Process: 122/2017-T

Date: October 27, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In CAAD Case 122/2017-T, a taxpayer challenged Stamp Tax assessments totaling €14,617.60 under Verba 28.1 of the General Stamp Tax Table (TGIS), which applies to residential properties. The company had filed an official review claiming its property did not qualify as residential under Verba 28.1. The tax authority partially granted the review, reimbursing €548.16 but issuing a new assessment for the remaining amount. The taxpayer then initiated tax arbitration challenging both the partial deferral decision and the assessment acts. During the arbitral proceedings, the tax authority voluntarily annulled the contested assessments and fully reimbursed the taxpayer. The arbitral tribunal declared supervening uselessness of the dispute (inutilidade superveniente da lide) regarding the illegality claims, as the taxpayer had already obtained the substantive relief sought—annulment of the tax acts and full reimbursement. However, the tribunal proceeded to rule on compensatory interest, finding the taxpayer entitled to such interest from the dates of wrongful payment (April, July, and November 2013) until the reimbursement dates (December 2016 and October 2017). The tribunal applied Article 43(1) of the Tax Governance Law, which mandates compensatory interest when errors attributable to tax authorities result in excessive tax payments. This decision illustrates that while proceedings may be dismissed when the main objective becomes moot, taxpayers retain their right to compensatory interest for the period their funds were wrongfully held by the state.

Full Decision

ARBITRAL DECISION

REPORT:

A…, S.A., a company with registered office at …, street address …, postal code …-… Funchal, holder of the single registration number and identification number of a legal entity …, hereinafter referred to as the Claimant, submitted a request for the constitution of an arbitral tribunal in tax matters and a request for arbitral decision, pursuant to the provisions of paragraph a) of article 2, number 1, and paragraph a) of article 10, number 1, both of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as LFAT), petitioning for a declaration of illegality of the decision granting partial relief of the official review No. …2015…, insofar as it is unfavorable to the Claimant, as well as of the tax assessment acts for Stamp Tax (ST) No. 2012… and No. 2016…, which result in the demand from the Claimant of the amount of €14,617.60, and consequently, the condemnation of the Respondent to the reimbursement of the aforementioned amount, plus compensatory interest.

To substantiate its petition, the Claimant alleges, in summary:

  • The Claimant submitted a request for official review of the tax assessment act for ST No. 2012…, in the amount of €15,165.76, relating to the fiscal year 2012;

  • To this effect it alleged, in short, that the property of which it is owner is not subsumed in the concept of property with residential purpose as provided in item 28.1 of the Tax-Fee Schedule;

  • Such request for official review was partially granted, and as a result the Claimant was reimbursed the amount that the Respondent understood to have been wrongfully paid, in the sum of €548.16;

  • And a new assessment notice was issued – No. 2016… -, in the amount of €14,617.60;

  • In the year 2012, the Claimant's property was not subsumed in the concept of property with residential purpose as provided in item 28.1 of the Tax-Fee Schedule;

  • Wherefore the contested acts are affected by error as to the legal prerequisites.

The Claimant submitted 4 documents and did not call any witnesses.

In the request for arbitral decision, the Claimant chose not to appoint an arbitrator, wherefore, pursuant to the provisions of article 6, number 1 of the LFAT, the undersigned was appointed by the Ethical Council of the Administrative Arbitration Center, and the appointment was accepted in accordance with legal provisions.

The arbitral tribunal was constituted on April 27, 2017.

Notified in accordance with the provisions of article 17 of the LFAT, the Respondent submitted a response, invoking that its services are proceeding with the steps necessary for the annulment of the contested assessment, wherefore there exists subsequent mootness of the dispute. Subsidiarily, and in the event it is found that there is no subsequent mootness of the dispute, it requested the grant of a period of not less than 30 days for submission of supporting documentation proving the completion of the annulment.

Notified of the response submitted by the Respondent, the Claimant opposed the dismissal of the proceedings due to subsequent mootness of the dispute, given the fact that the acts subject to the challenge had not yet been annulled.

By motion of 09/10/2017, the Respondent submitted to the file supporting documentation of the annulment of the assessment in question, and the Claimant confirmed that the reimbursement of the petitioned amount had been completed on 03/10/2017.

PRELIMINARY ISSUE: SUBSEQUENT MOOTNESS OF THE DISPUTE:

In the present proceedings, the acts contested by the Claimant were completely annulled by the Respondent, and the Claimant was reimbursed the full amount paid.

It is thus found that, as to the annulment of the contested acts, the Claimant has already obtained the result it sought to obtain by the decision in the present proceedings, wherefore any decision to be rendered as to this matter would be entirely devoid of utility.

Thus, as to the petitioned declaration of illegality of the tax acts granting partial relief of the request for official review and of assessment acts Nos. 2012… and 2016…, the dismissal of the proceedings due to subsequent mootness of the dispute must be declared – see article 277 e) of the Code of Civil Procedure, applicable by virtue of article 29, number 1 e) of the LFAT.

CASE MANAGEMENT:

The Arbitral Tribunal was regularly constituted and is substantively competent.

There are no nullities that invalidate the proceedings.

The parties have legal personality and capacity and are entitled to participate, with no defects in representation.

There are no other nullities, exceptions, or preliminary issues that prevent the determination of the merits and which it is incumbent upon the Tribunal to address ex officio.

ISSUE TO BE DECIDED:

Having analyzed the arbitral petition filed by the Claimant, it is found that, in view of the subsequent mootness of the dispute as to the declaration of illegality of the contested tax acts, it remains only to determine the right to the receipt of compensatory interest petitioned by the Claimant.

FACTS:

Established Facts

With relevance for the decision to be rendered in the present proceedings, the following facts were established as proven:

  • The Claimant paid the ST assessment No. 2012…, relating to the fiscal year 2012, in the total amount of €15,165.76, on the following dates and amounts:

    • On 23/04/2013, the amount of €5,055.26;
    • On 22/07/2013, the amount of €5,055.25; and
    • On 29/11/2013, the amount of €5,055.25.

  • The Respondent reimbursed the Claimant in the amount of €548.16 on 06/12/2016;

  • On 03/10/2017, the Respondent reimbursed the Claimant in the amount of €14,617.60.

Unproven Facts

No other facts of relevance to the case were established.

Justification of the Facts

The finding regarding the facts established as proven was formed on the basis of the documentary evidence submitted by the parties, as indicated with respect to each point, the truthfulness of which was not challenged, as well as the matters alleged and not contested.

AS TO THE LAW:

Concerning compensatory interest, article 43, number 1 of the Tax Governance Law provides that "compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was an error attributable to the tax authorities which results in payment of the tax debt in an amount higher than legally due."

In the case now under consideration, the error affecting the contested assessments, the illegality of which was acknowledged by the Respondent, is attributable to the Tax Authority, wherefore there is no doubt that the Claimant has the right to receive compensatory interest.

The payment of compensatory interest is thus due from the date of the wrongful receipts by the Respondent until the date on which the Claimant was reimbursed the respective wrongfully paid amount.

Thus, as to the first ST installment paid, the Claimant has the right to receive compensatory interest, calculated on the amount of €5,055.26 from 23/04/2013 until 06/12/2016, the date on which it was reimbursed the amount of €548.16, with the right to receive compensatory interest on the difference (€4,507.10) from 07/12/2016 until 03/10/2017.

As to the second ST installment paid, the Claimant has the right to receive compensatory interest, calculated on the amount of €5,055.25 from 22/07/2013 until 03/10/2017.

Finally, as to the third ST installment paid, the Claimant has the right to receive compensatory interest, calculated on the amount of €5,055.25 from 29/11/2013 until 03/10/2017.

RULING:

In view of the foregoing, it is decided:

  1. To declare the dismissal of the proceedings, as to the petitioned declaration of illegality of the tax acts granting partial relief of the request for official review and of the ST assessment acts Nos. 2012… and 2016…;

  2. To condemn the Respondent to the payment of compensatory interest to the Claimant, calculated on the amounts, from the dates and until the following dates:

    • Amount of €5,055.26, from 23/04/2013 until 06/12/2016;
    • Amount of €4,507.10, from 07/12/2016 until 03/10/2017;
    • Amount of €5,055.25, from 22/07/2013 until 03/10/2017; and
    • Amount of €5,055.25 from 29/11/2013 until 03/10/2017.

  3. To condemn the Respondent to pay the costs of the proceedings.

The value of the case is fixed at €14,617.60, pursuant to paragraph a) of article 97-A, number 1 of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of article 29, number 1 of the LFAT and of number 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at €918.00, pursuant to Table I of the Regulation on Costs of Tax Arbitration Proceedings, as well as article 12, number 2 and article 22, number 4, both of the LFAT, and article 4, number 4 of the aforementioned Regulation, to be paid by the Respondent, as the unsuccessful party.

Register and notify.

Lisbon, October 27, 2017.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, pursuant to article 131, number 5 of the Code of Civil Procedure, applicable by reference to paragraph e) of article 29, number 1 of Decree-Law No. 10/2011, of 01/20.

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto de Selo) under Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS)?
Stamp Tax under Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) applies specifically to properties classified as having residential purposes (prédios com afetação habitacional). This provision imposes stamp duty on the ownership of residential real estate. The classification is crucial because properties without residential purpose fall outside this tax provision's scope, as was argued in this case where the taxpayer contended their property did not meet the residential criteria.
When does supervening uselessness of proceedings (inutilidade superveniente da lide) apply in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) applies in Portuguese tax arbitration when the objective sought by the claimant is achieved during the proceedings, rendering any judicial decision on the merits devoid of practical utility. Under Article 277(e) of the Code of Civil Procedure, applicable via Article 29(1)(e) of the LFAT, proceedings are dismissed when the contested acts are annulled and the taxpayer is fully reimbursed before judgment, as occurred in Case 122/2017-T. However, the tribunal may still rule on ancillary matters like compensatory interest.
Can a taxpayer challenge a partial deferral of an ex officio review of a Stamp Tax assessment?
Yes, a taxpayer can challenge a partial deferral of an ex officio review (revisão oficiosa) of a Stamp Tax assessment in Portuguese tax arbitration. In this case, the taxpayer challenged both the decision granting partial relief of the official review and the resulting assessment acts. The partial deferral meant the tax authority acknowledged some error but not the full extent claimed by the taxpayer, justifying the taxpayer's right to seek complete annulment through arbitration under Articles 2(a) and 10(1)(a) of Decree-Law 10/2011.
How does the CAAD arbitral tribunal handle cases where the tax authority agrees to annul a contested assessment?
When the tax authority agrees to annul a contested assessment during CAAD arbitral proceedings, the tribunal declares supervening uselessness of the dispute (inutilidade superveniente da lide) regarding the illegality claims, dismissing those proceedings under Article 277(e) of the Code of Civil Procedure. However, the tribunal retains jurisdiction to decide ancillary matters such as compensatory interest. In Case 122/2017-T, despite dismissing the main illegality claims after the tax authority's voluntary annulment, the tribunal ruled that the taxpayer was entitled to compensatory interest from the dates of wrongful payment until full reimbursement.
Does a property classified as non-residential qualify for Stamp Tax under Verba 28.1 of the TGIS?
No, a property classified as non-residential does not qualify for Stamp Tax under Verba 28.1 of the TGIS. Verba 28.1 specifically applies only to properties with residential purposes (prédios com afetação habitacional). In this case, the taxpayer successfully argued that its property lacked residential classification, leading the tax authority to annul the assessments. The distinction between residential and non-residential property is determinative for the application of this stamp duty provision, and misclassification constitutes an error in legal prerequisites (erro sobre os pressupostos de direito).