Process: 651/2016-T

Date: April 19, 2017

Tax Type: IRC

Source: Original CAAD Decision

Summary

CAAD decision 651/2016-T addresses the deductibility of financial expenses under IRC tax benefit rules. A... SGPS, S.A., holding company of a tax group, challenged the tacit rejection of its administrative appeal against IRC self-assessment for 2013, disputing €276,021.40 in excess taxation. The case centered on article 32(2) of the Fiscal Benefits Statute and Circular 7/2004, which restrict tax deductibility of financial expenses related to equity interest acquisitions. Two subsidiaries (B... SGPS and C... SGPS) had excluded €299,083.44 and €787,057.17 respectively as non-deductible financial expenses. The arbitral tribunal, constituted under Decree-Law 10/2011 on 19-01-2017, examined whether these financial expenses genuinely related to equity acquisitions. The tribunal found that the expenses borne by both subsidiaries in fiscal year 2013 were not generated by financing used for acquiring equity interests, despite Circular 7/2004's application. This finding was critical since B... SGPS had only made one capital increase in kind (€529,200) in Mozambique subsidiary F... Lda during 2007-2013 using non-debt supplementary contributions, while C... SGPS had no acquisitions in 2012-2013. The claimant sought declaration of illegality of the tacit rejection, annulment of the self-assessment portion, reimbursement plus compensatory interest from 01-09-2014. The case demonstrates CAAD's jurisdiction over IRC tax benefit disputes under the special group taxation regime.

Full Decision

The arbitrators Counselor Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. A. Sérgio de Matos and Prof. Doctor João Zambujal de Oliveira (arbitrators-members), appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 19-01-2017, hereby agree as follows:

1. Report

A…, SGPS, S.A., legal entity number…, currently with registered office at … street, no.…, …, Floor…, …, …-… … (hereinafter referred to as "Claimant"), holding company of a group (the "Tax Group A…") subject to the special taxation regime for groups of companies, has, pursuant to articles 2, no. 1, paragraph a), and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters – RJAT), submitted a petition for an arbitral ruling, with a view to the declaration of illegality of the tacit rejection of the administrative appeal which it lodged against the self-assessment of Corporate Income Tax (IRC) of the fiscal group A… relating to the year 2013, and also the partial illegality of such self-assessment of IRC (and consequent municipal tax), with respect to the amount of € 276,021.40, with its consequent annulment in this part, with reimbursement to the Claimant of this sum, plus compensatory interest at the legal rate counted from 1 September 2014 until full reimbursement.

The respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.

The petition for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority and Customs Authority on 18-11-2016.

Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories hereof, who communicated their acceptance of the appointment within the applicable time-limit.

On 04-01-2017 the parties were duly notified of such appointment and did not express any wish to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision contained in paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 19-01-2017.

The Tax Authority and Customs Authority responded arguing that the petition should be judged without merit.

By order of 20-02-2017 a hearing was dispensed with and it was decided that the proceedings would continue by written pleadings.

The parties did not file pleadings.

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

The parties are duly represented, possess legal personality and capacity, are legitimately entitled and are represented (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from any vices of nullity and there are no exceptions nor any obstacle to the examination of the merits of the case.

2. Facts

2.1. Proved facts

On the basis of the elements contained in the administrative proceedings and documents attached to the petition for arbitral ruling, the following facts are considered proved:

2. Facts

2.1. Proved facts

The following facts are considered proved:

· On 04-04-2014, the Claimant filed the model 22 declaration of the fiscal group A… relating to the fiscal year 2013, of which it was the holding company (document no. 1 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· On 08-05-2015, the Claimant presented a substitute declaration (document no. 2 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· In the individual model 22 declarations relating to the same fiscal year of 2013, B… SGPS, S.A., and C… SGPS, S.A., added, for the purposes of determining their taxable profit/fiscal result for IRC purposes, the amounts of € 299,083.44 and € 787,057.17, respectively, as non-deductible financial expenses under the (then) article 32, no. 2, of the Fiscal Benefits Statute (EBF), in field 779 of table 07 of the said individual model 22 declarations (documents nos. 4 and 5 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· This exclusion in the year 2013 of the tax deduction of financial expenses in the said amounts of € 299,083.44 and € 787,057.17 was made in accordance with the provision of Circular no. 7/2004, of 30 March, of the DSIRC (a copy of which is contained in document no. 6 attached to the petition for arbitral ruling, whose contents are deemed reproduced), and were calculated in accordance with what is set out in the following table:

(document no. 7 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· In the year 2013, the financial expenses borne by B… SGPS, S.A. (hereinafter B… SGPS), recorded in account #69, were as follows: (document no. 9 attached to the petition for arbitral ruling, whose contents are deemed reproduced)

· The following was the evolution of the balances of interest-bearing liabilities in the sphere of B… SGPS, in the tax periods between 2007 and 2013 inclusive: (document no. 9 attached to the petition for arbitral ruling, whose contents are deemed reproduced)

· There was no acquisition of equity interests by B… SGPS in the tax periods between 2007 and 2013 inclusive, with the exception of a capital increase in kind on 28-09-2012 in F…, Lda. – its subsidiary resident in Mozambique –, in the amount of € 529,200.00, by means of conversion of supplementary contributions into capital, supplementary contributions which in turn had not been made using interest-bearing debt (document no. 9 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· In the year 2013, the financial expenses borne by C… SGPS, S.A. (hereinafter "C… SGPS") were as follows (document no. 27 attached to the petition for arbitral ruling, whose contents are deemed reproduced):

· The following was the evolution of the balances of interest-bearing liabilities in the sphere of C… SGPS, in the tax periods between 2007 and 2013 inclusive: (document no. 27 attached to the petition for arbitral ruling, whose contents are deemed reproduced)

· The following were the occurrences of acquisitions of equity interests by C… SGPS in the tax periods between 2007 and 2011 inclusive, whereas in 2012 and in 2013 no acquisition occurred: (document no. 27 attached to the petition for arbitral ruling, whose contents are deemed reproduced)

· On 04-04-2016, the Claimant filed an administrative appeal against the said self-assessment of IRC (document no. 3 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· The expenses borne by B… SGPS and C… SGPS in the fiscal year 2013 were not generated by financing used in the acquisition of equity interests;

· The Claimant in the self-assessment of the fiscal group determined an amount to be recovered (field 368 of table 10 of document no. 1 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· The non-deduction from the taxable profit of the Claimant of the financial expenses borne by B… SGPS and C… SGPS indicated in fields 779 of tables 07 of the individual model 22 declarations relating to the fiscal year 2013 had the effect of the self-assessment being in excess of € 271,535.15 of IRC and € 4,486.25 of municipal tax, for a total of € 276,021.40 (document no. 38 attached to the petition for arbitral ruling, whose contents are deemed reproduced);

· On 29-10-2015, the Claimant filed the petition for constitution of the arbitral tribunal that gave rise to the present proceedings.

2.2. Facts not proved and reasoning of the decision on facts

The fixing of the factual basis is based on the administrative proceedings and documents attached to the petition for arbitral ruling.

There is no indication whatsoever that B… SGPS and C… SGPS used the financing that generated the financial expenses borne in the fiscal year 2013 to acquire equity interests.

On the contrary, the documents presented by the Claimant point to the fact that the financing that generated financial expenses for B… SGPS and for C… SGPS were not used to acquire equity interests, documents whose relevance is not called into question by the Tax Authority and Customs Authority, which merely stated that the "analysis carried out does not allow us to demonstrate what is alleged by the Claimant which is why such documents are contested for all legal purposes", without at all explaining what analysis was conducted and why it considers that the demonstration of what is alleged was not made.

In this context, not seeing any factual basis for doubting what is alleged and the documentary evidence presented by the Claimant, there is justification for a positive finding that such proof has been made.

In fact, whilst it is true that the difficulty of proving a fact does not alter the allocation of the burden of proof, it is equally true that the natural difficulty of proving the direct allocation of the financing that is invoked in the said Circular no. 7/2004 should have as a corollary, by force of the constitutional principle of proportionality, a lesser evidentiary requirement on the part of the adjudicator, giving weight to less relevant and convincing evidence than would be required if such difficulty did not exist, applying the Latin maxim "iis quae difficilioris sunt probationis leviores probationes admittuntur". ([1])

3. Law

Article 32, no. 2, of the EBF, in the wording given by Law no. 64-B/2011, of 30 December, in force in the year 2013, provides as follows:

2 – The capital gains and losses realized by SGPS on equity interests held by them, provided they are held for a period of not less than one year, and likewise, the financial expenses incurred in their acquisition, do not contribute to the formation of the taxable profit of such companies.

The DSIRC issued Circular no. 7/2004, of 30 March, with instructions aimed at clarifying "doubts about the tax regime applicable to companies managing equity interests (SGPS) and venture capital companies (SCR), provided for in article 31 of the Fiscal Benefits Statute (EBF), in the wording given to it by Law no. 32-B/2002, of 30 December (Budget Law for 2003)".

To the said article 31 of the EBF corresponds article 32, in the wording of the EBF in force in the year 2013.

In item 7 of the said Circular is included the following instruction:

Method to be used for the purposes of allocating financial expenses to equity interests

7. Regarding the method to be used for the purposes of allocating financial expenses incurred in the acquisition of equity interests, given the extreme difficulty of using, in this matter, a method of direct or specific allocation and the possibility of manipulation that the same would allow, such imputation should be carried out on the basis of a formula that takes into account the following: the interest-bearing liabilities of SGPS and SCR should be imputed, in the first place, to the remunerative loans granted by these companies to the invested companies and to other investments generating interest, with the remainder being allocated to the other assets, namely equity interests, proportionally to their respective acquisition cost.

B… SGPS and C… SGPS presented their individual model 22 declarations of IRC relating to the fiscal year 2013, and the taxable profits determined in them were taken into account in the model 22 declaration of the fiscal group which the Claimant presented relating to that fiscal year and the respective self-assessment of IRC and municipal tax.

Subsequently, the Claimant filed an administrative appeal against the said self-assessment, arguing, in summary, in the context of an internal review of procedures and following jurisprudential decisions, concluded that the application of such instruction is not consistent with the correct interpretation of the meaning and scope of no. 2 of article 32 of the EBF, in particular with respect to compliance with the principles of tax equality, taxpaying capacity and taxation of real income, and therefore, when possible, preference should be given to a method that respected a real allocation of loans obtained, only being applicable the method referred to in that instruction on a subsidiary basis.

The Tax Authority and Customs Authority did not make a decision on the administrative appeal, but, in the Response which it presented in the present proceedings, accepts this interpretation of the Claimant regarding the subsidiary application of the method referred to in that instruction, saying, in articles 57 to 60 ([2]):

57

The interpretation contained in Circular no. 7/2004, with respect to article 32 of the EBF – broadly speaking – is as follows:

a) If the taxpayer is able to carry out a direct allocation of the financial expenses incurred with equity interests, only those do not contribute, in principle, to the formation of taxable profit. In principle, because there may be financial expenses incurred with equity interests that do contribute to the formation of taxable profit – when the equity interest is disposed of before one year has passed from its acquisition, as there may be financial expenses related to other assets that cannot be deducted, e.g. related to the provision of supplementary contributions, under the general rules, in view of the provision of article 23 of the Corporate Income Tax Code (CIRC);

b) If the taxpayer is not able to carry out that direct allocation, which will be the majority of cases, given the fungible nature of capital, then the circular states that there should be carried out an allocation relationship of the financial expenses incurred with the respective equity interests, to assess their deductibility.

59

These instructions recognize the difficulty that taxpayers may face when carrying out the calculation that the legal rule requires, and therefore suggest a method capable of making the law applicable.

60

The aforementioned circular does not state, in any part, that the criterion suggested is the only valid one for the purpose.

61

Instead, it accepts that other criteria may be used provided they are validly substantiated and demonstrated by the taxpayers.

62

That is, Circular no. 7/2004 does not impose compliance with the methodology implemented therein, clearly leaving the possibility for taxpayers to use other criteria.

There is thus agreement between the parties regarding the subsidiary application of the method provided for in that instruction 7 of Circular no. 7/2004.

And, in fact, in the said no. 2 of article 32 of the EBF it is established that there do not contribute to the formation of taxable profit the "financial expenses incurred in their acquisition", referring to equity interests, and therefore it is manifest that its literal content indicates that only the financial expenses that are connected with the acquisition of equity interests are covered by the non-deductibility established therein.

Beyond being this the interpretation that results from the literal wording, it is corroborated by the explanation for its introduction in the EBF that was given in the Report of the State Budget for 2003 (Law no. 32-B/2002, of 30 December).

In fact, as is stated in Circular no. 7/2004, the regime of this rule was introduced in the EBF by Law no. 32-B/2002, of 30 December, which approved the State Budget for 2003, then in article 31, whose regime came to be included in article 32 after the renumbering carried out by Decree-Law no. 108/2008, of 26 June.

In Draft Law no. 28-IX, which came to give rise to the Budget Law for 2003, this article 31, no. 2, was included, with wording identical to that in force in 2011 (in article 32, no. 2), the only difference being the addition of the reference to "ICR" (abbreviation of "venture capital investors"), which is irrelevant for the interpretation of the rule.

In the said Report of the State Budget for 2003 ([3]) the introduction of this rule is announced, with a view to the "broadening of the tax base and measures for moralization and neutrality", in the following terms:

"It is established that financial expenses directly associated with the acquisition of equity interests by SGPS are disregarded for the purposes of determining taxable profit for deductibility purposes";

It is unequivocal, therefore, that it was intended that only the financial expenses directly associated with the acquisition of equity interests should be covered by the non-deductibility.

On the other hand, as is seen from this explanation of the scope of this final part of no. 2, this is an independent legislative measure in relation to the part in which it is established that capital gains and losses realized do not contribute to the formation of taxable profit, because it is obvious that the non-contribution of capital gains does not broaden the tax base, rather it reduces it and therefore that reasoning does not apply.

By that express reference in the Report to the need for financial expenses to be directly associated with the acquisition of equity interests (which is also expressed in the text of the rule through the reference to "financial expenses with their acquisition"), it is concluded that it is not sufficient to determine the non-deductibility of financial expenses the fact that the SGPS holds equity interests, being necessary to demonstrate that there is a direct relationship between certain financial expenses and the acquisition of specific equity interests.

It is a corollary of this interpretation, imposed by the literal wording of article 32, no. 2, that, if certain equity interests were not acquired with liabilities generating financial expenses, they are irrelevant for the purpose of applying that rule, in the part that refers to the non-deductibility of financial expenses.

There is thus no legal support for disregarding the rule of deductibility of financial expenses, which is contained in paragraph c) of no. 1 of article 23 of the CIRC, in relation to expenses that are not directly associated with the acquisition of equity interests.

On the other hand, even if it were understood (as may be implicit in item 7 of Circular no. 7/2004, but also without support in the text of the law) that that article 32, no. 2, contains an implied presumption that there is association between financial expenses and the acquisition of equity interests, that hypothetical presumption would always admit proof to the contrary, by force of the provision in article 73 of the General Tax Law (LGT), which refers to rules of incidence in the broad sense, which encompasses all those that "define the incidence plane, that is, the complex of presuppositions whose combination results in the birth of the tax obligation, as well as the elements of the same obligation". In this sense, rules of incidence are those that determine the active and passive subjects of the tax obligation, those that indicate what is the taxable matter or collectible matter, the rate and tax benefits. ([4])

For this reason, a conclusion to the effect of non-deductibility of the financial expenses referred to by the Claimant in the administrative appeal could only be reached by the Tax Authority and Customs Authority following the examination of the evidence presented by the Claimant therein, relating to the manner in which the equity interests which it indicated were acquired.

Thus, the tacit rejection of the administrative appeal, which is translated into the non-acceptance of the Claimant's claim without formulation of a judgment on the viability of the proof of the non-direct allocation of the financing, is necessarily illegal.

In any case, the evidence contained in the case file does not allow the discernment of any relationship between the acquisition of equity interests and the financial expenses borne in the fiscal year 2013 by B… SGPS and by C… SGPS and points to the fact that such relationship does not exist, as the Claimant makes a demonstration of the allocation of the financing obtained from 2007 onwards and the Tax Authority and Customs Authority does not indicate any weakness in such demonstration, which, in view of the aforementioned principle iis quae difficilioris sunt probationis leviores probationes admittuntur, justifies that the allocation of financing to other purposes which is invoked be considered proved.

On the other hand, it should be noted, with respect to the burden of proof, as the Tax Authority and Customs Authority correctly states in article 65 of its Response, "we are not dealing with the invocation of presuppositions of tax benefits, since the part of article 32, no. 2, of the EBF that provides for the non-deductibility of financial expenses incurred in the acquisition of equity interests does not establish a tax benefit, but rather a limitation on the deductibility of financial expenses, negative for the taxpayer, established with the purpose of attenuating the fiscally favorable regime enjoyed by SGPS in relation to companies in general".

Therefore, it is not even to be suggested that the specialties of the burden of proof in the matter of tax benefits which can be inferred from articles 14, no. 2, of the LGT and 65, no. 1, of the Code of Tax Procedure (CPPT) are relevant with respect to the proof of the presuppositions for the application of this final part of article 32, no. 2, of the EBF.

At the very least, should it be understood that the allocation of financing invoked by the Claimant is not sufficiently proved, the rule of article 100, no. 1, of the CPPT would always be applicable to this situation, applicable to tax arbitral proceedings by force of the provision in article 29, no. 1, paragraph c), of the RJAT, which establishes that "whenever from the evidence produced results a reasoned doubt about the existence and quantification of the tax fact, the contested act should be annulled".

But, as has been said, in the case at hand, the balanced examination of the evidential duties justifies that it be considered demonstrated that the financing generating expenses borne by B… SGPS and by C… SGPS in the fiscal year 2013 is not related to the acquisition of equity interests.

Therefore, the annulment of the self-assessment is justified, in the part relating to IRC and municipal tax corresponding to the amounts indicated by these companies, in fields 779 of tables 07 of the respective individual model 22 declarations of B… SGPS and of C… SGPS relating to the fiscal year 2013.

4. Request for reimbursement of amounts paid and compensatory interest

As a result of the self-assessment, the Claimant determined, in the 1st model 22 declaration presented with respect to the fiscal year 2013, the amount of € 2,121,052.10 to be recovered, and therefore the amounts of IRC and municipal tax corresponding to the values of the financial expenses which were unduly indicated in fields 779 of tables 07 of the individual model 22 declarations relating to the fiscal year 2013 of B… SGPS and of C… SGPS are paid (Document no. 1 attached to the petition for arbitral ruling, whose contents are deemed reproduced – table 10, field 368). ([5])

The Claimant requests reimbursement of the amount of € 276,021.40, of which € 271,535.15 is IRC and € 4,486.25 is municipal tax relating to B… SGPS, this amount increased by compensatory interest.

The demonstration of the calculations is contained in document no. 38 attached to the petition for arbitral ruling and the Tax Authority and Customs Authority does not contest its correctness, and therefore it is considered to have been correctly made.

Article 43 of the LGT establishes the following in its nos. 1 and 2:

1. Compensatory interest is due when it is determined, in an administrative appeal or judicial contest, that there was an error attributable to the services which resulted in the payment of the tax debt in an amount higher than that legally due.

2. An error attributable to the services is also considered to exist in the cases in which, despite the assessment being made on the basis of the declaration of the taxpayer, the taxpayer has followed, in its completion, the generic guidelines of the tax administration, duly published.

In the case at hand, it is concluded that there is an error in the self-assessment which is considered attributable to the Tax Authority and Customs Authority by force of the provision in no. 2 of article 43 of the LGT, in so far as the Claimant acted in keeping with the generic guidance contained in item 7 of Circular no. 7/2004.

Thus, having been considered proved that the values contained in fields 779 of tables 07 of the individual model 22 declarations relating to the fiscal year 2013 of B… SGPS and of C… SGPS were unduly indicated, the Claimant is entitled to reimbursement of the said amount of IRC and municipal tax relating to B… SGPS, plus compensatory interest.

The compensatory interest will be paid from 01-09-2014 (the date on which the overpayment is considered to have been made, by force of the provision in article 104, no. 3, of the CIRC) until full reimbursement of the overpaid amount, at the legal default rate, in accordance with article 137, no. 6, of the CIRC, articles 43, no. 4, and 35, no. 10, of the LGT, article 61 of the CPPT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.

5. Decision

In accordance with the above, this Arbitral Tribunal agrees:

a) To find the petition for declaration of illegality of the tacit rejection of the administrative appeal to be well-founded;

b) To find the petition for declaration of partial illegality of the self-assessment of IRC and consequent municipal tax of the fiscal group A… relating to the fiscal year 2013 as to the amount of € 276,021.40, corresponding to the amounts entered in fields 779 of tables 7 of the individual model 22 declarations presented by B… SGPS and by C… SGPS, to be well-founded;

c) To annul the tacit rejection of the administrative appeal and the self-assessment in the part in which its illegality is declared;

d) To find the petitions for reimbursement and payment of compensatory interest to be well-founded and to condemn the Tax Authority and Customs Authority to make the respective payments, in the manner referred to in item 4 of the present ruling.

6. Value of the proceedings

In accordance with the provisions of article 306, no. 2, of the Code of Civil Procedure (CPC) of 2013, article 97-A, no. 1, paragraph a), of the CPPT and article 3, no. 2, of the Rules of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 276,021.40.

7. Costs

In accordance with article 22, no. 4, of the RJAT, the amount of costs is fixed at € 5,202.00, in accordance with Table I attached to the Rules of Costs in Tax Arbitration Proceedings, to be borne by the Tax Authority and Customs Authority.

Lisbon, 19-04-2017

The Arbitrators

(Jorge Lopes de Sousa)

(A. Sérgio de Matos)

(João Zambujal de Oliveira)

[1] Essentially in this sense, reference may be made to MANUEL DE ANDRADE, Elementary Notions of Civil Procedure, 1979, page 203, whose teachings are followed in the Ruling of the Supreme Court of Justice no. 4/83, of 11-7-1983, published in the Official Gazette, I Series, of 27-8-1983 and in the Law Magazine no. 328, page 297, in which it is stated: "the negative maxim non sunt probanda does not apply; the natural difficulty of proving a fact is a coefficient that does not alter the allocation of the burden of proof; what that coefficient, like others, "can do is make advisable [...] the maxim iis difficilioris sunt probationis leviores probationes admittuntur".

This understanding was followed in the Ruling of the Plenary of the Supreme Administrative Court of 17-12-2008, case no. 0327/08, whose jurisprudence was followed in the Rulings of the Section of Tax Disputes of the Supreme Administrative Court of 02-02-2011, case no. 016/11 and in the Ruling of the Plenary of 05-07-2012, case no. 0286/12.

[2] Apparently by oversight, the Tax Authority and Customs Authority, in its Response, moves from article 57 to article 59, and therefore there is no article 58 in it.

[3] Available at:

http://www.dgo.pt/politicaorcamental/Paginas/OEpagina.aspx?Ano=2003&TipoOE=Orçamento+Estado+Aprovado&TipoDocumentos=Lei+/+Mapas+Lei+/+Relatório

[4] SOARES MARTINEZ, Tax Law, 7th edition, page 126.

In the same sense, reference may be made to NUNO SA GOMES, Manual of Tax Law, volume II, page 56.

In this sense, reference may be made to the Ruling of the Supreme Administrative Court of 04-11-2009, case no. 0553/09, in which it was understood that "the rule established in article 73 of the General Tax Law applies not only to the rules of tax incidence in the strict sense, but also in relation to other rules that establish fictions that influence the determination of taxable matter (either directly, through fictitious values for taxable matter, or indirectly, by setting fictitious values for the incomes relevant to their determination), since the adverb 'always' used therein instils the idea that this is a basic principle of the whole tax legal system, corollary of the principle of equality in the distribution of public burdens, based on the principle of taxpaying capacity."

[5] The amount to be recovered increased to € 2,147,087.59, with the substitute declaration contained in document no. 2 attached to the petition for arbitral ruling.

Frequently Asked Questions

Automatically Created

What IRC tax benefit was claimed under Circular 7/2004 in CAAD decision 651/2016-T?
Under Circular 7/2004 in CAAD decision 651/2016-T, the IRC tax benefit claimed related to the deductibility of financial expenses under article 32(2) of the Fiscal Benefits Statute. The Circular established methodology for calculating non-deductible financial expenses allegedly connected to equity interest acquisitions. Two subsidiaries (B... SGPS and C... SGPS) had excluded €299,083.44 and €787,057.17 respectively from taxable profit as non-deductible financial expenses following Circular 7/2004 guidance. However, the tribunal determined these expenses were not actually generated by financing used for acquiring equity interests, suggesting incorrect application of the limitation.
How does the special group taxation regime (RETGS) apply to IRC self-assessments in Portugal?
The special group taxation regime (RETGS - Regime Especial de Tributação dos Grupos de Sociedades) applies to IRC self-assessments in Portugal by allowing a holding company to consolidate tax results of group entities. In this case, A... SGPS, S.A. filed as holding company for the Tax Group A... for fiscal year 2013. Individual subsidiaries' model 22 declarations reported their separate results with adjustments (like the financial expense exclusions in fields 779 of table 07), which then consolidated into the group's overall IRC self-assessment. The holding company filed the group declaration and later a substitute declaration, determining an amount to be recovered in field 368 of table 10.
Can a taxpayer challenge a tacit rejection of a gracious complaint on IRC self-assessment?
Yes, a taxpayer can challenge a tacit rejection of a gracious complaint (administrative appeal) on IRC self-assessment through CAAD arbitration. Under articles 2(1)(a) and 10 of Decree-Law 10/2011 (RJAT - Legal Regime of Arbitration in Tax Matters), the claimant submitted a petition for arbitral ruling seeking declaration of illegality of the tacit rejection of its administrative appeal filed on 04-04-2016. The arbitral tribunal has jurisdiction to review both the tacit rejection and the underlying self-assessment's partial illegality, demonstrating that taxpayers have recourse when tax authorities fail to respond to administrative appeals within statutory deadlines.
What are the conditions for obtaining compensatory interest on IRC overpayments in Portugal?
Conditions for obtaining compensatory interest on IRC overpayments in Portugal require: (1) an illegal or excessive self-assessment creating an overpayment; (2) successful challenge resulting in annulment and reimbursement order; (3) calculation from the payment date until full reimbursement. In this case, the claimant sought compensatory interest at the legal rate from 01-09-2014 (reflecting the payment/self-assessment date) until complete reimbursement of the €276,021.40 excess. The legal basis stems from tax procedural law principles requiring the State to compensate taxpayers for unlawful retention of funds, with interest serving as compensation for the time value of money wrongfully held.
How does CAAD arbitral tribunal jurisdiction apply to IRC tax benefit disputes under Decree-Law 10/2011?
CAAD arbitral tribunal jurisdiction applies to IRC tax benefit disputes under Decree-Law 10/2011 through articles 2(1)(a) and 10, which grant jurisdiction over challenges to tax acts including self-assessments and tacit rejections of administrative appeals. The tribunal must be constituted following RJAT procedures: petition acceptance, arbitrator appointment by the Deontological Council (here pursuant to article 6(2) and 11(1)(b)), parties' notification and non-refusal period, and formal constitution (here on 19-01-2017). The tribunal verifies it is regularly constituted, parties have legal personality and standing, no nullity vices exist, and no exceptions bar merit examination. CAAD jurisdiction extends to declaring illegality, ordering annulments, and awarding reimbursements with compensatory interest for IRC tax benefit disputes.