CAAD 740/2015-T: Autonomous Taxation Deductions Under IRC Article 90 – Corporate Tax Ruling

ARBITRAL DECISION

The Arbitrators Counsellor Jorge Lopes de Sousa, Dr. João Taborda da Gama and Prof. Dr. Ana Maria Rodrigues, appointed by the Deontological Council of the CAAD to form the Arbitral Tribunal, constituted on 17-02-2016, agree as follows:

1. REPORT

A... SGPS S.A., (formerly known as B..., SGPS, S.A.) with Tax Registration Number..., registered at Rua..., no.... ..., Building..., Lisbon, hereinafter referred to as "A... SGPS" or "Claimant") filed a request for constitution of a collective arbitral tribunal, pursuant to the provisions of articles 2, no. 1, subsection a), and 10, nos. 1 and 2, of Decree-Law no. 10/2011 of 20 January (hereinafter RJAT) and of articles 1 and 2 of Ordinance no. 112-A/2011 of 22 March, in which the TAX AND CUSTOMS AUTHORITY is the Respondent.

The Claimant seeks a declaration of illegality of the rejection of the administrative complaint that it filed against the self-assessment of Corporate Income Tax (IRC) for the fiscal year 2012, regarding the amount of autonomous taxation rates in IRC of € 4,383,109.23, with its consequent annulment in this part, by improper disallowance of deductions from the tax collected, as well as the reimbursement of this amount plus compensatory interest from 01-09-2013, until full reimbursement.

Subsidiarily, should it be understood that article 90 of the CIRC does not apply to autonomous taxation, the illegality of the assessments of autonomous taxation should then be declared (and consequently annulled) by absence of legal basis for their implementation, with the consequent reimbursement of the same amount of € 4,383,109.23 and the payment of compensatory interest also counted from 01-09-2013.

The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and automatically notified to the Tax and Customs Authority on 17-12-2015.

Pursuant to the provisions of subsection a) of no. 2 of article 6 and subsection b) of no. 1 of article 11 of the RJAT, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable period.

On 02-02-2016 the parties were duly notified of such appointment and did not manifest a will to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, subsections a) and b) of the RJAT and of articles 6 and 7 of the Deontological Code.

In compliance with what is prescribed in subsection c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was constituted on 17-02-2016.

The Tax and Customs Authority responded, defending the lack of merit of the request for arbitral pronouncement.

By order of 29-03-2016, it was decided to dispense with the meeting provided for in article 18 of the RJAT and that the case should proceed with written arguments.

The parties submitted arguments.

The arbitral tribunal was duly constituted, is competent, and the Parties are duly represented.

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

The case does not suffer from any nullities.

2. STATEMENT OF FACTS

2.1. Established Facts

The following facts are considered established:

a) The Claimant is the holding company of Fiscal Group C...;

b) The Claimant filed on 30-05-2013 the IRC Declaration Model 22 for the fiscal year 2012 of its Fiscal Group having determined an amount of autonomous taxation in IRC of € 5,192,691.74 (Documents nos. 2 and 3 attached with the request for arbitral pronouncement, whose contents are given as reproduced);

c) By arbitral award of 01-09-2014, the illegality of autonomous taxation relating to the fiscal year 2012 was declared, in the amount of € 809,582.51, whereby its amount was reduced to € 4,383,109.23 (Document no. 4 attached with the request for arbitral pronouncement, whose content is given as reproduced);

d) The value of IRC (including state surtax), including autonomous taxation, and the consequent municipal surtax, self-assessed, is paid (field 368 of table 10 of the aforementioned Documents nos. 2 and 3);

e) The computer system of the Tax and Customs Authority prevented the deduction from the value of autonomous taxation of the amounts of fiscal benefit recognized to the companies in the fiscal group under the System of Fiscal Incentives for Research and Development (SIFIDE) and the Special Investment Support Regime (RFAI), in the modality of tax credit deductible from the IRC collected;

f) In the fiscal year 2012, the Tax and Customs Authority did not determine the taxable profit of the Claimant by indirect methods (document no. 2 attached with the request for arbitral pronouncement, whose content is given as reproduced);

g) On 29-05-2015, the Claimant filed an administrative complaint against the self-assessment of autonomous taxation for the fiscal year 2012 (administrative proceeding);

h) On 11-09-2015 the Claimant was notified of the rejection of the administrative complaint by order of 09-09-2015 issued by the Director of the Large Taxpayers Unit (Document no. 5 attached with the request for arbitral pronouncement, whose content is given as reproduced);

i) The order rejecting the administrative complaint expressed agreement with Information no. …-AIR/2015, a copy of which is contained in document no. 5, in which the following is stated, among other things:

Following consideration of the arguments invoked by the Taxpayer, here Claimant, in its initial petition, the competent "Decision Draft" was prepared by this Large Taxpayers Unit and is attached to the file, embodied in our earlier Information no. …-AIR1/2015.

1. Through an official communication from this Large Taxpayers Unit, the Taxpayer, now Claimant, was duly notified to, if desired, exercise its right of participation, in the form of prior hearing, in written form, pursuant to the provisions of subsection b) of no. 1 of art. 60 of the General Tax Law, in turn combined with what is prescribed in art. 122 of the Administrative Procedure Code.

2. After the period then granted for the exercise of its right of participation, in the form of prior hearing, in written form, neither did the Taxpayer, here Claimant, come to add other elements to the file that had not already been settled in our earlier "Decision Draft," nor did this Large Taxpayers Unit discover any other elements capable of putting into question the conclusions previously proposed.

In these terms,

1. Considering the permanence of the validity of the prerequisites that, in fact and in law, supported our earlier "Decision Draft," we then understand it to be final, with all legal consequences.

§ II. CONCLUSION

In accordance with what was previously stated and having examined all elements of the file, in particular our earlier "Decision draft" and the procedural documents submitted by the Taxpayer, here Claimant, namely the initial petition and its request for the right to a hearing, since it is evident to this Large Taxpayers Unit that no other understanding is possible than what has been stated, it seems appropriate to us to reject the request contained in the file, in accordance with the content of the "summary table" mentioned in the opening of our Information, with all legal consequences, namely, if applicable, with respect to what is prescribed in art. 163 of the Administrative Procedure Code and, as well, the compliance with what is determined by art. 100 of the General Tax Law.

j) In Information no. …-AIR1/2015, contained in the administrative proceeding (document "Proceeding …-2015 (pp. 88-142)"), whose content is given as reproduced, it is stated, among other things, the following:

§ IV. ANALYSIS OF THE REQUEST

1. Having examined the content of the initial petition submitted by the Taxpayer, now Claimant, and considering that, in the file, the issue is to determine whether or not the tax act under examination suffers from the vices of illegality pointed out to it, we then evaluate the soundness of the arguments brought to our attention on this basis.

2. The thema decidendum in question in the present administrative proceeding for administrative complaint revolves, as can be seen, around the deduction of values resulting from certain fiscal benefits from the tax collected under autonomous taxation, with all legal consequences that may apply to the case.

Having said this,

§ IV. Calculation of tax

§ IV.I. Deduction of fiscal benefits from autonomous taxation collected

§ IV.II. Arguments of the Claimant

1. Notwithstanding the tax act of assessment, because of "self-assessment," results from the direct evaluation immediately promoted by the Taxpayer itself, here Claimant, still this in no way agrees with it in the part relating to the tax collected under autonomous taxation pursuant to the rule currently provided for in art. 88 of the Code of Corporate Income Tax.

2. The Taxpayer, here Claimant, understands that, just as occurs with the collection of corporate income tax, also here, in the collection of tax by way of autonomously taxed expenses, should equally benefit from fiscal benefits relating to both the "Fiscal Regime for Investment Support" ("SIFIDE"), and the "System of Fiscal Incentives for Research and Development" ("RFAI").

3. Starting from the premise - an incorrect one - that autonomous taxation is also corporate income tax, the Taxpayer, here Claimant, understands that the value of fiscal benefits deductible from the collection thereof, which, in a first instance, ceased to be deducted by insufficient amount, may, in a second instance, be deducted from the amount of the collection now determined under autonomous taxation.

4. In this way, in turn considering that its corporate income tax collected by reference to the taxation period relating to the civil year 2012 was insufficient for the "consumption" of the benefits in question, then the amount "not consumed" in that respect should in turn be deducted from the amount of the collection determined in the matter of autonomous taxation.

5. To support this conclusion, the Taxpayer, now Claimant, invokes first of all the provisions of art. 90 of the Code of Corporate Income Tax, in the wording in force at the date of the facts, regarding the rules for deduction relating to fiscal benefits, more specifically "SIFIDE II" and "RFAI," to the point of concluding that the value benefited by the effect of those same benefits can be deducted from the autonomous taxation collected.

6. Starting from these premises, the Taxpayer, now Claimant, states that, with respect to the collection of autonomous taxation, it is entirely possible to deduct from it the value of the fiscal benefits determined - in this case "SIFIDE II" and "RFAI" - and not yet deducted by insufficient collection in the strict category of the principal, bearing in mind the nature of those same autonomous taxation, having as settled that, in its thesis, autonomous taxation has the nature of corporate income tax.

7. In this sense, the Taxpayer, now Claimant, understands that, being therefore owed under this tax, and that the collection encompasses in addition to this also autonomous taxation, this implies that equally to the collection of these - in view of the cited normative - are deductible fiscal benefits that operate by deduction from the collection as is precisely the case with the benefits brought here for consideration.

In these terms,

1. The Taxpayer, now Claimant, concludes, requesting, in the first place, that, having as basis the amount of fiscal benefits that were to be deducted and, as well, the value of the autonomous taxation collection determined within the scope of the entire fiscal sphere, it should then be reimbursed the amount of € 4,383,109.23 (four million, three hundred and eighty-three thousand, one hundred and nine euros and twenty-three cents) corresponding to the total aggregate benefit under "RFAI" and "SIFIDE."

2. In turn, on a subsidiary basis, and in the event of lack of merit of the main request, the Taxpayer, now Claimant, also formulates the request for annulment of the "self-assessment," in the part relating to autonomous taxation, understanding that such amount is not owed.

3. Finally, additionally and complementarily, the Taxpayer, now Claimant, also formulates a request for compensatory interest, considering that the tax is entirely paid and that the essential prerequisite of "error attributable to the authorities" contained in no. 1 of art. 43 of the General Tax Law is verified.

§ IV.III. Assessment

1. As results from the express terms of its initial petition, the Taxpayer, now Claimant, contests requesting that the amounts that are due to it as "credit" of tax by virtue of the benefit of fiscal benefits relating to "SIFIDE" and "RFAI" are in turn deducted from the collection determined and determined by way of autonomous taxation of certain expenses and charges pursuant to the mechanism established by the provision of art. 88 of the Code of Corporate Income Tax, in the wording in force at the date of the facts now under examination.

Now,

1. Having examined the file and considering the legal regime in force at the date of the facts here under examination, it seems appropriate to us to dismiss the request formulated in the present case, since the collection determined under autonomous taxation cannot - nor should - be confused with the collection that results in the strict scope of corporate income tax, with all legal consequences, in particular regarding the mechanism of deduction from the collection of any amounts resulting from the benefit of values derived from fiscal benefits such as those here under consideration.

Indeed,

1. With regard to autonomous taxation provided for in art. 88 of the Code of Corporate Income Tax, it is easily seen that these are determined in a distinct manner, and equally autonomous, in relation to the processing alluded to by art. 90 of the same legal instrument, this one, as is well known, inherent to the nucleus of strict taxation of income and not to that of taxation in the category of expenses as occurs at the level of autonomous taxation. This on the one hand.

2. On the other hand, do not overlook the foundations that led to the legal establishment of both, on the one hand, autonomous taxation and, on the other, fiscal benefits, both distinct realities and with immediate and mediate interests equally disparate to the point of preventing their respective convergence, in particular, with respect to the deduction to the former of the value relating to these latter.

We proceed to explain:

(...)

1. With the establishment of this typology, markedly anti-abuse, indirect, markedly intentional as regards the purposes of combating tax fraud and evasion and of establishment of the principle of tax capacity by connection to the principle of taxation of real income of enterprises, the tax legislator sought to promote, as much as possible, that taxpayers reduced these expenses that negatively affect the collection and, consequently, tax revenue, in particular, under corporate income tax.

2. The mechanism imprinted by virtue of art. 88 of the Code of Corporate Income Tax, through the autonomous taxation of the different realities provided for there, seeks, primarily, to safeguard the general balances of the fiscal system itself and, as well, of corporate income tax itself, doing so in particular by balancing interests.

3. The establishment of autonomous taxation aimed, before all else, to prevent that from the repeated revelation of charges and expenses, such as those listed in that rule, the distortion of fiscal results would be promoted, especially of the final tax revenue itself, all through censurable conduct of tax avoidance and mitigation, unbalancing the pendulum regarding the general idea of justice and the fundamental duty to pay taxes.

4. Unlike what occurs at the level of the intrinsic category of "IRC," which contemplates the taxation of income, autonomous taxation of expenses and charges, in turn, is nothing more than an instrumental, accessory reality essential to obtaining the result thereof, in the fair measure that it was in function (and protection) of corporate income tax that gave rise to the conception of these and in which, all things considered, its own raison d'être is rooted.

5. Autonomous taxation seeks its objective incidence in expenses and charges and not in income, thus remaining distanced from "IRC" in the strict sense, although, as is well known, it is universally linked to this for effects, it may be said, "operational" and "functional."

6. As an example of this, and not going beyond the Code of Corporate Income Tax itself, this one, in no. 1 of its art. 12, immediately emphasizes the relationship of "operationality" and "functionality" between taxation of income and autonomous taxation of certain expenses or charges, without prejudice to still thus, obviously, reiterating the distance between those same realities.

7. Equally reflecting this link of "operationality" and "functionality," and, in turn, also without deviating from the respective distinction, come to support, among others, subsection a) of no. 1 of current art. 23-A, no. 1 of art. 65 and, as well, nos. 4 and 10 of art. 88, all of the Code of Corporate Income Tax, which greatly emphasize the interdependence, doing so without any prejudice to the respective distinction.

In these terms,

1. In light of the core of autonomous taxation and the traits that both, on the one hand, identify it with corporate income tax itself and, on the other, and paradoxically, distance it from this, these, "protecting" in an indirect manner the objective component of income taxation, aim to eliminate or mitigate the tax advantage that that kind of expenses and charges, by their nature, may produce.

2. Therefore, the very collection determined under autonomous taxation itself, in turn, cannot serve as a mitigating factor within the scope of the procedure for determining the taxable base of corporate income tax, precisely the one that the former has as its purpose to keep unharmed in the face of certain conduct tendentially harmful from the tax point of view. This on the one hand.

3. On the other, likewise important for the case sub judicio, by not falling within the strict category of the concrete taxation of income but rather within the inverse perspective (that of expenses), autonomous taxation cannot, therefore, and likewise the respective collection, benefit from fiscal benefits whose emphasis is verified only and solely within the strict and concrete scope of income and never in that of expenses, as occurs in the well-known cases relating to benefits such as "SIFIDE" or "RFAI" itself.

4. Even more serious, all under penalty of the contra legem promotion of the paradox corresponding to the emptying of autonomous taxation collection by virtue of its reduction by benefit of amounts granted for reasons and interests that ab initio conflict with the purposes of the legal establishment of the former, fiscally benefiting precisely those whom the legislator wanted to provide from the start with a "fiscal" penalty through a mechanism (accessory) that taxes not income but rather expenses, eliminating or reducing by indirect means any tax advantage that may be within the strict sphere of income taxation and, consequently, in the respective collection and final revenue.

Wherefore,

1. In light of what we have stated so far, which does not converge with what was argued by the Taxpayer, now Claimant, it seems appropriate to us, in fact, to promote the complete lack of merit not only of the main request but also of the subsidiary request, being, of course, by inherence, equally prejudiced the recognition of any compensatory interest by reason of the non-fulfillment of the respective prerequisites required by the rule contained in art. 43 of the General Tax Law.

§ V. CONCLUSION

In accordance with all that was previously stated, since it is evident to this Large Taxpayers Unit that no other understanding is possible than what was stated here, we propose that the request formulated in the file be entirely rejected in accordance with the content of the "summary table" immediately better identified in the opening of our information, with all legal consequences. It is further proposed that, equally in the event of Superior Concurrence, the notification of the Taxpayer, here Claimant, be promoted in accordance with the rules contained in arts. 35 to 41, all of the Code of Procedure and Tax Process, through official communication to be sent by registered mail, so that, if desired, within the period of 15 (fifteen) days, it may exercise its right of participation, in the form of prior hearing, in written form, pursuant to the provisions of art. 60 of the General Tax Law, in turn combined with the rule contained in art. 121, this of the Administrative Procedure Code, ex w of subsection c) of art. 2 also of the General Tax Law. That is all that is incumbent upon us for now to report.

k) On 09-12-2015, the Claimant filed the request for constitution of the arbitral tribunal that gave rise to the present proceeding.

2.2. Unestablished Facts

The allegation of the Claimant that the companies making up the group at the origin of SIFIDE are not and were not then entities owing to the State and social security any taxes or contributions was not established as fact.

Specifically, the certificates contained in document no. 14 attached with the request for arbitral pronouncement cannot be considered sufficient for this purpose, since some date from 2011 and 2012 and only one of them, relating to company D..., S.A. has a period of validity covering the date on which Model 22 declaration was filed.

2.3. Reasoning for the Establishment of the Statement of Facts

The facts were established on the basis of documents attached with the request for arbitral pronouncement and in the administrative proceeding, with no controversy about them.

Regarding the fact in subsection e) of the established facts, relating to the computer system, the Tax and Customs Authority does not question what is stated by the Claimant in articles 15 to 17 of the request for arbitral pronouncement, rather defending that this is the appropriate operation (articles 139 to 142 of the response).

3. LEGAL ISSUES

The issue that is the subject of the present proceeding is whether, regarding the fiscal year 2012, the fiscal benefits that operate by deduction from the IRC collected, in particular those provided for in SIFIDE II ([1]) and in RFAI ([2]) are deductible from the autonomous taxation collected.

The Claimant formulates a subsidiary request for the event that it is accepted that article 90 of the CIRC is not applicable to the assessment of autonomous taxation, the 2012 self-assessment should be annulled because there is no legal basis for its assessment.

It is convenient to begin with this latter issue, since its solution is relevant to the resolution of the first.

3.1. Issue of the Application of Article 90 of the CIRC to the Assessment of Autonomous Taxation

Articles 89 and 90 of the CIRC establish the following, in the wording given by Law no. 3-B/2010, of 28 April, in force in 2012:

Article 89

Competence for Assessment

Assessment of IRC is carried out:

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

b) By the Directorate-General for Taxation, in the remaining cases.

Article 90

Assessment Procedure and Form

1 - Assessment of IRC proceeds as follows:

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

b) In the absence of submission of the declaration referred to in article 120, the assessment is carried out by 30 November of the year following the one to which it relates or, in the case provided for in no. 2 of the said article, by the end of the 6th month following the end of the period for submission of the declaration mentioned therein and is based on the annual value of minimum monthly remuneration or, when higher, the totality of the taxable base of the closest fiscal year for which it has been determined;

c) In the absence of assessment under the foregoing subsections, the same is based on the elements available to the tax administration.

2 – To the amount determined under the foregoing number the following deductions are made, in the order indicated:

a) That corresponding to international double taxation;

b) That relating to fiscal benefits;

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

d) That relating to withholding taxes not susceptible to compensation or reimbursement under the applicable legislation.

3 – (Repealed by Law no. 3-B/10)

4 – To the amount determined under no. 1, with respect to the entities mentioned in no. 4 of article 120, only the deduction relating to withholding taxes is to be made when these have the nature of tax on account of IRC.

5 – The deductions referred to in no. 2 relating to entities to which the transparent tax regime established in article 6 applies are imputed to the respective partners or members under the terms established in no. 3 of that article and deducted from the amount determined on the basis of the taxable base that has taken into account the imputation provided for in the same article.

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

7 – From the deductions made under subsections a), b) and c) of no. 2, no negative value may result.

8 – To the amount determined under subsections b) and c) of no. 1, only the deductions of which the tax administration has knowledge and that can be made under nos. 2 to 4 are made.

9 – In cases where the provisions of subsection b) of no. 2 of article 79 apply, annual assessments are carried out based on the taxable base determined on a provisional basis, and, with regard to the assessment corresponding to the taxable base for the entire assessment period, the difference found is collected or annulled.

10 – The assessment provided for in no. 1 may be corrected, if applicable, within the period referred to in article 101, and the differences found are then collected or annulled.

These articles 89 and 90 of the CIRC, as well as other norms of this Code, such as those relating to the declarations provided for in articles 120 and 122, are applicable to autonomous taxation.

From the outset, it is now settled, following abundant arbitral case law and the positions assumed by the Tax and Customs Authority, that tax collected based on autonomous taxation provided for in the CIRC has the nature of IRC. ([3]) Moreover, beyond the unanimity of case law, article 23-A no. 1, subsection a), of the CIRC, in the wording of Law no. 2/2014, of 16 January, leaves no room for any reasonable doubt today, corroborating what already previously resulted from the literal tenor of article 12 of the same Code.

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

Therefore, that article 90 also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Authority, following the submission or not of declarations, there being no other provision in force in 2012 that provided for different terms for its assessment.

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

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

Nevertheless, the fact that a self-assessment of IRC, carried out under no. 1 of article 90, may contain several partial calculations based on various rates applicable to certain taxable bases, does not imply that there is more than one assessment, as results from the very terms of that rule when it makes reference to "assessment," in the singular, in all cases where it is "made by the taxpayer in the declarations referred to in articles 120 and 122," having "as basis the taxable base contained therein" (whether determined based on the rules of articles 17 and following or determined based on the various situations provided for in article 88).

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

In any case, whatever calculations are to be made, the self-assessment that the taxpayer or the Tax and Customs Authority must carry out under articles 89, subsection a), 90, no. 1, subsections a), b) and c), and 120 or 122, is unitary, and based on it that global IRC is calculated, whatever the taxable bases relating to each of the types of taxation that underlie it may be.

Indeed, as the Claimant well states when formulating its subsidiary request, if this article 90 were not applicable to the assessment of autonomous taxation provided for in the CIRC, we would have to conclude that, in 2012, there would be no rule providing for its assessment, which would lead to illegality, by violation of article 103, no. 3, of the CRP, which requires that assessment of taxes be made "under the terms of the law."

There is no even controversy over the applicability of article 90 of the CIRC to the assessment of autonomous taxation, since the Tax and Customs Authority, in article 26 of its Response states that there are "two distinct calculations which, although processed under the terms of subsection a) of no. 1 of art. 90 of the CIRC, in the declarations referred to in articles 120 and 122 of the same code, are carried out on the basis of different parameters, since each one is materialized in the application of its own rates, provided for in articles 87 or 88 of the CIRC, to the respective taxable bases determined equally according to its own rules."

It should also be noted that the new rule of no. 21 added to article 88 of the CIRC by Law no. 7-A/2016, of 30 March, independent of whether or not it is truly interpretative, in no way alters this conclusion, since it establishes, with respect to the form of assessment of autonomous taxation, that it "is carried out under the terms provided for in article 89 and is based on the values and rates that result from the provisions of the preceding numbers."

Indeed, if it is true that this new rule comes to explain how the amounts of autonomous taxation are calculated (which already resulted from the very text of the various provisions of article 88) and that competence belongs to the taxpayer or to the Tax Authority under the terms of article 89 (which was also uncontroversial), it is also clear that it does not eliminate the need to use the procedure provided for in no. 1 of article 90, in particular in the cases provided for in its subsection c) in which assessment falls to the Tax and Customs Authority and is "based on the elements available to the tax administration," which will include the possibility of assessing based on autonomous taxation, if a declaration is not submitted by the taxpayer and the Tax and Customs Authority has elements that prove its prerequisites.

Therefore, both before and after Law no. 7-A/2016, of 30 March, article 90, no. 1, of the CIRC is applicable to the assessment of autonomous taxation, although based on distinct taxable bases and rates, both in the various situations referred to in article 87 of the CIRC and in those provided for in article 88 of this Code.

3.2. Issue of Deductibility of Investment Expenses Provided for in SIFIDE II from Amounts Owed by Virtue of Autonomous Taxation

In 2011, the System of Fiscal Incentives for Research and Development (SIFIDE II) was in force, which was approved by article 133 of Law no. 55-A/2010, of 31 December, with amendments introduced by Law no. 64-B/2011, of 30 December.

This legislation establishes the following, in its articles 4 and 5:

Article 4

Scope of Deduction

1 - Taxpayers subject to IRC resident in Portuguese territory who carry on, as their principal activity, an agricultural, industrial, commercial and service activity and non-residents with a permanent establishment in that territory may deduct from the amount determined under article 90 of the Code of IRC, up to its extent, the value corresponding to research and development expenses, in the part that has not been the subject of financial participation by the State on a non-refundable basis, carried out in the taxation periods from 1 January 2011 to 31 December 2015, in a dual percentage:

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

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

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

3 - The deduction is made, under the terms of article 90 of the Code of IRC, in the assessment relating to the taxation period mentioned in the preceding number.

4 - Expenses which, due to insufficient collection, cannot be deducted in the fiscal year in which they were incurred may be deducted up to the sixth immediate fiscal year.

5 - For the purposes of the foregoing numbers, when a change in the taxation period occurs in the year of commencement of benefit, the annual period commencing in that year should be considered.

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

7 - For taxpayers who are reorganized, as a result of concentration acts as defined in article 73 of the Code of IRC, the provisions of no. 3 of article 15 of the Status of Fiscal Benefits apply.

Article 5

Conditions

Only taxpayers subject to IRC who cumulatively fulfill the following conditions may benefit from the deduction referred to in article 4:

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

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

The Claimant argues, in summary, that if the collection of autonomous taxation is considered IRC collection, it is relevant for deduction of tax credits from SIFIDE II, in the year 2012.

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

And, as also stated, there is no legal support to affirm that, in the event that several calculations must be made in a declaration to determine IRC, more than one self-assessment is made.

The legislation that approved SIFIDE does not state that credits derived therefrom are deductible from all and any IRC collection, rather it defines the scope of deduction by alluding, in its no. 1 of article 4, "to the amount determined under article 90 of the Code of IRC, up to its extent."

No. 3 of the same article 4 confirms that it is to the amount determined under article 90 of the CIRC that is relevant to carrying out the deduction when it says that "the deduction is made, under the terms of article 90 of the Code of IRC, in the assessment relating to the taxation period mentioned in the preceding number."

Thus, by mere interpretative declaration, it is concluded that article 4, no. 1, of SIFIDE II, when establishing the deduction "to the amount determined under article 90 of the Code of IRC, up to its extent," implies deduction from the amount of autonomous taxation that is determined under article 90.

The fact that article 5 of SIFIDE II excludes the benefit when taxable profit is determined by indirect methods and autonomous taxation includes situations where indirect taxation of profits is sought (namely, by not giving relevance to or discouraging facts capable of reducing them) has no relevance for this purpose, since the concept of "indirect methods" has a precise scope in tax law, which is specified in article 90 of the GTA (in addition to special rules), referring to means of determining taxable profit, the use of which is not provided for calculating the taxable base of autonomous taxation provided for in article 88 of the CIRC.

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

Furthermore, it cannot be seen, in the possible anti-abuse nature that some autonomous taxation assumes ([5]) an explanation for its exclusion from the collection thereof from the scope of deductibility of the benefit of SIFIDE II, since there is no legal support to exclude the deductibility from the collection resulting from corrections based on rules of an indisputably anti-abuse nature, such as, for example, those relating to transfer pricing or thin capitalization.

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

Thus, pointing to the literal tenor of article 4 of SIFIDE II in the sense that deduction applies also to the collection of IRC derived from autonomous taxation and determined under article 90 of the CIRC, only through a restrictive interpretation could the application of the fiscal benefit to the IRC collection provided by autonomous taxation be excluded.

The viability of a restrictive interpretation encounters, from the outset, a general obstacle, which is that rules creating fiscal benefits have the nature of exceptional rules, as follows from the express tenor of article 2, no. 1, of the EBF, whereby, in the absence of a special rule, they should be interpreted in their precise terms, as is settled case law. ([6]) In the case of fiscal benefits, the possibility of extensive interpretation is explicitly provided for (article 10 of the EBF), but not of restrictive interpretation, whereby, as a rule, the fiscal benefit should not be interpreted with less breadth than that which, in an interpretative declaration, results from the tenor of the rule that provides for it.

In any case, a restrictive interpretation is only justified when "the interpreter reaches the conclusion that the legislator adopted a text that betrays his intention, insofar as it says more than what he intended to say. Also here the ratio legis will have a decisive word. The interpreter should not be carried away by the apparent scope of the text, but should restrict it so as to make it compatible with legislative thought, that is, with that ratio. The argument on which this type of interpretation rests is usually expressed as: cessante ratione legis cessat eius dispositio (where the reason for the law ends its scope ends)" ([7]).

As a basis for a restrictive interpretation, it could be suggested that some autonomous taxation aims to discourage certain conduct of taxpayers capable of affecting taxable profit and, consequently, reducing tax revenue, and its deterrent force would be attenuated with the possibility that the respective collection could be subject to deductions.

However, the deterrence of such conduct is justified only by concerns with tax revenue protection, and fiscal benefits granted, by definition, are "exceptional measures instituted for the protection of relevant non-tax public interests superior to those of the taxation they prevent" (article 2, no. 1, of the EBF).

And, in the case of SIFIDE II fiscal benefits, the non-tax reasons that justify their imposition over tax revenues are, from the legislative perspective, of enormous importance, as is inferred from the reasoning in the Report of the State Budget for 2011.

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

Considering that one of Portugal's competitive advantages lies in betting on technological capacity, scientific employment and conditions for assertion in the European space, the Proposed State Budget for 2011 proposes to renew SIFIDE (System of Fiscal Incentives for Research and Development), now in the SIFIDE II version, to be in force in the periods 2011 to 2015, making it possible to deduct from IRC collection for companies that invest in R&D (research and development capacity).

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

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

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

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

Therefore, it is certain that we are dealing with fiscal benefits whose justification is legislatively considered more relevant than the obtaining of tax revenue, inferred from that article 92 that the legislative intention to encourage investment in research and development provided for in SIFIDE II is so firm that it goes to the point of not even establishing any limit to the deductibility from IRC collection, despite this tax regime having been created and applied in a period of notorious difficulties in public finances.

Thus, no legal basis is seen, in particular in light of the legislative intention that can be detected, to, on the basis of a restrictive interpretation, exclude the deductibility of the SIFIDE II fiscal benefit from the collection of autonomous taxation that results directly from the letter of article 4, no. 1, of the respective legislation, combined with article 90 of the CIRC.

On the other hand, a possible limitation of the application of the fiscal benefit to companies that presented taxable profit in 2012 would result in a very strong restriction of its field of application, since, as is public fact, the vast majority of companies, in that year and in previous ones, presented fiscal losses, although they paid IRC by other means.

In fact, according to statistics published by the Tax and Customs Authority, in the year 2011 (the last year whose data would have been available when the Proposed State Budget for 2012 was presented, so it is to be assumed that it was considered in weighing the scope of the fiscal benefit), more than half of the IRC declarations presented negative net value and in the taxation period of 2011 only 26% of taxpayers presented IRC Assessed (Table 7), and approximately 71% of taxpayers made IRC payments (Table 8), via Special Payment on Account, or other positive components of the tax (Autonomous Taxation, Surtax, State Surtax, IRC from previous taxation periods, etc.). ([8]).

Therefore, it is manifest that the applicability of the fiscal benefit to companies which, although presenting fiscal losses, paid IRC, including by way of autonomous taxation, greatly expanded the number of potentially beneficiary companies and, consequently, is more consistent with the legislative intention underlying SIFIDE II than that defended by the Tax and Customs Authority.

On the other hand, as stated, it cannot be overlooked that autonomous taxation aims to protect or increase tax revenues and that fiscal benefits granted are, by definition, "exceptional measures instituted for the protection of relevant non-tax public interests superior to those of the taxation they prevent" (article 2, no. 1, of the EBF).

That is, in the case at hand, in establishing a fiscal benefit by deduction from IRC collection, the legislator chose to forgo the tax revenue that this tax could provide, to the extent of the granting of the fiscal benefit. For this weighing of the relative interests at stake (tax revenue versus strong stimulus to investment) it is indifferent whether that revenue comes from calculations made on the basis of article 87 or article 88 of the CIRC. In fact, whatever the form of calculation of that tax revenue, one is faced with money whose collection the legislator considered to be less important than the pursuit of the economic purpose referred to. Of the two alternatives that faced the legislator regarding the incentive to investment provided for in SIFDE II, which were, on the one hand, to keep intact the revenues from IRC (including those from autonomous taxation) and not see investment incentivized and, on the other hand, to achieve this incentive with loss of IRC revenues, the weighting that necessarily underlies SIFIDE II is that of opting for the creation of the incentive at the expense of revenues. And, naturally, since the creation of the investment incentive is better, from the legislative perspective, than the collection of revenues, it is not clear how it can be relevant that the IRC revenues that are foregone to achieve the incentive come from general taxation of IRC provided for in no. 1 of article 87 or from taxation at special rates provided for in nos. 4 to 6 of the same article, or from autonomous taxation provided for in article 88: in all cases, the alternative is the same between creation of the incentive and collection of IRC revenues and the relative weighting that can be done of conflicting interests is identical, whatever the forms of determining the amount of IRC that is foregone to create the incentive.

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

Therefore, it is certain that we are dealing with a fiscal benefit whose justification is legislatively considered more relevant than the obtaining of tax revenue from IRC, whatever the basis of its calculation, since what is at issue is always whether or not to forgo a certain sum of money to create an investment incentive.

In this context, the nature of autonomous taxation and the solutions legislatively adopted, in general, with respect to them, have no relevance to the assessment of this issue, since this must be assessed in light of the specific interests that clash in its weighing.

In fact, what is at issue is, exclusively, to determine the scope of SIFIDE II, which establishes a regime of an exceptional nature, which aimed to pursue certain public interests, and not to contribute to the decision of any conceptual issue on the nature of autonomous taxation, a matter on which there is no apparent concern, either in the text of the law or in the Report of the Budget for 2011, from the legislative perspective.

For the same reason that what is at issue is to interpret the scope of the diploma of a special nature that is SIFIDE II, no relevance can be attributed, for this purpose, to the rule of no. 21 of article 88 of the CIRC, added by Law no. 7-A/2016, of 30 March, in the part in which it states that no "deductions are made from the global amount determined," notwithstanding the alleged interpretative nature that was attributed to it.

In fact, there is no sign, neither in Law no. 7-A/2016, nor in the Report of the Budget for 2016, nor in its discussion, that with the addition to article 88 of the CIRC of a general rule prohibiting deductions from the global amount determined of autonomous taxation, it was intended to restrictively interpret the expression "deduct from the amount determined under article 90 of the Code of IRC" that appears in a special rule of a separate legislation, such as SIFIDE II.

And, in the absence of an unequivocal intention to the contrary, the rule applies that general law does not alter special law (article 7, no. 3, of the Civil Code), which finds its justification in the fact that "the general regime does not include consideration of the particular conditions that justified precisely the issuance of the special law." ([9])

Furthermore, the referred rules of SIFIDE II are aimed at encouraging taxpayers subject to IRC to make investments in the period between 01-01-2011 and 31-12-2015, whereby, being the fiscal benefit a counterpart of the adoption of legislatively desired and encouraged conduct, it would be incompatible with the constitutional principle of trust, inherent in the principle of the democratic rule of law (article 2 of the CRP), not to recognize these conduct the favorable tax effects provided for in the law in force at the moment they occurred. Therefore, if hypothetically Law no. 7-A/2016 intended to eliminate, totally or partially, the favorable tax effects that SIFIDE II promised to taxpayers who, with justified trust, adopted the conduct provided for there, it would be materially unconstitutional, by violation of that principle.

By what has been stated, converging the literal and rational elements of the interpretation of article 4 of SIFIDE II in the sense that the investment expenses provided for therein are deductible from "the amount determined under article 90 of the Code of IRC, up to its extent," it is to be concluded that they are deductible from the entirety of that collection, which encompasses, in addition, that derived from the taxation of profits in each fiscal period, that arising from the special payment on account and other positive components of the tax, in particular autonomous taxation, state surtax and IRC from previous taxation periods.

It therefore proceeds, the request for arbitral pronouncement as regards this issue.

3.3. Issue of Deductibility of Investment Expenses Provided for in RFAI from Amounts Owed by Virtue of Autonomous Taxation

The Fiscal Regime for Investment Support carried out in 2009 (RFAI 2009) was approved by Law no. 10/2009, of 10 March.

It was maintained in force in the year 2012 by article 162 of Law no. 64-B/2011, of 30 December (State Budget Law for 2012).

With regard to IRC, the said regime resulted in a fiscal benefit provided for in article 3 of that Law, which establishes the following, insofar as is relevant here:

Article 2

Scope of Application and Definitions

1 - RFAI 2009 applies to taxpayers subject to IRC who carry on, as their principal activity, an activity:

a) In the agricultural, forestry, agro-industrial, energy and tourism sectors and also in the extractive or transformative industry, with the exception of the steel, shipbuilding and synthetic fibers sectors, as defined in article 2 of Regulation (EC) no. 800/2008, of the Commission, of 6 August;

b) In the scope of next-generation broadband networks.

2 - For the purposes of this regime, the following investments are considered relevant provided they are allocated to the business:

a) Investment in tangible fixed assets acquired in a new state, with the exception of:

i) Land, except where they are intended for the operation of concessions in mining, natural mineral water and spring water, quarries, clay pits and sand pits in extractive industry projects;

ii) Construction, acquisition, repair and expansion of any buildings, except if they are factory installations or allocated to administrative activities;

iii) Light passenger vehicles or mixed-use vehicles;

iv) Furniture and comfort or decoration items, except hotel equipment allocated to tourism activities;

v) Social facilities, with the exception of those that the company is obliged to have by legal determination;

vi) Other investment goods that are not directly and absolutely essential to the productive activity carried out by the company;

b) Investment in intangible fixed assets, consisting of expenses relating to technology transfer, in particular through the acquisition of patent rights, licenses, know-how or technical knowledge not protected by patent.

3 - The fiscal incentives provided for in this regime may benefit taxpayers subject to IRC who cumulatively meet the following conditions:

a) They have regularly organized accounting, in accordance with accounting standardization and other legal provisions in force for their respective sector of activity;

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

c) They maintain in the company and in the region for a minimum period of five years the goods that are the subject of the investment;

d) They are not debtors to the State and social security of any contributions, taxes or dues or have the payment of their debts duly secured;

e) They are not considered companies in difficulty under the terms of the Communication of the Commission - Community guidelines on State aid for emergency aid and restructuring to companies in difficulty, published in the Official Journal of the European Union, no. C 244, of 1 October 2004;

f) They carry out relevant investment that provides for the creation of jobs and their maintenance until the end of the deduction period contained in nos. 2 and 3 of article 3.

4 - In the case of taxpayers subject to IRC that do not fall within the category of micro, small and medium-sized enterprises, as defined in Annex I of Regulation (EC) no. 800/2008, of the Commission, of 6 August, the investment expenses referred to in subsection b) of no. 2 cannot exceed 50% of relevant investments.

5 - It is considered investment made in 2009 that corresponding to the additions, verified in that fiscal year, of fixed assets and also that, having the nature of tangible assets and not relating to advances, is translated into additions to fixed assets under construction.

6 - For the purposes of the preceding number, the additions of tangible fixed assets resulting from transfers of fixed assets under construction carried forward from previous fiscal years are not considered, except if they are advances.

Article 3

Fiscal Incentives

1 - To taxpayers subject to IRC resident in Portuguese territory or who have a permanent establishment there, who carry on as their principal activity a commercial, industrial or agricultural activity covered by no. 1 of the previous article who carry out, in 2009, investments considered relevant, the following fiscal benefits are granted:

a) Deduction from IRC collection, up to 25% thereof, of the following amounts, for investments carried out in regions eligible for support within the scope of incentives with a regional purpose:

i) 20% of relevant investment, for investment up to the amount of (euro) 5,000,000;

ii) 10% of relevant investment, for investment of amount exceeding (euro) 5,000,000;

(...)

2 - The deduction referred to in subsection a) of the preceding number is made in the assessment relating to the taxation period commencing in 2009.

3 - When the deduction referred to in the preceding number cannot be made in full due to insufficient collection, the amount still not deducted may be deducted, under the same conditions, in the assessments of the four following fiscal years.

(...)

5 - The global amount of fiscal incentives granted under the preceding numbers cannot exceed the value resulting from the application of the maximum limits applicable to investment with a regional purpose for the period 2007-2013, in force in the region where the investment is carried out, contained in article 7.

As can be seen from subsection a) of no. 1 of this article 3, the fiscal benefit is concretized through "deduction from IRC collection."

There is agreement between the Parties that this expression does not have substantially different scope from that used in SIFIDE II which is "amount determined under article 90 of the Code of IRC." ([10])

By what was already stated above, the collection derived from autonomous taxation provided for in the CIRC is "IRC collection," whereby the expression used in RFAI does not exclude the deduction of eligible investments from the collection provided by those taxation.

Also regarding this fiscal benefit, what was stated above applies regarding

– the exceptional nature of the rules that provide for this fiscal benefit;

– the prevalence of the interests that the fiscal benefit aims to achieve over the interest in obtaining tax revenues;

– the relevance of the collection derived from autonomous taxation to give the fiscal benefit considerable scope, given the minimal IRC collection that comes from assessment based on taxable profit;

– the inadmissibility, in light of the constitutional principle of trust, of a hypothetical restrictive a posteriori interpretation of the scope of legislation that created a fiscal benefit materialized through a tax advantage that is a counterpart to a certain conduct by the taxpayer.

Therefore, also as regards this issue, the request for arbitral pronouncement proceeds.

3.4. Conclusion

As results from what has been stated, the decision on the administrative complaint is illegal in adopting the understanding that investments covered by SIFIDE II and by RFAI could not be deducted from the autonomous taxation collected.

With regard to self-assessment, one cannot assert, without more, its illegality for it not having been demonstrated that the Claimant met all the conditions provided for in those legislation to be able to benefit from the regimes provided for in those legislation.

However, the self-assessment is illegal insofar as, by incorrect interpretation of the law, it was based on the assumption that the fiscal benefits in question are not deductible from autonomous taxation collection, an assumption that is inherent in the unfeasibility of making that deduction that results from the computer system for submitting Model 3 declaration.

Therefore, the request for arbitral pronouncement proceeds as regards the request for a declaration of illegality of the decision on the administrative complaint and proceeds as regards the request for a declaration of illegality of self-assessment, without prejudice to the Tax and Customs Authority, in execution of this award, being able to determine whether or not the conditions provided for in article 5, subsection b) of SIFIDE II and article 2, no. 3, subsection d), of RFAI are met, on which depends the possibility of enjoying the fiscal benefits.

4. REIMBURSEMENT OF AMOUNTS PAID AND COMPENSATORY INTEREST

The Claimant requests reimbursement of the amount paid plus compensatory interest.

As results from what has been stated, the decision on the administrative complaint is illegal, by error on the premises of law, in excluding the right of the Claimant to deduct investments capable of being covered by SIFIDE II and by RFAI from the amount of autonomous taxation.

However, by what was stated in the reasoning of the statement of facts, it was not demonstrated that the Claimant was in the conditions provided for in article 5, subsection b) of SIFIDE II and article 2, no. 3, subsection d), of RFAI, on which depends the possibility of enjoying the fiscal benefits.

Therefore, without prejudice to the rights to reimbursement and compensatory interest potentially being recognized in execution of judgment, they cannot be adjudged as having merit in the present proceeding.

5. DECISION

By which the members of this Arbitral Tribunal agree to:

– adjudge as having merit the request for arbitral pronouncement as regards the request for a declaration of illegality of the decision on the administrative complaint and annul it;

– adjudge as having merit the request for a declaration of illegality of self-assessment, without prejudice to the Tax and Customs Authority in execution of judgment, being able to determine whether or not the conditions provided for in article 5, subsection b) of SIFIDE II and article 2, no. 3, subsection d), of RFAI, on which depends the possibility of enjoying the fiscal benefits, are met;

– adjudge as lacking merit the requests for reimbursement and payment of compensatory interest, without prejudice to the respective rights being recognized in execution of judgment.

6. VALUE OF THE CASE

In accordance with the provisions of art. 305, no. 2, of the CPC and 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Regulation of Costs in Arbitration Proceedings in Tax Matters, the value of the case is fixed at € 4,383,109.23.

7. COSTS

Pursuant to art. 22, no. 4, of the RJAT, the amount of costs is fixed at € 55,386.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Tax and Customs Authority.

Lisbon, 16-05-2016

The Arbitrators

(Jorge Lopes de Sousa)

(João Taborda da Gama)

(Ana Maria Rodrigues)

[1] Initially provided for in article 133 of Law no. 55-A/2010, of 31 December, amended by articles 163 and 164 of Law no. 64-B/2011, of 30 December, and later incorporated by Decree-Law no. 82/2013, of 17 June, into the Fiscal Code of Investment.

[2] Approved by article 13 of Law no. 10/2009, of 10 March, and, insofar as is relevant here, maintained in force in 2012, by article 162 of Law no. 64-B/2011, of 30 December, and incorporated by Decree-Law no. 82/2013, of 17 June, into the Fiscal Code of Investment.

[3] The Tax and Customs Authority expressly states in the information on which the decision on the administrative complaint is based "that the fact that autonomous taxation has the nature of IRC does not mean that the entire legal framework provided for in the Code of this tax can be applied to this figure."

[4] No. 6 of article 87 of the CIRC was repealed by Law no. 55/2013, of 8 August, which has no relevance for this purpose of demonstrating that outside the scope of autonomous taxation there were and are partial calculations of IRC based on special rates applicable to certain taxable bases.

[5] Currently only with respect to some autonomous taxation can the anti-abuse nature be found, since, as CASALTA NABAIS teaches, Tax Law, 7th edition, page 543, "it is, however, evident that the enlargement and aggravation of which such autonomous taxation currently have a clear purpose of obtaining more tax revenue."

[6] In this sense, the award of the Supreme Administrative Court of 15-11-2000, case no. 025446, published in the Bulletin of the Ministry of Justice no. 501, pages 150-153, can be seen, in which abundant case law of the Supreme Administrative Court and the Supreme Court of Justice is cited.

This Bulletin of the Ministry of Justice is available at:

http://www.gddc.pt/actividade-editorial/pdfs-publicacoes/BMJ501/501_Dir_Fiscal_a.pdf

[7] BAPTISTA MACHADO, Introduction to Law and Legitimating Discourse, page 186.

[8] This text is available at http://info.portaldasfinancas.gov.pt/NR/rdonlyres/70E81137-189A-440E-AF11-88B4A6CC1C9A/0/Notas_Previas_IRC_20092011.pdf.

Moreover, for several years now only a minority of taxpayers have paid IRC based on the taxable profit of their respective fiscal year, as can be seen in the statistical documents published at http://info.portaldasfinancas.gov.pt/pt/dgci/divulgacao/estatisticas/estatisticas_ir/:

– 29% in the taxation period of 2010, in which approximately 76% of taxpayers made IRC payments via Special Payment on Account, or other positive components of the tax (Autonomous Taxation, Surtax, State Surtax, IRC from previous taxation periods, etc.);

– 31% in the taxation period of 2009, in which 77% of taxpayers made payments via Special Payment on Account, Autonomous Taxation and IRC from previous fiscal years;

– 34% in the taxation period of 2008, in which 79% of taxpayers made payments via Special Payment on Account, Autonomous Taxation and IRC from previous fiscal years;

– 36% in the taxation period of 2007, in which 80% of taxpayers made payments via Special Payment on Account, Autonomous Taxation and IRC from previous fiscal years.

[9] OLIVEIRA ASCENSÃO, The Law – Introduction and General Theory, page 260.

[10] The Tax and Customs Authority expresses agreement with the Claimant in articles 72 and 73 of its Response in which it states that "as is evident, the Claimant is in agreement, with respect to the fact that the editorial variants used in different provisions of the Fiscal Code of Investment, the Status of Fiscal Benefits and extraneous legislation, which regulate fiscal benefits aim to achieve the same result – deduction from IRC assessed under the terms of subsection a) of no. 1 of art. 90 of the respective Code – and, therefore, do not introduce any difference in the delimitation of its actual content."