Supreme Administrative Court

Judgment of 25 March

Case no. 0107/13

In this Judgment, the Supreme Administrative Court decides that the updating of the tax value of a property, previously assessed in accordance with the old Property Tax and Agricultural Tax Code, following improvements conducted into that property and resulting from a valuation carried out pursuant to the rules of the existing Municipal Property Tax Code, did not allow the Tax Authorities to assess taxable income subject to PIT by indirect methods and to consider as a capital gain the difference between the second and first tax valuations, since the increase in value reflects a merely potential or latent capital gain, not effectively realised.

Supreme Administrative Court

Judgment of 25 March 2015

Case no. 01080/13

In this Judgment, the Supreme Administrative Court stated that if a company did not pay Stamp Duty at the time of its incorporation and transfer of assets because the notary considered that there was an exemption, the liability for this payment, ascertained following a tax inspection, shall be borne entirely by the company (as entity that should borne the underlying cost) and not by the notary (in its capacity of taxpayer), on the assumption that the notary acted with due diligence in the collecting of such tax.

North Central Administrative Court

Judgment of March 12

Case no. 00173/05.6BEBRG

In this Judgment, the North Central Administrative Court states that the Tax  and Customs Authority does not have to provide evidence regarding the falsity of the invoices for the purposes of refusal of VAT deduction. Instead, it is sufficient to simply identify facts from which results the strong probability of the underlying operations being simulated, in order to rebut the presumption of veracity of taxpayers’ declarations and accounting.

The inexistence of contracts, budgets or any other documents concerning the acquisitions to which the invoices relate, as well as the reentry in cash, on the purchaser’s bank account, of the total net value of the check issued for payment, constitutes suff icient evidence that the invoices do not represent real transactions. Thus, it shall be to the purchaser to provide the competent authorities with proof that the issued invoices, in respect of which VAT has been deducted, correspond to real transactions.

North Central Administrative Court

Judgment of March 12

Case no. 00005/04.2

In this Judgment, the North Central Administrative Court states that ancillary obligations must have a legal basis, and therefore the Tax and Customs Authority cannot impose the compliance with the former when such obligation derives from an administrative circular and not from statutory provisions.

Thus, considering that the law does not prescribe any obligation of prior notification to the Tax and Customs Authority, by corporate income taxpayers, concerning their intention of destruction of outdated inventories or with  loss of value, the Tax and Customs Authority cannot ignore the extraordinary loss, reflected on the taxpayer´s accounting and as such reported for tax purposes, exclusively on the basis of lack of said prior notification.

South Central Administrative Court

Judgment of 15 April 2015

Case no. 05108/11

In this Judgment, the South Central Administrative Court confirms that an invoice can only confer the right to deduct the payable tax if it is issued with respect to the legal requirements.

Thus, in the case of invoices issued breaching legal requirements and that, simultaneously, are considered by the Tax and Customs Authority as not corresponding to real transactions, it is not sufficient for the taxpayer to prove that the underlying transaction took place in order to secure right to deduct, being also necessary to provide evidence that the formal requirements of the invoice are duly observed.

Administrative and Tax Arbitration Centre

Tax Arbitration Court

Arbitration Decision of 19 December 2013, published on 8 April 2015 Case no. 130/2013-T

In this Arbitration Decision, the Arbitration Court gives its opinion on the legality of a PIT assessment issued following the application by the Tax and Customs Authority of transfer pricing rules to a company’s purchase of shares from its main shareholder, considering that the selling price exceeded what would have been agreed between independent entities and this excess should be reclassified as an advance on profits, taxed in the hands of the shareholder, a natural person, as capital income.

The Arbitration Court annulled the PIT assessment, underlining that transfer pricing rules can only be applied to under PIT in Category B (organized accounting regime), and not under Category E.

It further notes that the transaction could only be reclassified by application of an anti-abuse provision and not through the application of the legal presumption determining that entries of amounts in any current accounts of the shareholders, that do not derive from loans, from the provision of work or from the exercise of management functions, are presumed to be made as profits or advance payment of profits, which had indeed been rebutted in this case.

Administrative Arbitration Centre

Decision of 04 December 2014, published on 9 April 2015

Case no. 307/2014

In this Arbitration Decision, the Arbitration Court decided that, for the purposes of rules concerning liability to PIT, the classification of ‘rent beneficiary’ constitutes a legal position that is not dependent upon a declaration of intent by the taxpayer, as it could lead to the breach of the principle of tax legality and of taxpaying capability.

As such, ‘rent beneficiary’ is the person who, according to civil law, is entitled to its receipt, i.e. the owner, the usufructuary and/or the landlord, for which reason any person outside this legal framework, namely a person who receives rents under a rent assignment agreement, cannot be classified as PIT taxpayer for the rents in question.

Administrative Arbitration Centre

Decision of 10 November 2014, published on 9 April 2015 Case no. 278/2014-T

In this Arbitration Decision, the Arbitration Court analyzes the conditions for the adjustment of VAT in favour of the taxpayer based on credit notes, in light of the requirements listed in Article 78(5) of the VAT Code.

The Court decides that the presentation of current account statements concerning the acquirer and the adjustment of the credit note, as well as the corresponding accounting entries, can demonstrate that the acquirer was informed of the rectification or that the tax was repaid.

The Court also stresses that the classification of a document as “internal document of the company” is not sufficient to affect its adequacy as evidence of the facts alleged by the taxpayer.