Process: 197/2018-T

Date: November 13, 2018

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Case 197/2018-T) addresses the critical issue of expiry (caducidade) of the Portuguese Tax Authority's right to assess VAT for the 2012 tax year. The claimant, A... Lda., challenged VAT assessments and compensatory interest issued on 12-01-2018, arguing that the Tax Authority's right to assess had expired on 31-12-2016 under article 45(1) and (4) of the General Tax Law (LGT). The core dispute centered on whether the Tax Authority could invoke the extension provision in article 45(5) LGT, which extends assessment deadlines when a criminal inquiry has been opened regarding the relevant facts. The claimant argued that the inspection report failed to demonstrate any criminal inquiry had been opened, and provided no factual circumstances justifying application of the extension. The claimant emphasized that Portuguese jurisprudence, including both ordinary and arbitral courts, requires acts to be assessed based on their stated reasoning at the time of issuance, not on alternative grounds introduced later. The Tax Authority's response and the administrative file were submitted, with both parties filing written arguments. The case highlights fundamental principles of Portuguese tax procedure: the general four-year limitation period for VAT assessments, the strict requirements for invoking exceptions to expiry rules, and the burden on the Tax Authority to properly document and justify the legal basis for assessments that appear time-barred. This decision has significant implications for taxpayers facing late assessments and establishes important precedents regarding the procedural requirements for extending limitation periods in VAT cases.

Full Decision

ARBITRAL DECISION

I - Report

  1. A A..., Lda., legal entity no. ..., with registered office at ... no. ..., ..., room ..., ...-... ... (hereinafter referred to as "Claimant"), filed, on 16-04-2018, a request for arbitral ruling, pursuant to article 2.º no. 1, paragraph a) and article 10.º, nos. 1 and 2 of the Legal Regime for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228.º of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "LRTA") and articles 1.º and 2.º of Order no. 112-A/2011, of 22 March.

  2. The Claimant seeks a ruling from the Arbitral Tribunal to declare the annulment of the assessments for Value Added Tax (VAT) and compensatory interest, relating to the year 2012, under no. 2018..., with all legal consequences.

  3. The Tax and Customs Authority (hereinafter referred to as "Respondent") is the party being sued.

  4. 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 17-04-2018.

  5. Pursuant to paragraph a) of no. 2 of article 6.º and paragraph b) of no. 1 of article 11.º of the LRTA, as amended by article 228.º of Law no. 66-B/2012, of 31 December, the Deontological Council of CAAD appointed as arbitrator of the sole arbitral tribunal His Excellency Dr. Olívio Mota Amador who, within the applicable period, communicated his acceptance of the appointment.

  6. The Claimant was notified, on 14-06-2018, of the appointment of the arbitrator and did not manifest any intention to refuse the appointment, in accordance with the combined provisions of article 11.º, no. 1, paragraphs a) and b), of the LRTA and articles 6.º and 7.º of the CAAD Code of Ethics.

  7. In accordance with the provisions of article 11.º, no. 1, paragraph c), of the LRTA, as amended by article 228.º of Law no. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 04-07-2018.

  8. The Respondent, duly notified through the arbitral order of 10-07-2018, filed its Response on 24-09-2018 and attached the Administrative File.

  9. The Arbitral Tribunal, by order of 25-09-2018, determined: (i) to dispense with the holding of the meeting provided for in article 18.º of the LRTA, in accordance with the general principles of procedural economy and the prohibition of unnecessary acts and to promote speed, simplification and informality of the arbitral process, as provided for in paragraphs c) and e) of article 16.º and no. 2 of article 29.º of the LRTA, given that no exception was invoked nor were any questions raised that would prevent the tribunal from examining the merits of the claim; (ii) in case the parties wish to submit written arguments, these should be produced within a simultaneous period of 10 days; (iii) to set 5 November 2018 as the deadline for rendering the arbitral decision.

  10. The Respondent, on 27-09-2018, requested the Arbitral Tribunal to produce final arguments in successive form.

  11. The Arbitral Tribunal, by order of 04-10-2018, determined that the parties may submit written arguments within a period of 10 days from notification of this order, granting the Respondent the right to attach its arguments in successive form relative to those submitted by the Claimant. The Arbitral Tribunal set 30 November 2018 as the new deadline for rendering the arbitral decision.

  12. The arguments were submitted by the Claimant on 18-10-2018 and by the Respondent on 30-10-2018.

  13. The position of the Claimant, in accordance with the provisions of the request for constitution of the Arbitral Tribunal and the arguments, is, in summary, as follows:

13.1. Following the tax inspection to which the Claimant was subject, it was notified on 16-01-2018 of the assessment notices relating to the year 2012, issued on 12-01-2018.

13.2. The said assessments are illegal, since the right to assess the tax and respective compensatory interest expired on 31-12-2016, in accordance with the provisions of article 45.º, nos. 1 and 4 of the LGT.

13.3. The Inspection Report states that the right to assessment is guaranteed by the application of no. 5 of article 45.º of the LGT, but no factual circumstances are invoked that would allow the application of such provision.

13.4. The legality of the contested acts must be assessed as they were undertaken, with the reasoning used in them, with other possible grounds being irrelevant that could support other acts with content that is wholly or partially coincident with the act undertaken. This is the unanimous understanding of case law, not only of ordinary courts but also of arbitral courts (cf., among others, Judgment of STA of 11-11-2015 – Case 0190/14 and of 01-10-2014 Case 178/14; Judgment of TCA Norte of 26-03-2015 – Case 478/12.0BRPRT and of 18-01-2012 – Case 670/08.1BEBRG and, in the context of arbitral decisions, Judgment of 18-11-2015 – Case 199/2015 and of 28-11-2016 - Case 7/2016).

13.5. The invoked no. 5 of article 45.º of the LGT establishes that "whenever the right to assessment concerns facts in relation to which a criminal inquiry was opened, the period referred to in no. 1 is extended until the dismissal or final judgment, plus one year". However, the inspection report does not contain any reference or factual element that permits verification and conclusion, to the extent relevant here, that the assessment in question concerns facts in relation to which a criminal inquiry was opened.

13.6. In any event, it would be necessary to determine under what circumstances, having regard to the provisions of articles 42º and 47º of the RGIT, it could be understood that the assessment under examination would concern the said facts in relation to which a criminal inquiry was opened. Stating from the outset that it should be established that, as a rule, the definition of the tax situation precedes the conclusion of investigations, given the rule of prejudiciality of the determination of the tax situation for the criminal qualification of the facts and, consequently, for the pursuit of the tax criminal process and not the reverse.

13.7. Which means that no. 5 of article 45.º of the LGT constitutes an exception to that rule, and therefore its field of application is restricted to exceptional cases in which it is expressly demonstrated that the tax qualification is dependent on the criminal qualification of the facts. That is, it is restricted to those cases in which the conclusion of the investigation in criminal inquiry proves to be essential to the assessment of taxes by the Authority. Which, in any circumstance, is manifestly not the case.

13.8. In addition to no factual circumstances having been identified in the inspection report that would have led to the opening of a criminal inquiry, there is not even any reference to, much less invocation of, the fact that the assessment now being contested was dependent on investigation in a criminal process and that knowledge of the determinative facts of the assessment was obtained precisely from the investigations and diligences purportedly conducted in the context of a criminal process.

13.9. It is not alleged and, much less, demonstrated in the inspection report that the assessment act in question concerns facts in relation to which a criminal inquiry had been opened, in accordance with the provisions of no. 5 of article 45.º of the LGT.

Whence it follows, ineluctably, that when the Claimant was notified of the assessments that are the object of the present arbitral petition, expiration of such right had already occurred, which determines the illegality thereof, which is argued for all legal purposes.

13.10. The Claimant was unaware – and remains unaware – whether a criminal inquiry process was actually opened against it (having received no notification to that effect or having had any involvement in such a process) and, much less, whether there would be coincidence of facts between it and those that were the basis for the tax inspection.

  1. The position of the Respondent, expressed in the response and arguments, may be summarized as follows:

14.1. Pursuant to article 45.º, no. 1, of the LGT "the right to assess taxes expires if the assessment is not validly notified to the taxpayer within the period of four years, when the law does not provide for another". As for the counting of the period, no. 4 of that article provides that "the period of expiration is counted (…) in value added tax (…) from the beginning of the calendar year following that in which, respectively, the exigibility of the tax or the tax fact occurred."

14.2. Transposing to the case under examination, considering that the tax in question refers to the 3rd quarter of 2012, the period of expiration would occur on 01-01-2017.

14.3. In the present case the provisions of article 45.º, no. 5, of the LGT apply, according to which "whenever the right to assessment concerns facts in relation to which a criminal inquiry was opened, the period referred to in no. 1 is extended until the dismissal or final judgment, plus one year".

14.4. The Claimant was notified of the suspension of the inspection procedure in light of the opening of inquiry process no. .../2016...DPRT (p. 10 of the Administrative File).

14.5. Following the notification referred to in the previous paragraph, the Claimant informed the Respondent that henceforth it would exercise "(…) the right not to answer any questions that have an impact on the suspended inspection procedures" (cf., p. 13 of the Administrative File). Thus, well before notification of the tax inspection report, the Claimant had already acquired knowledge of the suspension and even adjusted its conduct accordingly.

14.6. The Claimant forgets what is contained on pages 10 to 12 of the tax inspection report, that is, the reason for the suspension, the inquiry process number and the conduct undertaken by the Claimant itself from the moment it was notified of that suspension.

14.7. The Claimant did not raise the issue of lack of reasoning at the procedural stage, because, in reality, it had no doubt whatsoever as to the reasons underlying the suspensive cause. Wherefore, not having raised such issue at the procedural stage, naturally it must be considered precluded from now, at the trial stage, from raising such issue.

14.8. Even if the possibility is admitted that, now, the insufficiency of reasoning be invoked – a hypothesis that is admitted only in theory and without conceding – it was still incumbent on the Claimant to request the issuance of the certificate provided for in article 37.º of the CPPT. However, the Claimant having not exercised such right granted by law, it is necessary to conclude that the act sub judice contained, and contains, all elements necessary to its full understanding and that the alleged defect was remedied. The arguments which the Claimant advances regarding the lack of reasoning as to the use of the mechanism provided for in article 45.º, no. 5, of the LGT are therefore without merit.

14.9. Subsidiarily, the Claimant alleges the illegality of the tax acts sub judice arguing that the Respondent has not demonstrated in what manner the criminal inquiry became essential to the assessment of the tax. Now, in the case at hand the inspection procedure (which is the basis for the VAT assessment sub judice) and the criminal investigation relate to the same facts. However, one cannot find in the extension of the period of expiration of article 45.º, no. 5, of the LGT any argument to the effect of suspension of the tax procedure until the conclusion of the inquiry process. Given that the conduct that may be involved in the context of the inquiry process does not coincide with the facts that are relevant for determining the taxable base, nor do they depend on the qualification of those facts as crime.

14.10. The Claimant provides no proof as to the payment of the tax in question here and is now precluded from doing so.

II - Sanitation of the Proceedings

  1. The parties have legal capacity and standing, show themselves to be legitimized and are regularly represented (articles 4.º and 10.º, no. 2, of the LRTA and article 1.º of Order no. 112-A/2011, of 22 March).

The tribunal is competent and is regularly constituted.

The proceedings do not suffer from any nullities.

No exceptions were raised.

There are no other circumstances that would prevent the tribunal from examining the merits of the case.

In these terms, the Arbitral Tribunal is regularly constituted to examine and decide the object of the proceedings.

III - Merits

III.1. Factual Matters

16. Proven Facts

16.1. With relevance for the examination and decision of the questions raised, the following facts are considered established and proven:

  • The Claimant is a limited liability company with capital of €5,000.00, engaged in the activity of "Bookbinding and Related Activities" - CAE 18140 - and is classified for Corporate Income Tax (IRC) purposes under the general taxation regime and for VAT purposes under the normal regime, with quarterly periodicity (see Final Tax Inspection Report at pages 53 and 54 of the Administrative File).

  • The Tax Inspection Services of the Finance Directorate of Porto, pursuant to Service Orders nos. OI2016... and OI2016... (see pages 3 and 5 of the Administrative File), conducted an external inspection procedure at the Claimant's premises relating to the years 2012 and 2013, which was initiated on 05-07-2016 (regarding OI2016...) and on 24-10-2016 (regarding OI2016...), with the external inspection acts being concluded on 11-10-2017 (see Final Tax Inspection Report at page 52 of the Administrative File).

  • The inspection procedure, identified in the preceding paragraph, was determined as a result of the inspection action carried out by the Tax Inspection Services of the Finance Directorate of Porto at B... Lda., which revealed that between this company, the Claimant and C... Lda. cross-invoicing was issued that indicated it did not correspond to actual operations (see Final Tax Inspection Report at page 52 of the Administrative File).

  • The Final Tax Inspection Report describes the situation in the following terms: "Following the inspection action at the related entity – B...Lda.) – it was found that the taxpayer (A...) participated in the scheme set up by that entity, which involved overvaluation (inflation) and issuance of false invoices in order to "compensate" vehicle/instrumental companies – as in the case of D... – or to "compensate" the suppliers of B..., who had also issued overvalued (inflated)/false invoices, such that the simulation of the legal transaction was relative (price only)/absolute (false transaction), pursuant to article 39.º of the General Tax Law (LGT), as will be demonstrated hereinafter. The entire scheme arose because B... had an Investment Project in progress and the overvaluation of acquisitions would allow it to achieve the investment contracted with IAPMEI without having actually done so, and consequently to achieve the maximum of premiums to be received (converting repayable loans into non-repayable ones." (see page 33 of the Final Tax Inspection Report at page 66 of the Administrative File).

  • The Tax Inspection Division III of the Finance Directorate of Porto, on 15-11-2016, prepared the Preliminary Information for Opening a Criminal Inquiry Process in which it set out the following:

"Given the foregoing, it is considered that there are proven facts regarding the overvaluation of equipment acquired by the taxpayer, with a view to altering undue subsidies (within the scope of the Investment Project) as well as the inflation of expenses for IRC purposes, in addition to serious doubts regarding the veracity of certain commercial operations carried out by the taxpayer.

The scheme used consisted of the use of "vehicle" companies – A..., E..., D..., F... – which were tasked with overvaluing the invoicing of the "actual" suppliers and/or compensating the taxpayer's suppliers for overvaluations effected in their invoicing by the taxpayer – a situation more evident in company A... and E... ."

"The facts described constitute evidence of criminal tax fraud committed by the taxpayer – aggravated fraud, provided for in article 104.º of the General Tax Infraction Regime."

"Wherefore the present Preliminary Information is prepared for examination by the Division of Criminal and Tax Processes and opening of the corresponding Criminal Inquiry Process at the following entities (…)

A... LDA, NIPC..., for the years 2012 and 2013;"

(see Document no. 1 attached to the Response of the Respondent).

  • On 18-11-2016, Criminal Inquiry Process no. .../2016... DPRT was opened (see Final Tax Inspection Report at page 55 of the Administrative File and Document no. 2 attached to the Response of the Respondent).

  • According to the Final Tax Inspection Report, the Criminal Inquiry Process was opened: "In light of the facts being determined in the course of the inspection actions at the taxpayer and B..., namely confirmation that the cross-invoicing issued between the taxpayer, B... and C... LDA would not correspond to actual operations, the competent information was prepared for opening a Criminal Inquiry Process for the years 2012 and 2013" (see page 55 of the Administrative File).

  • Tax Inspection Division III of the Finance Directorate of Porto, through official letter no. 2016..., dated 16-12-2016, notified the Claimant that the period for concluding the inspection procedure (Service Orders nos. OI2016... and OI2016...) was suspended as of 18-11-2016 due to the opening of the Criminal Inquiry Process, identified in paragraph F), in accordance with the provisions of article 36.º, no. 5, paragraph c) of the Complementary Regime for Tax and Customs Inspection Procedure (see page 9 of the Administrative File).

  • The Manager of the Claimant in a letter sent on 02-08-2017 to Tax Inspection Division III of the Finance Directorate of Porto stated: "I was notified, in my capacity as manager, that the inspection procedure at the company is suspended due to the opening of criminal inquiry process no. .../2016... DPRT. For the reasons contained in the petition already submitted by my attorney in the context of the inspection also instituted at B... I have the right not to answer any questions that have an impact on the suspended inspection procedures." (see pages 10 and 11 of the Administrative File).

  • The Tax Inspection Services of the Finance Directorate of Porto, through official letter no. 2017..., dated 30-10-2017, notified the Claimant to exercise the right to a hearing on the Draft Tax Inspection Report, pursuant to the provisions of article 60.º of the LGT and article 60.º of the Complementary Regime for Tax and Customs Inspection Procedure (see page 47 of the Administrative File).

  • The Tax Inspection Services of the Finance Directorate of Porto, through official letter no. 2017..., dated 12-12-2017, notified the Claimant, pursuant to article 62.º of the Complementary Regime for Tax and Customs Inspection Procedure, of the Final Tax Inspection Report (see page 82 of the Administrative File).

  • Regarding the year 2012, the Final Tax Inspection Report detected the following VAT infractions regarding the Claimant: "For the wrongful deduction of VAT in the amount of €44,620.00 in the period of 201203T, invoiced in invoices that did not correspond to real operations (issued by D...), the taxpayer violated article 19.º of the VAT Code, an infraction that constitutes criminal tax fraud aggravated, provided for and punishable in accordance with paragraph a) of no. 2 of article 104.º of the General Tax Infraction Regime." (see page 33 of the Final Tax Inspection Report at page 66 of the Administrative File).

  • Following the inspection action identified in paragraph B) and whose Final Report was identified in paragraph K), the Finance Service of ...-... issued on 12-01-2018 the following assessments (see Petition for Arbitral Ruling):

    • VAT Assessment no. 2018..., relating to the 3rd quarter of 2012, in the amount of €44,620.00, with the basis "Assessment made based on correction effected by Tax Inspection Services";
    • Compensatory interest assessment no. 2018..., in the amount of €9,021.79, for delay in the VAT assessment in the amount of €44,620.00.

16.2. Unproven Facts

It was not proven that the Claimant proceeded to pay the amounts contained in the assessment notices identified in paragraph M) of the preceding number.

There are no other facts with relevance for examination of the merits of the case that have not been proven.

16.3. Justification of the Factual Matters

Regarding the factual matters, having regard to the provisions of article 123.º, no. 2, of the CPPT and article 607.º, no. 3, of the Civil Procedure Code (CPC), applicable ex vi article 29.º, no. 1, paragraphs a) and e), of the LRTA, the Tribunal does not need to rule on everything that was alleged by the parties, it being incumbent on it to select the facts that matter for the decision and to distinguish the proven matter from the unproven matter.

Thus, in accordance with the provisions of article 596.º of the Civil Procedure Code (CPC), applicable ex vi article 29.º, no. 1, paragraph e), of the LRTA, the facts pertinent to adjudication of the case were selected and determined in terms of their legal relevance, which was established taking into account the questions of law raised.

Having regard to the positions assumed by the parties, in the light of article 110.º, no. 7, of the CPPT, the documentary evidence and the Administrative File attached to the record, the facts listed above were considered proven, with relevance for the decision.

III.2. Matters of Law

  1. The question at issue in the present arbitral proceedings consists of determining whether the right to assess VAT has expired, pursuant to the provisions of article 45.º of the LGT.

Such matter requires examination.

  1. In the legal framework of the question at issue in the present arbitral proceedings, it is important to bear in mind the provisions of nos. 1, 4 and 5 of article 45.º of the LGT, which have the following content:

"1 – The right to assess taxes expires if the assessment is not validly notified to the taxpayer within the period of four years, when the law does not provide for another."

"4 – The period of expiration is counted, for periodic taxes, from the end of the year in which the tax fact occurred and, for single obligation taxes, from the date on which the tax fact occurred, except for value added tax and income taxes when taxation is effected by withholding at source on a final basis, in which case that period is counted from the beginning of the calendar year following that in which, respectively, the exigibility of the tax or the tax fact occurred.

5 – Whenever the right to assessment concerns facts in relation to which a criminal inquiry was opened, the period referred to in no. 1 is extended until the dismissal or final judgment, plus one year."

  1. The general period for exercising the right to assess VAT is four years counting from the end of the year in which the tax fact occurred, in accordance with the provisions of article 45.º, nos. 1 and 4, of the LGT.

In the case at hand, the tax facts occurred in the third quarter of the year 2012, consequently the period of expiration occurred on 01-01-2017.

The contested assessments were issued on 12-01-2018 (see paragraph M) of no. 16.2 above), that is, after the lapse of the respective general period of expiration of the assessment, contained in no. 1 of article 45.º of the LGT.

  1. However, on 18-11-2016, Criminal Inquiry Process no. .../2016...DPRT was opened, which was notified to the Claimant on 16-12-2016, and to which the Claimant took a position on 02-08-2017 (see paragraphs F), H) and I) of no. 16.2 above). The period of expiration of the right to assess can be extended due to the opening of a criminal inquiry, pursuant to the provisions of no. 5 of article 45.º of the LGT.

  2. Regarding the meaning of the extension of the period of expiration of the right to assess, provided for in no. 5 of article 45.º of the LGT, the Arbitral Decision rendered in case no. 199/2015-T, with which we agree, states the following:

"As was written in the Judgment of the STA of 01-10-2014, rendered in case 0178/146, 'The counting of the period of expiration of the right to assess taxes pursuant to article 45º, no. 5, of the LGT, only occurs if the tax assessment act and the criminal investigation refer to the same facts.'

In the said Judgment, reliance was placed on the opinion of the Honorable Deputy Prosecutor General, who pointed out, among other things, that 'there must be a correspondence between the facts that are the object of investigation in the criminal process and the facts that constituted the basis for the corrections that gave rise to the additional assessment' and that it is necessary to 'determine whether such corrections are related to the matter that is the object of investigation in the criminal process'.

Also in the Judgment of TCA-Norte of 18-01-2012, rendered in case 00670/08.1BEBRG, it had been considered that 'in order for that extension of the period of expiration to occur, it is imperative that the tax facts underlying the assessment(s) in question have been the object of an investigation at the criminal level and that a criminal inquiry be opened regarding them 'Which is understandable, for, in the absence of the required identity of the facts investigated in the context of the penal process and those that constitute the presupposition of the assessment, one does not see how the pendency of that process could affect the exercise of the right to assess taxes.' [cf. Judgment of TCA Norte of 22 April 2010]."

Also in the recent Judgment of TCA-Norte of 26-03-2015, rendered in case 00478/12.0BEPRT, the previous understanding was reaffirmed, it being considered that 'The extension of the general period of expiration provided for in no. 5 of article 45.º of the LGT presupposes that the corrections that originated the assessment in question are based on material factuality investigated in the context of a criminal inquiry,' emphasizing the need to 'understand with (...) restrictive scope, (...), the expression "...concerns facts in relation to which a criminal inquiry was opened..." of article 45.º, no. 5, of the LGT.'"

  1. From the factuality that is the object of the present arbitral proceedings, it results that the Claimant participated in a scheme, with other entities, involving the issuance of "false invoices" (see paragraph D) of no. 16.2 above) and proceeded to the wrongful deduction of VAT in the third quarter of 2012, invoiced in invoices that did not correspond to real operations and, in consequence, violated the provisions of article 19.º of the VAT Code (see paragraphs L) of no. 16.2 above). The said infraction also constitutes criminal tax fraud aggravated, pursuant to paragraph a) of no. 2 of article 104.º of the General Tax Infraction Regime (see paragraphs E), F), G) and L) of no. 16.2 above). Thus, the facts that constituted the basis for the assessments are the same facts that are the object of investigation in the criminal inquiry.

In these terms, it is considered that the presupposition for application of no. 5 of article 45.º of the LGT is verified, namely that the tax assessment act and the criminal investigation refer to the same facts, in terms of there being a correspondence between the facts that are the object of investigation in the criminal process and the facts that constituted the basis for the assessment.

It follows from this that the contested assessments were issued by the Tax and Customs Authority in accordance with the law.

IV - Decision

In view of the foregoing, the Arbitral Tribunal decides to rule the request for arbitral ruling as without merit and, in consequence, to absolve the Respondent from the claim, with the due legal consequences.

V - Value of the Case

Having regard to the provisions of articles 32.º of the CPTA, 306.º, no. 2, of the Civil Procedure Code and 97.º-A of the CPPT, applicable by virtue of the provisions of article 29.º, no. 1, paragraphs a) and b), of the LRTA, and article 3.º, no. 2, of the Rules of Costs in Tax Arbitration Proceedings (RCPAT), the value of the case is set at €53,641.79 (fifty-three thousand six hundred and forty-one euros and seventy-nine cents).

VI - Costs

The amount of costs is fixed at €2,142.00 (two thousand one hundred and forty-two euros) to be borne by the Claimant, in accordance with Table I of the RCPAT, in compliance with the provisions of articles 12.º, no. 2, and 22.º, no. 4, both of the LRTA, as well as article 4.º, no. 4, of the RCPAT.

Notify accordingly.

Lisbon, Centre for Administrative Arbitration, 13 November 2018

The Arbitrator

Olívio Mota Amador

Frequently Asked Questions

Automatically Created

What is the right to liquidation expiry (caducidade) in Portuguese VAT law?
The right to liquidation expiry (caducidade do direito à liquidação) in Portuguese VAT law refers to the time limit within which the Tax Authority must issue tax assessments. Under article 45 of the General Tax Law (LGT), the standard period is four years from the end of the tax year to which the tax relates. For VAT from 2012, this would normally expire on 31-12-2016. However, article 45(5) LGT provides an extension when a criminal inquiry has been opened concerning the relevant facts, extending the deadline until dismissal or final judgment plus one year. The expiry protects taxpayers from indefinite exposure to tax assessments and requires the Tax Authority to act within defined timeframes.
Can VAT assessments from 2012 be annulled due to expiry of the liquidation deadline?
Yes, VAT assessments from 2012 can be annulled due to expiry if issued after the deadline established in article 45 LGT. The standard four-year limitation period would expire on 31-12-2016 for 2012 tax obligations. Assessments issued after this date, such as those issued on 12-01-2018 in this case, are prima facie time-barred unless the Tax Authority can demonstrate a valid legal ground for extension. The burden lies on the Tax Authority to prove that specific circumstances justify the extension, such as a criminal inquiry under article 45(5) LGT. Courts and arbitral tribunals will annul assessments where the Tax Authority fails to properly establish and document the legal basis for exceeding the standard limitation period, as the expiry rule is a fundamental taxpayer protection in Portuguese tax law.
How does the CAAD arbitral tribunal handle disputes over IVA liquidation and compensatory interest?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal handles disputes over VAT liquidation and compensatory interest through a streamlined arbitral process established under Decree-Law 10/2011. Taxpayers file requests for arbitration challenging assessments, and a single arbitrator or panel is appointed. The Tax Authority submits a response with the administrative file. The tribunal may dispense with hearings when no exceptions prevent examining the merits, applying principles of procedural economy and efficiency under article 16 LRTA. Both parties may submit written arguments, either simultaneously or successively. The tribunal examines whether assessments comply with substantive and procedural tax law, including limitation periods, proper legal basis, and adequate documentation. Decisions must be issued within strict timeframes, typically extended to accommodate argument submissions. CAAD provides an alternative to judicial courts, offering faster resolution of technical tax disputes while applying the same legal standards and jurisprudence as ordinary administrative courts.
What are the legal grounds for challenging VAT liquidations before the Portuguese tax arbitration court (CAAD)?
Legal grounds for challenging VAT liquidations before CAAD include: (1) expiry of the assessment right (caducidade) under article 45 LGT when assessments are issued beyond the four-year limitation period without valid extension; (2) lack of proper legal basis or reasoning in assessment notices, as Portuguese jurisprudence requires acts to be judged by their stated grounds at issuance; (3) failure to demonstrate factual circumstances justifying exceptions to limitation periods, such as criminal inquiries under article 45(5) LGT; (4) procedural irregularities in inspection procedures or notification; (5) substantive errors in calculating tax liability or applying VAT rules; and (6) improper assessment of compensatory interest. Taxpayers must file arbitration requests under article 10 LRTA, demonstrating how the contested assessment violates legal provisions. The burden shifts to the Tax Authority to justify the assessment's legality, particularly when expiry or procedural defects are alleged. CAAD tribunals apply the same substantive law and case law principles as administrative courts.
What is the time limit for the Portuguese Tax Authority to issue VAT assessments before the right expires?
The standard time limit for the Portuguese Tax Authority to issue VAT assessments before the right expires is four years from the end of the tax year to which the tax relates, pursuant to article 45(1) and (4) of the General Tax Law (LGT). For example, VAT obligations arising in 2012 must be assessed by 31-12-2016. This period may be extended under article 45(5) LGT when a criminal inquiry has been opened concerning the relevant facts, extending until dismissal or final judgment plus one year. Extensions require proper documentation and demonstration that the assessment actually concerns facts under criminal investigation. The limitation period may also be suspended during inspection procedures under article 46 LGT, but suspension has specific requirements and maximum durations. Once expiry occurs, the Tax Authority permanently loses the right to assess, and any subsequent assessments are invalid and subject to annulment. The expiry is automatic and cannot be waived by taxpayers.