CAAD 670/2015-T: Autonomous Taxation Deduction from PEC (IRC)

Process: 670/2015-T

Date: July 11, 2016

Tax Type: IRC

Summary

CAAD Case 670/2015-T addressed two critical issues in Portuguese Corporate Income Tax (IRC): (1) whether autonomous taxation amounts (tributações autónomas) can be deducted from the special payment on account (pagamento especial por conta - PEC), and (2) whether the Tax Arbitral Tribunal has substantive jurisdiction when the challenge arises from a rejected ex officio review request rather than administrative reconsideration. The taxpayer A…, S.A. contested the Tax Authority's rejection of its ex officio review request concerning IRC self-assessment for fiscal year 2011, claiming €148,406 in improperly assessed tax. The core substantive issue involved whether IRC tax liability (coleta) generated by autonomous taxation rates should be deductible from PEC payments. The Tax Authority raised a jurisdictional exception arguing that Article 2(a) of Ordinance 112-A/2011 restricts arbitral jurisdiction over self-assessment acts to those preceded by administrative reconsideration under Articles 131-133 CPPT, not ex officio review under Article 78 LGT. The TA contended that the legislator deliberately limited arbitral competence to cases following formal administrative reconsideration procedures, excluding challenges initiated through ex officio review mechanisms. This distinction is significant because Article 131 CPPT establishes mandatory administrative reconsideration as a prerequisite for certain tax disputes, while Article 78 LGT provides a separate ex officio review pathway. The case highlights critical procedural requirements for accessing tax arbitration in Portugal and raises fundamental questions about the deductibility framework for autonomous taxation vis-à-vis special advance payments under IRC legislation.

Full Decision

ARBITRAL DECISION

Claimant: A…, S.A.

Respondent: Tax and Customs Authority

ARBITRAL DECISION

The arbitrators José Baeta de Queiroz (Presiding Arbitrator), José Ramos Alexandre and Luísa Anacoreta, appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, hereby agree as follows:

I – REPORT

On 14 July 2015, the taxpayer A…, S.A., with the NIPC … (hereinafter "Claimant"), with registered office at …, … …-… Coimbra, filed a request for constitution of a Collective Arbitral Tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter "RJAT", which currently applies with the amendments introduced by Article 228 of Law No. 66-B/2012, of 31 December), in which the Tax and Customs Authority (hereinafter "TA" or "Respondent") is the respondent.

In such request, the Claimant requests an arbitral pronouncement on (i) the legality of the rejection of a request for ex officio review relating to the self-assessment of Corporate Income Tax for the tax year 2011 and, likewise, (ii) the illegality concerning an amount of €148,406 relating to self-assessed Corporate Income Tax for that tax year.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the TA on 13 November 2015.

Pursuant to the provisions of paragraph a) of Article 6(2) and paragraph b) of Article 11(1) of the RJAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrators of the Collective Arbitral Tribunal, who communicated their acceptance of such assignment within the applicable deadline.

On 30 December 2015, the parties were notified of this appointment, and neither raised any objection.

The Collective Arbitral Tribunal was constituted on 15 January 2016, in accordance with the provisions of paragraph c) of Article 11(1) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December.

The act that is the subject of the request for arbitral pronouncement is the rejection of the request for ex officio review against the self-assessment act of Corporate Income Tax for the tax year 2011, insofar as it corresponds to the non-deduction from the tax levy of Corporate Income Tax produced by autonomous taxation rates of the special payment on account made in the context of Corporate Income Tax.

The Tax and Customs Authority submitted an answer in which it raised the exception of substantive incompetence of the Arbitral Tribunal.

On 14 March 2016, a meeting of the Arbitral Tribunal was held with the presence of all arbitrators and representatives of the Claimant and the Respondent.

At the aforementioned meeting, the parties agreed to submit written arguments, with the Claimant to pronounce itself on the matter of exception in the arguments.

15 July 2016 was set as the deadline for the issuance of the Arbitral Decision.

The Claimant submitted written arguments on 23 March 2016.

The Respondent submitted written arguments on 12 April 2016.

II – PRELIMINARY MATTERS

• The Arbitral Tribunal was regularly constituted.

• The parties are duly represented, possess legal personality and capacity, and are legitimate (Articles 4 and 10(2) of the same law and Article 1 of Ordinance No. 112-A/2011, of 22 March), notably regarding the legitimacy of the Claimant (which is not contested), it derives from being the holder of a legally protected interest since its legal sphere may be directly affected by what is decided in this case, a situation in which legitimacy is assured by Articles 9(1) and 9(4) of the Tax Procedure and Process Code (CPPT) applicable to tax arbitral proceedings by virtue of Article 29(1)(c) of the RJAT.

• The proceedings do not suffer from nullities, but the TA defends itself, firstly through exception, and then through substantive challenge.

Dilatory exceptions prevent the tribunal from ruling on the merits of the case and, as their examination has an official and priority character, it is necessary to consider, from the outset, the dilatory exception of incompetence of the tribunal raised by the Respondent TA.

The TA alleges, in this matter, the following:

The request for arbitral pronouncement sub judice has as its immediate object the decision rejecting ex officio review and as its mediate object the self-assessment act of Corporate Income Tax, including autonomous taxation rates, for the tax year 2011.
Now, having regard to the provisions of Articles 2(1)(a) and 4(1), both of the RJAT, and Articles 1 and 2(a), both of Ordinance No. 112-A/2011, of 22.03, there is an exception of substantive incompetence of the present Arbitral Tribunal to consider and decide on the aforementioned request.
Pursuant to paragraph a) of Article 2(1) of the RJAT, the jurisdiction of arbitral tribunals comprises the consideration of declarations of illegality of acts of assessment of taxes, self-assessment, withholding at source and payments on account.
Article 2(a) of Ordinance 112-A/2011 provides that the binding of the TA to the jurisdiction referred to has as its object the consideration of claims relating to taxes whose administration is entrusted to it, referred to in Article 2(1) of the RJAT, "with the exception of claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payments on account that have not been preceded by recourse to the administrative procedure in accordance with Articles 131 to 133 of the Tax Procedure and Process Code" (emphasis added).
From the facts it follows that, in the situation sub judice, the mandatory precedence of a request for administrative reconsideration was always required in accordance with Article 131(1) of the CPPT. This, notwithstanding the fact that, as concluded in the decision rejecting the request for ex officio review sub judice, it is still, in the abstract, possible to raise the illegality of self-assessment acts in accordance with Articles 78(1) and 78(2) of the General Tax Law.
Article 2(a) of Ordinance No. 112-A/2011 excludes, literally, from the scope of the binding of the TA to arbitral jurisdiction, "(…) claims relating to the declaration of illegality of acts of self-assessment (…) that have not been preceded by recourse to the administrative procedure in accordance with Articles 131 to 133 of the CPPT", making no reference therein to ex officio review provided for in Article 78 of the General Tax Law.
That is, from the wording given to the cited legal provision it can be seen that the legislator chose to restrict the jurisdiction in arbitral proceedings to claims that, relating to the declaration of illegality of self-assessment acts, have necessarily been preceded by the request for administrative reconsideration provided for in Article 131 of the CPPT.
Besides, if it were not so, it would have sufficed for the legislator to reduce the exclusion provided for in Article 2(a) of Ordinance No. 112-A/2011 to the expression "that have not been preceded by recourse to the administrative procedure", distinguishing nothing further.
Which has not occurred, with the express reference to prior recourse to the administrative procedure in accordance with, in this case, Article 131 of the CPPT, that is, through submission of the necessary request for administrative reconsideration, regardless of its grounds.
But if, hypothetically, without justification, it is intended to include in the authorization granted the administrative procedure of ex officio review, such formulation appears manifestly illegal for two reasons.
In the first place, such interpretation follows from the literal element inherent in the legal norm in question, as mentioned above, and for this purpose it is established in Article 11(1) of the General Tax Law that in determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.
From the interpretative elements referred to, no other interpretative solution is reached for the situation sub judice than that the TA only bound itself, pursuant to Ordinance No. 112-A/2011, to the jurisdiction of arbitral tribunals if the request for declaration of illegality of self-assessment act had been preceded by recourse to the administrative procedure of request for administrative reconsideration.
And when reference is made to recourse to the administrative procedure of request for administrative reconsideration, this refers only to the means provided for in Articles 131 to 133 of the CPPT, having regard to the literal and consequently inescapable element of Article 2(a) of Ordinance No. 112-A/2011.
Wherefore, it follows from this that the letter of the law cannot be departed from, being the principal reference and starting point of the interpreter.
Indeed, having regard to the voluntary and conventional nature of arbitration (understood here in its broad sense, since the substantive jurisdiction of arbitral tribunals derives from regulations of a public nature carried out in the RJAT), as explained above, the interpreter cannot extend the object fixed by the legislator concerning the binding of the TA to arbitral jurisdiction. In this sense, see the arbitral award issued in Case No. 51/2012-T.
In sum, having regard to the foregoing, it is concluded that by virtue of the provisions of Article 2(a) of Ordinance No. 112-A/2011, disputes having as their object the declaration of illegality of self-assessment acts, as is the case in the situation sub judice, are excluded from the substantive jurisdiction of arbitral tribunals, if they are not preceded by a request for administrative reconsideration in accordance with Article 131 of the CPPT, and this, regardless of whether such reconsideration is mandatory in accordance with the cited provision or whether the taxpayer has opted (sibi imputet) for ex officio review.
In the second place, the aforementioned understanding, that disputes having as their object the declaration of illegality of self-assessment acts, as is the case in the situation sub judice, are excluded from the substantive jurisdiction of arbitral tribunals, if they are not preceded by a request for administrative reconsideration in accordance with Article 131 of the CPPT, is required by virtue of the constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the Portuguese Constitution), as well as of legality (cf. Articles 3(2) and 266(2), both of the Portuguese Constitution), as a corollary of the principle of indisponibility of tax credits inherent in Article 30(2) of the General Tax Law, which bind the legislator and all activity of the TA.
Having regard to the voluntary and conventional nature of arbitral protection, understood here in its broad sense, since the substantive jurisdiction of arbitral tribunals derives from regulations of a public nature carried out in the RJAT, the interpreter cannot amplify the object fixed by the legislator concerning the binding of the TA to such jurisdiction.
This is because, in establishing pursuant to Article 4(1) of the RJAT and Article 2(a) of Ordinance No. 112-A/2011 the binding of the TA to necessary arbitral protection, the legislator is disposing on matters of general interest, previously delimiting the defense of the public interest in the aspect of indisponibility of tax credits.
Indeed, the binding of the TA to necessary arbitral protection, in which the principle of irreversibility of decisions applies, presupposes a limitation of the situations in which it can fully decide whether or not to appeal an unfavorable judicial decision, that is, the power to choose between definitively renouncing the collection of the tax credit or adopting conduct potentially adequate to effectuate it.
Wherefore, unless there is better opinion, it is constitutionally prohibited, by virtue of the constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the Portuguese Constitution), as well as of legality (cf. Articles 3(2) and 266(2), both of the Portuguese Constitution), as a corollary of the principle of indisponibility of tax credits inherent in Article 30(2) of the General Tax Law, the interpretation, even if extensive, that broadens the binding of the TA to arbitral protection legally fixed, since such necessarily presupposes the consequent enlargement of the situations in which it is obligatorily submitted to such regime, renouncing to that extent the recourse to full judicial remedy [cf. Article 124(4)(h) of Law No. 3-B/2010 and Articles 25 and 27 of the RJAT, which impose a restriction of the remedies of the arbitral decision].
In sum, it should therefore be understood that in light of the cited constitutional and legal principles, the interpretation of the provisions of Ordinance No. 112-A/2011 should be configured literally, as it is not immaterial that the legislator in paragraph a) of Article 2 of Ordinance No. 112-A/2011, having complemented the expression "that have not been preceded by recourse to the administrative procedure" with the mention "in accordance with Articles 131 to 133 of the Tax Procedure and Process Code", has intentionally delimited the binding of the TA to such situations, given the reasons set forth.
To this is further added that the rejection of the dilatory exception of substantive incompetence now raised, which is not conceded, would always constitute a violation of the principle of equality of the parties and the means of reaction, inasmuch as it would permit some taxpayers, in a spirit of disdain for the content of Article 131 of the CPPT, to enjoy not a period of two years – provided, precisely, for the necessary request for administrative reconsideration –, but rather a maximum period of four years to challenge acts of assessment.
Thus, in sequence and as a consequence of all the foregoing, it is concluded that the Arbitral Tribunal constituted is substantively incompetent to consider and decide on the request that is the subject of the dispute sub judice, in accordance with Articles 2(1)(a) and 4(1), both of the RJAT and Articles 1 and 2(a) of Ordinance No. 112-A/2011, which constitutes a dilatory exception that prevents the tribunal from ruling on the merits of the case, in accordance with Article 576(1) and (2) of the Code of Civil Procedure (CPC) ex vi Article 2(e) of the CPPT and Article 29(1)(a) and (e) of the RJAT, which prevents the tribunal from ruling on the request and the dismissal of the instance of the TA in accordance with Articles 576(2) and 577(a) of the CPC, ex vi Article 29(1)(a) and (e) of the RJAT.
Under penalty of, if this be not understood, such interpretation being not only illegal, but manifestly unconstitutional, by violation of the constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the Portuguese Constitution), as well as of legality (cf. Articles 3(2) and 266(2), both of the Portuguese Constitution), as a corollary of the principle of indisponibility of tax credits inherent in Article 30(2) of the General Tax Law, which bind the legislator and all activity of the TA.

The Claimant, for its part, in Arguments duly submitted, invokes the non-verification of any exception of compliance, in summary, with the following reasoning:

In the first place, it states that the overwhelmingly majority arbitral jurisprudence has always understood this exception raised by the TA to be without merit;
In the second place, it emphasizes the key idea whose correct understanding may have importance in what is discussed: there is no arbitration agreement between taxpayers on one side and the TA on the other.
Whether with respect to the concrete Ordinance and provision here in issue, or with respect to the Decree-Law that authorizes it, one is faced with legal provisions approved and issued unilaterally by a public law body.
It is not, therefore, correct to say, from the point of view that is relevant here (the legal one), that tax arbitration has "voluntary and conventional nature", even if one then adds "in the broad sense".
Tax arbitration is only what it appears to be: a legal regime of alternative dispute resolution in the field of taxes, parallel to the tax judicial process. And as a legal regime it is subject to the very same interpretative rules to which all laws and legal provisions in general are subject.
Nor was it the TA that adhered generically and abstractly to tax arbitration, thus fulfilling the suspensive condition upon which its actual entry into operation was made to depend: the Ordinance that embodied the fulfillment of that condition is the responsibility of the members of Government responsible for the areas of Finance and Justice, bodies that are not identical with the TA (cf. Article 4 of Decree-Law No. 10/2011, of 20 January).
In the interpretation of legal provisions the legislator prevents the interpreter from simply confining itself to the letter of the law and instead imposes that it take into account in the reconstruction of the legislative thought (Article 9 of the Civil Code):
And furthermore, the law imposes that the interpreter presume that the legislator adopted the most appropriate solutions.
It makes sense that the matrix procedure, the tax judicial, can be used to discuss the legality of acts of assessment and self-assessment following rejections of requests for ex officio review, and the tax arbitral procedure, which aims to constitute an option or alternative to the matrix procedure, cannot be used when in self-assessments the prior administrative procedure has been of one type (request for ex officio review) and not another (request for administrative reconsideration)?
From the point of view of the unity of the legal system, of coherence and of the presumption that the legislator adopted the most appropriate solutions (presumption that the legislator has right intention and is just, as opposed to arbitrary), this exclusion makes no sense whatsoever, is not supported by any rational basis, rather would constitute, if upheld, an arbitrary or, if you will, capricious solution.
It is incompatible with the aforementioned objectives to understand that in reaction to a rejection of a request for ex officio review one can have recourse to administrative and tax courts for them to consider the contested (self-)assessment act but not to tax arbitration. Especially (coherence of the system) in a context where, faced with an administrative act rejecting a request for administrative reconsideration that discusses this very (self-)assessment, both avenues are admittedly open.
Added to this is that in the statutory authorization law on tax arbitration it is prescribed that the tax arbitral process "must constitute an alternative procedural means to the judicial challenge process" (cf. Article 124(2) of Law No. 3-B/2010, of 28 April), an objective that will be partially curtailed if paragraph a) of Article 2 of the (delegated) Ordinance No. 112A/2011, of 22 March, is given the meaning that the TA (which looks to it as an isolated island of everything else) intends.
It should be noted that it is further added that Decree-Law No. 10/2011, of 20 January, which made use of the aforementioned statutory authorization, did not distinguish (cf. its Article 2 and Article 10(1) and (2)(b)), in keeping with the spirit and the letter of the statutory authorization law, between reaction to administrative acts rejecting in the course of a request for administrative reconsideration procedure and in the course of an ex officio review procedure.
Both can trigger recourse to arbitration, which is aligned with the prescription that arbitration be an alternative procedural means to the judicial challenge process. And from the point of view of the underlying substance it makes complete sense that it should be so: what is really discussed is the legality of an act of (self-)assessment that does not cease to be what it is independently of the administrative procedure (for assessment thereof) to which it has previously been subjected.
Wherefore, in the face of this unequivocal pointing by all the relevant legislation and of hierarchical degree (or constitutional legal value) superior to that of Ordinance No. 112-A/2011, of 22 March, it is to be concluded, making the underlying materiality and the unequivocal intention of the legislator (National Assembly and Government) prevail in the matter of tax arbitration, to the effect that what paragraph a) of Article 2 of the Ordinance in reference seeks to safeguard is that in the case of self-assessments (assessments in which by definition the TA did not intervene, at least formally) the TA be given the opportunity to consider the invoked illegalities before recourse to court.
Indeed, the judicial tax process also prescribes as a condition of subsequent challengeability the existence of a prior request for administrative reconsideration against acts of self-assessment.
Does this mean that if the ex officio review procedure is used, judicial challenge of the self-assessment is prejudiced? If one were to use reasoning here similar to that of the TA in the interpretation of paragraph a) of Article 2 of Ordinance No. 112 A/2011, of 22 March, the answer would have to be affirmative: it would be prejudiced.
But it is not. And it is not so in conformity with the understanding overwhelmingly reached by the jurisprudence of the Supreme Administrative Court ("STA"): even if the self-assessment act has been preceded by an ex officio review procedure, that does not prejudice its subsequent challengeability, without the content of the wording of Article 131 of the CPPT, with express reference also only to the (necessity of) prior request for administrative reconsideration, opposing it.
And, it should be noted, the wording in Article 131(1) of the CPPT is far stronger than that used in paragraph a) of Article 2 of Ordinance No. 112-A/2011, of 2 March: "[i]n case of error in self-assessment, challenge shall necessarily be preceded by a request for administrative reconsideration (…)". In contrast, from the reading of the provision under analysis of the Ordinance, the central element is the necessity of prior recourse to the administrative procedure, not the request for administrative reconsideration.
The fact that the CPPT only provides for prior request for administrative reconsideration will be explained by the fact that it sees itself in the context of tax procedure and tax judicial process as self-sufficient and complete, wherefore reference is made to the request for administrative reconsideration procedure and mention is not made of the ex officio review procedure, provided as it is in another statute (cf. Article 78 of the General Tax Law – hereinafter "GTL").
But the applier of the law must see and look at all the law, and the GTL is also law, wherefore the overwhelming jurisprudence states that : … notwithstanding the literal content of Article 131 of the CPPT, the self-assessment act can also be discussed in the context of tax judicial process when it has been preceded by a request for ex officio review (as opposed to request for administrative reconsideration), which is another administrative procedure, provided for in another statute (the GTL), which equally allows satisfying the condition of prior consideration of the claim by the TA.
Tax arbitration, notably the provision contained in paragraph a) of Article 2 of Ordinance No. 112-A/2011, of 22 March, followed, unsurprisingly, the model of wording of the CPPT, referring only (by mere remission to the CPPT) to the request for administrative reconsideration.
Now, this provision of the tax arbitration regime does not live isolated either. And here, in addition to the GTL and the ex officio review procedure provided therein, account must also be taken of the Decree-Law and the statutory authorization law that preceded and framed the Ordinance under analysis.
And also the interpretative result cannot be other than that which the jurisprudence reached with respect to the identical provision contained in Article 131 of the CPPT (in what is relevant here, identical in the sense of the provision as a condition of subsequent challengeability, only of request for administrative reconsideration and nothing more): notwithstanding the wording of the provision of the Ordinance under analysis, also the rejection of a request for ex officio review must allow making use of the means parallel to that of judicial challenge which is tax arbitration.
In other words, it is not possible, having regard to all the relevant legal data for this issue, to which is added the legal presumption that the legislator adopted the most appropriate solution, to read paragraph a) of Article 2 of Ordinance No. 112-A/2011, of 22 March, as seeking (as having the purpose of) removing self-assessments preceded by a request for ex officio review from the (parallel to the tax judicial process) tax arbitration process.

What must be decided

The TA has repeatedly raised the issue that, in its interpretation of Article 2 of the RJAT, the Arbitral Tribunal functioning at CAAD is not competent to decide in situations in which the interested party challenges in arbitral proceedings the legality of a self-assessment (which is what now concerns us) without having previously submitted the request for administrative reconsideration referred to in Article 68 of the CPPT, in light of what Article 131 of the same Code provides. For this purpose it relies on its combined reading of Articles 2 and 4 of the RJAT and paragraph a) of Article 2 of Ordinance No. 112-A/2011, of 22 March.

Let us see

The Arbitral Tribunal of CAAD has jurisdiction (for the framing of the case that concerns us here – in the terms of Article 2(1) of Decree-Law No. 10/2011, of 20 January, with the various amendments introduced since), for the consideration of claims presented that relate to the consideration of the illegality of acts of assessment, self-assessment, withholding at source and payments on account.

However, the jurisdiction rule just stated is delimited by Article 2 of Ordinance No. 112-A/2011, of 22 March (also for what concerns us here), which did not include in that jurisdiction "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payments on account that have not been preceded by recourse to the administrative procedure in accordance with Articles 131 to 133 of the Tax Procedure and Process Code". The TA therefore considers that the administrative procedure to which Articles 131 to 133 of the CPPT refer is only the request for administrative reconsideration provided for in Article 68 of the same CPPT, whereby any other procedural means will not serve to meet the prior condition referred to in Article 2 of the cited Ordinance 112-A/2011.

This position has already received consideration in various decisions taken at CAAD, not always in the same sense, but at present a certain arbitral jurisprudential orientation appears to be consolidating that is based on a more comprehensive interpretation of those legal provisions. The awards in arbitral proceedings now unanimously follow the theses that prevailed, notably in Case 117/2013-T (see also Cases 203/2015-T; 843-2015-T and 943/2015).

What is at issue, in the first place, is the jurisdiction or lack thereof of the arbitral tribunal for the immediate consideration of the legality of the rejection of a request for ex officio review submitted in accordance with Article 78 of the GTL and, mediately, the legality of the self-assessment underlying it, it being the case that, in the concrete case, it is proven in the record that the Claimant did not submit any prior request for administrative reconsideration to the filing of the arbitral petition. However, it is equally proven that the Claimant filed, before that, a request for review in accordance with what is provided in Article 78 of the GTL and it is from the decision taken on that appeal that it requests the respective declaration of illegality.

"The review of the tax act within the GTL constitutes an administrative means of correction of errors of assessment acts, which is admitted as a complement to the means of administrative and contentious challenge of those acts, to be invoked within the normal respective deadlines, which aims to make it possible to remedy injustices in taxation both in favor of the taxpayer and in favor of the administration (Decision of the STA, of 12/07/2006 Case 402/2006).

Following the theses of that Decision 117/2013-T, we agree with the understanding that "the act of rejection of a request for ex officio review of the tax act constitutes an administrative act, in light of the definition provided by Article 120 of the Administrative Code [subsidiarily applicable in tax matters, by virtue of Article 2(d) of the GTL, 2(d) of the CPPT, and Article 29(1)(d) of the RJAT], as it constitutes a decision of an Administration body that, under public law provisions, aimed at producing legal effects in an individual and concrete situation. On the other hand, it is also beyond question that it is an act in tax matters as the application of tax law provisions is made therein.

Thus, that act of rejection of a request for ex officio review constitutes an "administrative act in tax matters"."

In that case, the inevitable conclusion is to admit that the tax judicial process comprises the consideration of the legality of administrative acts in tax matters, in the terms that are defined in Article 97 of the CPPT, that is, "the judicial process comprises: … e) the challenge of administrative acts in tax matters that comprise the consideration of the legality of the assessment act". However, administrative acts in tax matters that do not comprise the consideration of the legality of the assessment act cannot be considered in the judicial challenge process, but rather will follow the procedure of special administrative action provided for in Article 46 of the Code of Procedure in Administrative Courts (CPTA), except by special law, as is obvious.

It is undisputed today (see, among many, the Decision of the STA No. 194/2009, of 25/06/2009, No. 638/08, of 20-5-2003; No. 870/03, of 8-10-2003; No. 2012/03, of 15-10-2003; No. 1588/03, of 24-3-2004; No. 357/08, of 6-11-2008) that the appropriate procedural means to challenge the decisions issued in the context of a request for review under the cited Article 78 of the GTL, taking into account the definition that it is an administrative act in tax matters, is judicial challenge or special administrative action. It will be judicial challenge if, as defined by the cited paragraph of Article 97 of the CPPT, it concerns the consideration of the legality of an assessment act. In other cases, the appropriate procedure is special administrative action.

Because such jurisprudence merits our agreement, we will closely follow the reasoning used in the interpretation that we judge to be the most appropriate of the law.

Article 2 of the RJAT, in which the "Jurisdiction of arbitral tribunals" is defined, does not include in its literal content the consideration of claims for declaration of illegality of acts of rejection originating in requests for ex officio review of tax acts, "as, in the wording introduced by Law No. 64-B/2011, of 30 December, the jurisdiction of arbitral tribunals is only indicated as being for "the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payments on account" and "the declaration of illegality of acts of fixing of the tax matter when it does not give rise to the assessment of any tax, of acts of determination of the taxable matter and of acts of fixing of property values".

However, the fact that paragraph a) of Article 10(1) of the RJAT makes reference to Articles 102(1) and (2) of the CPPT, in which the various types of acts that give rise to the deadline for judicial challenge are indicated, including request for administrative reconsideration, "reveals that all types of acts capable of being challenged through the judicial challenge process, covered by those Articles 102(1) and (2), will be encompassed within the jurisdiction of the arbitral tribunals functioning at CAAD, provided that they have as their object an act of one of the types indicated in that Article 2 of the RJAT".

Indeed, this interpretation in the sense of the identity of the fields of application of the judicial challenge process and the arbitral process is the one that is in harmony with the aforementioned statutory authorization in which the Government based itself to approve the RJAT, granted by Article 124 of Law No. 3-B/2010, of 28 April, in which the intention is revealed that the tax arbitral process constitutes "an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters" (No. 2).

But this same argument that is derived from the statutory authorization leads to the conclusion that the possibility of using the arbitral process will be excluded when, in the tax judicial process, judicial challenge or action for recognition of a right or legitimate interest will not be usable.

Therefore, the best reading of paragraph a) of Article 2(1) of the RJAT is that if the arbitral tribunal is permitted to consider the possible illegality of the assessment itself, that jurisdiction will also encompass cases in which the second-instance act is that of rejection of a request for review of the tax act, as there is no reason to restrict it. In truth, the arbitral avenue, in the matter of consideration of legality of tax acts, will have the same scope that is established for the judicial avenue, wherefore, the courts being competent for the consideration of the legality of a decision on a request for review, so the arbitral tribunal will be, by virtue of the provisions of Article 2 of the RJAT, when the petition involves the consideration of the legality of the tax act.

On the other hand, as is demonstrated, the decision issued after a request for ex officio review is an administrative act in tax matters comprised in the cited Article 2 of the RJAT when it concerns the consideration of the legality of the tax act.

But will this definition be sufficient to exclude the restriction to the general rule of binding of the TA contained in Ordinance No. 110/A which does not permit the consideration of a petition that is not preceded by a request for administrative reconsideration?

In its response, the TA admits the settled jurisprudence of the judicial courts and of CAAD itself that consider that the ex officio review provided for in Article 78 of the GTL is an administrative act in tax matters. However, the jurisdiction of arbitral tribunals does not encompass claims relating to self-assessment, without the interested party having previously resorted to the administrative procedure which, in accordance with Article 131 of the CPPT, is interpreted as being solely the request for administrative reconsideration in the strict sense. If the equation or inclusion of ex officio review were to be permitted, we would be before an interpretation constitutionally prohibited, having regard to the "constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the Portuguese Constitution), as well as of legality (cf. Articles 3(2) and 266(2), both of the Portuguese Constitution), as a corollary of the principle of indisponibility of tax credits inherent in Article 30(2) of the GTL, which bind the legislator and all activity of the TA".

In a different sense, also on this issue, we follow the theses of the Decision of 117/2013-T. The express reference to Article 131 of the CPPT made in Article 2 of Ordinance No. 112-A/2011 cannot have the decisive scope of excluding the possibility of consideration of requests for illegality of acts of rejection of requests for ex officio review of self-assessment acts.

"… the letter of the law is not an obstacle to declarative interpretation, which makes explicit the scope of the literal content, nor even extensive interpretation, when it can be concluded that the legislator said less than what, in coherence, it would intend to say, that is, when it said imperfectly what it intended to say. In extensive interpretation "it is the very valuation of the provision (its "spirit") that leads to the discovery of the need to extend its text to the hypothesis that it does not encompass", "the expansive force of the legal valuation itself is capable of leading the provision of the provision to cover hypotheses of the same type not covered by the text". Extensive interpretation, thus, is imposed by the coherence valuation and axiological of the legal system, raised by Article 9(1) of the Civil Code to the status of principal interpretative criterion via the imposition of observance of the principle of unity of the legal system.

It is manifest that the scope of the requirement for prior request for administrative reconsideration, necessary to open the contentious avenue of challenge of self-assessment acts, provided for in Article 131(1) of the CPPT, has as its sole justification the fact that with respect to that type of acts there is no statement of position by the Tax Administration on the legality of the legal situation created by the act, a position that may even turn out to be favorable to the taxpayer, avoiding the need for recourse to the contentious avenue.

In fact, beyond not seeing any other justification for that requirement, the fact that an identical request for administrative reconsideration is required for contentious challenge of withholding at source and payments on account acts (in Articles 132(3) and 133(2) of the CPPT), which have in common with self-assessment acts the circumstance that there is also no statement of position by the Tax Administration on the legality of the acts, confirms that that is the reason for being of that necessary request for administrative reconsideration.

Now, cases in which a request for ex officio review of an assessment act is filed, the Tax Administration is provided, with this petition, an opportunity to pronounce itself on the merit of the claim of the taxpayer before this person resorts to the jurisdictional avenue, wherefore, in coherence with the solutions adopted in Articles 131(1) and (3) of the CPPT, it cannot be required that, cumulatively with the possibility of administrative consideration within the scope of that ex officio review procedure, a new administrative consideration be required through a request for administrative reconsideration.

On the other hand, it is unequivocal that the legislator did not intend to prevent taxpayers from filing requests for ex officio review in cases of self-assessment acts, as these are expressly referred to in Article 78(2) of the GTL.

In this context, and having present the definition of the STA in Decision No. 402/2006, of 12/7/2006, that "The review of the tax act both before the validity of the CPT, and during its validity, and after the GTL, constitutes an administrative means of correction of errors of assessment acts, which is admitted as a complement to the means of administrative and contentious challenge of those acts, to be invoked within the normal respective deadlines, which aims to make it possible to remedy injustices in taxation both in favor of the taxpayer and in favor of the administration" and that " … the procedural means of review of the tax act cannot be considered as an exceptional means to react against the consequences of an assessment act, but rather as an alternative means of administrative and contentious challenge means (when used at a time when those can still be used) or complementary to them (when the deadlines for use of the challenge means of the assessment act have already expired), there cannot be any reason that could justify the impossibility of accessing the arbitral avenue for a taxpayer who has opted for review of the tax act instead of a request for administrative reconsideration.

"Assuring the review of the tax act the possibility of consideration of the claim of the taxpayer before access to the contentious avenue that is sought to be achieved with necessary administrative challenge, the most appropriate solution, because it is the most coherent with the legislative intent of "reinforcing effective and efficient protection of the rights and legally protected interests of taxpayers" manifested in Article 124(2) of Law No. 3-B/2010, of 28 April, is the admissibility of the arbitral avenue to consider the legality of assessment acts previously considered in review procedure.

And, for being the most appropriate solution, it must be presumed to have been normatively adopted (Article 9(3) of the Civil Code).

It is to be concluded, thus, that Article 2(a) of Ordinance No. 112-A/2011, duly interpreted on the basis of the criteria of interpretation of law provided for in Article 9 of the Civil Code and applicable to substantive and adjective tax provisions, by virtue of Article 11(1) of the GTL, makes viable the filing of requests for arbitral pronouncement regarding self-assessment acts that have been preceded by a request for ex officio review".

On the basis of this reading of the law, the raised unconstitutionality based on erroneous literal interpretation that the TA made of that provision is not at issue, wherefore its consideration is prejudiced.

Likewise, there is no violation of the principle of equality of the parties and the means of reaction because it is the law itself that grants all taxpayers the possibility of using one or the other means, alternatively, to request judicial or arbitral consideration of the legality of the tax act.

In this conformity, the raised exception of incompetence of the arbitral tribunal is without merit, wherefore [we decide].

Once the matter of exception is resolved, we proceed to the issue related to the challenge of the tax act relating to the use of special payments on account for deduction to assessments of Corporate Income Tax by autonomous taxation.

III - MATTER OF FACT

III.I - PROVEN FACTS

Relevant for the consideration and decision of the issues raised, the following facts are taken as established and proven:

a) On 23 November 2012, the Claimant filed an income statement, model 22, for the year 2011.

b) From said statement resulted the ascertainment of a tax loss for the year 2011 of €3,780,104.97, duly recorded in field 301.

c) In said statement, was recorded in field 359, intended for withholdings at source, the amount of €32,417.25 and, in field 365, intended for autonomous taxation, the amount of €150,828.19.

d) With no other values recorded in Table 10 of said statement, resulted in field 367 the amount of €118,410.94 of Corporate Income Tax to be paid, corresponding to the amount of autonomous taxation, less withholdings at source.

e) There remains on 31 December 2011 the amount of €148,406.33 of special payment on account to be deducted from the Corporate Income Tax levy, an amount which takes into account an identical request for the tax year 2010, for deduction of special payment on account to withholdings at source made in that year.

f) The Corporate Income Tax model 22 statement and its articulation with the programming of the Tax Administration's computer system prevents the deduction from the levy related to autonomous taxation rates in Corporate Income Tax, recorded in field 365 of table 10 of the statement, of special payments on account still to be deducted from the Corporate Income Tax levy, starting with the oldest.

g) On 11 February 2015, the claimant filed a request for ex officio review against the aforementioned self-assessment act of Corporate Income Tax for 2011, seeking acceptance of the deduction of the amount borne under special payment on account in Corporate Income Tax from the amount of levy ascertained under autonomous taxation.

h) On the said ex officio review, a draft rejection was issued, handed down by the Director of Corporate Income Tax Services on 29 June 2015, denying the Claimant's right to be able to deduct the amount of special payment on account from the levy produced by autonomous taxation.

i) On 2 July 2015, the Claimant was notified that, if it wished, it could, within a period of 15 days, exercise its right to be heard, in accordance with Article 60(1)(b) of the GTL.

j) The claimant did not exercise the right to be heard.

k) On 12 August 2015 the Claimant was notified that, by order of 31 July 2015, the request for ex officio review was rejected.

III.II - UNPROVEN FACTS

No other facts relevant to be considered in deciding on the arbitral petition were proven.

III.III - REASONING OF THE DECISION ON THE MATTER OF FACT

The proven facts were based on critical analysis of the administrative file and other documents attached to the record, whose authenticity and veracity were not disputed by any of the parties, as well as on the consensus positions of the latter.

IV - MATTER OF LAW

The Claimant's petition

The Claimant seeks that the Tribunal declare "both the illegality of the rejection of the request for ex officio review and the partial illegality of the self-assessment act and that they consequently be annulled –, in accordance with Article 2(1)(a) of Decree-Law No. 10/2011, more specifically with respect to the part of the said self-assessment act that reflects the non-deduction from the part of the Corporate Income Tax levy produced by autonomous taxation rates of the special payment on account made in the context of Corporate Income Tax, whether in 2011 or in the years 2009 and 2010, which gave rise to an amount of tax improperly assessed in the amount of €148,406.33 for the year 2011".

Additionally, the claimant, for understanding that it has paid tax in an amount greater than legally due, once declared the illegality of the (self-)assessment in the part petitioned, seeks that it be refunded of those amounts plus compensatory interest, under Article 43 of the General Tax Law ("GTL").

For this purpose it invokes the following grounds in its favor:

The issue that is sought to be clarified is whether or not the challenger has the right to proceed with the deduction, also from the Corporate Income Tax levy produced by the application of autonomous taxation rates, of the said special payments on account.
Now, having regard to the overwhelming arbitral jurisprudence that today qualifies autonomous taxation as Corporate Income Tax, the claimant sees absolutely nothing in the law that excludes the deduction of these special payments on account also from the part of the Corporate Income Tax levy produced by autonomous taxation.
But in the year of presentation of the Model 22 statement here in issue, the Tax Administration's computer system did not yet think so.
And in the context of a request for ex officio review, the Tax Administration continued not to think so, contradicting its earlier opinion on this matter.
Jurisprudence has understood, in a practically unanimous manner, that the Corporate Income Tax levy provided for in (in effect until 2013) Article 45(1)(a) of the Corporate Income Tax Code, comprises, without need of any additional specification, the levy of autonomous taxation in Corporate Income Tax, wherefore the Corporate Income Tax levy provided for in Article 90(1) and (2)(c) of the Corporate Income Tax Code, in the wording in effect in 2013, also encompasses the levy of autonomous taxation in Corporate Income Tax.
That is, in the various decisions handed down in the arbitral tribunal context cited by the Claimant, it was decided that the tax credits that have been recognized in SIFIDE can be deducted from the levy produced by autonomous taxation that taxed them in that fiscal year, in the part in which they cannot be deducted from the remaining Corporate Income Tax levy.
As an additional point it should be noted that, contrary to what has been affirmed by the Tax Administration, there is no reason to conclude that the reasoning and rationale of the decision in case No. 769/2014-T would only apply to SIFIDE, and not also necessarily to other amounts deductible from the Corporate Income Tax levy.
Indeed, if it is a fact that the very SIFIDE regime regarding the provision of the fiscal benefit of deduction from the Corporate Income Tax levy mentions "the amount ascertained in accordance with Article 90 of the Corporate Income Tax Code", it is to be asked whether there will be a difference for what is discussed here by the fact that the normative provision of deduction of special payment on account from the Corporate Income Tax levy (cf. Article 90(2) of the Corporate Income Tax Code) does not express itself in that same manner. And the answer is negative.
Indeed, even if the provision of deduction from the Corporate Income Tax levy expresses itself in terms of "deduction from the Corporate Income Tax levy", as opposed to "deduction from the amount ascertained in accordance with Article 90 of the Corporate Income Tax Code", the final practical result is the same, inasmuch as the amount ascertained in accordance with Article 90 of the Corporate Income Tax Code is none other than Corporate Income Tax.
Wherefore, being understood by the courts that autonomous taxation is Corporate Income Tax (and it is because what applies to it is Article 90 of the Corporate Income Tax Code, directed exclusively to Corporate Income Tax and to no other tax), it is indifferent whether the benefit provision refers to what is ascertained in application of Article 90 of the Corporate Income Tax Code (and therefore indirectly, but necessarily, to Corporate Income Tax), as is the case with SIFIDE, or directly to Corporate Income Tax, as is the case with special payment on account.
Wherefore, the negation of the deduction of special payment on account from the Corporate Income Tax levy of autonomous taxation violates paragraph c) of Article 90(2) of the Corporate Income Tax Code (previously to 2010, Article 83; and from 2014 became paragraph d) of the aforementioned Article 90(2) of the Corporate Income Tax Code).
Well or badly, it has been systematically decided by tax courts, in this case in the form of arbitral tribunals, that autonomous taxation is Corporate Income Tax, from which is drawn as a consequence that to them apply provisions directed to Corporate Income Tax such as the one relating to non-consideration of the Corporate Income Tax levy for the computation of taxable profit in Corporate Income Tax (Article 45(1)(a) of the Corporate Income Tax Code, in effect until 2013).
In truth, arbitral jurisprudence grounded its conclusion with the idea – starting by provisionally making a generalization by approximation –, which follows, in which moreover it has relied and relies also the Tax Department: autonomous taxation relating, at least, to expenses with vehicles, travel allowances and representation expenses (the majority here in issue, are a substitute (or complement) for the non-deductibility of costs in Corporate Income Tax, wherefore the nature of Corporate Income Tax of the levy produced by this autonomous taxation.
And it is on the basis of this conclusion, thus grounded, that jurisprudence concluded that by being Corporate Income Tax levy the levy produced by this autonomous taxation was, therefore, subject to the regime provided for the Corporate Income Tax levy in paragraph a) of Article 45(1) of the Corporate Income Tax Code (in the wording in effect until 2013): non-deductibility of this levy in the operation of computation of taxable profit.
For the very same reason, the claimant requests that, coherently, it be concluded that the Corporate Income Tax levy constituted by this autonomous taxation is available, alongside the remaining Corporate Income Tax levy, in the operation of deductions from the levy provided for in Article 90 of the Corporate Income Tax Code, among which is the deduction of special payment on account.
Yet, from the jurisprudence cited by the claimant, in no case is the issue of deduction of special payment on account in the autonomous taxation levy expressly addressed.

In challenge, the Tax Administration briefly responded to the Claimant's petition as follows:

The integration of autonomous taxation into the Corporate Income Tax Code (and the Personal Income Tax Code), conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, notably, in the context of paragraph a) of Article 90(1) of the Corporate Income Tax Code, in separate ascertainments of the respective levies, because they comply with different rules.
And that, since, in one case, it is the application of the rate(s) of Article 87 of the Corporate Income Tax Code to the taxable matter determined in accordance with the rules contained in Chapter III of the Code and, in another case, it is the application of the rates to the values of taxable matters relating to the different realities contemplated in Article 88 of the Corporate Income Tax Code.
That is, contrary to what is stated in point 9 of the dissenting opinion annexed to the Arbitral Decision handed down in case No. 697/2014-T, there is not a single assessment of Corporate Income Tax, but rather two ascertainments;
That is, two distinct calculations which, although processed, in accordance with paragraph a) of Article 90(1) of the Corporate Income Tax Code, in the statements referred to in Articles 120 and 122 of the same code, are made on the basis of different parameters, since each materializes itself in the application of its own rates, provided for in Articles 87 or 88 of the Corporate Income Tax Code, to the respective taxable matters determined equally in accordance with its own rules.
The task of the interpreter and applier of the law is to, faced with the necessity of, for certain purposes – namely of the deductions provided for in Article 90(2) of the Corporate Income Tax Code or of the calculation of payments on account –, identify the relevant part of the Corporate Income Tax levy, extracting from the applicable provisions a useful sense, literally possible, that permits a coherent solution in keeping with the nature and functions attributed to each component of the tax.
Having regard to the nature of payments on account of the tax due finally, in accordance with the definition of Article 33 of the GTL, these are "the advance monetary payments made by taxpayers during the period of formation of the tax fact", constituting a "(…) form of bringing the moment of collection closer to that of perception of income so as to fill situations in which that approximation cannot be effectuated through withholdings at source".
In good logic, it only makes sense to conclude that the calculation basis of payments on account corresponds to the amount of the Corporate Income Tax levy resulting from the taxable matter that is identified with the profit/income of the period of the taxpayer.
The delimitation of the content of the expression used by the legislator in Article 90(2) of the Corporate Income Tax Code, "the amount ascertained in accordance with the preceding number", and in Article 105(1) of the Corporate Income Tax Code, "the tax assessed in accordance with Article 90(1)", must be done in a coherent manner, being consequently attributed to it, in both provisions, a univocal sense.
Which is to say that it corresponds to the amount of Corporate Income Tax calculated through the application of the rates of Article 87 to the taxable matter determined on the basis of profit and the rates of Article 87 of the Code.
The interpretation of the expression "the amount ascertained in accordance with the preceding number" is the only one consistent with the nature of the deductions referred to in the paragraphs in the paragraphs of Article 90(2) of the Corporate Income Tax Code, relating to:

credits for tax by dual international legal and economic taxation;
fiscal benefits;
special payment on account;
and withholdings at source;

In reality, let it be noted that the common feature to all the realities reflected in the deductions referred to in Article 90(2) of the Corporate Income Tax Code resides in the fact that they relate to income or expenses incorporated in the taxable matter determined on the basis of the profit of the taxpayer or advance payments of the tax, being, therefore, entirely unrelated to the realities that integrate the tax-generating facts of autonomous taxation.
By simple consequence of the preceding considerations that led to the conclusion that the deductions referred to in paragraphs a) and b) of Article 90(2) of the Corporate Income Tax Code are made to the "amount ascertained in accordance with the preceding number", understood as the amount of Corporate Income Tax ascertained on the basis of the taxable matter determined in accordance with the rules contained in Chapter III and the rates of Article 87 of the same Code, and descending to the concrete case, it is possible to extend such conclusion to the deduction relating to special payments on account.
It suffices, for such purpose, to invoke what is provided for in Article 90(7) of the same provision, according to which "From the deductions made in accordance with paragraphs a), b) and c) of Article 90(2), no negative value can result".
In any case, it is also possible to reach the same conclusion if one looks at the nature of the special payment on account (special payment on account), defined as being an advance delivered to the State on account of the tax due finally, which can be made in two installments (Article 106(1) of the Corporate Income Tax Code) and whose calculation takes as its starting point the volume of business of the taxpayer relating to the preceding period of assessment (No. 2).
Although the special payment on account differs, in terms of calculation rules, from payments on account – since these have as their calculation basis the tax assessed in accordance with Article 90(1) of the Corporate Income Tax Code, relating to the period of assessment immediately preceding (Article 105(5) of the Corporate Income Tax Code) –, it should be noted that these regimes have in common the nature of advance payment of Corporate Income Tax;
This all the more so since it can be stated that, in certain circumstances, they even mutually exclude each other, inasmuch as, from the amount resulting from the calculation of special payment on account, are deducted the payments on account made in the preceding period of assessment.
The institution of special payment on account, by Decree-Law No. 44/98, of 03.03, which added Article 83-A to the Corporate Income Tax Code, was inscribed in a set of fiscal policy measures directed against tax evasion and fraud, whose motivation is explained in the Preamble of this statute, as follows: "(…) Statistics show that the income of legal persons subject to assessment in Corporate Income Tax is frequently, and without any plausible reason, the object of a levy far inferior to the real. Evasive practices of concealment of income or inflation of costs are manifestly generative of grave distortions of the principles of equity and tax justice and economic efficiency itself and harmful to the stability of tax revenues. From them results an unjust distribution of the tax burden, all the more felt as many Corporate Income Tax taxpayers, during successive years, contributed little or nothing to the State Budget, continuing, nevertheless, to benefit sometimes in a privileged manner from the economic and social rights provided for in the Constitution. In this context, the present statute establishes a special payment on account, through a new mechanism, on the income of the years 1998 and subsequent, for legal persons subject to Corporate Income Tax. The calculation formula used for its ascertainment and the mechanism used allow bringing the moment of production of income closer to the moment of its taxation."
Thus, and by way of conclusion, we hold that the legal nature of special payment on account, revealed by its configuration as "an instrument or guarantee of payment of the tax on account of which it is required, and not as an imposition in itself" (cf. Decision of the Constitutional Court No. 494/2009, of 29/09/2009), as well as by the function associated with it in combating tax evasion and fraud, connects indissolubly this payment to the amount of Corporate Income Tax ascertained on the taxable matter determined on the basis of profit (Chapter III of the Code).
Being, therefore, manifestly devoid of any basis the claim of the now Claimant for deduction of the amount borne under special payment on account from the levy produced by autonomous taxation in the year 2011.

In response to the Tax Administration, the Claimant alleged:

There are countless arbitral decisions that have stated and restated that autonomous taxation is Corporate Income Tax and, what is more, that therefore to them applies not only Article 45(1)(a) of the Corporate Income Tax Code (in the version in effect in 2012/13), but also Article 90, among other provisions directed to the assessment of Corporate Income Tax.

There applies, therefore, equally, to the levy of autonomous taxation here in issue, the provision directed to the Corporate Income Tax levy contained in paragraph c) (now d)) of Article 90(2) of the Corporate Income Tax Code, for there is no obstacle seen to such in its "special form of incidence and rates applicable".

As to special payment on account in particular, if it is Corporate Income Tax, if special payment on account is an advance on account of Corporate Income Tax, if its deduction from the Corporate Income Tax levy is provided for, and if autonomous taxation is Corporate Income Tax, as it is, the result of declarative interpretation of the law, solidly anchored in abundant and unanimous jurisprudence, is that special payment on account is deductible from the Corporate Income Tax levy generated by autonomous taxation. Contrary to the understanding established in the arbitral decision handed down in case (Single Arbitrator) No. 113/2015-T.

Nothing in the letter of the law, absolutely nothing, prevents it. And there is no hypothetical gap exposed by the spirit of special payment on account, which is its anti-abuse spirit.

Indeed, the pressure of special payment on account to prevent tax evasion yields before and insofar as there is a Corporate Income Tax levy ascertained. That is the law: Article 90(2)(c) – from 2014 onwards, paragraph d) – of the Corporate Income Tax Code. Thus being, by this (anti-tax evasion objective of special payment on account) one does not depart from the starting point of declarative interpretation: being autonomous taxation in Corporate Income Tax a Corporate Income Tax levy, and sharing the objective, purpose, spirit of Corporate Income Tax to ensure the taxation of real income (substitute taxation), in accordance with the overwhelming jurisprudential understanding, nothing stands opposed to the application to this levy of the deduction of special payment on account.

Also the anti-abuse character of autonomous taxation is not a reason "on the plane of spirit" to exclude the application of declarative interpretation that determines the deduction of special payment on account from the autonomous taxation levy.

Nor for this reason, that is, nor because of the anti-abuse character of these fiscal provisions, does the additional Corporate Income Tax levy attributable to them cease to be what it is – Corporate Income Tax levy – for purposes, also, of interaction with special payment on account. Special payment on account is therefore today deducted from the Corporate Income Tax levy resulting from the application of anti-abuse provisions of the Corporate Income Tax Code itself and, therefore, the levy resulting from the "fight against fiscal abuses".

Wherefore, that also by resort to the invoked spirit or purpose of autonomous taxation, one does not see how, or for what reason, the levy resulting from them would be excluded from the deductibilities provided for in the law for Corporate Income Tax of which it is an integral part.

With respect to some specific points of the erudite Response of the Tax Administration, it is further to be added the following, as more fully developed above:

i) It is irrelevant that autonomous taxation in Corporate Income Tax and Corporate Income Tax directly on profit are ascertained in different ways; here the issue at hand is downstream, in which the respective primary levies are already ascertained; to this regard, see further above, for example, the arbitral decisions in cases Nos. 769/2014-T and 219/2015-T, or the dissenting opinion of Arbitrator Professor Leonor Fernandes Ferreira, in case No. 697/2014-T: after the respective rates are applied to the respective taxable matters (primary levy), these two Corporate Income Tax levies converge, namely for purposes of application of Articles 89 et seq of the Corporate Income Tax Code.

ii) It is irrelevant what has been or has not been the practical experience. It is not by virtue of the fact that the experience is this or that that the law loses its autonomy and nature of command, to become a reality commanded, in this case by habits, reflected or unreflected. Added to this is that, and although that is not what is discussed here, from the point of view of the conceptual and the legal text, nothing, being autonomous taxation Corporate Income Tax, stands opposed to such an amount (which constitutes an ever larger portion of Corporate Income Tax) also being paid in installments and in advance (payment on account), or that it enter into calculations (as Corporate Income Tax borne) of Article 92 of the Corporate Income Tax Code.

iii) In this concrete case there is no issue of use of credit for dual international taxation, wherefore it is irrelevant what the Tax Administration argues in this respect. But it will always be said that if autonomous taxation is held by the Tax Administration and jurisprudence to be Corporate Income Tax, notably for being still taxation on income/profit, in the capacity of a substitute for the prohibition of deduction of certain expenses from taxable profit, it is to say the least hasty to exclude this part of the Corporate Income Tax levy from deduction from the levy by dual international taxation, there being ways of calculating any necessary conversions for such purpose.

iv) It is irrelevant, since no credit for investment tax is at issue here, but in any case it will always be said that as the Tax Administration well knows (suffice it to read, for example, the regimes of CFEI, SIFIDE, RFAI, etc.), and contrary to what it seems to want to assert, there is no separate ascertainment of profit attributable to the investment that benefited from a fiscal incentive in the form of a tax credit in Corporate Income Tax. If the investment performs poorly but the company generates a Corporate Income Tax levy on income via other projects, absolutely nothing prevents the deduction to this levy of the tax credit obtained by means of the investment that does not generate profits.

v) That is, there is no indexation of the use of the tax credit to the profitability of the investment: Corporate Income Tax levy from any other source can be used to offset the tax credit. Being that the Corporate Income Tax levy includes that of autonomous taxation in Corporate Income Tax, in accordance with overwhelmingly dominant jurisprudence (no interpretative doubt subsists on this matter) of the courts, and in accordance with the understanding of the Tax Administration itself. What is more, that same jurisprudence states and restates that autonomous taxation in Corporate Income Tax is also taxation on income/profit: the function of substituting levy that would be generated by taxation on income/profit, were it not for the deduction of certain expenses.

vi) In the concrete case at issue, there is not a fiscally transparent entity, wherefore the considerations of the Tax Administration around this topic are irrelevant. But it will always be said that the adaptation rule provided for in Article 90(5) of the Corporate Income Tax Code only applies, as results from its text and its logic, insofar as one is faced with the situation of imputation of the taxable matter of transparent entities to a third party (the partner or member) under Article 6 of the Corporate Income Tax Code. Insofar as one is faced with Corporate Income Tax (in this case, that of autonomous taxation) in which there is no such imputation to partners, there is no dissociation nor consequently does the adaptation rule that expressly presupposes it apply.

vii) That is: to Corporate Income Tax outside of tax transparency, as is the case, always, of autonomous taxation (Article 12 of the Corporate Income Tax Code), the adaptation rule designed and provided for Corporate Income Tax (that on profit) blocked, by being substituted by taxation of third parties, by tax transparency, does not apply by definition. To contend otherwise is illogical and completely disconnected from the purpose and the presupposition in Article 90(5) of the Corporate Income Tax Code.

viii) Why does the Tax Administration invoke Article 90(7) (now Article 90(9)) of the Corporate Income Tax Code (in the numbering in 2011), if no one here asks that the credits from special payment on account be used beyond the forces of the autonomous taxation levy in Corporate Income Tax?

xi) In the rest and as was analyzed above with respect to the arbitral decision handed down in case No. 113/2015-T, the fact that special payment on account is payment on account of Corporate Income Tax in no way obstructs the settling of accounts with the Corporate Income Tax levy generated by autonomous taxation. On the contrary, the fact that special payment on account is payment on account of Corporate Income Tax, permits it.

On the deduction of special payment on account from the assessed value of autonomous taxation

Recalling, what must be answered is: "is the value of Corporate Income Tax advanced under special payment on account deductible from the autonomous taxation levy in Corporate Income Tax?"

The issue is pertinent and arises from the already recognized guiding principle, which this arbitral tribunal also follows, that the tax on the income of legal persons, Corporate Income Tax, includes autonomous taxation. Now, if this tax includes autonomous taxation, and if special payment on account is Corporate Income Tax, what reason prevents this from being used to offset the amount of Corporate Income Tax assessed autonomously?

There is agreement between the Tax Administration, the Claimant and arbitral jurisprudence, notably the Decision of CAAD 535/2015, that the assessment of Corporate Income Tax resulting from Article 90 unequivocally includes autonomous taxation, if for no other reason because if it were not so "there would be no provision that provided for its assessment, which would reduce to illegality, by violation of Article 103(3) of the Portuguese Constitution, which requires that the assessment of taxes be made «in accordance with the law»".

In this line the Tax Administration argues that, even if the scope of Article 90 includes the assessment of autonomous taxation, it must be considered that such assessment corresponds to two calculations, one of which that which follows from the application of the normal Corporate Income Tax rate to income generated over the period and that only to the part of the Corporate Income Tax levy relating to this calculation is special payment on account deductible.

On the other hand, the claimant argues that, even if there are two calculations of Corporate Income Tax, the two levies resulting therefrom converge to a single amount, and that there is no impediment found in the law to the deduction of special payment on account from that ascertained amount.

And in truth, such an impediment is not found in the law. But, neither is there a provision that provides for it. For this reason it is considered pertinent a deeper analysis of the ratio legis of each figure, that of autonomous taxation and that of special payment on account.

As referred to in Decision 113/2015 of CAAD, "(…) special payment on account became part of the Corporate Income Tax system whose assessment established in Article 83 was designed to ascertain the tax directly levied on the stated income. When there is a tax loss, the taxpayer nonetheless must bear special payment on account; that was indeed the reason for its introduction. If a given company has successive tax losses, it will systematically bear tax, as the system doubts its possibility of operating in a permanently deficient situation, requiring it to provisionally (on account) satisfy a certain amount. It may have it reimbursed if it proves that this situation is common in its sector of activity or if the Tax Administration verifies the regularity of its statements. This was the balance that the Corporate Income Tax Code required to maintain a system based on statements made by taxpayers. Already the tax resulting from autonomous taxation is grounded solely in the pursuit of tax evasion by transfer of income and has the dissuasive and compensatory effect."

In the line of this reasoning it is understood that, although both special payment on account and autonomous taxation pursue the same objective of tax evasion, they aim to prevent two distinct taxpayer behaviors: by the first one prevents the non-declaration of continuous income that is presumed to exist since only thus is the continuity of activity understood; already the latter find justification as dissuasive and compensatory measures for the transfer of income from the personal sphere or the consideration of expenses without business purpose. And thus it is understood that it is defended that, coexisting both behaviors, there must also coexist both figures of combating evasion: a company that does not declare income bears special payment on account; a company that overloads expenses so as to minimize Personal Income Tax (or to decrease/increase its tax loss/profit) bears autonomous taxation; a company that engages in both behaviors bears special payment on account and autonomous taxation.

From this it follows that, looking at special payment on account as a mere advance of Corporate Income Tax and that, for this reason, can be offset against any Corporate Income Tax to be paid, whether the "normal" Corporate Income Tax flowing from the exercise of activity, whether the "special" Corporate Income Tax flowing from autonomous taxation, appears to be inconsistent with what justifies its own existence.

And thus it is believed that, perhaps for this reason, Law No. 7-A/2016, of 30 March, conferred an interpretative character to the new No. 21 of Article 88 of the Corporate Income Tax Code, which provides:

"21 - The assessment of autonomous taxation in Corporate Income Tax is made in accordance with the terms provided for in Article 89 and is based on the values and rates that result from the foregoing, with no deductions being made to the global amount ascertained."

Notwithstanding the reasoning already expressed, it is still considered relevant all the argumentation made in the aforementioned Decision of CAAD 535/2015 relating to the acceptance of the attribution of an interpretative character to Article 88(21) of the Corporate Income Tax Code made in Article 135 of Law No. 7-A/2016, of 30 March. In fact, from that Decision result arguments that could lead to different conclusions from those which are here defended, it being licit to conclude that until the publication of Law No. 7-A/2016 the doubts that could be raised about the deductibility of special payment on account from autonomous taxation had full justification given the non-existence of a categorical response in the legislation in effect until that date.

Thus, the clarification that came to be effected with the provision in the recent No. 21 of Article 88 of the Code, came to allow answering a totally pertinent issue, and the unequivocal clarification of the acceptability of the interpretative character of that provision, as sufficiently explained in the aforementioned Decision, explanation which the present tribunal agrees with, is of total importance.

V - DECISION

· Considering the elements of fact and law gathered and set forth, this arbitral tribunal decides to judge the request for arbitral pronouncement as lacking merit. Consequently, the Tax Administration is absolved of the claim.

· Given the decision handed down, the consideration of the requests for restitution of the tax paid and compensatory interest claimed is prejudiced.

· The Claimant is ordered to pay the costs, which are to be assessed in the appropriate manner.

VI - VALUE OF THE CASE AND COSTS

In accordance with Article 305(2) of the Code of Civil Procedure and Article 97-A(1)(a) of the Tax Procedure and Process Code and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at €148,406.33.

In accordance with Article 22(4) of the RJAT, the amount of costs is set at €3,060.00 (three thousand and sixty euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Claimant.

Lisbon, 11-07-2016

The Arbitrators

José Baeta de Queiroz (dissenting, in accordance with vote hereafter)
(Presiding Arbitrator)

José Ramos Alexandre

Luísa Anacoreta

DISSENTING OPINION:

I agree with the decision on the tribunal's competence, but not on the substantive issue.

I would instead conclude, considering the request for arbitral pronouncement as having merit.

Being autonomous taxation due under Corporate Income Tax, they are not excluded from Article 90 of the Corporate Income Tax Code, which tells us what deductions are to be made from the taxable matter (resulting, also, from autonomous taxation), including among them special payment on account.

As to Article 88(21) of the Corporate Income Tax Code added by the 2016 Budget Law and declared an interpretative provision by its Article 135, I do not believe that it has, in truth, an interpretative nature.

The grounds of disagreement here briefly summarized can be seen, with greater development, in the award handed down on 28 June 2015 in case 775/2015-T, of CAAD, which I subscribed to.

José Baeta de Queiroz

Text prepared by computer, in accordance with Article 131(5) of the Code of Civil Procedure, applicable by remission of Article 29(1)(e) of the RJAT.

Frequently Asked Questions

Automatically Created

Can autonomous taxation (tributações autónomas) be deducted from the special payment on account (pagamento especial por conta) under Portuguese IRC?

Under Portuguese IRC law, the deductibility of autonomous taxation (tributações autónomas) from the special payment on account (pagamento especial por conta - PEC) is contested. The legal issue centers on whether the IRC coleta produced by autonomous taxation rates qualifies for deduction from PEC amounts. The taxpayer in Case 670/2015-T argued that autonomous taxation amounts totaling €148,406 should be deducted from PEC. The question involves interpreting which components of IRC tax liability can offset PEC obligations, specifically whether autonomous taxation—which applies special rates to certain corporate expenses—generates deductible coleta for PEC purposes or whether only standard IRC rates produce deductible amounts.

Does the CAAD Tax Arbitral Tribunal have jurisdiction to review decisions on pedidos de revisão oficiosa of IRC self-assessments?

The CAAD Tax Arbitral Tribunal's jurisdiction to review decisions on pedidos de revisão oficiosa (ex officio review requests) of IRC self-assessments is disputed. Article 2(1)(a) RJAT grants arbitral tribunals jurisdiction over self-assessment acts, but Article 2(a) of Ordinance 112-A/2011 excludes self-assessment claims not preceded by administrative reconsideration under Articles 131-133 CPPT. The Tax Authority in Case 670/2015-T argued that arbitral jurisdiction requires prior administrative reconsideration (reclamação graciosa), not ex officio review under Article 78 LGT. The TA contended the legislator deliberately restricted access to arbitration for self-assessment disputes, requiring the specific administrative procedure of Articles 131-133 CPPT as a mandatory prerequisite, thereby excluding challenges initiated solely through ex officio review mechanisms from arbitral competence.

What is the legal procedure to challenge an IRC self-assessment through revisão oficiosa and subsequent tax arbitration in Portugal?

To challenge an IRC self-assessment through revisão oficiosa and subsequent tax arbitration in Portugal, taxpayers must navigate complex procedural requirements. Article 78 LGT allows taxpayers to request ex officio review of self-assessment acts. However, Article 2(a) of Ordinance 112-A/2011 restricts access to CAAD arbitration for self-assessment disputes to those preceded by administrative reconsideration under Articles 131-133 CPPT. The Tax Authority's position in Case 670/2015-T suggests that ex officio review alone does not satisfy the prerequisite for arbitral jurisdiction over self-assessments. This creates a potential procedural gap where taxpayers using ex officio review may be barred from arbitration. The proper procedure likely requires filing administrative reconsideration (reclamação graciosa) under Article 131 CPPT before accessing arbitral remedies, though Article 78 LGT separately permits ex officio review requests for illegal self-assessments.

How does Portuguese tax law distinguish between IRC coleta produced by standard rates and coleta from autonomous taxation for PEC deduction purposes?

Portuguese tax law's distinction between IRC coleta from standard rates versus autonomous taxation for PEC deduction purposes is central to Case 670/2015-T. The special payment on account (pagamento especial por conta) under IRC allows deduction of certain tax amounts. The disputed issue is whether coleta produced by autonomous taxation rates—which apply to specific corporate expenses like vehicle costs, entertainment expenses, and certain compensation—can be deducted from PEC, or whether only coleta from standard IRC rates qualifies for such deduction. Autonomous taxation operates independently from standard IRC rate calculations, applying fixed percentages to particular expense categories. The legal question involves whether the IRC code treats autonomous taxation amounts as part of the general coleta eligible for PEC deduction or whether these constitute separate, non-deductible tax obligations with distinct legal treatment under the PEC deduction framework.

What was the outcome of CAAD Case 670/2015-T regarding the competência material exception raised by the Autoridade Tributária?

Regarding the competência material (substantive jurisdiction) exception in CAAD Case 670/2015-T, the Tax Authority argued the Arbitral Tribunal lacked jurisdiction because the challenge involved a self-assessment act accessed through ex officio review rather than administrative reconsideration. The TA relied on Article 2(a) of Ordinance 112-A/2011, which excludes from arbitral jurisdiction self-assessment claims not preceded by administrative reconsideration under Articles 131-133 CPPT. The Authority emphasized that the provision specifically references Articles 131-133 CPPT procedures, not Article 78 LGT ex officio review, suggesting deliberate legislative restriction. The TA contended that if the legislator intended to include ex officio review, the provision would simply state 'administrative procedure' without specifying Articles 131-133. The tribunal scheduled arguments and set a decision deadline of July 15, 2016, but the provided excerpt does not contain the final ruling on this jurisdictional exception.

IRC Arbitration: Deduction of Autonomous Taxation from Special Payment on Account (PEC) – CAAD 670/2015-T

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IRC Arbitration: Deduction of Autonomous Taxation from Special Payment on Account (PEC) – CAAD 670/2015-T

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