Common-Law Union IRS Tax Filing: CAAD Ruling on Fiscal Domicile Proof Beyond Tax Registry (476/2017-T)

ARBITRAL DECISION

Parties

Claimants: A…, NF … and B…, NF… .

Respondent: TAX AND CUSTOMS AUTHORITY (AT)

REPORT

On 21 August 2017 the Claimants filed with CAAD a request for arbitral pronouncement (RAP) requesting, under the Legal Regime for Arbitration in Tax Matters (LRATM), the constitution of a singular arbitral tribunal (SAT).

THE REQUEST

The Claimants request the annulment of Personal Income Tax (PIT) assessments nos. 2017 … and 2017…, relating to the year 2014, from which resulted the obligation to deliver to the State, respectively, the amounts of 327.79 € and 57.60 €, amounts which they have since paid.

Assessments which resulted from the fact that the AT considered there to be a discrepancy in the declaration submitted, on the grounds that the taxpayers, having invoked the institute of "de facto union", did not have the same address registered in the "taxpayer registration system" for at least two years.

THE CAUSE OF ACTION

The Claimants invoke the illegality of the impugned assessments, for dissonance with article 14 of the Personal Income Tax Code and with nos. 1 and 2 of article 2A of Law no. 7/2001, of 11 May which adopted protection measures for de facto unions.

They disagree with the fact that the AT considers that the requirement "identity of tax domicile", to which article 14, no. 2 of the Personal Income Tax Code refers, is only fulfilled if there is prior registration in the "taxpayer registration system".

They invoke decisions of the Central Administrative Court South and of CAAD, adopted in identical situations, to sustain that "... in addition to timely compliance with the declarative obligation referred to in numbers 3 and 4 of article 19 of the General Tax Law, taxpayers may avail themselves of other means of proof to demonstrate that they live in conditions analogous to those of spouses, for more than two years and, consequently, reside habitually in the same place".

THE SINGULAR ARBITRAL TRIBUNAL (SAT)

The request for constitution of the SAT was accepted by the President of CAAD and automatically notified to the AT on 21-08-2017.

By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, and the parties were notified thereof on 31.10.2017. The parties did not express an intention to refuse the appointment, in accordance with article 11, no. 1, items a) and b) of the LRATM and articles 6 and 7 of the Deontological Code.

The Singular Arbitral Tribunal (SAT) has been, since 21.11.2017, regularly constituted to hear and decide the subject matter of this dispute (articles 2, no. 1, item a) and 30, no. 1, of the LRATM).

All these acts are documented in the records contained in the Case Management System which are hereby considered reproduced.

On 21-11-2017 the AT was notified in accordance with and for the purposes of article 17-1 of the LRATM. It responded on 18.12.2017, attaching the Administrative File (AF) composed of a computerized file, here designated as AF, with 20 pages.

By implicit agreement of the parties, the meeting of parties contemplated in article 18 of the LRATM was not held. By order of 18.12.2017 a deadline was fixed for the presentation of successive written pleadings. On 11.01.2018 the Claimants presented their pleadings. On 22.01.2018 the Respondent filed counter-pleadings. Both parties maintained the positions already assumed in the request for pronouncement and in the response, respectively.

PROCEDURAL REQUIREMENTS

Legitimacy, capacity and representation – The parties are legitimate, possess legal personality and judicial capacity and are represented (articles 4 and 10, no. 2, of the LRATM and article 1 of Ministerial Order no. 112-A/2011, of 22 March).

Principle of contradiction - The AT was notified in accordance with item k) of this Report. All procedural documents and all documents attached to the proceedings were made available to the respective counterparty in CAAD's Case Management System. Notification of their attachment was always given to both parties.

Although the SAT did not invite the AT to pronounce itself on documents nos. 1 and 2 attached with the Claimants' pleadings, the fact is that it exercised that right, as emerges from nos. 22 and 23 of the counter-pleadings.

Dilatory exceptions - The arbitral procedure does not suffer from nullities and the request for arbitral pronouncement is timely since it was filed within the period prescribed in item a) of no. 1 of article 10 of the LRATM, as results from the fact that the Claimants filed the request for pronouncement on 22.08.2017 and the final payment date of the PIT assessments shown in the assessment statement is 22.05.2017.

SUMMARY OF THE CLAIMANTS' POSITION

The Claimants allege that "... they have lived in de facto union since 01.01.2012". That "on 30.05.2015, ... they filed a Model 3 PIT declaration, having chosen, in accordance with article 14, no. 1 of the PITC, the taxation regime for married taxpayers not judicially separated with respect to persons and property", but in July 2017 they were notified "...of discrepancies in the declaration filed, on the grounds that the two taxpayers did not have the same address registered in the "taxpayer registration system" for at least two years", and "... although the claimant altered her tax address to Rua…, … -…, …, …-…Matosinhos, in December 2012, the claimant was slow to do so" having nevertheless, when notified by the AT, promptly provided "proof that the said address was the habitual residence of both since 01.12.2012, attaching various documents dated December, namely, the lease agreement for the said property, water and energy supply contracts concluded by them and statements issued by their employer, for PIT purposes", in addition to "... a document expressly provided for in article 2-A of Law no. 7/2001, of 11/05, as a means of proof of de facto union: a statement issued by the Local Council of …, accompanied by statements of both, under commitment to truthfulness, that they have lived in de facto union since 01.12.2012 and written statement of two witnesses".

They further state that "notwithstanding all the clarifications and means of proof presented, on 30.01.2017, the claimants were notified of an order issued in an error correction proceeding, in which the AT insists on the argument that the conditions provided for in no. 2 of article 14 of the PITC are not met for the filing of a joint declaration", which resulted in the "... elimination of the declaration filed on 30.05.2015 and the preparation of a single correction document for each of the claimants" and in that sequence "... in late March 2017, the claimants were notified of PIT assessments nos. 2017… and 2017 …" here impugned, "from which resulted the obligation to deliver to the State, respectively, the amounts of 327.79 € and 57.60 €, which ... they have already paid".

And they conclude: "The AT's reasoning is, however, based on an incorrect interpretation of the applicable legal provisions, namely of article 14 of the PITC, in the version prior to the amendments introduced by Law no. 82-E/2014, of 31/12", because "... it incorrectly understands ... that the identity of tax domicile referred to in no. 2 of article 14 is equivalent to the address registered in the "taxpayer registration system"", since "... in accordance with article 19, no. 1, item a) of the General Tax Law, the concept of tax domicile of natural persons is equivalent to the place of their habitual residence", "it being understood that, "for the purposes of the provisions of no. 2 of article 14 of the PITC, [there] is identity of tax domicile of the taxpayers when they have the same habitual residence, regardless of compliance with the notification provided in no. 3 of article 19 of the General Tax Law." (Decision of the Central Administrative Court South, of 5/03/2015, case no. 05655/12)".

They further invoke several CAAD decisions in the sense of the Central Administrative Court South decision and also the position of the Ombudsman contained in recommendation no. 1/A/2013, directed to the Director-General of the AT.

They conclude by stating that "… THE PIT ASSESSMENT ACTS NOS. 2017 … AND 2017 …, RELATING TO THE YEAR 2014, SHOULD BE ANNULLED, WITH ALL LEGAL CONSEQUENCES".

In pleadings they sustained what they had already stated in the request for pronouncement and added: "Since it is established, by agreement, that claimant B… has her habitual residence on Rua…, … - …, since 18.12.2012, the issue under debate concerns only the habitual residence of claimant A… at the end of 2012, since he only notified the AT of the change of address in mid-2015. However, there were numerous proofs presented demonstrating that the claimant, at the end of 2012, lived in de facto union with B…, also having habitual residence on Rua…, …º, in…".

SUMMARY OF THE RESPONDENT'S POSITION

The Respondent advocates a different interpretation of the law. It begins by stating that it is a fundamental duty of taxpayers to update the domicile in the Taxpayer Registration Management System (TRMS), in the following terms:

"At stake is the fundamental duty to update the domicile in the Taxpayer Registration Management System, in accordance with the provisions of article 19 of the General Tax Law (GTL) and the imperatives of combating tax fraud and evasion associated therewith", having "in consideration what is provided, regarding the disputed matter, by article 19 of the GTL".

"That is, the notification of tax domicile is mandatory and only with this notification does the tax domicile declared by the taxpayer have effectiveness vis-à-vis the AT".

"From consultation of the information contained in the Tax Authority's computer system, it is verified that Claimant A… changed, on 2015-06-11, his residence to Rua … no. …, …, in…, having until that date his address on Rua … no.…, …, in Maia"

"With respect to Claimant B…, she changed her residence to Rua … no.…, …, in …, on 2012-12-18" "from which it is concluded that there is an obligation to notify the change of domicile to the tax administration and Claimant A… did not do so". "As the Claimant did not do so, such fact is ineffective, by virtue of no. 3 of article 19 GTL for the purposes of the provision in no. 5 of article 10 of the Personal Income Tax Code".

It concludes by questioning "if the change of domicile was not made, how could the tax administration have knowledge of the facts alleged by the Claimant if he did not notify them, failing to comply with the legal obligation provided in article 19 GTL?", clarifying that "the application of the General Tax Law to the tax legal relationship in question in the present arbitral proceedings is absolutely peremptory" by virtue of its article 1 nos. 1 and 2, as results from what is stated by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in commentary to "General Tax Law", Encontro da Escrita Publishers, 4th edition, 2012, pages 61, 64 and 65, whereby "thus, it is unequivocal that the provision in article 19 of the GTL regarding tax domicile is fully applicable in the case in question".

Concluding that "... the failure to notify would necessarily bring about abuses, as in the situation in question, which by absence of notification, would improperly benefit from the de facto union regime", whereby in the concrete case "... the Claimants could not benefit from the de facto union regime, since there was no timely notification by Claimant A… of the change in his residence, so that they could in 2014 benefit from that regime".

It then expresses the following regarding the application of the norms of article 14 of the Personal Income Tax Code:

"... the basic difference vis-à-vis the tax regime applied to married persons is that, in order to be able to choose, given that the status of de facto unions for tax purposes is a facility and not an obligation, it requires some factual prerequisites for its legal recognition, these being identity of tax domicile and joint signature of the declaration". "In that article 14, no. 2 of the PITC establishes, the formal requirements on which depends the acquisition of the status of de facto union for strictly tax purposes and which consist of the "(…) identity of tax domicile of the taxpayers during the period required by law to verify the prerequisites of de facto union and during the taxation period, as well as the signature, by both, of the respective income tax declaration.""

"Beyond the situation of de facto union not being able to be viewed as a typical consequence of mere identity of tax domicile, as it is a far more complex reality, which implies a communion of life in conditions analogous to those of married persons not judicially separated with respect to persons and property, to which is added the non-verification of any circumstances preventing the effects of de facto union, listed in article 2 of Law no. 7/2001, of 11/05, with the amendments introduced by Law no. 23/2010, of 30/08".

"Also at stake is the fundamental duty to update the domicile in the Taxpayer Registration Management System, in accordance with the provisions of article 19 of the General Tax Law and the imperatives of combating tax fraud and evasion associated therewith".

"The meaning of the segment of the norm in analysis, supported by the spirit of the legislator and sufficiently expressed in the letter of the law, is that the tax status of de facto union, incorporates in its acquisition prerequisites, the formal requirement of timely compliance with the declarative obligation to register or update the domicile in the Taxpayer Register, a requirement that accrues to the identity of habitual residence, not being satisfied by the latter alone".

"Since the tax status of de facto union has underlying both the conformity of the material facts with the law protecting de facto unions (no. 1 of article 14 PITC), and the burden of declaring in time the domicile for tax purposes (no. 2 of article 14 PITC), the data notified to the Tax Administration for inclusion in the TRMS acquire, by this means, a qualified value in respect of the acquisition prerequisites of that status".

"The identity of tax domicile of the taxpayers, during the legally required period, as a formal prerequisite of the tax status of de facto union, based on the duty to update taxpayer identification data, appears adequate to the functions of Tax Administration control, without violating constitutionally imposed limits, namely the constitutional principle of proportionality ..."

And it concludes by stating: "On the other hand, under the principle of tax equality, based on contributive capacity, the legislative measure, contained in article 14 of the PITC, added by Law no. 30-G/200, of 29/12, proves to be an adequate and not excessive measure, aimed at combating the artificial creation of de facto unions, making the invocation of a right correspond to the indispensable compliance within fiscal policies, whereby, when there is no timely notification or there has been no notification whatsoever, by both or one of the members of the de facto union, of the change of domicile, for the purpose of registration in the taxpayer identification number, the formal acquisition prerequisite of the tax status of de facto unions, provided for in article 14 of the PITC, ceases to be met".

Regarding the requirements of Law 7/2001 of 11 May, with the amendments introduced by Law no. 23/2010 of 30 August, it states the following:

"...faced with the obligation to notify a change of domicile, under penalty of ineffectiveness of the same, as long as it is not notified (nos. 1, 3 and 4 of article 19 of the General Tax Law), it is not applicable for the purposes of the income tax regime, the provision of article 1, no. 2 of Law 7/2001 of 11 May "persons who, regardless of sex, live in conditions analogous to those of spouses for more than two years"".

"In the case in question, the domiciles of the Claimants are as follows:

Concluding: "It is therefore concluded that there was only identity of tax domicile between the Claimants in 2015, whereby only after that date do the two years of identity of domicile begin to count, as moreover the Claimants themselves admit in article 5 of the arbitral petition". "If there is no identity of domicile between the Claimants, then they cannot benefit from the de facto union regime".

Regarding the elements of proof submitted by the Claimants it states the following:

Regarding the lease agreement "...it only states that the property is intended, exclusively, for permanent habitation of the family group of the Claimant, with no identification of the elements that compose it".

Regarding the water supply contract, dated 27 December 2012, concluded between the Claimant and company C… it states that "... it only proves that from that date, the property located on Rua … has water and does not prove that the Claimants live there",

Regarding the electricity and natural gas supply contract, dated 18-03-2013, concluded between the Claimant and D…, it states that "... it only proves that electricity and gas were only connected in March 2013, and does not prove that the Claimants resided there since 2012", adding "will the Claimants have moved to that address before it had the normal conditions of habitability necessary such as light and gas?".

Regarding the income statements of the employer issued by E… S.A., issued in the name of the Claimant, both dated 31 December 2012, it states that in "... in one of the statements the address of the Claimant appears as Rua…, no.…, in Leça da Palmeira".

It concludes in the following terms: "the value of the present action should be corrected to the amount of € 385.39, referring to the assessment that the Claimants intend to see annulled. The present request for arbitral pronouncement should be judged to lack merit, as unproven, with the tax assessment acts impugned remaining in the legal order, absolving the respondent entity accordingly from the request"

In counter-pleadings it sustained what it had already affirmed in its response.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

The issues that arise are two, namely:

1. Is the requirement "identity of tax domicile" (referred to in no. 2 of article 14 of the Personal Income Tax Code) only considered to be met if both de facto union members prove, by prior registration in the Taxpayer Registration Management System (TRMS) in accordance with article 19 of the GTL, that in the two-year period preceding the choice of taxation, they effectively lived in de facto union? Or, conversely, can such proof be made when both or one of the de facto union members have not complied with that tax obligation?

2. In the event that it is possible to prove the existence of "identity of tax domicile" (referred to in no. 2 of article 14 of the Personal Income Tax Code), in a manner other than prior registration in the TRMS, by adducing the elements that prove the effective de facto union subsequently, should the proof presented by the Claimants in this proceeding and in the discrepancy management procedure be considered sufficient?

Finally, it is incumbent on the SAT to fix the value to be attributed to the case, as this is a matter of dispute.

III. PROVEN AND UNPROVEN MATTERS OF FACT. REASONING

Regarding the matters of fact, the Tribunal need not pronounce on everything alleged by the parties, it being incumbent on it to select the facts that are relevant to the decision and to distinguish the proven matters from the unproven (in accordance with article 123, no. 2, of the Tax Procedure and Process Code and article 607, no. 3 of the Code of Civil Procedure, applicable by virtue of article 29, no. 1, items a) and e), of the LRATM).

Accordingly, the relevant facts for the determination of the case are chosen and delineated according to their legal relevance, which is established in light of the various plausible solutions to the legal issue(s) (in accordance with the former article 511, no. 1, of the Code of Civil Procedure, corresponding to the present article 596, applicable by virtue of article 29, no. 1, item e), of the LRATM).

Thus, having regard to the positions taken by the parties and the documentary evidence attached, the following facts were considered proven, as relevant to the decision, and the respective documents are indicated (proof by documents), as the basis therefor.

Proven Facts

1. Claimant B… has had her tax address, since 01.12.2012, on Rua…, Leça da Palmeira, …-… Matosinhos – as per article 5 of the request for arbitral pronouncement (RAP) and article 57 of the AT's response;

2. Claimant A… changed, on 2015-06-11, his residence to Rua … no.…, in Leça da Palmeira – as per article 5 of the RAP and article 16 of the AT's response;

3. On 30.05.2015, the claimants filed a Model 3 PIT declaration relating to the income of 2014, having chosen the taxation regime for married taxpayers not judicially separated with respect to persons and property, marking in the field reserved for marital status "de facto union" – as per article 2 of the request for arbitral pronouncement (RAP), article 2 of the response and document no. 1 attached to the RAP;

4. By email of 01.07.2015 the Claimant was informed of the following:
   "... your Model 3 income tax declaration with identification …/…, was selected for analysis whereby shortly you will receive, via CTT, a notification informing you of the situation(s) to be verified by the Tax and Customs Authority services as well as the procedures to be adopted with a view to resolving the same. Further notice is given that the said situation(s) has/have been perfectly identified since this date in your personal area of the Portal das Finanças website, available at www.portaldasfinancas.gov.pt, in the Consult/Discrepancies option. Through that website you may replace the declaration or send by electronic means the clarifications you deem opportune with a view to the eventual resolution of the issue(s) under analysis", a message which was subsequently confirmed, by notification 07.08.2015, with the following wording:

• as per article 4 of the request for arbitral pronouncement (RAP), article 3 of the response, document no. 3 attached to the RAP and pages 4 and 12 of the AF;

1. In July 2015 the Claimant, with the purpose of remedying the discrepancy, submitted various documents, including a residential lease agreement, a water supply contract, an electricity and gas supply contract, two statements of employer regarding the annual income of 2012 earned by the Claimant, a certificate issued by the Local Council regarding the residence of the Claimant on Rua…, no. … in Leça da Palmeira since 01.12.2012, in de facto union with the Claimant, and two statements of the Claimants, under commitment to truthfulness, alleging that they have lived in de facto union with each other, since 2012-12-01 - as per articles 6 to 8 of the request for arbitral pronouncement (RAP), article 4 of the response and documents nos. 4 to 9 attached to the RAP;

2. By official letter of 02.10.2015 and 05.10-2015 the Claimants were notified of the following:

• as per pages 10 and 17 of the AF;

1. On 30.01.2017 the Claimants were notified of the order issued in the error correction proceeding, containing the following decision:

2. In March 2017 the claimants were notified of PIT assessments nos. 2017… and 2017…, here impugned, which show 21,611.66 euros and 57.60 euros, of net PIT collection, respectively for the Claimant and for the Claimant, and to which corresponded 327.79 euros and 57.60 euros to be paid, respectively, amounts which were paid - as per article 11 of the RAP, documents nos. 11 and 12 submitted with the RAP and article 6 of the AT's response;

3. On 21 August 2017 the Claimants filed with CAAD the present request for arbitral pronouncement (RAP) – entry record in the CAAD's Case Management System of the request for arbitral pronouncement.

Unproven Facts

There is no other factual matter alleged that has not been considered proven and that is relevant to the resolution of the processual dispute.

IV. ASSESSMENT OF THE ISSUES FOR THE SINGULAR ARBITRAL TRIBUNAL (SAT) TO RESOLVE

As we have already stated in a previous decision on this matter, the SAT cannot but adhere to what was decided, for example, in the decision cited in the Claimants' pleadings (Decision of the Central Administrative Court South of 5/03/2015, case no. 05655/12) "for the purposes of the provision in no. 2 of article 14 of the PITC, there is identity of tax domicile of the taxpayers when they have the same habitual residence, regardless of compliance with the notification provided in no. 3 of article 19 of the GTL".

In strict terms, what is stated in articles 60 to 79 of the AT's response cannot be considered as the justification of the disputed act (assessments with the reasoning stated in 7 of the proven facts), insofar as the AT, in its final decision on the discrepancy review procedure, did not pronounce itself on the proof presented there by the Claimants, whereby the Tribunal should not concern itself with this factuality, understood as "justification" subsequent to the decision in the procedural stage (act mediately impugned by the Claimant), that is, the post-hoc justification will be irrelevant, and the acts whose legality is questioned must be assessed as they were practiced, and the tribunal cannot, when faced with the finding of the invocation of an illegal ground as support for the administrative decision, assess whether its action could be based on other grounds (see decisions of the Supreme Administrative Court of 10-11-98, Plenary, issued in appeal no. 32702, published in Appendix to the Official Journal of 12-4-2001, page 1207, of 19/06/2002, case no. 47787, published in Appendix to the Official Journal of 10-2-2004, page 4289, of 09/10/2002, case no. 600/02, of 12/03/2003, case no. 1661/02).

It must be said from the outset that it is in the absence of critical appraisal, of critical assessment, by the AT, of this body of documents in the PIT discrepancy review procedure that resides the core of the dispute between the parties. That is, the AT never pronounced itself, save in the AT's response (at least this does not appear in the proceedings) on this body of documents and furthermore on other facts within its official knowledge capable of instructing (the lease agreement presented to the Finance Authority), of supporting, a judicious decision (principle of inquisitoriality).

What matters to establish is the material truth regarding the "situation in which persons live in communion of bed, table and habitation (tori, mensae et habitationes) as if they were married, with only the difference that they are not".

No exceptions are raised that would prevent the existence of a de facto union between the claimants, as referred to in article 2 of Law 7/2011, of 11 May.

Following what was decided by the Central Administrative Court South, in admitting the premise that "de facto union can be proven by any legally admissible means of proof, namely by declaration issued by the competent local council, such declaration to be accompanied by a declaration of both members of the de facto union, under commitment to truthfulness, that they live in these circumstances for more than two years, and by certified copies of the full birth registration of each of them",

it does not seem proper that subsequently one should reach the opposite conclusion, that is, that de facto union is only relevant, in tax terms, after the tax domicile has been notified in identity with the respective partner in accordance with nos. 1, 3 and 4 of article 19, no.1, of the General Tax Law, and it seems that an attempt is being made to say that without this notification, one cannot proceed to prove the de facto union "by any legally admissible means of proof", which does not appear to be sustainable.

The question of the ineffectiveness vis-à-vis the AT of the failure to notify the tax domicile in identity of the de facto union partners, may lead to the assessment being made as if not united in de facto union and will require the taxpayers, should they wish to reverse that situation, to impugn the assessment and prove in the subsequent gracious or contentious procedure the elements of the said personal status.

It shall therefore be concluded that the regime established in article 14 of the Personal Income Tax Code can be applied in the case where there is prior notification of the tax domicile (which will presume identity of domiciles with the person who has also done so) and also in the case of taxpayers proving the required elements of de facto union by any legally admissible means of proof (requirements of civil law and tax law), if they have not complied with the obligation to change domicile.

The first of the issues for the Tribunal to determine is thus resolved. Let us then see whether the proof presented is sufficient to meet the burden that falls on the Claimants.

As can be seen in 5 of the proven facts, the Claimant presented, in the discrepancy review procedure:

• a residential lease agreement;

• a water supply contract;

• an electricity and gas supply contract;

• two statements of employer regarding the annual income of 2012 earned by the Claimant;

• a certificate issued by the Local Council regarding the residence of the Claimant on Rua …, no…, since 01.12.2012 in de facto union with the Claimant; and

• two statements of the Claimants, under commitment to truthfulness, alleging to live in de facto union with each other, since 2012-12-01.

It appears to us that this set of documents, presented to the AT in the discrepancy review procedure, would have made it possible, as soon as they were presented, to conduct instruction of the proceeding, in particular the gathering of further evidence, if the AT considered it insufficient.

In the joint reading of the various documents and having regard to no. 2 of article 2A of Law no. 7/2001 of 11 May, this SAT considers that the proof presented by the Claimants is sufficient to permit the conclusion that the legal and tax requirements of de facto union between both are met (article 2A-2 of Law no. 7/2001 and nos. 1 and 2 of article 14 of the Personal Income Tax Code).

In fact, the lease agreement was concluded only by the Claimant as tenant, but combined with the certificate of residence issued by the Local Council, it is understood that the Claimant also lives there, including because it would be their tax domicile, since 2012.

The water supply contract shows that, since December 2012, there is a water supply, being not a document intended to prove that both Claimants actually inhabited the property, but if any doubts existed as to whether the Claimants permanently lived there, nothing prevented the AT from notifying, for example, the landlord and hearing him in written or oral statements.

The fact that the electricity and gas supply contract was only concluded and the supplies supposedly connected on 18 March 2013 (articles 65 to 68 of the response) only means that there would certainly be - as common sense dictates - another prior contract, at least for electricity (in the name of the builder if the property was newly constructed or in the name of the previous tenant, if previously rented). This doubt could and should have been clarified by the AT during instruction of the discrepancy review procedure, either before the Claimants or before the company that supplies gas and electricity. No proof was made that prior contracts did not exist in the names of other entities.

As for the copies of the Claimant's income statements issued by the employer – what the Claimant intended to prove was that one of them would have been issued with the previous address, because he certainly had not notified the change to the employer, which he would later do, just as before the AT.

All these documents, combined with the certificate issued by the local Local Council, can only lead this SAT to hold that the existence of de facto union between the Claimants is demonstrated, since, at least, 01.01.2012.

Accordingly, the request for arbitral pronouncement is well-founded.

Determination of the Case Value

In the request for pronouncement the Claimants state the following:

"On 30.05.2015, the claimants filed a Model 3 PIT declaration, having chosen, in accordance with article 14, no. 1 of the PITC, the taxation regime for married taxpayers not judicially separated with respect to persons and property ... with the result that from the simulation carried out in the Tax Authority's computerized simulator, a value to be received by the claimants resulted in approximately 3,300.00 €" (articles 2 and 3 of the RAP);

"In that sequence, in late March 2017, the claimants were notified of PIT assessments nos. 2017 … and 2017 … ... from which resulted the obligation to deliver to the State, respectively, the amounts of 327.79 € and 57.60 €, which the plaintiffs have already paid";

They end by requesting: "WHEREBY THE PIT ASSESSMENT ACTS NOS. 2017 … AND 2017 …, RELATING TO THE YEAR 2014, SHOULD BE ANNULLED, WITH ALL LEGAL CONSEQUENCES".

In pleadings they state: "What the respondents seek with the present arbitral action is, as subjects living in conditions analogous to those of spouses for more than two years, to see annulled PIT assessments nos. 2017 … and 2017 …, relating to the year 2014, which, in consequence, should be replaced by another that respects their choice of the taxation regime for married taxpayers not judicially separated with respect to persons and property, as is permitted by them by articles 14 of the PITC and 3, item d) of Law no. 7/2001, of 11/05. The claimants understood, therefore, in view of the simulation carried out in the Tax Authority's computerized simulator, that the value of the economic benefit of the request is substantially higher than the amount assessed by the AT. What is certain is that the LRATM does not have any norm that regulates the case value, whereby, if it is understood that article 97-A, no.1, item a) of the Tax Procedure and Process Code is applicable by virtue of article 29, no. 1, item a) of the LRATM, the case value should be corrected accordingly".

And they assign at the end of the RAP the following procedural value: "3,685.39 € (three thousand, six hundred and eighty-five euros and thirty-nine cents)".

For its part, the AT states the following: "The Claimants assign to the arbitral request the value of € 3,685.39. Now, pursuant to article 97.-A of the Tax Procedure and Process Code (TPPC), applicable by referral of article 29, no. 1, item a) of the Legal Regime for Tax Arbitration (LRATM), when an assessment is impugned, the case value is that of the amount whose annulment is sought. It is verified that the Claimants seek the annulment of PIT assessments nos. 2017… and 2017…, relating to the year 2014, with the global value of € 385.39, which value should be the indicated one for the present proceedings, and should accordingly be corrected from the previously indicated one" (articles 8 to 10 of the response);

In counter-pleadings the AT states: "Regarding the case value, it is strange that the Claimants are unaware of the provision in article 29, which provides for the subsidiary right to be applied, in matters not covered, of the LRATM. The AT reiterates everything stated in articles 9 to 10 of the Response, and to the situation in question, the norm provided in article 97.-A, no. 1, item a) of the TPPC should be applied, whereby the case value of the arbitral request should correspond to the value of the assessment for which the Claimants seek annulment. The Claimants indicate as the case value of the arbitral request, the value they obtained in a simulation, which should not be considered, since it is no more than a simulation and not a concrete determination of values. It is thus reiterated that the arbitral request should be corrected to the value of € 385.39, which corresponds to the assessment for which the Claimants seek annulment" (articles 2 to 5 of the counter-pleadings).

Article 97A of the TPPC, under the heading "case value" provides that: "1 - The values to be considered, for the purposes of costs or others provided in law, for actions that take place in tax courts, are the following: a) When an assessment is impugned, that of the amount whose annulment is sought."

In annotation to article 97A in the TPPC, Volume II, 6th Edition, 2011, by Jorge Lopes de Sousa, it is stated: "In view of the rule in item a) of no. 1 of this article 97.-A, it must be concluded that, when a tax assessment act is impugned, the case value is only that of the amount whose annulment is sought, which will be that of the assessment itself, if total annulment is sought, or the value of the part impugned, if only partial annulment is sought".

Naturally, the amounts to be reimbursed or to be paid (which the AT considers, implicitly, as being the result of an assessment, as an act of application of a rate to a taxable base), in a PIT assessment, do not reflect the value of the assessment, understood as the product of the application of a rate to a taxable base, possibly increased by compensatory interest.

It was proven that "In March 2017 the claimants were notified of PIT assessments nos. 2017 … and 2017 …, here impugned, which show 21,611.66 euros and 57.60 euros, of net PIT collection, respectively for the Claimant and for the Claimant, and to which corresponded 327.79 euros and 57.60 euros to be paid, respectively, amounts which were paid" – item 8 of the agreed proven facts.

The Claimant comes to impugn the assessment without having expressly and strictly stated that she was doing so partially, and it is certain that by the manner in which she expressed herself she intends that the assessment be annulled, at least to the extent indicated as being the result of the simulation which she carried out (3,300.00 euros) or to the amount which at the end she indicates as being the value of the economic benefit (3,685.39 €).

In view of the above, the value of the economic benefit is fixed at 3,685.39 euros, the value indicated by the Claimants, considering that they presented a request for partial annulment, since, by the manner in which they presented it they intend to see annulled the total values of the net PIT collections (which resulted from PIT assessment operations = disputed acts) contained in the assessment notes, placed globally in question by the Claimant, but only to the extent of the global amount which they indicated as being the value of the economic benefit.

V - OPERATIVE PART

In view of and with the reasoning set out above:

1. The request for arbitral pronouncement seeking partial annulment of PIT assessments nos. 2017… and 2017…, relating to the year 2014, is judged to be well-founded, since, by the proof produced, they are in non-conformity with no. 2 of article 2A of Law 7/2001, of 11.05 and article 14 of the Personal Income Tax Code.

2. Accordingly, PIT assessments nos. 2017 … and 2017 …, relating to the year 2014, are partially annulled, and in consequence, they must be replaced by others that respect the choice of the taxation regime for married taxpayers not judicially separated with respect to persons and property, in the condition of living in "de facto union", in accordance with articles 14 of the Personal Income Tax Code and 3, item d) of Law no. 7/2001, of 11/05.

Case value: in accordance with the provision in article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (and item a) of no. 1 of article 97A of the TPPC), the case value is fixed at 3,685.39 €.

Costs: in accordance with the provision in article 22, no. 4, of the LRATM, the amount of costs is fixed at € 612.00 according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let notification be made.

Lisbon, 27 March 2018

Singular Arbitral Tribunal (SAT),

Augusto Vieira

Text prepared by computer in accordance with the provision in article 131, no. 5, of the Code of Civil Procedure, applicable by referral of article 29 of the LRATM.

The wording of this decision is governed by the orthography prior to the Orthographic Agreement of 1990.