Process: 707/2018-T

Date: May 3, 2019

Tax Type: Outros

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 707/2018-T) involved stamp duty (Imposto de Selo) assessments totaling €45,248.83 imposed on properties held by a real estate investment fund. The dispute centered on whether properties classified as 'land for construction' qualified as 'property with residential use' under item 28.1 of the General Stamp Duty Table, as amended by Law 55-A/2012. The claimant, a fund management company representing the real estate investment fund, challenged both the stamp duty liquidations for 2012-2013 and the rejection of its ex officio revision requests filed in November 2015. During the arbitration proceedings, the Tax Authority revoked all contested assessments through a Director's dispatch dated February 21, 2019. Following this revocation, the claimant declared it no longer had interest in continuing the proceedings, requesting termination due to supervening uselessness of the dispute (inutilidade superveniente da lide) under Article 277(e) of the Code of Civil Procedure. However, the claimant maintained claims for reimbursement and indemnity interest on amounts allegedly paid. The tribunal issued a procedural order requiring clarification on whether the claimant was withdrawing these remaining claims and requesting proof of payment, as no documentation supported the payment allegation. The case demonstrates how administrative revocation of tax acts during arbitration can render proceedings superfluous, while highlighting the importance of documenting payments and clarifying remaining claims regarding reimbursement and compensatory interest when assessments are administratively reversed.

Full Decision

ARBITRAL DECISION

I – Report

1. On 31.12.2018, the Claimant, A... – SOCIEDADE GESTORA DE FUNDOS DE INVESTIMENTO MOBILIÁRIO, S.A., with tax identification number..., with registered office at..., nº..., Right, in its capacity as managing company and representing B... – Real Estate Investment Fund […], with tax identification number..., filed with CAAD a request for the constitution of an arbitral tribunal, pursuant to article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Respondent, with a view to annulling the stamp duty assessments numbered 2013..., 2013..., 2013..., 2013..., relating to the year 2012 and 2014..., 2014..., 2014..., relating to the year 2013, concerning the property registered in the land registry under article number... of the Union of Parishes of... and..., Municipality of... (article... of the extinct parish of... at the time of the facts) and the assessments numbered 2013..., 2013..., 2013... relating to the urban property with article number... of the Union of Parishes of..., Municipality of Lisbon (article..., of the extinct parish of... at the time of the facts), and relating to the year 2012, in the total amount of € 45,248.83, as well as the rejection acts of the ex officio revision requests filed by the Claimant against these assessments.

The Claimant further petitions for the condemnation of the Respondent to refund the amount of the assessments, which it alleges to have paid, as well as the corresponding indemnification interest at the legal rate in force.

2. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority.

Pursuant to and for the purposes of article 6, paragraph 1 of RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the undersigned was appointed as arbitrator, who communicated the acceptance of the assignment to the Deontological Council and the Centre for Administrative Arbitration within the regularly applicable period.

The Arbitral Tribunal was constituted on 7 March 2019.

3. The grounds presented by the Claimant in support of its claim were, in summary, as follows:

a. The Fund is the owner of the urban property with article number... of the Union of Parishes of... and..., Municipality of... and of the urban property with article number... of the Union of Parishes of..., Municipality of Lisbon.

b. The assessments subject to the present case allegedly result from the application by the Respondent of article 1, paragraph 1 of the Stamp Duty Code, combined with item 28.1 of the General Table of Stamp Duty, amended by article 4 of Law no. 55-A/2012, of 29 October and with article 6 of this legal instrument.

c. The Claimant disagrees with the assessments in question because they are unlawful, since the properties registered in the land registry as "land for construction" are not subsumed in the concept of "property with residential use" provided for in the aforementioned item 28.1 of the General Table of Stamp Duty (in its original wording, applicable here).

4. The ATA – Tax and Customs Administration, called to pronounce itself, filed a Request as follows:

"The Tax and Customs Authority (AT), entity respondent in the arbitral process identified above, having been notified to respond in accordance with and for the purposes of article 17 of the Legal Framework for Tax Arbitration (RJAT), approved by Decree-Law no. 10/2011, of 20 January, hereby gives notice that it does not present a Response.

Further, it is communicated that the real estate transfer tax (IMT) assessment impugned was revoked by a Dispatch of the Director of the U.G.C. (Unit for Large Taxpayers), of 21.02.2019, issued in Information no.... -CIP1/2019, notified to the claimant by letter no.... of 07.03.2019, as per attached document."

5. The Claimant was notified to pronounce itself on the request filed by the Respondent and it stated the following:

"Following the request filed by the Public Treasury on 18.03.2019 and the arbitral dispatch issued today, we hereby inform you that we no longer maintain an interest in the continuation of the action, pursuant to article 13, paragraph 2 of RJAT, since the tax act impugned was subject to revocation by the Tax Authority.

Additionally, we request that the proceedings be terminated due to the supervening futility of the dispute, and that the Tax Authority be condemned to pay the costs of the process as the said futility is attributable to it, pursuant to article 277, subparagraph e) and articles 536, paragraphs 3 and 4, both of the Code of Civil Procedure.

It is further informed that the amounts unduly assessed, the reimbursement of which was petitioned, have not yet been paid by the Tax Authority."

6. On 3.04.2019 an arbitral dispatch was issued with the following content:

"Since the Claimant states in its request of 20.03.2019 that 'we no longer maintain an interest in the continuation of the action', requesting that the proceedings be terminated due to the supervening futility of the dispute and simultaneously informing that 'the amounts unduly assessed, the reimbursement of which was petitioned, have not yet been paid by the Tax Authority' and taking further into account the request for indemnification interest formulated, as long as the reimbursement does not occur and the payment of interest manifestly does not occur, with respect to this part of the claim, supervening futility, the Claimant shall be notified to, within a period of ten days:

a) Clarify whether it desists from these claims.

b) In case of withdrawal, attach a power of attorney with special powers of withdrawal of those claims in favour of its representative, taking into account that the power of attorney attached does not include such powers.

It is further requested of the Claimant that, should the reimbursement and payment of the petitioned interest occur in the meantime, it inform the tribunal of such facts."

The Claimant said nothing within the indicated period, nor thereafter.

7. The tribunal is materially competent and is regularly constituted in accordance with RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

The process does not suffer from vices that would invalidate it.

II – Relevant Factual Matters

8. The following facts are considered proven:

1. By dispatch of His Excellency the Director of the Unit for Large Taxpayers, by delegation, issued on 21/02/2019, the tax assessment acts subject to the process were revoked, in the total amount of € 45,248.33.

2. The requests for ex officio revision of the assessments subject to the process were filed on 12.11.2015.

9. Facts Not Proven

Of interest to the decision of the case, it was not proven that the Claimant paid the amount of the assessments subject to the present process.

10. The Tribunal's conviction regarding the decision on the factual matter, with respect to the factual matter proven in no. 1 of the proven facts, was based on a document attached to the case file by the Respondent. With respect to no. 2 of the factual matter, the proof thereof results from the decisions that were issued on the revision requests filed by the Claimant, from which this fact is recorded, not contested by either party.

As for the factual matter considered not proven, the tribunal's decision results from the absence of proof on such matter, since the Claimant, in addition to generically alleging that it timely made payment but without specifying the respective date(s), did not attach any supporting document, and there is no certification of such fact in any of the payment documents issued by the Respondent (attached to the case file by the Claimant), in which there is no mention in the part referring to "payment certification".

III – Applicable Law

11. As proven, the Respondent revoked on 21.02.2019 the tax acts subject to the present case.

Given the extinction of these acts, the continuation of the present dispute becomes futile and unfeasible with respect to the annulment claim, since this claim concerned acts that no longer remain in the legal order.

The supervening futility of the dispute occurs when, due to a fact occurring while the case is pending, the solution of the dispute ceases to have interest and utility, which justifies the termination of the proceedings (see article 277, subparagraph e) of the Code of Civil Procedure). As stated by LEBRE DE FREITAS, JOÃO REDINHA, RUI PINTO, the supervening futility or impossibility of the dispute "occurs when, due to a fact occurring while the instance is pending, the claimant's claim cannot be maintained, by virtue of the disappearance of the subjects or of the object of the process, or is found satisfied outside the scheme of the remedy sought. In either case, the solution of the dispute ceases to be of interest – here, by impossibility of achieving the intended result; there, because it has already been achieved by another means".

As stated in the decision issued in case 672/2018-T:

"Thus, if, by virtue of new facts occurring while the process is pending, the aim sought with the claim deduced in court has already been achieved by another means, then the decision to be issued does not involve useful effect, whereby, in that context, supervening futility of the dispute occurs.

The administrative action proven shows that the claim formulated by the Claimant, which had as its purpose the declaration of illegality and annulment by this Tribunal of the reviewed act, was prejudiced insofar as the suppression of that act and its effects from the legal order was achieved by another means, after the instance had been initiated. In fact, the subsequent practice of the express act of revocation of the impugned assessment (see article 79, paragraph 1 of the LGT) implies that the instance relating to the examination of the legality of such assessments is terminated by supervening futility of the dispute, given that, by having its effects eliminated by the annulling revocation, the examination of the alleged defects with a view to its invalidity loses utility, with respect to such assessments, leaving without object the objection claim against them deduced."

Thus, the supervening futility of the dispute is verified with respect to the claim for annulment of the tax acts subject to the present case.

12. Different questions are the claims of the Claimant referring to the restitution of the taxes allegedly paid and the indemnification interest, since, it not having been alleged by the parties that such claims have been satisfied by the Respondent, no supervening futility occurs with respect to the same.

However, as results from the evidence, the alleged payments were not proven, and, as a consequence, such claims cannot but be judged as unfounded.

IV – Decision

Thus, the arbitral tribunal decides:

a) To judge the present dispute as supervening futile with respect to the claim for annulment of the tax acts subject to the process, discharging the Respondent from the instance, in this part.

b) To judge unfounded the claims for condemnation of the Respondent to the restitution of the amount of the assessments, allegedly paid, and to indemnification interest.

Value of the action: € 45,248.33 (Forty-five thousand two hundred and forty-eight euros and thirty-three cents) in accordance with article 306, paragraph 2 of the CPC and 97-A, paragraph 1, subparagraph a) of the CPPT and 3, paragraph 2 of the Regulation of Costs in Arbitration Proceedings.

Costs borne by the Respondent, in the amount of € 2,142.00 (two thousand one hundred and forty-two euros) in accordance with paragraph 4 of article 22 of RJAT and article 536, paragraph 3 of the CPC applicable by virtue of article 29, paragraph 1, subparagraph e) of RJAT.

Notify.

Lisbon, CAAD, 3.05.2019

The Arbitrator

Marcolino Pisão Pedreiro

Frequently Asked Questions

Automatically Created

What happens when the Tax Authority revokes tax assessments during pending CAAD arbitration proceedings?
When the Tax Authority revokes tax assessments during pending CAAD arbitration, the proceedings may be terminated due to supervening uselessness of the dispute (inutilidade superveniente da lide) under Article 277(e) of the Code of Civil Procedure, applicable to tax arbitration through Article 29(1)(e) of the RJAT. The claimant must declare whether they maintain interest in continuing the proceedings. If revocation satisfies the taxpayer's claims, the main object of the action disappears. However, secondary claims such as reimbursement of paid amounts and indemnity interest may remain active unless explicitly withdrawn. The tribunal must verify whether any remaining claims justify continuation before terminating proceedings. According to Article 536(3) and (4) of the Code of Civil Procedure, costs may be attributed to the Tax Authority when supervening uselessness is attributable to its conduct.
What is supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration?
Supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration occurs when the object of the dispute ceases to exist during the proceedings, making continuation pointless. This typically happens when the Tax Authority revokes contested acts, satisfying the claimant's annulment request. Regulated by Article 277(e) of the Code of Civil Procedure and Article 29(1)(e) of the RJAT, it requires the claimant to declare whether they maintain interest in continuing. The tribunal must assess whether any remaining claims (such as reimbursement or interest) justify continuation. If proceedings terminate due to supervening uselessness attributable to the Tax Authority's conduct, the Authority may be ordered to pay procedural costs under Articles 536(3) and 536(4) of the Code of Civil Procedure, as the initial administrative error necessitated judicial intervention that later became unnecessary through administrative correction.
Can stamp tax (Imposto de Selo) be applied to real estate investment funds under Verba 28.1 of the General Stamp Tax Table?
Under item 28.1 of the General Stamp Duty Table (Tabela Geral do Imposto de Selo), introduced by Law 55-A/2012, stamp tax applies annually to 'property with residential use' (prédios para habitação) owned by entities not subject to IRC (Corporate Income Tax) or subject but not for business purposes. The central dispute in this case was whether properties classified in land registry as 'land for construction' (terrenos para construção) fall within this definition. Real estate investment funds argued these properties do not constitute 'property with residential use' in the original wording of the provision. The Tax Authority ultimately revoked the assessments, suggesting acceptance that such classification was incorrect. This demonstrates the importance of precise property classification for stamp duty purposes and indicates that mere potential for residential development does not automatically trigger the residential property stamp duty obligation.
How does the official review procedure (revisão oficiosa) work for challenging stamp tax liquidations in Portugal?
The official review procedure (revisão oficiosa) for challenging stamp tax liquidations in Portugal is governed by Article 78 of the LGT (General Tax Law). Taxpayers can request the Tax Authority to review and revoke its own administrative acts when they are illegal, even after the deadline for hierarchical appeal has expired. The request must be filed within the statute of limitations period. In this case, the ex officio revision requests were filed in November 2015 against 2012-2013 assessments. Initially rejected by the Tax Authority, these requests formed part of the arbitration claim. During arbitration, the Authority reconsidered and revoked the assessments through a Director's dispatch in February 2019. This demonstrates that revisão oficiosa can continue to be analyzed by the Tax Authority even after arbitration is initiated, and administrative correction can occur during judicial proceedings, potentially rendering the arbitration superfluous.
Are taxpayers entitled to reimbursement and indemnity interest when tax assessments are revoked during arbitration?
When tax assessments are revoked during arbitration, taxpayers are entitled to reimbursement of amounts paid and indemnity interest (juros indemnizatórios) under Article 43 of the LGT and Article 61 of the CPPT. The reimbursement obligation arises automatically from the revocation, as the legal basis for the tax collection disappears. Indemnity interest compensates for the State's unjustified retention of funds, calculated from payment until reimbursement at the legal rate. However, the taxpayer must prove actual payment of the contested amounts. In this case, the tribunal found no proof of payment despite the claimant's allegations, as no supporting documentation or certification appeared in payment documents. The claimant's failure to clarify whether it maintained claims for reimbursement and interest after revocation, despite tribunal order, complicated resolution of these secondary claims, demonstrating the importance of documenting payments and actively maintaining specific claims throughout proceedings.