Autonomous Taxation Deductibility from IRC: Special Payment on Account and SIFIDE Credits (CAAD 752/2015-T)

ARBITRAL DECISION

I – Report

1.1. A…, S.A., with registered office in …, …, …, …-… … (hereinafter designated as "Claimant"), in the face of the tacit rejection of the administrative appeal for self-assessment of autonomous IRC taxes for the year 2012, in the amount of €72,120.15, presented, on 16/12/2015, a request for constitution of an arbitral tribunal and for arbitral pronouncement, in accordance with the provisions of Article 2, No. 1, letter a), of Decree-Law No. 10/2011, of 20/1 (Legal Regime for Arbitration in Tax Matters, hereinafter designated only as "LRATM"), in which the Tax Authority and Customs Authority (AT) is summoned, seeking, in summary, that "it be declared, both the illegality of the rejection of the administrative appeal, and the partial illegality of the aforementioned self-assessment act (cfr. Doc. No. 1) – and that they be consequently annulled –, in accordance with Article 2, No. 1, letter a), of Decree-Law No. 10/2011, more specifically with respect to the part of said self-assessment act that reflects the failure to deduct from the IRC tax collection produced by the autonomous taxation rates of the special payment on account made in the context of IRC, which resulted in an amount of tax improperly assessed in the value of €72,120.15, or, subsidiarily, insofar as it reflects undue autonomous taxation."

1.2. On 1/3/2016 the present Collective Arbitral Tribunal was constituted, composed of Dr. Judge José Poças Falcão (President), Prof. Dr. Miguel Patrício and Dr. João Cruz (in substitution of Dr. Júlio Tormenta, as per the ruling of the President of the CAAD Deontological Council of 15/2/2016).

1.3. In accordance with Article 17, No. 1, of the LRATM, the AT was summoned, as the defendant party, to present a response, in accordance with the said article. The AT presented its response on 11/4/2016, having argued, in summary, towards the total lack of merit of the Claimant's request. The Administrative File was sent to CAAD on 4/5/2016.

1.4. By ruling dated 29/4/2016, the present Tribunal considered that, "given that the evidence is of a documentary nature and the necessary documents are annexed, there is no probative diligence to be performed, whether ex officio or requested." It also considered that the meeting of Article 18 of the LRATM was unnecessary given that there were no "exceptions to be appreciated and decided before ruling on the request nor any apparent need for correction of procedural documents" and further invited the parties to present "their final submissions, in writing, within the successive period of 15 (fifteen) days, this period commencing, for the defendant, when it is notified of the submission of the Claimant's submissions or when the period for this expires." In accordance with the above, the date of 7/7/2016 was finally set for the pronouncement and notification of the final decision.

1.5. Following the said ruling, the Claimant presented its final submissions through a petition dated 10/5/2016, in which, in summary, it reiterated some of the arguments contained in its initial petition – having focused, now, on 4 selected points: "i) Autonomous taxation rates are IRC, therefore Article 90 of the CIRC applies to them prima facie, except for an exclusion rule; ii) In particular, the function of both the special payment on account and autonomous taxation does not oppose this result of the declarative interpretation; iii) Some reasoning from the learned Response of the AT [these are responses from the Claimant to the recitals Nos. 22 to 25, 37 to 39, 45 to 50, 56 to 57, 58 to 60, 61 to 64, 66 to 70 and 131 to 133 of the AT's response, as well as to the invocation of the arbitral award transcribed by the AT in recitals Nos. 93 to 104]; iv) The allegedly interpretive norm contained in the State Budget Law for 2016."

1.6. The Arbitral Tribunal was regularly constituted, is materially competent, the case is not affected by vices that would invalidate it and the Parties have standing and legal capacity, proving themselves to be legitimate.

II – Allegations of the Parties

2.1. The Claimant alleges, in its initial petition, that: a) "in the same way that jurisprudence has understood, in an almost unanimous manner, that the IRC tax collection provided for in (in force until 2013) Article 45, No. 1, letter a), of the CIRC, comprises, without need for any additional specification, the collection of autonomous taxation rates in IRC, there must also be understood that the IRC collection provided for in the same code a few meters further (Article 90, No. 1, and No. 2, letter c), of the CIRC, in the version in force in 2013) also covers the collection of autonomous taxation rates in IRC"; b) "hence, the denial of the deduction of the special payment on account from the collection in IRC of autonomous taxation violates letter c) of No. 2 of Article 90 of the CIRC (prior to 2010, Article 83; and from 2014 onwards became letter d) of said No. 2 of Article 90 of the CIRC)"; c) "there is no reason to conclude that the reasoning and rationale of the [aforementioned] decision in process No. 769/2014-T would only apply to SIFIDE and not also necessarily to other credits for tax benefits or other deductions from IRC collection such as that of the special payment on account"; d) "in fact, if it is a fact that the SIFIDE regime itself, with respect to the provision of the tax benefit of deduction from IRC collection, mentions 'the amount determined in accordance with Article 90 of the CIRC', is it to be asked whether when a legal regime does not express itself thus, as occurs with the normative provision of deduction of the special payment on account from IRC collection (cfr. Article 90, No. 2, of the CIRC), there will be a difference for what is here discussed. And the answer is negative"; e) "even if the provision of the tax credit expresses itself in terms of 'deduction from IRC collection', as opposed to 'deduction from the amount determined in accordance with Article 90 of the CIRC', the final practical result is the same, since the amount determined in accordance with Article 90 of the CIRC is none other than IRC"; f) "if autonomous taxation rates were not (after all) IRC for the purposes of Article 90 of the CIRC, as the AT has come to claim in other proceedings relating to deductions from collection [...] on what basis is the assessment of autonomous taxation rates made and has been made? For Article 88 of the CIRC only refers to the taxpayer, the basis of incidence and the rates to be applied in order to determine the collection of IRC in the context of autonomous taxation, in every way equal to what Article 87 of the same Code does [...] with respect to the IRC collection resulting from taxable profit and taxable matter determined in the context of this tax"; g) "if the AT understands that in that Article 90 of the CIRC is not included the collection of IRC resulting from autonomous taxation rates (determined in accordance with Article 88), but only the collection of IRC resulting from taxable profit (determined in accordance with Article 87), it would always have to conclude in any case that, after all, the assessment of autonomous taxation itself is, in itself, illegal, by force of both Article 8, No. 2, letter a), of the General Tax Law, and Article 103, No. 3, of the Constitution of the Portuguese Republic [...]. And by force of this illegality, the assessments of autonomous taxation at issue here will always have to be annulled, now based on this other ground"; h) "in a scenario in which, despite all the arguments set out above, it is understood that it is not possible to effect the deduction of tax benefits and special payments on account available for use from the amounts due under autonomous taxation, arguing that, despite in their essence autonomous taxation being IRC, their assessment has no framework in the IRC assessment norm enshrined in Article 90 of the IRC Code (which only as a mere theoretical hypothesis is conceived), then the claimant requests, subsidiarily, that the self-assessment of IRC for the taxation period of 2012 be annulled, in the portion corresponding to autonomous taxation, on the ground that the same have been assessed and collected without legal basis for such purpose"; i) "the claimant paid tax in an amount higher than legally due [...], therefore, once the illegality of the (self-)assessments is declared in the part here petitioned, the claimant is entitled not only to the respective reimbursement, but, also, under Article 43 of the General Tax Law ("GTL"), to compensatory interest"; j) "in light of the foregoing, there is no doubt that the granting of this request for constitution of an Arbitral Tribunal with the consequent partial annulment of the IRC self-assessment act, including autonomous taxation rates, for the fiscal year 2012, should determine the restitution to the claimant of the amount improperly paid, in the amount of €72,120.15, and also the payment of compensatory interest counted from 31 May 2013 as to €70,259.38, and from 1 September 2013 as to the remaining €1,860.77."

2.2. Therefore, the Claimant seeks, in summary, that: "a) [...] it be declared the illegality and annulled the rejection of the administrative appeal to the extent that it refused the annulment of the illegal part, in the terms discussed here, of the IRC self-assessment in the part produced by autonomous taxation rates, for fiscal year 2012, thereby violating the principle of legality; b) [...] it be declared the illegality of this self-assessment (and be consequently annulled), in the portion corresponding to the amount of €72,120.15; c) [...], consequently, recognized the right to reimbursement of this amount and, likewise, the right to compensatory interest for the payment of improperly assessed tax, counted, until full reimbursement, from 31 May 2013 as to €70,259.38, and from 1 September 2013 as to the remaining €1,860.77; d) subsidiarily, should it be understood that Article 90 of the CIRC does not apply to autonomous taxation [...] it be declared the illegality of the assessment of autonomous taxation (and be consequently annulled) due to absence of legal basis for its implementation (cfr. Article 8, No. 2, letter a), of the GTL, and Article 103, No. 3, of the Constitution), with the consequent reimbursement of the same amount and the payment of compensatory interest counted from the same dates."

2.3. For its part, the AT alleges, in its defense, that: a) "The Claimant comes to sustain [its] claim, in the essential, on the following grounds: i. vast arbitral jurisprudence qualifies autonomous taxation as IRC, therefore, nothing exists in the law that removes the deduction of the special payment on account also from the part of the IRC collection produced by those taxation rates; ii. if the IRC collection provided for in letter) of No. 1 of art. 45 of the IRC Code comprises, without need for any additional specification, the collection of autonomous taxation rates, it must be understood that Nos. 1 and 2 of art. 90 of the same Code also cover the collection of taxation rates; iii. the AT has already established a favorable understanding on the possibility of the deductions provided in No. 2 of art. 90 of the CIRC, with the exception of that relating to international double taxation, being effected from the collection of autonomous taxation; iv. the AT's computer system prevents the Claimant from registering the value relating to autonomous taxation rates in IRC, not allowing the deduction, for the purposes of determining the IRC owed by it, of the amount of autonomous taxation assessed at the special payment on account"; b) "the integration of autonomous taxation into the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, on the normative system of this tax, which became embodied, namely, in the framework of letter a) of No. 1 of art. 90 of the CIRC, in separate determinations of the respective collections, by force of obeying different rules. And this, because, in one case, it is the application of the rate(s) of art. 87 of the CIRC to taxable matter determined according to the rules contained in Chapter III of the Code and, in another case, it is the application of the rates to the values of taxable matters relating to the different realities contemplated in art. 88 of the CIRC"; c) "contrary to what is stated in point 9 of the dissenting vote statement attached to the Arbitral Decision delivered in process No. 697/2014-T, there is not a single IRC assessment, but rather two calculations: that is, two distinct calculations which, although processed, in accordance with letter a) of No. 1 of art. 90 of the CIRC, in the statements referred to in Articles 120 and 122 of the same code, are effected based on different parameters, since each materializes itself in the application of its own rates, provided for in Articles 87 or 88 of the CIRC, to the respective taxable matters determined equally in accordance with its own rules"; d) "as is well indicated in the decision of CAAD delivered in Proc. No. 113/2015-T – 'But if that recognition [that the tax calculated by application of autonomous taxation rates regulated in Article 88 of the CIRC is also itself tax on the income of legal persons] can be a starting point, the solution of the case sub judice requires that one go a bit deeper and determine what is the regime applicable to IRC calculated through autonomous taxation rates.' In other words, it is necessary to determine whether the deductions provided in No. 2 of art. 90 of the IRC Code are comprised in the areas of conflict that result from the application of the general IRC regime to the discipline of 'autonomous taxation'"; e) "in accordance with this interpretive thesis [contained in the arbitral decision delivered in the aforementioned process No. 113/2015-T], whenever incompatibility is detected between the objectives inherent in the general structure of IRC and the objectives that govern autonomous taxation, as a starting point, the general rules that make up the discipline of this tax are not applicable to it. Whence it results as evident that the integration of autonomous taxation into the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, on the normative system of this tax, which became embodied, namely, in the framework of letter a) of No. 1 of art. 90 of the CIRC, in separate determinations of the respective collections, by force of obeying different rules, because, in one case, it is the application of the rate(s) of art. 87 of the CIRC to taxable matter determined according to the rules contained in Chapter III of the Code, i.e., having profit as its basis, and in another case, it is the application of the rates to the values of taxable matters relating to the different realities contemplated in art. 88 of the CIRC"; f) "for the basis of calculation of installment payments only the IRC determined based on taxable matter determined according to the rules of Chapter III and the rates of art. 87 of the respective Code is considered. As, indeed, is an understanding adopted by the AT and peacefully accepted by doctrine and taxpayers in general"; g) "also for deductions from collection as title to tax benefits, the amount to which they are effected can only respect the tax assessed based on taxable matter, determined based on the rules of Chapter III and the rates provided for in art. 87 of the CIRC"; h) "by simple consequence of the preceding considerations that led to the conclusion that the deductions referred to in letters a) and b) of No. 2 of art. 90 of the IRC Code are effected to the 'amount determined in accordance with the previous number', understood as the amount of IRC determined based on taxable matter determined in accordance with the rules contained in Chapter III and the rates of art. 87 of the same Code and, descending to the concrete case, it is possible to extend such conclusion to the deduction relating to special payments on account. It suffices, for this purpose, to invoke the provision of No. 7 (in the 2012 version) of the same provision, according to which 'From the deductions effected in accordance with letters a), b) and c) of No. 2 no negative value may result'. And that, in the absence or insufficiency of collection, determined in these terms, the special payment on account that cannot be deducted in that taxation period may be deducted up to the 4th taxation period following – cf. provides No. 1 of Article 93 of the CIRC"; i) "although the special payment on account distinguishes itself, in terms of calculation rules, from installment payments – because these have as their calculation basis the tax assessed in accordance with No. 1 of art. 90 of the CIRC, relating to the immediately preceding taxation period (No. 5 of art. 105 CIRC) –, it should be noted that these regimes have in common the nature of advance payment of IRC"; j) "in this way, and in summary, we have that the legal nature of the special payment on account, revealed by its configuration as 'an instrument or guarantee of payment of the tax on account of which it is required, and not as an imposition in itself' (cfr. Ruling of the TC mentioned above), as well as by the function that is associated with it in combating tax evasion and fraud, indissolubly links this payment to the amount of IRC determined on taxable matter determined on the basis of profit (Chapter III of the Code)"; l) "in summary, the interpretation of No. 2 of art. 90 in coherence with the nature and content of the deductions provided for in its letters, among which figures the special payment on account, must be made in light of the general objectives of IRC which are reduced, in their essence, to the taxation of the income of legal persons, determined in accordance with the rules of Chapter III of the respective code. Being, therefore, manifestly devoid of any basis the claim of the Claimant for deduction of the amount borne under special payment on account from the collection produced by autonomous taxation in the years 2012 and 2013"; m) "one cannot attribute to the AT a position in a certain sense – which, curiously, appears in the Request as favorable to the Claimant's claim – when, on the matter in question, there was no pronouncement that leads to the conclusion that the understanding expressed in the filling out of the periodic statement of income, form 22, which, as we have seen and demonstrated, completely removes the possibility of deducting special payments on account from the amount of autonomous taxation, was altered"; n) "contrary to what the Claimant seeks, the AT never claimed that Autonomous Taxation is IRC, but rather that the same are intertwined in IRC. [...]. Without forgetting the obvious fact that the decisions delivered decided strictly and concretely the non-deduction of Autonomous Taxation from IRC collection. Hence it is to be extracted that what is sought by the Claimant will be nothing more than mere extrapolative and unfounded reasoning"; o) "if at the time the Request was filed there was no arbitral jurisprudence on the matter at hand, on 30-12-2015 the arbitral decision was delivered within the scope of Process No. 113/2015-T, which specifically addressed the matter here at issue, i.e., deduction of the special payment on account from the collection produced by Autonomous Taxation, with the Claimant's request being judged to lack merit. [...]. [...] In light of all the foregoing [mentioned above], that court decided that 'the Claimant's claim must necessarily lack merit because the assessed taxation complies with legality, as it is based on correct interpretation of the cited norm.'"; p) "in the situation of the present case, the determination of the tax was carried out by the Claimant. In accordance with Jorge Lopes de Sousa, in Regarding Civil Liability of the Tax Administration for Illegal Acts, Áreas Editora, Lisbon, 2010, p. 52, 'In situations in which the practice of the act that defines the tax debt falls to the taxpayer (such as, namely, in the aforementioned cases of self-assessment, withholding at source and installment payments), as well as those in which the act is practiced by the Tax Administration based on incorrect information provided by the taxpayer and there is recourse to administrative appeals (administrative appeal or hierarchical appeal), the error will become attributable to the Tax Administration after the possible rejection of the claim presented by the taxpayer, that is, from the moment when, for the first time, the Tax Administration takes a position on the taxpayer's situation, having the necessary elements to make a decision with correct assumptions'"; q) "that is, even if the granting of the request regarding the payment of interest were configurable – which it is not, since the main request lacking merit will necessarily mean that the request for interest lacks merit – in the situation at issue in the present case, its calculation would have as its initial term the date of the decision that rejected the administrative appeal and, never, the moment indicated by the Claimant in its request." The AT further pronounced, as to the unnecessary nature of interrogating witnesses, even though "the Claimant [did not directly request] the production of witness evidence".

2.4. The AT concludes, finally, in light of the foregoing, that "the tax acts impugned by the Claimant merit no censure and should remain valid in the legal order", therefore, in its view, "the present request for arbitral pronouncement should be judged to lack merit for lack of proof, and, consequently, the defendant absolved of all requests, all with the due legal consequences."

III – Proven Facts, Unproven Facts and Respective Justification

3.1. The following facts are considered proven:

i) On 23/5/2013, the Claimant, in compliance with the provision of Article 120 of the CIRC, proceeded to submit the IRC Tax Return Form 22 with reference to the taxation period of 2012.

ii) To said tax return was assigned the identification number …-… -…, corresponding to the note of settlement statement No. 2013 … (vd. Docs. 1 and 2 attached to the present case file).

iii) In accordance with the Tax Return Form 22 submitted, the Claimant determined a loss for tax purposes of €5,500,439.71, and a total amount of tax to pay of €70,259.38, which resulted from a collection of autonomous taxation in the amount of €72,120.15, deducted from withholdings at source in the amount of €1,860.77. Said tax was paid, as demonstrated by Doc. 3 attached to the present case file.

iv) Dissatisfied, the Claimant filed an administrative appeal of the aforementioned IRC self-assessment act on 21/5/2015 (vd. Doc. 2 attached to the present case file).

v) After the 4-month period provided by law for this purpose had elapsed, and there being no decision on said appeal, it was presumed, in accordance with the terms and for the purposes of the provision of Article 57, No. 1 and 5, of the GTL, the rejection thereof on 21/9/2015.

vi) The Claimant presented the present request for constitution of an arbitral tribunal and for arbitral pronouncement on 16/12/2015.

3.2. There are no facts unproven that are material to the decision of the case.

3.3. The facts considered pertinent and proven (v. 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence attached to the case file.

IV – The Law

Questions to be decided or subject matter of the dispute

The subject matter of the case is the (i)legality in part of the IRC self-assessment act (year of 2012) in the portion of the IRC collection produced by autonomous taxation rates (AT) of the special payment on account (special payment on account) that resulted in an amount of tax assessed in the value of €72,120.15 or, subsidiarily, insofar as it reflects undue autonomous taxation.

It is necessary to reiterate what has been understood by Jurisprudence for many years, namely, that the Courts do not have to appreciate all the arguments formulated by the parties (Cfr inter alia, Judgment of the Plenary of the 2nd Section of the STA, of 7 Jun 95, rec 5239, in DR – Appendix of 31 March 97, pgs. 36-40 and Judgment STA – 2nd Sec – of 23 Apr 97, DR/AP of 9 Oct 97, p. 1094).

This jurisprudential understanding is currently grounded on the provision of Articles 607-2 and 3, of the CPC and 123-1st part, of the CPPT, applicable in the arbitral tax process by force of Article 29 of the LRATM, which impose only on the Judge (or Tribunal) that, after identifying the parties and the subject matter of the dispute and enunciating the questions to be decided, ground the decision by discriminating the facts proven and those not proven and indicate, interpret and apply the corresponding norms to its final conclusion (decision).

Let us see then.

Autonomous Taxation (TA)

The figure of autonomous taxation has been instrumentalized for the pursuit of diverse objectives, which range from the original purpose of avoiding practices of evasion and fraud – through confidential or undocumented expenses, or payments to entities located in jurisdictions with privileged tax regimes, to the substitution of taxation of ancillary advantages 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 designated as "dividend washing" (cfr. No. 11 of art. 88 of the CIRC) or of burdening, by way of taxation, the payment of income considered excessive (cfr. No. 13 of the same provision).

In this regard, Professor Saldanha Sanches emphasized that, under the designation of "autonomous taxation", hide themselves very diverse realities (...)

Adding furthermore that, in terms of common denominator, it could be affirmed that this type of taxation has as its target "expenses that are found in the zone of intersection of the personal sphere and the business sphere, in order to avoid remuneration in kind more attractive for exclusively fiscal reasons or hidden distribution of profits."

For its part, Professor Casalta Nabais qualifies autonomous taxation as "true taxes on (certain) expenses realized by companies. Having begun by focusing on undocumented and confidential expenses and, then, on representation and vehicle expenses, they were meanwhile expanded to various expenses and, in the context of IRC, to some income such as distributed profits and certain indemnifications or compensations. Which leads us to recognize that in IRC we have autonomous taxation on certain income, on expenses that are not fiscal deductions and on expenses that are considered fiscal deductions".

Being that, furthermore, as to the purpose of the same, adds that, if, in a first phase, "they aimed to prevent that, through such expenses, companies would proceed to camouflaged distribution of profits, especially dividends, as well as combat tax fraud and evasion caused by such expenses, not only in relation to IRS and IRC, but also in relation to contributions (of employing entities and workers) to social security";

At present, the expansion and aggravation to which they have been subjected reveal a "clear purpose of obtaining more tax revenue".

In line with the characterization of autonomous taxation effected in the arbitral award delivered within the scope of process No. 80/2014-T – and in the expression, undoubtedly happy, used there that "autonomous taxation is nothing more than adjunct mechanisms of the central axis of IRC, which is that of taxing profits (...)" – it is made clear the recognition of the coexistence between, on one hand, the (special) regime of autonomous taxation and, on the other hand, the (pre-existing) rule-system of IRC.

And as is further explained in the same arbitral award, "the inclusion of autonomous taxation in the respective Code (...) has as its logical corollary the application of the general norms peculiar to this tax that do not conflict with its special form of incidence".

It is thus recognized that the autonomous character of this taxation resulting from the special configuration given to the material and temporal aspects of the taxable facts, imposes, in certain domains, the exclusion or an adaptation of the general rules of application of IRC.

In reality, the integration of autonomous taxation into the IRC Code (and IRS), conferred a dualistic nature, in certain aspects, on the normative system of this tax, which became embodied, namely, in the framework of letter a) of No. 1 of art. 90, of the CIRC, in separate determinations of the respective collections, by force of obedience to different rules: in one case, it is the application of the rate(s) of art. 87 of the CIRC to taxable matter determined according to the rules contained in Chapter III of that Code and, in another case, it is the application of the rates to the values of taxable matters relating to the different realities contemplated in art. 88 of the CIRC.

In other words: contrary to what is stated in point 9 of the dissenting vote statement of Prof. Leonor Ferreira, attached to the Arbitral Decision delivered in process No. 697/2014-T, there is not properly a single IRC assessment but, rather, two calculations, that is, two distinct calculations which, although processed, in accordance with letter a) of No. 1 of art. 90 of the CIRC, in the statements referred to in Articles 120 and 122 of the same Code, are effected based on different parameters, since each materializes itself in the application of its own rates, provided for in Articles 87 or 88 of the CIRC, to the respective taxable matters determined equally in accordance with its own rules.

And regarding the admission of autonomous taxation as a fiscal cost, it would be said that accepting it would be to undo, after all, the deterrent effect that with such (autonomous taxation) the legislator aimed to achieve and annul that same autonomous taxation, since the amount paid would be offset by the reduction of the same to taxable profit, hence, on IRC to be paid or on losses to be carried forward.

Following the integration of autonomous taxation into the IRC Code, through Law No. 30-G/2010, of 29/12, the legislator does not seem to have felt the need to explicitly state, in a comprehensive manner – i.e. in all the normative provisions where it manifests itself – the consequences of the coexistence of two forms of taxation within the IRC system, limiting itself to safeguard the situations in which the exemption from IRC did not project itself onto autonomous taxation.

This resulted in the amendment made to the wording of art. 12 of the CIRC, in order to clarify, with an interpretive character, that companies and other entities covered by the tax transparency regime are not taxed in IRC, except as to autonomous taxation.

Further to this, it was also established (cfr. then No. 6 of art. 109 of the CIRC [current art. 117/6] that the obligation to submit the periodic statement of income covers entities exempt from IRC, when they are subject to autonomous taxation.

It was thus left to the care of the interpreter and the applier of the law the task of, when faced with the need to, for certain purposes – namely of the deductions provided for in No. 2 of art. 90 of the CIRC or the calculation of installment payments – identify the relevant part of IRC collection, extracting from the applicable norms a useful sense, literally possible, that allows for a coherent solution and in accordance with the nature and functions attributed to each component of the tax.

Well then, when it comes to the deductions provided for in No. 2 of art. 90 of the CIRC, it seems the Claimant argues – anchoring itself, with all due respect, in a simplistic and decontextualized reading of this normative provision – that the expression "amount determined in accordance with the previous number" should be understood as encompassing the sum of the amount of IRC, determined on taxable matter determined according to the rules of Chapter III and the rates provided for in art. 87 of the same Code, and the amount of autonomous taxation, calculated based on the rules provided for in art. 88.

Note that, moreover, the result of this interpretation would imply that, in the basis of calculation of installment payments defined in No. 1 of art. 105 of the IRC Code – and in terms identical to those used in No. 2 of art. 90 ["Installment payments are calculated based on the tax assessed in accordance with No. 1 of art. 90 (...)"] – autonomous taxation would be included.

Indeed, for the basis of calculation of installment payments only the IRC determined based on taxable matter determined according to the rules of Chapter III and the rates of art. 87 of the respective Code is considered.

Now, it is to be emphasized that the coherence and adequacy of this understanding is grounded in the very nature of installment payments of the tax finally due, which, in accordance with the definition of art. 33 of the GTL are "pecuniary advance payments that are made by taxpayers in the period of formation of the taxable fact", constituting a "(...) form of approximation of the moment of collection to that of the perception of income in order to overcome situations in which this approximation cannot be effected through withholdings at source.".

Therefore, in good logic, it only makes sense to conclude that the respective calculation basis corresponds to the amount of the IRC collection resulting from taxable matter that is identified with the profit/income of the fiscal year of the taxpayer.

Thus, the delimitation of the content of the expression used by the legislator in No. 2 of art. 90 of the CIRC, "amount determined in accordance with the previous number", and in No. 1 of art. 105 of the CIRC, "tax assessed in accordance with No. 1 of art. 90", must be done in a coherent manner;

That is, being it consequently assigned, in both provisions, a univocal sense.

What is equivalent to saying that it corresponds to the amount of IRC calculated by application of the rates of art. 87 to taxable matter determined based on profit and the rates of art. 87 of the CIRC.

It should be noted that this interpretation of the expression "amount determined in accordance with the previous number" is also the only one consistent with the nature of the deductions referred to in the letters of No. 2 of Article 90 of the IRC Code, relating to:

• tax credits for international legal and economic double taxation (current letters a) and b));

• tax benefits (current letter c));

• special payment on account (current letter d));

• and withholdings at source (current letter e)).

And this, in view of the interconnection that, on the material plane, must be established between the realities reflected by such deductions and the origin of the amount from which they are subtracted.

In reality, it should be noted that the common trait to all the realities reflected in the deductions referred to in No. 2 of art. 90 of the CIRC resides in the fact that they respect to income or expenses incorporated in taxable matter determined based on the profit of the taxpayer or advance payments of the tax, being, therefore, entirely foreign to the realities that make up the taxable facts of autonomous taxation.

The essential question is not thus in knowing whether autonomous taxation is or is not IRC being clear that the assessment of autonomous taxation is effected based on Articles 89 and 90, No. 1, of the IRC Code but, in truth, applying different rules for the calculation of the tax:

(1) in one case, the assessment operates by application of the rates of Article 87 to taxable matter determined in accordance with the rules of Chapter III of the Code and

(2) in the other case, diverse collections are determined according to the diversity of the facts that give rise to autonomous taxation.

From this it results that the amount determined in accordance with letter a) of No. 1 of art. 90 does not have a unitary character, since it comprises values calculated according to different rules, to which are associated also differentiated purposes, therefore the deductions provided for in the letters of No. 2 can only be effected to the part of the IRC collection with which there exists a direct correspondence, so as to maintain the coherence of the conceptual structure of the rule-regime of the tax.

It is concluded from here, if we understand correctly, that there is not even controversy between the parties as to the application of Article 90 of the CIRC to the assessment of autonomous taxation, the divergence being limited to the manner of proceeding with the assessment, since the Tax Authority and Customs Authority understands, if we understand correctly, that diverse collections are determined according to the diversity of the facts that give rise to autonomous taxation and the deductions provided for in the letters of No. 2 can only be effected to the part of the IRC collection with which there exists a direct correspondence, understanding that it does not verify itself in relation to the collection of IRC that results from autonomous taxation.

In any case, the said Articles 89 and 90 of the CIRC, as well as other norms of this Code, such as those relating to the statements provided for in Articles 120 and 122, are applicable to autonomous taxation.

As of now – it is reaffirmed – it is today pacified, in the wake of numerous arbitral jurisprudence and the positions assumed by the Tax Authority and Customs Authority, that the tax collected based on autonomous taxation rates provided for in the CIRC has the nature of IRC.

Moreover, beyond the unanimity of jurisprudence, Article 23-A, No. 1, letter a), of the CIRC, in the version of Law No. 2/2014, of 16 January, leaves today no room for any reasonable doubt, corroborating what previously already 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 Administration, applying itself to the determination of the tax owed in all situations provided for in the Code, including additional assessment (No. 10).

For this reason, that Article 90 also applies to the assessment of the amount of autonomous taxation, which is determined by the taxpayer or by the Tax Administration, following the submission or not of statements, with no other provision providing 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 limited to the determination of the taxable matter and the rates applicable, which are those provided for in Chapters III and IV of the CIRC for IRC which has taxable profit as its basis and in Article 88 of the CIRC for IRC which has taxable matter of autonomous taxation as its basis and the respective rates.

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

However, the circumstance that an IRC self-assessment, effected in accordance with No. 1 of Article 90, may contain several partial calculations based on several rates applicable to certain taxable matters, does not imply that there is more than one assessment, as results from the very terms of that norm when it makes reference to "assessment", in the singular, in all cases in which it is "made by the taxpayer in the statements referred to in Articles 120 and 122", having "as its basis the taxable matter that appears therein" (whether that determined in accordance with the rules of Articles 17 and following or that determined in accordance with the various situations provided for in Article 88).

Incidentally, it is not only the assessments provided for in Article 88 that may encompass several calculations of application of rates to certain taxable matters, as the same may occur in the situations provided for in Nos. 4 to 6 of Article 87.

In any case, whatever the calculations to be made, the self-assessment that the taxpayer or the Tax Authority and Customs Authority must effect in accordance with Articles 89, letter a), 90, No. 1, letters a), b) and c), and 120 or 122 is unitary, and it is based on it that the global IRC is calculated, whatever the taxable matters relating to each of the types of taxation that may underlie it.

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

Now as was stated above there does not appear to be any violation by the AT of the procedural and/or formal rules of assessment provided for in Article 90 of the CIRC with the disregard, for this purpose, of autonomous taxation assessed and paid by the Claimant (...).

The Special Payment on Account (Article 106 of the CIRC)

Having arrived here, it is time to address the question of the deduction from the "amount determined in accordance with the previous number [No. 1 of art. 90]" of the special payment on account referred to in art. 106, as provided for in letter c) of No. 2 of art. 90 (version of 2012, given by Law No. 3-B/2010, of 28-4).

The special payment on account was created with the purpose of guaranteeing a minimum tax collection, being even this its first designation in the discussion of the State Budget for 1998. This requirement for minimum collection arose from the finding that the great majority of companies did not present taxable profit and/or that this was in most cases insignificant.

Like autonomous taxation, the special payment on account functions as a presumption of income and as a means of combating tax evasion, obliging some companies to pay at least some tax. The special payment on account is also used as a "fiscal anesthesia mechanism", making reduce the period of time between the taxable fact and the payment of the tax. Although the regime of Autonomous Taxation (TA) has as its foundation the taxation of presumed income, this differs from the special payment on account regime, in that the payment of TA is definitive and is not subject to later adjustments.

The special payment on account regime presents many specificities that will not be relevant to point out for the subject matter of the process. We only emphasize that the possibility of the value borne being able to be deducted from collection, makes it much less burdensome for companies than TA. It is further added that companies can, in certain circumstances, obtain reimbursement of the special payment on account borne, if they cannot deduct the entire value, thus functioning as a way to elude the presumption of income that results from this institute.

The incidence of the special payment on account is based on the volume of business relating to the immediately preceding taxation period, in accordance with Article 106, No. 2, of the CIRC. Despite there not being an obvious relationship with the capacity to contribute, the criterion of volume of business is closer to a notion of income than expenses subject to TA.

Since the creation of the special payment on account, constitutional questions have been raised, because it departs from the principle of capacity to contribute. The fact is that, despite the heated debate, the institute of the special payment on account endures.

Now at this light and by simple consequence of the preceding considerations that led to the conclusion that the deductions referred to in letters a) and b) of No. 2 of art. 90 of the IRC Code are effected to the "amount determined in accordance with the previous number", understood as the amount of IRC determined based on taxable matter determined in accordance with the rules contained in Chapter III and the rates of art. 87 of the same Code it is possible to extend such conclusion to the deduction relating to special payments on account.

It suffices, for this purpose, to invoke the provision of No. 7 of the same provision, according to which "From the deductions effected in accordance with letters a), b) and c) of No. 2 no negative value may result".

In any case, it is also possible to reach the same conclusion if one pays attention to the nature of the special payment on account (special payment on account), defined as being an advance delivered to the State on account of the tax finally due, which may be made in two installments (art. 106, No. 1, of the CIRC) and whose calculation takes as its starting point the volume of business of the taxpayer relating to the immediately preceding taxation period (No. 2).

It should be emphasized that, although the special payment on account distinguishes itself, in terms of calculation rules, from installment payments – because these have as their calculation basis the tax assessed in accordance with No. 1 of art. 90 of the CIRC, relating to the immediately preceding taxation period (No. 5 of art. 105 of the CIRC) – it should be noted that these regimes have in common the nature of advance payment of IRC.

This, all the more so since it can be affirmed that, in certain circumstances, they even mutually exclude themselves, since to the amount resulting from the calculation of the special payment on account are deducted the installment payments made in the preceding taxation period.

It is further to be emphasized that the institution of the special payment on account, by Decree-Law No. 44/98, of 03.03, which added art. 83-A to the IRC Code, was inscribed in a set of tax policy measures directed against evasion and tax fraud, whose motivation is explained in the Preamble of this diploma, in the following terms:

"(...) Statistics show that the income of legal persons subject to IRC taxation are frequently, and without any plausible reason, the object of a collection much lower than the real. Evasive practices of concealment of income or exaggeration of costs are manifestly generators of grave distortions of the principles of equity and tax justice and of economic efficiency itself and harmful to the stability of tax revenue. From them results an unjust distribution of the tax burden, all the more felt as many IRC taxpayers, for successive years, contributed nothing or almost nothing to the State Budget, while continuing, sometimes in a privileged manner, to enjoy the economic and social rights provided for in the Constitution. In this context, the present diploma establishes a special payment on account, through a new mechanism, on the income of the years 1998 and following, for legal persons subject to IRC. The calculation formula used for its determination and the mechanism utilized allow approximating the moment of production of income to the moment of its taxation."

Notwithstanding the successive amendments that were introduced to it, Saldanha Sanches and Salgado de Matos understand that:

"(...) from a conceptual point of view, special payments on account are, in confirmation of their designation, true installment payments – that is, a fiscal anesthesia mechanism used by the legislator to reduce the time lag between the moment of verification of the fact that indicates the existence of capacity to contribute (the perception of income) and the moment when the tax debt is due, which gives rise to autonomous obligations, with specific terms and rules of maturity, arising at a moment prior to the definitive formation of the tax debt. The difference between special payments on account and general installment payments is thus not of nature, but only of regime".

Indeed, as the same authors point out when referring to the reasons that dictated that form of payment:

"Although the law does not say it expressly, the presumption of income and the minimum collection present in the special payment on account aim at combating tax evasion (...). It should be borne in mind that such mechanisms can, indeed, constitute the only adequate means, not – as is natural – to put an end to tax evasion, but to guarantee that certain taxpayers in situations of tax evasion will be obliged, at least, to make some effort in contributing to the general expenses of the political community (...).

And in the same register, the Constitutional Court also pronounced itself in Ruling No. 494/2009, proc. No. 595/06, of 29/09:

"(...) a reading of the legal regime of the special payment on account that is attentive to its genesis and evolution leads to the conclusion that it does not obey primarily the typical logic of an installment payment – that is, primarily, that of ensuring to the public treasury regular cash inflows and, in second line, safeguarding the Tax Administration against variations in the fortune of the debtor and producing a certain fiscal "anesthesia" –, but rather being indissolubly linked to the fight against evasion and tax fraud. There had long been suspicions, first of all by the Tax Administration, regarding the income declared by IRC taxpayers; namely, there was doubt as to the extent they corresponded to the taxable income actually earned. This was evidenced by Law No. 52-C/96, of 27 December (State Budget Law for 1997), in its Article 32 (Common Provisions), which contained the legislative authorization to the Government to "define a minimum taxation" and which would mark the introduction into our tax system of the figure of the special payment on account. In the aforementioned provision, the fiscal instrument which was then established was presented as "a new type of installment payment" which aimed to achieve "greater tax justice and [a] greater efficiency of the system", admitting, when appropriate, to resort to "circumstantial methods". It should be said that the national doctrine is unanimous in affirming the nature of an instrument for combating tax evasion assigned to the special payment on account."

Thus, and in summary, we have that the legal nature of the special payment on account, revealed by its configuration as "an instrument or guarantee of payment of the tax on account of which it is required, and not as an imposition in itself" (cfr. Ruling of the TC mentioned above), as well as by the function that is associated with it in combating tax evasion and fraud, indissolubly links this payment to the amount of IRC determined on taxable matter determined on the basis of profit (Chapter III of the Code).

Being, therefore, manifestly devoid of any basis the claim of the Claimant for deduction of the amount borne under special payment on account from the collection produced by autonomous taxation in the year 2012.

With interest for the proper decision of the case, there are transcribed, as being especially illuminating, the most relevant passages of arbitral award dated 30-12-2015, within the scope of Process No. 113/2015-T, which specifically addressed the matter sub judicio, that is, deduction of the special payment on account from the collection produced by Autonomous Taxation, with the Claimant's request being judged to lack merit.

It was in that award understood that:

"The fundamental question to be answered in this decision is whether the sums paid as special payment on account can be deducted from income tax of legal persons resulting from the application of autonomous taxation rates.

Comparing the abundant jurisprudence referenced by the Claimant there is indeed a conducting line that must be highlighted and which coincides with what this arbitral tribunal supports: the tax calculated by application of autonomous taxation rates regulated in Article 88° of the CIRC is also itself tax on the income of legal persons, i.e., tax on the income of legal persons includes autonomous taxation. Should there be doubts the current wording of Article 23°-A CIRC would dispel them.

(...)

the solution of the case sub judicio requires that one go a bit deeper and determine what regime is applicable to IRC calculated through autonomous taxation rates.
Income tax of legal persons was born inciding objectively on taxable profit, corresponding this to the difference between net assets at the end and at the beginning of the taxation period

(...)
Thus in the original conceptual structure of IRC the determination of taxable profit takes as its starting point the result of the fiscal year obtained through the technical rules of accounting, introducing to it then some corrections of positive or negative sense, so that this final result corresponded to taxable profit, i.e. to the real income that it was intended to tax (...). It was clear that neither could nor regulated the treatment to be given to "autonomous taxation" which did not form part of the system, which was conceived in this simple structure: take as starting point the accounting result (17°-1 of CIRC.1989), correct it in order to reflect the income that it was intended to tax through rules qualitatively similar to those that prevailed in the then official accounting plan (Article 18° and following CIRC.1989), apply the general rate to it (69°-1 CIRC.1989) and to the product thus obtained make it the deductions of taxation that in some way had already been borne or would have to be borne through another fiscal system (71°-2 CIRC.1989).

(...)
We now need to see how "autonomous taxation" was inserted in this system.
The introduction in the complex of taxes on income of the application of autonomous taxation rates, was made through Decree-Law No. 192/90, of 9 June, which stipulated that undocumented or confidential expenses would be autonomously taxed in IRS and IRC

(...)
All elements indicate that the introduction of the method of taxing expenses in IRC constituted initially an extravagant measure, outside the conceptual structure of IRC, created to honor the principle of taxation on real and balanced income through codified corrections. The said autonomy of this rate appears thus with great intensity; although it is undeniably considered that its product is tax on the income of legal persons, it is no longer the income that is directly taxed (as regulated by IRC) but rather expenses.

In these cases of dissonance there will be such conflicts that matter to be resolved.

Those conflicts result and are resolved through normative interpretation. In essence there will need to be resolved the apparent conflict when the legislative thought underlying the norm of the general regime of the tax on one hand and the special norm regulating autonomous taxation on the other hand, is not reconcilable, i.e. from its application will be achieved a purpose not pursued by the norm in question.

This conflict in the purposes to be achieved by each of these norms is apparent at the moment when the so-called "autonomous taxation" were introduced into the Portuguese tax system.

(...)
It seems clear in light of these commands that in the period 1990-2000 it was not conceivable to use potential tax credits to satisfy the obligation of tax determined on this basis, under pain of perverting the intent of the law.

In its line of general orientation the post-reform CIRC maintained the principles that are at its genesis: start from the accounting result and correct it in accordance with the rules established, now perfected by the experience of 12 years, to reach taxable profit.
As far as we have been determining the CIRC resulting from reform came to contain its Article 69°-A, with the heading "Autonomous taxation rate", where it was regulated that undocumented or confidential expenses (No. 1) and representation expenses and charges related to light passenger vehicles, recreational boats, tourism aircraft, motorcycles and motorbikes (No. 2), would be autonomously taxed"

(...)
It is not seen that the reform of CIRC operated in 2000-2001 introduced any significant alteration in the code. Only the mechanism for combating expenses considered undesirable which already appeared in extralegal legislation was introduced, the spectrum of application was slightly expanded but the procedure of assessment was not adapted in any way. It is believed therefore that the characterization of the regime which already previously prevailed was maintained, continuing to have to effect the interpretation of norms in a way to prevent effects contrary to the ratio legis.

The successive amendments to this article did not affect in any way the (dis)equilibrium of the system, which remained until the date of the facts.

For its part, in the ruling of the Constitutional Court No. 617/2012, regarding "autonomous taxation", it was considered:

More than affirming the ratio of the imposition of autonomous taxation rates, the foundation of said ruling expresses well the way in which its calculation is understood, by comparison with the assessment of tax on income in accordance with the general rate:

Contrary to what occurs in the taxation of income in IRS and IRC, in which the aggregate of income earned in a given 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 falls), in this case each expense made is taxed, considered in itself, and subject to a certain rate, with autonomous taxation being determined independently of IRC that is due in each fiscal year, because it is not directly related to the obtaining of a positive result, and therefore, subject to taxation. (underlined our).

The aforementioned ruling further expresses clearly the way in which the taxable fact occurs instantaneously and the absence of periodic, lasting or successive character in its formation.

For this reason it characterizes the assessment operation thus:

That operation of assessment is translated only into the aggregation, for purposes of collection, of the set of operations subject to that autonomous taxation, with the rate being applied to each expense, with no influence of the volume of expenses made in the determination of the rate (bold our).

It is believed that with the historical analysis, systematic framework and doctrinal and jurisprudential positions, the ratio legis of the norms that impose autonomously taxed income has been demonstrated and their perfect distinction from the objectives that animate the general structure of the CIRC. The line in which the conflict begins is thus traced; as soon as the interpretation of the norm in question leads to result that removes the objectives that presided over its inclusion in the tax system. What each was has already been seen.

It is recognized by all the actors who have to work with tax law in general and with IRC in particular, the lesser coherence of the coexistence of "autonomous taxation" with the general regime of tax on the income of legal persons. The Claimant gives abundant notice of this. But granted that this difficulty must be recognized there will always have to apply the law, determining its sense through interpretation."

And, specifically, as far as the special payment on account is concerned:

"In doctrine and jurisprudence the special payment on account regime has always been regarded as a system to prevent tax evasion and to guarantee the payment of tax by all companies in activity. This line of guidance appears in the texts most inductive of the application of the regime in the courts, namely through the doctrinal work developed by the Constitutional Court. In this sense it can be seen in the motivation of its ruling No. 494/2009, that the special payment on account in the cut that was given to it in the CIRC, is "indissolubly linked to the fight against evasion and tax fraud", seeking to guarantee that the income manifested by taxpayers "correspond[ed] to the taxable income really earned".

In doctrine (...) [Teresa Gil] gave justified account of the circumstances that surrounded the introduction of the special payment on account, namely the difficulties in the application of the principle of taxation by real profit, noted facing the "divergence that exists between the profits actually obtained and those that are declared by companies and, therefore, subject to taxation". Although this author considers that the special payment on account is an insufficient measure to solve this type of tax evasion problem, preferring the establishment of minimum collection, mentions that the special payment on account was after all the regime possible faced with the constitutional limits.

The current regime of the special payment on account is thus characterized by (i) having an indissoluble connection to the fight against evasion and tax fraud; (ii) it was introduced in the CIRC in March 1998, before autonomous taxation rates which only became part of its systematization in the 2000-2001 reform; (iii) in the conception of the special payment on account its deduction from collection in the assessment of IRC calculated on real income was provided; (iv) the recovery of the credit resulting from the special payment on account is subordinate to conditions of obtaining profitability ratios peculiar to companies in the business sector in which they operate or to justification of the credit situation by inspection action made at the request of the taxpayer (87°-3 CIRC). In short, the credit for the amounts delivered as special payment on account does not constitute an exigible credit that IRC taxpayers can dispose of. For them to be able to do so there must be met certain conditions."

Finalizing:

"It now falls to appreciate finally the foundational argument which is that which results from the letter of the norm of Article 83°-2/e), of the CIRC [wording given by Law No. 60-A/2005, of 31-12 and 90°-c), of the CIRC, in the wording given by Law No. 3-B/2010, of 28-4] which allows that to the amount of tax on the income of legal persons determined the deduction relating to special payment on account made be effected.

There indeed results a conflict between the regime that regulates autonomous taxation and the deduction from the respective collection of the special payment on account. See the ratio of the norms in question. The method of determination of the tax contained in the CIRC is based on the principle of incidence on taxable profit; autonomous taxation focuses on expenses individually considered, to which the rate is applicable to each expense, with that "operation of assessment is translated only into the aggregation, for purposes of collection, of the set of operations subject to that autonomous taxation".

It is unequivocal that the system of assessment is not the adequate one for the determination of autonomous taxation. But will deducting the special payment on account from said "aggregation of the set of operations subject to autonomous taxation" lead to a result irreconcilable for the system in question?

This line merits inquiry.

As has been seen the special payment on account became part of the IRC system whose assessment embodied in then Article 83 was conceived to determine the tax directly inciding on declared income. When there is fiscal loss the taxpayer must still bear the special payment on account; this was indeed the reason for its introduction. If a certain company has successive fiscal losses, it will systematically bear tax, as the system doubts its capacity to function in permanently deficient situation, requiring it to satisfy provisionally (on account), a determined value. It may obtain reimbursement if it proves that this situation is common in its business sector or if the AT verifies the regularity of its statements. This was the balance that the CIRC required to maintain a system based on statements made by taxpayers."

For its part:

"(...) the tax resulting from autonomous taxation is grounded solely in the pursuit of tax evasion through income transfer and has the deterrent and compensatory effect.
There is indeed an irreconcilable conflict between the ratio of the special payment on account – combat against evasion or pressure for correction of statements – and the allocation of its credits to the satisfaction of other obligations than those resulting from the determination of IRC calculated on taxable result.

In practical terms the possibility of deducting the special payment on account from autonomous taxation would imply that even if a certain company were eternally in loss situation, no tax on its real income would have to be borne, as long as it applied the special payment on account to the satisfaction of autonomous taxation. Moreover the autonomous taxation itself would lose its anti-abuse character, coming to be confused after all with the tax calculated on taxable profit. Now these are not the objectives of the system of taxation of the income of legal persons and the best interpretation of the norm contained in Article 83°-2, of the CIRC is not this decidedly the one that allows deducting special payments on account from the collection resulting from the application of autonomous taxation rates."

Faced with all the foregoing, that Tribunal decided in the sense that:

"(...) the Claimant's claim must necessarily lack merit because the assessed taxation complies with legality, as it is based on correct interpretation of the cited norm."

And this is also the conclusion that is drawn regarding the subject of the present case, that is, of total lack of merit of the request for declaration of illegality of the IRC self-assessment act in the terms in which it was formulated and its consequent maintenance, in totum, in the legal order.

Subsidiary Request

Formally a subsidiary request is that which is presented to the Court to be considered only in the event that a prior request lacks merit (Cfr. Article 554-1, of the CPC, applicable ex vi Article 29 of the LRATM).

In the principal matter, the request is thus formulated:

"(...) It should be declared the illegality of the rejection of the administrative appeal above better identified and, as well, the illegality of the IRC Self-assessments, including autonomous taxation rates (...)",

And the subsidiary request is thus formulated:

"(...) Subsidiarily, should it be understood that Article 90 of the CIRC does not apply to autonomous taxation, it should then be declared the illegality of the assessments of autonomous taxation (and be consequently annulled) due to absence of legal basis for its implementation (cfr. Article 8, No. 2, letter a), of the GTL, and Article 103, No. 3, of the Constitution), with the consequent reimbursement of the same amounts and the payment of compensatory interest counted from the same dates(...)".

That is: this "subsidiary request" is formulated not to be considered only if the principal request lacks merit but only for the eventuality of a certain understanding or interpretation of the Law (in this case, the application of Article 90 of the CIRC to autonomous taxation) not being supported by the Court.

There is thus, in a formal and proper sense, no true subsidiary request.

In any case, the appreciation of such matter was already made above, transcribing, in essence, the following:

"(...) The essential question is not in knowing whether autonomous taxation is or is not IRC being clear that the assessment of autonomous taxation is effected based on Articles 89 and 90 No. 1 of the IRC Code but, in truth, applying different rules for the calculation of the tax:

(1) in one case, the assessment operates by application of the rates of Article 87 to taxable matter determined in accordance with the rules of Chapter III of the Code and

(2) in the other case, diverse collections are determined according to the diversity of the facts that give rise to autonomous taxation.

From this it results that the amount determined in accordance with letter a) of No. 1 of art. 90 does not have a unitary character, since it comprises values calculated according to different rules, to which are associated also differentiated purposes, therefore the deductions provided for in the letters of No. 2 can only be effected to the part of the IRC collection with which there exists a direct correspondence, so as to maintain the coherence of the conceptual structure of the rule-regime of the tax.

It is concluded from here, if we understand correctly, that there is not even controversy between the Parties as to the application of Article 90 of the CIRC to the assessment of autonomous taxation, the divergence being limited to the manner of proceeding with the assessment, since the Tax Authority and Customs Authority understands, if we understand correctly, that diverse collections are determined according to the diversity of the facts that give rise to autonomous taxation and the deductions provided for in the letters of No. 2 can only be effected to the part of the IRC collection with which there exists a direct correspondence, understanding that it does not verify itself in relation to the collection of IRC that results from autonomous taxation.

In any case, the said Articles 89 and 90 of the CIRC, as well as other norms of this Code, such as those relating to the statements provided for in Articles 120 and 122, are applicable to autonomous taxation (...)" (underlined our).

From this it is concluded that Article 90 of the CIRC is applicable to autonomous taxation, but subject to the specificities described and which do not permit the deduction from the collection of the amounts of the respective rates.

V – DECISION

In accordance with the foregoing, the members of this Arbitral Tribunal agree in:

a) Judging as lacking merit the request for declaration of illegality and annulment of the act of rejection of the aforementioned administrative appeal that refused the annulment of the illegal part, of IRC self-assessments identified in the case file and produced by autonomous taxation rates, for the fiscal year 2012;

b) Judging as lacking merit the request for declaration of illegality of such self-assessments in the portions corresponding to the amount of €72,120.15;

c) Judging as moot the request for recognition of the right of the Claimant to reimbursement of such amounts and, likewise, the right to compensatory interest petitioned;

d) Judging as moot, in the terms mentioned, by the appreciation and decision of the principal request, the request formulated in the following terms: "(...) should it be understood that Article 90 of the CIRC does not apply to autonomous taxation, it should then be declared the illegality of the assessments of autonomous taxation (and be consequently annulled) due to absence of legal basis for its implementation (cfr. Article 8, No. 2, letter a), of the GTL, and Article 103, No. 3, of the Constitution), with the consequent reimbursement of the same amounts and the payment of compensatory interest counted from the same dates (...)" and

e) Condemning the Claimant A… – …, S.A., to the payment of the costs of this process.

Value of the Case

In accordance with the provision of Article 306, Nos. 1 and 2, of the Code of Civil Procedure, approved by Law No. 47/2013, of 26 June, 97-A), No. 1, letter a), of the Code of Tax Procedure and Process, and Article 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of €72,120.15.

Costs

In accordance with Articles 12, No. 2, 22, No. 4, of the LRATM, and Articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I attached hereto, the amount of costs is fixed at €2,448.00, charged to the Claimant.

Let it be notified.

Lisbon, 30 August 2016

The Collective Arbitral Tribunal,

(José Poças Falcão)

(Miguel Patrício)

(João Cruz)