IMT Exemption for Tourism Developments Under Decree-Law 423/83 – Arbitral Decision Reform (Process 301/2014-T)

TAX ARBITRAL JURISPRUDENCE

Case No. 301/2014-T

Date of Decision:
2019-11-18
IMT

Value of Claim:
€ 20,415.40

Subject Matter:
IMT – IMT Exemption; installation of qualified tourism utility enterprises; No. 1 of Article 20 of Decree-Law 423/83, of December 5 – Reform of Arbitral Decision (attached to this decision)
*Replaces the arbitral decision of November 10, 2014.

Version in PDF

THE PARTIES

Claimant: A..., VAT No. ..., domiciled at Street ..., No. ..., ..., ..., ...-... Lisbon.

Respondent: Tax Authority and Customs Authority (AT).

ARBITRAL DECISION

I. REPORT

a) On March 28, 2014, A..., VAT No. ..., filed with the CAAD a request for, under the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a singular arbitral tribunal (TAS).

b) The request is signed by attorneys whose power of attorney has been attached.

THE REQUEST

c) The Claimant petitions for the annulment of the tax assessment act for municipal tax on onerous transfers of immovable property (IMT), in the amount of € 20,415.40, issued by the Finance Service of... ... (...), pursuant to office ... of 29.11.2013, from that finance service.

d) Tax assessed due to the fact that he acquired the autonomous fraction designated by the letter "R" of the urban property registered in the property register under article ...º, district of ..., on 20.11.2008, with the benefit of tourism utility (Article 20-1 of Decree-Law No. 423/83, of December 5) which the AT considers to be undue.

e) He alleges that he acquired the autonomous fraction under the "presupposition, indicated by the seller and ascertained in the terms expressly set forth in the law, that that particular operation would benefit from the IMT exemption provided in Article 20 of Decree-Law 423/83, of December 5", and that "he acquired that fraction with a view to its installation as a component of the integrated tourism enterprise B..., precisely aiming at its commercial exploitation and the obtaining of the return and increase of the investment made there".

f) And that "with a view to the commercial exploitation of that fraction, the Claimant entered into a tourism exploitation contract with C..., S.A., under the terms of which he ceded to that company the exclusive right to exploit the fraction", this company being "the operator of the Hotel and the tourism apartments, both classified as 5-star, which are part of the tourism complex B...".

g) Disagreeing with the assessment, he concludes that "he acted as developer of the enterprise in which the fraction is integrated… he actively contributed to the financing of the works in progress", "he did so always from the perspective of investment and the return that would come from it for him" and that "the granting of the exemption was fundamental to his decision to acquire the fraction".

h) He argues that the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5, should encompass "within its scope the transfers made to the acquirers of the fractions, with these benefiting from the same privileged status that the legislator intended to confer on the real estate developer".

i) Inasmuch as these are those who bear the "burden of investment", and because "the process of installation of a real estate enterprise of tourism utility, as an organizational unit intended to provide tourism services, only ceases when, after the real estate complex is constructed and licensed, it proves capable of functioning in the terms that allowed it to achieve the status of tourism utility, that is, when it proves capable of being used for tourism exploitation activity with the quality required in the ministerial dispatch that granted it that status", treating the enterprise as plural property, the acquisition of accommodation units embodies "investment in the creation/installation of Portuguese tourism supply, in a real estate product for tourism investment".

j) And he adds "… whoever acquires one of these new fractions in a tourism complex in plural property, becoming co-owner of the hamlet, also participates in its installation, inasmuch as it cannot be considered integrally installed as long as the respective accommodation units are not capable of functioning and being exploited due to lack of prior acquisition in that property regime".

k) And that the fact of there being an IMI exemption should be relevant as provided in No. 1 of Article 47 of the Tax Benefits Statute (EBF), which states that "Properties integrated in enterprises to which tourism utility has been attributed are exempt from municipal contribution for a period of seven years."

l) And equally the fact that the exemption was not questioned by the Notary who verified it in the deed and by the Registry Officer who recorded the property registration of the acquisition (No. 1 of Article 49 of the IMT Code and No. 1 of Article 72 of the Property Registration Code).

m) Nor did the AT subsequently question the exemption, so the impugned assessment is not in accordance with the principles of certainty and legal security, putting in question acquired rights and the principles of good faith and transparency.

n) He concludes by stating: "…in the case at hand, all the formal and substantial requirements for the granting of the benefit were fully met, so that, in these terms, from the outset, the assessment act that revokes it is, in itself, illegal and sufficiently apt to defeat the AT's claims" therefore "it cannot proceed, in the terms set forth, with the revocation of the granting of the tax benefit, under the aforementioned Article 141 of the CPA."

o) He concludes by petitioning for the annulment of the tax act identified in c) and d), with the legal consequences.

OF THE SINGULAR ARBITRAL TRIBUNAL (TAS)

p) The request for constitution of the TAS was accepted by the President of CAAD and automatically notified to the AT on April 2, 2014.

q) By the Deontological Council of CAAD, the signatory of this decision was designated as arbitrator, and the parties were notified thereof on May 20, 2014.

r) Therefore the Singular Arbitral Tribunal (TAS) has been, since June 4, 2014, regularly constituted to hear and decide the subject matter of this dispute.

s) All these acts are documented in the communication constituting the Singular Arbitral Tribunal dated June 6, 2014, which is hereby reproduced.

t) On June 4, 2014, the AT was notified in accordance with and for the purposes of Article 17-1 of RJAT.

u) On September 22, 2014, the meeting of parties referred to in Article 18 of RJAT was held. A period of 10 days was granted to the parties for written and successive pleadings. The joinder to the record of the testimony of D... produced in case 102/2014-T was also admitted.

v) On October 22, 2014, the Claimant presented written pleadings and the Respondent presented its pleadings on November 3, 2014.

w) It is recorded that the recording of the testimony of D..., produced in the context of case CAAD 102/2014-T, was obtained at CAAD on November 7, 2014, at 2:30 p.m., using this contribution for this case given that it involves cases with total identity of legal substance (according to the express or implicit position of the parties in this case).

PROCEDURAL REQUIREMENTS

x) Legitimacy, capacity and representation - The parties have legal personality and capacity, are legitimate and are duly represented.

y) Adversarial procedure - The AT was notified in accordance with item t) of this Report. All orders issued in the case and all documents attached were notified to the other party.

z) Dilatory exceptions - The case is not affected by nullities and the request for arbitral pronouncement is timely given that it was presented within the period prescribed in subparagraph a) of No. 1 of Article 10 of RJAT.

SUMMARY OF THE CLAIMANT'S POSITION

As to the possible illegality of the assessment act due to non-conformity with the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5

aa) The Claimant understands that the assessment is not in accordance with the law because "he acted as developer of the enterprise in which the fraction is integrated… he actively contributed to the financing of the works in progress", "he did so always from the perspective of investment and the return that would come from it for him" and that "the granting of the exemption was fundamental to his decision to acquire the fraction".

bb) He argues that the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5, should encompass "within its scope the transfers made to the acquirers of the fractions, with these benefiting from the same privileged status that the legislator intended to confer on the real estate developer".

cc) Inasmuch as these (the acquirers) are those who bear the "burden of investment", and because "the process of installation of a real estate enterprise of tourism utility, as an organizational unit intended to provide tourism services, only ceases when, after the real estate complex is constructed and licensed, it proves capable of functioning in the terms that allowed it to achieve the status of tourism utility, that is, when it proves capable of being used for tourism exploitation activity with the quality required in the ministerial dispatch that granted it that status", treating the enterprise as plural property, the acquisition of accommodation units embodies "investment in the creation/installation of Portuguese tourism supply, in a real estate product for tourism investment";

dd) And he adds "… whoever acquires one of these new fractions in a tourism complex in plural property, becoming co-owner of the hamlet, also participates in its installation, inasmuch as it cannot be considered integrally installed as long as the respective accommodation units are not capable of functioning and being exploited due to lack of prior acquisition in that property regime".

ee) And that the fact of there being an IMI exemption should be relevant as provided in No. 1 of Article 47 of the Tax Benefits Statute (EBF), which states that "Properties integrated in enterprises to which tourism utility has been attributed are exempt from municipal contribution for a period of seven years."

ff) And equally the fact that the exemption was not questioned by the Notary who verified it in the deed and by the Registry Officer who recorded the property registration of the acquisition (No. 1 of Article 49 of the IMT Code and No. 1 of Article 72 of the Property Registration Code).

gg) Subsequently the AT did not question the exemption, so the impugned assessment is not in accordance with the principles of certainty and legal security, putting in question acquired rights and the principles of good faith and transparency.

hh) In his pleadings, the Claimant raises the appreciation of the testimony of D... produced in case 102/2014-T, in a situation entirely identical to this case, to the effect of concluding that "the acquirers of the fractions were co-financers of the enterprise, which, moreover, only proceeded after a pool of investors was assembled".

ii) He proposes that the requirements are met for the functioning of the tax benefit in question given that "it was the intervention of the acquirers that made possible the achievement and installation of the enterprise, it being clear from the outset that they assumed their intervention in partnership with the developer and following the plan determined by him".

SUMMARY OF THE TAX AUTHORITY'S POSITION

As to the possible illegality of the assessment act due to non-conformity with the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5

jj) The AT disagrees with the fact that the Claimant understands the acquisition of the immovable property in question, which occurred on 2008-11-20, still falls within the process of installation of the tourism enterprise B..., whose tourism utility was granted provisionally on 2005-06-02, subsequently confirmed on 2007-05-07, for a period of seven years counted from the date of its opening to the public on 2005-09-30.

kk) And does not consider "… acceptable that, after more than three years have passed since the opening to the public of the tourism enterprise, it should be considered that the Claimant's acquisition of the fraction still aimed at the installation of the same".

ll) He bases his position on the jurisprudence of the Supreme Administrative Court (judgment of the Tax Contention Section of the Supreme Administrative Court of 2013-01-23, handed down in expanded hearing, in accordance with Article 148 of the Code of Administrative Court Procedure, in case No. 968/12, which gave rise to the Jurisprudence-Standardizing Judgment No. 3/2013, published in the Official Gazette, 1st series, No. 44, of 2013-03-04, which standardized jurisprudence regarding the concepts of "exploitation" and "installation").

mm) And concludes: "the decision contained in the learned judgment – referred to in the previous item - and which grounded the IMT assessment act now impugned, is based on solid legal grounds, whose most relevant vertices".

nn) He further expresses that "given that the enterprise qualified as Tourism Complex B..., opened to the public on 2005-09-30, it is manifest that the sale of the fraction in question, on 2008-11-20, occurred when the enterprise was already, without any doubt, in operation and exploitation".

oo) And that the very deed of purchase of the autonomous fraction states textually that "… is intended for tourism exploitation".

pp) As to the alleged "logical-systematic inconsistency" proposed by the Claimant, he argues that, as to that aspect "…the Supreme Administrative Court sees a coherent legislative evolution that has always excluded the tax exemption on the acquisition of autonomous fractions in already-installed tourism enterprises".

qq) On the other hand, he contests that the Claimant's intervention (before acquiring the fraction) avoids the factual reality that the developer of the tourism enterprise was a company other than him, the role previously performed being irrelevant, given that the acquisition of the immovable property occurred on 2008-11-20, well beyond the physical completion of the enterprise.

rr) He states that "… it is not sufficient for the Claimant to allege that he acted "in the conviction that he was acting within the boundaries of legality" or invoke "a grave injustice", with the intent to base an alleged administrative bad faith action", given that "…the transfer of the immovable property did not meet, ab initio, the legal requirements to benefit from IMT exemption", concluding that "there does not exist in the Claimant's legal sphere any legitimate expectation deserving of protection", "Nor is any grave injustice to the Claimant apparent that could result from compliance with tax law".

ss) "Regarding the invoked violation of constitutional principles resulting from the application of the norm of No. 1 of Article 20 of Decree-Law No. 423/83, of December 5, the Supreme Administrative Court has already ruled in various judgments, unequivocally rejecting such argumentation. See, by way of example, the Judgment handed down in Case No. 01046/13, of 2014-03-26".

tt) As to the invocation of the "illegal revocation of a valid act because it is constitutive of rights, under Article 140 of the Code of Administrative Procedure (CPA) and the possible revocation of the tax exemption could only take place within the period provided in Article 141 of the CPA", the AT states that both norms presuppose the existence of an administrative act (in the definition of Article 120 of the CPA), in the case of granting or recognition of a tax benefit, invoking for this the very literal wording of No. 1 of Article 141 of the CPA and No. 4 of Article 14 of the EBF, which is not the case here because it is an automatic tax benefit.

uu) He concludes: "The Administration issued no decision recognizing or granting a tax benefit to the Claimant under the terms provided in Article 5 of the EBF". What occurred was that "... when the deed of purchase and sale of the immovable property was executed, it was wrongly considered that the Claimant would meet the legal requirements for IMT exemption", "which… constituted an incorrect interpretation and application of tax law in relation to which the tax administration and its organs are completely unaware".

vv) In pleadings the AT maintained, in essence, everything it had already stated in its response to the request for pronouncement.

ww) Arguing for the legality of the tax act because it constitutes a correct application of the law to the facts "under Article 2, No. 1, read in conjunction with Articles 4, 5 and 12, No. 1, at the rate provided in the current subparagraph d) of Article 17, all of the IMT Code".

xx) On November 10, 2014, a decision was issued by this TAS that ruled favorably on the Claimant's request for arbitral pronouncement (PPA), from which the AT appealed to the South Regional Administrative Court (TCA Sul).

yy) On April 8, 2019, a judgment of the TCA Sul was attached to the case that annulled the TAS decision mentioned above on the grounds that reasoning was taken into account that was not alleged by the Claimant, which the TAS could not take knowledge of, resulting in excess of pronouncement and lack of prior adversarial procedure, generating a true surprise decision.

zz) By order of October 26, 2019, the parties were invited to submit their views regarding the factual circumstances giving rise to nullity of the decision, with neither party using that faculty.

II - ISSUES FOR THE TAS TO RESOLVE

On this matter, there are divergent CAAD decisions, brought to the case by the parties.

Regarding the testimony of the witness referred to in w) of the Report, the TAS concludes that it concerns the contractual relationship between the Claimant, before acquiring the autonomous fraction and after acquiring it, with the developer and with the entity that exploits the enterprise.

As to the substantive issue, the consolidated jurisprudence of the SAC is clear: the exemptive norm in question here only covers "installation" and not "exploitation".

The Claimant will ultimately seek to characterize his action at the level of contracting, in commercial relations with the real estate development company, through extensive interpretation, in the notion of "installation", to then argue for the right to the tax benefit.

As to identical cases, there already exist at least 3 CAAD decisions, cited by the AT, issued in cases No. 102/2014-T, 104/2014-T and 110/2014-T. In the latter case, as to the qualification/characterization of the type of intervention of the Claimant in relations with the real estate development company, it is stated: "the acquisition of the accommodation unit in the tourism enterprise, "B...", even though integrated in the enterprise in question and even though allocated to tourism exploitation, and even that such tourism exploitation is carried out by the entity exploiting the remaining tourism enterprise, the Claimant's acquisition does not meet one of the fundamental requirements of the concept of installation, so it cannot benefit from the exemptions enshrined in Article 20, No. 1 of Decree-Law 423/83".

These are concrete judgments concerning concrete situations, identical to those of this case, taking into account the Claimant's own description of the facts in the request for pronouncement.

It should be noted that the CAAD decision that the Claimant attached to the case, which was in the sense of accepting his point of view, concerns a situation that occurred before the entry into force of Decree-Law No. 39/2008, of March 7 (legal framework for the installation, exploitation and operation of tourism enterprises), subsequently amended by Decree-Law No. 228/2009, of September 14, and by Decree-Law No. 15/2014, of January 23.

The TAS is subordinate to "constituted law" as provided in No. 2 of Article 2 of RJAT.

Given a matter with such unanimity of interpretation by the holders of the highest Judicial Court (the SAC) and given what has been decided at CAAD, we see no reason to understand it differently here, indeed, we adhere to the grounds of the learned decision by the SAC and decided in the CAAD cases mentioned above, in the aspect of the separation of what is installation versus exploitation and as to the qualification/delimitation of the concepts.

Let us say that, even if the TAS were to take into account the factuality alleged in Articles 12, 13 and 16 to 38 of the request for pronouncement, in the logic of the discourse used, the truth is that, ultimately, the Claimant would seek to benefit from two IMT exemptions (economic benefits):

• One as a developer (associated with the developer);
• Another as an acquirer of an autonomous fraction (in which his patrimonial assets increase).

If the Claimant seeks to characterize his intervention at the level of economic viability of the enterprise in the first phase: installation, well then, in the acquisitions that took place there, he already benefited economically from the IMT exemption that certainly operated there. He already had the corresponding economic benefit. He already had a State subsidy, because tax benefits are "fiscal expenditure" and as such are State subsidies under community law. The contribution of all taxpayers to the promotion of tourism activity has already occurred.

To argue, on that basis, that he would then also have the right to another subsequent tax benefit (on the acquisition of accommodation units) is what seems to us questionable, given the fiscal principle that taxes "patrimonial increase". If it were as the Claimant proposes, it is verified that he already had, in the first phase, in his association with the developer in what he seeks to characterize as the "installation phase", that implicit "patrimonial increase", by having borne a lower cost.

The law appears to provide for one tax benefit and not two tax benefits (from the perspective of patrimonial increase), in two distinct factual moments. Nothing would prevent the tax benefit from being extended, through extensive interpretation, by reasoning from parallel cases, to the two moments of the enterprise: installation versus exploitation, in situations where, as the Claimant proposes, the acquirers of units have been in fact the financers thereof and without that financing installation could not have occurred, provided that, e.g., in the deed it was stated – and this corresponded to material truth - that the concrete price of the unit acquired was delivered in advance to finance the installation and the price set forth in the deed reflected, at a discount, the implicit patrimonial increase that occurred through the benefit of IMT verified in the installation phase.

We are dealing with a tax benefit that is automatic in the definition of No. 1 of Article 5 of the EBF - it depends directly on the law, on a legal norm. Inasmuch as it is automatic, its attribution or verification does not generate an administrative act, so its extinction, by revocation, under No. 4 of Article 14 of the EBF is not possible.

The issue raised in this case has, however, another dimension: that of access to tax justice (right of challenge and appeal).

Access to tax justice – in the jurisdictional dimension - seems to us must be as broad as possible, in practical terms and not in a merely programmatic dimension as may appear from reading the general rule of Article 9 of the LGT (and Article 96 of the CPPT).

At the level of ordinary tax law, it is Article 95 of the LGT (and Article 97 of the CPPT) that specifies, by way of example, the acts injurious to rights and legally protected interests that may be the subject of jurisdictional proceedings.

Access to tax justice – in the dimension of amicable procedure – (Article 54 of the LGT and Article 44 of the CPPT) should also be as broad as possible, inasmuch as it aims to create administrative decisions, with the participation of taxpayers, that permit them, if desired, to subsequently settle their disagreements in the organs of sovereignty of judicial administration.

In the case, given that what is at issue is the existence or not of a right to a tax benefit, see subparagraphs d) and i) of No. 1 of Article 44 of the CPPT, read in the sense of subparagraph c) of No. 1 of Article 60 of the CPPT, that is, "any benefit" (the law does not speak of an administrative act that confers tax benefits) in order to be considered extinct, non-existent in the legal order, it seems must be preceded by a procedure aimed at obtaining a decision (an act) capable of permitting the taxpayer to act before the courts.

In this case what happens is that it is considered, (due to the fact that the tax benefit contained in the exemptive norm of No. 1 of Article 20 of Decree-Law No. 423/83, of December 5, is of an automatic nature and verification of requirements by the Notary, in the deed), that there is no administrative act and as such it is not possible to revoke what does not exist, as an administrative act practiced by the AT.

The Claimant himself considers that the IMT assessment act revoked the tax benefit (Article 163 of the request for pronouncement), which, as we have said, we do not accept, given the lack of procedural concurrence between the moments of application of the rule of incidence and the exemptive rule.

It seems to us there is a factual misunderstanding: the benefit, even though being automatic and of "ope legis" functioning, whether well or badly attributed (as has been said, it is not for us to scrutinize this aspect directly and expressly, given the limitation of competence of the TAS), exists, is recorded in the deed. It was verified in the deed by the Notary who understood that its requirements were met.

To proceed on the principle that, given the non-existence of an administrative act that recognized the tax benefit, the act itself (which is not by definition an administrative act in the dimension of Article 120 of the CPA), practiced by the Notary, does not exist, is certainly not in accordance with factual reality.

The AT conducted an inspection procedure and from this proceeded to the assessment procedure, without first opening a procedure aimed at discussing the concrete requirements of the benefit and above all aimed at obtaining a decision that would permit the taxpayer to discuss the right to the concrete tax benefit. Hence the taxpayer now comes, in this case, to discuss that right, as an interrupting fact that would obstruct the assessment.

That is, as has been said, unless there is procedural concurrence between the moments of application of the rule of incidence and the exemptive rule, the assessment procedure does not seem to be the appropriate means to remove (implicitly) from the legal order, even if factually, set aside, any tax benefit, even of "ope legis" functioning.

Furthermore, the tax inspection procedure will not be appropriate, in this case, to produce an administrative decision subject to direct judicial scrutiny (subparagraph a) of No. 1 of Article 12 of the RCPIT). As a rule, the conclusions of the Inspection Report are not challengeable (Article 11 of the RCPIT).

What has just been stated does not collide with the jurisprudence regarding the lack of need for prior hearing of taxpayers in assessment proceedings when they have already been heard in tax inspection proceedings (No. 3 of Article 60 of the LGT) – Judgment of the SAC of 16.05.2007, appeal 186/07 at www.dgsi.pt. That is, corrections to taxable matter is something different from extinction or declaration of illegality of a tax benefit that exists, whether well or badly granted.

It seems to us that the crucial issues to which the TAS must respond are the following:

1. General issue - automatic tax benefits in the sense of No. 1 of Article 5 of the EBF, inasmuch as they are not conferred by an administrative act in the definition of Article 120 of the CPA, can be considered (implicitly) in non-conformity with the law in assessment proceedings, regardless of procedural concurrence between the moments of application of the rule of incidence and the exemptive rule?

2. Specific issue - the tax benefit contained in the exemptive norm of No. 1 of Article 20 of Decree-Law 423/83, of December 5, which appears in the deed of purchase and sale executed on 2008.11.20, as an automatic benefit and of "ope legis" functioning, was implicitly declared illegal, thus extinct, by the assessment act carried out by the AT and referred to in subparagraphs c) and d) of this decision's Report?

The answer to these questions will result in the favorability or unfavorability of the request, and if the answer is in the sense of concluding that the procedure for declaration of illegality of the tax benefit contained in the deed was omitted, in order to obtain a decision that would permit judicial protection, as to the concrete question of the right to the tax benefit, the TAS will not need to pronounce itself on the remaining grounds invoked by the Claimant in the request for pronouncement, with possible effect on the validity of the assessment act, due to manifest futility.

III. ESTABLISHED AND UNESTABLISHED FACTS. GROUNDS

The following are the facts considered established as relevant to the decision to be adopted, indicating the respective documents (proof by documents) as grounds:

Established Facts

1. By order of the Secretary of State for Tourism of 2005-06-02, whose notice was published in the Official Gazette, ... series, No...., of 2005-07-15, tourism utility was granted, on a provisional basis, to the enterprise qualified as Tourism Complex B..., located at ..., district of ..., municipality of ..., district of Faro, to be carried out by company E..., S.A., holding NIPC ... - Pages 4 and 5 of PA, Article 6 of the AT's Response and overall position of the Claimant in the request for pronouncement.

2. By order of the Secretary of State for Tourism of 2007-05-07, whose notice was published in the Official Gazette, ... series, No...., of 2007-06-11, tourism utility was confirmed for the enterprise qualified as Tourism Complex B..., valid for a period of seven years, counted from the date of issuance of the tourism utility license by the Municipal Chamber of ..., which coincided with the opening of the enterprise to the public, on 2005-09-30 - Pages 4 and 5 of PA, Article 7 of the AT's Response and overall position of the Claimant in the request for pronouncement.

3. On 2008-11-20, the Claimant, married to G..., under the community of acquests regime, acquired from company E..., S.A. the autonomous fraction R, intended for residential use, of the urban property registered in the respective property register under article ...º, located at ..., district ..., municipality of ... - in accordance with public deed of purchase and sale No. .../..., executed on that date at the Notary's Office of F..., in Lisbon – Article 11 of the request for pronouncement, pages 4 of PA and Article 8 of the AT's Response.

4. It was declared in the aforementioned deed that the transfer of the immovable property was exempt from payment of municipal tax on onerous transfers of immovable property (IMT), under Nos. 1 and 2 of Article 20 of Decree-Law No. 423/83, of December 5, by virtue of the fraction acquired being intended for the installation of an enterprise qualified with tourism utility, in accordance with the order of the Secretary of State for Tourism of June 2, 2005 – Pages 4 of PA, Article 10 of the AT's Response and overall position of the Claimant in the request.

5. By Service Order No. OI2013..., of 2013-08-01, issued by the Tax Inspection Services of the Finance Authority of Faro, a procedure of internal inspection of partial scope was opened, in the matter of IMT, concerning the year 2008 and relating to the fact referred to in 3) and 4) – PA attached by the AT, Article 11 of the AT's Response and overall position of the Claimant in the request.

6. The Claimant exercised the right to hearing regarding the draft final report on October 28, 2013, following the notification made to him by office ... of October 11, 2013, expressing his disagreement with the draft decision – Pages 6 of PA.

7. Upon conclusion of the inspection procedure referred to in 5), the respective final report was prepared, where it was concluded: "A... and G..., upon acquiring the immovable property from company "E... S.A.", acquired an immovable property in an already-constructed and installed enterprise, so they could not benefit from the exemption provided in Article 20 of Decree-Law No. 423/83 of December 5, so the acquisition of the urban property registered in the property register under article ... fraction R at the price of € 314,083.00, is subject to IMT as of 2008/11/20 under Article 2 read in conjunction with Articles 4, 5 and No. 1 of Article 12 of the IMT Code. From the facts previously set forth resulted lack of assessment of IMT, at the rate provided in Article 17, No. 1 subparagraph c) of the IMT Code (current subparagraph d)) of the respective Code, so it is proposed to assess the tax properly." – PA attached by the AT, Article 12 of the AT's Response and overall position of the Claimant in the request.

8. By office No. ... of November 29, 2013, the Finance Service of ... ... (...), notified the Claimant of the assessment of € 20,415.40 as IMT and to request payment slips within 30 days – Document No. 1 attached with the request for pronouncement, Article 13 of the AT's Response and overall position of the Claimant in the request for pronouncement.

9. The Claimant entered into a tourism exploitation contract with C... SA – Article 18 of the PI and Document No. 4 attached with the request for pronouncement.

Unestablished Facts

There is no other alleged factuality that is relevant for the proper composition of the legal dispute.

The established matter results from the documents attached by the Claimant, from PA and from the AT's response, inasmuch as the contents of the documents were not called into question and the facts alleged, taken as established, were the subject of agreement with the other party, express or tacit.

The facts about which the witness's testimony was directed constitute "res inter alios acta" and in that measure will neither benefit nor harm third parties, in addition to being irrelevant to the composition of this dispute, in the solution to be adopted.

IV. APPRECIATION OF THE ISSUES FOR THE TAS TO RESOLVE

General issue - automatic tax benefits in the sense of No. 1 of Article 5 of the EBF, inasmuch as they are not conferred by an administrative act in the definition of Article 120 of the CPA, can be considered (implicitly) in non-conformity with the law in assessment proceedings, regardless of procedural concurrence between the moments of application of the rule of incidence and the exemptive rule?

Tax Procedure

Regarding the subject matter of exemptions and as to tax procedure – Articles 54 of the LGT and 44 of the CPPT – it is verified that "the tax procedure comprises the entire succession of acts directed at the declaration of tax rights, specifically: the recognition and revocation of tax benefits" (subparagraph d) of No. 1 of Article 54 of the LGT).

Right from the outset, a particularity can be noted here. The LGT, in addition to not being exhaustive, does not refer to "revoke acts that grant tax benefits", it is much more comprehensive when it refers to "revocation of tax benefits". The expression "revocation" (from the Latin "revocare") must be understood in its common meaning of "to invalidate the effect of something; to rescind or annul, to cease the effects of a law, of a legal act, etc."

That is, from this norm, it does not seem that one should draw the reading that an automatic tax benefit, of "ope legis" functioning, whose requirements were verified by the Notary and which was expressed in the deed, does not have to be the subject of an autonomous procedure aimed at verifying its possible illegality, in order for the taxpayer to use judicial remedies to discuss the matter, given the decision that puts an end to it.

The apparently more restrictive wording of subparagraph d) of No. 1 of Article 44 of the CPPT, when read in the sense that it would only require an autonomous procedure in situations where there is an administrative act that has granted the benefit, is not preventive of what has just been stated, taking into account, e.g., the more generic norm contained in subparagraph i) of No. 1 of Article 44 of the CPPT.

It is in Article 60, No. 1, subparagraph c) of the LGT that the answer that seems clear to us for this question will be found. There it is stated that there is a "right to hearing before the revocation of any benefit or administrative act in tax matters". Also here the expression "revocation" seems to us to must have the common sense already referred to above.

Starting from the principle that the inspection procedure will not be the appropriate means to remove from the legal order a tax benefit, that is not its purpose, nor is the final report, as a rule, susceptible to autonomous judicial challenge, it will be concluded that the hearing carried out there cannot fill the requirements of subparagraph c) of No. 1 of Article 60 of the LGT, and the norm of No. 3 of Article 60 of the LGT is not applicable here.

A reading contrary to what has just been stated would strike against the logic of gradation of tax benefits, embodied in the Tax Benefits Statute, given that

• The regime of removal (revocation) of non-automatic tax benefits (dependent on recognition – those of No. 2 of Article 14 of the EBF), given that their attribution always results in the issuance of a formal written act of attribution, when it is verified that an error occurred (of the administrative act), would have a much superior guaranty regime, from the outset, because, in order to be removed, an prior procedure would have to run for their "revocation" – Article 60, No. 1 c) of the LGT and Article 44 - 1 d) of the CPPT.

• But as for automatic benefits or of "ope lege" functioning, as is the case with the tax benefit at issue in this case, which are considered irrevocable (No. 8 of Article 14 of the EBF), therefore at a higher level of gradation than those that are revocable, they would be subject to "revocation" at any moment (until the period of extinction of the right to assessment), without any procedural formality and would not even be subject to the minimum requirement of prior hearing of the interested parties in a procedure that generates a recourse-available decision and as such judicially reviewable, which in the reading made here of the law constitutes a violation of the norms contained in Article 60, No. 1 c) of the LGT and Article 44 - 1 d) of the CPPT.

Tax Judicial Procedure

Apparently subparagraph f) of No. 1 of Article 95 of the LGT, when it refers to the injurious nature of acts of "rejection of requests for exemption or tax benefits whenever their granting is dependent on an autonomous procedure" seems that it would remove from the right to judicial challenge and appeal the acts of revocation of tax benefits, whether these have been the subject of administrative recognition, or have been attributed "ope lege" in an automatic manner (benefits of Nos. 1 and 2 of Article 14 of the EBF).

But that reading will soon be avoided by subparagraph h), where that right is safeguarded as to "other administrative acts in tax matters".

In an annotation to Article 95 of the LGT, Publishing House Encontro da Escrita, 4th Edition – 2012, by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, pages 830 and 831, it is stated:

"The characterization as injurious acts of the rejection of requests for exemption or tax benefits when their granting is dependent on an autonomous procedure is founded on the circumstance that such acts constitute the final act of a specific legal procedure subject to its own rules aimed at obtaining or recognition of the benefit that are not procedurally connected with those of the tax assessment procedure.

The denying act of the exemption assumes, in such case, the nature of a mere act external to the tax assessment process. This characterization is express in subparagraph f) of No. 2 of Article 95 of the LGT…

…

Differently matters stand in the hypotheses of automatic tax benefits or those dependent on recognition that takes place in the tax assessment procedure: here the actionable injurious act is the act of tax assessment, given the procedural concurrence existing between the moments of application of the rule of incidence and the exemptive rule (negative incidence).

The assessment of tax against the norm of automatic recognition is struck with illegality by also being automatically paralyzed the potentiality of the taxation norm to generate the assessed tax obligation.

The same applies in the case of a benefit dependent on recognition to be made in the administrative process directed at tax assessment: the act denying it then assumes itself as a mere preparatory and prejudicial act of the act of declaration of tax rights (Article 54 of the LGT), being covered by the unitary challenge."

Naturally these principles will have to be applied to situations of revocation, extinction, or verification of illegality of granting or attribution of tax exemptions, that is, any procedural means to put an end to a tax benefit that exists in the legal order, even if it has been badly granted or considered.

Also subparagraph p) of No. 1 of Article 97 of the CPPT apparently seems to restrict the contentious appeal – special administrative action – to situations where rejection or revocation of exemptions or benefits "by administrative act" occurs. The expression "dependent on recognition" should be understood as confined only to benefits referred to in Article 65 of the CPPT.

We adopt the reading of the law, in the sense that the expression "revocation of exemptions" encompasses the situation of fact of removal of tax exemptions attributed "ope lege" that the AT must remove from the legal order, as in the situation of this case, by understanding that they were not correctly attributed or granted.

A restrictive reading of the law does not seem to be the best, given the general principle of Article 9 of the LGT and No. 1 of Article 20 of the Constitution: full and effective protection of all rights or legally protected interests.

It will be concluded, therefore, that unitary challenge (of the assessment act vs. right to tax exemptions) will only exist when the right to tax benefits whose recognition or functioning occurs simultaneously with the assessment act is discussed, and not when there is no "procedural concurrence between the moments of application of the rule of incidence and the exemptive rule (negative incidence)".

In cases where there is no (or should not exist) unitary challenge, an autonomous tax procedure is required aimed at obtaining a decision from the AT declaring the possible illegality of the verification of the requirements of the automatic tax benefit that is contained, e.g., in a public deed, to permit a possible autonomous judicial challenge of that decision.

Concluding: as to automatic tax benefits, it seems to us, given the foregoing, that in tax assessment procedures only those that have procedural concurrence between the moments of application of the rule of incidence and the exemptive rule can be considered there or not. In the case, it seems to us that before the tax assessment there should occur an autonomous procedure aimed at hearing the interested party to create an administrative decision that is jurisdictionally reviewable, autonomous from the tax assessment (Article 60, No. 1 c) of the LGT and Article 44 - 1 d) of the CPPT).

Specific issue – Extinction of the tax benefit contained in the exemptive norm of No. 1 of Article 20 of Decree-Law 423/83, of December 5, and which appears in the deed of purchase and sale executed on 2008.11.20.

As was stated above, the inspection procedure does not seem to us to be the appropriate means to terminate an automatic tax benefit that exists factually in the legal order, whether well or badly verified by the Notary as to its requirements, given that that is not its purpose, nor is the final report, as a rule, susceptible to autonomous judicial challenge.

Precisely because, e.g., there could be interest in the Notary being called to the case in which the legality of the revocation of the tax benefit is discussed, as an interested third party, given that, as was stated, the tax benefit recorded in the deed resulted from the appraisal of a professional qualified in law and is irrevocable, that is, the Claimant could never voluntarily waive it.

It must be taken into account that tax benefits - especially automatic ones of "ope lege" functioning – are (No. 1 of Article 2 of the EBF):

1. Measures of an exceptional character;
2. That protect relevant extrafiscal public interests;
3. Superior to the taxation they prevent.

In the case, we are dealing with a benefit of the highest gradation possible given the EBF: irrevocable by its beneficiary.

In the case, there is no procedural concurrence between the moments of application of the rule of incidence of IMT (2013) and the application of the exemptive norm of IMT (2008), given that, it is stressed, it cannot be considered that the notarial act of verification of the requirements for IMT exemption does not exist, even if it may be considered not in accordance with the law.

Thus, we will have to conclude that the tax benefit contained in item 4 of the established matter, assessed as of November 20, 2008, exists still in the legal order, whether well or badly verified as to its requirements in 2008 by the Notary, until it is declared in non-conformity with the law, through the aforementioned procedure, relating to that specific purpose.

From what has been expressed above, it also does not seem to us that the assessment procedure be, in this case, the appropriate means for its declaration in non-conformity with the law, for the reasons and grounds stated above.

With the grounds expressed above, the IMT assessment impugned, carried out without previously being declared in non-conformity with law the exemption (as an interrupting fact to taxation) that factually appears in the deed, does not seem to us to be in harmony, specifically, with the norms contained in Articles 9, Article 54, No. 1, subparagraph d) of the LGT; Article 44, No. 1, subparagraph i) of the CPPT; Article 95, No. 1, subparagraph h) of the LGT; Articles 96, No. 1 and 97, No. 1, subparagraph p), final part, of the CPPT, resulting, therefore, in the illegality provided in subparagraph a) of Article 99 of the CPPT.

Given the success of this ground, there will be no need to appreciate the other grounds (items k) to n) of the Report), due to futility.

As a consequence of the foregoing, the request for annulment of the tax act filed by the Claimant before the Arbitral Tribunal is upheld.

V. DECISION

Given the grounds expressed above, the Claimant's request is ruled favorable, and the IMT assessment contained in subparagraphs c) and d) of this decision's Report is annulled.

Value of the case: in accordance with the provisions of Article 3, No. 2, of the Costs Regulation in Tax Arbitration Proceedings (and subparagraph a) of No. 1 of Article 97A of the CPPT), the case is valued at 20,415.40 euros.

Costs: in accordance with the provisions of Article 22, No. 4, of RJAT, the amount of costs is fixed at € 1,224.00, according to Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the respondent.

Notify.

Lisbon, November 18, 2019

Singular Arbitral Tribunal

Augusto Vieira

REFORMED ARBITRAL DECISION

THE PARTIES

Claimant: A..., VAT No. ..., domiciled at Street ... Lisbon.

Respondent: Tax Authority and Customs Authority (AT).

ARBITRAL DECISION

II. REPORT

a) On March 28, 2014, A..., VAT No. ..., filed with the CAAD a request for, under the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a singular arbitral tribunal (TAS).

b) The request is signed by attorneys whose power of attorney has been attached.

THE REQUEST

c) The Claimant petitions for the annulment of the tax assessment act for municipal tax on onerous transfers of immovable property (IMT), in the amount of € 20,415.40, issued by the Finance Service of Loulé... (...), pursuant to office ... of November 29, 2013, from that finance service.

d) Tax assessed due to the fact that he acquired the autonomous fraction designated by the letter "R" of the urban property registered in the property register under article ...º, district of ..., on November 20, 2008, with the benefit of tourism utility (Article 20-1 of Decree-Law No. 423/83, of December 5) which the AT considers to be undue.

e) He alleges that he acquired the autonomous fraction under the "presupposition, indicated by the seller and ascertained in the terms expressly set forth in the law, that that particular operation would benefit from the IMT exemption provided in Article 20 of Decree-Law 423/83, of December 5", and that "he acquired that fraction with a view to its installation as a component of the integrated tourism enterprise B..., precisely aiming at its commercial exploitation and the obtaining of the return and increase of the investment made there".

f) And that "with a view to the commercial exploitation of that fraction, the Claimant entered into a tourism exploitation contract with C... – Construction and Hotel Management, S.A., under the terms of which he ceded to that company the exclusive right to exploit the fraction", this company being "the operator of the Hotel and the tourism apartments, both classified as 5-star, which are part of the tourism complex B...".

g) Disagreeing with the assessment, he concludes that "he acted as developer of the enterprise in which the fraction is integrated… he actively contributed to the financing of the works in progress", "he did so always from the perspective of investment and the return that would come from it for him" and that "the granting of the exemption was fundamental to his decision to acquire the fraction".

h) He argues that the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5, should encompass "within its scope the transfers made to the acquirers of the fractions, with these benefiting from the same privileged status that the legislator intended to confer on the real estate developer".

i) Inasmuch as these are those who bear the "burden of investment", and because "the process of installation of a real estate enterprise of tourism utility, as an organizational unit intended to provide tourism services, only ceases when, after the real estate complex is constructed and licensed, it proves capable of functioning in the terms that allowed it to achieve the status of tourism utility, that is, when it proves capable of being used for tourism exploitation activity with the quality required in the ministerial dispatch that granted it that status", treating the enterprise as plural property, the acquisition of accommodation units embodies "investment in the creation/installation of Portuguese tourism supply, in a real estate product for tourism investment".

j) And he adds "… whoever acquires one of these new fractions in a tourism complex in plural property, becoming co-owner of the hamlet, also participates in its installation, inasmuch as it cannot be considered integrally installed as long as the respective accommodation units are not capable of functioning and being exploited due to lack of prior acquisition in that property regime".

k) And that the fact of there being an IMI exemption should be relevant as provided in No. 1 of Article 47 of the Tax Benefits Statute (EBF), which states that "Properties integrated in enterprises to which tourism utility has been attributed are exempt from municipal contribution for a period of seven years."

l) And equally the fact that the exemption was not questioned by the Notary who verified it in the deed and by the Registry Officer who recorded the property registration of the acquisition (No. 1 of Article 49 of the IMT Code and No. 1 of Article 72 of the Property Registration Code).

m) Nor did the AT subsequently question the exemption, so the impugned assessment is not in accordance with the principles of certainty and legal security, putting in question acquired rights and the principles of good faith and transparency.

n) He concludes by stating: "…in the case at hand, all the formal and substantial requirements for the granting of the benefit were fully met, so that, in these terms, from the outset, the assessment act that revokes it is, in itself, illegal and sufficiently apt to defeat the AT's claims" therefore "it cannot proceed, in the terms set forth, with the revocation of the granting of the tax benefit, under the aforementioned Article 141 of the CPA."

o) He concludes by petitioning for the annulment of the tax act identified in c) and d), with the legal consequences.

OF THE SINGULAR ARBITRAL TRIBUNAL (TAS)

p) The request for constitution of the TAS was accepted by the President of CAAD and automatically notified to the AT on April 2, 2014.

q) By the Deontological Council of CAAD, the signatory of this decision was designated as arbitrator, and the parties were notified thereof on May 20, 2014.

r) Therefore the Singular Arbitral Tribunal (TAS) has been, since June 4, 2014, regularly constituted to hear and decide the subject matter of this dispute.

s) All these acts are documented in the communication constituting the Singular Arbitral Tribunal dated June 6, 2014, which is hereby reproduced.

t) On June 4, 2014, the AT was notified in accordance with and for the purposes of Article 17-1 of RJAT.

u) On September 22, 2014, the meeting of parties referred to in Article 18 of RJAT was held. A period of 10 days was granted to the parties for written and successive pleadings. The joinder to the record of the testimony of D... produced in case 102/2014-T was also admitted.

v) On October 22, 2014, the Claimant presented written pleadings and the Respondent presented its pleadings on November 3, 2014.

w) It is recorded that the recording (phonographic record) of the testimony of D..., produced in the context of case CAAD 102/2014-T, was obtained at CAAD on November 7, 2014, at 2:30 p.m., using this contribution for this case given that it involves cases with total identity of legal substance (according to the express or implicit position of the parties in this case). This phonographic record, with a duration of 15.15 minutes, was heard in its entirety by the TAS on the same day of its obtaining.

PROCEDURAL REQUIREMENTS

x) Legitimacy, capacity and representation - the parties have legal personality and capacity, are legitimate and are duly represented.

y) Adversarial procedure - the AT was notified in accordance with item t) of this Report. All orders issued in the case and all documents attached were notified to the other party.

z) Dilatory exceptions - the case is not affected by nullities and the request for arbitral pronouncement is timely given that it was presented within the period prescribed in subparagraph a) of No. 1 of Article 10 of RJAT.

SUMMARY OF THE CLAIMANT'S POSITION

As to the possible illegality of the assessment act due to non-conformity with the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5

aa) The Claimant understands that the assessment is not in accordance with the law because "he acted as developer of the enterprise in which the fraction is integrated… he actively contributed to the financing of the works in progress", "he did so always from the perspective of investment and the return that would come from it for him" and that "the granting of the exemption was fundamental to his decision to acquire the fraction".

bb) He argues that the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5, should encompass "within its scope the transfers made to the acquirers of the fractions, with these benefiting from the same privileged status that the legislator intended to confer on the real estate developer".

cc) Inasmuch as these (the acquirers) are those who bear the "burden of investment", and because "the process of installation of a real estate enterprise of tourism utility, as an organizational unit intended to provide tourism services, only ceases when, after the real estate complex is constructed and licensed, it proves capable of functioning in the terms that allowed it to achieve the status of tourism utility, that is, when it proves capable of being used for tourism exploitation activity with the quality required in the ministerial dispatch that granted it that status", treating the enterprise as plural property, the acquisition of accommodation units embodies "investment in the creation/installation of Portuguese tourism supply, in a real estate product for tourism investment";

dd) And he adds "… whoever acquires one of these new fractions in a tourism complex in plural property, becoming co-owner of the hamlet, also participates in its installation, inasmuch as it cannot be considered integrally installed as long as the respective accommodation units are not capable of functioning and being exploited due to lack of prior acquisition in that property regime".

ee) And that the fact of there being an IMI exemption should be relevant as provided in No. 1 of Article 47 of the Tax Benefits Statute (EBF), which states that "Properties integrated in enterprises to which tourism utility has been attributed are exempt from municipal contribution for a period of seven years."

ff) And equally the fact that the exemption was not questioned by the Notary who verified it in the deed and by the Registry Officer who recorded the property registration of the acquisition (No. 1 of Article 49 of the IMT Code and No. 1 of Article 72 of the Property Registration Code).

gg) Subsequently the AT did not question the exemption, so the impugned assessment is not in accordance with the principles of certainty and legal security, putting in question acquired rights and the principles of good faith and transparency.

hh) In his pleadings, the Claimant raises the appreciation of the testimony of D... produced in case 102/2014-T, in a situation entirely identical to this case, to the effect of concluding that "the acquirers of the fractions were co-financers of the enterprise, which, moreover, only proceeded after a pool of investors was assembled".

ii) He proposes that the requirements are met for the functioning of the tax benefit in question given that "it was the intervention of the acquirers that made possible the achievement and installation of the enterprise, it being clear from the outset that they assumed their intervention in partnership with the developer and following the plan determined by him".

SUMMARY OF THE TAX AUTHORITY'S POSITION

As to the possible illegality of the assessment act due to non-conformity with the exemptive norm contained in Article 20-1 of Decree-Law No. 423/83, of December 5

jj) The AT objects to the fact that the Claimant seeks to have the TAS consider that the acquisition of the immovable property in question, which occurred on November 20, 2008, still falls within the process of installation of the tourism enterprise B..., whose tourism utility was granted provisionally on June 2, 2005, subsequently confirmed on May 7, 2007, for a period of seven years counted from the date of its opening to the public on September 30, 2005.

kk) And does not consider "… acceptable that, after more than three years have passed since the opening to the public of the tourism enterprise, it should be considered that the Claimant's acquisition of the fraction still aimed at the installation of the same".

ll) He bases his position on the jurisprudence of the Supreme Administrative Court (judgment of the Tax Contention Section of the Supreme Administrative Court of January 23, 2013, handed down in expanded hearing, in accordance with Article 148 of the Code of Administrative Court Procedure, in case No. 968/12, which gave rise to the Jurisprudence-Standardizing Judgment No. 3/2013, published in the Official Gazette, 1st series, No. 44, of March 4, 2013, which standardized jurisprudence regarding the concepts of "exploitation" and "installation").

mm) And concludes: "the decision contained in the learned judgment – referred to in the previous item - and which grounded the IMT assessment act now impugned, is based on solid legal grounds, whose most relevant vertices".

nn) He further expresses that "given that the enterprise qualified as Tourism Complex B..., opened to the public on September 30, 2005, it is manifest that the sale of the fraction in question, on November 20, 2008, occurred when the enterprise was already, without any doubt, in operation and exploitation".

oo) And that the very deed of purchase of the autonomous fraction states textually that "… is intended for tourism exploitation".

pp) As to the alleged "logical-systematic inconsistency" proposed by the Claimant, he argues that, as to that aspect "…the Supreme Administrative Court sees a coherent legislative evolution that has always excluded the tax exemption on the acquisition of autonomous fractions in already-installed tourism enterprises".

qq) On the other hand, he contests that the Claimant's intervention (before acquiring the fraction) avoids the factual reality that the developer of the tourism enterprise was a company other than him, the role previously performed being irrelevant, given that the acquisition of the immovable property occurred on November 20, 2008, well beyond the physical completion of the enterprise.

rr) He states that "… it is not sufficient for the Claimant to allege that he acted "in the conviction that he was acting within the boundaries of legality" or invoke "a grave injustice", with the intent to base an alleged administrative bad faith action", given that "…the transfer of the immovable property did not meet, ab initio, the legal requirements to benefit from IMT exemption", concluding that "there does not exist in the Claimant's legal sphere any legitimate expectation deserving of protection", "Nor is any grave injustice to the Claimant apparent that could result from compliance with tax law".

ss) "Regarding the invoked violation of constitutional principles resulting from the application of the norm of No. 1 of Article 20 of Decree-Law No. 423/83, of December 5, the Supreme Administrative Court has already ruled in various judgments, unequivocally rejecting such argumentation. See, by way of example, the Judgment handed down in Case No. 01046/13, of March 26, 2014".

tt) As to the invocation of the "illegal revocation of a valid act because it is constitutive of rights, under Article 140 of the Code of Administrative Procedure (CPA) and the possible revocation of the tax exemption could only take place within the period provided in Article 141 of the CPA", the AT states that both norms presuppose the existence of an administrative act (in the definition of Article 120 of the CPA), in the case of granting or recognition of a tax benefit, invoking for this the very literal wording of No. 1 of Article 141 of the CPA and No. 4 of Article 14 of the EBF, which is not the case here because it is an automatic tax benefit.

uu) He concludes: "The Administration issued no decision recognizing or granting a tax benefit to the Claimant under the terms provided in Article 5 of the EBF". What occurred was that "... when the deed of purchase and sale of the immovable property was executed, it was wrongly considered that the Claimant would meet the legal requirements for IMT exemption", "which… constituted an incorrect interpretation and application of tax law in relation to which the tax administration and its organs are completely unaware".

vv) In pleadings the AT maintained, in essence, everything it had already stated in its response to the request for pronouncement.

ww) Arguing for the legality of the tax act because it constitutes a correct application of the law to the facts "under Article 2, No. 1, read in conjunction with Articles 4, 5 and 12, No. 1, at the rate provided in the current subparagraph d) of Article 17, all of the IMT Code".

II - ISSUES FOR THE TAS TO RESOLVE

On this matter, there are divergent CAAD decisions, brought to the case by the parties.

Regarding the testimony of the witness referred to in w) of the Report, the TAS concludes that it concerns the contractual relationship between the Claimant, before acquiring the autonomous fraction and after acquiring it, with the developer and with the entity that exploits the enterprise.

The facts brought to the TAS by the witness may be considered "res inter alios acta, allis nec prodest nec nocet". That matter, that subject, will neither benefit nor harm third parties (in this case, it cannot affect the powers and duties of the AT), especially because we are dealing with a case of application of norms of public law (tax law).

Such facts, as will be argued below, may have their interest for the dispute in judicial proceedings in which the possibility of extensive interpretation of the elements of the exemptive rule is discussed, a situation which, from the perspective we will adopt here, does not seem possible to occur in this arbitral procedure of mere challenge of a tax assessment, for the reason that Tax Arbitral Tribunals do not have competence to appreciate decisions that put an end to tax benefits (subparagraph a) of No. 1 of Article 2 of RJAT), unless as to the actionable injurious act (the assessment act) there has been procedural concurrence between the moments of application of the rule of incidence and the exemptive rule.

Now, in the case of these proceedings, this is not verified. The assessment of the tax occurred in 2013 (application of the rule of incidence of IMT) and it was on the date of acquisition of the immovable property on November 20, 2008 that the exemptive rule was applied, even if it may have been done in violation of the law, as the AT proposes.

As to the substantive issue, the consolidated jurisprudence of the SAC is clear: the exemptive norm in question here only covers "installation" and not "exploitation".

The Claimant will ultimately seek to characterize his action at the level of contracting, in commercial relations with the real estate development company, through extensive interpretation, in the notion of "installation", to then argue for the right to the tax benefit.

As to identical cases, there already exist at least 3 CAAD decisions, cited by the AT, issued in cases No. 102/2014-T, 104/2014-T and 110/2014-T. In the latter case, as to the qualification/characterization of the type of intervention of the Claimant in relations with the real estate development company, it is stated: "the acquisition of the accommodation unit in the tourism enterprise, "B...", even though integrated in the enterprise in question and even though allocated to tourism exploitation, and even that such tourism exploitation is carried out by the entity exploiting the remaining tourism enterprise, the Claimant's acquisition does not meet one of the fundamental requirements of the concept of installation, so it cannot benefit from the exemptions enshrined in Article 20, No. 1 of Decree-Law 423/83".

These are concrete judgments concerning concrete situations, identical to those of this case, taking into account the Claimant's own description of the facts in the request for pronouncement.

It should be noted that the CAAD decision that the Claimant attached to the case, which was in the sense of accepting his point of view, concerns a situation that occurred before the entry into force of Decree-Law No. 39/2008, of March 7 (legal framework for the installation, exploitation and operation of tourism enterprises), subsequently amended by Decree-Law No. 228/2009, of September 14, and by Decree-Law No. 15/2014, of January 23.

The TAS is subordinate to "constituted law" as provided in No. 2 of Article 2 of RJAT.

Given a matter with such unanimity of interpretation by the holders of the highest Judicial Court (the SAC) and given what has been decided at CAAD, we see no reason to understand it differently here, indeed, we adhere to the grounds of the learned decision by the SAC and decided in the CAAD cases mentioned above, in the aspect of the separation of what is installation versus exploitation and as to the qualification/delimitation of the concepts.

Let us say that, even if the TAS were to take into account the factuality alleged in Articles 12, 13 and 16 to 38 of the request for pronouncement, in the logic of the discourse used, the truth is that, ultimately, the Claimant would seek to benefit from two IMT exemptions (economic benefits):

• One as a developer (associated with the developer);
• Another as an acquirer of an autonomous fraction (in which his patrimonial assets increase).

If the Claimant seeks to characterize his intervention at the level of economic viability of the enterprise in the first phase: installation, well then, in the acquisitions that took place there, he already benefited economically from the IMT exemption that certainly operated there. He already had the corresponding economic benefit. He already had a State subsidy, because tax benefits are "fiscal expenditure" and as such are State subsidies under community law. The contribution of all taxpayers to the promotion of tourism activity has already occurred.

To argue, on that basis, that he would then also have the right to another subsequent tax benefit (on the acquisition of accommodation units) is what seems to us questionable, given the fiscal principle that taxes "patrimonial increase". If it were as the Claimant proposes, it is verified that he already had, in the first phase, in his association with the developer in what he seeks to characterize as the "installation phase", that implicit "patrimonial increase", by having borne a lower cost.

The law appears to provide for one tax benefit and not two tax benefits (from the perspective of patrimonial increase), in two distinct factual moments. Nothing would prevent the tax benefit from being extended, through extensive interpretation, by reasoning from parallel cases, to the two moments of the enterprise: installation versus exploitation, in situations where, as the Claimant proposes, the acquirers of units have been in fact the financers thereof and without that financing installation could not have occurred, provided that, e.g., in the deed it was stated – and this corresponded to material truth - that the concrete price of the unit acquired was delivered in advance to finance the installation and the price set forth in the deed reflected, at a discount, the implicit patrimonial increase that occurred through the benefit of IMT verified in the installation phase.

We are dealing with a tax benefit that is automatic in the definition of No. 1 of Article 5 of the EBF - it depends directly on the law, on a legal norm. Inasmuch as it is automatic, its attribution or verification does not generate an administrative act, so its extinction, by revocation, under No. 4 of Article 14 of the EBF is not possible.

The issue raised in this case has, however, another dimension: that of access to tax justice (right of challenge and appeal).

Access to tax justice – in the jurisdictional dimension - seems to us must be as broad as possible, in practical terms and not in a merely programmatic dimension as may appear from reading the general rule of Article 9 of the LGT (and Article 96 of the CPPT).

At the level of ordinary tax law, it is Article 95 of the LGT (and Article 97 of the CPPT) that specifies, by way of example, the acts injurious to rights and legally protected interests that may be the subject of jurisdictional proceedings.

Access to tax justice – in the dimension of amicable procedure – (Article 54 of the LGT and Article 44 of the CPPT) should also be as broad as possible, inasmuch as it aims to create administrative decisions, with the participation of taxpayers, that permit them, if desired, to subsequently settle their disagreements in the organs of sovereignty of judicial administration.

In the case, given that what is at issue is the existence or not of a right to a tax benefit, see subparagraphs d) and i) of No. 1 of Article 44 of the CPPT, read in the sense of subparagraph c) of No. 1 of Article 60 of the CPPT, that is, "any benefit" (the law does not speak of an administrative act that confers tax benefits) in order to be considered extinct, non-existent in the legal order, it seems must be preceded by a procedure aimed at obtaining a decision (an act) capable of permitting the taxpayer to act before the courts.

In this case what happens is that it is considered, (due to the fact that the tax benefit contained in the exemptive norm of No. 1 of Article 20 of Decree-Law No. 423/83, of December 5, is of an automatic nature and verification of requirements by the Notary, in the deed), that there is no administrative act and as such it is not possible to revoke what does not exist, as an administrative act practiced by the AT.

The Claimant himself considers that the IMT assessment act revoked the tax benefit (Article 163 of the request for pronouncement), which, as we have said, we do not accept, given the lack of procedural concurrence between the moments of application of the rule of incidence and the exemptive rule.

It seems to us there is a factual misunderstanding: the benefit, even though being automatic and of "ope legis" functioning, whether well or badly attributed (as has been said, it is not for us to scrutinize this aspect directly and expressly, given the limitation of competence of the TAS), exists, is recorded in the deed. It was verified in the deed by the Notary who understood that its requirements were met.

To proceed on the principle that, given the non-existence of an administrative act that recognized the tax benefit, the act itself (which is not by definition an administrative act in the dimension of Article 120 of the CPA), practiced by the Notary, does not exist, is certainly not in accordance with factual reality.

The AT conducted an inspection procedure and from this proceeded to the assessment procedure, without first opening a procedure aimed at discussing the concrete requirements of the benefit and above all aimed at obtaining a decision that would permit the taxpayer to discuss the right to the concrete tax benefit. Hence the taxpayer now comes, in this case, to discuss that right, as an interrupting fact that would obstruct the assessment.

That is, as has been said, unless there is procedural concurrence between the moments of application of the rule of incidence and the exemptive rule, the assessment procedure does not seem to be the appropriate means to remove (implicitly) from the legal order, even if factually, set aside, any tax benefit, even of "ope legis" functioning.

Furthermore, the tax inspection procedure will not be appropriate, in this case, to produce an administrative decision subject to direct judicial scrutiny (subparagraph a) of No. 1 of Article 12 of the RCPIT). As a rule, the conclusions of the Inspection Report are not challengeable (Article 11 of the RCPIT).

What has just been stated does not collide with the jurisprudence regarding the lack of need for prior hearing of taxpayers in assessment proceedings when they have already been heard in tax inspection proceedings (No. 3 of Article 60 of the LGT) – Judgment of the SAC of May 16, 2007, appeal 186/07 at www.dgsi.pt. That is, corrections to taxable matter is something different from extinction or declaration of illegality of a tax benefit that exists, whether well or badly granted.

It seems to us that the crucial issues to which the TAS must respond are the following:

1. General issue - automatic tax benefits in the sense of No. 1 of Article 5 of the EBF, inasmuch as they are not conferred by an administrative act in the definition of Article 120 of the CPA, can be considered (implicitly) in non-conformity with the law in assessment proceedings, regardless of procedural concurrence between the moments of application of the rule of incidence and the exemptive rule?

2. Specific issue - the tax benefit contained in the exemptive norm of No. 1 of Article 20 of Decree-Law 423/83, of December 5, which appears in the deed of purchase and sale executed on November 20, 2008, in which the Claimant is the acquirer and company E... – … SA is the seller, the object of which is the autonomous fraction designated by the letter "R", intended for residential use, of the urban property registered in the property register of ... - ... - ... under article ...º, in the following manner: "by virtue of the fraction acquired being intended for the installation of an enterprise qualified with tourism utility, in accordance with the order of the Secretary of State for Tourism of June 2, 2005", as an automatic benefit and of "ope legis" functioning, was implicitly declared illegal, thus extinct, by the assessment act carried out by the AT and referred to in items c) and d) of this decision's Report?

The answer to these questions will result in the favorability or unfavorability of the request, and if the answer is in the sense of concluding that the procedure for declaration of illegality of the tax benefit contained in the deed was omitted, in order to obtain a decision that would permit judicial protection, as to the concrete question of the right to the tax benefit, the TAS will not need to pronounce itself on the remaining grounds invoked by the Claimant in the request for pronouncement, with possible effect on the validity of the assessment act, due to manifest futility.

III. ESTABLISHED AND UNESTABLISHED FACTS. GROUNDS

The following are the facts considered established as relevant to the decision to be adopted, indicating the respective documents (proof by documents) as grounds:

Established Facts

1. By order of the Secretary of State for Tourism of 2005-0…-0…, whose notice was published in the Official Gazette, 3rd series, No. …, of 2005-0…-…, tourism utility was granted, on a provisional basis, to the enterprise qualified as Tourism Complex B..., located at Avenue …, district of ..., municipality of ..., district of Faro, to be carried out by company E... – …, S.A., holding NIPC … - Pages 4 and 5 of PA, Article 6 of the AT's Response and overall position of the Claimant in the request for pronouncement.

2. By order of the Secretary of State for Tourism of 2007-0…-0…, whose notice was published in the Official Gazette, 2nd series, No. …, of 2007-0…-…, tourism utility was confirmed for the enterprise qualified as Tourism Complex B..., valid for a period of seven years, counted from the date of issuance of the tourism utility license by the Municipal Chamber of ..., which coincided with the opening of the enterprise to the public, on 2005-0…-… - Pages 4 and 5 of PA, Article...

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