Process: 480/2017-T

Date: May 21, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

In this CAAD arbitration case (Process 480/2017-T), a taxpayer challenged an IRS assessment of €18,172.53 for the 2015 tax year, specifically disputing the rejection of rental property deductions including maintenance, conservation expenses, insurance, and stamp duty. The claimant argued the assessment lacked proper reasoning and violated essential formalities. After filing an administrative review (reclamação graciosa) that was tacitly rejected, she requested arbitration. The Tax Authority argued the request was untimely, as the 90-day deadline to challenge the original assessment had expired. Crucially, while the claimant referenced the tacit rejection in her submissions, she only requested annulment of the original assessment act, not the tacit rejection decision itself. The arbitrator determined that although CAAD tribunals have competence to review second-level acts like administrative review decisions, the claimant failed to properly request annulment of the tacit rejection act. The case establishes important procedural principles: when challenging a tax assessment after administrative review, taxpayers must explicitly request annulment of the rejection decision, not just the underlying assessment. The 90-day deadline runs from voluntary payment deadline for direct challenges, but from the tacit rejection date when challenging review decisions. This ruling emphasizes the critical importance of precise procedural compliance in Portuguese tax arbitration, particularly regarding temporal limits and proper identification of the challenged administrative act.

Full Decision

ARBITRAL DECISION

The Arbitrator Dr. Maria Antónia Torres, appointed by the Ethics Council of the Administrative Arbitration Centre ("CAAD") to form this Single Arbitral Tribunal, constituted on 21 November 2017, decides as follows:

1. REPORT

1.1. A..., taxpayer no..., with residence in ..., ..., ..., Lisbon, notified of the tax assessment act for personal income tax (IRS), relating to the year 2015, with collection note no. 2016..., in the amount of €18,172.53 (eighteen thousand one hundred and seventy-two euros and fifty-three cents) and following the decision of tacit rejection of the administrative review filed against such act, requested the constitution of an arbitral tribunal, under article 2, no. 1, paragraph a), and article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

1.2. The request for arbitral decision has as its object the declaration of illegality, and consequent annulment, of the personal income tax (IRS) assessment act, relating to the year 2015, with collection note no. 2016..., in the amount of €18,172.53 (eighteen thousand one hundred and seventy-two euros and fifty-three cents), better identified in the initial pleading presented by the Claimant, and which is hereby considered as properly pleaded and reproduced, for all legal purposes. The annulment of the interest assessment act with no. 2016... is also requested.

In accordance with the initial pleading, the Claimant was notified of the aforesaid assessment act and, not agreeing with such IRS assessment, filed an administrative review on 8 February 2017, which was tacitly rejected, whereupon she requested the constitution of this Arbitral Tribunal, which request was accepted. The Claimant considers the request to be manifestly timely, given that the 90-day period for the request to constitute the Arbitral Tribunal should be counted from the date of formation of the presumption of tacit rejection of the aforementioned administrative review.

1.3. The Claimant also maintains that the assessment act should be considered illegal, firstly because it does not contain the necessary reasoning for understanding the act, and also because the Claimant considers that essential formalities required for the proper formation of the act were omitted.

Finally, the Claimant objects to the non-acceptance of maintenance and conservation expenses, insurance and stamp duty borne with the real properties of which she is the owner and which she has let. She considers that these were actually borne and documented proof was provided.

1.4. The Respondent's position is that the request to constitute this tribunal should be considered untimely from the outset. The Respondent contends that, wishing to oppose the assessment act sub judice, the Claimant had a 90-day period in which to do so, a period that had long since expired at the time her request to constitute an arbitral tribunal was filed.

It is true that the Claimant filed an administrative review which was tacitly rejected, however, this act does not feature in the request formulated. The tribunal considers itself bound by this request.

Without conceding, the Respondent further adds that, in summary, expenses relating to the let properties presented by the Claimant were not accepted because they were not properly documented or had a different place of location from where the service was provided.

Finally, the Respondent maintains that there is no lack of reasoning in the tax assessment act, and that no essential formality was omitted.

1.5. The meeting of the arbitral tribunal provided for in article 18 of the RJAT was waived and the parties agreed not to submit further arguments.

2. SANITATION

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, are properly entitled and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

3. FACTUAL MATTER

With relevance for the substantive decision, the Tribunal finds the following facts to be proven:

1) The Claimant received the personal income tax (IRS) assessment act, relating to the year 2015, with collection note no. 2016... and the interest assessment act with no. 2016..., in the amount of €18,172.53 (eighteen thousand one hundred and seventy-two euros and fifty-three cents);

2) The disagreement between the Claimant and the Respondent regarding the aforementioned assessment act concerns the acceptance or not of the expenses presented by the Claimant in her model 3 form for 2015, relating to the real properties of which she is the owner and which are let;

3) Disagreeing with the assessment act received, the Claimant filed an Administrative Review of the said collection note, her request being tacitly rejected;

Facts not proven:

No essential facts, with relevance for the assessment of the merits of the case, were found which were not proven.

Justification of the Factual Matter

The conviction regarding the facts found to be proven was based on the evidence presented by the Claimant and the Respondent, attached to the proceedings.

4. ON THE LAW

Analysis of the lapse of the right of action

Having established the factual matter, it is important to address the legal issues raised by the parties.

The request for arbitral decision has as its object the Personal Income Tax (IRS) assessment act, relating to the year 2015, with collection note no. 2016..., in the amount of €18,172.53 (eighteen thousand one hundred and seventy-two euros and fifty-three cents).

The period for challenging a tax assessment act is 90 days (pursuant to article 10, no. 1, paragraph a), of the RJAT, calculated from the events provided for in numbers 1 and 2 of article 102 of the CPPT. In the present case, the 90-day period would be calculated from the end of the period for voluntary payment of the tax liability, by virtue of the provisions of article 104, no. 1, paragraph b), of the CIRC. The request for arbitral decision was submitted when the aforementioned 90-day period had clearly already elapsed.

However, it is established in the arbitral jurisprudence of the CAAD that, although article 2, no. 1, paragraph a), of the RJAT explicitly refers to the competence of arbitral tribunals to declare the illegality of assessment acts, this competence also extends to second and third-level acts that assess the legality of primary acts, such as acts of rejection of administrative reviews (tacit or otherwise).

It so happens that, being thus, having the period for challenging the assessment act expired (because the 90-day period had already elapsed), the Claimant had available the means to challenge the tacit rejection act of the administrative review, that is, to request the assessment of the legality of the assessment act by challenging the unfavourable decision rendered in the administrative remedy.

However, what the Claimant requests in her initial pleading is solely the annulment of the assessment act in question and, although she makes reference to the tacit rejection of the administrative review she filed, the Claimant identifies as the object of the arbitral request the IRS assessment act, never challenging the said rejection of the review.

Additionally, in response to the exception of untimeliness of the request for arbitral decision raised by the Respondent, the Claimant reiterates the request for annulment of the assessment act sub judice, and nothing more.

We cannot therefore fail to agree with the Respondent when it, in the response submitted, contends that the Claimant did not formulate to the Tribunal any request aimed at the annulment of the act of tacit rejection of the administrative review.

The Claimant had an appropriate means to achieve her purpose – to challenge the tacit rejection of the Administrative Review – but did not use it. She identifies her cause of action and her request clearly, in respect of which the contradictory process provided for in paragraph a) of article 16 of the RJAT was exercised and the principle of equality was respected: the Tribunal, having received the response of the Respondent, invited the Claimant to make submissions on the exceptions raised. She had ample opportunity to request of the Tribunal what she deemed convenient, and, in that regard, she did not come to request any change to her request and/or cause of action.

Now, the scope of the Tribunal's powers of cognition is limited by the request made by the Claimant, and pursuant to article 609 of the CPC "The object of the judgment thus coincides with the object of the proceedings, and the judge can neither fall short of nor go beyond what was requested of him". In this context, the decision of this Tribunal can only be to uphold the exception invoked, thus precluding the assessment of the remaining issues raised in the proceedings.

5. DECISION:

In these terms, and with the reasoning set out above, this arbitral tribunal decides to find the request for a declaration of illegality of the tax assessment act for personal income tax (IRS), relating to the year 2015, better identified above, to be unfounded.

* * *

The value of the proceedings is fixed at €18,172.53 (eighteen thousand one hundred and seventy-two euros and fifty-three cents), in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, paragraph a) of the CPPT and 306 of the CPC.

The amount of costs is fixed at €1,224 (one thousand two hundred and twenty-four euros) under article 22, no. 4 of the RJAT and Table I attached to the RCPAT, to be paid by the Claimant, in accordance with the provisions of articles 12, no. 2 of the RJAT and 4, no. 4 of the RCPAT.

Let notice be given.

Lisbon, 21 May 2018

The Arbitrator

(Maria Antónia Torres)

Text prepared by computer, pursuant to article 131, no. 5 of the Code of Civil Procedure, applicable by referral of article 29, no. 1, paragraph e) of the RJAT.

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

Frequently Asked Questions

Automatically Created

What rental property expenses can be deducted from IRS income tax in Portugal, including maintenance, insurance, and stamp duty?
Under Portuguese IRS law, rental property expenses including maintenance, conservation costs, insurance premiums, and stamp duty (imposto do selo) are generally deductible from rental income under Category F (predial income), provided they are properly documented with invoices, receipts, or other valid proof. The expenses must relate directly to the let property and correspond to the actual location where services were provided. In this case, the Tax Authority rejected certain expenses because they were inadequately documented or involved properties in different locations from where services were rendered, highlighting that mere presentation of expenses is insufficient without proper supporting documentation meeting legal requirements.
What is the deadline to request arbitration at CAAD after a tacit rejection of a tax complaint (reclamação graciosa)?
The deadline to request CAAD arbitration after tacit rejection of an administrative review (reclamação graciosa) is 90 days from the date the tacit rejection is deemed to have occurred. Under Portuguese tax procedure law (CPPT), tacit rejection forms after the legal period for the Tax Authority to respond expires. However, this case demonstrates a critical procedural requirement: taxpayers must explicitly request annulment of the tacit rejection decision itself in their arbitration petition, not merely the underlying assessment act. If the taxpayer only challenges the original assessment after the initial 90-day period (counted from voluntary payment deadline) has expired, the request will be deemed untimely, even if filed within 90 days of the tacit rejection.
Can Portuguese taxpayers challenge an IRS tax assessment that lacks proper legal justification or fundamental reasoning?
Yes, Portuguese taxpayers can challenge IRS assessments that lack proper legal justification or fundamental reasoning, as tax acts must comply with the duty to provide reasons (fundamentação) required under Portuguese tax law. The claimant in this case argued the assessment violated essential formalities and lacked necessary reasoning for understanding the act. However, procedural compliance is equally critical—challenges must be filed within the 90-day deadline and properly identify the administrative act being contested. When an administrative review has been filed and rejected, the challenge at CAAD must explicitly target the rejection decision to preserve the right to contest the underlying assessment's substantive legality, including defects in reasoning or formal requirements.