Process: 211/2015-T

Date: November 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision (Process 211/2015-T) addresses the legality of retroactive application of periodic Property Value for Tax Purposes (VPT) updates under Article 138 of CIMI and consequent Stamp Duty assessments. The claimant challenged a 2014 VPT update to €1,025,734.75 that was retroactively applied to 2012, resulting in Stamp Duty assessments of €20,514.70 for fiscal years 2012-2013. The claimant argued that periodic updates performed in 2014 cannot legally produce effects from 2012, constituting unlawful retroactive taxation. The Tax Authority raised multiple procedural defenses: (1) material incompetence if the arbitral request included the dismissed administrative reconsideration decision, which should be challenged through special administrative action; (2) statute of limitations, arguing the claimant's right to challenge the assessments had lapsed; (3) consolidation of the second evaluation, contending the claimant should have challenged that evaluation (notified 16/07/2014) rather than the periodic update; and (4) inadmissible cumulation of claims regarding property valuation illegality. The claimant subsequently requested expansion of the arbitral request to expressly include annulment of the administrative reconsideration dismissal, claiming its omission was mere oversight. The Tax Authority opposed this expansion. Key legal issues include: whether periodic VPT updates under Article 138 CIMI can validly apply retroactively; the interplay between challenging periodic updates versus second evaluations; statute of limitations periods for arbitral actions against Stamp Duty assessments based on contested valuations; procedural requirements for expanding arbitral requests; and the arbitral tribunal's jurisdiction over administrative reconsideration dismissals. The case illustrates tensions between administrative efficiency in tax collection and taxpayer protection against retroactive fiscal burdens, fundamental to Portuguese tax procedure.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, NIF …, resident at Rua …, nº …, …, … Vila Nova de Gaia, hereinafter simply referred to as the Claimant, presented a request for constitution of an arbitral tribunal in tax matters and request for arbitral ruling, pursuant to the provisions of articles 2 and 10/1-a) and b) of the Legal Regime of Arbitration in Tax Matters (hereinafter RJAT), approved by Decree-Law No. 10/2011, of 20 January, petitioning for the annulment and elimination of the effects of the periodic updating of the Property Value for Tax Purposes (VPT) of the fraction of which he is the owner, made in 2014 with retroactive effects to 2012, in the amount of €37,134.75 and annulment of subsequent Stamp Duty (IS) assessments, concerning fiscal years 2012 and 2013, in the amount of €20,514.70.

To substantiate his request, he alleges, in summary:

a) He is the owner of the autonomous fraction designated by the letter "…" of the urban property registered under article … of the urban property register, parish of ..., municipality of Cascais;

b) The property registration application in favor of the Claimant was requested on 24/11/2009;

c) Following the periodic updating referred to in article 138 of the CIMI, of which the Claimant was not notified, carried out in 2014, the fraction was assigned the value of €1,025,734.75;

d) As a consequence, the Tax Authority (AT) assessed Stamp Duty concerning fiscal years 2012 and 2013, in the total amount of €20,514.70, based on the property value for tax purposes that resulted from the periodic updating referred to in c) above, deeming that in 2012 the fraction already had this new property value for tax purposes resulting from the periodic evaluation;

e) The Claimant presented a request for administrative reconsideration (reclamação graciosa) of such periodic updating act, to which was assigned the number …201…., on the grounds that the retroactive application of this new property value for tax purposes with effects from 2012 is illegal;

f) By letter dated 04.02.2015, the Claimant was notified of the decision to dismiss the request for administrative reconsideration presented;

g) Having the periodic updating been carried out in 2014, its effects cannot retroact to 2012.

The Claimant submitted 1 document and did not list any witnesses.

In the request for arbitral ruling, the Claimant opted not to designate an arbitrator, and therefore, pursuant to article 6, paragraph 1 of the RJAT, the undersigned was designated by the Ethics Committee of the Administrative Arbitration Centre, and the appointment was accepted in accordance with legal provisions.

The arbitral tribunal was constituted on 1 June 2015.

Notified in accordance with the provisions of article 17 of the RJAT, the Respondent presented a reply, raising defenses by way of exception and impugnation.

By way of exception, the Tax Authority defends the following:

a) In the event that it is understood that the act dismissing the request for administrative reconsideration is also the subject matter of the request for arbitral ruling formulated, there is a procedural error and material incompetence of the Arbitral Tribunal, since in the examination of the request for administrative reconsideration the Tax Authority did not pronounce on the merits, having been dismissed for lack of timeliness;

b) In this case, the act dismissing the request for administrative reconsideration cannot be reviewed through the present request, but through special administrative action;

c) The immediate subject matter of the present proceeding is the acts of assessment of Stamp Duty concerning fiscal years 2012 and 2013;

d) At the date of the institution of the present request for arbitral ruling, the period for challenging the said assessments had long since expired, and therefore the Claimant's right to challenge the assessments in question has lapsed;

e) The Claimant was notified of the second evaluation of the fraction in question;

f) Not agreeing with the respective values and grounds, he should have challenged the result of that second evaluation and not the periodic evaluation;

g) Having not challenged the second evaluation, it became consolidated in the legal order, which results in the non-challengeability of the administrative act;

h) With respect to the assessments of Stamp Duty, the cause of action reduces to the illegality of the quantification of the property value of the real property, and therefore there is an inadmissible and illegal cumulation of claims.

By way of impugnation, the Respondent alleges, in summary, the following:

a) The Claimant was notified of the second evaluation on 16/07/2014;

b) The Tax Authority, as soon as it was possible to determine the property value for tax purposes in light of that second evaluation, in compliance with the provisions of article 138 of the CIMI, proceeded with the proper three-yearly periodic updating, with reference to 2012 (2009/2012);

c) Since such updating derives from the law and not from any direct evaluation, there is no obligation for the Tax Authority to notify the Claimant thereof, who is notified only of the assessment notices;

The Respondent submitted the administrative file and two documents, and did not list any witnesses.

On 17/08/2015, the Claimant came to reply to the exceptions raised by the Tax Authority, urging their dismissal, and requesting the extension of the arbitral request formulated, so that it may expressly include the request for annulment of the act dismissing the request for administrative reconsideration No. …2015….

For such purpose, he invokes in summary that the non-inclusion of that request was due to mere oversight, since the Claimant's objection to this decision is evident throughout the entire request for arbitral ruling.

The Claimant submitted the challenged assessments to the proceedings, after having been duly [noted].

By petition dated 04.09.2015, the Tax Authority came to urge the inadmissibility of the requested extension of the claim, also requesting the removal from the record of the petition presented by the challenging party.

Considering the position assumed by the parties and there being no need for the holding of the meeting referred to in article 18 of the RJAT, the same was dispensed with, and the parties submitted written submissions, in which they maintained the positions initially defended.

II. CLARIFICATION

The Arbitral Tribunal is properly constituted.

The parties possess legal personality and capacity, are legitimate and are properly represented.

The proceedings are not subject to defects affecting their validity.

III. ISSUES TO BE DECIDED

Considering the positions assumed by the Parties, as set forth in the arguments presented, it is necessary to:

a. Determine whether the requested extension of the request for arbitral ruling is admissible;

b. Consider the exceptions raised by the Tax Authority;

c. Determine the illegality of the retroactive application of the property value for tax purposes assessed in 2014; and

d. Determine the legality of the Stamp Duty assessments notified.

IV. FINDINGS OF FACT

a. Facts Proven

With relevance to the decision to be rendered in the present proceedings, the following facts were established as proven:

  1. A autonomous fraction designated by the letter … of the urban property registered in the property register under article …, situated at Rua …, …, parish of ..., municipality of Cascais, is registered in the name of the Claimant;

  2. On 24/11/2009, an IMI Model 1 declaration was filed based on the completion of the address concerning the fraction referred to in 1) above;

  3. On 16/05/2013, the previous owner of the fraction referred to in 1) above was notified of its respective evaluation;

  4. On 07/06/2013, the Claimant presented a request for rectification of the evaluation, which was subsequently converted into a request for second evaluation;

  5. On 16/07/2014, the Claimant was notified of the result of the second evaluation, the property in question having been then evaluated, by reference to the year 2009, at the value of €988,660.00;

  6. In 2014, the Tax Authority proceeded with the periodic updating of the property value for tax purposes of the real property, setting it at €1,025,734.75;

  7. The Tax Authority did not notify the Claimant of this periodic updating carried out;

  8. As a consequence, the Tax Authority assessed Stamp Duty concerning the fraction referred to in 1) above, for fiscal years 2012 and 2013, in the amount of €10,257.35 each;

  9. The Claimant was notified of these assessments, the payment deadline of which fell in November 2014;

  10. On 02/12/2014, the Claimant presented a request for administrative reconsideration, to which was assigned the number …2015…, against the periodic evaluation with retroactive effect and the subsequent Stamp Duty assessments;

  11. By letter dated 04/02/2014, the Claimant was notified of the dismissal of the request for administrative reconsideration presented;

  12. The request for constitution of the arbitral tribunal in tax matters and for arbitral ruling was presented on 23/03/2015.

b. Facts Not Proven

No facts emerged with relevance to the decision that were not proven.

c. Justification of Findings of Fact

The conviction regarding the facts established as proven was formed on the basis of the elements contained in the administrative file and the documentary evidence submitted by the parties, indicated with respect to each of the points, whose correspondence to reality was not questioned, as well as the matters alleged and not impugned contained in the petitions submitted to the record.

It is clarified that the tribunal established as proven the matter contained in point 5 of the proven facts, considering that although the Claimant alleged that notification of the second evaluation had been received by a third party who did not transmit its content to him, the law considers that notification is deemed to have been effected to the person being notified, even when, as occurs in the present case, the notice was signed by a third party – see article 39, paragraph 3 of the CPPT.

V. LAW

a. Regarding the admissibility of the requested extension of the request for arbitral ruling:

In response to the exception of lapse of the arbitral action raised by the Tax Authority, the Claimant came to petition for the extension of the request for arbitral ruling, so that it may expressly include the request for annulment of the decision dismissing the request for administrative reconsideration presented.

Thus, it is necessary to examine:

Pursuant to paragraph 2 of article 265 of the Code of Civil Procedure, applicable ex vi sub-paragraph e) of paragraph 1 of article 29 of the RJAT, "the plaintiff may, at any time, reduce the claim and may extend it until the close of the discussion in first instance if the extension is the development or a consequence of the original claim."

In the present case, it appears that the extension of the request for arbitral ruling was petitioned by the Claimant until the close of the discussion in first instance, inasmuch as it occurred before the dispensing of the meeting provided for in article 18 of the RJAT and, consequently, before the submission of final submissions.

Indeed, the last possible moment to permit a possible extension of the claim is that of the final hearing, and therefore, having the request for extension been formulated before the meeting referred to in article 18 of the RJAT, it seems manifest that it fulfills the temporal requirements provided for in article 265, paragraph 2 of the Code of Civil Procedure.

Thus, it is established that the request for arbitral ruling was timely formulated by the Claimant.

Let us examine, however, whether it should be judged procedurally admissible, in light of the legal prerequisites established therefor, namely in light of what is provided in paragraph 2 of article 265 of the Code of Civil Procedure, as constituting the development or consequence of the original claim.

Now, "as Professor Castro Mendes stated, in Civil Procedural Law, 1980, vol. II, p. 347, in order for the extension of the claim to constitute development or consequence of the original claim, there must be a common origin, that is, the same cause of action or that the two causes of action are integrated in the same complex of facts."[1]

The question to be decided is thus limited to determining whether the requests for revocation of the decision dismissing the request for administrative reconsideration and for challenging the assessments have the same cause of action or whether both causes of action are integrated in the same complex of facts.

Now the answer to this question cannot but be in the negative.

Indeed, the cause of action underlying the request for revocation of the decision dismissing the request for administrative reconsideration is the decision dismissing the request for administrative reconsideration itself, whereas the cause of action that underlies the request for challenging the acts of assessment are these tax acts themselves.

Similarly, and for the same reasons, it does not appear possible to argue that both causes of action are integrated in the same complex of facts.

On this point, it is necessary here to distinguish between the immediate subject matter of the proceedings and the mediate subject matter, knowing that this is integrated in that.

In the case of a challenge intended to result in a declaration of illegality of the decision dismissing the request for administrative reconsideration (immediate subject matter), it is true that its declaration necessarily results in a declaration of illegality of the subsequent act of tax assessment (mediate subject matter).

But the inverse proposition is not true, inasmuch as a challenge intended to result in a declaration of illegality of the act of assessment of tax (immediate subject matter) does not have as its consequence the annulment of the act dismissing the decision of the request for administrative reconsideration (mediate subject matter).

This is because, having the request for administrative reconsideration as its subject matter the assessment, the annulment of that determines as a logical corollary the annulment of the assessment which serves as its foundation.

On the contrary, the assessment does not have the request for administrative reconsideration as its subject matter, and therefore it could never be argued that the annulment of the assessment would result in the annulment of the dismissal of the request for administrative reconsideration.

In these terms, it cannot be argued that the annulment of the decision dismissing the request for administrative reconsideration constitutes the development or consequence of the original claim formulated in the present proceedings, that is, of the request for annulment of the assessments.

Whereby it is established that the requested extension of the claim formulated by the Claimant is not admissible.

b. Regarding the exception of procedural error and the (consequent) incompetence of the arbitral tribunal:

As to this exception, the Respondent invokes that, in the event that it is understood that the act dismissing the request for administrative reconsideration is also the subject matter of the request for arbitral ruling formulated, there is a procedural error and material incompetence of the Arbitral Tribunal, since in the examination of the request for administrative reconsideration the Tax Authority did not pronounce on the merits, having been dismissed for lack of timeliness.

Consequently, it sustains that the act dismissing the request for administrative reconsideration cannot be reviewed through the present request, but through special administrative action, thus verifying a procedural error and, consequently, incompetence of the arbitral tribunal.

For its part, the Claimant argues that the request for administrative reconsideration was not dismissed for lack of timeliness, since, as clearly appears from the decision dismissing it, the request for administrative reconsideration presented was considered timely.

Let us examine:

It is true that, as the Claimant alleges, the Tax Authority considered that the request for administrative reconsideration presented was timely.

Despite this assessment, the fact is that the Tax Authority did not come to pronounce on the merits of the request for administrative reconsideration, having been dismissed on the grounds that the Tax Authority considered that "the annulment and elimination of the effects of the periodic updating of the property value for tax purposes had their discussion periods at the second evaluation and in the property section."

It appears, however, that the question raised by the Tax Authority is manifestly irrelevant.

This is because, whether the proper remedy against the dismissal of the request for administrative reconsideration be special administrative action or challenge, the fact is that, in the present case, the Claimant did not review this dismissal, having only raised the question of the legality of the retroactive application of the periodic evaluation and its subsequent assessments.

Whereby it is established that there is no procedural error and incompetence of the arbitral tribunal.

c. Regarding the exception of lapse of the right to arbitral action:

Having established that the extension of the claim is inadmissible, let us examine whether the exception of lapse of the right to arbitral action raised by the Tax Authority is verified.

In this regard, the Tax Authority invokes that, having the Claimant limited itself to challenging the legality of the retroactive application of the periodic evaluation and subsequent acts of assessment of Stamp Duty and not the act dismissing the request for administrative reconsideration, the request for arbitral ruling is untimely, since it was presented after the period of 90 days legally provided therefor had expired, counted from the expiration of the period for voluntary payment of the challenged assessments.

In response to the exception raised, the Claimant argued, invoking that, by oversight, he did not identify in the arbitral request initially formulated the review of the dismissal of the request for administrative reconsideration, despite it appearing from the entire petition that his objection to such dismissal is manifest, later requesting the extension of the claim.

It is necessary to decide:

As appears from the initial petition presented, the Claimant petitions for the annulment and elimination of the effects of the periodic updating of the property value for tax purposes and annulment of the subsequent Stamp Duty assessments, saying nothing with respect to the annulment of the decision dismissing the request for administrative reconsideration.

It results from the facts proven – see point 9 – that the final date for payment of Stamp Duty occurred in November 2014.

For its part, it is equally established that the Claimant presented the request for constitution of the arbitral tribunal on 23/03/2015 – see point 12.

Pursuant to article 10, paragraph 1 a) of the RJAT, the period for presentation of the request for constitution of an arbitral tribunal is 90 days, counted from the facts provided for in paragraphs 1 and 2 of article 102 of the CPPT, among which is comprised the expiration of the period for voluntary payment of the tax obligations legally notified to the taxpayer.

Whereby it is established that, having the Claimant circumscribed his request to the annulment and elimination of the effects of the periodic updating of the property value for tax purposes and annulment of the subsequent Stamp Duty assessments, he had for this purpose the period of 90 days, counted from the final date for voluntary payment of such assessments.

Such period, at the date of presentation of the request for constitution of the arbitral tribunal, had already been exceeded.

Having the respective period been exceeded, the Claimant's right to challenge by way of the presentation of the request for constitution of the arbitral tribunal the assessments in question as well as the act that was at their origin has lapsed.

Therefore, the pleaded exception of lapse of the right to action of the Claimant is well-founded, thus prejudicing the examination of the substantive issue.

VI. DISPOSITIF:

In view of the foregoing, it is decided:

a) to uphold the exception of lapse of the right to arbitral action and, by way of this,

b) to dismiss the claim formulated.

The value of the case is set at €57,649.45, in accordance with sub-paragraph a) of paragraph 1 of article 97-A of the Code of Tax Procedure and Process, applicable by force of sub-paragraphs a) and b) of paragraph 1 of article 29 of the RJAT and of paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is set at €2,142.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, as well as of the provisions of paragraph 2 of article 12 and paragraph 4 of article 22, both of the RJAT, and of paragraph 3 of article 4 of the said Regulation, to be paid by the Claimant, as the unsuccessful party.

Register and notify.

Lisbon, 20 November 2015.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, pursuant to paragraph 5 of article 131 of the CPC, applicable by reference of sub-paragraph e) of paragraph 1 of article 29 of Decree-Law No. 10/2011, of 20/01.

[1] In Decision of the Court of Appeal of Lisbon, case No. 5202/2007-1, of 06JUN2007, available at www.dgsi.pt.

Frequently Asked Questions

Automatically Created

Can the Portuguese Tax Authority retroactively apply a periodic VPT update to prior tax years?
Under Article 138 of CIMI, periodic VPT updates are conducted every three years based on existing evaluations. The core legal issue is whether such updates can produce retroactive effects to prior tax years. The claimant argued that a periodic update performed in 2014 cannot legally apply to 2012, as this constitutes unlawful retroactive taxation. The Tax Authority maintained that periodic updating derives directly from law and automatically applies to the reference period (2009-2012 triennium). Portuguese tax law generally prohibits retroactive tax increases that burden taxpayers for periods when they could not know the applicable tax basis. The legality depends on distinguishing between the evaluation date and the update's effective date under the statutory framework.
What is the legal basis for challenging periodic property tax value updates under Article 138 of CIMI?
Article 138 of CIMI governs three-yearly periodic VPT updates. Taxpayers can challenge these through: (1) administrative reconsideration (reclamação graciosa); (2) hierarchical appeal; or (3) arbitral action under RJAT articles 2 and 10. A critical distinction exists between challenging the evaluation itself versus the periodic update. The Tax Authority argued that when a second evaluation occurs (Article 139 CIMI), taxpayers must challenge that specific evaluation, not the subsequent periodic update. Once an evaluation becomes final without challenge, it consolidates in the legal order. The legal basis for challenge includes procedural violations, incorrect valuation methodology, lack of notification, and unlawful retroactive application. The choice of remedy affects deadlines and jurisdictional competence.
How does the statute of limitations affect arbitral action rights in Stamp Tax disputes?
Under Portuguese tax arbitration law (RJAT), statute of limitations (caducidade) periods strictly limit arbitral action rights. For Stamp Duty assessments, taxpayers must file arbitral requests within specific deadlines after notification of the contested act. The Tax Authority argued that by the date of the arbitral request filing, the period for challenging the 2012-2013 Stamp Duty assessments had expired, resulting in lapse of the right to challenge (caducidade do direito de acção). This defense raises whether challenging the underlying VPT update extends the deadline for contesting dependent tax assessments. The statute of limitations protects legal certainty and administrative finality. Taxpayers must vigilantly monitor deadlines, as procedural bars prevent substantive review regardless of merit.
Can a taxpayer request annulment of Stamp Tax assessments based on an unlawful retroactive VPT update?
Yes, taxpayers can request annulment of Stamp Duty assessments when based on an allegedly unlawful retroactive VPT update. Stamp Duty on high-value property (Article 1 of Stamp Tax Code) uses VPT as the tax base. If the underlying VPT determination is illegal—whether due to procedural violations, incorrect methodology, or unlawful retroactive application—derivative tax assessments are also vitiated. The claimant sought both annulment of the retroactive VPT update and consequent Stamp Duty assessments. However, the Tax Authority raised an inadmissible cumulation of claims issue, arguing the challenge reduces to quantification illegality. The relationship between principal acts (VPT updates) and derivative acts (tax assessments based thereon) determines whether combined challenges are procedurally proper or constitute impermissible claim accumulation requiring separate proceedings.
What are the grounds for expanding the scope of an arbitral pronouncement request (ampliação do pedido) in Portuguese tax arbitration?
Under RJAT, taxpayers may request expansion (ampliação) of arbitral requests under certain conditions. The claimant initially sought annulment of the VPT update and Stamp Duty assessments but later requested expansion to expressly include the administrative reconsideration dismissal decision. Grounds for expansion include: (1) correction of mere oversight where the claim was substantively addressed in the original request; (2) connexity between original and expanded claims; (3) procedural economy. The claimant argued the omission was oversight, evidenced by discussing the dismissal throughout the original request. The Tax Authority opposed expansion, seeking removal of the petition. Admissibility depends on whether expansion introduces genuinely new claims requiring separate proceedings or merely clarifies existing claims. Timing restrictions and respondent's procedural rights factor into the tribunal's discretionary assessment of expansion requests.