Process: 230/2018-T

Date: December 28, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

CAAD arbitral process 230/2018-T addressed a taxpayer's challenge to IRS assessments for 2014, disputing the Tax Authority's classification under the simplified regime instead of the organized accounting regime per Article 28 of the Portuguese IRS Code (CIRS). The taxpayer argued that upon commencing activity, they elected the organized accounting regime and never communicated a regime change. Under Article 28(5) CIRS applicable in 2014, regime permanence lasted three years, renewable for equal periods unless the taxpayer communicated a change. The taxpayer claimed the Tax Authority's application of the simplified regime was unjustified and illegal, resulting in excess taxation of €20,187.80. The taxpayer sought annulment of IRS assessment 2017... and interest assessment 2017..., plus related 2018 assessments. The Tax Authority raised preliminary exceptions of lis pendens (due to a parallel administrative court action) and lack of material jurisdiction. The regime choice significantly impacts tax liability: the simplified regime applies coefficients to gross income to determine taxable income, while organized accounting requires complete bookkeeping and taxes actual net profits. This distinction can produce substantially different tax burdens. The case illustrates critical aspects of Portuguese tax procedure, including the three-year regime stability rule, taxpayer election rights, and the availability of tax arbitration after partial deferral of administrative complaints under RJAT.

Full Decision

ARBITRAL DECISION (consult full version in PDF)

I – REPORT

A..., taxpayer no..., resident at ..., ..., hereinafter referred to as the "Claimant", filed a request for constitution of an Arbitral Tribunal, under the provisions of article 2, no. 1, paragraph a), of Decree-Law no. 10/2011, of 20 January (RJAT) and of Ordinance no. 112-A/2011, of 22 March, for impugnation and declaration of illegality of the "decision partially granting the Administrative Claim no. ...2017..." and consequent annulment of the statement of IRS assessment no. 2017..., relating to the year 2014, and interest assessment no. 2017... that proceeded, as well as of the IRS assessment no. 2018... and interest assessment no. 2018... and statement of account reconciliation no. 2018..., relating to the year 2014.

The decision partially granting the claim, made and notified by Official Letter of 29-01-2018, is contained in document no. 1 attached to the arbitral request, which is hereby reproduced.

The request for constitution of the Arbitral Tribunal was filed by the Claimant on 03-05-2018, was accepted by the Esteemed President of CAAD and notified to AT on 04-05-2018, in accordance with the legally provided terms and effects. The Claimant chose not to appoint an arbitrator, whereby, in accordance with the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed, on 26-06-2018, the undersigned as arbitrator of the arbitral tribunal to be constituted, who communicated her acceptance within the applicable time limit. The singular arbitral tribunal was constituted on 16-07-2018.

On 17-07-2018, an arbitral order was issued to the Tax and Customs Authority (AT) to present a response within the legal time limit, in accordance with the terms and effects provided in nos. 1 and 2 of article 17 of RJAT. The Respondent submitted its response and the respective Administrative File (PA) on 28-09-2018, the contents of which are hereby fully reproduced.

On 23-10-2018, given the positions of the parties evidenced in the pleadings, considering that the issues raised are limited to matters of law and that the meeting provided for in article 18 of RJAT would prove unnecessary, as the AT well argued in article 52 of the Response, the arbitral tribunal issued, on 23-10-2018, an arbitral order dispensing with the holding of the meeting provided for in article 18 of RJAT, as unnecessary. A time limit of 15 days (equal and consecutive) was set for the parties to submit arguments and the date of 21-12-2018 was indicated as the probable date for delivery of the final decision, which was extended, by arbitral order of 21-12-2018, to 28-12-2018.

The Claimant submitted its arguments on 08-11-2018 and the AT on 23-11-2018. On 30-11-2018, the Claimant submitted proof of payment of the subsequent arbitration fee.

B) OF THE REQUEST FORMULATED AND THE CLAIMANT'S POSITION:

In summary, the Claimant bases its arbitral request on an error in the qualification of the applicable taxation regime and consequent excess in the quantification of the impugned assessments. Essentially, the Claimant alleges that the AT made an error of qualification regarding the applicable taxation regime, since the organized accounting regime, and not the simplified regime, as decided by the Respondent, should apply to the specific case. The Claimant further alleges that the application of the simplified regime was not properly justified by the AT, and that the Claimant was, by choice, in the organized accounting regime and did not make any declaration of changes, whereby it is unclear why the simplified taxation regime was applied, which requires the annulment of the impugned tax acts.

As to the applicable law, the Claimant alleges that from the provisions of nos. 1 to 6 of article 28 of CIRS, at the date of the facts (year 2014), specifically from the provision in its no. 5, it results that the period of permanence in each regime is three years, extendable for equal periods, except if there is a communication of change of regime by the taxpayer. It happens that the Claimant opted, at the beginning of his activity, for the organized accounting regime and made no subsequent communication to change the regime by which he had opted. Whereby, the application of the simplified regime to the case of the Claimant, which gave rise to the impugned assessments, constitutes the practice of illegal acts and requires the annulment of the Administrative Claim decision and the underlying assessments. The Claimant further alleges violation of the principles of good faith, legal certainty, and the constitutional principle of taxation, preferentially, based on actual income.

Thus, in summary, from the point of view of the Claimant, excess tax was paid in the amount of €20,187.80, demanding the annulment of the aforementioned assessments and the reimbursement of the amount of excess, which the Claimant alleges was paid improperly.

C – OF THE RESPONDENT'S RESPONSE

In its response, submitted on 28-09-2018, the Respondent raised the exceptions of lis pendens and lack of material jurisdiction of this Tribunal. Absent such finding, the Respondent pleads for the legality of the impugned acts, in accordance with the terms and grounds contained in the response, which is hereby fully reproduced. It concludes by requesting that the exception of lis pendens or the exception of absolute lack of jurisdiction of the Arbitral Tribunal be upheld and the AT absolved of the proceedings, with the further legal consequences. Absent such finding, the AT argues that the arbitral request should be judged unfounded, with the impugned acts remaining in the legal order, the arbitral request failing and the requested entity being accordingly absolved of the request.

II - PROCEDURAL REQUIREMENTS

The Arbitral Tribunal is regularly constituted. The Parties have legal personality and capacity, are legitimate and are legally represented (cf. articles 4 and 10 no. 2 of RJAT and art. 1 of Ordinance no. 112/2011, of 22 March).

The process does not suffer from defects that would invalidate it.

It is necessary to decide, as a preliminary matter, on the exceptions invoked.

A) On Lis Pendens:

The AT alleges that the Claimant, in points 17 and 18 of its arbitral request, admits that, not agreeing with the AT's decision to classify it in the simplified regime for the three-year period 2014/2016, filed a special administrative action for impugnation of administrative act, proceeding under no. .../15...... at the Administrative and Tax Court of ..., which has not yet been subject to judgment. Being so, the AT argues that we are faced with a case of lis pendens, since the cause is repeated with the previous one still pending and in which there is identity of subjects, request, and cause of action.

Thus, the AT considers the existence of lis pendens between these two cases, which constitutes a dilatory exception that leads to the absolution of the proceedings, with the consequent absolution of the AT, in accordance with the provisions of article 29 of RJAT, combined with the provisions of article 577, paragraph i), 580 and following of the Code of Civil Procedure.

To assess this matter, it is important to take into account the provisions of articles 580 and 581 of the Code of Civil Procedure (CPC), with the latter providing as follows:

"Article 581

Requirements of Lis Pendens and Res Judicata

1 - The cause is repeated when an action identical to another is filed in terms of subjects, request, and cause of action.

2 - There is identity of subjects when the parties are the same from the point of view of their legal capacity.

3 - There is identity of request when in both causes the same legal effect is sought.

4 - There is identity of cause of action when the claim made in the two actions proceeds from the same legal fact. In real actions the cause of action is the legal fact from which the real right derives; in constitutive and annulment actions it is the concrete fact or the specific nullity invoked to obtain the desired effect."

Thus, there is lis pendens when an action identical to another is filed in terms of subjects, request, and cause of action. It is a fundamental requirement for lis pendens that this triple equality be verified. Now, in the case at hand, there is no doubt that the subjects are the same, but the cause of action and the request are different, whereby the AT's argument is unfounded, as follows:

there is no identity of request, because the same legal effect is not sought, since in the action filed in the Administrative and Tax Court of ... it seeks to annul an administrative act and not the tax assessments that gave rise to the administrative claim and to the present arbitral request, in addition to which the decision that may be rendered in that proceeding will necessarily have a different effect from what is sought here regarding the specific impugned assessment acts;

on the other hand, there is also no identity of cause of action, since the claim made in the two actions does not proceed from the same legal fact, because in the action pending in the Administrative and Tax Court of ... the legal fact at its origin is an administrative decision with impact on the life of the taxpayer for a set of taxation periods (years), and differently, in the present proceedings the legal fact at its origin is the concrete taxation of a determined period, with expression in the acts of tax and interest assessments, claimed and impugned in the present arbitral request.

Given the above, it is concluded that all legal requirements for lis pendens are not met, which determines the unfoundedness of the alleged exception.

B) On Lack of Jurisdiction

It is still necessary to assess the second exception of lack of jurisdiction of the Arbitral Tribunal, invoked by the AT, in accordance with article 13 of the Code of Procedure in Administrative Courts, applicable to tax arbitration proceedings by virtue of the provisions of article 29, no. 1, paragraph c), of RJAT. The AT raises the question of lack of material jurisdiction, on the understanding that the request at issue is reduced to a request for an arbitral decision that determines that the Claimant was classified in the organized accounting regime, that is, what the Claimant seeks is the declaration of illegality of the decision of the Tax Administration that classified him in the simplified taxation regime, and such decision does not constitute an act that can be classified under article 2 of RJAT.

Also in this matter the AT's argument is unfounded, because, as was stated regarding the treatment of the question of the alleged lis pendens, the Claimant formulates a very concrete request, in which it asks for the declaration of illegality and annulment of assessment acts, which it identifies specifically. It is not, therefore, a matter of knowing any other decision in the present proceedings, in particular of an administrative nature, as the AT argues. The AT alleges that "the Claimant requests the constitution of the Arbitral Tribunal with a view to obtaining the declaration of illegality of the order that denied the Administrative Claim no. ...2017... of its classification in the organized accounting regime, seeking that the IRS assessment relating to 2014 reflect the option for that regime made by it. From reading the initial request and the documents attached to it, it is concluded that the request at issue is reduced to a request for an arbitral decision that determines that the Claimant was classified in the organized accounting regime, and should accordingly receive tax treatment."

Now, the interlocutory acts of the assessment procedure (for example, those that decided the application of the simplified regime) are not autonomously impugnable, as they are not injurious, and any illegality previously committed may be invoked in the impugnation of the final decision, by virtue of the provisions of article 54 of CPPT applicable to tax arbitration proceedings by virtue of the provisions of article 29, no. 1, paragraph c), of RJAT.

As was well decided in the Arbitral Award rendered in case no. 262/2018-T, "it is in light of the request or set of requests formulated by the claimant that the adequacy of special procedural forms is assessed, in particular the arbitral process. Article 2, no. 1, paragraph a), of RJAT includes within the jurisdiction of arbitral tribunals functioning in CAAD the declaration of illegality of assessment acts. For this reason, with the declaration of illegality of assessment acts being requested, it must be concluded that this Arbitral Tribunal has jurisdiction to assess the Claimants' claim."

In summary, the matter should be decided taking as reference "the purpose for which, in each concrete case, use is made of the process, known through the initial petition, because it is in this that the claimant formulates its request and the request stated by the claimant is what designates the purpose for which the process is intended, the following conclusion is reached: the question of the propriety or impropriety of the special procedure is a question, pure and simple, of adjustment of the claim of the action to the purpose for which the law created the respective special procedure".[1]

For all the foregoing, considering the formulation of the present arbitral request, as it appears in the arbitral request, which concerns the impugnation of tax assessment acts, expressly provided for in article 2, no. 1, paragraph a) of RJAT as a matter of jurisdiction of arbitral tribunals constituted within the scope of CAAD, it is concluded that the exception of lack of material jurisdiction raised by the AT is unfounded.

Whereby all procedural requirements are met for the arbitral tribunal to decide the request, so that, taking into account the documentary evidence submitted and the arguments of the parties, it is necessary to establish the material facts relevant to the decision.

III – DECISION ON THE MATERIAL FACTS

Facts Proven

As relevant material facts, this tribunal considers the following facts established:

  • The Claimant submitted a declaration of commencement of activity on 02-01-2001, described as café activity, CAE 56301);

  • In the declaration of commencement of activity, the Claimant opted for the organized accounting regime regarding the taxation of category B income, despite the amount of income declared being less than that provided by law for mandatory application of the organized accounting regime;

  • From then until 2013 the Claimant was taxed by application of the rules of organized accounting;

  • The Claimant submitted his income declaration (form 3) for the year 2014, within the legal time limit, declared his category B income and submitted appendix C, for taxation according to the organized accounting regime.

  • On 23-06-2015 he was notified of the existence of central errors in the declaration submitted, informing him that there was incompatibility between the appendix submitted and the option in the registry;

  • On 05-08-2015 he was notified by registered mail with acknowledgment of receipt by the Tax Office of ... ..., of the decision of the Service Management of taxpayer registration informing that he had been classified in the simplified taxation regime for the three-year period 2014-2016;

  • Against this decision the Claimant filed a special administrative action in the Administrative and Tax Court of ... for impugnation of an administrative act, proceeding under no. .../15......, which has not yet obtained a decision;

  • On 06-04-2017, the Claimant was notified to submit the 2014 form 3 income declaration, within a period of 30 days, under penalty that, if the deadline passed without presentation of a declaration in the terms requested by AT, the latter would proceed to issue the IRS assessment based on the elements at its disposal;

  • On 19-06-2017 the Claimant was notified of the official IRS assessment no. 2017 ... and of the statement of interest assessment no. 2017 ... for the year 2014;

  • This assessment was issued on the basis of a global income value of €145,083.03;

  • The Claimant submitted an Administrative Claim against the aforementioned assessments for not agreeing with his inclusion in the simplified taxation regime and for disagreeing with the application made, without considering the different indices applicable to each type of category B income;

  • The administrative claim was partially granted, in that AT maintained its understanding regarding the application of the simplified taxation regime, but corrected the indices applicable to each type of income, correcting the assessment in the part in which it had applied only one index of 0.75 to all category B income;

  • Consequently, a new statement of assessment no. 2018..., statement of interest assessment no. 2018... and statement of account reconciliation no. 2018..., for the year 2014, were issued, with an amount to be paid of €20,187.80.

  • On 03-05-2018, the Claimant filed an arbitral request to impugn the decision partially denying the administrative claim, which processed the 2014 IRS assessment based on the application of the simplified regime;

FACTS NOT PROVEN

There are no other relevant facts for the decision that should be considered as unproven.

REASONING OF PROVEN FACTS

The tribunal does not have to pronounce on all the details of the material facts alleged by the parties, being incumbent upon it the duty to select the facts that are relevant to the decision and to distinguish the matter that it considers proven and to declare that which it considers unproven (cf. article 123, no. 2, of CPPT and article 607, no. 3 of CPC, applicable by virtue of article 29, no. 1, paragraphs a) and e), of RJAT). In this way, the relevant facts for the judgment of the case are selected and shaped according to their legal relevance, which is established in light of the various solutions for the object of the dispute in the applicable law (article 596, no. 1 of CPC, applicable by virtue of article 29, no. 1, paragraph e), of RJAT).

Taking into account the positions assumed by the parties, in light of article 110, no. 7 of CPPT, the documentary evidence submitted to the proceedings by the Claimant and that contained in the administrative file itself, the facts enumerated above were considered proven, with relevance to the decision.

IV – DECISION ON THE MATERIAL LAW

The present proceedings concern the assessment of the legality of the act partially granting the administrative claim and of the tax and interest assessments issued in accordance with that decision, impugned in the present arbitral request.

With relevance to the decision of the case, it is noted that the Claimant opted for the application of the organized accounting regime in 2001, when he began his activity, with income declared by him less than the limit established by law from which that regime is assumed as mandatory. That is, there is no doubt that this was his choice, not because he foresaw income exceeding the legal limit but because he desired, whatever the actual income obtained, to be taxed in accordance with the rules of organized accounting.

From then until 2013, he was always taxed in accordance with the rules of organized accounting.

In the year 2014, he submitted his category B income declaration, once again in accordance with the rules of organized accounting, having submitted appendix C. In the year in question (2014) the Claimant had category B income less than the amount legally provided for automatic application of the organized accounting regime.

Already on 2015-08-05, the Claimant was notified that he had been classified for the three-year period 2014/2016 in the simplified regime, since, as per page 4 of the administrative file 2nd part:

In its response the AT alleged that "from 2002 to 2013, the Claimant was integrated in the organized accounting regime by legal imposition, since the annual net amount of category B income exceeded the legal limit provided in no. 2 of art. 28 of CIRS."

The AT understands that, in accordance with no. 6 of article 28 of CIRS, the Claimant, by exceeding the amounts indicated in no. 2 of the same article, was classified in the rule regime of organized accounting, by legal imposition, remaining in the same until 2013. In the year 2013 and from 2014 onwards, because he obtained income less than the legal limit and did not opt for the organized accounting regime, he was from then on in the simplified taxation regime. It bases this understanding on the provision of no. 2 of art. 28 of CIRS which provides that: "Taxpayers who, in the exercise of their activity, have not exceeded in the immediately preceding taxation period an annual net amount of income of this category of €200,000.00 are covered by the simplified regime."

Thus, according to AT, in 2013, the Claimant declared, regarding category B income, an income of €9,526.88 from sales and €176,266.51 from services rendered, an amount less than the limit of no. 2 of art. 28 CIRS, whereby he met the requirements for classification in the simplified regime, which had effects in the taxation period of 2014. It recognizes that in 2001, the Claimant OPTED for the organized accounting regime regarding the taxation of category B income, but as he exceeded the amounts provided in nos. 2 and 6 of art. 28 of CIRS, he was classified by legal imposition in the organized accounting regime relating to the taxation of category B income.

It follows from what has been stated that the essential question to be decided is whether the AT's interpretation of the provisions of article 28 of CIRS is correct.

With the amendment introduced by Law no. 83-C/2013, no. 2 of article 28 of CIRS came to establish the following:

"2 - Taxpayers who, in the exercise of their activity, have not exceeded in the immediately preceding taxation period an annual net amount of income of this category of (euro) 200,000 are covered by the simplified regime."

The Tax and Customs Authority interpreted this rule as determining the application of the simplified regime to all taxpayers who until then were subject to the organized accounting regime by legal imposition and, understanding that this was the situation of the Claimant, imposed upon him the application of the simplified regime, for not having expressed by the end of March 2014 the option for the organized accounting regime.

Category B IRS taxpayers may be subject to the accounting regime by option or by legal imposition. The Claimant was subject to the organized accounting regime by option expressed in 2001 and, subsequently, also by legal imposition, because the category B income that he came to receive was always greater than the legal limit provided in article 28, no. 2, of CIRS, in the versions preceding Law no. 83-C/2013.

In this regard, we cite the jurisprudence contained in the Arbitral Award rendered in case 262/2018-T, to which we adhere fully, which we cite:

"There are, thus, two legal grounds for the organized accounting regime to be applicable to the Claimant, each one of them sufficient, by itself, to determine the application of that regime.

And, obviously, when a legal situation has two autonomous grounds, each one of them sufficient, by itself, to give it legal support, the fact that one of them ceases to subsist does not prevent the maintenance of the situation on the basis of the other."

Thus, the essential question is whether the Claimant's initial option for the application of the organized accounting regime, expressed in his declaration of commencement of activity, ceases to have relevance from the fact that, subsequently, the application of that regime becomes mandatory, because the income received is not compatible with the application of the simplified regime.

In no. 2 of article 28 of CIRC, in force in 2001, when the Claimant began his activity, it was indicated that taxpayers who, not having opted for the organized accounting regime, have not exceeded in their activity, in the immediately preceding taxation period any of the limits of sales volume or net value of other category B income, are covered by the simplified regime. (underlining ours)

Whereby, in the case of the Claimant, it is proven that he opted for the organized accounting regime, whereby the application of the simplified regime was precluded.

Furthermore, in the remaining numbers of this article 28 (version in force in 2001), there was no provision for any cessation of the application of the organized accounting regime by option of the taxpayer, but rather the situations in which the simplified regime ceased.

With the amendment that Law no. 53-A/2006, of 29 December, gave to no. 5 of article 28, which is still in force, there came to exist a minimum period of permanence of three years in either regime, "extendable for equal periods, except if the taxpayer communicates, in accordance with paragraph b) of the preceding number, the change of regime by which he is covered."

Now, it is proven that the Claimant did not communicate any change of the regime by which he was covered. Thus, having made the option for the organized accounting regime and the Claimant not having communicated the change of regime, the application of the organized accounting regime was extended for periods of three years, successively, which includes the year 2014 here at issue.

The arbitral jurisprudence has ruled in this sense, in particular in cases nos. 262/2018-T; 300/2018-T, 295/2017-T, 114/2017-T, among others. Furthermore, the jurisprudence of the Supreme Administrative Court in the judgment of 11 May 2016, rendered in case no. 01536/15, decided that "having the taxpayers opted to be taxed on the basis of their accounting, the Tax Administration cannot come to classify them in the simplified taxation regime". As is stated in the same judgment, "the Tax Administration could not have substituted itself for the taxpayers in that option, because the minimum period of permanence in the chosen regime had not been exceeded, but, above all, because only taxpayers can opt for a different regime, except when classified in the simplified regime they exceed the amount of income previously indicated for two successive periods – art. 28, no. 6 of CIRS".

As is stated in the arbitral award rendered in case 262/2018-T, "Law no. 83-C/2013, of 31 December, did not alter this regime, limiting itself, in what is relevant here, to increasing the value of income from which the application of the organized accounting regime is mandatory, without imposing its cessation.

As is stated in that Supreme Administrative Court judgment, "if permanence in the simplified regime implies that taxpayers, in the exercise of their activity, have not exceeded in the immediately preceding taxation period an annual net amount of income of this category of (euro) 200,000, there is no specific requirement regarding the amount of income earned for them to be able to opt for the determination of income based on accounting."

In summary, there is no legal provision that permits the conclusion that the option for the organized accounting regime ceases to have any relevance from the fact that the application of that regime becomes mandatory in light of the annual income obtained, disregarding it when this again becomes less than the legal value limit. Such interpretation has no legal basis.

By the foregoing, the decision that concerned the Administrative Claim and the underlying assessments, all impugned in these proceedings, rest on the wrong assumption that the simplified regime would apply to the Claimant, and in that measure they are afflicted with the vice of violation of law, which imposes their annulment.

V. DECISION

In accordance with the foregoing, this Arbitral Tribunal decides:

a) To judge unfounded the exceptions of lis pendens and lack of material jurisdiction invoked by the Tax and Customs Authority;

b) To judge fully founded the request for arbitral pronouncement;

c) To declare the illegality of and annul all impugned tax acts, with all legal consequences.

VALUE OF PROCEEDINGS

The value of the proceedings is set at €20,187.80 in accordance with article 97-A, no. 1, a), of CPPT, applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

COSTS

The value of the arbitration fee is set at €1,224.00, in accordance with Table II of the Regulation of Costs of Tax Arbitration Proceedings, in accordance with articles 12, no. 2, and 22, no. 4, both of RJAT, and article 5 of said Regulation, to be paid by the defeated party.

Notify.

Lisbon, 28-12-2018

The Singular Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] See in this sense, ALBERTO DOS REIS, in Code of Civil Procedure Annotated, volume II, pages 288-289.

Frequently Asked Questions

Automatically Created

What is the difference between the simplified regime and the organized accounting regime under Article 28 of the Portuguese IRS Code?
Under Article 28 of the Portuguese IRS Code, the simplified regime (regime simplificado) determines taxable income by applying fixed coefficients to gross income from professional or business activities, without requiring complete accounting records. The organized accounting regime (regime de contabilidade organizada) requires taxpayers to maintain full bookkeeping in accordance with accounting standards and taxes actual net profits calculated from these records. The organized accounting regime typically provides a more accurate reflection of actual income but imposes greater administrative burdens. Taxpayers can elect their preferred regime, with the choice remaining valid for three-year periods unless communicated otherwise.
Can a taxpayer challenge an IRS tax assessment through arbitration at CAAD after a partial deferral of a gracious complaint?
Yes, a taxpayer can challenge an IRS tax assessment through arbitration at CAAD (Centro de Arbitragem Administrativa) after partial deferral of a gracious complaint (reclamação graciosa). Article 2(1)(a) of the RJAT (Tax Arbitration Legal Regime) permits arbitral requests for declaration of illegality of decisions on administrative claims and consequent annulment of tax assessments. The partial deferral of an administrative claim does not preclude subsequent arbitration regarding the remaining contested issues. However, taxpayers must observe applicable time limits and procedural requirements, and the Tax Authority may raise exceptions such as lis pendens if parallel proceedings exist in administrative courts.
How does the choice between the simplified regime and organized accounting affect IRS tax liability in Portugal?
The choice between the simplified regime and organized accounting directly affects IRS tax liability by determining how taxable income is calculated. Under the simplified regime, gross income is multiplied by legally prescribed coefficients (which varied by activity type), potentially resulting in higher or lower taxable income than actual profits. The organized accounting regime taxes actual net profits, allowing deduction of all documented business expenses. In Process 230/2018-T, this regime difference resulted in alleged excess taxation of €20,187.80. Taxpayers engaged in professional or business activities should carefully evaluate which regime minimizes their tax burden based on their expense structure and income levels.
What was the outcome of CAAD arbitral process 230/2018-T regarding the IRS assessment for 2014?
The document excerpt does not reveal the final outcome of CAAD arbitral process 230/2018-T, as it contains only the initial sections (Report and Procedural Requirements). The arbitral tribunal was constituted on July 16, 2018, with a decision initially scheduled for December 21, 2018 (extended to December 28, 2018). The tribunal needed to first rule on preliminary exceptions raised by the Tax Authority: lis pendens (due to a parallel administrative court action under process .../15...... ) and lack of material jurisdiction. Only after resolving these procedural issues would the tribunal address the merits regarding whether the taxpayer should be taxed under the simplified or organized accounting regime for 2014.
What are the legal grounds for contesting an IRS liquidation and interest calculation before the Portuguese Tax Arbitration Court?
Legal grounds for contesting an IRS liquidation and interest calculation before the Portuguese Tax Arbitration Court (CAAD) include: (1) errors in legal qualification of the applicable tax regime or rules; (2) incorrect quantification or calculation of tax due; (3) violation of procedural requirements or taxpayer rights; (4) misapplication of law to established facts; (5) violation of constitutional principles including legal certainty, good faith, and taxation based on actual income; and (6) illegality of decisions on administrative claims. Under RJAT Article 2(1)(a), taxpayers may request declaration of illegality of tax acts and their annulment. The arbitration request must be filed within the legal deadline after notification of the contested decision, with payment of required arbitration fees.