CAAD Ruling on SIFIDE Tax Credits Deduction from State Surcharge (Derrama Estadual) in IRC

Arbitral Decision

1. Report

1.1

A…, Ld.ª, hereinafter referred to as the "Claimant", Tax Identification Number (NIPC) ..., with registered office at …, in …, requested the constitution of a single arbitral tribunal, pursuant to the combined provisions of Article 2, No. 1, paragraph a) and Article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT") and Articles 1 and 2 of Order No. 112-A/2011, of 22 March, in which the Tax and Customs Authority (AT) is the Respondent.

1.2

The request for arbitral determination, presented on 18 December 2015, concerns the decision rejecting the administrative appeal filed in proceedings No. ...2015..., relating to the self-assessment of corporate income tax (IRC) No. 2014 ... for the fiscal year 2012, within which the deduction from the state levy of tax benefits for the year 2010, granted under the System of Tax Incentives for Research and Development in Business (SIFIDE) and SIFIDE II, in the amount of €55,678.70, was not accepted.

1.3

The Claimant further requests the condemnation of the Respondent to reimburse the said amount, plus the respective compensatory interest, in accordance with Articles 43 of the General Tax Law (LGT) and 61 of the Code of Procedure and Tax Process (CPPT), from 01-09-2013, the day following the expiry of the period for official reimbursement of tax, until the date of effective and complete payment.

1.4

The Claimant chose not to appoint an arbitrator.

1.5

The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and notified to the AT on 04 January 2016.

1.6

The Undersigned was designated by the President of the CAAD Deontological Council as arbitrator of a single arbitral tribunal, in accordance with the provisions of Article 6 of the RJAT, and acceptance of the appointment was communicated within the applicable period.

1.7

On 17 February 2016, the Parties were notified of this designation and did not object thereto, in accordance with the combined provisions of Article 11, No. 1, paragraphs a) and b) of the RJAT and Articles 6 and 7 of the CAAD Deontological Code.

1.8

Thus, in accordance with the provisions of paragraph c) of No. 1 of Article 11 of the RJAT, the single arbitral tribunal was constituted on 03 March 2016.

1.9

The Respondent was notified, by arbitral order of 03 March 2016, to, in accordance with Article 17, No. 1, of the RJAT and within a period of 30 days, submit its response and, if it so wishes, request the production of additional evidence.

1.10

It was further notified to, within the same period, present the administrative proceedings (PA) referred to in Article 111 of the CPPT, but chose not to do so.

1.11

On 07 April 2016, the Respondent presented its response, defending itself by way of objection and arguing for the dismissal of the request for arbitral determination.

1.12

On the same date it attached a copy of the said PA.

1.13

Considering that the Parties did not request the production of any evidence beyond that which the Claimant attached to the request for arbitral determination, the Arbitral Tribunal, in light of the principles of autonomy in the conduct of proceedings, expedition, simplification and procedural informality, inherent in No. 2 of Articles 19 and 29 of the RJAT, by order of 09 April 2016, dispensed with the holding of the meeting provided for in Article 18 of the same legislation, and further decided that the proceedings would continue with optional written submissions, to be made successively by the Respondent.

1.14

On 11 April 2016, the Parties were notified of this order, and the Claimant, on 19 April 2016, presented its submissions and formulated its respective conclusions.

1.15

The Respondent also did so on 02 May 2016.

1.16

The date of 21 June 2016 was also set for the delivery of the respective final arbitral decision.

2. Preliminary Matters

2.1

The Parties have legal personality and capacity, are duly legitimated and regularly represented (Articles 4 and 10, No. 2, of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March).

2.2

The proceedings do not suffer from any nullities.

2.3

There are no other circumstances that prevent the consideration of the merits of the case.

3. Positions of the Parties

3.1 Of the Claimant

For the Claimant, the self-assessment is unlawful, insofar as it did not accept the deduction from the state levy calculated by the company "B... SGPS, SA", in the amount of €55,678.70, of tax benefits for the year 2010 granted to the companies "A..., Ld.ª" and "C...–…, SA" under SIFIDE and SIFIDE II, by virtue of violation of law in the respective legal presuppositions, since:

The Claimant is the parent company of a group of companies taxed under the Special Taxation Regime for Groups of Companies (RETGS), provided for in Articles 69 et seq. of the CIRC, which is characterized as an optional and special taxation regime of great complexity, since from a legal perspective there are several companies, but physically there is only one taxable person (aggregating the individual tax situation of the companies that make up the tax perimeter), with a single company (the parent), responsible for the calculation and payment of IRC due.

With respect to the determination of the taxable profit of the Group, the parent company must calculate the algebraic sum of taxable profits and tax losses established in the periodic individual declarations of each of the companies belonging to the Group, as provided for in Article 70 of the CIRC.

Thus, the Group is the sole taxable person for IRC purposes under RETGS or, conversely, the companies that make up the Group and are subject to RETGS are not taxable persons for IRC.

Each company calculates a taxable profit in its individual declaration, thereby contributing to the collective taxable base of the Group.

However, in the periodic individual declarations there is not a true determination of collection, but rather only a determination of taxable profit or individual tax loss.

The application of RETGS involves the determination of a single collective taxable base, a single collection, a single state levy, by the taxable person obliged to calculate and pay, namely the parent company on behalf of the Group.

In the calculation of the tax, in accordance with the express rule of No. 6 of Article 90 of the CIRC, the deductions of No. 2 of that article, including those relating to tax benefits, are made to the amount of collection calculated by the Group, in accordance with No. 1 of the same article, thus corresponding to the total collection of the Group, comprised of the IRC and the state levy of the Group.

That it is the taxable person "GROUP", personified in the parent company, who is obliged to calculate and pay, that is, to follow the procedures subsequent to the determination of the collective taxable base, with each of the companies that form part of the RETGS perimeter required to submit individual declarations, in accordance with paragraph b), No. 6, Article 120 of the CIRC, but solely for declarative purposes.

The deduction benefits generated within the Group, such as those of SIFIDE, are deductible from the collection of the same group, which comprises the IRC and the state levy.

The IRC surcharge, referred to as the state levy, arose to achieve budget consolidation and was introduced in 2010 within the Stability and Growth Programme (PEC).

It is agreed between the Parties, in line with Doctrine and Case Law, that with respect to its legal and fiscal nature, the state levy is classified as an ancillary tax and not autonomous or differentiated from the IRC, or in other words, it forms part of the total IRC collection. Within this typology, the state levy consists of an addition or surcharge.

The total IRC collection comprises the state levy.

Within the application of RETGS, it is agreed between the Parties that the taxable person for IRC is the Group, in accordance with the unity and tax-paying capacity underlying this special taxation regime.

For purposes of IRC calculation, in accordance with Articles 89 and 90 of the CIRC, when RETGS applies, the collection to be taken into account corresponds to the total collection of the Group, which comprises the algebraic sum of state levies calculated in accordance with the rule of Article 87-A of the same code.

The determination of the state levy, considering the taxable profit of RETGS companies, constitutes a mere calculation rule and should not be confused with the tax calculation and payment rules, in particular in the case of application of this special taxation regime.

The SIFIDE tax benefit is deducted, in accordance with the rules of Article 90 of the CIRC, from the total collection of the Group and, in the absence of any specific rule to the contrary, up to its limit.

In accordance with No. 6 of Article 90 of the CIRC, if RETGS applies, the value of deductions to be made from the total collection of the Group, such as those relating to SIFIDE, must consider the total value of the benefit calculated by the Group, namely that relating to each of the companies that make it up.

It is not legitimate to consider that state levies are peculiar to each company that makes up the RETGS, nor is any limitation to the rule of No. 6 of Article 90 of the CIRC legitimate, with deductions always being made from the total collection of the group, since it is to this that No. 1 of Article 90 of the CIRC refers.

For the AT, notwithstanding the state levy being due by the parent company, on behalf of the Group, it is calculated individually by each of the companies of the Group, and one cannot speak of a state levy of the Group, but rather of a sum of individual state levies, as if RETGS did not apply.

Therefore, considering the state levy an addition to the IRC and the specific tax calculation rules within RETGS, the parent company should calculate the state levy of the Group resulting from the algebraic sum of state levies calculated in the periodic declaration of each one of the companies of the Group, including that of the parent company.

The contested decision violates the law, in particular the provisions of Article 4 of Law No. 40/2005, of 3 August (SIFIDE) and Law No. 55-A/2010, of 31 December (SIFIDE II), of Nos. 1, 2—paragraph c) and 6 of Article 90 of the CIRC as well as of the legal framework of RETGS, which justifies its annulment.

As well as violates the principles of equality, justice, good faith, material truth and proportionality.

In the event of the Claimant's claim being upheld and illegality of the contested act, the AT is obliged to pay compensatory interest, in accordance with Article 43 of the LGT and No. 4 of Article 61 of the CPPT, from 01-09-2013, the day following the expiry of the period for official tax reimbursement, until the date of effective and complete payment.

It concludes by arguing for the full upholding of the request for arbitral determination.

3.2 Of the Respondent

In its defense, by way of objection, the AT invokes the following arguments:

That the Group "A..." is not a taxable person for IRC, in the strict sense, because it is not attributed its own tax personality, since, as Gonçalo AVELÃS NUNES states, citing: "… the group has no assets, has no income and (…) has no organs of its own that define its will and purposes. This means that the group of companies has no autonomous tax-paying capacity to bear the burden that the tax represents".

Therefore, when the group of companies is referred to as a "taxable person", such reference must be understood in an economic and extra-fiscal sense and not in the legal plane of the attribution of tax personality, with each member company remaining an autonomous taxable person.

Thus, the group of companies constitutes a sui generis taxation unit, with tax-paying capacity residing in each of the companies that comprise it, although the determination of the collective taxable base is carried out jointly (as per No. 1 of Article 69), and this amount is calculated by means of the integration of the fiscal results of each of the companies.

That the doctrine has consistently understood that no tax personality is attributed to groups of companies, as per José Maria Fernandes Pires, in "General Tax Law", commented and annotated, Almedina, 2015, p. 128: "(…) although they are integrated in a group of companies, all companies subject to a regime of taxation by the taxable profit of the group maintain their legal, patrimonial and tax autonomy separate from the others."

Thus, as the same author argues, in the configuration of RETGS, the effectiveness of the group logic projects itself, essentially, in the process of determination of the collective taxable base and in the calculation based on this amount, since, in the other aspects covered, namely the determination of the state levy, the logic of taxation unity yields in favor of a perspective of individualized treatment of the companies, as also occurs with the municipal levy (as per No. 14 of Article 18 of Law No. 73/2013, of 03.09).

In this way, by virtue of what is provided in No. 3 of Article 87-A of the CIRC, the rates of the state levy apply to the taxable profit calculated in the periodic individual declaration of each company of the group, that is, the levy collection is calculated on an individualized basis, and the respective amount is transposed to the group declaration to be submitted by the parent company in accordance with paragraph a) of No. 6 of Article 120, insofar as it is this company that is responsible for the payment of the IRC (Article 115), and must therefore proceed with the centralized quantification of the amounts of tax to be paid or recovered.

Thus, although the state levy collection appears in the group declaration and the corresponding amount is taken into account for the calculation of the total amount of tax to be paid or recovered by the parent company, the calculation is the responsibility of each company of the group and is carried out, in accordance with Article 89 and No. 1 of Article 90, by the taxable person in the individual declaration to be submitted by virtue of the requirement of paragraph b) of No. 6 of Article 120, and therefore does not form part of the collection determined on the basis of the collective taxable base of the group referred to in No. 6 of Article 90.

The SIFIDE regime grants IRC taxable persons a tax benefit in the form of a deduction from the amount calculated in accordance with Article 90 of the IRC Code (and up to its limit) of an amount obtained by applying the legally established percentages to expenses incurred with research and development. This means that if the subsidiary companies "C..." and "A..." met the legal requirements to acquire the right to this tax benefit, the deduction may only be made from the amount of the IRC calculated by the parent company on the basis of the collective taxable base of the group, in accordance with No. 6 of the same provision, and never from the amount of the state levy calculated by another subsidiary company – "B..." – in its own periodic individual income declaration, in accordance with No. 3 of Article 87-A of the IRC Code.

Thus its determination is based on the taxable profit calculated in the periodic income declaration in which, in accordance with the provision of paragraph b) of No. 6 of Article 120, the tax must be determined as if RETGS did not apply.

If the functioning rules of RETGS do not permit that the deduction of the SIFIDE tax benefit held by a company of the group be made from the collection of the state levy of another company belonging to the same group, such possibility is also not permitted by the regime of transferability of tax benefits provided for in No. 1 of Article 15 of the Tax Benefits Statute (EBF), according to which the right to tax benefits, without prejudice to the provisions of the following numbers, is non-transferable inter vivos.

Hence it follows that No. 1 of Article 15 of the EBF prevents the right to the tax benefit – SIFIDE – held by the two companies that met the legal requirements to that effect, "C..." and "A...", from being enjoyed by another company – "B..." – through the deduction to be made from the collection of the state levy calculated by this company.

That, unlike what occurs within the tax regime applicable to merger operations, whereby, in accordance with No. 1 of Article 75-A of the IRC Code, the tax benefits of the merging companies are transferred to the beneficiary company, provided the respective requirements are met and the special regime established in Article 74 applies, within the context of RETGS, there is no provision that expressly provides for the transferability of tax benefits between companies of the group, in the circumstances present in the case sub judice, and therefore the regime provided for in said Article 15 of the EBF applies.

As no error attributable to the AT has occurred, the request for payment of compensatory interest should be dismissed.

But, even if such request were to be considered well-founded, which it admits solely as a hypothesis, its calculation would have as its starting point the date of the decision rejecting the administrative appeal and not the day following the expiry of the period for official tax reimbursement.

Thus, as the Claimant has no right to make the deduction of the SIFIDE tax benefit acquired by the companies of the group "A..., Ld.ª" and "C...–…, SA" from the collection of the state levy calculated by the company "B... SGPS, SA" in the fiscal year 2012, in the amount of €55,678.70, it concludes by arguing for the total dismissal of the requests for arbitral determination and absolution of the Respondent.

4. Subject Matter of the Dispute

The question that constitutes the thema decidenduum consists of determining whether, given that the state levy has an ancillary and non-differentiated character from the IRC, it is lawful for the Claimant, within RETGS, to deduct the SIFIDE tax benefit granted to the companies "A…, Ld.ª" and "C... – …, SA" from the collection of the state levy calculated by the company "B... SGPS, SA", in the amount of €55,678.70.

5. Reasoning

5.1 Established Facts

With relevance to the appraisal and decision of the questions raised, preliminary and on the merits, the following facts are hereby established and proven:

5.1.1

The Claimant is the parent company of the perimeter of the Group of companies "A...", taxed in accordance with the Special Regime for the Taxation of Groups of Companies (RETGS), provided for in Articles 69 et seq. of the Code of Corporate Income Tax (CIRC).

5.1.2

By reference to the tax period of 2012, the perimeter of Group "A..." was constituted by the following companies:

5.1.3

In accordance with paragraph b) of No. 6 of Article 120 of the CIRC, the companies of the group submitted, via electronic means, the periodic income declaration (Model 22), referred to in paragraph b) of No. 1 of Article 117 of the same code, relating to the fiscal year 2012.

5.1.4

The Claimant as well as the company "C..., SA" declared in Form 07, Field 710, of Annex D to the Model 22 declaration, tax benefits (deductions from collection) granted under the System of Tax Incentives for Research and Development in Business (SIFIDE), provided for in Law No. 40/2005, of 3 August, and System of Tax Incentives for Research and Development in Business II (SIFIDE II), provided for in Article 133 of Law No. 55-A/2010, of 31 December, in the amounts of €198,490.39 and €221,466.59, respectively.

5.1.4

Of all the companies of the group, only "B... SGPS, SA" declared a taxable profit, in the amount of €3,355,956.66, which was entered in Form 9, Field 302, of its declaration, submitted on 29-05-2014 (Replacement Declaration No. …-…-…).

In the same declaration (Form 10, Field 373) the state levy was calculated, in compliance with Nos. 1 and 3 of Article 87-A of the CIRC, in the wording in force at the date of the facts (2012), in the amount of €55,678.70, thus determined: (€3,355,956.66 - €1,500,000.00) x 3%

5.1.5

The remaining companies declared a tax loss in the overall amount of €13,556,402.99.

5.1.6

On 29 May 2014, the Claimant, as parent company, submitted, via electronic means, the replacement Model 22 declaration (Declaration No. …-…-…) relating to the same fiscal year, in accordance with paragraph a) of No. 6 of Article 120 of the CIRC.

In which, in accordance with No. 1 of Article 70 of the same code, a tax loss was calculated in the amount of €10,200,446.33 (Form 9, Field 382), by means of the algebraic sum of taxable profits (€3,355,956.66) and tax losses (€13,556,402.99) established in the periodic individual declarations of each of the companies belonging to the group, including that of the parent company.

5.1.7

In the same declaration (Form 10, Field 373) was entered the amount of €55,678.70, relating to the state levy calculated in the Model 22 declaration of the subsidiary company "B... SGPS, SA".

5.1.8

The tax benefits granted under SIFIDE and SIFIDE II, in the overall amount of €419,956.98, were declared in Form 07, Field 710, of Annex D to the said Model 22 declaration of the Claimant, as parent company.

5.1.9

The submission dates of the declarations, fiscal results established therein, as well as the amounts of the state levy and tax benefits under SIFIDE and SIFIDE II, are represented in the following table:

(a) Replacement declaration. The 1st declaration was submitted on 28-05-2013
(b) Replacement declaration. The 1st declaration was submitted on 29-05-2013
(c) Replacement declaration. The 1st declaration was submitted on 29-05-2013
(d) Replacement declaration. The 1st declaration was submitted on 31-05-2013

5.1.10

From the self-assessment carried out in accordance with paragraph a) of Article 89 of the CIRC, there resulted tax to be recovered in the amount of €278,357.59.

5.1.11

On 20 May 2015, an administrative appeal was filed against the said self-assessment, in accordance with Articles 68 et seq. of the CPPT and Article 137 of the CIRC (Proceedings No. ...2015...).

5.1.12

Being the same dismissed by order of 11 September 2015 of the Head of the Division of Administrative and Contentious Justice of the Finance Directorate of ..., in the exercise of delegated authority.

5.1.13

The said order was notified to the Claimant by means of official letter No. …/…, received on 21 September 2015 (A/R No. RM…PT), and which marks the initial date or dies a quo of the period for filing the request for constitution of the arbitral tribunal, in accordance with paragraph a), No. 1, Article 10 of the RJAT.

5.2 Unproven Facts

5.2.1

There are no facts relevant to the decision of the case that have not been proven.

5.3 Findings of Fact

With respect to the factual matters, the Tribunal does not have to rule on everything alleged by the Parties, but rather has the duty to select the facts that matter for the decision and to distinguish proven from unproven facts [(see Article 123, No. 2 of the CPPT and Articles 607 of the CPC, applicable by virtue of Article 29, No. 1, paragraphs a) and e) of the RJAT)].

Thus, the Tribunal's conviction was based on the body of documents attached to the file as well as on the positions taken by the Parties.

5.4 Legal Analysis

The state levy, introduced into the Portuguese fiscal legal system by Law No. 12-A/2010, of 30 June, and which was created within the framework of the Stability and Growth Programme (PEC) of 2010, with a view to "budget consolidation aimed at establishing the reduction of excessive deficit and the control of public debt growth", introduced (in addition to other measures of a transversal nature) fiscal measures, within the scope of corporate income tax, with its Article 2 proceeding to the addition of several articles to the CIRC, namely Articles 87-A, 104-A and 105-A, in the following sense:

"Article 87-A

State Levy

1. A supplementary tax rate of 2.5% is levied on the portion of taxable profit exceeding €2,000,000 subject to and not exempt from corporate income tax calculated by taxable persons resident in Portuguese territory who exercise, as their principal activity, a commercial, industrial or agricultural activity and by non-residents with a permanent establishment in Portuguese territory.

2. When the special regime for the taxation of groups of companies applies, the rate referred to in the preceding number applies to the taxable profit calculated in the periodic individual declaration of each of the companies of the group, including that of the parent company.

3. Taxable persons referred to in the preceding numbers must proceed with the calculation of the additional levy in the periodic income declaration referred to in Article 120."

Likewise proceeding to the addition of Article 104-A of the CIRC relating to the method of payment of the state levy in the following sense:

"Article 104-A

Payment of the State Levy

1. Entities that exercise, as their principal activity, a commercial, industrial or agricultural activity and non-residents with a permanent establishment must proceed with the payment of the state levy as follows:

a) In three additional payments on account, in accordance with the rules established in paragraph a) of No. 1 of Article 104;

b) By the last day of the period set for the submission of the periodic income declaration referred to in Article 120, for the difference between the total amount of the state levy calculated therein and the amounts paid on account in accordance with Article 105-A;

c) By the date of submission of the replacement declaration referred to in Article 122, for the difference between the total amount of the state levy calculated therein and the amounts already paid.

1. A refund is due to the taxable person for the respective difference when the amount of the state levy calculated in the declaration is less than the amount of the additional payments on account.

2. The payment rules for the state levy not referred to in this article are to be applied, with the necessary adaptations, the payment rules for corporate income tax."

As well as Article 105-A:

"Calculation of Additional Payment on Account

1 — Entities obliged to make payments on account and special payments on account must make the additional payment on account in cases where in the prior tax period the state levy was due in accordance with the terms referred to in Article 87-A.

2 — The amount of additional payments on account due in accordance with paragraph a) of No. 1 of Article 104-A is equal to 2% of the portion of taxable profit exceeding €2,000,000 relating to the prior tax period.

3 — When the special regime for the taxation of groups of companies applies, an additional payment on account is due for each of the companies of the group, including the parent company".

Pursuant to No. 1 of Article 20 of the said law, the provisions in question came into force on the day immediately following its publication, that is, on 01 July 2010, with the normative text not providing any provision relating to the temporal validity of the measures in question, and Article 87-A of the CIRC remains in force with the amendments introduced by the budget laws of 2012 and 2013 respectively, Law No. 64-B/2011, of 30 December and Law No. 66-B/2012, of 31 December and, more recently, by Law No. 2/2014, of 16 January.

Thus, at the date of the facts (fiscal year 2012), the said article had the following wording given by Article 113 of Law No. 64-B/2011, of 30 December:

"State Levy

1 — Supplementary tax rates set out in the following table are levied on the portion of taxable profit exceeding €1,500,000 subject to and not exempt from corporate income tax calculated by taxable persons resident in Portuguese territory who exercise, as their principal activity, a commercial, industrial or agricultural activity and by non-residents with a permanent establishment in Portuguese territory:

2 — The amount of the portion of taxable profit exceeding €1,500,000, when exceeding €10,000,000, is divided into two parts: one, equal to €8,500,000, to which the rate of 3% is applied; another, equal to the taxable profit exceeding €10,000,000, to which the rate of 5% is applied.

3 — When the special regime for the taxation of groups of companies applies, the rates referred to in No. 1 apply to the taxable profit calculated in the periodic individual declaration of each of the companies of the group, including that of the parent company.

4 — Taxable persons referred to in the preceding numbers must proceed with the calculation of the additional levy in the periodic income declaration referred to in Article 120."

Considering that the Claimant is the parent company of the perimeter of the Group of companies "A...", taxed in accordance with the Special Regime for the Taxation of Groups of Companies (RETGS), provided for in Articles 69 et seq. of the Code of Corporate Income Tax (CIRC), the content of No. 3 of Article 87-A stands out clearly, according to which when that special regime applies, the rates referred to in No. 1 of the same article apply to the taxable profit calculated in the periodic individual declaration of each of the companies of the group, provided for in No. 6 of Article 120 of the CIRC, including that of the parent company.

In this way, for the determination of the state levy, the taxable profit does not correspond to the algebraic sum of taxable profits and tax losses calculated in the periodic individual declarations of each of the companies belonging to the group, in accordance with No. 1 of Article 70 of the CIRC, but rather to the taxable profit calculated in the periodic individual declaration of each of the companies of the Group.

Hence it follows that, of all the companies of the Group (parent and subsidiaries), only "B... SGPS, SA" calculated the state levy, in the amount of €55,678.70, being the only one to declare a taxable profit in the amount of €3,355,956.66, which was entered in Form 9, Field 302, of its declaration submitted on 29-05-2014 (Replacement Declaration No. …-…-…), notwithstanding that the payment of the state levy falls upon the parent company, namely the Claimant, in accordance with Article 115 of the CIRC.

All the remaining companies presented a tax loss in the amount of €13,556,402.99.

As for the legal nature of the state levy, it should be noted that, in light of the typology of taxes usually accepted by our doctrine, no doubts appear to arise as to the classification of levies (state and municipal) as taxes of a general nature, ordinary and direct, real and allegedly with a periodic character, this with respect to the state levy (to be taken into account in light of the justification that underlay its creation as mentioned above).

As for the dichotomy (principal/ancillary) or trichotomy (principal/ancillary/dependent), if the question assumed some relevance with respect to the municipal levy in its regime prior to Law No. 2/2007, of 15 January, which until then appeared to converge as to its ancillary character in relation to corporate income tax, ceased thereafter to assume such a nature of ancillarity since it clearly ceased to have regard either to the collective taxable base or to the IRC collection itself as presuppositions of its application.

Case law[1] as well as doctrine[2]-[3]-[4]-[5] appear to converge in the sense that we are dealing with an "addition" or "surcharge" to the IRC, due to the fact that, among others, it began to be calculated from taxable profit and no longer from collection.

Levies, reasoning that applies equally to both municipal and state levies with which we are concerned, now have, with respect to their relationship with corporate income tax, an absolutely restricted relationship, solely for purposes of their calculation for reasons of simplicity and operationality.

Thus, the state levy having an ancillary and non-differentiated character from the IRC, the Claimant contends that the tax benefits granted to the subsidiary companies "A…, Ld.ª" and "C... – …, SA" within the System of Tax Incentives for Research and Development in Business (SIFIDE) and SIFIDE II should be deductible from the collection of the state levy calculated by the company "B...-SGPS, SA" based on the taxable profit in IRC calculated by it.

It must be said immediately that the Claimant is not correct, since the legislator expressly provided for the situation of companies subject to RETGS with respect to the state levy, see No. 3 of Article 87-A of the CIRC.

As stated in the arbitral decisions handed down in Arbitral Proceedings Nos. 369/2015-T and 370/2015-T, with which we agree:

"This tax (referring to the state levy), notwithstanding its ancillary character in relation to the IRC, has been excluded from the scope of application of RETGS, since it does not apply to the global profit of a group of companies (to the algebraic sum of the taxable profits and tax losses of the companies that comprise it), but rather to the taxable profit of each of the companies of the group, including the parent company.

Which makes sense if we look at the objectives of Law 12-A/2010, which "approves a set of additional measures for budget consolidation aimed at reinforcing and accelerating the reduction of excessive deficit and controlling the growth of public debt as provided for in the Stability and Growth Programme (PEC)"."

To reach a conclusion, we must resort to the rules of legal interpretation, since if the Claimant makes one interpretation of the provisions of Article 87-A of the CIRC and other related legislation and the AT another, divergent interpretation, the provisions in question must be interpreted.

In the matter of interpretation, Article 9 (interpretation of law) of the Civil Code determines the following:

1. Interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted, and the conditions specific to the time in which it is applied.

2. The interpreter, however, cannot consider legislative intent that does not have in the letter of the law a minimum of verbal correspondence, however imperfectly expressed.

3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms.

Now, among the various elements of legal interpretation (hermeneutic factors), the interpreter must resort, in addition to the grammatical element (text or "letter of the Law"), also to the spirit of the law, which we reach through various other sub-elements, such as the systematic element (context of the law and parallel passages), the historical element, with emphasis on preparatory works, and the rational or teleological element. This consists of the reason for the law (ratio legis), the end pursued by the legislator in drafting the norm. As João Baptista Machado[6] states, "Knowledge of this purpose, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.) in which the norm was drafted or the political-economic-social context that motivated the legislative "decision" (occasio legis) constitutes material of the utmost importance for determining the meaning of the norm".

However, the starting point is the text of the law, as determined in No. 2 of Article 9 transcribed, since the interpreter cannot consider legislative intent that does not have in the letter of the law a minimum of verbal correspondence, however imperfectly expressed.

As to the text of the law, let us therefore look at the terms of No. 1 of Article 87-A, State Levy, added by Law No. 12-A/2010, of 30 June, to the CIRC[7]:

"1 A supplementary tax rate of 2.5% is levied on the portion of taxable profit exceeding €2,000,000 subject to and not exempt from corporate income tax calculated by taxable persons resident in Portuguese territory who exercise, as their principal activity, a commercial, industrial or agricultural activity and by non-residents with a permanent establishment in Portuguese territory."

We thus verify that what this Article 87-A established in its No. 1 are the rules of incidence, subjective and objective, the scope of territorial application, and the respective rate.

It emerges from the preparatory works, from the preamble of Bill No. 26/XI/1[8], which formed the basis of Law No. 12-A/2010, of 30 June, the reference to:

"An additional taxation in the context of IRC, applying a surcharge corresponding to a levy of 2.5 percentage points to companies whose taxable profit exceeds 2 million euros".

It is important to note the terms employed in the text of the law and in the preparatory works, so that, where it stated "A surcharge corresponding to a levy of 2.5 percentage points" in Bill No. 26/XI/1, it came to state "A supplementary tax rate of 2.5%, in Article 87-A".

It becomes clear that the legislator used the expression supplementary tax rate in the final version in the same sense as, in the same socioeconomic context, there was an increase – an additional – of the VAT rate by 1% with respect to all rates; the increase, progressive, selective and targeted, of IRS tax rates, which grow by 1% in the first three brackets of IRS, where two-thirds of Portuguese households are aggregated, and with growth of 1.5% in the fourth bracket and higher.

Thus it occurred also with the introduction of a levy, in the context of IRC, which is directed, uniquely and exclusively, at large companies with taxable profits exceeding 2 million euros, a measure that covers, essentially, a set of about 1,300 legal entities.

This clarifies that this element – historical (occasio legis) – by reference to the moment or circumstances in which the law was created, does not constitute the existence of exception or exemption regimes.

On the contrary, the historical moment – more correctly, the historical circumstances, of scarcity of resources and public funds available to the State to meet its current obligations – were determinative that taxable persons – natural and legal persons – who were endowed with special tax-paying capacity, then defined, would be called upon to pay an additional tax according to that tax-paying capacity, in the context of various taxes.

Which led to the creation of the State Levy and the establishment as the threshold of objective incidence the portion of taxable profit exceeding €2,000,000 subject to and not exempt from corporate income tax.

For the understanding of the historical moment in which is expressed the purpose of capturing fiscal revenue in a period of economic-financial great weakness of public accounts, it is also important to analyze the preamble of Law No. 12-A/2010, of 30 June, which approves the State Levy, added to the code of corporate income tax, which emphasizes:

"It approves a set of additional measures for budget consolidation aimed at reinforcing and accelerating the reduction of excessive deficit and controlling the growth of public debt as provided for in the Stability and Growth Programme (PEC)".

These are measures of great urgency, evident also in the date of approval of the legislation – the middle of the fiscal year – when, had there not been this urgency, the legislator could have opted to approve the same in the Law that approved the State Budget for the year 2011, urgency furthermore reinforced by the entry into force of the legislation the day following its publication[9].

This inference also emerges from the preparatory works and parliamentary debates, in the approval of the Bill No. 12-A/2010, of 30 June, in general and detailed review, as well as from other parliamentary debates[10], where reference is made to the state levy, for two orders of reasons:

By reference to the calling for the contribution of all legal entities, provided they meet the rules of subjective and objective incidence – a given volume of taxable profit, since as the State Secretary for Tax Affairs then stated: — thus it is important that this effort be shared equitably and that it be especially the taxpayers that have the most who are called to pay more tax.

Illustrative is an excerpt from a parliamentary debate in which reference is made to the so-called state levy[11], in the socioeconomic context of a crisis in public finances:

The State Secretary for Tax Affairs - "It was also in this House that the 45% IRS rate was approved, reinforcing the progressivity of a tax that already has a strong redistributive component and which has already seen the light of day in publication in the Official Gazette.

Certainly the Government will not stop there in its effort and will bring to the proposed State Budget for 2011 the remaining measures that appear in the PEC, a proposal that will come to this House, as is well known, in the coming months.

More recently, in the pursuit of this fiscal policy response to the crisis, the Government introduced, brought to this House and were already subject to voting, last week, additional measures aimed at responding to the need for an additional budget consolidation, still in the course of 2010. Thus it occurred with the increase in VAT by 1% with respect to all rates, immediately restoring the normal rate of 21%; it was so with the increase, progressive, selective and targeted, of IRS tax rates, which grow by 1% in the first three brackets of IRS, where two-thirds of Portuguese households are aggregated, and with growth of 1.5% in the fourth bracket and higher, allocated, in any case, at 7/12 for the fiscal year 2010. Thus it occurred also with the introduction of a levy, in the context of IRC, which is directed, uniquely and exclusively, at large companies with taxable profits exceeding 2 million euros, a measure that covers, essentially, a set of about 1,300 legal entities.

With these crisis response measures, the Government has sought, throughout this year, to build a vigorous, coherent and effective fiscal policy response to the difficult circumstance the country is facing, a policy that rests on two essential concerns: first, a concern for urgency, because we are conscious that we must act quickly and must show that we have the capacity and skill and gather the political consensus necessary to advance with consolidation measures in tax matters, however unpopular they may sometimes appear; and, secondly, a concern for solidarity, because the time has come — and undoubtedly it has come — for all of us to make an additional effort in tax matters".

Mr. Bernardino Soares (PCP): — "All, semicolon!"

The State Secretary for Tax Affairs: — "Therefore it is important that this effort be shared equitably and that it be especially the taxpayers that have the most who are called to pay more tax.

Also for this reason of solidarity, the Government chose to anticipate, already for 2010, the taxation of stock capital gains and the 45% IRS bracket. It was also for reasons of solidarity that a progressive and selective increase in IRS brackets was constructed. For these reasons, the new state levy was constructed, looking only at large companies".

In another legislative session[12]:

"First, justice in the distribution of burdens; justice recognized in the increase to 45% of the maximum IRS rate; justice in the taxation of capital gains; justice in a differentiation of the new IRS rates; justice in treating small and medium enterprises in a privileged way, excluding them from the taxation of the new state levy in the context of IRC".

Indeed, it would make no sense for the legislator to prevent, for the calculation of the state levy, the determination of taxable profit through the algebraic sum of taxable profits and tax losses calculated in the periodic individual declarations of each of the companies belonging to the Group and, on the other hand, to permit, in accordance with No. 6 of Article 90 of the CIRC, the deduction from the state levy of tax benefits granted to other companies of the same group, which even declared tax losses, whereby this provision is inapplicable whenever RETGS is in question.

All the more so, in determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms, in accordance with No. 3 of Article 9 of the said Civil Code.

It follows clearly from the letter and the ratio of the law that the general rules of RETGS do not apply to the state levy, that the existence of a group of companies is irrelevant for purposes of this tax.

Thus the Claimant's claim to deduct the tax credit relating to SIFIDE and SIFIDE II, of which two of the companies of the group it dominates are holders – "A…, Ld.ª" and "C... – …, SA" – from the "collection of the state levy of the group" is not well-founded, inasmuch as this does not exist.

For all the foregoing, we understand that the self-assessment of IRC No. 2014 ..., for the fiscal year 2012, is not affected by any defect, and should be maintained in the legal order.

Appraisal of the Request for Compensatory Interest

Since this request is dependent on the success of the preceding request, and that request is unsuccessful, this request is also unsuccessful, with no condemnation of the AT for the payment of compensatory interest.

6. Decision

In light of the foregoing, it is decided:

a) To dismiss the request for annulment of the order of the Head of the Division of Administrative and Contentious Justice of the Finance Directorate of ..., of 11-09-2015, issued in the administrative appeal proceedings No. ...2015....

b) To dismiss the request for annulment of the self-assessment of IRC No. 2014 ..., for the fiscal year 2012.

c) To deem the appraisal and decision regarding the request for payment of compensatory interest moot.

7. Value of the Proceedings

In accordance with Article 306, No. 2, of the CPC, 97-A, No. 1, paragraph a), of the CPPT and 3, No. 2, of the Regulations on Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €55,678.70.

8. Costs

In accordance with Article 22, No. 4, of the RJAT, the amount of costs is set at €2,142, in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Notify.

Lisbon, 21-06-2016

The Arbitrator,

(Rui Ferreira Rodrigues)

Text prepared by computer, in accordance with Article 131, No. 5, of the CPC, applicable by reference from Article 29, No. 1, paragraph e), of the RJAT.

[1] Decision of the Constitutional Court No. 197/2013, of 09 April (Proceedings No. 602/12).

[2] Jónatas Machado and Paulo Nogueira e Costa, in "Course of Tax Law", Coimbra Editora, 2012, pp. 332/333.

[3] António Fernandes de Oliveira, in "Legal and Fiscal Nature of Collection Produced by the so-called State Levy", Taxation 48/Oct-Dec, 2011, p. 25.

[4] José Casalta Nabais, in "Tax Law", Coimbra Editora, 2011, pp. 62/63.

[5] Freitas Pereira, M. H., in "Taxation", Almedina, 5th ed., 2014, p. 59 (footnote No. 87).

[6] In "Introduction to Law and Legitimating Discourse", 12th Reprint, Almedina, pp. 181/185.

[7] Articles 87-A, 104-A and 105-A were added to the CIRC, all relating to the state levy, with the objective of determining the rules of incidence – subjective and objective – as well as payment and calculation of additional payment on account.

[8] Available at: http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=35339

[9] Article 20 of Law No. 12-A/2010, of 30 June (Entry into force): "1. This law enters into force on the day following its publication (…)".

[10] This can be seen in the debate in general: "(…) additional taxation in the context of IRC, applying a surcharge corresponding to a levy of 2.5 percentage points to taxable profit exceeding 2 million euros", available at:
http://app.parlamento.pt/DARPages/DAR_FS.aspx?Tipo=DAR+I+série&tp=D&Numero=64&Legislatura=XI&SessaoLegislativa=1&Data=20100604&Paginas=4471&PagIni=0&PagFim=0&Observacoes=&Suplemento=.&PagActual=1&PagGrupoActual=0&TipoLink=0&pagFinalDiarioSupl=&idpag=521869&idint=&iddeb=&idact=

[11] Available at:
http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl1n690010&type=texto&q=derrama estadual&sm=p

[12] Available at:
http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl1n640053&type=texto&q=derrama estadual&sm=p