Summary
Full Decision
ARBITRAL DECISION
I – REPORT
a) A..., hereinafter referred to as the Claimant, resident at ... no. ..., ..., ...-... Setúbal, Tax Identification Number..., presented on 18 September 2018 a request for arbitral pronouncement, pursuant to the Legal Framework for Arbitration in Tax Matters (RJAT), with a view to annulling the act of assessment of Personal Income Tax with the number 2018..., relating to the fiscal year 2015, in the amount of € 90.13, corresponding to an amount payable to the Tax Authority of € 675.57.
b) The Claimant requests that the Court declare (1) "the illegality and consequently the annulment of the assessment act relating to Personal Income Tax for 2015 number 2018..., which should be replaced by the original assessment; (2) "as well as the annulment of the interest assessment no. 2018...; (3) and "the Tax Authority be condemned to refund to the Claimant the amount of € 675.57 relating to the Personal Income Tax and compensatory interest, plus indemnificatory interest, from the payment of the assessments until the effective reimbursement of the amounts due".
c) The request for constitution of the Singular Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority on 19-09-2018.
d) By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, with the parties being notified on 21.09.2018, who expressed no intention to refuse the appointment, in accordance with article 11, paragraph 1, subparagraphs a) and b) of RJAT and articles 6 and 7 of the Deontological Code.
e) The Singular Arbitral Tribunal (SAT) has been, since 28 November 2018, duly constituted to hear and decide the object of this dispute (articles 2, paragraph 1, subparagraph a) and 30, paragraph 1, of RJAT).
f) To support the request, the Claimant invokes the following, regarding the illegality of the assessment, stating that "... in the Personal Income Tax Code there is nor has there ever been any reference to the concept of Joint Custody, so the proposed correction has serious gaps in its reasoning, using an indeterminate concept in a completely arbitrary manner".
g) And adds: "... let us then seek to understand what Joint Custody is that the Tax Authority uses to justify this correction". "ANA TERESA LEAL, FELICIDADE D'OLIVEIRA, HELENA GOMES DE MELO, JOÃO VASCONCELOS RAPOSO, LUÍS BAPTISTA CARVALHO and MANUEL DO CARMO BARGADO tell us, in their work Parental Authority and Parental Responsibilities, at pages 48 et seq., that the said "Joint Custody" is nothing more than a contradictory concept within a divorced couple, since it presupposes that both parents maintain custody of the child concurrently". "What may exist is shared or alternating custody, in which the parents alternate between them, by having separate residences, the custody or the exercise of parental responsibilities, but the Tax Authority or the Personal Income Tax Code makes no reference to that either".
h) In 2015 the following wording of no. 9 of article 78 of the Personal Income Tax Code was in force: "9 - Whenever the same dependent or ascendant appears in more than one tax return, the value of the deductions from the assessed tax provided for in this Code with reference to dependents or ascendants is reduced by half, per taxpayer", and
i) "Until the end of 2014, article 78, contained indications regarding the manner of division and the requirements for deduction of amounts relating to dependents: "Article 78 - Deductions from assessed tax – 9 - In cases where by divorce, judicial separation of persons and assets, declaration of nullity or annulment of marriage, the parental responsibilities relating to dependents provided for in subparagraph a) of paragraph 4 of article 13 are exercised jointly by both parents, the deductions from assessed tax are made as follows: a) 50% of the amounts set out in subparagraph d) of paragraph 1 and in paragraph 3 of article 79 and in paragraphs 1, 2 and 6 of article 87, with respect to each dependent; b) 50% of the limit provided for in paragraph 4 of article 87, respectively, per each dependent;"
j) And concludes "as has been demonstrated, the law does not and never did result in any recourse to the concept of Joint Custody used by the Tax Authority, but rather to parental responsibilities exercised jointly".
k) And for the reason that "Parental responsibilities exercised jointly was a requirement that was in force until the end of 2014, it was subsequently removed from the Code by the legislator with the intention of simplifying the process of deduction from assessed tax of amounts relating to dependents, becoming necessary only that the dependent appeared in more than one tax return".
l) Disagrees with what is stated in the memorandum no. ..., of 9 April, where "... it is said that from the Agreement results that the minor dependent, B..., is in the custody and care of the mother, coming to reside with her", transcribing the text of the Agreement "so that the content thereof is demonstrated and which was attached as document no. 4: "B... shall reside with the mother who shall also exercise the function of person in charge of education"."
m) Clarifies that "it is never said that B... is in the custody and care of the mother" since "the residence that was established in the homologated agreement was attributed to the mother for a reason of practical impossibility of the minor having two addresses" and taking into account that "... the choice of the person in charge of education was due to the fact that B...'s mother is a teacher and has always been the one to exercise that position, so it was also decided in the agreement to assign her that duty".
n) In summary, the Claimant states that "using the expression used by the legislator in article 78, paragraph 9, of the Personal Income Tax Code in the wording in force until 2014, we highlight that in the agreement sent to the Tax Authority, in Chapter II, under the heading Parental Responsibilities, it is said that "the parents mutually recognize their competence and their responsibility, with both exercising jointly the parental responsibilities""
o) Concluding that: "... it is evident from the text of the homologated agreement that parental responsibilities were always exercised jointly, complying with the normative provision in question and being therefore applicable the said deduction, with the dependent appearing in both Personal Income Tax returns", adding that "... in 2015, B... appeared in the tax returns of both parents because the time and all of B...'s expenses were divided between them, as also results from the homologated agreement".
p) Therefore "... the correction proposed by the Tax Authority is illegal, as it is based on an erroneous interpretation of the legal provision and an incorrect interpretation of the Agreement for the regulation of parental responsibilities, and the tax act in question should be annulled".
q) Regarding the lack of reasoning of the act of dismissal of the gracious complaint, it states: "everything contained in this petition was brought to the knowledge of the Tax Authority, which in the decision on the Gracious Complaint adopts completely contradictory reasoning, reaching an unintelligible conclusion, using a legal provision that it did not even cite correctly", therefore "... if nothing of what has been set out above is favorably received, and as a mere precaution in representation it will always be said that the act suffers from lack of reasoning, whereby it will be voidable under article no. 268, paragraph 3, of the Constitution, article no. 77 of the General Tax Law, and article 152 of the Administrative Procedure Code".
r) The Respondent was notified and replied on 14.01.2019, defending itself by exception and by contestation, as follows:
s) As regards the defense by exception, it invokes "the lapse of the request for arbitral pronouncement" stating that "pursuant to paragraph 1 of article 10 of RJAT, the period for submission of the request for constitution of the Arbitral Tribunal is 90 days counted from the facts provided for in paragraphs 1 and 2 of article 102 of the Tax Procedure and Process Code, in this case, from the end of the period for voluntary payment of the tax liabilities legally notified to the taxpayer" and because "... the Claimant comes to challenge the act of additional assessment of Personal Income Tax no. 2018 ... relating to the year 2015, whose payment deadline occurred on 16.05.2018 see statement of account reconciliation no. 2018..." ... "it cannot be concluded otherwise than that the present request for arbitral pronouncement submitted on 18.09.2018 is manifestly out of time".
t) It adds: "it is true that on 16.05.2018 the Claimant filed a gracious complaint, gracious complaint proceedings ...2018... which was dismissed by decision of 26.06.2018", "however, the subject matter of the present proceedings, as results from the tenor of the request made by the Claimant, is the act of assessment and not the act of dismissal of the gracious complaint, which constitute different acts in content, form and legal requirements". "We are dealing with procedurally distinct and differentiated interventions".
u) Since "the subject matter of the present proceedings, insofar as it concerns the Claimant's claim, is fixed by his request and cause of action, the manner in which it is set out in his request for arbitral pronouncement being not irrelevant", "as is verified by reading the request the Claimant comes to request from the Court: "The declaration of illegality and consequent annulment of the assessment act relating to Personal Income Tax for 2015 number 2018...""
v) And concludes: "the subject matter of the request, expressly delimited by the Claimant, is the invoked illegality of the assessment acts and not the dismissal of the gracious complaint filed. Thus, the timeliness of the request for arbitral pronouncement formulated is assessed in relation to the assessment act". "It should be noted, moreover, that at no point in the petition does the Claimant make any assessment of the dismissal of the gracious complaint and its grounds, and has moreover not formulated any request on such that decision".
w) And because "the Court's powers of cognition being limited by the request, the Court is prevented from assessing and declaring the illegality and consequent annulment of the assessment act for being out of time, and thus the Tax Authority should be absolved of the proceedings", "in this sense see, by way of example, the judgment delivered in proceedings no. 261/2013-T, where the exception of untimeliness, raised by the Tax Authority on grounds similar to those invoked in the present proceedings, was considered well-founded", where the Tax Authority defended, as is transcribed "notwithstanding having made an allusion to and identified the circumstances of the existence of a gracious complaint and of tacit dismissal, the truth is that the Claimant did not formulate/make concrete to the Court any request aimed at the annulment of the tacit dismissal that operated, resulting from its gracious complaint." "Not having done so, that is, not having the Claimant challenged the second-degree act (the tacit dismissal of the gracious complaint) the arbitral request is out of time and, consequently, the Court cannot assess the request formulated as to the self-assessment act".
x) And in that proceeding "... the Court decided as follows, since its powers of cognition are limited by the request: "thus if, on the one hand, it is unequivocal that the Claimant in identifying and formulating its arbitral request made not the slightest allusion to challenging the act of tacit dismissal of the gracious complaint it filed on 30 May 2013, on the other, it is also quite clear that the Claimant identifies as the subject matter of the arbitral request the act of self-assessment of Corporate Income Tax and municipal surcharge whose partial declaration of illegality and consequent partial annulment it requests from this Court". "We cannot, therefore, fail to agree with the Respondent when in its Reply it writes that the Claimant did not formulate/make concrete to the Court any request for annulment of the tacit dismissal that operated, resulting from its complaint."
y) It adds: "in the same sense, see also the arbitral decision delivered in proceedings no. 763/2014-T".
z) In conclusion it states: "... the true and only request for pronouncement made by the Claimant was for the annulment of the tax act of the Personal Income Tax assessment, with the corresponding restitution of improperly paid tax and the payment of indemnificatory interest", therefore "... as the attack is directed exclusively at the tax acts of assessment, it is clearly evident that the 90-day period legally defined for its challenge under arbitration has been exceeded, counted from the day following the end of the period for voluntary payment of the tax liability, in accordance with article 10 of RJAT, combined with article 102, paragraphs 1 and 2 of the Tax Procedure and Process Code ("CPPT")", resulting in "... there is verified in the case in question the lapse of the right of action, which constitutes a dilatory exception that determines the absolution of the Respondent of the proceedings under subparagraph h) of paragraph 1 of article 89 of the Administrative Courts Procedure Code and subparagraph e) of paragraph 1 of 287 of the Civil Procedure Code, applicable ex vi art. 2 of RJAT which is hereby requested".
aa) As regards the defense by contestation, the Tax Authority states that "the question at issue in the present proceedings consists in knowing whether all the requirements for the deduction of expenses relating to the Claimant's daughter are met under article 78 of the Personal Income Tax Code".
bb) For this purpose "... it is first necessary to analyze what is provided in the parental agreement regarding the distribution of parental responsibilities: "I - Residence: B... shall reside with the mother who shall also exercise the function of person in charge of education. II - Parental Responsibilities: A) The parents mutually recognize their competence and their responsibility, with both exercising JOINTLY THE PARENTAL RESPONSIBILITIES. B) Thus, the parents agree to consult each other mutually about all important decisions relating to the education, health, religion and well-being of their daughter before taking final decisions. IV - Division of Time: Weekends: B... shall spend 2 (two) alternate weekends per month with the father. During the week: B... shall spend the night 2 (two) times per week with the father. On these nights the father will pick up B... from school and the following day take her to classes."."
cc) The Respondent maintains that at the date of the facts the wording of paragraph 9 of article 78 of the Personal Income Tax Code is applicable, in the wording in force prior to the amendment made by Law 82-E/2014 of 31.12 (an amendment that produced effects according to its article 17, from 1 January 2015) and states that, by force of the regime of article 11, paragraphs 1 and 2 of the General Tax Law, "from the combined interpretation of article 78 of the Personal Income Tax Code with paragraph 3 of article 1096 of the Civil Code it is evident that the tax rule only covers situations of alternating residence" for the reason that "... the joint exercise of parental responsibilities is effectively translated as: "in mutual consultation on all important decisions relating to the education, health, religion and well-being of their daughter before taking final decisions", in light of paragraph 1 of article 1096 of the Civil Code and in light of the agreement for the regulation of parental authority".
dd) It concludes that "if the residence is common – in the case of alternating residence –, the exercise of parental responsibilities is joint; if the residence ... is determined in the Agreement for the Regulation of Parental Authority only in the home of one of the parents – as is verified in the case in question – the exercise of parental responsibility is not joint, it is the responsibility only of the parent who resides with the minor".
ee) Adding that "in sum, the Personal Income Tax rules are: a) If the regime is of non-alternating residence, the expenses are deducted in full by the parent in whose household the dependents are included. b) If the regime is of alternating residence, each of the parents deducts half of the expenses relating to the children. That is, the dependents appear in the declarations of both and the expenses are considered in half for each of them", therefore the Claimant "... could only deduct the expenses relating to his minor daughter if the agreement had established the regime of alternating residence, which is not the case in question", indicating that "in this sense the Ombudsman also pronounced in a letter sent to the president of Personal Income Tax reform on 18.07.2014" regarding the wording of paragraph 9 of article 78 of the Personal Income Tax Code in force until 31.12.2014.
ff) It seeks the complete dismissal of the request for arbitral pronouncement.
gg) As to the alleged lack of reasoning of the decision on the gracious complaint, it states that it is "... evident that the Claimant fully understood the tenor of the decision, as is manifest from the reading of the present request for arbitral pronouncement". "Indeed, from the reading of the administrative file, it is clear that the disputed decisory acts are fully and adequately reasoned and in compliance with the law". "An average person placed in the position of recipient could grasp its meaning", therefore what occurs is "... the Claimant not wishing to conform to the act now under attack, as clearly transpires from its request for pronouncement".
hh) By decision of 16.01.2019 the holding of the meeting referred to in article 18 of RJAT was dispensed with. In that same decision, the Claimant was invited to pronounce on the exception of lapse invoked by the Respondent. Also in that decision, the Claimant was invited to correct the request for arbitral pronouncement, in accordance with, in particular, subparagraph c) of article 18 of RJAT, perfecting it in light of the dissonance between the cause of action and the request formally made.
ii) By petition of 25.01.2018 the Claimant came to perfect the final part of the request for arbitral pronouncement, indicating the following "should ...read at the end of the request for arbitral pronouncement: The present request for arbitral pronouncement should be judged well-founded, as proven, and, in consequence: 1. The act dismissing the Gracious Complaint shall be annulled, and consequently, 2. The illegality and annulment of the assessment act relating to Personal Income Tax for 2015 number 2018... shall be declared, which should be replaced by the original assessment; 3. as well as the annulment of the interest assessment no. 2018... (Doc. 8); and 4. The Tax Authority be condemned to refund to the Claimant the amount of € 675.57 (six hundred seventy-five euros and fifty-seven cents) relating to Personal Income Tax and compensatory interest, plus indemnificatory interest, from the payment of the assessments until the effective reimbursement of the amounts due". Regarding the exception it came to state that "... it is clear that the Claimant filed a Gracious Complaint of the assessment act whose annulment is sought, therefore that should always be the fact from which the counting of the said period begins", therefore "... with the request clarified and perfected, following the learned invitation made by this SAT, no grounds are seen that could serve as a basis for any possible exception of lapse, therefore it will always be said that the submission of this request for arbitral pronouncement was timely".
jj) The Tax Authority did not pronounce on the invitation made to the Claimant to perfect the request for arbitral pronouncement.
kk) By decision of 05 February 2019, the parties were invited to submit written arguments. The Tax Authority was also invited to pronounce on a petition of the Claimant that proceeded to the perfection of the request for arbitral pronouncement. In this decision, 01 April 2019 was also scheduled as the deadline for the delivery of the arbitral decision.
ll) In arguments the Claimant concluded the following: "(1) The assessment now challenged had its origin in an erroneous interpretation of the Agreement on Parental Responsibilities. (2) The Tax Authority argued that the Claimant could not deduct the expenses relating to his dependent because it was not a case of Joint Custody, triggering an illegal official assessment, as has been demonstrated. (3) In the context of the Gracious Complaint, the Claimant explained that Joint Custody was not a requirement of the said deduction, but that Parental Responsibilities exercised jointly were satisfied, presenting the Agreement on Parental Responsibilities that had already been attached. (4) The Gracious Complaint was dismissed on the ground that it was not a case of Joint Custody and that the residence established in the Agreement on Parental Responsibilities had been attributed to B...'s mother. (5) Now, neither Joint Custody nor the residence of the dependents were requirements of the deduction, as has been demonstrated. (6) Without prejudice to this, we consider that from the text of the Agreement on Parental Responsibilities, a situation of alternating residence results, as the minor divides her time between the mother's and the father's home. (7) In the said Agreement the residence is attributed to the mother because it is not possible to have two addresses on the Citizen Card. (8) Thus, no reason is seen why the deductions provided for in article 78 of the Personal Income Tax Code should not be considered for both parents...".
mm) The Respondent counter-argued maintaining what it had already stated in the context of the gracious complaint and in its Reply to the request for arbitral pronouncement. It did not pronounce on the petition of the Claimant relating to the perfection of the request for arbitral pronouncement.
II – PRELIMINARY EXAMINATION
a) The parties have legal standing, enjoy legal personality and procedural capacity and are represented (articles 4 and 10, paragraph 2, of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
b) The request for pronouncement was submitted on 18 September 2018 and notification of the decision on the gracious complaint was made by the Tax Authority through a Memorandum dated 27.06.2018. Since, as stated above, the Tax Authority invokes untimeliness in its submission, pursuant to subparagraph a) of paragraph 1 of article 10 of RJAT, which leads to the lapse of the right of action, this is deferred to the merits section of the decision for examination.
c) The arbitral procedure is free from nullities.
It is necessary to examine the merits.
III - MERITS
III-1- MATTER OF FACT
• Facts established as proven
The following matters of fact are established as proven:
a) On 31 May 2016 the Claimant submitted the Personal Income Tax return for the period 01.01.2015 to 31.12.2015 and indicated under article 78 of the Personal Income Tax Code amounts of expenses relating to his daughter B... – as per paragraphs 5, 6 and 7 of the request for arbitral pronouncement, document no. 4 annexed to the request for arbitral pronouncement, page 3 of document no. 7 attached with the request for arbitral pronouncement and lack of specific contest of these facts by the Respondent (article 110-7 of the Tax Procedure and Process Code);
b) On a date not precisely determined, the Claimant was notified to provide proof of his civil status and of the homologation of the Regulation of Parental Authority, which he did, also on a date not precisely determined – as per articles 8 and 9 of the request for arbitral pronouncement and lack of specific contest of these facts by the Respondent (article 110-7 of the Tax Procedure and Process Code);
c) On 06 April 2018 the Tax Authority issued an official assessment of Personal Income Tax with the number 2018..., relating to the fiscal year 2015, with a reimbursement of € 90.13, given the compensation no. 2018..., corresponding to an amount payable to the Tax Authority of € 675.57, including compensatory interest assessed with no. 2018..., of € 40.56. – as per article 11 of the request for arbitral pronouncement, documents nos. 1 and 2 attached with the request for arbitral pronouncement and article 1 of the Tax Authority's Reply;
d) With the date of 09 April 2018 the Tax Authority sent to the Claimant the memorandum no. ... with the following content "Subject: NOTIFICATION RESULTING FROM ANALYSIS OF PERSONAL INCOME TAX RETURN (ART. 770 OF THE GENERAL TAX LAW). You are hereby notified, in accordance with article 77 of the General Tax Law, of the grounds for the purely arithmetic corrections made to the taxable income/tax for the year 2015. Notification of the assessment associated with the aforementioned corrections is the responsibility of the Central Services of the Tax and Customs Authority, which contains the deadlines and means of defense against the assessment", attaching the grounds, which state "as it did not meet the requirements to be considered for Joint Custody and with a view to regularizing the tax situation, the taxpayer was notified through memorandum ... of 31.01.2018, by registered mail, to exercise, within 15 days, the right of prior hearing provided for in article 60 of the General Tax Law. Given the above and bearing in mind that the taxpayer did not make any correction, it is proposed that the above-mentioned draft decision be converted into a final one with the preparation of a document of official correction so as to remove the dependent (Tax Identification Number...) from the declaration under analysis and the withdrawal of the notice under article 119 of the Tax Administration Rules." – as per article 10 of the request for arbitral pronouncement and Document no. 5 attached with the request for arbitral pronouncement;
e) Not conforming to the assessments, on a date not precisely determined, the Claimant filed a gracious complaint, which, following notification for prior hearing, was dismissed and the dismissal decision communicated to him by memorandum dated 27 June 2018, with the following grounds: "Comes C..., representative of A..., taxpayer no. ... to complain of the assessment no. 2018 ... of Personal Income Tax for the year 2015.
The complainant has legitimacy, the request is timely, this is the competent service and the complaint is the proper means of proceedings.
The complainant alleges that "" ... he submitted the Personal Income Tax return for the year 2015 in a timely manner" and that "In the said declaration he deducted under article 78 of the Personal Income Tax Code the amounts to which he was entitled with respect to B..., his daughter."
According to the documents attached to the file and those in the computer system, it was verified that:
The complainant submitted the Personal Income Tax return, Model 3 of the year 2015 (JI 10741), on 2016-05-31 which gave rise to the complained assessment no. 2016... .
An analysis of the declaration was carried out regarding the dependent who was in joint custody, and it resulted from the documents presented (Agreement for the regulation of the exercise of parental responsibilities), with decision of 06-01-2014, of the Family Mediation System of the Office for Alternative Dispute Resolution, that the custody of the same belongs to the mother.
As the complainant did not proceed to replace the declaration, and in accordance with the decision of 15 March last, issued in the procedure of Declaration Analysis, an official declaration was made (...), on 2018-03-21, which gave rise to the complained assessment no. 2018 ... .
From the above, it is verified that the dependent does not meet the conditions to be part of the family unit of the complainant, pursuant to paragraph 9 of article 13 of the Personal Income Tax Code "In cases of divorce, judicial separation of persons and assets, declaration of nullity or annulment of marriage, when parental responsibilities are exercised jointly by both parents, the dependents provided for in subparagraph a) of paragraph 5 are considered as constituting:" – as per articles 1 and 12 of the request for arbitral pronouncement and documents nos. 3 and 7 attached with the request for arbitral pronouncement;
f) On 18 September 2018 the Claimant filed the present request for arbitral pronouncement with CAAD – entry registration in CAAD's filing system of the request for arbitral pronouncement.
• Facts not established as proven
There is no other factual matter alleged that was not considered proven and that is relevant to the composition of the dispute.
• Reasoning of the facts established as proven and not proven
With regard to the matter of fact, the Court is not required to pronounce on all that was alleged by the parties; rather, it is the duty of the Court to select the facts that matter for the decision and to discriminate between the established and unestablished matters (as per article 123, paragraph 2, of the Tax Procedure and Process Code and article 607, paragraph 3, of the Civil Procedure Code, applicable ex vi article 29, paragraph 1, subparagraphs a) and e), of RJAT).
In this manner, the relevant facts for the judgment of the case are selected and defined according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (as per the former article 511, paragraph 1, of the Civil Procedure Code, corresponding to the current article 596, applicable ex vi article 29, paragraph 1, subparagraph e), of RJAT).
Thus, taking into account the positions assumed by the parties and the documentary evidence attached, the facts listed above were established as proven, with relevance to the decision, indicating, for each matter brought to the established facts, the means of proof that were considered relevant as reasoning.
The Respondent did not submit a response with content, consisting of only two pages without any elements. In light of the documents attached by the Claimant with the request for arbitral pronouncement, it is established that the necessary proof was not impossible nor of considerable difficulty (paragraph 6 of article 84 of the Administrative Courts Procedure Code by force of article 29, paragraph 1, subparagraph c) of RJAT).
III-2- ON THE LAW
The following legal questions are to be decided:
• Whether there was, in this case, submission of the request for arbitral pronouncement out of time which led to the lapse of the right of action;
• Whether the official assessments of Personal Income Tax and interest, (and likewise the decision of dismissal of the Gracious Complaint that maintained them), made by the Tax Authority, suffer from non-conformity stemming from erroneous interpretation of the agreement on parental responsibilities and with applicable law.
• If the request for arbitral pronouncement is well-founded, whether there is a right to reimbursement of amounts paid and whether the Claimant is entitled to indemnificatory interest.
III-2-On the Merits
A) Untimeliness of the request for arbitral pronouncement. Lapse of the right of action.
First of all, it should be noted that it is established jurisprudence of the Supreme Administrative Court that, in the case of a request for gracious complaint, the period for challenge (which is to say, for requesting the constitution of an arbitral tribunal) is not counted from the date limit for voluntary payment, but from that on which notification is made of the decision dismissing that request.
Furthermore, it is also settled that the decision on a gracious complaint request can be judicially challenged and that, insofar as it preserves the assessment act, this is also the mediate object of that challenge - as per articles 95, paragraphs 1 and 2, subparagraph a) of the General Tax Law and 102, paragraph 1, subparagraph e) of the Tax Procedure and Process Code.
In the case in question, the request for arbitral pronouncement is timely, since the Claimant submitted that request on 18 September 2018 and the date appearing on the memorandum notifying the decision dismissing the gracious complaint is 27 June 2018, as per subparagraphs e) and f) of the established facts.
Given that the request for constitution of the arbitral tribunal is timely, the exception of untimeliness fails.
However, the Respondent invoked the above-mentioned exception as justification for subsequently invoking the lapse of the right of action, proceeding from the manifest incongruity between the manner in which the cause of action is expressed and the manner in which the request was drafted. It states the following:
• "The Claimant comes to challenge the act of additional assessment of Personal Income Tax no. 2018 ... relating to the year 2015, whose date limit for payment occurs on 16.05.2018 see statement of account reconciliation no. 2018.... Thus it cannot be concluded otherwise than that the present request for arbitral pronouncement submitted on 18.09.2018 is manifestly out of time."
• "It is true that on 16.05.2018 the Claimant filed a gracious complaint, gracious complaint proceedings ...2018... which was dismissed by decision of 26.06.2018. However, the subject matter of the present proceedings, as results from the tenor of the request made by the Claimant, is the act of assessment and not the act of dismissal of the gracious complaint, which constitute acts different in content, form and legal requirements. We are dealing with procedurally distinct and differentiated interventions."
• "The subject matter of the present proceedings, insofar as it concerns the Claimant's claim, is fixed by his request and cause of action, the manner in which it is set out in his request for arbitral pronouncement being not irrelevant. As is verified by reading the request, the Claimant comes to request from the Court: "The declaration of illegality and consequent annulment of the assessment act relating to Personal Income Tax for 2015 number 2018...;"
• "The subject matter of the request, expressly delimited by the Claimant, is the invoked illegality of the assessment acts and not the dismissal of the gracious complaint filed."
• And concludes "Thus, the timeliness of the request for arbitral pronouncement formulated is assessed in relation to the assessment act. It should be noted, moreover, that at no point in the petition does the Claimant make any assessment of the dismissal of the gracious complaint and its grounds, and has moreover not formulated any request on such that decision"
In fact, the Claimant in the request for arbitral pronouncement terminated, formalizing the final request, as follows: "The present request for arbitral pronouncement should be judged well-founded, as proven, and, in consequence (1) the illegality and consequently the annulment of the assessment act relating to Personal Income Tax for 2015 number 2018... shall be declared, which should be replaced by the original assessment; (2) as well as the annulment of the interest assessment no. 2 2018...; (3) the Tax Authority be condemned to refund to the Claimant the amount of € 675.57 (six hundred seventy-five euros and fifty-seven cents) relating to Personal Income Tax and compensatory interest, plus indemnificatory interest, from the payment of the assessments until the effective reimbursement of the amounts due". That is, the Claimant omitted an express and clear request for annulment of the decision that was made on the Gracious Complaint, filed against the assessments here challenged (Personal Income Tax and interest) and that maintained them.
It appears to us, however, that the Claimant is not requesting merely that the "illegality" of the assessments be declared. He petitions that "illegality" be declared in the abstract and not merely assessed against the assessments. At the very least, this will be one of the meanings that can be attributed to the formulation used.
On the other hand, in terms of grounds (cause of action), the Claimant stated in article 12 of the request for arbitral pronouncement "after that assessment, the Claimant filed a gracious complaint, which was likewise dismissed, because the Tax Authority insisted on the understanding it had previously adopted", essentially attributing to the dismissal of the Gracious Complaint the same non-conformity that it alleged against the assessments challenged.
And in articles 31 and 32 of the request for arbitral pronouncement, the Claimant invokes "...LACK OF REASONING OF THE ACT OF DISMISSAL OF THE GRACIOUS COMPLAINT", states that "everything contained in this petition was brought to the knowledge of the Tax Authority, which in the decision on the Gracious Complaint adopts completely contradictory reasoning, reaching an unintelligible conclusion, using a legal provision that it did not even cite correctly. Thus, if nothing of what has been set out above is favorably received, and as a mere precaution in representation it will always be said that the act suffers from lack of reasoning, whereby it will be voidable under article no. 268, paragraph 3, of the Constitution, article no. 77 of the General Tax Law, and article 152 of the Administrative Procedure Code."
Thus, it was not possible to accept the allegation, (except as to the lack of proper formalization of the request, in consonance with the cause of action, for annulment of the decision on the Gracious Complaint), that "at no point in the petition does the Claimant make any assessment of the dismissal of the gracious complaint and its grounds, and has moreover not formulated any request on such that decision".
It should be added that the situation described would allow the Claimant to "broaden" the request, in consonance with the cause of action (paragraph 2 of article 265 of the Civil Procedure Code, applicable by force of subparagraph e) of paragraph 1 of article 29 of RJAT).
Now, it was in these circumstances that the SAT, in light of the tenor of subparagraph c) of paragraph 1 of article 18 of RJAT, since in this case the holding of a meeting of parties was dispensed with, invited the Claimant to perfect the request, having regard to the dissonance with the cause of action (subparagraph hh) of the Report).
The Claimant came to perfect the request (as per subparagraph ii) of the Report), in practice broadening it, in order to encompass the annulment of the decision on the Gracious Complaint.
In these terms, the invoked exception of lapse of the right of action fails.
B) Illegality of the decision on the Gracious Complaint and of the assessments.
In the reasoning of the decision dismissing the gracious complaint, reproduced in e) of the established facts, it is verified that the Tax Authority understood that
"the dependent does not meet the conditions to be part of the family unit of the complainant, pursuant to paragraph 9 of article 13 of the Personal Income Tax Code";
but in its Reply the Tax Authority came to state something different:
"The question at issue in the present proceedings consists in knowing whether all the requirements for the deduction of expenses relating to the Claimant's daughter are met under article 78 of the Personal Income Tax Code" (article 24);
The reasoning of the decision dismissing the Gracious Complaint is in conformity with what was communicated to the Claimant in the proceedings for analysis of the tax return and appears in subparagraph d) of the established facts:
""as it did not meet the requirements to be considered for Joint Custody and with a view to regularizing the tax situation, the taxpayer was notified through memorandum ... of 31.01.2018, by registered mail, to exercise, within 15 days, the right of prior hearing provided for in article 60 of the General Tax Law. Given the above and bearing in mind that the taxpayer did not make any correction, it is proposed that the above-mentioned draft decision be converted into a final one with the preparation of a document of official correction so as to remove the dependent (Tax Identification Number...) from the declaration under analysis and the withdrawal of the notice under article 119 of the Tax Administration Rules."
It should be stated, in the first place, that ex post facto reasoning would be irrelevant, the acts whose legality is questioned having to be assessed as they were practiced, the Court not being able, upon the finding that an illegal ground was invoked as support for the administrative decision, to assess whether its action could be based on other grounds. (see judgments of the Supreme Administrative Court of 10-11-98, of the Plenary, delivered in case no. 32702, published in Appendix to the Official Gazette of 12-4-2001, page 1207, of 19/06/2002, case no. 47787, published in Appendix to the Official Gazette of 10-2-2004, page 4289, of 09/10/2002, case no. 600/02, of 12/03/2003, case no. 1661/02).
It is to be concluded, from the above, that the Respondent, on the one hand (in its Reply), sustains its position not on the wording of paragraph 9 of article 78 of the Personal Income Tax Code in force from January 2015, but rather on the wording of the previous legal provision in force until 31 December 2014.
In the reasoning of the decision dismissing the Gracious Complaint, the Respondent sustains its position with reference to paragraph 9 of article 13 of the Personal Income Tax Code.
In article 29 of its Reply, it states that at the date of the facts, the wording of paragraph 9 of article 78 of the Personal Income Tax Code in force until 31.12.2014 was applicable.
Now, the taxation period to which the dispute refers is from 01.01.2015 to 31.12.2015, as is verified by what was established as proven in a) of the established facts.
With effect, article 2 of Law 82-E/2014 of 31.12, which began to have effect on 01.01.2015 (according to paragraph 1 of its article 17) set the following wording for paragraph 9 of article 78 of the Personal Income Tax Code: "Whenever the same dependent or ascendant appears in more than one tax return, the value of the deductions from the assessed tax provided for in this Code with reference to dependents or ascendants is reduced by half, per taxpayer".
It is established, from the above, that this is the rule applicable to the case here in discussion.
The simplicity of the rule in paragraph 9 of article 78 of the Personal Income Tax Code, as it appears worded, from 01.01.2015, is sufficient in itself for the purpose of solving what is here discussed (deductions from assessed tax of expenses legally eligible for deduction from assessed tax of Personal Income Tax, provided that they are demonstrably incurred with the dependents of the taxpayer), it not being evident, in light of its literal wording, the necessity of resorting to concepts of family law, nor to the rule or rules that allude to the concept of family unit for tax purposes.
The same may be said with respect to the choice of the residence of the minor (clearly an elective domicile – article 84 of the Civil Code) in the home of the parent, set out in the Agreement on Parental Responsibilities, as a determining element for concluding that parental responsibilities must, solely because of this fact, be considered as exercised only by that parent.
It was not here disputed that the expenses that the Claimant entered in the original Personal Income Tax return that he submitted within the legal deadline were not eligible for deduction from assessed Personal Income Tax.
In this case, it results from the agreement on the Regulation of Parental Authority relating to the minor dependent that the same, in a universe of two weeks of (14 consecutive days, from Monday inclusive to Sunday inclusive), given that she spends alternate weekends with the parents, ends up being able to spend the night at the father's home 7 nights and at the mother's home another 7 nights.
Therefore, it will be concluded that the "residence" of the minor, in common terms, in light of the Regulation of Parental Authority, is divided between the home of the father and the home of the mother, there being no elements in the file that allow for the conclusion that, among the parents, there does not occur the joint exercise of parental responsibilities with relevance for Personal Income Tax, permitting the application of the regime provided for in paragraph 9 of article 78 of the Personal Income Tax Code.
The request for arbitral pronouncement is therefore well-founded.
In light of the solution reached here, which permits the annulment of the acts here challenged (assessments and decision dismissing the Gracious Complaint), which effectively protects the rights at issue, the examination of the vice of lack of reasoning of the decision dismissing the Gracious Complaint is rendered moot.
C) Right to reimbursement of improperly paid tax and indemnificatory interest
The Claimant makes a request for restitution of the amount of € 675.57 relating to Personal Income Tax and compensatory interest, plus the corresponding indemnificatory interest.
Article 24, paragraph 1, subparagraph b) of Decree-Law no. 10/2011, of 20 January (RJAT), provides that in case of well-foundedness of the arbitral decision the Tax Authority must: "(…) restore the situation that would have existed if the tax act subject to the arbitral decision had not been practiced, adopting the acts and operations necessary for that purpose;".
In the concrete case, following the illegality of the official assessment act, there is ground for reimbursement of the improperly paid tax and interest, by force of articles 24, paragraph 1, subparagraph b), of RJAT and 100 of the General Tax Law, as this is essential to «restore the situation that would have existed if the tax act subject to the arbitral decision had not been practiced».
Thus, the Claimant should be reimbursed for the tax and interest that it bore improperly, as a result and to the extent of the disregard of the deductions from assessed tax of expenses that it presented, in the context of paragraph 9 of article 78 of the Personal Income Tax Code.
The Claimant further made a request for condemnation of the Tax Authority to the payment of indemnificatory interest, therefore it is necessary to determine whether it is entitled to such interest.
Article 43, paragraph 1, of the General Tax Law provides that: «Indemnificatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount exceeding that legally due».
In other words, there are three requirements for the right to such interest: i) the existence of an error in a tax assessment act attributable to the services; ii) the determination of such error in proceedings of gracious complaint or judicial challenge and iii) the payment of tax debt in an amount exceeding that legally due.
In this manner, it is immediately possible to raise a question: is it permissible to determine the payment of indemnificatory interest in tax arbitration proceedings? The answer to the question is affirmative.
With effect, article 24, paragraph 5 of RJAT provides that: "Payment of interest, regardless of its nature, is due in accordance with the provisions of the General Tax Law and the Tax Procedure and Process Code", which refers to the provisions of articles 43, paragraph 1, and 61, paragraph 5, of each of those statutes.
It results from the above that payment of indemnificatory interest must occur from the date of payment of the improperly paid tax and interest (by compensation) until the date of processing of the respective credit note.
There is therefore ground, following the declaration of illegality of the official assessment act of Personal Income Tax and of the assessment of compensatory interest, for the payment of indemnificatory interest, in accordance with the cited provisions of articles 43, paragraph 1, of the General Tax Law and 61, paragraph 5, of the Tax Procedure and Process Code, calculated on the amount that the Claimant improperly paid, at the rate of legal interest (articles 35, paragraph 10, and 43, paragraph 4, of the General Tax Law).
IV. DECISION
With the grounds set out:
a) The request for arbitral pronouncement is judged well-founded, declaring in non-conformity with paragraph 9 of article 78 of the Personal Income Tax Code: (1) the official assessment of Personal Income Tax with the number 2018..., relating to the fiscal year 2015, with reimbursement of € 90.13; (2) the compensation 2018..., corresponding to an amount payable to the Tax Authority of € 675.57; (3) the assessment of compensatory interest with no. 2018... of € 40.56. The same non-conformity is verified with respect to the decision dismissing the gracious complaint indicated in e) of the established facts that maintained the complained assessments.
b) The assessments and the decision dismissing the gracious complaint are annulled.
c) The Respondent is condemned to refund to the Claimant the sum of 675.57 euros, which includes Personal Income Tax and interest, to the extent that the assessment of Personal Income Tax resulting from the submission of the Personal Income Tax Return, Model 3, for the year 2015 should be maintained.
d) The request for payment, to the Claimant, of indemnificatory interest is judged well-founded, calculated at the legal rate, with the initial date from the date on which payment of the improperly paid tax and interest is considered to have occurred and until the date of processing of the respective credit note.
V - VALUE OF THE CASE
The value of the case is set at 675.57 €, in accordance with article 97-A of the Tax Procedure and Process Code (CPPT), applicable by force of the provision in article 29, paragraph 1, subparagraph a) of RJAT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).
VI – COSTS
Costs to be borne by the Respondent, in the amount of 306.00 €, in accordance with article 22, paragraph 4 of RJAT and Table I annexed to the RCPAT.
Notify.
Lisbon, 16 March 2019
Singular Arbitral Tribunal,
Augusto Vieira
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