Process: 247/2018-T

Date: November 13, 2018

Tax Type: IRC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 247/2018-T) addresses the critical issue of timeliness in challenging IRC (Corporate Income Tax) assessments through Portuguese tax arbitration. The taxpayer, A... LDA, filed an arbitral request on May 15, 2018, seeking to annul an official IRC assessment for fiscal year 2015 worth €7,666.31. The Tax Authority issued the assessment on January 5, 2017, with a payment deadline of March 7, 2017, after the company failed to submit its Model 22 declaration within the statutory period. The central legal question concerns whether the taxpayer's arbitration request was filed within the mandatory 90-day deadline established by Article 10 of the RJAT (Decree-Law 10/2011). According to Article 102(1)(a) of the CPPT, this period begins the day after the voluntary payment deadline expires. The Tax Authority argued that the arbitration request was untimely, invoking the doctrine of caducidade do direito de acção (expiration of the right to sue). The taxpayer had previously filed a reconsideration claim (rejected November 9, 2017) and a hierarchical appeal (filed December 20, 2017, also rejected for untimeliness). The tribunal was constituted on July 25, 2018, and the Tax Authority submitted its defense raising the procedural exception of untimeliness. This case illustrates the strict nature of procedural deadlines in Portuguese tax arbitration and the fatal consequences of missing statutory time limits, even when substantive grounds for challenging an assessment may exist. The procedural irregularity takes precedence over merits-based arguments.

Full Decision

ARBITRAL DECISION

I – REPORT

1. A..., LDA., a commercial company organized as a limited liability partnership, tax identification number ..., with registered office at ...- ...-... ..., municipality of ... (hereinafter referred to as the Claimant or Taxpayer), submitted on 2018-05-15, a request for constitution of a singular arbitral tribunal, pursuant to the provisions of subparagraph a) of paragraph 1 of article 2, paragraph 5, subparagraph a), article 6, paragraph 1, and article 10, paragraphs 1 and 2, all of Decree-Law no. 10/2011, of January 20 (hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter referred to as the Respondent or TA) is requested, with a view to declaring the illegality and consequent annulment of the ex officio assessment of Corporate Income Tax (IRC) no. ..., relating to the fiscal year 2015, in the amount of €7,666.31.

2. The request for constitution of a Singular Arbitral Tribunal was accepted by His Excellency the President of CAAD, and notified to the Respondent on 2018-05-16.

3. Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 of RJAT, by decision of His Excellency the President of the Deontological Council of CAAD, duly notified to the parties within the prescribed deadlines, the undersigned was designated as arbitrator, and communicated acceptance of the appointment to that Council within the period provided for in article 4 of the Code of Ethics of the Administrative Arbitration Center.

4. On 2018-07-05 the parties were notified of this designation, and did not manifest the will to refuse the arbitrator's designation, pursuant to the combined provisions of article 11, paragraph 1, subparagraphs a) and b), in the wording conferred upon them by Law no. 66-B/2012, of December 31.

5. The Singular Arbitral Tribunal was constituted on 2018-07-25, in accordance with the requirement of subparagraph c) of paragraph 1 of article 11 of RJAT, in the wording conferred upon it by article 228 of Law no. 66-B/2012, of December 31.

6. Duly notified to do so, through an order issued on 2018-07-25, the Respondent submitted its response on 2018-10-01, and on the same date proceeded with the filing of the administrative record.

7. On 2018-10-02, and in exercise of the right to be heard, an order was issued requesting that the Claimant make a statement on the matter of exception raised by the TA in its response.

8. On 2018-10-15 the Claimant responded to the exception of untimeliness of the request for arbitral pronouncement raised by the TA.

9. By order issued on 2018-10-15, duly notified to the parties, which justified, among other matters, the dispensation with a hearing referred to in article 18 of RJAT, and the presentation of final arguments, I indicated as the foreseeable deadline for rendering and notification of the final decision the day 20/11/2018.

10. To substantiate its request, the Claimant invoked, in summary, and with relevance to what matters here, the following (which is mentioned mainly by transcription):

10.1. On 31.05.2017, the Claimant submitted the IRC Declaration Model 22 (...) relating to the fiscal year 2015, (see article 1 of the request for arbitral pronouncement and document no. 1 attached thereto),

10.2. The Claimant presented the simplified annual statement of business information (...) relating to the fiscal year 2015, on 2017-07-22, (see article 4 of the request for arbitral pronouncement and document no. 2 attached thereto),

10.3. The Claimant, not accepting the amounts stated in the ex officio assessment of IRC 2015, submitted a claim for reconsideration (see article 8 of the request for arbitral pronouncement and document no. 3 attached thereto),

10.4. The tax authority rejected the claim for reconsideration, (see article 12 of the request for arbitral pronouncement and document no. 7 attached thereto),

10.5. The Claimant, not accepting the grounds for the decision rejecting the claim for reconsideration, filed a Hierarchical Appeal, (see article 17 of the request for arbitral pronouncement and document no. 8 attached thereto),

10.6. The appeal was rejected by order of the Deputy Director of the Finance Directorate of Porto, (see article 18 of the request for arbitral pronouncement and document no. 9 attached thereto).

10.7. The Claimant concludes, as appears from its request, that "the present request should be considered as proven, and in consequence the ex officio assessment of IRC relating to the year 2015 should be annulled, since it presents a tax loss of €44,672.95, and moreover that the accounting elements be considered valid as they reflect the Claimant's reality as to income (...)"

11. As mentioned, on 2018-10-01, the Tax and Customs Authority proceeded with the filing of the administrative record and submitted its response, having defended itself both by exception and by objection,

11.1. Where, fundamentally, and in very brief summary (which is likewise mentioned mainly by transcription), it argues for the verification of untimeliness of the request for arbitral pronouncement and, on the merits for the maintenance of the ex officio assessment of IRC at issue, arguing, insofar as relevant here, the following:

11.2. "On 2016-10-21, the TA notified the Claimant that Declaration Model 22 was missing" (see article 3 of the response and administrative record annexed);

11.3. "Since within thirty days the situation was not regularized, the TA issued the ex officio assessment, no. ... dated 2007-01-05 and with payment due date 2017-03-07, in accordance with subparagraph b) of paragraph 1 of article 90 of CIRC" (see article 4 of the response),

11.4. [the Claimant] "submitted on 2017-06-09 a claim for reconsideration, filed under case number ... (see article 5 of the response and administrative record annexed),

11.5. "(...) the claim for reconsideration was rejected by order of the Chief of the Finance Service of ... dated 09-11-2017 (see article 7 of the response and administrative record annexed),

11.6. "(...) submitted on December 20, 2017 a hierarchical appeal, which was not reviewed due to its untimeliness (see article 8 of the response and administrative record annexed),

11.7. it further states that the Claimant "identifies as the object of the request for arbitral pronouncement it formulates, the "annulment of the act of ex officio assessment of income tax on legal entities relating to the fiscal year 2015, in the amount of €7,666.31 (...)" [see article 9 of the response].

11.8. "(...) the request formulated by the Claimant petitions (solely) that "the ex officio assessment of IRC relating to the year 2015 should be annulled, since it presents a tax loss of €44,672.95, and moreover that the accounting elements be considered valid." (see article 13 of the response)

11.9. It further contends that the period for challenging the aforementioned assessment act in arbitration is exceeded, aligning with the following argument that synoptically unfolds as follows, having regard to what was produced by the TA with respect to this segment:

11.10. Article 10 of RJAT establishes that for assessment acts, the period for submission of a request for arbitral pronouncement is ninety days, counted from the facts stated in paragraphs 1 and 2 of article 102 of the Code of Procedure and Tax Procedure,

11.11. For the situation at hand, the prescribed period of ninety days would commence on the day following the end of the period for voluntary payment of the tax obligation (see article 102, paragraph 1, subparagraph a) of CPPT),

11.12. The due date for payment of the assessed tax occurred on 2017-03-07,

11.13. The request for constitution of the arbitral tribunal was submitted on 2018-05-15,

11.14. The Respondent further makes various considerations regarding the specific object of the request for arbitral pronouncement, to conclude that, in its view, the Claimant, despite having made mention in its pleadings of having reacted administratively against the assessment at issue, through a claim for reconsideration (rejected) and a hierarchical appeal (rejected as untimely),

11.15. Did not formulate any request, in arbitration, aimed at annulling the act rejecting the claim for reconsideration,

11.16. And that, consequently, the tax arbitral tribunal is exclusively confronted with the challenge of an act of tax assessment (in this case ex officio assessment of IRC relating to the year 2015),

11.17. Which should have been submitted in arbitration within the period referred to in subparagraph a) of paragraph 1 of article 10 of RJAT, which did not occur.

11.18. The TA concludes its pleadings arguing for the granting of the exception it raised (untimeliness of the request for arbitral pronouncement) or, should this not be upheld, for the rejection of the request as unproven, with the assessment act remaining in the legal order.

12. The Singular Arbitral Tribunal is materially competent, and is regularly constituted pursuant to articles 2, paragraph 1, subparagraph a), 5 and 6 of RJAT.

13. The parties have legal personality and capacity, are legitimate and are duly and legally represented (articles 3, 6 and 15 of the Code of Procedure and Tax Procedure, by reference to article 29, paragraph 1, subparagraph e) of RJAT).

14. No other exceptions requiring decision were raised beyond the untimeliness of the request for arbitral pronouncement.

II – REASONING

A. FACTUAL MATTERS

A.1. Facts established as proven

With relevance to the assessment and decision of the issues raised, the following facts are established as proven and agreed:

i. The Claimant is registered under CAE 41200, classified for VAT purposes under the normal quarterly regime since 2013-02-19 and for IRC purposes under the general regime;

ii. On 2016-10-21 the TA notified the Claimant that Declaration Model 22, relating to fiscal year 2015, was missing;

iii. The TA issued the ex officio assessment no. ..., dated 2017-01-05, with payment due date 2017-03-07 in the amount of €7,666.31;

iv. On 2017-05-31 the Claimant submitted Declaration Model 22 of IRC no. ..., relating to the year 2015;

v. On 2017-07-22 the Claimant presented the simplified annual statement of business information relating to fiscal year 2015,

vi. From the underlying ex officio assessment no. ..., the Claimant on 2017-06-09 submitted a claim for reconsideration with the Finance Service of ..., to which it was assigned case number ...2017..., which was rejected by order dated 09-11-2017, by the Chief of the Finance Service of ...,

vii. From such rejection the Claimant submitted a hierarchical appeal which was never reviewed due to untimeliness,

viii. On 2018-05-15 the Claimant submitted to CAAD a request for arbitral pronouncement which gave rise to the present proceedings. (see CAAD case management information system)

A.2. Facts established as not proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Reasoning regarding the factual matters established as proven and not proven.

With respect to the factual matters, the tribunal need not pronounce upon everything alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish proven from unproven matters (see article 123, paragraph 2 of CPPT and article 607, paragraph 3 of CPC, applicable by reference to article 29, paragraph 1, subparagraphs a) and e) of RJAT).

In this manner, the facts pertinent to the judgment of the case are chosen and delimited according to their legal relevance, which is established having regard to the various plausible solutions to the legal question(s). (see article 596 of the Code of Civil Procedure, applicable by reference to article 29, paragraph 1, subparagraph e) of RJAT.

Thus, taking into account the positions assumed by the parties in light of article 110, paragraph 7 of CPPT, the documentary evidence and the administrative record annexed, the facts listed above are considered proven, with relevance to the decision.

B. MATTERS OF LAW

Pursuant to article 608, paragraph 1 of the Code of Civil Procedure, by reference to subparagraph e) of paragraph 1 of article 29 of RJAT "(...) the judgment decides, in the first place, on the procedural questions that may determine dismissal of the action, according to the order imposed by their logical precedence", with paragraph 2 of the same provision establishing that "the judge must resolve all questions that the parties have submitted for his decision, except those whose decision is prejudiced by the solution given to others (...)".

Thus, taking into account the circumstance already noted, that the Respondent in its response raised the exception of untimeliness of the request for arbitral pronouncement with implications for the action, its prior assessment and decision becomes necessary, since this may condition or prejudice the examination of the legal questions raised by the parties.

Well then;

Article 10 of RJAT, under the heading "request for constitution of an arbitral tribunal", provides under subparagraph b) of paragraph 2, that it shall contain the "identification of the act or acts subject to the request for arbitral pronouncement".

With respect to this segment and revisiting the request for arbitral pronouncement formulated by the Claimant, the Claimant's intention is clear, and appeared immediately in the preamble of its request; "(...) comes (...) to request the constitution of an Arbitral Tribunal "(...) with a view to annulling the act of ex officio assessment of income tax on legal entities relating to fiscal year 2015, in the amount of €7,666.31 (...)" concluding its request with the granting thereof, and that, in consequence, "the ex officio assessment of IRC relating to the year 2015 be annulled since it presents a tax loss of €44,672.95, and moreover that the accounting elements be considered valid as they reflect the Claimant's reality as to income (...)".

This is the request formulated by the Claimant, which delimits the cognitive and decision-making powers of the tribunal, pursuant to the applicable articles 608 and 609 of the Code of Civil Procedure.

The content and scope of the request does not lend itself to any ambiguity or controversy, and from the Claimant's response to the exception raised by the TA no contribution ensues to motivate a different response, without prejudice to the reference (already mentioned in the request for arbitral pronouncement) both to the claim for reconsideration and to the hierarchical appeal.

It is verified in the present proceedings that in the object of the request, expressly delimited by the Claimant, it is clearly stated that the (sole) object of the request for arbitral pronouncement is the request for declaration of the illegality of the ex officio assessment of IRC for 2015, petitioning that it be annulled, with no request for review of the order rejecting the claim for reconsideration,[1] since as to the alleged hierarchical appeal there would never be the possibility that any decision could be rendered thereon since it was rejected as untimely.

On the other hand, and considering the provisions of article 10, paragraph 1, subparagraph a) of RJAT, the request for constitution of an arbitral tribunal must be submitted "within a period of 90 days, counted from the facts provided for in paragraphs 1 and 2 of the article susceptible to independent challenge and, likewise, from the notification of the decision or the end of the legal period for decision of the hierarchical appeal"

The facts stated in subparagraphs a) and b) of paragraph 1 of article 102 of CPPT to which the aforementioned RJAT provision refers are, clearly: "a) end of the period for voluntary payment of tax obligations legally notified to the taxpayer" and "b) notification of other tax acts, even when they do not give rise to any assessment.

It appears, perhaps pertinent to the decision to be rendered in the present proceedings, to proceed with better interpretative clarification of subparagraph a) of paragraph 1 of article 10 of RJAT, and to examine the Claimant's request in its temporal dimension of submission.

For the first of such purposes, we rely, with deference, on the teaching of Jorge Lopes de Sousa [2]: "A first sure conclusion to be drawn from subparagraph a) of paragraph 1 of article 10 of RJAT is that the declaration of illegality of all assessment acts, self-assessments, withholding tax and payments on account, indicated in subparagraph a) of article 2 of this legislation applies the period of 90 days, provided for in subparagraph a), for the reason that subparagraph b) of that paragraph 1 of article 10 applies only to acts falling within subparagraphs b) and c) of that article 2."

Continuing: "The period of 90 days was fixed, identical to that provided for in article 102 of CPPT for judicial challenge, counted from the initial terms provided therein (...)".

As to the request for arbitral pronouncement formulated by the Claimant, and reiterating what has already been stated, we cannot but agree with the TA.

The Claimant's request is circumscribed to the declaration of illegality and subsequent annulment of the ex officio assessment of IRC relating to fiscal year 2015, and the Claimant has not raised any challenge to the order rejecting the claim for reconsideration.

Thus the Respondent is correct insofar as the period for submission of the request for arbitral pronouncement to CAAD should have occurred within ninety days from the due date for voluntary payment of the tax in question (2017-03-17), as appears from item iii of the proven facts, and the date of submission of the request for arbitral pronouncement is 2018-05-15.

Thus the untimeliness of the request for arbitral pronouncement formulated by the Claimant is verified.

Considering the exception of untimeliness of the request for arbitral pronouncement raised to be well-founded, the examination of the remaining issues raised in the proceedings is prejudiced.

III – DECISION

In light of what has been set forth, this Singular Arbitral Tribunal decides as follows:

a. to find well-founded the exception of untimeliness of the request for arbitral pronouncement;

b. in consequence, to dismiss the Respondent from the claim on the ground of expiration of the right of action;

c. to order the Claimant to pay the costs of the proceedings.

IV – VALUE OF THE CASE

In accordance with the provisions of articles 296, paragraphs 1 and 2 of the Code of Civil Procedure, approved by Law no. 47/2013, of June 26, 97-A, paragraph 1, subparagraph a) of the Code of Procedure and Tax Procedure, and article 3, paragraph 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at €7,666.31 (seven thousand six hundred sixty-six euros and thirty-one cents).

V – COSTS

Pursuant to the provisions of articles 12, paragraph 2, 22, paragraph 4 of RJAT and articles 2 and 4 of the Regulations on Costs in Tax Arbitration Proceedings, and Table I annexed thereto, the amount of costs is fixed at €612.00 (six hundred twelve euros).

NOTICE BE GIVEN

Text prepared by computer, pursuant to the provisions of article 131 of the Code of Civil Procedure, applicable by reference of article 29, subparagraph a), subparagraph e) of the Legal Regime of Tax Arbitration, with blank pages, and reviewed by the arbitrator.

[The writing of this decision is governed by the orthography prior to the Orthographic Agreement of 1990, except with respect to transcriptions made]

Thirteenth of November, two thousand and eighteen

The Arbitrator

(José Coutinho Pires)

[1] See Case no. 261/2016-T, rendered within CAAD on 18/11/2016.

[2] Guide to Tax Arbitration, Almedina, 2013, Coord: Nuno Villa-Lobos and Mónica Brito Vieira.

Frequently Asked Questions

Automatically Created

What happens if an arbitral tax claim (pedido de pronúncia arbitral) is filed outside the legal deadline in Portugal?
If an arbitral tax claim is filed outside the legal deadline in Portugal, the tribunal lacks jurisdiction to hear the case on its merits. The claim is rejected on procedural grounds due to untimeliness (intempestividade), resulting in caducidade do direito de acção (expiration of the right to sue). Under Article 10 of RJAT and Article 102 of CPPT, taxpayers must file arbitration requests within 90 days from the day following the voluntary payment deadline for assessment acts. Missing this deadline is fatal to the claim, regardless of substantive merit.
What is the legal consequence of caducidade do direito de acção in Portuguese tax arbitration proceedings?
Caducidade do direito de acção in Portuguese tax arbitration represents the definitive expiration of the legal right to challenge a tax act through judicial or arbitral proceedings. Once the statutory deadline passes without the taxpayer filing a timely challenge, the tax assessment becomes final and unappealable. This procedural bar prevents the tribunal from analyzing the merits of the case. Unlike prescription (prescrição), which can be interrupted or suspended, caducidade operates automatically and irreversibly once the time limit expires, making strict compliance with filing deadlines essential.
Can a taxpayer challenge an official IRC (Corporate Income Tax) assessment through CAAD arbitration after the filing deadline has expired?
No, a taxpayer cannot challenge an official IRC assessment through CAAD arbitration after the filing deadline has expired. Article 10 of RJAT establishes a mandatory 90-day period for submitting arbitration requests against assessment acts, counted from the day after the voluntary payment deadline. This is a preclusive deadline (prazo preclusivo), meaning once it expires, the right to challenge is permanently extinguished through caducidade. Even if the taxpayer previously filed administrative appeals (reconsideration or hierarchical appeal), these do not suspend or extend the arbitration deadline unless specifically provided by law.
What are the time limits for filing an arbitral request under the RJAT (Decreto-Lei nº 10/2011) against an IRC tax assessment?
Under the RJAT (Decree-Law 10/2011), the time limit for filing an arbitral request against an IRC tax assessment is 90 days, as established in Article 10. This period is calculated according to Article 102 of the CPPT (Tax Procedure Code). For assessment acts, the deadline begins on the day following the end of the voluntary payment period (Article 102(1)(a) CPPT). For example, if the payment deadline is March 7, the 90-day period starts on March 8. The deadline is strict and non-extendable, and failure to comply results in caducidade. Taxpayers must carefully calculate this period, as prior administrative appeals do not automatically toll or extend the arbitration filing deadline.
How does the late submission of the Modelo 22 IRC declaration affect the right to challenge a subsequent official tax assessment?
The late submission of the Modelo 22 IRC declaration triggers the Tax Authority's power to issue an official assessment (liquidação oficiosa) under Article 90(1)(b) of the IRC Code. However, this does not directly affect the procedural deadlines for challenging the subsequent assessment. Whether the original declaration was timely or late, the taxpayer still has 90 days from the day after the voluntary payment deadline to file an arbitration request under RJAT. The late filing may affect the substantive merits (potentially limiting deductions or penalties), but the procedural timeline for challenging the assessment remains governed by Articles 10 RJAT and 102 CPPT, independent of when the declaration was submitted.