Process: 768/2014-T

Date: April 6, 2015

Tax Type: IRS

Source: Original CAAD Decision

Summary

Process 768/2014-T concerned an arbitration dispute between married taxpayers and the Portuguese Tax Authority (AT) regarding IRS assessment 2014 for tax year 2011, specifically involving incorrect calculation of capital gains (mais-valias) from securities and financial assets. The petitioners challenged multiple corrections made by the AT, arguing that the Tax Authority miscalculated taxable capital gains despite having all necessary documentation. Key disputes included: (1) securities transactions where the AT calculated €2,291.18 in gains when petitioners claimed only €807.52 was taxable; (2) transactions totaling €40,000 where acquisition and sale values were identical, resulting in zero gain; (3) bond redemptions totaling €389.85 incorrectly treated as gains when the balance was zero; and (4) investment fund unit redemptions that petitioners argued were exempt under Article 22(2) of the Tax Benefits Statute. The petitioners provided detailed documentary evidence (bank statements and transaction records) demonstrating calculation errors. During the arbitration proceedings initiated under RJAT (Decree-Law 10/2011), the Tax Authority exercised its power under Article 13 of RJAT to partially revoke the contested assessment on 12/01/2015, issuing a partial approval of the administrative review. This procedural development required the arbitration to continue only against the new act (the partial rejection), not the original assessment. The petitioners also sought annulment of compensatory interest, claiming no culpable conduct, plus indemnification for bank guarantee costs and indemnificatory interest under Article 43 of the General Tax Code. The case illustrates the CAAD arbitration process, the AT's self-correction powers during proceedings, and common disputes regarding capital gains taxation on financial instruments.

Full Decision

ARBITRAL DECISION

Case No. 768/2014-T

I – REPORT

1.1. A…, resident at …, Condominium …, Lot …, 1st floor, …, …, tax identification number …, and B…, resident at the same address, tax identification number …, married to each other (hereinafter referred to as "petitioners"), filed on 14/11/2014 a request for the constitution of an arbitral tribunal and for an arbitral decision, pursuant to the provisions of Articles 2, no. 1, lit. a), 5, no. 2, and 10, no. 1, lit. a), of Decree-Law no. 10/2011, of 20/1 (Legal Regime for Arbitration in Tax Matters, hereinafter only referred to as "LRAT"), concerning the review of the legality of the income tax assessment no. 2014 … and the interest assessment no. 2014 …, both relating to income tax for 2011.

1.2. On 30/1/2015, the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to Article 17, no. 1, of the LRAT, the Tax Authority was cited as the respondent party to submit its reply, in accordance with said article. The Tax Authority submitted its reply on 4/3/2015 (and on 2/3/2015 by electronic means), arguing for the total dismissal of the petitioners' claim.

1.4. By order of 23/3/2015, the Tribunal considered, pursuant to Articles 16, lits. c) and e), of the LRAT, that the meeting referred to in Article 18 of the LRAT was unnecessary and that the case was ready for decision. The date of 6/4/2015 was further set for the issuance of the arbitral decision.

1.5. The Arbitral Tribunal was duly constituted, is materially competent, the case does not have defects that would invalidate it, and the Parties have legal standing and capacity, being duly constituted.

II – FACTUAL BASIS

2.1. The petitioners allege in their petition that: a) "all the values presented by the Tax Authority as the basis for the correction of the income tax return are fully justified – without room for doubt – there being no grounds whatsoever for the correction made"; b) "the Tax Authority had in its possession all the necessary elements to understand the matter", but in this way it evidences and clarifies, point by point, value by value, that no tax is due"; c) in detail, regarding the values of petitioner A…: c.1) "[regarding the values €4.99; €1.05; €327.50; €268.52 and €1,689.12, for a total of €2,291.18] according to [doc. 10] it is clear that the balance of the capital gain subject to taxation is €807.52 [...] and not €2,291.18"; c.2) "[regarding the values €15,000.00; €15,000.00 and €10,000.00, for a total of €40,000.00] [doc. 11] demonstrates that the acquisition values are also the sale values, thus resulting no capital gain for the Petitioner from this transaction, that is, the resulting value is zero and not €40,000.00"; c.3) "[regarding the values €140.60; €187.00 and €62.25, for a total of €389.85], [from the analysis of doc. 10, in the section corresponding to bonds denominated "C SAD-6%-2010-2013", "D… – 1st Issue/…" and "D… – 2nd Issue/…", it is verified that] the balance of the capital gain is zero, and not €389.85, as results from the assessment"; c.4) "[regarding the remaining values in question, itemized in points 71 to 105 of the initial petition, relating to redemption of investment fund units, the taxpayers in the conditions of the petitioners] are exempt from income tax with respect to income from participation units [in securities investment funds], pursuant to the provisions of Article 22, no. 2, of the Tax Benefits Statute"; c.5) "[regarding specifically the value of €13,605.19, dealt with in points 106 to 111 of the initial petition,] the petitioner has no knowledge whatsoever of its origin"; d) also in detail, now regarding the values of petitioner B…: d.1) "[regarding the values €4.99; €1.05; €327.50; €268.52 and €1,689.12, for a total of €2,291.18] according to [doc. 23] it is clear that the balance of the capital gain subject to taxation is €807.52 [...] and not €2,291.18"; d.2) "[regarding the value of €1,995.00, which refers to bonds subscribed on 25/5/1998] [from the analysis of doc. 22 it is verified that] there is no capital gain balance to be calculated, which is equal to zero"; d.3) "[regarding the values €187.00, €62.25 and €140.60, for a total of €389.85], [from the analysis of doc. 23, in the section corresponding to bonds denominated "C… SAD-6%-2010-2013", "D… – 1st Issue/…" and "D… – 2nd Issue/…", it is verified that] the balance of the capital gain is zero, and not €389.85, as results from the assessment"; d.4) "[regarding the remaining values in question, itemized in points 128 to 151 of the initial petition, relating to redemption of investment fund units, it is understood, in terms identical to those described above (see point 129 of the initial petition), that the taxpayers in the conditions of the petitioners are exempt from income tax with respect to income from participation units in securities investment funds, pursuant to the provisions of Article 22, no. 2, of the Tax Benefits Statute"]; e) "since the amount of tax assessed to the Petitioners is not due, as fully proven, the assessment of compensatory interest cannot subsist either, given its accessory nature, [and it is not verified] any culpable conduct on the part of the Petitioners"; f) "in view of the above, since the requirements upon which the law (cfr. Article 35 of the General Tax Code) makes the State's right to assess compensatory interest dependent are not met in this case, said interest must be annulled in accordance"; g) "should this claim succeed, it should further be recognized the right to indemnification for the amount corresponding to the costs of the [bank] guarantee"; h) "demonstrated, as has been, that the tax assessment is affected by error attributable to the Tax Authority, resulting in payment of an amount greater than legally due, it is further requested the payment of indemnificatory interest, pursuant to the provisions of Article 43 of the General Tax Code".

2.2. The petitioners conclude that "this request for arbitral decision be judged entirely well-founded, as proven, based on the factual and legal grounds presented and, consequently, the tax assessment act for 2011 be annulled, as well as the compensatory interest assessment act [...], with all legal consequences". The petitioners further request that the Tax Authority "be condemned [...] to the payment of indemnification for undue bank guarantee provision, on the one hand, and indemnificatory interest, on the other."

2.3. For its part, the Tax Authority alleges in its reply: a) that "the petitioners filed a request for arbitral decision against the act of implicit rejection of the administrative review that they had filed against the self-initiated income tax assessment, relating to tax year 2011"; b) that, "in due course, and within the scope of the provisions of no. 1 of Article 13 of the LRAT, the respondent came to partially revoke the impugned act, by Order of 12/01/2015, issuing an act of partial approval of the aforementioned administrative review (see Final Order appended to the case file)"; c) that "of all this, and for the purposes of no. 2 of said normative provision, [it gave] notice both to the Center for Administrative Arbitration and to the petitioners (which it did on 12/01/2015, cfr. Documents already attached to the case file)"; d) that, "accordingly, and in the precise terms of the latter part of no. 2 of Article 13 of the LRAT, the proceeding could only continue against the new act, that is, against the partial rejection of the administrative review" [but,] "contrary to what is permitted to them by law, which expressly stipulates 'the proceeding continuing with respect to that latter act' – no. 2 of Article 13 of the LRAT –, the petitioners come to the proceeding to state that 'they will proceed, at any cost and to the utmost consequences, with the court case that is now in progress'"; e) that, "until the constitution of the arbitral tribunal there is no case" and that, "in this case, the tribunal was constituted on 30/01/2015"; f) that, "once the act is revoked, in the part in which it was, the proceeding could never be constituted against a non-existent object in the legal order"; g) that "on 30/01/2015 [...] the arbitral proceeding commenced having as its object the part of the act impugned and not revoked. That is [...], the part not revoked and which constitutes the object of the present case file concerns only the matter examined in points 106 to 111 of the initial petition and which refers to the capital gain from the sale of shares of the entity with tax identification number …, recorded with a sale value of €13,605.19 and an acquisition value of €13,500.88 (cf. page 70 of the case file)"; h) that, regarding that specific capital gain, "the petitioners [argue], solely and only, that they are unaware of its origin, making use, to that effect, of a document they attach as document 21"; i) that "the Tax Administration, acting within the scope of the principle of legality, to which it is bound, could not ignore the declaration made to it by said institution [therefore,] what the appellants intend would imply that the respondent disregarded what was declared in form 13 attached to the case file at page 29"; j) that "the [referred] declaration is of mandatory filing [...] pursuant to Article 124 of the Income Tax Code [and that,] should a supposed lapse occur on the part of that institution [the Foundation E…] in completing form 13, it could have been corrected by the institution itself [and, even if it had not been detected by it,] the appellants should always have approached the declaring entity, confronting it and formally requesting that it proceed, before the Tax Authority, with the correction that they allege to be due. Which they did not do [despite the] burden of proof that lies upon them"; l) that, "furthermore, the appellants come, in the context of a request for arbitral decision, to raise issues that were not subject to administrative review, whereby the right of action is, in this part, time-barred", and that, "without conceding, [...] the petitioners are not right [because, regarding compensatory interest,] all the requirements upon which the law makes the assessment of compensatory interest dependent are fulfilled; [because, regarding the bank guarantee, the petitioners] did not [request indemnification] in the administrative review. Having not done so, nor within the 30 days following its constitution (14/06/2014), cannot now, and in violation of Article 171 of the Administrative Procedure Code for Tax Matters, the petitioners claim what they did not do in due time; [and because, regarding indemnificatory interest], no error can be attributed [to the Tax Authority and] any error, should it exist, would not be attributable to the Tax Authority, since only in the context of the divergence procedure and, subsequently, in the context of an administrative review, do the appellants come before the Tax Authority to explain that, by lapse, they did not declare the values examined (see the administrative review petition attached to the case file at pages 4 to 23)."

2.4. The Tax Authority concludes, in summary, that "the petitioners' arguments completely lack merit", and that "the request for arbitral decision must be judged totally unwell-founded, as not proven and, consequently, the Respondent absolved of all claims, all with the due legal consequences."

2.5. The following facts are considered proven:

i) On 16/4/2014 (page 2 of the appended case file), the petitioners filed an administrative review of the income tax assessment no. 2014 … and the interest assessment no. 2014 …, relating to income tax for 2011. In said review, no request was made for the indemnification referred to in Article 171 of the Administrative Procedure Code for Tax Matters (nor did this occur in the subsequent 30 days).

ii) Pursuant to Article 13, no. 1, of the LRAT, the Respondent partially revoked the impugned act, by partially approving, by Order of 12/1/2015, the above-referenced administrative review (see Final Order appended to the case file). This order was notified to the petitioners on the same day and in accordance with the provisions of Article 13, no. 2, of the LRAT.

iii) On 12/1/2015, considering the decision of the Tax Authority, pursuant to Article 13, no. 1, of the LRAT, and the circumstances provided for in Article 13, no. 2, of the LRAT, the President of the Center for Administrative Arbitration issued an order requesting the petitioners to inform the Center, if they so wished, about whether they wished to continue the proceeding. They informed, by petition of 22/1/2015, that they intended to proceed with the proceeding.

iv) On 30/1/2015, the present Singular Arbitral Tribunal was constituted, which has as its object the part of the act that was not revoked, pursuant to the latter part of no. 2 of Article 13 of the LRAT. The referred part not revoked, here under analysis, concerns only the matter examined in points 106 to 111 of the initial petition of the petitioners, which relates to the capital gain from the sale of shares of the entity with tax identification number …, recorded with a sale value of €13,605.19 and with an acquisition value of €13,500.88 (cf. page 70 of the case file appended to the case).

v) In view of Docs. 2, 3 and 5, appended to the petition of the petitioners of 22/1/2015, (Doc. 2 also contained in Annex 2 to the petition of the petitioners of 1/4/2015), it is verified that they made sufficient proof that "they did not receive any sum [from the Foundation E…] during the year 2011 or relating to that year" (petition of 22/1, § 31).

2.6. There are no unproven facts relevant to the decision of the case.

III – LEGAL REASONING

In the present case, there are three controversial legal questions: A) whether, as the Tax Authority concludes, in the "terms of the latter part of no. 2 of Article 13 of the LRAT, the proceeding can only continue against the new act, that is, against the partial rejection of the administrative review"; B) whether, as the petitioners allege, "they received nothing from Foundation E…"; C) whether the right to indemnification for the amount corresponding to the costs of the bank guarantee provided by the petitioners should be recognized, as well as the (also petitioned) right to payment of indemnificatory interest.

Let us then proceed.

A) Regarding the first question, it is concluded that the Tax Authority is correct, since, as mentioned above, in the proven factual matter:

– Pursuant to Article 13, no. 1, of the LRAT, the Respondent partially revoked the impugned act, by partially approving, by Order of 12/1/2015, the above-referenced administrative review (see Final Order appended to the present case file), and this order was notified to the petitioners on the same day and in accordance with the provisions of Article 13, no. 2, of the LRAT.

– On 12/1/2015, considering the decision of the Tax Authority, pursuant to Article 13, no. 1, of the LRAT, and the circumstances provided for in Article 13, no. 2, of the LRAT, the President of the Center for Administrative Arbitration issued an order requesting the petitioners to inform the Center, if they so wished, about whether they wished to continue the proceeding. They informed, by petition of 22/1/2015, that they intended to proceed with the proceeding.

Thus:

– On 30/1/2015, the present Singular Arbitral Tribunal was constituted, which has as its object the part of the act that was not revoked, pursuant to the latter part of no. 2 of Article 13 of the LRAT. The referred part not revoked, here under analysis, concerns only the matter examined in points 106 to 111 of the initial petition of the petitioners, which relates to the capital gain from the sale of shares of the entity with tax identification number …, recorded with a sale value of €13,605.19 and with an acquisition value of €13,500.88 (cf. page 70 of the case file appended to the present case).

In the same sense, and in accordance with what the cited legal text provides, see what is referred to, for example, by Jorge Lopes de Sousa, in his "Commentary on the Legal Regime for Arbitration in Tax Matters", which is inserted in the Guide to Tax Arbitration, coordinated by Nuno Villa-Lobos and Mónica Brito Vieira (Almedina, 2013, p. 177): "In no. 2 of Article 13 of the LRAT, the continuation of the proceeding is provided for only in relation to the new act that replaces, totally or partially, that which is the object of the request for arbitral decision. [...]. If a new act is issued in substitution, total or partial, of the act which is the object of the request for arbitral decision, the head of the Tax Administration Service shall proceed to notify the taxpayer so that, within a period of 10 days, the taxpayer may make a pronouncement, the proceeding continuing in relation to that latter act if the taxpayer says nothing or declares that it maintains its interest (Article 13, no. 2, of the LRAT)."

Having the petitioners declared, in the petition of 22/1/2015, that they maintain their interest, it is concluded, from the above, that the present case has as its object the part of the impugned act not revoked by the Tax Authority through its Order of 12/1/2015.

B) Regarding the matter here at issue, examined in points 106 to 111 of the initial petition of the petitioners, these allege, in the petition of 22/1/2015, that "they received nothing from Foundation E…", and that, to demonstrate this, "they obtained a new document – this time, complying with all the requirements imposed by the Tax Authority in its evaluation – issued by Foundation E…, which they attach as Document 2 to the present and which they presented with their prior hearing submission", being that, in the understanding of the petitioners, "from that document it is clear that the Petitioners did not receive any sum from that entity during the year 2011 or relating to that year."

For its part, the Tax Authority refers that, "in the computer records in force at the Tax and Customs Authority, namely, in form 13, which is the proper and legal means, being used by entities to declare to the State the securities and others, paid to the taxpayer, that entity, that is, Foundation E…, declared a transaction of sale by taxpayer A-Tax ID …, in the amount of €13,605.19. [And] as such, [one] cannot ignore [this] situation." It adds that, "if such transaction was declared by error of the Foundation, it is incumbent upon the same, as well as upon the claimant to prove this", pursuant to the provisions of no. 1 of Article 74 of the General Tax Code.

However, it happens that it is verified that the petitioners made sufficient proof of said error, through the presentation of Document 2, appended to the petition of 22/1/2015 (also contained in Annex 2 to the petition of 1/4/2015) – a document that was not contested by the Tax Authority –, whereby it is concluded that they are, in this part, correct.

Furthermore, considering the nature of the Foundation, its Statutes and the respective financial statements (cf. Documents 3 and 5, appended to the petition of 22/1/2015), it was equally demonstrated that it is not an entity with capacity or standing to issue shares, whereby – being certain that the Tax Authority relied on and acted on the basis of the elements that were provided to it – it is concluded that, also by this route, the petitioners succeeded in making sufficient proof that they did not receive the amount in question.

In these terms, it is concluded that the assessment in question, in the part not revoked by the Tax Authority, cannot subsist – the same occurring with the compensatory interest assessment, given that, in view of the above, there is no tax debt (tax to which this latter assessment was inextricably linked).

C) Regarding the other claims (of "indemnification for undue guarantee provision" and that relating to the alleged "right to indemnificatory interest"), it is verified that the petitioners are not correct.

With respect to the claim for indemnification for undue guarantee provision, the petitioners are not correct because, as the Tax Authority rightly refers, "Article 171 of the Administrative Procedure Code for Tax Matters provides that indemnification 'shall be requested in the proceeding in which the legality of the debt to be enforced is disputed' – no. 1 – and 'must be requested in the review, impugnation or appeal or in case its grounds are subsequent within 30 days after its occurrence' – no. 2 [...]. Having not [requested the indemnification in the mentioned review], nor within 30 days following its constitution [...], cannot now [...] claim what they did not do in due time."

In fact, as noted, for example, by the following court decision, "from the regime resulting from Articles 53 of the General Tax Code and 171 of the Administrative Procedure Code for Tax Matters it appears that, in principle, the claim for indemnification for undue guarantee provision must be presented in the proceeding in which the legality of the guaranteed debt is impugned and at the time of presentation of the petition (review, impugnation or objection). But, should at that time (of presentation of the petition) the guarantee still not have been provided, the claim must be formulated within 30 days" (cf. Decision of the Administrative Supreme Court of 8/10/2014, case 1016/14).

With regard to the claim for indemnificatory interest, it should be noted that the right thereto presupposes that tax has been paid in an amount exceeding that due and that such derives from an error, whether of fact or law, attributable to the services of the Tax Authority. And, in fact, in view of what was said above, it is concluded that tax was paid in an amount exceeding that due; however, even though it is recognized that it is not due (in the part not revoked by the Tax Authority) the tax paid by the petitioners, it is not apparent that, in its origin, there is the invoked error attributable to the services, which would determine the right to the petitioned indemnificatory interest. In fact, the Tax Authority merely complied with the legal provision in view of the documents that were delivered to it and, in particular, in view of what Foundation E… declared in form 13 (cf. page 29 of the case file). It is also important to note, finally, that said declaring entity did not proceed to any rectification of said declaration, in due time or of its own motion.

In these terms, it is concluded that the error is not attributable to the Tax Authority, for which reason the claim for payment of indemnificatory interest in favor of the petitioners is dismissed.

IV – DECISION

In view of the above, it is decided:

– The claim for arbitral decision is judged well-founded, with the consequent revocation, with all legal effects, of the impugned tax assessment acts, in the part not revoked by the Tax Authority.

– The claim is judged ill-founded in the part concerning the requested payment to the petitioners of indemnification for bank guarantee provision.

– The claim is judged ill-founded in the part relating to indemnificatory interest.

The value of the case is set at €13,500.88 (thirteen thousand five hundred euros and eighty-eight cents), pursuant to Article 32 of the Administrative Procedure Code and Article 97-A of the Administrative Procedure Code for Tax Matters, applicable by virtue of the provisions of Article 29, no. 1, lits. a) and b), of the LRAT, and Article 3, no. 2, of the Regulation for Costs in Tax Arbitration Proceedings.

Costs to be borne by the respondent, in the amount of €918.00 (nine hundred eighteen euros), pursuant to Schedule I of the Regulation for Costs in Tax Arbitration Proceedings, and in compliance with the provisions of Articles 12, no. 2, and 22, no. 4, both of the LRAT, and the provision in Article 4, no. 4, of said Regulation.

Notify.

Lisbon, 6 April 2015.

The Arbitrator

(Miguel Patrício)

Document prepared by computer, pursuant to the provisions of Article 131, no. 5, of the Code of Civil Procedure, applicable by referral to Article 29, no. 1, lit. e), of the LRAT.

The text of this decision follows the spelling prior to the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

What is the partial revocation of a tax assessment (revogação parcial do ato impugnado) in Portuguese IRS disputes?
Partial revocation of a tax assessment (revogação parcial do ato impugnado) in Portuguese IRS disputes is a procedural mechanism whereby the Tax Authority (AT) voluntarily corrects or cancels part of a contested tax assessment during administrative or arbitration proceedings. Under Article 13 of the RJAT (Decree-Law 10/2011), when the AT partially revokes an assessment after an arbitration request has been filed, it must issue a new administrative decision and notify both the CAAD (Administrative Arbitration Center) and the taxpayer. The arbitration proceeding then continues only against the new act (the portion not revoked), rather than the original assessment. This allows the AT to correct errors without requiring full arbitration, reducing the scope of dispute and potentially resolving part of the taxpayer's claims administratively. The partial revocation effectively supersedes the original contested act to the extent of the revocation, and any remaining dispute proceeds based on the revised assessment.
How are capital gains (mais-valias) from securities and financial assets taxed under Portuguese IRS law?
Capital gains (mais-valias) from securities and financial assets under Portuguese IRS law are calculated as the difference between the disposal value and the acquisition value of assets. For bonds, shares, and other securities, taxpayers must report both acquisition and disposal values, with the net gain subject to IRS taxation. However, specific exemptions apply: under Article 22(2) of the Tax Benefits Statute (Estatuto dos Benefícios Fiscais), income from units in securities investment funds may be exempt from IRS for taxpayers meeting certain conditions. When calculating capital gains, the Tax Authority relies on information reported by financial intermediaries and taxpayers' declarations. Errors in AT calculations can occur when the authority fails to properly match acquisition costs with disposal proceeds, or when it doesn't apply applicable exemptions. Taxpayers must maintain documentation (bank statements, transaction confirmations, custody account statements) to substantiate their reported values and challenge incorrect AT calculations. The taxable amount is included in the taxpayer's overall IRS assessment.
What is the procedure for filing a tax arbitration request under the RJAT (Decreto-Lei 10/2011) at CAAD?
The procedure for filing a tax arbitration request under RJAT (Decreto-Lei 10/2011) at CAAD involves several steps: First, taxpayers must have exhausted or chosen to forgo administrative remedies (such as hierarchical review) against the contested tax act. The arbitration request must be filed within the legal deadline, typically within 90 days from notification of the contested act or from the expiration of the deadline for the Tax Authority to decide on an administrative review. The request must be submitted to CAAD (Centro de Arbitragem Administrativa) specifying the legal basis (Article 2(1)(a) and Article 10(1)(a) of RJAT for challenging tax assessments), identifying the contested acts (assessment numbers and tax years), stating the factual and legal grounds, and presenting supporting documentation. After filing, an arbitral tribunal is constituted (either singular or collective depending on the case value and complexity). The Tax Authority is then cited to submit its reply (typically within 30 days per Article 17 RJAT). The tribunal may hold hearings or decide the case is ready for decision based on written submissions. The arbitral decision must be issued within specified timeframes.
Can the Portuguese Tax Authority (AT) correct IRS declarations based on reported acquisition and disposal values of assets?
Yes, the Portuguese Tax Authority (AT) can correct IRS declarations based on reported acquisition and disposal values of assets, particularly when discrepancies are identified through information reported by financial intermediaries, banks, and other third parties. Under Portuguese tax law, financial institutions are required to report transactions involving securities, bonds, and investment funds to the AT. When the AT receives information indicating that taxpayers have not correctly declared capital gains or have made calculation errors, it has the power to issue corrective assessments (liquidações oficiosas or correções). The AT may determine that acquisition values were not properly deducted, that disposal values were underreported, or that exemptions were incorrectly claimed. However, the AT's correction power is subject to legal constraints: corrections must be based on factual evidence, taxpayers have the right to substantiate their original declarations with documentation, and the AT must respect applicable exemptions and deductions provided by law. If the AT makes errors in its corrections—such as miscalculating the net gain or failing to recognize properly documented acquisition costs—taxpayers can challenge these assessments through administrative review, arbitration at CAAD, or judicial appeal.
What remedies are available to taxpayers when the AT incorrectly calculates capital gains on IRS liquidation?
When the Portuguese Tax Authority (AT) incorrectly calculates capital gains on IRS liquidation, taxpayers have several remedies available: (1) Administrative Review (Revisão do Ato Tributário): taxpayers can file a request for administrative review directly with the AT within specified deadlines, asking the authority to correct its errors; (2) Tax Arbitration at CAAD: under the RJAT (Decree-Law 10/2011), taxpayers can file an arbitration request with the Administrative Arbitration Center (Centro de Arbitragem Administrativa - CAAD), which provides a faster alternative to judicial courts for resolving tax disputes; (3) Judicial Appeal: taxpayers can challenge the assessment in administrative and tax courts; (4) Annulment of Compensatory Interest: if the underlying tax assessment is incorrect, any compensatory interest charged is also subject to annulment due to its accessory nature; (5) Indemnificatory Interest: under Article 43 of the General Tax Code (Código de Procedimento e de Processo Tributário), if the AT's error caused the taxpayer to pay amounts exceeding what was legally due, the taxpayer may claim indemnificatory interest on the overpaid amount; and (6) Reimbursement of Guarantee Costs: if the taxpayer provided a bank guarantee to suspend enforcement of the contested assessment, and the challenge succeeds, the taxpayer may claim reimbursement of the guarantee costs. All remedies require proper documentation substantiating the correct capital gains calculation.