IRC Autonomous Taxation and Special Advance Payment (PEC) Deduction – CAAD Case 769/2015-T

ARBITRAL DECISION

Claimant: A... –…, S.A.

Respondent: Tax and Customs Authority

I. STATEMENT OF FACTS

A... –…, S.A., Tax Identification Number …, with registered office at …, B…, … (hereinafter referred to simply as the Claimant) submitted on 22-12-2015 a request for the constitution of a sole arbitration tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011 of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to simply as RJAT), and Articles 1 and 2 of Order No. 112-A/2011 of 22 March, in which the Tax and Customs Authority is respondent (hereinafter referred to simply as the Respondent).

The Claimant requests a declaration of illegality of: (i) the rejection (presumed) of the administrative complaint filed against the self-assessed Corporate Income Tax (IRC) acts for the years 2012 and 2013, on the grounds of failure to deduct the special payment on account ("PEC") from the amounts due in respect of autonomous taxation, in the amount of €22,917.34 (2012) and €13,497.04 (2013), as well as (ii) the self-assessed tax acts themselves that are the subject of the complaint. Alternatively, the Claimant requests that the illegality of the assessment of autonomous taxation be declared due to the absence of legal basis for its implementation. Should the claims submitted be found to be well-founded, the Claimant also requests the condemnation of the Respondent to reimburse the tax unduly paid plus compensatory interest.

The request for constitution of the arbitration tribunal was accepted by the Esteemed President of CAAD on 23-12-2016 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provisions of paragraph (a) of Article 6(2) and paragraph (b) of Article 11(1) of the RJAT, the Deontological Council appointed the undersigned as arbitrator of the sole arbitration tribunal, who communicated acceptance of the assignment within the applicable period.

On 16-02-2016 the Parties were duly notified of this appointment and did not express any intention to reject the appointment of the arbitrator, in accordance with the combined provisions of Article 11(1), paragraphs (a) and (b) of the RJAT and Articles 6 and 7 of the Deontological Code.

In accordance with the provisions of paragraph (c) of Article 11(1) of the RJAT, the sole arbitration tribunal was constituted on 02-03-2016.

Notified to submit its response, the Respondent presented a pleading in which it sustains the legality of the challenged acts, arguing for the dismissal of the claim filed by the Claimant.

As the Claimant waived the production of the testimonial evidence initially indicated, by order of 20-05-2016 the hearing provided for in Article 18 of the RJAT was dispensed with, and the parties were granted a period to present successive written submissions, which both parties proceeded to do.

II. GROUNDS FOR THE ARBITRAL DECISION

The Claimant requests a declaration of illegality of the rejection of the administrative complaint filed against the self-assessed Corporate Income Tax acts for the years 2012 and 2013, as well as of the self-assessed tax acts themselves, considering that there was an error in determining the amount to be paid. Indeed, the Claimant takes the position that the value of the special payments on account paid throughout the years and recorded in favour of the Claimant would be deductible from the amount of autonomous taxation assessments determined in 2012 and 2013, respectively €22,917.34 and €13,497.04.

In its written submissions, the Claimant concludes as follows:

"A) There are countless arbitral decisions that have affirmed and reaffirmed that autonomous taxation is IRC and, moreover, that for that reason not only Article 45(1)(a) of the CIRC (in the version in force in 2012/13) applies to them, but also Article 89 et seq., among other norms directed at the assessment and payment of IRC.

(…)

D) The norm directed at the assessment of IRC contained in paragraph (c) (currently (d)) of Article 90(2) of the CIRC therefore applies equally to the assessment of the autonomous taxation in issue here, as there is no apparent obstacle to doing so in its 'special form of incidence and applicable rates'.

E) It is important to recall this, as it is discrediting and contradictory that when the assessment of IRC referred to in Article 45(1)(a) of the CIRC is in issue, the assessment of autonomous taxation is included therein, and further on, for paragraphs (b) and (c) (currently (c) and (d)) of Article 90(2) of the CIRC, the assessment produced by autonomous taxation is excluded from the same assessment of IRC. The assessment of autonomous taxation cannot simultaneously be assessment of IRC for the purposes of one article and not be assessment of IRC for the purposes of another article, on pain of manifest contradiction by the interpreter.

(…)

I) As regards the PEC in particular, if it is IRC, if the PEC is an advance payment on account of IRC, if its deduction from the IRC assessment is provided for, and if autonomous taxation is IRC, as it is, as a result of the declarative interpretation of the law, solidly anchored in abundant and unanimous case law, it is that the PEC is deductible from the IRC assessment generated by autonomous taxation. Contrary to the understanding established in the arbitral decision handed down in case (Sole Tribunal) No. 113/2015-T.

J) Nothing in the letter of the law, absolutely nothing, permits its prevention. And there is no possible gap revealed by the purpose of the PEC, which is its anti-abuse purpose.

K) Indeed, the pressure of the PEC to prevent the evasion of declarative tax yields to and to the extent that there is IRC assessment determined. This is the law: Article 90(2), paragraph (c) – from 2014 onwards, paragraph (d) – of the CIRC. Thus, here (the anti-tax evasion objective of the PEC) we do not depart from the starting point of the declarative interpretation: since autonomous taxation in IRC is assessment of IRC, and shares the objective, purpose, and spirit of IRC to ensure the taxation of real income (substitute taxation), in accordance with the overwhelmingly dominant case law, there is nothing that opposes the application to this assessment of the deduction of the PEC.

L) It is only possible for the interpreter to break with the solid and jurisprudentially grounded reasoning 'PEC is payment on account of IRC, PEC is deductible from the IRC assessment, autonomous taxation is IRC, therefore PEC is deductible from the autonomous taxation assessment', when it departs from and denies, whether or not it assumes it, one of the three premises that lead to the conclusion.

M) In summary, and as above attempted to be shown, if the anti-abuse character of the PEC does not prevent its deduction from base IRC, including from base IRC itself resulting from very diverse anti-abuse norms (as will be detailed below), there appears to be no legal or 'spiritual' support (purposes of the PEC) whatsoever to exclude the IRC assessment from autonomous taxation from interacting with credits for PEC.

N) Nor is the anti-abuse character of autonomous taxation a reason 'in the realm of purpose' to set aside the application of the declarative interpretation that determines the deduction of the PEC from the IRC assessment of autonomous taxation.

O) If A manipulates the selling or buying prices to transfer profit to related entity B, domiciled in a low-tax zone, the anti-abuse mechanism of transfer pricing intervenes, which gives rise to an increase in the IRC assessment, which nonetheless (that is, which by virtue of resulting from the application of an anti-evasion mechanism) does not cease to be available for the purposes of all deductions from the assessment, including that of the PEC.

(…)

Q) Nor therefore, that is to say, nor by virtue of the anti-abuse character of these tax provisions, does the additional IRC assessment attributable to them cease to be what it is – IRC assessment – also for the purposes of interaction with the PEC. The PEC is, therefore, today deducted from the IRC assessment resulting from the application of anti-abuse norms of the IRC Code itself and, therefore, from the assessment resulting from 'combating' tax abuses.

R) Hence also by resorting to the invoked spirit or purpose of autonomous taxation there is no seen how, nor for what reason, the assessment resulting from them should remain excluded from the deductibilities provided for in the law for the IRC of which it is an integral part.

(…)

T) With regard to some specific points of the learned Response of the TA, the following is to be further added, as more fully developed above:

i) It is irrelevant that autonomous taxation in IRC and IRC directly on profit are determined in different ways; what is at issue here is the downstream moment, in which the respective primary assessments are already determined; in this regard, see also above, for example, the arbitral awards in cases Nos. 769/2014-T, 219/2015-T, 369/2015-T, 370/2015-T, 637/2015-T, 673/2015-T, 740/2015-T and 784/2015-T, or the dissenting opinion of arbitrator Professor Leonor Fernandes Ferreira in case No. 697/2014-T: after the respective rates are applied to the respective taxable matters (primary assessment), these two IRC assessments converge, specifically for the purposes of the application of Articles 89 et seq. of the CIRC.

ii) It is irrelevant what practical experience has been or has not been. It is not by virtue of experience being this or that that the law loses its autonomy and nature as a command, to become a reality commanded, in this case by habits, whether reflected or unreflected. Moreover, and although this is not what is discussed here, from the conceptual and legal text perspective, nothing, with autonomous taxation being IRC, stands in opposition to this quantity (which constitutes an increasingly larger portion of IRC) also being paid in phases and in advance in installments (payment on account), or entering into the calculations (as supported IRC) of Article 92 of the CIRC.

iii) In this specific case what is not at issue is the use of a tax credit for international double taxation, which is why what the TA argues in that regard is irrelevant. But it will always be said that if autonomous taxation is held by the TA and by case law to be IRC, specifically because it is still taxation of income/profit, in the capacity of substitute for the prohibition of deduction of certain expenses from taxable profit, it is at the very least hasty to exclude this part of the IRC assessment from the deduction from the assessment for international double taxation, there being ways of calculating any necessary conversions for the purpose.

iv) It is irrelevant, since what is not at issue here is any tax credit for investment, but in any case it will always be said that as the TA well knows (it suffices to read, for example, the regimes of CFEI, SIFIDE, RFAI, etc.), and contrary to what it seems to want to affirm, there is no separate calculation of profit attributable to the investment that benefited from a tax incentive in the form of a tax credit in IRC. If the investment goes badly but the company generates IRC assessment on income through other projects, absolutely nothing prevents the deduction from this assessment of the tax credit obtained through the investment that does not generate profits.

v) That is to say, there is no indexation of the use of the tax credit to the profitability of the investment: IRC assessment from any other source can be used to offset the tax credit. With the understanding that IRC assessment includes that of autonomous taxation in IRC, in accordance with overwhelmingly dominant case law (no interpretive doubt subsists in this regard) of the courts, and in accordance with the understanding of the TA itself. Moreover, this same case law affirms and reaffirms that autonomous taxation in IRC is also taxation on income/profit: function of substituting the assessment that would be generated by taxation with direct incidence on income/profit, were it not for the deduction of certain expenses.

vi) In the specific case what is not at issue is a fiscally transparent company, which is why the TA's considerations around this subject are irrelevant. But it will always be said that the adaptation rule provided for in Article 90(5) of the CIRC applies only, as results from its text and logic, insofar as there is the situation of attribution of the taxable matter of transparent companies to a third party (the partner or member) under Article 6 of the CIRC. Insofar as there is IRC (in this case, that of autonomous taxation) in which there is no such attribution to partners, there is no dissociation whatsoever and consequently the adaptation rule that expressly presupposes it is not applied.

vii) That is to say: to IRC outside fiscal transparency, as is the case, always, of autonomous taxation (Article 12 of the CIRC), the adaptation rule conceived and provided for IRC (that on profit) blocked, by being substituted by the taxation of third parties, by fiscal transparency is not, by definition, applied. To claim otherwise is illogical and completely disconnected from the purpose and presupposition in Article 90(5) of the CIRC.

viii) Why does the TA invoke Article 90(7) (current Article 90(9)) of the CIRC (in the numbering of 2012/13), if no one here asks that the credits for PEC be used beyond the forces of the autonomous taxation assessment in IRC?

ix) In the remainder, and as analysed above with regard to the arbitral decision handed down in case No. 113/2015-T, the fact that the PEC is payment on account of IRC in no way obstructs the settling of accounts with the IRC assessment generated by autonomous taxation. On the contrary, the fact that the PEC is payment on account of IRC permits it.

U) As regards in particular the intervention effected by the 2016 State Budget Law in the area of autonomous taxation in IRC, invoked by the TA in its learned Response, it is judged to be appropriate to conclude the following:

i) It is settled case law (and TA doctrine, when it suits it) that autonomous taxation in IRC is IRC; and that the norms for the assessment of IRC contained in Articles 89 et seq. of the CIRC apply to it.

ii) It should be noted that certain statements by the TA are not true with the intention of giving the idea that it does not apply Article 90(2) (deductions from the assessment) of the CIRC to the assessment of autonomous taxation. Because it does apply: withholding tax is (unquestionably) deducted from the autonomous taxation assessment. And the same occurs with (normal) payments on account, the reimbursement of which is made (see Article 104(2) of the CIRC) always when the aggregate of the assessments of base IRC and autonomous taxation in IRC is not sufficient. All of this is done, applies, has always been done.

iii) The incongruence lies in the TA's refusal to apply the same to the assessment of autonomous taxation in IRC with respect to other portions equally deductible from the IRC assessment. And the logical impossibility lies in the interpretation of the very same expression in the very same provision (Article 90(2) of the CIRC: "From the amount determined in accordance with the preceding paragraph the following deductions are made...") with opposite meanings depending on whether the deductible portion, or paragraph in issue, is one or another.

iv) Falling equally, apparently, into logical impossibility, the 2016 State Budget Law on the one hand reaffirmed that Article 89 of the CIRC applies to autonomous taxation (part 1 of the new Article 88(21) of the CIRC), on the other hand excluded autonomous taxation from Article 90(2) that follows (part 2 of the new Article 88(21) of the CIRC). And to both of these prescriptions, of opposite meaning, it attributed, on first appearance, and contradictorily, an interpretive character. This appearance does not, however, resist analysis, for the reasons that will be summarised below.

v) Before, however, entering into qualitative and conceptual analysis, it should be noted that the prism of counting votes (or of weighing the inclination of case law) until 30 March 2016 is a first symptom that one is dealing with a law innovative as to the exclusion prescribed in part 2 of the new Article 88(21) of the CIRC (as developed above).

vi) Moving to qualitative and conceptual analysis, as affirmed in the Supreme Administrative Court award establishing jurisprudence, handed down in case No. 075143, of 2 March 1994, citing Baptista Machado, "[i]n order for a new law to truly be interpretive, two requirements are therefore necessary: that the solution of prior law be controversial or, at least, uncertain; and that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or the interpreter could arrive at it without exceeding the limits normally imposed on the interpretation or application of the law."

vii) It can, and should, be concluded that Article 135 of the 2016 State Budget Law refers only to part 1 of the new Article 88(21) of the CIRC, an interpretation that by the negative is authorized by the manifest incorrectness of the wording of that Article 135 (as developed above), revealing the little care the legislator had in being precise, and which by the positive is authorized by the presumption that the legislator adopted the most correct solutions and by the guideline of interpretation in accordance with the Constitution (at a more advanced stage of this segment of the conclusions presented there will be additional grounds for this interpretation of Article 135 of the 2016 State Budget Law).

viii) Furthermore, as developed above, the attribution of an interpretive character to a norm does not by itself trigger the application of the regime for the application of laws in time provided for in the Civil Code. Specifically, and synthesizing, the regime for the application of laws in time provided for in the Civil Code (which includes by its own right its Article 13), does not apply with respect to matters that have a private regime for the purpose, in obedience to distinct principles, as is the case (currently) of taxes: see Article 12 of the General Tax Law and Article 103(3) of the Constitution.

ix) In any case Article 13 of the Civil Code and the retroactivity prescription contained therein applies only to interpretive norms, as opposed to false interpretive norms. And part 2 of the new Article 88(21) of the CIRC is, supposing that it was truly the legislator's intention to attribute to it an interpretive character (a matter to which we will return below), a false interpretive norm.

x) Indeed, where is the interpreted norm, the object of the interpretation? From no part of the 2016 State Budget Law does it result that the norm identified in part 2 of the new Article 88(21) of the CIRC would interpret. This constitutes yet another symptom that one is dealing with a normative novelty, as opposed to an interpretive view of an old norm.

xi) Admitting, for the sake of argument, that the norm object of interpretation is Article 90(2) of the CIRC (no other possible candidate is seen), the relevant question then becomes this: what ambiguity is detected in the reference thereto to IRC that was not equally shared then also in the same measure by either the precedent Article 90(1) of the same article, or by the precedent Article 89?

xii) As is seen, no ambiguity or opacity: all these norms are directed at the assessment of IRC, without any ambiguity, in the post-regulation phase of the primary assessment (which is obtained by the application of IRC rates to taxable matters of IRC, in accordance with the preceding Articles 1 to 88 of the CIRC).

xiii) What leads us to yet another strong reason to consider that part 2 of the new Article 88(21) of the CIRC is not interpretive for the purposes of the application of the law in time, that is, for the purposes of activating the provision in Article 13 of the Civil Code (supposing, for the sake of argument, that this is applicable in matters that have private regulation concerning the application of law in time).

xiv) Indeed, how can both parts, 1 and 2, of the new Article 88(21) of the CIRC, be simultaneously interpretive of what Articles 89 and 90 of the CIRC provide (both inserted in the same phase of IRC assessment, after obtaining the primary assessment), in opposite meanings? How can they be simultaneously interpretive in the sense that the IRC of Article 89 also includes autonomous taxation (part 1 of Article 88(21)), and in the opposite sense that the IRC of Article 90, at least that of its paragraph 2, does not include autonomous taxation?

xv) They cannot, this is a logical and systemic impossibility. One of the two prescriptions, either that of part 1, or that of part 2, of the new Article 88(21) of the CIRC, does not have, and does not necessarily have, by logical impossibility, an interpretive character.

xvi) And knowing from the overwhelmingly dominant case law, accompanied by the TA, in the sense of qualification of the autonomous taxation assessment in IRC as possessing the nature of IRC, it is easy to conclude that in this duality of prescriptions of opposite meaning what has an interpretive character is part 1. And that therefore, and necessarily, part 2 of the new Article 88(21) of the CIRC has an innovative character (counter-current, in this case counter to the inclusion of the primary assessment of autonomous taxation in the IRC assessment).

xvii) And with this the first of the qualitative reasons presented above is reinforced: the logical impossibility detected, the antinomy, is only resolved if the attribution of an interpretive character to the new Article 88(21) of the CIRC, by Article 135 of the 2016 State Budget Law, is interpreted as intending to refer to part 1, and not to part 2, of the said Article 21.

xviii) If, notwithstanding all the reasons that have been listed above, it is still understood that (i) Article 135 of the 2016 State Budget Law (Law No. 7-A/2016 of 30 March) attributed an interpretive character also to part 2 of the new Article 88(21) of the CIRC, that is, also to the normative segment 'no deductions being made to the global amount [of autonomous taxation in IRC] determined', introduced by the same 2016 State Budget Law (by its Article 133), (ii) and that therefrom would result the application of Article 13 of the Civil Code insofar as it prescribes the retroactive application of interpretive laws,

xix) it is believed that it would then be in the presence of a material unconstitutionality of the said Article 135 of the 2016 State Budget Law, by violation of the prohibition of retroactivity in tax matters provided for in Article 103(3) of the Constitution, whether or not the conclusion has been reached (and it is understood that it has not), that one is in the presence of a materially interpretive law (see the award of the Constitutional Court No. 172/00, and as well as Saldanha Sanches in Tax Law, No. 1, January 2000, 'Interpretive Law and Retroactivity in Tax Matters, pp 77 et seq., in particular 87 and 88), and in its Manual of Tax Law, 3rd Edition, Coimbra Publishers 2007, p 193 et seq., in particular 196), and Jónatas E. M. Machado and Paulo Nogueira da Costa, Course in Tax Law, Coimbra Publishers 2012, p 76.

xx) The unconstitutionality that is raised concerns the tax, with the assessment, of autonomous taxation (and not with the putative 'assessment' of PEC'), the taxable event of which was consumed, was closed, in the fiscal year(s) in question here: assessment, determination, and payment, of additional 'autonomous taxation in IRC', should the 2016 State Budget Law provision that eliminates the deductions from the assessment of this tax be applied retroactively."

III. RESPONSE OF THE RESPONDENT

The Respondent presented a defence arguing for the dismissal of the claims filed by the Claimant, concluding as follows:

"8. (...) And if doubts subsisted regarding the autonomy of Autonomous Taxation, let us overlook the pleonasm, note the dissenting opinion of judge Vítor Gomes in the Constitutional Court Award No. 18/2011, case No. 204/2010, where he affirms that 'Although formally inserted in the CIRC and the amount that it permits to collect is assessed within it and under the heading of IRC, the norm in question [Article 88] concerns a tax imposition that is materially distinct from taxation in this schedule, (…)' and further on 'Indeed, we are dealing with autonomous taxation, as the very letter of the provision states. And that makes all the difference. (…)'.

1. Autonomy that was recently confirmed, in an award handed down on 13 April 2016, in the Constitutional Court Award No. 197/2016, case No. 465/2015, available at http://www.tribunalconstitucional.pt/tc/acordaos/20160197.html with regard to the rate applicable to expenses covered by Article 88(13) of the CIRC, (…)."

2. The State Budget for 2016 added Article 88(21) to the CIRC, attributing to it an interpretive character, which states: 'The assessment of autonomous taxation in IRC is carried out in accordance with the provisions of Article 89, and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the global amount determined.'

(…)

1. The norm contained in the State Budget for 2016, which causes such indignation for the Claimant, merely, as the Respondent has already defended, and for that reason, for reasons of procedural economy, abstains from repeating such considerations, serves to evidence what has always been the spirit of that norm.

2. It is that, notwithstanding the mere convenience and the theoretical disagreements of the Claimant, such concerns do not deprive the norm sub judice of the interpretive character that underlies it.

3. Traversing the entire journey undertaken by the Respondent and the conclusions drawn therefrom (contrary to what the Claimant seeks to demonstrate) it is evident that the reasoning evidenced and pre-existing the approval of the norm, fully refutes the arguments of the Claimant as to the substance of the case.

4. From which, the existence of the norm now in question, and especially the effect attributed to it, amounts to mere clarifying evidence.

5. Indeed, the Respondent in its Response demonstrates clear, logical and, above all, coherent reasoning, in which the sole logical and pure conclusion to draw, in a reasoning of interpretation and systematic integration and coherence with the spirit of the matter at issue (autonomous taxation) would always lead to the understanding manifested decades ago (whether one likes it or not!) by taxpayers and which the claimant now seeks to contradict.

6. Understanding and practice, which was never called into question by the Respondent, nor, as the Claimant falsely seeks to demonstrate, was called into question by the overwhelming case law and 'very strong prior jurisprudential current' (sic.)

(…)

1. This norm, having an interpretive character, is integrated into the interpreted law (see Article 13 of the Civil Code), forming with it an indivisible whole, contrary to what the Claimant prolixly, soporifically and tediously reiterates to exhaustion.

2. It is considered to have an interpretive character 'the law which on a point on which the rule of law is uncertain or controversial comes to establish a solution which the case law, by itself, could have adopted' (Baptista Machado, in Application of Laws in Time in the New Civil Code, p. 286 et seq.).

3. Which means that, in order to be able to affirm that a law has that character, it is necessary that, substantially, it have brought nothing new in relation to the law interpreted and have limited itself to resolving a legal uncertainty or controversy, giving it an understanding which the case law, had it wanted, could already have adopted.

4. The interpretive norm thus aims to put an end to the controversy that has been installed, by mere and exclusive volition of this learned counsel, regarding the meaning that should be given to a certain law, fixing it itself the meaning that this should have, which will be binding.

5. It is a matter of an authentic interpretation intended to confer greater certainty and equality in the application of the law.

6. Now, in the case at hand, if we analyse well the said legal provision, it does nothing more than clarify in a reasoning of interpretation, systematic integration and coherence with the spirit of the matter at issue (autonomous taxation),

7. i.e., the understanding manifested for decades both by taxpayers and by the Respondent itself and which was never called into question either by those, or by this Respondent, nor, as the Claimant claims, by the publicized but non-existent 'very strong prior jurisprudential current' (sic.).

8. It should be emphasised that the norm at issue merely came to clarify by positivizing, as was evidenced in the Response presented, what has always been the spirit of the norm, as well as the understanding and practice perfilhed peacefully by doctrine and by taxpayers in general, which were never called into question by the TA, whereby any dissenting interpretation will be materially unconstitutional.

9. Indeed, since the creation of Autonomous Taxation, in the early 1990s, and its legislative evolution, it has always been settled that autonomous taxation did not admit any deduction.

10. Indeed, the law by attributing an interpretive character, does not depart from the solutions that were already seen established both by the Law and by the tax legal practice, but rather, interprets and clarifies the practical application of the devices now controversial, revealing a non-innovative solution, so that the judge or the interpreter could arrive at it without exceeding the limits normally imposed on the interpretation and application of the law.

11. It is therefore unquestionable that the judge and the interpreter, in the face of old texts, could not feel authorized to adopt any solution other than the solution that the new law comes to interpret and which was already that which taxpayers and the TA adopted,

(…)

1. Hence it follows that the addition at issue merely limits itself to translating the axiomatic evidence of the entire teleology of the history of the norm

2. Notwithstanding that, for the Claimant, this be a controversial matter, in total dissonance with what was the behavior and interpretation repeatedly taken into account over time, both by taxpayers and by the TA, the solution defined by the new law does not depart from what was the teleology of the normative in question, quite the contrary.

3. In view of this, the tax acts challenged by the now Claimant merit no censure, and the same should remain valid in the legal order.

(…)

1. As regards the interpretive effect conferred by Article 135 contained in the State Budget Law for 2016, let us appeal to the good case law expressed in the arbitration case No. 673/2015-T, constituted in a collegiate tribunal, presided over by the distinguished Councilor Jorge Lopes de Sousa (…).

(…)

1. More recently also the arbitral decisions handed down in the course of case No. 781/2015-T and case No. 784/2015-T, adopted the above position, equally considering that one is dealing with a truly interpretive law, whereby the authentic interpretation made does not violate any constitutional principle, the Claimant's claim being unfounded.

2. Finally, it is important to bring to light the arbitral decision handed down in the course of Case No. 535/2015-T, which concerned the question at issue and was decided in favor of the Respondent.

3. In summary, it is important that to date the question to be decided has already been the subject of several arbitral awards, in this case, Case No. 113/2015-T; Case No. 535/2015-T; Case No. 673/2015-T, and Case No. 781/2015-T; Case No. 784/2015-T all of them corroborating the thesis defended by the Respondent.

4. Without omitting, by way of conclusion, it is always to be said that any interpretation that does not apply the norm contained in the State Budget Law for 2016, set forth in Article 133, which added Article 88(21) to the CIRC, with the effects provided for in Article 135, both contained in the State Budget Law for 2016, published 30.03.2016, entering into force the following day, in which it is prescribed, with an interpretive character, that

'The assessment of autonomous taxation in IRC is carried out in accordance with the provisions of Article 89, and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the global amount determined.'

And which, consequently, permit the deduction to the part of the IRC assessment produced by the rates of autonomous taxation either of the special payment on account made in the context of IRC (PEC), is materially unconstitutional, because of

a) violation of the principle of legality, inherent in Article 103(2) of the CRP,

b) violation of the principle of separation of powers, enshrined in Article 2 of the CRP,

c) violation of the principle of protection of trust provided in Article 2 of the CRP,

d) violation of the principle of equality, in its positive formulation of taxable capacity, arising from Article 13(2) and 103(2) both of the CRP."

IV. PRELIMINARY MATTER

The Arbitration Tribunal was regularly constituted and is competent.

The parties possess legal personality and legal capacity and are legitimate (Articles 4 and 10(2) of the same statute and Article 1 of Order No. 112-A/2011 of 22 March).

The proceedings are free from defects and there is no obstacle to the consideration of the merits of the case.

V. FACTUAL MATTERS

A. Established Facts

The following facts are considered established:

1. On 31-05-2013, the Claimant submitted the IRC Form 22 for the fiscal year 2012, with identification code …-…-…, in which it determined the amount of €22,917.34 as autonomous taxation (see document No. 1 of the record).

2. The tax thus assessed was paid on 19-12-2013.

3. On 19-11-2014, the Claimant submitted the IRC Form 22 for the fiscal year 2013, with identification code …-…-…, in which it determined the amount of €13,497.04 as autonomous taxation (see document No. 2 of the record).

4. The tax thus assessed was paid on 06-03-2015.

5. In 2012, the Claimant held a credit against the State in the amount of €28,902.00 in respect of PEC for the years 2008 to 2010, with the following breakdown (see document No. 7 of the record):

1. In 2013, the amount of the credit against the State referring to PEC was €14,014.00, corresponding to the years 2009 and 2010 (see document No. 7 of the record).

2. The PEC for the fiscal years 2010 (2nd installment), 2011, 2012 and 2013 were paid after the filing of the IRC income tax returns Form 22 identified in points 1 and 2 above, more specifically on 20-03-2015 (see document No. 7 of the record).

3. On 27-05-2015, the Claimant filed an administrative complaint against the self-assessed IRC for the years 2012 and 2013.

4. Until the date of submission of the present request for an arbitral decision, the Tax and Customs Authority did not issue an express decision on the filed complaint, whereby on 27-09-2015 its tacit rejection was presumed.

B. Unproven Facts

No other facts with relevance to the arbitral decision were proven.

C. Grounds for the Factual Matters

The factual matters established rest on documentary evidence presented and uncontested.

VI. MATTERS OF LAW

In light of the foregoing, this tribunal must decide on the possibility of a taxpayer subject to IRC being able, under paragraph (c) of Article 90(2) of the CIRC (wording in force at the date of the facts), to deduct from the value of autonomous taxation under that tax the amounts paid to the State as PEC that were not subject to deduction or reimbursement.

In the words of the Claimant, it will be incumbent upon this tribunal to confirm or refute the reasoning defended by it that "PEC is payment on account of IRC, PEC is deductible from the IRC assessment, autonomous taxation is IRC, therefore PEC is deductible from the autonomous taxation assessment".

For such purpose, it is necessary to scrutinize each of the premises to validate the logical conclusion that the Claimant derives from them.

Let us see:

A) The Nature of the PEC

Notwithstanding the recognition that the introduction of the PEC had as its primary objective the fight against tax fraud and evasion[1], and despite the vicissitudes and adjustments of regime to which it was subject, it is today unquestionable, in light of the wording of Article 93 of the CIRC, that the PEC assumes – as it already assumed at the date of the facts – the nature of an advance payment on account of tax due. As such, pursuant to Article 33 of the General Tax Law, the amounts paid by the taxpayer shall be deductible from the tax determined and due ultimately.

To that extent, Article 106 of the CIRC does not constitute a norm of objective incidence which, complementing Articles 3 and 4 of the CIRC, creates a new tax figure. In fact, considering its systematic insertion (in Chapter VI under the heading "Payment") and the very letter of the law, it is concluded that we are dealing with a norm that merely defines forms and periods of payment of the tax.

This was recognized by the Constitutional Court in award No. 494/2009, of 29-09-2009, case No. 595/06: "The PEC is a tax instrument that configures a tax obligation of the taxpayer, to which is required that it pay in advance a legally determined amount relative to a tax before its final determination. In the case under analysis, it is a periodic tax on income, the Corporate Income Tax (IRC). The purpose of payments on account (of the PEC but, likewise, of normal payment on account – PNC) is that of, concretizing the maxim 'pay as you earn', bringing closer the date of payment, in this case, of IRC, to the date of production or obtaining of the income, it being certain that the tax obligation will only be effectively defined and quantified at the end of the respective imposition period, by reference to the tax facts that ground the emergence of the obligation of the tax. Impositions of this kind correspond juridically, in a structural perspective, to provisional tax acts and, functionally, to cautionary or security acts." (underlined in original).

As refer J. L. Saldanha Sanches and André Salgado de Matos[2], "(…) from the conceptual point of view, special payments on account are, in confirmation of their designation, true payments on account – that is, a mechanism of tax anesthesia used by the legislator to reduce the time gap between the moment of verification of the fact that indicates the existence of taxable capacity (the perception of income) and the moment when the payment of the tax debt is due (…) The difference between special payments on account and general payments on account is not, therefore, one of nature, but only of regime".

Being an advance payment of the tax due ultimately, in the period of IRC discussed here (2012 and 2013), the PEC was, however, subject to a special regime of deduction and reimbursement that resulted from the combined application of paragraph (c) of Article 90(2) and Article 90(7) and Articles 93(2) and (3) of the CIRC (numbering and wordings at the date). But, as the aforementioned AA. refer[3], the conditions imposed by the legislator to permit the reimbursement of the tax advanced in excess are nothing more than "(…) a specific procedure for illusory action of a legal presumption at a moment subsequent to its operation (…)", transferring to the taxpayer the burden of demonstrating before the Tax Authority that the value considered for the purposes of quantifying the PEC due (volume of business of the previous year) does not correspond to actual income subject to taxation under the general rules.

To that extent, it was concluded that this special regime of deduction or reimbursement – given the referred purpose of fighting tax fraud and evasion – does not interfere with the qualification of the PEC as an effective advance payment on account of the IRC to be determined with respect to each fiscal year, and is, for that very reason, deductible from the value to be paid.

For this reason, the CIRC expressly provided and provides for the deduction of the PEC from the IRC to be paid in the same fiscal year or in the following fiscal years.

B) The Nature of Autonomous Taxation and Respective Rules of Assessment

This issue has been the subject of intense doctrinal and jurisprudential debate, having given rise to divergent orientations.

By way of example, reference is made to the Supreme Administrative Court award of 21-03-2012, handed down in case No. 830/11, in which it was concluded that autonomous taxation is a tax on expenditure and not on income, with the following being recorded in that award: "In truth, autonomous taxation, although formally inserted in the CIRC (Article 81), does not aim to tax income at the end of the tax period, but rather certain types of expenditure, each expenditure constituting an autonomous tax fact, to which the taxpayer is subject, whether or not it has taxable income at the end of the period (See the Dissenting Opinion of Counselor Vítor Gomes to the Constitutional Court Award No. 18/2011.) (…) as regards autonomous taxation, it is verified that, although it be a form of taxation provided for in the CIRC, it has nothing to do with the taxation of income, but rather with the taxation of certain expenditures, which the legislator understood, for the reasons pointed out above, to do so autonomously. It is hereby evidenced that autonomous taxation constitutes tax realities completely different from the regime of fiscal transparency either because autonomous taxation does not affect income, but rather expenditure as such, or because each expenditure is taken as constituting an autonomous tax fact subject to different rates from those of IRC. And, although confidential expenditures are only to be taxed together with IRC, the truth, however, is that the taxable matter subject to the incidence of autonomous taxation rates is the mere sum of the various portions of expenditure".

In the same sense, the recent award No. 197/2016 of the Constitutional Court of 13-04-2016, case No. 465/15, in which it is recorded that "Indeed, as was noted, IRC and autonomous taxation are distinct taxes, with different bases of incidence and subject to specific rates. IRC applies to income obtained and profits directly attributable to the exercise of a certain economic activity, by reference to the annual period, and thus taxes, the aggregation of all income obtained in the tax period. By contrast, in autonomous taxation in IRC – according to the case law itself – the tax-generating fact is the expenditure itself, characterized as an instantaneous tax fact that arises isolated in time and generates a payment obligation with an ad hoc character. (…) As is to be concluded, autonomous taxation, although provided for in the CIRC and assessed jointly with IRC for the purposes of collection, has nothing to do with the taxation of income and profits attributable to the economic exercise of the company, since they apply to certain expenditures that constitute autonomous tax facts that the legislator, for reasons of tax policy, wished to tax separately by subjection to a predetermined rate that has no relation whatsoever to the volume of business of the company (award of the Supreme Administrative Court of 12 April 2012, Case No. 77/12)."

As regards doctrine, as referred to by Rui Morais[4] "what is at issue is taxation that applies to certain expenditures of taxpayers, which are taken as constituting tax facts. It is difficult to discern the nature of this form of taxation and, even more so, the reason why it appears provided for in the codes of taxes on income".

Also, Casalta Nabais[5] considers that it "concerns taxation on expenditure and not on income". In the same sense, see Ana Paula Dourado[6]. In summary, some doctrine and the case law mentioned of the Supreme Administrative Court and the Constitutional Court consider that autonomous taxation are autonomous tax facts that apply to expenditure. Thus, following this orientation, autonomous taxation, despite being formally inserted in the CIRC, concerns a form of taxation distinct from the tax on income.

It happens, however, that it is possible to identify several arbitral decisions which, although addressing another specific legal question, conclude that autonomous taxation has always been considered a component of IRC, integrating its respective legal regime. See, in particular, the following cases: Nos. 187/2013-T, 209/2013-T, 210/2013‑T, 246/2013-T, 255/2013-T, 260/2013-T, 282/2013-T, 292/2013-T, 298/13-T, 6/2014-T, 36/2014-T, 37/2014-T, 59/2014-T, 79/2014-T, 80/2014-T, 93/2014-T, 94/2014-T, 163/2014-T, 166/2014-T, 167/2014-T and 211/2014-T, 659/2014-T, 697/2014-T and 769/2014-T.

From the case law mentioned it is settled that the assessment produced through the application of the autonomous taxation rules is true IRC, integrating the respective debt of this tax.

In this regard, in the arbitral award handed down in case No. 59/2014-T, it was recorded, among other things, that "if it is true that autonomous taxation constitute a different way of making taxes apply to companies, which could be contained in independent regulation or be arranged in the Stamp Tax Code, it is also not less true that the legislative choice to include such taxation in the CIRC reveals an intention to consider such taxation as inserted in the IRC, which may be justified by their being an indirect way, but, in the legislative perspective, equitable, simple and efficient, of taxing business income that escapes the regime of taxation with direct incidence on income. It is thus concluded that both in the face of Article 4 of Decree-Law No. 192/90 of 9 June, in which, in all of its versions, it referred to autonomous taxation as being 'IRS or IRC' and not another tax, as after its inclusion in the CIRC, the autonomous taxation of which the passive subjects are legal entities are considered IRC, whereby the norms of the CIRC will apply to them that do not conflict with its special form of incidence and applicable rates."

Equally, note should be taken of what was recorded in the arbitral award, handed down in case No. 187/2013-T, also concerning autonomous taxation relating to motor vehicle expenses, representation expenses and subsistence allowances: "In this sense, care should be taken, above all, to the fact that the legal regime of the autonomous taxation in question only makes sense in the context of taxation under IRC. That is, disconnected from the legal regime of this tax, they will, completely, lack meaning. Their existence, their purpose, their explanation, ultimately, their legality, is only comprehensible and acceptable within the framework of the legal regime of IRC. [p 21]. (…) That is, the autonomous taxation of the kind now under consideration are strongly linked to the subjects of the tax on income respective, and, more specifically, to the economic activity carried out by them. This aspect becomes even more evident, if note is taken of another fundamental fact: the circumstance that the autonomous taxation now under consideration [motor vehicle expenses, representation expenses and subsistence allowances] only apply to deductible expenditures. (…) Nevertheless, the said modus operandi through expenditure, typical of the autonomous taxation under analysis, will still be materially connectable with the income that, ultimately, legitimates the IRC. (…). In light of everything that has been stated, considering that the autonomous taxation that apply to expenditures deductible in IRC integrate the regime, and are due under the heading, of this tax, and, as such are covered by the provision of Article 45(1)(a) of the CIRC (…)."

Finally, it should be underlined that the repeated and uniform case law mentioned above would have led the legislator, in the IRC reform carried out by Law No. 2/2014, of 16 January, to expressly provide that autonomous taxation are not deductible for the purposes of determining taxable profit, with paragraph (a) of Article 23A(1) of the CIRC coming to refer to 'IRC, including autonomous taxation (…)'. This new wording thus formalizes, without margin for doubt, that autonomous taxation are, in fact, IRC and, to that extent, will have the nature of '(…) taxes that directly or indirectly apply to profits'.

This qualification is also subscribed to by both Parties which have a convergent position on this matter; both recognize that autonomous taxation are an integral part of IRC, corresponding to the assessment of this tax.

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Being – as it is – IRC, the assessment of autonomous taxation follows the same rules and procedures provided for in Articles 89 and 90 of the CIRC (wording at the date). The Respondent itself recognizes this in Article 38 of the record when it refers that "It is appropriate to clarify that the assessment of autonomous taxation is carried out on the basis of Articles 89 and 90(1) of the IRC Code but, applying different rules for the calculation of the tax: (1) in one case the assessment operates through the application of the rates of Article 87 to the taxable matter determined in accordance with the rules of Chapter III of the Code and (2) in the other case, various assessments are determined according to the diversity of the facts that give rise to autonomous taxation".

It is true that the amounts due in respect of autonomous taxation are calculated on the basis of a specific taxable matter, determined in accordance with Article 88 of the CIRC, different from the base of incidence of the tax to be calculated in accordance with Articles 15 et seq. of the CIRC. In the same way that the tax rates applicable are also different.

However, contrary to what the Respondent alleges, this distinction does not imply that the tax determined in the self-assessment made by the taxpayer, pursuant to Article 89 and Article 90(1) of the CIRC, is distinct, giving rise to two separate tax assessments.

In fact, Article 90 of the CIRC, presenting itself as the only norm of the code that regulates the procedure and manner of assessment of the tax, will necessarily have to apply to the situations identified, giving rise to only one assessment of the tax. Thus, when the legislator refers to the tax assessed in accordance with Article 90(1) of the CIRC, he is precisely referring to the tax calculated at the rates of Article 87 of the CIRC, as well as the tax due in respect of autonomous taxation.

Having only one procedure for assessment of IRC (in this case, self-assessment), this will give rise to only one assessment of tax – although calculated in a dualistic manner – whereby the deductions provided for in Article 90(2) of the CIRC will be applicable to that same total assessment and not only to part of it.

In that sense, the conclusion of the Respondent set out in Article 39 of the record cannot be considered justified and legally sustained to the effect that, not having the assessment determined on the basis of the norm in question a unitary character – since it comprises amounts calculated according to different rules to which differentiated purposes are associated – the deductions permitted pursuant to Article 90(2) of the CIRC would be applicable only with respect to the component of the assessment with which there existed direct correspondence to maintain the coherence of the conceptual structure of the general regime of the tax.

This interpretation has, in our view, no adhesion to the letter of the law and the legal regime in force. Nothing in the CIRC permits such conclusion, being rather contradicted by the very letter of paragraph (c) of Article 90(2) and Article 93 of the CIRC which established the possibility of deduction of the PEC from the tax determined by the taxpayer in the income tax return. Of all the limitations on the deduction of the PEC imposed by the legislator (namely those arising from Articles 90(7) and (8) of the CIRC), none refers to the need for connection or correspondence to the assessment or part of the assessment determined.

Furthermore, the tax determined to which Article 90(2) of the CIRC refers is precisely that resulting from the self-assessment made by the taxpayer in compliance with Articles 89 and 90(1) of the CIRC, without any distinction or individualization being made as a function of the tax rate or the base of incidence.

Consequently, from the combination of these norms resulted the legal possibility of deduction of amounts with the nature of PEC from the totality of the IRC assessment determined in accordance with Article 90(1) of the CIRC which, as referred to above, necessarily encompasses the autonomous taxation determined in the fiscal year.

In light of the foregoing, in 2012 and 2013, the PEC paid by the taxpayer and not yet subject to deduction or reimbursement would be deductible from the amounts of autonomous taxation determined in each of those fiscal years, in the terms legally permitted (having particular regard to Articles 90(7) and (8) of the CIRC).

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It happens that Law No. 7-A/2016, of 30 March, added Article 88(21) of the CIRC, attributing to it a merely interpretive character (Article 135). Taking this situation into account, it will be necessary to determine what impact, if any, this has on the above conclusions.

C) The Amendment Introduced by Article 133 of Law No. 7-A/2016, of 30 March

By Law No. 7-A/2016, of 30 March, the legislator introduced Article 88(21) of the CIRC, with the following wording:

"The assessment of autonomous taxation in IRC is carried out in accordance with the provisions of Article 89, and is based on the values and rates that result from the provisions of the preceding paragraphs, no deductions being made to the global amount determined".

In Article 135 of the said Law No. 7-A/2016, of 30 March, the legislator determined that the norm in question will have an interpretive character.

Should it be verified that, in fact, the new Article 88(21) of the CIRC has an interpretive character, the provisions contained therein will be integrated into the interpreted norm from the beginning of its validity, whereby this tribunal will have to conclude for the non-deductibility of the PEC from the amounts due in respect of autonomous taxation, dismissing the claim of the Claimant. The same would result from the application to the concrete case of Article 13 of the Civil Code which states "The interpretive law is integrated into the law interpreted, the effects already produced by the performance of the obligation, by judgment passed in judgment, by agreement, although not ratified, or by acts of similar nature being saved".

It is thus necessary to analyze.

First of all, it should be noted that, although in tax matters the constitutional principles of legality and the prohibition of retroactivity of law, provided for in Article 103 of the CRP, impose some restrictions on the legislator, this tribunal understands that there is no general constitutional prohibition of interpretive tax laws.

We do not, therefore, agree with the position defended by J.L Saldanha Sanches[7] who concluded that "And therefore it does not seem to us that interpretive law can take place in tax matters: if until now what was at issue were falsely interpretive laws the constitutional revision has come to prevent the retroactive effects of any norm in tax matters. Including those caused by interpretive law.". In the same way that it is considered that, in light of the most recent case law of the Constitutional Court on the matter of interpretation and delimitation of the scope of the principle of prohibition of retroactivity of tax law[8], the conclusions of award No. 172/2000, of 22-03-2000, handed down in case 762/98, of this Court would not justify an absolute prohibition of interpretive laws.

The constitutional admissibility of interpretive laws in tax matters – just as with respect to any norms of a tax nature – should be assessed as a function of the matters on which they concern and their normative content since the constitutional prohibition of retroactivity of tax law is limited to matters of incidence (objective, subjective, temporal and territorial) of the tax.

In fact, as writes Casalta Nabais[9] from the wording of Article 103(3) of the CRP results "(…) the prohibition of retroactive tax norms that are burdensome or aggravating of the legal situation of taxpayers (…)" (underlined in original).

The same is defended by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa[10], "The constitutionality of retroactive tax norms has to be assessed in different terms depending on whether they concern the material elements that concur for the definition of the tax norm type (incidence, exemptions and rate) or other matters (guarantee of taxpayers, procedure for assessment and collection). The prohibition contained in Article 103(3) of the CRP; concerns only the former. The constitutional conformity of the latter has to be equated in light of the material principles of legal certainty and protection of trust that inform the rule of law (Article 2 of the CRP)".

And the truth is that jurisprudential practice, examples of which are the Supreme Administrative Court awards of 21-03-2012, case No. 830/11, and 16-05-2012, case No. 675/11, has admitted the existence of interpretive laws of tax scope.

Starting, thus, from the theoretical admissibility of interpretive laws in tax matters, it is necessary to analyze whether, in the case at hand, notwithstanding the express declaration of the legislator, we are truly dealing with an interpretive law.

For Ferrer Correia[11] "In the absence of other elements that permit giving an interpretive value to a norm, the fundamental criterion to use for this purpose is 'that the principle contained in the new law can be considered inherent in the prior law. Now that requirement should be judged satisfied whenever it can be said that courts would normally decide, in the domain of the prior legislation, in accordance with such principle. (…) It is that, being this presupposition verified, the reasons that underlie the principle of non-retroactivity of the law cease, which are embodied in the protection of acquired rights and expectations conceived by individuals by acting under the norms of the preceding law. If case law was clearly favorable to a certain understanding of the prior legislation, and the new law comes to confirm it expressly, there is no reason not to define this law as interpretive and as such applicable even to the past. In short, no one will be able to complain of violations of subjective rights or of frustration of expectations, since those interested, had they resorted to the courts to assert a supposed right or to have a certain situation clarified, would probably not have obtained a result different from what is now made certain".

This is also the understanding of Baptista Machado[12] who concluded that "the reason why interpretive law applies to facts and situations prior to it lies fundamentally in that it, coming to establish one of the possible interpretations of the old law with which the interested parties could and should count, is not susceptible to violating expectations that are secure and legitimately founded". In these cases, there is no true retroactivity in the application of interpretive law because the interpretation of the original norm effected in light of the legal framework in force would lead to the same solution as that enshrined by the legislator in a later norm.

It is thus considered that, in order to qualify a law as interpretive, the following requirements should be verified:

(i) there is a controversial or uncertain question in the law in force; and

(ii) the legislator enshrines an interpretive solution that resolves the uncertainty to which the interpreter or judge would arrive based on the normative provision in force prior to the legislative amendment.

Applying these criteria to the situation at hand, we are led to conclude that we are, truly, dealing with an interpretive law. In fact, the matter regulated by the new Article 88(21) of the CIRC was controversial and uncertain (having given rise to the arbitral cases listed by the Claimant itself), corresponding to the solution enshrined to one of the plausible interpretations to which the judge would arrive, as actually occurred, for example, in the arbitral decision handed down in case 113/2015-T, of 30-12-2015. It is true that the solution enshrined by law does not correspond to the interpretation that this tribunal made of the norms of the IRC in force at the date of the facts, as set out above, but it is nonetheless a plausible and substantiated solution that found prior jurisprudential support.

Against this understanding the allegation of the Claimant that, in order to be in the presence of a truly interpretive law, it would be necessary for there to be a body of case law that imposed a certain solution on the legislator, which would not be verified in the present situation given that some of the awards mentioned by the Respondent are subsequent to the legislative amendment, would not proceed.

And this allegation does not proceed since, as refers Baptista Machado[13] "(…) It is not necessary for the law to establish one of the prior bodies of case law or a strong prior jurisprudential current. All the more so since interpretive law often arises before such bodies of case law come to form. (…) In order for a new law to be truly interpretive, two requirements are therefore necessary: that the solution of prior law be controversial or at least uncertain; and that the solution defined by the new law be situated within the framework of the controversy and be such that the judge or the interpreter could arrive at it without exceeding the limits normally imposed on the interpretation or application of the law. If the judge or the interpreter, in the face of old texts, could not feel authorized to adopt the solution that the new law comes to establish, then this is decidedly innovative." (underlined in original).

Essential is, therefore, that the solution enshrined by the legislator could be determined by the interpreter or judge within the normative framework in force and within the scope of the controversy or uncertainty generated by the norm. As already mentioned, despite the solution enshrined by the legislator not being the one to which this tribunal arrived, as set out above, the truth is that it corresponds to a possible interpretation within the scope of the controversy, logically sustained in other (arbitral) decisions prior to it.

Furthermore, this conclusion regarding the interpretive character of the new Article 88(21) of the CIRC, with the inherent application of the same in accordance with Article 13 of the Civil Code, does not violate the principle of prohibition of retroactivity of tax law arising from Article 103(3) of the CRP, as alleged by the Claimant on the grounds that it would put at risk the assessment of autonomous taxation whose tax facts were consumed in the years 2012 and 2013. In the understanding of the Claimant, should the provision introduced by Law No. 7-A/2016, of 30 March, be applied retroactively, this will affect the assessment and determination of the said assessments, leading to the payment of additional 'autonomous taxation in IRC' for the fiscal years in question.

Now, without prejudice to better opinion, the question under discussion in the proceedings does not concern the assessment for autonomous taxation for the years 2012 and 2013, which will always remain unaltered whatever decision is made regarding the possibility of deduction of the PEC. This is because, contrary to what seems to result from the position of the Claimant, there is no necessary conceptual correspondence between tax assessment and tax to be paid as a result of the submission of the income tax return under Article 120 of the CIRC. To that extent, even if the claim made by the Claimant were granted, it would be subject to exactly the same level of taxation (the assessment would be exactly the same); what would differ would be the tax to be remitted to the State as a result of the self-assessment made in Form 22 since the amounts previously paid as special payments on account would be deducted from such value.

Furthermore, in the understanding of this tribunal, the acceptance of the interpretive nature of the said norm does not violate Article 103(3) of the CRP because, as stated above, the constitutional principle in question prohibits the creation of retroactive taxes, thus confining its scope of application to matters of subjective, objective, temporal and territorial incidence. Now, the norm in question regulates the matter of payment of the assessed tax, not concerning itself with its incidence or quantification of the assessment itself. The alleged unconstitutionality invoked by the Claimant does not therefore proceed by alleged violation of the prohibition of retroactivity of the tax.

Finally, as also decided in the arbitral award handed down in case 673/2015-T cited by the Respondent, it cannot be concluded that the attribution of an interpretive nature to the norm in question puts at risk the principle of legal certainty because, "(…) there was not a consolidated body of case law to the effect of its deductibility [of the special payment on account] from the assessment resulting from autonomous taxation and, on the contrary, the solution adopted in Article 88(21), could already previously be adopted by the courts, as was by the Arbitration Tribunal that handed down the decision in case No. 113/2015-T of the CAAD. Thus, it cannot be concluded that the authentic interpretation that is made in that Article 88(21), by force of Article 135 of Law No. 7-A/2016, of 30 March, violates the constitutional principle of legal certainty, to the extent that part of that norm refers to the non-deductibility of special payments on account from the assessment of autonomous taxation."

In light of everything set out above, it remains to conclude for the interpretive character of Article 88(21) of the CIRC, introduced by Law No. 7-A/2016, of 30 March, which, being directly applicable to the situation at hand, in accordance with Article 13 of the Civil Code, will imply the dismissal of the claim of the Claimant by determining expressly the said norm that no deductions shall be made to the amount of autonomous taxation.

The attribution of an interpretive character to the said norm does not violate the constitutional principles of legal certainty and prohibition of retroactivity, whereby it is not judged unconstitutional Article 135 of the said statute.

Consequently, the self-assessed IRC for 2012 and 2013 are valid and in conformity with the law, meriting no judgment of censure.

VII. DECISION

In accordance with the foregoing, this Arbitration Tribunal judges the claims filed by the Claimant to be totally unfounded and, in consequence, absolves the Respondent of the claims.

Value of the proceedings: In accordance with the provisions of Article 306(2) of the Code of Civil Procedure and 97-A(1)(a) of the Code of Procedure in Tax Courts and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings are assigned a value of €36,414.38, corresponding to the total value of the assessed amounts contested.

Costs: Pursuant to Article 22(4) of the RJAT, the amount of costs is set at €1,836.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 30-06-2016

The Sole Arbitrator

(Maria Forte Vaz)

[1] Teresa Gil, "Special Payment on Account", in Fisco, No. 107-108, Year XIV, March, 2003, p. 11); Luís Marques, "The Special Payment on Account within the Scope of the Special Regime for Taxation of Groups of Companies", in Fisco, No. 107-108, Year XIV, March, 2003, p. 3); José João de Avillez Ogando, "The Constitutionality of the Special Payment on Account Regime", in Journal of the Order of Lawyers, vol. 62, Part III, 2002, pp. 806 and 821); J. L. Saldanha Sanches and André Salgado de Matos, "The Special Payment on Account of IRC: Constitutional Conformity Questions, in Tax and Finance Management Journal, July, 2003, p. 10.

[2] See "The Special Payment on Account of IRC: Constitutional Conformity Questions, in Tax and Finance Management Journal, July, 2003, p. 8.

[3] Cited work, p. 24 et seq.

[4] See Annotations to the IRC, Almedina, 2009, p. 202 et seq.

[5] See Tax Law, Almedina, 6th Edition, p. 614.

[6] Tax Law, Lectures, 2015, p. 237.

[7] See "Interpretive Law and Retroactivity in Tax Matters", Tax Law, No. 1, January 2000, p. 77 et seq.

[8] Award No. 310/2012, of 20 June, and award 399/2010, of 27 October.

[9] See Tax Law, Almedina, 3rd Edition, p. 148.

[10] See General Tax Law Annotated and Commented, Writing Encounter Press, 4th Edition, 2012.

[11] See Case Law Collection, Year XIV, Part IV, p. 35.

[12] See Introduction to Law and Legitimizing Discourse, Almedina, Coimbra, 1994, p. 246 et seq.

[13] Cited work, p. 246-247.