Process: 91/2017-T

Date: June 12, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration case 91/2017-T addressed the application of Stamp Tax (Imposto do Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) to urban property classified as 'terreno para construção' (building land) for the 2012 tax year. The applicant company challenged Stamp Tax assessments totaling €20,024.85, contesting the Tax Authority's (AT) application of Verba 28 to construction land. After the applicant filed an ex officio review request that was rejected, the company initiated CAAD arbitration proceedings on January 27, 2017. However, before the arbitral tribunal could examine the substantive merits of whether Stamp Tax properly applies to building land under Item 28.1, the AT revoked the contested assessment acts on March 9, 2017, annulling the tax and ordering reimbursement with compensatory interest. This revocation occurred after the arbitral tribunal had been constituted but before the merits hearing. The AT then raised the procedural defense of 'inutilidade superveniente da lide' (supervening uselessness of proceedings), arguing the dispute had become moot. The arbitral tribunal agreed, finding that the AT's post-filing revocation rendered it unnecessary to examine the legality of the original assessments. Under Article 287(e) of the Civil Procedure Code, the proceedings were terminated. Significantly, the tribunal held the AT responsible for all arbitration costs, reasoning that the mootness was attributable to the Tax Authority's conduct. The AT could have revoked the assessments within 30 days under Article 13 of RJAT but failed to do so, allowing the tribunal to be constituted unnecessarily. This case illustrates an important procedural principle in Portuguese tax arbitration: when the Tax Authority revokes contested acts after arbitration begins, creating supervening mootness, it bears full responsibility for arbitration costs. While the case did not produce a substantive ruling on Stamp Tax application to construction land under Verba 28, it demonstrates taxpayer success through procedural resolution and establishes cost allocation principles when AT causes proceedings to become moot.

Full Decision

ARBITRAL AWARD

1. REPORT

1.1. A…, Lda., taxpayer no. …, resident at …, no.…, ..., … (Applicant), filed on 27/01/2017 an application for arbitration, whereby it requests the annulment of the assessment acts for Stamp Tax for the year 2012, in the total amount of € 20,024.85, following the decision to dismiss the ex officio review request duly submitted.

1.2. The Honourable President of the Ethical Council of the Administrative Arbitration Centre (CAAD) designated, on 07/03/2017, the signatory of this award as sole arbitrator.

1.3. On 04/05/2017, the arbitral tribunal was constituted.

1.4. In accordance with paragraph 1 of Article 17 of the Legal Framework for Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified, on 04/05/2017, to, if it so wishes, submit a response and request the production of additional evidence.

1.5. On 29/05/2017, the AT responded, raising the plea of subsequent mootness of the dispute.

1.6. On 30/05/2017, by arbitral order, the Applicant was notified to pronounce itself on the termination of the proceedings due to subsequent mootness of the dispute.

1.7. On 05/06/2017, the Applicant responded, not opposing the termination of the proceedings due to subsequent mootness of the dispute as decreed by the arbitral tribunal.

1.8. Thus, on 05/06/2017, by arbitral order, this arbitral tribunal decided, in accordance with the procedural principles set out in Article 16 of the RJAT, to set 16/06/2017 for the delivery of the final award.

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 are not affected by defects that would impair their validity.

Consequently, the conditions are met for the delivery of the final award.

3. FACTS OF THE CASE

3.1. FACTS DEEMED PROVEN

In light of the documents submitted in the proceedings, the following facts are deemed proven:

3.1.1. The AT assessed, with reference to the year 2012, Stamp Tax as provided in Item no. 28.1 of the General Table of Stamp Tax (General Table), on the urban property of the type "land for construction" registered in the urban real estate register of the parish of … (…), municipality of Sesimbra, under the property registration number …, in the total amount of € 20,024.85 (cf. Stamp Tax assessment acts no. 2012 …, no. 2013 …, no. 2013 … and no. 2013 …).

3.1.2. Not accepting the content of the assessment acts, the Applicant filed a request for ex officio review against said assessment acts, which was assigned case no. …2016….

3.1.3. By means of Office Letter no. … issued by the Finance Directorate of …, dated 30/11/2016, the Applicant was informed that a draft decision for rejection had been issued thereon.

3.1.4. By means of Office Letter no. … issued by the Finance Directorate of …, dated 03/01/2017, the Applicant was informed of the final adoption of said draft decision for rejection.

3.1.5. Disagreeing with the decision to dismiss the ex officio review request submitted, the Applicant filed, on 27/01/2017, the application for arbitration in question.

3.2. FACTS NOT DEEMED PROVEN

There are no facts of relevance to the award that have not been deemed proven.

4. PRELIMINARY ISSUE TO BE DECIDED

The AT raises the issue of subsequent mootness of the dispute, because, in compliance with the Order of the Director of Finance of … of 09/03/2017, it revoked on that date the order rejecting the ex officio review request challenged, with the consequent annulment of the assessment acts identified above and the reimbursement of the tax paid plus compensatory interest.

The Applicant, notified to pronounce itself, expressed its intention for the proceedings to be archived.

As a consequence, the revocation of the assessment acts challenged renders it unnecessary to examine their illegality and leads to the conclusion that there is subsequent mootness of the dispute, as the AT argues.

Now, subsequent mootness of the dispute is a cause for termination of proceedings, under Article 287, paragraph (e) of the Code of Civil Procedure (CPC).

5. COSTS OF THE PROCEEDINGS

In accordance with Article 22, paragraph 4 of the RJAT, "the arbitral award issued by the arbitral tribunal shall include the determination of the amount and the apportionment between the parties of the costs directly resulting from the arbitral proceedings (…)".

In general terms, in accordance with Article 527, paragraph 1 of the CPC (applicable by virtue of the reference provided in Article 29, paragraph 1, paragraph (e) of the RJAT), the award deciding the action or any of its incidents or appeals shall condemn in costs the party that caused them or, if there is no success on the merits of the action, the party that obtained benefit from the proceedings.

In this regard, paragraph 2 of the aforementioned article clarifies the phrase "caused them", in accordance with the principle of non-success, understanding that the unsuccessful party, in proportion to its lack of success, causes the costs of the proceedings.

However, in accordance with Article 536, paragraph 1 of the CPC, "when the claim of the (…) applicant or the opposition of the (…) was well-founded at the time it was filed or raised and ceased to be so due to subsequent circumstances not attributable to them, the costs shall be apportioned between them in equal parts", and, under paragraph 3 of the same article, in the case of termination of proceedings due to subsequent mootness of the dispute, "(…) the responsibility for the costs shall be borne by the (…) applicant, unless such impossibility or mootness is attributable to the (…) respondent, in which case the latter shall be responsible for all costs" [emphasis ours].

Now, the Stamp Tax assessment that is the object of the present application for arbitration was annulled by the AT on 09/03/2017, that is, after the filing of the application submitted by the Applicant (27/01/2017).

It should be noted, moreover, that, with the request for constitution of the arbitral tribunal having been accepted by the Honourable President of the CAAD on 30/01/2017 and notified to the AT on 31/01/2017, the latter could "(…) within 30 days from notice of the request for constitution of the arbitral tribunal, proceed to revoke, ratify, reform or convert the tax act whose legality was raised (…)", as provided in Article 13 of the RJAT.

Notwithstanding the foregoing, and although the AT had internally annulled the assessment acts that are the object of the application for arbitration on 09/03/2017, it allowed this arbitral tribunal to be constituted on 30/03/2017, having raised, in its response (on 29/05/2017), the issue of subsequent mootness of the dispute, then petitioning for the consequences flowing therefrom.

Thus, in the case at hand, taking into account that there is a cause for termination of proceedings attributable to the AT (subsequent mootness of the dispute, due to revocation of the assessment acts challenged, as explained above), responsibility for the costs should be entirely attributed to the AT.

6. AWARD

With the grounds set out above, the arbitral tribunal awards:

a) To declare the proceedings terminated due to subsequent mootness of the dispute, under Article 277, paragraph (e) of the CPC (applicable by virtue of the reference provided in Article 29, paragraph 1, paragraph (e) of the RJAT), with the consequences flowing therefrom;

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

7. VALUE OF THE DISPUTE

The value of the dispute is set at € 20,024.85 (twenty thousand and twenty-four euros and eighty-five cents), in accordance with Article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by virtue 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 € 1,224 (one thousand two hundred and twenty-four euros), in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, under paragraph 2 of Article 22 of the RJAT.

Notify.

Lisbon, 12 June 2017

The Arbitrator,

(Hélder Filipe Faustino)

Document prepared by computer, in accordance with paragraph 5 of Article 131 of the CPC, applicable by reference of paragraph (e) of paragraph 1 of Article 29 of the RJAT. The redaction of this award is governed by the orthography preceding the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto do Selo) under Verba 28 of the Portuguese General Stamp Tax Table (TGIS)?
Stamp Tax under Verba (Item) 28 of the Portuguese General Stamp Tax Table (Tabela Geral do Imposto do Selo - TGIS) is an annual tax levied on certain types of real estate property. Specifically, Verba 28.1 applies to urban properties, and the disputed application in case 91/2017-T involved whether this provision extends to land classified as 'terreno para construção' (building land or land zoned for construction). The tax is assessed annually based on the cadastral or tax registration value of qualifying properties, though the specific rate and scope of what constitutes taxable property under Item 28 has been subject to legal challenges and interpretation.
Can Stamp Tax under Verba 28.1 be levied on urban land classified as 'terreno para construção' (building land)?
The core issue in case 91/2017-T was whether Stamp Tax under Verba 28.1 can be levied on urban land classified as 'terreno para construção' (building land). The Tax Authority initially assessed €20,024.85 in Stamp Tax for 2012 on such property, suggesting their position that building land falls within the scope of Item 28.1. However, the AT subsequently revoked these assessment acts before the arbitral tribunal ruled on the merits, leaving the substantive legal question unresolved in this particular case. The revocation suggests the AT may have reconsidered its position, but no binding precedent was established on whether construction land properly falls within Verba 28.1's scope.
What does 'inutilidade superveniente da lide' (supervening uselessness of proceedings) mean in Portuguese tax arbitration?
'Inutilidade superveniente da lide' (supervening uselessness of proceedings or supervening mootness) is a procedural ground for terminating legal proceedings in Portuguese tax arbitration when the dispute becomes pointless or impossible to decide after the case has been initiated. Under Article 287(e) of the Portuguese Code of Civil Procedure (applicable to CAAD arbitration via Article 29 of RJAT), proceedings terminate when subsequent events eliminate the practical purpose of adjudication. In case 91/2017-T, supervening uselessness occurred when the Tax Authority revoked the contested Stamp Tax assessments after arbitration began, making it unnecessary for the tribunal to examine their legality. This is distinct from initial lack of standing or jurisdiction—the case was valid when filed but became moot due to subsequent AT action.
How does the CAAD tax arbitration process work when the Tax Authority (AT) revokes the contested tax assessment?
When the Tax Authority (AT) revokes a contested tax assessment during CAAD arbitration proceedings, the process depends on timing. Under Article 13 of RJAT, the AT has 30 days from notification of the arbitration request to revoke, ratify, reform, or convert the challenged tax act. If revocation occurs within this period, arbitration typically ends without cost consequences to AT. However, if the AT revokes after this 30-day window (as in case 91/2017-T), it creates 'inutilidade superveniente da lide' (supervening mootness). The arbitral tribunal then terminates proceedings under Article 287(e) CPC. Critically, under Article 536(3) CPC, when mootness is attributable to the respondent AT's conduct, the Tax Authority bears full responsibility for all arbitration costs, including the arbitration fee and the taxpayer's procedural expenses. This cost allocation serves as a disincentive for AT to delay proper revocations until after arbitration formally begins.
What was the outcome of CAAD arbitration case 91/2017-T regarding the 2012 Stamp Tax liquidation?
The outcome of CAAD arbitration case 91/2017-T was termination of proceedings due to 'inutilidade superveniente da lide' (supervening uselessness/mootness), with the Tax Authority condemned to pay all costs. The arbitral tribunal did not reach a substantive decision on whether Stamp Tax under Verba 28.1 properly applies to 'terreno para construção' (building land). The case ended procedurally because the AT revoked the contested 2012 Stamp Tax assessments totaling €20,024.85 on March 9, 2017, after arbitration had been initiated on January 27, 2017. The taxpayer company achieved its practical objective—annulment of the tax assessments and reimbursement with compensatory interest—without a merits ruling. The tribunal held the AT responsible for costs because the mootness was attributable to the Tax Authority's failure to revoke within the statutory 30-day period under Article 13 RJAT, unnecessarily prolonging proceedings and causing the arbitral tribunal to be constituted.