Process: 155/2016-T

Date: August 24, 2016

Tax Type: IRS

Source: Original CAAD Decision

Summary

CAAD Process 155/2016-T involved a dispute between an expert appraiser and the Portuguese Tax Authority (AT) concerning an additional IRS assessment of €14,821.11 for 2012. The central legal issue focused on interpreting Article 116(1)(b) of the Portuguese IRS Code (CIRS) regarding accessory obligations for documenting expense reimbursements totaling €47,250.85 received from clients. The taxpayer argued full compliance with Article 116(1)(b) by properly registering amounts received as expense reimbursements and issuing electronic receipts explicitly identifying these as reimbursements for expenses paid on behalf of clients. The claimant contended that the AT's interpretation requiring supporting documentation for underlying expenses lacked legal basis, legislative rationality, and systematic coherence with the law's wording. The Tax Authority maintained a contrary position, arguing that the phrase 'when duly documented' in Article 116(1)(b) CIRS requires taxpayers to provide and retain supporting documents proving the actual expenses incurred on behalf of clients. Without such documentation, the AT asserted these amounts must be reclassified as taxable professional fees subject to both IRS and VAT. The inspection revealed significant discrepancies between the declared service income (€9,663.33 in Annex B) and total receipts issued (€56,914.18), with the difference attributed to client expense reimbursements. The arbitral tribunal was constituted on May 25, 2016, with both parties submitting written arguments. The claimant invoked the inquisitorial principle, Article 75 of the General Tax Law, and Article 100(1) of the Tax Procedure Code in support of their position. The case highlights critical questions about the extent of documentation requirements for professional service providers who incur expenses on behalf of clients and whether receipt issuance alone satisfies legal obligations or whether underlying expense documentation must be retained and presented upon AT request.

Full Decision

ARBITRAL DECISION

Claimant: A…

Respondent: TAX AND CUSTOMS AUTHORITY

I - REPORT

  1. A… (hereinafter referred to as the Claimant), taxpayer no. … with tax domicile at Rua…, no. ..., …, in…, …-… Amora, presented on 15 March 2016, a request for constitution of an arbitral tribunal under the terms of subparagraph a) of no. 1 of article 2 and article 10, nos 1 and 2, both of Decree Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), and of articles 1 and 2 of Regulation no. 112-A/2011, of 22 March, in which the Tax and Customs Authority is requested (hereinafter designated as AT or Respondent), with a view to the declaration of illegality and consequent annulment of the additional assessment of personal income tax no. 2015…, in the total amount of 14,821.11 € relating to the year 2012.

  2. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 16 March 2016 and was immediately notified to the Respondent in accordance with the law.

  3. Pursuant to and for the purposes of the provisions of subparagraph a) of no. 2 of article 6 of RJAT, by decision of His Excellency the President of the Deontological Council of CAAD, duly notified to the parties within the prescribed periods, the undersigned was designated as arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration the acceptance of the appointment within the period stipulated in article 4 of the Deontological Code of the Centre for Tax Arbitration.

  4. The Singular Arbitral Tribunal was constituted on 25 May 2016, in accordance with the provision of subparagraph c) of no. 1 of article 11 of RJAT, in the wording conferred upon it by article 228 of Law no. 66-B/2012, of 31 December.

  5. An arbitral order was issued on 30 June 2016, duly notified to the parties, which justified the waiver of the holding of the meeting referred to in article 18 of RJAT, the examination of witnesses enrolled by the Claimant, and granted to them the faculty of submitting written submissions.

  6. On 6 June 2016, the Claimant proceeded to submit written submissions where it fundamentally reiterates and defends the position it had already presented in its initial pleading.

  7. To support its request, the Claimant alleged, in very brief summary, and with relevance to what matters here, the following:

(i) that it complied with the ancillary obligations arising from subparagraph b) of no. 1 of article 116 of CIRS, namely the registration of amounts relating to expenses incurred on behalf and on account of its client,

(ii) manifesting its disagreement with the AT's position in the inspection report regarding the necessity of presentation/justification of the supporting documents for such expenses,

(iii) that the AT's interpretation regarding the necessity of documentation/proof of receipt of expenses incurred on behalf and on account of its client is erroneous "as it has no correspondence in the letter of the law and also due to the absence of legislative rationality and systematic coherence",

(iv) arguing that it complied with the ancillary obligation provided in subparagraph b) of no. 1 of article 116 of CIRS, reiterating the unnecessary nature of documentation/justification of the amounts received as reimbursement of expenses incurred on behalf of third parties.

(vi) that the requirement for documentation referred to in the final part of the aforementioned norm is satisfied with receipts "issued in legal form where it is expressly shown that these are sums received for reimbursement of expenses",

(v) further making in its pleading considerations regarding article 120, no. 1 of the General Regime of Tax Breaches, on article 6 of the Supplementary Regime of Tax Inspection Procedure, and article 75, no. 1 of the General Tax Law,

(vi) finally culminating its request for constitution of an arbitral tribunal with considerations regarding the applicability of article 100, no. 1 of the Code of Tax Procedure and Process.

  1. The AT, duly notified for such purpose, submitted its response within the prescribed period, sustaining a perspective contrary to that presented by the Claimant, and disagreeing with it, in line with the position it had already adopted in the Tax Inspection Report, and which is condensed, equally in brief summary, to the interpretation it conducts regarding the final part of subparagraph b) of no. 1 of article 116 of CIRS, in the sense of the necessity of documentation/presentation of the supporting documents of the amounts/reimbursements received as advance on account and on behalf of the client, in order to fulfill the objective provided in the final part of the aforesaid legal norm - "when duly documented" - under the penalty of such receipts coming to be considered as fees and consequently taxed under personal income tax and VAT.

  2. The Arbitral Tribunal is materially competent and is regularly constituted in accordance with articles 2, no. 1, subparagraph c), 5 and 6, no. 1 of RJAT.

  3. The parties have legal personality and capacity, are legitimate and are legally represented (article 3, 6 and 15 of CPPT by virtue of article 29, no. 1, subparagraph a) of RJAT).

  4. The proceedings are not affected by nullities, and no exceptions were invoked.

  5. There is thus no obstacle to the examination of the merits of the case.

II - GROUNDS

A - MATTER OF FACT

A.1. Facts Established as Proven:

i. The Claimant initiated its activity as "EXPERT APPRAISER" to which corresponds code … of the Table of Activities of article 155 of CIRS, on 1998-01-01, having ceased the activity in VAT and personal income tax pursuant to subparagraph b) of no. 1 of article 34 of CIVA and subparagraph a) of no. 1 of article 114 of CIRS respectively, on 2012-09-21,

ii. The Claimant is a sole taxpayer, subject to personal income tax, given the provisions of article 1, no. 1 of CIRS, taxed by the aggregate income from the various categories of personal income tax, as provided in article 22 of CIRS,

iii. Classified by the income from its professional activity, in category B – Professional Income – article 3, no. 1, b) of CIRS,

iv. The determination of the Claimant's income was made pursuant to article 31 of CIRS – simplified regime.

v. With reference to the years 2011 and 2012, the Claimant proceeded to file the respective income tax returns (form 3), having declared in annex B the following values:

"Other provision of services and other income (includes capital gains)":

2011 – 14,278.38 €

2012 – 9,663.33 €,

vi. In the year 2012, the Claimant opted for the taxation of income earned in category B according to the rules established for category A.

vii. The Claimant, with reference to the year 2012, issued electronic receipts from receipts of B… both as provision of services and of amounts received as advance for payment of expenses on account and on behalf of the client,

viii. The AT detected discrepancies between the value of the provision of services declared in Annex B (9,663.33 €) and the total value of the electronic receipts issued relating to the year 2012 from which results an amount of 47,250.85 relating to expenses on account and on behalf of the client,

ix. The Claimant was subject to an external inspection procedure, under the terms of service orders nos 0I2015… and 0I2011… of 2015-06-12, issued by the Tax Inspection Service of the Finance Directorate of … which took place in the period between 2015-09-29 and 2015-11-23.

x. From the AT's computer system it is verified that the value of the receipts issued by the Claimant, with respect to the year 2012, amounts to 56,914.18 €, with 9,663.33 € relating to provision of services and 47,250.85 € to "advance for expenses on account and on behalf of the client" (this value with VAT),

xi. On 28 October 2015, the Claimant was notified to present within a period of eight days the supporting/justifying documents of the expenses paid on account and on behalf of its client B…, relating to the invoices – electronic receipts issued in the years 2011 and 2012,

xii. The Claimant did not present the supporting documents subject of the aforementioned notification,

xiii. The Claimant addressed B… communication dated 30 September 2015, requesting from this entity the supporting/justifying documents of the expenses allegedly incurred on its account and on its behalf, during the years 2011 and 2012,

xiv. The Claimant, through office no. … of the Finance Directorate of…, was notified on 20 November 2015, pursuant to and for the purposes of the provisions of article 60 of the General Tax Law and article 60 of the Supplementary Regime of Tax Inspection Procedure, having not exercised its right of hearing.

xv. The Claimant was notified of the official correction of the personal income tax return and of the assessment with reference to the year 2012,

xvi. On 15 March 2016, the Claimant filed with CAAD the present request for constitution of an arbitral tribunal.

A.2. Facts Established as Not Proven.

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Grounds of the Matter of Fact Established as Proven and Not Proven.

With regard to the matter of fact, the tribunal does not have to pronounce itself on everything that was alleged by the parties; rather, it falls to it the duty to select the facts that matter for the decision, to discriminate the matter proven from the unproven [(see art. 123, no. 2 of CPPT, and article 607 of the Code of Civil Procedure, applicable by virtue of article 29, no. 1, subparagraphs a) and e) of RJAT)].

In this manner, the facts relevant to the trial of the case are chosen and selected according to their legal relevance, which is established with regard to the various plausible solutions of the question(s) of law. (see article 596 of CPC, applicable by virtue of article 29, no. 1 of RJAT).

Thus, taking into account the positions assumed by the parties, the documentary evidence attached to the file and the PA annexed, the facts listed above are considered proven as relevant to the decision.

B - ON THE LAW

From the complex nature of the legal tax relationship emerge for the taxpayer, in addition to the legal duty of tax obligation, translated in the duty to pay the tax, other obligations of differentiated character and nature generally and conventionally designated as "ancillary obligations".

Article 31 of the General Tax Law enumerates generically under no. 2 that: "ancillary obligations of the taxpayer are those that aim to enable the determination of the tax obligation, namely the presentation of declarations, the exhibition of fiscally relevant documents, including bookkeeping or records, and the provision of information."

The definition of ancillary obligations is subject to the principle of tax legality, as clearly follows from subparagraph c) of no. 1 of article 8 of the General Tax Law, determining, furthermore, that "the ancillary nature equally imposes that duties cannot be demanded from the taxpayer that do not aim at the determination of its tax situation or the control of the tax situation of third parties with whom it maintains economic relations, under the penalty of violation of the principle of proportionality. The ancillary duties of taxpayers are subject to the principle of material legality, pursuant to article 8, number 2, subparagraph c) of the present law, and thus the Revenue cannot demand from taxpayers obligations not provided for in express law." [1]

In turn, the generality of tax codes densifies in their own chapters such "ancillary obligations" or ancillary obligations and inspection", of which are expressions, for example, articles 117 to 132 inserted in Chapter VIII of the Code of Corporate Income Tax and articles 29 to 52 of Section III of Chapter V of the Code of Value Added Tax.

With regard to the Code of Personal Income Tax, articles 112 to 131 enumerate a set of obligations of a declarative, accounting, bookkeeping and documentation character.

Article 116 of CIRS determines for holders of income of category "B", when they do not possess organized accounting, the obligation of:

(i) to keep the books referred to in subparagraphs a), b) and c) of no. 1 of article 50 of the VAT Code, [2] in the event they do not possess organized accounting – subparagraph a) of no. 1 of article 116 of CIRS,

(ii) to show separately in the respective registration book the amounts relating to reimbursements of expenses incurred on behalf and on account of the client, which when duly documented, do not influence the determination of income, when they do not possess organized accounting – subparagraph b) of no. 1 of article 116 of CIRS.

With regard to ancillary obligations of bookkeeping/entry, in addition to the rules provided in subparagraphs a) and b) of no. 4, subparagraph c) of article 116, whether at the time of occurrence of the facts or currently [3], determines that "entries must be supported by documents".

The Claimant in defense of the thesis that supports its request for constitution of an arbitral tribunal, rebelling against the interpretation produced by the AT, from the outset in the Tax Inspection Report, proceeds to an interpretation of subparagraph b) of no. 1 of article 116 of CIRS that essentially rests on the unnecessary nature of documentation/presentation of such expenses to fulfill the objective provided in the last part of the provision in question, and that such requirement for documentation is satisfied by receipts "issued in legal form where it is expressly shown that these are sums received for reimbursement of expenses",

With all due respect for contrary opinion, it appears that the requirement contained in the aforementioned norm (in addition to its obvious registration) is the documentation/justification of such expenses, and not merely the issuance of receipts relating to them in an appropriate manner with the express indication and notation in a place designated for such purpose (box on the receipt) that they were incurred as "advance for payment of expenses on account and on behalf of the client".

The obligation of issuance already follows from the provision of subparagraph a) of no. 1 of article 115, where it is stipulated for holders of category B income the passing/issuance of "receipt, in the official form of all amounts received from their clients, for the provision of services referred to in subparagraph b) of no. 1 of article 3, even if on account of provision, advance or reimbursement of expenses […]"

The Claimant invokes article 75, no. 1 of the General Tax Law, with reference to the declaration issued by B… in compliance with the provisions of subparagraph b) of no. 1 of article 119 of CIRS (document no. 6 attached with the request for constitution of the arbitral tribunal) to conclude that such declaration enjoys the presumption of truthfulness in light of article 75, no. 1 of the GTL.

Now, the declaration in question translates to the "Annual Amount of Income Paid and Subject to Personal Income Tax and Withheld Tax", with reference to the year 2012, contributing nothing to the question underlying the present proceedings, namely the justification/documentation of expenses incurred by the Claimant on "behalf and on account of the client".

On the other hand, it must be borne in mind that if indeed the presumption of truthfulness of declarations of taxpayers depends on the fact that the accounting or records are "organized in accordance with commercial and tax legislation", the same does not occur when "the declarations, accounting or records reveal omissions, errors, inaccuracies or well-founded indications that they do not reflect or prevent the knowledge of the real taxable matter of the taxpayer", as provided in no. 2 of article 75 of the General Tax Law.

If the presumption referred to in no. 1 of article 75 of the General Tax Law is not absolute, ceasing before the verification of the circumstances provided in its no. 2, in the present case it appears to us that the Claimant's income declaration is not "organized in accordance with commercial and tax legislation", due to the absence of documentation/justification of expenses in accordance with subparagraph b) of no. 1 of article 116 of CIRS.

On the Principle of Official Investigation

Regarding the alleged violation of the principle of material truth.

  • The principle of official investigation, investigation or officiality imposes in accordance with the provision of article 58 of the GTL that: "the tax administration must, in the procedure, carry out all necessary measures for the satisfaction of the public interest and the discovery of material truth, and is not subordinated to the initiative of the person filing the request".

Further, it follows from article 6 of RCPIT that "the inspection procedure aims at the discovery of material truth, and the tax administration must officially adopt the appropriate initiatives for such objective"

  • The "justification of the principle of official investigation is justified by the obligation of pursuit of the public interest imposed on the activity of the tax administration (arts. 266, no. 1, of CRP and 55 of the GTL) and is a corollary of the duty of impartiality that must guide its activity (art. 266, no. 2, of CRP and 55 of the GTL).

In the procedural domain, this obligation imposes that the tax administration does not await the initiative of the interested party who formulated the request that gave rise to the procedure, and it must itself take the initiative to carry out the measures that appear as relevant for the correct verification of the factual reality on which its decision must rest.

On the other hand, that duty of impartiality requires that the tax administration seek to bring to the procedure all evidence relating to the factual situation on which the decision will rest, even if they have in view to demonstrate facts whose proof is contrary to the patrimonial interests of the Administration."

[…] "However, the lack of performance by the tax administration of measures that it is possible for it to carry out or the lack of request to interested parties of probative elements necessary for the instruction of the procedure, constitutes a vice therein susceptible of implying the annulment of the decision made therein".[4]

  • In the same sense as just evidenced, and this time invoking Rui Duarte Morais, [5] "the tax administration, when creating the factual basis of its decision, must investigate all facts of which it has notice (namely through the interested party), when they appear to be susceptible of allowing a better clarification of the situation (even if they are facts that, if proven, will result favorable to the taxpayer) […] Such obligation of investigation on the part of the administration will be all the more imperative when the taxpayer does not have the possibility of, itself, carrying out such production of proof".

  • Continuing further, the recognized author (cited location and work):

"Thus, the lack of performance by the tax administration of a measure that it is possible for it to carry out or the lack of request to interested parties of probative elements necessary for the instruction of the procedure constitutes a vice therein, susceptible of implying the annulment of the decision made therein".

An interpretation in the same sense may be gathered from the annotation to article 58 of the GTL, to which Lima Guerreiro proceeds [6];

"The failure to investigate the elements necessary for the discovery of material truth, with the consequent violation of the principle of official investigation, is a ground of illegality of the tax act or in tax matters."

Reverting to the case at hand, it appears that in truth, and as follows from the administrative file annexed and from document no. 4, attached by the Claimant with its request for constitution of the arbitral tribunal, the AT notified the Claimant on 28 October 2015, to present "within a period of eight (8) days, counting from this date, the supporting/justifying documents of expenses paid on account and on behalf of the client, for which electronic receipts were issued (invoice-receipt) for the years 2011 and 2012".

Being that on an earlier date – 30 September 2015 – the Claimant had addressed communication to "B…", requesting "supporting and documentary justification documents that appear in your accounting records and payment by your treasury of amounts in my name relating to debit of expenses and charges with the exercise of the profession to your bank "[(emphasis and underlining in the original) see document no. 5 attached with the request for constitution of the arbitral tribunal and administrative file annexed)].

Heard the Claimant in statements in the context of the inspection procedure, on 5 November 2015, declared that: (see administrative file – annex 3)

"Despite the effort in seeking to obtain the documents/means of proof relating to amounts received as advance of expenses paid on account and on behalf of the client, B…, to date it has not been possible to obtain them.

However, we await the obtaining of the same, which at the time we will forward to the services of the Tax Authority.

And nothing more was declared.".

Thus being;

Given the factual circumstance evidenced, the position of the parties, the body of documentary evidence attached to the file, and the administrative file annexed, the question to be resolved is whether the AT would be obliged in observance of the principle of official investigation and the discovery of material truth, to request from B…, the supporting documents of expenses allegedly incurred by the Claimant on behalf of that party, and embodied in the electronic invoices – receipts issued by the latter and documented in the administrative file annexed.

In our view, given the circumstance that the Claimant failed to obtain a response to the communication directed to B… in the sense that this entity provide it with the documentary justification of the expenses at issue here, to which is added the knowledge of the AT, both of such request and of its non-satisfaction by the entity in question, would impose such investigation on the part of the latter.

As will be seen below, the omission of the AT concerning the notification of B… to document the expenses/reimbursements in controversy disrespected the principle of material truth, violating the principle of official investigation that should underlie the activity of the tax administration.

In this particular, we subscribe to what was decided in the context of process 90/2014-T of 26 September 2014 under the aegis of CAAD [7], in the segment where it is affirmed:

"[…] the AT did not perform in the procedure all measures necessary for the satisfaction of the public interest and the discovery of material truth, having violated art. 58 of the General Tax Law, which constitutes a ground of illegality of the tax act […]"

Additionally:

The factual situation sub judice does not diverge significantly, in its essence, from that which was the subject of a decision by the Supreme Administrative Court, in the Ruling of 21 October 2009, reported by His Excellency Counselor Lúcio Barbosa, [8] in the context of process no. 0583/09, where "in a situation in which the taxpayer did not have the documentary proof of the performance of certain expenses but only copies of the checks that funded the respective payment – it was understood that it was the obligation of the tax administration to proceed with an inspection of the beneficiary's records of those checks, in order to ascertain the proof and the cause of such payments, since such possibility was entirely forbidden to the appellant, and the performance of such measure would not constitute an excessive burden for the administration".

Further retrieved from the aforementioned ruling that:

"The principle of official investigation is situated upstream of the burden of proof"

In the same sense the ruling handed down by the Southern Central Administrative Court of 06/08/2013, handed down in the context of process no. 06883/13, reported by His Excellency Judge Joaquim Condesso:

"(…) 13. The principle of official investigation, is enshrined in the scope of the gracious tax procedure, in art. 58 of the G.T. Law, according to which the Tax Authority must proceed with the measures it deems convenient for the discovery of material truth. The principle of official investigation is justified by the obligation of pursuit of the public interest imposed on the activity of the Tax Administration (art. 266, no. 1 of C.R.P. and art. 55 of the G.T.L.) and is a corollary of the duty of impartiality that must guide its activity (art. 266, no. 2 of C.R.P. and art. 55 of the G.T.L.). This duty of impartiality requires that the Public Treasury seek to bring to the procedure all evidence relating to the factual situation on which the decision will rest, even if they have in view to demonstrate facts whose proof is contrary to the patrimonial interests of the Administration. In conclusion, this principle obligates the tax administration to perform all measures that appear to be necessary for the satisfaction of the public interest and the discovery of material truth. This means that all measures must be performed even if they have not been requested, and do not therefore depend on any procedural impulse by the taxpayer"

"14. The principle of material truth is enshrined in art. 6 of R.C.P.I.T. and imposes that the Tax Administration, within the scope of the inspection procedure, seek to collect the probative elements that make it possible later to substantiate the tax act that comes to be performed. It is about investigating and ascertaining the correct compliance with tax obligations by taxpayers, and, based on that investigation, gathering elements that allow the ascertainment of the possible existence of irregularities. In conclusion, the principle of material truth sets what should be the objective of the inspection procedure – the discovery of material truth. This principle is a concretization of the examined principle of official investigation (enunciated in art. 58 of the G.T.L. as a general principle of tax procedure) being postulated by the public and indisposable nature of the legal tax relationship, thus encompassing, for this reason, its factual elements."

With all respect for contrary opinion, it appears to us that beyond being legally required given the principle of material truth, it would have been prudent and advisable, from the outset and also, in observance of the principle of impartiality of the AT (article 55 of the GTL), that it had proceeded to notify B… with a view to obtaining the supporting/justifying documents of expenses allegedly incurred on behalf and on account of another party which, moreover, were quantified, dated and duly identified in the receipts issued by the Claimant.

The failure to investigate the elements necessary for the discovery of material truth, embodied in this case in the omission of notification to B… in the sense that it present the supporting/justifying documents of expenses incurred by the Claimant allegedly on behalf and on account of that banking institution, within the scope of its professional activity, constitutes a ground of illegality of the tax act at issue here.

Concluding without need for any other considerations;

"The violation of the principle of material truth, in the dimension of the principle of official investigation, translated in the refusal on the part of the Tax Administration to perform measures requested by the person or entity inspected or abstention from performing measures which it had the obligation to perform and from which results frustration of the duty of ascertainment of material truth, constitutes a procedural vice susceptible of determining the annulment of the final tax act". [9]

III - DECISION

In harmony with the foregoing, this Singular Arbitral Tribunal decides in:

a. to judge the arbitral request made admissible and, in consequence, annul the tax act that is the object of the present proceedings, embodied in the additional assessment of personal income tax no. 2015… in the total amount of 14,821.22 €, relating to the year 2012,

b. to condemn the Respondent in the payment of the costs of the proceedings.

IV - VALUE OF THE PROCEEDINGS

In accordance with the provision of article 296, nos 1 and 2 of the Code of Civil Procedure, approved by Law no. 47/2013, of 26 June, 97-A) no. 1, subparagraph a) of the Code of Tax Procedure and Process, and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings is valued at 14,821.22 €.

V - COSTS

Pursuant to the provisions of articles 12, no. 2, 22, no. 4 of RJAT, and articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Schedule I annexed hereto, the amount of costs is fixed at 918.00 €, at the charge of the Respondent.

NOTIFY

Text prepared on computer, pursuant to the provisions of article 131 of the Code of Civil Procedure applicable by referral of article 29, no. 1, subparagraph e) of the Legal Regime of Arbitration, with blank verses, and reviewed by the arbitrator.

The drafting of the present decision is governed by the spelling prior to the 1990 Orthographic Agreement.

Lisbon, 24 August 2016

The Arbitrator

(José Coutinho Pires)

[1] António Lima Guerreiro, General Tax Law Annotated, Editora Rei dos Livros, p. 164.

[2] Subparagraph a) of the article in question makes reference to the "book of registration of purchases of goods and/or book of registration of raw materials and consumption, subparagraph b) refers to the "book of registration of sale of goods and/or book of manufactured products, and subparagraph c) refers to the "book of registration of services provided".

[3] Wording of Law 82-E/2014, of 31 December.

[4] Diogo Leite Campos, Benjamim Silva Rodrigues, Jorge Lopes de Sousa, General Tax Law, Annotated and Commented, 4th Edition, 2012, Lisbon, Encontro da Escrita, 2012, p. 488.

[5] Manual of Tax Procedure and Process, Almedina, Coimbra, 2012, pp. 254-257.

[6] General Tax Law Annotated, Lisbon, Editora Rei dos Livros, p. 266.

[7] Accessible at www.caad.org.pt

[8] Apud Rui Duarte Morais, work and location cited.

[9] Supplementary Regime of Tax Inspection Procedure, Annotated and Commented, Joaquim Freitas da Rocha and João Damião Caldeira, Coimbra Editora, May 2013, p. 49.

Frequently Asked Questions

Automatically Created

What are the accessory obligations under Article 116 of the Portuguese IRS Code (CIRS) regarding expense records?
Article 116(1)(b) of the Portuguese IRS Code establishes that taxpayers engaged in professional activities must maintain proper records of amounts received as reimbursement for expenses incurred on behalf of clients. The provision requires these amounts to be documented through receipts issued in legal form that explicitly identify the nature of the payment as expense reimbursement rather than professional fees. The disputed interpretation concerns whether 'when duly documented' means only issuing proper receipts or also retaining supporting documentation of the underlying expenses paid to third parties on behalf of clients.
Can the Tax Authority (AT) require additional documentation for expenses incurred on behalf of clients beyond what Article 116 CIRS mandates?
The Tax Authority's position in Process 155/2016-T requires taxpayers to provide supporting documentation for expenses incurred on behalf of clients beyond mere receipt issuance. The AT interprets 'when duly documented' in Article 116(1)(b) CIRS as mandating retention and presentation of underlying expense proof (invoices, receipts from third parties) to verify that amounts received were genuine reimbursements rather than disguised professional fees. The taxpayer challenged this interpretation as lacking legal foundation, arguing the law only requires proper receipt issuance showing the reimbursement nature of payments, not documentation of every underlying expense transaction.
How does the inquisitorial principle apply to IRS tax disputes at CAAD arbitral tribunals?
The inquisitorial principle (princípio do inquisitório) in Portuguese tax law places an affirmative duty on tax authorities and arbitral tribunals to investigate and establish the true facts of a case, rather than relying solely on party submissions. In CAAD arbitration, this principle is reflected in Article 75(1) of the General Tax Law, which requires the tax administration to determine the actual tax situation of taxpayers. The principle empowers tribunals to request additional evidence, examine witnesses, and actively investigate facts necessary for correct tax determination, ensuring decisions are based on material truth rather than procedural formalities alone.
What was the outcome of CAAD Process 155/2016-T concerning the additional IRS tax assessment for 2012?
The provided excerpt of CAAD Process 155/2016-T does not include the final arbitral decision or ruling. The document describes the procedural history, party arguments, and factual background through the evidence-gathering phase but is incomplete, ending during the factual recitation section. To determine the outcome regarding the €14,821.11 additional IRS assessment for 2012 and whether the tribunal found in favor of the taxpayer's interpretation of Article 116(1)(b) CIRS or upheld the Tax Authority's requirement for supporting expense documentation, the complete arbitral decision would need to be reviewed.
How can taxpayers challenge an additional IRS tax assessment through CAAD tax arbitration in Portugal?
Taxpayers can challenge additional IRS assessments through CAAD tax arbitration by filing a request for constitution of an arbitral tribunal under Article 2(1)(a) of Decree-Law 10/2011 (RJAT). The request must be submitted within the legal deadline and accepted by the CAAD President. The process involves: (1) tribunal constitution with an appointed arbitrator; (2) submission of initial pleadings stating grounds for illegality; (3) Tax Authority response; (4) optional witness examination and written submissions; (5) arbitral decision on the legality and potential annulment of the contested tax assessment. The arbitration provides an alternative to judicial court appeals for resolving tax disputes.