Summary
Full Decision
ARBITRAL DECISION
The arbitrators Counsellor Jorge Lopes de Sousa (arbitrator-president), Prof. Doctor Suzana Fernandes da Costa and Dr. Cristina Aragão Seia (arbitrators-members), appointed by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 25-06-2018, hereby agree as follows:
1. Report
A... — Open Real Estate Investment Fund, with the collective person number ..., with registered office at Rua ..., ..., floor ..., Lisbon, here represented by the management company B... — Real Estate Investment Funds Management Company, S.A. (hereinafter designated as "Claimant"), came, pursuant to the provisions of article 10, no. 2, of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Tribunal.
The Claimant requests the annulment of the following Real Estate Transfer Tax (IMT) assessment acts:
– Assessment no. ..., in the amount of € 487,500.00 (four hundred and eighty-seven thousand five hundred euros), assessed on 10-04-2015 and paid on 13-04-2015;
– Assessment no. ..., in the amount of € 1,163,500.00 (one million one hundred and sixty-three thousand five hundred euros), assessed on 27-04-2016 and paid on 28-04-2016;
– Assessment no. ..., in the amount of € 1,128,064.60 (one million one hundred and twenty-eight thousand and sixty-four euros and sixty cents), assessed on 20-06-2016 and paid on 21-06-2016;
– Assessment no. ..., in the amount of € 871,000.00 (eight hundred and seventy-one thousand euros), assessed on 21-10-2016 and paid on 21-10-2016;
– Assessment no. ..., amount of € 1,867,910.85 (one million eight hundred and sixty-seven thousand nine hundred and ten euros and eighty-five cents), assessed on 27-12-2016 and paid on 27-12-2016;
– Assessment no. ..., amount of € 544,050.30 (five hundred and forty-four thousand fifty euros and thirty cents), assessed on 24-07-2017 and paid on 24-07-2017;
– Assessment no. ..., in the amount of € 492,236.00 (four hundred and ninety-two thousand two hundred and thirty-six euros), assessed on 24-07-2017 and paid on 24-07-2017.
The Claimant further requests the refund of the amount paid plus compensatory interest, from the dates of the respective payments.
The respondent is the TAX AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 12-04-2018.
Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the assignment within the applicable period.
On 05-06-2018, the parties were duly notified of this appointment and expressed no intention to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, subparagraphs a) and b) of RJAT and articles 6 and 7 of the Code of Ethics.
Thus, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 25-06-2018.
The Tax and Customs Administration submitted a reply, arguing that the petition should be judged unfounded.
The Tax and Customs Authority did not attach administrative proceedings or any documents, considering the documents presented by the Claimant as sufficient.
By order of 07-09-2018, the meeting provided for in article 18 of RJAT was dispensed with, as were pleadings, and a date for the decision was set.
The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, no. 1, subparagraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January, and is competent.
The parties are duly represented, possess legal personality and capacity, are legitimate and are represented (articles 4 and 10, no. 2, of the same instrument and article 1 of Ministerial Order no. 112-A/2011, of 22 March).
The proceedings are not affected by nullities.
2. Factual Matter
2.1. Proven Facts
The following facts are considered proven:
A) The Claimant is an alternative Collective Investment Undertaking (CIU), in real estate, open in the form of an Open Real Estate Investment Fund (FIIA), in accordance with the classification of the general regime of CIUs, approved by Law 16/2015, of 24 February, constituted by authorization from the Real Estate Securities Commission dated 6 June 2005;
B) The Claimant commenced its activity on 15 July 2005, with its management entrusted to the joint-stock company "B... — Real Estate Investment Funds Management Company, S.A.";
C) Under the terms contained in the management regulations of the Claimant, the Fund's assets may include urban properties, or their autonomous fractions, intended for resale or for economic exploitation, by way of lease or other form of paid exploitation;
D) On 13-04-2015, the Claimant entered into a purchase and sale contract with reserve of ownership with the Pension Fund of Group C..., on the basis of which it acquired the urban property located at ..., numbers ..., ... and..., parish of..., Municipality of Lisbon, described in the Land Registry of Lisbon under number ... and registered in the respective urban property matrix of the parish of ... under article ..., as appears in the purchase and sale contract which is now attached and is given as fully reproduced for all due and legal purposes (Document no. 1 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
E) Prior to the acquisition of the property identified in the preceding subparagraph, the Claimant completed and submitted the respective declaration for IMT assessment — Form 1 — on the basis of which the Tax and Customs Authority proceeded to assess the tax due in the amount of € 487,500.00 (four hundred and eighty-seven thousand five hundred euros), according to Declaration no. ... assessed on 10-04-2015 and paid on 13-04-2015 (document no. 2 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
F) On 28-04-2016, the Claimant entered into a purchase and sale contract with reserve of ownership with company D..., S.A., under the terms of which the Claimant acquired from the latter the urban property denominated E..., located at ... (...), of the parish of..., municipality of Lagoa, described in the Land Registry of Lagoa under number ... and registered in the urban property matrix under article ... (document no. 3 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
G) Prior to the execution of the purchase and sale contract mentioned in the preceding subparagraph, the Claimant completed and submitted the respective declaration for IMT assessment — Form 1 — on the basis of which the Tax Authority proceeded to assess the tax due in the amount of € 1,163,500.00, according to Declaration no. ..., assessed on 27-04-2016 and paid on 28-04-2016 (Document no. 4 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
H) On 21-06-2016, the Claimant entered into a purchase and sale and mortgage contract with Bank F..., S.A., under the terms of which the Claimant acquired from the latter the urban property consisting of an urban building of 3 floors, with basement, ground floor and thirteen floors above ground, intended for services, located at ..., nos. ..., ..., ... and ... and Rua de ..., no. ..., parish of ..., municipality of Lisbon, described in the Land Registry of Lisbon under number ... and registered in the respective urban property matrix under article ... (document no. 5 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
I) Prior to the acquisition of the property identified in the preceding subparagraph, the Claimant completed and submitted the respective declaration for IMT assessment — Form 1 — on the basis of which the Tax Authority proceeded to assess the tax due in the amount of € 1,128,064.60, according to Declaration no. ... assessed on 20-06-2016 and paid on 21-06-2016 (document no. 6 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
J) On 21-10-2016, the Claimant entered into a purchase and sale contract with company G..., S.A., under the terms of which the Claimant acquired from the latter the urban property located at ..., ..., parish of Joint Parish of ... and ..., municipality of Coimbra, described in the ... Land Registry of Coimbra under number ... and registered in the respective urban property matrix under article ... (document no. 7 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
K) Prior to the acquisition of the property identified in the preceding subparagraph, the Claimant completed and submitted the respective declaration for IMT assessment — Form 1 — on the basis of which the Tax Authority proceeded to assess the tax due in the amount of € 871,000.00 (eight hundred and seventy-one thousand euros), according to Declaration no. ... assessed on 21-10-2016 and paid on 21-10-2016 (Document no. 8 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
L) On 27-12-2016, the Claimant entered into a purchase and sale and mortgage contract with H..., S.A. and Bank F..., S.A., under the terms of which the Claimant acquired from the latter the portion of the urban property that each of them held of the urban property denominated Hotel I..., consisting of 2 blocks and outbuilding, located at ..., parish of ..., municipality of Funchal, described in the Land Registry of Funchal under number ... and registered in the respective urban property matrix under article ... (Document no. 9 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
M) Prior to the acquisition of the property identified in the preceding article, the Claimant completed and submitted the respective declaration for IMT assessment — Form 1 — on the basis of which the Tax Authority proceeded to assess the tax due in the amount of € 1,867,910.85, according to Declaration no. ... assessed on 27-12-2016 and paid on 27-12-2016 (document no. 10 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
N) On 25-07-2017, the Claimant entered into a purchase and sale contract with company J... — Branch in Portugal, under the terms of which it acquired from the latter the following urban properties for the global price of € 15,942,866.00, as stated in the purchase and sale contract contained in (Document no. 11 attached with the request for arbitral pronouncement, the contents of which are given as reproduced):
i) Autonomous fraction designated by the letter "A", corresponding to the second left floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua ..., no. ... and..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
ii) Autonomous fraction designated by the letter "B", corresponding to the second right floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua ..., no. ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
iii) Autonomous fraction designated by the letter "C", corresponding to the first left floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua das ..., no. ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
iv) Autonomous fraction designated by the letter "D", corresponding to the first right floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua das ..., no. ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
v) Autonomous fraction designated by the letter "E", corresponding to the left ground floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua das ..., no. ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
vi) Autonomous fraction designated by the letter "F", corresponding to the right ground floor, intended for services, of the urban property located at Rua ..., no. ... and ... and to Rua ..., no. ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
vii) Autonomous fraction designated by the letter "A", corresponding to the second right floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua das ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
viii) Autonomous fraction designated by the letter "B", corresponding to the second left floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
ix) Autonomous fraction designated by the letter "C", corresponding to the first right floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
x) Autonomous fraction designated by the letter "D", corresponding to the first left floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
xi) Autonomous fraction designated by the letter "E", corresponding to the right ground floor, intended for services, of the urban property located at Rua ..., no. ..., and ... and to Rua das ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
xii) Autonomous fraction designated by the letter "F", corresponding to the front ground floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
xiii) Autonomous fraction designated by the letter "G", corresponding to the left ground floor, intended for services, of the urban property located at Rua ..., no. ..., ... and ... and to Rua ..., no. ..., ... and ..., parish of ..., municipality of Oeiras, described in the ... Land Registry of Oeiras under number ... and registered in the respective urban property matrix with article ...;
O) Prior to the execution of the purchase and sale contract mentioned in the preceding subparagraph, the Claimant completed and submitted the respective declarations for IMT assessment — Form 1 — on the basis of which the Tax Authority proceeded to assess the tax due in the amount of € 544,050.30 and € 492,236.00, according to Declaration no. ... assessed on 24-07-2017 and paid on 24-07-2017 and Declaration no. ..., assessed on 24-07-2017 and paid on 24-07-2017, respectively (documents nos. 12 and 13 attached with the request for arbitral pronouncement, the contents of which are given as reproduced);
P) On 13-09-2017, the Claimant submitted a request for official revision of the aforementioned assessments;
Q) No decision was issued on the request for official revision until 11-04-2018, the date on which the Claimant submitted the request for arbitral pronouncement that gave rise to the present proceedings.
2.2. Unproven Facts and Reasoning of the Decision on Factual Matter
There are no material facts for the decision of the case that have not been proven.
The proven facts are based on documents submitted by the Claimant whose correspondence to reality is not contested by the Tax and Customs Authority.
There is no controversy regarding the factual matter.
3. Legal Matter
The Claimant is a real estate investment fund that acquired properties in the years 2015, 2016 and 2017, with IMT being assessed by the Tax Administration at the rate of 6.5%, provided for in subparagraph d) of no. 1 of article 17 of CIMT for "acquisition of other urban properties and other paid acquisitions".
Article 1 of Decree-Law no. 1/87, of 3 January, establishes that "acquisitions of immovable property made for a real estate investment fund by its respective management company are exempt from transfer tax (sisa)".
The Claimant argues that the acquisitions of the properties made are exempt from IMT, as this exemption applies to it, which was not repealed on the dates on which it made the acquisitions of the properties referred to in the contested assessments.
The Tax and Customs Authority argues, in summary, that with the amendment introduced by Law no. 53-A/2006 of 29 December, article 46 of EBF (Tax Benefits Statute) came to regulate the IMT tax benefits for acquisitions of immovable property by investment funds, and by regulating the same matter, it implicitly repealed article 1 of Decree-Law no. 1/87, of 3 January.
Decree-Law no. 1/87 refers to transfer tax (sisa) and not to IMT, but Decree-Law no. 287/2003, of 12 November, which carried out the reform of property taxation, repealed by its article 31, no. 3, the Code of Municipal Transfer Tax and the Code of Inheritance or Donation Tax, but established, in article 28, no. 2, that "all legal texts that mention the Code of Municipal Transfer Tax and the Code of Inheritance or Donation Tax, municipal transfer tax or inheritance or donation tax are deemed to refer to the Code of Municipal Tax on Onerous Transfers of Immovable Property (CIMT), the Stamp Duty Code, the municipal tax on onerous transfers of immovable property (IMT) and stamp duty, respectively".
No. 6 of article 31 of Decree-Law no. 287/2003, establishes that "the tax benefits relating to municipal contribution, now reported to IMI, as well as those relating to municipal transfer tax established in legislation outside the Code approved by Decree-Law no. 41969, of 24 November 1958, and in the Tax Benefits Statute, which shall now be reported to IMT, remain in force".
The acquisitions referred to fall within the scope of the aforementioned article 1 of Decree-Law no. 1/87, so that, if this rule remains in force, the exemption, reported to IMT, will apply, by virtue of these provisions of Decree-Law no. 287/2003.
The essential question to be decided is, therefore, whether or not article 1 of Decree-Law no. 1/87, was repealed, namely by Law no. 53-A/2006, of 29 December.
3.1. Regime for the Cessation of Validity of Law
The general regime for the cessation of validity of law is provided for in article 7 of the Civil Code, which establishes the following:
Article 7
Cessation of validity of law
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Where it is not intended to have temporary validity, a law only ceases to have effect if repealed by another law.
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Repeal may result from express declaration, from incompatibility between the new provisions and the preceding rules, or from the fact that the new law regulates all the matter of the previous law.
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General law does not repeal special law, except if the legislator's intention is otherwise unequivocal.
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The repeal of the law that repealed another law does not bring back into effect the law that this had repealed.
No temporary validity was provided for article 1 of Decree-Law no. 1/87, so that any cessation of its validity can only result from repeal by another law, as follows from no. 1 of this article 7 of the Civil Code.
3.1.1. Express Repeal
No express repeal occurred, specifically before or with the approval of the EBF, by Decree-Law no. 215/89, of 1 July.
In fact, the approval of the EBF was preceded by a comprehensive review of tax benefits, which was initiated by Law no. 2/88, of 26 January (State Budget for 1989), which in its article 49 repealed several tax benefits, including the one provided for in article 7 of Decree-Law no. 1/87, but not the one provided for in article 1, which is at issue here.
The list of tax benefits expressly repealed was completed by Decree-Law no. 485/88, of 30 December, which also does not include the tax benefit provided for in that article 1 of Decree-Law no. 1/87.
After the approval of the EBF, there is also no law that expressly repeals that article 1 of Decree-Law no. 1/87.
Specifically, express repeal was proposed by the Government in article 81, no. 3, of the State Budget Bill for 2007 (Bill no. 99/X), in a list of tax benefits to be repealed, but was not included in the approved Budget law (Law no. 53-A/2006, of 29 December), although the express repeal of other tax benefits was maintained, in article 87.
It is thus unequivocal that it was not intended to expressly repeal article 1 of Decree-Law no. 1/87.
3.2. Implicit Repeal
In the absence of express repeal, the repeal of that article 1 of Decree-Law no. 1/87 could only result from implicit repeal, resulting from "incompatibility between the new provisions and the preceding rules, or from the fact that the new law regulates all the matter of the previous law".
The EBF, in its original wording, does not include any provision on taxes on property relating to real estate investment funds, so it cannot be understood to have regulated all the matter of the previous law.
Moreover, the aforementioned fact that the EBF was preceded by the express repeal of tax benefits, which included one provided for in Decree-Law no. 1/87, but not the one provided for in its article 1, requires the conclusion that it was not intended to repeal this tax benefit.
Decree-Law no. 189/90, of 8 June, added to the EBF article 56, relating to "Real Estate Investment Funds", establishing that "properties included in real estate investment funds are exempt from local property contribution". Law no. 39-B/94, of 27 December, amended the wording of this article to "properties included in real estate investment funds and equivalent funds, in pension funds constituted in accordance with national legislation and in savings-retirement funds are exempt from local property contribution".
With the renumbering carried out by Decree-Law no. 198/2001, of 3 July, this article 56 came to correspond to article 46.
Law no. 32-B/2002, of 30 December, gave article 46 the following wording: "Properties included in real estate investment funds and equivalent funds, in pension funds and in savings-retirement funds, which are constituted and operate in accordance with national legislation, are exempt from local property contribution".
With Law no. 53-A/2006, of 29 December, article 46 of the EBF came to cover tax benefits under IMT, relating to properties included in real estate investment funds.
This article 46 came to have the following wording:
1 - Properties included in real estate investment funds, pension funds and savings-retirement funds that are constituted and operate in accordance with national legislation are exempt from municipal property tax (IMI) and municipal tax on onerous transfers of immovable property (IMT).
2 - Immovable property included in mixed or closed real estate investment funds subscribed privately by unqualified investors or by financial institutions on account of the latter do not benefit from the exemptions referred to in the preceding number, and the IMI and IMT rates are reduced by half.
With Decree-Law no. 108/2008, of 26 June, this article 46 came to correspond to article 49 of the EBF.
This article 49 was successively amended by Law no. 3-B/2010, of 28 April, by Law no. 55-A/2010, of 31 December, by Law no. 83-C/2013, of 31 December, and came to be repealed by Law no. 7-A/2016, of 30 March.
In any of the aforementioned wordings, article 49 only refers to properties included in real estate investment funds, not referring to IMT relating to their acquisition.
In this context, it cannot be understood that implicit repeal has occurred of article 1 of Decree-Law no. 1/87, since all the matter provided for therein, specifically that relating to benefits relating to the acquisition of immovable property by real estate investment funds, was not regulated by any subsequent law.
On the other hand, no provision is found that is incompatible with that tax benefit, since, as the Claimant argues, "while the IMT exemption provided for in no. 1 of Decree-Law 1/87 applies to situations in which the Fund is in the capacity of acquirer, i.e., when it acquires immovable property to integrate its assets, the exemption of article 46 of the EBF applies to situations in which the Fund is in the position of seller, i.e., when it proceeds to the sale of immovable property that already integrates its assets".
In fact, acquisitions of immovable property made for an investment fund referred to in article 1 of Decree-Law no. 1/87 are not covered by article 46 of the EBF.
Furthermore, as the Claimant states, the existence of benefits relating to the acquisition of immovable property concurrently with benefits relating to their transfer is expressly provided for in the regime of incentives for urban rehabilitation, in subparagraphs b) and c) of article 45 of the EBF in the wording introduced by Law no. 114/2017, of 29 December (and was previously provided for in no. 2 of article 45 and no. 8 of article 71), which demonstrates that, from the legislative perspective, there is no obstacle to the cumulation of benefits.
Thus, there is no incompatibility of benefits for the acquisition of immovable property with benefits for their transfer, so the regime of the aforementioned article 46 (later article 49) is not incompatible with the maintenance of the exemption for the acquisition of immovable property by real estate investment funds.
Therefore, it cannot be concluded that article 46 of the EBF regulates all the matter of exemptions for real estate investment funds, and it is perfectly acceptable that it has introduced a new exemption that coexists with the previously existing one.
Thus, as was understood in the arbitral decision handed down in proceedings no. 544/2016-T, "the exemptions in question are substantially and structurally different and independent of each other, and cannot in any way be considered contrary, contradictory or logically irreconcilable. And they can even less be considered legally and economically incompatible. Each retains its own utility independently of what may happen to the other".
Furthermore, and decisively, the aforementioned fact that the express repeal of Decree-Law no. 1/87 was included in the State Budget Bill for 2007, and the bill was not approved, corroborates the conclusion that it was not intended to repeal its article 1. In fact, given that it must be presumed that the legislator knew how to express their intention in appropriate terms (article 9, no. 3, of the Civil Code), the omission in Law no. 53-A/2006 of the express repeal that had been proposed has, objectively, the effect of expressing that it was not intended to repeal that norm, since the appropriate way to express a hypothetical intention to repeal was to refer to it expressly, by approving the bill, and not to obscure it with silence, which, in this context, is appropriate to express the intention to reject the proposed repeal.
Therefore, it must be concluded that article 1 of Decree-Law no. 1/87, of 3 January, was not implicitly repealed, nor was it repealed in 2015, 2016 and 2017, when the acquisitions in question were made.
Consequently, the contested assessments are affected by a defect consisting of violation of law that justifies their annulment, pursuant to article 163, no. 1, of the Code of Administrative Procedure, subsidiarily applicable pursuant to article 2, subparagraph c), of the General Tax Law.
4. Refund of Amounts Paid and Compensatory Interest
The Claimant requests the refund of the unduly paid tax, plus compensatory interest.
The Claimant paid the assessed amounts on 13-04-2015 (assessment no. ...), on 28-04-2016 (assessment no. ...), 21-06-2016 (assessment no. ...), 21-10-2016 (assessment no. ...), 27-12-2016 (assessment no. ...) and 24-07-2017 (assessments nos. ... and ...).
In accordance with the provisions of subparagraph b) of article 24 of RJAT, the arbitral decision on the merits of the claim against which no appeal or challenge lies binds the Tax Administration from the expiry of the period set for appeal or challenge, the latter being required, in the exact terms of the propriety of the arbitral decision in favor of the taxpayer and until the expiry of the period set for voluntary execution of decisions of tax courts, to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been executed, adopting the necessary acts and operations for this purpose", which is in line with the provision of article 100 of the General Tax Law [applicable pursuant to subparagraph a) of no. 1 of article 29 of RJAT] which establishes that "the tax administration is obliged, in case of total or partial allowance of a complaint, judicial challenge or appeal in favor of the taxpayer, to immediately and fully restore the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, from the expiry of the period for execution of the decision".
Although article 2, no. 1, subparagraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals operating in CAAD, not referring to condemnatory decisions, it should be understood that their competences include the powers that, in judicial challenge proceedings, are attributed to tax courts, and this is the interpretation that accords with the meaning of the legislative authorization on which the Government based itself to approve RJAT, in which it is proclaimed, as the first directive, that "tax arbitration proceedings must constitute an alternative procedural means to judicial challenge proceedings and to the action for the recognition of a right or legitimate interest in tax matters".
The judicial challenge process, although it is essentially an annulment process for tax acts, allows for the condemnation of the Tax Administration to pay compensatory interest, as is apparent from article 43, no. 1, of the General Tax Law, which establishes that "compensatory interest is owed when it is determined, in voluntary complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than legally due" and from article 61, no. 4, of the Tax Procedure and Process Code (in the wording given by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original wording), which provides that "if the decision recognizing the right to compensatory interest is judicial, the payment period runs from the beginning of the voluntary execution period".
Thus, no. 5 of article 24 of RJAT, by stating that "payment of interest is owed, regardless of its nature, under the terms provided for in the general tax law and in the Code of Tax Procedure and Process", should be understood as allowing the recognition of the right to compensatory interest in arbitration proceedings.
Moreover, since the right to compensatory interest depends on the existence of the right to an amount to be refunded, from this competence to decide on the right to compensatory interest, it is inferred that it extends to the assessment of the right to refund.
No. 1 of article 43 of the General Tax Law only recognizes the right to compensatory interest when it is determined in voluntary complaint or judicial challenge proceedings that there was error attributable to the services.
In the case at issue, the contested assessments are affected by a defect consisting of violation of law attributable to the Tax and Customs Authority, which made the assessments.
However, the Claimant did not submit a voluntary complaint or judicial challenge of the assessments, but instead submitted a request for official revision, pursuant to article 78 of the General Tax Law.
The request for official revision submitted within the period for voluntary complaint, to which no. 1 of article 78 of the General Tax Law refers, is equivalent to the latter, as was understood in the decisions of the Supreme Administrative Court of 12-07-2006, proceedings no. 0402/06, and of 15-04-2009, proceedings no. 065/09.
However, the Claimant submitted the request for official revision on 13-09-2017, so that only in relation to assessments nos. ... and ..., of 24-07-2017, was the request submitted within the 120-day period from the date of notice of the assessments, provided for voluntary complaint in article 70, no. 1, of the Tax Procedure and Process Code, with reference to subparagraph f) of no. 1 of its article 102.
Thus, in relation to the payments relating to assessments nos. ... and ..., the Claimant is entitled to compensatory interest, pursuant to no. 1 of article 43 of the General Tax Law and article 61 of the Tax Procedure and Process Code.
Concerning the remaining assessments in which the Claimant took the initiative to request the revision of the tax act, only compensation interest is provided for in subparagraph c) of no. 3 of article 43 of the General Tax Law, "when the revision of the tax act at the initiative of the taxpayer is made more than one year after their request".
In this regard, the Supreme Administrative Court has repeatedly pronounced itself, as can be seen from the following decisions: of 6-07-2005, proceedings no. 0560/05; of 02-11-2005, proceedings no. 0562/05; of 17-05-2006, proceedings no. 016/06; of 24-05-2006, proceedings no. 01155/05; of 02-11-2006, proceedings no. 0604/06; of 15-11-2006, proceedings no. 028/06; of 10-01-2007, proceedings no. 523/06; of 17-01-2007, proceedings no. 01040/06; of 12-12-2006, proceedings no. 0918/06; of 15-02-2007, proceedings no. 01041/06; of 06-06-2007, proceedings no. 0606/06; of 10-07-2013, proceedings no. 390/13; of 18-01-2017, proceedings no. 0890/16; of 10-5-2017, proceedings no. 0159/14.
Thus, the Claimant is entitled to compensatory interest only as to the amounts of € 544,050.30 and € 492,236.00, paid on 24-07-2017, in relation to assessments nos. 160117220631030 and 160317220657030.
Compensatory interest is owed at the legal default rate, pursuant to articles 43, no. 4, and 35, no. 10, of the General Tax Law, article 559 of the Civil Code and Ministerial Order no. 291/2003, of 8 April.
5. Decision
In accordance with the foregoing, this Arbitral Tribunal agrees to:
a) Judge the petition for arbitral pronouncement founded, as to the annulment of the assessments;
b) Annul the following assessments:
– no. ..., in the amount of € 487,500.00;
– no. ..., in the amount of € 1,163,500.00;
– no. ..., in the amount of € 1,128,064.60;
– no. ..., in the amount of € 871,000.00;
– no. ..., amount of € 1,867,910.85;
– no. ..., amount of € 544,050.30; and
– no. ..., in the amount of € 492,236.00;
c) Judge the petition for refund to the Claimant of the amounts paid, in the total amount of € 6,554,261.75, as founded and condemn the Tax and Customs Authority to effect this payment;
d) Judge the petition for compensatory interest partially founded, as to the amounts of € 544,050.30 and € 492,236.00, paid on 24-07-2017, in relation to assessments nos. ... and ... and condemn the Tax and Customs Authority to pay to the Claimant interest calculated on these amounts, from 14-07-2017 until their refund.
6. Value of the Proceedings
In accordance with the provisions of article 296, no. 1, of the Code of Civil Procedure and 97-A, no. 1, subparagraph a), of the Tax Procedure and Process Code and no. 3, no. 2, of the Regulations on Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 6,554,261.75.
7. Costs
Pursuant to article 22, no. 4, of RJAT, the amount of costs is set at € 82,008.00, under Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, to be charged to the Tax and Customs Authority.
Lisbon, 20-09-2018
The Arbitrators
(Jorge Lopes de Sousa)
(Suzana Fernandes da Costa)
(Cristina Aragão Seia)
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