Summary
Full Decision
ARBITRAL DECISION
I – REPORT
1. A…, taxpayer n.º … and B…, taxpayer n.º …, resident in …, …, …, United Kingdom, married, hereinafter referred to as the Claimants, notified of the additional income tax assessment of Personal Income Tax (IRS) n.º 2016…, and the respective compensatory interest assessment n.º 2016 … and the Statement of Account Adjustment n.º 2016 …, all relating to the year 2013 and finally, notified of the additional income tax assessment of IRS n.º 2016 …, the respective compensatory interest assessment n.º 2016 … and the Statement of Account Adjustment n.º 2016 …, relating to the year 2014, and not conforming thereto, filed, on 18-04-2017, a petition for constitution of a singular arbitral tribunal, in accordance with the combined provisions of articles 2.º and 10.º of Decree-Law n.º 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), and articles 1.º and 2.º of Order n.º 112-A/2011, of 22 March.
2. The Tax and Customs Authority is the Respondent (hereinafter referred to only as "Respondent").
3. The petition for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and automatically notified to the Respondent on 27-04-2017.
4. Given that the Claimant did not proceed with the appointment of an arbitrator, pursuant to article 6.º, n.º 2, subsection a), of RJAT, the signatory was designated as arbitrator, by the President of the Deontological Council of CAAD, with the appointment having been accepted, within the legally provided timeframe and terms.
5. On 12-06-2017 the Parties were duly notified of such designation, and did not manifest willingness to refuse the arbitrator's designation, in accordance with article 11.º, n.º 1, subsections a) and b) of RJAT, combined with articles 6.º and 7.º of the Deontological Code.
6. In conformity with the provision of subsection c), n.º 1, of article 11.º of RJAT, the Arbitral Tribunal was constituted on 03-07-2017.
7. The Claimants allege, in summary, the following:
a. The Tax Inspection Services, by not sustaining in the Conclusions of the Final Tax Inspection Report, in a clear and unequivocal manner, the facts upon which they based their conclusion that the income earned by the Claimants was category F income, failed to comply with the legal duty, constitutionally enshrined, of express, clear and thorough substantiation of the decisions that rest upon them, and therefore, the contested tax acts should be annulled;
b. The Tax Inspection Services fail to meet the burden of proof of verification of the respective indicia or assumptions of taxation that rest upon them, in accordance with n.º 1 of article 74.º of the LGT, that is, of the legal assumptions of their action, in light of the legal presumption of veracity of taxpayers' declarations (article 75.º of the LGT), when the judgment underlying the disregard of the operations results from conclusions of a generic character, without a case-by-case analysis of the Claimants' activity;
c. In the present case, the Tax Inspection Services should have demonstrated which objective facts demonstrate that the tourist exploration in question constitutes a source of category F income and not category B income, as declared by the Claimants;
d. The Tax Inspection Services did not proceed to such demonstration, nor would it be successful, since all risks of the exploration activity are borne by the husband Claimant, who is obliged to maintain the apartment in conditions suitable for exploitation by C… and bears all costs inherent to insurance and current expenses of the apartment, namely water, electricity, telephone, among others, as per the executed contract;
e. The Tax Inspection Services limited themselves to supporting the corrections made on the idea that the Claimants obtain their income in a passive manner – whereas taxation under Category B makes no distinction as to the manner of obtaining income –, and for that reason reclassify Category B income as Category F income, without having collected a single concrete indication that supports this reclassification;
f. The Tax Inspection Services did not demonstrate, with respect to the Claimants, especially to the husband Claimant, the existence of "founded indicia" demonstrating that the income in question is category F income and not category B income, as declared, and therefore the tax acts should be annulled;
g. By understanding that the tourist exploratory activity carried out by them and the income generated therein were earned within the scope of a business activity (albeit resulting from the exploitation of a property), the Claimants treated them within Category B of IRS, by force of the principle of preponderance of this Category in relation to income that falls within other income categories, but which are obtained in connection with a business activity (in the case, a commercial activity);
h. It follows from the provision of subsection a) of n.º 1 of article 3.º and subsection h) of n.º 1 of article 4.º, both of the IRS Code, that the income earned by the Claimants is category B income of the IRS Code and not category F income;
i. Income earned within the scope of income-generating activities of commercial activities is taxed under Category B, namely those resulting from hotel and similar activities;
j. In order for income to be imputable to income-generating activities of an enterprise or professional nature, with the taxpayer registered with the respective CAE, it will only be necessary that the income earned is related to that activity, which occurred in the present case;
k. Being income resulting from tourist exploitation, which is the activity carried out by the husband Claimant, it cannot be taxed as category F income, completely unrelated to the aforementioned commercial activity carried out;
l. Within the scope of subsection a) of n.º 1 of article 3.º of the IRS Code, having the legislator used the expression "activity" without delimiting (restrictively) its extension, it is evident that it intended to include all income obtained, in any manner, from direct exploitation or through the contracting of services to carry out the income in question;
m. It is thus verified that "activity" for purposes of taxation under Category B should not be limited – when the legislator did not do so – to the consideration of operational activity, excluding those who obtain income as a result of the assignment of exploitation and consequent contracting of services, as occurred in the present case;
n. For the Claimants, the term "activity" also encompasses the set of operations aimed at making investments and choosing the appropriate form of management, which in the present case becomes even more pertinent, given that the Claimants are non-resident taxpayers;
o. The position and restrictive interpretation, carried out by the Tax Administration, lacks legal foundation, because attending to the legal concept of activity, it must necessarily be concluded that the income in question should be taxed under subsection a) of n.º 1 of article 3.º of the IRS Code and not in accordance with n.º 2 of article 8.º of the same statute;
p. Administrative circulars, although, when disclosed, intended to clarify the position assumed by the Tax Administration, are weakened from the point of view of their constitutionality and enforceability against taxpayers, especially from the moment they add to or have an innovative character in relation to what is contained in the text of the law, as verified in the case sub judice;
q. It thus appears illegitimate and illegal that the Tax Administration intends to tax the income earned by the Claimants within subsection a) of n.º 1 of article 3.º of the IRS Code (Category B) in accordance with subsection a) of n.º 2 of article 8.º of the same statute (Category F), through an interpretation of its own and contra legem regarding the exercise of activity;
r. Thus, because the contested tax acts are founded on a circular contra legem, the same should be annulled as manifestly illegal;
s. Furthermore, and of manifest relevance to the present case, it is not understood how the Tax Inspection Services concluded that the income obtained by the Claimants does not constitute category B income of the IRS Code by virtue of the assignment of tourist exploitation, when with regard to the assignment of exploitation of the local accommodation establishment, the Tax Administration expressly understands that the income obtained by the owners and assignors of the exploitation of the establishment – as is the case where the Claimants are owners and assignors of the tourist exploitation – is taxed within Category B;
t. By understanding differently in the present case, that the income resulting from the assignment of tourist exploitation of the apartment identified above to C… is category F income of IRS, it is manifest the venire contra factum proprium of the Tax Administration;
u. The Tax Administration is treating differently two similar situations, since in each case the owners, having opened an activity within Category B of IRS and being holders of the right to tourist exploitation, assigned that right of exploitation to third parties, which constitutes a manifest violation of the constitutional principle of equality, and therefore also for this reason the tax acts are illegal;
v. The income earned by the Claimant resulting from the tourist exploitation contract entered into is subsumable to the typology of income from a commercial activity, in particular the pursuit of an activity of a hotel and similar nature, provided for in subsection a), n.º 1, of article 3.º and subsection h), n.º 1, of article 4.º of the IRS Code, and, consequently, the additional IRS assessments, relating to the years 2012, 2013 and 2014, should be annulled, in accordance with subsection a) of article 99.º of CPPT;
w. Even if it were admitted that the income obtained by the Claimants is income from Category F of the IRS Code, but without conceding, the reality is that the taxable matter of the husband Claimant would never be in the amount determined by the Tax Inspection Services during the tax inspection, since the position assumed in the Inspection Report did not, for all legal purposes, consider the totality of expenses incurred by the Claimants with the maintenance of the source of income in question;
x. Beyond expenses inherent to insurance, remuneration of C… and security, the costs relating to cleaning woman, gardener's salary, electricity, water and gas expenses, repairs and paintings should also be considered, to be determined finally at the execution of judgments;
y. The aforementioned expenses should be deducted from the taxable matter insofar as they are essential expenses for obtaining the income in question.
8. The Respondent presented a Response, in which it defends itself by challenging, arguing, for the dismissal of the petition for arbitral pronouncement, in summary, the following:
a. Regarding the alleged lack of substantiation of the corrections now challenged, one must disagree with such understanding, especially because, from reading the inspection report it results that an average person, placed in the position of the addressee, is able to grasp its meaning and conclusion;
b. The substantiation is, in the present case, sufficiently clear and unequivocal, all the more so because the Claimant, through the present petition for arbitral pronouncement, not only demonstrates, in light of the arguments set forth throughout its pleading, to have fully understood the factual and legal framework on which the Respondent's decision was based, since it attempts to rebut, point by point, all its action, but in reality had also fully understood the same factual and legal framework during the prior hearing;
c. Should a situation of lack or insufficiency of substantiation be verified – a hypothesis which only in theory and without conceding is admitted, for caution and duty of representation –, it was incumbent on the Claimant to make use of the mechanism provided for in article 37.º of the Code of Procedure and Tax Process (CPPT) and request the respective notification or issuance of the certificate in accordance;
d. Not having used the Claimants the faculty conferred by law, it is necessary to conclude that the aforementioned acts contained, and indeed contain, all the elements necessary for their full understanding and that the alleged defect from which they might have suffered was remedied;
e. No reason whatsoever asserts to the Claimants when, based on the provisions of articles 3.º and 8.º of the IRS Code, they consider that the income earned should be considered as category B income, despite not resulting from direct exploitation of the property;
f. The law expressly states that income resulting from the exercise of any commercial activity is understood as business income, which does not occur in the present case;
g. The Claimants never performed any act that would suggest a will to exercise any type of property exploitation, since it was also not within their disposal the possibility of not assigning such exploitation;
h. The mere act of purchasing a property and its consequent and immediate assignment of exploitation to a third party must be subsumed to simple acts of management of private property, not constituting, in themselves, signs of exercise of property exploitation activity by whoever assigned the exploitation, as, mistakenly, the Claimants intend;
i. The Claimants, owners of the property, could only be so because they immediately agreed to assign its exploitation in accordance with clause 20 of the assignment contract, never having been holders of any exploitation;
j. It is not understood in what way the understanding of the AT can be called incongruent when, in reality, the 2015 circulated official letter strengthens the position assumed during the inspection procedure analyzed here;
k. From reading the contract of assignment of exploitation, it clearly results that the Claimants never assume the functions of those responsible for the exploitation of the accommodation, such functions being assumed by the Manager in its different aspects;
l. The Claimants do not carry out, nor can carry out any action of free use and utilization of the property of which they are only owners;
m. They further state that the AT's position is also incoherent in light of the position assumed, in 2010, in another inspection procedure which analyzed a request for IVA reimbursement;
n. It happens that, as the Claimants themselves say, not only is it a different taxable year from those that now occupy us, but also the tax in question is different, and in the present case, attention should be given to the specific norms of IRS applicable to the present case;
o. As for the Claimants' claim that the totality of expenses with personnel salaries, cleaning, electricity, gas and water be accepted, since these were not accepted in the analysis carried out in the inspection procedure, it is important to note the provisions of article 41º n.º1 of the IRS Code, in the wording in force at the date of the facts, from which it results that one must evaluate whether those expenses mentioned in the abstract by the Claimants, and not demonstrated during arbitration, have the character of conservation and/or maintenance expenses that are incumbent on the taxpayer;
p. The Claimants, beyond not attaching any documentary element proving the alleged expenses, refer in article 115º of the ppa that the costs should be determined finally, at the execution of judgments, contrary to the provision in art.74º of the LGT, given that the burden of proof is placed on the Claimants;
q. The expenses mentioned by the Claimants do not constitute conservation expenses nor, either, maintenance expenses;
r. Regarding expenses with salaries and cleaning, it clearly results from sections 5 and 6 of the assignment contract that these charges are the responsibility of the Manager, which means that they are not the responsibility of the Claimants, as landlords herein.
9. By order of 21-09-2017, the Tribunal, on the basis of the principles of autonomy in the conduct of proceedings, celerity, simplification and informality of proceedings, decided to waive the holding of the meeting provided for in article 18.º of RJAT, as well as to waive the production of witness testimony, determining that proceedings continue with written submissions.
10. The Claimants contested the decision to waive the production of witness testimony, having requested that the Tribunal set aside the order issued on 21-09-2017 and schedule a date for hearing the witnesses called.
11. By order of 29-09-2017, the Tribunal maintained the decision to waive the production of witness testimony, based on the understanding that the facts invoked in proceedings should be subject to documentary evidence, and relying on the principles of limitation of useless acts (article 130.º of the CPC, applicable ex vi of art. 29.º of RJAT), autonomy in the conduct of proceedings [article 16.º, subsection c), of RJAT] and free determination of the measures of evidence production necessary [article 16.º, subsection e), of RJAT].
12. The Claimants presented written submissions, in which they proceeded to expand the petition, with the formulation of the petition for condemnation of the AT to pay indemnificatory interest, and attached to the case new documents, presenting the following conclusions:
a. In the present case the production of additional evidence (in casu, witness testimony) appeared essential so that the Claimant woman could demonstrate that her conduct was always in consonance with the information transmitted to her by the various bodies of the Tax Administration and that, as such, not all requirements for the reclassification of the income earned by her from the assignment of exploitation of her apartment in … to company C… were met;
b. By excluding the possibility of the Claimants producing all the evidence indicated - and, without prejudice to the principle of free conduct of proceedings, to which article 19.º of RAJT alludes -, it may remove the Arbitral Tribunal from the hypothesis that in the case the determination of the factual matter that the Claimants regard as "correct" would remain, and may, for that reason, call into question the good decision of the case;
c. The undue waiver of means of witness testimony, when the same appears essential to the decision of the case, may determine - should an incorrectness of judgment occur - that the Claimants may challenge, in the context of Appeal (in casu, in the context of Impugnation to be filed with the Central Administrative Court of the South), the factual matter considered as proven by the Arbitral Tribunal, by virtue of the same resulting from a violation of the principles of the right to be heard and equality of the parties (cfr. articles 16.º and 28.º of RJAT);
d. Through collaboration, the Claimants informed this Tribunal that this factual question was already subject to witness questioning, within the scope of proceeding n.º 271/2017-T, which runs before the Centre of Administrative Arbitration - with the Claimants in that proceeding also being non-resident taxpayers in Portugal, to whom corrections were made in IRS (from Category B to Category F), based on the same arguments of the corrections made to the Claimants herein -, and therefore requested, in the name of the principles of procedural economy, celerity and adequate form, the use of the evidence production carried out in the aforementioned proceeding n.º 271/2017-T, by extraction of a certificate from the minutes of questioning, inasmuch as the witnesses called in both proceedings are the same and the facts underlying said proceeding are similar to those indicated in the present case (or even identical, with some exceptions, whose evidence, in these cases, is only of a documentary nature);
e. The Tax Inspection Services, by not sustaining in the Conclusions of the Final Tax Inspection Report, in a clear and unequivocal manner, the facts upon which they based their conclusion that the income earned by the Claimants was income from category F, failed to comply with the legal duty, constitutionally enshrined, of express, clear and thorough substantiation of the decisions that rest upon them, and therefore the contested tax acts should be annulled;
f. The fact that the Claimants did not avail themselves of the mechanism provided for in article 37.º of CPPT does not determine that the Claimants may not allege the lack of substantiation of the act, inasmuch as the mechanism provided for in article 37.º of CPPT is a faculty at the disposal of the taxpayer and not a compulsory or necessary expedient;
g. From the analysis of n.º 1 of article 37.º of CPPT – particularly from the expression "the interested party may" – it is possible to conclude that the legislator places the possibility of obtaining the missing elements in the notification as a mere faculty conferred on the taxpayer and not a burden, and therefore the lack of substantiation of the Tax Inspection Report and, consequently, of the contested assessment acts, determines the illegality of the notified tax acts;
h. The duty to notify the taxpayer of all elements of substantiation is not cut off or set aside by the fact that the legislator has placed, at the disposal of the same, an expedient to petition for notification of missing elements;
i. The Tax Inspection Services failed to meet the burden of proof of verification of the respective indicia or assumptions of taxation that rest upon them, in accordance with n.º 1 of article 74.º of the LGT, that is, of the legal assumptions of their action, in light of the legal presumption of veracity of taxpayers' declarations (article 75.º of the LGT), not having demonstrated, with respect to the Claimants, especially regarding the husband Claimant, the existence of "founded indicia" demonstrating that the income in question is category F income and not category B income, as declared;
j. The classification as Category B by the Claimants was, in a first phase, carried out by guidance of their tax representatives and by the managing entity (D… and, subsequently, C…), which adopted this same classification since the opening of the enterprise in 2006 and, subsequently, by the IVA Services Directorate. Indeed, it follows from the IVA Code that the assignment of a furnished apartment licensed for services, to a third entity in exchange for remuneration, requires the taxpayer to register as a self-employed businessman CAE 55123 - Category B and to collect IVA from the acquirers of services, with the property coming to be part of the business sphere of the taxpayer - hence the registration of the same as a permanent establishment in the statement of commencement of activity of the husband Claimant;
k. The position of the Claimants – as far as IVA is concerned, since the IRS Services Directorate had never pronounced on the matter before the publication of Circular n.º 5/2013 –, was already supported by the IVA Services Directorate in the binding information proceeding n.º 3626, of 09.10.2012, in which it is stated that a lease contract with inclusion of services constitutes "thus, an operation subject to IVA collection at the rate defined in subsection c) of n.º 1 of article 18.º of the said Code";
l. For a matter of coherence of the system and good faith conduct by the AT, it must be concluded that (i) either the income of the husband Claimant is classified as being a business income (Category B) and, as such, is subject to IVA, (ii) or the income of the husband Claimant is classified as being real property income and, for that reason, is not subject to IVA, and being the AT one, the facts at issue being outside its (dis)organization, the tax treatment to be given to its income - specifically to the tax facts that underlie them - must also be one and coherent, and cannot use one criterion for IRS and another criterion for IVA...
m. The IRS reform, in which it became possible for taxpayers to opt for taxation of real property income in accordance with the terms and rules applicable to business and professional income (category B), merely served to clarify how the matter should be treated, thus resolving the conflicts that existed between the application of IVA and IRS in this matter, and in any case, the Claimants understand that, by force of the impositions provided in the IVA Code, the assignment of a properly furnished and equipped property, is a provision of services whatever the nature of the taxpayer (individual or company) and, as such, in the case of individuals, they will always be subject to a classification under Category B;
n. Given the provision in n.º 2 of article 11.º of the LGT, concepts imported by tax law from other branches of law must, as a principle, be interpreted in the same sense that they have therein, unless otherwise directly results from the Law, which is why, in the absence of a definition in the tax codes of the operation of "hotel and similar activities", attention should be given to the provisions of Decree-Law n.º 39/2008, of 7 March, which establishes the legal regime for the installation, operation and functioning of tourist enterprises, inasmuch as the Unit …, which integrates the tourist apartments in question, was established under the legal regime of tourist enterprises, with the respective fractions being framed in the typology of "tourist apartments" which, in accordance with n.º 1 of the respective article 14.º, are capable of being understood as "(…) tourist enterprises constituted by a coherent set of furnished and equipped accommodation units, intended to provide accommodation and other supplementary and support services to tourists.";
o. The property in question was delivered by the Claimants (and other owners) to C…, not to be occupied by the same, but, instead, with the purpose of this ensuring their management and exploitation, as accommodation units integrated in a tourist enterprise, thus the occupation being carried out by third parties in a lodging regime, within the scope of a hotel activity, and such delivery does not have as its counterpart the payment of a rent by C…, which, in fact, is in the opposite position, that is, of an entity providing the set of services necessary for the exploitation of the properties as accommodation units of a tourist unit;
p. Within the scope of subsection a) of n.º 1 of article 3.º of the IRS Code, having the legislator used the expression "activity" without delimiting (restrictively) its extension, it is evident that it intended to include all income obtained, in any manner, from direct exploitation or through the contracting of services to carry out the income in question. At no time does the law make any limitation, and therefore it is not the responsibility of the AT to make such limitation;
q. Just as the concept of income for purposes of taxation under Category B) of the IRS Code is not limited to results obtained by direct means, excluding income from the exercise of activity through contracted services. And if the law does not make this distinction, it is not the responsibility of the AT to do so;
r. The term "activity" also encompasses the set of operations aimed at making investments and choosing the appropriate form of management, which in the present case becomes even more pertinent, given that the Claimants are non-resident taxpayers;
s. Administrative guidelines - and in particular the cited Circular n.º 5/2013, of 2 July 2013 - only bind the organs of the AT and are not considered a source of tax law, and therefore have no own external binding effect, not being even the subject of publication, and therefore taxpayers are in no way obliged to comply with what is provided in the same, nor are the Courts (including the Arbitral Tribunal);
t. Administrative circulars, although, when disclosed, intended to clarify the position assumed by the AT, are weakened from the point of view of their constitutionality and enforceability against taxpayers, especially from the moment they add to or have an innovative character in relation to what is contained in the text of the law (as verified in the case sub judice), and therefore it appears illegitimate and illegal that the AT intends to tax the income earned by the Claimants within subsection a) of n.º 1 of article 3.º of the IRS Code (Category B) in accordance with subsection a) of n.º 2 of article 8.º of the same statute (Category F), through an interpretation of its own and contra legem regarding the exercise of activity;
u. The conduct of the AT, both in the inspection and in the position assumed in the present action, constitutes an abuse of right, in the aspect of venire contra factum proprium that violates the principle of justice and good faith to which it is bound in accordance with article 55.º of the LGT, inasmuch as, following the issue of Circular n.º 5/2013, of 2 July, the representatives of the Claimants requested clarification from the Tax Service of Loulé - … - which validated their understanding with the Finance Directorate of Faro -, having obtained the information that the legal classification they had been making was correct, which is why they should maintain the same;
v. The conduct of the AT - both through contact with its officials, and by force of the position assumed by the Finance Directorate of IVA - created in the minds of the Claimants a (quite) reasonable confidence, of a legitimate character, inasmuch as they could reasonably presume that the position assumed reflected, at the time, the legal understanding of the AT before all cases that merited analogous treatment, in compliance with n.º 3 of article 8.º of the Civil Code. That is, the conduct of the AT was conduct creating confidence, the situation of confidence occurred and the Claimants invested in that confidence to the extent that they acted in accordance with the guidelines of the AT (verbal as to IRS and written relating to IVA);
w. In the context of a tax inspection carried out on the taxpayer E… (NIF …), the Finance Directorate of Faro initially refused the IVA refund – based on the information that the said taxpayer would be improperly classified under Category B –, only to subsequently authorize the said refund;
x. The inspection in question is not an isolated case, inasmuch as it targeted at least 28 owners (individuals) of the same tourist enterprise (Apartments "…") and with the same representative for IVA purposes and was based not only on IVA, but also on IRS, at which time the AT proposed, in an initial phase, the classification of the income of the said taxpayers under Category F (instead of Category B) – which, as seen, was subsequently altered in the final inspection report;
y. Even if it were admitted - which is done merely for caution and duty of advocacy -, that the income obtained by the Claimants is indeed category F income of the IRS Code, the reality is that the taxable matter of the husband Claimant would never be in the amount determined by the Tax Inspection Services during the tax inspection, since the position assumed in the Inspection Report would, in all respects, have to consider the expenses with personnel salaries, cleaning, electricity, gas and water, supported by the Claimants in the years 2013 and 2014;
z. Should the present action come to be decided as well-founded and it being verified that the Claimants proceeded to the payment of improper tax, the AT should be condemned to pay indemnificatory interest, at the maximum rate in force, in accordance with the provision in n.º 1 of article 43.º and n.º 10 of article 35.º of the General Tax Law, in n.º 5 of article 61.º of the Code of Procedure and Tax Process, in article 559.º of the Civil Code and in Order n.º 291/2003, of 8 April.
13. By order of 04-10.2017, this Tribunal granted the Claimants' request for attachment to the case of the translation of one of the documents in the proceeding;
14. The AT presented submissions, in which it fully reproduced what was said in its Response;
15. Simultaneously with the written submissions, the AT challenged the attachment to the case of new documents by the Claimants (attached with the submissions), and requested their removal from the proceeding, pronounced in the sense of non-use of evidence produced in proceeding 271/2017-T, which had been requested by the Claimants, and defended the dismissal of the petition for indemnificatory interest;
16. By order of 08-11-2017, this Tribunal decided:
To admit the attachment to the case of the documents submitted by the Claimant together with the written Submissions and, consequently, to deny the petition for removal of the same, filed by the Respondent, taking into account the provision in n.º 3 of article 423.º of the Code of Civil Procedure and considering that the tribunal rejected the production of witness testimony, which justifies the reinforcement of documentary evidence by the Claimant, the Respondent having had the opportunity to pronounce itself, as it did, on the attached documents;
To admit the expansion of the petition, in conformity with the provision in n.º 2 of article 265.º of the Code of Civil Procedure ex vi subsection e) of article 29.º of RJAT, considering that the petition for condemnation of the Respondent in indemnificatory interest, formulated by the Respondent in the submissions, results from the original petition, and taking into account that the Respondent had the opportunity to exercise, and did exercise, the right to be heard;
To deny the Claimants' petition for use of the witness testimony production carried out under proceeding n.º 271/2017-T, for the reasons already set forth in the Arbitral Order of 29/09/2017.
II – DETERMINATION OF ISSUES
17. The Claimants intend that the Arbitral Tribunal pronounce itself on two income tax assessment acts (of Personal Income Tax), and in both the same circumstances of fact are at issue and the interpretation and application of the same principles or rules of law, and therefore the requirements for the admissibility of cumulation of petitions, provided for in article 3.º, n.º 1, of RJAT, are met.
18. No exceptions were raised.
19. The Parties have legal personality and capacity, are legitimate as to the petition for arbitral pronouncement and are duly represented, in accordance with the provisions of articles 4.º and 10.º of RJAT and article 1.º of Order n.º 112-A/2011, of 22 March.
20. No nullities are verified, and therefore the merits must be addressed.
III. MERITS
III. 1. FACTUAL MATTER
§1. Proven Facts
21. With relevance to the decision, the Tribunal considers the following facts proven:
a) On 27 January 2010, the husband Claimant entered into a preliminary contract, and on 28 January 2010, a financial leasing contract for the acquisition from the company D…, S.A. (NIPC…), hereinafter referred to as "D…", of the property designated "Apartment …", an urban property registered in the land registry of the Parish Union of … and … under the article …, fraction C, located in the enterprise "Apartments …";
b) On 1 November 2012, the husband Claimant entered into a preliminary contract for the acquisition from company D…, of the property designated "Apartment…", an urban property registered in the land registry of the Parish Union of … and … under the article …, fraction D, located in the enterprise "…";
c) On the same dates, the husband Claimant signed with the company C…, S.A., NIPC … (hereinafter "C…") a contract for assignment of tourist exploitation of the units … … and … identified above, with this entity assuming the function of management entity;
d) The tourist apartments "…" are an integral part of the set of tourist enterprises designated by "…", also known as "…", which «has followed a policy of phased development promoted by D.., S.A., since 1989, in order to obtain for each of the enterprises that integrate it the maximum classification allowed by law, of five stars, thus ensuring the homogeneity of the set of tourist enterprises integrated therein and the intended quality of the tourist offering» (cfr. first paragraph of the Preamble of the constitutive title of tourist apartments "…");
e) The tourist apartments "…" are constituted by 154 real property fractions, divided into 13 buildings, all destined for accommodation units;
f) On 8 February 2008, the constitutive title of "…" was deposited with the then General Directorate of Tourism;
g) On 7 July 2008, the Municipal Chamber of … granted a license for tourist use to the enterprise "…";
h) The Claimants (owners) had no intervention in obtaining the license;
i) Since 15 February 2010 the husband Claimant began to exercise the activity of exploitation of tourist apartments, being registered for this purpose with CAE 55123 "tourist apartments without restaurant" and classified in the normal system with quarterly periodicity in IVA and in the organized accounting system, by choice, under IRS (Category B), with in the year 2012 being classified in the simplified system;
j) According to the contract for assignment of tourist exploitation entered into, it was established that the tourist exploitation would be assured by the managing entity (C…), in accordance with the same contract;
k) The Claimants acknowledged and accepted that, during the entire duration of the Contract, they would not exploit, rent or in any other way make available the unit to a third party in exchange for payment, rent, remuneration or any other means of payment (including of a non-pecuniary or gratuitous character), further acknowledging and accepting not to disclose nor to permit that another natural or legal person disclose the unit as being, among others, available for occupation;
l) It is the responsibility of the managing entity (C…) to provide the services described in Section 2.2 of the Contract throughout its duration, more precisely:
A. To manage the Tourist Exploitation Program (...) described in Section 3;
B. To provide the Property Administration Services described in Section 4;
C. To provide the Property Maintenance Services described in Section 5; and
D. To provide the Cleaning and Tidying Services of the Unit described in Section 6.
m) Within the scope of the Tourist Exploitation Program (described in section 3 of the contract for assignment of tourist exploitation), the managing entity (C…) was obliged to manage the operational aspects (current management) inherent to the tourist exploitation of the apartment identified above, specifically dealing with the collection of payments due, collection of expenses, management of reservations, and determination of tariffs;
n) The manager (C…) was responsible for the general administration services of the unit;
o) The nature and object of the general administration services of the unit to be provided will be determined by the manager and include, accounting, sales and marketing, travel agency costs and/or commissions of tour operators and respective expenses incurred, expenses of central services related to the Tourist Exploitation Program and reception service expenses and other related expenses;
p) Within the scope of the general administration services of the unit, the managing entity (C…) committed to carry out routine maintenance services that it freely considered necessary to keep the unit appropriate for occupancy by guests;
q) Also within the scope of the general administration services of the unit, the manager (C…) is responsible for ensuring the cleaning and tidying services of the Unit;
r) In exchange for the management services provided, the managing entity (C…) has the right to retain 25% (twenty-five per cent) of the Gross Revenue of the Tourist Exploitation, or any other percentage that might be agreed upon periodically between the manager and the Claimants;
s) It was incumbent on the Claimants to carry out all operations not related to the operational management of tourist exploitation;
t) It was also incumbent on the husband Claimant to keep the units completely operational, which is why he acquired all equipment and furniture for the Units, equipping it with the standard furniture package, which represented in relation to Unit …. an expense of € 67,200.00 (sixty-seven thousand two hundred euros), including VAT at the applicable statutory rate;
u) The manager (C…) is obliged to provide a monthly account report to the Claimants, within 15 (fifteen) days of the end of each month, as well as an audited annual report (report) of that account;
v) The manager (C…) makes available to the Claimants (owners) the amounts contractually agreed;
w) By reference to the years 2012, 2013 and 2014, the Claimants filed together their income statement Model 3 of IRS, the following results being determined:
| | 2012 | 2013 | 2014 |
|---|---|---|---|
| Net result | 55,495.67 | 16,459.31 | 69,601.00 |
| Taxable result | 55,495.67 | 16,459.31 | 69,601.00 |
| Withholdings at source | 17,045.10 | 24,318.75 | 29,760.78 |
| Liquidation result* | - 3,470.23 | - 20,310.62 | - 12,514.48 |
x) The Claimants were subsequently subject to a tax inspection procedure, directed at analyzing the income declared under IRS with reference to the years 2012, 2013 and 2014, in compliance with the Service Order n.º OI2016…/…/… of 30 August 2016, with the Claimants being notified, through Official Letter n.º…, dated 6 October 2016, of the respective Draft Report;
y) In the said Draft Inspection Report, corrections to the taxable income of the Claimants were proposed, of € 115.62 as of the year 2012, of € 53,091.55 as of the year 2013 and also of € 16,726.04 as of the year 2014;
z) The Tax Inspection Services (SIT) qualified the income earned by the Claimants as category F income;
aa) The expenses incurred by the Claimants relating to the items including personnel salaries, cleaning, electricity, gas and water were not considered by the SIT, on the understanding that they do not meet the conditions to be considered maintenance or conservation expenses;
bb) By not conforming with the cited Draft Inspection Report, the husband Claimant filed, on 18 October 2016 and 19 October 2016, his prior hearing requests;
cc) Notwithstanding the arguments raised during the prior hearing, the Claimants were notified of the Final Inspection Report, in which the Tax Inspection Services maintained the corrections to the taxable matter in accordance with what was initially proposed;
dd) Taking into account the conclusions set forth in the Inspection Report, the Claimants were notified of the tax acts relating to the years 2012, 2013 and 2014, however, they only came to contest in the present action the tax acts relating to the years 2013 and 2014, as described below, in the total amount of €23,799.41:
a. Additional IRS assessment act n.º 2016…, compensatory interest assessment act n.º 2016…, and Statement of Account Adjustment n.º 2016…, all relating to the year 2013, from which an amount payable of € 16,710.87 resulted;
b. Additional IRS assessment act n.º 2016…, the respective compensatory interest assessment act n.º 2016… and the Statement of Account Adjustment n.º 2016…, all issued by reference to the year 2014, from which an amount payable of € 7,088.54 resulted.
§2. Unproven Facts
22. With relevance to the decision, there are no essential unproven facts.
§3. Reasoning as to the Factual Matter
23. As to the proven factual matter, the Tribunal's conviction was based on the free appraisal of the positions assumed by the Parties as to fact, in the Administrative Proceeding and the content of the documents attached to the case.
III.2. LEGAL MATTER
§1. Issues to be Decided
24. The relevant factual matter having been determined, it is verified that the present proceeding concerns exclusively matters of law, and this Tribunal must, based on the provision in n.º 2 of article 608.º of the Code of Civil Procedure, applicable by force of the provision in article 29.º, n.º 1, subsection e), of RJAT, assess and decide the following issues:
1) To know whether the Tax Inspection Report and, consequently, the contested assessment acts, suffer from the defect of lack, incongruence or insufficiency of substantiation;
2) To know whether the income earned by the Claimants constitutes category B income of IRS (as alleged by the Claimants) or whether the same should, rather, be qualified as category F income of IRS (according to the understanding of the Respondent);
3) In case of dismissal of the main petition, to know whether the contested assessment acts suffer from partial illegality by virtue of the non-acceptance, by the AT, of the deduction, under Category F, of all expenses incurred by the Claimants with the property generating the income in question;
4) In case of granting of the petition, to know whether the Claimants are entitled to payment, by the AT, of indemnificatory interest.
§2. Analysis of the Issues to be Decided
A) As to the alleged violation of the duty of substantiation by the Respondent
25. Article 268.º, n.º 3, of the Constitution of the Portuguese Republic (CRP) provides that «administrative acts are subject to notification to the interested parties, in the form provided by law, and require express and accessible substantiation when they affect rights or legally protected interests».
26. In tax matters, article 77.º of the General Tax Law (LGT) provides that «[the] decision of procedure is always substantiated by means of a succinct exposition of the reasons of fact and law that motivated it, the substantiation being able to consist in mere declaration of concordance with the foundations of previous opinions, information or proposals, including those that integrate the report of tax inspection».
27. As is sustained in the judgment of the Supreme Administrative Court (STA) of 11-11-1998, issued in the context of proceeding n.º 31339, «(…) the duty of substantiation requires that a normal person, placed in the position of the respondent, in light of the express content of the act, is able to grasp its meaning and conclusion, in order to be able to determine oneself, consciously, in the sense of challenging or not challenging it».
28. The Claimants understand that the AT did not comply with the said duty of substantiation.
29. The Claimants, however, do not have reason in this matter.
30. As is admitted by the STA in its judgment of 13-04-2000, issued in the context of appeal n.º 31.616, the density of substantiation may vary «depending on the legal type of act and its circumstances», considering acceptable «a less dense substantiation of certain types of acts, such substantiation being considered sufficient as long as it corresponds to a minimum limit that does not characterize it, that is, the "quantum" indispensable to compliance with the minimum requirements of formal substantiation is guaranteed: the revelation of the existence of a reflection and the indication of the main reasons that motivated the agent».
31. As understood in the judgment of the section of dispute resolution of the STA of 25-05-1993, issued in the context of appeal n.º 27387, «[h]eeding the merely instrumental purpose pursued by the substantiation of administrative acts, one should understand that this will be assured whenever, notwithstanding the non-existence of an express reference to any legal provision, or legal principle, the decision in question is situated indisputably in a determined legal framework perfectly cognizable from the point of view of the normal addressee».
32. In the case sub judice, the substantiation of the Tax Inspection Report on which the contested assessments are based is sufficiently clear and unequivocal, allowing a normal addressee to know the logical-legal path followed and understand the reasons that led to the decision.
33. The Claimants, in the arguments they put forward, reveal that they have fully understood the factual and legal framework on which the Respondent's decision was based.
34. It is mentioned, by way of example, article 35.º of the petition for arbitral pronouncement (ppa), which reveals the understanding, by the Claimants, of the reasons that led to the acts performed by the Respondent, whose content is as follows:
«Within the scope of the said Draft Inspection Report, the Tax Inspection Services argued that:
a. The income earned derives only from the making available to third parties of property, and that the owners had no intervention in obtaining the license, whereby the income that the taxpayer earned in 2012, 2013 and 2014, were earned in a merely passive manner, as a result of the pursuit of a commercial activity by C…, and should therefore be classified as category F income in the sphere of the taxpayer;
b. Although the taxpayer has borne all expenses of operation of the tourist exploitation program, part of such charges is not capable of being deducted from category F income and for that reason should be disregarded».
35. Thus, it is concluded, as to the first issue, that the defect of lack, incongruence or insufficiency of substantiation of the contested acts is not verified.
B) As to the qualification of the income earned
36. In accordance with subsection a) of n.º 1 of article 3.º of the Code of Personal Income Tax (CIRS), relating to category B income, «income from business and professional activities are considered […] a) Those resulting from the exercise of any commercial, industrial, agricultural, forestry or livestock activity […]».
37. The legislator enumerates, by way of example, in n.º 1 of article 4.º of CIRS, various activities considered commercial and industrial, among which are found the «hotel and similar activities, restaurants and beverages, as well as the sale or exploitation of the right to periodic residential use» [subsection h)].
38. On the other hand, article 8.º of CIRS, referring to category F income, provides, in the wording applicable at the date of the facts, as follows:
«1 - Real property income is considered the rents of rustic, urban and mixed properties paid or made available to their respective holders.
2 - Are regarded as rents:
a) The amounts relating to the assignment of the use of the property or part of it and to the services related to that assignment;
b) The amounts relating to the rental of machinery and furniture installed in the leased property; […]»
39. In order to determine whether the income earned by the Claimants should be framed, in light of the aforementioned provisions, in category B or in category F of income, for IRS purposes, it is important to know, in the present case, whether the same results from the exercise of a commercial activity (as alleged by the Claimants) or whether, differently, it results from the mere assignment of the property (as sustained by the Respondent).
40. It has been the understanding of the jurisprudence of superior courts, reiterated in the Judgment of the STA of 11-01-2017, issued in the context of proceeding 01622/15, that «the concept of commercial or industrial activity must be determined by the economic concept of commercial or industrial activity, which encompasses activities of mediation between supply and demand and activity of incorporation of new utilities in matter, in both cases with speculative purposes, that is, with the objective of obtaining profits».
41. In the present case, what results from the contract for assignment of tourist exploitation entered into between the Claimants and company D… is that the tourist exploitation would, initially, be the responsibility of this company and that, subsequently, this exploitation would be carried out by a third party, which would come to be designated – company C… .
42. Thus, and as results from the said contract, it is up to C… to assure the tourist exploitation of the real property fraction of which the Claimants are owners.
43. In other words, and in accordance with the words of the STA in the cited judgment (n.º 40), it is C… that develops the activities of mediation between the supply and demand for tourist accommodation.
44. That is, it is C… that assures the commercial activity that consists in the tourist exploitation of the real property fraction of which the Claimants are owners.
45. It is, in any case, important to pay attention to the fact, to which the Claimants draw attention (article 16.º of the petition for arbitral pronouncement), that, as stipulated in the contract for assignment of tourist exploitation, that activity of C… is developed "for the account of" the owners (subsection 2.1 of the contract).
46. Note that acting "for the account of" does not mean the same as acting "on behalf of" – the first expression is appropriate for referring to the relationship existing between principal and agent in a mandate without representation (article 1180.º of the Civil Code), while the second allows reference to the relationship established between principal and agent in a mandate with representation (article 1178.º, n.º 1 of the Civil Code).
47. The exploitation of the real property fraction is, therefore, carried out by C… "for the account of" the Claimant-owners, but not "on behalf of" these.
48. This Tribunal cannot, in any case, ignore that in the present case there is a contract for assignment of tourist exploitation.
49. These contracts have been qualified by jurisprudence as atypical or unnamed contracts (cfr. Judgments of the Supreme Court of Justice of 9 February 2011, issued in the context of proceeding 572/03.8TCFUN.L1.S1, and of 9 June 2009, issued in the context of proceeding nº 823/06.7TCFUN.S1), and must be understood in light of the legal regime for the installation and functioning of tourist enterprises in force (approved by Decree-Law n.º 39/2008, of 7 March, with the amendments introduced by Decree-Law n.º 228/2009, of 14 September, and by Decree-Law n.º 15/2014, of 23 January, which revoked Decree-Law n.º 167/97, of 4 July, with the amendments that had been introduced by Decree-Law n.º 305/99, of 6 August, by Decree-Law n.º 55/2002, of 11 March, and by Decree-Law n.º 217/2006, of 31 October).
50. The enterprise "…" is subject to the legal regime for the installation and functioning of tourist enterprises, as is, moreover, recognized in the constitutive title itself.
51. At the date of deposit of the constitutive title of the enterprise "…" (8 February 2008), the legal regime for the installation and functioning of tourist enterprises (RJIFET) was that which had been approved by Decree-Law n.º 167/97, of 4 July, with the amendments introduced by Decree-Law n.º 305/99, of 6 August and by Decree-Law n.º 55/2002, of 11 March, whose article 1.º, n.º 1, defined tourist enterprises as «establishments intended to provide services of temporary accommodation, catering or tourist animation, having, for their operation, an adequate set of structures, equipment and complementary services».
52. On the exploitation of tourist enterprises, article 44.º of RJIFET provided as follows:
«1- The exploitation of each tourist enterprise must be the responsibility of a single entity.
2- The unit of exploitation of the enterprise is not preventive of the ownership of the various real property fractions that compose it belonging to more than one person.
3- Only accommodation units may be withdrawn from the exploitation of tourist enterprises and only in the cases and on the terms established in the regulation provided for in n.º 3 of article 1.º.
4- Accommodation units that have been withdrawn from the exploitation of a tourist enterprise may not be the object of other commercial, tourist or otherwise exploitation».
53. The legislator clearly distinguished here between the ownership of the various real property fractions that compose the enterprise, which may be plural, and the exploitation thereof, which «must be the responsibility of a single entity».
54. In other words, the legislator admits plural ownership, but imposes the unity of exploitation.
55. From this comes the indispensability of entering into contracts for assignment of tourist exploitation between the owners of the real property fractions and the entity responsible for tourist exploitation.
56. The entering into of such contracts derives from the necessity of compliance with the law, and not from the will of the contracting parties – it is not, therefore, an option of management on the part of the owner of the fraction, but rather a necessary condition for the acquisition of the real property fraction.
57. As to the income in question in the present proceeding relating to the year 2013, the RJIFET approved by Decree-Law n.º 39/2008, of 7 March, with the amendments introduced by Decree-Law n.º 228/2009, of 14 September, was in force (applicable, as a rule, to tourist enterprises existing at the date of its entry into force, by force of the provision in n.º 1 of article 75.º), whose n.º 1 of article 44.º maintains the legal consecration of the rule of unity of exploitation, and in which article 45.º provides as follows:
«1- Without prejudice to the provision in article 49.º, the accommodation units are permanently in a regime of tourist exploitation, with the exploring entity being obliged to assume the continuous exploitation of the totality of the same, even if occupied by their respective owners.
2- The exploring entity must assure that the accommodation units remain at all times furnished and equipped in full conditions to be rented for accommodation to tourists and that in them the compulsory services of the category attributed to the tourist enterprise are provided.
3- When the ownership and tourist exploitation do not belong to the same entity or when the enterprise is in a regime of plural ownership, the exploring entity must obtain from all owners a legal title that enables it to the exploitation of the totality of the accommodation units.
4- The title referred to in the previous number must provide for the terms of tourist exploitation of the accommodation units, the participation of the owners in the results of the exploitation of the accommodation unit, as well as the conditions of utilization thereof by the respective owner».
58. N.º 3 of the cited article makes explicit what already implicitly resulted from the previous version of RJIFET – the indispensability of a legal title that enables the exploitation of the totality of accommodation units.
59. The amendments to RJIFET introduced by Decree-Law n.º 15/2014, of 23 January, had no implications for the text of n.º 1 of article 44.º nor of 45.º, and therefore what was said with respect to the year 2013 is equally valid for the year 2014.
60. In conclusion, the tourist exploitation of the real property fraction of which the Claimants are owners, in the years 2013 and 2014, which are at issue in the present case, was assured by company C…, in observance of the rule of unity of exploitation enshrined in n.º 1 of article 44.º of RJIFET.
61. The Claimants limited themselves to assigning the real property fraction for exploitation, whereby the income that they earned have the nature of rents, as these are defined in subsection a), n.º 2 of article 8.º of CIRS, constituting real property income (as results from n.º 1 of article 8.º of CIRS), framed in category F of income.
62. The income earned by the Claimants does not, therefore, result from the tourist exploitation of the real property fraction of which they are owners, but rather from the assignment of the same for exploitation by another entity (company C…).
63. For this conclusion, it is irrelevant that the Claimants are registered for the exercise of commercial activities, in particular the one referred to as "tourist apartments without restaurant", just as it is irrelevant the regime of IVA in which they are framed.
64. Nor is it relevant to the case the profit intent that may have motivated the Claimants in the acquisition of the real property fraction of the tourist enterprise.
65. Nor is it relevant the fact that the Claimants may have, eventually, some organization for the development of the commercial activities in which they are registered for tax purposes.
66. It should be noted that it is not in question, in the present proceeding, whether the Claimants exercise or do not exercise the commercial activity for which they are registered.
67. What is at issue is whether the income earned in the present case, and only this, with the legal contours that frame the exercise of the activity of tourist exploitation, can be imputed to the Claimants as title of commercial income (framed in category B), the answer to this question being negative.
68. From which it is evident what has already been affirmed above – that the decision of the case sub judice centers on matters of law, and not of fact.
69. What is decisive is that, by legal imposition, the tourist exploitation of the real property fraction of which the Claimants are owners cannot be assured by the same, whereby the income earned by them, and that is at issue in the present proceeding, cannot, logically, be imputed to such activity.
70. The income earned results from the assignment of the real property fraction, whereby it has the nature of real property income.
71. The fact that the income in question cannot be imputed to commercial activity carried out by the Claimants also renders inapplicable the criterion of preponderance of category B – this would only be relevant if the income in question could, simultaneously, be framed in category B and in another category (in the case, in category F), which does not occur in the case sub judice.
72. As has already been demonstrated, it results from RJIFET the legal inadmissibility of exploitation of the real property fractions integrated in tourist enterprises by the various owners thereof, whereby the income obtained by the Claimants cannot be imputed to such exploitation nor, consequently, be framed in category B of income, for IRS purposes.
73. The qualification of the income in question as real property income, framed in category F, results from the interpretation and application of the law, independently of the content of any administrative circular, in particular of Circular n.º 5/2013 of the IRS Services Directorate, which, as the Claimants rightly note, only binds the organs of the AT.
74. Just as the decision of this Tribunal is not bound by any administrative circular, it is also not limited by the sense of any decisions of the AT, carried out following other administrative proceedings, in particular inspection proceedings under IVA or even IRS.
C) As to the non-acceptance by the AT of the deduction of certain expenses in the determination of net income of category F
75. It is now important to analyze the claim of the Claimants, presented alternatively, that the deduction of the totality of costs incurred with the maintenance and conservation of the property be accepted, including those «relating to cleaning woman, gardener's salary, electricity, water and gas expenses, repairs and paintings» (art.119.º of the petition for arbitral pronouncement), considering that the same were not considered deductible by the AT.
76. N.º 1 of article 41.º of CIRS, in the wording in force at the date of the facts, provided as follows:
«From the gross income referred to in article 8.º are deducted maintenance and conservation expenses that are incumbent on the taxpayer, paid by him and found to be documented, as well as the municipal property tax and stamp tax that applies to the value of the properties or part of properties whose income is subject to taxation in the fiscal year» (Wording given by law n.º 66-B/2012, of 31 December).
77. Thus, one must determine whether the referred expenses constitute maintenance and conservation expenses that are incumbent on the taxpayer.
78. For this purpose, it is important to attend to the relevant norms of RJIFET.
79. In truth, if RJIFET cannot fail to be considered for purposes of qualification of income, it also cannot be ignored for the purpose of delimitation of the scope of deductible expenses, attending to the specificities of the activity regulated therein.
80. Article 56.º of Decree-Law n.º 39/2008, of 7 March, in the wording given to it by Decree-Law n.º 228/2009, of 14 September, provided, at the date of the facts, as follows:
«1 — The owner of a lot or autonomous fraction of a tourist enterprise in plural ownership must pay to the administering entity of the enterprise the periodic payment fixed in accordance with the criterion determined in the constitutive title.
2 — The periodic payment is intended to cover the expenses of maintenance, conservation and operation of the enterprise, including those of the accommodation units, common facilities and equipment and common use services of the enterprise, as well as to remunerate the provision of permanent reception, security and cleaning services of the accommodation units and common parts of the enterprise.
3 — In addition to what is provided in the previous number, the periodic payment is intended to remunerate the services of the official accountant and the administering entity of the enterprise, and may cover other expenses provided for in the constitutive title.
[…]
8 — A percentage of no less than 4% of the periodic payment must be assigned to the establishment of a reserve fund intended exclusively for the performance of repair and conservation works of common use facilities and equipment and other expenses expressly provided for in the constitutive title [with amendments introduced by Decree-Law n.º 15/2014 of 23 January, became n.º 9].
9 — Irrespective of the criterion for fixing the periodic payment established in the constitutive title, this may be altered by proposal of the official accountant inserted in the respective opinion, whenever it proves excessive or insufficient in relation to the charges it is intended for and provided that the alteration is approved at an assembly convoked for such purpose [with amendments introduced by Decree-Law n.º 15/2014 of 23 January, became n.º 10].
81. It results from n.º 2 of the cited article that it is important to proceed to the distinction between expenses of maintenance, conservation and operation, with only the former being deductible (provided they are actually incurred and documented), and excluding the possibility of deduction of operation expenses (current expenses), as results from the provision in n.º 1 of article 41.º of CIRS.
82. As expressly understood by the STA in its judgment of 06-07-2016, issued in the context of proceeding 088/16, «[m]aintenance and conservation expenses will be expenses that are necessary to the conservation and maintenance of properties that generate income. They may be, as previously defined in the Urban Lease Regime, art. 11.º, expenses made with ordinary conservation works – repair and general cleaning of the property, works imposed by the Public Administration, and, in general, those intended to maintain the property in the conditions required by the purpose of the contract and existing at its date of celebration; extraordinary conservation works – repair of construction defects of the property or supervening; or even improvement of the property, but always with impact on the property and its susceptibility to generate income».
83. Are thus considered excluded from the concepts of maintenance and conservation the expenses relating to consumption of electricity, water and gas, which cannot, in light of the provision in n.º 1 of article 41.º of CIRS, be deducted from the gross income of category F, contrary to what the Claimants intend.
84. As to the other expenses on which there is disagreement in the case sub judice – expenses with cleaning personnel and gardening, repairs and paintings –, they are integrated in the concept of maintenance and conservation expenses.
85. To know whether these expenses are deductible, one must determine, in light of what was agreed between the parties in the contract for assignment of tourist exploitation, whether it was incumbent on the Claimant-owners to bear them.
86. In accordance with the agreed terms, the expenses with cleaning personnel (6) and gardening (5.5), repairs (5.3) and paintings (5.4), are included in the services that must be provided by the Manager (cfr. Section 6 and subsections 5.3, 5.4 and 5.5 of the contract for assignment of tourist exploitation), and for which this is remunerated, as results from Subsections 2.2. and 2.3 and Section 7 of the contract for assignment of tourist exploitation, whereby the same cannot be deducted by the Claimant-owners.
87. It is incumbent on the manager (C…) to make the payments relating to such expenses, these being borne by the owners through the remuneration paid to that entity.
88. The deductible cost is, thus, the one corresponding to the remuneration paid to the Manager, which is not contested by the Claimants.
89. In conclusion, the petition of the Claimants for consideration, for purposes of deduction from the income of category F of IRS, of the expenses with salaries of personnel (cleaning and gardening), electricity, gas, water, paintings and repairs (art. 119.º of the ppa) relating to the years 2013 and 2014, is dismissed.
D) As to the right to indemnificatory interest
90. N.º 1 of article 43.º of LGT provides that indemnificatory interest is due «[…] when it is determined […] that there was error imputable to the services from which results the payment of the tax debt in an amount greater than that legally due».
91. Having this Tribunal concluded that the contested acts do not suffer from any defect, and that, therefore, there is no error that can be imputed to the services of the AT, the Claimants do not have the right to reimbursement of the amounts of tax paid nor to indemnificatory interest.
V – DECISION
In these terms, and with the foundations set forth, this Arbitral Tribunal decides to judge the petition for arbitral pronouncement totally dismissed and to acquit the Respondent from the petition, with all legal consequences.
VI- VALUE OF THE PROCEEDING
In accordance with the provision in article 306.º, n.º 2, of CPC and 97.º-A, n.º 1, subsection a), of CPPT and 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at € 23,799.41.
VII – COSTS
In accordance with article 22.º, n.º 4, of RJAT, the amount of costs is set at € 1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimants.
Lisbon, 29/11/2017
The Arbitrator
(Paulo Nogueira da Costa)
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