CAAD Arbitration 232/2016-T: IMT and Stamp Tax Exemptions for FIIAH Real Estate Investment Funds Under Law 83-C/2013

ARBITRAL DECISION

I - REPORT

1. On 19 April 2016, A… – Real Estate Investment Fund Management Company, S.A., NIPC…, with registered office at …, no.…, …-… Lisbon, in its capacity as managing company and in representation of B… – Closed Real Estate Investment Fund for Rental Housing, with NIPC …, hereinafter referred to as the Claimant, requested the constitution of an arbitral tribunal and filed an application for arbitral decision, pursuant to subparagraph a) of paragraph 1 of Article 2 and subparagraph a) of paragraph 1 of Article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFATM), in which the Tax and Customs Authority is the Respondent (hereinafter referred to as TCA).

2. The Claimant is represented, in the scope of the present proceedings, by its legal representative, Dr. C…, and the Respondent is represented by Dr. D… and Dr. E….

3. The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and notified to the Respondent on 28 April 2016.

4. By means of the request for constitution of the arbitral tribunal and application for arbitral decision, the Claimant seeks to submit to the Tribunal's examination the legality of the assessment act for Municipal Tax on Onerous Property Transfers ("IMT") no.…, in the amount of € 1,392.93 (one thousand, three hundred ninety-two euros and ninety-three cents) and of the assessment act for Stamp Duty ("SD") no.…, in the amount of € 926.80 (nine hundred twenty-six euros and eighty cents).

5. Upon verification of the formal regularity of the request filed, pursuant to subparagraph a) of paragraph 2 of Article 6 of the LFATM and, as the Claimant did not proceed to appoint an arbitrator, the undersigned was appointed by the President of the Deontological Council of CAAD.

6. The undersigned accepted the appointment made, and the Arbitral Tribunal was constituted on 29 June 2016, at the registered office of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, as confirmed by the deed of constitution of the Arbitral Tribunal which was executed and is attached to the present proceedings.

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

8. Given that no exceptions were raised, there being no need for the production of additional evidence beyond that already incorporated in the proceedings by way of documents, and there being no apparent need for the parties to correct their respective procedural pleadings, the proceedings containing all the necessary elements for the pronouncement of the decision, and for reasons of procedural efficiency and expedience, and in accordance with the prohibition on the performance of unnecessary acts, the Tribunal, following the intention manifested by the Respondent, suggested, by order issued on 30 September 2016, the potential waiver of the holding of the hearing referred to in Article 18 of the LFATM and the presentation of arguments.

9. In that same order, the Tribunal, in compliance with paragraph 2 of Article 18 of the LFATM, set 26 December 2016 as the date for the pronouncement of the arbitral decision, and further warned the Claimant that it should proceed with the payment of the subsequent arbitral fee, pursuant to paragraph 3 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

10. On 13 October 2016, the Claimant, by means of a petition, declared that it waived the holding of the hearing referred to in Article 18 of the LFATM, although manifesting its intention to present written arguments.

11. Thus, in light of the position expressly manifested by the parties, the Tribunal, by order issued on 14 October 2016, granted a successive period of 15 days for the Claimant and the Respondent, in that order, to present their respective written arguments, with the Respondent's period commencing upon notification of the Claimant's arguments or upon the expiry of the period for that purpose.

12. On 24 October 2016, the Claimant presented written arguments, and the Respondent presented its arguments on 8 November 2016.

II. The Claimant sustains its application, in summary, as follows:

1. The Claimant supports its application for a declaration of illegality of the assessment acts for IMT and SD no. ("IMT") no.…, in the amount of € 1,392.93 (one thousand, three hundred ninety-two euros and ninety-three cents) and no.…, in the amount of € 926.80 (nine hundred twenty-six euros and eighty cents), respectively, totaling the global amount of € 2,319.73 (two thousand, three hundred nineteen euros and seventy-three cents), on the following grounds:

a) After reference to and transcription of the provisions of the special regime applicable to real estate investment funds for rental housing (FIIAH) and real estate investment companies for rental housing (SIIAH) relevant to the matter at hand, the Claimant begins its exposition by stating that: "Article 8(14) (Tax Regime) of the Tax Regime of the FIIAH (…) clarified unambiguously, and for the first time, the meaning of the expression 'urban properties [are] intended for rental for permanent housing'."

b) Indeed, the Claimant considers that: "In the said legal provision, it was established that, for the purposes of the Tax Regime of the FIIAH, 'urban properties [---] intended for rental for permanent housing' are the urban properties [and autonomous units] 'that are subject to a rental contract for permanent housing within the period of three years counted from the moment they became part of the fund's assets'," whereby "The introduction of this definition of 'urban properties [---] intended for rental for permanent housing' was accompanied by clarification of the circumstances in which properties that form part of the assets of FIIAH cease to benefit from the regime of exemptions provided in paragraphs 6 to 8 of the Tax Regime of the FIIAH (a regime of expiry of exemptions)."

c) Specifying, the Claimant states that: "Thus, should the properties that form part of the FIIAH's assets not have been subject to a rental contract within the period of 3 (three) years, counted from the date of their entry into that patrimony, the taxpayer must request from the Tax Authority, within 30 (thirty) days following the expiry of the said period, the assessment of the respective tax. The taxpayer must also proceed in the following cases: (i) the properties being transferred by the FIIAH or (ii) the FIIAH being liquidated, in both cases, before the period of 3 (three) years, counted from the date of the entry of the relevant properties into the FIIAH's patrimony, has elapsed."

d) Thus, "Article 236 (Transitional Provision within the scope of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (State Budget for 2014), extended the application of the above regime 'to properties that were acquired by FIIAH before 1 January 2014, and in those cases, the three-year period provided in no. 14 shall be counted from 1 January 2014'." That is, the Claimant considers that "the amendments to the Tax Regime of the FIIAH assume particular relevance within the framework of single obligation taxes, in this case, IMT and SD when they concern properties that formed part of the FIIAH's assets on the date of entry into force of Law no. 83-C/2013, of 31 December (State Budget for 2014), that is, those covered by the aforementioned Article 236 (Transitional Provision within the scope of the special regime applicable to FIIAH and SIIAH)."

e) In fact, and in this context, the Claimant: "(…) requested from the Tax Authority the assessment of IMT and SD tax acts in light of the amendments introduced to the Tax Regime of the FIIAH.", given that "These tax acts concerned urban properties that formed part of the patrimony of Fund B…, on the date of entry into force of Law no. 83-C/2013, of 31 December (State Budget for 2014), that is, those covered by the aforementioned Article 236 (Transitional Provision within the scope of the special regime applicable to FIIAH and SIIAH)"

f) And it did so, notwithstanding the fact that it considers that "the Assessments are vitiated by illegality due to violation of Article 103 (Tax System), paragraph 3, of the Constitution of the Portuguese Republic and should, consequently, be declared null."

g) Moreover, the Claimant further states in support of its position that: "IMT [like SD] is a single obligation tax. (…) This qualification is relevant here insofar as the exemptions from IMT and SD, provided respectively in paragraphs 7, subparagraph a), and 8 of Article 8 (Tax Regime) of the Tax Regime of the FIIAH, were recognized at the request of Fund B…, pursuant to Article 10 (Recognition of Exemptions) of the IMT Code, at a moment prior to the entry of the relevant properties into the patrimony of Fund B…. That is, at the moment when the properties – objects of the Assessments – entered the patrimony of Fund B…, the exemptions from IMT and SD provided respectively in paragraphs 7, subparagraph a), and 8 of Article 8 (Tax Regime) of the Tax Regime of the FIIAH became definitively crystallized in the tax legal order."

h) Thus, the Claimant believes that: "(…) the fact subject to taxation is, both for IMT and SD purposes, the acquisition of ownership of the relevant properties by Fund B…. And the exemptions from IMT and SD were not, at the date when they entered the patrimony of Fund B…, conditioned on the verification of any subsequent facts or circumstances, nor, moreover, subject to any regime of expiry."

i) Indeed, "Nothing prevents the legislator from opting for the modification of the Tax Regime of the FIIAH by imposing certain conditions the verification (or non-verification) of which is dependent on their expiry – as it now appears to us to be the case.", however, the Claimant considers that "This is, moreover, inter alia, the regime provided for the exemption from the acquisition of properties for resale (cf. Articles 7 (Exemption from acquisition of properties for resale) and 11 (Expiry of Exemptions), paragraph 5, both of the IMT Code)", whereby "Not being, however, legally provided, at the moment of recognition of the exemption, any facts or circumstances on which the expiry of the exemption recognized depended, it is manifest that the subsequent imposition of these facts or circumstances on exemptions crystallized in the tax legal order of the Claimant is vitiated by unconstitutionality, due to violation of the principle of non-retroactivity of tax law, enshrined in Article 103 (Tax System), paragraph 3, of the Constitution of the Portuguese Republic."

j) The Claimant continues to the effect that: "Article 236 (Transitional Provision within the scope of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (State Budget for 2014), in extending the application of the current Tax Regime of the FIIAH 'to properties that were acquired by FIIAH before 1 January 2014, and in those cases, the three-year period provided in no. 14 shall be counted from 1 January 2014' – is directly and unambiguously violating the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension established there configures a new regime of expiry of the exemptions provided in paragraphs 7, subparagraph a) and 8 of Article 8 (Tax Regime) and not merely a densification of a criterion previously provided. It should be noted that the violation of the retroactivity principle now invoked takes into account the understanding that has been followed by the Constitutional Court according to which the prohibition of retroactivity, in the field of tax law, is directed only at authentic retroactivity, covering only those cases in which the tax fact that the new law intends to regulate has already produced all of its effects under the old law; excluded from its scope of application are situations of retrospectivity or improper retroactivity, that is, those situations in which the law is applied to past facts but whose effects still persist in the present, as occurs when tax norms produce an aggravation of the taxpayers' tax position in relation to tax facts that did not occur entirely in the domain of the old law and continue to form in the course of the same fiscal year, in the vigence of the new law (e.g. decisions no. 128/2009, 85/2010 and 399/2010, all accessible at www.tribunalconstitucional.pt).", to conclude that: "in the case sub judice there is no doubt whatsoever that the tax facts that the new law intends to regulate have already produced all of their effects under the old law.", and to request, finally, "that the nullity of the Assessments be declared on the basis of their unconstitutionality, subsidiarily, should this not be understood, that the Assessments be annulled; and that the Claimant be reimbursed for the entire amount paid due to the Assessments that are the object of the present application for arbitral decision, plus, pursuant to Article 43 (…) of the General Tax Law, the default interest that is owed up to the date of such reimbursement."

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

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

a) On one hand, the Respondent states that "pursuant to paragraph 2 of Article 266 of the CRP, the Administration is obliged to act in compliance with the principle of legality, and such principle is implemented at the infra-constitutional level in paragraph 1 of Article 3 of the Code of Administrative Procedure (CAP). (…) That is, from such legal requirements it follows that administrative bodies and agents do not have competence to decide on the non-application of norms regarding which doubts of unconstitutionality are raised. (…) That is, the Law being the normative standard that governs its action, it does not fall to the Administration, as is obvious, to make judgments of constitutionality regarding norms, as it is not qualified to do so, unlike what occurs with the Courts."

b) Adding, furthermore, regarding this matter that: "(…) the Administration is subject to the law and to law, and its bodies and agents must be the first to comply with it, and therefore, it cannot be required of them to pronounce on the options of the legislator, since these, once expressed in law, are the normative discipline within which it exercises its attributions in the pursuit of the public interest. (…) Wherefore, in short, the TCA could not/cannot refuse the application of a norm or fail to comply with the law invoking or questioning its constitutionality, as it is subject to the principle of legality, as established in Articles 266, paragraph 2 of the CRP, 3, paragraph 1 of the CAP, and 55 of the GTL."

c) On the other hand, as regards the alleged unconstitutionality, after a historical overview of the normative framework of the special regime applicable to real estate investment funds for rental housing (FIIAH) and real estate investment companies for rental housing (SIIAH), from its introduction into the Portuguese legal system until its last amendment, driven by Law no. 83-C/2013, 31.12, it states, from the outset, that: "with regard to the aforementioned property, which formed part of the Fund on the date of entry into force of Law no. 83-C/2013, of 31 December, the Applicant requested from the TCA the assessments of IMT and Stamp Duty, in light of the amendments introduced to the tax regime of the FIIAH, insofar as in 2016, it was transferred to third parties, giving it a destination different from what was supposed: rental housing."

d) Subsequently, as regards the allegation of the vice of nullity to the assessments due to violation of Article 103 of the CRP, it states that "the vice pointed out (…) is not generative of nullity. Indeed, the sanction that falls on an invalid administrative act is its annulability (Article 135 of the [former] CAP), nullity only occurring when it lacks one of its essential elements or when the law expressly sanctions it with that form of invalidity (Article 133 of the [former] CAP). This choice of the legislator is perfectly understandable if we consider that the regime of nullity (which generates absolute inability to produce effects and the possibility of its challenge at any time) must be reconciled with the principles of certainty and stability, fundamental in the activity and in administrative relations, so as not to jeopardize the efficacy and security of this administrative activity with its administered subjects. It happens that, even if the violation of the norm invoked by the Claimant were to occur, namely, Article 103, paragraph 3 of the CRP, the fact is that, as stated, the challenged acts are only capable of annulment and never of declaration of nullity. And thus because, considering that the legal provision of subparagraph d) of paragraph 2 of Article 133 of the CAP is only extensible to the violation of rights, freedoms and guarantees of Title II of Part I of the CRP, the case at hand does not have legal framework here."

e) Moreover, the Respondent argues, under the heading "On the non-violation of Article 103, paragraph 3 of the CRP" that: "as will be demonstrated, given that the assessments in question are based on the fact that the property was given a 'destination different from that which was the basis of the benefit', then, contrary to what the Claimant intends, not only is there no question of retroactivity of the legal norm better identified by it at the beginning of the arbitral application, but also there is no violation of its expectations." Continuing to the effect that, "first, it must be noted that, on the date of creation of the tax regime applicable to FIIAH, with Law no. 64-A/2008, of 31 December, the exemptions in question, both for IMT and Stamp Duty purposes, required, respectively: (i) that the acquisition of the properties was intended exclusively for 'rental for permanent housing' and, (ii) that the transfer had as its object 'properties intended for permanent housing that occurs due to the conversion of the right of ownership of those properties into a right of leasehold on the same, as well as with the exercise of the purchase option provided in paragraph 3 of Article 5'."

f) The Respondent further states that "(…) the taxpayers who wished to benefit from said exemptions always had, from the very beginning of the tax regime applicable to FIIAH, to comply with the requirement that such properties be intended exclusively for rental for permanent housing. (…) and it is certain that, in any case, given the transfer of the properties in 2016, it follows unambiguously that the Applicant could not, in any way, benefit from the requested exemption."

g) The Respondent further states that "all things considered and weighed, it is manifest that, from the beginning of the regime, the tax benefits in question applicable to FIIAH always depended on the dedication of the properties to rental for permanent housing, a legal requirement that the TCA, within the scope of its powers of inspection, could always assess, so as to conclude for the continuance of the benefit or, rather, for the restoration of the regular taxation system. Thus, being the case of the transfer of properties without dedication of the same to rental for permanent housing, this would always determine the expiry of the exemption, pursuant to Article 14, paragraph 2 of the FBL, such that, Article 8, paragraph 16 of the regime came merely to implement an anti-abuse measure, establishing that properties that do not remain in portfolio with exclusive dedication to rental housing, were not acquired for such purpose. Further limiting such expiry to a period defined in the law instead of what occurred previously, due to the application of the FBL."

h) By way of conclusion, the Respondent alludes to the fact that "(…) it is true that the tax fact for IMT or Stamp Duty purposes, for what now matters, occurs at the time of acquisition of the property. However, this does not mean that, in the case at hand, one can conclude for the existence of a circumstance of retroactivity since the new law did not simply come to determine, without more, that previously acquired properties would be subject to taxation for IMT and Stamp Duty purposes. What the new law came to do, rather, was merely to densify criteria already provided in the old law, namely: (i) the concept of dedication to rental for permanent housing, stipulating a more than sufficient period for taxpayers to adapt, gathering an unambiguous means of proof (rental contract); (ii) as well as the clarification of the situations in which the transfer of the property intended for rental does not cause the exemption to expire pursuant to what was previously provided in the FBL. (…) In such terms, contrary to what the Applicant argues, there is no introduction ex novo of a regime of expiry of the benefit, and even less is there any frustration of the expectations of taxpayers or violation of the principle of non-retroactivity of tax law."

i) Finalizing its reasoning, pronouncing itself regarding the default interest claimed, to the effect that "it [cannot] be imputed to the services of the TCA an error that, by itself, has determined the payment of a tax debt in an amount greater than legally due – since it was not within its discretion to decide differently from how it decided – it can only be concluded to the effect that default interest is not owed pursuant to Article 43 of the GTL."

IV. Preliminary Determination

The Tribunal is competent and is regularly constituted, pursuant to subparagraph a) of paragraph 1 of Article 2 and Articles 5 and 6, all of the LFATM.

The parties have legal personality and capacity, demonstrate themselves to be legitimate, are regularly represented, and the proceedings do not suffer from any defects.

V. Findings of Fact

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

a. Facts Found as Proved

With relevance for the decision, the following facts are found as proved:

A) The Claimant constituted the B… – Closed Real Estate Investment Fund for Rental Housing – cf. fact alleged by the Respondent and not contradicted by the Claimant –;

B) On 30.12.2013, the B… – Closed Real Estate Investment Fund for Rental Housing acquired the urban property registered in the respective register under the article …, unit "H", having benefited from the exemption from IMT and Stamp Duty pursuant to subparagraph a) of paragraph 7 and paragraph 8 of Article 8 of the legal framework of the FIIAH – cf. fact alleged by the Respondent and not contradicted by the Claimant –

C) On 26.01.2016, the assessment notices for IMT no. …, in the amount of € 1,392.93 (one thousand, three hundred ninety-two euros and ninety-three cents), and for Stamp Duty no.…, in the amount of € 926.80 (nine hundred twenty-six euros and eighty cents) were issued, the description of the tax fact stating that:

"Payment is requested for [IMT and SD] with reference to the following:

On 30 December 2013 they assessed the IMT no. …/2013 for the acquisition of the article …, unit "H", registered in the urban real estate register of the parish of…, municipality ... to the taxpayer NIPC … (F…) with the benefit Code … FIIAH/SIIAH ( ARTICLE 87 of the OE) at the price of 115,850.00€ with housing dedication. On this date they request payment of IMT because the aforementioned unit is going to be transferred, so it will be given a destination different from that which was the basis of the benefit, the exemption expiring.

In the deed of sale a destination different from that which was the basis of the benefit will be given, the exemption expiring." – cf. Doc. no. 1 attached with the initial petition –

D) On 03.02.2016, the property identified in B) was transferred by the Fund – cf. fact alleged by the Respondent and not contradicted by the Claimant –

E) On 27.02.2016, the Fund proceeded to pay the global amount of € 2,319.73 (two thousand, three hundred nineteen euros and seventy-three cents), by way of assessment of IMT and Stamp Duty referred to in C) above. – cf. Doc. no. 2 attached with the initial petition –.

VI. Facts Found as Not Proved

There are no facts found as not proved, because all the relevant facts for the examination of the application were found as proved.

VII. Legal Grounds

In the present proceedings, the fundamental question that arises is whether the assessment acts for Municipal Tax on Onerous Property Transfers (IMT) and Stamp Duty (SD), effected pursuant to Article 236 of Law no. 83-C/2013, of 31.12, challenged 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, from the outset, the special regime applicable to real estate investment funds for rental housing (FIIAH) and real estate investment companies for rental housing (SIIAH) approved through Article 102 of Law no. 64-A/2008, of 31.12 (LOE2009), with the objective of, following the economic crisis triggered in 2008, assisting various entities with difficulties in fulfilling commitments assumed before financial and credit institutions.

2. Thus, and in this sequence, the special regime of FIIAH was introduced into the Portuguese legal system, with Article 104 of the LOE2009 providing as follows:

"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 Framework of Real Estate Investment Funds, approved by Decree-Law no. 60/2002, of 20 March, amended by Decree-Laws nos. 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 no. 486/99, of 13 November, amended by Decree-Laws nos. 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 specificities contained in the following articles" (bold and underlined by us)

1. Indeed, from the array of specificities provided for in the regime, it is relevant to highlight, only those which, with interest for the present proceedings, are enshrined in paragraph 7 and 8 of Article 8 of the regime, and which according to which:

"7 – Exempted from IMT are:

a) The acquisitions of urban properties or of autonomous units of urban properties intended exclusively for rental for permanent housing, by the investment funds referred to in paragraph 1;

b) The acquisitions of urban properties or of autonomous units of urban properties intended for permanent housing, as a result of the exercise of the purchase option referred to in paragraph 3 of Article 5, by the lessees of the properties that form part of the patrimony of the investment funds referred to in paragraph 1.

8 – Exempted from stamp duty are all acts performed, provided they are connected with the transfer of urban properties intended for permanent housing that occurs due to the conversion of the right of ownership of those properties into a right of leasehold on the same, as well as with the exercise of the purchase option provided in paragraph 3 of Article 5".

1. However, and in accordance with the legislative evolution regarding the exemptions that FIIAH and SIIAH could benefit from, Law no. 83-C/2013, of 31.12, in its Article 235 proceeds to the addition of paragraphs 14 to 16 of Article 8, which now provide that:

"14 – For the purposes of the provisions of paragraphs 6 to 8, it is considered that urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within the period of three years counted from the moment they became part of the fund's patrimony, and the taxpayer must communicate and provide proof to the TCA of the respective actual rental, within 30 days following the expiry of said period.

15 – When properties have not been subject to a rental contract within the three-year period provided in the previous paragraph, the exemptions provided in paragraphs 6 to 8 shall lapse, and in that case the taxpayer must request from the TCA, within 30 days following the expiry of said period, the assessment of the respective tax.

16 – Should the properties be transferred, except in the cases provided for in Article 5, or should the FIIAH be subject to liquidation, before the period provided in paragraph 14 has elapsed, the taxpayer must likewise request from the TCA, prior to the transfer of the property or the liquidation of the FIIAH, the assessment of the tax owed pursuant to the previous paragraph."

1. Additions these, subordinated and dependent upon the transitional provision provided for by Article 236 of Law no. 83-C/2013, of 31.12, within the scope of the special regime applicable to FIIAH and SIIAH, which provided to the effect that:

"1 – The provisions of paragraphs 14 to 16 of Article 8 of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008, of 31 December, shall apply to properties acquired by FIIAH from 1 January 2014 onwards.

2 – Without prejudice to the provision of the previous paragraph, the provisions of paragraphs 14 to 16 of Article 8 of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008, of 31 December, shall also apply to properties that were acquired by FIIAH before 1 January 2014, and in those cases, the three-year period provided in paragraph 14 shall be counted from 1 January 2014."

1. Now, having set out this chronology and the historical evolution of the special regime of FIIAH, we shall then proceed to the interpretation of the norms in question, relying on the general principles that guide this task, in accordance with 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 must be performed in accordance with the general principles of interpretation.

2. Thus, in respect of the general rules of interpretation, we can see that the exemptions from IMT and Stamp Duty provided in paragraphs 7 and 8 of Article 8 of the legal framework of FIIAH and SIIAH only take place when the following requirements are met:

As for IMT:

a) The acquisitions of urban properties or of autonomous units of urban properties, by the investment funds referred to in paragraph 1;

b) intended exclusively for rental for permanent housing,

And/or

a) The acquisitions of urban properties or of autonomous units of urban properties;

b) intended for permanent housing;

c) as a result of the exercise of the purchase option of the property by the lessees of the properties that form part of the patrimony of the investment funds, to the fund, capable of being exercised up to 31 December 2020.

Indeed, and to what concerns us here, subparagraph a) of paragraph 7 of Article 8 of the special regime requires that the property in question be intended for rental for permanent housing in order that it may benefit from the benefit provided there.

As for the Stamp Duty exemption

a) All acts performed by FIIAH;

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

i) Occur due to the conversion of the right of ownership of those properties into a right of leasehold on the same;

ii) Or, occur as a result of the exercise of the purchase option by the lessee up to 31.12.2020.

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

2. That is, the exemption from IMT and Stamp Duty in question is influenced and dependent on the facts and circumstances in light of which it is granted, resulting from the provision and statutory establishment of Article 8, paragraphs 7 and 8 of the FIIAH Regime.

3. However, and given that it is a tax benefit, it is necessary to bring to the discussion the provision of paragraph 2 of Article 14 of the General Tax Law (GTL) according to which:

"The holders of tax benefits of any nature are always obliged to reveal or authorize the revelation to the tax administration of the requirements for their grant, or to comply with other obligations provided by law or by the instrument of recognition of the benefit, namely those relating to taxes on income, expenditure or assets, or to the provisions of the social security system, under penalty of said benefits becoming void."

1. Indeed, and in accordance with this legal provision, also applicable to the legal regime of FIIAH, here in question, the tax benefit provided in paragraphs 7 and 8 of Article 8 of the special regime of FIIAH – exemption from IMT and Stamp Duty – in order to be applicable at the date of its grant, it was necessary that the interested party, here the Claimant, reveal to the Tax Administration the requirements for its grant, as regards the exemption from IMT and SD, namely, and here specifically, that:

As for IMT:

a) The acquisition of the unit designated by the letter "H" of the urban property registered in the respective register under the article … of the parish of …, municipality of ... was intended exclusively for rental for permanent housing.

It should be noted that the obligation to dedicate the unit here in question to rental housing is not a requirement that was added or introduced by the amendments made by the LOE2014, it is in fact, "a requirement of the tax regime of FIIAH ab initio, indeed a natural consequence of the motivations that led to the creation of these funds. The State Budget for 2014 certainly came to establish a new requirement for the exemption: if dedication to rental for permanent housing does not occur within the period of 3 years following the entry of the property into the fund, the fund must request the assessment of the IMT that was not assessed ab initio. (…) it is not enough for there to be a declared intention at the acquisition of the property, but there must be an actual dedication to rental for permanent housing." (Decision of CAAD rendered in case no. 398/2015-T).

As for the SD exemption

The transfer of urban properties intended for permanent housing occurred due to the conversion of the right of ownership of those properties into a right of leasehold on the same, or from the exercise of the purchase option by the lessee up to 31.12.2020.

1. Now, it appears from B) of the facts found as proved that "On 30.12.2013, the B… – Closed Real Estate Investment Fund for Rental Housing acquired the urban property registered in the respective register under the article …, unit "H", having benefited from the exemption from IMT and Stamp Duty pursuant to subparagraph a) of paragraph 7 and paragraph 8 of Article 8 of the legal framework of FIIAH", which means that (apparently) the Claimant, on 30.12.2013, met the necessary and sufficient requirements for the exemption from IMT and SD provided in the special regime to be recognized to it.

2. In this sequence and resuming subparagraph a) of paragraph 7 of Article 8 of the Special Regime, it is important to state, agreeing with some arbitral awards which we transcribe here, that "with respect to the same normative framework, when this refers to the aforesaid norm – i.e., subparagraph a) of no. 7 of Article 8 of the Special Regime – already presupposed that the property was intended for rental for permanent housing in order to benefit from such exemption. Wherefore, we also subscribe to the view that "the obligation to dedicate the property to rental housing is not a requirement of the amendments introduced by the State Budget for 2014, but rather a requirement of the tax regime of FIIAH ab initio, indeed a natural consequence of the motivations that led to the creation of these funds" (Decision of CAAD in case no. 710/2015-T).

3. The truth is that the conditionalities, as already mentioned, were present ab initio in the regime – See paragraph 8 of Article 8 of the special regime – and have not undergone any modification with the amendments introduced by LOE 2014, contrary to what is argued by the Claimant, when it states that: "the exemptions from IMT and SD were not, at the date when they entered the patrimony of Fund B…, conditioned on the verification of any subsequent facts or circumstances, nor, moreover, subject to any regime of expiry."

4. As stated in the aforementioned Decision of CAAD [case 710/2015-T], as regards this matter, "the tax benefit in question is not of a subjective or contractual nature, and was dependent on a condition – dedication to rental housing. Furthermore, tax benefits are not, as is known and as a rule, permanent and, much less, immutable. Indeed, there are several ways to extinguish them such as their express revocation, the suppression of the tax to which the benefit pertains, or the lapse of the normative periods provided for the validity of the 'benefiting' norms with the consequent expiry of the benefits. The Statute itself of Tax Benefits now enshrines, a general regime of extinction of tax benefits provided in its Article 14 and which includes, namely, express reference to cases of tax benefits relating to acquisition of goods intended for the direct realization of the purposes of the acquirers (see paragraph 3). It happens that nothing of that occurred in this case with the entry into force of the State Budget Law for 2014, since it sufficed in introducing an element of densification of the concept 'dedication to rental for permanent housing'. In this respect, it should even be said that it always seemed to us incomprehensible that the reference to 'dedication to rental' did not contain, in the initial regime (i.e., in the wording of the State Budget Law for 2009) any densification. What type of dedication did the tax law intend (e.g., merely accounting)?"

5. Continuing, that arbitral award alluding, regarding facts entirely similar to those of the present proceedings, that: "That said, it is hardly shown to exist a violation of legal expectations on the part of the Claimant, nor even in the aspect of the prohibition of the retroactive tax norm. In this respect, note that the position of the Claimant, before and after the entry into force of the State Budget Law for 2014, underwent no change whatsoever, despite the special regime and the transitional norm coming to indicate a period of holding and imposing actual rental (i.e., execution of contract). Indeed, it was only the transfer of the unit by the Claimant – subsequent to the entry into force of the State Budget Law for 2014 it should be said – that triggered taxation under the norm (already) in force at the time of the transfer. This aspect invokes the traditional position of the Constitutional Court of prevalence, as the taxable event, at the moment of transfer of the goods and not at the moment of their acquisition – see, among all, Constitutional Court Decision no. 85/2010, rendered on 3 March 2010, and our note to the same.]".

6. Indeed, and returning to the facts found as proved in the present proceedings, we find that the Claimant acquired, on 30.12.2013, the unit designated by the letter "H" of the urban property registered in the respective register under the article …, of the parish of …, which it transferred on 03.02.2016.

7. From these facts it appears that the property in question was transferred without having properly fulfilled its purpose – dedication to rental for permanent housing. This is not a matter of time, but merely of fact.

8. As stated in the decision rendered in case no. 398/2015-T, which we recall here: "for compliance with subparagraph a) of paragraph 7 of Article 8, it is not enough to have a declared intention at the acquisition of the property, but there must be an actual dedication to rental for permanent housing."

9. Thus, the Claimant not having proven this requirement, and taking into account that the assessment acts in question concern a property that was transferred by the Claimant in the year 2016, in light of the legal regime of FIIAH approved by Article 102 of Law no. 64-A/2008, of 31.12 (LOE 2009), or the amendments perpetuated by Article 235 of Law no. 83-C/2013, of 31.12 (LOE 2014), the exemption from IMT and SD granted ab initio to the Claimant ultimately did not have support in the Law,

10. … as the Claimant failed to demonstrate to the Tax Administration, as it was incumbent upon it to do, given the provision of paragraph 2 of Article 14 of the GTL, that there was actual dedication of the property to rental for permanent housing.

11. The same applies as regards the exemption from IMT, as the Claimant likewise failed to demonstrate that the transfer of the property in 2016 occurred due to the conversion of the right of ownership into a right of leasehold or that the right of purchase option was exercised by the lessee.

12. Moreover, and as regards the eventual temporal issue, it appears from the facts proved that the assessments of IMT and SD in question were not based on the maintenance of the property with the Claimant for a period equal to or greater than three years without there having been dedication to rental for permanent housing.

13. Indeed, the property remained in the ownership of the Claimant for 2 years and 2 months.

14. Thus, and as explained by Nuno de Oliveira Garcia in case no. 710/2015-T of CAAD, "The benefit in question did not become extinct, nor did it lapse; it was merely regulated, a period of holding being introduced and the condition of actual rental being concretized, which cannot even be considered disproportionate, as we understand that for compliance with the special regime in question – even in the initial version of subparagraph a) of paragraph 7 of Article 8 of the State Budget Law for 2009 – a mere declared intention at the acquisition of the property should not be sufficient, actual rental for permanent housing being necessary. This is – actual rental for permanent housing – the requirement of the benefit, wherefore, and pursuant to Article 12 of the FBL, one cannot even assert that the right to the benefit was constituted by the Claimant, contrary to what it invokes in its initial petition, (…) This understanding is reinforced by the use of the word 'exclusively' in the wording of subparagraph a) of paragraph 7 of Article 8 of the Special Regime."

15. Indeed, given the facts found as proved, we are of the opinion that the assessments in question do not arise for the purpose of a "retroactivity test," but solely and exclusively for the fact that the unit in question was transferred, without it being known, as it was not alleged and consequently not proved, whether it fulfilled its purpose – dedication to rental for permanent housing.

16. In light of the foregoing, taking into account that the assessment acts of IMT and Stamp Duty challenged in the present proceedings were effected pursuant to subparagraph a) of paragraph 7 and paragraph 8 of Article 8 of the special – tax – regime of FIIAH, whose wording has remained unchanged since its approval, maintaining its requirements at the date of acquisition of the properties by the Fund, it is the understanding of the arbitral tribunal that the assessment acts in question are legal, as the required purpose [rental for permanent housing] was not given to the property in question, and due to its subsequent transfer.

17. Proceeding further, in the direction of the analysis of the issue raised by the Claimant regarding the retroactivity or otherwise of the norms introduced by Article 236 of Law no. 83-C/2013, of 31 December, under the heading "Transitional Provision within the scope of the special regime applicable to FIIAH and SIIAH"

18. Now, the State Budget Law 2014, as we have already stated, added to Article 8, paragraphs 14 to 16, as we now retrace:

"14 – For the purposes of the provisions of paragraphs 6 to 8, it is considered that urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within the period of three years counted from the moment they became part of the fund's patrimony, and the taxpayer must communicate and provide proof to the TCA of the respective actual rental, within 30 days following the expiry of said period.

15 – When properties have not been subject to a rental contract within the three-year period provided in the previous paragraph, the exemptions provided in paragraphs 6 to 8 shall lapse, and in that case the taxpayer must request from the TCA, within 30 days following the expiry of said period, the assessment of the respective tax.

16 – Should the properties be transferred, except in the cases provided for in Article 5, or should the FIIAH be subject to liquidation, before the period provided in paragraph 14 has elapsed, the taxpayer must likewise request from the TCA, prior to the transfer of the property or the liquidation of the FIIAH, the assessment of the tax owed pursuant to the previous paragraph."

1. Indeed, from the reading of these legal provisions it appears that none of the situations specifically provided for in them (or at least, no facts to that effect were alleged), have application in the case at hand, as, reporting on the transitional provision provided for in Article 236 of the LOE 2014, to the provision of paragraphs 14 to 16 of Article 8, whose provision is inapplicable to the present situation, the discussion of the retroactivity of the norm in question has no place within the scope of the present proceedings.

2. Now, from the analysis of the assessment acts for IMT and Stamp Duty it appears that those contain the applicable legal provisions, the characterization and quantification of the tax facts, as well as the operations for determination of the taxable base, wherefore, consequently, no defect of lack of grounds can be imputed to these acts, as the acts contain the elements legally required.

3. In light of all the foregoing, it is the understanding of this Tribunal that the claim of the now Claimant is without merit.

VIII. DECISION

On the basis of the factual and legal grounds set out, it is decided, therefore, that the application for a declaration of illegality of the assessment acts for IMT and Stamp Duty no. … and no.…, respectively, in the global amount of € 2,319.73 (two thousand, three hundred nineteen euros and seventy-three cents), is without merit, and the same shall be maintained in the legal order.

Value of the Case

The value of the case is set at € 2,319.73 (two thousand, three hundred nineteen euros and seventy-three cents), pursuant to Article 97-A, paragraph 1, a), of the Code of Tax Procedure, applicable by virtue of subparagraphs a) and b) of paragraph 1 of Article 29 of the LFATM and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs are to be borne by the Claimant, in accordance with Article 12, paragraph 2 of the LFATM, Article 4 of the RCPAT, and Table I attached to the latter, which are set at the amount of € 612.00.

Let it be notified.

Lisbon, 23 December 2016

The Arbitrator

(Jorge Carita)