Process: 689/2014-T

Date: May 19, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD tax arbitration case (Process 689/2014-T) involves a dispute over Personal Income Tax (IRS) for the 2009 tax year, focusing on health expense deductions and statute of limitations issues. The taxpayer was assessed €4,902.25 after the Tax Authority challenged declared medical expenses. The case presents multiple procedural irregularities: notifications signed by officials lacking proper authority or delegation, potential expiration of taxation rights (caducidade), and alleged violations of taxpayer rights to prior hearing under article 65(4) of the IRS Code. The taxpayer filed two administrative reclamations (reclamações graciosas) - the first was granted due to nullity of notification but led to a new assessment procedure; the second was rejected, prompting the arbitration request. Key legal issues include whether the Tax Authority complied with article 128 of the IRS Code regarding proof of health expenses, whether officials had proper delegated authority (a delegation order was published in March 2014 with retroactive effects to September 2013), and whether the statute of limitations had expired for the 2009 tax year. The case illustrates the taxpayer's right to challenge IRS assessments through CAAD arbitration when administrative reclamations fail, following the procedural framework established in the RJAT (Legal Framework for Tax Arbitration). The arbitral tribunal must determine the validity of the assessment considering both substantive tax law and procedural guarantees.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 689/2014-T

Subject: Personal Income Tax (IRS) – Health expenses; expiration of taxation rights

APPLICANT: A..., TIN: ..., resident at Street ..., ... – ..., ... Porto.

RESPONDENT: Tax and Customs Authority (hereinafter referred to as TA) represented by Dr. B and Dr. C, in accordance with the appointment order of the General Director of TA, dated 01-10-2014.

I – REPORT

  1. The APPLICANT submitted a request for arbitral decision stating that it seeks the declaration of illegality of the assessment act for Personal Income Tax (IRS), relating to the year 2009 and made in the amount of € 4,807.42, to which is added compensatory interest in the amount of € 94.83,

  2. Having previously mentioned that he had been notified of the total rejection of the administrative reclamation filed with respect to the same assessment, for which reason,

  3. The request falls within the provisions of articles 2nd No. 1 letter a), 10th No. 1 letter a) and No. 2 of the Legal Framework for Tax Arbitration (RJAT), insofar as, ultimately, the APPLICANT petitions that this Arbitral Tribunal pronounce itself to the effect that

The present request for declaration of illegality of the assessment act should obtain a wholly favorable decision.

  1. The APPLICANT submitted a Request for Constitution of the Arbitral Tribunal on 23-09-2014, which was accepted by the Distinguished President of CAAD on 24-09-2014, leading to the notification of the TA, in compliance with No. 3 of article 10 of the Legal Framework for Arbitration in Tax Matters (hereinafter RJAT).

  2. As the APPLICANT opted not to appoint an arbitrator, pursuant to the provisions of No. 1 of article 6 of the RJAT, the undersigned was appointed sole arbitrator by the Deontological Council of the Administrative Arbitration Center on 07-11-2014, an appointment that was timely accepted and notified to the parties, who did not object to the said appointment.

  3. The Singular Arbitral Tribunal was constituted on 25-11-2014, combining the provisions of letter c), No. 1, with No. 8 of article 11 of the RJAT, whereby on 27-11-2014 the TA was notified to, in accordance with and for the purposes of the provisions of Nos. 1 and 2 of article 17 of the RJAT, present Reply and the corresponding administrative file;

  4. In Reply, the TA, on 08-01-2014, presents defense and requests waiver of the meeting provided for in article 18 of the RJAT (article 57 of the Reply).

  5. Having on 18-02-2015 scheduled the meeting provided for in article 18 of the RJAT, it did not take place as it was waived in accordance with the order of 04/03/2015, which fixes the date of 25-05-2015 for rendering of the arbitral decision.

II – PROCEDURAL MATTERS

  1. The tribunal is materially competent and is regularly constituted, in accordance with articles 2nd, No. 1, letter a), 5th, No. 2 and 6th, No. 1 of the RJAT.

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

  3. The proceedings do not suffer from any vices that would invalidate them.

Therefore, the matter shall proceed to examination on the merits.

III - FACTS

The relevant facts, established as proven for the subsequent examination and decision, are as follows:

  1. The APPLICANT's Personal Income Tax return for the year 2009, based on the volume of declared medical expenses, was selected for analysis;

  2. As a result of that analysis, the IRS Service proceeded to alter the declared income, notifying the APPLICANT by letter dated 13/03/2012;

  3. This notification was signed by an entity that did not have proper authority, nor made mention of having delegated authority for that purpose;

  4. From the said alterations resulted the assessment of 26/03/2012, in the amount of 5,302.07€;

  5. Against which, on 05/09/2012, the now APPLICANT filed an Administrative Reclamation;

  6. On 22/10/2013 the Administrative Reclamation was decided and notified on the same date to the Claimant;

  7. The decision on the Administrative Reclamation was based on the terms and grounds contained in the legal opinion below;

  8. The approval thus concerns the examination of the nullity of the notification of the alteration of the declared items;

  9. The decision does not address the remaining defects raised in the Administrative Reclamation, as the opinion supporting it states: (…) we will not pronounce on the remaining arguments invoked by the claimant.

  10. The order granting the said administrative reclamation, of 22/10/2013, further determined: for verification and restoration of the accuracy of the declared values relating to the Personal Income Tax for the year 2009, notify the claimant to, within the period of 10 (ten) days, present proof of the declared expenses, in accordance with article 128 of the Personal Income Tax Code.

  11. Thus, on 22/10/2013, the taxpayer was notified to present all documentation proving the elements supporting the declaration;

  12. The now APPLICANT on 31/10/2013 again presented all the said documentation.

  13. Coming on 04/11/2013 to be notified of the proposed correction and for the exercise of his prior hearing right.

  14. The APPLICANT, on 22/11/2013, then contested the proposed correction;

  15. On 26/11/2013 the draft became final;

  16. On 02/12/2013 the APPLICANT was notified of the final decision;

  17. This notification was signed by an entity that did not have proper authority, nor made mention of having delegated authority for that purpose;

  18. The TA proceeded to a new assessment on 04/12/2013, in the amount of 4,902.25€, of which on 30/12/2013 it notified the APPLICANT, by certified mail with acknowledgment of receipt;

  19. On 13/05/2014 an Administrative Reclamation was filed against this new assessment;

  20. Having on 27/05/2014 the APPLICANT been notified for purposes of prior hearing on the draft decision on this Administrative Reclamation, he did not exercise that right;

  21. Coming on 20/06/2014 the Administrative Reclamation of 13/05/2014 to be wholly rejected and,

  22. The APPLICANT notified by letter dated 23/06/2014, notification was made on 25/06/2014;

  23. On 27 February 2014 an order of delegation of authorities was issued by the Director of Finance of Porto, in a replacement regime;

  24. This order was published in the Official Gazette No. 52, 2nd series, of 14 March 2014, under No. 3977/2014;

  25. Being that the same provides that its effects are produced from 1 September 2013.

  26. From the rejection, on 20/06/2014, of the Administrative Reclamation of 13/05/2014, which upheld the assessment act, the constitution of this arbitral tribunal was requested on 23/09/2014.

The facts established as proven result from the documents attached to the record, both from the Application for Arbitration and the Reply and respective administrative file.

IV - POSITION OF THE PARTIES

IV. A - POSITION OF THE APPLICANT

The APPLICANT opposes the assessment alleging, in summary, and with relevance to the examination, the following:

  1. The lack of authority for the performance of the act by the entity that issued it;

  2. The lack of notification of the alteration act in accordance with article 65, No. 4 of the Personal Income Tax Code;

  3. The lack of mention of delegation of authority in that alteration act;

  4. The lack of response to the prior hearing right in the same alteration act;

  5. The lack of grounds for the corrections;

  6. The disregard for instructions disclosed by the TA, contrary to article 68, No. 5 of the General Tax Law.

IV. B - POSITION OF THE RESPONDENT

The TA sustains the validity of the assessment alleging, in summary, and with relevance to the examination, the following:

  1. There is no lack of authority for the performance of the assessment act insofar as:

1.1. The assessment act resulted from the correction determined by decision of 26/11/2013, following the decision of 22/10/2013, of the Head of the Finance Service Porto-..., which annulled the assessment No. 2012..., given that the author of the act did not have authority to perform it;

1.2. The tax administration can repeat the act within the period of expiration of the right to assess;

1.3. The authority to perform that act being with the Head of the Finance Service of the residence of the taxpayer and by Order No. 3977/2014, published in the Official Gazette No. 52, 2nd series, of 14/03/2014, the Director of Finance of Porto delegated to the Finance Chiefs of the areas of the respective taxpayers, the authority provided for in article 65, No. 5 of the Personal Income Tax Code,

1.4. And being that this Order produces effects from 1 September 2013,

1.5. By virtue of the instrument of ratification, the act of 26/11/2013, which determined the assessment No. 2013..., is an act performed by someone who has authority to do so;

  1. There is no lack of notification of the alteration act in accordance with article 65, No. 4 of the Personal Income Tax Code since the acknowledgment of receipt was signed, and given the provisions of No. 3 of article 39 of the Tax Procedure Code, regarding the regime of perfection of notifications, it is presumed that there was delivery to the recipient, to which is added that the APPLICANT recognizes that he received the notification as he reacted against it;

  2. There is no invalidity arising from the lack of mention of delegation of authority in the notification of the decision of 26/11/2013, insofar as:

3.1. The APPLICANT's reference that in the notification of the decision of 26/11/2013 no mention was made of the use of delegated authority thus would constitute an incurable nullity, this is not correct as the lack of the mentioned reference constitutes a curable irregularity, in accordance with No. 1 of article 37 of the Tax Procedure Code;

3.2. Adding that the act itself would be voidable and not null, whereby it could be subject to ratification with retroactive effects, which would have been produced by Order No. 3977/2014, published in the Official Gazette No. 52, 2nd series, of 14/03/2014, of the Director of Finance of Porto;

  1. There is no lack of the prior hearing right in the same alteration act as can be seen in the grounds of the decision there is reference to "alleged by the taxpayer", being that, although the alleged claim was considered "because he did not consider it valid (…) did not reflect it in the final decision";

  2. There is no illegality due to lack of grounds for the corrections as given the distinct treatment proper to care home expenses as opposed to health expenses, the same were duly framed in the legal framework.

V - EXAMINATION OF THE ISSUE

The APPLICANT attributes various defects to the act whose declaration of illegality is requested from this Tribunal. In light of the same, it is important to begin by examining the defects whose procedence determines, according to the prudent judgment of the judge, more stable and effective protection of the injured interests, in accordance with No. 2 of article 124 of the Tax Procedure Code, applicable by virtue of the provisions of letter a) of No. 1 of article 29 of the RJAT, thus meeting the teleology of tax arbitration, expressed in No. 3 of article 124 of Law No. 3-B/2010 of 28 April, which conferring authorization on the Government to legislate for its institution, as an alternative form of jurisdictional resolution of conflicts, determines that it aims to strengthen the effective and actual protection of the rights and legally protected interests of taxpayers.

Although the APPLICANT attributes to the act in question various defects (supra, V.A), some of the said acts, given the defect in question, can lead to the production of new acts of identical content, purging themselves of the said defect, whereby, given the effective and actual protection of taxpayers' rights, it is important, in accordance with No. 2 of article 124 of the Tax Procedure Code to begin by examining the defect of lack of notification before expiration of the deadline, whose procedence prevents the renewal of the assessment act.

  1. This defect is contained in the Request for Constitution of the Arbitral Tribunal and also in the Reply, being able to be read:

1.1. In the Request for Constitution of the Arbitral Tribunal:

Notwithstanding the impossibility resulting from expiration of the deadline, which, with respect to Personal Income Tax and the year 2009, has as its limit date 31/12/2009. (cf. § 28, PI).

1.2. And in the Reply, the TA:

States: Being certain that the tax administration can repeat the act within the deadline for expiration of the right to assess, a new act was performed, preceded by the prior hearing right. (cf. 23rd, Reply).

And previously recognizes that the present request for constitution of the Arbitral Tribunal is also related to the defect of the notification act (§ 2nd of the Reply).

  1. It is thus important to understand whether, there being an invalidity of the notification act, the same is susceptible to affect the right to assess:

2.1. As sustained by the APPLICANT, given that it is an incurable nullity (§22);

2.2. Or as sustained by the RESPONDENT, to be a mere voidability, curable, which would have been ratified by Order No. 3977/2014, published in the Official Gazette No. 52, 2nd series, of 14/03/2014, of the Director of Finance of Porto delegated to the Finance Chiefs of the areas of the respective taxpayers, the authority provided for in article 65, No. 5 of the Personal Income Tax Code;

Examining:

  1. As results from the established facts, the nullity of the notification made on 22/10/2013 was proven, as the decision that fell on the Administrative Reclamation only considered the nullity of the notification, as sustained in the legal opinion that supports the said order and from which is extracted (cf. PA, P6, fls 4 and 129; Annex 4, PI, last pg.):

The notification made to the claimant regarding the determination of the aggregate net income, is signed by the Head of the said, without mention of delegation of authority.

3.1. To which it adds,

It is inherent in No. 11 of article 39 of the Tax Procedure Code, that the notification act is null in the case of lack of indication of the author of the act, and, in the case of the latter having performed it in the use of delegation or subdelegation of authority.

3.2. And leaving no doubt that the analysis of the defect fell only on the notification act, it further states:

Being null the notification act is totally ineffective from the beginning, producing no effect whatsoever in relation to the claimant. The nullity is incurable, either by the passage of time, or by ratification, reform or conversion. The null act is not susceptible of being transformed into a valid act.

3.3. Thus, ultimately leaving the certainty that it only pronounces on the defect of the notification act:

Thus being, we will not pronounce on the remaining arguments invoked by the claimant.

  1. And it was on this legal opinion that fell the order granting the said Administrative Reclamation, on 22/10/2013, which, in what is relevant to this aspect determines:

In accordance with and on the grounds contained in the opinion below, I grant the petition.

  1. The order acted correctly being supported in the opinion since it results from the applicable legal provisions:

5.1. Determines No. 5 of article 65 of the Personal Income Tax Code - Bases for the determination, fixing or alteration of income:

The authority to perform the acts of determination, fixing or alteration referred to in the present article is exercised by the director of finance in whose area is situated the tax residence of the taxpayers, and can be delegated to other officials whenever the high number of such justifies it.

5.2. Determines article 66 of the Personal Income Tax Code - Notification and grounds of acts:

1 - The acts of fixing or alteration provided for in article 65 are always notified to the taxpayers, with the respective grounds.

5.3. Determines No. 11 of article 39 of the Tax Procedure Code - Perfection of notifications:

The notification act shall be null in the case of lack of indication of the author of the act and, in the case of the latter having performed it in the use of delegation or subdelegation of authority, the capacity in which it decided, its sense and its date.

  1. Thus, the granting is in accordance with the opinion, not in accordance with the global petition, whereby what was granted, and only, was the consideration of the nullity of the notification, to which must be assigned the legal consequences.

  2. It happens that the same order which falls on the administrative reclamation, of 22/10/2013, further determines:

For verification and restoration of the accuracy of the declared values relating to the Personal Income Tax for the year 2009, notify the claimant to, within the period of 10 (ten) days, present proof of the declared expenses, in accordance with article 128 of the Personal Income Tax Code.

  1. Now, if the granting given to the administrative reclamation concerned the nullity of the notification, there would be, only, to proceed with the notification of the then Claimant in accordance with No. 11 of article 39 of the Tax Procedure Code.

  2. Thus, the fact is that in so doing, the said order, of 22/10/2013, when issued by the Head of the Finance Service in a replacement regime, does not comply with the provisions of No. 4 and No. 5 of article 65 of the Personal Income Tax Code, insofar as the authority to perform the acts of determination, fixing or alteration, when corrections are to be made arising from errors evident in the declarations themselves, from omissions made in them or corrections arising from divergence in the qualification of the acts, facts or documents with relevance to the assessment of the tax, is exercised by the director of finance in whose area is situated the tax residence of the taxpayers, and can be delegated to other officials whenever the high number of such justifies it, which did not occur.

  3. Now, what is essentially in question is to ascertain:

10.1. If the defects inherent to the acts relating to the corrections thus determined, by someone who did not, at the time, have proper authority, nor delegated, nor for its determination, is remedied by Order No. 3977/2014, of 27 February 2014, published in the Official Gazette No. 52, 2nd series, of 14 March 2014, of the Director of Finance of Porto, in a replacement regime, which by means of a set of delegations of functions, determined the production of effects from 1 September 2013, would have ratified all the acts in the meantime performed on the matters object of delegation, whereby, the act of the Finance Chief in a replacement regime would be properly ratified (ex. vi, Annex 12 to the PI and reply of the RESPONDENT to §§ 24th to 27th);

10.2. But it is also important to ascertain whether the notifications which proved necessary, particularly in accordance with article 66 of the Personal Income Tax Code, following those corrections complied with the terms of No. 11 of article 39 of the Tax Procedure Code and whether these defects as well can be remedied by Order No. 3977/2014 and its retroactive effects.

  1. Now, being that the act only produces effect by means of a valid notification – immediately by force of No. 3 of article 268 of the Constitution – examining this is prior to the verification of the existence or not of defects of the acts inherent to the assessment.

Let us then see:

  1. The act which determines the corrections was performed by someone who, at the time exercising functions of Head of Finance Service in a replacement regime, did not have proper authority, nor delegated, being that,

  2. By order of the same entity, the APPLICANT was then notified.

  3. Now, if it is true that, as the RESPONDENT states, the tax administration can repeat the act within the deadline for expiration of the right to assess (cf. 23rd, Reply).

  4. It becomes convenient that it does not suffer from the defects that led to the previous act not producing the effects it intended to produce. Now,

  5. It occurs, in the case in question that both defects persist, for two reasons:

16.1. By the fact of having been performed by someone who did not have authority to do so, in accordance with article 65 of the Personal Income Tax Code;

16.2. By having been notified, in accordance with article 66 of the Personal Income Tax Code, however, by someone who did not have authority to do so (as admitted by the RESPONDENT at § 34th, Reply), with that notification being null, in accordance with No. 11 of article 39 of the Tax Procedure Code;

  1. Ascertaining, as is in the record – cf. fls. 138 of the PA, that the notification of the corrections of the elements declared by the now APPLICANT, relating to the year 2009 was made by the Finance Chief in a replacement regime, who, not having proper authority for the act of alteration of the declared elements did not have it either to proceed with the respective notification, in accordance with article 66 of the Personal Income Tax Code, nor, in the same notification order did she make any mention of any delegation of authority, since, it is known, she did not possess it, the notification is null and as such the same produced no effects whatsoever in the legal sphere of the now APPLICANT.

  2. It is true that irregularities can be remedied in accordance with No. 1 of article 37 of the Tax Procedure Code, as sustained by the RESPONDENT, whereby if the APPLICANT did not avail himself of the means that the law placed at his disposal, in the absence of request, the defect of the notification act will be remedied, producing normal effects, particularly for determination of the initial term of the periods for administrative or judicial challenge.

  3. However, if there are defects that the law allows to be remedied, others are not, as indeed recognized by the RESPONDENT (cf. PA, P6, fls 4 and 129; Annex 4, PI, last pg.), referring to the first notification made to the then claimant (now APPLICANT) regarding the determination of the aggregate net income, which had then been signed by the Head of Finance, without mention of delegated authority (supra V.3).

  4. Therefore, the RESPONDENT's argument now does not apply that the lack of mention of the use of delegated authority (§ 34th) constitutes a curable irregularity in accordance with No. 1 of article 37 of the Tax Procedure Code (§ 36th and 37th). In fact,

"This article 37 allows the remedying of deficiencies of notification acts, apparently providing for the possibility that such remedying occur in relation to any requirements of the notification act.

There must, however, be a distinction, first and foremost, as to the defects of the notification act qualified as nullity in No. 8 of article 39, which are the lack of indication of the author of the act of its sense and its date, as well as the indication that the act was performed in the use of delegation or subdelegation of powers".

  1. On the other hand, although the RESPONDENT sustains that Order No. 3977/2014, came to ratify the acts in the meantime produced, we have seen that not all acts admit ratification given that in accordance with No. 1 of article 137 of the Administrative Procedure Code not susceptible of ratification, reform or conversion, are null or nonexistent acts.

  2. In the absence of proper authority, with no mention – in the notification made on 22/10/2013 -, which in accordance with article 66 of the Personal Income Tax Code aims to inform the APPLICANT of the alteration of the declared elements and the grounds for the same -, that the taxpayer is being notified in the use of delegated authority, the notification act is null.

  3. Being null the notification made in accordance with article 66 of the Personal Income Tax Code, with no verification of the notification of the acts of alteration of the declared elements, the legal obligation of notification is not fulfilled and, as well as of grounds, since administrative acts are subject to notification to interested parties, in the form provided for in law, and require express and accessible grounds when they affect rights or legally protected interests, in light of the provisions of No. 3 of article 268 of the Constitution.

  4. Being null the notification act, by violation of law, a new notification, valid, would have to be produced, which not having occurred affected the validity of the assessment, which cannot, for this reason, legitimize the collection of the tax ascertained in it given that nobody can be obliged to pay taxes (…) whose assessment and collection are not made in accordance with the law, by force of No. 3 of article 103 of the Constitution.

  5. The material relationship disputed concerns the alterations made in Personal Income Tax for the year 2009, whereby the assessment should have been validly notified to the APPLICANT within the period of four years, that is, until 31 December 2013, in accordance with No. 1 of article 45 of the General Tax Law, since,

The notification of the taxpayer must be validly made in the course of the four-year period. Without which, the period will expire. In effect, notification, and only it, makes the tax debt certain and enforceable.

  1. Thus, unless there is some reason determining the suspension of the expiration period, in accordance with article 46 of the General Tax Law is that the right to assess has not yet expired.

Let us then see if one of the assumptions for suspension of the expiration period is verified:

  1. In accordance with article 46 of the General Tax Law, there having been no external inspection action (No. 1), nor judicial litigation (letter a) of No. 2) or request for revision of the assessable matter (letter e) of No. 2), nor being this concerning tax benefits (letters b) and c) of No. 2), it is important to ascertain whether the first Administrative Reclamation, initiated on 05/09/2012 and concluded on 22/10/2013, fits the terms provided for in letter d) of No. 2, determining the suspension of the expiration period in the case of the right to assess resulting from reclamation (…), from its filing until the decision.

  2. In fact, the right of assessment never results from an annulment of an administrative reclamation (…) as they are means of annulment of acts and not declarative of rights (…). On the other hand, administrative reclamation and judicial challenge are means of challenge of assessment acts, whereby that letter d) refers to situations in which the right of assessment has already been exercised and there was administrative or judicial challenge.

  3. In the inadequate formulation of letter d) of No. 2 of article 46 of the General Tax Law, it is intended to safeguard the suspension of the expiration period because following administrative or judicial annulment, there is the possibility of performing a new assessment act without incompatibility with what was decided.

  4. In the situation under examination, referring back to the Administrative Reclamation of 05/09/2012 it is necessary to understand whether as a result of that Reclamation the possibility of the TA performing a new assessment act was created and this occurred without incompatibility with what was decided.

  5. On the said Administrative Reclamation fell an order, on 22/10/2013: in accordance with and on the grounds contained in the opinion below, I grant the petition.

  6. It is important to note that this reference to the grounds contained in the opinion below is the means found, as a rule, by the administration to ground its decisions, in compliance with No. 3 of article 268 of the Constitution.

  7. Thus, the order is grounded in the grounds of the opinion and, if it deviates from it, the decision, because it goes beyond its legal grounds, is found, in that part not grounded, thus violating the law and the Constitution, due to lack of grounds. Having arrived here, it is important to state that the order, in these terms does not annul the assessment in accordance with what was requested, only determines the nullity of the notification, as sustained in the legal opinion supporting the said order (cf. PA, P6, fls 4 and 129; Annex 4, PI, last pg.):

The notification made to the claimant regarding the determination of the aggregate net income, is signed by the Head of the said, without mention of delegation of authority.

It is inherent in No. 11 of article 39 of the Tax Procedure Code, that the notification act is null in the case of lack of indication of the author of the act, and, in the case of the latter having performed it in the use of delegation or subdelegation of authority.

Being null the notification act is totally ineffective from the beginning, producing no effect whatsoever in relation to the claimant. The nullity is incurable, either by the passage of time, or by ratification, reform or conversion. The null act is not susceptible of being transformed into a valid act.

Thus being, we will not pronounce on the remaining arguments invoked by the claimant.

  1. Thus, what was declared null was the notification act of the assessment, not the assessment itself, as the legal opinion already mentioned did not pronounce on this, only understanding that the notification was null.

  2. The opinion clearly distinguished the administrative acts performed tending to the alteration of the declared elements, from the notification act. And rightly so, since any defects of those are not confused with those of this, whose invalidity provided for in No. 11 of article 39 of the Tax Procedure Code, is nullity and not that of those.

  3. Thus, the second part, handwritten, of the order of 22/10/2013, has nothing to do with the examination of the defects that in the Administrative Reclamation are attributed to the assessment, particularly concerning all the operations tending to the alteration of the declared values, as the opinion does not examine any defects attributed to the assessment act, thus the decision lacks the notification of the claimant to, within the period of 10 (ten) days, present proof of the declared expenses, of the due grounds.

  4. Therefore, if from the order of 22/10/2013 resulted the repetition of the acts tending to a new assessment, this does not derive from the Administrative Reclamation, but rather from an order that is issued beyond the grounds on which it is based – the respective internal opinion, when in truth, there would be, only to proceed with a valid notification.

  5. Being the notification null or ineffective (…) and not having been another, made in legal form and with perfection (a fact whose proof would always be the responsibility of the Tax Authority), the same is INEFFECTIVE, thus having, on 31/12/2009, occurred the expiration of the right to assess;

  6. It is true, as sustained by the RESPONDENT, that the tax administration can repeat the act within the deadline for expiration of the right to assess (cf. 23rd, Reply),

  7. However, it cannot wait for that period not to expire, unless the causes of suspension of expiration provided for in article 46 of the General Tax Law occur, which do not occur here.

  8. In effect, the assumptions of letter d) of No. 2 of article 46 of the General Tax Law are not verified, whose teleology is to safeguard the suspension of the expiration period because following administrative or judicial annulment of the assessment act, there is the possibility of performing a new assessment act without incompatibility with what was decided, as there was no administrative annulment of the acts determining the assessment, but rather a declaration of nullity of the notification act, required in accordance with article 66 of the Personal Income Tax Code, for not having been performed in accordance with No. 11 of article 39 of the Tax Procedure Code.

  9. And the non-verification is moreover evident in the new assessment produced, since, as results from the PA, the grounds which the TA found valid in the first assessment (PA, p 102) it maintained in the second (PA, p 144 §3), and in nothing giving cause to the defects already invoked, in nothing, thus, being verified that there was a new assessment without incompatibility with what was decided.

  10. Besides which, and without entering into consideration the examination of the defects attributed to the act under Administrative Reclamation, the fact is that it was found to maintain the defect of lack of proper authority for the performance of the acts in question, as well as for proceeding with the notification act – which the Respondent recognizes at § 2 of the Reply to be one of the reasons for the request for constitution of this Arbitral Tribunal.

  11. That is, the TA demonstrates, in the new assessment, that it did not grant the Reclamation of the now APPLICANT, whereby the right of assessment (this new one) is not resulting from the Reclamation, as required by letter d) of No. 2 of article 46 of the General Tax Law.

  12. It adds that, in fact, the RESPONDENT did not have, at the time, that is, until the expiration of the deadline, the possibility of remedying this defect unless it issued a valid notification by someone with proper authority - the Director of Finance of Porto - as the delegation of authority occurred after the expiration deadline.

  13. Therefore, to admit that a new assessment procedure, which the TA's own internal opinion did not support, would allow the suspension of the expiration period based on letter d) of No. 2 of article 46 of the General Tax Law, would be to permit that due to the lack of authority of whoever performed the notification act, being this null, new acts would be repeated, evading the expiration period, until a valid notification would be produced.

  14. Now, if by means of Order No. 3977/2014, of 27 February 2014, published in the Official Gazette No. 52, 2nd series, of 14 March 2014, of the Director of Finance of Porto, in a replacement regime, which proceeds to the attribution of diverse delegations of authority, it can be considered that, due to the combination of the attribution to the same of retroactive effects, from 1 September 2013, and the fact that the APPLICANT did not avail himself of the means at his disposal in accordance with No. 1 of article 37 of the Tax Procedure Code, the defect of lack of delegation of authority for the performance of the acts in accordance with No. 4 of article 65 of the Personal Income Tax Code would be remedied,

  15. But the said Order No. 3977/2014, of 27 February 2014 does not remedy, as we have seen, the defect of nullity of the notification arising from the non-compliance with the provisions of No. 11 of article 39 of the Tax Procedure Code, as recognized by Case Law:

In cases provided for in article 39, No. 9, of the Tax Procedure Code, the non-observance of the legal requirements of notifications implies its nullity, which has as consequence the legal elimination of all effects of the act from which it suffers (article 134, No. 1, of the Administrative Procedure Code)

Consequently,

  1. Respecting the tax in question to the alterations performed under Personal Income Tax for the year 2009, and being that the notification of the taxpayer must be validly made in the course of the four-year period. Without which, the period will expire. In effect, notification, and only it, makes the tax debt certain and enforceable, this did not occur in the situation under examination, that is, by 31 December 2013, in accordance with No. 1 of article 45 of the General Tax Law,

  2. Whereby the right to assess has expired.

  3. Thus, being verified that there is a defect of lack of notification within the expiration period of the right to assess, as determined by No. 1 of article 45 of the General Tax Law, this Tribunal must conclude that the assessment suffers from the defect of expiration of the right to assess.

  4. The petition proceeds, therefore, for the declaration of illegality of the assessment, on the grounds of this defect.

VI - QUESTIONS OF PREJUDICED KNOWLEDGE

As the petition for arbitral decision proceeds on the basis of the defect of expiration of the right to assess, which ensures the effective and actual protection of the rights of the APPLICANT, knowledge of the remaining defects which are attributed to the assessment is prejudiced.

VII - DECISION

In these terms it is decided to judge the petition for arbitral decision as having merit and to declare the illegality of the assessment in question, proceeding with its annulment.

VIII - VALUE OF THE CASE

€ 4,902.25 (Four thousand nine hundred and two euros and twenty-five cents).

IX – COSTS

In accordance with the provisions of the Regulation of Costs in Tax Arbitration Proceedings, costs are fixed at 612.00€, to be borne by the TA.

Lisbon, 19 May 2015

Text prepared by computer, in accordance with article 131, No. 5 of the Code of Civil Procedure, ex vi, article 29 No. 1 letter e) of the RJAT, with blank verso of each page, spelling being that prior to the last orthographic agreement.

The Arbitrator

Henrique Curado

[1] This provision of article 39 of the Tax Procedure Code has undergone successive changes in numbering. It was formerly No. 8, then No. 9, being No. 11 at the date of the facts, resulting from the amendment introduced by Law No. 3-B/2010 of 28/04, and is currently No. 12.

[2] With doubts of constitutionality concerning the duty to ground, cf., Tax Procedure and Process Code Annotated, Jorge Lopes de Sousa, Vislis Ed., 2000, article 37, note 4.

[3] Tax Procedure and Process Code Annotated, Jorge Lopes de Sousa, Vislis Ed., 2000, article 37, note 3.

[4] Tax Procedure and Process Code Annotated, Jorge Lopes de Sousa, Vislis Ed., 2000, article 37, note 2. Regarding the reference to No. 8 of article 39 of the Tax Procedure Code, cf., supra, note 1.

[5] Reference to the Administrative Procedure Code in force at the date of the facts.

[6] General Tax Law Annotated and Commented, Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, 4th Ed., Encontro da Escrita, 2012, note 2 to article 45.

[7] Ibid., previous note, now note 8 to article 46.

[8] Ibid., previous note.

[9] Since the notification act is not confused with the notified assessment act, Central Administrative Court of the South, Decision of 29-09-2009, Case 03041/09.

[10] Ibid., previous note.

[11] Cf. Supreme Administrative Court, Decision of 18 Nov. 2009, Case 0801/09 and Decision of 10 November 2010 of the Constitutional Court, Case No. 79/2010.

[12] Already in previous arbitral decisions the CAAD-T has pronounced on the expiration of the right to assess, e.g., in Case 126/2012-T.

Frequently Asked Questions

Automatically Created

What health expenses (despesas de saúde) can be deducted under Portuguese IRS rules?
Under Portuguese IRS rules, health expenses (despesas de saúde) that can be deducted include documented medical costs paid by taxpayers. According to article 128 of the Personal Income Tax Code (CIRS), taxpayers must present proof of all declared health expenses when requested by the Tax Authority. The deduction requires proper documentation such as invoices and receipts from healthcare providers, hospitals, pharmacies, and medical professionals. The Tax Authority has the right to verify these expenses and require taxpayers to substantiate their claims within 10 days of notification. Failure to provide adequate proof may result in correction of the tax declaration and additional assessments with compensatory interest.
What is the statute of limitations (caducidade) for IRS tax assessments in Portugal?
The statute of limitations (caducidade do direito de liquidação) for IRS tax assessments in Portugal is generally 4 years from the end of the tax year in which the income should have been declared. However, this period can be interrupted by certain administrative acts such as notifications of inspection or correction procedures. In this case involving the 2009 tax year, the taxpayer raised caducidade as a defense, arguing that assessments made in 2012-2013 exceeded the limitation period. The Tax Authority must exercise its right to assess within the statutory deadline, and any assessment made after expiration is illegal and must be annulled. When administrative acts interrupt the limitation period, it restarts from that point.
How can taxpayers challenge an IRS tax assessment through CAAD tax arbitration?
Taxpayers can challenge an IRS assessment through CAAD (Centro de Arbitragem Administrativa) tax arbitration by following this procedure: First, file an administrative reclamation (reclamação graciosa) with the Tax Authority within the legal deadline. If the reclamation is rejected or partially granted, the taxpayer can request constitution of an arbitral tribunal under articles 2(1)(a) and 10(1)(a) of the RJAT (Legal Framework for Tax Arbitration). The request must be submitted within 90 days of notification of the decision on the administrative reclamation. The taxpayer may choose to appoint an arbitrator or allow CAAD to appoint a sole arbitrator. The arbitral tribunal has jurisdiction to review the legality of tax assessments, analyze procedural defects, and determine whether the Tax Authority acted within its legal authority.
What happens when a gracious complaint (reclamação graciosa) against an IRS assessment is rejected?
When a gracious complaint (reclamação graciosa) against an IRS assessment is rejected, the taxpayer has the right to seek judicial or arbitral review. In this case, after the rejection of the administrative reclamation on June 20, 2014 (notified June 25, 2014), the taxpayer requested arbitration at CAAD on September 23, 2014. The rejection of an administrative reclamation does not prevent the taxpayer from challenging the assessment through alternative means. Taxpayers have 90 days from notification of the reclamation decision to file for tax arbitration under the RJAT, or they may choose to appeal to the tax courts. The arbitral tribunal has full power to review both the substantive and procedural aspects of the assessment, regardless of the grounds cited in the Tax Authority's rejection decision.
What are the legal grounds for declaring an IRS tax assessment illegal under Portuguese law?
Legal grounds for declaring an IRS tax assessment illegal under Portuguese law include: (1) lack of authority (incompetência) - when officials signing acts lack proper authority or delegation; (2) violation of notification requirements under article 65(4) of the IRS Code - failure to properly notify taxpayers of alterations to their declarations; (3) absence of mention of delegated authority in official acts; (4) denial of the right to prior hearing (audiência prévia) - failure to respond to taxpayer submissions; (5) lack of grounds (falta de fundamentação) - insufficient reasoning for corrections made to tax declarations; (6) violation of article 68(5) of the General Tax Law (LGT) - disregard for official Tax Authority instructions; (7) expiration of the statute of limitations (caducidade do direito de liquidação); and (8) substantive errors in tax calculation or application of law. Any of these defects may render an assessment illegal and subject to annulment by the arbitral tribunal.