What is the prior hearing
The prior hearing is a procedural mechanism that safeguards taxpayers’ rights.
It arises from the principle of participation set out in Article 60 of the General Tax Law (LGT) and allows taxpayers to take part in the formation of tax decisions or administrative acts that directly concern them.
When does it apply?
This right may arise in several situations, such as tax assessments, refusals of requests, administrative appeals, conclusions of tax audits, or cases involving subsidiary tax liability.
It is particularly relevant in the context of fiscal reversion, where tax enforcement proceedings against the main debtor are extended to a secondary (subsidiary) debtor under Article 23(1) LGT. Before this reversion occurs, the subsidiary debtor must be given the opportunity to be heard.
Possible advantages of accepting the reversion
If a company owes debts to the Tax Authority or to Social Security, and its manager or director faces a fiscal reversion, accepting it may offer certain benefits, such as:
- Exemption from late-payment interest and costs if paid within 30 days (Article 23(5) LGT)
- Payment in instalments when immediate payment is not possible (Article 42(1) LGT)
- Payment in kind (Dação em cumprimento) through movable or immovable property, if requested within 30 days (Article 201 CPPT)
- Right of recourse against other tax-liable persons (Article 24(1) LGT)
Deadlines and procedures
Deadline
The right to be heard must be exercised within the period set by the tax authority, notified by registered letter to the taxpayer’s fiscal address (Article 60(4) LGT). Typically, this period is 15 days (Article 60(6) LGT), extendable depending on case complexity.
Form
The statement may be submitted in writing or orally (Article 60(6) LGT). When presented orally, it must be recorded in writing (Article 45 CPPT).
Tax authority response
The response time usually does not exceed four months (Article 57 LGT). However, this period is not strictly binding. If no reply is received within six months, the taxpayer should formally request justification from the authority.