Process: 321/2015-T

Date: January 11, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision from the Portuguese Tax Arbitration Court (CAAD) addresses critical jurisdictional questions regarding the review of Stamp Tax liquidation acts. The taxpayer challenged two Stamp Tax assessment acts totaling €26,537.20, issued under item 28.1 of the General Stamp Tax Table (TGIS), which applies to urban properties classified as building land. The case centers on whether CAAD has jurisdiction to review such liquidation acts and the grounds upon which they may be contested. The Tax Authority raised three preliminary exceptions: lack of jurisdiction to examine collection notes, non-challengeability of collection documents per se, and incompetence to award compensation for improperly furnished guarantees. The taxpayer argued the assessment acts suffer from lack of proper reasoning, omission of essential legal formalities under article 60 of the General Tax Law (requiring prior notification before assessment), and erroneous application of law regarding property classification. The procedural history reveals complex issues about the distinction between liquidation acts and collection notes, the arbitral tribunal's material competence under the RJAT (Legal Regime for Tax Arbitration), and whether compensation for bank guarantees falls within CAAD's jurisdiction. This decision is significant for establishing the boundaries of tax arbitration competence in Portugal, particularly regarding Stamp Tax matters under Verba 28.1, which frequently arise in real estate transactions involving properties classified as building land. The case also addresses fundamental principles of tax procedure, including the right to prior notification, adequate reasoning of tax acts, and the protection of taxpayers' procedural rights. The outcome impacts both the scope of arbitral review and the practical remedies available to taxpayers contesting Stamp Tax assessments, including ancillary claims for compensation related to litigation costs and guarantees.

Full Decision

ARBITRAL DECISION

I – Report

1.1. A..., taxpayer no...., now represented by B..., S.A., taxpayer no...., with tax domicile at Avenue..., lot..., ground floor C, parish ..., municipality of Lisbon (hereinafter designated as "Applicant"), having been notified of "Stamp Tax Assessment Acts no. 2015... and 2015..., issued on 20/3/2015 by the Director-General of Taxes under item 28.1 of the General Table attached to the Stamp Tax Code (CIS), resulting in a total collection of €26,537.20", and not accepting the same, submitted to this Court, on 20/5/2015, a request for arbitral pronouncement seeking the examination of the "illegality of the [aforementioned] Stamp Tax Assessments", on the grounds that there occurs "lack of grounds for the contested tax assessment act", "omission of essential legal formality" and "erroneous application of law by the Tax Administration". Finally, it requests "compensation for guarantee improperly furnished".

1.2. On 7/8/2015, the present Singular Arbitral Court was constituted, with as arbitrator His Excellency Dr. Augusto Vieira (appointed on 22/7/2015).

1.3. Under article 17, no. 1, of the RJAT, the AT was cited, as respondent party, to submit its response, under the terms and for the purposes of said article, through dispatch of 10/8/2015. By the same dispatch, the parties were invited to pronounce themselves on the possible waiver of holding the meeting referred to in article 18 of the RJAT and, further, on the possible waiver of production of written or oral pleadings. In a further dispatch, also of 10/8/2015, concerning witness evidence, the Court decided, under the provisions of article 16, point c), and article 19, both of the RJAT, not to proceed with the hearing of witnesses called by the Applicant, as it was understood "that the evidence required [for the factuality alleged in the request for pronouncement] is documentary in nature, which moreover follows from reading the request for pronouncement and the documents already filed in the case."

1.4. By dispatch of 31/8/2015 from His Excellency the President of the Deontological Board of CAAD, the following was communicated to the parties: "His Excellency Dr. Augusto Vieira, designated to perform the duties of arbitrator in the aforementioned proceeding, has requested to be excused from his duties. Accordingly, it is determined that His Excellency Dr. Augusto Vieira be replaced, as arbitrator in this proceeding, by His Excellency Professor Doctor Miguel Patrício."

1.5. The AT submitted its response on 1/10/2015, having there argued the following exceptions: i) exception of "lack of jurisdiction of the arbitral tribunal" for "the examination of the request formulated, namely that of the legality of a mere collection note"; ii) exception of "non-challengeability of the challenged acts", on the grounds that "the present collection documents are not challengeable per se"; and, if this is not understood, it further alleged iii) exception of "absolute material incompetence of the Arbitral Court to recognize the right of the applicants to receive compensation for improper furnishing of guarantee", due to "lack of legal provision". By way of defense, the AT argued, in summary, that there was no lack of grounds, nor omission of essential legal formality by alleged violation of article 60 of the General Tax Law (LGT), nor erroneous application of law. The AT alleged, finally, that there is "no error attributable to the services, wherefore the Applicants' request for any compensation for improper furnishing of guarantee is unfounded and inadmissible" and stated that it did not waive the presentation of written pleadings.

1.6. The Applicant, notified of the AT's response, replied, in writing, to the exceptions invoked, in a petition of 12/10/2015, which was notified to the Respondent. In said petition, the Applicant alleged, in summary, that the exceptions raised by the AT are "entirely unfounded and unproven".

1.7. On 12/10/2015 – and following the dispatch of 31/8/2015 from His Excellency the President of the Deontological Board of CAAD – Mr. Professor Doctor Miguel Patrício was appointed as arbitrator of this proceeding.

1.8. On 21/10/2015, the Respondent submitted a petition requesting the waiver of joining the administrative file.

1.9. On 26/10/2015, the Applicant submitted a petition in which it includes a copy of the, by itself designated, "tax acts" relating to the 3rd installment of Stamp Tax assessed under item 28.1 of the TGIS, as they constitute "part of the collection of Stamp Tax whose annulment, in its entirety, was requested in this action". (On 9/7/2015, the now Applicant had requested the joining to the case of copies of the collection notes relating to the 2nd installments.)

1.10. On 7/12/2015, the Applicant submitted a petition requesting, "under articles 53 and 171, no. 2, of the CPPT, in case of success of this arbitral proceeding, the payment of compensation to the Applicant, corresponding to the totality of costs incurred with the bank guarantee no...., furnished on 3 November 2015, by Bank..., S.A., in the amount of €23,474.30, for the suspension of the fiscal execution proceedings identified above, recorded until the date on which authorization is granted to lift the guarantee."

1.11. Considering that the now Applicant had already pronounced itself in writing on the exceptions raised by the Respondent, the present Court deemed, under the provisions of article 16, points c) and e), and 19, both of the RJAT, unnecessary the meeting of article 18 of the RJAT, as well as the hearing of witnesses, and that the proceeding should continue to decision, having set the date of 11/1/2016 for its issuance.

1.12. The Arbitral Court was regularly constituted.

1.13. In its request for pronouncement, the now Applicant states that it intends the Court to "examine the legality of the Stamp Tax Assessment Acts no. 2015... and 2015..., issued on 20/03/2015 by His Excellency the Director-General of Taxes, under item 28.1 of the General Table attached to the Stamp Tax Code, resulting in a total collection of €26,537.20". In this respect, the Applicant specifies that "the subject of the request for pronouncement to the Arbitral Court are the following tax acts: - Stamp Tax Assessment Act no. 2015..., issued on 20/03/2015 by His Excellency the Director-General of Taxes, by reference to the plot of land inscribed in the property register of the parish of..., municipality of Lisbon, under article..., under item 28.1 of the General Table attached to the Stamp Tax Code, resulting in a total collection of €13,042.50 [and] – Stamp Tax Assessment Act no. 2015..., issued on 20/03/2015 by His Excellency the Director-General of Taxes, by reference to the plot of land inscribed in the property register of the parish of..., municipality of Lisbon, under article..., under item 28.1 of the General Table attached to the Stamp Tax Code, resulting in a total collection of €13,494.70". In summary, the Applicant "intends that the illegality of the Stamp Tax Assessment Acts [...] be declared and, consequently, the same be annulled, under articles 2, no. 1, point a) and 10, no. 1, point a), both of Decree-Law no. 10/2011, of 20 January". It petitions said annulment on the grounds that the "assessment acts" aforementioned suffer from "defect of violation of law", based on "lack of grounds for the contested tax assessment act" (on the grounds that, allegedly, "the factual and legal grounds underlying" the tax acts in question "were not explained"), in "omission of essential legal formality" (on the grounds that, allegedly, "the now Applicant [was not] notified under the terms provided in point a), of no. 1, of article 60 of the General Tax Law") and in "erroneous application of law by the Tax Administration" (on the grounds that, in summary, "both properties could not have been classified as 'land for construction', under the terms and for the purposes of article 6, no. 1, point c), of the Real Estate Tax Code (IMI), being instead more appropriate to its material reality the classification of 'other', under the terms and for the purposes of article 6, no. 1, point d), of the IMI Code, in light of its lack of construction licensing, in the case of the property inscribed under article ... of the parish of..., or by reason of the lack of construction capacity, in the case of the property inscribed under article ... of the parish of..."). Finally, the Applicant requests "compensation for guarantee improperly furnished".

1.14. The now Applicant concludes its petition requesting "the illegality of the Stamp Tax Assessment Acts [above identified, and] their consequent annulment, all with the legal consequences."

1.15. For its part, the AT alleged, in its response, and in summary, that: a) "the applicant challenges not [...] the stamp tax assessment act but rather the periodic installments of payment of a single tax. Moreover, the Stamp Tax referred to in item 28 of the TGIS is assessed annually, with payment in installments being merely a collection technique for the tax and not a partial payment thereof, [whereby] the payment of one of the installments of the assessment made under item 28.1 of the TGIS is not a partial payment of that assessment, but merely a collection technique for the assessed tax. [...] The AT understands that the collection documents are not challengeable per se, reason for which the exception invoked should be upheld and the AT should be absolved of the claim"; b) "the Applicant does not challenge the tax assessment act, but rather the payment of an installment of the assessment act contained in a document that is a collection note, [whereby] the subject of the proceeding is the annulment not of a tax act (or of 1/3 of a tax act, which would not be legally possible) but of collection notes for the payment of [installments] of a tax, [which] exceeds the jurisdiction of the Arbitral Court"; c) "there is no provision for the jurisdiction of the Arbitral Court for the recognition of rights, wherefore there is, in the case at hand, absolute material incompetence of the arbitral tribunal to proceed with the recognition of rights, namely the payment of compensation for improper furnishing of guarantee, due to lack of legal provision". In addition to the exceptions aforementioned, the AT argued, by way of defense, and in summary, that there was no lack of grounds, nor omission of essential legal formality by alleged violation of article 60 of the LGT, nor erroneous application of law. It alleged, finally, that there is "no error attributable to the services, wherefore the Applicants' request for any compensation for improper furnishing of guarantee is unfounded and inadmissible".

1.16. The AT concludes that "the exception of lack of jurisdiction of the Arbitral Court should be upheld, or if this is not the case, the non-challengeability of the acts at issue in the request for arbitral pronouncement should be considered upheld, or in any case, if this is not decided, this action should be ruled unfounded, absolving the Respondent entity of the claim with the other legal consequences."

II – Relevant Factuality

2.1. In May 2015, the now Applicant submitted a request for arbitral pronouncement to the CAAD, in which it identifies as "subject of the request [...] the following tax acts: - Stamp Tax Assessment Act no. 2015..., issued on 20/03/2015 by His Excellency the Director-General of Taxes, by reference to the plot of land inscribed in the property register of the parish of..., municipality of Lisbon, under article..., under item 28.1 of the General Table attached to the Stamp Tax Code, resulting in a total collection of €13,042.50 (see Document no. 1 attached); - Stamp Tax Assessment Act no. 2015..., issued on 20/03/2015 by His Excellency the Director-General of Taxes, by reference to the plot of land inscribed in the property register of the parish of..., municipality of Lisbon, under article..., under item 28.1 of the General Table attached to the Stamp Tax Code, resulting in a total collection of €13,494.70 (see Document no. 2 attached). All in the amount of €26,537.20."

2.2. Observing the said Documents nos. 1 and 2, appended to the petition for pronouncement by the Applicant, it is clear that the same associates with "tax acts" of assessment the collection notes (relating to the "1st installment" of payment of the single Stamp Taxes) no. 2015... and no. 2015..., respectively.

2.3. It is true that the Applicant intended, in its petition of 9/7/2015, the inclusion in the subject of pronouncement of the Arbitral Court – because, in its understanding, they are "corresponding to part of the collection of Stamp Tax already contested, in its entirety" – the examination of the legality of acts no. 2015... and no. 2015..., relating to the 2nd installment; and in its petition of 7/12/2015, the inclusion in the subject of pronouncement of the Arbitral Court of the legality of acts no. 2015... and no. 2015..., relating to the 3rd installment. However, it also seems to be no less true that what was intended in the petition for arbitral pronouncement was the autonomous challenge of (first) Stamp Tax installments (even if this was not stated in these exact terms). Indeed, no other interpretation can be made because the now Applicant invoked, in said petition, defects that could only relate to the first installments, and not to the Stamp Tax assessment acts – which, at the time, did not yet exist. Note also that the mention of the total collection value in that petition does not allow – contrary to what the now Applicant intends, in its petition of 12/10/2015 – to overcome the above finding – since it allows only to conclude that there was not, at that date, documented facts supporting the total value indicated by the now Applicant (regarding single Taxes which, at the date, did not exist and which, for that reason, were not challengeable). Being the mentioned assessments indivisible, only the single acts of Stamp Tax assessment could be challenged, and not the various installments thereof (even if later cumulated), given that these do not constitute, per se, "single assessment act" or injurious act susceptible to challenge.

III – Regarding the Exception of Autonomous Non-Challengeability of Installments

Having in mind that the exceptions aforementioned were invoked by the AT, it is justified to previously examine them (see article 608, no. 1, of the CPC, ex vi article 29, no. 1, point e), of the RJAT). In these terms, it is now justified to know whether, as the now respondent alleges, there occurs the autonomous non-challengeability of the installments of the assessment acts contained in the collection notes that constitute the subject of this request for pronouncement.

Indeed, reading the provisions of the CIS, it is verified that the tax in question is assessed annually (article 23, no. 7) and that it must be paid within the terms, periods and conditions defined in article 120 of the IMI Code (article 44, no. 5). In turn, said article 120 of the IMI Code provides, in its no. 4, that "non-payment of an installment [...] within the established period implies the immediate maturity of the remainder".

From the above it follows that we are dealing with a case where, similarly to what occurs with IMI installments, the payment of each of the installments of the tax does not constitute partial payment of the assessment, but merely a collection technique for the tax.

Also in this sense, see, for example, the AD handed down in proc. 726/2014-T, of 10/3/2015: "an installment does not equate to a tax assessment, given that, under no. 7, of article 23, of the Stamp Tax Code, as amended by article 3, of Law no. 55-A/2012, of 29 October, "7 - In the case of tax owed for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, with the necessary adaptations, the rules contained in the IMI Code being applied" (emphasis ours). Now, the expression "the tax is assessed annually" indicates that a single annual assessment is made, although the same may be divided, for payment purposes, into installments, and not as many assessments as there are installments in which the debt must be satisfied – the division of an assessment into installments shall thus be nothing more than a mere revenue collection technique. [...] The payment installments of an IMI assessment or, in the situation under analysis, of a Stamp Tax assessment, under Item 28 of the TGIS, are not autonomously challengeable, as they originate from a single annual obligation, according to the teaching of Braz Teixeira: "It is necessary not to confuse periodic installments, which, although being performed by successive acts, at different moments, originate from the same obligation and constitute the various portions of a single performance that was divided, with performances that must be effected periodically, not due to a division of the overall performance, but rather to the periodic birth of new obligations, by the permanence of the factual presuppositions of taxation." See, equally, in the same sense, the AD handed down in proc. no. 205/2013-T, of 7/3/2014: "From the fact that the value of the assessment [of Stamp Tax] can be paid in several installments, it does not follow that there are three assessments. It is, rather, a single assessment that can be paid in several installments". Equally in the sense of indivisibility, but now as regards IMI tax acts (which is also relevant here, given the referral provided in article 67, no. 2, of the CIS), see, for example, the AD handed down in proc. 120/2012-T, of 12/6/2013.

Also in this regard, see, finally – and given the similarity with the case under analysis – the AD handed down in proc. 90/2015-T, of 25/9/2015, with which we agree: "the tax assessment is only one and only it will constitute an injurious act, susceptible of being the subject of a single challenge, so that when the law provides for its payment in various installments, staggered in time, the annulment of the tax act will have consequences with respect to all of them [...]. What the law does not provide for, neither in arbitral proceedings, nor in judicial review proceedings, is the possibility of annulment of payment of isolated tax installments, since such effect shall only result from the annulment of the tax assessment act which, as we have seen, consists of the quantification of the total amount to be paid and which is only and solely a single tax act. Thus, from the above it follows that the Stamp Tax collection notes, subject of the [...] request for arbitral pronouncement, are not challengeable per se, because they do not constitute tax assessment acts". (Emphasis ours.)

As stated previously, the petition for arbitral pronouncement intended the autonomous challenge of (first) Stamp Tax installments (even if it did not state this in these exact terms). Indeed, no other interpretation can be made because the Applicant invoked, in said petition, defects that could only relate to the 1st installments, and not to the Stamp Tax (single) assessment acts (which, at the time, did not yet exist). Moreover, the mention of the total collection value in the petition does not allow – contrary to what the now Applicant intends, in its petition of 12/10/2015 – to overcome that finding – since it only allows to conclude that there was not, at that date, documented facts supporting the total value indicated by the Applicant (regarding single Taxes which, at the date, did not exist and which, therefore, were not challengeable). Thus, being the mentioned assessments indivisible, only the single acts of Stamp Tax assessment could be challenged, and not the various installments thereof (even if later cumulated), given that these installments do not constitute, per se, "single assessment act" or injurious act susceptible to challenge.

In summary: given that each of the installments relating to Stamp Tax assessment are not autonomously challengeable, it is concluded, for the reasons indicated above, that this Court lacks jurisdiction to examine and decide the claim at issue in the litigation sub judice, under the provisions of article 89, no. 1, point c), of the CPTA, ex vi article 29, no. 1, point c), of the RJAT, as there occurs a dilatory exception preventing knowledge of the merits of the case, under the provisions of articles 576, nos. 1 and 2, of the CPC, ex vi article 2, point e), of the CPPT, and article 29, no. 1, points a) and e), of the RJAT, which precludes knowledge of the claim and leads to the absolution of the instance of the AT, under articles 576, no. 2, and 577, point a), of the CPC, ex vi article 29, no. 1, points a) and e), of the RJAT.

IV – Regarding the Other Exceptions and the Merits of the Case

Under the provisions of article 608, no. 2, of the CPC, applicable ex vi article 29, no. 1, point e), of the RJAT, "the judge must resolve all questions which the parties have submitted for examination, except those whose decision is foreclosed by the solution given to others".

Now, considering the solution given to the question of the Court's lack of jurisdiction due to the autonomous non-challengeability of the installments, the examination of the other exceptions invoked becomes unnecessary, and the examination of the merits of the case is further necessarily precluded, including the examination of the request for compensation for improper furnishing of guarantee.

V – Decision

In light of the foregoing, it is decided:

  • That the dilatory exception on the grounds of autonomous non-challengeability of the installments, invoked by the respondent, is upheld.
  • The respondent is absolved of the instance (articles 96 and 278 of the Civil Procedure Code, ex vi article 29, no. 1, points a), c) and e), of the RJAT).

The value of the case is set at €26,537.20 (twenty-six thousand five hundred and thirty-seven euros and twenty cents), under articles 32 of the CPTA and 97-A of the CPPT, applicable by reason of the provisions in article 29, no. 1, points a) and b), of the RJAT, and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to be borne by the applicant, in the amount of €1,530.00 (one thousand five hundred and thirty euros), under Table I of the RCPAT, given the exceptions noted above, and in compliance with articles 12, no. 2, and 22, no. 4, both of the RJAT, and the provisions of article 4, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 11 January 2016.

The Arbitrator

(Miguel Patrício)

Text drawn up by computer, under the provisions of article 131, no. 5, of the CPC, applicable by referral in article 29, no. 1, point e), of the RJAT.

The drafting of this decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is the competence of the Arbitral Tribunal to review Stamp Tax (Imposto do Selo) liquidation acts under Portuguese law?
The Arbitral Tribunal has jurisdiction to review Stamp Tax liquidation acts under Portuguese law pursuant to the RJAT (Legal Regime for Tax Arbitration - Decree-Law 10/2011). However, this competence extends only to challengeable administrative acts that determine tax liability, not mere collection notices. The tribunal must examine whether the contested acts are true liquidation acts (actos de liquidação) that establish or modify tax obligations, rather than simple collection documents. Under articles 2 and 10 of the RJAT, CAAD can examine the legality of tax assessment acts, including those relating to Stamp Tax, when they are properly characterized as autonomous administrative decisions subject to challenge under the Tax Procedure Code (CPPT). The distinction is critical: liquidation acts issued by the Director-General of Taxes under item 28.1 TGIS are reviewable, while subsequent collection notes implementing those liquidations may not independently constitute challengeable acts.
Can a taxpayer challenge Stamp Tax liquidations issued under Verba 28.1 of the General Stamp Tax Table before CAAD?
Yes, a taxpayer can challenge Stamp Tax liquidations issued under Verba 28.1 of the General Stamp Tax Table before CAAD, provided the acts challenged are properly characterized as liquidation acts (actos de liquidação) rather than mere collection documents. Verba 28.1 applies to urban properties or fractions held by entities subject to IRC (Corporate Income Tax) or non-residents subject to IRS (Personal Income Tax) that are not allocated to business activity. The Tax Authority argued that collection documents are not challengeable per se, but the taxpayer contended that the assessment acts issued by the Director-General constitute autonomous administrative decisions determining tax liability. Under the RJAT, CAAD has jurisdiction over disputes concerning the legality of tax acts, including Stamp Tax assessments. The key issue is whether the documents titled 'Stamp Tax Assessment Acts' (Actos de Liquidação de Imposto do Selo) are substantive liquidation decisions or merely executory collection notices. If they represent the initial determination of tax liability with independent legal effects, they fall within CAAD's material competence.
What are the grounds for contesting a Stamp Tax liquidation based on lack of reasoning and procedural irregularities?
The grounds for contesting a Stamp Tax liquidation based on lack of reasoning and procedural irregularities include: (1) Violation of the duty to provide grounds (fundamentação) - tax acts must explain the factual and legal basis for the assessment under article 77 of the Tax Procedure Code and article 268(3) of the Portuguese Constitution; (2) Omission of essential legal formalities, specifically violation of article 60 of the General Tax Law (LGT), which requires prior notification to taxpayers before certain tax assessments, allowing them to exercise their right to be heard (direito de audição prévia); (3) Defective reasoning that fails to explain why properties were classified as 'building land' under article 6(1)(c) and subjected to Verba 28.1; and (4) Erroneous application of substantive tax law regarding property classification and the applicable Stamp Tax rate. These defects constitute grounds for annulment under articles 163 and 99 of the Tax Procedure Code. The lack of proper grounds violates fundamental principles of administrative legality, transparency, and the taxpayer's right to understand and effectively challenge tax determinations.
How does the exception of material incompetence affect arbitral proceedings involving Stamp Tax collection notices?
The exception of material incompetence significantly affects arbitral proceedings by potentially limiting the scope of relief available to taxpayers. When the Tax Authority raises this exception, the arbitral tribunal must first examine its own jurisdiction before addressing substantive issues. In this case, the AT argued absolute material incompetence on three grounds: (1) lack of jurisdiction to review collection notes as opposed to liquidation acts; (2) non-challengeability of collection documents; and (3) incompetence to award compensation for improperly furnished guarantees due to lack of legal provision. Under article 16 of the RJAT, the arbitral court must resolve preliminary questions including its own competence. If the exception is upheld, the tribunal must dismiss the request without examining the merits. The taxpayer must respond to these exceptions, demonstrating that: the challenged acts are substantive liquidation decisions within CAAD's material scope; collection notices implementing liquidations can be challenged when they embody the underlying assessment; and compensation claims are ancillary to the principal challenge and fall within the tribunal's jurisdiction under articles 53 and 171(2) of the CPPT regarding costs incurred from illegal tax acts.
Is compensation for an unduly provided guarantee available when Stamp Tax liquidation acts are deemed illegal?
Compensation for an unduly provided guarantee is available when Stamp Tax liquidation acts are deemed illegal, but only within specific legal parameters. Under articles 53 and 171(2) of the Tax Procedure Code (CPPT), taxpayers who successfully challenge tax acts may recover costs incurred from furnishing guarantees to suspend collection proceedings. However, the Tax Authority contested the arbitral tribunal's material competence to award such compensation, arguing lack of legal provision for this remedy within tax arbitration. The taxpayer requested compensation for all costs associated with bank guarantee no. [...] furnished on November 3, 2015, to suspend tax execution proceedings. The legal basis requires: (1) the underlying tax act must be annulled or declared illegal; (2) the guarantee must have been improperly required, meaning the tax assessment was unlawful; (3) the costs must be properly documented and quantified; and (4) no error or fault is attributable to the taxpayer. The critical jurisdictional question is whether CAAD has competence to award such compensation under the RJAT or whether this claim falls exclusively within the jurisdiction of administrative or civil courts. This determination impacts the practical effectiveness of tax arbitration as a comprehensive remedy for illegal tax assessments.