Process: 697/2018-T

Date: April 3, 2019

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 697/2018-T) addresses the procedural consequences when the Portuguese Tax Authority (AT) administratively revokes an IMT (property transfer tax) assessment during pending arbitration proceedings. The claimant, a real estate investment fund, challenged an IMT assessment dated December 26, 2018, concerning property acquisition in Maia. After the arbitral tribunal was constituted in March 2019, the AT filed a communication during the response period informing that the contested assessment had been revoked by order of the Director of the Large Taxpayers Unit on February 21, 2019. The tribunal applied Article 277-e) of the Civil Procedure Code to declare extinction of the instance due to supervening impossibility of the dispute (impossibilidade superveniente da lide). The reasoning established that administrative revocation of the contested tax deed during case pendency completely divested the arbitral process of its object, making continuation not only futile but impossible due to lack of dispute object. Importantly, the tribunal ruled that costs must be borne by the Tax Authority under Articles 527 and 536 of the CPC, as it gave cause to the instance extinction. The arbitration fee was set at €7,956.00, with proceedings valued at €520,000 according to Article 97-A of the Tax Procedure Code. This decision confirms that voluntary administrative elimination of contested tax acts during arbitration leads to mandatory case termination, with cost responsibility falling on the party causing the extinction, establishing a significant precedent for tax arbitration procedural law.

Full Decision

ARBITRAL DECISION

I Report

In these proceedings for arbitral determination, the Claimant, A... – Special Closed Real Estate Investment Fund, represented by the company "B..., SA", brought an action against the Tax and Customs Authority seeking a declaration of illegality and corresponding annulment of the IMT assessment deed, dated 26/12/2018 [no..., of 26-12-2018], to which corresponds the DUC no... and consequent reimbursement of the assessment paid [See doc 1, with the initial petition].

The claimant alleged, in particular, that the aforesaid assessment concerns IMT owed by the claimant for the acquisition of a property registered in the land register of the parish of ..., municipality of Maia, under article U-... and that it proceeded to pay the IMT thus assessed on 26-12-2018, as per document 2, attached with the initial petition.

With the respective regulatory procedures completed, this Arbitral Tribunal was constituted on 7 March 2019, as per communication from the President of the Deontological Council of CAAD.

By order of 8-3-2019, the Director General of the Tax and Customs Authority (AT) was notified by the Tribunal to respond in accordance with article 17 of the RJAT.

During the period for submission of the Response, on 18-3-2019, the AT filed with the proceedings a request communicating that the assessment deed which is the subject of this challenge was revoked by order of the Director of the Large Taxpayers Unit (UGC), of 21-2-2019, notified to the Claimant by official letter no..., of 7-3-2019, which it attached.

Notified to make submissions, the claimant concluded that the prerequisites exist for the instance to be declared extinguished by supervening futility of the dispute, with condemnation of the AT to pay the costs, considering that responsibility for the extinction is attributable to it.

Procedural Clarification

This Tribunal is competent.

The proceedings are proper and the parties are legitimate and possess legal and procedural personality and capacity.

There are no exceptions or nullities.

It is therefore necessary to consider and decide upon the extinction of the instance.

II Grounds

According to Lebre de Freitas, "supervening impossibility or futility of the dispute occurs when, by fact occurring during the pendency of the instance, the claimant's claim cannot be maintained by virtue of the disappearance of the subjects or object of the proceedings, or finds satisfaction outside the scheme of the relief sought. In either case, the relief ceases to be of interest – here, by impossibility of achieving the intended result; there, by it having already been achieved by other means" – See "Annotated Code of Civil Procedure", vol. III, p. 633. Lopes do Rego follows the same understanding, Comments, p. 611 and Remédio Marques, Course on Common Enforcement Proceedings, p. 381.

Applying the rule:

Clearly, given that these proceedings have as their object the annulment, on grounds of illegality, of the IMT assessment no..., of 26-12-2018, the aforesaid revocation order of that assessment completely divests this arbitral process of its object.

That is: with the tax deed subject to scrutiny destroyed by administrative revocation during the pendency of the case, the continuation of the instance is not only futile but indeed impossible, due to lack of object of the dispute.

III Decision

In light of the foregoing and having weighed the positions of both parties and the provisions of articles 277-e) of the CPC applicable by virtue of article 29 of the RJAT, it is hereby declared that the instance is extinguished by supervening impossibility of the dispute arising from the voluntary elimination from the legal order, as set out above, of the assessment deed which is the subject of these proceedings, and the appropriate filing of the case is ordered.

Costs

The costs are borne by the AT to the extent that it gave cause to the extinction of the instance (See articles 527 and 536-3 and 4 of the CPC, applicable by virtue of article 29 of the RJAT), with the arbitration fee being fixed at € 7,956.00 (seven thousand nine hundred and fifty-six euros), in accordance with Table I of the Regulations of Costs of Tax Arbitration Proceedings and articles 12, no. 2, and 22, no. 4, both of the RJAT and 4, no. 4, of the aforementioned Regulation.

Value of the Proceedings

The value of the proceedings is fixed at € 520,000 (five hundred and twenty thousand euros), in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by force of subsections a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings.

Let notification be made.

Lisbon, 3 April 2019

The Arbitral Tribunal,

José Poças Falcão

(Presiding Arbitrator)

Maria do Rosário Anjos

(Adjunct Arbitrator)

João Taborda da Gama

(Adjunct Arbitrator)

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority revokes an IMT assessment during pending arbitration proceedings?
When the Tax Authority revokes an IMT assessment during pending arbitration proceedings at CAAD, the arbitral tribunal must declare extinction of the instance due to supervening impossibility of the dispute (impossibilidade superveniente da lide). The administrative revocation completely eliminates the object of the arbitral process, as the contested tax deed no longer exists in the legal order. The continuation of proceedings becomes not only futile but legally impossible, requiring mandatory termination under Article 277-e) of the Civil Procedure Code, applicable to tax arbitration through Article 29 of the RJAT.
What is supervening inutility of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening inutility of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when, during the pendency of the instance, a fact arises that either makes the claimant's claim unmaintainable due to disappearance of the subjects or object, or finds satisfaction outside the requested relief. In tax arbitration, this commonly occurs when the Tax Authority administratively revokes the contested assessment, eliminating the dispute's object. The relief ceases to be of interest either by impossibility of achieving the intended result or by it having already been achieved through other means, requiring case termination under Article 277-e) CPC.
Can the Tax Authority administratively revoke an IMT liquidation act after an arbitration claim is filed at CAAD?
Yes, the Tax Authority can administratively revoke an IMT liquidation act after an arbitration claim is filed at CAAD. This decision confirms that administrative revocation power continues even during pending arbitration proceedings. In this case, the Director of the Large Taxpayers Unit issued a revocation order on February 21, 2019, after the arbitral tribunal was constituted on March 7, 2019. The AT communicated this revocation during the response period prescribed under Article 17 of the RJAT. Such administrative revocation represents voluntary elimination of the contested act from the legal order, leading to mandatory extinction of arbitration proceedings.
Who bears the costs when a tax arbitration case is terminated due to administrative revocation of the contested act?
When a tax arbitration case is terminated due to administrative revocation of the contested act, the Tax Authority bears all costs, including the arbitration fee. This follows Articles 527 and 536(3) and (4) of the Civil Procedure Code, applicable through Article 29 of the RJAT, which establish that costs are borne by the party that gave cause to the instance extinction. Since the AT voluntarily revoked the assessment during proceedings, it is deemed responsible for the termination. In this case, the AT was ordered to pay the €7,956.00 arbitration fee, calculated according to Table I of the Regulations of Costs of Tax Arbitration Proceedings.
What are the legal grounds for termination of proceedings (extinção da instância) in CAAD tax arbitration cases?
The legal grounds for termination of proceedings (extinção da instância) in CAAD tax arbitration cases include supervening impossibility or futility of the dispute under Article 277-e) of the Civil Procedure Code, applicable via Article 29 of the RJAT. This occurs when the object of the dispute disappears during case pendency, such as through administrative revocation of the contested tax act. The tribunal must verify that continuation would be futile or impossible due to lack of dispute object. Other grounds include lack of jurisdiction, improper proceedings, illegitimacy of parties, or procedural defects. The extinction declaration requires analysis of whether the claimed relief can still be maintained and whether any practical utility remains in continuing the arbitration.