CAAD 659/2014-T: Autonomous Taxation on SGPS Bonuses and Preliminary Ruling Reference in IRC

ARBITRAL DECISION

I. REPORT

1. A, SGPS, S.A., (hereinafter referred to as the Claimant) taxpayer number …, with registered office at Avenue … in Lisbon, filed on 2 September 2014, under the provisions of Article 2, No. 1, paragraph a) and Article 10, Nos. 1 and 2, both of Decree-Law No. 10/2011, of 20 January, hereinafter referred to as RJAT (Legal Regime of Tax Arbitration), a request for establishment of an Arbitral Tribunal, in which the Tax and Customs Authority (hereinafter referred to as AT or Defendant) is summoned, with a view to pronouncing on the partial illegality and consequent partial annulment of the self-assessment of corporate income tax (IRC), of 25 October 2012, with the number 2012 …, relating to the fiscal year 2011, in the amount of €1,424,772.67.

2. The request for establishment of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 04 September following, and was immediately notified to the Defendant in accordance with legal procedures.

3. Pursuant to and for the purposes of paragraph a) of No. 2 of Article 6 of RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties, within the prescribed deadlines, the following were appointed as arbitrators: Judge José Poças Falcão as president, and as members, Prof. Dr. João Ricardo Catarino and Dr. José Coutinho Pires, who communicated to the Deontological Council and to the Administrative Arbitration Centre their acceptance of the appointment within the period stipulated in Article 4 of the Deontological Code of the Administrative Arbitration Centre.

4. The Collective Arbitral Tribunal was constituted on 05 November 2014, in accordance with the requirement of paragraph c) of No. 1 of Article 11 of RJAT.

5. By order issued on 06 February 2015, duly notified to the parties, the holding of the meeting referred to in Article 18 of RJAT was waived.

6. To substantiate its claim, the Claimant alleged, in summary and with relevance:

i. That it is a holding company (SGPS), subject to the special taxation regime for groups of companies (RGTS);

ii. That in this capacity, and on 31 May 2012, it submitted its aggregate self-assessment of IRC relating to the fiscal year 2011, with the presentation of the respective Form 22, having proceeded to self-assess all autonomous taxes it determined.

iii. The total amount determined of €1,906,358.08 concerning all autonomous taxes was paid in full.

iv. The Claimant hereby challenges the legitimacy, seeking its annulment, with respect to the following autonomous taxes:

• €1,361,650.78 on bonuses and indemnities to administrators and similar,
• €63,121.89 relating to the increase of ten percentage points in the remaining autonomous taxes;

iv. The Claimant filed on 10 April 2013, with the Large Taxpayers Unit (UGC), a petition for review, to which was assigned the number …, against the self-assessment relating to the aforementioned taxes.

v. Regarding which a decision denying the petition was issued, by order issued on 11 October 2013, notified to the Claimant through Official Letter No. ….

vi. The Claimant, following the denial of the petition for review, filed on 13 November 2013, an administrative appeal to which was assigned the number …;

vii. Through an order of 28 May 2014, the administrative appeal was partially granted, regarding the non-application of the increase in the rate of ten percent on bonuses granted to the administrators of the Claimant relating to the fiscal year 2010;

viii. Throughout its petition, the Claimant also makes several considerations regarding the genesis and legal nature of autonomous taxes, proceeding with a historical excursus on the same, with various references and excerpts to doctrine that has addressed this issue, similarly referring to jurisprudence, pointing out the existence of various vices of illegality and unconstitutionality relating to the various provisions on autonomous taxes,

ix. Arguing and in summary, that the applicability of autonomous taxation on charges relating to bonuses of administrators, managers, and likewise on indemnities paid for the cessation of functions, is contrary to the Constitution of the Portuguese Republic,

x. Also defending that such autonomous taxation should only occur on the amount exceeding that provided in paragraph b) of No. 13 of Article 88 of CIRC,

xi. And that the increase of ten percentage points, as provided and applicable to taxpayers that present a tax loss, is inapplicable to Holding Companies, insofar as any tax losses determined are not economic losses.

xii. Concluding as set forth in its request, that the partial illegality of the self-assessment of autonomous taxes relating to the fiscal year 2011, in the amount of €1,424,772.67, be declared,

xiii. Also formulating a request for compensatory interest under the provisions of Article 43 of the General Tax Law;

xiv. As a subsidiary matter, it raises the possibility, if applicable, for the Arbitral Tribunal to promote a preliminary reference to the Court of Justice of the European Union on the questions it raises within the scope of autonomous taxes.

xv. The claimant attached the Learned Opinion of Messrs. Doctors Eduardo Paz Ferreira and Clotilde Palma where appropriate considerations are made regarding the issue at hand.

1. The AT, in its response, taking a position contrary to that presented by the Claimant, and in accordance with the position it had already assumed in the petition for review proceedings and administrative appeal, and having as reference the vices of unconstitutionality and illegality attributed by the Claimant, relating to autonomous taxes, reduces its point of view, in very brief summary, to the fact that in accordance with the provision of No. 1 of Article 3 of the Code of Administrative Procedure, "The organs of Public Administration must act in obedience to law and right, within the limits of the powers attributed to them and in accordance with the purposes for which these powers were conferred upon them", it is therefore not required to pronounce on the choices of the legislator or the constitutional conformity of the norms that derive therefrom, being bound by the principle of legality, "and therefore cannot, by force of this, disapply norms in function of their unconstitutionality".

Arguing for the inadmissibility of the request for arbitral pronouncement formulated by the Claimant.

1. The parties also came, under the provisions of Article 18 of RJAT, to present written arguments, where, fundamentally, they reiterate and defend the positions they had already set forth in their pleadings.

2. The Arbitral Tribunal is materially competent and is duly constituted, pursuant to Articles 2 No. 1 paragraph a), 5 and 6 No. 1 of RJAT.

3. The parties have legal standing and capacity, are legitimate and are duly represented, pursuant to Articles 4 and 10 of RJAT and Article 1 of Order No. 112-A/2011, of 22 March.

It is necessary to decide on the merits of the claim.

II - GROUNDS

A. FACTS

A.1. Proven facts

1. The Claimant is a holding company (SGPS) subject to the Special Taxation Regime for Groups of Companies (RGTS), being the dominant company of the Tax Group "B".

2. In this capacity, and on 31 May 2012, it submitted its aggregate self-assessment of IRC relating to the fiscal year 2011, through the presentation of the respective Form 22, with the self-assessment of all autonomous taxes.

3. Within the scope of the self-assessment of IRC for the fiscal year 2011, the Claimant determined a total of autonomous taxes, and in final terms, of €1,906,358.08 recorded in field 365 of table 10 of the Form 22 declaration (cf. document No. 1 attached with the request for arbitral pronouncement)

4. The Claimant challenges the autonomous taxes levied on bonuses and indemnities to administrators in the amount of €1,361,650.78 and the increase of ten percentage points relating to other autonomous taxes in the amount of €63,121.89.

5. The autonomous taxes, which the Claimant challenges, are distributed, with respect to their nature, as follows, as per document No. 6, attached with the request for arbitral pronouncement:

• €1,361,650.78 on bonuses and indemnities to administrators and similar,
• €63,121.89 relating to the increase of ten percentage points in the remaining autonomous taxes;

1. Such autonomous taxes were paid in full by the Claimant (cf. documents Nos. 1 and 5 attached with the request for arbitral pronouncement)

2. On 10 April 2013, the Claimant filed, with the Large Taxpayers Unit (UGC), a petition for review against the aforementioned autonomous taxes. (cf. attached administrative file);

3. On 11 October 2013, an order was issued denying said petition for review, by His Excellency the Head of the Division of Tax Management and Assistance for Large Taxpayers (cf. document No. 4 attached with the request for arbitral pronouncement and administrative file)

4. Such denial order was notified to the Claimant through Official Letter No. …, and received by it on 15 October following:

5. Following which, on 13 November 2013, the Claimant filed an administrative appeal to which was assigned No. …;

6. The administrative appeal in question was partially granted, whereby the self-assessment of IRC for 2011, was corrected with respect to autonomous taxes in the amount of €375,324.40 (bonuses paid to administration in 2011 in the amount of €3,753,244.00 x 10%). (cf. page 6 of the decision of the administrative appeal)

7. The decision granting the administrative appeal in part was notified to the Claimant through Official Letter No. …, and received by it on 09 June 2014.

8. On 2 September 2014, the Claimant filed its request for arbitral pronouncement with CAAD, which gave rise to the present proceedings.

A.2. Unproven facts

With relevance to the decision, there are no essential unproven facts

A.3. Grounds for the facts given as proven and unproven

Regarding the facts, the Tribunal does not have to pronounce on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish the proven facts from the unproven ones [(cf. Art. 123 No. 2 of CPPT and articles 607 of CPC, applicable by virtue of Article 29, No. 1, paragraphs a) and e) of RJAT)].

In this manner, the facts relevant to the judgment of the case are chosen and selected according to their legal relevance, which is established in consideration of the various plausible solutions of the legal question(s) (cf. Article 596 of CPC, applicable by virtue of Article 29, No. 1, paragraph e) of RJAT).

Thus, having regard to the positions taken by the parties, the documentary evidence attached to the file, and the administrative file attached, the aforementioned facts are considered proven, with relevance to the decision, as recognized and accepted by the parties.

B. LAW

1. Issues to be decided

The Claimant petitions that the illegality of the partial denial of the administrative appeal mentioned above be declared and, consequently, the act of self-assessment of IRC relating to autonomous taxes, as mentioned above.

Raising for the Tribunal's consideration (i) the legality of that partial denial (of the administrative appeal), insofar as it disregards the recognition of the partial illegality and unconstitutionality of that portion of the self-assessment of IRC relating to the fiscal year 2011 of Tax Group B and, as well, (ii) the legality and partial unconstitutionality of that portion of the self-assessment of IRC relating to the same fiscal year (2011), more specifically regarding an amount of €1,424,772.67.

The Claimant invokes, for this purpose, three main lines of argument, namely:

1. The question of the conformity of autonomous taxes with the Constitution of the Portuguese Republic: in particular the non-conformity of autonomous taxation on bonuses of administrators, managers or corporate officers, and likewise on indemnities paid for the cessation of functions of such agents;

2. The question of the applicability of autonomous taxation on charges relating to bonuses of administrators, managers or corporate officers only on what exceeds the amount provided in paragraph b) of No. 13 of Article 88 of CIRC

3. The inapplicability of the increase of 10 percentage points in autonomous taxation to SGPS given that, in this concrete case, tax losses are not indicative of economic losses (they are technical losses, which rest on technical specificities – as opposed to resting on economic reality – of the fiscal law itself), under penalty of unconstitutionality of this provision contained in No. 14 of Article 88 of CIRC.

Let us examine each of these issues individually.

1. On the nature and genesis of autonomous taxes

Autonomous taxes were introduced into the Portuguese legal system through Article 4 of Decree-Law No. 192/90, of 9 June, which provided for autonomous taxation, at a rate of 10%, of confidential or undocumented expenses (e.g. arbitration case No. 20/2014-T and the reference made in the Learned Opinion attached to the file of Messrs. Doctors Eduardo Paz Ferreira and Clotilde Palma, at pages 6.). Subsequently autonomous taxes were included in the Corporate Income Tax Code, through Law No. 30-G/2000, of 29 December, which integrated the provision of autonomous taxes in the instrument that regulates IRC.

More specifically, autonomous taxation of confidential expenses is even earlier. In fact, the current Article 88 No. 1 of CIRC dates back to Decree-Law No. 375/74 of 20 August, by which was carried out the "Reform of the Tax System, aimed at its rationalization and the reduction of the tax burden on disadvantaged classes, with a view to an equitable distribution of income". In this reform, confidential expenses were penalized, for example, with a fine equivalent to the amount of such expenses.

This specific type of expense – confidential expenses / today undocumented expenses – corresponds to an old accounting tradition, of treating as such certain expenditures made by companies, which, in their essence, would correspond to economically necessary expenses for the company's activity (expenses that supposedly had to be made for a company to obtain certain market shares or certain clients) but in which, for some reason, it was not possible or convenient to identify the beneficiary thereof.

Naturally, expenses of this nature, which, it should be emphasized, corresponded to a practice socially and legally accepted in the not too distant past, contain a high anti-social potential, as they give clear accounting cover to practices related both to corruption (payment of bribes) and to fraud and tax evasion.

It is true that, in this case, we are not in a situation of autonomous taxation of confidential expenses, but the example well illustrates, in general, the clear embryonic connection that exists between the autonomous taxes established in Article 88 of CIRC, IRC itself, and some measure of anti-juridicality of conduct.

Since then the regime of autonomous taxes has undergone a process of progressive expansion, in part driven by the apparent continued intention to contain evasive phenomena through expenses that more easily can represent some form of abuse and, possibly, to secure the levels of tax revenue through this mechanism [Cf. Report of the State Budget-2010 (item 1.4.1.8), where reference is made to the need to achieve "a fairer distribution of tax burdens" and the Opinion cited in these proceedings, page 16].

Currently, there are several types of autonomous taxes established in Article 88 of the Corporate Income Tax Code, namely:

i) Autonomous taxation on undocumented expenses;

ii) Autonomous taxation on vehicle charges;

iii) Autonomous taxation on representation expenses;

iv) Autonomous taxation on amounts paid or owed, in any capacity, to individuals or legal entities resident outside Portuguese territory and subject there to a clearly more favorable tax regime;

v) Autonomous taxation on expenses for travel allowances and compensation for worker displacement in private vehicle

vi) Autonomous taxation on profits distributed by entities subject to IRC to taxpayers that benefit from total or partial exemption;

vii) Autonomous taxation on expenses or charges relating to indemnities and any compensation due not related to the achievement of productivity objectives previously defined in the contractual relationship, when there is a cessation of functions of manager, administrator or manager, as well as on charges relating to the portion that exceeds the value of remuneration that would have been earned by the exercise of such offices until the end of the contract, in the case of termination of a contract before its term;

viii) Autonomous taxation on expenses or charges relating to bonuses variable remuneration paid to managers, administrators or managers.

Arbitral jurisprudence has decided that the autonomous taxes now under analysis belong, systematically, to IRC, and not to VAT, to IRS, or to any other tax of the Portuguese tax system. This is the case in Arbitral proceedings Nos. 166/2014-T, Nos. 246/2013-T, 260/2013-T, 282/2013-T, 6/2014-T and 36/2014-T, among several others.

They are, therefore, strongly linked to the taxpayers of the respective income tax, and more specifically, to the economic and business activity carried out by them. What is at issue in autonomous taxes is, in fact, taxing certain expenses or charges (outlays), viewed in their relationship with the general idea of real and effective profit and income taxation.

Indeed, it seems to us beyond doubt that the mechanism of autonomous taxation of the set of realities provided in Article 88 of CIRC aims, primarily, to safeguard the general equilibria of the tax system itself, the specific equilibria of IRC and the revenue of the tax itself. That is, it aims to prevent that through the significant recognition of charges such as those provided in Article 88, distortions are not introduced affecting the system and the expectation about what should be the "normal" revenue of the tax is not defeated. In this case, as is equally well known, what is at issue is to discourage the realization/recognition of these expenses, not least because, by their nature and purposes, they can be more easily diverted to consumptions that, in essence, are primarily private or correspond to charges that do not cease to have, as well, as specific purpose, the avoidance of tax. Realities that present some measure of censurability since, while not violating the law directly, they generate sensible and important imbalances about the general idea of justice, about the fundamental duty to contribute in proportion to one's means, equality, sacrifice, proportionality of the measure of tax in face of possible manifestations of wealth, taxation of real income, equality and justice.

Although functioning in a way different from what constitutes the essential scope of IRC – which taxes income – autonomous taxes tax certain specific expenses or charges – and constitute an instrumental reality, accessory to that tax, to the extent that it is in function of it that they were instituted and are, therefore, capable of being recognized as having an instrumentality or accessoriness of purposes, rooted in the safeguarding of the purposes of the tax itself where they manifest.

So, as was appropriately referred to in the Arbitral decision handed down in case 187/2013-T, "The reason for being of autonomous taxes is not found in the simple collection of more tax, but aims primarily to discourage recourse to the type of expenses they tax, which, by their nature, are conducive to payment of disguised income, and ultimately, even to allow recovery of some tax that failed to be paid by the beneficiary of the income, transferring responsibility from the latter to the sphere of whoever pays that income. What gives them a clear anti-abuse nature, manifestly accessory/complementary to taxation according to the contributory capacity revealed by income, even if only apparently to the detriment of taxation of real income (that is, based on accounting). In short, with autonomous taxes what is intended is precisely to prevent abusive use of certain expenses and distribution of dividends and in fraud of the norms aimed at reaching the real income of taxpayers."

It is thus certain that autonomous taxes do not constitute IRC in the strict sense but are imbricated with it (IRC), and should be contained in the "other taxes" of which we are given an account in the final part of paragraph a) of No. 1 of Article 45 of CIRC (wording in effect in 2011 and current Article 23-A/1-a), of CIRC).

Revelations of this functional connection, and in the context of the legislator's overall intention, emerge, for example, from the discipline of Article 12 of CIRC regarding entities subject to the regime of fiscal transparency, by not taxing them in IRC, "except for autonomous taxes", a relationship that equally manifests itself in the face of No. 14 of Article 88 of CIRC, in the sense that the rates of autonomous taxation take into account the fact of whether the taxpayer presents or not a tax loss.

It should be noted that Article 88-14 of CIRC does not establish the presumption, rebuttable, that companies that present tax losses carry out, in an abusive manner, the operations or taxable facts mentioned in the various numbers of Article 88 of CIRC, for if this were the case this presumption would have to be set forth in the Law itself (cf. articles 349 et seq., of the Civil Code)

The "dual nature" of autonomous taxes or the response "to the admittedly difficult question of the tax regime for expenses that are in the zone of intersection of the personal sphere and the business sphere, so as to avoid remuneration in kind more attractive for exclusively fiscal reasons or the hidden distribution of profits", to which Saldanha Sanches calls us, does not detract from the interpretation we have been outlining, in the sense that autonomous taxes are still a component included in the charges borne as IRC.

Analyzed even from another angle, one must consider autonomous taxes in the context of specific anti-abuse norms and their similarity with the regime provided under No. 1 of Article 65 of CIRC, in the 2011 wording ("are not deductible for purposes of taxable profit the amounts paid or owed, in any capacity, to individuals or legal entities resident outside Portuguese territory and subject there to a clearly more favorable tax regime, unless the taxpayer can prove that such charges correspond to operations actually carried out and do not have an abnormal character or an excessive amount").

There is, thus, in the mechanism of autonomous taxes an anti-disturbing function of the normal functioning of IRC, resulting from the adoption, by the taxpayers, of behaviors avoiding the general duty of tax, because they mitigate the collection due and which, therefore, produce an effect unbalancing the revenue which, were it not for these abusive conducts, would be due.

And this because, as is known, individuals accept or consent to tax, within the framework of the general dogmatics of the functioning of democratic order, but do not desire it. Indeed, the general mechanism of popular representation in the general assemblies of peoples, if it permits that tax be approved "by the people", equally requires that it be modeled in such terms that it falls on everyone in a general way.

Therefore, it was very well pointed out in Arbitral Decision No. 187/2013-T where it is stated: "The anti-abuse function legitimizes autonomous taxes in light of the principle of contributory capacity. Attending to this anti-abuse function with which autonomous taxes are invested, it is fallacious to state that those 'have nothing to do with the function of IRC'. On the contrary, they have everything to do with the function of IRC, which is to reach the contributory capacity revealed by real income. In this conformity, aiming autonomous taxes to reduce the tax advantage achieved with the deduction to taxable profit of the costs on which they fall and to combat tax evasion that this type of expense, by its nature, potentiates, it cannot itself be through its deduction to taxable profit as an exercise cost constitute a factor reducing that diminution of advantage intended and determined by the legislator."

Thus, it seems clear to us the correctness of the arbitral decision handed down in case No. 187/2013-T in considering that autonomous taxes, which fall on charges deductible in IRC, are integrated into the regime and are due under this tax, with the expenses of payment of such autonomous taxes not constituting deductible charges for purposes of determining taxable profit.

This understanding was legally and recently clarified by Article 3 of Law No. 2/2014, of 16 January, which added Article 23 A) to CIRC (while its Article 13 repealed Article 45) with the following wording:

Article 23 A) - Charges not deductible for tax purposes

"1. The following charges are not deductible for purposes of determining taxable profit, even when accounted as expenses of the taxation period:

a) IRC, including autonomous taxes, and any other taxes that directly or indirectly fall on profits".

There being no doubt as to the interpretative character of the provision transcribed, according to the rules of legal hermeneutics, in practice, such norm comes to express what the legislator has always understood and continues to understand, that is that the charges resulting as the cost associated with autonomous taxes do not amount to anything for purposes of determining taxable profit.

From the present proceedings, despite the respect that the argumentative effort evidenced by the Claimant merits, no elements emerge that justify alteration of the position subscribed to in the CAAD arbitral decisions regarding the nature and function of autonomous taxes. And, in particular, of the sense that results from the arbitral decision handed down in case No. 187/2013-T where it can be read:

"It is understood, thus, in summary, that one thing is the type of taxable fact that underlies a given imposition. Another thing is the title to which such imposition is due, in essence the cause of the tax obligation. And in the case of autonomous taxes in IRC, that cause, the title to which the tax is exacted, will still be IRC.

In this sense, one should attend, beyond everything else, to the fact that the legal regime of autonomous taxes in question only makes sense in the context of taxation under IRC. That is, disconnected from the legal regime of this tax, they will completely lack sense. Their existence, their purpose, their explanation, in essence, their juridicality, is only comprehensible and acceptable within the framework of the legal regime of IRC.

Indeed, the autonomous taxes now under analysis belong, systematically to IRC, and not to VAT (as was seen), to IS, or to any new tax. For although it can be accepted that the taxable fact impositive will be each of the singular expenses legally typified, the fact is that these are not, qua talis, the final object of taxation, the reality that it is intended to burden with the tax. If this were so, obviously all expenses carried out by all taxpayers would be taxed, and not only by some. That is, autonomous taxes of the kind now at issue are strongly linked to the taxpayers of the respective income tax, and more specifically, to the economic activity carried out by them."

Having framed the figure of autonomous taxes, it is now important to ascertain whether the lines of argument developed by the Claimant are sustainable. Let us see then.

1. The question of the conformity of autonomous taxes with the Constitution of the Portuguese Republic

With respect to this question, the Claimant invokes the violation of a set of principles, some of which with express constitutional enshrinement, which it considers violated according to the terms and foundations it invokes.

It does not appear to us that this can be right. Indeed, autonomous taxes, as stated, do not have an essentially revenue-generating purpose, that is, they do not aim, primarily, at obtaining tax revenue, although this may not be an insignificant aspect, possibly verifiable.

They have, as emphasized, in line moreover with the argument put forth by CAAD in numerous decisions, a function:

. General ordering - disciplining the tendentially abusive behavior of IRC taxpayers in the recognition of charges that may more easily correspond to private consumptions that, by their nature, are easily recognized as expenses of IRC taxpayers although, substantially, they may have nothing to do with the needs thereof.

. Specific preserving - directed at maintaining or preserving certain equilibria within the tax - preserving the revenue of the tax by limiting behaviors substantively or mainly directed at its mitigation, subjecting generally certain expenses to autonomous tax rates;

. Systemic pacifying - sustaining a given equilibrium in the distribution of the tax burden on taxpayers in general, within the Portuguese tax system itself.

In the first case, this occurs by discouraging behaviors, practices or options of companies rooted in reasons essentially of fiscal savings nature, revenue-generating. In the second case, by preserving the equilibria proper to the taxation regime of legal entities, avoiding distortions not only at the level of taxable results, as waves of deviant behaviors, affecting the legal expectation of revenue, in each economic year.

And in the third case, by forcing through these general anti-abuse clauses, the maintenance of a healthy correlation between business volumes, taxable profits and tax due finally by entities subject to IRC, in line with the average levels of effective tax burden that falls on different groups of taxpayers, within the Portuguese tax system and, even, comparatively with that of OECD member states. It is worth noting that estimated IRC revenue for the current year 2015 is approximately €4,690 million, whereas estimated IRS revenue amounts to almost three times more, reaching €13,168 million. Allowing for the respective distances, it is still worth reflecting on the differences between the total business volumes declared by IRC taxpayers with the gross income declared by IRS taxpayers to become aware of the importance of autonomous taxes as a mechanism for ordering or disciplining abusive behaviors.

Autonomous taxes, including those provided in para. b) of No. 13 of Art. 88 of CIRC have a general disciplining function that is not alien to systemic purposes. And this because it – autonomous taxation – as an anti-abuse mechanism, is not alien to the general purposes of the tax system.

Article 103 of CRP states that the tax system aims at "meeting the financial needs of the state". But such a system cannot pursue this relevant purpose in any way. It must do so within the principles of justice, equity and coherence that inform the system itself and allow it to function as smoothly as possible.

Thus, one asks: Are the purposes pursued by the establishment of autonomous taxes in IRC alien to the purposes of the Portuguese tax system? The answer must be negative. If it is true that there are neither income tax models nor "pure" tax systems, because complex and varied is social reality, it is equally certain that one cannot expect of concrete solutions adopted in general law, nor of the particular tax, because objectified in that complex reality and intermingled with antagonistic interests, a purity of solutions that only in the ideal world could, perhaps, be found.

But this, it can be rightly said, does not mean that the common legislator and the tax legislator in particular should not seek the solutions that concretely seem to them to be those that best safeguard the public interests at stake. In this case, objectified in the need to curb abusive behaviors, generating exhaustion of IRC tax revenue and important imbalances in tax burden between groups of taxpayers, those yes, violators of the structuring values of equity and justice in the distribution of tax burdens, and of the very necessity, of general interest, to preserve the taxable matter in IRC. Values enshrined in Article 103 No. 1 of CRP, according to which "the tax system aims at meeting the financial needs of the State and other public entities and an equitable distribution of income and wealth." An idea, moreover, corroborated in community law, as can be extracted from the Commission Communication to the European Parliament and Council – Action Plan to strengthen the fight against tax fraud and evasion, under the heading "Recommendation on aggressive tax planning, where concern is expressed to "ensure that the tax burden is shared equitably". (COM (2012) 722 final, p. 6).

For this very reason, the adoption of legal regimes that limit the harmful effects resulting from behaviors affecting the balanced distribution of the tax burden on different groups of taxpayers does not constitute merely an option of the legislator, but is, rather, a strict obligation, resulting from the obligation to outline and make the system function as a whole in a balanced manner. Autonomous taxes introduce, it is true, taxation mechanisms that, naturally, will displease their recipients, but they prevent or limit the harmful effects of abusive practices that would harm others and are, therefore, necessary for the preservation of the system's equilibria. Now, companies, like individuals, are also subject to the general duty to pay taxes and, in this measure, fiscal law cannot fail to establish mechanisms that limit deviant procedures.

It is important to note that, in our days, the regime of taxation according to real and effective income has been adopted as a general rule for legal entities. Now, this does not constitute merely a mere option for the functioning of the tax system, among several other possible ones. It is, rather, a concrete manifestation of the modernity and maturity of a tax system that demands of its recipients/beneficiaries a maturity of the same order of magnitude as it also represents a new form of ethical and social accountability toward the phenomenon of tax (regarding questions about the limits of morality vis-à-vis tax see SUSANNE LANDREY, STEF VAN WEEGHEL and FRANK EMMERINK). For there is a profound and indisputable interlink between law and morality (JOÃO BAPTISTA MACHADO).

That is to say that, for example, in Brazil, the overwhelming majority of legal entities is taxed in IRPJ – Income Tax of Legal Entities (equivalent to IRC) according to a regime of taxation of presumed income, with taxation of real profit reserved only for taxpayers with business volumes above 78 million Reais. And also that in the old Industrial Contribution, in effect in the tax reform of the sixties of the last century (the tax equivalent to today's IRC), the overwhelming majority of taxpayers was taxed according to the general regime of normal income, as was the case with taxpayers in groups B and C, with taxation of real profits reserved for those in group A, with organized accounting, who were very few.

This rough method was the current way of taxing profits in Portugal throughout the twentieth century, successively implemented in the tax reforms of 1922, 1929 and 1959/65. In it the chief of the finance department fixed, according to subjective criteria, unknown to taxpayers, the taxable matter and the collection due in each exercise, and where the safeguards of defense were, at minimum, very few and limited to consultation of assessment entries before the elaboration of the nominal list delivered and the opening of the vault for purposes of voluntary payment.

And that, as a consequence of all this, the taxpayer's position only came to know a new dimension in the 1989 tax reform where, finally, the criterion of taxation of real income prevailed, which represented, unequivocally, an extraordinary advance over past practices and models, by being much fairer in resting on a new dimension of citizenship embodied in the principle of presumption of truthfulness of declaration, later reaffirmed in Article 75 of the General Tax Law.

It happens that the true requalification that the taxpayer's status underwent in that reform did not only bring him an improvement in his rights of defense, his prerogatives vis-à-vis advances of the administration, finally, his status before law and society, as eloquently explained by VITOR FAVEIRO, in his The Status of the Taxpayer in the Social State under the Rule of Law, Coimbra editor, 1999, but also added new responsibilities to him.

Foremost among these are those of adopting commercial and fiscal practices consistent with the elevated principled status conferred to his acts with fiscal relevance, of truthfulness in accounting recognition and in declaration. And, finally, to assume in matters of tax a new idea of fiscal responsibility so that, voluntarily, they adopt postures, behaviors and actions that promote levels of tax payment consistent with their real capabilities to contribute to the promotion of the whole of society in a committed, pro-active and truly participatory manner in this construction.

In truth, that status imposed as consideration to legal entities, the duty to adopt constructive practices of the whole of society, encompassing the effective duty to bear tax. But not just any duty, formal, merely derisory or ridiculous, but a substantive, full and integral duty, in line with its real capacity to contribute. So much so that from this financial contribution, materialized and calculated according to the norms of the tax, there corresponds a voluntary, conscious and mature practice, which in no case can be confused with compulsory actions of assessment and collection. All, naturally, within a vision sustainable of human societies, involving benefit to the collectivity, whether it be relative to the internal public of each legal entity (its employees, shareholders, etc.), or external actors (the collectivity, partners, persons in general).

From this commitment between legal entities and persons and human values, along with other equally genuine and valid concerns, e.g. with life conditions or the environment, should result abstention from behaviors that, through various ways, aimed only and essentially, or not, to forcefully diminish the taxable matter and the collection in IRC.

But the facts demonstrate that, in this regard, perhaps the social commitment of legal entities to the community where they develop their activity is flawed or does not have the quality presupposed, and therefore become general behaviors that, being legally permissible – as is the case with the granting of bonuses -, whether from the perspective of freedom of management, whether from that of law in the strict sense – assume an ethical dimension in doubt when one notes, according to maxims of experience and by mere recourse to the diligence of the average person, that they aim, in whole or in part, to evade the tax burden.

Now, one cannot say that, faced with such a scenario, moreover more or less widespread, the fiscal law can do or should do nothing. For if it is true that freedom of management is general, allowing legal entities to act within the limits of their purposes and manage in the best way and in the best interest of their shareholders, it will also be no less true that the individual interest, of each of them, is not the only one that should be taken into account in the distribution of the tax burden.

And this because, along with individual interest coexists collective interest and this, because it generates common expenses, cannot fail to be financed by all and in measure of their means. We therefore do not see how the invoked principles of contributory capacity, proportionality and taxation of real and effective income are violated.

Because if it is true that, to obtain revenues the state is bound to distribute the tax burden by the generality of existing tax species, to obtain authorization (annually) for its collection and to collect them in a way as to achieve a distribution of the burden by the largest possible number of agents and individuals. It would be manifestly unjust a tax system based on a single tax falling on a portion or category of specific taxpayers, or that primarily or essentially taxed one or another fiscally relevant reality, leaving out others, equally important, leaving aside from the duty to pay taxes large groups of individuals or taxable facts.

A just tax system is one that distributes well, not only in the theoretical plane but equally in the effective plane, the duty to contribute, the burden and the tax revenue by all those who evidence capacity to do so. From the perspective of distribution on the side of the recipients of the fiscal burden, the operation of imputation of tax to taxable sources is of paramount importance, a matter of justice and not of mere economic order or financial technique. "The problem of justice in the effective distribution of fiscal burdens is closely bound up with all science of tax law, all economic science of taxation and its implications in public and private economy, all theory of fiscal policy and all knowledge of the construction of the state and its purposes", as stated by VÍTOR FAVEIRO, Contemporary National Fiscal Policy, Ministry of Finance, Lisbon, 1964, p. 14.

On the other hand, it does not seem to us that equality and proportionality are, also, sacrificed at the altar of autonomous taxes. As is well known, it is not an absolute principle since, in its vertical aspect, it requires and demands that taxpayers in different situations be treated differently (Cf. the cited Opinion, page 31).

Now, insofar as autonomous taxes fall, generically, on all taxpayers that evidence the identified realities, it is not clear how this violates equality for those in the same position. On the other hand, if it is true that the Constitutional Court has pointed out protection of the principle of equality (e.g. Decision 644/94, case 267/93, among others), it is equally certain that differences in treatment are only admissible if rooted in ascertainable, plausible reasons and framed in the order of values established, as it seems to us to be the case. There is, thus, in the concrete legal solution adopted a rational foundation that is easily discovered and whose terms are not repugnant. Now, what has been said does not allow one to conclude otherwise than that autonomous taxes do not offend that equality.

Even because, unlike what occurs with Item 28.1 of TGIS – General Table of Stamp Tax, here, in autonomous taxation provided in para. b) of No. 13 of Article 88 of CIRC, there is a double criterion. It is not merely a matter of taxing expenses or charges above a certain amount, in absolute terms, as is the case in IS. Here the legislator was more demanding in establishing a double consideration or initial criterion complemented by two others, cumulative: these expenses must exceed a certain absolute amount and, at the same time, must present a given significant correlation with the individual structure of the annual remuneration of the person to whom they were allocated.

And beyond these two general criteria, the law adds two others, equally imperative, namely, that their payment not be deferred and not be conditioned to the performance of the legal entity, in the terms provided therein. Now, analyzed the criteria of the law, we can easily identify in them the evaluative foundation that guides them, their reason for being and, even, the care taken by the legislator in formulating a regime on bonuses and variable remuneration, which does not reach all these realities exactly because not all of them present the same symptoms of disvalue. And being so, we do not see how these factors can constitute inadmissible differentiations, without any reasonable justification in light of the specific principles of tax law and the other general principles invoked by the Claimant.

Proportionality can still be invoked in another perspective, centered, naturally, on the Claimant, sole challenging entity here. When in 1989 the income reform came into effect in Portugal, the marginal rates of IRS and IRC were equal. After more than 30 years of application of these taxes and after a quite profound reformist evolution, the marginal rates of IRC are less than half those of IRS. This means that companies today pay, correlatively, much less tax than individuals. Now, if the weight of IRC has diminished for companies, it does not appear that the increases in taxation originating from autonomous taxation of the realities under consideration impose intolerable levels of taxation on them.

It is important to recall, as Saldanha Sanches appropriately noted, cited in Arbitral Decision 187/2013-T, pp. 28, that autonomous taxes constitute a way of preventing abusive actions: "... that the "normal" functioning of the taxation system was incapable of preventing, and that others, including more burdensome forms for the taxpayer, were possible. This anti-abuse character of autonomous taxes, will be not only coherent with its "anti-systemic" nature (as with all norms of the kind), but with a presumptive nature, pointed out both by Prof. Saldanha Sanches and by the jurisprudence that cites it. They "will then materially underlie a presumption of "partial" business nature of the expenses on which they fall, in function of the above-pointed circumstance that such expenses sit on a gray line that separates what is business expense, productive, from what is private expense, consumption, whereby, notoriously, in many cases, the expense will even in reality have a dual nature (part business, part particular)."

And where, moreover, as already stated in the Decision above identified (p. 27), the autonomous taxes whose burdens the Claimants intend to see subtracted from their taxable profit, may be viewed as a species of consensual anti-abuse norm, in which the legislator proposes to the taxpayer one of three alternatives, namely:

a) Not to deduct the expense;

b) Deduct but pay the autonomous tax, dispensing itself, as well as the Tax Authority, from discussing the question of the business nature of the expense;

c) Prove the integral business nature of the expense, and deduct it integrally, not bearing the autonomous tax.

The recognition of this presumptive nature will, beyond everything else, be a safeguard of its constitutionality, to the extent that the possibility of its integral deduction by the taxpayer is guaranteed, or its non-deduction, depending on which side the presumption underlying it is, in each case, rebutted.

On the contrary, it falls to the organs of public power the power-duty to detect and provide mechanisms for correction of behaviors that, being entirely logical in the plane of individual interests, are harmful to collective interests by materializing entorses to relevant interests and, well viewed, an intolerable deflection of tax burdens between groups of taxpayers.

For all that which has been set forth, it is that no grounds are surprised for the invoked vices of unconstitutionality.

1. The question of the applicability of autonomous taxation on charges relating to bonuses of administrators, managers or corporate officers only on what exceeds the amount provided in paragraph b) of No. 13 of Article 88 of CIRC

What was stated previously allows one to conclude that there is no quid pro quo or parti pris on the part of the law regarding bonuses awarded. Despite the profuse eloquence of the Claimant's argument, and the commendable effort to demonstrate, in its articles 131 et seq., the excessiveness of the taxation rates, these arguments overlook a prior balance, a consideration about the behavior of companies that the law requires be made.

And this because, as stated, the taxation of the autonomous taxes provided in para. b) of No. 13 of Article 88 of CIRC only occurs in cases where the established criteria are not observed. Thus, for example, a given employee who earns €1 million in annual remuneration can also earn a bonus of up to 25% of that amount without being subject to autonomous taxation. Or it can even exceed any of those first two limits – e.g., it can receive a bonus equal to or greater than that annual remuneration – provided that the two conditions provided in the second part of the provision are met.

So the regime does not possess the violence that the Claimant attributes to it in the isolated analysis it makes of the provision at issue. It does tax, it is true, in no insignificant way, the situations that fall within the material scope of the provision, but it is important not to forget the anti-abuse character that attends it, and the evident and not denied intention to restrain behaviors of this nature, for the reasons already pointed out above.

On the other hand, the taxation of these realities "only on what exceeds" in the Claimant's claim, constitutes a hypothesis that neither the letter nor the spirit of the law contemplates. In fact, and in the first place, when in the interpretive activity, the interpreter eventually intends to fit that hypothesis into the law, he finds in the respective letter a limit that seems to us insurmountable. Indeed, nothing in that letter permits us even to suppose or imagine that it accommodates this hypothesis of autonomous taxation on the surplus. And this because the law orders the taxation of "expenses or charges" and from it one cannot extract, nor even faintly, the slightest objective intent to do so. It is "the expenses" as a whole, in the conditions there specified, that become subject to autonomous taxation and that is all the law wishes to convey. So that, absent further reason, when the provision refers to the taxation of those charges, the quantitative limit of €27,500 relates to the value supported as an expense by the legal entity, as a whole considered.

It must, it is true, summon to the process of discovery of the true sententia legis, the other elements of interpretation of the law. But, having traversed the excursus, we have not found, frankly, in the other elements of this interpretation, grounds, even if merely symptomatic or indicated, that allow us to walk in the direction intended by the Claimant. In fact, neither the logical element, nor the systematic nor, finally, the historical, permit us to conclude this.

Moreover, even going further, we remain the same. It is true that the discovery of the true meaning of the law is not a mere faculty of the interpreter. It constitutes an imperative, for it is important to assure that the activity of the interpreter achieves an interpretive meaning by which the law displays its most beneficial, most useful and most salutary meaning, in the words of FRANCESCO FERRARA, in his Interpretation and Application of Laws, Arménio Amado, editors, 1978, p. 137 et seq. On the other hand, the logical meaning of interpretation leads us only in the direction of taxation in totum of those bonuses or variable remuneration, since nothing permits us to defend that a part of them should be excluded. Note that we are in a logic according to which the law intends to prevent or discourage such legal entities from recognizing (abusively) as expenses values relating to bonuses or variable remuneration, so it makes sense to consider the total value of the expense incurred by them. It is the recognition as an expense, therefore, in its entirety that is intended to be discouraged and, to that extent, it makes little or no sense the establishment of autonomous taxation regimes "only for the difference".

Then, appealing to the ratio legis, we continue not to discern reasons to think that the law has intended taxation by the difference. Although it is true, as MANUEL DE ANDRADE noted, in his Essay on the Theory of Interpretation of Laws, that the ratio legis is the element that establishes the contact between the law and real life, it is certain that from this real life, of the concrete case results exactly the opposite of that intended by the Claimant. For, having the regime a function of discouraging abusive behaviors, it is not seen why logical reasons that discouragement would be made only from a certain amount. All the more certain that the amount of €27,500 does not constitute an absolute limit, but a quantitative marker that must be related to the other aspects of the regime, as stated above.

Then, although it is true that the occasio legis may have, here, some relevance, rooted in the concrete motivations that determined the expansion of autonomous taxes to variable remuneration and bonuses, it is certain that it does not lead us to suppose anything other than that the taxation of these expenses be by their totality, when they fall within the scope of the provision of said para. b) of No. 13 of Art. 88 of CIRC.

It is not therefore, absent better logical meaning and a ratio indicating something other than the taxation of these expenses in their totality, that the interpreter should presume, in face of the interpretive principles enshrined in Article 9 No. 3 of the Civil Code (which the General Tax Law mandates be applied through Article 11), that "the legislator expressed his thinking in adequate terms" and "enshrined the most correct solutions."

Terms in which it seems to us that the considerations made by the Claimant in this matter are devoid of merit due to lack of legal support.

1. The inapplicability of the increase of 10 percentage points in autonomous taxation to SGPS given that, in this concrete case, tax losses are not indicative of economic losses (they are technical losses, which rest on technical specificities – as opposed to resting on economic reality – of the fiscal law itself), under penalty of unconstitutionality of this provision contained in No. 14 of Article 88 of CIRC.

As stated above, the regime under consideration clearly aims to discourage behaviors that, aiming wholly or mainly to avoid the IRC burden, are presented as censurable for abusing the legal regimes of recognition of expenses in the tax and, with this, causing relevant systemic imbalances. In this logic, the law considers reprehensible that bonuses and variable remuneration be recognized under the conditions provided in it (and only these) because such recognition assumes the character of an anomalous behavior.

Such censurability, in the eyes of the law (No. 14 of Art. 88 of CIRC), results enhanced when IRC taxpayers, or economic groups within the RGTS framework, recognize this type of charges as expenses, considered abusive or anomalous, and present tax losses. The Claimant argues that the economic group where it is inserted paid IRC in the form of state and municipal surtax, in addition to other autonomous taxes. And that, with this, it should not become subject to the elevation of 10 percentage points of the autonomous taxation rate provided in para. b) of the same provision.

Now, in the first place, it seems to us clear that, for the interpretive reasons pointed out in the previous point, the law is clear in referring to "tax losses" and not merely to "losses" or "economic losses". By employing the expression "tax losses" the law is sufficiently clear to, in determining its meaning, leave no room for doubt that these and only these are relevant for application of the criterion of elevation of autonomous taxation rates.

On the other hand, it seems to us clear that the reference in that No. 14 to "tax losses" takes as its starting point the process of determining real and effective profit in IRC and refers to the net result of the exercise after addition or subtraction of asset variations and the fiscal corrections of IRC to which Articles 15 to 17 of the Code allude. That is, it refers to the question of knowing whether the legal entity in question presents a taxable profit or a tax loss. And it bears well in mind that accounting and fiscal matters pursue different purposes, within the framework of the noted principle of partial dependence, in such terms that it becomes necessary to introduce corrections to the base, adding accounting expenses that are not accepted for fiscal purposes and fiscal income that is not reflected in accounting and deducting accounting income that is not relevant for fiscal purposes and fiscal expenses that were not recognized accounting-wise to the period (in this sense, see HELENA MARTINS, The IRC, in Lessons of Fiscal Policy, 3rd edition, almedina, 2014, coord. by João Ricardo Catarino / Vasco Guimarães and Manuel Pereira, Fiscal Policy, Almedina, 2009.)

Being thus, no doubts remain that the provision under consideration cannot be interpreted except in the sense that the criterion that is effectively established in it is that of "tax loss" and not that of another loss or economic, financial, accounting or any other profit.

It is certain that until the coming into force of the State Budget Law for 2011, only companies that presented tax losses in the two previous exercises would become subject to the aggravated rate of autonomous taxation of 20%, to fall on deductible expenses [relating, for example, to light passenger vehicles and mixed vehicles whose acquisition value was superior to €40,000] and that from 2011 the rates of autonomous taxation came to be aggravated by ten percentage points, whenever the taxpayer presents a tax loss in the very exercise to which the charges relate.

And it is equally certain that, combining this new rule with the fact that the 20% rate of autonomous taxation came to be applied, for example, to expenses with vehicles valued superior to €30,000 (for those acquired in the very year 2011), regardless of whether the company presents tax losses or not, came about such that the final rate of autonomous taxation could ascend to about 30%, and it can effectively happen that companies that present tax losses from 2011 come, in some cases, to be more penalized, from the fiscal perspective, than those that present taxable profit.

However, this is a side of the question that ignores or forgets the aforesaid deterrent nature of autonomous taxes relative to consumptions or expenses that are, at minimum, of very questionable business essentiality or necessity.

That is: the question can be reduced to knowing, in simple terms, whether it is just or not to penalize who, in a situation of tax loss, opts, using the previous example, for acquisition of light passenger vehicles for use by its administrators, of cost above a reasonable limit.

And with respect to this matter there are no specificities or exceptions to point out for the case, as that of the present proceedings, of companies taxed, by their own choice, under the RGTS (Articles 69 et seq., of CIRC).

In truth, although an assessment of tax losses occurs in this case by declaration of the Fiscal Group, the truth is that this occurs by the voluntary choice of the taxpayer that accepted that the respective calculation would be processed not individually but through the algebraic sum of taxable profits and tax losses determined in the individual periodic declarations so that, in the end, there was only a single taxpayer for purposes of IRC.

If from this taxation regime results, in one case or another, a final taxation more burdensome than that which could result from individual final taxation, such consequence can only be imputed to the taxpayer.

A note regarding surtaxes, to recall that these have been qualified by Doctrine for a long time as accessory taxes, although autonomous. The State and Municipal Surtax constitute today accessory taxes and not mere dependent taxes (for they are due even if the principal tax, on which they depend, is not), resulting from the respective regime that they fall on the taxable profit of the principal tax, but they are not nor are configured as an integral, inseparable part of the principal tax itself – IRC. Surtaxes thus enjoy, in the fiscal system, scientific autonomy, whether in the form of accessory taxes or of additions, as is the case with the Surtaxes under consideration, although it is a mitigated autonomy since, in some way, they live in dependence of the principal tax. They do not configure, however, IRC itself. (in this sense see CARDOSO MOTA, LEMOS PEREIRA, Theory and Fiscal Technique, 7th ed. P. 46; SOARES MARTINEZ, Tax Law, Coimbra editor, 1993, p. 215; CASALTA NABAIS, Tax Law, Almedina, p. 61, 62; ANTÓNIO BRAZ TEIXEIRA, Principles of Portuguese Tax Law, vol. 1, ed. Ática, 1964, p. 59).

Now autonomous taxes, as the Claimant very well refers to, are indeed, IRC, in the sense previously defined as, in fact, numerous Arbitral Decisions have confirmed and is here reaffirmed. But Article 88 No. 14 of CIRC does not elect as a criterion for the increase that of the payment of IRC, much less by autonomous taxes. As stated, that criterion is only one, namely, that of "tax loss". It is therefore the losses related to commercial activity that matter and only these.

It is possible, it is true, to argue that some IRC was paid by the group where the Claimant is inserted (cf. Article 150 of the budget item), but the fact is that that IRC is not an IRC on profits but an IRC by autonomous taxes. That is, a tax on facts fiscally relevant – expenses accepted as such – that the law desires to discourage. It is, thus, an IRC due by the recognition of expenses or other realities subject to autonomous taxation and, to that extent, one cannot ascertain that the group has paid IRC on profits in the exercise under consideration to the extent that it presented "tax losses".

One can discuss, it is also certain, the grounds of this logic, but the truth is that it presents itself to us in a clear, coherent manner that does not offend intolerably the order of values that it is intended to preserve. Thus, there is nothing strange, illegal or unconstitutional in the fact that there be "tax losses" and, at the same time, room for the payment of IRC by autonomous taxes attended to the fact that one and the other reality refer to differentiated aspects of this order of values that aim precisely to preserve.

Concluding in this part, it will be said that the alleged unconstitutionality of the provision of Article 88 No. 14, invoked by the claimant, is also not surprised.

1. Question of preliminary reference

The claimant also formulates, as a subsidiary matter, a request for preliminary reference to the Court of Justice of the European Union, as provided for in Article 19 No. 3, paragraph b), and in Article 267 of the Treaty on the Functioning of the European Union.

It alleges, for this purpose, that "(...)notwithstanding the community jurisprudence already produced on the matter, the scope and implications of Article 4 No. 1 of Directive 90/435/CEE and Directive 2011/96/EU that succeeded it, or any other provision of said Directives that in its judgment might interfere with the good solution of this concrete case, should then this Arbitral Tribunal promote the preliminary reference of the questions it understands to raise, to the Court of Justice of the European Union, as provided for in Article 19 No. 3, paragraph b), and in Article 267 of the Treaty on the Functioning of the European Union (...)".

The question that the claimant poses is now whether the aforementioned regime of autonomous taxes raised by the claimant, although, in our understanding, not always very direct or linear, is connected, if we understand correctly, with the harmonization of the aforementioned autonomous taxes of the taxation regime for groups of companies (RGTS) [arts 69 to 71, of CIRC] and of autonomous taxes, that is, with the faculty of option of a group of companies for a homogeneous and single taxation in IRC terms in such a way that the fiscal result of the group is the algebraic sum of taxable profits and tax losses of the companies that integrate that group, headed by the dominant company (parent company, SGPS or not).

Underlying here is an option by the taxpayers in the sense that the fiscal treatment of the companies that integrate the Group becomes done globally, having as taxable base the fiscal result of those algebraic sums (profits+losses) [Cf. arts. 69 to 71, of CIRC], with only exception of the state and municipal surtax [which, according to the wordings given to those norms by the State Budget for 2012, came to fall on the taxable profit determined in the individual periodic declaration].

It is within this framework that the claimant challenges the necessity of raising an interpretation by the Court of Justice of the European Union (CJEU) in light of the provision in article 19-3/b) and 267, of TFEU, considering to be here at issue the necessity of interpretation and uniform application "(...) of Article 4 No. 1 of Directive 90/435/CEE and Directive 2011/96/EU that succeeded it, or any other provision of said Directives (...)".

The cited Article 4-1 of Directive No. 90/435/CEE provides:

Article 4

1. Whenever a parent company receives, in its capacity as partner of its affiliated company, profits distributed in any manner other than upon the liquidation of the latter, the State of the parent company:

• either refrains from taxing such profits,

• or taxes them, authorizing such company to deduct from the amount of the tax the fraction of the tax of the affiliate corresponding to such profits and, if applicable, the amount of the withholding tax carried out by the Member State of the affiliate's residence pursuant to the derogatory provisions of Article 5, within the limit of the amount of the national tax correspondent.

Considering that it was Directive 90/435/CEE that was in effect as of the date of the taxable facts at issue in these proceedings (Cf. note 4), it will be this the only community legislative act underlying the subsidiary request for preliminary reference.

Let us see then.

The preliminary reference is a fundamental mechanism of European Union law, which has as its purpose to provide the judicial organs of the Member States with the means to assure a uniform interpretation and application of this law throughout the Union.

By force of Article 19-3/b) of the Treaty on European Union and Article 267 of the Treaty on the Functioning of the European Union, the Court of Justice of the European Union is competent to decide, on a preliminary basis, on the interpretation of Union law and on the validity of acts adopted by institutions, organs or organisms of the Union.

Arbitral tribunals integrate the set of National Courts, as expressly results from what is provided in Article 209 of the Constitution of the Portuguese Republic (CRP). As such, and in the active performance of its arbitral function, attending to the exceptional nature of the recourse of the decision of the Arbitral Tribunals in tax matters, the national legislator left expressed in the preamble of Decree-Law No. 10/2011, that "(…) in cases where the arbitral tribunal is the last instance of decision of tax disputes, the decision is susceptible of preliminary reference in compliance with §3 of Article 267 of the Treaty on the Functioning of the European Union".

There is no doubt, then, that in case of doubt about the interpretation of legal norms of European law the arbitral tribunal can resort to the mechanism of preliminary reference.

National courts are considered as common courts of the European Union Legal Order, given the considerable number of norms and community acts, constituted by directly applicable provisions or with direct effect, it falling to the national courts of Member States to apply them in disputes submitted to them for consideration. It falls, thus, to the national courts the duty to apply community law, even against provisions of domestic law to the contrary.

Thus, to resort to the process of referring one or more questions on a preliminary basis, for interpretation of one or more legal norms of community law, original or derived, it is necessary that doubts subsist about the interpretation of the text in question. On the contrary, if the text is perfectly clear, it is not already a matter of interpreting, but of applying it, which is the competence of the Tribunal/Judge/Arbitrator charged with the competence to judge the concrete case applying the law, national and/ or community, if that is the case. This understanding is widely known and defended by doctrine and jurisprudence as the "theory of the acte clair".

All this considered, this arbitral tribunal understands, following and in consequence of the considerations developed above regarding the nature of autonomous taxes, that doubts do not subsist regarding interpretation of the norms in presence in light of Directive 90/435/CEE or of any legal instruments of the EU and, to that extent, what is required of this tribunal is to decide in conformity with applicable law and in accordance with the interpretation it makes thereof under general terms.

In this conformity, not foreseeing doubts of interpretation that would ground the request for preliminary reference nor the claimant indicating the concrete questions it would wish to see posed to the CJEU, this Tribunal decides to reject the request for preliminary reference to the CJEU.

III. DECISION

In accordance with the foregoing, the members of this Arbitral Tribunal agree to:

a) Find wholly inadmissible the requests for partial annulment of the self-assessment of IRC of 25 October 2012, with the number 2012 …, relating to the fiscal year of the claimant for the year 2011, in the amount of €1,424,772.67 and

b) Consider moot the consideration and decision relating to the other issues raised by the claimant, namely that relating to the request for payment of compensatory interest.

Value of the case

In accordance with the provisions of Art. 306 Nos. 1 and 2, of CPC and 97-A, No. 1, paragraph a), of CPPT and 3 No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €1,424,772.67

Costs

Pursuant to Art. 22 No. 4 of RJAT, the amount of costs is fixed at €18,972.00, according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the claimant, A, SGPS.

Lisbon and CAAD, 24-4-2015

The Tribunal

José Poças Falcão
(President)

José Coutinho Pires
(Member)

João Ricardo Catarino
(Member)

[Text prepared by computer, pursuant to Article 131, No. 5 of the Code of Civil Procedure (CPC), applicable by referral of Article 29, No. 1, paragraph e) of RJAT, with blank verses and reviewed by the Collective of Arbitrators].