Process: 713/2016-T

Date: June 16, 2017

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitral decision addresses the critical issue of expiry of the right of action (caducidade do direito de ação) in VAT disputes. A German company challenged VAT assessments totaling €843,768.55 for periods in 2010, but only filed the arbitration request in November 2016, more than a year after the tax payment deadline of January 31, 2015. The taxpayer argued it never received proper notification of the assessments or their grounds, only learning of them through a tax enforcement citation in February 2015. Despite requesting the grounds in April 2015 and filing an administrative review petition in June 2015, the Tax Authority failed to provide the requested information and dismissed the petition. The Tax Authority invoked the exception of expiry, arguing the 90-day deadline under LRÁTM for filing arbitration had long passed. The case highlights the tension between procedural deadlines and the taxpayer's fundamental right to know the basis of tax assessments. Key issues include: whether the lack of notification affects the starting point for challenge deadlines, whether a tax enforcement citation can restart the period for challenging the underlying assessment, and the consequences of the Tax Authority's failure to provide grounds when requested. The decision has significant implications for taxpayers' procedural rights in cross-border VAT disputes.

Full Decision

ARBITRAL DECISION

I. REPORT

1. A…, currently with the designation of B…, with registered office in …-…, … …, GERMANY, registered in Portugal with the tax identification number …, (hereinafter Claimant) submitted a request for constitution of a sole arbitral tribunal, in accordance with the provisions of articles 2.º and 10.º of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter only referred to as LRÁTM), in which the Tax and Customs Authority (hereinafter TA) is the Respondent, with the objective of obtaining a declaration of illegality and annulment of the VAT assessment acts identified in the case file, in the total amount of €843,768.55.

2. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the TA on 13.12.2016.

3. In accordance with the provisions of subparagraph c) of no. 1 of article 11.º of LRÁTM, the arbitral tribunal was constituted on 09.02.2017.

4. The Claimant bases its request on the following arguments:

a) The Claimant was cited by the Finance Service of Lisbon … to notify it that a fiscal execution proceeding No. …2015… was instituted, for collection of VAT debts, totalling €843,768.55, of which €739,660.58 is tax and €104,107.97 is compensatory interest;

b) A first citation dated 2015.02.24 was sent to the claimant's former premises in Germany, where it was received on 3 March 2015, and subsequently, the claimant received the same citation again, dated 2015-10-12 addressed to its current premises;

c) As the informational elements accompanying the citation were not sufficient to understand the essential basis of the assessments underlying the execution, the claimant requested that the missing grounds be provided to it;

d) Thus it sent a request addressed to the Director General of the TA, on 2 April 2015, requesting information about the origin and grounds of the assessments and whether said notifications were notified and to whom;

e) The Claimant never received a response to said request for provision of grounds;

f) Since in the debt certificates sent with the citation it was indicated that the tax concerned 2010 and that the date fixed as the limit for voluntary payment was 31 January 2015, the Claimant, as a precaution, submitted a petition for administrative review on 1 June following;

g) In that petition the claimant states that it was "presented incomplete so as not to lose the deadline for filing a petition and that the presentation of the grounds of the petition was conditioned on being provided the grounds of the assessment which it had meanwhile already requested" (paragraph 11 of the Request);

h) In exercising the right of hearing the Claimant clarified that the petition was not intended to react to the fiscal execution, but rather to inform that it was only with the citation of the fiscal execution referred to that it had knowledge that the TA had made another assessment and that it needed the respective grounds to be provided to it, thus considering the petition the appropriate procedural means;

i) On 29 August 2016, the Claimant was notified of the decision to dismiss the petition filed, with the TA considering that the petition for administrative review was not "the proper means to analyse such request" and that the claimant had already reacted to the decision dismissing the refund request submitted by it which gave rise to the assessment that is the subject of the executive proceeding through the filing of appropriate petition for administrative review and hierarchical appeal, with the respective special administrative action being pending;

j) For the Claimant the dismissal of the petition continues to evade the issue of the presentation of the grounds of the impugned assessments;

k) The Claimant "which has neither facilities nor any representation in Portugal, nor has carried out any taxable operations here since July 2010, inquired of the consulting and accounting firm that had provided it with support in the periods in which it carried out taxable operations here, to inform it about any possibility of access to the assessments and their grounds" (paragraph 45 of the Request);

l) "It was then that it was reminded that there was an electronic mailbox and that one could access it to try to obtain more information there" (paragraph 46 of the Request);

m) That access was made in September 2016;

n) The TA did not fulfil the obligation to provide grounds, hence the complete justification for the present arbitral request in the legitimate expectation that the illegality of the impugned assessments, particularly based on the defect of lack of grounds and other illegalities invoked, will be recognized by the arbitral tribunal with all the legal consequences deriving therefrom.

5. The TA responded, defending itself by exception and counterclaim.

5.1. In defence by exception it invoked the following exceptions: lack of material jurisdiction of the Arbitral Tribunal to assess dismissals and petitions for administrative review based on error in the form of the procedure; lapse of the right of action; non-existence of the immediate object; lack of material jurisdiction of the Tribunal to decide on matters connected with fiscal execution proceedings; and lack of material jurisdiction of the Arbitral Tribunal to decide refund requests.

5.2. The TA also defended itself by counterclaim, arguing for the dismissal of the request, alleging, in summary, the following grounds:

a) The arbitral petition is not the appropriate means of judicial reaction, since the act that dismissed the petition for administrative review under examination did not address, even indirectly, the assessment act that was supposedly being challenged there;

b) Following the best case law, the following is cited, by way of example, the Judgment of the TCA South, proceeding No. 06246/12, of 11-05-2015, according to which: "if the act carried out assessed the legality of the act, the appropriate means of challenging it is judicial challenge; if in the act carried out the legality of the assessment act was not subject to assessment, because such assessment was prevented by any legal circumstance or obstacle (such as untimeliness or lack of standing of the requesting or appealing party), the appropriate means of challenging it is special administrative action, by virtue of what article 97.º, no. 2 of CPPT provides.";

c) The Claimant indicates as the request underlying the arbitral petition, the obtaining of illegality and annulment of VAT assessments relating to the tax periods of March, April and May 2010, plus compensatory interest, in the total amount of €843,768.55;

d) However, not a single word is devoted to requesting the annulment of the act dismissing the petition for administrative review; in fact, the attack is directed exclusively at the tax assessment acts, so it is (clearly) shown that the legally defined deadline for their challenge has been exceeded, specifically in arbitration;

e) Given that the deadline for payment of the tax in question in the case occurred on 31.01.2015 and that the request for constitution of the arbitral tribunal was only submitted on 29.11.2016, that is, more than a year after the payment deadline, the request made is untimely and the tribunal cannot hear it, because it was submitted far beyond the ninety days provided for in LRÁTM;

f) Not having expressly requested the annulment of the order that dismissed the petition for administrative review filed by it, there is no support that could establish the timeliness of the request and, consequently, the possibility of the Tribunal assessing the request made regarding the assessment act;

g) "The subject matter of the judgment coincides with the subject matter of the proceeding, and the judge cannot fall short of nor go beyond what has been requested" - which will mean in the concrete case of the file that the Tribunal, in the judgment it will deliver, cannot order anything that has not been requested;

h) It is not clear how this Tribunal can be competent to hear a petition for administrative review which, in turn, beyond not discussing any type of legality, is also not within the scope of a fiscal execution proceeding;

i) No matter how much the Claimant insists, no matter how much it invokes that the special administrative action is prior to the additional assessment acts now challenged, the fact is that, and in truth, it wants (and is) discussing in this forum what was before, in said action, is, precisely, under discussion;

j) The arbitral tribunals functioning in CAAD have no material jurisdiction to hear and resolve disputes involving refund requests;

k) The invocation that the additional VAT assessment acts suffer from lack of grounds is devoid of sense;

l) The compensation sought by the Claimant is not based on an amount it has to receive, but rather an amount it has to pay;

m) In view of this, the tax assessment acts in question merit no censure, nor are compensatory interest damages due.

6. The meeting referred to in article 18.º of LRÁTM was dispensed with, and the Parties were notified to submit final arguments, given the content of the matter contained in the file.

7. The Respondent did not submit arguments.

7.1. The Claimant argued by submitting, among other things, that the request it presented as a petition for administrative review was intended to question the illegality of the assessment and that through it exercised the right to react before the author of the act and assumed that it would have to have access to the grounds of the assessment to be able to develop its terms further. According to the Claimant, such request cannot fail to be qualified as a petition for administrative review for the purposes of articles 68.º and following of CPPT and for the dismissal of it to access the judicial route. The Claimant argues, namely in light of the conduct of the Respondent in not responding to the request for provision of grounds, and subsequently with the position it assumed in the course of the petition for administrative review proceeding that preceded the present arbitral petition, that the assessment act was inevitably and irreversibly affected by the defect of lack of grounds.

II. PROCESSING

The parties have legal capacity and standing, are legitimate (articles 4.º and 10.º, no. 2, of the same instrument and article 1.º of Order No. 112-A/2011, of 22 March) and are properly represented.

The proceeding does not suffer from nullities.

As we have seen, the Respondent raised the exceptions of lack of material jurisdiction of the Arbitral Tribunal and lapse of the right of action.

Such exceptions shall be assessed as a priority according to their procedural priority order.

III. MERITS

III.1. FACTUAL MATTER

§1. PROVEN FACTS

With regard to the facts relevant to the decision of the case, the following facts are considered proven:

a) On 25 November 2014, the TA issued the additional VAT assessment acts and compensatory interest No. …, …, …, …, …, … in the total amount of €843,768.55, whose voluntary payment deadline ended on 31 January 2015 (DOC 6);

b) On 3 March 2015, the Claimant was cited at its former premises in Germany by the Finance Service of Lisbon … of the institution of a fiscal execution proceeding with the No. …2015…, for collection of VAT debts, in the total amount of €843,768.55, of which €739,660.58 is tax and €104,107.97 is compensatory interest (DOC 2);

c) On 12 October 2015, the Claimant was again cited, now at its current premises by the Finance Service of Lisbon … of the institution of a fiscal execution proceeding with the No. …2015…, for collection of VAT debts, in the total amount of €843,768.55, of which €739,660.58 is tax and €104,107.97 is compensatory interest (DOC 2);

d) The citation was accompanied by 6 debt certificates (3 on tax debts and 3 on compensatory interest debts) which contain general elements of identification of the executing entity and the executed party, indication of the nature of the debt and some more detailed data on the amount due, namely, identification of the source document, payment deadline, year of the debt, tax period, indication of the tax and value (DOC 2);

e) On 2 April 2015, the Claimant requested from the Director General of the TA information about the origin, grounds and date of notification of the assessments underlying the fiscal execution proceeding identified above (DOC 3);

f) On 20 April 2015, the Claimant was notified by order No. …, issued by the Collections Services Department of the TA, that the information request had been forwarded to the Finance Service of Lisbon … (DOC 3);

g) Not having received a response to the request for notification of VAT assessment acts and respective grounds submitted on 6 April 2015, on 29 May 2015, the Claimant filed a petition for administrative review against a VAT assessment act, with the following content: "The petitioner received a citation from the Finance Service of Lisbon … notifying it that a fiscal execution proceeding with No. …2015… was instituted, for collection of VAT debts, totalling € 843,768.55. As said citation was not accompanied by the assessment note that gave rise to the fiscal execution proceeding and its respective grounds, the petitioner hereby sent on 2 April 2015 a request for such information to be notified (…). Since to date the petitioner has not yet received a response to said letter, it is not possible for it to know or dispute the grounds of the assessment; Nevertheless, since the debt certificates sent indicated that the tax concerned 2010 and that the deadline for voluntary payment was 31 January, the petitioner, as a precaution, hereby files a petition for administrative review, which is conditioned on the opportunity being given to respond to the grounds of the assessment, within a timeframe to be set which should be counted from its notification, as requested and requests again" (DOC 3);

h) On 12 July 2016, the Claimant was, through order No. … of the DF of Lisbon, notified to exercise the right of hearing on the draft order dismissing the petition for administrative review filed on 29 May 2015 (DOC 3);

i) In that draft order it was stated, among other things, the following: "In the present proceeding, the petitioner presents a petition for administrative review following the citation, by the Finance Service of Lisbon … in the context of the fiscal execution proceeding No. …2015…. Now, such form of reaction cannot be analysed herein, since it does not fall within the scope of the grounds of the petition for administrative review, in accordance with the combined articles 70.º and 102.º CPPT, not falling within any of the grounds of article 99.º of the same instrument. Thus, as this is not the proper means to address the petitioner's claim, our opinion is that the present request cannot be granted. Notwithstanding the foregoing, it should be noted that the petitioner has already reacted to the decision dismissing the refund request submitted by it which gave rise to the assessment that is the subject of the executive proceeding referred to, through the filing of appropriate petition for administrative review and hierarchical appeal, with a special administrative action being currently pending regarding the dismissal of said appeal" (fls. 91 et seq. of PA);

j) Through order No. …, dated 26 August 2016, the Claimant was notified of the dismissal of the petition filed on 29 May 2015 on the grounds of the inadequacy of the means (petition for administrative review) in relation to the request for grounds of the VAT assessment acts underlying the fiscal execution proceeding (fls. 91 PAT);

k) In the Final Information, which formed the basis for the dismissal of the petition, it can be read, among other things, that: "(…) having analysed the allegations of the petitioner in the context of the right of hearing, it appears that what now it invokes is not what follows from the content of its initial petition, which referred to the citation of the fiscal execution proceeding and the request it had made, in that context, for information concerning the assessment note that was the subject of that proceeding to be notified to it, which would prevent it from disputing the grounds of the assessment. Thus, and since it is a matter under discussion in the context of an executive proceeding, we refer that this is not the proper means to analyse the request, as it does not fall within the scope of the grounds of the petition for administrative review. In fact, it should be added, none of the grounds of the petition for administrative review was invoked in the initial petition, the petitioner referring that it filed the petition for administrative review "as a precaution", conditioning it on the opportunity being given to respond to the grounds of the assessment. From the foregoing, as far as this point is concerned and in accordance with the request submitted, we maintain the contents of the draft decision, that this is not the proper means of reaction." (PA);

l) On 5 September 2016, C… accessed the Claimant's electronic mailbox, viewing the notifications of the additional VAT assessment acts identified in a);

m) On 29 November 2016, the Claimant filed the present arbitral petition, requesting the declaration of illegality and annulment of the VAT assessments identified in a), concerning the tax periods of March, April and May 2010, plus compensatory interest.

§2. FACTS NOT CONSIDERED PROVEN

With relevance to the decision, there are no facts that should be considered as not proven.

§3. BASIS FOR THE DECISION ON THE FACTUAL MATTER

Having regard to the positions assumed by the parties, in light of article 110.º, no. 7 of CPPT and the documentary evidence joined to the file, including the PA, the facts listed above are considered proven, with relevance to the decision.

III.2. LEGAL MATTER

It is necessary to assess, first and foremost, the exception of lapse of the right of action invoked by the Respondent.

Exception of Lapse of Action

Within the scope of the present proceeding, the Claimant, in compliance with the provisions of subparagraph a) of no. 1 of article 10.º of LRÁTM, petitions in its request for arbitral pronouncement that the "illegality and annulment of VAT assessments relating to the tax periods of March, April and May 2010, plus compensatory interest" be declared. Also, in the final request submitted, the Claimant asks this Tribunal to "annul the impugned assessments."

Taking into account that, in accordance with article 609.º of CPC "The subject matter of the judgment coincides with the subject matter of the proceeding, and the judge cannot fall short of nor go beyond what has been requested", it is understood that, in the terms defined by the Claimant, the immediate object of the arbitral proceeding corresponds to the VAT assessments identified in II. a), with the act dismissing the petition for administrative review filed (DOC. 1) being only its mediate object.

As the Respondent invoked, among others, the exception of lapse of the right of action, it is incumbent on this Arbitral Tribunal to pronounce itself, previously, on whether or not the same is well-founded, since, being the lapse of the right of action a peremptory exception, should the same be well-founded it will prevent knowledge of the merits of the request. In truth, in accordance with no. 3 of article 576.º of CPC, peremptory exceptions "consist in the invocation of facts that prevent, modify or extinguish the legal effect of the facts alleged by the plaintiff".

The lapse of the right of action constitutes a peremptory exception, inasmuch as it configures a cause to which substantive law attributes the cessation of the right that one invokes as already validly constituted and, from this perspective, integrates the domain of that type of exception, which "are those that are translated in the invocation of facts or causes that are imperative, modifying or extinguishing of the Plaintiff's right (…) leading to the total or partial lack of foundation of the action".

Let us therefore see, first and foremost, what is the legal deadline for submission of the arbitral petition under analysis.

Article 10.º, no. 1, of LRÁTM provides that the request for constitution of an arbitral tribunal must be submitted, in particular, "within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102º of CPPT, as regards acts susceptible to autonomous challenge and, likewise, from the notification of the decision or the end of the legal deadline for decision of the hierarchical appeal;"

Article 102.º of CPPT, in turn, provides as follows:

"1 - The challenge shall be submitted within three months counted from the following facts: (As amended by law No. 66-B/2012, of 31 December)

a) End of the period for voluntary payment of tax obligations legally notified to the taxpayer;

b) Notification of other tax acts, even when they do not give rise to any assessment;

c) Citation of subsidiary liable parties in a fiscal execution proceeding;

d) Formation of the presumption of implied dismissal;

e) Notification of other acts that may be subject to autonomous challenge in accordance with this Code;

f) Knowledge of acts prejudicial to legally protected interests not covered in the previous subparagraphs.

2 - (Repealed by subparagraph d) of article 16.º of Law No. 82-E/2014, of 31 December)

3 - If the ground is nullity, the challenge may be made at any time.

4 - The provisions of this article do not prejudice other special deadlines established in this Code or in other tax laws."

In general terms, in accordance with the provisions of article 102.° of CPPT, the deadline for making judicial challenge is three months counted, namely, from the end of the period for voluntary payment of tax obligations legally notified to the taxpayer or from the notification of other acts that may be subject to autonomous challenge.

In accordance with the provisions of article 29.º of LRÁTM, the procedural or procedural tax norms, the norms on organisation and procedure in administrative and tax courts, the norms of the Administrative Procedure Code (APC) and the CPC are subsidiarily applicable to the regime of arbitration.

As has been stated, within the scope of the present proceeding, the Claimant, in compliance with the provisions of subparagraph a) of no. 1 of article 10.º of LRÁTM, petitions in its request for arbitral pronouncement that the "illegality and annulment of VAT assessments relating to the tax periods of March, April and May 2010, plus compensatory interest" be declared. Also, in the final request submitted, the Claimant asks this Tribunal to "annul the impugned assessments."

Thus, according to the Respondent entity, the Claimant not having attacked the dismissal of the petition, in accordance with the provisions of article 10.º no. 1, subparagraph a) of LRÁTM, and intending to react against the acts of officioso VAT assessment from 2010 (identified in the proceeding), the request for constitution of an arbitral tribunal should have been submitted within 90 days counted from the end of the period for voluntary payment, in accordance with the provisions of article 102.º, no. 1, subparagraph a) of CPPT. Given that the deadline for voluntary payment of the VAT assessment acts in question ended on 31 January 2015 (See DOC. 6), and that the request for constitution of the arbitral tribunal was only submitted on 29 November 2016, that is, more than a year after the payment deadline, the arbitral request would have been submitted beyond the 90 days of LRÁTM.

For its part, as has been stated, the Claimant defends the thesis of timeliness by arguing, in essence, that the initial point of the 90-day period is counted from the date of notification of the dismissal of the petition for administrative review, namely, since 29 November 2016.

Let us see.

The Claimant argues that it first had knowledge of the existence of an additional VAT assessment, its amounts and the periods to which it related, when it was cited, via ordinary CTT mail, of the institution of a fiscal execution proceeding.

Once cited in the context of fiscal execution, it would be open to the Claimant to defend itself by filing an opposition to the execution, based on the provisions of subparagraph i) of no. 1 of article 204.º of CPPT.

What happened was that, instead of filing an opposition, the Claimant, as appears from the facts given as proven, requested from the Director General of the TA information about the origin, grounds and date of notification of the assessments underlying the fiscal execution proceeding in question. And, as it did not obtain a response, it subsequently filed a petition for administrative review reiterating that its objective was to obtain the grounds of the assessments, since without knowledge of them it could not dispute the assessments.

Notwithstanding the Claimant having called its request of 2 April 2015 a petition for administrative review, the truth is that its content, as results from the facts given as proven and from doc no. 3 attached to the file, aims only to obtain notification of the grounds of the assessments. So much so that the Claimant refers, it is repeated, among other things, that "Nevertheless, since the debt certificates sent indicated that the tax concerned 2010 and that the deadline for voluntary payment was 31 January, the petitioner, as a precaution, hereby files a petition for administrative review, which is conditioned on the opportunity being given to respond to the grounds of the assessment, within a timeframe to be set which should be counted from its notification, as requested and requests again".

Beyond the unambiguous content of the first request termed "petition", and considering the content of the petition for administrative review filed following that, the Claimant's objective was to obtain notification of the assessments and the respective grounds. An objective that finds express formulation in several points of the arbitral request which we proceed to indicate.

In point 5 of the request it can be read, among other things, that "As the informational elements accompanying the citation (…) were not sufficient to understand the essential basis of the assessments underlying the execution (…) the now challenging party requested that the missing grounds be provided to it".

In point 6 of the request it states that on 2 April 2015 it requested "information about the origin and grounds of the assessments and whether said assessments were notified and to whom".

In point 8 of the request it is stated that "(…) the claimant never received a response to said request for provision of grounds, even after having reiterated the same request in the context of the petition for administrative review identified in the heading of the present petition…".

In point 11 of the request it says that "the petition for administrative review was presented incomplete so as not to lose the deadline for filing a petition and that the presentation of the grounds of the petition was conditioned on being provided the grounds of the assessment which it had meanwhile already requested." An idea that is repeated in point 17 of the request.

In article 23 of the request the Claimant reiterates that "the TA did not attend to the requests, made after citation of the execution, renewed in the petition of the petition for administrative review and in the prior hearing, to provide the grounds of the assessments now impugned."

Also in point 34 of the request it is reiterated that "the order dismissing the petition for administrative review confirms that the TA refused to provide the grounds of the impugned assessments." An idea reiterated in other points of the request, such as point 35.

From the foregoing, it is clear, in the first place, that the petition for administrative review, whose dismissal was used by the Claimant as a procedural means to open the arbitral route, followed a request for notification of the assessments and respective grounds. On the other hand, and in the second place, it is also clear that that petition for administrative review aimed to obtain notification of the requested elements: the notification of the assessments and respective grounds.

The appropriate procedural means to obtain notification of the grounds of the tax act is the one established in article 37.º of CPPT. No. 1 of this provision provides that "If the communication of the decision on tax matters does not contain the grounds legally required, the indication of the means of reaction against the notified act or other requirements required by tax laws, the interested party may, within 30 days or within the period for petition for administrative review, appeal or challenge or other judicial means available against that decision, if shorter, request notification of the requirements that have been omitted or a certified copy containing them, free of any payment".

Under no. 2 of the same provision, "If the interested party makes use of the power granted in the previous number, the period for petition for administrative review, appeal, challenge or other judicial means is counted from the notification or delivery of the certified copy that has been requested".

In the case at hand, the Claimant began by using this procedural means aimed at obtaining notification of the grounds of the assessments, but not having obtained a response and having doubts as to the suspension of the periods to react against the assessment, decided to resort to the petition for administrative review.

In point 10 of the request it is stated very clearly: "It is noted that for the purposes of justifying the presentation of the petition for administrative review, that the request for notification of the grounds of the assessment had not been presented within the 30-day period provided for in no. 1 of article 37.º of CPPT counted from the date on which it received the citation, it being therefore not certain that it could benefit from the suspension of the period to file a petition for administrative review or challenge provided for in no. 2 of the said legal provision."

In the context of the case at hand, since the request for notification of the grounds of the assessment could not benefit from the suspension of the period to file a petition for administrative review, the procedural mechanism of article 37.º of CPPT was not applicable. Thus, against the absence of a response, it would be open to the Claimant to turn to the tax courts requesting that the TA be ordered to provide it with, both the notification of the assessments and their respective grounds, but in an autonomous action and without benefiting from the suspension of the periods, in accordance with the mentioned provision of CPPT.

Instead, as we have seen, the Claimant, it is repeated, resorted to a petition for administrative review. The use of a petition for administrative review against the absence of response to a request for notification of the tax acts and their respective grounds, without application of the mechanism of article 37.º of CPPT, does not constitute, in the present case, the appropriate procedural means to timely open the arbitral route with a view to the challenge of those acts.

On the other hand, it is true that the Individual who wishes to challenge an assessment, instead of using the procedural means of judicial challenge, may resort to a petition for administrative review.

The petition for administrative review may be filed, in accordance with the provisions of article 99.º of CPPT, on the same grounds provided for judicial challenge and shall be submitted within 120 days counted from the facts provided for in no. 1 of article 102.º of CPPT.

For its part, in article 99.º of CPPT, judicial challenge has as its grounds the erroneous classification of income, profits, property values and other tax facts, incompetence, absence or defect of legally required grounds and preterition of other legal formalities.

Thus, the Claimant could have begun by filing a petition for administrative review to challenge the assessment.

What happened was that, in the case, the request presented as a petition for administrative review by the Claimant aimed, not at challenging the assessment, but rather at reacting against the absence of response to the request made aimed at obtaining notification of the assessments and respective grounds.

Accordingly, the arguments invoked by the Claimant in the petition for administrative review do not fall within those mentioned in article 99.º of CPPT, despite the fact that, in the arguments, the Claimant invokes that it has amply demonstrated in the arbitral request the illegality of the impugned assessment, "namely for not having been provided to the challenging party the grounds concerning its origin and the quantification of its values".

The Claimant's argument conflates, on the one hand, notified act and act of notification and, on the other hand, illegality due to lack or insufficiency of grounds (one of the prerequisites for challenging the assessment) and lack of notification of the grounds of the assessment. This latter circumstance does not give rise to illegality of the notification, but only its ineffectiveness (cf. JORGE LOPES DE SOUSA, Code of Procedure and Tax Process, Annotated and Commented, 6th ed., pp. 349 et seq.), in which case the individual has the right to obtain those grounds namely through the mechanism of article 37.º of CPPT.

In this context, the Respondent is right when in the context of the express dismissal of the petition for administrative review it refers that this is not the proper means to analyse the request because it does not fall within the scope of the grounds for the petition for administrative review. And it adds that "(…) none of the grounds of the petition for administrative review was invoked in the initial petition, the petitioner referring that it filed the petition for administrative review "as a precaution", conditioning it on the opportunity being given to respond to the grounds of the assessment".

As the Claimant resorted to the petition for administrative review, not to attack the assessment, but rather, it is repeated, to obtain the grounds of the same, the inadequacy of the means used has as a consequence that the initial point of the period for recourse to the arbitral route cannot be counted from the dismissal of the same, as the Claimant wishes.

In truth, according to the Claimant's thesis it only had knowledge of the assessments when it was cited in the context of the fiscal execution proceeding, and will have taken as a reference the date fixed as the payment limit, namely, 31 January 2015. If so, the request for constitution of an arbitral tribunal should have been submitted within 90 days from that date, in accordance with the provisions of article 10.º, no. 1, subparagraph a), of LRÁTM, in combination with the provisions of article 102.º of CPPT.

What happened was that, as results from the facts given as proven, the request for constitution of an arbitral tribunal was submitted on 29 November 2016, that is, more than a year after the payment deadline.

Accordingly, the request made is untimely and the tribunal cannot hear it, because it was submitted far beyond the ninety days provided for in LRÁTM [article 10.º, no. 1, subparagraph a)].

The foregoing demonstrates that, even following the Claimant's thesis, it cannot fail to be concluded that the same has no legal foundation and inevitably leads to the lapse of the present arbitral request.

In addition, there are more evident reasons that inevitably lead to the lapse of the arbitral request.

Indeed, it is the Claimant itself that admits in points 45 and 46 of the arbitral petition that the assessment acts were validly notified to its electronic mailbox, on 26 November 2014, and does not allege any facts apt to rebut the presumption of notification of those assessment acts, being the same validly notified on the 25th day following their sending, in accordance with the provisions of no. 10 of article 39.º of CPPT.

Thus, in accordance with the provisions of article 10.º, no. 1 a) of LRÁTM and of article 102.º, no. 1 a) and 39.º, no. 10 of CPPT, the Claimant should have submitted an arbitral petition of the assessment acts in question by 4 May 2015.

Having the Claimant submitted the request for constitution of an Arbitral Tribunal on 29 November 2016, and considering what is set out in the previous points, the lapse would still be verified, as on that date the said deadline was widely exceeded.

Given that the lapse of the right of action constitutes a peremptory exception, which prevents knowledge of the merits of the case, in accordance with the provisions of nos. 1 and 3 of article 576.º, of CPC [(ex vi subparagraph e) of article 2.º of CPPT and subparagraphs a) and e) of no. 1 of article 29.º of LRÁTM)] the Respondent must, consequently, be absolved of the request, since the lapse of the right of action prevents the production of the legal effects intended by the Claimant.

Given the lapse of the deadline for direct challenge of the VAT assessment acts in question, the legal discussion of the legality of those acts appears only to be possible now through a request for official review, followed, depending on the decision, by judicial challenge or special administrative action.

Accordingly, the exception of lapse invoked by the Respondent is well-founded, the request made (leading to the annulment of the VAT assessment acts identified in the proceeding) is lacking foundation, on the ground of untimeliness.

IV. DECISION

In these terms, for the reasons set out, it is agreed in this Collective Arbitral Tribunal:

To uphold the exception of lapse of the right of action, inasmuch as the request for constitution of the arbitral tribunal is untimely and, consequently, to absolve the Respondent of the request;

To condemn the Claimant to payment of the costs of the present proceeding.

V. VALUE OF THE PROCEEDING

In accordance with the provisions of article 306.º, no. 2 of the Code of Civil Procedure, 97.º-A of CPPT and article 3.º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings the value of the request is fixed at € 843,768.55.

VI. COSTS

In accordance with the provisions of articles 12.º, no. 2 and 22.º, no. 4, both of LRÁTM, and article 4.º, no. 4 of the Regulation of Costs of Tax Arbitration Proceedings, the arbitration fee is fixed at € 11,934.00, in accordance with Table I of the mentioned Regulation, at the expense of the Claimant.

Notify.

Lisbon, 16 June 2017

Maria Fernanda dos Santos Maçãs
(President)

Fernando Araújo

Magda Feliciano

Frequently Asked Questions

Automatically Created

What is the expiry of the right of action (caducidade do direito de ação) in Portuguese VAT disputes?
The expiry of the right of action in Portuguese VAT disputes is governed by strict deadlines. Under the LRÁTM (Legal Regime for Tax Arbitration), taxpayers have 90 days to file an arbitration request challenging VAT assessments. According to the Tax Authority's position in this case, this deadline runs from the tax payment deadline. In this case, with a payment deadline of January 31, 2015, the arbitration request filed on November 29, 2016 was considered untimely by more than a year. However, the taxpayer argued that lack of proper notification and grounds should affect when the deadline begins to run.
Can a taxpayer challenge VAT liquidation acts through CAAD tax arbitration after receiving a tax enforcement citation?
The ability to challenge VAT liquidation acts through CAAD arbitration after receiving a tax enforcement citation is highly constrained by timing requirements. While a taxpayer may first learn of an assessment through an enforcement citation, this does not automatically restart or extend the 90-day deadline for filing arbitration. The Tax Authority argues that the deadline runs from the original payment date, not from when the taxpayer receives the enforcement citation. Taxpayers who receive enforcement citations for assessments they were not previously aware of face significant procedural challenges in mounting an effective challenge within the statutory timeframes.
What are the legal deadlines for filing a gracious complaint against VAT assessments in Portugal?
The legal deadline for filing a gracious complaint (reclamação graciosa) against VAT assessments in Portugal is generally 120 days from notification of the assessment act. However, this case illustrates the complexity when a taxpayer claims never to have received proper notification. The taxpayer filed an administrative review petition on June 1, 2015, as a precautionary measure after receiving the enforcement citation, explicitly noting it was incomplete and conditioned on receiving the grounds for the assessment. The Tax Authority dismissed this petition, stating it was not the proper procedural vehicle for such requests.
How does the lack of notification of VAT liquidation grounds affect the taxpayer's right to challenge the assessment?
The lack of notification of VAT liquidation grounds significantly impacts a taxpayer's ability to exercise their right to challenge, though it may not automatically suspend procedural deadlines. In this case, the taxpayer requested the grounds in April 2015 but never received a response from the Tax Authority. The taxpayer argued that the Tax Authority's failure to fulfill its legal obligation to provide grounds justified the arbitration request and demonstrated the illegality of the assessments based on the defect of lack of grounds. This violation of the duty to provide grounds is a substantive illegality that can form the basis for annulment, but does not necessarily extend challenge deadlines.
What happens when the Portuguese Tax Authority fails to respond to a taxpayer's request for the basis of VAT liquidations?
When the Portuguese Tax Authority fails to respond to a taxpayer's request for the basis of VAT liquidations, the taxpayer faces a procedural dilemma. In this case, the Tax Authority never responded to the April 2, 2015 request for information about the origin and grounds of the assessments. When the taxpayer filed an administrative review petition seeking this information, it was dismissed on the grounds that it was not the proper procedural means for such a request. The Tax Authority's silence effectively deprived the taxpayer of the information necessary to mount an informed challenge, yet procedural deadlines continued to run. This creates a fundamental tension between the taxpayer's right to know the basis of assessments and the strict application of procedural time limits.