Summary
Full Decision
ARBITRAL DECISION
The Arbitrator Dr. José Joaquim Monteiro Sampaio e Nora, designated by the Ethics Council of the Centre for Administrative Arbitration to act as sole arbitrator on 22 May 2018, hereby renders the following arbitral decision:
I. Report:
A..., NIF..., resident at Rua ...–..., in Lisbon, pursuant to Article 2, No. 1, subsection a), and Article 10, Nos. 1 and 2, both of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters or "RJAT"), in conjunction with Article 10 of Decree-Law No. 10/2011, of 20 January, and Article 2 of Ordinance No. 112-A/2011, of 22 March, filed a request for CONSTITUTION OF AN ARBITRAL TRIBUNAL for the purpose of obtaining a declaration of illegality of the Personal Income Tax (IRS) assessment acts and compensatory interest for the years 2013 – assessments No. 2017... and No. 2017... – with tax payable in the total amount of €29,089.59, and for 2014 – assessments No. 2017... and No. 2017... – in the total amount of €12,938.97, on the grounds of error, both factual and legal, in that such assessments failed to recognize the de facto union declared in IRS Form 3 submissions, with the consequent condemnation of the Tax Authority to refund to the Claimant the tax and compensatory interest wrongfully assessed and paid by him, and the condemnation of the Tax Authority to the payment of indemnity interest at the legal rate of 4%, calculated from the date of wrongful payments until full reimbursement to the Claimant of the amounts wrongfully paid.
The REVENUE AND CUSTOMS AUTHORITY is named as the Respondent.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Revenue and Customs Authority on 23-5-2018.
Pursuant to the provisions of subsection a) of No. 2 of Article 6 and subsection b) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council designated the undersigned as sole arbitrator, who communicated acceptance of the appointment within the applicable deadline.
On 3-5-2018 the parties were duly notified of this designation and did not manifest any intention to refuse the arbitrator's designation, pursuant to the combined provisions of Article 11, No. 1, subsections a) and b) of the RJAT and Articles 6 and 7 of the Code of Ethics.
Thus, in accordance with the provision in subsection c) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the sole arbitral tribunal was constituted on 23-5-2018.
The Revenue and Customs Authority submitted a reply in which it contended that the claim should be dismissed.
By an arbitral order of 5-7-2018, 19-09-2018 at 10:00 hours was designated as the date for the hearing provided for in Article 18 of the RJAT, at which, inter alia, the examination of witnesses presented by the Claimant was to take place, with the Claimant required to ensure their attendance, on the matters indicated by him insofar as they do not constitute conclusive or legal matters or consist in reproduction of documents.
The said date was corrected to 18-9-2018 by an order of 9-7-2018, which was immediately notified to the parties.
On the aforementioned date of 18-9-2018, the examination of the witnesses presented by the claimant was conducted with observance of all legal formalities, after which the Tribunal notified the Claimant and the Respondent to submit written submissions within 10 days, in that order and in succession, and decided that, in compliance with Article 18, No. 2 of the RJAT, the final decision would be rendered within 30 days after submission of submissions by the Respondent or the end of the respective deadline.
The claimant submitted submissions within the granted deadline, to which the respondent replied within its available timeframe, the parties maintaining, in essence, the positions they had already defended in their pleadings.
II. Sanation Order:
The Arbitral Tribunal was duly constituted in accordance with Articles 2, No. 1, subsection a), and 10, No. 1, of Decree-Law No. 10/2011, of 20 January, is competent ratione materiae, the parties have legal standing and capacity and are entitled to be parties (Articles 4 and 10, No. 2, of the same instrument and Article 1 of Ordinance No. 112-A/2011, of 22 March) and are duly represented, with no other exceptions or nullities that must be addressed.
III. Established Facts:
In light of the documents submitted by the claimant and the administrative file submitted by the respondent and the testimonial evidence produced, the following facts are considered established:
a) The Claimant submitted, on 30-4-2014, the IRS declaration for the year 2013, jointly with B..., NIF..., including in the respective family unit the minor son of both, C..., NIF...; (proven by document contained in the divergence file submitted by the Tax Authority);
b) Making the election for taxation as de facto partners; (proven by document contained in the divergence file submitted by the Tax Authority):
c) The Revenue and Customs Authority ("Tax Authority") made the IRS assessment for 2013 in the name of A... and B..., such assessment bearing No. 2014..., with amount payable of €11,951.63 (proven by doc. 1 submitted with the initial petition);
d) On 25-11-2015, the Tax Authority notified the Claimant to prove compliance with the requirements of Article 14 of the IRS Code regarding the existence of de facto union for more than 2 years; (proven by document contained in the divergence file for 2013 submitted by the Tax Authority);
e) The present claimant sent to the Tax Authority, through his Counsel, Dr. D..., a response, exercising the prior hearing right provided for in Article 60 of the General Tax Code, stating that the condition of de facto partners should be recognized inasmuch as the two taxpayers have effectively lived in de facto union since September 2011 (proven by document contained in the divergence file for 2013 submitted by the Tax Authority);
f) The Tax Authority sent to the Claimant the official letter No. ..., of 04/10/2017, in which it concluded on the non-existence of de facto union and that a corrective assessment would be made (proven by doc. 2 submitted with the initial petition);
g) The Claimant and B..., on 8/11/2017, were notified of the notice of cancellation of the initially made assessment, with the refund of the tax then paid (proven by docs. 3 and 4 submitted with the initial petition);
h) On that same date, the claimant was notified of a new IRS assessment for the year 2013 – assessment No. 2017... – which results in tax payable in the amount of €29,089.59 (proven by doc. 5 submitted with the initial petition);
i) With the notification referred to in the preceding subsection, the claimant was notified to pay compensatory interest in the amount of €3,435.53, calculated from 01/06/2014, as per assessment note No. 2017... (proven by doc. 6 submitted with the initial petition);
j) The present claimant paid the amounts of tax and compensatory interest referred to in subsections h) and i) above (proven by docs. 5 and 6 submitted with the initial petition);
k) The Claimant submitted the IRS declaration for the year 2014, jointly with B..., NIF..., including in the respective family unit the minor son of both, C..., NIF..., with the election for taxation as de facto partner. (proven by agreement of the parties);
l) On 19/12/2016, the Tax Authority notified the Claimant to prove compliance with the requirements of Article 14 of the IRS Code regarding the existence of de facto union for more than 2 years. (proven by doc. 7 submitted with the initial petition)
m) The present claimant sent to the Tax Authority, on 6/1/2017, various documents in a request signed by his counsel, having sent on 17/1/2016, a certificate of residence from the Parish Council of... (proven by docs. 8 and 9 submitted with the initial petition and by document contained in the divergence file for 2014 submitted by the Tax Authority);
n) The Tax Authority sent to the Claimant the official letter No. ..., of 27/01/2017, for him to exercise the prior hearing with respect to the proposed decision to conclude on the non-existence of de facto union (proven by doc. 10 submitted with the initial petition).
o) The present claimant delivered his response at the Lisbon Tax Office..., on 14/2/2017 (proven by doc. 11 submitted with the initial petition)
p) The Tax Authority sent to the Claimant the official letter No. ..., of 19/10/2017, in which it concluded on the non-existence of de facto union and that a corrective assessment would be made (proven by document contained in the divergence file for 2014 submitted by the Tax Authority).
q) The Claimant was notified on 14-11-2017 of the notice of cancellation of the initially made assessment, with the refund of the tax then paid (proven by document contained in the divergence file for 2014 submitted by the Tax Authority).
r) On that same date, the claimant was notified of a new IRS assessment for the year 2014 No. 2017..., with tax payable in the amount of €12,938.97 (proven by doc. 12 submitted with the initial petition)
s) With the notification referred to in the preceding subsection, the claimant was notified to pay compensatory interest by assessment note No. 2017..., in the amount of €1,128.61, (proven by doc. 13 submitted with the initial petition).
t) Having failed to pay the assessed amounts, tax enforcement proceedings were initiated against him, in which he paid the assessed amounts, plus costs and default interest, meanwhile accrued. (proven by doc. 18 submitted with the initial petition)
u) B..., NIF... had fiscal domicile, since 24-09-2004, at ... No...., in Lisbon and, on 13-08-2012, changed his fiscal domicile to Rua ... No...., in Lisbon (proven by agreement of the parties)
v) The claimant since 05-06-2011 had his fiscal domicile at Avenida ... No...., in Lisbon, having, on 25-07-2011, changed his domicile to Rua ... No...., in Lisbon (proven by agreement of the parties)
x) B..., NIF... obtained authorization to reside in Portugal, having been issued a residence card on 08/09/2011, which records the address Rua ..., No...., in Lisbon. (proven by doc. 14 submitted with the initial petition and document contained in the divergence file for 2014 submitted by the Tax Authority).
y) C..., NIF... – born on 27/02/2009 – is the child of the claimant and of B... (proven by doc. 15 submitted with the initial petition)
z) Upon renewal of the residence authorization, B... declared his residence at Rua ..., No...., in Lisbon (proven by docs. 16 and 17 submitted with the initial petition)
aa) The Claimant has lived in de facto union with B..., of Brazilian nationality, NIF..., since mid-September 2011,
bb) Since B...'s move to Portugal, together with the son of both, the claimant and B... have lived in common at Rua ..., No...., in Lisbon, sharing bed, table and house, in the manner typically referred to for married persons.
The facts considered established in subsections aa) and bb) resulted from the testimony of the witnesses presented by the claimant, E... and F..., who, with minor divergences on accessory facts, essentially confirmed what appears in the said facts, having testified with impartiality and objectivity, revealing tranquility and confidence in their testimony, for which reason they merited the tribunal's credibility. Indeed, this testimony is in harmony with the content of the document supporting the fact considered established in subsection x) and relating to the residence authorization granted to B....
Such testimony is also in accord with the testimony of witness B..., testimony which is not valued as she is a directly interested party in the outcome of the present dispute.
No other fact of interest for the decision of the present case was proven.
IV. Questions to be Decided
- Considering the established facts and the legal matter contained in the request for arbitral pronouncement presented by the Claimant and the response of the Respondent, the controversial questions to be decided by the Arbitral Tribunal are:
- Whether the claimant and B... can or cannot be considered as living in de facto union for purposes of IRS assessment in the years 2013 and 2014, as referred to by them, the Tax Authority having canceled the income declaration initially submitted by the claimant, replacing it with an ex officio declaration.
The question also involves another sub-question raised by the respondent, namely, that in order to benefit from the status of de facto partners, the claimant and B... should have had the same fiscal domicile for more than two years.
b) To clarify whether, should the claim for declaration of illegality and consequent annulment of the contested assessments be upheld, the Claimant, within the scope of the present arbitral process, may obtain the condemnation of the Respondent to pay indemnity interest concerning the amounts paid by him for satisfaction of taxes illegally demanded.
- Article 14 of the Personal Income Tax Code (CIRS), in the wording in effect during the years 2013 and 2014, provided as follows:
Article 14
De Facto Unions
1 - Persons living in de facto union who satisfy the requirements provided by the respective law may elect the taxation regime of married taxpayers who are not judicially separated in persons and property.
2 - The application of the regime referred to in the preceding number depends on the identity of fiscal domicile of the taxpayers during the period required by law to verify the requirements of de facto union and during the taxation period, as well as on the signature by both of the respective income declaration.
3 - In the case of exercise of the election provided in No. 1, the provisions of No. 2 of Article 13 apply, both de facto partners being responsible for compliance with tax obligations. (Amended by Decree-Law No. 198/2001 of 3 July)
This wording, which dates from 2001, as it was introduced by Decree-Law No. 198/2001, of 3 July, corresponds to the wording of Article 14-A in the version prior to that date.
Moreover, it was already amended by Law No. 82-E/2014, of 31 December, and currently has the following wording:
Article 14
De Facto Unions
1 - (Repealed.)
2 - The existence of identity of fiscal domicile of the taxpayers during the period required by law to verify the requirements of de facto union, and during the taxation period, creates a presumption of the existence of de facto union when invoked by the taxpayers.
3 - Taxpayers not resident in Portuguese territory during all or part of the period referred to in the preceding number may submit documentary proof of identity of fiscal domicile in the State or States where they resided during that period.
It is also relevant to consider, as the Tax Authority does, that, pursuant to Article 13, No. 8 of the CIRS, for purposes of IRS, the personal situation of the taxpayers "as it exists on the last day of the year to which the tax relates" is what matters.
- De facto union is not defined with precision by law. Indeed, Law No. 7/2001, of 11 May, which currently establishes the programmatic guidelines for attributing legal significance to de facto unions, merely identifies the object thereof as being the legal situation of two persons, regardless of sex, who live in de facto union for more than two years, proceeding from there to the casuistic situations within its scope, without being concerned with finding a definition that encompasses its content. Such an attitude, which already existed and was justified under the former Law No. 135/99, of 28 August, to the extent that [heterosexual] de facto union was merely and solely a factual situation verified by social reality in all respects similar to marriage, which did not follow the formalities that the law establishes for the validity of marriage.
Now, faced with the verification of this type of situation, the legislator did not attribute general legal significance to it, not equating it to marriage, under the penalty of, if it did so, completely eroding the differences existing between both: de facto union and marriage.
In any case, prior to the entry into force of this Law, references to the efficacy of de facto union were already found in specific situations, the most important of which is the provision of No. 1 of Article 2020 of the Civil Code, regarding obligations of maintenance, a norm that has remained unchanged and was even reinforced, in light of the express reference to its regime contained in No. 1 of Article 6 of the referred Law 7/2001.
- In the tax field, Article 3, subsection d) of the aforementioned Law No. 7/2001, of 11 May, provides that:
Persons living in de facto union under the conditions provided in this law have the right to:
d) Application of the personal income tax regime under the same conditions as married taxpayers who are not judicially separated in persons and property;
Article 14 of the CIRS appears only as a concretization of that right enshrined by Law No. 7/2001, now at the level of the tax law that contains the regime for personal income tax.
In fact, it seems to result without doubt from No. 1 of Article 14 of the CIRS that "Persons living in de facto union who satisfy the requirements provided by the respective law may elect the taxation regime of married taxpayers who are not judicially separated in persons and property."
This means that,
The tax law refers to general law on de facto union (Law 7/2001 of 11 May) for the definition of this situation which is: "De facto union is the legal situation of two persons who, regardless of sex, live in conditions analogous to those of spouses for more than two years." (Article 1, No. 2)
However, then
No. 2 of Article 14 of the CIRS determines that the invocation of this regime "depends on the identity of fiscal domicile of the taxpayers during the period required by law to verify the requirements of de facto union and during the taxation period, as well as on the signature by both of the respective income declaration."
Apparently, this No. 2 seems to contain the determining and absolute requirements for being able to invoke the situation of de facto union.
However, in our opinion, this is merely an appearance because:
1st - Article 14 CIRS is a provision concerning personal incidence of IRS and
2nd - Any presumptions contained in provisions concerning tax incidence (personal or real) always admit proof to the contrary, in accordance with Article 73 of the General Tax Code, which is a mandatory provision in this matter and applies to all taxes.
Indeed, No. 2 of Article 14 of the CIRS does not establish requirements other than those contained in Law No. 7/2001 which should be added to the election taken by taxpayers living in de facto union, but contains, in our opinion, merely a presumption: having in common the same declared fiscal domicile for 2 years creates a presumption of the existence of living in conditions analogous to those of spouses.
In this manner, the non-existence of this presumption requires that, for the application of Article 14, No. 1 of the CIRS, proof be made by the claimants of the election for the application of the provided regime, that they really live in de facto union which will also bear upon the effective residence of the two elements of the invoked de facto union, in order to ascertain whether or not there exists legally relevant de facto union.
Common residence is one of the essential elements for proving the existence of a de facto union.
However, the respondent goes further and requires that the declarations of the present impugner and of B... as de facto partners be accompanied by a declaration before the tax authority of the existence of that same domicile, through the existence of common declared fiscal domicile by both and that such declaration should have occurred more than two years earlier so as to influence the annual income declarations submitted.
And this even though the taxpayers demonstrate, by other means, that they effectively have common habitual residence for more than two years, without, however, having taken the care to report it fiscally.
-
The frequency of this rejection of factual situations by the legally fixed period in Law No. 7/2001, unaccompanied by the coincidence of fiscal domicile declared by those seeking recognition of such de facto union, prompted the intervention of the Ombudsman to request that the Tax Authority services permit proof of de facto union by another legally admissible means beyond registration with the Taxpayer Registration and Management System – Recommendation 1/A/201, of 11-1-2013 – following numerous complaints received by that body, a recommendation which, however, was expressly rejected by the order of the Director-General of the Revenue and Customs Authority, dated 15.03.2013, which endorsed the understanding contained in the instructions transmitted on 14-7-2008 and which are being followed by the Tax Offices.
-
Such is not, however, the understanding of the Courts, as is evident from the Decisions of the Supreme Administrative Court of 16-11-2016, rendered in case No. 0761/15, and of the Central Administrative Court South of 07-04-2011, rendered in case No. 04550/11, of 19-2-2015, case No. 08313/14, and of 5-3-2015, rendered in case No. 05655/12, and of 08-10-2015, rendered in case No. 06685/13, all published on www.dgsi.pt.
In these decisions, it is fundamentally understood that, once the requirements provided in Law No. 7/2001 are met, the claimants could make the election for the taxation regime of married taxpayers who are not judicially separated in persons and property, provided they had the same habitual residence, even though they had not reported that residence fiscally, so that the non-compliance with the provision of Article 14, No. 2 of the CIRS, in the wording in effect at the time of the facts, did not prevent those concerned from electing the taxation regime specific to taxpayers united by marriage.
Similarly, the consistent jurisprudence of decisions in CAAD arbitral cases is also in this sense, as is evident from the decisions rendered in cases No. 569/2017, 143/2017, 142/2017, 11/2017, 737/2016, 547/2016, 413/2016, 773/2015, 713/2015, 564/2015, 304/2015, 497/2014.
All these decisions concern IRS assessments relating to years prior to the entry into force of the new wording of Article 14 of the CIRS, which was given by the State Budget Law, Law No. 82-E/2014 of 31-12, so they concern assessments made within the scope of the wording of Article 14 of the CIRS prior to this amendment.
Thus, the interpretation followed by the courts, both judicial and arbitral, is uniform in the sense that non-compliance with the provision of Article 14, No. 2 of the CIRS, in the wording in effect at the time of the facts, did not prevent those concerned from electing the taxation regime specific to taxpayers united by marriage, constituting merely a presumption of de facto union.
And we consider that, on the same grounds contained in these decisions, there is no reason why the prevailing orientation should be altered.
- Subsequently, the legislator amended the wording of Article 14 of the CIRS (Law 82-E/2014 of 31-12) in order to allow joint declarations by de facto partners even without the same fiscal domicile provided they prove de facto union by other means which it indicates.
In fact, it repealed No. 1, with Article 3, subsection d) of the aforementioned Law No. 7/2001, of 11 May, prevailing, amending the wording of No. 2 in the sense that the existence of the same fiscal domicile constituted a legal presumption of de facto union relevant for tax purposes.
That is, therefore, the recognition that situations such as those in the present case were considered illegal and unjust in their tax treatment and that is why its regulation was altered.
Although, in principle, this new wording applies only to future cases, the fact is that by enshrining an interpretation that was already adopted by some decisions, one can, without difficulty, consider the amendment of Article 14 of the CIRS in its new wording an interpretive norm, and therefore with retroactive effects, in accordance with Article 13, No. 1 of the Civil Code.
It seems to us, however, that it is not necessary to go so far for the decision of the present case, notwithstanding that the assessments in question relate to years prior to the entry into force of the new wording of Article 14 of the CIRS.
- The respondent merely verified the requirement of coincidence of fiscal domiciles in the Taxpayer Registration and Management System (SGRC), stating that Article 19 of the General Tax Code (General Tax Code) requires notification of the habitual address (No. 3) and makes fiscal domicile of taxpayers correspond to their habitual residence (No. 4).
It thus did not accept any other element proving an actual situation divergent from that declared, saying that this is what results from Article 14, No. 2 of the CIRS and making this legal presumption an irrebuttable presumption. – see in this regard the Letter ... of 8-4-2013 in response to Recommendation No. 1/A/2013 of the Ombudsman.
Now, this consideration is not to be accepted, as results from the abundant jurisprudence cited.
Indeed, pursuant to the cited No. 3 of Article 19 of the General Tax Code (General Tax Code), notification of the fiscal domicile of the taxpayer to the tax administration is mandatory, with No. 4 of the same provision sanctioning with inefficacy the change of domicile unless notified to the tax administration.
Note that this is, in this case, a mere inefficacy of the change, which determines its non-production of effects before the tax authority, and not any invalidity of the change, the failure to report not affecting the substance of the rights invoked by the taxpayers.
In other words, the fiscal domicile of the individual taxpayer, which is the place of his habitual residence, does not cease to be so by the fact that he has not reported it to the tax administration.
Upon fulfillment of the obligation provided in Article 19, No. 3 of the General Tax Code, taxpayers have in their favor a presumption that their fiscal domicile corresponds to the domicile appearing in the Taxpayer Registration and Management System.
Conversely, in the case where taxpayers fail to comply with this obligation, it falls upon them to prove their respective fiscal domicile and the situation of de facto union, by legally admissible means of proof.
In fact, pursuant to No. 1 of Article 74 of the General Tax Code, "the burden of proof of facts constituting the rights of the tax administration or of taxpayers rests on whoever invokes them."
- In the case of the present proceedings, it was proven – see subsections u) and v) of the established facts – that the claimant and his partner only came to have the same domicile registered with the Taxpayer Registration and Management System, respectively, as of 25/7/2011 and 13-8-2012.
But from this it does not necessarily follow, as the respondent contends, that the claimant and his partner did not have the same fiscal domicile at an earlier time.
This is because what the law requires is the identity of fiscal domicile, as habitual residence, and not the identity of domicile appearing in the Taxpayer Registration and Management System.
And as to the identity of fiscal domicile, as the place of habitual residence of individual taxpayers, there is no doubt that the claimant succeeded in demonstrating it.
In fact, it was proven – see subsections aa) and bb) of the established facts – that the claimant has lived, at least since September 2011 and continuously, in community of bed, table and home with B..., at Rua..., No...., in Lisbon, so that there is no doubt that both had, at least from that date, the same fiscal domicile, as habitual residence, it being true that, as results from the fact contained in subsection x) of the established facts, the residence authorization granted to B..., already in September 2011, was to reside at Rua..., No...., in Lisbon.
And if the claimant and B... had, at least from September 2011, the same habitual residence, living from that date in community of bed, table and home, in conditions analogous to those of spouses, continuously, there is no doubt that they lived, from then on, in de facto union.
Note that de facto union does not require any special formality and its proof may be made by any legally admissible means, as expressly results from Article 2-A, No. 1 of Law No. 7/2001, of 11 May, a norm introduced by Law No. 23/2010, of 30/08.
In the case of the present proceedings, although some documents submitted by the claimant do not permit concluding, with the necessary certainty, that the claimant lived in de facto union with B... – see the certificate from the Parish Council which refers to 20 years – the proof of that fact was made through the testimonial evidence presented and the residence authorization, these means being suitable and sufficient for proof of the de facto union of the claimant and B....
- It is important to note here that neither in the course of the administrative proceedings nor in the present case did the respondent ever question whether the claimant lived in de facto union with his partner, having merely rejected the application of the regime provided in Article 14 of the IRS Code on the ground that it understood that the taxpayers did not have the same fiscal domicile reported to the tax services for at least two years.
Therefore, once proof is made of the identity of fiscal domicile, as habitual residence, and the requirement of identity of fiscal domicile to the Taxpayer Registration and Management System not being constitutive of the taxpayer's right, it must be concluded that non-compliance with the obligation provided in Article 19, No. 3 of the General Tax Code does not prevent taxpayers from electing the taxation regime of married taxpayers not judicially separated in persons and property provided for in Article 14, No. 2 of the IRS Code, when they have succeeded, by other means, in making the proof incumbent upon them of the identity of fiscal domicile and of de facto union – in this sense, see Decision of the Central Administrative Court South of 19FEB2015, case No. 08313/14, on www.dgsi.pt.
As argued in the decision of the Central Administrative Court South of 05MAR2015, case No. 05655/12, on www.dgsi.pt, cited above, "where two persons, regardless of sex, live in conditions analogous to those of spouses for more than two years, in the same habitual residence (proof which falls upon the taxpayers, in the case of non-compliance with the notification obligation reviewed in No. 3 of Article 19 of the General Tax Code), there is verified the identity of fiscal domicile provided for in No. 2 of Article 14 of the CIRS."
Nor should it be said, as the respondent does, that the interpretation it defends is the only one in conformity with the requirements imposed by Articles 14 of the IRS Code and 19 of the General Tax Code, "inasmuch as it suffers from a primary error, namely that of confusing the mandatory nature of notification of fiscal domicile (or its change) and the inefficacy of any unreported change with the existence or possibility of recognition of the right which may, in fact, be dependent on proof that is made regarding said identity of domicile. That is, it is the efficacy of the joint declaration which becomes dependent on proof of the identity of fiscal domicile (habitual residence) for two years and not the right to submit that declaration which is rendered impossible by failure to report a change of fiscal domicile. What is relevant is that the fiscal domicile – of those declaring de facto union for at least two years – is effectively the same and not that they have declared it as such, although the production of the intended legal effects may be paralyzed in time until that proof (and consequent dismissal of the presumption that such common residence/common domicile does not exist) is made." – in this sense, Decision of the Central Administrative Court South of 19FEB2015, case No. 08313/14, on www.dgsi.pt.
It is also important to note that this interpretation of Article 14 of the IRS Code also finds support in Recommendation No. 1/A/2013 of the Ombudsman's Office, according to which it was understood that "taxpayers who, living in de facto union, as defined by the respective law, and who have not duly proceeded to change their fiscal domicile, shall not cease to benefit from the joint taxation regime which they have elected, without prejudice to the liability for contraventions that may apply, in accordance with No. 4 of Article 117 of the Tax Procedure Code."
Indeed, any other interpretation of the cited Article 14 of the IRS Code would violate in an obvious manner the constitutional principles of protection of the family, of taxpaying capacity, and of equality.
- It is thus verified that the first two requirements provided for in Article 14 of the IRS Code for election of the taxation regime of married taxpayers who are not judicially separated in persons and property are satisfied, that is, existence of de facto union and identity of fiscal domicile of the taxpayers for more than two years and during the taxation period.
As to the last requirement legally required – signature of the income declaration by both taxpayers – having the same not been challenged by the Tax Authority, it must necessarily be concluded that it is met.
In view of all that has been set forth, verifying that, on 31/12/2013, all the requirements provided for in Article 14 of the IRS Code were met, the claimant could elect, as he did, in the income declaration submitted for the tax year 2013, the taxation regime of married taxpayers who are not judicially separated in persons and property.
Likewise, verifying that, on 31/12/2014, all the requirements provided for in Article 14 of the IRS Code were met, the claimant could elect, as he did, in the income declaration submitted for the tax year 2014, the taxation regime of married taxpayers who are not judicially separated in persons and property.
Indeed, with respect to the year 2014, the claimant and his partner had already completed two years of fiscal domicile at the same address actually reported fiscally, as results from the established facts u) and v), since the partner was the last to change her fiscal domicile and this occurred on 13-8-2012, therefore more than 2 years prior to the end of the 2014 fiscal year, so that, also for this reason, the assessment act relating to 2014 had to be annulled.
Thus, it is clear that there is no legal or factual basis for the contested assessment acts with respect to 2013 and 2014, making their annulment mandatory.
V. On Indemnity Interest:
The claimant further petitions for the condemnation of the respondent to the payment of indemnity interest, calculated on the total amount of refund due – subsections h), i), j), r), and t) – from the date on which the assessments now annulled were paid until the date on which the claimant is reimbursed the wrongfully paid amount, such interest accrued and accruing from that date, calculated on the difference between the refund due and the refund made.
With respect to indemnity interest, Article 43, No. 1 of the General Tax Code provides that "indemnity interest is due when it is determined, in administrative request for reconsideration or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount superior to that legally due."
In the case now under consideration, the error affecting the contested assessment is exclusively attributable to the respondent Tax Authority, which assessed the tax without any factual or legal support, so that there is no doubt that the claimant has a right to receive indemnity interest.
Therefore, the present claimant has a right to be reimbursed for the amount improperly paid (in accordance with the provisions of Articles 100 of the General Tax Code and No. 1 of Article 24 of the RJAT) and further to be indemnified for the improper payment through the payment of indemnity interest by the respondent, from the date of payment of the amount until reimbursement, at the legal default rate, in accordance with Nos. 1 and 4 of Article 43 and No. 10 of Article 35 of the General Tax Code, Article 559 of the Civil Code, and Ordinance No. 291/2003, of 8 April.
In this amount are also included the compensatory interest improperly assessed to the present claimant in the assessments now being challenged, as well as the amounts he had to pay more for the tax enforcement of the challenged assessment now annulled relating to the year 2014 – fact contained in subsection t) of the established facts.
VI. Decision
In these terms, and on the grounds set forth, the Arbitral Tribunal decides:
a) To uphold in full the claim for declaration of illegality of the IRS assessments challenged and relating to the years 2013 and 2014.
b) To condemn the Revenue and Customs Authority to refund to the claimant the amount of tax improperly paid, to include therein the compensatory interest improperly assessed to the present claimant in the challenged assessments, as well as the amounts he had to pay more for the tax enforcement of the challenged assessment now annulled relating to the year 2014, with all refunded amounts accruing indemnity interest at the legal rate in effect.
c) To condemn the Respondent in the costs of the present proceedings, as the unsuccessful party.
Value of the Case: In accordance with the provision of Article 306, No. 2 of the Civil Procedure Code, Article 97-A, No. 1 a) of the Tax Procedure Code, and Article 3, No. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €42,028.56.
Costs: Pursuant to Article 22, No. 4 of the RJAT and in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, I fix the amount of costs at €2,142.00, to be borne by the Respondent (Tax Authority).
Lisbon, 29 October 2018,
The Arbitrator
José Joaquim Monteiro Sampaio e Nora
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