Process: 298/2018-T

Date: March 27, 2019

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 298/2018-T) addresses whether properties located within the Alto Douro Vinhateiro UNESCO World Heritage Site qualify for IMI (Municipal Property Tax) exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute (EBF). The claimant, A... S.A., challenged an IMI assessment of €633.76 for 13 properties in 2016, arguing that their location within the UNESCO-designated cultural landscape constitutes classification as national monuments, thereby warranting exemption. The Tax Authority contested this interpretation, arguing that: (1) UNESCO World Heritage designation does not equate to individual property classification under Portuguese law; (2) Law 107/2001 eliminated the 'National Monument' category, replacing it with National Interest, Public Interest, and Municipal Interest classifications; (3) IMI exemption requires individual administrative classification of each property, not mere inclusion within a designated ensemble; and (4) the Alto Douro Vinhateiro is classified as an 'ensemble' of national interest, but individual properties within it lack separate classification. The Authority further argued that one assessment was time-barred as it wasn't included in the original administrative complaint. The core legal dispute centers on whether Article 44(1)(n) EBF exemption applies to properties within a UNESCO-designated area without individual classification, and whether collective heritage designation suffices for tax exemption purposes. The case illustrates the tension between cultural heritage protection policies and tax exemption requirements, highlighting the importance of precise administrative classification procedures for obtaining IMI benefits.

Full Decision

ARBITRAL DECISION

I. REPORT

A..., S.A., with registered office at Rua ..., nº..., ..., holder of the single registration and identification number for legal entities ..., hereinafter simply designated as the Claimant, submitted a request for the constitution of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of articles 2º no. 1 a) and 10º no. 1 a), both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter abbreviated as RJAT), petitioning for the annulment of the decision dismissing the administrative complaint and consequent declaration of illegality and partial annulment of the Municipal Property Tax (IMI) assessment, in the part relating to 13 properties, for the year 2016, in the total amount of € 633.76, as well as the condemnation of the Tax Authority to reimburse the tax paid by the Claimant, plus compensatory interest.

To substantiate its claim, it alleges, in summary:

a) The Claimant was notified of the IMI assessment for the year 2016, in the total amount of € 57,518.35;

b) The Claimant filed an administrative complaint regarding part of that assessment, relating to 13 properties, in the total amount of € 633.76, which complaint was dismissed;

c) The aforementioned properties are an integral part of the Alto Douro Vinhateiro, considered as UNESCO World Heritage, whereby they are classified as national monuments, in accordance with and for the purposes of the provisions of article 15º nos. 3 and 7 of Law 107/2001, of 8 September;

d) Whereby they are exempt from IMI, in accordance with and for the purposes of the provisions of article 44º no. 1 n) of the EBF;

e) Article 44º no. 1 n) of the EBF only requires individual classification for properties classified as of public interest or municipal interest and not for properties classified as national monuments, as is the case with the properties in question in the present proceedings;

f) The Tax Authority cannot impose restrictions or requirements that are not expressly provided for in tax legislation;

g) The IMI assessment, in the part contested here, is illegal, due to violation of the provisions of article 44º no. 1 n) of the EBF.

The Claimant attached four documents and did not call any witnesses.

In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator, whereby, in accordance with the provisions of article 6º no. 1 of the RJAT, the signatory was appointed by the Ethics Council of the Administrative Arbitration Centre, the appointment having been accepted in accordance with legal provisions.

The arbitral tribunal was constituted on 30 August 2018.

Notified in accordance with and for the purposes of the provisions of article 17º of the RJAT, the Respondent submitted its reply, defending itself by exception and by substantive objection.

In its defence by exception, it alleged, in summary, the following:

a) In the present request for arbitral pronouncement, the Claimant requests the annulment of assessments numbered 2016..., 2016... and 2016...;

b) In the administrative complaint, the Claimant only requested the annulment of assessments numbered 2016... and 2016...;

c) Whereby, at the date of submission of the present request for arbitral pronouncement, the Claimant's right to challenge assessment number 2016... had already lapsed.

In its defence by substantive objection, it invoked, in summary:

a) Since the enactment of Law 107/2001, of 8 September, there has been no classification called "National Monument", but only classifications called National Interest, Public Interest and Municipal Interest;

b) The concept of classification called National Monument contained in Decree 20985, of 7 March 1932, does not equate to the concept of designation as National Monument contained in Law 107/2001, of 8 September;

c) The UNESCO World Heritage Committee, when inscribing a cultural asset on the respective list, is not classifying an asset;

d) Classification presupposes the existence of a prior administrative classification procedure, as results from the provisions of articles 18º of Law 107/2001, of 8 September and 4º of DL 309/2009, of 23 October, a procedure that in this case did not exist;

e) The cultural landscape of Alto Douro Vinhateiro belongs to the category of "ensemble", is included in the list of assets classified as of national interest and is designated National Monument;

f) In order to benefit from the IMI exemption provided for in article 44º no. 1 n) of the EBF, it is necessary that each of the properties comprising the ensemble be individually classified;

g) The first part of article 44º no. 1 n) of the EBF, in providing that "properties classified as national monuments" are exempt from IMI, refers to properties classified as national monuments under the legislation in force before the entry into force of Law 107/2001, of 8 September;

h) Even if it were understood that the cultural landscape of Alto Douro Vinhateiro were classified as National Monument, nonetheless the properties inserted therein would not, in themselves, benefit from IMI exemption;

i) The tax benefit of IMI exemption provided for in article 44º no. 1 n) of the EBF is linked to the fiscal concept of property provided for in article 2º of CIMI, with the cultural landscape of Alto Douro Vinhateiro not being a property;

j) Article 44º no. 1 n) of the EBF, in the interpretation defended by the Claimant, is unconstitutional, both by violation of the principles of tax equality, tax justice, taxpaying capacity, local autonomy and participation in decision-making, and by suffering from organic unconstitutionality.

The Respondent attached nine documents and the administrative file.

The Claimant replied to the exception of lapse of the right of action invoked by the Respondent, arguing for its dismissal.

The meeting referred to in article 18º of the RJAT was dispensed with, without opposition from the parties, with the proceedings continuing, at the request of the Respondent, for written submissions.

The parties presented written submissions, in which they maintained the positions previously defended in their respective pleadings.

II. ISSUES TO BE DECIDED:

In the present proceedings, the issues to be decided are reduced to (i) the assessment of the legality of the contested assessment and (ii) the Claimant's right to the payment of compensatory interest.

III. FACTUAL MATTER:

a. Established facts:

With relevance to the decision to be rendered in the present proceedings, the following facts were established:

  1. The Claimant was notified of the IMI assessment for the year 2016, in the total amount of € 57,518.35;

  2. The assessment was based, inter alia, on the ownership, by the Claimant, of the following properties, located in the Municipality of ...:

Parish Article

... R-...

... R-...

... U-...-A

... U-...-B

... U-...-C

... R-...

... R-...

... R-...

... R-...

... R-...

... R-...

U. F. ... and ... R-...

U. F. ... and ... R-...

  1. The IMI relating to the properties referred to in 2) above amounts to € 633.76;

  2. The Claimant paid the IMI assessed for the year 2016, in the total amount of € 57,518.35;

  3. On 12/07/2017, the Claimant filed an administrative complaint against the IMI assessment of 2016, in the part relating to the properties referred to in 2) above;

  4. The administrative complaint was dismissed, by decision dated 21/03/2018;

  5. The properties referred to in 2) above are located in Alto Douro Vinhateiro, included in the indicative list of UNESCO World Heritage, in the category of Cultural Landscape;

  6. On 21/02/2017, the Regional Directorate of Culture of the North issued a certificate relating to the properties registered in the register under the articles R-..., R-..., R-..., U-...-A, U-...-B and U-...-C, certifying that the aforementioned properties are classified as National Monument.

b. Facts not established:

With interest in the proceedings, there are no unestablished facts.

c. Reasoning on the factual matter:

The conviction regarding the facts established was based on documentary evidence attached to the proceedings as well as on the uncontested allegations of the parties.

IV. PRELIMINARY EXAMINATION:

The Arbitral Tribunal is regularly constituted and has material competence.

The parties have legal personality and capacity, are legitimate and are regularly represented.

The proceedings do not suffer from defects affecting their validity.

V. ON THE LAW:

Having established the factual matter, it is now necessary, by reference thereto, to determine the applicable law.

First and foremost, it is necessary to assess the exception of lapse invoked by the Respondent.

The Tax Authority invokes that, at the date of submission of the present request for arbitral pronouncement, the Claimant's right to challenge assessment number 2016... had already lapsed, given the fact that in the administrative complaint presented the Claimant only requested the annulment of assessments numbered 2016... and 2016....

The Claimant defends itself, invoking, on the one hand, that in the administrative complaint it requested the annulment not only of the aforementioned IMI assessments but also of those "that may be issued relating to the 3rd instalment of IMI payment by reference to the year 2016 and subsequent years" and, on the other hand, that the IMI assessment whose annulment it requested is not confused with the collection notices sent by the Tax Authority.

In this respect, we believe the Claimant is correct.

Not only because in the administrative complaint it also included in its request the annulment of the 3rd instalment of IMI, not yet sent at the date of submission of the complaint, but above all because, contrary to what is now argued by the Tax Authority, for IMI three assessments are not issued but rather one assessment with one or more collection notices (in this case, three).

Thus, since the Claimant challenged the IMI assessment for the year 2016, there is no doubt that in that request are included all collection notices for the respective tax, not only those already issued but also those to be issued.

Wherefore it is verified that the Claimant's right to challenge assessment number 2016... has not lapsed.

Having disposed of the exception of lapse invoked, we are thus in a position to examine the merits of the claim.

Thus,

The assessment of the alleged illegality of the contested assessment requires a brief analysis of the legal regime for cultural heritage.

The bases of the policy and regime for protection and enhancement of cultural heritage were established by Law no. 107/2001, of 8 September (LBPC).

In accordance with the provisions of no. 1 of article 15º of the aforementioned LBPC, "immovable assets may belong to the categories of monument, ensemble or site, as such categories are defined in international law."

The definition of such categories is provided for in the Convention for the Protection of World Cultural and Natural Heritage (UNESCO Convention of 1972), which defines what is considered as world heritage:

Monuments – Architectural works, monumental sculpture or painting, 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;

Ensembles – Groups of separated or linked buildings which, by virtue of their architecture, unity or integration in the landscape have exceptional universal value from the point of view of history, art or science;

Sites of interest – Works of human beings or combined works of human beings and nature, and zones, including sites of archaeological interest, with exceptional universal value from the point of view of historical, aesthetic, ethnological or anthropological interest.

In the Convention for the Safeguarding of the Architectural Heritage of Europe, signed in Granada on 03/10/1985 and ratified by Presidential Decree no. 5/91 of 23 January, the same categories of immovable assets are likewise provided for, with the "sites of interest" defined in the UNESCO Convention of 1972 adopting here the designation of "sites".

Continuing, no. 2 of article 15º of the LBPC determines that "movable and immovable assets may be classified as of national interest, of public interest or of municipal interest".

Having said this, on 22 July 2010, through the publication of Notice no. 15170/2010, it was made public that, in 2001, Alto Douro Vinhateiro was included in the indicative list of UNESCO World Heritage, in the category of Cultural Landscape, encompassing the municipalities of Mesão Frio, Peso da Régua, Santa Marta de Penaguião, Vila Real, Alijó, Sabrosa, Carrazeda de Ansiães, Torre de Moncorvo, Lamego, Armamar, Tabuaço, São João da Pesqueira and Vila Nova de Foz Côa.

As expressly results from that notice, the said publication was made "in accordance with and for the purposes of the provisions of no. 3 of article 72º of Decree-Law no. 309/2009, of 23 October".

In accordance with the provisions of article 72º no. 1 of the aforementioned Decree-Law, "the inclusion of an immovable asset in the indicative list of world heritage automatically determines the opening of a classification procedure, at the degree of national interest and fixing of the respective special protection zone."

In turn, no. 7 of article 15º of the LBPC prescribes that "cultural immovable assets included in the world heritage list are incorporated, for all purposes and in the respective category, into the list of assets classified as of national interest." (emphasis ours).

Providing no. 3 of the same provision that "for immovable assets classified as of national interest, whether they are monuments, ensembles or sites, the designation 'national monument' shall be adopted"

In the same sense, article 3º no. 3 of DL 309/2009 prescribes: "the designation of 'national monument' is attributed to immovable assets classified as of national interest, whether they are monuments, ensembles or sites."

In light of the above, there is no doubt that, following its inclusion in the indicative list of UNESCO World Heritage, Alto Douro Vinhateiro is classified as of national interest – cf. article 15º no. 7 of the LBPC.

Being an immovable asset classified as of national interest, it shall have the designation of national monument – cf. article 15º no. 3 of the LBPC.

Having reached this point, it is now important to analyse whether the properties in question in the present proceedings, which are located in Alto Douro Vinhateiro, benefit or not from the IMI exemption provided for in article 44º no. 1 n) of the EBF.

The cited provision provides that the following are exempt from IMI "properties classified as national monuments and properties individually classified as of public interest or municipal interest, in accordance with applicable legislation."

The IMI exemption provided for in this provision thus covers: (i) properties classified as national monuments and (ii) properties individually classified as of public interest or municipal interest.

From the plain reading of the wording of the law it is verified that individual classification is only required for properties classified as of public interest or municipal interest, such individual classification not being required for properties classified as national monuments.

On this point, the Respondent invokes that the reference contained in this provision to national monuments refers to properties thus classified under the Decree no. 20985, of 7 March 1932.

This is because, according to the Tax Authority, the LBPC does not provide for any classification of national monument, as was the case before its entry into force, only providing for the category of national monument.

This is not, however, the understanding we defend.

Indeed, notwithstanding the merit of the arguments advanced by the Tax Authority, it cannot be overlooked that the "classification" of monuments is provided for not only in the LBPC (see, for example, article 53º no. 1) but also in the fiscal law itself – cf. article 44º no. 5 of the EBF, which provides for "classification as national monuments" (emphasis ours).

Now, if the fiscal law itself provides for this classification as national monuments, one cannot argue, as the Tax Authority claims, that no such classification exists and even less that, when article 44º no. 1 n) of the EBF refers to "properties classified as national monuments" it is intended to refer to the classification instituted by legislation long since repealed.

All the more so because the EBF has been subject to successive amendments, so one cannot argue that this "detail" of the non-existence of a classification as national monument has "escaped" the legislator.

Neither does the argument advanced by the Respondent hold, that classification as national monument requires the opening of a prior administrative classification procedure, in accordance with DL 309/2009, of 23 October.

This is because, notwithstanding that this is the rule, the truth is that, with regard to immovable assets included in the World Heritage list, the LBPC itself created an exception, providing that their inclusion on this list determines, ope legis, their classification as of national interest, thereby dispensing with, in this case, the prior classification procedure.

Whereby, as from the entry into force of the LBPC, the inclusion of immovable assets in the World Heritage list has the effect of their classification as of national interest, without need for any classification procedure.

It being certain that, regarding immovable assets included in the World Heritage list before the entry into force of DL 309/2009 (as is the case in the present proceedings, where the assets were included in the World Heritage list in 2001), there is no need for any classification procedure, this resulting directly from the law and only requiring the publication referred to in article 72º no. 3 of DL 309/2009.

Therefore, in relation to these assets there is no place for the notification of the classification referred to in article 44º no. 5 of the EBF, with the IMI exemption operating by mere effect of the publication provided for in the cited article 72º no. 3 of DL 309/2009.

Being thus irrelevant any certificate issued by the Regional Directorate of Culture of the North as to the classification of the properties in question in the present proceedings as national monument or the fact that the Claimant only attached a certificate relating to six properties, since, it is insisted, such classification results ope legis with the publication of the Notice referred to in article 72º no. 3 of DL 309/2009, not depending on any administrative classification procedure.

The argument advanced by the Respondent that the exemption provided for in article 44º no. 1 n) of the EBF could not be applied because Alto Douro Vinhateiro does not constitute a property but rather an aggregate also cannot hold.

Indeed, notwithstanding that Alto Douro Vinhateiro does not constitute any property, the truth is that what is at issue in the present proceedings is the IMI exemption applicable to the properties of the Claimant and located in Alto Douro Vinhateiro.

And, as regards those properties, there is no doubt about their classification as properties, whereby, in light of all that has been set out, one cannot argue that the IMI exemption provided for in the EBF is not applicable to these properties.

In this sense, see, inter alia, Decision of the Court of Appeal dated 07DEC2016, case no. 134/14BEPRT, in www.dgsi.pt:

"Indeed, and as provided for in article 15º of Law no. 107/2001, of 8 September, and article 3º of Decree-Law no. 309/2009, of 23 October, an asset classified as of national interest is designated as a 'national monument', regardless of whether it is a single building, ensemble or site, it being clear that the immovable assets that compose the ensemble or site are covered by that classification.

The fact that individually classified properties may coexist, in case of delimitation of an ensemble or of a site, in accordance with article 56º of Decree-Law no. 309/2009, of 23 October, only has temporary relevance for delimiting the protection zone of that asset until the publication of the classification of the ensemble or of the site (cf. no. 2).

For that reason it is understood that article 44º of the Tax Benefits Statute distinguishes between 'property classified as national monument' and 'property individually classified as of public interest or municipal interest', requiring individualization only in relation to these two latter categories, not to that of assets of national interest."

This is, in our view, the best interpretation of article 44º no. 1 n) of the EBF, and we do not see that such interpretation suffers from any unconstitutionality, neither by violation of the principles invoked by the Respondent, nor by organic unconstitutionality.

Indeed, this is the understanding predominantly advocated by the case law, both of this arbitral tribunal and of the higher courts, and we do not foresee any reasons or grounds for taking a decision in a contrary sense.

In light of the above, it is concluded that the IMI assessment, in the part contested, is illegal, due to violation of the provisions of article 44º no. 1 n) of the EBF.

Having addressed the question of the legality of the assessment, let us see whether the Claimant is entitled to payment of compensatory interest.

As to compensatory interest, no. 1 of article 43º of the LGT prescribes:

"Compensatory interest is due when it is determined, in administrative complaint or judicial challenge, that there was error imputable to the services resulting in payment of the tax debt in an amount greater than that legally due".

It being considered that there is error imputable to the services whenever the challenge to the assessment proves to be well-founded.

In the case of the present proceedings, given that the illegality of the assessment, in the part contested, is established, there is no doubt that there was error imputable to the services, it being certain that such error resulted in payment, by the Claimant, of a debt in an amount greater than that due.

Whereby there is no doubt that the Claimant is entitled to the payment of compensatory interest, calculated at the legal rates, from the date of payment of the tax until its effective reimbursement by the Respondent.

VI. OPERATIVE PART:

In light of the above, the decision is as follows:

a) To dismiss as unfounded the exception of lapse invoked by the Respondent;

b) To uphold the claim for annulment of the decision dismissing the administrative complaint and for declaration of illegality and partial annulment of the Municipal Property Tax (IMI) assessment, in the part relating to 13 properties, for the year 2016, in the total amount of € 633.76, with the consequent annulment of the decision dismissing the complaint and of the assessment, in the part contested;

c) To uphold the claim for condemnation of the Tax Authority to payment of the reimbursement of the tax paid by the Claimant, as well as of compensatory interest, calculated at the legal rates from the date of payment of the tax by the Claimant until its effective reimbursement.

The value of the case is set at € 633.76, in accordance with subparagraph a) of no. 1 of article 97º-A of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of no. 1 of article 29º of the RJAT and no. 2 of article 3º of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is set at € 306.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, as well as the provisions of no. 2 of article 12º and no. 4 of article 22º, both of the RJAT, and no. 3 of article 4º, of the cited Regulation, to be paid by the Respondent as the unsuccessful party.

Register and notify.

Lisbon, 27 March 2019.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, in accordance with no. 5 of article 131º of the CPC, applicable by cross-reference of subparagraph e) of no. 1 of article 29º of Decree-Law no. 10/2011, of 20/01, with its drafting governed by the old spelling rules.

Frequently Asked Questions

Automatically Created

Are properties located within the Alto Douro Vinhateiro UNESCO World Heritage Site exempt from IMI tax under Portuguese law?
Properties located within the Alto Douro Vinhateiro UNESCO World Heritage Site are not automatically exempt from IMI tax. Portuguese tax law requires individual administrative classification of each property as a national monument or property of cultural interest. Mere inclusion within a UNESCO World Heritage designated area, even as a cultural landscape, does not satisfy the legal requirements for IMI exemption under Article 44(1)(n) of the EBF without specific individual classification through the administrative procedure established in Law 107/2001.
What does Article 44(1)(n) of the EBF (Estatuto dos Benefícios Fiscais) establish regarding IMI exemption for nationally classified monuments?
Article 44(1)(n) of the EBF establishes IMI exemption for properties classified as national monuments and properties classified as of public interest or municipal interest that are individually classified. Since Law 107/2001 eliminated the 'national monument' category and replaced it with National Interest, Public Interest, and Municipal Interest classifications, the provision now applies to individually classified properties under the current legal framework. The exemption requires formal administrative classification through the procedure defined in heritage protection legislation.
Does IMI exemption for national monuments require individual property classification or is inclusion in a UNESCO World Heritage Site sufficient?
IMI exemption for properties of cultural heritage value requires individual property classification through the administrative procedure established in Portuguese law. Inclusion in a UNESCO World Heritage Site is insufficient. Each property must undergo the classification process defined in Law 107/2001 and Decree-Law 309/2009. Collective designation of an area or cultural landscape as heritage does not automatically confer tax benefits to individual properties within that area. The tax benefit is linked to the specific fiscal concept of 'property' under Article 2 of the IMI Code, requiring individualized classification.
How can property owners challenge an IMI tax assessment through the CAAD arbitration tribunal in Portugal?
Property owners can challenge IMI tax assessments through the CAAD (Administrative Arbitration Centre) by first filing an administrative complaint (reclamação graciosa) with the Tax Authority. If the complaint is dismissed or not decided within the legal timeframe, the taxpayer may submit a request for arbitration within 90 days. The request must identify the contested assessment, present legal grounds for challenge, and attach supporting documentation. Taxpayers can choose to appoint an arbitrator or allow the CAAD Ethics Council to make the appointment. The arbitration process follows the Legal Regime for Tax Arbitration (RJAT) established in Decree-Law 10/2011.
Are property owners entitled to a refund with compensatory interest if an IMI exemption is wrongfully denied by the Portuguese tax authority?
Property owners are entitled to a refund with compensatory interest (juros indemnizatórios) if an IMI exemption is wrongfully denied and the tax was paid. Compensatory interest accrues when the Tax Authority collects tax not legally due, compensating taxpayers for the financial loss from improper tax payment. The interest is calculated from the date of payment until refund, at rates established by ministerial order. However, entitlement depends on successfully proving the exemption applies and that the assessment was illegal, which requires demonstrating compliance with all legal requirements for the claimed tax benefit.