Summary
Full Decision
ARBITRATION DECISION (consult full version in PDF)
REPORT
A – PARTIES
A..., with tax identification number..., residing at... ... and B..., tax identification number..., residing at Street..., ...-... ..., hereinafter referred to as the Applicant or taxpayer.
TAX AND CUSTOMS AUTHORITY hereinafter referred to as the Respondent or AT.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 17-05-2018 to examine and decide on the subject matter of the present proceedings, and automatically notified to the Tax and Customs Authority on 17-05-2018, as appears in the respective minutes.
The Applicant did not proceed to appoint an arbitrator, wherefore, under the provisions of article 6, paragraph 1 and article 11, paragraph 1, letter b) of Decree-Law no. 10/2011 of 20 January, as amended by article 228 of Law no. 66-B/2012 of 31 December, the Deontological Council appointed Arbitrator Paulo Ferreira Alves, and the appointment was accepted as legally provided for.
On 27-04-2018 the parties were duly notified of this appointment, and did not express any intention to refuse the appointment of the arbitrators, pursuant to article 11, paragraph 1, letters a) and b), of the RJAT and articles 6 and 7 of the Code of Ethics.
In accordance with the provisions of article 11, paragraph 1, letter c) of Decree-Law no. 10/2011 of 20 January, as amended by article 228 of Law no. 66-B/2012 of 31 December, the single arbitral tribunal is duly constituted on 28-05-2018.
The arbitral tribunal is duly constituted. It is materially competent, pursuant to articles 2, paragraph 1, letter a), and 30, paragraph 1, of Decree-Law no. 10/2011 of 20 January.
On 12-09-2018 at 11:00, the meeting referred to in article 18 of the RJAT took place at CAAD for the examination of witnesses.
The parties have legal capacity and standing, are legitimately constituted and are legally represented (articles 4 and 10, paragraph 2, of the same decree and article 1 of Ordinance no. 112-A/2011 of 22 March).
The proceedings are not affected by defects that would render them invalid.
B – REQUEST
The present Applicant seeks a declaration of illegality of the tax assessment acts for Personal Income Tax (Imposto Sobre o Rendimento das Pessoas Singulares) for 2013 and 2014, numbers 2017 ... and 2017 ..., in the total amount of € 12,198.30.
C – GROUNDS
To support their request for arbitral decision, the Applicants alleged, with a view to obtaining a declaration of illegality of the tax assessment act for Personal Income Tax, already described in point 1 of this Award, the following in summary:
Two additional IRS assessments are at issue relating to the years 2013 and 2014, with numbers 2017... and 2017..., issued following a Tax Inspection procedure, which corresponded to Statements of Account Adjustment nos. 2017... and no. 2017..., in the total amounts payable of € 6,212.24 and € 5,986.06, respectively.
The Applicant submits that the AT considered that Applicant A... should be taxed as resident in Portugal, in 2013 and 2014.
Arguing that the AT presumed that he spent most of the time in its territory (more than 183 days), based on statements made to the GNR, following a traffic check operation conducted at the end of 2015; and even assuming that he did not spend most of his time in Portugal, and pursuant to paragraph 2 of article 16 of the IRS Code, because "persons who constitute the family unit are always considered as residents in Portugal, provided that any of the persons responsible for the direction thereof resides there".
The Applicants in the model 3 IRS return forms for the years 2013 and 2014 only declared the income earned by Applicant B..., insofar as Applicant A... was a non-resident in Portugal.
However, due to manifest declarative omission, in the preamble of Model 3 (i.e., Q.3, automatically required since they were registered as 'married' in Q.6), Applicant A... is included in the 'family unit composition', when, despite being legally "married", the option of "de facto separated" should have been made for tax purposes.
Regarding the statements made to the GNR, they are nothing more than that – mere statements made in another context (traffic stop) aimed, namely, at verifying vehicle documentation and respective records (addresses, ownerships, etc.), and which do not prove that the APPLICANT spent most of his time in Portugal so that this could "attract", without more, taxation to its territory.
Furthermore, such statements were made at the end of 2015, and the tax acts relate to 2013 and 2014. It being certain that, with nothing else mentioned or proven in this regard by the AT, it must be considered not proven in the case files the alleged presence in Portugal of more than 183 days of the taxpayer B, the Applicant A....
He alleges that the AT's own statement that, based on the 2015 statements, "it is presumed that the taxpayer B, in both 2013 and 2014, was in Portugal for more than 183 days" is proof thereof.
Furthermore, being alone in Spain and performing commercial functions, it is normal that he moved (and moves) with all possible regularity to Portugal to visit his family, who maintained the family home there, given that his wife and children continued to reside in Portugal.
Consequently, there can be no doubt that Applicant A... continued and continues to reside and work in Spain, which results unquestionably from all the evidence that was presented in the administrative procedure and which is now, by necessity, repeated in the context of the present proceedings.
He alleges that since 2010, Applicant A... is a non-resident in Portugal, as per a copy of the AT registry, an amendment which was requested on 08/06/2010.
The Applicant, being unemployed in Portugal, moved to Spain for professional reasons, pursuant to an employment contract, whose validity commenced on 1/06/2010.
It should further be noted that said contract establishes in the first clause, should any doubts exist regarding the place of work, that: "The place of work is located in ... [Valencia, Spain]." and maintains that regarding working time, 40 hours weekly.
He further submits that this fact is also proven by the statement, which certifies that he lives in Valencia, in an apartment and the certificates of residence issued by the "Ajuntament de Valencia".
As well as the full compliance with the respective tax obligations in the country of residence, namely in Spain, in the said years of 2013 and 2014.
The Applicant contends that the AT, even admitting that he did not spend most of his time in Portugal, and pursuant to paragraph 2 of article 16 of the IRS Code, "persons who constitute the family unit are always considered as residents in Portuguese territory, provided that any of the persons responsible for the direction thereof resides there".
That is, it is important to confirm whether paragraph 2 of article 16 of the IRS Code, as invoked by the AT, is applicable to him. To this end, it should be noted that we are dealing with a presumption which may be rebutted, pursuant to paragraph 3 of the same article, in the wording in force at the time of the facts:
Applicant A... has his place of work in Spain, where he works Monday to Friday (40 hours), which means, at most, that he could have come to Portugal on weekends and during the holiday period, to be with his family.
Therefore, since this work in Spain is the only source of work income that he has earned since 2010, it immediately proves "the absence of a link between the majority of his economic activities and Portuguese territory", as provided for in the rule, that is, the presumption in paragraph 2, invoked by the AT to justify the adjustments, is rebutted for due legal purposes.
It results clearly and unequivocally that the present Applicant A... has a permanent dwelling and "centre of vital interests" (family vs. work) in both States, wherefore the conflict of residence between Portugal and Spain should be resolved through the criterion of 'State in which he habitually resides'.
Now, there can be no doubt that he works in Valencia, declares his taxes in Spain, that being the principal centre of his economic interests determined under Portuguese law (article 16, paragraph 3 of the IRS Code) and the place where he habitually resides, pursuant to the said Convention.
Wherefore, no factual or legal reasons remain for the AT to legitimately presume that he can be taxed as a resident in its territory.
The Applicant concludes by alleging that the present Request for Arbitral Decision should be declared well-founded, as proven, for all due legal purposes and the APPLICANTS reimbursed the total amount of tax indevidly paid, plus the payment of indemnatory interest.
D – RESPONSE OF THE RESPONDENT
The Respondent, duly notified for such purpose, timely presented its response in which, in brief summary, alleged the following:
It is important to note, as to the facts, that in relation to the administrative complaint the Applicants add document no. 5, which contains the "información de la presentación de la declaración modelo 100" and "IRPF", which result from the income declarations submitted by Applicant A... in Spain for the years 2013 and 2014.
Applicant A... failed to present a document issued by the Spanish tax authorities certifying that, in the years 2013 and 2014, he was a tax resident in Spain pursuant to article 4 of the Convention to Avoid Double Taxation concluded between the Kingdom of Spain and Portugal.
Now, the Spanish tax authorities, in communicating to the AT the income earned by Applicant A..., namely in the context of Information Exchange, are declaring that they consider him, for tax purposes, a resident in Portugal, as results from paragraph 1 of article 26 of the CDT.
Moreover, and without prejudice to the exception below, the AT, in the context of the adjustments to income at issue in the case, made no change to the residence status of Applicant A... in the income declarations – Model 3 for the years 2013 and 2014.
Applicant A... at no time, prior to the adjustments made by the AT in 2017, with reference to the years 2013 and 2014, challenged and/or contested his declaration as a resident in the respective income declarations – Model 3.
Contrary to what has been alleged by the Applicants, the alleged manifest declarative omission cf. nos. 9 and 10 of the Request, such as married instead of de facto separated, and further noting that Applicant A... being resident instead of non-resident, concerns a repeated practice from the Model 3 Return of 2010 through 2016, which are attached and are deemed fully reproduced for all legal purposes.
The declaration of the status of married of the Applicants and of resident in national territory of Applicant A... over 7 fiscal years, unless we are mistaken, precludes the thesis that this constitutes a "manifest declarative omission".
Added to this is the fact that Applicant A..., as alleged in no. 30 of the Request, changed his status to non-resident with the AT, which also prevents the thesis that this concerns a "manifest declarative omission".
Note further that, as appears from the said documents 1 to 7, Applicant A..., with the exception of the Model 3 Return of 2010 in which he declared income in the amount of € 150.00, did not declare income in any of the following years, from 2011 to 2016.
And that from 2010 to 2016 he always declared in Annex H of the Model 3 Return, in Table 7 – Deductions from tax liability and tax benefits and/or Table 8 – Health and Education Expenses.
Now, pursuant to legal provision, the taxpayer may prove the contrary, that is, that the information provided by the tax authorities of Spain was not correct, and for this purpose he must present proof of equal or greater probative value.
For this, it was sufficient for Applicant A... to present a statement issued and certified by the Spanish tax authorities, in which the income actually earned and the tax actually paid in the end were stated, which he failed to do, this as to the quantum of income and tax liability.
Moreover, the Spanish tax authorities, in sending information of the income earned by the Applicant in Spain, are implicitly declaring that, pursuant to article 26 of the CDT, they considered him a tax resident in Portugal.
If Spain understood that the Applicant was its tax resident, it would not send his tax information to Portugal, as this would be contrary to the provisions of the Convention.
Thus, it was incumbent upon Applicant A... to present a certificate of tax residence in Spain, for the years in question, issued by the tax authorities of that State, which would contradict the information provided by that tax administration pursuant to the information exchange provided for in the CDT.
The Respondent concludes, submitting that the present request for arbitral decision should be judged unfounded, with the tax assessment act impugned remaining in the legal order and the respondent entity being absolved of the request, all with due and legal consequences.
E – FACTUAL FINDINGS
Before proceeding with the examination of these issues, it is necessary to present the factual matter relevant to its understanding and decision, which was done on the basis of documentary and testimonial evidence, and taking into account the facts alleged.
In the specific case of witnesses, it is considered that they testified in a coherent manner, sustained and demonstrative of command of the reasons for knowledge relevant to providing information to the Tribunal.
As to relevant factual matters, this tribunal accepts as established the following facts:
The Applicant (A...) entered into a full-time employment contract without a fixed term on 1 June 2010, corresponding to 40 hours per week, Monday to Friday, with Company C..., S.L., with Spanish tax identification number..., with headquarters in Spain.
Pursuant to the employment contract of the Applicant (A...), the work centre is located in Spain, at....
The Applicant (A...) indicated Spain and the municipality of Valencia as his country of domicile in his employment contract.
Pursuant to a certificate issued by the Ajuntament de Valencia, by D..., certifying on 26/05/2010 that the Applicant (A...) has domicile at..., no....
Pursuant to "Certificado de Empadronamiento", certifying for Social Security purposes on 03/10/2013, that the Applicant (A...) has had his address since 26-05-2010 at..., no..., Valencia.
Pursuant to "Certificado de Empadronamiento", certifying for Social Security purposes on 16/10/2014, that the Applicant (A...) has had his address since 26-05-2010 at..., no..., Valencia.
The Applicant (A...) has Spanish tax identification number … J.
On 17-06-2014, with registration number 2013..., relating to the year 2013, the Applicant (A...) submitted in Spain his declaration for personal income tax purposes "Impusto sobre la Renta de las Personas Físicas".
In that declaration he declared as work remuneration 22,045.32€.
By accessing the page www.agenciatributaria.es, indicated in the footer of the Spanish Income Declaration, for purposes of confirming the veracity of the declaration (respectively the page https://www... ....vis.VisualizaSc?COMPLETA=NO&ORIGEN=J), in accordance with the secure validation code on the declaration submitted by the taxpayer, ..., the veracity of the income declaration of Applicant (A...) for the year 2013 is verified, and the respective tax to be assessed for the work income declared in that period in Spain.
It is further verified that in accordance with the ..., that the declaration contains as Primary Residence Spanish Territory, in the year 2013.
On 05-06-2015, with registration number 2014..., relating to the year 2014, the Applicant (A...) submitted in Spain his declaration for personal income tax purposes "Impusto sobre la Renta de las Personas Físicas".
In that declaration he declared as work remuneration 22,046.09€.
By accessing the page www.agenciatributaria.es, indicated in the footer of the Spanish Income Declaration, for purposes of confirming the veracity of the declaration (respectively the page https://www2 ... ... ovis.VisualizaSc?COMPLETA=NO&ORIGEN=J), in accordance with the secure validation code on the declaration submitted by the taxpayer, ..., the veracity of the income declaration of Applicant (A...) for the year 2014 is verified, and the respective tax to be assessed for the work income declared in that period in Spain.
It is further verified that in accordance with the ..., that the declaration contains as Primary Residence Spanish Territory, in the year 2014.
The Applicants are married to each other and have two children.
Applicant (B...) resides at Street ... ...-... ..., Portugal, with her two children.
Applicant (B...) declared in Model 3 for purposes of IRS declaration, for the years 2013 and 2014, recorded in the family unit composition, as married.
Applicant A..., with the exception of the Model 3 Return of 2010 in which he declared income in the amount of € 150.00, did not declare income in any of the following years, in the years 2013 and 2014, and between the period of 2011 to 2016.
By official letter no. ... of 19-10-2017 (registered letter RD...PT), the AT notified the complainant, now Applicant, to exercise prior hearing regarding the decision proposal set out in the following information, in case no. ...2017....
On 09-11-2017, the Applicants exercised the right to prior hearing.
By official letter no. ... of 30-11-2017 (ordinary letter) and official letter no. ... of 30-11-2017 (registered letter with A/R – RD ...), respectively, the Applicant and his representative were notified of the final decision dismissing the administrative complaint.
In 2013, Applicant A... remained for more than 183 days, consecutive or non-consecutive, in Spain.
In 2014, Applicant A... remained for more than 183 days, consecutive or non-consecutive, in Spain.
F – FACTS NOT PROVEN
As to factual matters, the Tribunal need not rule on everything alleged by the parties; rather, it has a duty to select the facts relevant to the decision and to distinguish between proven and unproven matters (see articles 123, paragraph 2, of the Code of Tax Procedure and Process (CPPT) and 607, paragraph 3 of the Code of Civil Procedure (CPC), applicable ex vi article 29, paragraph 1, letters a) and e), of the RJAT).
Thus, the facts pertinent to the judgment of the case are chosen and determined according to their legal relevance, which is established with attention to the various plausible solutions of the legal issue(s) (see former article 511, paragraph 1, of the CPC, corresponding to the current article 596, applicable ex vi article 29, paragraph 1, letter e), of the RJAT).
G – ISSUES TO BE DECIDED
Given the positions of the parties assumed in the arguments presented, the central issues to be decided are the following, which must therefore be examined and decided:
Issues Alleged by the Applicant:
Declaration of illegality of the tax assessment acts for Personal Income Tax of 2013 and 2014, numbers 2017 ... and 2017 ..., in the total amount of € 12,198.30.
Condemnation to payment of indemnatory interest.
Issues Alleged by the Respondent:
Exception of unassailability of the status of tax resident in Portuguese territory.
H – PRELIMINARY ISSUE: EXCEPTION OF UNASSAILABILITY OF THE STATUS OF TAX RESIDENT IN PORTUGUESE TERRITORY
Issues concerning the determination of the competence of the courts are to be examined as a priority and ex officio, pursuant to articles 13 of the Code of Procedure in Administrative Courts (CPTA) and article 578 of the Code of Civil Procedure (CPC), by subsidiary application of article 29 of the Legal Regime for Tax Arbitration (RJAT); thus, given the foregoing, it is important to examine this dilatory exception.
It is raised by the Respondent that unassailability of the tax act is a dilatory exception which determines the absolution of the Respondent from the proceedings under articles 89, paragraph 4, letter i) of the CPTA and 278, paragraph 1, letter e) of the CPC, applicable ex vi article 1 of the CPTA.
The Respondent argues that at the time of the additional IRS assessments here at issue, issued ex officio by the AT in 2017, with reference to the periods of 2013 and 2014, all the facts declared by the Applicants were unassailable, due to having become time-barred.
Thus, the Applicants could not in 2017, when the periods for administrative complaint and impugnation had expired, challenge a tax act that resulted from the declarations of the Applicants themselves.
Thus, we consider that the acts of additional IRS assessment of 2017, with reference to the years of 2013 and 2014, can only be impugned in the modified segments, namely, as to the income earned and tax paid in the foreign country added in annexes J, and never as to the segment that was already consolidated and stable in the legal order, namely, as to the declaration of tax residence in Portuguese territory of the Applicant, in the respective income return forms.
The Applicant counter-alleged that the AT cannot defend that there was no longer a period within which to allege the error in the indication of the Applicant's residence, when this is intimately connected/a determining factor of the additional assessments sub judice.
And given that the income declarations for the years 2013 and 2014 are being challenged, it cannot be accepted that the taxpayers cannot put into question the information contained in the same, which would only be permitted to the AT, by issuing additional assessments, without the taxpayers being able to do anything.
Considering the AT that nothing else may be discussed beyond the inclusion/exclusion of income and tax paid in the foreign country, it is limiting the scope of the administrative complaint to established facts – the income received and tax paid in the foreign country – restricting the taxpayer's right to defend itself, as it cannot invoke any other dimension of the tax law relationship and of the Model 3 IRS return itself.
Before the positions assumed by the parties, given the exception invoked, it is for the present Tribunal to decide.
It is raised in the present arbitral tribunal that the present assessments resulted from the declarations submitted by the Applicants of the years 2013 and 2014, where they declared themselves as tax residents in Portugal. Consequently, as they declared themselves tax residents, and having the period of 120 days to correct their declarations (pursuant to articles 70 and 102 of the CPPT) expired, they could no longer alter that status in the context of the inspection procedure or in the context of the present request for arbitral decision. According to the AT's argument, as the Applicant (husband) cannot alter his status to non-resident, and consequently as the present arbitral tribunal cannot do so as this constitutes an exception, he can only do so as to the modified segments, namely, as to the income earned and tax paid in the foreign country added in annexes J.
Dilatory exception of unassailability of the impugned act, which has no merit, as follows.
Dilatory exceptions are preventive of the examination on the merits of the case, pursuant to articles 576, paragraphs 1 and 2 of the CPC ex vi article 2, letter e) of the CPPT and article 29, paragraph 1, letters a) and e) of the RJAT, which prevents examination of the request and the absolution of the AT from the proceedings.
Constitutes a dilatory exception the incompetence, whether absolute or relative, of the arbitral tribunal regarding its material capacity to examine the acts subject to the arbitral claim, article 577 of the CPC and article 2 of the RJAT.
The present arbitral proceedings concern additional assessments of Personal Income Tax for 2013 and 2014, numbers 2017... and 2017..., in the total amount of € 12,198.30, which resulted from the implementation of the final decision of the inspection procedure.
In the assessments the AT expressed itself on the issue of residence in the inspection report and decided on the tax residence status of the taxpayer, as can be verified from the excerpt taken from the report:
"Having examined the grounds advanced during the prior hearing, it was concluded that these are not likely to lead to an understanding different from that recommended in the draft decision, insofar as:
In the context of a traffic check action, on 2015-10-19, the taxpayer B declared to a soldier of the National Republican Guard (GNR) that, although he has an address in Spain and works for a Spanish company, performing commercial functions of the company in Portugal, he spends most of his time in Portugal, residing with his family unit at Street..., ...-... ... .
By force of what he declared to the GNR soldier, it is presumed that the taxpayer B, in both 2013 and 2014, was in Portugal for more than 183 days, wherefore he should be considered resident in Portuguese territory, by force of the provisions of letter a) of paragraph 1 of article 16 of the IRS Code (CIRS).
Even if it were not confirmed that he remained in Portugal for more than 183 days in each of the years in question, the taxpayer B would still be considered resident in Portuguese territory, since paragraph 2 of article 16 of the CIRS, in the wording in force in the years 2013 and 2014, determines that persons who constitute the family unit are always considered as residents in Portuguese territory, provided that any of the persons responsible for the direction thereof resides there."
Given that the argument now invoked had already been advanced and examined in the Directorate for IRS, having that directorate promoted the issuance of ex officio assessments, it is evident that there is no legal basis for addressing the matter complained of."
It is unquestionable that the AT expressed itself on the tax residence of the Applicant, and submitted the same examination to the Applicant in the notification of the inspection report and subsequent assessment acts, and the Applicant submitted the Tax and Customs Authority in the administrative complaint to this issue of illegality of the additional assessment as to tax residence, as it was expressly referred to in the complaint.
Thus, having the issue been submitted to the examination of the Tax and Customs Authority and with the AT having expressed itself thereon, there is no unassailability.
On the other hand, in situations of additional assessment where an express decision is rendered, what remains in the legal order is the position of the Tax and Customs Authority before the taxpayer, which is defined by its decision, in the part in which the legality of the assessment was examined by the Tax and Customs Authority.
In truth, in a dispute concerning mere legality, the legality of the impugned act must be assessed as it occurred, with the grounds that were used in it, other possible grounds that could support other acts of total or partial substantive coincidence with the act performed being irrelevant. (Arbitration Case no. 208/2015-T)
For this reason, it is in light of the grounds of the decision of the inspection report that the issue of legality must be examined or by what was declared in the income declaration of 2013 and 2014 by the taxpayer.
The acts here in question are the act of additional assessment arising from an inspection report. The 120-day period (pursuant to articles 70 and 102 of the CPPT) is counted from the end of the period for voluntary payment of the tax liabilities legally notified to the taxpayer, here in question.
Acts of additional assessment pronounced on the tax residence status of the taxpayer.
Having expressed itself thereon, the taxpayer can defend itself therefrom, in accordance with the principle of contradiction, provided for in article 45 of the CPPT.
For this reason, nothing prevents the examination of the legality of the additional assessment as it remained in the legal order following the decision of the AT, with the grounds invoked therein.
Having expressed itself and decided thereon, pursuant to articles 576, paragraphs 1 and 2 of the CPC ex vi article 2, letter e) of the CPPT and article 29, paragraph 1, letters a) and e) of the RJAT, there is no unassailability of the issue of the Applicant's tax residence.
The exception raised therefore has no merit.
I – MATTERS OF LAW
Given the positions of the parties assumed in the pleadings presented, the central issue to be decided by the present arbitral tribunal is to examine the legality of the Personal Income Tax assessment acts, Personal Income Tax of 2013 and 2014, numbers 2017... and 2017..., in the total amount of € 12,198.30, for breach of law.
The issue to be decided, in light of the factuality established as proven and the legal norms in force at the date of the facts, consists of examining whether the Applicant (A...), in the years 2013 and 2014, met the requirements to be considered a Portuguese tax resident, and consequently, to be taxed on all his income in Portugal.
The final decision issued by the AT, which gave rise to the assessments here impugned, the AT decided that the Applicants indicated in their model 3 that they were both taxpayers resident in Portuguese territory.
Further relevant is the draft final decision issued by the AT, which states that "According to the information communicated to the Tax and Customs Authority by Spanish authorities, the taxpayer earned income in Spain in the years 2013 and 2014, as follows in the table below:
[table]
From this table it results that Applicant (A...) obtained dependent work income in Spain and bore in 2013 and 2014 in Spain a tax of 3,193.00€ and 3,180.00€.
Values which were confirmed by the Spanish Income Declarations presented by Applicant (A...).
From the final decision of the inspection report and notified to the Applicants, the following resulted:
"Having examined the grounds advanced during the prior hearing, it was concluded that these are not likely to lead to an understanding different from that recommended in the draft decision, insofar as:
In the context of a traffic check action, on 2015-10-19, the taxpayer B declared to a soldier of the National Republican Guard (GNR) that, although he has an address in Spain and works for a Spanish company, performing commercial functions of the company in Portugal, he spends most of his time in Portugal, residing with his family unit at Street..., ...-... ... By force of what he declared to the GNR soldier, it is presumed that the taxpayer B, in both 2013 and 2014, was in Portugal for more than 183 days, wherefore he should be considered resident in Portuguese territory, by force of the provisions of letter a) of paragraph 1 of article 16 of the IRS Code (CIRS).
Even if it were not confirmed that he remained in Portugal for more than 183 days in each of the years in question, the taxpayer B would still be considered resident in Portuguese territory, since paragraph 2 of article 16 of the CIRS, in the wording in force in the years 2013 and 2014, determines that persons who constitute the family unit are always considered as residents in Portuguese territory, provided that any of the persons responsible for the direction thereof resides there."
Given that the argument now invoked had already been advanced and examined in the Directorate for IRS, having that directorate promoted the issuance of ex officio assessments, it is evident that there is no legal basis for addressing the matter complained of."
Given that it is established as a fact that Applicant (A...) has an employment contract in effect in Spain, and that his place of work is located more specifically in the City of Valencia, where he performs his work activity of 40 hours per week Monday to Friday, and proven by the certificates of residence attached to the case files.
The Applicants are married to each other and have two children, possessing a dwelling in Portugal, where Applicant B... has her fiscal residence, together with her two children.
The Applicant moved frequently to Portugal to visit his wife and children. A frequency which was not alleged or contested, or for which documentary proof was presented to demonstrate the number of days that Applicant (A...) actually spent in Portugal.
It was not possible to ascertain the exact number of days that Applicant (A...) spent in Portugal and in Spain, nor was this the subject of the AT inspection report.
However, it is evident that a full-time contract of 40 hours per week means that the days he remained in Spain far exceed the 183 days required by article 16, paragraph 1, letter a).
The AT alleges that "Applicant A... failed to present a document issued by Spanish tax authorities certifying that, in the years 2013 and 2014, he was a tax resident in Spain pursuant to article 4 of the Convention to Avoid Double Taxation concluded between the Kingdom of Spain and Portugal".
As to this allegation, it has no foundation, since the Applicant proved his tax residence in Spain by means of the "información de la presentación de la declaración modelo 100" and "IRPF" for the years 2013 and 2014, verified electronically via the secure validation code on the declaration submitted by the taxpayer, ... and ..., in which both documents state the following: "COMUNIDAD O CIUDAD AUTÓNOMA DE RESIDENCIA EN 2013: Comunidad Valenciana" and "COMUNIDAD O CIUDAD AUTÓNOMA DE RESIDENCIA EN 2014: Comunidad Valenciana".
For a better understanding of the issue sub judice, it is important to underline the importance that the concept of residence assumes in Tax Law and, in particular, in income taxation.
Residence is the criterion used to determine the scope of application of the tax provided for in article 15: "Persons resident in Portuguese territory are subject to IRS on all their income, including that obtained outside that territory", submitting its determination to the principle of universal taxation of income, through a strong and stable link to a specific territory.
The legislation in force in the years in question sub judice, 2013 and 2014, listed more than one criterion of tax residence; article 16 in the wording given by Law no. 20/2012 of 14/05 determined the following:
"1 – Persons resident in Portuguese territory are those who, in the year to which the income relates:
a) Have remained there for more than 183 days, consecutive or non-consecutive;
b) Having remained for less time, they have, on 31 December of that year, accommodation under conditions that suggest the intention to maintain and occupy it as usual residence;
c) On 31 December, are crew members of ships or aircraft, provided that such are in the service of entities with residence, seat or effective direction in that territory;
d) Perform functions or commissions of a public nature abroad, in the service of the Portuguese State.
2 – Persons who constitute the family unit are always considered as residents in Portuguese territory, provided that any of the persons responsible for the direction thereof resides there.
3 – The condition of resident resulting from the application of the provisions in the preceding paragraph may be rebutted by the spouse who does not meet the criterion provided for in letter a) of paragraph 1, provided that he proves the absence of a link between the majority of his economic activities and Portuguese territory, in which case he is subject to taxation as a non-resident as to income of which he is the owner and which is considered as obtained in Portuguese territory under article 18.
4 – Where proof is made as provided in the preceding paragraph, the spouse resident in Portuguese territory presents a single declaration of his own income, his share in common income and income of dependents under his care according to the regime applicable to persons in the situation of de facto separated as provided for in paragraph 2 of article 59."
On the criteria of tax residence, case law and doctrine have already expressed themselves as to their understanding; we highlight the decisions of CAAD Case no. 332/2016-T, Arbitrators Fernanda Maçãs (arbitrator president), Dr. João Taborda da Gama and Dr. André bacelar Gonçalves, and Arbitration Award Case no. 214/2017-T, Arbitrators José Baeta de Queiroz (Arbitrator President), Nuno Cunha Rodrigues and Diogo Leite de Campos.
It is thus verified that the criterion provided for in letter a) is limited to physical presence (corpus) in Portugal, considering as residents, automatically, individuals who remain for 183 days in national territory. Letter b), on the other hand, requiring a less qualified physical link, imposes a case-by-case analysis that still makes it possible to ensure that there is an effective connection with the territory. This connection is deemed to be verified through a mediate subjective element, the intention to be resident (animus), which must be analyzed from an objective perspective, that is, through immediate elements that make it possible to reconstruct the individual's will from the indications revealed by him. Note that the existence of purely artificial residence criteria, without an effective connection with the territory as a basis, encounter restrictions on their application either through Public International Law (Cf. Rui Duarte Morais, Allocation of Profits of Non-Resident Companies Subject to a Privileged Tax Regime, Porto: Publicações Universidade Católica, 2005, p. 35), or at a later time through application of DTCs (Cf. Klaus Vogel, On Double Taxation Conventions, Third Edition, Deventer: Kluwer Law International, 1997, pp. 232-233).
Thus, letter b) of paragraph 1 of article 16 of the IRS Code serves two essential functions: first, to consider resident in Portugal an individual who has only relocated his residence to national territory in the second half of the year, so that it is no longer possible to meet the 183-day criterion; and, second, to consider residents individuals who, despite their link to the territory, verified through a place where they reside habitually, may intentionally circumvent the permanence rule (Cf. André Salgado de Matos, IRS Code (Personal Income Tax) Annotated, Lisbon: Instituto Superior de Gestão, 1999, pp. 206-207).
In the words of Alberto Xavier "[t]he intention to maintain and occupy accommodation as usual residence is not the object of direct proof, but rather results from objective conditions that suggest it." (Cf. Alberto Xavier, International Tax Law, 2nd Updated Edition, Coimbra: Almedina, 2007, p. 286).
Since the intention to be demonstrated refers to the maintenance and occupation of usual residence, it is important to determine, as a preliminary point, what is meant by usual residence, so that it is clear that it must result from the individual's intention. Now, the concept of usual residence must be interpreted in the context in which it is situated, that is, article 16 must be read as a whole. As noted, both letter a) and letter b) of paragraph 1 of article 16 of the IRS Code impose an effective connection with Portuguese territory. If the quality of resident, pursuant to letter a) results automatically from a factual criterion, merely numerical, the presence in Portugal, letter b) requires, due to the lack of greater presence in the territory, an additional element of intention. The article thus imposes the will to be regularly present in national territory, using, for such purpose, a particular dwelling.
Usual residence is thus equally a factual criterion determined by regular (habitual) permanence in a particular dwelling and where, as such is presumed to have organized his life. As already held by the Supreme Administrative Court, "[i]t is evident that, as usual residence is the place where a person normally lives and has the center of his life, there are no great differences between "fiscal domicile" and "permanent accommodation": there is an intimate relationship between the two figures, which is expressed in both presupposing a place with which a certain person is in connection, the place where he has his existence organized and which, as such, serves as the basis for his life." (Cf. Award of the Supreme Administrative Court, of 11/23/2011, rendered in case 0590/11), as well as the Central Administrative Court South, noting that "[t]he concept of usual residence (which coincides with the concept of voluntary domicile) must be sought in domestic law, being embodied as the place where a natural person normally lives and from which he is absent, as a rule, for periods more or less short (cfr.art. 82 of the Civil Code)." (Cf. Award of the Central Administrative Court South, of 12/11/2012, rendered in case 05810/12).
As Manuel Faustino argues, the said legal criterion "(…) in integrating into the provision the maintenance and occupation of that house as usual residence immediately excludes from the condition of residents those who have in Portugal a mere secondary dwelling (provided they do not remain there more than 183 days a year) or vacation homes, as well as those who, particularly emigrants, having accommodation here which they may come to occupy as their usual residence when, definitively, they return to Portugal, only occupy it on the occasion of their vacations or in punctual and fortuitous moves." (Cf. Manuel Faustino, "Residents..." op. cit., pp. 124-125 and, in the same sense, Award of the Supreme Administrative Court of 02/24/2011, rendered in case 876/10).
For there to be a usual residence it should result clearly that the accommodation maintained in Portugal, by its characteristics, is intended for a lasting permanence and not for a mere passage of short duration (Cf. Alberto Xavier, Tax Law…op. cit. 286)" (CAAD Case no. 332/2016-T, Arbitrators Fernanda Maçãs (arbitrator president), Dr. João Taborda da Gama and Dr. André bacelar Gonçalves).
It is necessary to verify whether Applicant A... met any of the legal criteria, presuppositions and conditions provided for in article 16 of the IRS Code, capable of determining his tax residence in Portuguese territory.
Regarding the criterion of article 16, paragraph 1, letter a) of the IRS Code, which is limited to physical presence (corpus) in a territory (in this case national territory), to assign the country of tax residence, Applicant A... would have had to remain for more than 183 days in Portuguese territory, which was not the case.
Thus, Applicant A..., not having remained for more than 183 days in Portuguese territory, is not considered a tax resident in Portugal, in accordance with article 16, paragraph 1, letter a) of the IRS Code.
Analyzing next the case of letter b) of paragraph 1 of article 16 of the CIRS, a less qualified physical link is required, which implies a case-by-case analysis that still makes it possible to ensure that there is an effective connection with the territory, in this case Portuguese.
This connection is deemed to be verified through a mediate subjective element, the intention to be resident (animus), which must be analyzed from an objective perspective, that is, through immediate elements that make it possible to reconstruct the individual's will from the indications revealed by him.
Thus, letter b) of paragraph 1 of article 16 of the CIRS serves two essential functions: first, to consider resident in Portugal an individual who has only relocated his residence to national territory in the second half of the year, when it is no longer possible to meet the 183-day criterion; and, second, to consider residents individuals who, despite their link to the territory, verified through a place where they reside habitually, may intentionally circumvent the permanence rule.
As stated in doctrinal and case law terms, letter b) of paragraph 1 of article 16 of the IRS Code requires three cumulative requirements, on whose verification depends the qualification as resident:
i) permanence in Portugal;
ii) availability of accommodation; and
iii) verification of conditions that suggest that the accommodation will be maintained and occupied as usual residence.
Arbitration Award Case no. 214/2017-T, Arbitrators José Baeta de Queiroz (Arbitrator President), Nuno Cunha Rodrigues and Diogo Leite de Campos.
We verify that the Applicant does not meet the first requirement, that is, having an employment contract that provides for performance of functions in Valencia of 40 hours per week, immediately, he did not have permanence in Portugal in the years 2013 and 2014.
Requiring letter b) of paragraph 1 of article 16 of the IRS Code three cumulative requirements, with one of them not being met, the need to verify the remaining ones is obviated.
Based on the foregoing, Applicant A... is not considered a tax resident in Portugal on the basis of letter b) of paragraph 1 of article 16 of the IRS Code.
Continuing the analysis of tax residence criteria, the interpretation and application of article 16, paragraphs 2, 3 and 4 of the IRS Code must be undertaken, as well as recourse to the Convention on Double Taxation (CDT) between Portugal and Spain, approved by Ratification by Resolution of the Assembly of the Republic no. 6/95.
Conventions on Double Taxation have at their origin the fact that various sovereign States considered that the unilateral application of their tax norms constituted a potential source of conflict. Thus, alongside traditional sources of tax law, legal instruments have emerged designed to avoid double taxation and international tax evasion and which form part of International Tax Law (see Margarida Mesquita, "Conventions on Double Taxation, Lisbon, 1998)".
These double taxation agreements, in which two sovereign States negotiate ways to prevent the same tax fact belonging to the same taxpayer and in the same time period from being taxed in two or more jurisdictions, imply a bilateral derogation of sovereignty, guided by the rule of reciprocity. Paraphrasing José Casalta Nabais (in Studies on Tax Law, Vol. 1, Almedina), "double taxation agreements are a limitation on the tax power of each State, which maintains the essential aspects of its competences in tax matters. Everything is based on mutual concessions of two States in matters that primarily concern sovereignty regarding tax legislation (…) DTCs have negative efficacy, since they prevail over domestic law, and effect a partial derogation of it in certain areas. Thus, the norms of DTCs refer to the norms of Domestic Tax Law, resolving conflicts between legal systems (as can happen, for example, when each of the two legal systems considers the same taxpayer resident in it...)".
The Portugal – Spain CDT establishes the following:
"1 – For the purposes of this Convention, the term 'resident of a Contracting State' means any person who, under the legislation of that State, is there subject to tax due to his domicile, his residence, the place of management or any other criterion of a similar nature. However, this term does not include any person who is subject to tax in that State only as to income from sources within that State.
2 – When, under the provisions of paragraph 1, a natural person is a resident of both Contracting States, the situation shall be resolved as follows:
a) He shall be considered a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both States, he shall be considered a resident of the State with which his personal and economic relations are closer (centre of vital interests);
b) If the State with which he has the centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be considered a resident of the Contracting State in which he habitually resides;
c) If he habitually resides in both States, or if he does not habitually reside in either of them, he shall be considered a resident of the State of which he is a national; d) If he is a national of both States, or if he is not a national of either of them, the competent authorities of both States shall resolve the case by mutual agreement."
To this end, the examination of the concept underlying article 16, paragraph 2 of the CIRS – "residence by dependence" – is contrary to the interpretation of Conventions on Double Taxation, as the Supreme Administrative Court recalled in award 068/09 of 28/03/2009, award of 08/07/2009 (Case no. 382/09), award 0461/10 of 08/09/2010, award 0462/10 of 27/10/2010, "[t]he concept of (fiscal) residence for purposes of domestic law will be fully applicable in situations which only present connection with the national legal order or in situations in which, although there is connection with another legal order, there is no link through a convention of the Portuguese State with the State with which that connection is verified. This is not the case with Germany, as is known, which has concluded with Portugal a Convention to Avoid Double Taxation. Thus, in relations between Portugal and Germany in matters of taxes on income and capital, it is the conventional concept of residence that must prevail, by virtue of the supremacy of international law over ordinary domestic law (article 8 of the Constitution of the Portuguese Republic; Cfr. JOSÉ CASALTA NABAIS, Tax Law, 5th ed., Coimbra, Almedina, 2009, p. 104).
Although the concepts of (fiscal) residence for conventional purposes and for domestic tax purposes do not coincide, the Portugal/Germany CDT, following the OECD Model Convention (article 4, paragraph 1 of the OECD Model), refers the definition of the conventional concept of residence to the domestic legislation of the Contracting States. This reference does not mean, however, as the best doctrine clarifies (cfr. ALBERTO XAVIER, International Tax Law, 2nd ed, Coimbra, Almedina, 2007, p. 291), an unconditional reference.
From the outset, it presupposes that the examination of the issue of residence be done individually, person by person, abstracting from the family situation of the subject in question. ALBERTO XAVIER writes to this effect, op. cit., note 61 at p. 291, that "[t]he examination of residence must be done person by person, even if married, so it is frequent for the existence of 'mixed couples', with one member considered resident in one country and the other in another. (…). The Conventions thus supersede internal regimes which possibly enshrine, by fiction, 'residence' by 'dependence' of a person in the country of residence of any other member of the family unit".
In the same sense, Maria Margarida Cordeiro Mesquita, "Conventions on Double Taxation", Lisbon, 1998, p. 85, where it is stated: "[a]s to natural persons, the residence test is carried out contributor by contributor, independently of his marital status. The conventional concept of residence supersedes internal regimes which, as the Portuguese one, enshrine 'residence by dependence' of a person in the country of residence of another member of his family unit - cfr. IRS Code, article 16, paragraph 2".
Article 4, paragraph 1 of the Convention requires that the examination of the issue of residence "be done individually, person by person, abstracting from the family situation of the taxpayer and establishes limits to the nature of the connections adopted by the laws [internal] of the Contracting States, requiring that such criteria impose a [personal] effective link with the territory of the State".
The concept of residence by dependence, adopted in paragraph 2 of article 16 of the CIRS, cannot supersede the conventional concept of residence, wherefore the residence in Portugal of the spouse of the taxpayer is irrelevant for the determination of his tax residence. The quality of resident for purposes of the Convention must be ascertained by criteria that "express an effective link to the territory of the State, with a mere criterion of 'residence by dependence' as in article 16, paragraph 2 of the CIRS not being admissible for conventional purposes, as it does not express in itself any effective and real connection of the majority of his economic activities with Portuguese territory." (The Supreme Administrative Court in award 68/09 of 28/03/2009).
The CDT between Portugal and Spain seeks to resolve situations of dual residence, in which someone has "prolonged contacts with more than one legal order" (Cf. J. L. Saldanha Sanches, Manual of Tax Law, Coimbra, 2007, pp. 339-340), through various special rules (tie-breaker rules) whose application will determine residence in only one of the States claiming the tax residence of a particular taxpayer.
The tie-breaker rules, as Rui Duarte Morais states "[i]nternational conventions on double taxation accept such competence (…) limiting themselves to establishing 'tie-breaker' rules that make it possible to qualify a taxpayer as resident in (only) one of the Contracting States when both (by force of the divergences between their respective laws) consider him as such." (Cf. Rui Duarte Morais, On IRS, Coimbra: Almedina, 2016, 3rd Edition, p. 12.).
Article 4 of the CDT clarifies by stating that "If he has a permanent home available to him in both States, he shall be considered a resident of only the State with which his personal and economic relations are closer (centre of vital interests), if it is not possible to identify or there is more than one vital centre, one in Spain and another in Portugal, then paragraph 2, letter b) of article 4 of the CDT provides that: If the State with which he has the centre of vital interests cannot be determined, he shall be considered a resident of only the Contracting State in which he habitually resides.
Based on the foregoing, in the present case files it was demonstrated that the Applicant had a permanent home available to him in both Portugal and Spain, but the Applicant necessarily resided for more than 183 days in Spain, in the years pertaining to the impugned assessments, the country where he performed his activity daily as an employee.
On the other hand, the quality of resident in Portugal that the AT attributes to the present applicant rests on the fact that the Applicant made statements to the GNR about spending most of his time in Portugal and on the fact that his wife and children reside here.
However, taking into account, in accordance with the concept of residence established by the Convention, that the examination of the quality of resident must be done individually, the residence in Portugal of the applicant's wife is irrelevant for purposes of determining his conventional tax residence.
In this regard, it further appears from the grounds of the awards of the Supreme Court in the following: "the criteria admissible for purposes of the CDT Portugal - Germany to determine the quality of conventional resident of the applicant must be similar to those listed in paragraph 1 of article 4 of the CDT Portugal-Germany (domicile, residence, place of management), that is, must be criteria that express an effective link to the territory of the State, with a mere criterion of 'residence by dependence' as in article 16, paragraph 2 of the CIRS not being admissible for conventional purposes, as it does not express in itself any effective and real connection of the majority of his economic activities with Portuguese territory".
Now, from the examination of the evidence in the present case files, it results that the present Applicant was taxed in Spain, in the years 2013 and 2014, for his work income, not only because he obtained work income in Spain (competence of the source State), but because he has usual residence there (competence of the State of residence), this information being confirmed in the inspection report.
The Applicant resided, with a character of permanence, in Spain for the period corresponding to the periods to which the income in question relates, received by virtue of work performed in that country.
Although it may be considered that he is resident in both States (Portugal and Spain), for the period to which the income in question corresponds, he had effective residence in Spain, necessarily by force of the performance or effective fulfillment of the employment contract that he satisfied in that country.
Existing doubts as to the vital centre, enumerated in article 4 of the CDT, "[t]his makes the scales tip in favor of the State in which he habitually resides. For this purpose, the periods spent by the interested party should be taken into account not only in his permanent home in the State in question, but also in any other point within the same State.", comment 17 to article 4 of the Model of Fiscal Convention on Income and Capital.
During the year 2013 and 2014 the Applicant spent more time in Spain than in Portugal, both by force of the date when he effectively changed his residence to Spain and by force of his employment contract.
Adhering fully to the thesis of the case law of this Supreme Administrative Court, we conclude in this manner that the Applicant does not reside, for tax purposes in Portugal, by application of Portuguese domestic law paragraphs 1 and 2 of article 16 of the IRS Code) and article 3 of the CDT concluded between the Portuguese Republic and the Kingdom of Spain prevent Portugal from taxing the income earned by the Applicant, insofar as it resolves the positive conflict of tax residences in favor of Spain. That is, in the year 2013 and 2014 the Applicant is considered a tax resident in Spain and a non-tax-resident in Portugal.
It is further raised by the Respondent, although this is not included in the grounds of its final decision of the inspection report which gave rise to the additional IRS assessments here in question, that the Applicants declared in 2013 and 2014 as both tax residents, with the Applicant (husband) declaring no income, however having made deductions to the tax liability of his own expenses.
The AT further alleges that the Applicants should have in their respective declarations the provisions of article 16, paragraph 4 established that the spouse resident in Portuguese territory presents a single declaration of his own income, his share in common income and income of dependents under his care according to the regime applicable to persons in the situation of de facto separated as provided for in paragraph 2 of article 59."
As the Applicants did not make the respective choice of article 16, paragraph 4, paragraph 2 of article 59, the same does not lead to the presumption that the Applicant husband is considered a Portuguese tax resident, it only reveals that it is incorrectly filled on that point, having to be corrected and an additional IRS assessment issued, if this is the case.
However, on errors in completing the declaration of taxpayers, the present tribunal endorses the position assumed in the arbitration decision in Case no. 194/2016-T, which decided in the following manner:
"In our legal and tax system, specifically in IRS matters, the principle of the taxpayer's declaration governs in determining taxable income, which means that the initial impulse in the assessment procedure falls upon the taxpayer with the submission of his declaration.
For an explanation of the scope and various aspects of this principle of declaration, in IRS matters, we refer to the Award of the TCAS in Case no. 01076/03, which provides as follows: "In our tax system, the principle of the taxpayer's declaration governs in determining taxable income, which implies an increase in the duties of cooperation of the taxpayer with the AT, among which that of maintaining organized accounting under the terms of commercial and tax law and which permits the determination and inspection of the IRS (articles 78 of the CPT and 38, paragraph 1, letter e) of the CIRS) and that of submission of periodic declaration of… Paragraphs 1 and 2 of article 76 of the CPT established: "1. The assessment procedure is instituted with the declarations of taxpayers or, in the absence or defects of these, on the basis of all elements available to the competent entity. 2. The determination of taxable income shall be made on the basis of the declarations of taxpayers, provided that they are presented under the terms provided by law and the administration is provided with the elements indispensable to the verification of their tax situation". With regard to this, ALFREDO JOSÉ DE SOUSA and JOSÉ DA SILVA PAIXÃO consider that the declaration is an act by which the taxpayer brings to the knowledge of the Tax Administration the existence of the taxable income that comprises the tax fact, indicating its amount and all elements necessary for the calculation of tax (expenses, deductions, etc.). The declaration is required by law and reflects an act of cooperation of the taxpayer in light of the public nature of the tax justified by the idea that the tax obligation is not a voluntary, contractual obligation, but the fulfillment of a legal duty. It is a mandatory act and if the taxpayer, being in the conditions provided by law, fails to comply, is subject to sanctions (articles 31 and 32 of the RJIFNA). The Portuguese tax system thus enshrines the method of the taxpayer's declaration in determining taxable income (articles 57 to 61 of the CIRS, 16 of the CIRC and 28 to 40 of the CIVA). (…) Therefore, when the declaration of the taxpayer is in accordance with the elements in its accounting or books, this is shown to be organized under the terms of law and no errors, inaccuracies or other founded indications are verified that it does not correspond to reality, it is presumed that the declared taxable income is real. And, as results from the provisions of article 38 of the CIRS, the AT can only correct the declarations of taxpayers and proceed to the corresponding additional assessment when it reasoned considers that it shows an amount of tax lower than that due". [6] [7]
However, although the principle of declaration governs the assessment procedure, it is equally true that the said procedure culminates with the issuance of an assessment or tax act par excellence, for which the AT is responsible.
In fact, contrary to "self-assessed" taxes, "the IRS is an 'assessed' tax, for which assessment is the responsibility of the DGCI (article 75)". [8]
Therefore, the responsibility for assessment, in the strict sense, is not the taxpayer's, despite the procedure beginning with his declaration, but the AT's, which has, among others, the powers to request clarifications about the declarations presented, to make corrections in the event of errors evidenced in the same, and to correct assessments, as provided in the IRS Code.
For its part, paragraph 5 of article 57 under the heading "Income Declaration" clarifies that: "Whenever declarations are not considered clear or there are omissions or defaults in them, the Directorate-General of Taxes notifies the taxpayers or their representatives to, in writing, and within the period fixed to them, not less than 5 and not more than 15 days, provide the indispensable clarifications." [9]
And paragraph 4 of Article 65 under the heading "Bases for the determination, fixing or alteration of income" provides that "[t]he Directorate-General of Taxes proceeds to alter the declared elements whenever, there being no place for the fixing referred to in paragraph 2, corrections should be made resulting from errors evidenced in the declarations themselves, omissions practiced in them, or corrections resulting from divergence in the qualification of acts, facts or documents with relevance for the assessment of tax."
(…) However, not only was the declaration accepted by the AT, it was taken as certain and it was on the basis of this same declaration that the corresponding IRS assessment was issued.
Being the assessment, in the strict sense, the tax act par excellence for which the AT is responsible, with the said assessment the AT accepted the qualification and quantification of income appearing in the declaration submitted by the taxpayer concerning the 2014 fiscal year.
Not having proceeded to any correction at the moment of submission of the declaration, nor having requested any clarification, as was its responsibility under the cited provisions of the IRS Code, the departments complied with the taxpayer's declaration, transforming it into the tax assessment.
Consequently, although the assessment in question results from what was strictly self-declared by the Applicant, it revealed errors or lapses which could have been detected by the AT, if not at the phase of submission of the declaration, at least at the phase of issuance of the corresponding assessment, if the prerogatives resulting namely from the provisions above identified provided for in the IRS Code had been used.
Furthermore, even if the errors or lapses of the declaration had not been detected at the phase of submission of the declaration and subsequent issuance of the assessment, they could have been detected in the procedure subsequent to the assessment, that is, in the administrative complaint procedure.
In fact, before the issued assessment, the Applicant presented, from the outset, an administrative complaint with the competent tax office, reiterating the source of income in France and requesting the application of the exemption method. However, in accordance with the factuality proven in the case files, the Respondent neither responded to the complaint, nor to the request for case status, nor even when summoned by the office of the Ombudsman, before a complaint filed against it by the Applicant."
To this regard, see the recent Award of the STA of 18 January 2017, which we endorse: "[i]n truth, as Cons. Jorge Lopes de Sousa emphasizes, '[i]n situations in which the practice of the act which defines the tax debt falls to the taxpayer (as happens, namely, in the said cases of self-assessment, withholding at source and installment payments), as well as those in which the act is practiced by the Tax Administration on the basis of incorrect information provided by the taxpayer and there is administrative impugnation (administrative complaint or hierarchical appeal), the error will become attributable to the Tax Administration after the possible dismissal of the request presented by the taxpayer, that is, from the moment when, for the first time, the Tax Administration takes a position on the taxpayer's situation, having at its disposal the elements necessary to issue a decision with correct presuppositions. It will be immaterial, for this purpose of attributing responsibility for the error, generating liability for indemnatory interest, whether it is a case of necessary or optional administrative impugnation, because, in either case, the decision on the impugnation (administrative complaint or hierarchical appeal) is an act of the Tax Administration, wherefore the possible error will be attributable to it from the moment it practiced it. The practice of an express act should be equated, for this purpose, with implicit dismissal, formed by the passage of the legal deadline for decision on administrative impugnation (article 57, paragraph 5 of the LGT), as it is this moment that the Tax Administration should have issued a legal act and, with its omission, maintained the situation of illegality, which makes it possible to attribute to it responsibility for maintaining the situation of error and payment not due.' (Jorge Lopes de Sousa, IRS Code (Personal Income Tax Code) Annotated and Commented, 6th ed., vol. I, annotation 6) a) 2 to article 61, p. 537). "
In accordance with the inspection report that resulted in the additional IRS declarations now notified to the Applicant, and on which it defended itself, the AT presumed that Applicant (A...) spent more than 183 days in Portugal, additionally, it comes to next obviate that presumption, by stating that "even if it were not confirmed that he remained in Portugal for more than 183 days", always considered as residents in Portuguese territory.
Pursuant to the legal grounds now set out, article 16, paragraph 1, letter a) does not result from the application of a presumption, it results from facts, that is, whether or not he spent 183 days, consecutive or non-consecutive, in Portuguese territory.
As was verified,
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