Process: 560/2018-T

Date: April 1, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 560/2018-T) concerned a challenge by a closed special real estate investment fund, represented by its management company, against Stamp Tax assessments totaling €42,601.25 for the years 2014 and 2015. The assessments were issued under item 28.1 of the General Table of Stamp Duty (Tabela Geral do Imposto de Selo - TGIS), which applies to urban properties with tax values exceeding €1,000,000. The dispute centered on whether the tax should apply to the aggregate value of a property in vertical ownership containing multiple divisions susceptible to independent use, or to each division individually. The claimant argued that item 28.1 should apply to each division's individual tax property value rather than the total sum, citing favorable arbitration precedents. The property in question comprised 5 residential divisions, each with tax values below €1,000,000 individually, but collectively valued at €2,421,365.26 (2014) and €1,838,760.00 (2015). Before the arbitral tribunal could rule on the merits, the Tax Authority revoked the challenged assessments through an order dated December 10, 2018, notified to the claimant on December 28, 2018. This revocation occurred after the arbitration request was filed on November 13, 2018. The tribunal declared the proceedings extinguished due to supervening uselessness (inutilidade superveniente da lide), as the administrative act being challenged had been eliminated. The claimant accepted this outcome while requesting that the Tax Authority bear the full costs of proceedings, given the revocation occurred after arbitration was initiated and was attributable solely to the administration's decision.

Full Decision

ARBITRAL DECISION (consult full version in PDF)

The arbitrator António Pragal Colaço designated by the Deontological Board of the Administrative Arbitration Center to form the Arbitral Tribunal determines as follows:

REPORT

On 13/11/2018, A..., S.A. (hereinafter "Claimant"), with tax identification number..., here representing B... - Closed Special Real Estate Investment Fund (hereinafter Fund,) with tax identification number ... and registered office at ... -... – ..., ...-... Porto Salvo, (hereinafter designated as Claimant), filed a request for arbitral decision with a view to annulling the tax assessment acts for Stamp Duty in the total amount of 42,601.25, issued by the Tax and Customs Authority ("TA"), under item 28.1 of the General Table of Stamp Duty ("GTSD"), relating to the years 2014 and 2015.

The claim subject to the request for arbitral decision consists in obtaining a decision declaring the illegality of the tacit rejection of the request for official review relating to the acts of Stamp Duty assessment that underlie it, as well as of these latter acts themselves, petitioning consequently for the reimbursement of the Stamp Duty unduly paid.

The assessments in question relate to the years 2014 and 2015 and refer to the urban property registered in the register under matriculation article ..., of the Parish Union of ... and ..., municipality of Cascais and district of Lisbon.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 13/11/2018.

The Claimant did not proceed with the appointment of an arbitrator, whereby, pursuant to the provisions of subsection a) of paragraph 2 of article 6 and subsection b) of paragraph 1 of article 11 of RJAT, the President of the Deontological Board designated the undersigned as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the designation within the time limit.

On 3/1/2019 the parties were notified of the arbitrator's designation and raised no objection.

In conformity with the provisions of subsection c) of paragraph 11 of RJAT, the singular Arbitral Tribunal was constituted on 23/1/2019.

In these terms, the Arbitral Tribunal is regularly constituted to examine and decide on the subject matter of the proceedings.

4. To support the request for arbitral decision, the Claimant alleges, in summary, the following:

The stamp duty assessments issued are based in their legal substance on the application of article 1, paragraph 1, of the Stamp Duty Code, combined with item 28.1 of its General Table, and apply to the urban property registered in the register under matriculation article..., of the Parish Union of ... and ..., municipality of Cascais and district of Lisbon.

According to the respective property register, the property identified in 4.1. constitutes property in full ownership with stories or divisions susceptible of independent use comprising a total of 5 divisions, all dedicated to residential use.

Consequently, each one of the "stories and divisions with independent use" of the aforementioned property has its own tax property value, calculated in accordance with the IMI Code, contained in the respective register, and the tax property values calculated relative to each one of the "stories or divisions with independent use" of the aforementioned properties are all of them lower than 1,000,000.00€.

The total tax property value is 2,421,365.26 (with reference to the year 2014) and 1,838,760.00 (with reference to the year 2015), resulting from the sum of the tax property values of each one of its "stories or divisions susceptible of independent use".

The application of item 28.1 of the General Table of Stamp Duty should not be effected on the sum of the value of the divisions susceptible of independent use in properties in vertical ownership intended for residential use, but rather on the unitary value of each one of these divisions.

It cites various case law to defend its claim, namely Decisions of the Arbitral Tribunal, cases numbers 50/2013-T, 132/2013-T, 181/2013-T, 183/2013-T, 185/2013-T, 248/2013-T and 479/2014-T.

On the basis of subsection b) of paragraph 1 of article 24 of RJAT, articles 35, paragraph 10, 43, paragraph 1, 100, paragraph 2, all of the General Tax Law, 61 of the Tax and Customs Procedure Code, 559 of the Civil Code and Order 291/2003, of 8 April, the TA should be condemned to reimburse the assessed tax and indemnificatory interest, arising from the acts of Stamp Duty assessment.

By arbitral order issued on 23/1/2019, the TA was notified pursuant to paragraphs 1 and 2 of article 17 of RJAT, to submit a response and, if it so wishes, to request the production of additional evidence, adding that a copy of the administrative file must be sent to the Arbitral Tribunal within the time limit for submission of the response, and in the event of non-submission, the provisions of paragraph 5 of article 110 of the Tax and Customs Procedure Code shall apply.

By petition submitted to the system on 5/2/2019, the TA, through its Large Taxpayers Unit, informed that the act challenged, subject of the arbitral proceedings, was revoked by order of 2018-12-10 of the Head of Division of the Large Taxpayers Unit, which was notified to the Claimant on 2018-12-28 through an office of the Large Taxpayers Unit, attaching the document evidencing such action, requesting consequently the futility of the dispute.

On 22/2/2019, the Claimant, notified to exercise the right to be heard, submitted a petition in the proceedings with the following content:

"A..., S.A. (hereinafter "Claimant"), here representing B...– Closed Special Real Estate Investment Fund (hereinafter "Fund"), having been notified of the Response submitted by the TA, as well as of the arbitral order of 06/02/2019, in which it was notified to pronounce itself on the supervening futility of the dispute, hereby informs that, in view of the fact that the challenged act has been effectively revoked by the TA, already during the pendency of the present request for arbitral decision, it does not object to the present dispute being extinguished by supervening futility, notwithstanding the fact that the tax in question has not yet been reimbursed to it, which will certainly happen shortly.

However, given the date on which such revocation occurred and the fact that it occurred already after the submission of the present request for arbitral decision, being exclusively the responsibility of the TA, such facts should be taken into consideration by the Tribunal, namely for the purposes of condemning the TA to pay in full the costs of the proceedings, having given rise to the action."

By arbitral order of 25/2/2019, the meeting referred to in article 18 of RJAT was dispensed with, in view of neither party having expressly objected, and the submissions were also dispensed with under the same circumstances of non-objection by the parties, and finally, 1 April was set for the issuance of the final decision, notifying the claimant to proceed with the remaining payment of the arbitration fee.

PRELIMINARY SIFT

The Arbitral Tribunal is substantively competent and is regularly constituted, pursuant to articles 2, paragraph 1, subsection a), 5 and 6, paragraph 1, of RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4 and 10 of RJAT and article 1 of Order No. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullities.

All having been considered, it is appropriate to issue

DECISION

Matter of Fact

Facts Deemed Proven

On 13/11/2018, the Claimant filed a request for arbitral decision with a view to annulling the tax assessment acts for Stamp Duty in the total amount of 42,601.25, issued by the Tax and Customs Authority ("TA"), under item 28.1 of the General Table of Stamp Duty ("GTSD"), relating to the years 2014 and 2015.

The TA, by order of 2018-12-10 of the Head of Division of the Large Taxpayers Unit, which was notified to the Claimant on 2018-12-28 through an office of the Large Taxpayers Unit, proceeded to revoke the 2014 and 2015 Stamp Duty assessments subject of the present proceedings, within the scope of the official review procedure, assessments which are identified as:

whereby it requested the futility of the dispute.

The Respondent, notified of the fact described in a), filed a response petition in the proceedings informing that, in view of the fact that the challenged act has been effectively revoked by the TA, already during the pendency of the present request for arbitral decision, it does not object to the present dispute being extinguished by supervening futility, notwithstanding the fact that the tax in question has not yet been reimbursed to it, which will certainly happen shortly.

However, given the date on which such revocation occurred and the fact that it occurred already after the submission of the present request for arbitral decision, being exclusively the responsibility of the TA, such facts should be taken into consideration by the Tribunal, namely for the purposes of condemning the TA to pay in full the costs of the proceedings, having given rise to the action."

Facts Deemed Not Proven

With relevance to the decision, there are no facts that should be considered as not proven.

Substantiation of the Matter of Fact Deemed Proven and Not Proven

With regard to the matter of fact, the Tribunal does not need to pronounce on everything alleged by the parties; rather, it is incumbent upon it to select the facts that matter for the proper decision of the case and to discriminate between matters proven and not proven (cf. article 123, paragraph 2, of the Tax and Customs Procedure Code and article 607, paragraph 3 of the Code of Civil Procedure, applicable by reference to article 29, paragraph 1, subsections a) and e), of RJAT).

In this way, the facts relevant to the judgment of the case are selected and delimited according to their legal relevance, which is established in light of the various plausible solutions to the question(s) of Law (cf. former article 511, paragraph 1, of the Code of Civil Procedure, corresponding to current article 596, applicable by reference to article 29, paragraph 1, subsection e), of RJAT).

Thus, taking into account the positions assumed by the parties, the documentary evidence attached to the proceedings, the facts listed above were deemed proven, with relevance to the decision.

III.2. Matter of Law

The subject matter of the present proceedings is constituted by the acts of stamp duty assessment relating to the years 2014 and 2015, described in 2) of the matter of fact deemed proven.

As results from the fact deemed proven number 2), by order of 2018-12-10 of the Head of Division of the Large Taxpayers Unit, which was notified to the Claimant on 2018-12-28 through an office of the Large Taxpayers Unit, the TA proceeded to revoke the 2014 and 2015 Stamp Duty assessments subject of the present proceedings, within the scope of the official review procedure.

In view of what occurred, it becomes futile to continue the present dispute, in so far as the continuation thereof will not result in any effect on the disputed material legal relationship, with which the parties are, moreover, in agreement.

Indeed, the supervening futility of the dispute is verified when, by fact occurring during the pendency of the case, the solution of the dispute ceases to have interest and utility, which justifies the termination of the instance (cf. article 277, subsection e), of the Code of Civil Procedure). As LEBRE DE FREITAS, JOÃO REDINHA, RUI PINTO state, the supervening futility or impossibility of the dispute "occurs when, by fact occurring during the pendency of the instance, the plaintiff's claim cannot be maintained, by virtue of the disappearance of the subjects or object of the proceedings, or its satisfaction is found outside the scheme of the remedy sought. In either case, the solution of the dispute ceases to be of interest – either by impossibility of achieving the intended result; here, because it has already been achieved by another means".

Thus, if, by virtue of new facts occurring during the pendency of the proceedings, the objective sought with the claim deduced in court has already been achieved by another means, then the decision to be issued would involve no useful effect, whereby supervening futility of the dispute occurs in such circumstances.

It follows from the administrative action deemed proven that the claim formulated by the Claimant, which had as its purpose the declaration of illegality and annulment by this Tribunal of the challenged acts, was prejudiced in so far as the suppression of those acts and their effects from the legal order was achieved by another way, after the instance was initiated. In truth, the subsequent practice of the express act of revocation of the impugned assessments (cf. article 79, paragraph 1 of the General Tax Law) implies that the instance relating to the examination of the legality of those assessments is extinguished by supervening futility of the dispute, given that, as their effects have been eliminated by annulling revocation, the examination ceases to have utility, in relation to such assessments, of the vices alleged in order to their invalidity, leaving without purpose the claim against them deduced.

In these terms, this Tribunal deems it verified that there is supervening futility of the dispute as concerns the request for annulment of the tax acts subject of the present proceedings, which implies the termination of the corresponding instance pursuant to the provisions of article 277, subsection e) of the Code of Civil Procedure, applicable by reference to article 29, paragraph 1, subsection e) of RJAT.

RESPONSIBILITY FOR COSTS

The present action was, in a causally adequate manner, a consequence of the assessment acts that constitute its subject matter, acts that were revoked by the TA itself, which, in doing so, also gave rise to the termination of the dispute.

In this manner, it is understood that it is the Respondent who should be held responsible for the corresponding costs, pursuant to article 536, paragraphs 3 and 4, of the Code of Civil Procedure.

Value of the Proceedings

In harmony with the provisions of articles 306, paragraph 2, and 297, paragraph 2 of the C.P.C., article 97-A, paragraph 1, subsection a) of the C.P.P.T. and article 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at 42,601.25€.

VI. Costs

In accordance with the provisions of articles 22, paragraph 4, and 12, paragraph 2, of the Legal Framework of Arbitration, article 2, paragraph 1 of article 3 and paragraphs 1 to 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I annexed to this regulation, the total value of costs is fixed at 2,142.00€ pursuant to Table I of the aforementioned Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent, in so far as, in conformity with the provisions of the final part of paragraph 3 and paragraph 4 of article 536 of the Code of Civil Procedure, applicable by reference to article 29, paragraph 1, subsection e) of RJAT, it is imputable to it the fact of the revocation of the impugned assessments that determined the supervening futility of the dispute as concerns the request for their respective annulment.

DECISION

In the terms set out above, this Arbitral Tribunal decides:

To declare this arbitral instance extinguished by supervening futility of the dispute;

To condemn the Respondent to payment of the costs of the proceedings.

VALUE OF THE PROCEEDINGS: in conformity with the provisions of articles 306, paragraph 2, of the Code of Civil Procedure, 97-A, paragraph 1, subsection a), of the Tax and Customs Procedure Code and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at 42,601.25€, (Forty-two thousand six hundred and one euros and twenty-five cents);

COSTS: pursuant to the provisions of articles 536 of the Code of Civil Procedure, 12, paragraph 2, 22, paragraph 4 and 29, paragraph 1, subsection e) of RJAT, paragraph 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and respective Table I, the amount of costs is fixed at € 2,142.00 (two thousand, one hundred and forty-two euros), pursuant to Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let it be notified.

Lisbon, 1 April 2019

The singular arbitrator,

(António Pragal Colaço)

(The text of this decision was prepared by computer, pursuant to article 131, paragraph 5, of the Code of Civil Procedure, applicable by reference from article 29, paragraph 1, subsection e) of Decree-Law No. 10/2011, of 20 January (RJAT), its drafting being governed by the spelling prior to the 1990 Spelling Agreement.)

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese Stamp Tax General Table and how does it apply to high-value properties?
Verba 28.1 of the Portuguese Stamp Tax General Table (Tabela Geral do Imposto de Selo) applies an annual tax to urban properties or fractions thereof intended for residential use with tax property values (valor patrimonial tributário) exceeding €1,000,000. The tax rate varies based on property value: 0.7% for properties between €1,000,000 and €2,000,000; 1.0% for properties between €2,000,000 and €5,000,000; and 1.5% for properties valued above €5,000,000. A key interpretative question, addressed in multiple CAAD decisions, concerns whether the threshold applies to properties in vertical ownership (propriedade horizontal) with multiple autonomous divisions: should the tax apply to the aggregate total value or to each division individually? Several arbitration precedents have held that the tax should apply to individual divisions when they are susceptible to independent use, not to the sum of their values, which was the legal argument advanced in this case.
What does supervening uselessness of proceedings (inutilidade superveniente da lide) mean in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when the administrative act being challenged ceases to exist or loses its legal effects during the pendency of the arbitration process, rendering a judicial decision unnecessary or purposeless. Under Article 29(2) of the RJAT (Legal Regime for Tax Arbitration), proceedings must be terminated when they become useless. This typically happens when the Tax Authority voluntarily revokes the contested act (as occurred in Process 560/2018-T), when the tax is refunded, or when the taxpayer withdraws the claim. When supervening uselessness is declared, the tribunal does not rule on the merits of the case. However, the timing and responsibility for the uselessness affects cost allocation: if the Tax Authority's actions after the arbitration filing caused the uselessness, the taxpayer may request that the administration bear procedural costs, recognizing that the taxpayer was substantively correct in challenging the assessment.
Can a real estate investment fund challenge Stamp Tax assessments on urban properties through CAAD arbitration?
Yes, a real estate investment fund (fundo de investimento imobiliário) can challenge Stamp Tax assessments through CAAD arbitration. In Process 560/2018-T, a closed special real estate investment fund (fundo especial de investimento imobiliário fechado), represented by its management company, successfully initiated arbitration proceedings. Real estate investment funds possess legal personality and capacity to be parties in tax proceedings under Portuguese law. The fund must be represented by its management company, which has statutory authority to act on behalf of the fund. According to Article 2(1)(a) of the RJAT, tax arbitration is available to challenge acts of tax assessment, settlement, and collection regarding any tax, including Stamp Tax (Imposto de Selo). Real estate funds frequently own high-value properties subject to Verba 28.1 of the Stamp Tax General Table and therefore have legitimate interest in challenging potentially unlawful assessments. The arbitral tribunal confirmed both the fund's legal standing and the management company's representative authority in its preliminary analysis.
How are Stamp Tax liquidations calculated for properties subject to Verba 28.1 of the TGIS?
Stamp Tax liquidations under Verba 28.1 of the General Table (TGIS) are calculated by applying progressive rates to the tax property value (valor patrimonial tributário - VPT) of urban properties for residential use. The VPT is determined according to the IMI Code (Property Tax Code) and appears in the property registry (matriz predial). For properties exceeding €1,000,000 VPT, the rates are: 0.7% for values between €1,000,000-€2,000,000; 1.0% for €2,000,000-€5,000,000; and 1.5% above €5,000,000. The tax is assessed annually and charged to the property owner as of January 1st. A critical calculation issue arises with properties in vertical ownership (horizontal property regime) containing multiple autonomous divisions: the Tax Authority historically aggregated all division values to determine if the €1,000,000 threshold was exceeded, while taxpayers argued that each autonomous division with independent use should be taxed separately based on its individual VPT. Multiple CAAD precedents support the latter interpretation, holding that autonomous divisions susceptible to independent use should be taxed individually, not collectively.
What is the procedure for filing a request for official review (revisão oficiosa) of Stamp Tax assessments in Portugal?
The procedure for filing a request for official review (pedido de revisão oficiosa) of Stamp Tax assessments in Portugal is governed by Articles 78 of the Tax Procedure and Procedural Code (CPPT). Taxpayers must submit a written request to the Tax Authority (typically the tax office that issued the assessment or the relevant specialized unit like the Large Taxpayers Unit) identifying the contested act and grounds for review. The request can be based on manifest illegality, legal error, factual error, or procedural violations. There is no strict deadline for filing official review requests, unlike hierarchical appeals, though delay may affect legal certainty. The Tax Authority must decide within four months; failure to respond constitutes tacit rejection (indeferimento tácito). If official review is expressly or tacitly rejected, taxpayers can escalate to judicial review or, as in Process 560/2018-T, to tax arbitration at CAAD. The claimant in this case filed for arbitration challenging both the tacit rejection of the official review request and the underlying Stamp Tax assessments totaling €42,601.25 for 2014-2015.