Process: 49/2018-T

Date: May 28, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 49/2018-T) addresses the application of simplified regime coefficients under Article 31 of the Portuguese IRS Code (CIRS) for a taxpayer operating a plumbing installation business. The claimant husband initiated activity in November 2014 under CAE 45330 (later revised to CAE 43211/43221 - installation of piping), declaring income under the simplified regime in Annex B of the IRS Model 3 declaration. He reported €42,192.31 in field 401 (sales of goods) and €10,745.00 in field 443 (other Category B income). The Tax Authority (AT) subsequently reclassified income from field 443 to field 440, applying the 0.75 coefficient for service provision rather than a potentially more favorable treatment. This reclassification resulted in an additional assessment of €1,077.38 for the 2014 tax year. The taxpayers challenged both the assessment and the denial of their administrative appeal (reclamação graciosa) through CAAD arbitration. The core dispute concerns whether the plumbing installation activity constitutes service provision subject to the 0.75 coefficient under Article 31(1)(b) of CIRS, as AT argued, or whether different coefficient treatment applies. The AT defended its position by asserting that activities listed in the CAE or in the Article 151 CIRS table must be reported in field 440, automatically triggering the service provision coefficient. This case illustrates the importance of proper CAE classification and field selection in IRS declarations under the simplified regime, as these determinations directly impact the applicable coefficient and resulting tax liability.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, taxpayer no. … and wife B…, taxpayer no. …, both residing in …, …, …-… …, Ponte da Barca, (hereinafter referred to as Claimants or Taxpayers), filed on 2018-02-05 a request for constitution of a singular arbitral tribunal, in accordance with the provisions of subsection a) of no. 1 of article 2, no. 5, subsection a), article 6, no. 1 and article 10, nos. 1 and 2, all of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter designated as Respondent or AT) is requested, with a view to the declaration of illegality and consequent annulment of the IRS assessment act no. 2015…, and respective interest relating to the year 2014, in the total amount of 1,077.38 €, as well as the declaration of illegality and consequent annulment of the decision to deny the administrative appeal to which no. …2016… was assigned.

  2. The request for constitution of the Singular Arbitral Tribunal was accepted by the Honorable President of CAAD, and notified to the Respondent on 2018-02-12.

  3. In accordance with the provisions of subsection a) of no. 2 of article 6 of RJAT, by decision of the Honorable President of the Deontological Council of CAAD, duly notified to the parties, within the prescribed periods, the undersigned was appointed as arbitrator, who communicated to that Council the acceptance of the assignment within the period provided for in article 4 of the Deontological Code of the Center for Administrative Arbitration.

  4. On 2018-03-17 the parties were notified of this appointment, having not manifested an intention to refuse the arbitrator's appointment, in accordance with the combined provisions of article 11, no. 1, subsections a) and b) in the wording conferred upon them by Law no. 66-B/2012, of 31 December.

  5. The Singular Arbitral Tribunal was constituted on 2018-04-16, in accordance with the requirement of subsection c) of no. 1 of article 11 of RJAT, in the wording conferred upon it by article 228 of Law no. 66-B/2012, of 31 December.

  6. Duly notified for this purpose, through order issued on 2018-04-16, the Respondent presented on 2018-05-15 its response, and on that same date proceeded to attach the administrative file.

  7. By arbitral order issued on 2018-05-15, and for the reasons contained therein, the following was, among other things: (i) dispensed with the holding of the meeting referred to in article 18 of RJAT, (ii) dispensed with the submission of pleadings, (iii) indicated as the deadline for delivery of the decision the thirty-first of May of two thousand and eighteen, with the Claimants further being warned to proceed with payment of the subsequent court fee up to ten days before that indicated date.

  8. To support their request, the Claimants (with express reference in particular to the Claimant husband) invoked in summary, and with relevance to what matters here, the following (which is mentioned mostly by transcription):

8.1. The Claimant husband declared the beginning of his activity on 11-11-2014, in the main CAE 45330 – installation of piping and air conditioning systems (see article 6 of the request for arbitral pronouncement and document no. 3 attached thereto),

8.2. With revision 3 of the CAE, this CAE 45330 came to correspond to CAE 43211 – installation of piping (see article 7 of the request for arbitral pronouncement),

8.3. In the year 2014 (….) the Claimant husband filled out Annex B of the IRS model 3 declaration relating to "Category B Income", filling in field 1 relating to "Simplified Taxation Regime" (see article 9 of the request for arbitral pronouncement and document no. 5 attached thereto),

8.4. In section 3 A of the said Annex "Identification of the Taxpayer(s)", field 11 – "CAE Code (Professional, Commercial and Industrial Income", the Claimant husband inserted the code 43221 – installation of piping (see article 10 of the request for arbitral pronouncement and document no. 5 attached thereto),

8.5. Field 10 – "Code of the Activity Table Art. 151 of CIRS" was not filled in (see article 11 of the request for arbitral pronouncement and document no. 5 attached thereto),

8.6. The Claimant husband declared, in 2014, in field 401, the amount of 42,192.31 €, relating to sales of goods and products carried out (see article 12 of the request for arbitral pronouncement and document no. 5 attached thereto),

8.7. And in field 443 (category B income not included in the previous fields) the Claimant husband declared the amount of 10,745.00 € (see article 13 of the request for arbitral pronouncement and document no. 5 attached thereto),

8.8. (….) the Claimants received notification (….) in which they were informed that the AT proposed to alter the declared elements relating to category B income for the year 2014 (see article 15 of the request for arbitral pronouncement and document no. 6 attached thereto),

8.9. On 02.12.2015, the Claimants were notified of the final decision to alter category B income, from field 443 to field 440 (see article 16 of the request for arbitral pronouncement and document no. 7 attached thereto),

8.10. And (…) of the IRS assessment no. 2015 … and account settlement statement no. 2015 …(see article 17 of the request for arbitral pronouncement and documents nos. 8 and 9 attached thereto).

8.11. The Claimants further make in their petition various considerations regarding the activity of the Claimant husband and the applicability of the coefficients provided for in no. 2 of article 31 of CIRS,

8.12. Concluding their request for the annulment of the underlying IRS assessments, and for the AT to be ordered to pay compensatory interest.

  1. The AT and as already mentioned, notified for this purpose (arbitral order of 2018-04-16) presented its response in a timely manner, arguing for the absence of any illegality relating to the assessment in question here, concluding, consequently, for the lack of merit of the request formulated by the Claimants in accordance, moreover, with the position already expressed by it in the course of the denial of the administrative appeal.

9.1. Sustaining in very brief summary, in defense of its position, and for what matters here that "to the activity carried out [by the Claimant husband] on 2014/12/31, "Installation of Piping", activity listed with CAE 43221, the coefficient 0.75, provided for in subsection b) of no. 1 of article 31 of CIRS, applies to the provision of services that fall within subsection b) of no. 1 of the same statute, which prescribes "Those earned in the exercise on a self-employed basis, of any activity of provision of services including those of a scientific, artistic or technical character, whatever their nature, even if connected with activities mentioned in the previous subsection"

9.2. It further notes that "Field 440 with the descriptor "Income from professional activities provided for in the Table of art. 151 of CIRS and/or in CAE (…) is intended to indicate the income earned in the exercise on a self-employed basis of any activity of provision of services that falls within subsection b) of no. 1 of art. 3 CIRS or in accordance with the codes mentioned in the activity table approved by Regulation 1011/2001 of 21/08." (see article 17 of the response).

9.3. Concluding that (…) "provided that the activity carried out is listed in the table of art. 151 CIRS or is listed in the CAE list, the income must be entered in field 440, as stated in the description of that field." (see article 18 of the response).

  1. The Singular Arbitral Tribunal is materially competent and is regularly constituted, in accordance with the provisions of articles 2, no. 1, subsection a), 5 and 6 of RJAT.

  2. The parties have legal personality and capacity and tax capacity, are legitimate and are legally represented (articles 15, 16 and 65 of the General Tax Law and articles 3, 6 and 15 of the Code of Tax Procedure and Process, pursuant to article 29, no. 1, subsection a) of RJAT.

  3. The process is not affected by any nullities.

  4. No exceptions or preliminary questions have been raised that would prevent the examination of the merits.

II. REASONING

A. MATTER OF FACT

A.1. Facts deemed as proven

  1. The Claimant husband declared the beginning of his activity on 2004-11-11, with CAE 453330 – installation of piping and air conditioning systems, corresponding on the date of occurrence of the facts to RevIII CAE 43221.

  2. The Claimant husband opted at the beginning of activity for the simplified regime for purposes of taxation of his category B income, provided for in article 28, no. 1, subsection a) and in article 31, both of CIRS.

  3. On 2015-05-18 the Claimants submitted via the internet their IRS model 3 income declaration, with reference to the year 2014, to which no. … was assigned.

  4. The Claimant husband declared in field 401 of the IRS model 3 the amount of 42,192.31 €, relating to sales of goods and applied materials, and in field 443, corresponding to category B income not included in the previous fields, declared the amount of 10,745.00 €.

  5. There being no mention in the field intended for the insertion of the Code of the Activity Table Art. 151 of CIRS – Field 10 A of Annex B of the IRS model 3.

  6. The declaration in question was selected for analysis of discrepancies, as it was (in the AT's understanding) detected the existence of a discrepancy relating to 2014, with the reason being "D-71 – Consistency of CAE, Registry and Declared Income"

  7. The Claimants were through office no. … of 2015-06-30 notified of such discrepancy,

  8. Having been subsequently and specifically on 2015-10-01 notified, in accordance with the provisions of article 60 of the LGT, in light of the AT's draft decision to proceed with correction of the income declaration of the Claimants, more specifically in the sense that "category B income, to be withdrawn from field 443 and included in field 440 of annex B, given that they derive from provision of services falling within subsection b) no. 1 of article 3, combined with subsection b) of no. 1 of article 31, both of CIRS"

  9. The AT issued the IRS assessments challenged here,

  10. Assessments with which the Claimants disagreed, having filed against them an administrative appeal, presented on 2016-05-16 with the Tax Service of … and subsequently forwarded to the Tax Service of … .

  11. In the draft decision of the administrative appeal, which became final, it states, among other things, and for what is relevant here, the following:

"(…)

  1. Having raised doubts in the interpretation of subsections b) and c) of article 31 of the IRS Code, it was, by Order of His Excellency the State Secretary for Tax Affairs, of 28 February, sanctioned the understanding contained in Circular no. 5/2014, of 20 March, of the Department of Services of Personal Income Tax (DSIRS), came to issue the AT's understanding regarding the conceptualization of the provision of services as a basis for application of the coefficients established in subsections b), c) and e) of no. 2 of article 31 of the IRS Code.

  2. In the introduction of this Circular it states that Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, altered the wording of no. 2 of article 31 of the IRS Code, coming to provide new coefficients for obtaining taxable income when the determination of business and professional income, category B, is made on the basis of applying the rules arising from the simplified regime.

  3. And in point no. 1, which is what matters here, it clarifies the following:

"Are covered under subsection b) of no. 2 of article 31 of the IRS Code the income earned in the exercise, on a self-employed basis, of any activity of provision of services that fall within subsection b) of no. 1 of article 3 of the same Code, regardless of whether the activity carried out is, in accordance with article 151 of the IRS Code, classified according to the Portuguese Classification of Economic Activities (CAE), of the National Institute of Statistics, or in accordance with the codes mentioned in the activity table approved by Regulation no. 1011/2001, of 21 August, including the activity with the code "1519 Other service providers", since the regulation in question does not refer to activities identified in a specific manner in the activity table, unlike what happens in subsection b) of no. 1 of article 101 of the IRS Code for purposes of withholding at source"

  1. Notwithstanding the allegations by the claimant, the truth is that its income relating to the provision of services is taxed in accordance with the coefficient provided for in subsection b) of no. 2 of art. 31 of CIRS.

  2. The AT continues to believe that the income relating to the provision of services in question should be indicated in field 440, for purposes of applying the coefficient for determination of taxable income of category B (The amount of € 10,745.00 declared in Field 443 must be entered in the aforementioned field 440).

  3. Being applicable the coefficient 0.75, in accordance with article 31, no. 2, subsection b) of the IRS Code, and not the coefficient of 0.10, in accordance with article 31, no. 2, subsection e) of the IRS Code, in the wording given by Law no. 83-C/2013, of 31 December." (emphasis in original)

  4. The administrative appeal in question to which no. …2016… was assigned, was finally denied by order of 2017-11-03, notified to the Claimants, through office no. …/2017.

  5. Claimants proceeded to pay the additional IRS assessment in question here (see documents nos. 11 to 17 attached with the request for arbitral pronouncement).

  6. On 2018-02-05 the Claimants presented with CAAD a request for arbitral pronouncement which gave rise to the present process (see administrative case management information system of CAAD).

A.2. Facts deemed as not proven

With relevance to the decision there are no facts that should be considered as not proven.

A.3. Reasoning of the matter of fact deemed as proven and not proven

With respect to the matter of fact, the Tribunal need not pronounce itself on everything that was alleged by the parties, with the duty of selecting the facts that matter for the decision and discriminating the proven from the not proven matter (see art. 123, no. 2 of CPPT and article 607, no. 3 of CPC, applicable pursuant to article 29, no. 1, subsections a) and e) of RJAT).

Thus, the facts relevant to the adjudication of the case are chosen and determined according to their legal relevance, which is established in consideration of the various plausible solutions of the question(s) of law (see previous article 511, no. 1 of CPC, corresponding to the current article 596, applicable pursuant to article 29, no. 1, subsection e) of RJAT).

Thus, taking into account the positions assumed by the parties in light of article 110, no. 7 of CPPT, the documentary evidence and the PA attached to the case, the facts listed above are deemed proven, with relevance to the decision.

B. MATTERS OF LAW

The question to be analyzed and decided in the present case is clearly identified, and comes down to determining which of the coefficients b) or e) provided for in no. 2 of article 31 of CIRS will be properly applied to the income, category B earned by the Claimant husband with reference to the tax year 2014, and relating to the services provided by him.

It is not controversial regarding the value of "sales of goods and products", entered in field 401, of field 4 A of Annex B of IRS model 3.

The Regulatory Framework at the Time of the Underlying Facts

In the year 2014, the wording of no. 1 of article 3 of CIRS was as follows: "business and professional income is considered: a) that which results from the exercise of any commercial, industrial, agricultural, forestry or livestock activity", also providing for subsection "b) income earned in the exercise, on a self-employed basis, of any activity of provision of services, including those of a scientific, artistic or technical character, whatever their nature, even if connected with activities mentioned in the previous subsection"

The wording of article 31 of CIRS being the following, introduced by article 175 of Law no. 83-C/2013, of 31 December (State Budget Law 2014), effective on 2014-01-01:

"1. The determination of taxable income results from the application of objective indicators of a technical-scientific basis for the different sectors of economic activity"

"2. Until the approval of the indicators mentioned in the preceding number, or in their absence, taxable income is obtained by adding to the income resulting from the provision of services provided by the partner to a company covered by the transparent tax regime, in accordance with subsection b) of no. 1 of the Corporate Income Tax Code, the amount resulting from the application of the following coefficients:

a) 0.15 of sales of goods and products, as well as of the provision of services carried out under hotel and similar activities, catering and beverages;

b) 0.75 of the income from professional activities listed in the table referred to in article 151;

c) 0.95 of the income from contracts whose object is the transfer or temporary use of intellectual or industrial property rights or the provision of information concerning experience acquired in the industrial, commercial or scientific sector, of income from capital attributable to income-generating business and professional activities, of positive results from real estate income, of the positive balance of gains and losses and of the remaining patrimonial increases;

d) 0.30 of subsidies or subventions not intended for operation;

e) 0.10 of subsidies intended for operation and remaining category B income not provided for in the preceding subsections".

As is clear, the entry of income in the various fields provided for in Annex B of the IRS Model 3 – Field 4 A PROFESSIONAL, COMMERCIAL AND INDUSTRIAL INCOME, has repercussions on the choice of coefficient for determination of taxable income, in accordance with the provisions of no. 2 of article 31 of CIRS, since, and for what is relevant here, the entry of income in field 440 of Annex B of IRS model 3 corresponds to the coefficient of 0.75% taxation, while for income entered in field 443, the coefficient to be applied is 0.10%.

We have already seen that the Claimant husband A…, entered in the IRS model 3 declaration for the year 2014, in Annex B, section A4 field 443, income in the amount of 10,745.00 €, that field being intended for "Category B Income not included in the previous fields", with the AT arguing, also as already signaled, that the Claimant should have entered the amount of 10,745.00 € in field 440 and not as he did in field 443, with obvious implications in the application of the coefficients provided for in no. 2 of article 31 of CIRS for the determination of taxable income.

This is the point of disagreement between the parties and, as emphasized, the subject of the present proceeding, with the AT having notified the Claimants of the discrepancy regarding the declaration in question relating to the Claimant husband A…, and of the intention to proceed with correction of the amounts entered, in accordance with its interpretation, that is, that in its view the sum of 10,745.00 € entered in field 443, should appear in field 440.

If, in truth, in the table of professional activities to which article 151 of CIRS refers, (Regulation no. 1011/2001, of 21 August) the activity of "installation of piping" is not expressly listed, the same is already found in the classification of Portuguese economic activities by branch of activity (CAE), specifically under code 43221.

This being the case and,

Having delineated the professional, commercial and industrial income frameworks, it will now be necessary to analyze what type of provision of services activity was carried out by the Claimant husband in the year 2014, in order to determine which coefficient should be applied for purposes of determination of taxable income.

The AT argues that the Claimant husband's income earned in the year 2014 resulted from the exercise of the activities of "installation of piping – CAE 43221", to which the coefficient of 0.75% provided for in subsection b) of no. 2 of article 31 of CIRS should be applied, whereas the Claimant husband argues that such activity, since it does not derive from activities listed in the table of article 151 of CIRS, the coefficient of 0.10 should be applied in accordance with subsection e) of no. 2 of article 31 of CIRS" (see article 28 of the request for arbitral pronouncement).

Let us then see;

Not disregarding this Tribunal the function, scope, level of binding and recipients of administrative guidance, particularly circulars in tax matters, subscribing to the doctrine that flows from, by way of example, the Decision of the Central Administrative Court of the South, of 09-11-2010 (reported by the Honorable Judge José Correia in the context of case no. 04292/10) [1] it is, however, tending to agree with the AT's understanding regarding the conceptualization of services as a basis for application of the coefficients established in subsections b) and e) of no. 2 of article 31 of the IRS Code, which results from Circular no. 5/2014, of the Department of Services of Personal Income Tax (DSIRS), of 20 March 2014.

There it is stated that, (…) "1. Are covered under subsection b) of no. 2 of article 31 of the IRS Code the income earned in the exercise, on a self-employed basis, of any activity of provision of services that fall within subsection b) of no. 1 of article 3 of the same Code, regardless of whether the activity carried out is, in accordance with article 151 of the IRS Code, classified according to the Portuguese Classification of Economic Activities (CAE) of the National Institute of Statistics, or in accordance with the codes mentioned in the activity table approved by Regulation no. 1011/2001, of 21 August, including the activity with the code "1519 Other service providers", since the regulation in question does not refer to activities identified in a specific manner in the activity table, unlike what happens in subsection b) of no. 1 of article 101 of the IRS Code for purposes of withholding at source".

  1. Are also included within the scope of applicability of the regulation in question the income from the practice of isolated acts relating to activities covered under subsection b) of no. 1 of article 3 of the IRS Code, to which subsection i of no. 2 of the same article refers"

Being the activities of "installation of piping" activities of provision of services, as it follows from the provision of article 1154 of the Civil Code,[2] we see no reason not to subscribe to the position conveyed by the AT in the sense that the income therefrom is not applied the coefficient provided for in subsection b) of no. 2 of article 31 of CIRS, with the entry thereof in field 440 – Section 4-A of Annex B of the IRS model 3 declaration.

It should also be noted that the considerations made by the Claimants regarding "taxation under the Corporate Income Tax", set out under articles 39 and following of the request for arbitral pronouncement, have no relevance to what is in question in the present proceedings.

In light of what has been stated above and without need for any other developments or considerations, the request for annulment of the underlying IRS assessment is without merit.

III. COMPENSATORY INTEREST

The Claimants formulate a request for compensatory interest.

The reimbursement of amounts relating to them depends on the success of the request for declaration of illegality of the assessment acts.

Consequently, since that request is without merit, the requests for reimbursement and compensatory interest are necessarily without merit.

IV. DECISION

In accordance with what has been stated above, this Singular Arbitral Tribunal decides on:

a. to declare without merit the requests formulated by the Claimants,

b. to order the Claimants to pay the costs of the proceeding.

V. VALUE OF THE PROCEEDING

In accordance with the provisions of articles 296, nos. 1 and 2 of the Code of Civil Procedure approved by Law no. 47/2013, of 26 June, 97-A no. 1, subsection a) of the Code of Tax Procedure and Process, and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the proceeding is assigned the value of 1,077.38 € (one thousand seventy-seven euros, thirty-eight cents).

VI. COSTS

In accordance with the provisions of articles 12, no. 2, 22, no. 4 of RJAT, and articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I attached hereto, the amount of costs is fixed at 306.00 € (three hundred and six euros).

NOTIFY

Text prepared on computer, in accordance with the provisions of article 131 of the Code of Civil Procedure, applicable by reference in article 29, no. 1, subsection e) of the Legal Regime for Tax Arbitration, with blank lines, and revised by the arbitrator.

The wording of this decision is governed by the spelling prior to the Orthographic Agreement of 1990, except as regards transcriptions made.

Twenty-eighth of May of two thousand and eighteen

The arbitrator

(José Coutinho Pires)

[1] "(…)

VII- The Courts, as independent sovereign bodies, are not subordinated to decisions taken in fiscal matters by the administration, even if binding on it, to the extent that it falls to them to interpret and apply tax law without any dependence on the criteria adopted by the administration and hence, if a judicial decision of a different nature from that followed in the binding information is preferred, the administration must respect it and have it executed.

VIII- That is, if it is true that the courts are only subject to the law, so that they are not bound by any administrative guidance from which a certain interpretation of the same flows, administrative circulars (as well as prior information) do not bind the taxpayers, but only their respective services and, in light of the law, the procedures defined, "maxime" the "circulated law" of the AF cannot derogate from the principle of tax legality, so that, in this light, it will be possible to affirm the non-compliance of the content of the appealed act with the legal norms referred to and, in this way, that the really existing requirements imposed the administrative decision of the opposite nature, being certain that the Judge, even if he had knowledge of the binding prior information, was not bound by that administrative decision."

[2] "Service provision contract is one in which one party undertakes to provide to the other a certain result of its intellectual or manual work, with or without remuneration"

Frequently Asked Questions

Automatically Created

How are the simplified regime coefficients under Article 31 of the CIRS applied to IRS income calculations?
The simplified regime coefficients under Article 31 of CIRS are applied based on the nature of the income earned. Article 31(1)(b) establishes a 0.75 coefficient for income from self-employed service provision activities, including scientific, artistic, or technical services. The coefficient is applied to gross income to determine taxable income, with the type of activity and its classification in the CAE (Classificação das Atividades Económicas) or the Article 151 CIRS activity table determining which coefficient applies. Taxpayers must correctly identify their activity code and report income in the appropriate field of Annex B (Model 3 declaration), as this determines the applicable coefficient. In this case, the dispute centered on whether plumbing installation (CAE 43221) should be treated as service provision subject to the 0.75 coefficient.
Can taxpayers challenge IRS tax assessments through arbitration at CAAD under the simplified regime?
Yes, taxpayers can challenge IRS assessments under the simplified regime through tax arbitration at CAAD (Centro de Arbitragem Administrativa). According to Decree-Law 10/2011 (RJAT), taxpayers may request constitution of an arbitral tribunal to contest the legality of tax assessments, including those involving simplified regime income calculations. The process begins with filing a request for arbitration within the statutory deadline, typically after exhausting administrative remedies such as reclamação graciosa. In this case, the taxpayers successfully initiated arbitration proceedings under Article 2(1)(a) and Article 10 of RJAT to challenge both the IRS assessment (€1,077.38 for 2014) and the denial of their administrative appeal. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering a faster and specialized forum for tax law matters.
What is the procedure for filing a tax arbitration claim against the Portuguese Tax Authority (AT) regarding IRS?
To file tax arbitration at CAAD against the Portuguese Tax Authority regarding IRS, taxpayers must: (1) Submit a formal request for constitution of an arbitral tribunal pursuant to Decree-Law 10/2011 (RJAT), typically after receiving denial of an administrative appeal; (2) Pay the initial arbitration fee; (3) Identify the contested act (assessment notice number and amount); (4) Present legal grounds for challenging the assessment's legality. The CAAD President accepts the request and notifies AT, then appoints an arbitrator whom parties may refuse within the legal deadline. Once constituted, the tribunal follows procedural rules including AT's response deadline (30 days), submission of the administrative file, and optional hearings or written pleadings. In this case, the process proceeded from filing (February 2018) through tribunal constitution (April 2018) to AT's response (May 2018), with taxpayers paying subsequent fees before the decision deadline.
What happens when a reclamação graciosa (administrative complaint) against an IRS assessment is denied in Portugal?
When a reclamação graciosa (administrative complaint) against an IRS assessment is denied in Portugal, taxpayers have two main options: (1) File a judicial appeal (impugnação judicial) in the administrative tax courts within the statutory deadline (typically 3 months from notification); or (2) Request tax arbitration at CAAD under RJAT, which provides an alternative dispute resolution mechanism. In this case, following denial of their administrative appeal (assigned number …2016…), the taxpayers chose arbitration, filing their CAAD request in February 2018. The arbitration request must challenge both the underlying assessment and the decision denying the reclamação graciosa. Taxpayers requesting arbitration must demonstrate that administrative remedies have been exhausted and file within applicable deadlines. The denial decision triggers the timeline for contesting the assessment through either judicial or arbitral channels, making prompt action essential to preserve appeal rights.
How does the simplified regime for IRS differ from organized accounting in determining taxable income?
The simplified regime for IRS differs fundamentally from organized accounting in determining taxable income through the application of fixed coefficients rather than actual expenses. Under the simplified regime (Article 28 and 31 CIRS), taxable income is calculated by applying statutory coefficients to gross income, with different coefficients for sales of goods (typically lower) versus service provision (0.75 under Article 31(1)(b)). Taxpayers need not maintain detailed accounting records or prove actual expenses. In contrast, organized accounting requires full bookkeeping under accounting standards, with taxable income determined by subtracting documented expenses from revenues. The simplified regime benefits small businesses with limited record-keeping capacity but may result in higher taxation if actual expenses exceed the coefficient-based deduction. This case illustrates simplified regime complexities: the taxpayer reported income in different fields (401 for goods sales, 443 for other income), but AT reclassified to field 440, applying the service provision coefficient and increasing tax liability by €1,077.38.