Process: 360/2015-T

Date: November 4, 2015

Tax Type: IRS

Source: Original CAAD Decision

Summary

In CAAD Case No. 360/2015-T, taxpayers A and B withdrew their IRS (Income Tax) arbitration claim against the Portuguese Tax Authority on October 28, 2015. This decision provides important guidance on the procedural and legal consequences of withdrawing tax arbitration requests in Portugal. The arbitrator, Alexandra Gonçalves Marques, homologated the withdrawal based on Article 283(1) of the Portuguese Code of Civil Procedure, which permits plaintiffs to withdraw claims at any time during proceedings. The legal framework applied includes Article 285(1) of the Code of Civil Procedure, which establishes that claim withdrawal extinguishes the substantive right the claimant sought to enforce through arbitration. The arbitrator's decision referenced the applicability of civil procedure rules to tax arbitration through Article 2(e) of the Code of Tax Procedure and Process (CPPT) and Article 29(1)(e) of the Tax Arbitration Statute (RJAT). The case involved a disputed amount of €21,557.48, determined pursuant to Article 315(2) of the Code of Civil Procedure in conjunction with Article 97-A(1)(a) of CPPT and Article 3(2) of the Regulation of Costs in Tax Arbitration Cases. Significantly, the claimants were required to bear arbitration costs of €1,224.00, calculated according to Schedule I of the Cost Regulation as mandated by Articles 12(2) and 22(4) of RJAT and Article 4(4) of the Cost Regulation. This decision underscores critical considerations for taxpayers contemplating withdrawal from CAAD arbitration: the irrevocable nature of such withdrawal, the definitive extinguishment of the underlying tax rights being challenged, and the financial burden of arbitration costs despite case withdrawal. Tax advisors should carefully evaluate these consequences before recommending claim withdrawal, as the taxpayer loses the ability to contest the tax assessment through this or potentially other judicial mechanisms.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 360/2015-T

Subject: Income Tax, Withdrawal of Claim

In the present proceedings, in which the constitution of an Arbitral Tribunal was requested, the Claimants A…, Tax Identification Number …, and B…, Tax Identification Number …, residents at Street … No. …, in …, Mafra, through petition subscribed by their esteemed Counsel, on 28 October 2015, with subsequent filing of power of attorney with special powers, hereby withdraw the claim for an arbitral judgment filed in the present proceedings against the Respondent.

In accordance with paragraph 1 of Article 283 of the Code of Civil Procedure, the plaintiff may at any time during the proceedings withdraw the entire claim. Furthermore, paragraph 1 of Article 285 of the same Code provides that withdrawal of the claim extinguishes the right that was intended to be enforced.

Having regard to its subject matter and the status of the parties, I deem the withdrawal of the claim valid and effective and I homologate by decision the withdrawal of the claim and, consequently, I declare extinguished, by withdrawal, the claims filed by the Claimants in this case (Articles 283, 285 paragraph 1, 286 paragraph 2 first part, 289 paragraph 1 and 290 of the Code of Civil Procedure, applicable by virtue of Article 2, subparagraph e) of the Code of Tax Procedure and Process and Article 29, paragraph 1, subparagraph e) of the Statute of Tax Arbitration).

Value of the Case:

Pursuant to Article 315, paragraph 2 of the Code of Civil Procedure, in conjunction with subparagraph a), paragraph 1 of Article 97-A of the Code of Tax Procedure and Process and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Cases, the value of the case is set at €21,557.48.

Costs:

For the purposes of paragraph 2 of Article 12 and paragraph 4 of Article 22 of the Statute of Tax Arbitration and paragraph 4 of Article 4 of the Regulation of Costs in Tax Arbitration Cases, the amount of costs is fixed at €1,224.00, in accordance with Schedule I attached to the Regulation, to be borne by the Claimants.

Lisbon, 4 November 2015

The Arbitrator,

Alexandra Gonçalves Marques

Frequently Asked Questions

Automatically Created

What happens when a taxpayer withdraws an IRS arbitration request at CAAD?
When a taxpayer withdraws an IRS arbitration request at CAAD, the arbitrator homologates (officially approves) the withdrawal through a formal decision. The arbitration proceedings are declared extinguished by withdrawal, meaning the case is definitively closed. The taxpayer must pay the arbitration costs, which are calculated based on the case value and the applicable Cost Regulation schedule. In Case 360/2015-T, the claimants paid €1,224.00 in costs despite withdrawing their claim.
What is the legal basis for claim withdrawal under Portuguese tax arbitration (RJAT)?
The legal basis for claim withdrawal under Portuguese tax arbitration is primarily Article 283(1) of the Code of Civil Procedure (Código de Processo Civil), which applies to tax arbitration through Article 2(e) of the Code of Tax Procedure and Process (CPPT) and Article 29(1)(e) of the Tax Arbitration Statute (RJAT). These provisions establish that a claimant may withdraw their claim at any time during proceedings. The withdrawal must be formalized through petition and homologated by the arbitrator.
How does Article 283 of the Portuguese Civil Procedure Code apply to tax arbitration desistance?
Article 283 of the Portuguese Civil Procedure Code applies to tax arbitration desistance by establishing the taxpayer's right to unilaterally withdraw their claim at any procedural stage. This provision is incorporated into tax arbitration through the subsidiary application rules in the CPPT and RJAT. The arbitrator must validate the withdrawal considering the subject matter and parties' status, then issue a formal decision homologating the withdrawal and declaring the proceedings extinguished. This procedural flexibility allows taxpayers to terminate arbitration without requiring the Tax Authority's consent.
What are the cost implications when a claimant withdraws from CAAD tax arbitration proceedings?
The cost implications when a claimant withdraws from CAAD tax arbitration proceedings are significant. The withdrawing claimant bears the full arbitration costs as determined by Article 12(2) and Article 22(4) of RJAT and Article 4(4) of the Cost Regulation. Costs are calculated based on the case value using Schedule I of the Regulation of Costs in Tax Arbitration Cases. In the referenced case with a value of €21,557.48, the claimants paid €1,224.00. Unlike voluntary dismissal in some jurisdictions, withdrawal does not exempt the claimant from financial responsibility for initiating the arbitration.
Does withdrawing an IRS arbitration claim at CAAD extinguish the taxpayer's right to challenge the assessment?
Yes, withdrawing an IRS arbitration claim at CAAD extinguishes the taxpayer's right to challenge the assessment. Article 285(1) of the Code of Civil Procedure, applicable to tax arbitration, explicitly provides that claim withdrawal extinguishes the substantive right the claimant sought to enforce. This means the taxpayer definitively loses the ability to contest that specific tax assessment through arbitration or potentially other judicial means. The withdrawal has res judicata effects, making the tax assessment final and binding. Taxpayers should therefore carefully consider this irreversible consequence before withdrawing, as it represents a complete abandonment of their legal challenge to the IRS assessment.