IMI and Stamp Tax Annulled for Missing VPT Notice

Process: 295/2013-T

Date: September 1, 2014

Tax Type: Selo IMI

Summary

Process 295/2013-T addresses critical procedural requirements for IMI (Municipal Property Tax) and Stamp Duty assessments in Portuguese tax law. The taxpayer challenged IMI assessments for 2010-2012 and Stamp Duty for 2012, totaling over €24,000, following the Tax Authority's discovery of an undeclared swimming pool that increased the property's taxable patrimonial value (VPT) to €1,189,590. The central legal issues involve notification requirements and duty to state reasons under articles 77 LGT and 36 CPPT. The claimant argued that the VPT update was never validly notified, rendering subsequent tax assessments ineffective under article 77(6) LGT. Additionally, the taxpayer contended the assessments lacked proper legal reasoning, failing to explain how the new VPT was calculated or justify retroactive application to 2010-2011, potentially violating article 15-D(4) of Decree-Law 287/2003, which generally provides that VPT updates enter force on December 31, 2012. The Tax Authority countered that notification occurred via registered mail on June 28, 2012, carrying legal presumption of validity, and that the evaluation sheet contained sufficient reasoning. This case highlights fundamental taxpayer protections in Portuguese tax procedure: the constitutional right to notification and reasoning (article 268(3) CRP), the ineffectiveness of unnotified administrative acts, and requirements for retroactive taxation. The arbitral tribunal's decision would clarify whether collection notes alone suffice as notification, the standard for adequate reasoning in property valuations, and taxpayers' entitlement to compensatory interest when assessments are annulled for procedural defects.

Full Decision

ENGLISH TRANSLATION

Claimant: A...

Respondent: Tax and Customs Authority

IMI, 2010, 2011 and 2012 and IS 2012

I. REPORT

1.1. A..., hereinafter "Claimant", taxpayer number ..., resident at Rua …, …, filed a request for the constitution of a Single Arbitral Tribunal to rule on the illegality and annulment of assessment acts relating to Municipal Property Tax ("IMI") for the years 2010, 2011 and 2012 and Stamp Duty ("IS") for the year 2012, and the decisions rejecting the administrative appeals filed against these acts, in accordance with the combined provisions of articles 2, no. 1, paragraph a) and 10, no. 1, paragraph a) of the Legal Framework for Arbitration in Tax Matters ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January.

1.2. The Deontological Council of the Administrative Arbitration Centre, in accordance with article 6, no. 1 of RJAT, appointed Alexandra Coelho Martins as arbitrator, with the Tribunal being constituted on 21 February 2014.

1.3. The request for arbitral ruling is presented following dispatch orders rejecting the administrative appeals filed against the assessment acts identified below:

(a) Additional IMI assessment no. 2010 ..., dated 29 August 2012, in the amount of € 4,106.09, relating to IMI for the year 2010;

(b) Additional IMI assessment no. 2011 ..., dated 29 August 2012, in the amount of € 4,106.09, relating to IMI for the year 2011;

(c) IMI assessments relating to the year 2012, notified by collection notes nos. 2012 ..., 2012 ... and 2012 ..., dated 17 March 2013, in the total amount of € 4,639.40; and

(d) IS assessments for the year 2012 notified by collection notes nos. 2013 ..., 2013 ... and 2013 ..., dated 21 March 2013, in the total amount of € 11,895.90,

with the Claimant requesting the annulment of these assessment acts and, likewise, the refund of the amounts paid, plus compensatory interest under article 43, no. 1 of the General Tax Code ("LGT"). In the alternative, it requests the declaration of nullity of the tax acts.

1.4. As the basis for its claims, the Claimant alleges, in summary, the following defects:

(a) Absence of notification of the act of updating and fixing the taxable property value ("VPT") that preceded the IMI and IS assessments, whereby the same did not produce effects in the Claimant's sphere, under articles 77, no. 6 of the LGT and 36, no. 1 of the Code of Tax Procedure and Process ("CPPT");

(b) Violation of the duty to state reasons for the IMI and IS assessments, concerning the fixing of VPT, given that there was no prior notification of the manner in which the taxable matter was determined, in accordance with articles 268, no. 3 of the Constitution of the Portuguese Republic ("CRP"), 77, nos. 1 and 2 of the LGT and 125 of the Code of Administrative Procedure ("CPA"). The assessment acts do not indicate the reason for the new taxable value of € 1,189,590.00 and do not allow understanding whether this value was based on the general valuation system provided for in articles 15-A to 15-P of Decree-Law no. 287/2003, of 12 November (as amended by article 5 of Law no. 60-A/2011, of 30 November), or in articles 37 to 46 of the IMI Code, or in any other legal provisions;

(c) Still within the defect of lack of reasoning, in the case of additional IMI assessments for the years 2010 and 2011, the issuance thereof without stating the legal basis for taxation with retroactive effects, infringing article 15-D, no. 4, paragraphs a) and b) of Decree-Law no. 287/2003, which determines that the VPT of urban properties subject to general valuation enters into force on 31 December 2012, for IMI purposes, or at the moment of occurrence of the respective taxable events, for the purposes of other taxes;

(d) Breach of the duty of cooperation on the part of the Tax and Customs Authority, as set forth in article 59 of the LGT, for not having responded to the request for clarification submitted by the Claimant following the request to present the IMI Model 1 Declaration and update the property register;

(e) In the alternative, the tax acts do not contain the indication of the author of the act, its signature and reference to the issuance in the use of own or delegated powers, which must appear in the notifications in accordance with article 36, no. 2 of CPPT. Considering that in the present case there is no distinction between notification acts and assessments (to be notified), the requirements of notification acts are, by inherence, requirements of the assessments themselves, and these and their respective notification acts, in the absence of such requirements, are null under the combined provisions of articles 39, no. 12 of CPPT and 134 of CPA.

1.5. The Tax and Customs Authority submitted a response and sustains, by way of challenge, that:

(a) The valuation that updated the VPT of the property and which is at the origin of the IMI and IS assessments results from the detection of a swimming pool that existed for several years, which was not declared by the Claimant;

(b) As stated in the notification initially sent to the Claimant to submit the Model 1 within 30 days, the legal basis indicated for purposes of updating the property register is article 13 of the IMI Code. The notification states that, upon expiry of the referred period, the services "shall proceed ex officio with valuation";

(c) Despite the existence of the undeclared swimming pool, the Claimant responded stating that no event occurred that would determine the obligation to submit IMI Model 1, as provided for in article 13, no. 1 of the IMI Code, "with the property classification, its owner or any modification thereof and within the corresponding limits not being changed" and requested additional clarification;

(d) The Claimant was notified of the VPT of € 1,189,590.00, on 28 June 2012, by registered mail, in accordance with postal record no. ..., addressed to the Claimant, at the address contained in the property register, and has not succeeded in rebutting the legal presumption, as it is not enough to say that she does not know the person who signed the receipt;

(e) Having been validly notified of the property valuation, the Claimant had 30 days to request a second valuation. Having failed to do so, it became consolidated in the legal order;

(f) On the basis that the property valuation is founded on an element of increasing quality not declared in accordance with the IMI Code (a swimming pool constructed after the inspection of the works), whose existence dates back to at least 2009, this valuation was applied retroactively to the year in which the basis for the update occurred;

(g) The evaluation sheet that was the subject of notification to the Claimant contains the cognitive process that led to the determination of the new VPT in the amount of € 1,189,590.00, whereby the case law invoked regarding lack of reasoning is inapplicable to the case, as the notification of the facts and legal grounds of the new VPT occurred prior to the tax assessments;

(h) The notifications of the additional IMI assessments for the years 2010 and 2011 contain the legally required elements, namely the author of the act, the Director-General of the Tax and Customs Authority;

(i) Likewise, the collection notes provided for in articles 119 and 120 of the IMI Code relating to IMI and IS for the year 2012 are sufficient to make the tax debt enforceable and need not contain the author of the act, nor the capacity in which it was performed.

It concludes that the tax acts are not afflicted with any defect that calls into question their validity and that there is no ground for the payment of compensatory interest, and that the total rejection of the claim should be declared.

The administrative file was attached to these proceedings, of which the Claimant was informed.

1.6. On 16 May 2014, the first meeting of the Single Arbitral Tribunal took place at the seat of CAAD, in accordance with article 18 of RJAT. No exceptions having been raised or identified, the scope of evidence was delimited. The tribunal set 20 June 2014 for the examination of the first witness called by the Claimant, deciding not to hear the second witness in view of the lack of knowledge of relevant facts, and for oral arguments on the date of examination.

1.7. On 19 June 2014, the Claimant requested the dispensing of the first witness, and the tribunal annulled the examination, granted a period for optional written arguments, and set 1 September 2014 as the date for delivery of the arbitral decision.

1.8. The Claimant submitted written arguments, maintaining the position previously stated.

II. PROCEDURAL MATTERS

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of RJAT.

The parties have legal capacity and standing, show themselves to be legitimate and are regularly represented (cf. articles 4 and 10, no. 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The cumulation of claims is admissible as we are dealing with the same circumstances of fact and the interpretation and application of the same principles or rules of law (cf. article 3, no. 1 of RJAT).

No procedural nullities were identified.

III. ISSUES TO BE DECIDED

The essential issues to be examined and decided are as follows:

(a) Absence of notification of the act fixing the VPT;

(b) Lack of reasoning in the IMI and IS assessment acts concerning the matter of taxable value and, in the specific case of additional IMI assessments for the years 2010 and 2011, regarding the retroactive effect thereof;

(d) Omission of essential requirements of the notification acts of IMI and IS assessments (indication of the author of the act, signature and reference to the use of own or delegated powers).

It is also important to evaluate the grounds for the request for compensatory interest filed by the Claimant.

IV. REASONING

OF THE FACTS

a) Proven facts

The factual matter relevant to examining the issues raised is as follows:

A. A..., herein Claimant, was notified on 8 February 2012 of Circular Memorandum no. ..., dated 6 February 2012 and sent by the Finance Service of …, with the following content:

"SUBJECT: UPDATE OF IMI PROPERTY REGISTER

You are hereby notified, in your capacity as owner of the urban property located at Sítio da ..., registered in the property register under article ... of the Parish of …, to within 30 days of receipt of this letter, submit, by virtue of article 13 of the Municipal Property Tax Code, the IMI Model 1 Declaration, referred to in article 37 of the IMI Code for purposes of updating the respective property register.

You are further notified that upon expiry of the 30-day period notified, without the said declaration having been submitted, these services shall proceed ex officio with valuation with updates, in accordance with no. 3 of article 13 of CIMI, without prejudice to administrative enforcement procedures."

– according to a copy of the memorandum contained in the administrative file ("PA"), file PA3-2010-2013, pages 28-29.

B. According to the Urban Property Register, extracted on 27 October 2011, the matricial article no. ... of the parish of …, corresponded to a dwelling, located at Sítio da ..., with the characteristics contained in the description below transcribed:

PROPERTY DESCRIPTION

Property Type: Full Ownership Property without Floors nor Divisions Capable of Independent Use

Description: TWO-STOREY DWELLING WITH ATTIC IN SOUTHERN SECTION. TILED ROOF WITH EAVES HAVING TO THE SOUTH 1 COVERED TERRACE AND 2 UNCOVERED. GROUND FLOOR WITH 5 ROOMS, 1ST FLOOR WITH 11 ROOMS. ATTIC WITH 1 ROOM. GARAGE ON GROUND FLOOR.

VALUATION DATA

Valuation pursuant to CCPIIA: GFA 297.85M2

Land 2,423.90M2

Year of inscription in property register: 1976

Current property value: € 93,180.85 Determined in year: 2009

OWNERS

Tax Identification: ... Name: A...

Address: QTA …, …

Type of owner: Full Ownership Share: 1/1 Document: OTHER Entity: UNKNOWN

Obtained via internet on 2011-10-27

– according to a copy of the Urban Property Register contained in PA, file PA3-2010-2013, page 26.

C. Since at least 1999, there is evident at this dwelling, registered in the urban property register of the parish of ... under article ..., the existence of a swimming pool, which was not declared by the Claimant to the tax authorities – as evidenced by documents contained in PA, file PA3-2010-2013, pages 38-40, representative of photographs obtained from the Municipality of ….

D. Following notification to the Claimant of the aforementioned Circular Memorandum no. ... from the Finance Service of …, relating to the update of the IMI property register, of the urban property (dwelling) described above, the Claimant submitted, by registered mail sent to the Head of the Finance Service of …, still in February 2012, a request for clarification stating that she did not understand the basis for the obligation to submit the IMI Model 1 Declaration, "as no event occurred that determines such obligation to submit in accordance with the provisions of article 13, no. 1 of the IMI Code, given that the property classification, its owner, or any modification thereto and within the corresponding limits have not been changed" – cf. copy of the request for clarification and postal record contained in PA, file PA2-2nd part, pages 2-7.

E. In the request for clarification mentioned in the point above, it is further highlighted by the Claimant that in accordance with the general valuation system for urban properties and Circular no. 25/2011, from the Office of the Director General of Taxes (point 4), general valuation will not involve any additional declarative obligations for taxpayers of IMI (owners, usufructuaries, superficiaries), namely the submission of declarations for updating properties in the register (IMI Model 1) – cf. copy of the request for clarification and postal record contained in PA, file PA2-2nd part, pages 2-7.

F. The Claimant did not obtain a response to the request for clarification submitted by her, referred to in points D and E above – proven by agreement in accordance with the reasoning of the decision rejecting the administrative appeals submitted by the Claimant, contained in Documents 20 and 21 attached to the arbitral petition and PA, file PA4-2010-2013, pages 56-65, and file PA2-2010-2013, pages 37-49.

G. The Finance Service of … submitted ex officio the Model 1 Declaration, giving rise to the valuation procedure of the dwelling corresponding to the matricial article no. ... of the parish of …, identified above. From this ex officio declaration the following information elements appear, inter alia:

Elements of the Declaration

Tax ID: ... Name: A...

Reason: 2 – Improved/Modified Property

Reception Date: 2012-03-14 Registration No.: …

Matricial Identification

Type: Urban Parish: … (EXTINCT)

Article: ...

Property Elements

Parish: … (EXTINCT) Finance Service: … – ….

Avenue/Street/Square: STREET … Floor: Unit: QTA .. Postal Code: …

Land Registry Office: … Registration no. .

Annex I

(…)

Full Ownership Property without Floors nor Divisions Capable of Independent Use

Designation: 3 – Residential Area of Property Coverage: 297.8500 m2

Number of Floors: 3 Dependent Gross Area: 1.0000 m2

Typology/Number of Rooms: 17 Gross Construction Area: 2.0000 m2

Total Land Area: 2,721.7500 m2 Private Gross Area: 1.0000 m2

Quality and Comfort Elements

1 – Single Family Dwellings

3 – Individual Garage

5 – Individual Swimming Pool

(…)

– cf. copy of the declaration for registration or update of urban properties in the register (Model 1) contained in PA, file PA2-2nd part, pages 29-31.

H. From the valuation procedure of the dwelling corresponding to the matricial article no. ... of the parish of …, carried out on 29 May 2012, resulting in the fixing of a VPT of € 1,189,590.00, in first valuation, based on the following elements contained in valuation sheet no. …:

ü Designation: Residential

ü Number of floors: 3

ü Typology/Divisions: 17

ü Total land area: 2,721.7500 m2

ü Property coverage area: 297.8500 m2

ü Gross construction area: 849.0000 m2

ü Dependent gross area: 173.0000 m2

ü Private gross area: 676.0000 m2

ü Coordinates X, Y: 84,481.00; 193,107.00

ü Location coefficient type: Residential

ü Location coefficient: 3.00

ü Dwelling coefficient: 0.17

ü Quality and comfort elements

Description | Coefficient | Notes

Quality of construction | 0.020 |

Quality level, namely, security, fire, home automation, thermal and acoustic insulation | 0.020 | Special facilities/security

Exceptional location | 0.070 |

Panoramic views to sea, rivers, mountains, green areas, other natural or artificial visual elements | 0.050 | Sea view/green areas

Urban setting | 0.020 | Low density construction area Proximity to collective equipment

Relative location and operationality | 0.040 |

Property orientation | 0.020 | Good solar exposure

Special areas, namely, sheds, terraces, open parking or similar, in large commercial or service buildings or other buildings | 0.020 | Terrace/Shed

ü Date of commencement of construction: 2008-12-31

ü Age of property: 35

ü Taxable property value:

Vt* = Vc × A × Ca × Cl × Cq × Cv

1,189,590.00 = 603.00 × 635.3535 × 1.00 × 3.00 × 1.380 × 0.75

Vt = taxable property value, Vc = base value of buildings, A = gross construction area plus area exceeding the coverage area, Ca = designation coefficient, Cl = location coefficient, Cq = quality and comfort coefficient, Cv = age coefficient, with A = (Aa + Ab) x Caj + Ac + Ad, where Aa represents the private gross area, Ab represents dependent gross areas, Ac represents the land area free up to the limit of twice the coverage area, Ad represents the land area free beyond the limit of twice the coverage area. (Aa + Ab) x Caj = 100 x 1.0 + 0.90 x (160-100) + 0.85 x (220-160) + 0.80 x (Aa + Ab – 220.0000).

For land for construction, A = gross construction area including Ab

Value rounded, in accordance with no. 2 of Article 38 of CIMI

– cf. copy of valuation sheet no. ... contained in PA, file PA2-2nd part, pages 26 to 34, and the Urban Property Register updated at page 16 of the same file.

I. The valuation of the urban property corresponding to the matricial article no. ... of the parish of …, carried out on 29 May 2012, from which resulted the VPT of € 1,189,590.00, was sent to the Claimant's residence by registered mail – cf. information obtained from CTT, including copy of the CTT Distribution List, contained in PA, file PA2-2010-2013, pages 29-35, and result of search in file PA2-2nd part, page 35.

J. The CTT Distribution List, requested by the Claimant in May 2013 and received by her on 18 June 2013[1], states that the notification letter referred to in the previous point was sent under registration ... and delivered on 28 June 2012 by the postman "…", at 10 a.m., to a person who identified himself with the name of "…" with nothing further stated regarding the identification of the latter – cf. requests submitted to CTT by the Claimant, file PA1-2010-2013, pages 45-53; information obtained from CTT, including copy of the CTT Distribution List, contained in PA, file PA2-2010-2013, pages 29-35; and result of search in file PA2-2nd part, page 35.

K. The following additional IMI assessments were issued, dated 29 August 2012, notified to the Claimant in September 2012:

(i) Assessment no. 2010 ..., relating to property U-0... of the Municipality and parish of …, in the amount payable of € 4,106.09, relating to tax (IMI) for the year 2010, with payment deadline in October 2012 – as per copy of the notification of the additional assessment attached to the arbitral petition as Document 1;

(ii) Assessment no. 2011 ..., relating to property U-0... of the Municipality and parish of …, in the amount payable of € 4,106.09, relating to tax (IMI) for the year 2011, with payment deadline in October 2012 – as per copy of the notification of the additional assessment attached to the arbitral petition as Document 2.

L. The notifications of the additional assessments for 2010 and 2011 contain the Taxable Property Value of € 1,189,590.00; the tax rate of 0.40%; the tax collected of € 4,758.36; reference to the previous tax of € 652.27; notification for payment of € 4,106.09; the mention "ADDITIONAL"; reference to the possibility of appeal or challenge of the assessment in accordance with the terms and periods established in CPPT; the indication of the Director-General, José António de Azevedo Pereira, and his signature – all as per the notifications of the additional assessments attached to the arbitral petition as Documents 1 and 2.

M. An IMI assessment for the year 2012 was issued, dated 17 March 2013, in the total amount of € 4,639.40, communicated to the Claimant through the three collection notes enumerated below, relating to property U-0... of the Municipality and parish of …:

(a) Collection note no. 2012 ..., first instalment, in the amount payable of € 1,546.47, with payment deadline in April 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 3;

(b) Collection note no. 2012 ..., second instalment, in the amount payable of € 1,546.47, with payment deadline in July 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 4;

(c) Collection note no. 2012 ..., third instalment, in the amount payable of € 1,546.46, with payment deadline in November 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 5.

N. The collection notes relating to IMI for 2012 contain the following mentions: the Taxable Property Value of € 1,189,590.00; the tax rate of 0.39%; the tax collected of € 4,639.40; reference to the 1st, 2nd or 3rd instalment, respectively, April (€ 1,546.47), July (€ 1,546.47) and November (€ 1,546.46); the fixing of the rates "by resolution of the Municipal Assembly – article 112 of CIMI" and the possibility of appeal or challenge of the assessment in accordance with the terms and periods established in articles 76 and 102 of CPPT – all as per the notifications of the collection notes attached to the arbitral petition as Documents 3, 4 and 5.

O. An IS assessment for the year 2012 was issued, dated 21 March 2013, in the total amount of € 11,895.90, communicated to the Claimant through the three collection notes enumerated below, relating to property U-... of the Municipality and parish of …:

(a) Collection note no. 2013 ..., first instalment, in the amount payable of € 3,965.30, with payment deadline in April 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 6;

(b) Collection note no. 2013 ..., second instalment, in the amount payable of € 3,965.30, with payment deadline in July 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 7;

(c) Collection note no. 2013 ..., third instalment, in the amount payable of € 3,965.30, with payment deadline in November 2013 – cf. copy of the notification of the collection note attached to the arbitral petition as Document 8.

P. The collection notes relating to IS for 2012 contain the following mentions: the Property Value of € 1,189,590.00; Budget Code TGIS 28.1; the tax rate (%) of 1.00; the tax collected of € 11,895.90; reference to the 1st, 2nd or 3rd instalment, respectively, April, July and November, all in the amount of € 3,965.30; the possibility of appeal or challenge of the assessment in accordance with the terms and periods established in articles 70 and 102 of CPPT – all as per the notifications of the collection notes attached to the arbitral petition as Documents 6, 7 and 8.

Q. The Claimant paid the tax referred to in the assessments identified above on the following dates:

(a) IMI 2010 – in the amount of € 4,106.09, via Multibanco, on 25.09.2012 – cf. Document 1 attached to the arbitral petition;

(b) IMI 2011 – in the amount of € 4,106.09, via Multibanco, on 25.09.2012 – cf. Document 2 attached to the arbitral petition;

o First instalment in the amount of € 1,546.47, via home banking …, on 07-05-2013 – cf. Document 3 attached to the arbitral petition;

o Second instalment in the amount of € 1,546.47, via home banking …, on 29-07-2013 – cf. Document 4 attached to the arbitral petition;

o Third instalment in the amount of € 1,546.46, via home banking …, on 13-11-2013 – cf. Document 5 attached to the arbitral petition;

(d) IS 2012:

o First instalment in the amount of € 3,965.30, via home banking …, on 07-05-2013 – cf. Document 6 attached to the arbitral petition;

o Second instalment in the amount of € 3,965.30, via home banking …, on 29-07-2013 – cf. Document 7 attached to the arbitral petition;

o Third instalment in the amount of € 3,965.30, via home banking …, on 13-11-2013 – cf. Document 8 attached to the arbitral petition.

R. The Claimant filed an Administrative Appeal of the Additional IMI Assessments for the years 2010 and 2011 (assessments better identified in points K and L above), by registered mail sent on 21 February 2013 – cf. PA, file PA1-2010-2013, pages 5-24; PA2-2010-2013, pages 50-52; PA3-2010-2013; and Document 15 attached to the arbitral petition.

S. On 8 May 2013, the Claimant was notified of the preliminary rejection decisions relating to the appeal of the IMI assessments for 2010 and 2011, for purposes of exercising the right to be heard – cf. PA, file PA1-2010-2013, pages 25-31; PA3-2010-2013, pages 48-52; and Documents 16 and 17 attached to the arbitral petition.

T. The Claimant exercised the right to be heard by registered mail sent on 20 June 2013 – as per Documents 18 and 19 attached to the arbitral petition and PA, particularly file PA2-2010-2013, pages 14-26, and file PA4-2010-2013, pages 32 to 43.

U. On 18 September 2013, the Claimant was notified, through her representative, of the decisions rejecting the Administrative Appeals (IMI 2010 and 2011), contained in dispatches from the Head of the Finance Service of …, dated 2 July 2013 – as per memoranda attached to the arbitral petition as Documents 20 and 21 and contained in PA, particularly file PA2-2010-2013, pages 36-46, and file PA4-2010-2013, pages 56-65.

V. The grounds of the decisions rejecting the Administrative Appeals for IMI for the years 2010 and 2011 are as follows:

"In the scope of inspection of alterations to properties that may determine the change of taxable property value referred to in paragraph d) of no. 1 of article 13 of CIMI was the taxpayer notified to submit the Model 1 Declaration of IMI to which no. 1 of the aforementioned article refers and concerning the property registered in the property register under article ... of the parish of … because the construction of an undeclared swimming pool was detected.

In response to such notification, the taxpayer came to request clarifications, although it was not possible to verify whether or not there was a response to the request for clarification.

Thus, and given that the Model 1 of IMI was not submitted due to the alteration made to the property, on 2012-03-14 an ex officio Model 1 was drafted, which gave rise to a valuation where the property value of 1,189,590.00 was determined. That valuation was duly notified to the appealing taxpayer on 2012-06-12 by registered mail with no. ... having been considered by CTT as received. In face of that valuation and after it became final, the assessments now being appealed were made.

As for the situation of considering the address incorrect, this can only be due to negligence on the part of the appellant, since the address still appears in the register as Quinta da ... no. 5 … which was the one declared and if there was any change it should have been communicated to the Tax Authority and will only have effect when communicated in accordance with nos. 2 and 3 of article 19 of the General Tax Code, which has not happened to date.

PROPOSED DECISION

Given the allegations, the documents attached to the file and the facts reported, it is verified that:

The cumulation of claims cannot be considered an imperative of law, however the claim will be instituted as two administrative appeals and considered separately for each year.

There were alterations to the property registered in the property register under article ... of the parish of ... namely the construction of a swimming pool which occurred at least in 1999 as evidenced by photographs attached to the file and obtained from the Municipality of ..., alterations that were not communicated through the necessary declaration.
The fact of not having received a response to the request for clarification does not imply that she did not know of these alterations and that she should have communicated them in a timely manner.

It does not seem correct to allege that she did not have knowledge of any further action since she was duly notified of the valuation and such notification was received according to information from CTT.

The valuation was not the subject of any appeal.

It is not considered that there was any illegality in the assessments or defect of reasoning in the assessments since the taxpayer was notified of the valuation where all its grounds are contained and in the assessments, being a consequence of the valuation and also because in the respective notification all essential elements appear.

Regarding the address being incorrect and although the appellant alleges that this is not preventive of having always received the notifications, it is verified that it is the one contained in the tax register and there has been no communication of change as required by article 19 of the LGT to date.

Thus in view of the information and reporting above, the total REJECTION of the claim is proposed.

PRIOR HEARING

(…)

The appellant alleges that the Tax Authority says that he was notified of the valuation and that such notification was considered received, however he never received the notification and contacted CTT to obtain a certificate and in that certificate it states that the notification occurred on 2012-06-28 and not on 2012-06-12 as appears in the computer application and that this fact is proof of non-receipt of the notification.

On the matter it is understood that the fact reported does not prove non-receipt of the notification but on the contrary that it was received but on a different date.

He also alleges that in that notification it states that it was not received by himself but by another person and that in the receipt notice no identification of the person who received it can appear and is thus invalid.

On the matter it is understood that this allegation is not correct since the notification was made in accordance with legal terms with registered mail and not with registered mail with receipt notice and therefore no identification of the person receiving the notification had to appear in the notification.

As for the request for clarification that he requested when the initial notification to submit the Model 1 of IMI was not detected in response and thus it is assumed that there was no response to the request, however such procedure did not prejudice the appellant in any way since all procedures carried out by the services would be those that had to be performed by the taxpayer and which would give rise to the assessments now being appealed. (…)".

– cf. Documents 21 and 20 attached to the arbitral petition, also contained in PA, file PA4-2010-2013, pages 56 et seq., and file PA2-2010-2013, pages 37-42.

X. The Claimant filed an Administrative Appeal against the IMI Assessment for the year 2012 (assessment better identified in points M and N above), by registered mail sent on 18 August 2013 – cf. PA, file PA2-1st part and file PA2-2nd part and Document 22 attached to the arbitral petition.

Z. On 1 November 2013, the Claimant was notified of the preliminary rejection decision of the Administrative Appeal (IMI 2012) to, if she wished, exercise the right to be heard. Not having exercised that right, the preliminary decision became final. The rejection of the Administrative Appeal in question, in accordance with the dispatch from the Head of the Tax Justice Division of 28 November 2013, was notified to the Claimant on 3 December 2013 – cf. PA, file PA2-2nd part, pages 36 et seq., and Documents 23 and 24 attached to the arbitral petition.

AA. The grounds of the rejection of the appeal of the IMI assessment for the year 2012 are as follows:

"II – DESCRIPTION OF FACTS

· The IMI assessment for the year 2012 relating to the property owned by the appellant is under analysis, located in the parish of …, municipality of … with the urban matricial article no. ....

· By consultation of the computer system, particularly the property valuation sheet and property register of the property, it is verified that it is valued at € 1,189,590.00 determined in 2012.

· The current VPT of the property in question was determined by the update of the register resulting from the general valuation that took place in 2012.

· Not conforming to the fixing of the VPT of the property determined by the tax administration, the appellant hereby submits the present administrative appeal.

III – ANALYSIS OF THE CLAIM

(…)

· In the concrete case, the first matter to examine, on which the appellant makes the merits depend, is whether the notification of the valuation carried out on the urban property located in Rua ..., in the area of …, in the parish and municipality of …, registered in the urban property register of the said parish under article ..., is considered validly made.

· Indeed, as stated above, the notification of the valuation made by the services of the Tax Authority was carried out in legal form, by registered mail, in accordance with article 15-E of Decree-Law no. 287/2003, of 12 November, which provides "1. The taxable property value of the urban property resulting from general valuation is notified to the taxpayer by electronic data transmission or, if not possible, by registered postal mail."

· The notification of the valuation of the property registered under no. ..., was received by a third party, whereby it is presumed to have been effectively realized to the person of the appellant, not prevailing here the argument of lack of identification of the third party by the postal distributor, as this will only apply in the case of registered mail with receipt notice (cf. article 39, nos. 3 and 4 of CPPT and article no. 236 nos. 2 and 3 of the CPC applicable at the time of the facts).

· We are not unaware that this is a rebuttable presumption in accordance with no. 2 of article 350 of the Civil Code, however, and save for a better understanding, it seems to us that from the mere certificate extracted from the list of distribution of CTT, it does not result per se that such registered object was not delivered to the appellant.

· From the consultation to CTT, the said notification was delivered on 28/12/2012 (page 84 of the file), the appellant not having rebutted the said presumption.

· Thus, the appellant had 30 days to request a second valuation. Having failed to do so, this became consolidated in her legal sphere, and this means of administrative appeal is not the proper means to come to dispute the said valuation.

(…)

· From the information provided by the services of the Municipal Chamber combined with that contained in the property register prior to the update, discrepancies were verified, particularly regarding the existence in the property of an individual swimming pool, which is one of the elements of quality and comfort that increases the value in the property valuation (cf. article 43 of CIMI), an element that did not appear in the register, as results from the analysis of the property register of the property extracted before the general valuation at page 47, obtained via internet on 2011-10-27.

· However, the appellant having not submitted the MOD 1 declaration of IMI voluntarily for purposes of updating the property register, despite being requested to do so, the said MOD 1 declaration of IMI was made ex officio by the services of the tax administration, as per document at pages 80 to 83 of the file, thus giving rise to the update of the VPT of the property in accordance with the CIMI rules.

· As for the defects of the assessment invoked by the appellant, the following will be said:

A – NULLITY OF THE STAMP DUTY [IMI] ASSESSMENT FOR FAILURE TO INDICATE THE AUTHOR OF THE ACT, LACK OF SIGNATURE AND FAILURE TO REFERENCE ISSUANCE IN OWN OR DELEGATED POWERS:

· On this matter of the lack of signature in the notification, it will always be said that no. 2 of article 36 of CPPT contains the mandatory mentions of the notification: the decision, its grounds and means of defense and deadline to react against the notified act, as well as the indication of the entity that performed it and whether it did so in the use of delegation or subdelegation of powers.

· It follows from the above that the signature of the author of the act is not a mandatory mention in the notification, i.e., does not constitute a requirement of validity of the notification.

· And even for the failure to indicate the author of the act the case law of the Supreme Administrative Court has shown some tolerance: in the judgment of 2000.11.22, case no. 25389, it was understood that regarding "mass acts", it is sufficient that the identification of the entity that performed the act is clear [DGT, for example, instead of the Director-General] if the manner in which such practice occurred does not result in any diminution of guarantees of the taxpayer.

· On the other hand, in accordance with no. 1 of article 119 of CIMI "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to that of payment, the competent collection document, with discrimination of properties, their parts capable of independent use, respective taxable property value and the collection amount attributed to each municipality of the location of the properties".

· Thus, in accordance with the provision of 119 of CIMI to the taxpayer a collection note is sent and, not an assessment, whereby, it need not contain the author of the act.

· On an identical matter, however, in the scope of Municipal Contribution and Municipal Property Tax, the Supreme Administrative Court has already ruled, in the Judgment of 20/10/2010, in case no. 01089/09, an excerpt of which we transcribe here:

"… it remains for us to say that we adhere unreservedly to the doctrine taught in the judgment delivered by this Section of the Supreme Administrative Court on 18/09/2008, in case no. 0300/08, according to which the assessment of CA and IMI, made within the normal period, does not require notification to the taxpayer, with the sending of the collection document referred to in articles 22 and 23 of CCA and in articles 119 and 120 of CIMI being sufficient to make the tax debt enforceable. This notification of the assessment act is only required when an "out of the normal period" assessment is concerned or when it is an "additional assessment".

· As for the indication of the use of delegation or subdelegation of powers by the author of the act, its requirement only occurs when such use has taken place. The mention of the performance of the act on the basis of delegation or subdelegation of powers is required by articles 38 and 123, no. 1 paragraph a) of CPA as a requirement of the act itself and not only of its notification. (see Jorge Lopes de Sousa in Code of Tax Procedure and Process, annotated and commented, 6th edition, Áreas Editora, pages 344 and 345)

· In tax litigation prior to the entry into force of CPTA, the Supreme Administrative Court understood that the obligation of the mention of delegation or subdelegation of powers in the notification of the act performed in its use was justified only by the need to assure to the notified party the possibility of realizing the definitive character of the act performed by whom does not have it, in the first place, to perform it, so that he could challenge it immediately by judicial means (cited work).

· Being that the reason for such requirement of notification, the failure to mention delegation or subdelegation of powers therein, when the act was performed in its use, should be considered as preterition of a legal formality, which would be degraded to non-essential, when not affected by the possibility of judicial challenge by the appellant. (cited work).

· That was the position that the Supreme Administrative Court had been defending, considering, in particular, that in the case of acts of members of the Government, such mention of delegation or subdelegation of powers was unnecessary, since from Decree-Law no. 3/80, of 7 February, the successive organic laws do not establish any relations of hierarchy between Ministers, State Secretaries and Under-Secretaries of State, and therefore, acts performed by State Secretaries and Under-Secretaries of State are always vertically definitive acts, not being necessary, consequently, the mention of delegation of powers, so that the recipient could realize such definitiveness. (cited work)

· With the CPTA (Code of Procedure in the Administrative Courts), the characteristic of definitiveness was abandoned as a condition of the judicial challenge of administrative acts, coming to consider any act with external efficacy challengeable, even if inserted in an administrative procedure (article 51 of that code). (cited work)

· On the other hand, in the field of tax litigation, all acts performed by an authority competent ratione materiae are definitive, as inferred from article 60 of CPPT, whereby the judicial challenge of acts of subordinates does not depend on the existence or not of delegation or subdelegation of competencies. (cited work)

· That author concludes in the cited work, "For this reason, it does not make sense to defend, currently, that the requirement that the performance of the act in the use of delegation of powers be mentioned in the act itself and in its respective notification (required by articles 38 and 123 no. 1 paragraph a) of CPA and 39 no. 9 of CPPT), is imposed by the need to allow the recipient to realize the judicial challenge of the act".

B – ANNULABILITY OF THE ASSESSMENT ON THE BASIS OF A PROCEDURAL DEFECT OF THE VALUATION PROCEDURE AND DEFECT OF LACK OF REASONING

ABSENCE OF NOTIFICATION OF POSSIBLE EARLIER ACT(S) TO THE STAMP DUTY [IMI] ASSESSMENT.

· (…) we refer to what was stated above on this matter.

LACK OF REASONING

· An act is considered properly reasoned whenever its respective recipient reveals having grasped its grounds. In this sense, see "General Tax Code commented and annotated", CAMPOS, Diogo Leite, Benjamin Rodrigues, Jorge Lopes Sousa, 3rd ed., Vislis, September 2003, pages 381-382.

· It is concluded, therefore, that in the concrete case, the tax act is properly reasoned, both factually and legally, all the more so that the reasoning of the appellant reveals that she had no difficulty in grasping the reasons that led to the performance of the act.

· Notwithstanding, at the time of notification of the assessment act, and if any doubt remained in the mind of the appellant, she should have resorted to the provision of article 37 of CPPT, which would have allowed her to obtain all the elements and clarifications she deemed necessary to understand the assessment act.

· Having failed to do so, the appellant reveals not having had difficulty in grasping the factual and legal grounds that led to the performance of the act, with the same having been perfectly understood by her.

REQUEST FOR COMPENSATORY INTEREST

· In view of the above, and with the grounds mentioned above, and also because the requirements of fact and law on which the allocation of compensatory interest depends are not met, particularly, because if the contested assessment did not suffer from any error or defect attributable to the services, we also advocate, in this respect, for the total rejection of the claim. (…)"

– cf. Document 24 attached to the arbitral petition, also contained in PA.

BB. The Claimant filed an Administrative Appeal against the IS Assessment for the year 2012 (assessment better identified in points O and P above), by registered mail sent on 18 August 2013 – cf. PA, file PA1-1st part and Document 25 attached to the arbitral petition.

CC. On 1 November 2013, the Claimant was notified of the preliminary rejection decision of the Administrative Appeal (IS 2012) to, if she wished, exercise the right to be heard. Not having exercised that right, the preliminary decision became final, with the rejection of the Administrative Appeal in question, in accordance with the dispatch from the Head of the Tax Justice Division of 28 November 2013, being notified to the Claimant on 3 December 2013 – cf. PA, file PA1-2nd part, and Documents 26 and 27 attached to the arbitral petition.

DD. The grounds of the rejection of the appeal of the IS assessment for 2012 are as follows:

"II – DESCRIPTION OF FACTS

· The application of budget code 28.1 of TGIS to the property owned by the appellant is under analysis, located in the parish of …, municipality of … with the urban matricial article no. ....

· By consultation of the computer system, particularly the property valuation sheet and property register of the property, it is verified that it is valued at € 1,189,590.00 determined in 2012.

· The current VPT of the property in question was determined by the update of the register resulting from the general valuation that took place in 2012.

· Not conforming to the fixing of the VPT of the property determined by the tax administration, the appellant hereby submits the present administrative appeal.

III – ANALYSIS OF THE CLAIM

(…)

· From the consultation to CTT, the said notification was delivered on 28/12/2012 (page 80 of the file), the appellant not having rebutted the said presumption.

· On the other hand, the argument that only with the notification of the assessment for payment of the 1st instalment of IS budget code 28.1, did the appellant take knowledge of the value of the property valuation, does not prevail, as from the analysis of the property register attached to the file by the appellant at page 64, it is verified that it was obtained via internet on 2013/01/11 and the IS assessment was issued on a later date, 2013/03/21, to which is added further that the said property register contains the data of the valuation, as well as the calculation formula used.

(…)

· However, the appellant having not submitted the MOD 1 declaration of IMI voluntarily for purposes of updating the property register, despite being requested to do so, the said MOD 1 declaration of IMI was made ex officio by the services of the tax administration, as per document at pages 76 to 79 of the file, thus giving rise to the update of the VPT of the property in accordance with the CIMI rules.

· As for the defects of the assessment invoked by the appellant, the following will be said:

A – NULLITY OF THE STAMP DUTY ASSESSMENT FOR FAILURE TO INDICATE THE AUTHOR OF THE ACT, LACK OF SIGNATURE AND FAILURE TO REFERENCE ISSUANCE IN OWN OR DELEGATED POWERS:

· It follows from the above that the signature of the author of the act is not a mandatory mention in the notification, i.e., does not constitute a requirement of validity of the notification.

· On the other hand, the provision of budget code 28 of TGIS follows, concerning assessment and collection, the rules established in CIMI, taking into account, in particular, the provisions of articles 23 no. 7, 44 no. 5, 46 no. 5 and 67 no. 2, all of IS Code, in the version given by Law 55-A/2012.

· In accordance with the provision of 119 of CIMI to the taxpayer a collection note is sent and, not an assessment, whereby, it need not contain the author of the act.

B – ANNULABILITY OF THE ASSESSMENT ON THE BASIS OF A PROCEDURAL DEFECT OF THE VALUATION PROCEDURE AND DEFECT OF LACK OF REASONING

ABSENCE OF NOTIFICATION OF POSSIBLE EARLIER ACT(S) TO THE STAMP DUTY ASSESSMENT.

· (…) we refer to what was stated above on this matter.

LACK OF REASONING

– cf. Document 25 attached to the arbitral petition, also contained in PA.

EE. The Claimant filed the request for constitution of the Single Arbitral Tribunal with CAAD on 17 December 2013 – cf. electronic request in the CAAD system.

b) Unproven facts

Other facts with relevance to the decision of the case were not proven and particularly that:

– the Claimant was unaware of the third party - "…" - who received the correspondence addressed to her residence relating to the valuation in question, which resulted in the VPT of € 1,189,590.00 (article 38 of the arbitral petition) and that, consequently, she did not have the opportunity to request a second valuation of the property (article 59 of the arbitral petition);

only when she received the additional assessment collection notes did she become aware that the VPT had been updated.

c) Motivation of the factual decision

The decision on the factual matter was made on the basis of an examination of the documents and information attached to the file and above identified regarding each of the items of the factual assessment.

As for the unproven facts, the decision is based on the absence of any means of proof that substantiates or provides evidence of them.

V. ON THE LAW

Absence of notification of the act fixing the Taxable Property Value

1.1. Framework: the duty of notification

The first defect raised by the Claimant concerns the absence of notification of the act fixing the VPT that preceded the IMI and IS assessments subject to this action, an act which, consequently, would be ineffective in her sphere.

It is irrefutable that the act of fixing the VPT of an urban property must be notified to its recipient, regardless of the nature, ex officio or otherwise, of the procedure in which it is inserted.

The requirement of notification is, from the outset, a constitutional imperative in accordance with article 268, no. 3 of the Constitution of the Portuguese Republic ("CRP"), according to which "[a]dministrative acts are subject to notification to the interested parties, in the form provided by law, and lack express and accessible reasoning when they affect rights or legally protected interests".

A requirement concretized by the tax legislator in article 36, no. 1 of CPPT which determines that acts in tax matters "affecting the rights and legitimate interests of taxpayers only produce effects in relation to these when validly notified to them", with the efficacy of the decision depending on the notification as also expressly stated in article 77, no. 6 of the LGT.

An identical solution results, in general, from the Code of Administrative Procedure ("CPA") for administrative acts that are capable of imposing "duties, subjections or sanctions, or cause harm" (cf. article 66, paragraph b) of CPA). Even if such acts are objectively effective and capable of producing their effects, "the act not notified to its (a its) recipient is legally unopposable to him (now or later), for the period that passed before notification. Inefficacy or inoponibility (subjective) are, therefore, irremediable consequences of the failure to notify the administrative act (…) that should be notified" – cf. Mário Esteves de Oliveira, Pedro Costa Gonçalves and J. Pacheco de Amorim, Code of Administrative Procedure Commented, 2nd Edition, 2003, Almedina, p. 349.

It is irrelevant for this purpose whether we are dealing with (i) an ex officio update within the framework of the general valuation system for urban properties provided for in the decree approving the IMI Code (Decree-Law no. 287/2003, of 12 November, as amended by article 5 of Law no. 60-A/2011, of 30 November), whose initiative is attributed by article 15-C, no. 1 to the "central services of the Directorate-General of Taxes"; (ii) an ex officio update contemplated in article 13, no. 3 of the IMI Code, in charge of the Head of Finance, particularly when the taxpayers fail to voluntarily fulfill the duty to update the registers within 60 days of the occurrence of improvement works or other alterations that may determine variation in the taxable property value of the property (article 13, no. 3, paragraph a), combined with no. 1 paragraph d) of the IMI Code); or (iii) an update on the basis of a declaration submitted by the taxpayer (article 13, no. 1 of the IMI Code).

In fact, the valuation procedure is in all cases mentioned above subject to the same rules and valuation operations whether the initiative can be framed within article 37, no. 1 of the IMI Code[2], or in the provision of article 15-D of the cited Decree-Law no. 287/2003, with article 38 and following of the IMI Code (direct valuation) being applicable in all cases.

The notification of the act fixing the VPT must be carried out by registered mail (cf. article 38, no. 3 of CPPT), with article 39, no. 1 of CPPT establishing that notifications are presumed to be made "on the 3rd day following that of registration or on the 1st business day following that, when that day is not a business day". A formula in no. 2 that states "the presumption of the previous number can only be rebutted by the notified party when the failure of notification to occur on the date presumed is not attributable to him, and for this purpose the tax administration or the court, on the basis of a request from the interested party, shall request information from the postal service about the actual date of receipt".

Only in the case of there being a receipt notice, which, as we have seen, is not applicable to the situation in question, does article 39, no. 3 of CPPT determine that the postal service distributor shall note the identity card or other official document of the person who receives the notice, whether the notified party himself or a third party.

An identical conclusion is drawn from the general valuation system for urban properties, given that article 15-E, no. 1 of Decree-Law no. 287/2003 provides that the VPT is notified to the taxpayer by electronic data transmission or, if not possible, by registered postal mail, being also in this case inapplicable the system of notification through registered mail with receipt notice.

1.2. The non-rebuttal of the presumption of article 39, no. 1 of CPPT – consequences

Examining the factual matter it is found that the first valuation of the urban property corresponding to the matricial article no. ... of the parish of …, carried out on 29 May 2012, fixing its value in the amount of € 1,189,590.00, was sent to the Claimant by registered mail, delivered on 28 June 2012 at her residence.

From the certificate of the distribution list obtained from CTT it is extracted that the corresponding registration – ... – was delivered by the postman "…", at 10 a.m., to a person identified with the name of "…", unaccompanied by additional references to the person who received the letter, with CTT considering that the letter was received.

It was demonstrated that the notification was sent by the Tax and Customs Authority, in accordance with legal terms, by registered mail, to the recipient's domicile, now Claimant, whereby it was incumbent upon her to rebut the legal presumption of article 39, no. 1 of CPPT.

For this purpose, the Claimant argues that she did not receive the letter and does not know the third party who received it, arguing that the latter is not properly identified, given that there is no notation of an identification document, and highlights the difficulties inherent in proving a negative fact.

However, as stated above, article 39, no. 4 of CPPT only requires that the postal distributor identify the recipient of notifications, noting his identity card or other official document, when it concerns registered mail with receipt notice, contained in the normative hypothesis of article 38, no. 1 of CPPT, which is not the case in the present proceeding, which, conversely, is included in the provision of article 38, no. 3 of CPPT, whereby there is no invalidity or irregularity to note in the delivery of the registered letter.

It should be added that, in the concrete case, the correspondence was addressed to a dwelling, from which it can be reasonably inferred that the postman, in a normal frame of circumstances, will have delivered it to someone who was within the perimeter of the dwelling in which the Claimant resides (which is, at the same time, the object of the contested property valuation), namely to some employee thereof.

In summary, given the demonstration of the regularity of the sending of the registered letter to the Claimant contained in the information certified by the postal service, it was incumbent upon her not only to allege but to carry evidence into the file, even if indirect or circumstantial, that could undermine and rebut the legal presumption. Having failed to do so, the notification is presumed to have been made under the circumstances described in articles 38, no. 3 and 39, no. 1, both of CPPT.

Given that the first valuation was notified to the Claimant and produced legal effects in her sphere, and she did not react against it within the 30-day period provided for in article 76 no. 1 of the IMI Code[3], by requesting or promoting a second valuation, the act fixing the VPT became consolidated in the legal order, being unchallengeable.

In this sense, article 77 of the IMI Code establishes, in no. 1 that "From the results of second valuations there is recourse to judicial challenge, in accordance with the terms defined in the Code of Tax Procedure and Process", preventing the judicial review of first valuations. (emphasis ours)

A regime consistent with the general system applicable to acts fixing property values provided for in articles 134 of CPPT, nos. 1 and 7[4] and 86, no. 2[5] of the LGT: judicial challenge thereof can only take place after exhausting the administrative means provided for in the valuation procedure, thus establishing a necessary prior administrative appeal regime.

It is to be recalled, likewise, that tax arbitral proceedings constitute an alternative procedural means to judicial challenge proceedings, as assumed by its authorizing legislative act (article 124 of Law no. 3-B/2010, of 28 April), and concretized by RJAT, in accordance with its article 2, and that arbitrators should judge in accordance with the constituted law. Thus, the delimitation of the challengeability of acts continues to be determined by the provisions of CPPT and LGT on this matter (see also the referral of article 29, nos. 1, paragraphs a) and c) of RJAT).

In view of the above, the possible defects of the act fixing the VPT are not subject to review in the circumstances of the file, nor can they be invoked as cause of invalidity of the subsequent IMI and IS assessment acts that have it as a prerequisite.

On this point, the Claimant is not correct, and the allegation of the defect of absence of notification of the act fixing the VPT and the consequent invalidity of the IMI and IS assessments made on the basis of the VPT thus fixed is rejected as unfounded.

On the defect of lack of reasoning in the IMI and IS assessments

The Claimant also alleges the formal defect of lack of reasoning in the tax assessment acts of IMI and IS for two distinct reasons that are the subject of examination in autonomous points.

2.1. On the defect of lack of reasoning concerning the matter of taxable value and the origin/type of valuation procedure

First, the Claimant, proceeding from the premise that she was not notified of the determination of the taxable matter, i.e., of the fixing of the VPT resulting from the first valuation, sustains that the fact that the assessment acts do not indicate the reason for the new taxable value, substantially higher (€ 1,189,590.00) than the preceding VPT (€ 93,180.85), and do not allow her to understand whether the valuation procedure in question had its origin in the general valuation system provided for in articles 15-A to 15-P of Decree-Law no. 287/2003 (as amended by article 5 of Law no. 60-A/2011, of 30 November), or in articles 37 to 46 of the IMI Code, or in any other legal provisions, constitutes the violation of the duty to state reasons for tax acts, under articles 268, no. 3 of the CRP, 77, nos. 1 and 2 of the LGT and 125 of the CPA, and constitutes a formal defect that invalidates the assessments.

From the outset, the premise from which the Claimant proceeds is inapplicable, since she was notified of the first fixing of the VPT resulting from the first valuation.

It should further be noted that the information elements and assumptions made in the determination of the VPT appear in the Model 1 Declaration ex officio submitted by the Finance Service of … and in the contemporaneous valuation sheet (29 May 2012), including the respective calculation formula.

The duty to state reasons regarding the manner in which the VPT was determined could only be a cause of invalidity of the assessments (of IMI and IS) if the Claimant had not been previously notified of the determination of that VPT. Having failed to rebut the legal presumption of notification, as concluded above, the legal effects were produced in her sphere.

It appears that the cognitive and evaluative process followed by the Tax and Customs Authority is in no way non-existent or indecipherable, as can be inferred from a summary of the proven facts, nor capable of constituting lack of reasoning regarding the fixing of the taxable value:

(a) The Claimant was notified on 8 February to update the IMI property register of the dwelling (where she resides) identified under article ... of the parish of …;

(b) The notification letter states that the Claimant must submit the IMI Model 1 Declaration, by virtue of article 13 of this tax Code and that if she does not do so, the services shall proceed ex officio with valuation with updates, in accordance with no. 3 of article 13 of the IMI Code.

The Claimant became aware that an update of the VPT of her dwelling would take place, although she was not clear, as she alleges, as to the reason for such update, i.e., whether such update was integrated or not within the general valuation system for urban properties;

(c) However, even as to this point (to know which valuation system was at issue) the Claimant's doubt does not appear to be justified, since the update of the register under article 13 of the IMI Code cannot be framed within the general valuation system for urban properties (which is contained in the decree approving the IMI Code and not in the IMI Code itself);

(d) The Finance Service of … ex officio submitted the IMI Model 1 giving start to the procedure that culminated in the fixing of the VPT of € 1,189,590.00, with the Model 1 and the Valuation Sheet containing a detailed set of information elements, including the factual assumptions and the calculation formula applied (points G and H of the factual matter);

(e) The valuation was notified to the Claimant, with her not requesting or promoting a second valuation, with the VPT obtained in this way becoming consolidated;

(f) The Claimant was notified of the additional assessment acts (IMI 2010 and 2011) and of the collection notes relating to the IMI and IS assessments for 2012.

The case law of the Supreme Administrative Court ("STA") corroborates that the "reasoning of the act fixing the VPT, whether resulting from valuation or from update, must be communicated to the taxpayer subject of the IMI to be assessed on the basis of such taxable matter"[6], but only requires that such reasoning appear in the assessment acts if the manner in which the VPT was determined has not been previously made known to the taxpayer – see in this regard the Judgments delivered in cases no. 036/12, of 19 April 2012, no. 0659/12, of 19 September 2012 (Rapporteur Francisco Rothes) and no. 0822/12, of 17 October 2012 (Rapporteur Fernanda Maçãs).

In view of the above, it appears that the Claimant is not only wrong in what she alleges but seeks to reopen the discussion of the taxable value matter around the tax assessment acts, when this is barred to her, given that, in the absence of a request for a second valuation, the act fixing the VPT became consolidated.

The Claimant invokes the fact that she did not understand the content of the notification that communicated to her the duty to submit the IMI Model 1 Declaration for updating the property register, by virtue of article 13 of this tax Code, and that, although she submitted a request for clarification regarding that notification, it was never responded to.

Without prejudice to the reason that is recognized to the Claimant that the Tax and Customs Authority violated its duty to pronounce on the request submitted to it (cf. articles 56, no. 1 of the LGT and 9, no. 1, paragraph a) of the CPA) and the duty of cooperation with the taxpayer (cf. article 59, no. 1 and no. 3, paragraphs c) and f) of the LGT), the same did not have consequences regarding the valuation (of an objective character) and the issuance of the assessment acts.

On the other hand, it cannot be overlooked that the violation of the principle of cooperation was reciprocal and, in the first place, attributable to the Claimant. It was she who, over the years, omitted the declaration of a relevant element of increase in the value of her real estate property, thus evading the payment of the corresponding increase in tax (IMI) owed by law.

Indeed, it cannot be forgotten that article 13, no. 1 of the IMI Code determines the obligation to update the registers, on the basis of a declaration submitted by the taxpayer within 60 days of the occurrence of subjective and objective modifications, namely, according to its paragraph d), upon completion of improvement works or other alterations that may determine variation in the taxable property value of the property, as occurs with the implantation of a swimming pool.

Now, the Claimant possessed a swimming pool for several years without ever communicating such fact to the Tax Authorities, although she was obliged to do so, as it constitutes an element that increases the quality and comfort coefficient provided for in article 43, no. 1 of the IMI Code.

This non-compliance with the declarative/accessory duties on the part of the Claimant constituted a not inconsiderable violation of the duty of cooperation on the part of the Claimant towards the Tax and Customs Authority, which determined over the years a value of tax to be paid (IMI) lower than the amount owed. Such infraction attributable to the Claimant (identified by aerial photographs made available by the Municipality of …) triggered the ex officio direct valuation procedure that culminated in the fixing of the VPT, in compliance with the provision of article 13, no. 3 of the IMI Code, a norm expressly mentioned in the initial notification made to the Claimant.

It is further added that the Claimant, in the request for clarification addressed to the Tax and Customs Authority, asserts that "no event occurred that determines such obligation to submit in accordance with the provisions of article 13, no. 1 of the IMI Code, with the property classification, its owner or any modification thereof and within the corresponding limits not being changed".

Beyond the substantive defect that such assertion suffers (error in the assumptions), by this means the Claimant demonstrates that she is aware of the applicable system, as she knows the circumstances under which article 13, no. 1 cited imposes the update of the register.

Regarding the alleged lack of reasoning concerning the origin of the valuation procedure, the initial notification of the Tax and Customs Authority, prior to the institution of the procedure, explains that it concerns an update of the register, under article 13 and likewise invoking article 37, both of the IMI Code, whereby the reason why this matter is raised is not understood.

It should be noted that this framework was maintained throughout the valuation procedure, appearing in the Model 1 Declaration ex officio submitted the reason for the valuation: "2 – Improved/Modified Property". Again, the Claimant is not correct on this matter.

It should be noted that... [document truncated]

Frequently Asked Questions

Automatically Created

What happens if the taxpayer is not notified of the property tax valuation (VPT) before IMI and Stamp Tax assessments?

Under Portuguese tax law, if a taxpayer is not properly notified of a property tax valuation (VPT) update before IMI and Stamp Tax assessments are issued, those assessments do not produce legal effects in the taxpayer's sphere. Article 77(6) of the General Tax Code (LGT) and article 36(1) of CPPT establish that notification is essential for administrative acts to become effective. Without valid notification of the VPT determination, subsequent tax liquidations based on that valuation are legally ineffective and subject to annulment. The Tax Authority bears the burden of proving proper notification occurred, typically through registered mail with proof of receipt. If notification is deemed invalid, the taxpayer can request annulment of all related assessments through administrative appeal or tax arbitration (CAAD).

Can IMI and Stamp Tax liquidations be annulled due to insufficient legal reasoning under Portuguese tax law?

Yes, IMI and Stamp Tax liquidations can be annulled for insufficient legal reasoning under Portuguese tax law. Article 268(3) of the Portuguese Constitution, articles 77(1) and 77(2) of the LGT, and article 125 of the Administrative Procedure Code (CPA) require tax authorities to provide adequate reasoning for their decisions. For property tax assessments, this means explaining how the taxable patrimonial value (VPT) was calculated, which valuation method was applied (general valuation system under articles 15-A to 15-P of Decree-Law 287/2003 or specific provisions in articles 37-46 of the IMI Code), and the legal basis for any retroactive application. Assessment acts that fail to provide this information prevent taxpayers from understanding the tax determination and effectively exercising their right of defense, constituting grounds for annulment.

What are the taxpayer's rights when challenging IMI and Stamp Tax assessments through tax arbitration (CAAD)?

When challenging IMI and Stamp Tax assessments through tax arbitration (CAAD), taxpayers have several fundamental rights under the Legal Framework for Arbitration in Tax Matters (RJAT). These include: (1) the right to request constitution of an arbitral tribunal to review the legality of tax assessments and administrative appeal decisions; (2) the right to contest both the substantive and procedural validity of tax acts; (3) access to the complete administrative file; (4) the right to oral hearings and presentation of evidence; (5) protection against assessments lacking proper notification or reasoning; (6) the ability to claim refunds of illegally collected amounts plus compensatory interest under article 43(1) LGT; and (7) fast-track proceedings typically concluded within six months. Taxpayers can invoke constitutional protections, challenge violations of the duty to cooperate (article 59 LGT), and request declarations of nullity for acts with serious procedural defects.

Is the Tax Authority required to notify property owners before updating the taxable patrimonial value (VPT)?

Yes, under Portuguese tax law, the Tax Authority is required to notify property owners before updating the taxable patrimonial value (VPT). Article 77(6) of the General Tax Code (LGT) establishes that administrative acts only produce effects after proper notification. For property valuations, article 36 of CPPT sets forth notification requirements, and articles 13 and following of the IMI Code regulate the valuation process. When the Tax Authority identifies changes affecting a property's value (such as undeclared improvements), it must first notify the owner to submit the IMI Model 1 declaration. If the owner fails to comply, the Tax Authority can proceed with an ex officio valuation, but the resulting VPT determination must be formally notified to the property owner, typically by registered mail, before it can serve as the basis for tax assessments. The owner then has 30 days to request a second valuation under article 76 of the IMI Code.

Can a taxpayer claim compensatory interest (juros indemnizatórios) after annulment of unlawful IMI and Stamp Tax assessments?

Yes, a taxpayer can claim compensatory interest (juros indemnizatórios) after annulment of unlawful IMI and Stamp Tax assessments under article 43(1) of the General Tax Code (LGT). Compensatory interest is due when the Tax Authority illegally collects tax amounts due to annulled assessments, provided the annulment is based on illegality attributable to tax services (not taxpayer error). The interest compensates taxpayers for being deprived of funds they should not have paid. To claim compensatory interest, the taxpayer must: (1) obtain a final decision annulling the tax assessments; (2) have actually paid the contested amounts; and (3) demonstrate the annulment resulted from Tax Authority errors (such as failure to notify, lack of reasoning, or incorrect legal application). The interest rate and calculation method are established by ministerial order. Compensatory interest runs from the payment date until the refund is processed, ensuring full restitution of the taxpayer's financial position.

IMI and Stamp Tax Annulled for Lack of Property Valuation Notice – CAAD 295/2013-T

Table of Contents

Summary

Full Decision

ENGLISH TRANSLATION

Frequently Asked Questions

Tags

FRESH Legal Group

Table of Contents

IMI and Stamp Tax Annulled for Lack of Property Valuation Notice – CAAD 295/2013-T

Table of Contents

Summary

Full Decision

ENGLISH TRANSLATION

Frequently Asked Questions

Tags

FRESH Legal Group

Related Articles

Table of Contents