Process: 7/2016-T

Date: November 28, 2016

Tax Type: IRC

Source: Original CAAD Decision

Summary

CAAD Process 7/2016-T addresses a crucial IRC (Corporate Income Tax) dispute concerning caducidade do direito de liquidação (expiry of the right to assess). A... B.V., a Dutch company engaged in NPL (Non-Performing Loan) servicing, challenged IRC assessments totaling €3,568,943.00 for fiscal years 2008-2010. The arbitral tribunal, constituted in April 2016, examined whether the Portuguese Tax Authority exceeded the statutory limitation period under Article 45 of the General Tax Code (LGT) when issuing these assessments. The applicant's primary argument centered on the expiry of the assessment right, followed by alternative grounds including lack of permanent establishment under Article 5 of the IRC Code and the Netherlands-Portugal Tax Treaty. The case illustrates the procedural framework available to non-resident entities through CAAD arbitration, demonstrating that foreign companies can effectively challenge Portuguese tax assessments. The tribunal prioritized examining the limitation period issue first, applying the principle of procedural economy to avoid unnecessary analysis of subsidiary grounds. This decision holds significant implications for cross-border tax planning and demonstrates the strict temporal constraints imposed on tax authorities when issuing assessments, particularly in complex international scenarios involving servicing arrangements and potential permanent establishment issues.

Full Decision

ARBITRAL DECISION

The arbitrators Advisor Jorge Manuel Lopes de Sousa (arbitrator-president), (appointed by the other Arbitrators), Dr. Ricardo da Palma Borges and Prof. Dr. António Carlos dos Santos, appointed, respectively, by the Applicant and by the Respondent, to form the Arbitral Tribunal, constituted on 07-04-2016, agree as follows:

1. Report

A… B.V., with headquarters in …, …, … Floor, …, Amsterdam, Holland, legal entity number … (hereinafter referred to as "Applicant" or "A…"), came, in accordance with article 10 of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Tribunal with a view to:

(i) the declaration of illegality and consequent annulment of the assessments of Corporate Income Tax ("CIT") and compensatory interest nos. 2015…, 2015… and 2015…, relating to the fiscal years 2008, 2009 and 2010, respectively, from which resulted a total amount due of € 3,568,943.00; and

(ii) the condemnation of the Tax Administration ("TA") to reimburse the amounts unduly paid by the Applicant with respect to such assessments – in the total amount of € 3,568,943.00 plus the corresponding indemnity interest and default interest, if applicable.

The Respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.

The Applicant appointed as Arbitrator Dr. Ricardo da Palma Borges, under the provisions of article 6, no. 2, paragraph b), of the RJAT.

The request for constitution of the Arbitral Tribunal was accepted by the President of the CAAD and automatically notified to the Tax Authority and Customs Authority on 28-01-2016.

In accordance with the provisions of paragraph b) of no. 2 of article 6 and of no. 3 of the RJAT, and within the deadline provided for in no. 1 of article 13 of the RJAT, the head of the Tax Administration service appointed as Arbitrator Prof. Dr. António Carlos dos Santos.

The Arbitrators appointed by the Parties agreed to appoint Advisor Jorge Lopes de Sousa as arbitrator-president, who accepted the appointment.

In accordance with and for the purposes of the provisions of no. 7 of article 11 of the RJAT, the President of the CAAD informed the Parties of this appointment on 22-03-2016.

Thus, in compliance with the provisions of no. 7 of article 11 of the RJAT, the deadline provided for in no. 1 of article 13 of the RJAT having expired without the Parties raising any objection, the Collective Arbitral Tribunal was constituted on 07-04-2016.

The Tax Authority and Customs Authority responded, arguing that the request for arbitral pronouncement should be judged as unfounded.

On 01-07-2016, a hearing took place in which witness evidence was produced and it was agreed that the proceedings would continue with written submissions.

The Parties filed submissions.

The Arbitral Tribunal is competent and was properly constituted.

The parties possess legal personality and capacity, are legitimate (arts. 4 and 10, no. 2, of the same statute and article 1 of Ordinance No. 112-A/2011, of 22 March) and are duly represented.

The proceedings do not suffer from any nullities.

There are no obstacles to the examination of the merits of the case.

The Applicant alleges against the contested assessments, in the first place, defects by:

"(i) Expiry of the period of limitation for the right to assess, in violation of the provisions of article 45 of the General Tax Code ("GTC"); and

(ii) Failure to verify the prerequisites for considering that there exists a permanent establishment of the Applicant in Portugal, in violation of the provisions of article 5 of the Corporate Income Tax Code ("CIT") and of article 5 of the Tax Treaty.

For the case that this is not accepted, the Applicant alleges against the contested assessments the following other defects in the action of the Tax Authority and Customs Authority:

(i) It disregarded the rules and procedures necessary for the application of indirect methods;

(ii) it failed to properly substantiate the quantification of the corrections made, in violation of the provisions of arts. 125, no. 2 of the Code of Administrative Procedure ("CAP"), 77 of the GTC and 268, no. 2 of the Constitution of the Portuguese Republic ("CPR");

(iii) it used criteria that find no legal basis whatsoever, in manifest violation of the principle of legality as provided for in arts. 165, no. 1, paragraph i) and 103, no. 2 of the CPR and 8 of the GTC; and

(iv) it took as a basis criteria and elements (acquisition values, sales values, and other elements) that were provided to it by C… and whose suitability is quite doubtful, which by application of article 100 of the Code of Tax Procedure and Process ("CTPP"), implies that the doubt should be resolved in favor of the Applicant.

Since the factual matter relating to the alleged defect of expiry of the right to assess is completely autonomous in relation to that concerning the other defects and since the merit of that defect could render the examination of the others unnecessary, it is justified to begin by examining that defect, as this approach is consistent with the procedural principle of avoiding the performance of acts that may be unnecessary [article 130 of the Code of Civil Procedure (CCP)].

2. Factual Matter Relating to the Question of Expiry of the Right to Assess

2.1. Established Facts

The following facts are considered established:

a) The Applicant is a commercial company under Dutch law, incorporated in June 2006, indirectly dominated and controlled by B…;

b) The Applicant's principal activity is the acquisition, administration and collection of credits and other assets, acquiring defaulted credits (NPLs or Non Performing Loans), with a view to collecting the amounts owed, which it does either through recourse to the courts (by judicial enforcement), or extrajudicially; or, residually, by again assigning such credits acquired by it to other entities (activity commonly designated as "Servicing");

c) The Applicant contracted, in the fiscal years 2008, 2009 and 2010, in Portugal C…, S.A. ("C…" or "…"), a company that provides services to assist in the management and recovery of the acquired NPLs ("Loan Servicing" or "Servicing");

d) On 15-02-2011, the letter contained in document no. 3 attached to the Response was received at the DSIFAE (Department of Services for Investigation of Fraud and Special Actions), whose content is reproduced, sent by the President of the Board of Directors of C…, S.A., which communicates the activity of the Applicant in Portugal and expresses doubts about the tax treatment that should be given to it;

e) In compliance with directive DI2011…, issued by the Director of Services of the DSIFAE, the Tax Authority and Customs Authority carried out an investigation action, with temporal scope in the fiscal years 2007 to 2010, for the collection and cross-checking of information concerning the Applicant;

f) In February 2012, the Report contained in document no. 1 attached to the Response was prepared, whose content is reproduced, in which, among other things, the following proposals for correction to the taxable matter of CIT of the Applicant are made:

[Content as contained in original document]

g) On 28-02-2012, the Director of Services of the DSIFAE issued a directive manifesting agreement with the Report referred to and ordering its transmission to the Finance Department of Lisbon (document no. 1 attached to the response);

h) On 16-11-2012, the Finance Department of Lisbon communicated to the Public Prosecutor the commencement of criminal investigation process no. …/12…ID…, against the Applicant "for indications of tax fraud - art. 103 of the RGIT, concerning the fiscal years 2008, 2009 and 2010" (document no. 4 attached to the Response, whose content is reproduced);

i) On 14-08-2014, Opinion No. 37/2014 was issued by the Tax and Customs Studies Centre, which is contained in document no. 6 attached to the Response, whose content is reproduced, in which the following conclusions are formulated:

33. It is thus considered, from the above, that the fundamental elements are present to conclude that, in the light of the provisions of no. 6 of article 5 of the CIT Code and of the relevant articles of the Tax Treaties (TTs) concluded between Portugal and the USA and Portugal and the Netherlands, D… and A… BV carried out their activity in Portuguese territory through a dependent agent - in the person of the company C…, S.A. Similarly to the position set out in the 2nd report of the IRC Services Department, it also appears to us that there was no relationship of independence between the representatives and C…, S.A. and that the powers of attorney were actually "in a relationship of instrumentality with the service provision contract".

34. The existence of a permanent establishment constituted by a dependent agent under no. 6 of article 5 of the CIT Code or of no. 6 of article 5 of the Tax Treaty between Portugal and the USA or of no. 5 of article 5 of the Tax Treaty between Portugal and the Netherlands implies that the person subject to the tax is the non-resident entity on whose behalf the agent acts and not the agent itself, who, however, must include in his taxable income the remuneration obtained in the capacity of agent.

j) On 18-09-2014, the Director-General of Taxes issued the directive contained in document no. 7 attached to the Response, whose content is reproduced, in which he manifested agreement with Opinion No. 37/2014 referred to;

k) In May 2015, the Inspection Report contained in the administrative file, part 1, was prepared, whose content is reproduced, in which the following corrections in the CIT assessment are proposed to the taxable matter of the Applicant:

[Content as contained in original document]

l) On 30-06-2015, the directive for filing of the Investigation referred to was issued by the Assistant Prosecutor of the DIAP, which is contained in document no. 5 attached to the Response, whose content is reproduced;

m) Following the inspection, the Tax Authority and Customs Authority issued the following CIT assessments and compensatory interest:

(i) Assessment no. 2015…, relating to the CIT and compensatory interest for 2008, in the total amount of € 1,660,078.64, dated 15-07-2015, whose voluntary payment deadline ended on 19 October 2015 (document no. 1 attached to the request for arbitral pronouncement, whose content is reproduced);

(ii) Assessment no. 2015…, relating to the CIT and compensatory interest for 2009, in the total amount of € 1,385,765.23, dated 15-07-2015, whose voluntary payment deadline ended on 19 October 2015 (document no. 2 attached to the request for arbitral pronouncement, whose content is reproduced);

(iii) Assessment no. 2015…, relating to the CIT and compensatory interest for 2010, in the total amount of € 523,099.05, dated 15-07-2015, whose voluntary payment deadline ended on 19 October 2015 (document no. 3 attached to the request for arbitral pronouncement, whose content is reproduced).

n) The Applicant paid the assessed amounts within the voluntary payment deadlines (nos. 4 to 6 attached to the request for arbitral pronouncement, whose contents are reproduced and article 130 of the request, unchallenged).

2.2. Unproven Facts and Substantiation of the Determination of Factual Matter

The established facts are based on the documents submitted by the Tax Authority and Customs Authority and which are contained in the administrative file.

It was not proved that the determination of the taxable matter of the Applicant which underlies the contested assessments had been based on any fact that came to the knowledge of the Tax Administration through the Criminal Investigation …/12…ID…, nor which facts were, possibly, the subject of investigation in it.

3. Law

3.1. Question of Expiry of the Right to Assess

The general period for exercising the right to assess CIT is four years from the end of the year in which the taxable event occurred (article 45, nos. 1 and 4, of the GTC).

In the case at hand, the taxable events occurred in the years 2008, 2009 and 2010, and the contested assessments were issued in 2015, all of them after the expiry of the respective general period referred to.

However, in no. 5 of article 45 of the GTC, reintroduced by Law No. 60-A/2005, of 30 December, it is established that "whenever the right to assess concerns facts in relation to which a criminal investigation was instituted, the period referred to in no. 1 is extended until the filing or final judgment of the conviction, plus one year".

As results from the text of this rule itself, in requiring that the right to assess concerns facts in relation to which a criminal investigation was instituted, for application of the extension of the period provided for in this article 45, it is necessary, first, to prove that the right to assess is based on facts in relation to which a criminal investigation was instituted, which presupposes knowledge of the concrete facts that were the subject of the criminal investigation. ( [1] )

On the other hand, as referred to in the judgment of the Central Administrative Court of the North of 18-01-2012, case 00670/08.1BEBRG, following the judgment of the same Court of 22-04-2010, which it cites, "for that extension of the period of limitation to occur it is imperative that the taxable facts underlying the assessment(s) in question have been the subject of an investigation in criminal proceedings and that a criminal investigation has been instituted concerning them "which is understood, as without the required identity of the facts investigated within the scope of the criminal proceedings and those that constitute the prerequisite of the assessment, it is not clear in what way the pendency of that proceeding could affect the exercise of the right to assess the taxes"".

It is necessary, therefore, that there be a relationship between the possibility of exercising the right to assess and the pendency of the investigation proceeding, so that it can be stated that the right to assess could not be exercised in the correct manner without knowledge of facts ascertained in the investigation.

In truth, in a teleological interpretation, of the referred to article 45, no. 5, of the GTC, which bears in mind, alongside the interest in the collection of taxes, the interest of the taxpayer and the public in legal certainty, inherent in the institute of the limitation of the right to assess taxes, and the constitutional principle of necessity in the restriction of guarantees of taxpayers, it cannot be understood that, by virtue of the fact that a criminal investigation has been instituted to ascertain any fact that may generate a tax debt, the right to assess in relation to any facts occurring in the same year extends in accordance with that article 45, no. 5.

Indeed, this weighing of the conflicting interests of legal certainty and tax collection must necessarily lead to the conclusion that the extended period is only applicable when the facts that serve as the basis for the assessment are ascertained in the criminal investigation, that is, when there was no other way for the Tax Authority and Customs Authority to assess within the normal period, safeguarding all the interests in confrontation.

In other words, the extension of the period cannot be understood as an incomprehensible benefit granted to the Tax Authority and Customs Authority or an incentive to be able to act with less diligence than that normally required of it in the assessment of taxes, but rather as an inconvenience for legal certainty that is only tolerable when the knowledge of the facts ascertained in the criminal investigation is necessary to effect the assessment, in terms consistent with reality. ( [2] )

This conclusion regarding the restriction of the extension of the limitation period of the right to assess to cases in which the ascertainment of facts is necessary for the correct determination of the tax is in accordance with the legislative intention expressly publicized by the Government on p. 30 of the Update of December 2005 to the Stability and Growth Programme 2005-2009, presented to the Parliament in line with the Proposed Law of the State Budget for 2006 (at http://www.parlamento.pt/OrcamentoEstado/Documents/pec/pec2005-2009.pdf), in which came to be introduced in the GTC the rule referred to:

"In the State Budget for 2006, the regime of the limitation period of the right to assess taxes (as a rule, in periodic taxes, 4 years from the end of the year following that in which the taxable event occurred and in taxes of single obligation, counted from the date of the occurrence of the taxable event) was altered in order to provide that, the correct determination of the tax being dependent on facts ascertained in criminal investigation, that period is extended until the filing or final judgment of the respective conviction, plus one year. With such change it is intended, in essence, to prevent those who are suspected or even accused of the commission of criminal violations of a tax nature from benefiting, by virtue of the passage of the limitation period, from the non-assessment of tax, with the consequent discharge from the obligation to proceed with its payment, by virtue of the commission of those violations. It is intended, therefore, to moralize the legal-tax system and a more effective fight against fraud and tax evasion;" (emphasis ours).

It is, therefore, clear that, from the legislative perspective, the extension of the period referred to is only justified in situations in which "the correct determination of the tax (is) dependent on facts ascertained in criminal investigation".

In light of this clarification of the ratio legis of the extension of the limitation period of the right to assess, it is to be concluded, as was concluded in the arbitral judgment of 18-11-2015, delivered in case no. 199/2015-T, that "the extension of the limitation period of the right to assess taxes, referred to in article 45/5 of the GTC, will only operate if it is demonstrated that that right was – effectively and in concrete terms – conditioned by the outcome of the criminal investigation".

Thus, the rational and historical elements of interpretation point decisively towards the extension of the period only occurring when the assessment could not have been effected without the ascertainment of facts that came to be ascertained in criminal investigation, even if in the latter those facts do not lead to a criminal charge.

In the case at hand, it is manifest that it cannot be concluded that the facts ascertained in the referred criminal investigation were necessary for the correct determination of the tax, starting with the fact that it was not even proved that any fact was ascertained in the referred investigation nor which facts were the subject of investigation, if any investigation took place.

On the other hand, the fact that the Tax Inspection Report was prepared before the final decision of the investigation and makes no reference to any fact ascertained in it, also points to the conclusion that the referred investigation was not necessary to ascertain the facts on which the assessments were based.

Furthermore, the fact that the amounts of the corrections proposed in the Tax Inspection Report coincide exactly with those that had already been proposed in February 2012 by the DSIFAE confirms that none of the tax assessments that were made was dependent on facts to be ascertained in the referred criminal investigation, as they could be made, in the precise terms in which they were, on the basis of the facts referred to in the 2012 information.

Thus, the extension of the limitation period of the right to assess provided for in no. 5 of article 45 of the GTC is not applicable to the case at hand.

For this reason, as the assessments were drawn up more than four years after the beginning of the civil year following each of the fiscal years in question and there is not even any suggestion that any cause of suspension exists, it must be concluded that the contested assessments were issued and notified after the expiry of the respective limitation periods for the right to assess.

The request for arbitral pronouncement is therefore well-founded with respect to the defect of limitation of the right to assess that is alleged against the contested assessments.

4. Questions of Prejudicial Knowledge

As the request for arbitral pronouncement is to be judged well-founded on the grounds of expiry of the right to assess, the examination of the remaining questions is prejudiced, being unnecessary.

5. Request for Reimbursement of Amount Paid and Indemnity Interest

The Applicant makes requests for reimbursement of the amounts paid and indemnity interest.

In accordance with the provisions of paragraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim, against which no appeal or challenge may be made, binds the tax administration from the end of the deadline provided for an appeal or challenge, and this must, in the exact terms of the well-founded nature of the arbitral decision in favor of the taxable person and until the end of the deadline provided for the voluntary execution of decisions of the tax courts, "re-establish the situation that would exist if the tax act that was the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose", which is in line with the provisions of article 100 of the GTC [applicable by virtue of the provisions of paragraph a) of no. 1 of article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial merit of a claim, judicial challenge or appeal in favor of the taxable person, to the immediate and full re-establishment of the legality of the act or situation subject of the dispute, including the payment of indemnity interest, if applicable, from the end of the deadline for execution of the decision".

Although article 2, no. 1, paragraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in the CAAD, making no reference to condemning decisions, it should be understood that their competence includes the powers that in judicial challenge proceedings are conferred on tax courts, this being the interpretation that is in line with the meaning of the legislative authorization on which the Government relied in approving the RJAT, in which it is proclaimed, as the first directive, that "the tax arbitration process must constitute an alternative procedural means to the judicial challenge process and to the action for the recognition of a right or legitimate interest in tax matters".

The judicial challenge process, despite being essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration in the payment of indemnity interest, as can be seen from article 43, no. 1, of the GTC, in which it is established that "indemnity interest is due when it is determined, in an administrative review or judicial challenge, that there was an error attributable to the services from which results payment of the tax debt in an amount greater than that legally due" and article 61, no. 4 of the CTPP (in the wording given by Law No. 55-A/2010, of 31 December, to which corresponds no. 2 in the original wording), that "if the decision that recognized the right to indemnity interest is judicial, the payment deadline is counted from the beginning of the deadline for its voluntary execution".

Thus, no. 5 of article 24 of the RJAT in saying that "payment of interest is due, regardless of its nature, in the terms provided for in the General Tax Code and in the Code of Tax Procedure and Process" should be understood as permitting the recognition of the right to indemnity interest in the arbitral process.

In accordance with article 43 of the GTC, in the part applicable here, "indemnity interest is due when it is determined, in an administrative review or judicial challenge, that there was an error attributable to the services from which results payment of the tax debt in an amount greater than that legally due".

In the case at hand, it is manifest that, following the declaration of illegality of the acts of assessment of CIT and compensatory interest, there is provision for the payment of indemnity interest, as the illegality of those acts, embodied in the untimely exercise of the right to assess, is attributable to the Tax Administration, which, on its own initiative, carried them out without legal support.

This is a violation of substantive law, embodied in an error in the legal prerequisites, attributable to the Tax Administration.

Consequently, the Applicant has the right to indemnity interest, in accordance with article 43, no. 1, of the GTC and article 61 of the CTPP, calculated on the amounts that it paid unduly, at the rate of the legal interest provided for in article 559 of the Civil Code and, currently, in Ordinance No. 291/2003, of 8 April (articles 43, no. 4, and 35, no. 10, of the GTC).

6. Decision

Therefore, the Arbitral Tribunal agrees in:

– to judge the request for arbitral pronouncement well-founded;

– to declare illegal and annul the following assessments:

(i) Assessment no. 2015…, relating to the CIT and compensatory interest for 2008, in the total amount of € 1,660,078.64;

(ii) Assessment no. 2015…, relating to the CIT and compensatory interest for 2009, in the total amount of € 1,385,765.23;

(iii) Assessment no. 2015…, relating to the CIT and compensatory interest for 2010, in the total amount of € 523,099.05)

– to condemn the Tax Authority and Customs Authority to reimburse to the Applicant the amounts that it paid relating to the contested assessments plus indemnity interest from the dates in which the payments occurred until the actual reimbursement.

7. Value of the Case

In accordance with the provisions of article 306, no. 2, of the CCP and 97-A, no. 1, paragraph a), of the CTPP and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 3,568,943.00.

Lisbon, 28 November 2016

The Arbitrators

(Jorge Lopes de Sousa)

(Ricardo da Palma Borges)

(António Carlos dos Santos)

[1] In this sense, see the judgments of the Supreme Administrative Court of 10-01-2014, delivered in case no. 0178/14 and of 11-11-2015, delivered in case no. 0190/14.

[2] Essentially in this sense, see the arbitral judgment of 24-10-2014, delivered in case no. 144/2014-T.

Frequently Asked Questions

Automatically Created

What is caducidade do direito de liquidação in Portuguese IRC tax law and how does it limit tax assessments?
Caducidade do direito de liquidação is the statutory expiry of the Portuguese Tax Authority's right to issue tax assessments. Under Article 45 of the General Tax Code (LGT), the tax authority generally has four years from the end of the relevant tax year to issue IRC assessments. Once this period expires, the authority permanently loses its right to assess or collect taxes for that period, protecting taxpayers from indefinite exposure to tax claims. This limitation period may be extended in cases involving fraud, gross negligence, or when inspection procedures are initiated within the standard timeframe.
Can a non-resident company challenge IRC tax liquidations through CAAD arbitration in Portugal?
Yes, non-resident companies can challenge IRC tax liquidations through CAAD (Centro de Arbitragem Administrativa - Administrative Arbitration Center). As demonstrated in Process 7/2016-T, A... B.V., a Dutch company, successfully initiated arbitration proceedings under Decree-Law 10/2011 (RJAT). Foreign entities have the same procedural rights as Portuguese residents to contest tax assessments through this alternative dispute resolution mechanism, which offers faster resolution than traditional court proceedings. The arbitral tribunal has full jurisdiction to examine both procedural and substantive tax issues.
What are the legal time limits for the Portuguese Tax Authority to issue IRC tax assessments?
The Portuguese Tax Authority must generally issue IRC assessments within four years from the end of the relevant tax year, as stipulated in Article 45 of the General Tax Code (LGT). For example, for fiscal year 2008, the deadline would ordinarily be December 31, 2012. However, this period may be suspended or extended under specific circumstances: when criminal proceedings are initiated (suspension under Article 46 LGT), when inspection procedures begin before expiry, or in cases of fraud or gross negligence. In Process 7/2016-T, the timing of criminal proceedings initiated in November 2012 became relevant to determining whether the 2015 assessments were issued within the legal timeframe.
How does CAAD Process 7/2016-T address the expiry of the right to liquidate corporate income tax?
CAAD Process 7/2016-T addresses the expiry issue by prioritizing its examination over other grounds, applying the procedural economy principle from Article 130 of the Civil Procedure Code. The tribunal recognized that the limitation period question was factually autonomous and could render other defenses unnecessary. The decision examined whether assessments issued in 2015 for fiscal years 2008-2010 respected the four-year limitation under Article 45 LGT, considering potential suspensions due to criminal proceedings initiated in November 2012. The tribunal analyzed the interplay between investigation actions completed in February 2012, criminal proceedings, and the eventual 2015 assessments to determine compliance with temporal requirements.
What remedies are available when IRC tax assessments are issued beyond the statutory limitation period in Portugal?
When IRC assessments are issued beyond the statutory limitation period, taxpayers can seek annulment through administrative arbitration (CAAD) or judicial courts. In Process 7/2016-T, the applicant requested: (i) declaration of illegality and annulment of the assessments; and (ii) reimbursement of amounts unduly paid (€3,568,943.00) plus indemnity interest and default interest. If caducidade is proven, the assessments are automatically void, and the Tax Authority must return all amounts collected with statutory interest. Taxpayers should act promptly, as the deadline to challenge assessments is 90 days from notification under Article 10 RJAT.