Late tax correction and taxpayer rights – A recent judgment by the Southern Central Administrative Court (TCAS), dated April 3, 2025, sheds new light on the role of Portugal’s Tax Authority (Autoridade Tributária – AT) and its accountability when it comes to errors in tax assessments, especially when such corrections are made late in the process, even during ongoing litigation. The case, numbered 2621/16.0BELRS, centred on whether a taxpayer is entitled to compensatory interest (juros indemnizatórios) when the AT revokes part of an IRS (personal income tax) assessment on its initiative.
Legal Framework and the Core Issue
At the heart of the dispute was the interpretation of Article 43(1) of the Lei Geral Tributária (LGT), which states that compensatory interest is due when there is an “error imputable to the services.” The central question is whether an administrative correction made while pending litigation automatically signals such an error, triggering the taxpayer’s right to interest?
Trial Court’s Finding: A Missed Opportunity for Timely Correction
The lower court found that the Tax Authority had sufficient documentation to justify a partial annulment at the time of issuing the original IRS assessment. Specifically, receipts for services rendered by two companies had been previously submitted. This led the court to conclude that the AT committed a factual and legal error and failed to act on time, thus fulfilling the conditions for paying compensatory interest.
The Tax Authority’s Defence: No Fault, Just Procedure
On appeal, the AT argued that the revocation of part of the tax assessment resulted not from any error, but from compliance with new documentation submitted by the taxpayer. According to the AT, no wrongful act or negligence could justify compensatory interest, merely an adjustment in light of the law (Articles 41 and 8 of the IRS Code) and additional data.
TCAS Decision: Context Matters in Determining Responsibility and Taxpayer Rights
The TCAS ultimately upheld a nuanced view. The court affirmed that revocation, even if initiated by the AT, can, under certain conditions, constitute recognition of an error. What matters is whether the elements leading to the correction were available during the initial assessment.
In this case, the necessary documentation had been presented for two of the service providers, making the AT’s failure to act a clear “error imputable to the services.” Hence, the taxpayer is owed compensatory interest on that portion of the tax bill.
However, the court ruled that the error could not be blamed on the AT for a third provider, whose documents were only filed with the lawsuit. The failure to submit those documents earlier fell on the taxpayer, disqualifying that portion from interest claims.
Key Takeaways
- “Error imputable to the services” doesn’t require a formal court finding; administrative revocation based on existing data can suffice.
- Timeliness of documentation is critical. If taxpayers fail to provide key evidence early on, they may lose the right to compensatory interest.
- Case-by-case analysis is essential in attributing fault and establishing financial liability on the part of the Tax Authority.
Final Thoughts on Taxpayer Rights
This ruling reaffirms that while taxpayers have rights, they also bear responsibilities, especially regarding timely collaboration with the AT. For professionals and taxpayers alike, it underscores the importance of maintaining thorough, prompt, and well-documented submissions during tax procedures.
It also marks a growing judicial awareness of the need to hold public authorities accountable when their delays or oversights unjustly affect taxpayers. As jurisprudence evolves, so should the diligence with which both sides of the tax equation prepare and present their cases.
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