Process: 314/2014-T

Date: December 3, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 314/2014-T) concerns IUC (Single Circulation Tax) assessments issued between 2008-2012 for vehicles that the Claimant company had previously sold between 2006-2011. The core dispute involves whether a former vehicle owner remains liable for IUC after selling vehicles that were not re-registered in the purchaser's name. The Claimant argues that Article 3(1) of the IUC Code establishes only a rebuttable presumption that the registered owner is liable, and that proof of sale through invoices should defeat this presumption since vehicle registration has no constitutive effect under Portuguese law. The company contends that the purchase and sale contract has real effect per Article 408(1) of the Civil Code, transferring ownership without requiring registration, which serves merely for publicity. The Tax Authority raised a procedural exception of caducidade (lapse of right of action), arguing the arbitration request filed on 1 April 2014 exceeded the 90-day deadline from the last voluntary payment period ending 18 December 2013. The Claimant counters that the deadline follows Articles 138-139 of the New Code of Civil Procedure and was still running. The company seeks annulment of IUC assessments totaling €2,591.05, cancellation of associated penalties, reimbursement of amounts paid, and compensatory interest. The arbitral tribunal, constituted as a singular tribunal on 9 June 2014, held a preliminary hearing under Article 18 RJAT to clarify the lapse exception. The case raises fundamental questions about the interaction between civil ownership transfer, vehicle registration, and tax liability, as well as procedural deadline calculations in tax arbitration proceedings under the RJAT regime.

Full Decision

ARBITRATION DECISION

I. - REPORT

A - PARTIES

A, a commercial limited partnership company, legal entity no. …, with registered office at …, Parish of …, hereinafter referred to as "Claimant", filed a request for constitution of an arbitral tribunal, pursuant to the provisions of article 2(1)(a) and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), with a view to the examination of the following claim opposing it to the Tax and Customs Authority (which succeeded, among others, the General Directorate of Taxes), hereinafter referred to as "Respondent" or "TA".

B - REQUEST

1 - The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD on 02 April 2014 and notified to the TA on 04 April 2014.

2 - The Claimant failed to appoint an arbitrator, and therefore, pursuant to the provisions of article 6(1) of the RJAT, the undersigned was designated by the Ethics Council of the Centre for Administrative Arbitration on 22-05-2014 as arbitrator of a Singular Arbitral Tribunal, having accepted in the terms legally provided.

3 - The Parties were, on 22-05-2014, duly notified of this appointment and did not manifest any intention to refuse it, in accordance with the combined provisions of article 11(1)(a) and (b) and articles 6 and 7 of the Ethics Code.

4 - Under these circumstances, in compliance with the provisions of article 11(1)(c) of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was regularly constituted on 09-06-2014.

5 - On 21 November 2014, a meeting with the Parties was held as referred to in article 18 of the RJAT, of which minutes were drawn up, which are attached to the case file, and the TA clarified the sense and grounds of the exception of lapse of the right of action, raised by it in its Response, reaffirming its merit, to which the Claimant's representative preferred to respond in writing, a response which, having been admitted by the Tribunal on those terms, shall be presented by 25-11-2014.

6 - The Claimant herein requests that this Arbitral Tribunal:

a) - Declare the illegality and consequent annulment of the acts of assessment relating to the Single Circulation Tax (hereinafter referred to as IUC), concerning the years 2008 to 2012, as identified in the case file, concerning the vehicles, likewise identified in the case file and which are hereby given as fully reproduced;

b) - Declare the annulment of the penalties arising from the notifications of IUC assessments that are the subject of the present proceedings, with the Claimant relieved of the obligation to pay them;

c) - Condemn the TA to reimbursement of the amount of € 2,591.05, corresponding to the total amount paid as IUC, relating to the assessments and vehicles previously referenced;

d) - Condemn the Tax and Customs Authority to payment of compensatory interest for payment of improperly assessed and paid IUC.

C - CAUSE OF ACTION

7 - The Claimant, in the substantiation of its request for arbitral pronouncement, states, in summary, the following:

8 - That, between the years 2006 and 2011, it sold motor vehicles to various natural and legal persons, as identified in the case file, in a document attached under number one, which are hereby given as fully reproduced.

9 - That, between the years 2008 and 2012, it was notified of official assessments of IUC, relating to the vehicles identified in the proceedings, in the terms previously mentioned, and in December 2013, as shown in the document attached to the case file under number three, proceeded to the corresponding payment.

10 - That, as of the date of the tax facts, it was no longer the legitimate owner of the vehicles referenced in the case file, given that they were sold on dates prior to those on which the tax became due, as evidenced by the respective invoices attached to the case file, in a document identified under number four.

11 - That the Respondent, in carrying out the assessments in question, only considered the registration of the vehicles to qualify the Claimant as the passive subject of the tax obligation of the tax, which is not acceptable given that registration in the Motor Vehicle Registry does not affect the validity of the transmission of ownership of the vehicles.

12 - That it did not effect payment of the penalties identified in the document attached to the case file, under number five, on the grounds that it considers it has no obligation to do so, given that it does not consider itself the subject of the obligation to pay the tax.

13 - That the provision contained in article 3, no. 1 of the IUC Code enshrines a presumption, which, concerning a rule of tax incidence, always admits contrary proof, in accordance with the provisions of article 73 of the LGT.

14 - That the purchase and sale contract has a real nature, and the real effect, in view of the provisions of article 408(1) of the Civil Code, results from the contract itself, which means that the transmission of ownership of the thing, having as its cause the contract itself, does not depend on any subsequent act, namely registration.

15 - That the essential function of vehicle registration is to give publicity to the legal situation of vehicles, with registration not having constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership.

16 - That, given the legal notion of third party, it is to be concluded that such qualification is not met by the Tax Administration, and the latter cannot prevail itself of the absence of updating of the registration of the ownership right to challenge the full effectiveness of the purchase and sale contract and to require from the seller (previous owner) the payment of the IUC owed by the buyer of the vehicle (new owner), provided that the presumption of the respective ownership is rebutted, through sufficient proof of the corresponding sale.

17 - Finally, in accordance with what was recorded in the minutes of the meeting referred to in article 18 of the RJAT, the Claimant, in the context of its written response, concerning the exception of lapse of the right of action raised by the Respondent, considers that the time period for filing the Request for Arbitral Pronouncement follows the terms of the provisions of articles 138 and 139 of the New Code of Civil Procedure, and therefore, on 1 April 2014, the time period for filing the said request was still running.

D - RESPONSE OF THE RESPONDENT

18 - The Respondent, Tax and Customs Authority, (hereinafter referred to as TA), submitted its Response on 15-07-2014 and proceeded to attach a copy of the Tax Administrative Proceedings on 18-07-2014.

19 - In the said Response, the TA raises the exception of lapse of the right to file the request for arbitral pronouncement, in addition to contending that the acts of IUC assessment impugned do not suffer from any illegalities, which, in summary and in substance, is embodied in the following:

BY WAY OF EXCEPTION

REGARDING THE LAPSE OF THE RIGHT OF ACTION

20 - In this regard, the TA considers that the Claimant filed the arbitral request on 2014-04-01 with the Centre for Administrative Arbitration, a request that "should have been presented within a period of 90 (ninety) days, counted from the date of notification of the assessment act(s)", which results "from the combined provisions of articles 10, no. 1, (a) of the RJAT and 102, no. 1, (a) of the Code of Procedure and Tax Process (CPPT)". (See articles 10 and 11 of the Response)

21 - It also considers that the assessments impugned by the Claimant have different voluntary payment deadline dates, and the last of these voluntary payment periods ended on 2013-12-18, emphasizing that the 90-day period available for filing the Request for Arbitral Pronouncement ended on 2014-03-18 and not on 2014-04-01, the date on which it was filed.

22 - It further adds that, all the more so, the Request for Arbitral Pronouncement is also manifestly untimely regarding the assessments whose voluntary payment period deadline occurred before the aforementioned period of 2013-12-18.

23 - It understands, finally, that the Request for Arbitral Pronouncement, underlying the present proceedings, is manifestly untimely, and on 01-04-2014, the Claimant's right of action has already lapsed, a lapse which, being a dilatory exception, has as a consequence the absolution of the Respondent from the present instance, in view of the provisions of article 89, no. 1 of the CPTA and article 576, no. 2 of the CPC, applicable by force of article 29, paragraphs (c) and (e) of the RJAT, respectively. (See articles 23 and 24 of the Response)

BY WAY OF IMPUGNATION

24 - The TA also understands that, even if the said exception is not ruled to be well-founded, the tax acts at issue do not suffer from any legal non-conformity, pronouncing itself for the dismissal of the claim and the maintenance of the assessment acts questioned, defending, in summary, the following:

25 - The allegations of the Claimant cannot at all be well-founded, in as much as they make an interpretation and application of the legal norms applicable to the case that is notoriously wrong, in that it not only incurs in "a skewed reading of the letter of the law", but also in the adoption of "an interpretation that does not attend to the systematic element, violating the unity of the regime" enshrined throughout the IUC Code and, more broadly, throughout the entire tax legal system, further following an "interpretation that ignores the ratio of the regime enshrined in the article in question". (See articles 40 and 41 of the Response)

26 - The tax legislator considered, in article 3, no. 1 of the IUC Code, expressly and intentionally, that the passive subjects of the IUC are the owners of the vehicles, considering as such the persons in whose names the same are registered.

27 - The said legislator did not use the expression "it is presumed" as it could have done, for example, in the following terms: "the passive subjects of the tax are the owners of the vehicles, with it being presumed that they are such natural or legal persons, of public or private law, in whose names the same are registered". (See article 46 of the Response)

28 - The non-establishment of a presumption in the said article 3 corresponds to a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative conformation, was that, for the purposes of the IUC, those who appear as such in the vehicle registry should be considered owners, further adding that it is in this sense that it points,

29 - The "understanding already adopted by the jurisprudence of our courts", transcribing, for this purpose, part of the judgment of the Administrative and Tax Court of Penafiel, delivered in Proceedings no. …13.OBEPNF. (See articles 54, 55, and 56 of the Response)

30 - Regarding the systematic element of interpretation, it considers that the solution advocated by the Claimant is untenable, finding the understanding endorsed by it no legal support whatsoever. (See article 57 of the Response)

31 - Regarding the ignoring of the "ratio" of the regime, the TA considers that the interpretation advocated by the Claimant is manifestly wrong, in as much as what was intended to be established in the IUC Code was to create a tax based on the taxation of the owner of the vehicle, as stated in the vehicle registry. (See article 76 of the Response)

32 - It further adds that the IUC Code carried out a reform of the regime for taxation of vehicles in Portugal, substantially altering the motor vehicle taxation regime, with the passive subjects of the tax now being the owners entered in the property registry, regardless of the circulation of the vehicles on the public road. (See article 80 of the Response)

33 - In this sense, it refers to this being the understanding inscribed, in particular, in recommendation no. 6-B/2012, of 22/06/2012, from the Ombudsman addressed to the State Secretary for Public Works, Transport and Communications.

34 - The interpretation conveyed by the Claimant is, also, in addition to what has already been referred to, non-conforming with the Constitution, namely because, among others, it violates the principle of efficiency of the tax system, in as much as it translates an obstruction and increase in cost of the competences assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent form part.

35 - It also refers that the Claimant has failed to produce adequate proof of the constitutive facts of the right it alleges, and the proof presented is not sufficient to effect conclusive proof of the transmission of the vehicles in question in the case file.

36 - It further adds that, the Respondent, the tax acts at issue being valid and legal, because in conformity with the legal regime in force as of the date of the tax facts, no error occurred attributable to the services, the legal prerequisites that confer on the Claimant the right to compensatory interest are not met. (See articles 109 and 110 of the Response)

37 - Finally, in light of all the arguments it has adduced, it considers that, given the legal conformity of the tax acts in question, the request for arbitral pronouncement should be ruled to be without merit, absconding, accordingly, the Respondent entity.

E - ISSUES TO BE DECIDED

38 - It behooves us, then, to examine and decide.

39 - In light of the foregoing, regarding the positions of the Parties and the arguments presented, it is necessary to examine and decide the following issues:

a) The dilatory exception of lapse of the right of action, raised by the Respondent.

b) The establishment, or not, of a presumption in the rule of subjective incidence contained in article 3, no. 1 of the IUC Code;

c) The legal value of vehicle registration in the economy of the IUC Code, particularly for purposes of the subjective incidence of this tax;

d) If, on the date of the occurrence of the tax-triggering event, the vehicle has already been previously alienated, although the ownership right therein continues to be registered in the name of its previous owner, the passive subject of the IUC, for the purposes of the provisions of article 3, no. 1, of the IUC Code, is the previous owner or the new owner;

F - PROCEDURAL REQUIREMENTS

40 - The Arbitral Tribunal is regularly constituted and is materially competent, in the terms of article 2(1)(a) of Decree-Law no. 10/2011, of 20 January.

41 - The Parties have legal personality and capacity, are entitled parties and are legally represented (see article 4 and article 10(2) of Decree-Law no. 10/2011 and article 1 of Ordinance no. 112/2011, of 22 March).

42 - The proceedings do not suffer from vices that would invalidate it.

43 - Taking into account the tax administrative proceedings, a copy of which was sent by the TA, and the documentary evidence attached to the case file, it is now necessary to present the factual matter relevant to understanding the decision, which is fixed in the following terms.

G - REGARDING THE RAISED EXCEPTION

44 - Taking into account the provisions of article 608(1) of the CPC, applicable here by force of article 29, no. 1, paragraph (e), of the RJAT, the said exception should, first and foremost, be examined, since, in light of the said provision, it is important, in the first place, to address procedural issues that could determine the absolution of the instance.

THE EXCEPTION OF LAPSE OF THE RIGHT OF ACTION

45 - As was already referred to above, the Respondent considers that the 90-day period provided for the filing of the Request for Arbitral Pronouncement ended on 18-03-2014 and not on 01-04-2014, the date on which it was filed.

46 - The Respondent thus adds that the Request for Arbitral Pronouncement, underlying the present proceedings, is manifestly untimely, and on 01-04-2014, the Claimant's right of action has already lapsed, a lapse which, being a dilatory exception, has as a consequence the absolution of the Respondent from the instance, in view of the provisions of article 89, no. 1 of the CPTA and article 576, no. 2 of the CPC, applicable by force of article 29, paragraphs (c) and (e) of the RJAT, respectively.

47 - The Claimant, for its part, considers that the time period for filing the Request for Arbitral Pronouncement follows the terms of the provisions of articles 138 and 139 of the New Code of Civil Procedure, and therefore, on 1 April 2014, the time period for filing the said request was still running.

Let us see.

48 - First and foremost, it should be noted that, in light of the elements recorded in the Electronic System for Case Management (SGP), the request for constitution of an arbitral tribunal was presented to CAAD on 01-04-2014.

49 - On the other hand, account must be taken, in light of the universe of notifications of IUC assessments contained in the case file, that the most recent date of payment, that is, the last of the dates corresponding to the end of the period for voluntary payment of the assessed tax is 18-12-2013, which means that the 90-day period for the impugnation of these tax obligations should be counted from the day following the end of that same date, as the deadline period for voluntary payment of such tax obligations, which, in the case of the proceedings, refers to 19-12-2013. (See article 279, paragraph (b) of the Civil Code)

50 - The 90-day period for presentation of the request for constitution of the arbitral tribunal, provided for in article 10(1)(a) of the RJAT, inasmuch as it does not constitute either a procedural or procedural period to which articles 3-A(1) and (2) of the said RJAT, as amended by Law no. 66-B/2012, of 31 December, refer respectively, is governed by the provisions of the CPPT. In fact,

51 - It follows explicitly from the provisions of the aforementioned article 3-A, nos. 1 and 2 that the rules applicable to the periods relating to the arbitral procedure are the Code of Administrative Procedure and, to the periods of a procedural or judicial nature, inscribed within the framework of tax proceedings, the Code of Civil Procedure, such norms not being thus applicable to the counting of the period relating to the request for constitution of the arbitral tribunal. In truth,

52 - The period for presentation of the request for constitution of the arbitral tribunal refers to a moment prior to the existence of the proceedings, situating itself outside and before the procedure and, necessarily, before the arbitral process, whose beginning occurs, in view of the provisions of article 15 of the RJAT, on the date of the constitution of the arbitral tribunal.

53 - Article 20(1) of the CPPT provides, applicable subsidiarily to the tax arbitral process by force of the provisions of article 29(1)(a) of the RJAT, that "The periods of the tax procedure and of judicial impugnation are counted in accordance with article 279 of the Civil Code".

54 - In this regard, it is worth noting what Jorge Lopes de Sousa writes, in Commentary on the Legal Regime for Tax Arbitration, integrated in the Guide to Tax Arbitration, Almedina, March, 2013, p. 174, when he states that "As regards the period for presentation of the request for constitution of the arbitral tribunal, provided for in article 10, being prior to the procedure, this article 3-A (of the RJAT) shall not apply, but rather the regime of article 279 of the Civil Code, by referral from article 29, no. 1, paragraph (a) of the RJAT and article 20, no. 1, of the CPPT".

55 - It should be noted, however, that, as it is settled and reiterated jurisprudence of the Supreme Administrative Court, which may be seen, among others, in the Decisions of the SAC of 14-01-2004, Proceedings 01208/03, of 30-01-2013, Proceedings 0951/12 and of 15-01-2014, Proceedings 01534/13, available at www.dgsi.pt, the period for lodging an appeal is a period of lapse, of a substantive nature, continuous, integral to the material legal relationship itself in dispute and counted in accordance with the rules of article 279 of the Civil Code (CC) and article 20, no. 1 of the Code of Procedure and Tax Process (CPPT). It is, in effect, a peremptory period, whose passage extinguishes the right to perform the act, in the case, the request for constitution and pronouncement of this arbitral tribunal.

56 - Under the terms of the provisions of article 10(1)(a) of the RJAT, combined with the provision of article 102, no. 1, paragraph (a) of the CPPT, the judicial impugnation of the IUC assessments in question must be lodged within a period of 90 days, which, being counted, as has been referred to above, from the day following the end of the period for voluntary payment, that is, from 19-12-2013, ended on 18-03-2014.

57 - The request for constitution of the arbitral tribunal, in these circumstances, had to be presented by 18-03-2014, which did not happen, in as much as such request had its presentation to CAAD on 01-04-2014, that is, after the lapse of the aforementioned 90-day period legally established for the purpose.

58 - Under these circumstances, it is concluded that the request for constitution of the arbitral tribunal is untimely, and thus the exception of lapse of the right of action raised by the Respondent proceeds, which constitutes a dilatory exception, and therefore, consequently, the Respondent is absolved of the instance.

CONCLUSION

59 - In the factual context that has been referred to, and in preparation of the decision, it is concluded, taking into account the provisions of article 576, no. 2 of the CPC, in the sense of the well-foundedness of the exception of lapse of the right of action raised by the Respondent, considering thus, in view of the provisions of article 608, no. 2 of the CPC, that the examination of the remaining issues raised either by the Claimant or by the Respondent is prejudiced.

II - DECISION

60 - Accordingly, in light of all the foregoing, this Arbitral Tribunal decides:

  • To rule well-founded the exception of lapse of the right of action, refraining from examining the merits of the case, deciding, in consequence and in accordance with the provisions of article 278, no. 1, paragraph (e), of the Code of Civil Procedure, applicable by force of article 29, no. 1, paragraph (e), of the RJAT, to absolve the Tax and Customs Authority of the instance.

  • To condemn the Claimant to pay the costs of the present proceedings.

PROCESS VALUE

In accordance with the provisions of articles 306, no. 2 of the CPC (formerly 315, no. 2) and 97-A, no. 1 of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the process is assigned a value of € 2,591.05.

COSTS

In accordance with the provisions of article 12, no. 2, in fine, article 22, no. 4, both of the RJAT, and article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, the total amount of costs is fixed at € 612.00.

Let it be notified.

Lisbon, 03 December 2014

The Arbitrator

António Correia Valente

(The text of this decision was prepared by computer, in accordance with article 131, no. 5 of the Code of Civil Procedure (formerly 138, no. 5), applicable by referral from article 29, no. 1, paragraph (e) of Decree-Law no. 10/2011, of 20 January (RJAT), governed in its drafting by the spelling prior to the Orthographic Agreement of 1990.)

(1) It is not settled in tax litigation whether the lapse of the right of impugnation or the right to request the constitution of the arbitral tribunal constitutes a dilatory or peremptory exception, determining, respectively, the absolution of the instance or of the claim. In cases such as the one at issue, we deem it appropriate to frame the lapse of the right to have the claim examined by an arbitral tribunal within the scope of dilatory exceptions, because the legality of the assessment act is not analyzed or evaluated, there being thus the possibility of future examination of that act, in particular, by way of its review, as provided for in article 78 of the LGT.

Frequently Asked Questions

Automatically Created

What is the IUC (Imposto Único de Circulação) and who is liable to pay it in Portugal?
The IUC (Imposto Único de Circulação) is Portugal's Single Circulation Tax, an annual vehicle tax that replaced several previous automotive taxes. According to Article 3(1) of the IUC Code, the person registered as the vehicle owner in the Motor Vehicle Registry is presumed to be liable for payment. However, this case establishes that this is a rebuttable presumption under Article 73 of the General Tax Law (LGT), meaning taxpayers can present contrary evidence. When vehicles are sold but not re-registered in the new owner's name, disputes arise about whether the former registered owner or the actual current owner bears the tax liability. The Claimant argued that vehicle registration serves only a publicity function without constitutive effect, and that actual ownership transfers through the sale contract itself under Article 408(1) of the Civil Code, making the purchaser liable for IUC from the transfer date regardless of registration status.
What does caducidade do direito de ação mean in Portuguese tax arbitration proceedings?
Caducidade do direito de ação in Portuguese tax arbitration means the expiry or lapse of the right to file a legal action or request. In CAAD (Centro de Arbitragem Administrativa) proceedings, Article 10(1)(a) of the RJAT (Legal Regime for Arbitration in Tax Matters) combined with Article 102(1)(a) of the CPPT (Tax Procedure Code) establishes a 90-day deadline to file an arbitration request, counted from notification of the assessment act or the end of the voluntary payment period. If this deadline expires without filing, the taxpayer loses the right to challenge the assessment through arbitration. In this case, the Tax Authority argued that since the last voluntary payment period ended on 18 December 2013 and the request was filed on 1 April 2014, the 90-day period had lapsed. The Claimant countered by invoking Articles 138-139 of the New Code of Civil Procedure, arguing the deadline was still running, which became a preliminary issue requiring resolution before examining the merits.
Can taxpayers challenge multiple years of IUC tax assessments in a single CAAD arbitration request?
Yes, taxpayers can challenge multiple years of IUC assessments in a single CAAD arbitration request, as demonstrated in this case where the Claimant contested IUC assessments for vehicles covering the years 2008 through 2012. The request can encompass multiple assessment acts relating to different tax years and different vehicles, provided they share common legal issues and grounds for challenge. This procedural economy allows taxpayers to consolidate related disputes rather than filing separate requests for each tax year or vehicle. In this case, all assessments shared the fundamental issue of whether the Claimant remained liable for IUC on vehicles it had sold prior to the tax becoming due. The arbitration request must identify each specific assessment act being challenged, which the Claimant did by referencing the case file documentation. However, taxpayers must ensure that the 90-day deadline for filing applies to all assessments being challenged, as different notification dates could affect the timeliness of the request for different tax years.
What is the procedure for constituting a CAAD arbitral tribunal for tax disputes in Portugal?
The procedure for constituting a CAAD arbitral tribunal for tax disputes involves several stages: (1) The taxpayer files a request for constitution of an arbitral tribunal with CAAD under Article 2(1)(a) and Articles 10 et seq. of the RJAT; (2) The CAAD President accepts the request and notifies the Tax Authority; (3) For disputes under certain value thresholds or by agreement, a singular (single arbitrator) tribunal is formed - the taxpayer may appoint an arbitrator or, if they fail to do so, the CAAD Ethics Council designates one under Article 6(1) of the RJAT; (4) Parties are notified of the arbitrator appointment and have the right to refuse under the Ethics Code (Articles 11(1)(a)(b) and Articles 6-7); (5) If no refusal occurs, the tribunal is formally constituted under Article 11(1)(c) of Decree-Law 10/2011; (6) After constitution, an Article 18 RJAT preliminary hearing is typically held to organize the proceedings. In this case, the tribunal was constituted on 9 June 2014, and a preliminary hearing was held on 21 November 2014 to clarify the lapse exception.
Are penalties and fines (coimas) related to IUC assessments subject to annulment through tax arbitration?
Yes, penalties and fines (coimas) related to IUC assessments are subject to annulment through CAAD tax arbitration. In this case, the Claimant specifically requested in point (b) of its petition that the tribunal 'Declare the annulment of the penalties arising from the notifications of IUC assessments that are the subject of the present proceedings, with the Claimant relieved of the obligation to pay them.' The Claimant had not paid these penalties, asserting it had no obligation to do so since it did not consider itself the liable party for the underlying IUC tax. When a taxpayer successfully challenges the underlying tax assessment as illegal, any associated penalties and fines must also fall, as they derive from and depend upon the validity of the principal tax obligation. The RJAT regime allows arbitral tribunals to examine both the substantive tax assessment and any accessory obligations like penalties, compensatory interest, and late payment surcharges, providing comprehensive relief when tax acts are found to be illegal or improperly assessed.