Process: 197/2017-T

Date: September 11, 2017

Tax Type: IRS

Source: Original CAAD Decision

Summary

CAAD Process 197/2017-T addresses whether a taxpayer can revise a 2013 IRS assessment based on a disability certificate (atestado médico de incapacidade multiuso) issued in 2015 certifying 60% incapacity retroactive to 2013. The taxpayer filed Form 3 in May 2014 without declaring the disability, resulting in assessment 2014... for €180.08. In June 2014, after receiving the certificate, the taxpayer requested revision under Article 76(4) of the IRS Code to claim Article 87 deductions for persons with disabilities. The Tax Authority (AT) analyzed the request under Article 78(4) of the General Tax Law (LGT) and denied it, arguing the error was attributable to taxpayer negligence. The key legal issue is whether the revision request should be governed by Article 76(4) of the IRS Code (as claimed by taxpayer) or Article 78 of the LGT (as applied by AT), and whether the taxpayer's failure to declare the disability constitutes negligence precluding revision. The arbitral tribunal found the proceedings value should be €180.08, not the €1,500 claimed. The AT's procedural reply was deemed improper as no exceptions were raised. The decision examines the temporal effects of disability certificates and requirements for exceptional revision of tax assessments under Portuguese tax law.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A..., taxpayer no. ..., resident at Rua..., ..., Ovar (hereinafter referred to as the Claimant), filed on 23/03/2017 a request for arbitral decision regarding the challenge of the assessment act for Income Tax on Individuals (IRS) for the year 2013.

1.2. The Honorable President of the Deontological Council of the Administrative Arbitration Center (CAAD) appointed, on 24/04/2017, the signatory of this decision as sole arbitrator.

1.3. On 01/06/2017 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of article 17(1) of the Legal Regime of Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 01/06/2017 to, if willing, submit a response and request the production of additional evidence.

1.5. On 30/06/2017 the AT submitted a response, raising no exception.

1.6. As this was a matter exclusively of law, the arbitral tribunal on 05/07/2017 decided to waive the meeting referred to in article 18(1) of the RJAT, based on the principle of the arbitral tribunal's autonomy in conducting the proceedings, inviting both parties to, if willing, submit optional written arguments and scheduled the date for rendering the final decision.

1.7. On 14/07/2017 the Claimant submitted a request considering it useful to make some additional clarifications.

1.8. On 02/08/2017 the AT submitted a request asking that the request submitted by the Claimant be removed from the present arbitral proceedings.

2. PRELIMINARY EXAMINATION

The arbitral tribunal was regularly constituted and is materially competent.

The parties have legal personality and judicial capacity and are legitimate, with no defects in representation.

There are no nullities or exceptions that prevent knowledge of the merits and that must be known ex officio.

Consequently, the conditions for rendering the final decision are met.

3. POSITIONS OF THE PARTIES

As the basis of his request, the Claimant alleges, in summary, that he submitted a request for revision of the IRS assessment act, pursuant to article 76(4) of the IRS Code, and the AT – in response to his request – mentioned that the revision request was filed pursuant to article 78 of the General Tax Law (LGT), a situation which the Claimant rejects, since, as no illegality was found on the part of the AT in the assessment in question, the request could never be supported by recourse to article 78 of the LGT. He concludes by requesting the condemnation of the AT to carry out the revision of the IRS assessment act for the year 2013, taking into account the disability of 60%, as certified by the medical report of multi-purpose incapacity capacity presented.

Conversely, the AT argues that, given the Claimant's request in which he seeks the revision of the IRS assessment for the year 2013, with the grounds stated therein, relying on article 76(4) of the IRS Code, it was analyzed pursuant to article 78(4) of the LGT, which provides for the revision of tax acts, in accordance with the principle of decision provided for in article 56 of the same statute.

The AT further argues that documents proving fiscally relevant disability produce effects only from the date of their issuance, however, for purposes of assessment, the personal situation of the taxpayer as of 31 December of each year is considered, therefore, the right to the benefit shall be deemed constituted after the qualification of the disability and the right to exemption arises at the moment the competent entity issues the medical report of multi-purpose incapacity and is effective from the date of its issuance.

Notwithstanding, if documents proving fiscally relevant disability state that it relates to a date prior to their respective issuance, they may support the filing of an administrative claim or judicial challenge against the IRS assessment for previous years, provided the deadline for such purpose has not yet expired.

The AT concludes that, as the Claimant filed a request for revision of the IRS assessment act for the year 2013 and this was analyzed pursuant to article 78(4) of the LGT, in order to operate the exceptional revision of the taxable matter, it is imperative that the error not be attributable to negligent conduct of the taxpayer, which, according to the AT, does not apply in the present case.

4. FACTUAL MATTER

4.1. FACTS CONSIDERED PROVEN

Based on the documents submitted to the proceedings, the following is established as proven:

4.1.1. The Claimant, by medical report of multi-purpose incapacity issued on 01/05/2015, was recognized to have a degree of incapacity of 60%, with this incapacity situation retroactively applying to the year 2013.

4.1.2. The Claimant's status as a person with disability was communicated to the AT on 25/05/2015 (cf. System for Management and Registration of Taxpayers).

4.1.3. In the income statement Form 3 of the IRS relating to the year 2013, presented on 06/05/2014, the Claimant did not mention any fiscally relevant disability, as recognized under the applicable legislation, which, in the corresponding assessment, did not allow him to benefit from the deductions provided for in article 87 of the IRS Code.

4.1.4. From the said IRS Form 3 income statement resulted assessment no. 2014..., which determined tax to be paid in the amount of € 180.08.

4.1.5. On 04/06/2014, the Claimant, pursuant to article 76(4) of the LGT, filed a request for ex officio revision of the IRS assessment for the year 2013, in order to take into account the said incapacity.

4.1.6. By Official Notice no. ... of 31/10/2016, the Claimant was notified of the draft decision to dismiss the request for ex officio revision on the ground that, in this case, the requirements for the revision provided for in article 78(4) of the LGT were not met, namely, the fact that the error in the assessment was not attributable to negligent conduct of the taxpayer.

4.1.7. On 21/11/2014, the Claimant exercised his right to prior hearing.

4.1.8. By Official Notice no. ... of 02/01/2017, the Claimant was notified of the decision to dismiss the request for ex officio revision filed.

4.1.9. On 23/03/2017, the Claimant filed the request for arbitral decision that gave rise to the present arbitral proceedings.

4.2. FACTS NOT CONSIDERED PROVEN

There are no facts relevant to the decision that have not been established as proven.

5. THE LAW

Preliminary Issue – On the value of the proceedings

The Claimant attributes to the arbitral request the value of € 1,500.00 (one thousand five hundred euros), without, however, explaining how he reached that value.

In accordance with article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by reference under article 29(1)(a) of the RJAT when an assessment is challenged, the value of the proceedings is the amount whose annulment is sought.

It is verified, therefore, that the Claimant seeks the annulment and revision of assessment no. 2014..., relating to the year 2013, with the value of € 180.08 (one hundred eighty euros and eight cents), a value that should have been indicated as the value of the proceedings, and therefore the value previously indicated by the Claimant should be corrected accordingly.

Preliminary Issue – On the reply

As referred to above, the AT submitted a response to the arbitral request filed by the Claimant, in which it raised no exception.

Notwithstanding the foregoing, the Claimant came to pronounce on the response presented, exceeding the scope of his position, to the extent that the request submitted is nothing more than a reply.

In accordance with article 85-A of the Code of Process in Administrative Courts (CPTA),[1] applied subsidiarily by reference under article 29(1)(c) of the RJAT, a reply is a pleading presented by the claimant, intended to respond to exceptions raised in the response.

Now, as the AT raised no exception, the request presented by the Claimant should not be accepted, and it should be removed from the present arbitral proceedings.

On the revision of the tax act

First and foremost, it is important to clarify that, contrary to what is alleged and argued by the Claimant, the request for ex officio revision of the IRS assessment for the year 2013 in question could not be analyzed and decided through the direct application of article 76(4) of the IRS Code, pursuant to which "In all cases provided for in paragraph 1, the assessment may be corrected, if necessary, within the deadlines and in the terms provided for in articles 45 and 46 of the General Tax Law."

Since articles 45 and 46 of the LGT refer to the lapse of the right to assess and suspension of its deadline.

Now, the meaning of the segment of the rule in analysis, supported by the intent of the legislator and sufficiently expressed in the letter of the law, is that all assessments made in the cases provided for in article 76(1) of the IRS Code, whose heading is "Procedure and forms of assessment," may be corrected, after analysis, if they are within the deadlines and in accordance with the right to assess the tax, in this case, the IRS.

However, it is through the provisions that constitute the LGT that the essential elements of the legal relationship established between taxpayers and the AT are defined, which determine specific rules of immediate and direct application, such as, for example, rules on lapse, prescription, revision of tax acts and also the important structuring principles of the tax system.

Thus, although the Claimant insists that the revision of the IRS assessment for the year 2013 should be carried out in accordance with article 76(1) of the IRS Code, this procedure is not correct, but the AT has the obligation to appreciate his request in accordance with the provisions of article 78 of the LGT.

In this sense, see the conclusion of the Decision of the Central Administrative Court South, Case no. 07787/14, of 21/05/2015[2]:

"The obligation of the Administration to carry out the revision of tax acts, when it detects a situation of illegal collection of taxes, exists in relation to all taxes, since the principles of justice, equality and legality, which the tax administration must observe in the totality of its activity (art. 266(2) of the Constitution and article 55 of the LGT), impose that errors in assessments that have led to the collection of amounts of taxes that are not due under the law be corrected ex officio, within the time limits set out in article 78 of the LGT."

Being, therefore, in question the Claimant's request in which he seeks the revision of the IRS assessment for the year 2013, with the grounds stated therein, relying on article 76(4) of the IRS Code, it was, rightly, analyzed in accordance with article 78(4) of the LGT, which provides for the revision of tax acts, in accordance with the principle of decision provided for in article 56 of the same statute, a principle to which the AT is bound and which determines that "The tax administration is obliged to pronounce itself on all matters within its competence that are presented to it by means of claims, appeals, representations, statements, complaints or any other means provided for by law by taxpayers or anyone with legitimate interest."

Given the request formulated by the Claimant and the legal norms in force at the date of the facts, this seeks, with a declared incapacity of 60%, to benefit from the regime provided for in article 87 of the IRS Code for persons with disabilities, as well as from the reduction of 10% of the taxable matter for the year 2013, in accordance with article 188(6) and (7) of Law no. 66-B/2012, of 31 December (State Budget Law for the year 2013).

In fact, as the medical report of multi-purpose incapacity was issued on 11/05/2015, with retroactive effects to the year 2013, article 13(7) of the IRS Code provides that "The personal and family situation of taxpayers relevant for taxation purposes is that which occurs on the last day of the year to which the tax relates."

However, for the retroactive effect of the disability declaration to assume tax relevance, it becomes necessary that the taxpayer demonstrate the "supervening of the document," that is, that he allege and prove that he could not obtain it or make use of it on a date prior to the one that appears as the date of issuance of the document, despite having made efforts and taken steps in that direction.

Considering what is established in Circular no. 15/92 of the IRS Services Directorate, "Documents proving fiscally relevant disability produce effects only from the date of their issuance, being, however, considered, for purposes of assessment, the personal situation of the taxpayer on 31 December of each year (...)", therefore, the right to the benefit is constituted after the qualification of the disability and the right to exemption arises at the moment the competent entity issues the medical report of multi-purpose incapacity and is effective from the date of its issuance.

It further states, in paragraph 3 of the same Circular, that if documents proving fiscally relevant disability state that it relates to a date prior to their respective issuance, they may support the filing of an administrative claim or judicial challenge against the IRS assessment for previous years, provided the deadline for such purpose has not yet expired.

On the other hand, article 70(4) of the CPPT stipulates that "In case of a supervening document or judgment, as well as any other fact that it would not have been possible to invoke within the deadline provided for in paragraph 1, this is counted from the date on which it became possible for the claimant to obtain the document or become aware of the fact."

Further determining, article 74(1) of the LGT that "The burden of proof of facts constitutive of the rights of the tax administration or taxpayers rests on whoever invokes them."

Thus, nothing appears in the present proceedings, nor in any document filed, that can prove the impossibility of obtaining the medical report of multi-purpose incapacity at a time prior to when it was obtained, and the burden of this proof rests with the Claimant, therefore, the supervening of the said medical report of multi-purpose incapacity cannot be considered.

As results from article 78(4) of the LGT, the exceptional regime of revision to which it refers has as prerequisites, in addition to gross or manifest injustice of the taxation, that the same originated from an error not attributable to negligent conduct of the taxpayer, which, in light of the facts that are given as proven, does not apply in the present case.

6. DECISION

In these terms, and with the grounds set forth, the arbitral tribunal decides to adjudge unfounded the requests formulated by the Claimant, deciding to maintain in the legal order the 2013 assessment, as it does not suffer from any illegality.

7. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at € 180.08 (one hundred eighty euros and eight cents), pursuant to article 97-A of the CPPT, applicable by force of articles 29(1)(a) and (b) of the RJAT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs to be borne by the Claimant in the amount of € 306.00 (three hundred six euros), pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings, under article 22(2) of the RJAT.

Notify.

Lisbon, 11 September 2017

The Arbitrator,

(Hélder Filipe Faustino)

Text prepared by computer, in accordance with the provisions of article 131(5) of the Code of Civil Procedure, applicable by reference under article 29(1)(e) of the RJAT. The drafting of this decision is governed by the spelling prior to the 1990 Orthographic Agreement.

[1] Approved by Decree-Law no. 214-G/2015, of 2 October.

[2] Available at www.dgsi.pt.

Frequently Asked Questions

Automatically Created

Can a taxpayer request revision of an IRS assessment to include a disability certificate (atestado médico de incapacidade multiuso) under Portuguese tax law?
Yes, a taxpayer can request revision of an IRS assessment to include a disability certificate under Portuguese tax law, but the applicable legal framework depends on the circumstances. If requesting under Article 76(4) of the IRS Code, specific IRS revision procedures apply. However, the Tax Authority may analyze such requests under Article 78 of the General Tax Law (LGT), which establishes stricter requirements including that the error cannot be attributable to negligent conduct by the taxpayer. The medical certificate of multi-purpose incapacity (atestado médico de incapacidade multiuso) certifying at least 60% disability is the required documentation.
What is the difference between Article 76(4) of the IRS Code and Article 78 of the LGT for requesting tax act revision?
Article 76(4) of the IRS Code is a specific provision for revision of IRS assessments, while Article 78 of the LGT is a general provision governing revision of tax acts across all taxes. The crucial difference lies in the requirements: Article 78(4) LGT requires that the error in assessment not be attributable to negligent conduct of the taxpayer for exceptional revision to proceed. Article 78 LGT follows the principle of decision under Article 56 of the LGT. The Tax Authority may recharacterize a taxpayer's revision request from Article 76(4) to Article 78 LGT analysis, as occurred in this case, potentially applying more stringent negligence standards.
How does Article 87 of the IRS Code apply to taxpayers with a certified disability of 60% or more?
Article 87 of the IRS Code provides tax deductions for taxpayers with certified disabilities of 60% or greater. To benefit from these deductions, taxpayers must present a medical certificate of multi-purpose incapacity (atestado médico de incapacidade multiuso) issued by competent health authorities. According to the Tax Authority's position, such certificates produce effects from their issuance date, and the right to exemption arises when the certificate is issued. However, if the certificate states the disability relates to a prior date, it may support administrative claims or judicial challenges for previous years, provided statutory deadlines have not expired. The personal situation considered for assessment purposes is as of December 31 of each tax year.
What is the procedure for challenging an IRS liquidation through CAAD tax arbitration in Portugal?
The CAAD (Centro de Arbitragem Administrativa) tax arbitration procedure for challenging IRS liquidations follows these steps: (1) taxpayer files an arbitration request (pedido de pronúncia arbitral) after exhausting administrative remedies; (2) the CAAD President appoints a sole arbitrator or arbitral panel; (3) the arbitral tribunal is constituted; (4) the Tax Authority is notified under Article 17(1) RJAT to submit a response and request additional evidence if desired; (5) for purely legal matters, the tribunal may waive the hearing under Article 18(1) RJAT; (6) parties may submit optional written arguments; (7) the tribunal renders a final decision. The proceedings value must reflect the amount whose annulment is sought, following Article 97-A of the Tax Procedure Code (CPPT) as incorporated by Article 29(1)(a) RJAT.
Can a disability certificate issued after the original IRS assessment be used to revise a prior year's tax liquidation?
Yes, a disability certificate issued after the original IRS assessment can potentially be used to revise a prior year's tax liquidation, but with important limitations. According to the Tax Authority's interpretation, while medical certificates of multi-purpose incapacity generally produce effects from their issuance date, if the certificate explicitly states the disability existed at an earlier date, it may support revision of prior assessments through administrative claims or judicial challenges. However, this is subject to two critical conditions: (1) statutory deadlines for challenging the assessment must not have expired, and (2) under Article 78(4) LGT, the error in the original assessment cannot be attributable to negligent conduct by the taxpayer. The key question becomes whether the taxpayer's failure to obtain or declare the disability certificate earlier constitutes negligence that bars revision.