regime, through the express revocation of item 2 of article 6 of the SDC. Finally, in a third moment, through the amendments introduced by Law No. 107-B/2003, the legislator expanded still more that exemption, in the sense of covering, among other operations, commissions charged by financial institutions, even if they are not credit institutions or financial companies, to institutions of the same nature.

9. The State Budget Law for 2016 came, thus, to restrict the field of application of the exemption in Stamp Duty provided for in paragraph e) of item 1 of article 7 of the SDC, and, being designated by the legislator as interpretative, would be applied from the vigor of the interpreted rule. The taxpayers would be, in this manner, confronted with the imposition of a tax burden, only bounded by the lapse of the tax, with which they did not count nor could in principle foresee, in accordance with the rules of hermeneutics applicable.

10. And it should not be argued in the sense of the non-innovative character of Law No. 7-A/2016. Indeed, in accordance with the jurisprudence of the superior tax courts, initiated by Judgment of the Central Administrative Court South, of 21 September 2010, case 2754/08, and confirmed by Judgments of the Supreme Administrative Court, namely, among others, that of 18 January 2016, case 0835/16, of 15 June 2016, case 770/15, of 9 June 2016, case 01630/15, and of 3 November 2016, case 0976/16, there would be subject to and not exempt from Stamp Duty commissions charged to insurance companies by credit institutions or other legally authorized financial entities, such as mere private individuals, to exercise the activity of insurance brokerage, in accordance with Decree-Law No. 144/2006, of 31 July.

11. But the referred jurisprudence does not cover, to the contrary of what seems to result from the argument of the Respondent, directly or indirectly, the management commissions of pension funds charged to the funds by the managing companies and, in general, commissions or other consideration resulting from the provision of financial services.

12. The commissions to which that jurisprudence relates are commissions charged for the exercise of insurance brokerage activity, taxed by item 22.2, which is distinguished from the provision of financial services covered by sub-item 17.3.4, both of the GTSD.

13. Stamp Duty on such commissions has a distinct nature from that referred to in sub-item 17.3.4 of the General Table: in truth, as refers the Judgment of 15 June 2016 previously cited, such commissions are not the consideration for any financial service but a service which, although connected with a financial activity, in the case, insurance activity and, for this reason, exempt from VAT in accordance with item 29, current 28, of the VAT Code and subject to specific regulation in Decree-Law No. 144/2006, is not materially a financial service, even when provided by a credit institution, as admits article 11 of the said Decree-Law.

14. It is not, in this manner, legitimate the extrapolation of that jurisprudence to the case of the proceedings and in order to exclude from the exemption of Stamp Duty commissions charged by virtue of the exercise of the activity of pension funds management. Nor can that jurisprudence be invoked as a consolidated jurisprudential current consecrating an unequivocal sense that resulted clearly from the old law and which the new law had limited itself to adopting.

15. In sum, for the reasons that are exposed, it is considered that Law No. 7-A/2016 came, through the interpretation conjugated of its articles 152 and 154, to delimit the material scope of the exemption provided for in paragraph e) of item 1 of article 7 of the SDC, in an innovative manner. Those provisions by instituting a wording that did not appear in the legal order since 2003 have to be considered retroactive and, as such, unconstitutional, by violation of the principle of protection of confidence and legal certainty.

Law No. 7-A/2016 and the Prohibition of Retroactivity of Tax Law (article 103, item 3, of the CRP)

1. Even if one were faced with a true interpretative rule (interpretative law material and not purely formal), the legitimacy of the interpretative scope of paragraph e) of item 1 of article 7 of the SDC conferred by articles 152 and 154 of Law No. 7-A/2016 would encounter as an obstacle article 103, item 3, of the CPR.

2. Since the constitutional revision of 1997 there is express constitutional consecration of the principle of non-retroactivity of taxes, saying itself in item 3 of article 103 of the CRP that "no one can be obliged to pay taxes that have not been created in accordance with the law, which have retroactive nature or whose assessment and collection are not made in accordance with the law."

3. As to the Judgment of the Constitutional Court No. 172/2000, case 762/98, relating to the constitutionality of item 7 of article 28 of Law No. 10-B/96, of 23 March, on the deductibility of the assessment while a cost of exercise of CIT it is to be mentioned that the sense of the Judgment is not contradicted by the dissenting votes, which diverge only on the grounds of the decision.

4. That Judgment considers interpretative laws that bind retroactively the interpreter, incompatible with the prohibition of the creation of retroactive taxes introduced by the Fourth Revision.

5. Being certain, for the Constitutional Court, that the authentically interpretative laws, do not truly shake, the concrete prior expectations of the recipients of the same, in the case that the interpretation made binding is already known and has even been applied. However, even in those cases, the interpretative binding that such laws entail, by becoming the exclusive legal criterion of the application of the previous text of the law, in cases in which constitutional law prohibits its retroactivity, modifies the relation of the State, emitter of rules, with its recipients.

6. The exclusion by interpretative law of other interpretations advocated, following still that Judgment, leads to that the State may subsequently prevent that the Right which it created functions through its intrinsic logic communicable to the recipients of the rules, allowing that interferes in legal interpretation an imperative and immediate power that alters the frame of the relevant elements of legal interpretation, with the consequent frustration of the constitutional principle of non-retroactivity of taxes.

7. In this measure, would continue the Judgment, one could understand that interpretative law, even if authentic, by intending to be in effect for the period prior to its emission, in accordance with item 1 of article 13 of the Civil Code, alters the context of self-binding of the organs of application of the Right to the Right and, consequently, affects the security of the recipients of the rules protected by a (constitutional) prohibition of retroactivity.

8. There would be, consequently, in this latter situation, a guarantee of security more strong inherent to the prohibition of retroactivity. In this manner, only in situations in which there exists a legal good that merits a superior tutelage could retroactive interpretative law be accepted, which in the concrete case does not exist.

9. In that measure, as concerns the new item 7 of article 7 of the Stamp Duty Code, the interpretation which is given to paragraph e) of the previous item 1, by article 152, with the scope of article 154 both of Law No. 7-A/2016, cannot be considered genuinely authentic.

10. Even if it were, as results from the jurisprudence of the Constitutional Court, the interpretative rule contained in the referred article 154, by implying retroactive tax, would always violate item 3 of article 103 of the CRP, whereby, in accordance with its article 204, could not be applied in the case sub judice.

11. For all that goes exposed, the TCA is not correct in not considering the commissions charged by the Claimant exempt from Stamp Duty in conformity with the provision of paragraph e) of item 1 of article 7 of the SDC.

12. Such being the terms in which the petition for declaration of illegality of the Stamp Duty assessments subject of the arbitral petition proceeds, by error of law as to the sense and scope of the mentioned provisions, with the consequent annulment of the same.

Questions Barred

The petition for arbitral pronouncement proceeding on the ground of the vice of illegality by error of law as to the sense and scope of paragraph e) of item 1 of article 7 of the SDC, which assures effective and stable protection of the rights of the Claimant, it becomes barred the knowledge of the other vices which are imputed to the tax act in question.

On Indemnitory Interest

The Claimant alleges that, in case she obtains the merits of the present action and considering the assessments of Stamp Duty and compensatory interest illegal, the TCA should pay indemnitory interest, in accordance with article 43 of the LGT.

In accordance with the provision of paragraph b) of item 1 of article 24 of the RJAT "[t]he arbitral decision on the merits of the petition of which there is no recourse or challenge binds the tax administration from the end of the period provided for recourse or challenge, and this must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of the sentences of the tax courts, alternatively or cumulatively, as the case may be:

[…]

b) Reestablish the situation that would exist if the tax act subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for that effect.

[…]".

In the same sense, article 100 of the LGT provides that "[t]he tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full reestablishment of the situation that would exist if the illegality had not been committed, including the payment of indemnitory interest, in the terms and conditions provided for in the law".

Doctrine and jurisprudence have defended that it is framed within the scope of the competences of arbitral courts the fixation of the effects of their decisions, in the same terms provided for for judicial challenge, designedly, as to condemnation in indemnitory interest or condemnation for indemnification for undue guarantee (cfr. Jorge Lopes de Sousa (2013), "Commentary to the Legal Regime of Tax Arbitration", 116).

Indeed, in the legislative authorization granted to the Government for approval of the RJAT, contained in article 124 of Law No. 3-B/2010, of 28 April proclaims, undoubtedly, the intention of a true alternative nature between the judicial and the arbitral tax process, reading there that "the arbitral tax process must constitute a procedural alternative means to the process of judicial challenge and the action for the recognition of a right or legitimate interest in tax matters".

Thus, although the paragraphs a) and b) of item 1 of article 2 of RJAT utilize the expression "declaration of illegality" to define the competence of arbitral tax courts, making no express reference to constitutive (nullifying) decisions and condemnatory decisions, should understand, in harmony with the above transcribed legislative authorization and, as well, with the effects imputed to arbitral decisions provided for in article 24 of RJAT, that there are included in the competences of arbitral tax courts the powers which, in process of judicial challenge, are attributed to tax judicial courts in relation to acts whose appraisal of (il)legality is inserted in their competences.

In this manner, if, notwithstanding the judicial challenge process being essentially a process of mere annulment – in accordance with the provision of articles 99 and 124 of CPPT –, can therein be issued condemnation of the tax administration to the payment of indemnitory interest and of indemnification for undue guarantee, identical conclusion should result within the scope of the arbitral tax process.

As to indemnitory interest, item 1 of article 43 of the LGT provides that "indemnitory interest is due when it is determined, in gracious complaint or judicial challenge, that there was error imputable to the services from which resulted payment of the tax debt in an amount superior to that legally due".

In the case sub judice, the Claimant did not allege the payment of the taxes, whereby indemnitory interest is not owed to her.

Moreover, such payment would be incompatible with the fact, alleged and proven, that tax executions were instituted against her and that she provided a bank guarantee to obtain its suspension.

On Indemnification for Guarantee Provided

As established in the factual setting, the Claimant provided a bank guarantee to suspend the tax executions that were instituted against her.

This occurred on 23 December 2015.

In accordance with item 1 of article 53 of the LGT, "The debtor who, to suspend execution, offers bank guarantee or equivalent will be indemnified totally or partially for the damages resulting from its provision, if she has maintained it for a period superior to three years in proportion to the success in administrative recourse, challenge or opposition to execution that have as object the debt guaranteed".

In the case at hand, the referred three years have not yet passed, nor can it be established that the guarantee will subsist for such a period, which amounts to saying that, of the time elapsed, no effect is to be drawn, by force of the transcribed rule, being certain that the court cannot issue decisions subject to condition, but only before established facts. The legal rules which the court applies in the sentence are those that correspond to the proven facts, and not those that will correspond to facts of future and uncertain verification (see article 607 of the Civil Procedure Code, previously 659).

It is true that item 2 of the referred article 53 provides that "The period referred to in the previous number does not apply when it is verified, in gracious complaint or judicial challenge, that there was error imputable to the services in the assessment of the tax".

It is necessary, therefore, to see whether, in this case, such error occurred.

As flows from the grounds of the present judgment, the Administration incurred, when practicing the acts in controversy, in error in the interpretation of the applicable legal rules, an error that is imputable to no one other than its services.

Hence that the period of three years provided for in item 1 of article 53 of the LGT does not apply, that is, item 2 of the said article must be invoked, and the Claimant has the right to indemnification for the damages resulting from the provision of guarantee, independently of such guarantee surviving beyond that period of three years.

Reasons why this petition also proceeds.

OPERATIVE PART

For the grounds exposed, it is decided:

a) To judge the principal petition well-founded, annulling the acts of assessment impugned;

b) To judge well-founded the petition for indemnification for bank guarantee provided;

c) To judge unfounded the petition for indemnitory interest;

d) To judge unfounded the petition for condemnation of the Respondent in attorney's fees, by such not being provided for in the Regulations of Costs in Tax Arbitration Proceedings;

e) To condemn the Claimant and the Tax and Customs Authority in costs, in the percentage of 3% and 97%, respectively, considering the corresponding success/failure;

f) To fix in € 1,217,833.73 the value of the proceedings, in accordance with the provision of articles 305 item 2 of the Civil Procedure Code, 97-A item 1, paragraph a) of the Code of Tax Procedure and Process and 3 item 2 of the Regulations of Costs in Tax Arbitration Proceedings;

g) To compute in € 16,524.00 the costs of the proceedings, attending to that established in articles 22 item 4 of the Legal Regime of Tax Arbitration, 4 item 4 of the Regulations of Costs in Tax Arbitration Proceedings and Table I annexed hereto.

Be notified, including the Public Ministry (article 72 of the Constitution of the Portuguese Republic).

Lisbon, 19 May 2017

The Arbitrators

(José Baeta de Queiroz)

(Leonardo Marques dos Santos)

(Diogo Leite de Campos)

[1] In this sense, Decree-Law No. 157/2014 of 24 October came to add article 2-A to the GRCIF.

[2] Amended by Directives No. 2011/61/EU, of the European Parliament and of the Council, of 8 June, and 2013/14/EU, of the European Parliament and of the Council of 21 May 2013. Decree-Law No. 124/2015, of 7 June, relating to the activities and supervision of the institutions for the realization of professional pension plans, operated the partial transposition to the internal legal order of these Directives.

[3] In this sense, cfr. Opinion submitted by the Claimant to the case file of the authorship of Joaquim Silvério Mateus and others, p.13.

[4] In accordance with article 2 of Directive No. 2003/41/EC, of the Parliament and of the Council of 3 June, applicable to institutions for the realization of professional pension plans, which establishes that whenever, in accordance with national law, such institutions do not have legal personality, the Member States will apply this Directive to these institutions or, under reserve of item 2, to the authorized entities responsible for their management and which act in their name.

[5] Venture capital companies did not appear in the previous wording.