Process: 195/2017-T

Date: October 6, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 195/2017-T, the CAAD arbitral tribunal addressed whether construction land (terreno para construção) was subject to Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) for the 2013 tax year. The taxpayer, a Portuguese company, challenged a €10,304.87 Stamp Tax assessment on land for construction with a taxable property value of €1,030,486.50. The claimant argued that Law 55-A/2012 only subjected residential properties (prédios urbanos com afetação habitacional) valued over €1,000,000 to Stamp Tax, not construction land. The taxpayer contended that residential properties and land for construction are distinct categories under Article 6 of the Municipal Property Tax Code (CIMI), and that land for construction was only brought within the scope of Item 28.1 through Law 83-C/2013, which entered into force after 2013 and was not given interpretative effect. During the arbitration proceedings, the Tax Authority (AT) voluntarily revoked the contested assessment, acknowledging the taxpayer's position as correct in accordance with Order 6/2017-XXI from the State Secretary for Tax Affairs. The proceedings were terminated due to supervening uselessness of the dispute (inutilidade superveniente da lide), a ground for instance termination under Article 277(e) of the Civil Procedure Code. This occurs when the dispute's essential premise ceases to exist. The revocation of the invalid assessment had retroactive effects pursuant to Article 171(3) of the Administrative Procedure Code, requiring the Administration to restore the pre-assessment situation. This decision clarifies that for 2013, only residential properties exceeding €1,000,000 in taxable value were subject to Stamp Tax under Item 28.1, and that construction land only became taxable under this provision from 2014 onwards following Law 83-C/2013. The case demonstrates taxpayers' right to challenge Stamp Tax assessments through CAAD arbitration and the procedural consequences when the Tax Authority concedes during proceedings.

Full Decision

ARBITRAL AWARD

REPORT

On March 23, 2017, A…, SA, with Tax Identification Number … and registered office at Rua …, …-… Barcelos (hereinafter referred to as the Claimant), pursuant to the provisions of Article 10 of Decree-Law No. 10/2011, of January 20, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), filed a request for the constitution of an Arbitral Tribunal, with the Tax and Customs Authority (hereinafter AT or Respondent) as the respondent, with a view to the declaration of illegality and consequent annulment of the assessment of Stamp Tax (Item 28.1 of the General Tax Stamp Table) relating to the year 2013 and to the property registered in the urban land register of the parish of …, municipality of ..., under article …, in the total amount of € 10,304.87 (ten thousand, three hundred and four euros and eighty-seven cents), the economic value attributed to the claim.

Summary of the claim:

As grounds for the request to annul the act of assessment of Stamp Tax (item 28.1 of the General Tax Stamp Table) relating to the year 2013 and to the property identified in the request for arbitral ruling, the Claimant contends that it is classified as "land for construction", and the disputed assessment is illegal due to an error in the legal assumptions, since Law No. 55-A/2012 subjected to taxation, under Stamp Tax, urban properties "with residential allocation", with a Taxable Property Value exceeding € 1,000,000.00, thus seeking to tax the ownership of luxury properties.

That it results from Article 6 of the Municipal Property Tax Code that urban properties may have one of the following classifications: a) residential, b) commercial, industrial or service properties, c) land for construction, and d) other, and it should be concluded that residential properties and land for construction are of an absolutely distinct nature, and there is land for construction that is not even intended for the construction of residential buildings.

That only with the new wording introduced to item 28 of the General Tax Stamp Table, by law No. 83-C/2013, of December 31, to which no interpretative character was attributed, did land for construction become covered by that provision of objective scope.

That the AT adopted a different understanding, by dismissing the administrative complaint filed against the assessment under analysis, as well as the subsequent hierarchical appeal of that dismissal decision.

II. PROCEDURAL DEFENSES

The sole arbitral tribunal is competent and was regularly constituted on June 7, 2017, in accordance with Articles 2, paragraph 1, subparagraph a), 5 and 6, all of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT, and Article 1 of Order No. 112-A/2011, of March 22.

The case does not suffer from defects that would invalidate it.

Notified in accordance with the terms and for the purposes provided in Article 17 of the RJAT, the AT, by petition of August 4, 2017, communicated that "by order of 11.07.2017, from the Director of Services of the DSIMT - Directorate of Services for the Municipal Tax on Taxable Transfers of Real Estate, Stamp Tax, Single Circulation Tax and Special Contributions, the revision of the act sub judice was proposed, with the consequent annulment of assessment No. 2013…, in accordance with the understanding contained in Order No. 6/2017-XXI of January of the State Secretary for Tax Affairs", with the competent Tax Office having proceeded to the registration that would "immediately trigger a corrective assessment under Item 28 of the General Tax Stamp Table".

By order of September 1, 2017, the Claimant was notified to inform the arbitral tribunal whether it agreed with the decision of the Respondent, with the consequent termination of the proceedings due to subsequent lack of necessity of the dispute, or whether it intended the proceedings to continue for a decision on the merits of the case.

In a petition presented on September 13, 2017, the Claimant requested the termination of the proceedings due to subsequent lack of necessity of the dispute, with a request for the Respondent to be ordered to pay all costs.

REASONING

Matter of fact:

Proven facts

Having analyzed the documents submitted by the Claimant with the request for arbitration, not contested by the Respondent, the following facts are considered proven:

The urban property to which the assessment of Stamp Tax (item 28.1 of the General Table of Stamp Tax) disputed in these proceedings relates was registered in the land register of the parish of …, municipality of ..., under article …;

According to the respective property record (Doc. 1), issued on April 11, 2014, the said property was described as "Land for Construction";

On the taxable property value of € 1,030,486.50, the AT issued, on March 17, 2014, the assessment of Stamp Tax, in the amount of € 10,304.87, payable in three installments, in April, July and November of 2014 (Docs. 2 and 3, corresponding to copies of the collection notices No. 2014 … (1st Installment) and 2014 … (2nd Installment);

By official letter No. … from the Tax Office of ... …, dated December 23, 2016, the Claimant was notified of the decision to dismiss the Hierarchical Appeal No. …2014…, filed following the dismissal of the Administrative Complaint procedure No. …2014…, regarding the assessment now disputed (Doc. 5).

Unproven facts

There are no facts that should be considered as unproven.

On the law: the subsequent lack of necessity of the dispute.

The subsequent lack of necessity of the dispute constitutes a ground for termination of the instance, in accordance with subparagraph e) of Article 277 of the Civil Procedure Code (CPC), applicable supplementarily to tax arbitration proceedings, by virtue of the provision in Article 29, paragraph 1, subparagraph e), of the RJAT, which occurs "in the event that the dispute comes to an end, due to the lack of some essential premise or element"[1].

Having the Respondent communicated to the proceedings that "by order of 11.07.2017, from the Director of Services of the DSIMT - Directorate of Services for the Municipal Tax on Taxable Transfers of Real Estate, Stamp Tax, Single Circulation Tax and Special Contributions, the revision of the act sub judice was proposed, with the consequent annulment of assessment No. 2013…, in accordance with the understanding contained in Order No. 6/2017-XXI of January of the State Secretary for Tax Affairs", the claim of the Claimant should be considered satisfied, which is moreover confirmed by the latter, the proceedings having lost their object.

In fact, the aforementioned "annulment of the assessment" which is the subject of these proceedings, as the revocation of an invalid act – the principle of indisponibility of tax claims, enshrined in Article 30, paragraph 2, of the General Tax Law, prevents the AT from revoking valid assessment acts – has, unless otherwise provided, retroactive effects (Article 171, paragraph 3, of the Administrative Procedure Code – CPA), constituting the Administration in the duty to restore the situation that would have existed if the annulled act had not been carried out (Article 172, paragraph 1, of the CPA), "a necessary consequence of the principle of legality"[2].

With the revocation of the disputed assessment, the procedural interest of the Claimant ceases, "which constitutes a procedural prerequisite or condition of the action, which 'consists in the necessity of using the procedure, of instituting or continuing the action'. (…) this interest must exist at the time the process begins, but it must be maintained throughout it, justifying its absence the termination of the instance due to subsequent lack of necessity of the dispute"[3].

Since the cause of the subsequent lack of necessity of the dispute is attributable to the Respondent, which voluntarily proceeded to the revocation of the disputed tax act, after the constitution of the Arbitral Tribunal, when it could have done so at an earlier date, that is, within 30 days from the knowledge of the request for its constitution, in accordance with Article 13 of the RJAT, it is responsible for the procedural costs, in accordance with the provisions of paragraphs 3 and 4 of Article 536 of the CPC (by virtue of Article 29, paragraph 1, subparagraph e), of the RJAT).

DECISION

For the foregoing reasons, it is decided:

To declare the present arbitral proceedings terminated, due to subsequent lack of necessity of the dispute (in accordance with Article 277, subparagraph e), of the CPC, by virtue of Article 29, paragraph 1, subparagraph e), of the RJAT);

To order the AT to pay the arbitration fee (in accordance with Article 536, paragraphs 3 and 4, of the CPC (by virtue of Article 29, paragraph 1, subparagraph e), of the RJAT)).

VALUE OF THE CASE: In accordance with the provisions of Article 306, paragraphs 1 and 2, of the CPC, Article 97-A, paragraph 1, subparagraph a), of the Tax Procedure Code and Article 3, paragraph 2, of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 10,304.87 (ten thousand, three hundred and four euros and eighty-seven cents).

COSTS: Calculated in accordance with Article 4 of the Regulations on Costs in Tax Arbitration Proceedings and Table I annexed thereto, in the amount of € 918.00 (nine hundred and eighteen euros), to be borne by the Tax and Customs Authority.

Lisbon, October 6, 2017.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with paragraph 5 of Article 131 of the CPC, applicable by reference of subparagraph e) of paragraph 1 of Article 29 of Decree-Law 10/2011, of January 20.

The drafting of this decision is governed by the 1990 orthographic agreement.

[1] MENDES, João de Castro, "Civil Procedure Law", II volume, AAFDL, 1987, p. 444.

[2] SOUSA, Marcelo Rebelo and MATOS, André Salgado de, "General Administrative Law – Volume III – Administrative Activity", D. Quixote, 2009, p. 208.

[3] SOUSA, Jorge Lopes de, "Tax Procedure and Process Code", Annotated and Commented, Volume II, Áreas Editora, 6th Edition, 2011, p. 307.

Frequently Asked Questions

Automatically Created

Is construction land ('terreno para construção') subject to Stamp Tax under Verba 28.1 of the TGIS for the year 2013?
No. For the 2013 tax year, construction land (terreno para construção) was not subject to Stamp Tax under Verba 28.1 of the TGIS. Law 55-A/2012 only subjected residential properties (prédios urbanos com afetação habitacional) with taxable property value exceeding €1,000,000 to this tax. Construction land only became subject to Stamp Tax under Item 28.1 with Law 83-C/2013, effective December 31, 2013, which was not given interpretative character and therefore only applied prospectively from 2014 onwards.
What does 'inutilidade superveniente da lide' (supervening uselessness of the dispute) mean in Portuguese tax arbitration?
Inutilidade superveniente da lide (supervening uselessness of the dispute) is a ground for termination of proceedings under Article 277(e) of the Civil Procedure Code, applicable to tax arbitration under Article 29(1)(e) of the RJAT. It occurs when the dispute comes to an end due to the lack of some essential premise or element. In this case, it arose because the Tax Authority voluntarily revoked the contested assessment during the proceedings, satisfying the claimant's request and eliminating procedural interest in continuing the litigation.
How did the 2013 Lei n.º 83-C/2013 change the scope of Verba 28.1 regarding construction land taxation?
Law 83-C/2013, dated December 31, 2013, amended Item 28 of the General Stamp Tax Table to expressly include land for construction (terreno para construção) within its scope. Prior to this amendment, under Law 55-A/2012, only residential properties with taxable property value exceeding €1,000,000 were subject to Stamp Tax. Importantly, Law 83-C/2013 was not attributed interpretative character, meaning it only applied prospectively from its effective date and did not retroactively apply to prior tax years like 2013.
Can a taxpayer challenge a Stamp Tax liquidation on urban property valued over €1,000,000 through CAAD arbitration?
Yes. Taxpayers can challenge Stamp Tax assessments on urban properties valued over €1,000,000 through arbitration at the Centro de Arbitragem Administrativa (CAAD). This case was initiated under Article 10 of Decree-Law 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters). The arbitral tribunal has jurisdiction over such disputes pursuant to Articles 2(1)(a), 5, and 6 of the RJAT, providing taxpayers with an alternative dispute resolution mechanism to judicial courts for contesting tax assessments.
What happens when the Tax Authority revokes a contested liquidation during pending arbitration proceedings at CAAD?
When the Tax Authority revokes a contested assessment during pending CAAD arbitration proceedings, the case is terminated due to supervening uselessness of the dispute (inutilidade superveniente da lide). The revocation of the invalid assessment has retroactive effects under Article 171(3) of the Administrative Procedure Code (CPA), and the Tax Authority must restore the situation as if the annulled act had never occurred, pursuant to Article 172(1) of the CPA. The taxpayer's procedural interest ceases, as the claim has been satisfied. If the dispute termination is attributable to the Tax Authority's conduct, costs may be awarded against it.