Process: 208/2013-T

Date: May 14, 2014

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitration case (Process 208/2013-T) concerns the jurisdiction and timeliness of challenging Municipal Property Tax (IMI) assessments before the Portuguese Tax Arbitration Court (CAAD). The claimant company challenged IMI assessments for 2008 affecting approximately 270 properties, arguing the assessments lacked proper reasoning regarding property valuations. Following the 2003 property tax reform (Decreto-Lei 287/2003), tax authorities updated property values without adequately notifying the claimant of the methodology and criteria used. In December 2012, the claimant requested official review (revisão oficiosa) under Article 78 LGT. When the Tax Authority failed to respond within four months, the request was deemed tacitly dismissed under Article 57 LGT, enabling the claimant to file for arbitration in August 2013. The claimant argued the assessments violated constitutional and legal requirements for administrative reasoning, citing Article 268(3) of the Portuguese Constitution and Articles 36 CPPT, 77 LGT, and 124-125 of the Administrative Procedure Code. The Tax Authority countered that official review was an unsuitable remedy, arguing that lack of reasoning does not constitute an 'error attributable to services' under Article 78 LGT. Additionally, the Authority asserted that property values were notified in 2004, and the claimant's failure to timely challenge them rendered the valuations final. The arbitral tribunal was constituted on October 30, 2013, under Decreto-Lei 10/2011, demonstrating CAAD's jurisdiction over IMI disputes. This case highlights critical issues regarding the limitations period for challenging property valuations, the scope of official review procedures, the tacit dismissal mechanism when authorities fail to respond, and the ability to consolidate multiple property challenges in a single arbitration proceeding.

Full Decision

ARBITRAL DECISION[1]

  1.  Report

A - General

1.1. A, a company with registered office at Avenue …, in .., with the unique registration number and collective person number … (hereinafter referred to as "Claimant"), filed, on 30.08.2013, a petition for constitution of a collective arbitral tribunal in tax matters, which was accepted, seeking the partial annulment of the assessments of Municipal Property Tax (hereinafter IMI) no. 2008 …, of 27.02.2009, reviewed by the demonstration of the ex officio review of the IMI assessment no. 2008 …, of 04.06.2009, and no. 2008 …, of 04.06.2009, corresponding to the first and second instalments of IMI for the year 2008 (hereinafter Contested Assessments) concerning approximately 270 (two hundred and seventy) properties of which it is the owner and which are listed in article 10 of the petition for constitution of the collective arbitral tribunal (hereinafter properties).

1.2. Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council of the Centre for Administrative Arbitration appointed Manuel Luís Macaísta Malheiros (arbitrator-president), Ana Teixeira de Sousa and Nuno Pombo as arbitrators, and the parties, after being duly notified, made no objection to such appointment.

1.3. Thus, in accordance with the provision of subparagraph c) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 30.10.2013.

1.4. On 30.10.2013 the head of the Tax and Customs Authority service (hereinafter referred to as "Respondent") was notified to, if it so wished, within 30 days, submit a reply and request the production of additional evidence.

1.5. On 29.11.2013 the Respondent submitted its reply as well as the order designating Messrs Dr. … and Dr. … to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

B – Position of the Claimant

1.6. The Claimant is the owner of the properties, having been notified in 2009 of the contested assessments.

1.7. On 31.12.2012, the Claimant requested, pursuant to the provisions of article 78, paragraph 1 of the General Tax Law (hereinafter LGT), ex officio review of the Contested Assessments, having received no reply within the period of 4 (four) months from its submission, for which reason the said request should be deemed tacitly dismissed, in accordance with the terms and for the purposes of the provision of article 57, paragraph 1 and paragraph 5 of the LGT.

1.8. Following the entry into force of the reform of property taxation approved by Decree-Law no. 287/2003, of 12 November, the Tax Authority proceeded to update the taxable property value of the properties, with the Claimant alleging it was never notified of the results of these updates made to the property value of the properties of which it was the owner.

1.9. In 2004, with the notification of the IMI assessments for the properties of which it was the owner relating to the year 2003, and given the differences compared to the assessments of the same tax relating to the immediately preceding year, the Claimant inferred that the said update of the property value of the said properties had taken place.

1.10. However, the IMI assessments for the properties of which it was the owner relating to 2003 do not contain the method and the criteria underlying the determination of the updated respective taxable property values, an absence which "made it difficult to exercise the necessary critical judgment on the advisability of filing an objection based on error of fact or law", whereby the Claimant found itself "compelled to accept" the said fixing.

1.11. This "critical judgment" of which the Claimant speaks suggests the need to be able to scrutinise the correct application of the criteria chosen by the transitional regime established by the reform referred to in 1.8. for the general update of the property value of non-leased urban properties.

1.12. Meanwhile, some of the properties saw their taxable property value updated following first transfers, substantial modifications or voluntary requests for valuation, although approximately half of the properties maintain the taxable property value resulting from the valuation carried out by the tax administration following the entry into force of the reform to which reference was made in 1.8. and on the basis of which, since that date, the respective IMI tax instalments have been assessed and collected.

1.13. So much so that, also from the contested assessments there do not appear "the grounds which determined the fixing of the taxable property value" of the properties.

1.14. Thus, and regarding the Contested Assessments, the Claimant was never able to validate the criteria invoked by the transitional regime of valuation of urban properties imposed by the reform mentioned in 1.8., namely the year of registration in the property register and the property value initially fixed in that year of registration.

1.15. The Claimant concludes therefore that the contested assessments suffer from the "formal defect" of lack of reasoning, in violation of the principle which imposes it on all acts of the administration, a principle which finds support in various normative provisions, namely, in paragraph 3 of article 268 of the Constitution of the Portuguese Republic (hereinafter CRP), in paragraphs 1 and 2 of article 36 of the Code of Procedure and Tax Process (hereinafter CPPT), in paragraph 2 of article 77 of the LGT and in articles 124 and 125 of the Code of Administrative Procedure, applicable by virtue of subparagraph c) of article 2 of the LGT, which renders the Contested Assessments partially invalid.

1.16. The portion of the contested assessments which is invalid is precisely that which concerns those Properties whose taxable property value was fixed within the scope of the general revaluation imposed by the transitional regime established in the reform referred to in 1.8. and which are mentioned in subparagraph c) of article 86 of the petition for arbitral pronouncement.

1.17. The Claimant proceeded to payment of the tax demanded of it by the contested assessments, whereby it requests the return of what was wrongfully charged to it.

C – Position of the Respondent

1.18. The Respondent, in its reply, considers that the request for ex officio review referred to in 1.7. is "an unsuitable means of asserting the claims" of the Claimant, since, in its judgment, the defect of lack of reasoning is not covered by the concept of "error attributable to the services", for the purposes of the regime of ex officio review of tax acts established in article 78 of the LGT, whereby the alleged tacit dismissal of the request for ex officio review cannot give rise to the present petition for arbitral pronouncement.

1.19. The Respondent equally considers that the contested assessments are not subject to review on the basis of the grounds presented by the Claimant, since the property value of the properties was notified to the Claimant in 2004, the Claimant having had the opportunity, at that time, to lodge an objection, request its determination in accordance with the rules of the IMI Code or judicially challenge the fixing of the property value of the properties.

1.20. It happened that the Claimant chose not to lodge an objection, not to request a new valuation of the property values nor to judicially challenge such fixing, whereby the same should be deemed final, under penalty of considering that all IMI assessments occurring or to occur after 2004 are subject to review for the possible defect of lack of reasoning in the fixing of that value in 2003.

1.21. The contested assessments result from property values fixed within the scope of the transitional regime of valuation of urban properties imposed by the reform mentioned in 1.8., which were notified to the Claimant, and it could have, if it wished, at that time, raised the formal defect which it now invokes to challenge the IMI of 2008.

1.22. In that measure, what underlies the petition for arbitral pronouncement is the fixing of the taxable property value of the properties, following the update which took place in 2003 and not properly the tacit dismissal of the request for ex officio review referred to in 1.7., it being certain that that value, with the exception of the periodic update provided for in article 138 of the IMI Code, corresponds, in the contested assessments, to what had been notified to the Claimant in 2004.

1.23. The Respondent further submits the non-existence of an impugnable act, since the Claimant never reacted, contentiously or judicially, to the contested assessments, it merely made improper use of the request for ex officio review, whose alleged tacit dismissal gives rise to the present petition for arbitral pronouncement, whereby the defences placed at the disposal of the Claimant by the legal system are precluded. In fact, nor can one properly speak of tacit dismissal, inasmuch as the requirements for the said review were not met, which means that the Respondent had no duty to decide.

1.24. In the absence of an impugnable act, the Respondent concludes that it should be absolved from the instance, in accordance with the provision of paragraph 2 of article 576 of the Code of Civil Procedure (hereinafter CPC), applicable by virtue of subparagraph e) of article 29 of the Legal Regime of Arbitration in Tax Matters (RJAT), and the object of the petition for arbitral pronouncement cannot therefore be heard, in accordance with subparagraph e) of paragraph 1 of article 278 of the CPC, applicable via subparagraph e) of article 2 of the CPPT, subparagraph e) of article 29 of the RJAT, subparagraph a) of paragraph 1 of article 87 and subparagraph c) of paragraph 1 of article 89, both of the Code of Process in Administrative Courts, applicable ex vi subparagraph c) of article 2 of the CPPT and subparagraph c) of paragraph 1 of article 29 of the RJAT.

1.25. Without prejudice to the dilatory exceptions which it invokes, the Respondent considers that the rule of revaluations carried out by force of the transitional regime of the reform mentioned in 1.8. amounts to the application of coefficients fixed in Order no. 1337/2003, of 5 December to property values already known to the taxpayers, whereby that update did not require separate notification to the taxpayers (with the exception of the update concerning urban properties exempt from IMI – article 20, paragraph 3 of Decree-Law no. 287/2003, of 12 November), these being notified only of the new taxable property values, through a collection document.

1.26. The Respondent accordingly submits that the Claimant was regularly and validly notified of the update of the property values of the properties, through the IMI assessments relating to the year 2003, having chosen to conform to them, by not making use of any of the means of defence provided for in law.

D – Reply of the Claimant to the Exceptions Invoked by the Respondent in its Reply

1.27. On 09.12.2013 the Claimant, in writing, pursuant to the principle of adversarial proceedings, presented its objection to the exceptions invoked by the Respondent in its reply, since they obstruct the hearing on the merits of the claim.

1.28. The Claimant considers that the request for ex officio review mentioned in 1.7. is not an improper or unsuitable means of reaction against the contested assessments, since they and not the assessments of 2003 are the object, directly or indirectly, of the petition for arbitral pronouncement.

1.29. The Claimant submits that the request for ex officio review is based on an "error attributable to the services" in the contested assessments, with this concept encompassing the formal defect consisting of the lack of reasoning of the property value of the properties.

1.30. Since it was never notified of the update of the property values of the properties of which it was the owner, in accordance with the transitional regime established by the reform to which reference is made in 1.8., the Claimant considers that all subsequent tax acts are unlawful and the fact that it never reacted to the earlier assessments does not cure the defect affecting the contested assessments.

E – Position of the Respondent Regarding the Reply of the Claimant to the Exceptions Invoked by the Respondent in its Reply

1.31. The Respondent on 23.12.2013 submitted in writing its position regarding the reply of the Claimant to the exceptions invoked by it in the reply to the petition for arbitral pronouncement.

1.32. The Respondent considers that the RJAT does not provide for the presentation of any further pleading subsequent to the submission of the reply by the Respondent, for which reason it asks the arbitral tribunal to remove from the record the document submitted by the Claimant on 09.12.2013 and to take no cognisance of it, under penalty of violation of the provision of subparagraph b) of article 18 of the RJAT.

1.33. The Respondent further considers that the Claimant, in the petition submitted, not only objects to the exceptions invoked by it in the reply to the petition for arbitral pronouncement but also makes considerations unrelated to them, relating to the substance of the question to be decided, which should not be admitted.

F – Conclusion of the Report

1.34. On 07.01.2014, at 11 o'clock, the first (and only) meeting of the collective arbitral tribunal with the parties took place, the Claimant having requested that it be permitted to submit written arguments, which the tribunal granted, neither of the parties, as the matter was exclusively one of law, deeming the performance of any additional proceedings necessary.

1.35. Thus, a period of 15 (fifteen) consecutive days was granted for the Claimant and the Respondent, in that order, to submit their written arguments, which both did, within the time limit.

1.36. In its arguments, the Claimant reiterates, in substantially identical terms, what had already been presented in the petition for arbitral pronouncement and in the request of 09.12.2013.

1.37. For its part, the Respondent, in its arguments, maintains everything which it had set forth in its reply, presenting nothing new that in substantive terms would show itself materially relevant for the assessment which it is appropriate to carry out.

1.38. The collective arbitral tribunal, given the special complexity of the case, delivered, pursuant to the provision of paragraph 2 of article 21 of the RJAT, two orders extending the period for the delivery of the decision, the respective date being fixed for 24 June 2014.

1.39. The collective arbitral tribunal is materially competent, pursuant to the provision of articles 2, paragraph 1, subparagraph a) of the Legal Regime of Arbitration in Tax Matters.

1.40. The parties possess legal personality and capacity and have standing pursuant to article 4 and paragraph 2 of article 10 of the RJAT, and article 1 of Order no. 112-A/2011, of 22 March.

1.41. The case does not suffer from any nullity, the conditions for the delivery of the arbitral decision being met. As the Respondent has raised exceptions which obstruct the assessment of the merits of the case, the invoked exceptions will be assessed first, and, should they prove unfounded, the merits of the case.

  1.  Statement of Facts

2.1. Proven Facts

2.1.1. The Claimant holds real property rights over approximately 270 (two hundred and seventy) properties, which are listed in article 10 of the petition for constitution of the collective arbitral tribunal.

2.1.2. The Claimant, in 2004, was notified of the IMI assessments for the properties of which it was the owner relating to the year 2003.

2.1.3. The IMI assessments for the properties of which the Claimant was the owner relating to the year 2003 contain, for each of them, a property value different from what the Respondent had considered in the preceding year in the taxation of that same real property.

2.1.4. The Respondent therefore proceeded to update the property value of each of the properties of which the Claimant was the owner following the entry into force of the IMI Code, as provided for by the transitional regime established by the reform referred to in 1.8..

2.1.5. The Claimant inferred that the Respondent, regarding the IMI for 2003 of the properties of which it was the owner, had proceeded to update the respective taxable property value.

2.1.6. The Respondent never presented to the Claimant any other document in which specifically appear the method and the criteria underlying the determination of the updated taxable property values of each of the properties of which the Claimant was the owner.

2.1.7. The Claimant was duly notified of the IMI assessments for the properties of which it was the owner relating to the years 2003, 2004, 2005, 2006, 2007 and 2008.

2.1.8. The Claimant never made use of the mechanisms which the legal system places at its disposal to challenge the IMI assessments relating to the years 2003, 2004, 2005, 2006 and 2007.

2.1.9. The Claimant paid the IMI relating to the years 2003 to 2008 for each of the properties of which it was the owner.

2.1.10. On 31.12.2012 the Claimant addressed to the Respondent, more specifically to the Department of Services of the Municipal Property Tax, a request for ex officio review whereby it requests the partial annulment of the IMI assessment relating to the year 2008 (document no. 1 attached with the petition for arbitral pronouncement, the content of which is hereby reproduced).

2.1.11. The Respondent presented no reply to the request for ex officio review referred to in 2.1.10..

2.2. Unproven Facts

There are no facts relevant to the assessment of the merits of the case that should be considered unproven.

  1.  Legal Issues

Preliminary Questions

a) Regarding the Written Reply of the Claimant to the Exceptions Invoked by the Respondent in its Reply to the Petition for Arbitral Pronouncement

3.1.

3.1. In its reply to the petition for arbitral pronouncement, the Respondent, as has been stated, invoked dilatory exceptions, and the Claimant addressed to the collective arbitral tribunal a written reply. The Respondent considers that "the reply to the exceptions set forth in writing in the petition of the Claimant clearly violates the provision of subparagraph b) of article 18 of the RJAT", whereby it asks for "its removal from the case".

This is therefore the first question which it is important to clarify.

3.2. Arbitration in tax matters is dominated by various principles, among which those of adversarial proceedings, procedural promptness and the autonomy of the tribunal in the conduct of the proceedings.

The first of these principles, that of adversarial proceedings, imposes that the parties be assured the faculty "to pronounce themselves on any questions of fact or law raised in the proceedings" [subparagraph a) of article 16 of the RJAT]. The principle of promptness for its part finds expression in paragraph 1 of article 21 of the RJAT, which states that the "arbitral decision must be delivered and notified to the parties within a period of six months from the date of the beginning of the arbitral proceedings". In fact, subparagraph c) of article 16 which establishes the last principle to which reference was made, that of autonomy, grounds its existence in that of promptness, as it is clearly stated that the "autonomy of the tribunal in the conduct of the proceedings and in the determination of the rules to be observed" has as its objective the "obtaining, within a reasonable period, of a pronouncement on the merits of the claims formulated".

3.3. Even if one accepts, as the Respondent states, that the RJAT has as its fundamental objective "promptness and effectiveness in the resolution of disputes", from this it does not follow the legal impossibility of written positions of the parties being presented to the arbitral tribunal, beyond the petition for arbitral pronouncement and the respective reply of the tax authority. As the Respondent itself rightly states, the arbitral tribunal has "a time limit of six months" within which to deliver the arbitral decision, it accordingly being its responsibility, with full autonomy, to conduct the proceedings as it sees fit, provided that a pronouncement on the merits of the claims formulated is guaranteed within the appropriate time.

3.4. Even if subparagraph b) of article 18 states that at the first meeting with the parties they should be heard "as to any exceptions that may require appreciation and decision before hearing the claim", this provision cannot be interpreted in the sense of intending to restrict the faculty of the parties to pronounce themselves in writing on those exceptions, even before the first meeting, unless the arbitral tribunal should object. As would be accepted, no serious interest of the Respondent would be prejudiced if the collective arbitral tribunal should choose to accept the written position presented by the Claimant regarding the exceptions invoked by the Respondent in its reply to the petition for arbitral pronouncement, provided that, of course, an arbitral decision within the established period is assured.

3.5. Thus, the collective arbitral tribunal judges it appropriate to admit the written position presented by the Claimant regarding the exceptions invoked by the Respondent in its reply to the petition for arbitral pronouncement, accordingly dismissing the request of the Respondent in which it asks for its removal from the case.

b) Regarding the Impropriety of the Request for Ex Officio Review and the Exception of Timeliness of the Petition for Arbitral Pronouncement

3.6. On 31.12.2012, the Claimant filed, pursuant to the provision of article 78, paragraph 1 of the LGT, a request for ex officio review of the IMI assessments no. 2008 ..., of 27.02.2009, reviewed by the demonstration of the ex officio review of the IMI assessment no. 2008 ..., of 04.06.2009, and no. 2008 ..., of 04.06.2009, corresponding to the first and second instalments of IMI for the year 2008, having received no reply within the period of 4 (four) months from its submission.

3.7. In its reply, the Respondent began by alleging that the request for ex officio review is "an unsuitable means of asserting the claims" of the Claimant, since, in its judgment, the defect of lack of reasoning is not covered by the concept of "error attributable to the services", for the purposes of the regime of ex officio review of tax acts established in article 78 of the LGT, whereby the alleged tacit dismissal of the request for ex officio review cannot give rise to the present petition for arbitral pronouncement.

3.8. In fact, the Respondent judges that the contested assessments are not subject to review on the basis of the grounds presented by the Claimant, since the property value of the properties was notified to the Claimant in 2004, the Claimant having had the opportunity, at that time, to lodge an objection, request its determination in accordance with the rules of the IMI Code or judicially challenge the fixing of the property value of the properties.

3.9. It occurred that the Claimant chose not to lodge an objection, not to request a new valuation of the property values nor to judicially challenge such fixing, whereby the same should be deemed final, in the opinion of the Respondent.

3.10. The Respondent further submits the non-existence of an impugnable act, since the Claimant never reacted, contentiously or judicially, to the contested assessments, having limited itself to improper use of the request for ex officio review, whose alleged tacit dismissal gives rise to the present petition for arbitral pronouncement, whereby the defences placed at the disposal of the Claimant by the legal system are precluded.

3.11. Taking into account the position of the Parties, assumed in the pleadings filed and in the arguments produced, and in accordance with the provision of paragraph 1 of article 608 of the CPC, the following constitute central questions to be resolved by this arbitral tribunal:

i)                    The alleged impropriety of the request for ex officio review presented by the Claimant which would lead to the non-impugnability of the act due to lack of object;

ii)                  The consequent exception of timeliness of the petition for constitution of the arbitral tribunal;

iii)                The alleged illegality of the IMI assessments no. 2008 ..., of 27.02.2009, reviewed by the demonstration of the ex officio review of the IMI assessment no. 2008 ..., of 04.06.2009, and no. 2008 ..., of 04.06.2009, corresponding to the first and second instalments of IMI for the year 2008.

3.12. Pursuant to the provision of paragraph 1 of article 608 of the CPC, applicable by virtue of subparagraph e) of paragraph 1 of article 29 of the RJAT, the exception must be heard first, since its substantiation would have the effect of extinguishing the instance which, consequently, makes the assessment of the claim irrelevant.

3.13. It accordingly falls to this arbitral tribunal to assess the suitability of the procedural means used by the Claimant and object of the petition for arbitral pronouncement, which is translated into the presentation of a request for ex officio review, filed pursuant to article 78 of the LGT, of the IMI assessments above identified relating to the year 2008, the request for ex officio review having been filed on 31.12.2012, on the basis of the lack of reasoning of the tax acts of assessment of IMI for 2008.

3.14. That is, it first falls to this arbitral tribunal to decide whether the formal defect of lack of reasoning should be integrated into the concept of "error attributable to the services".

3.15. The Respondent believes not and invokes the dissenting opinion of the Administrative Supreme Court Decision of 14.03.2012, no. 01007/11, of Counsellor Lino Ribeiro: "the lack of reasoning or the erroneous interpretation of the applicable norm, are illegalities that do not fit within the concept of 'error', as ignorance or imperfect knowledge of the rules of Law, or of circumstances of fact, revealed by the declaration, and not in the will of the person who issued the act. Otherwise, one risks transforming voidable acts into void acts, if the tax has not been paid. The error provided for in that norm can only be the 'material error' or the 'obstacle error' which can be corrected at any time, or within the period of four years, depending on whether or not the tax has been paid".

3.16. The Claimant, for its part, believes yes – that "error attributable to the services" can correspond to any illegality, not attributable to the taxpayer but to the Administration – see Decision of the Administrative Supreme Court of 22.03.2011, case no. 1009/12 and also the aforementioned Decision of the Administrative Supreme Court of 14.03.2012, case no. 01007/11.

3.17. Article 78 of the LGT, in the part relevant to the assessment of the case, provides as follows:

Art. 78 - Review of Tax Acts

1 - The review of tax acts by the entity that carried them out may be effected at the initiative of the taxpayer, within the administrative objection period and on the grounds of any illegality, or, at the initiative of the tax authority, within four years after the assessment or at any time if the tax has not yet been paid, on the grounds of error attributable to the services.
2 - Without prejudice to the legal burden of objection or challenge by the taxpayer, error attributable to the services is considered, for the purposes of the preceding paragraph, the error in self-assessment.
3 – ……………………………………………………………………………
4 – …………………………………………………………………….….
5 – ……………………………………………………………………………
6 - ……………………………………………………………………………
7 - …………………………………………………………………………

3.18. Article 78 of the LGT, in the part which now concerns us, provides for the tax act to be subject to review by the entity that carried it out in two situations:

a. At the initiative of the taxpayer, within the administrative objection period, on the grounds of any illegality;

b. At the initiative of the Tax Authority, within four years after the assessment or at any time if the tax has not been paid, on the grounds of error attributable to the services.

3.19. This does not mean that the taxpayer cannot, within the period for ex officio review, request this same review from the Tax Authority.

3.20. In fact, the jurisprudence of the Administrative Supreme Court has been deciding, in a consistent manner, that, just as the tax authority can, on its own initiative, proceed to the ex officio review of the tax act, within four years after the assessment or at any time if the tax has not yet been paid, on the grounds of error attributable to the services, the taxpayer can also, within that period for ex officio review, request this same review on that ground error attributable to the services - see in this sense the Decisions of 11.05.2005, case 0319/05, and of 02.11.2005, case 512/05, in www.dgsi.pt and also the Decisions of 20/03/2002, 19/11/2003 case 1181/03, 17/12/2002 case 1182/03, 29/10/2003 case 462/03, 02/04/2003 case 1771/02, 20/07/2003 case 945/03, 30/01/2002 case 26.231, all cited in the first decision to which we refer.

3.21. The possibility of the taxpayer raising the request for ex officio review with the tax authority, within four years, (except for the grounds of duplication of collection or gross and notorious injustice, which were not alleged by the Claimant in any circumstance and do not apply in the present case) depends on the verification of the requirements of "error attributable to the services" in the controversial assessments of 2008, by virtue of the defect of lack of reasoning.

3.22. It accordingly falls to this arbitral tribunal to assess the interpretation of the concept of "error attributable to the services", referred to in that legal provision and the inclusion in this concept of the defect of "lack of reasoning" as grounds for the request for review of the tax act, in order to decide whether it is invested with the legal obligation to decide on the merits of the case.

3.23. In truth, the non-verification of the said requirements prejudices the substantiation of the claim of the Claimant as to both the object and the timeliness, in accordance with subparagraph a) of paragraph 1 of article 87 and subparagraph c) of paragraph 1 of article 89, both of the Code of Administrative Procedure and Process, and subparagraph e) of paragraph 1 of article 278 of the CPC, applicable by virtue of the provision of subparagraph e) of paragraph 1 of article 29 of the RJAT.

3.24. Now, for this purpose and in the framework of the interpretation of the concept of "error attributable to the services" set forth in paragraph 1 of article 43 of the LGT, writes the Honourable Mr Counsellor Jorge de Sousa in Annotated CPPT, Vol. I, p. 472 et seq., that "the use of the expression 'error' and not 'defect' or 'illegality' to allude to the facts which can serve as the basis for the attribution of interest, reveals that only the defects of the act annulled to which that designation is adequate were taken into account, which are the error as to the factual presuppositions and the error as to the legal presuppositions. In fact, there are defects of administrative and tax acts to which such designation is not adequate, namely the defects of form and lack of competence, whereby the use of that expression 'error' has a more restricted scope than the expression 'defect'".

3.25. The jurisprudence of the Administrative Supreme Court is in agreement with this position – see Decision case no. 892/2009, of 02/12/2009, Decision case no. 0999/2009, of 17/03/2010 and Decision case no. 244/2008, of 01/10/2008, among others.

3.26. As firmly emerges from this jurisprudence of the Administrative Supreme Court, the expression "error attributable to the services" refers to "error" and not to "defect", which suggests that it only intends to cover errors as to the factual or legal presuppositions which led the Administration to an illegal definition of the tax legal relationship of the taxpayer, not considering formal or procedural defects which, although affecting the act with illegality, do not necessarily imply an erroneous definition of that relationship (cf. also in this sense the Decisions of the Administrative Supreme Court of 27.06.2007, case 80/07, of 21.01.2009 case 945/08, and of 1.10.2008, case 244/08, all in www.dgsi.pt and also Jorge Lopes de Sousa in his Annotated CPPT, 4th edition, p. 293).

3.27. This is, moreover, as Jorge Lopes de Sousa states, op. cit. at p. 295 "a restriction which is understandable. In truth, the existence of formal defects or lack of competence means that there was a violation of procedural rights of the administered and for this reason, justifies the annulment of the act as it is affected with illegality".

3.28. "However, the judicial recognition of a defect of those types does not imply the existence of any defect in the tax legal relationship, that is, any judgment as to whether the monetary obligation charged by the tax authority on the basis of the annulled act is undue, merely expressing the non-conformity with law of the procedure adopted to declare or collect it or the lack of competence of the authority which required it".

3.29. Pursuant to the jurisprudence cited, "error attributable to the services" should therefore be understood as error relating to the ascertainment of the tax situation of the taxpayer, this concept not covering formal or procedural defects.

3.30. We follow here very closely, endorsing, the doctrine subscribed to by the Decision of the Administrative Supreme Court of 04/11/2009, case no. 0665/2009, which, regarding the integration of the concept of "error attributable to the services" provided for in article 43, paragraph 1 of the LGT, considers that it should have the same scope as the nominally identical concept used by paragraph 1 of article 78 of the LGT, which distinguishes between "error attributable to the services" and any other "illegality" in the following terms:

3.31. "The use of the expression error and not defect or illegality suggests the intention of the legislator to elect as the grounds for compensatory interest only error as to the factual presuppositions and error as to the legal presuppositions (article 43, paragraph 1 LGT).

3.32. The occurrence of a formal defect per se, signifying the violation of a norm governing the activity of the tax authority, reveals nothing as to whether the monetary obligation charged by the tax authority is undue under the applicable substantive tax norms.

3.33. The situations in which compensatory interest is payable are indicated in article 43 of the LGT.

3.34. Regarding the annulment of tax acts in judicial proceedings, the regime of compensatory interest is indicated in paragraph 1 of this article, according to which «compensatory interest is due when it is determined in (...) judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due».

3.35. Thus, in the light of this paragraph 1, what is relevant for the purposes of the attribution of interest is that there be an error which is attributable to the services of the Tax Administration.

3.36. That expression «error», without any qualification, encompasses both error of fact and error of law.

3.37. However, the use of the expression «error», and not «defect» or «illegality» to allude to the facts which can serve as the basis for the attribution of interest, reveals that only the defects of the act annulled to which that designation is adequate were taken into account, which are the error as to the factual presuppositions and the error as to the legal presuppositions. ( ) On the use of this terminology, established in doctrine and jurisprudence, one can see MÁRIO ESTEVES DE OLIVEIRA, Administrative Law, volume I, pages 564-566).

3.38. In truth, there are defects of administrative and tax acts to which such designation is not adequate, namely the defects of form and lack of competence, whereby the use of that expression «error» has a more restricted scope than the expression «defect», which is used legislatively to reference any illegality.

3.39. On the other hand, it is noted that in the CPPT the expression «defects» is used when it is intended to allude, generically, to all illegalities susceptible to leading to the annulment of acts, as is the case of articles 101 (subsidiary raising of defects) and 124 (order of consideration of defects in the judgment).

3.40. For this reason, it is to be concluded that the use of that expression «error», has a restrictive scope of the type of defects which can serve as the basis for the right to compensatory interest.

3.41. This is, moreover, a restriction which is understandable.

3.42. In truth, the existence of formal defects or lack of competence means that there was a violation of procedural and formal rights of the administered and, for this reason, justifies the annulment of the act as it is affected with illegality.

3.43. However, the judicial recognition of a defect of those types does not imply the existence of any defect in the tax legal relationship, that is, does not imply any judgment as to whether the monetary obligation charged by the Tax Administration on the basis of the invalid act is due or undue, merely expressing the non-conformity with law of the procedure adopted to declare or collect it or the omission of legal formality or the lack of competence of the authority which required it".

3.44. Now in the disputed case which was the object of the decision of the Administrative Supreme Court in case no. 0665/09, the assessment acts impugned had not been declared void by any defect of their own, but rather, as a reflection of the defect of lack of reasoning of the valuation act which they had as presupposition.

3.45. And, in this way, the Administrative Supreme Court concluded that the voidness of the assessment acts impugned in the case, which resulted only from the defect of lack of reasoning which affects the valuation act, did not represent any error of fact or of law.

3.46. Consequently, the Administrative Supreme Court determined that one was faced with a situation in which it is not demonstrated that an error of fact or of law occurred, in which antijurality at the level of the underlying substantive tax relationship of the impugned assessment acts is not demonstrated and in which, for this reason, the right to compensatory interest is not justified as the concept of "error attributable to the services" is not satisfied.

  1.        Conclusions of the Tribunal

4.1. In summary, and in the case sub judice, the arbitral tribunal considers that:

4.2. The Claimant could have invoked the defect of lack of reasoning of the valuation act, verified in 2003, upstream, through the presentation of:

i)                    Administrative objection

ii)                  Judicial challenge

iii)                Request for review

4.3. Not having done so, it cannot now take advantage of the means of defence provided for in article 78 of the LGT, even regarding the assessment act for IMI for 2008, since the request for review to be filed pursuant to this article implies the verification of "error attributable to the services".

4.4. And the lack of reasoning, if it exists, does not integrate the concept of "error attributable to the services" being instead a "defect" linked to the tax procedure with a more restricted scope and reach than the "defect" corresponding to any illegality.

4.5. Accordingly, the assessment act for IMI relating to the year 2008 is not subject to review on the basis of subparagraphs c) and h) of article 89 of the Code of Administrative Procedure and Process, applicable by virtue of article 29 of the RJAT.

  1.   Decision

5.1. In view of the foregoing, the arbitrators who constitute this collective arbitral tribunal agree that the exceptions raised by the Respondent, namely those of non-impugnability of the act due to lack of object and of timeliness / lapse of time of the petition for arbitral pronouncement, are well founded.

5.2. Since the substantiation of the dilatory exceptions obstructs the hearing on the merits of the claim, the arbitrators who constitute this collective arbitral tribunal accordingly agree, in consequence, to absolve the Respondent from the instance.

  1.   Value of the Case

In accordance with the provision of paragraph 2 of article 315 of the CPC, subparagraph a) of paragraph 1 of article 97-A of the CPPT and also paragraph 2 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €240,206.95 (two hundred and forty thousand, two hundred and six euros and ninety-five cents).

  1.   Costs

For the purposes of the provision of paragraph 2 of article 12 and paragraph 4 of article 22 of the RJAT and paragraph 4 of article 4 of the Regulations of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €4,284.00, in accordance with Table I attached to the said Regulations, to be borne entirely by the Claimant.

Let it be notified.

Lisbon, 14 May 2014

The Arbitrators

Manuel Macaísta Malheiros

Ana Teixeira de Sousa

Nuno Pombo

Document prepared by computer, in accordance with article 138, number 5 of the CPC, applicable by referral of article 29, paragraph 1, subparagraph e) of the RJAT.

		[1] The wording of the present arbitral decision follows the orthography prior to the Agreement of 1990.

Frequently Asked Questions

Automatically Created

Does the Portuguese Tax Arbitration Tribunal (CAAD) have jurisdiction over IMI property tax disputes?
Yes, the Portuguese Tax Arbitration Court (CAAD) has jurisdiction over IMI (Municipal Property Tax) disputes. This is confirmed by the case itself, where the arbitral tribunal was constituted on October 30, 2013, pursuant to Decreto-Lei 10/2011 (as amended by Law 66-B/2012). The CAAD's Deontological Council appointed three arbitrators to hear the dispute, and the petition for arbitration was accepted. The jurisdiction extends to challenges of IMI assessments, including disputes concerning property valuations, assessment procedures, and formal defects in tax notifications.
What are the deadlines for filing a request for official review (revisão oficiosa) of IMI tax assessments under Article 78 of the LGT?
Article 78 of the General Tax Law (LGT) governs official review (revisão oficiosa) of tax acts. While the specific deadline is not explicitly stated in this excerpt, the case indicates that the claimant filed for official review on December 31, 2012, for assessments issued in 2009, suggesting a multi-year timeframe may be available. The request must be submitted to the Tax Authority, which then has a statutory obligation to respond. The review procedure allows taxpayers to request correction of errors attributable to tax services without resorting to formal litigation as an initial step.
What happens when the tax authority fails to respond to a review request within the 4-month statutory period?
When the Tax Authority fails to respond to an official review request within the statutory 4-month period, the request is deemed tacitly dismissed (indeferimento tácito) pursuant to Article 57(1) and (5) of the LGT. This tacit dismissal has important legal consequences: it enables the taxpayer to proceed to the next stage of administrative or judicial challenge. In this case, following the tacit dismissal of the December 2012 review request, the claimant was entitled to file a petition for arbitration in August 2013, thereby accessing the CAAD tribunal to adjudicate the dispute.
Can taxpayers challenge multiple IMI property tax assessments in a single arbitration proceeding?
Yes, taxpayers can challenge multiple IMI property tax assessments in a single arbitration proceeding before CAAD. This case demonstrates this principle clearly, as the claimant consolidated challenges to IMI assessments affecting approximately 270 properties into one arbitral petition. The properties were listed in Article 10 of the petition, and all related to the same tax year (2008) and the same underlying issue (property valuations following the 2003 reform). This consolidation promotes judicial economy and consistent resolution of related disputes arising from the same factual and legal circumstances.
How did the 2003 property tax reform (Decreto-Lei 287/2003) affect IMI valuations and subsequent tax assessments?
The 2003 property tax reform, approved by Decreto-Lei 287/2003 of November 12, established a comprehensive update of taxable property values (valores patrimoniais tributários) for properties across Portugal. The reform implemented a transitional regime with specific criteria for general revaluation of non-leased urban properties, based on factors such as the year of registration in the property register and initial property values. Following this reform, the Tax Authority proceeded to update property values, which formed the basis for subsequent IMI assessments. However, disputes arose regarding the adequacy of notifications to property owners about these updated valuations and the transparency of the methodology and criteria applied during the transitional valuation process.