Process: 309/2013-T

Date: September 2, 2014

Tax Type: IRC

Source: Original CAAD Decision

Summary

CAAD Case 309/2013-T involved A... Security Services and Technology, S.A. challenging the Portuguese Tax Authority (AT) over autonomous taxation under Corporate Income Tax (IRC) for fiscal year 2008. The company contested €26,816.49 in autonomous taxation on certain expenses incurred between January 1 and December 5, 2008. After filing an official review request on May 28, 2013, which was deemed tacitly rejected, the taxpayer initiated arbitration proceedings on December 26, 2013. The legal basis for the challenge was the alleged unconstitutionality of the tax assessment due to violation of the principle prohibiting retroactive application of tax law. The claimant argued that new autonomous taxation rules were being improperly applied to expenses incurred before the law's effective date. A single arbitrator tribunal was constituted on February 27, 2014, and the Tax Authority filed its defense, raising several procedural exceptions and arguing on the merits. However, before the tribunal could issue a substantive decision, the claimant filed a motion to withdraw from the proceedings. In accordance with Articles 277(d), 283(1), and 285(2) of the Civil Procedure Code, which apply subsidiarily to tax arbitration under Article 29(1)(e) of the RJAT, the arbitrator declared the proceedings extinguished due to withdrawal. The case value was fixed at €26,816.49, and the claimant was ordered to bear the arbitration fee of €1,530.00. The decision was issued on June 2, 2014, by arbitrator Luís Máximo dos Santos, without addressing the substantive tax law issues raised regarding autonomous taxation or retroactivity.

Full Decision

ARBITRAL DECISION

Process No. 309/2013 – T

Claimant: A… – Security Services and Technology, S.A.

Respondent: Tax and Customs Authority

Subject Matter: CIT / Autonomous taxation / Application for official review / Withdrawal

I. REPORT AND ASSESSMENT OF THE WITHDRAWAL APPLICATION

On 26 December 2013, the company A… – Security Services and Technology, S.A., hereinafter abbreviated as "A…" or "Claimant", with the collective person identification number ..., filed an application for the constitution of a single arbitrator tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to only as LFTA), with the Tax and Customs Authority as Respondent (hereinafter referred to as "Respondent" or TCA).

The application for constitution of the arbitral tribunal was accepted on the same date by the President of the Administrative Arbitration Center (CAAD) and notified to the Tax and Customs Authority on 27 December 2013.

In accordance with the provisions of article 6, paragraph 2, subsection a), and article 11, paragraph 1, subsection b), both of the LFTA, the Ethics Council appointed the undersigned as arbitrator of the single tribunal, who accepted in accordance with legal provisions.

On 12 February 2014, both parties were duly notified of this appointment and did not manifest any intention to refuse it, whereby the single arbitrator tribunal was constituted on 27 February 2014.

Alleging the presumption of tacit dismissal of the application for official review presented on 28 May 2013, the Claimant requests the declaration of partial illegality of the self-assessment act of Corporate Income Tax (CIT) for the financial year 2008, in the part corresponding to the autonomous taxation of certain expenses, incurred between 1 January and 5 December 2008, in the amount of €26,816.49, on the basis of the defect of violation of law due to unconstitutionality by virtue of the express violation of the principle of prohibition of retroactive application of tax law, and, consequently, the condemnation of the Respondent to the restitution of the tax which it alleges was unduly paid, in the aforementioned amount of €26,816.49, plus the corresponding compensatory interest.

Notified in accordance with article 17 of the LFTA, the Respondent filed its Reply within the legal time limit and appended the administrative file. In its defense, the TCA invoked several exceptions conducive to the dismissal of the case and, in the event that the Tribunal did not find them well-founded, argued that the claim should be considered unfounded and not proven, with its consequent dismissal of all claims.

On 15 May 2014, the meeting referred to in article 18 of the LFTA took place, as evidenced by the minutes which are attached to the case file.

The Tribunal notified the Claimant and the Respondent to present written submissions in the period of 15 days, in this order and successively, the period for the Respondent beginning to run with the notification of the filing of the Claimant's submissions.

Subsequently, the Claimant filed a motion communicating to the Tribunal its intention to withdraw from the case and, consequently, requesting the extinction of the present proceedings.

In this manner, taking into account the provisions of articles 277, subsection d), 283, paragraph 1, and 285, paragraph 2, all of the Civil Procedure Code, subsidiary applicable to tax arbitral proceedings by virtue of the provision set forth in article 29, paragraph 1, subsection e), of the LFTA, I declare the present proceedings extinguished due to withdrawal of the Claimant.

II. VALUE OF THE CASE

The value of the case is fixed at €26,816.49, in accordance with article 97-A, paragraph 1, subsection a), of the Tax Procedure Code, applicable by virtue of subsections a) and b) of paragraph 1 of article 29 of the LFTA and paragraph 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings.

III. ARBITRATION FEE

The arbitration fee is fixed at €1,530.00, in accordance with Table I of the Regulation on Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Lisbon, 2 June 2014

The Arbitrator,

Luís Máximo dos Santos

The drafting of the present Decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is autonomous taxation (tributação autónoma) under Portuguese IRC and how was it challenged in CAAD Case 309/2013-T?
Autonomous taxation (tributação autónoma) under Portuguese IRC is a special taxation regime that applies to certain corporate expenses regardless of whether the company has taxable profits. In CAAD Case 309/2013-T, A... Security Services challenged €26,816.49 in autonomous taxation on expenses incurred between January 1 and December 5, 2008. The company argued that the tax assessment violated the constitutional principle prohibiting retroactive application of tax law, claiming that new autonomous taxation rules were being improperly applied to expenses incurred before the law's effective date. However, the case was extinguished due to the claimant's withdrawal before the arbitral tribunal could rule on the merits of this constitutional challenge.
Can a taxpayer request an official review (revisão oficiosa) to contest IRC self-assessments in Portugal?
Yes, taxpayers can request an official review (revisão oficiosa) to contest IRC self-assessments in Portugal under the Tax Procedure Code. In Case 309/2013-T, the claimant filed an official review request on May 28, 2013, challenging the self-assessment of IRC for fiscal year 2008. When the Tax Authority did not respond within the legal deadline, the request was deemed tacitly rejected (indeferimento tácito). This tacit rejection gave the taxpayer standing to initiate arbitration proceedings at CAAD on December 26, 2013, treating the silence as an administrative act that could be challenged. The official review mechanism provides taxpayers with an administrative remedy before resorting to judicial or arbitral proceedings.
How does the principle of prohibition of retroactivity apply to Portuguese tax law under IRC?
The principle of prohibition of retroactivity in Portuguese tax law prevents tax authorities from applying new or amended tax laws to facts or situations that occurred before the law's entry into force. This principle is constitutionally protected and aims to ensure legal certainty and protect taxpayers' legitimate expectations. In Case 309/2013-T, the claimant invoked this principle, arguing that the autonomous taxation assessment for expenses incurred in 2008 (specifically January 1 to December 5) violated the prohibition because it allegedly applied new rules retroactively. The company claimed this constituted a defect of violation of law due to unconstitutionality. However, the tribunal never ruled on the merits of this constitutional challenge because the claimant withdrew from the proceedings before a substantive decision was issued.
What happens when a claimant files a withdrawal (desistência) in CAAD tax arbitration proceedings?
When a claimant files a withdrawal (desistência) in CAAD tax arbitration proceedings, the case is extinguished without a decision on the merits. In Case 309/2013-T, after the claimant filed a motion communicating its intention to withdraw, the arbitrator applied Articles 277(d), 283(1), and 285(2) of the Civil Procedure Code, which apply subsidiarily to tax arbitration under Article 29(1)(e) of the RJAT (Legal Framework for Tax Arbitration). The tribunal declared the proceedings extinguished on June 2, 2014. The claimant bore the arbitration costs, including the €1,530.00 arbitration fee. The withdrawal meant that the substantive tax issues—including the constitutional challenge regarding autonomous taxation and retroactivity—were never adjudicated, and the original tax assessment remained in force.
What are the legal consequences of deemed tacit rejection of a tax review request before the CAAD?
The legal consequences of deemed tacit rejection (indeferimento tácito) of a tax review request before CAAD include creating standing for the taxpayer to initiate arbitration or judicial proceedings. In Case 309/2013-T, when the Tax Authority failed to respond to the official review request filed on May 28, 2013, within the legal deadline, the silence was presumed to be a tacit rejection. This tacit rejection is treated as an administrative act that can be challenged, giving the taxpayer the right to seek arbitral review. The claimant filed for arbitration on December 26, 2013, based on this presumed tacit rejection. The tacit rejection serves as the challengeable act (ato impugnado) for purposes of initiating contentious proceedings, ensuring taxpayers are not prejudiced by administrative inaction and preserving their right to effective judicial or arbitral protection.