Summary
Full Decision
ARBITRATION DECISION
I – REPORT
A…, CF[1]…, with residence at Street … no…, …-… – Aveiro, filed a request for arbitration, pursuant to article 2(1)(a), article 3(1) and article 10(1)(a), all of the RJAT[2], requesting the ATA[3], to examine the legality of the ATA's procedure which, in the year 2012, did not consider him resident in Spain, but in Portugal, with the consequent taxation in PIT[4] of income from Spanish source, which resulted in the issuance of settlement note and account adjustment, as per collection note no. 2016…, for the said year of 2012, in the amount of € 25,068.26, which he seeks to have annulled, with the consequent refund increased by indemnity interest, provided for in article 43 of the LGT[5], for unduly paid tax liability.
Which was filed without exercising the option to designate an arbitrator, coming to be accepted by the Honourable President of CAAD[6] on 17/03/2017 and notified to the ATA on the same date.
Pursuant to article 6(2) of the RJAT, by decision of the Honourable President of the Ethics Council, duly communicated to the parties within the legally applicable time limits, on 03/05/2017, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated acceptance of the assignment within the legally stipulated time limit.
The tribunal was constituted on 26/05/2017 in accordance with the provisions contained in article 11(1)(c) of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.
As already seen, the claimant seeks the annulment of the said collection note, with the consequent refund of the tax paid, in the amount of € 25,068.26 plus the respective indemnity interest.
He supports his point of view, in summary, on the understanding that, contrary to what the ATA claimed, he had residence in Spain from September 2008 to June 2013, whereby only income from Portuguese source is subject to PIT.
In fact, the claimant as from September 2008 proceeded to exercise his professional activity in Spain as director of information systems at B…, having proceeded with his registration as a taxpayer in Spain, where he was issued with the NIE[7] and where he took up residence at … … in Madrid.
Despite acknowledging that he did not proceed to change his status as a fiscal resident in Portugal, as soon as he became aware of the lapse, he communicated to the ATA, in December 2014, the occurrence.
He opened bank accounts in Spain, domiciled his personal and professional vehicles in Madrid, having paid the taxes inherent therein, traffic fines, made contributions to Spanish Social Security, subscribed to a Pension Fund and obtained a certificate of fiscal residence in Spain.
He further alleges that he has joint custody of his minor son aged 9 years with his ex-wife and that the family home address in Portugal was only awarded to him in the division of marital property on 5 April 2013 and that by agreement the son's custody was carried out by his ex-wife and that in the week he was with his son it was only for 4 or 5 days.
Finally, he alleges that in October 2015 he requested registration with the ATA as a non-habitual resident and attached a declaration confirming that the requirements to be considered a fiscal resident in Portuguese territory were not met, which request came to be granted.
In its response, the defendant, and also in summary, considers that the corrective procedure for the income statement for the year 2012 resulted from an exchange of information between Portugal and Spain on individual and collective taxpayers which indicated declarative non-compliance.
From what was established about the claimant, as per the minutes of notice, he was taxed in Spain under the optional regime of non-resident, which implies, according to the DTC[8] entered into between the two countries, that fiscally he is not considered resident in Spain and therefore would be considered a fiscal resident in Portugal with the declarative obligation of income obtained in Spain.
The Spanish Tax Authority communicated to the ATA that the TP[9] earned in 2012 the amount of € 167,035.00 having paid tax of € 41,341.00, in the capacity of non-resident, and the ATA noted that in the income statement duly presented by the claimant, such amounts were not declared.
In the income statement for the year 2012, he stated his status as non-resident, in the situation of divorced with one child, then aged 9 years, "dependent in joint custody" having the same address as the father, thus verifying that the centre of vital interests is in Portugal.
That the TP, since 2008, has been changing his residence, varying between Street … in Aveiro and … Madrid, this not corresponding to any of those contained in the document he attached in the exercise of the right to be heard in the corrective procedure for the income statement of 2012.
That the TP continues to exercise his activity in Spain and will maintain a residence there, although he has changed his residence to Portugal intending to benefit from a fiscal regime identical to that which he enjoyed in Spain, where he exhausted the temporal limit of its application.
The income statement for 2012 was delivered in a timely manner in 2013, as non-resident, with one dependent, and in the year 2013 changed his address successively to Spain, to Portugal and again to Spain, such that in Portugal the address is always the same, having incurred consumption expenses both in Portugal and in Spain, concluding that the claimant has no right whatsoever.
II - CASE MANAGEMENT
The tribunal was regularly constituted and is competent ratione materiae, according to article 2 of the RJAT.
The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented in accordance with articles 4 and 10(2) of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
Given that in its response the defendant considered the production of witness evidence offered by the claimant to be unnecessary, the tribunal after analysis of the case files, issued the following order: "Although the production of witness evidence has been requested, the tribunal considers that it is unnecessary given that a large part of the items for which it is requested have documentary support, at the same time that we consider that the contested matter is one of law with the position of the parties perfectly defined. Thus, the claimant should, within 10 days, if it so wishes, express itself on this understanding".
Came, in a motion of 14/07/2017 attached to the case files, the claimant to express itself on the tribunal's understanding which, on 20 of the same month, issued the following order: "Given the claimant's motion and that, of the 37 items of the petition for which it claims witness evidence, 22 have documentary evidence and the remainder are neither contested by the defendant nor does the tribunal call into question their truthfulness, witness evidence offered is deemed unnecessary as well as the hearing provided for in article 18 of the RJAT, fixing 28/09/2017 as the date for the issuance of the decision, and the claimant must, until the said date, provide proof to CAAD of payment of the subsequent court fee".
Thus, the process not being affected by nullities, no issues having been raised nor verified which would hinder the examination of the merits of the case, the tribunal considers the conditions to be met to issue a decision.
III - LEGAL REASONING
1 - Questions to be resolved with interest for the case
To determine whether in light of the legislation in force at the time and the proven facts, the claimant should or should not be considered resident in Portugal and consequently to conclude as to the maintenance or not, in the legal order, of the PIT assessment here called into question.
If the assessment in question is concluded to be annulled, to decide whether or not there shall be a right to payment of indemnity interest to the claimant.
2 - Factual Matters
The claimant filed the PIT income statement for the year 2012, as a non-resident, having declared only values of Portuguese source.
For its part, the ATA came to consider that the same, for PIT purposes in the said year of 2012, was considered resident in Portugal and as such would have to include income from Spanish source.
As from September 2008, the claimant proceeded to exercise his professional activity in Spain, having proceeded with his registration with the Spanish tax authorities.
In the years 2009 to 2014, the claimant remained in Spain for more than 183 days per year, where he had his home, in a property, at Avenue … … in Madrid.
For the said property he entered into contracts for the supply of water and electricity.
He opened bank accounts, domiciled his vehicles, paid the taxes for the use thereof, proceeded with the respective technical inspections and paid traffic fines.
When he relocated to Spain, he did not communicate to the ATA his status as a non-resident, communication which he only made on 22 December 2014, requesting retroactive effects from 1 January 2009.
The claimant obtained a certificate of residence in Spain, in the years 2009 to 2013, having made contributions to Spanish Social Security, having subscribed to a Spanish Pension Fund.
The claimant was, from September 2008, de facto separated, with joint custody of a minor child, in the family home which they would share and only on 5 April 2013 was the property awarded to the claimant in the context of division by divorce.
There was an agreement between the parents for joint custody of the child so as to avoid its placement with a third person, in situations where one of them was unable to carry out the custody, such that the claimant only assumed his commitment 4 or 5 days per month.
The claimant currently has the status of non-resident, which he requested in March 2015 and which came to be accepted with effects from 2016 and ending in 2024.
The claimant in the year 2012 was taxed in Spain for the income obtained there, under the optional regime of non-resident.
The taxation here called into question, as per collection note 2016…, resulted from an inspection action promoted by the ATA, following an exchange of information between Portugal and Spain, due to the fact that the claimant had not declared the income obtained in Spain, when he maintained his fiscal residence in Portugal and was notified thereof on 28 November 2016.
The said collection note in the amount of € 25,068.26 was paid on 27 December 2016.
The facts described are proven either in documents or in the administrative process, or have not been contested by the parties and are those considered relevant for the decision of the case.
3 - Legal Matters
3.1 - The Legality of the Assessment
Given the factuality described, it is now necessary to frame it in the legislation applicable at the time, namely, articles 19(1) to (4) of the LGT, articles 15 and 16 of the PITR[10] and article 4 of the DTC entered into between Portugal and Spain, which are transcribed below, in that order:
"Article 19 of the LGT
Tax Domicile
1 - The tax domicile of the taxpayer is, unless otherwise provided:
a) For natural persons, the place of habitual residence;
b) For legal persons, the place of head office or effective management or, failing that, of its permanent establishment in Portugal. 2 - The tax domicile also includes the electronic mailbox, in terms provided for in the public service of electronic mailbox. 3 - It is mandatory, in accordance with the law, to communicate the domicile of the taxpayer to the tax authority.
4 - The change of domicile is ineffective as long as it is not communicated to the tax authority. ...."
"Article 15 of the PITR
1 - Being persons resident in Portuguese territory, PIT is levied on the totality of their income, including that obtained outside that territory.
2 - In the case of non-residents, PIT is levied only on income obtained in Portuguese territory.
Article 16
Residence
1 - Persons resident in Portuguese territory are those who, in the year to which the income relates:
a) Have remained there for more than 183 days, consecutive or interpolated;
b) Having remained for less time, have there available, on 31 December of that year, a dwelling in conditions that suggest the intention to maintain and occupy it as habitual residence;
c) On 31 December, are crew members of ships or aircraft, provided that these are in service to entities with residence, head office or effective management in that territory;
d) Exercise abroad functions or commissions of a public character, in service of the Portuguese State.
2 - Are always deemed residents in Portuguese territory the persons who constitute the family unit, provided that there resides therein any of the persons responsible for the direction thereof.
3 - The condition of resident resulting from the application of the provisions of the preceding number can be set aside by the spouse who does not meet the criterion provided for in article (1)(a), provided he makes proof of the non-existence of a connection between the majority of his economic activities and Portuguese territory, in which case he is subject to taxation as a non-resident regarding the income of which he is the holder and which is considered obtained in Portuguese territory in accordance with article 18.
4 - Being made the proof referred to in the preceding number, the spouse resident in Portuguese territory presents a single statement of his own income, his share in common income and the income of his dependents according to the regime applicable to persons in the situation of de facto separated pursuant to article 59(2).
5 - Are also deemed residents in Portuguese territory persons of Portuguese nationality who transfer their fiscal residence to a country, territory or region subject to a clearly more favourable fiscal regime contained in a list approved by order of the Minister of Finance, in the year in which such a change occurs and in the four subsequent years, unless the interested party proves that the change is due to compelling reasons, namely the exercise in that territory of temporary activity on account of an employer entity domiciled in Portuguese territory.
6 - Non-habitual residents in Portuguese territory are considered to be those taxpayers who, becoming fiscally resident pursuant to numbers 1 or 2, have not been residents in Portuguese territory in any of the five previous years.
7 - The taxpayer considered a non-habitual resident acquires the right to be taxed as such for the period of 10 consecutive years from the year, inclusive, of his registration as resident in Portuguese territory.
8 - The taxpayer must request registration as a non-habitual resident at the time of registration as resident in Portuguese territory or, subsequently, by 31 March, inclusive, of the year following that in which he becomes resident in that territory.
9 - The exercise of the right to be taxed as a non-habitual resident in each year of the period referred to in number 7 depends on the taxpayer being, in that year, considered resident in Portuguese territory.
10 - The taxpayer who has not exercised the right referred to in the preceding number in one or more years of the period referred to in number 7 can resume the exercise thereof in any of the remaining years of that period, from the year, inclusive, in which he again becomes considered resident in Portuguese territory.
11 - Is encompassed in the provisions of article (1)(d) the exercise of functions of deputy to the European Parliament."
"Article 4 of the DTC
1 – For the purposes of this Convention, the expression "resident of a Contracting State" means any person who, by virtue of the law of that State, is subject to tax therein, due to his domicile, his residence, the place of management or any other criterion of a similar nature. However, this expression does not include any person who is subject to tax in that State only with regard to income from sources located in that State.
2 – When, by virtue of the provisions of number 1, a natural person is resident of both Contracting States, the situation shall be resolved as follows:
He shall be considered resident of the Contracting State in which he has a permanent home at his disposal. If he has a permanent home at his disposal in both States, he shall be considered resident of the State with which his personal and economic ties are most closely connected (centre of vital interests);
If the State in which he has the centre of vital interests cannot be determined, or if he does not have a permanent home at his disposal in either State, he shall be considered resident of the Contracting State in which he habitually resides;
If he habitually resides in both States, or if he does not habitually reside in either of them, he shall be considered resident of the State of which he is a national.
If he is a national of both States, or if he is not a national of either of them, the competent authorities of both States shall resolve the matter by mutual agreement".
It can already be concluded that the claimant has been exercising his professional activity in Spain since September 2008, where he was taxed on the income obtained there under the special regime of non-resident. With regard to the year 2012, the taxation period in question in the present proceedings, the claimant presented the respective income statement (PIT) within the legal time limit, declaring himself a non-resident in Portuguese territory and with one dependent. Only in December 2014 did the claimant communicate to the ATA his relocation to Spain and requested that it have effects from 1 January 2009.
Being certain of the existence of various types of domiciles, ranging from general voluntary, professional, elective, as provided for in articles 82 to 84 of the CC[11], the tax domicile is regulated in article 19 of the LGT, in accordance with the version in force at the time and which we have already transcribed, imposed then, as now, the said normative, the obligation to communicate to the ATA the respective domicile, with the change being ineffective as long as the respective communication is not made.
Therefore, only from the communication onwards, can it become effective before the ATA, the request for retroactive effects was not considered, which is deduced, given that the ATA initiated an inspection procedure in 2016, regarding the income obtained in Spain in 2012, resulting in the PIT assessment here called into question, relating to the said year.
However, in March 2015, the claimant requested his registration as a non-habitual resident in Portuguese territory, which came to be accepted, with effects from 2016 and ending in 2024. Now this finding and in accordance with what is stipulated in article 16(6) of the PITR, previously transcribed (current article 16(8) of the PITR), requires that the taxpayer claimant has not been considered resident in Portuguese territory in any of the five previous years.
In this way, one can only conclude that the ATA, in the present case, considered the claimant a non-resident in Portuguese territory, in the year 2012, being therefore neither comprehensible nor legally supported the issuance of the PIT collection note on 28 November 2016 and which is here called into question.
In fact, article 15, number 1 of the PITR, previously transcribed, only allows universal taxation of income to taxpayers considered resident in Portuguese territory and its number 2 only allows taxation of income obtained here by non-residents.
As already seen, the claimant was attributed the status of non-resident in Portuguese Territory, with effects from 2016 to 2024, which implies that in the five previous years he was not considered resident in Portuguese Territory, therefore, in the year 2012, only income obtained here could be taxed, being therefore no legal support for the issuance of the collection note here called into question, all the more so that it was the Administration itself that conferred such status on him.
Faced with this conclusion, the tribunal considers it unnecessary to confront the facts with other applicable legal norms previously transcribed (article 16 of the PITR and article 4 of the DTC).
3.2 - Payment of Indemnity Interest
Considering that the conclusion has been reached as to the illegality of the assessment as set out above and having regard to the provisions of article 43 of the LGT, it is evident the error attributable to the services from which resulted the unduly paid tax liability, thus, in accordance with what is stipulated in article 100 of the LGT, the ATA is obliged to reconstitute the situation that would have existed if the annulled act had not been carried out, including the payment of indemnity interest.
Once the payment and illegality of the assessment has been proven, the claimant has the right to the payment of indemnity interest in the precise terms of the already cited article 43 of the LGT and article 61 of the CPPT[12].
IV - OPERATIVE PART
Given the foregoing, the tribunal decides as follows:
a) Declare the petition for arbitration well-founded with the consequent annulment of the collection note 2016… of PIT regarding the year 2012, in the amount of € 25,068.26.
b) Declare the right to the refund of the said amount, increased by the payment of indemnity interest, calculated from the date on which the unduly paid sum occurred until the date of its return.
c) Fix the value of the case at € 25,068.26, considering the provisions contained in articles 299(1) of the CPC, 97-A of the CPPT and 3(2) of the RCPAT.
d) Costs against the defendant, under article 22(4) of the RJAT, fixing its amount at € 1,530.00 in accordance with Table I of article 4 of the RCPAT.
Let it be notified.
Lisbon, 28 September 2017
Text prepared by computer, in accordance with article 131(5) of the CPC, applicable by reference of article 29(1)(e) of the RJAT, with blanks and reviewed by me.
The sole arbitrator,
Arlindo José Francisco
[1] Acronym for taxpayer
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Personal Income Tax
[5] Acronym for General Tax Law
[6] Acronym for Administrative Arbitration Centre
[7] Acronym for Foreigner Identification Number
[8] Acronym for Convention to Avoid Double Taxation
[9] Acronym for Taxpayer
[10] Acronym for Personal Income Tax Code
[11] Acronym for Civil Code
[12] Acronym for Tax Procedure and Process Code
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