Process: 600/2017-T

Date: June 11, 2018

Tax Type: IRS

Source: Original CAAD Decision

Summary

CAAD arbitration case 600/2017-T addressed the taxation of employment termination compensation under Article 2(4)(b) of the Portuguese IRS Code (CIRS). The taxpayer, a banking employee, received €78,300 as compensation when their employment contract with C... bank was terminated by mutual agreement in 2013. The dispute centered on how to calculate seniority for the IRS exemption formula. The taxpayer had worked for Bank B... from 1999-2009 (10.6 years) and then for C... bank from 2009-2013 (3.5 years), totaling approximately 14 years in the banking sector. The Tax Authority issued an additional assessment of €21,917.73, arguing that only seniority with the debtor entity (C... bank - 3.5 years) should count for the exemption calculation. The taxpayer argued that the applicable Collective Labour Agreement (ACT) for banking sector workers defined seniority as all years of service in credit institutions operating in Portugal, thus including their prior employment with Bank B... The taxpayer cited Clause 17 of the banking sector ACT and supported their position with precedents from the Central Administrative Court South and prior CAAD decision 230/2016-T, which held that when the IRS Code does not explicitly restrict seniority to time with the debtor entity, the broader labor law definition from applicable collective agreements should apply. This case highlights the intersection between labor law concepts and tax law interpretation, particularly when collective bargaining agreements provide specific definitions that may expand the scope of tax exemptions beyond what the Tax Authority considers appropriate.

Full Decision

ARBITRAL DECISION

I. REPORT

On 15 November 2017, A..., unmarried, taxpayer with number..., resident in ..., nos. ..., ..., ..., ..., ...-... Mem Martins (hereinafter referred to as Claimant), came, pursuant to article 2, no. 1, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT) and Ordinance no. 112-A, of 22 March, to request the constitution of an Arbitral Tribunal, in which the Tax and Customs Authority is the Respondent (hereinafter AT or Respondent), with a view to the declaration of illegality and consequent annulment of the statement of account settlement with no. 2017..., relating to the notice of additional assessment of Personal Income Tax (IRS) and to the notice of interest assessment, embodying the collection document with no. 2017..., all relating to the year 2013, in the total amount to be paid of € 21,917.73.

The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 15 November 2017 and notified to the Respondent on 20 November 2017. The Deontological Council appointed as arbitrator the undersigned, who communicated acceptance of the appointment within the applicable time limit.

On 8 January 2018, the Parties were duly notified of this appointment, and neither expressed a wish to challenge the designation of the arbitrator, pursuant to the combined provisions of article 11, no. 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

In accordance with what is provided in subsection e) of no. 1 of article 11 of the RJAT, the single arbitral tribunal was constituted on 30 January 2018.

Notified to make submissions, the AT presented a response in which it petitioned that the request for arbitral pronouncement be judged without merit by reason of lack of proof, with the contested tax acts remaining in the legal order and the Respondent entity accordingly absolved of the claim.

The AT presented arguments within the respective time limit. The Claimant did not present arguments.

Summary of the Parties' Position

a. Of the Claimant:

From the request made and further elements joined to the proceedings, it results, in the understanding of the Claimant, as follows:

The Claimant was, between 29/03/1999 and 02/12/2009, an employee of Bank B..., pursuant to an employment contract concluded between the parties.

Subsequently, on 03/12/2009, the Claimant was admitted to service with C... to perform the functions of Branch Manager, also by means of an employment contract concluded between the parties.

On 30/04/2013, the Claimant and C... concluded an agreement for revocation of the employment contract to take effect on 21/06/2013.

To the employment relationship between the Claimant and C... applied the Collective Labour Agreement concluded between various credit institutions and executed by the National Union of Banking Managers and Technicians and also by the employer entity (C...).

Furthermore, the Claimant was also registered with the Union of Bankers of the South and Islands between at least 22/04/1999 and 03/12/2009, and with the National Union of Banking Managers and Technicians between 01/03/2010 and 01/07/2013.

As consideration for the cessation of the aforementioned employment contract, C... paid to the Claimant the gross amount of € 78,300.00 as compensation of a global nature, with the corresponding income statement being submitted.

As a consequence of the submission of the said income statement, the Claimant received notice of assessment no. 2014..., with the amount to be reimbursed of € 4,075.86.

Notwithstanding, the Claimant was subsequently notified of the opening of a tax inspection procedure which, for what matters here, culminated in the issuance of the statement of account settlement with no. 2017..., relating to the notice of additional IRS assessment and the notice of interest assessment, embodying the collection document with no. 2017..., all relating to the year 2013, in the total amount to be paid of € 21,917.73, on the grounds that the AT considered that only the portion of seniority relating to work performed at C... should be counted for purposes of the exclusion rule contained in subsection b) of number 4 of article 2 of the IRS Code (in force at the date of the facts).

The Claimant understands that the issue at hand concerns the interpretation to be given to that rule, namely to the excerpt "(...) number of years or fraction of seniority or of exercise of functions with the debtor entity, in other cases (...)".

According to the opinion held by the Claimant, where the notion of seniority is concerned, a concept typical of labour law, the rules of interpretation of tax laws mandate, in the absence of a specific tax meaning, seeking the meaning that the concept has in the branch of law from which it originates.

The Claimant therefore appeals to the elaboration of the concept within the scope of labour law, understanding it as comprising its various sources, in accordance with the provisions of the Labour Code (and which include, in addition to the Labour Code itself, collective regulation instruments, which include Collective Labour Agreements).

Thus, the Claimant continues, in the absence of an express definition of the concept of seniority in the Labour Code, its meaning must be sought in the Collective Labour Agreement applicable, which in its Clause 17, under the heading "Determination of seniority", requires counting "All years of service, provided in Portugal, in credit institutions with activity in Portuguese territory;".

The Claimant thus understands that the seniority relevant for purposes of the IRS Code is that which results from the said Collective Labour Agreement, even though it relates to professional activity developed, in a sequential but independent manner, in favour of two unrelated entities.

In particular, the Claimant understands that the rule whose interpretation is here sought makes no reference to seniority with the debtor entity, but only to seniority, without qualifications, its content being to be sought in the said collective regulation instruments.

In support of its argumentation, the Claimant cites diverse case law of the Central Administrative Court South (TCAS), namely that produced in proceedings 03748/10 of 21/09/2010, 05971/12 of 12/03/2013 and 06002/01 of 11/05/2004, where it is considered (by all) that "Not resulting from the rule under examination (cf. art. 2, no. 4, of the C.I.R.S.) that the concept of seniority refers strictly to the time of service with the entity owing the compensation for cessation of the employment contract, and nothing justifying a restrictive interpretation of the rule of incidence, the broader notion of seniority arising from labour law must be accepted for calculating the amount subject to taxation under IRS".

In the arbitral field, the Claimant also invokes the analysis carried out in the arbitral decision rendered in proceedings no. 230/2016-T.

The Claimant concludes that it was the bank itself that recognised the applicability of the seniority clause since it ended up paying, as compensation, an amount much higher than what it would have paid if such clause were not applicable.

The Claimant considers, in conclusion, that it is the law itself that mandates the application of the concept of seniority contained in the said Collective Labour Agreement, it being indisputable that the period to be considered must encompass not only that relating to work performed in favour of the debtor entity of the income, but also that relating to the previous employer, by force of application of the said Collective Labour Agreement.

b. Of the Respondent:

Notified in the terms and for the purposes provided in article 17 of the RJAT, the AT presented a Response and attached the administrative file (PA), defending the legality and maintenance of the assessment that is the subject of the present request for arbitral pronouncement.

The Respondent understands, from the outset, that the disputed question concerns whether the counting of seniority, for purposes of IRS incidence, in the case of indemnification for cessation of employment, should be done taking into account the time of service previously provided at another banking institution, or, on the contrary, considering only the time of work provided with the entity with which the employment relationship ceased.

Now, the AT understands that the seniority to be counted, for the present purposes "(...) is the seniority with the entity owing the compensation for cessation of the employment contract, and it is not to be considered, in the application of the said legal provision, the seniority with a previous employer, even if the worker and the new employer have agreed that it be considered in any future "indemnifications", under employment contract or that arise from collective regulation instruments.".

Furthermore, the AT states that "The concept of seniority – seniority per se, without any qualification – in the labour field does not carry special scientific weight that would distance it significantly from the meaning in ordinary language: translating, as in other legal contexts, a legally relevant interval, with diverse effects, between a determined start date and a determined end date.".

Already with regard to the applicability of the definition of seniority contained in the Collective Labour Agreement, the AT understands that "Analysing the content of collective labour agreements in the banking sector, which contains that clause 17 (under the heading "Determination of seniority"), it is important to conclude that, beyond the indemnity scheme by substitution of reinstatement arising from the unlawfulness of dismissal, such instruments do not apply to compensations/indemnifications for expiry of the employment contract, for dismissal on objective grounds, for termination of the contract by the worker on the basis of unlawful act of the employer or for agreement to cancel/revoke the contract – matters which, properly considered, are therefore excluded from the normative effects arising from such clause 17, simply because they do not integrate "all the provisions" in such instruments."

The AT thus understands that the seniority to be sought here is precisely that contained in the IRS Code, further considering that "(...) from the very literal meaning of the normative provision itself results that this corresponds to the number of years or fraction of seniority with the employer entity with which the contract ceases at the origin of the amounts paid (with the exception of seniority verified in other entities in a relationship of control or group with it by force of the extension of the concept operated by no. 10 of art. 2 of the CIRS).).

Lastly, in criticism of a supposed "voluntary taxation", the AT also states that "The reason why the legislator combined, alternatively and inclusively, the expressions "seniority" or "of exercise of functions" has to do with the need for comprehensive regulatory provision, so as to capture the multiple situations generating dependent employment income, respectively the employment contract or the provision of services, on the one hand, and the exercise of public function, service or office, on the other hand.".

The Respondent thus concludes with the understanding that the assessment carried out should be maintained, also refusing payment of any compensatory interest.

II. CLARIFICATION

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

  2. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10 of the RJAT, and article 1 of Ordinance no. 112-A/2011, of 22 March.

  3. No exceptions were invoked that merit examination.

  4. The proceedings do not suffer from defects that would invalidate them.

III. REASONING

III.1. MATTER OF FACT

The factual matter relevant to understanding and deciding the case, following critical examination of the documentary evidence attached to the initial petition, the administrative file, the response and the arguments of the Respondent, is determined as follows:

A – Proven Facts

  1. The Claimant was, between 29/03/1999 and 02/12/2009, an employee of Bank B..., S.A., pursuant to an employment contract concluded between the parties.

  2. Subsequently, on 03/12/2009, the Claimant was admitted to service with C... to perform the functions of Branch Manager, also by means of an employment contract concluded between the parties.

  3. On 30/04/2013, the Claimant and C... concluded an agreement for revocation of the employment contract to take effect on 21/06/2013.

  4. The Claimant was registered with the Union of Bankers of the South and Islands between at least 22/04/1999 and 03/12/2009, and with the National Union of Banking Managers and Technicians between 01/03/2010 and 01/07/2013.

  5. To the employment relationship between the Claimant and C... applied the Collective Labour Agreement concluded between various credit institutions and executed by the National Union of Banking Managers and Technicians and also by the employer entity (C...).

  6. In accordance with Clause 17 of the said Collective Labour Agreement, seniority is determined by counting the time of service, provided in Portugal, in credit institutions with activity in Portuguese territory.

  7. As consideration for the cessation of the aforementioned employment contract, C... paid to the Claimant the gross amount of € 78,300.00 as compensation of a global nature.

  8. The Claimant was notified of the opening of a tax inspection procedure which culminated in the issuance of the statement of account settlement with no. 2017..., relating to the notice of additional IRS assessment and the notice of interest assessment embodying the collection document with no. 2017..., all relating to the year 2013, in the total amount to be paid of € 21,917.73.

B – Unproven Facts

There are no facts relevant to the decision of the case that should be considered unproven.

III.2. MOTIVATION

With respect to the matter of fact, the Tribunal has no duty to pronounce on all the matters alleged, but rather has the duty to select those which are relevant to the decision, taking into account the cause (or causes) of action that substantiates the claim presented by the Claimant.

With regard to the assessment of evidence, the Tribunal formulates its judgment, in attention to the principle of free assessment, based on the examination and evaluation it makes of the means of proof brought to the proceedings and in accordance with its experience.

Thus the Tribunal's conviction was based on the body of documents joined to the proceedings as well as on the positions assumed by the Claimant and the Respondent.

III.3. ON THE LAW

1. The Question to be Decided:

Considering the positions of the Claimant and the Respondent, as well as the established factuality, the question which must be answered will, in short, be whether the concept of seniority relevant for purposes of the provision contained in article 2, number 4, subsection b) of the IRS Code is limited to seniority with the entity owing the income or, on the contrary, whether it can encompass seniority counted in previous employer entities, by force of applicable Collective Labour Agreement.

Since the question concerns mere legal interpretation, two clear and opposing currents can be found – both with proper interpretative authority.

In favour of the thesis that does not limit the concept of seniority, for purposes of IRS exclusion, to seniority with the entity owing the income, the TCAS has advanced in various judgments and, at least, the arbitral decision rendered in proceedings 230/2016-T.

This current understands, in short, that, since the concept of seniority is not defined in tax law, its meaning must be sought in the branch of law from which it originates – labour law – and Collective Labour Agreements should be understood as sources of labour law.

This is also the position assumed in the present proceedings by the Claimant.

In reading the tax exclusion rule at issue, the defenders of this doctrine extract from the expression "number of years or fraction of seniority or of exercise of functions with the debtor entity, in other cases" two distinct models for calculating the excluded amounts, one appealing to the concept of seniority (defined in the terms already mentioned), and another to the exercise of functions with the debtor entity.

That is, this interpretation results in limiting the expression "with the debtor entity" to the rule relating to exercise of functions, thus excluding this limitation from the rule applicable to seniority.

As it appears to us, and with all due respect to previous case law, since the present Tribunal is not bound by a principle of precedent, the question must first be raised whether article 2 itself of the IRS Code, in its various numbers, does not require the interpretation according to which seniority must be determined in relation, also, to the debtor entity and, additionally, and independently of the response which must be given to the first question, whether the interpretation defended by the Claimant can even be considered in light of the constitutional principles governing the tax relationship.

Beginning the interpretative exercise with the letter of the law, in observance of the applicable legal principles, we entirely concur here with the position defended in the arbitral decision rendered in proceedings 505/2017-T where it states that "(...) grammatically, the final reference to the «debtor entity» could also, without appreciable effort, refer to «seniority» («seniority ... with the debtor entity»), this being a textually adequate form to express a legislative intent that the relevant seniority be also, as occurs with regard to «exercise of functions», that pertaining to the debtor entity.".

Notwithstanding recognition that the mere literal expression of the provision does not permit an unshakeable conclusion about the meaning of the rule, the truth is that the systematic interpretation of the provision seems to point decisively in the direction that seniority must also be ascertained with the entity owing the income.

Otherwise it would be difficult to understand the rule contained in the final part of the said subsection. In fact, by prohibiting a new link with "the same entity" (underlined and bold ours), the law seems to refer, unequivocally, to the entity owing the income. It is not by chance that the law refers to entity (in the singular) and not entities. Thus, if the exclusion from taxation were understood as encompassing periods of work in other entities, even by Collective Labour Agreement, and the prohibition in the final part of the rule were limited to a new employment link with the entity owing the income, the law would be permitting the conclusion, within a period of 24 months, of a new employment link with previous employer entities whose working time had been considered for purposes of the exclusion from taxation.

On the other hand, if one were to follow the understanding sustained by the Claimant, it would be permitted that the same person would benefit doubly from the said exclusion from taxation in a case such as that advanced in the decision rendered in the already mentioned proceedings 505/2017-T, which we agree with, in which a person was 10 years in the service of one employer entity, left benefiting from the exclusion from taxation, and entered for a further 10 years with a new employer entity, benefiting from seniority of 20 years (via Collective Labour Agreement) and respective exclusion from taxation, thus duplicating the benefit relating to the first 10 years of work.

Thus, as Manuel Faustino advances, On the meaning and scope of the new wording of article 2, no. 4 of CIRS, in Fiscalidade 13/14, "The clauses cannot be opposed to the tax administration (…) banking sector which impose, in the transfer of a worker between credit institutions, the counting of the time of seniority verified in the previous or prior credit institutions of which he has been an employee. As, a fortiori, neither can any agreements which, relating to the guarantee of benefits inherent to seniority, have been concluded between the worker and the employer entity. Without considerations that today could be afforded by the subjective extension of the concept of employer entity operated by no. 10 of art. 2, since that is based on relationships of control or group among corporations, regardless of their geographic location, we reaffirm here the known orientation of the Tax Administration according to which the time of seniority relevant is, only, the time of seniority "acquired" with the entity with which the individual employment contract ceases, as literally results from the law, and there does not appear to be any room for any other type of interpretation.".

As such, in response to the first question posed, it must be understood that article 2, number 4, subsection b) of the IRS Code must be read in the sense that seniority for purposes of exclusion from taxation must be (can only be) assessed in relation to the entity owing the income in question.

However, even if this were not the case, and even if it were not understood, as is understood, that the solution proposed by the Claimant contravenes the very letter and meaning of the law (from a systematic and teleological perspective), there would always need to be a response to the second question posed in order to determine whether the interpretation proposed by the Claimant would be admissible in light of the Constitution of the Portuguese Republic.

In fact, where conventional seniority is at issue here (cf. Pedro Furtado Martins, Compensation for lawful cessation of the employment contract promoted by the employer, in JURISMAT, no. 4, 2014, p. 168), the question is raised whether the taxpayer, by means of an agreement with his employer entity, or benefiting from the provisions of a Collective Labour Agreement, can broaden the scope of the exclusion from taxation contained in the law.

In this respect we entirely concur with the decision rendered in proceedings 505/2017-T, when it states that "Indeed, that subsection b) of no. 4 of article 2 of the CIRS constitutes a negative delimitation of IRS incidence and the rules that define the incidence of taxes are only constitutionally valid if they are inserted in formal law or decree-law issued pursuant to legislative authorization from the Assembly of the Republic, as results from what is provided in articles 103, no. 2, and 165, no. 1, subsection i), and 198, no. 1 subsection b), of the CRP.".

Furthermore it is stated there, and here accompanied, that "(...) by force of what is provided in article 112, no. 5, of the CRP, «no law can create other categories of legislative acts or confer on acts of another nature the power to, with external effect, interpret, supplement, modify, suspend or repeal any of its provisions». For this reason, subsection b) of no. 4 of article 2 of the CIRC, would be unconstitutional if interpreted as assigning to individual contract acts or to normative acts of a non-legislative nature (such as collective labour agreements and extension ordinances) the power to define the amplitude of the delimitation of IRS incidence. If it is understood that article 11, no. 2, of the LGT ensures the possibility of appealing to rules of a non-legislative nature to define the scope of IRS incidence, in that interpretation, it will be materially unconstitutional, for being incompatible with article 112, no. 5 of the CRP. The reference to «no law» that appears in this constitutional provision, encompasses the LGT.".

Therefore, not only would the interpretation here defended by the Claimant violate constitutional principles by violation of the formal reservation of law, in the terms set forth, but the same would also directly infringe against the, also constitutionally protected, principle of equality by subjecting two taxpayers in identical situations (imagine again the case of two workers who were employed 10 years by one employer entity and the following 10 years by another, only the first being covered by Collective Labour Agreement in terms identical to that analyzed here) to a distinct legal solution.

Thus, and in conclusion on this point, we entirely concur with the understanding produced by Filipe Fraústo da Silva and Cláudia Reis Duarte, in their study Annotation to the Judgment of the Central Administrative Court South on seniority of banking worker (for purposes of calculating the amount of compensation for cessation of the employment contract not subject to taxation, in accordance with no. 4 of article 2 of the IRS Code), published in the Journal of the Bar Association, no. 1, 2012, where it is stated, especially, that "…one cannot fail to admit that the legislator intended to refer the phrase with the debtor entity to the two realities that literally precede it – situations of cessation of the contract and situations of cessation of exercise of functions (…). We see no reason why the legislator should have intended that the concept to be followed in the first situation should be unjustifiably broader than in the second, creating a situation of inequality which, ultimately, could even affect the constitutional principle. (…). We thus understand that the normative segment with the debtor entity (which is, and cannot but be, in our view, the entity that is obliged to pay the amounts whose tax treatment the rule establishes) refers to the two situations that precede it, and should be heeded in both situations the number of years or fraction of seniority with the debtor entity or the number of years or fraction of exercise of functions with the debtor entity.".

In response to the questions posed it is thus understood that not only does it directly result from the law that seniority for purposes of exclusion from taxation of amounts paid as compensation for cessation of the employment contract should be assessed, only, in relation to the entity owing the income, but the rule in question would be materially unconstitutional if interpreted in the sense that the negative delimitation of incidence provided therein would depend on what is provided in collective labour agreements or individual contracts regarding the counting of seniority.

IV. DECISION

Based on the grounds of fact and law set forth above and, in accordance with article 2 of the RJAT, the Arbitral Tribunal decides:

I) To dismiss the request for arbitral pronouncement and, consequently, to maintain the statement of account settlement with no. 2017..., relating to the notice of additional assessment of Personal Income Tax (IRS) and to the notice of interest assessment embodying the collection document with no. 2017..., for the year 2013, in the total amount of € 21,917.73;

II) To dismiss the request for reimbursement of the amounts already assessed relating to the collection document above referred to;

III) To dismiss the request to order the Respondent to pay compensatory interest;

IV) To order the Claimant to pay the entirety of costs, given the dismissal of the claim.

VALUE OF THE PROCEEDINGS:

In accordance with the provisions of article 306, nos. 1 and 2, of the CPC, 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 21,917.73 (twenty-one thousand, nine hundred and seventeen euros and seventy-three cents).

COSTS:

Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 1,224.00 (one thousand two hundred and twenty-four euros).

Lisbon, 11 June 2018.

The Arbitrator,

José Calejo Guerra

Text drawn up by computer, in accordance with no. 5 of article 131 of the CPC, applicable by cross-reference of subsection e) of no. 1 of article 29 of Decree-Law 10/2011, of 20 January.

The wording of this decision is governed by the 1990 spelling agreement.

Frequently Asked Questions

Automatically Created

How is compensation for termination of employment taxed under Portuguese IRS rules (Article 2(4)(b) of CIRS)?
Under Article 2(4)(b) of the Portuguese IRS Code (CIRS) in force in 2013, compensation for employment termination was subject to partial exemption. The exemption applied to amounts up to a calculation based on the employee's seniority multiplied by statutory formulas. The taxable portion depended on how many years of seniority were recognized, making the definition of 'seniority' crucial for determining the final tax liability on termination payments.
How is employee seniority calculated for IRS exemption purposes when there is a transfer between employers in the banking sector?
The central issue in case 600/2017-T was whether seniority for IRS exemption purposes includes only time with the employer paying compensation or encompasses prior employment in the same sector. The taxpayer argued that the applicable banking sector Collective Labour Agreement (ACT) defined seniority as all years worked in Portuguese credit institutions, thus including 10.6 years with a previous bank plus 3.5 years with the paying employer. The Tax Authority contended only the 3.5 years with the debtor entity should count. Courts have held that when tax law does not explicitly restrict seniority to the debtor entity, the broader labor law definition from applicable collective agreements should apply.
Can collective labor agreements (ACT) affect the calculation of seniority for tax purposes on termination compensation?
Yes, collective labor agreements (Acordos Coletivos de Trabalho - ACT) can significantly affect seniority calculations for IRS termination compensation taxation. When the IRS Code uses a labor law concept like 'seniority' without providing a specific tax definition, Portuguese tax interpretation principles require looking to the originating branch of law—in this case, labor law including applicable collective agreements. In the banking sector, the ACT's Clause 17 defined seniority broadly as all service years in Portuguese credit institutions, potentially allowing workers to count employment with multiple banks sequentially. The Central Administrative Court South has supported this interpretation in multiple decisions, recognizing that collective agreements form part of the labor law framework that gives meaning to undefined tax concepts.
What was the outcome of CAAD arbitration case 600/2017-T regarding the additional IRS tax assessment on termination compensation?
While the complete outcome is not provided in the excerpt, the case record shows the taxpayer challenged an additional IRS assessment of €21,917.73 related to 2013 termination compensation. The taxpayer sought annulment based on extensive legal precedent from the Central Administrative Court South (cases 03748/10, 05971/12, 06002/01) and CAAD decision 230/2016-T, all supporting the inclusion of prior banking employment in seniority calculations. The taxpayer argued that the paying bank itself recognized the broader seniority by paying compensation far exceeding what would be due for only 3.5 years of service, and that applicable collective agreement provisions mandated counting all credit institution employment.
What is the procedure to challenge an IRS additional tax assessment through CAAD tax arbitration in Portugal?
To challenge an IRS additional assessment through CAAD (Centro de Arbitragem Administrativa) tax arbitration in Portugal, taxpayers must file a request under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). In case 600/2017-T, the process involved: (1) filing the arbitration request on November 15, 2017; (2) acceptance by the CAAD President and notification to the Tax Authority; (3) appointment of an arbitrator by the Deontological Council; (4) notification to parties with opportunity to challenge the arbitrator; (5) formal constitution of the tribunal (January 30, 2018); (6) the Tax Authority's response defending the assessment; and (7) opportunity for both parties to present arguments. This procedure provides an alternative to traditional court appeals for resolving tax disputes, typically with faster resolution than judicial courts.