Process: 590/2015-T

Date: February 26, 2016

Tax Type: IRS

Source: Original CAAD Decision

Summary

This arbitration case (Process 590/2015-T) concerns a taxpayer's challenge to the Portuguese Tax Authority's dismissal of her request for official review of an IRS assessment for tax year 2010. The taxpayer initially filed her 2010 IRS declaration on April 29, 2011, without mentioning any disability status, resulting in a partial refund of €233.21. On January 17, 2012, she obtained a multi-use disability medical certificate certifying 60% permanent disability retroactive to 2010. Subsequently, on April 29, 2012, she filed a substitute IRS declaration for 2010 indicating her disability status in Field 03-A of Table 3. While the Tax Authority validated this substitute declaration, it was deemed non-taxable and did not result in any correction to the original assessment. On August 16, 2013, the taxpayer filed a request for official review under Article 78(4) of the General Tax Law (LGT), arguing that the disability deduction provided in Article 87(1) of the IRS Code should be applied, which would result in an additional refund of €1,667.88. The Tax Authority dismissed this review request, prompting the taxpayer to initiate arbitration proceedings at CAAD. The case raises important questions about the interaction between substitute declarations and official review procedures, the retroactive application of disability deductions when certificates are issued after the original filing deadline, and the time limits for requesting official reviews. The arbitral tribunal was constituted on November 20, 2015, under the RJAT framework (Decree-Law 10/2011), with the Tax Authority arguing for inadmissibility of the claims in its response.

Full Decision

ARBITRAL DECISION

A…, Tax ID Number…, residing at Rua da … nº …- … Esq.º, …-… Porto, came, in accordance with the provisions of paragraph a) of article 2, paragraph 1, and articles 10 and following of Decree-Law no. 10/2011, of 20 January (RJAT), to submit a request for establishment of an arbitral tribunal to pronounce on the illegality of the decision dismissing the request for official revision that she had filed on 2013/08/16, concerning IRS - tax year 2010, as well as the declaration of illegality of the respective Liquidation Notice, in which a partial refund was ascertained in the amount of €233.21.

The PORTUGUESE TAX AND CUSTOMS AUTHORITY (AT) is the respondent.

By order of 11/09/2015, the request for establishment of the arbitral tribunal was accepted by the President of CAAD, which was notified to the Portuguese Tax and Customs Authority on 23/09/2015.

The Applicant waived the right to appoint an arbitrator, so, in accordance with the provisions of paragraph a) of article 6, paragraph 2, and paragraph b) of article 11, paragraph 1, of the RJAT, the Deontological Council designated as arbitrator of the singular arbitral tribunal the signatory of this decision, who communicated acceptance of the office within the applicable period.

On 20/11/2015 the parties were duly notified of the constitution of the Arbitral Tribunal, and neither party manifested the will to refuse the appointment of the arbitrator, in accordance with the combined provisions of article 11, paragraph 1, paragraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, taking into account what is established in paragraph c) of article 11, paragraph 1, of the RJAT, the Tribunal was constituted on 20/11/2015.

The Portuguese Tax and Customs Authority filed a response in which it defends the inadmissibility of the claims formulated in the present action, which concern the IRS liquidation for 2010.

By order of 2016/01/07, the Tribunal dispensed with the holding of the meeting provided for in article 18 of the RJAT and, despite being notified to do so, the parties presented no submissions.

The Arbitral Tribunal was duly constituted.

The parties have legal personality and capacity, are legitimate (articles 4 and 10, paragraph 2, of the same statute, and article 1 of Regulatory Order no. 112-A/2011, of 22 March), and are duly represented.

The proceedings do not suffer from nullities nor is there any exception to be considered.

STATEMENT OF FACTS

a) The Applicant timely submitted her IRS Form 3 declaration relating to income earned in 2010, on 29/04/2011, in which she made no mention of her situation as a person with permanent disability.

b) On 29/04/2012, she filed, with reference to the same tax year, a substitute Form 3 declaration, in which she indicated that she was a person with a disability/incapacity with a degree of 60%.

c) On 16/08/2013, she filed a request for "official revision of the IRS declaration, arguing the need to consider the deduction provided for in article 87, paragraph 1, of the IRS Code, for purposes of determining her IRS, given her incapacity/disability duly recognized by a multi-use disability medical certificate";

d) The Applicant attached to the request for establishment of the Arbitral Tribunal a copy of said certificate, issued on 17/01/2012, which certifies that she has a degree of permanent disability of 60%, and that this disability existed since 2010, to be reassessed in 2015.

e) The request for official revision was dismissed, and it is this dismissal that the Applicant seeks to have reviewed by the arbitral tribunal, because, as she alleges, the illegality arising from the Dispatch, by not allowing the deduction that flows from the degree of disability she possesses, in accordance with article 87, paragraph 1, of the IRS Code, is reflected in liquidation no. 2011…;

f) That is, if the deduction provided for in article 87 cited were to be considered, relating to the degree of disability in the recalculation of IRS for 2010, the Applicant would have to be refunded an additional amount of €1,667.88.

PROVEN FACTS

The following facts are considered proven:

  • The challenger timely submitted her income statement subject to IRS (29/04/2011) concerning the tax year 2010, without any reference to her condition of incapacity;

  • This declaration gave rise to liquidation no. 2011…, the final result of which was the determination of €233.21 refund, without consideration of any circumstance related to physical disabilities.

  • On 29/04/2012, the challenger now submitted a new income declaration, this time a substitute declaration, which is only differentiated from the previous one because she indicated in Frame 3, field 03-A, her status as a taxpayer with disability with a Degree of 60%, this because, as she alleges,

  • On 17/01/2012, a multi-use disability medical certificate had been issued by the Medical Board of ARS-Norte -…, in which it is certified that the challenger was the holder of a "permanent physical disability of 60%, since 2010, to be reassessed in 2015".

  • The substitute declaration filed on 29/04/2012 was validated by the AT in the computer system, but deemed non-taxable.

  • On 16/08/2013, the applicant submitted a request for revision of the IRS liquidation for 2010, with no. 2011…, on the basis of paragraph 4 of article 78 of the General Tax Law (LGT), claiming that the taxable matter be revised, now taking into account the circumstance of incapacity mentioned in the substitute declaration.

  • It is the decision dismissing this procedure, opened under the cited article 78 of the LGT, that comes under challenge.

PROVEN AND UNPROVEN FACTS

The facts are deemed proven based on the documents submitted with the initial petition, all of which are confirmed in the administrative proceedings.

It is not considered proven any of the circumstances or causes related to the date on which the Applicant obtained the disability declaration (Certificate) nor on what date she came into possession of said document, nor are there any other facts relevant to the assessment of the matter of the request for arbitral pronouncement that should be considered proven or unproven.

THE LAW

I - The Applicant comes seeking from the tribunal the annulment of the dispatch dismissing the request for revision filed regarding the alleged illegality of the IRS liquidation for the year 2010, requiring, in practice, the consequent treatment of the substitute declaration that contains the mention of disability in a degree of 60%, for which she alleges, in summary, the following:

  1. She submitted Form 3 declaration of IRS for 2010, from which resulted liquidation no. 2011… with the refund in the amount of €233.21.

  2. In that declaration she did not fill in field 03 of Frame 3-A.

  3. By the end of 2011, reduced by the effects of the medical treatment to which she was submitted, according to her allegation, the Applicant went to a medical board, and on 17/01/2012, a multi-use disability medical certificate was issued, which gave her "permanent global incapacity of 60%, since 2010, to be reassessed in 2015".

  4. On 29 April 2012 the Applicant then submitted a substitute Form 3 declaration of IRS, relating to the tax year 2010, where she registered in said field 03 of Frame 3-A, her degree of permanent disability of 60%.

  5. The declaration in question was deemed correct by the Central Services, but did not result in the correction of the liquidation stated in the IRS Liquidation Notice that had previously been notified to her.

  6. For this reason, on 16 August 2013, she filed a request for official revision of the IRS liquidation for 2010, arguing the need to consider the deduction provided for in article 87, paragraph 1, of the IRS Code, given her incapacity/disability duly recognized by a multi-use disability medical certificate.

  7. The IRS Services Directorate, meanwhile, notified the Applicant of the draft dismissal of the request for official revision in question, the arguments raised by her in the prior hearing being disregarded, and consequently the Applicant was notified of the final decision dismissing the request for official revision.

  8. Thereafter, the Applicant, based on the foregoing, understands it to be necessary to conclude that the IRS liquidation no. 2011…, because it does not consider the deduction provided for in article 87 of the IRS Code, is illegal.

  9. Her disability, in the percentage of 60%, with effect from 01 January 2010, is validated by the AT, and is included in the information contained in the "general data" of the Applicant, on her Finance Portal page.

  10. The Applicant contends that the request for official revision is admissible in light of the provisions of article 78, paragraph 4, of the LGT, but is also so in light of article 74, paragraph 1, of the LGT, so that a new IRS liquidation notice relating to 2010 should be processed, from which, after adjustments, IRS in her favor will result in the amount of €1,677.60.

  11. She alleges as to paragraph 4 of article 78, that she submitted the request for revision before the expiry of the three years referred to in paragraph 4 of the cited article 78, as the liquidation was made in 2011 and the petition was filed with the Services in 2013, so there is no issue of timeliness of the revision request.

  12. On the other hand, she contends that there is no doubt of the verification, in her case, of grave or notorious injustice in respect of taxation in IRS with reference to the year 2010, because if the same liquidation were to be maintained, it does not consider the invalidity/incapacity certified by medical certificate already recognized by the AT, as is in the computer system;

  13. The Applicant supports her thesis of verification of the presupposition of grave or notorious injustice in jurisprudence and in administrative doctrine of the AT itself, concluding that "…what is at issue is the taxation of a taxpayer with permanent physical disability of 60%. Now, the non-consideration of this deduction – article 87 of the IRS code - for purposes of determining the Applicant's IRS for 2010, would result in her taxation as if she were a taxpayer without any disability whatsoever, which does not correspond to the truth".

  14. As to the question of the absence of negligent behavior, the Applicant expresses the opinion that the certificate, although attesting the existence of incapacity since 2010, was only issued on 17/01/2012 and that, having obtained the certificate, she immediately submitted a substitute Form 3 IRS declaration relating to the tax year 2010 and, subsequently, presented the request for official revision in question,

  15. Therefore, there is no negligence whatsoever that can be imputed to the Applicant, there being obviously unequivocal and evident grave injustice in the taxation of IRS relating to the tax year 2010 of the Applicant, if her incapacity is not considered for purposes of the tax to be paid.

  16. The Applicant further understands that, should there be disagreement with the verification of the presuppositions provided for in paragraph 4 of article 78 of the LGT, that, still, the request for revision should have been granted under paragraph 1 of the same provision.

  17. In fact, the Applicant would always have the general period for contesting an illegal tax act according to the regime provided for in paragraph 1 of the same article 78 of the LGT, that is, four years, since the taxpayer may request official revision within the period that the law grants to the Administration to do so, as results from the understanding endorsed by the STA within the scope of Case no. 945/03, of 2/07.

  18. She concludes, thus, that the legality and timeliness of the request for official revision of the IRS liquidation relating to the tax year 2010 in the terms stated above have been demonstrated.

II - Notified to make pronouncements on the petition, the AT filed a Response, from which, in summary, we can conclude the following:

  1. The request does not merit acceptance because the conditions imposed by paragraph 4 of article 78 of the LGT are not met for the taxpayer to be able to avail himself of the revision procedure provided therein, with the aim of correcting the IRS liquidation for 2010.

  2. Effectively, article 87 of the IRS Code provides for a deduction to persons with permanent invalidity/disability, duly proved by a multi-use certificate, when equal to or exceeding 60%;

  3. On the other hand, the IRS Code establishes in paragraph 7 of article 13 that the personal and family situation of taxpayers relevant for taxation purposes is that which exists on the last day of the tax year;

  4. It happens that the applicant did not submit any medical certificate at the time of the revision request, so it was not possible to determine, for the purpose of deciding that revision request, whether on 31/12/2010 the certificate already existed, in order to verify that on that date the applicant already met the conditions of article 87;

  5. The Applicant only submitted the said multi-use medical certificate at the moment she exercised the right to prior hearing, before the decision, "but failed to demonstrate, as was her burden, that the alleged error could not be imputed to negligent behavior on her part", this because paragraph 4 of article 78 of the LGT establishes the possibility of "revision of the taxable matter ascertained on the basis of grave or notorious injustice, provided the error is not imputable to negligent behavior of the taxpayer".

  6. On the other hand, "...the revision mechanism only provides for the possibility of revision of taxable matter, so it does not include the possibility of revision of other parameters of the IRS liquidation, such as the rates or deductions from the assessment (namely provided for in article 87 of the IRS Code). As such, the eventual grave or notorious injustice in the ascertainment of this deduction does not fall within the scope of application of that regulation".

  7. According to the AT, "even if this is not the understanding, it must be noted that the grave or notorious injustice to which that legal regulation alludes is only capable of supporting the exceptional official revision when "the error is not imputable to negligent behavior of the taxpayer".

  8. Now, as to this respect the applicant alleges only that she attempted to correct the situation as soon as she obtained the certificate, saying nothing that would allow it to be demonstrated that the failure to obtain the certificate in a timely manner, in a year, in which, according to the applicant, the incapacity was already manifest, cannot be imputed to her negligent behavior.

  9. As to the alleged injustice in the taxation prevailing on the income of 2010, it must be reiterated the fact that the same was ascertained taking into account the presuppositions existing at the date of the tax facts, among which there was no recognized degree of incapacity, in the legally required terms for the purpose, it being true, moreover, that the applicant only in the year 2012, with the obtaining of the disability certificate, met the legal conditions necessary for her incapacity to be fiscally relevant.

  10. As we stated above, article 74, paragraph 1 of the LGT prescribes that "The burden of proof of the facts constitutive of the rights of the tax administration or of the taxpayers rests on whoever invokes them".

  11. Also article 342 of the Civil Code determines in its paragraph 1 that "he who invokes a right is responsible for proving the facts constitutive of the alleged right": determining paragraph 2 of the same article that "The proof of the facts that impede, modify or extinguish the invoked right is the responsibility of him against whom the invocation is made".

  12. Thus, it must be concluded that the dispatch dismissing the Services Directorate of the Income Tax on Individuals does not deserve any censure, as the legal presuppositions expressly determined in article 78, paragraph 4, of the LGT are not met, and consequently the tax liquidation act now in crisis does not suffer from any illegality".

  13. Given what has been explained, the AT understands that the acts or facts alleged are not capable of supporting the imputation of any error to the AT in the assessment of the fact and consequent application of the law requested.

  14. Finally, the AT contends that the permission of paragraph 1 of article 78 cannot be applied to the case either because "…in the situation under analysis it is verified that the sub judice liquidation was issued by the Tax Authority, based on the information that was then communicated and declared by the now Applicant, so that the omission of information relating to the incapacity now invoked, cannot be considered as an error by the respondent nor, consequently, an error susceptible of correction on the basis of the final part of paragraph 1 of article 78 of the LGT".

  15. Therefore, it must be concluded that the dispatch sub judice, issued in the information of the Services Directorate of the Income Tax on Individuals, does not deserve any censure."

LEGAL FRAMEWORK

In the present proceedings, there are at issue, although the first appears to have been made only marginally, two questions that may influence the illegality of the dispatch dismissing it, and, consequently, the liquidation that is sought to be revised.

The first concerns (i) the filing of a substitute declaration that did not merit treatment by the AT, although it is on file in the computer system, by reason of which might result an eventual correction of the liquidation arising from the previous declaration, and, the second, in view of the finding of this fact, (ii) the presentation of a request for revision in accordance with article 78 of the LGT.

I – On the matter relating to substitute declarations, article 59 of the Tax Procedure Code (CPPT) applies, which defines the set of steps necessary for the initiation of the tax proceeding that must be based on income declarations submitted by taxpayers.

Alongside the normal income declaration, the same provision provides for the possibility of, through the filing of substitute declarations, making it possible to correct the liquidations arising from such declarations because errors or declarative omissions were made therein.

Having as a presupposition the scope of influence of substitute declarations in the liquidations made or to be made, article 59 of the CPPT provides that:

"In case of error of fact or of law in the declarations of taxpayers, these may be substituted:

1-…;

2-…;

3-…;

a)-…;

b)-

I…;

II-Until the end of the legal period for voluntary payment or judicial challenge of the liquidation act, for the correction of errors or omissions imputable to taxpayers from which results a tax lower than that liquidated on the basis of the declaration filed;

III -…

…"

Thus, the filing of the substitute declaration by the challenger on 29/04/2012, in which she indicated the existence of a disability exceeding 60%, which would allow the benefit provided for in article 87 of the IRS Code, in addition to generating a lower tax to be liquidated, occurred beyond the legal period for voluntary payment or judicial challenge of the original liquidation act as is proven in the proceedings.

In view of this factuality, the filing of a substitute declaration cannot be the appropriate procedure to obtain the revision of the liquidation, knowing further that the error or omission in the first declaration is not imputable to the administration.

The AT had no legal obligation to process the substitute declaration filed given the lapse of the legally provided period for such purpose. Therefore, to obtain the correction of the liquidation, the taxpayer would have had to resort to another avenue. Which in fact happened through the presentation of a request for revision of the tax act under article 78 of the LGT.

II - Article 78 of the General Tax Law establishes the following:

Article 78

Revision of Tax Acts

1 - Revision of tax acts by the entity that issued them may be effected on the initiative of the taxpayer, within the period for voluntary payment and on the basis of any illegality, or, on the initiative of the tax administration, within four years after the liquidation or at any time if the tax has not yet been paid, on the basis of error imputable to the services.

2 - Without prejudice to the legal burden of voluntary payment or challenge by the taxpayer, error in self-assessment is deemed imputable to the services for purposes of the foregoing.

3 - Revision of tax acts in accordance with paragraph 1, regardless of whether it is material or substantive error, requires its proper recognition on the terms of paragraph 1 of the previous article.

4 - The top official of the service may authorize, exceptionally, within three years following the year of the tax act, the revision of the taxable matter ascertained on the basis of grave or notorious injustice, provided the error is not imputable to negligent behavior of the taxpayer[1] (Amendment by Law no. 60-A/2005, of 30/12 - Former paragraph 3.)

5 - For purposes of the foregoing paragraph, only ostensible and unequivocal injustice is considered notorious and grave injustice is that resulting from manifestly excessive and disproportionate taxation with reality or from which has resulted high prejudice to the National Treasury.

6 - Revision of the tax act by reason of duplicate collection may be carried out, whatever the basis, within four years.

7 - The deadline for official revision of the tax act or taxable matter is interrupted by the taxpayer's request directed to the competent body of the tax administration for its carrying out.

Under this provision, tax liquidation acts[2] and tax acts fixing taxable matter may be subject to revision.

· The tax liquidation act, according to the heading of article 78 of the LGT, may be revised at the request of the taxpayer or on the initiative of the tax administration.

A. If the basis for revision is "any illegality", the initiative for revision can only be requested within the period for voluntary payment.[3]

B. If the basis is error imputable to the services, the initiative for revision of the liquidation may come from the tax administration or from the taxpayer's request – the revision request may occur within four years after the issuing of the respective tax act or at any time if the tax has not yet been paid.

C. If there is duplicate collection - whatever the basis – the period for filing the request is four years for revision, both on the initiative of the AT and the taxpayer.

· The revision of taxable matter may also be authorized, exceptionally, on the basis of grave or notorious injustice, if the error is not imputable to negligent conduct of the taxpayer – period 3 years.

In the proceedings, what is at issue is a request for revision filed after the non-treatment of a substitute declaration which, in normal terms, according to the challenger, should result in a corrective liquidation of the previous liquidation, on the basis of the incapacity/disability certified in a medical certificate and, in parallel, to know whether the error resulting therefrom is imputable to the AT.

It is this reality that should be subsumed in the law, so as to know or determine whether the presuppositions of article 78 of the LGT are met for the obligation to revise the IRS liquidation that would result, not from the omission of treatment of the substitute declaration, but rather from the finding that there will be grave or notorious injustice in the ascertainment of the taxable matter subject to IRS by the non-consideration of the certified incapacity/disability of the multi-use medical certificate presented, which would have conferred on the challenger the deduction from assessment provided for in article 87 of the IRS Code and, consequently, a greater refund than that which was ascertained with the filing of the initial IRS declaration in 2011.

In this analysis, it is convenient to bear in mind the fact that, as has been said, paragraph 4 (former paragraph 3) of article 78 was amended by Law no. 60-A/2005, of 30/12 (effective 1/1/2006) which added to it the phrase "provided the error is not imputable to negligent behavior of the taxpayer". The amendment is not negligible because, if until then the verification of grave or notorious injustice in the ascertainment of taxable matter was sufficient, afterwards it came to require, cumulatively, that the error generating the proved grave or notorious injustice not be due to a subjective condition related to the taxpayer's behavior.

Having added a subjective condition, the matter relating to the burden of proof of rights became of crucial importance, given that what is at issue is subjective behavior, and hence the taxpayer's right to a favorable decision can only be accepted by means of proof, that is, in accordance with article 74 of the LGT, "the burden of proof of facts constitutive of the rights of the tax administration or of the taxpayers rests on whoever invokes them".

The legal institute of revision enshrined in article 78 of the LGT is nothing more than the duty of the administration to carry out the revision of tax acts in favor of the taxpayer, since the principles of justice, equality and legality which the tax administration must observe in the entirety of its activity impose that errors made in liquidations be officially corrected whenever taxes higher than those owed have been or are being collected. There is, thus, a recognition within the scope of tax law of the duty to revoke illegal acts.[4]

However, this duty suffers from limitations, justified by the need for legal certainty, so that, in addition to the framework of presuppositions and requirements fixed in the law, it was necessary to introduce temporal limits.

In the field of presuppositions, the Applicant alleges that we are in the presence of a case of grave or notorious injustice in the ascertainment of taxable matter and that she only obtained the confirming certificate in 2012 considering her disabled since 2010, so that, only after that date could she file the substitute declaration that would give her the right to benefit in the IRS of the legal status of taxpayers with disability.

For its part, the tax administration, not calling into question the documented verification of disability in a degree that falls under article 87 of the IRS Code, so much so that it entered it in the computer system, and also not calling into question the possibility of obtaining the revision of the liquidation by force of articles 93 of the IRS Code and 78 of the LGT, however, asks for the dismissal of the request due to lack of proof produced regarding the negligence to which paragraph 4, final part, of the mentioned article 78 refers. In its view, the legal presuppositions are not met.

Still, and widening the scope, the Applicant came to protest that the request falls not only within paragraph 1 of article 78 of the LGT, but also, and originally, within paragraph 4 of the same provision, because there is error and it was timely presented.

This possibility is not questioned, only that, in both, the law makes it depend either on the timeliness of the request or on its merits of proof of the cumulative verification of the imputability of the error to the tax administration, or that, in cases of grave or notorious injustice, the error is not due to negligent behavior of the taxpayer.

Either the basis for revision is the error in the tax act imputable to the tax administration and the request may be presented within four years after the issuing of the tax act that is sought to be revised, or there is grave and notorious injustice in the determination of collectible income and the act may be revised in three years provided that the error is not due to any negligent behavior of the taxpayer. A contrario, we must understand that if there is negligent behavior of the taxpayer in the formation of grave or notorious injustice, the act can no longer be revised.

What there is no doubt about is that the AT effected the challenged liquidation based on the elements declared in 2011. On the other hand, there is also no doubt that the applicant was declared 60% incapable with effects reported to 2010 and that, if this circumstance had appeared in the declaration, the liquidation could generate a refund of an additional €1,667.88.

However, there is no knowledge in the proceedings of the reasons that motivated the obtaining of the medical certificate only in 2012 - this stating the existence of disability eligible for purposes of article 87 of the IRS Code since 2010 -, and which justified that the same could not have been obtained before, at least, until the date of filing of the declaration in Form 3

The Applicant brings in its defense some jurisprudence of the STA, TCA and CAAD to support the timeliness of the request, both within the scope of paragraph 1 and paragraph 4, both of article 78 of the LGT, and also the verification of grave and notorious injustice, as well as the obligation of the AT to annul unjust acts. Still, it is convenient to recall that the jurisprudence cited by the Applicant concerns tax facts verified before the date of the amendment of paragraph 4 of article 78, as noted above. However, there is not yet any pronouncement (even in known decisions of 2014 or 2015) on the question of the existence of negligent behavior to which paragraph 4 refers, nor on its interference in the possibility of acceptance or rejection of the revision request.

The jurisprudence favors the challenger as to the verification of the need to revise unjust acts but always with the safeguard of the legal requirements being met.

From another perspective, it is settled in jurisprudence and doctrine that the error to which the law refers, whether in paragraph 1 or paragraph 4 of article 78, may be error of fact or error of law. Still, and in both cases, if the basis of the revision request is the verification of error, the law makes it depend, in addition to its existence, that this error, in accordance with paragraph 1, always be imputable to the tax administration and in the case of paragraph 4 that the error (giving rise to grave or notorious injustice) not be due to negligent behavior of the taxpayer, that is, the error may be of the taxpayer or the administration, what cannot be is an error imputable to negligent conduct of the taxpayer.

It may be admitted that there is error in the definition of the IRS tax situation of the Applicant relating to the year 2010, following the medical certification insofar as the liquidation did not consider the condition of incapacity/disability, in a degree of 60%, which, however, was not known at the date of the liquidation. It could, in theory, be admitted that there exists an illegality in that liquidation motivated by the verification of error in the presuppositions of fact, falling within both paragraph 1 and paragraph 4 of article 78 of the LGT, because article 87 of the IRS Code was not observed, which requires deduction from the ascertained assessment an amount determined.

In the same way, there would likewise be no difficulty in recognizing that the presupposition of timeliness of the request regulated in article 78 is met, whether the framing is made within the scope of paragraph 1, because four years had not yet elapsed since the occurrence of the act for which revision is requested, or whether the framing must be included within paragraph 4, because three years had also not yet passed there mentioned.

However, in all cases provided for, except for revision by duplicate collection, the law always requires cumulatively that the error be imputable to the administration or that, at least, the error or omission not be due to negligent conduct of the taxpayer, but the burden of negative proof of negligence rests, by force of article 74 of the LGT, on the taxpayer.

The taxpayer justifies the arbitral petition on the fact that she filed a substitute declaration stating that she was disabled, although more than a year had elapsed after filing the initial Form 3 declaration that gave rise to the liquidation, invoking only that she filed the substitute declaration as soon as she obtained the certificate. Still, it should be noted that between the date of the certificate (17/01/2012) and the date of filing the substitute Form 3 (29/04/2012), approximately three months elapsed.

That is, despite being notified to present that justification when notified of the right to prior hearing before the decision on the revision request, as shown by the evidence in the proceedings, the applicant said nothing on the subject, limiting herself, at that time, to submitting a copy of said certificate.

For this reason, and with due respect, it is possible to conclude that the Applicant may even not have given proper consideration, at minimum, to the duty of cooperation provided for in article 59, paragraph 4, of the LGT, all the more so because the success of the request she presented under paragraph 4 of article 78 of the LGT was dependent on proof that her conduct in the verification of the error did not suffer from any negligence on her part.

Additionally, although the framing in article 78, paragraph 1, is invoked as an alternative or cumulatively to paragraph 4, it was always necessary to prove, attentive to the provisions of article 74 of the LGT, that the error in the liquidation or in the determination of taxable matter was imputable to the services, which according to the proof produced, she also failed to achieve.

Attentive to the provisions, at the date of the liquidation, the AT was not obliged to know that the Applicant had a degree of incapacity/disability of 60%, which would have given her the right to benefit from a deduction from assessment;

The proof requirements that the Applicant was required to meet are therefore not verified, and consequently, the AT is not obliged to revise the tax liquidation act of the IRS for 2010 identified above.

For all this, it is not proven that, in either case, the verification of the error is imputable to the AT nor that "the error is not imputable to negligent behavior of the taxpayer".

The present challenge is therefore inadmissible.

Given the foregoing, it is prejudiced to examine the question of knowing, as the AT alleges, whether the case in question was or was not falling within paragraph 4 of article 78 of the AT because it is a deduction from assessment and not an error in the fixing of taxable matter, in which grave or notorious injustice will be verified.

DECISION

With the grounds set forth:

· The requests formulated by the applicant are judged inadmissible, deciding to maintain in the legal order the IRS liquidation act for 2010, as it does not suffer from any illegality.

· The value of the action is fixed at €1,667.88 (paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, article 97-A of the CPPT and article 306 of the CPC).

Costs to be borne by the Applicant.

In accordance with the terms of article 22, paragraph 4, of the RJAT, and with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of the arbitration fee is fixed at €306.00.

Lisbon, Administrative Arbitration Centre, 26/02/2016

The Arbitrator

(José Ramos Alexandre)

[1] Former wording: "4 - Without prejudice to the provisions of the foregoing paragraphs, the top official of the service may authorize, exceptionally, within three years following the year of the tax act, the revision of the taxable matter ascertained on the basis of grave or notorious injustice. (wording of Law 55-B/2004, of 30 December which was in force until 31/12/2005)

[2] See also articles 93 of the IRS Code or article 103 of the Corporate Income Tax Code, regarding the liquidation act, and article 62 of the Corporate Income Tax Code regarding taxable matter.

[3] There are those who understand that "the fact that the period for voluntary payment and judicial challenge of the liquidation act has elapsed does not prevent the taxpayer from requesting official revision and judicially challenging the act dismissing it" (See note 4, in annotation to article 78 of the "General Tax Law-Annotated and Commented"- 4th Edition, by Diogo Leite Campos, Benjamim da Silva Rodrigues and Jorge Lopes de Sousa, page 706, and jurisprudence of the STA cited therein).

[4] In this sense, "General Tax Law-Annotated and Commented" - 4th Edition, by Diogo Leite Campos, Benjamim da Silva Rodrigues and Jorge Lopes de Sousa.

Frequently Asked Questions

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What is the procedure for requesting an official review (revisão oficiosa) of an IRS tax assessment under Article 78 of the LGT?
Under Article 78 of the LGT (General Tax Law), a taxpayer can request an official review (revisão oficiosa) of an IRS tax assessment by submitting a written request to the Tax Authority. The request must identify the specific tax assessment being challenged, explain the legal or factual grounds for review, and provide supporting documentation. In this case, the taxpayer filed her request on August 16, 2013, invoking Article 78(4) LGT, arguing that the disability deduction under Article 87(1) of the IRS Code should be considered based on a disability certificate issued in 2012 but retroactive to 2010. The Tax Authority must review the request and issue a decision, which can be either acceptance (with recalculation of tax) or dismissal. If the request is dismissed, the taxpayer can challenge the dismissal decision through administrative or arbitral proceedings at CAAD.
Can a taxpayer submit a substitute IRS declaration (declaração de substituição) to claim a previously omitted disability deduction under Article 87 of the CIRS?
Yes, taxpayers can submit a substitute IRS declaration (declaração de substituição) to correct or supplement information in their original filing, including previously omitted disability deductions under Article 87 of the CIRS (IRS Code). In this case, the taxpayer filed a substitute declaration on April 29, 2012 (within the legal deadline for the 2010 tax year), adding her 60% permanent disability status in Field 03-A of Table 3. The Tax Authority validated the substitute declaration in its computer system but classified it as 'non-taxable,' meaning it did not automatically trigger a recalculation of the tax assessment. This situation illustrates a critical issue: while substitute declarations are accepted procedurally, they may not automatically result in revised tax assessments, particularly when the new information (such as a disability certificate) was issued after the original filing deadline. In such cases, taxpayers may need to file a formal request for official review under Article 78 LGT to ensure the deduction is actually applied.
What are the time limits for filing a request for official review of IRS tax assessments with the Portuguese Tax Authority (AT)?
The time limits for filing a request for official review of IRS tax assessments are governed by Article 78 of the LGT. Generally, official review requests must be filed within four years from the date of the tax assessment for corrections favorable to the taxpayer, or within the limitation period established by law. In this case, the taxpayer filed her 2010 IRS declaration on April 29, 2011, which generated liquidation notice 2011… with a partial refund. She then filed an official review request on August 16, 2013, approximately two years after the original assessment. The timing appears to fall within the permissible period under Article 78(4) LGT. However, the Tax Authority's position (as defendant in the arbitration) argued for inadmissibility of the claims, suggesting potential issues with either the timing or grounds for the review request. The specific time limit calculation may depend on when the taxpayer became aware of the grounds for review (i.e., when she obtained the disability certificate in January 2012) versus when the original assessment was made.
How does the CAAD arbitral tribunal process work for challenging IRS tax assessment decisions in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal process for challenging IRS tax assessment decisions follows the framework established in the RJAT (Decree-Law 10/2011). The process begins when a taxpayer files a request for arbitration, which must be accepted by the CAAD President. In this case, the request was filed and accepted on September 11, 2015, and the Tax Authority was notified on September 23, 2015. The taxpayer may appoint an arbitrator or waive this right (as occurred here), in which case the Deontological Council designates a sole arbitrator. Both parties are notified of the tribunal's constitution and have the opportunity to challenge the arbitrator's appointment. The tribunal was formally constituted on November 20, 2015. The Tax Authority then files a response (here arguing inadmissibility), and the tribunal may dispense with oral hearings if appropriate. The arbitrators review the administrative file, assess proven facts based on submitted documents, apply relevant tax law, and issue a binding decision on the legality of the challenged tax act. The entire process provides an alternative to judicial courts for resolving tax disputes efficiently.
Is a partial reimbursement of IRS tax sufficient grounds to dispute the legality of a tax assessment through arbitration?
Yes, a partial reimbursement of IRS tax can serve as grounds to dispute the legality of a tax assessment through arbitration, provided the taxpayer argues that the amount refunded is incorrect based on applicable tax law. In this case, the taxpayer received a partial refund of €233.21 from the 2010 IRS assessment but claims she is entitled to an additional €1,667.88 if the disability deduction under Article 87(1) of the IRS Code were properly applied. The existence of a partial refund does not preclude challenging the assessment's legality—what matters is whether the Tax Authority correctly applied the law in calculating the tax liability or refund amount. The taxpayer's argument is that the assessment is illegal because it failed to consider her 60% permanent disability status (certified retroactively to 2010), which would entitle her to deductions that would increase the refund amount. The arbitral tribunal has jurisdiction to review whether the dismissal of the official review request was lawful and whether the underlying tax assessment correctly applied Article 87(1) CIRS, regardless of whether the original assessment resulted in a payment obligation or a refund to the taxpayer.