Process: 635/2014-T

Date: August 21, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision addresses a critical jurisdictional question regarding the competence of Portugal's Centre for Administrative Arbitration (CAAD) to adjudicate Municipal Property Tax (IMI) disputes arising in the Autonomous Region of Madeira. The taxpayer challenged an IMI assessment for 2013, but the Tax Authority (Respondent) contested the tribunal's jurisdiction, arguing that IMI in Madeira is administered by the Regional Directorate of Tax Affairs (DRAF), not the national Tax and Customs Authority (AT). The Respondent contended that only taxes managed by AT fall within CAAD's material scope under Binding Order No. 112-A/2011 of March 22, which exhaustively lists the public entities subject to CAAD arbitration. The claimant countered that IMI is centrally assessed by AT, whose logo appears on tax notices, making arbitration proper. The tribunal faced a procedural dilemma: the jurisdictional challenge was raised belatedly in final written arguments rather than in the initial response. While the principle of procedural stability (estabilidade da instância) generally prohibits introducing new matters after pleadings close, the tribunal recognized its duty to examine jurisdictional defects ex officio, including absolute lack of competence and lis pendens. The decision reveals a split in Portuguese legal doctrine and arbitral jurisprudence on this issue. One line holds that Madeira's fiscal regionalization through Decree-Law 18/2005 transferred tax administration to regional authorities, placing such taxes outside CAAD's reach since DRAF is not listed in the binding order. Conversely, other arbitral decisions have found jurisdiction exists based on AT's role in assessing the legality of acts under Article 2 of the RJAT (Legal Regime for Tax Arbitration). This case exemplifies the complex interplay between Portugal's national tax arbitration system and regional fiscal autonomy, raising fundamental questions about access to alternative dispute resolution mechanisms for taxpayers in autonomous regions.

Full Decision

Arbitral Decision

CAAD: Tax Arbitration

Case No. 635/2014-T

  1. REPORT

1.1. A, taxpayer no. …, submitted on 27/08/2014 a request for arbitral decision, wherein he petitions the declaration of illegality of the assessment act for the Municipal Property Tax (IMI) relating to the year 2013.

1.2. The Honorable President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) designated on 15/10/2014 as arbitrator, Francisco Nicolau Domingos.

1.3. On 30/10/2014 the singular tribunal was constituted.

1.4. In compliance with the provision of art. 17, para. 1 of Decree-Law No. 10/2011, of 20 January (RJAT) the Respondent was notified on 03/11/2014 to, if it so wished, submit a response and request the production of additional evidence.

1.5. On 04/12/2014 the Respondent submitted its response.

1.6. The tribunal on 24/04/2015 by order extended the deadline for issuing the arbitral decision, with the reasoning therein described.

1.7. By order of 07/05/2015 the holding of the meeting referred to in art. 18 of the RJAT was scheduled.

1.8. On 21/05/2015 the first meeting of the arbitral tribunal took place, in which the Respondent was invited to correct its response, cf. art. 18, para. 1, lit. c) of the RJAT, given the fact that the one presented on 04/12/2014 did not refer to the present proceedings.

1.9. The Respondent on 22/05/2015 submitted a new response.

1.10. On 04/06/2015 the tribunal invited the Claimant to indicate the facts of its request for arbitral decision regarding which it intended to examine the witnesses summoned, in order to assess the relevance of such evidence.

1.11. On 05/06/2015 the Claimant indicated such facts.

1.12. The tribunal on 12/06/2015 determined, in particular, the non-production of the requested evidence, judicial inspection and the designation of a qualified person to carry out the inspection acts, with the grounds better described in such order.

1.13. By order of 21/06/2015, the tribunal determined, in particular, given the absence of matters of exception that would prevent the knowledge of the claim in the Respondent's response of 22/05/2015 and the tenor of the arbitral order of 12/06/2015, the dispensing with the holding of a new meeting to fulfill the purposes described in the subparagraphs of art. 18, para. 1 of the RJAT and, consequently, granted a period of 10 days for the parties to submit their final written arguments.

1.14. The parties submitted their arguments on 03/07/2015, and it is certain that the Respondent invoked ex novum in such pleading the absolute lack of jurisdiction of the tribunal and lis pendens.

1.15. The Claimant took a position regarding such matter of exception on 10/07/2015.

1.16. The tribunal, by order of 15/07/2015 and under the principle of stability of the instance decided that it would only pronounce itself on questions of ex officio knowledge.

1.17. By order of 27/07/2015 the tribunal scheduled the final decision for 21/08/2015.

  1. SANATION – PRELIMINARY MATTERS

The Respondent, in its arguments, invoked the absolute lack of jurisdiction of this tribunal, arguing that the AT is not competent to represent the Government of the Autonomous Region of Madeira (ARM), that the tax in question is not assessed by the AT, but by the Regional Directorate of Tax Affairs (DRAF), that the Claimant has tax domicile in Funchal and that the property is located in the ARM. Consequently, in its view, the only body of the Ministry of Finance that is bound by the jurisdiction of the CAAD is the AT.

In response to such matter of exception, the Claimant argued that IMI is assessed by the Central Services of the AT in relation to each municipality, that the AT logo appears on the concrete collection notice, and that the administration of IMI is the responsibility of the AT.

In the first place, it should be noted that the lack of jurisdiction of this tribunal was invoked only in the arguments and therein the Respondent neither alleged nor proved any factual basis for such belated allegation. Now, although the principle of stability of the instance prevents changes to its content, except where the law permits, in this area doctrine notes: "In arguments, as a rule, only the critical assessment of evidence and the discussion of legal questions raised in the petition of the challenge are admissible, it being impossible to use them to invoke new facts or raise new questions of illegality of the challenged act. This understanding has been based on the principle of stability of the instance (art. 268 of the CPC), and on the burden imposed on the challenger to set forth in the petition of challenge the facts and legal grounds that support the request (para. 1 of art. 108 of the CPPT). Thus, only with respect to questions of ex officio knowledge or when facts subjectively subsequent to the challenger arise that provide it with knowledge of defects that it could not have known at the time of presentation of the petition, will it be permitted to the challenger to invoke new facts or raise new questions of legality of the challenged act, namely impute new defects to it (our emphasis)"[1].

Now, if as the author states, this ex officio knowledge concerns the non-existence or nullity of the act, it is equally necessary to know previously and ex officio the dilatory exceptions invoked, the absolute lack of jurisdiction and lis pendens, so that, if applicable, subsequently the tribunal may assess the assessment in question, cf. art. 260, art. 577, lit. a) and i) and art. 578, all of the Code of Civil Procedure, applicable by force of art. 29 of the RJAT.

The matter raised by the Respondent in its arguments is not new, having already been subject to analysis by doctrine and jurisprudence. In this respect, doctrine argues that: "…the taxes levied in the Autonomous Region of Madeira are outside the material scope of arbitration insofar as the Binding Order imposes as a limit the taxes managed by the Tax and Customs Authority. (…) The Autonomous Region of Madeira does not have its fiscal system adaptation measures enshrined in a single statute, this adaptation being realized through various separate statutes. In truth, with regard to Madeira a process of regionalization of tax administration was carried out through Decree-Law No. 18/2005, of 18/1, and Regional Regulatory Decrees Nos. 1/A/2001/M, of 13/3, 29-A/2005/M, of 31/8, 5/2007/M, of 23/7, 27/2008/M, of 3/7, 8/2011/M, of 14/11, 4/2012/M, of 9/4, and 2/2013/M, of 1/2. Thus, taking into account that art. 1 of Decree-Law No. 18/2005, of 18/1, enshrines the transfer to the Autonomous Region of Madeira of the attributions and fiscal competencies that within the scope of the Finance Directorate of the Autonomous Region of Madeira and all services dependent on it were being exercised in the territory of the Region by the Government of the Republic, the taxes levied in the Autonomous Region of Madeira are outside the material scope of arbitration insofar as the Binding Order imposes as a limit the taxes managed by the Tax and Customs Authority"[2].

In this doctrinal line jurisprudence has also pronounced itself[3], using as argumentative foundations the following: i) The Regional Directorate of Tax Affairs is not explicitly listed in Order No. 112-A/2011, of 22 March, or implicitly, insofar as the Autonomous Region is not confused with another legal reality, the State and ii) The list of services bound to the jurisdiction of the CAAD in the binding order has a nature of exhaustive enumeration and, consequently, the DRAF is not included therein.

In the opposite sense arbitral jurisprudence has also pronounced itself in the scope of cases 260/2013-T, of 6/05/2014 and 90/2014-T, of 26/09/2014 in which the first arbitral decision concluded as follows: i) The jurisdiction of tax arbitral tribunals requires, in the first place, that the tribunal assess the legality of the act, cf. art. 2 of the RJAT and art. 2 of Order No. 112-A/2011, of 22 March; ii) It should be ascertained whether the AT as the successor of the entities described in art. 1 of the Order, has an interest in contradicting the claim of the Claimant's request for arbitral decision and whether the case decided finally has useful effect and iii) Art. 1 of Decree-Law No. 18/2005, of 18 January only involves the transfer to the Autonomous Region of Madeira of the attributions and fiscal competencies proper to the Finance Directorate of the Autonomous Region of Madeira and all services dependent on it and, thus, exclude the competencies exercised by delegation or any other form of representation of other bodies[4]. In the same sense jurisprudence adds: "…it results from the legislative itinerary set forth above that the AT never ceased to "ensure the performance of the administrative and computational procedures necessary for the exercise of the attributions and competencies transferred to the ARM", including those relating to the assessment and collection of the taxes that constitute own revenue of the ARM, including under Regional Regulatory Decree No. 2/2013, in force on the date of the assessments sub judice, whereby the Respondent had the necessary powers for the performance of the assessments in question, and it may further be considered that, unequivocally, the tax was subject to its administration"[5].

Thus, it is necessary to question, from the outset, whether: this tribunal has jurisdiction to assess the assessment in question?

To settle such a question it is necessary to mobilize the pertinent normative framework, that is, the RJAT and Order No. 112-A/2011, of 22 March which established the terms of the binding of the Tax Administration to the jurisdiction of the CAAD. More concretely, art. 2, para. 1 of the RJAT provides that: "The jurisdiction of arbitral tribunals comprises the assessment of the following claims: a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account; b) The declaration of illegality of acts of determination of taxable matter when not giving rise to the assessment of any tax, of acts of determination of collectible matter and of acts of determination of patrimonial values;"

However, the binding to the jurisdiction of the tribunals constituted alongside the CAAD includes as provided in art. 1 of Order No. 112-A/2011, of 22 March: "the following services of the Ministry of Finance and Public Administration: a) The General Directorate of Taxes (DGCI); and b) The General Directorate of Customs and Special Taxes on Consumption (DGAIEC)". It so happens that, through Decree-Law No. 118/2011, of 15 December, such services were merged into the Tax and Customs Authority (AT). Moreover, art. 2, para. 1 of the aforementioned Order adds: "The services and bodies referred to in the preceding article bind themselves to the jurisdiction of the arbitral tribunals that function in the CAAD that have as their object the assessment of claims relating to taxes whose administration is entrusted to them (our emphasis) referred to in para. 1 of art. 2 of Decree-Law No. 10/2011, of 20 January…".

The Organic Law of the Regional Directorate of Tax Affairs (Regional Regulatory Decree No. 2/2013/M, of 1 February 2013), in art. 2, para. 3 determines that: "It is incumbent especially on the DRAF and with respect to own fiscal revenues: a) To ensure the assessment and collection of taxes on income, on patrimonial assets and on consumption and other taxes that it is incumbent upon it to administer, as well as to collect and gather other revenues of the Region or of collective bodies of public law". However, art. 12, para. 1 of the same statute provides that: "Until all the logistical means necessary for the exercise of the fullness of the attributions and competencies provided for in art. 2 of the present statute are installed, the AT, through its departments and services, shall continue to ensure the performance of the administrative and computational procedures necessary for the exercise of the attributions and competencies transferred to the ARM, including those relating to the assessment and collection of the taxes that constitute own revenue of the ARM".

Now, in the concrete case, there are various regulations that demonstrate that the administration of IMI is the responsibility of the AT. Indeed, in art. 1 of the IMI Code it is provided that the amounts collected constitute "…revenue of the municipalities where they are located". Likewise, art. 113, para. 1 of the IMI Code adds that: "The tax is assessed annually, in relation to each municipality, by the central services of the General Directorate of Taxes…".

Thus, in the assessment in question the AT logo appears and not the DRAF logo, which equally demonstrates that the administration of the tax in question is entrusted to the AT, which is sufficient to conclude the material jurisdiction of this tribunal to assess the defects imputed by the Claimant to the disputed assessment.

It is further believed that such interpretative sense is reinforced when the care taken by the regional legislator in the cited art. 12, para. 1 of Regional Regulatory Decree No. 2/2013/M, of 1 February 2013 is observed when it states that the AT shall continue to perform the administrative procedures, until the DRAF has all the necessary means for the exercise of the totality of the attributions and competencies provided for in art. 2 of the same statute and in which are included the "assessment and collection of taxes…on patrimonial assets…".

In summary, the alleged lack of jurisdiction does not obtain, which is hereby declared, and as such, the tribunal should, within the realm of ex officio knowledge of dilatory exceptions, assess the matter of lis pendens.

Art. 580, para. 1 of the CPC provides that: "The exceptions of lis pendens and res judicata presume the repetition of a cause; if the cause is repeated while the preceding one is still pending, lis pendens exists…". In implementing the concept, art. 581, para. 1 also of the CPC provides that: "The cause is repeated when an action identical to another is brought as to the subjects, the claim and the cause of action". Paras. 2, 3 and 4 of such regulation add that: "There is identity of subjects when the parties are the same from the point of view of their legal capacity"; "There is identity of claim when in both causes the same legal effect is sought to be obtained" and "There is identity of cause of action when the claim set forth in the two actions proceeds from the same legal fact".

In the case at hand, the Claimant seeks the annulment of the assessment act, imputing to it in particular the defect of violation of law. The Respondent, in its arguments, states that the Claimant filed an administrative special action for the act of tacit rejection of a request for ex officio update of the property register, which is pending under No. …/14.1… of the Administrative and Tax Court of Funchal, which has as its cause of action the lack of possession by the Claimant of the totality of the property, the detachment of a parcel of 1665 m2 and its registration in the name of the expropriating entity. It further adds that following the express rejection of the same cadastral appeal another administrative special action was filed with the Administrative and Tax Court of Funchal, to which the number …/14.1… was assigned.

Now, although the Respondent did not present any certificate proving what it alleges, there is, at least, no identity of claim. If in the present proceedings the declaration of nullity is sought and, alternatively, the annulment of the IMI assessment relating to the year 2013, in those other proceedings the claim consists in the alteration of the property registration entry. Thus, the exception of lis pendens does not obtain.

Consequently, the proceedings do not suffer from nullities and, as such, the arbitral tribunal is regularly constituted and is materially competent to know and decide the claim, verifying, consequently, the conditions for the final decision to be rendered.

  1. POSITIONS OF THE PARTIES

The Claimant submitted a request for arbitral decision, imputing to the IMI assessment of the year 2013 a list of defects of a formal and material nature, concluding its pleading with the invocation of certain questions of unconstitutionality.

In concrete terms, in the realm of formal defects it alleges that in the collection document sent to the taxpayer there is an omission of the author of the act and that the tax assessment act is not reasoned, even if by reference. With respect to material defects, it invokes that as a result of the expropriation of a parcel of 1665 m2 of the property registered in the property register of the parish of ..., municipality of ..., ARM, whose declaration of public utility was published on 24/04/2003 in the official gazette of the ARM, it ceased to be owner of the said parcel, associated with the circumstance that the parcel actually occupied in the context of expropriation was much larger, by virtue of the installation of a water tank and gardens, it would not in totum be a tax subject of IMI, given the lack of possession.

It further alleges that, given the judicial award of the parcel of 1665 m2 by order of the Court of ... of 14/05/2007 which is known to the Respondent, there is an error in the calculation of the assessed tax, insofar as the patrimonial value used was calculated from the totality of the property and not from the remaining parcel.

It concludes by alleging that the interpretation made by the Respondent of art. 8 of the IMI Code is unconstitutional, according to which the owner of a certain property is considered a tax subject of the tax, when he does not have the possession, use and enjoyment thereof, because he has been dispossessed by virtue of administrative possession arising from expropriation for public utility, by violation of the principle of equality, proportionality, justice and the right to property. It adds that the taxation in the context of IMI of the owner of the real property who was deprived of its use and enjoyment, as a result of expropriation for public utility, violates the constitutional principle of equality and contributive capacity, insofar as, in its view, it derives no economic benefit whatsoever from the property subject to the tax.

The Respondent in its response of 22/05/2015 argues that the extinction of the right of property of the expropriated party does not result directly from the declaration of public utility, but from the judicial order referred to in art. 51, para. 5 of the Expropriation Code (CE) and, thus, as in the present case the award to be made is pending, the tax subject of IMI will be the expropriated party until such award occurs. It being further irrelevant for purposes of the incidence of such tax the dispossession of a parcel larger than the expropriated one and constitute an extensive interpretation that the law does not admit.

It further adds that art. 8, para. 4 of the IMI Code shall apply only subsidiarily, that is, the possessor shall be the tax subject in case of lack of property registration entry of the owner.

It concludes by writing that notwithstanding the injustice of the assessment, an interpretation of art. 8 of the IMI Code cannot be made in light of the constitutional principles invoked by the Claimant, because any other interpretation different from the one it defends would violate the letter and the spirit of such regulation, as well as the principle of legality, provided for in art. 103, para. 2 of the Constitution.

  1. MATTER OF FACT

4.1. FACTS CONSIDERED PROVEN

4.1.1. The Claimant has registered in the property register in his name the urban property corresponding to art. …, of the parish of ..., municipality of ..., Autonomous Region of Madeira.

4.1.2. In the property registration entry of such property there appears an area of 3410 m2.

4.1.3. The AT assessed IMI in the amount of € 3027.17 with respect to the property described in 4.1.1. above and to the year 2013.

4.1.4. In such assessment there is a reference to the identification of the property, its patrimonial value, the year of the tax, the date of assessment, the nature of the tax and the rate used to determine the amount of the tax and the value of the collection.

4.1.5. The deadline for voluntary payment of the 1st installment of such assessment ended on 30 April 2014.

4.1.6. The Claimant submitted on 27/08/2014 a request for arbitral decision, requesting the nullity of the assessment above identified and, subsidiarily, its annulment.

4.1.7. On 24/04/2003 a declaration of public utility of expropriation of 1665 m2 of the area subject to the property identified in 4.1.1. above was published in the Official Gazette of the ARM.

4.1.8. Such expropriation was intended for the construction of the road link between the … (…) and the ... (…) and was given a character of urgency.

4.1.9. The expropriating entity has had administrative possession of the expropriated parcel since 24/04/2003.

4.1.10. The expropriation proceedings are pending before the ….º Court of the Court of ..., under No. …/07.0… (now Local Court of ... – Section of General Jurisdiction – J …, of the Judicial District of Madeira).

4.1.11. By judicial sentence dated 14/05/2007 the right of property of the expropriated parcel of the property above identified was awarded to the expropriating entity, Regional Secretariat for Planning and Finance.

4.1.12. The Claimant filed an appeal of the arbitral decision and a request for total expropriation on 11/06/2007 because he disagreed, in particular, with the amount of compensation arbitrated.

4.1.13. The Claimant has access to the remaining parcel of the property via a roundabout.

4.1.14. The Claimant filed a cadastral appeal on 25/02/2014 with the Finance Service of ..., in which he alleges and proves that he is not the owner of a parcel of 1665 m2 of the property referred to in 4.1.1. above, by virtue of the award of the right of property to the expropriating entity.

4.2. FACTS NOT CONSIDERED PROVEN

There are no facts relevant to the decision that have not been given as proven.

4.3. REASONING OF THE MATTER OF FACT CONSIDERED PROVEN

The matter of fact given as proven has its source in the documents used for each of the alleged facts and whose authenticity was not called into question. Likewise, facts not challenged that are relevant to the decision to be rendered were also taken as established.

  1. THE LAW

Preliminarily it is necessary to delimit the object of the dispute, the Claimant imputing to the assessment act in question defects of a formal nature, of a material character and certain questions of unconstitutionality.

Indeed, the Claimant imputes to the assessment in question a set of formal defects: i) lack of author of the act and ii) lack of reasoning of the assessment.

In this area, doctrine advocates as to the requirements of the decision of the tax procedure that: "The decision of the tax procedure, being an act defining the position of the tax administration before individuals, must comply with the general requirements of administrative acts, set forth in art. 123 of the CPA. (….) Under para. 2 of this art. 123, all these references must be stated in a clear, precise and complete manner, so that the meaning and scope of the act and its legal effects can be unequivocally determined. Non-compliance with the prescription in these provisions is likely to lead to the annulment of the act, for defect of form. However, it should be borne in mind that defects may be considered remedied when it is demonstrated that, despite the inaccuracy or omission or irregularity of the content of the act, the objective intended to be achieved with the imposition of this content was attained, namely that its addressee correctly understood its exact scope"[6].

Now, in the concrete case, if it is true that there is no indication of the author of the act in the assessment, it is equally true that the Claimant understood its exact scope, despite such omission. So much is it so that the present request for arbitral decision contains 159 articles, in which the Claimant invokes, in particular, the defect of violation of law, with source in error as to the subjective incidence of IMI and error as to the calculation of the assessed tax and a list of questions of unconstitutionality. Reason for which, such defect is considered remedied.

Differently, the Claimant further alleges that the assessment is not reasoned, because, in its view, it is not possible to understand the reasons for the decision, especially since it contains no motivation of fact and law.

Jurisprudence supports as to the reasoning of the assessment act that: "The act shall be sufficiently reasoned when the administered party, placed in the position of a normal addressee – the bonus pater familiae of which art. 487, para. 2 of the Civil Code speaks – can come to know the factual and legal reasons that are in its genesis, so as to allow him to choose, in an informed manner, between acceptance of the act or the activation of legal means of challenge, and so that, in the latter circumstance, the tribunal can also exercise effective control of the legality of the act, assessing its legal accuracy in light of its contextual reasoning"[7]. Or, put another way, the reasoning must incorporate elements of fact and law that allow the addressee of the act to understand the decision-making process of the AT.

In the case sub judice, it is possible to discern in the assessment/collection document, the reference to the identification of the registered property, its patrimonial value, the year of the tax, the date of assessment, the nature of the tax, the rate used to determine its amount and, finally, the value of the collection. Reason for which, the tribunal considers that the act is sufficiently reasoned, since it contains the minimum references to the matter of fact and law used by the AT for its performance. Even because, the alleged lack of reasoning of the same, did not constitute any obstacle to the Claimant invoking the nullity of the assessment and, subsidiarily, requesting its annulment in a pleading in which it imputes to the assessment a list of defects. In summary, the act does not suffer from the defect of lack of reasoning that the Claimant imputes to it.

As regards material defects, the Claimant alleges that the award of the right of property of a parcel of 1665 m2, as a result of expropriation, which associated with the lack of possession with respect to the remaining area of the property, would lead to the annulment of the assessment, by application of art. 8 of the IMI Code and that, secondly, with the award of the right of property of such parcel of the property to the expropriating entity, the provision of art. 8, para. 1 of the IMI Code is not fulfilled.

Let us begin with the second ground alleged by the Claimant, for a logical reason, that is, to determine who is the owner of the expropriated parcel of 1665 m2. Expropriation for public utility encompasses the so-called acts of an ablative nature, through which subjective rights over private immovable property are extinguished, because these are necessary for the realization of a purpose of public interest. Correspondingly, the expropriating entity is obliged to pay a "just compensation" to the expropriated party.

Indeed, art. 1 of the CE provides that: "Immovable property and the rights inherent thereto may be expropriated for reason of public utility included in the attributions, purposes or subject matter of the expropriating entity, by means of the payment of a just compensation…".

Even in litigious expropriation, art. 51, para. 5 of the CE provides that, after the arbitral decision, the expropriating entity shall send the proceedings to the court in which "...the judge, within the period of 10 days, awards to the expropriating entity the property and possession (our emphasis), except, as to the latter, if there is already administrative possession, and simultaneously orders the notification of his order, the arbitral decision and all the elements presented by the arbitrators, to the expropriating entity and the expropriated parties and other interested parties, with indication, as to these, of the amount deposited and the faculty of filing an appeal referred to in art. 52". That is, the expropriating entity is in this case the owner of a parcel of 1665 m2 of the property, the Claimant having filed an appeal because he disagreed with the amount of compensation arbitrated and considered that total expropriation would be justified. However, repeating, it is unequivocal that the Claimant is not the owner, as he alleges and proves, of such parcel of the property which would justify its detachment from the original property registration entry.

In this line doctrine observes: "The right of property only becomes extinct in the legal sphere of the expropriated party with the judicial order of award or with the execution of the deed or instrument of amicable expropriation"[8].

Thus, if art. 8, para. 1 of the IMI Code provides that: "The tax is due by the owner of the property on 31 December of the year to which it relates", the Claimant is not responsible for the payment of the entire assessed tax, but only for the part of which he is the owner, that is, 1745 m2.

Already in para. 4 of the same regulation the legislator wrote that: "It is presumed that the owner, usufructuary or superficiary, for tax purposes, is the one who figures or should figure as such in the property register, on the date referred to in para. 1 or, in the absence of registration, the one who on that date has possession of the property.".

In truth, as stated above, the next question which is the subject of the material claim of the Claimant consists in determining the relevance that his lack of possession over the remaining parcel (that which was the subject of expropriation) may have on the subjective incidence of IMI.

In this respect, it should be noted from the outset that even in the taxation of patrimonial assets there is not an absolute identity of legal concepts in the context of IMI and Municipal Tax on Onerous Transfer of Real Property (IMT).

This is what happens with the concept of transfer of the right of property. That is, if there is no doubt that for purposes of the incidence of IMT, mere delivery presumes such transfer, already as regards IMI, the relevant concept of transfer refers to Civil Law and operates only with the legal transfer of the same property, as is the example of the public deed of purchase and sale. Or, put another way, the effects of delivery are not similar. In IMT the alteration of possession determines subjection, in IMI this does not, as a rule, have any effects on the incidence of such tax.

In this sense, doctrine supports that: "The residual solution of attributing passive subjection to the one holding possession of the property on that date should, in our view, apply only to cases in which it is not possible to know the respective holder as moreover results from para. 1 of art. 35 of the IMI Code…"[9]. It further adds that, as taught by Counselor JORGE LOPES DE SOUSA: "The Municipal Contribution and the Municipal Tax on Real Property are not, like the Land Contribution, a tax on income, but rather taxes on patrimonial assets (art. 1 of the Municipal Contribution Code and art. 1 of the IMI Code), whose passive subject is, as a rule the owner of the property (arts. 8, para. 1 of the Municipal Contribution Code and 8, para. 1, of the IMI Code). Only in cases where there is usufruct or conditional property is the tax due by the usufructuary or by the one having the use or enjoyment of the property, respectively (paras. 2 and 3 of the same articles). Naturally, in cases where there is no usufruct nor conditional property, the owner being the debtor of the tax, the demonstration that he is not the possessor or fruitor in no way affects the tax debt, because possession and enjoyment cannot serve as the basis for the incidence of the tax (our emphasis)"[10].

In the same interpretative line jurisprudence supports, with respect to the repealed art. 8, para. 4 of the Municipal Contribution Code (reproduced in its essential lines now also in art. 8, para. 4 of the IMI Code): "The municipal contribution is a tax that falls on patrimonial assets and not on income. Thus, the passive subject thereof is, as a rule and in the first place, the owner of the taxed real property. And the legal presumption established by para. 4 of art. 8 of the MCC is relevant only for cases in which perhaps the Tax Authority remains without knowing who is the owner of the real property"[11].

Now, for such a sum of reasons, if in the case sub judice no doubts exist as to who was the owner of the remaining parcel of the property on the date of the tax fact, that is, the Claimant himself, the assessment in question did not violate art. 8 of the IMI Code, whereby, as to this segment the claim of the Claimant does not obtain.

Finally, he invokes the unconstitutionality of the interpretation made by the Respondent of art. 8 of the IMI Code in the assessment in question, that is, the one that concludes that the passive subject of the tax is the one who does not have possession, use and enjoyment of the property, because he has been dispossessed by virtue of administrative possession arising from expropriation for public utility, by violation of the principle of equality, proportionality, justice and the right to property.

He adds that the taxation in the context of IMI of the owner of the real property who was deprived of its use and enjoyment, as a result of expropriation for public utility, violates the constitutional principle of equality and contributive capacity, insofar as, in his view, he derives no economic benefit whatsoever from the property subject to the tax.

The central nucleus of the constitutional question, as defined by the Claimant, consists in the violation of the (constitutional) principle of equality and contributive capacity, since he cannot derive any economic benefit from the property subject to the tax.

It so happens that, such is not the case with respect to the remaining parcel of the expropriation, because as the Claimant himself sustains in para. 77 of his request for arbitral decision, he continues to have access to the property via the roundabout.

Moreover, and even if it is invoked that the remaining parcel lost its building capacity, the fact is that arts. 6, 101, and 130 and following, all of the IMI Code allow that, from the alteration of the property registration to be undertaken as a result of the transfer of the right of property of a parcel of 1665 m2 to the expropriating entity, a different classification results for the property of the Claimant.

Thus, it is considered that the Claimant will continue to be able to derive "benefit" from the property. Which, as such, is a circumstance revealing contributive capacity.

Moreover, art. 8, para. 4 of the IMI Code only gives relevance to possession when it is not possible to determine the owner of the property.

Finally, no discriminatory reason is discerned that would constitute the violation of the principle of equality. In summary, the invoked unconstitutionality does not obtain.

In view of the partial dismissal of the claim of the Claimant in the present request for arbitral decision, the question of partial annulment of the assessment in question arises. In this respect doctrine JORGE LOPES DE SOUSA teaches[12]: "Under art. 100 of the LGT, in case of total or partial success of a complaint, judicial challenge or appeal in favor of the passive subject, the tax administration is obliged to the immediate and complete restoration of the legality of the act or situation that is the subject of the dispute. From this provision the possibility of partial annulment of tax acts is inferred. The STA has generally held that assessment acts, by defining a sum, are naturally divisible, and also legally so, because the law provides for the possibility of partial annulment of such acts, in the said art. 100, by providing for the partial success of procedural means of challenge (as previously, art. 145 of the CPT provided). However such partial annulment can only be legally admissible when the reason for annulment is valid only with respect to a part of the act, that is, when there is only partial illegality. This will be the case when an assessment act is based on a certain taxable matter and it is ascertained that part of it was calculated illegally, because it should not be considered. In these cases, there is no obstacle to the assessment act being annulled with respect to the part that corresponds to the taxable matter whose consideration was illegal, the assessment remaining in force as to the part that corresponds to taxable matter that is not affected…".

Now, it is precisely what happens in the case sub judice in which the tribunal held that with respect to part of the tax base, that corresponding to 1665 m2, considered in the assessment in question, was determined illegally by violation of art. 8, para. 1 of the IMI Code. Thus, the assessment act is annulled with respect to the part in which it considered it.

  1. DECISION

In these terms and with the reasoning above described it is judged that the request for arbitral decision is partially meritorious, with the consequent partial annulment of the IMI assessment act for the year 2013, in the terms set forth above.

  1. VALUE OF THE CASE

The value of the case is set at € 3027.17, under the terms of art. 97-A of the CPPT, applicable by force of the provision in art. 29, para. 1, lit. a) and b) of the RJAT and art. 3, para. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne by the Claimant and Respondent, in the amount of € 612, cf. art. 22, para. 4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, in the proportion of their respective dismissal, that is, 51.17% and 48.83%, respectively.

Notify.

Lisbon, 21 August 2015

The Arbitrator,

Francisco Nicolau Domingos

[Text prepared by computer, pursuant to art. 131, para. 5 of the Code of Civil Procedure (CPC), applicable by reference of art. 29, para. 1, lit. e) of the Tax Arbitration Regime. The writing of the present decision is governed by the old orthography.]

[1] JORGE LOPES DE SOUSA, Code of Procedure and Tax Procedure – annotated and commented, Volume II, 6th edition, Áreas Editora, 2011, p. 297 and 298.

[2] SÉRGIO VASQUES/CARLA CASTELO TRINDADE, The material scope of tax arbitration, in Notebooks of Tax Justice No. 00, April/June 2013, p. 26 and 27.

[3] Arbitral decision rendered in the context of case No. 89/2012-T, of 18/02/2013, in which Professor Doctor JORGE BACELAR GOUVEIA served as arbitrator.

[4] For an exhaustive analysis of all the argumentation consult the arbitral award rendered in such case, of 06/05/2014 in which Master JOSÉ PEDRO CARVALHO served as arbitrator-president.

[5] Arbitral decision rendered in the context of case No. 90/2014-T, of 26/09/2014 and in which Master MARCOLINO PISÃO PEDREIRO served as arbitrator.

[6] DIOGO LEITE CAMPOS/BENJAMIM SILVA RODRIGUES/JORGE LOPES DE SOUSA, General Tax Law – annotated and commented, 4th edition, Encontro da escrita editora, 2012, p. 674.

[7] Award of the Supreme Administrative Court rendered in the context of case No. 01690/13, of 23/04/2014 and in which Counselor ASCENSÃO LOPES was the reporter.

[8] PEDRO CANSADO PAES/ANA ISABEL PACHECO/LUIS ALVAREZ BARBOSA, Expropriation Code – Revised and Updated, 2nd edition, Almedina, 2003, p. 26.

[9] J. SILVÉRIO MATEUS/L. CORVELO DE FREITAS, The taxes on immovable patrimonial assets. The stamp duty, Engifisco, 2005, p. 124 and 125.

[10] JORGE LOPES DE SOUSA, Code of Procedure and Tax Procedure – Annotated and Commented, II Volume, 5th edition, Áreas Editora, 2007, p. 80 and 81.

[11] Award rendered by the Supreme Administrative Court in the context of appeal No. 0713/02, of 23/10/2002 and in which Counselor ALFREDO MADUREIRA served as reporter.

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

Frequently Asked Questions

Automatically Created

Is the CAAD arbitral tribunal competent to rule on IMI disputes from the Autonomous Region of Madeira?
The competence of CAAD arbitral tribunals to rule on IMI disputes from the Autonomous Region of Madeira remains contentious in Portuguese tax law. The central issue is whether taxes administered by the Regional Directorate of Tax Affairs (DRAF) fall within CAAD's jurisdiction under Binding Order No. 112-A/2011, which lists only the Tax and Customs Authority (AT) and certain state services. Legal doctrine argues that Madeira's fiscal regionalization through Decree-Law 18/2005 transferred tax administration to regional authorities, placing such taxes outside CAAD's material scope since DRAF is not explicitly or implicitly included in the binding order's exhaustive enumeration. However, conflicting arbitral jurisprudence exists: some decisions deny jurisdiction on grounds that DRAF is a distinct legal entity from AT, while others (cases 260/2013-T and 90/2014-T) have affirmed jurisdiction based on AT's role in assessing act legality under Article 2 of RJAT. This split reflects ongoing uncertainty about whether regional fiscal autonomy excludes taxpayers in Madeira and the Azores from accessing national tax arbitration mechanisms.
How can a taxpayer challenge an IMI property tax assessment through tax arbitration in Portugal?
To challenge an IMI property tax assessment through tax arbitration in Portugal, taxpayers must submit a request for arbitral decision (pedido de pronúncia arbitral) to CAAD within the statutory deadline. The process begins with filing the arbitration request, identifying the contested assessment act and stating the grounds for illegality. The President of CAAD's Deontological Council designates an arbitrator (in singular tribunals) or panel (in collective tribunals), who are then notified to accept the appointment. Once the arbitral tribunal is constituted, the respondent tax authority is notified and given the opportunity to submit a written response (contestação) and request additional evidence. The tribunal may hold one or more procedural meetings under Article 18 of RJAT to clarify issues, invite corrections to pleadings, rule on preliminary exceptions, organize evidence, and attempt settlement. After evidence production (if any), parties submit final written arguments (alegações). The arbitrator must then issue the arbitral decision within the legal deadline, which can be extended by reasoned order. Throughout this process, taxpayers should ensure their request clearly identifies the challenged act, presents factual and legal grounds supporting illegality, and responds to any procedural issues raised by the tax authority.
What are the procedural steps in a CAAD arbitral process for municipal property tax disputes?
The procedural steps in a CAAD arbitral process for municipal property tax disputes follow the framework established in the RJAT (Legal Regime for Tax Arbitration). First, the taxpayer files the arbitration request identifying the contested IMI assessment. Second, CAAD's Deontological Council President designates the arbitrator(s), who must accept within the statutory period. Third, the singular or collective arbitral tribunal is formally constituted. Fourth, under Article 17(1) of RJAT, the respondent is notified to submit a response and request additional evidence if desired. Fifth, the tribunal may issue procedural orders extending deadlines, scheduling meetings, or ruling on preliminary matters. Sixth, Article 18 of RJAT provides for a procedural meeting where the tribunal invites corrections to pleadings, rules on preliminary exceptions, decides on evidence production, attempts settlement, and sets the schedule for remaining acts. Seventh, if evidence is admitted, the tribunal conducts hearings, inspections, or expert examinations as appropriate. Eighth, parties submit final written arguments (alegações) analyzing the evidence and legal issues. Finally, the arbitrator issues the arbitral decision within the deadline, pronouncing on jurisdictional issues ex officio before addressing the merits of the tax assessment's legality. This structured process balances efficiency with due process rights.
Can the respondent raise new exceptions such as absolute incompetence during final submissions in tax arbitration?
The ability of the respondent to raise new exceptions such as absolute incompetence during final submissions in tax arbitration is limited by the principle of procedural stability (estabilidade da instância) but subject to important exceptions. Generally, final written arguments (alegações) are limited to critical assessment of evidence and discussion of legal questions already raised in the pleadings; parties cannot invoke new facts or raise new illegality questions at this late stage, as this would violate Article 268 of the Civil Procedure Code and the burden on parties to set forth facts and legal grounds in their initial pleadings (Article 108(1) CPPT). However, Portuguese procedural law recognizes two critical exceptions: (1) matters subject to ex officio examination by the tribunal, and (2) facts subjectively subsequent to the initial pleading that provide knowledge of defects unknown at that time. Absolute lack of jurisdiction and lis pendens are dilatory exceptions that tribunals must examine ex officio under Articles 260, 577(a) and (i), and 578 of the Civil Procedure Code, applicable to tax arbitration via Article 29 RJAT. Therefore, even when raised belatedly in final arguments without supporting factual allegations or evidence, the tribunal must examine jurisdictional competence before proceeding to the merits, as these issues affect the tribunal's power to adjudicate the dispute.
What is the role of the principle of procedural stability (estabilidade da instância) in CAAD arbitral proceedings?
The principle of procedural stability (estabilidade da instância) plays a fundamental role in CAAD arbitral proceedings by preventing changes to the content of the legal dispute except where law permits. This principle, grounded in Article 268 of the Civil Procedure Code applicable to tax arbitration via Article 29 RJAT, ensures predictability and fairness by requiring parties to define their positions in initial pleadings—the petition (petição inicial) for claimants and the response (contestação) for respondents. Once these pleadings are filed, parties generally cannot introduce new factual allegations, raise new legal grounds for illegality, or expand the scope of their claims in subsequent procedural phases. Final written arguments must focus on critical analysis of evidence produced and discussion of legal questions already framed in the pleadings. This limitation prevents ambush tactics and protects the opposing party's right to adequate defense. However, the principle admits exceptions: tribunals must examine ex officio certain fundamental issues including absolute lack of jurisdiction, nullity of essential acts, and other matters of public order that affect the validity of proceedings. Additionally, parties may invoke supervening facts (factos supervenientes) that arose after initial pleadings and could not have been known earlier. The principle thus balances procedural efficiency and finality against the need to address fundamental defects that would undermine the legitimacy of arbitral decisions.