CAAD Case 263/2018-T: Arbitral Tribunal Jurisdiction Over IRC Tax Reassessment Review Decisions

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Dr. Fernanda Maçãs (chairperson), Dr. Suzana Fernandes Costa and Dr. Marcolino Pisão Pedreiro (members), appointed by the Ethics Council of the Administrative Arbitration Center to form the Arbitral Tribunal, agree as follows:

1. Report

On 24-05-2018, the limited company A..., SGPS, S.A., corporate entity no. ..., with registered office at ..., no. ..., ...-... Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Center (CAAD) an application for constitution of an arbitral tribunal with a view, immediately, to the declaration of illegality of the act of dismissal of the revision of the tax act, and mediately, to the declaration of illegality of the act of assessment of Corporate Income Tax (IRC) for the year 2010, in the total amount of €1,247,479.14.

The application for constitution of the Arbitral Tribunal was accepted by the Honorable President of CAAD on 25-05-2018 and notified to the Respondent on the same date.

The Claimant did not proceed to appoint an arbitrator, wherefore, pursuant to the provisions of article 6º no. 2 letter a) of the RJAT, were appointed, by the President of the Ethics Council of CAAD, as Arbitrator Chairperson, Counselor Maria Fernanda dos Santos Maçãs and, as members, Dr. Suzana Fernandes da Costa and Dr. Marcolino Pisão Pedreiro, on 12-07-2018, with the appointment having been accepted within the legally prescribed timeframe and terms.

On the same date the parties were duly notified of this appointment, and did not express their will to refuse the appointment of the arbitrators, in accordance with the provisions of article 11º, no. 1, letters a) and b) of the RJAT, combined with articles 6º and 7º of the Ethics Code.

Thus, in accordance with the provision of letter c), no. 1, article 11º of the RJAT, the Arbitral Tribunal was constituted on 01-08-2018.

On 05-08-2018, an order was issued instructing the notification of the Respondent to, within 30 days, submit a response and, if it wished, request the production of additional evidence and remit to the arbitral tribunal a copy of the administrative file within the timeframe for submission of the response.

On 01-10-2018, the Respondent submitted its response and attached to the proceedings the administrative file.

On 03-10-2018, an order was issued instructing the Claimant to, within 10 days, respond, if it so wished, to the matter of exception raised in the Respondent's response.

The Claimant sent on 15-10-2018 its response regarding the exception matter alleged by the Tax Authority.

On 20-10-2018 an order was issued dismissing the conditional application for production of evidence submitted by the Claimant, due to the fact that the relevant factual matter lacked documentary evidence and the same was contained in the file. In the same order it was decided to dispense with the meeting provided for in article 18º of the RJAT, taking into account the principles of the Tribunal's autonomy in conducting proceedings, and in order to promote speed, simplification and informality, and, furthermore, in view of the fact that the right to be heard was exercised regarding the matter of exception. The date of 01-02-2019 was designated as the deadline for delivery of the decision.

No submissions were presented.

The parties possess legal personality and capacity and are legitimate (articles 4º and 10º no. 1 and 2 of the RJAT and article 1º of Order no. 112-A/2011 of 22 March).

The arbitral application is timely, in accordance with article 10º no. 1 letter a) of Decree-Law no. 10/2011 of 20 January and article 102º no. 1 letter a) of the Code of Tax Procedure and Process.

The proceedings do not suffer from nullities.

2. Grounds of Claim

The Claimant begins by stating that its corporate purpose is the management of equity interests in other companies, as an indirect form of exercise of economic activities as provided for in law, and that it was, in the tax period of 2010, the parent company of a group of companies subject to the Special Regime for Group Company Taxation ("RETGS"), in accordance with articles 69º and following of the IRC Code, which comprised, at that date, the following perimeter:

As the parent company of the aforementioned group subject to RETGS, the Claimant proceeded to submit the Group IRC Model 22 income statement return for the tax period of 2010, which gave rise to IRC assessment no. 2011....

According to the Claimant, in the aforementioned income statement return, the group determined a taxable profit of €104,643,279.16, to which corresponded a total amount of state surcharge of €2,424,373.18.

The Claimant states that O..., S.A. (which changed its corporate name to D..., S.A., hereinafter referred to as "D..."), and B..., S.A. (which was merged into D..., S.A., hereinafter referred to, briefly, as "B..."), companies at that time forming part of the perimeter of the tax group subject to RETGS led by the Claimant, were subject to tax inspection actions regarding the tax period of 2010.

The Claimant also states that the tax group was also subject to an inspection action carried out by the Large Taxpayers Unit (UGC), concerning the same year 2010, in the context of which the Claimant was notified of the Tax Inspection Report, from which would result corrections to the taxable matter and to the tax payable by the Group in the amounts of €2,823,404.46 and €327,624.02, respectively.

As a result of the corrections made to the taxable matter and to the calculation of the tax aforementioned, the Claimant was notified, on 20-11-2014, of the demonstration of additional IRC assessment no. 2014..., in which was determined an amount of tax and interest to pay of €468,609.81, which included the state surcharge in the amount of €2,494,958.28.

For the Claimant, this demonstration of additional assessment suffers from an error with regard to the determination of the amount due as state surcharge, there being a defect of law, for which reason it submitted an application for revision of the aforementioned act of IRC assessment, aiming at the annulment of the amount of state surcharge illegally assessed on the part of the taxable profit corresponding to the period prior to the entry into force of Law no. 12-A/2010, of 30 June.

The grounds used in the aforementioned application for revision were as follows:

• The alteration of the amount of taxable profit in the context of tax inspection generated an additional assessment of state surcharge;

• This additional assessment was calculated by reference to the tax period of 2010 as a whole;

• The tax incidence norm of state surcharge on taxable profit contained in article 2º of Law no. 12-A/2010, of 30 June, entered into force in the legal order on 1 July 2010, wherefore;

• As recently confirmed by case law issued by CAAD, the UGC cannot assess tax on the part relating to the taxable profit generated between 1 January 2010 and 30 June 2010, by violation of article 12º of the General Tax Law (LGT), and since this appears unconstitutional by violation of the principle of prohibition of tax retroactivity embodied in article 103º of the Constitution of the Portuguese Republic (CRP).

The Claimant states that it was notified on 05-02-2018 of the draft decision on the application for revision of the tax act, in which the UGC proposed to decide on the preliminary dismissal of the application on grounds of untimeliness. And on 27-02-2018, the Claimant was notified of the decision dismissing the application for revision of the tax act submitted by it.

As regards any untimeliness, the Claimant states that the additional assessment in the context of which it requested the respective official revision was issued on 20-11-2014, wherefore the four-year period for the submission of the respective application ended on 20-11-2018.

The Claimant also alleges that if it is true that the various inspection actions carried out in 2014 by the UGC made corrections to a set of matters, which did not directly address the state surcharge relating to the exercise of 2010, as was incumbent upon it under the terms discussed in the context of the official revision application, the Claimant cannot fail to note that the same corrections had an impact on the taxable profit with reference to the period of 2010 and, consequently, on the determination of the amount of state surcharge initially assessed by the Claimant. For the Claimant, a portion of the state surcharge relating to the year 2010, whose assessment was recalculated by means of the additional IRC assessment no. 2014..., only "saw the light of day" for the first time on 20-11-2014, the date of notification of the aforementioned assessment, and the error of which it suffers is only imputable to the UGC.

Thus, in the Claimant's view, the Respondent's claim that the period for its revision would be counted from 10-08-2011 is incorrect.

For the Claimant, if the Respondent's thesis that the period for challenging the new assessment begins to run from the initial assessment were to prevail, then the Claimant would only have been in a position to avail itself of the mechanisms for protection of its rights for nine months (from 21-11-2014 to 10-08-2015), since the harmful fact was only notified to it on 20-11-2014, which is, in its view, injurious to the taxpayer's rights, as it violates the constitutional principle of access to tax justice, contained in no. 4 of article 268º of the CRP and in no. 1 of article 9º of the LGT.

For the Claimant, it is also shown to be incorrect, as it rests on the same vice of reasoning, the citation by the UGC, in support of its thesis, of the decision of the Supreme Administrative Court rendered in process no. 01305/16, of 28-06-2017, since it does not present similarities with the concrete case at hand.

The Claimant alleges that it is the additional assessment no. 2014..., of 20-11-2014, which it seeks to challenge, since, although indirectly, state surcharge was illegally assessed on the totality of the taxable profit, albeit corrected, in light of the inspection action carried out by the UGC.

The Claimant concluded by stating that the application for revision of the tax act was timely submitted.

As to the illegality of the impugned assessment act, the Claimant begins by making reference to Law no. 12-A/2010 of 30-06-2010, stating that it entered into force on 1 July 2010, and that approved various additional measures for budgetary consolidation, among which it provides, in its article 2º, for the creation of the state surcharge.

The Claimant transcribes the aforementioned no. 2 of that law, which introduced an additional tax rate in the context of IRC, corresponding to a surtax of 2.5%, applicable to the portion of taxable profit exceeding €2,000,000.

In the Claimant's position, insofar as the state surcharge, accruing on a part of the taxable profit, assumes the nature of an accessory tax and not autonomous or differentiated from the IRC and, considering that this tax is configured as a tax fact of successive formation, which, therefore, only becomes complete at the end of each tax period, the temporal application of article 2º of Law no. 12-A/2010, of 30-06-2010, must be regulated by the provision of no. 2 of article 12º of the LGT. Thus, for the Claimant, the state surcharge approved by the aforementioned law could only accrue on the portion of the taxable profit generated as of 1 July 2010 that exceeds the limit of €2,000,000 established therein, and not on the entirety of the taxable profit determined in that tax period.

In support of this position, the Claimant refers to the arbitral decision rendered in process no. 432/2016-T, and that a contrary understanding would, moreover, be unconstitutional, by violation of the principle of non-retroactivity of tax law enshrined in article 103º of the CRP.

The Claimant indicates that the detection and correction of the illegality of state surcharge assessment, between 01-01-2010 and 30-06-2010, was incumbent in the first place upon the UGC, under the principle of legality to which it is bound under the terms of article 55º of the LGT, of no. 1 of article 3º of the Code of Administrative Procedure (CPA) and of no. 2 of article 266º of the CRP.

In this way, the Claimant considers it proven that this action, on the part of the UGC, manifestly entails error imputable to the services, by illegally assessing an amount of tax without legal basis, wherefore the UGC should have proceeded to correct the amounts paid in excess.

The Claimant concludes by requesting the restitution of the amount of €1,247,479.14, corresponding to 50% (from 01-01-2010 to 30-06-2010 – half year) of the amount collected in excess as state surcharge relating to the fiscal year 2010 in the additional assessment following the inspection action carried out by the UGC.

Furthermore, the Claimant requests that it be paid compensatory interest for undue payment of the tax obligation, in accordance with articles 43º and 100º of the LGT.

The Claimant also alleges that the Arbitral Tribunal is competent to hear the application and that the application for arbitral decision was timely submitted.

3. Response of the Respondent

The Tax Authority and Customs Authority, in its response, presented defense by exception and by impugnation.

As to the matter of exception, the Tax Authority begins by alleging the lapse of the right of action, stating that the legal period for challenging the act of assessment, in particular, in arbitral proceedings, has been exceeded, taking into account that the period for submitting the application for arbitral decision is 90 days, counting from the notification of the notification of the additional assessment now impugned, in accordance with letter b) of no. 1 of art. 102º, no. 1 of the CPPT.

In the Respondent's view, the tribunal cannot hear the application, since it is untimely, taking into account that the assessment was notified to the Claimant on 20-11-2014 and the arbitral application was submitted on 24-05-2018.

To support this position, the Tax Authority refers to the arbitral awards of processes no. 38/2015-T, no. 62/2012-T, no. 188/2013-T, no. 244/2013-T, no. 261/2015-T, no. 38/2015-T, no. 195/2015-T, no. 196/2015-T, no. 211/2015-T, and no. 346/2015-T.

Having regard to this understanding, the Tax Authority requests that the application be declared to lack merit, as untimely, and consequently the Respondent be absolved of the instance.

If this is not the case, the Respondent states that the material incompetence of the Arbitral Tribunal to appraise the applications for declaration of illegality of the decision of official revision should be declared.

The Respondent cites that the Claimant allowed the 2-year period provided for in no. 1 of article 131º of the CPPT to expire for submission of an administrative complaint, and only on 20-11-2017 submitted an application for official revision against the IRC assessment.

For the Respondent, the application for revision of the tax act cannot substitute the gracious complaint provided for in article 131º of the CPPT, especially when resort to it is made beyond the 2-year period provided for in no. 1 of that article.

The Tax Authority mentions that, from the reading of article 2º letter a) of Order no. 112/2011, of 22-03, it follows that the arbitral avenue for appraisal of the dispute can only be opened, in cases of self-assessment, after prior submission of a gracious complaint, which does not occur in the present proceedings, where the appraisal of an application for official revision is sought.

In the Respondent's perspective, there is the existence of a dilatory exception, embodied in the material incompetence of the arbitral tribunal, which prevents the tribunal from hearing the application, and, therefore, the Respondent entity should be absolved of the instance, having regard to the provisions of articles 576º, no. 1 and 577º, letter a) of the CPC, applicable ex vi article 29º, no. 1, letter e) of the RJAT. In support of its thesis the Respondent refers to the decisions rendered by the arbitral tribunal, in the context of processes no. 48/2012-T, 51/2012-T, 73/2012-T, 236/2013-T, 603/2014-T, 669/2015-T, 584/2016-T, 8/2017-T.

From another angle, the Respondent alleges the non-appraisal of legality in the application for official revision.

Thus, for the Respondent, having the application for revision of the tax act been preliminarily dismissed given its untimeliness, the legality of the act of assessment was not appraised since the same was foreclosed in that a procedural prerequisite necessary for its effective appraisal was missing.

The Respondent alleges that the decision on the application for revision constitutes an administrative act in tax matters which, by not appraising or discussing the legality of the assessment act, cannot be sindicable through impugnation, in accordance with the provisions of letter a) of no. 1 of article 97º of the CPPT.

The Tax Authority concludes that the sindicance of the act in question is outside the scope of matters susceptible to appraisal in arbitral proceedings, as results from article 2º of the RJAT, and in accordance with what arbitral case law has decided when faced with similar circumstances, namely the arbitral decision of process no. 244/2013-T.

In the defense by impugnation, the Respondent begins by alleging that the state surcharge has as the taxable event generating the tax obligation the taxable profit, and that profit cannot be seen in a piecemeal or isolated fashion, but rather as accruing on a part of the taxable profit considering that the IRC is configured as a tax fact of successive formation, which, therefore, only becomes complete at the end of each tax period, in conformity with the characteristic of annuality of the tax. Furthermore, for the Respondent, the taxable event only occurs on 31 December 2010 and not at an earlier moment, contrary to what the Claimant understands.

The IRC is qualified in doctrine and case law as a periodic tax, conditioned by taxable events of complex and successive formation that only become full, for tax purposes, at the end of the tax period.

Furthermore, the Respondent states that the assessment in question in the proceedings had regard to the alteration introduced by Law no. 12-A/2010, of 30-06-2010.

The Tax Authority understands that the existence of a degree of retroactivity capable of frustrating the application of no. 1 of article 87º-A of the IRC Code is not configurable, after the publication of Law no. 12-A/2010, of 30-06-2010.

As to the arbitral decision of process no. 432/2016-T, mentioned by the Claimant, the Tax Authority alleges that it does not agree with it.

On the other hand, the Tax Authority alleges that the Claimant's application could not be satisfied since the determination of the state surcharge allegedly determined in excess suffers from an erroneous quantification.

First and foremost, the Respondent alludes to the fact that the IRC is configured as a tax fact of successive formation and that only becomes complete at the end of each tax period, and to the fact that profit corresponds to the difference between the net estate at the end and at the beginning of the tax period. For that reason, the Respondent understands that the Claimant is not correct in advocating for the application of the pro rata temporis principle, petitioning for the illegality of 50% of the amount paid as state surcharge by reference to the period between 1 January to 30 June 2010.

For the Tax Authority, the Claimant's thesis is contradictory and cannot prevail, because the mid tax period (1 July to 31 December 2010) will not necessarily correspond to 50% of the determination of the state surcharge. For this thesis to prevail, the Claimant would have had to attach to the proceedings supporting documentation that would make it possible to validate the determination of taxable profit up to 30 June 2010 and the calculations corresponding to the state surcharge determined by reference to that period (1 January to 30 June 2010), so as to have fulfilled the burden of proof incumbent upon it, in accordance with article 74º no. 1 of the LGT.

In the Tax Authority's view, taxable profit is not capable of being divided and determined proportionally, as the Claimant wishes, by virtue of the fact that we are dealing with a tax of successive formation.

Thus, for the Respondent, the assessment in question is not tainted by any vice of illegality.

Finally, as to the request for payment of compensatory interest, the Respondent alleges that there was no error imputable to the services in the issuance of the impugned assessment, and advocates for its lack of merit.

4. Factual Matter

4.1. Proved Facts

Having analyzed the documentary evidence produced and the position of the parties contained in the procedural documents, the following facts are considered proved and with interest for the decision of the case:

• The Claimant has as its corporate purpose the management of equity interests in other companies, as an indirect form of exercise of economic activities

• And was, in the tax period of 2010, the parent company of a group of companies subject to the Special Regime for Group Company Taxation ("RETGS"),

• As a result of inspections carried out on the group and on two companies forming part of its perimeter, the Claimant was notified, on 20-11-2014, of the demonstration of additional IRC assessment of 2010 no. 2014..., in which was determined an amount of tax and interest to pay of €468,609.81, which included the state surcharge in the amount of €2,494,958.28.

• The Claimant was notified, on 20-11-2014, of the demonstration of additional IRC assessment no. 2014..., in which was determined an amount of tax and interest to pay of €468,609.81, which included the state surcharge in the amount of €2,494,958.28 relating to the year 2010.

• The Claimant submitted an application for revision of the tax act on 20/11/2017, in the following terms:

[Document content preserved]

• The decision that addressed the application for revision dismissed the Claimant's claim, and was notified to it on 27-02-2018 and has the following tenor:

[Document content preserved]

4.2. Facts Not Proved

There were no facts, with relevance for the decision of the case, that were not proved.

4.3. Foundation of Proved Factual Matter

The arbitrators' conviction was based on the documents attached to the proceedings and on the position of the parties demonstrated in the procedural documents produced.

5. Legal Matter

The Tax Authority and Customs Authority, in addition to other exceptions, raises the question of the incompetence of this Arbitral Tribunal given the content of the decision that addressed the application for official revision and since the question of incompetence is of priority knowledge, the appraisal thereof will begin.[1]

By virtue of dealing with an identical question, we reproduce what was decided in the arbitral decision, rendered in proc. 617/2015-T, whose understanding is accompanied:

"In article 2º of the RJAT, in which the 'Competence of arbitral tribunals' is defined, the appraisal of claims for declaration of illegality of acts of dismissal of applications for official revision of tax acts is not expressly included, since, in the wording introduced by Law no. 64-B/2011, of 30 December, only the competence of arbitral tribunals is indicated for 'the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account' and 'the declaration of illegality of acts of fixing the taxable matter when it does not give rise to the assessment of any tax, of acts of determination of the taxable matter and of acts of fixing patrimonial values'.

However, the fact that letter a) of no. 1 of article 10º of the RJAT makes reference to nos. 1 and 2 of article 102º of the CPPT, in which the various types of acts are indicated that give rise to the period for judicial challenge, including the gracious complaint, allows us to understand that all types of acts capable of being challenged through judicial challenge process, covered by those nos. 1 and 2, shall be encompassed within the jurisdiction of arbitral tribunals functioning at CAAD, provided that they have as their object an act of one of the types indicated in that article 2º of the RJAT.

Indeed, this interpretation in the sense of the identity of the fields of application of the process of judicial challenge and the arbitral process is that which is in harmony with the aforementioned legislative authorization on which the Government based itself to approve the RJAT, granted by article 124º of Law no. 3-B/2010, of 28 April, in which the intention is revealed that the tax arbitral process constitute 'an alternative procedural means to the process of judicial challenge and to the action for recognition of a right or legitimate interest in tax matters' (no. 2).

But this same argument that is drawn from the legislative authorization leads to the conclusion that the possibility of use of the arbitral process shall be excluded when, in the judicial process in tax matters, the judicial challenge or the action for recognition of a right or legitimate interest is not useable.

In fact, being this the sense of the aforementioned legislative authorization law and inserting itself within the relative reservation of legislative competence of the Assembly of the Republic to legislate on the 'fiscal system', including the 'guarantees of taxpayers' [articles 103º, no. 2, and 165º, no. 1, letter i), of the CRP], and on the 'organization and competence of tribunals' [article 165º, no. 1, letter p), of the CRP], the aforementioned article 2º of the RJAT, under penalty of unconstitutionality, for lack of coverage in the legislative authorization law that limits the power of the Government (article 112º, no. 2, of the CRP), cannot be interpreted as conferring upon arbitral tribunals functioning at CAAD competence for the appraisal of legality of other types of acts, for whose challenge the process of judicial challenge and the action for recognition of a right or legitimate interest are not adequate.

Thus, to resolve the question of the competence of this Arbitral Tribunal connected with the content of the acts of dismissal of the application for official revision and the hierarchical appeal depends on the analysis of these acts.

In the case at hand, the grounds invoked for the dismissal of the official revision and of the hierarchical appeal was the untimeliness of the intended regularization of the acts of self-assessment, which, obviously, does not entail appraisal of the legality or not of any assessment act.

However, in the light of the criterion for distribution of the fields of the process of judicial challenge and of the action for administrative special relief outlined by letters d) and p) of no. 1 of article 97º of the CPPT, it is not necessary that the appraisal of the legality of an assessment act be the ground of the procedural decision or that in the application the appraisal of the legality of an assessment act be requested, it sufficing that this act encompass it, which, in this context, means that in the impugned act there is included a judgment about the legality of an assessment act, even if it is not its legality or illegality that is the ground of the decision. It would be different if the law employed other expressions, such as 'appraise' or 'decide'.

In the case at hand, it cannot be understood that the decision on the application for official revision and the decision on the hierarchical appeal include the appraisal of the legality of any act of self-assessment (...).

Being thus, by what has been said above about the limitation of the competencies of arbitral tribunals functioning at CAAD to the appraisal of legality of acts of decision of applications for official revision that encompass the appraisal of legality of assessment acts, one must conclude to the incompetence of this Arbitral Tribunal to appraise the legality of the act of dismissal of the application for official revision and the act of dismissal of the hierarchical appeal.

The incompetence to appraise the legality of the act of dismissal of the application for official revision and the act of dismissal of the hierarchical appeal has as a corollary the incompetence of this Arbitral Tribunal to appraise the legality of the acts of self-assessment that the Claimant refers to.

In fact, the immediate object of the application for arbitral decision is the illegality of the acts of dismissal of the applications for official revision and hierarchical appeal with the illegality of the acts of self-assessment being merely the mediate object of the application for arbitral decision, which has as a consequence that the illegality of these acts can only be appraised through the appraisal of the illegality of the act of dismissal of the application for official revision and the act of dismissal of the hierarchical appeal (which would be tainted by illegality if, appraising the legality of self-assessment acts that are illegal, they dismissed its revision by considering them legal).

(...).

One concludes, thus, that this Arbitral Tribunal is materially incompetent to appraise the application for arbitral decision, as we are dealing with impugnation of acts that did not appraise the legality of self-assessment acts.

By the foregoing, the exception of material incompetence is verified, which is an obstacle to appraisal of the merits of the case and justifies the absolution of the Tax and Customs Authority of the instance [articles 16º, no. 1, of the CPPT and 278º, no. 1, letter a), of the CPC, subsidiarily applicable by virtue of the provision of article 29º, no. 1, letters c) and e), of the RJAT].

Consequently, the appraisal of the remaining questions raised becomes prejudiced."[2]

In the same sense in doctrine, expounds Jorge Lopes de Sousa:

"Limiting the competence of tribunals functioning at CAAD, as regards acts of assessment, self-assessment, withholding at source and payments on account, to the declaration of illegality and its consequences, only those acts of dismissal of gracious complaints or of hierarchical appeals or requests for appeal of tax acts shall be included in that competence in cases where these second-level acts effectively hear on the legality of the acts of assessment, self-assessment, withholding at source and payment and not also when those acts abstain from such knowledge due to some obstacle to it (such as, for example, untimeliness (...)."[3] [4]

Still in this sense goes the opinion of Carla Castelo Trindade, when she writes:

"(...) are simultaneously arbitrable and challengeable:

(...)

Acts of express dismissal of gracious complaints, hierarchical appeals or applications for official revision that themselves appraise the (i) legality of the act of assessment, self-assessment, withholding at source or payment on account (...)"[5].

Applying to the case at hand the jurisprudence mentioned above one verifies that, analyzing the tenor of the decision that dismissed the application for official revision, no judgment about the legality of an assessment act is detected therein. In fact, all of the discourse legitimizing the decision goes in the direction of substantiating the preliminary dismissal of the application on grounds of untimeliness, with no proper judgment being formulated about its juridicity, in particular about the application of article 12º, no. 2, of the General Tax Law and of the possible violation of the principle of prohibition of tax non-retroactivity, questions raised by the claimant as the foundation of its claim for annulment. On the other hand, the ground for the preliminary dismissal of the petition for official revision was, as has been demonstrated, exclusively, its untimeliness.

Not encompassing the decision in question the appraisal of the legality of the assessment, the challenge thereof must be effected through action for special administrative relief (as, moreover – correctly – is referred to in the decision in question, and expressly mentioned in the notification made to the Claimant) wherefore one cannot fail to conclude, in the light of the jurisprudence and doctrine mentioned, that, as referred to, is accompanied, that this Arbitral Tribunal is materially incompetent to appraise the present application for arbitral decision.

By the foregoing, the exception of material incompetence is verified, which is an obstacle to appraisal of the merits of the case and justifies the absolution of the Tax and Customs Authority of the instance [articles 16º, no. 1, of the CPPT and 278º, no. 1, letter a), of the CPC, subsidiarily applicable by virtue of the provision of article 29º, no. 1, letters c) and e), of the RJAT].

Consequently, the appraisal of the remaining questions raised becomes prejudiced.

6. Decision

In these terms, the arbitrators agree in this Arbitral Tribunal to:

• Find the exception of material incompetence of this Arbitral Tribunal to be well-founded;

• Absolve the Tax and Customs Authority of the instance.

7. Case Value

In accordance with the provision of article 306º, no. 2, of the CPC and 97º-A, no. 1, letter a) of the CPPT and 3º, no. 2 of the Regulation of Costs in Processes of Tax Arbitration, the value of the action is fixed at €1,247,479.14 (One million two hundred and forty-seven thousand, four hundred and seventy-nine euros and fourteen cents).

9. Costs

In accordance with article 22º, no. 4, of the RJAT, and Table I attached to the Regulation of Costs in Processes of Tax Arbitration, the amount of costs is fixed at €16,830.00 (sixteen thousand eight hundred and thirty euros), to be borne by the Claimant, in accordance with article 22º no. 4 of the RJAT.

Notify.

Lisbon, 25 January 2019

The Arbitrators

(Fernanda Maçãs)

(Suzana Fernandes da Costa)

(Marcolino Pisão Pedreiro)

Text prepared by computer, in accordance with article 138º, no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29º, no. 1, letter e) of the Tax Arbitration Regime, reviewed by me.

[1] Cfr. articles 29º, no. 1 of the RJAT, 16º of the Code of Tax Procedure and Process – "CPPT" –, 13º of the Code of Process in Administrative Tribunals – "CPTA" and 101º of the Code of Civil Procedure – "CPC".

[2] As mentioned in note 8) of this arbitral decision: "In the sense that the appropriate procedural means for hearing on the legality of act of decision of procedure for official revision of assessment act is the action for special administrative relief (which succeeded the contentious appeal, in accordance with art. 191º of the CPTA) if in that decision the legality of the assessment act was not appraised, reference can be made to the Supreme Administrative Court decisions 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".

[3] Guide to Tax Arbitration, Coordination Nuno de Villa-Lobos and Tânia Carvalhais Pereira, 2nd Edition, Almedina, 2017, p. 109.

[4] In footnote of this work at p. 111, jurisprudence of the STA in this sense is mentioned.

[5] Legal Regime of Tax Arbitration, Almedina, 2016, p. 116.