Process: 473/2018-T

Date: June 4, 2019

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 473/2018-T) addresses the supervening uselessness of proceedings (inutilidade superveniente da lide) when the Portuguese Tax Authority (AT) annuls IMI (Municipal Property Tax) liquidations during pending arbitration. The taxpayer, A... S.A., challenged IMI assessments for 2013 and 2014 on two properties, seeking annulment and reimbursement plus compensatory interest under Article 43 of the General Tax Law (LGT). After the arbitration request was filed at CAAD on September 24, 2018, the AT informed the court on November 15, 2018, that it had annulled the contested liquidations and issued reimbursements, including compensatory interest of €4,508.69 for the 2014 IMI assessment of €34,791.46. The AT raised preliminary exceptions arguing lack of subject matter and impropriety of means, seeking absolution and costs against the claimant. The taxpayer contended it had no prior knowledge of the annulments before filing and that the AT had not clearly committed to paying compensatory interest. The case illustrates key procedural issues in Portuguese tax arbitration: the effect of official review (revisão oficiosa) on pending proceedings, the right to compensatory interest when tax acts are revoked, and the allocation of procedural costs when the administration satisfies taxpayer claims during litigation. The decision addresses whether proceedings should continue when the substantive relief has been granted but procedural disputes remain about timing and responsibilities.

Full Decision

ARBITRATION DECISION

A – Report

  1. A..., S.A., with the other details contained in the case file, requested the constitution of an Arbitration Court seeking a declaration of illegality and consequent annulment of the Municipal Property Tax (IMI) assessments for the years 2013 and 2014 that were levied on the property registered in the urban property register under article ... of the Union of parishes of ... and ..., Municipality of ..., and likewise on the assessment of the said tax, relating to 2014, which fell on the property registered, under article ..., in the urban property register of the parish of ..., Municipality of ..., with the consequent reimbursement of tax paid, and further requesting the condemnation of the respondent Tax and Customs Authority (hereinafter, abbreviated as AT) to payment of compensatory interest.

  2. Upon examination of the case file, it contains, with relevance for the arbitration decision, the following elements:

2.1. The request for constitution of an arbitration court was filed with CAAD on 24 September 2018;

2.2. On 15 November 2018, the AT filed, pursuant to article 13, no. 1, of the RJAT, "information from the services regarding the annulment and consequent reimbursement of amounts paid as tax and compensatory interest owed pursuant to article 43, no. 3, paragraphs a) and b), of the General Tax Law in the context of implementation of the procedures determined by Service Instruction from the Office of the Deputy General Director of Property Taxes no. 40048 – Series I, of 23.05.2017". In the document, it refers to the annulment of the 2014 tax assessment relating to article ... of the parish of ... and the issuance of reimbursement no. 2014... and the annulment of IMI assessments for the years 2013 and 2014 of the property registered under article ... of the Union of Parishes of ... and ... and restitution of the respective amounts, "situation as of 29.06.2018 and 14.09.2018", in accordance with "printouts extracted from the AT Computer System".

2.3. Subsequently, the President of CAAD notified the Claimant to inform whether it intended to proceed with the procedure.

2.4. In response, the Claimant stated that "in light of the documents filed in the case by the AT, the Claimant cannot consider its entirety of claims satisfied, insofar as it does not appear from them that the AT considers itself bound to pay compensatory interest for the improper payment of IMI for the year 2014, in the amount of € 34,791.46, relating to article ... of the parish of ..., Municipality of ... (...), to which it is bound under the provisions of article 43 of the LGT. § In this manner, the present case must proceed with its normal procedures, if the AT does not clearly demonstrate that it intends to comply with that normative provision".

2.5. After the constitution of the Arbitration Court, an order was issued pursuant to article 17 of the RJAT.

2.6. In its response, defending itself by exception, the Respondent sought its absolution from the claim for "lack of subject matter of this arbitration claim or, should the Court not so consider, the dilatory exception of impropriety of the means used should be judged well-founded, and the Respondent absolved from the instance, with all legal consequences", further requesting that the payment of procedural costs be charged to the Claimant "for having been the one who gave rise to the action".

2.7. Notified to respond, the Claimant alleges that it had no knowledge, prior to the filing of the arbitration request, of the annulment of the 2013 and 2014 assessments relating to the property registered under article ... of the Union of Parishes of ... and ..., likewise invoking that, until that time, it had not been notified of any identifiable "corrective assessment" as the annulment of that assessment. It further sought the absence of procedural error and concluded that costs must be borne by the AT, to whom it imputes the futility of the action, pursuant to article 536 of the Civil Procedure Code.

2.8. The meeting provided for in article 18 of the RJAT was dispensed with and the parties dispensed from the presentation of pleadings, as the case file contains the relevant elements for the issuance of the decision

  1. The parties have legal personality and capacity, are legitimate (articles 4 and 10, no. 2, of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March) and are properly represented, the case being free from any nullities. The Court is regularly constituted and competent to adjudicate.

B. Grounds

  1. As the Respondent has raised preliminary issues that constitute an obstacle to consideration of the merits of the case, it is necessary to assess prioritarily the exceptions invoked in the AT's response.

  2. To this end, and considering the quaestiones decidendi emerging from the case file, it is necessary to establish the facts that appear relevant for the issuance of the decision.

5.1. Facts Established

5.1.1. With relevance to the arbitration decision, the following facts are considered established, regarding the IMI assessment for the year 2014 on the urban property registered under article ... in the urban property register of the parish of ..., Municipality of ... ("..."):

a) On 25 February 2015, the AT assessed IMI for the year 2014 on the urban property registered under article ... in the urban property register of the parish of ..., Municipality of ..., determining a levy of € 34,791.46 – cf. doc. 3, filed with the arbitration request and doc. 1, filed with the respondent's response.

b) The Claimant was notified of this assessment through document no. 2014..., received on 12 March 2015, which set 30 April 2015 as the deadline for payment of the first installment of the tax – cf. doc. 3, filed with the arbitration request.

c) By request, with entry stamp of 1 March 2018, the Claimant requested official review of this assessment, pursuant to article 78, no. 1, of the LGT, also petitioning payment of compensatory interest in accordance with article 43 of the LGT – cf. doc. 2, filed with the arbitration request.

d) By letter no. .../2018, dated 30 July 2018, the claimant was notified of the decision to close the request – cf. doc. no. 1, filed with the arbitration request.

e) This closure decision was preceded by information from the services in which it was noted that "[c]onsulting the property information system, it appears that similarly to the years 2012 and 2013, in which corrective assessments were issued, a corrective assessment was issued for the year under analysis. [§] Thus, considering that the petitioner's claim has already been addressed, following the issuance of the said corrective assessments, the present request for official review has lost its object and should therefore be closed as a matter of supervening futility of the dispute" – cf. doc. 1, filed with the arbitration request.

f) The so-called "corrective assessment", dated 7 April 2017, was identified with number ... – cf. doc. 1, filed with the arbitration request and doc. 1, filed with the Respondent's response.

g) On 24 September 2018, a request for constitution of the Arbitration Court was sent to CAAD – cf. CAAD Case Management System.

h) On 5 November 2018, reimbursement no. 2014 ... was issued in the amount of € 34,791.46, with the value of € 4,508.69 being determined in this document as compensatory interest.

i) On 15 November 2018, the Respondent's communication entered CAAD, pursuant to article 13, no. 1, of the RJAT, "regarding the annulment and consequent reimbursement of amounts paid as tax and compensatory interest owed pursuant to article 43, no. 3, paragraphs a) and b) of the General Tax Law in the context of implementation of the procedures determined by Service Instruction from the Office of the Deputy General Director of Property Taxes no. 40048 – Series I, of 23.05.2017 (...)", the document containing, regarding the tax in question, information about the "reimbursement no. 2014... in the amount of € 98,331.46, which includes the amount of € 34,791.46, referring to the annulment of the IMI assessment for the year 2014" – cf. Communication pursuant to article 13, no. 1, of the RJAT, contained in the CAAD Case Management System.

j) On 15 November 2018, the claimant was notified of the communication provided for in article 13, no. 1, of the RJAT, and to inform of its claim regarding continuation of the procedure – cf. Order from the President of CAAD, contained in the CAAD Case Management System;

k) The Claimant was notified on 26 November 2018 of the reimbursement note no. 2014..., which orders the reimbursement of the sum of € 98,331.46, which includes the amount of € 34,791.46 paid as IMI for the property in question – cf. doc. no. 1, presented with the request for continuation of the case.

l) By request of 27 November 2018, the Claimant informed that it could not "consider the entirety of its claims satisfied, insofar as it does not appear [from the documents filed in the case] that the AT considers itself bound to pay compensatory interest for the improper payment of IMI for the year 2014, in the amount of € 34,791.46, relating to article ... of the Parish of ..., Municipality of ... (...), to which it is bound under the provisions of article 43 of the LGT" – cf. Request for continuation of the case, contained in the CAAD Case Management System.

m) The amount of € 4,508.69, determined as compensatory interest, was paid by electronic bank transfer with number ..., pending the arbitration case – cf. docs. nos. 3 and 5 of the administrative case.

5.1.2. With relevance to the arbitration decision, the following facts are considered established, regarding the IMI assessments for the years 2013 and 2014 on the property registered under article... in the urban property register of the Union of Parishes of ... and ..., Municipality of ... ("..."):

a) On 5 March 2014, the AT assessed IMI for the year 2013 on the property registered under article ... in the urban property register of the Union of Parishes of ... and ..., Municipality of ..., determining a levy of € 3,450.90 – cf. doc. 3, filed with the arbitration request.

b) The Claimant was notified of this assessment through document no. 2013..., received on 17 March 2014, which set 30 April 2014 as the deadline for payment of the first installment of the tax – cf. doc. 3, filed with the arbitration request.

c) Regarding the same property, the AT assessed IMI for the year 2014 on 25 February 2015, determining a levy of € 4,163.88 – cf. doc. 3, filed with the arbitration request.

d) The Claimant was notified of the assessment through document no. 2014..., received on 12 March 2015, which set 30 April 2015 as the deadline for payment of the first installment of the tax – cf. doc. 3, filed with the arbitration request.

e) By request dated 27 February 2018, the Claimant requested official review of these aforementioned assessments, pursuant to article 78, no. 1, of the LGT, also petitioning payment of compensatory interest in accordance with article 43 of the LGT – cf. doc. 2, filed with the arbitration request.

f) Until the date of presentation of the arbitration request, the Respondent did not notify the Claimant of its decision on this review request – fact invoked in article 46 of the arbitration request and confirmed in article 16 of the Respondent's Response.

g) The IMI assessments for 2013 and 2014 were annulled by the Respondent, with restitution of the amounts of improperly paid tax – cf. document "IMI_...pdf", filed with the communication pursuant to article 13, no. 1, of the RJAT, contained in the CAAD Case Management System;

h) On 24 September 2018, a request for constitution of the Arbitration Court was sent to CAAD – cf. CAAD Case Management System.

i) In accordance with the calculation and assessment map of compensatory interest, an amount of € 563.55 was determined regarding the 2013 IMI, with 14 September 2018 noted as the date of issuance of the credit note – cf. doc. filed with the communication pursuant to article 13, no. 1, of the RJAT, "article_..._..._compensatoryinterest.pdf", contained in the CAAD Case Management System;

j) In accordance with the calculation and assessment map of compensatory interest, an amount of € 534.77 was determined regarding the 2014 IMI, with 30 October 2018 noted as the date of issuance of the credit note – cf. doc. filed with the communication pursuant to article 13, no. 1, of the RJAT, "article_..._..._compensatoryinterest.pdf", contained in the CAAD Case Management System;

k) It appears from the document referred to in the two preceding points that the basis for the compensatory interest assessments was a fully granted official review process, and that the interest is owed pursuant to article 43, no. 3, paragraph b), of the LGT;

l) The compensatory interest was paid pending the arbitration case – cf. documents nos. 4 and 6 filed with the communication pursuant to article 13, no. 1, of the RJAT, contained in the CAAD Case Management System;

m) On 15 November 2018, the Respondent's communication entered CAAD, pursuant to article 13, no. 1, of the RJAT, "regarding the annulment and consequent reimbursement of amounts paid as tax and compensatory interest owed pursuant to article 43, no. 3, paragraphs a) and b) of the General Tax Law in the context of implementation of the procedures determined by Service Instruction from the Office of the Deputy General Director of Property Taxes no. 40048 – Series I, of 23.05.2017 (...)", the document containing, regarding the tax in question, information about "the annulment of the IMI assessments for the years 2013 and 2014 and restitution of the respective amounts, situation as of 29.06.2018 and 14.09.2018" and "calculation map of compensatory interest" – cf. Communication pursuant to article 13, no. 1, of the RJAT, contained in the CAAD Case Management System;

n) On 15 November 2018, the claimant was notified of the communication provided for in article 13, no. 1, of the RJAT, and to inform of its claim regarding continuation of the procedure – cf. Order from the President of CAAD, contained in the CAAD Case Management System;

o) By request of 27 November 2018, the Claimant manifested its intention to proceed with the case as it did not consider its claim satisfied regarding the IMI assessed on the property corresponding to article ... of the Parish of ..., Municipality of ... – cf. Request for continuation of the case, contained in the CAAD Case Management System.

5.2. Facts Not Established

5.2.1. It was not proven that, prior to the presentation of the arbitration request, the Claimant had been notified of the revocation of the disputed IMI assessments;

5.2.1. It was not proven that the Claimant, prior to the presentation of the arbitration request, had been notified of any compensatory interest assessment relating to improperly paid tax.

5.3. Motivation of the Facts

It is the duty of the Court to select the facts relevant to the adjudicatory decision. In the case sub judice, the decision on the facts established and not established was based, according to the principle of free evaluation of evidence, on the documentary collection in the case file.

Regarding the facts not established, it must be clarified that, although it can be assumed that, with the decision to close the request for official review regarding the 2014 IMI ("..."), the claimant gains knowledge of the existence of a "corrective assessment", no element in the case file permits verification of notification of this assessment, reflected in the annulment of the tax assessment at issue.

Mutatis mutandis, regarding the 2013 and 2014 IMI relating to "...", there is likewise no notification of similar content. Regarding this specific point, from the alleged knowledge of the property's deactivation, it does not necessarily follow, as an apodictic imperative, that the AT had proceeded to the ex officio revocation of the original tax acts arising from the disputed assessments, or much less granted the request for official review.

Equally unproven was the notification of any decision related to the right to compensatory interest, regarding which the Claimant only gained knowledge pending this proceeding, with such interest having been paid already after the constitution of the Arbitration Court.

  1. Matter of Law

Pursuant to article 608, no. 1, of the Civil Procedure Code, applicable by virtue of article 29 of the RJAT, "(...) the judgment addresses, in the first place, the procedural questions that may determine the absolution of the instance, according to the order imposed by their logical precedence", and pursuant to no. 2 of said article, the "judge must resolve all questions that the parties have submitted to its consideration, except those whose decision is prejudiced by the solution given to others".

It results from the case file that the disputed assessments were annulled prior to the presentation of the arbitration request, although this annulment was not notified to the Claimant, and that the compensatory interest has already been paid pending the arbitration case.

Now, if in the request regarding continuation of the case the Claimant sustained that it would be justified only in light of the question of compensatory interest relating to the annulment of the 2014 IMI assessment relating to the urban property registered under article ... in the urban property register of the parish of ..., the fact that these have been paid causes the case to fall, pursuant to article 277, paragraph e), of the Civil Procedure Code, under a cause for extinction of the instance.

According to such provision the instance is extinguished with the supervening impossibility or futility of the dispute.

The impossibility of the dispute occurs in the case of death or extinction of one of the parties, by disappearance or loss of the object of the case or by extinction of one of the interests in conflict. Supervening futility of the dispute occurs when, by virtue of new facts occurring pending the case, the decision to be issued will no longer have any useful effect, either because it is not possible to satisfy the claim that the plaintiff intends to assert in the case or because the purpose aimed at with the action has been achieved by another means – cf. Alberto dos Reis, Commentary on the Annotated Civil Procedure Code, vol. III, pp. 367-373. In accordance with Lebre de Freitas, João Redinha and Rui Pinto – Annotated Civil Procedure Code, Vol. 1st, Coimbra Editora, 2nd ed., p. 555 –, "the supervening impossibility or futility of the dispute occurs when, by a fact occurring pending the instance, the plaintiff's claim cannot be maintained, by virtue of the disappearance of the subjects or the object of the case, or finds satisfaction outside the scheme of the remedy sought. In each case, the solution of the dispute ceases to be of interest – here, by impossibility of achieving the intended result; there, by having already been achieved by another means".

In the present case, considering that the Claimant had not been notified of the annulment of the disputed assessments prior to the opening of this arbitration proceeding and that at that date the requisite legal effects had not yet been triggered, the concrete case presents full coincidence with the exception embodied in the supervening futility of the dispute, and accordingly the extinction of the instance is determined.

The AT raises the question of the unnamed exception of impropriety of the procedural means, arguing that, as there exists a juridical act consolidated in the legal order defining the claimant's tax situation, the appropriate procedural means would never be challenge. But without merit. In truth, as the claimant had not been notified of the content of the act annulling the assessment, nor of the legal effects resulting therefrom (as regards interest), in compliance with articles 77 of the LGT and 153 of the CPA, the only means by which the Claimant could react against the legal-factual framework, which was then within its knowledge, was the challenge process.

  1. Responsibility for Costs

Article 536, no. 3, of the Civil Procedure Code provides that "in cases of extinction of the instance due to supervening impossibility or futility of the dispute, responsibility for costs shall be borne by the claimant, unless such impossibility or futility is attributable to the respondent or defendant, in which case it is the latter who is responsible for the totality of costs".

The failure to notify the annulment of the tax assessment acts, accompanied by the absence of full restitution of the improperly paid amounts and compensatory interest, which only occurred entirely pending the arbitration action, requires that the Respondent be recognized as responsible for the futility of the dispute, which did not provide, in an adequate and duly substantiated manner, to the Claimant's legal sphere the necessary elements to prevent the opening of the instance.

C. Decision

  1. Thus, having considered the foregoing, the following is decided:

a) Declare the instance extinct due to supervening futility of the dispute;

b) Condemn the Respondent to pay the costs of the case.

Value of the claim: € 42,406.14

Pursuant to articles 12, no. 2, and 22, no. 4, of the RJAT and article 4, no. 4, and in Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 2,142.00 (two thousand one hundred and forty-two euros), in accordance with said Table.

Lisbon, 4 June 2019

João Pedro Rodrigues

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority revokes IMI liquidation acts during pending arbitral proceedings at CAAD?
When the Tax Authority revokes IMI liquidation acts during pending CAAD arbitral proceedings, it may render the case supervenient useless (inutilidade superveniente da lide). Under Article 13(1) of the RJAT, the AT must inform CAAD of any annulment and reimbursement. If the AT fully satisfies the taxpayer's claims—including payment of both the tax refund and compensatory interest owed under Article 43 of the LGT—the arbitration proceedings lose their object and should be terminated. However, the taxpayer has the right to contest whether all claims have been satisfied and may request continuation if any element, particularly compensatory interest, remains unpaid or disputed.
What is supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when the subject matter of the dispute ceases to exist after the arbitration request is filed but before a final decision. This typically happens when the Tax Authority voluntarily annuls the contested tax acts and reimburses amounts paid, thereby satisfying the taxpayer's substantive claims. Under the RJAT, when this occurs, the AT must notify CAAD pursuant to Article 13(1). The arbitration court must then determine whether the proceedings should continue based on whether all claims—including compensatory interest and any other ancillary relief—have been fully addressed. The doctrine prevents unnecessary judicial resources from being expended on disputes that have been administratively resolved.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) under Article 43 of the LGT when IMI liquidations are annulled by official review?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) under Article 43 of the LGT when IMI liquidations are annulled through official review (revisão oficiosa). Article 43(3) establishes that compensatory interest is due when taxes are paid but later determined to be undue or excessive, running from the date of payment until reimbursement. When the Tax Authority annuls IMI assessments—whether through contentious proceedings or official review—it must calculate and pay compensatory interest automatically. In this case, the AT issued reimbursement no. 2014... including €4,508.69 in compensatory interest on the principal amount of €34,791.46. Failure to pay such interest violates the LGT and justifies continuation of arbitral proceedings to secure this legal entitlement.
Can a taxpayer request continuation of CAAD arbitral proceedings if compensatory interest has not been fully paid after tax act revocation?
Yes, a taxpayer can request continuation of CAAD arbitral proceedings even after the Tax Authority revokes the contested tax acts if compensatory interest has not been fully paid or clearly committed. In this case, after the AT informed CAAD of the annulment, the President notified the claimant to confirm whether it wished to proceed. The taxpayer responded that it could not consider its claims fully satisfied because the AT's filing did not clearly demonstrate commitment to pay compensatory interest for the improper 2014 IMI payment. The taxpayer argued that proceedings must continue unless the AT clearly shows intent to comply with Article 43 of the LGT. This right ensures taxpayers can secure all legal remedies, not just principal tax refunds, and prevents the AT from avoiding interest obligations through partial compliance during litigation.
How does the Tax Authority's official review (revisão oficiosa) of IMI liquidations affect arbitration proceedings under the RJAT?
The Tax Authority's official review (revisão oficiosa) of IMI liquidations under Article 78 of the LGT directly impacts arbitration proceedings under the RJAT by potentially rendering them supervenient useless. When the AT conducts official review and annuls contested liquidations, it must notify CAAD pursuant to Article 13(1) of the RJAT. This notification triggers evaluation of whether the dispute's object still exists. However, official review does not automatically terminate arbitration—the court must assess whether all relief sought has been granted, including compensatory interest. If the AT issues corrective assessments but fails to clearly establish reimbursement procedures or interest calculations, the taxpayer retains standing to continue proceedings. The timing matters: annulments occurring after the arbitration request may raise issues of procedural cost allocation under Article 536 of the Civil Procedure Code, as the taxpayer may argue the AT's delay necessitated litigation.