Summary
Full Decision
ARBITRAL DECISION
Agreed in Arbitral Court
I – Report
1. A... – Real Estate Investment Fund Management Company, S.A., with tax identification number ..., with registered office at ..., n.º..., ..., ...-... Lisbon, manager of the Closed Real Estate Investment Fund B... and the Closed Real Estate Investment Fund C..., submitted a request for constitution of an arbitral tribunal, pursuant to the provisions of articles 2.º, n.º 1, letter a), and 10.º et seq. of Decree-Law n.º 10/2011, of 20 January, to examine the legality of tax acts levying Municipal Tax on Onerous Property Transfers (IMT), in the total amount of € 214,106.88, relating to the acquisition of various properties, and likewise the tacit acts of dismissal of requests for official review submitted before the Tax Authority, requesting the annulment of these acts and the consequent reimbursement of the tax wrongly paid and condemnation to payment of indemnity interest.
The request is grounded in the following terms:
The Funds are configured as real estate investment funds which are managed by the Applicant and whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law n.º 16/2015, of 24 February.
In the exercise of its activity, the Applicant acquires properties, on behalf of real estate investment funds, which are integrated into the assets of the real estate investment funds under its management.
On 24 July 2016, the Applicant, on behalf of Fund C..., acquired, by public deed of purchase and sale, the properties detailed in document n.º 3 attached to the request, which were taxed in IMT at the individual values of € 109,935.13 and € 56,721.75. And on 3 March 2017, on behalf of Fund B..., executed a promise contract with delivery regarding the property identified in document n.º 6 attached to the request, which was taxed in IMT at the value of € 47,450.00.
However, the aforesaid acquisitions are covered by the exemption provided for in article 1.º of Decree-Law n.º 1/87, of 3 January, which declares "exempt from sales tax acquisitions of immovable property effected for a real estate investment fund by its respective management company", this provision being reserved and maintained in force by Decree-Law n.º 287/2003, of 12 November, which reformed property taxation and approved the creation of IMT and IMI, and, especially, by the provisions in n.º 2 of article 28.º and n.º 6 of article 31.º of that statute.
The Tax Authority, in its reply, contends that article 46.º of the Tax Benefits Statute, in the wording resulting from Law n.º 53-A/2006, of 29 December, came to regulate tax benefits for IMT in acquisitions of properties by investment funds, tacitly repealing article 1.º of Decree-Law n.º 1/87, and that the benefits provided for in that article 46.º, subsequently renumbered as article 49.º, were terminated by means of the repeal operated by Law n.º 7-A/2016.
As regards indemnity interest, the Tax Authority considers that, if due at all, it may only be calculated from one year after the request for official review, pursuant to letter c) of n.º 3 of article 43.º of the General Tax Law, since the Applicant did not challenge the assessment through amicable settlement claim, thereby excluding the possibility of application of n.º 1 of that provision.
It concluded for the dismissal of the request.
2. No production of testimonial evidence was requested and, in the course of the proceeding, the meeting referred to in article 18.º of the RJAT was dispensed with, the proceeding continuing to written submissions.
In written submissions, the Applicant reproduced the allegations in the initial petition maintaining its previous position. The Tax Authority did not file counter-submissions.
3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority in accordance with the applicable regulations.
Pursuant to the provisions of letter a) of n.º 2 of article 6.º and letter b) of n.º 1 of article 11.º of the RJAT, in the wording introduced by article 228.º of Law n.º 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the mandate within the applicable period.
The parties were timely and duly notified of such appointment and did not express any wish to challenge it, in accordance with the combined provisions of article 11.º, n.º 1, letters a) and b), of the RJAT and articles 6.º and 7.º of the Deontological Code.
Thus, in accordance with the provisions of letter c) of n.º 1 of article 11.º of the RJAT, in the wording introduced by article 228.º of Law n.º 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 19 September 2018.
The arbitral tribunal was duly constituted and is materially competent, in light of the provisions of articles 2.º, n.º 1, letter a), and 30.º, n.º 1, of Decree-Law n.º 10/2011, of 20 January.
The parties have legal personality and capacity, are legitimized and are represented (articles 4.º and 10.º, n.º 2, of the same statute and 1.º of Ordinance n.º 112-A/2011, of 22 March).
The proceeding is not affected by nullities and no exceptions were raised.
This tribunal may proceed to examine and decide.
II – Reasoning
Factual Matters
4. The factual matters relevant to the decision of the case are as follows:
a) The Closed Real Estate Investment Fund B... and the Closed Real Estate Investment Fund C..., managed by the Applicant, are real estate investment funds whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law n.º 16/2015, of 24 February.
b) In the exercise of its activity, the Applicant acquires properties, on behalf of real estate investment funds, which are integrated into the assets of the funds under its management.
c) On 27 October 2017, the Applicant, on behalf of Fund C..., acquired, by public deed of purchase and sale, the properties registered in the property register of the Parish Union of ..., ..., ..., ..., ... and ..., of the municipality of Porto, under the nos. U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-..., U-...-...;
d) In relation to these acquisitions, the Tax Authority issued acts assessing IMT n.º..., in the amount of € 109,935.13, and n.º..., in the amount of € 56,721.75;
e) On 3 March 2017, the Applicant, on behalf of Fund B..., executed a promise contract with delivery regarding the property registered under the matrix article ... of the Parish Union of ... and ...;
f) In relation to this taxable event, the Tax Authority issued the act assessing IMT n.º..., in the amount of € 47,450.00;
g) The Applicant proceeded to payment of the tax due;
h) On 11 December 2017, the Applicant filed with the Tax Authority a request for official review concerning the assessment referred to in the preceding letter d) and another request for official review concerning the assessment referred to in the preceding letter f), on which the Administration did not pronounce itself within the legally prescribed period.
The Tribunal formed its conviction regarding the proven facts based on the documents attached to the petition and those contained in the administrative file presented by the Tax Authority with its reply.
Legal Question
5. The Applicant contends that the acquisition of immovable property effected for the Real Estate Investment Funds under its management falls within the scope of the IMT exemption, originally provided for in article 1.º of Decree-Law n.º 1/87, of 3 January, as an exemption from sales tax, and that was reserved by article 28.º, n.º 2, of Decree-Law n.º 287/2003, of 12 November, and maintained in force by article 31.º, n.º 6, of that statute.
The Tax Authority contends, however, that the said provision of article 31.º, n.º 6, of Decree-Law n.º 287/2003, which maintained in force the tax benefits relating to the municipal sales tax, now applying them to IMT, does not imply that this exemption remains in effect today, particularly considering that real estate funds have in the meantime been subject to their own regime of tax benefits in relation to IMT.
The question that arises is therefore whether the subsequent legislative evolution brought about the cessation of the provision of article 1.º of Decree-Law n.º 1/87.
On this matter the arbitral decision handed down in Process n.º 622/2018-T has already pronounced – in line with that also decided in Process n.º 544/2016-T – and which, for lack of any other considerations, is now reproduced:
"Decree-Law n.º 1/87 provides, in its article 1.º, that 'acquisitions of immovable property effected for a real estate investment fund by its respective management company are exempt from sales tax'. The provision emerges following the regulation of real estate investment funds, effected by Decree-Law n.º 246/85, of 12 July, and, as is evident from its preamble, aimed to define a fiscal framework appropriate for the creation of these funds to which the Government recognizes an important contribution to the formation of savings and mobilization of investments in the real estate sector, with positive effects on construction and the real estate rental market.
Meanwhile, Decree-Law n.º 287/2003, of 12 November, which reformed property taxation, approving in annex the Code of Municipal Tax on Property (CIMI), and the Code of Municipal Tax on Onerous Property Transfers (CIMT), determined, in its article 28.º, n.º 2, that references in legal texts to the municipal sales tax shall be considered as references to the Code of Municipal Tax on Onerous Property Transfers.
Furthermore, the same statute, in article 31.º – which included various repeal clauses – provided, in its n.º 6, for the maintenance in force of tax benefits relating to the municipal sales tax established in extraneous legislation.
Thus, in accordance with the combined interpretation of the cited provisions of articles 28.º and 31.º, n.º 6, of Decree-Law n.º 287/2003, exemptions from sales tax contained in any separate statutes should be considered as applying to IMT, and, on the other hand, acquisitions of immovable property effected for a real estate investment fund would continue to be exempt from IMT by virtue of the provision in article 1.º of Decree-Law n.º 1/87.
Following the creation of the sales tax exemption in relation to the acquisition of property for real estate investment funds in 1987, Decree-Law n.º 215/89, of 1 July, came to approve the Tax Benefits Statute, with the clear purpose of systematizing the general principles to which the attribution of benefits situations should be subject. The TBS emerged following the reform of income tax on individuals (CIRS), income tax on legal entities (CIRC) and municipal contribution (CA), which had already introduced some structural mechanisms for tax relief, whereby the Statute aimed to characterize some other situations of less structural character but which possessed relative stability, leaving to future State Budget Laws benefits with markedly cyclical purposes or requiring more frequent regulation (cf. its respective preamble note).
In the original wording of the TBS, and in relation to management and real estate investment companies, only a specific tax regime for IRC taxation was contemplated and, under IRS, as to profits distributed by those companies to their respective partners (article 26.º). This regime was maintained with various amendments and came to transition to article 22.º with Law n.º 109-B/2001, of 27 December, under the heading 'Investment Funds', which was also subject to various legislative modifications.
It is the new wording given to article 46.º of the TBS by the State Budget Law for 2003 (Law n.º 32-B/2002, of 30 December) that provides, for the first time, a tax exemption regime in favor of real estate investment funds in relation to municipal contribution, in the following terms:
Properties integrated in real estate investment funds and equivalent funds, pension funds and retirement savings funds, which are established and operated in accordance with national legislation are exempt from municipal contribution.
Following the reform of property taxation, approved by the aforesaid Decree-Law n.º 287/2003 – which repealed the Municipal Contribution Code – that article 46.º, in the wording given by the State Budget Law for 2007 (Law 53-A/2006, of 29 December) came to establish exemption from municipal property tax (IMI) and municipal tax on onerous property transfers (IMT) for properties integrated in real estate investment funds, under the same conditions that already appeared in the previous wording of the provision, and Decree-Law n.º 108/2008, of 26 June, maintained that same exemption in the same terms.
Law nº 3-B/2010, of 28 April, being also a budget law, through new wording given to article 49.º of the TBS, came to exempt from municipal property tax and municipal tax on onerous property transfers only 'properties integrated in open real estate investment funds', and the State Budget Law for 2012 (Law n.º 55-A/2010, of 31 December) extended that exemption to 'properties integrated in open or closed real estate investment funds with public subscription'.
Law n.º 83-C/2013, of 31 December, amending that article 49.º, suppressed the exemption, coming instead to provide for reduction by half of the rates of municipal property tax and municipal tax on onerous property transfers applicable to properties integrated in open or closed real estate investment funds with public subscription.
Article 49.º of the TBS was repealed by article 215.º, n.º 1, letter g), of Law n.º 7-A/2016, of 30 March.
[6.] From the legislative evolution just described the idea emerges that the tax benefits attributed to real estate investment funds do not have a systematic character, instead assuming a markedly cyclical nature, thus justifying that the successive amendments to the legal regime have been established, as a rule, by means of budget laws.
It suffices to note that it began by providing for the exemption of municipal contribution – and of IMI and IMT – in relation to properties integrated in any type of real estate fund, and then this exemption was restricted to properties integrated in open real estate investment funds. Later the exemption was restored in relation to properties integrated in open or closed real estate investment funds with public subscription until the tax benefit was transformed into reduction of the applicable tax rate and, finally, was suppressed.
It is not therefore possible to see, in the approval of the TBS and in the multiple amendments to this Statute a general criterion that permits defining a stable fiscal regime that may supersede other separate provisions that subsisted in the legal order.
Moreover, it is important to note that the scope of application of the exemption initially created by Law n.º 53-A/2006, by means of amendment of article 46.º of the TBS – which came to provide for exemption of IMI and IMT in relation to properties integrated in real estate investment funds – is not coincident with that of the exemption contemplated in article 1.º of Decree-Law n.º 1/87, which refers to acquisitions of immovable property effected for a real estate investment fund by its respective management company. In fact, by virtue of the new provision of article 46.º of the TBS, properties already integrated in real estate investment funds came to be exempt from IMT, whereas the exemption to which the 1987 statute referred covered acquisitions of immovable property effected by management companies of real estate investment funds for integration into the assets of those funds. This means that the TBS came to broaden the exemption, covering not only situations in which the fund was in the position of acquirer of the property, but also those in which the fund acts in the position of transferor of the property (cf. in this sense, the arbitral decision handed down in Process n.º 544/2016, in which the same question was analyzed).
[7.] It now falls to address the question of whether the norm of article 1.º of Decree-Law n.º 1/87 is repealed by any of the provisions of the TBS that came to regulate the exemption of IMT in relation to real estate investment funds or whether there was a systemic repeal by virtue of the new overall regulation of the subject matter of tax benefits.
As follows from article 7.º, n.º 2, of the Civil Code, repeal of the law 'may result from express declaration, from incompatibility between the new provisions and the preceding rules or from the circumstance that the new law regulates the entire subject matter of the preceding law'.
Repeal is express when a law individualizes, in an explicit declaration, the subject matter of cessation of force of a preceding law. Tacit repeal occurs when, in view of the legislator's silence on identification of the repealed norms, there is registered a content incompatibility between the provisions of a new law and those of a chronologically preceding legislative act. Global repeal occurs when a complex of norms comes to be, in its entirety, subject to a discipline diverse from that which previously prevailed, independently of the problem of its compatibility with the rules previously in force (cf. Baptista Machado, Introduction to Law and Legitimating Discourse, Coimbra, 1993, págs. 165-166; Carlos Blanco Morais, Reinforced Laws – Reinforced Laws of Procedure within the Scope of Structuring Criteria of Relations between Legislative Acts, Coimbra, 1998, págs. 338, 341 and 343).
Express repeal does not raise special difficulties. It consists of a declaration made in the new law and may be limited to extinguishing the efficacy of the old law or to restoring a legal regime that had previously been repealed, or be accompanied by constitutive or modifying effects, as occurs when the repealing law institutes a new complex of norms or operates modification of the preceding legal regime.
Tacit repeal occurs to the extent of contradiction existing between the preceding law and the new law, for where that contradiction does not occur it is possible the coexistence or interpenetration between the two laws.
Global repeal has in common with tacit repeal the fact of operating in any silence of the legislator, who may say nothing about the suppression of antecedent laws, but differs from it by the fact of not necessarily registering a general incompatibility of commands between the old law and the new law. The ratio of this modality of repeal is anchored essentially in reasons associated with the updating of the process of legal innovation or to policies of systematization and legislative consolidation (Carlos Blanco Morais, ob. cit., pág. 344).
[8.] Applying the principles just enunciated to the situation before this tribunal, it is easily concluded that the norm of article 1.º of Decree-Law n.º 1/87 cannot be regarded as repealed.
It is established that the norm of article 1.º of Decree-Law n.º 1/87 was not the subject of express repeal. And, as was indicated, there is no incompatibility between that norm and the one that came to be introduced in the TBS (article 46.º later renumbered as article 49.º), since these provisions contain different scopes of application and the latter was limited to broadening the exemption already established by the 1987 statute.
The possibility of a systemic repeal is also ruled out. As was set out, the TBS, in its original version, and in relation to management and real estate investment companies, established only a specific tax regime in relation to IRC and IRS. And only much later, by means of budget laws, was there established in relation to real estate investment funds, by means of new wording given to article 46.º (later renumbered as article 49.º), the exemption in relation to taxation of property by reference to municipal contribution and, later, to IMI and IMT (Laws n.º 32-B/2002, of 30 December, and 53-A/2006, of 29 December). This regime suffered yet successive amendments until the tax benefit came to be translated into reduction by half of the rates of tax on property and tax on onerous property transfers (Law n.º 83-C/2013, of 31 December) and was finally extinguished by means of repeal of article 49.º operated by Law n.º 7-A/2016, of 30 March.
With the approval of the Tax Benefits Statute, tax benefits of structural character applicable to the financial system and the capital market, here including investment funds, impacted on the taxation of income. The later introduction of an exemption of IMI and IMT applicable to investment funds, in the category of tax benefits relating to property, by means of mere amendment of an already existing provision, does not evidence any general criterion defining the regime of tax benefits in relation to taxation of property and the later legislative evolution reveals that the exemption was instituted for merely cyclical reasons and without a clear purpose of systematization of the legal regime.
In these circumstances, one cannot speak of a global repeal of article 1.º of Decree-Law n.º 1/87."
All these considerations maintain full validity and are applicable to the situation in the present case, leading to the conclusion that the tax acts assessing IMT in relation to acquisition of immovable property by the Applicant as representative of the Real Estate Investment Funds are illegal by violation of the provision in the cited article 1.º of Decree-Law n.º 1/87, of 3 January.
Indemnity Interest
The Applicant further requests condemnation of the Tax Authority to payment of indemnity interest, at the legal rate, calculated on the tax, until full reimbursement of the amount owed.
In accordance with the provision in letter b) of article 24.º of the RJAT, the arbitral decision on the merits of the claim as to which no recourse or challenge lies binds the Tax Administration, in the exact terms of the success of the arbitral decision in favor of the taxpayer, it being incumbent on it to 'restore the situation that would exist if the tax act subject of the arbitral decision had not been performed, adopting the necessary acts and operations to that effect'. This is in line with the provision in article 100.º of the GTL, applicable by virtue of the provision in letter a) of n.º 1 of article 29.º of the RJAT.
Further pursuant to n.º 5 of article 24.º of the RJAT 'payment of interest, regardless of its nature, is due in accordance with the terms provided for in the General Tax Law and in the Code of Tax Procedure and Process', which refers to the provision in articles 43.º, n.º 1, of the GTL and 61.º, n.º 5, of the CTPP, implying payment of indemnity interest from the date of wrongful payment of tax until the date of processing of the respective tax credit note.
There is thus occasion, in the sequence of declaration of illegality of the act assessing IMT, for payment of indemnity interest, in accordance with the cited provisions of articles 43.º, n.º 1, of the GTL and 61.º, n.º 5, of the CTPP, calculated on the amount wrongfully paid by the Applicant, at the rate of legal interest (articles 35.º, n.º 10, and 43.º, n.º 4, of the GTL).
The Respondent contends, however, that indemnity interest may only be calculated from one year after the request for official review, in accordance with letter c) of n.º 3 of article 43.º of the General Tax Law, since the Applicant did not file an amicable settlement claim, thereby precluding the possibility of application of n.º 1 of that provision.
Now, what article 43.º, n.º 3, letter c), of the General Tax Law prescribes is that 'indemnity interest is also due (…) when revision of the tax act at the initiative of the taxpayer occurs more than one year after the request thereof, unless the delay is not attributable to the tax administration'. This is therefore a matter of indemnity interest that is due when, at the initiative of the taxpayer, there is revision of the tax act, but it has only occurred more than one year after the request was made and which therefore aims to compensate the interested party for the delay in the pronouncement of the favorable decision. It is understood, in that case, that interest is due from one year after submission of the request for review, which is understandable since it is at that moment that the Tax Administration enters into default.
This regime operates still within the domain of tax procedure and presupposes a favorable decision in relation to the request for review.
What occurs, however, in the present case, is that the Tax Administration did not pronounce itself on the request for review, which determined that the taxpayer filed judicial challenge by means of submission of the arbitral request, whereby the applicable rule is not that of letter c) of n.º 3 of article 43.º, but that of n.º 1 of that article, which refers to situations of wrongful payment of tax due to error attributable to the services when the error comes to be verified in an amicable settlement claim or in judicial challenge. The indemnity interest is therefore that due by the favorable decision handed down in the judicial challenge and is without doubt counted from the date of wrongful payment of tax until the date of processing of the respective tax credit note (article 61.º, n.º 5, of the CTPP).
III – Decision
For these reasons it is decided:
a) To uphold the request for arbitral pronouncement and annul the tax acts assessing municipal tax on onerous property transfers n.º..., n.º ... and n.º...;
b) To condemn to payment of indemnity interest from the date of payment of the tax until the date of issuance of the tax credit note, in accordance with articles 43.º of the GTL and 61.º of the CTPP.
Value of the Case
The Applicant indicated as value of the case the amount of € 214,106.88, which was not contested by the Respondent, and corresponds to the value of the assessment that was being challenged (article 97.º, n.º 1, letter a), of the CTPP).
Costs
Pursuant to articles 12.º, n.º 2, and 24.º, n.º 4, of the RJAT, and 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings and Table I annexed to that Regulation, the amount of costs is fixed at € 4,284.00, which is charged to the Respondent.
Notify.
Lisbon, 7 December 2018
The President of the Arbitral Tribunal
Carlos Fernandes Cadilha
The Arbiter Member
Paulo Nogueira da Costa
The Arbiter Member
Regina de Almeida Monteiro
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