Process: 510/2017-T

Date: April 6, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 510/2017-T) addresses the classification of professional income from personal trainer and handball referee activities for Portuguese IRS purposes. The taxpayer contested the 2015 IRS assessment, arguing that income from these activities should be reported in field 404 of Annex B (coefficient 0.35) rather than field 403 (coefficient 0.75), as they are not specifically listed in the table of Article 151 of CIRS. The taxpayer relied on an opinion from the Order of Certified Accountants (OCC) and Circular Notice 20.187/2016, claiming her activities did not constitute professional athlete services under code 1323. The Tax Authority (AT) argued that both personal training and sports refereeing fall within the scope of "Athletes" (code 1323) as sports-related activities, requiring classification in field 403 with the 0.75 coefficient. The AT emphasized that Law 82-E/2014 reformed IRS taxation for 2015, restricting the 0.75 coefficient to activities specifically provided in Article 151's table, while creating a 0.35 coefficient for other service provisions. The key legal question centered on whether personal trainers providing recreational fitness services and sports referees qualify as "athletes" under the CIRS classification system. The case demonstrates the importance of proper activity classification for determining applicable income coefficients, which directly impacts taxable income calculation. The taxpayer also sought €500 compensation for procedural costs, which the AT contested as not provided for under LRAT. This decision clarifies the scope of sports-related professional activities under Portuguese tax law and the proper interpretation of Article 151 classifications.

Full Decision

ARBITRAL DECISION

The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority. Pursuant to the provisions of paragraph a) of section 2 of article 6 and paragraph b) of section 1 of article 11 of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal and communicated acceptance of the appointment. Thus, in compliance with the provisions of paragraph c) of section 1 of article 11 of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 06-12-2017, following the regular procedure.

I – REPORT

1- On 15-09-2017, A…, NIF…, resident at Rua de …, no.…, …, …-… …, filed a request for constitution of a sole arbitral 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 only as LRAT), with the Tax and Customs Authority as the Respondent.

2- The Claimant comes, albeit implicitly (as addressed hereinafter), to contest the assessment of Personal Income Tax (IRS), No. 2017…, the assessment of interest No. 2017… and reversal – assessment 2016…, for the year 2015, in the amount of €1,108.39, against which she filed Gracious Complaint No. …2017…, which was rejected by decision of 2017-10-06 from the Head of the Finance Service of …. She further requests the condemnation of the Tax Authority in the amount of €500.00, as compensation for costs allegedly related to the proceedings.

In fact, the Claimant filed on 09-06-2017 a Gracious Complaint against the official assessment act of IRS/2015, requesting the annulment of the act, which was rejected.

Not satisfied with such rejection, she came to "request the intervention" of CAAD, "to clarify whether what Circular Notice No. 20.187 of 05 April 2016 states, and the opinion of the OCC, is correct and whether income from Personal Trainer and arbitrator activities should be considered in field 404, or whether, conversely, both the OCC and the circular notice are wrong and such income should be included in field 403".

3- She invokes, briefly, in her favour:

The activities whose services she provided, as "personal trainer" and handball arbitrator, are not specifically provided for in the table of article 151 of CIRS, as the code 1323 Athletes does not apply to her, although she is also registered in CAE 93192 (other sports activities).

As a "personal trainer" she provides only a service of physical activity practice in a "recreational" manner, to provide better quality of life to her clients, …and the practice of arbitration means that she is never in competition.

For these activities to be considered within code 1323 – Athletes in the table attached to article 151 of CIRS, there should be a circular notice or any other binding information issued by the Tax Administration in that sense, given that by the concept of athlete these activities cannot be considered as identical.

She adds that several colleagues of hers who exercise the same activities, but who are registered in other finance offices, declared the income from Personal Trainer or arbitrator in field 404 of annex B and all such declarations were validated successfully.

She alleges that she requested a technical opinion from the Order of Certified Accountants (OCC), on the question, stating that opinion that "income from the activity of personal trainer and arbitrator, as it does not fit specifically into any of the professional activities listed in the annex to article 151 of the IRS Code, shall be included in paragraph c) of section 1 of article 31 of the IRS Code and as such should be entered in field 404 of table 4-A of annex B".

4- For its part, the Tax Authority defends…

Law No. 82-E/2014, of 31/12, in force from 1 January 2015, proceeded to reform the taxation of individuals, introducing amendments to CIRS and consequently, the reformulation of the entire Form 3 declaration and respective annexes, in compliance with the legislative changes resulting from said law, as well as the respective completion instructions.

With the wording introduced for the year 2015, the application of the coefficient 0.75 was restricted to "income from professional activities specifically provided for in the table referred to in article 151", whereby this term clarifies that the coefficient of 0.75 shall only apply if the activity developed, the service concretely provided, can be framed within one of the codes in the aforementioned table, a new coefficient of 0.35 being created for the remaining service provisions.

Furthermore, in order for the coefficient 0.75 to be applied, it is not required that the service provider be registered with the respective code in the table referred to in article 151 of CIRS, as even if registered with a CAE code, if the service provided falls within one of the activities specifically provided for in that table, the coefficient 0.75 shall always be applied and the value of services provided shall be indicated in field 403 of table A of annex B of the IRS declaration.

It further follows that the exclusion from this field of income from activities with the code "1519 – Other service providers" should only be carried out when the service provided does not correspond to any of the activities specifically provided for in the table referred to in article 151.

The activities that the Claimant actually carried out and the nature of the income obtained were related to sporting activity, sports practice and as an athlete, with no doubt whatsoever that the code 1323 "Athletes" applies to codify the activities that the Claimant exercised and from which she received income, activities which are "personal trainer" and federated handball game arbitrator, directly linked to sports practice.

The Tax Administration complied fully with the applicable legal norms in relation to the facts, since the Claimant's income could only be entered in field 403, to which the coefficient of 0.75 applies for determining taxable income, as these income, the nature of these values received, derived from services provided related to sports practice, with sports modalities and sports practices.

Therefore, the IRS assessments relating to the year 2015 remain fully valid, concluding as to their legality.

With regard to the requested payment of €500.00 as compensation for all costs incurred by the Claimant with this proceeding, this should not be considered, as such request is not provided for in the Legal Regime for Arbitration in Tax Matters.

The Tax Authority concludes that the total dismissal of the request should be declared, maintaining the act and absolved from the claim, with the due legal consequences.

II- Preliminary Matters

II1- There was no appointment of a representative. However, such omission does not contend with the regularity of the instance, as there is only an obligation for such appointment in proceedings whose value exceeds twice the jurisdiction of the court of first instance, pursuant to article 6/1 of CPPT.

II2- Nevertheless, the atypicality of the present procedure and documents presented is evident, showing relevance to the unclear formulation of the claim in the Initial Request and presentation of the Motion of 02 March 2018.

It shall be stated as follows:

II2a- With regard to the aforementioned Motion, obviously its content shall not be taken into account, in any circumstance or context, as it has no procedural standing. There is, therefore, no necessity in its removal from the file, which would be as useless as the uselessness that characterizes it.

II2b- With regard to the claim formulated in the Initial Request, it is indeed evident that its lack of unambiguity and clarity.

However, we can verify that this Initial Request shows the intention of its author and it was that same intention apprehended by the Tax Authority. The Tribunal can also conclude, in an evident manner, that the act shall have the meaning corresponding to the intention to challenge the decision rejecting the Gracious Complaint and mediately intend the annulment of the tax act in question.

It is, thus, an implicit claim, which, in the combination of the provisions of article 193 of CPC with the specific nature of the arbitral process, leads to the Initial Request not being considered defective, with the legal consequences.

III- The Tribunal is competent and the process is not affected by nullities, with no obstacle to consideration of the merits of the case.

IV- FACTUAL MATTERS

1- The Claimant exercised in the year 2015 the activities of Personal Trainer and federated handball arbitrator, being registered with CAE code 0393192 (Sports activities).

2- The Claimant, in her activity commencement declaration, opted for the simplified regime for purposes of taxation under IRS of her category B income.

3- She filed the IRS income declaration, form 3, for the year 2015, having declared in annex B, in field 403 the amount of €850.00, referring to professional activities specifically provided for in the table of article 151 of CIRS and €11,553.50 in field 404, referring to the activity of service provision.

4- The Finance Service of…, understood that the entry in field 404 of income from the activity of Personal Trainer and federated arbitrator was incorrect, notifying the Claimant accordingly.

5- The Tax Authority considered all income obtained by the Claimant in 2015 in field 403 of annex B, proceeding with an official assessment in the amount of €1,108.39.

6- Not satisfied, the Claimant filed Gracious Complaint No. …2017…, which was rejected in its entirety.

V- Facts Established as Proven

All the aforementioned.

VI- Reasoning for Proven and Unproven Factual Matters

With regard to factual matters, the Tribunal does not have to rule on everything that was alleged by the parties, being incumbent upon it, rather, the duty to select the facts that matter for the decision and discriminate between proven and unproven facts (cf. article 123, section 2, of CPPT and article 607, section 3 of CPC, applicable ex vi article 29, section 1, paragraphs a) and e), of LRAT).

In this manner, the facts relevant to the judgment of the case are chosen and selected based on their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (cf. previous article 511, section 1, of CPC, corresponding to current article 596, applicable ex vi article 29, section 1, paragraph e), of LRAT).

Thus, having regard to the positions assumed by the parties, in light of article 110/7 of CPPT, and the documentary evidence attached to the file, the facts listed above were considered proven, with relevance to the decision.

VII- ON THE LAW

The central point of controversy in the present arbitral action points to the question of which of the coefficients provided for in article 31 of CIRS (in force in the year 2015) shall be properly applied to the income earned by the Claimant with the provision of services in the activities of Personal Trainer and federated arbitrator.

Such income shall be framed in paragraph b) or c) of section 1 of the aforementioned article 31 of the IRS Code and as such should be entered in field 403 or 404 of table 4-A of annex B of the Annual Declaration?

As has been referred to in cases of similar underlying philosophy, notwithstanding the merits of the arguments put forward in the Tax Authority's Response, the truth is that there are fundamental principles that in no case can we overlook in tax law, whereby we tend to agree with the decision rendered in Proc. 107/2016-T of this CAAD.

We understand, therefore, that indeed, the rules of interpretation of tax norms are exactly the same as those applied to norms in other branches of law. "In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

But precisely for this reason, (or notwithstanding), it must be borne in mind that in Tax Law the principle of specific typicality prevails, an element of the principle of legality, which, for what concerns us, requires the exhaustive enumeration of the facts or realities that, "within each generic type of the regulatory objective of incidence, are indicated by law as the objective of incidence".

By virtue of the principle of legality provided for in article 106, section 2, of the Constitution of the Republic and of the principles of typicality and determination in which it is subdivided, the norms of incidence must be predetermined in their content, and the elements comprising the same must be formulated in a precise and determined manner.

"The determination of the content of the tax norm of incidence excludes the use of indeterminate concepts, as well as determined regulatory concepts whose application to the concrete case is based on subjective or personal assessment of the implementing authority, under penalty of undermining legal certainty".

Now we do not see that, in the sense referred, the activities in question have unambiguous and clear provision, in the aforementioned table attached to article 151 of CIRS, whether or not they are related to any sporting activity, as neither one nor the other are, notably, themselves sporting activities, without more.

FOR THIS REASON AND MEASURE we must agree, as stated, with the aforementioned decision, when it states that (…) starting from the literal element, the result of the interpretation seems to us unambiguous – the coefficient of 0.75 is applicable only to income from professional activities contained in the table referred to in article 151.

It is not seen, therefore, how it is possible to include in this scope income from activities that are not professional activities specifically contained in the table referred to in article 151.

…As the letter of the law is the maximum limit of the interpretive task, it is not possible to conclude that other income beyond these should merit the same treatment, especially when the legislator itself created, parallel to this specific category of income, a residual category contained in paragraph c) of section 1 article 31 of CIRS – where the "remaining category B income not provided for in the preceding paragraphs" is included.

It must therefore be considered that the income from service provisions such as Personal Trainer and federated arbitrator, obtained in the year 2015 by the Claimant, shall be calculated based on the coefficient provided for in paragraph c) and not in paragraph b) of section 1 of article 31 of CIRS;

WHEREBY THE CLAIM PROCEEDS, thus, as the contested assessment is affected by a defect of error regarding the presuppositions of fact and law, imposing its annulment.

As for the claim for condemnation of the Tax Authority in the amount of €500.00, as compensation for allegedly procedure-related costs, it has no support either in tax procedural law or, specifically, in arbitral proceedings, whereby it fails.

DECISION

On these grounds, this Arbitral Tribunal decides to partially uphold the arbitral claim filed and, consequently:

a- Declare the annulment of the tax assessment act of official assessment identified for the year 2015;

b- Not condemn the Tax Authority in the requested payment of €500.00;

d- Condemn both parties in the costs of the proceedings, fixed below.

Value of the Proceedings

The value of the proceedings is fixed at €1,108.39, pursuant to article 97-A, section 1, a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of section 1 of article 29 of LRAT and section 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

The value of the arbitration fee is fixed at €306.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Respondent and Claimant, in the proportion of 90/10, as the claim was considered partially upheld, pursuant to articles 12, section 2, and 22, section 4, both of LRAT, and article 4, section 4, of the aforementioned Regulation.

Lisbon, 06 April 2018

The Arbitrator,

(Fernando Miranda Ferreira)

Frequently Asked Questions

Automatically Created

How should income from personal trainer and sports referee activities be classified for IRS purposes in Portugal?
Income from personal trainer and handball referee activities should be classified under code 1323 'Athletes' (Desportistas) in the Article 151 CIRS table and reported in field 403 of Annex B of the IRS declaration, applying the 0.75 coefficient. The Tax Authority consistently held that these activities are directly linked to sports practice and sporting modalities, regardless of whether the services are recreational or competitive in nature. The classification depends on the actual nature of services provided, not the CAE registration code.
Does the activity code 1323 (Desportistas) in Article 151 of the CIRS apply to personal trainers and handball referees?
Yes, activity code 1323 (Desportistas/Athletes) applies to both personal trainers and handball referees according to the Tax Authority's interpretation. The AT argued that personal training services related to physical activity practice and sports refereeing are inherently connected to sports practice and athletic activities. This classification applies even when services are provided in a recreational context rather than competitive sports, as the determining factor is the sports-related nature of the service itself.
What is the correct IRS declaration field (403 vs 404) for professional income from non-listed activities under the CIRS table?
For professional income from activities not specifically listed in the CIRS Article 151 table, the correct field is 404 of Annex B (applying the 0.35 coefficient) under Article 31(1)(c) of CIRS. However, the Tax Authority maintains that if an activity can reasonably be framed within any of the codes in the Article 151 table, field 403 must be used with the 0.75 coefficient. The reform introduced by Law 82-E/2014 for 2015 specifically restricted the 0.75 coefficient to activities 'specifically provided for' in the Article 151 table, creating the 0.35 coefficient for remaining service provisions. The key is whether the actual service provided corresponds to listed activities, regardless of formal registration codes.
Can taxpayers challenge IRS tax assessments through CAAD arbitration after a denied Reclamação Graciosa?
Yes, taxpayers can challenge IRS assessments through CAAD arbitration after a denied Reclamação Graciosa (Gracious Complaint). This case demonstrates the proper procedural sequence: the taxpayer filed a Reclamação Graciosa on June 9, 2017, which was rejected on October 6, 2017, and subsequently requested CAAD arbitration on September 15, 2017. The Legal Regime for Arbitration in Tax Matters (LRAT - Decree-Law 10/2011) allows taxpayers to seek arbitral resolution of tax disputes as an alternative to judicial courts, following administrative rejection of complaints.
What does Ofício Circulado 20.187 of 2016 establish regarding the classification of sports-related professional income for IRS?
Ofício Circulado (Circular Notice) 20.187 of April 5, 2016, addressed the classification of sports-related professional income for IRS purposes following the 2015 tax reform. The taxpayer referenced this circular to support her position that personal trainer and referee income should be classified in field 404. The circular provided guidance on interpreting the reformed Article 151 table and the application of the 0.75 versus 0.35 coefficients. However, the Tax Authority maintained that the circular, properly interpreted, supports classifying sports-related activities like personal training and refereeing under code 1323 'Athletes,' requiring field 403 reporting. The dispute centered on whether these activities are 'specifically provided for' in the Article 151 table.