Process: 342/2016-T

Date: February 7, 2017

Tax Type: IVA

Source: Original CAAD Decision

Summary

In Decision 342/2016-T, the CAAD (Centre for Administrative Arbitration) addressed a challenge to additional VAT assessments for 2011, totaling €1,816.99, issued following an external tax inspection. The case raised two fundamental procedural issues: the arbitral tribunal's subject-matter jurisdiction and the expiry (caducidade) of the right to issue assessments. The taxpayer challenged five VAT assessments and compensatory interest, arguing notification irregularities and statute of limitations violations. The Tax Authority raised preliminary exceptions regarding jurisdiction and caducidade in its Reply. Critically, the taxpayer failed to respond to these exceptions despite being granted an opportunity through arbitral order. Under Portuguese tax law, the right to issue additional assessments expires four years from the date the tax became due (Article 45 of the LGT). The notification must occur before this deadline expires; otherwise, the assessment is invalid. The case also examined whether certain matters fall outside CAAD's jurisdiction under Article 2 of the RJAT (Decree-Law 10/2011). The tribunal, constituted as a singular arbitral tribunal on September 29, 2016, proceeded without a hearing under Article 18 of RJAT. The decision highlights the importance of timely notification procedures in tax assessments and the strict application of jurisdictional rules in tax arbitration, reinforcing that procedural defects in notification timing can render assessments unenforceable when the statute of limitations expires before proper notification occurs.

Full Decision

ARBITRAL DECISION

Claimant: A…

Respondent: TAX AND CUSTOMS AUTHORITY

I - REPORT

1. A…, (hereinafter referred to as Claimant) taxpayer no. …, resident at Street…, no. …, …-… …, filed on 27-06-2016 a request for the constitution of an arbitral tribunal under the terms of paragraph a) of section 1 of article 2 and article 10, sections 1 and 2, both of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), and of articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, requesting the Tax and Customs Authority (hereinafter referred to as TCA or Respondent), with a view to the declaration of illegality and annulment of the following additional VAT assessments, and respective compensatory interest with reference to the year 2011:

- assessment no. … - in the amount of €92.01
- assessment no. … - in the amount of €717.51
- assessment no. … - in the amount of €125.42
- assessment no. … - in the amount of €756.45
- assessment no. … - in the amount of €124.60

2. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and notified to the Respondent on 14-07-2016.

3. Pursuant to and for the purposes of paragraph a) of section 2 of article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council of CAAD, duly notified to the parties within the prescribed time limits, the undersigned was appointed as arbitrator, and communicated to the Deontological Council and to the Centre for Administrative Arbitration the acceptance of the assignment within the time limit stipulated in article 4 of the Deontological Code of the Centre for Administrative Arbitration.

4. On 2016/08/29, the parties were notified of this appointment and did not manifest the will to refuse the appointment of the arbitrator, in accordance with the combined terms of article 11, section 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

5. The Singular Arbitral Tribunal was constituted on 2016-09-29, in accordance with the prescription of paragraph c) of section 1 of article 11 of the RJAT, in the wording conferred upon it by article 228 of Law no. 66-B/2012, of 31 December.

6. By an arbitral order issued on 2016-10-18, the Claimant was invited to make representations on the exceptions raised by the TCA in its Reply.

7. The Claimant did not make representations on the matter of exception.

8. An arbitral order was issued on 2016-11-16, duly notified to the parties, which substantiated the dispensing of the meeting referred to in article 18 of the RJAT, the examination of witnesses summoned by the Claimant, granted to the parties the faculty of presenting written submissions and indicated the deadline for the issuance and notification to the parties of the arbitral decision.

9. The Claimant did not present written submissions, and on 2016-12-13 the TCA proceeded with the presentation of its submissions.

10. To substantiate its request, the Claimant alleged, in summary, and with relevance for what matters here the following (which is mentioned mostly by transcription):

a. An external inspection procedure was opened for the Claimant by the Tax Authority, conducted under service orders no. OI215… and OI2015… of the Finance Directorate of…, aimed at the years 2011 and 2012 (cfr. article 1 of the request for arbitral ruling),

b. On 23/11/2015, the draft decision was notified to the Claimant for purposes of the right to a hearing (cfr. article 2 of the request for arbitral ruling and document no. 6, attached thereto),

c. The Claimant exercised the right to a hearing on 18-12-2015 (cfr. article 3 of the request for arbitral ruling and document no. 7, attached thereto),

d. On 29-12-2015, a notification mandate was issued by the Head of the Finance Service of …, relating to manual assessments and respective compensatory interest, determined as a result of the inspection action carried out for the year 2011 (Service Order OI2015…), with the following identification regarding VAT:

- Period of 201103T - Tax to be remitted to the State + Compensatory Interest – €92.01 + €17.03
- Period of 201106T - Tax to be remitted to the State + Compensatory Interest – €717.51 + €0.00
- Period of 201109T - Tax to be remitted to the State + Compensatory Interest - €756.45 + €0.00
- Period of 201112T - Tax to be remitted to the State + Compensatory Interest - €3,250.99 + €0.00

(cfr. article 4 of the request for arbitral ruling and document no. 8, attached thereto);

e. In the aforementioned office there is a "Notice of Service of a Specified Time" in which, among other things, the following is stated:

"I hereby certify that on this day, 29 December 2015, at 4:30 p.m., having travelled to Street…, no.…, …, in order to notify of the assessment of IRS and VAT for the year 2011, taxpayer A…, TIN …, I was unable to carry out this diligence, by virtue of not having found at the indicated place any administrator/manager/representative of the taxpayer (…) who on the next day 30/12/2015, at 4:30 p.m. will be contacted at this location, to carry out the procedure that I proposed to perform […]" (cfr., article 5 of the request for arbitral ruling and document no. 9, attached thereto);

f. On 30-12-2015, Office no. … was issued by the Tax Inspection Division I of the Finance Directorate of…, directed to the claimant, with the heading: "Notification under Article 233 of the Civil Procedure Code", in which it states that "on 30/12/2015 at 4:30 p.m., at Street…, no.…, …, notification was made of the assessment of IRS, VAT and compensatory interest, resulting from the inspection action for the year 2011, corresponding to Service Order no. OI2015… of the Finance Directorate of…"

"By posting, by virtue of not finding present at its residence, located at Street …, no.…, …, when I sought to perform this diligence;

"Attached is a copy of:

* Warrant
* Notification with specified time
* Certificate of verification of specified time
* IRS Assessment
* VAT Assessment

"Further to inform Your Excellency that the objects of notification are at your disposal at the Finance Service of…, at…, Municipal Chamber Building, …-…- …(cfr. article 6 of the request for arbitral ruling and document no. 10, attached thereto;

g. Said notification was only dispatched on 4/1/2016, and received by the claimant on 15/01/2016 (cfr. article 7 of the request for arbitral ruling and document no. 11, attached thereto),

h. On 30/12/2015, a certificate of verification of specified time was posted on the property located at Street…, no.…, in…, with reference to the fact that notification should be considered made under Article 240 of the CPC, and that the IRS and VAT assessments and compensatory interest resulting from the inspection action for the year 2011 were at the disposal of the Claimant at the Finance Service of … (cfr. article 8 of the request for arbitral ruling and document no. 12, attached thereto);

i. On 18/01/2016 – IRS 2011 and 2012 – were received in the electronic postal box (Via CTT), the […] assessments (cfr. article 9 of the request for arbitral ruling, and documents nos. 1 to 5, attached thereto),

j. As regards the manual VAT assessments and compensatory interest, these were personally delivered to the Claimant on 13/01/2016, by the Finance Service of…, according to Document Delivery Report (article 13 of the request for arbitral ruling and document no. 16, attached thereto.

k. The Claimant further proceeded, in its pleading, to various considerations regarding the form and validity of notifications, the implications of the lack of notification of assessments before the expiration of the statute of limitations period, concluding - for what is relevant here - that the "lack of notification of the assessment before the expiration of the statute of limitations period also constitutes (alongside the opposition provided for in article 204 of the CPPT) a basis for judicial challenge implying supervening illegality of the assessment act.

11. The Claimant concluded, as extracted from its request, for the annulment of the VAT assessments and respective compensatory interest, relating to the periods of 201103T, 201106T and 201109T in the amount of €1,815.99.

12. The TCA, duly notified for such purpose, timely presented its reply, by exception and challenge:

12.1. It excepted the Claimant's request on two fronts which in the case of the present proceedings end up being intertwined; (i) "error in form of process" and/or (ii) "lack of material competence of the Arbitral Tribunal to know of the lack of notification of the assessments within the statute of limitations period of the right to assess".

12.2. By challenge, it sustains a perspective and position contrary to that presented by the Claimant, and dissenting from it in accordance with the position it has already assumed when concluding the tax inspection report, arguing for the maintenance of the additional assessments made in the course of the inspection procedure.

13. The Tribunal was duly constituted on 29-09-2016,

14. The parties have legal personality and capacity, are legitimate and are legally represented (article 3, 6 and 15 of the CPPT, ex vi of article 29, section 1, paragraph a) of the RJAT,

15. The process does not suffer from nullities, the exceptions noted in 12.1 having been invoked.

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Given that the scope of the material competence of the tribunal is of public order and its knowledge precedes that of any other matter (article 13 of the Code of Procedure in Administrative Courts ex vi of article 29, section 1, paragraph c) of the RJAT), and that infringement of the rules of competence ratione materiae determines the absolute incompetence of the tribunal, which is subject to ex officio knowledge (article 16, sections 1 and 2 of the Code of Tax Procedure and Process and articles 96 and 98 of the Civil Procedure Code, applicable by force of the provision in article 29, section 1, paragraphs a), c) and e) of the RJAT, it is necessary to evaluate the dilatory exception regarding the incompetence of the Arbitral Tribunal, raised by the Respondent.

The facts will be seen, and more specifically, those especially relevant to the issuance of the decision on the noted exception.

II - SUBSTANTIATION

A. MATTER OF FACT

A.1. Facts Established as Proven

The Claimant has a tax domicile at Street…, no. … in…, and has been registered at the finance service of… since 18/04/1998, for the exercise of the main activity of forestry and other forestry activities, as a secondary activity of services related to hunting and game restocking, to which correspond the CAE … and …, and to which was attributed the tax identification number …,

For VAT purposes it is a non-exempt taxable person pursuant to paragraph a) of section 1 of article 2 of the CIVA, which performs operations provided for in paragraph a) of section 1 of article 1 of the CIVA, taxed at the rate indicated in paragraphs a) and c) of article 18 of the CIVA, framed in the normal quarterly periodicity regime, since 18/04/1998, for purposes of the provision in article 41 of the CIVA,

Covered by service orders nos. OI215… and OI215…, of the Finance Directorate of …, an external inspection procedure was carried out for the Claimant having as object the IRS and VAT for the years 2011 and 2012,

As a result of the inspection procedure, the tax inspection services carried out, among others, corrections relating to the year 2011, from which resulted the additional VAT assessments above identified,

The Claimant in the course of the enforcement proceedings meanwhile initiated provided bank guarantee at the finance service of its residence,

On 27-06-2016, the Claimant filed the request for constitution of Arbitral Tribunal, which gave rise to the present case, formulating a request for declaration of illegality and annulment of the additional VAT assessments and respective compensatory interest for 2011.

A.2. Facts Established as Not Proven

With regard to the decision there are no facts that should be considered as not proven.

A.3. Substantiation of the Matter of Fact Established as Proven and Not Proven

Regarding the matter of fact, the tribunal does not have to rule on everything that was alleged by the parties, but rather it is its duty to select the facts that matter for the decision, to distinguish the proven matter from the unproven matter [(cfr. art. 123, section of the CPPT, and article 607 of the Civil Procedure Code, applicable ex vi of article 29, section 1, paragraphs a) and e) of the RJAT)].

Thus, the facts pertinent to the judgment of the case are chosen and delineated in accordance with their legal relevance, which is established in attention to the various plausible solutions of the (s) question(s) of law. (cfr. article 596 of the CPC, applicable ex vi of article 29, section 1, paragraph e) of the RJAT).

Thus, taking into account the positions assumed by the parties, the documentary evidence attached to the proceedings, and the PA attached, the facts listed above are considered proven with relevance for the decision.

B - OF LAW

On the error in the form of process and/or the lack of competence of the Arbitral Tribunal to know of the lack of notification of the assessments within the statute of limitations period of the right to assess.

The Claimant, notified to make representations on the invoked exceptions, remained silent, despite throughout its request for arbitral ruling having made various considerations regarding the doubts raised as to the dual possibility of reaction before the illegality of the lack of notification of assessments within the statute of limitations period – see article 50 of the request for arbitral ruling - ; (i) judicial challenge (in defense of which thesis it invokes paragraphs e) and i) of article 204 of the CPPT and section 1 of article 45 of the LGT), or tax opposition.

In turn, the Tax and Customs Authority comes to sustain the position that "the lack of notification of the assessment within the statute of limitations period is exclusively a basis for opposition to enforcement, under the terms of paragraph e) of section 1 of article 204 of the CPPT", from which to conclude the incompetence of the arbitral tribunal, before the provision in section 1 of article 2 of the RJAT and in Ordinance no. 112-A/2911, of 22 March.

Culminating that "only in the tax opposition procedure can the claimant obtain the effect that it here seeks, given that, also in the opposition procedure if the lack of notification of the assessments on the date when the enforcement process was initiated is recognized (the Claimant notes the request to suspend enforcement - article 73 of the ppa and document no. 21 attached thereto) there will be no need to appreciate, as is evident, the legality of those assessments".

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Arbitral tribunals are constitutionally recognized as true courts (article 209, section 2 of the CRP), and voluntary arbitration, in general, finds its legal basis in Law no. 63/2011, of 14 December, in force and which proceeded to the repeal of Law no. 31/86, of 29 August, which provides that "the State and other legal persons of public law may enter into arbitration conventions, if they are authorized to do so by special law or if these have as object disputes relating to relationships of private law" (article 1, section 5)

The legislative authorization contained in article 124 of Law no. 3-B/2010, of 28 April, relating to arbitration in tax matters, configures tax arbitration as an alternative means to the judicial challenge process and to the action for recognition of a right or legitimate interest enshrined in the Tax Procedure and Process Code.

In the use of this authorization, Decree-Law no. 10/2011, of 20 January was approved, which regulates arbitration in tax matters.

According to its preamble, the competence of arbitral tribunals functioning under the auspices of CAAD was fixed in the following terms: covered by the "competence of arbitral tribunals, the appreciation of the declaration of illegality of assessment of taxes, self-assessment, withholding at source and advance payments, the declaration of illegality of acts of determination of taxable matter, of acts of determination of collectable matter and of acts of fixing patrimonial values, whenever the law does not ensure the faculty of deducing the claim referred to."

The material scope of tax arbitration is defined in paragraphs a) and b) of section 1 of article 2 of the RJAT:

Article 2

Competence of arbitral tribunals and applicable law

1. The competence of arbitral tribunals comprises the appreciation of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and advance payments;

b) The declaration of illegality of acts of determination of taxable matter when it does not give rise to assessment of any taxes, of acts of determination of collectable matter and of acts of fixing patrimonial values".

This competence of the arbitral tribunals is, however, limited by the terms in which the TCA came to express its will to bind itself to this jurisdiction, embodied in Ordinance no. 112-A/2011, of 22 March, binding ordinance which already resulted from the provision in article 4 of the RJAT:

Article 4

Binding and functioning

"1. The binding of the tax administration to the jurisdiction of the tribunals constituted under the terms of the present law depends on an ordinance of the members of the Government responsible for the areas of finances and justice, which establishes, in particular, the type and maximum value of the disputes covered".

Thus, and in addition to others contained in paragraphs b), c) and d), paragraph a) of section of article 2 of the Binding Ordinance lists the claims that are expressly excluded within the scope of the binding of the TCA to the jurisdiction of the tax arbitral tribunals: "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and advance payments that have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Tax Procedure and Process Code".

That is to say, the statute that instituted arbitration in tax matters, containing a provision of broad arbitrability in tax matters, does not, however, as has already been written [1], have immediate operability as it is conditioned by the binding of the TCA, in the precise terms provided for in article 2 of Ordinance no. 112-A/2011, of 22 March.

According to the teaching of the distinguished Councillor Jorge Lopes de Sousa [2] the competence of tax arbitral tribunals "is restricted to activity connected with acts of assessment of taxes, being outside its competence the appreciation of the legality of administrative acts of total or partial rejection or revocation of exemptions or other tax benefits when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax issues that do not involve appreciation of the legality of the assessment act referred to in paragraph p) of section 1 of article 97 of the CPPT."

Now,

If, as the Claimant moreover points out, and as is revealed in the arbitral award no. 126/2012-T of 2013/02/21, with the entry into force of the Tax Procedure and Process Code there arose "legal doubts about the possibility of invoking in opposition to tax enforcement the illegality constituted by notification of the assessment after the end of the statute of limitations period, in particular whether it was framed in paragraph e) of section 1 of its article 204" and that "after contradictory decisions, the Supreme Administrative Court came to understand in appeal of judged opposition that, in cases where notification of the assessment was not made and tax enforcement was initiated, there is a situation of ineffectiveness of the assessment act that constitutes a basis for opposition frameable in paragraph i) of section 1 of art. 204 of the CPPT and, when notification of an assessment act was made, but the notification was made after the statute of limitations period of the right to assess has elapsed, there is a basis for opposition to tax enforcement frameable in paragraph e) of section 1 of art. 204 of the CPPT (award of the Plenary of 20/01/2010, case no. 832/08)", the doubt will subsist equally evidenced in the award rendered in the context of CAAD which we have cited whether, "in addition to being able to be invoked as a basis for opposition to tax enforcement, the lack of notification before the end of the statute of limitations period can also be a basis for judicial challenge by implying supervening illegality".

Not unaware is this tribunal of the decision sense of award no. 126/2012-T and of the arbitral decision rendered in the context of case no. 725/2014-T, where this question was addressed and decided in the sense that the lack of notification within the statute of limitations period constitutes supervening illegality of assessment that was made within that period, opening up a "dual possibility" of invoking the untimeliness of notification in the face of art. 45, section 1, both as a basis for judicial challenge and opposition", with determining impact on the judgment to be formed regarding the material competence of this tribunal, we adopt as all due deference and respect a dissenting position from that reached in the indicated arbitral awards.

Recalling that the Claimant invokes in particular in articles 50 and 56 of its request for arbitral ruling the "lack of notification of the assessment act within the statute of limitations period", we are of the opinion that the proper means of reaction to attack such "illegality" should have been tax opposition, provided for in article 204 of the CPPT.

We rely on the recent Award of the Supreme Administrative Court, of 08/07/2015, rendered in the context of case no. 01475/14 where after extracting from its summary, that "the lack of notification of the assessment, before or after the expiration of the statute of limitations period of the right to assess the tax, constitutes ineffectiveness of the tax act, being a basis for opposition to enforcement", the following is extracted:

"[…] it has long been established the jurisprudential orientation in the sense that this absence of notification – whether before or after the expiration of the statute of limitations period of the right to assess – constitutes ineffectiveness of the tax act and constitutes, for this reason, a basis for opposition to enforcement, frameable, respectively, in paragraphs i) and e) of section 1 of art. 204 of the CPPT (cfr, among others the Awards rendered by this Section of Tax Litigation on 2/02/2011, in case no. 0803/10, on 28/09/2011, in case no. 0473/11, on 20/05/2012, in case no. 0378/12, on 26/09/2012, in case no. 0251/12, and by the Plenary of the Section on 20/01/2010, in case no. 0832/08, on 7/07/2010, in case no. 0545/09, and on 18/09/2013, in case no. 578/13".

Extracting further from the Award of the Plenary of the Tax Litigation Section, of 18/09/2013, rendered in the context of case no. 0578/13, and in the same sense, the following:

"[…] Thus, it is now clear that both the lack of notification as well as the lack of timely notification affect the effectiveness of the assessment act and not its validity, and therefore it is in opposition that both the non-existence of any notification and the untimeliness of notification that was made should be invoked". (underlined and highlighted ours)

Having the Claimant invoked that there was no notification of the underlying VAT assessments, and that the statute of limitations period of the right to assess within which notification must be made has already elapsed, there must be, according to its contention, "analyze the legality of the challenged act based on the assumption that notification of the assessment was not made to the challenger and, as the statute of limitations period of the right to assess within which notification must be made has already elapsed (cfr. article 45, section 1 of the LGT) one must conclude that the assessment suffers from a defect of statute of limitations of the right to assess, which, moreover and without conceding, is petitioned in these proceedings".

As has been stated, this Arbitral Tribunal subscribes to the view that the proper and suitable means at the disposal of the Claimant to attack the statute of limitations in question should have been opposition to enforcement and not recourse to the tax arbitral tribunal since it does not fall within its competencies, as above noted, the knowledge of the ineffectiveness of the assessment acts, under the conditions that result from the present proceedings.

In light of the foregoing, it is considered that the Respondent is correct as to the exception raised.

Therefore, without need for any other considerations and concluding; this Arbitral Tribunal is materially incompetent to appreciate and decide the claim that is the object of the underlying dispute, under the terms of articles 2, section 1, paragraph a) and 4, section 1, both of the RJAT, and of articles 1 and 2, paragraph a) of Ordinance no. 112-A/2011, of 22 March, and which constitutes a dilatory exception preventing the knowledge of the merits of the case, under the terms of the provision in article 576, sections 1 and 2 of the Civil Procedure Code, ex vi of article 2, paragraph e) of the CPPT, and article 29, section 1, paragraphs a) and e) of the RJAT, which prevents the knowledge of the claim and the absolution of the Respondent from the suit, under the terms of the provision in articles 576, section 2 and 577, paragraph a) of the Civil Procedure Code, ex vi of article 29, section 1, paragraphs a) and e) of the RJAT.

III - DECISION

In harmony with the foregoing, this Singular Arbitral Tribunal decides:

to uphold the dilatory exception of material incompetence of this Tribunal, raised by the Tax and Customs Authority, and, as a result, absolve the Respondent from the suit,

to judge, in consequence, that knowledge of the issue of merit invoked is prejudiced,

to condemn the Claimant to payment of costs.

IV - VALUE OF THE PROCEEDINGS

In conformity with the provisions of articles 296, sections 1 and 2 of the Civil Procedure Code, approved by Law no. 47/2013, of 26 June, 97-A) section 1, paragraph a) of the Tax Procedure and Process Code, and article 3, section 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €1,815.99.[3]

V - COSTS

Pursuant to the provisions of articles 12, section 2, 22, section 4 of the RJAT, and articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I attached hereto, the amount of costs is fixed at €306.00.

NOTIFY

Text prepared by computer, pursuant to the provision in article 131 of the Civil Procedure Code, applicable by remission of article 29, section 1, paragraph e) of the Legal Regime of Tax Arbitration, with blank verses, and reviewed by the arbitrator.

The drafting of this decision is governed by the spelling prior to the 1990 Spelling Agreement.

Seventh of February of two thousand and seventeen.

The Arbitrator

(José Coutinho Pires)

[1] Cfr, arbitral award no. 236/2013-T, of 22/04/2014, available at www.caad.org.pt

[2] Guide to Tax Arbitration, Almedina, 2013, p. 105

[3] The amount indicated in words by the Claimant is not correct.

Frequently Asked Questions

Automatically Created

What happens when the CAAD arbitral tribunal lacks subject-matter jurisdiction over a VAT dispute?
When the CAAD arbitral tribunal lacks subject-matter jurisdiction over a VAT dispute, it must declare itself incompetent to hear the case and dismiss the arbitration request. Under Article 2 of the RJAT (Decreto-Lei n.º 10/2011), tax arbitration has specific jurisdictional limits. If the matter falls outside these limits—such as disputes involving criminal tax matters, social security contributions (unless specifically included), or certain administrative procedures—the tribunal cannot proceed with substantive analysis. The tribunal must rule on its own jurisdiction as a preliminary matter. This incompetence can be raised by the Tax Authority as an exception or addressed ex officio by the arbitrator. When incompetence is declared, the taxpayer must seek alternative remedies through hierarchical appeal or administrative courts.
How does the expiry (caducidade) of the right to issue additional VAT assessments work under Portuguese tax law?
The expiry (caducidade) of the right to issue additional VAT assessments under Portuguese law is governed by Article 45 of the Lei Geral Tributária (LGT). The Tax Authority has four years from the date the tax became due to issue assessments. For VAT, this typically runs from the end of the year in which the taxable event occurred. Crucially, the assessment must not only be issued but also properly notified to the taxpayer before the four-year deadline expires. If notification occurs after the caducidade period, even if the assessment was formally created before expiry, it is considered invalid and unenforceable. The notification date is determinative—not the assessment creation date. This principle protects taxpayers from indefinite liability exposure and ensures legal certainty. Courts and arbitral tribunals consistently hold that failure to notify before caducidade results in the automatic illegality of the assessment.
Can a taxpayer challenge additional IVA liquidations and compensatory interest through tax arbitration in Portugal?
Yes, taxpayers can challenge additional VAT liquidations and compensatory interest through tax arbitration in Portugal under the RJAT (Decreto-Lei n.º 10/2011). Article 2(1)(a) specifically grants CAAD jurisdiction over disputes concerning 'the legality of acts of assessment of taxes.' This expressly includes VAT assessments, whether original or additional (resulting from inspections or corrections). Taxpayers can request arbitration as an alternative to hierarchical appeal and judicial review in administrative courts. The arbitration request must be filed within 90 days after the notification that makes the act challengeable (typically the assessment itself or the rejection of a hierarchical claim). Arbitration covers both the principal tax and accessory obligations like compensatory interest. However, jurisdictional limits apply—certain matters like tax execution proceedings or criminal tax issues fall outside CAAD's competence.
What are the legal grounds for declaring the illegality and annulment of additional VAT assessments in Portugal?
Legal grounds for declaring the illegality and annulment of additional VAT assessments in Portugal include: (1) Caducidade—expiry of the four-year statute of limitations for issuing/notifying assessments under Article 45 LGT; (2) Formal defects in notification procedures violating Articles 36-38 LGT and the CPPT (Código de Procedimento e de Processo Tributário); (3) Substantive errors in tax calculation or legal interpretation, including incorrect application of VAT rates, improper denial of deductions, or misclassification of transactions; (4) Procedural violations during tax inspections, such as failure to grant proper hearing rights (audiência prévia) under Article 60 LGT; (5) Lack of sufficient factual or legal grounds in the assessment decision; (6) Violation of constitutional principles including proportionality, legal certainty, or legitimate expectations; and (7) Incorrect determination of the tax base or taxable amount. Each ground must be specifically invoked and proven by the taxpayer in arbitration proceedings.
What is the procedural timeline for constituting a singular arbitral tribunal under the RJAT (Decree-Law 10/2011)?
The procedural timeline for constituting a singular arbitral tribunal under the RJAT (Decreto-Lei n.º 10/2011) follows these stages: (1) The taxpayer files the arbitration request, which is reviewed for acceptance by the President of CAAD; (2) Upon acceptance, the Tax Authority is notified and has 30 days to file its Reply (Article 17); (3) The President of the Deontological Council appoints an arbitrator within 5 days after the Reply deadline under Article 6(2)(a); (4) The appointed arbitrator communicates acceptance within 5 days (Article 4 of the Deontological Code); (5) Parties are notified of the appointment and have 10 days to refuse the arbitrator under Article 11(1) and Article 7 of the Deontological Code; (6) If no refusal occurs, the tribunal is formally constituted 30 days after parties are notified of the arbitrator appointment, per Article 11(1)(c). In Process 342/2016-T, this timeline was followed: request filed June 27, 2016; parties notified of arbitrator August 29, 2016; tribunal constituted September 29, 2016.