Process: 138/2017-T

Date: July 6, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision addresses critical procedural issues arising when the Portuguese Tax Authority revokes Stamp Duty assessments during pending arbitration proceedings. The claimant challenged two Stamp Duty liquidations totaling approximately €46,000, requesting cancellation and reimbursement with compensatory interest (juros indemnizatórios). After the arbitration request was filed but following tribunal constitution, the Tax Authority revoked both assessments on 13/03/2017 and reimbursed the principal tax amounts.

The Tax Authority argued for extinction of proceedings due to supervening uselessness of the case (inutilidade superveniente da lide) and claimed the tribunal lacked competence to award compensatory interest, characterizing it as merely accessory to the now-revoked assessments. The claimant confirmed receiving tax reimbursement but not the compensatory interest.

The tribunal rejected the incompetence argument, determining it retained jurisdiction to adjudicate the compensatory interest claim. Citing Article 65(1) of the Administrative Procedure Code (CPTA), the tribunal held that when a revocatory act is performed but harmful effects persist, proceedings continue regarding those effects. Since compensatory interest remained unpaid, the harm persisted in the legal order. The tribunal referenced Supreme Administrative Court precedent (Process 0574/14) establishing that when the Tax Administration annuls assessments ex officio during judicial challenge, this demonstrates error attributable to the tax services, triggering entitlement to compensatory interest under Article 43 LGT. The tribunal also noted the Tax Authority failed to comply with Article 13(1) RJAT, which requires notification to the CAAD president within 30 days of knowledge of the arbitration request when revoking contested acts.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1.A…, CRL, taxpayer no.…, with registered office at Street…, no.…, …- Lisbon, hereinafter referred to as the Claimant, submitted on 23/02/2017, a request for constitution of tribunal and for arbitral ruling, in which it requests the cancellation of the Stamp Duty assessments in the amounts of € 38,269.40 (collection document no. 2012…) and of € 7,702.19 (collection document no. 2012…) and the reimbursement of the amounts of tax paid, increased by default interest, which were the subject of hierarchical appeals and gracious complaints submitted.

1.2.His Excellency the President of the Deontological Council of the Administrative Arbitration Center (CAAD), appointed on 11/04/2017 as arbitrator, Francisco Nicolau Domingos.

1.3.On 28/04/2017 the arbitral tribunal was constituted.

1.4.In compliance with the provision of art. 17.º, no. 1 and 2 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 28/04/2017 to, if it so wishes, submit a response, request the production of additional evidence and to remit the administrative process (PA).

1.5.On 26/05/2017 the Respondent came before the tribunal requesting: i) the extinction of the instance due to impossibility of the case, given that the Stamp Duty assessments were revoked on 13/03/2017 or the dismissal of the entire claim given the revocation that extinguished the legal effects of the facts alleged by the Claimant and ii) the recognition of the impossibility of the arbitral tribunal to assess the claim for condemnation to the payment of default interest.

1.6.The tribunal on 07/06/2017 invited the Claimant to pronounce on the matter of exception.

1.7.The Claimant pronounced on 19/06/2017 to the effect that it was reimbursed of the amounts of Stamp Duty paid, but not of the default interest.

1.8.The tribunal on 22/06/2017 considered that the matter of exception could be decided together with the arbitral decision and decided to dispense with the holding of the meeting to which art. 18.º, no. 1 of RJAT refers, on the basis of the principle of the tribunal's autonomy in the conduct of the process and in the determination of the rules to be observed with a view to obtaining, within a reasonable time, a decision on the merits of the claims formulated, cf. art. 16.º, para. c) of RJAT, granted 8 days for the parties, if they so wish, to submit written final submissions and set a deadline for issuing the arbitral decision.

2. POSITIONS OF THE PARTIES

The Claimant in the request for arbitral ruling, submitted on 23/02/2017, requests the cancellation of the Stamp Duty assessments subject to the gracious complaints and hierarchical appeals on the grounds of error in the factual and legal assumptions.

It transpires that the Respondent communicated to the tribunal on 26/05/2017 the revocation of the Stamp Duty assessments and, in light of such circumstance, petitioned that the extinction of the instance be determined as a result of impossibility of the case, due to lack of object, the dismissal of the claim and, finally, that the impossibility of the tribunal to assess the claim for condemnation to the payment of default interest be recognized, given the accessory nature of the claim. In this context it also requested that the costs be paid by the Claimant, given that the revocation was made on a date prior to the constitution of the arbitral tribunal.

Notified of the matter of exception invoked, the Claimant came before the tribunal to state that it was reimbursed of the amounts of tax paid, but did not receive the default interest.

Thus, these are the issues which the tribunal must address:

i) Whether there is material incompetence of the tribunal to assess the claim for condemnation to the payment of default interest;

ii) Whether the instance should be judged as extinct due to subsequent uselessness of the case or the Respondent dismissed from the claim;

iii) Whether there is entitlement to the payment of default interest.

3. PRELIMINARY MATTERS AND CLARIFICATION

3.1.Material Incompetence of the Arbitral Tribunal

The Respondent contends that, given the revocation of the Stamp Duty assessment acts and the claim for condemnation to the payment of default interest being of an accessory nature, the arbitral tribunal does not have competence to assess this latter claim.

Invited to pronounce on the matter of exception, the Claimant stated that it has already been reimbursed of the Stamp Duty amounts paid, but not of the default interest.

Will the Respondent be right?

The subsequent uselessness of the case prevents the continuation of the process for judgment and elaboration of the judgment, and it is certain that the grounds thereof are found in the unnecessariness of using the process, given that there is no lack of judicial protection.

It happens that, in the present case, the Claimant formulated the request for declaration of illegality of the Stamp Duty assessments and for restitution of the tax unduly paid, increased by default interest.

However, the Respondent communicated to the case file on 26/05/2017 the revocation of the Stamp Duty assessment acts subject to the hierarchical appeals and gracious complaints, by decisions dated 13/03/2017.

For this reason, it could be raised in this context the question: does the tribunal have competence to assess the claim for condemnation to the payment of default interest?

The doctrine sustains[1] with respect to judicial challenge, a procedural means that inspired the legislator in the provision of our system of tax arbitration[2], that: «If during the pendency of the challenge, after the period referred to in arts 111.º, no. 1 and 112.º, no. 1 of CPPT, a revocatory act is performed without new regulation of the legal situation, but the effects produced by the revoked act subsist, the challenge process continues with regard to those effects (art. 65.º, no. 1 of CPTA)».

In the present case, the harm caused by the practice of the revoked acts subsists in the legal order, given that there is no notice of the payment of default interest, for which reason it is incumbent to continue the procedural handling of this claim.

In this regard, jurisprudence defends that: «Having the Tax Administration come to annul the assessments ex officio during the pendency of the judicial challenge, instituted against such assessments and where, in addition to requesting the annulment of these tax acts, the condemnation of the TA to default interest was also requested, such fact is in itself demonstrative of error imputable to the services and determinative of the payment of interest under article 43.º of LGT», decision of the Supreme Administrative Court rendered in the context of process no. 0574/14, of 07/01/2016 and in which Councillor FONSECA CARVALHO was the rapporteur.

Furthermore, art. 13.º, no. 1 of RJAT determines that: «In requests for arbitral ruling that have as their object the assessment of the legality of the tax acts provided for in art. 2.º, the highest official of the tax administration service may, within 30 days from the knowledge of the request for constitution of the arbitral tribunal, proceed to the revocation, ratification, reform or conversion of the tax act whose illegality has been raised, practicing, when necessary, a substitute tax act, and must notify the president of the Administrative Arbitration Center (CAAD) of his decision, whereupon the counting of the period referred to in para. c) of no. 1 of art. 11.º begins».

It transpires that, in the present case the Respondent only gave notice of the revocation after the constitution of the arbitral tribunal, more specifically, after being notified to submit a response. Or, in other words, the president of CAAD was not notified of any decision within that 30-day period.

Thus, the tribunal is materially competent to assess the claim for condemnation to the payment of default interest, and the exception invoked by the Respondent is judged to be without merit.

3.2.Subsequent Uselessness of the Case

The Claimant requests in its request for arbitral ruling, the cancellation of the Stamp Duty assessments, the condemnation of the Respondent to the reimbursement of the tax unduly paid and of default interest.

It transpires that the Respondent came to communicate the revocation of the assessments and, notified to pronounce, the Claimant came to declare that it has already been reimbursed of the amounts of tax paid, but has not received the default interest.

Thus, it is incumbent on this tribunal to verify the usefulness of the knowledge of the claim for annulment of the Stamp Duty assessments and of reimbursement of the amounts of tax paid.

There is subsequent uselessness of the case when, during the pendency of the case, the solution of the dispute ceases to have useful effect.

In the present case, the Claimant formulates a claim for annulment of the Stamp Duty assessments - illegality of the decisions of the gracious complaints and hierarchical appeals - as well as, for reimbursement of the amounts of tax paid and for condemnation to the payment of default interest.

It happens that, the annulment objective sought by the Claimant with regard to the Stamp Duty assessments and reimbursement of the amounts of tax has already been achieved, for which reason, the knowledge of the defects imputable to the Stamp Duty assessment acts is prejudiced.

Consequently, there is subsequent uselessness of the case with regard to the claim for annulment of the Stamp Duty assessments and reimbursement of the amounts of tax paid, which determines the extinction of the instance – art. 277.º, para. e) of the Code of Civil Procedure (CPC), applicable by virtue of art. 29.º, no. 1, para. e) of RJAT.

3.3.Clarification

The process does not suffer from any nullities, the arbitral tribunal is duly constituted and is materially competent to know and decide the claim for condemnation to the payment of default interest, thereby verifying the conditions for the final decision to be rendered.

4. FACTUAL MATTERS

4.1. Facts that are considered proven

4.1.1. The Claimant on 31/10/2012 was the owner of the building registered in the urban property register under article…, of the parish of … and of the building registered in the urban property register under article … (originating from article…), of the Parish Union of …, … and ….

4.1.2. The Claimant was notified of the Stamp Duty assessments, of € 38,269.40 and of € 7,702.19, respectively.

4.1.3. The Claimant submitted a gracious complaint with respect to each of such acts on 20/12/2012.

4.1.4. The gracious complaint no. …2013… regarding the assessment of € 38,269.40 was expressly dismissed by decision dated 24/09/2013.

4.1.5. The gracious complaint no. …2013… relating to the assessment of € 7,702.19 was granted by decision dated 07/01/2013.

4.1.6. It happens that on 06/11/2013 the decision granting the gracious complaint identified in 4.1.5. was revoked, leading to its dismissal.

4.1.7. From the decisions of express dismissal of the gracious complaints, hierarchical appeals were submitted on 30/10/2013 and 12/12/2013, respectively.

4.1.8. The Claimant was notified of the express dismissal of the hierarchical appeals (…2013… and …2013…), by decision dated 29/11/2016.

4.1.9. The Respondent communicated to the case file on 26/05/2017 the revocation, by decision dated 13/03/2017, of the Stamp Duty assessment acts subject to the hierarchical appeals.

4.1.10. The above described assessments were paid on 19/12/2012.

4.2. Facts that are not considered proven

There are no other facts of relevance to the arbitral decision that have not been given as proven.

4.3. Basis of the factual matters considered proven

The factual matter given as proven has its genesis in the documents used for each of the alleged facts and whose authenticity was not put in question.

5. LEGAL MATTERS

It is thus incumbent to address the claim for condemnation to the payment of default interest.

Art. 43.º, no. 1 of the General Tax Law (LGT) provides that: «Default interest is due when it is determined, in gracious complaint or judicial challenge, that there was error imputable to the services which resulted in the payment of the tax debt in an amount higher than legally due». In other words, there are three requirements for entitlement to said interest: i) the existence of an error in a tax assessment act imputable to the services; ii) determination of such error in a process of gracious complaint or judicial challenge and iii) payment of a tax debt in an amount higher than legally due.

Thus, it is immediately possible to formulate a question: is it admissible to determine the payment of default interest in a tax arbitration process? The answer to the question is affirmative. Indeed, art. 24.º, no. 5 of RJAT provides that: «Payment of interest is due, regardless of its nature, under the terms provided for in the General Tax Law and in the Code of Procedure and Tax Process».

And given the revocation, it may be asked: is there error imputable to the services in the present case?

The answer to the question must be affirmative, the revocation of the acts and the reimbursement of the amounts of tax paid demonstrate the error imputable to the services, that is, the recognition of the lack of normative support at the time of their practice.

Consequently, the claim for default interest is upheld, calculated at the legal rate, in accordance with the provision of art. 43.º, no. 4 of LGT, between the date on which the unduly paid amount was made and until full reimbursement.

6. DECISION

In these terms and with the basis described above, it is decided to judge:

i) The instance extinct with regard to the claim for declaration of illegality of the Stamp Duty assessment acts and reimbursement of the amounts paid, due to subsequent uselessness of the case, under the terms of art. 277.º, para. e) of the CPC, applicable by virtue of the provision of art. 29.º, no. 1, para. e) of RJAT;

ii) To judge as upheld the claim for condemnation of the Tax and Customs Authority (AT) to the payment of default interest, from the date of payment until full reimbursement.

7. VALUE OF THE PROCESS

The value of the process is fixed at € 45,971.59, under the terms of art. 97.º - A of the Code of Procedure and Tax Process (CPPT), applicable by virtue of the provision of art. 29.º, no. 1, para. a) of RJAT and of art. 3.º, no. 2 of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

8. COSTS

Costs to be borne entirely by the Respondent, in the amount of € 2,142, cf. art. 22.º, no. 4 of RJAT and of Table I attached to RCPAT, given that, in accordance with art. 536.º, no. 3 and 4 of CPC, applicable by virtue of art. 29.º, no. 1, para. e) of RJAT, the constitution of the arbitral tribunal is imputable exclusively to the Respondent which, notified of the request for constitution of the tribunal with the object of assessment of the legality of tax acts, did not inform the president of CAAD of its revocatory decision within the period provided for in art. 13.º, no. 1 of RJAT.

Notify.

Lisbon, 6 July 2017

The arbitrator,

(Francisco Nicolau Domingos)

[1] JORGE LOPES DE SOUSA, Code of Procedure and Tax Process – Volume II, 6th edition, Áreas Editor, 2011, p. 219.

[2] Art. 124.º, no. 2 of Law no. 3-B/2010, 28 April.

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority revokes Stamp Tax (Imposto do Selo) liquidations during arbitral proceedings?
When the Tax Authority revokes Stamp Tax liquidations during arbitral proceedings, the proceedings may continue if harmful effects persist, such as unpaid compensatory interest. Under Article 13(1) RJAT, the Tax Authority should notify the CAAD president within 30 days of knowledge of the arbitration request when revoking contested acts. If the revocation occurs after tribunal constitution without following proper notification procedures, and compensatory interest remains unpaid, the arbitral tribunal retains competence to adjudicate the interest claim. The revocation addresses the principal tax assessment but does not automatically extinguish claims for compensation arising from the unlawful collection.
What is supervening uselessness of the proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening uselessness of the proceedings (inutilidade superveniente da lide) occurs when the main object of litigation disappears during the pendency of proceedings, making judicial protection unnecessary. In Portuguese tax arbitration, this typically arises when the Tax Authority revokes contested assessments, eliminating the need for a judicial determination of legality. However, under Article 65(1) CPTA, if harmful effects of the revoked act persist in the legal order—such as unpaid compensatory interest, unreimbursed amounts, or other consequences—the proceedings continue with regard to those persisting effects. The tribunal must assess whether complete remediation has occurred or if claims remain to be adjudicated.
Can a CAAD arbitral tribunal still award compensatory interest (juros indemnizatórios) after the Tax Authority revokes the contested liquidations?
Yes, a CAAD arbitral tribunal can award compensatory interest (juros indemnizatórios) even after the Tax Authority revokes the contested liquidations. The tribunal determined it retains competence because the harm caused by the unlawful collection persists until full remediation occurs. Supreme Administrative Court precedent (Process 0574/14, 07/01/2016) establishes that when the Tax Administration annuls assessments ex officio during judicial challenge, this demonstrates error attributable to the tax services and triggers entitlement to compensatory interest under Article 43 LGT. The interest claim is not merely accessory—it constitutes an independent right to compensation for damages caused by unlawful tax collection, and the tribunal has material competence to adjudicate this claim.
What is the procedure for challenging Stamp Tax liquidations through CAAD tax arbitration in Portugal?
To challenge Stamp Tax liquidations through CAAD tax arbitration: (1) file a request for constitution of tribunal and arbitral ruling within the legal deadlines; (2) the CAAD President appoints an arbitrator; (3) the arbitral tribunal is constituted; (4) the Tax Authority is notified to submit a response, request additional evidence, and remit the administrative file within the statutory period; (5) under Article 13(1) RJAT, the Tax Authority may, within 30 days of knowledge of the arbitration request, revoke, ratify, reform or convert the contested act and must notify the CAAD president of this decision; (6) the tribunal may dispense with hearings based on procedural autonomy principles; (7) the tribunal issues a binding arbitral decision addressing the legality of the assessments and any claims for reimbursement and compensatory interest.
How does the revocation of tax assessments affect pending hierarchical appeals and gracious complaints in Portuguese tax law?
When the Tax Authority revokes tax assessments that were subject to hierarchical appeals and gracious complaints, those administrative remedies become moot regarding the principal assessment determination, as the contested acts cease to exist in the legal order. However, the revocation does not automatically resolve all legal consequences. If arbitration proceedings are simultaneously pending and effects of the unlawful collection persist—such as unpaid compensatory interest under Article 43 LGT—the arbitration continues to address those persisting effects under Article 65(1) CPTA. The taxpayer's right to full remediation, including compensation for damages caused by unlawful tax collection, survives the revocation and must be adjudicated by the competent tribunal. The revocation demonstrates error attributable to the tax services, supporting the compensatory interest claim.