Process: 325/2018-T

Date: December 11, 2018

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitral decision addresses the timeliness of challenging an IMT (Municipal Tax on Onerous Transfers of Real Property) assessment of €71,500.00 levied on a closed-end real estate investment fund. The Claimant, a real estate investment fund, acquired urban property in Lisbon through an exchange deed in February 2014 and paid IMT at a 6.50% rate on the declared exchange difference of €1,100,000. Nearly four years later, in February 2018, the fund filed a request for official review claiming exemption under Decree-Law 1/87 of January 3, which grants IMT exemptions to certain real estate investment funds. After receiving no response to the review request, the Claimant filed for tax arbitration in July 2018, invoking tacit rejection. The Tax Authority raised a preliminary objection regarding timeliness, arguing the arbitral action was filed outside the statutory 90-day period. The tribunal's analysis focuses on determining when the presumption of tacit rejection was formed under Article 102(1)(d) of the Tax Procedure Code (CPPT), combined with Article 10(1)(a) of the Legal Framework for Tax Arbitration (RJAT). The decision scrutinizes whether the deadlines for filing the initial review request and subsequent arbitral action were properly observed, examining the interaction between administrative review procedures and arbitration timeframes. This case illustrates critical procedural requirements for challenging IMT assessments through CAAD arbitration and the importance of strict compliance with statutory deadlines in Portuguese tax litigation.

Full Decision

ARBITRAL DECISION

I – REPORT

On 10 July 2018, A... – Real Estate Investment Fund (Closed-end), Tax Number..., with registered office at..., No...,..., ... – ... Lisbon, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking a declaration of illegality of the Municipal Tax on Onerous Transfers of Real Property (IMT) assessment act No..., in the amount of €71,500.00.

To substantiate its request, the Claimant alleges, in summary, the occurrence of a defect of violation of law that justifies the annulment of that tax act, in accordance with Article 163, No. 1 of the Code of Administrative Procedure, subsidiarily applicable under Article 2, paragraph c) of the General Tax Law (LGT), since the acquisition of the real property in question would be exempt from IMT under Article 1 of Decree-Law 1/87, of 3 January.

On 11-07-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

The Claimant did not appoint an arbitrator, wherefore, pursuant to Article 6, No. 2, paragraph a) and Article 11, No. 1, paragraph a) of RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable period.

On 30-08-2018, the parties were notified of these appointments and did not manifest the intention to refuse any of them.

In accordance with Article 11, No. 1, paragraph c) of RJAT, the collective Arbitral Tribunal was constituted on 19-09-2018.

On 18-10-2018, the Respondent, duly notified for this purpose, filed its defense by way of exception and counterclaim.

The requirement for adversarial proceedings regarding the matter of exception contained in the Respondent's answer was fulfilled, and the Claimant exercised the faculty granted to it.

Pursuant to Article 16, paragraphs c) and e), and Article 29, No. 2, both of RJAT, the holding of the meeting referred to in Article 18 of RJAT was dispensed with, as well as the presentation of arguments by the parties, and it was indicated that the final decision would be notified by the end of the period referred to in Article 21/1 of RJAT.

The Arbitral Tribunal has material jurisdiction and is regularly constituted, in accordance with Articles 2, No. 1, paragraph a), 5, and 6, No. 2/a) of RJAT.

The parties have legal personality and capacity, are legitimate parties and are legally represented, in accordance with Articles 4 and 10 of RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings are not affected by nullities.

Thus, there is no impediment to the consideration of the case.

In view of all the foregoing, it is necessary to pronounce:

II. DECISION

A. FACTUAL MATTER

A.1. Facts established as proved

The Claimant is, and was at the date of the events, a real estate investment fund (closed-end), constituted in accordance with the provisions of the Legal Framework for Real Estate Investment Funds.

The Claimant is administered, managed and represented by the company B... – Fund Management Company, S.A.

By deed of exchange executed by public deed on 10 February 2014, the Claimant acquired, by way of exchange and for the global price of €2,100,000 (two million one hundred thousand euros) from the previous owner, C..., Lda, the urban property located at..., No...,...and... and Street..., No... to..., in Lisbon, parish of..., municipality of Lisbon, described in the Property Registration Office of Lisbon under No.... and registered in the respective property matrix under the item....

On 07-02-2014, at the request of the Claimant, the Municipal Tax on Onerous Transfers of Real Property (IMT) assessment act No..., in the amount of €71,500.00, was issued, which resulted from the application of the rate of 6.50% on the value of the difference declared in the exchange, for which it was intended, of €1,100,000.00.

The aforementioned assessment was paid by the Claimant on the same date and accompanied the aforementioned public deed of exchange.

The property was acquired by the Claimant, represented in the deed by B... – Fund Management Company, S.A., to form part of its assets.

On 09-02-2018, the Claimant filed a request for official review with the purpose of reviewing the aforementioned IMT assessment act.

Up to the date of submission of the arbitral petition, the Claimant had not been notified of any decision issued in the aforementioned request for official review.

A.2. Facts established as not proved

With regard to the merits of the decision, there are no facts that should be considered as not proved.

A.3. Basis for the matters of fact established as proved and not proved

With regard to the factual matter, the Tribunal is not required to pronounce on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish the matters proved from those not proved (see Article 123, No. 2, of CPPT and Article 607, No. 3 of CPC, applicable by virtue of Article 29, No. 1, paragraphs a) and e) of RJAT).

Thus, the facts relevant to the judgment of the case are chosen and determined according to their legal relevance, which is established in view of the various plausible solutions to the legal question(s) (see former Article 511, No. 1, of CPC, corresponding to the current Article 596, applicable by virtue of Article 29, No. 1, paragraph e) of RJAT).

Therefore, in view of the positions taken by the parties, in light of Article 110/7 of CPPT, the documentary evidence and the administrative proceedings attached to the case, the facts listed above were considered proved, with relevance for the decision.

B. ON THE LAW

The Respondent begins by raising before this arbitral tribunal, prior to all else, the question of the timeliness of the present dispute.

Article 10/1 of RJAT provides:

"The request for constitution of an arbitral tribunal shall be presented:

a) Within a period of 90 days, counted from the facts provided for in Nos. 1 and 2 of Article 102 of the Code of Tax Procedure and Process, as regards acts capable of autonomous challenge and, likewise, from the notification of the decision or the end of the legal period for decision of the hierarchical appeal;"

Article 102 of CPPT provides:

"1 - The challenge shall be presented within a period of three months counted from the following facts:

a) End of the period for voluntary payment of tax obligations legally notified to the taxpayer;

b) Notification of other tax acts, even if they do not give rise to any assessment;

c) Summons of secondary liable persons in tax enforcement proceedings;

d) Formation of the presumption of tacit rejection;

e) Notification of other acts capable of being challenged autonomously under the terms of this Code;

f) Knowledge of acts damaging legally protected interests not covered in the foregoing paragraphs."

In the present case, the timeliness of this arbitral action is based on, invoked by the Claimant, the tacit rejection of the request for official review which had as its object the Municipal Tax on Onerous Transfers of Real Property (IMT) assessment act No..., in the amount of €71,500.00, filed by it on 09-02-2018.

Thus, under the combined terms of Article 16, paragraph a) of RJAT and Article 102, No. 1, paragraph d) of CPPT, the present action will be timely if presented within a period of 90 days, counted from the "Formation of the presumption of tacit rejection" of that request for official review.

Therefore, to assess the timeliness of the present dispute, it is necessary to determine whether, and eventually when, the formation of the presumption of tacit rejection of the request for official review, filed by the Claimant, occurred.

Let us see then.

As explains the Honorable Counselor Jorge Lopes de Sousa, "Tacit rejection is a legal fiction intended to enable the interested party access to the courts, to obtain protection for their rights or legitimate interests, in cases of inertia of the tax authority regarding requests that were presented to it."

There is no doubt, therefore, that the presumption of tacit rejection is a consequence of the "inertia of the tax authority regarding requests that were presented to it," inertia assessed by the failure to make a decision on such requests within the period that is legally granted to it for that purpose.

That is, in summary, the presumption of tacit rejection derives from the violation of the legal duty to decide that falls upon the AT.

As written by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, "The creation of a legal duty to decide has the purpose of enabling the formation of a tacit act of rejection, which depends on the existence of such duty, and the provision for the formation of such an act has as its only possible justification the possibility of challenging it contentiously."

The same understanding is held by António Lima Guerreiro, noting that "When there is no duty to decide, the presumption of tacit rejection cannot be formed for purposes of contentious challenge or appeal, since no legal effects can be drawn from the silence of the Administration on the matter discussed. Thus, the question arises of defining, once the means of contentious challenge or appeal based on the presumption of tacit rejection has been ruled out, what effects result from the breach of the duty to respond, when this is not associated with a duty of procedural decision. The breach of the duty to respond provided for in number 1 can only give rise to disciplinary responsibility of officials and, possibly, non-contractual civil liability of the Tax Authority, if the respective legal requirements are proved (...)."

It is therefore considered that "A tacit act of rejection is only formed when the entity to which the request was directed has competence to know of it and all the subjective and objective procedural requirements are met."

Among these requirements, evidently, is the verification, in concreto, of the legal duty to decide, whereby "The formation of tacit rejection presupposes that the administrative body to which the request was directed has the legal duty to decide." and "The absence of the legal duty to decide means that the administrated party does not have the faculty to presume the request rejected after the lapse of the period for pronouncement."

In light of what has been set forth, it can be concluded that to determine whether, in the present case, the formation of the presumption of tacit rejection of the request for official review presented by the Claimant occurred, it becomes necessary to investigate whether, in concreto, the AT had, or did not have, the duty to decide it.

In the present case, it appears that the Claimant filed on 09-02-2018 a request for official review which had as its object the Municipal Tax on Onerous Transfers of Real Property (IMT) assessment act No..., in the amount of €71,500.00, and on 10-07-2018 the present arbitral action was filed, based on the tacit rejection of the aforementioned request for official review.

Now, Article 78/1 of the applicable LGT provides: "The review of tax acts by the entity that performed them may be carried out at the initiative of the taxpayer, within the period of administrative complaint and on the grounds of any illegality, or, at the initiative of the tax authority, within four years after the assessment or at any time if the tax has not yet been paid, on the grounds of error attributable to the services."

Given that the tax in question was paid by the Claimant on 07-02-2014, as the established factual matter confirms, the four-year period provided for in the article transcribed above should have expired on 08-02-2018, that is, more than 4 years after the assessment, which also took place on 07-02-2014.

Therefore, on 09-02-2018, when the Claimant filed the request for official review, it was no longer legally possible for the AT to proceed with the requested official review of the assessment act in question.

To this end, in the exercise of the right to reply that was granted to it, the Claimant argued that the four-year period referred to in Article 78/1 of the LGT should be counted from the occurrence of the tax event (which, in the present case, occurred on 10-02-2014), and not from the assessment, as referred to in the text of the aforementioned rule.

In substance, being a matter of a tax of single obligation, the Claimant intends that the period provided for in Article 78/1 of the LGT be counted in the same manner as the period provided for in Article 45 of the LGT, that is, "from the date on which the tax event occurred."

Now, on this matter, the Supreme Administrative Court (STA) has already pronounced itself in its Decision of 09-11-2016, issued in case 01524/15, to the effect that "It is now established case law that the possibility of review of the tax act at the initiative of the AT, within four years from the assessment (or at any time, if the tax has not yet been paid), provided for in No. 1, 2nd part of Article 78 of the LGT, can be carried out at the request of the taxpayer, as results from No. 7 of the same article and from Article 86, No. 4, paragraph a) of CPPT."

As written in the aforementioned judgment, "the Respondent is in error in considering that the period for review of an assessment must be counted in the same manner as the period for exercise of the right to assess," concluding that succinctly "the period for the taxpayer to request review (which is the same as the period in which the AT can proceed with review) is counted from the assessment."

Such conclusion is, moreover, justified in light of the earlier jurisprudence of the STA itself, which already in its Decision of 13-03-2013, issued in case 01183/12, had explained that:

"There is, therefore, a recognition within the scope of tax law of the duty to revoke illegal acts.

This duty, however, is subject to limitations, justified by the need for legal certainty, particularly when the taxes assessed have been collected, which justifies that temporal limitations be established."

This last paragraph is relevant to understanding the distinction between the period when the tax is paid and when it is not. That is, when the tax is paid, there is a temporal limitation of four years for the request for review in order to avoid disruption to the State coffers in the restitution of taxes unduly paid. When, however, there is no tax paid, no insecurity or disruption exists for the State coffers, since the request for review will only lead, at most, to annulment of the assessment act.

The Supreme Court concluded there that "as a matter of legal certainty and avoidance of disruption to the state coffers in the restitution of tax, the restriction of the request for review to the four years referred to in the aforementioned Article 78 of the LGT is imposed."

Under the terms and on the grounds of the jurisprudence set forth, there is no doubt, therefore, that the four-year period provided for in Article 78 of the LGT, regarding taxes paid, is counted from the date of the assessment, as expressly stated in the legal text, whereby the request for official review filed by the Claimant on 09-02-2018 must be considered out of time.

Having arrived here, it must be concluded that, in the present case, the AT did not have the legal duty to decide the request for official review in question in the present arbitral proceedings.

Indeed, as was written already in the decision of the STA of 27-04-1995, with regard to the hierarchical appeal, but in terms directly transposable to the present case, "the filing of a hierarchical appeal necessary beyond its legal period (...) does not entail, for the superior, the legal duty to decide that appeal, which immediately renders impossible the formation of any tacit rejection."

Thus, given that tacit rejection of the hierarchical appeal, in question in the present arbitral proceedings, was not formed, due to the absence of the legal duty to decide it, the Claimant cannot avail itself of the provision of already-cited Article 102/1/d) of CPPT, applicable by reference to Article 10/1/a) of RJAT, in the segment that provides as dies a quo of the period for filing the arbitral action the "Formation of the presumption of tacit rejection."

Therefore, the aforementioned dies a quo of the period provided for in Article 10/1/a) of RJAT can only, given the facts established as proved, refer to the "End of the period for voluntary payment of tax obligations legally notified to the taxpayer," in accordance with Article 102/1/a) of CPPT.

Having that reference in mind, it must necessarily be concluded that the presentation of the request for arbitral pronouncement took place already beyond the period of 90 days, provided for in Article 10/1/a) of RJAT, and therefore the Claimant's right of action has lapsed, and the submission of the arbitral petition is out of time, which determines the absolution of the Respondent from the claim.

Indeed, as was written in the Decision of the STA of 27-05-2009, issued in case 076/09, "Verified that the petition is out of time, in a non-initial phase of the proceedings, it is incumbent upon the judge to absolve the defendant from the claim (equivalent to the dismissal of the action)."

In view of what has been decided, which prevents the consideration of the merits of the case, the consideration of the remaining questions raised by the parties is precluded.

C. DECISION

For these reasons, this Arbitral Tribunal declares the present dispute out of time (as regards the assessment act which is its object), due to lapse of the right of action, absolving the Respondent from the claim, and consequently condemning the Claimant in the costs of the arbitral proceedings, fixed below, as it is the cause thereof.

D. Value of the Proceedings

The value of the proceedings is fixed at €71,500.00, in accordance with Article 97-A, No. 1, a) of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of No. 1 of Article 29 of RJAT and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at €2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, since the claim was entirely unsuccessful, in accordance with Articles 12, No. 2, and 22, No. 4, both of RJAT, and Article 4, No. 4, of the aforementioned Regulation.

Notify.

Lisbon, 11 December 2018

The Arbitrator President

(José Pedro Carvalho)

The Arbitrator Member

(Alberto Amorim Pereira)

The Arbitrator Member

(Maria Alexandra Mesquita)

Frequently Asked Questions

Automatically Created

What is the timeliness requirement for filing an arbitral action against an IMT tax assessment at CAAD?
The timeliness requirement for filing an arbitral action against an IMT assessment at CAAD is 90 days, counted from specific triggering events outlined in Article 10(1) of RJAT combined with Article 102 of CPPT. These include the end of the voluntary payment period, notification of tax acts, or formation of tacit rejection of administrative reviews. When a taxpayer files a request for official review and receives no response, the arbitral action must be filed within 90 days from when the presumption of tacit rejection is formed, making precise calculation of deadlines essential for preserving appeal rights.
Are closed-end real estate investment funds exempt from IMT under Decree-Law 1/87 of January 3?
Closed-end real estate investment funds may be exempt from IMT under Decree-Law 1/87 of January 3, which establishes specific exemptions for real estate investment funds constituted under the applicable legal framework. The Claimant in this case argued that as a closed-end real estate investment fund properly constituted under the Legal Framework for Real Estate Investment Funds and managed by a licensed fund management company, its property acquisitions qualified for exemption. However, the application of this exemption depends on meeting all statutory requirements and proper invocation during the acquisition process.
What is the legal basis for challenging an IMT liquidation through tax arbitration in Portugal?
The legal basis for challenging an IMT liquidation through tax arbitration in Portugal is established in Decree-Law 10/2011 of January 20 (RJAT - Legal Framework for Tax Arbitration), as amended. Article 2(1)(a) grants CAAD jurisdiction over disputes concerning legality of tax acts, including IMT assessments. Article 10 establishes filing procedures and deadlines. Taxpayers may challenge IMT assessments by alleging violations of law under Article 163(1) of the Administrative Procedure Code, subsidiarily applicable through Article 2(c) of the General Tax Law (LGT), seeking annulment of illegal tax acts and claiming applicable exemptions.
How does the CAAD arbitral tribunal assess procedural admissibility in IMT disputes?
The CAAD arbitral tribunal assesses procedural admissibility in IMT disputes by examining several threshold requirements before reaching the merits. These include verifying: (1) material jurisdiction under Article 2(1)(a) of RJAT; (2) proper constitution of the tribunal under Articles 5 and 6; (3) legal personality, capacity, and legitimacy of parties under Articles 4 and 10 of RJAT; (4) timeliness of filing under Article 10(1) combined with Article 102 of CPPT; (5) absence of procedural nullities; and (6) proper legal representation. Only after confirming all procedural requirements does the tribunal proceed to substantive analysis of the tax dispute.
What are the grounds for annulment of an IMT assessment under Article 163(1) of the Portuguese Administrative Procedure Code?
The grounds for annulment of an IMT assessment under Article 163(1) of the Portuguese Administrative Procedure Code, subsidiarily applicable to tax matters through Article 2(c) of the General Tax Law, include violation of law (vício de violação de lei). This defect occurs when the tax authority incorrectly applies substantive tax law, such as failing to recognize applicable exemptions, miscalculating tax bases, applying incorrect rates, or disregarding statutory requirements. In IMT cases, taxpayers commonly invoke violation of law when claiming entitlement to exemptions under Decree-Law 1/87 or other legislation, arguing the assessment unlawfully ignored their exempt status and demanding annulment and refund of amounts paid.