CAAD 661/2018-T: SIFIDE Tax Credit Deduction Against Autonomous Taxation Under IRC - Constitutionality Ruling

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Cons. Jorge Lopes de Sousa (arbitrator-president), Dr. Cristina Aragão Seia and Dr. João Taborda da Gama (arbitrator members), appointed by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 28-02-2019, agree as follows:

1. Report

A..., S.A. (hereinafter abbreviated as "A..." or "Applicant"), holder of the single identification number for legal entities ..., with registered office in ..., ..., ...-... ... municipality of ..., in its capacity as the dominant company of the Special Tax Treatment Regime for Groups of Companies ("RETGS") of Group B... submitted, under Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT") a request for arbitral pronouncement concerning the decision to reject the request for official revision of the tax act which was processed under case no. ...2017..., submitted by it regarding the assessment of Corporate Income Tax ("IRC") no. 2015..., issued on 09-11-2015, relating to the financial year 2014.

The Applicant requests «the annulment of the decision rejecting the Request for Official Revision, issued in the context of case no. ...2017... and, as a result thereof, the annulment of the IRC assessment no. 2015..., relating to the tax period of 2014, with all legal consequences», namely, «the addition to the tax determined in accordance with article 90 of the IRC Code, of the amount of autonomous taxation determined in accordance with article 88 of the IRC Code and, consequently, the deduction of the tax benefit, determined under SIFIDE, in accordance with paragraph c) of no. 2 of article 90 of the IRC Code, (...) and the reimbursement of the amount of tax unduly paid in excess by the now Applicant relating to financial year 2014, in the amount of Euro 704,280.85 (seven hundred and four thousand, two hundred and eighty euros and eighty-five cents), plus compensatory interest and other due and legal consequences».

The Respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 21-12-2018.

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

On 08-02-2019 the parties were duly notified of this appointment, and did not express any wish to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11 no. 1 paragraphs a) and b) of RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 20-02-2019.

The Tax and Customs Authority submitted a response in which it argued that the request should be dismissed.

By order of 09-04-2019 it was decided to dispense with the meeting provided for in article 18 of RJAT and oral arguments.

The arbitral tribunal was duly 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.

The parties are duly represented, have legal standing and capacity and have legitimacy (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March).

The process contains no defects.

2. Facts

2.1. Proven Facts

The following facts are considered proven:

a) In the year 2014, the Applicant was the dominant company of a group of companies ("Group B...") to which the Special Tax Treatment Regime for Groups of Companies ("RETGS") was applicable, and which was composed, in that tax period, of itself and the companies:

b) By reference to the 2014 tax period, the now Applicant proceeded, on 29 May 2015, in accordance with and for the purposes of the provisions of nos. 1 and 6 of article 120 and article 70 of the IRC Code, to submit the consolidated IRC Model 22 Return, identified under number ... (document no. 3 attached with the request for arbitral pronouncement, the content of which is hereby reproduced);

c) Following the submission of the aforesaid Return, IRC assessment no. 2015..., of 09 September 2015 was issued (Document no. 2 attached with the request for arbitral pronouncement, the content of which is hereby reproduced);

d) In the aforesaid IRC assessment, a total collection amount of Euro 111,732.52 (one hundred and eleven thousand, seven hundred and thirty-two euros and fifty-two cents) was determined, relating to financial year 2014, whereby, in the context of the said IRC assessment, the amount of 704,280.85 (seven hundred and four thousand, two hundred and eighty euros and eighty-five cents) was also determined and paid under autonomous taxation;

e) It results from Schedule 07 of Annex D (relating to tax benefits that operate by deduction to collection) of the Model 22 return submitted by the Applicant, relating to financial year 2014, that it held a balance of tax benefits determined in previous years and not yet expired, in the total amount of Euro 67,327,391.68 (sixty-seven million, three hundred and twenty-seven thousand, three hundred and ninety-one euros and sixty-eight cents), capable of deduction to collection in the year in question, which relates to tax credits determined within the scope of SIFIDE relating to financial years 2009 to 2013, in accordance with the following schedule:

f) The tax credit relating to SIFIDE of 2014, in the amount of Euro 12,365,891.26 (twelve million, three hundred and sixty-five thousand, eight hundred and ninety-one euros and twenty-six cents) does not appear in the respective Model 22 Return, due to the fact that, at the time of submission thereof, the respective application for SIFIDE had not yet been submitted;

g) The Applicant understood that the aforementioned credits could be deducted to the collection of autonomous taxation in IRC determined in that same year, in the amount of € 704,280.85;

h) On that basis, the Applicant submitted, on 29-12-2017 a Request for Official Revision, with a view to correcting the amount unduly paid, under autonomous taxation, in financial year 2014;

i) The Tax and Customs Authority issued a draft rejection of the request for official revision in the terms set out in document no. 5 attached with the request for arbitral pronouncement, the content of which is hereby reproduced, in which the following is stated, among other things:

2 - Opinion

2.1 – It was not observed that, on the same grounds, a Gracious Complaint (Art. 68 and following of CPPT), or even a Judicial Challenge (Art. 99 and following of CPPT) had been filed.

2.2 – The company / petitioner, in question [A...- Holding, S.A. (NIF:...)], has legitimacy to submit the Request for Revision, now under review, in the terms provided for in Art. 9 of CPPT and Art. 65 of LGT.

2.3 – Now as to the legality and timeliness of the same / present Request for Revision [framed by the company in question (recall) in no. 1 of Art. 78 of LGT], we must state the following:

2.3.1 – Art. 78, no. 1 of LGT, provides that the Revision of Tax Acts, by the entity that performed them, may be carried out, at the initiative of the taxpayer, within the Administrative Complaint Period and on the grounds of any "Illegality", or may be carried out, at the initiative of the Tax Administration (even if at the request of the taxpayer), within 4 years after the assessment, or at any time if the tax is unpaid, on the grounds of "Error Attributable to the Services", however:

2.3.1.1 – First and foremost, it should be noted that, at the date of presentation of the request for revision, now under review (recall: 29/12/2017), the administrative complaint period for the "IRC/2014" assessment, also now under review (recall: Assessment no. 2015... of 09/09/2015), both as it results from Art. 70, combined with paragraph b) of no. 1 of Art. 102 of CPPT (approximately: 20/01/2016), and as it results from Art. 131 of CPPT (approximately: 29/05/2017), had already been considerably exceeded;

2.3.1.2 – Now, taking into account the AT's position in similar situations, that which is now being analyzed [the AT's position to which (as is known) this Service is bound], we do not see, regarding the Assessment (and completion) of the aforementioned D.R. "IRC/M.22-2014", relating to the company / petitioner in question (repeat: "...", submitted on 29/05/2015), any "Illegality", or indeed "Error Attributable to the Services" (contrary to what is invoked / alleged by the company / petitioner in question), as we shall see:

A.3 – For the AT, the collection derived from autonomous taxation moves away from the rest of IRC collection, insofar as that ("collection derived from autonomous taxation"), pursues several very specific objectives, such as the purpose of avoiding practices of evasion and fraud (whether through confidential or undocumented expenses, whether through payments made to entities located in jurisdictions with privileged tax regimes, whether by disguising / concealing payments / provision of benefits / additional remuneration in the form of representation expenses, or through the provision of vehicles to employees and/or members of corporate bodies);

B.3 – For the AT, "Tax Benefits – IRC/2014" (Tax Credits "SIFIDE"), are only deductible to the collection of IRC/2014, based on the taxable matter, which is identified with the profit / income of the year, subject (in turn) to the "general rates" (so to speak) of Art. 87 of CIRC/2014 [in opposition, therefore, to the collection of IRC/2013, based on the amounts of expenses / charges / payments, subject to the "Autonomous Taxation Rates" (Art. 88 of CIRC/2014), because these are a kind of separate reality, due to their very specific purposes (as indeed has already been mentioned)];

C.3 – For the AT, the provision of Art. 12 of CIRC/2014 ("Companies subject to the fiscal transparency regime, are not taxed in IRC, except with respect to autonomous taxation"), in a sense reinforces the already mentioned specific / separate character of the collection of autonomous taxation, which [as indeed the name itself indicates, as well as its representation / location at the level of Schedule 10 ("Tax Calculation"), of the D.R. "IRC/M.22-2014" (representation / location that is, incidentally, peacefully accepted, at least in a general manner, by all users of the same D.R. M.22)], is not susceptible to any type of deduction;

D.3 – For the AT, therefore, the rule contained in the aforementioned no. 21 of Art. 88 of CIRC/2016 ("no deductions whatsoever are made from autonomous taxation in IRC"), was already (as mentioned above), at least in a generic manner (despite not being unanimous), accepted and adopted when the previous wording of the same Art. 88 of CIRC was in force [namely, when in force its respective wording throughout the year under analysis (2014)], so it is not a matter of any "new rule" (that is, in force only for the year 2016 and beyond), but rather of an interpretive rule / law, that is, with retroactive character (which, moreover, is constitutionally permitted in situations such as that now described), and (it should further be added):

D.3.1 - Art. 135 of the State Budget Law for 2016 (Law no. 7-A/2016 of 30/03), by qualifying as "Interpretive Law" [therefore with retroactive character, constitutionally permitted (as mentioned above)], the aforementioned no. 21 of Art. 88 of CIRC/2016, does no more than to solidify / consolidate an understanding that in essence was already previously adopted and accepted, at least in a generic manner (as mentioned above);

E.3 – The AT further reinforces that:

E.3.1 - Although in tax matters, the constitutional principles of legality and prohibition of retroactivity of the law [provided (as mentioned above) in Art. 103 of CRP], impose certain restrictions on the legislator, there is no generic constitutional prohibition of interpretive tax laws [therefore with retroactive character (as mentioned above)];

E.3.2 – The constitutional admissibility of interpretive laws in tax matters (as with respect to any norms of a fiscal nature), should be assessed based on the matters to which they relate and their respective normative content, since the constitutional prohibition of retroactivity of fiscal law is limited (only) to matters of incidence (objective, subjective, temporal and territorial) of the tax [matters these (incidentally) that do not appear to be properly at issue in the present analysis];

E.3.3 – Since the creation of the legal and fiscal figure of "Autonomous Taxation" in the early 1990s, through its respective legislative evolution, it has always been settled that "Autonomous Taxation" does not allow (nor does it allow) any deduction, and (and this should be emphasized), the aforementioned Art. 135 of the State Budget Law/2016, by qualifying as "Interpretive Law" (therefore with retroactive character), the aforementioned no. 21 of Art. 88 of CIRC/2016, does not depart (the same Art. 135 of the State Budget Law/2016) from the solutions that were already being established both by Law and by tax law practice, so that the content of the aforementioned no. 21 of Art. 88 of CIRC/2016 may in no way be classified / qualified as an "innovative solution", and further (it should also be added):

E.3.3.1 – It is beyond question that the judge and the interpreter, faced with "old texts" (read: versions prior to 2016), could not feel authorized to adopt any solution other than the solution / rule advocated by the content of the aforementioned no. 21 of Art. 88 of CIRC/2016;

E.3.3.2 – Thus, that is, taking into account what has been set out so far (that is, in points 2.3.1.1, 2.3.1.2 and respective sub-points of the present information), we understand that the same / aforementioned provision in no. 1 of Art. 78 of LGT may not be invoked by the company in question in the Request for Revision now under review.

3 – Conclusion

3.1 – In this way, it is our understanding to propose rejection of the present Request for Revision, insofar as it does not fall within the invoked (by the taxpayer) no. 1 of Art. 78 of LGT.

3.2 – It is also proposed that the same company in question [A..., S.A. (NIF:...)], be notified of the present Information / Draft Rejection, in order to exercise (if it so wishes, naturally) its respective Right to Hearing, as provided in paragraph b) of no. 1 of Art. 60 of LGT.

j) The Applicant exercised the right to hearing on the draft rejection of the request for official revision in the terms set out in document no. 6 attached with the request for arbitral pronouncement, the content of which is hereby reproduced);

k) By order of 11-10-2018, the Tax and Customs Authority rejected the request for official revision (document no. 1 attached with the request for arbitral pronouncement, the content of which is hereby reproduced), in which the following is stated, among other things:

2.1 - We insist that the collection derived from autonomous taxation moves away from the rest of IRC collection (and for that reason is not subject to any deductions, let it be clear), insofar as that collection (of autonomous taxation) pursues several very specific objectives, such as the purpose of avoiding practices of evasion and fraud (whether through confidential or undocumented expenses, whether through payments made to entities located in jurisdictions with privileged tax regimes, whether by disguising/concealing payments/provision of benefits/additional remuneration in the form of representation expenses, or through the provision of vehicles to employees and/or members of Corporate Bodies):

2.1.1 - Hence moreover the term "Autonomous", as well as its location at the level of the DR. "IRC/M.22" [Schedule 10» Field 365 (not subject to any deduction, note)];

2.2 - It should also be noted that, in addition to continuing to invoke (as has been seen), the "Position of the AT", in our understanding that with respect to the "Request for Official Revision" now under review, no. 1 of Art. 78 of LGT does not apply ("Error Attributable to the Services"), we further invoke the same "Position of the AT", in our understanding that nos. 4 and 5 of Art. 78 of LGT ("Serious or Notorious Injustice") likewise do not apply, and it should further be added, for this same purpose (justification for the non-existence / non-application of the so-called "Serious and Notorious Injustice"), the following:

2.2.1 - As the company in question did not, regarding the "IRC2014" assessment, whose challenge / request for revision is now being reviewed (recall: Assessment no. 2015... of 09/09/2015), exercise the competent administrative complaint, having therefore exceeded the deadline for the exercise of such right, the AT understands that such fact configures a "negligent behavior" on the part of the company in question (hence also, repeat, the impossibility of application of the aforementioned nos. 4 and 5 of Art. 78 of LGT to the Request for Revision now under review);

2.3 - In summary, the AT considers that the said assessment (whose Request for Revision is now being reviewed) is correct, that is, it does not suffer from any "illegality" or "Error attributable to the Services" (no. 1 of Art. 78 of LGT), or even from "Serious or Notorious Injustice" (nos. 4 and 5 of Art. 78 of LGT), for which reason (and finally):

2.3.1 - We propose that the "Request for Official Revision" now in question (referred to, namely, in point 1.1 and respective sub-points of the aforementioned "Draft Rejection", attached to the present information), should now be definitively subjected to rejection.

l) The Tax and Customs Authority's computer system for submission of the Model 22 return does not permit deduction of tax benefits from collection derived from autonomous taxation;

m) On 21-12-2018 the Applicant submitted the request for arbitral pronouncement which gave rise to the present proceedings.

2.2. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

2.3. Justification of the Establishment of Facts

The proven facts are based on documents submitted by the Applicant and which also form part of the administrative file.

As regards the fact relating to the Tax and Customs Authority's computer system, it is accepted by it in point 2.1.1 of the decision on the request for official revision.

3. Legal Issues

The question that is the subject of the proceedings is whether investment expenses that benefit from SIFIDE can be deducted from the amounts due under autonomous taxation in IRC relating to financial year 2014.

3.1. Applicability of Articles 89 and 90 of the CIRC to the Calculation of Autonomous Taxation

Articles 89 and 90 of the CIRC establish the following in the wording of Law no. 2/2014 of 16 January, in force during the year 2014:

Article 89

Competence for Assessment

The assessment of IRC is carried out:

a) By the taxpayer itself in the returns referred to in articles 120 and 122;

b) By the Tax Authority in the remaining cases.

Article 90

Assessment Procedure and Form

1 - The assessment of IRC is carried out as follows:

a) When the assessment is to be made by the taxpayer in the returns referred to in articles 120 and 122, it is based on the taxable matter contained therein;

b) In the absence of submission of the return referred to in article 120, the assessment is made up to 30 November of the following year to which it relates or, in the case provided for in no. 2 of the said article, until the end of the 6th month following the end of the period for submission of the return mentioned therein and is based on the annual value of the minimum monthly remuneration or, when greater, the totality of the taxable matter of the nearest financial year that is determined;

c) In the absence of assessment in the terms of the previous paragraphs, it is based on the elements available to the tax authority.

2 – To the amount determined in accordance with the preceding number, the following deductions are made, in the order indicated:

a) That corresponding to international double taxation;

b) That relating to tax benefits;

c) That relating to the special payment on account referred to in article 106;

d) That relating to tax withheld at source not susceptible of compensation or refund under the applicable legislation.

3 – (Repealed by Law no. 3-B/2010)

4 - To the amount determined in accordance with no. 1, with respect to the entities mentioned in no. 4 of article 120, only the deduction relating to tax withheld at source shall be made when it has the nature of tax on account of IRC.

5 - The deductions referred to in no. 2 relating to entities to which the fiscal transparency regime established in article 6 applies are attributed to their respective partners or members in the terms established in no. 3 of that article and deducted from the amount determined on the basis of the taxable matter that took into account the attribution provided for in the same article.

6 - When the special tax treatment regime for groups of companies is applicable, the deductions referred to in no. 2 relating to each of the companies are made from the amount determined with respect to the group in the terms of no. 1.

7 – From the deductions made in accordance with paragraphs a), b) and c) of no. 2, no negative value can result.

8 - With respect to taxpayers covered by the simplified regime for determining the taxable matter, to the amount determined in accordance with no. 1, only the deductions provided for in paragraphs a) and e) of no. 2 are made.

9 - From the deductions made in accordance with paragraphs a) to d) of no. 2, no negative value can result.

10 - To the amount determined in accordance with paragraphs b) and c) of no. 1, only deductions of which the tax authority has knowledge and which can be made in accordance with nos. 2 to 4 are made.

11 - In cases where the provision of paragraph b) of no. 2 of article 79 applies, annual assessments are made on the basis of the taxable matter determined on a provisional basis, and, in view of the assessment corresponding to the taxable matter relating to the entire assessment period, the difference determined should be collected or cancelled.

The aforementioned articles 89 and 90 of the CIRC, as well as other provisions of this Code, such as those relating to the returns provided for in articles 120 and 122, are applicable to autonomous taxation.

In fact, it is today settled, following abundant arbitral jurisprudence and the positions taken by the Tax and Customs Authority, that the tax charged on the basis of autonomous taxation provided for in the CIRC has the nature of IRC. Moreover, in addition to jurisprudence, article 23-A no. 1 paragraph a) of the CIRC in the wording of Law no. 2/2014 of 16 January, no longer leaves any reasonable margin for doubt, corroborating what previously resulted from the literal content of article 12 of the same Code.

Now, article 90 of the CIRC relates to the forms of assessment of IRC, by the taxpayer or by the Tax Authority, applying to the determination of the tax due in all situations provided for in the Code, including the additional assessment (no. 10).

Therefore, that article 90 also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Authority, following the submission or not of returns, there being no other provision that provides for different terms for its assessment.

Thus, the differences in the year 2014 between the determination of the amount resulting from autonomous taxation and that resulting from taxable profit are restricted to the determination of the taxable matter and the applicable rates, which are those provided for in Chapters III and IV of the CIRC for IRC based on taxable profit and in article 88 of the CIRC for IRC based on the taxable matter of autonomous taxation and the respective rates.

But the forms of assessment provided for in Chapter V of the same Code are of common application to autonomous taxation and to the remaining taxable matter of IRC.

However, the fact that a self-assessment of IRC, made in accordance with no. 1 of article 90, may contain several partial calculations based on various rates applicable to certain taxable matters does not imply that there is more than one assessment, as results from the very terms of that norm when referring to "assessment" in the singular, in all cases in which it is "made by the taxpayer in the returns referred to in articles 120 and 122", having "as its basis the taxable matter contained therein" (whether determined on the basis of the rules of articles 17 et seq. or determined on the basis of the various situations provided for in article 88).

Indeed, it is not only the assessments provided for in article 88 that may encompass various calculations of the application of rates to certain taxable matters, as the same may occur in the situations provided for in nos. 4 to 6 of article 87. ( )

In any case, whatever calculations are to be made, it is the unitary self-assessment that the taxpayer or the Tax and Customs Authority must make in accordance with articles 89, paragraph a), 90, no. 1, paragraphs a), b) and c), and 120 or 122, and it is on the basis of it that the total IRC is calculated, whatever the taxable matters relating to each of the types of taxation underlying it. ( )

Indeed, if article 90 were not applicable to the assessment of autonomous taxation provided for in the CIRC, we would have to conclude that there would be no norm providing for its assessment, which would amount to illegality by violation of article 103 no. 3 of the CRP, which requires that the assessment of taxes be made "in accordance with the law".

Reference should also be made to the new norm of no. 21 added to article 88 of the CIRC by Law no. 7-A/2016 of 30 March, regardless of whether or not it is qualifiable as truly interpretive ( ), in no way alters this conclusion, as it establishes, as regards the form of assessment of autonomous taxation, that it "is carried out in the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers". Indeed, while it is true that this new norm comes to clarify how the amounts of autonomous taxation are calculated (which already resulted from the text itself of the various provisions of article 88) and that the competence falls to the taxpayer or the Tax Authority in accordance with article 89, it is also clear that it does not do away with the need to use the procedure provided for in no. 1 of article 90, namely in the cases provided for in its paragraph c) in which the assessment is incumbent on the Tax and Customs Authority, with "basis the elements available to the tax authority", which will include the possibility of assessing on the basis of autonomous taxation, if the Tax and Customs Authority has elements that prove its assumptions.

The same applies to the wording given to that no. 21 of article 88 by Law no. 114/2017 of 29 December.

Therefore, both before and after Law no. 7-A/2016 of 30 March and Law no. 114/2017 of 29 December, article 90, no. 1 of the CIRC is applicable to the assessment of autonomous taxation.

3.2. Applicability of the Deductions Provided for in No. 2 of Article 90 of the CIRC

to the Collection of IRC Resulting from Autonomous Taxation

Given what has been stated, at least until Law no. 7-A/2016 of 30 March, there was no legal provision indicating any special procedure for assessment of IRC resulting from autonomous taxation, so, under pain of unconstitutionality by violation of no. 3 of article 103, on the grounds that the assessment was not made "in accordance with the law", the procedure provided for in article 90 of the CIRC had to be applied.

Since the collection of IRC, both that resulting from taxable profit and that resulting from autonomous taxation, is determined through the assessment procedure provided for in article 90 of the CIRC, the deductions provided for in no. 2 of the same article are potentially applicable to such collection, which refer to "the amount determined in accordance with the preceding number", without any distinction as to the nature of the types of IRC collection that are included in that amount.

Therefore, from the literal content of no. 2 of article 90 of the CIRC, no obstacle results to the application of the deductions to the part of the amount determined in accordance with no. 1 derived from autonomous taxation.

As stated in the ruling of the Constitutional Court no. 267/2017 of 31-05-2017, issued in case no. 466/16, "the autonomy of the taxation in question as to its base of incidence, as to the applicable rates and even as to the moment of payment, by itself, does not determine – neither logically nor legally – the irrelevance of the collection obtained with autonomous taxation in the context of the determination of IRC collection itself – a matter regulated generally in article 90, no. 1 of the CIRC – namely as to the integration of that into the latter and, consequently, as to the admissibility of consideration of the value of the said collection for the purpose of making the deductions legally provided for in article 90, no. 2 of the CIRC. Such question, in the absence of a specific norm to the contrary – such as that which came to be established in article 88, no. 21 of the CIRC – is a matter of the very legislative configuration of IRC, including therein the relevance or irrelevance for the purposes of determining the final IRC collection of the amounts paid under autonomous taxation".

In fact, only with Law no. 7-A/2016 of 30 March, which added to article 88 of the CIRC a no. 21, there came to exist a norm in which the possibility of application of the deductions provided for in no. 2 of article 90 of the CIRC to the amount determined with autonomous taxation is excluded, establishing the following:

21 - The assessment of autonomous taxation in IRC is made in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers, no deductions whatsoever being made to the total amount determined.

In the final part of this norm, the scope of application of the deductions provided for in article 90, no. 2 of the CIRC is restricted to IRC collection derived from taxable profit.

Law no. 114/2017 of 29 December reaffirmed the exclusion of the applicability of the deductions provided for in no. 2 of article 90 of the CIRC to the collection of IRC resulting from autonomous taxation by establishing the following:

21 - The assessment of autonomous taxation in IRC is made in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers, no deductions whatsoever being made to the total amount determined, even if such deductions result from special legislation.

To this no. 21 of article 88 of the CIRC was attributed interpretive nature by article 135 of Law no. 7-A/2016 and by article 233 of Law no. 114/2017 respectively.

However, the Constitutional Court in the cited ruling no. 267/2017 has already declared the unconstitutionality of that article 135 insofar as by effect of the merely interpretive nature attributed to the 2nd part of no. 21 of article 88 of the CIRC, it excludes the possibility of deduction to the total amount resulting from autonomous taxation assessed in a given year under IRC of deductions permitted in tax years prior to 2016.

This decision of the Constitutional Court was based on no. 3 of article 103 of the CRP, which establishes that no one can be required to pay taxes of a retroactive nature, from which the Constitutional Court understood that "the legislator cannot create taxes of such nature or introduce into existing taxes modifications which, with retroactive effects, burden them" and that "what is at issue is the prohibition on establishing new legal consequences that constitute ex novo or burden situations already defined, namely the amount due in respect of a certain tax and previously defined by reason of the verification of all facts relevant in the light of the applicable law before the establishment of the new legal consequences".

Therefore, in line with this jurisprudence, the constitutionality of the restrictive interpretation of no. 2 of article 90 of the CIRC so as to exclude the possibility of deductions to IRC collection resulting from autonomous taxation depends on it already having to be made in light of the regime prior to that law no. 7-A/2016, since it is constitutionally inadmissible the retroactivity unfavorable to taxpayers of tax norms from which results an obligation to pay taxes.

It should be noted, however, from the outset, that the new wording given by Law no. 114/2017 to no. 21 of article 88 of the CIRC by excluding the possibility of deductions to the total amount of autonomous taxation "even if such deductions result from special legislation" clarifies, with interpretive nature (in this part without problems of constitutionality, as it concerns retroactivity favorable to taxpayers), that there was special legislation from which resulted that deductions were made to the amount of autonomous taxation, thus coming to recognize, with the legislative authority of an authentic interpretation, what had already been repeatedly explained by the majority arbitral jurisprudence.

Therefore, since it is constitutionally inadmissible, as stated by the Constitutional Court in the cited ruling, that this new law come to exclude the possibility of deductions admissible in light of the legislation in force until the entry into force of Law no. 7-A/2016, the question that arises in order to resolve the issues of legality of the assessment and the decision on the request for official revision that are raised in the present proceedings is to ascertain whether prior to this law, the restrictive interpretation already should have been made, restrictions should already have been placed on the application of the deductions provided for in no. 2 of article 90 of the CIRC to the part of IRC collection resulting from autonomous taxation.

In fact, the fact that the wording of no. 2 of article 90 points to the application of the deductions to collection resulting from autonomous taxation, that deductibility did not exclude the possibility of restrictive interpretation, if "the interpreter reaches the conclusion that the legislator adopted a text that betrays its thinking in that it says more than it intended to say. Here too the ratio legis will have a decisive word. The interpreter should not be carried away by the apparent scope of the text, but should restrict it in order to make it compatible with the legislative thinking, that is, with that ratio. The argument on which this type of interpretation is based is usually expressed as follows: cessante ratione legis cessat eius dispositio (where the reason for the law ends there its scope ends)". ( )

As a basis for a restrictive interpretation could, in a first analysis, be advanced the fact that some autonomous taxation, namely some that have "expenses" or "charges" as their base of incidence ( ), aim to discourage certain taxpayer behaviors liable to affect taxable profit and consequently reduce tax revenue, and its discouraging force will be attenuated by the possibility that the respective collection can be subject to deductions.

However, as was legislatively recognized by the wording given to no. 21 of article 88 by Law no. 114/2017 (here with interpretive force constitutionally unobjectionable in light of article 103, no. 3 of the CRP), there is special legislation from which result deductions to collection derived from autonomous taxation, which are necessarily situations in which legislation gave preference to satisfaction of the interests that justify the deductions in relation to those aimed at with autonomous taxation, which occurs with the norms on tax benefits deductible to IRC collection.

On the other hand, the nature of anti-abuse norms, designed to prevent fraud and tax evasion, does not exclude the possibility of deductions to IRC collection that with the application of such norms is determined, which is manifest with respect to collection provided by corrections based on norms of indisputably anti-abuse nature, such as those relating to transfer pricing or undercapitalization and also corrections resulting from the application of the general anti-abuse norm provided for in article 38, no. 2 of the LGT.

Furthermore, it is also evident that the anti-abuse nature of some autonomous taxation that aim to discourage expenses and prevent tax evasion could not serve to justify the non-deduction of tax benefits to all IRC collection resulting from autonomous taxation, since that provided for in no. 11 of article 88 of the CIRC does not affect expenses or charges, but rather "profits", being a form of taxation of profit complementary or alternative to that provided for the generality of income. Furthermore, the autonomous taxation provided for in no. 8 of article 88 does not have underlying any intention to discourage the performance of the operations to which it refers, but rather to impose on taxpayers special evidential duties in situations where the more favorable taxation of the recipients of the expenses may raise doubts about the reality and normality of the operations, as autonomous taxation is ruled out "if the taxpayer can prove that they correspond to effectively performed operations and do not have an abnormal character or an excessive amount".

To this must be added that even with respect to some autonomous taxation that affect expenses, it would not be compatible with the constitutional principles of proportionality and equality to impose taxation on the grounds of a hypothetical legislative intention to discourage the use of motorcycles for certain activities for which they are indispensable, as occurs with motorcycle shows, or for which they have evident adequacy, their use corresponding to manifest good business management ( ) and would be especially inconceivable to include in the scope of that discouraging intention the very payment of "taxes incidental to their possession or use" to which the end part of no. 5 of article 88 refers, which should even be ensured coercively by the Tax and Customs Authority in the event that the taxpayer feels discouraged from making such payment.

Thus the understanding that all autonomous taxation aim to tax expenses or discourage or sanction behaviors, which may result from a first superficial analysis, encounters in a more incisive perception an insurmountable lack of correspondence with reality, being more coherent as a global explanation the idea that we are "before a mechanism whose ultimate objective is to contribute to the "normalization" of taxation under IRC, that is to the functioning of this tax in its purest form and closest to its roots as a tax on profit obtained by legal persons. In that sense autonomous taxation are nothing more than auxiliary mechanisms of the central axis of IRC which is to tax profits allowing the deduction of expenses in which taxpayers must incur in order to achieve taxable income". ( )

As also stated in the CAAD ruling issued in case no. 59/2014-T autonomous taxation in IRC should be considered a form of taxation of business income:

"The Explanatory Memorandum contained in the Bill no. 46/VIII which gave rise to Law no. 30-G/2000 of 29 December which greatly expanded the situations of autonomous taxation leaves no room for doubt that this is a conscious and intended expansion of previously existing distortions as it was understood that they were necessary in essence to compensate for other distortions resulting from significant fraud and tax evasion and thus increase the equity of the distribution of the fiscal burden among citizens and enterprises".

(...)

"autonomous taxation affecting directly certain expenses within taxes that originally affected only income are considered distortions of the direct income taxation system that was intended with IRC but a value that was legislatively considered to be more relevant than theoretical consistency of taxes such as the implementation of tax justice imposed a choice for these forms of taxation as they are consistent with the principles of equity efficiency and simplicity".

(...)

"But this indirect taxation continues to be carried out within the scope of IRC as results from the inclusion of autonomous taxation in the respective Code which has as a corollary the application of the general norms specific to this tax that do not conflict with its special form of incidence".

"Thus if it is true that autonomous taxation constitute a different form of taxing companies which could be contained in autonomous regulations or be arranged in the Tax Stamp Code it is also true that the legislative option to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in IRC which may be justified by being an indirect form but in the legislative perspective equitable simple and efficient way of taxing business income that escape the direct income taxation regime".

In fact autonomous taxation under IRC in light of the growing breadth that the legislator has been giving them ( ) to be compatible with the constitutional principle of taxation of enterprises fundamentally affecting their real income (article 104, no. 2 of the CRP) should be understood as indirect forms of taxing business income through the taxation of certain expenses and charges that reveal contributory capacity or even in the cases of autonomous taxation provided for in nos. 8 and 11 of article 88 as complementary forms of directly taxing income in situations in which they will presumably be generated without taxation in the legal sphere of third parties.

Indeed it is a fact that the imposition of any expense without counterpart on a legal person has as a corollary a potential decrease in its income so that the imposition of a unilateral tax obligation even calculated on the basis of expenses incurred or charges supported constitutes a form of indirectly taxing its income. ( )

The new article 23-A of the CIRC introduced by Law no. 2/2014 of 16 January by saying that "the following charges are not deductible for the purposes of determining taxable profit even when accounted for as expenses of the tax period: a) IRC including autonomous taxation and any other taxes that directly or indirectly affect profits" allows us to perceive that in the legislative perspective IRC and autonomous taxation are taxes that directly or indirectly affect profits since it is that understanding that can justify the inclusion of the expression "any other taxes" which presupposes that IRC and autonomous taxation are also taxes of these types are taxes that directly or indirectly affect real or presumed profits.

Therefore since autonomous taxation provided for in the CIRC are ultimately indirect forms of taxing business income there is no apparent necessary incompatibility between them and the general rules that provide for the form of making IRC assessment.

In any case a restrictive interpretation can only result in light of the wording of the CIRC prior to Law no. 7-A/2016 from the conclusion that the text of no. 2 of article 90 in some measure does not correspond to legislative thinking namely if it can be concluded that the reason justifies some or some of the deductions only if they are compatible with their application to IRC collection resulting from taxable profit.

And naturally in light of the constitutional prohibition of retroactive application of the exclusion of global deductibility to situations prior to Law no. 7-A/2016 deductions are to be applied when they result from the special legislation to which reference is made in the wording of no. 21 of article 88 introduced by Law no. 114/2017.

In fact at least in these cases in which deductions result from special law the possibility of excluding them is necessarily ruled out by way of restrictive interpretation of no. 2 of article 90 since it is that special law precisely because it is special that imposes its application since special laws prevail over general laws in their specific fields of application.

It is in this light that it is important to examine each of the situations in which the Applicant seeks to make deductions to IRC collection resulting from autonomous taxation.

3.3. Deductibility of Investment Expenses Provided for in SIFIDE to the Collection of IRC Derived from Autonomous Taxation

SIFIDE - System of fiscal incentives in business research and development was created by Law no. 40/2005 of 3 August with expected validity for the years 2006 to 2010 but was reformulated by article 133 of Law no. 55-A/2010 of 31 December to be in force until 2015 as System of fiscal incentives in business research and development II (SIFIDE II).

Subsequently it was amended by articles 163 and 164 of Law 64-B/2011 of 30 December and transferred to articles 33 to 40 of the Tax Code for Investment republished by Decree-Law no. 82/2013 of 17 June.

Articles 33, 35, 36 and 38 of the Tax Code for Investment were amended by Law no. 83-C/2013 (articles 211 and 212) extending the period of validity until 2020 (in no. 1 of that article 36).

In 2014 the System of fiscal incentives in business research and development II (SIFIDE II) was in force which was approved by article 133 of Law no. 55-A/2010 of 31 December and amended by article 163 of Law no. 64-B/2011 of 30 December.

This instrument establishes the following in its articles 4 and 5:

Article 4

Scope of the Deduction

1 - Taxpayers of IRC resident in Portuguese territory that exercise as their main activity an activity of agricultural industrial commercial or service nature and non-residents with permanent establishment in that territory can deduct from the amount determined in accordance with article 90 of the IRC Code and up to its concurrence the value corresponding to expenses with research and development in the part that has not been subject to financial contribution from the State on a non-repayable basis made in tax periods from 1 January 2011 to 31 December 2015 in a double percentage:

a) Base rate - 32.5 % of expenses incurred in that period;

b) Incremental rate - 50 % of the increase in expenses incurred in that period compared to the simple arithmetic average of the two previous financial years up to the limit of (euro) 1 500 000.

2 - For IRC taxpayers that are SMEs in accordance with the definition contained in article 2 of Decree-Law no. 372/2007 of 6 November that have not yet completed two financial years and that have not benefited from the incremental rate established in paragraph b) of the preceding number an increase of 10 % is applied to the base rate established in paragraph a) of the preceding number.

3 - The deduction is made in accordance with article 90 of the IRC Code in the assessment relating to the tax period mentioned in the preceding number.

4 - Expenses that by lack of collection cannot be deducted in the year in which they were incurred may be deducted up to the sixth immediately following financial year.

5 - For the purposes of the preceding numbers when in the year of commencement of use of the benefit a change of tax period occurs the annual period that begins in that year should be considered.

6 - The incremental rate provided for in paragraph b) of no. 1 is increased by 20 percentage points for expenses relating to the hiring of doctoral degree holders by companies for research and development activities the limit provided for in the same paragraph becoming (euro) 1 800 000.

7 - To taxpayers that reorganize as a result of concentration acts as defined in article 73 of the IRC Code the provisions of no. 3 of article 15 of the Tax Benefits Statute apply.

Article 5

Conditions

Only taxpayers of IRC that cumulatively meet the following conditions can benefit from the deduction referred to in article 4:

a) Their taxable profit is not determined by indirect methods;

b) They are not debtors to the State and social security of any taxes or contributions or have their payment duly secured.

In the case in question the Tax and Customs Authority does not question that the Applicant meets the subjective and objective requirements to be able to benefit from SIFIDE having rejected the request for official revision on the understanding that the expenses in question cannot be deducted from the amounts it paid under autonomous taxation as the deduction can only be made to IRC collection resulting from the application of the IRC rate to taxable profit.

As stated article 90 of the CIRC also refers to the assessment of autonomous taxation.

And as also stated there is no legal support for asserting that in the event that several calculations have to be made in a return to determine IRC more than one self-assessment is made.

The instrument that approved SIFIDE does not state that credits from it are deductible to all and any IRC collection but rather defines the scope of the deduction referring in its no. 1 of article 4 to "the amount determined in accordance with article 90 of the IRC Code and up to its concurrence".

No. 3 of the same article 4 confirms that it is to the amount that is determined in accordance with article 90 of the CIRC that is relevant to implement the deduction by saying that "the deduction is made in accordance with article 90 of the IRC Code in the assessment relating to the tax period mentioned in the preceding number".

Thus asserted that IRC includes autonomous taxation [as results from the express content of article 23-A no. 1 paragraph a) of CIRC 2014] by mere declarative interpretation it is concluded that article 4 no. 1 of SIFIDE II by establishing the deduction "to the amount determined in accordance with article 90 of the IRC Code and up to its concurrence" implies the deduction from the amount of autonomous taxation that are determined in accordance with that article 90.

The fact that article 5 of SIFIDE II excludes the benefit when taxable profit is determined by indirect methods and autonomous taxation includes situations in which one aims indirectly at taxation of profits (namely by not giving relevance or discouraging facts liable to reduce them) has no relevance for this purpose as the concept of "indirect methods" has a precise scope in tax law which is implemented in article 90 of the LGT (in addition to special norms) and refers to means of determining taxable profit whose use is not provided for in calculating the taxable matter of autonomous taxation provided for in article 88 of the CIRC.

On the other hand if it is the need to use indirect methods that excludes the possibility of enjoying the benefit it cannot be justified that exclusion with respect to the collection of autonomous taxation which is determined by direct methods.

Moreover one cannot see in the possible anti-abuse nature of some autonomous taxation ( ) an explanation for its exclusion from its respective collection from the scope of deductibility of the SIFIDE II benefit as there is no legal support for excluding deductibility to collection provided by corrections based on norms of indisputably anti-abuse nature such as for example those relating to transfer pricing or undercapitalization and corrections resulting from the application of the general anti-abuse clause contained in article 38 no. 2 of the LGT.

On the other hand the fact that the deductibility of the SIFIDE II tax benefit is limited to the collection of article 90 of the CIRC up to its concurrence does not allow concluding that the tax credit is only deductible if there is taxable profit since what that fact requires is that there be IRC collection which can exist even without taxable profit namely by virtue of autonomous taxation.

Thus pointing the literal content of article 4 of SIFIDE II to the effect that the deduction also applies to IRC collection derived from autonomous taxation determined in accordance with article 90 of the CIRC only by way of restrictive interpretation can the application of the tax benefit to IRC collection provided by autonomous taxation be excluded.

The viability of a restrictive interpretation encounters from the outset an obstacle of a general nature which is that norms creating tax benefits have the nature of exceptional norms as results from the express content of article 2 no. 1 of the EBF so that in the absence of special rule they must be interpreted in their precise terms as is settled jurisprudence. ( ) In the case of tax benefits the possibility of extensive interpretation is explicitly provided for (article 10 of the EBF) but not restrictive interpretation so that in principle the tax benefit should not be interpreted with less breadth than that which in a declarative interpretation results from the content of the norm that provides for it.

In any case restrictive interpretation is only justified when "the interpreter reaches the conclusion that the legislator adopted a text that betrays its thinking in that it says more than it intended to say. Here too the ratio legis will have a decisive word. The interpreter should not be carried away by the apparent scope of the text but should restrict it in order to make it compatible with the legislative thinking that is with that ratio. The argument on which this type of interpretation is based is usually expressed as follows: cessante ratione legis cessat eius dispositio (where the reason for the law ends there its scope ends)" ( ).

As a basis for restrictive interpretation could be advanced the fact that some autonomous taxation aim to discourage certain taxpayer behaviors liable to affect taxable profit and consequently reduce tax revenue and their discouraging force will be attenuated by the possibility that the respective collection can be subject to deductions. In fact it is manifest that some autonomous taxation do not aim to discourage expenses such as those relating to transactions with residents outside Portuguese territory and subject therein to a clearly more favorable tax regime (no. 8 of article 88 of the CIRC) or taxation of distributed profits (no. 11 of the same article). And also obviously it is not imaginable a legislative intention to discourage the payment of IUC and other taxes affecting the possession or use of vehicles on which nos. 4 and 5 of article 88 of the CIRC impose autonomous taxation as it is the State itself that imposes the payment of those taxes.

But when discouragement of behaviors is aimed at it is justified only by concerns for protection of tax revenue and tax benefits granted are by definition "measures of an exceptional character established for the protection of relevant public non-fiscal interests that are superior to those of the taxation they prevent" (article 2 no. 1 of the EBF).

And in the case of the SIFIDE tax benefits the reasons of a non-fiscal nature that justify their superposition to tax revenues are from the legislative perspective of enormous importance since it is understood that the capacity for research and development is a decisive factor for the competitiveness of companies and of the country as well as for productivity and long-term economic growth which is stated clearly in the grounds of Bill no. 5/X and in the Report of the State Budget for 2011:

Bill no. 5/X

The capacity for research and development (R&D) of companies is a decisive factor not only of their own affirmation as competitive structures but of productivity and long-term economic growth a fact moreover expressly recognized in the Program of the XVII Government as well as in recent international reports namely in the conclusions of the Organization for Economic Cooperation and Development (OECD) report "Tax Incentives for Research and Development" 2003 and in the European Commission report on "Monitoring Industrial Research" 2004.

(...)

It is therefore important to restore as provided for in the Government Program the fiscal incentives for dynamic business R&D in cooperation with Universities and other research Institutions which will have a fundamental role in implementing the Technological Plan. The stated goal of tripling R&D activities by companies operating in Portugal is only possible with a redoubling of public support to companies that effectively want to focus on scientific and technological innovation as the central axis of their competitiveness strategies. Support in the form of tax incentive will have increasing importance not only because it is a more expeditious way for companies that want to intensify their investments in an organized and continuous manner but because it allows leveraging the effects of financial support. In the measures of financial support for R&D in consortium between companies and research institutions of the QCA 3 (POCTI and POSI) a component of reimbursable support was introduced which represents a significant step in the involvement of companies in the results of projects. The restoration of SIFIDE by allowing deduction of part of the reimbursements that they will make to financing entities is a just reward for an involvement that is desired to grow.

II.2.2.4.4. System of Fiscal Incentives for Business Research and Development II (SIFIDE)

Given that one of the strengths of competitiveness in Portugal lies in investment in technological capacity scientific employment and conditions for affirmation in European space the Draft State Budget for 2011 proposes to renew SIFIDE (System of Fiscal Incentives in Business Research and Development) now in the version SIFIDE II to be in force in the periods 2011 to 2015 allowing deduction to IRC collection for companies that invest in R&D (research and development capacity).

Given the positive balance of fiscal incentives for business R&D and also considering the evolution of the support system in other countries it was decided to review and reintroduce for five more tax periods this support system. The R&D of companies is a decisive factor not only of their own affirmation as competitive structures but of productivity and long-term economic growth a fact moreover expressly recognized in the Program of the XVIII Government as well as in several recent international reports.

It is in this context that on the international scene the OECD has considered since 2001 Portugal as one of the three countries with the most significant progress in business R&D. Being the national system in force comparatively to other systems that use deduction to collection and the distinction between base rate and incremental rate is one of the most attractive and competitive.

Since the research and development of companies is "a decisive factor not only of their own affirmation as competitive structures but of productivity and long-term economic growth" it is understandable that preference has been given to incentivizing investment in technological capacity scientific employment and conditions for affirmation in European space which in time are reduced to obtaining higher tax revenues.

The importance that from the legislative perspective was recognized to this tax benefit provided for in SIFIDE II is decisively confirmed by the fact that it is indicated as being especially excluded from the general limit to the relevance of tax benefits in IRC which is indicated in article 92 of the CIRC.

Therefore it is certain that one is before tax benefits whose justification is legislatively considered more relevant than the obtaining of tax revenues inferring from that article 92 that the legislative intention to incentivize investments in research and development provided for in SIFIDE II is so firm that it goes to the point of not even establishing any limit to the deductibility to IRC collection despite this tax regime having been created and applied in a period of notorious difficulties of public finances.

Thus there is no legal basis specifically in light of the legislative intention that is possible to detect for by way of restrictive interpretation to exclude the deductibility of the SIFIDE II tax benefit to the collection of autonomous taxation which results directly from the wording of article 4 no. 1 of the respective instrument combined with article 90 of the CIRC.

On the other hand the eventual limitation of the application of the tax benefit to companies that presented taxable profit in 2014 would be reduced to a very strong restriction of its field of application since as is public fact a large part of companies in that year and in previous years presented tax losses although it paid IRC through other means.

In fact according to statistics published by the Tax and Customs Authority in the years 2011 to 2014 more than half of the IRC returns did not show taxable profit ( ) and less than 1/3 of taxpayers paid tax on the basis of IRC assessed on the basis of taxable profit being the majority of IRC payments made "by way of the Special Payment on Account or other positive components of the tax (Autonomous Taxation Stamp Tax IRC of previous tax periods etc.)". ( ).

Therefore it is manifest that the applicability of the tax benefit to companies that although they presented tax losses paid IRC including under autonomous taxation greatly expanded the number of companies potentially benefiting and consequently is more compatible with the legislative intention underlying SIFIDE II than that defended by the Tax and Customs Authority.

This is therefore the manifestly most correct solution which because it is must be presumed to have been legislatively established (article 9 no. 3 of the Civil Code).

On the other hand as stated one cannot overlook that autonomous taxation aim to protect or increase tax revenues and that tax benefits granted are by definition "measures of an exceptional character established for the protection of relevant public non-fiscal interests that are superior to those of the taxation they prevent" (article 2 no. 1 of the EBF).

That is in the case in question by establishing a tax benefit by deduction to IRC collection the legislator chose to dispense with the tax revenue that this tax could provide to the extent of the granting of the tax benefit. For this weighting of the relative interests at stake (tax revenue versus strong investment incentive) it is indifferent whether that revenue comes from calculations made on the basis of article 87 or article 88 of the CIRC. In fact whatever form of calculation of that tax revenue is at stake money whose collection the legislator considered to be less important than the pursuit of the said economic purpose.

Of the two alternatives that faced the legislator regarding incentive to investments provided for in SIFIDE II which were on the one hand to maintain intact the revenues from IRC including those from autonomous taxation and not see investment incentivized and on the other hand to implement such incentive with loss of IRC revenues the weighting that necessarily underlies SIFIDE II is that of opting to create the incentive with loss of revenue. And naturally since the creation of the investment incentive is better in the legislative perspective than the collection of revenues it is not seen how it can be relevant that the IRC revenues that are lost to implement the incentive come from the general taxation of IRC provided for in no. 1 of article 87 or from taxation at special rates provided for in nos. 4 to 6 of the same article or from autonomous taxation provided for in article 88: in all cases the alternative is the same between creation of the incentive and collection of IRC revenues and the relative weighting that can be made of the conflicting interests is identical whatever the forms of determining the amount of IRC that is foregone to create the incentive.

And in the case of the SIFIDE II tax benefit the reasons of a non-fiscal nature that justify the incentive with loss of revenue are very strong since it is considered that the incentivized investments are a decisive factor in the country's future competitiveness which is fundamental for the very increase of tax revenues.

Therefore it is certain that one is before a tax benefit whose justification is legislatively considered more relevant than the obtaining of tax revenues from IRC whatever the basis of its calculation since what is always at stake is whether or not to dispense with a certain amount of money to create an investment incentive.

In this context the nature of autonomous taxation and the legislatively adopted solutions in general with respect to them have no relevance for the examination of this question since this must be examined in light of the specific interests that are in conflict in its weighting.

In fact what is at stake is exclusively to determine the scope of SIFIDE which establishes a regime of an exceptional nature which aimed to pursue determined public interests and not to contribute to the decision of any conceptual question about the nature of autonomous taxation a matter on which there is perceived neither in the text of the law nor in the preparatory works the least legislative concern.

For the same reason that what is at stake is to interpret the scope of the instrument of a special nature that is what establishes SIFIDE no relevance can be attributed for this purpose to the norm of no. 21 of article 88 of the CIRC added by Law no. 7-A/2016 of 30 March in the part in which it refers that no deductions are "made to the total amount determined" despite the supposed interpretive nature attributed to it (which implies its unconstitutionality by prejudicial retroactivity to taxpayers as understood by the Constitutional Court in ruling no. 267/2017 of 31-05-2017).

Indeed there is no signal neither in Law no. 7-A/2016 nor in the Report of the Budget for 2016 nor in its discussion that with the addition to article 88 of the CIRC of a general norm prohibiting deductions to the total amount determined by autonomous taxation it was intended to interpret restrictively the expression "deduce to the amount determined in accordance with article 90 of the IRC Code" which is contained in special norms of individual instruments such as those that provide for SIFIDE.

And in the absence of an unequivocal intention to the contrary the rule prevails that general law does not alter special law (article 7 no. 3 of the Civil Code) which has the justification the fact that "the general regime does not include consideration of the particular conditions that justified precisely the issuance of the special law". ( )

Moreover it was the legislator itself that recently through Law no. 114/2017 of 29 December came to recognize expressly and unequivocally with explicit interpretive intention declared in its article 233 (constitutionally admissible insofar as it is not unfavorable to taxpayers) that there are special norms from which results that deductions should have been made to the amount determined with autonomous taxation by giving new wording to no. 21 of article 88 of the CIRC with the following content:

"21. The assessment of autonomous taxation in IRC is made in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers no deductions whatsoever being made to the total amount determined even if such deductions result from special legislation.

Thus if it is true that this norm clarifies that it is legislative intention that no deductions be made to the total amount determined with autonomous taxation it is also true that in it one recognizes that it resulted from special legislation that deductions be made being that precisely the case of norms that provide for tax benefits by deduction to IRC collection.

But if from those special norms resulted that deductions be made to the total amount determined by autonomous taxation it is manifest that it is not compatible with the constitutional principle of prohibition of retroactivity of norms that create taxes (article 103 no. 3 of the CRP) the exclusion of that result by a later law to all those who relying on those special laws in which they trusted created the conditions to obtain the deductions announced legislatively as the result for their investments.

The thesis defended by the Tax and Customs Authority that the deduction of a certain percentage of an investment to the collection of a tax on profits is only effectuated if there is profit in the measure in which it rewards the profitability of the investment (a supposed intention to reward profitable companies) has no support in the letter of the law rather conflicts with the express content of no. 6 of article 90 of the CIRC in which it is established that "when