Process: 237/2014-T

Date: December 2, 2014

Tax Type: IRC

Source: Original CAAD Decision

Summary

In Process 237/2014-T, a parent company (A, SA) challenged the tacit denial of its official review request concerning an additional IRC (corporate income tax) assessment for 2008 totaling €121,936.95. The assessment originated from the Tax Authority's correction of fiscal losses declared by subsidiary C for fiscal year 2002. Under the RETGS group taxation regime (Articles 69-71 CIRC), the parent company calculates consolidated taxable profit, making it responsible for assessments arising from subsidiary corrections. The applicant argued the assessment violated Article 52(4) CIRC, which prohibits IRC assessments beyond six years when correcting fiscal losses. However, the company contended this provision applied only when corrections are made to losses declared before subsequent year deductions, not their situation where C's 2008 tax declaration (filed May 2009) occurred after the 2002 correction was notified (October 2005). The applicant argued the three-year limitation period under Article 45(2) LGT for obvious declaration errors should apply instead. The Tax Authority contested the arbitral tribunal's material jurisdiction, noting it had issued a draft decision on April 21, 2014, denying the revision request for untimeliness, as the official review was filed on July 8, 2013—beyond the two-year deadline under Article 78(1) LGT from the October 1, 2010 notification. This raised fundamental questions about CAAD's competence to hear challenges to tacit denials when subsequent express decisions are issued, the temporal application of Article 52 CIRC's limitations on loss corrections, and whether dominant companies can challenge assessments flowing from subsidiary adjustments under group taxation rules. The case highlights procedural complexities in Portuguese tax arbitration jurisdiction and substantive issues regarding limitation periods for loss carryforward corrections.

Full Decision

ARBITRAL DECISION

The arbitrators, Judge Dr. José Poças Falcão (arbitrator-president), Dr. Paulo Ferreira Alves and Dr. Suzana Fernandes da Costa (arbitrators members), appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to form the Collective Arbitral Tribunal, constituted on 14 May 2014, agree on the following:

I - REPORT

A, SA, Tax Identification Number …, with registered office at …, requested the constitution of an Arbitral Tribunal, pursuant to the provisions of Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Tax Arbitration "RJAT") and Articles 1 and 2 of Ordinance No. 112-A/2011, of 22 March, with a view to annulling the act of tacit denial of the request for revision of the additional IRC assessment for the year 2008, intending thereby that this act of denial be annulled and, consequently, also annulled the act of IRC assessment and respective compensatory interest for the year 2008, (Assessment No. 2010 ...), disclosed in the account reconciliation document No. 2010 ... in the amount of €121,936.95, whose final payment deadline expired on 03.11.2010,

Alleging:

"(…)

  1. The applicant submitted, to the General Directorate of Taxes, a request for the promotion of official revision of the aforementioned withholding act, pursuant to the provisions of Article 78-1, second part, of the General Tax Law (LGT) - Doc. No. 3

  2. With respect to which the presumption of tacit denial has already occurred for purposes of Article 102, No. 1, paragraph d), of the Code of Tax Procedure and Process (By virtue of Article 10, No. 1, paragraph a), of Decree-Law No. 10/2011, of 20 January), since it was not notified of any decision rendered thereupon.

  3. It is certain that the applicant disagrees with the aforementioned assessment, understanding that it cannot be maintained, and it should be annulled as should the act of tacit denial of the request for official revision.

  4. The additional IRC assessment and respective compensatory interest for the year 2008 results essentially from the correction of the fiscal loss declared by B, Lda. (currently C, hereinafter C) concerning the fiscal year 2002.

  5. From this correction resulted the correction of the taxable matter of 2008 of this company (C).

  6. Originating, as stated, the assessment that is here challenged, since the applicant and C are integrated into a group of companies taxed in accordance with the rules provided in RETGS of Articles 69 to 71 of the CIRC.

  7. As the applicant is the parent company, it is the one competent to calculate the group's taxable profit.

  8. However, the applicant cannot agree with the correction made to C because it is illegal.

  9. In fact, the tax administration makes an incorrect application of the law, by saying that the correction [and consequent IRC 2006 Assessment] finds legal support in Nos. 1 and [2] of Article 47 (now Article 52) of the CIRC, - See Point III [description of facts and grounds of corrections that are merely arithmetic to taxable matter] of Corrections resulting from inspection action - office … of 08.06.2010 of the Finance Department of ... - Tax Inspection Services - notified to C. - Doc. 4

  10. Because Article 47, No. 4 (now Article 52) of the CIRC states that "when corrections are made to fiscal losses declared by the taxpayer, the deductions made must be altered accordingly, but no annulment or assessment, even if additional, of IRC shall be carried out if more than six years have elapsed with respect to the year to which the taxable profit relates."

  11. The verb to effect is used in the past: "made/effected."

  12. Which has full logic, as what is intended to be corrected is not only the initial error (fiscal losses), but also those (deductions made), which occurred as a consequence of this first error, because it was not known (at the time of subsequent year assessments) that the fiscal losses were not correct...

  13. In our case we verify that the tax administration corrected the fiscal year 2002 of C, and made concrete through assessment No. 2005 ..., and notified it on 28.10.2005. - Doc. No. 5

  14. Now the IRC Declaration Form 22 for the year 2008 made and filed by the appellant occurred much later, on 31.05.2009. - Doc. No. 6

  15. Being that in those circumstances the declaration should automatically remain in the situation of non-taxable, because fiscal losses to be deducted were declared, which do not appear in the system.

  16. Therefore we are faced with an error evidenced in the taxpayer's declaration which, given the tax administration's computerized system, should not allow assessment before the correction is made by the tax administration to the declaration (as indeed happened with respect to IRC for 2005 of C).

  17. Therefore, Article 47, No. 4 (current Article 52) of the CIRC does not apply to this concrete situation, because the 2008 Form 22 declaration is subsequent to the correction of the 2002 IRC, so at that moment (26.10.2005) there was no deduction made regarding the year 2008 to be corrected, since the assessment only took place in May 2009

  18. We are not dealing with a case in which corrections are made to the losses of one year, which requires altering the tax declarations already filed (before the correction) of subsequent years

  19. Thus occurring a breach of violation of law

  20. Therefore also does not apply Article 45, No. 3 of the LGT- period of limitation of 6 years in the case of loss carryforward,

  21. Rather applying Article 45, No. 2 of the LGT which tells us "In cases of obvious error in the declaration of the taxpayer or use of indirect methods by reason of application to the taxpayer's tax situation of objective indicators of activity provided for in this law, the period of limitation referred to in the preceding number is three years"

  22. Therefore, the assessment is marred by illegality.

  23. In this manner, the assessment acts that are intended to be revised cannot be maintained, as they suffer from the defect of error in the legal presuppositions, since the rule of incidence invoked is not applicable to this case.

  24. This implies that the Administration incurred in error attributable to it, in proceeding with such assessment, and accordingly, compensatory interest is owed in accordance with legal provisions to be computed from the day following that of the undue payment until the date of issuance of the respective credit note, all with the other legal consequences.

Requests:

a) - The annulment of the act of tacit denial of the request for revision of the additional IRC assessment for the year 2008;

b) - Consequently, the annulment of the tax act of IRC assessment and respective compensatory interest for the year 2008,

c) – The condemnation of AT to refund to the Applicant of the unduly paid tax, increased by compensatory interest to be computed between the date of payment of the aforementioned amount and the issuance of the corresponding credit note in favor of the Applicant, as provided in Article 43 of the General Tax Law (…)"

The Tribunal having been constituted, AT responded to the Applicant's request, by exception and by objection, alleging, in particular, the material incompetence of this Arbitral Tribunal.

In essence and regarding the question of material competence, AT alleges:

On 07/03/2014, the applicant submitted the present arbitral request, based on the tacit denial of the request for official revision concerning the fiscal year 2008.

On 21/04/2014 it was notified of the draft decision denying the request for revision, for lack of timeliness, which became final on 29/05/2014, because, while the legality of the additional assessment No. 2010... was being examined, notified on 01/10/2010, it only submitted the request for official revision on 08/07/2013, already having exceeded the two years provided for in Article 78, No. 1 of the LGT.

Regulating Article 78, No. 1 of the LGT, in a generic manner, the presuppositions of revision of tax acts, establishing that a tax act may be revised at the request of the taxpayer, within 120 days, on the grounds of any illegality, or also on the initiative of the Tax Authority, within 4 years or at any time, if the tax is not paid, on the grounds of error attributable to the services.

Thus, in accordance with the provisions of the first part of No. 1 of the cited Article 78 of the LGT, the possibility of revision of the tax act is provided for, by the entity that performed it, on the initiative of the taxpayer and on the grounds of any illegality, within the period for administrative objection.

In this manner, it is determined that the request for revision is untimely, regarding the fiscal year 2008, because more than 3 years have elapsed since the impugned additional assessment.

It thus results from the grounds of the denial act of the request for revision in question that the denial was based on the inadmissibility of official revision, for lack of timeliness, not including the assessment of the legality of the assessment act.

Thus must be assessed the question of the competence of the Arbitral Tribunal to assess the legality of the denial act of the request for official revision.

In this aspect, the delimitation of the competence of the arbitral tribunal derives from the scope of the commitment of the tax administration, which does not include the declaration of illegality of assessment acts, when such illegality was not assessed by the act that denied the request for official revision.

And from arbitral jurisdiction is excluded, as it is not covered by Article 2, No. 1 of the RJAT, the assessment of acts denying requests for official revision that do not include the assessment of the legality of assessment acts, as has already been decided in Processes No. 73/2012-TCAAD and 210/2013-TCAAD, there was legislative concern to exclude from the competencies of the arbitral tribunals functioning at CAAD the assessment of the legality of administrative acts that do not include the assessment of the legality of assessment acts, in addition to resulting, from the outset, from the generic guideline of creating an alternative means to the process of judicial challenge and to the action for recognition of a right or legitimate interest, it results clearly from paragraph a) of No. 4 of Article 124 of Law No. 3-B/2010, of 28 April, in which are indicated among the possible objects of the tax arbitral process "the administrative acts that include the assessment of the legality of assessment acts", as this specification can only be justified by a legislative intention to exclude from the possible objects of the arbitral process the assessment of the legality of acts that do not include the assessment of the legality of assessment acts". (underlined and bold in original).

The meeting provided for in Article 18 of the RJAT was dispensed with and the applicant was notified to respond, if it wished, in writing to the exception (See dispatch of 27-6-2014).

There was no response to the exceptions.

By dispatch of 11-11-2014, the deadline provided for in Article 21-1 of the RJAT was extended by 2 months.

Case Preparation

Material Competence of Tax Arbitral Tribunals

Proved Facts

For the assessment of the exception raised regarding the (in)competence of the Arbitral Tribunal, it is important to point out the following proved facts, as a result of the analysis of the administrative file, the documents attached and the position of the parties in the process which, regarding this matter, do not give rise to any controversy:

a) The applicant submitted [pursuant to Article 78-1 of the LGT] to the General Directorate of Taxes a request for the promotion of official revision of the additional IRC assessment act No. 2010... for 2008 (Doc. No. 3, with the PI);

b) This request for official revision was denied by AT for being untimely;

c) Such request for official revision was submitted on 07/08/2013, through a request addressed to the Finance Director of ....

d) The Applicant, in Declaration Form 22, for 2008, as parent company, used the loss carryforward originating in 2002, by C Lda..

e) The applicant was the subject of an inspection procedure, covering the IRC for 2008, instituted by Service Order No. OI..., notified on 17/08/2010, by the Tax Inspection Services, of the Finance Department of ...…

f) …from which resulted corrections, which had, in summary, the following grounds: "(…) this means that in the consolidated tax declaration of the group, A, SA ceases to have a deductible loss of €470,523.75 being able to deduce only €5,358.75 the net value of the algebraic sum of the tax results of the companies within the group taxed by the special regime (field 382 of declaration form 22: €3,848,146.55".

g) As a consequence of the notification of the final inspection report, the AT services proceeded to issue the respective additional assessment No. 2012 ..., for the period 2008, which was notified to the now applicant, through registration No. RY…PT, issued on 27/09/2010…

h) Having submitted an administrative objection, which was denied, it also submitted a hierarchical appeal, which was denied on the grounds of lack of timeliness, for having been submitted outside the 30-day period provided for in Article 66, No. 2 of the CPPT.

i) On 08/07/2013, the now Applicant submitted a request for official revision, pursuant to Article 78 of the LGT.

j) On 07/03/2014, with the aforementioned request for official revision still undecided, the applicant submitted the present arbitral decision request, based on the tacit denial of that request for official revision concerning fiscal year 2008.

k) On 21/04/2014 it was notified of the draft decision denying the request submitted on 8-7-2013, for lack of timeliness, which became final on 29/05/2014.

Unproved Facts

There are no facts essential to the decision that are not proved.

The Law

Excluded from arbitral jurisdiction, as it is not covered by Article 2, No. 1 of the RJAT, is the assessment of acts denying requests for official revision that do not include the assessment of the legality of assessment acts - See arbitral decisions rendered, among others, in Processes No. 73/2012-TCAAD and 210/2013-TCAAD.

In fact there was legislative concern to exclude from the competencies of the arbitral tribunals functioning at CAAD the assessment of the legality of administrative acts that do not include the assessment of the legality of assessment acts, as results from the outset from the generic guideline of creating an alternative means to the process of judicial challenge and to the action for recognition of a right or legitimate interest – See paragraph a) of No. 4 of Article 124 of Law No. 3-B/2010, of 28 April, in which are indicated among the possible objects of the tax arbitral process "the administrative acts that include the assessment of the legality of assessment acts", specification which can only be justified by a legislative intention to exclude from the possible objects of the arbitral process the assessment of the legality of acts that do not include the assessment of the legality of assessment acts.

In the case at hand, as AT alleges, it is clearly extracted that there was no assessment of merit, as the "(...) manifest lack of timeliness of the request for revision (...)" was considered.

Questions regarding the determination of the competence of tribunals are of priority knowledge and official knowledge and determine the absolute incompetence of the tribunal as to the matter and hierarchy, in accordance with Article 13 of the Code of Administrative Tribunal Procedure and Article 578 of the Civil Procedure Code by subsidiary application, provided for in Article 29 of the RJAT.

Constitutes a dilatory exception the incompetence, whether absolute or relative, of the Arbitral Tribunal as to the material capacity to assess the acts that are the object of the arbitral claim (Article 577 of the CPC and Article 2 of the RJAT).

The question is, in this case and as can be seen, to determine whether it is included in the competencies of the arbitral tribunals functioning at CAAD to declare the illegality of assessment acts when such illegality was not assessed by the act that denied the request for official revision[1].

In effect the assessment of questions related to the request for official revision of acts denying that request, provided for in Article 78 of the LGT, is included in the competencies attributed to the arbitral tribunals functioning at CAAD - Article 2 of the RJAT.

The denial act of a request for official revision of the tax act constitutes an administrative act within the definition provided by Article 120 of the Administrative Procedure Code [subsidiarily applicable in tax matters, by force of the provision in Article 2, paragraph d), of the LGT, 2, paragraph d), of the CPPT, and 29, No. 1, paragraph d), of the RJAT], as it constitutes a decision of a body of the Administration that, under norms of public law, was intended to produce legal effects in an individual and concrete situation.

On the other hand, it is also unquestionable that it is an act in tax matters as the application of norms of tax law is made therein. Thus, that denial act of the request for official revision constitutes an "administrative act in tax matters."

From paragraphs d) and p) of No. 1 and No. 2 of Article 97 of the CPPT, the rule is inferred that the challenge of administrative acts in tax matters can be made, in the tax judicial process, through judicial challenge or special administrative action as these acts include or do not include the assessment of the legality of administrative assessment acts – and that, in the concept of "assessment," in a broad sense, are encompassed all acts that come down to the application of a rate to a certain taxable matter and, therefore, also acts of withholding at source, self-assessment and payment on account.

In the face of this criterion of division of the fields of application of the process of judicial challenge and special administrative action, acts rendered in procedures of official revision of self-assessment acts may only be challenged through the process of judicial challenge when they include the assessment of the legality of these same assessment acts. Otherwise, the special administrative action will apply.

For this reason, the solution to the question of the competence of this Arbitral Tribunal by reference to the content of the denial act of the request for official revision depends on the analysis of the denial act of the request for official revision.

Now, in the concrete case, the denial act of the request for official revision is, originally, a silent act, in that it was only by the effect of the passage of time that the existence of a tacit denial was fictional.

Subsequently and already pending this arbitral decision request, an express act is rendered denying the request formulated on grounds of lack of timeliness.

That is: even though one could presume a substantive assessment denying the request for annulment on grounds of illegality, such presumption was averted or rebutted with the express pronouncement as rendered.

For this reason the arbitral decision request formulated is outside the scope of material competence of CAAD established in the RJAT and in the Ordinance (No. 112-A/2011, of 22-3) of commitment to arbitration of the Tax and Customs Authority (AT).

In fact, this request could only be decided within the scope of a special administrative action and not within the scope of this process.

For this reason it must be considered that this tribunal is incompetent to decide in the manner petitioned by the Applicant[2].

In truth and being more precise:

The scope of tax arbitral jurisdiction results, in the first place, from the provision in Article 2, No. 1 of the RJAT, which enumerates the criteria for determining the material competence of the arbitral tribunals in the following terms:

"The competence of the arbitral tribunals comprises the assessment of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts of fixation of taxable matter when they do not give rise to the assessment of any tax, of acts of determination of taxable matter and of acts of fixation of property values".

Now in view of this provision, it should be understood that the competence of the arbitral tribunals "is restricted to the activity connected with acts of assessment of taxes, remaining outside its competence the assessment of the legality of administrative acts of total or partial denial or revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax questions that do not include assessment of the act of assessment, to which paragraph p) of No. 1 of Article 97 of the CPPT refers" (Jorge Lopes de Sousa, Commentary on the Legal Regime of Tax Arbitration in Guide to Tax Arbitration, Almedina, 2013, p. 105).

The assessment of the competence of the arbitral tribunal involves a judgment on the adequacy to the case sub judice of the means of process of special administrative action or of judicial challenge process, in view of the provision in Article 97 of the CPPT, which proceeds to the definition of their respective fields of application distinguishing the "challenge of administrative acts in tax matters that include assessment of the legality of the assessment act" (par. d) of No. 1) and the "contentious appeal of total or partial denial or revocation of exemptions or other tax benefits, when dependent on recognition by the tax administration, as well as other administrative acts relating to tax questions that do not include assessment of the legality of the assessment act" (par. p) of No. 1), and that, in accordance with No. 2 of Article 97, the "contentious appeal of administrative acts in tax matters, which do not include assessment of the legality of the assessment act, from the tax administration, comprising the central government, regional governments and their members, even when carried out by delegation, is regulated by norms on process in administrative tribunals".

To implement such a distinction between the scope of application of these procedural means, which, by force of par. a) of No. 1 of Article 2 of the RJAT, has bearing on the definition of the competence of tax arbitral tribunals, it constitutes a consolidated jurisprudential orientation that "the use of the process of judicial challenge or contentious appeal (currently special administrative action, by force of the provision in Article 191 of the CPTA) depends on the content of the impugned act: if it includes assessment of the legality of an assessment act the process of judicial challenge will apply and if it does not include such assessment special administrative action/contentious appeal will apply" (cfr. the judgment of the STA of 25.6.2009, Process No. 0194/09).

In this manner, having these basic principles in mind, to ascertain the competence of the arbitral tribunal it falls to ascertain the content of the impugned act, so as to verify whether it included assessment of an assessment act.

For this purpose, as results from the expression "assessment" used in paragraph d) of No. 1 of Article 97 of the CPPT, it suffices that, in the act in question, the "legality of the assessment act" has been evaluated or examined, even if such assessment is not the ground of the administrative decision (See, in this sense, the arbitral judgment of 06/12/2013, rendered in Process No. 117/2013-T).

Now as clearly results from the case, without controversy of the parties, what is at issue here is an act of tacit denial of a request for official revision concerning assessment No. 2010..., of IRC, for the year 2008 and which pending this arbitral decision request, an express act of denial was rendered on the ground that, quoting the dispatch, "(…)the sought regularization cannot be authorized due to lack of timeliness of the respective request, in view of the provision in No. 6 of Article 78 of the VAT Code(…)"

From the foregoing results the obvious conclusion that, whether in the case of tacit denial or in the case of express denial, the Tax Administration did not assess the legality of the assessment.

As a final note, it is noted that a certain jurisprudential understanding is not unknown to the effect that tacit denial is equivalent to a pronouncement on the merits [cfr v.g., the Judgments of the STA rendered in Processes Nos. 306/09, of 8-7 and 1950/13, of 2-7].

The understanding that at issue is, in mediated form, in the case of tacit denial of administrative objection, hierarchical appeal and/or official revision, the legality of the tax act will be admissible, in general theory, if concretely the lack of timeliness is not verified, for example, of the submission of the respective requests (objection, appeal or revision).

Which is manifestly not the case.

That is: the act that is at issue and which constitutes the immediate object of this process, is, consequently and undoubtedly, the decision to deny the request for official revision submitted.

As such, it is considered, in the wake and with the grounds of previous decisions rendered by the Arbitral Tribunal[3], that it does not fall within the scope of arbitral competencies to assess the legality or illegality of decisions denying, tacit or express, requests formulated under Article 78 of the LGT.

Therefore and in conclusion: this Arbitral Tribunal is materially incompetent to assess and decide the request that is the object of the litigation sub juditio, in accordance with Articles 2, No. 1, paragraph a) and 4, No. 1, both of the RJAT and Articles 1 and 2, paragraph a), of Ordinance No. 112-A/2011, which constitutes a dilatory exception preventing knowledge of the merits of the case, in accordance with the provision in Article 576, Nos. 1 and 2 of the CPC ex vi Article 2, paragraph e) of the CPPT and Article 29, No. 1, paragraphs a) and e) of the RJAT, which prevents knowledge of the request and the dismissal from instance of AT, in accordance with Articles 576, No. 2 and 577, paragraph a) of the CPC, ex vi Article 29, No. 1, paragraphs a) and e) of the RJAT.

This obviously leaves prejudiced the assessment of the other questions raised in the case.

III DECISION

Considering the grounds stated, this Tribunal decides:

a) To find the exception of material incompetence raised by the Tax and Customs Authority well-founded and, in consequence, dismisses the Respondent from the instance;

b) To find, in consequence, the knowledge of the other exceptions and the question of merits prejudiced.

c) To condemn the applicant to payment of costs (Article 22-4 of the RJAT), fixing these in the amount of €3,060.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Processes.

Value of the Proceedings

In accordance with the provision in Article 306, No. 2, of the CPC and 97-A, No. 1, paragraph a), of the CPPT and 3, No. 2, of the Regulation of Costs in Tax Arbitration Processes, the value of the proceedings is fixed at €121,936.95.

Lisbon, 2 December 2014

The Collective Arbitral Tribunal,

José Poças Falcão
(President)

Paulo Ferreira Alves
(Member)

Suzana Fernandes da Costa
(Member)

[1] To the effect that the appropriate procedural means for determining the legality of an act of decision in a procedure of official revision of an assessment act is the special administrative action (which succeeded the contentious appeal, in accordance with Article 191 of the CPTA) if in that decision the legality of the assessment act was not assessed, reference may be made to the judgments of the Supreme Administrative Court of 20-5-2003, Process No. 638/03; of 8-10-2003, Process No. 870/03; of 15-10-2003, Process No. 1021/03; of 24-3-2004, Process No. 1588/03, of 6-11-2008, Process No. 357/08. Adopting the understanding that the process of judicial challenge is the appropriate procedural means for challenging acts of denial of administrative objections that have assessed the legality of assessment acts, reference may be made to the judgments of the STA of 15-1-2003, Process No. 1460/02; of 19-2-2003, Process No. 1461/02; and of 29-2-2012, Process No. 441/11.

[2] In this same sense, see the judgment of the Arbitral Tribunal, No. 147/2014-T.

[3] See, v.g., in addition to others cited previously, Judgments Nos. 236/2013-T and 244/2013-T, at www.caad.org.pt

Frequently Asked Questions

Automatically Created

What happens when the Portuguese tax authority tacitly rejects an official review request for IRC corporate tax?
When the Portuguese Tax Authority tacitly rejects an official review request for IRC corporate tax, a legal presumption of denial arises under Article 102(1)(d) of the Tax Procedure Code (CPPT) after the statutory response period expires without notification of a decision. This tacit denial can be challenged through tax arbitration under Article 10(1)(a) of the RJAT (Legal Regime of Tax Arbitration). The taxpayer may request annulment of both the tacit denial act and the underlying tax assessment. In Process 237/2014-T, the applicant filed for arbitration after receiving no response to its July 2013 official review request concerning a 2008 IRC assessment, though the Tax Authority subsequently argued it had issued an express denial in April 2014 for untimeliness, raising questions about the tribunal's continuing jurisdiction over the tacit denial claim.
Does the CAAD arbitral tribunal have material jurisdiction over tacit denials of official tax review proceedings?
The material jurisdiction of CAAD arbitral tribunals over tacit denials of official tax review proceedings is a contested procedural issue in Portuguese tax law. While Article 10(1)(a) of the RJAT explicitly grants arbitral tribunals competence to hear challenges to 'acts of tax assessment,' the Tax Authority in Process 237/2014-T argued the tribunal lacked material competence when an express decision denying the review request was subsequently issued before the arbitral proceeding concluded. The Authority contended that once the tacit denial transformed into an express denial (issued April 21, 2014, and becoming final May 29, 2014), the basis for arbitral jurisdiction shifted. This case exemplifies the tension between protecting taxpayer rights to challenge administrative silence and respecting procedural requirements when the administration later issues formal decisions, a critical issue for determining the proper scope of CAAD's jurisdiction under the arbitration regime.
How does a correction to a subsidiary's tax losses affect the parent company's IRC liability under the RETGS group taxation regime?
Under Portugal's RETGS group taxation regime (Articles 69-71 of the Corporate Income Tax Code), corrections to a subsidiary's declared tax losses directly impact the parent company's IRC liability because the parent calculates the consolidated taxable profit for the entire group. In Process 237/2014-T, when the Tax Authority corrected fiscal losses declared by subsidiary C for fiscal year 2002 (notified October 2005), this correction flowed through to affect the parent company A's 2008 IRC assessment, resulting in an additional assessment of €121,936.95. The parent company, as the dominant entity responsible for group tax compliance, bears the obligation to adjust group calculations based on subsidiary corrections. This creates standing for the parent to challenge assessments arising from subsidiary adjustments, though the parent must argue that the underlying correction to the subsidiary was illegal or that procedural time limits were violated—precisely the strategy employed here.
What are the legal grounds under Article 78 of the LGT for requesting an official review of an additional IRC tax assessment?
Article 78 of the General Tax Law (LGT) provides the legal framework for requesting official review (revisão oficiosa) of tax acts in Portugal. Under Article 78(1), taxpayers may request the Tax Authority to review and correct illegal tax acts, serving as an administrative remedy before pursuing judicial or arbitral challenges. The request must typically be filed within two years of notification of the contested act, as the Tax Authority argued in Process 237/2014-T (assessment notified October 1, 2010; review requested July 8, 2013). Grounds for official review include violations of law, errors in legal presuppositions, and manifest errors in factual assessment. When the Tax Authority fails to decide within the statutory period, Article 102(1)(d) of the CPPT creates a presumption of tacit denial, enabling taxpayers to proceed to arbitration. Official review provides taxpayers an opportunity for administrative correction without litigation costs, though timeliness requirements are strictly enforced.
Can a dominant company in a Portuguese tax group challenge additional IRC assessments arising from corrections to a subsidiary's declared fiscal losses?
Yes, a dominant company in a Portuguese tax group can challenge additional IRC assessments arising from corrections to a subsidiary's declared fiscal losses, as demonstrated in Process 237/2014-T. Under the RETGS group taxation regime, the parent company is legally responsible for calculating and declaring the group's consolidated taxable profit, giving it standing to contest assessments affecting group liability. The parent company can challenge both the procedural validity of the assessment (such as time-bar limitations) and the substantive legality of the underlying correction to the subsidiary's losses. In this case, the parent argued that Article 52(4) CIRC—which allows corrections to fiscal losses within six years—did not apply because the subsidiary's 2008 declaration was filed after the 2002 correction was finalized, meaning no 'deduction made' existed at the correction time. Instead, the parent contended the three-year limitation under Article 45(2) LGT for obvious declaration errors should govern, making the 2008 assessment time-barred and illegal.