Process: 716/2015-T

Date: May 23, 2016

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This arbitral decision from the Portuguese Administrative Arbitration Centre (CAAD) addresses procedural issues in tax arbitration involving Municipal Property Transfer Tax (IMT) and Stamp Duty. A..., S.A., acting as managing company of a Closed Real Estate Investment Fund for Residential Rental, challenged tax assessments totaling €1,590.57. The Tax and Customs Authority raised a preliminary objection regarding the Arbitral Tribunal's competence to conduct abstract constitutional review of Article 236 of Law 83-C/2013. The Applicant clarified that no abstract constitutional review was being sought, arguing the claim should be dismissed for lack of proof. Before substantive hearing, the Applicant discovered an error concerning the property acquisition date and filed a withdrawal request under Article 283 of the Civil Procedure Code. The sole arbitrator, applying Articles 283, 285(1), 286(2), 289(1), and 290 of the CPC by reference through the Tax Procedure Code and RJAT Article 29(1)(e), homologated the withdrawal and declared the claim extinct. The decision confirms that withdrawal of a claim in Portuguese tax arbitration extinguishes the asserted right definitively. Case value was fixed at €1,590.57 pursuant to Article 306(2) CPC and Article 97-A(1)(a) CPPT. Arbitration costs of €306.00 were imposed on the Applicant under Article 22(4) RJAT and Table I of the Regulation on Costs. This case illustrates important procedural principles: the limitations on arbitral tribunals' constitutional review powers, the proper procedure for claim withdrawal in tax arbitration, and the cost consequences of withdrawal before substantive determination.

Full Decision

ARBITRAL DECISION

Claimant/Applicant: A…, S.A.

Respondent: Tax and Customs Authority (hereinafter T.C.A.)

  1. Report and assessment of the withdrawal request

On 30-11-2015, A…, S.A., a legal entity no. … with headquarters at Avenue…, no.…, …, …-… Lisbon, registered in the Commercial Registry of Lisbon under no.…, in its capacity as managing company of B… – Closed Real Estate Investment Fund for Residential Rental, registered with the Securities Commission and with tax identification number…, hereinafter referred to as the Applicant, filed a request with the Administrative Arbitration Centre (CAAD) for the establishment of an arbitral tribunal with a view to declaring unlawful the acts of assessment of Municipal Tax on Onerous Transfers of Property and the assessment of Stamp Duty, totalling €1,590.57.

A sole arbitrator, Suzana Fernandes da Costa, was appointed on 26-01-2016.

In accordance with the provisions of article 11, section 1, paragraph c) of the RJAT, the sole arbitral tribunal was constituted on 10-02-2016.

Notified in accordance with article 17 of the Legal Framework for Arbitration in Tax Matters (RJAT), the Tax and Customs Authority submitted a reply on 04-04-2016, defending the maintenance of the tax acts in question, requesting dismissal of the claim. The Respondent first filed a plea of exception alleging the incompetence of the Arbitral Tribunal to proceed with abstract review of constitutionality.

On 14-04-2016, the Applicant was notified to make submissions, within 10 days, on the matter of exception raised in the Respondent's reply, or alternatively, to indicate whether it preferred the scheduling of the meeting provided for in article 18 of the RJAT, to make submissions on the exception there.

The Applicant made submissions on 18-04-2016 on the matter of exception of incompetence of the Arbitral Tribunal, stating that its claim was not intended to raise abstract review of the legality and constitutionality of article 236 of Law no. 83-C/2013 of 31-12, and that the claim should be ruled unfounded for lack of proof.

On 11-05-2016 an order was issued dispensing with the holding of the meeting provided for in article 18 of the RJAT, and granting a period of 15 days to the Applicant and Respondent, if they so wished, to submit their respective arguments, with the period for the Respondent to commence upon notification of the attachment of the Applicant's arguments or upon the expiration of the period for their submission. In the same order, 20-06-2016 was set for the pronouncement of the arbitral decision, and the Applicant was warned to proceed with payment of the subsequent arbitral fee by that date.

On 17-05-2016, the Applicant submitted a request notifying the Tribunal of its withdrawal from the claim, with the legal consequences thereof, having become aware that there was an error regarding the date of acquisition of the property subject to the assessments in dispute in the proceedings.

As provided in section 1 of article 283 of the Code of Civil Procedure, the plaintiff may, at any time in the proceedings, withdraw the entire claim. On the other hand, article 285, section 1 of the same Code provides that withdrawal of the claim extinguishes the right that was intended to be asserted.

Having regard to its subject matter and the status of the parties, I find the withdrawal of the claim to be valid and effective and homologate by decision the withdrawal of the claim and, consequently, I declare extinct, by withdrawal, the claim filed by the Applicant in this proceeding, in accordance with articles 283, 285 section 1, 286 section 2 first part, 289 section 1 and 290 of the Code of Civil Procedure, applicable by force of article 2, paragraph e) of the Code of Tax Procedure and Proceedings and article 29, section 1, paragraph e) of the RJAT.

  1. Value of the case:

In accordance with the provisions of article 306, section 2, of the CPC and article 97-A, section 1, paragraph a) of the CPPT and article 3, section 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the case is fixed at €1,590.57.

  1. Costs:

In accordance with article 22, section 4, of the RJAT, and Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €306.00, payable by the Applicant.

Notify.

Lisbon, 23 May 2016.

Text prepared by computer, in accordance with article 138, section 5 of the Code of Civil Procedure (CPC), applicable by reference to article 29, section 1, paragraph e) of the Tax Arbitration Regime, revised by me.

The Sole Arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Can the Tax Arbitration Tribunal conduct abstract constitutional review of tax legislation in Portugal?
No, the Tax Arbitration Tribunal in Portugal cannot conduct abstract constitutional review of tax legislation. This decision confirms this limitation when the Tax and Customs Authority raised a preliminary objection of incompetence regarding the tribunal's ability to perform abstract constitutional review of Article 236 of Law 83-C/2013. The Applicant had to clarify that their claim was not seeking such review. Arbitral tribunals have jurisdiction to apply and interpret tax laws in concrete cases but lack competence for abstract constitutional review, which remains within the exclusive purview of the Constitutional Court.
What happens when a claimant withdraws their request in Portuguese tax arbitration proceedings?
When a claimant withdraws their request in Portuguese tax arbitration proceedings, the claim is declared extinct and the asserted right is extinguished. Under Article 283(1) of the Civil Procedure Code (applicable to tax arbitration via Article 29(1)(e) RJAT), a plaintiff may withdraw at any time. Article 285(1) CPC establishes that withdrawal extinguishes the right intended to be asserted. The tribunal homologates the withdrawal by decision, declaring the proceeding extinct. The withdrawing party bears the arbitration costs, as occurred in this case where €306.00 in costs were imposed on the Applicant under Article 22(4) RJAT.
How does IMT (Municipal Property Transfer Tax) apply to real estate investment funds for residential leasing?
This decision does not provide substantive analysis of how IMT applies to real estate investment funds for residential leasing because the case was withdrawn before merits examination. The Applicant, managing company of a Closed Real Estate Investment Fund for Residential Rental registered with the Securities Commission, challenged IMT and Stamp Duty assessments but withdrew after discovering an error regarding the property acquisition date. The withdrawal prevented substantive determination of whether the specific tax treatment and any exemptions or special regimes applicable to residential rental investment funds were properly applied in the assessment.
What are the legal consequences of withdrawing a claim under Article 283 of the Portuguese Civil Procedure Code in tax arbitration?
Under Article 283 of the Portuguese Civil Procedure Code in tax arbitration, withdrawal of a claim has definitive legal consequences: (1) the plaintiff may withdraw at any point in proceedings; (2) withdrawal extinguishes the right that was intended to be asserted (Article 285(1)); (3) the tribunal homologates the withdrawal by decision; (4) the proceeding is declared extinct by withdrawal; (5) arbitration costs are imposed on the withdrawing party. These provisions apply to tax arbitration through Article 2(e) of the Tax Procedure Code and Article 29(1)(e) RJAT. The withdrawal is irreversible and prevents re-litigation of the same claim based on the same facts.
Can Stamp Tax and IMT liquidation acts be challenged simultaneously before the CAAD arbitration tribunal?
Yes, Stamp Tax (Imposto do Selo) and IMT liquidation acts can be challenged simultaneously before the CAAD arbitration tribunal in a single proceeding. This case demonstrates such joint challenge, where the Applicant contested both IMT and Stamp Duty assessments in one arbitration request, with combined value of €1,590.57. Portuguese tax arbitration law permits taxpayers to consolidate related tax assessments in a single proceeding when they arise from the same transaction or factual circumstances, promoting procedural efficiency and avoiding contradictory decisions. The case value is calculated as the aggregate of all contested assessments under Article 306(2) CPC and Article 97-A(1)(a) CPPT.