Process: 313/2018-T

Date: February 11, 2019

Tax Type: IRC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 313/2018-T) addresses the critical issue of timeliness (tempestividade) in tax arbitration proceedings concerning Corporate Income Tax (IRC) autonomous taxation. A company challenged an IRC assessment act dated February 22, 2018, relating to the 2015 tax year, specifically contesting autonomous taxation of €69,863.09. The taxpayer filed the arbitration request on July 5, 2018, after being electronically notified via ViaCTT on February 27, 2018, with mailbox access on February 28, 2018. The Portuguese Tax Authority (AT) raised a preliminary objection challenging the timeliness of the claim. Under Article 10(1) of the RJAT (Legal Regime of Arbitration in Tax Matters), arbitration requests must be filed within 90 days from specific triggering events outlined in Article 102 of the Tax Procedure and Process Code (CPPT). The relevant trigger here was the expiry of the voluntary payment period for tax obligations. Article 39(10) of the CPPT establishes that electronic notifications are deemed effective on the fifth day following registration in the electronic system. The tribunal had to calculate whether the 90-day deadline was met, considering notification timing rules and the voluntary payment period. This decision illustrates the strict procedural requirements for challenging IRC assessments through CAAD arbitration and demonstrates how courts rigorously apply statutory deadlines. The preliminary objection on timeliness takes precedence over substantive arguments regarding alleged errors in income qualification and defective substantiation, highlighting the importance of compliance with procedural timelines in Portuguese tax litigation.

Full Decision

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Jónatas Machado and Augusto Vieira, appointed by the Ethics Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby agree as follows:

ARBITRAL DECISION (consult full version in PDF)

I – REPORT

On 5 July 2018, A..., Lda, Tax Identification Number ..., with registered office at ... ...-... …, filed a request for constitution of an arbitral tribunal, under the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime of Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, referred to in abbreviated form as LRAT), seeking a declaration of illegality of the corporate income tax assessment act No. 2018... of 2018-02-22, relating to the tax year 2015, in the part concerning Autonomous Taxation in the amount of € 69,863.09.

To substantiate its request, the Petitioner alleges, in summary, "erroneous qualification of income, profits, patrimonial values and other tax facts", "absence or defect of the legally required substantiation" and "omission of other legal formalities".

On 06-07-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.

The Petitioner did not proceed to appoint an arbitrator, wherefore, pursuant to the provisions of Article 6, No. 2, subsection a) and Article 11, No. 1, subsection a) of the LRAT, the President of the Ethics Council of CAAD appointed the signatories as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable time period.

On 23-08-2018, the parties were notified of these appointments and did not manifest any intention to challenge any of them.

In accordance with the provision in Article 11, No. 1, subsection c) of the LRAT, the collective Arbitral Tribunal was constituted on 12-09-2018.

On 17-10-2018, the Respondent, duly notified for this purpose, filed its defence, raising both preliminary objections and substantive challenges.

Procedural fairness was observed with respect to the matter of the preliminary objection raised in the Respondent's defence.

Pursuant to the provisions of Articles 16, subsections c) and e), and Article 29, No. 2, both of the LRAT, the holding of the hearing referred to in Article 18 of the LRAT was dispensed with, and the parties were afforded the opportunity to submit submissions, which they did.

Given that the Respondent presented a new ground for the same preliminary objection previously raised, the Petitioner was afforded the opportunity to reply on this matter, which it duly exercised.

The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with Articles 2, No. 1, subsection a), 5 and 6, No. 2/b), of the LRAT.

The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the LRAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings contain no defects of nullity.

Thus, there is no obstacle to the examination of the case.

Having considered all the foregoing, the following must be decided:

II. DECISION

A. MATTERS OF FACT

A.1. Facts Found to be Proven

The Petitioner was notified by electronic means (ViaCTT) of the corporate income tax assessment act No. 2018 ... of 2018-02-22, relating to the tax year 2015.

The said notification contained the following wording:

[notification details]

The notification was delivered to the Petitioner's electronic mailbox in ViaCTT on 27-02-2018.

On 28-02-2018, the Petitioner's electronic mailbox in ViaCTT was accessed.

The present arbitral action was received by the CAAD offices at 10:43 hours on 05-07-2018.

A.2. Facts Found to be Unproven

With relevance to the decision, there are no facts that should be considered as unproven.

A.3. Reasoning on the Proven and Unproven Matters of Fact

With respect to matters of fact, the Tribunal is not required to pronounce on everything that was alleged by the parties; rather, it is incumbent upon it to select the facts that are important for the decision and to distinguish the proven matter from the unproven (cf. Article 123, No. 2, of the Tax Procedure and Process Code and Article 607, No. 3 of the Civil Procedure Code, applicable by virtue of Article 29, No. 1, subsections a) and e), of the LRAT).

Thus, the facts relevant to the determination of the case are selected and delimited according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) at issue (cf. former Article 511, No. 1, of the Civil Procedure Code, corresponding to the current Article 596, applicable by virtue of Article 29, No. 1, subsection e), of the LRAT).

Thus, taking into account the positions assumed by the parties, in light of Article 110/7 of the Tax Procedure and Process Code, the documentary evidence and the administrative file attached to the record, the facts listed above were considered proven, with relevance to the decision.

B. MATTERS OF LAW

The Respondent begins by raising before this arbitral tribunal, prior to all else, the question of timeliness of the present action.

In this regard, Article 10, No. 1 of the LRAT provides that:

"The request for constitution of an arbitral tribunal is filed:

a) Within a period of 90 days, counted from the facts provided for in Nos. 1 and 2 of Article 102 of the Tax Procedure and Process Code, with respect to acts susceptible of independent challenge and, equally, from the notification of the decision or the expiry of the legal time period for hierarchical review;"

Article 102 of the Tax Procedure and Process Code provides:

"1 - The challenge shall be filed within a period of three months counted from the following facts:

a) Expiry of the time period for voluntary payment of tax obligations legally notified to the taxpayer;

b) Notification of other tax acts, even when they do not give rise to any assessment;

c) Summons of secondary liable parties in tax enforcement proceedings;

d) Formation of the presumption of tacit rejection;

e) Notification of other acts that may be subject to independent challenge under the terms of this Code;

f) Knowledge of acts prejudicial to legally protected interests not covered by the preceding subsections."

In the present case, the timeliness of the present arbitral action is referred to subsection a) of No. 1 of Article 102 of the Tax Procedure and Process Code, that is, the "Expiry of the time period for voluntary payment of tax obligations legally notified to the taxpayer".

Thus, in accordance with the combined provisions of subsection a) of Article 16 of the LRAT and subsection d) of No. 1 of Article 102 of the Tax Procedure and Process Code, the present action will be timely if filed within a period of 90 days, counted from the "Expiry of the time period for voluntary payment of tax obligations legally notified to the taxpayer".

Accordingly, to assess the timeliness of the present action, it is necessary to calculate the relevant time periods.

Let us proceed.

Under Article 39, No. 10 of the Tax Procedure and Process Code: "Electronic notifications to the electronic tax address shall be deemed to be effected on the fifth day following the registration of such notifications in the electronic notification system associated with the single digital address or in the electronic mailbox of the person being notified."

As emerges from the matters of fact, the registration of availability of the notification in question in the electronic notification system associated with the single digital address or in the electronic mailbox of the Petitioner occurred on 27-02-2018.

Thus, pursuant to the said legal provision and having regard to the provision in Article 279/e) of the Civil Code, the Petitioner must be considered notified on 05-03 (Monday), with the time period for voluntary payment of the notified assessment (30 days) beginning on the following day, 06-03.

This time period for voluntary payment of the notified assessment expired on 04-04 (Wednesday), with the time period for filing the arbitral request beginning on the following day, that is, 05-04.

Thus calculated, the said time period for filing the arbitral request of 90 days expired on 04-07 (Wednesday), whereas, as emerges from the proven matters of fact, the said request was filed at 10:43 hours on 05-07.

Given the foregoing, there can be no doubt, and the Petitioner itself acknowledged this, that the present arbitral request was filed outside the legal time period.

The Petitioner, in exercise of its right of reply with respect to the preliminary objection raised by the Respondent, raised various circumstances, in order to prevent the effects of filing its arbitral request beyond the legally prescribed time period.

The Petitioner begins by arguing the insufficiency and obscurity of the text of the notification of the tax assessment act addressed to it, which appears in the facts found to be proven.

For the Petitioner, the alleged insufficiency exists because:

"In breach of what is provided in No. 2 of Article 36 of the Tax Procedure and Process Code, it does not make express reference to time periods but only refers to legal rules";

"completely forgets, as a means of reaction, the possibility of recourse to CAAD".

Further, for the Petitioner, the alleged obscurity exists because:

"not even two persons with special obligations of knowledge in these matters (such as the legal advisors representing the Public Treasury) interpreted it correctly";

"it did not adequately clarify the Petitioner regarding the time period for recourse to CAAD, inducing it to apply the three-month period (cf. No. 1 of Article 102 of the Tax Procedure and Process Code) instead of 90 days (cf. No. 1 of Article 10 of the LRAT)."

The Petitioner further invokes, in this regard, that in accordance with the provision in No. 2 of Article 11 of the Code of Administrative Procedure, applicable by virtue of subsection c) of Article 2 of the General Tax Law to tax legal relations, "The Public Administration is responsible for information provided in writing to individuals, even if not obligatory." and that, as information regarding means of defence must be included as a requirement in the notification of the tax act (No. 2 of Article 36 of the Tax Procedure and Process Code), responsibility for the deficient manner in which such information was conveyed must be attributed entirely to the Tax Administration.

On these matters, it has been understood by the jurisprudence of the superior state tax courts that insufficiency of notification regarding means of defence may only interfere with the legally prescribed time period if the person notified avails themselves of the prerogative provided in Article 37, No. 1 of the Tax Procedure and Process Code.

Thus, and by way of example, in the Decision of the Superior Administrative Court of 08-07-2015, handed down in case 0389/15[1], which cites abundant preceding jurisprudence, it may be read that:

"I - Insufficiency of the notification act due to failure to indicate the means of defence does not lead to nullity of the act, but grants the person notified the right to request notification of the omitted elements or a certified copy thereof, within the time period set in No. 1 of Article 37 of the Tax Procedure and Process Code; if this facility is used, the time period to react against the tax act is calculated from notification of the omitted requirements or the certified copy thereof.

II - If the facility provided in Article 37, No. 1 of the Tax Procedure and Process Code is not exercised, the said omission is irrelevant to eliminate the normal effects of notification already effected.

III - The time period to deduce judicial challenge is a time period of preclusion, of substantive nature, which is calculated in accordance with Article 279 of the Civil Code, as provided in Article 20, No. 1 of the Tax Procedure and Process Code."

That is, in summary, whether one agrees or not, superior tax jurisprudence has held that, when confronted with a notification that does not indicate (or, all the more, that does not indicate sufficiently, or does so in an obscure manner) the means of defence, the taxpayer must request the clarifications it requires, under pain of, in failing to do so, assuming the risk of deficiently utilizing the means of defence available to it.

In the case at hand, the notification addressed to it did not contain mention of the possibility of challenge through the arbitral route and the respective terms.

When confronted with the notification, the Petitioner, having doubts as to whether it could or could not utilize it, or as to the terms of doing so, should have used the facility of Article 37, No. 1 of the Tax Procedure and Process Code.

In failing to do so, it assumed the risks inherent in its choice, and this is not a case for application of the provision of Article 11 of the Code of Administrative Procedure, since the Tax Procedure and Process Code has its own provision, the said Article 37, No. 1 of the Tax Procedure and Process Code, to regulate the matter.

Next, the Petitioner argues that "at the genesis of tax arbitration, there prevailed a parallelism between the request for constitution and pronouncement of the arbitral tribunal and the deduction of judicial challenge, clearly evident in No. 2 of Article 124 of Law No. 3-B/2010, of 28 April – State Budget for 2010, which authorized the Government to legislate in order to institute arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters."

Noting that:

  • "at the time of the drafting of No. 1 of Article 10 of the LRAT (published in 2011), Article 102 of the Tax Procedure and Process Code prescribed, consistently, a period of 90 days for requesting constitution of the arbitral tribunal or deduction of judicial challenge;";

  • "Law No. 66-B/2012, of 31 December – State Budget for 2013, (...) altered No. 1 of Article 102 of the Tax Procedure and Process Code, which ceased to provide for a period of 90 days, to provide instead for a period, strictly speaking not coincident but, broadly speaking identical, of three months for the deduction of judicial challenge."; and

  • "if, instead of filing a request for constitution of an arbitral tribunal, recourse had been had to the alternative means of deduction of judicial challenge, this would be absolutely timely",

the Petitioner concludes, suggesting that this "arbitral tribunal should endeavor to adopt a contemporary interpretation of the provision in No. 1 of Article 10 of the LRAT, as a result of the legislative amendment made to No. 1 of Article 102 of the Tax Procedure and Process Code and in light of what is provided in No. 1 of Article 9 of the Civil Code."

Also here it is not considered possible to uphold the Petitioner's arguments. Indeed, the same law that amended No. 1 of Article 102 of the Tax Procedure and Process Code, providing for a period of 3 months instead of the 90-day period, simultaneously amended, in its Articles 228 and 229, the LRAT.

Accordingly, having the legislator amended both the Tax Procedure and Process Code and the LRAT, and not having introduced in the latter the amendment that it introduced in the former, the judge cannot substitute himself for the legislator, adopting a solution which, in light of the reasonable legislator standard, he did not intend to establish.

The Petitioner further argues, in the exercise of the right of reply afforded to it, that there is an "abuse of right and illegality on the part of the Tax Authority in raising the exception of lack of timeliness in the manner it did."

Also here it is not considered possible to uphold the Petitioner's arguments.

Indeed, as may be read in the Decision of the Court of Appeal of the South (Tribunal da Relação de Lisboa) of 29-06-2017, handed down in case 1569/15.0BELRA[2], and in keeping with various preceding jurisprudence:

"The judge may pronounce on preclusion of the right of action on the basis of facts other than those alleged by the Public Treasury in its defence, since we are dealing with a peremptory exception, subject to ex officio knowledge, it being lawful for the judge to know all facts relevant to the knowledge of the exception, even if not alleged by the parties."

That is, and immediately, we are dealing with a matter of ex officio knowledge by the Tribunal, which is not even limited by the matters of fact or law alleged by the parties, wherefore questions of legitimacy or abuse of right will not be relevant, inasmuch as they are not capable of conditioning the power-duty of the Tribunal to know of the preclusion of the right of action resulting from the untimely filing of the petition in proceedings.

Put another way, the Tribunal has a duty to know the question and to decide it according to law, even if the parties allege nothing in this respect, wherefore, all the more so, if the parties allege something in the matter, they cannot preclude or limit the power-duty of the Tribunal in question. As was stated in the Decision of the Superior Administrative Court of 22-02-2017, handed down in case 0706/16[3], "Lack of timeliness (...) entails the non-pronouncement of the tribunal on the questions raised (...), even if subject to ex officio knowledge", as "the assessment of the question of preclusion of the right of action must precede the assessment (...) and the discussion, at this juncture, of any legal question, even if subject to ex officio knowledge."

It should further be noted that preclusion of the right of action resulting from untimely filing of the petition in proceedings does not correspond to a right of the defendant or respondent, but rather to the assessment by the Tribunal of a necessary procedural requirement for it to be lawful for it to proceed with the action and to know the merits of the case.

Thus, the question of any abuse or illegality in the exercise of a right cannot be raised, precisely because such right does not exist.

Finally, the Petitioner argues that, should preclusion of the right of action be found, such shall have merely dilatory character, not constituting a peremptory exception.

Also here, the Petitioner litigates contrary to what has been the understanding of the superior state tax courts.

Indeed, as was stated in the Decision of the Superior Administrative Court of 27-05-2009, handed down in case 076/09[4], "When untimeliness of the petition is found, at a non-initial phase of the proceedings, it is incumbent on the judge to absolve the respondent from the claim (equivalent to the dismissal of the action)."

Also here, as before, in compliance with the duty of uniform application of law, imposed by Article 8, No. 3 of the Civil Code, and under pain of being subject to appeal of the present decision, under Article 25, No. 2 of the LRAT, this Arbitral Tribunal should not diverge from what has been the understanding of the said superior courts, wherefore, in function of the preclusion of the right of action resulting from the untimeliness of the initial filing, the Respondent must be absolved from the claim.

Having regard to all the foregoing, it must necessarily be concluded that the filing of the request for arbitral pronouncement occurred after the 90-day period provided for in Article 10, No. 1/a) of the LRAT, with the result that the Petitioner's right of action has been precluded, and the filing of the arbitral request is untimely, which shall result in the absolution of the Respondent from the claim.

Given the decision, which prevents examination of the merits of the case, examination of the remaining questions raised by the parties is precluded.

The Petitioner further seeks to hold the Respondent liable for costs, on the grounds that "[this is] attributable to the Tax Authority's responsibility for the deficient provision of mandatory written information, as well as to the fact that it only in its final submissions invoked adequate grounds for preclusion of the right of action/lack of timeliness".

Having regard to what was set forth above, it will not be possible to reach the conclusion sought by the Petitioner.

Indeed, as was seen, given the "deficient provision of mandatory written information" in the notification of the assessment, the Petitioner had the burden of demanding clarification, in accordance with Article 37, No. 1 of the Tax Procedure and Process Code, which it did not do, an omission for which it is accountable.

With respect to the moment of "invocation" by the Respondent of the "adequate grounds for preclusion of the right of action/lack of timeliness", as was also clarified above, the matter in question is subject to ex officio knowledge and is independent of the grounds invoked by the parties, wherefore it will not be relevant, also here, the moment at which, or the manner in which, the Respondent alleged in the matter.

C. DECISION

Accordingly, this Arbitral Tribunal decides to find the present action untimely, due to preclusion of the right of action, and absolves the Respondent from the claim, and consequently condemns the Petitioner to pay the costs of the arbitral proceedings, fixed below, for having caused it.

D. Value of the Proceedings

The value of the proceedings is fixed at € 69,863.09, in accordance with Article 97-A, No. 1, a), of the Tax Procedure and Process Code, applicable under Articles 29, No. 1, subsections a) and b) of the LRAT and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at € 2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Petitioner, since the claim was entirely unsuccessful, in accordance with Articles 12, No. 2, and 22, No. 4, both of the LRAT, and Article 4, No. 4, of the said Regulation.

Notify the parties.

Lisbon, 11 February 2019

The Presiding Arbitrator

(José Pedro Carvalho)

The Member Arbitrator

(Jónatas Machado)

The Member Arbitrator

(Augusto Vieira)

[1] Available at: http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/5e01ea13f32f11d380257e880039f92a?OpenDocument&ExpandSection=1

[2] Available at: http://www.dgsi.pt/jtca.nsf/-/5DF27F088346D4E480258155003BFE51

[3] Available at: http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/7532ab1f15016ec6802580d4003e43bb?OpenDocument&ExpandSection=1

[4] Available at: http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/c4b1eaa28f495149802575c500546e33?OpenDocument

Frequently Asked Questions

Automatically Created

What is the timeliness requirement for filing a tax arbitration claim (acção arbitral) under the RJAT in Portugal?
Under Article 10(1)(a) of the RJAT, tax arbitration requests must be filed within 90 days from the events specified in Article 102(1) and (2) of the Tax Procedure and Process Code (CPPT). For tax assessment acts, this period is calculated from the expiry of the voluntary payment period for legally notified tax obligations. Electronic notifications via the tax electronic address are deemed effective on the fifth day following registration in the electronic notification system, pursuant to Article 39(10) of the CPPT. Taxpayers must carefully calculate these deadlines to ensure timely filing, as late submissions result in dismissal without consideration of substantive merits.
Can autonomous taxation (tributações autónomas) under IRC be challenged through CAAD arbitration proceedings?
Yes, autonomous taxation (tributações autónomas) under IRC can be challenged through CAAD arbitration proceedings. Article 2(1)(a) of the RJAT establishes CAAD's jurisdiction over disputes relating to the legality of acts concerning IRC, including autonomous taxation assessments. Autonomous taxation constitutes a component of the overall IRC liquidation and falls within the scope of challengeable administrative acts. In this case, the taxpayer specifically contested autonomous taxation of €69,863.09 imposed for the 2015 tax year, alleging erroneous qualification of income, defective substantiation, and omission of legal formalities. CAAD has material competence to adjudicate such disputes, provided all procedural requirements, particularly timeliness, are satisfied.
What happens if a tax arbitration request is filed outside the legal deadline under Portuguese tax law?
If a tax arbitration request is filed outside the legal deadline under Portuguese tax law, the arbitral tribunal must dismiss the case for untimeliness (intempestividade) without examining the substantive merits. Timeliness is a preliminary procedural requirement that must be satisfied before any substantive analysis can occur. The Tax Authority routinely raises timeliness as a preliminary objection (excepção dilatória) in its defense. Courts strictly enforce statutory deadlines under Articles 10 of the RJAT and 102 of the CPPT, as these represent mandatory procedural conditions. Late filing constitutes an insurmountable procedural defect that prevents the tribunal from adjudicating the taxpayer's substantive claims, regardless of their potential merit. Taxpayers lose their right to judicial review of the contested tax act if deadlines expire.
How does CAAD determine whether a taxpayer's challenge to an IRC liquidation is timely (tempestivo)?
CAAD determines timeliness by calculating whether the arbitration request was filed within 90 days from the relevant triggering event specified in Article 102 of the CPPT. For tax assessment acts, the trigger is typically the expiry of the voluntary payment period. The calculation requires determining: (1) when notification was legally effective under Article 39(10) of the CPPT (fifth day after electronic registration); (2) when the voluntary payment period expired; and (3) whether the 90-day arbitration filing deadline was met. The tribunal examines documentary evidence including electronic notification records, ViaCTT access logs, and CAAD filing timestamps. Time periods are calculated according to Civil Code provisions (Article 279) regarding computation of days. If the request is filed even one day late, it is dismissed as untimely.
What procedural exceptions can the Portuguese Tax Authority (AT) raise in response to a CAAD arbitration request?
The Portuguese Tax Authority can raise several procedural exceptions in CAAD arbitration, with timeliness (tempestividade) being the most common preliminary objection. Other exceptions include: lack of material or territorial jurisdiction (incompetência material ou territorial); lack of legal personality, capacity, or legitimacy of the parties; irregular legal representation; failure to exhaust mandatory administrative remedies; res judicata (caso julgado); and pending litigation on identical matters (litispendência). The AT typically raises these as excepções dilatórias (preliminary objections) in its defense submitted within the statutory period. The tribunal must address preliminary objections before examining substantive merits, affording the taxpayer opportunity to respond. If a preliminary objection is sustained, the case is dismissed without substantive analysis of the tax assessment's legality.