Summary
Full Decision
TAX ARBITRATION JURISPRUDENCE
Case No. 143/2019-T
Decision Date: 2019-09-30
Tax: IRS (Personal Income Tax)
Claim Value: €37,186.96
Subject Matter: IRS - Liquidation and division of company. Capital income. Statutory limitation of right to assess.
ARBITRAL DECISION (see complete version in PDF)
I. REPORT
A... Lda., an extinct company formerly headquartered at Rua ..., no. ..., ..., ...-... Lisbon, hereinafter designated as "Claimant," requested the establishment of an Arbitral Tribunal, pursuant to articles 2, no. 1, paragraph a) and 10 et seq. of the Legal Framework for Tax Arbitration ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January, in conjunction with articles 99 and paragraph e) of no. 1 of article 102 of the Code of Tax Procedure and Process ("CPPT"), with the Tax and Customs Authority ("AT") as Respondent.
The Claimant submitted a request for arbitral ruling against the decision handed down on 26 November 2018 by the Director of Finance of Lisbon, which dismissed the administrative review application no. ...2018..., which in turn was based on the assessment of Source Tax Withholdings on Personal Income Tax ("IRS") no. 2017..., relating to the year 2013, in the amount of €31,486.60 plus €5,700.36 in compensatory interest, totaling €37,186.96 (thirty-seven thousand, one hundred eighty-six euros and ninety-six cents), seeking, in summary, that the Arbitral Tribunal annul the decision dismissing the aforementioned Administrative Review procedure and, consequently, the assessment of source tax withholdings on Personal Income Tax.
To support its claim, the Claimant alleges, in summary, that:
a) On 31 December 2012, the General Assembly of the Claimant decided to dissolve and liquidate the company.
b) Since there were no debts at that date, the assets of the company were immediately divided.
c) The registration of dissolution and simultaneous liquidation was effectuated on 28 January 2013, therefore within the two-month period provided for in no. 2 of article 15 of the Commercial Registry Code.
d) On 17 October 2017, following a tax inspection conducted for the year 2013, the Claimant was notified of the Final Inspection Report concluding an alleged failure to remit source tax withholding on IRS on the values attributed to the shareholders as a result of the division, in the amount of €31,486.60.
e) However, the Claimant understands that the conclusion of the Services is illegal.
f) To support this assessment of illegality, the Claimant alleges that, under paragraph b) of no. 1 of article 141 of the Commercial Companies Code (CSC), a commercial company may be dissolved by resolution of the shareholders.
g) The dissolution of a company by resolution of the shareholders is not subject to any special form, requiring, however, the majority required for amendments to the bylaws, namely a three-fourths majority.
h) In the case at hand and as stated above, the resolution to dissolve the Claimant was adopted on 31 December 2012 by the two sole shareholders existing at that date.
i) Thus, the condition regarding the number of shareholders necessary to effect such resolution is satisfied, with the effects of dissolution being immediate.
j) Even in the specific case where the company has no debts, which corresponds to the situation in question, the shareholders may, under article 147 of the CSC, proceed immediately to the division of company assets.
k) At the date of dissolution, the Claimant had no debts to pay, and its only assets consisted solely of a bank deposit and debit balances in the shareholders' account.
l) Apart from the shareholders' debit balance, which was not a divisible asset at the date of dissolution, the remaining assets consisted of a bank deposit in the amount of €10,417.22, which was immediately distributed to the shareholders on the date of dissolution/division, that is, on 31 December 2012.
m) Thus, and as a result of immediate division, there was no need to enter into a liquidation period.
n) In the trial balance for results determination (month 13), the movements are evident that made it possible to settle all accounts and proceed to the immediate division of company assets.
o) Similarly, from the analysis of the trial balance as of 31 December 2012, after division, it follows that it no longer shows any account balances, thus being "at zero."
p) All movements of determination and division occurred factually only in 2012.
q) Before determination of the liquidation result, the Claimant's accounting showed a debit balance in the shareholders' account in the amount of €107,099.06.
r) That amount resulted from several fund withdrawal movements, which were made by the shareholders over the years.
s) Although these withdrawals are presumed to have been made as profits or advances on profits, their respective taxation should have occurred at the date the income was placed at their disposal, under paragraph 2) of no. 3 of article 7 of the IRS Code, combined with paragraph h) of no. 2 of article 5 of the same statute.
t) In this sense, the tax event occurred over the years, with the withdrawal of funds by the shareholders, with the last movement occurring on 31/12/2012.
u) Thus, at the date of dissolution of the company, that is, on 31 December 2012, nothing more remained to be divided among the shareholders, except for a bank deposit of €10,417.22, which was effectively distributed on that date.
v) The AT sought to set aside the application of the aforementioned legal norms without, however, providing minimal justification under which legal provision it does so, thereby incurring the vice of illegality of the decision due to lack of accessible reasoning (cf. article 77 of the LGT and 37 of the CPPT).
w) Under article 45 of the LGT, the right to assess taxes is extinguished if the assessment is not validly notified to the taxpayer within four years, unless the law sets another period.
x) Furthermore, under that article, in the case of periodic taxes (e.g., IRS), the period is counted from the end of the year in which the tax event occurred.
y) In the case at hand, the Assessment of Source Tax Withholding on IRS no. 2017... was issued on 30 October 2017.
z) Considering that the last tax event occurred on 31 December 2012, with the division of the bank deposit value, it is not understood how the AT can, on 31 October 2017, attribute to it any failure to remit source tax withholding on IRS.
aa) Even if that value (€10,417.22), deducted from the realized capital (€5,000), could be subject to source tax withholding, the truth is that the period of limitation for assessment also applies here, such that no amount is currently due.
The request for establishment of the Arbitral Tribunal was accepted by the President of CAAD and followed its normal procedure, specifically with notification to the Tax and Customs Authority ("AT").
The Deontological Council designated the undersigned as sole arbitrator of the Arbitral Tribunal, who communicated acceptance of the assignment within the applicable period, pursuant to articles 6, no. 1 and 11, no. 1, paragraph a), both of the RJAT, and article 4, no. 2 of the CAAD Deontological Code.
The parties, duly notified, did not express their will to refuse the designation, pursuant to the provisions of the CAAD Deontological Code, and the Arbitral Tribunal was constituted on 14 May 2019, in accordance with paragraph c) of no. 1 and no. 8 of article 11 of the RJAT.
The Respondent submitted its Answer and attached the administrative file. In the Answer presented, the Respondent presented a defense by contestation as follows, summarized as:
a) The Claimant bases its claim on the argument that it ceased its activities on 31/12/2012 because, on that date, through the resolution recorded in minutes no. 36, dissolution and division occurred.
b) However, under the provisions of paragraph a) of no. 5 of article 8 of the Corporate Income Tax Code (IRC), cessation of activity, for entities with headquarters or effective management in Portuguese territory, occurs on the date of the closure of liquidation.
c) Underlying the legal concept of "cessation," contained in the aforementioned legal provision, is the principle of actual cessation of obtaining income or the possibility of obtaining it, by virtue of the extinction of the taxpayer.
d) And this actual cessation occurs with the registration of the closure of liquidation, a registral act determining that the company is considered extinct, under no. 2 of article 160 of the CSC.
e) In the case at hand, the Claimant requested the registration of the closure of liquidation at the Commercial Registry Office on 28/01/2013, thus being the moment from which the company is considered extinct.
f) Under IRC, the taxable profit of companies in liquidation is determined with reference to the entire liquidation period, observing the provisions of no. 2 of article 79 of the IRC Code:
(i) Closure of accounts with reference to the date of dissolution, corresponding to the period from the beginning of the taxation period in which dissolution occurred until that date;
(ii) During the liquidation period and until the end of the fiscal year immediately before its closure; and
(iii) In the fiscal year in which dissolution occurs, the taxable profit must be determined separately, taking into account the period between the start of the fiscal year and the date of dissolution and the period between dissolution and the end of the fiscal year.
g) The Claimant confuses the dissolution of the company with its cessation/extinction, which, for IRC purposes, is distinct: for purposes of this tax, and regarding the Claimant, cessation occurs only on the date of the closure of liquidation, which is necessarily registered at the Commercial Registry Office.
h) The Claimant closed its accounts with reference to the date of dissolution, determining a net result for the period—from the start of the fiscal year (01/01/2012) to the date of dissolution (31/12/2012).
i) It is certain that the Claimant presented no accounting movements in the fiscal year 2013 that could have generated a net result, positive or negative, in that fiscal year.
j) However, for IRC taxation purposes, and as explained above, the taxable profit of companies in liquidation is determined with reference to the entire liquidation period.
k) At the date of dissolution, the Balance Sheet was as follows:
[Balance sheet details omitted for brevity]
l) Through analysis of the values contained in the Equity (Assets–Liabilities), specifically the retained earnings account, the AT observed that the Claimant presented, in fiscal year 2012, a final balance in the amount of €18,908.31.
m) As for the net result determined in the same fiscal year (€4,766.24), it was resolved in the shareholders' meeting of 28/03/2013 to apply the net results of the fiscal year to retained earnings, as indicated in schedule 07 of Appendix A of the IES.
n) Thus, the opening balance of account 56–Retained Earnings for the year 2013 came to record the total amount of €23,674.55.
o) Minutes no. 38 say nothing regarding the distribution of results, wherefore the Claimant should have presented in the Balance Sheet for the 2013 period an Equity (Assets–Liabilities) in the total amount of €117,452.15, constituted as follows:
(i) Realized capital: €5,000.01;
(ii) Legal reserves: €5,909.07;
(iii) Other reserves: €82,868.52;
(iv) Retained earnings: €23,674.55.
p) The Claimant did not properly comply with its accounting obligations insofar as Appendix A of the IES for the fiscal year 2013 should not have been completed at zero.
q) Instead, the values should have been entered in appendix A of that declaration reflecting the liquidation operations immediately prior to division, that is, from the last balance sheet presented, and should contain all assets comprising the division schedule and the equity accounts.
r) Indeed, Appendix A of the IES for fiscal year 2012 presents final values, which means that liquidation of the company did not occur in that year, with no reference in the "comments" to liquidation and division of the company having occurred.
s) To which is added the fact, not insignificant in sustaining the disputed assessment, that the date of approval of accounts for fiscal year 2013 was 15/01/2013, while approval of accounts for fiscal year 2012 occurred later, on 28/03/2013.
t) Under no. 1 of article 81 of the IRC Code, the result of division "is included for taxation purposes of the shareholders, in the taxation period in which the value attributed to each of them as a result of division is placed at their disposal, less the acquisition cost of the corresponding shares," this difference, if positive, being considered as income from capital investment up to the limit of the difference between the value attributed and what, in view of the accounting of the liquidated company, corresponds to effectively made contributions to capital realization, under paragraph a) of no. 2 of article 81 of the IRC Code.
u) In the specific case of the Claimant, given that the value attributed to the shareholders as a result of division exceeds the acquisition value of the corresponding shares, taxation occurs in the individual sphere of the shareholders.
v) Under paragraph i) of no. 2 of article 5 of the IRS Code, the difference shown in the amount of €112,452.14 is subject to IRS, at the moment it is placed at their disposal, as provided in no. 2 of paragraph a) of no. 3 of article 7 of the IRS Code, and it falls to the Claimant, in accordance with the provisions of articles 98 and 101 of the same statute, to effect the respective withholding—which it did not do.
w) As a result of the division, the values attributed to the shareholders are thus subject to source tax withholding at the rate of 28%, under paragraph c) of no. 1 of article 71 of the IRS Code.
x) The Claimant should, therefore, have submitted the source tax withholding return on IRS relating to these capital income in reference to January 2013, in the total amount of tax of €31,486.60, as shown in the tax calculation in the inspection report and sustained in the decision that fell on the administrative review.
y) Finally, it understands that the Claimant also has no reason regarding what is alleged regarding the matter of the expiration of the right to assess, because, contrary to what the Claimant contends, the cessation of the company only occurred in fiscal year 2013, and the assessment could be validly notified by 31/12/2017—as it was.
z) It concludes by arguing for the dismissal of the arbitral ruling requested by the Claimant and, consequently, for the maintenance of the tax acts contested.
On 19/06/2019, the Arbitral Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT. In the same decision, the parties were granted a simultaneous period of 20 days to submit Arguments.
In this decision, the Parties were also notified of the deadline for rendering the decision, which was set for 30 September 2019.
After the deadline expired, no Arguments were submitted by either party.
II. PROCEDURAL ISSUES
The Tribunal was regularly constituted, the request for arbitral ruling is timely, as it was submitted within the period provided for in paragraph a), of no. 1, of article 10 of the RJAT.
The parties have standing and legal capacity, have legitimacy, and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from nullities.
III. REASONING
A. FACTUAL MATTERS
§.1. Established Facts
a) The Claimant's corporate purpose was the provision of medical radiography services and all activities related thereto, including research and auxiliary diagnostic means—cf. Agreement.
b) The company's capital was divided into two shares of nominal value of €2,500 each, subscribed by B... and by C...—cf. Agreement.
c) On 31 December 2012, the shareholders resolved in General Assembly to dissolve and liquidate the company with the following grounds: "(...) since it ceased exercising its activity, having no assets nor liabilities (...)"—cf. document no. 4 attached to the request for Establishment of Arbitral Tribunal.
d) Since there were no debts at that date, liquidation was immediately carried out—cf. Agreement.
e) The dissolution of the company was registered at the Commercial Registry Office on 28 January 2013—cf. Agreement.
f) The Claimant closed its accounts with reference to the date of dissolution (31/12/2012)—cf. Agreement and document no. 4 attached to the request for Establishment of Arbitral Tribunal.
g) At the date of dissolution, the Claimant's assets consisted of:
- Shareholders/shareholders: €107,099.06;
- State and other public entities: €505.81;
- Cash and bank deposits: €10,417.22
h) According to the Claimant's accounting records, account #268229100001 was moved, by debit, for the last time on 31 December 2012—cf. document no. 9 attached to the request for establishment of Arbitral Tribunal;
i) The Claimant presented no accounting movements in fiscal year 2013—cf. Agreement.
j) On 17 October 2017, the Claimant was notified of the Final Inspection Report which covered fiscal year 2013 and in which the Tax Inspection Services (SIT) concluded that there was a failure to remit source tax withholding on IRS on the values attributed to the shareholders as a result of the division in the amount of €31,486.60—cf. Document no. 5 attached to the request for Establishment of Arbitral Tribunal.
k) According to that Report:
[Report details omitted for brevity]
l) And it continues:
[Report details omitted for brevity]
m) And concludes:
[Report details omitted for brevity]
n) As a result of the inspection, the Respondent issued, on 30/10/2017, the IRS assessment (Source Tax Withholdings) and compensatory interest no. 2017... for the year 2013;
o) On 10 April 2018, the Claimant submitted an Administrative Review of said assessment—cf. A.F.
p) By decision of the Director of Finance of Lisbon dated 26 November 2018, the mentioned Administrative Review was dismissed—cf. document no. 1 attached to the request for Establishment of Arbitral Tribunal.
q) To support the dismissal decision, it is alleged, in summary, that:
[Decision grounds omitted for brevity]
r) On 1 March 2019, the Claimant submitted the request for Establishment of the Arbitral Tribunal—check the CAAD procedural management system.
§.2. Unproven Facts
With relevance for the appreciation and decision of the case, there are no facts that were not proven.
§.3. Reasoning on the matter of fact
Regarding the matter of fact, the Tribunal need not rule on everything alleged by the parties, falling to it, moreover, the duty to select the facts that matter to the decision and distinguish established fact from unproven fact [cf. no. 2 of article 123 of the CPPT and no. 3 of article 607 of the Code of Civil Procedure ("CPC"), applicable by virtue of article 29, no. 1, paragraphs a) and e), of the RJAT]. Thus, the facts pertinent to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (cf. previous article 511, no. 1, of the CPC, corresponding to the current article 596, applicable by virtue of article 29, no. 1, paragraph e), of the RJAT). Therefore, considering the positions assumed by the parties, in light of no. 7 of article 110 of the CPPT, the documentary evidence and the A.F. attached to the file, the facts enumerated above were considered established.
No allegations consisting of strictly conclusive statements, susceptible to proof, and whose truthfulness must be assessed in relation to the concrete matter of fact consolidated above, were considered proven or unproven.
B. LEGAL MATTERS
§.1. Definition of Issues to be Decided
In light of what is set forth in the preceding sections, the main issue to be decided is whether the assessment in question suffers, or not, from the defects imputed to it by the Claimant and, in particular:
(i) Whether the decision contested suffers, or not, from a formal defect due to lack of reasoning (§.43 of the request for establishment of Arbitral Tribunal);
(ii) Whether, when the IRS assessment (source tax withholdings) that constitutes the mediate object of the present proceedings was notified to the Claimant, the statutory limitation period provided for in article 45 of the LGT had already elapsed or not.
In evaluating the defects imputed to the act for which annulment is sought, one should begin with "defects whose substantiation determines, according to the prudent judgment of the judge, more stable or effective protection of the interests offended" [article 124, no. 2, of the CPPT, applicable by virtue of the provisions of article 29, no. 1, paragraph a), of the RJAT], since "tax arbitration aims to strengthen effective and actual protection of the rights and legally protected interests of taxpayers" (article 124, no. 3, of Law no. 3-B/2010, of 28 April).
In this sense, the defect of failure to notify the assessment in question within the limitation period will be evaluated first, the substantiation of which precludes the renewal of the assessment act.
§.2. Appreciation
Let us begin by analyzing the matter from the perspective of Corporate Law. In this context, the dissolution decided by the Claimant's shareholders may be qualified as an "immediate dissolution" which materializes, precisely, a manifestation of will to set in motion the extinction of the company (dissolving intent).
In such cases, the company is considered dissolved from the date of the resolution, as stated in no. 4 of article 142 of the Commercial Companies Code ("CSC").
On the other hand, under no. 1 of article 146 of the CSC, a dissolved company enters immediate liquidation and, under no. 1 of article 147, if the company has no debts, the shareholders may proceed immediately to the division of company assets. This serves to abbreviate the procedure leading to extinction of the company whenever there is no liability to liquidate. As Raul Ventura states, "the law envisioned the natural situation where, there being no debts and the shareholders agreeing on division of assets, both division and extinction of the company would succeed not only logically but temporally, without delay."
In practical terms, liquidation involves the settlement of all legal situations related to the company in liquidation, the resolution of pending problems that may involve it, the pecuniary realization, if appropriate, of its assets, the payment of all debts, and the determination of the final balance, to be distributed among the shareholders.
In division is thus involved the act of performance of the obligation resulting from the company contract, of attributing to each shareholder a determined part of the liquidation balance.
Finally, and with relevance for the present proceedings, no. 2 of article 160 of the CSC provides that, as a legal consequence of registration of the closure of liquidation, the extinction of the company occurs. That is, the registration has here a "constitutive effect," not merely signifying a condition of enforceability of the extinction against third parties.
Subsuming the legal framework cited to the case at hand, the following decision-making vectors may already be affirmed:
-
The Claimant is considered dissolved on 31/12/2012 (date of resolution);
-
Liquidation and division occurred at the same moment;
-
The company was only extinguished on 28/01/2013, the date of registration of liquidation.
It should be said, however, and already, that the object of division is not accounting balances but rather, preferentially, liquidity. This results from the combination of no. 3 of article 152 with no. 2 of article 153 and no. 1 of article 156, all of the CSC. Indeed, "implicitly, the law gives priority to division in money, establishing it as a supplementary regime—which seems reasonable if we consider that money is the only good that places all interested parties on equal footing and that the law can force them to accept."
Let it finally be said that the corporate legal framework set out above, which, it should be stressed, assumes an imperative nature, is not affected by compliance or non-compliance with declarative obligations imposed by tax law.
Let us now examine the situation at hand from the perspective of Tax Law.
In the present proceedings, and according to the Claimant's accounting records which, note, benefit from the presumption of accuracy under no. 1 of article 75 of the General Tax Law, a very significant portion of the company's assets existing at the date of the company's dissolution (specifically, €107,099.06) consisted of a credit of the company against the respective shareholders.
The remaining assets consisted of bank deposits and credits against the State and other public entities.
As is evident from the evidence produced in the proceedings, the credit against the shareholders was constructed over the years (according to document no. 9 attached to the request for establishment of Arbitral Tribunal, the balance carried forward from prior fiscal years to fiscal year 2012 was €103,000). In practice, these are transfers of assets from the company to the shareholders.
It is necessary to analyze what legal-tax framework is given by law to this reality at the date of the facts, as well as to the values attributed to the shareholders as a result of the division.
Thus, under no. 1 of article 5 of the IRS Code, "capital income is considered to be the fruits and other economic advantages, whatever their nature or denomination, whether monetary or in kind, derived, directly or indirectly, from patrimonial elements, assets, rights or legal situations of a moveable nature, as well as from their respective modification, transfer or cessation, with the exception of gains and other income taxed in other categories."
On the other hand, under paragraph h) of no. 2 of the same provision, in the version in force at the date of the facts:
"2 - The fruits and economic advantages referred to in the preceding number include, specifically:
h) The profits of entities subject to IRC placed at the disposal of their respective associates or holders, including advances on profits, except those referred to in article 20;
i) The value attributed to associates as a result of division which, under article 81 of the IRC Code, is considered capital income, as well as the value attributed to associates in the amortization of share interests without capital reduction."
Additionally, under no. 4 of article 6 of the same legal compendium:
"4 - Entries in their favor, in any current accounts of shareholders, recorded in commercial or civil companies in commercial form, when not resulting from loans, the provision of work or the exercise of corporate offices, are presumed to have been made as profits or advances on profits."
As Doctrine has stated, "with this norm, a supplementary qualification is made of sums whose cause is not expressed in the accounts in question. (…) What the law, with that presumption, sought to resolve was the qualification of recorded sums whose 'legal cause' was not expressly declared."
Here arrived, it is necessary to ascertain when the tax event occurred—understood here as "the typical fact provided for to which the law attaches a duty to pay"—regarding each of the situations being analyzed.
The answer is given by the legislator in article 7 of the IRS Code, under which:
"1 - The income referred to in article 5 is subject to taxation from the moment it is earned, is presumed earned, is placed at the disposal of its holder, is paid, or from the date of determination of the respective amount, as appropriate.
(…)
3 - For purposes of the provisions of no. 1, account is taken of:
a) Regarding no. 2 of article 5:
- Placement at the disposal, for income referred to in paragraphs h), i), j), l) and r), as well as certificates of segregation;"
Additionally, these income items were, under paragraph c), of no. 1, of article 71 of the IRS Code (in the version in force at the date of the facts) subject to a liberatory rate of 28%.
It follows thus, with meridian clarity, from the applicable legal regime, that the taxable facts in question occurred when the respective values were placed at the disposal of the shareholders. It was, therefore, at that moment that the source tax withholding should have occurred.
As is known, tax norms that contemplate the tax event are norms of real incidence, which simultaneously define its objective elements. It is with the occurrence of the tax event and not at any other moment that the tax obligation arises.
In this sense, the temporal dislocation of the taxable fact is not acceptable as it constitutes a violation of the principle of legality constitutionally protected, which assures, among others, "the predictability and calculability of the tax obligation and its essential elements (…) and thus also legal certainty."
Let us now examine whether the limitation of the right to assess the tax has occurred, as the Claimant alleges. The answer, which we advance hereby, is affirmative.
For the case at hand, the relevant provisions are nos. 1 and 4 of article 45 of the LGT, which stated the following:
Under the terms of the first cited provision:
"1. The right to assess taxes is extinguished if the assessment is not validly notified to the taxpayer within four years, when the law does not set another."
On the other hand, under no. 4:
"4. The limitation period is counted, for periodic taxes, from the end of the year in which the tax event occurred and, for taxes of single occurrence, from the date on which the tax event occurred, except for value added tax and taxes on income when taxation is effected by source withholding as a final tax, in which case that period is counted from the beginning of the civil year following that in which the taxability occurred, respectively, the exigibility of the tax or the tax event"—wording given by Law no. 55-B/2004, of 30 December.
In the case of the present proceedings, and as stands out from document no. 9 attached to the file with the request for Establishment of Arbitral Tribunal, the last movement reflected in account #268 dates to 31/12/2012, with €103,000 of the total value recorded therein being attributable to prior fiscal years.
Now, by application of the rules set forth in the cited no. 4 of article 45 of the LGT, it follows that the beginning of the calculation of the limitation period occurred on 01/01/2013, and the last day on 31/12/2016.
The same applies to the bank deposits. Although the file does not contain elements permitting conclusion regarding the exact date of their placement at the disposal of the shareholders, the Claimant's accounting records demonstrate that, if not earlier, this occurred on 31/12/2012, the date on which the accounts were actually settled.
Having the assessment in question been issued on 30/10/2017, there is no doubt that, on that date, the Respondent could no longer validly proceed to assess the tax.
Likewise, the Respondent errs in considering as the relevant tax event the moment at which the Claimant's cessation of activity occurred. Indeed, and as has been demonstrated, regardless of the date of that cessation, the truth is that the income in question was placed at the disposal of the Respondent's shareholders at different moments, but in all cases by 31/12/2012. It is, therefore, this date and no other that is relevant for purposes of limitation.
Thus, and considering that limitation constitutes a defect generating illegality of the act, insofar as it constitutes the enactment of a tax act affected by the defect of violation of law, it must be concluded that the tax act in question cannot remain in the Legal Order.
IV. DECISION
For the reasons set forth, this Arbitral Tribunal decides:
-
To find procedent the claim filed by the Claimant regarding the illegality of the decision dismissing the Administrative Review which occurred under case no. ...2018... filed against the IRS assessment act (Source Tax Withholdings) and compensatory interest no. 2017..., dated 30/10/2017;
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To condemn the Tax and Customs Authority to pay the costs of the present proceedings.
VALUE OF THE CASE
In conformity with the provisions of articles 306, no. 2, of the CPC, 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at €37,186.96 (thirty-seven thousand, one hundred eighty-six euros and ninety-six cents).
COSTS
Costs in the amount of €1,836.00 (one thousand, eight hundred thirty-six euros) in conformity with Table I annexed to the RCPAT, and with the provisions of articles 12, no. 2 and 22, no. 4 of the RJAT, 4, no. 5 of the Regulation of Costs in Tax Arbitration Proceedings and 527, nos. 1 and 2 of the Code of Civil Procedure, by virtue of article 29, no. 1, paragraph e) of the RJAT.
Lisbon, 30 September 2019,
The Arbitrator,
Text drawn up by computer, under article 131, no. 5 of the CPC, applicable by referral of article 29, no. 1, paragraph e) of the RJAT. The wording of the present arbitral decision is governed by the orthography prior to the Orthographic Agreement of 1990.
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