Process: 534/2015-T

Date: February 10, 2016

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 534/2015-T) addresses the supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration following the Tax Authority's ex officio annulment of a VAT assessment. The claimant challenged additional VAT assessment no. 2015... for €1,150.00 relating to Q4 2014, arguing the VAT from an invoice dated October 6, 2014 (for services rendered September 25, 2014) had already been paid in the Q3 2014 periodic return. The Tax Authority, after reviewing the case, performed an official annulment of the contested assessment and initiated reimbursement procedures. The arbitral tribunal declared the proceedings extinct under article 277(e) of the Code of Civil Procedure, as the claimant's principal claim was satisfied outside the arbitration framework through administrative revocation. The tribunal ruled it lacked material competence to order reimbursement of penalties paid, citing the limits of arbitral jurisdiction under article 2(1) of RJAT as amended by Law 64-B/2011. The decision confirms that when the Tax Authority voluntarily annuls an assessment during pending arbitration, the dispute becomes moot, leading to case extinction. The Authority was ordered to pay procedural costs, recognizing the legitimacy of the original claim despite its administrative resolution.

Full Decision

ARBITRAL DECISION

  1. A..., (hereinafter referred to as Claimant) taxpayer no..., resident at Street..., no..., ... ...-... Lisbon, submitted on 04/08/2015, pursuant to the provisions of paragraph a) of no. 1 of article 2 and article 10, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January, (hereinafter referred to as RJAT (Legal Regime for Tax Arbitration) a request for constitution of an Arbitral Tribunal, in which the Tax and Customs Authority is requested (hereinafter referred to as AT or Respondent), with a view to ruling on the illegality of the act of assessment of value added tax (VAT) no. 2015..., relating to the fourth quarter of 2014, in the amount of 1,150.00 €.

  2. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD, and immediately notified to the Respondent in accordance with legal procedures.

  3. Pursuant to the provisions of paragraph a) of no. 2 of article 6 of RJAT, by decision of His Excellency the President of the Ethics Council, duly communicated to the parties within the prescribed periods, the undersigned was appointed as arbitrator, who communicated to the Ethics Council and to the Centre for Administrative Arbitration the acceptance of the appointment within the period stipulated in article 4 of the Code of Ethics of the Centre for Administrative Arbitration.

  4. The Sole Arbitral Tribunal was constituted on 16/11/2015, in accordance with the requirement of paragraph c) of no. 1 of article 11 of RJAT.

  5. In the request for arbitral ruling, the Claimant seeks the declaration of illegality and consequent annulment of the additional VAT assessment no. 2015..., in the amount of 1,150.00 €, relating to the 4th quarter of 2014.

  6. Alleging, in very brief summary, that the VAT collected by the issuance of the invoice/receipt of 5,000.00 € on 06 October 2014, in the amount of 1,150.00 €, and having as "date of service provision" 25 September 2014, had already been paid in the periodic settlement of the 3rd quarter of 2014.

  7. Concluding, as is evident from his request, in the sense of "annulment of the tax act, as it is illegal", further arguing for "reimbursement of the penalty amount", to the payment of which he was subjected.

  8. The AT, duly notified for this purpose, presented its response in a timely manner, wherein it states that: (i) "following the analysis carried out by the services of the Respondent of the factual elements informing the record, the official annulment of that assessment was determined", and that "administrative procedures necessary regarding the reimbursement to the Claimant of the tax paid are underway" requesting consequently the supervening futility of the dispute.

  9. The Claimant, notified of the AT's response, said nothing.

  10. The AT, following an arbitral order of 2016-01-13, came on 2016-01-26 to document the annulment procedure in the assessment in question.

  11. The Arbitral Tribunal was regularly constituted, in accordance with articles 2 no. 1, paragraph a), 5 and 6 no. 1 of RJAT.

  12. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10 of RJAT.

ON THE LAW

As mentioned, the Claimant frames his request (as may be gleaned therefrom) in the sense of "annulment of the tax act, as it is illegal", further arguing for "reimbursement of the penalty amount".

With regard to what might be considered the "principal" request, it appears that in view of the official annulment of the assessment in question, the claimant has obtained satisfaction of his claim and in this sense there will be no doubt whatsoever that we are faced with the futility of the dispute, dictating the extinction of the proceedings.

As was recently decided: [1] "the supervening futility of the dispute (paragraph e) of the current article 277 of the CPC - corresponding to the former article 287) occurs when, due to a fact occurring during the pendency of the proceedings, the solution of the dispute ceases to have all interest and utility, thus leading to the extinction of the proceedings, since the plaintiff's claim can no longer be maintained, by virtue of the disappearance of the subjects or the object of the proceedings, or because it finds satisfaction outside the scheme of the relief sought."

Supervening futility of the dispute (or its impossibility) occurs "when, due to a fact occurring during the pendency of the proceedings, the plaintiff's claim cannot be maintained, by virtue of the disappearance of the subjects or the object of the proceedings, or finding satisfaction outside the scheme of the relief sought".[2]

The annulment/revocation of the underlying assessment act carried out by the Respondent entity, during the pendency of the present proceedings, appears clearly as supervening so as to dictate the futility of the dispute in accordance with the provisions of paragraph e) of article 277 of the Code of Civil Procedure, by virtue of paragraph e) of no. 1 of article 2 of RJAT, with the consequent extinction of the proceedings.

Insofar as the Claimant has also formulated a request in the sense of "reimbursement of the penalty amount" to which he was subjected and paid, (as results from documents nos. 1 and 2, which he attached to his request for arbitral ruling), the question that could arise is whether, in view of the provisions of article 125 of CPPT and article 608 of the Code of Civil Procedure, applicable by virtue of paragraphs a) and e) of no. 1 of article 29 of RJAT, and notwithstanding the supervening futility of the dispute, the Arbitral Tribunal must rule thereon.

In other words, whether the arbitral tribunal would be obliged to rule on all issues that have been submitted to its consideration.

Well then;

Reiterating that the Claimant has not shown any opposition, after having been notified of the AT's response in which the latter, for the reasons stated, came to argue for the extinction of the proceedings, the truth is that, within the scope of the material competence of the Arbitral Tribunal, we are of the opinion that it would always be materially incompetent to order the AT to make restitution of the penalty.

For this purpose, the normative provisions relating to the competence of tax arbitral tribunals point to this, e.g., the provisions of no. 1 of article 2 of RJAT (as amended by Law no. 64-B/2011, of 30 December) and Binding Order no. 112-A/2011, of 22 March.

This is neither the proper place nor the proper forum to proceed with an analysis of the genesis of the tax arbitration process, arbitrability of tax matters, the competence of tax arbitral tribunals [3] taking into account the legislative authorization granted by article 124 of Law no. 3-B/2010, of 28 April until the amendment made to Decree-Law no. 10/2011, of 20 January, carried out by Law no. 64-A/2011, of 30 December and, Order no. 112-A/2011, of 22 March, and notwithstanding the recognition of the competence of arbitral tribunals for the consideration, annulment and condemnation, arising from the provisions of article 24 of RJAT, without need for further considerations, we subscribe to the opinion that the examination of the request regarding "reimbursement of the penalty" formulated by the Claimant is beyond the material competence of the arbitral tribunal.

DECISION

For these reasons, this tribunal decides:

  • to declare the proceedings extinct due to supervening futility of the dispute, regarding the request for declaration of illegality of the VAT assessment no. 2015..., relating to the fourth quarter of 2014, in the amount of 1,150.00 €, absolving the AT from the proceedings;

  • to order the AT to pay the costs incurred.

VALUE OF THE PROCEEDINGS

In accordance with the provisions of articles 306 nos. 1 and 2 of the Code of Civil Procedure, approved by Law no. 47/2013, of 26 June, 97 A) no. 1, paragraph a) of the Code of Tax Procedure and Process, and article 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at 1,150.00 €.

COSTS

Pursuant to articles 12 no. 2, 22 no. 4 of RJAT, articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached hereto, the amount of costs is fixed at 306.00 € charged to the Respondent, in accordance with what is provided in nos. 3 and 4 of article 536 of the Code of Civil Procedure, applicable by virtue of paragraph e) of no. 1 of article 29 of RJAT.

NOTIFY

Text prepared by computer, in accordance with the provisions of article 131 of the Code of Civil Procedure, applicable by reference to article 29 no. 1 paragraph e) of the Legal Regime for Tax Arbitration, with blank verses and reviewed by the arbitrator.

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

Lisbon, 12 February two thousand and sixteen.

The Arbitrator

(José Coutinho Pires)

[1] See: Judgment of the Supreme Court of Justice, of 08/07/2015, reported by His Excellency Counsellor Casimiro Gonçalves, in the context of proceedings no. 0163/14, available at www.dgsi.pt.

[2] José Lebre de Freitas, João Redinha and Rui Pinto, Annotated Code of Civil Procedure, volume I, page 512, Coimbra Editora, 1999.

[3] On the competence of arbitral tribunals and applicable law, see: (i) Jorge Lopes de Sousa, Commentary on the Legal Regime for Tax Arbitration, Nuno Villa Lobos and Mónica Brito Vieira (coord.) Guide to Tax Arbitration, Coimbra, Almedina 2013, and (ii) Carla Castelo Trindade, Legal Regime for Tax Arbitration, pages 57-129, Coimbra Almedina, 2016.

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority annuls a VAT assessment during arbitration proceedings in Portugal?
When the Tax Authority annuls a VAT assessment during arbitration proceedings in Portugal, the case is typically declared extinct due to supervening futility of the dispute (inutilidade superveniente da lide) under article 277(e) of the Code of Civil Procedure. The taxpayer's claim is considered satisfied outside the arbitration framework through the administrative revocation. The arbitral tribunal will order the extinction of proceedings and typically require the Tax Authority to pay procedural costs, as the taxpayer's original position was vindicated. The Authority initiates separate administrative procedures for any tax refunds owed.
What is 'inutilidade superveniente da lide' (supervening uselessness of proceedings) in Portuguese tax arbitration?
Inutilidade superveniente da lide (supervening uselessness of proceedings) in Portuguese tax arbitration occurs when, due to facts arising during the proceedings, the dispute resolution loses all interest and utility. This happens when the plaintiff's claim can no longer be maintained due to disappearance of the subjects or object of proceedings, or when the claim finds satisfaction outside the relief sought. In tax arbitration under RJAT, this commonly occurs when the Tax Authority voluntarily revokes or annuls the contested tax assessment, thereby satisfying the taxpayer's principal request for annulment before the arbitral tribunal issues a decision on the merits.
Can a taxpayer challenge a duplicate VAT assessment through CAAD arbitration?
Yes, a taxpayer can challenge a duplicate VAT assessment through CAAD (Centro de Arbitragem Administrativa) arbitration under article 2(1)(a) and article 10(1)(a) of Decree-Law 10/2011 (RJAT). In this case, the claimant successfully argued that VAT collected from an invoice issued in October 2014 for services rendered in September 2014 had already been declared and paid in the Q3 2014 periodic return, making the Q4 2014 assessment duplicative. The Tax Authority's subsequent ex officio annulment confirmed the legitimacy of challenging erroneous duplicate assessments through the arbitration process, demonstrating CAAD's effectiveness for resolving administrative errors in VAT liquidations.