Process: 265/2017-T

Date: September 26, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 265/2017-T, the CAAD arbitral tribunal addressed the procedural issue of supervening uselessness of litigation (inutilidade superveniente da lide) in the context of Stamp Tax assessments. The claimant, a sole trader owning building plots in Sintra with fiscal property values exceeding €1,000,000, challenged five Stamp Tax assessments issued for 2013 under item 28.1 of the General Stamp Tax Table. After unsuccessful administrative review and hierarchical appeal, the claimant filed an arbitration request on 17 April 2017. The Tax Authority responded by arguing for dismissal on grounds of supervening futility, as the contested assessments had been administratively annulled by order dated 21 February 2017. However, the claimant was only notified of this annulment on 13 July 2017, after the arbitration proceedings had commenced. The arbitral tribunal, composed of Cons. Jorge Lopes de Sousa, Dr. António Pragal Colaço, and Dr. Luís Baptista, agreed that the case had become moot. Since the claimant only sought a declaration of illegality of the assessments, their annulment rendered continuation of proceedings pointless and impossible due to lack of subject matter. Applying articles 277(e) and 278(1)(e) of the Code of Civil Procedure subsidiarily pursuant to article 29(1)(e) of the RJAT, the tribunal dismissed the case. Significantly, the tribunal ordered the Tax Authority to bear all procedural costs (€2,448.00) because it had caused the supervening futility by failing to notify the claimant of the annulment in accordance with article 13(1) and (2) of the RJAT before the arbitration was filed. This decision clarifies that while tax authorities retain power to revoke assessments during arbitration, failure to properly notify taxpayers creates liability for costs.

Full Decision

ARBITRAL DECISION

The arbitrators Cons. Jorge l Lopes de Sousa (arbitrator-president), Dr. António Pragal Colaço and Dr. Luís Baptista (arbitrator members), appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 28-06-2017, hereby agree on the following:

1. REPORT

A…, sole trader, Tax Identification Number…, sole trader, resident at Rua …, …, …, …, Cascais, …-… … (hereinafter referred to as "Claimant"), filed, pursuant to the provisions of article 2, paragraph 1 of Decree-Law No. 10/2011, of 20 January (hereinafter referred to as "RJAT"), a request for constitution of an Arbitral Tribunal, seeking the review of the legality of Stamp Tax assessments Nos. 2014…, 2014…, 2014…, 2014… and 2014…, relating to the year 201.

The REVENUE AND CUSTOMS AUTHORITY is the respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Revenue and Customs Authority on 27-04-2017.

In accordance with the provisions of article 6, paragraph 2, subparagraph a) and article 11, paragraph 1, subparagraph b) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable deadline.

On 12-06-2017 the parties were duly notified of such appointment, and neither expressed any intention to refuse the appointment of the arbitrators, in accordance with article 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Therefore, in accordance with the provisions of article 11, paragraph 1, subparagraph c) of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 28-06-2017.

The Revenue and Customs Authority filed a response in which it argued for the dismissal of the request for arbitral ruling on the grounds of supervening futility of the case, as the assessments in question had been annulled.

Notified to file its reply on 14-09-2017, the Claimant made no submission.

The arbitral tribunal was properly constituted in accordance with the provisions of articles 2, paragraph 1, subparagraph a), and 10, paragraph 1, of Decree-Law No. 10/2011, of 20 January, and is competent.

The parties are duly represented and have legal standing and capacity, are legitimate and are represented (articles 4 and 10, paragraph 2, of the same legal instrument and article 1 of Portaria No. 112-A/2011, of 22 March).

The proceedings are free from any nullities.

2. FACTS

2.1. Proven Facts

On the basis of the elements contained in the file and the administrative proceedings attached to the record, the following facts are deemed proven:

– The Claimant is the owner of building plots located in the Municipality of Sintra, Parish of …, with the matriculation numbers U-…, U-…, U-…, U-… and U-…;

– To the said building plots, a Fiscal Property Value (VPT) exceeding €1,000,000.00 (one million euros), in force in the year 2012, was assigned;

– The Revenue and Customs Authority issued Stamp Tax assessments Nos. 2014…, 2014…, 2014…, 2014… and 2014…, relating to the year 2013 and to each of the aforesaid building plots, respectively, on the basis of item 28.1 of the General Stamp Tax Table (documents Nos. 1 to 5 attached to the request for arbitral ruling, the contents of which are hereby reproduced);

– The Claimant filed a request for administrative review of the assessments which was denied;

– The Claimant filed a hierarchical appeal of the decision on the administrative review which was dismissed (document No. 6 attached to the request for arbitral ruling, the contents of which are hereby reproduced);

– By order dated 21-02-2017, from the Head of the Finance Service of Sintra-…, in compliance with Service Instruction No. …-Series I from the Office of the Deputy General Director for Property Taxes, the aforementioned assessments were annulled (article 3 of the Response of the Revenue and Customs Authority and document No. 1 attached thereto);

– The said order was notified to the Claimant on 13-07-2017 (document No. 1 attached to the Response of the Revenue and Customs Authority);

– The request for constitution of the arbitral tribunal that gave rise to the present proceedings was filed on 17-04-2017 (CAAD computer system).

2.2. Unproven Facts and Reasoning for the Determination of Facts

There are no facts relevant to the decision of the case that have not been proven.

All facts are proven by the documents attached to the request for arbitral ruling and the Response.

3. LAW

The Revenue and Customs Authority raised the issue of supervening futility of the case, as the assessments which are the subject matter of the request for arbitral ruling have been administratively annulled.

The Claimant was notified to submit its response and made no submission.

The Claimant merely requested a declaration of illegality of the assessments, whereby their annulment renders the continuation of the proceedings pointless, and is indeed impossible due to lack of subject matter.

In this context, there is a procedural exception which constitutes grounds for dismissal of the case and entails the dismissal of the Respondent from the proceedings, in accordance with articles 277, subparagraph e), and 278, paragraph 1, subparagraph e), of the Code of Civil Procedure, subsidiarily applicable by virtue of the provisions of article 29, paragraph 1, subparagraph e), of the RJAT.

4. COSTS

In accordance with the provisions of article 22, paragraph 4, of the RJAT, "the arbitral decision rendered by the arbitral tribunal shall contain the determination of the amount and apportionment among the parties of the costs directly resulting from the arbitral proceedings".

As stated above, there is a cause for dismissal of the case which is attributable to the Revenue and Customs Authority, as it only notified the Claimant of the annulment of the assessments after the filing of the request for arbitral ruling and did not communicate such revocation in accordance with paragraphs 1 and 2 of article 13 of the RJAT.

The basic rule on responsibility for costs of proceedings is that the party which has caused them should be condemned, it being understood that the losing party is responsible for the costs of the proceedings, in the proportion in which it has been defeated (article 527, paragraphs 1 and 2, of the Code of Civil Procedure).

In the case at hand, the cause for dismissal of the case is attributable to the Revenue and Customs Authority, whereby it bears responsibility for the costs of the present proceedings.

5. DECISION

On these grounds, this Arbitral Tribunal hereby agrees to:

– Declare the case dismissed;

– Dismiss the Respondent from the proceedings;

– Order the Revenue and Customs Authority to pay the costs of the present proceedings.

6. VALUE OF THE CASE

In accordance with the provisions of article 306, paragraph 2, of the Code of Civil Procedure and article 97-A, paragraph 1, subparagraph a), of the Code of Tax Procedure and article 3, paragraph 2, of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 64,383.87.

7. COSTS

In accordance with article 22, paragraph 4, of the RJAT, the amount of costs is fixed at € 2,448.00, in accordance with Table I annexed to the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the Revenue and Customs Authority.

Lisbon, 26-09-2017

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(António Pragal Colaço)

(Luís Baptista)

Frequently Asked Questions

Automatically Created

What is supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when the object of the litigation ceases to exist after the arbitration request is filed, making continuation of proceedings impossible or pointless. Under articles 277(e) and 278(1)(e) of the Code of Civil Procedure, applied subsidiarily through article 29(1)(e) of the RJAT, this constitutes a procedural exception requiring dismissal of the case. In Process 265/2017-T, supervening uselessness arose when the Tax Authority annulled the contested Stamp Tax assessments after arbitration was initiated, eliminating the subject matter since the claimant only sought a declaration of illegality of acts that no longer existed.
Can the Tax Authority revoke a Stamp Tax (Imposto do Selo) liquidation during CAAD arbitration proceedings?
Yes, the Tax Authority retains competence to revoke Stamp Tax liquidations even during pending CAAD arbitration proceedings. Process 265/2017-T demonstrates this power, where the Tax Authority administratively annulled five Stamp Tax assessments (relating to properties with VPT exceeding €1,000,000 under item 28.1 of the General Stamp Tax Table) through an order dated 21 February 2017 from the Head of Finance Service of Sintra, despite arbitration being filed on 17 April 2017. However, article 13(1) and (2) of the RJAT requires the Tax Authority to promptly notify both the taxpayer and CAAD of such revocations. Failure to comply with notification requirements, as occurred in this case where notification came only on 13 July 2017, results in the Tax Authority bearing all procedural costs.
What happens to a CAAD arbitration case when the contested tax assessments are annulled by the Tax Authority?
When contested tax assessments are annulled by the Tax Authority during CAAD arbitration, the case is dismissed for supervening uselessness of litigation (inutilidade superveniente da lide). The arbitral tribunal loses its subject matter jurisdiction because there is no longer a valid administrative act to review. In Process 265/2017-T, the tribunal applied articles 277(e) and 278(1)(e) of the Code of Civil Procedure to dismiss the case and discharge the respondent from proceedings. The tribunal cannot issue a substantive decision on illegality when the contested act has ceased to exist. However, the tribunal retains jurisdiction to rule on procedural costs. When the Tax Authority causes the supervening futility by failing to notify the revocation in accordance with article 13 of the RJAT, it bears responsibility for all procedural costs incurred.
How does the revocation of a tax act affect the arbitral tribunal's jurisdiction in Process 265/2017-T?
The revocation of the contested tax act eliminates the arbitral tribunal's substantive jurisdiction in Process 265/2017-T. Since the claimant's petition solely requested a declaration of illegality of the Stamp Tax assessments, their administrative annulment rendered the proceedings objectively impossible—there was no longer a valid act to declare illegal. The tribunal applied article 29(1)(e) of the RJAT, which incorporates articles 277(e) and 278(1)(e) of the Code of Civil Procedure, establishing supervening futility as grounds for case dismissal. However, the tribunal retained procedural jurisdiction to determine costs. Because the Tax Authority annulled the assessments on 21 February 2017 but only notified the claimant on 13 July 2017 (after arbitration commenced on 17 April 2017), violating article 13(1)-(2) of the RJAT, the tribunal held the Tax Authority responsible for causing the futility and ordered it to pay all costs (€2,448.00).
What are the legal grounds for extinguishing a tax arbitration claim due to supervening uselessness under the RJAT?
The legal grounds for extinguishing a tax arbitration claim due to supervening uselessness under the RJAT are established through article 29(1)(e), which applies the Code of Civil Procedure subsidiarily. Specifically, articles 277(e) and 278(1)(e) of the CPC provide that supervening impossibility or uselessness of litigation constitutes a procedural exception requiring dismissal and discharge of the respondent. Supervening uselessness occurs when circumstances arising after filing make continuation pointless because the sought relief cannot be granted. In Process 265/2017-T, the tribunal found that annulment of the contested Stamp Tax assessments created supervening uselessness because the claimant's sole request—a declaration of illegality—became impossible when the acts ceased to exist. The party causing the supervening futility bears costs. Article 13(1)-(2) of the RJAT requires the Tax Authority to notify taxpayers and CAAD of revocations; non-compliance creates cost liability under article 527 of the CPC.