Process: 94/2017-T

Date: July 10, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Decision 94/2017-T addresses the procedural consequence when the Portuguese Tax Authority (AT) voluntarily revokes a contested Stamp Tax assessment during pending arbitration proceedings. The taxpayer challenged a €10,566.10 Stamp Tax assessment under Item 28.1 of the Stamp Tax Table (Tabela Geral do Imposto do Selo) for 2013, applicable to urban property classified as building land in Gondomar. After the arbitration request was filed but before the tribunal ruled on merits, the Gondomar Tax Office revoked the contested assessment by dispatch dated 07.03.2017, ordering full reimbursement of the tax paid plus compensatory interest. Following notification under Article 13(1) of the RJAT (Legal Regime for Tax Arbitration), the claimant was given the opportunity to state whether it wished to continue proceedings but made no response. The arbitral tribunal declared supervening uselessness of the proceedings (inutilidade superveniente da lide) pursuant to Article 277(e) of the Civil Procedure Code, as incorporated by Article 29 RJAT. The tribunal reasoned that since the AT had fully and voluntarily satisfied the claimant's claims by revoking the assessment and refunding the tax with interest, any arbitral decision on the merits would lack useful effect. The decision confirms that Item 28.1 Stamp Tax applies annually to ownership of building land, that AT may revoke assessments during CAAD proceedings, and that such revocation triggers automatic entitlement to refund with compensatory interest. The ruling illustrates the supervening futility doctrine in Portuguese tax arbitration, where proceedings terminate when their objective is achieved through means other than a judicial decision, typically with costs allocated to the party responsible for the futility—here, the Tax Authority.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. On 31 January 2017, the company A…, S. A., Tax Identification Number …, with registered office at …, Street …, no. …, Porto (hereinafter, the Claimant), filed a request for the constitution of an arbitral tribunal, pursuant to the joint provisions of Articles 2, no. 1, subsection a), and 10, nos. 1, subsection a), and 2, of Decree-Law no. 10/2011 of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by Article 228 of Law no. 66-B/2012 of 31 December (hereinafter, abbreviated as LRAT), seeking the declaration of illegality and the annulment of the assessment act of Stamp Tax, carried out pursuant to Item 28.1 of the TBS, in the amount of € 10,566.10, relating to the year 2013 and concerning an urban property consisting of land for construction, located in the parish of …, municipality of Gondomar, registered in the urban property register of said parish under article … .

The Claimant attached 3 (three) documents, having requested no production of any other evidence.

The respondent is the Tax and Customs Authority (hereinafter, the Respondent or TCA).

  1. The request for constitution of the arbitral tribunal was accepted and automatically notified to the TCA on 6 February 2017.

  2. The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to the provisions of Article 6, no. 1, and subsection a) of Article 11, no. 1, of the LRAT, the President of the Ethics Board of CAAD appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable time period.

  3. On 10 March 2017, the TCA filed, in accordance with and for the purposes of Article 13, no. 1, of the LRAT, a request, communicating the revocation of the contested tax act, in the following terms which warrant noting here:

"…the Head of the Gondomar Tax Office … revoked, by Dispatch dated 07.03.2017, the contested assessment [«assessment of Item 28.1 of the TBS, for the year 2013, in the amount of € 10,566.10, relating to article … registered in the urban property register of the parish of … (…), municipality of Gondomar, as land for construction»], determining the consequent reimbursement of tax paid, plus compensatory interest."

  1. On 10 March 2017, the Claimant was duly notified of both the request from the TCA and the dispatch from the President of CAAD, with the following tenor:

"With reference to Case no. 94/2017-T and in the sequence of the communication from the Tax and Customs Authority provided for in Article 13, no. 1 of Decree-Law no. 10/2011 of 20 January (LRAT), you are requested to be so kind as to inform the CAAD, if you wish, of the continuation of the proceedings, in view of the circumstances provided for in Article 13, no. 2 of the LRAT."

  1. On 21 March 2017, the Parties were duly notified of the appointment of the undersigned as arbitrator of the sole arbitral tribunal, and did not express any intention to challenge that appointment, in accordance with Articles 11, no. 1, subsections b) and c), of the LRAT and Articles 6 and 7 of the CAAD Ethics Code.

  2. The Claimant having made no statement or request in the proceedings following the aforementioned notification mentioned in point 5 (five), in compliance with the provisions of subsection c) of Article 11, no. 1, of the LRAT, the sole arbitral tribunal was constituted on 5 April 2017.

  3. On 6 June 2017, the Respondent, duly notified for this purpose, filed its Response which concluded as follows:

"In the terms set out above and in the remaining matters of law that Your Excellency will duly supply, the exceptions raised should be upheld:

Proceedings should be ordered to be terminated on the grounds of the impossibility of the dispute, pursuant to subsection e) of Article 277 of the CPC as provided by Article 29 of the LRAT,

Or, should this not be understood,

The peremptory exception raised should be upheld and the TCA absolved from all claims, pursuant to Article 576, no. 3, of the CPC as provided by Article 29 of the LRAT,

Or, further,

The exception of material incompetence of the Arbitral Tribunal to hear the claim for compensatory interest be upheld;

The Respondent Entity should be exempted from payment of costs for having revoked in time the contested acts,

All with the other legal consequences."

  1. The Claimant was duly notified to make submissions on the issues and exceptions raised by the TCA, if it so wished, and made no statement or request in the proceedings.

  2. The Tribunal dispensed with both the holding of the hearing referred to in Article 18 of the LRAT and the submission of final arguments, having fixed 14 July 2017 as the deadline for the delivery of the arbitral award.

II. SANATION

The Arbitral Tribunal was regularly constituted and is competent.

The proceedings do not suffer from any nullities.

The parties possess legal personality and judicial capacity, are duly represented and are parties of interest.

II.I. OF THE SUPERVENING FUTILITY OF THE DISPUTE

Article 277, subsection e), of the CPC, applicable as provided by Article 29, no. 1, subsection e), of the LRAT, provides as follows: "Proceedings are terminated by the impossibility or supervening futility of the dispute".

Impossibility of the dispute occurs in the event of death or extinction of one of the parties, by disappearance or loss of the subject matter of the proceedings or by extinction of one of the interests in conflict.

Supervening futility of the dispute occurs when, by virtue of new facts that have occurred during the pendency of the proceedings, the decision to be delivered no longer has any useful effect, either because it is not possible to satisfy the claim which the claimant seeks to enforce in the proceedings, or because the purpose intended by the action has been achieved by another means.

The impossibility or supervening futility of the dispute thus translates into an impossibility or legal futility, the determination of which is based on what is provided for in law.

According to José Lebre de Freitas, Rui Pinto and João Redinha (Civil Procedure Code Annotated, Volume 1, 2nd edition, Coimbra Editora, Coimbra, 2008, page 555), "the impossibility or supervening futility of the dispute occurs when, by fact arising during the pendency of the proceedings, the claimant's claim cannot be maintained, by virtue of the disappearance of the subjects or object of the proceedings, or finds satisfaction outside the framework of the remedy sought. In both cases, the solution of the dispute ceases to be of interest – beyond, by impossibility of achieving the intended result; here, because it has already been achieved by another means".

Turning to the present case, we find that the TCA has satisfied in full and voluntarily the claims that the Claimant formulated in these proceedings.

To that extent, the results which the Claimant sought through the present arbitration proceedings have already been fully achieved, so that the arbitral award which, normally, would be delivered, ruling on the merits of the claims raised, appears to be devoid of any useful effect, and therefore there is no justification for its delivery.

Without need for further considerations, the supervening futility of the dispute is therefore deemed to be established.

III. OF LIABILITY FOR COSTS

Pursuant to Article 536, no. 3, of the CPC, applicable as provided by Article 29, no. 1, subsection e), of the LRAT, in cases of termination of proceedings by impossibility or supervening futility of the dispute (excepting those provided for in the preceding paragraphs), liability for costs is borne by the claimant or applicant, unless such impossibility or futility is attributable to the defendant or respondent, in which case the latter is liable for all costs; no. 4 of the same article provides, which is important to note here, that it is considered, in particular, that supervening futility of the dispute is attributable to the defendant or respondent when it derives from the voluntary satisfaction, on the part of the latter, of the claim of the claimant or applicant.

In the present case, we find that the Claimant's claim was satisfied voluntarily by the TCA, by the latter having revoked the contested tax act.

However, the TCA carried out the aforementioned revocation before the constitution of this sole Arbitral Tribunal, and the continuation of the proceedings (more properly, of the arbitration proceedings), despite the full and voluntary satisfaction of the claims made by the TCA, can only be attributed to the Claimant.

For, having been notified to make submissions on the request presented by the TCA, in accordance with and for the purposes of Article 13, no. 1, of the LRAT, the Claimant made no statement or request in the proceedings, so that, taking into account the Claimant's silent stance and only because of it, there was occasion for the constitution of this sole Arbitral Tribunal; in fact, the constitution of the Arbitral Tribunal would not have occurred had the Claimant, on that occasion, come before the Tribunal to state the supervening futility of the dispute and the consequent termination of the proceedings, since it is self-evident that this supervening futility of the dispute was established at a point in time anterior to the constitution of the Arbitral Tribunal.

The costs of these proceedings must therefore be entirely attributable to the Claimant.

IV. DECISION

In the terms set out above, this Arbitral Tribunal decides:

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

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

VALUE OF THE CASE

In accordance with Articles 306, no. 2, of the CPC, 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at € 10,566.10.

COSTS

Pursuant to Articles 12, no. 2, and 22, no. 4, of the LRAT and Article 4, no. 4, and Table I attached to the Costs Regulation in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), pursuant to Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Claimant.

Notify.

Lisbon, 10 July 2017.

The Arbitrator,

(Ricardo Rodrigues Pereira)

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS and how does it apply to building land in Portugal?
Stamp Tax under Item 28.1 of the Tabela Geral do Imposto do Selo (TGIS) is an annual tax on ownership of certain urban properties in Portugal, specifically including building land (terrenos para construção). This tax applies to urban properties registered as land designated for construction purposes. In this case, the assessment of €10,566.10 was levied for the year 2013 on an urban property consisting of land for construction located in Gondomar. The tax is assessed annually based on the property's tax value and classification in the urban property registry.
What does supervening uselessness of the proceedings (inutilidade superveniente da lide) mean in Portuguese tax arbitration?
Supervening uselessness of the proceedings (inutilidade superveniente da lide) is a ground for terminating proceedings under Article 277(e) of the Portuguese Civil Procedure Code, applicable to tax arbitration via Article 29 of the RJAT. It occurs when, due to facts arising during the pendency of proceedings, the judicial decision would no longer have any useful effect—either because the claim cannot be satisfied or because its purpose has been achieved by other means. In tax arbitration, this typically happens when the Tax Authority revokes the contested act and refunds the tax, fully satisfying the taxpayer's claims and rendering a tribunal decision on the merits pointless.
Can the Portuguese Tax Authority (AT) revoke a contested tax assessment during CAAD arbitration proceedings?
Yes, the Portuguese Tax Authority can revoke a contested tax assessment during CAAD arbitration proceedings under Article 13(1) of the RJAT (Regime Jurídico da Arbitragem Tributária). In this case, the Head of the Gondomar Tax Office revoked the contested Stamp Tax assessment by dispatch dated 07.03.2017, after the arbitration was initiated on 31.01.2017 but before the tribunal was constituted. The AT must communicate such revocation to CAAD, which then notifies the claimant under Article 13(2) to determine whether they wish to continue the proceedings. This mechanism allows AT to correct errors and resolve disputes without requiring a full arbitral decision.
What happens to a CAAD arbitration case when the Tax Authority voluntarily revokes the challenged tax act under Article 13 of the RJAT?
When the Tax Authority voluntarily revokes the challenged tax act under Article 13 of the RJAT during CAAD arbitration, the claimant is notified and asked whether they wish to continue proceedings pursuant to Article 13(2). If the claimant does not respond or declines to continue, and the revocation fully satisfies their claims (including refund with compensatory interest), the tribunal will typically declare supervening uselessness of the proceedings under Article 277(e) CPC and terminate the case without a decision on the merits. Costs are allocated under Article 536(3-4) CPC, generally to the party responsible for the futility—typically the Tax Authority when it revokes the act.
Are taxpayers entitled to a refund with compensatory interest when a Stamp Tax assessment on urban property is revoked by the Tax Authority?
Yes, taxpayers are entitled to a refund with compensatory interest (juros indemnizatórios) when a Stamp Tax assessment on urban property is revoked by the Tax Authority. In this case, the revocation dispatch dated 07.03.2017 expressly determined 'the consequent reimbursement of tax paid, plus compensatory interest.' This reflects the principle that taxpayers must be compensated for the time value of money when they have paid tax that is subsequently determined to be undue. The refund with compensatory interest forms part of the full satisfaction of the taxpayer's claims and is automatic upon revocation of the unlawful assessment.