Process: 420/2017-T

Date: May 15, 2018

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 420/2017-T) addresses the legality of a 30% IMI surcharge applied to 28 autonomous units in Lisbon classified as 'degraded properties.' The claimants challenged IMI assessments for 2016, arguing lack of proper reasoning in the tax acts and absence of factual grounds for the surcharge, particularly since the Lisbon City Council had terminated a degradation declaration procedure due to ongoing conservation works. The claimants contended that all units were in good conservation state and that the Tax Authority failed to explicitly state the concrete factual or legal reasons justifying the 30% surcharge. The Tax Authority defended the assessments, citing legal provisions under the IMI Code allowing municipalities to impose surcharges up to 30% on degraded urban properties through Municipal Assembly resolution, referencing Decree-Law 555/99 and 307/2009 regarding properties subject to notices for conservation or rehabilitation works. The tribunal found all units were classified as 'degraded property' in the Tax Authority's system, but critically noted that the degradation procedure had been terminated by municipal authorities in May 2015 due to ongoing conservation works. This case highlights the fundamental requirement for proper legal reasoning (fundamentação) in tax assessments and the necessity of current, valid factual grounds when applying IMI surcharges. The decision emphasizes taxpayer rights to understand the specific basis for tax penalties and the importance of coordination between municipal classification procedures and tax assessment practices.

Full Decision

ARBITRATION DECISION

1. Report

A…, with tax identification number no. …, domiciled at Rua …, no. … – …, …-… Lisbon and B…, with tax identification number …, resident in …, no. …, …-… Funchal, hereinafter referred to as the Claimants, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution and arbitration ruling for the purpose of annulling the tax acts assessing Municipal Property Tax (IMI) for the year 2016, bearing nos. … and …, formalized through collection documents nos. 2016 … and 2016 …, respectively, namely regarding the surcharge applied to units A through AE of the article in the urban property register inscribed under number …, of the parish of …, municipality of Lisbon, situated at Rua …, no. … to … .

The Claimants base the illegality of the above-identified assessments and substantiate the consequent annulment of the tax acts on the following defects:

  • Lack of Reasoning in the IMI assessments, given that they do not explicitly state the concrete factual or legal reason for which a surcharge of 30% was applied to the tax collection.

  • Non-existence of any grounds for the IMI surcharge and lack of knowledge regarding any cause for such surcharge, since all twenty-eight autonomous units are in good state of conservation, alleging that there was a procedure by the Lisbon City Council intended for the declaration of diverse autonomous units of the aforementioned property as vacant, with the municipal authority having extinguished that same procedure due to lack of legal grounds.

Based on the above-stated grounds, the Claimants request the partial annulment of the tax acts, in the segment pertaining to the inclusion of a 30% surcharge on the IMI tax collection and likewise that the payments made by the Claimants relating to the surcharge contained in the assessments now at issue be considered as unduly paid.

The Tax and Customs Authority, notified to respond, came to argue for the dismissal of the requests formulated, based on the fact that there exists no lack of reasoning in the tax acts, as well as on the existence of legal provision, under the terms of the IMI Code, for municipalities, through a resolution of the Municipal Assembly, to surcharge up to 30% of the rate applicable to degraded urban properties, which are considered as such – in accordance with article 2 of article 89 of Decree-Law no. 555/99, of 16 December, and subsequent amendments, or as provided in article 55 of Decree-Law no. 307/2009, of 23 October, and subsequent amendments – those that have been subject to notice to execute conservation and/or rehabilitation works, necessary to correct poor safety or sanitation conditions or to improve aesthetic arrangement.

The sole arbitrator was designated and appointed on 01.09.2017.

In accordance with the provisions of article 11, no. 1, paragraph c) of the RJAT, the singular arbitration tribunal was constituted on 19.09.2017.

By order of this Tribunal, the holding of the arbitration meeting referred to in article 18 of the RJAT was dispensed with, as well as the production of the witness evidence listed.

2. Preliminary Matters

The Tribunal is materially competent and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), 5 and 6, all of the RJAT.

The parties have judicial personality and capacity, are legitimate and are represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Regulation no. 112-A/2011, of 22 March.

No nullities and preliminary questions affecting the entire proceeding exist, therefore it is now necessary to rule on the request.

Considering that the Claimants are co-owners of the properties whose tax legality is at issue and considering also that the IMI assessments at issue relate to the same tax period and are based on the same factual and legal basis, the prerequisites for joinder of claimants and joinder of claims established in said article 3, no. 1, of the RJAT are therefore met.

3. Factual Matters

3.1. Proven Facts:

Following analysis of the documentary evidence produced and the positioning of the parties, in this case valuing the absence of Response by the Respondent, the following facts are considered proven and relevant to the decision of the case:

  • The Claimants are co-owners of the autonomous units A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD and AE that comprise the urban property inscribed in the urban property register of the parish of …, under article …, situated at Rua …, no. … to … .

  • Claimant A… was notified of assessment no. …, valued at €9,884.70, through collection document no. 2016 … to proceed with payment of the 1st installment of IMI for 2016, which included, among other properties, the tax relating to units A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD and AE of the urban matrix article …, of the parish of … .

  • The Tax and Customs Authority, in the collection document identified in the preceding paragraph (first of three installments), applied a surcharge of 30% to all aforementioned autonomous units, having determined through this basis an increase to the collection of €1,038.57.

  • Claimant B… was notified of assessment no. …, valued at €3,432.73, through collection document no. 2016 … to proceed with payment of the 1st installment of IMI for 2016, which included, among other properties, the tax relating to units A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD and AE of the urban matrix article …, of the parish of … .

  • The Tax and Customs Authority, in the collection document identified in the preceding paragraph (first of three installments), applied a surcharge of 30% to all aforementioned autonomous units, having determined through this basis an increase to the collection of €519.29.

  • The Claimants proceeded with payment of the first and second collection notices.

  • As per extracts obtained from the Tax and Customs Authority system and attached by it to the Administrative Proceeding, the twenty-eight units – A through AE – more fully identified above are classified as to "Type of Property" as "Degraded Property".

  • Claimant A… was notified by letter from the Planning and Coordination Division of the Lisbon City Council, dated 07.05.2015, that the procedure regarding the declaration of the property situated at Rua …, … to …, in the parish of …, in Lisbon, had been terminated by order of the respective Division Chief, 04.05.2015, due to the conservation works that were taking place in the building.

  • The Claimant proceeded on 27.06.2017 to payment of the initial court fee;

  • On 10.07.2017 the now Claimants submitted, by electronic means, the Request for Constitution and Arbitration Ruling that gave rise to the present proceedings.

  • The Claimants proceeded with payment of the initial court fee on 10.07.2017, in the amount of €153.00;

No other facts with relevance to the decision of the case were proven.

3.2. Substantiation of the Proven Factual Matters:

Regarding the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the file, as well as on the positioning of the parties regarding the factual matters brought before this proceeding.

4. Matters of Law

4.1. Questions to be Decided:

The request for arbitration ruling thus has as its object the declaration of illegality of the IMI assessment acts for 2016, in the segment relating to the surcharge understood by the Tax and Customs Authority as due with respect to the autonomous units A through AE of the urban property inscribed in the urban property register of the parish of … under number …, based on the lack of reasoning in the tax assessment acts and as well regarding the fact that there exists no factual basis that would permit the surcharge calculated.

In light of the foregoing, in view of the provisions of article 124 of the CPPT, applicable by virtue of paragraph a) of no. 1 of article 29 of the RJAT, it is necessary to rule on the defects pointed out in the IMI tax acts that are the object of these arbitration proceedings, in accordance with such criteria.

Thus, first and foremost, it is incumbent upon the Tribunal to decide on the question of whether the prerequisites relating to the surcharge contained in the tax acts object of the present arbitration dispute are or are not satisfied.

4.2. On the IMI Surcharge:

Before the positioning of Claimants and Respondent, and also considering the facts deemed proven, it is nonetheless necessary to frame in legal terms what the downstream procedure is capable of originating the surcharge on the IMI rate in case of declaration of urban properties as vacant.

The legislator, in view of the provisions of no. 3 of article 112 of the CIMI, through Decree-Law 159/2006, of 8 August, came to define not only the fiscal concept of vacant property, but also to regulate the procedure and the prerequisites for such declaration to take place.

According to said legal text, namely its article 2, a property is considered vacant if an urban property or autonomous unit remains unoccupied for one year, with signs of non-occupation being the lack of contracts in force with telecommunications companies, water, gas and electricity supply, and the lack of billing relating to water, gas, electricity and telecommunications consumption, without prejudice to the exceptions listed in article 3 of the same legal compendium.

At the level of the procedure intended for the eventual declaration of a property as vacant, no. 1 of article 4 states that: "The identification of urban properties or autonomous units that are vacant is the responsibility of municipalities" and that "Municipalities notify the taxpayer of the IMI at the tax domicile of the draft declaration of vacant property, so that they may exercise the right to prior hearing, and of the decision, in accordance with the terms and periods provided in the Administrative Procedure Code." as stated in no. 2 of the aforementioned regulation.

It thus follows from the concatenation of the regulations at issue that it was incumbent upon the municipality, in this case the Lisbon City Council, should the prerequisites for declaring a certain property as vacant be met, to initiate the procedure provided in article 4 of Decree-Law 159/2006, of 8 August, namely by proceeding to notify the owner to express themselves on the draft decision for declaration of vacant property, as well as the decision that after the right to contradict been afforded, would result.

Also regarding the declaration of properties as degraded, the initiative and competence therefor lies with the municipalities, with no. 8 of article 112 of the CIMI prescribing that: "Municipalities, through a resolution of the Municipal Assembly, may surcharge up to 30% the rate applicable to degraded urban properties, considering as such those which, given their state of conservation, do not satisfactorily fulfill their function or pose a danger to the safety of persons and property."

Now, in this case the Municipal Assembly of Lisbon, through resolution of 16 November 2012, unanimously, approved proposal 827/2012, which would be in force for IMI assessments of 2013, in which it decided in its paragraph 3, subparagraph b) "The surcharge of 30% on the rate applicable to degraded urban properties or parts thereof for which the Lisbon City Council has determined the execution of conservation works necessary to correct poor safety or sanitation conditions, under the provisions of no. 2 of article 89 of the Legal Regime of Urban Development and Building approved by Decree-Law no. 555/99 of 16 December, and subsequent amendments, as long as the works ordered have not been initiated for reasons beyond the responsibility of the Lisbon Municipality;"

Also in the context of declaration of an urban property as degraded, it is a prerequisite for the surcharge of 30% of the IMI rate for the year 2016 that necessarily the owner has been notified to proceed with the corrections of the poor safety or sanitation conditions of the property.

Which is to say that also in this case, the right of participation of the owner could not fail to be complied with in obedience to the provisions of article 100 of the Administrative Procedure Code and also the final decision of the municipality regarding the degradation or non-degradation of the property in order to grant the municipality the right to surcharge the IMI rate by 30%.

Thus, it follows that, whether in the hypothesis of vacant property or in the hypothesis of degraded property, such framing for tax purposes, namely for purposes of surcharge of the IMI rate with respect to the units now at issue, could not fail to be preceded by notification to their owners, whether for exercise of the right to contradict, or, necessarily, of the final decision of the municipality to proceed with the respective surcharges.

Now, this constitutes a central issue to be assessed and resolved in this proceeding.

Being relevant for this purpose, it is important to note that the law guarantees, in the case of declaration of an urban property as vacant and equally in the case of degraded property, that the owner of the property in question may participate in the formation of the decision, thus being able to exercise contradiction and influence the decision that on such matter may be taken by the municipality.

Which, moreover, from the strict fiscal point of view, is well justified, given the fact that a property is considered degraded or vacant having direct influence on the IMI rate and thus on the collection to be charged to its owners, thus constituting that tax assessment a tax act capable of affecting the legitimate interests and rights of the taxpayer in the tax relationship.

It is, in function of that same prior procedure initiated by the creditor tax municipality, that it is understood that the tax legislator has not provided for any prior hearing before that IMI assessment, given that within the scope of the procedure intended for the eventual declaration of a certain property as degraded or vacant by the municipality competent therefor, the legislation requires that the owners of that same property be called to participate in that same decision, in the course of prior hearing, in order to be able to influence the final decision of the municipality.

A situation similar to another that is likewise capable of altering the IMI collection and which relates to the alteration of Taxable Patrimonial Value (VPT).

Also in this case, the legislator expressly provided a specific form of intervention of the taxpayer in the formation of the decision of that same VPT – through recourse to a second appraisal – which is why it excluded any other second opportunity for the taxpayer of IMI to express themselves before the issuance and notification of the assessment of this same tax, and in any case (with or without recourse to second appraisal), the taxpayer is always notified of the VPT that comes to be fixed.

Returning to the case under analysis, the first and essential issue to be clarified in the proceedings at issue is whether or not the Claimants, as taxpayers of IMI, were notified to express themselves on the prior intention of the tax administration and consequent decision to consider the surcharges contained in the assessment of the autonomous units of the urban article of the matrix … of the parish of …, municipality of Lisbon, in order to affect the IMI rate for the year 2016?

From the documents attached to the file by the Claimants there is a notification dated 2015, in which the municipality of Lisbon terminates the procedure intended for the declaration as vacant of the property that is the subject of the IMI assessments at issue, so that from the said documentation nothing can be extracted in the sense of the existence of any declaration as vacant of any one of the autonomous units that compose it; on the contrary, the said letter seems to indicate precisely the opposite: the municipality in question extinguished that procedure intended for that same qualification as vacant, as the respective prerequisites were not met.

On the other hand, the Respondent did not attach to this proceeding any documentary evidence proving the declaration as degraded or vacant of any one of the twenty-eight autonomous units in question and even less so regarding proof of notification of that same notice to the Claimants, whether for purposes of participation rights thereof, or of a hypothetical final decision regarding the declaration of the units that would permit the surcharges contained in the tax acts sub judicio, with the content of the Administrative Proceeding only showing that the property is classified as "Degraded" without any documentary support sustaining such notation in the informatic system of the Tax and Customs Authority.

Such conclusion follows inevitably from the omission by the Respondent to prove that the Claimants had actually been notified prior to the IMI assessment in question for purposes of prior hearing and the final decision regarding the consideration of such autonomous units as degraded and/or vacant, by hypothesis.

The Respondent maintains in defense of the dismissal of the request and the cause of action on which the Claimants based themselves, the fact that, being the case of notifications to be made by the municipality, any right of hearing of the Claimants prior to assessment would be excluded.

At the same time, in the course of a procedure that took place between it and the municipality intended for the consideration of the units as degraded and/or vacant, it limited itself to discussing the procedure set forth in the law, without ever proving its existence, that is, the declaration by the municipality of the units as degraded and/or vacant.

It is important to note here, as has been understood by doctrine, that local authorities may and should be considered as tax creditors, inasmuch as although they cannot create taxes, it is certainly true that they are holders of the revenue from the tax in question – IMI – without prejudice to its administration and management being the responsibility of the State's tax administration, in this case the Tax and Customs Authority, now Respondent, manifesting that same tax power through the power of fixing IMI rates, by Municipal Assemblies, as occurs in the case of these proceedings in which the law grants them the power to surcharge that same fixed IMI rate.

Being the case of the surcharge of the IMI rate an example of municipal tax power, in which, in full respect for the principle of fiscal legality (formal law reserve) for the creation of taxes, municipalities may fix and alter the rates of that same tax, with the exclusive power of initiative resting with local authorities with a view to fixing, altering and surcharging IMI rates, within the parameters defined by law in obedience to the provisions of no. 2 of article 103 of the Portuguese Constitution.

In coherence with this, it is without surprise that the General Tax Law, in accordance with no. 3 of article 1, integrates within the scope of tax administration not only the current Tax and Customs Authority, but also the competent bodies of local authorities when they exercise administrative competencies in the tax domain.

Therefore, under the provisions of nos. 3 and 8 of article 112 of the CIMI and following a resolution of the Municipal Assembly, the initiation of a procedure intended for the declaration of a certain urban property as vacant or degraded, respectively, cannot fail to be within the scope of the tax procedure, which may be defined as a set of acts, emanating from plural tax administrative bodies, relatively autonomous and organized sequentially, directed to the production of a certain result, of which they are instrumental.

And, in the case of the surcharges at issue in these arbitration proceedings, there is no doubt that these constitute a determining element for the fixing of the effective tax rate to be the subject of assessment and placed for payment before the taxpayer, it not being possible, however, to establish what their concrete basis is and in what prior procedure (if one existed) to the assessment they would have been fixed.

From which, any eventual procedure for such purpose undertaken by the local authority cannot fail to not only subsume itself within the concept of tax procedure, but also to integrate the prerequisites on which the requirement of the tax assessed through the IMI assessment for the year 2013 now subject to arbitration ruling rests.

Under no. 1 of article 74 of the General Tax Law: "The burden of proof of the facts constitutive of the rights of the tax administration or taxpayers rests with whoever invokes them."

As correctly stated by António Lima Guerreiro[1] in annotation to the aforementioned regulation, which for its clarity and power of synthesis will not fail to be quoted: "From the norm of number 1, it follows that the administration is not obliged to prove the tax facts declared by the taxpayer, proceeding to assess based on the content of the declaration which, indeed, enjoys a presumption of truth. It is obliged, because it is then that which invokes the facts, to prove the existence and quantification of tax facts not declared, to the extent that they contradict the truthfulness of the taxpayer's declaration. In the absence of special rules, that is, except for a legally established presumption, it is thus the tax authority that must demonstrate the factual prerequisites of its action, namely the existence of the tax facts on which the assessment of the tax not declared by the taxpayer rests."

Returning to the case of the assessment whose legality is now being specifically assessed, there is no doubt that we are dealing with an assessment not emanating from any declaration by the taxpayer/contributor, but rather with the issuance of a tax act of the exclusive responsibility of the tax administration, and therefore the burden of proof lies with the latter regarding the prerequisites on which the 2013 IMI assessment rests.

Being that, inevitably, one of the prerequisites that requires proof and that influences the IMI assessment is that relating to the surcharge rate of the IMI applicable.

Such proof, which passes through the demonstration that in this case, the surcharges actually levied in the tax act now questioned were not only decided by the municipal body with administrative competency in the tax domain in obedience to the applicable legal framework, but also notified to the taxpayer/owner of the properties subject to such decision.

Now, regarding this prerequisite, the tax administration did not come to present any proof that the prerequisite relating to the surcharge of the IMI rate concretely applied to the units allegedly degraded and vacant was actually met, which would objectively be concretized by the documentary evidence that the Claimants had been notified of the declaration of those same units as degraded or vacant.

It appears to follow from the positioning of the Respondent an understanding according to which, being the procedure for declaration of the urban properties in question as degraded or vacant the competency of the Municipality (of Lisbon), such circumstance would as it were exonerate the Respondent from making such proof.

As was already stated through the above invoked substantiation, the mere circumstance that the procedure, in light of article 112 of the CIMI, is initiated by the local authority regarding the situation of the properties does not derogate from the discipline of the distribution of the burden of proof in force in the tax proceeding and to which we have already alluded.

This is because, as was opportunely noted, under the conjunction of nos. 1 and 3 of article 1 of the General Tax Law, the local authority when initiating a procedure intended to declare a certain urban property as vacant or degraded, acts under the tax powers that are legally entrusted to it, thus integrating the tax administration typified therein, and such municipal procedure, insofar as it defines the applicable rate and thus is essential for the quantification of the collection to be charged, cannot fail to be considered a tax procedure with reflexes in the assessment that is the subject of the present arbitration ruling.

Now, the rule in force between the administration and the administered, and in the specific aspect of tax law relationships, between the tax administration and taxpayers, is that of the right of participation of the administered/taxpayers in the formation of decisions capable of contending with their rights and interests.

And such rule is excepted, in the case of tax relationships, in situations in which the tax act capable of affecting the interests and rights of the taxpayer (e.g., tax assessment) is based on elements declared by the taxpayer themselves or when we are dealing with an assessment intended to fill the omission of submission of a declaration through official assessment based on objective data, and even in this latter case, it is necessary that the tax administration proceed prior to notification of the taxpayer to submit the missing declaration under penalty of issuance of the stated official assessment, as follows from no. 2 of article 60 of the General Tax Law.

As annotated by António Lima Guerreiro[2], the right to participation by the taxpayer in the formation of the tax decision through the prior hearing provided in article 60 of the General Tax Law, "…is generally exercised only once in the procedure: after instruction and before the decision. It cannot be used to introduce successive delays in the proceeding. This article thus refuses the idea of any double or triple hearing in the procedure."

Which is why there would be no right to hearing before the IMI assessment, finds, in theory, support in the legal framework of said article 60 of the General Tax Law, inasmuch as, as alleged, the new elements of the IMI assessment at issue – surcharge of IMI rates – should have already been previously made known to the taxpayer through the procedure for declaration of vacant or degraded property.

It happens, however, that the tax administration, here represented by the Respondent, as the active subject of the tax relationship, did not prove that same knowledge by the taxpayer of the IMI, whether regarding the decision to surcharge.

Considering that the purpose aimed at by the legislator with the principle of participation of taxpayers in the formation of decisions that concern them is to ensure compliance with the principle of material truth and the principle of transparency of the tax procedure and thus to allow the right of defense and contradiction on the part of these, in order to thus also avoid the so-called surprise tax decisions or acts.

That is, tax acts capable of affecting taxpayers, without them having had before, during the tax procedure eventually taking place downstream, the opportunity to express themselves on these, when they contain new elements on which the taxpayer had not been called to express themselves and of which they had no knowledge.

By the foregoing, it cannot fail to be concluded that it is not demonstrated that the Claimants were notified of any final decision that established the IMI surcharges contained in the tax act subject of these proceedings, nor even the exercise of such right of defense within the scope of the tax procedure that would legitimize those same surcharges on the units A through AE of the article … of the parish of …, in Lisbon.

Not being proven in the file, notwithstanding the burden that rested on the Respondent, the notification to the Claimants regarding the fixing of the surcharges to the IMI rate contained in the tax act subject of the present arbitration ruling, that same prerequisite on which the tax act rests is placed in jeopardy.

Reason for which, in view of the substantiation that has been discussed, it is concluded that there exists an error regarding the prerequisites of law, inasmuch as it was not demonstrated that the Claimants were notified regarding the tax-legal qualification of the units that would legitimize the surcharges effected, whether through the qualification of the units as degraded and/or vacant or through any other distinct basis, within the scope of any eventual tax procedure prior to the assessment, which, in the case of declaration of vacant or degraded property was required to have been carried out by the Municipality of Lisbon within the scope of its tax powers.

4.3. On the Restitution to the Claimants of Unduly Paid IMI:

In light of all that has been expended and concluded in point 4.2.: judgment of illegality that falls on part of the tax act subject of the present arbitration ruling, it is necessary to effect the reconstruction of the tax situation of the Claimants, which is why the Respondent AT cannot fail to effect the reversal of the amounts paid as tax and which relates to the value paid under the unwarranted surcharges of 30% on the IMI rate.

Therefore, the Claimants are creditors of the Respondent AT for the amount corresponding to the difference between the non-surcharge IMI rate and the one subject to surcharge in the IMI assessments of 2016 relating to units A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD and AE of the urban matrix article …, of the parish of …, for being unduly paid.

4.4. Prejudiced Questions:

Accepting, as this singular Arbitration Tribunal did accept here, the understanding of the existence of an error regarding the prerequisites of law, given that it was not proven that prior decision and notification of the Claimants on which the surcharges contained in the IMI assessment of 2016 could rest, the assessment of the defect relating to the alleged lack of reasoning adduced by the Claimants is prejudiced, as procedurally useless, and which may affect the arbitrally contested IMI assessments of 2016.

4.5. Value of the Proceeding:

The Claimants assigned a value of €519.29 to these proceedings, such value corresponding to the value of the surcharge relating only to the assessment of Claimant B…, it not being possible to fail to add to this the value of the surcharge determined in the IMI assessment of also Claimant A… – €1,038.57, given that they benefited from the joinder regime, cumulating in these same proceedings the IMI assessments of 2016 relating to both.

Thus, in view of the provisions of article 97-A, no. 1, paragraph a), of the Code of Administrative and Tax Procedure and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €1,557.86.

5. DECISION:

In such terms and with the substantiation that has been set forth, this arbitration tribunal decides:

To rule entirely favorably on the request for declaration of partial illegality of the tax assessment acts of IMI for the year 2016 above identified, on the basis of error regarding the prerequisites of law, annulling them in the segment in which it proceeded with the surcharges of the IMI rate of 2016 to units A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD and AE of the urban matrix article …, of the parish of …, municipality of Lisbon, and the Claimants must be restituted concomitantly by the difference between the value of the non-surcharge IMI rate (0.30%) and the value of the surcharges of 30% applied in the assessments sub judicio, unduly the subject of payment by the Claimants.

Costs:

Under the terms of article 22, no. 4, of the RJAT, the amount of costs is fixed at €306.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to the charge of the Respondent.

The parties shall be notified of this arbitration decision and, in due course, the proceeding shall be filed away.

Lisbon, 15 May 2018.

The sole arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29, no. 1, paragraph e) of the Tax Arbitration Regulations, revised by me.

[1] In Annotated General Tax Law, Reis dos Livros, page 329;

[2] In cited work, page 279;

Frequently Asked Questions

Automatically Created

What is the 30% IMI surcharge (majoração) applied to degraded urban properties in Portugal?
The 30% IMI surcharge (majoração) is a penalty rate applied to degraded urban properties in Portugal under the IMI Code. Municipalities can impose this surcharge, up to 30% of the standard IMI rate, through Municipal Assembly resolution on properties classified as degraded. Properties are considered degraded when they have been subject to formal notice to execute conservation or rehabilitation works necessary to correct poor safety, sanitation conditions, or improve aesthetic arrangement, as defined in Decree-Law 555/99 and Decree-Law 307/2009. The surcharge aims to encourage property owners to maintain their buildings in proper condition and discourage urban degradation.
Can a municipality apply an IMI surcharge without properly notifying the property owner of the degradation classification?
No, municipalities cannot validly apply an IMI surcharge without proper notification and valid grounds. Property owners must receive formal notice regarding the degraded classification and the specific reasons justifying it. The tax assessment itself must contain adequate legal reasoning (fundamentação) explaining why the surcharge applies. In this case, the tribunal found that the Lisbon City Council had terminated the degradation declaration procedure in May 2015 due to ongoing conservation works, undermining the factual basis for the surcharge applied in 2016. Lack of proper notification or current valid grounds for degradation classification can render the surcharge illegal and subject to annulment through CAAD arbitration proceedings.
What legal grounds exist to challenge an IMI surcharge on properties declared as degraded under Portuguese tax law?
Property owners can challenge IMI surcharges on several legal grounds under Portuguese tax law: (1) lack of adequate legal reasoning (fundamentação) in the tax assessment explaining the specific factual and legal basis for the surcharge; (2) absence of valid factual grounds, such as when properties are not actually degraded or when degradation procedures have been terminated; (3) procedural irregularities in the municipal classification process; (4) lack of proper notification regarding the degraded status; and (5) demonstrating that required conservation works have been completed. Challenges are typically filed through CAAD (Administrative Arbitration Centre) within the statutory time limits. Evidence of property condition, municipal communications terminating degradation procedures, and proof of conservation works can support successful challenges.
What are the requirements for fundamentação (legal reasoning) in IMI tax assessments involving surcharges?
IMI tax assessments involving surcharges must comply with the fundamental legal requirement of fundamentação (legal reasoning) under Portuguese tax law. The tax authority must explicitly state the concrete factual circumstances and specific legal provisions justifying the surcharge application. Generic references to legal authority are insufficient; assessments must identify why the particular property qualifies as degraded, reference any formal notices issued for conservation works, and explain the legal basis under Decree-Law 555/99 or 307/2009. The reasoning must be clear enough for taxpayers to understand the grounds and exercise their right to challenge. Failure to provide adequate fundamentação constitutes a procedural defect that can result in annulment of the surcharge portion of the assessment.
How does the CAAD arbitral tribunal handle disputes over IMI surcharges applied to urban property fractions?
The CAAD arbitral tribunal handles IMI surcharge disputes by examining both procedural legality and substantive grounds. The tribunal verifies its own jurisdiction under RJAT (Regime Jurídico da Arbitragem Tributária), analyzes whether tax assessments contain adequate legal reasoning, reviews documentary evidence regarding property classification and municipal procedures, and determines whether factual grounds exist to support the surcharge. In cases involving multiple co-owners and property fractions, CAAD allows joinder of claimants and claims when they relate to the same tax period and legal basis. The tribunal weighs Tax Authority system classifications against evidence of actual property condition and municipal decisions. If surcharges lack proper legal foundation or current factual support, CAAD can order partial annulment and declare payments unduly made, providing an effective remedy for taxpayers challenging municipal property tax penalties.