Process: 701/2016-T

Date: April 27, 2017

Tax Type: IVA

Source: Original CAAD Decision

Summary

In CAAD Process 701/2016-T, a German company challenged an additional VAT assessment of €646,030.41 plus €102,444.49 in compensatory interest for the March 2010 tax period. The case arose after the claimant filed substitute VAT declarations in May 2014 that significantly reduced a previously declared VAT credit from €697,666.13 to €51,635.72. The Tax Authority responded by issuing a supplementary assessment to recover the difference, arguing that the substitute declaration system permits such recovery under Portuguese VAT law. The claimant contested this assessment through administrative review, which was dismissed in August 2016, leading to the arbitration request at CAAD in December 2016. The Tax Authority raised several procedural exceptions including lack of material jurisdiction, claiming that decisions on administrative reviews do not permit challenges to assessment acts, expiry of the right of action, absence of immediate subject matter, and lack of CAAD competence to rule on credit compensation matters. The arbitral tribunal, constituted on February 9, 2017, comprising three arbitrators, proceeded to analyze these preliminary exceptions before examining the merits. This case involves critical issues regarding the legal effects of substitute VAT declarations, the scope of additional assessments when taxpayers voluntarily reduce claimed credits, procedural requirements for challenging such assessments through administrative arbitration, and the entitlement to compensatory interest when assessments are deemed unlawful. The decision has significant implications for taxpayers filing corrective VAT declarations and the Tax Authority's powers to issue supplementary assessments based on voluntary corrections.

Full Decision

ARBITRAL DECISION

The arbitrators Counselor Jorge Manuel Lopes de Sousa (arbitrator-president), Prof. Doctor Luís Menezes Leitão and Prof. Doctor Glória Teixeira (arbitrator members), designated by the Deontological Board of the Administrative Arbitration Center to form the Arbitral Tribunal, constituted on 09-02-2017, agree as follows:

1. Report

A…, currently designated as B…, with registered office in …, … …, GERMANY (previous registered office in …, … …, Germany), registered in Portugal with TIN … (hereinafter referred to as "Claimant"), pursuant to the provisions of articles 2(1)(a) and 10 of Decree-Law No. 10/2011, of January 20 (Legal Regime for Arbitration in Tax Matters - RJAT), following the dismissal of the administrative review claim No. …2015…, submitted a request for arbitral decision, with a view to declaring the illegality of the supplementary VAT assessment No.…, Collection Document No.…, relating to the tax period of March 2010, in the amount of € 646,030.41, and the assessment of compensatory interest with No.…, Collection Document No. …, in the amount of € 102,444.49.

The Claimant further requests the return of the amount of € 748,474.90, plus compensatory interest.

The Respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 13-12-2016.

Pursuant to the provisions of article 6(2)(a) and article 11(1)(b) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of December 31, the Deontological Board designated as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable time period.

On 25-01-2017 the parties were duly notified of such designation and did not manifest the intention to challenge the arbitrators' designation, in accordance with article 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in conformity with the provisions of article 11(1)(c) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of December 31, the collective arbitral tribunal was constituted on 09-02-2017.

The Tax and Customs Authority responded, raising the following exceptions:

a) lack of material jurisdiction of the Arbitral Tribunal (on the grounds that the decision on administrative review does not allow for consideration of the legality of an assessment act);

b) expiry of the right of action;

c) absence of immediate subject matter;

d) lack of material jurisdiction of CAAD to decide on whether or not to compensate the assessment with existing credit.

Furthermore, the Tax and Customs Authority argued that the request should be judged unfounded.

By order of 16-03-2017, a hearing was dispensed with and it was decided that the proceedings would continue with written submissions.

The Parties submitted their arguments.

The arbitral tribunal was properly constituted, in accordance with the provisions of articles 2(1)(a) and 10(1) of Decree-Law No. 10/2011, of January 20.

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

The proceedings do not suffer from any defects and exceptions are raised, which must be considered as a priority.

2. Facts

2.1. Proven Facts

Based on the elements in the file and documents attached to the request for arbitral decision, the following facts are deemed proven:

a) On 10-05-2010, the Claimant filed the VAT declaration for the period 2010/03, a copy of which is attached as document No. 3 to the request for arbitral decision, the content of which is reproduced, in which reference is made to "VAT CREDIT TO BE RECOVERED" in the amount of € 697,666.13;

b) On 08-11-2010, the Claimant submitted a VAT refund request based on its current account evidenced in the periodic declaration for September 2010, which included the accumulated tax credit that had been carried forward from the months of March, April, May and June 2010 (article 7 of the request for arbitral decision, whose correspondence to reality is not disputed);

c) The aforementioned refund request was dismissed;

d) The Claimant filed an administrative review of the decision denying the refund request, which was dismissed;

e) The Claimant filed a hierarchical appeal against the dismissal of the administrative review;

f) In May 2014, during the aforementioned hierarchical appeal proceedings (which was subsequently dismissed by order of 24-09-2014, notified by letter No.…, of 29-09-2014), the Claimant submitted amended declarations replacing the original declarations for the tax periods of March, April, May and June 2010 (article 16 of the request for arbitral decision, whose correspondence to reality is not disputed);

g) On 18-12-2014, the Claimant filed in the Tax Court of Lisbon a special administrative action whose initial petition is attached as document No. 4 to the request for arbitral decision, the content of which is reproduced, in which it requests that the illegality of the hierarchical appeal decision referred to be declared (article 8 of the request for arbitral decision);

h) On 26-04-2014, while the aforementioned hierarchical appeal was pending, the Claimant filed an amended declaration for the period 2010/03, a copy of which is also contained in document No. 3, in which reference is made to "VAT CREDIT TO BE RECOVERED" in the amount of € 51,635.72;

i) While the hierarchical appeal was still pending, the Claimant, in addition to the amended declaration for period 2010/03, also submitted amended declarations for periods 2010/04, 2010/05 and 2010/06, which resulted in differences of € 50,264.91 and € 545.24 in favor of the Claimant and € 19,795.72 (in favor of the State) respectively (article 18 of the request for arbitral decision, whose correspondence to reality is not disputed);

j) The sum of the first refund requests was therefore € 814,007.51 (697,666.13 + 42,077.82 + 72,163.63 + 2,099.93) and was reduced to € 196,891.60 (51,635.72 + 92,342.73 + 72,708.87 - 19,795.72) with the second refund requests, the difference being € 611,115.91 (article 19 of the request for arbitral decision, whose correspondence to reality is not disputed);

k) On 20-05-2014, the Tax and Customs Authority issued, for period 1003, the VAT assessment No.…, in the amount of € 646,030.41, and the compensatory interest assessment No.…, in the amount of € 102,444.49 (document No. 2 attached to the request for arbitral decision, the content of which is reproduced);

l) In the VAT assessment referred to, the following reasoning is stated:

m) In the compensatory interest assessment, the following reasoning is stated:

n) On 24-11-2014, the Claimant filed an administrative review of the aforementioned assessments, which was assigned No. …2015… (document No. 1 attached to the request for arbitral decision, the content of which is reproduced);

o) The administrative review was dismissed by order of 25-08-2016, which expressed agreement with the content of a report, which is attached as document No. 3 to the request for arbitral decision, the content of which is reproduced, in which the following is stated, among other matters:

I - INTRODUCTION

The taxpayer identified above, pursuant to the provisions of article 68 of the Code of Tax Procedure and Process (CPPT), hereby appeals against the supplementary Value Added Tax assessment, relating to the tax period of 2010/03, with No. … and …, effected on 13/05/2014 in the amount of € 748,474.90, the period for submission of which began on 01/08/2014.

The appeal in question was submitted on 24/11/2014, with the grounds which are summarized as follows:

The appellant, through its representative with power of attorney attached at pages 14 et seq., invokes that it was notified of the supplementary VAT assessment, as a result of the processing of the amended declaration and relating to a tax period for which it had already submitted a periodic declaration.

According to the notification received, relating to the tax period of March 2010 (1003), taxation was effected as follows: the amended declaration indicated a VAT credit of € 697,666.13, the corrected declaration now indicated a VAT credit of € 51,635.72, resulting in a difference of € 646,030.41, which was considered as due to the State and consequently entered in the assessment.

It was also notified of the compensatory interest assessment.

It invokes, as the basis for the Tax Authority to have made this correction, the fact that it submitted in May 2014 an amended declaration replacing the normal declaration it had submitted, relating to the aforementioned tax period (March 2010).

It states that on 08/11/2010 it submitted a refund request based on its current account evidenced in the periodic declaration of September 2010, which included the accumulated tax credit that had been carried forward in the months of March to June 2010. As a result of the denial of this request (which was subject to administrative review and hierarchical appeal) and in the face of verification of declarative errors, the appellant proceeded to correct the initial amount from € 814,007.51 to € 196,891.60, by submitting amended declarations in May 2014 (still before receiving a response to the hierarchical appeal request), for the tax periods of March, April, May and June 2010.

Doing nothing in relation to the amended declarations for the months of April and May 2010, the appellant contests the fact that the Tax Authority only focused on March 2010 to make the assessment that is the subject of this appeal, notifying the appellant for payment of € 646,030.41, plus compensatory interest, knowing that the appellant had not benefited from the credit presented in the amended declarations.

It argues that in order to make the appealed assessments no reasoning was presented, for which reason it considers them null, due to lack of valid reasoning to justify them.

Thus, from the above, it argues that the aforementioned supplementary assessments should be annulled.

II - ANALYSIS OF THE ADMINISTRATIVE REVIEW

The present administrative review is lawful (article 68 of the CPPT), timely (article 70(1) of the CPPT), there is no knowledge that judicial review has been filed where the appealed assessment(s) is(are) disputed, and the appellant has standing (article 65 of the LGT and article 9 of the CPPT), so it is necessary to examine the merits of its claim.

The Tax and Customs Authority proceeded to assess tax, resulting in assessments No.(s) 14012762 and 14012763 effected on 13/05/2014, and based on the elements in this file and having consulted the computer data through the central information system, it is verified that the appellant's allegations have no basis, given that:

In terms of registration, the appellant is registered for purposes of Corporate Income Tax (IRC) for the activity of (Manufacturing of Components and Accessories for Motor Vehicles), with CAE code 029320 and registered under VAT (Value Added Tax) in the normal regime with monthly periodicity (currently quarterly).

In the case under analysis, it is verified that the appellant only contests the fact that it was notified for payment of € 646,030.41, plus compensatory interest, without taking into account that it had not benefited from the credit presented in the corrective declarations it submitted.

However, the correction of the assessment in question is never challenged; what the appellant argues is that there should be a reduction of existing credit, according to the corrections it made, without this resulting in payment.

Thus, since neither the amount assessed in the appealed assessment nor any of the grounds provided for in article 99 of the CPPT, applicable by virtue of article 70 of the same Code, are at issue, it is our opinion that the appellant's claim is not capable of being granted in this forum, and we propose its dismissal.

However, given that from the assessment there should not result a payment but rather a compensation with the amount that existed as a credit and for which a refund was requested, and with a view to discovering the material truth and restoring the tax situation of the taxpayer, it may, if so understood by the higher authority, be requested from the VAT Services Directorate to examine the situation in question in light of the provisions of article 78 of the LGT.

Thus, and because it was proposed that this administrative review not be wholly granted, there was a prior hearing in accordance with article 60(1)(b) of the General Tax Law, and the appellant submitted submissions, as appears in pages 105 et seq., from which the following conclusions are drawn:

III – EXERCISE OF THE RIGHT TO BE HEARD

In exercise of the right to be heard, the appellant comes to show its disagreement with the assertions that in the appeal the correction of the assessment and its amount were not challenged, considering that it did so extensively.

It further states that, notwithstanding the draft decision proposing dismissal of the appeal, with which it categorically disagrees, following the services' proposal to request the VAT Services Directorate to examine the situation in light of the provisions of article 78 of the LGT, this means a positive signal that the Tax Authority recognizes the inconsistency in the assessment and will not fail to restore tax truth by annulling the appealed assessment and the negative effects caused to the appellant by having requested the German tax authority to collect a credit that is not effectively due.

Thus, and although it recognizes a positive position by the Tax Authority regarding the examination in light of article 78, it states that what it seeks is the swift restoration of justice, with the annulment of the assessment and its pernicious effects, for which reason it considers it unnecessary to invoke the aforementioned article 78 of the LGT, arguing that this appeal is the proper means to correct any and all illegality.

Having analyzed the appellant's arguments, we find that they are limited to maintaining its position already expressed in the initial petition, without adding to the file any new element capable of altering our position communicated in the draft decision.

Thus, the content of that draft decision is maintained, proposing the dismissal of the appellant's claim.

IV – CONCLUSION

Thus, it is established that the taxpayer's tax situation does not require correction, for which reason it is proposed that this administrative review be DISMISSED, for the reasons set forth above, notifying the appellant of this final decision.

p) The Claimant did not use any credit calculated in the declarations in question, either by refund or by any other subsequent deduction (an assertion stated in article 23 of the request for arbitral decision, which is not disputed);

q) On 25-10-2016, the Claimant submitted the request for constitution of the arbitral tribunal which gave rise to the present proceedings.

2.2. Unproven Facts and Reasoning on the Factual Basis

It was not proven that the Claimant paid the assessed amounts. In particular, no documentary evidence of payment was presented.

The facts were deemed proven based on the documents attached to the request for arbitral decision and the Claimant's statements which were not disputed.

Regarding the content of the administrative review, which is deemed proven, it is based solely on what is referred to in the report to which the administrative review decision refers, since the Claimant also did not attach a copy of the administrative review to the file.

The Tax and Customs Authority did not present an administrative file.

3. Exceptions of lack of material jurisdiction of the Arbitral Tribunal to examine dismissals of administrative reviews based on procedural error and expiry of the right of action

The Tax and Customs Authority raises the issue of lack of material jurisdiction of the Arbitral Tribunal to examine decisions denying administrative reviews based on procedural error.

The present proceedings do not involve an administrative review of self-assessment acts, but rather of supplementary VAT assessment acts.

The Claimant does not request a declaration of illegality of the decision on administrative review (as the Tax and Customs Authority itself recognizes in article 23 of its Response), but rather of the supplementary VAT assessments and compensatory interest that are being challenged.

The reference to the decision on administrative review that the Claimant makes in the introduction of the request for arbitral decision relates only to its notification, but the request formulated has the assessments as its subject matter.

And, in order to examine the legality of assessments, the arbitral tribunals operating at CAAD have jurisdiction, as results from the express language of article 2(1)(a) of the RJAT.

However, the notification of the decision dismissing the administrative review, which upholds the challenged assessments, is relevant to determining the start of the period for submitting the request for arbitral decision, in accordance with article 10(1)(a) of the RJAT, in conjunction with article 102(1)(e) of the CPPT.

In fact, in this subparagraph (e), provision is made for the start of the period to be counted from "notification of other acts that may be subject to independent challenge pursuant to this Code," and the decision on administrative review is one of the acts that is susceptible to independent challenge, as results from article 97(1)(c) of the CPPT and article 95(2)(d) of the LGT.

That is, in light of the RJAT, when assessments are challenged administratively through administrative review which upholds them, the period for requesting a declaration of illegality of the assessments is counted from the notification of the administrative review decision.

Therefore, the initial start of the period for submitting a request for arbitral decision (as well as judicial review), when there is administrative review, is counted from the notification of the decision thereon and not from the end of the voluntary payment period.

In the case at hand, the Claimant challenged the assessments within the 90-day period counted from the notification of the dismissal of the administrative review, for which reason the Arbitral Tribunal has jurisdiction by virtue of article 2(1)(a) of the RJAT, and the request for arbitral decision is timely, by virtue of article 10(1)(a) of the same decree.

Therefore, these exceptions of lack of jurisdiction and expiry of the right to challenge are unfounded.

4. Exceptions of absence of immediate subject matter and lack of material jurisdiction of CAAD to decide on whether or not to compensate the assessment with existing credit

As has been stated and results explicitly from the request for arbitral decision, the acts in respect of which the Claimant requests a declaration of illegality are the acts of VAT assessment and compensatory interest assessment.

These are acts that exist and are the immediate subject matter of the request for arbitral decision.

In the context of examining the legality of assessment acts, the arbitral tribunals operating at CAAD have jurisdiction to examine any illegality, as results from article 2(1)(a) of the RJAT and article 99 of the CPPT, applicable to tax arbitration proceedings by virtue of the provision in article 29(1)(c) of the RJAT, which establishes that "any illegality constitutes grounds for challenge."

Therefore, the examination of illegalities affecting assessment acts is not excluded from the jurisdiction of the arbitral tribunals operating at CAAD.

Different from this issue, which does not relate to jurisdiction but to the merits or lack of merits of the request for arbitral decision, is the question of whether the illegalities imputed to assessment acts affect their validity.

Thus, these exceptions are unfounded.

5. Issues relating to the legality of the VAT assessments and compensatory interest assessments being challenged

The Claimant submitted a VAT declaration for the period 2010/03 in which it indicated a VAT credit of € 697,666.13.

In a subsequent amended declaration, the Claimant indicated, for that period, a VAT credit of € 51,635.72.

The Tax and Customs Authority made the VAT assessment that is the subject of the present proceedings, the amount of which is the difference of € 646,030.41 between the two declared amounts, in addition to assessing the respective compensatory interest.

Meanwhile, a special administrative action is pending which concerns a decision denying a hierarchical appeal filed against a decision denying a refund request that the Claimant submitted in November 2010, based on its current account evidenced in the periodic declaration of September 2010, which included the accumulated tax credit that had been carried forward from the months of March to June 2010.

The first defect imputed by the Claimant to the challenged assessments relates to the reasoning of the challenged assessments.

However, contrary to what the Tax and Customs Authority understood in its Response, the Claimant does not impute to the assessments a formal deficiency in reasoning (insufficiency in the explanation of the reasons why the assessment was made), but rather a defect of a substantive nature, namely that article 87 of the VAT Code, which is the only regulatory basis cited in the VAT assessment, cannot serve as its foundation, because, in the Claimant's view, it can only be used as a basis for making a supplementary assessment when dealing with "tax that was not paid or an undue deduction."

In fact, in the "REASONING" of the supplementary VAT assessment, it is stated that it was "effected pursuant to article 87 of the VAT Code as a result of the processing of the corrected declaration and relating to a tax period for which a periodic declaration had already been submitted."

Article 87(1) of the VAT Code establishes that the Tax Administration "shall rectify the declarations of taxpayers when it reasonably considers that they show tax that is less or a deduction that is greater than due, and shall assess the difference additionally."

Article 87(2) of the same article establishes that "inaccuracies or omissions made in declarations may result directly from their content, from comparison with amended declarations submitted for the same period or relating to prior tax periods, or with other elements at its disposal, in particular those relating to Personal Income Tax, Corporate Income Tax, or information received under community administrative cooperation and mutual assistance."

In the case at hand, an amended declaration was submitted which allowed the Tax and Customs Authority to ascertain the inaccuracy of the first declaration submitted for period 2010/03.

However, the Claimant argues that, knowing that the Tax and Customs Authority that the Claimant "did not benefit from the tax it reduced in the declaration (it would be absurd that, having reduced its credit, it would have taken advantage of it), knowing that the reduced credit was even the subject of its own procedure, would not have allowed the appealed assessment to see the light of day," since "article 87 of the VAT Code, the only basis the Tax Authority uses to support the appealed assessments, expressly provides that any supplementary assessment issued on the basis of declarations must be reasoned and must have underlying either tax that was not paid or an undue deduction."

This position of the Claimant is supported by the final part of article 87(1) of the VAT Code in limiting the supplementary assessment to cases where the Tax and Customs Authority "reasonably considers that they show tax that is less or a deduction that is greater than due."

To justify a supplementary assessment in these situations where the declarations show tax that is less or a deduction that is greater than due, it is necessary that such declarations have resulted in some negative effect for the State in terms of the tax that should be collected.

In fact, this is the only interpretation that is consistent with the constitutional principles of justice and proportionality, which the Tax and Customs Authority must observe in all its activities (article 266(2) of the Constitution), and with the principle of taxation according to taxpaying capacity, since one could not justify imposing on the taxpayer the payment of tax that is not due.

Thus, as the Claimant argues, following the judgment of the Central Administrative Court of the South of 26-02-2008, delivered in case No. 00917/05, the aforementioned article 87 has as its purpose "to allow the correction of declarations submitted when it is evident that the same, as presented, would give rise to unjustified enrichment of taxpayers, through the non-payment of amounts due to the State" and it may "be understood that there would be no reason for deduction in the periodic declarations, but if that were the case, the conclusion to be drawn would be to consider the deduction undue and deny any refund request, but never to assess additionally an amount of tax already collected and notify the taxpayer that had paid it, to pay it again when it is certain that they never received the refund of the 2nd request that was denied to them."

In this light, it is evident that in the case at hand we are faced with a situation in which there is no justification for the supplementary assessment, since, as inferred from the denial of the refund request, no amount relating to VAT for period 2010/03 was received as a result of excessive deduction.

On the other hand, the reduction in the refund request resulting from the submission of an amended declaration with reduction of the "VAT credit to be recovered" could only justify an assessment of the difference if the amount initially indicated had actually been recovered by the taxpayer, either directly or through compensation with "tax to be paid to the State" relating to subsequent periods, and, in this case, only if the amount recovered exceeded, in any period, the VAT credit to which the taxpayer was entitled.

However, this did not occur in the case at hand, since, in light of the proven facts, neither in period 2010/03 nor in any of the other periods in which the Claimant conducted business in Portugal was it verified that the tax to be paid to the State exceeded the tax to be recovered, that is, the taxpayer calculated in all periods "VAT credit to be recovered."

Furthermore, it is also clear that the assessment of compensatory interest is not justified, since, as results from article 96(1) of the VAT Code and article 35 of the LGT (cited in the reasoning for this assessment), they are due when "assessment has been delayed or a refund greater than due has been received." In the case at hand, based on the evidence produced, the Claimant did not receive any refund, and no VAT assessment was delayed, since in all periods, whether in light of the first declarations or the amended declarations, the Claimant calculated VAT to be recovered.

From the foregoing, it is concluded that we are not faced with a situation in which, on the basis of articles 87 and 96(1) of the VAT Code and article 35 of the LGT, the supplementary VAT assessment and the compensatory interest assessment are justified.

Consequently, the challenged assessments are affected by defects of violation of law, which justify their annulment, in accordance with the provisions of article 163(1) of the Administrative Procedure Code, subsidiarily applicable pursuant to article 2(c) of the LGT.

The request for arbitral decision is therefore well-founded, with the result that examination of the remaining issues raised is rendered unnecessary as being superfluous.

6. Request for return of the amount of € 748,474.90 and condemnation to payment of compensatory interest

The Claimant requests the return of the amount of € 748,474.90 and that the Tax and Customs Authority be condemned to payment of compensatory interest.

However, the Claimant failed to prove that it paid the aforementioned amount.

The return of an amount as a consequence of the annulment of assessments obviously depends on the amount having been paid.

On the other hand, the right to compensatory interest is recognized by article 43(1) of the LGT and is made concrete in the manner provided for in article 61 of the CPPT, in cases where "payment of the tax debt in an amount greater than legally due" occurs.

In the case at hand, it is not proven that the Claimant paid the assessed amounts, for which reason, based on what appears in the file, there is no basis for determining the return of amounts or for recognizing the right to compensatory interest under article 43(1) of the LGT.

Therefore, the requests for payment of return and payment of compensatory interest must be judged unfounded, without prejudice to such rights being recognized in execution of judgment, if payment of the assessed amounts is proven.

7. Decision

On these grounds, the members of this Arbitral Tribunal agree:

  • To judge unfounded the exceptions raised;

  • To judge well-founded the request for declaration of illegality of the supplementary VAT assessment No.…, Collection Document No. …, relating to the tax period of March 2010, in the amount of € 646,030.41, and the compensatory interest assessment with No.…, Collection Document No. …, in the amount of € 102,444.49;

  • To judge unfounded the requests for return of amount and compensatory interest, without prejudice to such rights being recognized in execution of judgment, if it is proven that payment of the assessed amounts was made.

8. Value of the Proceedings

In accordance with the provisions of article 306(2) of the Code of Civil Procedure and article 97-A(1)(a) of the CPPT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 748,474.90.

9. Costs

In accordance with article 22(4) of the RJAT, the amount of costs is fixed at € 10,710.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 27-04-2017

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Luís Menezes Leitão)

(Glória Teixeira)

Frequently Asked Questions

Automatically Created

What is an additional VAT assessment (liquidação adicional de IVA) and when can it be challenged?
An additional VAT assessment (liquidação adicional de IVA) is a supplementary tax determination issued by the Tax Authority when there is a tax liability not covered by the original assessment. In Portugal, it can be challenged through administrative review (revisão oficiosa) within 120 days of notification, followed by hierarchical appeal, or directly through CAAD arbitration under the RJAT (Decree-Law 10/2011). The challenge must be filed within 90 days of notification or dismissal of administrative remedies. In this case, the assessment arose from substitute declarations that reduced previously declared VAT credits, triggering recovery proceedings.
How does filing a substitute VAT declaration (declaração de substituição) affect tax liability in Portugal?
Filing a substitute VAT declaration (declaração de substituição) in Portugal allows taxpayers to correct previously submitted periodic declarations under Article 78 of the VAT Code. When a substitute declaration reduces a VAT credit or increases tax liability, the Tax Authority may issue an additional assessment to recover the difference. The substitute declaration replaces the original entirely, recalculating the tax position. In this case, substitute declarations filed in May 2014 reduced the VAT credit from €697,666.13 to €51,635.72, prompting an assessment of €646,030.41. This demonstrates that voluntary corrections can trigger immediate tax consequences without formal audit procedures.
What is the procedure for requesting arbitral review of a VAT assessment at CAAD?
To request arbitral review of a VAT assessment at CAAD, taxpayers must: (1) exhaust administrative remedies or wait for their dismissal; (2) file a request within 90 days under Articles 2(1)(a) and 10 of the RJAT; (3) identify the contested act and grounds for illegality; (4) pay applicable fees; (5) demonstrate standing and legal interest. The CAAD President accepts the request and notifies the Tax Authority, which must respond within 30 days. A three-member arbitral tribunal is then constituted from the Deontological Board. In Process 701/2016-T, the request was filed on December 13, 2016, the tribunal was constituted on February 9, 2017, and proceedings continued with written submissions after dispensing with an oral hearing.
Can a taxpayer claim compensatory interest (juros indemnizatórios) on an unlawful VAT assessment?
Yes, taxpayers can claim compensatory interest (juros indemnizatórios) on unlawful VAT assessments under Article 43 of the General Tax Law (LGT). Compensatory interest is due when the Tax Authority unlawfully retains amounts paid by taxpayers or delays refunds beyond legal deadlines. The rate and calculation follow specific legal provisions. In this case, the claimant requested compensatory interest on the €748,474.90 disputed amount, arguing the assessment was illegal. However, the Tax Authority raised an exception claiming CAAD lacks jurisdiction to order compensation with existing credits, which constitutes a preliminary jurisdictional issue the tribunal must resolve before addressing the merits of the compensatory interest claim.
What are the grounds for the Tax Authority to raise material incompetence exceptions in CAAD arbitration?
The Tax Authority raised material incompetence exceptions in CAAD arbitration on several grounds: (1) arguing that administrative review decisions do not permit challenges to the underlying assessment acts themselves, only to the review decision; (2) claiming the matter involved credit compensation issues beyond CAAD's jurisdiction; (3) asserting expiry of action rights; and (4) alleging absence of immediate subject matter. These exceptions are procedural defenses questioning whether CAAD has legal authority (competência material) to hear the case. Under Article 2 of the RJAT, CAAD's jurisdiction is limited to acts explicitly listed, and preliminary exceptions must be decided before examining merits, as the tribunal ordered in this case.