Process: 136/2015-T

Date: October 26, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitration case (Process 136/2015-T) concerns the legality of IMI surcharges of 30% and 200% applied to ten property fractions owned by the claimant for the 2013 tax year, totaling €8,358.31. The claimant challenged the assessment on three primary grounds: (1) lack of notification of the decision imposing the surcharges, (2) violation of the right to prior hearing before classification of properties as vacant or degraded, and (3) insufficient substantiation in the collection notes explaining the basis for the surcharges. The Tax Authority argued it complied with all legal obligations, asserting that municipalities—not the Tax Authority—are responsible for initiating procedures to classify properties as vacant or degraded, notifying taxpayers, conducting prior hearings, and making classification decisions. The Tax Authority's role is limited to implementing the IMI assessment based on municipal decisions. A critical factual issue emerged: while the 2013 IMI assessment included surcharges on all ten fractions (A through J), documentary evidence showed the municipality only notified the claimant in February 2015 regarding a prior hearing for three fractions (E, G, H), which were subsequently declared vacant in March 2015. No evidence was presented of any notification or hearing procedure for the remaining seven fractions (A, B, C, D, F, I, J) that were subject to surcharges in the 2013 assessment. The case highlights the fundamental procedural requirements in Portuguese tax law: municipalities must notify taxpayers and provide an opportunity for prior hearing before classifying properties as vacant or degraded for IMI surcharge purposes. The collection notes themselves did not disclose the legal basis for the surcharges, raising substantiation concerns. This decision underscores the importance of procedural safeguards in tax administration and the distribution of responsibilities between municipal authorities and the Tax Authority in implementing IMI surcharges on vacant properties.

Full Decision

ARBITRAL DECISION

Claimant: A… (hereinafter "Claimant")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TCA" and "Respondent")

  1. Report

A…, with tax identification number nº …, resident at Rua …, nº …, …-… ..., hereinafter referred to as Claimant, submitted to the Administrative Arbitration Centre for Tax Matters (AACTM) a request for arbitral pronouncement with a view to the partial annulment of the tax act assessing Municipal Real Estate Tax (IMI) for the year 2013, which is broken down into three collection notes bearing nºs 2013 …, 2013 … and 2013 …, in the total amount of € 8,358.31.

The Claimant bases the illegality of the IMI assessment and the consequent annulment of the tax act on the following defects:

A) Lack of notification of the decision on which the increase of 30% and 200% is based, as well as of its reasons and grounds;

B) Violation of the right of participation and the right to be heard, due to lack of prior hearing, based on the fact that she was not previously notified in order to, if she so wished, make a statement regarding the fixing/alteration of the increases relating to the fractions of the urban property registered in the urban real estate matrix of the municipality of ..., parish of S…, with nº …;

C) Lack of substantiation of the tax act, in that the collection notes do not explain the reasons underlying the increases of 30% and 200%;

Requesting the annulment of the tax act and consequent reimbursement of the IMI corresponding to the difference between the value resulting from the IMI rate and the value obtained with the increase.

The Tax and Customs Authority, in turn, contended the non-existence of any illegality on the grounds that:

Given the legal framework governing the assessment of IMI in question, the fixing or alteration of the increases relating to the fractions in question are the responsibility of the municipalities, and the setting of the concrete rates result from a decision of the Municipal Assembly in which the properties are located.

It is the responsibility of the municipality to initiate the procedure aimed at qualifying the property (as vacant or degraded) and to proceed with the notification of the taxable person to exercise the right of hearing in such procedure and, if the conditions for doing so are met, to decide accordingly.

Being that, given this legal framework, the Respondent Tax and Customs Authority complied with the procedures to which it was legally bound, in that it was not obliged to conduct any hearing prior to the assessment of the tax, and, supported by case law of the Supreme Administrative Court, it maintains that the assessment complies with all legal formalities for substantiation of the tax act.

The sole arbitrator was appointed and designated on 21.04.2015.

In accordance with the provisions of article 11º nº 1 letter c) of the LRAT, the singular arbitral tribunal was constituted on 07.05.2015.

The first arbitral hearing was held, with the Claimant waiving the witness she had called and requesting the joining of a document, which was accepted and regarding which a period was granted to the Respondent, if it so wished, to make a statement, the Respondent requesting that the written submissions of the Claimant relating to the notification of 27.02.2015 from the Municipal Chamber of ... be joined to the case file, which the Claimant duly joined within the period set by this Tribunal.

Written and simultaneous submissions were made by the Claimant and Respondent, in which, in summary, the positions already taken in the Request for Arbitral Pronouncement and Response, respectively, were reiterated, and in the case of the Respondent, it further argued for the irrelevance of the documents joined by the Claimant in that they relate to a procedure for qualifying the condition of properties whose increase in the IMI rate is not at issue in the present case file.

  1. Preliminary Matters

The singular arbitral tribunal is materially competent, in terms of the provisions of articles 2º, nº 1, letter a) of the Legal Regime for Tax Arbitration.

The parties have legal capacity and standing in terms of article 4º and nº 2 of article 10º of the Legal Regime for Tax Arbitration (LRAT), and article 1º of Regulation nº 112-A/2011, of 22 March.

The process does not suffer from any nullity nor were any exceptions raised by the parties that would prevent the examination of the merits of the case, the request is timely, and therefore the conditions are met for the issuance of the arbitral decision.

  1. Factual Matters

3.1. Proved Facts:

Having examined the documentary evidence produced and the positions of the parties, the following facts are considered proved and of interest for the decision of the case:

  1. The Claimant is the owner of fractions A, B, C, D, E, F, G, H, I and J of the urban property registered in the matrix under nº … of the parish of …, municipality of ..., located at Rua do …, nº …, ...;

  2. Regarding the autonomous fractions in question and another property located at ..., the Claimant was notified of the assessment of Municipal Real Estate Tax (IMI) for the year 2013, which was manifested through collection notes nºs 2013 …, 2013 … and 2013 …, in the total amount of € 8,358.31.

  3. The assessment of IMI for 2013 relating to property … of the parish of … showed in the abovementioned collection notes the following rate increases: 200% relating to fractions A, C, D, F and J and 30% relating to fractions B, E, G, H and I;

  4. By letter dated 27.02.2015, the Municipal Chamber of ... notified the Claimant in order to, if he so wished, make a statement at a prior hearing regarding the declaration of property as vacant regarding fractions E, G and H of property … of the parish of …, municipality of ...;

  5. The Claimant exercised his right of hearing, arguing against the declaration of such fractions as vacant;

  6. By order issued on 30.03.2015, the Municipal Chamber of ..., through the municipal councilor B…, declared fractions E, G and H of property … of the parish of … as vacant;

  7. The collection notes were paid in full by the Claimant;

On 25.02.2015, the request for pronouncement and constitution of the arbitral tribunal was submitted via electronic platform;

The Claimant made payment of the initial court fee on 23.02.2015;

No other facts with relevance to the decision of the case were proved.

3.2. Substantiation of the Proved Factual Matters:

Regarding the proved facts, the arbitrator's conviction was based on the documentary evidence joined to the case file, as well as on the acceptance by the Claimant and Respondent of the factual matters brought before this tribunal and the position taken by each of them.

3.3. Unproved Facts

  1. The notification of the Claimant both for purposes of prior hearing and for purposes of final decision by the Municipal Chamber of ... regarding the qualification as degraded and/or vacant of fractions A, B, C, D, E, F, G, H, I, and J of property … of the parish of … in ..., in accordance with the increases set out in the assessment of IMI for 2013;

  2. Matters of Law:

4.1. Object and Scope of the Present Case

The request for arbitral pronouncement has as its object the declaration of partial illegality of the tax act assessing IMI for the year 2013, insofar as it concerns the application of increases of 30% and 200% applicable to the IMI rate on the fractions owned by the Claimant relating to property … of the parish of …, municipality of ....

4.2. On the Alleged Lack of Notification of the Decision on Which the Increases of 30% and 200% Are Based

First and foremost, it is important to note that from the collection notes into which the IMI assessment in question is broken down, one cannot discern the reason for the increases of 30% and 200% that appear in them, and yet, the Respondent points to the qualification as degraded and/or vacant of the fractions of property … of the parish of … as the basis for such increases, a basis which the Claimant also considers as likely to be the source of the increase.

Given the positions of the Claimant and Respondent, and also considering the facts considered proved in points 4 to 6, it is nevertheless important to frame in legal terms the procedure that may give rise to the increase on the IMI rate in the event of declaration of urban properties as vacant and degraded.

The legislator, mindful of the provisions of nº 3 of article 112º of the Municipal Real Estate Tax Code, through Decree-Law 159/2006, of 8 August, came to define not only the tax concept of vacant property but also to regulate the procedure and the prerequisites for such declaration to take place.

According to the said legal instrument, specifically its article 2º, a property is considered vacant when an urban property or an autonomous fraction has remained unoccupied for one year, with signs of non-occupation being the absence of contracts in force with telecommunications, water, gas and electricity supply companies and the absence of billing relating to consumption of water, gas, electricity and telecommunications, without prejudice to the exceptions listed in article 3º of this same legal compendium.

At the level of the procedure aimed at the possible declaration of a given property as vacant, nº 1 of article 4º provides that: "The identification of urban properties or autonomous fractions that are vacant is the responsibility of the municipalities" and that "The municipalities shall notify the taxable person of the IMI, at his tax address, of the draft declaration of vacant property, in order for him to exercise the right of prior hearing, and of the decision, in accordance with the terms and timeframes set out in the Code of Administrative Procedure.", as is evident from nº 2 of the aforementioned provision.

It thus results from the concatenation of the provisions in question that it is the responsibility of the municipality, in this case, the Municipal Chamber of ..., should the conditions for the declaration of a given property as vacant be met, to initiate the procedure contained in article 4º of Decree-Law 159/2006, of 8 August, namely by notifying the owner to make a statement regarding the draft decision for declaration of vacant property, as well as of the decision that, after the right to be heard has been afforded, may result.

Also with regard to the declaration of properties as degraded, the initiative and responsibility for doing so rests with the municipalities, as prescribed in nº 8 of article 112º of the Municipal Real Estate Tax Code: "The municipalities, by means of a decision of the municipal assembly, may increase up to 30% the rate applicable to degraded urban properties, considered as such those which, given their state of repair, do not adequately fulfill their function or pose a danger to the safety of persons and property."

Now, in this case, the Municipal Assembly of ..., through a decision on 16 November 2012, unanimously approved proposal 827/2012, which would apply to IMI assessments for 2013, in which it decided in point 3, letter b) "The increase of 30% on the rate applicable to degraded or partially degraded urban properties for which the Municipal Chamber of ... has determined the performance of conservation works necessary to correct poor safety or sanitation conditions, under the provisions of nº 2 of article 89º of the Legal Regime for Urban Planning and Building approved by Decree-Law nº 555/99 of 16 December, and respective amendments, while the works ordered have not been started for reasons beyond the control of the Municipality of ...;"

Also in the context of declaration of urban property as degraded, it is a prerequisite for the increase of 30% on the IMI rate for the year 2013 that the owner must necessarily have been ordered to proceed with corrections to the poor safety or sanitation conditions of the property.

Which is to say that also in this case, the right of participation of the owner could not fail to be observed in compliance with the provisions of article 100º of the Code of Administrative Procedure and also the final decision of the municipality on whether or not the property is degraded in order to grant the municipality the right to increase the IMI rate by 30%.

Thus, it results that, whether in the case of vacant property or in the case of degraded property, such classification for tax purposes, namely for purposes of increasing the IMI rate for the fractions now in question, could not fail to be preceded by notification to its owner, both for the exercise of the right to be heard, and, necessarily, of the final decision of the municipality in proceeding with the respective increases.

Now, this constitutes a central question to be assessed and resolved in this case file from the outset.

It is relevant for this purpose to note that the law guarantees, in the case of declaration of an urban property as vacant and equally in the case of degraded property, that the owner of the property in question may participate in the formation of the decision, thus being able to exercise the right to be heard and influence the decision that the municipality may take on this matter.

Which, moreover, from a strictly tax perspective, is well justified, given that the fact of a property being considered degraded or vacant has a direct influence on the IMI rate and thus on the amount of tax to be collected from its owner, constituting this tax assessment a tax act capable of affecting the legitimate interests and rights of the taxable person in the tax relationship.

It is, based on this same prior procedure initiated by the municipality that is the creditor in the tax relationship, that it is understood that the tax legislator did not provide for any prior hearing before this IMI assessment, given that in the framework of the procedure aimed at the possible declaration of a given property as degraded or vacant by the municipality competent to do so, the legislation requires that the owner of this same property be called to participate in this same decision, in a prior hearing, in order to be able to influence the final decision of the municipality.

A situation similar to another that is equally capable of altering the IMI assessment and which relates to the alteration of the Tax Patrimonial Value (TPV).

Also in this case, the legislator expressly provided for a specific form of intervention by the taxpayer in the formation of the decision of this same TPV – through recourse to a second assessment - for which reason it excluded any other second opportunity for the taxable person of the IMI to make a statement before the issuance and notification of this same tax, and in any case (with or without recourse to a second assessment), the taxpayer is always notified of the TPV that is set.

Returning to the case under analysis, the first and essential question to be clarified in the case file in question concerns whether or not the Claimant, as the taxable person of the IMI, was notified in order to make a statement regarding the prior intention of the tax authority and consequent decision to consider the increases contained in the assessment of the autonomous fractions of the urban property of the matrix … of the parish of …, municipality of ..., so as to affect the IMI rate for the year 2013?

From the documents joined to the case file by the Claimant and as the Respondent correctly points out, the same bring nothing of relevance to this case file, since the procedure to which the documents joined refer concerns the declaration as vacant in 2015 of fractions E, G and H, when in 2013 the IMI rate applicable was already increased, and therefore from the same one cannot extract any relevant information regarding the year 2013, now in question.

On the other hand, the Respondent did not join to this case file any documentary evidence of notification to the Claimant, either for purposes of the right of participation of the former, or of a hypothetical final decision regarding the declaration of the fractions that would permit the increases contained in the tax act in question, and the documentary elements contained in the Administrative File that form an integral part of this case file are equally silent on this matter, and therefore the answer to the question raised does not appear to be affirmative.

This conclusion flows inevitably from the omission on the part of the Respondent in furnishing proof that the Claimant had been effectively notified prior to the assessment of IMI in question for purposes of prior hearing and of the final decision regarding the consideration of such autonomous fractions, whether as degraded and/or vacant, by hypothesis.

The Respondent invoked in defense of the rejection of the request and the cause of action on which the Claimant based itself, the fact that, being notifications to be made by the municipality, any right of hearing of the Claimant was excluded before the assessment.

At the same time, in the context of the procedure undertaken between the latter and the municipality in the procedure aimed at the consideration of the fractions as degraded and/or vacant, it limited itself to asserting that this legal procedure, which is the responsibility of the municipality, had been complied with, without ever furnishing proof of its existence, that is, of the declaration by the municipality of the fractions as degraded and/or vacant.

It is important to note here, as has been understood by legal doctrine, that local authorities may and should be considered as tax creditors, inasmuch as, although they cannot create taxes, they are indeed holders of the tax revenue in question – IMI - without prejudice to its administration and management being the responsibility of the State tax administration, in this case the Tax and Customs Authority, now Respondent, manifesting this same tax power through the power to set the IMI rates by the Municipal Assemblies, as occurs in the case of the file in which the law confers on them the power to increase this same IMI rate.

Being the case of the increase of the IMI rate an example of municipal tax power, in which, in full compliance with the principle of tax legality (formal law reserve) for the creation of taxes, municipalities may set and alter the rates of this same tax, with the power of initiative to set, alter and increase the IMI rates being the exclusive responsibility of local authorities, within the parameters defined by law in compliance with the provisions of nº 2 of article 103º of the Constitution of the Portuguese Republic.

In coherence with this, it is without surprise that the General Tax Law, in terms of nº 3 of article 1º, includes within the scope of the tax administration not only the current Tax and Customs Authority, but also the competent bodies of local authorities when they exercise administrative responsibilities in the tax field.

Thus, under the provisions of nºs 3 and 8 of article 112º of the Municipal Real Estate Tax Code and following a decision of the municipal assembly, the activation of a procedure aimed at the declaration of a given urban property as vacant or degraded, respectively, cannot fail to be inserted within the scope of the tax procedure, which may be defined as a set of acts, emanating from plural and relatively autonomous tax administration bodies, organized sequentially, directed at the production of a determined result, of which they are instrumental.

And, in the case of the increases in question in this arbitral case file, there is no doubt that these constitute a determining element for the setting of the effective tax rate to be the subject of assessment and placed for payment before the taxable person of the tax, but it is not possible to determine what its concrete basis is and in what prior procedure (if it even existed) to the assessment they were set.

Wherefore, any procedure to such a purpose directed undertaken by the local authority cannot fail to not only be subsumed into the concept of tax procedure, but also to integrate the prerequisites on which the requirement for the tax assessed through the IMI assessment for the year 2013 now the subject of arbitral pronouncement is based.

In accordance with nº 1 of article 74º of the General Tax Law: "The burden of proof of the facts constituting the rights of the tax administration or the taxpayers falls on whoever invokes them."

As correctly noted by António Lima Guerreiro[1] in an annotation to the aforementioned provision, which for its clarity and synthetic power shall be cited: "From the provision of number 1, it results that the administration is not obliged to prove the tax facts declared by the taxpayer, proceeding to assess on the basis of the content of the statement which, indeed, enjoys a presumption of truth. It is obliged, because it is then that which invokes the facts, to prove the existence and quantification of the tax facts not declared, insofar as they contradict the faith of the taxpayer's statement. In the absence of special rules, that is, except presumption enshrined in law, it is thus to the tax administration that it falls to demonstrate the prerequisites of fact of its action, specifically the existence of the tax facts on which the assessment of the tax rests, which have not been declared by the taxpayer."

Returning to the case of the assessment whose legality in concreto is now being examined, there is no doubt that one is dealing with an assessment not emanating from any statement by the taxable person/taxpayer, but rather with the issuance of a tax act of the exclusive responsibility of the tax administration, and therefore the burden of proof falls on the latter regarding the prerequisites on which the assessment of IMI for 2013 is based.

Being that, inexorably, one of the prerequisites that requires proof and which influences the assessment of IMI is that relating to the increased IMI rate applicable.

This proof, which passes through the demonstration that in this case, the increases effectively recorded in the tax act now under examination were not only decided by the municipal body with administrative responsibility in the tax field in obedience to the applicable legal framework, but equally notified to the taxable person of the IMI / owner of the properties subject to such decision.

Now, with respect to this prerequisite, the tax administration failed to present any proof that the prerequisite relating to the increase in the IMI rate concretely applied to the fractions allegedly degraded and vacant effectively occurred, which objectively would be concretized by the documentary proof that the Claimant had been notified of the declaration of these same fractions as degraded and vacant.

It appears to flow from the position of the Respondent an understanding according to which, being the procedure for declaration of the urban properties in question as degraded or vacant the responsibility of the Municipality (of ...), this circumstance as it were would exempt the Respondent from furnishing such proof.

As has already been expressed through the substantiation above invoked, the mere circumstance that the procedure, in light of article 112º of the Municipal Real Estate Tax Code, is initiated by the local authority does not affect the discipline of the distribution of the burden of proof in force in the tax process and to which we have already alluded.

This is because, as was timely noted, in terms of the conjunction of nº 1 and 3 of article 1º of the General Tax Law, the local authority in initiating a procedure aimed at declaring a given urban property as vacant or degraded, acts under the powers in the tax field that are legally entrusted to it, thus integrating the tax administration typified there, and this municipal procedure, inasmuch as it defines the rate applicable and therefore essential for the quantification of the amount to be collected, cannot fail to be considered a tax procedure with implications for the assessment which is the subject of the present arbitral pronouncement.

Now, the rule in force between the administration and the administered and in the specific aspect of tax legal relationships, between the tax administration and the taxpayers, is that of the right of participation of the administered/taxpayers in the formation of decisions capable of affecting their rights and interests.

And such a rule is excepted, in the case of tax relationships, in situations in which the tax act capable of affecting the interests and rights of the taxpayer (e.g. tax assessment) is based on elements declared by the taxpayer himself or when one is dealing with an assessment aimed at filling the omission of presentation of a statement through an ex officio assessment based on objective data, and even in this latter case, it is necessary that the tax administration proceed prior to the notification of the taxpayer to present the missing statement under penalty of the issuance of the said ex officio assessment, as flows from nº 2 of article 60º of the General Tax Law.

As noted by António Lima Guerreiro[2], the right of participation by the taxpayer in the formation of the tax decision through the prior hearing provided for in article 60º of the General Tax Law, "…is exercised generally only once in the procedure: at the end of the instruction and before the decision. It cannot be used to introduce successive delays in the procedure. This article thus refuses the idea of any double or triple hearing in the procedure."

For which reason, the argument presented by the Respondent in the present case file according to which there is no right of hearing before the assessment of IMI, finds, in theory, support in the legal framework of the abovementioned article 60º of the General Tax Law, insofar as, as alleged, the new elements of the assessment of IMI in question – increase of the IMI rates – should have already been made known previously to the taxable person of the tax through the procedure for declaration of vacant and degraded property.

It happens, however, that the tax administration, here represented by the Respondent, as the active subject of the tax relationship, did not furnish proof of this same knowledge by the taxable person of the IMI, whether regarding the decision of increase, much less doing so with respect to the prior hearing that should precede such decision of the local authority.

Considering that the purpose aimed at by the legislator with the principle of the participation of taxpayers in the formation of decisions that concern them is to ensure the observance of the principle of material truth and the principle of transparency of the tax procedure and thus to permit the right of defense and the right to be heard by the latter, so as to also avoid the so-called surprise tax decisions or acts.

That is, tax acts capable of affecting taxpayers, without these having previously had, during the tax procedure possibly undertaken subsequently, the opportunity to make a statement about them, when those contain new elements about which the taxpayer had not been called upon to make a statement and of which it had no knowledge.

By the foregoing, one cannot fail to conclude that it has not been demonstrated that the Claimant was notified of any final decision that established the IMI increases contained in the tax act which is the subject matter of this case file, nor, moreover, the exercise of such right of defense within the framework of the tax procedure that would have legitimized these same increases on the fractions of property … of the parish of …, in ....

Not having been proved in the case file, notwithstanding the burden that fell on the Respondent, the notification to the Claimant regarding the setting of the increases to the IMI rate contained in the tax act which is the subject of the present pronouncement, that same prerequisite on which the tax act is based is called into question.

For which reason, attentive to the substantiation that has been discussed, it is concluded that there is an error concerning the legal prerequisites, inasmuch as it has not been demonstrated that the Claimant was notified regarding the tax legal classification of the fractions that would have legitimized the increases effected, whether by way of the classification of the fractions as degraded and/or vacant or by any other distinct basis, in the framework of any prior tax procedure to the assessment, which, in the case of declaration of vacant and/or degraded property, was necessary to have been carried out by the Municipality of ... in the framework of its tax powers.

4.3. Prejudiced Questions:

Accepting, as this singular arbitral tribunal has accepted, the understanding of the existence of an error concerning the legal prerequisites, given that it has not been proved that there was a prior decision and notification of the Claimant on which the increases contained in the assessment of IMI for 2013 could be based, the examination of the remaining defects alleged by the Claimant and which may affect the arbitrarily contested assessment of IMI for 2013 is prejudiced, as procedurally futile, specifically that relating to the right of hearing before the assessment and the lack of substantiation of the said tax act.

4.4. On the Restitution to the Claimant of IMI Unduly Paid:

In light of all that has been set forth and concluded in point 4.2 above: a judgment of illegality that has fallen on part of the tax act which is the subject matter of the present arbitral pronouncement, it is necessary to effect the restoration of the tax situation of the Claimant, for which reason the Respondent TCA cannot fail to effect the reversal of the amounts paid as IMI and which relates to the amount paid under the undue increases of 30 and 200% on the IMI rate.

It is, therefore, the Claimant a creditor of the Respondent TCA of the amount corresponding to the difference between the IMI rate not increased and that subject to increase in the assessment of IMI for 2013 relating to fractions A, B, C, D, E, F, G, H, I, and J, as unduly paid.

  1. DECISION:

In these terms and with the substantiation that is set forth above, this arbitral tribunal decides:

  1. To find the request for declaration of partial illegality of the tax act assessing IMI for the year 2013 to be completely well-founded, on the basis of error concerning legal prerequisites, annulling it in the segment in which it proceeded to increase the IMI rate for 2013 on fractions A, B, C, D, E, F, G, H, I and J of urban property … of the parish of …, municipality of ..., and the Claimant must concomitantly be reimbursed for the difference between the value of the IMI rate not increased (0.30%) and the value of the increases of 30% and 200% applied in the assessment now under review, unduly paid by the Claimant.

Value of the case: € 3,485.45 – articles 97º-A, of the Code of Tax Procedure and Process, 12º, of the LRAT (Decree-Law 10/2011), 3º-2, of the Regulation of Costs in Tax Arbitration Proceedings.

Costs in accordance with Table I, of the Regulation of Costs in Tax Arbitration Proceedings, calculated based on the aforementioned value of the claim, to be borne by the Respondent - articles 4º-1, of the Regulation of Costs in Tax Arbitration Proceedings and 6º-2/a) and 22º-4, of the LRAT.

This arbitral decision shall be notified to the parties and, in due course, the case file shall be archived.

Lisbon, 26 October 2015.

The Sole Arbitrator

(Luís Ricardo Farinha Sequeira)

Text produced by computer, in accordance with article 138º, nº 5 of the Code of Civil Procedure, applicable by reference to article 29º, nº 1, letter e) of the Legal Regime for Tax Arbitration, with blank lines and reviewed by me.

[1] In General Tax Law Annotated, Reis dos Livros, p. 329;

[2] In the work cited, p. 279;

Frequently Asked Questions

Automatically Created

What is the IMI surcharge applied to vacant properties (prédios devolutos) in Portugal?
The IMI surcharge applied to vacant properties (prédios devolutos) in Portugal varies based on municipal decisions. In this case, surcharges of 30% and 200% were applied to different property fractions. Under Portuguese law, the Municipal Assembly sets concrete rates for surcharges on vacant or degraded properties. These surcharges are applied in addition to the standard IMI rate and are intended to discourage property abandonment and incentivize proper maintenance or use of urban real estate. The specific percentage depends on the property's classification and the municipality's decisions regarding its urban real estate policy.
Can the Tax Authority apply IMI surcharges of 30% and 200% without prior notification to the taxpayer?
No, the Tax Authority cannot unilaterally apply IMI surcharges of 30% and 200% without proper procedural compliance. While the Tax Authority implements the IMI assessment, it is the municipality's responsibility to initiate the classification procedure for vacant or degraded properties. Critically, the municipality must notify the taxpayer and provide an opportunity for prior hearing before making a decision to classify a property as vacant or degraded. This procedural requirement protects the taxpayer's constitutional rights to participate in administrative proceedings and to be heard. Failure to provide proper notification and hearing rights before applying surcharges constitutes a violation of fundamental procedural guarantees in Portuguese tax law.
What are the legal requirements for notifying taxpayers before applying IMI surcharges on vacant or degraded properties?
The legal requirements for notifying taxpayers before applying IMI surcharges on vacant or degraded properties include: (1) the municipality must initiate a formal procedure to classify the property as vacant or degraded; (2) the taxpayer must receive proper notification of the proposed classification, clearly stating the grounds and giving the taxpayer an opportunity to respond; (3) the taxpayer must be granted the right to prior hearing (audiência prévia), allowing them to present arguments against the classification; (4) only after considering the taxpayer's response can the municipality issue a final decision classifying the property; and (5) this decision must be properly notified to the taxpayer with full substantiation. These requirements ensure due process and allow taxpayers to contest factual or legal errors before surcharges are applied.
Who is responsible for classifying a property as vacant (devoluto) for IMI surcharge purposes — the municipality or the Tax Authority?
The municipality is exclusively responsible for classifying a property as vacant (devoluto) for IMI surcharge purposes, not the Tax Authority (Autoridade Tributária e Aduaneira). According to the legal framework governing IMI surcharges, the municipality must initiate the procedure to qualify properties as vacant or degraded, notify taxpayers to exercise their right to prior hearing, and issue the final classification decision. The Municipal Assembly determines the applicable surcharge rates through official resolutions. The Tax Authority's role is limited to implementing the IMI assessment based on information provided by municipalities regarding property classifications. This separation of responsibilities is crucial: municipalities have local knowledge and authority over urban planning matters, while the Tax Authority executes tax collection based on municipal determinations.
What grounds can taxpayers use to challenge IMI surcharge assessments at CAAD arbitration?
Taxpayers can challenge IMI surcharge assessments at CAAD (Administrative Arbitration Centre for Tax Matters) on several grounds: (1) lack of notification of the municipal decision classifying the property as vacant or degraded; (2) violation of the right to prior hearing (audiência prévia) before the classification decision; (3) lack of substantiation in the collection notes, which must explain the legal basis for surcharges; (4) error regarding legal requirements (erro sobre os pressupostos de direito), such as incorrect application of the vacant property definition; (5) substantive errors in classifying the property as vacant when it does not meet legal criteria; (6) procedural violations by the municipality in the classification process; and (7) incorrect calculation of surcharge percentages. In this case, the claimant successfully demonstrated that no notification or prior hearing occurred for seven of the ten property fractions subject to surcharges, establishing a clear procedural violation that could invalidate the contested assessments.