Process: 366/2018-T

Date: February 9, 2022

Tax Type: IRS

Source: Original CAAD Decision

Summary

This landmark CAAD case (Process 366/2018-T) addresses the lapse period for IRS (Personal Income Tax) assessments when criminal inquiries are opened, and the challengeability of consequential tax liquidation acts. The Supreme Administrative Court (STA) granted the Tax Authority's motion to unify case law, reversing the original arbitral decision that had annulled IRS assessments for 2005-2007 based on lapse grounds. The STA established critical precedent: Article 45(5) of the Portuguese General Tax Law (LGT) extends assessment deadlines when criminal inquiries exist, requiring only objective factual coincidence between tax and criminal matters—not a prejudiciality relationship. The Court clarified that the right to assess need not be conditioned on criminal proceedings outcomes. Additionally, the decision addressed the nature of consequential acts, ruling that tax liquidation acts following indirect assessment decisions cannot be challenged based on defects in the underlying indirect assessment decision itself, but only for their own innovative defects. This distinction is crucial for Portuguese tax litigation strategy. The reformed decision upheld assessments for 2005-2007 after initially being annulled, demonstrating how case law uniformization can fundamentally alter taxpayer outcomes. The ruling provides essential guidance on procedural timelines, the interaction between tax and criminal proceedings, and the hierarchy of challengeable administrative acts in Portuguese tax law, with significant implications for high-value tax disputes involving indirect assessment methodologies.

Full Decision

ARBITRAL TAX JURISPRUDENCE

Case No. 366/2018-T

Decision Date: 2022-02-09

Personal Income Tax (IRS)

Value of Request: €5,581,672.85

Subject Matter: Reform of arbitral decision (attached to the decision) - Personal Income Tax (IRS). Lapse of the right to assessment. Unchallengeable nature of consequential acts.
Replaces, on the matter of law, the arbitral decision of 18 June 2021.

PDF Version

Summary:

I – The extension of the time limit for the right to assess, pursuant to article 45(5) of the General Tax Law (LGT), does not require a relationship of prejudiciality between the facts justifying the assessment and those that determined the opening of the criminal inquiry, but merely an objective factual coincidence;

II - Tax assessment acts are consequential acts in relation to the decision of assessment by indirect methods, and are not challengeable based on defects attributable to the decision of assessment by indirect methods, but only by their own defects insofar as they have an innovative character in terms of decisional content.

ARBITRAL DECISION

The Arbitral Tribunal Agrees

1.

The Tax Authority, respondent in the present case, filed a motion to unify case law with the Supreme Administrative Court (STA) against the arbitral decision of 21 June 2021, which upheld the request for arbitral pronouncement and annulled additional assessment acts relating to the years 2005, 2006 and 2007, and dismissed the arbitral request regarding the additional assessment act for the year 2008.

The arbitral decision, in order to uphold the arbitral request, was based on the understanding that, on the date when the assessments for the years 2005, 2006 and 2007 were issued, the right to assess had already lapsed, as it had been concluded that the decision on the tax situation of the Requesters was not conditioned by the outcome of the criminal inquiry instituted as a result of the inspection actions, and therefore there was no grounds for the extension of the time limit for lapse of the right to assess referred to in article 45(5) of the LGT.

In the motion to unify case law, the Tax Authority invoked as the foundational judgment the judgment of the STA of 2 July 2008 rendered in Case No. 0343/08, which has become final.

By judgment of 29 September 2022, rendered in Case No. 111/21, the STA, in Full Session of the Tax Contentious Section, granted the motion and revoked the arbitral decision appealed insofar as it considered invalid, by lapse, the assessments relating to the years 2005, 2006 and 2007, establishing the following doctrine:

I - The application of article 45(5) of the LGT does not require that there be a relationship of prejudiciality between the facts justifying the assessment and those that determined the opening of the criminal inquiry, but merely an objective factual coincidence.

II - It is not a requirement for the extension of the time limit for lapse provided for in article 45(5) of the LGT to operate that the right to assess the tax be conditioned by the outcome of the inquiry process.

The judgment became final on 26 January 2023.

In compliance with the judgment, and taking the factual matter already established as reproduced, it is necessary to reform the arbitral decision, on the matter of law, in the following terms.

Challengeability of Assessment Acts

2.

The Requesters are challenging the tax assessment acts carried out following the inspection procedure that determined that the preconditions for resorting to indirect assessment were verified, in application of article 87, paragraph f), of the LGT.

This provision establishes that indirect assessment is applicable in case of "increase in patrimony or expense incurred, including gifts, exceeding the value of €100,000, verified simultaneously with the absence of declaration of income or with the existence, in the same tax period, of an unjustified divergence with the income declared". In turn, article 89-A(7) specifically provides for the possibility of filing an appeal to the tax court, with suspensive effect, and to be processed as an urgent matter, of the decision on assessment of taxable matter by the indirect method.

The Requesters made use of the appeal to challenge the decision on assessment by indirect methods referred to in that provision, which was ultimately decided by the judgment of 26 May 2018 of the Northern Administrative and Tax Court (TCA Norte). There, three essential questions were discussed: (a) the probative value of documents obtained in criminal inquiry proceedings, containing banking information of the Requesters, when they were not obtained through the procedure provided for in article 63-B of the LGT and the interested parties had no involvement in the criminal proceedings and could not exercise their rights of control and defense; (b) the probative value of the expertise conducted on the handwriting and signature of the Requesters which concluded that the signatures affixed to banking documents "may be" those of the Requesters; (c) the sufficiency of the proof, which was incumbent on the Tax Administration, that the Requesters were the economic beneficiaries of the company F..., S.A. in the years 2005 to 2008.

In the present arbitral request, the Requesters impute the following illegalities to the tax assessment acts: that resulting from the failure to adopt the procedure provided for in article 63-B(3 and 4) of the LGT to access banking information and documents, the lapse of the assessment acts, the failure to provide prior notice of the tax inspection action, the violation of the principle of participation by not granting the right to be heard before assessment, the defect of lack of reasoning and also the defect resulting from the Tax Authority's failure to rebut the presumption that holders of joint deposits participate in the deposited amounts in equal shares.

This last ground is unintelligible in the context of the allegation in which it is raised (articles 121 to 127 of the petition) and has no correspondence with the established facts nor with any other elements of the case, so, as it is not possible to infer the scope of the illegality invoked and its grounds, knowledge thereof cannot be taken.

All the other defects invoked, with the exception of the lapse of the right to assess and the violation of the right to be heard before assessment, are attributable to the decision on assessment by indirect methods, as these are defects relating to the inspection procedure itself that gave rise to the use of indirect methods for the purpose of corrections to be made to taxable matter.

Now, tax assessment acts are consequential acts in relation to the decision on assessment by indirect methods, insofar as these are acts performed following that other act and taking as a precondition the legal definition resulting from it.

Portuguese law now makes reference to consequential acts to assume that, even if they have not been the subject of jurisdictional challenge, such acts, within certain conditions, should be eliminated, reformed or replaced by the Administration itself, in execution of any annulling judgment or in execution of administrative annulment of the act on which they are based, when this proves indispensable to restore the situation that should exist if that latter act had not been carried out. This is what results from article 173(2) of the Code of Administrative Procedure and Tax Procedure (CPTA), concerning the execution of judgments annulling administrative acts, the regime of which extends, by force of article 172(2) of the Code of Administrative Procedure (CPA), to the execution of annulment decisions taken by administrative authorities. But nothing of this naturally precludes the possibility available to the challenger of the prior act of proceeding to challenge, at the appropriate time, the consequential acts whose subsistence may undermine the satisfaction of their interests.

The point is that the challenge of consequential acts cannot serve for the challenger to again discuss questions of illegality attributable to the prior act and which have already been the subject of jurisdictional review in the context of its own appeal. Here, by analogy, article 53(3) of the CPTA applies, by which "the legal acts of execution of administrative acts are only challengeable for their own defects, insofar as they have an innovative character in terms of decisional content".

Indeed, consequential acts possess a dimension of merely confirmatory nature, insofar as they take as a precondition the legal definition resulting from a prior act and only become challengeable insofar as they produce new legal effects, which arise in the development of the legal situation defined by the prior act.

The only possibility of imputing to the consequential act defects of the prior act would be to invoke the nullity of that act. In fact, a null act produces no legal effects whatsoever (article 162 of the CPA), so the interested party could always attack the consequential act based on any illegality of the presupposed act that the law expressly attaches to that form of invalidity. This is because the nullity of the prior act, once judicially recognized, would determine the annulment of the consequential act by error in the factual or legal preconditions.

Given that the challenge is to the tax assessment acts based on defects attributable to the decision on assessment by indirect methods but which could only generate the mere annulability of that decision, such defects cannot be reviewed in the context of the arbitral request.

Knowledge is therefore not taken of the defects of non-adoption of the procedure provided for in article 63-B(3 and 4) of the LGT to access banking information and documents, failure to provide prior notice of the tax inspection action and lack of reasoning.

Lapse of the Right to Assess

3.

The question to be decided is whether the lapse of the right to assess applies, pursuant to article 45(5) of the LGT, when the Tax Administration should not await the outcome of the criminal proceedings to carry out the tax correction acts and has proceeded with the assessment while the proceedings are still pending.

The question was decided in the negative by the judgment to unify case law of 29 September 2022, handed down in the Full Session of the Tax Contentious Section of the STA, in Case No. 111/21.

As provided for in article 45(1 and 4) of the LGT, the general time limit for exercising the right to assess corporate income tax (IRC) is four years from the end of the year in which the taxable event occurred. And pursuant to article 45(5) of that same article, reintroduced by Law No. 60-A/2005, of 30 December, "whenever the right to assess concerns facts in relation to which a criminal inquiry was instituted, the time limit referred to in paragraph 1 is extended until the dismissal or the judgment becomes final, plus one year".

One could understand that the extension of the time limit for lapse of the right to assess, pursuant to the said provision of article 45(5) of the LGT, is dependent on a relationship of prejudiciality between the facts justifying the assessment and those that determined the opening of the criminal inquiry, such that it could be stated that the right of assessment could not be exercised correctly without knowledge of facts ascertained in the inquiry.

However, the said judgment of the STA of 29 September 2022 came to consider, in line with the foundational judgment, that the interpretation of article 45(5) of the LGT does not presuppose a relationship of prejudiciality between the facts justifying the assessment and those that determined the opening of the criminal inquiry, but a mere objective factual coincidence, and in that sense, the norm makes possible the existence of assessments prior to the conclusion of criminal inquiries and any criminal proceedings that follow, concluding that it is not a requirement for the extension of the time limit for lapse that the right to assess the tax be conditioned by the outcome of the inquiry process.

On the other hand, the judgment of the STA of 29 September 2022, based on the factuality taken as established in the arbitral decision, recognized the existence of an "objective factual coincidence" between the facts that originated the tax correction and the corresponding assessment acts and those that determined the institution of the criminal inquiry, considering it established, for that reason, the precondition upon which depends the extension of the time limit for assessment of taxes.

Indeed, in section B) of the factual matter of the arbitral decision, it was considered that, following inspection actions carried out on companies of which the Requesters were administrators, "and as there were indications of the commission of crimes of a fiscal nature, the inquiry process was opened which proceeded before the Public Prosecutor's Office (DIAP) of Coimbra and then before the DIAP of Porto under the case number .../08...IDAVR". And in the Tax Inspection Report, which served as the basis for the factual matter, it states that "following the inspection actions on companies C..., S.A. TIN ..., D..., SA, TIN..., and E... SA, TIN..., and given the existence of strong indications of the commission of crimes of a fiscal nature and obstruction by those responsible for these companies in accessing means of proof, this matter was communicated to the Public Prosecutor's Office Services of Ovar, in November 2008, with a competent inquiry process being opened to which the number .../08 ...DAVR was assigned.

There is thus sufficient proof, which was taken as established, of the correlation between the institution of the inquiry and the facts analyzed in the inspection procedure that gave rise to the challenged assessment acts, the condition being met that allows for the extension of the time limit for assessment of the tax, pursuant to the provision of article 45(5) of the LGT.

According to article 46(2), paragraph a), of the LGT, the time limit for lapse is suspended "in case of judicial dispute the resolution of which depends on the assessment of the tax, from its beginning until the judgment becomes final". Considering that, in the present case, an appeal was filed on 28 May 2012 to the tax court of the decision on assessment of taxable matter by the indirect method, pursuant to article 89-A(7) of the LGT, and the judgment of the Northern Administrative and Tax Court of 26 May 2018, which finally decided the dispute, only became final on 11 June following, it must be concluded that, on the date when the assessments were issued, on 20 July 2018, the time limit for lapse of the right to assess had not yet elapsed for any of the years to which the tax relates.

There is therefore no grounds for the alleged lapse of the right to assess for the years 2005, 2006, 2007 and 2008.

Right to be Heard Before Assessment

4.

The Requesters further invoke the violation of the right to be heard before assessment because they did not have the opportunity to comment, in opposition to article 60(1), paragraph a), of the LGT, on the divergence between the amounts owed that appear in the assessment acts and the arithmetic corrections that were determined as a result of the tax inspection report.

The Tax Authority explains, however, in its response, that the overall income of the assessment results from the aggregation of the amounts resulting from the corrections in the amounts that result from the prior tax assessment, with no effective change in the values that were considered in the context of the inspection procedure.

Now, pursuant to article 60(3) of the LGT, the hearing before assessment is dispensed with if the taxpayer has been heard at any of the earlier stages of the procedure and, specifically, before the conclusion of the tax inspection report, except in case of invocation of new facts on which they have not yet commented. And what is verified in the case is that the Requesters had the opportunity to comment on the draft inspection report, and on the other hand, no demonstration is made that an effective divergence occurred between the values stated in the report and the assessment, so it cannot be considered that the existence of new facts that could justify a new hearing before assessment has been verified.

And in these terms, the invoked defect of lack of hearing before assessment is shown to be unfounded.

III – Decision

Terms of the Decision

  • Not to take knowledge of the defects of non-adoption of the procedure provided for in article 63-B(3 and 4) of the LGT to access banking information and documents, failure to provide prior notice of the tax inspection action and lack of reasoning.

  • To dismiss the arbitral request regarding the additional assessment acts Nos. 2018..., 2018..., 2018..., relating to the years 2005, 2006, 2007 and 2008.

Value of the Case

The Requesters indicated as the value of the case the amount of €4,683,525.89, which was not contested by the Respondent and corresponds to the value of the assessment that was intended to be opposed, so that amount is fixed as the value of the case.

Costs

Pursuant to articles 12(2) and 24(4) of the Regulation on Tax Arbitration (RJAT) and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings and Table I annexed to that Regulation, the amount of costs is set at €59,058.00, which is the responsibility of the Requesters.

Notify.

Lisbon, 9 February 2023

The President of the Arbitral Tribunal

Carlos Fernandes Cadilha

The Arbitrator Member

Luís M. S. Oliveira

The Arbitrator Member

Nuno Cunha Rodrigues

CAAD: Tax Arbitration
Case No.: 366/2018-T
Subject Matter: Assessment by indirect methods. Consequential act. Lapse of the right to assess.
Replaced by the arbitral decision of 9 February 2023.

ARBITRAL DECISION

The Arbitral Tribunal Agrees

I – Report

1.

A...., with tax identification number ........., and B...., with tax identification number ........., residing at Av. ............., Mira, hereby request the establishment of an arbitral tribunal, pursuant to articles 2(1), paragraph a), and 10 of Decree-Law No. 10/2011, of 20 January, to review the legality of the tax acts of additional personal income tax (IRS) assessment and compensatory interest assessment, relating to the years 2005 to 2008, in the total amount of €4,683,525.89.

They substantiate the request in the following terms.

Inspection actions were carried out on the Requesters following service orders issued by the Finance Directorate of Aveiro, covering the years 2005 to 2008, and a tax inspection report was drawn up in which correction of the declared taxable matter through indirect methods was proposed pursuant to article 89-A(5), paragraph a), of the General Tax Law (LGT).

The indirect assessment, with invocation of article 89-A(11) of the LGT, was based on bank statements and other elements collected in the context of criminal inquiry process No. ../08…DAVR proceeding before the Public Prosecutor's Office of Ovar.

The assessment acts in question are vitiated by illegality due to the use of banking documents collected in criminal proceedings without the procedure provided for in article 63-A(3 and 4) of the LGT having been observed, which prevented the Requesters from exercising their right of defense.

Moreover, there is lapse of the assessment acts due to the inapplicability to the case of article 45(5) of the LGT. According to this provision, the time limit for assessment of taxes when it concerns facts in relation to which a criminal inquiry was instituted is extended until the dismissal or the judgment becomes final, plus one year. However, the mentioned inquiry was instituted in order to investigate the crime of tax fraud possibly committed by the companies of which the requesters were administrators and which does not concern the facts that served as the basis for the additional personal income tax assessment.

Moreover, the Tax Administration can only take advantage of the extension of the assessment time limit when it must await the outcome of the criminal proceedings to carry out the tax acts and not when it has proceeded with the assessment while the criminal proceedings are still pending.

Furthermore, the assessments are illegal due to lack of prior notification of the inspection. In effect, the Administration instituted an internal inspection procedure, but did not limit itself to the formal analysis and coherence of documents, instead conducting an external inspection action, of an investigatory nature, by resorting to information that is in the possession of third parties, so there was grounds for the prior notification referred to in articles 49(1) and 50(1), paragraph a), of the Supplementary Regime for Tax and Customs Inspection Procedure.

The assessments further suffer from a defect of form by violation of article 60 of the LGT by not permitting the taxpayer to exercise the right to be heard before assessment, taking into account that the overall net income set out in the inspection report differs from the amounts appearing in the assessments.

The assessments are further illegal because the presumption that holders of joint deposits participate in the deposited amounts in equal shares (article 516 of the Civil Code) is rebuttable by proving that the respective shares are different or that only one of the holders should benefit from the entire credit, proof which the Tax Authority failed to provide.

The assessment acts in question further incur illegality due to lack of reasoning, since the reasoning of the challenged act is not expressed in clear, sufficient and congruous terms regarding the determining reason for the corrections that would have to be made.

The Tax Authority, in its response, invokes the unnamed dilatory exception arising from the Administration's non-binding commitment to arbitral jurisdiction regarding acts of determining taxable matter using indirect methods, on the grounds that the disputed assessments are mere tax acts consequent to the decision on indirect assessment of taxable matter and the Requesters cannot use the arbitral route to challenge, albeit indirectly, that decision on indirect assessment.

It further raises the exception of res judicata regarding the questions raised by the Requesters, except as to the lapse of the right to assess which constitutes a defect of the disputed assessment acts. Indeed, the other defects relate to facts prior to the notification of the decision on indirect assessment of taxable matter, and which could have been raised in the appeal filed pursuant to article 89-A(7) of the LGT, leading to the conclusion that any existing defects are healed by force of res judicata or res decidenda. It further adds that the defect of lack of reasoning was the subject of knowledge by the Northern Administrative and Tax Court in the judgment of 21 March 2013, in the context of the appeal provided for in article 89(7), so it is covered by res judicata.

In the course of the challenge, the Tax Authority argues that there was no violation of article 63-B(3 and 4), as the banking documents in question were obtained in execution of an arrest warrant, in the context of the inquiry process and, in the case of documents referring to bank accounts located abroad, in response to a letter rogatory sent by the Public Prosecutor's Office, still in the context of that inquiry process, and that there is no place for the waiver of banking secrecy in relation to banking entities not subject to Portuguese domestic law.

Regarding the lapse of the right to assess, it argues that the inquiry process No. ../08…DAVR was instituted following the inspection actions on the companies of which the Requesters were administrators due to indications of the commission of crimes of a fiscal nature that also implicated the Requesters. With the institution of the inquiry process, the time limit for assessment of the tax is extended until the dismissal or the judgment becomes final, plus one year. And as there is no relationship between the criminal proceedings and the tax proceedings that justifies awaiting the conclusion of the criminal proceedings in order to determine the tax situation of the taxpayers, nothing prevented the Administration from issuing the assessment acts based on the available evidence independently of the decision to be rendered in the criminal proceedings.

It adds that the time limit for assessment would always have been suspended with the filing of the appeal referred to in article 89-A(7) of the LGT, until the judgment rendered as a result of article 46(2), paragraph a), of the LGT becomes final.

Regarding the alleged failure to provide prior notice of the tax inspection, it should be taken into account that an inspection procedure does not cease to constitute an internal procedure even when documents are provided by the taxpayer or by third parties at the Administration's request, and that in the case, the banking documents were obtained from the DIAP of Porto not implying the carrying out by the inspection services of any external diligence.

It is further not verified that the right to be heard before assessment has been waived, as the hearing is dispensed with, pursuant to article 60(1), paragraph e), and article 60(3) of the LGT, when the taxpayer has been previously heard, which was the case as the Requesters were notified to exercise the right to be heard in the context of the tax inspection procedure.

Nor does the invoked defect of lack of reasoning occur, as the assessment acts are sufficiently reasoned in the terms contained in the inspection report and the decision rendered on it determining the indirect assessment of taxable matter.

Regarding the defect related to the rebuttable presumption, the Tax Authority considers it not to be possible to exercise the right to be heard as it is not apparent what the terms and scope of the illegality that is intended to be imputed to the assessment acts are.

It concludes for the upholding of the exception and the dismissal of the request on the merits.

2.

Following the proceedings, the meeting referred to in article 18 of the RJAT was dispensed with and the continuation was ordered for arguments, also intended, as regards the Requesters, for the exercise of the right to be heard as to the matter of exception.

In arguments, the Requesters, regarding the exception of incompetence of the arbitral tribunal, argued that the arbitral request does not put in question the decision on assessment of taxable matter by the indirect method, but the tax assessment acts, regarding which the Respondent is bound by arbitral jurisdiction pursuant to article 2 of Order No. 112-A/201, of 22 March. And regarding the exception of res decidenda or res judicata, they considered that the assessment act merely has the nature of a consequential act of another previously carried out that sets the preconditions concerning the existence of the taxable facts, and that, being an instrumental decision, it does not prevent the taxpayer from attacking the assessment act on the grounds of illegality that occurred at the prior stage, with the challenge being the appropriate procedural means for reviewing such illegality.

On the merits, the parties maintained their previous positions.

3.

By request presented on 5 April 2019, the Requesters came to withdraw the request with all legal consequences, without a power of attorney conferring special powers on the judicial representative being attached.

By judgment of 19 April following, the tribunal decided (a) to homologate the withdrawal of the request and declare extinct the rights of annulment that the Requesters intended to exercise in relation to the additional assessment acts Nos. 2018 ........., 2018 ........., 2018 ......... and 2018 ......... and (b) to notify personally the Requesters of the homologating decision, with the warning that, if they say nothing, the act shall be deemed ratified and the nullity waived.

By request of 27 November 2020, the Requesters came to request the repetition of the notification of the homologating decision of the withdrawal of the request, pursuant to article 291(3) of the Code of Civil Procedure (CPC), arguing that they had not received the notification letters that had been ordered in the operative part of that decision.

Subsequently, by request of 2 December 2020, they came to waive consideration of the request of 27 November, and on 9 December following, they came to request the correction of the homologating decision of withdrawal of the request, so that it would state the withdrawal of the arbitral request and not the withdrawal of the request for annulment of the assessments.

By judgment of 1 February 2021, the tribunal decided to dismiss the request to reform the decision that homologated the withdrawal of the request and determined the personal notification of the Requesters of that homologating decision, in the terms and for the purposes provided in article 291(3) of the CPC.

Subsequently, by request of 5 February following, the Requesters came to withdraw from the proceedings, so that by arbitral order of 8 February, in view of the provision of article 286(1) of the CPC, the Tax Authority was notified to comment on that request.

The Tax Authority, by request of 23 February, declared its opposition to the withdrawal from the proceedings, and on the same date, communicated that it had filed a challenge with the Southern Administrative and Tax Court against the arbitral decision of 1 February 2021, which had ordered the personal notification of the Requesters of the homologating decision of the withdrawal of the request. By judgment of 25 February 2021, the tribunal decided to order the suspension of the proceedings and to await the decision of the Southern Administrative and Tax Court regarding the challenge proceedings.

By judgment of the Southern Administrative and Tax Court of 13 May 2021, the challenge to the arbitral decision ordering the repetition of the notification of the homologating sentence of the request was not admitted.

By judgment of 23 May 2021, the arbitral tribunal, in light of the Tax Authority's opposition to the withdrawal from the proceedings, and in view of article 286(1) of the CPC, decided to dismiss the request for withdrawal from the proceedings and to order the continuation of the case for review of the subject matter of the dispute.

4.

The request for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority under the applicable regulations.

Pursuant to article 6(2), paragraph a), and article 11(1), paragraph b), of the Regulation on Tax Arbitration (RJAT), as amended by article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council designated as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable time limit.

The parties were duly and timely notified of that designation and did not manifest an intention to refuse it, pursuant to the combined terms of article 11(1), paragraphs a) and b), of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in compliance with the provision of article 11(1), paragraph c), of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral tribunal was established on 10 October 2018.

The arbitral tribunal was duly constituted and is substantively competent, in light of articles 2(1), paragraph a), and 30(1) of Decree-Law No. 10/2011, of 20 January.

The parties have legal personality and capacity, are legally entitled and are represented (articles 4 and 10(2) of the same instrument and article 1 of Order No. 112-A/2011, of 22 March).

The case does not suffer from nullities.

There is grounds to review and decide.

II – Preliminary Review

Incompetence of the Arbitral Tribunal

5.

The Tax Authority invokes the unnamed dilatory exception arising from the Administration's non-binding commitment to arbitral jurisdiction regarding claims relating to acts determining taxable matter by indirect methods, making reference to article 2, paragraph b), of Order No. 112-A/2011, of 22 March, which excludes from the tax arbitration regime such type of claims. To reach this conclusion, the Respondent proceeds from the assumption that the tax assessment acts challenged are mere consequential acts of the decision on indirect assessment of taxable matter and it is prohibited for taxpayers to use the arbitral route to indirectly challenge the decision relating to the determination of taxable matter by indirect methods.

Now, as it seems clear, the arbitral request has as its object the declaration of illegality of tax assessment acts, which falls within the rule of competence defined in article 2(1), paragraph a), of the RJAT. The circumstance that the requesters could possibly raise, in the context of the arbitral request brought against tax assessment acts, defects that affect, not those assessment acts, but the prior acts of assessment by indirect methods, does not mean that the arbitral tribunal becomes incompetent to know of such assessment acts, but has only as a consequence that the tribunal cannot review the defects that relate to such prior acts.

But that is a matter that has to do not with the competence of the arbitral tribunal, but with the challengeability of consequential acts which, as will be more clearly seen below, may only be challenged for their own defects and not for defects that affect the prior act.

What is important to note when analyzing the competence of the arbitral tribunal is that the object of the arbitral request is the declaration of illegality of tax assessment acts, which is included in the rule of competence of article 2(1), paragraph a), of the RJAT, and does not fall within the exception of article 2, paragraph b), of Order No. 112-A/2011, of 22 March.

That is sufficient to declare the competence of the tribunal and to dismiss the dilatory exception invoked.

Res Decidenda and Res Judicata

6.

The Tax Authority further raises the exception of res decidenda regarding questions concerning the decision on assessment by indirect methods, considering that such questions should have been the subject of the appeal to the tax court referred to in article 89-A(7) of the LGT. And it also invokes the exception of res judicata regarding the defect of lack of reasoning, which would have been the subject of knowledge by the judgment of 21 March 2013 of the Northern Administrative and Tax Court, in the context of the appeal filed by the Requesters pursuant to that provision.

As is known, the figures of res decidenda and res judicata are not entirely coincident.

The legal force of res decidenda applies to administrative acts that define the situation of the specific case in a stable manner due to lack of timely jurisdictional challenge by the interested parties, provided it is not a question of null acts (articles 163(3) and 166(1), paragraph a), of the Code of Administrative Procedure). However, the consolidation of the invalid effects of the administrative act, due to the lapse of the right to jurisdictional challenge, does not mean that the acts are healed of their respective defects, but merely that their effects become definitive.

The effects of material res judicata may project themselves into a subsequent procedural relationship in two ways: either through the invocation of the force of res judicata, which binds the tribunal to apply the definition of law already become final with respect to the same question that arises again in another action (article 619(1) of the CPC); or through the invocation of a dilatory exception, which prevents the tribunal from pronouncing itself in another proceeding on the matter already previously decided, and which will lead to the dismissal of the instance (article 577, paragraph i), of the CPC). In the first case, the tribunal merely adopts the content of the prior decision as to the legal aspect that is covered by res judicata; in the second case, where there is complete identity of the object of the proceedings with respect to another previously decided (because the same claim is at issue), the tribunal does not have to issue any pronouncement and declares the instance extinct.

As provided for in article 619 of the CPC, the extra-procedural effect of res judicata operates within the limits fixed by articles 580 and 581 which define the concept and requirements of res judicata. It is understood that the cause is repeated "when an action is brought identical to another as to the parties, the claim and the cause of action" (article 581(1) of the CPC). These are the elements that make it possible, in turn, to define the extent of res judicata. The identity of procedural parties defines the subjective limits of res judicata, while the objective limits are defined by the identity of the claim and the cause of action, that is, by the object of the proceeding. Res judicata thus covers only the plaintiff's claim (relief sought) in light of the fact invoked as its basis (cause of action).

Now, in the present case, the Respondent intends that the decision on assessment by indirect methods is covered by res decidenda – that is, became unmodifiable due to lack of timely jurisdictional challenge – regarding questions that were not the subject of the appeal provided for in article 89-A(7) of the LGT. And regarding the defect of reasoning that could affect that decision, it alleges that material res judicata is verified, as this question was decided by the Central Administrative Court in the context of the appeal filed by the Requesters pursuant to that same provision.

Now, as has already been intimated, the present arbitral request does not have as its object the decision on assessment by indirect methods but the tax assessment acts that were produced following that other decision. And being thus, it becomes clear that the defects that are imputed in the present to the request against the challenged acts cannot be considered covered by the res decidenda that may have resulted from such defects not having been alleged in the appeal of article 89-A(7) of the LGT. In the same way that the defect of lack of reasoning cannot be found to be covered by the res judicata resulting from the judicial decision that has pronounced on that matter in the appeal filed under that provision.

That for the straightforward reason that there is no identity of claims. That appeal would have been aimed at the declaration of illegality of the decision on assessment by indirect methods, while the present challenge has as its object the tax assessment acts.

For all that has been set out, the exceptions of res decidenda and res judicata are shown to be unfounded.

III - Reasoning

Factual Matter

4.

The facts relevant to the decision of the case which may be taken as established are the following.

A) In the years 2005 to 2009, the Requesters were administrators of the companies C…, S.A., D…, S.A. and E…, SA.;

B) Following inspection actions carried out on those companies, and as there were indications of the commission of crimes of a fiscal nature, an inquiry process was opened which proceeded before the Public Prosecutor's Office (DIAP) of Coimbra and then before the DIAP of Porto under the case number ../08...DAVR;

C) On 6 February 2012, the Finance Directorate of Aveiro opened an internal inspection procedure, authorized by internal service orders Nos. OI2012....., OI2012....., OI2012..... and OI2012....., to investigate the tax situation of the Requesters, which covered the fiscal years 2005 to 2008;

D) On 4 May 2012, the tax inspection report was drawn up which determined that the preconditions for fixing the taxable matter by indirect methods were met and proposed correction of the taxable matter declared by the Requesters in the following amounts: €1,636,762.98 (2005), €1,727,614.99 (2006), €533,411.33 (2007) and €1,038,484.54 (2008);

E) The Requesters were notified by letter dated 12 April 2012 to comment on the tax inspection report, and did not exercise the right to be heard within the prescribed time limit.

F) The tax inspection report obtained the agreement of the Finance Director of Aveiro, by decision of 16 May 2012, which fixed the amounts of the corrections to the taxable matter;

G) On 28 May 2012, the Requesters filed an appeal of the decision on assessment by indirect methods in the Administrative and Tax Court of Coimbra, pursuant to article 89-A(7) of the LGT;

H) By judgment of 17 August 2012, the Administrative and Tax Court of Coimbra considered the assessment by indirect methods lawful and annulled the decision fixing the amounts of the capital increases to be taxed due to the defect of lack of reasoning;

I) In jurisdictional appeal, the Northern Administrative and Tax Court, by judgment of 21 March 2013, revoked the judgment as to the defect of lack of reasoning, finding it unfounded, and remanded the case to the first instance to carry out the necessary evidentiary diligences to determine the identity of the economic beneficiaries of the accounts existing in the Banque Privée Edmond Rothschild Europe in the name of F…, S.A.;

J) Upon reconsideration, by judgment of 11 December 2017, the Administrative and Tax Court of Coimbra determined that the Requesters were the economic beneficiaries of the accounts existing in the Banque Privée Edmond Rothschild Europe in the name of F…., S.A. and fully dismissed the appeal filed by the Requesters, upholding the decision appealed against;

L) In jurisdictional appeal, the Northern Administrative and Tax Court, by judgment of 26 May 2018, denied the appeal and confirmed the judgment appealed against;

M) The judgment of the Northern Administrative and Tax Court of 26 May 2018 became final on 11 June following;

N) On 20 July 2018, the additional assessment acts Nos. 2018 ........., 2018 ........., 2018 ........... and 2018 ..........., relating to the years 2005, 2006, 2007 and 2008, were issued in the amounts of €1,477,128.86, €1,616,524.43, €693,971.39 and €895,901.21;

O) The inquiry process No. 93/08…DAVR was dismissed by decision of 19 December 2018.

The Tribunal formed its conviction as to the proven facts based on the documents attached to the petition and the records and the administrative file attached by the Tax Authority with the response.

Facts Not Proven

There are no facts not proven that are relevant to the decision of the case.

Matter of Law

Challengeability of Assessment Acts

7.

The Requesters are challenging the tax assessment acts carried out following the inspection procedure that determined that the preconditions for resorting to indirect assessment were verified, in application of article 87, paragraph f), of the LGT.

This provision establishes that indirect assessment is applicable in case of "increase in patrimony or expense incurred, including gifts, exceeding the value of €100,000, verified simultaneously with the absence of declaration of income or with the existence, in the same tax period, of an unjustified divergence with the income declared". In turn, article 89-A(7) specifically provides for the possibility of filing an appeal to the tax court, with suspensive effect, and to be processed as an urgent matter, of the decision on assessment of taxable matter by the indirect method.

The Requesters made use of the appeal to challenge the decision on assessment by indirect methods referred to in that provision, which was ultimately decided by the judgment of 26 May 2018 of the Northern Administrative and Tax Court. There, three essential questions were discussed: (a) the probative value of documents obtained in criminal inquiry proceedings, containing banking information of the Requesters, when they were not obtained through the procedure provided for in article 63-B of the LGT and the interested parties had no involvement in the criminal proceedings and could not exercise their rights of control and defense; (b) the probative value of the expertise conducted on the handwriting and signature of the Requesters which concluded that the signatures affixed to banking documents "may be" those of the Requesters; (c) the sufficiency of the proof, which was incumbent on the Tax Administration, that the Requesters were the economic beneficiaries of the company F…, S.A. in the years 2005 to 2008.

In the present arbitral request, the Requesters impute the following illegalities to the tax assessment acts: that resulting from the failure to adopt the procedure provided for in article 63-B(3 and 4) of the LGT to access banking information and documents, the lapse of the assessment acts, the failure to provide prior notice of the tax inspection action, the violation of the principle of participation by not granting the right to be heard before assessment, the defect of lack of reasoning and also the defect resulting from the Tax Authority's failure to rebut the presumption that holders of joint deposits participate in the deposited amounts in equal shares.

This last ground is unintelligible in the context of the allegation in which it is raised (articles 121 to 127 of the petition) and has no correspondence with the established facts nor with any other elements of the case, so, as it is not possible to infer the scope of the illegality invoked and its grounds, knowledge thereof cannot be taken.

All the other defects invoked, with the exception of the lapse of the right to assess and the violation of the right to be heard before assessment, are attributable to the decision on assessment by indirect methods, as these are defects relating to the inspection procedure itself that gave rise to the use of indirect methods for the purpose of corrections to be made to taxable matter.

Now, tax assessment acts are consequential acts in relation to the decision on assessment by indirect methods, insofar as these are acts performed following that other act and taking as a precondition the legal definition resulting from it.

Portuguese law now makes reference to consequential acts to assume that, even if they have not been the subject of jurisdictional challenge, such acts, within certain conditions, should be eliminated, reformed or replaced by the Administration itself, in execution of any annulling judgment or in execution of administrative annulment of the act on which they are based, when this proves indispensable to restore the situation that should exist if that latter act had not been carried out. This is what results from article 173(2) of the Code of Administrative Procedure and Tax Procedure (CPTA), concerning the execution of judgments annulling administrative acts, the regime of which extends, by force of article 172(2) of the Code of Administrative Procedure (CPA), to the execution of annulment decisions taken by administrative authorities. But nothing of this naturally precludes the possibility available to the challenger of the prior act of proceeding to challenge, at the appropriate time, the consequential acts whose subsistence may undermine the satisfaction of their interests.

The point is that the challenge of consequential acts cannot serve for the challenger to again discuss questions of illegality attributable to the prior act and which have already been the subject of jurisdictional review in the context of its own appeal. Here, by analogy, article 53(3) of the CPTA applies, by which "the legal acts of execution of administrative acts are only challengeable for their own defects, insofar as they have an innovative character in terms of decisional content".

Indeed, consequential acts possess a dimension of merely confirmatory nature, insofar as they take as a precondition the legal definition resulting from a prior act and only become challengeable insofar as they produce new legal effects, which arise in the development of the legal situation defined by the prior act.

The only possibility of imputing to the consequential act defects of the prior act would be to invoke the nullity of that act. In fact, a null act produces no legal effects whatsoever (article 162 of the CPA), so the interested party could always attack the consequential act based on any illegality of the presupposed act that the law expressly attaches to that form of invalidity. This is because the nullity of the prior act, once judicially recognized, would determine the annulment of the consequential act by error in the factual or legal preconditions.

Given that the challenge is to the tax assessment acts based on defects attributable to the decision on assessment by indirect methods but which could only generate the mere annulability of that decision, such defects cannot be reviewed in the context of the arbitral request.

Knowledge is therefore not taken of the defects of non-adoption of the procedure provided for in article 63-B(3 and 4) of the LGT to access banking information and documents, failure to provide prior notice of the tax inspection action and lack of reasoning.

Lapse of the Right to Assess

8.

The Requesters argue that the lapse of the assessment acts has occurred due to the inapplicability to the case of article 45(5) of the LGT, considering that the inquiry process that gave rise to the inspection procedure was instituted to investigate the possible crime of tax fraud committed by the companies of which the requesters were administrators and did not concern the facts that served as the basis for the additional personal income tax assessment. Moreover, the Tax Administration can only take advantage of the extension of the assessment time limit when it must await the outcome of the criminal proceedings to carry out the tax correction acts and not when it has proceeded with the assessment while the criminal proceedings are still pending.

The Tax Authority argues that the inquiry process was instituted following the inspection actions on the companies of which the Requesters were administrators due to indications of the commission of crimes of a fiscal nature that also implicated the Requesters, and that there was no relationship between the criminal proceedings and the tax proceedings that would justify the need to await the conclusion of the criminal proceedings to determine the tax situation of the taxpayers.

As provided for in article 45(1 and 4) of the LGT, the general time limit for exercising the right to assess corporate income tax (IRC) is four years from the end of the year in which the taxable event occurred. And pursuant to article 45(5) of that same article, reintroduced by Law No. 60-A/2005, of 30 December, "whenever the right to assess concerns facts in relation to which a criminal inquiry was instituted, the time limit referred to in paragraph 1 is extended until the dismissal or the judgment becomes final, plus one year".

The extension of the time limit for lapse of the right to assess is therefore dependent on a relationship of prejudiciality between the facts justifying the assessment and those that determined the opening of the criminal inquiry, such that it could be stated that the right of assessment could not be exercised correctly without knowledge of facts ascertained in the inquiry.

In that sense, the judgment of 18 January 2012 of the Northern Administrative and Tax Court (Case No. 00670/08) states that "for such extension of the time limit for lapse to occur, it is essential that the tax facts underlying the assessment in question were the subject of investigation in criminal proceedings and a criminal inquiry was instituted regarding them" (…) "which is understandable, for there being no required identity of the facts investigated in the criminal proceedings and those that constitute the precondition of the assessment, it is not apparent in what way the pendency of that proceeding could affect the exercise of the right to assess taxes".

That interpretation – as was emphasized in the arbitral decision rendered in Case No. 7/2016-T – is the one that best safeguards the public interest in the collection of taxes and the interest of legal certainty and guarantee of taxpayers and finds support in the preparatory work and, especially, in the Draft State Budget Law for 2006 (at http://www.parlamento.pt/OrcamentoEstado/Documents/pec/pec2005-2009.pdf), which reintroduced the said provision, where it is stated:

In the State Budget for 2006, the regime governing the lapse of the right to assess taxes was altered (as a rule, for periodic taxes, four years from the end of the year following that in which the taxable event occurred and for single-obligation taxes, from the date of occurrence of the taxable event) so as to provide that, when the correct determination of the tax depends on facts ascertained in a criminal inquiry, such time limit is extended until the dismissal or the judgment becomes final, plus one year. With such alteration, the aim is, essentially, to prevent those who are suspected of or even charged with the commission of criminal illicit acts of a tax nature from benefiting, by virtue of the elapse of the time limit for lapse, from the non-assessment of tax, with the inherent exemption from proceeding to its payment, by virtue of the commission of those illicit acts. It is intended, thus, to moralize the tax legal system and to more effectively combat fraud and tax evasion.

It is to be concluded, as stated in the arbitral decision rendered in case No. 199/2015-T, that "the extension of the time limit for lapse of the right to assess taxes referred to in article 45(5) of the LGT will only operate if it is demonstrated that such right was – effectively and concretely – conditioned by the result of the criminal investigation".

In the present case, regardless of the question of whether the object of the inquiry process relates to the factual situation that gave rise to the inspection procedure and the correction of taxable matter, the fact is that the Tax Authority issued the assessment acts following the final judgment of the judgment of the Northern Administrative and Tax Court of 26 May 2018, rendered in the context of the appeal filed against the decision on assessment by indirect methods, whereas the decision to dismiss the inquiry process only occurred on 19 December of that year. This allows the conclusion that the decision on the tax situation of the Requesters was not conditioned by the outcome of the inquiry and could be issued even before the outcome of the proceeding became known.

There is therefore no grounds for the extension of the time limit for lapse of the right to assess on the basis of the invoked provision of article 45(5) of the LGT.

However, pursuant to article 46(2), paragraph a), of the LGT, the time limit for lapse is suspended "in case of judicial dispute the resolution of which depends on the assessment of the tax, from its beginning until the judgment becomes final".

Now, in the present case, an appeal was filed on 28 May 2012 to the tax court of the decision on assessment of taxable matter by the indirect method, pursuant to article 89-A(7) of the LGT. The appeal has suspensive effect and the final judgment of the judgment of the Northern Administrative and Tax Court of 26 June 2018, which finally decided the dispute, only became final on 11 June following.

Given that the appeal concerned the presupposed act on which the issuance of the additional assessments depended and had suspensive effect, the suspension of the time limit for lapse referred to in the cited article 46(2), paragraph a), of the LGT operates.

And being thus, taking into account that the time limit for lapse of the right to assess begins to run from the beginning of the calendar year following that in which the taxable event occurred, it is necessary to conclude that on the date when the assessments were issued, the right had already lapsed regarding the years 2005, 2006 and 2007, as more than four years had elapsed from the end of the year to which the assessments relate and the date when the appeal referred to in article 89-A(7) of the LGT was filed.

The right to assess relating to the year 2008 is not, however, lapsed.

Right to be Heard Before Assessment

9.

The Requesters further invoke the violation of the right to be heard before assessment because they did not have the opportunity to comment, in opposition to article 60(1), paragraph a), of the LGT, on the divergence between the amounts owed that appear in the assessment acts and the arithmetic corrections that were determined as a result of the tax inspection report.

The Tax Authority explains, however, in its response, that the overall income of the assessment results from the aggregation of the amounts resulting from the corrections in the amounts that result from the prior tax assessment, with no effective change in the values that were considered in the context of the inspection procedure.

Now, pursuant to article 60(3) of the LGT, the hearing before assessment is dispensed with if the taxpayer has been heard at any of the earlier stages of the procedure and, specifically, before the conclusion of the tax inspection report, except in case of invocation of new facts on which they have not yet commented. And what is verified in the case is that the Requesters had the opportunity to comment on the draft inspection report, and on the other hand, no demonstration is made that an effective divergence occurred between the values stated in the report and the assessment, so it cannot be considered that the existence of new facts that could justify a new hearing before assessment has been verified.

And in these terms, the invoked defect of lack of hearing before assessment is shown to be unfounded.

III – Decision

Terms of the Decision

  • To uphold the arbitral request and annul the additional assessment acts Nos. 2018 ........., 2018 ......... and 2018 ........., relating to the years 2005, 2006 and 2007;

  • To dismiss the arbitral request regarding the additional assessment act No. 2018 ........., relating to the year 2008.

Value of the Case

The Requesters indicated as the value of the case the amount of €4,683,525.89, which was not contested by the Respondent and corresponds to the value of the assessment that was intended to be opposed, so that amount is fixed as the value of the case.

Costs

Pursuant to articles 12(2) and 24(4) of the Regulation on Tax Arbitration (RJAT) and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings and Table I annexed to that Regulation, the amount of costs is set at €59,058.00, which is the responsibility of the Respondent in the proportion of 3/4 and of the Requesters in the proportion of 1/4.

Notify.

Lisbon, 18 June 2021

The President of the Arbitral Tribunal

Carlos Fernandes Cadilha

The Arbitrator Member

Luís M. S. Oliveira

The Arbitrator Member

Nuno Cunha Rodrigues

Frequently Asked Questions

Automatically Created

What does Article 45(5) of the Portuguese LGT say about extending the tax liquidation deadline when a criminal inquiry is opened?
Article 45(5) of the Portuguese LGT extends the deadline for tax assessment when a criminal inquiry is opened involving facts related to the taxable period. According to the STA's uniformization ruling in Process 366/2018-T, this extension requires only an objective factual coincidence between the tax situation and the criminal investigation—not a formal prejudiciality relationship. The right to assess does not need to be conditioned on the criminal proceedings' outcome; the mere existence of concurrent factual circumstances between tax and criminal matters suffices to suspend the normal lapse period, providing the Tax Authority additional time to complete assessments.
Does the extension of the IRS liquidation period require a prejudiciality relationship between tax facts and criminal investigation facts?
No, the extension of the IRS liquidation period under Article 45(5) LGT does not require a prejudiciality relationship between tax facts and criminal investigation facts. The STA's uniformization judgment in Case 111/21 (arising from Process 366/2018-T) definitively established that only objective factual coincidence is necessary. This means the Tax Authority can benefit from extended assessment deadlines whenever criminal inquiries involve factual circumstances overlapping with the tax period under review, regardless of whether the tax assessment legally depends on criminal proceedings conclusions. This interpretation significantly broadens the Tax Authority's temporal scope for conducting assessments in cases with potential criminal dimensions.
Can consequential tax liquidation acts be challenged based on defects in the indirect assessment decision under Portuguese tax law?
No, consequential tax liquidation acts cannot be challenged based on defects attributable to the underlying indirect assessment decision under Portuguese tax law. The CAAD decision in Process 366/2018-T clarifies that liquidation acts are consequential to the indirect assessment decision issued under Article 89-A(7) LGT. Taxpayers must challenge the indirect assessment decision itself through the specific appeal mechanism provided in that article. Subsequent liquidation acts can only be challenged for their own innovative defects—not for illegalities originating in the inspection procedure or indirect assessment methodology. Defects such as improper access to banking information, insufficient proof of economic beneficiary status, or procedural violations in the inspection must be raised when contesting the indirect assessment decision, not the consequential liquidation acts.
What was the outcome of the STA uniformization appeal in CAAD Process 366/2018-T regarding IRS liquidations for 2005-2007?
The STA granted the Tax Authority's uniformization appeal, reversing the original arbitral decision that had annulled the IRS liquidations for 2005-2007. The arbitral tribunal had initially ruled in favor of the taxpayers, finding that the right to assess had lapsed because the tax situation was not conditioned by criminal inquiry outcomes. However, the STA's Full Section judgment of September 29, 2022 (Case 111/21) established binding precedent that Article 45(5) LGT's extension applies with mere objective factual coincidence between tax and criminal matters, without requiring prejudiciality. Consequently, the assessments for 2005-2007 were deemed valid and timely, not barred by lapse. The reformed arbitral decision of February 9, 2022, implemented this legal standard, upholding the Tax Authority's position and confirming the validity of the contested liquidations.
What is the legal significance of the reform of the arbitral decision dated June 18, 2021, in Portuguese tax arbitration?
The reform of the June 18, 2021 arbitral decision represents a significant exercise of the STA's case law uniformization power in Portuguese tax arbitration. Under the Portuguese arbitration system, when arbitral decisions conflict with settled court jurisprudence, the Tax Authority can seek uniformization through appeals to the STA's Full Section. The February 9, 2022 reformed decision substituted the legal reasoning of the original arbitral ruling while maintaining the established factual findings. This mechanism ensures coherence between arbitral tax jurisprudence and court precedents, preventing divergent interpretations of fundamental provisions like Article 45(5) LGT. The reform became definitive on January 26, 2023, establishing binding precedent that arbitral tribunals must follow regarding lapse period extensions in cases involving concurrent criminal inquiries, thereby harmonizing tax dispute resolution across judicial and arbitral forums.