Process: 137/2018-T

Date: October 12, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 137/2018-T) addresses the correction of real estate capital gains (mais-valias) realization values in IRS for 2015. The taxpayer failed to declare the sale of two property fractions in her IRS return, leading to an additional assessment of €23,299.74 by the Tax Authority. The TCA used the tax assessed value (valor patrimonial tributário - VPT) of €238,538.60 as the realization value for fraction BQ, despite the actual sale price being €142,000 to the taxpayer's daughter. After filing a voluntary complaint, the assessment was partially granted and reduced to €5,483.65, with corrections to acquisition dates and values. However, the TCA maintained the higher VPT as the realization value. The taxpayer contested this, arguing that Article 44(5) of the PITC allows proving lower actual values, even without following the Article 139 CITC procedural requirements (January filing deadline), citing principles of effective judicial protection, proportionality, and tax capacity. She also claimed €102,573.36 in deductible expenses related to the sale were improperly excluded. The core legal issue involves whether the presumption favoring VPT over actual transaction values can be challenged after missing statutory deadlines, and whether procedural formalities should prevail over substantive tax justice when the actual realization value is demonstrably lower than the administratively determined value used for property transfer tax purposes.

Full Decision

ARBITRAL DECISION

I. REPORT

On 22 March 2018, A..., taxpayer no. ..., resident at Street ..., no. ..., ..., ..., ...-... ..., Matosinhos, came, under the terms set forth in subparagraph a), of no. 1, of article 2 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (hereinafter "LRATM"), and of Ordinance 112-A, of 22 March, to request the constitution of an Arbitral Tribunal, in which the Tax and Customs Authority (hereinafter simply "TCA") is the Respondent, with a view to declaring the illegality of the additional assessment of Personal Income Tax no. 2017 ... and respective compensatory interest, as well as of the decision that partially rejected the complaint filed, both relating to the year 2015, in the amount of € 5,483.65 (five thousand four hundred and eighty-three euros and sixty-five cents).

The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and notified to the Respondent on 28 March 2018. The Deontological Council designated as arbitrator the undersigned, who communicated acceptance of the assignment within the applicable time limit.

On 15 May 2018, the Parties were duly notified of this designation, having manifested no desire to refuse the arbitrator's designation, pursuant to the combined terms of article 11, no. 1, subparagraphs a) and b) of the LRATM and articles 6 and 7 of the Deontological Code.

In accordance with the provision set out in subparagraph c), of no. 1, of article 11 of the LRATM, the sole arbitral tribunal was constituted on 05 June 2018. Notified to respond, the TCA presented a reply in which it petitioned that the request for arbitral decision be ruled unfounded due to lack of legal grounds, with the disputed tax acts remaining in the legal order and the Respondent entity being absolved accordingly of the claim.

Summary of the Positions of the Parties

a. Of the Claimant:

From the petition and allegations presented by the Claimant, the following results:

The Claimant was notified of an additional Personal Income Tax assessment relating to the year 2015, for failing to declare in her income tax return (Annex G) the alienation, which occurred on 24/02/2015, of fractions BQ and B of the property registered in the cadastral matrix of the Municipal Union of ... and ... .

In summary, in said additional assessment the following values were taken as acquisition values, respectively, € 106,598.76 and € 8,540.00, and as realization values € 238,538.60 and € 8,988.35, with the acquisition date being considered as 30/07/2015.

In said assessment the amount payable of € 24,782.47 was calculated, which, deducted from the value of the initial declaration of € 1,482.73, resulted in an additional amount to be assessed of € 23,299.74.

Upon verifying the amount payable in the additional Personal Income Tax assessment, the Claimant presented a new model 3 income tax return in substitution of the previous one, wherein she corrected the omission as to the values and dates of acquisitions and realizations, as well as the declaration of intention to reinvest said realization values.

The Claimant also filed a voluntary complaint against the additional assessment in question in this proceeding, seeking its annulment.

In response to the voluntary complaint, a draft decision was prepared to the effect of granting it as to the dates and acquisition values and also as to the effects of the expression of intention to reinvest, but not as to the realization values. As a consequence of the partial granting of the voluntary complaint, the additional assessment was corrected, with the additional amount to be assessed being reduced to € 5,483.65.

The Claimant considers that the said tax act, now being challenged, continues to suffer from illegality as regards the realization value and the expenses inherent to the sale of fraction BQ.

She contends, thus, that this fraction was sold, by deed executed at the Property Registry of ..., on 24 February 2015, to the Claimant's daughter, B... and her partner.

The Claimant alleges that, despite the tax assessed value ("TAV") recorded in the property register being € 238,538.60 (two hundred and thirty-eight thousand five hundred and thirty-eight euros and sixty cents), the price that the Claimant's daughter and her partner were willing to pay was considerably higher than the normal market price at that time.

Pursuant to no. 2, of article 44 of the Personal Income Tax Code (hereinafter "PITC"), for purposes of determining the realization value in the case of onerous transmissions of real property, should prevail, when higher, the values at which the assets had been considered for purposes of assessing municipal tax on onerous property transmissions.

However, no. 5, of article 44 of the PITC, provides that what is established in no. 2 of the same provision is set aside, if proof is made that the realization value was actually lower than that provided therein, and such proof shall be made in accordance with article 139 of the Corporate Income Tax Code (hereinafter "CITC").

Nos. 3 and 4 of article 139 of the CITC provide that the request intended to make such proof must be submitted in January of the year following that in which the transmissions in question occurred.

However, the Claimant maintains the understanding that, despite not having submitted the aforementioned request, referred to in article 139 of the CITC, intended to set aside the presumption of no. 5, of article 44 of the PITC, she should not be barred from this prerogative under penalty of violation of the principles of effective judicial protection, proportionality, and contributive capacity.

The Claimant further contends for the illegality of the acts of the Respondent (decision rejecting the voluntary complaint and respective assessment) that did not consider the expenses inherent to the sale of the property, in the amount of € 102,573.36 (one hundred and two thousand five hundred and seventy-three euros and thirty-six cents), for purposes of deduction from the realization value.

She concludes by petitioning for the allowance of her arbitral claim.

b. Of the Respondent:

Notified in accordance with and for the purposes provided in article 17 of the LRATM, the TCA presented a Reply and attached the administrative file (AF), defending the legality and maintenance of the assessment which is the subject of the present request for arbitral decision.

The Respondent delimits the object of the present proceeding to the taxation of capital gains, on the basis that the Claimant failed to declare the alienation of the real property in question herein, the TCA having proceeded, in this line, to the corrections which it considered appropriate, adding an Annex G to the declaration of the taxpayer, now Claimant, in which it recorded the acquisition and realization values, leaving blank the fields corresponding to expenses, charges, and intention to reinvest.

As a consequence of the corrections made by the Respondent, assessment no. 2017... was issued in the amount of € 23,299.74 (twenty-three thousand two hundred and ninety-nine euros and seventy-four cents), against which the Claimant came to file a voluntary complaint, in the terms already explained above, having also presented a replacement declaration in which she indicates, in Annex G, the values and dates of acquisition and realization and the expenses and charges which she considers correct.

The voluntary complaint filed by the taxpayer, now Claimant, was partially granted, consequently a new official declaration was issued in which, in summary, the realization values and the expenses and charges presented by the Claimant were not considered.

The fraction BQ was sold on 24 February 2015 by the Claimant to her daughter for the amount of € 142,000.00 (one hundred and forty-two thousand euros), the TAV being € 238,538.60 (two hundred and thirty-eight thousand five hundred and thirty-eight euros and sixty cents).

Just as the Claimant did, the TCA comes to cite no. 2, of article 44 of the PITC, highlighting the fact that the Claimant herself cited and acknowledged the content of this provision in the context of the present arbitral proceeding. It further cites, the Respondent, numbers 5 and 6, of article 44 of the PITC.

Regarding what is alleged by the Claimant in article 22 of her arbitral claim, the Respondent invokes the principle that ignorance of the law avails no one, inquiring about its application to tax law and about the relevance of such application.

The TCA understands that the realization value to be attributed to the real property, in cases such as those of the present proceeding, is that which would be relevant for purposes of Property Transfer Tax, or which should be in cases where this is not due. However, and in agreement with the Claimant, it defends that what has just been written, and which flows from no. 2, of article 44 of the PITC, is a rebuttable presumption by means of contrary proof, that is, by means of proof that the realization value was actually lower than the TAV.

The TCA also asserts that in the case in question the Claimant merely attached the document evidencing the sale of the real property in question for the price of € 142,000.00, questioning whether such attachment will be sufficient to set aside the legal presumption which the TCA enjoys – subsequently asserting that it understands it is not.

It also alleges that the probative force which article 371 of the Civil Code attributes to authentic documents does not conflict with the presumption of article 44, no. 2, of the PITC, since it merely puts in question the facts attested therein as performed by the documentor or performed in his presence, but not those performed by the authority in question, in this case the Registrar.

That, because it is a rule of incidence, the presumption can only be rebuttable, whereby the law admits to the taxpayer proof that the realization value was lower than that provided therein (article 73 of the General Tax Law).

Being that proof subject to a specific procedure, regulated by article 139 of the CITC, by referral from article 44 of the PITC, in the wording given to it by Law no. 82-E/2014, of 31 December, and thus applicable to the case, since the Personal Income Tax assessment in the case sub judice concerns the year 2015.

For these reasons it considers the response to the voluntary complaint, already referred to above, to have been correct.

The other issue concerns the disregard of expenses inherent to the sale of the real property (article 51 of the PITC). That the TCA considers them not to be expenses and charges that fall within the scope of article 51 of the PITC. To this end the Respondent brings to the proceeding the Decision of the Southern Tax and Customs Court, P. 05834/12, of 10 July 2017.

The Respondent defends that they are not inseparable from the sale the expenses with the payment of debts, insofar as these expenses are not inherent to the alienation of the real property, are not integrated into it or are not intrinsically linked to it. On this, it cites the Decision of the Southern Tax and Customs Court P. 06824/13, of 14 April 2015.

It notes that, otherwise, all types of expenses would be contemplated and without any limits, provided they are remotely connected to the acquisition and alienation of real property, which would be contrary to the letter and ratio of article 51 of the PITC.

It alleges that the Constitutional Court has already pronounced on this subject in Decision no. 451/2010, published in the second series of the Official Journal of 19 January 2011. Concluding, relative to the case law emanating from that court, that it would be abusive an interpretation of article 51 of the PITC that would encompass any and all expenses incurred with the acquisition or alienation of real property, whereby it defends that the TCA services acted correctly in disregarding the expenses in question in the present proceeding.

It highlights that the Claimant did not even attach any proof of the expenses which she claims in this regard.

It ends by challenging everything that was alleged by the Claimant, insofar as it is contrary to its reply, and by requesting the dispensing of testimonial evidence, as it understands the case sub judice to be a matter of Law.

It concludes by requesting dismissal of the Claimant's claim, due to lack of legal grounds.

II. SANITATION

1. The Arbitral Tribunal is competent and was regularly constituted, in accordance with articles 2, no. 1, subparagraph a), 5 and 6, all of the LRATM.

2. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10 of the LRATM, and article 1 of Ordinance no. 112-A/2011, of 22 March.

3. No exceptions were invoked that need to be considered.

4. The proceeding does not suffer from vices that would invalidate it.

III. GROUNDS

III.1. MATTER OF FACT

The factual matter relevant to the understanding and decision of the case, after critical examination of the documentary evidence attached to the initial petition, of the administrative file, of the reply and of the allegations of the Claimant and the Respondent, is established as follows:

A – Established Facts

1. The Claimant sold, on 24 February 2015, fraction BQ, corresponding to the sixth, seventh and eighth floors, intended for residential use in triplex, with exclusive right of use of the terrace installed on the eighth floor, of the urban property, constituted in horizontal property ownership, named "Building ...", located at the corner of Avenue ... with Street ..., parish of ... and ..., municipality of ..., described under number .../... - ..., of the Property Registry of ...;

2. The buyers of fraction BQ, better identified above, were the Claimant's daughter, B... and her partner, C...;

3. The sale was executed by public deed of purchase and sale, loan with mortgage and guarantee, at the Property Registry of ..., the declared price being € 142,000.00 (one hundred and forty-two thousand euros).

4. The tax assessed value ("TAV") of the real property in question was € 238,538.60 (two hundred and thirty-eight thousand five hundred and thirty-eight euros and sixty cents);

5. The Claimant did not declare in her income tax return the alienation, insofar as relevant herein, of fraction BQ;

6. Consequently, the TCA proceeded to correct that declaration through an official declaration, having added Annex G, in which the onerous alienation of the fractions in question is declared, with the acquisition and realization values which it considered correct, not having completed the fields relating to expenses, charges, and reinvestment;

7. In the official declaration it was considered, relative to fraction BQ, as acquisition value, the amount of € 106,598.76 (one hundred and six thousand five hundred and ninety-eight euros and seventy-six cents) and as realization value the sum of € 238,538.60 (two hundred and thirty-eight thousand five hundred and thirty-eight euros and sixty cents);

8. The Claimant filed a voluntary complaint against the official assessment issued by the TCA, alleging, in particular, the incorrectness of the acquisition values, of the realization values and the fact that the expenses inherent to the sale were not considered;

9. She also presented, the Claimant, a substitute income tax return, in which she recorded the values which she considered correct, as well as the intention to reinvest the proceeds of the sale;

10. The voluntary complaint filed by the Claimant was partially granted, the TCA not accepting the realization values and the expenses inherent to the sale which the Claimant declared;

11. On 24 February 2015, the Claimant's daughter issued, to the order of her mother, a cheque in the amount of € 48,426.64 (forty-eight thousand four hundred and twenty-six euros and sixty-four cents);

B – Unestablished Facts

It was not established that the buyers of the fraction paid debts of the Claimant which burdened the property, in the amount of € 102,573.36 (one hundred and two thousand five hundred and seventy-three euros and thirty-six cents).

III.2. MOTIVATION

Regarding the matter of fact, the Tribunal does not have the duty to pronounce on all the matters alleged, but rather has the duty to select that which is relevant to the decision, taking into account the cause (or causes) of action that substantiates the claim presented by the Claimant.

As regards the assessment of evidence, the Tribunal formulates its judgment, in view of the principle of free assessment, from the examination and evaluation it makes of the means of evidence brought to the proceeding and in accordance with its experience.

Thus the conviction of the Tribunal was based on the set of documents attached to the proceeding as well as on the positions taken by the Claimant and the Respondent.

III.3. ON THE LAW

1. The question to be decided:

Taking the factuality established herein, as well as the positions taken by the parties, the questions that are to be decided here, in summary, are two:

Whether it will be admissible, as the Claimant alleges, for her to make use of the procedure provided in article 139 of the CITC, thus being able to set aside the rebuttable presumption provided in no. 2, of article 44 of the PITC, despite the time limit for doing so being exhausted; and whether,

The expenses and charges presented by the Claimant should add to the acquisition value, in accordance with article 51 of the PITC.

Regarding the first legal question which falls to this arbitral tribunal to decide, the Claimant comes to defend that, despite not having timely initiated the procedure provided in article 139 of the CITC, intended to set aside the presumption provided in article 44, no. 2, of the PITC, she should be granted now, in the context of challenging the Personal Income Tax assessment, an opportunity to do so, since she was unaware of the presumption established in article 44, no. 2, of the PITC and, consequently, of the need to resort to the procedure provided in article 139 of the CITC.

Pursuant to the said provisions, it is clear that when, as in the case sub judice, a taxpayer proceeds to alienate a real property below the TAV, this is taken, still as a presumption, as the realization value. This shall only not be the case if and when, as provided in no. 5, of the cited article 44 of the PITC, and as, moreover, results from the general rule contained in article 73 of the General Tax Law (hereinafter simply "GTL"), proof is made that the realization value was actually lower than that.

This proof follows the regime provided in article 139 of the CITC, by referral from article 44, no. 6 of the PITC, with that article establishing that the said request for setting aside the presumption must be delivered in January of the year following that in which the sale occurred (article 139, no. 3 of the CITC) and that the challenge to the tax assessment resulting from the use of that presumption always depends on the prior presentation of that request (article 139, no. 7 of the CITC).

Thus, the law establishes a certain time limit and a specific procedure for setting aside the presumption contained in article 44 of the PITC, which the Claimant did not observe, with her right (to set aside the presumption) thus being extinguished.

And by establishing this requirement, the law, ignorance of the same cannot be alleged for its non-compliance, taking into account the principle enshrined in article 6 of the Civil Code, according to which "Ignorance or misinterpretation of the law does not justify failure to comply with it nor exempts persons from the sanctions established therein," a principle fully applicable to tax law.

Even if one were to admit as possible the setting aside of the presumption referred to above at this stage, it must still be stated that the Claimant attaches no element of proof capable of proving what she alleges that the counterparty for the alienation of the real property in question was, in fact, lower than the TAV.

It is true that she attaches the deed of purchase and sale underlying the transaction, an authentic document (article 369 of the Civil Code), which makes full proof of the facts described therein as performed by the documentor or performed in his presence (article 371 of the Civil Code). However, the authentic document does not attest to the truthfulness of the declarations of the parties, only that those declarations existed (on this see the Decision of the Court of Appeal of Coimbra, P. 8470/15.6T8CBR.C1).

Passing to the second question which must be decided, the Claimant objects to the fact that the TCA did not consider the expenses inherent to the sale of the real property, alleging that, in order for her to proceed with the sale of the real property it was necessary to pay debts which burdened the real property.

It is understood, also in this regard, that the Claimant is not correct.

In the first place, the Claimant does not even specify what necessary expenses, actually incurred and inherent to the alienation, she is referring to in the present proceeding. She does not specify in what way they burdened the real property in question, who would be its creditors and, most importantly, she does not attach any element of proof that the debts in question were in fact satisfied by the buyers of the real property. Being debts that burdened the real property, it is presented as unlikely that documents do not exist (for example, bank statements, cheques or certificates) that prove the situation as configured by the Claimant.

Note that it would be the obligation of the Claimant to present the documents evidencing the situation which she alleges, which she failed to do, neither in the context of the voluntary complaint, nor in the present proceeding.

Thus, for this reason, this claim of the Claimant cannot be considered as well-founded.

Even if this were not the case, national case law on this subject points in the direction of the thesis here supported by the TCA, that is, that expenses which burdened the real property cannot be included within the scope of application of article 51 of the PITC. In fact, as stated in the Decision of the Southern Tax and Customs Court, in P. 05834/12, brought to bear by the TCA: "It is not enough, therefore, that the expenses be connected to the obtaining of income, it is necessary that they be inseparable from it. According to the most recent doctrine, examples of 'necessary and actually incurred expenses, inherent to acquisition and alienation' are registrations and public deeds – read Rui Duarte Morais in On the PIT, 2nd Edition, page 141 and Paula Rosado Pereira in Studies on the PIT, Capital Income and Capital Gains, IDEFF Notebooks, no. 2.

One may also consider real estate brokerage expenses, more specifically the brokerage commission, as necessary expenses and inherent to the sale of real property for purposes of no. 1 subparagraph a) of art. 51 of the PITC."

Following this understanding, the expenses and charges, in order to be considered for purposes of determining capital gains, must be objectively necessary to the sale, and not observed from a subjective perspective, according to which, in the specific case, in that specific transaction, it was necessary to incur certain expenses for the sale to be able to occur.

The position just set forth is not an innovation of the Tribunal in question, with several other decisions being found in this sense (see, for example, Decision of the Southern Tax and Customs Court, P. 06824/13 and P. 715/11.8BEALM, of the same Court, and also of the SAT, P. 0585/09).

In fact, relative to the claims of the Claimant, in the specific case, it is pertinent to cite the summary of the Decision of the Southern Tax and Customs Court, P. 05182/11, which reads:

"I. (…)

II. One cannot consider as 'necessary expense inherent to alienation' the expenses incurred with the extinguishment and payment of liens, since these are not deductible in determining taxable income (capital gains) in PIT, insofar as these expenses were only necessary to free the assets from the charges that rested upon them." (emphasis ours).

Thus, in view of everything set forth above, we are necessarily forced to conclude that the Claimant is not correct, and the expenses and charges alleged by her should not be considered for purposes of determining capital gains.

IV. DECISION

On the basis of the facts and legal grounds set forth above and, pursuant to article 2 of the LRATM, the Arbitral Tribunal decides:

I) To rule unfounded the request for arbitral decision and, in consequence, to maintain the additional Personal Income Tax assessment no. 2017..., corrected through the partial granting of the voluntary complaint, notified to the Claimant by letter no. 2017..., of 05 December 2017, relating to the year 2015, in the amount of € 5,483.65 (five thousand four hundred and eighty-three euros and sixty-five cents);

II) To condemn the Claimant to payment of all costs, given the unfoundedness of the claim.

VALUE OF THE PROCEEDING: In accordance with the provision set out in article 306, nos. 1 and 2, of the Code of Civil Procedure, 97-A, no. 1, subparagraph a), of the Code of Procedure for Tax Proceedings and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at € 5,483.65 (five thousand four hundred and eighty-three euros and sixty-five cents).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 612.00 (six hundred and twelve euros).

Lisbon, 12 October 2018

The Arbitrator,

José Calejo Guerra

Text prepared on computer, in accordance with no. 5 of article 131 of the Code of Civil Procedure, applicable by referral from subparagraph e) of no. 1 of article 29 of Decree-Law 10/2011, of 20 January.

The wording of this decision is governed by the spelling agreement of 1990.

Frequently Asked Questions

Automatically Created

How does the Portuguese Tax Authority correct the realization value for real estate capital gains (mais-valias) in IRS?
The Portuguese Tax Authority corrects real estate capital gains realization values by applying Article 44(2) of the PITC, which establishes that the realization value shall be the higher of either the declared sale price or the tax assessed value (valor patrimonial tributário) used for calculating IMT (municipal property transfer tax). When taxpayers fail to declare property sales or declare incorrect values, the TCA issues an additional assessment using the VPT from the property registry. However, Article 44(5) PITC allows taxpayers to rebut this presumption by proving the actual realization value was lower, following the procedure in Article 139 of the CITC, which requires filing a specific request in January of the year following the transaction.
Can a taxpayer submit a substitute IRS Model 3 declaration to correct omissions in reporting property sales?
Yes, taxpayers can submit a substitute IRS Model 3 declaration to correct omissions in reporting property sales. In this case, upon receiving the additional assessment notice, the taxpayer filed a replacement declaration including Annex G with corrected acquisition and realization dates, values, and expenses, as well as declaring the intention to reinvest proceeds (reinvestimento). While the Tax Authority must consider substitute declarations, they retain discretion to accept or reject the corrected values. The substitute declaration does not automatically invalidate the additional assessment; taxpayers should also file a formal complaint (reclamação graciosa) to contest the assessment's legality and request its revision or annulment based on the corrected information.
What happens when property acquisition and realization values are incorrectly declared for IRS capital gains purposes?
When property acquisition and realization values are incorrectly declared for IRS capital gains purposes, the Tax Authority conducts an official correction and issues an additional assessment (liquidação adicional). The TCA adds or corrects Annex G to the taxpayer's declaration, inserting what it considers the proper values based on available records, particularly the tax assessed value from property registries. Taxpayers receive notification of the additional tax due, calculated on corrected capital gains. They have the right to file a voluntary complaint (reclamação graciosa) within a specific timeframe, which may result in partial or total revision of the assessment. If the complaint is partially granted, as occurred here, the TCA issues a corrected assessment reflecting accepted changes while maintaining disputed elements, resulting in a reduced but not eliminated additional tax liability.
How are compensatory interest (juros compensatórios) calculated on additional IRS tax assessments for real estate transactions?
Compensatory interest (juros compensatórios) on additional IRS assessments for real estate transactions are calculated pursuant to Article 35 of the LGT (General Tax Law). Interest accrues from the date when the tax should have been paid (typically the original filing deadline) until the date of the additional assessment's issuance. The interest rate is legally established and updated periodically. In this case, compensatory interest was charged on the additional assessment amount because the taxpayer failed to declare the property sales in the original return, creating a delayed payment situation. The interest compensates the State for the delayed tax collection. When an additional assessment is subsequently reduced following a complaint, the compensatory interest is recalculated proportionally on the revised tax amount.
What is the procedure for filing a complaint (reclamação) against an additional IRS assessment related to property capital gains in Portugal?
The procedure for filing a complaint (reclamação graciosa) against an additional IRS assessment related to property capital gains involves submitting a written complaint to the Tax Authority within 120 days of notification of the assessment, pursuant to Article 70 of the CPPT (Tax Procedure Code). The complaint must specify the grounds for contesting the assessment's legality, supported by relevant documentation. The TCA reviews the complaint and issues a draft decision (projecto de decisão) indicating which aspects will be granted or rejected, allowing the taxpayer to respond. A final decision is then issued, which may totally or partially grant or reject the complaint. If partially granted, as in this case, a corrected assessment is issued reflecting accepted corrections. If the taxpayer remains dissatisfied, they may pursue arbitration through CAAD or judicial appeal to challenge the remaining disputed elements.