Summary
Full Decision
ARBITRAL DECISION
Carla Castelo Trindade, Arbitrator appointed by the Deontological Council of the Administrative Arbitration Centre to constitute this arbitral tribunal hereby decides as follows:
I – REPORT
On 25 January 2017, A..., SGPS, S.A., with registered office at ...-..., No...., ..., ..., district of Lisbon and parish of ..., ... and ..., in the municipality of Oeiras and with a share capital of Euro 50,000.00 (fifty thousand euros), (hereinafter Applicant), filed a request for the constitution of a single arbitral tribunal, in accordance with and for the purposes of the provisions of Articles 2 and 10 of the Legal Framework for Arbitration in Tax Matters, approved by Decree-Law 10/2011, of 20 January (LFAT).
By means of the request for constitution of the arbitral tribunal and arbitral pronouncement, the Applicant seeks the annulment of the dispatch of the Head of the Finance Management Division, of 26 October 2016, which rejected the administrative appeal against the self-assessment of Corporate Income Tax ("CIT"), for the fiscal year 2013, lodged on 4 May 2016 against the self-assessment acts of CIT, relating to the period of 2013.
With the petition, it attached 4 documents.
As the Applicant opted for non-appointment of an arbitrator, in accordance with the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of the LFAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed Dr. Carla Castelo Trindade as arbitrator of the single arbitral tribunal, who communicated acceptance of the office within the applicable time period.
The parties were notified of this appointment, and no request for recusal of the appointment as arbitrator by Dr. Carla Castelo Trindade was presented.
Thus, in accordance with the provisions of subparagraph c) of paragraph 1 of Article 11 of the LFAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 30 March 2017.
On 18 May 2017, the Tax and Customs Authority (hereinafter "Respondent") filed a response in which it defended itself by way of objection, contending for the total lack of merit of the request for arbitral pronouncement and seeking dismissal of the Applicant's claims.
Taking into account that, in the present case, none of the purposes legally assigned to the meeting referred to in Article 18 of the LFAT were present, and considering the position taken by the parties in the pleadings, pursuant to Articles 16, subparagraph c) and 19 of the LFAT, as well as the principles of procedural economy and prohibition of useless acts, the holding of this meeting was dispensed with and the parties were notified to present arguments.
Arguments were presented by the Applicant on 29 May and by the Respondent on 6 June of the same month.
Under the principle of cooperation and procedural good faith provided for in Article 16 of the LFAT and also under the principle of free conduct of the proceedings provided for in Article 19, also of the LFAT, on 28 June the Tribunal notified the Applicant to, within the period of 10 days, comment on the method used and the cognitive route, to determine the value of the case fixed at €42,194.23. This is because the issue to be decided in the present proceedings is whether the loss of €334,108.79 obtained as a result of the non-restitution of supplementary contributions in the context of the winding-up of the Clinical Analysis Laboratory B... – and only this loss – affects (or does not affect) the taxable profit for the fiscal year 2013 by 50% of its value, i.e. €167,054.40, by subsumption in paragraph 3 of Article 45 of the CIT Code, as argued by the Applicant. However, the value of the case was fixed at €42,194.23 (forty-two thousand, one hundred and ninety-four euros and twenty-three cents).
On 7 July of the same month, the Applicant filed a request for response to this Tribunal's request, arguing that as the act underlying the request for arbitral pronouncement corresponds to a mere act of fixing the taxable matter or taxable base, since the correction proposed by the Tax Inspection Services would not give rise to any additional assessment, the value of the case would be that of the assessment "which the taxpayer, in whole or in part, seeks to prevent", as provided for in paragraph 3 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings. In this case, the value of the assessment which the taxpayer, in whole or in part, seeks to prevent would be €42,194.23 (forty-two thousand, one hundred and ninety-four euros and twenty-three cents).
The Respondent entity agreed with the arguments put forward by the Applicant entity regarding this issue of the value of the case, stating, in a request presented on 20 July, that it had "nothing to object to the fixing of the value of the action at the aforementioned amount of €42,194.23".
The tribunal adheres to this fixing of the value of the case at €42,194.23 (forty-two thousand, one hundred and ninety-four euros and twenty-three cents).
II. PRELIMINARY EXAMINATION
The arbitral tribunal was regularly constituted.
The parties possess legal personality and legal capacity and are entitled to participate.
The Respondent invoked, in its arguments, that:
"The learned arguments of the Applicant, with due respect, add nothing, in their overall assessment, to the thesis that had been developed in the equally learned request for arbitral pronouncement."
Notwithstanding this observation – which the tribunal corroborates – the Respondent further adds that:
"with the arguments, the Applicant attached documentation, without alleging any supervening matter. It being clear, moreover, that the document is not supervening"
The Respondent entity thus concludes that "the request presented cannot be allowed as it lacks legal support, and it should be removed from the record, under penalty of violation of the law". Adding further on this point that "As the Applicant did not claim the supervening nature and/or impossibility of attachment of such documents at the appropriate time, i.e., with the presentation of the arbitral request, such attachment should be rejected (cf. Article 108, paragraph 3 of the Tax Code of Procedure and Process, Article 10, paragraph 2, subparagraphs c) and d) of the LFAT, as well as Article 423, paragraphs 1 and 3 of the Civil Procedure Code and Article 86, paragraph 1 of the Administrative Court Procedure Act)".
As to this issue, it should first be noted that, in fact, the document attached during the arguments adds nothing to the factual and evidentiary circumstances of the case under analysis and in no way influences the decision to be rendered below. This notwithstanding the fact that the attachment of the document at point 31 of the Applicant's arguments is pertinent to the arguments developed by the Tax Administration in its Response, more specifically at point 48.
In this way, the decision to remove (or not) the document loses relevance insofar as the tribunal's decision would be the same with or without the document in question.
However, the present tribunal nonetheless considers – under the principles of the tribunal's autonomy in conducting the proceedings and in determining the rules to be observed with a view to obtaining, within a reasonable period, a pronouncement on the merits of the claims made; of the free assessment of facts and of the free determination of the measures for production of evidence necessary, as provided for in Article 16, subparagraphs c) and e) of the LFAT – not to order the removal of the document sub judice.
Indeed, this would only be justified if there had been a violation of the principle of contradictory procedure, which is not the case here. And it is not the case not only because the Respondent entity had the opportunity to comment during the arguments – where it advocated for removal – but also because the present document alters or proves nothing with respect to the issue to be decided.
In conclusion, as there is no violation of the principle of contradictory procedure, the present tribunal considers that it should not order the removal of document No. 1 attached to the Applicant's arguments, all in accordance with the provisions of subparagraphs c) and e) of Article 16 of the LFAT.
III. MATTERS OF FACT
III.1. PROVEN FACTS
With respect to matters of fact, it is important, first and foremost, to emphasize that the tribunal is not required to rule on everything alleged by the parties; rather, it is incumbent upon the tribunal to select the facts that matter for the decision and distinguish between proven and unproven matters. All as provided for in Article 123, paragraph 2, of the Tax Code of Procedure and Process and Article 607, paragraphs 2, 3 and 4 of the Civil Procedure Code, applicable pursuant to Article 29, paragraph 1, subparagraphs a) and e), of the LFAT. Thus, the relevant facts for the judgment of the case are chosen and delineated according to their legal relevance, which is established in view of the various plausible solutions to the issue(s) of law (see Article 596 of the Civil Procedure Code, applicable pursuant to Article 29, paragraph 1, subparagraph e), of the LFAT).
Now, taking into account the positions assumed by the parties, the documentary evidence and the Administrative File attached to the record, the following facts with relevance to the decision are considered proven:
1. The Applicant is a management company holding participations that integrates the business group C... ("Group C...").
2. This Group C... is composed of several companies that operate in the health sector in Portugal, being specialized in essential areas of medicine such as clinical analysis, diagnostic imaging, oncological treatments and psychiatric care.
3. At the date of the facts, the Applicant was subject to the general taxation regime, under CIT, having a tax period coinciding with the calendar year, being taxed under the Special Taxation Regime for Groups of Companies ("STRGC"), as the parent company of the Group.
4. The Applicant was subject to an external inspection action carried out by the Tax Inspection Services ("TIS"), by reference to the fiscal year 2013.
5. On 20 April 2016, the Applicant was notified of the respective Tax Inspection Report Draft, which proposed, among others, a mere arithmetic correction in the amount of Euro 875,120.35 (eight hundred and seventy-five thousand, one hundred and twenty euros and thirty-five cents) corresponding to the amount which it had improperly deducted in field 768 of Table 07.
6. The correction proposed in the amount of Euro 875,120.35 (eight hundred and seventy-five thousand, one hundred and twenty euros and thirty-five cents) relates to the non-acceptance of the tax deductibility of losses obtained as a result of the alienation of supplementary contributions granted to company D..., Ltd. in the amount of Euro 535,494.97 (five hundred and thirty-five thousand, four hundred and ninety-four euros and ninety-seven cents), as well as losses obtained underlying the winding-up of companies E... Ltd., in the amount of Euro 331,794.50 (three hundred and thirty-one thousand, seven hundred and ninety-four euros and fifty cents), and Clinical Analysis Laboratory B..., Ltd. in the amount of Euro 7,830.88 (seven thousand, eight hundred and thirty euros and eighty-eight cents).
7. The Applicant verified that it had not considered, by reference to the company Clinical Analysis Laboratory B..., Ltd., from a tax perspective, a loss in the amount of Euro 167,054.40 (one hundred and sixty-seven thousand, fifty-four euros and forty cents), calculated in the context of its winding-up, but rather the amount of Euro 7,830.88 (seven thousand, eight hundred and thirty euros and eighty-eight cents).
8. The Applicant filed on 5 May 2016 an administrative appeal against the self-assessment acts of CIT, relating to the period of 2013, individually and in its capacity as the parent company of the tax group.
9. In this administrative appeal, the Applicant petitioned for the correction of the Individual and Group CIT Tax Return Declaration Form 22 "by means of the consideration of a tax deduction in the amount of Euro 1,034,343.87" as opposed to the amount originally considered by it of Euros 875,120.75 (eight hundred and seventy-five thousand, one hundred and twenty euros and seventy-five cents).
10. It further petitioned for the correction of the negative tax result calculated in the tax period of 2013, on an individual basis, to Euro 1,088,108.11 (one million, eighty-eight thousand, one hundred and eight euros and eleven cents) and, the correction of the Individual CIT Tax Return Declaration Form 22 submitted by the Applicant in its capacity as parent company of Group C... taxed under the STRGC, for the tax period of 2013, so as to reflect a negative tax result in the amount of Euro 3,662,950.58 (three million, six hundred and sixty-two thousand, nine hundred and fifty euros and fifty-eight cents).
11. The draft decision that was notified for purposes of exercising prior hearing, as per dispatch of 5 September 2016.
12. The right to hearing not having been exercised, a dispatch rejecting the Administrative Appeal was issued, dated 24 October 2016.
13. The rejection decision was notified to the Applicant on 26 October 2016.
III.2. UNPROVEN FACTS
As referred to, with respect to matters of fact taken as established, the tribunal is not required to rule on everything alleged by the parties; rather, it is incumbent upon the tribunal to select the facts that matter for the decision and discriminate between proven and unproven matters, as provided for in Article 123, paragraph 2, of the Tax Code of Procedure and Process, applicable pursuant to Article 29, paragraph 1, subparagraphs a) and e), of the LFAT. Thus, the relevant facts for the judgment of the case were, as stated above, chosen and delineated according to their legal relevance, with no other alleged factuality being relevant for the proper resolution of the procedural dispute.
IV. MATTERS OF LAW
Taking into account the positions of the parties assumed in the pleadings filed, the central issue to be resolved by the present arbitral tribunal consists of assessing the legality of the dispatch of the Head of the Finance Management Division, of 26 October 2016, which rejected the administrative appeal against the self-assessment of CIT, for the fiscal year 2013, lodged on 4 May 2016.
Here a preliminary note to state that, as is well known, the material scope of arbitration is the assessment of the illegality of acts of assessment of taxes, self-assessments, withholding at source and payment on account.
However, the tribunal adopts on this matter the position of Carla Castelo Trindade (Cf. Carla Castelo Trindade (2016), in "Legal Framework for Tax Arbitration Annotated", p. 149-153) when she states that:
"acts of second or third degree may always be arbitrable, insofar as they themselves involve, and only to this extent, the (il)legality of the assessment acts in question. The basis for this understanding will be, for part of the Doctrine, a teleological interpretation, in particular because subparagraph a) of paragraph 1 of Article 10 expressly refers to the "hierarchical appeal decision" and it also appears to be, it is believed, the fact that the second or third degree act is assessing the assessment act, self-assessment, withholding at source or payment on account that is the object of arbitration.
It is therefore argued here, for a contrary interpretation, that the defects specific to acts of rejection of administrative appeals, hierarchical appeals or requests for revision of the tax act are not arbitrable because they fall outside the material scope of tax arbitration. In other words, these acts of rejection may only be "brought" before the arbitral jurisdiction, under the strict condition that they themselves have assessed the (il)legality of the tax act that the taxpayer, truly and effectively, intends to challenge through arbitration."
Thus, and as the Respondent entity correctly notes at points 14 to 16 of its Response, the object of the present action is that which was the object of the administrative appeal – the second degree act that is now being analyzed.
Having the Applicant imputed a single defect to the challenged act: the defect of violation of law, it is this that will be analyzed below.
Defect of Violation of Law
The issue to be decided in the present proceedings consists in determining whether the loss of €334,108.79 obtained as a result of the non-restitution of supplementary contributions in the context of the winding-up of Clinical Analysis Laboratory C..., Ltd., affects the taxable profit for the fiscal year 2013 by 50% of its value, i.e. €167,054.40, by subsumption in paragraph 3 of Article 45 of the CIT Code, as argued by the Applicant. Or if, instead, they do not count, in their entirety, for the determination of taxable profit, due to non-fulfillment of the conditions for deductibility of expenses and losses provided for in paragraphs 1 and 5 of Article 23 and of Article 41 of the same Code, as maintained by the Respondent.
On this matter, it is first necessary to make a brief framing of the position that the tribunal will defend and which, it is anticipated, will result in accepting the position defended by the Applicant and, consequently, in the annulment of the decision rejecting the Administrative Appeal that is the object of the present proceedings.
It should be noted preliminarily that courts are not required to address all arguments formulated by the parties, as has been repeatedly affirmed by case law (see, inter alia, Decision of the Plenary of the 2nd Section of the Administrative Supreme Court, of 7 June 1995, issued in the context of appeal No. 5239, in Official Reports – Appendix of 31 March 97, pages 36-40 and Decision of the Administrative Supreme Court – 2nd Section – of 23 April 1997, Official Reports/Appendix of 9 October 97, p. 1094, also published in www.dgsi.pt).
It should also be noted that the understanding advocated by the tribunal and defended by the Applicant is equally shared, in a crystal-clear manner, in the context of other decisions handed down by the Tax Arbitration Tribunal of CAAD, in particular, in proceedings No. 570/2015, No. 326/2015-T, No. 734/2014, No. 376/2014, No. 39/2013-T, No. 24/2013-T, No. 12/2013-T and No. 69/2012-T, rendering repetition of the arguments and subject matter unnecessary for the case.
From a historical perspective, the position of the Respondent entity based on the opinion of the Tax Studies Centre No. 107/2004, which advocated for the application of Article 41 to losses with supplementary contributions and in general resulting from the alienation of credits, raised, already at the date of the facts, various reservations. Today the issue is entirely different, as is known. In effect, with subsequent developments, and in particular after the CIT reform, the legislator came to establish identical treatment between supplementary contributions and share capital, thus making obsolete the doctrine defended in the opinion of the Tax Studies Centre No. 107/2004.
And, although it appears to the tribunal that, in theory, it would be desirable that Article 23, paragraph 5 would apply to both share capital and supplementary contributions, the same applying to paragraph 3 of Article 45 of the CIT Code, in fact the wording of paragraph 5 of Article 23 of the CIT Code, when referring to "share capital" was not, at the date of the facts, definitive as to the inclusion (or not) of supplementary contributions within its scope, making it difficult to defend their inclusion, as illustrated by the fact that the Respondent entity itself at one point refers to supplementary contributions as not integrating the concept of share capital. This is in line, moreover, with the position advocated by all the Doctrine which argues that supplementary contributions do not integrate the concept of share capital.
On the other hand, it follows expressly from the provisions of paragraph 3 that losses or negative patrimonial variations relating to supplementary contributions have the nature of capital losses, whereby, contrary to the position defended by the Respondent entity, the provision of Article 41 will not be applicable to the case sub judice.
In view of the foregoing, in view of the arguments put forth by the Applicant in its request for arbitral pronouncement and, as well, in the arguments presented, the tribunal considers that the Applicant is correct in holding that the loss of €334,108.79 obtained as a result of the non-restitution of supplementary contributions in the context of the winding-up of Clinical Analysis Laboratory C..., Ltd., affects the taxable profit for the fiscal year 2013 by 50% of its value, i.e. €167,054.40, by subsumption in paragraph 3 of Article 45 of the CIT Code. Given this, and not seeing the tribunal any need to replicate the entire technical discussion defended in the pleadings insofar as it subscribes to the arguments defended by the Applicant entity and the case law and Doctrine it cites, it is thus concluded that the decision rejecting the Administrative Appeal is illegal due to a defect of violation of law by error regarding the legal premises, which justifies its annulment pursuant to Article 135 of the Administrative Procedure Code, applicable pursuant to Article 29, paragraph 1, subparagraph d), of the Legal Framework for Tax Arbitration and Article 2, subparagraph c) of the General Tax Law.
There is, however, an issue to be analyzed insofar as the tribunal's position is slightly different from that defended by the Applicant entity and which relates to the problem of the conversion of advances into supplementary contributions.
This is because one of the points raised by the TIS is that "(...) the claimant recorded supplementary contributions in this company (...) which resulted from the conversion of advances [and that] the entry of money in advances occurred, in general, at a date very different from the conversion into supplementary contribution", and that this fact would be sufficient to remove the nature of supplementary contributions.
The Applicant disagrees with this understanding, saying from the outset that "the requirement provided for in paragraph 2 of Article 210 of the Commercial Societies Code, which provides that 'supplementary contributions always have money as their object', is fulfilled, considering the principle of substance over form set out, in particular, in paragraph 3 of Article 11 of the General Tax Law, in a scenario of conversion of advances into supplementary contributions, when they had money as their original object". The Applicant adds further on this point that "the conversion of advances into supplementary contributions embodied a decision approved in an Act of General Assembly".
The fact is that the Tax Administration at no time triggered the procedure established in Article 63 of the Tax Code of Procedure and Process which regulates the application of the General Anti-Abuse Clause (GAAC) established in Article 38 of the General Tax Law.
Now, Article 75, paragraph 1 of the General Tax Law establishes that "the declarations of taxpayers presented as provided for by law, as well as the data and calculations entered in their accounting or books, when these are organized in accordance with commercial and tax legislation, without prejudice to the other requirements on which the deductibility of expenses depends, are presumed to be true and made in good faith." A presumption of veracity is thus established for the declarations of taxpayers, presented as provided for by law, as well as for the data contained in their accounting and books, if organized in accordance with commercial and tax legislation. This presumption results not only from Article 75, paragraph 1 of the General Tax Law but also from Article 100 of the Tax Code of Procedure and Process, from which flows the presumption of veracity of the taxpayer's actions.
On this matter Serena Neto and Carla Castelo Trindade state that "From this it follows that any doubts that may arise regarding the existence and quantification of a tax fact should be valued procedurally in favor of the taxpayer, resulting in the annulment of the challenged act[1]. This presumption is not, however, irrebuttable; it is incumbent upon the Tax Administration to prove the falsity of the declarations of taxpayers. On the other hand, this presumption ceases to exist, with the burden of proof thus reversing, in accordance with Article 100, paragraph 2 of the Tax Code of Procedure and Process, when the taxpayer fails to meet its obligations to maintain elements that allow verification of its declarations[2]." (Cf. Serena Cabrita Neto and Carla Castelo Trindade (2017), in "Tax Litigation", Volume I, Procedure, Principles and Guarantees, p. 160).
Thus, looking to the rules of burden of proof provided for in Article 74 of the General Tax Law and there having been no reversal thereof, there are no reasons to, in the case at hand, disregard the nature of supplementary contributions as decided by the General Assembly and as recorded in the Applicant's accounting, unless this resulted from the application of the GAAC, which is not the case. For further development on the burden of proof and its reversal in case of declarations that enjoy presumption of veracity, reference is made to the same Manual for that purpose, pages 639 to 647.
Moreover, even if the GAAC mechanism had been triggered, the truth is that paragraph 5 of Article 23 did not apply – nor, it is believed, was it ever intended that it apply – to advances, and the application of Article 41 to cases of alienation was always a matter of controversy even within the Tax Administration.
The request for arbitral pronouncement thus wholly succeeds.
Indemnificatory Interest
The Applicant further requests that payment of indemnificatory interest be determined, considering that the decision rejecting the administrative appeal, which is the object of the present request, results from error in application of the factual and legal premises on which the law makes the correction proposed by the tax administration depend, the error in question being, therefore, entirely attributable to the Tax Administration.
First and foremost, the present tribunal is competent to analyze the issue of the possible condemnation of the Tax Administration to pay indemnificatory interest, as provided for in subparagraph b) of Article 24 of the Legal Framework for Tax Arbitration, insofar as the arbitral decision on the merits of the claim from which no remedy or appeal lies binds the Tax Administration from the end of the period provided for remedy or appeal, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of decisions of tax courts, "restore the situation that would exist if the tax act that is the object of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", which is in line with the provision of Article 100 of the General Tax Law, applicable by virtue of the provision of subparagraph a) of paragraph 1 of Article 29 of the Legal Framework for Tax Arbitration[3].
Already in accordance with paragraph 5 of Article 24 of the Legal Framework for Tax Arbitration, in stating that "payment of interest, regardless of its nature, is due, in accordance with the terms provided for in the General Tax Law and in the Tax Code of Procedure and Process", it is nothing more than the acknowledgment of the right to indemnificatory interest in arbitral proceedings.
Doctrine has also argued that it falls within the scope of the competence of arbitral tribunals to determine the effects of their decisions, in the same terms provided for judicial challenge, in particular, as to condemnation to pay indemnificatory interest or to condemnation for indemnification for undue guarantee (Cf. Carla Castelo Trindade (2016), "Legal Framework for Tax Arbitration Annotated", 121 and Jorge Lopes de Sousa (2013), "Commentary on the Legal Framework for Tax Arbitration", 116).
This was also the understanding of the arbitral tribunal constituted in the context of proceeding No. 66/2013-T, where claims for reimbursement and condemnation to payment of indemnificatory interest were also at issue. That tribunal concluded that:
"Thus, similarly to what occurs in tax courts in proceedings of judicial challenge, this Tribunal is competent to assess the requests for reimbursement of the amount paid and for payment of indemnificatory interest.
In the case at hand, it is clear that these requests must succeed, since the assessments are annulled and the error of which they suffer is attributable to the Tax Administration, whereby the right to indemnificatory interest is recognized by Article 43, paragraph 1 of the General Tax Law."
On this matter the Applicant argues that notwithstanding the fact that we are dealing with a merely arithmetic correction to the tax loss calculated in fiscal year 2013, taking into account the arguments adduced in the request and having been demonstrated that the premise of error attributable to the services is fulfilled - because it considers that the decision rejecting the administrative appeal results in an error in application of the factual and legal premises by the Tax Administration following its respective tax inspection - the Respondent entity should be condemned to the payment of indemnificatory interest, in accordance with the provision of Article 43 of the General Tax Law, on the payment of tax debt that, eventually, may be required in an amount greater than legally due as a result of the adjustment of the tax loss of fiscal year 2013.
On this issue of delineating the concept of error attributable to the services, Serena Cabrita Neto and Carla Castelo Trindade argue that:
"when the assessment of the tax is effected through self-assessment, there are those who understand that the errors committed by the taxpayer should be equated to errors by the services, an equation which is not strange to the system, in particular by the rule which was contained in Article 78, paragraph 2 of the General Tax Law (which equated, for purposes of revision, self-assessment to assessment), and it is attributable to the Administration the payment of tax in an amount greater than due. In fact, the law seems to adopt an objective conception of the duty to indemnify, the question of who concretely carried out the assessment being immaterial. This understanding is debatable insofar as one could argue that the errors are those of the taxpayer and not of the services, and the dominant opinion is that, in these cases, there is no entitlement to payment of indemnificatory interest. This understanding gained more strength with the repeal of the aforementioned paragraph 2 of Article 78 of the General Tax Law by the State Budget Law for 2016, ceasing to consider as error attributable to the services the error in self-assessment, for purposes of revision of tax acts, a topic we will analyze at the appropriate time. However, we cannot agree with the position that extends this understanding to cases other than those of revision. Indeed, there should be entitlement to indemnificatory interest when the assessment of the tax is effected through self-assessment since the error of the taxpayer in assuming a task that was originally attributed to the Tax Administration – to assess the tax – should be considered error attributable to the services. Thus, if one were to admit as possible the Tax Administration not being answerable for the losses resulting from these errors, the taxpayer would be doubly penalized, because not only is it obliged to manage all the declarative and assessment obligations of that tax thus assuming a risk that originally would not be its own but that of the Tax Administration itself, but also it must bear the costs of the errors made to its detriment which result in unjust enrichment for the Tax Administration. What is clear is that if the taxpayer proceeded to self-assessment following erroneous generic guidance, it likewise has the entitlement to indemnificatory interest, in accordance with Article 43, paragraph 2 of the General Tax Law.
When the error is not considered attributable to the services, for example in case of error in self-assessment when the taxpayer did not follow erroneous generic guidance, this then becomes attributable to the Tax Administration after express or tacit rejection of the taxpayer's claim at the administrative appeal or hierarchical appeal stage. From this moment onwards, we have an act authored by the Tax Administration in which the latter takes a position regarding the taxpayer's situation, whereby any error will always be attributable to it. The Administration has already had the opportunity to issue a legal act, annulling the act that suffered from an error attributable to the taxpayer and, not having done so, it then assumed authorship of the error." (Cf. Serena Cabrita Neto and Carla Castelo Trindade (2017), in "Tax Litigation", Volume I, Procedure, Principles and Guarantees, p. 222 and 223).
Thus, concluding that the tribunal that the decision rejecting the Administrative Appeal that is the object of the present proceedings is illegal due to a defect of violation of law by error regarding the legal premises, which justifies its annulment pursuant to Article 135 of the Administrative Procedure Code, applicable pursuant to Article 29, paragraph 1, subparagraph d), of the Legal Framework for Tax Arbitration and Article 2, subparagraph c) of the General Tax Law, the Applicant's request for indemnificatory interest also succeeds, the starting date of which will be the date on which the decision rejecting the administrative appeal occurred.
V. DECISION
The tribunal therefore decides as follows:
a) Judge that the request for arbitral pronouncement is well-founded;
b) Declare the illegality and consequent annulment of the dispatch of the Head of the Finance Management Division, of 26 October 2016, which rejected the administrative appeal against the self-assessment of CIT, for the fiscal year 2013, lodged on 4 May 2016 against the self-assessment acts of CIT, relating to the period of 2013;
c) Condemn the Tax and Customs Authority to pay to the Applicant indemnificatory interest, in accordance with Article 43, paragraph 1, of the General Tax Law and Article 61 of the Tax Code of Procedure and Process, from the date of the decision rejecting the administrative appeal.
VI. VALUE OF THE CASE
The value of the case is fixed at €42,194.23, in accordance with Article 97-A, paragraph 1, a), of the Tax Code of Procedure and Process, applicable by virtue of subparagraphs a) and b) of paragraph 1 of Article 29 of the Legal Framework for Tax Arbitration and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
VII. COSTS
The arbitration fee is fixed at €2,142.00 in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the request was wholly well-founded, in accordance with Articles 12, paragraph 2, and 22, paragraph 4, both of the Legal Framework for Tax Arbitration, and Article 4, paragraph 4, of the aforementioned Regulation.
Let notification be made.
Lisbon, 8 September 2017
The Arbitrator
(Carla Castelo Trindade)
Text produced on computer, in accordance with Article 138, paragraph 5 of the Civil Procedure Code (CPC), applicable by referral of Article 29, paragraph 1, subparagraph e) of the Legal Framework for Tax Arbitration.
The present decision follows the old orthography rules.
[1] This assessment of doubts in favor of the taxpayer, i.e. the application of the principle in dubio contra fiscum, does not constitute a rule of interpretation of the law but only of decision on uncertain fact Cf. ALBERTO XAVIER "Manual of Tax Law" (1974) p. 172.
[2] DIOGO LEITE CAMPOS/BENJAMIM SILVA RODRIGUES/JORGE LOPES DE SOUSA (2012), p. 495 and RUI DUARTE MORAIS (2012), p. 32.
[3] Which establishes that "the tax administration is obliged, in case of total or partial success of administrative appeal, judicial challenge or appeal in favor of the taxpayer, to immediately and fully restore the legality of the act or situation that is the object of the dispute, including the payment of indemnificatory interest, if applicable, from the end of the period for execution of the decision".
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