Process: 743/2014-T

Date: July 3, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD arbitration case (743/2014-T) involved a challenge to multiple IMI (Municipal Property Tax) assessments for 2012 and 2013 following a general property revaluation. The claimant company contested five supplementary IMI assessments, arguing procedural violations and substantive illegalities. Key issues included: (1) absence of prior hearing before issuing supplementary assessments, constituting an omission of essential formality; (2) lack of adequate reasoning in the assessment notices, violating Articles 77 LGT, 125(2) CPA, and 268 CRP; (3) alleged unconstitutional retroactive application of new tax patrimonial values (VPT) under Article 15-D(4)(a) of the IMI Code, which made revaluations effective as of December 31, 2012, contrary to Article 103 CRP's non-retroactivity principle; and (4) improper application of the safeguard clause (Article 15-O), which phases tax increases over multiple years. The claimant argued the Tax Authority violated its own Circular 4/2013 commitment to notify 2012 supplementary assessments by November 2013. During proceedings, the AT conducted ex officio reviews of certain contested assessments and submitted corrections. Both parties waived the oral hearing and written arguments. The case raised important constitutional questions about fiscal retroactivity, legitimate expectations, legal certainty, and tax legality. The arbitral tribunal joined the claims as they concerned the same tax, property, and factual/legal circumstances, proceeding under the simplified procedure established in the Tax Arbitration Regime (RJAT).

Full Decision

Arbitral Decision

CAAD: Tax Arbitration

Case No. 743/2014 – T

Subject: Municipal Property Tax

Claimant/Applicant: A…, …, S.A.

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

1. Report

On 28-10-2014, the joint-stock company A…, …, S.A., legal entity no. …, with headquarters at Rua …, no. …, …, ..., hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for the constitution of an arbitral tribunal with a view to annulling the tax acts assessing Municipal Property Tax (IMI), relating to the years 2012 and 2013 and concerning various floors or units of independent use integrated in the urban article no. …, located at Rua …, no. …, ..., Union of parishes of ... and ....

The Claimant requests the annulment of IMI assessments no. 2012 …, 2012 …, 2013 …, 2013 … and 2013 …, notified to the Claimant on 06-06-2014, 06-07-2014, 13-03-2014, 09-06-2014 and 16-10-2014, respectively. The arbitral request regarding assessment no. 2013 … is made following the tacit rejection of a request for official review under Article 115 no. 1 letter c) of the IMI Code, filed on 21-04-2014, whereby it covers the said assessment indirectly. The arbitral requests that are the subject of the remaining assessments are filed following the notification of said assessments.

Suzana Fernandes da Costa was appointed as sole arbitrator on 17-12-2014.

In accordance with Article 11 no. 1, letter c) of the RJAT, the sole arbitral tribunal was constituted on 05-01-2015.

The Tax and Customs Authority submitted a response on 10-02-2015 (within the legal deadline for this purpose).

The A.T.A. stated that it had conducted, before notification to submit a response to the present request, the official review of some of the assessments that are the subject of the arbitral request, having attached to the response the respective documentary evidence (documents 1 and 5 of PA2012 and documents 1, 3, 4, 5 and 6 of PA 2013). It further requested in the response the waiver of the holding of the meeting provided for in Article 18 of the Tax Arbitration Regime, as well as the waiver of the submission of arguments.

Having been notified of this request from the A.T.A., the Claimant informed on 19-02-2015 that it agreed to the waiver of the meeting and the waiver of arguments, and that it maintained an interest in the continuation of the proceedings regarding amounts not yet annulled.

On 24-02-2015 an order was issued admitting the attachment to the proceedings of this request from the Claimant and granting a period of 10 days to the A.T.A. to make such submissions as it deemed appropriate, pursuant to the principle of contradiction.

And on 12-03-2015 the A.T.A. submitted to the proceedings a request stating that it had made corrections to all errors committed.

An order was issued on 16-03-2015 waiving the holding of the meeting provided for in Article 18 of the RJAT and waiving the submission of arguments. It was also decided in the same order to set 30-06-2015 as the date for the pronouncement of the arbitral decision, and the Claimant was warned that by that date it would have to proceed with the payment of the subsequent arbitral fee and communicate such payment to CAAD.

However, on 30-06 an order was issued postponing the date of the decision to 03 July, given the complexity of the case and the number of documents attached to the proceedings.

The parties have legal standing and capacity and are legitimate (Articles 4 and 10 no. 1 and 2 of the RJAT and Article 1 of Ordinance no. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was submitted within the deadline, pursuant to Article 10 no. 1 letter a) of Decree-Law no. 10/2011 of 20 January.

The proceedings are not subject to nullities and no preliminary questions were raised except for the joinder of claims.

The Claimant requests the joinder of claims alleging that they concern assessments relating to the same tax and the same property and concern the same circumstances of fact and law. In this case, the joinder of claims is admissible pursuant to Articles 104 of the CPPT and 3 of the RJAT, whereby it is admitted.

Summary of the Parties' Positions:

The Claimant requests the annulment of IMI assessments no. 2012 …, 2012 …, 2013 …, 2013 … and 2013 …, which were notified to it on 06-06-2014, 06-07-2014, 13-03-2014, 09-06-2014 and 16-10-2014, respectively.

The Claimant alleges that it was not notified for the exercise of the right to prior hearing before the first and second supplementary assessments of the year 2012 (respectively assessments no. 2012 … and no. 2012 …), which implies the omission of an essential formality in the tax procedure, and which results in the annulment of the said supplementary assessments.

The Claimant further points out various errors and illegalities in all IMI assessments in question.

Regarding the first supplementary IMI assessment of 2012 (assessment no. 2012 …), the Claimant alleges that only in 2014 was it notified of the supplementary assessment of 2012 based on the VPT (Tax Patrimonial Value) resulting from the valuation notified to the Claimant on 04-10-2013. Furthermore, it states that the assessment does not indicate the legal basis that supports it, which constitutes the omission of the right to reasoning and prior hearing, whereby the assessment should be annulled for violation of Articles 77 of the General Tax Law (LGT), 125 no. 2 of the Administrative Procedure Code (CPA) and 268 of the Constitution of the Portuguese Republic (CRP). The Claimant states that this assessment would have been issued pursuant to Article 15-D no. 4 letter a) of the IMI Code, which determines that the tax patrimonial values of properties that have been subject to general valuation come into effect on 31-12-2012 for purposes of IMI. The assessment in question would have been made taking into account the new VPT notified to the Claimant on 04-10-2013 and the rate of 0.39%. The Claimant considers that the VPT for purposes of IMI for 2012, as of 31-12-2012, was 302,959.38 €, and therefore the assessment carried out has retroactive effects contrary to what Article 103 of the Constitution of the Portuguese Republic (CRP) determines.

The Claimant further alleges that in Circular no. 4/20113 of 12-03-2013, the A.T.A. committed itself to carrying out and notifying the supplementary IMI assessments of 2012 during the month of November 2013, which did not occur in the case of the Claimant. And it states that Article 15-D no. 4 letter a) of the IMI Code, which determines that the tax patrimonial values of properties that have been subject to general valuation come into effect on 31-12-2012 for purposes of IMI, is unconstitutional for violation of the principle of fiscal non-retroactivity contained in Article 103 of the CRP, and the constitutional principles of protection of legitimate expectations and legal certainty.

The Claimant states that the safeguard regime, provided for in Article 15-O of Decree-Law no. 287/2003 of 12-11, as amended by Law no. 60-A/2011 of 30-11, implies the phasing of the increase in the tax over the years 2012 and 2013, and therefore the assessment of IMI for 2013 presupposed that the value of IMI for 2012 was already settled and consolidated in the legal system.

In summary, the Claimant alleges that the first supplementary IMI assessment of 2012 (assessment no. 2012 …) should be annulled for violation of fiscal non-retroactivity, protection of legitimate expectations and legal certainty, tax legality, erroneous quantification of the tax patrimonial values that form the basis thereof and absence of legally required reasoning.

As for the second supplementary IMI assessment of 2012 (assessment no. 2012 …), which was made considering the new VPT (2,231,790.00 €) of the floors of the properties, the Claimant alleges that it suffers from the same errors and defects as the first supplementary IMI assessment of 2012, and states that it should be annulled for violation of fiscal non-retroactivity, protection of legitimate expectations and legal certainty, tax legality, erroneous quantification of the tax patrimonial values that form the basis thereof and absence of legally required reasoning.

Finally, the Claimant states that, even if it is understood that the supplementary IMI assessments of 2012 are admissible, it must always be concluded that they suffer from quantification errors.

In fact, the Claimant alleges that the second supplementary assessment of 2012 (assessment no. 2012 …) reveals the undue omission of the application of the safeguard regime, which provides that the collection of IMI for the years 2012 and 2013 and assessed in the years 2013 and 2014, respectively, for property or part of urban property subject to general valuation, may not exceed the collection of IMI due in the immediately preceding year plus, in each of those years, the greater of the following values:

a) 75 €; or

b) One-third of the difference between the IMI resulting from the VPT fixed in the general valuation due in the year 2011 or that should have been due, in the case of exempt properties.

The Claimant states that, having made these calculations of the safeguard regime, the collection of IMI for the year 2012 could not exceed 4,264.03 €, which corresponds to the sum of the collection of IMI for 2011 (2,044.06 €) with one-third of the difference between the IMI resulting from the VPT fixed in the general valuation and the IMI due in the year 2011 (2,219.97 € = 8,703.99 € - 2,044.06 / 3).

Regarding the assessment of IMI for 2013, first installment (assessment no. 2013 …), the Claimant alleges that the assessment, in the case of the REST floor, applies the rate of 0.70% to the VPT resulting from the general valuation in the amount of 1,049,200 €. However, the rate should be 0.39% as per the resolution of the Municipal Chamber of .... And having applied the rate of 0.70% to the floor in question, the A.T.A. incurred an error that results in a collection of an amount greater than that due.

Also in this assessment the Claimant alleges that the A.T.A. did not apply the safeguard regime. If it had applied the safeguard regime to which it was obliged, the collection of IMI for 2013 could not exceed 4,340.69 €, and each of the three installments would be of the value of 1,446.89 € and not 3,985.52 €.

The Claimant concludes by stating that the assessment of IMI for 2013, corresponding to the first installment (assessment no. 2013 …), should be annulled for violation of the law (Article 8 of the LGT and Article 99 of the CPPT).

Regarding the second installment of IMI for 2013 (assessment no. 2013 …), the Claimant alleges that the safeguard regime was also not applied, and that if it had been applied the collection of IMI for the year 2013 could not exceed 4,340.69 € and not 7,077.75 € as stated in the assessment. And it concludes that the assessment in question should be annulled for violation of the law.

As for the assessment of IMI for 2013, third installment (assessment no. 2013 …), the Claimant states that the said safeguard regime was not applied, since the value of the third installment of IMI for 2013 should be 1,446.89 € and not 2,359.25 €, as can be inferred from the assessments. The Claimant concludes by stating that the assessment in question should be annulled for violation of the law.

The Claimant further requests, pursuant to Article 53 of the General Tax Law, condemnation of the A.T.A. to compensate for the expenses incurred with the security deposit it made to suspend the tax enforcement proceedings, and for all amounts paid relating to the IMI assessments in question and respective compensatory interest, to be determined in the execution phase of the arbitral decision.

The A.T.A. states in its response that there was an oversight in the assessment no. 2013 … for the year 2013, first installment, having failed to mark the IMI valuation indicator on the REST unit, which caused the assessment to apply the rate of 0.70% instead of 0.39%. And it alleges that the error was corrected and collection notes no. 2013… and no. 2013 … were issued (documents 4 and 5 attached with the arbitral request).

In the A.T.A.'s response it also states that on 05-07-2014 a second supplementary assessment of the year 2012 with no. 2013 … was issued in order to correct the error in the rate to be applied in the year 2012. Furthermore, the A.T.A. states that despite diligences made, it verified that the corrective documents relating to the year 2012 still contained oversights, and on 12-11-2014 it issued another corrective assessment concluding that the total collection of IMI for 2012 is 4,264.03 €, resulting in a refund of 526.69 €, which would have been transferred to the Claimant's bank account on 29-11-2014.

As for the IMI for the year 2013, the A.T.A. also detected that the corrective documents had not applied the safeguard regime, and the corrective document no. … was issued. This corrective document applied the safeguard clause that was lacking regarding unit 1E, resulting in the collection of this unit in the amount of 429.47 €. And on 20-12-2014 two refunds were issued in favor of the Claimant in the amounts of 147.03 € and 1,546.27 €.

Regarding the defects pointed out by the Claimant to the IMI assessments, the A.T.A. states that no formality was omitted in terms of prior hearing, and that the assessments are the result of the general valuation and that the Claimant did not lodge a complaint about the general valuation of the property in question.

Regarding the lack of reasoning alleged by the Claimant, the A.T.A. states that there is no lack of reasoning, since in the context of IMI the VPT of properties (on which the tax is levied) is determined based on the general valuation of properties. And the Claimant was notified of the valuation of the property, with specification of the elements to be valued, quality and comfort elements and tax patrimonial value.

Regarding the violation of the principle of fiscal non-retroactivity of the IMI assessments of 2012, alleged by the Claimant, the A.T.A. alleges that Article 15-D no. 4 letter a) of Decree-Law no. 287/2003 of 12-11, added by Law no. 60-A/2011 of 30-11 provides that the tax patrimonial values of urban properties that have been subject to general valuation come into effect on 31-12-2012 for purposes of IMI. And that Law no. 60-A/2011 of 30-11 came into effect on 01-12-2011, and therefore was fully in effect as of the date of the facts, with no fiscal retroactivity occurring. Regarding the omission of the application of the safeguard regime, the A.T.A. states that it officially corrected the assessment when it detected the non-application of the rate of 0.39% to the REST unit and the non-application of the safeguard clause to unit 1E. And it concludes by alleging that the disputed act should be maintained in the legal system.

Having been notified of this request from the A.T.A., the Claimant came to inform that, regarding IMI for 2012, it was notified on 12-11-2014 of assessment no. 2012 … in the amount of 4,264.03 €, which demonstrates that the A.T.A. understands that the maximum collection of IMI for 2012 will have to be 4,264.03 €, having applied the safeguard regime. And it requested the continuation of the arbitral request regarding IMI for 2012, only regarding assessment no. 2012 … and in the amount of 2,143.31 €, which corresponds to the difference between the maximum collection being applied the safeguard clause (4,264.03 €) and the value of the IMI assessment for 2012 no. 2012 … (2,120.72 €), by considering it not legally possible to have a supplementary assessment of IMI for 2012 based on the valuation of the property made in 2013.

Regarding the IMI for the year 2013, the Claimant stated in its request of 19-12-2015 that it was notified of assessment no. 2013 .. in the amount of 7,010.69 €, resulting in a refund in favor of the Claimant in the amount of 147.03 €. It also alleged that it was notified of assessment no. 2013 …, and another refund was calculated in the amount of 1,546.27 €.

Despite the issuance of these refund documents, the Claimant states that the amount of 2,670.00 € remains disputed, and the proceedings should continue regarding assessment no. 2013 … of 01-12-2014 for this amount, by considering it not legally admissible to proceed with a supplementary assessment of IMI for the year 2012. The Claimant further states that, should it be understood that a supplementary assessment of IMI for the year 2012 is admissible, the amount for which it seeks the continuation of the proceedings is only 526.69 €.

And on 12-03-2015 the A.T.A. submitted to the proceedings a request stating that it made corrections to all errors committed, and that it made the correct application of both the IMI rate of 0.39% and the safeguard clause to each of the units in question, and therefore should be absolved of the claim.

2. Factual Matters

2.1. Established Facts:

Having analyzed the documentary evidence produced, the following facts are considered established and with relevance to the decision of the case:

  1. The Claimant is the owner of the urban property located at Rua …, no. …, registered in the property matrix under article … of the union of parishes of ... and ..., municipality of ..., described in the Registry Office of ... under no. …, as per the property booklet attached to the arbitral request as document 16.

  2. It is a property under a vertical ownership regime, composed of eight units susceptible to independent use.

  3. The Claimant was notified on 04-10-2013 of the general valuation of the floors that comprise the property identified above, with the new tax patrimonial values fixed at the following amounts:

  • Ground Floor D: tax patrimonial value of 147,260.00 €
  • Ground Floor E: tax patrimonial value of 111,850.00 €
  • REST: tax patrimonial value of 1,049,200.00 €
  • 1st Floor DT: tax patrimonial value of 152,500.00 €
  • 1st Floor E: tax patrimonial value of 147,820.00 €
  • 2nd Floor DT: tax patrimonial value of 152,500.00 €
  • 2nd Floor E: tax patrimonial value of 147,820.00 €
  • 3rd Floor DT: tax patrimonial value of 322,840.00 €.

  1. The Claimant did not request a second valuation of the Tax Patrimonial Value of the properties.

  2. The Claimant was notified in 2012 of assessment no. 2011 … of 25-12-2012, relating to IMI for the year 2011, concerning the property identified above, in the amount of 2,044.06 €, as per document 17 attached to the arbitral request.

  3. The Claimant was notified in 2013 of assessment no. 2012 … of 09-03-2013, relating to IMI for the year 2012, concerning the property identified above, in the amount of 2,120.72 €, as per document 18 attached to the arbitral request.

  4. The Claimant was notified on 06-06-2014 of supplementary assessment no. 2012 … relating to IMI for the year 2012, concerning the property identified above, in the amount of 1,639.88 €, with the final payment date of 31-07-2014, as per document 1 attached to the arbitral request.

  5. The Claimant was notified on 06-07-2014 of supplementary assessment no. 2012 … relating to the total IMI for the year 2012, concerning the property identified above, in the amount of 1,030.12 €, with the final payment date of 31-08-2014, as per document 2 attached to the arbitral request.

  6. The Claimant was notified on 13-03-2014 of assessment no. 2013 … relating to IMI for the year 2013, concerning the property identified above, in the amount of 11,956.51 €, to which corresponds a first installment of 4,126.08 euros, with the final payment date of 30-04-2014, as per document 3 attached to the arbitral request.

  7. The Claimant filed on 21-04-2014 a request for official review of assessment note no. 2013 … (first installment for the year 2013), under Article 115, no. 1, c) of the IMI Code, and as of the date of filing of the present arbitral request had not been notified of any decision on this request.

  8. The Claimant was cited on 20-05-2014 in tax enforcement proceedings no. …2014…, due to non-payment of assessment no. 2013 … (first installment), as per document 19 attached to the arbitral request.

  9. To suspend the tax enforcement proceedings, the Claimant made a security deposit in the amount of 5,425.99 €, as per document 20 attached to the arbitral request.

  10. The Claimant was notified on 09-06-2014 of assessment no. 2013 … relating to IMI for 2013, which alters the value notified in assessment no. 2013 …, in the amount of 8,703.99 €, with the final payment date of 31-07-2014, as per document 4 attached to the arbitral request.

  11. The Claimant was notified on 16-10-2014 of assessment no. 2013 … relating to IMI for 2013 (third installment), concerning the property identified above, in the amount of 8,703.99 €, with the final payment date of 30-11-2014, as per document 5 attached to the arbitral request.

  12. The Claimant proceeded to payment of the IMI assessments no. 2011 … for 2011, no. 2012 … for 2012, no. 2012 … for 2012, no. 2012 … for 2012 and no. 2013 … for 2013.

  13. The A.T.A. issued supplementary assessment no. 2012 … of 12-11-2014, proceeding with the official review of assessment no. 2012 … relating to IMI for 2012, in the amount of 4,264.03 €, which resulted in a refund to the Claimant of 526.69 €.

  14. The A.T.A. issued on 01-12-2014 assessment no. 2013 …, which officially reviews assessment no. 2013 …, partially annulling the amount of 1,693.30 € and fixing IMI for 2013 at 7,010.69 €.

  15. As a consequence of this corrective assessment, the A.T.A. issued refund documents no. 2013 … in the amount of 147.03 € and no. 2013 … in the amount of 1,546.27 €.

No other facts with relevance to the decision of the case were proven.

2.2. Reasoning of the Established Factual Matters:

With respect to the facts proven, the arbitrator's conviction was based on the documentary evidence attached to the proceedings and on facts admitted by agreement.

3. Legal Matters:

3.1. Object and Scope of the Present Proceedings

Part of the knowledge of the request made by the Claimant is precluded by the official reviews issued by the A.T.A. at a later date than the filing of the arbitral request and before notification to submit a response. Thus, Article 13 of the RJAT is not applicable since prior to the response the tax act was reviewed.

Having annulled the IMI assessments for 2012 no. 2012 … and no. 2012 …, the defects pointed out by the Claimant regarding lack of prior hearing, lack of reasoning of the assessments and omission of the application of the safeguard clause will not be considered.

Regarding IMI for 2013, having officially reviewed assessments no. 2013 …, no. 2013 … and no. 2013 …, and having applied the rate of 0.39%, the knowledge of the error pointed out in the application of the rate is precluded.

The Claimant nevertheless manifested interest in the continuation of the present proceedings regarding the part not revoked of the IMI assessments for the years 2012 and 2013.

Thus, the assessment of the questions raised will be restricted to the part of the assessments not yet officially revised by the Tax and Customs Authority.

3.2. On the Mootness of the Case

Regarding 2012:

As was proven, the assessments that are the subject of the arbitral request were subject to official review by the Tax and Customs Authority.

The original assessment (2012 …) was altered by assessment no. 2012 … by application of a correction to the coefficients used (0.39 instead of 0.70).

The A.T.A. thereupon issued supplementary assessment no. 2012 … of 12-11-2014, applying the safeguard clause provided for in Article 15-O of Decree-Law no. 287/2003 of 12/11, proceeding with the official review of assessment no. 2012 … relating to IMI for 2012, in the amount of 4,264.03 €, which resulted in a refund to the Claimant of 526.69 €.

The official review of assessment no. 2012 … renders it useless to assess the legality of this assessment and the original assessment, and leads to the conclusion that mootness of the case occurs, which is a cause of extinction of the instance.

Thus, regarding IMI assessments no. 2012 … and 2012 …, for the year 2012, the instance is terminated by mootness, pursuant to Article 277, e) of the Code of Civil Procedure, with costs to the A.T.A. for having caused the claim.

Only the unannulled part of assessment no. 2012 … of 12-11-2014, in the amount of 2,143.31 €, will be assessed.

Regarding 2013:

The Claimant was notified on 13-03-2014 of assessment no. 2013 … relating to IMI for the year 2013, concerning the property identified above, in the amount of 11,956.51 €, to which corresponds a first installment of 4,126.08 euros, with the final payment date of 30-04-2014, as per document 3 attached to the arbitral request.

The Claimant filed on 21-04-2014 a request for official review of assessment note no. 2013 … (first installment for the year 2013), under Article 115, no. 1, c) of the IMI Code as per document 6 in annex to the arbitral request, and as of the filing date of the present arbitral request the Claimant had not yet been notified of any decision on this review request.

The Claimant was notified on 09-06-2014 of assessment no. 2013 … relating to IMI for 2013, which alters the value notified in assessment no. 2013 …, fixing the assessment in the amount of 8,703.99 €, with the final payment date of 31-07-2014, as per document 4 attached to the arbitral request.

The Claimant was notified on 16-10-2014 of assessment no. 2013 …, which maintains the value of the assessment at 8,703.99 €, and fixes the value of the third installment of IMI at 2,499.80 concerning the property identified above, with the final payment date of 30-11-2014, as per document 5 attached to the arbitral request.

The A.T.A. states that assessment no. 2013 …, in the amount of 7,010.69 €, was issued on 01-12-2014, stating that this assessment would correct the assessments previously issued for IMI for 2013, and that it applied the safeguard clause to unit 1E, the collection of IMI for this unit becoming 429.47 €.

Following this corrective assessment no. 2013 …, the A.T.A. also issued assessment no. 2013 … of 20-12-2014, which officially reviews assessment no. 2013 …, and which resulted in a refund to the Claimant in the amount of 147.03 €, annulling the amount of 1,693.30 € and fixing IMI for 2013 at 7,010.69 €.

The A.T.A. thereupon issued assessment no. 2013 … of 20-12-20114, relating to IMI for 2013, and which resulted in a refund to the Claimant in the amount of 1,546.27 €.

In summary, assessment no. 2013 … is no longer in effect because it was replaced by assessment 2013 …. Assessment no. 2013 … was replaced by assessment no. 2013 …. And assessment no. 2013 … was officially reviewed by assessment no. 2013 …, which partially revokes it.

Thus, regarding IMI assessments no. 2013 … and 2013 … the instance is terminated by mootness, pursuant to Article 277, e) of the Code of Civil Procedure, with costs to the A.T.A. for having caused the claim.

Only the unannulled part of assessment no. 2013 … will be assessed.

It constitutes a question to be decided in the present proceedings whether the IMI assessments for 2012 and 2013 in the part not yet annulled by the Tax and Customs Authority suffer from illegality.

The questions that must be answered are:

a) Is it admissible for the A.T.A. to proceed with a supplementary assessment of IMI for the year 2012 in 2014, based on the fixing of the VPT in 2013?

b) Should the supplementary assessments of IMI for 2013 be annulled for the defect of violation of law (Articles 8 of the LGT and 99 of the CPPT)?

3.3. General Valuation and the Producing of Effects of the New Tax Patrimonial Value

It was proven that on 06-06-2014 the Claimant was notified of the supplementary assessment of 2012 no. 2012 …, and of subsequent assessments, all concerning 2012.

All assessments are based on the VPT resulting from the valuation notified to the Claimant on 04-10-2013.

The Claimant did not file within the 30-day period a request for second valuation of the property, pursuant to Article 15 F of Decree-Law 287/2003 amended by Law 60-A/2011.

The assessments were made within the period provided for in Article 45, 1 and 4 of the LGT.

Letter a) of no. 4 of Article 15-D of Decree-Law no. 287/2003 of 12-11 states the following:

"The tax patrimonial values of urban properties that have been subject to general valuation come into effect:

a) On 31 December 2012, for purposes of the municipal property tax; (…)"

Circular no. 4/2013 of 12-03-2013 states that "regardless of when the valuation acts become final, the tax patrimonial values of properties covered by the general valuation produce effects in the assessment of IMI for 2012, thereby ensuring full application of the valuation rules provided for in the IMI Code, as well as respect for the principles of fairness and equality in tax relations with the owners, usufructuaries or superficiaries of those urban properties."

Despite the valuation operation having extended over time, in view of what was mentioned in the said Circular, it is certain that its result, as a definer of the tax patrimonial value of the properties, had effects reported to the fact generating the obligation to value.

Thus, in the present case, the new VPT of the property notified to the Claimant on 04-10-2013 and which was not the subject of a request for second valuation reported its effects to 31-12-2012. And even though the general valuation was only completed in 2013, the A.T.A. may proceed with supplementary assessments of IMI for the years 2012 and 2013.

As stated in the judgment of the Central Administrative Court South of 27-11-2014 of case no. 08013/14 "as results from Article 113 no. 4 of the IMI Code, official or supplementary assessments may be made at any time, without prejudice to what is provided in Article 116 of the same decree regarding deadlines of limitation, that is, within the period of four years, in view of what is determined in Article 45 of the General Tax Law."

For its part, Article 115 no. 1 letter b) of the IMI Code provides that assessments may be officially reviewed as a result of a new valuation.

The Claimant alleges that the IMI assessments for the year 2013 suffer from the defect of violation of the principle of fiscal non-retroactivity provided for in Article 103 no. 3 of the Constitution of the Portuguese Republic.

The judgment mentioned above refers to the constitutional principle of legal certainty and protection of legitimate expectations, expressed in the non-violation of acquired rights or frustration of legitimate expectations without sufficient basis, should be assessed, in the context of constitutional protection, as an emanation of the principle of the democratic State of Law (as per Articles 2 and 9, letter b) of the CRP). In accordance with the same principle, only an intolerable retroactivity, which affects in an inadmissible and arbitrary manner the rights and expectations legitimately founded of citizens, violates the principle of protection of legitimate expectations (as per judgment of the Constitutional Court 1011/1996, 8/10/1996; 260/2010, 29/6/2010; J. J. Gomes Canotilho and Vital Moreira, Constitution of the Portuguese Republic Annotated, 4th Edition, 1st Volume, Coimbra Editora, 2007, p.204 et seq.).

We understand that in the present case there is no violation of the principle of fiscal non-retroactivity, and the Claimant's allegation in that regard is without merit.

3.4. The Incorrect Application of the Safeguard Clause in IMI

Considering that the A.T.A. revoked the IMI assessments for the year 2012 that suffered from non-application of the safeguard clause, the knowledge of this question is precluded.

However, regarding the IMI assessments for the year 2013, the Claimant alleges that despite the corrections made by the A.T.A., assessment no. 2013 … still does not contemplate the correct application of the safeguard clause, exceeding the maximum collection of IMI for that year by 526.69 €.

We shall thus analyze whether the safeguard clause was correctly applied.

When the request was filed, the Claimant attached the IMI assessments for 2012 and 2013 that did not contemplate the application of the IMI safeguard regime. In the course of the proceedings, in the response and in the subsequent request of the A.T.A., new corrective assessments were issued applying the safeguard clause, both to IMI for 2012 and to IMI for 2013.

With application of the safeguard regime, the collection of IMI for 2012 may not exceed 4,264.03 € and the collection of IMI for 2013 may not be greater than 6,484.00 €.

However, the Claimant alleged that the proceedings should continue regarding the IMI assessment for 2012 no. 2012 … of 12-11-2014 and regarding the amount of 2,143.31 € and the IMI assessment for 2013 no. 2013 … of 01-12-2014 and regarding the amount of 2,670.00 €, on the ground that it does not consider it admissible for the official correction of IMI for 2012, given the general valuation of the property in the year 2013. However, as analyzed above, it is possible for the A.T.A. to officially correct the assessment of IMI for 2012.

In summary, the collection of IMI for 2012 in the amount of 4,264.03 €, after the corrective documents issued by the A.T.A., is correctly calculated and does not suffer from any defect.

As for the collection of IMI for 2013, which with the application of the safeguard regime could not exceed the amount of 6,484.00 €, and despite the corrective documents issued by the Respondent, is not correctly calculated, as the assessment contains an excess of quantification in the amount of 526.69 €, whereby the IMI assessment for 2013 should be partially annulled.

Accordingly, it must be concluded that the safeguard regime provided for in Article 15-O no. 1 of Decree-Law no. 287/2003 of 12-11 was correctly applied to IMI for 2012 but was not correctly applied to the year 2013.

3.5. On the Request for Indemnification for Undue Security Provided

The Claimant further makes a request for indemnification for undue security, having made a security deposit to suspend tax enforcement proceedings no. …2014…, instituted due to non-payment of assessment no. 2013 … (first installment of IMI for 2013).

Article 171 of the CPPT provides that indemnification in case of a bank guarantee or equivalent unduly provided will be requested in the proceedings in which the legality of the enforceable debt is disputed.

The regime of the right to indemnification for undue security is contained in Article 53 of the LGT, which provides the following:

"1. The debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be indemnified wholly or partially for the harm resulting from its provision, if it has maintained it for a period exceeding three years in proportion to the outcome in administrative appeal, judicial challenge or opposition to enforcement that are the subject of the debt guaranteed.

  1. The period referred to in the preceding number shall not apply when it is verified in a gracious complaint or judicial challenge that there was an error imputable to the services in the assessment of the tax (…)"

In the case at hand, it is evident that the error of the assessment act no. 2013 … (first installment of IMI for 2013) is imputable to the Tax and Customs Authority, since the assessment was issued by it. Therefore, the Claimants have the right to indemnification for the security provided.

However, the expenses incurred by the Claimant were not alleged and proven, whereby we are not in a position to fix the amount of indemnification, which may only be determined in the execution of this arbitral decision.

4. Compensatory and Indemnificatory Interest

The Claimant, perhaps by oversight, requests condemnation of the A.T.A. to payment of compensatory interest. However, compensatory interest is owed by taxpayers to the State pursuant to Article 35 of the LGT.

What may be at issue in the present proceedings is whether indemnificatory interest may be awarded pursuant to Article 43 of the General Tax Law.

Article 43 no. 1 of the LGT provides that «indemnificatory interest is due when it is determined in a gracious complaint or judicial challenge that there was an error imputable to the services resulting in payment of the tax debt in an amount greater than that legally due».

The right to indemnificatory interest is not dependent on the making of a request to that effect, in accordance with the judgment of the Central Administrative Court South no. 05110/11 of 31-01-2012.

In the case at hand, the error that affects part of the assessments is imputable to the Tax and Customs Authority that committed the acts of assessment on its own initiative, whereby the Claimant has the right to indemnificatory interest, in the proportion of the outcome, from the date of payment of each of the amounts unduly owed until reimbursement, at the legal rate of last resort, pursuant to Articles 43, nos. 1 and 4, and 35, no. 10 of the LGT, Article 559 of the Civil Code and Ordinance no. 291/2003 of 8 April.

As results from the said Article 43 no. 1 of the LGT, the right to indemnificatory interest depends on the payment of a tax debt in an undue amount.

The assessment of IMI for 2013 no. 2013 … in the amount of 526.69 € being affected by illegality, indemnificatory interest is owed from the date of payment of the IMI until full reimbursement by the A.T.A., pursuant to Articles 43 of the LGT and 61 no. 2 of the CPPT. Regarding the amounts paid and subsequently reimbursed from the remaining assessments, since the reimbursement did not contemplate indemnificatory interest, the same should be calculated until the date on which A.T.A. proceeded with the reimbursement and paid to the Claimant.

5. Decision

Based on the foregoing, it is determined:

a) To declare the instance partially terminated regarding IMI assessments no. 2012 … and 2012 …, for the year 2012, by mootness;

b) To judge without merit the claim made by the Claimant in the present tax arbitral proceedings regarding the illegality of IMI assessment no. 2013 … in the amount of 2,143.31 €;

c) To judge with merit the claim made by the Claimant in the present tax arbitral proceedings regarding the illegality of IMI assessment no. 2013 … in the amount of 526.69 € that corresponds to the part not officially annulled by the A.T.A., and to condemn the latter to reimburse the Claimant the amount of 526.69 €, as well as indemnificatory interest until full reimbursement;

d) To condemn the A.T.A. to payment to the Claimant of indemnificatory interest calculated from the date of the payments of IMI for 2012 and 2013 until the date of their reimbursement to the Claimant;

e) To judge with merit the claim for condemnation of the Tax and Customs Authority to pay indemnification for undue security provided, pursuant to Article 53 of the General Tax Law, in the amount to be determined in execution of the judgment.

6. Value of the Case:

In accordance with Article 315 no. 2 of the CPC and 97-A no. 1 letter a) of the CPPT and 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 10,285.82 €.

7. Costs:

Pursuant to Article 22 no. 4 of the RJAT and Table I appended to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 918.00 € to be borne by the Claimant and Respondent in the proportion of their respective outcomes (20.84% for the Claimant and 79.16% for the Tax and Customs Authority).

Notify.

Lisbon, 03 July 2015.

Text prepared by computer, pursuant to Article 138 no. 5 of the Code of Civil Procedure (CPC), applicable by referral of Article 29 no. 1 letter e) of the Tax Arbitration Regime, reviewed by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

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What is the safeguard clause in Portuguese Municipal Property Tax (IMI) and how does it apply to property valuations?
The safeguard clause (cláusula de salvaguarda) in IMI, established by Article 15-O of Decree-Law 287/2003 as amended by Law 60-A/2011, is a mechanism designed to phase property tax increases resulting from general revaluations over multiple years (2012 and 2013). Rather than imposing the full tax burden immediately based on new, higher tax patrimonial values (VPT), the safeguard clause graduially increases the tax liability to mitigate the financial impact on taxpayers. This provision requires that the IMI for 2012 be settled and consolidated before calculating the 2013 assessment, as the phasing depends on the established baseline from the previous year.
Can a taxpayer challenge IMI tax assessments through arbitration at CAAD?
Yes, taxpayers can challenge IMI tax assessments through arbitration at CAAD (Centro de Arbitragem Administrativa), Portugal's Administrative Arbitration Center. Under the Tax Arbitration Regime (RJAT - Decree-Law 10/2011), taxpayers may submit requests for arbitral tribunal constitution to contest tax assessments, including IMI liquidations. The arbitration process can be initiated following direct notification of assessments or after tacit rejection of administrative review requests under Article 115 of the IMI Code. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering a faster and specialized forum for tax matters with legally binding decisions.
What is the right to prior hearing (audição prévia) in IMI liquidation proceedings?
The right to prior hearing (direito de audição prévia) in IMI proceedings is a fundamental procedural safeguard guaranteed by Portuguese administrative and tax law (Articles 60 LGT, 45 CPA, and constitutional principles). Before the Tax Authority issues a supplementary IMI assessment that adversely affects a taxpayer, it must notify the taxpayer and provide an opportunity to be heard and present objections or clarifications. This right allows taxpayers to participate in the decision-making process before final assessments are issued. Failure to provide prior hearing when legally required constitutes an omission of an essential formality (formalidade essencial), which can result in annulment of the tax assessment under Article 37 of the Tax Procedure Code (CPPT).
How does the duty of reasoning (fundamentação) apply to IMI tax assessments in Portugal?
The duty of reasoning (dever de fundamentação) requires the Tax Authority to clearly state the legal and factual grounds supporting IMI tax assessments. Under Articles 77 of the General Tax Law (LGT), 125(2) of the Administrative Procedure Code (CPA), and 268 of the Portuguese Constitution (CRP), tax assessments must specify the applicable legal provisions, explain how the tax was calculated, and identify the factual basis for the liquidation. For IMI assessments, this includes indicating which article of the IMI Code authorizes the assessment, the tax patrimonial value used, the applicable rate, and any relevant calculation methodology. Insufficient or absent reasoning violates taxpayers' rights to understand and effectively challenge administrative decisions, constituting grounds for annulment.
What happens when the Tax Authority (AT) performs an ex officio review of IMI assessments during arbitration proceedings?
When the Tax Authority performs an ex officio review (revisão oficiosa) of IMI assessments during arbitration proceedings at CAAD, it acknowledges errors in the contested assessments and administratively corrects them before the arbitral tribunal issues a decision. Under Article 78 LGT, the AT can review and annul or modify tax acts containing legal errors at any time. In this case, the AT conducted official reviews and submitted documentary evidence to the proceedings showing corrections made to some challenged assessments. The claimant must then clarify whether it maintains interest in continuing arbitration for any remaining amounts not corrected. The principle of contradiction (princípio do contraditório) ensures the claimant can respond to the AT's corrections. If all issues are resolved through ex officio review, the arbitration may become moot; otherwise, proceedings continue for unresolved matters.