CAAD Case 164/2018-T: Non-Habitual Resident IRS Taxation and Arbitral Tribunal Jurisdiction

ARBITRAL DECISION[1]

The arbitrators Dr. José Pedro Carvalho (arbitrator-president), Prof. Dr. Manuel Pires and Dr. Sílvia Oliveira (arbitrators-member), appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Collective Arbitral Tribunal, constituted on 14 June 2018, agree as follows:

REPORT

A..., taxpayer no..., with tax domicile in ..., ..., in Lagoa (hereinafter designated as "Claimant"), submitted a request for arbitral ruling and for constitution of a Collective Arbitral Tribunal, on 2 April 2018, pursuant to the provisions of article 4 and no. 2 of article 10 of Decree-Law no. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority (hereinafter designated as "Respondent") is the respondent party.

The Claimant seeks to have annulled the "(…) decision of the Finance Director of the Finance Directorate of Faro, which filed the gracious objection case, as well as the IRS assessment no. 2017..., with all legal consequences, namely the immediate and full restoration of the situation that would exist if the illegality had not been committed, which determines the reimbursement to the Claimant of the amount unduly assessed and paid, as well as the payment of compensatory interest (…) until full reimbursement (…)".

1.3. The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of the CAAD on 3 April 2018 and notified on the same date to the Respondent.

1.4. Given that the Claimant did not proceed to appoint arbitrators, pursuant to the provisions of article 6, no. 2, paragraph a) of the RJAT, the signatories were appointed as arbitrators on 23 May 2018 by the President of the Deontological Council of the CAAD, having the appointment been accepted within the timeframe and in the terms legally provided for.

1.5. On the same date, the Parties were duly notified of such appointment and did not express any intention to refuse it, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

1.6. Thus, in accordance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the Arbitral Tribunal was constituted on 14 June 2018, having issued an arbitral ruling on the same date to the effect of notifying the Respondent to, pursuant to the provisions of article 17, no. 1 of the RJAT, present a Response within a maximum period of 30 days and, if it wished, request the production of additional evidence.

1.7. Additionally, it was further stated in that arbitral ruling that the Respondent should send to the Arbitral Tribunal, within the timeframe for the Response, a copy of the administrative file.

On 3 September 2018, the Respondent presented its Response, having defended itself by exception and by objection and concluded that this Arbitral Tribunal should judge "(…) the dilatory exception (…) invoked as well-founded, accordingly dismissing the Respondent from the case, in the terms petitioned; or, should it not be so understood, the arbitral claim should be judged unmeritorious for want of proof, and consequently the Respondent absolved, in the terms above petitioned, all with the due and legal consequences".

On the same date, the Respondent attached to the case file the respective administrative file.

By arbitral ruling of 3 September 2018, the Claimant was notified to, if it wished, within a period of 10 days, state its position on the matter of exception contained in the Response of the Respondent.

The Claimant presented, on 19 September 2018, a defense regarding the exception of material incompetence of the Arbitral Tribunal, raised by the Respondent, to the effect of understanding that it cannot proceed inasmuch as it understands that "(…) the use of the process of judicial review or administrative action necessarily depends on the content of the act being challenged, i.e., (i) if the act involves the assessment of the legality of an assessment act, the process of judicial review is applicable; (ii) if it does not involve such assessment, the administrative action is applicable", being that "the rule (…) applies in the absence of a special rule that establishes any provision to the contrary (…)".

Now, according to the Claimant, "in the absence of a special rule, what is relevant for the purposes of the suitability of the procedural remedy is only the content of the act subject to review, in the present case, the decision that concerned the Claimant's claim, submitted by way of gracious objection" whereby the Claimant understands that "it is clear that administrative action will be the suitable procedural remedy when the act subject to review does not assess the legality of the assessment act, because there is a procedural obstacle to such review, such as expiration of time or lack of standing".

Now, in this case, according to the Claimant, the "Tax Authority dismissed the gracious objection (…)" and even though it has termed "(…) this filing decision (…) in substance, the same constitutes an act of dismissal" (bold and underlined by the Claimant).

And, "as is evident, if the Tax Authority decides to characterize all filing decisions as filings, this does not mean that they constitute filings" whereby the Claimant understands that "(…) arguing that the act is not arbitrable because the Tax Authority characterized it as a filing constitutes an unconstitutional interpretation of article 2, no. 1, paragraph a) of the RJAT, due to violation of the principles of equality, access to law and effective judicial protection, of article 20, no. 1, and article 268, no. 4, of the Portuguese Constitution", whereby the Claimant understands that "(…) this Tribunal should consider the arguments and defense by exception of the Tax Authority completely unmeritorious".

By arbitral ruling of 23 September 2018, this Collective Arbitral Tribunal decided, in accordance with the principles of the Tribunal's autonomy in conducting the proceedings, expedition, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), as well as taking into account the principle of limitation of unnecessary acts provided in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of the provisions of article 29, no. 1, paragraph e) of the RJAT]:

To dispense with the holding of the meeting referred to in article 18 of the RJAT;

To determine that the proceedings continue with optional written submissions, to be presented within the successive period of 10 days, counted from notification of said ruling;

To designate the expiration of the period provided in article 21, no. 1 of the RJAT as the deadline for issuing the arbitral award.

In the same ruling, the Claimant was further warned that by the expiration of the period referred to in the preceding point it should proceed to pay the subsequent arbitral fee.

On 10 October 2018, the Claimant presented written submissions concluding that the Respondent "by focusing exclusively on the argumentation constructed to defend the alleged exception of material incompetence of this Arbitral Tribunal, (…) did not refute a single argument raised by the Claimant in the initial pleading, which (…) is self-explanatory of the evident illegality of the assessment being challenged".

On 26 October 2018, the Respondent presented its written submissions to the effect of stating that "(…) given the factuality that emerges from the case file, namely from the administrative file (…), it is necessary, in essence, to have fully reproduced for all legal purposes, in the present submissions, the position set forth by the Tax Authority in the Response presented", whereby having decided in the gracious objection decision to file the case, "consequently the analysis of the application in concreto of the regime invoked by the Claimant was not carried out, as knowledge of this issue was necessarily prejudiced by the solution reached" whereby it concludes that "a decision should be issued (a) judging the dilatory exception supra invoked as well-founded, accordingly dismissing the Respondent from the case, in the terms petitioned; or should it not be so understood, (b) the arbitral claim should be judged unmeritorious for want of proof, and consequently the Respondent absolved, in the terms above petitioned, all with the due and legal consequences; or should it not be so understood, (c) the arbitral claim should be judged partially unmeritorious, with the consequent condemnation of the Respondent to reconsider the gracious objection, in the terms above petitioned, all with the due and legal consequences".

CAUSE OF ACTION

2.1. The Claimant, of Dutch nationality, has been registered as a non-habitual resident ("NHR") in Portugal since 2015, and in such capacity submitted on 29.05.2017 its income statement form 3 of IRS for the year 2016 (no...).

2.2. In the IRS Form 3 for the year 2016, identified in the preceding point, the Claimant declared the following income:

Source | Qualification | Amount | Form/Annex
Portuguese | Dependent work | 5,565 | 4A of Annex A
Capital income | 418.47 | 4B of Annex E
Foreign | Pensions | 63,026 | 5A of Annex J
Capital income | 498,902.17 | 8A of Annex J

2.3. The Claimant states that "it calculated and declared a balance of losses relative to the onerous disposal of share capital and other securities (…)" and, "since it benefits from the NHR status, the Claimant expressly exercised the option for non-inclusion of capital income of foreign source (…)", having also expressed "(…) its willingness to be applied the exemption method to eliminate double taxation, pursuant to no. 5 of article 81 of the IRS Code (…)".

2.4. In these terms, the Claimant understands that "the amount of IRS to be assessed to the Claimant would be residual (applying only to income of Portuguese source, which are of very small amounts), as income of foreign source are clearly non-taxable by virtue of the regime applicable to NHRs" but, "(…) to its great surprise, (…) it was notified on 08.08.2017 of the IRS assessment no. 2017..., from which resulted an amount of IRS to pay of € 249,272.91 (…)" because this "(…) IRS assessment (…) did not take into account, certainly by oversight, the NHR regime applicable to the Claimant".

2.5. Now, "unable to agree with this assessment, the Claimant presented on 02.10.2017 (…) the competent gracious objection, wherein it requested the annulment of the above-mentioned IRS assessment (…)" but "to avoid the compulsory collection of the amount in question, the Claimant paid the full amount on 25.10.2017 (…)" whereby "(…) it requested the broadening of the gracious objection request so as to include, in addition to the reimbursement of IRS paid unduly (…) the payment of the corresponding compensatory interest (…)".

2.6. Thus, the Claimant states that "it was with astonishment and bewilderment that (…) it received on 28.11.2017, the Office no..., of 27.11.2017, through which the Tax Authority requested the presentation of [o]riginal documents or properly authenticated copies, issued by the Tax Authority of the country of origin of the income and which served as the basis for completing Annex J of the income statement form 3 of IRS for the year 2016".

2.7. "Given the evident illegality of the Tax Authority's conduct in this proceeding (…) the Claimant presented on 13.12.2017, a response to the request for documents and clarifications from the Tax Authority, without attaching any document (…)", having been the Claimant notified on 28.12.2017 "(…) of the final decision of the gracious objection presented, to the effect of filing the gracious objection case with the sole basis that the Claimant has refused to send (…) the documents requested, when it was obligated to comply with the provision of the above rule [article 128 of the IRS Code] and send the documentation requested in the office described above (…)".

In this context, the Claimant understands that "(…) this filing decision and the IRS assessment that preceded it are manifestly illegal and must necessarily be annulled", because "(…) only an erroneous perception of the same by the Tax Authority could lead it to conclude that the capital income earned by the Claimant should be taxed in Portugal since the following facts are not disputed:

The Claimant benefits from NHR status;

It earned income from category E with foreign source;

Such income, pursuant to the Conventions to Avoid Double Taxation signed by Portugal, may be taxed in the other contracting State".

Regarding the Lack of Reasoning of the Assessment Being Challenged

In this context, the Claimant understands that "it was never notified of the basis for this assessment (and of the non-application of the exemption whose application it had duly declared), neither at a moment prior to its issuance, nor at a moment subsequent thereto", considering that "the lack of reasoning of the assessment is grounds for its annulment, both by legal requirement (…), and by constitutional requirement, annulment which is hereby requested".

Regarding the Lack of Notice for Exercise of the Right to Be Heard

In this matter, the Claimant alleges that "(…) it was never notified to exercise its right to prior hearing which is legally and constitutionally enshrined", understanding that "the lack of notice to exercise the right to hearing on the assessment is grounds for its annulment, both by legal requirement, and by constitutional requirement, annulment which is hereby requested".

Regarding the Application of Article 81, No. 5 of the IRS Code

As to this aspect, the Claimant understands that "it is unequivocal and, therefore, not susceptible to discussion, that (…) it has benefited since 2015 from the NHR status, provided in no. 8 and following of article 16 of the IRS Code (…)".

And, having "the income in question (…) the nature of interest and dividends (…)" they are classified "(…) as income of category E (…)" whereby, according to the Claimant's understanding, "when it comes to capital income of foreign source, the application of the exemption method to such income, in the case of beneficiaries of NHR status, depends only on the convention to avoid double taxation concluded between Portugal (as Residence State) and the jurisdictions of the source of such income attribe power to tax to the Source State".

Accordingly, "having in mind that in light of the conventions to avoid double taxation applicable to the concrete case, as well as, moreover, under the OECD model convention itself, there is provided the possibility of the respective source States of the income being able to tax interest and dividends in that jurisdiction (…)", the Claimant understands that "there is no doubt whatsoever, nor was this at any time questioned by the Tax Authority, that the sole substantive requirement on which the application of the exemption method to capital income of foreign source not originating in "tax havens" depends is fulfilled, (…), since the Source States have the power to tax such income pursuant to the conventions to avoid double taxation concluded with Portugal" (bold and underlined by the Claimant).

According to the Claimant, "to the above is added the fact that, from the procedural point of view, all acts were carried out so that the exemption would be applied", that is, "the Claimant expressly indicated in Form 3 the following options regarding capital income of foreign source:

Option for non-inclusion (…);

Option for application of the exemption method (…)".

Thus, for the Claimant, it follows from the above that "(…) the income in question (…) are exempt from tax in Portugal, by virtue of the NHR status which the Claimant has benefited from since 2015", "whereby the assessment being challenged is manifestly illegal, by virtue of disregarding the Claimant's quality as an NHR and, thus, taxing income that should be exempt pursuant to the provisions of the IRS Code".

Regarding the Omission of the Duty to Rule by the Tax Authority in the Context of the Gracious Objection

In this context, the Claimant understands that in the face of the gracious objection presented "(…) the Tax Authority had one of two options: either it recognized the error underlying the issuance of the IRS assessment in question (the disregard of the Claimant's NHR status), and determined its illegality or, alternatively – and although we cannot understand on what basis – it decided on the legality of the issued assessment, determining the maintenance of its effects" but, "surprisingly, the Tax Authority did neither one thing nor the other", having initiated, according to the Claimant, "(…) a true inspection procedure (…) to require original documents that were not (…) necessary for the decision of the gracious objection presented".

Now, the Claimant understands that "[p]ublic Administration bodies have the duty to rule on all matters within their competence that are presented to them and, namely, on matters that directly concern the interested parties, as well as on any petitions, representations, objections or complaints formulated in defense of the Constitution, the laws or the public interest", being that "[t]he tax administration is obligated to rule on all matters within its competence that are presented to it by means of objections, appeals, representations, expositions, complaints or any other means provided in the law by taxpayers or whoever has legitimate interest".

On the other hand, the Claimant reiterates that "[f]or the realization of the right of access to justice, procedural rules must be interpreted in the sense of promoting the issuance of rulings on the merit of the claims formulated", concluding that "the duty to rule or respond of the Tax Authority to the question concretely raised by the Taxpayer stems, therefore, from the right of petition, constitutionally enshrined in article 52, no. 1, of the Constitution of the Portuguese Republic, according to which [a]ll citizens have the right to present, individually or collectively, to the bodies of sovereignty, to the self-government bodies of the autonomous regions or to any authorities petitions, representations, objections or complaints for the defense of their rights, the Constitution, the laws or the general interest and likewise the right to be informed, within a reasonable timeframe, about the result of the respective assessment" (bold by the Claimant).

In these terms, the Claimant understands that "the Tax Authority was legally bound to assess the question formulated (…) which (…) it failed to do" (bold and underlined by the Claimant).

Regarding the Conversion of the Objection into an Inspection Proceeding

In this matter, the Claimant understands that "in addition to refraining from ruling on the question raised (…) in the context of gracious objection, the Tax Authority goes even further along the path of illegality by notifying the Claimant to present documentation, converting the objection proceeding into an ad-hoc tax inspection, without compliance with the legal parameters on which it depends", revealing such requirements, according to the Claimant, to be without any legal basis and being truly disproportionate to the purpose they allegedly aim at.

Indeed, according to the Claimant, the Respondent "(…) imposed requirements for the application of the exemption that are not required by law, in conduct evidently disproportionate to the purposes allegedly aimed at and imposing excessive harm to the Claimant, especially since it already had all the information necessary to be able to know of the claim formulated by the Claimant and respond to the gracious objection presented".

Regarding the Presumption of Truthfulness of Taxpayers' Statements

Finally, the Claimant further considers that "(…) it enjoys the presumption of truthfulness of the statements presented before the Tax Authority, which, in the case under analysis, was already validated and even gave rise to the assessment being objected to" whereby "if well-founded doubts existed about the taxpayer's statement, the Tax Authority would always have to initiate an inspection procedure and, in that context, request all documentation it deemed necessary to verify compliance by the Claimant with its tax obligations".

"It happens that, in the present case, the Tax Authority at no time questions the taxpayer's statement" because, "if on one hand the assessment being challenged was issued based on the taxpayer's statement (…)" "on the other hand, the Tax Authority comes to question that same statement, in a subsequent and decontextualized moment, by requiring additional elements (which, it should be noted, are not even required by law) outside the legal formalities required for that purpose, to culminate in (…) without assessing (…) the gracious objection proceeding on the basis of the taxpayer's refusal to present unnecessary elements required without legal support".

Regarding the Good Faith of the Claimant

"(…) the presentation of the elements requested through the Tax Authority's office no. 44887 (…) does not constitute a requirement necessary for the application of the exemption provided in no. 5 of article 81 of the IRS Code" but, "without prejudice to the above, and since doubt has been raised about the elements declared by the Claimant, the Claimant has every interest in demonstrating compliance with the tax obligations incumbent upon it", whereby "(…) it attaches to the present case file the documents evidencing the capital income of foreign source earned (…)".

The Claimant concludes by requesting that the Tribunal deign to "(…) grant the arbitral ruling claim (…)".

RESPONSE OF THE RESPONDENT

By Exception - Regarding the Material Incompetence of the Arbitral Tribunal to Know of the Legal Claim Formulated by the Claimant

3.1. According to the Respondent, "(…) there exists, in the present case, material incompetence of the Arbitral Tribunal to assess and decide the claim formulated by the Claimant" because "(…) the binding of the Tax Authority to arbitral review presupposes a limitation of the situations in which it can fully decide whether or not to lodge an appeal from an unfavorable court decision, that is, the power to choose between definitively waiving collection of the tax credit or adopting the behavior potentially suitable to seek its enforcement", being "(…) constitutionally forbidden, by virtue of the constitutional principles of the rule of law and separation of powers (…), as well as of the right of access to justice (…) and of legality (…), in its corollary of the principle of indisposability of tax credits inherent in article 30, no. 2 of the LGT, an interpretation that expands the binding of the Tax Authority to arbitral review fixed by law".

3.2. The Respondent reiterates that "(…) such interpretation will imply the expansion of the situations in which the Tax Authority is mandatorily submitted to such regime, renouncing in that same measure to full judicial review (…)" being that "respect for the will expressed in the binding to arbitration in tax matters (…) represents, also, the realization of the consequences intended by the exercise of action of the parties in litigation, which cannot be isolated from the aforementioned normative protections of constitutional protection, under penalty of such presupposing a (unconstitutional) power of the interpreter-judge in the delimitation of the powers of the State in the privatization of the exercise of justice, especially when the systematic possibility of appeal in tax arbitrations is not admitted".

3.3. "Whereby, an interpretation that determines that article 2 of the RJAT includes the assessment of the arbitral claim here formulated by the Claimant will appear unconstitutional, when the letter and spirit of the rule do not permit it" because:

3.3.1. In the decision of the gracious objection "the objector answered negatively to what was requested, these elements being necessary for the assessment of what was alleged";

3.3.2. "(…) the competent body was of the opinion, which was accepted and subject to ruling, that "the present case should be filed (…)" (bold and underlined by the Respondent;

3.3.3. "As notified to the Claimant, it could lodge administrative act review pursuant to article 50 of the Code of Administrative Procedure and Process (CPTA) (…)";

3.3.4. "Whereby, unless there is a better understanding, the annulment of the decision of the Finance Director of the Finance Directorate of Faro", would not result in the immediate and full restoration of the situation that would exist if the (alleged) illegality had not been committed", that is, "from the annulment of the filing decision does not result the annulment of the assessment, this because the Tax Authority in the context of the gracious objection did not analyze nor decide on the merits, neither in fact nor in law".

3.4. Now, according to the Respondent, having this "(…) filed the gracious objection proceeding for lack of elements necessary for the assessment of what was alleged, as stated in the decision of the gracious objection", "what the Claimant in fact seeks is that in a first phase the Tax Authority respond to its objection, i.e. analyze the claim and grant or deny it, which was not done", being that "(…) the suitable means to obtain the annulment of the decision of the Finance Director of the Finance Directorate of Faro, as petitioned by the Claimant would always be the administrative action (…)".

3.5. Thus, the Respondent understands that "the present means does not constitute the suitable procedural remedy aimed at the intended effect, annulment of the administrative act and condemnation of the Tax Authority to respond to the gracious objection, there being impropriety of the procedural means used and incompetence of the tribunal to assess the same", "this because (…) the Tax Authority in the context of the gracious objection did not decide on the merits, neither in fact nor in law having merely filed the case (…)".

3.6. In these terms, the Respondent understands that the Claimant makes use "(…) of an unsuitable procedural means, which constitutes a dilatory exception preventing the assessment of the merits of the case (…)", "which prevents the assessment of the claim and determines the dismissal of the Respondent from the case (…)".

By Objection

3.7. Notwithstanding, and without conceding, the Respondent also comes to refer in the Response to the grounds proposed in the gracious objection proceeding, concluding "(…) for the complete lack of merit of the arbitral claim".

COURT ORDER FOR CLARIFICATION

4.1. The parties have personality and capacity to sue, are entitled as to the request for arbitral ruling and are duly represented, pursuant to the provisions of articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

The Tribunal is regularly constituted, pursuant to article 2, no. 1, paragraph a), articles 5 and 6, all of the RJAT.

As to the competence of the Arbitral Tribunal to proceed with the assessment of the request for arbitral ruling formulated by the Claimant, it should be noted that, in this context, there is a preliminary issue that must be addressed.

Indeed, the Claimant requests, in its arbitral claim, that the "(…) decision of the Finance Director of the Finance Directorate of Faro, which filed the gracious objection case, as well as the IRS assessment no. 2017..., (…)" be annulled and the Respondent raised, in the Response, the exception of incompetence of this Arbitral Tribunal to assess the request for annulment of said filing decision that concerned the gracious objection submitted regarding the 2016 IRS assessment.

Now, the assessment of the exception of incompetence is prioritary by virtue of the provisions of article 13 of the Code of Procedure in Administrative Courts (CPTA), applicable to tax arbitral proceedings by virtue of the provisions of article 29, no. 1, paragraph c) of the RJAT.

In these terms, see analysis of this issue in Chapter 6 of this Decision, to which reference is hereby made.

4.7. No procedural nullities were identified.

4.8. There are no other exceptions that need to be addressed.

FACTUAL MATTERS

Of Proven Facts

5.1. The Claimant, of Dutch nationality, has been registered in Portugal as an NHR since 2015.

5.2. In such capacity it submitted on 29 May 2017 its income statement form 3 of IRS for the year 2016 (no...), in which it declared the following income (amounts in Euros – EUR):

Source | Qualification | Amount | Form/Annex
Portuguese | Dependent work | 5,565.00 | 4A of Annex A
Capital income | 418.47 | 4B of Annex E
Foreign | Pensions | 63,026.00 | 5A of Annex J
Capital income | 498,902.17 | 8A of Annex J

5.3. The Claimant opted for non-inclusion of income obtained abroad and exercised the option for the application of the exemption method to eliminate double taxation.

5.4. As a result of the submission of the form 3 statement identified, assessment no. 2017... was generated in the amount of EUR 249,272.91, of 3 August 2017, having the respective billing notice no. 2017... been issued.

5.5. On 3 October 2017, the Claimant presented a gracious objection regarding the above-mentioned IRS assessment with which it disagreed, to petition for its annulment.

5.6. On 25 October 2017 the Claimant paid the full amount of IRS assessed for the year 2016, having requested the broadening of the gracious objection request so as to include, in addition to the reimbursement of the IRS paid, the payment of the corresponding compensatory interest.

5.7. The Claimant was notified on 28 November 2017 of Office no..., of 27 November 2017, from the Finance Directorate of Faro, through which it was requested to present original documents or properly authenticated copies issued by the competent Tax Authorities of the country of origin of the income and which served as the basis for completing Annex J of the income statement form 3 of IRS for the year 2016.

5.8. The Claimant presented on 13 December 2017 a response to the request for documents and clarifications, to the effect of refusing to send such documents.

5.9. The Claimant was notified of Office no..., of 27 December 2017, from the Finance Directorate of Faro, to the effect of being informed of the filing decision of the gracious objection proceeding no. ...2017... (regarding IRS for the year 2016), issued by the Finance Director of Faro, pursuant to own competence, it being stated in the notification that "from this decision you may lodge a hierarchical appeal within 30 days (…) or lodge administrative act review pursuant to (…) CPTA (…)".

5.10. No other facts capable of affecting the decision on the merits of the claim were proven.

Reasoning Regarding the Factual Matters

5.11. With respect to the proven factual matters, the conviction of the Arbitral Tribunal was based, in addition to the free assessment of the positions assumed by the Parties (on matters of fact), on the content of the documents attached by both Parties to the case file as well as on the analysis of the administrative file sent by the Respondent.

Of Unproven Facts

No facts were found as unproven with relevance to the arbitral decision.

1. LEGAL MATTERS

Preliminary Issue – Exception of Material Incompetence of the Arbitral Tribunal

6.1. In this context, as stated in points 4.3 to 4.6, above, the assessment of the issue of incompetence is prioritary, which is why it is now necessary to analyze and previously decide the eventual well-foundedness of the same.

6.2. The Claimant seeks, with the arbitral claim, that the Tribunal determine "(…) the annulment of the decision of the Finance Director of the Finance Directorate of Faro, which filed the gracious objection case, as well as the IRS assessment no. 2017..., with all legal consequences (…)".

6.3. The Respondent in the Response presented came to invoke the exception of material incompetence of the Arbitral Tribunal to know of the legal claim formulated by the Claimant because it alleges that:

• "(…) the Tax Authority in the context of the gracious objection did not analyze nor decide on the merits, neither in fact nor in law", given that "the Tax Authority filed the gracious objection proceeding for lack of elements necessary for the assessment of what was alleged (…)";

• "(…) the suitable means to obtain the annulment of the decision of the Finance Director (…) of Faro (…) would always be the administrative action".

6.4. In these terms, the Respondent understands that "(…) the present means does not constitute the suitable procedural remedy aimed at the intended effect, the annulment of the administrative act and condemnation of the Tax Authority to respond to the gracious objection, there being impropriety of the procedural means used and incompetence of the tribunal to assess the same".

6.5. In response to the exception invoked, the Claimant came to state that it cannot proceed because, citing Arbitral Decision no. 65/2012-T, of 1-10-2012, "the filing of the gracious objection proceeding (…) is equivalent, in its legal-practical effects, to its dismissal" because "(…) in the face of this decision, the tax act continues to maintain itself valid in the Legal Order" and, "being thus, such a decision must be considered as an act harmful to the rights and legitimate interests (…)" of the Claimant.[2]

6.6. Now, given that the determination of the competence of the courts is a matter of public order and its assessment must precede that of any other matter, as can be inferred from the combined reading of the provisions of article 16 of the Code of Procedure and Tax Process (CPPT), article 13 of the CPTA and articles 96 and 99 of the Code of Civil Procedure (CPC), subsidiarily applicable by referral of no. 1 of article 29 of the RJAT], the matter of exception must be analyzed immediately as, should it be judged well-founded, the assessment of the merits will be prejudiced, justified by a decision dismissing the case [article 89, no. 2 of the CPTA, subsidiarily applicable by virtue of the provisions of article 29, no. 1, paragraph c) of the RJAT].

6.7. According to the provisions of no. 1 of article 97 of the CPPT, "the judicial tax proceeding comprises:

a) the review of the assessment of taxes, including parafiscal taxes and self-assessment, withholding at source and payment on account acts;

b) the review of the determination of taxable matter, when it does not give rise to the assessment of any tax;

c) the review of the complete or partial dismissal of gracious objections to tax acts;

d) the review of administrative acts in tax matters that involve the assessment of the legality of the assessment act;

(…);

q) other procedural means provided for in the law" (underlined).

6.8. Pursuant to its no. 2, "contentious review of administrative acts in tax matters that do not involve the assessment of the legality of the assessment act authored by the tax administration (…) is regulated by the rules on procedure in administrative courts" (underlined).

6.9. As written in Note 18 to article 97 of the CPPT in the work of Counselor Jorge Lopes de Sousa ("Code of Procedure and Tax Process", Volume II, Areas Publisher, page 53 et seq.), "there are acts in Tax matters that are reviewed through special administrative action (…). (…) From this article it clearly results that, in cases where the act to be reviewed is an assessment act or an act that involves the assessment of the legality of an assessment act [act of dismissal of gracious objection or hierarchical appeal of the decision assessing it (…)], the suitable means is the review process. However, if we are faced with an administrative act that does not involve the assessment of the legality of an assessment act, special administrative action will not always be the suitable procedural remedy, since if it were, we would not understand the use of the term review to refer to the procedural means to review acts that do not involve such assessment (…)".

"Thus, in cases where article 97 of the CPPT itself, which is the rule containing the overall list of tax procedural means, uses the term review to refer to the suitable procedural remedy, it must be concluded that, even if the reviewed acts do not involve the assessment of the legality of assessment acts, the review procedure will have to be employed and, in cases where the review process is not specifically referred to as the suitable means and the act does not involve the assessment of the legality of an assessment act, the special administrative action will have to be used". (…) "Although it is not usual to determine the suitable judicial remedy through the content of the act and not its nature or the administrative or tax procedure in which it was issued, it is clear that paragraph d) of no. 1 and no. 2 of this art. 97 make the choice between review and special administrative action (contentious review) depend on the content of the act and not on any other factor".

6.10. The Counselor Jorge Lopes de Sousa further understands (see cited work, pages 4 et seq.) that "the most relevant doubts as to the full application of this rule are generated concerning the dismissal of gracious objections, because it is specially provided in no. 2 of art. 102 of the CPPT its reviewability through the review process, without any restriction derived from the content of the act, the same occurring with paragraph c) of no. 1 of this article 97 when it refers to the review of complete or partial dismissal of gracious objections to tax acts in an autonomous manner in relation to administrative acts in tax matters that involve the assessment of the legality of the assessment act referred to in paragraph d)".[3]

6.11. Now, "it not being possible to find an adequate and congruent solution to this issue without making abrogatory interpretations, the adequate option (…) seems to be to apply the literal dispositions, because with such application one can, at least, achieve greater certainty and clarity in the use of procedural means which, assuredly, are more important values for those who come to the courts to seek protection for their rights and interests than global coherence of the review regime could be. Therefore, although with the doubts that emerge from what was stated, it seems one should opt for the solution of always having judicial review of decisions dismissing gracious objections (…), regardless of whether the legality of the assessment act administratively reviewed was or was not assessed therein" (underlined).[4]

6.12. However, in the case under analysis, what is being challenged is, in addition to the Claimant's 2016 IRS assessment, the decision of the Finance Director of the Finance Directorate of Faro which filed the gracious objection case lodged against that tax assessment.

6.13. And contrary to what the Claimant argues, a filing decision is not a dismissal decision.

6.14. Indeed, the Respondent, in the face of the gracious objection lodged by the Claimant regarding the 2016 IRS assessment, in addition to being able to have granted the Claimant's claim, granting the gracious objection to declare the illegality of the IRS assessment or being able to have denied the Claimant's claim, dismissing the gracious objection to declare the legality of the IRS assessment, chose to issue a filing decision, thereby not assessing either the legality or the illegality of the IRS assessment in question.

6.15. Thus, the interpretation "that it always falls to lodge judicial review of decisions dismissing gracious objections (…), regardless of whether the legality of the assessment act administratively reviewed was or was not assessed therein" will not be valid in the case of filing, because in this case there is no decision dismissing the gracious objection.

6.16. Now, as to the competence of the Arbitral Tribunals, according to the provisions of article 2 of the RJAT, this comprises, for what now interests us, "the declaration of illegality of assessment acts of taxes (…)" (underlined).[5]

6.17. On the other hand, article 95, no. 1 of the General Tax Law (LGT) provides that "the interested party has the right to review or appeal any act that is harmful to its rights and legally protected interests, according to the forms of procedure prescribed by law", being able to be harmful, by virtue of respective no. 2, namely, "the assessment of taxes (…)".

6.18. In this matter, it follows from the normative framework transcribed above that, in general terms, the claim for declaration of illegality of assessment acts may be object of either judicial review or a request for arbitral ruling.

6.19. Also included in the competencies of the arbitral tribunals operating in the CAAD, in addition to the direct assessment of the legality of acts of tax assessment, described in article 2 of the RJAT, are the competencies to assess the acts that decide gracious objections (second-level acts) and hierarchical appeals of gracious objection decisions (third-level acts), in both cases "that assess the legality of such primary acts [assessment acts], namely acts of dismissal of gracious objections and acts of dismissal of hierarchical appeals submitted to such objection decisions" (see Jorge Lopes de Sousa in "Guide to Tax Arbitration", Lisbon. 2016, pages 102/103). as can be inferred from the express references made in article 10, no. 1, paragraph a) of the RJAT to the meanwhile revoked no. 2 of article 102 of the CPPT (which referred, as mentioned above, to judicial review of gracious objection decisions) and to the decision of the hierarchical appeal.

6.20. In consonance, the formula "the declaration of illegality of acts of tax assessment (…)" used in paragraph a) of no. 1 of article 2 of the RJAT does not restrict the scope of arbitral jurisdiction to cases in which a direct assessment act is being reviewed.

6.21. Indeed, the illegality of the assessment act follows as a corollary of the decision of a second or third-level act that confirms the assessment act.

6.22. On the other hand, it has also been understood, in harmony with the case law of the Supreme Administrative Court (STA), that following the declaration of illegality of assessment acts issued in judicial review proceedings, decisions condemning payment of compensatory interest may be issued as well as, by virtue of article 171, no. 1 of the CPPT, condemnation to payment of damages for unwarranted guarantee.

6.23. Now, having arrived at this point, it is important to analyze whether reason lies with:

The Respondent when it states that "(…) the present means does not constitute the suitable procedural remedy aimed at the intended effect, annulment of the administrative act and condemnation of the Tax Authority to respond to the gracious objection, there being impropriety of the procedural means used and incompetence of the tribunal to assess the same" because "(…) the Tax Authority in the context of the gracious objection did not decide on the merits, neither in fact nor in law, having merely filed the case (…)";

The Claimant when it asserts that "(…) the Tax Authority dismissed the gracious objection (…)" because although it has characterized "(…) this filing decision (…) in substance the same constitutes a dismissal act" and as such "this Tribunal should consider the arguments and defense by exception of the Tax Authority completely unmeritorious".

6.24. As we saw above, in article 2 of the RJAT which defines "the competence of arbitral tribunals", the assessment of acts filing gracious objections is not expressly included nor are there express references in that sense to articles of other statutes (namely the CPPT) that would allow such inference.

6.25. Recall that the fact that in paragraph a) of no. 1 of article 10 of the RJAT reference is made to no. 1 and the meanwhile revoked no. 2 of article 102 of the CPPT makes it clear that all types of acts capable of being reviewed through judicial review process will be encompassed within the jurisdiction of the arbitral tribunals operating in the CAAD, covered by those nos. 1 and 2, provided that they have as their object an act of one of the types indicated in that article 2 of the RJAT, but only those and provided the conditioning established.[6]

6.26. Thus, to resolve the issue of the competence of this Arbitral Tribunal it becomes necessary to determine in what terms the legality of an act filing a gracious objection can be assessed in a tax tribunal.

6.27. In general terms, the act of filing a gracious objection constitutes an administrative act, in light of the definition provided by article 148 of the Code of Administrative Procedure (CPA), subsidiarily applicable in tax matters by virtue of the provisions of article 2 paragraph d) of the LGT, article 2 paragraph d) of the CPPT and article 29, no. 1, paragraph d) of the RJAT], because it constitutes a decision pursuant to administrative-legal powers aimed at producing external legal effects in an individual and concrete situation.

6.28. On the other hand, it is also unquestionable that this is an act in tax matters, since application is made therein of norms of tax scope, that is, an act of filing a gracious objection regarding an assessment constitutes an "administrative act in tax matters", an act that does not involve the assessment of the legality of the assessment act.

6.29. From the provisions of paragraphs d) and p) of no. 1 and of no. 2 of article 97 of the CPPT the rule is inferred that review of administrative acts in tax matters must be effected in judicial tax procedure through judicial review or administrative action in accordance with whether such acts involve or do not involve the assessment of the legality of administrative assessment acts except in the case of dismissal of gracious objections, if the above-mentioned opinion is adopted.

6.30. In these terms, faced with this criterion of distribution of the fields of application of the process of judicial review and of administrative action, the act of filing the gracious objection by not involving the assessment of the legality of the assessment will be subject to administrative action.[7]

6.31. In fact, the legislative concern to exclude from the competencies of the arbitral tribunals operating in the CAAD the assessment of the legality of administrative acts that do not involve the assessment of the legality of assessment acts, in addition to resulting from the generic directive for creation of an alternative means to the judicial review process and action for recognition of a right or legitimate interest, results clearly from paragraph a) of no. 4 of article 124 of Law no. 3-B/2010, of 28 April, in which the possible objects of the tax arbitration process are indicated as "administrative acts that involve the assessment of the legality of assessment acts", because this specification can only be justified by a legislative intention to exclude from the possible objects of the arbitration process the assessment of the legality of acts that do not involve the assessment of the legality of assessment acts.

6.32. Therefore, the solution to the issue of the competence of this Arbitral Tribunal connected with the content of the act of filing the gracious objection submitted against the 2016 IRS assessment being the object of the arbitral claim depends on the analysis of that act.

6.33. In the case under analysis, there was no decision dismissing said gracious objection but rather a decision filing the case given that, being "(…) the objector (…) obligated to (…) send the documentation requested in the office (…)" "(…) and (…), these elements being necessary for the assessment of what was alleged (…)", and not having sent them, the Respondent decided to file such gracious objection (see articles 119, no. 3 of the CPA and 75, no. 2 of the LGT).

6.34. Now, as noted above, according to the provisions of article 95, no. 1 of the LGT, "the interested party has the right to review or appeal any act that is harmful to its rights and legally protected interests, according to the forms of procedure prescribed by law", being that pursuant to its no. 2 some of the acts that "may be harmful" to such legally protected interests are presented namely "other administrative acts in tax matters" [paragraph h)] (underlined).

6.35. Thus, given the above, being the filing decision an act harmful to the interests of the Claimant, it is subject to review but, given that that filing decision of the gracious objection does not involve an assessment of the legality of the underlying IRS assessment act regarding the arbitral claim, the suitable procedural means of contentious reaction to the same does not fall within arbitral competence being the administrative action as the Respondent argues in its Response and no appearance being found that this interpretation violates the Portuguese Constitution as the Claimant seeks to insinuate.

6.36. There is therefore no occurrence, given the difference of situations, of the possibility of applying STA awards, after they decide that "judicial review of dismissal of gracious objection has as its immediate object the decision of the objection and as its mediate object the defects attributed to the assessment act", according to which, "annulment of the dismissal of the objection due to procedural defects thereof, the tribunal is competent to know of the remaining defects attributed to the tax act, since the tribunal is competent to know in such review both of the dismissal of the objection and of the defects attributed to the tax act" (see among others STA Award of 12-10-2016 proceeding no. 0427/16).

6.37. Thus a dual competence is required, the first being exercised relating to the assessment of the objection and if decided favorably to the taxpayer the exercise of the second relating to the assessment act is required.

6.38. And such possibility does not occur because one is faced with neither dismissal of the gracious objection nor competence of the arbitral tribunal to assess the filing in which the assessment was not even assessed.

6.39. In these terms when the Respondent asserts that there exists the "(…) impropriety of the means used (…)" reason also lies with it when it argues that such "(…) constitutes a dilatory exception preventing the assessment of the merits of the case (…)" "(…) which prevents the assessment of the claim and determines the dismissal of the Respondent from the case (…)".

6.40. In consequence it should be concluded that the exception of material incompetence of the Arbitral Tribunal is well-founded as to the request "(…) for annulment of the decision of the Finance Director of the Finance Directorate of Faro which filed the gracious objection case as well as the IRS assessment no. 2017... (…)" with all consequent effects.

6.41. In the face of the now declared material incompetence of this Arbitral Tribunal the assessment of the merits of the claim is considered prejudiced.

Regarding Liability for Payment of Arbitral Costs

6.42. Pursuant to the provisions of article 527, no. 1 of the CPC (ex vi 29, no. 1 paragraph e) of the RJAT) it must be established that the party that caused them or if there is no prevailing in the action whoever derived benefit from the proceeding shall be condemned to costs.

6.43. In this context no. 2 of the said article concretizes the expression "caused them" according to the principle of partial success understanding that the losing party causes the costs of the proceeding in the proportion that it loses.

6.44. Thus in consideration of the above the liability regarding arbitral costs should be exclusively imputed to the Claimant.

1. DECISION

7.1. In these terms having considered the conclusions presented in the preceding Chapters this Collective Arbitral Tribunal decided:

7.1.1. To judge the exception of material incompetence of this Arbitral Tribunal to assess and decide the arbitral claim as well-founded thereby not proceeding to assess it and dismissing the Respondent from the case;

7.1.2. In consequence to condemn the Claimant to payment of the costs of the present proceeding.

Value of the proceeding: In accordance with the provisions of articles 306, no. 2 of the CPC article 97-A no. 1 of the CPPT and article 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings the value of the proceeding is fixed at EUR 249,272.91.

Pursuant to the provisions of Table I of the Regulation of Costs in Tax Arbitration Proceedings the value of the Arbitral Proceeding costs is fixed at EUR 4,284.00 at the charge of the Claimant in accordance with article 22, no. 4 of the RJAT.

Let notification be made.

Lisbon, 13 December 2018

The Arbitrator-President
(Dissenting, as per declaration of vote)
The Arbitrator-Member
The Arbitrator-Member

José Pedro Carvalho
Manuel Pires
Sílvia Oliveira

DECLARATION OF VOTE

I voted in dissent from the learned arbitral award because I consider in summary that it does not provide a full response to the issue – which it was required to decide – of the competence of this Tribunal to know of the legality of the IRS assessment act no. 2017....

Indeed and the award itself recognizes "what is being challenged is (...)the Claimant's 2016 IRS assessment," (underlined by the signatory).

And indeed in its claim the Claimant requests "the annulment (...) of the IRS assessment no. 2017... with all legal consequences".

Now is this Tribunal not competent to judge the legality of IRS assessment no. 2017...?

In my view the answer can only be affirmative in light of the provision in art. 2, no. 1, paragraph a) of the RJAT which states unequivocally that:

"1 — The competence of arbitral tribunals comprises the assessment of the following claims:

a) The declaration of illegality of tax assessment acts self-assessment withholding at source and payment on account acts;"

There being no doubt therefore that "the competence of arbitral tribunals comprises the (…) declaration of illegality of tax assessment acts" there should be no doubt it seems that this present arbitral tribunal is competent for the assessment of the legality of IRS assessment no. 2017...

The position that prevailed is thus based on a perspective that is out of focus regarding the nature of the tax arbitral dispute attaching it excessively and without foundation to judicial tax procedure when the structure and nature of both is distinct notwithstanding they share certain purposes at the level of effective judicial protection of the rights of taxpayers.

Indeed and there is no doubt in this regard the RJAT is structured in terms distinct from the CPPT being that as far as what is relevant to the case the object of the arbitral proceeding will always be the assessment act (as follows from the above-transcribed art. 2 of the RJAT) being relevant only the decision of second and third-level acts (gracious objection hierarchical appeal request for official revision) for purposes of fixing the initial term of the deadline for presentation of the arbitral claim.

Indeed as art. 2 of the RJAT does not make any reference when defining the competence of the CAAD to second and third-level acts one should conclude that the competence of the arbitral tribunals in tax matters functioning in the CAAD must always be assessed in function of the acts listed in that same art. 2 of the RJAT and not others.

In this manner and as better and more in detail explains Carla Castelo Trindade in her "Legal Regime for Tax Arbitration - Annotated"[8] the tax arbitral dispute is structured around the assessment act this being the one that figures as the object thereof in art. 2, no. 1, paragraph a) of the RJAT and being the second-level acts pursuant to art. 10, no. 1, paragraph a) also of the RJAT mere reference points for the assessment of the timely presentation of the arbitral claim.

Thus as the Author in question refers in the cited work[9] "This is the first issue that must be made clear: the object of the tax arbitration proceeding is the assessment act"[10]! (underlined by the signatory).

And referring to art. 10 of the RJAT the same Author continues "From this rule must not however be inferred the competence for direct assessment of second-level acts. This is a rule that concerns solely and exclusively the dies a quo of the deadline for presentation of the arbitral claim"

The provision in art. 10 of the RJAT will confirm this understanding when it provides that:

"The request for constitution of an arbitral tribunal is presented:

a) Within a period of 90 days counted from the facts provided in nos. 1 and 2 of article 102 of the Code of Procedure and Tax Process as to acts susceptible to autonomous review and also from notification of the decision or the expiry of the legal deadline for decision of the hierarchical appeal;"

It thus follows from the systematic of the RJAT without prejudice to better opinion and the respect due to other opinions that the acts possibly relevant through the provision of the transcribed art. 10 of that statute will be susceptible to contend only with timely presentation (and no longer with competence for assessment) of the arbitral claim.

In this manner I believe that the decision that prevailed is based on an erroneous hermeneutical and methodological procedure by not proceeding to assess the competence of this arbitral Tribunal for the assessment of the legality of IRS assessment act no. 2017... and by focusing on the act of decision of the gracious objection that had such as its object and which in accordance with the regime of the RJAT evidenced by its own systematic above described should be viewed on principle under the prism of timely presentation of the arbitral claim.

It being agreed therefore with the judgment of the decision that prevailed that it is not understood in the competence of the arbitral tribunals functioning in the CAAD the illegality of the decision of the gracious objection that has not assessed the legality of the assessment it is believed that that is not the (first) issue that arises in the case but rather of the competence of the arbitral Tribunal to assess the legality of IRS assessment act no. 2017... an issue to which it is thought with all due respect that the prevailing decision does not give (at least) full response.

Thus in my view the situation is as follows:

• Object of the proceeding: legality of IRS assessment no. 2017... for whose assessment the arbitral Tribunal is competent (arbitrable pursuant to paragraph a) of no. 1 of art. 2 of the RJAT);

• Timely presentation of the claim: to be assessed in function of the provision in art. 10, no. 1, paragraph a) of the RJAT.

That is: the issue of the gracious objection and what was decided therein by the Tax Authority should always it is believed with all due respect and without prejudice to better opinion be viewed by the decision taken under the prism of timely presentation of the arbitral claim and not under the prism of competence.

And under such prism it will be believed irrelevant the issue of whether the gracious objection did or did not know of the legality of the assessment act if only because neither from art. 10 of the RJAT nor from art. 102 of the CPPT will result directly or indirectly that it be otherwise.

Stated in another manner the circumstance that the decision of the gracious objection may not be possibly arbitrable will not contend in my view neither with the (competence for the) arbitrability of the assessment act nor much less with its timely presentation since the referral made by art. 10, no. 1, paragraph a) of the RJAT to art. 102 of the CPPT - made exclusively for that purpose that is for assessment of timely presentation - will not permit unless there is a better opinion to distinguish between decisions of gracious objection that rule on the legality of the assessments from those that do not.

Consequently in the face of the combined normativity of arts. 2 and 10 of the RJAT both timely will be the review of an assessment (having it in mind that pursuant to art. 2, no. 1, paragraph a) of the RJAT it is always such the object of the arbitral action - see cited work) followed by a Gracious Objection in whose decision the legality thereof was assessed as will be timely the review of an assessment followed by a Gracious Objection in whose decision the legality thereof was not assessed. Indeed in both situations timely presentation will be assessed by the combined application of arts. 10, no. 1, paragraph a) of the RJAT and 102, no. 1, paragraph b) of the CPPT which does not contain unless there is a better opinion any distinction as to the content of the decision of the gracious objection.

Thus and given the foregoing because presented within the 90 days following notification of the decision of the gracious objection pursuant to the combined provision of art. 10, no. 1, paragraph a) of the RJAT and 102, no. 1, paragraph b) of the CPPT I would judge not only the arbitral Tribunal competent for the assessment of the legality of IRS assessment no. 2017... as timely the arbitral claim presented by the Claimant having such as its object.

Ex abundanti it is further added that the issue of arbitrability of the second and third-level acts if raised will assume relevance solely when they know of the legality of the assessment act which consensually is not the case.

It will be in those cases because such acts overlap with the assessment act and the latter cannot be annulled without annulling those that affirm it that the issue of arbitrability of the second and third-level acts will have pertinence.

In cases like the present in which the second-level act does not know of the legality of the assessment act the possible annulment thereof will not contend in any manner with such in the measure that precisely it did not rule on the legality or illegality of the assessment act.

Stated in another manner: the annulment of an assessment act will not be contradictory or in any manner incompatible with a second or third-level act that has such as its object but that does not know of its legality or illegality because in the measure that it is of such a nature (that is: of an act that does not know [and that therefore neither confirms nor infirms] the legality or illegality of the assessment act) there is no legal logical or formal incompatibility between the jurisdictional decision (in the arbitral case) that confirms and infirms the legality of an assessment and the second or third-level act that has not known thereof.

Given all the foregoing and in summary I consider that:

The object of the arbitral proceeding is the IRS assessment act no. 2017...;

The award that prevailed does not rule fully on the issue of arbitrability of the IRS assessment act no. 2017...;

This arbitral Tribunal is competent for the assessment of IRS assessment act no. 2017... pursuant to art. 2, paragraph a) of the RJAT;

The decision of the gracious objection proceeding is relevant only for the fixing of the dies a quo of the deadline for presentation of the request for arbitral ruling;

For purposes of fixing the dies a quo of the deadline for presentation of the request for arbitral ruling it is irrelevant whether the decision of the second or third-level act (in this case the decision of the gracious objection) rules or not on the legality of the assessment act;

Given the foregoing I would consider the arbitral Tribunal competent for the assessment of the legality of IRS assessment act no. 2017... pursuant to art. 2, paragraph a) of the RJAT and the present arbitral action timely pursuant to art. 10, no. 1, paragraph a) of the same statute proceeding therefore to the assessment of the merits of the case.

Lisbon 13-12-2018

The arbitrator president

(José Pedro Carvalho)

[1] The drafting of this decision is governed by spelling prior to the Orthographic Agreement of 1990 except for transcriptions made.

[2] According to the Claimant "(…)the same arbitral case law is reflected in the (…) decisions issued in proceedings no. 481/2014-T (…) no. 710/2014-T (…) no. 563/2016-T (…)" because "in all these proceedings the alleged filing is treated as a dismissal because in practice that is what it is".

[3] Note that no. 2 of article 102 of the CPPT was revoked by Law no. 82-E/2014 of 31 December the provision of article 97 no. 1 paragraph c) of the CPPT remaining in force.

[4] In this sense see STA Award no. 125/09 of 2-4-2009.

[5] The provision of said rule should be understood in conjunction with the provisions of article 97 of the CPPT in which the claims object of judicial tax procedure are indicated providing in paragraph a) of its no. 1 that judicial tax procedure comprise "the review of the assessment of taxes including parafiscal taxes (…)".

[6] Indeed this interpretation in the sense of the identity of the fields of application of judicial review and arbitral process is the one that is in harmony with the referred legislative authorization on which the Government based itself to approve the RJAT (granted by article 124 of Law no. 3-B/2010 of 28 April) in which is revealed the intention that the tax arbitration process constitutes "an alternative procedural means to judicial review and action for recognition of a right or legitimate interest in tax matters".

[7] This is thus a criterion of distinction of the fields of application of the procedural means that results from the content of paragraphs d) and p) of no. 1 of article 97 of the CPPT which has been uniformly adopted by the STA.

[8] Almedina 2016.

[9] Idem.

[10] Op. Cit. p. 69.