Process: 549/2017-T

Date: March 26, 2018

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 549/2017-T) addresses the ex officio revision of IMT assessments based on erro imputável aos serviços (error attributable to tax authorities). The claimants acquired property lot B in May 2016, which was incorrectly registered in the property matrix as commercial use. They submitted form no. 1 on 11/05/2016 requesting reclassification to residential before the acquisition on 13/05/2016. However, IMT was levied at the 6.5% commercial rate totaling €2,210.65, despite the property's actual residential purpose. After the form submission, official records showed the residential classification. The taxpayers filed an ex officio revision request on 08/06/2017 seeking reimbursement of €1,870.55 overpaid and compensatory interest. The tax authority's failure to respond constituted tacit rejection, prompting the October 2017 arbitral request. The central legal issue concerns Article 78 of the General Tax Law (LGT), which permits revision of tax acts for errors attributable to services within four years. The tribunal must determine whether the matrix classification error constitutes an administrative error warranting revision, refund, and compensatory interest. The tax authority argued the commercial classification resulted from legitimate 2012 assessment procedures that became consolidated when unchallenged. However, the evidence shows the taxpayers proactively sought correction before the taxable event occurred, suggesting the services failed to process the update timely, potentially constituting attributable error justifying the revision and financial remedies sought.

Full Decision

ARBITRAL DECISION

REPORT

A..., taxpayer no. ... and B..., taxpayer no. ..., resident respectively at Avenue ..., no. ..., ..., ..., no. ..., ..., Lisbon, hereinafter referred to as the Claimants, filed on 12/10/2017 a request for constitution of a tribunal and arbitral pronouncement, in which they request the annulment of the act of tacit rejection of the ex officio revision request filed on 08/06/2017, having as its object the levies of Tax on Onerous Transmissions of Real Estate (IMT) to which correspond the collection documents no. ... and no. ..., the reimbursement of the paid tax and the payment of compensatory interest.

The Esteemed President of the Deontological Council of the Administrative Arbitration Centre (CAAD) designated on 28/11/2017 as arbitrator, Francisco Nicolau Domingos.

On 20/12/2017 the arbitral tribunal was constituted.

In compliance with the provision of art. 17, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 20/12/2017 to, if so wished, present a response, request the production of additional evidence and remit the administrative proceedings (PA).

On 01/02/2018 the Respondent presented a response, in which it defends the lack of merit of the requests formulated in the case.

The tribunal on 05/02/2018, in view of the absence of evidence to produce, the non-existence of matters of exception to be heard before the merits were considered, and the unnecessary nature of inviting the parties to correct their procedural documents, decided to dispense with the holding of the meeting to which art. 18, no. 1 of RJAT refers, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of proceedings and in the determination of rules to be observed with a view to obtaining, within a reasonable time, a pronouncement on the merits regarding the claims formulated, cf. art. 16, para. c) of RJAT, granted 8 days for the parties, if so wished, to present written final submissions and set a deadline for issuing the arbitral decision.

The Claimants presented written final submissions on 19/02/2018, maintaining their initial position.

The Respondent did not present written final submissions.

POSITIONS OF THE PARTIES

The Claimants argue that the tacit rejection of the ex officio revision request of the acts of IMT levy relating to lot "B" of article ... of the parish of ... is illegal, since it was due to error by the Respondent that they unduly paid the total amount of € 1,870.55, which corresponds to € 935.27 for each of them; in the matricial registration it appeared that the lot was intended for commerce, when in reality the allocation was for residential purposes.

The Respondent, in its response, argues that the lot in question was allocated to commerce, as a result of the assessment arising from the delivery of the form no. 1 with the no. ..., of 12/10/2012 and in accordance with the declaration of the owners at that date. Secondly, it adds that if the result of that assessment was not subject to complaint, it became consolidated in the legal order.

Thus, adherence to the principle of legality prevented it from acting differently, there being no purported illegality.

Finally, it argues that if there is no defective appraisal of relevant facts or wrong interpretation of the norms, the request for compensatory interest should fail.

Thus, these are the issues that the tribunal must address:

Whether the impugned tax act is flawed as to factual and legal grounds;

Whether there exists a right to reimbursement of the amount of paid tax;

Whether the Claimants have a right to compensatory interest.

PRELIMINARY PROCEEDINGS

The joinder of plaintiffs and the cumulation of claims underlying the present case is admissible, in so far as there is identity between the factual matter and the merits depend on the interpretation of the same principles and rules of law, cf. art. 3, no. 1 of RJAT. On the other hand, the object of the case falls within the same tax, the IMT.

The proceedings are not affected by nullities, the arbitral tribunal is regularly constituted and is materially competent to hear and decide on the request for arbitral pronouncement, consequently verifying the conditions for a final decision to be issued.

4. FACTUAL MATTERS

4.1. Facts deemed proved

4.1.1. The Claimants acquired on 13/05/2016 lots "A" and "B" of the property registered in the urban property matrix under no. ... of the parish of ....

4.1.2. Lot "B" was on that date registered in the matrix as intended for commerce.

4.1.3. On 11/05/2016 a form no. 1 was presented, in which the updating of the type of urban property (lot "B") to residential was requested.

4.1.4. IMT was levied with respect to lot "B" of the property registered in the urban property matrix under no. ... of the parish of ..., in the total amount of € 2,210.65, being € 1,105.33 in relation to each of the Claimants.

4.1.5. In the levy on each of the Claimants an allocation to commerce was considered and the rate of 6.5% was applied.

4.1.6. The collection documents no. ... and no. ... were delivered for the instruction of the public deed of the lots described above.

4.1.7. As a result of the presentation of form no. 1, it appears in the assessment record that lot "B" is intended for residential purposes.

4.1.8. The request for ex officio revision of the tax acts of IMT levies was filed on 08/06/2017.

4.1.9. To date the Claimants have not been notified of any decision.

4.1.10. The request for constitution of a tribunal and arbitral pronouncement was filed on 12/10/2017.

4.2. Facts not deemed proved

There are no facts of relevance to the arbitral decision that have not been deemed proved.

4.3. Basis of the factual matters deemed proved

The factual matters deemed proved have their origin in the documents used for each of the alleged facts.

5. LEGAL MATTERS

The first issue that the tribunal must address consists in determining whether there is in the present case an error attributable to the services, since from this flows the determination of the period for challenge.

To that end, it is necessary to identify, from the outset, the applicable norm, that is, art. 78 of the General Tax Law (LGT), which provides as follows:

"1. The revision of tax acts by the entity that performed them may be carried out at the initiative of the taxpayer, within the period of administrative complaint and on the grounds of any illegality, or, at the initiative of the tax administration, within four years following the levy or at any time if the tax has not yet been paid, on the grounds of an error attributable to the services.

2. Repealed.

3. The revision of tax acts under the terms of no. 1, regardless of whether it is a material or legal error, implies the respective recognition duly substantiated under the terms of no. 1 of the preceding article.

4. The senior official of the service may authorize, exceptionally, in the three years following that of the tax act, the revision of the taxable matter ascertained on the grounds of serious or notorious injustice, provided that the error is not attributable to negligent conduct by the taxpayer.

5. For purposes of the preceding number, only ostensible and unequivocal notorious injustice and grave injustice resulting from manifestly excessive and disproportionate taxation with reality or from which significant loss has resulted to the National Treasury shall be considered.

6. The revision of the tax act on grounds of duplication of collection may be carried out, whatever the grounds, within four years.

7. The request by the taxpayer directed to the competent body of the tax administration for its realization interrupts the period for ex officio revision of the tax act or the taxable matter."

The institute of revision constitutes a realization of the duty to revoke illegal acts and, as such, the Tax Administration (Autoridade Tributária e Aduaneira) must proceed in this manner in cases where errors in levies occur that result in the collection of taxes in an amount higher than that legally provided. The principles of justice, equality and legality that inform the activities of the Tax Administration impose this official correction.

Thus, if on the one hand revision of the act at the initiative of the taxpayer is admissible within the period of administrative challenge, on the other, the Tax Administration, at the impulse of the taxpayer, may also promote the so-called "ex officio revision".

In this sense, the case law affirms: "It follows from the law and constitutes settled case law of this Supreme Court that ex officio revision of tax acts to which the final part of no. 1 of art. 78 of the LGT refers 'at the initiative of the tax administration' may be carried out at the request of the taxpayer (art. 78, no. 7 of the LGT), the refusal, express or tacit, of this revision request being subject to contentious challenge, under the terms of art. 95, nos. 1 and 2, para. d) of the LGT and art. 97, no. 1, para. d) of the CPPT, when the assessment of the legality of the levy act is at issue and this possibility is not prejudiced by the circumstance that the request for ex officio revision was filed long after the periods for administrative challenge had expired, but within the four-year period for revision of the levy act 'at the initiative of the tax administration'".

The revision request must also be based on "an error attributable to the services" and be filed within four years. Now, this error encompasses the lapse, material or factual error, as well as legal error.

In support of this last conclusion, the case law also states: "...this Supreme Court has long understood in a settled manner that where there is a legal error in a levy carried out by the services of the tax administration, and this erroneous application of law does not stem from any information or declaration by the taxpayer, the error in question is attributable to the services, as both no. 2 of art. 266 of the Constitution and article 55 of the General Tax Law establish the general obligation for the tax administration to act in full accordance with the law..."

"Ex officio revision" requires that, cumulatively, the following requirements be met: i) the request be formulated within four years counted from the act whose revision is requested or at any time when the tax is not paid; ii) it originates from "an error attributable to the services" and iii) it proceeds from the initiative of the taxpayer or is carried out officially by the Tax Administration.

Thus, after the period for judicial challenge or administrative complaint has been exceeded, art. 78, nos. 1, 3 and 4 of the LGT establish as an essential requirement of "ex officio revision" that the error be attributable to the services. "An error attributable to the services" admits the pathology of fact and law, however the illegality cannot be attributable to the taxpayer by negligent conduct, but to the Tax Administration.

This is the position of the Supreme Administrative Court when it states that: "...any illegality not resulting from conduct by the taxpayer will be attributable to the Administration itself, and this attribution to the services is independent of the demonstration of fault of any of the officials involved in the issuance of the act affected by the error..." And, in the same sense: "...the tax administration is attributable that error, whenever the erroneous application of law is not based on any information from the taxpayer".

Doctrine, in addition to agreeing with the jurisprudential position mentioned above, teaches that there will also be "an error attributable to the services" when, although the levy has been carried out based on the taxpayer's declaration, the latter has adopted a general orientation of the Tax Administration duly published, by defective performance of the duty of collaboration on the part of the Tax Administration.

Reverting the interpretation to the specific case, it is verified that prior to the IMT levies a form no. 1 was presented with the objective of altering the allocation of the property. Thus, although the IMT declarations originate from the declaration of the Claimants, the truth is that there is defective performance of the principle of inquisitorial power and collaboration on the part of the Tax Administration. One must not overlook that, with the delivery of form no. 1, the Tax Administration had documentary evidence that allowed for consideration of residential allocation in IMT.

In summary, if the allocation of the lot in question was always that of residential, as emerges from the deed of constitution of the horizontal property, if this fact was communicated to the Tax Administration prior to the deed of purchase and sale and to the IMT levies, it is imperative to conclude that the levies are flawed as to the grounds and, consequently, the act of tacit rejection must be annulled, with all legal consequences.

But the question arises: should the tribunal determine the complete annulment of the levies underlying the tacit rejection? To that effect, doctrine teaches: "Under the terms of art. 100 of the LGT, in the event of total or partial merit in a complaint, judicial challenge or appeal in favor of the taxpayer, the tax administration is obliged to immediately and fully restore the legality of the act or situation subject to the dispute. From this norm is inferred the possibility of partial annulment of tax acts. The STA has generally understood that levy acts, by defining a sum, are naturally divisible, and also legally so, because the law provides for the possibility of partial annulment of those acts, in the aforementioned art. 100, by providing for partial merit of procedural means of challenge (as, previously, art. 145 of the CPT provided). However, such partial annulment may only be legally admissible when the grounds for annulment apply only to part of the act, that is, when there is only a partial illegality. This is what will happen when a levy act is based on certain taxable matter and it is found that part of it was calculated illegally, because it should not be considered. In these cases, there is no obstacle to the levy act being annulled with respect to the part that corresponds to the taxable matter whose consideration was illegal, with the levy being maintained in the part that corresponds to taxable matter that is not affected by any illegality. However, if the levy act has a single legal ground, it not being possible to distinguish within it between a part that complies with the law and another that violates it, a partial annulment cannot be decreed, even if it is understood that, by force of other legal provisions, a levy could take place. This will be, for example, the case of a levy having been based on a certain table of tax rates and it being understood that the legally applicable table would be another. In these situations, the entire levy will be based on erroneous legal grounds, and therefore the act must be wholly annulled, on the grounds of error as to legal grounds (vice of violation of law)".

Consequently, if the table of tax rates actually applicable is that which is provided for in art. 17, no. 1, para. b) of the Code of Tax on Onerous Transmissions of Real Estate (CIMT) and not the rate described in para. d) of the same norm, it is imperative to conclude that the levies in totum cannot subsist in the legal order.

The Claimants also formulate a request for compensatory interest, therefore it is necessary to ascertain whether they have a right to it.

Art. 43, no. 1 of the LGT provides that: "Compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount higher than that legally due". In other words, there are three requirements for the right to such interest: i) the existence of an error in a tax levy act attributable to the services; ii) the determination of such error in a process of administrative complaint or judicial challenge; and iii) payment of a tax debt in an amount higher than that legally due.

In this manner, it is immediately possible to formulate a question: is it admissible to determine the payment of compensatory interest in a tax arbitration process? The answer to the question is in the affirmative. Indeed, art. 24, no. 5 of RJAT provides that: "Payment of interest is due, regardless of its nature, under the terms provided for in the General Tax Law and in the Code of Tax Procedure and Process".

However, in the present instance, the tribunal's cognition activity relates to a decision of tacit rejection of a request for revision of tax acts and art. 43, no. 1 of the LGT determines that compensatory interest is only due for undue collection when the taxpayer challenges or complains. However, "ex officio revision" constitutes an institute distinct from administrative complaint and judicial challenge.

To this effect, art. 43, no. 3 of the LGT provides that: "Compensatory interest is also due in the following circumstances: (...) c) When the revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request, unless the delay is not attributable to the tax administration".

Thus, upon request of "ex officio revision" of the tax act by the taxpayer, if the Tax Administration exceeds the one-year period to carry out such revision and decides it favorably, compensatory interest is only due after the lapse of one year. And if the taxpayer needs to resort to the judicial route? The question is answered by case law stating that: "...if the taxpayer finds himself obliged to resort to court to obtain a decision, because the Administration, within or outside that period, did not revise the act, this taxpayer is not treated differently from one who obtained the same favorable decision by the administrative route after one year has passed. Similarly to the interested party whose revision request had a favorable outcome dictated by the Administration after more than one year, also he to whom justice was only rendered in court after that time is due the same interest". That is, art. 43, no. 3, para. c) of the LGT applies to a reality distinct from reimbursement to the taxpayer as a result of "an error attributable to the services", namely, the delay by the Tax Administration in the conclusion of the "ex officio revision" procedure.

Reverting such interpretation to the specific case, if the revision request was formulated on 08/06/2017, compensatory interest would only be due from 09/06/2018 onwards, and therefore this request is rejected.

6. DECISION

In these terms and with the reasoning described above, this tribunal decides to judge the request for annulment of the act of tacit rejection of the request for ex officio revision of the IMT levies as having merit, with the consequent annulment of the levies, reimbursement of the paid tax and as lacking merit the request for condemnation to payment of compensatory interest.

7. VALUE OF THE CASE

The value of the case is set at € 1,870.55, under the terms of art. 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of the provision of art. 29, no. 1, para. a) of RJAT and art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs charged to the Respondent, in the amount of € 306, cf. art. 22, no. 4 of RJAT and Table I attached to RCPAT, in so far as the annulment request had merit.

Notify.

Lisbon, 26 March 2018

The arbitrator,

(Francisco Nicolau Domingos)

[1] Decision of the Supreme Administrative Court rendered in process no. 0886/14, of 19/11/2014, reported by Counsellor ISABEL MARQUES DA SILVA.

[2] Decision of the Supreme Administrative Court rendered in process no. 0886/14, of 19/11/2014, reported by Counsellor ISABEL MARQUES DA SILVA.

[3] Decision of the Supreme Administrative Court rendered in process no. 0886/14, of 19/11/2014, reported by Counsellor ISABEL MARQUES DA SILVA.

[4] Decision of the Supreme Administrative Court rendered in process no. 0771/08, of 21/01/2009, reported by Counsellor LÚCIO BARBOSA.

[5] PAULO MARQUES, The revision of the tax act. From mea culpa to the restoration of legality, 2nd edition, Notebooks of IDEFF, no. 19, Almedina, 2017, p. 219.

[6] JORGE LOPES DE SOUSA, Code of Tax Procedure and Process – annotated and commented, 6th edition, 2011, p. 342.

[7] Decision of the Supreme Administrative Court rendered in process no. 0918/06, of 12/12/2006, reported by Counsellor BAETA DE QUEIROZ.

Frequently Asked Questions

Automatically Created

What is a 'revisão oficiosa' (official review) of an IMT tax assessment and when can it be requested?
A revisão oficiosa (ex officio revision) is a procedure under Article 78 of the General Tax Law allowing correction of tax acts by the issuing authority. Taxpayers may request it within the administrative complaint period for any illegality. The tax administration can initiate it within four years following levy for errors attributable to services, or anytime if tax remains unpaid. The revision requires substantiated recognition of material or legal errors and can result in tax refunds when overpayment occurred.
How does an 'erro imputável aos serviços' (error attributable to the tax authorities) affect IMT liquidation?
An erro imputável aos serviços (error attributable to tax authorities) fundamentally affects IMT liquidation by creating grounds for ex officio revision under Article 78 LGT. When administrative services incorrectly classify property use in matrix records—such as registering residential property as commercial—this leads to application of wrong tax rates (e.g., 6.5% commercial vs. lower residential rates). Such errors obligate the tax administration to revoke the illegal act, recalculate IMT correctly, and refund overpaid amounts with compensatory interest.
Can a taxpayer challenge a tacit rejection of an IMT review request before the CAAD arbitral tribunal?
Yes, taxpayers can challenge tacit rejection of IMT review requests before CAAD arbitral tribunals. When the tax authority fails to respond to an ex officio revision request within the legal timeframe, this constitutes tacit rejection under Portuguese administrative procedure law. As demonstrated in this case, the claimants filed their arbitral request on 12/10/2017 after receiving no response to their June 2017 revision request. Article 3 of the RJAT (arbitration regime) grants CAAD jurisdiction over such disputes, including tacit acts.
What happens when a property's matrix registration incorrectly classifies a dwelling as commercial for IMT purposes?
When property matrix registration incorrectly classifies residential dwellings as commercial for IMT purposes, significant tax consequences arise. Commercial properties incur IMT at 6.5% rate, while residential properties benefit from progressive rates often substantially lower. Taxpayers discovering such misclassification can submit form no. 1 requesting matrix correction and file ex officio revision requests for already-levied IMT. If the error is attributable to administrative services rather than taxpayer conduct, full refund of overpaid tax plus compensatory interest becomes due under Article 78 LGT.
Are taxpayers entitled to a refund and compensatory interest when IMT is overpaid due to an administrative error?
Yes, taxpayers are entitled to both refund and compensatory interest when IMT overpayment results from administrative error. Article 78 LGT establishes the revision framework for errors attributable to services, while Article 43 LGT governs compensatory interest on amounts unduly paid. When tax authorities incorrectly assess IMT due to their own classification errors in matrix records, they must reimburse the excess payment and pay compensatory interest from the payment date until refund, compensating taxpayers for deprivation of funds to which the State had no legal entitlement.