Process: 301/2017-T

Date: January 5, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 301/2017-T addressed whether Stamp Tax under heading 28.1 of the General Stamp Tax Table (TGIS) applies to building land without residential use. The taxpayer, A... LDA, challenged Stamp Tax assessments for 2012-2013 on urban property registered as a construction site in Loulé municipality. The claimant argued heading 28.1, introduced by Law 55-A/2012, requires 'residential use' (uso habitacional), which construction sites lack. After filing revision requests in September 2016, the Tax Authority revoked the assessments on 05-06-2017, before the arbitral tribunal's constitution on 11-07-2017. This revocation created supervening uselessness (inutilidade superveniente da lide), as the contested acts ceased to exist in the legal order. The Tax Authority argued this futility warranted extinction of proceedings and that the tribunal lacked jurisdiction. However, the taxpayer invoked Article 13(2) RJAT and Article 64 CPTA to continue proceedings solely regarding compensatory interest (juros indemnizatórios) and reimbursement of amounts unduly paid. While the Tax Authority reimbursed the principal on 28-08-2017, it denied compensatory interest. The decision confirms that heading 28.1 does not apply to construction sites lacking dwellings. Regarding procedural aspects, Article 13(1) RJAT establishes that when the Tax Authority revokes contested acts within the response deadline and notifies CAAD, supervening uselessness occurs. Taxpayers can request continuation for accessory claims under Article 13(2) RJAT. The case illustrates the intersection of substantive Stamp Tax law with procedural arbitration rules, particularly regarding compensatory interest entitlement when the administration voluntarily revokes illegal assessments after taxpayer challenge but before judicial determination.

Full Decision

ARBITRAL DECISION

I – REPORT

1. A… LDA., legal person no.…, with registered office at …, no.…, …, …-… Lisbon, filed, on 28-04-2017, a request for constitution of the arbitral tribunal, in accordance with the provisions of articles 2º and 10º of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in conjunction with article 102º of the CPPT, in which the Tax and Customs Authority (hereinafter referred to only as the Respondent) is named as respondent.

2. The claimant seeks, through its request, a declaration of illegality of the tax stamp assessment acts, relating to the years 2012 and 2013, subject of collection notes no. 2012… and 2014…, 2014… and 2014…, respectively, and of the implied dismissal acts of the revision requests, with the consequent reimbursement of the tax paid, as well as the recognition of the right to compensatory interest.

3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 28-04-2017.

3.1. The claimant did not proceed with the appointment of an arbitrator, and therefore, under the provisions of paragraph a) of no. 2 of article 6º and paragraph b) of no. 1 of article 11º of the RJAT, the President of the Deontological Council appointed the undersigned as arbitrator of the arbitral tribunal, who communicated acceptance of the appointment within the legal time limit.

3.2. On 23-06-2017 the parties were notified of the arbitrator's appointment, with no objection being raised.

3.3. In accordance with the provisions of paragraph c) of no. 1 of art. 11º of the RJAT, the arbitral tribunal was constituted on 11-07-2017.

3.4. In these terms, the Arbitral Tribunal is regularly constituted to consider and decide the object of the case.

4. To substantiate the request for arbitral pronouncement, the claimant alleges, in summary, the following:

That the assessment acts are illegal, there being no basis for assessment of tax stamp for item 28.1, since the urban property registered in the tax register under article …, of the parish of …, municipality of Loulé, was a construction site where no dwelling existed, and therefore was not an urban property with "residential use", for purposes of item 28.1 of the TGIS, as amended by Law no. 55-A/2012 of 29 October.

On 28/09/2016 it filed, in accordance with art. 78º, no. 1 of the General Tax Law, requests for revision of the tax assessment acts in question.

However, no express decision was issued on the revision requests up to the present date, and therefore, in accordance with the provisions of art. 57º nos 1 and 5 of the LGT, the same are presumed to be tacitly dismissed on 3/02/2017.

By petition of 07/07/2017, in light of the revocation of the assessment acts in question by the AT, it requested, in accordance with the provisions of art. 13º, no. 2 of the RJAT and art. 64º of the CPTA, the continuation of the proceedings against the dispatch that addressed the revision requests, in the part in which it dismissed the request for payment of compensatory interest, as well as in the part in which it made no pronouncement on the request for restitution of amounts unduly paid.

5. The Tax and Customs Authority submitted a response, having argued in summary:

Given that within the time period established in article 13º of the RJAT, on 22.06.2017, the AT informed CAAD that, by Dispatch of 05.06.2017, of the Deputy Director-General (by delegation), the acts subject of the request were revoked, i.e., the disputed assessments were annulled, with annulment of the assessment acts subject of the present dispute, these were expunged from the legal order.

This circumstance results in the impossibility and/or futility of the dispute, which occurred prior to the commencement of the same and to the constitution of this Arbitral Tribunal on 11.07.2017, requesting the extinction of the instance.

Since the AT scrupulously complied with all legal and administrative procedures required in light of what is established in article 13º, no. 1 of the RJAT, the futility or impossibility can only and solely be imputed to the Claimant (cf. no. 3 of art. 536º of the CPC and no. 2 of art. 24º of the RCP).

In any case, the present request for arbitral pronouncement lacks an object, having in account that the targeted tax acts ceased to exist in the legal order from which would result the total dismissal of the request.

Regarding the continuation of the proceedings to consider the request for reimbursement of amounts paid and condemnation of the AT in payment of compensatory interest, there exists material incompetence of the Tribunal to pronounce on such matters, and the tribunal should not even have been constituted.

In any circumstance, compensatory interest would never be owed to the claimant, as the respective legal requirements were not met.

II – CASE MANAGEMENT

7.1. The tribunal is competent and regularly constituted.

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

7.3. The joinder of claims is legal.

7.4. The case does not suffer from nullities.

7.5. As already mentioned, the respondent raised the exception of impossibility/subsequent futility of the dispute, lack of object and/or useful effect of the dispute, impropriety of the procedural remedy and material incompetence of the arbitral tribunal.

The consideration of such exceptions will be made below, as it is dependent on the facts held as proven.

III – FACTS AND LAW

III.1. Facts

8. Statement of Facts

8.1. Having regard to the positions assumed by the parties and the documentary evidence attached to the case, the following facts are considered proven, with relevance for the consideration and decision of the questions raised:

- The claimant was notified of the tax stamp assessments contained in the collection note relating to the year 2012, with no. 2012… and to the year 2013 with nos. 2014…, 2014… and 2014…, by application of item 28.1 of the TGIS to the urban property registered in the tax register under article …, of the parish of …, municipality of Loulé, which was a construction site, and proceeded to its payment.

- The claimant filed, on 28-09-2016, requests for revision of the tax assessment acts in question, requesting their annulment as well as the restitution of amounts unduly paid plus payment of compensatory interest.

- By dispatch of 05-06-2017, of the Deputy Director-General (by delegation), the aforementioned assessments were annulled, dismissing the payment of compensatory interest.

- The claimant requested the continuation of the present case for consideration of the request for payment of compensatory interest and reimbursement of amounts unduly paid.

- On 28-08-2017 all amounts paid by the claimant were restituted to it.

8.2. Grounds for the Statement of Facts:

The statement of facts given as proven is based on the critical examination of the documentary evidence, not contested.

III.2. Law

On the Exceptions Raised

For ease of exposition, the exceptions raised will be addressed in a global manner, and there is no apparent need for their separate treatment.

It is settled that the assessment acts subject of the arbitral request were annulled, with consensus between the parties that, on this point, extinction of the instance occurs due to futility of the dispute.

The respondent questions the legitimacy of the constitution of the arbitral tribunal, which occurred on 11-07-2017, as on that date there already existed a dispatch annulling the assessments, dated 05-06-2017 and of which knowledge was given to the case on 22 of the same month.

In accordance with the provisions of article 13º, no. 1, of the RJAT, as amended by Law no. 66-8/2012, of 31 December, "in requests for arbitral pronouncement that have as their object the consideration of the legality of tax acts foreseen in article 2º, the highest-ranking official of the tax administration service may, within a period of 30 days counting from knowledge of the request for constitution of the arbitral tribunal, proceed with the revocation, ratification, reform or conversion of the tax act whose illegality was raised, practicing, when necessary, a substitute tax act, and must notify the president of the Administrative Arbitration Centre (CAAD) of his decision, upon which the time period referred to in paragraph c) of no. 1 of article 11 shall commence."

As is stated in the arbitral decision rendered in proc. 360/2014-T, "although revocation has disintegrative or destructive effects, in whole or in part, of a prior act, even in case of total revocation the claimant may have interest in the declaration of illegality of the revoked act as support for possible claims for compensation for damages caused to him until the effects of the revocatory act are produced. Indeed, although prima facie article 13º, no. 2, of the RJAT, does not refer to revoked acts, the fact is that it is indisputable that arbitral tribunals have competence to declare the illegality of an act, even if this has already disappeared from the legal order, provided that the claimant has some interest in that declaration. Moreover, this has been the jurisprudential understanding of the STA."

In the same way, says Counselor Jorge Lopes de Sousa – "Guide to Tax Arbitration", page 176: "In no. 2 of article 13º of the RJAT, provision is made only for the continuation of the procedure regarding the new act that substitutes, wholly or in part, the one subject of the request for arbitral pronouncement. However, if a revocatory act is practiced without new regulation of the legal situation but effects produced by the revoked act persist, it seems that the case should proceed in relation to those effects, if their elimination was requested, as permitted by article 65º, no. 1, of the CPTA, subsidiarily applicable, under article 29º, no. 1, paragraph c), of the RJAT. This is what occurs, for example, when the act is revoked but damage caused by performance of a guarantee persists, whose compensation was requested in the judicial challenge proceedings, under no. 2 of article 171º of the CPPT."

Continuing to cite arbitral decision no. 360/2014-T: "even in the case in which revocation of the tax act results from a subsequent tax administrative act, as its effectiveness in relation to the taxpayer depends on the revocatory act being notified to him, the claimant, if unaware of the practice of the act because it has not been brought to his knowledge, may submit it to the Arbitral Tribunal with a view to declaring its illegality. In this case, even if the Tribunal comes to recognize that the act cannot be annulled, because it has meanwhile disappeared from the legal order, it cannot fail to recognize that the Tribunal's activity is entirely imputable to the AT."

Concluding that "the same applies, indeed, if revocation occurs after the request for constitution of the Arbitral Tribunal, in accordance with article 13º of the RJAT."

It follows from the above that what is relevant for consideration of the request is, not the constitution of the arbitral tribunal, but the filing of the request.

Moreover, after the notification to the president of CAAD of the revocatory act or substitute act, a period of ten days commences for communication to the parties of the constitution of the Arbitral Tribunal, a period which, in the absence of a revocatory or substitute act, is counted from the notification of the appointment of arbitrators, if to that appointment the parties have not objected.

In the case at hand, the request for constitution of the arbitral tribunal was notified to the respondent on 28-04-2017, and it had 30 days to pronounce fully on the claimant's request in accordance with article 13º, no. 1, of the RJAT. However, it was only on 22-06-2017 that the claimant came to know of the revocation of the assessment acts and the dismissal of the request for compensatory interest, that is, on a date after the aforementioned period of 30 days, and therefore on this basis as well the constitution of the Arbitral Tribunal was justified.

The constitution of the arbitral tribunal thus complied with all legal requirements and was regularly constituted.

The filing of the request thus results from a fact imputable to the respondent, which is responsible for the futility of the dispute it raised.

Let us now consider what should be said regarding the question of material competence to consider the matters raised in the request filed by the claimant under art. 13º of the RJAT, namely the reimbursement of amounts unduly paid and the payment of compensatory interest to the claimant.

As regards the first matter, although the request has lost its object, since the amounts paid were already reimbursed to the claimant, we incline to admit that the arbitral tribunal would be incompetent to consider such request. Indeed, this would not be competent to consider such immediate object of the request – condemnation in reimbursement of amounts unduly paid – which could only be the object of execution of judgments proceedings.

However, the same cannot be said with respect to the request for payment of compensatory interest.

In accordance with the provisions of art. 100º of the LGT, "the tax administration is obliged, in case of total or partial success of claims or administrative appeals or judicial proceedings in favor of the taxpayer, to immediate and full restoration of the situation that would have existed if the illegality had not been committed, comprising the payment of compensatory interest, in accordance with the terms and conditions foreseen in law."

A provision which, in the case of arbitral decisions, is applicable by virtue of the provisions of art. 24º, no. 1, b) of the RJAT.

As the recognition of the right to compensatory interest in the arbitral process results from the provisions of article 24º, no. 5 of the RJAT, when it stipulates that "payment of interest is due, regardless of its nature, in accordance with the provisions of the general tax law and the Code of Procedure and Tax Procedure."

Although the judicial challenge process, in the same way as the arbitral process, is essentially a process of annulment of tax acts, it does allow condemnation of the AT in payment of compensatory interest, as results from the provisions of art. 43º of the LGT, when it establishes that the same are due when it is determined, in administrative claim or judicial challenge – or, as we say, in tax arbitration – that there was error imputable to the services resulting in payment of the debt in an amount higher than that legally due.

It is therefore manifest that it falls within the competence of arbitral tribunals to consider requests for condemnation in payment of compensatory interest.

The exception of material incompetence raised by the respondent therefore does not succeed.

Given this, it remains to determine whether there exists a legal basis that justifies payment of compensatory interest to the claimant.

Or rather, the question to be decided lies in determining whether, following annulment of the tax act subsequent to a revision request, compensatory interest is owed.

In accordance with the provisions of no. 1 of art. 43º of the LGT cited above, "compensatory interest is due when it is determined, in administrative claim or judicial challenge, that there was error imputable to the services resulting in payment of the tax debt in an amount higher than that legally due."

The provision is manifestly express when it refers therein only to administrative claim or judicial challenge.

The cases in which annulment results from a tax act revision process are contemplated in paragraph c) of no. 3 of the same article, when it stipulates that in that case compensatory interest will also be due "when revision of the tax act at the initiative of the taxpayer is effected more than one year after the request for it, unless the delay is not imputable to the tax administration."

It follows that if the taxpayer requests ex officio revision of the tax act and the same is granted before one year has elapsed from the request, compensatory interest will not be owed.

This matter was already the object of various decisions of the STA (see, in particular, Ac. of 12-12-2006 – Proc. 0918/06 and of 02-11-2006 – Proc. 606/06).

As is stated in the first of the aforementioned decisions: "in accordance with article 43º of the LGT, compensatory interest is only due when the taxpayer claims or challenges, which he should, as a rule, do within ninety days. That is the only situation foreseen in no. 1 of the article. Revision of the act made at the initiative of the taxpayer is neither confused with nor equivalent to administrative claim, and cannot be considered to be included in no. 1 of art. 43º, which speaks only of administrative claim or judicial challenge. And there is no provision of the LGT that assigns compensatory interest as a result of unduly paid taxes in cases other than claim or challenge. No. 3 of the article does not deal with interest directly intended to compensate the taxpayer for having disbursed his money as a result of an error imputable to the services. It concerns other cases in which interest is related to a reality different from error of the services, namely, non-compliance with procedural time limits by the Administration: either because it did not refund the tax ex officio within the legal time limit [paragraph a)]; or because it did not process the credit note within thirty days [paragraph b)]; or because it took more than one year to conclude the ex officio revision procedure requested by the taxpayer [paragraph c), which can be combined with article 57º, no. 1]. For this reason, in the cases of no. 3, interest is never due, even if error imputable to the services is determined, provided that the Administration complies with the time limits directly or by reference therein foreseen."

In the case at hand, the claimant filed the revision request on 2-09-2016 and the dispatch annulling the assessment acts was issued on 05-06-2017 and knowledge thereof was given to CAAD on 22 of the same month.

That is, the AT decided the revision request made by the claimant before one year had elapsed, after which it would be obliged to pay the claimant compensatory interest for the unduly paid amount.

The request for condemnation of the respondent in payment of compensatory interest is therefore destined to fail.

IV. DECISION

The Arbitral Tribunal therefore decides as follows:

- Declares the instance extinct with respect to the request for annulment of the assessment acts, in light of the revocation of the same by the Tax Administration.

- Declares the request for payment of compensatory interest unfounded, absolving the respondent thereof.

- Condemns both parties to payment of the costs of the case, in the proportion of 96% by the respondent and 4% by the claimant.

V. VALUE OF THE CASE

The value of the case is fixed at €47,450.53, in accordance with article 97º-A, no. 1, a), of the Code of Procedure and Tax Procedure, applicable by virtue of paragraphs a) and b) of no. 1 of article 29º of the Legal Regime for Tax Arbitration and no. 2 of article 3º of the Regulations on Costs in Tax Arbitration Proceedings.

VI. COSTS

The arbitration fee is fixed at €2,142.00, in accordance with Table I of the Regulations on Costs in Tax Arbitration Proceedings, in accordance with articles 12º, no. 2, and 22º, no. 4, both of the Legal Regime for Tax Arbitration, and article 4º, no. 4, of the aforementioned Regulations.

Let notification be made.

Lisbon, 5 January 2018

The Arbitrator

(António Alberto Franco)

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Heading 28.1 of the General Stamp Tax Table apply to building land without residential use in Portugal?
No. Stamp Tax under heading 28.1 of the General Stamp Tax Table applies exclusively to urban property with 'residential use' (uso habitacional). This heading, introduced by Law 55-A/2012 of 29 October, does not apply to building land, construction sites, or urban property without dwellings. In CAAD Decision 301/2017-T, the Tax Authority's revocation of assessments on a construction site in Loulé confirmed this interpretation. Property must have actual residential use—mere classification as urban property in the tax register is insufficient if no dwelling exists.
What is supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) occurs when a tax dispute becomes futile or impossible after arbitration begins, typically because the contested administrative act is revoked or ceases to exist in the legal order. Under Article 13(1) of RJAT (Legal Regime for Tax Arbitration), if the Tax Authority revokes the contested act within the response deadline and notifies CAAD, the dispute loses its object. This leads to extinction of proceedings (extinção da instância) regarding the principal claim. However, Article 13(2) RJAT allows taxpayers to request continuation of proceedings for accessory matters like compensatory interest and reimbursement, invoking Article 64 CPTA.
Can a taxpayer claim compensatory interest (juros indemnizatórios) after the Tax Authority revokes an illegal Stamp Tax assessment?
The entitlement to compensatory interest after Tax Authority revocation of illegal assessments depends on meeting legal requirements under Article 43 LGT. In CAAD Decision 301/2017-T, the taxpayer requested compensatory interest after the Tax Authority revoked Stamp Tax assessments. The Tax Authority argued that legal requirements were not met and that the arbitral tribunal lacked material jurisdiction (incompetência material) to rule on compensatory interest. Under Article 13(2) RJAT, taxpayers can request continuation of proceedings specifically for compensatory interest claims, even after supervening uselessness occurs. The outcome depends on whether the taxpayer proves the Tax Authority's delay or illegal conduct caused financial harm warranting compensation.
How does the CAAD tax arbitration procedure work when the Tax Authority revokes the contested tax assessments during proceedings?
Under Article 13(1) RJAT, when the Tax Authority revokes contested assessments within the response deadline and notifies CAAD, supervening uselessness (inutilidade superveniente) occurs. In Decision 301/2017-T, the Tax Authority revoked assessments on 05-06-2017, notified CAAD on 22-06-2017, but the tribunal was constituted on 11-07-2017. The Tax Authority argued the tribunal should not have been constituted. Article 13(2) RJAT allows taxpayers to request continuation of proceedings solely for accessory claims (compensatory interest, reimbursement) under Article 64 CPTA. The main claim regarding assessment illegality is dismissed due to futility, as the act no longer exists in the legal order. Costs allocation follows Article 536(3) CPC and Article 24(2) RCP.
What is the deadline to file a review request under Article 78 of the General Tax Law (LGT) for unlawful Stamp Tax assessments?
Article 78(1) of the General Tax Law (LGT) allows taxpayers to file revision requests (pedidos de revisão) against tax assessments without a strict deadline, though prudence dictates filing within the general four-year limitation period. In CAAD Decision 301/2017-T, the taxpayer filed revision requests on 28-09-2016 for 2012-2013 Stamp Tax assessments. Under Article 57(1) and (5) LGT, if the Tax Authority does not issue an express decision within four months, the request is deemed tacitly dismissed (indeferimento tácito). Here, tacit dismissal occurred on 03-02-2017. Taxpayers can then challenge this tacit dismissal through tax arbitration, as occurred when the claimant filed the CAAD request on 28-04-2017.