Process: 4/2017-T

Date: April 10, 2017

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 4/2017-T) addresses the procedural consequence of supervening uselessness of the dispute in Portuguese tax arbitration. The claimant challenged an IMT (Municipal Tax on Onerous Transfer of Real Property) assessment of €8,117.62, initially through an administrative claim that was dismissed on 4 November 2016. The taxpayer then initiated arbitration proceedings at CAAD on 2 January 2017, and the arbitral tribunal was constituted on 14 March 2017. However, before the Tax Authority submitted its defense, it revoked the administrative act on 17 March 2017, effectively upholding the taxpayer's original claim. Both parties agreed that the dispute had become moot, leading the arbitrator to declare the proceedings extinct due to supervening uselessness (inutilidade superveniente da lide) under Article 277(e) of the Civil Procedure Code. The decision establishes important principles: the Tax Authority can revoke contested acts even after arbitration proceedings commence, and when such revocation occurs, the case must be dismissed as there is no longer a live controversy requiring judicial determination. Significantly, the arbitrator ruled that the Tax Authority must bear all costs (€918.00) because the revocation occurred only after the tribunal was constituted and the Authority was notified, demonstrating that the impossibility or failure of purpose was attributable to the respondent. This case illustrates the flexibility of Portuguese tax dispute resolution and confirms that voluntary administrative corrections by the Tax Authority, even during pending arbitration, serve judicial economy while protecting taxpayer rights.

Full Decision

ARBITRAL DECISION

The arbitrator, Dr. Henrique Nogueira Nunes, appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to constitute the Arbitral Tribunal, constituted on 14 March 2017, hereby decides as follows:

1. REPORT

1.1. A…, S.A., with tax identification number …, with registered office at …, n.º …, parish of …, in Porto, hereinafter designated as "Claimant", requested, on 02 January 2017, the constitution of the Arbitral Tribunal pursuant to articles 2.º, n.º 1, paragraph a) and 10.º of Decree-Law n.º 10/2011, of 20 January (hereinafter "RJAT").

1.2. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and automatically notified to the Tax and Customs Authority on 13 January 2017.

1.3. The request for arbitral pronouncement has as its object the declaration of illegality of the assessment act for Municipal Tax on Onerous Transfer of Real Property with number …, in the amount of € 8,117.62.

1.4. The TCA or Respondent, by application submitted in the CAAD case management system on 20 March 2017, after the constitution of the Arbitral Tribunal, came to request the extinction of the proceedings due to failure of purpose of the dispute, on the grounds of the revocation of the administrative act, by order issued by the Head of the said Finance Service of Amadora-…, on 17 March 2017, which revoked the order dismissing the administrative claim presented by the Claimant in the present case.

1.5. The Claimant, notified by the Tribunal to pronounce on the application presented by the Respondent, expressed its non-opposition to the extinction of the proceedings due to failure of purpose of the dispute.

The arbitral tribunal was duly constituted and is materially competent in light of the provisions of articles 2.º, n.º 1, paragraph a) and 30.º, n.º 1 of the RJAT.

The parties have legal personality and capacity and are legitimate (articles 4.º and 10.º, n.º 2 of the RJAT and article 1.º of Ordinance n.º 112-A/2011, of 22 March).

The proceedings are free from nullities.

2. FACTUAL MATTERS

With relevance for the appreciation and decision of the case, the following facts are deemed proved:

A. On 3 March 2016, the Claimant made payment of the Municipal Tax on Onerous Transfer of Real Property assessment with number …, in the amount of € 8,117.62 (eight thousand one hundred and seventeen euros and sixty-two cents) (cf. Document n.º 4 attached by the Claimant with the arbitral petition).

B. On 18 July 2016, the Claimant filed an administrative claim against the aforementioned assessment (cf. Document n.º 5 attached by the Claimant with the arbitral petition).

C. On 4 November 2016, the Claimant was notified of the decision dismissing the administrative claim filed, which proceeded under number …2016… (cf. Document n.º 7 attached by the Claimant with the arbitral petition).

D. On 02 January 2017, the Claimant submitted a request for constitution of the Arbitral Tribunal with the CAAD – cf. electronic request in the CAAD system.

E. By application submitted in the case management system on 20 March 2017, the Respondent came to request the extinction of the proceedings due to failure of purpose of the dispute, pursuant to paragraph e) of article 277.º of the Civil Procedure Code ("CPC"), subsidiarily applicable in accordance with article 29.º of the RJAT.

F. The Claimant, notified by the Tribunal to pronounce on the application presented by the Respondent, expressed its non-opposition to the extinction of the proceedings due to failure of purpose of the dispute.

G. A date was fixed for the rendering of the arbitral decision until 14 April 2017.

3. UNPROVED FACTS

There are no facts with relevance to the decision of the case that have not been proved.

4. ON THE LAW

4.1. The TCA, even before presenting its Response, came to raise the issue of failure of purpose of the dispute, since in the meantime the administrative act was revoked which led to the dismissal of the administrative claim presented by the Claimant and, indirectly, to the revocation of the assessment act at issue in the present case.

4.2. Considering the applications attached to the case by the Claimant and Respondent, it is found that the assessment at issue in the present proceedings was the subject of official revision by the Tax Authority, which upheld the Claimant's claim.

4.3. Thus, and as the parties do not intend to continue with the present proceedings for any other purpose, which is apparent from the applications presented by the Claimant and Respondent, it is necessary to declare the extinction of the present proceedings due to failure of purpose of the dispute, which is hereby determined.

4.4. Consequently, the revocation of the administrative act which resulted in the dismissal of the administrative claim presented by the Claimant, and indirectly, of the assessment now challenged, renders it unnecessary to consider its illegality and leads to the conclusion that, in this case, there is failure of purpose of the dispute as requested by the TCA.

4.5. Failure of purpose of the dispute is a cause for extinction of proceedings, pursuant to article 277.º, paragraph e) of the Civil Procedure Code, applicable by virtue of article 29.º of the RJAT.

6. DECISION

In light of the foregoing, this Singular Arbitral Tribunal hereby decides:

- To declare the proceedings extinct due to failure of purpose of the dispute.

* * *

The value of the case is fixed at Euro 8,117.62, in accordance with the provisions of articles 3.º, n.º 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97.º-A, n.º 1, paragraph a) of the Tax Procedure Code and 297.º of the CPC.

The amount of costs is fixed at Euro 918.00, to be borne by the Respondent, in accordance with the provisions of article 536.º, n.ºs 3 and 4 of the Civil Procedure Code (CPC), applicable by virtue of article 29.º, n.º 1, paragraph e) of the RJAT, it being understood that pursuant to the provisions of article 536.º, n.º 3 of the CPC, responsibility for costs shall rest with the plaintiff or applicant, unless such impossibility or failure of purpose is attributable to the defendant or respondent, in which case the latter is responsible for all costs, which corresponds to the present case, as the revocation of the administrative act occurred only after the constitution of the Arbitral Tribunal and after notification to the Respondent to present its Response.

Let it be notified.

Lisbon, 10 April 2017.

The Arbitrator,

Dr. Henrique Nogueira Nunes

Text prepared by computer, in accordance with article 131.º, n.º 5 of the Civil Procedure Code, applicable by referral of article 29.º, n.º 1, paragraph e) of the RJAT.

The wording of the present arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is IMT (Imposto Municipal sobre a Transmissão Onerosa de Imóveis) and when does it apply in Portugal?
IMT (Imposto Municipal sobre a Transmissão Onerosa de Imóveis) is the Municipal Tax on Onerous Transfer of Real Property in Portugal. It applies to the acquisition of real property rights through onerous transactions, including property purchases, exchanges, expropriations with compensation, and transfers for consideration. The tax is levied on the transferee (buyer) and calculated based on the property's taxable value (VPT) or transaction price, whichever is higher. IMT rates vary depending on property type (urban/rural), value brackets, and intended use (principal residence, secondary residence, or commercial property), with rates ranging from 0% to 8% for urban properties depending on value tiers.
What does supervening uselessness of the case (inutilidade superveniente da lide) mean in Portuguese tax arbitration?
Supervening uselessness of the case (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when the dispute becomes moot because the circumstances that gave rise to the litigation cease to exist during proceedings. Under Article 277(e) of the Civil Procedure Code, applicable to CAAD arbitration through Article 29 of the RJAT, proceedings must be declared extinct when the controversy no longer requires judicial determination. In tax cases, this typically happens when the Tax Authority revokes or annuls the contested administrative act, satisfying the taxpayer's claim and rendering unnecessary any ruling on the merits. The tribunal cannot continue proceedings solely for declaratory purposes when the practical dispute has been resolved.
Can the Portuguese Tax Authority revoke a tax assessment after arbitration proceedings have started at CAAD?
Yes, the Portuguese Tax Authority can revoke a tax assessment even after arbitration proceedings have commenced at CAAD. This case demonstrates that administrative authorities retain the power to correct their own acts through official revision (revisão oficiosa) at any stage before final judgment. When the Tax Authority determines that an assessment was incorrectly issued, it can exercise self-correction powers under the Tax Procedure Code (Código de Procedimento e de Processo Tributário), either by revoking the assessment directly or by upholding an administrative claim that had previously been denied. This revocation can occur even after the arbitral tribunal has been constituted and the Authority notified to present its defense, though timing affects cost allocation.
What happens to a CAAD arbitration case when the Tax Authority voluntarily revokes the disputed tax act?
When the Portuguese Tax Authority voluntarily revokes the disputed tax act during CAAD arbitration proceedings, the case must be declared extinct due to supervening uselessness of the dispute (inutilidade superveniente da lide) pursuant to Article 277(e) of the Civil Procedure Code, applicable via Article 29(1)(e) of the RJAT. The arbitral tribunal does not rule on the merits of the case since there is no longer a live controversy requiring determination. Regarding costs, if the revocation occurs after the tribunal's constitution and after the Authority was notified, the Tax Authority bears all arbitration costs under Article 536(3) of the Civil Procedure Code, as the failure of purpose is attributable to the respondent. Both parties must agree to the extinction, though non-opposition suffices.
How can a taxpayer challenge an IMT tax assessment through gracious complaint and arbitration in Portugal?
To challenge an IMT assessment in Portugal, taxpayers must follow a two-tier process. First, within 120 days of notification, they must file an administrative claim (reclamação graciosa) with the Tax Authority under Articles 68-75 of the Tax Procedure Code, requesting revision or annulment of the assessment. If the claim is denied or not decided within the statutory timeframe, the taxpayer can then initiate arbitration at CAAD (Centro de Arbitragem Administrativa) within 90 days of notification of the denial, pursuant to Article 10 of Decree-Law 10/2011 (RJAT). The arbitration request must specify the contested act, legal grounds, evidence, and requested relief. CAAD arbitration provides a faster alternative to judicial tax courts for resolving disputes up to €10 million in value.