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Legal alert no. 43

Ruling of the Administrative Supreme Court no. 4/2017

Admissibility of the conviction in the payment cumulatively of compensatory interest and default interest

The ruling of the Administrative Supreme Court no. 4/2017, published in the Official Gazette of the Republic of Portugal, on the 18th of September, standardizes the jurisprudence concerning the admissibility of conviction of the Portuguese Tax Authority cumulatively in the payment of compensatory interest and default interest regarding the same amount and the same time frame.

This ruling was given in response to an appeal for standardization of jurisprudence, lodged by the Portuguese Tax Authority due to the obvious contradiction between the ruling of the South Administrative Central Court of 27.10.2016 (proc. 09549/16) and the previous jurisprudence of the same court (rulings of South Administrative Central Court 23.04.2015, proc. 08311/14; 28.04.2016, proc. 08784/15; and 13.07.2016, proc. 09624/16) when it comes to the main point of law. The contested ruling acknowledges the taxpersons’ right to compensatory interest and default interest cumulatively regarding the same time frame, whereas the jurisprudence of the South Administrative Central Court mentioned above declares the inadmissibility of such assumption.

The appellant claimed that the conviction of the Portuguese Tax Authority in the payment of compensatory interest and default interest cumulatively implies a double compensation for the same deprivation of availability of funds, given that in the appellant’s opinion both interests have a compensatory purpose. However, that was not the position adopted by the Administrative Supreme Court in the ruling mentioned above. In fact, the Administrative Supreme Court stated that, even though the previous jurisprudence of the South Administrative Central Court declared the inadmissibility of the conviction in the payment of compensatory interest and default interest cumulatively, the introduction of the no. 5 of article 43 of the General Tax Law allows us to conclude that the compensatory interest and the default interest have different purposes. This is because the former aim at the compensation of the deprivation of availability of funds, whereas the latter seek a sanctioning effect in the event of non-compliance with judicial decisions. Therefore, the Administrative Supreme Court standardized the jurisprudence, deciding that, given the provision of no. 5 of article 43 of General Tax Law, it’s admissible to convict the Portuguese Tax Authority in the payment of compensatory interest and default interest cumulatively regarding the same amount and the same time frame.

To access the complete text of the ruling of the Administrative Supreme Court no. 4/2017 please go to https://dre.pt/application/file/a/108169436.

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