Process: 73/2019-T

Date: May 10, 2019

Tax Type: IRC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 73/2019-T) addresses the supervening uselessness of proceedings (inutilidade superveniente da lide) in Portuguese tax arbitration. The claimant, A... S.A., sought annulment of an IRC (Corporate Income Tax) additional assessment No. 2017... totaling €569.36 for compensatory and default interest arising from alleged partial non-payment of the Special Payment on Account (Pagamento Especial por Conta - PEC) due in 2016. Before the arbitral tribunal could issue a substantive decision, the Tax Authority voluntarily revoked the contested tax assessment on March 11, 2019, pursuant to Article 13(1) of the RJAT (Legal Regime for Arbitration in Tax Matters). Following notification of the revocation, the CAAD President requested the claimant to confirm whether it wished to continue proceedings under Article 13(2) RJAT. Initially, the claimant failed to respond. After the tribunal's constitution on April 16, 2019, Arbitrator Alexandre Andrade issued a dispatch invoking principles of procedural autonomy, economy, and expedition, granting the claimant 10 days to declare its procedural interest. On April 24, 2019, the claimant confirmed it no longer maintained interest in continuing the proceedings given the revocation. The decision demonstrates that when the Tax Authority revokes a disputed tax act during CAAD arbitration, proceedings become moot unless the taxpayer demonstrates a continuing legitimate interest. This procedural outcome reflects the cooperative principle underlying Portuguese tax arbitration and confirms taxpayers' right to challenge IRC additional assessments for interest on PEC, while illustrating the practical resolution of disputes through administrative revocation before judicial determination.

Full Decision

ARBITRAL DECISION

The Arbitrator Alexandre Andrade, appointed by the Deontological Council of the Centre for Administrative Arbitration (hereinafter referred to simply as CAAD) to form the Sole Arbitral Tribunal, constituted on 16 April 2019, decides as follows:

1. Report

A..., S.A. (hereinafter referred to simply as the Claimant), Legal Entity No. ..., with registered office at Rua ..., No. ..., in Lisbon, filed a request for constitution of an Arbitral Tribunal, pursuant to Decree-Law No. 10/2011 of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to simply as LRAT), in which the TAX AND CUSTOMS AUTHORITY (hereinafter referred to simply as the Respondent) is the defendant.

The Claimant sought the annulment of Additional Assessment No. 2017..., relating to compensatory interest and default interest, in the total amount of € 569.36, arising from an alleged failure to pay part of the Special Payment on Account (SPA) of Corporate Income Tax (IRC), due in 2016, following the aforementioned additional assessment and the dismissal of the Gracious Appeal lodged against that additional assessment.

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD on 6 February 2019 and subsequently notified to the Respondent.

On 22 March 2019, the Respondent submitted a communication pursuant to paragraph 1 of Article 13 of the LRAT in the following terms: THE TAX AND CUSTOMS AUTHORITY (TA), notified on 12/02/2019 of the aforementioned request for arbitral pronouncement, in which A..., SA is the Claimant, hereby, in accordance with the principle of cooperation, informs that the tax act which is the subject of the request for arbitral pronouncement was revoked (emphasis and underlined by this Tribunal) by a decision of the Deputy Director-General of the Income Tax Management Area – IRC, in the exercise of delegated authority, rendered by means of a dispatch dated 11/03/2019.

The Claimant was notified of the communication pursuant to paragraph 1 of Article 13 of the LRAT on 22 March 2019.

On 22 March 2019, His Excellency the President of CAAD, by Dispatch, stated the following: With reference to Case No. 73/2019-T and following the communication of the Tax and Customs Authority, provided for in Article 13, paragraph 1 of Decree-Law No. 10/2011 of 20 January (LRAT), Your Excellency is hereby requested, given the circumstances provided for in Article 13, paragraph 2 of the LRAT, to kindly inform CAAD, if you so wish, of the continuation of the procedure.

The Claimant was notified of the Dispatch of His Excellency the President of CAAD on 22 March 2019.

The Claimant made no statement.

Pursuant to the provisions of paragraph 1 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of the LRAT, the Deontological Council of CAAD appointed the undersigned as Arbitrator of the Sole Arbitral Tribunal, who communicated acceptance of the appointment within the applicable period.

On 27 March 2019, both Parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrator, in accordance with the combined provisions of subparagraphs a) and b) of paragraph 1 of Article 11 of the LRAT and Articles 6 and 7 of the CAAD Deontological Code.

In accordance with the provisions set out in subparagraph c) of paragraph 1 of Article 11 of the LRAT, the Sole Arbitral Tribunal was constituted on 16 April 2019.

On 16 April 2019, the Sole Arbitral Tribunal issued the following Arbitral Dispatch: Considering that the Respondent communicated on 22 March 2019 that the tax act which is the subject of the request for pronouncement was revoked, and primarily in accordance with the Principle of Autonomy of the Arbitral Tribunal in the conduct of proceedings (subparagraph c) of Article 16 of the LRAT), as well as the Principles of Procedural Economy and Expedition, the Claimant shall be notified to indicate, within a period of 10 (ten) days, whether or not it maintains a procedural interest in the continuation of the present proceedings. Both Parties shall be notified of this Arbitral Dispatch.

On 24 April 2019, the Claimant communicated that it no longer maintains an interest in the continuation of the proceedings, given that the tax act which is the subject of the request had been revoked.

The Sole Arbitral Tribunal is competent and was properly constituted.

The Parties have legal personality and capacity, are legitimate and are duly represented (Article 4 and paragraph 2 of Article 10, both of the LRAT and Article 1 of Regulation No. 112-A/2011 of 22 March).

The proceedings are not affected by any nullities.

2. Facts

2.1 Proved Facts

Having examined the documentary evidence produced in the present Case, the Sole Arbitral Tribunal considers the following facts to be proved, as relevant to this Arbitral Decision:

A. The Claimant was notified of Additional Assessment No. 2017..., relating to compensatory interest and default interest, in the total amount of € 569.36, arising from an alleged failure to pay part of the Special Payment on Account (SPA) of Corporate Income Tax (IRC), due in 2016.

B. The Claimant filed a request for constitution of an Arbitral Tribunal, pursuant to Decree-Law No. 10/2011 of 20 January (Legal Regime for Arbitration in Tax Matters), in which the TAX AND CUSTOMS AUTHORITY is the defendant, seeking the annulment of Additional Assessment No. 2017..., relating to compensatory interest and default interest, in the total amount of € 569.36, arising from an alleged failure to pay part of the Special Payment on Account (SPA) of Corporate Income Tax (IRC), due in 2016.

C. On 22 March 2019, the Respondent submitted a communication pursuant to paragraph 1 of Article 13 of the LRAT in the following terms: THE TAX AND CUSTOMS AUTHORITY (TA), notified on 12/02/2019 of the aforementioned request for arbitral pronouncement, in which A..., SA is the Claimant, hereby, in accordance with the principle of cooperation, informs that the tax act which is the subject of the request for arbitral pronouncement was revoked by a decision of the Deputy Director-General of the Income Tax Management Area – IRC, in the exercise of delegated authority, rendered by means of a dispatch dated 11/03/2019.

D. The Claimant was notified of the communication pursuant to paragraph 1 of Article 13 of the LRAT on 22 March 2019.

E. On 22 March 2019, His Excellency the President of CAAD, by Dispatch, stated the following: With reference to Case No. 73/2019-T and following the communication of the Tax and Customs Authority, provided for in Article 13, paragraph 1 of Decree-Law No. 10/2011 of 20 January (LRAT), Your Excellency is hereby requested, given the circumstances provided for in Article 13, paragraph 2 of the LRAT, to kindly inform CAAD, if you so wish, of the continuation of the procedure.

F. The Claimant was notified of the Dispatch of His Excellency the President of CAAD on 22 March 2019.

G. The Claimant did not make any statement regarding the continuation of the procedure.

H. In accordance with the provisions set out in subparagraph c) of paragraph 1 of Article 11 of the LRAT, the Sole Arbitral Tribunal was constituted on 16 April 2019.

I. On 16 April 2019, the Sole Arbitral Tribunal issued the following Arbitral Dispatch: Considering that the Respondent communicated on 22 March 2019 that the tax act which is the subject of the request for pronouncement was revoked, and primarily in accordance with the Principle of Autonomy of the Arbitral Tribunal in the conduct of proceedings (subparagraph c) of Article 16 of the LRAT), as well as the Principles of Procedural Economy and Expedition, the Claimant shall be notified to indicate, within a period of 10 (ten) days, whether or not it maintains a procedural interest in the continuation of the present proceedings.

J. On 24 April 2019, the Claimant communicated that it no longer maintains an interest in the continuation of the proceedings, given that the tax act which is the subject of the request had been revoked.

2.2 Unproved Facts

There are no facts relevant to this Arbitral Decision that have not been proved.

2.3 Grounds for the Determination of Facts

The facts were determined by this Sole Arbitral Tribunal and its conviction was formed on the basis of the procedural documents and submissions presented by the Parties and the documents attached to the present Case.

3. Legal Issues – Supervening Futility of the Dispute

Pursuant to subparagraph e) of Article 277 of the Code of Civil Procedure (CCP), applicable pursuant to subparagraph e) of paragraph 1 of Article 29 of the LRAT, the proceedings shall be extinguished in the event of supervening impossibility or futility of the dispute.

Impossibility of the dispute occurs in the event of death or extinction of one of the parties, by disappearance or destruction of the object of the proceedings or by extinction of one of the conflicting interests.

Supervening futility of the dispute occurs when, by virtue of new facts that have occurred during the course of the proceedings, the decision to be rendered no longer has any useful effect, either because it is not possible to give satisfaction to the claim that the claimant wishes to assert in the proceedings or because the purpose sought by the action has been achieved by other means.

As taught by José Lebre de Freitas, Rui Pinto and João Redinha in Código de Processo Civil Anotado, 1st Volume, 2nd edition, Coimbra Editora, Coimbra, 2008, p. 555, impossibility or supervening futility of the dispute occurs when, by fact occurring during the course of the proceedings, the claim of the plaintiff cannot be maintained, by virtue of the disappearance of the subjects or the object of the proceedings, or finds satisfaction outside the scheme of the remedy sought. In either case, the resolution of the dispute ceases to be of interest – in the former, by impossibility of achieving the intended result; in the latter, because it has already been achieved by other means.

In the present proceedings, the Respondent, while the procedure for constituting the Arbitral Tribunal was still ongoing, fully and voluntarily satisfied the claims that the Claimant had raised.

Indeed, on 22 March 2019, the Respondent submitted a communication pursuant to paragraph 1 of Article 13 of the LRAT in the following terms: THE TAX AND CUSTOMS AUTHORITY (TA), notified on 12/02/2019 of the aforementioned request for arbitral pronouncement, in which A..., SA is the Claimant, hereby, in accordance with the principle of cooperation, informs that the tax act which is the subject of the request for arbitral pronouncement was revoked (emphasis and underlined by this Tribunal) by a decision of the Deputy Director-General of the Income Tax Management Area – IRC, in the exercise of delegated authority, rendered by means of a dispatch dated 11/03/2019.

Thus, although the event that renders consideration of the merits of the case pointless occurred before the constitution of the present Sole Arbitral Tribunal, the fact is that the results which the Claimant sought to achieve through the present arbitral proceedings have been fully accomplished, and therefore, there is no doubt that the Arbitral Decision which would normally be rendered, addressing the merits of the claims asserted, appears to be devoid of any useful effect, and therefore its issuance is not justified.

In these terms, with the appropriate adaptations, the supervening futility of the dispute is found to exist.

4. Costs

Pursuant to paragraph 3 of Article 536 of the CCP, applicable pursuant to subparagraph e) of paragraph 1 of Article 29 of the LRAT, in other cases of extinction of proceedings due to supervening impossibility or futility of the dispute, responsibility for costs shall rest with the plaintiff or claimant, unless such impossibility or futility is attributable to the defendant or respondent, in which case the latter shall be responsible for all costs.

Article 536, paragraph 4 of the aforementioned CCP continues, applicable pursuant to subparagraph e) of paragraph 1 of Article 29 of the LRAT, it is considered, in particular, that supervening futility of the dispute is attributable to the defendant or respondent when it results from voluntary satisfaction, by the latter, of the claim of the plaintiff or claimant [...].

It was demonstrated in the present proceedings that the claim of the Claimant was voluntarily satisfied by the Respondent, since the latter revoked the tax act that was contested.

However, it was also demonstrated that the Respondent proceeded to revoke the act even before the constitution of this Sole Arbitral Tribunal, and that the continuation of the proceedings, despite the full and voluntary satisfaction, on the part of the Respondent, of the claim filed by the Claimant, can only be attributed to the Claimant itself, for the reason that, as was also demonstrated, when notified to make a statement regarding the request presented by the Respondent, pursuant to the terms and for the purposes of Article 13 of the LRAT, the Claimant made no statement or request in the proceedings, and therefore, given that position of the Claimant, it was solely because of the Claimant that the constitution of this Sole Arbitral Tribunal took place.

In fact, the constitution of the Sole Arbitral Tribunal would not have occurred if the Claimant had, on that occasion, come forward in the proceedings to state its position in the sense of supervening futility of the dispute and consequent extinction of the proceedings, since it is certain that such supervening futility of the dispute occurred at a time prior to the constitution of this Sole Arbitral Tribunal.

In these terms, the costs of the present proceedings shall be entirely attributable to the Claimant.

5. Decision

Having regard to the above, this Sole Arbitral Tribunal decides:

a) To declare the present arbitral proceedings extinguished due to supervening futility of the dispute;

b) To condemn the Claimant to pay the costs of the proceedings.

6. Value of the Case

Pursuant to paragraph 2 of Article 306 of the CCP, subparagraph a) of paragraph 1 of Article 97-A of the Code of Tax Procedure (CTP) and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 569.36.

7. Costs

This Sole Arbitral Tribunal is of the opinion that the value to be considered for the purposes of determining costs in the present Request for Arbitral Pronouncement is the value that motivated the constitution of this Sole Arbitral Tribunal, i.e., the value of € 569.36, corresponding to the value of the contested assessment and initially indicated by the Claimant in the Request for Arbitral Pronouncement.

Pursuant to paragraph 2 of Article 12 and paragraph 4 of Article 22, both of the LRAT, the amount of costs is fixed at € 306.00, pursuant to Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, at the expense of the Claimant.

Let notification be made.

Lisbon, 10 May 2019

Sole Arbitral Tribunal

The Arbitrator,

(Alexandre Andrade)

Frequently Asked Questions

Automatically Created

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, rendering a judicial decision purposeless. In this CAAD case, it arose when the Tax Authority revoked the contested IRC additional assessment No. 2017... for €569.36 before the arbitral tribunal could issue a substantive decision. Under Article 13 of the RJAT, when the Tax Authority revokes the disputed tax act, the claimant must be notified and given the opportunity to declare whether they maintain a procedural interest in continuing. If no legitimate interest remains—as occurred here when the claimant confirmed on April 24, 2019 that it no longer wished to proceed—the arbitration becomes moot and must be terminated without a merit-based decision.
What happens when the Tax Authority revokes the contested tax assessment during CAAD arbitration proceedings?
When the Tax Authority revokes a contested tax assessment during CAAD arbitration proceedings, Article 13 of the RJAT (Legal Regime for Arbitration in Tax Matters) establishes a specific procedure. First, the Tax Authority must communicate the revocation to CAAD pursuant to Article 13(1), demonstrating the principle of cooperation. The claimant is then notified and asked under Article 13(2) whether they wish to continue the procedure despite the revocation. In Process 73/2019-T, the Tax Authority revoked the IRC additional assessment on March 11, 2019. After being notified on March 22, 2019, and given a second opportunity by the constituted tribunal on April 16, 2019, the claimant confirmed on April 24, 2019 that it no longer maintained procedural interest. The tribunal must respect the claimant's decision—if no continuing interest exists, proceedings terminate without a substantive ruling on the merits of the original tax dispute.
Can a taxpayer challenge IRC additional assessments for compensatory and default interest on Special Payment on Account (PEC)?
Yes, taxpayers can challenge IRC (Corporate Income Tax) additional assessments for compensatory and default interest related to the Special Payment on Account (Pagamento Especial por Conta - PEC) through CAAD arbitration. In Process 73/2019-T, the claimant A... S.A. successfully initiated arbitration proceedings to contest additional assessment No. 2017... totaling €569.36, which comprised compensatory interest (juros compensatórios) and default interest (juros de mora) arising from alleged partial non-payment of PEC due in 2016. The case demonstrates that such assessments are subject to arbitral review under Decree-Law No. 10/2011 (RJAT). Taxpayers can challenge both the principal obligation and accessory obligations like interest charges. While this specific case was resolved through administrative revocation before a merit-based decision, the tribunal's acceptance of jurisdiction confirms that IRC additional assessments for interest on PEC payments constitute reviewable tax acts within CAAD's competence, providing taxpayers an efficient alternative to judicial courts for contesting such determinations.
What is the procedure under Article 13 of the RJAT when the Tax Authority revokes the disputed tax act?
Article 13 of the RJAT (Regime Jurídico da Arbitragem Tributária) establishes a two-stage procedure when the Tax Authority revokes a disputed tax act during arbitration. Under Article 13(1), the Tax Authority must communicate the revocation to CAAD in accordance with the principle of cooperation (princípio da cooperação). In Process 73/2019-T, the Tax Authority informed CAAD on March 22, 2019 that additional assessment No. 2017... had been revoked by dispatch of the Deputy Director-General dated March 11, 2019. Article 13(2) then requires notification to the claimant, who must be given the opportunity to declare whether they wish to continue proceedings despite revocation. The claimant may have legitimate reasons to proceed (e.g., seeking precedential clarification or challenging related acts). In this case, after initially failing to respond to the CAAD President's March 22 inquiry, the claimant was given a second opportunity by the constituted tribunal on April 16, 2019. On April 24, 2019, the claimant confirmed no continuing interest, leading to termination of proceedings without a substantive decision on the merits.
How does the CAAD arbitral tribunal decide a case when the tax assessment is revoked before a final decision?
When a tax assessment is revoked before final decision, the CAAD arbitral tribunal determines whether proceedings have become supervenient useless (inutilmente superveniente) by assessing whether the claimant retains legitimate procedural interest. In Process 73/2019-T, Arbitrator Alexandre Andrade followed a structured approach consistent with procedural principles. After the Tax Authority's March 22, 2019 communication of revocation under Article 13(1) RJAT, and the claimant's initial silence, the tribunal—upon constitution on April 16, 2019—issued a dispatch invoking its procedural autonomy (Article 16(c) RJAT) and principles of procedural economy and expedition. The tribunal granted the claimant 10 days to confirm continued interest. When the claimant responded on April 24, 2019 that it no longer maintained interest given the revocation, the tribunal had no basis to continue. The case demonstrates that revocation does not automatically terminate proceedings—the claimant's express confirmation of lack of interest is required. The tribunal's role is to verify the factual circumstances (revocation occurred), ensure proper notification, confirm the claimant's position, and only then declare proceedings moot without issuing a merit-based arbitral decision on the underlying tax dispute.