CAAD Case 127/2016-T: Stamp Tax Exemption for FIIAH Real Estate Investment Funds and Fiscal Retroactivity under Article 236 of Law 83-C/2013

ARBITRAL DECISION

I - REPORT

1. On 4 March 2016, A… – Investment Fund Management Company, S.A., NIPC…, with registered office at Rua …, n.º …, …-… Lisbon, in its capacity as management company and in representation of B… – Closed Real Estate Investment Fund for Residential Rental, with NIPC…, hereinafter referred to as the Claimant, requested the constitution of an arbitral tribunal and proceeded with a request for arbitral determination, pursuant to paragraph a) of section 1 of article 2 and paragraph a) of section 1 of article 10 of Decree-Law n.º 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as LRAT), in which the Tax and Customs Authority (hereinafter referred to as TA) is the Respondent.

2. The Claimant is represented, in the course of these proceedings, by its attorney, Dr. C…, and the Respondent is represented by the jurists, Dr. D… and Dr. E….

3. The request for constitution of the arbitral tribunal was accepted by the Illustrious President of CAAD and notified to the Respondent on 18 March 2016.

4. By means of the request for constitution of the arbitral tribunal and for arbitral determination, the Claimant seeks to submit to the appreciation of the Tribunal, on the one hand, the legality of the acts of assessment of Stamp Duty and respective compensatory interest, n.º…, …, …, …, …, …, …, …, …, …, …, …, in the total amount of € 13,688.35 (thirteen thousand, six hundred and eighty-eight euros and thirty-five cents).

5. Having verified the formal regularity of the request presented, pursuant to the provisions of paragraph a) of section 2 of article 6 of the LRAT, and the Claimant not having proceeded with the appointment of an arbitrator, the undersigned was designated by the President of the Deontological Board of CAAD.

6. The undersigned accepted the designation made, with the Arbitral Tribunal having been constituted on 23 May 2016, at the headquarters of CAAD, located at Avenida Duque de Loulé, n.º 72-A, in Lisbon, in accordance with the minutes of the constitution of the Arbitral Tribunal that were drawn up and which are attached to these proceedings.

7. The Respondent, after being duly notified, submitted its response on 22 June 2016.

8. No exceptions having been raised, there being no need for the production of additional evidence beyond that which is already documentarily incorporated in the proceedings, no need being foreseen for the parties to amend their respective procedural documents, with the process containing all the necessary elements for the delivery of the decision, for reasons of procedural economy and dispatch, the prohibition of performing useless acts, in light of the (tacit) position manifested by the parties, notified to this effect, the Tribunal understood, through the order delivered on 14 September 2016, to dispense with the holding of the meeting referred to in article 18 of the LRAT, as well as the submission of arguments.

9. In that same order, the Tribunal, in compliance with the provisions of section 2 of article 18 of the LRAT, set 23 November 2016 as the date for delivery of the arbitral decision, and further warned the Claimant that it should proceed with the payment of the subsequent arbitral fee, pursuant to section 3 of article 4 of the Costs Regulation in Tax Arbitration Proceedings, and communicate such payment to CAAD.

II. THE CLAIMANT'S POSITION

The Claimant sustains its request, in summary, in the following manner:

The Claimant sustains the request for declaration of illegality of the acts of assessment of Stamp Duty n.º…, …, …, …, …, …, …, …, …, …, …, …, in the total amount of € 13,688.35 (thirteen thousand, six hundred and eighty-eight euros and thirty-five cents), on the following grounds:

a) The Claimant initiates its submission by mentioning that "The Fund here represented by its management company [...] is a collective investment undertaking, configured as a Closed Real Estate Investment Fund for Residential Rental ("FIIAH"), subject to private subscription. (...) In the context of its activity, in the course of 2013, the Fund acquired from Bank F…l, S.A., (...) the real estate assets (...) all allocated to housing. In the context of the aforementioned operations, the Fund benefited from the Stamp Duty exemption legally established, at that time, for operations involving the acquisition of urban properties or autonomous fractions thereof, intended exclusively for rental for permanent housing, when carried out by a FIIAH." It happens, however, that "(...) as a consequence of the operations of alienation of the aforementioned real estate assets, the TA triggered two Stamp Duty assessment proceedings, arguing that the Fund had given those assets a destination different from that assigned at the time of the acquisition of the same and that, as such, the Stamp Duty exemption applied had lapsed."

b) Now, the Claimant alludes, in support of its position, that "following the economic crisis triggered in 2008, various entities faced credit constraints, which resulted in genuine obstacles to the fulfilment of commitments assumed before financial and credit institutions." Indeed, "in light of the pressing need to devise an effective and immediate response to the economic-financial situation, the legislator introduced into the Portuguese legal system the figure of FIIAH, having established the special regime applicable to the same (cf. articles 102 et seq. of Law n.º 64-4/2008, of 31 December – State Budget for 2009);" That is, "in tax matters, the legislator granted FIIAH a range of tax benefits, substantially more expressive than those provided for other real estate investment funds;".

c) It continues by alluding that "(...) [f]rom the Stamp Duty exemption provided for in section 8 of article 8 of the special regime in question," it resulted evident that "the application of such tax benefits, in Stamp Duty, in the sphere of FIIAH was not subordinated to any condition of a temporal nature, sufficing, for this purpose, the mere observance of the tax event, i.e. the act of acquisition of the property right over the real estate assets." In this regard, "the State Budget for 2014 (Law n.º 83-C/2013, of 31 December) introduced relevant changes to the tax regime applicable to FIIAH, establishing, in particular, new conditions for the attribution of tax benefits to operations carried out by this type of real estate investment fund;" namely through the addition of section 14 to the aforementioned article 8 "which came to determine that, for purposes of application of the Stamp Duty exemption above discussed, 'urban properties are considered to be intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years from the moment they became part of the fund's assets (...)' – provision added by article 235 of Law n.º 83-C/2013;"

d) The Claimant further states that "in the context of these changes, the legislator also provided, a provision of a transitional nature, providing that the new rules, in addition to being applicable to urban properties acquired by investment funds from 1 January 2014, should also be applicable to '(...) properties that were acquired by FIIAH before 1 January 2014, with the three-year period provided for in section 14 being counted, in those cases, from 1 January 2014' (emphasis ours) – cf. article 236 of Law n.º 83-C/2013."

e) Continuing in the sense that "the change promoted by the provisions above described thus assumed a markedly retroactive character, stipulating additional conditions or requirements for the application of tax benefits to operations carried out in the past – which had already benefited from such benefits.", therefore, "in these terms, the transitional provision above discussed clearly violates the principle of non-retroactivity of tax law and, also, the principle of protection of confidence and legal certainty, all constitutionally enshrined (...)".

f) The Claimant further states that "Indeed, in the situation under analysis, the legislator altered the applicable legal regime and, in the respective transitional provision, came to condition the attribution of tax benefits already granted in the past to the observance of the (new) requirements and conditions – which were not provided for at the moment the tax acts were carried out and when the tax benefit of Stamp Duty exemption was granted to such acts. The new regime thus created a more burdensome situation in the sphere of the Fund – which acquired the real estate assets under the previous regime, benefiting from the Stamp Duty exemption (and IMT) – imposing a new legal framework on the tax event verified in the past, without the Fund being able to 'adapt its conduct in accordance with the new rules'. This is an unacceptable and manifestly abusive situation, which cannot proceed," argues the Claimant.

g) Adding, furthermore, that "Indeed, this 'new' framework applied to acquisitions of real estate assets carried out in 2013, is manifestly prejudicial for the Fund, frustrating all its expectations and preventing it from 'adapting' its decisions – indeed, had the Stamp Duty exemption (and IMT) been inapplicable to the acquisition operations in question, certainly the Fund would not have made that investment."

h) Concluding to the effect that "In light of the foregoing, it is important to infer that the provision that underpinned the assessments sub judice – i.e. article 236 of Law n.º 83-C/2013, of 31 December – violates the constitutional principle of non-retroactivity of tax law, as enshrined in article 103, section 3 of the CRP. And, consequently, such provision should be disapplied, in the concrete case, due to manifest unconstitutionality, being consequently annulled the tax acts of assessment of Stamp Duty sub judice."

i) Concurrently, to the invoked unconstitutionality, the Claimant further understands that "the acts of assessment of Stamp Duty Duty that constitute the subject matter of the present request do not include, in a clear and sufficient manner, the necessary statement of reasons of fact and law."

III. THE RESPONDENT'S POSITION

In its Response, the Respondent invoked, in summary, the following:

Against the Claimant's claim, the Respondent defends itself, by way of opposition, mentioning, in summary:

a) On the one hand, and "in the first place, it must be noted that, at the time of creation of the tax regime applicable to FIIAH, the IMT and Stamp Duty exemptions respectively required: (i) that the acquisition of the real estate assets had as exclusive destination the 'rental for permanent housing' and, (ii) that the transfer had as object 'properties intended for permanent housing that occurs by force of the conversion of the property right of those assets into a rental right over the same, as well as with the exercise of the purchase option provided for in section 3 of article 5'."

b) Continuing, specifically in the case at hand, the Respondent alludes that "the real estate asset was not given the destination provided for in law, the allocation to rental."

c) Indeed, the Respondent understands that "The objective for the attribution of a tax benefit in the sphere of IMT and Stamp Duty to FIIAH was established clearly from the beginning. The acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent housing, by investment funds. That is, the taxpayers who wished to benefit from the aforementioned exemptions, always had, from the beginning of the tax regime applicable to FIIAH, to comply with the assumption that such properties were intended exclusively for rental for permanent housing. The assessments now impugned were based precisely on the fact that the real estate asset was given a destination different from that which gave rise to the attribution of the tax benefit."

d) The Respondent further adds that "In the Portuguese legal-administrative system, for reasons of legal certainty, the rule governing invalidity of administrative acts is mere voidability, which ensures that, should an act suffer from a defect that implies its voidability, once a certain period of time has elapsed without its validity being challenged, such act becomes final, thus becoming valid." Thus, "the assessment acts, insofar as they do not violate the essential content of the fundamental right, but only the principle of tax legality, are merely voidable. However, in the case at hand, the impugned acts were carried out in accordance with the law in force, with no violation of constitutional principles being verified."

e) With regard to the alleged unconstitutionality of article 236 of the State Budget Law for 2014 (Law n.º 83-C/2013, of 31 December), the Respondent considers that by virtue of the changes introduced by this instrument, "from 1 January 2014: a) the IMT and Stamp Duty exemptions of real estate assets integrated in FIIAH is extended until 2015; b) proof of the existence of a rental contract for permanent housing became required for purposes of compliance with the assumption of allocation of real estate assets to rental for permanent housing." In truth, "these changes apply to properties that were acquired by FIIAH from 1 January 2014. With respect to properties that were acquired by FIIAH before 1 January 2014, the 3-year period is counted from 01.01.2014. That is, the law establishes a transitional period for application of the changes so that the new requirement established in the law is only assessed for the future, expressly providing that the counting of the 3-year period referred to in the new law for the execution of the rental contract only occurs after the entry into force of the new law."

f) The Respondent further states, in this regard, that: "The new law does not alter the assumptions, the conditions for attribution and recognition of the tax benefit of IMT and Stamp Duty exemption, there being only the legal provision of the time and manner of compliance with a legal requirement previously established. From which it is inferred, with ease, that the exemption in question did not simply cease to be in force: what occurred, merely, was that means of proof were established that aimed to implement a legal requirement provided for in an indeterminate manner with total and absolute respect for the principle of legal certainty and protection of confidence."

g) "For which reason it cannot be stated that there is a violation of the principle of non-retroactivity of tax law, namely, through the supervenient imposition of any conditions determining the lapse of the right to the IMT or Stamp Duty exemption that were not initially provided."

h) Indeed, "The new wording introduced by Law n.º 83-C/2013, of 31 December, in pursuit of legal certainty and the principle of protection of confidence and in line with the spirit of the legislator, when creating the regime, merely densified the criterion already required, stipulating 'that urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years from the moment they became part of the fund's assets'."

i) Concluding to the effect that "there is not verified, in the case at hand any situation of retroactivity of tax law (...)," whereby, it is thus "manifest that, from the beginning of the regime, the tax benefits at issue applicable to FIIAH always depended on the allocation of real estate assets to rental for permanent housing. Notwithstanding the legislative changes introduced by the State Budget Law for 2014, the TA, within the scope of its supervisory powers, would always be able to assess, in order to conclude by the permanence of the benefit or, rather, by the restoration of the system of tax-rule in accordance with article 14 of the EBF. Moreover, the lapse of the exemption due to lack of attribution assumptions was already expressly provided for in article 14/2 of the EBF, with article 8, section 16 of the regime limiting itself to establishing a defined period whose counting only begins after the entry into force of the new law."

j) Concluding its reasoning, pronouncing itself to the effect that "the request for payment of compensatory interest thus lacks merit inasmuch as there is no error in the conduct of the respondent entity, much less an error imputable to the services, thus ruling out the application of article 43 of the GTL."

IV. SIFTING

The Tribunal is competent and is regularly constituted, pursuant to paragraph a) of section 1 of article 2 and articles 5 and 6, all of the LRAT.

The parties have legal personality and capacity, show themselves to be legitimately interested, are regularly represented, and the process does not suffer from nullities.

V. FACTUAL FINDINGS

For the conviction of the Arbitral Tribunal, regarding the facts proved, the positions exposed by the parties, the documents and the administrative process attached to the proceedings were relevant.

a. Facts taken as proved

With interest for the decision, the following facts are taken as proved:

A) The Claimant, in its capacity as management company and in representation of B… - Closed Real Estate Investment Fund for Residential Rental, acquired, through public deed of purchase and sale, from Bank F…, S.A., the following real estate assets, all allocated to housing:

(cf. Documents n.º 13 and 14 attached with the initial petition);

B) In the context of the acquisitions above identified, the Fund benefited from the Stamp Duty exemption, under section 8 of article 8 of the Legal Regime of FIIAH; - cf. Documents n.º 13 and 14 attached with the initial petition -;

C) On 24 November 2015, through Office n.º…, of 2015.11.17 of the Tax Service of the Municipality of ...- … -, Finance Department of ... – the Fund was notified to exercise, if it so wished, the right of hearing that was afforded to it, pursuant to the provisions of article 60 of the General Tax Law, regarding "the loss of the exemptions contained in sections 6 to 8 of article 8 of the Special Regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law n.º 64-A/2008, of 31 December", relating to the urban property registered in the land registry of the Union of parishes of … and …, under article …, fraction BS, by sale of the same, on 06.05.2015, to G…, or to, pursuant to article 39 of the CPPT, request the payment vouchers for the tax, in the amount of € 1,942.40, plus the respective compensatory interest in the amount of € 41.51, totalling € 1,983.91 (one thousand nine hundred and eighty-three euros and ninety-one cents). – cf. Doc. n.º 15 attached with the initial petition –;

D) On 15.12.2015, the Fund proceeded with the payment of the amount of € 1,983.91, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 1 and 27 attached with the initial petition- ;

E) In early December 2015, the Fund was notified, through office n.º…, of 2015.11.30, of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty, "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-AE, parish…] exclusively for rental for housing and sold on 25.09.2015;" in the amount of € 1,032.00, as tax, and € 7.58, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL - cf. Doc. n.º 16 attached with the initial petition –;

F) On 15.12.2015, the Fund proceeded with the payment of the amount of € 1,039.58, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 2 and 28 attached with the initial petition- ;

G) In early December 2015, the Fund was notified, through office n.º…, of 2015.11.30, of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty, "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-U, parish…] exclusively for rental for housing and sold on 19.10.2015;" in the amount of € 1,392.00, as tax, and € 6.56, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL. - cf. Doc. n.º 17 attached with the initial petition –;

H) On 14.01.2016, the Fund proceeded with the payment of the amount of € 1,398.56, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 3 and 29 attached with the initial petition- ;

I) In early December 2015, the Fund was notified, through office n.º…, of 2015.11.30, of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty, "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-P, parish …] exclusively for rental for housing and sold on 29.10.2015;" in the amount of € 944.00, as tax, and € 3.41, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL. - cf. Doc. n.º 18 attached with the initial petition –;

J) On 14.01.2016, the Fund proceeded with the payment of the amount of € 947.41, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 4 and 30 attached with the initial petition- ;

K) In early December 2015, the Fund was notified, through office n.º…, of 2015.11.30, of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty, "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-AE, parish …] exclusively for rental for housing and sold on 09.10.2015;" in the amount of € 1,064.00, as tax, and € 6.18, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL. - cf. Doc. n.º 19 attached with the initial petition –;

L) On 14.01.2016, the Fund proceeded with the payment of the amount of € 1,070.18, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 5 and 31 attached with the initial petition- ;

M) The Fund was notified, through office n.º …/…/2015, of 2015.11.18, of the Tax Service of …– Finance Department of ... – of the additional assessment of Stamp Duty, "resulting from the alienation of the fraction "NA", the real estate asset with article …, located in the parish and municipality of …, acquired on 20.09.2013, by deed carried out at the Notarial Office of Lisbon, of H…, registered under n.º …/1.", in the amount of € 928.00, as Stamp Duty and € 13.83, as compensatory interest - cf. Doc. n.º 20 attached with the initial petition –;

N) In January 2016, the Fund gave authorization for debit to Bank F… in the amount of € 941.83, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 6 and 32 attached with the initial petition- ;

O) The Fund was notified, through office n.º …/…/2015, of 2015.11.18, of the Tax Service of …– Finance Department of ... – of the additional assessment of Stamp Duty, "resulting from the alienation of the fraction "CL", the real estate asset with article …, located in the parish and municipality of …, acquired on 20.09.2013, by deed carried out at the Notarial Office of Lisbon, of H…, registered under n.º …/1." in the amount of € 728.00, as Stamp Duty and € 2.63, as compensatory interest - cf. Doc. n.º 21 attached with the initial petition –;

P) In January 2016, the Fund gave authorization for debit to Bank F…, in the amount of € 730.63, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 7 and 33 attached with the initial petition- ;

Q) The Fund was notified, through office n.º …/…/2015, of 2015.11.18, of the Tax Service of …– Finance Department of ... – of the additional assessment of Stamp Duty, "resulting from the alienation of the fraction "CJ", the real estate asset with article …, located in the parish and municipality of…, acquired on 20.09.2013, by deed carried out at the Notarial Office of Lisbon, of H…, registered under n.º …/1." in the amount of € 840.00, as Stamp Duty and € 4.90, as compensatory interest - cf. Doc. n.º 22 attached with the initial petition –;

R) In January 2016, the Fund gave authorization for debit to Bank F… in the amount of € 843.50, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 8 and 34 attached with the initial petition- ;

S) The Fund was notified, through office n.º…/…/2015, of 2015.11.18, of the Tax Service of…– Finance Department of ... – of the additional assessment of Stamp Duty, "resulting from the alienation of the fraction "AO", the real estate asset with article …, located in the parish and municipality of …, acquired on 20.09.2013, by deed carried out at the Notarial Office of Lisbon, of H…, registered under n.º …/1." in the amount of € 840.00, as Stamp Duty and € 6.81, as compensatory interest - cf. Doc. n.º 23 attached with the initial petition –;

T) In January 2016, the Fund gave authorization for debit to Bank F… in the amount of € 886.81, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 9 and 35 attached with the initial petition- ;

U) On 15 January 2016, the Tax Service of the Municipality of ...- … - Finance Department of ..., notified the Fund, through Office n.º…, of 2016.01.12 to exercise, if it so wished, the right of hearing afforded to it, pursuant to the provisions of article 60 of the General Tax Law, regarding "the loss of the exemptions contained in sections 6 to 8 of article 8 of the Special Regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law n.º 64-A/2008, of 31 December", relating to the urban property registered in the land registry of the Union of parishes of … and …, under article …, fraction "BN", by sale of the same, on 27.11.2015, to I…, or to, pursuant to article 39 of the CPPT, request the payment vouchers for the tax, in the amount of € 1,401.60 plus the respective compensatory interest in the amount of € 7.07. – cf. Doc. n.º 24 attached with the initial petition -;

V) On 29.01.2016, the Fund proceeded with the payment of the amount of € 1,408.67, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 10 and 38 attached with the initial petition -;

W) The Fund was notified, in mid-January 2016, through office n.º…, of 2016.01.18 of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty, "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-V, parish …] exclusively for rental for housing and sold on 12.11.2015;" in the amount of € 1,056.00, as tax, and € 7.87, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL. - cf. Doc. n.º 25 attached with the initial petition –;

X) On 29.01.2016, the Fund proceeded with the payment of the amount of € 1,063.87, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 11 and 36 attached with the initial petition- ;

Y) The Fund was notified, in mid-January 2016, through office n.º…, of 2016.01.18 of the Tax Service of …– Finance Department of ... – of the draft assessment of Stamp Duty "carried out on the basis of the lapse of the exemption granted under paragraph a) of section 7 and section 8 of article 8 of the Special Regime of FIIAH, approved by article 102 of Law n.º 64-A/2008, of 31.12, since it did not assign the property […-N, parish…] exclusively for rental for housing and sold on 14.12.2015;", in the amount of € 1,368.00, as tax, and € 5.40, as compensatory interest, and to, if it so wished, exercise the right of hearing afforded to it under article 60 of the GTL. - cf. Doc. n.º 26 attached with the initial petition –;

Z) On 29.01.2016, the Fund proceeded with the payment of the amount of € 1,373.40, as Stamp Duty and respective compensatory interest. – cf. Doc. n.º 12 and 33 attached with the initial petition -.

VI. FACTS TAKEN AS NOT PROVED

There are no facts taken as not proved, because all facts relevant for the appreciation of the request were taken as proved.

VII. LEGAL GROUNDS

In the present proceedings, the fundamental question that arises is whether the acts of assessment of Stamp Duty, carried out under the provisions of article 236 of Law n.º 83-C/2013, of 31.12, questioned in the present proceedings, are or are not illegal.

1. In order to respond appropriately to the question posed to us, we deem it pertinent to address, at once, the special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH) approved through article 102 of Law n.º 64-A/2008, of 31.12 (SBL2009), with the objective of, following the economic crisis triggered in 2008, assisting various entities with difficulties in complying with commitments assumed before financial and credit institutions.

2. Thus, and following this sequence, the special regime of FIIAH was introduced into the Portuguese legal system, whereby article 104 of the SBL2009 provides the following:

"1 - The constitution and operation of FIIAH, as well as the marketing of their respective units of participation, are governed by the provisions of the Legal Regime of Real Estate Investment Funds, approved by Decree-Law n.º 60/2002, of 20 March, amended by Decree-Laws n.º 252/2003, of 17 October, 13/2005, of 7 January, and 357-A/2007, of 31 October, and subsidiarily, by the provisions of the Securities Code, approved by Decree-Law n.º 486/99, of 13 November, amended by Decree-Laws n.º 61/2002, of 20 March, 38/2003, of 8 March, 107/2003, of 4 June, 183/2003, of 19 August, 66/2004, of 24 March, 52/2006, of 15 March, 219/2006, of 2 November, and 357-A/2007, of 31 October, with the particularities contained in the following articles" (bold and underlined in the original)

1. In truth, from the range of particularities provided in the regime, it is to be noted, only those which, with interest for the present proceedings, are enshrined in section 8 of article 8 of the regime, and according to which it was provided that:

"8 - All acts carried out are exempt from Stamp Duty, provided that they are connected with the transfer of urban properties intended for permanent housing that occurs by force of the conversion of the property right of those assets into a rental right over the same, as well as with the exercise of the purchase option provided for in section 3 of article 5."

1. However, and according to the legislative evolution on the matter of exemptions from which FIIAH and SIIAH could benefit, Law n.º 83-C/2013, of 31.12, in its article 235, proceeds with the addition of sections 14 to 16 of article 8, which now provide:

"14 - For purposes of the provisions in sections 6 to 8, urban properties are considered to be intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years from the moment they became part of the fund's assets, with the taxpayer being required to communicate and provide proof to the TA of the respective effective rental, within 30 days following the end of the said period.

15 - When the properties have not been subject to a rental contract within the three-year period provided for in the preceding section, the exemptions provided for in sections 6 to 8 shall cease to have effect, and in that case the taxpayer shall request from the TA, within 30 days following the end of the said period, the assessment of the respective tax.

16 - Should the properties be alienated, with the exception of the cases provided for in article 5, or should the FIIAH be subject to liquidation, before the period provided for in section 14 has elapsed, the taxpayer shall likewise request from the TA, prior to the alienation of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the preceding section."

1. Additions these, subordinated and dependent on the transitional provision provided for by article 236 of Law n.º 83-C/2013, of 31.12, in the context of the special regime applicable to FIIAH and SIIAH, which provided to the effect that:

"1 - The provisions of sections 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law n.º 64-A/2008, of 31 December, are applicable to properties that were acquired by FIIAH from 1 January 2014.

2 - Without prejudice to the provisions of the preceding section, the provisions of sections 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law n.º 64-A/2008, of 31 December, are also applicable to properties that were acquired by FIIAH before 1 January 2014, with the three-year period provided for in section 14 being counted, in those cases, from 1 January 2014."

1. Now, having set out this chronology and the historical evolution of the special regime of FIIAH, we shall proceed to the interpretation of the provisions in question, relying on the general principles that guide this task, in conformity with the provisions of article 9 of the Civil Code (CC) applicable ex vi of article 11 of the General Tax Law (GTL), according to which the interpretation of tax law shall be carried out in accordance with the general principles of interpretation.

2. Thus, in compliance with the general rules of interpretation, we can state that the Stamp Duty exemption provided for in section 8 of article 8 of the legal regime of FIIAH and SIIAH applies only when the following assumptions are met:

a) All acts carried out by FIIAH;

b) Connected with the transfer of urban properties intended for permanent housing that:

i) Occur by force of the conversion of the property right of those assets into a rental right over the same;

ii) OR, occur by force of the exercise of the purchase option by the tenant until 31.12.2020.

1. This means that the Claimant, as a FIIAH, is entitled to the tax benefit in question – Stamp Duty exemption - provided that it complies with the legal conditions established for its attribution.

2. I.e., the Stamp Duty exemption in question is influenced and dependent on the facts and circumstances in light of which it is granted, resulting from the provision and normative establishment of article 8, section 8 of the Regime of FIIAH.

3. However, and since it is a tax benefit, it is necessary to bring into discussion the provisions of section 2 of article 14 of the General Tax Law (GTL) according to which:

"The holders of tax benefits of any kind are always obliged to reveal or to authorize the revelation to the tax administration of the assumptions of their granting, or to comply with other obligations provided for in the law or in the instrument of recognition of the benefit, namely those relating to taxes on income, expenditure or assets, or to the rules of the social security system, under pain of the said benefits ceasing to have effect."

1. In truth, and in compliance with this legal provision, also applicable to the legal regime of FIIAH, at issue here, the tax benefit provided for in section 8 of article 8 of the special regime of FIIAH – Stamp Duty exemption – in order to be applicable at the time of its attribution, it was necessary that the interested party, here the Claimant, reveal to the Tax Administration the assumptions of its granting, namely, and here specifically, that:

• it involved acts carried out by FIIAH;

• such acts were connected with the transfer of urban properties intended for permanent housing,

• and that this transfer occurred by force of the conversion of the property right of those assets into a rental right over the same, or the exercise of the purchase option by the tenant until 31.12.2020.

1. Thus being, we diverge from the Claimant when it asserts that, at the time of the granting of the tax benefit at issue here, "the State Budget for 2014 (...) introduced relevant changes to the tax regime applicable to FIIAH, establishing new conditions for the attribution of tax benefits to operations carried out by this type of real estate investment fund."

2. The truth is that the conditions were, ab initio, present in the regime – See section 8 of article 8 of the special regime - having suffered no modification with the changes introduced by the SBL 2014.

3. Indeed, and returning to the facts taken as proved in the present proceedings, we note that the Claimant acquired, between 20.09.2013 and 23.12.2013, twelve properties, which it subsequently alienated.

Let us see,

1. Thus being, it results from the facts established and taken as agreed, that the acts of assessment at issue relate to properties that were alienated by the Claimant in the year 2015, and therefore, in light of the legal regime of FIIAH approved by article 102 of Law n.º 64-A/2008, of 31.12. (SBL 2009), or the changes perpetuated by article 235 of Law n.º 83-C/2013, of 31.12 (SBL 2014), the Stamp Duty exemption granted ab initio to the Claimant ended up lapsing,

2. … by virtue of this not having been able to demonstrate to the Tax Administration, as it was incumbent on it to do, given the provisions of section 2 of article 14 of the GTL, that there was a transfer by force of the conversion of the property right into a rental right or that the purchase option right was exercised by the tenant.

3. In light of the foregoing, taking into consideration that the acts of assessment of Stamp Duty questioned in the present proceedings were carried out under the provisions of section 8 of article 8 of the Special Regime – tax – of FIIAH, whose wording has remained unchanged since its approval, maintaining its assumptions at the time of the acquisition of the properties by the Fund, it is the understanding of the Arbitral Tribunal that the acts of assessment at issue are legal, by virtue of the exemption granted having lapsed with the alienation of the properties, outside the situations provided for in article 8, section 8 of the Regime of FIIAH, and therefore the Claimant's argument is not well founded.

4. Proceeding, in the direction of the question raised by the Claimant regarding whether the provisions introduced by article 236 of Law n.º 83-C/2013, of 31 December, are retroactive or not, under the heading "Transitional provision in the context of the special regime applicable to FIIAH and SIIAH"

5. Now, the State Budget Law 2014, as we have already stated, added to article 8, sections 14 to 16, in the terms that we shall now reiterate:

"14 - For purposes of the provisions in sections 6 to 8, urban properties are considered to be intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years from the moment they became part of the fund's assets, with the taxpayer being required to communicate and provide proof to the TA of the respective effective rental, within 30 days following the end of the said period.

15 - When the properties have not been subject to a rental contract within the three-year period provided for in the preceding section, the exemptions provided for in sections 6 to 8 shall cease to have effect, and in that case the taxpayer shall request from the TA, within 30 days following the end of the said period, the assessment of the respective tax.

16 - Should the properties be alienated, with the exception of the cases provided for in article 5, or should the FIIAH be subject to liquidation, before the period provided for in section 14 has elapsed, the taxpayer shall likewise request from the TA, prior to the alienation of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the preceding section."

1. In truth, from the reading of these legal provisions it results that none of the situations specifically provided for therein (or at least, no such facts were alleged), has application in the case at hand, inasmuch as, relating to the transitional provision provided for in article 236 of the SBL 2014, to the provisions of sections 14 to 16 of article 8, whose provision is inapplicable to the present situation, the discussion of the retroactivity of the provision in question has no place within the scope of the present proceedings.

2. Finally, and with regard to the alleged lack of reasoning in the assessment acts, the Claimant argues that the acts of assessment of Stamp Duty, in dispute in the present proceedings, suffer from the defect of lack of reasoning, and are therefore voidable.

Let us see if this is so.

1. As to the matter of lack of reasoning, the present Arbitral Tribunal considers it appropriate to make reference to the Judgment of the Supreme Administrative Court, of 07.10.2015, in the context of process n.º 0406/15, which, in a clear and transparent manner, states the following:

"It is unquestionable that the tax administration has the duty to reason the acts that affect the rights or the legitimate interests of taxpayers, in conformity with the principle laid down in art. 268 of the CRP and accepted in arts. 124 of the CPA and 77 of the GTL. Reasoning that must be express, through the succinct exposition of the factual and legal grounds of the decision; clear, to permit the apprehension of the facts and the law on which the decision is based; sufficient, to enable the concrete knowledge of the motivation of the act; and congruent, so that the decision constitutes the logical conclusion of the reasons invoked as its justification.

It is also uncontroversial that the requirements of reasoning are not rigid, varying according to the type of act and the concrete circumstances in which it was made, being sufficient with the clear expression of the reasons that led to that concrete decision. The determination of the scope of the reasoning statement presupposes, therefore, the search for adequate content, which must be, in a broad sense, sufficient to formally support the decision. For which reason the act will be sufficiently reasoned when the administrative addressee, placed in the position of a normal addressee - the bonus pater familiae mentioned in art. 487, section 2, of the Civil Code – can come to know the factual and legal reasons that lie at its genesis, so as to permit them to choose, in an informed manner, whether to accept, or not, the act.

(...)

However, the sufficiency of formal reasoning must not be confused with the validity or correctness of the reasons invoked (substantive reasoning). Indeed, in the evaluation of the formal correctness of the act, the question of the validity or correctness of the reasons adduced does not arise, but only their sufficiency and coherence, in terms of making known the reasons for the decision. One thing is to know whether the administration made known the motives that determined it to act as it acted, the reasons on which it based its action, a question that falls within the scope of the formal validity of the act; and another, quite different and already falling within the scope of the substantive validity of the act, is to know whether those motives correspond to reality and whether, corresponding, they are sufficient to legitimize the concrete administrative action."

1. Complementarily, and further on the matter of lack of reasoning, it is express in the Judgment of the Supreme Administrative Court, of 05.06.2013, delivered in process n.º 0867713, in terms which are absolutely adopted, that:

"There is no doubt that the right to reasoning, with respect to acts that affect rights or legally protected interests, now has constitutional recognition of a nature analogous to the rights, freedoms and guarantees enshrined in Title II of Part 1 of the CRP (art. 268) - see the abundant jurisprudence of the STA on this matter, as well as Gomes Canotilho and Vital Moreira, "Constitution of the Portuguese Republic Annotated", 1993, pp. 936 and Vieira de Andrade, "The Duty of Express Reasoning of Administrative Acts", 1990, pp. 53 et seq., the respective constitutional principle having been densified in arts. 124 and 125 of the CPA and in art. 77 nos. 1 and 2 of the GTL.

And given that this legal duty of reasoning has, "alongside an exogenous function - giving knowledge to the administrative addressee of the reasons for the decision, permitting them to choose the acceptance of the act or its impugnation -, an endogenous function consisting of the very pondering by the administrative entity, in a careful, serious and impartial manner" (judgment of this STA, of 2/2/06, rec. n.º 1114/05), then, such reasoning must be contextual and integrated in the very act (although it may be done in a remissive manner), expressed and accessible (through brief exposition of the factual and legal grounds of the decision), clear (so as to permit that, through its terms, the facts and the law on which the decision is based are apprehended with precision), sufficient (allowing the addressee of the act concrete knowledge of the motivation thereof) and congruent (the decision should constitute the logical and necessary conclusion of the reasons invoked as its justification), equivalent to the lack of reasoning the adoption of reasons which, through obscurity, contradiction or insufficiency, do not concretely clarify the motivation of the act.

And if the reasoning is done in a remissive manner (through adherence or remission to a previous opinion, information or proposal), these shall constitute an integral part of the respective administrative act: this act integrates, then, in itself, the opinion, information or proposal to which it refers and these shall, thus, in terms of legality, have to satisfy the same requirements of autonomous reasoning.

Thus, using the language of jurisprudence, the act is only reasoned if an addressee normally diligent or reasonable - a normal person - placed in the situation concretely expressed by the reasoning statement and before the concrete administrative act (which will determine, depending on its diverse nature or type, a greater or lesser requirement of the density of elements of reasoning) is able to know the functional (not psychological) cognitive and evaluative itinerary of the author of the act, being, therefore, essential that the contextual discourse makes it known to them the entire course of the apprehension and evaluation of the factual and legal assumptions that support the decision or the reasons why the decision was made in a particular direction and not in any other. It aims to "concretely clarify the reasons that determined the decision taken and not to find the substantive basis which possibly legitimates it, since the formal duty of reasoning is fulfilled 'through the presentation of possible assumptions or coherent and credible motives, whereas substantive reasoning requires the existence of real assumptions and correct motives capable of supporting a legitimate decision as to substance'. The reasoning discourse must be capable of clarifying the determining reasons of the act, for which it must be a clear and rational discourse; but, insofar as its absence or insufficiency entails a formal defect, it is not in question, for evaluating the formal correctness of the act, the substantive validity of the reasons adduced, but only their existence, sufficiency and coherence, in terms of making known the reasons for the decision." (cf. Vieira de Andrade – cit. work pag. 239, in the citation of the judgment of the STA, of 11/12/2002, rec. 01486/02).

In sum, the characteristics enunciated are requirements of the formal reasoning of the tax act; being distinct from those required for the so-called substantive reasoning, which must express the real verification of the factual assumptions invoked and the correct interpretation and application of the rules indicated as legal ground."

1. Now, from the analysis of the acts of assessment of Stamp Duty, it appears that such acts contain the applicable legal provisions, the qualification and quantification of the tax events, as well as the operations for the determination of the taxable matter, and therefore, as a consequence, no defect of lack of reasoning can be imputed to such acts, since the acts contain the legally required elements.

2. In light of all the foregoing, it is the understanding of this Tribunal that the claim of the Claimant is bereft of foundation.

VIII. DECISION

On the basis of the factual and legal grounds set out, it is decided, thus, by the dismissal of the request for declaration of illegality of the acts of assessment of Stamp Duty and respective compensatory interest, n.º…, …, …, …, …, …, …, …, …, …, …, …, in the total amount of € 13,688.35 (thirteen thousand, six hundred and eighty-eight euros and thirty-five cents), which should be maintained in the legal order.

Value of the Proceedings

The value of the proceedings is fixed at € 13,688.35 (thirteen thousand, six hundred and eighty-eight euros and thirty-five cents), pursuant to art. 97-A, section 1, a), of the CPPT, applicable by virtue of paragraphs a) and b) of section 1 of art. 29 of the LRAT and of section 2 of art. 3 of the Costs Regulation in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Claimant, in accordance with art. 12, section 2 of the LRAT, art. 4 of the RCPAT, and the attached Table I thereto, which are fixed in the amount of € 918.00.

Let notice be given.

Lisbon, 22 November 2016

The Arbitrator

(Jorge Carita)