Process: 763/2014-T

Date: May 29, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

Process 763/2014-T concerns the challenge of IMT (Property Transfer Tax) and Stamp Tax assessments following the acquisition of rural property and urban fractions through a Special Recovery Process (CIRE). The claimant acquired properties previously held as inventories by a sole proprietor business subject to insolvency proceedings. Initially, the Tax Authority issued collection documents without tax payable, recognizing CIRE exemptions. Subsequently, IMT of €5,650.00 and Stamp Tax of €796.00 were assessed. The claimant argued entitlement to exemptions under Article 270(2) of the Insolvency Code (IMT exemption) and Article 269(c) (Stamp Tax exemption) for acquisitions within insolvency proceedings. The Tax Authority raised procedural exceptions: (1) untimeliness, claiming the arbitration request exceeded the 90-day deadline under Article 10 RJAT, and (2) illegal joinder of claims, arguing IMT and Stamp Tax have different natures under Article 104 CPPT. On the merits, the Tax Authority contended that CIRE exemptions do not apply to isolated asset transfers. The case raises critical questions about the scope of insolvency-related tax exemptions, the procedural requirements for tax arbitration, joinder of different tax claims, and the right to compensatory interest upon annulment of unlawful assessments. The claimant requested annulment of both assessments and reimbursement with compensatory interest, while subsidiarily requesting a ruling on IMT alone if joinder was deemed improper.

Full Decision

Process No. 763/2014-T

Claimant: A…
Defendant: Tax and Customs Authority

I. REPORT

A…, Tax ID …, with tax domicile at …, municipality of …, (hereinafter referred to only as Claimant), submitted, on 06-11-2014, a request for constitution of a singular arbitral tribunal, pursuant to articles 2.º and 10.º of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in conjunction with letter a) of article 99.º of the Code of Tax Procedure (CPPT), in which the Tax and Customs Authority (hereinafter referred to only as Defendant) is the defendant.

The Claimant requests the declaration of illegality and consequent annulment of the Property Transfer Tax (IMT) assessments with numbers 2014 …, in the amount of € 5,650.00, and Stamp Tax with numbers 2014 …, in the amount of € 796.00, made following the acquisition of the rural property registered in the property matrix of the parish of ... under article ... and of the autonomous fractions designated by the letters "R" and "S" of the urban property in horizontal ownership registered in the urban property matrix of the parish of ... under article .... As a consequence of this annulment, the amounts unduly paid should be reimbursed to the Claimant, increased by compensatory interest.

The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD on 10-11-2014 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provisions of letter a) of No. 2 of article 6.º and letter b) of No. 1 of article 11.º of the RJAT, the Deontological Council appointed as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the task within the applicable deadline.

On 02-01-2015 the Parties were duly notified of this appointment, and did not express the intention to refuse the appointment of the arbitrators, pursuant to the combined articles 11.º No. 1, letters a) and b) of the RJAT and articles 6.º and 7.º of the Code of Ethics.

In accordance with the provision of letter c) of No. 1 of article 11.º of the RJAT, the singular arbitral tribunal was constituted on 19-01-2015.

In the response presented, the Defendant raised the exception of untimeliness of the request for arbitral ruling, as well as the illegality of the joinder of claims.

The Claimant presented a written response to the exceptions raised by the Defendant, and finally declared that, if this tribunal understands that the joinder of claims is illegal, it requests that it rule on the illegality of the Property Transfer Tax assessment.

After the pleadings presented, by order of 20-04-2015, the meeting provided for in article 18.º of the RJAT was dispensed with, and a deadline was granted to the Parties to present written arguments, which only the Defendant came to do.

In response to the arguments of the Defendant, the Claimant submitted a request that was, however, removed from the file on the grounds that, pursuant to article 120.º of the CPPT applicable by reference from letter a) of No. 1 of article 29.º of the RJAT, a response to the arguments of the other party is not admissible.

The Arbitral Tribunal was regularly constituted and is competent.

The parties have legal personality and capacity and are legitimate (articles 4.º and 10.º, No. 2, of the same law and article 1.º of Ordinance No. 112-A/2011, of 22 March).

The proceeding is not subject to nullities.

II. OF THE CLAIMANT'S REQUEST

As mentioned, the Claimant hereby requests the declaration of illegality and consequent annulment of the Property Transfer Tax assessments with numbers 2014 …, in the amount of € 5,650.00, and Stamp Tax with numbers 2014 …, in the amount of € 796.00, made following the acquisition of the rural property registered in the property matrix of the parish of ... under article ... and of the autonomous fractions designated by the letters "R" and "S" of the urban property in horizontal ownership registered in the urban property matrix of the parish of ... under article ....

The Claimant alleges that the properties in question were acquired within the scope of the Special Recovery Process that proceeded at the 1st Civil Court of the Judicial Court of ... under No. …/13.2TBBRG concerning B and spouse.

The properties in question had been acquired by B for resale, being recorded as "inventories" in the accounting of his sole proprietorship business.

To that extent, the acquisition in question would benefit from the Property Transfer Tax exemption provided for in No. 2 of article 270.º of the Insolvency and Company Recovery Code, as well as from the Stamp Tax exemption provided for in the final part of letter c) of article 269.º of the same law. This had, moreover, been recognized by the Tax Authority itself by issuing collection documents without tax payable prior to the deed of sale and purchase executed between the Claimant and the aforementioned B and spouse.

Concludes, thus, requesting that the Stamp Tax and Property Transfer Tax assessments made by the Tax Authority be considered illegal, with the consequent reimbursement of the tax paid increased by compensatory interest.

III. OF THE RESPONSE OF THE PUBLIC TREASURY

In the response presented, the Defendant raises, from the outset, the exception of untimeliness of the present request for arbitral ruling insofar as it was made beyond the 90 days provided for in letter a) of No. 1 of article 10.º of the RJAT, counted from the end of the deadline for voluntary payment, by reference to No. 1 of article 102.º of the CPPT.

In addition, the Defendant invokes the illegality of the joinder of claims by violation of the provisions of article 104.º of the CPPT, on the grounds that the taxes in question – Property Transfer Tax and Stamp Tax – do not have the same nature.

Without prejudice to the exceptions raised, and regarding the question of the legality of the contested assessments, the Defendant understands that the Claimant is not right insofar as it considers that the exemptions invoked by the Claimant are not applicable to isolated transfers of assets.

Concludes, thus, for the dismissal of the Claimant's request, whereby the latter shall have no right to any reimbursement of tax increased by compensatory interest.

IV. FACTUAL MATTER

A. Proven Facts

The following facts are considered proven:

  1. On 14 May 2014, by deed executed at the Notarial Office of …, in …, the Claimant acquired the following properties:

(i) rural property registered in the property matrix of the parish of ... under article ..., for the value of € 54,500.00;

(ii) autonomous fraction designated by the letter "R" of the urban property in horizontal ownership registered in the urban property matrix of the parish of ... under article ..., for the value of € 25,000.00; and

(iii) autonomous fraction designated by the letter "S" of the urban property in horizontal ownership registered in the urban property matrix of the parish of ... under article ..., for the value of € 20,000.00.

  1. The properties described in items (i) to (iii) of the previous number had been acquired for resale by B, a sole proprietor businessman, being recorded in his assets as "inventories".

  2. On 13 May 2014, the Claimant proceeded with the submission of the Property Transfer Tax / Stamp Tax declaration prior to the transfer, pursuant to the Property Transfer Tax Code, and guides were issued without tax value payable, containing in the observations of the assessment note the indication: "Special recovery proceeding (CIRE) …/13.2TBBRG".

  3. After the execution of the deed of sale and purchase, the Claimant was notified of the Property Transfer Tax assessment with No. 2014 …, in the value of € 5,650.00, with payment deadline of 30/06/2014.

  4. The Claimant was also notified of the Stamp Tax assessment No. 2014 …, in the value of € 796.00, with payment deadline of 25/06/2014.

  5. The Claimant filed an administrative review of the assessments referred to in 4. and 5. above.

  6. The administrative review was dismissed by order of 22/08/2014 of the Head of the Tax Service ... 2, notified to the Claimant by letter No. ..., of the same date.

  7. The request for arbitral ruling was submitted on 06/11/2014.

B. Unproven Facts

No other facts with relevance to the arbitral decision were proven.

C. Grounds for the Factual Matter

The factual matter given as proven is based on the documentary evidence presented and not contested.

V. QUESTIONS TO BE DECIDED

As mentioned, the Defendant raised in its response the exception of untimeliness of the present request for arbitral ruling insofar as it was submitted beyond the 90 days provided for in letter a) of No. 1 of article 10.º of the RJAT, counted from the end of the voluntary payment deadline – 25/06/2014 and 30/06/2014, as per items 4. and 5. of the proven facts -, by application of letter a) of No. 1 of article 102.º of the CPPT. According to the Claimant's calculations, the deadline for the Claimant to submit a request for arbitral ruling would end, respectively, on 23/09/2014 and 29/09/2014.

The Claimant contested this position by understanding that the deadline for submission of the request for arbitral ruling provided for in letter a) of No. 1 of article 10.º of the RJAT would be counted, not from the end of the voluntary payment deadline, as the Defendant argues, but from the notification of the decision dismissing the administrative review rendered on 22/08/2014.

The Claimant's position would be correct if the request for arbitral ruling had as its object the decision dismissing the administrative review. However, that is not the case.

In fact, the Claimant begins its petition by declaring that "(…) comes, on the grounds of illegality, CONTEST the Property Transfer Tax assessments with numbers 2014 …, (…) and stamp tax of item 1.1 of the table with number 2014 ... (…)". And concludes with the following request: "On these grounds and on all other legal grounds that Your Excellency will duly supply, this action should be considered substantiated and, in consequence, the stamp tax and Property Transfer Tax assessments made to the Claimant be considered illegal, with the consequent reimbursement of the amounts paid increased by compensatory interest".

The object of the request, expressly delimited by the Claimant, is the alleged illegality of the Property Transfer Tax and Stamp Tax assessment acts and not the dismissal of the administrative review submitted. It should be noted, furthermore, that at no point in the petition and other requests submitted, the Claimant makes any assessment of the dismissal and its grounds, nor has it formulated any request regarding such tax act.

To that extent, this tribunal cannot fail to agree with the Defendant and conclude that the request for arbitral ruling, submitted on 06/11/2014, is out of time. Under the terms already mentioned, the 90-day deadline for requesting arbitral ruling on the assessments subject to these proceedings would end on 23/09/2014, as regards Stamp Tax, and 29/09/2014, as regards Property Transfer Tax, given that they began on 26/06/2014 and 01/07/2014, respectively [cf. letter a) of No. 1 of article 102.º of the CPPT by reference from letter a) of No. 1 of article 10.º of the RJAT].

Considering the exception raised to be well-founded, the examination of the remaining questions raised in the proceedings is prejudiced.

VI. DECISION

In accordance with the foregoing, this Arbitral Tribunal decides to find the exception of untimeliness of the request for arbitral ruling well-founded and, in consequence, to dismiss the request for arbitral ruling, absolving the Defendant thereof.

Value of the proceeding: In accordance with the provisions of article 306.º, No. 2, of the Code of Civil Procedure and 97.º-A, No. 1, letter a), of the CPPT and 3.º, No. 2, of the Regulations on Costs in Tax Arbitration Proceedings, the value of € 6,446.00 is assigned to the proceeding.

Costs: Under No. 4 of article 22.º of the RJAT, the amount of costs is fixed at € 612.00, pursuant to Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, at the expense of the Claimant.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 29-05-2015

The Sole Arbitrator

(Maria Forte Vaz)

Frequently Asked Questions

Automatically Created

What is the tax treatment of land for construction under IMT and Verba 28.1 of the General Stamp Tax Table (TGIS)?
Under IMT legislation, land for construction (terrenos para construção) is subject to taxation pursuant to Verba 28.1 of the General Stamp Tax Table (TGIS). The tax treatment depends on classification: rural land intended for construction is taxed based on its patrimonial value or transaction value, whichever is higher. Item 28.1 TGIS establishes the applicable rate structure for land transfers. Properties classified as 'terrenos para construção' in the property matrix trigger IMT liability unless specific exemptions apply, such as those under the Insolvency and Company Recovery Code (CIRE) for acquisitions within insolvency or recovery proceedings, though the Tax Authority may contest the applicability of such exemptions to isolated transfers.
Can a taxpayer challenge both IMT and Stamp Tax liquidations simultaneously through tax arbitration at CAAD?
The joinder of IMT and Stamp Tax claims in a single arbitration proceeding at CAAD raises procedural challenges under Article 104 CPPT. While both taxes may arise from the same property transaction, the Tax Authority argues they constitute different tax natures and cannot be joined pursuant to the procedural requirements for consolidation of claims. However, Article 10 RJAT permits challenges to tax assessments, and efficiency considerations may support joint resolution when assessments arise from identical facts. The claimant may request subsidiary relief, asking the tribunal to rule on IMT alone if joinder is deemed improper, ensuring at least partial resolution without dismissal on purely procedural grounds.
What are the grounds for annulment of IMT and Stamp Tax assessments on acquisitions involving rustic land and urban fractions?
Grounds for annulment of IMT and Stamp Tax assessments on acquisitions of rustic land and urban fractions include: (1) improper denial of statutory exemptions under Articles 269(c) and 270(2) of the Insolvency Code for transfers within CIRE proceedings; (2) violation of legitimate expectations when the Tax Authority initially issued collection documents without tax payable, then reversed position; (3) incorrect classification of properties or tax base calculation; (4) failure to recognize that properties held as business inventories for resale qualify for insolvency-related exemptions. The exemptions under CIRE aim to facilitate asset liquidation in insolvency contexts, though their application to isolated asset transfers versus global business transfers remains contested.
What is the deadline for filing a request for arbitral ruling (pedido de pronúncia arbitral) under the RJAT?
Under Article 10(1)(a) RJAT, the deadline for filing a request for arbitral ruling (pedido de pronúncia arbitral) is 90 days from the end of the voluntary payment deadline, by reference to Article 102(1) CPPT. For IMT and Stamp Tax assessments, this period begins after notification of the assessment with its payment deadline. Failure to file within this timeframe renders the request untimely, potentially resulting in dismissal. In this case, the Tax Authority raised untimeliness as a preliminary exception, requiring verification that the arbitration request filed on November 6, 2014, fell within 90 days of the June 2014 payment deadlines for both assessments.
Is a taxpayer entitled to compensatory interest (juros indemnizatórios) after annulment of unlawful IMT and Stamp Tax assessments?
Yes, a taxpayer is entitled to compensatory interest (juros indemnizatórios) following annulment of unlawful IMT and Stamp Tax assessments. When tax authorities collect taxes later declared illegal, compensatory interest compensates for the State's improper retention of funds. The legal basis derives from the general principles of tax procedure requiring restitution with interest when taxes are unduly paid due to unlawful administrative acts. Compensatory interest runs from payment until reimbursement, calculated according to statutory rates. This remedy ensures taxpayers are made whole for the financial prejudice of paying taxes that should not have been assessed, particularly where initial guidance suggested exemption applied before the Tax Authority reversed its position.