IMI Exemption for UNESCO World Heritage Properties: Alto Douro Wine Region CAAD Case 279/2018-T

ARBITRAL DECISION

I - Report

1. A..., S.A., hereinafter referred to as the "Claimant," taxpayer no. ..., with registered office at Street ..., no. ..., in ..., requested the establishment of a single arbitral tribunal, under the combined provisions of article 2, paragraph 1, letter a) and article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to simply as "LFTM") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, in which the Tax and Customs Authority (AT) is the Respondent.

2. The request for arbitral decision, submitted on 04 June 2018, concerns the declaration of illegality of the order dismissing the administrative complaint no. ...2018..., issued by the Head of the Finance Service of ..., on 02 March 2018, and the consequent partial annulment of the municipal property tax (IMI) assessment for the year 2016, made by the "AT" on 02 March 2017, to which correspond the collection documents no.s 2016..., 2016... and 2016..., in the total amount of 57,518.27 € (fifty-seven thousand, five hundred and eighteen euros and twenty-seven cents).

3. It further requests condemnation of the Respondent to refund the amount paid relating to said assessment, in the amount of 6,462.43 €, plus the respective compensatory interest, under the terms of articles 43, paragraph 1 of the General Tax Law (LGT) and 61 of the Tax Procedure and Process Code (CPPT), counted from the date of improper payment of the tax until the date of processing of the respective credit note.

4. The Claimant chose not to appoint an arbitrator.

5. The request for establishment of the arbitral tribunal was accepted by the President of CAAD and notified to AT on 05 June 2018.

6. The signatory was appointed by the President of the Ethics Council of CAAD as arbitrator of the single arbitral tribunal, under the terms of article 6 of the LFTM, and acceptance of the appointment was communicated within the applicable period.

7. On 24 July 2018, the Parties were notified of this appointment, and neither opposed it, under the combined terms of article 11, paragraph 1, letters a) and b) of the LFTM and articles 6 and 7 of the CAAD Ethics Code.

8. Thus, in accordance with the provisions of article 11, paragraph 1, letter c) of the LFTM, the single arbitral tribunal was constituted on 13 August 2018.

9. The Respondent was notified, by arbitral order of 14 August 2018, under the terms of article 17, paragraph 1 of the LFTM, to, within a period of 30 days, submit a Response, if it wished, and request the production of additional evidence.

10. It was further notified to submit, within the same period, the administrative file (AF) referred to in article 111 of the CPPT.

11. On 28 September 2018, the Respondent submitted its Response, defending itself by exception (expiration of the right of action) and by challenge, respectively requesting the acceptance of the peremptory exception raised and consequent dismissal of the claim, or, if this were not to be accepted, the rejection of the request for arbitral decision, as unproven, with the tax act of assessment remaining in the legal order and the consequent dismissal of the Respondent from the claim.

12. On the same date it appended to the file the respective AF.

13. On 29 September 2018 the Claimant was notified to, if it wished, respond to the raised exception, which it did on 15 October 2018.

14. Considering that the Parties did not request the production of any evidence beyond the documentary evidence attached to the file, the Arbitral Tribunal, in light of the principles of autonomy in the conduct of the proceedings, celerity, simplification and procedural informality, inherent in articles 16 and 29, paragraph 2, of the LFTM, by order of 16 October 2018, dispensed with the holding of the meeting provided for in article 18 of the same statute, and further decided that the proceedings would continue with optional written submissions, within a period of 10 days, successively for the Respondent.

15. By the same order it was determined that the arbitral decision would be issued by the end of the period referred to in article 21, paragraph 1 of the LFTM.

16. On 30 October 2018 written submissions were presented by the Claimant.

17. And on 07 November 2018 by the Respondent.

Position of the Parties

Of the Claimant -

It supports its request for arbitral decision, synthetically, as follows:

Regarding the properties of which the Claimant is the owner, the assessment of IMI for the year 2016 was made, in the amount of 57,518.33 €, paid in three installments in the months of April, July and November 2017.

However, some of the properties, namely those located in the parishes of ... and Union of Parishes of ..., ... and ..., in the municipality of ..., district of Vila Real, to which corresponds the IMI assessed in the amount of 6,462.42 €, are an integral part of the region of Alto Douro Vinhateiro, considered as UNESCO World Heritage, as evidenced by Notice no. 15170/2010, published in the Official Journal, II Series No. 147 of 30 July 2010, as evidenced by the certificates issued by the Regional Directorate of Culture North, which it attaches.

Therefore, since such properties integrate the Alto Douro Vinhateiro Region – UNESCO World Heritage – they are classified as national monuments, in accordance with the joint interpretation of the provisions of paragraphs 3 and 7 of article 15 of Law 107/2001, of 8 September, and as such are exempt from IMI under the terms provided in letter n), paragraph 1 of article 44 of the Tax Benefits Statute, since the year, inclusive, in which the classification occurred, that is, since the year 2001, cf. letter d), paragraph 2 of said article 44.

On the other hand, it does not appear necessary any individualized classification of the properties, especially since paragraph 5 of article 44, as amended by Law no. 3-B/2010, of 28 April, expressly provides that said exemption is automatic in nature, operating through communication of the classification as national monuments to be made by the Institute for Management of Architectural and Archaeological Heritage, I.P. (IGESPAR, I.P.), and in force while the properties are classified, even if they come to be transferred.

It concludes by requesting the acceptance of the request for arbitral decision and thereby the annulment of the order dismissing the administrative complaint prolatred in Administrative Complaint Process no. ...2018... and partial annulment of the assessed liability, in the amount of 6,462.43 €, with all the consequences provided by law, namely the refund of the amount improperly paid, plus the corresponding compensatory interest calculated from the date of improper payment of the tax until its return.

Of the Respondent -

Defending itself by exception, it invokes the following arguments:

That the Claimant "seeks to challenge the IMI assessments no. 2016-... and no. 2016-... and 2016-2016-..., relating to the period 2016," as provided in articles 1 and 2 of the petition, but that the administrative complaint only covered the first two assessments.

As the request for arbitral decision (RAD) was presented on 04-06-2018 and assessment no. 2016-2016-..., which was not covered by the administrative complaint, has the payment deadline of 30-11-2017, the said RAD was presented on a date when the right of the Claimant to challenge that assessment had already expired, "since more than 90 days elapsed between 2017-11-30 and 2018-06-04," expiration that constitutes a peremptory exception, cf. article 576, paragraphs 1 and 3 of the Civil Procedure Code, thereby extinguishing the legal effect of the facts asserted by the Claimant, giving rise to partial dismissal of the claim.

It concludes by requesting the acceptance of the peremptory exception raised regarding expiration of the right of action.

Defending itself by challenge, it invokes the following arguments:

For the Claimant all properties are classified as National Monuments, solely and only because they are found within the cultural landscape of Alto Douro Vinhateiro, considered World Heritage by UNESCO in 2010, whereby such properties meet the requirements established in law to enjoy the IMI exemption enshrined in article 44, paragraph 1-n), first segment, of the EBF.

However, this argument is based on an incorrect assumption and makes an incorrect interpretation and application of the applicable legal norms.

In fact, since the entry into force of Law no. 107/2001, of 8 September, which establishes the bases of the policy and the regime of protection and enhancement of cultural heritage (LBPC), there has not existed a classification called National Monument, but only classifications called National Interest, Public Interest and Municipal Interest, whereby it is manifestly impossible to assert, as the Claimant does, that the cultural landscape of Alto Douro Vinhateiro is classified as a National Monument as a direct result of it having been classified as UNESCO World Heritage.

But what is the classification enjoyed by Alto Douro Vinhateiro?

In the first place, there is no UNESCO classification called "Heritage of Humanity," "UNESCO Heritage," "World Heritage" or any equivalent expression, and the UNESCO World Heritage Committee, when inscribing a cultural property on the respective list, is not classifying a property, but rather recognizing that that cultural property also constitutes a universal heritage for the protection of which the international community as a whole has the duty to cooperate, cf. article 6, paragraph 1 of the 1972 UNESCO Convention.

In fact, the inscription of a cultural property on the "World Heritage List" does not constitute any Classification, as this necessarily presupposes the existence of a prior administrative procedure. That inscription "only" amounts to the attribution of a new status to the property in question, that is, from being a national cultural property it becomes (also) a world cultural property.

That the cultural landscape of Alto Douro Vinhateiro does not possess the classification of "UNESCO World Heritage" (or equivalent expression), because, on one hand, that reference refers to a "mere" inscription on a list of the World Heritage Committee and, on the other hand, that inscription was not preceded by any administrative classification procedure in light of our legal system, cf. articles 18 of the LBPC and 4 of Decree-Law no. 309/2009, of 23 October.

In light of the combination of these statutes as well as Notice no. 15170/2010, of 30 July, published in the Official Journal, 2nd series, the Cultural Landscape of Alto Douro Vinhateiro belongs to the category of "Ensemble" (paragraph 1 of Notice no. 15,170/2010), included in the list of properties classified as of "National Interest" (article 15, paragraph 7 of the LBPC) and designated "National Monument" (article 15, paragraphs 3 and 7 of the LBPC).

However, the designation of "National Monument" contained in article 15, paragraph 3 of the LBPC is not to be confused with the classification of "National Monument" contained in article 24 of Decree no. 20,985, of 07-03-1932.

But in order to benefit from IMI exemption, under the terms of letter n), paragraph 1 of article 44 of the Tax Benefits Statute (EBF), it is necessary that each of the properties that make up the "Ensemble" be individually classified.

As the 1st segment of that provision (Properties classified as national monuments) refers to properties classified as National Monuments in light of the laws of the Estado Novo (Decree no. 20,985, of 07-03-1932 and Law no. 2,032, of 11-06-1949), which preceded the LBPC, as those laws (given the absence of regulation of Law no. 13/85, of 06 June) only provided three possible classifications: National Monument; Property of Public Interest; and Municipal Value. Or if you prefer: the 1st segment of letter n), paragraph 1 of article 44 of the EBF refers to the classification of National Monument that was in force in the Portuguese legal system until the entry into force of Law no. 107/2001, of 08-09 (LBPC), classification that cannot be confused with the concept of designation of National Monument contained in paragraphs 3 and 7 of article 15 of this law.

And even if, by mere hypothesis, the cultural landscape of Alto Douro Vinhateiro constituted a classification corresponding to a National Monument, even so the properties within its space would not benefit from IMI exemption under the above-cited provision (letter n), paragraph 1 of article 44 of the EBF), since, appealing to the concept of "Ensemble," a category contained in the LBPC as well as in the 1972 UNESCO Convention, and here defined as "Groups of isolated or grouped buildings which, by virtue of their architecture, unity or integration into the landscape have exceptional universal value from the point of view of history, art or science," one appeals to a certain unity or architectural continuity, thereby admitting that not all "groups of buildings" enjoy total uniformity or homogeneity, as is the case with the cultural landscape of Alto Douro Vinhateiro, which despite dating back to year zero has come to our days under an appearance different from that of that historical era, as a result of normal urban evolution over several eras. In fact it is public and notorious that whoever travels to Alto Douro Vinhateiro encounters constructions from the Modern Era literally side by side with constructions from the Contemporary Era as a result of factors as diverse as the historical evolution of the urban agglomeration, the durability of the materials employed, conscious aesthetic choices or even failure to observe the respective urban planning regimes. That is: a "living" cultural landscape does not crystallize in time like a "dead" cultural landscape, which remains unchanged by the passage of time.

Thus the concept of "Ensemble" (and that of cultural landscape) contained in article 1 of the 1972 UNESCO Convention admits that within it may exist immovable property devoid of cultural value, and it is abusive to interpret that all properties located within an "Ensemble" or a "cultural landscape" are, by that fact alone, classified and, as such, exempt from IMI, as is moreover recognized by the General Directorate of Cultural Heritage itself in the letter that constitutes document no. 4, attached with the Response.

Therefore, as the Claimant has not demonstrated that its properties are individually classified as National Monuments, it is to be concluded that they do not meet the requirements to benefit from IMI exemption, under the terms of letter n), paragraph 1 of article 44 of the EBF.

In addition to this is the fact that the tax benefit is inextricably linked to the fiscal concept of property, provided for in article 2 of the CIMI, which does not include "the cultural landscape of Alto Douro Vinhateiro," which constitutes a reality very much peculiar to the law of cultural heritage and not to tax law, whereby, by itself, it does not constitute a property but, at most, a plurality of properties or, more accurately, a universality of fact composed of thousands of properties.

As for the documentary evidence relating to the certificates passed by the Regional Directorate of Culture of the North, regarding each of the properties, and embodied in document 4 of the petition, the AT challenges them, not because they are false, but because they are beset by and convey a serious error, as they certify that the properties are classified as a National Monument in light of the 2001 LBPC, when since that year there has not existed a classification called "National Monument" but only classifications called "National Interest," "Public Interest" or "Municipal Interest," whereby such certificates are asserting a reality that does not exist. On the other hand, the UNESCO World Heritage List does not contain the properties in question, but rather "Alto Douro Vinhateiro" in the category of Cultural Landscape.

On the other hand, what is certified collides with the understanding of said General Directorate of Cultural Heritage, set forth in the letter that constitutes document no. 4, attached with the Response, in admitting that "(…) given that it is a classification in which the "Ensemble" category was chosen, it is neither legitimate nor legally possible to conclude that the properties covered by it are individually classified".

That the interpretation conveyed by the Claimant is contrary to the Constitution of the Portuguese Republic (CRP), in that it violates the constitutional principles of tax equality; tax justice; contributory capacity; local autonomy; and participation in decision-making, as well as organic unconstitutionality, in the event that equivalence or equation is found to exist between the classifications contained in the legislation that preceded the LBPC and that provided for herein, taking into account that this matter constitutes a relative reserve of competence of the Assembly of the Republic, except with authorization to the Government, cf. letter g), paragraph 1 of article 165 of the CRP.

It concludes by requesting the total rejection of the request for arbitral decision and dismissal of the Respondent, with the tax act in question remaining in the legal order, as the contested assessment embodies a correct interpretation and application of law to the facts, not suffering from any defect of violation of law.

The Parties submitted submissions, maintaining the positions set forth in their respective pleadings.

Response of the Claimant to the Peremptory Exception of Expiration of the Right of Action, Raised by the Respondent

That when it filed the administrative complaint, it had not yet been notified of the collection note relating to the third installment. However, expressly, it took care to request in point 9 of the petition its annulment with the same factual and legal grounds, it being known to the finance service managing the administrative complaint in referring "It further requests the annulment of the IMI assessments that may be issued regarding the 3rd installment of IMI payment by reference to the year 2016 and subsequent years".

On the other hand, the administrative complaint as well as the request for arbitral decision concern the legality of the act of IMI assessment, relating to the year 2016, and not its collection documents, whereby, unlike what occurs with other taxes, the IMI assessment is not notified to the taxpayer. To the taxpayer are sent only and exclusively the respective collection notes.

Therefore what is at issue is the examination of the legality of the assessment and not that of each of the installments in which payment is divided.

For the reasons set forth, it requests the rejection of the exception raised regarding expiration of the right of action.

II - Reasoning

Facts Established

Of relevance to the examination and decision of the issues raised, the following facts are taken as established and proven:

1. On 02 March 2017 the central services of AT proceeded to assessment no. 2016... of the IMI, relating to the year 2016, in the amount of 57,518.27 €, based on the tax property values of the properties that, on 31 December 2016, were listed in the property registers in the name of the Claimant.

2. Payment of IMI was processed in three installments, with AT services sending the Claimant the respective collection documents (CD), cf. document no. 2, which is hereby fully reproduced:

1st installment – CD no. 2016..., in the amount of 18,960.46 €, for payment in the month of April 2017;

2nd installment – CD no. 2016..., in the amount of 18,960.38 €, for payment in the month of July 2017; and

3rd installment – CD no. 2016..., in the amount of 19,597.43 €, for payment in the month of November 2017.

1. Of said properties are part the following, located in the parishes of ... and Union of Parishes of ..., ... and ..., in the municipality of ..., district of Vila Real:

[Table of properties and IMI amounts for 2016 – omitted for brevity – total: 6,462.43 €]

1. On 20 and 21 February 2017 the Regional Directorate of Culture North issued certificates for each of the aforementioned properties, for purposes of processing the case for obtaining tax benefits (IMI exemption – no. 6 of art. 31 of DL no. 287/2003 and letter n) of para. 1 of art. 40 of DL no. 215/89, of 1 July – IMT exemption – letter g) of art. 6 of the CIMT contained in Annex II to DL no. 287/2003), certifying that the properties are classified as National Monument by paragraph 7 of article 15 of Law no. 107/2001, of 8 September, and that they form an integral part of the ensemble called Alto Douro Vinhateiro, classified as National Monument, cf. documents nos. 4-2, 4-3, 4-4 and 4-5, which are hereby fully reproduced.

2. By notice no. 15170/2010, of 22 July, of the Secretary of State for Culture, published in the Official Journal, 2nd series, no. 147, of 30 July 2010, under the terms and for the purposes of article 72, paragraph 3 of Decree-Law no. 309/2009, of 23 October, it was made public that, in 2001, Alto Douro Vinhateiro was included in the UNESCO World Heritage List, in the category of Cultural Landscape, encompassing the municipalities of ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ..., cf. document no. 4-1, which is hereby fully reproduced.

The same notice published the implementation plan, including the respective special protection zone as well as the location plan.

1. On 12 July 2017 the Claimant filed an administrative complaint concerning the legality of the IMI assessment under examination in the present proceedings, which served as the basis for the institution of the respective file with the number ...2018... of the Finance Service of ..., with the following request: "Annulment, with all legal effects, of the acts of IMI assessment no. 2016... and 2016... (1st and 2nd installment of IMI relating to the tax period 2016), to the extent corresponding to the IMI relating to properties located in the municipality of ..., and others that may be issued on the same subject," cf. document no. 1, which is hereby fully reproduced.

2. By order of merit of the Head of the Finance Service of ..., of 02 March 2018, the administrative complaint was dismissed, the Claimant being notified by letter no. .../.../2018, of the same date, registered with receipt notification (registration no. RF...PT), received on 05 March 2018, cf. document no. 3 which is hereby fully reproduced.

Facts Not Established

It was not proven that the Institute for Management of Architectural and Archaeological Heritage, I.P. or the General Directorate of Cultural Heritage that assumed its competencies as of 01-06-2012, under the terms of article 13 of Decree-Law no. 115/2012, of 25 February, had communicated to the Tax and Customs Authority any classification of the properties in question.

Reasoning

Regarding factual matters, the Tribunal has no duty to pronounce on all matters alleged, but rather has the duty to select those of interest for the decision, taking into account the cause (or causes) of action that underlies the claim filed by the claimant [cf. articles 596, paragraph 1 and 607, paragraphs 2 to 4 of the CPC, applicable ex vi of article 29, paragraph 1, letters a) and e) of the LFTM] and to state whether it considers it proven or unproven (cf. article 123, paragraph 2 of the CPPT).

According to the principle of free assessment of evidence, the Tribunal bases its decision, in relation to the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of proof brought before the tribunal and in accordance with its experience of life and knowledge of persons (cf. article 607, paragraph 5 of the CPC). Only when the probative force of certain means is pre-established in law (e.g. full probative force of authentic documents, cf. article 371 of the Civil Code) does the principle of free assessment not prevail in the assessment of evidence produced.

Thus, the conviction of the Tribunal was based on the documentary evidence attached to the file as well as on the positions assumed by the parties.

III - Sanation

1. Because the peremptory exception raised (expiration of the right of action) may result in total dismissal of the claim, cf. article 576, paragraph 3 of the Civil Procedure Code (CPC), it should be examined ex officio and as a priority matter (article 579 of the CPC).

Examining:

Under the terms of paragraph 1 of article 113 of the CIMI "the tax is assessed annually, in relation to each municipality, by the central services of the Directorate-General of Taxes, based on the tax property values of the properties and in relation to taxpayers that appear in the registers on 31 December of the year to which it relates."

As to payment (collection documents and period), article 119, paragraph 1 of the CIMI states: "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to payment, the respective collection document, with identification of the properties, their parts susceptible of independent use, respective tax property value and the amount assessed in relation to each municipality where the properties are located," with payment, as stated in letters a), b) and c) of paragraph 1 of article 120 of the CIMI, to be made in the following months: a) In one installment, in the month of April, when its amount equals or is less than € 250; b) In two installments, in the months of April and November, when its amount exceeds € 250 and equals or is less than € 500; and c) In three installments, in the months of April, July and November, when its amount exceeds € 500. Paragraph 4 of the same article 120 further states that non-payment of an installment within the established period implies the immediate maturity of the remaining ones.

In the proceedings at hand, the IMI was assessed on 19-04-2017, in the amount of 56,235.23 €, and should be paid, as it was, in three installments, in the months of April, July and November 2017.

From the reading of the administrative complaint it is clear, without any difficulty, that the Claimant's request consisted in the partial annulment of the assessment and not of the first two installments. For this one need only read article 9 of the petition (It further requests the annulment of the IMI assessments that may be issued regarding the 3rd installment of IMI payment by reference to the year 2016 and subsequent years) and the respective request (Annulment, with all legal effects, of the acts of IMI assessment no. 2016... and 2016... (1st and 2nd installment of IMI relating to the tax period 2016), to the extent corresponding to the IMI relating to properties located in the municipality of ..., and others that may be issued on the same subject).

In fact, when the administrative complaint was filed (12-07-2017), the Claimant had not yet received the collection document for the 3rd installment, which was sent on 30-10-2017, cf. what is extracted from the registration no. "RY...PT" affixed to document no. 2 attached with the request for arbitral decision.

However, the assessment of tax is only one, and it, moreover, constitutes the actionable injurious act, and the collection notes do not constitute acts of tax assessment, being merely means of bringing to the knowledge of the taxpayer the amount collected and the payment period. In this sense see decisions of the STA of 05-07-2017 (Case no. 0729/16) and 05-12-2018 (Case no. 0603/14.6BEPRT 0204/17), where in this latter decision it is stated: "(…) the possibility that respective payment be divided in installments is nothing more than a collection technique for the tax (and such installments also do not constitute as many other assessments of the tax, amounting only to the various portions of the total amount of tax to be paid, resulting, as a rule, from a single assessment, it being the amount thereof that is divisible for purposes of payment in diversified periods — in fact, the law specifies the moments in which assessment occurs and distinguishes them from those in which payment takes place)."

From the foregoing, it must be concluded that the claim filed in the administrative complaint is for partial annulment of the IMI assessment made by AT on 02-03-2017, precisely the same act challenged in the present proceedings, and there is therefore no extension relative to the request for arbitral decision.

And this is timely, under the terms of letter a), paragraph 1 of article 10 of Decree-Law no. 10/11, of 20 January (LFTM), combined with letter b), paragraph 1 of article 102 of the Tax Procedure and Process Code (CPPT), since the request for establishment of an arbitral tribunal was submitted on 04-06-2018, that is, within the period of 90 days counted from notification of the order dismissing the administrative complaint, which occurred on 05 March 2018 (registration no. RF...PT) and which constitutes the dies a quo or initial term of the period (note that the 90th day after notification of dismissal of the administrative complaint coincided with 03 June 2018, but, given the provision of letter e) of article 279 of the Civil Code, ex vi of paragraph 1 of article 20 of the CPPT and letter a), paragraph 1 of article 29 of the LFTM, the final term or dies ad quem for submission of the request was transferred to the first following working day, that is, 04-06-2018).

Accordingly, the raised exception of expiration of the right of action invoked by the Respondent is deemed unfounded.

1. The Parties have legal personality and judicial capacities, are properly interested and are regularly represented (articles 4 and 10, paragraph 2, of the LFTM and article 1 of Ordinance no. 112-A/2011, of 22 March).

2. The proceedings do not suffer from nullities, the claim was timely submitted and no exceptions other than the aforementioned expiration of the right of action were raised.

3. The Arbitral Tribunal is properly constituted and is materially competent to examine and decide on the claim, cf. article 2, paragraph 1, letter a) of the LFTM.

4. There are no other circumstances that prevent examination of the merits of the case.

IV - Matter of Law (Reasoning)

Subject of the Dispute

Beyond the peremptory exception raised by the Respondent of expiration of the right of action, the issue that constitutes the thema decidendum amounts to determining whether the properties above identified located in the parishes of Pinhão and Union of Parishes of ..., ... and..., in the municipality of..., are or are not exempt from IMI under the terms of letter n), paragraph 1 of article 44 of the Tax Benefits Statute, by virtue of their integration into Alto Douro Vinhateiro.

Issues to Decide:

• The (il)legality of the assessed liability; and
• The request for payment of compensatory interest.

On the (il)legality of the assessed Liability -

Given the antagonistic positions of the Parties, with respect to the necessity or not of individualized classification of the properties located in Alto Douro Vinhateiro, included in the indicative list of UNESCO World Heritage, in the category of Cultural Landscape, with a view to IMI exemption, under the terms of letter n) of paragraph 1 of article 44 of the EBF, let us begin by classifying "Alto Douro Vinhateiro".

In accordance with paragraph 1 of article 2 of Law no. 107/2001, of 8 September, statute that establishes the bases of the policy and the regime of protection and enhancement of cultural heritage (LBPC), the cultural heritage includes all property that, being evidence with value of civilization or culture bearing relevant cultural interest, should be subject to special protection and enhancement.

Paragraphs 3 and 5 of that article state:

"3 - The relevant cultural interest, namely historical, paleontological, archaeological, architectural, linguistic, documental, artistic, ethnographic, scientific, social, industrial or technical, of the property that make up cultural heritage shall reflect values of memory, antiquity, authenticity, originality, rarity, singularity or exemplariness."

"5 - Constitute, moreover, cultural heritage any other property that as such is considered by virtue of international conventions that bind the Portuguese State, at least for the purposes provided therein."

Under paragraph 1 of article 15 of the LBPC, immovable cultural property may belong to the categories of monument, ensemble or site, as such categories are defined in international law.

Being in the Convention for the Protection of World Cultural and Natural Heritage, more commonly known as the "1972 UNESCO Convention," signed in Paris on 16 November 1972, and approved by the single article of Decree no. 49/79, of 6 June, that we find such categories defined. Thus, as provided in article 1:

"The monuments. – Architectural works, sculptures or monumental paintings, elements of archaeological character structures, inscriptions, caves and groups of elements with exceptional universal value from the point of view of history, art or science;

The ensembles. – Groups of isolated or grouped buildings which, by virtue of their architecture, unity or integration into the landscape have exceptional universal value from the point of view of history, art or science;

The sites. – Works of man, or combined works of man and nature, and the zones, including archaeological sites, with exceptional universal value from the point of view of historical, aesthetic, ethnological or anthropological perspective."

Also in the Convention for the Safeguarding of the Architectural Heritage of Europe, signed in Granada on 3 October 1985 and ratified by Decree of the President of the Republic no. 5/91, of 23 January, we find such categories of immovable property defined. Thus, as provided in article 1:

"For the purposes of this Convention, the expression "architectural heritage" is considered to include the following immovable property:

• The monuments: all buildings particularly remarkable for their historical, archaeological, artistic, scientific, social or technical interest, including the facilities or decorative elements that are an integral part of such buildings;

• The architectural ensembles: homogeneous groups of urban or rural buildings, remarkable for their historical, archaeological, artistic, scientific, social or technical interest, and sufficiently coherent to be subject to topographical delimitation;

• The sites: combined works of man and nature, partially constructed and constituting spaces sufficiently characteristic and homogeneous to be subject to topographical delimitation, remarkable for their historical, archaeological, artistic, scientific, social or technical interest."

By the characteristics all of us know, we can assert that "Alto Douro Vinhateiro" falls within the category of "site."

In the development of article 15 of the LBPC, paragraphs 2, 4, 5 and 6 state:

"2 - Movable and immovable property may be classified as of national interest, public interest or municipal interest" (emphasis ours).

"4 – Property is considered to be of national interest when its protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation.

"5 – Property is considered to be of public interest when its protection and enhancement represents still a cultural value of national importance, but for which the regime of protection inherent in classification as of national interest would be disproportionate.

"6 – Property is considered to be of municipal interest whose protection and enhancement, in whole or in part, represent a cultural value of predominant significance for a given municipality."

It is worth mentioning that it is not proven in the proceedings that the properties in question were subject to individualized classification, it being that, under paragraph 1 of article 56 of Decree-Law no. 309/2009, of 23 October, which establishes the procedure for classification of immovable property of cultural interest, as well as the legal regime of protection zones and the detailed plan of safeguarding, within the area covered by the delimitation of an ensemble or site there may coexist immovable property individually classified.

At the 25th Session of UNESCO's World Heritage Committee, which took place from 11 to 16 December 2001, in Helsinki, "Alto Douro Vinhateiro" was included on the indicative list of World Heritage, in the category of Cultural Landscape, encompassing the municipalities of ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ...

The inclusion of "Alto Douro Vinhateiro" on the UNESCO World Heritage indicative list was made public through notice no. 15170/2010, published in the Official Journal, 2nd series, no. 147, of 30 July 2010, with the implementation plans also published, including the respective special protection zone, and the location plan, cf. annexes I and II, respectively.

Said publication was made under the terms and for the purposes of article 72, paragraph 3 of Decree-Law no. 309/2009, of 23 October, which states: "The location and implementation plan of immovable property inscribed on the world heritage list at the date of entry into force of this decree-law, including the respective protection zone, is published in the form of a notice in the Official Journal within one year."

Under paragraph 1 of article 72 of this statute, the inclusion of an immovable property on the indicative world heritage list ipso facto determines the opening of a classification procedure, at the level of national interest, and the establishment of the respective special protection zone, under the terms of the same decree-law.

Also paragraph 7 of article 15 of the LBPC states that cultural immovable property included on the world heritage list integrates, for all purposes and in their respective category, the list of property classified as of national interest.

Paragraph 3 of the same article further states that "For immovable property classified as of national interest, whether monuments, ensembles or sites, the designation 'national monument' shall be adopted, and for movable cultural property classified as of national interest the designation 'national treasure' is created" (emphasis and bold, ours).

In the same terms, paragraph 3 of article 3 of Decree-Law no. 309/2009 above cited, under the heading "Graduation of cultural interest and classification," states: "The designation of 'national monument' is attributed to immovable property classified as of national interest, whether monuments, ensembles or sites."

From the foregoing, in particular from the combination of paragraphs 1, 2, 3 and 7 of article 15 of the LBPC, of paragraph 3 of article 3 and paragraph 1 of article 72, both of Decree-Law no. 309/2009, of 23 October, and the content of notice no. 15170/2010, published in the Official Journal, 2nd series, no. 147, of 30 July 2010, we can assert, apodictically, that "Alto Douro Vinhateiro" belongs to the category of "Site," classified as of "national interest" by virtue of inclusion on the UNESCO World Heritage indicative list, in the category of Cultural Landscape, and thus designated "national monument."

Having defined "Alto Douro Vinhateiro" in terms of cultural heritage law, let us turn to the pertinent question, which is whether the properties in question, that is, those within its area of implantation are exempt from IMI under the terms of letter n) of paragraph 1 of article 44 of the Tax Benefits Statute (EBF), in the wording in force at the date of the facts (2016).

It should be noted that this article resulted from the renumbering carried out in accordance with the correspondence table contained in the annex "i" provided for in article 3 of Decree-Law no. 108/2008, of 26 June (previously corresponded to article 40).

On 31 December 2006, said letter n), which was added by Law no. 109-B/01, of 27/12, had the following wording:

"1 - The following are exempt from municipal property tax:

n) Properties classified as national monuments or properties of public interest, as well as those classified as properties of municipal value or as cultural heritage, under the terms of applicable legislation."

However, by article 82 of Law no. 53-A/2006, of 29 December, in force since 01 January 2007, its wording was altered and so maintained at the date of the facts:

"1 - The following are exempt from municipal property tax:

n) Properties classified as national monuments and properties individually classified as of public interest or municipal interest, under the terms of applicable legislation."

Analyzing said norm, it clearly emerges that it is divided into two segments: The first "Properties classified as national monuments (…) under the terms of applicable legislation" and the second "and properties individually classified as of public interest or municipal interest, under the terms of applicable legislation."

Thus properties classified as of public interest or municipal interest only benefit from IMI exemption if they are individually classified, which did not happen until 31 December 2006, that is, until the alteration made by article 82 of Law no. 53-A/2006, of 29 December.

However for those classified as national monuments the text remained unchanged, that is, it was not subject to any alteration.

For the Tax and Customs Authority this reference refers to properties that were classified as national monuments under the legislation in force before Law no. 107/2001, of 8 September, as this provides for the category of national monument, but not for classification as a national monument, in paragraphs 1 and 2 of article 15.

But, in light of the wording of the norm as well as the presumption inherent in paragraph 3 of article 9 of the Civil Code, according to which the legislator knew how to express its thinking in adequate terms, the AT lacks grounds.

Thus we concur with the Esteemed Arbitrators in the arbitral decision of 05-07-2017, delivered in Case no. 46/2017-T of CAAD, when they state:

"Nevertheless, paragraph 5 of article 44, as amended by Law 3-B/2010, of 28 April, makes reference to 'communication of classification as national monuments,' manifestly referring to communications that may occur after its entry into force, whereby this expression must be interpreted as referring to immovable property to which the designation of 'national monument' is attributed. In truth, this communication was not provided for, in these terms, in the previous wording, whereby it would not be understood that one was referring to communications relating to monuments classified before the entry into force of Law no. 107/2001, more than nine years earlier. In this context, if legislatively one intended to refer only to monuments classified before Law no. 107/2001, surely an express reference would be made.

(…) Moreover, in the same vein, article 53, paragraph 1, of Law no. 107/2001 alludes to 'the act that decrees the classification of monuments,' whereby it is unequivocal that, in light of this statute, there is 'classification of monuments.'

Therefore, the initial part must be interpreted as referring to 'properties classified as national monuments' under that Law no. 107/2001, inclusively.

And, as 'national monuments' should be considered all 'immovable property classified as of national interest, whether monuments, ensembles or sites,' as article 15, paragraph 3, of Law no. 107/2001 and article 3 of Decree-Law no. 309/2009, of 23 October, expressly attribute to all this designation. That is, they are 'properties classified as national monuments' for purposes of the initial part the property to which this designation is attributed.

Being 'properties individually classified as of public interest or municipal interest' expressly referenced in that letter n) of paragraph 1 of article 44 of the EBF, the useful scope of the initial reference to 'properties classified as national monuments' will consist in extending the exemption to property that is subject to non-individual classification, namely those integrated in 'monuments, ensembles or sites,' referred to in paragraph 3 of article 15 of Law no. 107/2001, to which it attributes, precisely, the designation of 'national monument,' which is used in letter n) of paragraph 1 of article 44 of the EBF.

'Immovable property included on the world heritage list integrates, for all purposes and in their respective category, the list of property classified as of national interest,' by virtue of the provision of paragraph 7 of article 15 of law no. 107/2001.

Thus, from the entry into force of this Law, the inclusion of immovable property on the world heritage list has as a consequence its classification as of national interest, coming to all intents and purposes to integrate the list of property classified as of national interest, which amounts to their being considered immovable property classified as of national interest, without need of any other classification act, and to have the designation of 'national monuments.'

In this context, the opening of a classification procedure that entails the inclusion of an immovable property on the indicative world heritage list, under paragraph 1 of article 72 of Decree-Law no. 309/2009, of 23 October, is not intended to examine whether the conditions for classification are met, nor the pronouncement of a final decision by the Government, under article 30, paragraph 1, of the same statute (as classification is already made 'for all purposes' by virtue of paragraph 7 of article 15 of Law no. 107/2001), but only to identify which are the immovable property that were included on that list, namely through a location plan, and to establish the respective special protection zone.

It is in this context that, relative to immovable property inscribed on the world heritage list at the date of entry into force of Decree-Law no. 309/2009, paragraph 3 of its article 72 provides only for publication in the form of a notice in the Official Journal, of the location and implementation plan of immovable property inscribed on the world heritage list, including the respective protection zone, and not a decision of the Government in the form of a decree, as provided for in its article 30, paragraph 1, for final decisions of processes of classification of immovable property as of national interest.

Thus, relative to immovable property inscribed on the world heritage list before the entry into force of Decree-Law no. 309/2009, there is no place for any classification act, and they integrate themselves 'for all purposes and in their respective category, the list of property classified as of national interest,' by virtue of paragraph 7 of article 15 of law no. 107/2001.

Therefore, in relation to these immovable property inscribed on the world heritage list, there is no place for the 'communication of classification as national monuments (…) to be made by the Institute for Management of Architectural and Archaeological Heritage, I.P.' that is referred to in paragraph 5 of article 44 of the EBF, as there is no classification to communicate.

Thus, in these cases, the exemption operates automatically, following the publication of the notice provided for in article 72, paragraph 3, of Decree-Law no. 309/2009.

Nevertheless, the exemption in question covers only 'properties classified as national monuments,' those that have the designation of 'national monument,' whether monuments, ensembles or sites, as such categories are defined in international law (articles 2, paragraph 1, and 3, paragraph 2, of Decree-Law no. 309/2009)."

We understand thus that it was the intention of the legislator to dispense with individualized classification for purposes of IMI exemption to national monuments, requiring it only in relation to property of public interest or municipal interest.

This interpretation also results expressly from the parliamentary debate and voting that took place regarding this legal provision. As results from the reading of the Official Journal of the Assembly of the Republic I Series, no. 24, of 02.12.2006, pages 29 and 30, the requirement of individual classification of property to be framed in the category of national monument was not expressly accepted by the deputies:

"The President: – Members, we will now move to the vote on proposal 740-P, of the Greens, for substitution of letter n) of paragraph 1 of article 40 of the Tax Benefits Statute contained in article 77 of the bill.

Submitted to a vote, it was rejected, with votes against from PS, PSD and CDS-PP and votes in favor from PCP, BE and the Greens.

It was as follows:

n) Properties classified on an individual basis as national monuments or properties of public interest, as well as those classified, also on an individual basis, as properties of municipal value or as cultural heritage, under the terms of applicable legislation.

The President: – We will now proceed to the vote on proposal 855-P, from the PS, for amendment of letter n) of paragraph 1 of article 40 of the Tax Benefits Statute proposed in article 77.

Submitted to a vote, it was approved, with votes in favor from PS, PSD and CDS-PP, votes against from BE and abstentions from PCP and the Greens.

It is as follows:

n) Properties classified as national monuments and properties individually classified as of public interest, municipal value or cultural heritage, under the terms of applicable legislation.

The President: – With this approval, the vote on letter n) of paragraph 1 of article 40 of the Tax Benefits Statute proposed in article 77 is prejudiced [and which was as follows:

n) Properties classified as national monuments, under the terms of applicable legislation]."

As to any possible nonconformity with the CRP, it should be noted that the norm in question, that is, letter n), paragraph 1 of article 44 of the EBF, was not disapplied nor was its wording altered, it being the understanding of the Arbitral Tribunal that the interpretation was appropriate to the case at issue.

Thus, considering that the properties in question are implanted in "Alto Douro Vinhateiro," included in 2001 on the UNESCO World Heritage indicative list, in the category of Cultural Landscape, and classified as a national monument, as evidenced by the certificates issued by the Regional Directorate of Culture North and notice no. 15170/2010, of 22 July, of the Secretary of State for Culture, published in the Official Journal, 2nd series, no. 147, of 30 July 2010, cf. articles 4 and 5 of the factual findings, the same benefit from the IMI exemption provided for in letter n), paragraph 1 of the Tax Benefits Statute, and individualized classification is not shown to be necessary.

In this sense arbitral decisions were rendered in the following cases operating under the auspices of CAAD, which we fully concur with: 531/2017, of 28-03-2018; 405/2017, of 21-12-2017; 356/2017, of 08-02-2018; 204/2017, of 20-10-2017; 172/2017, of 22-11-2017; 534/2016, of 24-07-2017; 379/2016, of 07-12-2016; 98/2016, of 14-06-2016; 33/2016, of 09-06-2016; 76/2015, of 16-11-2015; 325/2014, of 08-11-2014; and 256/2014, of 06-10-2014.

As well as the court decisions, which we also concur with, rendered in the following cases:

Of the STA – Cases nos. 01211/17, of 18-04-2018; 0501/17, of 17-01-2018; 0134/14.4BEPRT, of 12-12-2018.

Of the TCAN – Cases nos. 00693/14.1BEPRT, of 01-06-2017; 00581/14.1BEPRT, of 12-04-2018; 00485/14.8BEPRT, of 26-04-2018; 00134/14.4BEPRT, of 07-12-2016; and 01480/14.2BEPRT, of 04-05-2017.

In the summary of this latter decision can be read: "(…) XIII - The following are exempt from municipal property tax: properties classified as national monuments and properties individually classified as of public interest or municipal interest, under the terms of applicable legislation – cf. article 44, paragraph 1, letter n) of the Tax Benefits Statute.

XIV - Immovable property located in Historical Centers included on the UNESCO World Heritage List are classified as being of national interest, adopting the designation of 'national monuments' – cf. article 15, paragraphs 3 and 7 of Law no. 107/2001, of 8 September.

XV - Properties inserted in Classified Historical Centers benefit from municipal property tax exemption."

And the same should be said of properties located in immovable property belonging to the category of "sites," included on the UNESCO World Heritage indicative list, in the category of "Cultural Landscape," such as "Alto Douro Vinhateiro," precisely because, under paragraph 1 of article 54 of Decree-Law no. 309/2009, of 23 October, the properties covered by an ensemble or site are subject to the following duties and legal impositions: a) Graduation of restrictions, in particular, as to volumetry, morphology, alignments and cornices, chromaticism and exterior finish of buildings; b) Non-building zones; c) Areas of archaeological sensitivity with graduation of restrictions, in particular as to the type of preventive safeguard procedure; d) Immovable property, or groups of immovable property, that: i) Must be preserved integrally; ii) May be subject to alteration works; iii) Must be preserved; iv) In exceptional circumstances, may be demolished; v) May give rise to the exercise of the right of first refusal, in the event of sale or payment in kind; vi) Are subject to the regime of works or interventions provided for in Decree-Law no. 140/2009, of 15 June; e) Identification of the conditions and frequency of conservation works of immovable property or group of immovable property, in accordance with the regime of Decree-Law no. 140/2009, of 15 June; f) The rules of exterior advertising.

Paragraph 2 of the same article also states that to the urban operations to be carried out in ensembles or sites applies, with the necessary adaptations, the provision of articles 51 (Licenses and authorizations in protection zone) and 52 (Administrative challenge of unfavorable prior opinion of IGESPAR, I.P.).

From the foregoing it is considered that the alleged defect of violation of law due to error regarding the factual and legal presuppositions is verified, which determines the declaration of illegality and consequent partial annulment of the assessed liability.

On the Request for Condemnation to Payment of Compensatory Interest

The Claimant further requests that it be paid compensatory interest, due to error of the services, under the terms of article 43, paragraph 1, of the LGT, having proven payment of the assessed amount.

This provision, applicable subsidiarily to the tax arbitration proceedings, by virtue of the provision of article 29, paragraph 1, letter a), of the LFTM, states "Compensatory interest is due when it is determined, in administrative complaint or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due."

The existence of error attributable to the services is considered verified, according to uniform jurisprudence of the STA, whenever the acceptance of the administrative complaint or judicial challenge of the assessment act is verified (in the same sense, the decision in arbitral case no. 218/2013-T).

Having been demonstrated the erroneous application of the tax rule that justifies the partial annulment of the assessed liability, the right of the Claimant to compensatory interest at the legal default rate is recognized, under the terms of articles 43, paragraphs 1 and 4, and 35, paragraph 10, of the LGT, article 559, paragraph 1, of the Civil Code and Ordinance no. 291/2003, of 8 April, from the date of actual payment of the amount improperly assessed until the date of processing of the respective credit note, as provided for in paragraph 5 of article 61 of the CPPT.

V - Decision

In light of the foregoing, it is decided:

a) To reject the peremptory exception of expiration of the right of action raised by the Respondent;

b) To accept, due to defect of violation of law due to error regarding the factual and legal presuppositions, the request for declaration of illegality and consequent partial annulment of the IMI assessment relating to the year 2016, made by "AT" on 02 March 2017, to which correspond the collection documents nos. 2016..., 2016... and 2016..., to the extent corresponding to the properties above mentioned, in the amount of 6,462.43 €;

c) To accept the request for annulment of the order dismissing issued by the head of the Finance Service of..., on 02 March 2018, in the administrative complaint case no. ...2018...; and

d) To accept the request for condemnation of the Tax and Customs Authority to refund the amount improperly paid by the Claimant, in the amount of 6,462.43 €, plus the respective compensatory interest at the legal rate, from the date of payment until the date of processing of the respective credit note.

Value of the Case

In accordance with the provision of articles 306, paragraph 2, of the CPC, 97-A, paragraph 1, letter a) of the CPPT and 3, paragraph 2 of the Tax Arbitration Costs Regulations (TACR), the value of the case is fixed at 6,462.43 €.

Costs

Under the terms of article 22, paragraph 4 of the LFTM, the amount of costs is fixed at 612.00 €, in accordance with Table I, attached to the TACR, at the expense of the Tax and Customs Authority.

Notify.

Lisbon, 29 January 2019.

The Arbitrator,

(Rui Ferreira Rodrigues)

Text prepared by computer, in accordance with the provision of article 131, paragraph 5, of the CPC, applicable by referral of article 29, paragraph 1, letter e), of the LFTM.

[1] Decisions of the STA of 22-05-2002, Case no. 457/02; of 31.10.2001, Case no. 26167; of 2.12.2009, Case no. 0892/09