Process: 846/2014-T

Date: December 15, 2015

Tax Type: IRS

Source: Original CAAD Decision

Summary

Process 846/2014-T concerns an IRS assessment dispute for the 2010 tax year involving the Portugal-Norway Double Taxation Convention. The Claimant, a Portuguese national who worked aboard Norwegian ships for over 20 years, challenged an IRS assessment of €7,300.53, arguing she was a Norwegian tax resident under the Convention and already paid taxes there. She invoked Article 4(2)(a) of the PT/Norway Convention regarding center of vital interests, claiming her personal and professional ties were closest to Norway where she spent over 183 days annually. The Claimant also cited Article 15(3) of the Convention, which permits taxation of employment income from international ships in the state where the company has effective management (Norway). She argued the Portuguese assessment violated the principle of territoriality and constituted illegal double taxation. The Tax Authority raised preliminary exceptions challenging the arbitral tribunal's absolute material competence, particularly regarding suspension of enforcement proceedings and examination of rejected official revision requests. The procedural timeline followed Decree-Law 10/2011 (RJAT): request filed December 2014, accepted by CAAD President March 2015, tribunal constituted March 2015, answer filed April 2015, hearing held October 2015, with the award scheduled for December 2015. The case illustrates key issues in tax arbitration including jurisdictional limits of CAAD, application of double taxation conventions for determining fiscal residency, the tie-breaker rules when dual residency exists, and procedural requirements under the RJAT regime.

Full Decision

ARBITRAL DECISION

REPORT

  1. On 29 December 2014, A…, taxpayer number …, hereinafter referred to as the Claimant, with residence at Rua …, no. … - …, …-… Montijo, requested the constitution of an arbitral tribunal and submitted an application for arbitral award, in accordance with paragraph (a) of section 1 of Article 2 and paragraph (a) of section 1 of Article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as LRAT), in which the Tax and Customs Authority (hereinafter referred to as TA) is the Respondent.

  2. The Claimant is represented in the present proceedings by her representative, Dr. B…, and the Respondent is represented by the jurists, Dr. C… and Dr. D….

  3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the Respondent on 23 March 2015.

  4. Through the request for constitution of the arbitral tribunal and application for arbitral award, the Claimant seeks the annulment of the assessment act for Personal Income Tax (PIT), for the year 2010, in the amount of €7,300.53 (seven thousand, three hundred euros and fifty-three cents).

  5. The formal regularity of the request presented having been verified, in accordance with the provisions of paragraph (a) of section 2 of Article 6 of the LRAT, and the Claimant not having proceeded to nominate an arbitrator, the undersigned was designated by the President of the Deontological Board of CAAD.

  6. The Arbitrator accepted the designation made, and the arbitral tribunal was constituted on 10 March 2015, at the headquarters of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, in accordance with the minutes of constitution of the arbitral tribunal which were drawn up and are attached to the present proceedings.

  7. The Respondent presented its answer on 21 April 2015, invoking various exceptions, which were subject to a pronouncement by the Claimant, through the application she submitted on 3 August 2015, in the exercise of the principle of due process.

  8. The meeting of the arbitral tribunal, provided for in Article 18 of the LRAT, took place on 29 October 2015, in which it was agreed that written submissions would be presented, in the context of the present proceedings, in a successive period of 10 days for the Claimant and Respondent, respectively, and it was postponed, in accordance with the provisions of section 2 of Article 21 of the LRAT, the period for rendering the award by a further 2 months.

  9. Thus, the Tribunal, in compliance with the provisions of section 2 of Article 18 of the LRAT, designated 15 December 2015 as the date for rendering the arbitral award, the moment to which it postponed the examination of the exceptions invoked by the Respondent, and warned the Claimant that she should proceed to pay the subsequent arbitral fee, in accordance with section 3 of Article 4 of the Regulation of Costs in Tax Arbitration Processes, and communicate such payment to CAAD.

  10. The Claimant presented her submissions on 9 November 2015, and the Respondent on 23 November 2015.

II. The Claimant's Position

The Claimant sustains her request, in summary, as follows:

The Claimant sustains the request for annulment of the assessment act for Personal Income Tax (PIT) for the year 2010, on the grounds that it is affected by illegality, because:

i) Violation of the Convention to Avoid or Eliminate Double Taxation concluded between Portugal and Norway, in that:

a) According to the Claimant's allegation, "she is an emigrant in Norway, where she resides and works. A situation she has maintained for more than 20 years; (...) she has not earned income in Portugal for several years; (...) on 30/09/1992 she acquired a property in Portugal, by loan number … from Caixa Geral de Depósitos, with the purpose of investing in this country, the primary objective of the acquisition."

b) Indeed, and "due to the evident need to provide a house for her mother, she maintained the said property over the years, thus constituting a dwelling for her, a person with low income who receives a survivor's pension."

c) Furthermore, the Claimant states that "she resides and works on board the E… and F… Oslo, which is why she spends much of the time at sea; (...) spending more than 183 days outside Portuguese territory; (...) she is a dependent employee of this company for several years, maintaining the status of employee with an indefinite-term employment contract. Because of the income she earns in that country, she timely pays social contributions and also taxes in that country; also presenting income statements to the tax authorities of the Kingdom of Norway."

d) She adds that "she spent much of the last years in Norway, namely in 2010, where she was taxed on her income". Thus, "precisely because she almost never came to the national territory, because she resides and works in Norway, the Claimant never thought she would have to pay taxes in the context of PIT in Portugal, especially since these were already subject to taxation in the country where she resides", for which reason "it makes no sense whatsoever that she be taxed in two countries, making taxation of her income extremely burdensome."

e) She concludes by stating that: "it is clear that in the case at hand we are faced with a flagrant situation of double taxation which can be defined as a situation in which the same taxable event integrates the hypothesis of incidence of two different tax norms; The Tax Administration intends to tax in Portugal income that was obtained and already taxed in Norway." Furthermore, she asserts in support of her position that she does not fall within any of the paragraphs provided for in Article 16 of the Personal Income Tax Code (CITC), for which reason "she cannot be considered a resident in the national territory.", it being necessary to consider that she is a resident in Norway because it is there that "she lives most of the year (...) where she has her circle of friends and where she conducts all her social life", and in accordance with the provisions of paragraph (a) of section 2 of Article 4 of the Double Taxation Convention PT/Norway according to which "if the person has residence in both states, then it is presumed that she has residence in the country in which her personal and professional relations are closest".

f) Furthermore, regarding the provision of the Double Taxation Convention PT/Norway, the Claimant indicates Article 15 thereof, which provides that "a resident of a contracting state shall be taxed on his employment income in the country where he performs his work, and not in Portugal...". In the face of this legal provision, she understands that the "taxation of income earned abroad is violating the principle of territoriality (...) Going further, section 3 of the said article, providing that remuneration for employment on board an international ship or aircraft can be taxed in the Contracting State in which the company has its effective place of management, being in this case, the headquarters in Norway." Thus, "since the income was earned in Norway and was taxed there, it cannot be taxed again in Portugal, under penalty of violation of the Convention."

ii) Violation of the principle of decision, of collaboration with individuals and respect for the guarantees of taxpayers, motivated by the fact that the Tax Office did not render a decision on the request for revision of the tax act that the Claimant submitted within the legally prescribed period for such purpose, of 4 months.

III. The Respondent's Position

For its part, the TA presents its defense, by way of contestation and by way of exception.

i) By way of exception, the Respondent invokes the following situations:

  1. Of the absolute material incompetence of the arbitral tribunal, namely:

a) in proceeding to suspend the enforcement proceeding; and

b) to examine acts of rejection of requests for official revision that do not involve the examination of the legality of assessment acts", and

  1. Of the "expiry of the application for arbitral award".

a) In this sense, and with regard to the exception relating to the absolute material incompetence of the arbitral tribunal to proceed to suspend the tax enforcement proceeding, the Respondent invokes that this is not a matter that can be encompassed within the competence of the arbitral tribunal, in view of the conjunction of paragraph (a) of section 1 of Article 2, Article 4 of the LRAT and Article 2 of Ordinance no. 112-A/2011, of 22.03, "due to the lack of legal provision." Furthermore, arguing that "the incompetence of the tribunal constitutes a dilatory exception of ex officio knowledge that determines the dismissal of the instance in accordance with Article 575 and paragraph (a) of Article 577 of the Code of Civil Procedure (CCP) applicable by virtue of Article 29, section 1, paragraph (e) of the LRAT."

b) With respect to the invoked exception of absolute material incompetence of the arbitral tribunal to examine acts rejecting requests for official revision that do not involve examination of the legality of assessment acts, the Respondent argues that, being in a situation where there was tacit rejection of the request for official revision, there is no examination of the assessment act, or any decision on the admissibility of that request, whether on the untimeliness of its submission or any examination of the verification or not of the other requirements established by formal and material law. Thus, it concludes to the effect that: "... is equally excluded from arbitral jurisdiction, by not being covered by section 1 of Article 2 of the LRAT, the examination of acts rejecting requests for official revision that do not involve examination of the legality of assessment acts." It cites and transcribes relevant doctrine and arbitral case law, concluding by referring that "... is not within the scope of its competence (of the Arbitral Tribunal) to examine the legality or illegality of decisions of tacit rejection of requests made under Article 78 of the LGT.", further referring to it being a dilatory exception preventing knowledge of the merits of the case, barring knowledge of the request and leading to the dismissal of the TA from the instance.

c) And, with respect to the exception invoked "Of the expiry of the application for arbitral award", the Respondent understands that the application for arbitral award is untimely, for not complying with the 90 days counted from the end of the period for voluntary payment of tax obligations, in that "it is without any margin for doubt that, and not the decision rejecting the request for official revision that is the subject of the present application for arbitral award."

Concluding, thus, to the effect that "the assessment now being challenged identified with number 2013… and issuance of the corresponding collection note in the amount of €7,147.34 was notified by registered mail of 13-11-2013, received on 15-11-2013, with registration number RY…PT, whose payment deadline occurred on 09-12-2013". Now, with this application for arbitral award being submitted on 29-12-2014 it is manifestly untimely.

Ending by stating that "the expiry of the right of action is a dilatory exception that determines the dismissal of the Respondent from the instance under paragraph (h) of section 1 of Article 89 of the Code of Procedure in Administrative Courts, and paragraph (e) of section 1 of Article 287 of the Code of Civil Procedure (CCP) applicable by virtue of Article 2 of the LRAT.

iii) By way of contestation, the Respondent invokes that "on 31.12.2010 the Claimant had fiscal residence in Portugal." Having earned, in that year, "income in Norway", which were taken into account for purposes of PIT assessment for the year 2010, to the extent that the foreign tax paid was accounted for in the deductions from tax liability.

a) The Respondent understands that the Claimant failed to prove that it was her burden to prove that she has resided in Norway for more than 20 years, nor that "the property located in Portugal of which she is the owner, is not domiciled by her, much less that only her mother resides there." In fact, the Respondent continues, "it is evident and axiomatic that the Claimant, on 31.12.2010, owned a dwelling in Portugal to which corresponded (and corresponds) her tax domicile and that, as such, suggested her intention to maintain it as her habitual residence.", for which reason "no censure can be found in the TA's conduct.

b) With respect to the concept of fiscal residence provided for in the Double Taxation Convention, the Respondent refers that: "in the Exchange of Information with the Tax Authority of Norway this did not ascertain that the Claimant had a permanent dwelling in Norway", this authority having notified "the Claimant at her tax domicile (in Portugal), treating her (...) as a resident in Portuguese territory." Concluding, on this matter, to the effect that: "in view of the facts ascertained (by the Norwegian TA) and in accordance with the provisions of paragraph (b) of section 1 of Article 16 of the CITC, no other conclusion can be reached than the incontrovertible one of the Claimant's residence in Portugal."

c) Furthermore stating, also, that "the Norwegian Tax Authority understood, on 19.09.2013, to reiterate the above conclusion, considering Portuguese workers employed in the service of the company E…, as fiscal residents in Portugal."

d) Finally, the Respondent understands that: "from what comes before, it follows that the TA correctly applied the applicable rules, in that from the combined application of section 3 of Article 15 and section 1 of Article 23 of the Double Taxation Convention, whether the wording in force at the time of the facts, or the current wording, results the assignment of a cumulative international tax competence of the Source State (Norway) and of the Residence State (Portugal), provided that a tax credit is granted, as it was, for the tax already paid in the Source State by the Residence State, in order to eliminate international double taxation".

e) Concluding, to the effect that "the pretensions set forth by the Claimant lack foundation, both in the sense of carrying out official revision, and in the sense of imputing any illegality, non-existent to the assessment in question."

IV. Preliminary Matters

The Tribunal is competent and regularly constituted, in accordance with paragraph (a) of section 1 of Article 2 and Articles 5 and 6, all of the LRAT.

The parties have legal personality and capacity, are shown to be legitimate and are regularly represented.

However, and taking into account that the Respondent invoked, in its answer, i) the exception "of absolute material incompetence of the arbitral tribunal to proceed to suspend the enforcement proceeding; ii) the exception of absolute material incompetence of the arbitral tribunal to examine acts rejecting requests for official revision that do not involve examination of the legality of assessment acts", and iii) the exception of "expiry of the application for arbitral award" and since the eventual merit of any of these exceptions could prevent knowledge of the merits of the request and could lead to the dismissal of the Respondent, they will be duly examined in the first instance.

Let us then examine, one by one, the matter of the exceptions invoked:

A. Of the alleged "exception relating to the material incompetence of the Arbitral Tribunal to proceed to suspend the enforcement proceeding".

As for the first exception, the Respondent invokes in support of its position paragraph (a) of section 1 of Article 2, Article 4, both of the LRAT and Article 2 of Ordinance no. 112-A/2011, of 22 March, to state that the matter relating to the enforcement proceeding is not covered within the scope of material competence of the Arbitral Tribunal.

Indeed, the Respondent understands that the Claimant seeks the suspension of the enforcement proceeding, but that this claim cannot be upheld for the reason that it considers that the Arbitral Tribunal "... is incompetent ratione materiae to examine and decide the Claimant's request regarding everything that relates to examination of the matter relating to the tax enforcement proceeding, due to lack of legal provision". And it cites case law that supports it.

The incompetence of the Tribunal, the Respondent insists, "... constitutes a dilatory exception of ex officio knowledge that determines the dismissal of the instance in accordance with Articles 576 and paragraph (a) of Article 577 of the Code of Civil Procedure (CCP) applicable ex vi Article 29, section 1, paragraph (e) of the LRAT, which is hereby requested."

Indeed, it should be recalled that the Claimant concludes her initial Application requesting, in addition to the annulment of the assessment made, "the suspension of the tax enforcement proceeding".

Now, on this matter the Claimant was notified, by Order of the Arbitral Tribunal of 17/7/2015, to, in view of the exceptions invoked by the Respondent, come forward to pronounce on them, making use of the principle of due process.

And thus did the Claimant, which by application filed on 3 August 2015, in which after explaining the reasons underlying the suspension of the enforcement proceeding, and beginning by manifesting knowledge of the mechanism at her disposal to suspend such proceeding, comes to clarify the Tribunal that, among what is intended that the tribunal actually pronounce on, is the examination of the assessment act that gave rise to such enforcement proceeding and whose legality she calls into question.

Although, clearly, she does not deny that her application contained such reference, the Claimant concludes that the suspension of the enforcement proceeding is not the object of this arbitral procedure, thus correcting the error that appears in the conclusions of her initial application.

And she did so rightly, for the Respondent TA is correct, since it is to the tax enforcement body that undoubtedly falls the competence to examine and decide on the suspension of enforcement proceedings (See, among others, Article 199 of the Code of Tax Procedure and Process (CTPP)).

Having the party withdrawn from her request the said suspension, the Tribunal will not pronounce on it, which it would never do anyway, for being incompetent ratione materiae for such examination, by virtue of the provisions invoked by the Respondent in its Answer.

B. Of the alleged exception "Of the incompetence of the Tribunal to examine acts rejecting requests for official revision that do not involve examination of the legality of assessment acts.

To sustain this exception, the Respondent invokes the argument that, being a situation of tacit rejection of the request for official revision, there is no examination of the assessment act, nor any decision on the admissibility of that request, on the untimeliness of its submission or, furthermore, any examination of the verification or not of the other requirements established by formal and material law.

Concluding that:

"... is equally excluded from arbitral jurisdiction, by not being covered by section 1 of Article 2 of the LRAT, the examination of acts rejecting requests for official revision that do not involve examination of the legality of assessment acts."

It cites and transcribes relevant doctrine and arbitral case law, concluding by referring that "... is not within the scope of its competence (of the Arbitral Tribunal) to examine the legality or illegality of decisions of tacit rejection of requests made under Article 78 of the LGT.", being consequently a dilatory exception preventing knowledge of the merits of the case, barring knowledge of the request and leading to the dismissal of the TA from the instance.

Notified to pronounce on the invoked dilatory exceptions, the Claimant defended the competence of the Arbitral Tribunal to examine the request, manifesting the understanding that arbitral tribunals are competent to declare the illegality of tax assessment acts, and it is precisely that which is at issue in the present proceeding – the assessment act of PIT for the year 2010.

The remaining argument used relates to the censure by the Claimant of the conduct of the Respondent, for not having dignified itself to expressly respond to her request for official revision, in violation of the provisions of Article 56 of the General Tax Law (LGT).

Now, if self-assessment, withholding at source and advance payment lack prior complaint to guarantee their challengeability, being thus at issue a second-degree act, nothing prevents that such challengeability is also accepted when the second-degree act in question is the rejection, express or tacit, of a request, timely, for official revision.

Indeed, in this case the impugned assessment did not pass through the scrutiny of examination of legality by the TA, which is required in acts of self-assessment, withholding at source and advance payment, and which, as such, requires prior administrative complaint, but such opportunity is nonetheless given to the TA, in this case, through the examination of a request for official revision. Thus, the taxpayer should not be penalized if, through delay, neglect or negligence (or accumulation of service), the TA does not pronounce on the request for official revision in timely fashion.

This serves to say that, both is challengeable the express rejection of the request for official revision, as is the tacit rejection of that same request.

For purposes of its challengeability, this act is also considered an act that involves examination of the legality of the assessment act.

And it is this that the Supreme Administrative Court itself has upheld (See, among others, Judgment of the SAC, of 8.7.2009, extracted in Proc. no. 0306/09, Judgment of the SAC of 6.10.2005, Proc. no. 01166/04 and more recently Judgment of the SAC of 2.7.2014, Proc. 01950/13), and which the present tribunal concurs, according to which:

"II - The tacit rejection of a request for official revision of an assessment act, based on its illegality, must be considered, for the purposes of paragraphs (d) and (p) of section 1 of Article 97 of the C.T.P.P., as an act that involves examination of the legality of an assessment act.

III - Consequently, the appropriate procedural means to challenge this tacit rejection is the judicial challenge proceeding and not contentious review.

IV - If contentious review is used to challenge such act an error in procedural form occurs." (Excerpt from the Judgment of the SAC rendered in process no. 01166/04, of 06.10.2005)

The Respondent thus lacks reason as to this invoked exception.

In view of the foregoing, the present tribunal considers that the exception of material incompetence of the Tribunal invoked by the Respondent should not be upheld.

C. Of the alleged exception "Of expiry of the application for arbitral award".

Regarding the third and final exception, the Respondent invokes that the period for submission of the application for constitution of the Arbitral Tribunal is 90 days, counted from the date of the facts provided for in sections 1 and 2 of Article 102 of the CTPP (See section 1 of Article 10 of the LRAT) namely, from the end of the period for voluntary payment of tax obligations (namely, we say). Now, identifying the Claimant as the tax act subject of the application for arbitral award the PIT assessment for 2010, the Respondent understands that, underlying the application for arbitral award submitted by the Claimant, is the annulment of the decision rejecting the request for official revision. The Respondent continues, mentioning that the impugned assessment was subject to issuance of the collection note in the amount of €7,147.34, which was notified by registered mail of 13.11.2013 received on 15.11.2013, whose payment deadline occurred on 9.12.2013. Thus, the submission of the application for constitution of the Arbitral Tribunal by the Claimant on 29.12.2014 is untimely, for exceeding the aforementioned 90-day period, for which reason, consequently, the expiry of the right of action is verified, which constitutes a dilatory exception determining the dismissal of the Respondent from the instance.

For its part, and with respect to this alleged untimeliness, the Claimant develops, regarding the requirements for submission of a request for official revision, a dissertation, in which she invokes law, and case law in her favor.

Now, admitting that the present tribunal, so that the application for arbitral award is considered timely, not referring to dates, but on the presumption that what falls to the Tribunal to decide is the expiry or not of the right of action, being, in addition to an impugning of an assessment act of a tax, an impugning of the tacit rejection of the request for official revision of the assessment act of PIT for 2010, one should bear in mind that, in accordance with the provisions of paragraph (a) of section 1 of Article 10 of the LRAT, combined with Article 102 of the CTPP, to which it refers, the period for submitting this application for constitution of the arbitral tribunal begins with the presumption of tacit rejection.

Thus, considering that the request for official revision was submitted by the Claimant on 01.08.2014, its tacit rejection occurred on 01.12.2014, in accordance with the provisions of section 1 of Article 57 of the LGT.

In this light, the 90-day period for submission of this application for constitution of the tribunal would only expire on 01.03.2015. Now, considering that the application for constitution of this tribunal took place on 29.12.2014, it is manifest that it is timely, being thus to be considered unjustified also this exception presented by the Respondent of expiry of the application for arbitral award.

Given that the merits of the case will be examined, all the exceptions invoked by the Respondent having been rejected.

V. Factual Matters

Facts established as proven with relevance to the decision are the following:

A. On 30.09.1992, the Claimant acquired the autonomous fraction designated by the letter "B" of the property located on Rua ..., no. ..., which corresponds to the ...., in Montijo, described in the Registry of Civil, Property and Motor Vehicle Registry of Montijo under number .../..., having her tax domicile there. (cfr. Doc. no. 2 and 5 attached to the initial petition);

B. In the year 2010, the Claimant paid to Caixa Geral de Depósitos, by way of loan no. ..., the amount of €2,204.52, corresponding to €1,799.88 amortizations and €404.64 interest. (cfr. Doc. no. 4 attached to the initial petition);

C. On 31.12.2010 the Claimant had residence in Portugal, at ..., no. ..., ...-... Montijo. (cfr. Doc. no. 2 attached to the initial petition, and administrative proceeding);

D. The Claimant works on board the ship "G…" which travels between Oslo and Kiel, belonging to a company with headquarters in Norway, called "E….", since 29 July 1998, performing there the functions of restaurant assistant. (cfr. Doc. no. 1 attached with the submissions of the Claimant and at fls_ of the administrative proceeding);

E. The Claimant is registered in the taxpayer registry of the TA's computer system as a resident in Portugal, a situation which has been in effect since 22.10.1995 and which remained, at least until the date of submission of the application for constitution of the arbitral tribunal. (cfr. Doc. no. 1 attached to the answer);

F. In the year 2010, the income earned by the Claimant was subject to taxation in Norway. (cfr. Doc. no. 3 attached to the initial petition);

G. The Norwegian tax authority notified the Claimant of the tax assessment act (Norwegian tax) on the income earned in the year 2010, to Rua ..., no. ...-..., ...-... Montijo, Portugal. (cfr. Doc. no. 3 attached to the initial petition);

H. The Claimant's tax situation was subject to an inspection proceeding, initiated pursuant to Service Order no. OI2013… of 03.04.2013, Activity Code 11122002, issued by the Tax Inspection Service of the Finance Office of ..., motivated by spontaneous exchange of information under the Double Taxation Convention concluded between Portugal and Norway. (cfr. fls_ of the administrative proceeding);

I. The Claimant did not submit her PIT Return Form 3 in Portugal, this having been completed officially by the Tax and Customs Authority on 16.10.2013. (cfr. fls_ of the administrative proceeding);

J. On 01.01.2014 the Tax Enforcement Proceeding no. …2014… was initiated by the Finance Office of ..., for coercive collection of the amount of €7,147.34 (seven thousand, one hundred and forty-seven euros and thirty-four cents), relating to PIT for the year 2010. (Cfr. fls._ of the administrative proceeding);

K. On 17.04.2014 the Claimant submitted a request for payment in installments to the Finance Office of ..., within the Tax Enforcement Proceeding no. …2014…. (cfr. Doc. no. 5 attached to the initial petition);

L. On 01.08.2014 the Claimant submitted a request for official revision of the tax act to the Finance Office of ..., regarding the assessment of Personal Income Tax (PIT) for the year 2010. (Cfr. fls._ of the administrative proceeding);

M. On 23.02.2015, an order in agreement was issued by the Head of the Division of International Relations Services to the effect of maintaining the impugned act, affirmed by Opinion no. …/2015, of 19.02.2015 regarding the request for revision submitted by the Claimant. (cfr. at fls_ of the administrative proceeding).

VI. Justification of the Factual Matters

For the conviction of the Arbitral Tribunal, with respect to the facts established as proven, the documents attached to the proceedings were relevant, as well as the administrative file, everything analyzed and weighed in combination with the pleadings.

It should be noted that, in the context of submissions, the Claimant came to attach to the proceedings a document issued by the company E…, ..., dated 13 March 2015, which attests that she has been its employee since 29 July 1998, performing the functions of restaurant assistant. It happens that the Respondent understands that the document in question should be removed by bringing "aggregated new factuality", being "in itself contradictory of the conclusions set forth by the Norwegian authorities which never treated the Claimant, and other workers in similar situations, as residents", thus invoking that its acceptance is violative of the principle of preclusion and equality of the parties.

Now, notwithstanding the date of the document now attached being prior to the date of its presentation, the tribunal considers, in view of the principle of free evaluation of evidence, that it will remain in the proceedings, since it does not entail new facts, but merely complements to those already in the proceedings, having no influence on the decision of this judgment.

VII. Facts Given as Not Proven

There is only one fact that was not established as proven, for there being no reference in the proceedings regarding the same:

Sole item – It is not established as proven that the Claimant has a permanent dwelling in Norway.

VIII. Grounds of Law

The following are the issues to be examined and decided:

a) To ascertain whether the Claimant should be considered a resident in Norway or in Portugal, in view of the norms of the Convention to Avoid International Double Taxation, and consequently, to ascertain whether she can be taxed in Portugal for the income earned in the year 2010, arising from the dependent work she performed on board a ship owned by a Norwegian company;

b) To ascertain whether the PIT assessment act for the year 2010 is illegal for suffering from the vice of violation of the principles of tax procedure, namely: principle of collaboration, of decision, of respect for the guarantees of taxpayers.

Let us see,

1. Of the Convention to Avoid or Eliminate Double Taxation concluded between Portugal and Norway - international law and domestic law -

Regarding the first issue, and having in mind that the case at hand is susceptible to being integrated into a situation of international double taxation, we will inquire somewhat into this matter, to subsequently reach the key matter of the present proceedings.

Thus, double taxation is a concept with which in Tax Law are designated the cases of concurrence of norms. This concurrence is characterized by the existence of the same fact being integrated into the provision of two different norms. There is, thus, concurrence of norms of Tax Law when the same fact is integrated into the hypothesis of incidence of two distinct material norms, giving rise to the constitution of more than one tax obligation.[1]

This concurrence of norms can occur in different States, embodying, given the existence of identity of the tax fact and plurality of norms of taxation belonging to different legal tax systems, the so-called International Double Taxation.

The identity of the tax fact, to be verified, requires that between the two (or more) taxation there exist: identity of the object; identity of the subject; identity of the tax period and identity of the tax. "With regard to the latter identity, it is said that there is identity of the tax, when, in both legal systems, the tax has identical substantial nature."[2]

Now, in order to eliminate international double taxation and avoid the negative consequences that it represents for the development of international economic activity, two types of instruments have been made available to States, namely:

i) unilateral measures – internal provisions of States – and;

ii) bilateral measures – treaties or conventions on international double taxation.

With regard to unilateral measures, Américo Brás Carlos teaches that " Unilateral mechanisms are, as the name itself indicates, internal mechanisms for eliminating international double taxation adopted by each State, without the necessary correspondence in other legal systems. These mechanisms may act with respect to taxable income earned abroad, exempting it (full or progressive exemption), or with respect to the tax paid there, permitting its deduction from the tax to be paid in the country of its residence (tax credit, such as Article 81 of the CITC and Article 91 of the CIRTC)."[3]

As for bilateral measures, we have the so-called Conventions to Eliminate International Double Taxation, which are embodied in "international treaties concluded between two States – State of the source and the State of residence – through which they regulate between themselves the manner of taxing facts which, by virtue of the elements of connection used are comprised within the scope of application of taxation of both States, in order to eliminate double taxation."[4], which while not completely eliminating double taxation, may always attenuate it, and regarding which we have already had the opportunity to refer above.

Let us see,

A. Concept of Fiscal Residence in International Convention Law and Domestic Law

The analysis of the concept of fiscal residence becomes fundamental within the scope of Conventions to avoid double taxation and prevent tax evasion in respect of taxes on income and capital concluded between States.

Indeed, and considering that in the present proceeding we are faced with a situation in which the Claimant is being taxed in Norway and in Portugal for the income earned as an employee on board a Norwegian ship for a company headquartered in Norway, it will be useful to mention that between these two States was concluded the Convention to Avoid Double Taxation and Prevent Tax Evasion in Respect of Taxes on Income and Capital, approved by Decree-Law no. 504/70, of 27.10 (with exchange of ratification instruments on 01.09.1971, Notice in OG, IS, 15.10.1971, in force since 1 January 1972), and the same regime results from the new Convention between the Portuguese Republic and the Kingdom of Norway to Avoid Double Taxation and Prevent Tax Evasion in Respect of Taxes on Income, approved by Resolution of the AR no. 44/12, of 12.04 (with exchange of ratification instruments on 15.03.2013), in force since 15 June 2012, and to which we will need to resort to ascertain whether the Claimant is considered as a resident in Portugal or in Norway.

Let us see,

In accordance with the provisions of Article 1 of the Convention, this applies to persons resident in one or both Contracting States.

Indeed, and given the primacy of international law over domestic law, provided for in Article 8 of the Constitution of the Portuguese Republic, it seems prudent to us to define, at the outset, the concept of fiscal residence for purposes of application of the Convention, a concept that cannot be confused with the concept of fiscal residence for purposes of domestic law.

Thus, Article 4 of the Convention provides, under the heading "Tax domicile" that:

  1. For purposes of this Convention, the expression "resident of a Contracting State" means any person who, by virtue of the legislation of that State, is there subject to tax due to his domicile, residence, place of management or any other criterion of a similar nature.

  2. When, by virtue of the provision in section 1, an individual is a resident of both Contracting States, the situation shall be resolved in accordance with the following rules:

a) Shall be considered a resident of the Contracting State in which he has a permanent dwelling at his disposal. If he has a permanent dwelling at his disposal in both Contracting States, shall be considered a resident of the State with which his personal and economic relations are closest (centre of vital interests);"

Now, notwithstanding the concepts of (fiscal) residence for purposes of the Convention and for purposes of domestic taxation not coinciding, the truth is that the Convention in question in the present proceedings, following the OECD Model Convention, refers the definition of the conventional concept of residence to the domestic legislation of the contracting States.

Thus, and with the Convention referring to the notion of residence of each State, it can happen that a person is considered a resident in both different States, embodying itself thus in a positive conflict. In this case, one should resort to the provisions of section 2 of Article 4 of the Double Taxation Convention, in order to delineate the most correct path to determine fiscal residence, following the rules provided therein.

Within these rules, the one that appears first is the one that passes through ascertaining whether the passive subject has permanent residence in any of the contracting States. If he has permanent residence in only one of the States, it should be concluded that he should be considered a resident of that same State. If he has residence in both States, it becomes necessary to inquire about another element of connection that better identifies the State of residence, such as, the State in which the passive subject has the centre of his vital interests, that is, where his personal and economic relations are closest.

In Portuguese domestic law, the concept of fiscal resident is provided for in Article 16 of the Code of Personal Income Tax (CITC), according to which:

"Resident in Portuguese territory are persons 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, there have available, on 31 December of that year, a dwelling in conditions that make suppose the intention to maintain and occupy it as habitual residence."

Now, from the facts established as proven it results that the Claimant, in the year 2010, worked for company E…, …. a company headquartered in Norway, performing the functions of restaurant assistant, on board a Norwegian ship, being on this, precisely, 183 days per year.

On the other hand, from the facts established as proven it results that the Claimant had, on the date of 31 December 2010, a dwelling in Portugal in conditions that make suppose the intention to maintain and occupy it as habitual residence, not having been established as proven that she had a dwelling in Norway.

Added to these facts, it is further recorded in the facts established as proven that the Norwegian Tax Authorities consider that, in the year 2010, the Claimant was a resident in Portugal.

And so much so that they proceeded to notify the tax assessment act on the income earned in 2010, taxed in Norway, to Rua … no. ...- …, ...-... Montijo, Portugal, not having done so, however, to any other address that would be located in Norway, or in any other country.

And why would they have done so to Portugal?

Probably, because they had no record of another tax domicile, namely in Norway and thus considered the Claimant as non-resident (as results from Doc. no. 3 attached to the initial petition), although, given the provision in section 3 of Article 15 of the Double Taxation Convention Portugal-Norway, they considered themselves competent for the taxation of income earned on board the identified ship. This competence could result from the fact that the Norwegian Tax Authorities conclude that the company paying the income is headquartered in Norway.

Now, having in mind Article 16 of the CITC and Article 4 of the Double Taxation Convention, we can conclude that the Claimant, having permanent residence at her disposal, only in Portugal (and not in Norway), should be considered as a fiscal resident in Portugal, even if the source of the income that she earns is Norway.

It is concluded, thus, that the Claimant, in the year 2010, should be considered a fiscal resident in Portugal, for the requirements for such to be shown as met, provided for in Article 4 of the Double Taxation Convention Portugal-Norway and of Article 16, section 2 of the CITC.

Thus, and at a first moment, considering the Claimant a resident in Portugal, and equipping ourselves with the internal legal norms, we have that PIT applies, in accordance with the provision in Article 15, section 1 of the CITC on the totality of her income, which means that, the Claimant earning income only in Norway, and being considered a resident in Portugal, it is in this latter State that the Claimant would have to declare it, and here be taxed.

However, and considering that the Claimant performed functions on board a Norwegian ship, it becomes necessary to ascertain what the Double Taxation Convention provides regarding income earned in these circumstances.

Now, the Double Taxation Convention Portugal-Norway provides in its Article 15 that: "

  1. Save as otherwise provided in Articles 16, 18, 19 and 20, salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised therein, such remuneration as is derived therefrom may be taxed in that other State.

  2. Notwithstanding the provision in section 1, salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in the first-mentioned State if:

a) The recipient is present in the other State for a period or periods not exceeding in the aggregate one hundred and eighty-three days in any calendar year in question; and

b) The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

c) The remuneration is not borne by an establishment or a fixed base which the employer has in the other State.

  1. Notwithstanding the foregoing provisions of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised aboard a ship or aircraft engaged in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated."

Discerning this norm, we can infer that the general rule of taxation of dependent employment income provided for in section 1 is that when we are faced with a situation in which there is a resident in one of the contracting countries and his source of income is in the other State, the tax competence is cumulative, i.e., both Contracting States can proceed to the taxation of that income.

Section 2 provides as to the conditions for cumulative verification for the competence to be exclusive of the State of residence.

Section 3, with application in the concrete case, to the extent that the Claimant exercises the functions of restaurant assistant on board a ship belonging to a Norwegian company, re-establishes the rule of cumulative tax competence (of the State of residence and of the State where the effective place of management of the employer company is situated).

Thus, considering that the Claimant is a resident in Portugal, but works and performs the functions of restaurant assistant on board a ship belonging to a Norwegian company, we can conclude that either of the States - residence or source – have competence to tax the income earned by her in Norway, for which reason, in order to avoid an illegal situation of double taxation, measures must be adopted to avoid, attenuate or eliminate this double taxation, by the state of residence, in accordance with the provision in Article 23 of the Double Taxation Convention, and consequently, in Article 81 of the CITC.

B. Of Unilateral Measures for Elimination of International Double Taxation in Portugal – Article 81 of the CITC

Individuals resident in Portugal are taxed, in accordance with Article 15, section 1 of the CITC, as Personal Income Tax, on the totality of their income, including that obtained outside that territory, in accordance with the principle of universality.

"In Portuguese tax law, it is the principle of universality (of totality, of unlimited taxability or of world-wide income) that governs the taxation of individuals and legal persons. The principle of universality – whose origins go back to the Prussian Law of 24 July 1891, of the income tax and to the American income tax of 1913 – is found among us sanctioned, as regards individuals in Article 1, section 2 of the CITC, according to which "income, whether in cash or in kind, is subject to taxation, whatever the place where it is obtained, the currency and the form in which it is earned"; and also in Article 15, section 1 of the same Code, according to which "being individuals resident in Portuguese territory, PIT is levied on the totality of their income, including that obtained outside that territory." [5]

In this sequence, and according to teaches, furthermore, that Author, "As a rule, legislations that enshrine the principle of universality contain unilateral provisions intended to eliminate or attenuate the double taxation to which it can lead, providing for the grant of a tax credit for international double taxation.

With respect to individuals – which occupies us here – similar provisions apply. Thus, in the CITC, in its Article 81, section 1 it is provided that holders of the different categories of income obtained abroad have the right to a tax credit for international double taxation, deductible up to the extent of the portion of the tax liability proportional to this net income, which will correspond to the lesser of the following amounts: (i) income tax paid abroad; (ii) fraction of the PIT tax liability, calculated before the deduction, corresponding to the income that in that country can be taxed, net of specific deductions provided for in the said Code.

According to section 2 of this article, when there is a convention to avoid double taxation concluded by Portugal, that deduction cannot exceed the tax paid abroad, in accordance with the terms provided for in the convention."[6]

In the case at hand in which the State of the source (Norway) where the income is obtained can also tax that income, it will fall to the State of residence – in the present case – Portugal – to eliminate or attenuate the double taxation, according to the method of exemption or imputation (or credit) of foreign tax, which is provided for in Article 81 of the CITC.

Now, Article 81 of the CITC under the heading: "elimination of international double taxation", in its section 1, provides the rule regime, according to which: "holders of income of the different categories obtained abroad have the right to a tax credit for international double taxation, deductible up to the extent of the portion of the tax liability proportional to this net income, considered in accordance with the provisions of paragraph (b) of section 6 of Article 22, which will correspond to the lesser of the following amounts:

a) Income tax paid abroad;

b) Fraction of the PIT tax liability, calculated before the deduction, corresponding to the income that in that country can be taxed, net of the specific deductions provided for in this Code."

And, in its section 2, which will be the exception to that section 1, it is provided that: "when there is a convention to eliminate international double taxation concluded by Portugal, the deduction to be effected in accordance with the preceding section cannot exceed the tax paid abroad in accordance with the terms provided for by the convention."

It results thus, from the combination of these sections of Article 81 of the CITC, transcribed above, that section 1 is a unilateral measure of elimination or mitigation of international double taxation of income tax paid abroad not provided for in a Double Taxation Convention, and which will be the GENERAL RULE, while section 2 prescribes situations in which the limits provided for can be encompassed without, however, exceeding the deductions provided for in the Convention.

According to our understanding, this section 2 embodies, in the words of Américo Brás Carlos" (...) unilateral measures [which] can be applied jointly with bilateral measures resulting from conventions to avoid international double taxation that limit the taxation of the source country (or origin) of the income to a rate lower than normal. The consequence is that the deduction from Portuguese tax liability of foreign tax cannot be higher than the tax paid abroad in accordance with the terms provided for in the convention"[7] – V.G. Article 81, section 2 of the CITC.

This means that the application of section 2 of Article 81 of the CITC employs, only, a limit to the deduction of taxes provided for in a Double Taxation Convention, limit which cannot be higher than the tax paid abroad, in accordance with the term provided for in the convention.

Now, having in mind that the Claimant declared the income she earned in the year 2010 through the exercise of her functions as a restaurant assistant on board a Norwegian ship, and that she paid Norwegian tax in the amount of €6,379.69 (six thousand, three hundred and seventy-nine euros and sixty-nine cents), this should be taken into account for purposes of the tax credit to be granted in Portugal, that is, by its State of residence.

Indeed, from the administrative file and from the demonstration of PIT assessment regarding the year 2010 (cfr Doc. no. 3 attached to the Answer) it results that this credit was granted to the Claimant, in the deductions from tax liability, in the global amount of €6,640.94, of which €261.25 corresponds to the personal deduction of the passive subject (paragraph (a) of section 1 of Article 79 of the CITC) and €6,379.69 relates to tax credit borne abroad (paragraph (a) of section 1 of Article 81 of the CITC), for which the Tribunal considers to have complied with the provision in Article 23 of the Double Taxation Convention and Article 81 of the CITC, being without foundation the present impugning in this part.

The Tribunal understands that the TA made a correct application of the applicable tax norm, there being nothing to censure regarding this aspect of the impugned act.

Of the Principles Enshrined in the General Tax Law Relating to Tax Procedure.

The Claimant invokes that the conduct of the Tax and Customs Authority, in not having rendered a decision within the 4-month period provided for in the Law on the request for revision of the tax act that she submitted on 01.08.2014, suffers from a vice of violation of the principle of decision, of collaboration with individuals and respect for the guarantees of taxpayers.

Now, the principle of decision finds its provision in Article 9 of the Administrative Procedure Code (Old CPA, with similar wording in Article 13 of the New CPA), according to which:

1 - Administrative bodies have, in the terms regulated in this Code, the duty to pronounce on all matters within their competence that are presented to them by individuals and, namely:

a) On matters that directly concern them;

b) On any petitions, representations, complaints or protests formulated in defense of the Constitution, laws or the general interest.

2 - There is no duty of decision when, less than two years before the date of submission of the application, the competent body has taken an administrative action on the same request made by the same individual with the same grounds."

Indeed, this principle also has expression in tax law, namely in Article 56 of the LGT which provides that:

"1 - The tax administration is obliged to pronounce on all matters within its competence that are presented to it by means of complaints, appeals, representations, statements, protests or any other means provided for in the law by taxpayers or whoever has legitimate interest.

2 - There is no duty of decision when:

a) The tax administration has pronounced within less than two years on a request by the same author with identical object and grounds;

b) The legal period for revision of the tax act has been exceeded."

In fact, this Article 56 of the LGT should be combined with Article 57 of the same decree, bearing in mind that it sets forth the principle of celerity in tax procedure, based on the principles of deregulation and efficiency of the TA, according to which "Tax procedure must be concluded within four months, and the tax administration and taxpayers must refrain from practicing useless or dilatory acts."

Now, in this sense, it is prudent to refer that a taxpayer's claim directed to the tax administration has one of two possible outcomes: approval or rejection, which can be total or partial, and which can be express or tacit.

The tacit rejection of any tax procedure finds its provision in section 5 of Article 57 of the LGT, which should be interpreted as a guarantee of taxpayers against the inertia of the tax administration, since the failure, within the 4-month period, to conclude the tax procedure on a taxpayer's claim directed to the tax body, confers on the interested party, unless otherwise provided by law, the faculty to presume that claim rejected, being able to react accordingly against this tacit rejection.

Indeed, this tacit rejection does not relieve the TA of the obligation to pronounce on the petition that was directed to it. At least this relief does not result from any legal provision, quite the contrary, it seems to maintain the obligation to make known to the interested party the decision reached on his claim (Article 268 CRP and Article 56 LGT).

In fact, examining the administrative proceeding, we find that at a later time following the submission of the application for constitution of the present tribunal, the Respondent, in the person of the Head of the Division of International Relations Services, issued an Order in agreement with Opinion no. …/2015, of 19.02.2015, concluding, after examining the revision request, that it "lacks legal foundation and the impugned act should be maintained."

In this way, it is manifest that the Respondent, not complying with the 4-month period to decide or pronounce on the request for revision of the tax act, did not violate any principle established for the administrative phase, having with this conduct opened the possibility for the Claimant to achieve other means of challenging the controversial assessment act, for which reason also, on this matter, the Tribunal considers that the Claimant's claim should not be upheld.

In view of all the foregoing, it is concluded by the legality of the PIT assessment act for the year 2010, for which reason it should be maintained in the legal order.

DECISION

On the basis of the factual and legal grounds set forth above, it is hereby decided, by the unjustified nature of the claim, that the PIT assessment act for the year 2010 should be maintained in the legal order, in the amount of €7,147.34 (seven thousand, one hundred and forty-seven euros and thirty-four cents).

Value of the Proceeding

The value of the proceeding is fixed at €7,300.53 in accordance with Article 97-A, section 1, (a), of the CTPP, applicable by virtue of paragraphs (a) and (b) of section 1 of Article 29 of the LRAT and of section 2 of Article 3 of the Regulation of Costs in Tax Arbitration Processes.

Costs

Costs at the charge of the Claimant, in accordance with Article 12, section 2 of the LRAT, of Article 4 of the Regulation of Costs in Tax Arbitration Processes, and of Table I attached thereto, which are fixed in the amount of €612.00.

Let it be notified.

Lisbon, 15 December 2015

The Arbitrator

(Jorge Carita)

[1] Alberto Xavier, in International Tax Law, 2nd Edition, Almedina, pp. 30

[2] Américo Brás Carlos, in Taxes – General Theory, Almedina, p. 236

[3] Américo Brás Carlos, in Taxes – General Theory, Almedina, pp. 237 and 238

[4] Idem, p. 240

[5] Idem, p. 489

[6] Ibidem p. 494

[7] Américo Brás Carlos, in Taxes – General Theory, Almedina, p. 239

Frequently Asked Questions

Automatically Created

What did the CAAD decide regarding IRS tax residency under the Portugal-Norway Double Taxation Convention in process 846/2014-T?
The complete decision of CAAD in process 846/2014-T is not fully provided in the available excerpt. However, the case addressed whether the Claimant, who worked on Norwegian ships for over 20 years, was a Portuguese or Norwegian tax resident under the Portugal-Norway Double Taxation Convention. The Claimant argued she was a Norwegian resident under Article 4(2)(a) of the Convention because her center of vital interests—her closest personal and economic relations—were in Norway. She also invoked Article 15(3), which allows taxation of employment income from international ships in the state where the company has effective management (Norway). The Tax Authority challenged the tribunal's material competence to decide certain aspects of the case.
How does the Portugal-Norway Double Tax Treaty determine fiscal residency for IRS purposes?
Under the Portugal-Norway Double Taxation Convention, fiscal residency for IRS purposes is determined by Article 4. When a person is considered a resident of both contracting states, Article 4(2) provides tie-breaker rules: (a) the person is deemed resident in the state where they have their permanent home available; if they have a permanent home in both states, they are resident where their personal and economic relations are closest (center of vital interests); (b) if the center of vital interests cannot be determined, residency is where they habitually reside; (c) if they habitually reside in both or neither state, they are resident in the state of their nationality. Article 15 governs employment income, with Article 15(3) specifically addressing remuneration for work on international ships, allowing taxation in the state where the company's effective management is located.
What is the material competence of the tax arbitral tribunal in IRS disputes under the RJAT?
The material competence of the tax arbitral tribunal in IRS disputes under the RJAT (Decree-Law 10/2011) is defined in Article 2. The tribunal has jurisdiction to resolve disputes concerning the legality of tax assessment acts and other administrative acts in tax matters. However, in process 846/2014-T, the Tax Authority raised exceptions regarding absolute material incompetence, specifically challenging the tribunal's authority to: (a) suspend enforcement proceedings; and (b) examine acts rejecting requests for official revision. These exceptions highlight the jurisdictional boundaries of CAAD—certain procedural matters and preliminary administrative decisions may fall outside the tribunal's competence, requiring clarification of which tax disputes can be submitted to arbitration versus those that must follow other administrative or judicial channels.
Can the right of action expire (caducidade) in IRS arbitration proceedings before the CAAD?
Yes, the right of action can expire (caducidade) in IRS arbitration proceedings before CAAD. The title of process 846/2014-T specifically identifies 'caducidade do direito de ação' (expiration of the right of action) as one of the themes addressed. Under Portuguese tax procedural law, there are statutory limitation periods for challenging tax acts. Generally, taxpayers must file arbitration requests within specific timeframes from notification of the contested act or decision. If these deadlines are not met, the right to challenge the act expires through caducidade, and the tribunal lacks jurisdiction to hear the case. This procedural defense can be raised by the Tax Authority as a preliminary exception, as occurred in this case where multiple exceptions were invoked. The arbitral tribunal must examine such exceptions before proceeding to the merits of the dispute.
What are the procedural steps for filing an IRS tax arbitration request under Decree-Law 10/2011?
The procedural steps for filing an IRS tax arbitration request under Decree-Law 10/2011 (RJAT) are illustrated in process 846/2014-T: (1) The taxpayer submits a request for constitution of an arbitral tribunal together with the application for arbitral award to CAAD, in accordance with Articles 2(1)(a) and 10(1)(a) of the RJAT; (2) The President of CAAD examines the formal regularity of the request under Article 6(2)(a); (3) If accepted, the President notifies the Tax Authority, which becomes the Respondent; (4) An arbitrator is designated—either nominated by the claimant or appointed by the President of the Deontological Board; (5) The arbitral tribunal is formally constituted at CAAD headquarters; (6) The Respondent files its answer within the legal deadline, which may include exceptions; (7) A tribunal meeting is held under Article 18 to organize proceedings; (8) Parties submit written submissions; (9) The tribunal issues its award within the statutory period, which may be extended under Article 21(2). Payment of arbitration fees is required under the Regulation of Costs in Tax Arbitration Processes.