Process: 144/2015-T

Date: October 15, 2015

Tax Type: IRS

Source: Original CAAD Decision

Summary

Process 144/2015-T addresses the critical issue of petition ineptitude (ineptidão da petição) in Portuguese tax arbitration under the RJAT framework. The taxpayer challenged IRS assessments for 2013 but submitted multiple confusing documents including an appeal against administrative complaint rejection, an objection to IRS assessment, and an unrelated property appraisal request. The Tax Authority immediately raised the procedural defect of petition ineptitude, arguing the request was unintelligible. The arbitral tribunal, unable to discern the object of the request from the filed documents, scheduled an Article 18 RJAT hearing on 14 July 2015 to allow the taxpayer to clarify the substance of the request and correct procedural deficiencies. Despite proper notification, the taxpayer failed to appear at the hearing without representation. Exercising procedural diligence, the tribunal issued a subsequent order on 5 September 2015, granting the taxpayer an additional 10-day period to specify the factual and legal grounds constituting the cause of action, warning of petition dismissal. The taxpayer remained silent throughout. The tribunal declared the petition inept under Article 98(1)(a) of the CPPT, applicable via Article 29(1) of the RJAT, and absolved the Tax Authority from the proceedings (absolvição da instância). This decision establishes that Article 19(1) RJAT permits proceedings to continue despite party absence, but substantive defects in petition formulation combined with failure to cure deficiencies after judicial opportunity results in dismissal. The case valued at €1,021 resulted in €306 costs against the taxpayer under RCPAT provisions, demonstrating the financial consequences of inadequate procedural compliance in Portuguese tax arbitration.

Full Decision

I – REPORT

1- A..., Taxpayer[1] ..., with residence at Rua ..., ...;2 d, ...-... Lisbon presented a request for arbitral pronouncement, under the provisions of paragraph a) of no. 1 of article 2º, of no. 1 of article 3º and of paragraph a) of no. 1 of article 10º, all of the RJAT[2], with the Tax Authority[3] being requested, with a view to the annulment of the tax acts assessing Personal Income Tax[4] liability, relating to the year 2013, as appears from the summary of the request entered in the CAAD's[6] Management System[5].

2- The request was made without exercising the option to designate an arbitrator, and was accepted by His Excellency the President of the CAAD and automatically notified to the Tax Authority on 3/03/2015.

3- Under the terms and for the purposes set out in no. 2 of article 6º of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, on 25/03/2015, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated acceptance of the appointment within the legally stipulated time limit.

4- The tribunal was constituted on 06/05/2015 in accordance with the provisions contained in paragraph c) of no. 1 of article 11º of the RJAT, as amended by article 228º of Law no. 66-B/2012 of 31 December, and on the same date complied with the provision contained in article 17º of the RJAT.

5- In its response the Tax Authority raised a plea of ineptitude of the petition and consequently requested the nullity of the proceedings, the declaration of nullity of the present action, and in these circumstances should be absolved of the instance.

II - SANATION

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2º of the RJAT.

The parties have standing and procedural capacity, are shown to be legitimate and are regularly represented.

The tribunal held the hearing referred to in article 18º of the RJAT, which took place on 14/07/2015, without the presence of the applicant, who also failed to appear by representation, despite being notified.

Under the terms of no. 1 of article 19º of the RJAT, the failure of either party to appear does not prevent the continuation of the proceedings and the consequent issuance of the arbitral award.

The tribunal set the hearing for the present date, in order to give the opportunity for the applicant, notified of the proceedings, if he wishes, to appear in the case, under the terms and effects of no. 2 of article 19º of the RJAT.

On 05/09/2015 the tribunal issued the following order: "When the tribunal set the hearing referred to in article 18º of the RJAT, it had in mind not only to comply with the said regulation but also to give the applicant the opportunity to clarify to the tribunal the substance of his request and to allow him to make such corrections to the procedural documents as he might deem appropriate. Despite being notified, the applicant was not present nor was he represented. Thus, notify the applicant to, within 10 days, if he wishes, set forth the factual and legal grounds that constitute the cause of action, under penalty of his petition being declared inept and the consequent absolution of the instance."

As he said nothing, the tribunal issues its award.

III – GROUNDS

1 – Questions to be decided

a) Whether the petition is intelligible for the purpose of its substantive examination by the tribunal.

b) Or whether, on the contrary, it is inept, as contended by the Tax Authority and its nullity should be declared, absolving the respondent of the instance.

2 – Factual matters

a) On 28/02/2015 the applicant A..., filed with the CAAD a statement demonstrating the assessment of Personal Income Tax, which was accepted as a request for constitution of an arbitral tribunal;

b) On 03/03/2015 various documents were submitted to the file; one which states it is an appeal against the rejection of an administrative complaint relating to the Personal Income Tax assessment for 2013, another which states it seeks to lodge an objection to the Personal Income Tax assessment of the said year;

c) On 5 March 2015 a request from B..., relating to a second appraisal of a property registered in the urban property register of the parish of ..., is filed, and it is unclear what relation it bears to the statement referred to in paragraph a);

d) The tribunal scheduled the hearing referred to in article 18º of the RJAT for 14/07/2015 in order to comply with this regulation and simultaneously to afford the applicant the opportunity to clarify to the tribunal the substance of his request and to make corrections to the procedural documents if such was his intention.

e) The applicant failed to appear at the said hearing and, despite being notified of the contents of the respective minutes, said nothing.

f) On 05/09/2015 the tribunal issued an order calling the applicant to the case, notified on 7 of the same month, and he said nothing.

3 – Legal matters

In light of the facts proven, we shall frame them in relation to the applicable law:

a) From the analysis of the procedural documents that supported the institution of the present proceedings, it was not possible for the tribunal to understand what the object of the request was;

b) The same difficulty was raised by the respondent in its response;

c) Despite the steps taken by the tribunal, as has become evident, the applicant said nothing;

d) Having regard to the provisions contained in no. 1 paragraph a) of article 98º of the CPPT[7], applicable by virtue of no. 1 of article 29º of the RJAT, the tribunal can only declare the nullity of the present action due to ineptitude of the petition.

IV AWARD

On the basis of the grounds set forth above, the tribunal considers the petition unintelligible and inept and declares the absolution of the instance of the respondent, with all the legal consequences flowing therefrom.

To fix the value of the case at € 1,021.00 in accordance with the provisions contained in article 299º, no. 1 of the CPC[8], article 97-A of the CPPT and article 3º, no. 2 of the RCPAT[9].

To fix the costs, under paragraph 4 of article 22º of the RJAT, in the amount of € 306.00 in accordance with the provisions of Table I of article 4º of the RCPAT which shall be borne by the applicant.

Notify.

Lisbon, 15 October 2015

Document prepared by computer, in accordance with article 131º no. 5 of the CPC, applicable by cross-reference to article 29º no. 1, paragraph e) of the RJAT, with blank spaces and revised by the tribunal.

The arbitrator,

Arlindo José Francisco.

[1] Acronym for Taxpayer
[2] Acronym for Legal Regime for Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Personal Income Tax
[5] Acronym for Procedural Management System
[6] Acronym for Administrative Arbitration Centre
[7] Acronym for Code of Tax Procedure and Process
[8] Acronym for Code of Civil Procedure
[9] Acronym for Regulations on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

What constitutes an inept petition (ineptidão da petição) in Portuguese tax arbitration proceedings?
An inept petition in Portuguese tax arbitration proceedings under the RJAT occurs when the request is unintelligible and fails to allow the tribunal to understand its object. According to Process 144/2015-T, ineptitude arises when the petitioner submits confusing, contradictory, or incomplete documents that prevent identification of the specific tax acts being challenged and the legal grounds for challenge. Article 98(1)(a) of the CPPT, applicable via Article 29(1) RJAT, provides the legal basis for declaring petition nullity due to ineptitude. In this case, the taxpayer filed multiple contradictory documents—an appeal against administrative complaint rejection, an IRS objection, and an unrelated property appraisal request—making it impossible to discern the actual cause of action. The tribunal must be able to identify the factual and legal grounds supporting the request; when this proves impossible despite opportunities for clarification, the petition is declared inept and proceedings are dismissed.
Can the CAAD arbitral tribunal proceed with a case if the taxpayer fails to appear at the Article 18 RJAT hearing?
Yes, the CAAD arbitral tribunal can and must proceed with a case even if the taxpayer fails to appear at the Article 18 RJAT hearing. Article 19(1) of the RJAT expressly provides that the failure of either party to appear does not prevent continuation of proceedings and consequent issuance of the arbitral award. In Process 144/2015-T, the taxpayer failed to appear at the hearing scheduled for 14 July 2015 and provided no representation. The tribunal proceeded by issuing a subsequent order on 5 September 2015, giving the taxpayer an additional opportunity to clarify the petition. The tribunal's continuation despite absence demonstrates that procedural fairness is balanced with efficiency—parties receive opportunities to participate, but proceedings are not indefinitely suspended for non-participating parties. However, failure to appear combined with failure to cure substantive deficiencies (like petition ineptitude) leads to adverse consequences including dismissal from proceedings.
What are the consequences of failing to specify the legal and factual grounds in an IRS tax arbitration request?
Failing to specify legal and factual grounds in an IRS tax arbitration request results in the petition being declared inept (inepta) and dismissal from proceedings (absolvição da instância) under Article 98(1)(a) CPPT applicable via Article 29(1) RJAT. Process 144/2015-T demonstrates this consequence: the taxpayer submitted unintelligible documents without clearly stating the factual circumstances and legal basis for challenging the 2013 IRS assessment. Despite the tribunal's order explicitly requiring the taxpayer to "set forth the factual and legal grounds that constitute the cause of action" within 10 days under penalty of ineptitude declaration, the taxpayer remained silent. This resulted in petition nullity, absolution of the Tax Authority from the instance, case costs of €306 charged to the taxpayer, and complete loss of the opportunity to challenge the IRS assessment through arbitration. The specification requirement is fundamental—without clear grounds, the tribunal cannot perform its adjudicative function and the respondent cannot properly defend itself.
How does the CAAD handle IRS liquidation disputes when the petitioner does not respond to tribunal notifications?
When a petitioner in an IRS liquidation dispute fails to respond to CAAD tribunal notifications, the tribunal exercises procedural diligence by providing additional opportunities for compliance while ultimately proceeding to decision based on available evidence. In Process 144/2015-T, the tribunal's handling demonstrates this approach: (1) After initial confusion about the petition's object, the tribunal scheduled an Article 18 RJAT hearing to allow clarification; (2) When the taxpayer failed to appear at the 14 July 2015 hearing, the tribunal issued a formal order on 5 September 2015 granting 10 days to specify factual and legal grounds, with explicit warning of ineptitude consequences; (3) After continued silence, the tribunal declared the petition inept and absolved the Tax Authority from proceedings. This process balances procedural fairness with efficiency under Article 19(1) RJAT, which permits continuation despite party absence. The tribunal provides opportunities for correction but does not indefinitely postpone decision-making when petitioners fail to meet basic pleading requirements after proper notification.
What is the legal basis for dismissal from proceedings (absolvição da instância) in Portuguese tax arbitration under the RJAT?
The legal basis for dismissal from proceedings (absolvição da instância) in Portuguese tax arbitration under the RJAT is Article 98(1)(a) of the CPPT (Código de Procedimento e de Processo Tributário), applicable to arbitration proceedings via Article 29(1) of the RJAT. Process 144/2015-T applied this provision to dismiss the taxpayer from proceedings due to petition ineptitude. Absolvição da instância is a procedural dismissal (not a merit-based rejection) occurring when formal defects prevent substantive adjudication—specifically when the petition is unintelligible and fails to identify the challenged tax acts, factual circumstances, or legal grounds. The tribunal must declare nullity of the action (nulidade da presente acção) when ineptitude exists. Additional relevant provisions include Article 19 RJAT (permitting continuation despite party absence) and Article 18 RJAT (requiring a hearing that provides opportunity for clarification). Absolvição da instância results in cost liability for the unsuccessful party under Article 22(4) RJAT and RCPAT provisions, as demonstrated by the €306 costs charged to the taxpayer in this case.