In 2016, the State Budget Law for the same year introduced, as is practice, many relevant legislative changes in the tax domain, one of which we will address in the present Column.
The legislative change is question relates to the figure of the ex officio review as foreseen in the General Tax Law (hereinafter referred to as ‘GTL’).
The revision of tax acts by the entity that performed them, i.e. the ex officio review, may be carried out on the initiative of the taxpayer, within the time limit for an administrative complaint and on the grounds of any illegality, or, on the initiative of the tax administration, within four years after the assessment or at any time if the tax has not yet been paid, on the grounds of an error attributable to the services.
As such, the ex officio review is an alternative or complementary means, depending on whether it is used within the claim period or after the claim period, in which case it constitutes an increase and reinforcement of the taxpayer’s guarantees, when the time limits foreseen for the other means of protection (namely the deadline to submit an administrative claim) have already elapsed.
In this context, before the legislative change carried out in March 2016, article 78(2) of the GTL read «Without prejudice to the legal burden of complaint or impugnation by the taxpayer, the error in the self-assessment shall be considered imputable to the services, for the purposes of the previous number».
As we know, more and more the legislator introduced mechanisms in which the taxpayer is responsible for the self-assessment of its own tax.
The use of private potential to carry out activities traditionally under the Portuguese Tax Authorities’ (hereinafter referred to as ‘PTA’) jurisdiction has marked a paradigm shift, which is not exclusive to Portugal, leading to a substantially more privatized tax system.
By placing taxpayers in a position of active participation in the execution tasks of self-determination of the taxable base and self-assessment of the tax, among others, marks the passage to a system in which the intervention and action of the PTA assumes a subsidiary role, largely for a control of legality which occurs a posteriori.
In fact, the redaction of article 78(2) of the GTL previously in force, seemed to establish a leveled playing field, in which, in the cases where it is the taxpayers responsibility to self-assess the tax due (e.g. for Corporate Income Tax purposes), a legal fiction was established.
This legal fiction determined that, for the purposes of the deadline for access by the taxpayer to the ex officio review mechanism, the error in the self-assessment would be considered imputable to the services.
However, the State Budget Law for 2016 revoked article 78(2) of the GTL.
Without prejudice to the relevance of the analysis of the impact of legislative changes regarding taxpayers’ guarantees, and the risk that such legislative tendencies may give rise, the issue that we will now approach is one of a more practical nature:
How does the repeal of this rule affects taxpayers?
For this purpose, let us consider the following example:
A taxpayer submitted its Corporate Income Tax return in May 2013. At that time, the taxpayer could rely on the deadline of 4 years in order to submit a request for an ex officio review, given the mentioned legal fiction that established that errors self-assessment declarations would be considered imputable to the PTA’s services.
In this situation, if the legislative change is immediately applicable to the taxpayer, the 4-year deadline previously in force would no longer be applicable, and the guarantee provided by article 78(2) of the GTL would immediately made void.
Such a scenario calls for the consideration of the rules on the application of the law in time, as foreseen, for this purpose, on article 12 of the GTL, which establishes that «The rules on procedure and process are of immediate application, without prejudice to the previously established guarantees, rights and legitimate interests of taxpayers».
In our opinion, we are, in fact, in a circumstance in which the taxpayer would have previously established guarantees, rights and legitimate interests – in casu, the guarantee of a 4 year deadline to submit a request for an ex officio review of a given tax declaration, submitted using the self-assessment mechanisms.[1]
As such, it is our understanding that the application of the State Budget Law for 2016, regarding this matter in specific, should be made cautiously, given that taxpayers have established rights and guarantees – which disrespect would violate the principles inherent in the rule of law as regards to the legal protection of certainty and legitimate expectations.
On a final note, it should be considered that this theme is not outdated, on the contrary. Considering that the 4-year time limit would still be applicable to self-assessments submitted in 2015, and on previous years, it is expected that jurisprudence on this topic will start to emerge in our courts.[2]
Maria Lima Ferreira
28th November 2021
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[1] In this sense, consider the decision by the Central Administrative Court of the South, no. 9559/16.0BCLSB, of 16th September 2021, as well as the decisions by the Supreme Administrative Court no. 0259/12, of 14th June 2012, and no. 0532/07, of 28th July 2007, upholding the position that the ex officio review of assessment acts constitutes an autonomous means of strengthening taxpayers’ guarantees.
[2] In fact, there has already been a decision of the Centre for Administrative Arbitration ruling on this issue, rendered in case no. 477/2019-T. In this decision, the arbitral court considered that “The possibility to formulate ex officio review requests is, manifestly, a guarantee of taxpayers, so its application in time is subject to the application of this general rule on the application of tax law in time.”
However, this decision has since been annulled by the Supreme Administrative Court, in case no. 101/19.1BALSB, 20th of January 2021, which does not rule on the issue of the application of the law in time in the context of the taxpayers’ guarantees established by article 78(2) of the GTL.