Summary
Full Decision
ARBITRAL DECISION (consult full version in PDF)
The arbitrators Counselor Jorge Lopes de Sousa (arbitrator-president), Dr. João Taborda da Gama and Dr. Henrique Nogueira Nunes (arbitrator members), designated by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 26-02-2019, agree on the following:
1. Report
A..., a non-resident entity without a permanent establishment in Portugal and holder in Portugal of the tax identification number..., registered with the ... Office under no...., Irish tax identification number ...T, with registered office in ..., ..., Ireland ("Claimant" or "A..."), submitted, pursuant to Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), a request for arbitral decision with a view to:
(i) The declaration of illegality, and consequent annulment, of the tax acts embodied in the withholding tax certificates for Corporate Income Tax ("IRC") better identified in the table below, made by B..., S.A., a company governed by Portuguese law, Portuguese taxpayer number no. ..., with registered office in Rua ..., ..., ...-... Lisbon ("A...") relating to the months of October 2015 to October 2016, in the total amount of €305,518.88;
(ii) The declaration of illegality, and consequent annulment, of the decision dismissing in part the administrative complaint in which the Claimant contested the legality of those IRC withholdings ("Contested Decision") – cf. document no. 1 which is attached and is deemed to be fully reproduced for all legal purposes; and
(iii) The condemnation of the Tax and Customs Authority ("AT") to reimburse the amounts unduly borne with respect to such withholdings – in the total amount of €305,518.88 –, plus corresponding compensatory interest, in accordance with article 43 of the General Tax Law ("LGT") and default interest, if applicable.
Subsidiarily, the Claimant argues that "the AT would necessarily have to be condemned to partially annul the Contested Decision, to the extent that it dismisses the refund of the amount of €24,906.11 corresponding to the IRC withholding for the month of October 2015, with that amount to be refunded to the Claimant, plus the corresponding compensatory interest, in accordance with article 43 of the LGT and default interest, if applicable".
The respondent is the TAX AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 14-12-2018.
Pursuant to subsection a) of no. 2 of article 6 and subsection b) of no. 1 of article 11 of the RJAT, in the version introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated the signatories as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable period.
On 06-02-2019 the parties were duly notified of such designation, and did not express any will to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11 no. 1 subsections a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance with the provision of subsection c) of no. 1 of article 11 of the RJAT, in the version introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 26-02-2019.
The Tax and Customs Authority submitted a response in which it raised the exception of material incompetence of the Arbitral Tribunal and argued that the claim should be judged as lacking merit.
By order of 01-04-2019 it was decided to dispense with the meeting provided for in article 18 of the RJAT and oral arguments, with the possibility for the Claimant to pronounce itself on the exception raised by the Tax and Customs Authority.
The Claimant pronounced itself on the exception.
The arbitral tribunal was regularly constituted, in accordance with the provisions of articles 2, no. 1, subsection a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January.
The parties are duly represented, possess judicial personality and capacity, and have standing (articles 4 and 10, no. 2, of the same law and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings are not vitiated by any nullities.
It is necessary to assess the exception of incompetence raised by the Tax and Customs Authority as a matter of priority.
2. Exception of Material Incompetence of the Arbitral Tribunal
The exception of incompetence must be determined as a matter of priority, as results from article 13 of the Code of Administrative Court Procedure (CPTA), applicable to tax arbitration proceedings by virtue of article 29, no. 1, subsection c), of the RJAT.
The Tax and Customs Authority considers that
– the Claimant does not attribute any illegality vice to the withholdings;
– the Claimant intends that it should be the Tax and Customs Authority to grant an extension of the deadline for granting the tax benefit - provided for in article 28 of the Tax Benefits Statute (EBF) - in an arbitrary and illegal manner, thereby violating, if it were to do so, the conditions determined in Dispatch of the Secretary of State for Tax Affairs no. 276/2017 - XXI, of 11/07/2017.
– therefore, the mediate object of the present request for arbitral decision is not the withholdings identified, but rather the Dispatch of the Secretary of State for Tax Affairs no. 276/2017 - XXI, of 11/07/2017.
– it is not within the competence of arbitral tribunals to assess the legality of the Dispatch of the Secretary of State for Tax Affairs as the Claimant intends, an assessment that should be made through an administrative action, within the competence of the Central Administrative Court.
The Claimant responded to the exception as follows, in summary:
– the claims it formulated relate solely to the illegality of the withholding acts and of the decision on the administrative complaint in which the legality thereof was contested, and not to the said Dispatch of the Secretary of State for Tax Affairs;
– the Claimant raised various illegalities, which it attributed to the decision dismissing in part the administrative complaint submitted and to the contested tax acts (by withholding);
– the Claimant merely defends, throughout the administrative complaint, that the interpretation which the AT is making of the content of the dispatch is not correct and is illegal (which taints the withholding acts contested with illegality, without however discussing at this stage the legality of the dispatch);
– the illegality of the interpretation of a certain administrative act – as may be the case of a dispatch recognizing a tax benefit – does not imply that such administrative act is itself the object of any type of challenge;
– there is no autonomous tax act, distinct from the tax acts embodied in the IRC withholding certificates that the Claimant intended to challenge through a special administrative action;
– the Claimant understands that its claim – the refund of IRC withholdings made in excess – results expressly from the dispatch recognizing the tax benefits issued by the Secretary of State for Tax Affairs, whereby it disagrees with the AT on the rule it extracts from the dispatch, but is not questioning at this stage (as it has not done at any other stage, understanding that such act is not illegal) the compliance with law of said dispatch.
The competence of arbitral tribunals functioning in CAAD is defined, in the first place, by article 2, no. 1, of the RJAT, which establishes the following:
1 - The competence of arbitral tribunals comprises the assessment of the following claims:
a) The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account;
b) The declaration of illegality of acts determining the taxable matter when it does not give rise to the assessment of any tax, acts determining taxable income and acts fixing patrimonial values;
In the second place, the competence of arbitral tribunals functioning in CAAD is limited by the commitment of the Tax and Customs Authority which, pursuant to article 4, no. 1, of the RJAT, has been defined by Ordinance no. 112-A/2011, of 12 March, which establishes the following, to the extent relevant:
The services and bodies referred to in the preceding article are bound by the jurisdiction of arbitral tribunals functioning in CAAD that have as their object the assessment of claims relating to taxes whose administration is entrusted to them referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:
a) Claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process;
b) Claims relating to acts determining taxable income and acts determining taxable matter, both by indirect methods, including the decision of the revision procedure;
c) Claims relating to customs duties on imports and other indirect taxes affecting goods subject to import duties; and
d) Claims relating to tariff classification, origin and customs value of goods and tariff quotas, or whose resolution depends on laboratory analysis or proceedings to be carried out by another Member State within the framework of administrative cooperation in customs matters.
As can be seen, only in relation to customs matters is the definition of competences made having regard to the type of taxes to which the claims relate. And as for these, the Tax and Customs Authority only bound itself with respect to the taxes it administers.
As for the rest, competence is defined solely having regard to the type of acts that are the object of challenge, there being, in particular, no prohibition on the assessment of matters relating to tax exemptions or any other legality questions relating to acts of the types referred to in article 2 of the RJAT.
The fact that subsection a) of no. 1 of article 10 of the RJAT makes reference to nos. 1 and 2 of article 102 of the CPPT, in which the various types of acts that give rise to the period for judicial challenge are indicated, including the administrative complaint, makes it understood that all types of acts capable of being challenged through the judicial challenge process, covered by those nos. 1 and 2, shall be included within the jurisdiction of arbitral tribunals functioning in CAAD, provided they have as their object an act of one of the types indicated in that article 2 of the RJAT. Moreover, this interpretation in the sense of identity of the fields of application of the judicial challenge process and the arbitration process is in line with the legislative authorization on which the Government based itself to approve the RJAT, granted by article 124 of Law no. 3-B/2010, of 28 April, in which the intention is revealed that the tax arbitration process constitutes "an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters".
A tax assessment (or any act that implements it, such as self-assessment and withholding at source acts) that stems from disregarding an exemption ceases to be a tax assessment act. And the assessment of the legality or illegality of such disregard does not cease, therefore, to be the assessment of a claim relating to the declaration of illegality of assessment acts.
In the case in question, acts of IRC withholding at source are being challenged, which fall under subsection a) of no. 1 of article 2 of the RJAT, and whose assessment is not excluded by any of the provisions of the said Ordinance.
On the other hand, an administrative complaint was filed regarding the withholding acts, and it was against the decision dismissing it and the withholding acts that the request for arbitral decision was submitted.
The assessment of the legality of these acts clearly falls within the competence of arbitral tribunals functioning in CAAD.
However, it results from the express tenor of the said legislative authorization granted in article 124 of Law no. 3-B/2010, of 28 April, that the possible scope of the arbitration process was established as an alternative to the judicial challenge process and to the action for recognition of a right or legitimate interest and not to other procedural means of challenging acts in tax matters or on tax questions, such as was the contentious appeal, subsequently the special administrative action and, currently, the administrative action [articles 97, nos. 1, subsection p) and no. 2, of the CPPT and article 191 of the CPTA, in the versions of Law no. 15/2002, of 22 February (amended by Law no. 4-A/2003, of 19 February) and Decree-Law no. 214-G/2015, of 2 October].
Acts of "total or partial dismissal or revocation of exemptions or other tax benefits" are expressly referred to in subsection p) of no. 1 of article 97 of the CPPT as being challengeable through contentious appeal, which currently corresponds to administrative action, by virtue of article 191 of the CPTA.
In these cases where the legislature establishes the autonomous challengeability of acts on tax benefits, their legality cannot be assessed within the scope of challenging the assessment, since the establishment of autonomous challenge has the purpose, precisely, of autonomizing the assessment of the vices that may affect them. Therefore, if acts on recognition of tax benefits that are autonomously challengeable are not challenged through the proper means of challenge, the administrative decision contained therein shall become consolidated in the legal order and what was decided therein shall be the premise of the assessment act, in whose challenge any possible vices of the autonomously challengeable act cannot be assessed.
In the case in question, an exemption dependent on recognition was assessed, in accordance with article 28 of the EBF, of the competence of an entity other than that having competence for assessment, whereby the act issued on this matter can only be challenged autonomously, in accordance with article 97, nos. 1, subsection p), and 2 of the CPPT.
Therefore, any possible illegalities in the act recognizing the exemption cannot be assessed in the present proceedings.
However, it falls within the competence of this Arbitral Tribunal to assess whether the withholding acts and the decision on the administrative complaint are in compliance with what was decided on the exemption.
Now, in the case in question, as the Claimant clarifies when pronouncing itself on the exception, what it argues is that "the interpretation which the AT is making of the content of the dispatch is not correct and is illegal (which taints the withholding acts contested with illegality, without however discussing at this stage the legality of the dispatch)".
Thus, the request for arbitral decision being clarified in these terms, with the assessment of the legality of the dispatch on the exemption removed from its scope, it must be concluded, from what has been said, that the assessment of the legality of the withholding acts and of the decision on the administrative complaint which confirmed them falls within the competence of this Arbitral Tribunal.
However, as the Claimant acknowledges, the legality of the dispatch granting the exemption cannot be discussed in the present proceedings, only being able to be questioned, in relation to this, whether the interpretation of that dispatch made by the Tax and Customs Authority to dismiss the administrative complaint is correct, maintaining the withholding acts.
Therefore, the exception of incompetence is without merit, with respect to the request for arbitral decision, to this extent.
3. Facts
The following facts are considered proved:
a) The Claimant is a commercial company engaged in aircraft leasing;
b) The Claimant is tax resident in the Republic of Ireland and does not have any permanent establishment in Portugal;
c) On 05-01-2015, the Claimant entered into, with a Portuguese commercial company – B... –, a contract called Aircraft Lease Agreement (hereinafter referred to as "Contract" – document no. 2 attached with the request for arbitral decision, whose content is deemed to be reproduced);
d) The Contract had as its object the leasing of the aircraft ... ...-200, with manufacturer serial number ..., registration number .../1 and two engines, brand and model ... PW ... A installed therein, with manufacturer serial numbers ESN... and ES... (the aircraft and engines hereinafter jointly referred to as the "Aircraft");
e) Under this contract, the Claimant assumed the contractual position of lessor of the Aircraft, while B... assumed the contractual position of lessee;
f) Under the combined provisions of clause 2.1 and Annexes 1 and 2A of the Contract, it was provided that the Aircraft would be leased from the date of its delivery ("Delivery Date") – by the Claimant to B... – until the date of return of the Aircraft ("Termination Date") – by B... to the Claimant;
g) Under the terms of the Contract, it was provided that its commencement, that is, the delivery of the Aircraft, would take place on 01-04-2015 ("Scheduled Delivery Date" – cf. annexes 1 and 2A of the Contract);
h) However, if the delivery of the Aircraft ("Delivery") only took place at a later time, the lease term duration ("Lease Term") would only commence on the date of actual delivery, so the lease term duration would not necessarily have to commence on 01-04-2015 (clause 2.1 and Annexes 1 and 2A of the Contract);
i) Under the combined provisions of clause 2.1 and Annexes 1 and 2A of the Contract, the end of the lease term duration ("Termination Date") could take place, alternatively, at one of the following times:
(i) On the scheduled date for return ("Return") of the Aircraft by B... to the Claimant, provided that the return were to be effectively carried out by the scheduled date – "Scheduled Termination Date", which initially corresponded to 31 October 2015; or
(ii) On a later date, if the Aircraft were not returned by the lessee on the scheduled date for its return ("Scheduled Termination Date");
j) With respect to the rents due by B... to the Claimant, Annex 2B of the Contract provided for the following monthly rents in consideration of the leasing of the Aircraft:
(i) From the date of delivery of the Aircraft until 31 May 2015, the base monthly rent value corresponded to the sum of the following values: (1) USD 150,000.00 (one hundred and fifty thousand US dollars) or the equivalent in Euros and (2) USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(ii) From 1 June 2015 to 30 September 2015, the base monthly rent value corresponded to USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(iii) From 1 October 2015 until the end of the lease term duration ("Termination Date")2, the base monthly rent value corresponded to the sum of the following values: (1) USD 300,000.00 (three hundred thousand US dollars) and (2) an additional amount of USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
k) In June 2015 the Claimant and B... signed the Aircraft Lease Amendment Agreement (hereinafter referred to as "First Contract Amendment" – document no. 3 attached with the request for arbitral decision, whose content is deemed to be reproduced);
l) In this First Contract Amendment Annex 2A of the Contract was amended (where the lease term duration – "Lease Term" – is provided for) as follows (clause 2.2.1 of the First Contract Amendment):
(i) The lease term duration ("Lease Term") commences on the date of delivery of the Aircraft ("Delivery Date")3 and ends on 31 March 2016;
(ii) As from 1 November 2015, the lessor (the Claimant) could, at any time, choose to terminate the Contract, provided that the lessee (B...) is notified of such intention with at least 60 days' notice.
m) In this First Contract Amendment, clause 1.1 of Annex 2B of the Contract was also amended, which now provided the following with respect to the monthly rents, due by B..., in consideration of the leasing of the Aircraft by the Claimant:
(i) From the date of delivery of the Aircraft until 30 April 2015, the monthly rent value corresponded to USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour. In any case, the monthly rent could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(ii) From 1 May 2015 to 31 May 2015, the base monthly rent value corresponded to the sum of the following values: (1) USD 100,000.00 (one hundred thousand US dollars) or the equivalent in Euros and (2) an additional amount of USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(iii) From 1 June 2015 to 30 September 2015, the amount of USD 450,000.00 (four hundred and fifty thousand US dollars);
(iv) From 1 October 2015 to 31 October 2015, the base monthly rent value corresponded to the sum of the following values: (1) USD 250,000.00 (two hundred and fifty thousand US dollars) or the equivalent in Euros and (2) an additional amount of USD 1,000.00 (one thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(v) From 1 November 2015 until the end of the lease term duration ("Termination Date"), the monthly rent value corresponded to USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour.
n) Within the scope of the First Contract Amendment, it was further agreed by the Claimant and B... that the amount of USD 150,000.00 (one hundred and fifty thousand US dollars), paid in the month of delivery of the Aircraft, would be deducted from the amount of the second monthly rent due by B... (clause 3 of the First Contract Amendment);
o) On 18-12-2015 the Claimant and B... signed the Aircraft Lease Amendment Agreement No. 2 (hereinafter referred to as "Second Contract Amendment" – document no. 4 attached with the request for arbitral decision, whose content is deemed to be reproduced)
p) In this Second Contract Amendment, Annex 2A of the Contract (where the lease term duration – "Lease Term" – is provided for) was reworded as follows (cf. clause 2.2 of the Second Contract Amendment): the lease term duration ("Lease Term") commences on the date of delivery of the Aircraft ("Delivery Date")4 and ends on 31 October 2016;
q) In this Second Contract Amendment, clause 1.1 of Annex 2B of the Contract was also reworded, which now provided the following with respect to the monthly rents, due by B..., in consideration of the leasing of the Aircraft by the Claimant:
(i) From 1 November 2015 to 30 April 2016, the monthly rent value corresponded to USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour. In any case, the monthly rent could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(ii) From 1 May 2016 to 30 June 2016, the monthly rent value corresponded to the sum of the following values: (1) USD 100,000.00 (one hundred thousand US dollars) or the equivalent in Euros and (2) an additional amount of USD 2,000.00 (two thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
(iii) From 1 July 2016 to 30 September 2016, the amount of USD 450,000.00 (four hundred and fifty thousand US dollars);
(iv) From 1 October 2016 to 31 October 2016, the base monthly rent value corresponded to the sum of the following values: (1) USD 250,000.00 (two hundred and fifty thousand US dollars) or the equivalent in Euros and (2) an additional amount of USD 1,000.00 (one thousand US dollars), or the equivalent in Euros, for each flight hour exceeding 150 monthly flight hours. In any case, the monthly rent resulting from the sum of those two values could not exceed the maximum limit of USD 450,000.00 (four hundred and fifty thousand US dollars), or the equivalent in Euros;
r) B..., lessee of the Aircraft and entity obligated to make payments of rents as a result of the leasing, submitted a request for recognition of exemption from IRC on the rents paid to the Claimant under the Contract;
s) The request for recognition of IRC exemption (under article 28 of the Tax Benefits Statute) was submitted by B... to the Ministry of Finance on 22-01-2015 (document no. 5 attached with the request for arbitral decision, whose content is deemed to be reproduced);
t) B... ended the exemption request in the following terms:
"In view of the foregoing, B... hereby requests Your Excellency, pursuant to article 28 of the EBF, the granting of full IRC exemption with respect to the equipment leasing rents due by it under the Aircraft leasing operation described in points 2 and 3 above".
u) On 20 and 30 April 2015, B... attached to the proceedings the documents requested by the AT (documents nos. 6 and 7 attached with the request for arbitral decision, whose contents are deemed to be reproduced);
v) On 19-08-2015, B... requested information on the status of the request for recognition of the exemption in question and the scheduled date for notification of the decision (document no. 8 attached with the request for arbitral decision, whose content is deemed to be reproduced);
w) In August 2017, B... was notified, by letter dated 24-08-2017, of the granting of the exemption in the terms contained in document no. 9 attached with the request for arbitral decision, whose content is deemed to be reproduced, in which it is stated, among other things, the following:
Following the claim filed pursuant to article 28 of the Tax Benefits Statute, it is hereby communicated that by dispatch of the Secretary of State for Tax Affairs no. 276/2017-XXI, of 11.07.2017, full exemption in the matter of IRC was granted, with respect to the monthly payable leasing rents in the following terms: - from 1 April to 31 May 2015, the base value shall consist of the sum of USD$ 150,000.00 (one hundred and fifty thousand US dollars), or the equivalent in euros, and the equivalent to USD$ 2,000.00 or equivalent in euros, for each number of flight hours above 150 hours, with a limit of USD$450,000.00, or equivalent in euros; - from 1 June to 30 September 2015, the base value shall be USD$450,000.00, or equivalent in euros; - from 1 to 31 October 2015, the base value shall consist of the sum of USD$300,000.00 (three hundred thousand US dollars), or equivalent in euros, and the equivalent to USD$1,000.00, or equivalent in euros, for each number of flight hours above 150 hours, with a limit of USD$450,000.00, or equivalent in euros.
The said rents result from a Leasing Contract entered into on 05.01.2015 between "B... SA" and "A...", called "Aircraft Lease Agreement, relating to an aircraft with (S/N) 802 and registration ..., with two engines installed, model ... PW ... A, with (S/Ns) ... and..., for a period of 7 months, from 1 April 2015. The exemption in question is subject to the fact that whenever there are alterations during the contract validity period, the requester shall submit a new request seeking the exemption.
x) Under the Aircraft leasing, the Claimant invoiced a total amount of USD 5,075,560.00 between May 2015 and October 2016 (copy of the 20 invoices issued during that period contained in document no. 10 attached with the request for arbitral decision, whose content is deemed to be reproduced);
y) Although delivery of the Aircraft to B... (lessee) occurred on 17-04-2015, there was no rent payment in April, as a result of the absence of any flight hours in that month;
z) Since the request was only assessed in 2017, throughout the entire validity period of the Contract (both in the initially scheduled period, until 31 October 2015, and in the subsequent periods of Contract duration as a result of the change in the scheduled date for return of the Aircraft to 31 October 2016), the Claimant was subject to IRC taxation (by withholding);
aa) Although the Rents should be paid in US Dollars, according to Portuguese law the IRC withholding must be made in Euros, which required the parties to agree on a Dollar-Euro exchange rate, the official exchange rate between those two currencies having been agreed and applied, corresponding to the first business day of the payment month;
bb) Accordingly, B... proceeded monthly to withhold IRC in the total aggregate amount of €496,234.65 (document no. 11 attached with the request for arbitral decision, whose content is deemed to be reproduced);
cc) The amounts withheld by B... were reported through Model 30 declarations submitted for the months of May 2015 to October 2016 (Model 30 declarations contained in document no. 12 attached with the request for arbitral decision, whose content is deemed to be reproduced);
dd) All withholding amounts in question were delivered to the AT through non-resident withholding certificates issued for this purpose with reference to each relevant period (withholding certificates and respective bank payment receipts, contained in document no. 13 attached with the request for arbitral decision, whose content is deemed to be reproduced);
ee) On 27-12-2017, the Claimant filed an administrative complaint against the withholding acts (requesting the annulment and refund of the tax paid, in the amount of € 496,234.65 (document no. 14 attached with the request for arbitral decision, whose content is deemed to be reproduced);
ff) The Claimant was notified, on 17-07-2018 of the draft dismissal of the administrative complaint (document no. 15 attached with the request for arbitral decision, whose content is deemed to be reproduced), in which it is stated, among other things, the following:
16. In this context, the dispatch of the Secretary of State for Tax Affairs invoked by the claimant only granted full exemption in the matter of IRC with respect to the leasing rents for the period from 2015-04-01 to 2015-10-31 (7 months), in the other terms described above in point 5, whereby the tax due on the rents from 2016-11-31 to 2016-10-31 is outside the legal scope of the exemption granted above.
17. On the other hand, tax benefits when temporary expire by the passage of the period for which they were granted (no. 2 of article 14 of the EBF).
18. In this perspective, even that within the period covered by the exemption dispatch, it must be proven that the withholding certificates of the tax correspond to the leasing rents paid and relating to the Aircraft with registration ... and serial number S/N..., in accordance with the registration certificate issued by ANAC – National Civil Aviation Authority, dated 2015-04-24 (on p. 251).
19. Indeed, the document certifying the withholding with the total amount of € 496,234.65 (on p. 190) identifies an aircraft with serial number MSM... .
gg) The Claimant, in a request filed with the Tax and Customs Authority on 06-08-2018, exercised the prior hearing right, in the terms set out in document no. 16 attached with the request for arbitral decision, whose content is deemed to be reproduced (page 10 of the 3rd part of the administrative file);
hh) In the aforementioned request, the Claimant states, among other things, that "after receiving the notification from the AT for the exercise of the present right of prior hearing, the Claimant verified that, indeed, the declaration referred to in b) contained a clerical error, as - despite correctly indicating the amount of IRC withholdings that are the subject of the present administrative complaint - made reference to the aircraft 'MSN ...' instead of the aircraft 'MSN ...' (which is the aircraft that is the object of the Contract, which was the origin of the payment of rents subject to IRC withholding, whose refund is claimed at this stage)" and that "immediately requested B... to issue a corrected declaration - i.e., with reference to the correct aircraft (MSN...) - , with B... having issued a new declaration with the correct information", attaching a document contained in the 3rd part of the administrative file, whose content is deemed to be reproduced;
ii) By order of 07-09-2018, the administrative complaint was partially upheld, with the grounds contained in document no. 1 attached with the request for arbitral decision, whose content is deemed to be reproduced, in which it is stated, among other things, the following:
IV - COMPLEMENTARY INFORMATION
20. The claimant was notified of the draft decision dismissing the claim, via Letter no. ... dated 2018-07-16 (on p. 299 and 300), being considered notified on 2018-07-19 (on p. 301), to exercise, if wishing, the right of prior hearing, pursuant to article 60 of the LGT, within 15 days.
21. The request exercising the right of prior hearing was sent to this Finance Directorate, by post, on 2018-08-03 (on p. 302 to 328) and, as such, timely, whereby it should be assessed:
22. With reference to what is stated in points 18 and 19 above, the claimant begins by assuming the clerical error contained in a document delivered with the initial petition, namely regarding the declaration issued by B... in which it attested the withholding values for each month, making reference to aircraft "MSN ..." instead of "MSN ...", object of the contract under analysis.
23. For this purpose, the claimant attaches a new declaration from B... now already corrected (on p. 326), whereby it is deemed necessary to correct the clerical error, with the granting of the withholdings relating to the rents paid until October 2015, in the amount of € 190,715.77.
24. With respect to the rents from November 2015 to November 2016, the claimant states that the extension of the contract validity period until 2016-03-31 and thereafter until 2016-10-31 is not an impediment to the granting of the present administrative complaint.
25. First of all, article 28 of the EBF does not require the notification of any alterations in the contracts subject to exemption, nor can it result from the dispatch recognizing the benefit, under penalty of illegality.
26. But even if it were otherwise, it would have been impossible to comply with such hypothetical requirement since the granting of the exemption was notified only two and a half years after the request and also after the contractual extensions in question.
27. "What cannot be accepted is that the AT (i) fails to comply, for more than two years, with the deadline it has to recognize the tax benefit and (ii) in that decision places additional requirements with respect to a period in which the taxpayer can do nothing because there was no administrative decision in a timely manner (point 27 of the request, on p. 308).
28. Beginning by saying that, with the new declaration corrected by B..., the clerical error initially found with the reference to the unit in question is corrected, being thus in line with the official declaration issued by the National Civil Aviation Authority (on p. 261),
29. Whereby, being covered by the exemption period granted, the request should be partially granted and the withholdings of that period should be recognized, in the amount of € 190,715.77 (on p. 210 to 219, 326 and 329).
30. However, with respect to the remaining periods, as already mentioned above, there is no tax exemption.
31. That is, the leasing contracts in question, which are sought to be covered by the tax exemption recognized for the period from 2015-04-01 to 2015-10-31, were not the subject of analysis nor were their contours closely examined.
32. Regardless of the date of notification of the decision to grant and recognize that tax benefit, that decision had a very precise and concrete object, defined temporally.
33. Any alterations and extrapolations to its content would be worthy of new assessment - which did not occur.
34. Accordingly, the request can only be dismissed outside the temporal scope of the exemption granted.
jj) The amendments to the contract with the change in the validity period were not notified to the Tax and Customs Authority before the decision on the exemption request;
kk) On 13-12-2018, the Claimant submitted the request for arbitral decision that gave rise to the present proceedings.
3.2. Unproved Facts and Reasoning for the Determination of Facts
There are no facts relevant to the decision of the case that have not been proved.
The proved facts are based on documents attached by the Claimant and which are also contained in the administrative file.
There is no controversy over the facts.
4. Legal Issues
As mentioned, the competence of this Arbitral Tribunal does not extend to the assessment of the legality of the dispatch issued on the exemption.
The withholding acts were carried out by B..., with respect to leasing rents for an aircraft, before the exemption was granted, with the Claimant not attributing to them any illegality vice, in light of the circumstances in which they were carried out.
After the exemption was granted, the Claimant filed an administrative complaint in which the Tax and Customs Authority acknowledged that the exemption was applicable to the part of the withholding acts it considered to be included in the period initially fixed for the duration of the Contract, granting the claim of the then Claimant regarding withholdings carried out in relation to rents for the period from 1 April 2015 and 31 October 2015.
However, the Tax and Customs Authority dismissed the Claimant's claim to the extent that it understood the exemption did not apply, namely with respect to withholding acts relating to rents for later periods.
Thus, in the administrative complaint, already after the exemption was granted, the withholding acts that are the object of the present proceedings were maintained.
It is the legality of the dismissal of the request for annulment of those acts, which is reduced to the affirmation of their legality and maintenance in the legal order with the grounds contained in the decision on the administrative complaint, which constitutes the immediate object of the present proceedings.
The Claimant attributes to the decision on the administrative complaint, to the extent it maintained the withholding acts, vices which it summarizes as follows:
i. Violation of the principle of legality provided for in article 8 of the LGT and 103, no. 2 of the CRP;
ii. Violation of the principle of justice and good faith, to which the AT is bound, in accordance with article 266, no. 2 of the CRP;
iii. Lack of reasoning of the Contested Decision, in violation of articles 77 of the LGT, 153 of the Code of Administrative Procedure ("CPA") and 268, no. 3, of the CRP, which should lead to its annulment; and
iv. Subsidiarily, manifest error in the Contested Decision, due to error in determining the amount of IRC withholdings to be refunded to the Claimant.
4.1. Vice of Violation of the Principle of Legality Provided for in Article 8 of the LGT and 103, No. 2 of the CRP
The Claimant argues, in summary, that
– the initial contract already provided for a possible duration over 7 months, whereby the temporal scope of the exemption recognized on the basis of the Contract alone is not necessarily what was considered;
– even if it were understood that there was an obligation to notify the AT of contractual changes (which is not the case), it is important to distinguish alterations to the content of the contract, which may be capable of affecting or contending with the requirements on which the recognition of the tax exemption depends (which did not exist in the case), from mere amendments formalizing the option (provided for in the Contract) of extending its validity period by agreement between the parties for a different date for return of the Aircraft.
– the alteration of the Aircraft return date was possible and was provided for in the Contract, whereby its occurrence does not constitute any contractual alteration;
– even if it were otherwise, and there were any contractual alteration (which is not conceded), the law does not provide for any obligation to notify contractual alterations, whereby the requirement provided for in the dispatch recognizing the IRC exemption is illegal.
Articles 103, no. 2, of the CRP and 8 of the LGT, invoked by the Claimant, relate to the creation of norms on tax matters, which are not at issue in the case in question, as the constitutionality or legality of article 28 of the EBF is not being questioned. In any case, no unconstitutionality or illegality of this article 28 is apparent, which is a norm created by the Assembly of the Republic.
However, in any case, in our constitutional system of executive administration, in addition to the creation of norms (acts of a general and abstract nature) in tax matters, powers of declarative self-protection are attributed to the Public Administration, namely through administrative acts which, by definition, "aim to produce external legal effects in an individual and concrete situation" (article 148 of the Code of Administrative Procedure).
Within this scope of the exercise of administrative powers, the principle of legality has another dimension, provided for in articles 266, no. 2, of the CRP and 55 of the LGT, and is set out in article 3 of the Code of Administrative Procedure, which requires the Public Administration to act "in obedience to law and right", which includes respect for the definition of legal situations by the Public Administration through administrative acts.
Indeed, article 155, no. 1, of the Code of Administrative Procedure itself, invoked by the Claimant, corroborates this understanding, as it establishes that "the administrative act produces its effects from the date on which it is performed, except in cases where the law or the act itself confer on it retroactive, deferred or conditional effectiveness". What results from this norm is that the effects of administrative acts are produced in accordance with the terms defined therein, with the conditions included therein.
Therefore, subsisting administrative acts in the legal order, it is the law itself that requires them to produce their proper effects of defining the legal regime applicable to the individual and concrete situation. Thus, by virtue of law, the legality and law applicable to the individual and concrete situation become those resulting from the definition embodied in the administrative act.
In the case in question, the Claimant is correct regarding the fact that the contract already provided that the initial validity period need not coincide with the period between 1 April 2015 and 31 October 2015, nor be limited to 7 months.
However, what delimits the scope of the exemption is not the request that the Claimant submitted nor the terms of the contract, but rather the administrative decision that was issued on the request.
And it is clear that, despite the Claimant having requested exemption covering the entire duration of the contract, it was only granted "for a period of 7 months, from 1 April 2015".
If it is true that the initial contract already provided for validity in periods different from the period between 1 April 2015 and 31 October 2015 and that the now Claimant intended the granting for any validity period of the contract, it is also true that that claim was not heeded and the exemption request was only granted with respect to rents relating to that period. That is, the decision recognizing the exemption has implicit in it the partial dismissal of the claim, with greater amplitude, not temporally pre-determined, that the Claimant intended.
Moreover, the fixing of the start and end dates of tax benefits is mandatory (article 65, no. 4, of the CPPT), whereby it is clear that there is no illegality of the decision recognizing the tax benefit in fixing temporal limits.
In any case, it is not apparent from the proceedings that the decision recognizing the exemption with the said temporal limitation was annulled, whereby it had to be applied by the Tax Administration when assessing the administrative complaint.
The hypothetical illegality or unconstitutionality of the decision recognizing the exemption, in light of the provisions of article 28 of the EBF, in restricting the exemption to rents for the said period and in conditioning the exemption to notification of contractual alterations (namely due to the alleged "absence of margin of free decision regarding the recognition of the tax benefit" and because the decision should not be "different if the initial version of the Contract had provided that return of the Aircraft was scheduled for October 2016 and not October 2015"), is a matter that can only be assessed in a proper proceeding to challenge that decision which, as mentioned, does not fall within the competence of this Arbitral Tribunal.
As the law provides for the possibility of contentious challenge to the decision issued on the request for recognition of the tax benefit [articles 97, no. 1, subsection p), and 2, of the CPPT and 51 of the CPTA], by any injured party [article 55, no. 1, subsection a), of the CPTA], including as from the time the act becomes known to injured parties not notified [article 59, no. 3, subsection b), of the CPTA], the possibility of effective judicial protection of the Claimant's interests is perfectly ensured legislatively, whereby this legal regime cannot be considered incompatible with article 268, no. 4, of the CRP.
Thus, as the decision on the administrative complaint applied what was decided by the entity that granted the exemption, that decision does not violate the principle of legality, by not annulling the withholding acts relating to rents for periods different from 1 April 2015 and 31 October 2015.
4.2. Violation of the Principle of Justice and Good Faith, to which the AT is Bound, in Accordance with Article 266, No. 2 of the CRP
Article 266, no. 2, of the CRP establishes that "administrative organs and agents are subordinated to the Constitution and the law and must act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith".
Article 55 of the LGT reaffirms these principles in tax procedure by establishing that "the tax administration exercises its attributions in pursuit of the public interest, in accordance with the principles of legality, equality, proportionality, justice, impartiality and speed, in respect of the guarantees of taxpayers and other tax-obligated parties".
The Claimant invokes Supreme Administrative Court jurisprudence on the application of the principle of justice, prevailing over the principle of legality, in situations in which violation thereof causes no harm to the public interest. ( )
However, this does not occur in the situation in question, as the extension of the scope of recognition of the exemption results in loss of revenue for the State, namely the amount that the Claimant seeks to obtain with the present proceedings.
Furthermore, article 28 of the EBF provides for a tax benefit which, by its nature, constitutes an exceptional measure instituted for the protection of relevant extrafiscal public interests that are superior to those of the taxation it prevents (article 2, no. 1, of the EBF), whereby its recognition is based on considerations of opportunity based on the weighing of said conflicting interests and not on considerations of justice, which inform general taxation, but not (at least, not necessarily) tax benefits.
In this specific case, it is established that "the Minister of Finance may, at the request of and based on reasoned opinion from the Tax Authority, grant full or partial exemption from IRS or IRC...", which reveals that one is dealing with a tax benefit dependent on recognition by a member of the Government (and not any other entity, in particular the Tax and Customs Authority), to whom a discretionary power is attributed to define the scope of the benefit (full or partial) weighing casuistically, with respect to each exemption request, the relevance of the extrafiscal public interests that are in question and the prejudice to revenue that the satisfaction of those interests can justify.
In situations of this type, in which there is a deliberate legislative intention to reserve the decision on granting the tax benefit to one who possesses all relevant information, with casuistic weighing of extrafiscal interests and the taxation that collide, it is not permissible for other entities (whether from the Tax Administration or from the courts) to substitute themselves for the one to whom the law attributes the power to decide, namely on the basis of considerations of justice, which are not the basis for attribution of the benefit. In these cases, judicial review acts only on the limits of the margin of free assessment and not on its content.
In any case, should a violation of the principle of justice occur, it derives from the decision on the tax benefit and not from the decision on the administrative complaint, which merely applied what was decided by an administrative act that subsists in the legal order. This same finding applies with respect to the alleged lack of reasonableness of the failure to comply with the 4-month deadline to decide on the exemption request, combined with the requirement that "information on contractual amendments that had already taken place long before should have been provided". Also here, the alleged injustice and the respective vice may affect the act in which such requirement is made and not the dismissal of the administrative complaint, which, innovating nothing in this regard, cannot be annulled on the basis of this vice, as follows from no. 3 of article 53 of the CPTA.
These considerations apply with respect to the alleged violation of the principle of good faith, embodied in the fact that "it cannot be accepted as reasonable that the AT delay, for more than two years, in deciding on the recognition of the IRC exemption and come, through such decision, to place additional requirements with respect to contractual amendments that, as the AT well knows, had already taken place in the past because the Contract validity period that the AT was considering (7 months) had already been exceeded".
Indeed, these requirements were decided in the dispatch partially recognizing the tax benefit, susceptible to challenge by the Claimant, and not in the dismissal of the administrative complaint, which has nothing innovative about it, merely finding that, with respect to the periods after October 2015, in the absence of a decision by the competent entity recognizing the tax benefit, "there is no tax exemption".
In sum, as the Tax and Customs Authority correctly states in its Response, "the withholdings at source that were maintained in compliance with the Dispatch of the Secretary of State", "the Claimant's intention focuses exclusively on the claim for alteration of the conditions established in that Dispatch", "this not being the proper venue for doing so".
Thus, the request for arbitral decision is without merit as to these vices.
4.3. Question of Lack of Reasoning
The Claimant attributes to the decision on the administrative complaint a vice of lack of reasoning, namely because "at no point did the AT assess or analyze any of the arguments presented by the Claimant in the exercise of the prior hearing right, having only repeated the sparse reasoning already contained in the draft dismissal of the administrative complaint".
The requirement for reasoning of administrative acts harmful to interests is made in article 268, no. 3, of the CRP, which establishes that "they must be reasoned with express and accessible reasoning when they affect rights or legally protected interests".
Spelling out the content of reasoning in tax procedure, article 77 of the LGT establishes the general rule that "the procedure decision is always reasoned by means of a succinct exposition of the facts and legal reasons that motivated it, the reasoning being able to consist of mere declaration of agreement with the grounds of previous opinions, information or proposals, including those that form part of the tax inspection report".
The Supreme Administrative Court has consistently held that the reasoning of the administrative or tax act is a relative concept that varies according to the type of act and the circumstances of the specific case, but that the reasoning is sufficient when it enables a normal recipient to become aware of the cognitive and evaluative route followed by the author of the act to issue the decision, that is, when such person may know the reasons why the author of the act decided as it did and not differently, so as to enable the activation of administrative or contentious challenge mechanisms. ( )
Thus, for the reasoning to be considered sufficient, it is not necessary that all arguments invoked by interested parties in the procedure be assessed, but rather that the reasons why the decision was made in the way it was be perceptible.
In the case in question, the reasons for which the administrative complaint was dismissed are perceptible, namely the finding made by the Tax and Customs Authority that the dispatch granting the exemption did not recognize it with respect to rents for periods after October 2015, as results from the tenor of points 16, 17, and 30 to 34 of the information on which the decision was based:
– "the dispatch of the Secretary of State for Tax Affairs invoked by the claimant only granted full exemption in the matter of IRC with respect to the leasing rents for the period from 2015-04-01 to 2015-10-31 (7 months), in the other terms described above in point 5, whereby the tax due on the rents from 2016-11-31 to 2016-10-31 is outside the legal scope of the exemption granted above";
– "tax benefits when temporary expire by the passage of the period for which they were granted (no. 2 of article 14 of the EBF);
– "with respect to the remaining periods, as already mentioned above, there is no tax exemption";
– "the leasing contracts in question, which are sought to be covered by the tax exemption recognized for the period from 2015-04-01 to 2015-10-31, were not the subject of analysis nor were their contours closely examined";
– "regardless of the date of notification of the decision to grant and recognize that tax benefit, that decision had a very precise and concrete object, defined temporally";
– "any alterations and extrapolations to its content would be worthy of new assessment - which did not occur";
– "accordingly, the request can only be dismissed outside the temporal scope of the exemption granted".
Thus, regardless of the legal correctness of these considerations, the reasons that led the Tax and Customs Authority to dismiss the administrative complaint are perfectly perceptible.
Therefore, the decision on the administrative complaint is not vitiated by a vice of lack of reasoning.
4.4. Subsidiary Claim Based on Error in the Decision on the Administrative Complaint, Relating to Quantification of the Tax Benefit, to the Extent It Was Granted
The Claimant argues, subsidiarily, that "the partial annulment of the Contested Decision, to the extent that it dismisses the refund of the amount of €24,906.11 corresponding to the IRC withholding for the month of October 2015, with that amount to be refunded to the Claimant, plus the corresponding compensatory interest, in accordance with article 43 of the LGT and default interest, if applicable".
The Tax and Customs Authority says nothing on this matter.
The Claimant is correct as to this question, as, in light of the decision granting the tax benefit, the rent relating to the month of October 2015 is covered by the exemption.
The fact that the respective declaration was submitted in November 2015 does not prevent the exemption from being applied, as in the dispatch granting it reference is made to the "monthly payable leasing rents" in the period of seven months from 01-04-2015 to 31-10-2015, whereby the month to which the rent relates is relevant and not the month in which the withheld tax is paid. Moreover, only thus can the seven months that are covered by the exemption be counted.
Therefore, the decision on the administrative complaint is vitiated by a vice of error on the factual premises by not granting the Claimant's claim for annulment of the withholding act relating to the month of October 2015, which vice justifies the annulment of said withholding and the decision on the administrative complaint to the extent it maintained it.
5. Compensatory Interest
The Claimant requests compensatory interest.
In accordance with subsection b) of article 24 of the RJAT, the arbitral decision on the merits of the claim which is not subject to appeal or challenge binds the Tax Administration from the end of the period provided for appeal or challenge, the latter having, 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 spontaneous execution of the decisions of tax judicial tribunals, to "restore the situation that would exist if the tax act that is the object of the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose", which is in line with the provision in article 100 of the LGT [applicable by virtue of subsection a) of no. 1 of article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial success of a complaint, judicial challenge or appeal in favor of the taxpayer, to immediate and full restoration of the legality of the act or situation that is the object of the litigation, including the payment of compensatory interest, if applicable, from the end of the period for execution of the decision".
Although article 2, no. 1, subsections a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals functioning in CAAD, making no reference to condemnatory decisions, it should be understood that the powers attributed in judicial challenge proceedings to tax tribunals are included within its competence, this being the interpretation that is in line with the meaning of the legislative authorization on which the Government based itself to approve the RJAT, in which it is proclaimed, as the first directive, that "the tax arbitration process should constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters".
The judicial challenge process, despite being essentially a process of annulment of tax acts, admits condemnation of the Tax Administration to pay compensatory interest, as can be inferred from article 43, no. 1, of the LGT, which establishes that "compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount exceeding that legally due" and from article 61, no. 4 of the CPPT (in the version given by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original version), which establishes that "if the decision recognizing the right to compensatory interest is judicial, the period for payment is counted from the beginning of the spontaneous execution period thereof".
Thus, no. 5 of article 24 of the RJAT, by stating that "payment of interest is due, regardless of its nature, in the terms provided for in the general tax law and the Code of Tax Procedure and Process", should be understood as allowing recognition of the right to compensatory interest in the arbitration process.
In the case in question, following the application of the exemption, the withholding relating to the month of October 2015 becomes undue, whereby there is ground for restitution of the tax paid, by virtue of the aforementioned articles 24, no. 1, subsection b), of the RJAT and 100 of the LGT, as, after the exemption was granted, that payment is not due.
The substantive regime of the right to compensatory interest is regulated in article 43 of the LGT, which establishes, to the extent relevant here, the following:
Article 43
Undue Payment of the Tax Obligation
1 – Compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount exceeding that legally due.
The illegality of the decision on the administrative complaint, to the extent relating to the withholding relating to the month of October 2015, is attributable to the Tax Administration, which dismissed it on its own initiative, when it had in its possession, from 06-08-2018, all elements that enabled it to ascertain that that payment was covered by the exemption, as follows from subsections gg) and hh) of the factual matters established above.
The legal period for issuing a decision, following submission of documents by the Claimant, is 8 days, in accordance with article 57, no. 2, of the LGT, whereby the decision partially granting the administrative complaint should have been issued by 16-08-2018.
This situation of the Tax and Customs Authority maintaining an illegal situation, when it should have restored it, should be framed, by mere declarative interpretation, in no. 1 of article 43 of the LGT, as it is a situation in which there is adequate causal nexus between error attributable to the services and the maintenance of an undue payment and the omission of restoring legality when the action that would restore it should be performed should be equated to the action. ( )
Thus, from 17-08-2018, the error affecting the decision on the administrative complaint is attributable to the Tax and Customs Authority, whereby compensatory interest is due from that date.
Compensatory interest is due, in accordance with articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, 61, no. 5, of the CPPT, 559 of the Civil Code and Ordinance no. 291/2003, of 8 April, at the legal default rate, and counted from the date on which the error became attributable to the Tax and Customs Authority (17-08-2018) until the date of processing of the respective credit note and calculated on the amount of € 24,906.11.
6. Decision
In accordance with what has been set out, this Arbitral Tribunal agrees on:
a) To judge the main claim as entirely without merit and to absolve the Tax and Customs Authority thereof;
b) To judge the subsidiary claim as having merit and to annul the withholding act relating to the month of October 2015 (document no. ..., attached with the request for constitution of the arbitral tribunal), as well as the part of the decision dismissing the administrative complaint that maintained it;
c) To judge the subsidiary claim for refund of the amount of € 24,906.11 as having merit, and to condemn the Tax and Customs Authority to reimburse the Claimant that amount;
d) To judge the subsidiary claim for compensatory interest as having merit and to condemn the Tax and Customs Authority to pay it to the Claimant in the terms indicated in point 5 of this decision.
6. Value of the Case
In accordance with the provision in article 305, no. 2, of the CPC and 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at € 305,518.88.
7. Costs
In accordance with article 22, no. 4, of the RJAT, the amount of costs is fixed at € 5,508.00, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Claimant in the percentage of 91.85% and by the Tax and Customs Authority in the percentage of 8.15%.
Lisbon, 14-05-2019
The Arbitrators
(Jorge Lopes de Sousa)
(João Taborda Gama)
(Henrique Nogueira Nunes)
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