Process: 210/2017-T

Date: May 2, 2018

Tax Type: IRC

Source: Original CAAD Decision

Summary

This arbitral decision (Process 210/2017-T) addresses the jurisdictional competence of the CAAD arbitral tribunal to review AT's rejection of an IRC self-assessment revision request under RETGS. The applicant, a dominant company in a group taxation regime, challenged the Tax Authority's refusal to revise its 2013 IRC self-assessment concerning autonomous taxation on representation expenses (€2,364,187.77), light passenger vehicle costs, and travel allowances. The company argued these business expenses were incorrectly subject to autonomous taxation at €436,353.76. AT rejected the revision, maintaining that Article 88 CIRC establishes objective criteria for autonomous taxation regardless of business purpose. The applicant contended that autonomous taxation embodies a rebuttable presumption of non-business nature, invoking Constitutional Court jurisprudence and principles of equality and taxation according to actual capacity. The tribunal was constituted under RJAT following proper appointment procedures, with the arbitral panel comprising three arbitrators. The case raises fundamental questions about the scope of autonomous taxation, whether statutory presumptions in Article 88 CIRC can be rebutted through evidence of business necessity, and the application of proportionality principles when expenses serve mixed business-personal purposes. This decision is particularly relevant for large taxpayers operating under RETGS, as it clarifies procedural requirements for challenging self-assessment acts and the extent of arbitral jurisdiction over substantive tax determinations involving autonomous taxation regimes.

Full Decision

Arbitral Decision

I - Report

A..., S.A., legal entity no. ..., with registered office in ..., ... ...-... ..., (hereinafter referred to as the Applicant), came, pursuant to article 2 no. 1, paragraph a), and articles 10 et seq. of the Legal Framework for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "RJAT") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, to submit a request for arbitral pronouncement on the legality of the Decision of the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit, issued in information no. ...-... /2016, refusing the request for review of the self-assessed tax act regarding Corporate Income Tax (IRC) for the fiscal year 2013.

The AUTHORITY FOR TAX AND CUSTOMS (AT) is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Authority for Tax and Customs (AT) on 31-03-2017.

In the request for constitution of the arbitral tribunal, the Applicant appointed Paulino Brilhante Santos as arbitrator, and the Respondent appointed Jorge Carita, who both communicated their acceptance within the applicable period. The arbitrators appointed by the parties requested from the Ethics Committee the appointment of the third arbitrator, who would assume the functions of President, and José Baeta de Queiroz was appointed for this position, who accepted it, thus constituting the present collective arbitral tribunal.

On 08-06-2017, the parties were duly notified of this appointment and manifested no intention to refuse the appointment of the arbitrators, in accordance with the combined terms of article 11, no. 1, paragraphs a) and b), of RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provision of paragraph c) of no. 1 of article 11 of RJAT, the arbitral tribunal was constituted on 07-07-2017.

Duly notified, the Authority for Tax and Customs presented a reply in which it defended the dismissal of the application, defending itself by way of exception and challenge.

On 27-11-2017 there took place the meeting referred to in article 18 of RJAT, during which the witnesses listed by the Applicant were examined. Following the examination, the presiding arbitrator gave the floor to the representatives of the Applicant and the Respondent to present their respective oral arguments, in that order, which both did, reiterating and developing their respective legal positions.

The date of 7 May 2018 was set, following an order of 07.03.2018 to extend the deadline, in accordance with article 21, no. 2 of RJAT, for the pronouncement of the final decision.

The Applicant seeks to have declared the illegality of the Decision of the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit, issued in information no. ...-... /2016, refusing the request for review of the self-assessed Corporate Income Tax act for the fiscal year 2013, and consequently, the annulment of that tax act, alleging in summary the following:

  • The Applicant is subject to the General Regime for Taxation of Groups of Companies (RETGS), being the dominant company, and therefore it is on her that falls, among others, the responsibility for payment of IRC;

  • On 30-05-2014, the Applicant submitted its Model 22 income declaration, relating to IRC for the fiscal year 2013;

  • The Applicant understands that it incurred expenses in the amount of € 2,364,187.77, which were subject to autonomous taxation, resulting in a tax payable of € 436,353.76, which, given that it includes business expenses, essential and indispensable for obtaining income, suffers from an excess in quantification;

  • Thus, finding that the said self-assessment was not correct, it presented the respective request for official review;

  • The Applicant's request was dismissed by AT for understanding, on one hand, that "the Applicant never denied that the expenses [representation expenses] in question do not relate to charges with third parties, on the contrary, some of the initiatives presented are specifically directed at third parties, whereby their exclusion from autonomous taxation becomes impossible under penalty of disregarding the letter of the law and the spirit underlying it, making the question of their business nature irrelevant"; on the other hand, regarding charges with light passenger vehicles, that "no. 3 of article 88 of CIRC does not contain a rebuttable presumption through application of article 73 of LGT. Rather, it is a rule that, with an underlying presumptive judgment of the difficulty of strict control in certain cases, objectively opts to typify situations of application of autonomous taxation" and finally, with regard to charges with travel allowances, that "the condition that these charges are or are not linked to the activity of the company is only relevant for determining their deductibility or not insofar as we are dealing with a rule that autonomously taxes both deductible charges (and therefore of a "business" nature), except for the exceptions already mentioned and which are not applicable in this case, as well as non-deductible charges";

  • Not agreeing with the Respondent's position, the Applicant understands that autonomous taxation is, on one hand, a taxation mechanism independent of IRC, of instantaneous formation that applies to expenses and not to income, supporting its understanding on the jurisprudence of the Constitutional Court; on the other hand, it considers that the legislator in the wording given to article 88 of CIRC adopted a presumption of "lack of business nature", that is, that expenses subject to autonomous taxation may be viewed as expenditures of a presumptively personal rather than professional or business nature, capable of being rebutted, contrary to what the Respondent maintains, given that it is a rule of incidence, under penalty of violation of the principle of equality and the principle of taxation by actual income;

  • Regarding representation expenses, the Applicant states that they took place for purposes of brand visibility in two promotional events, with the purpose of increasing its sales, and given their business nature should not be considered for purposes of autonomous taxation and should, for that reason, be annulled as illegal, citing several arbitral decisions in support of its position;

  • Regarding charges with light passenger vehicles, the Applicant mentions that given its corporate purpose, the importance of charges with vehicles for purposes of obtaining income is manifest, which are used by the Applicant's group employees for the purpose of promoting, presenting and commercializing goods that generate its taxable income, being "working tools" thereof, whereby it is evident that, being business charges, they should not be burdened by autonomous taxation. However, and if such is not understood, and it is considered that we are dealing with a nature partially personal, the pro rata method should be used, so that amounts associated with the business nature are removed, and consequently, amounts associated to personal use are only subject to autonomous taxation, with the remainder to be annulled as illegal;

  • Regarding charges for travel allowances and expenses with employees' own vehicles in service to the employer entity, the Applicant states that jurisprudence has clarified the concept of "travel allowances" in the sense that they are "amounts paid to the worker aimed at compensating him for expenses he must bear, for the benefit and in service to the employer entity, for reasons of travel or new installations; Or, in another way, they constitute allowances occasioned mediately by said circumstances, in the interest and on account of the employer entity, once the time and space limits legally fixed are exceeded" (Judgment of TCA SOUTH issued in process no. 03616/09, of 23.03.2010). In this sense, the Applicant understands that these expenses are subject to autonomous taxation because it is presumed that they may have a non-business nature, which being rebuttable, in the face of proof of their business nature, that is, that they were not intended to grant a benefit to the personal sphere of the employees, should not be, thus, subject to autonomous taxation;

  • Now, in the present case, taking into account that expenses with travel allowances and with expenses in employees' own vehicles assume a role and relevance fundamentally similar to representation expenses, since they are not paid in order to compensate the employee for travel done in service of the company, the tax relating to autonomous taxation levied regarding these should also be annulled;

  • Consequently, the AT should be condemned to the restitution of the amounts borne by the Applicant as autonomous taxation, in the amount of € 346,176.66, or € 320,932.47, by application of the pro rata method relative to business use, and payment of compensatory interest, under article 43 of LGT.

For its part, the Respondent alleged, in summary:

  • By way of exception, that the arbitral tribunal is materially incompetent to know of the request for annulment of the decision dismissing the request for official review of the self-assessed IRC for 2013 presented by the Applicant, particularly because it was not preceded by the reclamation procedure provided for in article 131 of CPPT;

  • By way of challenge, that the conclusion drawn from reading the pleadings by the Applicant is that it concerns the correctness or otherwise of article 88, nos. 3, 7 and 9 of CIRC, and not the literal element of the rule.

In fact, the Respondent mentions that "[i]n the case of motor vehicles (…) it is provided that all costs incurred are taxed at the rate of 10%, meaning this that even if accepted as indispensable for the formation of taxable profit, said expenses do not prevent, by force of the rule, the corresponding autonomous taxation. And the same applies to the content of article 88, nos. 7 and 9 of CIRC, there providing that even if both are deductible for purposes of article 23 of IRC – and therefore considered necessary to obtain exclusively the company's income – the costs must be taxed under autonomous taxation";

  • The Respondent understands that, from reading nos. 3, 7 and 9 of article 88 of CIRC, it results unequivocally that the legislator did not intend to exclude charges related to vehicles from subjection to autonomous taxation, except in the situations clearly shown in the exception provided for in the final part of no. 3 and in no. 6 of article 88;

  • The Respondent further states that "[t]he persistent emphasis that the Applicant makes on 1) the special nature of its commercial activity, 2) the necessity of contracting costs with advertorial purposes of the brand and 3) context of the use of its vehicles are not arguments in the slightest apt to dispel what the tax law expressly and clearly establishes: subjection to autonomous taxation. With these arguments the Applicant pretends sub-reptitiously to open recourse to equity, justify justice in the present case, in face of the denial given to it by the principle of legality, for the absence of support in the letter of the law" – which is forbidden to it, because of the fact that tax law does not permit equity to function as a basis for correction of inadequate law, and for this reason the Applicant's allegations should be dismissed;

  • Regarding the presumption of "business nature", the Respondent defends that "NO concrete, material and unequivocal proof is produced by the Applicant, and probably, nor would it make it feasible" that the development of the activity in which it is engaged, in the automotive sector, the expenses that were subject to autonomous taxation constitute true advertising expenses, exclusively assigned to the company's activity, whereby "(...) even if it were admitted – which is not admitted – the possibility of rebutting the (non-existent) "presumption" contained in article 88, nos. 3, 7 and 9 of CIRC, through proof of the business nature of the expenses", the truth is that the Applicant fails to make any proof that the vehicles in question only serve to maintain commercial activity;

  • The Respondent further mentions that the legislator did not establish, explicitly or implicitly, the possibility of avoiding autonomous taxation of vehicle charges by demonstrating the exclusive assignment of vehicles to the activity carried out, but rather, starting from 2011, in accordance with the provision in the final part of no. 3 of article 88 of CIRC, it came to depend on the acquisition and use of vehicles powered exclusively by electric energy;

  • Concluding in the sense that "the Applicant's position has no support either in the letter of the law, nor in the ratio of nos. 3 to 6 of article 88 of CIRC, whereby the Respondent could not proceed to a corrective interpretation of the law that it must apply, and the suggestion to apply a pro rata method to article 88 of CIRC – which is a rule of incidence – is not accepted in the context of IRC, given that there is no margin for presumptions and waiver of autonomous taxation regarding expenses incurred exclusively for business purposes. That is, the tax base is that defined in the rule of objective incidence, article 88 of CIRC, and reports to deductible and non-deductible expenses in the context of the tax";

  • Thus, the Respondent concludes that "the tax acts that are being challenged merit no criticism, which, being legal, should remain valid in the legal order".

The arbitral tribunal was regularly constituted.

II - Decision

1. Factual Matters

Proven Facts

The following facts are considered proven:

  • The Applicant is a commercial company whose main activity consists, among others, in the trade of motor vehicles. – cf. agreement of the parties –;

  • In 2013, the Applicant was the dominant company of a Group of Companies subject to RETGS, and composed of the following commercial companies: – cf. agreement of the parties –

  • B..., S.A. with NIPC ...;

  • C... – Credit Financial Institution, S.A., with NIPC ...;

  • D..., Lda, with NIPC ...;

  • E..., Lda, with NIPC ...;

  • In this framework, in the tax period of 2013, the Applicant submitted its Model 22 IRC declaration on 30-05-2014, declaring as the algebraic sum of the tax results of the group the amount of € 20,593,482.63 and calculating, in particular, autonomous taxation of € 2,364,187.77, resulting in tax payable of € 436,353.72 – cf. Doc. no. 2 attached to the arbitral request;

  • On 09.08.2016 it requested the review of the self-assessed IRC, with reference to the fiscal year 2013 – cf PAT;

  • In October 2016, the Applicant was notified, through Official Notice no. ..., of 30.09.2016, from the Management and Tax Assistance Division of the Large Taxpayers Unit, on one hand, of the draft decision of the request for review of the tax act indicated in e) above in the sense of preliminary rejection of the same, as untimely, on the other hand, of information no. ...-... /2016 that supports such draft, and, finally, to, if it so wished, exercise the right to prior hearing that was available to it under article 60 of LGT – cf. PAT;

  • On 19.10.2016, the Applicant, in response to the draft decision identified in f) above, exercised its right to prior hearing – cf. PAT;

  • On 30.11.2016 the Applicant was notified, through Official Notice no. ..., of 18.11.2016, from the Management and Tax Assistance Division of the Large Taxpayers Unit, of the draft decision of the request for review of the tax act indicated in e) above, in the sense of dismissal of the same – cf. Doc. no. 3 attached to the arbitral request and PAT;

  • On 28.12.2016, the Applicant was notified, through Official Notice no. ..., of 27.12.2016, of the decision, issued from information no. ...-... /2016, by the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit, of the definitive dismissal of the request for review of the tax act dealt with in the present proceedings – cf. Doc. no. 1 attached to the arbitral request and PAT;

  • The present request for arbitral pronouncement was submitted on 27.03.2017.

Facts Not Proven

There are no facts relevant to the decision of the case that have not been proven.

Substantiation of Factual Matters

The facts were proven based on the documents submitted by the parties and contained in the administrative file, as well as on the positions of the parties, and it should be noted that no actual disagreement emerges from the positions assumed by Applicant and Respondent regarding the factual matters, the dispute being confined to matters of law.

2. On the Law

Preliminary Matter.
Dilatory Exception of Material Incompetence of the Arbitral Tribunal to Know of the Applicant's Request.

As a preliminary matter, it is necessary to address the request made by the Respondent to verify the dilatory exception of material incompetence of the arbitral tribunal to know of the Applicant's request, since if found to be well-founded, it will result in absolution of the Respondent from the instance.

Thus, and considering that, "the request for arbitral pronouncement has as its mediate object the decision of partial dismissal of official review and as its immediate object the self-assessed IRC act, including autonomous taxation rates, relating to fiscal year 2013, which in light of the provision in paragraph a) of no. 1 of article 2 and no. 1 of article 4, both, of RJAT and in articles 1 and 2, paragraph a), both of Ordinance no. 112-A/2011, of 22 March", the Respondent understands that we are dealing with "an exception of incompetence of the present Arbitral Tribunal to appreciate and decide the above request."

And, in order to demonstrate this, the Respondent begins by recalling that "Law no. 3-B/2010, of 28 April (Budget Law for 2010), contained in its article 124 an authorization for tax arbitration, as an alternative form of jurisdictional resolution of disputes in tax matters", and that, in the exercise thereof "... Decree-Law no. 10/2011, of 20 January, was approved, which governs tax arbitration (RJAT)."

The Respondent understands that the competence of these tribunals is limited to the matters indicated in no. 1 of article 2 of RJAT, as well as of Ordinance no. 112-A/2011, of 22 March, ex vi article 4 of RJAT, by the terms to which the Tax Administration bound itself to such jurisdiction, that is, and with application to the present case, "(...) the AT only bound itself (...) to the jurisdiction of the arbitral tribunals if the request for declaration of illegality of self-assessed tax act was preceded by recourse to the administrative procedure of reclamation provided for in article 131 of CPPT."

Reclamation, that, provided for "(...) in the provision of no. 1 of article 131 of CPPT,(...) and which the Applicant failed to submit", whereby, in these circumstances, "(...) it could only proceed judicially through judicial challenge."

Further, the Respondent considers that, notwithstanding the fact that jurisprudence has promoted the understanding that the administrative nature of the official review procedure is capable of being equated to the procedure provided for in no. 1 of article 133 of CPPT for purposes of subsequent challenge of its dismissal decision, the truth is that, according to its defense "(...) such equation is legally prohibited in arbitral proceedings, being excluded from the material competence of arbitral tribunals the appreciation of claims relating to the declaration of illegality of self-assessed acts that have not been preceded by recourse to the administrative procedure in the terms of article 131 of CPPT, but only of official review in the terms of article 78 of LGT." in light of the provision in paragraph a) of article 2 of Ordinance no. 112-A/2011, which "excludes, literally, from the scope of the AT's binding to arbitral jurisdiction the "(...) claims relating to the declaration of illegality of self-assessed acts (...) that have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT", not referring therein to official review provided for in article 78 of LGT."

Concluding, thus, in the sense that "(...) by force of what is established in article 2, paragraph a) of Ordinance no. 112-A/2011, disputes which have as their object the declaration of illegality of self-assessed acts, as is the case in the situation sub judice, are excluded from the material competence of arbitral tribunals, if not preceded by reclamation in the terms of article 131 of CPPT, [and] that, regardless of whether it is mandatory in the terms of said provision or the taxpayer has opted (sibi imputat) for official review."

In fact, according to the Respondent, such situation is imposed "(...) by force of constitutional principles of the rule of law and separation of powers (cf. articles 2 and 111, both of CRP), as well as legality (cf. articles 3, no. 2 and 266, no. 2, both of CRP), as a corollary of the principle of non-disposal of tax credits embedded in article 30, no. 2 of LGT, which bind the legislator and all activity of the AT."

... understanding it to be "(...) constitutionally prohibited, by force of constitutional principles of the rule of law and separation of powers (cf. articles 2 and 111, both of CRP), as well as the right of access to justice (article 20 of CRP) and legality [cf. articles 3, no. 2, 202 and 203 of CRP and also article 266, no. 2 of CRP], as a corollary of the principle of non-disposal of tax credits embedded in article 30, no. 2 of LGT, the interpretation, even if extensive, that expands the AT's binding to the arbitral protection fixed legally, as such would necessarily presume the consequent expansion of the situations in which it is mandatorily subject to such regime, renouncing in that measure recourse to full judicial relief [cf. article 124, no. 4, paragraph h) of Law no. 3-B/2010 and article 25 and 27 of RJAT, which imposes a restriction of the remedies of the arbitral decision]."

Supporting its position, in arbitral jurisprudence that it invokes, the Respondent considers that "(...) it should, therefore, be understood that in light of said constitutional and legal principles, the interpretation of the provision in Ordinance no. 112-A/2011 must be configured literally, because it is not insignificant that the legislator in paragraph a) of article 2 of Ordinance no. 112-A/2011, when completing the expression "that have not been preceded by recourse to the administrative procedure" with the mention "in the terms of articles 131 to 133 of the Code of Tax Procedure and Process", has intentionally delimited the AT's binding to such situations, (…)", adding, further, that "this latter part of the provision cannot, under penalty of manifest illegality/unconstitutionality, be disregarded, interpreting the rule as if the specific reference to a concrete administrative procedure did not exist, with the interpreter making a clean slate of the distinction provided by the legislator. To this is added also that the dismissal of the dilatory exception of material incompetence now invoked, which is not conceded, would always constitute a violation of the principle of equality of the parties and means of reaction, since it would allow that some taxpayers, in a spirit of disregard towards the content of article 131 of CPPT, would enjoy not a two-year period – provided for, precisely, for the reclamation required – but rather a maximum four-year period to challenge the assessment acts."

It concludes in the sense of concluding that "(...) the Arbitral Tribunal constituted is materially incompetent to appreciate and decide the request subject to the dispute sub judice, in the terms of article 2, no. 1, paragraph a) and 4, no. 1, both of RJAT and of articles 1 and 2, paragraph a) both of Ordinance no. 112-A/2011, which constitutes a dilatory exception that prevents knowledge of the merits of the case, in the terms of article 576, nos. 1 and 2 of CPC ex vi article 2, paragraph e) of CPPT and article 29, no. 1, paragraphs a) and e) of RJAT, which prevents knowledge of the application and absolution of the AT from the instance in the terms of articles 576, no. 2 and 577 paragraph a) of CPC ex vi article 29, no. 1, paragraphs a) and e) of RJAT".

It is necessary to appreciate and decide.

No. 1 of article 2 of RJAT, approved by Decree-law no. 11/2011, of 20 January, includes within the competence of arbitral tribunals the appreciation of the declaration of illegality of all self-assessed acts, withholding at source and payment on account.

Such legal rule is, however, not sufficient to bind the AT to the jurisdiction of CAAD.

It is not a "self-executing" provision, of direct and immediate application.

In fact, no. 1 of article 4 of RJAT makes the AT's binding to the jurisdiction of arbitral tribunals dependent on an Ordinance of the members of Government responsible for the areas of Finance and Justice, which must establish, in particular, the type and maximum value of disputes covered, which impairs the qualification of that no. 1 of article 2 as a self-executing legal rule.

The AT's binding to the jurisdiction of arbitral tribunals depends on the AT's adhesion to be made generically in a regulatory rule.

It is undisputed that, thus, broad freedom is granted to the Government to bind the AT to the decisions of CAAD.

It should be noted that the wording of that no. 1 of article 4 of RJAT is not the original, having been introduced by article 160 of Law no. 64-A/2011, of 30 December (Budget Law for 2012), which simply made the Tax Authority's binding to the jurisdiction of tribunals constituted in terms of RJAT dependent on a joint Ordinance of the members of Government responsible for the areas of Finance and Justice, without any mention of the possibility of the AT limiting adhesion based on the type and value of the case or, as results from the expression "in particular" of the new wording, or other factors of relevant nature, provided they are defined in a general and abstract manner in the Ordinance of binding.

That possibility, of the AT selecting the cases by which it binds itself to the jurisdiction of CAAD was, thus, an innovation of Law no. 64-A/2011.

If the AT has not bound itself to the jurisdiction of CAAD, the arbitral tribunal's pronouncement is nothing more than an academic decision: the AT is not legally obliged to comply with it, and may oppose it in the incident of execution of judgments based on that ground.

In that measure, article 2 of Ordinance 112-A/2011, of 22 March, already approved within the context of the new wording of article 2 of RJAT, by which the Tax Authority bound itself to arbitral jurisdiction, would except from such binding claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account, which have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of the Code of Tax Procedure and Process (CPPT).

The AT's binding to arbitral tribunals, when what is at issue is the declaration of illegality of self-assessment, depends, thus, cumulatively:

a) On prior recourse to the administrative procedure;
b) On such recourse to the administrative procedure being effected in the terms of article 131 of CPPT, that is, according to its no. 1, within the two-year period provided for in such legal rule for reclamation of the self-assessed act.

When the taxpayer, in principle, has not met the burden of prior reclamation of the self-assessed act, it cannot, thus, access the jurisdiction of CAAD.

We may also understand, as some CAAD jurisprudence does, that such burden is considered satisfied in cases where the request for official review has been improperly deduced within the period for reclamation of the self-assessed act, in which case the tax administration, in terms of article 52 of CPPT, was obliged to proceed to its conversion into the appropriate means, or by equating, for these purposes, official review to reclamation.

However, we cannot so understand when the request for official review has been deduced beyond that period, in which case the "reclamation" must be considered untimely.

Thus, the taxpayer who wished to challenge the self-assessed act could resort to arbitral jurisdiction, provided that in the recourse to the administrative procedure, the petition complied with the requirements of no. 1 of article 131, which requires its presentation within the two-year period.

Because it is sufficient to resort to the administrative procedure within the reclamation period of the self-assessed act to access the jurisdiction of CAAD, the qualification given by the taxpayer to the procedural means used is of no relevance.

It is thus outside the scope of CAAD's binding to appreciate the request for official review that has been deduced beyond the two-year period, provided that the taxpayer has not reclaimed against the self-assessed act within that period.

The solution of article 2 of Ordinance no. 112-A/2011 is not clothed in any incoherence: it results from the very nature of the necessary reclamation institute and that such institute cannot fail to embrace the arbitral process, to which those provisions are applicable, in terms of no. 1 of article 29 of RJAT.

In the case of self-assessment, it was, thus, the express will of the Government to limit adhesion to cases where the applicant had met, in the terms previously referred to, the burden of prior reclamation to the administrative procedure, through presentation of reclamation or procedural means capable, by being timely, of conversion into reclamation, in terms of no. 1 of article 131 of CPPT.

This solution has an explanation in the evolution of the self-assessment institute and the means of its administrative and judicial review.

In terms of no. 1 of article 78 of the General Tax Law (LGT), review of tax acts by the entity that performed them may be effected at the initiative of the taxpayer, within the administrative reclamation period and on the basis of any illegality, or at the initiative of the Tax Authority, within four years after the assessment or at any time if the tax had not yet been paid, on the basis of error attributable to the services.

According to the subsequent no. 2, without prejudice to the legal burdens of reclamation or challenge by the taxpayer, error in self-assessment was considered attributable to the services, for purposes of no. 1.

However, such no. 2 would be expressly revoked by paragraph h) of no. 1 of article 215 of Law no. 7-A/2016, of 30 March.

It may be noted that no. 2 of that article 78 of LGT had its origin in the administrative interpretation followed regarding the body of article 139 of the revoked Code of Industrial Contribution (CCI), which was expressed in Circular no. 23/77, of 6 October, from the then General Directorate of Contributions and Taxes (DGCI), in terms of which errors for excess committed by taxpayers who proceeded to self-assessment, facultative or mandatory, of Industrial Contribution were susceptible to official annulment in the same terms as the assessment made by the services.

As would be stated by Costa Teixeira, Martins Barreiros and Quintino Ferreira (in "Code of Industrial Contribution Annotated", Rei dos Livros, Lisbon, 1984, p. 849), self-assessment, by virtue of being authored by the taxpayer, remained a true assessment, and could thus be reviewed on the basis of any illegality within the period of official review of tax acts "stricto sensu", then 5 years, referred to in the body of article 139 of the CCI.

It should be noted that, at the time that administrative guidance was issued, there was no mechanism for necessary reclamation of self-assessment, a condition for judicial challenge, which would only be introduced much later, in article 151 of the Code of Tax Procedure (CPT).

Such mechanism of necessary prior reclamation would be reproduced in said no. 1 of article 131 of CPPT, with the "nuance" that there is no necessary reclamation of self-assessment, in the event that the cumulative circumstances occur that its ground be a matter exclusively of law and that, in self-assessment, the taxpayer has followed the generic instructions issued by the Tax Authority, in which case necessary reclamation is pointless, since it normally results from it, given the hierarchical character of the organization of the tax administration, in the confirmation of those instructions.

Such prior reclamation is a true legal burden, understood as the instrument through which the legal system imposes on any subject of law the adoption of certain conduct, under penalty of bearing the consequences legally provided for, generally unfavorable.

Burden is thus the conduct that the subject must follow to achieve a certain advantage, frequently translated into the acquisition or preservation of a right, or to avoid given harm, differentiated from mere legal obligation because it exists for the protection of the interest of the one burdened and not of someone else's interest.

That is, the taxpayer who intended to challenge the self-assessed act was obliged to follow the procedure defined in those provisions of CPT and later of CPPT: the deduction of prior reclamation within two years after the presentation of the self-assessment declaration. If they failed to do so, they could not challenge the self-assessed act.

The conversion or equation in reclamation of the request for official review of self-assessment thus depends on this having been presented within the period provided for in no. 1 of article 131 of CPPT.

Inherent to the figure of burden is, in fact, its sanctionary character, of the omission by the one burdened of the fulfillment of a legal obligation established in their own interest, in this case the presentation of reclamation within the legal period as a condition of the challengeability of the act.

There is no burden when the omission of the alleged one burdened has no legal consequences that, in this case, could only consist in the preclusion of the right to appreciation by the Courts of the self-assessed act, in the event that the Tax Authority considers it legally effected.

It is a fact that, when the challenged act is authored by the Tax Authority, the failure to meet the burden of reclaiming does not prejudice the subsequent review of the tax act on the basis of error attributable to the services. In such cases, however, the legislator would opt for not establishing any mechanism of necessary prior reclamation, which applies only when the challenged act is self-assessment.

That would be the sense of the expression "Without prejudice to the legal burdens of reclamation or challenge by the taxpayer", which opened no. 2 of article 78 of LGT: to reaffirm that the equation to error attributable to services of error in self-assessment does not prejudice the dependence of its judicial challengeability on prior reclamation.

The doctrine that judicial challengeability of self-assessment depends on prior reclamation is found in numerous Supreme Administrative Court jurisprudence. Among others, see the judgments issued in proceedings 860/10, on 12/10/11, 825/12, on 13/03/13, 0916/13, on 12/03/14, 1487/13, on 16/11/16, and 466/17, on 08/11/17, all available at www.dgsi.pt.

It is also in that line that the judgment no. 134/2017-T of 14 July, of CAAD is inscribed.

All these judgments explicitly or implicitly refer to the doctrine of the Supreme Administrative Court judgment of 8 November 2007, proc. 0532/07, reported by Jorge Lopes de Sousa, which inaugurated this judicial current.

In that measure, the dismissal of the request for official review of self-assessment on the basis of error attributable to services would be challengeable, even when the taxpayer had not deduced the necessary reclamation referred to in no. 1 of article 131 of CPPT and it was no longer possible, due to untimeliness, the conversion of the request for official review into necessary reclamation.

It happens, however, as we have already seen, that article 2 of Ordinance no. 112-A/2011 would expressly except from binding to arbitral jurisdiction claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account, which have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT.

From the expression "recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT" it results that susceptible to open the way to arbitral jurisdiction is not any and all administrative means of review of tax acts, but only reclamation, the sole way, to the exclusion of any others, referred to in those legal norms.

It does not matter, for purposes of that exception, the nature of the challenged act: the self-assessment or the dismissal of the request for official review thereof, on the basis of error attributable to services.

Prior reclamation is always mandatory before the request for arbitral pronouncement.

This is not the typification of a new case of prior reclamation not provided for in law, but the legitimate exercise by the Government of the faculty to, as the superior organ of public administration, bind itself to the jurisdiction of CAAD based on the disputes covered.

Nothing prevents, moreover, the taxpayer from challenging the dismissal of the request for official review of self-assessment, which cannot be converted into reclamation, in the light of such jurisprudence, before the Tax Tribunals.

Only recourse to arbitral jurisdiction would be precluded.

Such faculty was not established in the original wording of no. 1 of article 4 of RJAT, but came to be in unequivocal terms by Law no. 64-/B/2011.

Nor does it contradict, on the other hand, the enabling law, that no. 1 of article 4 of RJAT.

This legal rule, by obliging the AT to expressly specify the disputes covered or excluded from arbitral jurisdiction, would not bind it to a wholesale adhesion to such jurisdiction.

The fact that the tax arbitral process constitutes an alternative procedural means to the process of judicial challenge thus does not mean that the scope of these processes is absolutely identical.

Such scope may vary depending on the terms, broader or more restricted, of the AT's adhesion to RJAT.

Now it happens, however, that CAAD, including the arbitrators who are part of this collective, have come to admit, as seems to be defended by some CAAD jurisprudence, that access to the arbitral tribunal may also be through challenging the request for official review of assessment and not only through challenge, but of the dismissal of reclamation, equating, for these purposes, the CAAD regime to that of Tax Tribunals, one cannot forget that this faculty is determined by what is established in article 131 of CPPT, in light of what is established in paragraph c) of article 2 of Ordinance no. 112-A/2011, of 22/03.

Having exhausted access to CAAD through the prior interposition of a reclamation, since the two-year period for its presentation has already elapsed, it appears that a new avenue of "reclamation" (attempt at annulment of the assessment) opens to the taxpayer, which is called "official review", thus allowing the available period to be reopened and doubled.

The tribunal understands that perhaps that was not the intention, not so much of RJAT, but more of the Ordinance of the AT's adhesion to CAAD.

It appears that the door would be left open, if something were going wrong with the reclamation (any defect of form or the untimeliness of its presentation), so that the taxpayer, making recourse in the two following years to official review, would re-acquire access to a Tribunal that would be becoming closed to him.

What does not seem admissible is that recourse to such a channel opens for the taxpayer after exhaustion of the period for presentation of reclamation, as already appears in CAAD Proceeding no. 244/2013-T (Arbitrators: Jorge Lopes de Sousa, António Nunes dos Reis and Clotilde Celorico Palma)

In this decision, on p. 23, the following may be read:

"In this context, allowing the law expressly that taxpayers opt for reclamation or official review of assessment acts and being the request for official review formalized within the period of reclamation perfectly equitable to a reclamation, as was mentioned, there cannot be any reason that can explain that cannot access the arbitral channel a taxpayer who has opted for official review of tax act instead of reclamation". (emphasis ours)

In the process that now concerns us:

For an assessment effected on 30/5/2013, with a request for official review submitted on 28/3/2016, consequently submitted outside the period for reclamation, it could be defended that official review should not be equated to reclamation and the exception of CAAD's material incompetence should be considered well-founded, although that argument, in concreto, was not invoked by the AT.

It happens that diverse CAAD jurisprudence is referenced, which we propose to briefly analyze here.

Beginning with Proc. no. 117/2013-T (Tribunal: Jorge Lopes de Sousa, Diogo Leite de Campos and Victor Simões), which did not become final, for reasons we are unaware of.

This is a request for official review that was filed on 1 September 2010, relating to tax assessments that occurred throughout the year 2007.

It is our observation: the two-year period for presentation of reclamation of self-assessment had already elapsed when the request for official review was submitted.

In this proceeding, neither the parties, when presenting their arguments, nor the tribunal, when deciding, referred to the fact that the request for review was submitted after the period for presentation of reclamation had elapsed.

That decision defends that, because the tribunal's competence covers the appreciation of the illegality of second-degree acts, which includes the dismissal of reclamation, it also includes the dismissal of the request for official review, as it is also a second-degree act.

Thus, the question that concerns us in the present proceedings is only indirectly addressed in this decision, since there it does not establish the acceptance of the challengeability of the dismissal of official review, beyond the two years of timeliness of the challenge of the dismissal of reclamation.

Regarding Proc. no. 236/2013-T (Tribunal: Manuel Macaísta Malheiros, Jaime Esteves and Henrique Neves)

This is a request for official review that was filed on 27 December 2012, relating to VAT assessments that occurred throughout the years 2008 and 2009.

It is our conclusion that in this proceeding the two-year period for presentation of reclamation of self-assessment had already elapsed when the request for official review was submitted.

The tribunal understands that it cannot appreciate the declaration of illegality of self-assessed acts of VAT, when preceded by recourse to the administrative procedure, where the request for official review must be included, as such "... constitutes a restriction of the sphere of freedom of the AT, as a party, to establish the limits of its binding." (See Proc. no. 51/2012-T).

Here, the tribunal deciding found the exception of its material incompetence to be well-founded and absolved the AT from the instance.

Regarding Proc. no. 244/2013-T (Arbitrators: Jorge Lopes de Sousa, António Nunes dos Reis and Clotilde Celorico Palma).

This is a request for official review that was filed on 30 July 2012, relating to VAT assessments that occurred in July and December 2008.

It is our conclusion that the two-year period for presentation of reclamation had already elapsed when the request for official review was submitted.

In this decision, on p. 23, the following may be read, as already transcribed above:

"In this context, allowing the law expressly that taxpayers opt for reclamation or official review of assessment acts and being the request for official review formalized within the period of reclamation perfectly equitable to a reclamation, as was mentioned, there cannot be any reason that can explain that cannot access the arbitral channel a taxpayer who has opted for official review of tax act instead of reclamation". (See Supreme Administrative Court Judgments of 12.07.2006, proceeding no. 402/06 and 14.11.2007, proceeding no. 565/07) (emphasis ours).

This is the first reference we find in the analyzed jurisprudence (there may be more!!!) in which the equation between the two procedures is made dependent on the fact that the request for official review was presented in the course of the period for presentation of reclamation.

In light of the foregoing it is thus surprising that the tribunal decided to enable the presentation of the request for arbitral promotion regarding self-assessed acts that, having been preceded by the request for official review (p. 25 of the decision), that same request for official review was submitted after the period for presentation of reclamation had elapsed.

Although the tribunal subsequently precluded the Applicant from knowing of the request, for the fact that what is at issue is not the appreciation of the legality of the self-assessed act, which would require the use, instead of challenge, of administrative action, which, meanwhile, ceased to be "special".

We can conclude that, as a general rule, the cases appreciated by CAAD concern requests for official review submitted between the second and fourth year from the assessments, that is, when the channel for reclamation has already been exhausted and it is intended to reopen a door that seems to have already been closed.

It should be noted that the discussion only makes sense when the requests for official review were filed before 1 January 2016, the date of entry into force of the amendments to article 78 of LGT, via the approval of Law no. 7-A/2016, of 30 March (Budget Law for 2016) and which now establishes a two-year period for presentation of the request for official review, bringing the two figures even closer (reclamation/review).

Even admitting that the AT is obliged, outside what appears to have been its intention, in the context of the Adhesion Ordinance, to accept the legitimacy of CAAD to appreciate the request for tribunal constitution in case of dismissal of the request for official review, it would make more sense that this only happened when self-assessments, payment on account and withholding on a definitive basis were not at issue, but rather additional assessments made by the AT outside the scope of such self-assessments.

It appears more violent that, admitting this broad reading of the Adhesion Ordinance, such mechanism could be used in a longer period than that of reclamation itself (with the period being the same from 2016 onwards).

Legal certainty and security, the need for rapid consolidation of tax acts, impose respect for a shorter period, avoiding eternizing the conflict with acceptance of such a long official review period.

All the more so that the situations that it is intended be appreciated by CAAD through this channel all result from the taxpayer's acknowledgment of errors in their own declarations.

It is not a matter of imposing that before the request for official review a reclamation should have been presented.

It is a matter of knowing whether the taxpayer is free to opt between one channel or another (reclamation/review), when in most cases the channel of the request for review in extremis is used, that is, when there is no other possible alternative, since the period for interposition of reclamation has already elapsed.

Having finished this review of some CAAD jurisprudence on this matter, it is important to finalize.

Concluding:

a) No. 1 of article 2 of RJAT includes within the competence of arbitral tribunals the appreciation of the declaration of illegality of all self-assessed acts, withholding at source and payment on account;

b) Such legal rule is, however, not sufficient to bind the Tax and Customs Authority to the jurisdiction of CAAD;

c) In fact, no. 1 of article 4 of RJAT makes the AT's binding to the jurisdiction of arbitral tribunals dependent on an Ordinance of the members of Government responsible for the areas of Finance and Justice, which must establish, in particular, the type and maximum value of disputes covered;

d) It thus grants broad freedom to the Government to bind the AT to CAAD decisions;

e) Article 2 of Ordinance no. 112-A/2011 would expressly except from binding to arbitral jurisdiction claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT;

f) In case of non-compliance with the burden of necessary prior reclamation, it appears, thus, in principle, prohibited to resort to arbitral jurisdiction;

g) It could be understood that from the expression "recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT" it would result that, susceptible to opening the way to arbitral jurisdiction is not any and all administrative means of review of tax acts, but only reclamation, the sole channel, to the exclusion of any others, to which these legal norms refer, as is also the doctrine of CAAD Judgment 236/2013-T;

h) However, by force of article 52 of CPPT, such burden is considered met when the request for official review of self-assessment has been submitted within the two-year period provided for in no. 1 of article 131 of CPPT, but not thereafter.

III - Decision

Therefore, it is decided, by majority, by the arbitrators constituting this tribunal:

a). That the dilatory exception of material incompetence of the tribunal to know of the request for annulment of the self-assessed act relating to IRC for fiscal year 2013, in the amount of € 346,176.66, is well-founded;

b). To determine the absolution of the Tax and Customs Authority from the instance, in terms of article 576 of the Code of Civil Procedure.

IV - Value of the Proceeding

In accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at € 346,176.66 (three hundred forty-six thousand, one hundred seventy-six euros and sixty-six cents).

Notice to be served.

Lisbon, 2 May 2018

The Arbitrators

(José Baeta de Queiroz)

(Paulino Brilhante Santos)
(dissenting, in accordance with the declaration that follows and is part of the present judgment)

(Jorge Carita)

Declaration of Dissenting Opinion

I cannot agree with the material incompetence of the Arbitral Tribunal to know of the declaration of illegality of self-assessed acts that have not been preceded by recourse to reclamation, following the path of the jurisprudence of the Venerable Supreme Administrative Court, as well as CAAD jurisprudence.

According to my belief, the best way to express my opinion regarding the AT's binding to the jurisdiction of CAAD in claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of CPPT, will be through a commentary on the learned arbitral decision (hereinafter referred to only as the "Decision") issued in proceeding no. 134/2017-T of 14 July, in which, following prevailing arbitral jurisprudence, CAAD dismissed the invocation of said material incompetence.

The Decision begins by clearly characterizing Ordinance 112-A/2011 as a legal instrument binding the Tax and Customs Authority to arbitral jurisdiction as follows: "By force of the referral of no. 1 of article 4 of RJAT, the AT's binding to the jurisdiction of Arbitral Tribunals constituted in terms of that decree is dependent on what is provided in Ordinance 112-A/2011, in particular regarding the type and maximum value of disputes covered."

It should be added that Ordinance 112-A/2011 further defines the exact terms of such binding by indicating the tax and customs authorities, at the time distinct, which would come to be bound by arbitral decisions.

One can, from the outset, conclude that the exclusive and restricted scope of this Ordinance is binding, containing no procedural rule in this legal instrument, either directly or by referral. Moreover and decisively, an Ordinance is a legal instrument of inferior degree to a legislative instrument in which procedural rules are contained, particularly in the LGT and CPPT, whereby it could never operate, either directly or by force of referral, procedural rules distinct from those contained in appropriate instruments. At best, one could refer to legal rules of superior hierarchy for the exclusive and sole purpose of regulating their application, which is precisely what the Ordinance does in regulating the terms of the binding of fiscal and customs authorities to CAAD arbitration.

Thus, as seems to be the case, the subsequent references of the Ordinance to CPPT should be understood solely as delimiting the material object of the binding of fiscal and customs authorities to CAAD. This is what the Decision understood, as appears from the following considerations:

"It is provided in article 2, paragraph a) of Ordinance 112-A/2011 that the AT's binding to the aforementioned jurisdiction has as its object the appreciation of claims relating to taxes whose administration is incumbent upon it, referred to in no. 1 of article 2 of RJAT, "except for claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in the terms of articles 131 to 133 of the Code of Tax Procedure and Process".

However, among the reasons advanced by the Respondent, there is not discerned a substantial reason why, attentive to the conditionalities and specificities proper to each of the gracious means in question, the legality of self-assessed acts should not be cognizable in arbitral proceedings, in the same terms that tax tribunals are bound.

In fact, even a strictly literal interpretation, provided it is properly contextualized, would not lead to the result propounded by the Respondent.

In effect, the expression used by the rule in question is parallel to the rule itself of article 131/1 of CPPT, which should be understood as a realization of the peacefully recognized legislative intention that the tax arbitral process constitutes an alternative procedural means to the process of judicial challenge."

The rule of paragraph a) of article 2 of Ordinance 112-A/2011, of 22 March, should also be understood as being explained by the circumstance that, in its absence – and in light of the content of article 2 of RJAT – it would be possible to have direct challenge of self-assessed acts without prior administrative pronouncement. That is, taking into account that in light of RJAT no prior administrative intervention to arbitral challenge of a self-assessed act was configured as necessary, the content of the Ordinance should be interpreted as equating – in this matter – the tax arbitral process to the process of judicial challenge and not, as would result from the position sustained by the Respondent, go from 80 to 8, taking an impugnability broader than that possible in Tax Tribunals, and transmuting it into a more restricted one.

Thus, there is no reason to interpret one and another rule differently, all the more so that the letter of the rule of Ordinance 112-A/2011, of 22 March, turns out to be less restrictive than that of CPPT, in that it does not integrate the expression "mandatorily", nor does it refer to "reclamation", but to "administrative procedure". From which it is possible a reading of the letter of the law itself that is contained in the sense that only that which is barred from the scope of tax arbitral jurisdiction is knowledge of claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in terms compatible with articles 131 to 133 of CPPT.

And this is the reading that is subscribed to, following the Judgment issued in proceeding 48/2012-T of CAAD and subsequent arbitral jurisprudence, in particular in proceedings 670/2015 and 122/2016, not conceiving, insofar as the interpretation made is contained in the letter of the law, that therefrom violation of any constitutional provision can result, particularly of the indicated articles 2, 3, no. 2, 111 and 266, no. 2, all of the Constitution of the Portuguese Republic (CRP)."

These passages of the Decision underlined (underlining mine) reveal that in the Decision it is also understood that the material scope of the binding of the Tax and Customs Authority to arbitral jurisdiction is carved out taking as guiding principle the equation of the arbitral procedural means to the judicial procedural means. The Decision clearly explains that the arbitral tribunal must know of self-assessed acts "in the same terms that tax tribunals are bound". Now, in the case sub judice, it is unequivocal that the Applicant could have timely resorted to tax tribunals.

"The rule of paragraph a) of article 2 of Ordinance 112-A/2011, of 22 March, should also be understood as being explained by the circumstance that, in its absence – and in light of the content of article 2 of RJAT – it would be possible to have direct challenge of self-assessed acts without prior administrative pronouncement.

That is, taking into account that in light of RJAT no prior administrative intervention to arbitral challenge of a self-assessed act was configured as necessary, the content of the Ordinance should be interpreted as equating – in this matter – the tax arbitral process to the process of judicial challenge and not, as would result from the position sustained by the Respondent, go from 80 to 8, taking an impugnability broader than that possible in Tax Tribunals, and transmuting it into a more restricted one."

(...)

From which it is possible a reading of the letter of the law itself that is contained in the sense that only that which is barred from the scope of tax arbitral jurisdiction is knowledge of claims relating to the declaration of illegality of self-assessed acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in terms compatible with articles 131 to 133 of CPPT."

(underlines mine)

The Decision notes, however, that the Ordinance, by imposing an impugnability of self-assessment more restrictive on one hand, is, on the other hand, broader, by using precisely the expression "administrative procedure" instead of "reclamation" and by not using the expression "mandatorily". From which the inference is drawn that the reference in paragraph a) of article 2 of the Ordinance to articles 131 to 133 of CPPT constitutes not a limiting resort to only this gracious means, but rather a mere example of equation of the arbitral channel to the judicial channel, being that, in the case of arbitration, the expression "administrative procedure" leaves the door open to include other gracious means available to the taxpayer, such as the request for official review. The Decision gives full support to my opinion by referring "in terms compatible with articles 131 to 133 of CPPT". If such terms were exactly identical or equal or if this rule of paragraph a) of Ordinance 112-A/2011 were understood as a rule of referral, the Decision would have expressed something like "in the terms of articles 131 to 133 of CPPT".

Now, what the Decision intended to conclude is that official review is also compatible with the binding, in its material object, of the tax authorities provided for in said paragraph a) of Ordinance 112-A/2011. "Compatible terms" are not equal terms, particularly regarding periods for deduction of a request for official review vis-à-vis the period for presentation of reclamation.

It is unequivocal that in the previous wording of article 78 of LGT, the Applicant had four years to deduce the request for official review against the self-assessed act of Corporate Income Tax (IRC) for the year 2013 before this rule was amended. It should be emphasized that in the proceeding one can consult the draft dismissal of the Respondent that sustained the thesis of the two-year period by force of the entry into force of the amendment to the rule of the aforementioned article 78 of LGT but which ultimately gave the Applicant right regarding the period being in fact four years in the context of appreciation in prior hearing of the taxpayer.

As it appears to me indisputable that, even because of its inferior hierarchy, Ordinance 112-A/2011 could never, either directly or through referral to CPPT, alter any period for the exercise of a fundamental right of the taxpayer such as access to arbitral justice for the simple and obvious reason that such would exceed and largely exceed the scope that was assigned to it legally, consisting of defining the object of the binding of fiscal and customs authorities to CAAD arbitration. It follows from the very rules of CAAD that tax arbitration shall have an equation to judicial tax justice except, in certain cases, for the necessity of prior recourse to the "administrative procedure" and nothing more can or intended the Ordinance 112-A/2011 to regulate.

It is not up to CAAD through an interpretation that would have to be restrictive and even corrective of Ordinance 112-A/2011 to restrict the scope of its material competence even if it can be understood that nothing justifies the discrepancy of the four-year period for the request for official review vis-à-vis the two-year period for presentation of reclamation against the self-assessed act. For that matter, such an understanding, nor even pacified, is a matter of the exclusive forum of legislative policy, which is why the rule of article 78 of LGT was amended in the sense of equation of those two periods. A rule which, obviously, can only apply to the future. Any restrictive or corrective interpretation of paragraph a) of article 2 of Ordinance 112-A/2011 would thus gravely infringe a fundamental right and guarantee of a taxpayer and would, in my view, be susceptible to opening the door to judicial challenge of a decision supporting such understanding even up to the Constitutional Court.

The reason why article 78 of LGT established a four-year period for the request for official review of self-assessment due to error attributable to the services of the Tax Administration instead of the two-year period for presentation of reclamation, has as its basis the autonomous character of the institute of official review, in its terms, requirements and own procedures.

In this regard, the first point of the summary of the learned Judgment of the Venerable Supreme Administrative Court, 2nd Section, proceeding no. 0532/07, of 28 November 2007, is exemplarily clear in the established jurisprudence that it newly establishes in this regard:

"I - The scope of no. 2 of article 78 of LGT, in establishing that, for purposes of admissibility of review of the tax act, errors in self-assessment are considered attributable to the tax administration, was to expand the possibilities of review in these self-assessment situations, in relation to those that existed in the domain of CPT, a solution that is in line with the primary directive of the legislative authorization on which the Government based itself to approve the LGT, which was the strengthening of the guarantees of taxpayers." (underlining mine)

Whereby the uniformization of periods with ordinary reclamation is a legislative initiative that can even be considered debatable in light of this ratio legis of article 78 of LGT in an interpretation attentive to this its historical element as well underlined by this learned Judgment of the STA, it being of interest to me in particular to emphasize the autonomy of this institute vis-à-vis that of ordinary reclamation following this constant and peaceful jurisprudence of the Highest Tax Court to whose decisions CAAD is, moreover, bound.

In a learned more recent Judgment of the 2nd Section, proceeding no. 0329/11, of 11 February 2011, the Venerable Supreme Administrative Court would in summary, in this point 2 of its Summary decide the following:

"II. Even if that were not so, the untimeliness of reclamation would nevertheless not constitute a legal obstacle to the conversion of the latter into a review proceeding on the basis of grave and notorious injustice, under article 78, no. 4 of LGT, since to such possibility the untimeliness of gracious reclamation does not oppose it, because for that purpose only the timeliness of the appropriate procedural means is relevant and the fact that the law determines that "the head of the service can, exceptionally authorize," the review, does not oppose the possibility of conversion of gracious reclamation into a request for review on the basis of grave or notorious injustice, since such authorization power is not mere faculty but rather a true power-duty." (underlining mine)

In this learned Judgment it is manifest that it is jurisprudence of our Highest Tax Court that attentive to the autonomous nature of the institute of official review and its role in strengthening the rights and guarantees of taxpayers in the face of cases of "grave and notorious injustice" is again reaffirmed that official review obeys its own requirements, steps and periods, in the original wording of article 78 of LGT in effect and applicable to the case now sub judice. Note the unequivocal expression "timeliness of the appropriate procedural means." That is, this learned Judgment establishes jurisprudence in the sense that even in the case of conversion of ordinary reclamation into a request for official review the applicable period is always that of the "appropriate procedural means", that of official review and not the – shorter then in force – period of ordinary reclamation.

It is added that the learned Judgments and Arbitral decisions cited in support of the learned Decision that prevailed refer some to a factuality diverse from that of the present proceedings – deduction of the request for official review within the two-year period provided for presentation of ordinary reclamation – and others not even, as is stated, concern themselves with this crucial element of the present proceedings. Naturally that the deduction of a request for official review within the period for ordinary reclamation is a matter that should raise no doubts regarding the admissibility of recourse to the Arbitral Tribunal. But that is manifestly not the casu decidendi of these proceedings. The vexata quaestio rather consists in knowing whether the expression recourse to the "administrative procedure" contained in the rule of paragraph a) of Ordinance no. 112-A/2011 imposes or not

Frequently Asked Questions

Automatically Created

What is the RETGS (Regime Especial de Tributação dos Grupos de Sociedades) and how does it affect IRC self-assessment reviews?
The RETGS (Regime Especial de Tributação dos Grupos de Sociedades) is the Special Regime for Taxation of Groups of Companies in Portugal, applicable to corporate groups meeting specific criteria. Under RETGS, the dominant company consolidates the tax results of group entities and assumes responsibility for IRC payment and compliance obligations. For self-assessment reviews, this means the dominant company must submit revision requests for the consolidated tax position. The regime affects procedural standing, as only the dominant entity can challenge group-level tax determinations. RETGS companies face specific disclosure requirements when requesting reviews, including documentation establishing the business nature of contested expenses across multiple group entities. The regime's complexity often necessitates arbitral review when AT disputes expense characterization.
Can the CAAD arbitral tribunal review decisions on requests for revision of IRC self-assessment acts?
Yes, CAAD arbitral tribunals have jurisdiction to review AT decisions rejecting requests for revision of IRC self-assessment acts under Article 2(1)(a) of RJAT (Decree-Law 10/2011). This jurisdiction extends to examining both procedural legality and substantive tax determinations, including autonomous taxation assessments under Article 88 CIRC. The tribunal can evaluate whether AT correctly applied legal criteria when refusing revision requests, assess rebuttable presumptions regarding expense characterization, and determine if constitutional principles (equality, taxation by actual capacity) were violated. Taxpayers may invoke arbitral jurisdiction after administrative rejection of revision requests, provided timeliness requirements are met. The tribunal's competence includes annulling illegal tax acts and ordering recalculation of tax liability when AT's refusal is deemed unlawful.
What are the timeliness requirements for filing a request for revision of a tax self-assessment under Portuguese tax law?
Under Portuguese tax law, requests for revision of tax self-assessments must be filed within specific deadlines established in the Lei Geral Tributária (LGT). Generally, taxpayers must submit revision requests within two years from the date of self-assessment (Article 131 LGT for voluntary review) or demonstrate grounds for justified error. For IRC self-assessments filed via Model 22 declarations, the timeline begins when the declaration is submitted electronically or physically delivered. The request must identify specific errors in quantification or legal interpretation and provide supporting documentation. Timeliness is jurisdictional—late requests result in automatic dismissal without substantive review. AT must respond within specified periods; failure triggers tacit rejection, allowing taxpayers to proceed to arbitration under RJAT. The arbitral tribunal examines timeliness as a preliminary matter before addressing substantive claims.
What happens when the Tax Authority (AT) rejects a request for revision of an IRC self-assessment act?
When AT rejects a request for revision of an IRC self-assessment act, taxpayers have several remedial options. First, they may challenge the rejection through hierarchical administrative appeal to superior tax authorities. Alternatively, under RJAT Article 2(1)(a), taxpayers can directly submit the matter to CAAD arbitration within 90 days of notification of AT's rejection decision. This arbitral route is increasingly popular for large taxpayers due to faster resolution timelines (typically 6-12 months versus multi-year court proceedings). The rejection decision must state grounds and legal basis; arbitrary or insufficiently reasoned rejections are vulnerable to annulment. Taxpayers may also pursue judicial review through administrative courts, though arbitration generally offers procedural advantages. Pending resolution, the contested tax amount remains due unless suspension is granted, requiring guarantees equivalent to the disputed liability plus potential interest.
How does the arbitral jurisdiction under RJAT apply to disputes involving large taxpayers (Grandes Contribuintes) in Portugal?
Arbitral jurisdiction under RJAT applies fully to disputes involving large taxpayers (Grandes Contribuintes) managed by the Unidade dos Grandes Contribuintes (Large Taxpayers Unit). Article 2 RJAT establishes subject-matter jurisdiction over IRC disputes regardless of taxpayer size, including challenges to decisions by specialized tax divisions serving large corporate entities. Large taxpayers benefit from arbitration's specialized expertise, as arbitrators typically possess advanced knowledge of complex corporate tax issues like RETGS, transfer pricing, and autonomous taxation. The procedural framework remains identical: automatic notification systems, 90-day filing deadlines, and trilateral arbitral panel composition. However, large taxpayer cases often involve higher monetary stakes and more sophisticated legal arguments, as evidenced in this decision involving €436,353.76 in contested autonomous taxation. CAAD statistics show large taxpayers represent a significant proportion of arbitral claimants, reflecting confidence in the system's capacity to handle complex corporate tax controversies efficiently and impartially.