Summary
Full Decision
ARBITRAL DECISION
The arbitrator Dr. Henrique Nogueira Nunes, appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 30 August 2018, hereby decides as follows:
1. REPORT
1.1
A..., with tax identification number..., hereinafter referred to as the "Claimant," requested the constitution of the Arbitral Tribunal under the terms of articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").
1.2
The request for arbitral pronouncement, as initially configured, has as its immediate object the annulment of the act of tacit dismissal of the Administrative Review Claim against the act of assessment of Personal Income Tax (IRS) and compensatory interest no. 2017... and as its mediate object the annulment thereof, in the total amount of € 8,698.25, requesting the restitution of the tax wrongfully paid, plus indemnificatory interest.
1.3
To substantiate its request, the Claimant alleges, in summary, that it presented a new Administrative Review Claim on 17-04-2018, in which it argued that the first Administrative Review Claim presented by the Claimant contained an error due to lack of substantiation, and that this new Administrative Review Claim was intended to correct that error.
And that, in the present case, there is no capital gain for IRS purposes, since the acquisition value is higher than the realization value.
And that the assessment in dispute in the proceedings is vitiated by the defect of lack of substantiation as it is not clear what the calculation basis is for the assessed tax, petitioning the invalidity of the said act due to absolute lack of substantiation, as well as the defect of error concerning the factual assumptions, on the assumption that if the calculation carried out by the AT refers to the sale of the property in question in these proceedings, that calculation is incorrect, and the arbitral request should also proceed on the basis of this alleged defect.
It concludes by petitioning the restitution of the paid tax plus the payment of indemnificatory interest as it considers that there is an error attributable to the AT, in accordance with the provisions of article 43, no. 1 of the LGT.
1.4
The AT or Respondent, for its part, comes to defend itself by way of objection.
It argues that the second Administrative Review Claim presented by the Claimant was considered as the exercise of the right to prior hearing in relation to the first Claim presented, and that the value of € 17,956.72 was accepted as the acquisition value (as, they allege, already resulted from the Information from the SF of Lisbon..., of 21/5/2018) and that the Services are proceeding with the correction of the ex officio assessment of IRS sub judice, relating to the year 2013.
That the act which the Claimant attacks – tacit dismissal of the administrative review claim – did not exist, as there were instead express acts (draft decision and decision) duly notified to the Claimant by postal CTT.
And that the Claimant cannot attack the act of tacit dismissal of the administrative review claim, particularly because no such tacit dismissal thereof occurred.
Additionally, it states that the acts issued which constitute the decision and the respective draft decision were communicated to the Claimant by electronic notifications, which were digitally signed and sent to the electronic mailbox (CPE) of the Claimant via CTT.
And as the Claimant adhered to notifications via CTT (on 19/12/2012), the validity of these notifications cannot be questioned, as they comply with all requirements prescribed by article 36, no. 2 of the CPPT, nor can any lack of knowledge thereof benefit the Claimant.
And that the value was accepted by the AT, which issued a decision on 24/05/2018, corrected on 01/10/2018, due to an error contained in the conclusions therein, and which addressed what was requested by the Claimant.
And that the IRS declaration for 2013, filed by the Claimant on 20/11/2017, cannot be accepted as it was filed outside the legal deadline, being, moreover, incorrect as the Claimant itself acknowledges in article 20 of the PPA.
Not having been subject to appreciation by the AT, it was not subject to the Administrative Review Claim presented and cannot be subject matter in the present proceedings, it invokes.
Rather, it argues, it is the ex officio IRS declaration for the year 2013, issued on 03/11/2017 (identified by the Claimant as the mediate object of the PPA) in view of the failure to file a declaration by the Claimant, wherefore the Claimant cannot seek to impute to the AT an error in the assessment caused by the failure to file a declaration which was solely the responsibility of the Claimant itself and whose failure is solely attributable thereto.
And that the exemption request for transfer tax (SISA) presented on 2 June 1989, intending thereby to provide proof that the AT would have knowledge of the value at which the property had been acquired in April 1989, cannot be accepted as it does not provide proof of that fact, proving only that the claimant presented a SISA exemption request.
With regard to the alleged lack of substantiation, it denies that it occurred, as it argues that given the course of the Claimant's argument, it is manifest that the latter understood the cognitive process of demonstration of the assessment and corresponding assessment that it now challenges, reasons which were widely understood and subsequently referenced and attacked by the Claimant both in the administrative review claim and in the subsequent prior hearing and, consequently, in the present PPA, which, it should be said, otherwise it would not have presented with the foundations and configuration which illustrate it, wherefore it understands that the defect of lack of substantiation has not been verified.
Finally, with regard to the request for payment of indemnificatory interest, it argues that given the elements available at the time, particularly the value (of acquisition) of the property contained in the computer system, the assessment was correctly assessed, wherefore there is no error attributable to the services.
And that the Claimant's claim cannot succeed, as the situation depicted here resulted exclusively from the conduct of the Claimant, which omitted its legal duties, namely those provided for in article 57 of the CIRS, combined with articles 10 and 60 (deadline for filing the declaration), all of the same code.
It concludes that the arbitral request is unfounded as unproven.
1.5
The Tribunal considered it appropriate to dispense with the holding of the first meeting of the Arbitral Tribunal in accordance with the arbitral order notified to the parties in accordance with the provisions of article 18 of the RJAT.
Both parties were likewise notified to submit Arguments, if they so wished, and both chose to do so.
A deadline was set for the issuance of the arbitral decision until the end of the legal deadline.
1.6
The Tribunal was duly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.
The parties have legal standing and capacity, show themselves to be legitimate and are duly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
No procedural defects were identified in the proceedings.
2. QUESTIONS TO BE DECIDED
In the arguments phase, the Claimant informed the Tribunal that the primary and principal tax act in this arbitral proceeding was replaced by the AT on 1 October 2018, with the latter concluding that there was no taxable income in its sphere, being in conformity with the law, and meriting no objection on its part.
It thus places before the consideration of this Tribunal only the question of responsibility for the costs of the proceedings and the question of the right to receive the requested indemnificatory interest.
It is, thus, in face of the thema decidendum configured by the Claimant that the Tribunal will appreciate the request.
3. FACTUAL MATTER
With relevance for the appreciation and decision on the merits, the following facts are deemed proven:
A) The Claimant, on 26/11/2013, sold the autonomous unit better identified in the proceedings and in the deed of sale of the property, for the amount of € 37,500.00 (cf. Document no. 5 attached by the Claimant with the PPA and PA attached by the Respondent).
B) The Claimant did not file the IRS Form 3 declaration relating to the tax year in question (2013) within the legal deadlines, having filed said Declaration on 20/11/2017 (cf. Document no. 4 attached by the Claimant with the proceedings).
C) The Respondent issued an ex officio IRS/DC declaration which it did on 03/11/2017, contested in the arbitral proceedings (cf. PA attached by the Respondent).
D) The Declaration of Defaulters dated 29/10/2014 was made to the United Kingdom address of the Claimant (cf. Document no. 2 attached by the Respondent).
E) The Claimant presented on 21/11/2017 an Administrative Review Claim following a request presented for that purpose, in which it came to "claim against the ex officio IRS declaration for the year 2013, from which resulted the IRS assessment no. 2017..., of 17/11/2017," requesting that the Tax Market Value (VPT) of the property at the date of disposal be taken into account as the acquisition value of the property (cf. Document no. 2 attached by the Claimant with the proceedings and PA attached by the Respondent).
F) In said Claim, the Claimant acknowledged negligence for the failure to timely present the income declaration for the year 2013, and informed that it filed the IRS Form 3 declaration on 20/11/2017, attaching proof of its filing (cf. Document no. 2 attached by the Claimant with the proceedings and PA attached by the Respondent).
G) The Claim was appreciated by the Services of the AT and projected to be dismissed, with the grounds contained in pages 44 and 45 of the PA attached to the proceedings and notified to the Claimant for purposes of prior hearing, via CTT, a form of notification to which the Claimant adhered in the year 2012 (cf. see Document 4 attached by the Respondent and PA).
H) On 18/04/2018, a new Administrative Review Claim presented by the Claimant and subscribed by its Tax Representative was filed with the SF Lisbon..., which was accepted by the Respondent as constituting the exercise of the right to prior hearing with respect to the first Claim whose deadline was running (cf. pages 47 to 62 of the PA attached by the Respondent and Document 3 attached by the Claimant).
I) In this communication, the Claimant attached the deed of acquisition of the property in question, as document 4 (cf. pages 56 to 60 of the PA attached by the Respondent), and altered the request or the grounds of the Claim (alleging that the claim "was poorly substantiated" and that it would still be "within the deadline to present a claim"), having withdrawn the request to take into account the VPT at the date of disposal and asking instead that account be taken of the value (contained in the deed) of acquisition (cf. Document no. 3 attached by the Claimant and PA attached by the Respondent).
J) Following the presentation of that Claim, accepted by the AT as the exercise of the right to prior hearing, and with the Claimant having attached the deed of acquisition of the property in question, where it provided proof of the acquisition value of the property, said SF of Lisbon... accepted, in substance, its claim on 24/05/2018, having notified it of that decision on 30/05/2018 by the same form of notification – "CTT" to which the Claimant had adhered in 2012 (cf. PA and Document no. 6 attached by the Respondent).
K) However, the final proposal contained in the Information in question was drafted by the AT concluding for the alteration of the initial draft decision of dismissal to dismissal, despite the fact that in the body of said Information one could read that the proposed value would be accepted.
L) This information was subsequently annulled and replaced by another, dated 01/10/2018 (cf: Document no. 1 attached by the Respondent), in which only the decision proposal was modified, in the sense of altering the initial draft decision of dismissal to partial approval and notified to the Claimant by the same means (cf. PA attached by the Respondent).
M) The Claimant appointed a Tax Representative in Portugal on 10/04/2018 in the person of its Representative (cf. Document no. 7 attached by the Respondent in response to an Order of the Tribunal).
N) On 26 June 2018, the Claimant filed a request for constitution of the Arbitral Tribunal with the CAAD – cf. electronic request in the CAAD system.
4. UNPROVEN FACTS
It was not proven that the AT had knowledge at the time of the presentation of the first Administrative Review Claim of the acquisition value of the property in question in the proceedings, as from document no. 7 attached by the Claimant with its arbitral request only a SISA exemption request presented on 2 June 1989 can be discerned, with no deed being annexed, and, on the other hand, in 1989 public deeds were not automatically communicated to the AT as they are at present.
There are no other facts with relevance to the decision on the merits of the proceedings that have not been proven.
5. SUBSTANTIATION OF THE DECISION ON FACTUAL MATTER
As for the essential facts, the established matter is configured identically by both parties and the Tribunal's conviction was formed on the basis of the official documentary elements attached to the proceedings and discriminated above, whose authenticity and truthfulness was not questioned by either party.
It should be noted that the Tribunal does not have the duty to pronounce on all the matters alleged, but rather has the duty to select only those that matter for the decision, taking into account the cause (or causes) of action which substantiate(s) the request formulated by the Claimant as plaintiff (cf. articles 596, no. 1 and 607, nos. 2 to 4, of the Civil Procedure Code, as amended by Law 41/2013, of 26/6) and to record whether it considers it proven or unproven (cf. article 123, no. 2, of the CPPT).
According to the principle of free appreciation of evidence, the Tribunal bases its decision, in relation to the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of proof brought to the proceedings and in accordance with its life experience and knowledge of persons (cf. article 607, no. 5, of the Civil Procedure Code, as amended by Law no. 41/2013, of 26/6). Only when the probative force of certain means is pre-established in Law (e.g. full probative force of authentic documents – cf. article 371 of the Civil Code) does the principle of free appreciation of evidence not dominate in the appreciation of the evidence produced.
6. ON THE LAW
Of Indemnificatory Interest
Regarding the recognition of the right to indemnificatory interest, it is incumbent to decide whether, having determined the revocation of the tax act in question following the request for constitution of the Arbitral Tribunal – in the exercise of the right to prior hearing by the SF Lisbon-... – can the right to payment of indemnificatory interest on the amount paid still be recognized in arbitral proceedings.
In this regard, and as properly decided by the Arbitral Tribunal constituted under no. 153/2016-T, a decision which we fully endorse, indemnificatory interest corresponds to the materialization of a right to indemnification that has its constitutional root in article 22 of the Constitution of the Portuguese Republic. This provision establishes that the State and other public entities are civilly liable, jointly and severally with the holders of their organs, officials or agents, for actions or omissions practiced in the exercise of their functions and because of that exercise, resulting in the violation of rights, freedoms and guarantees or harm to others.
The obligation to pay indemnificatory interest is grounded in the institute of extracontractual civil liability of the State, constituting the counterpart of compensatory interest in favor of the Administration. Thus, the nature of indemnificatory interest is substantially identical to that of compensatory interest, being, like these, an indemnification assigned on the basis of extracontractual civil liability. Indemnificatory interest accrues in favor of the taxpayer, intended to compensate it for the prejudice caused by a wrongful payment of a tax obligation (cf. Judgment of the Central Administrative Court of the South, issued in Case no. 08862/15, on 10-09-2015[1]).
It should, therefore, be understood that having determined the revocation of acts following the request for constitution of an Arbitral Tribunal, the right to payment of interest on the amount paid can still be recognized therein, provided that the respective legal requirements are met.
Indeed, "[…] to consider in such a situation that the ex officio annulment was not constitutive of the right to the indemnificatory interest requested was to place, as the respondent rightly notes in its counter-argument, arbitrarily, in the hands of the Tax Administration the constitution of that same right whenever an error of the services occurred, which would constitute a manifest abuse that the law cannot tolerate or consent to", therefore, having been annulled the assessments by the Tax and Customs Administration "[…] during the pendency of judicial challenge, instituted against such assessments and where in addition to requesting the annulment of these tax acts there was also a request for the condemnation of the AT in indemnificatory interest, such fact is of itself demonstrative of error attributable to the services and of the payment of interest under article 43 of the LGT" (cf. Judgment of the Supreme Administrative Court, issued in Case no. 0574/14, of 07-01-2016[2]).
And if this is so in judicial courts, no reason is apparent why it should not be so in Arbitral Tribunals.
It is important, therefore, to determine whether in the case sub judicio the legal requirements are met for the right to indemnificatory interest to be recognized.
Article 43, no. 1 of the General Tax Law establishes that indemnificatory interest is due when it is determined, in administrative review or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount higher than legally due.
And in accordance with article 24, no. 5 of the Legal Regime of Tax Arbitration, payment of interest is due, regardless of its nature, in the terms provided for in the General Tax Law and in the Tax Procedure and Process Code (CPPT).
For the right to indemnificatory interest to be recognized, it is necessary that in the proceedings it is determined that in the assessment there was an error attributable to the services, understood as the "error concerning the factual or legal assumptions attributable to the Tax Administration".
In the present case, the Tribunal understands that this requirement was only met from the moment when, after the Claimant had attached the deed of acquisition of the property in question, bringing to the knowledge of the AT this fact (value), the dismissal of the Claim presented was nonetheless motivated and notified to the Claimant on 30 May 2018, but decided and dated 24 May 2018, as the AT acknowledges in its Response, it is certain that by apparent clerical error, but which is naturally not attributable to the Claimant.
Because before that, there is no error attributable to the AT which merely acted in accordance with the law, considering the failure to voluntarily comply with the declarative obligation which is solely attributable to the Claimant.
Furthermore, only on 1 October 2018, almost 5 months after its error, was this situation corrected by the AT, having then approved the Claimant's claim, whereby from the date of the decision of the first dismissal of the Claim presented, there was effectively an error attributable to the AT which could and should have decided promptly in accordance with what was then requested as came to occur later.
Being that this approval, by itself, forthwith established the taxpayer (now Claimant) in the right to receive indemnificatory interest in accordance with article 100 of the LGT, which is express in that regard, referring specifically to the situation of "total or partial approval of administrative claims or appeals".
In these terms, in addition to the reimbursement of the amount paid of € 8,698.25 paid as title of IRS assessment already revoked, the AT is condemned to payment of indemnificatory interest accruing on said amount, in accordance with article 43 of the General Tax Law, but only from 24 May 2018 onwards.
Finally, and as to the rest, by virtue of the revocation of the disputed assessment act, the extinction of the proceedings is determined due to supervening loss of subject matter with reference to the request for annulment of that same act on the grounds of its illegality.
Of Responsibility for Costs
In accordance with the provisions of article 22, no. 4, of the RJAT, "the arbitral decision issued by the arbitral tribunal contains the fixing of the amount and apportionment among the parties of the costs directly resulting from the arbitral proceedings".
From the present arbitral proceedings it results that the IRS assessment which is the object of the present request for arbitral pronouncement was only revoked by the Respondent following the entry into the CAAD of the request for constitution of the arbitral tribunal, which occurred on 26 June 2018. Furthermore, the arbitral proceedings had to continue for the appreciation of the right to indemnificatory interest, which the AT did not recognize.
In the current Portuguese legal system, the principle prevails that the party which has caused the need for the proceedings bears the costs thereof (article 527 of the Civil Procedure Code, applicable by virtue of the provisions of article 29, no. 1, paragraph e) of the RJAT).
As a consequence of the foregoing, responsibility for the costs, in their entirety, should be imputed to the Respondent, for the purposes of the provisions of article 12, no. 2 of the RJAT and article 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings.
7. DECISION
In view of the foregoing, this Singular Arbitral Tribunal hereby decides:
- To determine the extinction of the proceedings due to supervening loss of subject matter with reference to the request for annulment of the disputed act, by virtue of its revocation in the terms and for the purposes of article 277, paragraph e) of the CPC and, likewise, to condemn the Respondent in reimbursement of the amount paid and in payment of indemnificatory interest accruing on said amounts in accordance with article 43 of the LGT, from 24 May 2018 onwards.
The value of the proceedings is fixed at Euro 8,698.25, in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, paragraph a) of the CPPT and 306 of the CPC.
Having the Arbitral Tribunal been duly constituted, the Respondent is condemned in costs in the amount of Euro 918.00 under article 22, no. 4 of the RJAT and Table I attached to the RCPAT, in accordance with the provisions of articles 12, no. 2 of the RJAT and 4, no. 4 of the RCPAT.
Notice is given hereof.
Lisbon, 6 February 2019.
The Arbitrator,
(Henrique Nogueira Nunes)
Text prepared by computer, in accordance with article 131, no. 5 of the Civil Procedure Code, applicable by reference to article 29, no. 1, paragraph e) of the RJAT.
The drafting of this arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.
[1] Available at www.dgsi.pt
[2] Available at www.dgsi.pt
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