Process: 810/2014-T

Date: July 7, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This arbitral tax case (Process 810/2014-T) concerns a de facto union couple who filed separate IRS returns for tax years 2009-2011, failing to benefit from the married couples taxation regime and quotient system. The applicants sought to annul IRS assessments totaling €33,046.46 in allegedly excess tax payments. Under Article 14 of the IRS Code, common-law partners sharing the same tax domicile for over two years may opt for the married taxation regime, benefiting from the more favorable quotient calculation under Article 69. Due to lack of knowledge of this right, the couple filed separately and were assessed higher tax amounts. After the deadline for substitute declarations expired under Article 59 CPPT, they requested ex officio review of the tax acts pursuant to Article 78 of the General Tax Law, claiming the error was attributable to tax services or constituted serious injustice. The Tax Authority dismissed the review request, allegedly applying retroactively Circular Note 20162/2012, which contradicted the previous guidance in Circular Note 2785/1998 that permitted such amendments. The applicants argued this dismissal violated fundamental tax principles including legality, equality, justice, good faith, and legal certainty under Article 68-A LGT and constitutional provisions. They sought arbitral determination under the RJAT to annul the assessments and obtain reimbursement plus compensatory interest. The Tax Authority contended assessments were correct based on voluntarily submitted declarations and no legal grounds existed for ex officio review after statutory deadlines expired. The excerpt does not include the tribunal's final decision or complete legal analysis.

Full Decision

ARBITRAL DECISION

1. Report

1.1

A... and B... with the tax identification numbers ... and ..., respectively, both resident at Rua ..., ...-A, ...-... ..., hereinafter also referred to as "Applicants", filed a request for arbitral determination, under the terms of article 10 of Decree-Law No. 10/2011, of January 20 (Legal Regime of Tax Arbitration, hereinafter "LRTA"), with the "Respondent" being the Tax and Customs Authority (hereinafter "TCA").

1.2

The Applicants invoke that both the dismissal of the request for official review and part of the Personal Income Tax (IRS) assessments Nos. 2010...., 2011.... and 2012...., relating to the years 2009, 2010 and 2011, are vitiated by a material defect of violation of law, and that: (i) the illegality should be declared and the dismissal of the request for official review should be annulled insofar as it refused the annulment of the undue part of the aforementioned IRS assessments; (ii) the partial illegality of these assessments should be declared (and consequently annulled) insofar as they do not incorporate the right to apply the "married" regime in IRS, more specifically annulment with respect to the amounts of € 7,382.81 (2009 – assessment No. 2010....), of € 12,009.19 (2010 – assessment No. 2011....) and of € 13,654.46 (2011 – assessment No. 2012....), in a total of € 33,046.46; and (iii) consequently, the right to reimbursement of these amounts should be recognized and, likewise, the right to compensatory interest for the payment of tax unduly assessed, calculated from the payments thereof until their complete reimbursement.

1.3

As the basis for their request, the Applicants allege in summary that:

(a) The Applicants are Personal Income Tax (IRS) taxpayers whose personal situation, in light of the applicable legal norms, corresponds to the legal institute of "de facto union", a situation that has endured for more than 20 years and that can be easily proven by any legally admissible means;

(b) Thus, and by meeting the requirements provided for in article 14 of the IRS Code, that is, by having the same tax domicile for more than two years, the Applicants may opt for the taxation regime of taxpayers married and not judicially separated;

(c) Due to lack of knowledge of this fact, between 2009 and 2011, they filed their IRS returns separately, and as a consequence of such filings they were notified of assessments that they now seek to have partially annulled, given that they did not benefit, in light of the returns filed separately, from the married quotient.

(d) The Applicants did not benefit from the married quotient, provided for in article 69 of the IRS Code, for the purposes of determining the Personal Income Tax (IRS) assessment, and were seriously prejudiced thereby;

(e) With respect to the returns relating to the years 2009 to 2011, and because the deadline provided for in article 59 of the Tax Administration Code (CPPT) for submission of a replacement return has expired, in order to eliminate the effects of the heavier taxation to which the Applicants were subject – because they were treated as "single", when in fact they were in a "de facto union" – they requested Official Review by the TCA of the IRS assessments of 2009, 2010 and 2011 in question, as well as the respective reimbursement of the tax unduly overpaid, which was subject to dismissal.

(f) The resort to this expedient, in situations similar to those of the Applicants, has been recognized by the Supreme Administrative Court – Judgments of November 2, 2006 (Case No. 0604/06), of November 5, 2005 (Case No. 0319/05) and of February 11, 2005 (Case No. 0562/05), an understanding that has also been embraced by the generality of doctrine.

(g) In the case at hand, the Applicants correctly understood that the material error made in their IRS returns of 2009, 2010 and 2011 – of not having mentioned their status as "de facto partners" – seriously harmed, and harms, their interests worthy of protection, because it led to the determination of an amount of tax higher than that due when the condition of "de facto partners" of the Applicants and the consequent right (benefit) of the application of the "married" regime are not omitted, and the omission or lapse in question (result of ignorance/erroneous representation of the law at the time) should be attributed to the services for the purposes of Official Review of the tax act, as legally and expressly provided in the law (cf. article 78, No. 2, of the General Tax Law).

(h) Even if it were considered that the request for Official Review due to error attributable to the services was not applicable in the case at hand, the Tax Authority could still proceed with the Official Review of the tax acts on the grounds of serious or notorious injustice, as provided for in number 4 of article 78 of the General Tax Law transcribed above.

(i) The conduct of the TCA, dismissing the request for official review of the assessments in question, clearly and grossly violates the most elementary principles of tax law in force in our legal order, in particular (i) the principle of tax legality, (ii) the principle of equality, (iii) the principle of justice, (iv) the principle of legal certainty inherent to the Rule of Law, (v) the principle of good faith, (vi) the principle of contributory capacity and (vii) the principle of proportionality.

(j) The petition made in the course of the official review procedure was dismissed by the competent authority solely on the basis of the understanding that the law (read, a circular note invoked by the TCA) would not permit de facto partners to alter the initial IRS return moving from the separate taxation regime to the taxation regime as married, and therefore, only with this reasoning, and no other, which cannot be added to it, must it be assessed.

(k) However, the general orientation of the TCA in force for 14 years, and in force at the time of submission of the IRS returns whose review is here at issue (Circular Note No. 2785, of 20/01/1998), permitted subsequent alteration thereof in the event that de facto partners did not exercise the option for the tax regime of married, that is, it did not consider the initial returns crystallized as irreversible in the matter here at issue (it only considered irreversible the opposite case, of having exercised the option in reference).

(l) Wherefore the rejection by the TCA of the review of the IRS assessments here at issue, in addition to being based on a general orientation subsequent to the relevant facts (retroactive application of circular note No. 20162, of 29/10/2012), violates the general orientation in force at the time thereof, thus directly violating the provisions of article 68-A, Nos. 1 and 2, of the General Tax Law, and further violating the principle of good faith provided for in article 10 of the Code of Administrative Procedure and article 266, No. 2, of the Constitution.

(m) The present request for arbitral determination should, therefore, be judged admissible, as proven with the remaining legal consequences.

1.4

The Tax and Customs Authority did not file a defense, having only attached to the file a copy of the administrative process. At the meeting referred to in article 18 of the LRTA, the Parties agreed to the submission of written pleadings, and the TCA argued in summary that:

(a) The assessments were made in accordance with the elements voluntarily submitted by the taxpayers, who never had any doubt as to the personal situation declared in the context of the IRS for the years 2009, 2010 and 2011;

(b) The deadline for submission of replacement returns relating to the assessments for the years 2009, 2010 and 2011 had expired;

(c) There is no legal basis that, in the face of the law, could justify the success of a request for official review under the terms of article 78 of the General Tax Law, namely, because the deadline for the formulation of the request at the initiative of the taxpayers has passed (No. 1), and because there is absolutely no error attributable to the services that could justify the official review at the initiative of the latter, within the period of 4 years after the payment of the tax;

(d) Nor are the prerequisites met that could justify the review of the tax act on the grounds of serious or notorious injustice, first and foremost because it cannot fail to be exclusively attributable to the taxpayers the taxation carried out in the strict terms in which they filed their income tax returns;

(e) The claim of the applicants is manifestly unfounded in light of the administrative doctrine of the TCA, which seeks to clearly reduce the exercise of options motivated by tax planning;

(f) Having the TCA limited itself to proceed with the assessments in accordance with the elements voluntarily declared by the taxpayers, it is obvious that there is no right to the payment of compensatory interest, given that the legal prerequisites set forth in article 43 of the General Tax Law are not met: not only is there no error, but the same could never be attributable to the Administration, because if there was an error in the completion of the returns it was the exclusive responsibility of the taxpayers, as well as the fact that they let the deadline pass which they had to submit replacement returns, as they did with respect to the tax for the year 2012;

(g) The request for arbitral determination should therefore be judged unfounded.

1.5

As already mentioned, the TCA did not file a defense, having only attached to the file a copy of the administrative process. At the meeting referred to in article 18 of the LRTA, held on June 9, 2015, the Parties agreed to the submission of written pleadings. At that meeting, the Parties agreed that there are no exceptions that the Court should appreciate before the decision and the examination of the witnesses listed by the Applicants was waived.

1.6

The Arbitral Tribunal is regularly constituted, is materially competent, the process is not vitiated by defects that would invalidate it and the Parties have personality and judicial capacity, showed themselves to be legitimate, the Applicants are regularly represented by Counsel and no exceptions were raised, it is therefore incumbent to appreciate and decide.

2. Factual Matters

2.1. Facts Considered Proven

(a) With reference to the fiscal years 2009, 2010 and 2011, the Applicants are Personal Income Tax (IRS) taxpayers whose personal situation, in light of the applicable legal norms, corresponds to the legal institute of "de facto union".

(b) Between 2009 and 2011, the Applicants filed their IRS returns separately.

(c) During this period, the Applicants met the legal requirements provided for in article 14 of the IRS Code, by having the same tax domicile for more than two years, for the purposes of opting for the taxation regime of taxpayers married and not judicially separated.

(d) On October 17, 2013, the Applicants presented a request for official review, requesting the official review of the IRS assessments issued with reference to the fiscal years 2009 to 2011, which request was subject to dismissal.

(e) The application of the married quotient to the income obtained by the Applicants resulted in a tax saving of € 7,382.81 for the fiscal year 2009, of € 12,009.19 for the fiscal year 2010 and € 13,654.46 for the fiscal year 2011.

2.2 Facts Not Considered Proven and Respective Grounds

There are no facts relevant to the decision that are considered not proven.

2.3 Reasoning of the Proven Factual Matters

The facts proven are based on documents attached to the file, whose authenticity and correspondence were not questioned.

3. Legal Matters

The factual matters are not controversial. In fact, the TCA itself recognizes that "in the case at hand it is verified that the legal requirements upon which the application of the taxation regime of taxpayers married and not judicially separated of persons and property would depend are fully met" (See point 21 of the dismissal of the request for official review).

Although the Applicants argue in their written pleadings that "The administrative act of dismissal of the request for official review here under consideration has as its sole basis the invocation that the law (as understood by it) would not permit reverting the separate taxation regime contained in the additional IRS return to the married regime", defending the non-appreciation of the question associated with the timeliness of the request for official review, this Court understands that, notwithstanding the absence of a defense by the TCA, this question was invoked, both in the draft decision and in the final decision of dismissal of the request for official review of the IRS assessments of 2009 to 2011, wherefore it deserves determination.

A. Review of the Tax Act

Article 78 of the General Tax Law establishes the following:

"1 – The review of tax acts by the entity that performed them may be conducted at the initiative of the taxpayer, within the administrative appeal period and on the basis of any illegality, or, at the initiative of the tax administration, within the period of four years after the assessment or at any time if the tax has not yet been paid, on the basis of error attributable to the services.

2 – Without prejudice to the legal burden of administrative appeal or judicial challenge by the taxpayer, error in self-assessment is considered attributable to the services for the purposes of the preceding number.

3 – The review of tax acts under the terms of No. 1, regardless of whether it is a material or substantive error, implies the respective recognition duly reasoned under the terms of No. 1 of the preceding article.

4 – The head of the service may authorize, exceptionally, in the three years following that of the tax act, the review of the taxable matter ascertained on the grounds of serious or notorious injustice, provided that the error is not attributable to negligent behavior of the taxpayer.

5 – For the purposes of the preceding number, only obvious and unequivocal injustice is considered notorious and grave that resulting from taxation manifestly excessive and disproportionate to reality or from which has resulted high prejudice to the National Treasury.

6 – The review of the tax act due to duplication of assessment may be carried out, whatever the grounds, within the period of four years.

7 – The taxpayer's request directed to the competent body of the tax administration for its realization interrupts the deadline for the official review of the tax act or of the taxable matter".

With respect to the duty of official review of tax acts and its temporal limits, reference is made, among others, to the Judgment of the Supreme Administrative Court, of October 6, 2005, rendered in the context of Case No. 0653/05, which expressly states that (i) "Even after the expiration of the deadlines for administrative appeal and judicial challenge, the Tax Administration has the duty to revoke acts of assessment of taxes that are illegal, in the conditions and with the temporal limits referred to in article 78 of the General Tax Law"; (ii) "The duty of the Administration to carry out the review of tax acts, when it detects a situation of illegal collection of taxes, exists in relation to all taxes, because the principles of justice, equality and legality, which the tax administration must observe in the totality of its activity (article 266, No. 2 of the Constitution and article 55 of the General Tax Law), impose that errors in assessments that have led to the collection of amounts of taxes that are not due in the face of the law be officially corrected, within the temporal limits fixed in article 78 of the General Tax Law"; (iii) "The review of the tax act on the grounds of error attributable to the services must be carried out by the tax administration on its own initiative, but, as concluded from No. 7 (previous No. 6) of article 78 of the General Tax Law, the taxpayer may request that this duty be fulfilled, within the temporal limits in which the tax administration may exercise it"; and (iv) "The dismissal, express or tacit, of the request for review, even in cases where it is not formulated within the deadline for administrative appeal but within the temporal limits in which the Tax Administration may review the act on the grounds of error attributable to the services, may be challenged contentiously by the taxpayer [article 95, Nos. 1 and 2, subsection d), of the General Tax Law]".

In the same sense refers the Judgment of the Supreme Administrative Court, of May 29, 2013, rendered in the context of Case No. 0140/13, that: (i) "In accordance with the provisions of article 78, No. 2 of the General Tax Law, error in self-assessment is considered attributable to the services for the purposes of the preceding number, wherefore, notwithstanding the provisions of article 131 of the Tax Administration Code, the taxpayer may raise the appreciation of illegality committed in self-assessment"; (ii) "This results, from the outset, from the principles of legality, justice, equality and impartiality – article 266, No. 2 of the Constitution"; (iii) "In light of such principles, the Administration cannot legally shirk the initiative of reviewing the act when demanded to do so through a request of the interested parties since it has the legal duty to decide their requests, within the scope of its attributions, and the duty to pronounce constitutes, moreover, a principle openly assumed by article 9 of the Code of Administrative Procedure, in the domain of administrative procedure but also applicable here by virtue of the provisions of article 2 of the same code"; and (iv) "Being thus, and the request for official review made within the four-year period after self-assessment being timely, the respective request for review should be appreciated".

Finally, reference is made to the Judgment recently rendered by the Central Administrative Court - South, on May 21, 2015, in the context of Case No. 07787/14, which, based on the aforementioned Judgments and also on the Judgment of the Supreme Administrative Court, of October 29, 2010, rendered in the context of Case 01540/13, reporting to the analogous situation (in the sense that the assessment subject to official review was made on the basis of data declared by the taxpayer), also in the context of IRS, defends that "it constitutes a duty of the tax administration the official review of the act of assessment, within the period of four years, provided that the same is tainted by error in the factual or substantive premises attributable to the services; the error incurred in self-assessment is attributable to the services, insofar as upon receipt of the return the same was maintained in the precise terms in which it was presented".

Now, considering the above-mentioned case law, which is followed by the generality of doctrine, we must agree with the Applicants when they refer that "although the IRS assessments have been made on the basis of data declared by the Applicants (situation comparable to self-assessment in Corporate Income Tax), it will be possible to carry out the review of the tax act, since it is deemed that the error committed by the taxpayer is attributable to the services".

It is therefore concluded that the requests for official review of the assessments for 2009, 2010 and 2011 are legitimate and timely, under the terms of article 78, No. 1 of the General Tax Law.

B. Application of the Taxation Regime of Taxpayers Married and Not Judicially Separated of Persons and Property

What is at issue here is the alteration of the Model 3 IRS returns, with reference to the fiscal years 2009, 2010 and 2011, with the Applicants now seeking that the option for the taxation regime of taxpayers married and not judicially separated of persons and property be considered, under the terms set out in article 14, No. 1 of the IRS Code.

With respect to this matter, at the time – 2009, 2010 and 2011 – the internal guidance of the TCA was in force, by virtue of Circular Note No. 2785, of 20/01/1998 from the IRS Service Department.

The identified Circular Note stated that "with the exception of the options inherent to the family situation provided for in articles 14, No. 5 and 59, No. 2 of the IRS Code, which once exercised are irreversible, all others are susceptible to subsequent alteration, which may be invoked and accepted as grounds for administrative appeal or judicial challenge of the assessment act of the tax, under article 131" (See Point 25 of the decision of dismissal of the request for official review)

The TCA understood as irreversible the option for the taxation regime of taxpayers married and not judicially separated of persons and property, but the inverse situation was admissible.

That is, the TCA admitted that where the conditions for taxation under the taxation regime of taxpayers married were met, taxpayers who had opted for the general regime could subsequently alter the taxation regime and benefit from this optional regime.

Only in late 2012, with the publication of Circular Note No. 20162, of 29/10/2012, was the TCA's understanding with respect to this matter altered.

The TCA reverses its understanding and the possibility of subsequent alteration of the initial IRS return came to cover only the opposite case. That is, alteration is only admitted in situations in which the passage from the optional taxation regime to the general regime is sought.

The general orientations of the TCA, which include Circular Notes, only bind itself.

This Court does not accept the understanding defended by the TCA in any of the Circular Notes above referred to.

At the time of the facts subject to this arbitral decision, the regime of article 14 of the IRS Code and, likewise, article 3, No. 1, subsection d), of Law No. 7/2001, of May 11, was an optional regime for "de facto partners".

It is not apparent from the provisions in question that the option for the general or optional taxation regime is of inderogable application, without the possibility of review of the assessments within the legal period, when by ignorance/erroneous representation of the law in the first return of the tax period in question they did not make use of the right (benefit) of being taxed as "married" or vice versa.

Provided that the prerequisites are met, as happens in the present case, it is legally admissible that taxpayers in conditions to benefit from the optional taxation regime of taxpayers married and not judicially separated of persons and property may do so in a subsequent moment, and vice versa.

The circular note invoked by the TCA for the dismissal of the request for official review of the aforementioned IRS assessments lacks legal basis.

It is therefore illegal the dismissal of the request for official review at issue and, consequently, the IRS assessments No. 2010...., in the amount of € 7,382.81, No. 2011...., in the amount of € 12,009.19, and No. 2012...., in the amount of € 13,654.46, in a total of € 33,046.46.

C. Compensatory Interest

With respect to this matter we follow the understanding expressed in the Judgment of the Supreme Administrative Court, of November 2, 2005, rendered in the context of Case No. 562/05, which expressly states that "under the terms of the provision of article 43, No. 3, subsection a) of the General Tax Law, compensatory interest is due from one year after the request for review made by the taxpayer".

The aforementioned Judgment states that "Article 43, No. 1 of the General Tax Law provides that 'compensatory interest is due when it is determined, in administrative appeal or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount higher than that legally due'".

"It is also considered that there is error attributable to the services in cases in which, despite the assessment being made on the basis of the taxpayer's return, the taxpayer followed, in its completion, the general orientations of the tax administration, duly published" (No. 2).

And its No. 3 establishes that "compensatory interest is due in the following circumstances:... c) When the review of the tax act at the initiative of the taxpayer is carried out more than one year after the request thereof, unless the delay is not attributable to the tax administration".

"The meaning of this provision is that which the Administrative Authority attributes to it when it admits that compensatory interest, if due, should be accounted for from one year after the request for review made by the respondent.

And it is understood that this is so because the taxpayer could, on the basis of error attributable to the services, question the assessment, under the terms of No. 1 of the aforementioned article 43, having, in such a situation, if its claim succeeded, the right to compensatory interest calculated under the terms of No. 3 of article 61 of the Tax Administration Code (from the date of payment of the unduly paid tax until the date of issuance of the respective credit note) if it let pass the request for challenge and resorted to the official review mechanism it was immediately subject to the consequences of this legal mechanism.

Because when requesting such review it is reasonable that the TCA has a certain period to appreciate it"

In light of the foregoing, compensatory interest is due from October 17, 2014 and calculated on the basis of the amount of € 33,046.46, until its complete return to the Applicants, at the legal rate, under the terms of articles 43, No. 3, c) of the General Tax Law.

D. Questions of Impaired Knowledge

Resulting from the foregoing the declaration of illegality of the dismissal of the request for official review under the terms argued by the Applicants, the knowledge of the remaining defects associated with the violation of the principles of Tax Law - articles 60 to 112 of the Request for arbitral determination- is impaired (cf. article 124 of the Tax Administration Code, subsidiarily applicable by force of the provisions of article 29, No. 1, of the LRTA).

In light of the foregoing, we do not take cognizance of the referred defects.

4. Decision

In light of the foregoing, the Arbitral Tribunal decides to judge the Applicants' request as well-founded and thus (i) declares null the decision of dismissal of the request for official review submitted with reference to the identified IRS assessments; (ii) declares partially illegal and subject to annulment the consequent IRS assessments with respect to the amounts of € 7,382.81 (2009 – assessment No. 2010....), of € 12,009.19 (2010 – assessment No. 2011....) and of € 13,654.46 (2011 – assessment No. 2012....), in a total of € 33,046.46, which should be subject to reimbursement to the Applicants; and (iii) condemns the TCA to the payment of compensatory interest with respect to the amount unduly paid by the Applicants - € 33,046.46 -, calculated from October 17, 2014.

5. Case Value

In accordance with the provisions of article 315, No. 2, of the Code of Civil Procedure and article 97-A, No. 1, subsection a), of the Tax Administration Code and article 3, No. 2, of the Regulation of Costs in Tax Arbitration Processes, the case is assigned the value of € 33,046.46.

6. Costs

The arbitration fee is set at € 1,836.00, in accordance with Table I of the Regulation of Costs of Tax Arbitration Processes, to be paid by the Respondent, under the terms of articles 12, No. 2, and 22, No. 4, both of the LRTA, and article 4, No. 4, of the aforementioned Regulation.

Notify thereof.

Lisbon, Center for Administrative Arbitration, July 7, 2015

The Arbitrator,

André Gonçalves

Frequently Asked Questions

Automatically Created

Can common-law partners in Portugal opt for joint IRS taxation under the married couples regime?
Yes, common-law partners in Portugal can opt for joint IRS taxation under the married couples regime. Article 14 of the IRS Code expressly grants de facto union couples the right to choose the taxation regime applicable to married taxpayers who are not judicially separated, provided they meet specific requirements. This option allows them to benefit from the married quotient system under Article 69 of the IRS Code, which typically results in more favorable tax treatment through income splitting. The couple must affirmatively exercise this option when filing their annual IRS declaration, indicating their status as de facto partners and their choice for joint taxation.
What are the requirements under Article 14 of the IRS Code for common-law couples to file jointly?
Under Article 14 of the IRS Code, common-law couples must meet the following requirement to file jointly: they must have the same tax domicile (fiscal residence) for more than two years. This means both partners must be officially registered as residing at the same address for a period exceeding two years. Once this requirement is satisfied, the couple may opt for the taxation regime of married taxpayers not judicially separated. The de facto union status can be proven by any legally admissible means of evidence. It is important to note this is an option, not an obligation—couples meeting the requirement may choose between joint taxation under the married regime or separate individual taxation.
How can taxpayers request a review of IRS assessments when the deadline for substitute declarations has expired?
When the deadline for submitting substitute declarations has expired, taxpayers may request ex officio review of IRS assessments under Article 78 of the General Tax Law (LGT). This review can be requested on two main grounds: (1) error attributable to tax services, when the taxpayer can demonstrate that the incorrect assessment resulted from erroneous application of law by the administration, particularly when the taxpayer acted in good faith or lacked knowledge of applicable legal provisions; or (2) serious or notorious injustice under Article 78(4) LGT, when the assessment results in manifestly unjust taxation. If the Tax Authority denies the ex officio review request, taxpayers can challenge this decision through hierarchical appeal, judicial appeal to administrative courts, or request arbitral determination under the Legal Regime of Tax Arbitration (RJAT - Decree-Law 10/2011).
Are taxpayers entitled to compensatory interest when IRS is unlawfully assessed due to failure to apply the conjugal quotient?
Yes, taxpayers are entitled to compensatory interest when IRS is unlawfully assessed. Under Portuguese tax law, when taxpayers pay amounts exceeding what is legally due and subsequently obtain annulment or revision of the illegal assessment, they have the right to reimbursement of the excess amounts plus compensatory interest. This interest is calculated from the date of undue payment until complete reimbursement, as provided in the General Tax Law and Tax Procedure Code. The compensatory interest mechanism aims to compensate taxpayers for the financial loss resulting from having funds retained by the State when no legal basis existed for such retention. This applies particularly when the excess taxation results from failure to apply legal benefits or regimes to which taxpayers were entitled, such as the married quotient system for eligible de facto union couples.
What is the procedure for requesting arbitral review of a denied ex officio tax revision under Portuguese tax law?
To request arbitral review of a denied ex officio tax revision under Portuguese tax law, taxpayers must file a request for arbitral determination pursuant to the Legal Regime of Tax Arbitration (RJAT - Decree-Law 10/2011, as amended). The procedure involves: (1) submitting a formal request to the CAAD (Administrative Arbitration Center) within the applicable legal deadline, identifying the contested tax act and the grounds for challenge; (2) paying the required fee; (3) specifying the legal basis and factual circumstances supporting the claim; (4) the Tax Authority may file a defense or submit the administrative file; (5) the arbitral tribunal is constituted; (6) parties may present oral arguments at a hearing pursuant to Article 18 RJAT and submit written pleadings; (7) the tribunal issues a binding arbitral decision. This arbitral procedure provides an alternative to judicial appeals in administrative courts and is generally faster, though subject to specific value thresholds and admissibility requirements.