Process: 361/2017-T

Date: December 15, 2017

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 361/2017-T) addresses critical procedural time limits in Portuguese tax arbitration. The claimant acquired property through insolvency proceedings and challenged an IMT assessment of €8,412.81, arguing for exemption under Article 270(2) of the Insolvency Code (CIRE). The claimant was notified of the hierarchical appeal rejection on 27 February 2017 but only filed the arbitration request on 6 June 2017. The arbitral tribunal identified a potential fatal procedural defect: Article 10(1)(a) of RJAT establishes a 90-day substantive deadline for filing arbitration requests after notification of hierarchical appeal decisions. This deadline, governed by Article 279 of the Civil Code, appears to have been exceeded by approximately one month. Notably, the Tax Authority subsequently revoked the assessment based on Circular 4/2017, which clarified that CIRE Article 270(2) exemptions do apply to isolated property sales within insolvency proceedings, not just transfers of entire business establishments. However, this substantive victory became overshadowed by the procedural timing issue. The case illustrates the critical importance of strict compliance with arbitration filing deadlines, as untimeliness (intempestividade) leads to expiry of the right of action (caducidade), preventing substantive analysis regardless of merit. This precedent emphasizes that even when tax authorities concede the substantive point, procedural defaults can preclude relief in arbitration proceedings.

Full Decision

ARBITRATION DECISION

I – Report

  1. On 6.06.2017, the Claimant, A…, taxpayer number …, resident at street …, no…, ..., …, Vila Nova de Gaia, requested from CAAD the constitution of an arbitral tribunal, pursuant to art. 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Respondent, with a view to declaring the illegality and consequent annulment of the Municipal Tax on Onerous Transfer of Real Estate (IMT) assessment no. … in the amount of 8,412.81 € (eight thousand four hundred and twelve euros and eighty-one cents) and condemning the Tax and Customs Authority to repay the amount paid with respect to that assessment, increased by compensatory interest.

  2. The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority.

In accordance with and for the purposes of the provisions in no. 1 of art. 6 of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, the undersigned was appointed as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Centre his acceptance of the appointment within the regularly applicable time limit.

The Arbitral Tribunal was constituted on 21 August 2017.

  1. The grounds presented by the Claimant in support of its claim were, briefly, as follows:

  • Within the context of the insolvency proceedings no. …/12… TBSJM, … Court, of the Judicial Court of S. João da Madeira, and which currently runs in the District of Aveiro, Court of Oliveira de Azeméis, … commercial court, the Claimant and his spouse acquired an autonomous fraction of real estate, which they declared was intended for own and permanent dwelling.

  • Following this, the assessment act that is the subject matter of the proceedings was made.

  • In the understanding of the claimant, such acquisition should benefit from the exemption regime provided for in no. 2 of art. 270 of CIRE.

  • Notwithstanding the disagreement with the practice of the tax act, the Claimant paid the corresponding amount, which is why, in addition to the annulment of the assessment, he should be reimbursed that amount increased by compensatory interest.

  1. The ATA – Tax and Customs Administration, called upon to pronounce itself, did not present a response and presented a petition containing the following:

"The Director-General of the Tax and Customs Authority (AT), defendant in the proceedings above identified, in which the Claimant is A…, with the NIF…, and which has as its object the declaration of illegality and annulment of the 2016 IMT assessment in the amount of € 8,412.81, where it requests the reimbursement of the amount unduly paid, increased by compensatory interest on that amount, which was the subject of a Gracious Objection no. …2016… and Hierarchical Appeal no. …2016…, comes to bring to the attention of the proceedings that the judgment of rejection of the Hierarchical Appeal was revoked, with all legal consequences, by the Deputy Director of the Porto Finance Department, by judgment issued on 26.9.2017, in accordance with the review of the interpretation of no. 2 of art. 270 of CIRE set forth in Circular no. 4/2017, of 10 February, expressed in Point III of the annex to Circular no. 10/2015, according to which, the application of the tax benefits provided for in no. 2 of article 270 of CIRE does not depend on the thing sold, exchanged or transferred encompassing the universality of the insolvent company or one of its establishments.

Thus, the acts of sale, exchange or transfer, in an isolated manner, of real estate of the company or of its establishments are exempt from IMT, provided that they are integrated within the scope of insolvency plans, payment plans or recovery plans or practiced within the scope of liquidation of the insolvent estate.

Therefore, it is requested of Your Excellency that the proceedings be judged as terminated due to supervening mootness of the dispute, pursuant to subsection e) of art. 277 of the CPC, subsidiarily applicable in accordance with the provisions of art. 29 of the RJAT."

  1. On 6.10.2017, the following arbitral judgment was issued:

"Taking into account the petition presented by the Respondent to the effect that the proceedings be judged as terminated due to supervening mootness of the dispute, pursuant to subsection e) of art. 277 of the CPC, by virtue of revocation of the assessment act that is the subject matter of the proceedings:

a) The Claimant shall be notified to pronounce itself, if it so wishes.

b) The parties shall be notified to clarify whether, with reference to the claims formulated by the Claimant regarding the reimbursement of the amount paid relating to the assessment and its respective interest, the respective amounts were paid to the Claimant."

  1. On 10.10.2017, the Claimant presented a petition containing, in particular, the following:

"(…) until now the respective amounts have not been reimbursed to the claimant (…)

Given the above, the claimant considers that once the reimbursement of the IMT value increased by the respective default interest has been effected, the proceedings should be terminated due to supervening mootness of the dispute, in accordance with the petition presented by the respondent.

Therefore, it is requested of Your Excellency that the proceedings await the reimbursement of the amount paid and respective interest, before the instance is judged as terminated due to supervening mootness of the dispute, pursuant to article 277 of the CPC."

  1. On 20.10.2017 the Respondent presented a petition of the following tenor:

"The Defendant Entity, in order to respond to the aforementioned judgment, requested information from the competent services for the implementation of the payment and calculation of the interest due, however it has not yet been possible to obtain responses from the same.

Given that fact, it requests of Your Excellency to be so kind as to grant a new time limit of no less than 10 days."

  1. By judgment of 23.10.2017, the Respondent was granted what was requested in the Petition presented on 20.10.2017.

  2. On 6.11.2017 the Respondent came before the proceedings to provide the following information:

"The Defendant Entity, in order to respond to the aforementioned judgment, requested information on the implementation of the payment and calculation of the interest due, and was informed that the procedures necessary to comply with the revocation judgment are still underway.

This is what we have to inform."

  1. By arbitral judgment of 7.11.2017, the realization of the arbitral hearing provided for in art. 18, no. 1 of the RJAT was dispensed with, on the grounds of the prohibition of the practice of useless acts.

The realization of arguments was also dispensed with, pursuant to art. 18, no. 2 of the RJAT, "a contrario".

Furthermore, 4.12.2017 was set as the date for pronouncing the arbitral decision.

  1. On 29.11.2017, an arbitral judgment was issued containing, in particular, the following:

"The Claimant was notified on 27 February 2017 of the decision rejecting the hierarchical appeal (cf. art. 10 of the initial petition).

The filing of the request for arbitral pronouncement occurred on 6.06.2017.

Pursuant to art. 10, no. 1, subsection a) of the RJAT, the request for constitution of the arbitral tribunal must be presented within 90 days from notification of the decision of the hierarchical appeal (…)

The time limit for filing the request for constitution of an arbitral tribunal is a substantive time limit to which the rules provided for in article 279 of the Civil Code apply (...)

Thus, unless better understood and without prejudice to further consideration, in particular in light of the pronouncements of the parties on this issue, it appears that at the date of presentation of the request for arbitral pronouncement, the legal time limit for that purpose had already expired, a circumstance which is susceptible to constitute an exception to admissibility based on lapse of time, of official knowledge and susceptible to result in the dismissal of the instance and which only now, as the Tribunal prepares its arbitral decision, has become aware.

Thus, under art. 16, subsection a) of the RJAT, the notification of the parties is determined so that they pronounce themselves on this issue, within seven days, running simultaneously for both parties.

The scheduled date of 4.12.2017 for pronouncing the arbitral decision is made without effect and 18.12.2017 is designated as the new date."

  1. The Claimant exercised the right to pronounce itself, sustaining, in summary, the following:

  • It follows from arts. 58 and 59 of the CPTA that the time limit for exercising the right of action in case of express rejection is three months from notification of the decision of the hierarchical appeal.

  • Under the previous wording of the Code of Procedure in Administrative Courts, the counting of time limits applied the provisions of the CPC, that is, art. 138, which determines that the time limit is suspended during judicial holidays, as was required by art. 58, no. 3 of the CPTA.

  • Thus, there was a time limit of 3 months with a suspension period due to judicial holidays falling in between.

  • Art. 3-A provides on the matter of time limits that, in the arbitral procedure, "time limits are counted in accordance with the Code of Administrative Procedure, with the necessary adaptations. And time limits for the practice of acts in the arbitral process are counted in accordance with the Code of Civil Procedure."

  • And, pursuant to art. 17-A, "The procedural time limit, established by law or fixed by arbitral judgment, is suspended during judicial holidays, in accordance with article 144 of the Code of Civil Procedure, with the necessary adaptations."

  • The new regime for counting time limits in the CPTA gave new wording to no. 2 of art. 58, referring the discipline of the counting of time limits to art. 279 of the Civil Code, thus generating ambiguity in relation to the regime applicable until 1 December 2015, which was the general regime provided for in art. 138, no. 1 of the CPC, in which the counting of time limits was suspended during judicial holidays.

  • The fact that art. 1 of the CPTA did not undergo any change in relation to the previous wording, combined with the new wording of no. 2 of art. 58 of the CPTA which did not expressly repeal art. 138, no. 1 of the CPC, generated confusion and ambiguity in the succession of norms on the counting of time limits, further adding the fact that the majority of available case law still refers to the previous wording.

  • Being the application immediate and without tolerance during a reasonable period of transition of the new time limit regime, disproportionately penalizing for the rights and legally protected interests of those who claim them.

  • In light of the ambiguity and uncertainty generated by the new wording of no. 2 of art. 58 of the CPTA, it is understood that in the case at hand the situation provided for in subsection c) of no. 3 of the aforementioned article is verified.

  • In the case at hand, only 9 days had elapsed from the date alleged for the practice of the impugned act (precisely the period of judicial holidays).

  • Therefore, the delay of nine days in relation to the legal time limit of three months should be considered excusable, taking into account the ambiguity of the new normative framework applicable and the absence of a reasonable period of adaptation to the new situation.

  • From 26 September – well before the raising of the issue of possible lapse of the arbitral judgment dated 30 November – both of the present year, the impugned act no longer remained in the legal system, and the objection that had it as its object became superveniently moot.

Concluding as follows:

"Therefore, it is requested of Your Excellency to:

a) Admit the timeliness of the request for pronouncement, pursuant to art. 58, 1) CPTA, if not so understood, pursuant to no. 3 b) of the same article, and if not so understood, pursuant to no. 3 c), following the subsequent procedures which will culminate in the pronouncement of the arbitral decision.

b) As a subsidiary matter, determine the supervening mootness of the dispute, stating in the decision that it is based on the revocation of the impugned act by the initiative of the Tax Administration and, consequently, recognizing the duty to repay the amount of € 8,412.81 to the claimant."

  1. The Respondent exercised the right to pronounce itself, sustaining, in summary, the following:

  • The time limit for presenting the request for constitution of an arbitral tribunal is a substantive time limit that is counted in accordance with article 279 of the Civil Code (CC), that is, it is counted in a continuous manner, without suspensions, in particular during periods of judicial holidays.

  • At the moment of presentation of the request for constitution of an arbitral tribunal, no judicial proceeding or process had yet been initiated, so it is not possible to defend the application of any rule for counting time limits of the Administrative Procedure, nor of Civil Procedure, because no judicial process yet existed.

  • In the case at hand, the Claimant, in the counting of time limits it made, applied a suspension corresponding to the period of Easter holidays, which led to the time limit of 90 days having already expired when it presented the request for constitution of an arbitral tribunal.

  • The same rules for counting time limits are also applicable to the presentation of judicial challenges, and the time limit for lodging them is considered a time limit of a substantive nature and is counted in accordance with article 279 of the CC by application of no. 1 of article 20 of the CPPT (See as an example, among many, the Judgment of the TCA South issued in Proc. 04869/11 of 27-04-2017)

  • It is verified that case law has been consistent in considering that the time limit in question is counted in a continuous manner, without suspensions, in particular during periods of judicial holidays.

  • Based on the above, the present request for constitution of an arbitral tribunal is untimely, as its right had already been extinguished on the date of lodging, thus verifying an exception to admissibility, in accordance with article 278, no. 1 e) of the CPC, which leads to the dismissal of the instance in accordance with article 576, no. 2 of the CPC, which is requested forthwith.

  1. The tribunal is materially competent and is regularly constituted pursuant to the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

  1. It is necessary to immediately resolve the preliminary issue of lapse of the right of action raised as set forth above.

For that purpose, the following facts appear to be relevant:

  1. The Claimant was notified on 27 February 2017 of the decision rejecting the hierarchical appeal which it filed against the decision rejecting the gracious objection which it had presented against the assessment act that is the subject matter of the present proceedings (cf. art. 10 of the petition for arbitral pronouncement).

  2. The presentation of the petition for arbitral pronouncement occurred on 6.06.2017, as it appears in the case management system.

Pursuant to art. 10, no. 1, subsection a) of the RJAT, the request for constitution of the arbitral tribunal must be presented within 90 days from notification of the decision of the hierarchical appeal.

As Jorge Lopes de Sousa[1] writes:

"In accordance with the provisions of article 20 of the CPPT, subsidiarily applicable by force of the provisions of article 29, no. 1, subsection a) of the RJAT, the time limits of the tax procedure and judicial challenge are counted in accordance with article 279 of the Civil Code and the time limits for the practice of acts in the judicial process are counted in accordance with article 144 of the CPC.

(…).

Concerning the time limit for presentation of the request for constitution of an arbitral tribunal, provided for in art. 10, being prior to the procedure, article 3-A does not apply, but rather the regime of article 279 of the Civil Code, by referral of article 29, no. 1, subsection a) of the RJAT and of article 20, no. 1 of the CPPT".[2]

This is also the settled understanding of arbitral case law.

As can be read in the arbitral decision issued in proc. 17/2014-T[3]:

"For its part, the application of the provisions of article 3-A of the RJAT only appears, therefore, subsequently to the opening of the arbitral proceedings, with the acceptance of the petition for pronouncement. Until then there is no process.

This is, without doubt, the sense of the case law on the interpretation of the application of the aforementioned norm, cf. Arb. Judgments nos. 35/2012-T and 83/2012-T.

The purpose of this article 3-A of the RJAT is therefore intended for time limits relating to acts that have to be practiced subsequently to the opening of the proceedings, conferring more time on the parties, namely for Response and Arguments.

On the other hand, not applying, for the reasons expressed, art. 3-A of the RJAT to the petition for arbitral pronouncement, how is the 90-day time limit provided for in subsection a) of no. 1 of article 10 of the RJAT counted then.

And on that point there is no doubt that the rules of article 279 of the CC apply, as is expressly provided for in article 20, no. 1 of the CPPT, both with respect to the tax procedure and to judicial challenge, which is the nature that the petition for arbitral pronouncement bears.

That is, the 90-day time limit for presentation of the petition for arbitral pronouncement begins with the notification of the tax act relating to the IRS assessment in question, and is counted in successive days, in accordance with the aforementioned article 279 of the CC, being only relevant the provision of subsection e), as to the ending of the time limit, in the terms referred to therein.

And this is the best legal interpretation of art. 10 of the RJAT, since if the legislator intended for art. 3 of the same RJAT to apply to the presentation of the petition for arbitral pronouncement, it would have said so – which it did not do.

On the other hand, being the time limit for challenge a time limit of action, substantive and not judicial, one of lapse of time, aiming, therefore, to determine the period for the exercise of a right and being peremptory as they are, that right is extinguished with its expiration."

Similarly, the decision issued in Proceeding no. 792/2014-T[4]:

"It is settled that the counting of the time limit for lodging the challenge must observe the rules of article 279 of the Civil Code, as expressly results from the provisions of no. 1 of article 20 of the CPPT. The counting of the time limit occurs in consecutive days and is not suspended during judicial holidays, with the provision of article 144 of the CPC being inapplicable, whose scope is restricted to judicial (procedural) time limits. Understanding shared by the case law of the higher courts, as well as by arbitral case law, set forth, among others, in the arbitral decisions issued in proceedings nos. 35/2012-T; 83/2012-T; 188/2013-T, 353/2014-T, among others.

Thus, it is the understanding of this Arbitral Tribunal, in the same way as that set forth in the aforementioned arbitral decisions, that the arbitral nature of this tribunal and the application of the tax arbitration regime do not entail any modification relating to the nature, modalities and manner of counting time limits, as extracted from the reading of the RJAT, and even less with regard to substantive time limits, which are an integral part of the material status of the right of tax credit itself."

The doctrinal and case law understanding set forth is upheld, and the thesis of the Claimant that the regime of article 58 of the Code of Procedure in Administrative Courts would be applicable to the case is not accepted.

In fact, being the subject matter of the tax arbitral process acts of tax assessment, a species of administrative acts that are the subject matter of the judicial tax process, it cannot but be understood that the regime for counting the time limit for requesting the constitution of the arbitral tribunal, subsidiarily applicable, is that provided for in the Code of Procedure and Tax Process and not that of the Code of Procedure in Administrative Courts which, moreover, currently no longer provides for the suspension of the time limit for challenge during the period of judicial holidays, taking into account the elimination of the previous no. 3 of art. 58 of this code.[5]

Thus, it cannot but be judged that the exception to admissibility based on untimeliness of the petition for arbitral pronouncement is verified (Cf. arts 89, no. 2 and no. 4, subsection k) of the CPTA, applicable pursuant to art. 29, no. 1, subsection c) of the RJAT), since it was presented after the 90-day time limit provided for in the law for that purpose, given that notification of the rejection of the hierarchical appeal occurred on 27.02.2017 and the petition for arbitral pronouncement was only presented on 6.06.2017.

On the other hand, as can be read in the Judgment of the STA of 31 May 2017, issued in proc. 1609/13, following the judgment of 25/09/2013 drawn in appeal no. 0511/13[6] "When the Judge pronounces on the lapse of the means of challenge, he cannot thereafter enter into the appreciation of other issues or the merits of the case". Thus, the Tribunal cannot pronounce itself on the issue of supervening mootness of the dispute, based on the revocation of the impugned act by the initiative of the Tax Administration.

IV- Decision

Thus, the Arbitral Tribunal decides to judge verified the exception to admissibility based on untimeliness of the petition for arbitral pronouncement and, consequently, dismisses the Respondent from the instance.

Value of the action: € 8,412.81 (eight thousand four hundred and twelve euros and eighty-one cents) in accordance with the provisions of art. 306, no. 2 of the CPC and 97-A, no. 1, subsection a) of the CPPT and 3, no. 2 of the Regulations on Costs in Arbitration Proceedings.

Costs to the Claimant, pursuant to no. 4 of art. 22 of the RJAT.

Notify.

Lisbon, CAAD, 15.12.2017

The Arbitrator

Marcolino Pisão Pedreiro

[1] GUIDE TO TAX ARBITRATION, Coord.: Nuno Villa-Lobos and Mónica Brito Vieira, Almedina, 2013, pp. 173-174.

[2] In the same sense see Carla Castelo Trindade, FRAMEWORK OF TAX ARBITRATION ANNOTATED, Almedina, 2016, pp. 262-263).

[3] Available at "https://caad.org.pt/tributario/decisoes"

[4] Also available at "https://caad.org.pt/tributario/decisoes"

[5] Cf. Mário Aroso de Almeida - Carlos Alberto Fernandes Cadilha, COMMENTARY ON THE CODE OF PROCEDURE IN ADMINISTRATIVE COURTS, 4th Edition, Almedina, 2017, p. 397.

[6] Available at "http://www.dgsi.pt/"

Frequently Asked Questions

Automatically Created

What is the IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) tax in Portugal?
IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) is Portugal's Municipal Property Transfer Tax levied on the onerous acquisition of real estate. It applies to purchases, exchanges, and other onerous transfers of property rights, with rates varying based on property value, type (urban vs. rustic), and intended use. Certain exemptions exist, including for own permanent housing up to specific value thresholds and for transfers within insolvency proceedings under Article 270(2) of the Insolvency Code (CIRE).
What does intempestividade (untimeliness) of an arbitration request mean in Portuguese tax law?
Intempestividade (untimeliness) in Portuguese tax law refers to the filing of an administrative or judicial remedy after the legally prescribed deadline has expired. In tax arbitration, Article 10 of RJAT establishes strict time limits for requesting arbitral tribunal constitution. When a request is untimely, it results in caducidade (expiry) of the right of action, meaning the arbitral tribunal lacks jurisdiction to analyze the substantive merits of the case, regardless of its potential validity. These are substantive deadlines governed by Article 279 of the Civil Code, not merely procedural formalities.
Can IMT exemptions under Article 270(2) of the CIRE apply to property acquired in insolvency proceedings?
Yes, IMT exemptions under Article 270(2) of the Insolvency Code (CIRE) can apply to individual property acquisitions in insolvency proceedings. Initially, there was administrative uncertainty about whether the exemption required transfer of the entire business or establishment. However, Circular 4/2017 of 10 February 2017 clarified that isolated sales, exchanges, or transfers of real estate are exempt from IMT when conducted within insolvency plans, payment plans, recovery plans, or during liquidation of the insolvent estate. This interpretation was confirmed in this case when the Tax Authority revoked the IMT assessment.
What are the time limits for filing an arbitration request (pedido de pronúncia arbitral) with CAAD?
Under Article 10(1)(a) of the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011), the request for constitution of an arbitral tribunal with CAAD must be filed within 90 days from notification of the hierarchical appeal decision. This is a substantive deadline (prazo substantivo) governed by Article 279 of the Civil Code, meaning its expiry causes caducidade (lapse) of the right to arbitration. The deadline cannot be extended or restored, and failure to comply results in dismissal without substantive analysis of the tax dispute's merits.
What happens when the right of action (direito de ação) expires in Portuguese tax arbitration cases?
When the right of action (direito de ação) expires due to caducidade in Portuguese tax arbitration, the arbitral tribunal loses jurisdiction to decide the substantive merits of the case. The proceedings must be terminated, typically resulting in dismissal of the arbitration request. Unlike prescription (prescrição), which can be interrupted or suspended, caducidade is absolute and irreversible once the substantive deadline passes. Even if the taxpayer has a meritorious substantive claim or the Tax Authority later concedes the point, the procedural defect is fatal and prevents any relief through arbitration.