Process: 850/2014-T

Date: June 3, 2015

Tax Type: IRS

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 850/2014-T) addresses whether real estate capital gains tax is owed by the heirs of a deceased property owner or by the attorney-in-fact who executed the sale under an irrevocable power of attorney. In 2000, B... granted C... an irrevocable power of attorney to sell rustic property for €299,278.74, with C... paying the remaining price upon receiving the power. The power was expressly irrevocable, assignable in the attorney's interest, and survived B...'s death in 2006. In 2010, C... executed the deed of sale using this power. The Tax Authority assessed IRS capital gains tax on A... (B...'s heir) based on the 2010 deed execution. The taxpayer challenged this assessment, arguing he neither disposed of property nor received economic consideration. The central legal question concerns the timing of property transfer for IRS purposes: whether it occurred in 2000 when the irrevocable power was granted and remaining price paid, or in 2010 when the formal deed was executed. The case highlights the critical distinction between formal registration acts and substantive economic transfers in determining capital gains tax liability. It also demonstrates the CAAD arbitration process for challenging IRS assessments, including the taxpayer's right to seek annulment of assessments and compensatory interest. The decision has significant implications for understanding when irrevocable powers of attorney in the attorney's own interest constitute completed transfers for Portuguese tax purposes.

Full Decision

ARBITRAL DECISION

I. STATEMENT OF FACTS

A…, NIF …, residing at … Street, no. …, …-… Porto, hereby, pursuant to Article 10 of Decree-Law no. 10/2011 of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to as RJAT), requests the constitution of a singular Arbitral Tribunal, in which the Tax and Customs Authority is named as respondent, hereinafter referred to as AT or Respondent, with a view to obtaining the annulment of the Personal Income Tax assessment act no. 2014 …, in the amount of €36,371.19 (thirty-six thousand, three hundred and seventy-one Euros and nineteen cents), issued on 2.12.2014, as well as recognition of the right to indemnificatory interest.

The request for constitution of the Arbitral Tribunal was accepted by the Honourable President of the CAAD and subsequently notified to the AT on 30 December 2014.

In accordance with the provisions of subparagraph c) of Article 11, item 1 of the RJAT, in the wording introduced by Article 228 of Law no. 66-B/2012 of 31 December, the Arbitral Tribunal was constituted on 10 March 2015.

The AT submitted its response, contending that the claim should be deemed inadmissible.

The meeting referred to in Article 18 of the RJAT was dispensed with, and the holding of final arguments was dispensed with, in light of the nature of the matters contained in the proceedings.

The Arbitral Tribunal is regularly constituted and is materially competent, pursuant to subparagraph a) of Article 2, item 1 of the RJAT.

The parties have legal personality and capacity, are legitimate and are represented (Article 4 and item 2 of Article 10 of the RJAT and Article 1 of Ordinance no. 112/2011 of 22 March).

No nullities, exceptions or preliminary issues exist that would prevent the immediate examination of the merits of the case.

II. FACTUAL MATTERS

Based on the elements contained in the proceedings and the administrative file attached to the record, the following facts are considered proven:

A) On 28 March 2000, a promise to sell and purchase contract for a rustic property (hereinafter Property) designated "…" located in the place of … or …, parish of …, municipality of Paços de Ferreira, described in the Land Registry Office of Paços de Ferreira under number …, pp. … of book B-11 entry …, pp. 41, verso and 42 of Book G-40, registered in the respective matrix under the current articles … and … (which correspond to the former rustic articles …, … and … of the same parish), was executed between the promising seller B… and the promising buyer C….

B) In the capacity of promising seller, B… declared to undertake to transfer the said Property for the amount of €299,278.74;

C) The promising buyer C… delivered to the promising seller, at the time of execution of the promise contract, the sum of €74,819.68, as earnest money by means of a cheque;

D) The remaining price of €224,460.00 would be paid at the time of granting the irrevocable power of attorney by the seller in favour of the buyer, by which the latter irrevocably granted to the former the necessary powers to perform the promise contract on his behalf;

E) Pursuant to the promise to sell and purchase contract executed, with the granting of the power of attorney, the property shall be deemed delivered on the respective date and all charges affecting it shall be the responsibility of C…;

F) On 14 June 2000, B…, by notarial instrument, appointed C… as his Attorney-in-Fact, to whom he conferred the necessary powers to sell and execute the deed of sale relating to the said rustic property - "to perform the promise contract executed between both on 28 March 2000, executing the respective deed of sale, receiving the price and giving receipt (…)." (See Document no. 3);

G) The same power of attorney further provides that it "may be assigned in the interest of the attorney-in-fact and third parties, is irrevocable (…) and the powers conferred therein shall not lapse by death, legal incapacity, restriction of capacity or insolvency of the grantor, and may be exercised in the execution of transactions with the grantor themselves (…)".

H) On 12 March 2006, B… died;

I) On 31 March 2010, C…, holder of the irrevocable power of attorney and promising buyer of the property, executed with the company "D…–, Lda.", of which he was a partner and manager, the deed of sale of the properties already identified;

J) At the date of execution of the deed of sale, the property was still registered in the names of its owners B… and E…;

K) The Attorney-in-Fact C… received in the name of the deceased B… the sum of €299,278.74, having acted in the capacity of Attorney-in-Fact and having bought or sold nothing for himself;

L) The capital gain resulting from the sale of the rustic property was not declared in a Form 3/IRS declaration (Annex G), relating to the year 2010;

M) The AT issued the additional Personal Income Tax assessment act no. 2014 …, on the basis of the capital gains ascertained as a result of the disposition by B…'s Attorney-in-Fact, C…, on 31 March 2010, of the property already identified to the commercial company "D…, LDA", in the total amount of €299,278.74;

N) The AT considered in its final decision of the inspection procedure, filed under office memo no. …, dated 27/11/2014, that "Being the taxpayer the heir of B... – NIF …, deceased on 2006-03-12, should have declared in annex G of his 2010 IRS form 2 declaration the amount of €149,639.36, corresponding to his 50% share due to the disposition of two Rustic Properties – Parish … – Articles … and … in the total amount of €299,278.74, each one being €128,283.27 and €170,995.47 respectively, presented in form 11 declaration.";

O) "By consulting the Stamp Tax (IS) in the computer system, it can be verified that the said properties are part of the inheritance – NIF …, left by B…, appearing in the list of assets represented in the Finance Service Porto 3." (Document no. 2);

P) "In the notification made to the head of household/heir F… – NIF …, by office memo … of 2014/02/06, it was requested to communicate to the heir in question A…, so that he would proceed in the same manner as the head of household/heir, that is, to present form 3 of substitution to be included in annex G, the said amount of his share, due to the disposition of the two rustic properties." (Document no. 1)";

Q) On 11 December 2014, the Claimant proceeded to pay the tax assessed additionally;

R) The AT only became aware of the transfer of the real estate with the execution of the public deed of sale, in the year 2010.

No facts with relevance to the assessment of the merits of the case have failed to be proven.

This Tribunal formed its conviction based on the consideration of the documents attached to the proceedings by the Parties.

III. LEGAL MATTERS

The principal issue that arises in the present proceedings is whether the Personal Income Tax subject of the additional Personal Income Tax assessment act under analysis, arising from the sale of the rustic property already identified, is owed by the heirs of the owner B… or by the Attorney-in-Fact who executed the deed of sale of the property and who held an irrevocable power of attorney to, in his interest, proceed with the sale.

To this end, the Claimant alleges in its request for constitution of the Arbitral Tribunal the following:

A) The additional assessment act sub judice is based on the disposition of the rustic properties better identified therein for the amount of €299,278.74, which according to the AT should result in the payment of Personal Income Tax, in the category of capital gains, arising from onerous disposition of real rights over real estate;

B) It is the case that the Claimant did not dispose of any property, did not execute any notarial act, nor did he incorporate into his patrimony the economic consideration of the disposition of any property;

C) All acts, contracts and documents were executed by B… (Father of the Claimant) who received in the year 2000 the entirety of the price inherent to the sale;

D) In fact, on 14 June 2000, B… and his wife E… (parents of the Claimant) appointed C… as their Attorney-in-Fact, to whom they conferred the aforementioned powers, concerning the said property, with the said power of attorney being executed in the common interest of the grantors, with an irrevocable character, pursuant to Article 265 and item 2 of Article 1170 of the Civil Code;

E) By virtue of such act, and in the exercise of the irrevocable power of attorney, the promising buyer C… promoted the transfer of ownership, the payment of which had occurred in full with the granting of the power of attorney and promise contract executed in 2000;

F) The death of B…, which occurred on 12/03/2006, had no influence on the validity of the attorney's respective mandate;

G) Thus, the legal effect of the sale affected the legal sphere of the mandator (B…) and not that of the claimant herein, who, having not executed the contract nor the power of attorney, did not receive the legal effect of the purchase and sale;

H) With the execution of the promise contract in 2000, B… transferred to C… the possession and material detention of the properties and received the entirety of the price inherent to the transfer;

I) Not being the Claimant an integral part of the legal relationship inherent to the transfer of real estate, he is not the passive subject of the tax relationship, and therefore the rule of tax incidence does not apply to him, in particular that which arises from Article 13, item 1 of the Personal Income Tax Code, according to which "Natural persons residing in Portuguese territory are subject to Personal Income Tax, as are those not residing therein but obtaining income there";

J) In turn, item 3 of Article 10 of that provision establishes that:

"gains are considered obtained at the moment of performance of the acts provided for in item 1, without prejudice to the provisions of the following subparagraphs:

a) In cases of promise to sell and purchase (…) it is presumed that the gain is obtained as soon as verified the delivery or possession of goods or rights subject of the contract."

K) From the cited articles it follows that (i) having occurred the delivery of ownership in 2000 and (ii) having the identified B… received the entirety of the price notwithstanding the ownership being registered in the name of the seller,

L) the taxable fact giving rise to the tax obligation occurred in the economic period of 2000 and not in 2010, and therefore the gains would have been received in 2000 and not in 2010;

M) With the proof of the existence of a certain promise contract followed by delivery or possession, it shall be the date on which such occurs that is relevant for the purposes of calculating capital gains,

N) Thus, the act is illegal due to the absence of a taxable fact and as a result of the violation of the provisions of Article 13, item 1 of the Personal Income Tax Code and Article 18, item 3 of the General Tax Law.

O) The taxable fact giving rise to the tax obligation, in light of the provisions of Article 10, item 3 a) of the Personal Income Tax Code, occurred in 2000, given that it was in that economic year that the then owner granted the irrevocable power of attorney, received the price and promoted the delivery of the assets in question to the promising buyer C…;

P) Thus, in light of Article 45 of the General Tax Law, the AT had 4 years to carry out the assessment of the Personal Income Tax owed by the transfer – always and only in the legal sphere of B… – which ended on 31/12/2004;

Q) The assessment occurring on 02/12/2014 is, thus, time-barred, and therefore, beyond all else, the "impugned" act is illegal due to the lapse of the right to assess;

R) Given that in the case of the proceedings the assessment made is the result of a legal error arising from the erroneous application of Article 10, items 1 and 3 of the Personal Income Tax Code, in the event the claim is upheld, the AT should be condemned to pay to the claimant the tax paid in the amount of €36,371.19, as well as the indemnificatory interest that shall accrue from the date of payment (11/12/2014) until effective return to the taxpayer.

In turn, the AT alleges, in summary, the following:

A) Pursuant to subparagraph a) of item 1 of Article 10 of the Personal Income Tax Code, capital gains comprise gains obtained which, not being considered business and professional income, income from capital or property, result from onerous disposition of real rights over real estate;

B) In the case at hand, the onerous disposition of real rights over the property occurs on 31/3/2010, with the deed of sale executed by C…, in the capacity of Attorney-in-Fact and in the name of B…, and the company D… - Lda., in the capacity of buyer;

C) For tax purposes, this is the only relevant transfer and the only one that the administration must be aware of;

D) In fact, as of 14/6/2000, the irrevocable power of attorney executed by B… to C… did not have the capacity to constitute a tax transfer;

E) Only with the entry into force of the Real Estate Transfer Tax Code did the legislator deem a tax transfer to have occurred with the granting of an irrevocable power of attorney with powers to dispose of immovable property in favour of the Attorney-in-Fact. Upon issuance of the power of attorney, the legislator immediately considers the transfer to be completed (Article 5 of the Real Estate Transfer Tax Code), with the tax to be assessed and paid before the execution of the contract, as required by item 2 of Article 22 of the Real Estate Transfer Tax Code;

F) However, this was not the regime in force in 2000;

G) The Claimant confuses the powers inherent to the said power of attorney, executed on 14/06/2000, with the tax transfer of the property, which only occurs on 31/3/2010, with the execution of a public deed of sale, in which the seller had himself represented by an Attorney-in-Fact with powers to that effect;

H) As provided in Article 258 of the Code of Civil Procedure, "The legal transaction performed by the Attorney-in-Fact in the name of the represented, within the limits of the powers vested in him, produces its effects in the legal sphere of the latter.";

I) Indeed, the son of the Attorney-in-Fact, who in the meantime passed away – who, in the name and in representation of the father of the Claimant, executed the deed of sale of the mentioned property, declared that such transaction was performed in the interest of the mandator, who received the respective price;

J) On the other hand, for the promise to sell and purchase contract to constitute a tax transfer, it must be accompanied by delivery;

K) And, in the case in question, the Claimant failed to demonstrate the occurrence of the delivery allegedly occurred to C…, at the time of granting of the irrevocable power of attorney, all the more so since the said properties were, at the date of the promised transaction, let under a rural lease contract, executed on 22/9/93, between B… and G…;

L) We have, thus, that, contrary to what is alleged by the Claimant, the assessment act in question is based, as it could not fail to be, on a taxable fact, that fact being embodied in the tax transfer which occurs only with the public deed of sale, performed on 31 March 2010;

M) And dating from 31 March 2010, the taxable fact underlying the tax is obviously not time-barred, and the right to assess the capital gains resulting from the disposition of the rustic properties registered in the matrix under articles … and …, of the Parish ….

Given the foregoing, regarding the positions of the Parties and the arguments presented, in order to determine whether the Personal Income Tax assessment act sub judice is or is not illegal, it will be necessary to verify:

  1. Who is the passive subject of the tax with respect to the Personal Income Tax owed by the sale of the property?

  2. At what moment did the taxable fact occur – that is, the obtaining of the capital gain?

  3. Whether the right to additionally assess the Personal Income Tax owed has lapsed?

Let us examine what must be understood.

  1. Passive Subject of the Tax

In accordance with the provisions of Article 18, item 3 of the General Tax Law, "The passive subject is the natural or legal person, the patrimony or the de facto or de jure organization that, pursuant to the law, is bound to fulfill the tax obligation, whether as a direct contributor, substitute or responsible party."

To this end, item 1 of Article 13 of the Personal Income Tax Code provides that "Natural persons residing in Portuguese territory are subject to Personal Income Tax, as are those not residing therein but obtaining income there."

Further stated in item 1 of Article 15 of the Personal Income Tax Code that "Being natural persons residing in Portuguese territory, Personal Income Tax is levied on the totality of their income, including that obtained outside that territory."

In the case at hand, the Claimant is a fiscal resident in Portugal, being the passive subject of Personal Income Tax with respect to income obtained here, such as that resulting from the obtaining of real estate capital gains.

This would only not be the case if it were proven that the Claimant, in the capacity of heir, did not obtain the gain resulting from the capital gain realized, but rather the Attorney-in-Fact who executed the public deed of sale of the rustic property.

It is the case that, at no time, did the Claimant manage to prove that the gain resulting from the capital gains was not obtained by his father and, pursuant to the law of succession, by him, in the capacity of heir, pursuant to the provisions of item 2 of Article 29 of the General Tax Law.

In fact, it is the Claimant himself who states, in paragraph 28 of his Brief, that full payment of the sale price was made with the execution of the promise contract and the granting of the power of attorney.

Furthermore, notwithstanding the fact that the execution of the deed of sale was performed by the constituted Attorney-in-Fact, this does not prove that the capital gain is attributable to the Attorney-in-Fact, since not only does it not result from the terms of the power of attorney granted that the sale price is for the Attorney-in-Fact, but, in fact, it results from the public deed of sale that the Attorney-in-Fact declares with respect to the price that "for his represented B…, declares having already received, in the name of the latter".

Furthermore, it is considered that any amounts possibly received by the Attorney-in-Fact that were to be on account of the Mandators and, as a consequence, of the heirs, for which no accounts have been rendered, should be discussed between the heirs and the Attorney-in-Fact, in civil proceedings and not in tax proceedings.

In fact, as is well known, it is not the fact that, hypothetically, the Claimant has a claim against the Attorney-in-Fact, in consequence of the sale performed, that the obligation to pay the Personal Income Tax owed by the obtaining of the capital gain is transferred to the Attorney-in-Fact. Albeit, "Tax obligations are not susceptible to inter vivos transmission, except in cases provided for by law." – (See Article 29, item 3 of the General Tax Law).

It is concluded, thus, that the capital gain obtained is attributable to the Claimant, in the capacity of heir and not to the Attorney-in-Fact, with respect to whom it is unknown whether he obtained any capital gain with the sale of the property.

Let us examine in what terms the capital gain could be attributable to the Claimant.

  1. Verification of the Taxable Fact

Pursuant to subparagraph a) of item 1 of Article 10 of the Personal Income Tax Code, "Capital gains comprise gains obtained which, not being considered business and professional income, income from capital or property, result from: a) Onerous disposition of real rights over real estate".

In turn, with relevance for the present analysis, item 2 of Article 10 of the Personal Income Tax Code provides as follows:

"Gains are considered obtained at the moment of performance of the acts provided for in item 1, without prejudice to the provisions of the following subparagraphs:

a) In cases of promise to sell and purchase or exchange, it is presumed that the gain is obtained as soon as verified the delivery or possession of goods or rights subject of the contract."

According to the Claimant, "with the execution of the promise contract in 2000, B… transferred to C… the possession and material detention of the properties and, as stated, received the entirety of the price inherent to the transfer."

In fact, it appears from clause 7, subparagraph c) of document no. 2, the following: "Should the power of attorney be granted the property shall be deemed delivered on the respective date".

Already from the Power of Attorney granted (document no. 3) it results "That, by the present instrument, they appoint C… as their Attorney-in-Fact, (…), to whom they confer the necessary powers to sell and execute the deed of sale relating to the rustic property (…), to perform the promise contract executed between both on 28 March 2000,".

Although the AT contested that the delivery of the property occurred with the execution of the Irrevocable Power of Attorney, considering documents no. 2 and 3 submitted by the Claimant, the Tribunal is convinced that the delivery or possession of the property occurred on 14 June 2000 with the granting of the Power of Attorney.

In consequence, it is considered in light of the provisions of subparagraph a) of item 2 of Article 10 of the Personal Income Tax Code that the capital gain resulting from the disposition of the property in question was obtained in 2000 by the father of the Claimant, being thus attributable to him in the capacity of heir.

  1. Lapse of the Right to Assess

Having determined the date of the taxable fact in question, it becomes important, then, to analyze whether the Claimant is correct when he alleges in paragraphs 65 et seq. of his Brief that "The assessment occurring on 2/12/2014 is, thus, time-barred, and therefore, beyond all else, the "impugned" act is illegal due to the lapse of the right to assess."

Now, to this end, Article 45 of the General Tax Law provides, with relevance, the following:

"1 - The right to assess taxes shall lapse if the assessment is not validly notified to the taxpayer within the period of four years, when the law does not set another.

2 - In the case of error evidenced in the declaration of the passive subject, the period of lapse referred to in the preceding number is three years.

3 - In case any deduction or tax credit has been made, the period of lapse is that of the exercise of that right.

4 - The period of lapse is counted, in periodic taxes, from the end of the year in which the taxable fact occurred and, in taxes of single obligation, from the date on which the taxable fact occurred, except in the value added tax and in taxes on income when the taxation is carried out by withholding at source as final, in which case that period is counted from the beginning of the civil year following the one in which, respectively, the exigibility of the tax or the taxable fact occurred.

5 - Whenever the right to assess pertains to facts in relation to which a criminal inquiry was instituted, the period referred to in item 1 is extended until the filing or final judgment, plus one year.

6 - For the purposes of counting the period referred to in item 1, notifications by registered mail are considered validly performed on the 3rd day after registration or on the 1st working day following that, when that day is not a working day."

It results, thus, from items 1 and 3 of Article 45 of the General Tax Law that, in the case of Personal Income Tax, the tax must be assessed within the period of 4 years counted from the date on which the taxable fact occurred.

Thus, considering what is stated in A., it would be to be considered that the right to assess the tax here in discussion would have lapsed in 2004.

It is the case that, as has been defended by the Administrative Courts, for the purposes of lapse of the right of assessment, the taxable fact must be considered to have occurred at the moment of execution of the public deed of sale "If the passive subject did not declare the income, nor did the promising buyer pay the respective transfer tax in the year in which the impugner alleges the delivery of the property to have occurred for such." – See, among others, Judgment of the Central Administrative Court of the North, rendered in the scope of case 92/04, of 21.10.2004.

In fact, considering the facts analyzed here, one cannot consider that the AT had knowledge of the transfer of the property, in the year 2000, at the time of execution of the promise to sell and purchase contract and the granting of the Power of Attorney, if such acts were not communicated to it.

Thus, proven that the AT only became aware of the taxable fact with the execution of the public deed performed on 31 March 2010, that is the date relevant for the purposes of the lapse of the right to assess, with the assessment act sub judice being legal for the grounds set forth.

IV. DECISION

Under these circumstances, this Arbitral Tribunal decides as follows:

A) To find the claim for annulment of the Personal Income Tax assessment act no. 2014 … and indemnificatory interest completely without merit;

B) To order the Claimant to pay the costs of the present proceedings, as the unsuccessful party.

V. VALUE OF THE PROCEEDINGS

In accordance with the provisions of Article 306, item 2 of the Code of Civil Procedure, Article 97-A of the Code of Tax Procedure and Practices, and Article 3, item 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €36,371.19.

VI. COSTS

Pursuant to the provisions of Articles 12, item 2 and 22, item 4, both of the RJAT, and Article 4, item 4 of the Regulation of Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €1,836.00, in accordance with Table I of the aforementioned Regulation, to be borne by the Claimant, given the complete lack of merit of the claim.

Let notice be given.

Lisbon, 3 June 2015

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, pursuant to Article 131, item 5, of the Code of Civil Procedure, applicable by reference from Article 29, item 1, subparagraph e) of Decree-Law no. 10/2011 of 20 January (RJAT), with its wording governed by the orthography prior to the Orthographic Agreement of 1990.)

Frequently Asked Questions

Automatically Created

How are real estate capital gains (mais-valias imobiliárias) taxed under Portuguese IRS law?
Real estate capital gains (mais-valias imobiliárias) under Portuguese IRS law are taxed as Category G income. They arise from the onerous disposition of real rights over real property. The taxable gain is calculated as the difference between the sale price and the acquisition cost, adjusted for inflation coefficients and documented improvements. The gain is included in the taxpayer's total taxable income and subject to IRS at progressive rates, though taxpayers may elect for autonomous taxation at 28% in certain cases. The tax liability arises in the year the transfer occurs, and must be declared in Annex G of the IRS Form 3 declaration.
Can an irrevocable power of attorney (procuração irrevogável) trigger a taxable capital gains event for IRS purposes?
Yes, an irrevocable power of attorney (procuração irrevogável) can trigger a taxable capital gains event for IRS purposes when it constitutes a substantive transfer of economic rights rather than a mere administrative delegation. This occurs particularly when the power is granted 'em causa própria' (in the attorney's own interest), is expressly irrevocable, survives the grantor's death or incapacity, and is accompanied by payment of consideration and delivery of the property. In such cases, the capital gains tax event occurs when the irrevocable power is granted and economic transfer completed, not when the formal deed is later executed for registration purposes. The formal deed becomes merely a formality to perfect title registration.
What is the CAAD arbitration procedure for challenging an IRS tax assessment in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitration procedure for challenging IRS assessments operates under the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011). The taxpayer files a request for arbitration identifying the contested assessment and grounds for challenge. The CAAD President accepts the request and notifies the Tax Authority, which submits a response. An arbitral tribunal is constituted (singular or collective). The tribunal may dispense with hearings if unnecessary. Parties present arguments and evidence. The tribunal issues a binding decision that can annul assessments, recognize tax refunds, and award compensatory interest. The procedure typically concludes within six months, offering a faster alternative to judicial courts.
When does the transfer of property rights occur for IRS capital gains purposes in promise-to-sell contracts with irrevocable powers of attorney?
The transfer of property rights for IRS capital gains purposes in promise-to-sell contracts with irrevocable powers of attorney occurs when the substantive economic transfer is completed, not necessarily when the formal deed is executed. When a promise contract includes an irrevocable power of attorney granted in the attorney's own interest, accompanied by payment of the purchase price and delivery of the property, the transfer occurs at that moment. Key indicators include: (1) payment of remaining price upon granting the power, (2) express irrevocability and survival beyond grantor's death, (3) contractual provision deeming property delivered, and (4) transfer of risks and charges. The subsequent deed execution serves only to formalize and register the previously completed transfer.
What are the taxpayer's rights to compensatory interest (juros indemnizatórios) when an IRS assessment is annulled by CAAD?
Taxpayers whose IRS assessments are annulled by CAAD have the right to compensatory interest (juros indemnizatórios) under Article 43 of the Portuguese Tax Procedure Code (LGT). This interest compensates for financial loss from paying unlawfully assessed tax. It accrues from the date of payment until reimbursement at the legal rate established by ministerial order. The right arises automatically when the assessment is annulled, whether totally or partially. The taxpayer must request recognition of this right in the arbitration petition. Compensatory interest is paid by the Tax Authority without requiring separate litigation, and the CAAD tribunal can recognize and quantify this right in its decision.