Process: 118/2017-T

Date: July 10, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 118/2017-T addressed a Stamp Tax (Imposto de Selo) assessment of €15,165.76 levied on building land under Verba 28 of the General Stamp Tax Table (TGIS). The taxpayer, A… S.A., challenged both the tax liquidation no. 2013… and the decision rejecting an ex officio review proceeding. The arbitration request was filed on February 17, 2017, pursuant to Article 2(1)(a) and Article 10(1)(a) of Decree-Law 10/2011 (RJAT). The singular arbitral tribunal was constituted on April 27, 2017, with Rita Guerra Alves appointed as arbitrator. In its response filed May 26, 2017, the Tax Authority (AT) invoked supervening uselessness of proceedings under Article 277(e) of the Civil Procedure Code, requesting time to complete the annulment of the contested assessment. The claimant did not object to this procedural development. The tribunal granted AT a 30-day period to provide documentary proof of the annulment. On June 29, 2017, AT issued ex officio review decision annulling the contested Stamp Tax assessment, and filed documentary evidence on July 3, 2017. The tribunal analyzed whether supervening uselessness constituted grounds for extinction of the proceedings under Articles 277(e) and 287(e) of the CPC, applicable subsidiarily per Article 29(1) of RJAT. The decision confirmed that since the contested administrative act was revoked after the arbitration request was filed and the tribunal constituted, but before a decision on the merits, the dispute became moot. This case illustrates how Portuguese tax arbitration proceedings can terminate when the Tax Authority voluntarily annuls the contested assessment during arbitration, eliminating the practical utility of continuing litigation and resulting in procedural extinction without a substantive ruling on the legality of Stamp Tax on building land.

Full Decision

ARBITRAL DECISION

I - Report

A - Identification of the Parties

Claimant: A… S.A., with registered office at Rua de …, no …, …-… Funchal, holder of the collective tax identification number NIPC: ..., hereinafter referred to as Claimant or taxpayer.

Respondent: Tax and Customs Authority, hereinafter referred to as Respondent or AT.

The Claimant filed a request for the establishment of an Arbitral Tribunal in tax matters and a request for an arbitral award, pursuant to the provisions of paragraph a) of no. 1 of Article 2 and paragraph a) of no. 1 of Article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter abbreviated as RJAT).

The request for the establishment of the Arbitral Tribunal was accepted by the President of CAAD, and in accordance with the provisions of paragraph c) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, and notification thereof was given to AT on 2017-02-17.

The Claimant did not proceed with the appointment of an arbitrator, whereupon the Deontological Council, pursuant to the provisions of no. 1 of Article 6 and paragraph b) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, appointed Rita Guerra Alves as Arbitrator, whose appointment was accepted by her in accordance with the legally prescribed terms.

On 2017-04-10, the parties were duly notified of such appointment, and did not express any intention to object to the appointment of the arbitrator, in accordance with Article 11 no. 1, paragraphs a) and b), of the RJAT and Articles 6 and 7 of the Deontological Code.

The Singular Arbitral Tribunal was duly constituted on 2017-04-27, to review and decide on the subject matter of the present proceedings, and notification was automatically given to the Tax and Customs Authority on 2017-04-27 as stated in the respective minutes.

B - Request

1. The Claimant herein petitioned for the declaration of illegality of the tax assessment act:

1.1. of the decision rejecting the ex officio review proceeding no. …2015…, and

1.2. in respect of Stamp Tax, no. 2013…, in the amount of € 15,165.76 (fifteen thousand one hundred and sixty-five euros and seventy-six cents);

1.3. as well as the condemnation of AT to refund to the Claimant the tax paid, as well as default interest and procedural costs.

C - Sanction

2. The request for an arbitral award is timely insofar as it was filed within the time limit provided for in paragraph a) of no. 1 of Article 10 of the RJAT.

3. The parties have legal personality and capacity, are legitimate as to the request for an arbitral award and are duly represented, in accordance with the provisions of Articles 4 and 10 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.

4. The Arbitral Tribunal is materially competent, in accordance with Articles 2, no. 1, paragraph a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January, as to the review of the request for an arbitral award formulated by the Claimant.

5. Both parties agree with the waiver of the hearing meeting provided for in Article 18 of the RJAT.

6. The Respondent in its response filed on 2017-05-26, requested the supervening futility of the dispute, in accordance with Article 277, paragraph e) of the Code of Civil Procedure, arguing that the subject matter of the request for an arbitral award would be extinguished, as the Services are proceeding with the necessary steps for the annulment of the assessment, subject matter of the request for an arbitral award, pending the completion of the compensation of the amounts stated in the contested assessment.

7. The Respondent requested a period never less than 30 days to attach to the case file documentary evidence of the completion of the annulment of the contested assessment.

8. The Tribunal notified the Claimant on 2017-05-31 to inform the Tribunal whether it objected to the Respondent's request for a period of 30 days.

9. The Claimant did not object to AT's request.

10. The Tribunal granted AT on 2017-06-07 a period of 30 days to attach to the case file documentary evidence of the completion of the annulment of the contested assessment.

11. On 2017-07-03, AT attached to the case file documentary evidence of the completion of the annulment of the contested assessment.

12. The proceedings do not suffer from defects or nullity that would invalidate it, wherefore it is necessary now to address the merits of the request.

D - Issues to be Decided

13. In light of the positions assumed by the parties in the arguments presented, the following constitute the central issues to be decided, which must therefore be reviewed and decided:

14. As alleged by the Claimant:

14.1. of the decision rejecting the ex officio review proceeding no. …2015…, and

14.2. in respect of Stamp Tax, no. 2013…, in the amount of € 15,165.76 (fifteen thousand one hundred and sixty-five euros and seventy-six cents);

14.3. as well as the condemnation of AT to refund to the Claimant the tax paid, as well as default interest and procedural costs.

15. As alleged by the Respondent:

15.1. Preliminary issue, of the supervening futility of the dispute.

E - Preliminary Issue, of the Supervening Futility of the Dispute

16. AT raised in its response the issue of the supervening futility of the dispute, in accordance with Article 277, paragraph e) of the Code of Civil Procedure, arguing that the subject matter of the request for an arbitral award would be extinguished, as the Services are proceeding with the necessary steps for the annulment of the assessment, subject matter of the request for an arbitral award, pending the completion of the compensation of the amounts stated in the contested assessment.

17. The Claimant, notified to express itself on the Respondent's response and consequently on the revocation of the order, has no objection to the extinction of the present instance due to supervening futility of the dispute.

18. A period of 30 days was granted to AT to proceed with the annulment of the assessment, and AT on 2017-07-03 proceeded to attach to the case file documentary evidence of the completion of the annulment of the contested assessment.

19. The respective act was annulled by means of an ex officio review decision no. …2017…, by the Head of Division B…, on 29-06-2017, and by information no. …-APT/2017.

20. Given the above, it is necessary to decide whether supervening futility of the dispute occurs.

21. Supervening futility of the dispute is a cause for extinction of the instance, in accordance with Article 287, paragraph e) of the Code of Civil Procedure, in accordance with Article 277, paragraph e) of the Code of Civil Procedure (CPC), applicable subsidiarily as per Article 29, no. 1 of the Tax Arbitration Regime.

22. We are certain that the revocation of the act occurred on 2017-06-29, that is, on a date subsequent to the request for establishment of the present Tribunal and notification of AT, both carried out on 2017-02-17 and to the date of constitution of the Tribunal and respective notification to the parties, which occurred on 2017-04-27.

23. And it results from the RJAT the existence of two distinct phases: the phase of the procedure (Chapter II of the RJAT) and the phase of the proceedings proper (Chapter III of the RJAT), and the transition between phases constituted by the establishment of the Arbitral Tribunal.

24. The request for establishment of the Arbitral Tribunal is directed to the President of CAAD, within the time limits and with the formalities provided for in Article 10 of the RJAT, and must be preceded by payment of the initial arbitration fee, whose proof must be attached to it (cf. Article 10, no. 2, paragraph f), of the RJAT).

25. The acceptance of the request for establishment of the Arbitral Tribunal marks the beginning of the procedural phase, during which the Respondent entity may, within thirty days from knowledge of the request for establishment of the Arbitral Tribunal, "proceed to revoke, ratify, amend or convert the tax act whose illegality has been raised, performing, when necessary, a substitute tax act", provided that in that case it notifies the President of CAAD of the decision taken (cf. no. 1 of Article 13 of the RJAT).

26. After that thirty-day period from the date of knowledge of the request for establishment of the Arbitral Tribunal, without the Respondent having adopted any of the conduct provided for in no. 1 of Article 13 of the RJAT, and having the taxpayer opted not to appoint an arbitrator, the CAAD appoints the arbitrator(s), notifies the parties of the appointment (Article 11, no. 1, of the RJAT) and, if they do not object to such appointment, communicates to them the establishment of the Arbitral Tribunal within the next ten days (Article 11, no. 1, paragraph c) and no. 8, of the RJAT).

27. Once the Arbitral Tribunal is established, the tax arbitral proceedings begins (Article 15 of the RJAT), followed by the procedural conduct which will culminate in the final decision.

28. Given the above and considering that the revocation of the act in question is valid, we decide for extinction due to supervening futility of the dispute.

29. As to responsibility for the payment of costs, the rules contained in Article 536 of the CPC are applicable, subsidiarily applicable to tax arbitral proceedings, pursuant to Article 29, no. 1, paragraph e), of the RJAT.

30. However, and because the supervening futility of the dispute is attributable to the Respondent, motivated by the fact that the act of revocation occurred on a date subsequent to the phase provided for in no. 1 of Article 13 of the RJAT, the Respondent is responsible for all costs in accordance with Article 536 no. 3 at the end and no. 4 of the CPC.

F - DEFAULT INTEREST

31. The Claimant further sustains the payment of default interest.

32. As was decided above, it is attributable to the Respondent the extinction due to supervening futility of the dispute, motivated by the annulment and respective revocation by initiative of AT, which encompasses the assessment of Stamp Tax.

33. In truth, it being demonstrated that the claimant paid the contested tax in an amount superior to what is owed, the Claimant has by virtue of the provisions of Articles 61 of the CPPT and 43 of the LGT the right to compensation interest owed, such interest to be counted from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, calculating the period for such payment from the beginning of the period for voluntary execution of the present decision (Article 61, nos. 2 to 5 of the CPPTRIB), all at the rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT.

34. For this reason, we grant the Claimant's request for condemnation of the Respondent to pay default interest.

G - Decision

In accordance with the facts and legal grounds set forth above, this Arbitral Tribunal decides:

a) To declare the extinction of the instance by exception of supervening futility of the dispute as well-founded.

b) To condemn the Respondent to refund to the Claimant the amount of € 15,165.76 (fifteen thousand one hundred and sixty-five euros and seventy-six cents) unduly assessed and paid, plus the payment of accrued default interest for the period between the date of payment of the tax and its return, as well as the payment of accruing default interest from the date of notification of this decision until effective and full payment, all in accordance with nos. 2 to 5 of Article 61 of the CPPT, at the legal rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT until full reimbursement.

c) To condemn the Respondent for all costs.

d) Given the above and considering the decision on extinction due to supervening futility of the dispute, the review of the remaining requests brought to the case file by the Claimant is rendered moot.

The value of the proceedings is fixed at € 15,165.76, corresponding to the value of the assessment taking into account the economic value of the proceedings assessed by the value of the tax assessments contested, and accordingly the costs are fixed at the respective amount of € 918.00 (one thousand two hundred and twenty-four euros), at the charge of the Respondent in accordance with Article 12, no. 2 of the Tax Arbitration Regime, Article 4 of the RCPAT and Table I attached thereto – no. 10 of Article 35, and nos. 1, 4 and 5 of Article 43 of the LGT, Articles 5, no. 1, paragraph a) of the RCPT, 97-A, no. 1, paragraph a) of the CPPT and 536 and 559 both of the CPC).

Notify.

Lisbon, 10 July 2017

The Arbitrator

Rita Guerra Alves

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) applicable to building land under Verba 28 of the TGIS?
Stamp Tax (Imposto de Selo) under Verba 28 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção). This tax category targets land designated for construction purposes and represents a specific taxable event within the Portuguese stamp tax framework. In Process 118/2017-T, the assessment amounted to €15,165.76, though the decision did not reach the substantive merits regarding the proper application of Verba 28 because the case was closed due to supervening uselessness after AT annulled the assessment.
What does supervening uselessness of proceedings (inutilidade superveniente da lide) mean in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration is a ground for extinction of the proceedings established in Article 277(e) of the Civil Procedure Code, applicable subsidiarily to tax arbitration under Article 29(1) of RJAT. It occurs when the object of the dispute ceases to exist after proceedings commence, making continuation of litigation practically futile. In Process 118/2017-T, supervening uselessness arose when the Tax Authority voluntarily annulled the contested Stamp Tax assessment on June 29, 2017, after the arbitral tribunal was already constituted on April 27, 2017, thereby eliminating the practical purpose of continuing the arbitration to obtain a substantive ruling.
How can taxpayers challenge Stamp Tax assessments on building land through CAAD arbitration?
Taxpayers can challenge Stamp Tax assessments on building land through CAAD arbitration by filing a request for establishment of an arbitral tribunal under Article 10(1)(a) of Decree-Law 10/2011 (RJAT). The request must be directed to the President of CAAD within statutory deadlines, accompanied by proof of payment of the initial arbitration fee (Article 10(2)(f) RJAT). The claimant may appoint an arbitrator or, as in Process 118/2017-T, the Deontological Council will appoint one pursuant to Article 6 and Article 11(1)(b) of RJAT. The arbitral tribunal has material jurisdiction under Article 2(1)(a) RJAT to review the legality of tax assessments, including those under Verba 28 TGIS, and can declare acts illegal and order refunds of taxes paid plus default interest.
What are the legal grounds for requesting annulment of Stamp Tax liquidation on terrenos para construção?
Legal grounds for requesting annulment of Stamp Tax liquidation on building land (terrenos para construção) include challenging the proper legal classification under Verba 28 of TGIS, contesting whether the land qualifies as building land, disputing the tax base calculation, or arguing procedural irregularities in the assessment process. Taxpayers can also request ex officio review by the Tax Authority before resorting to arbitration. In Process 118/2017-T, the claimant challenged both the Stamp Tax liquidation no. 2013… and the decision rejecting ex officio review proceeding no. …2015…. The Tax Authority ultimately annulled the assessment through ex officio review decision no. …2017… issued by the Head of Division, suggesting recognition of legal or procedural defects in the original liquidation.
What is the procedure for filing a tax arbitration request under Decreto-Lei 10/2011 (RJAT) in Portugal?
The procedure for filing a tax arbitration request under Decreto-Lei 10/2011 (RJAT) involves: (1) submitting a request for establishment of an arbitral tribunal to the President of CAAD within statutory deadlines (Article 10 RJAT); (2) paying and proving payment of the initial arbitration fee (Article 10(2)(f)); (3) identifying parties, formulating claims, and presenting legal grounds; (4) optionally appointing an arbitrator, or accepting appointment by the Deontological Council (Article 11(1)(b)); (5) notification to the Tax Authority, which has the opportunity to respond; (6) constitution of the tribunal, which occurs after arbitrator appointment and absence of objections (Articles 6-7 Deontological Code); (7) procedural phase under Chapter II transitioning to proceedings phase under Chapter III; and (8) parties may waive oral hearings under Article 18 RJAT, as occurred in Process 118/2017-T where both parties agreed to waiver.