CAAD 307/2016-T: IRC Tax Benefit for Real Estate Investment Funds in Urban Rehabilitation

ARBITRAL DECISION

The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Paulo Lourenço and Dr. José Manuel Aurélio dos Santos (arbitrators members), designated by the Deontological Council of the Administrative Arbitration Center to form the Arbitral Tribunal, constituted on 29-08-2016, agree on the following:

1. Report

A…, S.A. (hereinafter designated as "A…" or "Claimant"), with headquarters at Avenida…, …, …, …, …-… Lisbon, parish of …, municipality of Lisbon, registered at the Commercial Registry Office of Lisbon under the single number of registration and legal person…, as manager of the Special Closed Real Estate Investment Fund for Urban Rehabilitation - … (hereinafter designated, in abbreviated form, as "B…" or "B…"), with the tax identification number …, filed a request for arbitral pronouncement pursuant to article 10 of the Legal Regime for Arbitration in Tax Matters, approved by Decree-Law no. 10/2011, of 20 January (hereinafter referred to only as LRAT), seeking the declaration of illegality of the tax act of additional assessment of Corporate Income Tax ("CIT") no. 2016…, of 20-01-2016, and the Interest Payment Statement no. 2016…, of 22-01-2016, relating to the fiscal year 2013.

The Respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAC and automatically notified to the Tax Authority and Customs Authority on 28-06-2016.

Pursuant to paragraph a) of number 2 of article 6 and paragraph b) of number 1 of article 11 of the LRAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the charge within the applicable period.

On 11-08-2016 the parties were duly notified of such designation, having shown no willingness to refuse the designation of the arbitrators, pursuant to the combined terms of article 11 number 1 paragraphs a) and b) of the LRAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of paragraph c) of number 1 of article 11 of the LRAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 29-08-2016.

The Tax Authority and Customs Authority responded defending that the request should be judged unfounded.

By order of 12-10-2016 the holding of a meeting was dispensed with, it being decided that the proceedings would continue with written arguments.

The Parties submitted arguments.

The arbitral tribunal was regularly constituted, in light of the provisions of articles 2, number 1, paragraph a), and 10, number 1, of Decree-Law no. 10/2011, of 20 January, and is competent.

The parties are properly represented, enjoy personality and procedural capacity, are legitimate and are represented (articles 4 and 10, number 2, of the same law and article 1 of Order no. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities and no exceptions have been invoked nor is there any obstacle to the examination of the merits of the case.

2. Statement of Facts

2.1. Proven Facts

Based on the elements contained in the proceedings and documents attached with the request for arbitral pronouncement, the following facts are considered proven:

a) The "B…" is a special closed real estate investment fund for urban rehabilitation, constituted by private subscription in accordance with the provisions of number 1 of article 48 of the Legal Regime for Real Estate Investment Funds (hereinafter abbreviated as LRFII);

b) The constitution of B… was authorized by CMVM on 22-12-2010, having been constituted on 16-06-2011, with an initial duration of 5 years, counted from the date of its constitution, renewable for periods not exceeding 2 years provided that such renewals are deliberated at the Participants' Assembly and authorized by CMVM;

c) B… is a Real Estate Investment Fund for Urban Rehabilitation – FIIRU;

d) At the beginning of 2014, the participation units were held by the following entities:

e) B… has been in the liquidation phase since 20-01-2014, by deliberation at the Participants' Assembly;

f) The activity of B… is aimed at urban rehabilitation investments in the city of Porto, having commenced its activity on 16-06-2011, with the acquisition of part of the residential properties of … through a deed of purchase executed on the same date, which were subjected to urban rehabilitation;

g) B… proceeded to acquire three adjoining and vacant buildings on Rua de … and Rua …, which are located in the urban rehabilitation area of the parish of …, municipality of Porto, through a public deed executed on 05-07-2011;

h) In addition to the urban rehabilitation investment already mentioned, B…, at the end of 2011, diversified its real estate portfolio with the acquisition of 12 units that comprise the property located on Rua…, parish of…, Municipality of Vila da Conde, through a deed of purchase on 23-12-2011, the units acquired being intended for rental;

i) The real estate assets of the Fund came to include the following properties: (agreement of the Parties – fls. 13 of the Tax Inspection Report and article 15 of the request for arbitral pronouncement):

j) The properties of …, as well as the properties on Rua … and Rua …, are integrated into the Urban Rehabilitation area of the Historic Centre of the Municipality of Porto (agreement of the parties, article 16 of the request for arbitral pronouncement and Tax Inspection Report);

k) Only the property of … was effectively subjected to urban rehabilitation (article 17 of the request for arbitral pronouncement);

l) The autonomous units located in ... are not located in an urban rehabilitation area nor have they undergone any rehabilitation action (agreement of the parties, article 18 of the request for arbitral pronouncement);

m) In the years 2013 and 2014 B… maintained its activity, both with the rental of the units of the property located in ..., and with the continuity of rehabilitation works on the properties of …, which were completed in March 2014 (date of the deliberation of the fund liquidation);

n) B… was the subject of a tax inspection procedure carried out by the Tax Inspection Service of the Finance Directorate of Lisbon, in compliance with Service Order no. OI2015…, for the fiscal year 2013, of external nature and multipurpose scope;

o) In the said inspection action, the Tax Inspection Report was prepared, which is contained in document no. 7 attached with the request for arbitral pronouncement, the content of which is given as reproduced, in which, among other things, the following is stated:

I. CONCLUSIONS OF THE INSPECTION ACTION

1.1. Brief description of the conclusions of the Inspection action

In accordance with the "Conclusions of the Inspection Action(s)" table above, in the periods of 2013 and 2014 values to be corrected were ascertained which are substantiated in corrections of a purely arithmetic nature to CIT and voluntary adjustments in the context of VAT, in the period of 2013, the basis for which is described in chapters III and VI of this report, and which are summarized in the following tables:

I.1.1. Purely arithmetic corrections to the tax - CIT - 2013 and 2014

I.1.1.1. Autonomous taxation on income (article 22 TBL)

II.3.1. Brief characterization of the Fund

The "B…" is a special real estate investment fund for urban rehabilitation, closed, constituted by private subscription in accordance with the provisions of number 1 of article 48 of the Legal Regime for Real Estate Investment Funds (hereinafter abbreviated as LRFII) and whose operation is governed, in particular, by Section I-A of Chapter III of Regulation no. 8/2002, of 18 June of the Securities Commission, republished by the CMVM Regulation no. 7/2007, and by the provisions of article 71 of the Tax Benefits Statute (TBS) and article 77 of Decree-Law no. 307/2009, of 23 October.

Its constitution was authorized by CMVM on 22 December 2010, having been constituted on 16 June 2011, with an initial duration of 5 years, counted from the date of its constitution, renewable for periods not exceeding 2 years provided that such renewals are deliberated at the Participants' Assembly and authorized by CMVM.

The Fund commenced its activity on 2011/06/15, with an initial capital of € 5,000,000.00 (five million euros), represented by 500,000 participation units with a unit value of € 10.00, fully subscribed by the company "C…, SA", with the NIF…, hereinafter designated as 'C…" (Annex 1).

At the beginning of 2011, the participation units were held by the following entities: (Annex 2):

It should be noted that the participation units are held by bank E…, SA, taxpayer no. …, as security for liabilities assumed by it by the Fund participants (Annexes 2 and 3).

The activity of the Fund is regulated by Decree-Law no. 60/2002, of 20 March, updated by various laws and republished by Decree-Law no. 71/2010, of 18 June, which establishes the LRFII and in particular by Section I-A of Chapter III of the CMVM Regulation no. 8/2002, of 18 June and republished by CMVM Regulation no. 7/2007, and consists in achieving, in a medium and long-term perspective, an increasing appreciation of capital, through the constitution and management of a portfolio of predominantly real estate securities.

The Fund is also governed by the Management Regulation approved by CMVM on 2010/12/22 and duly updated on 2011/06/24, (Annexes 4 and 5).

B…" is managed by the management company called "A… SA, NIF … and falls within the activity of "REAL ESTATE PROMOTION BUILDING PROJECTS DEVELOPMENT", which corresponds to CAE… .

(...)

II.3.2. Fund in liquidation since 2014/01/20

The Fund has been in the liquidation phase since 2014/01/20, by deliberation at the Participants' Assembly, as appears in minutes no. 3 of the Participants' Assembly meetings and in the CMVM Information Diffusion System, (Annex 2).

II.3.3. Tax classification

II.3.3.1. Tax regime (article 71 of the TBS)

The Taxable Person "B…" is a Real Estate Investment Fund for Urban Rehabilitation - FIIRU which fell within the tax regime of article 71 of the Tax Benefits Statute (TBS), as transcribed below:

• Real estate investment funds that operate in accordance with national legislation are exempt from CIT on income of any nature obtained, provided that they are constituted between 1 January 2008 and 31 December 2013 and at least 75% of their assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas.

II.3.3.2. In the context of CIT

Investment funds are considered CIT taxpayers in accordance with paragraph b) of number 1 in article 2 of the CIT Code, for the period of real estate promotion activity – development projects and urban rehabilitation buildings, from the date of commencement of their activity, and may benefit from the specific exemptions provided for in article 71 of the TBS.

(...)

II. DESCRIPTION OF FACTS AND GROUNDS OF PURELY ARITHMETIC CORRECTIONS

From the analysis of the selected accounting-tax areas, in accordance with procedures in use and with the depth considered appropriate to the circumstances, the following situations were verified, relating to the periods of 2013 and 2014:

III.1. Description of the activity developed by the Fund

The Fund is aimed at urban rehabilitation investments in the city of Porto, having commenced its activity on 2011/06/16, with the acquisition of part of the residential properties of … through a deed of purchase executed on the same date, which were subjected to urban rehabilitation.

As stated on the website www… "Urban rehabilitation intervention was carried out on a set of residential and commercial buildings, focused on …, in the southern part of … and facing the … station, providing them with excellent urban setting at the level of downtown Porto. The intervention involved the recovery or reconstruction of mixed residential and commercial buildings as well as the construction of a car park inside the …", with 5 floors of parking spaces

In continuation of its growth, still in 2011, the Fund proceeded to acquire three adjoining and vacant buildings on Rua … and Rua …, which are located in the urban rehabilitation area of the parish of …, municipality of Porto, through a public deed executed on 2011/07/05.

In addition to the urban rehabilitation investment already mentioned, the Fund, at the end of 2011, diversified its real estate portfolio with the acquisition of 12 units that comprise the property located on Rua …, parish of …, Municipality of Vila da Conde, through a deed of purchase on 2011/12/23. The units acquired were intended for rental.

In the years 2013 and 2014 it maintained its activity, both with the rental of the units of the property located in ..., and with the continuity of rehabilitation works on the Properties of …, which were completed in March 2014 (date of the deliberation of the Fund liquidation).

III.2. Real estate assets

As described previously, the Real Estate acquired by the Fund are broken down as follows:

(...)

III.4. Corrections of a purely arithmetic nature to the Tax - 2013 and 2014

III.4.1. CIT

III.4.1.1. Incentives for urban rehabilitation – article 71 TBS

The Fund as FIIRU fell within the CIT Exemption regime, provided for in article 71 of the TBS as already explained in the previous point III.3.1. of this report. However, from the analysis carried out of the Fund's accounting records, we verified that on 2013/12/31 and 2014/12/31, the income obtained by the Fund does not benefit from the CIT Exemption provided for in article 71 of the TBS, as they do not meet the requirements established in number 1 of the said article, as can be seen in the following calculations:

In this calculation, only the Real Estate property of … located in the urban rehabilitation zone and having been subject to urban rehabilitation actions were considered. Thus:

- in 2013 the percentage of real estate property subject to urban rehabilitation actions over the total gross or net assets of the Fund is 72.75% and 67.67% respectively, and

- in 2014 the percentage of Real Estate property subject to urban rehabilitation actions over the total gross or net assets of the Fund is 46.23% and 45.39% respectively,

Thus, the Fund does not meet the requirement of number 1 of article 71 of the TBS that "at least 75% of its assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas".

For the Fund to benefit from this Exemption it is necessary that all the presuppositions of the exemption as listed be met:

- That the Fund operates in accordance with national legislation;

- That its constitution occurs between 01 January 2008 and 31 December 2013; and

- That at least 75% of its assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas.

These presuppositions are cumulative.

As already mentioned previously, the Fund operates in accordance with national legislation, being a special real estate investment fund for urban rehabilitation, closed, constituted by private subscription in accordance with the provisions of number 1 of article 48 of the Legal Regime for Real Estate Investment Funds (hereinafter abbreviated as LRFII) and whose operation is governed in particular by Section I-A of Chapter III of Regulation no. 8/2002, of 18 June of the Securities Commission, republished by CMVM Regulation no. 7/2007.

Its constitution occurred on 16 June 2011.

However, regarding the presupposition that at least 75% of its assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas, this presupposition is not met as demonstrated above.

However, the Fund included in its calculation, (Annex 21), the 3 Real Estate properties that make up the real estate assets of the Fund. Rua … and … located in the parish of …, municipality of Porto, which are integrated in the Historic Centre of the Municipality of Porto, classified as a Monument of National Public Interest and situated in the urban rehabilitation zone of Porto, in the Intervention Unit of …, despite the same remaining in the same state of preservation as they were purchased, without any rehabilitation project.

As the Fund is in liquidation as of 2014/01/20, by deliberation at the Participants' Assembly and these 3 properties were not subject to urban rehabilitation actions, and were sold in mid-2015, in the state they were in, the presuppositions for their application for inclusion in the calculation of the 75% percentage were frustrated, and consequently in the application of the exemption regime of article 71 of the TBS. For which reason they were not included in the calculations made by the AT.

It is emphasized that it is not enough that the Properties are in the Fund's assets awaiting the carrying out of rehabilitation actions, it is necessary that they be subject to them, understanding by these the '(...) interventions designed to confer adequate performance and functional, structural and constructive safety characteristics to one or more buildings, or to the functionally adjacent constructions incorporated in their grounds, as well as to their units, or to give them new functional aptitudes, with a view to permitting new uses or the same use with higher performance standards, which result in a state of conservation of the Property, at least, two levels above that attributed before the intervention;", as provided for in paragraph a) of number 22 of article 71 of the TBS.

The Fund also includes in the calculation of its percentage, (Annex 21), the Property located in …, however, and taking into account the content of number 1 of article 71 of the TBS, it cannot be considered, as it is not located in an urban rehabilitation zone, nor subject to urban rehabilitation actions.

We again bring to light what is stated in the 2009 State Budget report of the Ministry of Finance and Public Administration," (...) It is the Government's objective to accelerate, through the strengthening of fiscal and normative measures, the process of urban rehabilitation in delimited zones. Over recent years a set of support programmes have been established whose results from these measures are aimed at enhancing, so that it is possible to promote virtuous cycles of heritage rehabilitation and social dynamics, which bring sustainability to Investment directed to priority areas in the field of urban rehabilitation (...)

In light of all that has been stated, not meeting the presuppositions of number 1 of article 71 of the TBS, its income cannot benefit from the CIT exemption which this article provides for, with the regime of article 22 of the TBS applying to it, in accordance with number 15 of article 71 TBS.

III.4.1.2. Real Estate Investment Fund - number 6 of article 22 TBS

Given that the presuppositions for the application of the "Incentives regime for urban rehabilitation" were not verified, the same ceases and the fiscal regime for FII is applied, provided for in number 6 of article 22 of the TBS, which establishes that income is taxed autonomously.

Number 6 of the said normative provides that the taxation of income obtained by FII, which are constituted and operate in accordance with national legislation, depends on the nature thereof, that is, if they are classified as:

• Rental income, in accordance with paragraph a) of number 6 of article 22 of the TBS;

• Real estate capital gains, in accordance with paragraph b) of number 6 of article 22 of the TBS;

• or as other income, in accordance with paragraph c) of number 6 of article 22 of the TBS.

Given that Real Estate Investment Funds have a tax regime with specific characteristics, we will proceed to describe the autonomous taxation, given the nature of the income.

III.4.1.2.1. Rental income, paragraph a) of number 6 of article 22 of the TBS

In accordance with paragraph a) of number 6 of article 22 of the TBS, rental income, which is not related to social housing subject to legal regimes of controlled costs, is taxed autonomously at the rate of 25%, in 2013 and 2014, which applies to the net income of maintenance and upkeep charges actually incurred and duly documented.

Thus, it is important to first of all define what should be understood as rental income. Article 22 of the TBS does not define the concept of rental income, therefore, in accordance with the interpretative principles contained in article 11 of the General Tax Law (GTL), and taking into account the provisions in article 8, number 1 of the Personal Income Code, 'rental income is considered to be the rents of rural, urban or mixed properties paid or made available to the respective titleholders.'

And for a correct determination of the contours of the tax incidence of this income, it seems to us as necessary to conduct a prior analysis of the notion of rent as a fundamental element in the legal-fiscal qualification of rental income.

Thus, rent, as a constitutive element of the lease contract, is a compensatory payment, periodic, by which the lessee complies with the obligation in which it becomes constituted by force of the said contract and which consists in the payment to the lessor of a price for the temporary right of use and enjoyment of the leased real estate property, although the tax legislator has adopted for the purposes of Personal Income Tax a concept of rent generically broader, reflected in number 2 of article 8 of the Personal Income Code, presumably for obvious reasons of preventing forms of tax avoidance, that is, the conclusion of other transactions with equivalent economic effect not typified in the law.

It thus results, and is commonly understood, that rent is everything that is owed to the owner (or usufructuary) for the cession of the use of a property or part thereof, and that the total of the rents received constitutes the rental income of the owner.

For tax purposes, it is thus relevant the requirement for the existence of a lease as a necessary condition for the qualification of the sum of the rents actually received.

A position that is reinforced by the understanding set out in Circular 20/94- NIR, of 1994/07/13, which in accordance with the provisions of paragraph a) of number 6 of article 22 of the TBS the taxation will only apply to rents actually received.

As to its delimitation, the law determines the need for its consideration as net, that is, with the deduction of maintenance and upkeep charges, which are duly documented.

Although we do not find in article 22 of the TBS or in any other article, a concrete definition of what should be considered as maintenance and upkeep charges, it is accepted that in a broad sense they constitute,

• Maintenance expenses are the charges incurred with energy for lighting, maintenance of lifts, concierges, cleaning, management of horizontal property, building insurance and municipal sanitation and sewerage taxes); and

• Conservation expenses are those incurred with works designed to maintain a building in the conditions existing at the date of its construction, reconstruction, enlargement or alteration, namely restoration, repair and cleaning works and which cannot be grouped under the concept of maintenance expenses.

Thus the rental income of the Real Estate Investment Fund is taxed, autonomously, at a rate of 25% in 2013 and 2014, which will apply to the net income of maintenance and upkeep charges actually incurred by the fund and duly documented.

And no other reading results from paragraph a) of number 6 of article 22 of the TBS, that is, what is taxed is the net rental income determined by deduction from the rents of the maintenance and upkeep charges with the properties that generate the income subject to taxation, and only these charges may be deducted.

It is a necessary condition, in order that it is possible to deduct maintenance and upkeep expenses with a determined property, that such property generates rental income, as this is the only way to obtain a "net income of charges".

In summary, the respective regime provides that from the rental income obtained by the Fund, the respective maintenance and upkeep expenses which present a necessary connection relationship with the obtaining of such income subject to taxation must be deducted, from which it is concluded that in this matter the rule by which the law determines deductions to income can be no other than that of the relevance of the costs or charges necessary for its maintenance.

Thus, although the maintenance and upkeep expenses with the properties that make up the fund's assets are fund charges, not all are in the condition of being fiscally eligible, given that for the purposes of the tax due on rental income, the calculation of the respective net income is made autonomously property by property, in those that have generated income, this being the only understanding that appears coherent within the scope of a systematic interpretation, with the principle underlying the taxation, in the context of Personal Income Tax of the same reality

It should be noted that, from the analysis carried out, situations resulted that are subject to correction, as per points III.4.2.1 and III.4.3.1. of this report

III.4.1.2.2. Real estate capital gains, paragraph b) of number 6 of article 22 of the TBS

The tax regime applicable to real estate capital gains, which are not related to social housing subject to legal regimes of controlled costs, is provided for in paragraph b) of the said normative, in which these are taxed autonomously at the rate of 25%, which applies to 50% of the positive difference between the capital gains and losses realized, determined in accordance with the rules of the Personal Income Code, in 2013 and 2014. It should be noted that, from the analysis carried out, situations resulted that are subject to correction, as per point III.4.2.2. of this report.

In accordance with article 10, number 1, paragraph a), of the Personal Income Code (PIC) capital gains are understood to be gains obtained which, not being considered business and professional income, capital or rental income, result from the onerously alienation, in particular of real rights over real property. The gain subject to Tax is defined in number 4 of article 10 of the PIC, being calculated by the difference between the value of acquisition of the asset and the value at which it was transmitted, by force of the facts which, in accordance with the law, constitute the realization of the capital gain.

The general rule for the determination of the net income of the capital gain, gain subject to Personal Income Tax is defined in number 1 of article 43 of the PIC. This corresponds to the balance struck between the capital gains and losses realized in the same year. The calculation of the balance has to be completed with the knowledge of other rules, namely:

- Value of acquisition - Article 46, number 3 of the PIC.

The value of acquisition of real estate constructed by the taxpayers themselves corresponds to the value inscribed in the property register or to the value of the land, plus construction costs duly proven, if higher than that.

In accordance with paragraph a) of article 51 of the Personal Income Code, for the determination of capital gains subject to tax, the value of acquisition is increased by charges for the appreciation of assets demonstrably made in the last five years, and necessary and actually practiced expenses, inherent to the acquisition and alienation of real rights over Real Estate.

- Realization value - Article 44, number 1, paragraph f) and number 2 of the PIC.

The value of the consideration or where it concerns real rights over real property, will prevail, when higher, the values at which the properties were considered for the purposes of liquidation of municipal tax on onerously transfers of real property or, where such liquidation does not apply, those which should be, if it were due.

III.4.1.2.3. Other income, paragraph c) of number 6 of article 22 of the TBS

Other income, by reference of paragraph c) of number 6 of article 22 of the TBS to paragraph a) of number 1 of the said normative, is taxed as follows:

- Income obtained in Portuguese territory, not qualified as capital gains and not subject to withholding at source are taxed autonomously at the rate of 25% on the net value obtained in each year, the Tax being delivered by the respective management entity by the end of the following year to which it relates. As these fall within the scope of this normative, interest on bank deposits, will be subject to taxation at the rate of 25%, as per points III.4.2.3. and III.4.3.3. of this report.

III.4.1.3. Notification to the Fund for CIT calculation

Contrary to the legal framework set out above, number 6 of article 22 TBS, it is verified that the Fund fell within the scope of the CIT exemption, provided for in article 71 of the TBS, therefore on 2013/12/31 and 2014/12/31, it considered that it met all the requirements established in that same normative and thus did not calculate Tax in the context of CIT.

Thus, on 2015/08/06, the Fund was notified to proceed with the calculation of CIT, in the periods of 2013 and 2014, in accordance with number 6 of article 22 of the TBS (Annex 22).

Based on the elements presented by the Fund and after our validation, we proceeded with the calculation of CIT tax, in accordance with number 6 of article 22 of the TBS (Annex 23).

III.4.2. Corrections to the tax for unpaid CIT - 2013

In light of the facts described, it is verified that the income of any nature obtained by the Fund in the period of 2013 is subject to taxation, in accordance with number 6 of article 22 of the TBS, therefore we propose to carry out corrections to CIT tax in the total amount of € 345,484.95, which results from the following calculation:

III.4.2.1. Autonomous taxation of rental income - paragraph a) of number 6 of article 22 TBS

A) Rental income/rents actually received

In the accounting analysis carried out, it is verified that the Fund as FIIRU obtained, in the period of 2013, rental income from the following Real Estate assets:

- Property of …, located on Rua …, no.…, of the parish …, municipality of ..., corresponding to 12 autonomous units from letter A to L, of the property registered in the property register under article…;

- Property of …, corresponding to an autonomous unit, designated by the letter "C" of the property registered under article…;

as evidenced in the accounting records made in the account "86 - Income from leased real estate assets".

Given that, for tax purposes, the rents actually received are relevant for the calculation of rental income, by the rentals of the identified properties, the Fund was requested for the respective monetary flows evidencing the receipt of rents, in the period of 2013 (Annex 24).

To prove the amounts of rents actually received, the Fund presented other elements, namely: lease contracts, rent receipts and auxiliary statements of calculation of rents by units (Annexes 25 and 26). Based on those elements, it was calculated that the rents actually received in 2013 amounted to the total amount of € 65,732.97 which is presented distributed by properties in the following table:

B) Maintenance and upkeep charges that are fiscally eligible

The rental income previously calculated is relevant as taxable income, when "net of maintenance and upkeep charges actually incurred, duly documented", as provided for in paragraph a) of number 6 of article 22 of the TBS.

In this sense, and based on the elements obtained, when notified, it was possible to calculate the fiscally eligible maintenance and upkeep charges in the total amount of € 12,665.61 (Annex 26), for each unit, in function of the proportion, as discriminated in the following table:

As a result it was calculated that the total value of the net rental income imputable to the Fund amounts to € 53,047.36 (€ 65,732.97 - € 12,685.61) from which by application of the 25% rate results in a total tax value due of € 13,261.84 (€ 53,047.36* 25%), as demonstrated by the following table:

III.4.2.2. Autonomous taxation of real estate capital gains - paragraph b) of number 6 of article 22 TBS

In 2013, the Fund initiated the sales of the following autonomous units of the Property of …:

To face the reconstruction of the said units we verified that the expenses incurred were recorded in the accounting in account 32 - constructions, which amount to the total amount of € 8,970,947.25 " (Annex 23).

Values designated as "post-sale adjustments" were also incurred, resulting from the return of the IMT value paid by the Fund when acquiring the property - favorable adjustments as well as some supplier invoices that were received after the accounting closure of the construction works - unfavorable adjustments.

These 'post-sale adjustments' were reflected in the accounting as a debit to the account … -unfavorable adjustments and as a credit to the account …- Favorable Adjustments. In light of the net values recorded in 2013, a favorable adjustment was calculated in the total amount of € 103,423.99.

Given that, for the calculation of income from real estate capital gains 50% of the positive difference between the capital gains and losses realized is relevant, a demonstrative statement of the calculation of fiscal capital gains for 2013 was prepared, for purposes of application of the autonomous taxation rate of 25%:

Thus, it results from the above that the CIT calculated on the total value of income from real estate capital gains amounts to € 332,200.80.

III.4.2.3. Autonomous taxation of other income - paragraph c) of number 6 of article 22 TBS

From the elements presented by the Fund, namely monetary flows and extraaccounting statements, in 2013 income from bank deposits was obtained in the value of € 89.21, subject to taxation at the rate of 25%, in accordance with paragraph c) of number 6 of article 22 of the TBS, in the amount of € 22.30 (€89.21 x 25%) (Annex 29).

III.4.2.4. Summary of Unpaid Tax CIT - 2013

In light of the above and in accordance with number 6 of article 22 of the TBS, we propose to carry out the correction of CIT tax in favor of the State in the amount of € 345,484.95, resulting from the following income:

(...)

X. PROPOSALS

In light of what has been mentioned in the previous chapters, from the external inspection actions carried out for the periods of 2013 and 2014, purely arithmetic corrections to the Tax were ascertained, in the context of CIT, in the total amount of € 345,484.95 and € 13,368.59, respectively and, voluntary adjustments to the tax, in the context of VAT in the total amount of € 23,898.40, a summary of which is presented on the first pages of this report.

For the corrections made in the context of CIT the corresponding Assessment Notice will be prepared.

(...)

X.1.2. Of Compensatory Interest

As a result of the correction proposed together with the Tax to be delivered to the State, compensatory interest will be liquidated which is shown to be due, in accordance with the provisions of article 35 of the General Tax Law (GTL).

Compensatory interest is counted day by day, from the first day immediately following the expiration of the deadline for delivery of the tax, 1 May 2014 and 1 May 2015, respectively until the date of preparation of the brief report, and the rate of compensatory interest, as provided for in number 10 of article 35 of the GTL is the rate of legal interest fixed pursuant to article 559, number 1, of the Civil Code, currently being 4% (rate fixed by Order 291/2003, of 8 April).

As the collection of the correction is carried out in the Model 22 Tax Return, the demonstrative note of calculation of compensatory interest that will be timely notified to the taxpayer, contemplates only the counting of compensatory interest starting on 1 June 2014 and 2015, and in light of the legal regime applicable to the situation in question (paragraph a), of number 6, of article 22 of the TBS), the counting of compensatory interest should commence on 1 May 2014 and 1 May 2015. This difference will be reflected only in the liquidation, as demonstrated below,

Consequently, to the amount above calculated of € 1,173.70 and of € 45.42 respectively, the value of the demonstrative notes of compensatory interest that will be notified to the taxpayer will be added.

p) Following the inspection, the Tax Authority and Customs Authority issued the assessment no. 2016…, of 20-01-2016, relating to the year 2013, which is contained in document no. 9 attached with the request for arbitral pronouncement, the content of which is given as reproduced, in the amount of € 368,201.76, being € 345,484.95 of CIT and € 22,716.81 of compensatory interest (these determined in the statement of interest payment no. 2016…, which is contained in document no. 10 attached with the request for arbitral pronouncement, the content of which is given as reproduced);

q) On 16-05-2016, the Claimant provided security to suspend the enforcement proceedings no. …2016…, instituted for collection of the liquidated amounts;

r) On 03-06-2016, the Claimant filed the request for constitution of the arbitral tribunal which gave rise to the present proceedings.

2.2. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

2.3. Justification of the fixing of the statement of facts

The proven facts are based on the documents submitted by the Claimant with the request for arbitral pronouncement and on the administrative proceedings.

3. Statement of Law

From the corrections made by the Tax Authority and Customs Authority, only that relating to the fiscal year 2013 is the subject of the present proceedings.

The general tax regime for real estate investment funds in force in the year 2013 was contained in article 22, numbers 6 and following of the Tax Benefits Statute (TBS), in the wording resulting from the republication made by Decree-Law no. 108/2008, of 26 June, and from the amendments introduced by Law no. 64-B/2011, of 30 December, and by Law no. 66-B/2012, of 31 December.

However, for real estate investment funds that develop urban rehabilitation activity, an exemption from CIT is provided for in article 71 of the TBS, which was introduced by Law no. 64-A/2008, of 31 December, and was in force in the year 2013, with the amendments resulting from Law no. 66-B/2012, of 31 December.

In number 1 of this article it is established that

1 – Income of any nature obtained by real estate investment funds that operate in accordance with national legislation are exempt from CIT, provided that they are constituted between 1 January 2008 and 31 December 2013 and at least 75% of their assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas.

In accordance with number 20 of the same article 71, in the wording in force in 2013, «the fiscal incentives embodied in this article are applicable to real estate subject to rehabilitation actions initiated after 1 January 2008 and which are completed by 31 December 2020».

In accordance with the provisions of number 15 of the same article 71, in the wording in force in 2013, «should the requirements referred to in number 1 cease to be met, the application of the regime provided for in this article ceases, and the regime provided for in article 22 of the Tax Benefits Statute applies, the income of the investment funds referred to in number 1 which, at the date, have not yet been paid or made available to the respective titleholders being taxed autonomously, at the rates provided for in article 22, plus the corresponding compensatory interest».

There is no controversy regarding the fulfillment of the first requirement required by number 1 of article 71 for B… to benefit from the CIT exemption, as it operates in accordance with national legislation.

There is also agreement of the Parties regarding the fulfillment of the second requirement required by number 1 of article 71, as B… was constituted on 16-06-2011, therefore between 01-01-2008 and 31-12-2013.

The divergence between the Parties concerns the fulfillment of the third requirement which is that at least 75% of the fund's assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas.

There is agreement of the Parties that the properties on Rua … are located in an urban rehabilitation area and only they were subjected to rehabilitation actions.

However, the Tax Authority and Customs Authority held (point III.4.1.1. of the Tax Inspection Report) that, from the analysis carried out of the Fund's accounting records, it results that on 31-12-2013 «the income obtained by the Fund does not benefit from the CIT Exemption provided for in article 71 of the TBS, as they do not meet the requirements established in number 1 of the said article, as can be seen in the following calculations»:

What is at issue in the present proceedings is whether the Claimant met, in the year 2013, the requirements necessary to enjoy the CIT exemption provided for in number 1 of article 71.

The Claimant understands, in summary, that:

– the activity of the Fund did not deviate from the objectives that motivated the introduction of the exemption provided for in article 71° of the TBS;

– that the calculation of the ratio of composition of the Fund's assets should not consider, in its numerator, only the value contained in the items that contain the designation "…"(in particular, the items # 3211001, # 3212001 and # 3221001. as well as, in the particular case of the calculation made in net terms, the items # 38121001, # 38122001 and # 38222001); and,

– that the period of reference adopted by the AT for purposes of that calculation (31 December 2013) is not the appropriate one and is contrary to the law.

3.1. Question of the value to be considered for calculation of the 75% percentage

The Claimant contends, in summary, that, with the regime provided for in article 71, number 1, of the TBS, «the legislator intended to reward promoters of rehabilitation actions of degraded buildings located in determined urban areas» and felt the need to limit access to that "reward" to funds that, in fact, promoted rehabilitation actions on real estate located in determined urban areas.

The Claimant understands that

– «it was in this context that the requirement of asset composition applicable within that exemption emerged - which appears to have been perceived by the legislator as an adequate indicator of activity»;

– but, «the pursuit of urban rehabilitation activity could be assessed through other indicators, possibly more effective, such as for example the proportion of income resulting from urban rehabilitation activity in relation to the totality of income obtained by the Fund»;

– «this indicator, moreover, seems from the outset to be more appropriate to the exemption in question: if the exemption applies to income, it would be natural that the criterion for application of the same depended, equally, on the income obtained by the Fund»;

– «this indicator would demonstrate, in the case of the Fund in particular, that its main activity did not deviate from that which the legislator aimed to encourage, i.e. urban rehabilitation: the income obtained from the properties of … (the only eligible assets for purposes of the said incentive) represented, in 2013, approximately 99% of the total gross income of the Fund».

Norms that provide for fiscal benefits have the nature of exceptional norms, as results from the express content of article 2, number 1, of the TBS, therefore they must be interpreted, in principle, in their precise terms, without broadening or narrowing, so as to include all cases literally provided for in them and only those, as is established jurisprudence on the interpretation of this type of norms ( [1] ), without prejudice to possible broadening or narrowing which allow concluding with certainty that the legislator did not adequately express the legislative intention, namely preparatory works or other texts that clarify it.

That is, norms on fiscal benefits must be interpreted in strict terms.

In the case at hand, it results from the express content of article 71, number 1, of the TBS that it was intended to grant the fiscal benefit only to cases in which at least 75% of the assets of the funds «are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas», therefore it is not within the powers of the law interpreter, in a State governed by the rule of law based on the supremacy of the law (article 2 of the CRP), to superimpose on the legislative index of identification of situations that must enjoy fiscal benefits the alternative index that the interpreter would use if it were he who held the legislative power.

Thus, the Tax Authority and Customs Authority had the obligation to use the criterion provided for in the law and no other, as results from the constitutional requirement to subordinate all its activity to the law (article 266, number 2, of the CRP).

Furthermore, the criterion proposed by the Claimant cannot even be considered more appropriate than that provided for in the law to assess, for a tax of annualized structure, as is CIT, of the priority devotion of the fund's activity to urban rehabilitation, as it is clear that the Claimant's criterion would allow the attribution of the benefit in situations in which funds would be holders of real estate majorly dedicated to other purposes, in particular real estate speculation resulting from the appreciation of real estate, which does not necessarily provide income every year, but only when the realization of capital gains occurs.

Thus, the act of assessment in question cannot be considered illegal for having used, to assess the applicability of the fiscal benefit, the criterion provided for in the law instead of that which the Claimant suggests.

3.2. Question of the calculation of the ratio of asset composition

The Claimant contends, in summary, that, in addition to real estate devoted to urban rehabilitation activity, there are other assets that were devoted to this activity that should also be considered, namely deposits with notice and term deposits, in the amount of € 780,000, other creditor accounts, in the amount of € 187,952 and other accruals and deferrals, in the amount of € 248,633.

Contrary to what is presupposed by the Tax Authority and Customs Authority in its Response, it is not a matter of the inclusion of other real estate in addition to those located in the "…" in the numerator of the fraction intended to ascertain the 25% percentage referred to in number 1 of article 71 of the TBS, but rather the inclusion in it of other movable assets connected with the rehabilitation carried out in them.

Again, the Claimant seeks the application of a criterion for assessment of the application of the fiscal benefit different from that provided for in the law, which is to recognize it only to funds in which «at least 75% of their assets are real estate property subject to rehabilitation actions carried out in urban rehabilitation areas».

Given that it is manifest that any entity that carries out urban rehabilitation actions will necessarily have other assets in addition to the real estate subject to these actions, at least those necessary to support the costs of the works, it is not minimally credible that the legislator «forgot» this obvious fact when determining the application of the percentage referred to to «assets that are real estate property subject to rehabilitation actions» and not to the totality of assets connected with the rehabilitation activity.

For this reason, there is no basis for the corrective interpretation which constitutes the proposal by the Claimant.

On the contrary, faced with the evidence that funds will hold assets devoted to rehabilitation in addition to the real estate to be rehabilitated and the law imposing that it be presumed that the legislator knew how to express its thinking in adequate terms and not that it made an error in expressing it (article 9, number 3, of the Civil Code), it should be concluded that it was deliberately chosen to consider only the value of the real estate as a reference for application of the fiscal benefit, which will be justified, in particular, by being a more stable and less manipulable value to assess the devotion of the funds' activity to urban rehabilitation than the value of other assets, such as bank balances or credits.

For this reason, as the Tax Authority and Customs Authority defends in its Response, in the numerator of the fraction intended to determine that percentage only the value of the properties that were subjected to urban rehabilitation actions can be relevant.

Thus, also here, the obligation to observe legality prevented the Tax Authority and Customs Authority from considering for the calculation of the percentage referred to assets different from real estate subjected to rehabilitation actions situated in urban rehabilitation areas.

3.3. Question of the relevance or otherwise of a period of reference for purposes of the calculation of the ratio of asset composition and its determination

The Tax Authority and Customs Authority, to assess whether at least 75% of the Claimant's assets were real estate property subjected to rehabilitation actions carried out in urban rehabilitation areas, used the financial information relating to 31-12-2013.

Having the Tax Authority and Customs Authority concluded that, on that date, the value of the real estate subject to rehabilitation action represented less than 75% of the assets, it understood that the fiscal benefit provided for in number 1 of article 71 was not applicable, regarding all income subject to CIT.

The Claimant contends, in summary, the following:

– article 71, number 1, does not clearly refer to the period of reference relative to which that ratio should be determined;

– the AT concluded that, if the ratio obtained at that date was not in line with what is required in the said article 71°, then all income obtained during that period (in this case, 2013) should be taxed in accordance with article 22° of the TBS;

– being thus, the tax regime applicable to the Fund's income is only known with certainty after the closure of the fiscal year, which is reducible to the fact that the Fund will have carried out its operations during the fiscal year 2013 not knowing whether it would pay tax or not on the income obtained, as if such were indifferent;

– the making of appropriate management decisions requires a certain predictability of the applicable tax framework and the tax treatment to be conferred, therefore the understanding of the AT unprotects the expectations of taxpayers;

– that perspective of the AT ignores the method of calculating CIT of FII in accordance with article 22° of the TBS, in which no annual taxable profit is taken into account, the tax due being determined by category of income and, in most cases, subject to withholding at source;

– thus, although CIT is a periodic annual tax of repetition (cf. article 8° of the CIT Code), in the case of an FII income is taxed "autonomously", suggesting that the tax event is not generally triggered on the last day of the tax period but rather at the moment of obtaining each income;

– the regime provided for in number 5 of article 38 of the LRFII should be applied, by virtue of number 2 of article 11 of the GTL, relating to the composition of the assets of open real estate investment funds, which establishes that "the percentage limits defined in paragraphs a) to f) of number 1 [i.e. limits to the composition of the assets of those funds] are assessed in relation to the average of the values verified at the end of each of the last six months (...)".

On this question, the Tax Authority and Customs Authority defends, in its Response, in line with what it has already stated in the Tax Inspection Report, that the right to fiscal benefits relates to the date of the verification of the respective presuppositions, unless the law provides otherwise, as provided for in article 12 of the TBS, which in the situation of the case will be 31 December 2013".

This article 12 of the TBS establishes that «the right to fiscal benefits must relate to the date of the verification of the respective presuppositions, even if it is dependent on declarative recognition by the fiscal administration or on agreement between this and the person benefited, unless the law provides otherwise».

The Claimant, in its arguments, stated that «the birth of the right to the benefit, being simultaneous with the verification of its respective presuppositions, could never correspond to 31 December of the year in question, in that none of the presuppositions of the right to the benefit relates to that date or can only be assessed with reference to the same» and that the regime provided for in number 15 of article 71.

In truth, it is not clear that article 12 of the TBS constitutes support for the understanding of the Tax Authority and Customs Authority, as what was verified on 31-12-2013 was only that the presuppositions for the application of the fiscal benefit were not met on that date, but based solely on the analysis of the ratio on that date, it could not conclude that the presuppositions for its application were not met before, during the entire year of 2013.

Furthermore, the Tax Inspection Report shows, in point III.4.2.2., that several of the properties of … that were subjected to rehabilitation works were sold during the year 2013, therefore the fact that on 31-12-2013 the minimum percentage of 75% required by number 1 of article 71 is not verified does not allow concluding that this percentage was not verified in any of the periods of the year 2013 in which income was obtained by the Claimant.

Furthermore, the regime of number 15 of the same article 71, in the wording in force in 2013, allows concluding that the norm of number 9 of article 8 of the CIT Code, which establishes that «the tax event is considered to be verified on the last day of the tax period the date of the closure of the fiscal year», is not relevant for this purpose.

In truth, that number 15 establishes that «should the requirements referred to in number 1 cease to be met, the application of the regime provided for in this article ceases, and the regime provided for in article 22 of the Tax Benefits Statute applies, the income of the investment funds referred to in number 1 which, at the date, have not yet been paid or made available to the respective titleholders being taxed autonomously, at the rates provided for in article 22, plus the corresponding compensatory interest».

There is, thus, a clear division of the fields of application of the two regimes without necessary coincidence with the last day of the tax period, but rather based on the date on which the requirements of the fiscal benefit ceased to be met: income which «at the date» has already been paid or made available to its holder benefits from the exemption; income which «at the date, have not yet been paid or made available to the respective titleholders» become subject to autonomous taxation at the rates provided for in article 22.

This regime of autonomous taxation is reducible to each income being subjected to the respective taxation independently of other tax facts that occur during the fiscal year. For this reason, the general rules on CIT taxation are not relevant for this purpose, namely the regime of taxation based on the taxable profit of a determined fiscal year, which underlies that number 9 of article 8 of the CIT Code.

Thus, it is concluded that the Claimant is correct in contending that «the benefit is applicable until the requirements established cease to be met, which determines the cessation of the application of the regime in question» and that «the tax event is not generally triggered on the last day of the tax period but rather at the moment of obtaining each income».

Therefore, it is to be concluded that the correction made is illegal in considering as relevant the situation existing on 31-12-2013 to assess the verification of the presuppositions of the fiscal benefit in the year 2013.

In this context, as it is certain that the action of the Tax Authority and Customs Authority has no legal support, the CIT assessment should be annulled (article 163, number 1, of the Code of Administrative Procedure of 2015), therefore it is not relevant for the decision of the case to examine whether or not the thesis of the Claimant that the ratio provided for in article 71 of the TBS should be assessed in relation to the average of the values verified at the end of each of the last six months is acceptable.

Thus, the examination of this question is unnecessary, as its resolution would be useless for the decision of the case (article 130 of the Code of Civil Procedure).

3.4. Compensatory interest

Compensatory interest is integrated in the debt of the tax itself, with which it is jointly liquidated (article 35, number 8 of the GTL).

The assessment of CIT being illegal, the assessment of compensatory interest is affected by the same defect, as it has that assessment as its presupposition.

Therefore, its annulment is also justified (article 163, number 1, of the Code of Administrative Procedure of 2015).

4. Indemnification for undue guarantee

The Claimant formulates a request for «payment of indemnificatory interest resulting from guarantee unduly provided, pursuant to article 53 of the GTL».

Regarding indemnification for provision of undue guarantee, article 171 of the Code of Tax Procedure, establishes that «indemnification in case of bank guarantee or equivalent unduly provided will be requested in the proceedings in which the legality of the enforceable debt is controversial» and that «indemnification must be requested in the claim, contestation or appeal or in case its basis is subsequent within the period of 30 days following its occurrence».

Thus, it is unequivocal that the judicial challenge proceedings encompass the possibility of condemnation in the payment of undue guarantee and it is even, in principle, the appropriate procedural means to file such request, which is justified by evident reasons of procedural economy, as the right to indemnification for undue guarantee depends on what is decided on the legality or illegality of the assessment act.

The request for constitution of the arbitral tribunal and of arbitral pronouncement has as a corollary that it is in the arbitral proceedings that the «legality of the enforceable debt» will be discussed, therefore, as results from the express content of that number 1 of the said article 171 of the Code of Tax Procedure, it is also the arbitral proceedings that is appropriate to examine the request for indemnification for undue guarantee.

The regime of the right to indemnification for undue guarantee is contained in article 53 of the GTL, which establishes the following:

Article 53

Guarantee in case of undue provision

1. The debtor who, to suspend enforcement, offers bank guarantee or equivalent will be indemnified wholly or partially for losses resulting from its provision, should he have kept it for a period exceeding three years in proportion to the success in administrative claim, challenge or opposition to enforcement which have as their object the guaranteed debt.

2. The period referred to in the previous number does not apply when it is verified, in gracious claim or judicial challenge, that there was error attributable to the services in the assessment of the tax.

3. The indemnification referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the indemnificatory interest rate provided for in this law and may be requested in the claim or judicial challenge proceedings themselves, or autonomously.

4. Indemnification for provision of undue guarantee will be paid by deduction from the tax revenue of the year in which the payment is made.

In the case at hand, it is clear that the errors underlying the assessments of CIT and compensatory interest are attributable to the Tax Authority and Customs Authority, as the corrections were its initiative and the Claimant contributed in no way to those errors being committed.

Therefore, the Claimant is entitled to indemnification for the guarantee provided.

Regarding the request for indemnificatory interest, there is no normative support in the tax laws for its attribution in cases of indemnification for undue guarantee. As the Supreme Administrative Court has understood «the right to indemnification for undue provision of guarantee does not, in any situation, involve the right to indemnificatory and/or default interest, pursuant to articles 43 and 102 of the GTL, being limited, solely, to the value corresponding to the charges actually incurred with its provision, even then with the limit provided for in number 3 of the aforementioned article 53 of the GTL». ( [2] )

On the other hand, it does not fall within the competence of this Arbitral Tribunal, which is restricted, pursuant to article 2 of the LRAT, to settle a dispute in tax matters, to decide whether or not there is a right to interest based on the general regime of non-contractual civil liability.

Therefore, the request for payment of interest must be judged unfounded.

As there are no elements that allow determining the amount of indemnification, the condemnation will have to be made with reference to what is to be liquidated in execution of this decision [articles 609, number 2, of the Code of Civil Procedure and 565 of the Civil Code, applicable pursuant to article 2, paragraph d) of the GTL].

5. Decision

In these terms, the Arbitral Tribunal agrees on:

a) Judge the request for arbitral pronouncement well-founded;

b) Annul the assessment of CIT no. 2016 … and the statement of payment of compensatory interest no. 2016 …;

c) Judge well-founded the request for condemnation of the Tax Authority and Customs Authority to pay to the Claimant the indemnification to be liquidated in execution of this decision for the guarantee provided to suspend the enforcement instituted for coercive collection of the liquidated amounts;

d) Judge unfounded the request for payment of indemnificatory interest and absolve the Tax Authority and Customs Authority of the respective request.

6. Value of the case

In accordance with the provisions of article 306, number 2, of the Code of Civil Procedure and article 97-A, number 1, paragraph a), of the Code of Tax Procedure and article 3, number 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 368,201.76.

7. Costs

Pursuant to article 22, number 4, of the LRAT, the amount of costs is fixed at € 6,120.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Tax Authority and Customs Authority.

Lisbon, 21-11-2016

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Paulo Lourenço)

(José Manuel Aurélio dos Santos)

( [1] ) In this sense, reference may be made to the decision of the Supreme Administrative Court of 15-11-2000, case no. 025446, published in the Bulletin of the Ministry of Justice no. 501, pages 150-153, in which abundant jurisprudence of the Supreme Administrative Court and the Supreme Court of Justice is cited.

This Bulletin of the Ministry of Justice is available at

http://www.gddc.pt/actividade-editorial/pdfs-publicacoes/BMJ501/501_Dir_Fiscal_a.pdf

[2] Decision of 30-3-2011, case no. 013/11, for which reasoning reference is made.

In the same sense, reference may be made to the decisions of the Supreme Administrative Court of 11-10-2006, case no. 0513/06; of 4-6-2008, case no. 023/08; and of 10-11-2010, case no. 0489/10.