Process: 402/2017-T

Date: February 8, 2018

Tax Type: IRC

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 402/2017-T addresses the jurisdictional scope of tax arbitration over IRC self-assessment revision requests under the RETGS framework. The case involved A… S.A., parent company of a Portuguese tax group, challenging an AT order dated 14-03-2017 that rejected its request for official revision of 2012 IRC self-assessment. The dispute centered on whether the company could retroactively include in its RETGS all Portuguese resident companies held by its Spanish parent (B… SL), following legislative changes introduced by Law 82-C/2014 that extended RETGS to groups with non-resident parents from 2015 onwards. The taxpayer argued the correction duty arose from CJEU recognition of the prior regime's illegality under EU law, invoking the primacy principle and established Portuguese case law. The AT contested CAAD's material competence, raised lack of standing objections, and argued Article 69-A of CIRC applies exclusively to taxation periods beginning on or after 1 January 2015 without retroactive effect. Key procedural issues included the timeliness of the arbitral request filed in July 2017, the tribunal's jurisdiction over decisions denying official revisions of self-assessments, and whether EU law primacy enables application of CJEU judgments to pre-2015 tax facts. The case illustrates critical intersections between Portuguese tax procedure, RETGS eligibility requirements, RJAT jurisdictional boundaries, and the temporal application of EU law principles in domestic tax matters.

Full Decision

ARBITRAL DECISION

REPORT

A…, S.A., legal entity no. …, with registered office at …, Place …, …, (hereinafter referred to as Applicant or "A…"), came, pursuant to Article 2, no. 1, paragraph a), and Articles 10 et seq. of the Legal Framework for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, with the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December (hereinafter briefly designated "LFTA") and Articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, to submit a request for an arbitral pronouncement on the legality of an Order of the Deputy Director-General of the Tax and Customs Authority, dated 14-03-2017, which rejected the request for official revision of the self-assessment of Corporate Income Tax (IRC) for the year 2012.

The RESPONDENT is the TAX AND CUSTOMS AUTHORITY (TA).

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority (TA) on 03-07-2017.

The Applicant did not appoint an arbitrator; therefore, in accordance with the provisions of paragraph a) of no. 2 of Article 6 and paragraph b) of no. 1 of Article 11 of the LFTA, the President of the Deontological Council of CAAD designated the undersigned as arbitrators of the collective arbitral tribunal, and they communicated acceptance of the appointment within the applicable time limit.

On 28-08-2017, the parties were duly notified of this designation, and neither manifested any intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of Article 11, no. 1, paragraphs a) and b), of the LFTA and Articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision in paragraph c) of no. 1 of Article 11 of the LFTA, the arbitral tribunal was constituted on 19-09-2017.

Duly notified, the Tax and Customs Authority submitted a response in which it defended the inadmissibility of the request, raising exceptions and challenges.

As the meeting referred to in Article 18 of the LFTA was dispensed with, as it was deemed unnecessary in this case, the tribunal invited the parties to submit written submissions, which only the Respondent did, reiterating and developing its respective legal position.

8 February 2018 was set as the date for pronouncement of the final decision.

The Applicant requests that the Order of the Deputy Director-General of the TA, issued by delegation, dated 14-03-2017, which rejected the request for official revision of the self-assessment of IRC for the year 2012, be declared illegal, arguing in summary:

  • On 30-05-2013, the Applicant submitted its income statement Form 22, relating to the year 2012, declaring as the algebraic sum of the fiscal results of the group the amount of fiscal losses of € 5,13.516.154,47, determining a tax to be paid of € 83.568,67 which was paid in a timely manner;

  • Considering that the said self-assessment was not correct, it submitted a request for official revision;

  • The Applicant's request was rejected by the TA solely on the grounds that the extension of the Special Regime for Group Taxation (RETGS) to resident companies that are directly or indirectly held by non-resident companies, is only applicable to taxation periods beginning on or after 1 January 2015;

  • Arguing the impossibility of retroactive constitution of the group to which the Applicant belongs;

  • However, the Applicant does not seek retroactive application of the provisions of Article 69-A of the CIRC;

  • Arguing that the duty to correct the self-assessment does not arise from the need for retroactive application of the legislative amendment introduced by Law no. 82-C/2014, of 31 December, as the TA appears to allege, but rather from the express recognition by the CJEU of the illegal nature of the tax regime in force until that date;

  • And that it is settled case law of national courts that, given the primacy of Union Law over domestic law, the doctrine laid down in judgments of the CJEU declaring the non-conformity of national rules of Member States also applies to tax facts that occurred at an earlier date, provided that the right of action provided for in domestic legislation is safeguarded in time (cf. Judgments of the Supreme Administrative Court, case no. 0275/08, of 04/06/2008 and case 568/13 of 18/12/2013).

  • Consequently, the TA should be ordered to correct the self-assessment of IRC for 2012, so that in determining the taxable profit of the Applicant as the parent company of the group, all resident companies for tax purposes in Portugal held, directly and indirectly, by the parent company, B…, are included in the RETGS.

For its part, the Respondent came, in response, to argue, in summary:

  • That the arbitral tribunal is materially incompetent to determine the request for annulment of the order rejecting the request for official revision of the self-assessment of IRC for 2012 submitted by the Applicant;

  • That the Applicant lacks standing;

  • That none of the companies made the option for the beginning of the application of the RETGS by the end of the taxation period of 2012;

  • That the legislator did not assign retroactive effect (or interpretative effect) to Article 69-A, having defined clearly and precisely that it applies to taxation periods beginning on or after 1 January 2015, without having created any transitional provision establishing a new time limit for the notification provided for in paragraph a) of no. 7 of Article 69, and it is legally prohibited that the provisions of that article can be invoked for tax situations occurring before 2015;

  • Nor can this result from the application, to the case sub judice, of the case law of the Court of Justice of the European Union;

  • The arbitral request should therefore be dismissed, as unproven.

The arbitral tribunal was regularly constituted.

II. DECISION

1. Factual Matter

1.1 Facts Established as Proven

The following facts are considered proven:

  • The Applicant has been registered since 19-09-1936, for the exercise of activity with main CAE 46732 Wholesale trade in construction materials (except wood) and sanitary equipment, and was classified, for the year 2012, for VAT purposes, in the normal monthly regime and for income tax purposes in the general regime.

  • In 2012, the Applicant was the parent company of a Group of Companies subject to the RETGS, composed of the following commercial companies (point 13 of doc. no. 3 attached to the arbitral request):

    · C…, SA;
    · D…, Lda;
    · E…, Lda; and
    · F…, Lda.

  • With this classification, in the taxation period of 2012, the Applicant submitted its Form 22 statement, on 30-05-2013, declaring as the algebraic sum of the fiscal results of the group the amount of €13.516.154,47 and calculating, notably, autonomous taxation of €123.486,19, resulting in tax to be paid of €83.568,67 (doc. no. 1 attached to the arbitral request), payment which was made on 31/05/2013.

  • This gave rise to assessment no. 2013…, of 15-07-2013 (doc. no. 1 attached to the arbitral request).

  • In 2011, it acquired 100% of the capital stock of G…, Unipersonal, Lda, NIPC …, which, given the provisions of paragraph b) of no. 3 of Article 69 of the CIRC, was only included in the scope of the RETGS in 2013 (point 14 of doc. no. 3 attached to the arbitral request).

  • The Applicant is, in turn, held 100% of its capital stock by B…, SL, a company resident for tax purposes in Spain (point 15 of doc. no. 3 already referred to).

  • As from 23-12-2015, the same group came to include the following companies, with B… SL becoming the parent company (docs no. 4, 5, 6 and 7, attached to the arbitral request):

    · B…, SL;
    · A…, SA;
    · H…, Lda;
    · I…, SA;
    · J…, SA;
    · G…, Lda;
    · C…, SA;
    · D…, Lda;
    · E…, Lda; and
    · F…, Lda

  • On 29-03-2016 it requested revision of the self-assessment of IRC, with reference to the year 2012 (doc. no. 2 attached to the arbitral request).

  • The request was, by order of the Deputy Director-General by delegation of powers, of 14-03-2017, rejected on the grounds that: "In light of the clarity of the wording of the rule, and as no interpretative nature is assigned to it, we must conclude that such a possibility is from the outset impossible, whereby the regime introduced by Article 69-A of the IRC Code is only applicable to taxation periods beginning on or after 1 January 2015. Thus, companies held, directly and indirectly, by B… in companies resident in Portugal are eligible to form part of the group of which A… was the parent company, as the applicant refers in its petition, but only as from the taxation period of 2015." (doc. no. 3 attached to the arbitral request).

  • On 05-04-2017, the Applicant was notified of the said order of rejection.

  • This request for arbitral pronouncement was submitted on 30-06-2017.

1.2 Facts Established as Not Proven

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

1.3 Substantiation of Factual Matter

The facts were established as proven on the basis of documents submitted by the parties and contained in the administrative file, as well as on the positions of the parties, and it should be noted that no actual disagreement emerges from the positions assumed by Applicant and Respondent with respect to factual matters, with the dispute being confined to matters of law.

2. On the Law

Preliminary Question

Exception of dilatory nature regarding material incompetence of the arbitral tribunal to determine the Applicant's request.

As a preliminary question, it is important to determine the exception raised by the Respondent regarding material incompetence of the arbitral tribunal to determine the Applicant's request, because if this is found to be well-founded, it will lead to the dismissal of the Respondent from the proceedings.

It should first be noted that, according to the established facts, the Applicant proceeded, on 30.5.2013, to file the Income Statement Form 22, relating to the year 2012, of the IRC, having self-assessed the amount of € 83.568,67 (See Doc. no. 1 attached to the initial request).

On 28.3.2016, it filed a request for official revision (See Doc. no. 2 attached to the initial request), which was rejected by Order of the Deputy Director-General of the Tax and Customs Authority, of 14.3.2017 (see Doc. no. 3 attached to the initial request), and which led to the submission, on 30.6.2017, of this present request for arbitral pronouncement.

In its response, the TA defended itself, from the outset, by exception, and invoked, regarding this matter, material incompetence of the arbitral tribunal to determine the Applicant's request.

And it did so in the following terms:

The Respondent begins by recalling that "Law no. 3-B/2010, of 28 April (State Budget for 2010), included in its Article 124 a legislative authorization, relating to arbitration in tax matters, as an alternative form of jurisdictional resolution of conflicts in tax matters", and that, in exercise of the same "… Decree-Law no. 10/2011, of 20 January, which regulates tax arbitration (LFTA) was approved."

The competence of these tribunals "… is limited to the matters indicated in no. 1 of Article 2 of the LFTA, as well as of Ordinance no. 112-A/2011, of 22 March, pursuant to Article 4 of the LFTA, by the terms in which the Tax Administration bound itself to that jurisdiction."

And, the Respondent proceeds, for the demonstration that, in the present case, there is verification of "… material incompetence of the Arbitral Tribunal to appreciate and decide the requests formulated by the Applicant."

The Respondent begins by arguing that "… it is constitutionally prohibited, by force of the constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the CRP), as well as of the right of access to justice (Article 20 of the CRP) and of legality [cf. Articles 3, no. 2, 202 and 203 of the CRP and also Article 266, no. 2, of the CRP], in its corollary of the principle of non-disposability of tax claims inherent in Article 30, no. 2 of the LGT, any interpretation that broadens the binding of the TA to arbitral oversight as legally fixed."

Such interpretation, continues the Respondent, "… would imply the extension of situations in which the TA is obliged to submit to such a regime, renouncing thereby the recourse to full judicial review [cf. Article 124, no. 4, paragraph h) of Law no. 3-B/2010 and Articles 25 and 27 of the LFTA, which impose a restriction of the remedies of the arbitral decision]."

The Respondent thus considers "… unconstitutional any interpretation that determines that Article 2 of the LFTA includes the appreciation of the arbitral request here formulated by the applicant, when the letter and spirit of the rule do not permit it."

Making it concrete: "… in Article 2, paragraph a) of Ordinance no. 112/2011, of 22 March, the TA bound itself to the jurisdiction of arbitral tribunals operating in CAAD that have as their object the appreciation of claims relating to taxes whose administration is entrusted to them, referred to in no. 1 of Article 2 of the LFTA, 'With the exception of claims relating to the declaration of illegality of self-assessment acts, source withholding and payment on account that have not been preceded by recourse to the administrative remedy, in accordance with Articles 131 to 133 of the Code of Tax Procedure and Process.'"

Now, the Respondent invokes that "… the Applicant did not timely have recourse to the gracious claim provided for in no. 1 of Article 131 of the CPPT, which in this case was necessary since it also raises questions of fact, as is proven by the official revision submitted, where it invokes that the companies meet the prerequisites, also of fact, to form part of a group to which the RETGS can be applied and, therefore, to be taxed according to such regime."

If that were not enough, the Respondent further invokes that "The Applicant allowed the period of 2 years provided for in no. 1 of Article 131 of the CPPT for submission of an administrative claim to lapse."

Arguing that "… official revision, under the terms of Article 78 of the LGT, cannot replace the gracious claim provided for in Article 131 of the CPPT, especially when recourse to the same is made beyond the period of 2 years provided for in no. 1 of such article."

Concluding, thereby, that "… from the mere reading of Article 2, paragraph a) of Ordinance no. 112/2011, of 22/03, it follows that the arbitral route for the appreciation of the dispute can only be opened, in cases of self-assessment, after prior submission of a gracious claim, which does not occur in the present proceedings, where appreciation of a request for official revision is sought."

The Respondent further raises the question that "… the decision issued in the context of official revision procedure may, or may not, involve the appreciation of legality of the assessment act."

And the procedural form of response (See judgment of the Supreme Administrative Court, of 06/11/08, in case no. 0357/08)

In reinforcement of its position, it further invokes the arbitral decision issued in the context of case no. 505/2016-T, which it quotes:

"It is objectively indisputable that paragraph a) of Article 2 of Ordinance no. 112-A/2011 does not refer to the official revision procedure, which is provided for in Article 78 of the General Tax Law."

In this arbitral decision, two other decisions issued in the context of CAAD are further invoked, namely in Case no. 236/2013-T and in Case no. 51/2012-T, quoted in this Case no. 505/2016-T, in the following manner:

"In the same sense, with very pertinent argumentation, also goes the decision issued in case no. 51/2012-T, which understood that 'considering the voluntary nature of arbitration, the interpretation of the binding of the TA 'cannot, in any case, translate into a restriction of the sphere of freedom of the TA, as a party, to establish the limits of its binding. This would only not be the case if its position implied total frustration of the objective sought with the institution of tax arbitration, which is not the case', emphasizing that then, as now, 'the Tribunal does not pronounce on the doctrinal construction on which the assimilation of the official revision procedure, at the initiative of the taxpayer, to the gracious claim procedure, for purposes of judicial review, is based. Simply, it understands that from the principle of the establishment of the arbitral procedure as a means of resolution of tax disputes alternative to the judicial review process, does not automatically result the extension of the binding of the TA to all situations in which, doctrinally and/or jurisprudentially, it is considered admissible such review.' This indeed follows from the very terms in which tax arbitration was created, applying to a much narrower range of situations than judicial review."

And the decision being quoted concludes that:

"In conclusion, it does not seem to us possible to submit to arbitration of the dispute relating to the claims to which Article 2 of Ordinance no. 112-A/2011, of 22 March, refers, that has not been preceded by a gracious claim. Thus, we understand it to be unquestionable that the incompetence, ratione materiae, of this Tax Arbitral Tribunal, under the terms of Articles 2, no. 1, paragraph a) and 4, no. 1, both of the LFTA and Articles 1 and 2, paragraph a), of Ordinance no. 112-A/2011, which constitutes a dilatory exception barring knowledge of the merits of the case, under the provisions of Article 576, no. Article 29, no. 1, paragraphs a) and e) of the LFTA, which precludes determination of the request and the dismissal of the TA from the proceedings, under the terms of Articles 576, no. 2 and 577, paragraph a) of the CPC, ex vi Article 29, no. 1, paragraphs a) and e) of the LFTA."

Furthermore, it is verified that "… in the present case, given the decision rejecting the request for official revision, the legality of any assessment was not at issue, but only the question of whether the applicant could benefit, retroactively, from the application of a rule that would allow it to opt for taxation under the tax regime of group taxation, cf. Articles 69 and 69-A of the CIRC."

Arguing in that sense, the Respondent concluded by noting that there is "…a dilatory exception, embodied in material incompetence of the arbitral tribunal, which precludes determination of the request, and for this reason should determine the dismissal of the Respondent entity from the proceedings, given the provisions of Articles 576, no. 1 and 577, paragraph c) of the CPC, applicable ex vi Article 29, no. 1, paragraph e) of the LFTA". (See response of the TA, page 7)

This argumentation and this request were reproduced by the Respondent in its final submissions, although such text was naturally used to respond to the position subsequently defended by the Applicant.

Notified of the response submitted by the TA, the Applicant came, by request submitted on 06.11.2017, to exercise the right of response, which it did in the following manner:

From the outset, the Applicant invoked that "… the exception raised by the Respondent has already been subject to various assessments by the case law of the CAAD arbitral tribunal, namely by decision no. 117/2013-T and decision no. 236/2013-T, and more recently by decision no. 9/2017-T and decision no. 101/2017, having the same decided in favor of competence of the arbitral tribunals."

The Applicant understands that "… the express reference to Article 131 of the CPPT, which is made in Article 2 of Ordinance no. 112-A/2011, cannot have the scope of excluding the possibility of appreciation of requests for illegality of acts rejecting requests for official revision of self-assessment acts."

The Applicant argues that the interpretation which the TA makes of the applicable tax rules is exclusively literal, which does not accord with the general rules of interpretation and application of laws (See Article 11 no. 1 of the LGT and Article 9 of the CC), which move us away from merely literal interpretations.

After bringing in support of its thesis what is established in the decision in Case no. 117/2013-T, the Applicant states that "… the case law of the Supreme Administrative Court has understood (notably in the judgments of 12-07-2006, issued in case no. 402/06, and of 14-11-2007, issued in case no. 565/07), that in cases where a request for official revision of self-assessment is formulated, the TA is provided, with this request, an opportunity to pronounce on the merits of the claim of the taxpayer before the latter resorts to the judicial route, whereby, in coherence with the solutions adopted in nos. 1 and 3 of Article 131 of the CPPT, it cannot be required that, cumulatively with the possibility of administrative appreciation within the scope of that official revision procedure, a new administrative appreciation be required through a gracious claim."

And returning to "… the decision of the arbitral tribunal no. 117/2013-T, signed by Jorge Lopes de Sousa, Diogo Leite de Campos and Victor Simões, 'it is unequivocal that the legislator did not intend to prevent taxpayers from formulating requests for official revision in cases of self-assessment acts, as these are expressly referred to in no. 2 of Article 78 of the LGT. (…) Therefore, it is to be concluded that the members of the Government who issued Ordinance no. 112-A/2011, in making reference to Article 131 of the CPPT regarding requests for declaration of illegality of self-assessment acts, spoke imperfectly of what they intended, because, seeking to impose administrative appreciation prior to contentious review of self-assessment acts, they ended up including a reference to Article 131 which does not exhaust the possibilities of administrative appreciation of such acts.'"

The Applicant concludes "… as the Esteemed Arbitrators concluded in decision no. 117/2013-T cited above, that Article 2, paragraph a) of Ordinance no. 112-A/2011, properly interpreted on the basis of the criteria of interpretation of law provided for in Article 9 of the Civil Code and applicable to substantive and adjective tax rules, by virtue of the provision of Article 11, no. 1, of the LGT, enables the submission of requests for arbitral pronouncement regarding self-assessment acts that have been preceded by a request for official revision."

The Applicant also invokes, in favor of this thesis, the "… arbitral decision issued in case no. 244/2013-T, in which the conclusions contained in the arbitral decision issued in case no. 117/2013-T are quoted, ipsis verbis, and also in the arbitral decision of case 39/2017."

The Applicant did not submit further submissions.

It is important to appreciate and decide.

No. 1 of Article 2 of the LFTA, approved by Decree-Law no. 11/2011, of 20 January, includes in the competence of arbitral tribunals the appreciation of the declaration of illegality of all self-assessment acts, source withholding and payment on account.

Such legal rule is, however, not sufficient to bind the TA to the jurisdiction of CAAD.

In fact, no. 1 of Article 4 of the LFTA makes the binding of the TA to the jurisdiction of arbitral tribunals dependent on an Ordinance of the members of the Government responsible for the areas of Finance and Justice, which must establish, in particular, the type and maximum value of the disputes covered.

It is indisputable that in this way, broad freedom is granted to the Government to bind the TA to the decisions of CAAD.

It should be noted that the wording of this no. 1 of Article 4 of the LFTA is not the original,[1] having been introduced by Article 160 of Law no. 64-A/2011, of 30 December (State Budget for 2012),[2] which simply made the binding of the Tax Authority to the jurisdiction of tribunals constituted under the LFTA dependent on a joint Ordinance of the members of the Government responsible for the areas of Finance and Justice, without any mention of the possibility of the TA limiting adherence based on the type and value of the case, or, as results from the term "in particular" in the new wording, or of other factors of a relevant nature, provided they are defined in a general and abstract manner in the Ordinance of binding.

This possibility, of the TA selecting the cases by which it binds itself to CAAD jurisdiction was thus an innovation of Law no. 64-A/2011.

If the TA has not bound itself to CAAD jurisdiction, the pronouncement of the arbitral tribunal is nothing more than an academic decision: the TA is not legally obliged to comply with it, and may oppose it in the incidental proceeding for execution of judgments on this ground.

To that extent, Article 2 of Ordinance 112-A/2011, of 22 March, by which the Tax Authority bound itself to arbitral jurisdiction, would except from that binding claims relating to the declaration of illegality of self-assessment acts, source withholding and payment on account, that have not been preceded by recourse to the administrative remedy in accordance with Articles 131 to 133 of the Code of Tax Procedure and Process (CPPT).

When the taxpayer, in principle, has not fulfilled the burden of prior claim of the self-assessment, access to CAAD jurisdiction is thus barred.

We may equally understand, as does some CAAD case law, that such burden is satisfied in cases where a request for official revision of self-assessment was improperly submitted within the period of gracious claim of the self-assessment, in which case the tax administration, under the terms of Article 52 of the CPPT, was obliged to proceed with its conversion to the appropriate remedy, or by treating, for these purposes, official revision as equivalent to a claim.

However, we cannot understand this to be the case when a request for official revision has been submitted beyond that period, in which case the "claim" [3] should be considered out of time.

The solution of Article 2 of Ordinance no. 112-A/2011 is not inconsistent: it results from the very nature of the institution of necessary claim and that such institution cannot but encompass the arbitral process, to which those provisions are applicable, under the terms of no. 1 of Article 29 of the LFTA.

In the case of self-assessment, it was thus express will of the Government to limit adherence to cases in which the party to the action had fulfilled, in the terms previously referred to, the burden of prior claim, in accordance with no. 1 of Article 131 of the CPPT.

Under the terms of no. 1 of Article 78 of the General Tax Law (LGT), revision of tax acts by the entity that performed them may be effected at the initiative of the taxpayer, within the period of administrative claim and on the ground of any illegality, or at the initiative of the Tax Authority, within four years of the assessment or at any time if the tax has not yet been paid, on the ground of error attributable to the services.

According to the subsequent no. 2, without prejudice to the legal burdens of claim or review by the taxpayer, error in self-assessment was considered attributable to the services for purposes of no. 1.

However, such no. 2 would be expressly repealed by paragraph h) of no. 1 of Article 215 of Law no. 7-A/2016, of 30 March.[4]

It may be noted that no. 2 of that Article 78 of the LGT had its origin in the administrative interpretation followed regarding the text of Article 139 of the repealed Code of Industrial Contribution (CCI), which was expressed in Circular no. 23/77, of 6 October, of the then General Directorate of Contributions and Taxes (DGCI), under the terms of which errors for more committed by taxpayers who carried out self-assessment, facultative or obligatory, of industrial contribution were susceptible to official annulment in the same terms in which assessment made by the services was.

As Costa Teixeira, Martins Barreiros and Quintino Ferreira would state (in "Code of Industrial Contribution Annotated" Rei dos Livros, Lisbon, 1984, page 849), self-assessment, by the fact of being authored by the taxpayer, was nonetheless a true assessment, and could thus be revised on the ground of any illegality within the period of official revision of tax acts "stricto sensu", then 5 years, to which Article 139 of the CCI referred.

It should be noted that, at the time of issuance of this administrative guidance, there was no mechanism of necessary claim of self-assessment, a condition of judicial review, which would only be introduced much later, in Article 151 of the Code of Tax Procedure (CPT), approved by Article 1 of Decree-Law no. 154/91, of 23 April, under the authorization granted by no. 2 of Article 2 of Law no. 37/90, of 10 August.

This mechanism of necessary prior claim would be reproduced in the aforementioned no. 1 of Article 131 of the CPPT, approved by Article 1 of Decree-Law no. 433/99, of 26 October, with the "nuance" that there is no necessary claim of self-assessment, in the case that the cumulative circumstances are verified that its ground is exclusively a matter of law and that, in the self-assessment, the taxpayer has followed the generic instructions issued by the Tax Authority, a case obviously in which the necessary claim has no utility, since it normally results from it, given the hierarchical nature of the organization of the tax administration, in the confirmation of those instructions.

This prior claim is a true legal burden, understood as the instrument through which the legal order imposes on any legal subject the adoption of certain conduct, under penalty of bearing the legally provided consequences, generally unfavorable.

A burden is thus the conduct which the subject should follow to achieve a certain advantage, frequently translated into the acquisition or conservation of a right, or to avoid given harm, differentiating itself from mere legal obligation because it exists for the protection of the oneself-burdened's own interest and not of another's interest.

That is, the taxpayer who wished to review the self-assessment was obliged to follow the procedure defined in these provisions of the CPT and subsequently of the CPPT: the submission of a prior claim within two years of the submission of the self-assessment statement. If the taxpayer did not do so, the taxpayer could not review the self-assessment.

The conversion or equation of the request for official revision of the self-assessment to a gracious claim thus depends on this having been submitted within the period provided for in no. 1 of Article 131 of the CPPT.

Inherent to the figure of burden is, however, its sanctionary character of the omission by the oneself-burdened of fulfillment of a legal obligation established in its own interest, in this case the submission of a gracious claim within the legal period as a condition of reviewability of the act.

There is no burden when the omission of the pretended oneself-burdened has no legal consequences which, in this case, could only consist in the preclusion of the right of appreciation by the Courts of the self-assessment, in the case the Tax Authority considers it legally performed.

It is a fact that when the claimed act is authored by the Tax Authority, non-fulfillment of the burden of claiming does not prejudice the subsequent revision of the tax act on the ground of error attributable to the services. In those cases, however, the legislator would choose not to establish any mechanism of necessary prior claim, which applies only when the claimed act is self-assessment.

This would be the meaning of the expression "Without prejudice to the legal burdens of claim or review by the taxpayer", which opened no. 2 of Article 78 of the LGT: to reaffirm that the equation of error attributable to the services of error in self-assessment does not prejudice the dependence of its judicial reviewability on prior claim.

The doctrine that judicial reviewability of self-assessment depends on prior claim appears in numerous case law of the Supreme Administrative Court. Among others, may be seen the judgments issued in cases 860/10, on 12/10/11, 825/12, on 13/03/13, 0916/13, on 12/03/14, 1487/13, on 16/11/16, and 466/17, on 08/11/17.

It is in this line that the judgment no. 134/2017-T of 14 July, of CAAD, is inserted.

All these judgments explicitly or implicitly refer to the doctrine of the judgment of the Supreme Administrative Court of 8 November 2007, case 0532/07, reported by Jorge Lopes de Sousa, which inaugurated this line of case law.

To that extent, the rejection of a request for official revision of self-assessment on the ground of error attributable to the services would be reviewable, even when the taxpayer had not submitted the necessary claim to which no. 1 of Article 131 of the CPPT refers and it would no longer be possible, due to being out of time, to convert the request for official revision to necessary claim.

However, it happens, as we have seen, that Article 2 of Ordinance no. 112-A/2011 would expressly except from binding to arbitral jurisdiction claims relating to the declaration of illegality of self-assessment acts, source withholding and payment on account, that have not been preceded by recourse to the administrative remedy in accordance with Articles 131 to 133 of the CPPT.

From the expression "recourse to the administrative remedy in accordance with Articles 131 to 133 of the CPPT" it results that capable of opening the way to arbitral jurisdiction is not every and any means of administrative revision of tax acts, but only the gracious claim, the sole remedy, with exclusion of all others, to which these legal rules refer.

It is not relevant, for purposes of that exception, the nature of the contested act: the self-assessment or the rejection of the request for official revision thereof, on the ground of error attributable to the services.

Prior gracious claim anterior to the request for arbitral pronouncement is always mandatory.

This is not the typification of a new period of prior claim not provided for by law, but the legitimate exercise by the Government of the faculty of, as the superior body of public administration, binding itself to CAAD jurisdiction depending on the disputes covered.

Nothing prevents, moreover, the taxpayer from reviewing the rejection of the request for official revision of the self-assessment, which cannot be converted to gracious claim, in light of this case law, before the Tax Courts.

Recourse to arbitral jurisdiction would be barred only.

Such faculty was not consecrated in the original wording of no. 1 of Article 4 of the LFTA, but would come to be in unequivocal terms by Law no. 64-B/2011.

This is not in conflict with the enabling law, this no. 1 of Article 4 of the LFTA.

This legal rule, in obliging the TA to expressly specify the disputes covered or excluded from arbitral jurisdiction, would not bind it to an en bloc adherence to that jurisdiction.

The fact that the tax arbitral process constitutes an alternative procedural means to the judicial review process does not consequently mean that the scope of these processes is absolutely identical.

Such scope may vary depending on the terms, broader or narrower, of the TA's adherence to the LFTA.

However, it so happens that CAAD, including the arbitrators who form part of this collective, have come to admit, as appears to be defended by some CAAD case law, that access to the arbitral tribunal may also be made by way of review of the request for official revision of assessment and not only by way of review of, but of the rejection of gracious claim, treating, for these purposes, the regime of CAAD as equivalent to that of Tax Courts, it being impossible to forget that this faculty is determined by the provision of Article 131 of the CPPT, in light of what is established in paragraph c) of Article 2 of Ordinance no. 112.A/2011, of 22/03;

Once access to CAAD has been exhausted by way of interposition of prior gracious claim, by the two-year period for its submission having already elapsed, it appears that a new avenue of "claim" (attempt at annulment of assessment) is opened to the taxpayer, which is called "official revision", thereby allowing reopening and doubling the available time period for the purpose.

The tribunal understands that perhaps this was not the intention, not so much of the LFTA, but more of the Ordinance of the TA's adherence to CAAD;

It appears that the door would be left open, if something were going wrong with the gracious claim (any defect of form or timeliness of its submission), for the taxpayer, by resorting in the following two years to official revision, to reacquire access to a Tribunal that would be closed to it.

What does not appear admissible is that recourse to that remedy opens to the taxpayer after the period for submission of gracious claim has elapsed, as already appears in Case no. 244/2013-T (Arbitrators: Jorge Lopes de Sousa, António Nunes dos Reis and Clotilde Celorico Palma)

In this decision, on page 23, the following may be read:

"In this context, allowing the law expressly for taxpayers to opt for gracious claim or official revision of assessment acts and being the request for official revision formalized within the period of gracious claim perfectly equatable to a gracious claim, as was referred to, there can be no reason that can explain that a taxpayer who has opted for official revision of a tax act instead of gracious claim cannot access the arbitral route". (underlined ours)[5][6]

In the case which now concerns us:

For an assessment of 30/5/2013, with a request for official revision submitted on 28/3/2016, consequently submitted beyond the period of claim, one could argue against the equation of revision to claim[7] and consider the exception of material incompetence of CAAD to be well-founded, although that argument, concretely, was not raised by the TA.

However, in the "reply" submitted by the Applicant, various CAAD case law is cited, which we propose to briefly analyze here, always with a view to assessing the reason for its invocation by the Applicant and whether it may effectively be used in its favor.

Beginning with Case no. 117/2013-T (Tribunal: Jorge Lopes de Sousa, Diogo Leite de Campos and Victor Simões), which did not become final, for reasons which we are unaware of.

This is a request for official revision that was filed on 1 September 2010, relating to assessments (of tax) that occurred throughout the year 2007.

It is our finding: the two-year period for submission of gracious claim of self-assessment had already elapsed when the request for official revision was filed.

In this case, neither the parties, when they submitted their arguments, nor the tribunal, when it decided, referred to the fact that the request for official revision was submitted after the period for submission of gracious claim had elapsed.

That decision argues that, because the competence of the tribunal includes appreciation of the illegality of second-level acts, which includes rejection of gracious claim, it also includes rejection of a request for official revision, because it is also a second-level act.

Thus, the question which concerns us in the present proceedings is only indirectly addressed in this decision, since it does not therein establish acceptance of the reviewability of rejection of official revision request, beyond the two years of timeliness of review of rejection of gracious claim, and the reason why the Applicant appeals to this Decision is not understood.

Regarding Case no. 236/2013-T (Tribunal: Manuel Macaísta Malheiros, Jaime Esteves and Henrique Neves)

This is a request for official revision that was filed on 27 December 2012, relating to VAT assessments that occurred throughout the years 2008 and 2009.

It is our conclusion that the two-year period for submission of gracious claim of self-assessment had already elapsed when the request for official revision was filed.

The tribunal understands that it cannot appreciate the declaration of illegality of acts of VAT self-assessment, when preceded by recourse to the administrative remedy, where the request for official revision should be included, because such "… constitutes a restriction of the sphere of freedom of the TA, as a party, to establish the limits of its binding." (See Case no. 51/2012-T).

Having the tribunal decided to find the exception of its incompetence ratione materiae to be well-founded and dismiss the TA from the proceedings, the reason for invocation by the Applicant of this decision as being in its favor is not understood.

Regarding Case no. 9/2017 (Arbitrators: José Pedro Carvalho, José Coutinho Pires and José Neves Brito).

This decision relates to the collection of stamp tax on management commissions by pension fund management companies to their respective Pension Funds.

In the approval of the substantive matter, the tribunal follows the decision issued in Case no. 348/2011-T, and in any of the decisions nothing is referred to regarding the question of material incompetence of the arbitral tribunal to determine the arbitral request relating to any second-level act.

We do not understand the reason why the Applicant brought this decision to bear, ostensibly using it in favor of its thesis.

Regarding Case no. 101/2017-T (Arbitrators: Jorge Lopes de Sousa, Olívio Mota Amador and Ana Maria Rodrigues)

Although a question of material incompetence of the tribunal is raised by the TA, there is no request for official revision, but only gracious claim.

The decision is unfavorable to the Applicant regarding the possibility of opting, outside the period provided for in the law of the Special Regime for Group Taxation (RETGS), that is, it prohibits its retroactive application.

We do not understand the reason why the Applicant brought this decision to bear.

In summary:

It is not without interest that of the four arbitral decisions cited by the Applicant, only one can actually be invoked in its favor, that issued in Case no. 117/2013-T.

Regarding Case no. 244/2013-T, referred to in the text of the "reply" submitted by the Applicant (Arbitrators: Jorge Lopes de Sousa, António Nunes dos Reis and Clotilde Celorico Palma).

This is a request for official revision that was filed on 30 July 2012, relating to VAT assessments that occurred in July and December 2008.

It is our conclusion that the two-year period for submission of gracious claim had already elapsed when the request for official revision was filed.

In this decision, on page 23, as previously quoted above, the following may be read:

"In this context, allowing the law expressly for taxpayers to opt for gracious claim or official revision of assessment acts and being the request for official revision formalized within the period of gracious claim perfectly equatable to a gracious claim, as was referred to, there can be no reason that can explain that a taxpayer who has opted for official revision of a tax act instead of gracious claim cannot access the arbitral route". (See Judgments of the Supreme Administrative Court of 12.07.2006, case no. 402/06 and of 14.11.2007, case no. 565/07) (underlined ours).

This is the first reference we find in the analyzed case law (there may be more!!!) in which the equation between the two procedures is made to depend on the fact that the request for official revision was submitted during the period for submission of gracious claim.

Given the foregoing, it is thus strange that the tribunal has decided to viabilize the submission of the request for arbitral promotion regarding self-assessment acts that having been preceded by the request for official revision (page 25 of the decision), that same request for official revision was submitted after the period for submission of gracious claim had elapsed.

Although subsequently the tribunal bars the Applicant from knowledge of the case, due to the fact that the legality of the self-assessment act was not at issue, which would require the use, instead of review, of administrative action, which, in the meantime, ceased to be "special".

It is thus not understood how our Applicant brings this decision to bear, which appears to be contrary to its interests, if only given the out-of-time nature of the submission of the request for official revision.

In summary: it is not without interest that of the five arbitral decisions cited by the Applicant, only one can actually be invoked in its favor, that issued in Case no. 117/2013-T.

We may conclude that, as a rule, the cases reviewed by CAAD concern requests for official revision submitted between the second and fourth year counting from the assessments, that is, when the route of gracious claim has already been exhausted and one seeks to open again a door that appears already to have been closed.

It should be noted that the discussion only makes sense when the requests for official revision have been filed before 1 January 2016, the date of entry into force of the amendments to Article 78 of the LGT, through the approval of Law no. 7-A/2016, of 30 March (State Budget of 2016), and which henceforth establishes a two-year period for submission of a request for official revision, bringing the two figures even closer together.

Even if one admits that the TA is obliged, outside what appears to have been its will in the context of the Ordinance of Adherence, to accept the legitimacy of CAAD for appreciation of the request for tribunal constitution in case of rejection of a request for official revision, it would make more sense that this only occurred when non-self-assessment acts, payments on account and withholding on final basis were not at issue, but rather additional assessments made by the TA outside the scope of those self-assessments.

It seems more extreme that, admitting that broader reading of the Ordinance of Adherence, such mechanism could be used within a broader period than that of gracious claim itself (since from 2016 the period is the same).

Certainty and legal security, the necessity of rapid consolidation of tax acts, impose respect for a shorter period, avoiding making eternal the conflict with acceptance of so broad a revision period.

All the more so since the situations which it is sought be reviewed by CAAD by this route all result from the recognition by the taxpayer of errors in its own statements.

Naturally, the Applicant in the case now under consideration, although it has referred to various decisions of CAAD, makes no reference to the fact that some of those decisions impose as a prerequisite of the "equation" of official revision to gracious claim, that it be submitted within the period thereof, although it quotes, for example, what appears in Case no. 73/2011-T where that condition is expressly stated (See page 18 of the reply).

This is not about requiring that prior to the request for official revision a gracious claim be interposed.

It is about knowing whether the taxpayer is free to choose between one route or the other (claim/revision), when in most cases the route of request for official revision is used in extremis, that is, when there is no other possible alternative, since the period for gracious claim has already elapsed.

It should be noted that the TA in its response (Article 21) although it does not admit that official revision may replace gracious claim, puts forth "… all the more so when recourse to the same (official revision) is made beyond the period of 2 years provided for in no. 1 of such article (78) (in parentheses ours).

We cannot conclude that the TA intended to say that, even if equation between the two procedures were admitted, such would not be sufficient, due to the request for official revision not having respected the period which the law establishes for presentation of the administrative response, that is the gracious claim, which is 2 years.

In support of its thesis, it cites the decision issued in Case no. 505/2016-T (Raquel Franco), a decision which refers to that issued in Case no. 236/2013-T, improperly collated by the Applicant in this case in its favor.

Concluded this passage through the case law of CAAD, it is important to finalize.

Concluding:

a) No. 1 of Article 2 of the LFTA includes in the competence of arbitral tribunals the appreciation of the declaration of illegality of all self-assessment acts, source withholding and payment on account;

b) Such legal rule is, however, not sufficient to bind the Tax and Customs Authority to the jurisdiction of CAAD;

c) In fact, no. 1 of Article 4 of the LFTA makes the binding of the TA to the jurisdiction of arbitral tribunals dependent on an Ordinance of the members of the Government responsible for the areas of Finance and Justice, which must establish, in particular, the type and maximum value of the disputes covered;

d) It thus grants broad freedom to the Government to bind the TA to the decisions of CAAD;

e) Article 2 of Ordinance no. 112-A/2011 would expressly except from binding to arbitral jurisdiction claims relating to the declaration of illegality of self-assessment acts, source withholding and payment on account that have not been preceded by recourse to the administrative remedy in accordance with Articles 131 to 133 of the CPPT;

f) In case of non-fulfillment of the burden of necessary prior claim, it thus appears, as a rule, that recourse to arbitral jurisdiction is barred;

g) One could understand that from the expression "recourse to the administrative remedy in accordance with Articles 131 to 133 of the CPPT" it would result that capable of opening the way to arbitral jurisdiction is not every and any means of administrative revision of tax acts, but only the gracious claim, the sole remedy, with exclusion of all others, to which these legal rules refer, as is indeed the doctrine of Judgment 236/2013-T of CAAD;

h) However, by force of Article 52 of the CPPT, such burden is considered fulfilled when the request for official revision of self-assessment has been filed within the two-year period provided for in no. 1 of Article 131 of the CPPT, but not thereafter.

Given what is concluded, there is no need to enter into the discussion, as the Respondent wishes, on whether, in the concrete case, legality of any assessment was or was not at issue, but only the fact of knowing whether the applicant could benefit, retroactively, from application of a rule that would allow it to opt for taxation under the tax regime of group taxation.

On the other hand, there is also no need to address the question raised by the Respondent regarding the possible illegitimacy of the Applicant, given the possible existence of necessary joinder of parties.

3. Decision

Whereupon, the arbitrators constituting this tribunal decide:

a). To find well-founded the dilatory exception of material incompetence of the tribunal to determine the request for annulment of the self-assessment relating to IRC for the year 2012, in the amount of € 83.568,67;

b). To determine the dismissal of the Tax Authority from the proceedings, in accordance with the provision of Article 576 of the Code of Civil Procedure.

4. Value of the Case:

The value of the case is fixed at € 3.874.108,60 (three million, eight hundred and seventy-four thousand, one hundred and eight euros and sixty cents), in accordance with Article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of no. 1 of Article 29 of the LFTA and of no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

5. Costs:

The amount of costs is fixed at € 48.960,00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Applicant, since the latter fails in its claim, in accordance with Articles 12, no. 2, and 22, no. 4, both of the LFTA, and Article 4, no. 4, of the aforementioned Regulation.

Notify accordingly

Lisbon, 8 February 2018

The Arbitrators

José Baeta de Queiroz

Cristina Aragão Seia

Jorge Carita

[1] - The binding of the tax administration to the jurisdiction of tribunals constituted under the terms of the present law depends on an ordinance of the members of the Government responsible for the areas of finance and justice. – Prior wording given by Decree-Law no. 10/2011, of 20 January, in force until 31 December 2011)

[2] 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 finance and justice, which establishes, in particular, the type and maximum value of the disputes covered. (Amended by Article 160 of Law no. 64-B/2011, of 30 December, in force from 1 January 2012)

[3] Request for official revision cannot be equated to gracious claim, because submitted out of the available period for the purpose.

[4] Without any effect in the case of the present proceedings.

[5] See Judgments of the Supreme Administrative Court of 12.07.2006, case no. 402/06 and of 14.11.2007, case no. 565/07.

[6] Although the decision has accepted the reviewability of the rejection of the request for official revision, the facts that result from the analysis of this case point to a request for official revision filed beyond the two-year period.

[7] Also due to manifest impossibility of conversion.

Frequently Asked Questions

Automatically Created

What is the scope of CAAD arbitral tribunal jurisdiction over IRC self-assessment revision requests?
CAAD arbitral tribunals have jurisdiction under Article 2(1)(a) of the RJAT (Decree-Law 10/2011) to review the legality of Tax Authority decisions on official revision requests (pedidos de revisão oficiosa) of IRC self-assessments. This jurisdiction extends to orders issued by AT officials rejecting such revision requests, provided the arbitral request is filed within applicable procedural deadlines. However, the AT may raise exceptions of material incompetence, which the tribunal must address before ruling on the merits. The scope covers both substantive tax issues and procedural compliance with RETGS requirements.
How does the RETGS (tax group regime) affect IRC self-assessment review procedures in Portugal?
The RETGS (Special Regime for Group Taxation) consolidates fiscal results of group companies for IRC purposes. Prior to 2015, Portuguese law restricted RETGS to groups with Portuguese resident parent companies. Law 82-C/2014 introduced Article 69-A of CIRC, extending RETGS to Portuguese resident companies held by non-resident EU parents, applicable to taxation periods beginning on or after 1 January 2015. This creates temporal limitations on revision requests for prior years. Self-assessment review procedures must consider whether the group composition met eligibility criteria under the law in force during the relevant taxation period, and whether subsequent legislative changes or CJEU judgments create grounds for revision under EU law primacy principles.
What are the legal deadlines for filing a pedido de revisão oficiosa of IRC self-assessments?
Portuguese tax law provides deadlines for requesting official revision (revisão oficiosa) of IRC self-assessments, generally within the statute of limitations for tax assessments (typically four years from the tax due date, extendable in certain circumstances). The request must be filed with the AT and must specify the grounds for revision. If denied, the taxpayer can challenge the rejection before CAAD within 90 days of notification of the denial decision, pursuant to Article 10 of the RJAT. Timeliness is assessed both for the initial revision request to AT and for the subsequent arbitral request to CAAD, with strict compliance required to preserve jurisdictional competence.
Can a taxpayer challenge an AT decision denying an official review of IRC self-assessment before CAAD?
Yes, taxpayers can challenge AT decisions denying official revision of IRC self-assessments before CAAD under Article 2(1)(a) of the RJAT. The arbitration request must be filed within 90 days of notification of the AT's rejection order. However, the AT may raise preliminary exceptions including material incompetence of the tribunal, lack of taxpayer standing, or untimeliness of the request. The arbitral tribunal must first resolve these procedural objections before addressing substantive tax issues. The challenge must concern a definitive administrative decision on the revision request, not merely preliminary positions or informal communications from tax officials.
What procedural requirements must be met for timely arbitral proceedings under the RJAT framework?
Timely arbitral proceedings under the RJAT framework require: (1) filing the arbitration request within 90 days of notification of the challenged AT decision; (2) payment of initial procedural fees; (3) proper identification of the contested administrative act and legal grounds; (4) compliance with Article 10 et seq. of RJAT regarding request content and supporting documentation; (5) tribunal constitution within prescribed timelines following acceptance by the CAAD President; (6) party notification of arbitrator appointments with opportunity to refuse under Articles 6-7 of the Deontological Code; and (7) final decision issuance within six months of tribunal constitution (extendable). In this case, the AT decision was issued 14-03-2017, arbitration was accepted 03-07-2017, and the tribunal constituted 19-09-2017, with decision due by 08-02-2018, demonstrating procedural compliance timelines.