Process: 260/2018-T

Date: December 14, 2018

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 260/2018-T) addresses whether real estate investment funds remain exempt from IMT (Municipal Tax on Onerous Transfers of Real Property) following legislative changes. A real estate investment fund management company, representing a closed special real estate investment fund, challenged an IMT assessment of €135,836.88 issued on property acquisitions made in July 2015. The central legal issue concerns whether Article 1 of Decree-Law No. 1/87 (granting IMT exemption to real estate investment funds) remained in force after the State Budget Law for 2007 introduced Article 46 into the Tax Benefits Statute. The tribunal examined whether the newer provision expressly or tacitly repealed the earlier exemption. The case references previous CAAD decisions (544/2016-T, 677/2016-T, and 440/2017-T) that addressed the same legal question. The fund had acquired three urban properties by public deed, paid the IMT assessment, and filed for official rectification before initiating arbitration proceedings. The arbitral tribunal was constituted under the Legal Regime for Arbitration in Tax Matters (LRAT), with the parties dispensing with the oral hearing. The decision required analysis of the temporal application of IMT legislation, as Article 5 of the IMT Code states that tax incidence is governed by legislation in force when the tax obligation arises, which occurs at the moment of transfer. This case demonstrates the CAAD process for challenging IMT assessments based on alleged errors in legal grounds, specifically regarding the applicability of tax exemptions to collective investment undertakings.

Full Decision

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Vasco Valdez and Jorge Bacelar Gouveia, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby decide as follows:

I – REPORT

On 21 May 2018, A... – Real Estate Investment Fund Management Company, S.A., Tax ID..., with registered office in ..., ..., ..., ..., ...-... Lisbon, in its capacity as management company and in representation of B... – Closed Special Real Estate Investment Fund, Tax ID..., filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as LRAT), seeking the declaration of illegality of the tax assessment act for Municipal Tax on Onerous Transfers of Real Property (IMT) No. ..., in the amount of €135,836.88.

To substantiate its request, the Applicant alleges, in summary, the illegality of the said IMT assessment due to errors in both factual and legal grounds.

On 22-05-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

The Applicant failed to appoint an arbitrator, therefore, pursuant to Article 6(2)(a) and Article 11(1)(a) of the LRAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable time limit.

On 12-07-2018, the parties were notified of these appointments and expressed no intention to challenge any of them.

In accordance with Article 11(1)(c) of the LRAT, the collective Arbitral Tribunal was constituted on 01-08-2018.

On 28-09-2018, the Respondent, having been duly notified, filed its response defending itself solely by way of objection.

Pursuant to Articles 16(c) and (e) and Article 29(2) of the LRAT, the holding of the meeting referred to in Article 18 of the LRAT was dispensed with.

Having been granted a time period for the submission of written pleadings, the parties abstained from doing so.

It was indicated that the final decision would be notified by the end of the time period fixed in Article 21(1) of the LRAT.

The Arbitral Tribunal is materially competent and is duly constituted, in accordance with Articles 2(1)(a), 5 and 6(2)(a) of the LRAT.

The parties have legal standing and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the LRAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings are not affected by any defects of nullity.

Therefore, there is no obstacle to the hearing of the case.

All having been considered, it is necessary to render:

II. DECISION

A. FACTUAL MATTERS

A.1. Facts found as proven

B... – Closed Special Real Estate Investment Fund ("Fund") is a closed real estate fund, constituted pursuant to Decree-Law No. 316/93, of 21 September.

The Fund's activity consists essentially in the acquisition of real property with a view to subsequent sale or lease.

The Applicant, in its capacity as management company and in representation of the "Fund", acquires multiple properties, which are intended to become part of its assets.

The Applicant, in representation of the "Fund", acquired, by public deed of purchase and sale, on 02-07-2015, the following properties:

  • Urban real property registered in the urban property matrix of ... and ... under article ..., with a tax patrimonial value of €717,931.30;

  • Urban real property registered in the urban property matrix of ... and ... under article ..., with a tax patrimonial value of €213,814.98;

  • Urban real property registered in the urban property matrix of ... and ... under article ..., with a tax patrimonial value of €100,327.70.

In the scope of the aforementioned acquisitions, the IMT assessment No. ..., in the amount of €135,836.88, was issued.

On 01-07-2015, the Applicant proceeded to pay the said IMT assessment.

The Applicant filed a request for official rectification concerning the aforementioned IMT assessment.

The Applicant was not, until the date of filing the arbitral request, notified of the decision on the request for official rectification.

A.2. Facts found as not proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Reasoning on the proven and unproven factual matters

With respect to factual matters, the Tribunal does not need to pronounce on everything alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to discriminate between proven and unproven matters (see Article 123(2) of the Tax Procedure Code and Article 607(3) of the Civil Procedure Code, applicable pursuant to Article 29(1)(a) and (e) of the LRAT).

Thus, the facts pertinent to the judgment of the case are selected and defined based on their legal relevance, which is established in light of the various plausible solutions to the legal question(s) (see former Article 511(1) of the Civil Procedure Code, corresponding to the current Article 596, applicable pursuant to Article 29(1)(e) of the LRAT).

Accordingly, taking into account the positions assumed by the parties, in light of Article 110(7) of the Tax Procedure Code, and the documentary evidence attached to the case file, the facts listed above were considered proven, with relevance to the decision.

Allegations made by the parties presented as facts, consisting of strictly conclusive statements incapable of proof and whose truthfulness must be assessed in relation to the concrete factual matters consolidated above, were neither proven nor not proven.

B. LAW

As the Respondent itself states, the essential question raised in the present case is to determine "whether Article 1 of Decree-Law No. 1/97, of 3 January, remains in force or not, which will determine whether Real Estate Investment Funds, regardless of their typology, will or will not be exempt from IMT in the acquisition of real property."

On the other hand, it is important to decide whether the IMT exemption introduced in Article 46 of the Tax Benefits Statute by the State Budget Law for 2007 did or did not repeal – and, if so, whether expressly or tacitly – the transfer tax exemption (IMT) contained in Article 1 of Decree-Law No. 1/87.

This question has already been addressed by CAAD decisions rendered in cases No. 544/2016-T, No. 677/2016-T and No. 440/2017-T[1].

It is necessary to first set out the legal rules relevant at the time the facts occurred.

According to Article 5(1) of the IMT Code, the incidence of IMT is governed by the legislation in force at the time the tax obligation is constituted, with Article 5(2) establishing that this obligation is constituted at the moment the transfer occurs.

Now, as stated in the established facts, the Applicant is a closed real estate investment fund, operating in accordance with the terms provided for in the General Regime for Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February.

The Applicant acquired, by public deed, on 02-07-2015, three properties located in the Union of Civil Parishes of ... and ..., to which correspond the property registration numbers ..., ... and ....

As it is relevant, one must begin by outlining the legal regime applicable to investment funds, created by Decree-Law No. 246/85, of 12-07, and subsequently complemented by Decree-Law No. 1/87 of 03-01, which created fiscal incentives for the constitution of real estate investment funds.

In the preamble of this Decree-Law No. 1/87, it is expressly acknowledged the important contribution that this new type of financial institution could bring to savings formation and their mobilization for investments in the real property sector, in addition to the positive effects that would be induced thereby in construction industries and in the market for rental of real property for residential and office purposes.

Article 1 of the aforementioned Decree-Law No. 1/87 of 03-01 provided that "acquisitions of real property made for a real estate investment fund by its respective management company shall be exempt from transfer tax."

Thus, in accordance with this legal rule, acquisitions of real property made with the objective of integrating a real estate investment fund would be exempt from transfer tax.

Later, Decree-Law No. 287/2003, of 12 November, reformed the taxation of property, approving the Real Estate Investment Tax Code (CIMI) and the Transfer Tax Code (CIMT), published respectively in its Annexes I and II.

With respect to cross-references, Article 28 of Decree-Law No. 287/2003, of 12-11, provided as follows:

"1 - All legal texts that mention the Code of Municipal Contribution or municipal contribution shall be understood to refer to the Code for Municipal Tax on Real Property (CIMI) or the municipal tax on real property (IMI).

2 - All legal texts that mention the Code for Municipal Transfer Tax and Tax on Successions and Donations, municipal transfer tax or tax on successions and donations shall be understood to refer to the Code for Municipal Tax on Onerous Transfers of Real Property (CIMT), the Stamp Duty Code, the municipal tax on onerous transfers of real property (IMT) and the stamp duty, respectively."

The aforementioned Decree-Law No. 287/2003 also included a repeal clause, in Article 31, whose Article 31(6) provided:

"Tax benefits relating to municipal contribution, now referred 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 henceforth be referred to IMT, remain in force."

Indeed, in accordance with Articles 28 and 31(6) of Decree-Law No. 287/2003, and as referred to in the CAAD decision of case No. 544/2016-T, "exemptions from transfer tax should be understood to be referred to IMT, therefore acquisitions of real property carried out by a management company of a real estate investment fund with the objective of them coming to form part of that fund would continue to be exempt from IMT (the transfer tax exemption provided for in Article 1 of Decree-Law No. 1/87, of 3 January). The exemption would exist whenever the fund was in the position of acquirer of the real property."

It should be noted, as stated in the cited CAAD decision of case No. 544/2016-T, "that this exemption had a clear purpose, fully assumed by the tax legislator. At issue was the objective, of a social and economic nature, of establishing a fiscal framework capable of incentivizing the creation of investment funds with the capacity to mobilize savings for the realization of investments in the real property sector, thereby stimulating construction industries and the market for rental of real property for residential and office purposes."

The State Budget Law for 2007, in its Article 82, amended the wording of Article 46 of the Tax Benefits Statute, which came to provide, in addition to the exemption from Municipal Contribution (IMI) for properties forming part of open real estate funds, an IMT exemption for the said properties. Thus, properties forming part of mixed or closed funds, when certain conditions were met, would be entitled to a 50% reduction in IMT rates.

This Article 82 made no reference to the transfer tax exemption (IMT) that was enshrined in Article 1 of Decree-Law No. 1/87 of 03-01.

As the aforementioned CAAD decision of case No. 544/2016-T suggests, the question that arises concerns the problem of determining whether the IMT exemption introduced in Article 46 of the Tax Benefits Statute by the 2007 State Budget Law did or did not repeal – and, if so, whether expressly or tacitly – the transfer tax exemption (IMT) contained in Article 1 of Decree-Law No. 1/87 of 03-01 – which, until then, no one doubted remained in force. This question is pertinent insofar as, pursuant to Article 7(1) of the Civil Code, the general rule regarding cessation of the force of law is that "when not intended to have temporary effect, a law ceases to be in force only if repealed by another law."

Decree-Law No. 1/87 contains no indication that Article 1 would have temporary effect, therefore, admitting its non-repeal by another law, the exemption contained therein will – even today – remain in force, as concluded in the CAAD decision of case No. 544/2016-T.

Thus, the answer to this question will indicate the answer to the question of whether the acts of IMT assessment at issue in the present case are or are not illegal.

Article 7(2) of the Civil Code provides that "repeal may result from express declaration, from incompatibility between the new provisions and the preceding rules or from the circumstance that the new law regulates the entire subject matter of the prior law."

As explained in the CAAD decision of case No. 544/2016-T, "the existence of recognition rules, oriented toward the clear and precise identification of the norms that are in force in the legal system and those that have already been expressly or tacitly repealed, is of the utmost significance, from the perspective of the principle of legality, particularly in its dimension of tax legality, affirming the requirement of legal certainty and protection of confidence inherent in the constitutionally-grounding principle of the rule of law. Citizens, economic agents and legal operators must be able to know with certainty which norms are and which are not in force in the legal system. Article 7 of the Civil Code thus establishes three alternative criteria for repeal, the fulfillment or non-fulfillment of which has significant implications in the specific case."

Let us examine whether any of the three alternatives which, according to Article 7(2) of the Civil Code, would lead to the repeal of Article 1 of Decree-Law No. 1/87 of 03-01, occurred.

The three alternatives of Article 7(2) of the Civil Code are:

  • express declaration of repeal;

  • incompatibility between the new provisions and the preceding rules; or

  • the circumstance that the new law regulates the entire subject matter of the prior law.

As to the first alternative, there is no express repeal provision in Article 46 of the Tax Benefits Statute, in the wording given to it by Article 82 of the 2007 State Budget Law, concerning the aforementioned Article 1 of Decree-Law No. 1/87.

As to the second alternative, the IMT exemption in the new wording of Article 46 would apply whenever the fund was the acquirer of the property, whereas the IMT exemption in Article 1 of Decree-Law No. 1/87 would apply when the fund was in the position of alienator of the property. Indeed, there is no incompatibility between the new provisions (new Article 46 of the Tax Benefits Statute) and the preceding rules (Article 1 of Decree-Law No. 1/87). It should be noted that the new provisions and the preceding rules are not only compatible but create a fiscal regime especially attractive for management companies of real estate investment funds.

It should also be noted that the reduction to half the IMT rates, contained in the current Article 49 of the Tax Benefits Statute, constitutes a significant and non-redundant supplement in relation to the exemption established by Article 1 of Decree-Law No. 1/87. This is a structurally and teleologically distinct exemption from the latter, whose introduction and maintenance in the legal order is based on a different valuation of tax policy.

Continuing with what was stated in the CAAD decision of case No. 544/2016-T, "the possibility of legal-normative coexistence of IMT exemptions at the time of acquisition and alienation of a property is far from constituting an anomalous or systemically dysfunctional solution. Such coexistence can be found today in the Tax Benefits Statute itself, regarding urban properties destined for rehabilitation, when certain prerequisites are met. Indeed, Article 45(2) provides that 'Acquisitions of urban properties destined for urban rehabilitation shall be exempt from municipal tax on onerous transfers of real property, provided that within three years from the date of acquisition, the acquirer initiates the respective works.' In parallel, Article 71(8) of the Tax Benefits Statute provides that 'Acquisitions of urban property or autonomous fraction of urban property intended exclusively for own permanent residence shall be exempt from IMT, in the first onerous transfer of the rehabilitated property, when located in the 'urban rehabilitation area'.' Here too, an IMT exemption at the time of acquisition of the property to be rehabilitated coexists with the exemption at the time of alienation of the rehabilitated property, in a framework of legal complementarity coherent with the economic and social rationality of the established regimes.

A structurally identical solution can also be found in Article 8(7) of the special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH), approved by Article 102 of Law No. 64-A/2008, of 31 December – Chapter X, which provides that the following are exempt from IMT: 'a) Acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for permanent residential lease by the investment funds referred to in No. 1; b) Acquisitions of urban properties or autonomous fractions of urban properties intended for own and permanent residence, as a result of the exercise of the purchase option referred to in No. 3 of Article 5 by the lessees of the properties forming part of the assets of the investment funds referred to in No. 1.'"

In relation to the third alternative of Article 7(2) of the Civil Code, the introduction of the exemption in Article 46 of the Tax Benefits Statute cannot be interpreted as a repeal by substitution of the exemption contained in Article 1 of Decree-Law No. 1/87, not least because tax benefits are not only provided for in the Tax Benefits Statute but may be contained in separate legislation.

Therefore, we must conclude that the two exemptions are different, compatible and complement each other.

Having established this, let us now examine the various amendments made, over time, to the aforementioned Article 46 of the Tax Benefits Statute:

  • the provision, in Article 88 of Law No. 53-A/2006, of 31 December (2007 State Budget Law), of a transitional regime for mixed or closed funds in certain circumstances;

  • the renumbering of Article 46 of the Tax Benefits Statute, which became 49, carried out by Article 109 of Law No. 2-B/2010, of 28 April (2010 State Budget Law), which reserves the IMT exemption for open real estate investment funds;

  • the extension of the IMT exemption to closed funds with public subscription carried out by Article 119 of Law No. 55-A/2010, of 31 December (2011 State Budget Law);

  • the substitution of the IMT exemption for properties forming part of open or publicly-subscribed closed real estate investment funds by a reduction to half the IMT rates, carried out by Article 206 of Law No. 83-C/2013, of 31 December (2014 State Budget Law), accompanied by a transitional regime in Article 209.

The aforementioned amendments concerned the IMT exemption regarding properties forming part of real estate investment funds. Nothing derives from them that could lead to the conclusion that they referred to the exemption contained in Article 1 of Decree-Law No. 1/87.

In this context, one must necessarily conclude, as was concluded in the CAAD decision of case No. 544/2016-T, namely that the transfer tax exemption provided for in Article 1 of Decree-Law No. 1/87, of 3 January, and which came to be referred to in the context of IMT, pursuant to Articles 28 and 31 of Decree-Law No. 287/2003, of 12-11, remains in force. Therefore, acquisitions of real property made for a real estate investment fund by its respective management company are exempt from IMT.

Now, the Applicant acquired three properties which it allocated to the fund itself. Thus, the IMT exemption provided for in Article 1 of Decree-Law No. 1/87 of 03-01, is applicable to the acquisition in question, and no IMT should be payable as a result of the said acquisition.

Therefore, and in conclusion, the Applicant is correct, and the declaration of illegality of the challenged assessments is determined, wherefore the arbitral request is granted with the consequent annulment of the said IMT assessments and all further consequences.

With respect to the request for compensatory interest submitted by the Applicant, Article 43(1) of the General Tax Law provides that compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the Tax Authority that resulted in payment of the tax debt in an amount exceeding what was legally due.

Indeed, Article 43(1) of the General Tax Law provides as follows:

"Compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the Tax Authority that resulted in payment of the tax debt in an amount exceeding what was legally due."

In the case at issue, it is proven that the assessment was issued at the request of the Applicant, therefore, only after the expiration of the time period that the Respondent had to pronounce on the matter, having failed to do so, can the error in the said assessment be considered attributable to the Respondent.

The Applicant is therefore entitled to be reimbursed the amount it paid (pursuant to Article 100 of the General Tax Law and Article 24(1) of the LRAT) as a result of the annulled acts and, further, to be indemnified for the undue payment through the payment of compensatory interest by the Tax Authority, from the formation of the tacit rejection of the request for official rectification submitted by the Applicant, until reimbursement, at the legal supplementary rate, pursuant to Articles 43(1) and (4) and 35(10) of the General Tax Law, Article 559 of the Civil Code and Ordinance No. 291/2003, of 8 April.

C. DECISION

For these reasons, this Arbitral Tribunal decides to grant in full the arbitral request filed and, consequently:

  • Annul the act of IMT assessment No. ..., in the amount of €135,036.88;

  • Condemn the Tax Authority to the return of the amount of tax improperly paid, and to the payment of compensatory interest as indicated above;

  • Condemn the Respondent to pay the costs of the proceedings, as fixed below.

D. Value of the Process

The value of the process is fixed at €135,036.88, in accordance with Article 97-A(1)(a) of the Tax Procedure and Process Code, applicable pursuant to Articles 29(1)(a) and (b) of the LRAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at €3,060.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Tax Authority, since the request was entirely granted, pursuant to Articles 12(2) and 22(4) of the LRAT and Article 4(4) of the aforementioned Regulation.

Notification shall be given.

Lisbon, 14 December 2018

The Presiding Arbitrator

(José Pedro Carvalho)

The Arbitrator Member

(Vasco Valdez)

The Arbitrator Member

(Jorge Bacelar Gouveia)

[1] Available for consultation at www.caad.org.pt.

Frequently Asked Questions

Automatically Created

Are real estate investment funds exempt from IMT (property transfer tax) in Portugal?
Real estate investment funds in Portugal have historically benefited from IMT exemption under Article 1 of Decree-Law No. 1/87. However, the legal landscape became uncertain when the State Budget Law for 2007 introduced Article 46 into the Tax Benefits Statute, creating a specific IMT exemption regime. The critical question is whether this newer provision repealed the earlier blanket exemption for all real estate investment funds or merely supplemented it. CAAD case law has addressed this issue in multiple decisions (544/2016-T, 677/2016-T, 440/2017-T), examining whether closed special real estate investment funds retain exemption status. The fund must be constituted under applicable collective investment legislation (currently Law No. 16/2015) and operate in compliance with regulatory requirements. The exemption's applicability depends on when the property transfer occurred and which legislative framework governed at that time, as Article 5 of the IMT Code establishes that tax incidence is determined by legislation in force when the tax obligation arises.
What legal grounds can be used to challenge an IMT tax assessment in Portugal?
Challenging an IMT assessment in Portugal can be done through administrative procedures or tax arbitration. Legal grounds include: (1) errors in factual assumptions (matéria de facto) - incorrect determination of property value, transaction nature, or taxpayer status; (2) errors in legal grounds (matéria de direito) - misapplication of exemptions, incorrect tax rates, or improper legal interpretation; (3) violation of applicable tax benefits or exemptions under the Tax Benefits Statute or specific legislation; (4) procedural irregularities in the assessment process. Before initiating arbitration, taxpayers typically file a request for official rectification with the Tax Authority. If no decision is rendered or the taxpayer disagrees with the response, arbitration proceedings can be initiated under the Legal Regime for Arbitration in Tax Matters (LRAT - Decree-Law 10/2011). The arbitration request must specify the contested assessment, the amount involved, and detailed grounds for illegality. Supporting documentation including deeds, assessment notices, and proof of payment must be submitted. CAAD arbitration offers a faster alternative to judicial courts with specialized tax law arbitrators.
How does the CAAD arbitration process work for disputing IMT tax assessments?
The CAAD arbitration process for IMT disputes follows the Legal Regime for Arbitration in Tax Matters (LRAT). The process begins with filing an arbitration request (Article 10 LRAT) specifying the contested assessment and grounds for illegality. Upon acceptance, the Tax Authority is automatically notified. Parties may appoint arbitrators; if they fail to do so, the CAAD Deontological Council appoints them (Article 6(2)(a) and 11(1)(a) LRAT). A collective tribunal typically consists of three arbitrators, with one serving as presiding arbitrator. The tribunal is formally constituted once arbitrators accept appointments and challenge periods expire (Article 11(1)(c) LRAT). The Tax Authority files a response, defending by objection or merit. Parties may waive the oral hearing (Article 16 and 18 LRAT), proceeding directly to written pleadings or final decision. The tribunal verifies its material competence, proper constitution, parties' legal standing, legitimacy, and legal representation. The decision must address factual findings (proven and not proven facts) with reasoning, then apply relevant law. Final decisions must be rendered within statutory deadlines (Article 21(1) LRAT). The process emphasizes efficiency, specialization, and expedited resolution compared to traditional judicial litigation.
What constitutes an error in factual and legal assumptions for IMT tax liquidation?
Errors in factual assumptions (vícios na matéria de facto) for IMT assessments involve incorrect determination of objective facts underlying the tax obligation. These include: misidentification of property characteristics, incorrect taxpayer classification (e.g., failing to recognize fund status), erroneous transaction value determination, or improper assessment of property usage. Errors in legal grounds (vícios na matéria de direito) involve misapplication or misinterpretation of tax law. Common examples include: incorrect application of tax exemptions (such as those for investment funds under Decree-Law 1/87 or Tax Benefits Statute Article 46), wrong tax rate application, failure to recognize applicable tax benefits, misinterpretation of legislative provisions, or incorrect temporal application of tax rules. In IMT cases involving investment funds, legal errors often concern whether exemption provisions remain in force, whether newer legislation repealed earlier exemptions (expressly or tacitly), and whether the fund qualifies under applicable exemption criteria. The tribunal must examine whether the Tax Authority correctly applied Article 5 of the IMT Code regarding temporal application of legislation. Taxpayers bear the burden of proving factual errors, while legal interpretation involves analyzing statutory provisions, legislative history, and relevant case law. Both types of errors constitute grounds for declaring an assessment illegal and obtaining rectification or refund.
Can a fund management company represent an investment fund in Portuguese tax arbitration proceedings?
Yes, a fund management company can represent an investment fund in Portuguese tax arbitration proceedings. Article 4 and 10 of the LRAT, combined with Article 1 of Ordinance No. 112-A/2011, establish legal standing and representation requirements. In this case, A... Real Estate Investment Fund Management Company, S.A. filed the arbitration request 'in its capacity as management company and in representation of' the B... Closed Special Real Estate Investment Fund. The tribunal explicitly verified that parties have 'legal standing and capacity, are legitimate and are legally represented' under applicable provisions. Investment funds, as collective investment undertakings without separate legal personality in all aspects, operate through management companies that act on their behalf. For tax purposes, funds have their own Tax ID numbers and are treated as separate taxable persons, but legal acts including litigation must be performed by the management entity. The management company's authority derives from its statutory role under the General Regime for Collective Investment Undertakings (Law 16/2015) and the fund's constitutive documents. When filing arbitration, the management company must clearly identify its representative capacity, provide the fund's Tax ID, and demonstrate proper authorization. This representation structure applies to all tax proceedings, including IMT assessments on property acquisitions made for the fund's asset portfolio.