Process: 689/2018-T

Date: April 15, 2019

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 689/2018-T) involved a challenge by a closed real estate investment fund against an IMT (Municipal Tax on Onerous Transmission of Real Estate) assessment of €58,500.00. The fund initiated arbitration proceedings on December 28, 2018, under Articles 2(1)(a) and 10 of Decree-Law 10/2011 (RJAT), seeking to annul the tax assessment issued under D.L. n.º 1/87 of January 3. The case demonstrates the standard procedure for challenging IMT liquidations through tax arbitration in Portugal. However, before the Tax Authority (AT) filed its response, the Director of the Large Taxpayers Unit revoked the contested assessment on February 21, 2019. The AT informed the tribunal it would not file a response due to this revocation, and the claimant confirmed receipt of the revocation notice. The arbitrator, Dr. Henrique Nogueira Nunes, declared the instance extinct due to supervening futility of the dispute under Article 277(e) of the Civil Procedure Code, applicable via Article 29 of RJAT. Since the revocation occurred after the tribunal's constitution and after the AT was notified to respond, the arbitrator ruled that the AT must bear all costs (€2,142.00) pursuant to Article 536(3) of the CPC. This decision confirms that real estate investment funds have standing to challenge IMT assessments through CAAD arbitration and establishes that when the tax authority voluntarily revokes a contested act during proceedings, the case becomes moot, but cost allocation depends on the timing of the revocation.

Full Decision

ARBITRAL DECISION

The arbitrator, Dr. Henrique Nogueira Nunes, appointed by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to form the Arbitral Tribunal, constituted on 7 March 2019, decides as follows:

1. REPORT

1.1. A... – Closed Real Estate Investment Fund, with tax identification number ..., with registered office at ..., no. ..., ...-... Lisbon, hereinafter referred to as "Claimant", requested, on 28 December 2018, the constitution of the Arbitral Tribunal pursuant to articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

1.2. The request for constitution of the arbitral tribunal was accepted by CAAD and notified to the Tax and Customs Authority on 03 January 2019.

1.3. The request for arbitral ruling is based on the illegality of the assessment act for Municipal Tax on Onerous Transmission of Real Estate with the number ..., in the amount of € 58,500.00.

1.4. The TA or Respondent, by request submitted in the CAAD SGP on 15 March 2018, already after the constitution of the Arbitral Tribunal, informed the Tribunal that it would not submit a Response by reason that the assessment act in question in these proceedings was revoked by Order of the Director of the Large Taxpayers Unit, dated 21.02.2019 and notified to the Claimant by letter no. ..., of 07.03.2019.

1.5. The Claimant, notified by the Tribunal to pronounce itself on the request presented by the Respondent, confirmed such revocation by the Tax Authority.

The arbitral tribunal was regularly constituted and is materially competent in accordance with the provisions of articles 2, no. 1, paragraph a) and 30, no. 1 of RJAT.

The parties possess legal personality and capacity and are legitimate (articles 4 and 10, no. 2 of RJAT and article 1 of Regulation no. 112-A/2011, of 22 March).

The proceedings are not affected by any defects.

2. FACTS

For the purposes of assessment and determination of the case, the following facts are established as proven:

A. On 12 December 2018, the Claimant proceeded to pay the IMT assessment with the no. ..., in the amount of € 58,500.00 (fifty-eight thousand five hundred euros) - (cf. Document no. 1 attached by the Claimant with the arbitral petition).

B. On 28 December 2018 the Claimant submitted a request for constitution of the Arbitral Tribunal to CAAD – cf. electronic request in the CAAD system.

D) By request submitted in the CAAD SGP on 15 March 2018 the Respondent informed the Tribunal that it would not submit a Response by reason that the assessment act in question in these proceedings was revoked by Order of the Director of the Large Taxpayers Unit, dated 21.02.2019 and notified to the Claimant by letter no. ..., of 07.03.2019.

E) The Claimant, notified by the Tribunal to pronounce itself on the request presented by the Respondent, confirmed such revocation by the Tax Authority.

F) A date was set for the pronouncement of the arbitral decision until 30 April 2018.

3. UNPROVEN FACTS

There are no facts with relevance to the determination of the case that have not been proven.

4. LAW

4.1. The TA, notified to submit its Response, informed the Tribunal that it would not submit a Response by reason that the assessment act in question in these proceedings was revoked by Order of the Director of the Large Taxpayers Unit, dated 21.02.2019 and notified to the Claimant by letter no. ..., of 07.03.2019.

4.2. The Claimant, notified by the Tribunal to pronounce itself, if it wished, on the notification referred to in the previous point, informed the Tribunal that revocation of the assessment act in question in these proceedings occurred. Thus, considering the request presented by the Respondent in the proceedings, it is verified that the assessment in question in these proceedings was subject to express revocation by the Tax Authority, having granted the Claimant's claim.

4.3. Thus, and as the parties do not intend to continue with these proceedings for any other purpose, which is concluded from the request presented by the Respondent and the Response thereto by the Claimant, the extinction of the present instance by supervening futility of the dispute is required, which is hereby determined.

4.4. As a consequence of the revocation of the assessment act in question in these proceedings, it becomes futile to assess its legality, leading to the conclusion that, in the present case, supervening futility of the dispute occurs.

4.5. Supervening futility of the dispute is a cause for extinction of the instance, pursuant to article 277, paragraph e) of the Civil Procedure Code, applicable ex vi article 29 of RJAT.

6. DECISION

In view of the foregoing, this Sole Arbitral Tribunal decides:

- To declare the instance extinct by supervening futility of the dispute.

* * *

The value of the case is fixed at Euro 58,500.00 in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, paragraph a) of CPPT and 297 of CPC.

The amount of costs is fixed at Euro 2,142.00, to be borne by the Respondent, in accordance with the provisions of article 536, nos. 3 and 4 of the Civil Procedure Code (CPC), applicable ex vi article 29, no. 1, paragraph e) of RJAT, it being understood that pursuant to the provisions of article 536, no. 3 of the CPC, responsibility for costs shall be borne by the claimant or petitioner, unless such impossibility or futility is attributable to the defendant or respondent, in which case the latter is responsible for all costs, which corresponds to these proceedings, as the revocation of the tax act occurred only after the constitution of the Arbitral Tribunal and after the notification to the Respondent to submit a Response.

Let notice be given.

Lisbon, 15 April 2019.

The Arbitrator,

Dr. Henrique Nogueira Nunes

Text prepared by computer, pursuant to article 131, no. 5 of the Civil Procedure Code, applicable by reference from article 29, no. 1, paragraph e) of RJAT.

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

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority revokes an IMT liquidation during CAAD arbitration proceedings?
When the Tax Authority revokes an IMT liquidation during CAAD arbitration proceedings, the case is declared extinct due to supervening futility of the dispute under Article 277(e) of the Civil Procedure Code. The tribunal ceases to examine the merits of the case since there is no longer a live controversy. However, costs are typically allocated to the Tax Authority if the revocation occurs after the tribunal's constitution and after the authority was notified to respond, as the claimant was forced to initiate proceedings to obtain relief.
Can a real estate investment fund challenge an IMT (Property Transfer Tax) liquidation through CAAD arbitration?
Yes, a real estate investment fund has full capacity and legitimacy to challenge an IMT liquidation through CAAD arbitration. Under Articles 2(1)(a) and 10 of Decree-Law 10/2011 (RJAT), and Article 1 of Regulation 112-A/2011, real estate investment funds possess legal personality and procedural capacity to request the constitution of an arbitral tribunal to contest tax assessments, including IMT charges on property transfers, just like any other taxpayer.
What is the legal basis for requesting arbitration under Articles 2 and 10 of Decree-Law 10/2011 (RJAT)?
Articles 2 and 10 of Decree-Law 10/2011 (RJAT) establish the legal framework for tax arbitration in Portugal. Article 2(1)(a) grants CAAD jurisdiction over disputes concerning the legality of tax acts, including IMT assessments. Article 10 governs the procedure for requesting the constitution of an arbitral tribunal, requiring taxpayers to submit a formal petition to CAAD, which then notifies the Tax Authority and appoints an arbitrator to form the tribunal with competence to decide tax disputes.
How does D.L. n.º 1/87 of January 3 apply to IMT tax assessments on real estate transactions?
D.L. n.º 1/87 of January 3 is the foundational decree-law that originally governed IMT (Municipal Tax on Onerous Transmission of Real Estate) in Portugal. It establishes the substantive legal framework for assessing IMT on property transfers, defining taxable events, taxpayers, tax base calculation, applicable rates, and exemptions. When the Tax Authority issues an IMT assessment, it must comply with the provisions of D.L. n.º 1/87, and taxpayers can challenge assessments that violate its provisions through administrative or arbitral proceedings.
What is the procedure when the Tax Authority decides not to file a response in CAAD arbitration due to revocation of the contested tax act?
When the Tax Authority decides not to file a response in CAAD arbitration due to revocation of the contested tax act, it must formally notify the tribunal of the revocation and provide evidence (such as the revocation order and notification to the taxpayer). The tribunal then notifies the claimant to confirm the revocation and state whether they wish to continue proceedings for any other purpose. If both parties agree that the dispute has become moot, the tribunal declares the instance extinct due to supervening futility under Article 277(e) of the CPC, and allocates costs based on who bears responsibility for the futility—typically the Tax Authority if revocation occurred after proceedings were initiated.