Supreme Administrative Court
Judgment of 15 January 2014
Case No. 0815/11

The Supreme Administrative Court declared that the costs borne by a banking entity in order to refund sums diverted from its customers’ bank accounts through the commitment of a crime of infidelity by one of its employees, are tax deductible. In fact, the indispensable nature of the cost should be examined by reference to the relation between the cost borne and the productive activity pursued by the company and that the return of the amounts diverted, in terms of public credibility and of the rules imposed by the Bank of Portugal, is not only related with the activity such an entity, as it is indispensible to its maintenance.

The court further considers that the fact that the Tax Administration is bound by the principle of legality prohibits it from setting out requirements for the deduction of costs other than those laid down in the law (such as the costs not corresponding to the payment of compensation relating to events whose risk are not capable of being ensured or the losses concerned «leading to an exceptional situation of impossibility or extreme difficulty in obtaining profits or maintaining the productive source »).

Supreme Administrative Court
Judgment of 15 January 2014
Case No. 01101/13

The Supreme Court of Justice confirmed its understanding that the requirement to first exhaust the administrative means of review of decisions setting asset values must be interpreted restrictively, limiting it to situations of disagreement as to the value actually set, concluding that it is legally admissible to challenge in court the decision of assessing the tax value of a property on the grounds of lack of proper reasoning .

South Central Administrative Court
Judgment of 16 de January 2014
Case No. 07265/13

The South Central Administrative Court held that, in the case of termination of tax enforcement proceedings as a result of the voluntary payment by the original debtor, the proceedings concerning a claim against a decision issued within the tax foreclosure proceedings submitted by the person having secondary liability, becomes no needed., On that basis the person having secondary liability cannot be ordered to pay the legal c osts arising from the claim in question since the termination of the dispute was not brought about by any conduct that may be attributed to that person .

On the other hand, the Court also notes that, considering that the Tax Authorities is bound by the principle of legality that imposed on it the acceptance of the application for payment by the original debtor, they cannot be made liable for paying the costs related to the underlying proceedings.

Regarding the original debtor, and although it was his cond uct that determined the termination of the tax foreclosure proceedings and the subsequent termination of the claim against the decision of the tax foreclosure entity, he was not a party to the said proceedings and therefore should not be ordered to pay the corresponding legal costs.

Accordingly, the South Central Administrative Court concluded that, in these circumstances, no legal costs are due.