Process: 178/2015-T

Date: January 25, 2016

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 178/2015-T) addresses whether Portuguese emigrants can claim IMT (property transfer tax) exemption when purchasing real estate in Portugal using funds from an emigrant savings account (poupança-emigrante). The petitioners, a married couple, acquired property in Oeiras in 2007 and were each assessed IMT of €18,630.00 in 2011 by the Tax Authority. They challenged these assessments, arguing they qualified for IMT exemption under the savings-credit regime for Portuguese emigrants because: (i) they held an emigrant savings account; (ii) funds from that account were used to acquire the property; (iii) the Tax Authority initially recognized the exemption by calculating IMT at zero value; and (iv) they were never notified of any revocation of the tax benefit. The Tax Authority contested the claim, arguing there was no formal recognition of exemption rights, that the initial zero-value calculation was based solely on the petitioners' own declarations without independent verification, and that the petitioners failed to provide adequate proof of meeting the legal requirements for the benefit under applicable transitional rules. The case raised important procedural questions about the burden of proof for tax benefits, whether initial Tax Authority calculations constitute recognition of exemption rights, and whether taxpayers must be formally notified before a previously applied benefit can be withdrawn. The arbitral tribunal also addressed preliminary issues concerning joinder of parties and cumulation of claims, concluding that the requirements of Article 3(1) of RJAT were satisfied given the identity of facts and unity of legal arguments between both petitioners' claims.

Full Decision

ARBITRAL DECISION

The arbitral tribunal operating with a sole arbitrator constituted at CAAD – Administrative Arbitration Center under the legal regime established by Decree-Law No. 10/2011 of January 20[1], to which was appointed by the respective Ethics Council, the arbitrator from the Center's list Nuno Maldonado Sousa, hereinafter renders its arbitral decision.

1. REPORT

1.1. Constitution of the Arbitral Tribunal

A..., taxpayer no. ..., and his wife, B..., taxpayer no. ..., residents at Rua ..., no. ..., ..., in ...-... Oeiras filed a request for constitution of the arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of the RJAT and articles 1 and 2 of Order No. 112-A/2011 of March 22, with the Tax and Customs Authority[2] being the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 18-03-2015 and was notified to the AT on the same date.

Pursuant to the provisions of article 6, no. 1 and article 11, no. 1, lit. b) of the RJAT, the Ethics Council appointed as arbitrator of the sole arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable deadline and notified the parties of such appointment on 08-05-2015. In compliance with the rule contained in article 11, no. 1, lit. c) of the RJAT, the arbitral tribunal was constituted on 25-05-2015. At the first meeting of the arbitral tribunal with the parties on 03-11-2015 the deadline for issuance and notification to the parties of the arbitral decision was extended by 2 months, pursuant to article 21-2 of the RJAT.

1.2. The Petitioners' Request

In their Initial Request the Petitioners sought:

(i) The annulment of the following tax acts:

a. Assessment of IMT[3] on the acquisition of ½ of article no. ... of the parish of ..., municipality of Oeiras through deed of 17-08-2007, in the amount of 18,630.00 €, notified to the male Petitioner by notice no. ... of 18-01-2011

b. Assessment of IMT on the acquisition of ½ of article no. ... of the parish of ..., municipality of Oeiras through deed of 17-08-2007, in the amount of 18,630.00 €, notified to the female Petitioner by notice no. ... of 18-01-2011.

(ii) The refund of the tax paid, plus interest at the statutory rate until full satisfaction of the amount paid.

The Petitioners contend that their purchase is exempt from IMT under the savings-credit system benefiting Portuguese emigrants, because (i) they held an emigrant savings account; (ii) the balance of the emigrant savings account was used in the acquisition of the real property (14th RI); (iii) the AT recognized the IMT exemption for each of the Petitioners (21st RI) and did so expressly (26th RI) and never notified them of the extinction of the tax benefit which they consider they held (29th and 30th RI).

1.3. The AT's Position

The Tax and Customs Authority in its Response[4] affirmed the legality of the assessment and argued for the dismissal of the request and its reasoning, contending that there was no recognition of the right to IMT exemption, that the original calculation of IMT at zero value was made based on declarations by the Petitioners themselves, and that they failed to provide the proof incumbent upon them regarding the requirements upon which the tax benefit depends, in light of the norms establishing the benefit and those regulating the applicable transitional regime. It concludes by arguing for its absolution from the requests.

1.4. Case Instruction and Allegations

In preliminary examination this tribunal invited the parties to clarify and substantiate the assertions made in their pleadings and they responded in the manner they deemed appropriate.

The Petitioners brought documentary evidence to the proceedings and a witness they called was heard in the course of the first meeting of this tribunal with the parties, which took place on 03-11-2015.

The AT attached to the proceedings in due time the Administrative File[5].

The Petitioner and the AT agreed in written form on their allegations, which they presented, reiterating the positions assumed in their pleadings.

1.5. Preliminary Examination

The arbitral tribunal was properly constituted and has jurisdiction ratione materiae pursuant to the provisions of article 2, no. 1, lit. a) of the RJAT.

1.5.1. Preliminary Issue – Cumulation of Claims and Joinder of Parties

The Petitioners seek "an arbitral determination, in cumulation of claims, regarding the illegality of the IMT assessment acts relating to the acquisition of the urban real property registered in the matrix of the parish of ... of the municipality of Oeiras under article ..." (9th RI). On the other hand they propose the action in joinder of parties (10th RI). They contend that the requirements for both the cumulation of claims relating to different acts and the joinder of different parties are met, the common requirement being the dependence that the merit of the request must have on the appraisal of the same factual circumstances and the interpretation and application of the same principles or rules of law (article 3-1 of the RJAT).

The present action was proposed jointly by both Petitioners. The factual grounds are brought to the proceedings, from a subjective perspective, in joint form, as if each fact concerned the male Petitioner and the female Petitioner.

By way of exception the AT argued the inadmissibility of joinder of parties by contending that "the merit of the requests does not depend on the appraisal of the same factual circumstances, which relate to the mobilization of capital and financial resources that, not being common to the Petitioners, do not permit concluding for the legality of the joinder of parties" (15th R-AT). It illustrates by arguing that "the male Petitioner alleges that the loan contracted with D... Portugal for acquisition of the real property was, in fact, applied to the payment of debts of the company of which he is managing partner, factuality which is not alleged by the female Petitioner" (14th R-AT). It interprets the applicable regime to the effect that it is incumbent upon each of the Petitioners to prove that part of the resources of the emigrant savings account was his and what amount he effectively channeled to the acquisition of the real property which they made in common.

With the exception of article 13 of the RI which may lend itself to different interpretations, the subject of all assertions is invariably presented in the plural form "the petitioners"; furthermore and contrary to what the AT affirms, the Petitioners do not manifest themselves in this action differently regarding the application of the value that was lent to them by D... Portugal, being common to both the assertion that it "was intended to cover expenses with works on the acquired real property and other expenses namely the payment of tax debts of the company designated C..., Lda." (16th to 20th of the RI).

Regardless of what the relevant facts are, all of them are brought as common facts and all legal arguments are invoked to sustain a common thesis. In initial analysis one cannot even assert that it is incumbent upon each of the Petitioners to prove what their quantitative position is in the various relevant acts; the law establishes the general presumption that "the parties having portions in a divisible obligation are equal as to the various creditors or debtors, if another proportion does not result from law or legal transaction" (article 534 of the Civil Code) and it is not apparent in what concrete situation the inapplicability of the legal presumption arises as to the situations in the proceedings.

Although the disputed assessment acts are distinct, the appraisal of their legality will be based on the very same facts and will resort to the same legal rules. Given the identity of the facts and the unity of the legal thesis, the requirements demanded by article 3-1 of the RJAT are considered to be met, whereby the cumulation of claims and joinder of parties is deemed admissible. The exception raised by the AT is therefore dismissed.

1.5.2. Other Procedural Requirements

The parties possess legal personality and capacity (the latter being that of the AT pursuant to the rules contained in article 4, no. 1 of the RJAT and 10, no. 2, of the same statute and article 1, lit. a) of Order No. 112-A/2011 of March 22), are legitimate and are properly represented.

There are no nullities that vitiate the proceedings.

Thus, there is no obstacle to the appraisal of the merits of the case and it is necessary to decide.

2. DECISION

2.1. Factual Matters

2.1.1. Facts Deemed Proven

The following facts stand established in these proceedings:

A. The Petitioners are married under the regime of separation of property. [7th RI: doc. 7].

B. On 13-02-2007 the Petitioners constituted at Bank ..., S.A[6] the "Emigrant Savings Account" no. ...-.... [12th RI and 30.2 R-AT: PA, p. 6].

C. On 13-02-2007 the female Petitioner applied to the "Emigrant Account" no. ...-... the amount of 302,181.96 €. [b2 of the RCR[7]: her doc. 2]

D. On 16-08-2007 each of the Petitioners presented to the Finance Service of Oeiras ..., a declaration for IMT assessment on the acquisition of half of the urban real property at the price of 310,500.00 €, located at Rua ..., no. ..., parish of ..., municipality of Oeiras, registered in the respective matrix, under article ... and in the respective documents reference was made to "Benefits: Emigrants" and "Amount of IMT: € 0.00". [R-AT 30.1: PA2, pp. 50-55]

E. The balance of the account identified in B) of 356,273.17 € was entirely de-mobilized on 14-08-2007 through bank check no. ... issued by Bank ..., to the order of the female Petitioner. [12th RI and 30.2 R-AT: doc. 9 and PA, p. 25].

F. On August 17, 2007 the Petitioners executed a public deed of purchase and sale of loan with mortgage through which they purchased in common the urban real property registered in the matrix of the parish of ... of the municipality of Oeiras under article ..., at the price of 621,000.00 €. [7th RI: doc. 7].

G. The Petitioners agreed with D... (Portugal), S.A.[8], by act formalized simultaneously with the deed of purchase and sale, to a loan in the amount of 532,000.00 €, "for purposes of financing the acquisition of the real property" identified in D). [16th and 17th RI and 30.3 and 30.4 of the R-AT: doc. 7].

H. The amount loaned by D... to the Petitioners was delivered to them on 17-08-2007, through a bank check issued to the order of the sellers of the real property. [30.4 R-AT: doc. 7, complementary document, article 1-2].

I. By notice sent by mail on 05-01-2011 the Petitioners were notified to pronounce themselves in prior hearing on the "draft decision on extinction of tax benefits" then sent, in the terms contained in the document at page 20 of the Administrative File, where besides everything else one can read: [30th RI and 30.5 R-AT: PA, p. 20]

DRAFT DECISION: Extinction of tax benefits (article 14 of the Statute of Tax Benefits), with the consequent additional assessment, in accordance with articles 31 and 33 of the CIMT.

GROUNDS: The deed of acquisition of the real property does not show the use of funds from an emigrant savings account, in accordance with the Decree-Law cited above, but rather a loan was granted for acquisition by a different entity [D... (Portugal) S.A.].

J. On 17-01-2011 the Petitioners expressed their position regarding the draft decision referred to in I). [30th RI: PA, p. 24]

K. On 18-01-2011 the AT sent to the Petitioners by mail "Notice of Extinction of Tax Benefits", where besides everything else one can read: [30th RI: PA, p. 64]

DECISION: Extinction of tax benefits (article 14 of the Statute of Tax Benefits), with the consequent additional assessment, in accordance with articles 31 and 33 of the Code of IMT.

GROUNDS: The deed of acquisition of the real property does not show the use of funds from an emigrant savings account, in accordance with the Decree-Law cited above, but rather a loan was granted for acquisition by a different entity [D... (Portugal) S.A.].

(…)

In fact:

• Upon examination of the deed of acquisition of the real property in question, dated 2007/08/17, it is verified that the price was 621,000.00 €, the aforementioned banking entity having granted a loan in the amount of 532,000.00 €, pursuant to Decree-Law No. 349/98 of November 11 (General Regime of Housing Credit);

• Only as to the difference between the price and the value of the loan, in the amount of 89,000.00 €, was own capital used, with it not being proven to be funds originating from the emigrant savings account;

L. By notices of 18-01-2011 the Petitioners were notified to make the payment of tax relating to the acquisition identified in E), pursuant to the documents attached to the RI under nos. 5 and 6, where besides everything else one can read in each of them: [29th RI: docs. nos. 5 and 6 and PA, pp. 66 and 69]

TAX FACT: Acquisition of 1/2 of article nos. ... of the parish of ..., municipality of Oeiras through deed of 2007/08/17, with the benefit of exemption through use of the amount transferred in the acquisition through emigrant savings account (D.L. 540/76 of July 9, as worded by D.L. 140-A/86 of June 14), without any amount from said account actually being used, nor the assessment of the respective tax having been requested.

TAX ASSESSED: IMT (621,000.00 x 6%): 2 | 18,630.00 €

M. On 15-04-2011 the Petitioners filed an administrative appeal against the "extinction of the exemption benefit through use of the amount transferred in the acquisition, through emigrant savings account (D.L 540/76 of July 9, as worded by D.L. 140-A/86 of June 14), without any amount from said account actually being used, nor the assessment of the respective tax having been requested", which was dismissed. [34th and 35th RI: PA5, pp. 2 et seq. and PA7, p. 27 of the pdf].

N. On 05-09-2011 the male Petitioner and the female Petitioner each filed a hierarchical appeal having as object the dismissal of the administrative appeal [35th RI: PA1, pp. 2 et seq. and PA8, pp. 2 et seq.]

O. The hierarchical appeal filed by the male Petitioner was dismissed, which was notified to his attorney by notice of 12-12-2014. [36th RI: PA4, p. 136]

P. The hierarchical appeal filed by the female Petitioner was dismissed, which was notified to her attorney by notice of 12-12-2014. [36th RI: PA12, p. 171]

Q. In the report substantiating the dismissal of the hierarchical appeal of the male Petitioner one can read, among other things that: [36th RI: PA4, pp. 121-132]

• From the documents brought to the proceedings, it is verified that Doc. 5 - Photocopy of Statement of ... (pp. 32), it is stated that the bank check with no. ... in the amount of € 356,273.17, was issued on that date by total de-mobilization of the Emigrant Savings Account with the same balance and which had been constituted at that Bank on 13/02/2007, the check being issued in the name of B..., wife of the appellant.

• Nothing in that statement refers to the withdrawal being intended for the acquisition of the real property which gave rise to the IMT assessment, nor was it issued in favor of the sellers of the real property contained in the deed, and

• Given that this type of account has various purposes not only the acquisition of real property, one cannot deduce from the statement of ... that the total de-mobilization of the account was for the acquisition of the real property in question.

• All the more so that from the deed of purchase and sale and Loan with Mortgage, it appears that the purchasers resorted to the loan request granted by D... Portugal, which was granted pursuant to Decree-Law 349/98 of November 11, General Regime of Housing Credit.

• Nowhere in the deed is reference made to the fact that the acquisition of the real property is made with use of the balance of emigrant savings account.

R. In the report substantiating the dismissal of the hierarchical appeal of the female Petitioner one can read, among other things that: [36th RI: PA12, pp. 160-167]

The check was issued by Bank ..., S.A., the bank that drafted the statement referring to "the bank check Bank ..., S.A. with no. ..., in the amount of €356,273.17 was issued on this date by total de-mobilization of the Emigrant Savings Account no. ...-..., with the same balance, which had been constituted at this Bank on 2007/02/13.

Further it is stated that said check was issued to the order of B...".

Thus, the statement issued by Bank ..., S.A. refers to the existence of an emigrant savings account in the name of the appellant, however, it indicates the appellant as beneficiary of the de-mobilization of the emigrant savings account. And this banking entity does not intervene in the deed of purchase and sale of the real property.

Moreover, from the analysis of the content of the deed of purchase and sale, no reference is withdrawn as to the use of funds from said emigrant savings account no. ...-..., nor does the appellant prove that the payment was made through the de-mobilization of the account of Bank ..., S.A.

The banking institution that intervenes in the deed of purchase and sale of the real property is D... (Portugal) S.A. and it did not make reference to the use of the balance of an emigrant savings account.

In light of the transcription of part of Circular Notice No. 358 of 1987/01/30, presented by the appellant herself, in the context of hierarchical appeal, it is derived that the Banking Institution where the emigrant savings account was constituted should, not only verify the legal requirements, but also be the same to grant the loan for the acquisition of the real property in question.

The appellant herself acknowledges having been financed by the amounts referred to in the deed, which were intended to cover other costs and added costs to the acquisition of the real property, being "impossible to determine whether it was with the funds de-mobilized from the emigrant savings account that she acquired" the real property, in that such funds were credited to the account of Bank D... (Portugal) S.A., from where the value for the payment of the real property came out.

From this it is derived that the requirements for the granting of the IMT exemption are not met, since the banking institution intervening in the deed of purchase and sale (Bank D... (Portugal) S.A.) did not make reference to the existence of an emigrant savings account nor did it issue the declaratory statement of the date of constitution of the emigrant savings account, the amount de-mobilized and its beneficiary.

S. On 17-12-2013 the male Petitioner paid a tax debt relating to the assessment of IMT in the amount of 16,560.00 €. [80th RI: doc. 18].

T. On 17-12-2013 the female Petitioner paid a tax debt relating to the assessment of IMT in the amount of 16,560.00 €. [80th RI: doc. 19].

2.1.2. Facts Not Deemed Proven

The Petitioners did not prove some of the factual allegations on which they based their thesis. The assertions that follow merit greater relevance.

The Petitioners did not prove that "the loan contracted with D... [was intended] to cover expenses with works on the acquired real property and other expenses namely the payment of tax debts of the company designated C..., Lda.", as they alleged in the 17th of the RI. Indeed, not only is document no. 11 silent as to the purpose of the loan (nor is it contemporaneous with it) but furthermore document no. 7, which is an authentic document, provides different information, as established in G).

The Petitioners also did not prove that the aforementioned company presented debts that were being coercively demanded in fiscal execution proceedings, which were regularized through payments by the Petitioners themselves, because the company did not have financial or other means to cover such costs (18th and 19th of the RI). The evidence presented to support this assertion (doc. no. 12) is a receipt issued by the AT in the name of the company executed and not the Petitioners, whereby it is only possible to assert that payment on account was made in the amount of 80,000.00 €, on 08-05-2009; note that this payment occurs almost 2 years after the deed, which occurred on 17-08-2007.

Nor was proof made that the IMT exemption was recognized to the Petitioners, before executing the deed of purchase and sale, at the Finance Service of ..., as they claim in the 21st and 24th of the RI. Note that the Petitioners contend that this factual assertion is proved by the document they reference as doc. no. 13[9] but from its content the intended recognition does not result; the documents cited are in fact the declarations made by the Petitioners and processed through the AT system, for IMT assessment. Moreover, the assertion being commented on is in some way incongruous with the one the Petitioners adduce in the 23rd of the RI, to the effect that they were informed that "the exemption in question would be recognized to them upon presentation of the document of the Bank holding the emigrant savings account" and for which they present no proof.

The Petitioners also did not manage to prove their assertion (13th RI: docs. 10) that the check referred to in B) was deposited on 14-08-2007 for the benefit of Petitioner A... at D... (Portugal), S.A., in an account of which the Petitioners were holders. Note that the AT contested this matter (R-AT: 32.3.) and the evidence produced does not support the thesis of the Petitioners. The tribunal has no doubt that the Petitioners are the holders of the account with the "NIB ...-..." at D... Portugal, referenced in the slip attached as doc. no. 10, as confirmation is obtained by comparison with the complementary document of the deed (doc. 7, p. 14), where the bank itself identifies it by the "NIB ...". But if the title to the account is established, it is already not possible to assert with certainty that the deposit of said check was effectively made therein as the respective slip does not bear any bank confirmation, although one can read therein "this delivery is only valid with the bank's seal or certification". Considering the position of the AT and that no other element was presented to support this assertion, this matter must be considered as not proved.

Nor was included in the body of proved facts the assertion of the Petitioners that the payment of the price of the real property identified in E), made in the deed, was made with the values that were deposited at D... (15th RI: doc. 7), for two reasons; it does not appear to the tribunal that this assertion constitutes a true fact but rather a conclusion that aggregates several elements (knowing whether the values were transferred to that account, whether they were mobilized for the intended purpose and whether they were delivered to the sellers) and for further raising the application of concepts of law (such as that of payment and that of price) that in this context assume their technical-legal character. Let it be recalled that this matter was contested by the AT (R-AT, 32.4). Following the perspective enunciated the tribunal will appraise the question in the chapter devoted to the appraisal of legal grounds, if such should prove necessary.

No other facts of interest for the decision of the case were alleged.

2.1.3. Reasoning for the Proven Factual Matters

The conviction of the Tribunal was based on the documentary evidence in the proceedings and the position taken regarding each fact by the parties in their pleadings, duly identified.

Although testimonial evidence was produced, the time elapsed and the circumstance that the witness had routine professional involvement in the facts of the proceedings did not allow gathering of elements that could support the decision on the factual matters.

2.2. Legal Matters

By the manner in which the action is configured the main questions to be decided consist in ascertaining whether the tax benefit sought by the Petitioners was in force at the moment the purchase of the real property was made and, if the answer to this question is affirmative, there will be the need to ascertain whether the Petitioners met the requirements to benefit from it and whether they performed the necessary acts for that purpose.

If the answer to the second question is also affirmative, with the request of the Petitioners succeeding, it will be necessary to appraise their request for restitution of the tax paid and payment of interest.

The savings-credit system intended to encourage operations of transfer to Portugal of savings by Portuguese emigrants, was originally established by Decree-Law No. 540/76 of July 9[10] and had the purpose of "encouraging the entry into the Country of savings generated by emigration, with a view to alleviating the imbalance in the balance of payments". The system comprised a credit modality with interest fixed below market rates, the State bearing that difference, and exemption from sisa.

Access to the benefits of the system presupposed two differentiated situations; (i) the prior transfer within the 6 months preceding the purchase of the real property of foreign currency of value equal to the amount which they sought to obtain by loan (article 4); (ii) the constitution of a special deposit account for a period of 5 years, for application of the transfers they made in foreign currency, with the loan being able to be of value equal to the balance of the account (article 5). Real property acquisitions effected with loans granted under the "savings-credit" system for Portuguese emigrants benefited from exemption from sisa (article 7).

In the original version of this system, the fundamental requirement to obtain tax exemption was in fact the acquisition of real property with resort to a loan granted under the "savings-credit" system for Portuguese emigrants. The perspective of the legislator, at the fiscal level, was not to reward the transfers of foreign currency already made but rather to ensure that the flow of remittances would continue to be made in the future, to satisfy the service of the debt contracted by the emigrant in question. Only thus is it understood that the exemption was granted to operations financed with loans but did not provide for its attribution to acquisitions effected with own capital originating from foreign currency remittances.

This gap – the granting of exemption in cases of acquisition with own capital – came to be filled by Law No. 21-B/77 of April 9 which updated the savings-credit regime, to extend the rules relating to sisa and property contribution to these acquisitions, in the following terms:

Article 7 (of Decree-Law No. 540/76 of July 9)

Acquisitions of real property or their autonomous fractions benefit from exemption from sisa, if the taxable matter that serves as the basis for assessment of this tax does not exceed, in any of the following cases, the amount corresponding to double the importance transferred from abroad and actually used in the acquisition, whenever such:

a) Is effected under the savings-credit system;

b) Although without resort to the credit established by this decree-law, the acquirer directly uses in the acquisition amounts transferred pursuant to article 4 or the deposit account referred to in article 5.

  1. If the taxable matter exceeds the amount referred to in the preceding number, sisa shall be assessed only on the excess.

  2. The taxable income of the real property acquired, in whole or in part, with the benefits established in nos. 1 and 2 of this article are also exempt from property contribution for a period corresponding to the percentage of taxable matter exempt from sisa pursuant to the table attached to this statute.

In 1979 a new initiative altered the scope of application of the benefit of exemption from sisa, increasing its dependence on the special account constituted with foreign currency remittances. In fact article 1 of Decree-Law No. 316/79 of August 21 fixed the following wording to article 7 of Decree-Law No. 540/76 of July 9:

7 (of Decree-Law No. 540/76 of July 9)

1 - Acquisitions of rural or urban real property or their autonomous fractions benefit from exemption from sisa if the taxable matter that serves as the basis for assessment does not exceed the amount corresponding to double the balance revealed by the special account constituted pursuant to article 5, with observance of the provisions of no. 2 of article 4, or double the part of that same balance used in the acquisition if there is no resort to credit.

2 - If the taxable matter exceeds the amount referred to in the preceding number, sisa shall be assessed on the excess.

Meanwhile the aforementioned Law No. 21-B/77 of April 9 also introduced a procedural norm imposing the filing of banking documentation for recognition of the exemption. That documentation was to be presented at the notarial office, in cases where the amount corresponding to the taxable matter that served as the basis for assessment did not exceed double the importance transferred from abroad and was actually used in the acquisition. In cases where the amount corresponding to the taxable matter that served as the basis for assessment exceeded double the importance transferred from abroad, sisa would have to be assessed on that part and the documentation was to be presented and filed at the finance office making the assessment. This was the wording of the norm:

Article 7 (of Law No. 21-B/77 of April 9)

For purposes of recognition of the exemption established in no. 1 of article 7 of Decree-Law No. 540/76, as worded by this law, the interested parties shall present at the respective notarial office, where they shall remain filed, the necessary documents issued by the credit institution and competent finance office and, there being assessment of sisa, pursuant to no. 2 of the same article, the documents emanating from the credit institution shall remain filed at the finance office making the assessment.

The savings-credit system intended to benefit Portuguese emigrants created by Decree-Law No. 540/76 of July 9 was repealed by Decree-Law No. 140-A/86 of June 14 which established the regime of "emigrant savings". The new regime came into force on 15-06-1986, the date on which the prior rules were extinguished (articles 21 and 22).

The new emigrant savings system aimed to finance the construction, acquisition or execution of improvements on urban real property, as well as the installation or development of economic activities by emigrants (articles 5 and 6). For that purpose this legal regime allowed credentialed emigrants the title to and management of accounts in foreign currency without prior authorization from the Bank of Portugal (articles 10 and 15 to 18).

This regime did not directly provide any tax exemption but maintained in force (article 21-a) the rules relating to sisa and property contribution, which consisted in article 7 of the original regime, as worded by Law No. 21-B/77 of April 9. Since Decree-Law No. 140-A/86 of June 14 did not repeal this Law No. 21-B/77, its autonomous provisions, namely its article 7, continued to be in force in the legal order.

As a first conclusion it is possible to assert that the exemption from sisa provided for in the 1976 regime for acquisitions effected under the savings-credit system or even without resort to credit, but whenever the acquirer directly used in the acquisition amounts transferred based on that regime, continued to be in force, even beyond the extinction of the original system and implementation of the 1986 regime. The procedural regime introduced by Law No. 21-B/77 also remained in force.

In turn the 1986 regime was repealed by Decree-Law No. 323/95 of November 29[11] which reformulated the system and unified the prior accounts in the "figure of emigrant account" expressed in national or foreign currency, also granting the possibility of opening accounts and contracting loans with the national banking system, with interest bonified by the State, pursuant to the terms regulated by Order No. 1,477/95 of December 23, in particular its article 3. This new rules again maintained intact the exemption from sisa as article 18-2 of the cited Decree-Law continued to maintain in force article 7 of Decree-Law No. 540/76 of July 9[12].

In turn Decree-Law No. 287/2003 of November 12[13], despite repealing the Code of the Municipal Tax on Sisa and the Tax on Inheritance and Gifts (31-3), expressly stipulates the regime for tax benefits of extravagant legislation, such as is considered that which establishes the exemption from sisa under the systems applicable to emigrants, in the following terms:

Article 31 - Repeal

(…)

6 - There remain in force the tax benefits relating to municipal contribution, now reported to IMI, as well as those relating to the municipal tax on sisa established in legislation extravagant to the Code approved by Decree-Law No. 41,969 of November 24, 1958, and in the Statute of Tax Benefits, which are now reported to IMT.

As a second conclusion it is possible to assert that the exemption from sisa associated with the successive 1976, 1986 and 1995 regimes, of support for acquisition of real property by emigrants, was maintained with the reform of taxation of property and came to be considered as exemption from IMT (31-6 of Decree-Law No. 287/2003 of November 12).

Finally, by understanding that there was "no longer justification socioeconomic for the maintenance" of the emigrant savings system, the Government extinguished it, without failing however to "safeguard contracted operations". Decree-Law No. 169/2006 of August 17 repealed the regime of the emigrant account, in the following terms:

Article 9

Repealing Norm

1 - There is repealed, for purposes of contracting of new operations, Decree-Law No. 323/95 of November 29.

It does not appear that there remain any doubts that no regime longer existed in 2007 that sustained the existence of new accounts or new operations undertaken by emigrants, as the last system, of 1995, regulated by Decree-Law No. 323/95 of November 29, was expressly repealed on August 17, 2006.

Notwithstanding the repeal of the regime it is important to understand (i) what operations were saved from repeal; (ii) what effects can be drawn from the non-existence of express repeal of article 7 of Decree-Law No. 540/76 of July 9 and article 7 of Law No. 21-B/77 of April 9, which is instrumental to it.

The concept of new operations used in the transitional norm, although not coinciding exactly with the nomenclature used in the law establishing the defunct regime, is not difficult to interpret. The regime of Decree-Law 323/85 regulated the contracting of special loans with interest bonified by the State (article 14) denominated emigrant savings loan (article 2), as well as title to the emigrant account (article 1), which constituted a fundamental requirement to access the aforementioned credit operations, with certain balance obligations (article 11-1 and 2). The conditions under which those loans were contracted are maintained but any new credit operations, even if based on accounts opened prior to the repeal under the rules of the emigrant account, will no longer benefit from the special regime that existed. The repealing norm does not impose that the emigrant accounts be closed; from the repeal of Decree-Law No. 323/95 of November 29 onward it is not possible to contract new operations pursuant to its rules, whether they be new banking account contracts or new financings. Notwithstanding, the old operations – accounts opened and loans contracted until then – will continue to exist under the conditions in which they were established.

It is now important to determine whether the exemption from sisa or IMT regulated in article 7 of Decree-Law No. 540/76 of July 9 is maintained, for accounts opened after 1995. The provision of the norm stipulates that acquisitions of rural or urban real property or their autonomous fractions would be exempt if therein the balance of the special account, proper to the regime of incentive for emigrants, is used, which from the 1995 regime came to be denominated emigrant savings account. Nothing points in the sense that this exemption should not be applied to accounts opened during the term of the regime, i.e. until August 17, 2006, given that the regime was repealed with effect from August 18, 2006 (article 10).

It is thus believed that the benefit of exemption from sisa or IMT regulated in article 7 of Decree-Law No. 540/76 of July 9 is maintained and that it continues to be applicable to operations with opening of emigrant savings account prior to 18-08-2006 as from that date the law ceased to consider them susceptible to any benefit.

The answer given to this first question – the force of the exemption on 17-08-2007 when the Petitioners made the purchase of the real property – ends up making to some extent unnecessary the answer to the second question – that of ascertaining whether the Petitioners met the necessary requirements to access the exemption. The question is preliminary and has to do with the very objective delimitation of the incidence of the norm.

As was established in the proven factual matters it was on 13-02-2007 that the Petitioners constituted at Bank ..., S.A a account that the bank designated as emigrant savings account and it was also on that date that the female Petitioner applied to it the amount of 302,181.96 €.

As was seen any banking account that is contracted (or opened) after August 17, 2006 is already not covered by the regime of incentives to emigrants and it is within the scope of the regime of incentives that the exemption from IMT could be attributed. And it is believed that this interpretation is valid regardless of the designation that the bank in question attributes to the deposit account.

Not being the banking account of the petitioners covered by the regime of incentives to emigrants they could never obtain the sought IMT exemption. Clear that two points merit being referred to: the "recognition" of the exemption and the prerogative of the AT to effect assessment of IMT after initially having issued documentation with the tax to be paid at zero value.

Both questions must be seen in light of the preponderance of the obligation of payment of tax as a contribution of citizens to the expenses of the State.

The documentation issued by the AT was elaborated on the basis of declarations by the Petitioners, intended for a specific purpose, which was to determine the value of the IMT to be paid. From this result two important consequences: (i) The Petitioners did not give rise to the facultative procedure for recognition of tax benefit, which must be expressly requested by means of a request specifically directed to that purpose, pursuant to the rules of article 65 of the CPPT[14]; (ii) as soon as the AT becomes aware of tax facts not declared by the taxpayer (in particular the purchase without evident use of the balance of the account) and the necessary probative support (the copy of the deed without that mention), the assessment procedure is instituted ex officio by the competent services (59-7 CPPT). Even if there were any less correct information provided by an official, it would always have to be taken into account that only the guidelines issued by the highest-ranking official of the service bind the AT (55 CPPT and 68-A LGT[15]) or those constituting binding information (68 LGT).

For the reasons stated the claims of the Petitioners must necessarily fail as the disputed assessments comply with legality.

2.2.1. Other Claims

The obligation of restitution by the AT is subject to the very scope of the merit (article 100 LGT) and, the request of the Petitioners being without merit, their requests for refund of amounts paid and interest are prejudiced.

3. DECISION

Given the factual and legal elements gathered and stated, this arbitral tribunal decides to render judgment of no merit for the request for arbitral determination. Consequently the AT is absolved from the request.

By the decision rendered the appraisal of the requests for restitution of the tax paid and interest is prejudiced.

The Petitioners are condemned to payment of the costs, which shall be computed in the proper place.

4. VALUE OF THE CASE

In accordance with the provisions of article 306-2 of the CPC, ex-vi 29-1-e) of the RJAT and 97-A, no. 1-a) of the CPPT ex-vi 3-2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at 43,238.44 €.

5. COSTS

The costs are charged to the party that gave rise to them, it being understood that the losing party gives rise to them (articles 527-1 and 2 CPC). In these proceedings and considering the aforementioned rule, the responsibility for the costs is that of the Petitioners, as the losing party.

Pursuant to article 22-4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of the costs charged to the Petitioner is fixed at 2,142.00 €.

Lisbon, January 25, 2016

The Arbitrator,

(Nuno Maldonado Sousa)

[1] In this decision designated by the abbreviated form of common use "RJAT" (Legal Regime of Arbitration on Tax Matters).

[2] In this decision designated by the abbreviated form "AT" as is customary usage.

[3] Municipal Tax on Real Estate Transfers (IMT).

[4] In this document also designated as the AT's Request "R-AT".

[5] In this document also designated as the Administrative File "PA".

[6] In this Request equally designated by the abbreviated forms Bank ... or simply....

[7] Complementary Request of the Petitioners of 03-11-2015.

[8] Which in this document is also designated as "D..." or as "D... Portugal".

[9] The file containing the document is designated as "doc. 13" but in the document one reads "doc. 11".

[10] Revised by Law No. 21-B/77 of April 9, by Decree-Law No. 79/79 of April 9, by Decree-Law No. 316/79 of August 21 and by Decree-Law No. 37/86 of March 4 (which reports on the abuses committed under the system), successively regulated by Order No. 718/76 of November 27, by Order 413/78 of July 27 and by Order No. 418/79 of August 11 which did not affect the benefit being disputed in these proceedings, although, among other rules, they established the cessation of the privileges provided for in the law when it was verified that the loaned amounts did not have the intended application. Accounts in the name of emigrants, in general, were also regulated by Decree-Law No. 75-C/77 of February 28.

[11] Successively altered by Decree-Law No. 65/96 of May 31 (coverage of the standing balance) and by Decree-Law No. 99/2003 of May 13 (general regime of deposit accounts and communications to the Bank of Portugal).

[12] In the wording given to it by Decree-Law No. 316/79 of August 21.

[13] Carries out the reform of the taxation of property, approving the new Codes of the Municipal Tax on Real Property (CIMI) and the Municipal Tax on Onerous Transfers of Real Property (CIMT) and making alterations to various taxation legislation related to that reform.

[14] Code of Procedure and Tax Process

[15] General Tax Law

Frequently Asked Questions

Automatically Created

What is the IMT tax exemption available to Portuguese emigrants under the savings-credit (poupança-emigrante) scheme?
The IMT tax exemption for Portuguese emigrants under the poupança-emigrante (savings-credit) scheme is a tax benefit designed to incentivize emigrants to repatriate capital and invest in Portuguese real estate. Under this regime, Portuguese emigrants who maintain emigrant savings accounts and use funds from these accounts to purchase property in Portugal may qualify for exemption from IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis - property transfer tax). The benefit aims to facilitate emigrants' acquisition of residential property in Portugal using savings accumulated abroad. To qualify, taxpayers must demonstrate they held a qualifying emigrant savings account, that funds from this account were actually channeled to the property acquisition, and that all other legal requirements and transitional regime provisions were satisfied. The Tax Authority may verify these conditions and require documentary proof before granting the exemption.
Can Portuguese emigrants claim IMT exemption when purchasing property in Portugal using a poupança-emigrante savings account?
Yes, Portuguese emigrants can potentially claim IMT exemption when purchasing property in Portugal using a poupança-emigrante savings account, provided they meet all legal requirements. However, as illustrated in Process 178/2015-T, merely having an emigrant savings account and using its funds for property acquisition may not automatically guarantee the exemption. The taxpayer bears the burden of proving eligibility by demonstrating: (i) possession of a qualifying emigrant savings account; (ii) that the account balance was actually applied to the property acquisition; (iii) compliance with all legal requirements governing the benefit; and (iv) adherence to applicable transitional regime provisions. The Tax Authority may challenge claims where adequate documentation is not provided. Even if the Tax Authority initially calculates IMT at zero value based on the taxpayer's declarations, this does not necessarily constitute formal recognition of exemption rights, and assessments may subsequently be issued if proper verification reveals insufficient proof of eligibility.
What are the requirements for IMT exemption on property acquisition under the emigrant savings-credit regime in Portugal?
The requirements for IMT exemption on property acquisition under the emigrant savings-credit regime include: (1) the purchaser must qualify as a Portuguese emigrant under applicable legal definitions; (2) the purchaser must hold a properly constituted emigrant savings account (conta poupança-emigrante); (3) funds from the emigrant savings account must be demonstrably used in the acquisition of the real property; (4) the property acquisition must comply with any limitations or conditions specified in the legislation establishing the benefit; (5) the purchaser must provide adequate documentary proof of all these requirements to the Tax Authority; and (6) any conditions established under transitional regime provisions must be satisfied. As the Tax Authority argued in this case, taxpayers cannot rely solely on their own declarations but must present independent verification and documentation. The burden of proof rests with the taxpayer claiming the benefit. Failure to substantiate any of these requirements may result in denial of the exemption and assessment of IMT at standard rates.
How does the CAAD arbitration process work for disputing IMT tax assessments issued by the Portuguese Tax Authority?
The CAAD (Centro de Arbitragem Administrativa - Administrative Arbitration Center) arbitration process for disputing IMT tax assessments works as follows: taxpayers file a request for constitution of an arbitral tribunal under the RJAT (Legal Regime for Administrative Arbitration), identifying the Tax and Customs Authority as respondent. The CAAD President accepts the request and notifies the Tax Authority. The Ethics Council appoints an arbitrator (or panel) who accepts the appointment and notifies the parties. The arbitral tribunal is formally constituted, typically within specific timeframes. Both parties submit their pleadings - the petitioner's initial request and the Tax Authority's response. The tribunal conducts preliminary examination of jurisdiction and admissibility issues. Case instruction may include document production, witness testimony, and clarification requests. Parties present written allegations reiterating their positions. The arbitral tribunal issues a binding decision within statutory deadlines (which may be extended by agreement). This process provides an alternative to judicial courts for resolving tax disputes, offering expertise, efficiency, and finality in administrative tax matters.
Can the Tax Authority revoke a previously granted IMT exemption without notifying the taxpayer of the benefit's extinction?
Whether the Tax Authority can revoke a previously granted IMT exemption without notifying the taxpayer is a central issue in this case. The petitioners argued that the Tax Authority expressly recognized their IMT exemption by initially calculating the tax at zero value and never notified them of any extinction of the tax benefit, suggesting that revocation without notification violates their rights. However, the Tax Authority contended that there was no formal recognition of exemption rights - the initial zero-value calculation was merely based on the petitioners' own declarations in the acquisition deed, without independent verification of eligibility requirements. According to the Tax Authority's position, when subsequent verification revealed insufficient proof of entitlement to the benefit, it was entitled to issue proper assessments. This raises important questions about taxpayer protection, legitimate expectations, and procedural fairness. Generally, if a tax benefit has been formally recognized and granted, principles of legal certainty and good faith would require notification before withdrawal. However, if no formal recognition occurred and the taxpayer failed to prove eligibility, the Tax Authority may assess tax without being bound by preliminary calculations based solely on unverified taxpayer declarations.