Stamp Tax on Renunciation of Compensation in Common Property Division – De Facto Union Exemption (CAAD 236/2016-T)

ARBITRAL DECISION

Claimant – A…

Respondent: Tax and Customs Authority

I – Report

1. On 21 April 2016, A…, with NIF…, resident in…, Place of …, …-… …, Vila Franca de Xira, came, pursuant to article 99 of the Code of Tax and Customs Procedure (CPPT), by virtue of subparagraph c) of article 10(2) of Decree-Law no. 10/2011, of 20 January, to request the constitution of a sole Arbitral Tribunal seeking a declaration of illegality of the Stamp Tax assessment, heading 2.1,[1] with number … in the amount of € 2,985.00. With the Request, it filed, in addition to the power of attorney, 13 documents, supplemented by copies delivered days later.

2. In the Request for Arbitral Determination, the Claimant opted not to designate an arbitrator, and it was by decision of the President of the Deontological Council, pursuant to article 6(1) of the Legal Framework for Tax Arbitration (RJAT), that the undersigned was designated as sole arbitrator, who accepted the position within the legally stipulated period.

3. The arbitral tribunal was constituted on 4 July 2016.

4. The Tax and Customs Authority (TA or Respondent) sent, on 23 September 2016, its Reply and the administrative file.

5. An Arbitral Order was issued designating 14 November 2016 for the holding of the meeting of article 18 of the RJAT, followed by the examination of witnesses indicated by the Claimant.

6. On 18 November 2016, the meeting of article 18 of the RJAT was held, with the examination of witnesses. The tribunal invited the Claimant to perfect the Request taking into account the exception raised, presenting simultaneously the arguments, followed by the running of the period for submission by the Respondent, and indicated 3 January 2017 as the date for the emission of the arbitral decision.

7. Only the Claimant presented, on 30 November 2016, arguments, and on 19 December 2016, came to request that the tribunal take into account that the Insolvency Administrator in Case .../16.BTBVXF proceeded, in the meantime, to the resolution of the act of division of common property that gave rise to the tax act that is the subject of the present proceedings, and therefore consider as the principal cause of action the non-existence of a tax fact.

8. By Arbitral Order, the Respondent was notified to make a statement, extending the period for decision by a further two months and setting the date of decision for 3 March 2017. The Respondent did not issue a position.

9. The Request for Determination

The Claimant argues, in summary (our responsibility):

• The assessment act originated in the public deed of division of common property, executed on 15 April 2015, by which he was awarded one-half of the urban property registered under article … of the urban property register of the Union of Parishes of … and … whose ownership he previously maintained in co-ownership with B….

• In the deed referred to in the preceding number, the property was assigned the value of € 59,700.00, so the share of each of the executing parties corresponds to € 29,850.00, which would give the claimant a benefit in this amount (€ 29,850.00) giving rise to owelty, but the executing party B… waived the respective payment.

• Having communicated the division of common property to TA, it came to assess Stamp Tax (heading 1.2 of the General Table of Stamp Tax - TGIS) on such waiver of owelty by applying a rate of 10% on the value subject to waiver, which resulted in a tax in the amount of € 2,985.00.

• The Claimant and B… have lived in a de facto union, sharing bed, table and dwelling, since 2004 and particularly, from 2006 to the present date, reside at the same address -…, …, …-… …, a situation confirmed by a residence certificate from the parish of … and … and declaration under honour by those involved, who present a common address.

• Indeed, despite the division of common property, the Claimant and B… remain in a de facto union, as attested by reference in documents subsequent to the deed and attached to the file with the Request.

• The executing parties in the deed maintain in the TA database the same tax domicile in…, …, …, as well as their income tax returns between 2011 and 2014, presented jointly, refer to their situation as de facto unions.

• TA understood that the waiver of owelty constitutes a tax fact subject to taxation under article 1 of the Stamp Tax Code and application of heading 2.1 of the TGIS, as it is a true waiver, a genuine gratuitous transfer, without taking into account the provisions of subparagraph e) of article 6 of the Stamp Tax Code (CIS) which exempts from tax gratuitous transfers occurring between, in particular, de facto unions.

• In the case of the Claimant, beneficiary of the waiver of owelty, the exemption provided for in article 6(e) of the CIS should apply, as the de facto union between the executing parties is maintained.

• The situation of the Claimant cannot be confused with the case subject to binding information from TA contained in a document attached with the Request, since there the marriage was dissolved by divorce with cessation of living together, whereas in this case the transfer occurred between de facto unions, with the waiver of owelty under the protection of the aforementioned subparagraph e) of article 6 of the CIS.

• Therefore, the Request should be considered well-founded, declaring the assessment illegal and determining its respective annulment and restitution of any amounts subsequently demanded coercively.

10. The Reply

The Respondent replies, in summary (our responsibility):

• In the present request for arbitral determination, the Stamp Tax assessment (TGIS) is challenged on the basis of the waiver of owelty, of which the Claimant was the beneficiary under the terms of the Deed of Common Property, by B…, concerning property of which they were co-owners.

• The Claimant alleges that he lived with B… in a de facto union since 2004 and particularly from 2006, residing at the same address, corresponding to the property subject to division, and that although the waiver of owelty in division of common property constitutes a gratuitous transfer, subject to Heading 1.2 of the TGIS, the transfer, having occurred between de facto unions, benefits from the exemption provided for in subparagraph e) of article 6 of the Stamp Tax Code (CIS), but it is important to bear in mind that the same Claimant filed, on 09.12.2015, an administrative review of the assessment of 22.01.2016, now being challenged, limiting itself to asserting the timeliness of the present Request by reference to the date of notification of the dismissal order of that administrative review, without making any reference to the respective decision, and expressly limiting the object of the present request for determination to "Stamp Tax assessment, Heading 28.1 – Donation – with number …, with a final amount to pay of € 2,985.00", without formulating, ultimately, any request for the annulment of what was decided in administrative review, and requesting only the declaration of illegality of the assessment challenged.

• Thus, the request for arbitral determination conflicts with the understanding, of doctrine and arbitral jurisprudence, that "the immediate object of the impugnatory process is, as a rule, the second-degree act, which assesses the legality of the assessment act, an act that, if it confirms it, must be annulled, to obtain the declaration of illegality of the assessment act."

• On the other hand, the factual situation exposed in the administrative review presented on 15.04.2015 – and which formed the basis of its dismissal and consequent maintenance of the assessment challenged – does not coincide with the facts articulated in the arbitral petition.

• In the administrative review, the now Claimant states that he lived in a de facto union regime with his partner B…, that "In the course of the de facto union, the claimant and his partner acquired the property…" and that "With the de facto union ended, the members of that union agreed to assign to the claimant, exclusively, the ownership of such property, by way of the deed of division of common property."

• That is, he declares unequivocally, in the administrative review, that the de facto union had ended at the date of the deed, as he reaffirms it in the request for prior hearing submitted on 15.01.2016 by declaring "They further alleged that, with the de facto union ended, the members of that union agreed to assign to the claimant, exclusively, the ownership of such property, by way of the deed of division of common property."

• Such declaration is in accordance with the content of the Deed of Division of Common Property executed on 15.04.2015, in which the First Executing Party, the present Claimant, declared "That he continues to destine the property to his own permanent dwelling," while the Second Executing Party declared nothing, for her part.

• The declaration of cessation of the de facto union constitutes a confession within the definition of article 352 of the Civil Code (CC), as the recognition that a party makes of the reality of a fact that is unfavorable to it and favorable to the other party, confession having full probative force in the present arbitral proceedings against the confessing party, by virtue of the provisions of article 355(1), read together with article 355(3), in fine, both of the CC.

• To that extent, the dismissal order of the administrative review could not have failed to consider that on 15.04.2015, the date of the Deed of Division of Common Property – the tax fact for the purposes of heading 1.2 of the TGIS, under article 5 of the CIS – the de facto union had ended, so that the dismissal of the administrative review, with the maintenance of the Stamp Tax assessment, was based on the objective requirements for the subjection to Stamp Tax of the waiver of owelty and is properly reasoned in concluding for the legality of the assessed tax.

• Gratuitous transfers are subject to Stamp Tax (article 1(1) of the Stamp Tax Code) and article 1(3), in particular subparagraph g), provides that for the purposes of heading 1.2 of the General Table gratuitous transfers are considered to include acquisition resulting from invalidity, disdain, waiver or abandonment, resolution, or revocation of inter vivos gifts with or without reservation of usufruct, save in the cases provided for in articles 970 and 1765 of the Civil Code, and that the tax is due by the respective beneficiaries (article 2(2)(b) of the CIS).

• In the present case, the waiver of owelty resulted in a patrimonial loss in the legal sphere of the waiving party B…, because without any consideration corresponding to the increase in the legal-patrimonial sphere of the beneficiary, the now Claimant; the right of the waiving holder, simply extinguished by unilateral non-receptive declaration, constituted a renunciative waiver, which, considering the economic substance and the gratuitous nature it displays, embodies a gratuitous transfer provided for in article 1(3)(g) of the CIS, and heading 1.2 of the TGIS, as decided in the order that dismissed the administrative review of the assessment challenged.

• The assessment challenged is legal and should be maintained, the Request being without merit.

11. Production of Witness Evidence, Attachment of New Documents and Arguments

The witnesses presented by the Claimant were heard – B…, presented as his partner, her son, and also a neighbour.

Following the meeting in which witness examination took place, the Claimant, responding to the invitation made by the tribunal, requested, in written arguments, an order to perfect the initial Request and attached three documents intended to clarify statements made by witnesses.

11.1. Perfection of the Request

Clarifying that the Request for arbitral assessment encompasses not only the assessment but also the dismissal of the administrative review, the illegality of which he also seeks to have considered, he requests the alteration of the final text of his request to expressly cover the declaration of "illegality and annulment of the decision dismissing the administrative review."

11.2. Arguments of the Claimant

Arguing properly, he says, in summary:

• The Claimant and B…, his partner, suffered in this proceeding from a lack of legal assistance and were harmed by the free support of a friend who induced the Claimant to make erroneous statements that harmed him.

• The Claimant and partner have lived in a de facto union for more than ten years and for reasons of B…'s debts proceeded to divide the urban property where the couple has their family home, a measure that did not harm creditors given the high value of the financing secured by mortgage, and was configured as the only way to maintain the house of dwelling, given the high value of rents.

• In claiming against the assessment, the Claimant invoked – as at the prior hearing – the cessation of de facto union because he was thus (poorly) advised but did not intend to make a confession of cessation of de facto union.

• Such confession would be a declaration vitiated by error, a defect of will that could be overcome by witness evidence, which in the file confirmed the permanence of the de facto union between Claimant and his partner after the division of the property. And since the separation of the couple was not indicated in the assessment made by the Respondent, there was no basis for the emission of the assessment.

• In addition to witness evidence, the de facto union is proven by authentic documents, such as declarations issued on 20.4.2016 by the Parish Board of … and …, in accordance with Law no. 7/2011, of 11 May.

• The Claimant and his partner B… maintain the same tax domicile.

• In the act of division of common property – with attribution to the property of the value of € 59,700.00, each co-owner would have had a share of € 29,850.00, but since one-half of B… was awarded to the Claimant, she waived owelty.

• In light of the waiver, TA assessed Stamp Tax of € 2,985.00, applying heading 1.2 of the TGIS, but, being a gratuitous transfer between persons who remain de facto unions, it benefits from the exemption provided for in subparagraph e) of article 6 of the Stamp Tax Code, just as in donations to children or grandchildren.

11.3. Documents attached with the arguments

Emphasizing the short time to gather documents, the Claimant attached, with the arguments, certificate of Property Registration and property register of the property in question, and a statement issued on 31.10.2016 by Bank … of the credit liabilities of the Claimant and B….

It points out in the referred documents that:

• Three loans with mortgage guarantee of the property subject to division were made in the amounts of € 97,500.00, € 5,500.00 and € 29,130.00.

• The loans in debt had at the end of 2016 the amounts of € 86,333.00, € 4,554.00 and € 26,442.00, respectively.

• The VAT of the property is € 59,700.00.

• At the time of the division of common property, the Claimant's partner remained as mortgagor and financial responsible, because they found no one to replace her in that role.

• The value of the liabilities guaranteed by the property is manifestly higher than this, meaning that the division of the property did not benefit him in net terms since the property is worth less than 90 thousand euros and is mortgaged for a sum exceeding 116 thousand euros.

12. Request for Extension of the Request

On 19 December 2016, the Claimant came to state that, already after the presentation of arguments, he received a communication dated 29 November 2016, in which the Insolvency Administrator in the case in which B… is insolvent, informs that he proceeded, under articles 120 et seq. of the Insolvency Code (CIRE), to the resolution of the division of common property that caused the Stamp Tax assessment that is the subject of assessment in the present proceedings.

He concludes that, given the resolution of the legal act of division of common property, the transfer of one-half undivided of the property and the respective declaratory acts taken within the scope of the already resolved legal act have no juridical effect whatsoever, there being no necessity to decide on the right to owelty by the assignee and the waiver of its receipt. He says that, regardless of any merit assessment that may be made on such decision, there is ex tunc annulment of the entire legal act and the consequent and execution acts relating to such division of common property. And that, as flows from article 126 of the CIRE, the resolution produced the fullness of its effects with the respective notification to the executing parties, the waiver and the tax fact ceased to exist.

He attaches copies of the notifications sent, to the Claimant and B…, by the Insolvency Administrator.

13. Object of the Request

The assessment of legality requested with the Request for constitution of an arbitral tribunal has as its object the Stamp Tax assessment practised by the tax administration, under the provisions of articles 2 and 6 of the CIS and heading 1.2 of the General Table of Stamp Tax, relating to a situation in which the Claimant executed a deed of division of common property with the former co-owner of a property, where both dwelt, renouncing she the payment of owelty due by the attribution to the Claimant of the exclusive ownership of the property. That decision implies assessing whether a de facto union relationship continued to exist with the author of the waiver of owelty and, should such a situation be confirmed, whether it confers the right to the Stamp Tax exemption invoked by the Claimant.

But there are two preliminary issues to be decided:

• Viability of assessment of the Request for arbitral determination having regard to its relationship with the dismissal of the administrative review, despite the perfection request filed with the arguments.

• Whether it is possible to heed what was requested on 19 December 2016, as to the invocation of "non-existence of a tax fact."

14. Sanation

The present sole arbitral tribunal is materially competent, pursuant to the provisions of articles 2(1)(a) of the Legal Framework for Tax Arbitration.

The parties have legal personality and capacity and have standing under articles 4 and 10(2) of the Legal Framework for Tax Arbitration (RJAT) and article 1 of Ordinance no. 112-A/2011, of 22 March.

The proceeding does not suffer from any nullity.

Even taking into account the request to perfect the initial Request, doubts remain about the question of the object of the action, the solution of which will be reflected in the decision as to the timeliness of the Request. The assessment of that question will be carried out after the determination of the facts.

Deciding:

II Reasoning

15. Facts Proven

a) On 15 April 2015, between the Claimant, as first executing party, and B…, as second executing party, a public deed of "division of common property" was executed of the urban property … of the Union of Parishes of … and …, terminating the co-ownership of the said property, to which they attributed the value of € 59,700.00, awarding to the first executing party the entirety of the property, and at that value, remaining he to pay owelty to the second executing party for the value that was more, of € 29,850.00. In the act, the second executing party declared to waive the owelty to which she was entitled. And the first executing party declared that he continued to destine the property to his own permanent dwelling. (Document no. 2 attached with the Request).

b) The TA, considering that the waiver of owelty due constitutes a gratuitous transfer subject to Stamp Tax, covered by Heading 1.2 of the General Table of Stamp Tax, came to effect, on 10 August 2015, an assessment of Stamp Tax in the amount of € 2,985.00, giving rise to a collection note of 19 September 2015, due by 31 October 2015 (PA, fls. 4 and 5).

c) On 23 November 2015, the Claimant filed an administrative review of the assessment referred to in the previous subparagraph, which was instituted with case number …2015…, exposing that he had executed with B… a deed of division of common property – the property they had acquired in the course of the de facto union that had since ended – and it was decided to assign exclusively to the claimant the ownership of the property which, at the time, was burdened with a debt guaranteed by a mortgage of € 88,497.42, of the responsibility of both debtors but which the Claimant assumed entirely. He says: "Accordingly, the parties considered the owelty that would have been due by the former co-owner as compensated, but due to impropriety of the deed it states that B… waived owelty. Thus, there was no liberality but a transfer of responsibility. However, even if it were a gift, the subjective exemption enshrined in subparagraph e) of article 6 of the Stamp Tax Code, relating to gratuitous transfers between members of a de facto union, would have to be taken into account." "In essence, what the division of common property constitutes, with the attribution to the claimant of the exclusive ownership of the property, is a gratuitous transfer of one-half aliquot of the former partner, a transfer that would always benefit from the mentioned subjective exemption," for which he requested the annulment of the assessment and recognition of the exemption. (PA, fls. 3 and v.) (our emphasis).

d) A draft dismissal decision was prepared, where the claimant's argument was analyzed that there was an impropriety in the deed when it said that the co-owner had waived owelty because what occurred was a compensation between the active to be received and the one-half that belonged to her in the liability. In the information base of the project, it was confirmed that the claimant had communicated the receipt of owelty (notification no. …) and the content of the deed was analyzed by highlighting that there it was concluded: "In accordance with the aforementioned identified deed, the division dealt with the urban property registered in the property register of the Union of Parishes of … and … under article …, which, at the date of the fact (date of execution of the deed) held the tax value of € 59,700.00, determined in accordance with the rules of the Code of Municipal Tax on Real Property and was awarded entirely to the claimant. Also contained in that deed is information that three mortgages in favor of Bank C…, SA, affect the property [here the information states that "the value of these was not mentioned nor proven as it should (unless our opinion to the contrary")]. It further states that in the same deed for this purpose, the partitioners attributed to the property the value of € 59,700.00 so that the first (here claimant) "takes more in relation to his right the value of twenty-nine thousand eight hundred and fifty euros, which he has to pay in owelty to the second executing party," with the second declaring "that she waives the owelty to which she was entitled."

e) Taking into account that "that deed contains no mention of the division/attribution or alteration of responsibility of the liability that burdens the property subject to division," it is concluded in the information referred to in the previous subparagraph, taking into account the provisions of articles 1, 2, 3 and 5 in the Stamp Tax Code and the lack of proof of the facts alleged, that the administrative review should be dismissed, confirming assessment no. … of 10 August 2015. The information was the subject of an order in agreement of the head of the tax service, on 21 December 2015, which ordered notification of the claimant of the draft decision for purposes of prior hearing (fls. 6 and 7 of PA).

f) In response to notification for prior hearing, made by office no. …, of 21/12/2015, received on 23/12/2015, the Claimant responded by document, sent on 24 January 2016 (whose presentation was considered untimely), where he said, in particular: "the claimant alleged that he lived in a de facto union regime with his partner B… and that during the de facto union (…) they acquired the property identified in the deed alluded to, of division of common property" and "They further alleged that, with the de facto union ended, the members of that union agreed to assign to the claimant, exclusively, the ownership of such property, by way of the deed of division of common property." (PA, fls. 11).

g) The initial draft for dismissal of the administrative review was converted to final and made the subject of an order on 19 January 2016, being notified by office no. … of 21 January 2016, of the Tax Service of Vila Franca de Xira …, and received by the Claimant on 22 January 2016 (PA, fls. 14 and 15).

h) The Claimant and B… lived in a de facto union at least until the division of ownership of the property, residing at the same address -…, …, …-… ….

i) After the deed of division of property, both the Claimant and B… maintained their respective tax domicile at the address of the property subject to award to the Claimant (Docs 10 and 11 attached by the Claimant with the Request).

j) Both the Claimant and B… exhibited documents, dated 19 and 20 April 2016, issued by the Parish Board of … and … to the effect that they reside in the property in question and have lived in communion of table and dwelling for more than ten years (Docs 3 to 5 attached with the Request).

k) The Claimant and B… attached birth records and declarations under honour dated 21 April 2016, declaring that, being single and divorced, respectively, they have lived in a de facto union from 2004 to the present date (documents attached as annex to doc. no. 3 attached with Request).

l) The property subject to division is burdened by three voluntary mortgages in favor of Bank C…, SA, to guarantee loans of which A… and B… are passive subjects – two of the mortgages were presented on 20 November 2006, and refer to a capital of € 97,500.00 and € 5,500.00 (guarantee of € 133,575.00 and € 7,535.00, respectively) and the third presented on 29 September 2011, to a capital of € 29,130.00, guaranteeing maximum value of € 39,908.10 (property registration certificate, presented with Claimant's arguments).

m) On 31 October 2016, it appeared in the Central Registry of Credit Liabilities of Bank … that A… is responsible for various financial products, as against various banks, with it appearing that as against Bank C…, SA, he is in addition to amounts derived from credit cards and overdrafts in current accounts, debtor as 1st mortgagor of loans designated as a "home loan" (for more than 30 years); consumer credit (one for more than thirty years and another for more than 8 to 9 years) and another designated as "other credit" for more than 30 years (Documents attached with Claimant's arguments).

n) On 31 October 2016, it appeared in the Central Registry of Credit Liabilities of Bank … that B… is responsible for various financial products, as against various banks, with it appearing that before Bank C…, SA, she is still, in addition to amounts derived from credit cards, responsible for "home loan" (for more than 30 years); consumer credit (one for more than thirty years and another for more than 8 to 9 years) and another designated as "other credit" for more than 30 years (Documents attached with Claimant's arguments).

o) On 21 April 2016, the present Request for arbitral determination was filed.

p) On 1 June 2015, the Claimant requested from Social Security assistance in the form of legal aid for consultation (doc. no. 6 attached with the Request).

q) By order of 20 May 2016 of Social Security, legal aid was granted in the form of exemption from court fees and other process costs (doc. attached on 09/06/2016).

r) The Insolvency Administrator in case .../16.8TBVXF, in which the insolvency of B… was decreed, sent communications to the Insolvent and to the Claimant that he had proceeded, under and for the purposes of article 120 of the CIRE, "to the resolution of the division of common property executed on day 23 April 2015 by AP … in the Registry of Property, Commercial and Motor Vehicles of … with reference to property no. …/2006… in favor of A…," and from that date, one-half of the undivided was seized for the insolvency proceeding to satisfy creditors.

16. Facts Not Proven

The evidence produced was insufficient for it to be considered proven that the division of common property was carried out between persons who at the time of the deed of partition maintained a de facto union.

17. Reasoning of Proven Facts

The determination of the facts was based on the documents attached by the Claimant (Request for arbitral determination, documents attached with the Request, arguments) and Respondent (Reply, administrative file attached to the file, arguments) as well as the statements given by the witnesses presented by the Claimant, taking into account that two of the witnesses have special connection to the Claimant that derives from the invoked de facto union (the partner herself and her son).

The proven facts are sufficient for decision of the proceeding.

18. Application of Law

18.1. The Request and the Proven Facts to be Framed Legally

It results from the proven facts that the Claimant challenged the Stamp Tax assessment made by TA, making the following statements that constitute relevant requirements:

• The division of common property occurred in a situation where there was a liability of € 88,497.42, so the statement, made improperly in the deed, of waiving owelty should have been understood as a compensation occurring.

• Being a division of common property of de facto unions, the gratuitous transfer of one-half of the aliquot would always be covered by the exemption provided for in the CIS.

But the statement of these facts coexisted with the declaration that the division of common property with attribution to the Claimant of the property held in co-ownership with B…, had as its cause the cessation of the de facto union situation between the co-owners. Explanation maintained firmly in the text of prior hearing delivered (though out of time) in the administrative review proceeding and contained in the present file.

Only later, in the Request for arbitral assessment, did the Claimant come to argue that, for ten years, he lived and lives in a de facto union with the former co-owner of the property that was awarded to him by division of common property. And that, despite in that award the other co-owner having waived the payment of owelty due to her, in the amount of twenty-nine thousand eight hundred and fifty euros of owelty, the situation is not subject to the Stamp Tax required in gratuitous transfers because, in this case, it is a transfer between de facto unions. The deposition of the witnesses in the present proceedings aimed to confirm that situation. B…, identified herself as the partner of the Claimant and justified the execution of the deed of division of common property, with attribution of ownership of the family home exclusively to her partner, not by cessation of the de facto union between them but by the existence of various garnishments on her salary, intending with that act of division/award to prevent the property from being affected by measures intended to obtain the collection of debts. She informed that she was currently in insolvency.

In response to the question posed by the tribunal as to whether there was a loan for purchase of the home, she said yes and that she continued to pay installments. From the analysis of the documents delivered subsequently, with the arguments, it appears, from the coincidence of entries in the property registration certificate and in the Central Registry of Credit Liabilities (Bank …), that, in addition to loans in individual names, B… was, and continues to be, responsible for mortgages affecting the property, guarantee of loans obtained for housing or at the time of acquisition of the same (though the identification of the property was not clarified).

The Claimant defends in the final arguments that he only invoked the cessation of the de facto union relationship with B… for having been poorly advised (indeed says that, although he signed the administrative review and the response in prior hearing, he never realized the argument being used), guaranteeing now (in line with the argument of the Request for arbitral assessment) that this does not correspond to reality and has continued after the division of the urban property to live with B… in the same house and maintained the same couple relationship. He states that the division of the property was done to avoid eventual effects of B…'s insolvency, although without prejudice to creditors who, in any case, would not see their claims satisfied due to the magnitude of the loans guaranteed by mortgage. He considers that the permanence of the de facto union is duly proven in the file and that his previous declarations about the cessation of the de facto union should be considered without legal value. He even argues that, having these statements been made after the deed of division of common property, there was no basis for the emission of the assessment by TA.

That is, the Claimant's argumentation was, successively, as follows:

• In the administrative review, the cause of the division of common property was the cessation of the de facto union with the co-owner; the deed contains an inaccuracy because there was no gift because the Claimant assumed all the charges with the property, and even if there had been a gratuitous waiver of owelty by the other co-owner, former partner, this would be exempt from Stamp Tax due to the (former) de facto union.

• Faced with the dismissal of the administrative review (which did not even appreciate the question of the de facto union but only the existence of a gratuitous act or not, through analysis of the division of liability responsibility), he completely abandoned the argument that the liability assumed compensated any benefit with the acquisition of property, passing, in the Request for arbitral determination, to argue that the de facto union had not ended, rather had continued.

• At the time of witness examination – on 18 November 2016 – the co-owner, alienator of the common part, came to declare that the division of common property had as its cause the attempt to avoid the effects of an insolvency proceeding involving her.

• In the arguments, sent to CAAD on 28 November 2016, points out that initially she was poorly defended, insisting on the fact that she always maintained the situation of de facto union with the co-owner executing party of the division of property, so the waiver of owelty, being albeit a gratuitous transfer, is exempt from Stamp Tax.

• Already after the arguments, invokes non-existence of a tax fact based on communication, dated 29 November 2016, of the resolution by the insolvency administrator of a property division occurring on 23 April 2015.

18.2. Assessment of Preliminary Issues

18.2.1. Possibility of Invocation of New Cause of Action "Non-Existence of a Tax Fact"

Beginning with the analysis of the second preliminary issue, arising with the request of 19 December 2016, which relates to the effects sought by the Claimant as to the Insolvency Administrator's communication: despite the scarcity of information on the situation targeted by the Insolvency Administrator's communication (which identifies the resolution of a division of common property executed on 23 April 2015 by AP … in the Registry of Property, Commercial and Motor Vehicles of … with reference to a property identified with no. …/2006…), it appears to coincide with the situation that gave rise to the tax act that is the subject of the Request for assessment (division of property executed on 15 April 2015 at the notarial office of …, of a property described in the … Registry of Vila Franca de Xira under no. … of said parish, registered in the property register no. … of the Union of Parishes of … and … (cf. property certificate, document attached with arguments).

It should be noted that this tribunal does not know the situation subsequent to the Administrator's communication, whether it was executed or if it was, for example, subject to opposition by the interested parties (cf. articles 120 et seq. of the CIRE). But the fundamental question to be decided is whether it is possible at this stage to heed the intended alteration of the cause of action.

Indeed, whereas in the initial Request the declaration of annulment of the assessment is sought due to violation of the rules of the Stamp Tax Code, now it is sought that due to an alteration of circumstances – by effect of the resolution of the contract of division of common property – the tax fact originating the assessment does not exist. That is, and as highlighted in the Request of 19 December, a different cause of action is now invoked, indicated as principal, based on "a supervening fact beyond the will of the challenging party," which made disappear the previous act from the legal order.

As to the alteration of the action by alteration of the cause of action in administrative contentious proceedings, one should take into account, in particular, articles 63 to 65, 70, 86, 87 and 91 of the Code of Administrative Procedure (CPTA). As a rule, the Claimant cannot, according to the current wording of the former article 91(5) of the said Code (conferred by Decree-Law no. 214-G/2015, of 02 October) invoke in final arguments (when they take place) new grounds of the request, even if of supervening knowledge.

Thus, only in the case of alteration of the factuality by the emission of new administrative acts within the scope of the procedures annulling, remedying or revoking the initially challenged acts can other grounds of the request be invoked after the end of the pleading phase and under articles 63 to 65, 70 or 86.

In accordance with article 86 of the CPTA (which is similar, in nos. 1 and 2, to article 588 of the Code of Civil Procedure) it is possible the presentation of pleading for the invocation of constitutive, modificative or extinctive supervening facts, but "the current wording restricts such possibility until the phase of 'closing of discussion' (when previously it was until the phase of arguments)"[2].

By articulating the provision of this article 86 with what is determined in articles 63 and 64 of the CPTA, it is concluded that, in the case of invocation of constitutive, modificative and extinctive supervening facts, there will first be to consider the field of action of article 64 and only to the extent that the supervening fact goes beyond this, can resort be had to article 86 of the CPTA.

Thus, if facts relating to administrative annulment, remedying or revocation of the initially challenged act are invoked and the invocation of the existence of a new regulation made by a new act, based on the allegation of the recurrence of the same "illegalities," value is given to what is determined in article 64, nos. 1, 2, 3, 5 and 6 of the CPTA, the period for the corresponding invocation in court, corresponding to that of "impugnation" of that new act, being able to occur until the entry into force of the decision that judged the action extinguished (article 64(4) of the CPTA). When the constitutive, modificative and extinctive supervening facts do not come down to the realities covered by article 64, or when it is intended to invoke different invalidity, is that recourse must be had to article 86.[3] In those cases, the invocation has to be made within 10 days after knowledge of the supervening events and has to occur until the closure of discussion in 1st instance. Account must also be taken as to the possibility of objective modification of the action the provision of article 87(5)[4] (coinciding with what is determined in article 590(6) of the Code of Civil Procedure).

All considered, it is concluded that in the present case the alteration of the cause of action, caused not by an administrative act practised in the procedure but resulting from an act practised within the scope of an insolvency proceeding submitted to legislation and judicial control means beyond the administrative sphere, cannot be accepted as sought by the Claimant.

Nor, even if the current Request fails, does the negation of the sought extension prejudice the Claimant's means of defense against the assessment in question, as if a situation as described in the request of 19 December 2016 were to materialize, and the arguments adduced on the respective effects were valid, he could always resort to the procedural means available to assert his position.

18.2.2. Effects of the Relationship Between Request for Arbitral Assessment and Dismissal of Administrative Review

As seen above, the Respondent identified in her Reply, as the first issue, the fact that the Claimant invoked the timeliness of the Request for declaration of illegality of the Stamp Tax assessment, by reference to the date of notification of the order dismissing the administrative review filed on 09.12.2015, but made no reference to the decision of the said administrative review, expressly limiting the object of the request to "Stamp Tax assessment for donation," ignoring doctrine and arbitral jurisprudence defending that "the immediate object of the impugnatory process is, as a rule, the second-degree act that assesses the legality of the assessment act, an act that, if it confirms it, must be annulled, to obtain the declaration of illegality of the assessment act."

The Respondent concludes that given the factual situation exposed in the administrative review filed on 23.11.2015, not coinciding with the facts articulated in the arbitral petition, the order dismissing the administrative review is legal because it could not have failed to consider that on 15.04.2015, the date of the Deed of Division of Common Property and of the tax fact for the purposes of heading 1.2 of the TGIS, in accordance with article 5 of the CIS, the de facto union had ended and that, taking into account the objective requirements for the subjection of the waiver of owelty to Stamp Tax, the maintenance of the Stamp Tax assessment was required.

Despite the doubts manifested at the very meeting of article 18 of the RJAT, the tribunal gave the Claimant the opportunity to clarify the Request through a request for perfection, and the witnesses indicated in the initial Request were heard. The Respondent came to perfect the Request in the manner already described, though defending that TA had drawn no conclusion as to the existence of any exception.

Let us see:

From the start, the tribunal considers quite unusual the alteration of argument and it is difficult to explain the change of position about the existence or non-existence of a de facto union, the argument of technical deficiency in the defense with disregard of the interested party being irrelevant. Nor do the reasons presented for the Claimant to have been unaware of the argument used appear credible, nor – being certain that ignorance of the law does not help those subject to the law (article 6 of the Civil Code) – can an error due to incompetence of the defense be invoked as justification for the radical alteration of legal argumentation and the presentation of the facts (which have to be the ones presented by the Claimant himself in his defense).

Indeed, it is verified that the decision of the administrative review did not expressly deal with the question – object of the present Request as a cause of illegality – of the incidence of Stamp Tax on the situation now presented of waiver as compensation carried out between persons allegedly in a de facto union (in this case former de facto unions). The decision to dismiss focused on the analysis of the indicia about gratuitousness, knowing whether this was confirmed or refuted, assuming that there was no subjective exemption (which is not surprising because the Claimant had stated that the de facto union had ended…). It appears that the Respondent may have aimed to substantiate the declaration in the deed that, with the property burdened by a debt guaranteed by a mortgage of € 88,497.42, the responsibility of both debtors, the Claimant assumed it entirely. It is stated in the decision of the administrative review: "That deed contains no mention of the division/attribution or alteration of responsibility of the liability that burdens the property subject to division."

Curiously, it was the Claimant himself who came to explain in the initial Request, citing a Binding Information from the Tax Administration, that the exemption did not apply to former de facto unions, a case different from his which, in the version of the same Request, maintains that situation for ten years.

Although this tribunal reaffirms the understanding, defended in other cases by the undersigned, that "(…) the real object of the impugnation is the assessment act and not the act that decided the administrative review, so it is the defects of the former and not of this order that are truly in issue (…)" and that "(…) the impugnation is not, therefore, limited by the grounds invoked in the administrative review, being able to have as ground any illegality of the tax act. (…)" (cf. Decision of the Supreme Administrative Court of 18 May 2011, case no. 0156/11), it cannot, in the present case, fail to consider it relevant that between the challenged act and the Request for arbitral assessment under consideration (the passage of time occurring only enabling the present request because there was an administrative procedure that led to a decision to dismiss) the description of the factual situation subject to tax incidence has completely altered.

Indeed, it is verified that the assessment of the legality of the tax act sought does not invoke only new grounds of illegality but a factual situation different from that which was subject to assessment by the Respondent in the administrative review proceeding, as in this one it was argued for the application of the Stamp Tax exemption provided for in subparagraph e) of article 6 of the Stamp Tax Code to persons who had ceased the de facto union and in the Request for arbitral assessment the application of the same rule is invoked but to a situation that is maintained as a de facto union.

That is, the decision to dismiss the administrative review analyzed the first part of the administrative review (where it was argued that the waiver of owelty that occurred was not a gratuitous transfer) and, in concluding that that waiver constituted a gratuitous transfer, did not assess the second part (where it was argued that the Stamp Tax exemption covered persons who had lived in a de facto union in the carrying out of acts verified by reason of the cessation of that same situation).

The initial Request concludes that "there is gratuitous transfer, in the modality of waiver of owelty, subject to Heading 1.2 of the TGIS, but exempt therefrom, by force of subparagraph e) of article 6 of the CIS" (article 43 of the Request) and that "the waiver of owelty occurring on 15 April 2015 thus constitutes a transfer subject, but exempt under the provision of subparagraph e) of article 6 of the CIS, so the challenged assessment violates such rule, and cannot but be annulled, with the due consequences." And as, simultaneously, the Claimant agrees with the position of TA on the waiver of owelty constituting a legal-tax transfer (articles 36 to 38), including in cases of dissolution of marriage or de facto union (articles 39 to 42), denying only that in the present case there is dissolution of a marriage or de facto union, it can be said that the Claimant does not disagree, but fully agrees with the decision to dismiss the administrative review, given the requirements, provided by the Claimant himself, on which that decision was based.

Taking into account the matter exposed, it becomes, we believe, untenable to accept the present Request, filed on 21 April 2016, for assessment of the legality of the assessment act dated 10 August 2015.

For it becomes difficult to apply in this case the doctrine (restrictive as to acceptance of the exception of timeliness) to which we have adhered because it seems to us to conform to the principles of effective judicial protection (article 268(4) of the Constitution), anti-formalist, "pro action"[5] and "in doubt in favor of the claim," enshrined in particular in article 7 of the CPTA, because here it is verified that the Claimant used his right to defense in the administrative review invoking a factual situation and legal argument distinct, even opposed, to those which he now seeks to assert.

Given this factuality, the present tribunal considers itself not legitimated to the understanding that the period to request arbitral assessment under subparagraph a) of article 10(1) of the RJAT was suspended during the period in which the first attempt of the Claimant's defense was subject to assessment in the administrative procedure.

In accordance with article 10 of the RJAT, the request for arbitral determination has to be presented within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102 of the CPPT, that is, from "the end of the period for voluntary payment of tax installments legally notified to the taxpayer" imposed or, in case an administrative review was filed, from the respective notification of dismissal.

As we have seen, in the present case the Claimant does not challenge the correctness of the decision to dismiss the administrative review taken based on the information provided by him as claimant in the administrative review, so the object of the request is the illegality of the assessment notified to the taxpayer for payment by 31 October 2015, without the respective period of impugnation having been suspended by the administrative review.

It is thus verified that on 21 April 2016, the date on which the Request for constitution of the arbitral tribunal was filed, the period provided for in subparagraph a) of article 10(1) of the RJAT was manifestly exhausted, having as consequence the lapse of the right to action.

Faced with that situation, which constitutes an exception of ex officio knowledge, the tribunal decides not to know of the Request and to absolve the Respondent.[6]

19. Decision

With the grounds exposed, the arbitral tribunal decides:

a) To absolve the Respondent of the Request, not proceeding with the assessment of the legality of the Stamp Tax assessment with number … in the amount of € 2,985.00, nor (in the formulation of the perfection request) of the dismissal of the administrative review.

b) To condemn the Claimant in costs.

20. Value of the Proceeding

In accordance with the provision of article 315(2) of the Code of Civil Procedure, subparagraph a) of article 97-A(1) of the Code of Tax and Customs Procedure and also article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at € 2,985.00 (two thousand, nine hundred and eighty-five euros).

21. Costs

For the purposes of the provision of article 12(2) and article 22(4) of the RJAT and article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 612.00 (six hundred and twelve euros) in accordance with Table I annexed to said Regulation, to be borne by the Claimant (taking into consideration the legal aid granted).

Lisbon, 2 March 2017.

The Arbitrator

(Maria Manuela Roseiro)

[1] The Request refers to heading 28.1 but this is clearly a typographical error.

[2] Cf. Sofia David, in The Modifications of the Action and the Convolation of Process in the Code of Procedure in Administrative Courts Revised, Notes, 2016, cf. http://www.cej.mj.pt/cej/recursos/fich-pdf/etaf_cpta/modificacao-instancia-sdavid-dez-2016-primo.pdf.

[3] Cf. Sofia David, ibidem.

[4] Article 87(5) provides that "Alterations to the factual matter alleged cannot result in convolation of the object of the proceeding to a different legal relationship from that in controversy, and must conform to the limits set out by the request and the cause of action, if introduced by the claimant, and to the limits imposed by article 83, when introduced by the respondent."

[5] Cf. "The pro action principle is a normative corollary or a concretization of the constitutional principle of effective access to (administrative) justice, which points to an interpretation and application of procedural norms in the sense of favoring access to the court or avoiding situations of denial of justice, in particular by excess of formalism." (Decision of the Supreme Administrative Court of 29/01/2014, in case 01233/13, Rapporteur Fernanda Maçãs).

[6] It is controversial to qualify the absolution as dilatory (of the action) or peremptory (of the request). In the latter sense, cf. arbitral decision in case no. 792/2014-T and case law cited therein. In the sense that judicial impugnation in the CPPT, as in the CPTA, constitutes, differently from what happens in civil proceedings, a dilatory exception, see position of Jorge Lopes de Sousa, in annotated CPPT, areas Editora, 6th edition, 2011, II vol. pp. 164 and 165, citing in different sense Decision of the Supreme Administrative Court of 27/05/2009, case 76/09. Furthermore, account must be taken of the new wording of articles 88 and 89 of the CPTA (in the prior wording of article 88 the lapse of the right to action prevented the continuation of the action (absolution of action or request?) but currently article 89 of the CPTA includes in the enumeration of examples of dilatory exception the untimeliness of procedural act (which the comment cited above considers to include the lapse of the right to action).