Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. Alexandra Coelho Martins (arbitrator chair), Dr. Nuno Pombo and Dr. André Festas da Silva (arbitrators members), appointed by the Deontological Council of the Centre for Administrative Arbitration ("CAAD") to form this Arbitral Tribunal, constituted on 17 September 2018, agree as follows:
I. REPORT
A... – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A., company identification number..., with registered office at..., n.º..., ...-... Lisbon, in its capacity as managing company and in representation of the SPECIAL OPEN REAL ESTATE INVESTMENT FUND – B..., with tax identification number..., also with registered office at..., n.º ... floor, in Lisbon, hereinafter referred to as "Claimant", submitted a request for arbitral pronouncement, pursuant to article 10, no. 1, paragraph a) of the Legal Framework for Arbitration in Tax Matters ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January, and subsequent amendments, following the formation of the presumption of tacit dismissal of the Request for Official Review concerning the acts of levy of Municipal Tax on Onerous Property Transfers ("IMT") no..., of 4 July 2014, in the amount of €49,010.00, and no..., of 24 June 2015, in the amount of €47,450.00, totalling €96,460.00.
The Claimant seeks the annulment of the silent act dismissing the Request for Official Review and, likewise, of the underlying IMT levy acts, on the grounds of a defect of violation of law (error of right), on the understanding that the exemption rule provided for in article 1 of Decree-Law no. 1/87, of 3 January, was not repealed. In this context, it additionally petitions for the restitution of the amount paid, plus compensatory interest at the legal rate from the date of payment until actual restitution.
The Respondent is the Tax and Customs Authority ("AT").
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and followed its normal procedure, namely with notification of the AT on 13 July 2018.
In accordance with articles 5, no. 3, paragraph a), 6, no. 2, paragraph a) and 11, no. 1, paragraph a), all of the RJAT, the Deontological Council of CAAD appointed as arbitrators of the Collective Arbitral Tribunal the signatories, who communicated acceptance of the appointment within the applicable timeframe.
On 28 August 2018, the parties were notified of this appointment and did not lodge any objection, in accordance with the combined terms of articles 11, no. 1, paragraphs a) and b) and 8 of the RJAT, 6 and 7 of the CAAD Code of Conduct.
The Collective Arbitral Tribunal was constituted on 17 September 2018, as communicated by the President of the Deontological Council of CAAD, pursuant to article 11, no. 1, paragraph c) of the RJAT.
On 16 October 2018, the Respondent filed its response, arguing for dismissal with the legal consequences thereof. It contends, to this effect, that, with the amendment of the IMT provision to article 46, no. 1 of the Tax Benefits Statute ("EBF"), effected by Law no. 53-A/2006, of 29 December, that article came to regulate the tax benefits of IMT in the acquisition of real estate by investment funds, and therefore, regulating the same matter provided for in the cited article 1 of Decree-Law no. 1/87, of 3 January, tacitly repealed it.
On the other hand, according to the Respondent, with the repeal, by Law no. 7-A/2016, of 30 March, of article 49 of the EBF, which succeeded the aforementioned article 46, none of the provisions are currently in force.
With regard to compensatory interest, the Respondent contends that, in the event of acceptance of the Claimant's request, such interest is only due from one year after the submission of the request for official review, which occurred on 19 December 2017, and not from the date of payment of the levied amount, in accordance with the provisions of article 43, no. 3, paragraph c) of the General Tax Law ("LGT").
Following the request of the AT on 18 October 2018, the Arbitral Tribunal, pursuant to the principle of autonomy in the conduct of proceedings (article 16, paragraph c) of the RJAT) and in light of the principle of procedural efficiency, which requires that no useless acts be performed (article 130 of the Civil Procedure Code – "CPC"), granted:
(a) The dispensing with the holding of the meeting provided for in article 18 of the RJAT, since no exceptions were raised and no production of evidence was requested;
(b) The dispensing with the joining of the administrative file, as it appeared that this would be merely a repetition of documents already attached to the proceedings.
The parties were notified to submit successive and optional written pleadings, and chose not to do so.
By order dated 11 March 2019, the deadline for delivery of the decision was extended, pursuant to article 21, no. 2 of the RJAT.
II. SANATION
The Tribunal was properly constituted and is competent ratione materiae, given the configuration of the subject matter of the proceedings (cf. articles 2, no. 1, paragraph a) and 5 of the RJAT).
The request for arbitral pronouncement is timely, as it was submitted within the 90-day period provided for in article 10, no. 1, paragraph a) of the RJAT, counted from the date of formation of the presumption of tacit dismissal, in accordance with the combined terms of article 102, no. 1, paragraph d) of the Code of Tax Procedure and Process ("CPPT") and article 57, nos. 1 and 5 of the LGT.
The parties have legal standing and capacity, have legitimacy and are duly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
The joinder of requests is permissible, since it concerns the assessment of the same factual circumstances and the same legal principles or rules, relating to the validity and scope of application of the IMT exemption provided for in article 1 of Decree-Law no. 1/87, of 3 January, for the acquisition of real estate effected for a real estate investment fund by its respective managing company.
The proceedings do not suffer from any nullities, and no exceptions were raised.
III. REASONING
- FACTUAL MATTERS
With relevance to the decision, the following facts, deemed to be proven, must be considered:
A. The SPECIAL OPEN REAL ESTATE INVESTMENT FUND – B..., also designated here as the "FUND", is intended to be marketed to unqualified investors (the general public) and qualified investors, and has as its managing company A... – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A. – cf. Financial Report and Accounts 2016, enclosed with the request for arbitral pronouncement (ppa) as document 2.
B. The FUND was established with indefinite duration, commenced its activity on 16 July 2010 and operates with the code of the Securities Exchange Commission (Comissão de Mercado de Valores Imobiliários) no. ... – cf. Financial Report and Accounts 2016, enclosed with the ppa as document 2.
C. On 7 July 2014, the FUND acquired, for the price of €1,508,000.00, the urban property situated in Lisbon, at..., nos..., ... and ..., and at Rua ... nos..., ..., ... and ..., parish of ..., described in the Property Register of Lisbon under no. ... of that parish and recorded in the matrix of the parish of ... under article ... – cf. copy of deed of purchase and sale enclosed with the ppa as document 3.
D. In this context, IMT was levied and paid, in the amount of €49,010.00, on 4 July 2014, as per document of levy identified with no. ... – cf. copy of the levy document and proof of payment enclosed with the ppa as documents 4 and 5, respectively.
E. On 24 June 2015, the FUND acquired, for the price of €1,460,000.00, the autonomous unit designated by the letter "B" of the urban property situated in Porto, at Rua..., nos..., ..., ..., ..., ..., ..., ..., ... and ..., and at Rua de ..., no..., parish of ..., described in the Property Register of Porto under no. ... of that parish and recorded in the matrix of the parish of Union of Parishes of ... and ... under article ... – cf. copy of deed of purchase and sale enclosed with the ppa as document 6.
F. The corresponding IMT having been levied and paid, in the amount of €47,450.00, on 24 June 2015, as per levy document identified with no. ... – cf. copy of the levy document and proof of payment enclosed with the ppa as documents 7 and 8, respectively.
G. The Claimant sent by post on 19 December 2017 to the Finance Office of Lisbon ... a Request for Official Review addressed to the Director-General of the AT, pursuant to article 78, nos. 1 and 2 of the LGT, for review of the IMT levy acts mentioned in points D and F above. The Request was received by that office on 20 December 2017 – cf. copy of the postal record and the record of receipt of the request enclosed with the ppa as document 1.
H. On 6 July 2018, not accepting the two IMT levies above identified, the Claimant submitted to CAAD the request for constitution of the Collective Arbitral Tribunal that gave rise to the present proceedings.
- MOTIVATION
The facts pertinent to the judgment of the case were selected and delimited according to their legal relevance, in view of the plausible solutions to the legal questions, in accordance with the combined application of articles 123, no. 2 of the CPPT, 596, no. 1 and 607, no. 3 of the Civil Procedure Code ("CPC"), applicable by referral from article 29, no. 1, paragraphs a) and e) of the RJAT.
With regard to the proven facts, the conviction of the arbitrators was based on the critical analysis of the documentary evidence attached to the file and on the consensual position taken by the parties, whose disagreement is strictly a matter of law.
- UNPROVEN FACTS
There are no facts alleged with relevance to the decision that should be considered unproven.
- ON THE LAW
2.1. ON THE NON-REPEAL OF THE IMT EXEMPTION APPLICABLE TO ACQUISITIONS OF REAL ESTATE EFFECTED BY REAL ESTATE INVESTMENT FUNDS
Article 1 of Decree-Law no. 1/87, of 3 January provides that the following are exempt from sisa [read as IMT]: "acquisitions of real estate effected for a real estate investment fund by its respective managing company" (cf. article 1 of Decree-Law no. 1/87), with the "incidence of IMT regulated by the legislation in force at the time in which the tax obligation is constituted", that is, with reference to the moment when the transfer occurs, as clarified by article 5, nos. 1 and 2 of the Code of IMT.
What is at issue in these proceedings is a single question: whether this exemption, whose objective and subjective prerequisites are met in the situation at hand, was in force on the dates when the transfers of the two aforementioned real properties occurred [2014 and 2015].
Indeed, the subsumption of the factual situation under the objective requirements of the cited article 1 of Decree-Law no. 1/87 is unequivocal and is not challenged, since we are dealing with the acquisition of two real properties that entered the patrimony of the Claimant as a result of their acquisition by its respective managing company (on its behalf). And from the subjective point of view, the Claimant is, without doubt, an open Real Estate Investment Fund, established and operating in accordance with the corresponding legal framework, under the supervision of the Securities Exchange Commission.
Thus, the aforementioned properties were integrated into the patrimony of a real estate investment fund – the Claimant – that was established in accordance with national legislation and that was operating in accordance with that same legislation, fulfilling, in both dimensions, objective and subjective, the legal hypothesis of the exemption of article 1 of Decree-Law no. 1/87.
The disagreement arises with regard to the validity of the exemption rule invoked on the date of the facts, since, according to the AT, it was tacitly repealed with the amendment introduced by Law no. 53-A/2006, of 29 December, in article 46 of the EBF, and therefore on the date the operations were carried out it was no longer in force.
In the AT's view, article 46 of the EBF came to regulate the tax benefits of IMT in acquisitions of real estate by investment funds, and therefore, in governing the same matter provided for in the cited article 1 of Decree-Law no. 1/87, implicitly repealed it.
Without prejudice to this being an interpretation that was possible and to which various legal operators and the practice of the real estate investment fund sector adhered, including the Claimant itself, whose Financial Report and Accounts for 2016 states that as from the entry into force of Law no. 7-A/2016, of 30 March, properties integrated in open or closed real estate investment funds with public subscription became subject to Municipal Real Estate Tax and Municipal Tax on Onerous Property Transfers at general rates (pages 18 and 19), that is, implicitly admitting the repeal of Decree-Law 1/87, it appears that this is not the interpretation that, from the perspective of legal certainty, should be followed.
This question has already been examined by arbitral case-law, in CAAD proceedings no. 544/2016-T, of 28 April 2017, whose reasoning was endorsed in proceedings nos. 677/2016-T, of 26 June 2017; 440/2017-T, of 15 January 2018, and 547/2017-T, of 15 March 2018.
The thesis advocated by the Claimant is defended there, which is followed here in accordance with the legal arguments contained in the arbitral decision in proceedings no. 544/2016-T, which is transcribed below, given its full applicability to the situation sub iudice:
"It was by Decree-Law no. 246/85, of 12 July that the activity of investment funds was regulated. In turn, in the preamble to Decree-Law no. 1/87, of 3 January, the 'important contribution that this new type of financial institutions could bring to the formation of savings and to their mobilization for investments in the real estate sector' is expressly recognized. Added to this are 'the positive effects that would thereby be induced in the construction industries and in the rental market for real estate for housing and offices.' Thus, and from the legislator's perspective, it became 'necessary, in order to establish conditions for the creation of investment funds with these characteristics, to define an appropriate tax framework.'
With this objective in mind, article 1 of Decree-Law no. 1/87, of 3 January, determined that:
'acquisitions of real estate effected for a real estate investment fund by its respective managing company are exempt from Sisa.'
According to the literal wording of this provision, acquisitions of real estate carried out with the intention of becoming part of a real estate investment fund would be exempt from Sisa.
Later, Decree-Law no. 287/2003, of 12 November, carried out a reform of the taxation of patrimony, approving the CIMI and the CIMT, published, respectively, in its annexes I and II.
Thereafter, with regard to references, article 28 of Decree-Law no. 287/2003, of 12 November, determined that:
1 - All legal texts that mention Code of Local Authority Contribution or local authority contribution shall be considered to refer to the Municipal Real Estate Tax Code (CIMI) or the municipal real estate tax (IMI).
2 - All legal texts that mention Code of Municipal Sisa Tax and Tax on Successions and Gifts, municipal sisa tax or tax on successions and gifts shall be considered to refer to the Code of Municipal Tax on Onerous Property Transfers (CIMT), the Stamp Duty Code, the municipal tax on onerous property transfers (IMT) and stamp duty, respectively. (emphasis ours)
Furthermore, Decree-Law no. 287/2003, of 12 November, also included a repeal clause, in its article 31, whose no. 6 provided:
'The tax benefits relating to the local authority contribution, now reported to IMI, are maintained in force, as well as those relating to municipal sisa tax established in legislation separate from the Code approved by Decree-Law no. 41969, of 24 November 1958, and in the Tax Benefits Statute, which shall now be reported to IMT.' (emphasis ours)
Thus, in accordance with the literal wording of articles 28 and 31, no. 6 of Decree-Law no. 287/2003, of 12 November, the exemptions from Sisa tax should be considered to apply to IMT, and therefore acquisitions of real estate carried out by a managing company of a real estate investment fund with the intention of them becoming part of that fund would remain exempt from IMT (that exemption from sisa provided for in article 1 of Decree-Law no. 1/87, of 3 January). The exemption would exist whenever the fund was in the position of acquirer of the real estate.
It should be noted that this exemption had a clear purpose and one fully assumed by the tax legislator. At stake was the objective, of a social and economic nature, of defining a tax framework capable of encouraging the creation of investment funds with the capacity to mobilize savings for the realization of investments in the real estate sector, thereby stimulating the construction industries and the rental market for real estate for housing and offices.
Article 82 of Law no. /2006 of 29 December (State Budget Law – "LOE" – for 2007) amended article 46 of the Tax Benefits Statute (EBF), coming to provide, together with the exemption from Local Authority Contribution (IMI) for properties integrated in real estate funds, an exemption from IMT for those same properties. Thus, properties integrated in mixed or closed funds, provided certain conditions were met, would benefit from a reduction of the tax rate to half (article 46, no. 2 of the EBF). However, the aforementioned article 82 of the LOE for 2007 made no reference to the exemption from Sisa (IMT) contained in article 1 of Decree-Law no. 1/87, of 3 January.
Consequently, the question that arises, following what was stated above, relates to the problem of whether the IMT exemption introduced in article 46 of the EBF by the LOE for 2007 came to repeal – and if so, expressly or tacitly – the exemption from Sisa (IMT) contained in article 1 of Decree-Law no. 1/87, of 3 January – which, until then, no one doubted remained in force. This question is pertinent insofar as, pursuant to article 7, no. 1 of the Civil Code, the general rule concerning the cessation of the validity of law is that 'when not intended to have temporary validity, law ceases to be in force only if repealed by another law.'
Now, Decree-Law no. 1/87, of 3 January, contains no indication that its article 1 was intended to have temporary validity, and therefore, admitting that it was not repealed by another law, the exemption contained therein will – even today – remain in force. And the answer to this question will answer the one now at issue in these proceedings: whether or not the act of levy of the Tax Administration suffers from a defect of violation of law, by disregarding a rule of exemption from a tax.
Now, retrieving what was stated above, in order to determine whether or not there was repeal of the rule contained in article 1 of Decree-Law no. 1/87, of 3 January, which provides for an exemption from Sisa (IMT), it is necessary to have regard to the provisions of article 7, no. 2 of the Civil Code, which deals with the concept of repeal of law. It is provided there that
'repeal may result from an express declaration, from incompatibility between the new provisions and the preceding rules, or from the circumstance that the new law regulates all the matters of the preceding law.'
The existence of recognition rules, aimed at the clear and precise identification of the provisions that are in force in the legal order and of those that have already been expressly or tacitly repealed, is of the greatest significance, first and foremost from the perspective of the principle of legality, particularly in its dimension of tax legality, affirming the requirement of legal certainty and protection of confidence inherent in the principle constitutionally structuring the rule of law. Citizens, economic agents and legal operators must be able to know with certainty which provisions are and which are not in force in the legal order. Article 7 of the Civil Code thus establishes three alternative criteria for repeal, whose fulfillment or not has significant implications in the concrete case.
It is therefore necessary to assess whether any of the three alternatives occurred which, according to article 7, no. 2 of the Civil Code, led to the repeal of article 1 of Decree-Law no. 1/87, of 3 January, namely:
a) express declaration of repeal;
b) incompatibility between the new provisions and the preceding rules; or
c) the circumstance that the new law regulates all the matters of the preceding law.
With regard to the first aspect, one will search in vain in article 46 of the EBF, in the wording given to it by article 82 of the LOE for 2007, for any express provision repealing article 1 of Decree-Law no. 1/87, of 3 January. Thus it is concluded that there was no express declaration of repeal, and therefore any repeal could only occur through the fulfillment of any of the remaining conditions.
As for incompatibility between the new provisions and the preceding rules, which constitutes the second alternative of article 7, no. 2 of the Civil Code, this also cannot be said. Quite the contrary, a joint reading of the new provision of article 46 of the EBF and the preceding rule of article 1 of Decree-Law no. 1/87, of 3 January, allows one reasonably to conclude that, as from the entry into force of the new wording of article 46 of the EBF, not only would acquisitions of real estate carried out by managing companies of real estate investment funds with the intention of them becoming part of those funds – as hitherto established in the preceding rule – be exempt from IMT, but also properties integrated in real estate funds – as established in that article 46 of the EBF. In other words, the IMT exemption would henceforth apply both to real estate acquired to become part of real estate funds, as had hitherto been established, and to those same real properties insofar as and while integrated in real estate funds, in accordance with article 46 of the EBF.
In the first case, the exemption would be applicable whenever the fund was in the position of acquirer of the real estate. In the second case, the exemption would be applicable whenever the fund was in the position of transferor of the real estate. Thus, it must be concluded that there is no incompatibility between the new provisions and the preceding rules.
Let us open a parenthesis here regarding the distinction between real properties to be integrated in the fund and real properties integrated in the fund, which is believed to be of great relevance in the case sub judice. Pursuant to article 22, no. 1 of the CIMT, the levy of IMT precedes the act or fact transferring the goods, and must be effected at the moment of execution of the promise of purchase and sale contract with delivery of the real estate. At that moment, the goods acquired by the taxable person were not yet integrated in the real estate investment fund. Indeed, the managing company of the real estate investment fund intended to acquire the real estate in question precisely in order to integrate it into the respective fund. Therefore, it could claim the exemption provided for in article 1 of Decree-Law no. 1/87, of 3 January, and not that of article 49 of the EBF, to the extent that the latter applies only to real properties integrated in the real estate fund, a reality that would only be fully established after the execution of the promise of purchase and sale contract with delivery of the thing.
Notwithstanding the structural differences that distinguish both exemptions, the truth is that in both cases managing companies of investment funds are placed in an economically advantageous position: either because they do not have to pay IMT when they acquire real properties to integrate them into the respective real estate investment fund, or because they can place them on the market more easily by virtue of the prospective acquirer being exempt from IMT. The new provisions and the preceding rules are not only entirely compatible but create a tax regime that is especially attractive for managing companies of real estate funds.
The exemption from IMI in favor of real properties integrated in real estate funds is well understood, to the extent that it frees them from payment of this annual tax on real estate patrimony, provided for in article 46 of the EBF before the wording given to it by the LOE for 2007. However, the utility of the IMT exemption, added by this act, in the case of transactions of real estate integrated in real estate funds, is also far from negligible.
Indeed, although, pursuant to article 4 of the CIMT, IMT should be borne by the acquirer of the real estate – who in most cases will be someone entirely unrelated to the real estate investment activity – the truth is that this exemption places real estate investment funds in an economically favorable and competitive position within the real estate market, in that it allows them to dispose of their real properties more easily, at a price more attractive from the consumer's point of view, because it is exempt from IMT or benefits from a reduction in tax rate.
For this reason, the exemption provided for in the current article 49 of the EBF, even in its attenuated version of reducing IMT rates to half, constitutes a non-negligible and non-redundant supplement to the exemption established by article 1 of Decree-Law no. 1/87, of 3 January. It is an exemption that is structurally and teleologically distinct from the latter, whose introduction and maintenance in the legal order rests on a distinct assessment of tax policy.
And the proof of this is that there once existed a government bill submitted to the National Assembly, Bill 478/2006, of 13 October 2006, for approval of the State Budget, which provided for the insertion of article 81, no. 3, paragraph e) in which Decree-Law no. 1/87, of 3 January, was expressly repealed. A bill that was not approved.
Furthermore, the possibility of legal-normative coexistence of IMT exemptions at the moments of acquisition and transfer of a real estate property is far from constituting an anomalous or systemically dysfunctional solution. Such coexistence can be found today in the EBF itself, regarding urban properties intended for rehabilitation, provided certain prerequisites are met. Indeed, article 45, no. 2 provides that 'Acquisitions of urban properties intended for urban rehabilitation are exempt from municipal tax on onerous property transfers, provided that within three years from the date of acquisition the acquirer commences the respective works.'
In parallel, article 71, no. 8 of the EBF provides that 'Acquisitions of urban property or of an autonomous unit of urban property intended exclusively for own permanent residence are exempt from IMT, on the first onerous transfer of the rehabilitated property, when located in the 'urban rehabilitation area'. Here too, an exemption from IMT at the moment of acquisition of the property to be rehabilitated coexists with the exemption at the moment of transfer of the rehabilitated property, within a framework of legal complementarity full of economic and social rationality.
A structurally identical solution can also be found in article 8, no. 7 of the Special Regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH), approved by article 102 of Law no. 64-A/2008, of 31 December – Chapter X, which provides that the following are exempt from IMT: 'a) Acquisitions of urban properties or of autonomous units of urban properties intended exclusively for rental for permanent residence by the investment funds referred to in no. 1; b) Acquisitions of urban properties or of autonomous units of urban properties intended for own permanent residence, as a result of the exercise of the purchase option referred to in no. 3 of article 5 by the tenants of the properties that form part of the patrimony of the investment funds referred to in no. 1.'
Finally, also having regard to the last of the criteria of article 7, no. 2 of the Civil Code, it will be said that the mere introduction of the exemption of article 46 of the EBF can hardly be interpreted as a measure of repeal and substitution of the exemption created by article 1 of Decree-Law no. 1/87, of 3 January. On the one hand, it results from the preceding considerations that article 46 of the EBF did not come to regulate all the matters contained in article 1 of Decree-Law no. 1/87. In fact, a new exemption is introduced in addition to the already existing one, which remains untouched. On the other hand, the EBF does not have a monopoly on tax benefits, which may be provided for and subsist in separate legislation. Think, for example, of the tax benefits contained in the Investment Tax Code.
The last of the criteria which, pursuant to article 7, no. 2 of the Civil Code, alternatively signal the presence of a repeal is not therefore met. Indeed, beyond the distinct literal content, the two exemptions under discussion are structurally different, economically and fiscally compatible, and, in truth, complementary. And even if it is understood that the EBF constitutes general law on the matter of tax benefits, article 7, no. 3 of the Civil Code provides that 'general law does not repeal special law, except if that is the unequivocal intention of the legislator'. Given that no factual or legal data permit the discernment of an unequivocal intention of the legislator to repeal the exemption of article 1 of Decree-Law no. 1/87, of 3 January.
In this regard, one may also have regard to the successive amendments to which the provision contained in article 46 of the EBF has been subject. Indeed, the wording of article 46 of the EBF underwent various vicissitudes and amendments over time, in particular:
• the provision, in article 88 of Law no. 53-A/2006, of 31 December (LOE for 2007), of a transitional regime for mixed or closed funds in certain circumstances;
• the renumbering of article 46 of the EBF, which became 49, effected by article 109 of Law no. 2-B/2010, of 28 April (LOE for 2010), which reserves the IMT exemption for open real estate investment funds;
• the extension of the IMT exemption to closed funds with public subscription effected by article 119 of Law no. 55-A/2010, of 31 December (LOE for 2011);
• the substitution of the IMT exemption for real estate integrated in open or closed real estate investment funds with public subscription by a reduction to half the IMT rates, operated by article 206 of Law no. 83-C/2013, of 31 December (LOE for 2014), accompanied by a transitional regime in article 209.
All the vicissitudes and amendments mentioned had as their subject matter the IMT exemption concerning real estate integrated in real estate funds, as established in the EBF.
There is no proof text (dicta probandi) that permits the conclusion that they related to the exemption – created by article 1 of Decree-Law no. 1/87, of 3 January, and factually sustained by subsequent legislation – for acquisitions of real estate carried out by managing companies of real estate investment funds so that they become part of those funds.
The exemptions under analysis are substantially and structurally different and independent from each other, and cannot, in any way, be considered contrary, contradictory or logically irreconcilable. And even less can they be considered legally and economically incompatible. Each preserves its own utility independent of what may happen to the other.
The introduction and evolution of the regime of article 46 (and later 49) of the EBF, concerning the exemption and reduction of the IMT rate for transactions involving real estate integrated in real estate investment funds, has its own useful effect and in no way affects the useful effect of the exemption created by article 1 of Decree-Law no. 1/87, of 3 January, regarding acquisitions of real estate to be integrated in real estate funds, and therefore there is no reason to conclude that the latter repealed the former, even if tacitly.
It is therefore not surprising that, in 2009, the Study of Tax Policy, Competitiveness, Efficiency and Justice of the Tax System – Subgroup 3 on Taxation of Patrimony, coordinated by Professor Sidónio Pardal, came to conclude that the exemption from Sisa (IMT) created by article 1 of Decree-Law no. 1/87, of 3 January, was in force, appearing the same in the list of Synthesis of Tax Benefits and Structural Reliefs in Force in the matter of IMT and IMI (at pages 81). This conclusion was not contradicted by a recent and careful analysis of the evolution of the regime of real estate investment funds, which, on the contrary, corroborated the understanding that article 1 of Decree-Law no. 1/87, of 3 January, was never actually repealed (despite this possibility having been contemplated in the bill for the State Budget for 2007), and therefore the FII, regardless of their type, maintain the exemption in the matter of IMT on the acquisition of real estate.
For all the foregoing, there is no doubt that the exemption from Sisa provided for in article 1 of Decree-Law no. 1/87, of 3 January, which came to apply to IMT pursuant to articles 28 and 31 of Decree-Law no. 287/2003, of 12 November, which approved the CIMT, remains, even today, in force, and therefore acquisitions of real estate effected for a real estate investment fund by its respective managing company are exempt from IMT, that is, carried out with the intention of them becoming part of the fund itself.'
It should be noted that article 1 of Decree-Law no. 1/87 remained in force until its repeal by article 319 of Law no. 71/2018, of 31 December (LOE 2019), that is, the legislator considered that it had not, by then, been repealed, expressly or tacitly. Consequently, it was in full force when the acquisitions of the real properties occurred that led to the levies challenged, which for that reason are illegal.
To hold otherwise would be to impute to the legislator of 2018 a glaring error, expressly repealing a provision that by then no longer existed in the legal order.
Concluding that there was no expiration or express or tacit repeal of article 1 of Decree-Law no. 1/87, of 3 January, as of the date of the facts, the transfers resulting in the entry into the patrimony of the Claimant of the two aforementioned real properties, in 2014 and 2015, benefit from the exemption of IMT, and therefore the corresponding acts of levy of this tax suffer from a defect of violation of law due to error in the legal prerequisites and must, for that reason, be annulled.
2.2. COMPENSATORY INTEREST
Where what is at issue is the wrong interpretation and application by the Respondent of tax incidence provisions, it has been consistently understood that Tax Arbitral Tribunals have competence to make condemning pronouncements in the same manner as those admitted in judicial challenge proceedings, and therefore including those arising from the recognition of the right to compensatory interest, pursuant to articles 24, no. 1, paragraph b) and no. 5 of the RJAT and 43 and 100 of the LGT.
The right to compensatory interest depends on a set of constituent prerequisites, and it is essential that the Claimant has previously proceeded to pay the tax for which it claims interest to be calculated.
In the situation at hand, the Claimant proved full payment of the levy acts. Moreover, it has been demonstrated that the tax acts suffer from an error of law attributable to the AT, which should not have proceeded to levy IMT, and therefore the request for condemnation of the AT to the payment of compensatory interest is well-founded, to be calculated on the amount of €96,460.00.
However, in the concrete situation, being an Official Review procedure initiated at the request of the taxable person, after the deadline for lodging a Grace Appeal had expired, the provisions of article 43, no. 3, paragraph c) of the LGT apply, according to which compensatory interest is due 'when the review of the tax act at the initiative of the taxpayer is effected more than one year after the request thereof'.
Thus, the counting of the deadline begins one year after the submission of the request, that is, one year after 19 December 2017, and not in accordance with the provisions of article 61, no. 5 of the CPPT, that is, from the date of payment of the undue tax. In this sense, the consistent case-law of the Supreme Administrative Court also pronounces itself, in particular in proceedings nos. 560/05, of 6 July 2005; 890/16, of 18 January 2017, and 159/14, of 10 May 2017.
Thus, the compensatory interest requested by the Claimant is only due from 19 December 2018.
IN SUMMARY,
In light of the foregoing, the tax acts of levy of IMT identified as nos. ..., of 4 July 2014, and ..., of 24 June 2015, in the amounts of €49,010.00 and €47,450.00, respectively, are voidable due to a defect of violation of law, in accordance with the provisions of article 135 of the Code of Administrative Procedure ("CPA"), with correspondence in article 163, no. 1 of the new CPA, applicable by referral from article 29, no. 1, paragraph d) of the RJAT.
Illegal is also the tacit dismissal of the Request for Official Review filed against the aforementioned tax acts.
Compensatory interest at the legal rate is due on the amounts levied, calculated from 19 December 2018, having regard to the provisions of article 43, no. 3, paragraph c) of the LGT.
IV. DECISION
In light of the foregoing, the arbitrators of this Arbitral Tribunal agree on:
(a) Granting the request for annulment of the aforementioned tax acts of levy of IMT and, likewise, of the (tacit) dismissal of the Request for Official Review that had them as its subject matter;
(b) Condemning the AT to the restitution to the Claimant of the IMT paid in the amount of €96,460.00;
(c) Condemning the AT to the payment of compensatory interest due on that amount calculated from 19 December 2018 until the processing of the respective credit note.
The value of €96,460.00 is assigned to the proceedings, in accordance with the provisions of articles 3, no. 2 of the Regulations on Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, no. 1, paragraph a) of the CPPT and 306, nos. 1 and 2 of the CPC, the latter ex vi article 29, no. 1, paragraph e) of the RJAT.
Costs in the amount of €2,754.00, at the charge of the Respondent, in accordance with Table I attached to the RCPAT, and with the provisions of articles 12, no. 2 and 22, no. 4 of the RJAT, 4, no. 5 of the RCPAT and 527, nos. 1 and 2 of the CPC, ex vi article 29, no. 1, paragraph e) of the RJAT.
Lisbon, 13 May 2019
[Text prepared by computer, in accordance with article 131, no. 5 of the CPC, applicable by referral from article 29, no. 1, paragraph e) of the RJAT]
The arbitrators,
Alexandra Coelho Martins
Nuno Pombo
André Festas da Silva
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