Process: 217/2016-T

Date: October 26, 2016

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD Process 217/2016-T addresses critical procedural and substantive VAT issues arising from invoice timing discrepancies. The case involves a lawyer who issued invoices in October 2014 (Q4) for legal services actually provided in August and September 2014 (Q3). The taxpayer correctly declared and remitted the VAT in the Q3 periodic declaration (09T), when the services were performed and payment received, rather than in Q4 (12T) when the invoices were belatedly issued. The Tax Authority (AT) conducted an additional VAT assessment for Q4 2014 totaling €1,790.31, asserting that VAT should have been declared in the quarter when invoices were issued, per Articles 7 and 8 of the VAT Code. After the gracious appeal was dismissed on January 7, 2016, the taxpayer filed an arbitration request with CAAD on April 8, 2016. The AT raised a critical procedural exception arguing the request was untimely under Article 10(1)(a) of RJAT, which establishes a 90-day deadline for filing arbitration requests. The AT calculated that notification was received on January 8, 2016, making the deadline expire on April 7, 2016—one day before the actual filing. The substantive dispute centers on whether a taxpayer can be subjected to double VAT payment when tax was already correctly remitted in an earlier reporting period based on service provision dates rather than invoice issuance dates. The claimant also challenged the dismissal decision for lack of sufficient reasoning under Article 77 of LGT and Article 36(2) of CPPT, arguing the AT merely cited legal provisions without explaining the factual and legal basis for rejection. This case highlights the tension between strict procedural deadlines in tax arbitration and substantive justice concerns regarding duplicate tax obligations.

Full Decision

Arbitral Decision

Tax Arbitration Process

The Arbitrator Dr. Filipa Barros (sole arbitrator), designated by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to constitute the Singular Arbitral Tribunal, constituted on 20 June 2016, decides as follows:

I. REPORT

The taxpayer A…, holder of tax identification number …, resident at Rua …, number …, … Apt., …-… …, in Vila Nova de Gaia, hereinafter "Claimant", seeking to have annulled the express dismissal of Gracious Appeal No. …2015…, whose subject matter was the tax assessment of Value Added Tax (VAT) No. 2015…, in the amount of €1,790.31, comes, under the provisions of Article 3(1) and Article 10(2) of Decree-Law No. 10/2011, of 20 January, hereinafter referred to as "RJAT"[1], to request the constitution of an Arbitral Tribunal to rule on the illegality and consequent annulment of the aforementioned dismissal of the gracious appeal as well as the VAT assessment relating to the 4th quarter of 2014.

To support his request, the Claimant submits that, in the course of his functions as a Lawyer, and during the 12T period of 2014, he issued receipts corresponding to a total VAT liability of €7,865.31, having declared VAT in the periodic declaration for the same period in the amount of €5,565.31. The difference in question concerns two invoice-receipts, each in the amount of €1,150.00, issued by the Claimant on 21 October 2014, relating to services provided in August and September 2014. Consequently, these are invoice-receipts that were effectively issued during the course of the identified quarter, but which do not relate to services provided in the same tax period.

This fact justifies that the VAT charged by means of the identified invoice-receipts does not appear in the periodic declaration submitted in the 4th Quarter (12T), but rather in the periodic declaration submitted for the 3rd Quarter (09T), in the course of which the corresponding VAT was delivered to the State. According to the Claimant's clarification, the VAT owed relating to the provision of services in question was paid in the VAT period in which the same were effectively provided, even though they were reported in the following periodic declaration (12T).

In this sense, he admits that although the provision of services in question requires the issuance of an invoice in accordance with the terms prescribed by Article 29(1)(b) of the VAT Code, this deadline having been disregarded through an oversight, since the provision of services resulted in payment prior to the issuance of the invoice, the tax became due and payable at the moment of its receipt, whereby, the Claimant cannot be obliged to deliver to the State tax previously charged and paid, and the additional tax assessment of which he was the subject should be declared illegal, as well as the rectification of accounts, with all other consequences ensuing therefrom.

The Claimant alleges, secondly, that the tax act carried out by the AT suffers from the defect of lack of reasoning, provided for in Article 77 of the LGT and Article 36(2) of the CPPT. He states that the duty to provide reasoning for administrative acts results from a constitutional imperative, clearly neglected in the dismissal decision, in which there is only a reference to the allegedly violated legal provisions, failing in terms of clarity and motivation, which results in the impossibility of knowing the factual and legal reasons that were at the basis thereof.

Now, given that the right to reasoning of administrative and tax acts is an express guarantee of taxpayers, the AT clearly violated the law by proceeding to dismiss the appeal, referring, without any other motivation, to the provisions of Article 7(1)(b) and Article 8(1)(a) of the VAT Code, and such dismissal appears to be illegal.

On 18 April 2016, the request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and immediately notified to the Respondent in accordance with legal procedures.

The Claimant did not proceed with the appointment of an Arbitrator.

Thus, in accordance with and for the purposes of Article 6(1) and Article 11(1)(b) of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legal timeframes, Ms. Dr. Filipa Barros was appointed arbitrator of the Singular Arbitral Tribunal, who communicated to the Deontological Council and to the Administrative Arbitration Centre her acceptance of the appointment within the timeframe stipulated in Article 4 of the Code of Ethics of the Administrative Arbitration Centre.

In accordance with the provisions of Article 11(1)(c) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Singular Arbitral Tribunal was constituted on 20 June 2016, following the pertinent legal procedures.

The Respondent, duly notified for this purpose, presented its response defending itself by exception and by challenge, concluding for the dismissal of the request for arbitral ruling.

By way of defence by exception, the Respondent invokes that the subject matter of the present arbitral action consists of the act of express dismissal of the gracious appeal presented against the additional VAT assessment No. …, and according to what appears in the CAAD electronic platform, the request for arbitral ruling was presented on 08-04-2016. Now, the Claimant was notified of the decision to dismiss the gracious appeal by means of official letter No. …/… of 07-01-2016, sent by registered mail with acknowledgement of receipt, received and signed on 08-01-2016.

Given that the deadline for presenting the request for arbitral ruling is 90 (ninety) days, in accordance with Article 10(1)(a) of the RJAT, counted continuously, the aforementioned deadline had as its initial date 09-01-2016 and final date 07-04-2016.

Now, the request for constitution of the arbitral tribunal was presented on 08-04-2016, that is, after the expiry of the 90-day period provided for in Article 10(1)(a) of the RJAT, being, consequently, untimely and the Tribunal unable to hear it.

In the defence by challenge, the Respondent alleges that in the periodic VAT declaration for the period 201412T, tax in favour of the State was assessed in the amount of €5,041.36, and in the same period invoices were issued from which VAT charged appears in the total amount of €7,865.31. Thus, in accordance with the combined reading of Articles 7 and 8 of the VAT Code, given that the moment of realization of taxable operations does not coincide with the moment of payment, the Claimant should have charged VAT on the date of issuance of the invoices, and reflected the amounts charged in the periodic declaration for the last quarter of 2014, which he did not do, neither ex ante nor ex post, through the presentation of a substitute declaration so as to correct his tax situation.

It further states that payment of the tax before the institution of executive proceedings is contrary to exigibility and constitutes grounds for opposition to tax execution, as provided in Article 204(1)(f) of the CPPT, and as results from the arbitral request, although the Claimant had considered that the enforceable debt was paid, he did not defend himself in the context of executive proceedings.

Finally, the AT challenges the absence of reasoning of the tax act, emphasizing that, both in the context of the exercise of the right to be heard and in the context of the analysis of the discrepancies, all relevant elements were sent to the Claimant for clarification of the cognitive and evaluative process followed by the author of the decision, in compliance with Articles 77 of the LGT and 124 and 125 of the CPA.

It concludes for the dismissal of the request for arbitral ruling.

By order of 09-09-2016, the Claimant was notified to, if he so wished, pronounce himself on the matter of exception raised in the AT's response, the Claimant not exercising such faculty.

By order of 26-09-2016, the holding of the meeting provided for in Article 18 of the RJAT was dispensed with, and it was determined that the process should proceed with optional written arguments.

The parties chose not to present arguments.

II. PROCESS CLARIFICATION

The Arbitral Tribunal is materially competent and is duly constituted, in accordance with Article 2(1)(a), Article 5 and Article 6(1) of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented (see Articles 4 and 10(2) of the RJAT and Article 1 of Ordinance No. 112-A/2011 of 22 March).

The process does not suffer from nullities.

It is necessary to previously hear the exception of untimeliness raised by the Respondent, which will be done after establishment of the facts.

III. GROUNDS

1. Facts Established as Proven

The facts were established as proven based on the documents attached in the context of the administrative proceedings, the request for arbitral ruling and the response presented by the AT, in accordance with the terms indicated below.

  1. The Claimant exercises the profession of law, falling, for VAT purposes, within the normal regime of quarterly periodicity;

  2. On 16-02-2015 the Claimant presented the periodic VAT declaration No. … for the period of 201412T, in which he assessed tax in favour of the State in the amount of €5,041.36;

  3. In relation to the period of 201412T, the Claimant issued invoices Nos. …, …, …, …, … and …, from which VAT charged appears in the total amount of €7,865.31;

  4. Following receipt and examination of the elements contained in the periodic VAT declaration, a discrepancy was detected between the value of VAT charged appearing in the declaration and the value of VAT charged in the invoices reported to the AT in the period in question;

  5. The Claimant was informed by e-mail of the detected discrepancy, as well as of the possibility of correcting the error or justifying the discrepancy by means of a substitute declaration;

  6. The Claimant did not pronounce himself on the detected discrepancy, nor did he present a substitute declaration;

  7. On 02-06-2015 official assessment No. 2015… was issued, in the amount of €1,790.31;

  8. The Claimant was notified to exercise the right of prior hearing on the draft of additional VAT assessment relating to the tax period 201412T;

  9. On 17-12-2015, dissatisfied with the additional VAT assessment, the Claimant presented the respective gracious appeal seeking to have annulled the additional assessment resulting from a difference of €2,300.00 between the total VAT charged in the invoice-receipts issued in the course of the quarter 201412T (€7,865.31) and the VAT declared in the periodic declaration of the same period (€5,565.31);

  10. The decision to dismiss the gracious appeal was notified to the Claimant by means of Official Letter No. …/…, of 07-01-2016, sent by registered mail with Acknowledgement of Receipt;

  11. The Acknowledgement of Receipt was received and signed by the Claimant on 08-01-2016;

  12. In the letter notifying the decision to dismiss the gracious appeal, the following statement appears: "In case of disagreement with the decision, you may lodge a hierarchical appeal within 30 (thirty) days from notification, in accordance with the provisions of Article 66(2) of the Code of Procedural and Substantive Tax Law, addressed to the Minister of Finance, or, file judicial review, within 3 (three) months, in accordance with the provisions of Article 102(1) of the same Code, addressed to the Judge of the Administrative and Tax Court of Porto, and the petition may be presented in the aforementioned Court or in this Financial Services office."

  13. On 8-04-2016, the Claimant deduced the request for constitution of the Arbitral Tribunal that gave rise to the present process (see electronic application to CAAD).

2. Facts Not Proven

No facts with relevance for the assessment of the matter in question were found that were not proven.

3. Reasoning

With regard to factual matters, the Tribunal does not have to pronounce itself on everything that was alleged by the parties; rather, it is its duty to select the facts that matter for the decision and distinguish the proven facts from the unproven ones (see Article 123(2) of the CPPT and Article 607(3) of the CPC, applicable by virtue of Article 29(1)(a) and (e) of the RJAT).

In this way, the facts relevant to the adjudication of the case are chosen and delimited in function of their legal relevance, which is established in light of the various plausible solutions to the question(s) of law (see previous Article 511(1) of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29(1)(e) of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of Article 110(7) of the CPPT, the documentary evidence and the administrative process attached to the case file, the following facts were considered proven, with relevance to the decision:

The above-listed facts were not proven in relation to other facts susceptible to influencing the exception of untimeliness invoked by the Respondent.

4. Matter of Law

4.1. Preliminary Question: Untimeliness of the Request for Arbitral Ruling

We shall begin by examining the question of untimeliness of the request relating to the VAT correction, as it is logically prior, since the decision of this question conditions or prejudices knowledge of the legal question raised by the parties.

The Claimant reacted against the tax act of official VAT assessment by means of a gracious appeal, having learned of the decision of express dismissal and its grounds on 8 January 2016.

As results from the evidence, the notification of the express dismissal of the gracious appeal was not omitted in the indication of the means of challenge (point 12 of the statement of facts).

In this framework, having in mind that the communication of the decision in tax matters contains the respective grounds and the indication of the means of challenge against the notified act, the same is legally apt to produce all its effects, among which stands out the establishment of the beginning of the counting of procedural and contentious deadlines, as provided in Article 36 of the CPPT.

Now, in accordance with the provision of Article 10(1)(a) of Decree-Law No. 10/2011, the request for constitution of the Arbitral Tribunal is presented:

"1 — (…)
a) Within 90 days, counted from the facts provided for in Articles 102(1) and (2) of the Code of Procedural and Substantive Tax Law, as regards acts susceptible to autonomous challenge and, as well, from the notification of the decision or the expiry of the legal deadline for decision of the hierarchical appeal;"

Therefore, the RJAT establishes a 90-day deadline for presenting the request for constitution of the Arbitral Tribunal. Once this deadline has elapsed, and if the Claimant has not submitted his claim for consideration by the Arbitral Tax Tribunal, the tax act, even if possibly defective and voidable, becomes consolidated and cannot be challenged by the Claimant.

It should be noted that the deadlines for submitting a request for constitution of an arbitral tribunal are not identical to those for judicial challenge. In fact, the general rule for the deadline for requesting the constitution of an arbitral tribunal is 90 days – and not 3 months, as is currently the deadline for judicial challenge – counted, by force of the reference provided for in Article 10 of the RJAT to the rules contained in Articles 102(1) and (2) of the CPPT, namely: (i) from the expiry of the deadline for voluntary payment of tax obligations, (ii) from the service of summons on subsidiary liable parties in tax execution proceedings, (iii) from the formation of the presumption of tacit dismissal, (iv) from the notification of the decision or the expiry of the legal deadline for decision of hierarchical appeal, or (v) from the notification of the decision to dismiss a gracious appeal.

Now, the reference made by Article 10 of the RJAT does not concern the periods of challenge themselves, but the moment of commencement of the counting of the period.

From the provisions of Article 102 of the CPPT, which establishes the rules relating to the deadline for judicial challenge, it follows that in the counting of the deadline the day on which the event occurs from which the deadline begins to run (notification, service or formation of tacit dismissal) is not included, and therefore, the 90-day period had as its initial date 09-01-2016, corresponding to the day following the signing of the Acknowledgement of Receipt, relating to the decision to dismiss the gracious appeal, the deadline to run continuously without suspension or interruption, from that lesive tax act, in accordance with Article 279 of the Civil Code and Article 20 of the CPPT.

Therefore, in the case at hand, the deadline for presenting the request for constitution of the Arbitral Tribunal expired on 07-04-2016.

Now, it is unequivocal that on the date on which the request for constitution of the Arbitral Tribunal is presented, 08-04-2016, the 90-day period provided for in Article 10(1)(a) of the RJAT had already elapsed.

The exception of untimeliness of the request for arbitral ruling, raised by the Respondent, is therefore well-founded.

The situation of untimeliness of the request for arbitral ruling prevents knowledge of the merits of the request and leads to the dismissal of the Respondent.

By verification of the exception invoked, no relief is granted to the request for arbitral ruling.

IV. OPERATIVE PART

In light of the foregoing, no relief is granted to the request for arbitral ruling, as it is untimely.

V. VALUE OF THE PROCESS

The value of the process is set at €1,790.31, in accordance with Article 97-A(1)(a) of the Code of Procedural and Substantive Tax Law, applicable by force of Article 29(1)(a) and (b) of the RJAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

The arbitration fee is set at €306.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, by virtue of the dismissal of the request, in accordance with Articles 12(2) and 22(4) of the RJAT, and Article 4(4) of the aforementioned Regulation.

Let it be notified.

Lisbon, 26 October 2016

The Arbitrator

(Filipa Barros)

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

What happens when a VAT arbitration request is filed outside the legal deadline under the RJAT?
When a VAT arbitration request is filed outside the 90-day legal deadline established in Article 10(1)(a) of RJAT, the CAAD tribunal lacks jurisdiction to hear the case on its merits. The request is dismissed as untimely without analysis of substantive arguments. The 90-day period is calculated continuously from the date the taxpayer receives notification of the administrative decision being challenged. In Process 217/2016-T, the Tax Authority argued the request was one day late (filed April 8 instead of April 7, 2016), which would result in automatic dismissal regardless of the substantive merits of the VAT dispute.
Can a taxpayer be required to pay VAT twice when the tax was already remitted in an earlier reporting period?
Under Portuguese VAT law, a taxpayer cannot be required to pay the same VAT twice. When VAT has been correctly declared and remitted to the State in one reporting period based on when services were actually provided and payment received, the Tax Authority cannot assess additional VAT for the same transactions in a later period merely because invoices were issued belatedly. The exigibility of VAT depends on when the taxable event occurs under Articles 7 and 8 of the VAT Code. If the tax was already paid in the correct period corresponding to service provision, subsequent payment would constitute unjust enrichment of the State and violate fundamental tax principles.
What are the consequences of issuing invoices in a different quarter than when services were actually provided for VAT purposes?
Issuing invoices in a different quarter than when services were provided creates VAT reporting complications. According to Article 29(1)(b) of the VAT Code, invoices should be issued within specific deadlines related to service provision. When this timing is disregarded, discrepancies arise between invoice issuance dates and VAT declaration periods. The Tax Authority may conduct additional assessments if VAT charged on invoices issued in one quarter is not reflected in that quarter's periodic declaration. However, if the taxpayer can demonstrate that VAT was correctly declared and paid in the period when services were actually provided and payment received (the moment of tax exigibility), the additional assessment may be challenged as creating duplicate tax obligations.
How does the CAAD assess the timeliness of arbitration requests challenging VAT additional assessments?
The CAAD assesses timeliness by strictly calculating the 90-day period established in Article 10(1)(a) of RJAT from the date the taxpayer receives notification of the challenged decision. This period runs continuously (including weekends and holidays). The calculation begins the day after notification receipt and ends exactly 90 days later. In Process 217/2016-T, notification was received January 8, 2016, making the deadline expire April 7, 2016. A filing on April 8, 2016—even one day late—would be considered untimely. The tribunal examines procedural requirements before analyzing substantive merits, and untimeliness results in dismissal without prejudice to substantive arguments.
What legal remedies are available after a gracious complaint (reclamação graciosa) against a VAT assessment is rejected as untimely?
After a gracious complaint (reclamação graciosa) against a VAT assessment is rejected, taxpayers have several legal remedies: (1) file an arbitration request with CAAD within 90 days under Article 10(1)(a) of RJAT; (2) file a judicial appeal to administrative tax courts within the statutory deadline; or (3) if the debt becomes enforceable and collection proceedings begin, oppose execution under Article 204 of CPPT on grounds including prior payment (Article 204(1)(f)). The choice of remedy is strategic—arbitration offers faster resolution while judicial appeal provides access to higher courts. Missing all deadlines results in res judicata, making the assessment final and enforceable.