IRC Autonomous Taxation and Special Advance Payment (PEC) Deduction – CAAD Case 746/2015-T

ARBITRAL DECISION

I. REPORT

1. On 11 December 2015, A..., S.A.", legal entity no. ..., with registered office at Street ... - Building ..., ... Room..., ...-... ... (hereinafter referred to as "A..." or "Claimant"), filed a request for arbitral pronouncement and constitution of an Arbitral Tribunal, pursuant to the provisions of article 10 of Decree-Law no. 10/2011, of 20 January [Legal Framework for Tax Arbitration (RJAT)] and articles 1 and 2 of Order no. 112-A/2011, of 22 March, requesting that the Tax and Customs Authority (hereinafter referred to as "Respondent") pronounce itself, in light of the provisions of article 99 of the CPPT, on the partial illegality of the Corporate Income Tax (IRC) assessment no. 2012 ... relating to the year 2011, in the part corresponding to autonomous taxations in the amount of €49,521.36.

2. In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator.

3. Pursuant to paragraph 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, Maria Manuela Roseiro, the undersigned, was appointed as sole arbitrator, who accepted the appointment within the legally stipulated period.

4. The parties having been notified and there being no refusal of such appointment (article 11, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code), the arbitral tribunal was constituted on 25 February 2016, in accordance with the provisions of paragraph c) of paragraph 1 of article 11 of the RJAT, and on the same date an arbitral order was issued notifying the Tax and Customs Administration (AT or Respondent) pursuant to article 17 of the RJAT.

5. On 4 April 2015, the Respondent submitted its Reply, attaching the administrative file on 6 April.

6. Following notification by the tribunal, the Claimant responded on 10 May 2016, and with the consent of the parties, the meeting provided for in article 18 of the RJAT was dispensed with, with a period of ten days set for submission of pleadings, to run successively.

7. The pleadings, in which the parties maintained their initial positions, were submitted on 7 and 26 June 2016, respectively, and the tribunal communicated that the decision would be rendered by 25 August 2016.

8. Request for Arbitral Pronouncement

The Claimant invokes, in summary (our responsibility):

a) On 30 May 2012, it submitted Corporate Income Tax return form 22 for 2011 of the group of companies (RETGS) of which it is the parent company, showing a fiscal loss of €1,126,703.59 and a total amount of tax to pay of €49,925.37.

b) On 4 March 2015 it submitted a request for administrative review of the IRC self-assessment act for 2011, requesting reimbursement of €49,521.36 relating to the deduction of amounts paid as special payments on account in the value of autonomous taxations, which the Respondent denied on 15 September 2015, considering article 90 of the CIRC not applicable to the case and, given the anti-abuse function of autonomous taxations, denying the possibility of offsetting these with special payments on account.

c) It does not agree with the decision because special payments on account constitute an advance of IRC due ultimately (Constitutional Court Decision no. 494/2009) and autonomous taxations are an integral part of the IRC collection.

d) The AT itself and decisions of arbitral tribunals have decided that autonomous taxations are part of the IRC regime, that "autonomous taxation is IRC", that such taxations are "an integral and inseparable part of IRC collection" whereby the value of the special payments on account that ceased to be deducted due to insufficiency of IRC collection (said normal) could after all have been deducted up to the amount of the autonomous taxations paid by it (since this amount should have been considered part of the IRC collection), a possibility not ruled out by the interpretation adopted in information from the DSIRC, attached to the case file.

e) The fact that the CIRC expressly mentioned autonomous taxations in article 12 and paragraph a) of paragraph 1 of article 23-A does not mean that article 90 regarding assessment does not implicitly apply to them, otherwise there would be no rule regulating it. Since their inclusion in the CIRC, autonomous taxations have been part of this tax, which justifies their exclusion in article 12, with the wording in force from 2014 of article 23-A merely providing clarification.

f) Thus, in case 219/2015, the arbitral tribunal decided that article 90 applies to all forms of determining the tax due in all situations provided for in the Code, including additional assessment. And concluded that the autonomy of autonomous taxations is restricted to the applicable rates and their respective taxable matter, but the calculation of the amount is carried out pursuant to article 90, and the forms of assessment provided for in chapter V apply to it because article 88 merely defines the base of incidence and the rates to apply.

g) Thus, autonomous taxations are covered by IRC collection for the purpose of deducting the special payments on account referred to in paragraph d) of paragraph 2 of article 90 of the CIRC, and this without prejudice to their anti-abuse character (whether in the case of incidence on certain expenses – vehicle charges, travel allowances and representation expenses - which the legislator wishes to discourage, or in the case of expenses intended to penalize presumptively evasive or fraudulent behaviour, such as undocumented expenses) because the Code also in other cases (e.g. rules on thin capitalization) does not render the collection derived therefrom cease to be considered IRC collection.

h) Because autonomous taxations are an integral part of IRC and its collection and the special payments on account are an advance of IRC, nothing prevents, contrary to the AT's understanding in denying the request for administrative review, the deduction of special payments on account from IRC collection (which includes autonomous taxations), without compromising the objectives of combating tax evasion.

i) Because it paid a tax obligation greater than that legally due, it has the right to payment of compensatory interest, pursuant to articles 43 and 100 of the LGT.

j) Paragraph 2 of article 43 provides for this right in the case of assessment being carried out on the basis of the taxpayer's declaration if it followed generic guidelines of the AT duly published, which should be understood as occurring insofar as the functioning of the AT's computer system through which the model 22 declaration is submitted, which does not allow the deduction of values entered in field 356 from the portion of IRC collection reflected in fields 365 (relating to autonomous taxations), effecting such deduction only to the amount shown in field 351 (portion of IRC inciding on period income).

k) The tribunal is competent to examine the Request, filed within 90 days from the date of denial of the review request, and must declare the illegality of the decision denying the review request and the partial illegality of the IRC assessment act for 2011 (no. 2012...), reimbursing the amount paid and ordering payment of compensatory interest.

9. The Respondent's Reply

The Respondent replied, in summary (our responsibility):

Existence of Exception – Lack of Jurisdiction of the Tribunal

a) The request for arbitral pronouncement was filed following the denial of a request for administrative review of the self-assessment IRC act for the year 2011 filed on 05.03.2015, a date by which the period for gracious objection provided for in article 131 of the CPPT had already expired.

b) In light of the provisions of articles 2, paragraph 1, paragraph a) and 4, paragraph 1, both of the RJAT, and articles 1 and 2, paragraph a), both of Order no. 112-A/2011, of 22 March, there exists the exception of material lack of jurisdiction of this Arbitral Tribunal to examine the request, requiring absolution of the Respondent from the claim [cf. articles 576, paragraphs 1 and 2 and 577, paragraph a) of the Code of Civil Procedure, pursuant to article 29, paragraph 1, paragraphs a) and e) of the RJAT].

Challenging the Claim

c) The figure of autonomous taxations has been instrumentalized for the pursuit of diverse objectives, ranging from the original purpose of avoiding practices of evasion and fraud (through confidential or undocumented expenses, payments to entities located in jurisdictions with privileged tax regimes, substitution of taxation of ancillary benefits in the form of representation expenses or allocation of vehicles to workers and members of corporate bodies, in the sphere of their respective beneficiaries) to the purpose of preventing the phenomenon known as "dividend washing" (cf. paragraph 11 of article 88 CIRC) or of burdening, through taxation, the payment of income considered excessive (cf. paragraph 13 of the same provision). It is thus recognized that the autonomous character of these taxations, resulting from the special configuration given to the material and temporal aspects of the taxable events, requires, in certain areas, the departure from or an adaptation of the general rules of application of IRC.

d) The amount determined pursuant to paragraph a) of paragraph 1 of article 90 does not have a unitary character - the assessment of autonomous taxations is carried out on the basis of articles 89 and 90, paragraph 1 of the IRC Code but, applying different rules for the calculation of tax: in one case the assessment operates through the application of the rates of article 87 to the taxable income determined in accordance with the rules of chapter III of the Code and, in the other case, various collections are determined according to the diversity of facts originating the autonomous taxation.

e) The interpretation proposed for paragraph 2 of article 90 of the CIRC would imply that, in the calculation basis of payments on account, defined in paragraph 1 of article 105 of the IRC Code, autonomous taxations were included when it only makes sense that the respective calculation basis corresponds to the amount of IRC collection resulting from taxable income that is identified with the profit/income of the taxpayer's accounting period.

f) But the interpretation of the expression used by the legislator in the said provision, "amount determined pursuant to the preceding paragraph", and in paragraph 1 of article 105 of the CIRC, "tax assessed pursuant to paragraph 1 of article 90", should be made in a coherent manner - it corresponds to the amount of IRC calculated through the application of the rates of article 87 to the taxable income determined on the basis of profit.

g) It is concluded that the deductions referred to in paragraphs a) and b) of paragraph 2 of article 90 of the IRC Code are effected to the "amount determined pursuant to the preceding paragraph", understood as the amount of IRC determined on the basis of taxable income determined in accordance with the rules contained in chapter III and the rates of article 87 of the same Code, and such conclusion may be extended to the deduction relating to special payments on account.

h) If the deductions carried out result in a negative value, the special payment on account may be deducted until the 4th following assessment period.

i) And the same conclusion is reached if one considers the nature of the special payment on account (PEC), defined as being an advance delivered to the State on account of the tax ultimately due, which may be made in two installments (article 106, paragraph 1, CIRC) and whose calculation takes as its starting point the volume of business of the taxpayer relating to the preceding assessment period (paragraph 2) because although the PEC differs, as regards calculation rules, from payments on account (which have as calculation basis the tax assessed pursuant to paragraph 1 of article 90 of the CIRC, relating to the immediately preceding assessment period (paragraph 5 of article 105 CIRC), the two regimes have in common the nature of advance payment of IRC.

j) The legal nature of the PEC, revealed by its configuration as «an instrument or guarantee of payment of the tax on account of which it is required, and not as an imposition in itself», as well as by the function associated with it in combating tax evasion and fraud, binds indissolubly this payment to the amount of IRC determined on taxable income determined on the basis of profit (chapter III of the Code), whereby IRC taxpayers cannot dispose of it, in the Claimant's case by deducting the amount borne under PEC from the collection produced by autonomous taxations in the years 2012 and 2013.

k) And, in the Request, the position of the AT contained in the Information from the DSIRC attached to the case file is distorted, which refers to other matters, and cannot lead to withdrawal of a position in a particular sense on the matter in the case.

l) And as for the fact that the IRC Model 22 declaration and its articulation with the programming of the AT's computer system prevent deduction from the collection related to the rates of autonomous taxation in IRC, entered in field 365 of table 10 of Model 22 declarations (...), of the special payments on account still to be deducted from IRC collection, beginning with the oldest, it is that the system and the AT's computer applications should be a mere reflection of the legal provisions in force at each moment and only changed as a consequence of some legislative change, adoption of a uniform position (superiorly sanctioned) by the AT, or when some lapse/error in them is detected.

m) Even if the request were meritorious, it would have to be considered, as regards the payment of interest, that the initial date for its calculation would not be the moment indicated by the Claimant in the request but the date on which the decision denying the gracious objection occurred.

n) The controversial matter is completely superseded in light of the addition of paragraph 21 to article 88 of the CIRC, with interpretative character (State Budget Law for 2016) which provides: «The assessment of autonomous taxations in IRC is carried out pursuant to the provisions of article 89 and is based on the values and rates resulting from the preceding paragraphs, no deductions being made from the total amount determined.», an understanding that was followed uniformly by doctrine and taxpayers in general.

10. Questions to be Decided

The main question which is the subject of the Request is whether the amounts paid by the Claimant as special payment on account within the scope of IRC can be deducted from the collection produced by autonomous taxation rates, also under IRC.

As a preliminary question there arises that of the tribunal's competence to examine the Request, taking into account that the same was filed, following the denial of a request for administrative review filed in 2015, relating to an IRC self-assessment act for the 2011 accounting period.

11. Preliminary Matters

The parties have legal personality and capacity, are legitimate as to the request for arbitral pronouncement and are duly represented, pursuant to the provisions of articles 4 and 10 of the RJAT and article 1 of Order no. 112-A/2011, of 22 March.

No nullities exist.

The issue raised by the respondent regarding the tribunal's material lack of jurisdiction will be subject to preliminary examination after the establishment of the facts.

Proceeding to decide.

II. REASONING

12. Matters of Fact

12.1. Proven Facts

a) The Claimant - A..., S.A. – is the parent company of a group of companies subject to the Special Tax Regime for Groups of Companies (RETGS), composed of five additional companies (Request for pronouncement, no. 5, and documents nos. 2 and 4 attached to it).

b) On 30 May 2012 the Claimant submitted the Corporate Income Tax ("IRC") return form 22 of its Tax Group, relating to the 2011 accounting period, showing a fiscal loss of €1,126,703.59 total amount to pay of €49,925.37, corresponding to municipal tax in the amount of €404.01 and autonomous taxation of €49,521.36 (Request for pronouncement, no. 6, document no. 1 attached to it).

c) On 13 June 2012 assessment no. 2012... was issued, where, taking into account the PEC of €90,253.82, municipal tax €404.01, autonomous taxations of €40,521.36 and self-assessment payment of €49,988.29, a reimbursement of €62.92 was calculated (Document "assessment act", attached to the Request).

d) In the 2007 to 2011 accounting periods the Claimant made special payments on account totaling €90,253.82 (€25,338.10, in 2007, €22,720.84 in 2009, €21,497.46 in 2010 and €20,697.42 in 2011) (Request, no. 7).

e) On 5 March 2015, the Claimant submitted, addressed to the Director of Finance of ..., a request for administrative review, asking for reimbursement of overpaid tax, in the amount of €49,521.36, corresponding to the payment of autonomous taxations and compensatory interest at the legal rate calculated on that amount and until effective and complete payment of it by the AT (Request, no. 12 and Doc. no. 4).

f) The examination of the request for administrative review referred to in the preceding number was carried out by the DSIRC, in the sense of its denial, through information dated 19 June 2015 which, after superior order, was notified for the purposes of the right to a hearing, through official letter no. ... of 30 June 2016, received by the Claimant on 2 July 2015 (Doc. no. 5 attached to the Request).

g) The Claimant did not exercise the right to a hearing, the draft order for denial being converted to final by superior decision, with the grounds of the information referred to in the preceding number, which was notified to the Respondent through official letter no. ..., of 11 September 2015 (Document no. 5 attached to the Request).

h) In the examination carried out by the Respondent, and referred to in the preceding paragraphs, the request for administrative review (submitted for self-assessment, relating to the 2011 assessment period, through submission of IRC model 22 declaration on 30 May 2012) was considered timely, by application of the four-year period after the assessment, pursuant to the 2nd part of paragraph 1 of article 78 of the LGT (in view of the understanding sanctioned by the Director-General that in light of the current wording of article 78 of the LGT, the error in self-assessment is, without exception, treated as error attributable to the services (...), but was denied, on the grounds of interpretation divergent from that sustained by the Claimant as to the provisions of the CIRC, namely articles 23-A and 90, concluding that there was no error in the self-assessment.

i) There are no generic instructions on the (non-)deductibility of special payments on account from autonomous taxations.

j) On 11 December 2015, the Claimant filed the present Request for pronouncement on the legality of assessment no. 2012... relating to IRC for 2011.

12.2. Facts Not Proven

There are no essential facts not proven, since all facts relevant to the examination of the request were considered proven.

12.3. Reasoning on Matters of Fact

Regarding the proven matters of fact, the tribunal's conviction was based on free examination of the positions assumed by the parties on matters of fact and the content of the documents attached to the case file, not contested by the parties, as well as analysis of the administrative file.

13. Matters of Law

13.1. Preliminary Issue – Examination of the Tribunal's Jurisdiction

The question is whether the Respondent is correct regarding the exception raised, invoking the material lack of jurisdiction of the arbitral tribunal to examine the legality of an IRC self-assessment act carried out in 2012, relating to the 2011 accounting period, of which a request for administrative review was filed without recourse to a gracious objection process, pursuant to the provisions of article 131 of the CPPT.

The Respondent recalls the legal framework for arbitration in tax matters (legislative authorization law, RJAT and binding Order), arguing that the legislator chose to "restrict knowledge in arbitral jurisdiction to claims which, being related to the declaration of illegality of assessment/self-assessment acts, have been preceded by the gracious objection provided for in article 131 of the CPPT".

On this matter it is possible to identify two positions, both expressed in arbitration cases decided within the scope of the CAAD, summarized, in accordance with words used by the decision rendered on 9 November 2012, in case no. 51/2012-T, as follows:

• One position argues that "in referring to articles 131 and 132 CPPT, the AT intended only to prevent the taxpayer from being able to react directly, before the arbitral tribunal, against withholding acts, among others, without the need for prior examination by the AT, thus opening the door to equating, for purposes of challengeability, the administrative review procedure to the gracious objection procedure (...)". In this thesis, which "expresses a broad vision of the AT's submission to arbitral jurisdiction", "the rationale for the need for prior gracious objection is not linked to the procedure's own regime (different from administrative review), but rather to the opportunity for the AT to pronounce itself on the taxpayer's claim, thereby avoiding the submission to courts of putative disputes".

• The position opposite to the first argues that "in referring to articles 131 and 132 CPPT, the AT intended to actually refer to the regime provided therein, therefore requiring as a condition of its submission to arbitral pronouncement in the context of challenging the illegality of withholding acts, among others, the precedence of a proper gracious objection procedure".

Both positions are grounded in sound arguments[1].

The first thesis considers that it is "manifest that the scope of the requirement of prior gracious objection, necessary to open the contentious avenue for challenging self-assessment acts, provided for in paragraph 1 of article 131 of the CPPT, has as its sole justification the fact that, as to this type of acts, there is no position taken by the Tax Administration on the legality of the legal situation created by the act, a position that could even prove favorable to the taxpayer, avoiding the need for recourse to the contentious avenue". And that, "beyond not envisaging any other justification for such requirement, the fact that an identical gracious objection is required for contentious challenging of withholding acts and payments on account (in articles 132, paragraph 3, and 133, paragraph 2, of the CPPT), which have in common with self-assessment acts the circumstance that there is also no position taken by the Tax Administration on the legality of the acts, confirms that this is the reason for being of such required gracious objection". As well it sees confirmation of this interpretation in the provision of paragraph 3 of article 131 of the CPPT, by ceasing to require the necessary gracious objection when there is a prior generic pronouncement by the Tax Administration on the legality of the legal situation created with the self-assessment act (generic guidelines issued by the tax administration).

Thus, it opts to make an extensive interpretation and "conclude that the members of the Government who issued Order no. 112-A/2011, by making reference to article 131 of the CPPT regarding requests for declaration of illegality of self-assessment acts, stated imperfectly what they intended, as, intending to impose prior administrative examination to the contentious challenging of self-assessment acts, they ended up including reference to article 131 which does not exhaust the possibilities of administrative examination of those acts"[2].

The second position, without questioning the doctrinal equation, for purposes of judicial challenging, of the administrative review procedure initiated by the taxpayer to the gracious objection procedure, understands that from the establishment of the arbitral procedure as a means of resolving tax disputes alternative to the judicial challenging process there does not automatically follow the extension of the AT's submission to all situations in which, doctrinally and/or jurisprudentially, such challenging is considered admissible. And that article 2, paragraph a) of Order no. 112-A/2011, of 22 March, order published pursuant to the provisions of article 4, paragraph 1 of Decree-Law no. 10/2011, of 20 January, expressly imposes the cited prior administrative procedure as a way of opening the arbitral avenue for examination of the dispute[3].

Adhering to the first thesis and responding to the second, at least implicitly, note the decision rendered in case no. 644/2014-T, where the following considerations are contained:

«The norm of paragraph a) of article 2 of Order 112-A/2011, of 22 March, should also be understood as being explained by the circumstance that, in its absence – and in light of the content of article 2 of the RJAT – it appeared possible to directly challenge self-assessment acts, without the precedence of prior administrative pronouncement. That is: taking into account that in light of the RJAT no prior administrative intervention was required for arbitral challenging of a self-assessment, the content of the order should be interpreted as equating – in this matter – the tax arbitral process to the judicial challenging process and not, as would result from the position sustained by the AT, going from 80 to 8, taking an impugnability that is broader than that possible in the Tax Courts, and transmuting it into one that is more restricted».

And concludes that «no reason is seen – and, once again, the AT provides no support in this sense – for interpreting one and the other rule differently, all the more so because the letter of the norm of Order 112-A/2011, of 22 March, ends up being less restrictive than that of the CPPT, in that it does not include the expression "mandatorily", nor does it refer to "gracious objection" but to "administrative avenue". Hence it is possible a reading of the very letter of the law that is contained in the sense that only excluded from the scope of tax arbitral jurisdiction is knowledge of claims relating to declaration of illegality of self-assessment acts, withholding acts and payments on account that have not been preceded by recourse to the administrative avenue in terms compatible with articles 131 to 133 of the Code of Tax Procedure and Process» (our emphasis).

Although with some doubts[4], the present tribunal decides in accordance with the 1st thesis, with the supplementary reasoning above (case 644/2014-T), whereby it considers the exception of material lack of jurisdiction of the Arbitral Tribunal, invoked by the Respondent, to be without merit, proceeding to the examination of the question which is the subject of the Request – to know whether the parent company of a group of companies subject to the RETGS, could, in the IRC return relating to 2011, invoking the provisions of paragraph 2 of article 90 of the CIRC, deduct from the amount of autonomous taxations subject to self-assessment in that accounting period, amounts corresponding to special payments on account (PECs) made in prior years and not yet deducted from their respective IRC collections.

13.2. The Question Which is the Subject of the Request

13.2.1. Taxation of Income of Corporate Persons – the CIRC and Taxation of Real Income

The Corporate Income Tax Code (CIRC), approved by Decree-Law no. 442-B/88, of 30 November, intended to implement the constitutional provision that "taxation of enterprises shall be based fundamentally on their real income" (paragraph 2 of article 107 of the original wording of the CRP maintained without changes in the current paragraph 2 of article 104).

In the preamble to the IRC Code, which came into force on 1 January 1989, it is explained: «In any case, the aim is always to tax actual effective income, which, in the case of enterprises, is even a constitutional imperative. With the corollary of this principle, it is the taxpayer's declaration, controlled by the tax administration, that constitutes the basis for the determination of taxable income" (point 9 of the preamble)».

However, faced with the difficulty in determining reality, elements of correction were maintained such as presumptive methods[5]. The preponderant role of "accounting as an instrument of measurement and information of the economic reality constituted by profit" was also affirmed but it was not hidden that the relations between taxation and accounting are a controversial field, "capable of different ways of conceiving these relations".[6]

13.2.2. Emergence and Evolution of Autonomous Taxations

The State Budget for 1990, approved by Law no. 101/89, of 29 December, authorized the Government (article 25, paragraphs 2 to 5) to introduce various changes to the CIRC, among which (paragraph 3) "to autonomously tax in IRS or IRC, as the case may be, at an increased rate of 10% and without prejudice to the provisions of paragraph h) of paragraph 1 of article 41 of the CIRC, confidential or undocumented expenses incurred in the course of the exercise of commercial, industrial or agricultural activities by IRS taxpayers who own or must own organized accounting or by IRC taxpayers not covered by articles 8 and 9 of the respective Code".

In the exercise of the legislative authorizations granted, Decree-Law no. 192/90, of 9 June, was approved, which, according to its preamble, aimed to introduce some adjustments to the IRC Code, after one year of its entry into force. It was clear that several of the measures aimed to address difficulties in taxing real income, namely article 4 by establishing autonomous taxation at the rate of 10% of confidential or undocumented expenses.

Subsequently, there were successive changes to the regime, namely:

• The 1995 State Budget increases the rate to 25%, while in article 41 of the CIRC (paragraph 1, paragraphs g) and j), and paragraph 4) limits were established for acceptance as tax deductible business expenses of "representation expenses, as well as charges relating to light passenger vehicles or mixed vehicles".

• The 1997 State Budget raises the rate to 30%, being 40% in cases where such expenses are incurred by IRC taxpayers, wholly or partially exempt, or who do not exercise as a main activity, activities of a commercial, industrial or agricultural nature (paragraph 2 of article 4)".

• The 1999 State Budget raises the rates provided for in article 4 of DL 192/90, that of paragraph 1 to 32%, and that of paragraph 2, relating to IRC taxpayers wholly or partially exempt, to 60%, and alters articles 41 and 24 of the CIRC.

• The 1999 State Budget alters the wording of Decree-Law no. 192/90, extending taxation to charges for representation expenses and vehicle charges (paragraphs 3 to 6), as well as the wording of articles 41 and 24 of the CIRC.

With the legislative changes made following the work of the Fiscal Reform Coordination Structure (ECORFI), created in 2000, autonomous taxations were inserted into the Income Tax Codes for Individuals and Corporate Persons,[7] then covering: confidential or undocumented expenses; representation expenses; charges for light passenger vehicles, recreational boats, tourist aircraft, motorcycles and scooters; amounts paid to residents in favorable tax regimes.

In the following years legislative changes to autonomous taxations succeed one another, with the respective regime being maintained fundamentally. On corporate persons, the current article 88 of the CIRC provides, following Law no. 2/2014, of 16 January, which aimed at "a reform of IRC oriented toward competitiveness, growth and employment"[8].

13.2.3. Special Payment on Account (PEC) – Creation and Evolution

Throughout the 1990s limitations to the 1988/89 Fiscal Reform had been pointed out. The Commission for Development of Fiscal Reform (1995/96) reported a situation in which 60% of IRC taxpayers paid no tax, with 50 companies accounting for 51% of revenue, 30% of which was paid by only 3 companies. Beyond limits on cost deductibility, particularly regarding representation expenses and travel allowances, structural measures were proposed, among which the introduction of a minimum tax on companies based on the gross assets of companies, deductible from tax collection over 5 years and with low amounts with predetermined thresholds, or a fixed tax, of moderate amount (not exceeding the equivalent of 300 contos)[9].

The Special Payment on Account was introduced with Decree-Law no. 44/98[10], of 3 March, which added to the IRC Code articles 74-A and 83-A. Article 83-A provided: "The amount of the special payment on account shall be equal to the difference between the value corresponding to 1% of the respective volume of business, with a minimum limit of 100,000$ and a maximum of 300,000$, and the amount of payments on account made in the preceding year". The PEC amounts were calculated pursuant to the general terms, set out in article 71 of the CIRC then in force and were deductible from the IRC determined if the tax to pay was positive (71-6 CIRC/1998). In the absence of IRC to pay pursuant to the general rules, the value of the PEC satisfied could be carried forward to the following accounting period (74-A-1) or reimbursed later (74-A-2).

In the Reform carried out by the XIV Constitutional Government, Law no. 30-G/2000, of 29 December, amended the wording of article 74-A of the CIRC restricting the possibility of reimbursement to cases of cessation of activity, which will have given the PEC a configuration close to minimum collection[11].

Law no. 32-B/2002, of 30/12 (State Budget Law for 2003), changed the calculation basis of the PEC, with the 1% percentage to be calculated on the proceeds and gains of the preceding year, significantly broadened the minimum and maximum limits and, in cases of impossibility of the respective deduction until the 4th following accounting period, conditioned the reimbursement of PEC paid to non-departure from the average ratio of profitability of companies in the sector and to a favorable judgment of a tax inspection, made at the request of the taxpayer, formulated within the period of 90 days from the submission of the periodic declaration (CIRC, article 87, 92 in 2011, with the wording given by Law no. 3-B/2010, of 28/04).

13.2.4. Conclusions Regarding the Legal Characterization of Autonomous Taxations and PEC – Comparison of the Two Figures

It follows from the preceding points that both autonomous taxations and the PEC emerge as instruments for combating tax fraud and evasion. Both figures emerged, developed and were maintained because it is detected, particularly among IRC-subject entities, fiscal behaviors indicative of lack of truthfulness in the declaration of income obtained, to the detriment of tax revenue and injustice to compliant taxpayers. The aim is also to discourage the carrying out of expenses which, although incurred in business activity, are considered, as to purpose and benefits, ambiguous, unjustified and/or exaggerated.

The form of taxation through autonomous taxations "was justified by the difficulty in distinguishing between the private character and the business nature of certain expenses, and there existing certain forms of income that were not taxed at the person of their beneficiaries (or because they were not known or because the income was not precisely determinable)"[12].

The legislative evolution shows a significant broadening of its base of incidence[13].

As analyzed in the arbitral decision rendered in case 722/2015-T, it will be concluded briefly, on this form of taxation: «(i) the autonomous taxations of IRC anchored in the diverse paragraphs and paragraphs of article 88 of the CIRC translate diverse situations, to which also apply different taxation rates; (ii) the autonomous taxations of IRC inciding on certain charges of IRC taxpayers should be understood as independent payments from the existence or not of taxable income; (iii) interpreted as payments, associated with IRC, or at least related to it, being able to be understood as an exception regarding the principle of taxation of corporate persons in accordance with actual and effective profit determined (article 3 of the CIRC); (iv) in autonomous taxations, the taxable fact giving rise to taxation is instantaneous: it is exhausted in the act of realization of certain expenses that are subject to taxation (although the calculation of the amount of tax resulting from the diverse taxation rates to the diverse acts of realization of expenses considered, comes to be effected at the end of a certain assessment period); (v) the fact that the calculation of tax is effected at the end of a certain period does not transform it into a periodic, successive or durable formation tax. This operation of calculation translates merely into the aggregation, for purposes of collection, of the set of operations subject to such taxation, whose rate is applied to each expense, with no influence of the volume of expenses incurred on the determination of the rate; (vi) autonomous taxation is not equivalent to the non-deductibility of expenses incurred by the IRC subject.»

And further citing the same Decision (P. 722/2015-T):

«Those characteristics are thus recognized here, which for several years now doctrine has been pointing to autonomous taxations in question, such as: a) Autonomous taxation only makes sense because costs/expenses are relevant as negative components of the taxable profit of IRC. This is what motivates IRC taxpayers to reflect as high a value as possible of these expenses to reduce the taxable income of IRC, the collection and, consequently, the tax to pay; b) It is intended to discourage this type of expense in taxpayers who show negative results but who, regardless, continue to show consumption structures little or not at all compatible with the financial health of their enterprises; c) It is, in a more general thesis, to model the tax system so that it reveals a certain balance with a view to better distribution of effective tax burden among taxpayers and types of income; d) Certain expenses are regarded unfavorably in which, admittedly, it is not easy to determine the exact measure of the component that corresponds to private consumption, and with respect to which the general practice of abuse in their reflection is known.»[14]

As for the Special Payment on Account, constituting a system to avoid tax evasion and to guarantee the payment of tax by all enterprises in activity, it presented "mixed characteristics of payment on account and of anticipated financing, this because it constituted either a tax credit or because its reimbursement was legally assured"[15]. Its calculation was effected in accordance with the express norms in the IRC Code, being deductible from the collection also in accordance with the rules of the same Code (articles 106 and 93 in the wording in force in 2011, resulting from the republication made by Decree-Law no. 159/2009, of 13 July).

It resulted from paragraph 3 of article 93 of the CIRC, as analyzed in Arbitral Decision no. 673/2015-T: "when there is a fiscal loss the taxpayer must still bear the PEC; that was indeed the reason for its introduction. If a certain enterprise has successive fiscal losses, it will systematically bear tax, as the system doubts its possibility of functioning in a permanently deficit situation, requiring it to provisionally satisfy (on account), a certain value. It may reimburse it if it proves that this situation is common in its sector of activity or if the AT verifies the regularity of its declarations. This was the balance that the CIRC required to maintain a system based on the declarations made by taxpayers"[16].

13.3. Deductibility under IRC

13.3.1. Norms of IRC Assessment and Components of Taxation

Paragraph d) of paragraph 2 of article 90 of the CIRC provides that in the assessment of tax (article 90 refers to the assessment of IRC), the deduction of the PEC provided for in article 106 shall be effected.

While the Respondent understands that a restrictive interpretation should be made of this norm, not accepting deduction of amounts corresponding to special payments on account from collections resulting from autonomous taxations, under penalty of emptying these as an anti-abuse fiscal instrument, the Claimant understands that the «special payments on account, which constitute payments on account in IRC, are effectively IRC. With their deduction provided for as to IRC collection and having already been clarified that autonomous taxations are also IRC and the same rules provided for IRC collection should apply to them (said normal or principal), particularly as to assessment, there was not, therefore, at the date of the facts, legal grounds to prevent the deduction of special payments on account from autonomous taxation collection (...)» (point V conclusions of the pleadings).

It seems pertinent to take into account the path followed in the Arbitral Decision rendered in case no. 673/2015-T: starting from article 90, paragraph 1, paragraph a), of the CITC - which provides that the assessment of IRC is made on the basis of taxable income contained in the income declarations submitted by the taxpayer - it emphasizes that, as to the «definition of taxable income», it is article 15 of the CIRC that defines what, for purposes of the same Code, should be understood by taxable income[17] this not being able to be interpreted as encompassing the taxable value to which autonomous taxation rates are applied.

And, verifying the existence of an enormous set of incompatibilities in the application of article 90 of the CIRC[18], concludes the mentioned arbitral Decision, that as to the assessment of autonomous taxations the legislator chose to regulate the respective matter in the article in which it provides the respective situations of incidence, taxable basis and rates (article 88). This is because the assessment consists in the application of the tax rate to taxable income, and for determination of collection, no other legal provision was necessary to calculate the quantum of autonomous taxations, being clearly demonstrated that autonomous taxations can neither be understood as being part of IRC collection, nor is article 90 of the CIRC applicable to them.

The Constitutional Court judgment no. 617/2012 also said: «Contrary to what happens in taxation of income under IRS and IRC, in which the set of income obtained in a certain year is taxed (which implies that only at the end of the same can the tax rate be determined, as well as the bracket in which the taxpayer is situated), in this case each expense incurred is taxed, in itself considered, and subject to a certain rate, autonomous taxation being determined independently of the IRC that is due in each accounting period, because it is not directly related to obtaining a positive result, and therefore, subject to taxation».

As already highlighted by arbitral decisions which we have cited[19], also judgment no. 617/2012 of the Constitutional Court emphasizes, with respect to autonomous taxations, the instantaneous manner in which the taxable fact occurs and the absence of periodic, durable or successive character in its formation, characterizing the operation of IRC assessment in the aggregation, for purposes of collection, of the set of operations subject to such autonomous taxation, whose rate is applied to each expense, with no influence of the volume of expenses carried out on the determination of the rate.

How is this reflected in the final IRC assessment?

Autonomous taxations are not deductible from IRC as was clarified with the addition of article 23-A, paragraph 1, of the CIRC, in the wording introduced by Law no. 2/2014, of 16 January, in saying that «are not deductible for purposes of determining taxable profit» «the IRC, including autonomous taxations».

And this understanding already resulted from article 12 of the CIRC that autonomous taxations are included in IRC, specifically for the purpose of excluding the deduction from taxable profit of the amounts spent with their payment[20].

Thus, the conclusion that the Claimant seeks to draw through construction of a syllogism - PECs are advance of IRC, deductible in their assessment/autonomous taxations are IRC/therefore, PECs are deductible in autonomous taxations - fails due to an error in the correct understanding of the premises.

This is because autonomous taxations are part of IRC but with specificity. As said in arbitral decision 59/2014-T, Law no. 2/2014, the new article 23-A, paragraph 1, paragraph a), of the CIRC, in providing that «are not deductible for purposes of determining taxable profit the following charges, even when accounted for as expenses of the assessment period: a) The IRC, including autonomous taxations, and any other taxes that directly or indirectly incide on profits», comes to explicit that, from the legislative perspective, IRC and autonomous taxations are taxes that directly or indirectly incide on profits, because it is this understanding that can justify that the expression «any other taxes» is included, which presupposes that IRC and autonomous taxations are also taxes of these types.

13.3.2. Deductibility of PEC in IRC Resulting from Autonomous Taxation Rates

The figure of Special Payment on Account, having the meaning also of an advance of tax due (that is clearly the function of "payment on account" provided for since the initial wording of the Income Tax Code)[21] raises the question whether the PEC would not be deductible in autonomous taxations while amounts which, although assessed differently, aim indirectly at the income of enterprises and are considered integrated in IRC.

As has also been referred to in other arbitral decisions, when autonomous taxations were not included in the CIRC (period 1990-2000), it was inconceivable to use potential tax credits to satisfy the obligation of tax determined under this heading, under penalty of perverting the intent of the law. And with their introduction (Law no. 30-G/2000) there was no change of philosophy of IRC. Article 69-A did not introduce any significant change in the code but merely the mechanism for combating expenses considered undesired that already consisted of legislation external to the code, the spectrum of application was slightly broadened but the assessment procedure was not adapted in any way. That is, the characterization of the regime that had previously been in force was maintained, continuing to have to effect the interpretation of norms in a way to prevent effects contrary to the ratio legis.

On this fundamental issue, to be decided in the present case – to know whether the credit resulting from the special payment on account can be used to satisfy the obligation of tax that emerges from the application of autonomous taxation rates to the taxable facts on which they incide – we end concluding as in the arbitral decisions rendered in cases numbered 113/2015-T and 722/2015-T: «As was seen, the PEC became part of the IRC system whose calculation established in article 83 was conceived to determine the tax directly inciding on declared income. When there is a fiscal loss the taxpayer must still bear the PEC; that was indeed the reason for its introduction. If a certain enterprise has successive fiscal losses, it will systematically bear tax, as the system doubts its possibility of functioning in a permanently deficit situation, requiring it to provisionally satisfy (on account), a certain value. It may reimburse it if it proves that this situation is common in its sector of activity or if the AT verifies the regularity of its declarations. This was the balance that the CIRC required to maintain a system based on the declarations made by taxpayers. The tax resulting from autonomous taxation, however, is grounded solely in the pursuit of tax evasion through income transfer and has a dissuasive and compensatory effect. If deduction of the PEC from collection resulting from autonomous taxation were permitted, the purposes of the system in which the norm of article 83-2-e CIRC is inserted would be frustrated, as the product of the special payment on account which should remain "stationary" in the ownership of the Public Treasury would be affected to the extinction of the debt of the taxpayer resulting from autonomous taxations, thereby alleviating the intended pressure to avoid "declarative" tax evasion. There is effectively an irreconcilable conflict between the ratio of the PEC – combating evasion or pressure for correction of declarations – and the allocation of its credits to satisfaction of obligations other than those resulting from the calculation of IRC on the taxable result. In practical terms, the possibility of deducting PEC from autonomous taxations would imply that even if a certain enterprise were eternally in a loss situation, no tax on its real income would have to be borne, as long as it applied the PEC to satisfaction of autonomous taxations. Moreover, autonomous taxations themselves would lose their anti-abuse character, ending up confusing themselves with the tax calculated on taxable profit. But these are not the objectives of the system of taxation of income of corporate persons and the better interpretation of the norm contained in article 83-2-e CIRC is not that one which definitely allows deduction of special payments on account from collection resulting from application of autonomous taxation rates.»

In view of these reasons, derived from the purposes sought with the creation of the special payment on account, a restrictive interpretation of articles 90, paragraph 1, and 93, paragraph 3, of the CIRC was considered justified, in particular the reference in this latter article to the amount determined in the declaration to which article 120 of the CIRC refers.

Because this tribunal considers correct the analysis effected in the cases which it has been referencing, as well as the conclusions on the lack of merit of the Requests in those cases, identical to that which is the subject of the present case, the same result is required in this case, also considering that the assessment challenged was effected in accordance with the law.

Moreover, even if the position adopted were considered debatable, the Request would nevertheless fail, as Law no. 7-A/2016, of 30 March, added a paragraph 21 to article 88 of the CIRC, to which was attributed interpretative nature (article 135 of Law no. 7-A/2016), which expressly provides that from the amount determined for autonomous taxations no «deductions whatsoever» are made.[22]

Following what we have been deciding, the invocation of illegality of the denial of the request for administrative review also lacks merit.

As well, the request lacking merit for declaration of illegality of the assessments challenged and of the request for review, the requests made by the Claimant for return of overpaid tax and respective compensatory interest are also prejudiced.

14. Decision

With the reasoning set out, this Arbitral Tribunal decides:

a) To judge totally without merit the arbitral request for declaration of partial illegality of the IRC self-assessment relating to the 2011 accounting period, in the part corresponding to autonomous taxations in the amount of €49,521.36, as well as for declaration of illegality of the decision denying the respective request for administrative review.

b) To likewise judge without merit the request for reimbursement, plus compensatory interest, absolving the Respondent of all claims, and condemning the Claimant in the payment of the costs of the case.

15. Value of the Case

In accordance with the provisions of article 306, paragraph 2, of the CPC, 97-A, paragraph 1, paragraph a), of the CPPT and paragraph 3, paragraph 2, of the Regulations for Costs in Tax Arbitration Cases, the value of the case is set at €49,521.36.

16. Costs

Pursuant to article 22, paragraph 4, of the RJAT, the amount of costs is set at €2,142.00, pursuant to Table I attached to the Regulations for Costs in Tax Arbitration Cases, to be borne by the Claimant.

Lisbon, 25 August 2016

The Arbitrator

Maria Manuela Roseiro

[1] Seeming therefore that there would be every advantage in there being normative clarification.

[2] Cf. for example, cases 48/2015-T, 117/2013-T, 244/2013-T.

[3] Cf. Arbitral Decisions in cases nos. 51/2012-T, 236/2013-T, 263/2003-T. See also case 236/2013-T, emphasizing that the AT's submission, contained in the cited Order, corresponds, first, to a voluntary acceptance of the jurisdiction of the arbitral tribunals and, secondly, to a strict delimitation of the scope of application of arbitration of tax acts generally fixed by article 2, paragraph 1, of the RJAT, translating into a waiver of the jurisdiction of the Tax Courts – common courts in this matter. Considering that AT's submission does not correspond to a true arbitral agreement but to a unilateral generic administrative act, emanating from two ministries: Finance and Justice, from which results for taxpayers the potestative right to resort to the arbitral avenue, concludes that the binding Order is a unilateral declaration of submission with restrictive character to be interpreted in its strict terms, because it expressly introduces a prior condition (consisting of gracious objection relating to the tax act being examined), pursuant to the legal provisions specifically indicated for access to arbitral arbitration.

[4] In cases 51/2012 and 603/2014, an aspect that deserves consideration is highlighted: «in the review the examination is made by the author of the act, while in the objection it is made, in its general regime, by the hierarchical superior – and, therefore, with added guarantees on the part of the Administration that the matter is examined properly before being submitted to the Court (be it Arbitral Court or State Tax Court). It is true that, in both cases, there is prior examination by the Tax Administration, but the care that it has for a more "severe" analysis, so that it can confirm or correct what was decided, have greater possibility of happening – in fact, also for the taxpayer (if he chose the review, sibi imputat) – in the objection than in the review. Therefore it is not indifferent and, therefore, also from this perspective, the equivalence for purposes of compliance with the requirement provided for in articles 131 to 133 of the CPPT and 2-a), of Order no. 112-A/2011, of 22 March, is not acceptable.»

[5] "The determination of taxable profit by presumptive methods is consequently circumscribed to cases expressly enumerated in law, which are reduced to the absolute minimum, only occurring when resulting from anomalies and inaccuracies in accounting, if it is altogether impossible to effect such calculation on the basis of this (...) the technical criteria are enunciated which the tax administration must, in principle, follow in effecting the determination of taxable profit by presumptive methods, guaranteeing the taxpayer the adequate means of defense, which include - which is a recognition of the utmost importance - the very challengeability of the amount fixed." (point 9 of the preamble to the CIRC).

[6] In point 10 of the preamble it was concluded, regarding the said relations between accounting and taxation: "Setting aside absolute separation or total identification, a solution marked by realism is continued to be favored and which, substantially, consists in making taxable profit reflect, at its origin, the accounting result to which there are introduced, extra-accounting, the corrections - positive or negative - enunciated in law to take into account the objectives and conditions specific to taxation".

[7] With Law no. 30-G/2000, of 20 December (articles 75-A of the CIRS and 69-A of the CIRC) and then with Decree-Law no. 198/2001, of 3 July (articles 73 of the CIRS and 81 of the CIRC).

[8] Article 88 of the CIRC of the new wording included taxation of undocumented expenses (50%/70%); charges for light passenger vehicles, motorcycles and scooters (brackets of 10% to 35%, depending on the acquisition value); representation expenses (10%); expenses corresponding to amounts paid or due, in any capacity, to natural or legal persons residing outside Portuguese territory and there subject to a clearly more favorable tax regime (35%/55%); travel allowances/relocation in own vehicles not invoiced to customers (5%); profits distributed by IRC-subject entities to taxpayers who benefit from total or partial exemption covering capital income, when the shareholdings did not remain in the ownership of the taxpayer in the preceding year (23%);charges with indemnifications for cessation of duties and with bonuses and other variable remuneration, when exceeding determined values, to managers, administrators, managers (35%). And provision continues to be made for an increase in autonomous taxation rates by 10 percentage points as to taxpayers who show fiscal loss in the period to which any of the taxable facts referred to in the various paragraphs of article 88 relate, connected with the exercise of an activity of commercial, industrial or agricultural nature not exempt from IRC (paragraph 14 of article 88 of the CIRC).

[9] Report of the Commission for Development of Fiscal Reform, 30 April 1996, Ministry of Finance, p. 684.

[10] In the exercise of legislative authorization granted by the State Budget for 1997 (Law no. 52-C/96, of 27/12) for definition of a minimum taxation to be paid, through a new type of payment on account, by corporate persons subject to IRC and natural persons subject to categories B and C of IRS (paragraphs 1 to 7 paragraph c) of paragraph 1 of article 32). Also on 19 June 1997, the Council of Ministers approved a Resolution on the "General Bases of Fiscal Reform for the Transition to the Twenty-first Century", where, in Point 14, paragraph 2, pointed to the study and development of diverse measures "guided by the combined principles of broadening the tax base, simplification, with reduction of exceptional situations and progressive decrease in the rate of taxation" among which was found the "introduction of minimum collection" (paragraph e). And the measure was also included in the Strategic Consultation Agreement (1996/1999) signed in the Permanent Consultation Committee of Social Concertation in the Economic and Social Council (point 2.4 of chapter VIII, relating to "Restructuring of the Tax System").

[11] Report of the Group for Study of Tax Policy, in 2009, "Cahiers de Science et Technique Fiscales", no. 209, cf. p. 32 et seq. In other cases only deduction from collection until the 4th following accounting period was possible, becoming definitive payment after that (Teresa Gil, Special Payment on Account, Magazine o Fisco, March 2003, no. 107/108, pp. 11 to 23).

[12] Cf. Report of the Group for Study of Tax Policy (2009) cited above, p. 332. See also Constitutional Court Judgment no. 617/2012: "With this type of taxation it was sought, on one hand, to encourage taxpayers subject to it to reduce as much as possible the expenses that negatively affect tax revenue and, on the other hand, to avoid that, through these expenses, enterprises proceed to camouflaged distribution of profits, especially dividends which, thus, would only be subject to IRC as profits of the enterprise, as well as to combat tax fraud and evasion occasioned by such expenses not only in relation to IRS or IRC, but also in relation to corresponding contributions, both of employer entities and workers, to social security."

[13] As evidenced in the Arbitral Decision rendered in case 59/2014-T, the Explanatory Memorandum of Draft Law no. 46/VIII, which gave rise to Law no. 30-G/2000, of 29 December, proves the conscious and intended amplification of the previously existing distortions, as it was understood that they were necessary to compensate for other distortions resulting from significant tax fraud and evasion and, thus, increase the equity of distribution of tax burden among citizens and enterprises. There is reference to "(…) compliance with a pact of tax justice with citizens, based on broadening the tax base, intensifying the fight against tax fraud and evasion and reducing the tax burden of compliant taxpayers, within the framework of the general principles of equity, efficiency and simplicity that should frame the tax system.

[14] "That is, it was understood that the system of taxation of enterprises exclusively on the basis of taxable profit generated situations of tax inequity which it was sought to attenuate or eliminate by effecting a «broadening of the tax base», through the addition to direct taxation, which continues to be the essence of the system of taxation of enterprises, of situations of indirect taxation, through the application of tax also to certain expenses which it would be understood are causes of this inequity, because they are presumably connected with situations of «tax evasion and fraud» which permit «frequently, that those who obtain the most income do not pay taxes or bear them in terms much inferior to what is required of them»." (Arbitral decision, case 50/2014-T).

[15] Report of the Group for Study of Tax Policy (2009), p. 327.

[16] In that decision it was added: "The tax resulting from autonomous taxation, however, is grounded solely in the pursuit of tax evasion through income transfer and has a dissuasive and compensatory effect."

[17] «for purposes of this Code: a) As to corporate persons and entities referred to in paragraph a) of paragraph 1 of article 3, taxable income is obtained by deducting from taxable profit, determined pursuant to articles 17 and following, the amounts corresponding to: 1) fiscal losses, pursuant to article 52; 2) tax benefits that may exist consisting of deductions in that profit (…)»,

[18] Shows, for example, how paragraph 12 of article 88 of the CIRC excludes the applicability of paragraph 2 of article 90 of the same Code to the calculation of autonomous taxation as to the amount withheld at source as to autonomous taxations, in accordance with paragraph 11 of the same article.

[19] In the arbitral decision rendered in case 673/2015-T, it was considered that the fact that autonomous taxations have the nature of IRC does not mean that this figure the entire legal block provided for in the Code of this tax can be applied. To autonomous taxations, notwithstanding their nature of IRC, only are applicable, in view of the noted specificities, the norms that in the IRC Code are intended for them, and not those that aim to regulate the taxation of the set of income obtained in a certain year, covering matters such as incidence, determination of taxable income, rate, calculation and collection. Because, continuing to have as reference the text of the same arbitral decision, while in taxation of income under IRS and IRC, the set of income obtained in a certain year is taxed (which implies that only at the end of the same can the tax rate be determined, as well as the bracket in which the taxpayer is situated), in autonomous taxations each expense incurred is taxed, in itself considered, and subject to a certain rate, that is, autonomous taxation is determined independently of the IRC that is due in each accounting period, because it is not directly related to obtaining a positive result and, therefore, subject to taxation. That is, the taxable event is the very realization of the expense, not being faced with a complex fact, of successive formation over a year, but faced with an instantaneous taxable event (emphasizing here the observation of Sérgio Vasques regarding income taxes contemplating elements of single obligation, such as tax-liberating rates of IRS or autonomous taxation rates of IRC, in Manual de Direito Fiscal, Almedina, 2011, page 293, note 470).

[20] Cf. Arbitral decision 59/2014-T. As to the non-deductibility of autonomous taxations from IRC it was said particularly: "Indeed, the fact that one of the types of autonomous taxations depends on the existence of a fiscal loss, as occurs with «the non-deductible charges pursuant to paragraph f) of paragraph 1 of article 42 borne by taxpayers who show fiscal loss in the accounting period to which the same relate» (paragraph 9 of article 81 of the CIRC, in the wording of Decree-Law no. 198/2001, of 3 July) and «the non-deductible charges pursuant to paragraph f) of paragraph 1 of article 45 borne by taxpayers who show fiscal loss in the assessment period to which the same relate» (paragraph 9 of article 88 of the CIRC, in the wording of Decree-Law no. 159/2009, of 13 July), evidences the lack of reason of the Claimant, as the existence or not of these autonomous taxations presupposes the prior determination of the taxable profit of that accounting period, with inclusion of all income and deductible expenses. Only after it is determined whether or not there is a fiscal loss can it be known whether there will be autonomous taxation provided for in those paragraphs and therefore, the possible amount of this cannot be an element to determine taxable profit, cannot be a deductible expense. Indeed, adoption of the Claimant's thesis that the amounts relating to autonomous taxations are deductible charges, could even lead, ultimately, due to the fact that there are autonomous taxations depending on the existence of fiscal losses, to the absurd conclusion of the existence of situations in which the taxpayer would come to be prejudiced by the fact of having more deductible expenses! (followed by presentation of an illustrative example).

Thus, the same decision (case 59/2014-T), recognizing difference between the two forms of achieving taxation under IRC, while concluding that the legislator insistently expressed his intention of taxing under IRC the expenses incurred by corporate persons through autonomous taxation, considers: "On the other hand, the rational element of interpretation corroborates these conclusions suggested by the literal tenor, since the common purpose sought with the imposition of such taxations, which is to discourage the practice of certain expenses, is more effectively achieved without an attenuation to which would lead their deductibility for purposes of determining taxable profit."

[21] Articles 96 and 97 of the CIRC, articles 104 and 105 after wording given by Law no. 159/2009, of 13 July.

[22] Recognizing the interpretative character of paragraph 21 of article 88 of the CIRC and denying the existence of unconstitutionality for violation of the principle of legal certainty, cf., for example, arbitral decisions rendered in cases 673/2015-T and 784/2015-T.