VAT Additional Assessment Annulled: Right of Action Expiry and Excusable Error in CAAD Case 197/2016-T

ARBITRAL DECISION

The arbitrators Fernanda Maçãs (president arbitrator), António Sérgio de Matos and Júlio Tormenta (member arbitrators), appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 13-06-2016, agree as follows:

I. Report

1. A…, hereinafter referred to as "Claimant", Tax Number…, with registered office at Avenue…, …-… …, following the dismissal of the Gracious Complaint duly submitted by it against the tax act for additional assessment of Value Added Tax (hereinafter referred to as "VAT") no. 2015…, with reference to the period 201409T, in the total amount of € 65,742.75, which it attaches as Document 1, has, pursuant to subparagraph a) of paragraph 1 of article 2 and paragraphs 1 and 2 of article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters or "LRATM") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, requested the constitution of an Arbitral Tribunal, in which the Tax and Customs Authority (hereinafter referred to as "TCA") is the Respondent, with a view to the declaration of illegality and annulment of the said act for additional assessment of VAT, as well as the dismissal of the aforementioned Gracious Complaint.

2. The Claimant requests:

a) that the illegality of the dismissal of the Gracious Complaint above identified be declared, as well as the illegality of the corrections in VAT matters above identified and of the act for additional assessment of VAT also above identified, relating to the tax period 201409T, with its consequent annulment, with all legal consequences, namely the condemnation of the TCA to refund € 65,742.75 and to payment of compensatory interest;

b) alternatively, and insofar as it is not clear to the Arbitral Tribunal, notwithstanding the Community case-law already produced on the matter, the scope of articles 167, 168, 169, 173, 174, 175 and 179 of the VAT Directive, or of any other provision of this Directive that may in its judgment interfere with the proper solution of this case, that this Arbitral Tribunal promote a preliminary ruling, of the questions that it considers to raise, to the Court of Justice of the European Union (hereinafter referred to as "CJEU"), as provided for in subparagraph b) paragraph 3 of article 19 and article 267, both, of the Treaty on the Functioning of the European Union.

1. The request for constitution of the Arbitral Tribunal was accepted by the President of the CAAD and automatically notified to the TCA on 31-03-2016.

In accordance with the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of the LRATM, in the version 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 Counselor Judge Maria Fernanda dos Santos Maçãs, Dr. António Sérgio de Matos, and Dr. Júlio Tormenta, who communicated acceptance of the appointment within the applicable period.

On 25-05-2016 the parties were duly notified of this appointment, and did not manifest any will to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11 paragraph 1 subparagraphs a) and b) of the LRATM and articles 6 and 7 of the Deontological Code.

Thus, in compliance with the provision of subparagraph c) of paragraph 1 of article 11 of the LRATM, in the version introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective Arbitral Tribunal was constituted on 14-06-2016.

1. In support of its claims the Claimant alleges, in summary:

a) The present request is timely insofar as the Claimant was notified of the dismissal of the Gracious Complaint previously submitted, on 28 December 2015 (cf. Document 2);

b) The act for additional assessment of VAT no. 2015…, of 13 June 2015, proceeds to the additional assessment of the amount of € 65,742.75, which resulted in the granting of a tax refund in the amount of € 39,802.84, less than that requested in the periodic VAT return relating to the period 201409T (cf. Document 1);

c) Such assessment act is based on erroneous factual and legal assumptions regarding the exercise of the right to deduct the VAT incurred by the Claimant for the purposes of its activity, during the year 2012, severely restricting the exercise of such right and compromising the neutrality which constitutes the cornerstone of the regulation of that tax;

d) The TCA considers that, in the present case, "in view of an alteration of the method of tax deduction in a mixed taxable person and in view of a VAT regularization on real property and other fixed assets, the periods to be observed are those found in arts. 23 and 24 of the VAT Code", i.e., in the return for the last period of the year to which they relate, however such understanding is shown to be incompatible with the provisions of the VAT Code concerning the period for effectuating the right to deduct this tax;

e) Having regard to the prescription in paragraph 2 of article 98 of the VAT Code, the four-year regularization period mentioned there constitutes the maximum limit, par excellence, for the deduction of VAT, which encompasses all situations not included in special provisions, namely those contained in article 78 of the VAT Code, which, as the TCA itself defends – a position with which the Claimant agrees – is not applicable to the present case;

f) As a result of the absence of a special provision contained in the VAT Code that provides for a period for the deduction of tax incurred in the situations subject to analysis – i.e., in situations where the taxable person does not correctly classify its taxable operations – the general four-year period should be taken as reference, which results from the aforesaid paragraph 2 of article 98 of the Code of that tax;

g) Thus, the understanding established by the TCA cannot prevail that the Claimant should have deducted and regularized in its favor the tax incurred in the year 2012 within the periods established by paragraph 6 of article 23 and paragraph 8 of article 24 of the VAT Code, that is, until the return for the last period of the year to which it relates;

h) Such restriction also violates the most elementary of the principles of VAT discipline, namely that of neutrality, which requires, in the words of the Counselor Judges of the Supreme Administrative Court ("SAC") in Judgment of 7 October 2015, delivered in case 01455/12, that "all restrictions on the right of deduction must be interpreted restrictively and reduced to the minimum";

i) It results from the case-law produced by the CJEU, which is adopted by the SAC, that although the Member States of the European Union may subordinate the exercise of the right to deduction to certain conditions, these cannot, by their number, technicality or disproportionality, make impossible or render excessively difficult the exercise of the right, since, as the SAC rightly notes, "aims to realize the purpose of neutrality pursued by the tax";

j) It is not reasonable or even acceptable that taxable persons who adopt deduction methods such as pro rata and actual allocation, which are deduction methods with rules that are difficult to grasp and with a high degree of associated technicality (namely due to the fact that the TCA itself misled taxable persons by making an incorrect interpretation of how to determine the pro rata and actual allocation), are still limited to correcting the deduction effected by it in the circumstances of the present case in the return for the last period of the year to which the deduction relates;

k) The understanding of the TCA in this respect should not be accepted, and should further be considered illegal, by violation of the principle of primacy of European Union Law (cf. paragraph 4 of article 8 of the Constitution of the Portuguese Republic), the Circular Letter no. 30082, of 17 November 2005, where the TCA conveys the said position;

l) Indeed, the periods provided for in paragraph 6 of article 23 and paragraph 8 of article 24, both, of the VAT Code, are intended exclusively for the correction of the percentage of the pro rata or the criterion of actual allocation from provisional to definitive and also for the correction of the regularization on fixed assets dependent on those deduction methods, and not for correction of the deduction effected by taxable persons based on misclassification error;

m) The pathological situations, such as the one in the present case, which derive from material errors or misclassification errors of taxable persons and which result in incorrect deduction of the tax incurred by them, have legal provision in paragraph 6 of article 78 (for material or calculation errors) and paragraph 2 of article 98 (for misclassification or legal errors, as occurs in the present case), both of the VAT Code;

n) The error committed by the Claimant does not constitute a material or calculation error, in accordance with paragraph 6 of article 78 of the VAT Code, but rather an error in the classification of its operations, an error in the premises, which finds its provision in the general framework of article 98 of the VAT Code which establishes as the time limit (and reasonable one, it should be added) for effectuating the right to deduct VAT four years after the birth of that right;

o) In view of the foregoing, it should be concluded that the Claimant has the right to deduct the additional amount of tax incurred by it during the year 2012 as a result of the revision of its deduction methodology that it effected concerning the period in reference, and the Circular Letter no. 30082, of 17 November 2005, on which the TCA bases itself to refuse such correction, is inapplicable to the present case, and which, moreover, does not have, nor could have, external effect, given the limits imposed by the requirement of legal reserve of the Assembly of the Republic with respect to the legislative competence in matters of "taxpayer safeguards" provided for in paragraph 2 of article 103 of the Constitution of the Portuguese Republic and the inherent violation of the principle of legality.

1. The TCA presented a Response and attached the instructing file, invoking, in summary:

By Exception:

a) The untimeliness/expiry of the request for arbitral pronouncement, which it bases on the fact that the arbitral request was submitted on 30-03-2016 (18:20) to the Centre for Administrative Arbitration (CAAD), and the Claimant itself admits untimeliness, by requesting finally that the present petition be admitted, by means of payment of the fine referred to in subparagraph a) paragraph 5 of article 139 of the CPC, allegedly under article 3-A paragraph 2 of the LRATM;

b) As is settled in case-law, both arbitral and judicial, the periods for bringing an action are substantive periods, of expiry and not adjective or procedural, since without the bringing of the respective action, there is no place for the application of any procedural period, only in view of the non-existence of a case that would allow the application of such period, in the present case, subparagraph a) paragraph 5 of article 139 of the CPC (a thesis which it supports with excerpts from two judgments delivered in arbitral proceedings and one from the SAC);

c) The request for arbitral pronouncement should be submitted within a period of 90 (ninety) days, counted from the date of notification of the dismissal of the Gracious Complaint submitted, as results from the combined provisions of subparagraph a) paragraph 1 of article 10 of the LRATM and subparagraph b) paragraph 1 of article 102 of the Code of Tax Procedure and Process (CTPP);

d) The Claimant, as it rightly states, was notified of the dismissal of the Gracious Complaint on 28 December 2015, having for that purpose signed the respective Notice of receipt - cf. article 3 of the Request for arbitral pronouncement, document 2 and PA – whereby the 90-day period that it had to submit the Request for Arbitral Pronouncement terminated on 29-03-2016 and not on 30-03-2016, the date on which it submitted it.

e) For which reason the present request for arbitral pronouncement is manifestly untimely, with the right of action of the Claimant having already expired on 30-03-2016 (date of entry of the Request at the CAAD), the expiry of the right of action being a dilatory exception that prevents the continuation of the case, in accordance with the provisions of paragraph 2 of article 576 of the CPC, applicable ex-vi subparagraph c) of article 29 of the LRATM;

f) Such dilatory exception is insuperable, since the assessment act whose illegality is requested by the Claimant is unsusceptible to being challenged again, by virtue of the said expiry of the right of action, and therefore, the Respondent should be absolved of the present instance in accordance with paragraph 2 of article 576 of the CPC, applicable ex-vi subparagraphs c) and e) of article 29 of the LRATM.

By Impugnation

g) The principles underlying the right to deduct VAT are set forth in articles 17 to 20 of Directive 77/388/CEE, of the Council, of 17/5/1977, commonly called the Sixth Directive, and are equally enshrined in articles 19 to 25 of the VAT Code;

h) But, from the outset, it is suggested that what is at issue in the case is not the suppression, tout court, of the right to deduction, but rather the non-observance of the period that taxable persons have to regularize the tax in their favor, being, therefore, paragraph 6 of article 23 and paragraph 8 of article 24, both of the VAT Code, procedural rules of Portuguese internal law, which not only conflict with the aforesaid Community Directive but serve its purpose and spirit;

i) Taxable persons can carry out operations that grant the right to deduction and, simultaneously, operations that do not grant that same right, qualifying themselves, for VAT purposes, as mixed taxable persons, whereby the need arises to determine the amount, both of the deductible tax and of that which is not deductible, cases in which taxable persons must, in the first place, proceed to direct allocation of expenses, as results from the articulation of the rules of articles 20 to 23 of the VAT Code;

j) Only in a later phase, to calculate the quantum of the right to deduct the VAT borne in the acquisition of goods and services, does article 23 of the Code on Value Added Tax provide for two methods: the actual allocation method and the percentage or pro rata method, and the criterion for choosing between them is subjective, that is, depends on the person carrying out the operations;

k) The actual allocation method consists in the possibility of deducting all the VAT borne in the acquisition of goods and services intended for activities that grant the right to deduction and in the prevention of deduction of the tax borne in operations that do not grant that right, only with the exception resulting from expenses enumerated in article 21 of the Code on Value Added Tax;

l) But taxable persons can also opt for the deduction percentage method or the pro rata method, which involves greater simplicity, a method in which the deductible VAT is determined in proportion to the percentage corresponding to the annual amount of operations that grant that right to deduction;

m) Thus, the pro rata results in a fraction in which the numerator is constituted by the annual amount, exclusive of VAT, of operations that grant the right to deduction in accordance with article 19 and paragraph 1 of article 20 of the Code on Value Added Tax, and the denominator by the annual amount, equally without VAT, of all operations carried out by the taxable person, including exempt operations or outside the scope of the tax, namely untaxed subsidies, which are not equipment subsidies;

n) This pro rata or deduction percentage method has been established as the general and subsidiary method, to be used whenever another method should not apply (by choice of the taxable person or by imposition of the TCA) in accordance with legally established terms, from the outset, because it is not certain that the pro rata method can be used, insofar as the quotient or deduction percentage (pro rata) referenced is a criterion that reflects the proportionality of operations that grant the right to deduction in all operations carried out and the TCA can depart from that method in accordance with the provisions of subparagraph b) paragraph 3 and paragraph 2 of article 23 of the VAT Code, if it understands that the application of that method leads to significant distortions;

o) It happens that, regardless of the deduction method adopted, taxable persons can have VAT expenses allocated, jointly or simultaneously, to economic activities subject, or not, to tax, and even to non-economic and untaxed activities;

p) Exercising this option, the Claimant determined in 2014 a pro rata on common expenses, wishing to apply it retroactively to the percentages determined in the years 2012 and 2013, which it was prevented from doing, since the pro rata to be applied during a given year presupposes the determination of the provisional pro rata in the prior year, with its correction subsequently being made at the end of the year, taking as the calculation basis the actual values of the transfers of goods and services (definitive pro rata);

q) Hence, the regularizations of tax are only due after the calculation of that definitive pro rata, with there being a regularization in favor of the State if the definitive percentage proves to be lower than the provisional percentage used in the year (field 41 of the DR), within the period of four years, whereas if the definitive percentage of the year proves to be higher than the provisional percentage used in the year, there will be a regularization in favor of the taxable person (field 40 of the DR), within the period of two years, being therefore entirely pertinent the reference in the Report to the absence of calculation by the Respondent of the provisional pro rata;

r) Taxable persons using the pro rata deduction method must also proceed to a multi-year regularization of the tax deducted relating to movable and immovable assets of their fixed assets (article 24 of the VAT Code) and the Claimant did not act in conformity in this aspect either;

s) Both the regularization of the definitive pro rata and the regularization of the tax deducted relating to movable assets of the fixed assets must be included in the return for the last period of the year to which it relates, since this is what is determined by the rules of paragraph 6 of article 23 and paragraph 8 of article 24, both of the VAT Code, and it is only the non-observance of this period that cannot be altered either by initiative of the TCA or by initiative of taxable persons, which is what is at issue in the case;

t) The TCA cannot agree with the Claimant as to the thesis of "Misclassification error": such error only exists when there is a false representation of reality or ignorance of circumstances of fact or of law, which does not seem to merit acceptance in the present case because the Claimant unequivocally chose to apply the actual allocation method and not the pro rata method to determine the deductible tax of its inputs because it considered that this was the method most favorable to its interests;

u) Even though it can claim that it was unaware of the possibility of determining a deduction percentage relating to common costs, it derives from the law, whereby if the Claimant did not make use of it in a timely manner, it cannot but suffer the consequence of its preclusion.

Regarding Compensatory Interest

The TCA alleges that: if the right to compensatory interest provided for in paragraph 1 of article 43 of the General Tax Law (GTL), deriving from judicial annulment of an assessment act, depends on the demonstration of error concerning the factual or legal premises attributable to the TCA, it appears that the TCA is not obliged to pay, on that basis, any amount to the Claimant, since, in light of all that has been stated, that error did not occur in the present case.

Regarding the Preliminary Ruling

The TCA maintains that this should only occur in view of a concrete rule and of a concrete and well-founded interpretative doubt of that rule, and not concerning abstract rules of the VAT Code that may interfere with the "proper solution of this case", reason for which it understands that such request should be dismissed.

Considering that the position of the parties is clearly defined in the case, the Respondent requested the waiver of the arbitral meeting provided for in article 18 of the LRATM, as well as the waiver of oral testimony, insofar as it constitutes a useless act, as well as the submission of arguments, since the position of the parties is widely and clearly defined.

It concludes by the legal conformity of the act subject to the present request, saying that the claim formulated is lacking merit and consequently, and as a consequence, it alleges that the dilatory exception of expiry should apply, absolving the Respondent of the instance, or, alternatively, that the arbitral request is unfounded, with the Respondent absolved of the same.

1. By order of 05-08-2016, the Claimant was notified to exercise, if it wished, the right to reply regarding the matter of exception raised, as well as to specify the factual aspects of the Arbitral Request concerning which it intends to produce oral testimony.

It replied by request, of 09-08-2016, in which it defends the non-expiry of its right of action, alleging, in short:

a) Despite the provisions of paragraph 1 of article 10 of the LRATM and paragraphs 1 and 2 of article 102 of the CTPP, the fact is that such regime was altered by Law 64-B/2011 of 30/12, by Law 64-B/2011 of 30/12, by Law 20/2012 of 14/05 and by Law 66-B/2012 of 31/12, and this latter law (which approved the State Budget/2013), as to periods, added article 3-A to the LRATM which provides as follows:

"1 – In arbitral proceedings periods are counted in accordance with the Code of Administrative Procedure with the necessary adaptations;

2 – Periods for the practice of acts in arbitral proceedings are counted in accordance with the Code of Civil Procedure;"

b) In view of this distinction of the law itself, it appears to the author of the present pronouncement that the constitution of the Arbitral Tribunal, not being yet part of the arbitral proceeding proper, is part of the arbitral procedure that precedes it, and therefore the 90-day period provided for in article 10 of the LRATM, in light of the alteration introduced by article 3-A of Law 66-B/2012, should be considered in business days, ex-vi subparagraph c) of article 87 of the CPA;

c) Hence, the right of action has not expired;

As a mere precaution, and even if this is not understood,

d) Article 29 of the LRATM considers that the rules on proceedings in the administrative and tax courts are of subsidiary application to the arbitral tax proceeding;

e) In accordance with article 58 of the CTAC (Code of Procedure in Administrative Courts), if the period for challenging annullable acts is three months in accordance with subparagraph b) paragraph 1 of the above rule, subparagraph c) of paragraph 3 of the same rule provides that the challenge is admissible beyond that period "having regard to the ambiguity of the applicable normative framework";

f) Now, if it were true – which is assumed without conceding – that the constitution of the Arbitral Tribunal had to be (sic) requested within a period of 90 days (consecutive) of the facts provided for in paragraphs 1 and 2, both, of article 102 of the CTPT, in light of the alteration introduced by article 3-A of the LRATM, the delay (moreover of only 1 day) would have to be considered excusable, ex-vi subparagraph c) paragraph 3 of the CTAC, applicable subsidiarily."

II. Clarification

1. The Arbitral Tribunal is properly constituted and is materially competent, in accordance with subparagraph a) of paragraph 1 of article 2 of Decree-Law no. 10/2011, of 20 January.

2. The Parties have personality and judicial capacity, are entitled to bring proceedings and are legally represented (cf. article 4 and paragraph 2 of article 10 of Decree-Law no. 10/2011 and article 1 of Ordinance no. 112/2011, of 22 March).

Having regard to the tax administrative proceeding, a copy of which was sent by the Respondent, and the documentary evidence attached to the case, it is now necessary to present the factual matter relevant to the understanding of the decision, which is fixed in the following terms:

REGARDING THE EXCEPTION RAISED by the Respondent

Having regard to the provisions of paragraph 1 of article 608 of the CPC, applicable here by virtue of subparagraph e) paragraph 1 of article 29 of the LRATM, it should be known previously whether the said exception is well-founded or not, since, in view of the aforesaid rule, it is important, in the first place, to know of the procedural issues that may determine the absolution of the instance or of the claim.

The LRATM does not contain its own regime concerning exceptions and procedural nullities, applying in this matter, as subsidiary, the provisions of the CTPP, the CTAC and the CPC, as results from the provisions of subparagraphs a), c) and e) paragraph 1 of article 29 of the LRATM.

REGARDING THE EXCEPTION OF EXPIRY OF THE RIGHT OF ACTION

1. In the Response, the Respondent raised, as aforementioned and made explicit, the question of untimeliness/expiry of the request for arbitral pronouncement, based on the transgression of the period of 90 (ninety) days, counted from the date of notification of the dismissal of the Gracious Complaint submitted, in light of the combined provisions of subparagraph a) paragraph 1 of article 10 of the LRATM and subparagraph b) paragraph 1 of the Code of Tax Procedure and Process (CTPP).

This is what must be assessed and decided immediately.

1. For this purpose, the following facts must be considered:

a) The Claimant was notified of the dismissal of the Gracious Complaint on 28 December 2015, having for that purpose signed the respective Notice of receipt - cf. article 3 of the Request for arbitral pronouncement, document 2 and PA;

b) The Arbitral Request was submitted on 30-03-2016 (18:20) to the Centre for Administrative Arbitration (CAAD), as results from the information system supporting the activity of the Centre itself;

c) The Claimant requests, under paragraph 2 of article 3-A of the LRATM and subparagraph a) paragraph 5 of article 139 of the CPC, that the present petition be admitted, for which purpose paying the corresponding fine.

1. In accordance with the combined provisions of subparagraph a) paragraph 1 of article 10 of the LRATM and subparagraph b) paragraph 1 of article 102 of the CTPP, the Claimant had a period of 90 days to initiate the challenge action, by submission of an Initial Petition.

2. The moment of the start of the counting of such period of 90 days coincides with the moment of notification of the dismissal of the Gracious Complaint concerning the additional assessment of Value Added Tax ("VAT") no. 2015 … of 13-06-2016 relating to the reference period for tax of 2014 09T.

3. The notification to which reference is made in the pleadings and documents – dismissal of the Gracious Complaint relating to the additional assessment of Value Added Tax ("VAT") no. 2015 … of 13-06-2016 relating to the reference period for tax of 2014 09T – was effected by registered mail with notice of receipt through the Office of the Tax Department of … no. … of 23/12/2015 – cf. document 2 attached to the Request for Arbitral Pronouncement and page 176 of PA (contained in the file PA –A… …14.PDF) - which is in consonance with the provisions of article 38 of the CTPP.

4. In accordance with paragraph 3 of article 39 of the CTPP, where notifications are effected with notice of receipt, which is the situation in the disputed case concerning the Gracious Complaint above, the notification is considered effected on the date when the notice of receipt is signed.

5. In accordance with the evidential material brought into the case, the Notice of receipt was signed on 28 December 2015 – cf. article 3 of the Request for Arbitral Pronouncement; page 177 of PA (contained in the file PA – A… …15.PDF); query to the CTT website at the CTT RF registration … …PT[1] contained in page 177 of PA and article 18 of the Response – and, consequently, the date on which the notification of the express dismissal of the Gracious Complaint relating to the additional assessment of Value Added Tax ("VAT") no. 2015 … of 13-06-2016 relating to the reference period for tax of 2014 09T occurred is 28 December 2015, with the peremptory period of 90 days beginning on the following day, that is, 29 December 2015.

6. The question to be decided in the present arbitral proceeding regarding the counting of the 90-day period for the purposes of bringing an action is to ascertain the nature thereof, that is, whether we are dealing with a substantive period, of expiry, or an adjective/procedural one, with a view to verifying whether the Request for Arbitral Pronouncement was timely submitted.

7. The question of the nature of the 90-day period has already been the subject of examination in arbitral proceedings and in the SAC, as referred to by the Respondent in its Response, and as is referred to in Case no. 314/2014-T[2] "55 - It should be noted, however, that, as is settled and reiterated case-law of the Supreme Administrative Court, as can be seen, among others, in the Judgments of the SAC of 14-01-2004, Case 01208/03, of 30-01-2013, Case 0951/12 and of 15-01-2014, Case 01534/13, available at www.dgsi.pt, the period for deducing an appeal is a period of expiry, of substantive nature, continuous, integral to the material legal relationship itself that is disputed and counted in accordance with the rules of article 279 of the Civil Code (CC) and article 20 paragraph 1 of the Code of Tax Procedure and Process (CTPP). It is, in effect, a peremptory period, whose expiry extinguishes the right to perform the act, in the case, the request for constitution and pronouncement of this Arbitral Tribunal.", a conclusion and substantiation to which this Arbitral Tribunal adheres and agrees.

8. Additionally, at the doctrinal level Jorge Lopes de Sousa, in Commentary on the Legal Regime for Arbitration in Tax Matters, integrated in the Guide to Tax Arbitration, Almedina, March, 2013, pp. 173-174, refers that "With regard to the period for submission of the request for constitution of an Arbitral Tribunal, provided for in article 10, being prior to the procedure, article 3-A (of the LRATM) will not apply, but rather the regime of article 279 of the Civil Code, by referral from article 29, paragraph 1, subparagraph a) of the LRATM and article 20, paragraph 1, of the CTPP". Equally noteworthy in the same sense, Carla Castelo Trindade, in Legal Regime for Arbitration in Tax Matters Annotated, 2016, Almedina, pp. 167-170 and 261-264.

9. From the above it results that the period for requesting the constitution of the Arbitral Tribunal is counted in accordance with article 279 of the Civil Code (continuous counting, initiated on the day following notification, with its term transferring to the first business day following, if it ends on a Saturday, Sunday or holiday).

10. In the disputed case, the last day for bringing the action corresponded to 27-03-2016 which, being a Sunday, would transfer to 28-03-2016. The Request for Arbitral Pronouncement was submitted on 30-03-2016 with the right of action on the part of the Claimant having already expired, since the term for initiating the challenge action in arbitral proceedings was 28-03-2016, the action having been initiated subsequently, that is, on 30-03-2016. In this manner, the Claimant did not intervene in time to prevent the expiry of the period of expiry.

11. In these circumstances, it is concluded that the request for constitution of the Arbitral Tribunal is untimely, and thus the exception of expiry of the right of action raised by the Respondent applies.

12. Additionally, the Claimant argues that even if it is not understood that the expiry of the right of action has occurred, by virtue of the provisions of article 29 of the LRATM, the rules concerning proceedings in the administrative and tax courts are of subsidiary application to arbitral tax proceedings. By virtue of subparagraph b) paragraph 1 of article 58 of the CTAC, the period for challenging annullable acts is three months and subparagraph c) of paragraph 3 of the same rule provides that the challenge is admissible beyond that period "having regard to the ambiguity of the applicable normative framework". Equally it defends that even if the constitution of the Arbitral Tribunal had to be requested within the period of 90 days (consecutive) of the facts provided for in paragraphs 1 and 2 of article 102 of the CTPT, by virtue of the alteration introduced by article 3-A of the LRATM, the delay (moreover of only 1 day) would have to be considered excusable, ex-vi subparagraph c) paragraph 3 of the CTAC, applicable subsidiarily.

This must also be assessed and decided immediately.

1. Giving prevalence to the principles of effective judicial protection and the encouragement of proceedings (principle pro actione), principles that guided the reform of the Code of Administrative Procedure of 2002, and were reaffirmed in the 2015 revision, subparagraph c) of paragraph 3 of article 58 of the CTAC came to provide that the initial petition may be presented outside the general temporal limit for challenging administrative acts (three months), namely:

"When, not having yet elapsed the period of one year from the date of the practice of the act or its publication, when mandatory, the delay should be considered excusable, having regard to the ambiguity of the applicable normative framework or to the difficulties which, in the concrete case, arose as to its qualification as an act or as a rule".

The legislator understood that, by virtue of the aforementioned principles, the submission of the initial petition within the general period will not be required, in the situations pointed out.

1. It is important, however, to ascertain whether the situation in the present case meets the requirements mentioned, that is, whether the legal framework applicable to the statutory period for challenging the assessment in the case reveals itself to be so ambiguous as to lead the court to consider the delay of the Claimant excusable.

In annotation to this rule, CARLOS CADILHA/MÁRIO AROSO DE ALMEIDA consider that "It is not enough that the legal question presents itself as being of great complexity; it is required that the complex normative framework itself in light of which the question should be analyzed, by virtue of its ambiguity, makes difficult or prevents the taking of decision, in timely manner, of a clarified position, by the interested party…" (Commentary on the Code of Procedure in Administrative Courts, 2nd ed., Almedina Coimbra, 2007, pp. 350/51).

Let us see.

1. As the Claimant rightly refers, in accordance with paragraph 1 of article 10 of Decree-Law no. 10/2011, of 20 January, the legal instrument that approved the Legal Regime for Arbitration in Tax Matters (LRATM), the request for constitution of the Arbitral Tribunal is submitted within a period of 90 days counted from the facts provided for in paragraphs 1 and 2 of article 102 of the CTPP.

2. The Claimant alleges that the LRATM was subject to various alterations which culminated with the introduction, by Law no. 66-B/2012, of 31 December, of article 3-A.

This rule merely regulated the periods which, beyond what was already established in paragraph 1 of article 10 of the LRATM, for the submission of the arbitral request, was lacking to provide for expressly: The periods relating to the arbitral procedure proper (constitution of the tribunal and appointment of arbitrators, etc.), which follow, as could not be otherwise, the regime of the Code of Administrative Procedure; and the periods for the practice of acts in the arbitral proceeding, whose regime follows that of the Code of Civil Procedure.

1. Observe that, even without this rule, by the very nature of the acts (procedural or processual), the regime to be followed would always have to be what came to be adopted in conformity with subsidiary application either of the Code of Administrative Procedure [cf. subparagraph d) paragraph 1 of article 29 of the LRATM], or of the Code of Civil Procedure [cf. subparagraph e) paragraph 1 of article 29 of the LRATM].

This means that, strictly speaking, the regime introduced in the LRATM by the rule added by the 2012 Budget Law (article 3-A), added nothing innovative, insofar as its content already resulted from the subsidiary application either of the Code of Administrative Procedure or of the Code of Civil Procedure. We can say that the rule merely received expressly what already resulted from the application of the subsidiary regime as to the nature and form of counting periods.

1. In any case, the periods to which article 3-A of the LRATM refers have nothing to do with the nature and regime of the period for submission of the arbitral request, whose nature always remained as substantive, in accordance with the general regime for challenging tax acts.

Even if by academic hypothesis some doubt could be admitted, it would be sufficient for the Claimant to consult the database of the SAC and the CAAD on the matter.

As we have seen, it constitutes settled and reiterated case-law of the SAC that the period for judicial challenge is a period of expiry and that it is counted in accordance with the provisions of article 279 of the Civil Code.

The reiterated case-law of the SAC also goes in the direction that the period for judicial challenge is of substantive nature and not a judicial period, whereby it does not apply to it paragraph 5 of article 45 of the CPC, which provides for the possibility of submitting documents in the three days following the expiry of the period by means of payment of a fine" (Judgment of the SAC of 27 February 2013, case no. 1213/2012).

It is a period that is continuous, without suspension during the period of judicial recess and without the possibility of practice of the act in the first three business days following the expiry of the period, by non-applicability of the regime of paragraph 1 of article 144 and paragraph 5 of article 145, both, of the CPC[3].

Also in doctrine, in annotation to subparagraph a) paragraph 1 of article 102 of the CTPP, JORGE LOPES DE SOUSA[4] refers that "The periods provided for in this article are counted in accordance with article 279 of the CC, as expressly referred to in paragraph 1 of article 20 of the CTPP. Thus they run continuously, without any interruption or suspension. In the counting of these periods the day on which the event occurs from which the period begins to run (notification, summons or formation of tacit dismissal) is not included. When the period for challenging ends on a Sunday or holiday or during judicial recess, its term transfers to the first business day following".

And, further on, it may also be read that "(…) the period for judicial challenge that ends during recess transfers to the first business day following the end thereof, with the transfer not being prevented by the fact that the submission of the petition is effected to the tax administration, pursuant to paragraph 1 of article 103 of the CTPP."

For all the foregoing, it does not appear that the legal framework applicable is characterized by such ambiguity as to be considered demonstrated that "the timely submission of the petition was not required from a normally diligent citizen" (MÁRIO AROSO DE ALMEIDA, The New Regime of Procedure in Administrative Courts, Almedina, 2003, p.140).

We are thus dealing with a period of expiry, whose expiry has the consequence of the extinction of the right to perform the act (paragraph 2 of article 298 and paragraph 1 of article 333, both, of the Civil Code) and whose non-observance constitutes a peremptory exception, determining the absolution of the claim (paragraph 3 of article 576 of the CPC).

III. Decision

• To uphold the exception of expiry of the right of action, refraining from examining the merits of the case, deciding, in consequence and in conformity with the provisions of paragraph 1 of article 576 and paragraph 3 of article 579, both, of the CPC, applicable ex-vi subparagraph e) paragraph 1 of article 29 of the LRATM, to absolve the Respondent of the claim.

• To condemn the Claimant to pay the costs of the present proceeding.

IV. Value of the Proceeding

In conformity with the provisions of paragraph 2 of article 306 of the CPC, paragraph 1 of article 97-A of the CTPP and paragraph 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings, the value is fixed at € 65,742.75.

V. Costs

In accordance with paragraph 4 of article 22 of the LRATM, the amount of costs is fixed at € 2,448.00, in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, charged to the Claimant.

Let it be notified.

Lisbon, 21 October 2016

The Arbitrators

Fernanda Maçãs
(President)

António Sérgio de Matos

Júlio Tormenta

(The text of the present decision was prepared on computer, in accordance with paragraph 5 of article 131 of the Code of Civil Procedure, applicable by referral from subparagraph e) paragraph 1 of article 29 of Decree-Law no. 10/2011, of 20 January (LRATM), with its drafting governed by the spelling prior to the 1990 Orthographic Agreement.)

[1] Available at: https://www.ctt.pt … [consulted on 9-10-2016:18h 45m]

[2] Available at http://www.caad.org.pt

[3] Cf. Jorge Lopes de Sousa, Code of Tax Procedure and Process, annotated and commented, Volume I, 6th edition, 2011, p. 276.

[4] Cf. Code of Tax Procedure and Process, 6th ed., Áreas editora, 2011, p.145.