Most tax disputes are decided by choices made early, often before anyone involved regards the matter as a dispute at all. The reply to an inspection report, the decision whether to pay and then reclaim, the route selected to challenge an assessment and the deadline attaching to it: each of these narrows what remains possible later. By the time a case reaches a court, the material facts and the available arguments have usually been fixed for some time.

GFDL Advogados acts for companies and individuals against the Portuguese tax authority at every stage of that sequence. The work is conducted jointly by the Tax & Social Security and Litigation teams, which means that the lawyers who understand the substantive tax position are the same ones who argue it.

Before a dispute exists

Inspections and audits are the point at which most disputes are won or lost.

We attend inspections, advise upon what is provided and how, prepare the response to the draft report during the hearing period, and identify at that stage which corrections are worth contesting and which are not. Where a correction is properly made, saying so early is frequently cheaper than the alternative.

Administrative stage

Complaints to the tax authority, hierarchical appeals against its decisions, and requests for review of assessments that have become final. These procedures resolve a substantial proportion of disputes without proceedings and preserve the position where they do not. They also carry their own deadlines, which run whether or not the taxpayer is aware of them.

Arbitration and the courts

An assessment may be challenged before the administrative and tax courts or, in many cases, before an arbitral tribunal constituted at the CAAD.

The two routes have different deadlines, different costs and materially different timescales, and the choice between them is a strategic one that must be made early. We advise upon that choice and conduct proceedings in either forum, including appeals to the higher courts.

Enforcement

Where tax enforcement proceedings have been opened, the immediate questions are the attachment of assets and how enforcement may be suspended, whether by guarantee, by an application to dispense with one, or by a payment arrangement. We act in oppositions to enforcement, in third party claims, and in the applications through which enforcement is suspended while the underlying assessment is contested.

Personal liability of directors and managers

Where a company cannot pay, the enforcement does not necessarily end there. The tax authority may redirect it against those who managed the company, a step known as reversal. The citation arrives personally, frequently years after the individual ceased to hold office, and it reaches assets that were never at risk while the company was trading: salary, personal accounts, the family home.

Two conditions precede it. The company’s attachable assets must be insufficient to meet the debt, and the individual must be given an opportunity to be heard before the reversal is ordered. That hearing is the first and often the best opportunity to stop the process, and it is regularly treated as a formality by those who receive it.

The decisive question is which limb of the subsidiary liability regime applies, because it determines who must prove what. Where the payment period for the debt expired during a person’s term of office, fault is presumed and the burden falls upon the individual to demonstrate that non-payment was not attributable to them. Where the debt arose during the term but fell due afterwards, the tax authority must show that the individual’s conduct caused the insufficiency of the company’s assets. Reversal orders do not always characterise the position correctly, and the characterisation is frequently worth contesting before anything else is argued.

The defences available depend upon the facts and are seldom limited to one. Whether the individual managed the company in fact as well as in name, or in name only. Whether a resignation was effective and when. Whether the company genuinely lacked assets at the relevant time. Whether the debt is time-barred, which succeeds more often than is generally assumed and requires close attention to when each limitation period was interrupted and against whom. And whether the underlying assessment was correct at all, which the individual is entitled to contest even though the company did not.

Alongside the tax itself, liability may be extended to fines and penalties imposed on the company under a separate regime, and social security contributions are subject to their own rules for pursuing those who managed the debtor. Both are commonly overlooked until the amounts appear in the citation.

We act for directors, former directors and those appointed in name only, including where the company has since become insolvent. Because the analysis turns on corporate conduct and on the record of appointment and resignation rather than on the tax alone, this work is conducted with the Corporate & Commercial team.

Related services

Tax & Social Security · Litigation · Tax Compliance · Corporate & Commercial