IMT Tax Exemption Expiry Under Article 11(5) CIMT – CAAD Arbitration Ruling

Case No. 289/2014-T

Arbitration Award

The arbitrators José Pedro Carvalho (arbitrator-president), Guilherme d'Oliveira Martins and Nina Aguiar (arbitrators-members), designated by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Arbitral Tribunal, constituted on 2 June 2014, hereby decide as follows:

I - REPORT

1. On 26 March 2014, the company A, S.A., TIN ..., requested, in accordance with the terms and for the purposes of paragraph a) of section 1 of article 2 and article 10, both of Decree-Law No. 10/2011 of 20 January, the constitution of an Arbitral Tribunal, with the Tax Authority and Customs (AT) being named as respondent.

2. The request for constitution of the Arbitral Tribunal was accepted by the esteemed President of CAAD on 28.03.2014 and automatically notified to AT on 31.03.2014.

3. In accordance with the terms of paragraph a) of section 2 of article 6 and paragraph b) of section 1 of article 11 of Decree-Law No. 10/2011 of 20 January, in the wording introduced by article 228 of Law No. 66-B/2012 of 31 December, the Deontological Council designated as arbitrators of the collective arbitral tribunal the undersigned hereto, who communicated acceptance of the corresponding office within the applicable time period.

4. On 16.05.2014 the parties were duly notified of this designation, and did not manifest a willingness to refuse the designation of the arbitrators in accordance with the combined terms of article 11, section 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

5. Thus, in accordance with the terms of paragraph c) of section 1 of article 11 of Decree-Law No. 10/2011 of 20 January, in the wording introduced by Law No. 66-B/2012 of 31 December, the arbitral tribunal was constituted on 02.06.2014.

6. On 13.07.2014, the Tribunal rendered the following order:

Considering that:

• there is no need for production of additional evidence, beyond the documentary evidence already incorporated into the case file;

• there are no matters of exception on which the parties lack the opportunity to pronounce;

• in the arbitration process, the general procedural principles of procedural economy and prohibition of useless acts apply;

After consulting with the other arbitrators, who manifested their agreement with this order, notify the parties to inform the tribunal within 10 days:

• whether they waive the holding of the meeting referred to in article 18 of the RJAT;

• in case of affirmative answer, whether they waive the presentation of submissions or if they wish to present them in writing.

1. On 22.09.2014, the Tribunal rendered the following order:

Considering that, in this case, none of the purposes legally entrusted to it are verified, and having regard to the position taken by the parties, pursuant to articles 16/c) and 19 of the RJAT, as well as the general procedural principles of procedural economy and prohibition of useless acts, after consulting with the fellow arbitrators who manifested their agreement with this order, the holding of the meeting referred to in article 18 of the RJAT is waived;

The AT requests that the parties not be granted the faculty to present submissions.

Considering that the RJAT expressly provides for this faculty (article 18/2), that the Petitioner has not waived the same, as well as the principle of free conduct of the arbitration process by the Tribunal, the arbitrators constituting this tribunal understand that the aforementioned request of AT should not be granted.

Thus, notify the Petitioner to, if it wishes, present within a period of 10 days the written submissions which, in the case, it deems pertinent.

Once those submissions have been presented or after the granted period has elapsed without them having been presented, the Respondent shall have a period of 10 days to, also if it wishes, present the written submissions which, in the case, it deems pertinent.

The final decision shall be rendered within 30 days after the presentation of the written submissions of the Respondent, or the expiration of the granted period.

1. On 07.10.2014 the Petitioner presented its written submissions and, on 15.10.2014, the Respondent presented its own.

2. In this arbitration process, the Petitioner requests that the Arbitral Tribunal declare the illegality of the assessment act for the Municipal Tax on Onerous Transfers of Real Estate (IMT), the same being annulled and consequently the tax already paid being refunded to the Petitioner accrued with indemnificatory interest which proves to be due.

I.A. The Petitioner sustains its request, in summary, in the following terms:

1. The Petitioner is the incorporating company of B, Lda., with respect to which the tax act was issued that constitutes the subject of the request for arbitration pronouncement.

2. B was a limited liability company whose object consisted of the holding and management of real estate and, further, the promotion of land subdivisions, urban developments and real estate projects, as well as the acquisition of real estate for resale.

3. B ceased its activity on 30.12.2011, at which time it was incorporated into the Petitioner.

4. On 28.06.2007, B acquired from company C, Lda., 10 real properties located in the extinct parish of ..., municipality of ....

5. The acquisition benefited from the exemption provided in article 7 of the CIMT, because the real estate was intended for resale.

6. On 08.04.2010, the aforementioned real properties were sold to fund D.

7. The parties agreed on the price due for the real estate in question and other properties sold on the same date - € 888,000.00 - and that the same should be paid by the Fund through the delivery of its own participation units, the Fund having delivered to B 83,725 participation units with a nominal value of € 10.6062 each, totalling that amount.

8. The transmission of the real properties was effected by means of a public deed of exchange, which was subsequently rectified to a deed of purchase and sale.

9. Following an inspection action carried out on B, corrections were made by AT, among which the one resulting from the lapse of the IMT exemption that benefited B, since AT understood that the operation in question was not a resale, but rather an exchange, which would determine the lapse of the exemption pursuant to article 11, section 5, of the CIMT.

10. It has been the understanding of case law and legal scholarship that the concept of "resale" enshrined in the CIMT must be understood in the technical-legal sense, and all realities that cannot be associated with the "civil law concept of sale" must be excluded – see the decision of the STA in which this tribunal clarifies the understanding that "the concept of resale referred to in article 11, section 3, of the CIMSISSD encompasses only the transmission of the right of ownership effected by a contract of purchase and sale as defined in article 874 of the Civil Code, carried out by the acquirer who exercised the activity of purchasing real estate for resale" and that, consequently, "the transmission (acquisition) of ownership by any of the other forms provided in article 1316 of the Civil Code is excluded from the aforementioned exemption" (see Decision of 20.02.2013, case 01205/12). In another decision, of 28.01.2009, case 0642/08, the same Court affirms that "to resell is to sell again, or to sell what one had purchased, even though without that purpose, and it becomes all too evident that only through sale does resale occur."

11. Pursuant to article 874 of the Civil Code, the contract of purchase and sale is "the contract by which the ownership of a thing, or another right, is transmitted, in exchange for a price." Thus, the legal transaction of purchase and sale always includes two essential elements: (i) the transmission of ownership over something; (ii) the payment of a price – which, in the Petitioner's view, are met in the present case because the right of ownership over a group of real properties was transmitted and because a price was defined – the amount of € 888,000.00 – which was paid through participation units in the purchasing Fund.

12. Citing Baptista Lopes, in his work "On the Contract of Purchase and Sale", Almedina, 1971, p. 111, the Petitioner contends that "when article [889 of the Civil Code] refers to price it refers to money, but the form of that payment may not be in cash – payment may be in goods, in provision of services, etc. – provided there is consent of the seller." – thus, the fact that the price was paid in other values than money would not hinder the qualification of the contract in question as one of purchase and sale. Citing further the same author, the Petitioner argues that "If, in the contract itself, the price has been determined in money and, contemporaneously, the seller authorizes the buyer to deliver, instead of money, another determined thing, there is a sale with alternative faculty on the part of the buyer." Thus, the Petitioner understands that the delivery of the participation units constituted the payment of a price for the acquisition of ownership over the real estate in question.

13. It further adds that the participation units assume themselves as true liquid financial instruments; they have effective economic value with liquidity; they are a monetary asset.

14. As to the fact that B received, in return for the transmission of the real properties, participation units in the purchasing Fund, the Petitioner understands that this is not sufficient to say that B continued to be the holder of the real estate in question, to the extent that the participation relationship in the Fund assumed by B grants it only a passive participation in the management or disposition of all assets, without any intervention in the management thereof, which, by legal mandate, is attributed to the fund management company.

15. As to the concept of exchange, the Petitioner invokes the provision of article 4, paragraph c) of the CIMT, according to which "in contracts for the purchase or exchange of real estate, whatever the title by which it operates, the tax is owed by the exchanger who receives the real estate of greater value, understanding as exchange or barter the contract in which the performances of both exchangers comprise real estate, even if future," arguing that "for purposes of IMT, the concept of exchange includes only the exchange of real estate for other real estate – which did not occur in the present case – and cannot include the exchange of real estate for movable property." On this concept, the Petitioner further appeals to the case law of the STA, namely the decision of 28.11.2012, rendered in case 0529/12, in which the Court decided that "there exists exchange or barter in the contract whose essential core consists in the performance of one real property for another." Beyond the case law of the STA, the Petitioner also alludes to the case law of the STJ (decision of 25.03.2010, appeal 2688/07), where it can be read that the characteristic element of the contract of exchange or barter is precisely "the absence of any monetary object that in the contract performs the function of payment medium, that is, in the absence of any object that can be qualified as price."

16. Finally, the Petitioner petitions for the payment of indemnificatory interest in accordance with the provision of section 5 of article 24 of the RJAT and articles 43 and 100 of the LGT.

I.B In its Response, AT stated the following:

1. The contracts in question were not configured as exchange contracts for tax purposes because they comprise the exchange of real estate for participations in a Fund.

2. The situation in question constitutes, in AT's view, a contribution in kind to Fund D, and since three capital increases of this Fund took place, it verifies that, with respect to the second and third increases, these occurred on 26.02.2010 and 08.04.2010, and these dates coincide with the celebration of the exchange deeds, and the participation units then increased correspond exactly to those that served as consideration for the real estate transmitted by B.

3. Thus, it verifies in the present case that the destination of the real estate in question was not resale, but rather a contribution in kind to the capital of the Fund (an operation that does not fall within the concept of resale).

4. AT further considers that the alienated real estate continued, albeit indirectly, to belong to B itself: even though it is granted that, formally, the right of ownership does not belong to B, what verifies is that this continues to derive, through the holding of the participation units held by virtue of the contract, income underlying the management of the same real estate, whereas if effective resale had been carried out, the benefit associated would, differently, be only the price of its alienation.

5. AT further states that Fund D requested, in 2012, the suspension of taxation for purposes of IMI on all real estate comprising its assets, including those transmitted by B, pursuant to article 9, section 1, paragraph e) of the CIMI, that is, because they are intended for resale, thus verifying that the purpose of the real estate would always be resale, implying thereby and with other grounds, new lapse of the IMT exemption in B's sphere, through the application of article 11, section 5 of the CIMT, to the extent that the real estate was sold being again qualified as for resale.

I.C Submissions

In the submissions, the Parties reiterated, in essence, the arguments already presented. With innovative relevance, only the Petitioner's response to the Respondent's argument that the real estate was acquired to proceed to a new resale stands out. For this purpose, the Respondent states that:

(i) The acquiring Fund, within the scope of its activity, had the intention to proceed with the construction of buildings on the acquired real estate (land for urban construction). It did not have the intention to (re)sell the acquired land;

(ii) The Fund classified the acquired real estate as "land for construction" for accounting purposes;

(iii) However, in 2012, two years after the date of acquisition, the Fund, faced with the economic situation and attentive to the need for liquidity, altered the destination initially given to the acquired land, ceasing to intend to proceed with the construction of buildings for residential purposes on the same, then intending to proceed with the sale of the same;

(iv) In 2012, the Fund updated the accounting classification of the real estate and requested the suspension of the collection of IMI, provided for in article 9, section 1, paragraph e) of the CIMI.

II. SANITATION

1. The Tribunal is competent and regularly constituted, in accordance with articles 2, section 1, paragraph a), 5 and 6, all of the RJAT.

2. The parties have personality and legal capacity, are legitimate and are legally represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Order No. 112-A/2011 of 22 March.

3. There are no prior questions to be examined nor vices that invalidate the process.

4. It is now necessary to examine the merits of the petition.

III. THEMA DECIDENDUM

The fundamental question in the present case consists in determining whether the operation carried out meets, or does not meet, the legal requirements on which depends the application of the exemption for resale provided for in article 7 of the CIMT.

IV. FACTUAL MATTERS

IV.1. Proven Facts

Before entering into the examination of the questions, it is necessary to present the relevant factual matter for its understanding and decision, which, examined the documentary evidence and the administrative tax process attached to the case file and also taking into account the alleged facts, is established as follows:

• The Petitioner is the incorporating company of B, Lda., with respect to which the tax act was issued that constitutes the subject of the request for arbitration pronouncement.

• B was a limited liability company whose object consisted of the holding and management of real estate and, further, the promotion of land subdivisions, urban developments and real estate projects, as well as the acquisition of real estate for resale.

• B ceased its activity on 30.12.2011, at which time it was incorporated into the Petitioner.

• On 28.06.2007, B acquired from company C, Lda., 10 real properties located in the extinct parish of ..., municipality of ..., valued at € 4,992,067.00, this acquisition having benefited from IMT exemption, pursuant to article 7 of the CIMT.

• On 08.04.2010, the aforementioned real properties were the subject of a contract qualified as an "exchange" (in accordance with the respective deed which is attached as annex 2 of the RIT and which is here deemed to be fully reproduced[1]) and later rectified to a "contract of purchase and sale" on 01.10.2013 (in accordance with the respective deed which is attached as annex 4 of the RIT and which is here deemed to be fully reproduced[2]), to Fund D.

• In the contract celebrated on 08.04.2010 and later rectified as to its legal designation, it was agreed that the consideration due for the transmission of the right of ownership over the real estate was the delivery of participation units in the acquiring Fund itself, valued at € 888,000.00 (in total, 83,725 participation units, with a unitary nominal value of € 10.6062).

• Having the extinct B, in the year 2013, been the subject of an inspection action relating to the tax year 2010, it was notified of the respective Draft Report, in which, among others, the correction was proposed regarding the matter subject to IMT tax, which would result from the lapse of the IMT exemption that B had benefited in the past (2007), at the time of the acquisition of the real estate in question, and consequent collection of the outstanding tax.

• In 2012, the Fund altered the destination initially given to the acquired land, ceasing to intend to proceed with the construction of buildings for residential purposes on the same, then intending to proceed with the sale of the same, having updated the accounting classification of the real estate and requested the suspension of the collection of IMI, provided for in article 9, section 1, paragraph e) of the CIMI.

IV.2. Facts Deemed Not Proven

i. That the designation of "Exchange", used in the deed to which reference is made in point v. of the facts deemed proven above, was employed by mere error.

IV.3. Reasoning of the Decision on Factual Matters

The establishment of the factual matter was based on the administrative process, on the documents attached to the initial petition, and on statements by the Petitioner that are not disputed by the Tax Authority and Customs.

The fact deemed not proven is due to the complete absence of evidence concerning it, and the evidence that exists points, precisely, in the direction of non-proof, to the extent that the original deed, for example, reiterates several times that it is an exchange, and does not refer, anywhere, to a price, a purchase or a sale, suggesting, therefore, that the parties said, in that deed, effectively, what they intended to say, as, moreover, should have been explained to them by the Notary, which was one of the principal justifications for the legal requirement of their intervention.

V. APPLICATION OF LAW TO FACTS

Pursuant to article 7 of the CIMT:

1 - The acquisitions of real estate for resale are exempt from IMT, in accordance with the following section, provided that it is verified that a declaration was presented before the acquisition as provided for in article 112 of the Personal Income Tax Code (IRS) or in paragraph a) of section 1 of article 109 of the Corporate Income Tax Code (IRC), as appropriate, relating to the exercise of the activity of purchaser of real estate for resale.

2 - The exemption provided for in the preceding section does not prejudice the collection and payment of the tax, under general terms, except if it is recognized that the acquirer normally and habitually exercises the activity of purchaser of real estate for resale.

3 - For purposes of the provision in the final part of the preceding section, it is considered that the taxpayer normally and habitually exercises the activity when it proves its exercise in the previous year by means of a certificate issued by the competent tax authority, and it must always appear in that certificate whether, in the previous year, any real estate was acquired for resale or resold that was previously acquired for that purpose.

4 - When the real estate has been resold without being again for resale, within a period of three years, and tax has been paid, the same shall be annulled by the tax director, at the request of the interested party, accompanied by documentation proving the transaction.

On the other hand, pursuant to article 11, section 5, of the CIMT (lapse of exemptions), "the acquisition referred to in article 7 shall cease to benefit from exemption as soon as it is verified that the acquired real estate was given a different destination or that the same was not resold within the period of three years or was resold again for resale."

The regime described has already been provided with identical contours in article 11, point 3 of the Municipal Tax Code on Real Estate Transfers and Tax on Succession and Donations ("Sisa Code"), according to which: "The following are exempt from sisa: (…) 3. The acquisitions of real estate for resale, in accordance with article 13-A, provided that it is verified that a declaration was presented before the acquisition as provided for in article 105 of the Code on Personal Income Tax (IRS) or in paragraph a) of section 1 of article 94 of the Code on Corporate Income Tax (IRC), as appropriate, relating to the exercise of the activity of purchaser of real estate for resale." The Sisa Code also provided (article 16, point 1) that the exemption lapsed as soon as it was verified that "the acquired real estate was given a different destination (…)".

Once the law is established, it is now necessary to address the facts that are relevant for the examination of the question of the qualification of the operation carried out between B and Fund D, which are the following:

• On 28.06.2007, B acquired from company C, Lda., 10 real properties located in the extinct parish of ..., municipality of ....

• The acquisition benefited from the exemption provided for in article 7 of the CIMT, because the real estate was intended for resale.

• On 08.04.2010, the aforementioned real properties were transmitted to Fund D.

• The parties agreed that the consideration due for the transmission of the real estate in question and other property transmitted at the same time, would be the delivery by the Fund of its own participation units, the Fund having delivered to B 83,725 participation units with a nominal value of € 10.6062 each, totalling the amount of €880,000.00.

• The transmission of the real estate was effected by means of a public deed of exchange, which was later rectified to a deed of purchase and sale.

The Petitioner devotes a significant part of the petition to demonstrating that the contract celebrated between B and Fund D should not be qualified as an exchange contract, with AT, in the Response presented, requesting that the same be qualified as an exchange of real estate for participations in a Fund.

A particularly important point in the examination of the matter at hand is the question of the burden of proof.

The Petitioner, seeking to avail itself of a norm of exemption – which exempts it from the payment of a tax (IMT) – must, in accordance with the norm of article 74/1 of the LGT, make proof of the requirements to which the law conditions its grant.

In the case, and for what now matters, at issue is the legal requirement that the real estate be resold within a period of 3 years. It is understood here that, contrary to what the norm of article 11 of the CIMT may eventually suggest, the cause of lapse of the benefit is, merely, the passage of the 3-year period fixed in section 5 thereof, with the resale effected within that period, being a fact that prevents lapse, whose proof shall, as such, be incumbent upon the interested party to prevent such lapse.

Given this, it is necessary to examine whether, in light of the proven and not proven facts, it can be concluded that there occurred a (re)sale of the real estate in question, within the 3-year period counted from its acquisition by the Petitioner.

With due respect for other opinions, it is understood that there did not. Indeed, agreeing with the Petitioner when it relies on case law of the STA, it is understood that "in the concept of 'resale' referred to in article 11, section 3 of the CIMSISSD, only the transmission of the right of ownership effected by a contract of purchase and sale as defined in article 874 of the Civil Code is encompassed."

Now, the contract of purchase and sale, as results from article 874 of the Civil Code, moreover cited by the Petitioner, translates to the transmission of ownership over an object or right, in return for the payment of a price, and this, as has been secularly settled, should be fixed in money.

Examining the deed of 08.04.2010, it verifies that nowhere therein is a price fixed; rather it is stated, recurrently, that it is an exchange or barter of real estate, on the one hand, against participation units of Fund D, on the other.

That is, it is not demonstrated that, effectively, on 08.04.2010 there occurred a (re)sale of the real estate in question in the present case.

This conclusion is not hindered by the deed of 01.10.2013, since the same does not have the power to make a fact occur that did not occur.

It is true that if – materially – it were demonstrated that what occurred on 08.04.2010 was a sale, and that the numerous references to exchange were due to an (improbable) error, it would not be a matter of transmuting a past act into another that did not occur, but merely conforming the document marred by error to the reality that occurred. But, it is repeated, it was necessary to demonstrate this reality which, naturally, does not pass through the parties' own (interested) declaration, more than three years later, even though in public form.

Moreover, the other elements available in the case file point to the fact that, in reality, what effectively existed was not a sale or an exchange, but rather a contribution in kind of an act of subscription of Fund D by the Petitioner, which, moreover, results from the Fund's Management Regulations themselves, which form Annex 6 of the RIT, and in whose point 2.2 it is expressly provided for the contribution in kind of acts of subscription, and in the last paragraph of point 4.3 of the same Regulations, it is expressly stated that on 08.04.2010, participation units were subscribed, whose contribution was susceptible of being carried out in kind.

Independently of this, and returning to what was initially pointed out, it was the Petitioner who bore the burden of demonstrating that within the 3-year period counted from its acquisition of the real estate in question, it proceeded to the respective (re)sale. Not having done so, it should be considered that, with the passage of that 3-year period, the exemption of which it benefited has lapsed, there being nothing to censure, from the perspective of legality, regarding the tax act against which it rebels.

As to indemnificatory interest, given the foregoing, the legal requirements on which depends its grant are not verified.

VI. DECISION

In light of all that has been set out above, it is decided to declare the present objection unfounded, both as regards the annulment of the IMT assessment in question, and as regards the accessory petition for condemnation of AT for payment of indemnificatory interest.

The value of the case is fixed at € 67,101.32 in accordance with article 97-A, section 1, a), of the CPPT, applicable by force of the terms of paragraphs a) and b) of section 1 of article 29 of the RJAT and section 2 of article 3 of the Regulations on Fees in Tax Arbitration Proceedings.

The value of the arbitration fee is fixed at € 2,448.00 in accordance with Table I of the Regulations on Fees in Tax Arbitration Proceedings, entirely at the charge of the Respondent, in accordance with articles 12, section 2, and 22, section 4, both of the RJAT, and article 4, section 4, of the cited Regulations.

Notice shall be given.

Lisbon, 30 November 2014

The Arbitrators

José Pedro Carvalho

Guilherme W. d'Oliveira Martins

(dissenting as per the attached dissenting opinion)

Nina Aguiar

DISSENTING OPINION

I disagree with the thesis that prevailed for the following reasons:

In this process, it was important to decide whether the operation carried out meets, or does not meet, the legal requirements on which depends the application of the exemption for resale provided for in article 7 of the CIMT, which implied, in turn, determining whether (i) there existed, or not, an operation qualifiable as a resale within the time period provided for by law; and if (ii) having been that operation, there is or is not verified some cause of lapse of the exemption provided for in article 7 of the CIMT, particularly the one provided for in section 5 of article 11 of the CIMT.

Although the Petitioner devotes a significant part of the petition to demonstrating that the contract celebrated between B and Fund D should not be qualified as an exchange contract, AT manifested, in the Response presented, its agreement with the non-qualification of the contract in question as an exchange contract once it was an exchange of real estate for participations in a Fund. Thus, that question would not require further in-depth examination.

However, the question of the qualification of the contract celebrated does not end there, since, in the Respondent's view, the contract should be qualified as a contract of purchase and sale, and, in the Respondent's view, the contract constitutes a contribution in kind to the capital of the Fund. AT understands that the operation in question configured a contribution in kind to Fund D because B exchanged real estate for participation units of the Fund and because, having existed three capital increases thereof, the second and third occurred on 26.02.2010 and on 08.04.2010, with these dates coinciding with the celebration of the exchange deeds and with the participation units then increased corresponding exactly to those that served as consideration for the real estate transmitted by B. For this reason, AT understands that the operation in question cannot be considered a resale and that, consequently, it should not have benefited from the IMT exemption.

In this regard, we understand that AT is not correct. Indeed, in a contribution in kind what verifies is the performance of the obligation of contribution to the capital of a determined entity through the delivery of assets that are evaluated for that purpose. Something different, although the difference may appear subtle, is the contract celebrated between two parties through which one transmits real estate and the other pays a price (defined in money) for the real estate that it acquires, simply with that price being paid through participations in a separate patrimony. Indeed, it does not appear to us that the circumstance that the price, defined in money, is paid in participations instead of capital constitutes sufficient reason to say that what is at issue is a contribution in kind and not a contract of purchase and sale. In the concrete case, we have an onerous contract, bilateral, with reciprocal performances and endowed with real or translative efficacy – these being precisely the characteristics that denote the existence of a contract of purchase and sale. The price was defined by the parties and was paid through participations whose value corresponds to the defined price, which does not invalidate the existence of a contract of purchase and sale, to the extent that the obligation to pay the price due for the transmitted thing is maintained.

Being a contract of purchase and sale, we have a first resale when company B, which had acquired the real estate in question from company C, Lda., transmits it to Fund D. As to that aspect, I therefore understand verified the requirement on which depends the application of the exemption provided for in article 7 of the CIMT.

However, another question that requires analysis is the one that AT raises regarding the destination that Fund D gave to the real estate that it had acquired from B. Indeed, AT refers that, in 2012, said Fund requested the suspension of taxation for purposes of IMI on all real estate comprising its patrimony, including those transmitted by B, pursuant to article 9, section 1, paragraph e) of the CIMI, that is, because they are intended for resale, thus verifying that the purpose of the real estate would always be resale, implying thereby and with other grounds, new lapse of the IMT exemption in B's sphere, through the application of article 11, section 5 of the CIMT, to the extent that the real estate was sold being again qualified as for resale.

In this regard, the Respondent stated that:

• The acquiring Fund, within the scope of its activity, had the intention to proceed with the construction of buildings on the acquired real estate (land for urban construction). It did not have the intention to (re)sell the acquired land;

• The Fund classified the acquired real estate as "land for construction" for accounting purposes;

• However, in 2012, two years after the date of acquisition, the Fund, faced with the economic situation and attentive to the need for liquidity, altered the destination initially given to the acquired land, ceasing to intend to proceed with the construction of buildings for residential purposes on the same, then intending to proceed with the sale of the same;

• In 2012, the Fund updated the accounting classification of the real estate and requested the suspension of the collection of IMI, provided for in article 9, section 1, paragraph e) of the CIMI.

Now, pursuant to the provision of article 11, section 5, of the CIMT, "the acquisition referred to in article 7 shall cease to benefit from exemption as soon as it is verified that the acquired real estate was given a different destination or that the same was not resold within the period of three years or that it was resold again for resale." It appears to have been precisely that which occurred, to the extent that, as the Respondent itself states, in 2012, two years after the date of acquisition, the Fund decided to proceed with the sale of the real estate, updating the accounting classification of the real estate and requesting the suspension of the collection of IMI, provided for in article 9, section 1, paragraph e) of the CIMI. In this sense, notwithstanding that the requirements for the initial attribution of the exemption have been verified, a resolutive condition of the exemption was verified because the real estate, although resold within the time period established by law for that purpose, was resold again for resale – the alteration of the accounting classification of the real estate and the request for suspension of the collection of IMI being objective evidence of the intention to resell the real estate again, which, moreover, is confirmed by the Respondent in its submissions, notwithstanding referring to an "initial intention" to the contrary.

Thus, notwithstanding considering verified the first resale – which gives rise to the IMT exemption pursuant to article 7 – I consider that a resolutive condition of the same was subsequently verified, because the real estate was resold again for resale.

Guilherme W. d'Oliveira Martins

[1] And which should accompany all legally mandatory notifications of this decision, except to the parties, who have personal knowledge of the document.

[2] And which should accompany all legally mandatory notifications of this decision, except to the parties, who have personal knowledge of the document.