Process: 509/2017-T

Date: May 11, 2018

Tax Type: IRC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 509/2017-T) addressed the autonomous taxation of employee travel expenses under Portuguese Corporate Income Tax (IRC) for the 2013 tax year. The taxpayer, A... S.A., challenged €95,619.09 in autonomous taxation arising from €409,818.44 in travel allowances and vehicle compensation paid to an employee. The dispute centered on two key issues: the application of a 15% autonomous taxation rate (5% base rate plus 10 percentage point surcharge) on employee vehicle compensation, and an additional 10% surcharge on other autonomous taxation due to the company reporting tax losses. The Tax Authority maintained that the company failed to adequately demonstrate the indispensability of these expenses for taxable income production, requiring detailed journey logs showing beneficiary identification, vehicle details, kilometers traveled, locations, service nature, and dates. The authority emphasized that internal accounting documents alone cannot establish the authenticity of such claims without objective evidence linking expenses to the company's productive activity. After filing an unsuccessful amicable claim and hierarchical appeal, the taxpayer sought arbitration under the RJAT framework. The case illustrates the stringent documentation requirements for deducting employee travel expenses and the substantial autonomous taxation burden when proper substantiation is lacking, particularly when combined with tax loss surcharges that can effectively double the autonomous taxation rate.

Full Decision

ARBITRAL DECISION

I - REPORT

A…, S.A., legal entity no.…, with registered office in Lisbon, covered by the local peripheral services of the Lisbon Tax Authority…, came on 14 September 2017, under the provisions of articles 2 no. 1 letter a), 10 nos. 1 and 2 of Decree-Law no. 10/2011 of 20 January (RJAT) and 1st and 2nd of Ordinance no. 112-A/2011 of 22 March, to request the constitution of an arbitral tribunal and to lodge a request for ruling, seeking the annulment of the self-assessment of Corporate Income Tax (IRC) and municipal fees for the tax year 2013, in the part corresponding to autonomous taxation in the amount of €95,619.09, from which it filed an amicable claim and against whose implicit rejection it lodged a hierarchical appeal which was partially rejected.

The request was accepted on 14 September 2017.

As the Applicant did not designate an arbitrator, the signatories were designated by the Ethics Council of CAAD and accepted the mandate within the legal period.

Notified of this designation, the parties made no statement, and the arbitral tribunal was duly constituted on 16 December 2017.

The Director-General of the Tax and Customs Authority (AT), notified to respond, to request, if desired, the production of additional evidence, and to attach a copy of the administrative file, responded, attached the administrative file, all within the legal period, raising a defence by way of objection, but did not request the production of additional evidence.

As it was not considered useful, the meeting referred to in article 18 of the RJAT was dispensed with and the parties were invited to present written arguments, which they did within the set period, merely reaffirming the positions previously taken in the proceedings.

11 May 2018 was set as the date for the arbitral decision.

II - PRELIMINARY RULING

The arbitral tribunal was properly constituted and is competent to decide.

The parties have legal personality and capacity, have standing and are duly represented.

The proceedings are not vitiated by any irregularities and there are no exceptions or preliminary matters that would prevent the merits from being considered.

III - FACTS OF THE CASE

Having regard for the decision, and as a result of examination of the attached documents, the following facts are found to be proven:

1)

The Applicant filed, on 28 May 2014, its IRC Declaration Form 22 for the tax year 2013, having self-assessed the said tax in the amount of €129,379.14, including autonomous taxation, which it paid in full by cheque dated 30 May 2014.

2)

The Applicant recorded as a cost €409,818.44 relating to allowances and expenses for compensation for travel in the employee's own vehicle paid to a worker.

3)

The autonomous taxes levied totalled €95,619.09, corresponding to:

- €61,472.77, arising from the application of a rate of 5%, with an increase of 10 percentage points, totalling 15%, on expenses relating to allowances and compensation for travel in the employee's own vehicle, in the service of the employer, in the amount of €409,814.44, and

- €34,146.32 (€341,463.25 x 10%) relating to the application of a surcharge of 10 percentage points, concerning the determination of tax losses, on the remaining expenses and charges subject to autonomous taxation.

4)

The Applicant filed an amicable claim against the self-assessment on 27 May 2016, and its claim was not decided.

5)

On 24 October 2016 the Applicant filed a hierarchical appeal against the implicit rejection of the amicable claim.

6)

The hierarchical appeal was rejected by means of a dispatch which adopted the proposal with the following reasoning:

"The appellant is requesting an increase in field 730 of Table 07 of Declaration Form 22 for the tax period of 2013, in the amount of €409,818.44 relating to allowances and expenses for compensation for travel in the employee's own vehicle, as an alternative to the application of the autonomous taxation rate.

Having weighed the arguments put forward in the request with regard to this matter and based on the wording of article 88 of the IRC Code at the time of the facts, we are to inform:

Allowances are payments attributed to workers who provide services outside their usual workplace, for professional reasons, which can only occur when, underlying such service, there is a subordinate employment contract.

These allowances, borne by the employer, have a compensatory and indemnificatory character, as they are intended to cover expenses for food and accommodation that the employee had to bear in his service, due to travel or installation in a location different from his usual workplace.

In addition to allowances, employees are also entitled to a transportation allowance for the amount of expenses actually incurred, or through the allocation of a subsidy per kilometre travelled, as is the case with travel in the employee's own vehicle. When travel in the service of the company is carried out in the employee's own vehicle, these travel expenses are borne by the company, being recorded in the account "staff remuneration - allowances" or in the account "travel and accommodation" if not covered by a transportation subsidy.

Thus, allowances are considered to be the amounts allocated to company staff for travel on duty (intended to compensate for a meal, overnight accommodation, a full daily allowance), for which staff must account to the company by means of the presentation of a document showing the name of the beneficiary, the location where they travelled, the date of travel, as well as the daily amount allocated to them.

Alongside this concept is that of "compensation for travel in the employee's own vehicle", whose expenses are also recorded in the sub-account of "allowances", which corresponds to travel undertaken on an occasional basis, without regular periodicity, being paid by means of the delivery of an amount established for each kilometre travelled. These are considered travel expenses and reimbursed to the beneficiary upon presentation of a document proving their payment, and for the purposes of verification of the rule of indispensability, must be attached to the respective journey log, which will show the identification of the user and the vehicle, the number of kilometres travelled, the locations and nature of the service which gave rise to the travel, the rate per kilometre and total, date and signature.

Thus, "allowances" and "compensation for travel in the employee's own vehicle", granted by companies, will be accepted as an expense for the period, in accordance with letter d) of article 23 of the IRC Code, provided that they are intended to meet travel expenses in the service of the company and are demonstrably indispensable for the production of income subject to tax.

This indispensability of expenses for the production of income subject to tax for the period is proven through knowledge of the client and/or the project to which these expenses were charged, the name of the beneficiary of the allowances, the location, the date, as well as the daily amount to be borne and the nature of the service provided.

Without this breakdown it is not possible for a credible certification of the true nature of the expenses incurred as "allowances" or "compensation for travel in the employee's own vehicle".

What is at issue in this type of expense is the assessment of its economic congruence, which makes clear the evidence that such expenses actually existed, which is only possible when an objective connection can be established with income subject to tax.

There must be a causal relationship, justified by the productive activity of the company.

The presumption of authenticity conferred on external documents, giving evidentiary value to accounting, does not apply in this specific case of "allowances" or "compensation for travel in the employee's own vehicle", which are entered in the accounting through internal documents.

Therefore, it is essential that additional evidence be gathered to confirm their actual existence.

Wherefore, as a requirement for the tax deductibility of expenses incurred with allowances and compensation for travel in the employee's own vehicle in the service of the employer, it is required that payments be supported by control schedules containing a set of elements necessary for their validation, when it is found that such expenses were not charged to clients.

Provided that the reasons giving rise to these expenses are duly substantiated, nothing prevents, at present, their complete tax deductibility, in accordance with letter d) of article 23 of the IRC Code.

When this does not occur, allowances and compensation for travel in the employee's own vehicle fall within the scope of the anti-abuse rule established at the time in letter f) of no. 1 of article 45 (current letter h) of article 23-A) of the IRC Code, which does not admit tax deductibility for allowances and expenses for compensation for travel in the employee's own vehicle, in the service of the employer, not charged to clients, recorded under any heading, whenever the employer does not possess, for each payment made, a schedule through which it is possible to control the travel to which such expenses refer, particularly the respective locations, duration of stay, purpose and, in the case of travel in the employee's own vehicle, identification of the vehicle and its owner, as well as the number of kilometres travelled, except to the extent that there is taxation under the IRS in the sphere of the respective beneficiary.

It should also be noted that expenses for allowances and compensation for travel in the employee's own vehicle are taxed autonomously at the rate of 5%, in accordance with no. 9 of article 88 of the IRC Code, in the following situations:

- The expenses meet the requirements for their tax deductibility (i.e., there is a schedule), but in the invoices issued to clients the amount is not expressly shown separately nor is there taxation under the IRS (cf. 1st part of no. 9 of article 88 of the IRC Code);

- The expenses are not tax deductible, in accordance with letter f) of no. 1 of article 45 (current letter h) of no. 1 of article 23-A) of the IRC Code, and the entity determined, in that tax period, tax losses (cf. final part of no. 9 of article 88 of the IRC Code).

Therefore, when they are not subject to taxation under the IRS in the person of the respective beneficiary, expenses for allowances and compensation for travel in the employee's own vehicle are not excluded from autonomous taxation, except when there is express identification in the clients' invoices of the amounts relating to these expenses borne by the employer.

Indeed, it is understood that the expression "not charged to clients" used by the legislator in letter f) of no. 1 of article 45 (current letter h) of no. 1 of article 23-A) and in no. 9 of article 88, both of the IRC Code, is intended to cover deductible expenses relating to allowances and compensation for travel in the employee's own vehicle, in the service of the employer "not indicated in the invoices to clients".

We understand that the aforementioned rules clearly stipulate an obligation to state in the invoices the amount corresponding to allowances and compensation for travel in the employee's own vehicle, in a visible manner, so that it can allow an accessible and unequivocal assessment of its actual accounting as income.

We also consider that this interpretation is consistent with the intention of the legislator when it created autonomous taxation, aimed at penalising a certain type of expenses that affect the accounting results of IRC taxpayers and which, by their nature, are subject to tax even when no taxable profit is determined for the period.

xxi) The legislator, through autonomous taxation, in addition to wishing to encourage taxpayers to reduce certain expenses that negatively affect tax revenue, also intended to prevent the possibility of tax evasion and fraud that such expenses can cause not only in relation to IRC or IRS, but also in relation to the corresponding contributions of both employers and workers (for example when there is concealment of salary payments through recourse to such expenses), as can easily be inferred that may be the case with allowances and compensation for travel in the employee's own vehicle.

xxii) The express mention in the invoices of expenses of this nature as one of the requirements for non-subjection to autonomous taxation, or for tax deductibility, is explained by the fact that they are difficult to prove as to their actuality and connection with the business activity carried out by companies and also for the purposes of recognition and control by the clients themselves.

It therefore results unequivocally that, in issuing invoices to clients, the individualisation of the amount of allowances and compensation for the use of the employee's own vehicle is essential, having regard to the specificities of autonomous taxation commonly recognised, these being understood as a way of inhibiting abusive procedures incapable of being prevented by the mere operation of the usual Tax System.

No. 9 of article 88 of the IRC Code and letter f) of no. 1 of article 45 of the IRC Code seek to limit the improper use of expenses of this nature having regard to the difficulty in distinguishing between the amounts actually paid in allowances and compensation for travel in the employee's own vehicle in the service of the company, and the amounts paid as such, but which actually constitute remuneration of workers.

In the specific case under consideration, the appellant subjected to autonomous taxation the amount of €409,818.44, relating to expenses for allowances and compensation for travel in the employee's own vehicle, in accordance with no. 9 of article 88 of the IRC Code.

That is, it considered as tax deductible the expenses incurred with allowances and compensation for the use of the employee's own vehicle, subjecting them to autonomous taxation, in light of the legal provision contained in the 1st part of no. 9 of article 88 of the IRC Code.

It now seeks to add that amount to the tax result on the argument that it is granted this option, as an alternative to subjecting the expenses in question to autonomous taxation, based on an alleged UGC document where "the nature of autonomous taxation is discussed".

Having regard to what has been previously stated, we are of the opinion that the appellant's claim regarding the "alteration" requested must be rejected for the reasons that follow:

- The alleged document issued by the UGC has no evidentiary value and did not influence this opinion, as no dispatch relating to a specific process is discernible in it.

Indeed, the said document is not identified as to its origin and number, nor is it complete. Wherefore the matters addressed in it may correspond to a situation different from that which is discussed in the present hierarchical appeal.

- No optional faculty is discernible in the letter of the law regarding the non-deductibility of expenses relating to allowances and compensation for travel in the employee's own vehicle as an alternative to the application of the autonomous taxation rate.

- On the other hand, the expenses under consideration meet the requirements provided for in the 1st part of no. 9 of article 88 of the IRC Code, as is referenced in § 55 of the request.

- We are of the opinion that the appellant proceeded correctly in its IRC self-assessment for the tax period of 2012, when subjecting to autonomous taxation the expenses incurred with allowances and compensation for travel in the employee's own vehicle, in the amount of €409,818.44, as it complied with the legal provision contained in no. 9 of article 88 of the IRC Code.

Given all the above, the appellant's claim should not be upheld.

(...)

For all the above reasons, it is proposed (…) Rejection of the request regarding the alteration requested in the form of taxation of expenses relating to allowances and compensation for travel in the employee's own vehicle of company staff."

No further facts were found to be proven that were relevant to the decision of the case.

IV - MATTERS OF LAW

1 - The position of the Applicant

The Applicant alleges that only after the self-assessment "(…) did it become aware, through various arbitral decisions, that autonomous taxation is IRC and (…) does not apply if the taxpayer chooses not to deduct from the determination of taxable profit in IRC, the expenses and charges that form the basis of the said autonomous taxation". The "(…) what is at issue here are precisely autonomous taxation levied on expenses or charges that are tax deductible, and which were tax deducted (…) in the mistaken belief that there did not exist as a matter of law such an option with such consequence".

Thus, according to the Applicant, in accordance with the interpretation of the courts, "there will be no autonomous taxation where, in the IRC that taxes taxable profit, the expenses and charges that form the basis of that autonomous taxation are not deducted". It further invokes the adoption by the AT of this interpretation, transcribing from a text attributed to the AT that it does not identify:

"19. To taxpayers, with reference to expenses subject to autonomous taxation, it is legally conferred the option of considering them as not tax deductible, not submitting them in this way to autonomous taxation, or of considering them relevant for the purposes of determining taxable profit, bearing, in this case, the said taxation.

20. The non-consideration as a tax cost of expenses submitted to autonomous taxation or the payment of this tax has the purpose of preventing abusive conduct, as these are expenses easily diverted to private consumption, with taxpayers always being able to prove their business character and within that scope make them negative components in the determination of taxable profit and not submit them to autonomous taxation."

And, consequently, it understands that "(…) both the AT through the Large Taxpayers Unit and the arbitral tax courts understand that the non-consideration as a tax cost and the subjection to autonomous taxation of certain expenses are equivalent ways of achieving the penalisation intended by the legislator, with it being up to the taxpayer to opt for one or the other form (…)".

Now, "(…) the A… intends, with regard to the attribution of allowances and compensation for travel in the employee's own vehicle to its workers, to opt for their non-deductibility for tax purposes, with the consequent removal of autonomous taxation on the same".

Requesting "(…) that the amount of €409,818.44 in expenses relating to allowances and compensation for travel in the employee's own vehicle, in the service of the employer, subject to autonomous taxation in that tax year of 2013 (…) be added to the 2013 taxable profit/subtracted from 2013 tax losses, with the consequent reduction in that amount of the tax losses determined in that year (…) and "that the autonomous taxation for 2013 on those expenses relating to allowances and compensation for travel in the employee's own vehicle, in the service of the employer, in the amount of €61,472.77 (…) and the remaining autonomous taxation for 2013, insofar as it concerns the rate increase of 10 percentage points, be annulled as an indissociable consequence."

2 - The position of the Tax Authority

The position of the AT is that set out in the reasoned proposal on which the dispatch rejecting the hierarchical appeal filed by the Applicant was based, to which reference was made above, and is contained in the facts of the case set out above.

The response to the request of the Applicant in these proceedings does not form part of the reasoning of the act, serving only to explain it and to contest the grounds of the request, as post hoc reasoning is not permissible, in accordance with long-standing and consistent case law of the Supreme Administrative Court and results from the provisions of article 77 of the General Tax Law (LGT).

3 - Consideration

Autonomous taxation is one of the most dealt with matters in arbitrary tax case law, on which it has already produced multiple decisions, not always entirely convergent, but in which fundamental common features can be found.

There is no justification for retaking here what this case law has been asserting, particularly regarding the nature and regime of autonomous taxation, especially as the Applicant invokes only one ground to support its claim: it only self-assessed autonomous taxation because it was unaware that, according to arbitral decisions and the understanding of the AT itself, it was possible for it to avoid them, it being sufficient for that purpose not to deduct the expenses it incurred and on which this taxation is levied.

It is for this reason, and only for this reason, that it should be permitted to eliminate the said expenses from its accounts, ceasing to consider them as costs or, in other words, adding them to taxable profit; and the AT, by not allowing this, incurs a breach of law.

Let us see:

In accordance with article 88, no. 9 of the Code of Corporate Income Tax (CIRC), in the version applicable to the case, there is autonomous taxation on deductible expenses relating to allowances and compensation for travel in the employee's own vehicle, in the service of the employer, not charged to clients, recorded under any heading, except to the extent that there is taxation under the IRS in the sphere of the respective beneficiary.

We are thus dealing with a taxation that applies to deductible expenses. Being deductible expenses, they necessarily contribute to the formation of taxable profit or to the maintenance of the source of income production.

This taxation does not therefore rest on what some arbitral case law has been calling "non-business character", total or partial. This concept rests on the idea that the expenses incurred will not be for the benefit of the business, or will have benefited other entities as well, particularly the owner of the business, administrators or employees thereof, and persons related to the business.

With regard to expenses that do not relate exclusively to the business, the entrepreneur may nevertheless deduct them, with the consequence of subjecting them to autonomous taxation. Or he may refrain from deducting them, refraining from considering them as costs, and in this case will not incur autonomous taxation.

The judgement which the entrepreneur is free to make, and which is solely his responsibility, is regarding the "business character" of the expense, choosing it as deductible or deciding on its non-deductibility.

Now, in our case, the Applicant does not allege that the expenses for allowances and compensation for expenses with the employee's own vehicle were incurred outside the scope of its activity, for which they were not necessary, that they did not benefit it, but a third party – that they are non-business expenses.

However, there is no possibility of omitting from the company's accounting an expense that was actually incurred and is necessary for the formation of taxable profit or the maintenance of the source of income production. No rule permits this, and it is certain that the Applicant does not point to one. And if this were to happen, it would amount to a falsification of the company's accounts, which will only be correct if they include all movements, both debit and credit, actually carried out and documented.

Note that article 23, no. 1 of the CIRC provides that "For the determination of taxable profit, all expenses and losses incurred or borne by the taxpayer to obtain income subject to IRC are deductible" – all expenses incurred or borne, not only those which the entrepreneur elects.

It is with this scope, and not with that attributed to it by the Applicant, that the case law invoked should be interpreted, as well as the understanding of the AT embodied in the document which the Applicant claims to be in its favour.

Moreover, it is not the deduction or non-deduction, in the concrete case, of the expenses that is relevant for the purposes of this autonomous taxation, but rather their deductibility, as results from no. 9 of article 88 of the CIRC. And the expenses in question here, in addition to having been deducted, are deductible, and would be so even if the Applicant had not deducted them or had added them to taxable profit, as it seeks to do.

In this sense, but with greater development, see the CAAD ruling of 3 October 2016 in case no. 148/2016-T.

As for indemnitary interest, this matter is prejudiced in light of the non-recognition of the Applicant's right to the reimbursement of the tax paid.

V - DECISION

On the basis of the grounds set out above, the Applicant's request is found to be unfounded, and the decision on the hierarchical appeal and the self-assessment effected by the Applicant remain in the legal order.

VI - VALUE OF THE CASE

In light of article 97-A no. 1 letter a) of the Code of Tax Procedure and Process, applicable by virtue of letters a) and b) of article 29 of the RJAT and article 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €95,619.09.

VII - COSTS

The costs, which amount to €2,754.00, are borne by the Applicant, having regard to its failure to succeed, in accordance with the provisions of articles 12 no. 2 and 22 no. 4 of the RJAT and 4 no. 4 of the Regulation of Costs in Tax Arbitration Proceedings and Annex Table I.

Let notice be given.

Lisbon, 11 May 2018.

The Arbitrators

(José Baeta de Queiroz)

(Carlos Lobo)

(Francisco Nicolau Domingos)

Document drawn up by computer, in accordance with the provisions of article 131 of the Code of Civil Procedure, applicable by reference to article 29, no. 1, letter e) of the Legal Regime for Tax Arbitration, with blank spaces, and reviewed by the arbitrators.

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

Frequently Asked Questions

Automatically Created

What are autonomous taxation rates on representation expenses and vehicle costs under Portuguese IRC?
Under Portuguese IRC law (Article 88), autonomous taxation rates on vehicle-related expenses vary by vehicle cost and emissions. For employee vehicle compensation and travel allowances, the base rate is 5%. However, a 10 percentage point surcharge applies when the company reports tax losses, increasing the effective rate to 15%. An additional 10% surcharge may apply to all autonomous taxation when tax losses are determined, effectively creating a compounding effect. These autonomous taxes apply regardless of whether the underlying expenses are deductible for general IRC purposes.
How does the 10 percentage point aggravation apply to autonomous taxation when a company reports tax losses?
When a company reports tax losses in Portugal, Article 88 of the IRC Code imposes a 10 percentage point aggravation (surcharge) on autonomous taxation rates. This surcharge applies to various expense categories subject to autonomous taxation, including representation expenses, vehicle costs, and employee allowances. The aggravation increases the base autonomous taxation rate proportionally - for example, from 5% to 15% on vehicle-related expenses. Additionally, a separate 10% surcharge may apply to the total autonomous taxation amount when tax losses are determined, as demonstrated in this case where €34,146.32 in additional tax resulted from applying 10% to €341,463.25 in autonomous taxation base amounts.
Can a company challenge IRC self-assessments related to autonomous taxation through CAAD arbitration?
Yes, companies can challenge IRC self-assessments related to autonomous taxation through CAAD (Centro de Arbitragem Administrativa) arbitration. The procedure requires first filing an amicable claim (reclamação graciosa) with the Tax Authority. If rejected or not decided within the legal timeframe (creating implicit rejection), the taxpayer may file a hierarchical appeal (recurso hierárquico). Following total or partial rejection of the hierarchical appeal, the taxpayer can request arbitration under the RJAT (Regime Jurídico da Arbitragem Tributária) framework, as established in Decree-Law 10/2011. The arbitration request must be filed within the legally prescribed deadlines, and CAAD has jurisdiction over disputes concerning the legality of tax assessments, including autonomous taxation matters.
What qualifies as deductible travel allowances and employee vehicle compensation under Portuguese tax law?
Under Portuguese tax law (IRC Code Article 23(d)), deductible travel allowances and employee vehicle compensation must meet strict requirements. Allowances (ajudas de custo) compensate employees for meals and accommodation when traveling for work outside their usual workplace. Vehicle compensation reimburses per-kilometer expenses when employees use personal vehicles for company business. To qualify as deductible, these expenses must be: (1) demonstrably indispensable for producing taxable income; (2) supported by journey logs identifying the user, vehicle, kilometers traveled, locations, service nature, dates, and per-kilometer rates; (3) linked to specific clients or projects; and (4) showing a causal relationship with the company's productive activity. Internal accounting documents alone are insufficient; objective evidence establishing the connection to taxable income is essential. Without proper documentation breakdown, the Tax Authority will not accept these as legitimate business expenses.
What is the procedure for contesting autonomous taxation after a partially denied hierarchical appeal in Portugal?
The procedure for contesting autonomous taxation after a partially denied hierarchical appeal in Portugal involves: (1) Filing an initial amicable claim (reclamação graciosa) within the legal deadline (typically two years from payment or notification); (2) If rejected or not decided within four months (creating implicit rejection), filing a hierarchical appeal (recurso hierárquico) with the superior tax authority; (3) Upon total or partial rejection of the hierarchical appeal, the taxpayer may either: (a) request tax arbitration through CAAD under the RJAT regime, or (b) file a judicial appeal to administrative courts. For CAAD arbitration, the request must be filed within 90 days of notification of the hierarchical decision, must specify the contested amount, and requires payment of initial fees. The arbitration follows procedures outlined in Decree-Law 10/2011, with the tribunal constituted by appointed arbitrators who examine legality issues, documentary evidence, and may dispense with hearings if deemed unnecessary.