Summary
Full Decision
TAX ARBITRATION CASE LAW
Process No. 434/2018-T
Decision Date: 2019-08-06
IRC
Amount of Claim: € 346,176.66
Subject Matter: IRC – Request for review of self-assessment – RETGS - Res Judicata – Competence of Arbitral Court – Autonomous taxation; "Business nature" of expenses.
ARBITRAL DECISION
The Arbitrators José Poças Falcão (Chairman), Jorge Carita and Isaque Marcos Ramos (Associate Arbitrators), appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to constitute this Collective Arbitral Court, hereby agree as follows:
I. REPORT
A..., S.A., legal entity no. ..., with registered office in ..., ..., ...-..., ... (hereinafter referred to as "Claimant"), presented, pursuant to paragraph a) of Article 2(1) and Articles 10 et seq. of the Legal Regime for Tax Arbitration regulated by Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter abbreviated as "RJAT") and Articles 1 and 2 of Ordinance No. 112-A/2011, of 22 March, a request for an arbitral ruling on the legality of the Order of the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit ("UGC"), dated 27 December 2017, which dismissed the Claimant's request for review of the self-assessment tax act for Corporate Income Tax ("IRC") relating to the 2013 tax year.
The Respondent is the Tax and Customs Authority (AT).
The application for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 04/09/2018.
The Claimant, in the application for constitution of the arbitral tribunal, appointed Isaque Marcos Ramos as arbitrator, and the Respondent appointed Jorge Carita, both of whom communicated their acceptance of the position within the applicable timeframe. The arbitrators appointed by the parties requested the Deontological Council to appoint the third arbitrator, who would assume the functions of Chairman, and José Poças Falcão was appointed to the position, accepting it, thus constituting this collective arbitral court.
On 26/10/2018, the Claimant filed a request for recusal of the arbitrator appointed by the Respondent, which was declared unfounded by order of the Honorable President of the Deontological Council of CAAD dated 9 November 2018.
On 19/11/2018, the parties were notified of the appointed arbitrators and did not, at this stage, express any intention to refuse the appointments, in accordance with the combined provisions of Article 11(1), paragraphs a) and b) of RJAT and Articles 6 and 7 of CAAD's Deontological Code.
Thus, in accordance with the provisions of Article 11(1), paragraph c) of RJAT, the arbitral tribunal was constituted on 10/12/2018.
Duly notified, the Tax and Customs Authority submitted a response in which it contested the admissibility of the claim, pleading by way of exception and substantive objection.
By order dated 22/02/2019, the Arbitral Tribunal dispensed with the meeting referred to in Article 18 of RJAT, granted the parties a period of 20 days to submit their arguments, and set the deadline for the issuance of the arbitral decision.
By order dated 09/03/2019, the Arbitral Tribunal admitted the use, in the present proceedings, of witness evidence produced in process No. 210/2017-T of CAAD.
By order dated 14/05/2019, the deadline for issuance of the final decision was extended as it had not been possible for the Court to complete and approve it by that date.
By order dated 31/05/2019, said deadline was extended again and 15/07/2019 was set as the expected deadline for the issuance and notification of the final arbitral award.
In the course of issuing the decision, it was found that the recording of the witness evidence produced in process No. 210/2017-T of CAAD suffered from deficiencies, with only one witness's testimony being intelligible.
Given the foregoing, the Court issued an order on 11/06/2019 noting that, as the parties had waived the audio recording of one of the witnesses then heard, only the recorded testimony would be considered as evidence in the present proceedings.
II. POSITIONS OF THE PARTIES
A. Position of the Claimant
The Claimant seeks to have declared the illegality of the Order of the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit, dated 27 December 2017, which dismissed the Claimant's request for review of the self-assessment tax act for IRC relating to the 2013 tax year, and consequently, the annulment of this tax act, alleging in summary as follows:
a. As a preliminary issue, it notes that, although the same underlying issue in the present proceedings has already been subject to appraisal by CAAD within process No. 210/2017-T, it considers that the requirements provided for in Article 24(3) of RJAT are met in this case, whereby: "When an arbitral decision terminates the proceedings without ruling on the merits of the claim due to facts not attributable to the taxpayer, the periods for filing complaints, objections, reviews, promotion of official reviews, review of the taxable base or for raising new arbitral rulings on the acts subject to the arbitral claim shall be calculated from the date of notification of the arbitral decision";
b. The Claimant understands that the application of this provision depends on the fulfillment of two requirements, namely: (i) that the arbitral decision terminates the proceedings without ruling on the merits, and (ii) that this failure to rule on the merits is not attributable to the taxpayer;
c. Additionally, the Claimant understands that such requirements are met in the case at hand since:
(i) The Arbitral Tribunal did not issue a decision on the merits in those proceedings, as it found the Respondent's exception of material incompetence of the arbitral tribunal to be well-founded, which led to the dismissal of the instance;
(ii) in a case with the contours of the present one, one cannot even speak of negligence on the part of the taxpayer in configuring the procedural requirements.
d. Invoking arbitral case law which it considers favorable to its claim, it considers that Article 24(3) of RJAT regulates "the effects of the decision that does not rule on the merits due to facts not attributable to the taxpayer, establishing that, in such cases, the rights of administrative and contentious objection are revived, with complete elimination of the time elapsed", furthermore considering that it should be concluded that "the correct interpretation of Article 24(3) is that, when the failure to rule on the merits is not attributable to the taxpayer, the latter shall have all the means of administrative and contentious objection indicated therein with the initial period renewed";
e. It further considers that, in the case at hand, the failure to rule on the merits cannot be attributed to it, since we are not dealing with an error in the interpretation of settled or clear provisions of RJAT or Ordinance No. 112-A/2011, but rather with a formal decision based on a procedural obstacle whose existence is controversial among the courts themselves;
f. It concludes by noting that, in the face of a procedural issue on which different interpretive lines exist among the courts and legal scholarship, the attribution to the taxpayer of the failure to rule on the merits may be excluded if the latter relied on one of these positions to submit the case to the Arbitral Courts;
g. In this sense, it considers that the present request for arbitral ruling has full legal basis in Article 24(3) of RJAT;
h. Also as a preliminary matter, it understands that the Arbitral Courts functioning under the aegis of CAAD are competent to appraise requests concerning decisions on requests for official review made beyond the period for filing amicable complaints, invoking various legal scholarship and case law that it considers favorable to its thesis;
i. With regard to the merits, the Claimant states that it is subject to the General Regime for Group Company Taxation (RETGS), being the parent company, and therefore, upon it falls, among other things, the responsibility for payment of IRC;
j. On 30/05/2014, it submitted its income tax return Form 22 for IRC for the 2013 tax year;
k. It states that the Claimant incurred expenses in the amount of € 2,364,187.77, which were subject to autonomous taxation, resulting in a tax payable in the amount of € 436,353.76, which, comprising expenses of a business nature, essential and indispensable for obtaining income, suffers from an excess of quantification;
l. Because it understood that said self-assessment was not correct, it filed the respective request for official review;
m. The Claimant's request was dismissed by AT on the basis of three arguments:
(i) on one hand, that the Claimant, at no time denied that the representation expenses in question do not relate to charges with third parties; on the contrary, some of the initiatives presented are precisely directed at third parties, and therefore cannot be excluded from taxation;
(ii) on the other hand, as regards charges relating to light passenger vehicles and travel allowances, that the condition of whether or not these charges are linked to the company's activity is only relevant for determining their deductibility, or otherwise, for tax purposes, insofar as, in AT's opinion, we are dealing with a rule that autonomously taxes both deductible and non-deductible charges; and
(iii) that autonomous taxation is a taxation mechanism independent of IRC that applies to expenses and not to income.
n. The Claimant understands that the legislator, in Article 88 of the IRC Code, merely adopted a presumption of "non-business nature", that is, that expenses subject to autonomous taxation may be regarded as charges of a presumably personal and not professional or business nature, and that this presumption may be rebutted given that it is a rule of incidence, under penalty of violation of the principle of equality and the principle of taxation based on actual income;
o. Regarding representation expenses, the Claimant states that the same took place for purposes of brand visibility at two promotional events, with the purpose of increasing its sales, and that given their business nature, they should not be considered for purposes of autonomous taxation and should, for that reason, be annulled as illegal, citing various arbitral awards as support for its position;
p. Regarding charges relating to light passenger vehicles, the Claimant mentions that, given its corporate purpose, the importance of vehicle charges for obtaining income is manifest, which are used by employees of the Claimant's group with the objective of promoting, presenting and marketing the goods that generate its taxable income, being the same "working tools" for them, and therefore it is manifest that, being business expenses, they should not be burdened by autonomous taxation. However, and should it be understood otherwise and that we are dealing with a partially personal nature, the pro rata method should be used, so that amounts associated with the business nature are removed, and consequently, amounts associated with the business use are not subject to autonomous taxation, and the remainder should be annulled as illegal;
q. Regarding charges for travel allowances and expenses for employees' own vehicles in service to the employer, the Claimant states that these expenses are subject to autonomous taxation because it is presumed they may have a non-business nature. However, being a rebuttable presumption, in the face of proof of their business nature, they should not be subject to autonomous taxation;
r. In the concrete case, having in mind that expenses for travel allowances and for expenses in employees' own vehicles assume a role and relevance that are fundamentally similar to representation expenses, since they are not paid in order to compensate the employee for the displacement made in service of the company, the tax relating to autonomous taxation levied on these should also be annulled;
s. It concludes by seeking the condemnation of AT to reimburse the amounts borne by the Claimant as autonomous taxation, in the amount of € 346,176.66, or € 320,932.47, by application of the pro rata method relating to business use, and the payment of compensatory interest, pursuant to Article 43 of LGT.
B. Position of the Respondent
For its part, the Respondent argued, in summary:
a. By way of exception, it states that the issue raised for appraisal by the Arbitral Tribunal in the present proceedings was already subject to analysis in process No. 210/2017-T, which was conducted at CAAD;
b. In this process, the Court found the exception of material incompetence of CAAD to be well-founded, and, as the Claimant did not judicially challenge the arbitral award before the superior courts, it expressly accepted the consequences of the enforcement of the judgment, allowing, in particular, the instance to be terminated;
c. Article 24(3) of RJAT should be read in light of the ratio pervading Article 18 of CPPT, especially since courts constituted under the aegis of the Arbitration Centre must apply the law as constituted and be guided by the procedural tax guidelines;
d. In the case at hand, the arbitral tribunal did not suddenly become competent to decide on cases arising from official reviews not preceded by amicable complaints presented following self-assessment of a given tax year in connection with IRC;
e. Taxpayers, once judicial verification and decision of absolute incompetence of the tribunal ratione materiae has been made, have two options: (i) either they appeal the decision to the superior courts; (ii) or, within 14 days of notification of the decision declaring it, they request the transfer of the case to the court competent to decide the matter in dispute. Should they fail to do so, the decision becomes final and the instance terminates, making it no longer possible to reopen it, much less through the filing of a new lawsuit;
f. If it were understood that RJAT differs, in this matter, from the stipulation in CPPT, one could assert that those with greater financial resources to resort to tax arbitration would end up being benefited by a more favorable procedural regime than the one in force for objections, which would ultimately constitute a violation of the constitutional principle of equality, in its corollary of the right to access to justice;
g. Thus, by not judicially challenging the arbitral award before the superior courts, the Claimant expressly accepted the consequences of the enforcement of the judgment, which should have materialized in the filing of a new suit, but this time before the court competent for that purpose, that is, before the territorially competent Administrative and Tax Court;
h. Such fact constitutes a dilatory exception that results in the dismissal of the Respondent from the present instance, in accordance with the provisions of Article 577, paragraph a) and 278(1), paragraph a) of CPC.
i. By way of exception, it further states that the arbitral tribunal is materially incompetent to rule on the request for annulment of the order dismissing the Claimant's request for official review of the 2013 IRC self-assessment, particularly because this was not preceded by the amicable complaint provided for in Article 131 of CPPT;
j. By substantive objection, it states that the conclusion it draws from reading the statement of claim submitted by the Claimant is that the same concerns the correctness or otherwise of Article 88(3), 7 and 9 of the IRC Code, and not the literal element of the rule;
k. Indeed, it states that the Respondent "[i]n the case of motor vehicles (…) it is provided that all costs incurred are taxed at the rate of 10%, meaning that even if accepted as indispensable for the formation of taxable profit, said expenses do not prevent, by force of the rule, the corresponding taxation under autonomous taxation. And the same applies to the content of Article 88(7) and 9 of CIRC, providing that even though both are deductible for purposes of Article 23 of IRC – and therefore considered necessary for the exclusive obtaining of the company's income – the costs must be taxed under autonomous taxation";
l. The Respondent understands that, from reading paragraphs 3, 7 and 9 of Article 88 of the IRC Code, it follows unequivocally that the legislator did not intend to exclude charges relating to vehicles from subjection to autonomous taxation, except in situations clearly evidenced in the exception provided for in the final part of paragraph 3 and paragraph 6 of said Article 88;
m. The Respondent further states that "[t]he persistent emphasis that the Claimant places on 1) the special nature of its commercial activity, 2) the necessity of contracting costs with publicity purposes for the brand, and 3) the context of the use of its vehicles are not arguments minimally apt to override what the tax law expressly and clearly establishes: subjection to autonomous taxation. With these arguments the Claimant seeks surreptitiously to open recourse to equity, to justify a justice in the specific case, in the face of the denial given to it by the principle of legality, by the absence of legal support" – which is forbidden to it, since tax law does not permit equity to function as a basis for the correction of inadequate law, and therefore the allegations of the Claimant should be dismissed;
n. As to the presumption of "business nature", the Respondent contends that the Claimant produces no concrete and unequivocal material evidence that the carrying out of the activity in which it operates, in the motor vehicle sector, the expenses that were subject to autonomous taxation constitute true expenses with publicity, exclusively devoted to the company's activity, and therefore "[(…) even if it were admitted – which is not admitted – the possibility of rebutting the (non-existent) "presumption" contained in Article 88(3), 7 and 9 of CIRC, through proof of the business nature of the expenses", the truth is that the Claimant fails to provide any evidence that the vehicles in question solely contribute to the maintenance of the commercial activity;
o. The Respondent further mentions that the legislator did not expressly or implicitly establish the possibility of avoiding autonomous taxation of vehicle charges by demonstrating the exclusive allocation of vehicles to the activity carried out, but rather, as from 2011, in accordance with the provision in the final part of Article 88(3) of the IRC Code, this came to depend on the acquisition and use of vehicles powered exclusively by electric energy;
p. Concluding to the effect that "the Claimant's position has no support either in the letter of the law or in the ratio of paragraphs 3 to 6 of Article 88 of CIRC, and therefore the Respondent could not proceed with a corrective interpretation of the law which it is bound to apply, and the suggestion of applying a pro rata method to Article 88 of CIRC – which is a rule of incidence – has no acceptance in IRC, since there is no margin for presumptions and exemption from autonomous taxation as regards expenses incurred exclusively for business purposes. i.e., the taxable base is that defined in the objective incidence rule, Article 88 of CIRC, and refers to expenses that are deductible and non-deductible for tax purposes";
q. Thus, the Respondent concludes by contending that "the tax acts being challenged merit no censure and should remain valid in the legal order";
III. CASE MANAGEMENT
The Tribunal was regularly constituted, the request for arbitral ruling is timely, the parties have legal standing and capacity, have legitimacy and are duly represented (see Articles 4 and 10(2) of RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).
The joinder of claims is admissible since we are dealing with the same factual circumstances and the interpretation and application of the same principles or rules of law (see Article 3(1) of RJAT).
The proceedings are not affected by any nullities.
IV. REASONING
A. Regarding the Facts
§.1 Proven Facts
For purposes of the present proceedings, the following facts are considered proven:
a. The Claimant is a commercial company whose principal activity consists, among others, of motor vehicle trade – see agreement of the parties;
b. In 2013, the Claimant was the parent company of a Group of Companies subject to RETGS, composed of the following commercial companies:
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B..., S.A., taxpayer no. ...;
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C..., S.A., previously designated D..., S.A., taxpayer no. ...;
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E..., Unipessoal, Lda., previously designated F..., Unipessoal, Lda., taxpayer no. ...;
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G..., Unipessoal, Lda., taxpayer no. ...;
c. On 30/05/2014, the Claimant submitted Form 22 IRC return for the 2013 tax year declaring, as the algebraic sum of the group's tax results, the amount of € 20,593,482.63 and calculating, in particular, autonomous taxation of € 2,364,187.77, resulting in tax payable of € 436,353.72 – see doc. no. 2 attached to the request for constitution of arbitral tribunal;
d. In this 2013 taxation period, expenses totaling € 2,364,187.77 were incurred subject to autonomous taxation, as follows:
(i) Claimant – € 1,507,177.46;
(ii) B..., S.A. – € 621,083.35;
(iii) F..., Unipessoal, Lda. – € 235,926.96 – see table 11 of doc. no. 2 attached to the request for constitution of arbitral tribunal;
e. Such expenses corresponded to a total amount (of the Group) of autonomous taxation of € 436,353.76 – see field 365 of the Form 22 IRC Declaration of the parent company attached to the request for constitution of arbitral tribunal;
f. Considering that, in the 2013 tax year, it had calculated and paid an amount of autonomous taxation higher than what, in its opinion, appeared to be due, it requested, on 09/08/2016 the review of the IRC self-assessment for the 2013 tax year – see PAT;
g. Said administrative procedure for review of the tax act was conducted under no. ...2016... – see PAT;
h. In October 2016, the Claimant was notified, via Office No. ..., of 30/09/2016, of the Management and Tax Assistance Division of the Large Taxpayers Unit, on one hand, of the draft decision on the request for review of the tax act indicated in g) above in the sense of its preliminary rejection, as untimely, and simultaneously, of information no. ...-AIR1/2016 supporting said draft – see PAT;
i. On 19/10/2016, the Claimant, in response to the draft decision referred to in f) above, exercised its right to prior hearing arguing for the timeliness of the request for review of the tax act – see PAT;
j. On 30 November 2016 and via Office No. ..., of 16/11/2016, of the Management and Tax Assistance Division of the Large Taxpayers Unit, the Claimant was notified of the draft decision on the request for review of the tax act in which, despite being considered timely, it proposed dismissal of the same on grounds of merit – see doc. no. 3 attached to the request for constitution of the tribunal and PAT;
k. On 28/12/2016, via Office No. ..., dated 27/12/2016, the Claimant was notified of the order of the Head of the Management and Tax Assistance Division of the Large Taxpayers Unit, issued from information no. ...-AIR1/2016, dismissing the request for review of the tax act under review in the present proceedings – see doc. no. 1 attached with the arbitral petition and PAT;
l. The Claimant follows a communication and marketing strategy previously defined by the parent company of the economic group in which the Claimant operates – see witness evidence;
m. With the organization of events and use of vehicles associated with the charges discussed here, the Claimant intends to create what in marketing is designated as "brand awareness" – see witness evidence;
n. Simultaneously, the intention is to make the brands visible in the market and enhance contact between the brands and the public so as to attract customers – see witness evidence;
o. The investments made by the Claimant at this level are monitored accounting-wise through "orders" so as to ensure that their respective budgets are met – see docs. nos. 12 and 13 attached to the request for constitution of the Arbitral Tribunal and witness evidence;
p. The holding of the events and use of vehicles aforementioned in m. are intended to increase customers and sales – see witness evidence;
q. The company F..., Unipessoal, Lda., a subsidiary, held, during the year 2013, two significant promotional events with the purpose of increasing its sales:
i. the presentation of the new model of brand A... (see doc. no. 8 attached with the request for constitution of the Arbitral Tribunal); and
ii. the all-terrain "..." ride (see doc. no. 9 attached with the request for constitution of the Arbitral Tribunal).
r. In the same fiscal year, the Claimant held a series of other events intended to promote the brand – see docs. nos. 15 to 22 and 31 and 32 attached with the request for constitution of the Arbitral Tribunal.
s. The Claimant spent the amount of € 353,428.38 on training (national and international) – see Docs. 23 to 30 attached).
t. These expenses are essentially related to airplane travel for training, accommodation and the training itself for non-employees (e.g. dealerships) – see Docs. 23 to 30 attached).
u. Such expenses are properly accounted for in accounts #611410, #611510, #611213, as per the detail of these accounts and trial balance (see docs. nos. 14 and 33 attached with the request for constitution of Arbitral Tribunal).
v. The Group of which the Claimant is parent company further reimbursed food and accommodation expenses incurred by employees on work-related trips outside the normal workplace and paid amounts relating to the use, by their respective employees, of their personal vehicle in service to the company – see doc. no. 40 attached with the request for constitution of Arbitral Tribunal.
w. The amount of these expenses totaled € 15,592.09 – see doc. no. 40 attached with the request for constitution of Arbitral Tribunal.
x. The reimbursable expenses submitted by employees comply with an internal regulation and are subject to review by the Claimant's Finance Department which carries out screening regarding: (i) the ceiling and (ii) eligible expenses – see witness evidence and doc. no. 41 attached with the request for constitution of Arbitral Tribunal;
y. The Claimant incurred autonomous taxation relating to charges for vehicles assigned to employees in the amount of € 298,494.71 (see doc. no. 2 attached with the request for constitution of Arbitral Tribunal);
z. The aforementioned amount applied to charges (e.g. fuel, insurance and tolls) in the value of € 1,636,679.07 – see doc. no. 34 attached with request for constitution of Tribunal);
aa. The employees do not have a vehicle specifically assigned to them personally but use the one that, at each moment, the Claimant decides to assign them for commercial policy or marketing reasons – see witness evidence;
bb. These employees use the vehicles primarily for professional purposes – see witness evidence;
cc. During periods when they are not in service to the Claimant, these employees may also use the vehicle for personal purposes – see witness evidence;
dd. On 27/03/2017, the Claimant filed, with CAAD, a request for constitution of an Arbitral Tribunal having as its immediate subject the aforementioned order in paragraph k) which was conducted under process No. 210/2017-T – see doc. no. 1 attached with the request for constitution of arbitral tribunal and PAT;
ee. On 27/11/2017, within the scope of said process, the meeting referred to in Article 18 of RJAT took place, at which the witnesses listed by the Claimant were examined – see minutes of witness examination attached to the file;
ff. By award dated 02 May 2018, that Arbitral Tribunal decided to find the dilatory exception of material incompetence of the Arbitral Tribunal to rule on the request for revocation of the dismissal of the request for official review, which aimed at the self-assessment relating to IRC for the 2013 tax year – see award;
gg. The present request for constitution of an Arbitral Tribunal was presented and accepted on 04/09/2018 – see consultation to CAAD's case management system;
hh. The facts, claim and cause of action in the present proceedings are identical to those underlying process No. 210/2017-T;
§.2 Unproven Facts
It was not proven that the Claimant has any internal control mechanism that would allow it to monitor and quantify the use for personal purposes, by employees, of vehicles assigned to them by the Claimant.
§.3 Reasoning for the Proven and Unproven Facts
Regarding factual matters, the Court need not rule on everything alleged by the parties; rather, it has a duty to select the facts that matter for the decision and distinguish proven facts from unproven ones [see Article 123(2) of CPPT and Article 607(3) of CPC, applicable ex vi Article 29(1), paragraphs a) and e), of RJAT].
In this manner, the facts pertinent to the adjudication of the case are chosen and delineated according to their legal relevance, which is determined in light of the various plausible solutions to the question(s) of law [see previous Article 511(1) of CPC, corresponding to current Article 596, applicable ex vi Article 29(1), paragraph e), of RJAT].
Thus, taking into account the positions adopted by the parties, in light of Article 110(7) of CPPT, the documentary evidence, the PAT attached to the file, and the witness evidence produced, the facts listed above were considered proven, with relevance to the decision.
Specifically, the facts given in paragraphs l) to p), bb), cc) and dd) are based on the testimony given by witness H..., consistent with the available documentary evidence, and even with facts that may be deemed notorious (such as the facts deemed proven in points n) and p).
Allegations that consist strictly of conclusive statements, insusceptible of proof, and whose truthfulness must be assessed in relation to the specific factual matter consolidated above were not deemed proven or unproven.
B. REGARDING LAW
Preliminary Issues
1. Dilatory Exception of Res Judicata
Applicable Legal Regime
The Respondent raises the exception of res judicata, considering that the same issue raised for appraisal by this Tribunal was already decided within process 210/2017-T, which, having become final, does not permit new appraisal of the claim. Let us examine.
Relevant to the present proceedings are Article 13(4) and Article 24(3) of RJAT. Pursuant to Article 13(4) of RJAT:
"4 – The filing of requests for constitution of arbitral tribunals precludes the right, on the same grounds, to file complaints, objections, request reviews, including of the taxable matter, or to promote official reviews, or to raise arbitral rulings on the acts subject to those requests or on the consequent acts of assessment, except when the arbitral procedure terminates before the date of constitution of the arbitral tribunal or the arbitral process terminates without a ruling on the merits of the claim."
On the other hand, pursuant to Article 24(3) of the same legal compendium:
"3 – When an arbitral decision terminates the proceedings without ruling on the merits of the claim due to facts not attributable to the taxpayer, the periods for filing complaints, objections, reviews, promotion of official reviews, review of the taxable matter or for raising new arbitral rulings on the acts subject to the arbitral claim filed are calculated from the date of notification of the arbitral decision."
It is clear from the law that there is the possibility of filing a new arbitral ruling "on the acts which were the subject" of the first arbitral claim whenever the latter does not rule on the merits of the claim. Denying this right would be based on an interpretation that abrogates the law, which, as is known, is prohibited in our Legal System (Article 8(2) of CC, Article 203 of CRP and preamble of RJAT whereby arbitrators judge according to the law as constituted, and recourse to equity is forbidden).
Without prejudice to the foregoing, it also seems clear to us that, contrary to what the Respondent contends, the doctrine of Article 18 of CPPT shall not be applied in the case at hand.
As to the first conclusion, see, for example, Jorge Lopes de Sousa, for whom "in cases where, in tax proceedings regulated by CPPT, the declaration of incompetence results in the competence of courts not belonging to the administrative and tax jurisdiction, the regime resulting, currently, from Article 14(2) of CPTA shall also be applicable" – see Jorge Lopes de Sousa, Code of Tax Procedure and Tax Process Annotated and Commented, Vol. I, 6th Edition, Áreas Editora, 2011, page 256.
What if the taxpayer does not request transfer to the competent court?
"If it is a case in which the competent court does not belong to the administrative jurisdiction and where the interested party has chosen not to request the transfer of the case, the same benefits from the regime of Article 89(2) [87(8) in the version introduced by DL No. 214-G/2015, of 02/10] (…) which, in the event of filing of a new action on the same object as one in which dismissal of the instance occurs, (namely because a declaration of absolute incompetence of the court was found to be well-founded – see Article 288(1), paragraph a)), assures the maintenance of effects derived from the filing of the first case (…)" – see Mário Aroso de Almeida, Carlos Alberto Fernandes Cadilha, Commentary on the Code of Process in Administrative Courts, Almedina, Coimbra, 2005, page 104.
The same regime, it should be noted, results from civil process and, in particular, from Article 279 of CPC, whereby:
"1 - Dismissal of the instance does not preclude the filing of another action on the same object.
2 - Without prejudice to the provisions of civil law regarding prescription and expiration of rights, the civil effects derived from the filing of the first case and the service of process on the defendant are maintained, where possible, if the new action is filed or the defendant is served within 30 days of the finality of the sentence dismissing the instance.
3 - If the defendant was dismissed on any of the grounds comprised in paragraph e) of paragraph 1 of the previous article, in the new action that runs between the same parties the evidence produced in the first process may be used and the decisions issued there have value."
As Alberto dos Reis teaches, referring to the effects of dismissal of the instance:
"The instance terminates; but this termination does not preclude the filing of another action on the same object. That is, if the plaintiff files another identical action, the defendant cannot invoke the exception of res judicata; and cannot invoke it precisely because, in the previous action, the court did not reach a ruling on the merits of the claim, as it refrained from knowing the claim" – see Alberto dos Reis, Code of Civil Process Annotated, Vol. I, 3rd Edition, 1948, Coimbra, 2004, page 365.
In case law, for example, the Award of the Supreme Court of Justice dated 12/12/2017 and issued within process 4420/15.8T8VCT.G1.S2 (Ferreira Pinto).
All things considered, the legislative option set forth in Article 24(3) of RJAT does not offend. It is, as has been seen, identical to that provided for in CPC and CPTA adapted to the specificities of RJAT and translates itself into the possibility of filing a new action, having as its object the same tax acts in case of dismissal of the instance due to material incompetence of the Court where the first action was filed.
And do not say, to avoid this conclusion, as the Respondent does, that "it is inconceivable that an Administrative and Tax Court declare itself incompetent and, as a consequence, the taxpayer, who did not appeal and also did not request within 14 days the transfer of the judicial case to the competent Court, manage to raise the same issue of merit in the same Court!" (paragraph 26 of the Response).
First of all, because, as has been demonstrated, Article 18 of CPPT is not applicable here and then, because it is not a matter of the "same Court". This is where, with due respect and better judgment, the Respondent's error lies. For arbitral courts, even when institutionalized as occurs with those organized within CAAD, do not follow the same logic and organization as State Courts. As referred to in the Award of the Constitutional Court No. 230/86 dated 08/07/1986 and issued within process 178/84 (Martins da Fonseca), arbitral tribunals, being true courts, in certain respects, "are not courts like others".
As stated in that same decision, voluntary arbitral courts, although they are constituted to exercise the judicial function, in sum, to perform judicial acts, are bodies "formed on a case-by-case basis".
It follows from the foregoing that each Arbitral Tribunal constituted under the organization of CAAD is an autonomous tribunal, with legal and functional independence from all others, and therefore when taxpayers make use of the prerogative granted by Article 24(3) of RJAT, they are not submitting the same issue to the appraisal of the "same tribunal" – which dissolves with the issuance of the arbitral decision pursuant to Article 23 of RJAT – but rather another, autonomous of the first, whose only similarity concerns the fact that both are organized under the aegis of the same institution and must obey the same rules (which does not mean they cannot make different interpretations thereof).
Finally, it should be noted that the regime under analysis here is neither more nor less advantageous than the regime provided for actions of objection (understood here latu sensu) filed in Administrative and Tax Courts.
As has been seen, faced with a decision dismissing the instance due to incompetence ratione materiae, taxpayers also have there the possibility of filing the same action in another State Court which may even, note, contradict the decision of the first that was considered incompetent, giving rise to a conflict of negative competence.
Allied to this fact is the circumstance that these taxpayers, unlike those who resort to CAAD, benefit from a much broader regime of Appeal than the latter.
It suffices to say that, in the case that concerns us in particular, the Claimant could not appeal the decision of material incompetence issued within process 210/2017-T to the Superior Courts pursuant to Article 25 of RJAT and, with no verification of any of the grounds set forth in Article 28 of that same RJAT, the decision would be unappealable, thus not existing a double degree of jurisdiction.
Concept of "Facts Not Attributable to the Taxpayer"
Having reached this point, and being clear, in our view, the possibility of raising a new arbitral ruling, it must be confirmed that the legally provided requirements for such are, in the case at hand, met. There are three such requirements:
a) That the first decision has terminated the proceedings without ruling on the merits of the claim;
b) That such has occurred due to facts not attributable to the taxpayer; and
c) That the new arbitral ruling has as its object the same tax acts that were the object of the first arbitral claim filed.
There is no doubt about the verification, in the case at hand, of the requirements provided in paragraphs a) and c) above. The vexata questio shall be, therefore, to decide whether, in the case that concerns us, the fact that the Arbitral Tribunal issued a mere formal decision is, or is not, due to "facts not attributable to the taxpayer".
A brief survey of the subsidiary legislation, and following the order provided in Article 29(1) of RJAT, permits the conclusion that the concept of "facts attributable" to the taxpayer or Plaintiff is found in regulatory provision in various legal compendiums.
Merely by way of example, in LGT, relevant are in particular paragraphs 1 and 2 of Article 35 (compensatory interest).
Pursuant to this provision:
-
Compensatory interest is due when, due to facts attributable to the taxpayer, the assessment of part or all of the tax due or the payment of tax payable in advance is delayed, or tax withheld or to be withheld in the context of tax substitution.
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Compensatory interest is also due when the taxpayer, due to facts attributable to it, has received a refund exceeding the amount due.
With respect to this rule, Legal Scholarship understands that "the conduct of the taxpayer must be censurable as grounds of intent or negligence", and it is also settled in both Legal Scholarship and Case Law that "there will be no responsibility for compensatory interest when the taxpayer has acted in good faith and the error is excusable, due to his position being reasonable" – see Diogo Leite de Campos, Benjamim Silva Rodrigues, Jorge Lopes de Sousa, General Tax Law Annotated and Commented, Encontro da Escrita, 4th Edition, 2012, page 284. Jorge Lopes de Sousa, "Interest in Tax Relations" in VV. (Lisbon, 1999) Fundamental Problems of Tax Law, page 148 and José Maria Fernandes Pires, Gonçalo Bulcão, José Ramos Vidal, Maria João Menezes, General Tax Law Commented and Annotated, Almedina, 2015, page 299.
This understanding is, moreover, shared by AT which, in Circular 107/2009 Series II, issued in process 4.0/09 DSRNRPC, of the Directorate-General for Customs and Consumer Taxes, wrote:
"2nd - A mere objective connection between the delay and the taxpayer's conduct will not suffice. The cumulative verification of fault in the conduct of the taxpayer, by way of intent or negligence, shall also be necessary, and it is in this sense that the "attribution" provided for in Article 35(1) of LGT should be understood.
Consequently, there will be no responsibility for compensatory interest when, although the delay in assessment is caused by the taxpayer's conduct and their position is erroneous, they have acted in good faith and the error is excusable, due to their position being reasonable" – emphasis added.
In Case Law, for example, the Award of the Central Administrative Court of the North, dated 11/02/2016 and issued within process 00232/06.8BEPN (Ana Patrocínio), where it was written:
"In truth, it constitutes settled jurisprudential understanding (In this regard, reference may be made to the following awards of the STA: of 8-7-92, issued in appeal No. 12147; of 28-6-95, issued in appeal No. 19014; of 20-3-96, issued in appeal No. 20042; of 2-10-96, issued in appeal No. 20605; of 18-2-98, issued in appeal No. 22325; of 3-10-2001, issued in appeal No. 25034; of 16-02-2005, issued in appeal No. 1006/04; of 12-07-2005 issued in appeal No. 12649 and of 19-11-2008, issued in appeal No. 325/08.) that responsibility for compensatory interest has the nature of civil reparation and that, therefore, it depends on the nexus of adequate causality between the delay in assessment and the taxpayer's conduct and the ability to formulate a judgment censuring their conduct (by way of intent or negligence). That is, it depends on the existence of fault, which consists in the censurable omission of a duty of diligence, to be assessed in the abstract (according to the diligence of a reasonable person) – see on the matter the Counselor Judge Jorge Lopes de Sousa in "Interest in Tax Relations", Fundamental Problems of Tax Law, page 145, as well as Professor Casalta Nabais in the opinion attached to the present proceedings)" – emphasis added.
In the same sense, for example, the Award of the Supreme Court dated 16/12/2010 and issued within process 0587/10 (Dulce Neto), where it was written:
"(…) That is, it depends on the existence of fault, which consists in the censurable omission of a duty of diligence, to be assessed in the abstract (…) and which, therefore, must be assessed according to the general duties of diligence and ability of a reasonable person (…)".
And further the Award of the Plenary of the Supreme Administrative Court dated 22/01/2014, and issued within process No. 01490/13 (Casimiro Gonçalves), where it was decided:
"And from this it follows, first of all, that in order for the taxpayer to owe compensatory interest, adequate nexus of causality is required between his conduct and the failure to receive timely payment, and the conduct of the taxpayer must be censurable by way of intent or negligence, and in any case, an inquiry must be made into whether or not fault is excluded in the concrete situation, and whether the excusability or reasonableness, in terms of a normal or average taxpayer, of the criterion adopted, in disagreement with the Tax Authority, even if erroneous, excludes fault."
In CPPT, relevant are, among others, Article 183-A(2) (Lapse of Guarantee in Case of Amicable Complaint) – whereby:
"1 - The guarantee provided to suspend the enforcement procedure lapses if the amicable complaint is not decided within one year of its filing.
2 - The regime of the previous number does not apply if the delay in the decision results from a cause attributable to the claimant."
On this rule, Jorge Lopes de Sousa affirms:
"For the delay to be attributable to the interested party it must be linked to a conduct of theirs by an adequate nexus of causality, that is, the conduct must be a naturalistic condition of the delay.
These conditions would include, for example, conduct by the interested party that has caused suspension of the instance or that amounts to lack of cooperation that may be required (…)" – see Jorge Lopes de Sousa, Code of Tax Procedure and Process Annotated and Commented, Vol. III, 6th Edition, Áreas Editora, 2011, pages 344 and 345.
Now, as is known, "a given action will be an adequate cause of certain harm if, taking into account the circumstances known to the agent and those which a normal person could have known, that action or omission showed itself, in light of common experience, as adequate to produce the harm, there being strong probabilities of bringing it about" – see Galvão Telles, apud, Pires de Lima and Antunes Varela, Civil Code Annotated, Vol. I, 4th edition, Coimbra, page 578.
Or, as written in the Award of the Supreme Court of Justice dated 15/01/2002 and issued within process 01A1481 (Pais de Sousa): "in accordance with the theory of adequacy, only that circumstance which, given the rules of experience and the concrete circumstances in which the agent found himself (having in mind the circumstances known or knowable by him) showed itself as apt, suitable or adequate to produce that harm, should be regarded as a cause of the harm.
But for a fact to be considered an adequate cause of harm suffered by others, it is necessary that such harm constitute a normal, typical, probable consequence thereof, thus requiring that the judge place himself in the concrete situation of the agent in issuing his decision, taking into account the circumstances the agent knew and those circumstances which a normal person, placed in that situation, would have known ".
In the Civil Code, for example, Article 327(3) determines:
"3. If, due to a procedural reason not attributable to the holder of the right, the defendant is dismissed from the instance or the arbitration agreement lapses, and the period of prescription has meanwhile terminated or terminates in the two months immediately following the finality of the decision or the occurrence of the fact making the agreement ineffective, prescription is not considered complete before the end of these two months" – emphasis added.
On this matter, Case Law has understood that "the conceptual definition of «procedural reason not attributable to the holder of the right», made explicit in Article 327(3) of the Civil Code, should be based essentially on the idea of fault. Thus, for dismissal of the instance to be attributable to the holder of the right it is enough that the latter has acted with mere fault, which should be assessed, in the absence of another legal criterion, by the diligence of a reasonable person, in light of the circumstances of each case" – see the Award of the Supreme Court of Justice dated 15/11/2006 and issued within process 06S1732 (Pinto Hespanhol).
From the foregoing, it seems that one may conclude, with reasonable certainty, that the concept of "facts not attributable to the taxpayer" provided for in Article 24(3) of RJAT should be understood as (i) requiring an adequate nexus of causality between the taxpayer's conduct and the result; (ii) according to the standard of the reasonable person; (iii) and that excusability or reasonableness (in terms of a normal or average taxpayer) of the criterion adopted, even if erroneous, excludes fault.
Given the foregoing, let us then see whether the conduct of the Claimant fulfilled, or not, the said requirements.
As appears from the facts established within process 210/2017-T, the request for arbitral ruling was filed on 27/03/2017.
A brief review of Case Law regarding the possibility of obtaining, in Courts constituted under the aegis of CAAD, appraisal of tax acts preceded by requests for official review (which appraise their legality) permits the conclusion that, up to that date, the status quo was as follows:
a) In the sense of CAAD's competence to appraise those requests, the following decisions may be found:
(i) of 06/07/2012 and issued within process 48/2012 (Jorge Lopes de Sousa);
(ii) of 23/10/2012, issued in process 73/2012 (Benjamim Silva Rodrigues);
(iii) of 17/05/2013, issued within process 117/2013 (Jorge Lopes de Sousa);
(iv) of 30/06/2014, issued within process 93/2014 (Jorge Lopes de Sousa);
(v) of 04/03/2015, issued within process 630/2014 (Jorge Lopes de Sousa);
(vi) of 11/07/2015, issued within process 670/2015 (José Baeta de Queiroz);
(vii) of 22/02/2016, issued within process 617/2015 (Jorge Lopes de Sousa);
(viii) of 01/09/2016, issued within process 123/2016 (Jorge Lopes de Sousa);
(ix) of 04/11/2016, issued within process 122/2016 (José Baeta Queiroz);
(x) of 14/11/2016, issued within process 221/2016 (José Coutinho Pires);
(xi) of 15/11/2016, issued within process 143/2016 (Fernanda Maçãs).
In the contrary sense, only 3 decisions were identified issued on 09/11/2012, 19/02/2014 and 22/04/2014, respectively, in processes 51-2012-T (José Poças Falcão), 364/2014 (Miguel Patrício) and 236/2013 (Manuel Macaísta Malheiros), in the latter, with a dissenting opinion on this matter.
It follows from the foregoing that the majority of CAAD Case Law concluded by CAAD's competence to appraise requests, such as that which the Claimant presented and which was submitted to CAAD's appraisal within process 210/2017-T.
This was also the unanimous understanding of Legal Scholarship published at the time, on the matter, of which 3 works are notable.
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Carla Castelo Trindade, Legal Regime for Tax Arbitration Annotated, Almedina, Coimbra, 2015, pages 96 et seq.;
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Jorge Lopes de Sousa, "Commentary on the Legal Regime for Tax Arbitration" in Guide to Tax Arbitration (Coord. Nuno de Villa-Lobos and Tânia Carvalhais Pereira), Almedina, Coimbra, pages 105 et seq; and
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Serena Cabrita Neto, Carla Castelo Trindade, Tax Litigation, Vol. II, Almedina, Coimbra, 2017, page 446.
Furthermore, this Legal Scholarship and Case Law were not (nor are they) innovative regarding the nature of Official Review in the context of taxpayer protections.
In fact, it has long been established in Case Law the equation of the request for Official Review as an alternative and complementary means of administrative and contentious objections – see in all, the Award of the Supreme Administrative Court, dated 12/07/2006, and issued within process No. 402/06 (Jorge Lopes de Sousa) with abundant jurisprudential references.
In light of this factual framework, it must be concluded that the formal decision issued within process 210/2017-T cannot be considered "attributable to the taxpayer".
If it is true that it was not a completely surprising decision (at the time there were at least three decisions to that effect, the most recent of which was dated 22/04/2014), in light of the factual situation at that time (and without making value judgments about its sense), it would certainly not be the most probable or expected one even considering the standard of the reasonable person.
It should also be noted that the excusability of the Claimant's conduct in situations with procedural relevance is recognized, in the legal system, both by the law itself and by Legal Scholarship.
For example, regarding Article 334 of CC (a provision connected to Article 279 of CPC), Vaz Serra notes that "the negligence of the holder of the right may not be attributable to the fact that the action was filed in an incompetent court, for example, "because it is difficult to interpret the law on competence"" – see Vaz Serra, Prescription and Lapse, in Bulletin of the Ministry of Justice, No. 106, May, 1961, p. 257, note 1010, §3 and, within the specific scope of RJAT, Carla Castelo Trindade, Op. Cit., page 464.
In adjective law, invoke for example, paragraph b) of Article 536(2) of CPC, whereby:
"Article 536
Apportionment of Costs
1 - When the claim of the plaintiff or applicant or the objection of the defendant or respondent were well-founded at the time they were made or raised and ceased to be so due to circumstances subsequent not attributable to them, costs are apportioned between them equally.
2 - An alteration of circumstances not attributable to the parties is deemed to have occurred when:
a) The claim of the plaintiff or respondent or objection of the defendant or applicant were based on a legal provision that has since been altered or repealed;
b) When there is a reversal of settled case law on which the claim of the plaintiff or applicant or objection of the defendant or respondent was based;" (emphasis added).
In CPTA, for example, see paragraph c), Article 58(3):
"3 - Objection is admissible, in addition to the period provided for in paragraph b) of paragraph 1:
c) When, less than one year having elapsed from the date of performance of the act or its publication, where mandatory, the delay should be deemed excusable, having regard to the ambiguity of the applicable legal framework or to the difficulties that, in the concrete case, arose regarding the identification of the act to be objected to, or its characterization as an administrative act or as a rule. (emphasis added)."
On this rule in particular, Mário Esteves de Oliveira and Rodrigo Esteves de Oliveira note that, in it, the legislator "honestly assumes that our administrative law system is, in many matters or sectors, labyrinthine, chaotic, dispersed, contradictory, etc.
The concept embraces the difficulties that exist both in the search for and establishment of applicable laws (…), as well as in their interpretation and application.
(…)
It is not necessary, note, that we are dealing with ambiguities of substantive administrative law, but rather difficulties related to procedural law" – see Mário Esteves de Oliveira and Rodrigo Esteves de Oliveira, Code of Process in Administrative Courts, Statute of Administrative and Tax Courts Annotated, Vol. I, Almedina, page 385, emphasis added.
In commentary to this same rule, Mário Aroso de Almeida, Carlos Alberto Fernandes Cadilha state in Commentary on the Code of Process in Administrative Courts, Almedina, Coimbra, 2005, pages 296 and 297:
"The solutions established in this paragraph 4 constitute a corollary of the principle of effective judicial protection, permitting the exercise of the right of objection beyond the general period of three months, whenever the procedural position of the interested party arises specially aggravated as a consequence of the imperfection of the legal system or the incidents of the administrative procedure in which the act to be objected was performed.
In any case, it is incumbent on the claimant to allege the facts constituting their right – (…) – and the decision will be adopted according to the free conviction of the judge, who should assess the existence of the situation of inexigibility by the diligence of an average citizen" – emphasis added.
Finally, it should be noted that the understanding we have been sustaining is further imposed by the pro actione principle with direct expression, among others, in Article 7 of CPTA, applicable to RJAT ex vi Article 29(1), paragraph c) of RJAT.
Pursuant to said provision: "For the realization of the right of access to justice, procedural norms shall be interpreted in the sense of promoting the issuance of rulings on the merits of the claims filed."
That rule constitutes nothing more than the codification of the principle which Case Law has been calling in dubio pro habilitate instantiae and which, at the level of procedural requirements, postulates that the interpretation that presents itself as most favorable to access to law and effective judicial protection be privileged – see for example, the Award of the Constitutional Court No. 385/2005, dated 13/07/2005 and issued within process 1109/04 (Benjamim Rodrigues) and the Award of the Supreme Administrative Court dated 24/06/2004 and issued within process 01631/03 (Adérito Santos).
Put otherwise, "it is a principle whose addressee is the judge and is intended to assure that, in case of doubt, the judge effects or privileges the interpretation of procedural norms most favorable to access to law and effective judicial protection. It constitutes, therefore, a criterion of interpretation which the judge should bear in mind when having to apply provisions establishing procedural duties and requirements that may jeopardize the continuation of proceedings" – see Carlos Carvalho, Principles of Administrative Process – Importance and Practical Application, in "The Revision of the Code of Process in Administrative Courts", I, Lisbon, 2017, Centre for Judicial Studies.
Now, if doubts persist about the correct interpretation of Article 24(3) of RJAT, Article 7 of CPTA (and Articles 20 and 268(4) of CRP which it reflects) also point toward the dismissal of the exception.
2. Dilatory Exception of Material Incompetence of the Arbitral Tribunal to Rule on the Claimant's Claim.
The Respondent raised material incompetence of the Arbitral Tribunal to appraise decisions dismissing requests for official review.
On this matter, AT contends, in sum, that paragraph a) of Article 2 of Ordinance No. 112-A/2011, of 22/3, by which it was bound to arbitral jurisdiction, excludes claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative channels, pursuant to the provisions of Articles 131 to 133 of CPPT, with no mention of official review provided for in Article 78 of LGT.
For AT, this understanding, in addition to the literal element, is imposed "by force of the constitutional principles of the rule of law and separation of powers (cf. Articles 2 and 111, both of the Constitution), as well as the principle of Legality (cf. Articles 3(2), and 266(2), both of the CRP), as a corollary of the principle of indisposability of tax credits inherent in Article 30(2) of LGT, which bind the legislator and all the activity of the Respondent" (§ 109 of Response).
Thus, and for the Respondent, it is constitutionally forbidden, by force of the constitutional principles mentioned, an interpretation that expands AT's binding to arbitral protection as legally set.
The Claimant, in exercise of the contradiction granted to it regarding the exception, defended its dismissal by invoking CAAD case law in a sense divergent from that sustained by AT.
Let us examine.
The competence of arbitral courts functioning at CAAD is, in the first place, determined by the matters indicated in Article 2(1) of Decree-Law No. 10/2011, of 20 January (RJAT), whereby:
"Article 2
Competence of Arbitral Tribunals and Applicable Law
"1 - The competence of arbitral tribunals encompasses appraisal of the following claims:
a) The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account;
b) The declaration of illegality of acts determining the taxable base, acts determining the taxable matter and acts fixing property values;
c) The appraisal of any question, of fact or of law, relating to the draft assessment decision, whenever the law does not assure the ability to raise the claim referred to in the previous paragraph."
In a second place, the competence of arbitral courts functioning under the aegis of CAAD is also limited by the terms in which AT was bound to that jurisdiction by Ordinance No. 112-A/2011, of 22 March, since Article 4 of RJAT establishes that "binding of the tax administration to the jurisdiction of courts constituted pursuant to this law depends on an ordinance of the members of Government responsible for the areas of finance and justice, establishing, in particular, the type and maximum value of disputes covered".
In light of this second limitation of competence, the resolution of the issue at hand depends essentially on the terms and nature of this binding, for, even if one is faced with a situation which could be framed under that Article 2 of RJAT, if it is not covered by the binding, the possibility of the dispute being judicially decided by this Arbitral Tribunal will be precluded. That is, "the scope (…) of arbitral cases restricts itself to questions of legality of acts of the types mentioned in Article 2 [of RJAT] which are covered by the binding which was made in Ordinance No. 112-A/2011 (…)" – see in this sense, the Award of the Central Administrative Court of the South dated 28/4/2016 and issued within process 09286/16 (Anabela Russo).
Now, pursuant to paragraph a) of Article 2 of Ordinance No. 112-A/2011:
"The services and organisms referred to in the previous article bind themselves to the jurisdiction of the arbitral tribunals functioning at CAAD which have as their object the appraisal of claims relating to taxes whose administration is entrusted to them referred to in paragraph 1 of Article 2 of Decree-Law No. 10/2011, of 20 January, with exception of the following:
a) Claims relating to the declaration of illegality of self-assessment acts, withholding at source and payment on account that have not been preceded by recourse to the administrative channels pursuant to Articles 131 to 133 of the Code of Tax Procedure and Process" – emphasis added.
As decided, for example, in the Award of CAAD dated 26/11/2018 and issued within process 273/2018 (Jorge Lopes de Sousa) and which, on this matter, is followed closely, "the express reference to the precedent «recourse to the administrative channels pursuant to Articles 131 to 133 of the Code of Tax Procedure and Process» should be interpreted as referring to cases in which such recourse is mandatory, through the amicable complaint, which is the administrative means indicated in those Articles 131 to 133 of CPPT, to whose terms it refers. In truth, first of all, it would not be understood that, where prior administrative objection were not necessary «when its ground is exclusively a matter of law and the self-assessment has been effected in accordance with generic guidelines issued by the tax administration» (Article 131(3) of CPPT, applicable to withholding at source cases, by force of Article 132(6) of the same Code), such administrative objection, which is understood to be unnecessary, should be excluded from arbitral jurisdiction."
In the case at hand, the declaration of illegality of self-assessment act is sought, following the dismissal of a request for review of tax acts filed after the two-year period provided for in Article 132 of CPPT has elapsed and in which the Tax Authority issued a ruling on the legality of the disputed act.
Thus, it is important, first of all, to clarify whether the declaration of illegality of acts dismissing requests for review of the tax act, provided for in Article 78 of LGT, is included in the competencies attributed to arbitral courts functioning at CAAD by Article 2 of RJAT.
In truth, in this Article 2, there is no express reference to these acts, contrary to what
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