Summary
Full Decision
ARBITRAL DECISION
The arbitrators, Councillor Jorge Lopes de Sousa (arbitrator-president), Professor Doctor Maria Celeste Cardona and Dr. José Sampaio e Nora (arbitrator members), appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 29-05-2017, agree as follows:
1. Report
A..., NIPC..., with registered address at ... n.º..., ...-..., Lisbon, here represented by its management company B... - REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A., with tax identification number ..., and registered address at ..., n.º..., ...-..., Lisbon, hereinafter designated "Claimant", came, pursuant to subsection a) of section 1 of article 2 and sections 1 and 2 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters or "RJAT") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, to submit a request for arbitral pronouncement seeking the declaration of illegality of the "act of withholding at source of Corporate Income Tax ("IRC") n.º..., in the amount of € 144.554,42, relating to the fiscal year 2014", regarding which it submitted an administrative review request that was rejected.
The defendant is the TAX AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 21-03-2017.
Pursuant to subsection a) of section 2 of article 6 and subsection b) of section 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable period.
On 11-05-2017 the parties were duly notified of this appointment and did not manifest any intention to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, section 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Accordingly, in compliance with the provisions of subsection c) of section 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 29-05-2017.
The Tax and Customs Authority submitted a reply in which it raised the dilatory exceptions of lack of prior administrative review request and lack of standing and argued that the claim should be dismissed.
By order of 27-07-2017, a hearing was dispensed with and it was decided that the proceedings would continue with written submissions.
The Parties did not submit written submissions.
The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, section 1, subsection a), and 10, section 1, of Decree-Law no. 10/2011, of 20 January, and is competent.
The parties are duly represented and possess legal personality and capacity (articles 4 and 10, section 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March).
Exceptions of lack of administrative review request and lack of standing were raised, which must be examined as a priority.
The proceedings are not affected by any nullities.
2. Statement of Facts
2.1. Proven Facts
Based on the elements contained in the file and in the administrative proceedings attached to the case, the following facts are considered proven:
- The Claimant is an open real estate investment fund constituted in accordance with and pursuant to Decree-Law no. 316/93, of 21 September and, subsidiarily, the General Regime for Collective Investment Undertakings, published by Law no. 16/2015, of 24 February;
- The Claimant was approved by Ordinance no. 1056/97, of 12 December, having commenced operations on 12 December 1997;
- On 15 December 2014, the Claimant changed its name to "Real Estate Asset Management Fund - A...", previously designated as "Real Estate Asset Management Fund - C...";
- The Claimant, as a real estate investment fund, benefited from the application of the tax regime provided for in article 22 of the Tax Benefits Statute ("EBF"), in the wording that was in effect until the amendments introduced in that statute by Decree-Law no. 7/2015, of 13 January;
- On 24 April 2014, the Claimant submitted a "DECLARATION OF WITHHOLDINGS AT SOURCE" in the appropriate form for "PERSONAL INCOME TAX/CORPORATE INCOME TAX AND STAMP DUTY", indicating the Code "209 - IRC - Investment Funds - article 2 of the EBF", a document with n.º..., and the amount of € 144.554,42 (Document n.º 1, attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- When the Claimant submitted the said declaration of withholding at source relating to IRC for the year 2013, it entered, by mistake, in the "PERIOD" field, "April/2014";
- When the Claimant made the bank transfer to pay the said amount, the personal reference "IRC-2013" was mentioned in the transfer description (Document n.º 4 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 30-04-2014, the Claimant submitted the tax return form 22 relating to the fiscal year 2013 (document n.º 5 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 18 June 2014, the Tax and Customs Authority issued IRC assessment n.º 2014..., relating to the year 2013, with settlement date of 22-07-2014 and document number 2014..., in which, among other things, the following are indicated:
– the amount of € 123.654,22 of "withholdings at source" (line 15);
– the amount of € 144.554,42 of "advance payments" (line 16);
– the amount of "IRC to recover (3 a 7-13+14-15-16)>0" of € 268.208,64 (line 18);
– the amount of € 268.208,64 of "Autonomous taxation" (line 24);
– the "AMOUNT PAYABLE" of € 144.554,42 (document n.º 6 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 10 September 2014, the Claimant sent an email to the Tax and Customs Authority at the email address dsc-dcv-ir@at.gov.pt, in which, among other things, the following is stated:
"The Real Estate Asset Management Fund - C..., tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source - code 209 - IRC-Investment Funds (article 22 of the EBF (document n.º... a copy of which is enclosed) in the amount of 144.554,42 €, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC.
Therefore, it hereby requests from Your Excellency that you consider this assessment as being the payment of IRC requested by the assessment notification 2014... (attached) with final payment deadline of 22 September 2014" (document n.º 7 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 29-10-2014 a citation was issued in the enforcement proceedings n.º...2014..., for forced collection of the amount of € 145.275,73, consisting of € 144.554,42 relating to IRC for the fiscal year 2013, € 175,37 of default interest and € 545,94 of costs (document n.º 8 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 24-11-2014, the Claimant paid the said amount of € 145.275,73 (documents n.ºs 8 and 10 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 12-11-2014, the Claimant, through the electronic service desk of the Tax and Customs Authority, sent, under the designation "Request for information/Clarifications", a request in which, among other things, the following is stated:
"The Real Estate Asset Management Fund - C..., tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source - code 209 - IRC-Investment Funds (article 22 of the EBF (document n.º... a copy of which is enclosed) in the amount of 144.554,42 €, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC.
Therefore, it hereby requests from Your Excellency that you consider this assessment as being the payment of IRC requested by the assessment notification 2014... (attached), which gave rise to proceedings...2014..." (document n.º 9 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 11-12-2014, the Tax and Customs Authority replied to the said request, by the same electronic means, stating, among other things, the following:
"The Tax and Customs Authority (AT) thanks you for your contact.
You must file an administrative review request of the payment slip so that the refund can be made, which will subsequently be applied to the debt in enforcement proceedings". (document n.º 9 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 18-10-2016, the Claimant filed an administrative review request with the FINANCIAL SERVICE OF LISBON - ... - ..., which was assigned number ...2015..., in which it indicated as "TAX ACT":
Payment Slip Number ...
Submission Date 2014-04-24
Amount 144.554,42
Amount Claimed 144.554,42 (document n.º 2 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- In the same review request, the Claimant indicated the following "GROUNDS FOR THE REQUEST":
The Real Estate Asset Management Fund A..., tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source code 209 IRC-Investment Funds - article 22 EBF (payment slip n.º...) in the amount of 144.554,42, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC, which resulted in the institution of proceedings ...2014....
On 24 November 2014 it proceeded to pay the proceedings referred to above.
Therefore, it hereby requests that it be made a refund of the amount paid - 144.554,42 - relating to payment slip n.º..., which was not due" (document n.º 2 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 9 January 2015, the Claimant submitted a new request to the Financial Service of Lisbon - ..., requesting the refund of € 144.554,42 of IRC, stating, among other things, the following:
The A... - Real Estate Asset Management Fund, tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source - code 209 - IRC-Investment Funds (article 22 of the EBF (document n.º... a copy of which is enclosed) in the amount of 144.554,42 €, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC, which resulted in the institution of proceedings ...2014....
On 24 November 2014, it proceeded to pay the proceedings referred to above (proof attached).
Therefore, it hereby requests from Your Excellency that you proceed to refund the amount of tax paid in duplicate – 144.554,42€
With best regards and awaiting approval of the requested relief (document n.º 11 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 10-11-2016, the Tax and Customs Authority sent an email to the Claimant, which is contained in document n.º 12 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced, and states, among other things, the following:
"It is hereby informed that the Declarations of Withholding at Source (multi-tax) relating to item 209 - IRC - Investment Funds (article 22 of the EBF) should have been submitted with the "Period to which the tax relates", in this case the withholding of the tax, with the indication of December of the year to which the withholdings actually relate.
Their submission should occur by the end of April of the year following that to which the withholdings relate, marking only field 209, and payment thereof is permitted until the end of that month, without any penalty or legal increase, as determined by article 22 of the Tax Benefits Statute.
For situations in which payment slips were incorrectly submitted as if they were withholdings from the payment year, the correction of the periods thereof should be requested, for which purpose a request should be sent to the address dsc-dcv-ti@at.gov.pt (this address, despite being discontinued, was exceptionally reactivated for these cases), and therefore clarifications are requested regarding the taxpayer mentioned below".
- On 28-11-2016, the Claimant responded by sending to the Tax and Customs Authority an email which is contained in document n.º 12 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced, and states, among other things, the following:
In response to your email, we clarify that, if the declaration of withholding at source (multi-tax), relating to item 209 - Investment Funds (article 22 of the EBF), had been submitted with the indication of the period of December of the year to which the IRC to be paid related, the Tax and Customs Authority system would immediately assume in the payment slip that the final payment deadline was 20 January of the year following that to which the tax related and not 30 April as established by law in section 1 of article 22 of the EBF, thereby giving rise to additional assessments and undue default and compensatory interest.
In this manner, to overcome the limitations of the Tax and Customs Authority declaration submission system, in the case of Investment Funds, and the constitution of tax debts that in reality did not exist, the declaration was submitted indicating that the tax period was that of the payment month, when in fact the tax period related to the previous year.
Accordingly, following your request, we clarify that:
- On 05-12-2016, the Tax and Customs Authority sent an email to the Claimant which is contained in document n.º 12 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced, and states, among other things, the following:
"Following the clarifications provided, we hereby inform that we have proceeded to correct the period of payment slips ..., ... and ..., as requested
... 2011 - 12 22.070,01 Document regularized 2012-04-28 In voluntary collection 2012-04-21 ...2012 - 12 7.593,58 Document regularized 2013-05-01 In voluntary collection 2013-04-26 ... 2013 - 12 144.554,42 Document regularized 2014-04-29 In voluntary collection 2014-04-24";
- Following this message, no refund was made to the Claimant of either of the two amounts of tax paid by the Claimant;
- On 27 December 2016, the Claimant was notified of the order dismissing the administrative review request issued by the Chief of the Administrative Justice Division, which expresses agreement with information contained in document n.º 3 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced and states, among other things, the following:
"I- DESCRIPTION OF THE REQUEST
REAL ESTATE ASSET MANAGEMENT FUND) – A..., TAX NUMBER: ..., with tax domicile at ... N..., ... - ... Lisbon, hereby submits an administrative review request, pursuant to article 137 of the Corporate Income Tax Code (CIRC) and articles 68 et seq. of the Tax Procedure and Process Code (CPPT), regarding the withholding payment slip n.º..., submitted on 2014-04-24, relating to the year 2014, in the amount of € 144.554,42, on the grounds that it was incorrectly submitted, as this amount corresponds to self-assessment, and therefore requests the refund of the amount paid.
PRELIMINARY ISSUES PRIOR TO CONSIDERATION OF THE MERITS OF THE REQUEST
1. The requesting party has standing in this tax procedure, as it is the taxable person of the tax relationship, pursuant to article 65 of the General Tax Law (LGT) and article 9 of the CPPT.
2. The review request procedure is the appropriate means, pursuant to articles 68 and 99 of the CPPT.
3. The request submitted on 2016-10-18 is timely in accordance with article 70 and subsection a) of section 1 of article 102, both of the CPPT.
4. As of this date there is no knowledge that any judicial challenge has been filed on the subject matter under analysis – section 3 of article 111 of the CPPT (see page 5).
III - DESCRIPTION OF FACTS/ANALYSIS OF THE REQUEST
Having examined the documentation in the proceedings and consulted the database of the Tax and Customs Authority (AT) computer system, it must be reported as follows:
1. In this request the requesting party seeks the refund of the payment made regarding payment slip n.º..., relating to the period of April 2014 in the amount of € 144.554,42.
2. Having examined the withholding payment slip paid, referred to above (see page 6), relating to the period of April 2014, and the IRC assessment for the year 2014 (page 7), the allegations are not substantiated, and moreover the requesting party has not presented any proof as would have been its obligation, and therefore the present claim of the requesting party should be dismissed".
- The Claimant was notified to exercise the right to be heard before the order of dismissal was issued, but did not exercise it within the period that was set;
- The said amount of 144.554,42 was not reflected/deducted as an advance payment of IRC relating to that year in the Claimant's income tax return with reference to 2014, submitted on 27 April 2015 (documents n.ºs 13, 14, 15 and 16 attached with the request for arbitral pronouncement, the contents of which are hereby reproduced);
- On 17-03-2017, the Claimant filed the request for arbitral pronouncement that gave rise to the present proceedings.
2.2. Unproven Facts
There are no facts relevant to the decision of the case that have not been proven.
2.3. Grounds for the Determination of Facts
The proven facts are based on the documents attached by the Claimant with the request for arbitral pronouncement and on the administrative proceedings.
There is no disagreement between the Parties on the factual matters relevant to the decision of the case, which is documentarily proven.
As regards the existence of a mistake on the part of the Claimant in indicating "April/2014" as the "Period" to which the payment relates, it results clearly from the fact that the IRC to be paid for the fiscal year 2014, pursuant to article 22 of the EBF (cited as the grounds for the payment), could not yet exist on 24-04-2014 and should only be assessed and paid by April 2015.
3. Exception of Lack of Prior Administrative Review Request
Pursuant to article 4, section 1 of the RJAT, in the wording of Law no. 64-B/2011, of 30 December, "the binding of the tax administration to the jurisdiction of tribunals constituted in accordance with the present law is dependent on an ordinance of the members of Government responsible for the areas of Finance and Justice, which establishes, in particular, the type and maximum value of disputes covered".
By Ordinance no. 112-A/2011, of 22 March, the Tax and Customs Authority bound itself to arbitral jurisdiction, but in subsection a) of its article 2, the following are excluded from the binding: "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and advance payments that have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Tax Procedure and Process Code".
The Claimant filed an administrative review request, which was assigned number ...2016..., before filing the request for arbitral pronouncement, and was even notified of the dismissal decision, but the Tax and Customs Authority believes that the requirement of administrative review request necessary under that subsection a) was not satisfied, for the following reasons, in summary:
– "In the administrative review request proceeding ...2016... it was argued by the claimant and considered by AT whether the amount delivered corresponded to self-assessment of IRC, with the question of the nature of withholding at source and its allocation to period X not being raised";
– "It was then stated there (in the administrative review request proceeding) that the Claimant submitted the said declaration (and proceeded to pay it) 'when it should have effected self-assessment of IRC'";
– "And, consequently, that was the matter naturally considered: whether the amount delivered corresponded to self-assessment of IRC (concluding that it did not, as the Claimant itself now confirms, arguing that it would be withholdings at source from a different period than declared)";
– "Therefore, prior to the consideration requested by the arbitral tribunal, there was never an administrative pronouncement on the matter of 'withholding at source'".
As is clear from the statement of facts determined, the Claimant repeatedly raised with the Tax and Customs Authority the question of having, by mistake, made a "withholding at source" indicating the year 2014, when it intended to make a self-assessment relating to the fiscal year 2013.
In the administrative review request, the Claimant stated the following:
The Real Estate Asset Management Fund A..., tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source code 209 IRC-Investment Funds - article 22 EBF (payment slip n.º...) in the amount of 144.554,42, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC, which resulted in the institution of proceedings ...2014....
That the withholding at source was made on 24-04-2014 and it was indicated to relate to the payment of IRC for the year 2014, effected pursuant to article 22 of the EBF, appeared from the payment slip itself.
On the other hand, although the text of the administrative review request is not explicit as to which year the "self-assessment" refers to, it makes reference therein to the fact that "it should have effected self-assessment of IRC, which resulted in the institution of proceedings ...2014...", these proceedings being the enforcement proceedings for forced collection of IRC relating to the fiscal year 2013.
The terminology "self-assessment", used to designate the payment to be made by investment funds pursuant to article 22 of the EBF, provided for in its section 6 in the wording in effect in 2014, is the appropriate one, and it is manifestly improper to use the designation indicated in the payment slip that was used, which was intended for "Declaration of withholdings at source".
Accordingly, despite the text not being entirely clear, it contains sufficient elements for the Tax and Customs Authority to understand that the mistake that the Claimant invoked as the grounds of the administrative review request is that of having made a self-assessment of IRC pursuant to article 22 of the EBF indicating it related to the year 2014, when it intended to make the payment of a self-assessment relating to the fiscal year 2013, relating to the amount that became the subject of the enforcement proceedings whose number is indicated in the administrative review request.
Examining the grounds contained in the information on which the decision to dismiss the administrative review request was based, it appears that the Tax and Customs Authority interpreted the text presented by the Claimant as alluding to self-assessment relating to 2014, having apparently not even taken care to verify to which self-assessment the proceedings n.º...2014... referred, expressly cited, nor even having requested any clarification from the Claimant, although it was evident that payment of a self-assessment of IRC relating to 2014 could not be made on April 24, 2014, pursuant to article 22 of the EBF.
In this context, it is clear that the Claimant raised with the Tax and Customs Authority in the administrative review request the question that it raises in the present proceedings, which is that of, by mistake, having indicated in a payment slip intended for declaration of withholdings at source, the amount of € 144.554,42, as relating to the fiscal year 2014, when it intended to make the payment of that amount, in accordance with article 22 of the EBF, following the self-assessment it had made relating to the fiscal year 2013, which amount was the subject of the enforcement proceedings that it cited in the administrative review request.
Furthermore, that this was the Claimant's intention is explicitly evident from the fact that it has presented its claim to the Tax and Customs Authority twice already, in the email messages contained in document n.º 7 and in the request submitted through the electronic service desk contained in document n.º 9, in which it is stated, in the first case:
The Real Estate Asset Management Fund – C..., tax identification number..., by mistake on 24 April 2014 submitted the declaration of withholdings at source - code 209 - IRC-Investment Funds (article 22 of the EBF (document n.º... a copy of which is enclosed) in the amount of 144.554,42 €, and proceeded to pay it on the same date, when it should have effected self-assessment of IRC.
Therefore, it hereby requests from Your Excellency that you consider this payment as being the payment of IRC requested by the assessment notification 2014... (attached) with final payment deadline of 22 September 2014. (emphasis ours).
In the second case, the first paragraph is reproduced and it is stated in the second:
Therefore, it hereby requests from Your Excellency that you consider this payment as being the payment of IRC requested by the assessment notification 2014... (attached), which gave rise to proceedings ...2014....
The same claim was presented by the Claimant in the request submitted to the Financial Service of Lisbon... on 09-01-2015 (document n.º 11).
Furthermore, it is evident from the email sent by the Tax and Customs Authority to the Claimant on 10-11-2016 that it understood exactly what is at issue, by stating:
"It is hereby informed that the Declarations of Withholding at Source (multi-tax) relating to item 209 - IRC - Investment Funds (article 22 of the EBF) should have been submitted with the "Period to which the tax relates", in this case the withholding of the tax, with the indication of December of the year to which the withholdings actually relate.
Their submission should occur by the end of April of the year following that to which the withholdings relate, and payment thereof is permitted until the end of that month, without any penalty or legal increase, as determined by article 22 of the Tax Benefits Statute.
For situations in which payment slips were incorrectly submitted as if they were withholdings from the payment year, the correction of the periods thereof should be requested, for which purpose a request should be sent to the address dsc-dcv-ti@at.gov.pt (this address, despite being discontinued, was exceptionally reactivated for these cases), and therefore clarifications are requested regarding the taxpayer mentioned below".
Therefore, despite the terminological imprecisions, the Claimant's claim was presented several times to the Tax and Customs Authority, and it is even certain from this last document that it understood perfectly what was at issue, which was a mistake in the submission of the tax payment made on 24-04-2014, as relating to the year 2014 when it actually related to the year 2013.
On the other hand, the payment slip in question expressly refers to what payment the mistake invoked relates to, as it is indicated that it concerns "IRC – Investment Funds (article 22 of the EBF), and it is thus perfectly clear that it was not a withholding at source in the proper sense, but rather a payment made in the context of section 6 of article 22 of the EBF, in the wording of Law no. 66-B/2012, of 31 December, in effect in 2014.
Accordingly, it is concluded that, in addition to the requirement of administrative review request provided for in article 2, subsection a), of Ordinance no. 112-A/2011, of 22 March, having been formally satisfied, the claim was even presented several times to the Tax and Customs Authority, in terms that substantiate materially an administrative review request (administrative challenge of an act of tax payment self-assessed by the taxpayer). In fact, in view of the requests referred to presented by the Claimant, which corresponded to typical claims of the administrative review request procedural means, it was even the obligation of the Tax and Customs Authority, imposed by article 52 of the CPPT, to proceed ex officio to the conversion of the requests into an administrative review request.
Therefore, the exception of lack of prior administrative review raised by the Tax and Customs Authority is without merit.
4. Exception of Lack of Standing
The Tax and Customs Authority raises the exception of lack of standing of the Claimant, claiming that it is a tax substitute.
It is evident that this assertion has no correspondence with reality, as the Claimant did not pay IRC that it had withheld from anyone in the capacity of a tax substitute, but rather made the payment of a tax for which it was itself liable, as evidenced by the payment slip through which the payment was made, in which, although it is the proper form for payment of withholdings at source, it expressly states that it relates to "IRC – Investment Funds (article 22 of the EBF)".
On the other hand, the only tax identification number indicated in the payment slip is that of the Claimant itself, and therefore there is no basis for asserting that the Claimant acted as a substitute for some substitute, who is unidentifiable.
Accordingly, as the Claimant invokes that it made its own payment by mistake and that from this results a situation of harm to its legal sphere, it is evident that it has standing to intervene in the present proceedings, in accordance with the provisions of articles 65 of the LGT and sections 1 and 4 of article 9 of the CPPT, subsidiarily applicable, by virtue of the provision in subsection c) of section 1 of article 29 of the RJAT, standing which, moreover, was even expressly recognized by the Tax and Customs Authority in the decision on the administrative review request.
Moreover, the recognition of this standing is in harmony with the right to effective judicial protection against harmful acts, constitutionally recognized (articles 20, section 1, and 268, section 4, of the CRP).
For the foregoing reasons, the exception of lack of standing is without merit.
5. Consideration of the Merits of the Request for Arbitral Pronouncement
As is clear from the statement of facts determined, despite the terminological imprecisions used by the Claimant, it is clear that what is at issue is an obvious mistake in the payment slip submitted to the Tax and Customs Authority on 24-04-2014, relating to the payment of IRC made by an Investment Fund, in accordance with article 22 of the EBF, as expressly stated therein.
Article 22 of the EBF, in the wording in effect in 2014, introduced by Law no. 66-B/2012, of 31 December, established the following:
6 - The income of real estate investment funds, which are constituted and operated in accordance with national legislation, are subject to the following tax regime:
a) In the case of real estate income, which does not relate to social housing subject to legal regimes of controlled costs, there shall be autonomous taxation at the rate of 25%, which applies to net income after the deduction of maintenance and conservation costs actually incurred, duly documented, as well as of municipal property tax, with the payment of the tax to be made by the respective management company by the end of April of the year following that to which it relates, and any tax withheld being considered as an advance payment of this tax; (emphasis ours)
Given this regime provided for in article 22, the mistake in the indication of the year is evident, as the payment of IRC by investment funds, pursuant to article 22 of the EBF cited in the payment slip, had to be made, pursuant to section 6, "by the end of April of the year following that to which it relates".
Therefore, it is evident that in April 2014 the Claimant could not be paying, pursuant to the aforesaid article 22 of the EBF, the IRC for 2014, which could not even yet be determined, in an entity whose fiscal years corresponded to the calendar year, pursuant to article 8 of the CIRC, something that was necessarily within the knowledge of the Tax and Customs Authority.
In this context, as the amount paid through this payment slip is precisely the amount that had to be paid for the year 2013, pursuant to the assessment that the Tax and Customs Authority was subsequently to issue, it must be concluded with certainty that the Claimant intended to pay the IRC for 2013, pursuant to the aforesaid article 22 of the EBF, and indicated by mistake in the field destined to refer to the "Period" to which the payment relates, the month of "April/2014".
The abnormality that consists of the use for this purpose of a form intended for payment of withholding at source does not affect the evidence of the said mistake and the materiality of the act of self-assessment of IRC in accordance with the aforesaid article 22 of the EBF, and the consequent payment to which the payment slip was intended.
Accordingly, as no IRC debt relating to this same year could exist on 24-04-2014, pursuant to article 22 of the EBF, the self-assessment made, under the designation of withholding at source, is affected by a defect of violation of law, by error regarding the factual and legal assumptions, as it is in dissonance with reality and is incompatible with the regime of section 6 of article 22 of the EBF.
This defect justifies the annulment of the aforementioned self-assessment relating to the fiscal year 2014 (carried out under the designation of withholding at source), in accordance with the provision in article 135 of the Administrative Procedure Code of 1991, in effect at the time this act was performed.
6. Refund of the Amount Paid and Compensatory Interest
The Claimant requests the refund of the tax with compensatory interest.
As is clear from the foregoing, there is an illegality of the self-assessment, carried out under the designation of withholding at source, and of the decision on the administrative review request that upheld it.
The amount due relating to IRC for the year 2013 was paid in the context of the enforcement proceedings, as stated in the statement of facts determined.
Accordingly, in view of the payment of IRC made on the basis of the payment slip contained in document n.º 1 attached with the request for arbitral pronouncement, it must be concluded that the payment made was not due for the year 2014, to which it related, and is also no longer due for the fiscal year 2013.
Therefore, following the annulment of the self-assessment made, the Claimant has the right to the refund of the amount improperly paid, which results from the annulment, and is supported by articles 24, section 1, subsection b), of the RJAT and 100 of the LGT.
As regards compensatory interest, in accordance with the provision in subsection b) of article 24 of the RJAT, the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the Tax Administration as of the expiration of the period set for appeal or challenge, and the latter must, in the exact terms of the merits of the arbitral decision in favor of the taxable person and until the expiration of the period set for spontaneous execution of judgments of tax courts, "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose", which is in harmony with the provision in article 100 of the LGT [applicable by virtue of the provision in subsection a) of section 1 of article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of full or partial success of an administrative review request, judicial challenge or appeal in favor of the taxable person, to the immediate and full restoration of the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, as of the expiration of the period for execution of the decision".
Although article 2, section 1, subsections a) and b), of the RJAT uses the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals operating in CAAD, not referring to condemning decisions, it should be understood that the jurisdiction comprises the powers that, in judicial challenge proceedings, are attributed to tax courts, and this is the interpretation that is in harmony with the purpose of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as a first guiding principle, that "the arbitral tax process must constitute an alternative procedural means to judicial challenge proceedings and to actions for the recognition of a right or legitimate interest in tax matters".
Judicial challenge proceedings, although essentially a process of annulment of tax acts, does admit condemnation of the Tax Administration to pay compensatory interest, as appears from article 43, section 1, of the LGT, in which it is established that "compensatory interest is due when it is determined, in an administrative review request or judicial challenge, that there was an error attributable to the authorities resulting in payment of the tax debt in an amount greater than legally due" and article 61, section 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to section 2 in the original wording), which establishes that "if the decision recognizing the right to compensatory interest is judicial, the period for payment is counted as of the beginning of the period for its spontaneous execution".
Accordingly, section 5 of article 24 of the RJAT, in stating that "payment of interest, regardless of its nature, is due in accordance with the terms provided for in the general tax law and in the Tax Procedure and Process Code", should be understood as permitting the recognition of the right to compensatory interest in arbitral proceedings.
The substantive regime for the right to compensatory interest is regulated in article 43 of the LGT, which establishes, insofar as relevant here, the following:
Article 43
Improper Payment of the Tax Obligation
1 – Compensatory interest is due when it is determined, in an administrative review request or judicial challenge, that there was an error attributable to the authorities resulting in payment of the tax debt in an amount greater than legally due.
2 – An error attributable to the authorities shall also be considered to exist in cases in which, although the assessment is made based on the declaration of the taxpayer, the latter has followed, in its completion, the generic guidance of the tax administration, duly published.
The illegality of the decision on the administrative review request is attributable to the Tax Administration, which dismissed it on its own initiative.
However, the error affecting the self-assessment (carried out under the designation of withholding at source) is attributable to the Claimant, which carried it out on its own initiative.
Therefore, as regards the self-assessment there was no error attributable to the authorities, and consequently there is no right to compensatory interest resulting from its performance.
However, the same does not apply to the decision on the administrative review request, as the Claimant's claim should have been accepted.
This situation of the Tax and Customs Authority maintaining a situation of illegality, when it should have restored it, should be framed, by mere declaratory interpretation, in section 1 of article 43 of the LGT, as it is a situation in which there is an adequate causal link between an error attributable to the authorities and the maintenance of an improper payment and the omission to restore legality when the action that would restore it should be performed must be equated to the action. [1]
In the case at hand, the administrative review request was filed on 18-10-2016 and dismissed on 23-12-2016, within the legal period provided for in section 1 of article 57 of the LGT, and therefore as from this date compensatory interest begins to accrue.
Compensatory interest is due, in accordance with articles 43, sections 1 and 4, and 35, section 10, of the LGT, 61, section 5, of the CPPT, 559 of the Civil Code and Ordinance no. 291/2003, of 8 April, at the legal default rate, and calculated from 24-12-2016 until the date of processing of the respective credit note.
7. Decision
Accordingly, this Arbitral Tribunal agrees on the following:
- To find the request for arbitral pronouncement to be well-founded;
- To annul the act designated as withholding at source relating to the fiscal year 2014 of Corporate Income Tax ("IRC"), embodied in document n.º..., in the amount of € 144.554,42, relating to the fiscal year 2014;
- To condemn the Tax and Customs Authority to refund to the Claimant the amount of € 144.554,42, plus compensatory interest, as from 24-12-2016, in the terms referred to in section 6 of this decision;
8. Value of the Dispute
In accordance with the provision in article 305, section 2, of the Code of Civil Procedure and 97-A, section 1, subsection a), of the CPPT and section 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the dispute is fixed at € 144.554,42.
9. Costs
Pursuant to article 22, section 4, of the RJAT, the amount of costs is fixed at € 3.060,00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.
Lisbon, 17-10-2017
The Arbitrators
(Jorge Lopes de Sousa)
(Maria Celeste Cardona)
(José Sampaio e Nora)
[1] ANTUNES VARELA, On General Obligations, 10th edition, page 528:
"Omission, as a purely negative attitude, cannot physically or materially generate the damage suffered by the injured party; however, it is understood that omission is the cause of damage whenever there is a special legal duty to perform an act that, certainly or very probably, would have prevented the occurrence of that damage".
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