Process: 71/2015-T

Date: January 4, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Arbitral Decision 71/2015-T addressed the legality of Stamp Tax (Imposto do Selo) assessments under Verba 28 of the General Stamp Tax Table (TGIS) applied to urban property held in vertical ownership (propriedade vertical) in Lisbon. The claimant contested twelve assessment notices for the third installment of 2014 IS, totaling €4,210.65. The Tax Authority argued for extinction of proceedings due to supervening futility, since a prior arbitral decision (430/2014-T of February 20, 2015) had already declared illegal all three installments of the same IS assessments. The claimant had filed separate arbitration requests for each installment before becoming aware of the first favorable decision, acting in response to payment notices from the Tax Authority. Another arbitral decision (722/2014-T) also confirmed the illegality of the second installment assessments. The arbitral tribunal found the proceedings were rendered moot by the previous decisions that ruled in favor of the claimant. The central issue was reduced to determining cost allocation under Article 536 of the Code of Civil Procedure. The tribunal applied the principle that when a claim is well-founded at the time it is brought but becomes futile due to supervening circumstances not attributable to the parties, costs should be divided equally. This case demonstrates that Stamp Tax under Verba 28 TGIS has been found inapplicable to vertical property structures by Portuguese tax arbitration tribunals, establishing important precedent for property owners facing similar assessments on buildings constituted under divided ownership regimes.

Full Decision

ARBITRAL DECISION

I. Report

  1. A…, (hereinafter "Claimant"), with tax identification number ("TIN") …, resident at …, n.º …, …, … Lisbon, filed, on 6 February 2015, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, i.e., Legal Framework for Arbitration in Tax Matters ("RJAT"), a request for the constitution of an arbitral tribunal, in order to declare illegal the assessment notices, relating to the 3rd instalment of Stamp Duty ("IS"), detailed hereinbelow:

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

u 2014 …

in the total amount of € 4,210.65, with the Tax and Customs Authority ("Respondent" or "TA") being named as defendant.

A) Constitution of the Arbitral Tribunal

  1. Pursuant to the provisions of paragraph a) in Article 6, paragraph 2 and paragraph b) in Article 11, paragraph 1 of the RJAT, the Deontological Council of this Administrative Arbitration Centre ("CAAD") appointed the undersigned as sole arbitrator, who communicated acceptance of the office within the applicable period, and notified the parties of this appointment on 1 April 2015.

  2. Thus, in conformity with what is provided in paragraph c) of Article 11, paragraph 1 of the RJAT, and through the communication of the President of the Deontological Council of CAAD, the Singular Arbitral Tribunal was constituted on 17 April 2015.

B) Procedural History

  1. In the request for arbitral determination, the Claimant petitioned for a declaration of illegality of the IS assessments detailed above, relating to the year 2013, by reference to an urban property, constituted in divided ownership, located at …, n.º … to n.º …, Lisbon, registered in the property register of the parish of ..., under article ….

  2. The TA submitted a response, petitioning for the extinction of the arbitral proceedings constituted on the grounds of the supervening futility of the dispute, since those assessments would have already been subject to arbitral determination, within the framework of the proceedings that gave rise to arbitral decision No. 430/2014-T, of 20 February 2015.

  3. Nevertheless, it stated that, should this not be accepted, its response given within the scope of the previously mentioned proceedings should be used, also requesting that both the hearing and final pleadings be waived.

  4. The Claimant, when called upon to make submissions on the TA's response, emphasised that, at the date of filing the initial petition (which gave rise to the constitution of the present tribunal), he had not yet become aware of the aforementioned arbitral decision (which declared illegal the three instalments that composed the previously mentioned tax assessments), and having been notified by the TA to pay those instalments, he likewise sought to contest the same.

  5. By order of 12 October, the Singular Arbitral Tribunal, pursuant to the provisions of paragraph c) of Article 16 of the RJAT decided, without opposition from the parties, that it was not necessary to hold the hearing referred to in Article 18 of the RJAT, as a result of the simplicity of the matters at hand, as well as on the grounds that it had at its disposal all the elements necessary to make a clear and impartial decision.

  6. It also decided, in accordance with Article 18, paragraph 2 of the RJAT, that oral pleadings were not necessary, as the positions of the parties were clearly defined in their respective pleadings, and extended the deadline for issuing an arbitral decision by one month.

  7. The Tribunal was duly constituted and is competent to consider the matters indicated (Article 2, paragraph 1, paragraph a) of the RJAT), the parties have legal personality and capacity and have full standing (Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March). No nullities occur, and therefore nothing prevents judgment on the merits.

  8. The present proceedings are thus in a position for a final decision to be rendered.

II. Issue to be Decided

  1. The central issue to be examined and decided, as may be gathered from the parties' pleadings, and given that there is already an arbitral decision which, as emphasised above, ruled on the illegality of the IS assessments in question (i.e., relating to the first, second and third instalments), rests solely on determining which of the parties shall, in the present situation, bear the court costs.

  2. In effect, the supervening futility of the dispute being established, pursuant to Article 277 of the Code of Civil Procedure ("CPC"), it remains only to decide, in accordance with the applicable legislation, who is responsible for bearing said costs.

III. Finding of Facts and Their Reasoning

  1. In this sense, the tribunal finds proven, as relevant to the decision of the case, the following facts:

I. The present Claimant is the owner of an urban property, constituted in divided ownership, located at …, n.º … to n.º …, Lisbon, registered in the property register of the parish of ..., under article ….

II. On 20 February 2015, following the initial petition submitted by the Claimant, with a view to contesting the 1st instalment of the IS assessments relating to the units that compose the property of which she is the owner, the respective arbitral tribunal ruled in favour of the Claimant's claim, and furthermore, extended its application to all of the assessments (that is, not only the 1st, but also the 2nd and 3rd instalments), pursuant to arbitral decision No. 430/2014-T, of 20 February.

III. The Claimant, at the time the aforementioned arbitral decision was rendered, had also submitted requests for arbitral determination relating to the 2nd and 3rd instalments (on 17 October 2014 and 6 February 2015, respectively), as the deadlines for contesting them ran in the normal manner.

IV. On 22 April, within the scope of the arbitral decision relating to proceedings No. 722/2014-T, the illegality of the assessment notices relating to the 2nd instalment of that IS assessment was also confirmed.

  1. The Tribunal's conviction concerning the facts found to be proven resulted from the documents annexed to the record and contained in the pleadings, which were not contested, of the parties, as specified in the points of the facts section above stated.

  2. There is no relevant factuality found not to be proven for the decision of the case.

IV. On the Law

A) Legal Framework

  1. Given that the legal issue to be decided in the present proceedings requires the interpretation of the relevant legal texts, it is important, firstly, to set out the provisions that comprise the relevant legal framework, at the date of the occurrence of the facts.

  2. Taking into account the matter in question, reference should be made to the CPC, which establishes, in its Article 277, the causes of extinction of proceedings:

"Proceedings are extinguished by:

a) Judgment;

b) Arbitration agreement;

c) Abandonment;

d) Withdrawal, admission or settlement;

e) Supervening impossibility or futility of the dispute".

  1. In parallel, and since the central issue of the present case is reduced to deciding who is responsible for bearing the costs, given that the TA, pursuant to the above exposition, has validated the understanding set out by the arbitral tribunal, within the scope of the 1st and 2nd instalments, we shall now set out Article 536 of the CPC:

"1 - When the plaintiff's or claimant's claim or the defendant's or respondent's opposition were well-founded at the time they were brought or raised and ceased to be so due to supervening circumstances not attributable to them, the costs are divided between them in equal parts.

2 - It is considered that an alteration of circumstances has occurred not attributable to the parties when:

a) The plaintiff's or claimant's claim or the defendant's or respondent's opposition was founded on a legal provision that has since been amended or repealed;

b) When there occurs a reversal of settled case law on which the plaintiff's or claimant's claim or the defendant's or respondent's opposition was founded;

c) When prescription or amnesty occurs in the course of the proceedings;

d) When, in enforcement proceedings, the assets that would serve as a guarantee to creditors have been dissipated by a fact not attributable to the enforced party;

e) When it is an action aimed at the satisfaction of pecuniary obligations and the declaration of insolvency of the defendant or enforced party occurs, provided that, at the date of the commencement of the action, such insolvency was not foreseeable to the plaintiff.

3 - In other cases of extinction of proceedings due to supervening impossibility or futility of the dispute, responsibility for the costs lies with the plaintiff or claimant, unless such impossibility or futility is attributable to the defendant or respondent, in which case the latter is responsible for all costs.

4 - It is considered, in particular, that the supervening futility of the dispute is attributable to the defendant or respondent when it results from voluntary satisfaction, by him, of the plaintiff's or claimant's claim, outside the cases provided for in paragraph 2 of the preceding article and unless, in the case of a settlement, the parties agree on the distribution of costs".

  1. It is, thus, within this legal framework that it is important to decide who is responsible, in the case under discussion, for bearing the respective costs.

B) Arguments of the Parties

  1. It should be noted that, within the scope of the present proceedings, the TA chose not to contest the request for illegality raised by the Claimant.

  2. In effect, the Respondent, after being duly notified to that effect, submitted its response to the request for arbitral determination made by the Claimant (which gave rise to the understanding put forward by the Claimant subsequently, as set out below), where, in summary, it alleged as follows:

  3. "The present respondent, at the time of submitting its response, cannot fail to take into account that the instalments in dispute here were already the subject of a decision on 20 February 2015, within the scope of CAAD proceedings No. 430/2014-T".

  4. Considering, in that manner, that, "the continuation of the proceedings in the present case is futile, given that the claimant already has its claim satisfied within the scope of the aforementioned proceedings, whose decision, moreover, has already acquired final effect".

  5. Concluding that "we are, therefore, faced with supervening futility of the dispute – Article 277, paragraph e) of the CPC, applicable 'ex vi' of Article 29 of the RJAT, a declaration of which is requested".

  6. The Respondent understood, in that manner, that the present arbitral proceedings should be declared extinct, given that the tax assessment acts contested had already been considered illegal by the arbitral tribunal.

  7. In parallel, it also requested that it not be burdened with the payment of the costs relating to the present proceedings.

  8. The Claimant, when called upon to make submissions regarding the understanding put forward by the TA in its response, considered that although within the scope of the arbitral decision relating to proceedings No. 430/2014-T all of the instalments were covered, this (decision) was only rendered on 20 February, the date on which he had already contested, before the arbitral tribunal, the 2nd and 3rd instalments independently.

  9. In fact, in the words of the Claimant: "notwithstanding the decision rendered in proceedings No. 430/2014-T, which did indeed cover the annulment of the assessment in its entirety, and not merely the part corresponding to the 1st instalment of the three into which it was divided and thus demanded of the present Claimant, with the argument that if the 1st instalment is not paid, the others fall due, in this case, the 2nd and 3rd instalments".

  10. "Ultimately, the Claimant, in the face of the decision annulling all three instalments at once, had no way to react and would have remained idle, were it not for the fact that the TA continued to notify the Claimant to pay the 2nd instalment until the end of July 2014, and the third instalment until the end of November of that year".

  11. And "because the decision for total annulment of the assessment only occurred on 20/02/2015, the Claimant found himself obliged to contest both the second and 3rd instalments and, in contesting them, could not fail to pay the initial arbitration fee".

  12. Emphasising in that sense that, if the same "requested, as he indeed did request and petition for the annulment of the 2nd and 3rd instalments, this is due exclusively to the TA, which, knowing that the first instalment had entered the enforcement stage, should, it would appear, and is the understanding of the Arbitral Tribunal, have released the entire debt upon maturity of the 1st instalment and, had it done so, the Claimant would not have petitioned for the said instalments".

  13. The Claimant lastly alerted to the fact that "regarding the second instalment whose proceedings in this Tribunal ran under No. 722/2014-T", the respective tribunal decided, on 22 April 2015, in favour of the Claimant, with the TA being condemned to pay the costs.

  14. Concluding that, "it makes no sense to invoke the stated exception, as it never existed and, if it did exist, it could never be attributed to the Claimant, since it was not he who caused it, but rather the TA which, had it released the entire debt at the time the first instalment entered the enforcement stage, would not have continued, as it did continue, to notify for payment of the 2nd and 3rd instalments and the Claimant would not have contested them in the Tribunal".

  15. The Claimant therefore petitioned that the Respondent be condemned to pay all costs relating to the present proceedings.

C) Tribunal's Assessment

  1. By way of introduction, it should be stated that, in the understanding of the present tribunal, the issue to be decided relates solely to the determination, in accordance with the legislation above referred to, of which party is responsible for payment of the costs relating to the present proceedings, which, as previously emphasized, are extinct.

  2. In fact, given that there has already been an arbitral decision which extended its ruling to all of the instalments of a particular IS assessment, in this case ruling on their illegality, the present tribunal considers that it would be pointless to analyze, once again, the same matter.

  3. And, in that sense, it is appropriate to confirm the TA's point of view, considering that the proceedings are extinguished, due to supervening futility of the dispute, in accordance with Article 277, paragraph e) of the CPC, as there exists a procedural occurrence that renders the proceedings unnecessary (in this case, a prior arbitral decision which rules on the illegality of the entire assessment and not merely the instalment that the Claimant sought to contest).

  4. Notwithstanding the present tribunal's agreement that, pursuant to the aforementioned rule, the extinction of the proceedings is confirmed, it is still important to identify which party shall bear the respective procedural costs.

  5. Now, pursuant to Article 450, paragraph 3 of the CPC it results that "(…) in other cases of extinction of proceedings due to supervening impossibility or futility of the dispute, responsibility for the costs lies with the plaintiff or claimant, unless such impossibility or futility is attributable to the defendant or respondent, in which case the latter is responsible for all costs" (emphasis added).

  6. Firstly, it should be stated that responsibility for the creation of the tax assessment acts in question belongs to the TA.

  7. And it is also this authority which issues, in a phased manner (i.e., in three instalments), the assessment notices, providing an opportunity to the taxpayer to, if it so wishes, contest the same.

  8. In this sense, and despite the taxpayer contesting the 1st instalment, the Respondent still sent the 2nd and 3rd instalments, not allowing the Claimant the possibility of perhaps waiting for the outcome of the first arbitral proceedings.

  9. Now, as demonstrated by the Claimant, he only contested the instalments independently, because he was compelled to do so, given that if the TA "had released the entire debt at the time the first instalment entered the enforcement stage", it would not have continued, as it did continue, to notify for payment of the 2nd and 3rd instalments.

  10. Moreover, at the moment the aforementioned arbitral decision became known, which extended the illegality of the 1st instalment to the entire IS assessment, the Claimant had already, as previously mentioned, requested the constitution of an arbitral tribunal, individually, for the 2nd and 3rd instalments.

  11. And, similarly, borne the respective initial arbitration fee.

  12. Being unable, naturally, to foresee that within the scope of decision No. 430/2014-T, of 20 April, he would obtain an arbitral determination declaring total illegality (i.e., by reference to all three instalments) of the IS assessments (especially since the arbitral decision itself relating to proceedings No. 722/2014-T, ruled on the illegality, independently, of the 2nd instalment, as previously referred to).

  13. In conclusion, this arbitral tribunal is of the opinion that the costs relating to the present request for arbitral determination should be borne by the Respondent.

V. Decision

  1. In these terms, this Arbitral Tribunal decides:

A) That the present arbitral proceedings are extinct, as previously indicated;

B) To condemn the Respondent to pay the costs of the proceedings.

VI. Amount of the Dispute

  1. The amount of the dispute is fixed at € 4,210.65, in accordance with Article 97-A, paragraph 1, paragraph a), of the Tax Code of Civil Procedure ("CPPT"), applicable by virtue of paragraphs a) and b) of Article 29, paragraph 1 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT").

VII. Costs

  1. In accordance with the provisions of Article 22, paragraph 4, of the RJAT, the arbitration fee is fixed at € 612, in accordance with Table I of the aforementioned Regulation, to be borne by the Respondent, for the reasons stated above.

Let it be notified.

Lisbon, CAAD, 4 November 2015

The Arbitrator

(Sérgio Santos Pereira)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS applicable to buildings held in vertical property (propriedade vertical)?
Based on arbitral decisions 430/2014-T and 722/2014-T referenced in this case, Stamp Tax under Verba 28 of the TGIS was found to be illegally applied to buildings held in vertical property (propriedade vertical). The arbitral tribunals declared the IS assessments on such properties illegal, indicating that Verba 28 does not apply to this type of property ownership structure.
Can a taxpayer challenge Stamp Tax liquidations on vertical property through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax liquidations on vertical property through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case and the referenced decisions (430/2014-T and 722/2014-T) demonstrate that CAAD arbitral tribunals have jurisdiction under Article 2(1)(a) of the RJAT to hear disputes regarding IS assessments on vertical property, and have ruled favorably for taxpayers in such cases.
What happens when duplicate CAAD arbitration proceedings exist for the same Stamp Tax liquidations?
When duplicate CAAD arbitration proceedings exist for the same Stamp Tax liquidations, the tribunal declares supervening futility of the dispute (inutilidade superveniente da lide) under Article 277(e) of the Code of Civil Procedure. Once a prior arbitral decision has ruled on the legality of the assessments, subsequent proceedings addressing the same liquidations are extinguished, with the main issue becoming the allocation of court costs between the parties.
Does a prior arbitral decision declaring Stamp Tax liquidations illegal render a subsequent case moot (inutilidade superveniente da lide)?
Yes, a prior arbitral decision declaring Stamp Tax liquidations illegal renders a subsequent case moot through supervening futility (inutilidade superveniente da lide). In this case, arbitral decision 430/2014-T had already declared all three installments of the IS assessments illegal before the present case was decided, making further proceedings on the same assessments futile and requiring extinction under Article 277(e) of the CPC.
How does the Autoridade Tributária handle Stamp Tax assessments on urban properties registered as vertical property under Verba 28 TGIS?
The Tax Authority (Autoridade Tributária) issued Stamp Tax assessment notices under Verba 28 TGIS on urban properties registered as vertical property. However, these assessments were successfully challenged through tax arbitration, with CAAD tribunals consistently finding such liquidations illegal. Despite the arbitral decisions declaring the assessments unlawful, the AT had continued to send payment notices to taxpayers, prompting multiple arbitration requests for different installments of the same underlying tax assessments.