Process: 567/2018-T

Date: March 19, 2019

Tax Type: Outros

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 567/2018-T) addresses the procedural consequence when the Tax Authority administratively annuls contested tax assessments before arbitration concludes. A real estate investment fund, through its management company A... S.A., challenged multiple Stamp Duty (Imposto do Selo) assessments for 2014-2015 concerning three properties in Porto. The fund initially filed an administrative complaint (reclamação graciosa), which was granted on June 1, 2018, with the Tax Authority annulling all contested assessments and reimbursing the taxpayer on June 12, 2018. However, the taxpayer subsequently filed for arbitration on November 14, 2018, seeking a declaration of illegality and compensatory interest. The arbitral tribunal, composed of three arbitrators, unanimously ruled that the case suffered from original impossibility of litigation (impossibilidade originária da lide). Since the contested assessments had been administratively annulled and no longer existed in the legal order when the arbitration request was filed, there was no subject matter for the proceedings. The tribunal applied Article 277(e) of the Civil Procedure Code, which mandates dismissal when litigation is impossible. The decision emphasizes that CAAD arbitration is an annulment proceeding aimed at declaring acts illegal; when those acts cease to exist through administrative annulment before arbitration is initiated, the proceedings become moot. The tribunal absolved the Tax Authority from the instance and fixed procedural costs at €3,060 on a case value of €108,561. This ruling clarifies that taxpayers must verify the status of contested acts before initiating arbitration to avoid procedural dismissal.

Full Decision

ARBITRAL DECISION

The arbitrators Cons. Jorge Lopes de Sousa (presiding arbitrator), Dr. Ricardo Marques Candeias and Dr. Pedro Miguel Bastos Rosado (arbitrator members), designated by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 24-01-2019, agree as follows:

1. REPORT

A..., S.A. (hereinafter "Claimant"), holder of tax identification number ... and with registered office at ..., ..., ..., ... - ... ..., in its capacity as management company and in representation of B... – Special Closed Real Estate Investment Fund (hereinafter "Fund"), with tax identification number ..., came, in accordance with Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Tribunal.

The Claimant requests the examination of the legality of the implied dismissal of the administrative complaint it filed against acts for the assessment of Stamp Duty.

The Claimant further requests the reimbursement of the amount paid plus compensatory interest.

The respondent is the TAX AND CUSTOMS AUTHORITY.

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 15-11-2018.

In accordance with the provisions of paragraph a) of section 2 of article 6 and paragraph b) of section 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the arbitrators who were initially designated by the Deontological Council communicated their acceptance of the assignment within the applicable period.

On 04-01-2019, the parties were duly notified of such designation, and they did not express any intention to refuse the designation of the arbitrators, in accordance with the combined provisions of article 11, section 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of paragraph c) of section 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 24-01-2019.

The Tax and Customs Administration submitted its response in which, among other things, it raised the impossibility of the dispute on the grounds that the contested assessment acts had been annulled.

By order of 27-02-2019, the meeting provided for in article 18 of the RJAT was dispensed with, with the possibility for the Claimant to comment on the exceptions raised by the Tax and Customs Authority, and a date for the decision was set.

The Claimant came to comment, acknowledging that the contested assessments had been annulled and that it had been reimbursed of the amounts it had paid.

The arbitral tribunal was regularly constituted, in accordance with the provisions of articles 2, section 1, paragraph a), and 10, section 1, of Decree-Law no. 10/2011, of 20 January, and is competent.

The parties are duly represented, have legal personality and capacity and are legitimate (articles 4 and 10, section 2, of the same decree and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities.

2. FACTS

2.1. Established Facts

The following facts are deemed established:

A) The Fund, represented by the Claimant, is the owner of several properties;

B) The Fund was notified of the collection documents relating to acts for the assessment of Stamp Duty with numbers 2015..., 2015..., 2015... (relating to the year 2014), 2016..., 2016..., and 2016... (relating to the year 2015), concerning the property registered under land register article..., as well as of the collection documents relating to tax assessment acts for Stamp Duty with numbers 2015..., 2015..., 2015... (relating to the year 2014), 2016..., 2016..., and 2016... (relating to the year 2015), concerning the property registered under land register article..., and also of the collection documents relating to tax assessment acts for Stamp Duty with numbers 2015..., 2015..., 2015... (relating to the year 2014), 2016..., 2016..., and 2016... (relating to the year 2015), concerning the property registered under land register article..., all of the Parish of ..., municipality of ... and district of Porto (Documents 2 to 19 attached with the request for arbitral review, whose contents are deemed reproduced), to which correspond the assessments indicated in the table that follows:

C) The Claimant filed an administrative complaint against the aforementioned assessments, which proceeded under no. ...2018... for examination of the legality of assessments no. 2014/..., 2014/..., 2014/..., 2015/..., 2015/... and 2015/...;

D) On 01-06-2018, the Head of Finance of ... issued an order to the effect of granting this same request, dismissing the payment of compensatory interest;

E) On 12-06-2018, six reimbursements were issued, one for each of the assessment acts in question here, which were transferred to a bank account of which the Claimant is the holder;

F) The reimbursements were notified to the Claimant on 24-06-2018 (documents 25 to 30 attached with the Response, whose contents are deemed reproduced);

G) On 14-11-2018, the Claimant filed, with the Centre for Administrative Arbitration, a request for constitution of an arbitral tribunal, under paragraph a) of section 1 of article 2 of the RJAT, having as its object the examination of the legality of the aforementioned stamp duty assessments.

2.2. Unestablished Facts and Rationale for Decision on Facts

There are no facts relevant to the resolution of the dispute that have not been established.

The established facts are based on the documents submitted by the Claimant and the Tax and Customs Authority, whose correspondence to reality is not disputed.

3. LAW

The Tax and Customs Authority raised the exception of original lack of subject matter of the proceedings, on the grounds that, in summary, the contested assessments had been annulled in administrative complaint proceedings and the Claimant had been notified of the annulling decision and reimbursed of the amounts paid before the filing of the request for constitution of the arbitral tribunal.

The documents attached confirm the facts asserted by the Tax and Customs Authority and the Claimant accepts them.

In these terms, the present proceedings lack ab initio subject matter, as the contested assessments no longer subsisted in the legal order on the date when the Claimant presented the request for arbitral review.

As the arbitral proceedings provided for in the RJAT are a contentious means of annulment, which aims to declare the illegality of acts of the type indicated in its article 2, the non-subsistence in the legal order of the acts whose declaration of illegality is requested implies impossibility of the dispute, which is grounds for extinction of the instance, in accordance with article 277, paragraph e), of the CPC, subsidiarily applicable by force of the provision in article 29, section 1, paragraph e), of the RJAT.

4. DECISION

In these terms, this Arbitral Tribunal agrees to:

– dismiss the instance due to original impossibility of the dispute, arising from lack of subject matter;

– absolve the Tax and Customs Authority of the instance.

5. VALUE OF PROCEEDINGS

In accordance with the provisions of article 306, section 2, of the CPC and article 97-A, section 1, paragraph a), of the CPPT and article 3, section 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 108,561.00.

6. COSTS

In accordance with article 22, section 4, of the RJAT, the amount of costs is fixed at € 3,060.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

As the annulment of the contested acts was notified to the Claimant before the filing of the request for arbitral review, the absolution of the instance is attributable to the Claimant, and therefore the responsibility for the proceedings' costs lies exclusively with it.

Lisbon, 19-03-2019

The Arbitrators

(Jorge Lopes de Sousa)

(Ricardo Marques Candeias)

(Pedro Miguel Bastos Rosado)

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority annuls tax assessments during pending arbitration proceedings at CAAD?
When the Tax Authority annuls tax assessments before arbitration proceedings are filed at CAAD, the arbitration case suffers from original impossibility of litigation (impossibilidade originária da lide). Since CAAD arbitration is an annulment proceeding under RJAT aimed at declaring the illegality of administrative acts, if the contested acts no longer exist in the legal order when the arbitration request is submitted, there is no subject matter for the proceedings. The tribunal must dismiss the instance pursuant to Article 277(e) of the Civil Procedure Code, applied subsidiarily under Article 29(1)(e) of RJAT. The taxpayer's reimbursement through administrative channels eliminates the basis for seeking judicial review, and any claims for compensatory interest must be pursued through the administrative complaint procedure itself rather than subsequent arbitration.
What is the legal concept of 'impossibilidade da lide' (impossibility of litigation) in Portuguese tax arbitration?
Impossibilidade da lide (impossibility of litigation) is a fundamental procedural exception in Portuguese tax arbitration that occurs when the legal relationship or administrative act subject to challenge ceases to exist before arbitration proceedings commence. In the context of CAAD, it represents an original defect (impossibilidade originária) that prevents the tribunal from examining the merits of the case. This concept applies when contested tax assessments are administratively annulled, rendering the arbitration request without object since there is no longer an act whose illegality can be declared. The impossibility arises because arbitration under RJAT is characterized as contentious annulment proceedings, requiring the continued existence of the challenged administrative act. When this condition is absent at the moment of filing, the tribunal lacks jurisdiction over non-existent acts, resulting in mandatory dismissal under Article 277(e) CPC and absolution of the Tax Authority from the instance.
Can a taxpayer claim reimbursement and compensatory interest after administrative annulment of Stamp Tax (Imposto do Selo) assessments?
After administrative annulment of Stamp Tax assessments through reclamação graciosa (gracious complaint), taxpayers are entitled to reimbursement of amounts paid, but claims for compensatory interest must be addressed within the administrative procedure itself. In this case, the Tax Authority granted the administrative complaint on June 1, 2018, annulling the assessments and issuing reimbursements on June 12, 2018, but specifically denied compensatory interest. Once the taxpayer has been reimbursed and notified of the annulment decision, subsequent arbitration proceedings cannot be initiated to challenge the already-annulled assessments or to claim additional compensatory interest. The proper course is to challenge the denial of compensatory interest within the administrative complaint decision itself, potentially through hierarchical appeal or direct judicial review of that specific aspect, rather than filing arbitration against assessments that no longer exist. The administrative annulment fully satisfies the primary claim, leaving only ancillary interest issues for separate challenge if desired.
How does CAAD handle arbitration cases when the disputed tax liquidations are revoked by the Tax Authority before a final decision?
CAAD handles arbitration cases where disputed tax liquidations are revoked before final decision by applying the procedural exception of impossibility of litigation. When the Tax Authority annuls contested assessments during the administrative complaint phase—before the taxpayer files for arbitration—the subsequent arbitration request is dismissed due to original lack of subject matter (impossibilidade originária da lide). The tribunal verifies through documentary evidence whether the assessments still exist in the legal order at the moment of filing. If annulment and reimbursement occurred prior to the arbitration request, the tribunal issues an order dismissing the instance under Article 277(e) CPC, applied subsidiarily through Article 29(1)(e) RJAT, and absolves the Tax Authority from the proceedings. The costs allocation reflects that the dismissal results from circumstances attributable to the claimant's failure to verify the status of contested acts before initiating arbitration. This procedural approach ensures CAAD resources are devoted to genuine disputes over existing administrative acts rather than moot cases.
What is the procedure for challenging Stamp Tax assessments through gracious complaint (reclamação graciosa) and subsequent tax arbitration in Portugal?
The procedure for challenging Stamp Tax assessments in Portugal follows a two-stage process: first, administrative complaint (reclamação graciosa), and potentially second, tax arbitration at CAAD. Upon receiving Stamp Tax assessment notices, taxpayers may file reclamação graciosa with the competent tax authority within the statutory deadline, challenging the legality or factual basis of the assessments. The Tax Authority examines the complaint and issues a decision either granting (annulling the assessments and ordering reimbursement) or denying the complaint. If the complaint is denied or implicitly rejected through administrative silence, the taxpayer may then initiate arbitration proceedings at CAAD under Article 2(1)(a) RJAT, requesting judicial review of the assessment's legality. However, if the administrative complaint is granted and assessments are annulled before arbitration is filed, subsequent arbitration becomes procedurally impossible due to lack of subject matter. Taxpayers must therefore monitor administrative complaint outcomes carefully and only proceed to arbitration if assessments remain contested. Claims for compensatory interest denied in administrative decisions require separate challenge rather than arbitration of annulled assessments.