Summary
Full Decision
ARBITRAL DECISION
The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and automatically notified to the Tax and Customs Authority on 28-11-2016. Pursuant to the provisions of paragraph a) of article 6(2) and paragraph b) 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 Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal and notified the parties of this appointment on 11-01-2017.
Thus, 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 sole arbitral tribunal was constituted on 26-01-2017, followed by the relevant legal procedures.
I – REPORT
On 07-11-2016, the company "A…, S.A.", Tax Identification Number…, filed a request for constitution of a sole arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011 of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as LRAT), naming the Tax and Customs Authority as respondent.
Seeking to annul the decision of the Tax and Customs Authority refusing the request for official review, and consequently to determine the annulment of the self-assessments relating to the tax year 2011 with the consequent restitution of the amount of €9,556.72, equivalent to the value of autonomous tax payments made in 2013, plus the respective indemnification interest, provided for in article 43 of the General Tax Code and article 61 of the Tax Procedure and Process Code.
Furthermore requesting that any application of the rule - no. 21 of article 88 of the Corporate Income Tax Code - that implies an interpretation thereof in the sense of non-deductibility of special payments on account from autonomous taxation, be declared unconstitutional, as violating the principle of non-retroactivity provided for in article 103(3) of the Constitution of the Portuguese Republic.
For its part, the Tax Authority defends, among other things, and with extensive reasoning, that such understandings inevitably diminish autonomous taxation in respect of the principles and purposes upon which it was founded by the legislator, having no legal basis whatsoever, and that the interpretation upheld by the Applicant is a violation of the rules currently in force for determination of tax.
It invokes abundant arbitral jurisprudence in its favour.
Previously it requests that the exception of absolute lack of jurisdiction due to violation of the rules of material jurisdiction be declared, since the request for arbitral pronouncement was formulated following refusal of a request for official review, and that the Respondent be absolved of the instance pursuant to the provisions of articles 2, paragraph a) of Order no. 112-A/2011 of 22 March, articles 96, paragraph a), 99(1), 278(1) paragraph a) and 577, paragraph a) of the Code of Civil Procedure, applicable by virtue of article 29(1) paragraph e) of the LRAT;
THIS EXCEPTION MUST BE CONSIDERED (to which the Applicant responded, contesting the grounds invoked and referring to extensive jurisprudence in support of its rejection).
On this issue, with due respect, we follow, as we agree with it, the understanding expressed in Proc. no. 443/2016-T, which in turn transcribes part of the decision/ruling handed down on 15.11.2016 in Proc. 143/2016-T:
"(…). The jurisdiction of the arbitral tribunals functioning at CAAD is, in the first instance, bounded by the matters indicated in article 2(1) of decree-law no. 10/2011 of 20/1 (LRAT). In a second instance, the jurisdiction of the arbitral tribunals functioning at CAAD is also limited by the terms in which the Tax Authority was bound to that jurisdiction by order no. 112-A/2011 of 22/3, since article 4 of the LRAT establishes that 'the binding of the tax administration to the jurisdiction of the tribunals constituted pursuant to this law depends on an order of the members of the Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered'.
In view of this second limitation of the jurisdiction of the arbitral tribunals functioning at CAAD, the resolution of the question of jurisdiction depends essentially on the terms and nature of this binding, because, even if one is dealing with a situation that falls within that article 2 of the LRAT, if it is not covered by the binding, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal is excluded. That is, 'the scope (…) of arbitral proceedings is restricted to questions concerning the legality of acts of the types referred to in article 2 [of the LRAT] that are covered by the binding made in Order no. 112-A/2011 (…)', see Administrative Court of Appeal Ruling of 28/4/2016 (proc. 09286/16, rapporteur: Anabela Russo).
"(…) It happens that in paragraph a) of article 2 of order no. 112-A/2011, there are expressly excluded from the scope of binding the Tax Authority to the jurisdiction of the arbitral tribunals functioning at CAAD the 'claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to administrative procedure in accordance with articles 131 to 133 of the Tax Procedure and Process Code'. That is, comparing the binding order with the LRAT, it is more demanding than the latter, by adding a requirement to abstractly delimit the object of the binding of the Tax Authority to arbitral jurisdiction."
"(…) Now what requires special interpretive effort is the requirement of 'administrative procedure' necessary (prior), 'in accordance with articles 131 to 133 of the Tax Procedure and Process Code'.
"From the outset, in obedience to those same 'terms', provided for in article 131 of the TPPC, the requirement of prior administrative procedure shall only apply to cases where such recourse is mandatory, through administrative complaint. In fact, in the case of self-assessments, an administrative complaint is required, but only in cases of errors that are not based exclusively on matters of law, and where the self-assessments have been made in accordance with generic guidelines issued by the tax administration (see article 131(1) and (3) of the TPPC)[2].
"The useful meaning of the order, given what is established in the LRAT, the will of the legislator, was to ensure that the taxpayer does not resort to the Tribunal '(…) before any position is taken by the administration on the situation created by the taxpayer's act (…) because no dispute is yet detectable'[3][4]. Thus it is understood why cases provided for in article 131(3) of the TPPC are excluded from the requirement of administrative complaint, since in those the Tax Authority has already pronounced itself, a priori, through 'generic guidelines'.
Returning to the request for arbitral pronouncement, in the present case, what truly matters is that, in cases where a request for official review of a tax assessment is formulated, the Tax Authority is equally provided, with this request, an opportunity to pronounce itself on the merit of the taxpayer's claim, before the latter resorts to the judicial process.
"Therefore, 'by consistency with the solutions adopted in articles 131(1) and (3) of the TPPC, it cannot be required that, cumulatively with the possibility of administrative review within the scope of that official review procedure, a new administrative review be required through administrative complaint. On the other hand, it is unequivocal that the legislator did not intend to prevent taxpayers from filing requests for official review in cases of self-assessment acts, since these are expressly referred to in article 78(2) of the General Tax Code. In this context, allowing the law expressly that taxpayers choose between administrative complaint or official review of self-assessment acts, and the request for official review being filed within the period of administrative complaint being perfectly equivalent to an administrative complaint[5] (…) there can be no reason whatsoever that could explain why a taxpayer who has chosen to seek review of the tax act instead of an administrative complaint cannot access the arbitral process'[6].
"(…) In light of the foregoing, it is concluded[7] that order no. 112-A/2011, in expressly referring to article 131 of the TPPC regarding requests for declaration of illegality of self-assessment acts, stated imperfectly what it intended. Seeking to impose the administrative review necessary for contesting of self-assessment acts, it ended up making express reference to article 131, forgetting that this procedure does not exhaust the possibilities for administrative review of these acts. The interpretation supported is the interpretation that best reflects the will of the 'legislator' and which does not collide with any constitutional principles (…)."
The exception of lack of jurisdiction alleged is therefore without merit.
The proceedings are free from defects.
There is no obstacle to the consideration of the merits of the case.
II - FACTS
1. The Applicant assumes the legal form of a Portuguese limited company, with headquarters and effective management in Portugal and qualified, for Corporate Income Tax purposes, as a resident taxpayer pursuant to article 2(1) paragraph a) of the Code of that tax.
2. The Applicant submitted the Corporate Income Tax Return Form 22, relating to the tax year 2011, on 25 May 2012.
3. The amount of special payments on account - available for deduction - paid with reference to the tax year 2011 amounts to €27,111.42.
4. The amount of autonomous taxation assessed in 2011 amounted to €9,556.72.
5. On 24.03.2016 the Applicant filed a request for official review, which was registered with the number …2016…, which resulted in a refusal order notified on 18 August 2016.
6. Such decision denied the Applicant's request for the right to annul the assessment in question, because it was understood, contrary to what the Applicant maintained, that special payments on account are not deductible from the tax collected produced by autonomous taxation.
A - Facts established as proven
All of the above.
The factual matter is not controversial.
B - Facts established as not proven
With relevance to the decision, there are no facts that should be considered as not proven.
C - Substantiation of proven and not proven facts
Regarding the factual matter, the Tribunal need not pronounce on everything that was alleged by the parties, it being its duty instead to select the facts that matter to the decision and distinguish proven from unproven facts (see article 123(2) of the TPPC and article 607(3) of the Code of Civil Procedure, applicable by virtue of article 29(1) paragraphs a) and e) of the LRAT).
Thus, the facts relevant to the judgment of the case are chosen and delimited according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (see former article 511(1) of the Code of Civil Procedure, corresponding to current article 596, applicable by virtue of article 29(1) paragraph e) of the LRAT).
Therefore, taking into account the positions assumed by the parties, in light of article 110/7 of the TPPC, and the documentary evidence attached to the proceedings, the following facts were considered proven, with relevance to the decision, as listed above.
III - LAW
1 - The disputed question in the present arbitral action concerns the claim for recognition of the right of the Applicant to deduct the amounts paid as special payments on account from the tax collected produced by autonomous taxation.
Let us examine this.
2 - This question has been dealt with persistently in this CAAD, as evidenced, among others, by the Response of the Tax Authority.
See, in that regard:
Case no. 113/2015-T; Case no. 535/2015-T; Case no. 639/2015-T; Case no. 535/2015-T; Case no. 670/2015-T; Case no. 722/2015-T; Case no. 736/2015-T; Case no. 745/2015-T; Case no. 746/2015-T; Case no. 750/2015-T; Case no. 751/2015-T; Case no. 752/2015-T; Case no. 767/2015-T; Case no. 769/2015-T; Case no. 780/2015-T; Case no. 781/2015-T; Case no. 784/2015-T; Case no. 784/2015-T. Proc. no. 775/2015, etc.
3 - As we agree with it, we follow, very closely, transcribing, with due respect, the understanding upheld in the decision handed down in Proc. no. 673/2015-T, in the part in which it states:
(…)…The Tax and Customs Authority acknowledged that 'the assessment of autonomous taxation is carried out on the basis of articles 89 and 90(1) of the Corporate Income Tax Code but, applying different rules for the calculation of the tax', being 'various tax amounts assessed depending on the diversity of facts that give rise to autonomous taxation' (article 38 of the Response).
The Tax and Customs Authority further stated, in article 39 of the Response, that 'the amount assessed pursuant to paragraph a) of article 90(1) does not have a unitary character, since it includes amounts calculated according to different rules, to which are associated also differentiated purposes, so that the deductions provided for in the paragraphs of article 90(2) can only be made to the part of the Corporate Income Tax collected with which there is a direct correspondence, in order to maintain the coherence of the conceptual structure of the general regime of the tax'.
This position has no consistent foundation, nor has the Tax and Customs Authority indicated any legal provision that would furnish it with the minimum verbal correspondence necessary for the admissibility of an interpretation.
Specifically, article 105(1) of the CIRC, in stating that 'payments on account are calculated on the basis of the tax assessed pursuant to article 90(1) relating to the immediately preceding tax period to that in which these payments are to be made, net of the deduction referred to in paragraph d) of article 90(2)', refers to the totality of the tax assessed pursuant to that article 90(1), which, as acknowledged by the Tax and Customs Authority in the cited article 38 of its Response, also applies to the assessment of autonomous taxation.
On the other hand, as already mentioned, before the new no. 21 of article 88 of the CIRC, there was no legal provision that established the manner of assessment of autonomous taxation, so that, on pain of unconstitutionality due to violation of article 103(3) of the Constitution of the Portuguese Republic, derived from lack of legal provision for assessment procedure, it would have to be understood that they were assessed in accordance with the provisions of article 90(1).
Thus, before Law no. 7-A/2016, the deductions provided for in article 90(2) of the CIRC, which are aimed at the 'amount assessed pursuant to the preceding article', applied to that single amount resulting from such assessment, whenever one was not dealing with one of the situations specially provided for in article 90(4) and following, which do not apply to the case at hand.
The deduction of special payments on account from the entire amount assessed pursuant to that article 90(1) paragraph a) also resulted from the explicit tenor of article 93(1) of the CIRC, in the wording prior to Law no. 2/2014 of 16 January, in establishing that 'the deduction referred to in paragraph c) of article 90(2) is made to the amount assessed in the declaration referred to in article 120 of the same tax period to which it relates or, if insufficient, up to the fourth following tax period, after the deductions referred to in paragraphs a) and b) of article 90(2) have been made and with observance of article 90(7)'. ([9])
The amount assessed in the declaration referred to in article 120 includes the amounts relating to autonomous taxation, with no other specific declaration for this purpose, either before or after Law no. 7-A/2016.
In fact, the declarations provided for in article 120 of the CIRC are drawn up in a single official form approved by order of the Minister of Finance, pursuant to articles 117(1) paragraph b) and 117(2) of the CIRC.
Thus, in light of the provisions of paragraph c) of article 90(2) and article 93(1) of the CIRC, until Law no. 7-A/2016, nothing in the literal tenor of the CIRC prevented the deduction of special payments on account from the entire Corporate Income Tax collected that was determined pursuant to that article 90(1), including that derived from autonomous taxation, within the conditionality provided for therein.
On the other hand, given that special payment on account has the nature of forced loan ([10]), which creates in the legal sphere of the taxpayer a credit against the Tax Administration, it does not appear unreasonable that it should be taken into account in situations where a credit of the latter arises in relation to the taxpayer.
Furthermore, autonomous taxation in Corporate Income Tax, in light of the increasing breadth that the legislator has been according it, in order to be compatible with the constitutional principle of taxation of companies fundamentally inciding on their actual income (article 104(2) of the Constitution of the Portuguese Republic), should be understood as indirect forms of taxing business income, through the taxation of certain expenses, as is evident in paragraph a) of article 23-A(1) of the CIRC in the wording of Law no. 2/2014 of 16 January, in alluding to 'Corporate Income Tax, including autonomous taxation, and any other taxes that directly or indirectly incide on profits'. The statistics of the Tax and Customs Authority referred to above, as well as the case at hand itself, in which the Applicant had tax losses in 2012 and 2013 and in both presents only substantial autonomous taxation, are elucidative of the constitutional issue that arises.
In any case, as stated in the ruling of CAAD handed down in case no. 59/2014-T, autonomous taxation in Corporate Income Tax should be considered a form of taxing business income:
"The Explanatory Memorandum contained in 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 was a conscious and intended amplification of previously existing distortions, as it was understood that they were necessary, in short, to compensate for other distortions resulting from significant tax fraud and evasion and, thus, to increase the equity of the distribution of the tax burden among citizens and companies".
(...)
"autonomous taxation directly inciding on certain expenses, within the scope of taxes that originally incided only on income, are considered distortions of the system of direct taxation of income which the Corporate Income Tax intended, but a value that was legislatively considered to be more relevant than the theoretical coherence of taxes, such as the implementation of tax justice, imposed a choice for these forms of taxation, because they are in line with the principles of equity, efficiency and simplicity.
(...)
But this indirect taxation is not carried out outside the scope of Corporate Income Tax, as results from the inclusion of autonomous taxation in the respective Code, which has as a corollary the application of the general rules of this tax, which do not conflict with its special form of incidence.
Thus, if it is true that autonomous taxation constitutes a different way of imposing taxes on companies, which could be included in autonomous regulation or be placed in the Stamp Duty Code, it is equally true that the legislative choice to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in the Corporate Income Tax, which could be justified by being an indirect form, but, in the legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income'.
Indeed, it is a fact that the imposition of any expense without counterpart to a legal entity has as a corollary a potential decrease in its income, so that the imposition of a unilateral tax obligation, even if calculated on the basis of expenses incurred, constitutes a form of indirectly taxing its income. ([11])
The new article 23-A of the CIRC, introduced by Law no. 2/2014 of 16 January, in stating that 'the following expenses are not deductible for purposes of determining taxable profit, even when accounted as expenses of the tax period: a) The Corporate Income Tax, including autonomous taxation, and any other taxes that directly or indirectly incide on profits', suggests that, in the legislative perspective, Corporate Income Tax and autonomous taxation are taxes that directly or indirectly incide on profits, as it is this understanding that can justify the inclusion of the expression 'any other taxes', which presupposes that Corporate Income Tax and autonomous taxation are also taxes of these types.
Therefore, given that autonomous taxation is provided for in the CIRC, ultimately as forms of taxing business income, it is not seen what there could necessarily be incompatibility between them and the general rules that provide for the manner of making Corporate Income Tax payments.
On the other hand, if it is true that, in light of the regime in force before Law no. 2/2014 of 16 January amended article 93(3) of the CIRC, the amounts paid as special payments on account could not always be deducted ([12]), it is equally true that this regime was altered by that Law, with reimbursement being admitted without conditions other than the taxpayer requesting it within the prescribed period.
Therefore, the interpretation that flows most linearly from the literal text of articles 93(3) and 90(1) of the CIRC, prior to Law no. 2/2014, is the deductibility of special payments on account from the entirety of the Corporate Income Tax collected derived from autonomous taxation.
But it is equally true that, in light of the previous regime of reimbursement of special payments on account, which revealed that the special payment on account had inherent therein a presumption of undeclared income, one could venture a restrictive interpretation, with respect to the special payment on account, in the sense that it is not deductible from the amount of autonomous taxation, as was understood in the arbitral decision of 30-12-2015, handed down in CAAD case no. 113/2015-T, which invokes considerable reasons, derived from the purposes that the legislator intended to achieve with the creation of special payments on account, which could justify a restriction of the reference made in article 93(1) of the CIRC to the 'amount assessed in the declaration referred to in article 120':
As seen, special payments on account became part of the Corporate Income Tax system whose assessment enshrined in article 83 was designed to determine the tax directly inciding on declared income. When there is a tax loss, the taxpayer must still bear the special payment on account; that was indeed the reason for its introduction. If a given company has successive tax losses, it will systematically support tax, as the system doubts its ability to function in a permanently deficit situation, requiring it to satisfy provisionally (on account) a determined value. It may reimburse it if it proves that this situation is common in its sector of activity or if the Tax Authority verifies the regularity of its declarations. This was the balance that the Corporate Income Tax Code required to maintain a system based on declarations made by taxpayers.
Whereas the tax resulting from autonomous taxation is based solely on the pursuit of tax evasion through income transfer and has a deterrent and compensatory effect.
If the deduction of special payments on account from the amount resulting from autonomous taxation is permitted, the purposes of the system in which the rule of article 83(2) paragraph e) of the CIRC is inserted will be defeated, as the product of the special payment on account that should remain 'stationary' in the ownership of the Public Treasury will be applied to the extinction of the debt of the taxpayer resulting from autonomous taxation, thus alleviating the intended pressure to avoid 'declarative' tax evasion. There is indeed an irreconcilable conflict between the ratio of special payments on account – the fight against evasion or the pressure to correct declarations – and the application of its credits to the satisfaction of other obligations that do not result from the determination of Corporate Income Tax calculated on the taxable income.
The new no. 21 of article 88 of the CIRC added by Law no. 7-A/2016 of 30 March is in tune with this arbitral understanding, as it comes to expressly establish that to the amount assessed of autonomous taxation no 'deductions whatsoever' are made.
On the other hand, article 135 of Law no. 7-A/2016 of 30 March, in attributing the nature of 'interpretative' to that new no. 21 of article 88, combined with article 13 of the Civil Code (which is the only rule that defines the concept of interpretative law), has inherent therein a legislative intention to apply the new regime to previous situations in which there are no 'effects already produced by performance of the obligation, by judgment that has become final, by agreement, even if not ratified, or by acts of analogous nature'.
BAPTISTA MACHADO teaches regarding interpretative laws:
Now the reason why an interpretative law applies to facts and situations prior to its enactment lies fundamentally in the fact that, in coming to establish and fix one of the possible interpretations of the old law with which the interested parties could and should have reckoned, it is not susceptible to violating safe and legitimately founded expectations. We can consequently say that those laws are interpretative in nature which, on points or questions where the applicable legal rules are uncertain or their meaning is controversial, come to establish a solution that courts could have adopted. It is not necessary that the law come to establish one of the previous currents of case law or a strong previous current of case law. Especially since interpretative law often arises before such currents of case law have even formed. But, if this is the case, and if in the meantime a uniform current of case law has formed that made the meaning of the old rule practically certain, then the new law that comes to establish an interpretation different from that same rule can no longer be considered truly interpretative (although it may be so by determination of the legislator), but innovative.
For a new law to be truly interpretative, two requirements are therefore necessary: that the solution of the prior law be controversial or at least uncertain; and that the solution defined by the new law be situated within the parameters of the controversy and be such that the judge or interpreter could reach it without exceeding the limits normally imposed on the interpretation and application of law. If the judge or interpreter, in light of old texts, could not feel authorized to adopt the solution that the new law comes to establish, then this is decidedly innovative.
In light of this position, whose foundation is weighty, faced with the legislation in force in 2012 and 2013, one can accept the attribution of the nature of interpretative to article 88(21) of the CIRC as made in article 135 of Law no. 7-A/2016 of 30 March, in light of the teachings of BAPTISTA MACHADO, because the solution provided for therein of the impossibility of deduction of special payments on account from the overall amount of autonomous taxation passes the test enunciated by this Author:
– the solution that resulted from the literal tenor of article 93(1) of the CIRC was controversial, as evidenced by that arbitral decision and the solution defined by the new law is situated within the parameters of the controversy;
– the judge or interpreter could reach that solution without exceeding the limits normally imposed on the interpretation and application of law, since restrictive interpretation is admissible when there are reasons to conclude that the scope of the legal text belies the legislative thinking or it is necessary to optimize the harmonization of conflicting interests that two rules intend to protect.
On the other hand, unlike what occurs with the Statute on Beneficial Tax Treatment, there is, regarding the deductibility of special payments on account, no concern with the protection of legitimate expectations, as special payments are connected with sales volume, not depending on any specific conduct that the taxpayer would be led to adopt because it was led to expect a tax advantage in return.
Moreover, it is not seen that the regime resulting from article 88(21) of the CIRC encloses any contradiction, contrary to what the Applicant contends: according to this new rule, the rules of the CIRC relating to the manner of assessment of autonomous taxation should be interpreted as provided therein and with respect to that part of the assessment of Corporate Income Tax no deductions are made.
Indeed, it was precisely with this meaning that the Corporate Income Tax Return Form 22 was prepared and it was in applying the regime now explicit in article 88(21) that the Applicant filled in the returns referred to in the proceedings, without any perceptible contradiction.
But, if that is the case, as the Applicant contends, the obstacle to the application of the regime resulting from this article 88(21) will only be its possible unconstitutionality, specifically in light of the rule prohibiting taxes of a retroactive nature contained in article 103(3) of the Constitution of the Portuguese Republic, which establishes that 'no one may be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not made in accordance with the law'.
The Constitutional Court has adopted a restrictive interpretation of the scope of this prohibition of taxes having a retroactive nature, understanding that the 'legislator of the constitutional revision of 1997, which introduced the current wording of article 103(3), only intended to establish the prohibition of authentic, or proper, retroactivity of tax law, encompassing only cases in which the taxable event that the new law intends to regulate has already produced all its effects under the old law, excluding from its scope of application situations of retrospectivity or improper, or false retroactivity, that is, those situations in which the law is applied to past facts but whose effects still persist in the present' (rulings no. 18/2011 of 12-01-2011, which follows case law adopted in ruling no. 399/2010).
The rules providing for special payments on account were not, in principle, rules concerning the incidence of Corporate Income Tax, but rather its assessment and payment, so that, to that extent, they would not be covered by the constitutional prohibition of retroactivity. But, before the wording given by Law no. 2/2014 of 16 January to article 93(3) ([13]), in the impossibility of deduction of special payments on account in the period to which they relate and in subsequent periods, those rules could end up creating a situation of Corporate Income Tax incidence, autonomous in relation to any other taxable event, if reimbursement were not to be permitted pursuant to article 93(3) of the CIRC, which depended on the fulfillment of conditions.
However, with the wording given to the referred article 93(3) by Law no. 2/2014, conditions ceased to be required, so that special payments on account only imply, by themselves, the definitive payment of tax when the taxpayer fails to take action to obtain reimbursement within the prescribed period.
And, even in this hypothesis, one would be facing a complex taxable event of successive formation, which is constituted by the sales volume in the year to which the special payments on account relate combined with the impossibility of deduction in the periods provided for in the law and non-reimbursement pursuant to article 93(3) of the CIRC.
Given this regime, the legal situation created with the special payments on account made in the years 2012 and 2013 has not yet been stabilized, which, from the outset, excludes the violation of the prohibition of retroactivity of tax laws, in the view of the Constitutional Court, as the taxable event that the new law intends to regulate did not occur in full nor did it produce all its effects under the old law: 'a case in which the taxable event that the new law intends to regulate has already produced all its effects under the old law and another case in which the taxable event occurred under the old law, but its effects, in particular those relating to assessment and payment, have not yet been fully exhausted will not necessarily have the same constitutional disapproval, since the first situation is, from the point of view of the possible impact on the legal situation of the taxpayer, more serious than the second' (ruling of the Constitutional Court no. 399/10 of 27-10-2010).
Thus, it must be concluded that the authentic interpretation made in article 88(21) of the CIRC, in the part in which it refers to the non-deductibility of special payments on account from autonomous taxation, does not violate the principle of non-retroactivity in the creation of taxes, understood as referring only to authentic retroactivity, relating to taxable events that were completed and produced all their effects in the past.
However, that rule of non-retroactivity of rules creating taxes does not exhaust the constitutional concerns for legal security imposed by the principle of democratic rule of law, as CASALTA NABAIS teaches:
"The principle of legal security, inherent in the idea of democratic rule of law, is far from having been totally absorbed by this new constitutional provision. It is true that it ceased to serve as a balance in the weighing of the legal interests in presence when we are faced with a tax affected by authentic or proper retroactivity. When this occurs, the solution is now dictated, to all intents and purposes, in the Constitution, and the organs applying it cannot, without violating it, proceed to a case-by-case weighing.
But the principle in question unequivocally has a much broader foundation. For it also serves as a criterion for weighing in situations of improper, inauthentic or false retroactivity, as well as in situations in which, with no retroactivity, proper or improper, there is a need to protect the confidence of taxpayers placed in the actions of State organs". ([14])
However, in the specific case of special payments on account, it cannot be concluded that one is not faced with a truly interpretative law, as there was not a consolidated body of case law to the effect of their deductibility from the amount resulting from autonomous taxation and, on the contrary, the solution embodied in article 88(21) could already previously be adopted by the courts, as it was by the Arbitral Tribunal that handed down the decision in CAAD case no. 113/2015-T.
Thus, it cannot be concluded that the authentic interpretation made in that article 88(21), by virtue of article 135 of Law no. 7-A/2016 of 30 March, is violative of the constitutional principle of legal security, as regards the part of that rule that relates to the non-deductibility of special payments on account from the amount of autonomous taxation (…).
4. Thus, the request for arbitral pronouncement fails in this part, as to the illegality of the self-assessments.
5. It should be noted, nonetheless, that we are very sensitive to the issue of the constitutional principle of non-retroactivity of Law in tax matters as it is defended in the Decision of Proc. no. 775/2015, as well as in the learned and excellently addressed dissenting opinion of His Excellency Arbitrator João Taborda da Gama - Proc. 302/2016 - in terms that, once again with due respect, are transcribed as follows:
(…)…In general it is methodologically very questionable the articulation between interpretative rules and the very idea of separation of powers, as well as its methodological basis, I do not see how, after the constitutional prohibition of tax retroactivity, the conduct of the tax legislator can be countenanced in seeking to dispose with force of law over the meaning of a source of law since its creation, fixing one of those meanings and excluding others.
Allowing retroactive interpretative rules in tax matters not only violates the express constitutional prohibition of retroactivity in tax matters but distorts the terms of a principle of tax justice and of tax equality in the context of the current configuration of the tax legal relationship, based on taxpayers' duties of cooperation. Indeed, and more so in a context of structural strong budgetary pressure, legitimizing the use of retroactive tax interpretative rules cannot fail to function as an incentive to the budgetary legislator to, and knowing the role of law and in fact of the Administration and Government in the making of tax laws, under cover of elaborate distinctions of general scope on what are (called) truly interpretative rules, exclude, with retroactive effects, the interpretative meaning of tax rules that do not maximize tax collection.
…In most cases, it will not be difficult for this second-hand legislator to find an interpretative meaning of the rule to its liking, starting with that which has come to be established after the enactment of the rule by the implementation of the tax administration in concrete cases or in generic guidelines, and regardless of the meaning extracted by taxpayers, by the community, or even by the courts. By doing this, through this expedient, so that that meaning is the one that should, ab initio, regulate legal situations that have already occurred, the legislator distorts in an inadmissible way the terms of the relationship between the State and the Citizen, and between the various powers constitutionally provided for and guaranteed.
That retroactive fixing of a normative meaning, which is the same as saying that retroactive exclusion of all other meanings, influencing also in various ways the decision of concrete cases, frontally violates, notably, the constitutional prohibition of retroactivity in tax matters.
This opens the way to permanent revisability of tax laws through interpretative laws, a tendency that, moreover, is already beginning its course. This revisability of the initial normative plane under the cover of interpretative rules has, it must be emphasized, traits of legislative insidiousness, insidiousness inadmissible in a Democratic Rule of Law, because it is a conduct that lacks the frontality of the legislator that chooses to assume clearly before the community the path of tax retroactivity, submitting itself then to the canons that the legal community, at a determined time and place, has perfected for dealing with this complex issue. In choosing to regulate the past in a skewed manner, saying that it is not touching the past because after all it should always have been as it is only now saying, and because escaping a frontal assumption of retroactivity in political, legal, dogmatic and methodological terms, the tax legislator exceeds the limits of its powers and denies the essence of its function, conduct that can only merit the clearest legal repugnance (…).
6 - Finally, mindful of the specific, concrete and relevant considerations adduced in the transcribed decision and, above all, the established sense of the majority ruling, (including in the Constitutional Court), to which - although with the reservations expressed - we adhere, because it is important to contribute to a uniform interpretation and application of the Law (article 8(3) of the Civil Code), it is necessary to conclude that:
- It follows from the text of articles 93(3) and 90(1) of the CIRC, prior to Law no. 2/2014, the possibility of deductibility of special payments on account from the Corporate Income Tax collected derived from autonomous taxation;
- However, the attribution of the nature of interpretative to article 88(21) of the CIRC contained in article 135 of Law no. 7-A/2016 of 30 March is conceded;
- It cannot be concluded that the authentic interpretation made in that rule is violative of the constitutional principle of legal security, or any other, as regards the non-deductibility of special payments on account from the amount of autonomous taxation.
Thus, the request for arbitral pronouncement fails, as to the illegality of the self-assessment.
7 - For that reason, the contested tax assessment act is free of the defect of error concerning the legal presuppositions, imposing its maintenance in the legal order and not its annulment, as requested.
8 - As regards the request for reimbursement of the tax paid and indemnification interest formulated by the Applicant, article 43(1) of the General Tax Code establishes that indemnification interest is due when it is determined that there was an error attributable to the services which resulted in payment of the tax debt in an amount exceeding that legally owed.
In the case, given what has been stated, there is, obviously, no basis for any reimbursement or payment of indemnification interest.
DECISION
We therefore decide to judge as unfounded the arbitral request formulated:
a - Declaring the alleged exception of lack of material jurisdiction to be unfounded;
b - Not declaring the annulment of the refusal order of the Administrative Complaint and the contested tax assessment act;
c - Not ruling on the unconstitutionality complaint formulated;
d - Not determining the reimbursement of the amount of the tax paid and payment of indemnification interest;
e - Condemning the Applicant in the costs of the proceedings.
Value of the proceedings
The value of the proceedings is fixed at €9,556.72, pursuant to article 97-A(1) paragraph a) of the Tax Procedure and Process Code, applicable by virtue of paragraphs a) and b) of article 29(1) of the LRAT and article 3(2) of the Regulations on Costs in Tax Arbitration Proceedings.
Costs
The amount of the arbitration fee is fixed at €918.00, pursuant to Table I of the Regulations on Costs in Tax Arbitration Proceedings, to be paid by the Applicant, pursuant to articles 12(2) and 22(4), both of the LRAT, and article 4(4) of the cited Regulations.
Let notification be made.
Lisbon, 11 April 2017
The Arbitrator,
Fernando Miranda Ferreira
Frequently Asked Questions
Automatically Created