Process: 134/2018-T

Date: July 20, 2018

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 134/2018-T) addresses the supervening futility of proceedings in an AIMI (Additional Municipal Property Tax) case involving married taxpayers challenging a 2017 assessment of €3,871.25. The claimants filed an administrative appeal on September 8, 2017, which was not decided within the statutory four-month period, resulting in tacit rejection on January 8, 2018. They subsequently filed an arbitration request on March 21, 2018, within the 90-day deadline. The Tax Authority raised preliminary objections including untimeliness and lack of jurisdiction. However, on May 11, 2018, after the arbitration tribunal was constituted, the Tax Authority informed that it had revised the contested AIMI assessment based on the administrative appeal. The tribunal ruled that the arbitration request was timely filed, correctly calculated from the tacit rejection date rather than the original assessment date. Regarding supervening futility, the tribunal found that since the Tax Authority revoked the assessment after the 30-day period established in article 13 of RJAT for pre-constitution revocation, the tribunal was properly constituted and competent. Nevertheless, since the contested act was revoked and the Tax Authority was obliged to reimburse the unduly paid amount, there was no longer any purpose in examining the legality of the assessment. The tribunal declared the proceedings extinct due to supervening futility under article 287(e) of the Civil Procedure Code, but importantly condemned the Tax Authority to pay the €612 procedural costs, as it failed to revoke the assessment within the legal timeframe before tribunal constitution.

Full Decision

REPORT

A…, NIF … and B…, NIF …, married to each other under the regime of general community of property, notified of the assessment of Additional Municipal Property Tax (AIMI) no. 2017 ..., in the amount of €3,871.25, issued in the name of the first Claimant, filed a request for arbitral determination with a view to declaring the illegality and annulment of that additional AIMI assessment act and the constitution of the Arbitral Tribunal.

The Tax and Customs Authority, hereinafter AT, responded by raising the preliminary issue of untimeliness of the submission of the request for arbitral determination, by exception and by challenge.

By petition dated 11 May 2018, the Respondent came to inform that it had carried out a revision of the AIMI assessment no. 2017 ..., based on the administrative appeal filed.

The Arbitral Tribunal was duly constituted on 1 June 2018 and is competent.

The parties have legal personality and capacity, are legitimate (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

The proceedings do not suffer from any nullities.

Given the raising of preliminary issues concerning untimeliness, lack of material jurisdiction, and subsequent futility of the proceedings, these shall be assessed as a priority.

II – FACTUAL MATTERS

The factual matters relevant to assessing the exceptions raised are as follows:

a) On 8.09.2017, the Claimant filed an administrative appeal of the AIMI assessment act no. 2017 ..., in the amount of €3,871.25;

b) The administrative appeal was not adjudicated upon until 8.01.2018;

c) On 21.03.2018, the request for constitution of the arbitral tribunal was filed, giving rise to the present proceedings;

d) By petition of 11.05.2018, the Respondent informed CAAD that new assessments had been issued following the revision of the AIMI assessment no. 2017 ….

The facts were established as proven on the basis of documents attached to the file and by agreement of the parties, with no challenge being made to their correspondence with reality.

There are no facts relevant to the determination of the preliminary issues that have not been established as proven.

III – Preliminary Issues

A – Preliminary Issue of Untimeliness of the Submission of the Request for Arbitral Determination

According to the provisions of article 57, no. 5, of the LGT and article 106 of the CPPT, upon the expiry of four months following the submission of the administrative appeal, tacit rejection thereof is presumed.

In case of tacit rejection, the time limit for filing the request for constitution of an arbitral tribunal is 90 days, in accordance with article 10, no. 1, paragraph a), of the RJAT and article 102, no. 1, paragraph d), of the CPPT.

Under article 57, no. 3 of the LGT, "in tax procedure, time limits are continuous and are calculated in accordance with the Civil Code".

Furthermore, under article 20, no. 1 of the CPPT, "the time limits for tax procedure and judicial challenge are calculated in accordance with article 279 of the Civil Code", thus making clear the procedural nature of these time limits for purposes of their calculation.

As the administrative appeal was received by the competent department on 8.09.2017, the calculation of the term – 4 months – is fixed at 8.01.2018, in accordance with article 279, paragraph d) of the Civil Code.

The subsequent time limit for submission of the request for constitution of the arbitral tribunal, of 90 days, ended on 18.04.2018.

Consequently, the request for constitution of the arbitral tribunal is timely, as it was filed on 21.03.2018.

Contrary to what the AT contends, the Claimant's indication of its intention to seek annulment of the assessment act sub judice does not determine that the applicable time limit should be calculated from the assessment act itself, since it follows from the information and evidence provided in the arbitral petition that the Claimant seeks to have the decision of (tacit) rejection and the underlying assessment act adjudicated upon here.

In this context, the exception of untimeliness raised is not considered well-founded.

B – Issue of Subsequent Futility of the Proceedings

The Respondent contends that there is a total and absolute absence of the assessment which is the subject of the present proceedings, by reason of its replacement, at the administrative stage, which must result in the extinction of the instance for lack of object of the proceedings.

The Claimant, notified to make submissions, stated that acceptance of the request for subsequent futility filed by the Respondent is dependent upon the AT satisfying the request connected with the annulment of the disputed assessment: the reimbursement of the tax unduly overpaid by the Claimants.

Let us examine this:

Having the assessment act been revoked, after the 30-day period provided for in article 13 of the RJAT, that revocation is not apt to produce effects as regards the constitution of the Arbitral Tribunal, the Tribunal being duly constituted and competent to exercise its jurisdictional function, within the scope of article 2 of the RJAT.

Nevertheless, considering that the act which is the subject of the present arbitral request was revoked, with the AT consequently being obliged to proceed with the reimbursement of the amount unduly paid, it is futile to assess its legality, thus verifying the subsequent futility of the proceedings, as the Respondent contends.

The subsequent futility of the proceedings is a ground for extinction of the instance, under article 287, paragraph e), of the Code of Civil Procedure.

IV – Costs of the Proceedings

In accordance with the provisions of article 22, no. 4, of the RJAT, "the arbitral decision issued by the arbitral tribunal shall include the determination of the amount and apportionment among the parties of the costs directly resulting from the arbitral proceedings".

The basic rule regarding liability for procedural costs is that the party that caused them shall be condemned, it being understood that the unsuccessful party causes the costs of the proceedings, in proportion to the extent to which it was unsuccessful (article 446, nos. 1 and 2, of the Code of Civil Procedure).

In the present case, the AT did not proceed to revoke the assessment act sub judice within the time limit set forth in article 13, no. 1 of the RJAT, and therefore it is understood that the Respondent must be held liable for the costs, under article 536, no. 3 of the Code of Civil Procedure.

V – Value of the Proceedings

In accordance with the provisions of article 315, no. 2, of the CPC and article 97-A, no. 1, paragraph a), of the CPPT and article 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings, the value of the proceedings is fixed at €3,871.25.

VI – Costs

Under article 22, no. 4, of the RJAT, the amount of costs is fixed at €612, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, payable by the Tax and Customs Authority.

VII – Decision

On these grounds, this Arbitral Tribunal hereby decides:

to declare the instance extinct due to subsequent futility of the proceedings;

to condemn the Tax and Customs Authority to payment of the costs of the proceedings.

Lisbon, 20 July 2018

The Arbitrator,

(Magda Feliciano)

(This decision was prepared by computer, in accordance with article 131, no. 5, of the Code of Civil Procedure, applicable by referral from article 29, no. 1, paragraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), with its drafting governed by the spelling prior to the 1990 Orthographic Agreement.)

Frequently Asked Questions

Automatically Created

What is the Additional Municipal Property Tax (AIMI) and how is it calculated in Portugal?
The Additional Municipal Property Tax (AIMI - Adicional ao Imposto Municipal sobre Imóveis) is a supplementary property tax in Portugal that applies to individuals and entities holding real estate with aggregate taxable values exceeding certain thresholds. For individuals, AIMI applies when the total taxable value of urban properties exceeds €600,000 (or €1,200,000 for married couples under joint taxation). The tax rates are progressive: 0.7% on the portion between €600,000-€1,000,000, 1% on values between €1,000,000-€2,000,000, and 1.5% above €2,000,000. For legal entities, AIMI applies to properties valued above €600,000 at a flat rate of 0.4% (or 7.5% for properties in tax havens or owned by entities without transparent ownership). The taxable value is based on the patrimonial value (valor patrimonial tributário) registered in the property tax records.
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 occurs when the object of the dispute ceases to exist or loses its purpose after the proceedings have been initiated, making it futile to continue with judicial examination. This typically happens when the Tax Authority voluntarily revokes or modifies the contested tax assessment during pending litigation, satisfying the taxpayer's claim and eliminating the legal interest in obtaining a judicial decision. Under article 287(e) of the Civil Procedure Code, supervening futility is a ground for extinction of the proceedings. However, importantly, when the Tax Authority revokes an assessment after the arbitral tribunal has been constituted (beyond the 30-day period in article 13 RJAT), the taxpayer is not responsible for procedural costs. The tribunal will typically order the Tax Authority to pay costs since it failed to resolve the matter administratively before forcing the taxpayer into arbitration proceedings.
What are the deadlines for filing a tax arbitration request after tacit rejection of a gracious complaint in Portugal?
After tacit rejection of an administrative appeal (reclamação graciosa) in Portugal, taxpayers have 90 days to file a tax arbitration request with CAAD. Tacit rejection occurs when the Tax Authority fails to decide the administrative appeal within four months from its submission, as established in articles 57(5) of the General Tax Law (LGT) and 106 of the Tax Procedure Code (CPPT). The four-month period is calculated continuously according to article 279(d) of the Civil Code, ending on the corresponding day of the fourth month. The subsequent 90-day deadline for filing arbitration (under article 10(1)(a) RJAT and article 102(1)(d) CPPT) is also procedural in nature and calculated continuously. In this case, an administrative appeal filed on September 8, 2017 resulted in tacit rejection on January 8, 2018, giving the taxpayer until April 18, 2018 to file arbitration. The request filed on March 21, 2018 was therefore timely. It's crucial that taxpayers correctly identify whether they're challenging the original assessment or the tacit rejection decision, as this determines the applicable deadline.
Can the Portuguese Tax Authority revise an AIMI liquidation during pending arbitration proceedings?
Yes, the Portuguese Tax Authority can revise an AIMI liquidation during pending arbitration proceedings, and frequently does so when it recognizes errors or when the taxpayer's arguments have merit. However, the timing of such revision has significant procedural and cost implications. Under article 13(1) of the RJAT, if the Tax Authority revokes or modifies the contested act within 30 days of receiving notification of the arbitration request (before the tribunal is constituted), the proceedings are terminated without cost consequences for either party. If the revision occurs after the tribunal has been constituted (after the 30-day period), the tribunal remains competent to exercise jurisdiction, though the proceedings may be declared extinct due to supervening futility. In such cases, the Tax Authority typically bears the procedural costs for failing to resolve the matter within the statutory timeframe. The revision can be based on the original administrative appeal or on a reassessment of the legal and factual situation. Once revised, the Tax Authority is obliged to reimburse any amounts unduly paid by the taxpayer.
What happens to CAAD arbitration proceedings when the Tax Authority voluntarily revises the contested tax assessment?
When the Tax Authority voluntarily revises the contested tax assessment during CAAD arbitration proceedings, the outcome depends on when the revision occurs. If the revision happens within 30 days of the Tax Authority receiving notification of the arbitration request (article 13 RJAT), before tribunal constitution, the proceedings terminate without the tribunal being formed and without cost attribution. However, if the revision occurs after the arbitral tribunal has been constituted, as in this case, the tribunal remains properly constituted and competent, but will typically declare the proceedings extinct due to supervening futility (inutilidade superveniente da lide) under article 287(e) of the Civil Procedure Code. Since the object of the arbitration—the contested assessment—no longer exists and the Tax Authority must reimburse the unduly paid tax, there is no purpose in examining the legality of the revoked act. Critically, when revision occurs after tribunal constitution, the tribunal will generally condemn the Tax Authority to pay procedural costs (under article 536(3) CPC), as it failed to resolve the dispute within the appropriate administrative timeframe, forcing the taxpayer to incur arbitration expenses unnecessarily.