Summary
Full Decision
ARBITRAL DECISION
The arbitrators Maria Fernanda Maçãs (presiding arbitrator), Ricardo Rodrigues Pereira and Hugo Freire Gomes, designated by the Ethical Council of the Centre for Administrative Arbitration to constitute the Arbitral Tribunal, agree as follows:
I. REPORT
- On 24 December 2015, the commercial company A... – SGPS, S.A., Tax Identification Number..., with registered office at Street..., ..., ..., ... (hereinafter, Claimant), filed a petition for the constitution of an arbitral tribunal, under the combined provisions of articles 2, no. 1, paragraph a), and 10, nos. 1, paragraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, briefly referred to as RJAT).
1.1. The Claimant requests the declaration of illegality and consequent annulment of the act of tacit dismissal of the gracious objection no. ...2015... and of the acts of self-assessment of Corporate Income Tax (IRC), including autonomous taxation rates, for the tax years 2012 and 2013, of the "Fiscal Group B...", to the extent corresponding to the non-deduction from the tax collection of the IRC produced by the autonomous taxation rates of the special payment on account (PEC) made in the context of IRC or, alternatively, the declaration of illegality and consequent annulment of the assessments of autonomous taxation, for lack of legal basis for their effectuation.
For this purpose, it attached 12 (twelve) documents and listed two witnesses, having not requested the production of any other evidence.
1.2. The Claimant did not proceed with the appointment of an arbitrator, wherefore, under the terms of paragraph a) of no. 2 of article 6 and paragraph a) of no. 1 of article 11 of the RJAT, the President of the Ethical Council of the CAAD designated as arbitrators of the collective Arbitral Tribunal Counselor Maria Fernanda Maçãs, Dr. Ricardo Rodrigues Pereira and Dr. Hugo Freire Gomes, who communicated acceptance of the appointment within the applicable period.
1.3. On 16 February 2016, the parties were duly notified of this appointment and did not manifest their will to refuse the appointment of the arbitrators, in accordance with the combined terms of article 11, no. 1, paragraphs b) and c), of the RJAT and articles 6 and 7 of the Code of Ethics of the CAAD.
1.4. Thus, in accordance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 2 March 2016.
- To substantiate the petition, the Claimant alleged, in summary, the following:
The Claimant is the holding company of the "Fiscal Group B..." and, in that capacity, presented in May 2013 and in May 2014, respectively, the income declarations (form 22) of IRC for the tax years 2012 and 2013. At those same times, the Claimant proceeded with the self-assessment of autonomous taxation in IRC for the years 2012 and 2013, respectively, in the amounts of €78,945.34 and €84,436.43.
In accordance with those income declarations it filed, the Claimant calculated a tax refund amount of €69,555.80 for the tax year 2012, and €19,495.02 for the tax year 2013.
It so happens that the Tax Authority's computer system, through which IRC is self-assessed, does not permit taxpayers to deduct, for purposes of determining the tax owed by them to IRC resulting from autonomous taxation, the special payment on account. That system does not make it possible, therefore, to deduct a portion of the advance payments made on account of IRC that will be owed in final – the PEC – from a portion of the final IRC actually calculated – the autonomous taxation rates.
However, in the context of special payments on account made by the Claimant, there remains an accumulated amount to be deducted from the IRC collection that amounts to €230,022.07 in 2012, and €246,513.73 in 2013; that is, the Claimant has special payments on account in an amount exceeding the collection of autonomous taxation rates in IRC for the tax years 2012 and 2013.
However, intentionally or inadvertently, the IRC Form 22 declaration and its articulation with the programming of the Tax Authority's computer system prevents deduction from the collection related to autonomous taxation rates in IRC, entered in field 365 of section 10 of Form 22, of the special payments on account still to be deducted from IRC collection, starting with the oldest.
Thus, the Claimant requests clarification as to whether or not it has the right to proceed with deduction, also from the IRC collection produced by the application of autonomous taxation rates, of the aforementioned special payments on account.
It is the Claimant's understanding that, just as case law has understood, in an almost unanimous manner, that the IRC collection provided for in article 45, no. 1, paragraph a), of the CIRC (wording in force until 2013) comprises, without need for any additional specification, the collection of autonomous taxation in IRC, so too should it be understood that the IRC collection provided for in article 90, nos. 1 and 2, paragraph c), of the CIRC (wording in force in 2013) likewise encompasses the collection of autonomous taxation in IRC.
For this reason, the denial of the deduction of special payments on account from the IRC collection of autonomous taxation violates article 90, nos. 1 and 2, paragraph c), of the CIRC.
The Claimant maintains that if autonomous taxation is IRC and if the IRC collection (which would be obtained if the expenses in question were not deducted in autonomous taxation), which this part of IRC that autonomous taxation is, is meant to replace/compensate, is deductible for the PEC, it is not understood why the substitute, also considered in final terms as IRC, would not be deductible for this same PEC.
On the other hand, the Claimant questions the following: if autonomous taxation were not IRC for purposes of article 90 of the CIRC, then on what legal basis is, and has been, the assessment of autonomous taxation made. The Claimant says that article 88 of the CIRC only refers to the taxpayer, the tax base and the rates to be applied in order to calculate IRC collection in the context of autonomous taxation, in exactly the same manner as article 87 of the CIRC does with respect to the IRC collection that results from taxable profit and taxable base calculated in the context of this tax. However, the assessment of the IRC collection calculated in those terms is made, that is, is legitimized by the provision of article 90 of the CIRC, which also adds other terms to it.
Therefore, if the Tax Authority understands that article 90 of the CIRC does not include the IRC collection resulting from autonomous taxation (calculated in accordance with article 88), but only the IRC collection resulting from taxable profit (calculated in accordance with article 87), it would have to be concluded that, ultimately, the assessment of autonomous taxation itself is, in itself, illegal, by virtue of the provision of article 8, no. 2, paragraph a), of the General Tax Law and article 103, no. 3, of the Constitution of the Portuguese Republic.
In light of the foregoing, the Claimant understands that the successful outcome of the present action with the consequent partial annulment of the acts of self-assessment of IRC, including autonomous taxation rates, for the tax years 2012 and 2013, should determine the reimbursement to the Claimant of the amounts of €78,945.34 (2012) and €84,436.43 (2013), as well as the payment of indemnificatory interest calculated on these amounts, counted, until full reimbursement thereof, from the end of the date for the corresponding automatic reimbursement of the tax, that is, from 1 September 2013 and 1 September 2014, respectively.
On 29 May 2015, the Claimant filed a gracious objection against the aforementioned self-assessments of IRC for the tax years 2012 and 2013, which, notwithstanding the four-month period legally provided therefor, was not the subject of any decision, until the date the petition for arbitral pronouncement was filed, wherefore its tacit dismissal is presumed on 29 September 2015 (cf. article 57, nos. 1 and 5, of the General Tax Law).
In conclusive summary, the Claimant alleges that both the dismissal of the gracious objection and the self-assessments of IRC (including their autonomous taxation rates) relating to the tax years 2012 and 2013 are defective due to violation of law, inasmuch as the deduction of the special payment on account from that portion of IRC collection corresponding to autonomous taxation rates should not be prohibited. To that extent, it should:
"a) declare illegal and annul the dismissal of the gracious objection insofar as it refused the annulment of the illegal portion (...) of the self-assessments of IRC in the portions produced by autonomous taxation rates, for the tax years 2012 and 2013, thereby violating the principle of legality;
b) declare illegal these self-assessments (and consequently annul them), in the portions corresponding to the amounts of €78,945.34 (2012) and €84,436.43 (2013);
c) consequently recognize the right to reimbursement of these amounts, as well as the right to indemnificatory interest calculated on the amounts of €78,945.34 and €84,436.43, counted, until full reimbursement thereof, from the end of the date for the corresponding automatic reimbursement of the tax, that is, from 1 September 2013 and 1 September 2014, respectively;
d) alternatively, if it is understood that article 90 of the CIRC does not apply to autonomous taxation, it should then be declared that the assessments of autonomous taxation are illegal (and consequently annul them) for lack of legal basis for their effectuation (cf. article 8, no. 2, paragraph a), of the General Tax Law and article 103, no. 3, of the Constitution), with the consequent reimbursement of the same amounts and payment of indemnificatory interest counted from the same dates."
2.1. The Claimant concludes its initial pleading by requesting the following:
"In these terms, it should be declared that the dismissal of the aforementioned gracious objection is illegal and, likewise, the self-assessments of IRC, including autonomous taxation rates, of Fiscal Group B... of which A... is the holding company, relating to the tax years 2012 and 2013, in what concerns the amounts of autonomous taxation rates in IRC of €78,945.34 (2012) and €84,436.43 (2013), respectively, with their consequent annulment in these portions by improper exclusion of deductions from collection, given the manifest illegality of the assessments in these portions, with all legal consequences, specifically the reimbursement to the Claimant of these amounts, increased by indemnificatory interest calculated on the amounts of €78,945.34 and €84,436.43, counted, until full reimbursement thereof, from the end of the date for the corresponding automatic reimbursement of the tax, that is, from 1 September 2013 and 1 September 2014, respectively. Alternatively, if it is understood that article 90 of the CIRC does not apply to autonomous taxation, it should then be declared that the assessments of autonomous taxation are illegal (and consequently annul them) for lack of legal basis for their effectuation (cf. article 8, no. 2, paragraph a) of the General Tax Law and article 103, no. 3, of the Constitution), with the consequent reimbursement of the same amounts and payment of indemnificatory interest counted from those same dates."
- On 11 April 2016, the Respondent, duly notified for this purpose, filed its Response in which it specifically impugned the arguments adduced by the Claimant, having concluded for the unsuccessful outcome of the present action, with its consequent dismissal of the petition.
3.1. In essence and also briefly, it is important to extract the most relevant arguments upon which the Respondent founded its Response:
The autonomous character of these taxation rates, arising from the special configuration given to the material and temporal aspects of the taxable events, requires, in certain domains, the exclusion or an adaptation of the general rules applicable to IRC.
Indeed – says the Respondent – the integration of autonomous taxation into the CIRC conferred a dualistic nature, in certain aspects, to the normative system of this tax, which was embodied, in particular, within the framework of paragraph a) of no. 1 of article 90 of the CIRC, in separate calculations of their respective collections, because they obey different rules; since, in one case, it is the application of the rates of article 87 of the CIRC to the taxable base determined according to the rules contained in Chapter III of the CIRC and, in another case, it is the application of the rates to the values of taxable bases relating to the different realities contemplated in article 88 of the CIRC.
Thus – the Respondent continues – there is no single IRC assessment, but rather two separate calculations which, though processed, in accordance with paragraph a) of no. 1 of article 90 of the CIRC, in the declarations referred to in articles 120 and 122 of the same Code, are effected on the basis of different parameters, since each is materialized in the application of its own rates, provided for in articles 87 and 88 of the CIRC, to their respective taxable bases determined equally in accordance with their own rules.
The Respondent concludes, then, that the value calculated in accordance with paragraph a) of no. 1 of article 90 of the CIRC does not have a unitary character, since it comprises amounts calculated according to different rules, to which are associated also differentiated purposes, wherefore the deductions provided for in no. 2 of the same article 90 can only be effected from the portion of IRC collection with which there exists a direct correspondence, so as to maintain the coherence of the conceptual structure of the general regime of IRC.
Indeed – emphasizes the Respondent – for the basis of calculation of payments on account (cf. article 105, no. 1, of the CIRC) only IRC calculated from the taxable base determined according to the rules of Chapter III of the CIRC and the rates of article 87 of the same Code is considered. In this manner, the delimitation of the content of the expression used in no. 2 of article 90 of the CIRC, "amount calculated in accordance with the preceding number", and in no. 1 of article 105 of the CIRC, "tax assessed in accordance with no. 1 of article 90", should be made in a coherent manner; to that extent, it should be given, in both provisions, a univocal sense, which amounts to saying that it corresponds to the amount of IRC calculated by the application of the rates of article 87 to the taxable base determined on the basis of profit. Being that the only and consistent interpretation of the expression "amount calculated in accordance with the preceding number" with the nature of the deductions referred to in the paragraphs of no. 2 of article 90 of the CIRC.
The Respondent further adds that proceeding along the lines of the understanding advocated by the Claimant would have as a logical consequence inherent to the functioning of IRC that the amounts calculated as autonomous taxation, if understood as forming part of a single collection, would be taken into account in the calculation of payments on account.
According to the Respondent, the common feature to all the realities reflected in the deductions referred to in no. 2 of article 90 of the CIRC resides in the fact that they respect income or expenses incorporated in the taxable base determined on the basis of the taxpayer's profit or advance payments of the tax, being, therefore, entirely unrelated to the realities that constitute the taxable events of autonomous taxation.
The Respondent further maintains that the legal nature of the PEC, revealed by its configuration as "an instrument or guarantee of payment of the tax for which it is required, and not as a tax in itself", as well as by the function associated with it in combating tax evasion and fraud, binds this payment indissolubly to the amount of IRC calculated on the taxable base determined on the basis of profit.
For this reason, the Claimant's intention to deduct the amount paid in the context of special payments on account from the collection produced by autonomous taxation for the years 2012 and 2013 appears to be devoid of any legal support.
Regarding the anomalies that the Claimant claims exist in the Tax Authority's computer system, the Respondent counters that this same system cannot allow or consecrate what the law does not provide, since the Tax Authority's systems and computer applications should be a reflection of the legal provisions in force at each moment.
In another order of considerations, the Respondent refutes that any indemnificatory interest is owed to the Claimant and, even if the successful outcome of that request were configurable, its calculation would always have as its initial term the date on which the gracious objection was dismissed and never the moment indicated by the Claimant.
Finally, the Respondent invokes article 133, which added no. 21 to article 88 of the CIRC, with the effects provided for in article 135, both of the State Budget Law 2016, in which it is recommended, with an interpretative character, that "[t]he assessment of autonomous taxation in IRC is carried out in accordance with the terms provided for in article 89 and is based on the values and rates that result from the provisions in the preceding numbers, with no deductions being made from the overall amount calculated".
The Respondent thus concludes its pleading:
"In these terms and in all other respects under the law, and with the learned supplementation of Your Excellency, the present petition for arbitral pronouncement should be judged unsuccessful and not proved, and consequently the Respondent absolved of all petitions, all with the due and legal consequences."
3.2. On 21 April 2016, the Respondent attached to the file the respective administrative case (hereinafter, briefly referred to as AC).
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The Claimant waived the examination of the witnesses listed by it, and thus the Tribunal dispensed with the holding of the meeting referred to in article 18 of the RJAT and fixed 2 September 2016 as the deadline for the issuance of the arbitral award.
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Both parties filed written arguments, in which they reiterated the positions previously taken in their respective pleadings.
II. CASE MANAGEMENT
The Arbitral Tribunal was regularly constituted and is competent.
The case is free from nullities.
The parties possess legal standing and capacity, are duly represented and are legitimate.
The cumulation of petitions is admitted – two self-assessment acts of IRC are at issue, with the partial annulment of each of them being requested – by virtue of the verification that the successful outcome of the petitions filed by the Claimant depends essentially on the assessment of the same factual circumstances and the interpretation and application of the same principles or rules of law (cf. article 3, no. 1, of the RJAT).
There are no exceptions or other preliminary matters that prevent knowledge of the merits and of which it is necessary to know.
III. GROUNDS
III.1. FACTUAL BASIS
§1. PROVEN FACTS
The following facts are considered proven:
a) The Claimant is a commercial company, to which, for tax purposes, in the years 2012 and 2013, the Special Regime for Taxation of Groups of Companies, provided for in articles 69 and following of the Corporate Income Tax Code, applied.
b) The fiscal group of which the Claimant was a member, in its capacity as holding company – "Fiscal Group B..." – was also constituted by the companies "C..., S.A.", "D..., S.A.", "E..., S.A." and "F..., S.A.".
c) The Claimant proceeded, on 31 May 2013, as holding company, to the electronic submission of the income declaration (form 22) of IRC, relating to the tax year 2012, of "Fiscal Group B...", having at that time proceeded with the self-assessment of autonomous taxation in IRC, in the amount of €78,945.34. [cf. documents nos. 1 and 7 attached to the Initial Pleading]
d) The Claimant proceeded, on 30 May 2014, as holding company, to the electronic submission of the income declaration (form 22) of IRC, relating to the tax year 2013, of "Fiscal Group B...", having at that time proceeded with the self-assessment of autonomous taxation in IRC, in the amount of €84,436.43. [cf. documents nos. 2 and 7 attached to the Initial Pleading]
e) The income declarations (form 22) of IRC referred to in facts c) and d) resulted in the IRC assessment no. 2013... of 14.06.2013, in which a refund in the amount of €69,555.80 was calculated, relating to the year 2012, and in the IRC assessment no. 2014... of 21.07.2014, in which a refund in the amount of €19,495.02 was calculated, relating to the year 2013. [cf. AC attached to the file]
f) The Claimant proceeded, on 29 May 2015, to the replacement of the income declaration (form 22) of IRC of "Fiscal Group B...", relating to the year 2013, maintaining, however, unchanged both the amount calculated for autonomous taxation in IRC and the amount of tax to be refunded to the Claimant/"Fiscal Group B...". [cf. document no. 3 attached to the Initial Pleading]
g) The Tax Authority's computer system, through which IRC is self-assessed, does not permit taxpayers to deduct, for purposes of determining the tax owed by them, from the IRC resulting from calculated autonomous taxation, the amounts of special payments on account.
h) Regarding the special payments on account made by the Claimant, there remains an accumulated amount to be deducted from IRC collection that amounts to €230,022.07 (corresponding to special payments on account available in the tax periods of 2009 and 2011), in 2012, and €246,513.73 (corresponding to special payments on account available in the tax periods of 2009, 2011 and 2012, purged of the amount of autonomous taxation for the tax year 2012), in 2013. [cf. documents nos. 5 and 6 attached to the Initial Pleading]
i) On 29 May 2015, the Claimant filed a gracious objection against the aforementioned self-assessments of IRC for the years 2012 and 2013 – which was filed under number ...2015... in the Tax Service of...-... – in which it requested the following: [cf. document no. 4 attached to the Initial Pleading and AC attached to the file]
"...it is respectfully requested that the correction of the self-assessment of IRC for the tax periods of 2012 and 2013 be carried out, determining the reimbursement of the amounts of €78,945.34 and €84,436.43, relating to the tax not reimbursed to the Objector regarding the aforementioned tax periods, as well as the respective indemnificatory interest at the legal rate, calculated on that amount and until the actual and full payment thereof by the Tax Authority."
j) Neither within the four-month period, calculated from the entry of the respective petition in the competent service of the Tax Authority, nor thereafter and, at least, until 24 December 2015, inclusive, was the aforementioned gracious objection the subject of any express decision, wherefore it is presumed tacitly dismissed on 29 September 2015, in accordance with the terms provided for in article 57, nos. 1 and 5, of the General Tax Law. [cf. AC attached to the file]
k) On 24 December 2015, the Claimant filed the petition for constitution of an arbitral tribunal that gave rise to the present case. [cf. case management computer system of the CAAD]
§2. UNPROVEN FACTS
With regard to the assessment and decision of the case, there are no facts that have not been proven.
§3. REASONING REGARDING FACTUAL MATTERS
Regarding the proven factual matters, the Tribunal's conviction was based on the facts alleged by the parties, whose correspondence to reality was not called into question, on the documents and on the administrative case attached to the file.
III.2. LEGAL BASIS
Article 124 of the Code of Tax Procedure and Process, applicable by virtue of article 29, no. 1, paragraph a), of the RJAT, establishes that the tribunal must assess, as a priority, the defects that lead to the declaration of non-existence or nullity of the impugned act and, subsequently, the defects that lead to its annulment (no. 1). Concerning the defects that constitute non-existence or nullity, the judge must assess, as a priority, the defects whose successful outcome determine, according to his prudent discretion, more stable or effective protection of the offended interests. Concerning the defects that constitute annullability, the same criterion is established, which will only not apply if the impugner has established a relation of subsidiarity among the defects imputed to the act – which is permitted by article 101 of the Code of Tax Procedure and Process – since in that case priority is given to his will (provided that the Public Ministry has not raised other defects) (no. 2).
The rules emanating from this legal provision regarding the order of knowledge of defects are intended to protect the interest of the impugner with maximum procedural economy, omitting pronouncement on defects raised when the defect or defects already recognized prevent the renewal of the act with the same sense. Indeed, the establishment of this order of knowledge of defects presupposes that, in knowing of a defect that leads to the legal elimination of the impugned act, the tribunal will cease to know of the remaining ones, for, if the judge had to know of all the defects imputed to the act, the order of knowledge would be indifferent.
The protection of offended interests is more stable when the decision prevents the renewal of the act that offends the interests of the impugner and will be more effective when it permits the interested party, in execution of judgment, to obtain a better satisfaction of its interests, offended by the annulled act.
Returning to the specific case, we have that the Claimant established the aforementioned relation of subsidiarity, materialized in the deduction of subsidiary petitions, having as a primary contention raised the defect of violation of article 90, nos. 1 and 2, paragraph c), of the CIRC (wording applicable ratione temporis) and, alternatively, the illegality of the assessments of autonomous taxation for lack of legal basis for their effectuation, which constitutes violation of the provision of article 8, no. 2, paragraph a), of the General Tax Law and article 103, no. 3, of the Constitution of the Portuguese Republic.
As the aforementioned legal provision requires, the Claimant's will regarding the order of knowledge of the pointed defects will therefore be observed.
§1. The nature of autonomous taxation in case law and legal doctrine
In the sense that autonomous taxation is meant to tax expense and not income, the dissenting opinion of Counselor Vítor Gomes, appended to Decision no. 204/2010 of the Constitutional Court, is pointed out, in which he states, referring to Autonomous Taxation:
"Although formally inserted in the CIRC and the amount it permits to collect is assessed in its scope and by way of IRC, the norm in question concerns a fiscal imposition that is materially distinct from taxation under this heading (...). Indeed, we are faced with autonomous taxation, as the very letter of the provision states. And that makes all the difference. It is not a matter of taxing an income at the end of the tax period, but rather a particular type of expenses in themselves, for the understandable reasons of fiscal policy that the decision points out.
In this manner, the fact revealing taxable capacity that is intended to be achieved is the simple realization of that expense, at a particular moment. Each expense is, for this purpose, an autonomous taxable event, to which the taxpayer is subject, whether or not it has taxable income in IRC at the end of the period, it being irrelevant that this portion of tax only comes to be assessed at a later moment and jointly with IRC".
It was also recognized by the case law of the Supreme Administrative Court (2nd Section, case 830/11, of 21-03-2012) that "under the designation of autonomous taxation are hidden very diverse realities, including, in accordance with no. 1 of the (then) article 81 of the CIRC, undisclosed or undocumented expenses, which are taxed autonomously, at the rate of 50%, which will be raised to 70%, in the cases of expenses incurred by taxpayers wholly or partially exempt, or that do not exercise, as their principal activity, activities of a commercial, industrial or agricultural nature (no. 2 of [then] article 81) and that are not considered as costs in the calculation of taxable income in IRC.
It should be noted, however, that representation expenses and those related to light vehicles, in accordance with the provision of (then) article 81, no. 3 of the CIRC and travel allowances are affected by business activity and "necessary" whereby they are fiscally accepted in some cases even though within certain limits.
For its part, the Constitutional Court, in its Decision no. 18/11, tells us that there are facts subject to autonomous taxation, which correspond to "expenses demonstrably necessary for the realization of income" and that therefore the prohibition on the retroactive application of the new law does not apply, since such expenses would have been incurred regardless of the tax regime applicable: this means that autonomous taxation also falls on expenses that correspond to the nucleus of the concept of actual income, net income and compliance with accounting obligations. This argument of the Constitutional Court, regarding the retroactive application of the tax law to autonomous taxation (and this matter of the application of law in time does not fall within the subject matter of this decision), interests us only to point out that the Court recognizes that this regime constitutes a limitation on the taxation of actual income (which is guaranteed by article 104, no. 2 of the Constitution).
In a recent Decision (no. 310/12, of 20 June, Reporting Judge Counselor João Cura Mariano), the Constitutional Court comes to reformulate the doctrine of Decision no. 18/11, drawing closer to the then dissenting opinion of Counselor Vítor Gomes and to the Decision of the Supreme Administrative Court no. 830/11, all cited in the preceding paragraphs, in the following terms. "Contrary to what happens in the taxation of income under Personal Income Tax and Corporate Income Tax, in which the set of income earned in a given year is taxed (which implies that only at the end thereof can the tax rate be determined, as well as the bracket in which the taxpayer falls), in this case each expense incurred is taxed, considered in itself, and subject to a particular rate, autonomous taxation being calculated independently of the IRC that is owed in each tax year, by not being directly related to the attainment of a positive result, and therefore subject to taxation.
Thus, and in the case of IRC, we are faced with an annual tax, in which each income received is not taxed per se, but rather the aggregation of all income obtained in a given year, the law considering that the taxable event occurs on the last day of the tax period (cf. article 8, no. 9, of the CIRC). As regards autonomous taxation in IRC, the taxable event is the very realization of the expense, we are not faced with a complex fact, of successive formation over a year, but with an instantaneous taxable event. This characteristic of autonomous taxation thus refers us to the distinction between periodic taxes (whose taxable event is produced in a successive manner, by the passage of a determined period of time, usually annual, and tends to repeat itself over time, generating for the taxpayer the obligation to pay tax on a regular basis) and single obligation taxes (whose taxable event is produced instantaneously, arises isolated in time, generating on the taxpayer an obligation of payment on an occasional basis). In autonomous taxation, the taxable fact giving rise to the tax is instantaneous: it is exhausted in the act of realization of a particular expense that is subject to taxation (although the determination of the amount of tax, resulting from the application of the various autonomous taxation rates to the various acts of realization of expense considered, comes to be effected at the end of a given tax period). But the fact that the assessment of the tax is effected at the end of a given period does not transform it into a periodic tax, of successive formation or of a lasting character. That operation of assessment amounts merely to the aggregation, for purposes of collection, of the set of operations subject to that autonomous taxation, whose rate is applied to each expense, there being no influence whatsoever from the volume of expenses incurred in the determination of the rate."
Case law reiterated by the Plenary Decision, in Decision no. 617/2012, case no. 150/12, of 31/1/2013 and in Decision no. 197/2016, case no. 465/2015.
As regards legal doctrine, we note that, in essence, the concept and nature of autonomous taxation does not substantially diverge from the understanding of the case law produced by the Constitutional Court.
As RUI MORAIS states, "it is a matter of taxation that falls on certain expenses of taxpayers, which are had as constituting taxable events. 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 on taxes on income." (RUI DUARTE MORAIS, Notes on IRC, Almedina, 2009, pp. 202-203).
In the same sense, JOSÉ ALBERTO PINHEIRO PINTO states that "it is not properly IRC – which aims to tax the income of legal entities and not expenses incurred by them – but the replacement of a taxation of 'implicit' income of natural persons, which is considered not directly enforceable". CASALTA NABAIS also considers that it is "taxation on expenses and not on income" (CASALTA NABAIS, Tax Law, 6th Edition, p. 614. In the same sense, cf. ANA PAULA DOURADO, Tax Law, Lessons, 2015, p. 237).
In summary, some legal doctrine and the case law of the superior courts and the Constitutional Court consider that autonomous taxation consists of autonomous taxable events, which fall on expenses. Thus, despite being formally inserted in the Corporate Income Tax Code, they concern a taxation distinct from the tax on income.
Furthermore, it is accepted by the generality of legal doctrine and case law that autonomous taxation aims to prevent abusive practices in the remuneration of workers, managers and partners/shareholders of the company. As SALDANHA SANCHES notes, "In this type of taxation, the legislator seeks to respond to the admittedly difficult question of the tax regime for expenses that lie in the zone of intersection of the personal sphere and the business sphere, so as to avoid remuneration in kind more attractive for exclusively fiscal reasons or the concealed distribution of profits. The provision has a characteristic similar to what we will find in the legal sanction against undocumented costs, with a rate increase when the situation of the taxpayer does not correspond to a situation of fiscal normality." (SALDANHA SANCHES, Manual of Tax Law, 3rd Edition, Coimbra Publisher, 2007, p. 406). "It is a taxation that is explained by the need to prevent and avoid that, through these expenses, companies proceed with the concealed distribution of profits, especially dividends that, thus, would be subject to IRC as profits of the company, as well as to combat the fraud and tax evasion that such expenses cause..." (CASALTA NABAIS, Idem, p. 614).
§2. The evolution of autonomous taxation
In the initial version of the Corporate Income Tax Code, approved by Decree-Law no. 442-B/88, of 30 November, there was no explicit or implicit reference to autonomous taxation, within the scope of IRC. Only with Law no. 101/89, of 29 December, which approved the State Budget for 1990, was a first reference made to autonomous taxation within the scope of IRC, through the legislative authorization contained in no. 3 of its article 15, which provides as follows:
3 - The Government is authorized to tax autonomously under Personal Income Tax or Corporate Income Tax, as appropriate, at an aggravated rate of 10% and without prejudice to the provision of paragraph h) of no. 1 of article 41 of the CIRC, undisclosed or undocumented expenses incurred in the exercise of commercial, industrial or agricultural activities by Personal Income Tax taxpayers who possess or should possess organized bookkeeping or by Corporate Income Tax taxpayers not covered by articles 8 and 9 of the respective Code.
As is well known, the origin in the Portuguese tax legal system of autonomous taxation goes back to 1990, with the publication of Decree-Law no. 192/90, of 9 June, where specifically in its article 4, with respect to undisclosed or undocumented expenses, an autonomous taxation at the rate of 10% was established and, regarding representation expenses and charges related to light passenger vehicles, a rate of 6.4%. Implementing this legislative authorization, the Government approved Decree-Law no. 192/90, in which it included, outside the codes of Personal Income Tax and Corporate Income Tax, a provision on autonomous taxation in which the following is established:
Decree-Law no. 192/90, of 9 June
Article 4
Undisclosed or undocumented expenses incurred in the exercise of commercial, industrial or agricultural activities by Personal Income Tax taxpayers who possess or should possess organized bookkeeping or by Corporate Income Tax taxpayers not covered by articles 8 and 9 of the respective Code are taxed autonomously under Personal Income Tax or Corporate Income Tax, as appropriate, at a rate of 10% without prejudice to the provision of paragraph h) of no. 1 of article 41 of the CIRC.
This provision and, in general, the regime of autonomous taxation, was subject to various amendments (e.g. Law no. 52-C/96, of 27 December; Law no. 87-B/97, of 31 December; Law no. 3-B/2000, of 4 April; Law no. 30-G/2000, of 29 December) in particular through successive modifications, either of the rates, or of the systematization and wording given to them, in the respective codes on taxes on income, that is, both in the CIRC and in the Personal Income Tax Code.
With the approval of Law no. 30-G/2000, of 29 December, the decree that enshrined "autonomous taxation" was repealed, adding to the CIRC article 69-A – corresponding to the date of the facts underlying (2012 and 2013) to article 88, where, in addition to the maintenance of the incidence of these to undocumented expenses, representation expenses and expenses with vehicles, it was extended to other situations of a diverse nature.
We can thus derive two principle inferences:
(i) The first is that autonomous taxation applies to both deductible and non-deductible expenses under IRC;
(ii) The second is that autonomous taxation aims to prevent erosion of the taxable base under IRC, imposing taxation on expenses that can be deducted by Corporate Income Tax taxpayers, but which, if deducted, transform themselves into an increase in taxation, intending therefore to serve as a disincentive to expenditure on such expenses.
Regarding autonomous taxation on non-deductible expenses, if their deductibility were admitted, it would be admitting the deductibility of an expense not essential for the realization of income subject to tax or for the maintenance of the income-producing source.
Being able to have it as established, and for what will be relevant in the sense of the decision to be issued within the scope of the present case, the following presuppositions:
(i) autonomous taxation of IRC anchored in the diverse numbers and paragraphs of article 88 of the CIRC translate diverse situations, to which different taxation rates also correspond;
(ii) autonomous taxation of IRC falling on certain expenses of Corporate Income Tax taxpayers should be understood as payments independent of the existence or not of taxable base;
(iii) interpreted as payments, associated with IRC, or at least related with it, it being possible to understand it as an exception regarding the principle of taxation of legal entities in accordance with actual and effective profit calculated (article 3 of the CIRC),
(iv) in autonomous taxation, the taxable fact giving rise to taxation is instantaneous: it is exhausted in the act of realization of particular expenses that are subject to taxation (although the determination of the amount of tax resulting from the diverse autonomous taxation rates to the diverse acts of realization of expenses considered, comes to be effected at the end of a given tax period);
(v) the fact that the assessment of the tax is effected at the end of a given period does not transform it into a periodic tax, of successive formation or of lasting character. That operation of assessment amounts merely to the aggregation, for purposes of collection, of the set of operations subject to that taxation, whose rate is applied to each expense, there being no influence whatsoever from the volume of expenses incurred in the determination of the rate;
(vi) autonomous taxation is not equivalent to the non-deductibility of the expenses realized by the Corporate Income Tax taxpayer.
Here are recognized, thus, those characteristics that legal doctrine has been pointing out to autonomous taxation for several years now, such as:
a) Autonomous taxation only makes sense because costs/expenses feature as negative components of the taxable profit of IRC. This is what motivates Corporate Income Tax taxpayers to report as high a value as possible of these expenses to reduce the taxable base of IRC, the collection and, consequently, the tax to be paid;
b) It is intended to discourage this type of expenses in taxpayers that present negative results but that, regardless, continue to evidence consumption structures little or not at all compatible with the financial health of their companies;
c) It is, in a more general sense, a matter of shaping the tax system in such a manner that it reveals a certain equilibrium with a view to better distribution of the effective tax burden among taxpayers and types of income;
d) Certain expenses are considered unfavorably in which, admittedly, it is not easy to determine the precise extent of the component that corresponds to private consumption, and regarding which it is a known general practice of abuse in their reporting.
§3. The cause and function of autonomous taxation under IRC
It is generally accepted that autonomous taxation is rooted, as has been touched upon, in the need to prevent abuses regarding the reporting of certain expenses or outlays that could easily be diverted to private consumption or that, in some manner, are susceptible to formally configuring an expense of the legal entity, but that, substantially, represent or can configure abuses in order to minimize the actual measure of the tax.
Aware of this difficulty of, often, effecting a rigorous separation of these two realities, was successively "grafted", as described above, to the regime of taxation of actual and effective profit established in the CIRC, as the general standard, an autonomous regime of taxation of certain expenses, wholly or in part undesired and undesirable, that contaminate the terms of the tax duty, which thus arises configured below the actual taxable capacity of the entity that reports them as such.
In these terms, in the ontology of things it can be affirmed that autonomous taxation emerges integrated into the IRC regime, is calculated and owed within the scope of the legal relationship of tax on the income of legal entities and it is within that framework that its determination is effected. But they are not "IRC", in themselves; for them to be such they would, from the start, have to tax income, and that is not what happens, at any moment, wherefore, in this respect, we do not believe it necessary to deliberate further. Although there exists – it is not denied – an evident instrumentality between IRC and the income taxation model in Portugal and autonomous taxation, a fact moreover well evidenced in the case law of the Superior Courts and, in particular, of the Constitutional Court, the prevailing understanding is that autonomous taxation taxes expenses.
Indeed, they are an instrument that, departing from and introducing some measure of distortion into a system that declares it taxes actual and effective income, after all also taxes expenses, deductible or not under IRC. Without this violating constitutional dictates insofar as the applicable rule (article 104, no. 2, of the Constitution) declares imperative the taxation of companies "fundamentally" on their actual income, without prejudice to either situations of taxation according to profits or actual income when determined by indirect methods, or situations of taxation of expenses subject to autonomous taxation by express legislative choice, the establishment of technical solutions such as the case of the special payment on account and the specific rules aimed at its refund.
It is worth recalling, in this regard, that neither tax systems nor models of concrete imposition correspond to pure models, free from elements foreign to the foundational system itself, of values, or to the general regime of any given tax abstractly considered. All taxes possess characteristics or solutions that, when viewed in isolation, can objectively represent a characterization of the model as conceived in the purity of concepts, but that, when articulated with the model, it is verified that they contribute to its effectivity, and confer upon it or strengthen its coherence.
Those solutions, more pragmatic or specific, do not offend such essential evaluative dictates, whether they are protection of revenue or densification of general evaluative ideals (of the tax order) or specific to the tax, as is the case of the need to prevent abuses. Provided that they themselves are not of such relevance that they abjure the general taxation model or structurally falsify the values on which it is rooted.
Although, in the present case, the choice of fundamental law and ordinary law, as a consequence, has been clearly in the sense of taxing the income of legal entities and, in the possible forms of determination thereof, the taxation of actual and effective income has been chosen as a manifestation of the highest standard of fiscal justice, the truth is that the system has always known more or less relevant deviations. Either because certain expenses are not considered as such by tax law even though objectively they may be imputable to a commercial activity, or because tax law, recognizing this essentiality, fears the occurrence of abuses, as is the case of autonomous taxation, generally speaking.
In part this departure from the purity of concepts is an inevitable consequence of the complexity of life relationships, either because pure tax imposition models are more burdensome to implement and manage as they require much more refined relevant information, or because in the field of taxes, as in other fields of life, there is a need to temper the ideal of justice enshrined with solutions of normative reasonableness in the qualification of relevant facts and technique in the solutions and requirements to be established. All to avoid tax models being excessively complex and burdensome, ceasing to attain realities and practices that mitigate the tax burden or contribute to a poor distribution thereof.
Now, from this balancing of the values that support the duty to establish / support tax with the realities of life can result the need to establish limits (tax or other) on the behavior of taxpayers, in order to maintain within general standards of equilibrium, the legal solutions of the system.
On the other hand, it is important to bear in mind, because this is relevant for purposes of the decision to be taken, that autonomous taxation configures anti-abuse rules directed at rationalizing specific behaviors of taxpayers faced with the tax duty, by which traditionally they were able to achieve a tax measure inferior to that evidenced by their actually revealed taxable capacity but that, by virtue of these abusive behaviors, was susceptible to being mitigated or eliminated. And with evident violation or postponement of the principle of justice, of fair distribution of the tax burden by those who reveal taxable capacity.
Consequently, it makes sense to admit that general deductions are made from the tax collection, which are permitted by law to give effective meaning to the principle of taxation of actual and effective income. But, regarding the collection owed by autonomous taxation, that general deduction ceases to make sense because, not taxing profits, but expenses, the question of justice in the distribution of the general tax burden does not arise regarding them, wherefore it would be illogical to allow the deduction of expenses when such deduction, in practice, would destroy the anti-abuse sense that imbues them; the discouragement of deviant behaviors that its institution represses or removes.
Now, autonomous taxation, as appears clear, does not have a predominantly revenue-raising purpose, that is, does not aim, primarily, at the obtaining of (more) tax revenue, although this may not be a negligible aspect, verifiable. They aim to dissuade behaviors, practices or choices of companies rooted in reasons essentially of a nature of fiscal savings, revenue-related. On the other hand, they preserve the equilibrium peculiar to the regime of taxation of legal entities, avoiding distortions not only at the level of taxable results, as waves of deviant behaviors, affecting the legal expectation of revenue, in each economic year.
And they force, through these general anti-abuse clauses, the maintenance of a healthy correlation between the volumes of business, the taxable profits and the tax owed in final by the entities subject to IRC, in line with the levels of average effective tax burden that falls on the different groups of taxpayers, within the Portuguese tax system and, even, comparatively with those of the member states of the OECD or outside it.
Autonomous taxation, including that provided for in paragraph b) of no. 13 of article 88 of the CIRC, has, thus, a general disciplinary function that is not unrelated to the systemic purposes of the tax. And this because they – autonomous taxation – as an anti-abuse mechanism, are not unrelated to the general purposes of the tax system.
The adoption of legal regimes that limit the harmful effects resulting from behaviors affecting the balanced distribution of the tax burden on different groups of taxpayers does not constitute only an option of the legislator, but is, rather, a strict obligation, as a result of the obligation to devise and make the system function as a whole in a balanced manner. Autonomous taxation introduces, certainly, taxation mechanisms that, naturally, will displease those to whom they are directed, but prevent or limit the harmful effects of abusive practices that would prejudice others and are, therefore, necessary to preserve the equilibrium of the system. Now, companies, like individuals, are also subject with the same intensity to the general duty to pay taxes and, to that extent, tax law cannot fail to establish mechanisms that limit deviant procedures. Exactly because each must bear tax according to his capacity, that is, according to his actually revealed taxable capacity.
It is important to note that in our days the regime of taxation according to actual and effective income has been adopted, as a general rule, for legal entities. Now, this does not constitute merely a simple option of functioning of the tax system, among several other possible ones. It is, rather, a concrete manifestation of the modernity and maturity of a tax system that demands of its recipients / beneficiaries a maturity of the same stature as it also represents a new form of ethical and social responsibility towards the phenomenon of tax (regarding questions about the limits of morality before tax, see SUSANNE LANDREY, STEF VAN WEEGHEL and FRANK EMMERINK). Since there is a profound and indisputable interconnection between law and morals (JOÃO BAPTISTA MACHADO, Introduction to Law and Discourse Legitimating, Almedina, 9th Reprint, pp. 50 et seq.).
As aptly noted by SALDANHA SANCHES, cited in Arbitral Decision 187/2013-T, pp. 28, that autonomous taxation constitutes a form of preventing abusive actions: "... that the 'normal' functioning of the taxation system was incapable of preventing, being that others, including forms more burdensome for the taxpayer, were possible. This anti-abuse character of autonomous taxation, shall not only be coherent with its 'anti-systemic' nature (as happens with all rules of the kind), as with a presumptive nature, pointed out both by Professor Saldanha Sanches and by the case law that cites him. They 'will then materially have an underlying presumption of 'partial' businesslike nature of the expenses on which they fall, as a function of the above-mentioned circumstance of such expenses being situated in a gray area that separates what is business expense, productive, from what is private expense, consumption, it being notorious that in many cases, the expense will indeed in reality have a dual nature (part business, part private)" (Arbitral Decision of the CAAD 210/13-T speaks of "expenses that share among themselves a risk of non-businesslike nature, that is, a risk of not being realized with business purposes, but rather extra-business or private".
All these considerations summon what appears to us to be the true legislative intent, inasmuch as the discovery of the true meaning of law constitutes an imperative, as it is important to ensure that the activity of the interpreter achieves an interpretative sense by which the law externalizes its most beneficial, most fruitful and most salubrious meaning, in the words of FRANCESCO FERRARA, in his Interpretation and Application of Laws, Arménio Amado, publishers, 1978, p. 137 et seq. On the other hand, the logical sense of interpretation leads us only in the sense that autonomous taxation is based on a logic according to which the law intends to prevent or discourage such legal entities from reporting (abusively) as expenses values relating to bonuses or variable remuneration. It is the reporting as an expense for purposes of IRC, in its entirety, that is intended to be discouraged.
Appealing to the legislative rationale, it is clear that autonomous taxation is charged within the process of IRC assessment in accordance with a root and its own dogmatic approach that lead to the total tax collection not being a single reality but a composite one (MANUEL DE ANDRADE, Essay on the Theory of Interpretation of Laws). Thus, it is possible in it to discern the tax collection proper, resulting from the general mechanics of IRC determination, which is owed with constitutional foundation based on the general duty of each one (in this being included legal entities) to contribute to public expenditure according to their means (article 103, no. 1 of the Constitution). All in respect and in compliance with the principles of justice, equality and the duty to pay tax according to actually revealed taxable capacity. And from which the amounts referred to in article 90 of the CIRC are deducted and in the terms and manners referenced there.
To this general collection, rooted in this fundamental foundation, is added the specific collection, owed by autonomous taxation, which has, as has been made clear, a root, a sense and its own foundation, which is to discourage the adoption of behaviors taxed by them, listed in article 88 of the Code, which constitutes, as is established doctrine, an anti-abuse rule, which permits us to invoke here all the dogmatic approach on which it is founded. Being that, in this case, because it is a matter of fulfilling purposes that go beyond the purely revenue-raising purposes of the tax, to be situated in the field of behaviors that the law considers abusive and / or undesired, it appears clear to us that it does not make sense for deductions to be made to it, under penalty of emptying, in practice, of any sense the anti-abuse regime created.
Attentive to what has been set forth, we are now in a position to analyze the Claimant's petition, regarding the legality of the deduction of the special payment on account from the portion of IRC collection corresponding to autonomous taxation rates.
§4. The evolution of the special payment on account of IRC and its regime
The genesis and evolution of the special payment on account (PEC) develop in three stages, namely (i) the regime that runs from its inception until the year 2000; (ii) the regime applicable to the tax years 2001 and 2002; and the subsequent regime that is in force until today.
In its initial version, the PEC was presented as a tool for improvement of the system, which was and is very much based on the declaration of income by taxpayers. Its introduction into the tax system was simultaneous with the reduction of the general IRC rate by two percentage points. The occurrence of the two facts is not a coincidence; on the one hand, the rate applicable to tax-paying taxpayers was reduced; through the PEC, the payment of a particular amount was promoted as tax, albeit provisionally, by taxpayers who, despite continuing to conduct their activity year after year, persisted in declaring negative or zero income, escaping effective taxation. It is thus, as a measure to combat "evasive practices of concealment of income or inflating of costs" that the PEC was justified in the preamble to Decree-Law no. 44/98, of 3 March, which instituted it.
The provisionalness of the tax payment lay after all in the possibility of deducting the amounts paid as PEC from the IRC calculated in accordance with the general terms, set forth in article 71 of the CIRC then in force (of which autonomous taxation did not yet form a part), although that deduction was only possible if, despite that operation, the value of the tax to be paid was positive (article 71, no. 6, of the 1998 CIRC). With no IRC to be paid in accordance with the general terms, the value of the PEC satisfied could be carried forward to the following tax year (article 74-A, no. 1) or refunded later (article 74-A, no. 2). An attempt was thus made to ensure that the generality of taxpayers satisfy a value on account of IRC, calculated provisionally on the turnover of the preceding tax year (article 83-A). In essence, it was fictitiously assumed that all companies would by tendency have taxable profit, calculated according to the general parameters, equivalent to 1% of its turnover of the previous year, settling the account later if that were not the case.
The IRC reform effected in 2000-2001 through Law no. 30-G/2000, of 29 December, reduced the character of payment on account that the tax had, preventing its refund while the taxpayer remained in business and required that the carry-forward of the amounts satisfied be made only up to the fourth subsequent tax year (article 74-A, no. 1, of the 2001 CIRC). From this restrictive rule results, for the first time, the possibility of the PEC becoming a minimum collection (TERESA GIL, Special Payment on Account, Magazine Tax. Year XIV, (March 2003), no. 107-108, p. 12) when it was not possible to deduct the amounts satisfied, by exhaustion of the carry-forward period. In summary, it is possible to state that the changes introduced in this reform not only maintained but accentuated the emphasis on combating tax evasion that had animated the introduction of the PEC. Despite autonomous taxation having been introduced into the CIRC at this time, no mechanism of articulation between the two instruments was foreseen.
The third configuration of the PEC is introduced by Law no. 32-B/2002, of 30 December, which in its article 27 introduced a new regime of PEC deductibility in article 87, no. 3, of the CIRC, restoring the possibility of refund of amounts delivered by way of special payment on account and not offset in the annual IRC assessment. The character of a measure of pursuit of tax evasion was still maintained here, although it was lightened, without completely abolishing it, the mark of minimum collection, in light of the tight conditionality imposed for the refund.
Article 104 of the CIRC provides that: "The entities that exercise, as their principal activity, a commercial, industrial or agricultural activity, as well as non-residents with a permanent establishment in Portuguese territory, must proceed with the payment of the tax in the following terms:
a) In three payments on account, due in July, September and 15 December of the same year to which the taxable profit relates or, in the cases of nos. 2 and 3 of article 8, in the 7th month, in the 9th month and on the 15th day of the 12th month of the respective tax period;
(...)"
And article 106 of the CIRC provides: "Without prejudice to the provision of paragraph a) of no. 1 of article 104, the taxpayers mentioned there are subject to a special payment on account, to be made during the month of March or in two installments, during the months of March and October of the year to which it relates or, in the case of adopting a tax period not coinciding with the calendar year, in the 3rd and 10th months of the respective tax period."
From the foregoing results the obligation, for Corporate Income Tax taxpayers, to make payments on account of the IRC that will be owed in final. As is known, the technique of payments on account consists, in general, of a mere mechanism of advance of the tax that comes to be owed finally. It is, as is pacifically accepted, a means that has advantages for the State as it permits it to advance the receipt of the tax, while at the same time ensuring its collection at the moment or as income is produced, without prejudice to the final determination and with observance of the determination of what is owed according to the general method of taxation by actual profit.
It is true that the reason for the existence of payments on account and of the special payment on account, starting from this common trunk – since, unequivocally, both are the product of a tax technique by which the final tax collection is anticipated – diverges, since they nonetheless present (in the second case), somewhat differentiated justifications. While the reason for the existence of payments on account is exhausted, in our view, in the foundations set forth above, the special payment on account, without losing sight of that purpose, has yet another that was added to it. Indeed, as well noted in the arbitral award issued in case no. 113/2015-T, "in legal doctrine and in case law, the PEC regime has always been considered as a system to prevent tax evasion and to guarantee payment of tax by all companies in business." It is also what results from the doctrinal work developed by the Constitutional Court. From its Decision no. 494/2009, it results that the PEC, in the form it was given in the CIRC, is also "indissolubly linked to the fight against tax evasion and fraud", seeking to ensure that the income declared by taxpayers "correspond[s] to the income actually earned".
The aforementioned Decision no. 494/2009 of the Constitutional Court identifies multiple scientific works that pronounced themselves in the same sense, as is the case of Teresa Gil (op. and loc. cit.) who gave account of the circumstances surrounding the introduction of the PEC, namely the difficulties in application of the principle of taxation by actual profit, noted in light of "the divergence that exists between the profits actually obtained and those that are declared by companies and, therefore, subject to taxation".
As has been said, and at this step, we make our own the synthesis invoked in the aforementioned Arbitral Decision, in which the current regime of the PEC is thus characterized by "(i) having an indissoluble connection to the fight against tax evasion and fraud; (ii) having been introduced into the CIRC in March 1998, before autonomous taxation rates that only came to form part of its systematics in the 2000-2001 reform; (iii) in the conception of the PEC its deduction from the collection in the assessment of IRC calculated on actual income was foreseen; (iv) the recovery of the credit resulting from the PEC is subject to conditions of obtaining profitability ratios specific to companies in the business sector in which they operate or to justification of the credit situation by inspection action made at the request of the taxpayer (87-3 of the CIRC)."
The subsequent question is whether these special reasons are such as to allow deductions to be made from the collection of autonomous taxation either of tax benefits to which the taxpayer is entitled or of the PEC itself. As to the first, we have already pronounced ourselves above in the sense of such impossibility. As to the PEC, the fact is that it is nothing more than a payment on account of the IRC that will (presumably) be owed finally by the taxpayer, albeit with some special characteristics. And, therefore, it is IRC for all legal purposes, although there are special rules for its refund.
Unlike autonomous taxation, which is collection owed on account of behaviors that the law wishes to discourage and, therefore, penalize the reporting of certain expenses for the reasons indicated, in the PEC what is at issue is to ensure that a certain measure of the tax is advanced by way of IRC and without prejudice to its deduction from the general collection of the tax, calculated as an effect of the operation of assessment in the strict sense.
Now, as well noted in Arbitral Decision issued in case no. 13/2015-T, "the PEC came to form part of the IRC system whose assessment was designed to determine the tax directly falling on declared income. When there is a tax loss, the taxpayer still has to bear the PEC; that was indeed the reason for its introduction. If a particular company has successive tax losses, it will systematically bear tax, as the system doubts its ability to function in a permanently deficit situation, requiring it to satisfy provisionally (on account), a particular value. It may refund it if it proves that that situation is common in its business sector or if the Tax Authority verifies the regularity of its declarations. This was the equilibrium that the CIRC required to maintain a system based on declarations made by taxpayers.
Already the tax resulting from autonomous taxation is founded solely on the pursuit of tax evasion through income transfer and has a dissuasive and compensatory effect. If one were to allow the deduction of the PEC from the collection resulting from autonomous taxation, the purposes of the system in which the rule of 83-2-e CIRC is inserted would be frustrated, as the product of the special payment on account that should remain 'stationary' in the ownership of the Public Treasury would be applied to the extinction of the debt of the taxpayer resulting from autonomous taxation, thereby lightening the intended pressure to prevent tax evasion by 'declaration'. There is indeed an irreconcilable conflict between the ratio of the PEC – the fight against evasion or pressure for correction of declarations – and the application of its credits to the satisfaction of other obligations that are not those resulting from the determination of IRC calculated on the taxable result.
In practical terms, the possibility of deduction of the PEC from autonomous taxation would imply that even if a particular company were eternally in a situation of loss, no tax on its actual income would have to be borne, as long as it applied the PEC to the satisfaction of autonomous taxation. Moreover, the autonomous taxation themselves (cf. Decision of the Constitutional Court no. 617/2012, cited) would lose their anti-abuse character, coming to be confused after all with the tax calculated on taxable profit. But those are not the objectives of the system of taxation of income of legal entities and the best interpretation of the rule contained in article 83-2-e CIRC is not decidedly that which permits the deduction of special payments on account from the collection resulting from the application of autonomous taxation rates."
In summary, weighty reasons, derived from the purposes intended to be achieved legislatively with the creation of the special payment on account, justify a restrictive interpretation of articles 90, no. 1, and 93, no. 3, of the CIRC, particularly of the reference made in the latter to "the amount calculated in the declaration referred to in article 120 of the CIRC".
It should be emphasized that this arbitral understanding is in harmony with the new no. 21 of article 88 of the CIRC added, as we have seen, by Law no. 7-A/2016, of 30 March, in establishing that to the amount calculated from autonomous taxation no "deductions are made whatsoever".
Also, in this case, the legislator merely adopted, clarifying it, a solution that the tribunals, with the use of the rules in force and by application of the criteria of legal hermeneutics, were in a position to extract from the regime to be applied, which after all is all this collective did, in the present case, not having therefore needed to apply this new legal provision.
In the same sense, goes the Arbitral Award issued in case no. 673/2015-T, where to this regard it was likewise concluded, inter alia, that the legal solution already resulted from the literal tenor of article 93, no. 1, of the CIRC, "without exceeding the limits normally imposed on the interpretation and application of law, as the restrictive interpretation is admissible when there are weighty reasons to conclude that the scope of the legal text betrays the legislative thinking or it is necessary to optimize the harmonization of conflicting interests that two rules intend to protect."
§5. In the present case: subsumption to the applicable normative block
Having assessed the facts and the Claimant's intention to see deducted from the portion of the IRC collection produced by autonomous taxation rates the PEC effected in the context of IRC, in light of all that has been set forth, it is necessary to conclude that such intention cannot but fail.
Indeed, for the reasons exposed, the Claimant's intention must necessarily be unsuccessful, since the controversial IRC self-assessments comply with legality, as they are based on correct interpretation and application of the legal rules cited above.
In this framework, the petition for declaration of illegality of the IRC self-assessments for the tax years 2012 and 2013, insofar as it concerns the non-deduction from the portion of IRC collection produced by autonomous taxation of the PEC effected in the context of IRC, is wholly unsuccessful.
Moreover, the alternative petition raised by the Claimant is also unsuccessful, in the sense of the declaration of illegality of the assessments of autonomous taxation for lack of legal basis for their effectuation, based on articles 8, no. 2, paragraph a), of the General Tax Law and 103, no. 3, of the Constitution, this provision establishing that "no one can be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not made in accordance with the law".
Consequently and for the same order of reasons, the petition for declaration of illegality of the dismissal of the gracious objection no. ...2015... is unsuccessful.
§5. On the refund of amounts paid and the payment of indemnificatory interest
The Claimant further petitions for the condemnation of the Tax Authority to the refund of the amounts of €78,945.34 and €84,436.43, increased by the respective indemnificatory interest.
Since the controversial IRC self-assessments, including autonomous taxation rates, do not suffer from any invalidating defect, being thus legal, the Claimant has no right to the refund of those amounts nor, inherently, to the payment of any interest.
IV. DECISION
In the terms set forth, this Arbitral Tribunal decides:
a) To judge the petition for arbitral pronouncement wholly unsuccessful and, consequently:
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not declare illegal the self-assessments of IRC for the tax years 2012 and 2013, including autonomous taxation rates, of Fiscal Group B... of which the Claimant is the holding company;
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not declare illegal the dismissal of the gracious objection no. ...2015...; and
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not recognize the right of the Claimant to the refund of the amounts of €78,945.34 and €84,436.43 nor, inherently, to the payment of any interest.
b) To absolve the Respondent of the petitions.
c) To condemn the Claimant to the payment of the costs of the case.
VALUE OF THE CASE
In accordance with the provision of articles 306, no. 2, of the Code of Civil Procedure, 97-A, no. 1, paragraph a), of the Code of Tax Procedure and Process, and 3, no. 2, of the Regulation of Costs in Arbitration Proceedings in Tax Matters, the value of the case is fixed at €163,381.77.
COSTS
In accordance with the provision of articles 12, no. 2, and 22, no. 4, of the RJAT and article 4, no. 4, and Table I annexed to the Regulation of Costs in Arbitration Proceedings in Tax Matters, the amount of costs is fixed at €3,672.00 (three thousand six hundred and seventy-two euros), in accordance with Table I annexed to the Regulation of Costs in Arbitration Proceedings in Tax Matters, to be borne by the Claimant.
Lisbon, 1 July 2016.
The Arbitrators,
(Maria Fernanda Maçãs)
(Ricardo Rodrigues Pereira)
(Hugo Freire Gomes)
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