Process: 505/2016-T

Date: July 4, 2017

Tax Type: IRC

Source: Original CAAD Decision

Summary

CAAD Process 505/2016-T addresses the critical jurisdictional and substantive issues surrounding the deduction of Pagamento Especial por Conta (PEC/Special Advance Payment) from autonomous taxes under Portuguese IRC legislation. The petitioner company sought €41,162.33 in refunds for tax years 2011 and 2012, arguing that Article 90 of the IRC Code permits PEC credits to be deducted from the total IRC collection, including autonomous taxes, not merely IRC stricto sensu. The company filed substitute Model 22 declarations in December 2015 under Article 122 of the IRC Code, followed by ex officio revision petitions in March 2016. The Tax Authority dismissed these petitions in May 2016, prompting the arbitral action. The TCA raised a preliminary exception challenging the arbitral tribunal's material jurisdiction under Articles 2(1)(a) and 4(1) of LRAT and Regulation 112-A/2011. The Authority argued that because the ex officio revision petitions were filed after the expiry of the amicable complaint period under Article 131 of the Tax Procedure Code, the arbitral tribunal lacked jurisdiction to hear challenges to decisions dismissing such late-filed revision requests. This case establishes important precedents regarding: (1) the temporal limits for challenging self-assessment acts through ex officio review; (2) whether CAAD arbitral tribunals can exercise jurisdiction over disputes arising from dismissed revision petitions filed outside statutory deadlines; and (3) the substantive interpretation of whether PEC credits constitute deductible tax credits against autonomous taxes or only against standard IRC liability. The decision has significant implications for taxpayer rights in claiming PEC deductions and the procedural pathways available when seeking to correct prior self-assessments.

Full Decision

ARBITRAL DECISION

I. STATEMENT OF FACTS

On 17.08.2016, the company "A… S.A.", Tax Identification Number …, filed a petition for constitution of a sole arbitrator tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to simply as LRAT), in which the Tax and Customs Authority (TCA) is named as Respondent.

The petition for constitution of the arbitral tribunal was accepted by the esteemed President of the Administrative Tax Arbitration Council (CAAD) and automatically notified to the Tax and Customs Authority on 09.09.2016.

Pursuant to the provisions of paragraph a) of Article 6(2) and paragraph b) of Article 11(1) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as arbitrator of the sole arbitrator tribunal, who communicated acceptance of the appointment within the applicable period and notified the parties of such appointment on 25.10.2016.

Accordingly, in compliance with the provisions of paragraph c) of Article 11(1) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the sole arbitrator tribunal was constituted on 10.11.2016.

II. POSITIONS OF THE PARTIES

In the present petition for arbitral decision, the Petitioner seeks to obtain the annulment of the decisions of the TCA – "Large Taxpayers Unit" – that were notified to it on 20.05.2016 and which dismissed the following ex officio revision petitions:

a) Ex Officio Revision Petition No. …2016…, relating to the Corporate Income Tax assessment for the year 2011 (document No. 2 attached to the petition for arbitral decision);

b) Ex Officio Revision Petition No. …2016…, relating to the Corporate Income Tax assessment for the year 2012 (document No. 3 attached to the petition for arbitral decision)

The petitions had been filed by the Petitioner with reference to two Corporate Income Tax assessment acts for 2011 and 2012.

As regards 2011, the Petitioner filed its first Corporate Income Tax Form 22 on 28 May 2012, and on 23 December 2015, pursuant to Article 122 of the Corporate Income Tax Code, a substitute declaration.

According to the information available in the Petitioner's area on the TCA website, the total amount of Special Advance Payments (SAP) still deductible in the taxation period of 2011 amounted to €39,600.72:

| Taxation Periods | SAP Paid | Last Reporting Year |
|---|---|---|
| 2010 | 26,291.80 | 2014 |
| 2011 | 13,308.92 | 2015 |
| Total | 39,600.72 | Total |

Since there was no collection in the taxation period of 2011, no amount was entered as SAP in field 356 of Form 22 for the period in question.

Furthermore, in Form 22 of the Corporate Income Tax relating to the taxation period of 2011, the amount levied by the Petitioner under autonomous taxes amounted to €23,407.53.

The Petitioner contends that, in light of the provisions of Article 90 of the Corporate Income Tax Code and the tax rules governing each of the deductions provided for in paragraph 2 thereof, as in force on the date to which the facts relate, the amount relating to "tax credits" arising from the SAPs made should be deducted from the Corporate Income Tax collection, which encompasses, in full, the Corporate Income Tax collection stricto sensu, the state surcharge and autonomous taxes.

From this perspective, the Petitioner notes that the amount paid as SAP by the Petitioner and subject to deduction in the period of 2011, may and should be deducted from the total Corporate Income Tax collection formed by the autonomous taxes relating to the same period and identified above, whereby the Petitioner considers that it is owed by the TCA a total of €23,407.53, equivalent to the deduction of the amount of SAP paid against the collection (constituted entirely, in this period, by autonomous tax).

As regards 2012, the Petitioner filed its first Form 22 of Corporate Income Tax on 28 May 2013 and on 23 December 2015, a substitute Corporate Income Tax Form 22 declaration.

According to the information available in the Petitioner's area on the TCA website, the total amount of Special Advance Payments (SAP) still deductible in the taxation period of 2012 amounted to €24,083.70:

| Taxation Periods | SAP Paid | Last Reporting Year |
|---|---|---|
| 2010 | 2,884.27(*) | 2014 |
| 2011 | 13,308.92 | 2015 |
| 2012 | 7,890.51 | 2016 |
| Total | 24,083.70 | Total |

(*)

The SAP paid in 2010 amounted to €26,291.80. Considering that the Petitioner filed an ex officio revision petition relating to the taxation period of 2011 requesting the deduction of €23,407.53 against the autonomous taxes levied and paid in the same period, the remaining amount of SAP from 2010, after such deduction, corresponds to €2,884.27.

Given the absence of collection in the taxation period of 2012, no amount was entered as SAP in field 356 of Form 22 for the period in question.

According to the information provided in Form 22 of Corporate Income Tax relating to the taxation period of 2012, the amount levied by the Petitioner under autonomous taxes amounted to €17,754.70.

The Petitioner contends that, in light of the provisions of Article 90 of the Corporate Income Tax Code and the tax rules governing each of the deductions provided for in paragraph 2 thereof, the amount relating to "tax credits" arising from the SAPs made should be deducted from the Corporate Income Tax collection, which encompasses, in full, the Corporate Income Tax collection stricto sensu, the state surcharge and autonomous taxes.

From this perspective, the Petitioner notes that the amount paid as SAP by the Petitioner and subject to deduction in the period of 2012, may and should be deducted from the total Corporate Income Tax collection formed by the autonomous taxes relating to the same period and identified above, whereby the Petitioner considers that it is owed by the TCA a total of €17,754.70, equivalent to the deduction of the amount of SAP paid against the collection (constituted entirely, in this period, by autonomous tax).

Based on these grounds, the Petitioner seeks to have reimbursed the tax paid in excess in the amount of €41,162.33, equivalent to the deduction of the amount of SAP paid against the collections of 2011 and 2012 (constituted entirely, in these periods, by autonomous tax), that is, the Petitioner seeks to deduct the amount paid as special advance payment (SAP) from the collection produced by autonomous taxes.

Notified to respond, the TCA submitted its reply by way of exception and substantive challenge:

By way of exception:

(i) Lack of material jurisdiction of the tribunal arising from the circumstance that the petition for arbitral decision was formulated as a result of dismissal of an ex officio revision petition

The petition for arbitral decision sub judice has been formulated as a result of dismissal of an ex officio revision petition of an act of self-assessment of Corporate Income Tax (CIT) relating to the years 2011 and 2012, filed on 24.03.2016, that is, in circumstances of time in which the period for amicable complaint referred to in Article 131 of the Tax Procedure Code had already elapsed;

In light of the provisions of Articles 2(1), paragraph a) and 4(1), both of the LRAT, and Articles 1 and 2, paragraph a), both of Regulation No. 112-A/2011, of 22 March, there exists the exception of lack of material jurisdiction – a circumstance that requires the determination of dismissal of the named defendant from the proceedings, pursuant to Articles 576(1)-(2) and 577, paragraph a) of the Code of Civil Procedure, by virtue of Article 29(1), paragraphs a) and e) of the LRAT.

Pursuant to Article 2, paragraph a) of Regulation No. 112-A/2011, of 22 March, the TCA is bound by arbitral claims that have as their object the assessment of claims relating to taxes whose administration is entrusted to it, referred to in Article 2(1) of the LRAT, "with the exception of claims relating to the declaration of illegality of acts of withholding tax self-assessment and advance payment acts that have not been preceded by recourse to administrative proceedings in accordance with Articles 131 to 133 of the Tax Procedure Code."

Now, as already mentioned, the petition for arbitral decision sub judice is directed, albeit indirectly, to the declaration of illegality of an act of self-assessment of a tax, in this case Corporate Income Tax; however, the claim was formulated without having been preceded by administrative challenge in accordance with Articles 131 to 133 of the Tax Procedure Code, and the examination of acts of self-assessment of tax is only admissible in arbitral proceedings if, at a prior moment, the same have been challenged administratively, in accordance with Article 131 of the Tax Procedure Code.

That is, from the wording given to said legal provision, it appears that the legislator chose to restrict knowledge in the arbitral jurisdiction to claims that, relating to the declaration of illegality of assessment/self-assessment acts, have been preceded by the amicable complaint provided for in Article 131 of the Tax Procedure Code.

When referring to recourse to administrative proceedings, reference is made only to the means provided for in Articles 131 to 133 of the Tax Procedure Code, given the literal element and, therefore, unavoidable, of Article 2, paragraph a) of Regulation No. 112-A/2011.

Having reached this point, from the simple reading of Article 2, paragraph a), of Regulation No. 112/2011, of 22 March, the express obligation to previously file an amicable complaint is inferred as a means of opening the arbitral avenue for assessment of the present dispute.

In this sense, Jorge Lopes de Sousa understands (Tax Procedure Code, Annotated and Commented, Volume II, Áreas Editora, 6th Edition, 2011, page 420):

"However, in accordance with the provisions of Article 2, paragraph a), of Regulation No. 112-A/2011, of 22 March, regarding withholding tax acts, the Tax Administration is only bound by the jurisdiction of arbitral tribunals if the petition for declaration of illegality of a withholding tax act has been preceded by recourse to administrative proceedings, that is, by an amicable complaint. Therefore, if the passive subject wishes to opt for the arbitral avenue, it must always make use of an amicable complaint."

The TCA also cites the understanding endorsed in the Arbitral Decision rendered in case No. 51/2012-T, where, in summary, the following was decided:

"Such lack of material jurisdiction is reinforced in the case of tax arbitration, inasmuch as the simple reading of Article 2, paragraph a) of Regulation 112-A/2011, of 22 March, regulation published in accordance with the provisions of Article 4 of decree-law No. 10/2011, of 20 January, expressly imposes said prior administrative procedure as a means of opening the arbitral avenue for assessment of the dispute.

It thus appears indisputable the lack of jurisdiction ratione materiae (and not of the procedural means) of the tax arbitral tribunal. (…) Concluding: the arbitrability of a dispute relating to the claims referred to in Article 2 (object of binding) of Regulation No. 112-A/2011, of 22 March, is only recognized if, previously, an amicable complaint has been filed (and not in any other forum, namely, through a process of review of a taxable act, which, constituting an available guarantee of taxpayers, has, however, its own particularities)."

The TCA further clarifies that Regulation No. 112-A/2011 was approved and published after extensive and profuse jurisprudence that reaffirmed that, given the administrative nature of the ex officio revision procedure, it is susceptible to being equated to the provisions of Articles 131 to 133 of the Tax Procedure Code for purposes of subsequent challenge of the respective dismissal decision; however, such equation is legally prohibited in the arbitral forum, being excluded from the material jurisdiction of arbitral tribunals the assessment of claims relating to the declaration of illegality of acts of self-assessment, withholding tax and advance payment, that have not been preceded by recourse to administrative proceedings, in accordance with Articles 131 to 133 of the Tax Procedure Code, not including, it is well to see, the ex officio revision procedure provided for in Article 78 of the General Tax Law – and if the legislator did not provide, in Article 2 of that Regulation, the ex officio revision procedure as equivalent to recourse to administrative proceedings, particularly to an amicable complaint, for purposes of accessing the petition for arbitral decision, it was, certainly, because it did not intend to do so.

Finally, the TCA refers to the arbitral decision rendered in the arbitral case conducted under No. 236/2013-T:

"As for the alleged "deficient" wording of Article 2, paragraph a) of the Regulation, it should be said further that, regardless of the merits of a broad arbitrability of tax acts, the fact is that:

(a) there is, indeed, a lack of agreement in using the past participle "preceded" in the masculine plural when it should be in the feminine plural, to agree with "claims." Such grammatical lapse, however, does not prejudice nor affect the understanding of the subsequent part of the text that is truly at issue here;

(b) the expression "recourse to administrative proceedings" constitutes a broad generic formula that in itself may encompass all means for the taxpayer to defend its rights, before resorting to courts. It is a broad formula but not incorrect or susceptible to inducing error. Moreover, the Administration (Ministries of Justice and Finance) specified subsequently, in a very precise manner, which provisions are in question by indicating them in a clear exhaustive and not merely exemplary enumeration;

(c) we thus have the generic designation "administrative proceedings" and a specific characterization: "in accordance with Articles 131 to 133 of the Tax Procedure Code." We are faced with a technique that respects legal-logical discourse, in perfect consonance with Article 9(3) of the Civil Code.

(d) for the interpreter to attempt to add further to this part of the sentence "… and of Article 78 of the General Tax Law," which manifestly is not there, constitutes a violation of the fundamental principles of legal hermeneutics applicable to both legal norms and legal acts."

In summary, the TCA understands that, by virtue of what is established in Article 2, paragraph a) of Regulation No. 112-A/2011, disputes that have as their object the declaration of illegality of withholding tax acts, as occurs in the situation sub judice, are excluded from the material jurisdiction of arbitral tribunals if they are not preceded by an amicable complaint in accordance with Article 132 of the Tax Procedure Code, regardless of whether this is mandatory in accordance with said provision or whether the taxpayer has opted (sibi imputat) for ex officio revision.

Furthermore, in the situation at hand the alleged "self-assessment act" was not effected in accordance with generic instructions issued by the TCA, whereby the mandatory prior filing of an amicable complaint was always required in accordance with Article 131(1) of the Tax Procedure Code.

Whereby in these terms access to arbitral jurisdictional protection is, with all the more reason, barred (which is defended without conceding), for here the amicable complaint would always be mandatory in accordance with Article 131 of the Tax Procedure Code, as required in Article 2, paragraph a) of Regulation No. 112-A/2011.

The TCA further reinforces the same position by stating that the understanding that disputes that have as their object the declaration of illegality of withholding tax acts, as occurs in the situation sub judice, are excluded from the material jurisdiction of arbitral tribunals if they are not preceded by an amicable complaint in accordance with Article 132 of the Tax Procedure Code, is equally imposed by virtue of the constitutional principles of the rule of law and separation of powers (see Articles 2 and 111, both of the Portuguese Constitution), as well as of legality (see Articles 3(2) and 266(2), both of the Portuguese Constitution), as a corollary of the principle of indisposability of tax credits inherent in Article 30(2) of the General Tax Law, which bind the legislator and all activity of the TCA.

In response to the position of the TCA, the Petitioner came forward to argue that such understanding would signify a limitation to the constitutional principle of impugnability of acts injurious to rights or legally protected interests, provided for in Article 268(4) of the Portuguese Constitution, and that excluding arbitral jurisdiction because the means used was not effectively an amicable complaint would constitute a limitation to the principle of effective jurisdictional protection, provided for in Article 20 of the Portuguese Constitution.

The Petitioner also cites extensive jurisprudence, both from the arbitral jurisdiction and the judicial jurisdiction, to the effect that ex officio revision is equivalent to an amicable complaint and, also, to the effect that a decision on a petition for ex officio revision is an administrative act in tax matters for purposes of its impugnability in the arbitral forum.

III. ANALYSIS OF THE EXCEPTION OF LACK OF MATERIAL JURISDICTION OF THE TRIBUNAL

Having set out the position of both Parties, this Arbitral Tribunal understands that it should begin by determining, precisely, whether the present dispute falls within its material jurisdiction, as defined in Article 2, paragraph a) of Regulation No. 112-A/2011.

Indeed, there have been understandings in both senses defended both by the Petitioner and by the TCA. In summary terms, we can say that some understand that paragraph a) of Article 2 of said Regulation should be read to mean that the exception concerns acts "that have not been preceded by recourse to administrative proceedings," with other acts being excluded only if expressly referred to by reference to Articles 131 to 133 of the Tax Procedure Code, while others understand that the legislator first generically stated what it intended to say "acts of self-assessment, withholding tax and advance payment that have not been preceded by recourse to administrative proceedings" and then closed that generic reference with the concrete reference to Articles 131 to 133 of the Tax Procedure Code.

For our part, we agree with the defenders of the second interpretation.

Articles 1 and 2 of said Regulation should be read together:

- Article 1 establishes the general rule – binding to the CAAD of the services of the Ministry of Finance and the Public Administration "Directorate-General for Taxes (DGT)" and "Directorate-General for Customs and Special Taxes on Consumption (DGCTC)";

- Article 2 establishes that said services are bound by the jurisdiction of the arbitral tribunals functioning at the CAAD if the object of the petition for arbitral decision is the assessment of claims relating to taxes whose administration is entrusted to them referred to in Article 2(1) of Decree-Law No. 10/2011, of 20 January,

- Establishing, however, Article 2, the following exceptions:

a) Claims relating to the declaration of illegality of acts of self-assessment, withholding tax and advance payment that have not been preceded by recourse to administrative proceedings in accordance with Articles 131 to 133 of the Tax Procedure Code;

b) Claims relating to acts of determination of taxable matter and acts of determination of taxable base, both by indirect methods, including the decision of the revision procedure;

c) Claims relating to customs duties on importation and other indirect taxes that fall on goods subject to import duties; and

d) Claims relating to tariff classification, origin and customs value of goods and tariff contingents, or whose resolution depends on laboratory analysis or procedures to be carried out by another Member State under administrative cooperation in customs matters.

Pursuant to paragraph a) of Article 2 of said Regulation are, therefore, expressly excluded, all claims connected with acts of "self-assessment, withholding tax or advance payment," admitting only those claims that have been preceded by recourse to administrative proceedings in accordance with Articles 131 to 133 of the Tax Procedure Code.

It is objectively indisputable that paragraph a) of Article 2 of Regulation No. 112-A/2011 does not refer to the ex officio revision procedure, which is provided for in Article 78 of the General Tax Law.

Should it be considered, by way of interpretation, that prior recourse to that procedure also enables subsequent challenge of the self-assessment act before arbitral tribunals? We do not think so.

Paragraph a) of Article 2 of Regulation No. 112-A/2011, in introducing the exception referred to, uses the broad expression ("recourse to administrative proceedings") and then specifies it by restricting it in a manner that appears to us to be exhaustive ("in accordance with Articles 131 to 133 of the Tax Procedure Code") – a technique that respects legal-logical discourse, in perfect consonance with Article 9(3) of the Civil Code, as was already highlighted in the decision rendered in case No. 236/2013-T.

The normative text does not therefore permit finding in it a minimum of verbal correspondence, even if imperfectly expressed, with the possibility that, in any of the three situations referred to in it (self-assessment, withholding tax and advance payments), one could dispense with recourse to an amicable complaint (and not to any other form of amicable challenge of the act in question) for arbitration of the tax claim, even though there may have been some second-level act concerning it and, therefore, a re-examination of the tax act examined by the TCA may have occurred, as a result of a petition for ex officio revision filed by the passive subject.

This conclusion is, in our view, independent of whether one considers that ex officio revision at the initiative of the taxpayer is equivalent, or not, to an amicable complaint for purposes of judicial challenge. The clarity of the provision in question, emanating after extensive doctrinal and jurisprudential debate concerning the equivalence, or lack thereof, between ex officio revision at the request of the taxpayer and an amicable complaint, does not authorize, in our view, a different conclusion.

Resorting here to the words used in the arbitral decision rendered in case No. 236/2013-T, "faced with such crystalline wording, it is not seen how the interpreter can reach a different conclusion, especially to broaden the scope of the TCA's subjection to an option of the passive subject, a subjection that the legislator intended to be specifically delimited by the will of the TCA itself, a clear reservation of the Administration with respect to self-binding." In the same sense, with very pertinent argumentation, goes also the decision rendered in case No. 51/2012-T, which understood that "considering the voluntary nature of arbitration," the interpretation of the TCA's binding "cannot, in any case, translate into a restriction of the sphere of freedom of the TCA, as a party, to establish the limits of its binding. It would only be otherwise if its position implied the total frustration of the objective intended with the institution of tax arbitration, which is not the case," emphasizing that then, as now, "the Tribunal does not rule on the doctrinal construction on which the equivalence of the ex officio revision procedure, at the initiative of the taxpayer, to the amicable complaint procedure for purposes of judicial challenge, is based. Rather, it understands that from the principle of consecration of the arbitral procedure as a means of resolution of tax disputes alternative to the process of judicial challenge, there does not automatically follow the extension of the TCA's binding to all situations in which, doctrinally and/or jurisprudentially, such challenge is considered admissible." This very thing follows, moreover, from the terms in which tax arbitration was created, applying to a much narrower range of situations than judicial challenge.

Concluding, it does not appear to us possible to submit to arbitration a dispute relating to the claims referred to in Article 2 of Regulation No. 112-A/2011, of 22 March, that has not been preceded by an amicable complaint. Accordingly, we understand that it is indisputable the lack of jurisdiction, ratione materiae, of this Tax Arbitral Tribunal, in accordance with Articles 2(1), paragraph a) and 4(1), both of the LRAT, and Articles 1 and 2, paragraph a), of Regulation No. 112-A/2011, which constitutes a dilatory exception preventive of knowledge of the merits of the case, in accordance with the provisions of Article 576(1)-(2) of the Code of Civil Procedure ex vi Article 2, paragraph e) of the Tax Procedure Code and Article 29(1), paragraphs a) and e) of the LRAT, which bars knowledge of the petition and requires dismissal of the proceedings against the TCA, in accordance with Articles 576(2) and 577, paragraph a) of the Code of Civil Procedure, ex vi Article 29(1), paragraphs a) and e) of the LRAT.

The knowledge of the question on the merits is thereby prejudiced.

IV. DECISION

In accordance with what is stated above, this Arbitral Tribunal decides:

a) To find in favor of the dilatory exception of lack of jurisdiction of this tribunal ratione materiae invoked by the Respondent;

b) To dismiss the proceedings against the Respondent (in accordance with Articles 96 and 278 of the Code of Civil Procedure);

c) To condemn the Petitioner in the costs of the proceedings.

Value of the case: €41,162.23

Costs: €2,142.00, to be borne by the Petitioner

Lisbon, 04 July 2017

The Arbitrator,

Raquel Franco

Frequently Asked Questions

Automatically Created

What is the scope of arbitral tribunal jurisdiction over IRC Pagamento Especial por Conta (PEC) disputes in Portugal?
The arbitral tribunal's jurisdiction over IRC PEC disputes is limited under LRAT Articles 2(1)(a) and 4(1) and Regulation 112-A/2011. CAAD tribunals have material jurisdiction to hear direct challenges to tax assessment acts, but jurisdiction becomes questionable when the dispute arises from a dismissed ex officio revision petition filed after the amicable complaint period under Article 131 of the Tax Procedure Code has elapsed. The TCA argued that arbitral tribunals lack jurisdiction over challenges to decisions on revision petitions submitted outside statutory deadlines, as such petitions fall outside the scope of challengeable acts defined in the LRAT framework. This jurisdictional limitation protects the finality of self-assessment acts and prevents circumvention of mandatory procedural deadlines.
Can a taxpayer request ex officio review (revisão oficiosa) of IRC assessments related to PEC deductions?
Yes, taxpayers can request ex officio review (revisão oficiosa) of IRC self-assessments related to PEC deductions, but strict time limits apply. Under Article 122 of the IRC Code, taxpayers may file substitute Model 22 declarations to correct errors in original filings. Following submission of substitute declarations, taxpayers may file ex officio revision petitions requesting refunds of overpaid taxes. However, as demonstrated in this case, if the ex officio revision petition is filed after the period for amicable complaint (reclamação graciosa) under Article 131 of the Tax Procedure Code has expired, the Tax Authority may dismiss the petition on procedural grounds, and subsequent arbitral challenges to that dismissal may face jurisdictional objections. Taxpayers must therefore act within the statutory complaint periods to preserve their right to administrative and judicial review.
How are Pagamentos Especiais por Conta (PEC) carried forward and deducted under the Portuguese IRC Code?
PEC amounts are carried forward and tracked by taxation period with designated 'last reporting years' during which they remain deductible. Under the system described in the case, PEC paid in one year can be deducted over subsequent years until the last reporting year expires (typically 3-4 years after payment). PEC amounts are entered in field 356 of IRC Model 22 declarations when there is actual IRC collection against which to deduct. The central substantive dispute concerns Article 90 of the IRC Code: the taxpayer argued that PEC constitutes a 'tax credit' deductible from total IRC collection, which encompasses IRC stricto sensu, state surcharge, and autonomous taxes. However, when no standard IRC liability exists (only autonomous taxes), the Tax Authority's position suggests PEC may not be deductible from autonomous taxes alone, as these are separate levies with distinct legal bases under the IRC Code.
What is the procedure for challenging an AT decision on PEC deduction through tax arbitration at CAAD?
The procedure for challenging an AT decision on PEC deduction through CAAD arbitration follows these steps: (1) File an ex officio revision petition with the Tax Authority following submission of substitute IRC declarations under Article 122; (2) Upon dismissal of the revision petition, file a petition for constitution of an arbitral tribunal under Articles 2 and 10 of LRAT (Decree-Law 10/2011) within the applicable deadline; (3) The CAAD President accepts the petition and automatically notifies the TCA; (4) The CAAD Ethics Council appoints an arbitrator pursuant to Article 6(2)(a) and Article 11(1)(b) of LRAT; (5) The arbitrator communicates acceptance and notifies both parties; (6) The arbitral tribunal is formally constituted under Article 11(1)(c) of LRAT. However, this procedure's viability depends on the ex officio revision petition being filed within the statutory deadlines, particularly before expiry of the amicable complaint period, to avoid jurisdictional challenges.
What are the time limits for filing substitute Model 22 declarations and claiming PEC deductions under Article 122 of the IRC Code?
Article 122 of the IRC Code governs substitute Model 22 declarations and allows taxpayers to correct errors in previously filed returns. In this case, the taxpayer filed substitute declarations on December 23, 2015, for tax years 2011 and 2012—approximately 3.5 years after the original filings. While Article 122 permits such corrections, the subsequent ex officio revision petitions filed on March 24, 2016, were submitted after the expiry of the amicable complaint period under Article 131 of the Tax Procedure Code. The standard deadline for amicable complaints is two years from the date of payment or the date the taxpayer becomes aware of the illegal act. The TCA's jurisdictional objection suggests that filing substitute declarations does not reset or extend the complaint deadlines for the underlying assessment periods, and taxpayers must initiate ex officio revision procedures within the original statutory timeframes to preserve their right to challenge assessments and claim refunds through administrative and arbitral channels.