Process: 302/2014-T

Date: December 1, 2014

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (302/2014-T) concerns the application of IMT (Municipal Tax on Onerous Transfers of Real Property) tax benefits to purchasers of individual units within tourism developments. The taxpayer challenged an additional IMT assessment of €34,700.90 after the Tax Authority denied the tax exemption under Article 20 of Decree-Law No. 423/83. The core legal dispute centered on whether IMT benefits applicable to tourism development installations extend to individual purchasers of accommodation units, or apply exclusively to the original developer. The taxpayer argued that purchasing an individual unit in a tourism complex constitutes part of the development's installation process, particularly under the shared ownership regime established by Decree-Law No. 39/2008 (RJIEFET). According to this interpretation, each unit only becomes functionally operational as tourist accommodation upon acquisition and execution of the tourism operation contract with the managing entity. Therefore, successive acquisitions progressively complete the development's installation, making purchasers eligible for the same IMT benefits granted to developers. The Tax Authority contended that the exemption applies only to initial acquisitions by developers for installation purposes, not subsequent transfers to individual owners. The case proceeded through full CAAD arbitration procedures including witness testimony from other unit owners in similar proceedings. This dispute reflects broader interpretative challenges regarding the scope of tourism-related tax incentives and whether fiscal benefits should follow the functional integration of assets into tourism operations regardless of ownership changes, or remain strictly limited to initial development phases.

Full Decision

ARBITRAL DECISION

I - REPORT

  1. On 28 March 2014, taxpayer "A" with the NIF … requested the constitution of an arbitral tribunal, under the provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "RJAT").

  2. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD, and notified to the Tax and Customs Authority (hereinafter referred to as "TA" or "Respondent") on 31 March 2014.

  3. The Claimant seeks the pronouncement of the Arbitral Tribunal with a view to declaring the nullity of the tax act that is the subject thereof, relating to an additional assessment of Municipal Tax on Onerous Transfers of Real Property (IMT) in the amount of € 34,700.90 (thirty-four thousand seven hundred euros and ninety cents).

  4. In the request for arbitral pronouncement, the Respondent chose not to appoint an arbitrator. Pursuant to subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council of CAAD appointed as arbitrator of the singular arbitral tribunal the Honourable Dr. Olívio Mota Amador who, within the applicable time period, communicated acceptance of the appointment.

  5. The parties were notified, on 20 May 2014, of the appointment of the arbitrator, and did not manifest any intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of article 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  6. In accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 4 June 2014.

  7. On 3 July 2014, the Respondent, having been duly notified for such purpose, presented its Response and on the same date submitted the Tax Administrative File.

  8. The Claimant, on 21 July 2014, requested the attachment to the case file of two documents. The Respondent, on 22 August 2014, made observations on the content of the said documents.

  9. On 22 September 2014, at 12:30 p.m., at the facilities of CAAD, the meeting provided for in article 18 of the RJAT was held, with attendance by the designated Arbitrator and the representatives of the Respondent, as recorded in the respective minutes, which are hereby fully incorporated for all legal purposes.

  10. The Claimant presented, on 22 September 2014, a request seeking to use in the present case the witness evidence produced in case No. 102/2014-T namely the testimony given by "B" and in case No. 110/2014-T namely the testimony given by "C" thereby avoiding a new examination of these witnesses on the same facts.

  11. The Respondent, on 29 September 2014, made observations on the request presented by the Claimant, on 22 September 2014, considering that the facts relevant to the assessment of the merits of the case are documentarily proven and have not been contested by both parties and if the Tribunal considers the production of witness evidence to be necessary, the in-person examination of the witnesses listed should be promoted in respect of the principles of orality and immediacy of the discussion of factual and legal matters set out in subparagraph d) of article 16 of the RJAT. The Respondent informed the Tribunal that both witnesses, listed by the Claimant, are owners of units in the development and claimants in proceedings pending before CAAD (cases 109/2014-T and 301/2014-T) in which they formulate claims identical to those in the present case.

  12. The Arbitral Tribunal, by order of 6 October 2014, determined that it does not accept using in the present case the witness evidence produced in other proceedings in which the present Arbitrator had no involvement. If the Claimant does not waive the witness evidence, the examination thereof will be carried out on the date that was set in the meeting provided for in article 18 of the RJAT.

  13. On 13 October 2014, at 15:18 and on 24 October 2014, at 15:00, witness evidence was produced with the examination of "B" and "C" respectively, witnesses listed by the Claimant as recorded in the respective minutes, which are hereby fully incorporated for all legal purposes.

  14. The Claimant, through the request presented on 29 September 2014, waived the witnesses "D", "E" and "F" indicated in the petition for constitution of the Arbitral Tribunal.

  15. Written submissions were presented by the Claimant on 30 October 2014, and by the Respondent on 12 November 2014.

  16. The position of the Claimant, in accordance with the provisions of the petition for constitution of the Arbitral Tribunal and in the written submissions, is, in summary, as follows:

16.1. The correct interpretation of paragraph 1 of article 20 of Decree-Law No. 423/83 dictates that transfers to the purchasers of the units are included within its scope, with these benefiting from the same status that the legislator intended to confer on the real estate developer. If the legislator's intention is to foster tourism activity, in pursuit of that objective, the said benefit is only understood as applicable to both the developer and the purchasers of the units, who bear the burden of the investment.

16.2. In the case at hand, involving a tourism complex in which each independent unit constitutes a functional element (accommodation unit) forming part of the organizational unit established for the provision of tourism operation services (the tourism development), it must be concluded that the first acquisition of each of these functional elements, because intended to enable the operation of each one and, concomitantly, of the development as a whole, was still part of the development installation process, thus falling within the scope of application of article 20 of Decree-Law No. 423/83, given the tourism utility recognized and attributed to the development in question and which encompasses all the functional elements that compose it.

16.3. The independent unit acquired by the Claimant constitutes an accommodation unit of the tourism complex … and thus forms part of a development to which tourism utility was recognized. The acquisition of this unit was intended for the installation of the said development and is, in any case, still part of the process of implementation of that same installation.

16.4. In accordance with the provisions of the new Legal Regime for Installation, Operation and Functioning of Tourism Developments (RJIEFET) approved by Decree-Law No. 39/2008, of 7 March, anyone who acquires one of these new units in a tourism complex in shared ownership, becoming a joint owner of the village development, still participates in its installation, insofar as this cannot be considered fully installed while its respective accommodation units are not capable of operating and being exploited due to lack of prior acquisition in that shared ownership regime.

16.5. Thus, only with the acquisition by the Claimant and the concomitant execution of the tourism operation contract with the operating entity, this independent unit became capable of functioning as an accommodation unit before the users of this development – that is, functionally capable of being used for tourism purposes in the manner and with the quality required by the tourism utility status that it holds, and the village development in which it is integrated is progressively being installed as its accommodation units enter into operation.

16.6. In this context, the acquisition of this unit was intended to permit the continuity of the installation process of this tourism utility development, contributing to its progressive transition to the operation and exploitation phase, with the gradual opening to the public of its functional accommodation units until its complete and full installation.

16.7. Therefore, this acquisition enjoys the objective exemption provided for in the cited article 20, because it was intended for the installation of developments qualified as having tourism utility.

16.8. It would be manifestly laconic and illogical that through the introduction of article 20 of Decree-Law No. 423/83, the legislator intended to introduce a benefit that would cover only real estate developers, who already had their own mechanisms to mitigate the weight of that initial taxation.

16.9. In the logic of the system, the said article 20 of Decree-Law No. 423/83 exists as a complement to that provision of the CIMSISSD, and its scope is, for all the more reason, extensible to the purchasers of the units who, by that means, participated in the installation of the development and, thus, in the promotion of tourism activity.

16.10. Systemic consistency requires that consideration be given as a parameter of interpretation to the fact that there is an exemption for purposes of Municipal Property Tax (IMI) for owners of properties integrated into developments to which tourism utility has been attributed. The integrated reading of the said article 20 of Decree-Law No. 423/83 requires that operations for the acquisition of the units that comprise the development classified as having tourism utility be considered within its scope, insofar as the conduct of those purchasers complements the installation process of the said development.

16.11. In the case at hand, the owners present themselves as true developers of the development – and promoters of tourism activity – and are thus clearly encompassed by the scope of the tax benefit granted by article 20 of the said Decree-Law No. 423/83.

16.12. The principles of legal certainty and legal security are clearly at issue by completely disregarding the prior legality control review to which the Notary and the Property Registry Officer were obliged and, on the other hand, by the fact that the TA, knowing and unable to be unaware of the granting of the exemption at issue here, now requires reestablishment of the taxation it alleges was omitted. In conclusion, if the assessment at issue is not considered illegal – which is not consented to – then in any event this conclusion must be drawn from the fact that it violates all the provisions in which the principle of good faith is enshrined – articles 266 of the Constitution, 6-A, paragraph 1 of the Code of Administrative Procedure (CPA) and 59 of the LGT.

  1. The position of the Respondent, expressed in the response and in the written submissions, may be summarized as follows:

17.1. There are several court decisions on the interpretation and scope to be given to paragraph 1 of art. 20 of Decree-Law No. 423/83, of 5 December, and in particular it has already been decided uniformly by the Tax Contentious Section of the Supreme Administrative Court (jurisprudence-standardizing judgment No. 3/2013, of 23 January 2013, published in the 1st Series of the Official Gazette, of 4 March 2013, pp. 1197 to 1217). The said judgment states that "The concept of 'installation', for the purposes of the benefits referred to in paragraph 1 of art. 20, of Decree-Law No. 423/83, of 5 December, refers to the acquisition of properties (or independent units) for the construction of tourism developments, after the respective urban operations are duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same and not the purchasers of independent units in tourism developments that have been constructed/installed under a shared ownership regime, since this has to do with 'operation' and not with 'installation'". And the learned judgment continues "What has just been set out leads us to conclude that when the legislator, in paragraph 1 of article 20, uses the expression acquisitions of properties or independent units intended for 'installation', this concept cannot fail to be understood as referring precisely to the acquisition of properties (or independent units) for construction (when it comes to new developments) of tourism developments, after the respective urban operations are duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same."

17.2. As is stated in the cited case law, what the legislator only intended to cover with that provision were acquisitions intended for the "installation" of developments. If, hypothetically, the legislator wished to cover both the installation activity and the operation of tourism developments, it would have been as clear as it was in art. 16 of the same decree, whose provision intended to benefit both property-owning and operating companies, similar to what occurs with paragraph 2 of art. 20 of the said decree.

17.3. Although the Claimant may enjoy advantages in the operation of a tourism development where he acquired a property, he is its owner, having had no participation in any promotion or commercialization activity.

17.4. It is clear from the legislation that there is a clear distinction between the concepts of "installation", on the one hand, and "operation" and "exploitation", on the other, a distinction that is clearly evident in the preamble of Decree-Law No. 39/2008. Now, the acquisition made by the Claimant, already at a moment subsequent to the date of the license for use and, consequently, after the installation phase of the tourism development, was intended for commercial operation and enjoyment and not for the installation of the development. This is so because: (i) the acquisition of the property in question occurred on 2005/12/16; (ii) tourism utility, on a provisional basis, was granted on 2005/07/15; (iii) and was subsequently confirmed on 2007/05/07, for a period of seven years from the date of its opening to the public which occurred on 2005-09-30.

17.5. In support of all that has been said above, let us note also the fact that the second witness, who indeed intervened in the negotiation process of the said development, stated expressly and clearly that no guarantee of IMT exemption was ever given to potential purchasers, nor was it even part of the business promotion campaign, and that only knowledge of the content of D.L. 423/83 was provided, nothing more.

17.6. It is not apparent how it can be considered acceptable that, after the public opening of the tourism development has been verified, the acquisition of the unit by the Claimant, which occurred at a later moment, still aimed at the installation of the same.

17.7. However, even if the acquisition of units occurs still during the licensing and construction phase of the development, one cannot consider that such purchasers, by contributing to financing, can be considered developers. So much so is this the case that the second witness, when asked about the promotion of the development, stated that the developer of the same was the company "G" – …, S.A..

17.8. It being irrefutable that the purchaser of units in tourism developments in shared ownership (cf. art. 52 et seq. of Decree-Law No. 39/2008) does not become, by that fact, a co-financier of the development. In truth, the now-purchaser had no responsibility in the installation of the said development, limiting himself to investing in real estate products within the so-called residential tourism and not to installing the tourism development.

17.9. Given that a tax benefit exemption from IMT provided for in paragraph 1 of art. 20 of Decree-Law No. 423/83 is at issue, and given that it is a benefit of an automatic nature, which flows directly and immediately from the law, that is, operates by effect of the law without requiring the performance of any administrative act, whether express or implied. The tax benefit provided for in that art. 20 is, consequently, not susceptible to being granted through any administrative act, and even less through an administrative act performed by entities without powers for such purpose, as is the case with the Notary in whose office the deed is executed and the Property Registry Officer in whose registry the respective Real Property Registration is carried out, which would be a null act under the terms of art. 133 of the CPA.

17.10. In sum, taking into account the tax-legal framework of the facts, it is considered that the acquisition in question does not benefit from the IMT exemption provided for in paragraph 1 of art. 20 of the said Decree-Law 423/83, since the acquisition made by the Respondent, already at a moment subsequent to the date of the license for use and, consequently, after the installation phase of the tourism development, is intended for commercial operation and enjoyment and not for the installation of the development. Thus we shall say that the requirements of the exemption are not met by the Claimant in order to benefit from the exemption. Regarding the first requirement, we shall say that:

  • the property acquired by the claimant would have to be acquired for him to proceed with the installation or construction of a tourism development;

  • however, the property acquired is already duly installed and constructed within a tourism development and ready for its enjoyment.

As regards the other requirement to benefit from the exemption, the claimant would have to develop the function of developer or creator of urban and tourism activities, which is not the case in the present proceedings.

17.11. The now-claimant alleges that he deliberately waived free enjoyment of his property in favor of the tourism and commercial operation of the same, through the execution of a tourism operation contract under which he ceded the exclusive right of tourism operation of the unit through the execution of a contract concluded with the operator entity of the tourism development, in exchange for remuneration, and would thus have the right to said exemption. This argument does not hold, because, reinforcing all the reasoning with the conclusions of the arbitral decisions rendered in cases No. 102/2014-T, 104/2014-T and 110/2014-T, on the same subject, from the latter of which the following excerpt is taken, being clear in concluding that "the acquisition of the accommodation unit in the tourism development, '…', even though integrated into the development in question and even if allocated to tourism operation, and including that such tourism operation is carried out by the entity operating the remainder of the tourism development, the claimant's acquisition does not fulfill one of the fundamental requirements of the concept of installation, and therefore cannot benefit from the exemptions enshrined in art. 20, para. 1 of Decree-Law 423/83."

17.12. In sum, it must be concluded, for the legality of the IMT assessment act, insofar as the acquisition of the property by the Claimant is subject to tax under the terms of article 2, paragraph 1, combined with articles 4, 5 and 12, paragraph 1, at the rate provided in the current subparagraph d) of article 17, all of the IMT Code.

II – SANCTION

  1. The arbitral tribunal is materially competent and is regularly constituted, under the terms of articles 2, paragraph 1, subparagraph a), 5, paragraph 2, and 6, paragraph 1 of the RJAT.

The parties have legal personality and capacity, are legitimate and are duly represented, under the terms of articles 4 and 10 of the RJAT and article 1 of Order No. 112-A/2011 of 22 March.

The case suffers from no defects that would invalidate it.

In these terms, there is no obstacle to the examination of the merits of the case.

III – FACTUAL MATTERS

  1. Proven Facts

19.1. Based on the documentary evidence attached to the case file and on the witness evidence presented, the following facts are considered proven:

A) The Claimant, married to "H", under a general community of property regime, acquired, on 16 December 2005, from the company "G" –, S.A., registered under the NIPC …, the independent unit designated by the letter "Z", intended for housing, of the urban property registered in the respective real property register under the article …, located in Vilamoura, parish of Quarteira, municipality of ..., in accordance with the public deed of purchase and sale executed on that date at the Notary Office … and which is attached to the present case as document No. 2 attached to the petition for constitution of the Arbitral Tribunal.

B) The independent unit identified in the preceding subparagraph is integrated into the Tourism Development …, located on Avenue …, …, parish of Quarteira of the municipality of ..., district of Faro, to which tourism utility was attributed, on a provisional basis, by order of the State Secretary for Tourism, of 2 June 2005, published in the Official Gazette, 3rd series, No. 135, of 17 July 2005.

C) The confirmation of tourism utility for the development identified in the preceding subparagraph occurred by order of the State Secretary for Tourism, of 7 May 2007, whose notice No. …/2007 was published in the Official Gazette, 2nd series, No. 111, of 11 June 2007. The notice informs that the Municipal Council of ... issued, on 30 September 2005, the license for tourism use of the said development.

D) The deed identified in subparagraph A) declares the transfer of the property exempt from the payment of IMT, in accordance with the provisions of article 20 of Decree-Law No. 423/83, of 5 December.

E) The Finance Directorate of Faro, Finance Service of …, through office No. …, of 29 November 2013, notified the now Claimant of the assessment of IMT in the amount of € 34,700.90 due to the fact that he had carried out the acquisition of the independent unit identified in subparagraph A) with the benefit of tourism utility improperly recognized, in accordance with the document that is attached to the present case as document No. 1 attached to the petition for constitution of the Arbitral Tribunal.

F) The IMT assessment results from the conclusions of the report of the Tax Inspection Service of the Finance Directorate of Faro, conducted in compliance with Service Order No. OI… and was made on the basis of the price attributed to the right acquired, in the amount of €533,860.00 (five hundred and thirty-three thousand eight hundred and sixty euros), to which the rate of 6.5% was applied, in accordance with the provisions of subparagraph d) of article 17 of the IMT Code, in accordance with the TA document included in the Tax Administrative File, pp. 18.

G) The Claimant entered into, on 17 April 2006, with "I"–…, S.A., holder of the NIPC …, a tourism operation contract, under which he ceded to that company the exclusive right of tourism operation of the unit, namely through short-term tourism rentals, in accordance with the text of the contract attached to the present case as document No. 4 presented by the Claimant.

19.2. The facts enumerated in the preceding paragraph are based on the documents included in the case file and on the testimony of witnesses "B" and "C", who appeared impartial in their statements and appeared to have knowledge of the facts they reported.

IV – LEGAL MATTERS

  1. The question to be decided in the present case consists of determining whether the purchaser of an independent unit intended for tourism operation, inserted in a tourism development, can benefit from the IMT exemption provided for in article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, and whether the operation contract executed between the purchaser and the entity operating the tourism development is relevant for benefiting from said exemption.

  2. The factual matters are established (see supra No. 19) and we shall now determine the law applicable to the underlying facts in accordance with the question already stated (see supra No. 20).

  3. Article 20 of Decree-Law No. 423/83, of 5 December provides:

"1- The acquisitions of properties or independent units intended for the installation of developments qualified as having tourism utility are exempt from transfer tax and tax on successions and donations, with the stamp tax reduced to one fifth, even if such qualification is granted on a provisional basis, provided that it remains valid and the period set for the opening to the public of the development is observed.

2- The exemption and reduction established in the preceding paragraph shall also apply to the transfer in favor of the operating company, in the case where the owner is a financial leasing company and the transfer takes place under and in accordance with the financial leasing contract that determined the acquisition of the development by the transferring company."

  1. The judgment of the Supreme Administrative Court No. 3/2013, of 23 January 2013, published in the Official Gazette, 1st series, of 4 March 2013, determines the scope of the concept of installation for the purposes of the exemption of paragraph 1 of article 20 of Decree-Law No. 423/83, of 5 December, in the terms that we shall now transcribe:

23.1. "Starting with the literal wording of art. 20, para. 1, of Decree-Law No. 423/83, it is important to emphasize that the legislator clearly refers to the fact that only acquisitions of properties or independent units intended for the installation of developments qualified as having tourism utility are exempt from transfer tax and stamp tax.

This means that this is not a subjective exemption aimed at benefiting companies, whether as owners or operators of the developments, but rather an objective one, since it aims to benefit the activity of installation, and only companies engaged in 'installing' tourism developments can request and benefit from the exemption, and not those intending to engage in the activity of operation of the same."[1]

23.2. "Since Decree-Law No. 423/83 does not contain a definition of the concept of 'installation', article 11, para. 2, of the LGT requires that we resort to the technical-legal meaning given to us by the legal regime of tourism developments."[2]

23.3. "(…) 'installation' emerges as a procedure that comprises the legal acts and formalities aimed at licensing (in a broad sense, comprising prior notices or authorizations, as the case may be) of the urban operations necessary for the construction of a tourism development, as well as the obtaining of the titles that make it capable of operating and being exploited for tourism purposes.

After being constructed and with the developers of the investment having obtained the necessary licenses to make the development capable of exercising the tourism activity, each tourism development 'must be operated by a single entity, responsible for its full operation and level of service and for compliance with the applicable legal and regulatory provisions'[3].

23.4. "It thus appears clear that any sales of accommodation units made still during the construction/installation phase of the development are already part of its operation. Two distinct procedures thus stand out, although they may occur simultaneously: one relating to the practice of operations necessary to install the development; another, relating to the operations necessary to put it into operation and exploit it, and the sale of the units projected or constructed is necessarily part of the second moment.

Although it is recognized that in the case of tourism developments in shared ownership there is evident compression of the content of the right of property (since even if inhabited permanently the accommodation unit is not intended for housing), the truth is that such restrictions are established according to the form of operation and functioning of the development and not by virtue of its installation.

What has just been set out leads us to conclude that when the legislator, in para. 1 of art. 20, uses the expression acquisitions of properties or independent units intended for 'installation', this concept cannot fail to be understood as referring precisely to the acquisition of properties (or independent units) for construction (when it comes to new developments) of tourism developments, after the respective urban operations are duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same."[4]

  1. We entirely agree with the jurisprudential orientation set out in the preceding point. Effectively, the exemption referred to in article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December is intended exclusively for the acquisition of properties and independent units for the construction and installation of tourism developments and not for purchasers of independent units in developments already constructed or installed.

  2. Taking into account the provisions of article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December and the case law cited, it is important to ascertain whether the requirements for the IMT exemption are met in the case under analysis.

Considering the factual circumstances subject of the present arbitral proceedings (see subparagraphs A), B), C) and G) of No. 19.1.) it is verified that the Claimant acquired the independent unit on 16 December 2005. On that date, the development into which the unit was inserted had already been granted, by order of the State Secretary for Tourism, of 2 June 2005, the declaration of provisional tourism utility and the license for tourism use had already been issued by the Municipal Council of ... on 30 September 2005, that is, the installation was already completed and the development was already capable of exercising the tourism activity. In these terms, the requirements are not met for the Claimant to benefit from the IMT exemption on the basis of article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December.

  1. The Claimant entered into a tourism and commercial operation contract (see supra subparagraph G) of No. 19.1.). In any event, there is no legal or factual support in the present case for the Claimant's assertion that the purchasers of the units enable the achievement of the installation of the development. One who acquires an independent unit does not become a co-financier of the development with responsibility in the installation, but merely acquires a tourism product that is placed on the market by the developer. Therefore, the transfer of the right of enjoyment by the purchaser through a tourism operation contract does not alter the situation for the purposes of application of the exemption provided for in article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December.

  2. It should be noted that tax benefits, in accordance with article 2 of the Tax Benefits Code, constitute exceptional measures instituted for the protection of relevant extra-fiscal public interests that are superior to those of the taxation they prevent. Tax benefits must be justified by a relevant public interest because they represent a derogation of the principle of equality and the principle of taxpaying capacity.

The legislator, through the tax benefit provided for in article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, intended to boost tourism activity for developers who intend to construct tourism establishments. But from this it does not necessarily follow that the legislator extends this benefit to purchasers of units integrated into tourism developments and allocated to tourism operation. In this regard, the Judgment of the Supreme Administrative Court No. 968/12, of 23 January 2013, states: "(…) considering that tax benefits present themselves, as has been said, as an 'exception to the rule of equality' (See Sérgio Vasques, ibidem) and of taxpaying capacity, we see no relevant reason to discriminate between one who buys properties in tourism developments and others.

In sum, since what is at issue is not the acquisition of properties or independent units intended for the construction/installation of tourism developments, but rather the acquisition of accommodation units by final consumers, even though because they are integrated into the development in question they are allocated to tourism operation, the same cannot benefit from the exemptions enshrined in art. 20, para. 1 of Decree-Law No. 423/83."[5]

  1. The Claimant alleges that the principles of legal security and legal certainty are at issue as a result of the fact that the acquisition was made based on information from the selling entity and confirmed by the notary when he executed the deed and by the Property Registry Officer.

Effectively, the deed declares the transfer of the property exempt from the payment of IMT, in accordance with the provisions of article 20 of Decree-Law No. 423/83, of 5 December (see subparagraph C) of No. 19.1.).

Under the terms of article 49 of the IMT Code, the intervention of the notary and the registry officer aims only at control of the tax regularity of the situations in which they intervene and they are bound to various obligations of cooperation with the TA. Only the TA has competence to pronounce itself, namely under article 68 of the LGT, on the tax situation of taxpayers and on the assumptions of tax benefits.

The fact that the deed declares the transfer of the property exempt from the payment of IMT does not prevent the TA from issuing an assessment act relating to the same tax in the event it has concluded that, in accordance with the applicable legal norms, that tax benefit had been improperly recognized.

  1. In conclusion, the acquisition of an independent unit of a property integrated into a tourism development and its allocation to tourism operation through a tourism operation contract does not meet the requirements to be able to benefit from the IMT exemption enshrined in article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December. In these terms, a decision is rendered on the legality of the tax act of additional IMT assessment, in the amount of € 34,700.90 (thirty-four thousand seven hundred euros and ninety cents), contained in office No. 3349, of 29 November 2013, of the Finance Directorate of Faro, Finance Service of ... 2 (Quarteira), object of the present proceedings.

V – DECISION

In accordance with what has been set forth, judgment is rendered that the request for arbitral pronouncement is unfounded.

The value of the case is fixed at € 34,700.90 (thirty-four thousand seven hundred euros and ninety cents) pursuant to the provisions of article 97-A, paragraph 1, subparagraph a), of the CPPT, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at €1,836.00 (one thousand eight hundred and thirty-six euros), pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), to be paid by the Claimant, pursuant to articles 12, paragraph 2, 22, paragraph 4, of the RJAT and 4, paragraph 4, of the said Regulation.

Notify.

Lisbon, Administrative Arbitration Center, 1 December 2014

The Arbitrator

Olívio Mota Amador

Text prepared by computer, pursuant to para. 5 of article 131 of the CPC, applicable by reference from subparagraph e) of para. 1 of article 29 of Decree-Law No. 10/2011, of 20/01.

The preparation of this decision is governed by the old orthography.

[1] Cf., Official Gazette, 1st series, of 4 March 2013, pp. 1208.

[2] Cf., Official Gazette, 1st series, of 4 March 2013, pp. 1208.

[3] Cf., Official Gazette, 1st series, of 4 March 2013, pp. 1209.

[4] Cf., Official Gazette, 1st series, of 4 March 2013, pp. 1210.

[5] Cf., Judgment SAC, No. 0968/12, of 23-01-2013, 2nd section, pp. 30 accessed at www.dgsi.pt

Frequently Asked Questions

Automatically Created

What IMT tax benefits apply to tourism developments (empreendimentos turísticos) under Portuguese law?
Under Portuguese law, Article 20 of Decree-Law No. 423/83 provides IMT exemption for acquisitions of real property intended for the installation of tourism developments (empreendimentos turísticos) with recognized tourism utility. The benefit was traditionally understood to apply to developers acquiring property for construction and initial installation. However, disputes arise regarding whether this exemption extends to subsequent purchasers of individual units within tourism complexes operating under shared ownership regimes, particularly under the framework established by Decree-Law No. 39/2008 (RJIEFET). The key interpretative question is whether 'installation' encompasses only initial construction or includes the progressive activation of accommodation units through individual acquisitions.
Can a taxpayer challenge an additional IMT assessment through CAAD tax arbitration?
Yes, taxpayers can challenge additional IMT assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration under the Legal Regime for Arbitration in Tax Matters (RJAT - Decree-Law No. 10/2011). The process involves filing a request for constitution of an arbitral tribunal, which can be singular (one arbitrator) or collective (three arbitrators). The taxpayer submits the arbitration request, the Tax Authority responds and provides the administrative file, and proceedings include document exchange, potential witness testimony, and written submissions. CAAD arbitration offers an alternative to judicial courts for resolving tax disputes, with decisions binding on both parties.
What are the legal grounds for declaring nullity of an IMT additional tax assessment in Portugal?
Legal grounds for declaring nullity of an IMT additional assessment in Portugal include: (1) incorrect interpretation or application of substantive tax law, including eligibility for exemptions or benefits; (2) procedural defects in the assessment process; (3) violation of constitutional principles or taxpayer rights; (4) lack of factual or legal basis for the assessment; and (5) errors in determining whether specific transactions qualify for tax benefits. In tourism development cases, nullity claims often challenge the Tax Authority's interpretation of which acquisitions qualify for IMT exemption under Decree-Law No. 423/83, arguing the assessment incorrectly denies benefits that should apply under proper legal interpretation.
How does the CAAD arbitration process work for disputes involving IMT on real estate transfers?
The CAAD arbitration process for IMT disputes follows these stages: (1) taxpayer files a request for constitution of arbitral tribunal specifying the contested assessment; (2) CAAD President accepts the request and notifies the Tax Authority; (3) arbitrator(s) are appointed (by parties or by CAAD's Deontological Council); (4) the tribunal is formally constituted; (5) the Tax Authority submits its response and administrative file; (6) parties may submit additional documents; (7) a preliminary meeting is held under Article 18 RJAT; (8) if necessary, witness testimony and evidence are produced; (9) parties submit written final arguments; and (10) the arbitral tribunal issues a binding decision declaring the assessment valid, null, or partially valid.
What is the outcome when IMT tax benefits for tourism projects are retroactively denied by the Portuguese Tax Authority?
When IMT tax benefits for tourism projects are retroactively denied by the Portuguese Tax Authority, taxpayers face additional tax assessments for amounts that would have been exempt. This typically occurs when the Authority reinterprets the scope of exemptions under Decree-Law No. 423/83, often concluding that benefits apply only to developers, not subsequent purchasers of units. Taxpayers can challenge these denials through CAAD arbitration, arguing for broader interpretations that extend benefits to all acquisitions functionally integrated into tourism operations. The outcome depends on whether tribunals adopt formalistic interpretations (limiting exemptions to initial installations by developers) or functional interpretations (extending benefits to acquisitions enabling progressive operationalization of tourism developments). Multiple similar cases have reached CAAD, indicating systemic disagreement on this interpretative issue.