Process: 769/2016-T

Date: April 26, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In this 2017 CAAD arbitration decision (Process 769/2016-T), the tribunal addressed a Stamp Tax challenge concerning urban building land under Verba 28.1 of the General Stamp Tax Table (TGIS). The claimant, acting as head of estate (cabeça de casal), contested three Stamp Tax assessments totaling €15,335.08 for the 2013 tax year on land classified as 'terrenos para construção' (building land) in Lisbon. After the dismissal of an official review request, the taxpayer filed for arbitration with CAAD on 30/12/2016. However, during the arbitration proceedings, the Portuguese Tax Authority (AT) revoked the original dismissal decision and annulled the contested assessments on 14/03/2017, following Order no. 6/2017-XXI of the Secretary of State for Tax Matters. The arbitral tribunal ruled that this revocation caused supervening futility of the dispute (inutilidade superveniente da lide), a procedural extinction ground under Article 287(e) of the Civil Procedure Code. Notably, the tribunal condemned the AT to pay all litigation costs, finding that the futility was attributable to the tax authority's actions. The AT had allowed the tribunal to be constituted on 07/03/2017 despite having already internally annulled the assessment on 14/03/2017, and failed to exercise its 30-day statutory right to revoke under Article 13 of RJAT before tribunal constitution. This decision illustrates important principles: heirs acting as estate representatives have standing to challenge tax assessments on inherited property through CAAD arbitration, and when the AT revokes contested acts during pending arbitration, it bears responsibility for the resulting procedural costs.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A..., taxpayer no. ..., head of household in the estate of B..., taxpayer no. ..., resident at Street ..., no. ..., ..., Loures (Claimant), submitted on 30/12/2016, a request for arbitral ruling, in which he/she petitions for the annulment of the acts of Stamp Tax assessment no. 2014 ..., no. 2014 ... and no. 2014 ..., of the year 2013, in the total amount of € 15,335.08, following the decision to dismiss the request for official review duly submitted.

1.2. The Honourable President of the Ethics Board of the Administrative Arbitration Centre (CAAD) appointed, on 31/01/2017, as sole arbitrator the signatory of this decision.

1.3. On 07/03/2017 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of paragraph 1 of article 17 of the Legal Framework for Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 07/03/2017, to, if it so wished, submit a response and request the production of additional evidence.

1.5. On 20/03/2017 the AT responded, raising the issue of subsequent futility of the dispute.

1.6. On 23/03/2017, by arbitral order, the Claimant was notified to pronounce itself on the extinction of the proceedings due to subsequent futility of the dispute.

1.7. The Claimant did not submit any request in response to the content of the arbitral order referred to in the previous paragraph.

1.8. Thus, on 19/04/2017, by arbitral order, this arbitral tribunal, in accordance with the procedural principles enshrined in article 16 of the RJAT, designated 28/04/2017 for the delivery of the final decision.

2. PRELIMINARY EXAMINATION

The arbitral tribunal was regularly constituted.

The parties have legal personality and capacity and are legitimate, with no defects in representation.

The proceedings do not suffer from defects that affect its validity.

Consequently, the conditions are met for the final decision to be delivered.

3. FACTUAL MATTER

3.1. FACTS CONSIDERED AS PROVEN

In light of the documents included in the proceedings, the following is considered proven:

3.1.1. The AT proceeded to assess, by reference to the year 2013, the Stamp Tax provided for in Item 28.1 of the General Stamp Tax Table, on the urban property of the kind "land for construction" registered in the urban property register of the parish of ..., municipality of Lisbon, under the tax registration number ..., in the total amount of € 15,335.08 (see acts of Stamp Tax assessment no. 2014 ..., no. 2014 ... and no. 2014 ...).

3.1.2. Not conforming with the contents of the assessment acts, the Claimant submitted a request for official review against the aforementioned assessment acts, which was processed under number ... 2014 ....

3.1.3. By means of Official Letter no. ... issued by the Tax Services of Lisbon –..., dated 04/11/2016, the Claimant was informed that a dismissal order dated 30/05/2016 had been issued in relation to it.

3.1.4. Dissatisfied with the decision to dismiss the request for official review submitted, the Claimant submitted, on 30/12/2016, the present request for arbitral ruling.

3.2. FACTS NOT CONSIDERED AS PROVEN

There are no facts relevant to the decision that have not been considered as proven.

4. PRELIMINARY QUESTION TO BE DECIDED

The AT raises the question of subsequent futility of the dispute, because, in compliance with the Order of the Secretary of State for Tax Matters no. 6/2017-XXI, of 13/01/2017, the Head of the Tax Services of Lisbon –... revoked, on 14/03/2017, the dismissal order dated 30/05/2016, and granted the request for review contested in the present proceedings, with the consequent annulment of the assessment in question.

The Claimant, notified to pronounce itself, did not express its intention for the proceedings to be archived.

In consequence, the revocation of the disputed assessment acts makes it futile to examine their illegality and leads to the conclusion that subsequent futility of the dispute occurs, as the AT contends.

Now, subsequent futility of the dispute is a cause for extinction of the proceedings, under the terms of article 287, paragraph e) of the Code of Civil Procedure (CPC).

5. LITIGATION COSTS

In accordance with the provisions of article 22, paragraph 4, of the RJAT, "the arbitral decision delivered by the arbitral tribunal includes the determination of the amount and allocation among the parties of the costs directly resulting from the arbitral proceedings (...)".

In general terms, in accordance with the provisions of article 527, paragraph 1 of the CPC (applicable by force of the referral provided for in article 29, paragraph 1, paragraph e) of the RJAT), the decision that dismisses the action or any of its incidents or appeals condemns in costs the party that gave rise to them or, where there is no judgment on the merits of the action, whoever benefited from the proceedings.

In this context, paragraph 2 of the aforementioned article specifies the expression "gave rise to", according to the principle of loss, understanding that the losing party gives rise to the costs of the proceedings, in the proportion that it lost.

However, in accordance with the provisions of article 536, paragraph 1 of the CPC, "when the claim of the (...) claimant or the opposition of the (...) were well-founded at the time they were brought or raised and ceased to be so due to subsequent circumstances not attributable to these, the costs are distributed among them in equal parts", and according to paragraph 3 of the same article, in the case of extinction of the proceedings due to subsequent futility of the dispute, "(...) the responsibility for the costs falls on the (...) claimant, unless such impossibility or futility is attributable to the (...) defendant, in which case it is the latter who is responsible for all the costs" [emphasis ours].

Now, the Stamp Tax assessment that is the subject of the present request for arbitral ruling was annulled by the AT on 14/03/2017, that is, after the submission of the request presented by the Claimant (30/12/2016).

In this context, it should be noted that, since the request for constitution of the arbitral tribunal was accepted by the Honourable President of the CAAD on 02/01/2017 and notified to the AT on the same date, the latter could "(...) within 30 days from the date of knowledge of the request for constitution of the arbitral tribunal, proceed to the revocation, ratification, reform or conversion of the tax act whose legality has been raised (...)", as provided for in article 13 of the RJAT.

Notwithstanding the foregoing, and despite the AT having internally annulled the assessment act that is the subject of the request for arbitral ruling on 14/03/2017, it allowed this arbitral tribunal to be constituted on 07/03/2017, having submitted, when responding (on 20/03/2017), the question of subsequent futility of the dispute, petitioning then the consequences arising therefrom.

Thus, in the case at hand, taking into account that there is a cause for extinction of the proceedings attributable to the AT (subsequent futility of the dispute, due to revocation of the contested acts, as set out above), the responsibility for the costs should be entirely attributed to the AT.

6. DECISION

With the grounds set out, the arbitral tribunal decides:

a) To dismiss the proceedings due to subsequent futility of the dispute, under the terms of article 277, paragraph e) of the CPC (applicable by force of the referral provided for in article 29, paragraph 1, paragraph e) of the RJAT), with the consequences arising therefrom;

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

7. VALUE OF THE PROCEEDINGS

The value of the proceedings is set at € 15,335.08 (fifteen thousand, three hundred and thirty-five euros and eight cents), under the terms of article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of paragraphs a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs to be borne by the AT, in the amount of € 918 (nine hundred and eighteen euros), under the terms of Table I of the Regulation of Costs in Tax Arbitration Proceedings, under the terms of paragraph 2 of article 22 of the RJAT.

Notify.

Lisbon, 26 April 2017

The Arbitrator,

(Hélder Filipe Faustino)

Text drawn up by computer, in accordance with the provisions of paragraph 5 of article 131 of the CPC, applicable by referral of paragraph e) of paragraph 1 of article 29 of the RJAT. The drafting of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto do Selo) under Verba 28 of the Portuguese General Stamp Tax Table (TGIS) and how does it apply to building land (terrenos para construção)?
Stamp Tax under Verba 28 of the Portuguese General Stamp Tax Table (TGIS) is an annual tax levied on the ownership of urban property, including building land (terrenos para construção). Verba 28.1 specifically applies to urban real estate classified for construction purposes. The tax is assessed annually based on the property's taxable value. In this case, the tax authority assessed €15,335.08 for the 2013 tax year on urban land designated for construction in Lisbon. Property owners, including those who inherit such land, are liable for this annual Stamp Tax obligation. The tax applies regardless of whether construction has commenced, as long as the property maintains its classification as building land in the urban property register.
What does supervening futility of proceedings (inutilidade superveniente da lide) mean in Portuguese tax arbitration?
Supervening futility of proceedings (inutilidade superveniente da lide) is a procedural ground for extinction of litigation that occurs when the object of the dispute ceases to exist during the course of proceedings, making it unnecessary to decide the merits. Under Article 287(e) of the Portuguese Civil Procedure Code (applicable to tax arbitration via Article 29 of RJAT), when the tax authority revokes or annuls the contested tax assessment during pending arbitration, the dispute becomes futile because there is no longer an administrative act to challenge. In such cases, the arbitral tribunal dismisses the proceedings without ruling on the substantive legality of the original assessment. Cost allocation depends on which party caused the futility: if attributable to the tax authority, it bears all litigation costs under Article 536(3) of the Civil Procedure Code.
How can a taxpayer challenge Stamp Tax assessments on urban building land through the CAAD arbitration process?
Taxpayers can challenge Stamp Tax assessments on urban building land through a two-stage process: first, filing an official review request (reclamação graciosa) with the Tax Authority within the statutory deadline; second, if the review is dismissed or denied, requesting arbitration with CAAD (Centro de Arbitragem Administrativa) within the applicable time limit. The arbitration request must identify the contested assessment acts and state the grounds for challenge. Upon acceptance, the CAAD President appoints an arbitrator, the tribunal is constituted, and the Tax Authority is notified to respond within 30 days. Under Article 13 of RJAT, during this 30-day period, the AT may revoke, ratify, reform, or convert the contested tax act. The process follows the Legal Framework for Tax Arbitration (RJAT) and subsidiarily the Civil Procedure Code, culminating in a binding arbitral decision.
What happens when the Portuguese Tax Authority (AT) revokes tax assessments during pending arbitration proceedings?
When the Portuguese Tax Authority (AT) revokes tax assessments during pending arbitration proceedings, it triggers supervening futility of the dispute (inutilidade superveniente da lide), causing procedural extinction under Article 287(e) of the Civil Procedure Code. The arbitral tribunal dismisses the case without examining the merits of the original assessment's legality. Regarding litigation costs, Article 536(3) CPC establishes that if the futility is attributable to the tax authority, it bears all procedural costs. In this decision, the tribunal condemned the AT to pay costs because it revoked the assessment after the arbitration tribunal was constituted, despite having a 30-day statutory period under Article 13 RJAT to revoke before tribunal constitution. This creates an incentive for the AT to exercise its revocation powers promptly to avoid unnecessary arbitration costs.
Can heirs acting as head of estate (cabeça de casal) request arbitral review of Stamp Tax liquidations on inherited property?
Yes, heirs acting as head of estate (cabeça de casal) have legal standing to request arbitral review of Stamp Tax assessments on inherited property. In this decision, the claimant expressly identified as 'cabeça de casal no espólio' (head of household in the estate) of the deceased taxpayer challenged Stamp Tax assessments on urban building land. The arbitral tribunal confirmed in its preliminary examination that the claimant had legal personality, capacity, and legitimacy to bring the arbitration. The head of estate acts as the legal representative of the inheritance, with authority to manage estate assets and contest tax liabilities assessed against inherited property. This standing extends to the full arbitration process under RJAT, including filing the initial request, participating in proceedings, and receiving any favorable decision or refund resulting from successful challenge of the tax assessments.