Process: 33/2016-T

Date: June 9, 2016

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD Arbitration Process 33/2016-T addressed the legality of IMI (Municipal Property Tax) assessments totaling €10,087.74 for the years 2010 and 2011. The claimant, acting as Head of Estate, challenged these assessments arguing that the properties should be exempt from IMI under Article 44(1)(n) of the Tax Benefits Statute (EBF), which grants exemptions to properties classified as national monuments or properties of public interest. The properties are located within the Historical Zone, which was individually classified as a property of public interest through Decree No. 67/97. Additionally, the claimant argued that part of the Historical Zone, including the properties in question located in the relevant parish, is classified as UNESCO World Heritage. Under Law No. 107/2001, properties included in the World Heritage List are deemed to have national interest status and adopt the designation of 'national monument.' The claimant emphasized that the legislator deliberately did not use the qualifier 'individually' before 'national monument' in the exemption provision, suggesting broader application. The Tax Authority contended that legislative amendments in 2007 through Law No. 53-A/06 changed the exemption regime for classified properties, implying stricter requirements. The arbitral tribunal was constituted as a singular tribunal under the RJAT framework, with arbitrator Paulo Ferreira Alves appointed by the Deontological Council. The case involved fundamental questions about whether properties situated within zones classified as public interest or world heritage qualify for IMI exemption, or whether only individually classified properties merit such tax relief. This case exemplifies the procedural framework available to taxpayers for challenging allegedly unlawful tax assessments through administrative arbitration in Portugal's CAAD system.

Full Decision

ARBITRATION DECISION

REPORT

A - PARTIES

A…, domiciled at …, …, …-… …, holder of tax identification number …, Head of Estate of B…, with tax identification number …, hereinafter designated as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxation, through Decree-Law No. 118/2011, of 15 December) hereinafter designated as Respondent or AT.

The petition for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly constituted on 07-04-2016 to hear and decide the subject matter of the present proceedings, and was automatically notified to the Tax and Customs Authority on 07-04-2016, as recorded in the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, and therefore, pursuant to paragraph 1 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed Arbitrator Paulo Ferreira Alves, with the appointment having been accepted in accordance with legal provisions.

On 21-03-2016 the parties were duly notified of such appointment and did not express any intention to refuse the appointment of the arbitrators, in accordance with Article 11, paragraph 1, subparagraphs a) and b), of the RJAT and Articles 6 and 7 of the Deontological Code.

In accordance with what is provided in subparagraph c) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the singular arbitral tribunal is duly constituted on 07-04-2016.

Both parties agree to the waiver of the meeting provided for in Article 18 of the RJAT.

The arbitral tribunal is duly constituted. It is materially competent pursuant to Articles 2, paragraph 1, subparagraph a), and 30, paragraph 1, of Decree-Law No. 10/2011, of 20 January.

The parties possess legal personality and capacity, are legitimate and are legally represented (Articles 4 and 10, paragraph 2, of the same statute and Article 1 of Regulation No. 112-A/2011, of 22 March).

The proceedings do not suffer from any defects that would invalidate them.

B - PETITION

  1. The present Claimant seeks a declaration of illegality of the tax assessment acts in the Municipal Property Tax (Imposto Municipal sobre Imóveis), No. 2010 … of 2010 and No. 2011 … of 2011, which established a total tax payable of € 10,087.74 (ten thousand and eighty-seven euros and seventy-four cents).

C - GROUNDS FOR CLAIM

  1. To support its petition for arbitral pronouncement, the Claimant alleged, with a view to declaring the illegality of the tax assessment acts in the Municipal Property Tax, already described in point 1 of this Decision, in summary, the following:

  2. The Claimant alleges that the assessments are illegal because the properties benefit from an exemption in the Municipal Property Tax, as provided for in subparagraph n) of paragraph 1 of Article 44 of the Tax Benefits Statute (EBF).

  3. The Respondent contends that the aforementioned urban properties targeted by these tax assessments belong to the said estate and are situated in a parish encompassed by the so-called "Historical Zone of …", specifically in the Parish of ….

  4. It further states that the "Historical Zone of …" is formed by part of the territorial jurisdiction referring to the former Parishes of …, …, …, …, … and …, and was individually classified, through publication of Decree No. …/97, of … of … of 1997, as a property of public interest and not as a group of properties of public interest.

  5. From the standpoint of public recognition, the properties integrated in that zone are true parts of the broader property which is the same zone and are inseparable from it.

  6. The Claimant alleges that the "Historical Zone of …" is a property individually classified as being of public interest pursuant to that Decree-Law No. 67/97, which placed it alongside other properties individually classified in the same statute as being of public interest.

  7. And in the classification of the "Historical Zone of …" contained on the website of the Directorate-General for Cultural Heritage, the aforementioned classification is not attributed to a group of properties, but rather to a property of public interest.

  8. The Claimant argues that the application of the said exemption does not flow exclusively from the individual classification of the "Historical Zone of …" as a property of public interest, insofar as, in fact, and indeed from common knowledge, part of this "Historical Zone of …" is classified by UNESCO as world heritage.

  9. The Respondent further contends that it results from Law No. 107/2001, of 8 September, that the part of the "Historical Zone of …" classified as world heritage, by being included in the "World Heritage List", integrates, for all purposes and in its respective category, the list of property classified as being of national interest.

  10. And, following this linear reasoning and the remaining provisions that make up the said Legal Framework, we find that, pursuant to paragraph 3 of the same Article 15, also immovable property classified with national interest, whether they are monuments, groups or sites, shall adopt the designation "national monument".

  11. And since the properties targeted by the Municipal Property Tax assessments in question are situated in the zone classified as world heritage, as they are situated in the parish of …, they themselves are an integral part of a national monument.

  12. The Claimant emphasizes that the legislator, in referring to the classification of "national monument", for purposes of granting the Municipal Property Tax exemption in subparagraph n) of paragraph 1 of Article 44 of the EBF, opted not to precede it with the adverb "individually".

  13. The Claimant further argues that the very public entity responsible for Municipal Property Tax revenue — the Municipal Authority of … — recognizes this exemption, as is evident from the information contained in the document "Delimitation of the Urban Rehabilitation Area of the Historical Centre of … in Appropriate Instrument" (See page 163), published by the Urban Rehabilitation Company of …, which states that the part of the Historical Centre of … that is classified as World Heritage benefits from the Municipal Property Tax exemption also granted to properties individually classified as being of public interest.

  14. The Claimant argues that the contested acts contain errors in the legal presumptions, errors that were flagrant errors in the legal presumptions of the contested tax acts committed by the AT.

  15. The Claimant concludes by alleging that in light of the factual framework set out and without forgetting the spirit of the legislator underlying the aforementioned legal provision, to which is added the jurisprudence of the Arbitral Tribunals that have already pronounced on this matter, it results, without room for doubt, that the respective legal presumptions of the contested tax acts suffer from errors.

D - RESPONSE OF THE RESPONDENT

  1. The Respondent, duly notified for that purpose, timely submitted its response in which, in abbreviated summary, it alleged the following:

  2. The subject matter of the present petition centers on whether the properties meet or do not meet the requirements of subparagraph n) of paragraph 1 of Article 44 of the EBF, and the legal instruments intended to prove compliance with those requirements.

  3. The Respondent alleges that the legislative amendment introduced in subparagraph n) of paragraph 1 of Article 44 of the EBF resulted in a change in the exemption regime that the classified properties had been enjoying.

  4. And with the amendment made by Law No. 53-A/06, of 29 December - Budget Law for the year 2007, and in force from 01.01.2007, the wording of subparagraph n) of paragraph 1 of the former Article 40, now Article 44 of the EBF was altered, now requiring as a condition for recognition of the said exemption individual classification as properties of public interest or municipal interest.

  5. In other words, from that date, the said exemption would only be maintained or recognized if each property individually was individually classified as a property of public interest or municipal interest and there existed a certificate proving such individual classification issued by IGESPAR.

  6. Beginning with the classification of the "Historical Centre of …" as a "national monument", a classification given by UNESCO and which would supposedly be outside the requirement that the classification be individualized.

  7. Having occurred the classification of a group of properties, it is important to assess whether, following such fact, each of the properties encompassed in the group could be automatically classified, thereby benefiting from the aforementioned Municipal Property Tax exemption.

  8. The Respondent further argues that in light of the current heritage legislation - Law No. 107/2001, of 8 September - Law of Cultural Heritage - LPC - and Decree-Law No. 309/2009, of 23 October, which establishes the procedure for classification of immovable property of cultural interest, the "Historical Centre of …" is integrated, through its inclusion in the list of world heritage, the list of property classified as being of national interest, but in its respective category, which is that of a group.

  9. The reality included in the world heritage list, and which for that reason is integrated into the list of property classified as being of national interest, designated as "national monument" was the group, as this category is defined by international law, formed by the "Historical Centre of …", and not a specific and individualized building.

  10. The Respondent alleges that starting from such presumption, and following the inclusion of the "Historical Centre of …" in the world heritage list, it was the group formed by the "Historical Zone of …", with a broader delimitation than that of the "Historical Centre of …", that was classified as a property of public interest, through Decree 67/97, (subparagraph b) of Article 1 and Annexes II and IV) and neither did it opt to identify any building that is part of the group possessing individually recognized public interest.

  11. The Respondent argues that once the applicable legislation is analyzed, we conclude that this does not result either from heritage legislation (LPC and Decree-Law No. 309/2009, of 23.10), or from tax legislation (Municipal Property Tax Code and EBF). On the contrary, paragraph 1 of Article 56 of Decree-Law No. 309/2009 expressly provides: "In the area encompassed by the delimitation of a group or of a site, individually classified immovable property may coexist."

  12. The Respondent argues that by interpretation "a contrario", it may be concluded that in the area encompassed by the delimitation of a group, there may coexist properties that are not individually classified.

  13. Regarding the classification of the property as being of public interest, subparagraph n) of paragraph 1 of Article 44 of the EBF confers exemption on properties classified as national monuments, as well as those that are individually classified as being of public interest or municipal interest.

  14. The Respondent argues that in the present case, the declaration of IGESPAR is essential in this exemption procedure. Therefore, everything begins and ends with that certificate.

  15. Now the Claimant did not attach any certificate from IGESPAR, as is legally required.

  16. The property is an integral part of the group called "Historical Zone of …", classified as a Property of Public Interest (I.I.P.), but it is not the Claimant's property/building that is individually classified.

  17. The Respondent further alleges that by being part of the group of the "Historical Centre of …", classified as a national monument by force of its inclusion in the world heritage list, or even the group of the "Historical zone of …", which was classified as a property of public interest, the Respondent's property does not merit, in itself, the individualized classification of a national monument or property of public interest. And, to that extent, does not meet the requirement leading to the benefit of the exemption provided for in subparagraph n) of paragraph 1 of Article 44 of the EBF.

  18. The Respondent concludes by alleging that the tax legislator, in the Municipal Property Tax Code, seems to corroborate this, as pursuant to paragraph 12 of Article 112, municipalities, by deliberation of the municipal assembly, may set a reduction of up to 50% of the rate in force in the year to which the tax applies to properties classified as being of public interest, of municipal value or cultural heritage, in accordance with applicable legislation, provided that these properties are not covered by subparagraph n) of paragraph 1 of Article 44 of the EBF.

E - FACTUAL BASIS

  1. Before addressing these issues, it is necessary to present the factual matter relevant to its understanding and decision, which was done on the basis of documentary evidence and taking into account the facts alleged.

  2. Regarding relevant factual matters, this tribunal establishes as proven the following facts:

  3. The Claimant was notified of the tax assessment acts in the Municipal Property Tax:

a) No. 2010 …, issued on 30-11-2013, referring to the year 2010, which established a tax to be assessed in the amount of €5,043.87, for payment in January 2014.

b) No. 2011 … of 2011, issued on 30-11-2013, referring to the year 2010, which established a tax to be assessed in the amount of €5,043.87, for payment in January 2014.

  1. The Claimant is the owner of the property situated on the street, property registered in the extinct parish of … under Article … - A,B,C,D,E,F,G,H,I,J, current Article … - A,B,C,D,E,F,G,H,I,J, of the Union of parishes of …, …, …, …, …, … and ….

  2. The "Historical Zone of …" is formed by part of the territorial jurisdiction referring to the former Parishes of …, …, …, …, … and ….

  3. The "Historical Zone of …", which was inscribed in the UNESCO World Heritage List, as declared by Notice No. …/2010, published in the Official Journal (Diário da República), II Series of … of … of 2010, issued pursuant to paragraph 3 of Article 72 of Decree-Law 309/2009, of 23 October.

  4. The urban properties targeted by these tax assessments are situated in a parish encompassed by the so-called "Historical Zone of …", specifically in the Parish of ….

  5. The Claimant filed an administrative review of both acts pursuant to Article 68 of the CPPT, to which was assigned the number …2014….

  6. The Claimant was notified of the express denial of the administrative review by Office No. …/…-… of 11-11-2014.

  7. The Claimant filed a hierarchical appeal pursuant to Article 66 of the CPPT, to which was assigned the number …2014….

  8. The Claimant was notified of the express denial of the administrative review by Offices No. …/…-… of 22.10.2015, and No. …/…-… of 26.11.2015.

F - FACTS NOT PROVEN

  1. Among the facts of interest for deciding the case, set out in the challenge, all of those subject to concrete analysis that are not contained in the factuality described above were not proven.

G - ISSUES TO BE DECIDED

  1. Given the positions of the parties taken in the arguments presented, the following constitute central issues to be determined and decided:

a. Those alleged by the Claimant:

(i) Declaration of illegality of the tax assessment acts in the Municipal Property Tax, No. 2010 … of 2010 and No. 2011 … of 2011, which established a total tax payable of € 10,087.74 (ten thousand and eighty-seven euros and seventy-four cents).

(ii) Payment of compensatory interest.

b. Regarding the validity of the joinder of claims.

H - JOINDER OF CLAIMS

  1. The present petition for arbitral pronouncement requests the annulment of the declaration of illegality of the tax assessment acts in the Municipal Property Tax, No. 2010 … of 2010 and No. 2011 … of 2011.

  2. According to the factuality already described, both tax acts relate to the same properties and the same building, based on the same legal grounds.

  3. The assessment of the legality of the assessments now challenged results from the interpretation and application of the same rules and principles of Law and from the analysis of the same factual grounds.

  4. Pursuant to the legal framework provided for in Articles 3 of the RJAT and 104 of the Tax Procedure and Process Code, the present arbitral proceedings and the joinder of petitions relating to different acts is valid and legally permitted.

I - MATTERS OF LAW

  1. Taking into account the positions of the parties taken in the pleadings submitted, the central issue to be determined by the present arbitral tribunal consists of assessing the legality of the Municipal Property Tax assessment acts.

  2. The issue sub judice consists of determining whether the property in question meets the legal requirements to benefit from the exemption provided for in subparagraph n) of paragraph 1 of Article 44 of the EBF.

  3. The legal framework in force applicable to the granting of the Municipal Property Tax exemption at issue here requires the assessment of a vast set of legal instruments, set out below.

  4. Article 44, paragraph 1, subparagraph n) of the EBF establishes the following: "1 - The following are exempt from municipal property tax: n) Properties classified as national monuments and properties individually classified as being of public interest or municipal interest, in accordance with applicable legislation."

  5. This provision refers, in particular, to Law No. 107/2001, of 8 September, the Legal Framework for the Protection and Enhancement of Cultural Heritage, which establishes the bases of the policy and regime for protection and enhancement of cultural heritage.

  6. This statute enshrines the requirements necessary for the classification of immovable property with national interest, public interest or municipal interest and specifically in the categories of Monument, Group and Site.

  7. Its Article 15 tells us the categories of property, enshrining:

"1 - Immovable property may belong to the categories of monument, group or site, as these categories are defined in international law, and movable property, among others, to the categories indicated in Title VII.

2 - Movable and immovable property may be classified as being of national interest, public interest or municipal interest.

3 - For immovable property classified as being of national interest, whether they are monuments, groups or sites, the designation 'national monument' shall be adopted and for movable property classified as being of national interest the designation 'national treasure' is created.

4 - A property is considered to be of national interest when its protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation.

5 - A property is considered to be of public interest when its protection and enhancement represents still a cultural value of national importance, but for which the protection regime inherent to classification as being of national interest proves disproportionate.

6 - Property is considered to be of municipal interest when its protection and enhancement, in whole or in part, represent a cultural value of significance predominantly for a given municipality.

7 - Immovable cultural property included in the world heritage list integrate, for all purposes and in their respective category, the list of property classified as being of national interest.

8 - The existence of the categories and designations referred to in this article does not prejudice the possible relevance of others, particularly when provided for in international law." (our emphasis).

  1. Additionally, Decree No. 45/93, in its Article 1, established the classification of properties as:

"The following properties are classified:

a) As national monuments, those listed in Annex I to this statute, of which it forms an integral part;

b) As properties of public interest, those listed in Annex II to this statute, of which it forms an integral part;

c) As municipal values, those listed in Annex III to this statute, of which it forms an integral part."

  1. This formulation is reiterated in Article 2 of Decree-Law 309/2009, of 23 October, "1 - An immovable property is classified in the categories of monument, group or site, as these categories are defined in international law."

  2. Decree-Law 309/2009, of 23 October, further provides in its Article 3, paragraph 1, that "an immovable property may be qualified as being of national interest, public interest or municipal interest", and adding in paragraph 3 that "the designation 'national monument' is attributed to immovable property classified as being of national interest, whether they are monuments, groups or sites".

  3. The aforementioned statutes refer to the sphere of International Law, and in that sphere, we highlight the Convention for the Protection of World Cultural and Natural Heritage, approved by Decree No. 49/79, of 6 June, which presents the following definitions of cultural and natural heritage:

  4. It provides in its Article 1:

"For purposes of the present Convention, the following shall be considered as cultural heritage: Monuments - Architectural, sculptural or monumental painting works, elements of structures of an archaeological character, inscriptions, caves and groups of elements with exceptional universal value from the point of view of history, art or science;

Groups - Groups of isolated or united buildings which, by virtue of their architecture, unity or integration in the landscape have exceptional universal value from the point of view of history, art or science;

Sites of Interest - Works of man, or combined works of man and nature, and areas, including sites of archaeological interest, with exceptional universal value from the point of view of historical, aesthetic, ethnological or anthropological interest."

  1. And the Convention for the Safeguarding of the Architectural Heritage of Europe, approved by Resolution of the Assembly of the Republic No. 5/91, in which we highlight the definition of architectural heritage, enshrined in its Article 1: "For purposes of the present Convention, the term 'architectural heritage' is considered to include the following immovable property:

  1. Monuments: all structures particularly notable for their historical, archaeological, artistic, scientific, social or technical interest, including the installations or decorative elements that form an integral part of such structures;

  2. Architectural Groups: homogeneous groups of urban or rural constructions, notable for their historical, archaeological, artistic, scientific, social or technical interest, and sufficiently coherent to be the subject of a topographical delimitation;

  3. Sites: combined works of man and nature, partially constructed and constituting spaces sufficiently characteristic and homogeneous to be the subject of a topographical delimitation, notable for their historical, archaeological, artistic, scientific, social or technical interest."

  1. The analysis of the legislation transcribed and relevant to the present case reveals that in subparagraph n) of paragraph 1 of Article 44 of the EBF, the legislator proceeded to the enactment of two distinct situations.

  2. First, properties classified as national monuments are exempt from municipal property tax. Second, properties individually classified as being of public interest or municipal interest are exempt from municipal property tax.

  3. It is a distinction between national monuments and individually classified properties that clearly results from the letter of the law.

  4. The "Historical Zone of …", which was inscribed in the UNESCO World Heritage List, as declared by Notice No. …/2010, published in the Official Journal (Diário da República), II Series of … of … of 2010, issued pursuant to paragraph 3 of Article 72 of Decree-Law 309/2009, of 23 October, is attributed the classification of national interest and consequent designation of "national monument".

  5. The inclusion in the UNESCO World Heritage List naturally meant the classification of the "Historical Zone of …" as a property of public interest, which was originally contained in Decree 67/97.

  6. As stated in Article 15 of Law 107/2001 and Article 3 of Decree-Law 309/2009, the properties in question are today of national interest, because they belong to the UNESCO World Heritage List, and are consequently classified as national monuments.

  7. The "Historical Zone of …" being a group or site, consequently the properties that compose the group or site are covered by that classification.

  8. Consequently, the "Historical Zone of …", as its very name indicates, is a "Zone", a limited zone, and different rules are applied to the properties located there.

  9. Therefore, all properties located in the "Historical Zone of …" are automatically attributed the classification of national interest and consequent designation of "national monument".

  10. In the specific case of the "Historical Zone of …" it is relevant that the protected heritage be viewed as a whole, as a group.

  11. In analyzing the transcribed legislation, it cannot be ignored that the author's property is part of a group.

  12. In this same sense, proceedings No. 325/2014 T and Proceedings No. 76/2015-T of the CAAD have already pronounced.

  13. Proceedings No. 325/2014 states:

"8. Today, in light of Law 107/2001, the properties in question are of national interest, and not merely of public or municipal interest, and are consequently classified as national monuments.

  1. Indeed, and as stated in Article 15 of Law 107/2001 and Article 3 of Decree-Law 309/2009, property classified as being of national interest is designated as a 'national monument', regardless of whether it is a single building, group or site, and it is clear that the properties that compose the group or site are covered by that classification.

  2. The fact that individually classified properties may coexist in the case of delimitation of a group or a site, pursuant to Article 56 of Decree-Law 309/2009, only has provisional relevance to delimit the zone of protection of that property until publication of the classification of the group or site (cf. paragraph 2).

  3. For this reason it is understood that Article 44 of the Tax Benefits Statute distinguishes between 'property classified as a national monument' and 'property individually classified as being of public interest or municipal interest', requiring individualization only with respect to these latter two categories, not already with respect to properties of national interest.

  4. It is a fact that there are authors such as José Casalta Nabais or Nuno Sá Gomes, who defended a restrictive interpretation of exemptions for classified properties in order to exclude from the benefits attributed in the context of Municipal Property Tax or Property Transfer Tax all situations in which there has not been a procedure or act of individual classification as a national monument, property of public or municipal interest[1].

  5. The intention to follow the position expressed by these illustrious authors determined the amendment to Article 6g) of the Property Transfer Tax Code by Law 55-A/2010, of 31 December, causing the exemption to cease covering 'acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law No. 107/2001, of 8 September' to now cover only 'acquisitions of properties individually classified as being of national interest, public or municipal interest, in accordance with applicable legislation'.

  6. However, the legislator did not simultaneously alter the tax benefits in the context of Municipal Property Tax in the same sense, despite having proceeded to modify the wording of Article 44 of the EBF itself, with its subparagraph n) continuing to require individual classification for the granting of the exemption only in the case of properties of public or municipal interest, but not making a similar requirement for national monuments.

  7. On the contrary, the provision of paragraph 5 of Article 44, in the wording given to it by Law 3-B/2010, of 28 April, expressly provides: 'the exemption referred to in subparagraph n) of paragraph 1 is of an automatic nature, operating through communication of the classification as national monuments or of the individualized classification as properties of public or municipal interest (…)'. It results, therefore, in very clear terms that the intention of the legislator was to dispense with individualized classification for purposes of Municipal Property Tax exemption for national monuments, requiring it only with respect to properties of public or municipal interest.

  8. Now, given that the properties in question are integrated in the Historical Zone of ..., legally qualified as a national monument, it is manifest that they benefit from the said exemption, the Municipal Property Tax assessments challenged being thus illegal, and the tax that was paid should be refunded."

  9. In the same sense, Proceedings No. 76/2015-T:

"4.12 The fact that individually classified properties may coexist in the case of delimitation of a group or a site, pursuant to Article 56 of Decree-Law 309/2009, only has provisional relevance to delimit the zone of protection of that property until publication of the classification of the group or site.

4.13. For this reason it is understood that Article 44 of the Tax Benefits Statute distinguishes between 'property classified as a national monument' and 'property individually classified as being of public interest or municipal interest', requiring individualization only with respect to these latter two categories, not already with respect to properties of national interest.

4.14. We understand that the argument that some authors defend a restrictive interpretation of exemptions for classified properties in order to exclude from the benefits attributed in the context of Municipal Property Tax or Property Transfer Tax all situations in which there has not been a procedure or act of individual classification as a national monument, property of public or municipal interest, does not hold.

4.15. The truth is that in that sense Article 6g) of the Property Transfer Tax Code was amended by Law 55-A/2010, of 31 December, causing the exemption to cease covering 'acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law No. 107/2001, of 8 September' to now cover only 'acquisitions of properties individually classified as being of national interest, public or municipal interest, in accordance with applicable legislation'.

4.16. However, the legislator did not alter the tax benefits in the context of Municipal Property Tax in the same sense, despite having proceeded to modify the wording of Article 44 of the EBF itself, with its subparagraph n) continuing to require individual classification for the granting of the exemption only in the case of properties of public or municipal interest, but not making such a requirement for national monuments.

4.17. On the contrary, the provision of paragraph 5 of Article 44, in the wording given to it by Law 3-B/2010, of 28 April, expressly provides: 'the exemption referred to in subparagraph n) of paragraph 1 is of an automatic nature, operating through communication of the classification as national monuments or of the individualized classification as properties of public or municipal interest (…)'. We thus understand it to be clear that the intention of the legislator was to dispense with individualized classification for purposes of Municipal Property Tax exemption for national monuments, requiring it only with respect to properties of public or municipal interest.

4.18. Now, given that the properties in question are integrated in the Historical Centre of ..., legally qualified as a national monument, it is manifest that they benefit from the said exemption, the Municipal Property Tax assessments challenged here being thus illegal, and the tax that was paid should be refunded to the Claimants."

  1. Now, given that the properties in question are integrated in the "Historical Zone of …", legally qualified as a national monument, it is manifest that they benefit from the said exemption, the Municipal Property Tax assessments challenged being thus illegal, and the tax that was paid should be refunded.

J - COMPENSATORY INTEREST

  1. The Claimant further petitions for payment of compensatory interest.

  2. In light of the foregoing, the assessment of Municipal Property Tax, in the part covered by the annulment that will be ordered, results from errors of fact and of law attributable exclusively to the tax administration, insofar as the Claimant fulfilled its declaration duty and such errors were committed by the administration, and the Claimant could not have been unaware of different understandings.

  3. In truth, given that it is demonstrated that the Claimant paid the tax challenged in an amount superior to what is due, by force of the provisions of Articles 61 of the CPPT and 43 of the LGT, the Claimant is entitled to the compensatory interest owed, such interest to be calculated from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, with the period for such payment counting from the beginning of the period for voluntary compliance with the present decision (Article 61, paragraphs 2 to 5, of the CPPT), all at the rate determined in accordance with the provision of paragraph 4 of Article 43 of the LGT.

  4. Judgment is rendered in favor of the Claimant's petition.

L - DECISION

Therefore, in light of all the foregoing, the present Arbitral Tribunal decides:

  1. To render judgment favorable to the petition for declaration of illegality of the tax assessment acts in the Municipal Property Tax (Imposto de Selo), No. 2010 … of 2010 and No. 2011 … of 2011, which established a total tax payable of € 10,087.74 (ten thousand and eighty-seven euros and seventy-four cents), for reason of violation of law as to the provision contained in Article 44, paragraph 1, subparagraph n) of the Tax Benefits Statute, for error concerning the legal presumptions, which justifies the declaration of its illegality and annulment.

  2. To condemn the Respondent to refund to the Claimant that sum wrongfully assessed and paid plus interest.

The value of the case is set at € 10,087.74, being the value of the assessment, taking into account the economic value of the case as determined by the value of the tax assessments challenged, and in accordance therewith the costs are set at the amount of €918.00 (nine hundred and eighteen euros), charged to the Respondent in accordance with Article 12, paragraph 2 of the Tax Arbitration Regime, Article 4 of the RCPAT and Table I attached to the latter. – paragraph 10 of Article 35, and paragraphs 1, 4 and 5 of Article 43 of the LGT, Articles 5, paragraph 1, subparagraph a) of the RCPT, 97-A, paragraph 1, subparagraph a) of the CPPT and 559 of the CPC).

Notification thereof.

Lisbon, 09 June 2016

The Arbitrator

Paulo Ferreira Alves

Frequently Asked Questions

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What is the IMI tax exemption for properties classified as Public Interest under Article 44(1)(n) of the EBF?
Article 44(1)(n) of the Tax Benefits Statute (EBF) provides IMI exemption for properties classified as national monuments or properties of public interest. This exemption applies to real estate that has received official heritage classification from Portuguese cultural authorities. The key interpretative issue is whether the exemption applies only to individually classified properties or also extends to properties located within zones classified as properties of public interest or UNESCO World Heritage sites. Legislative amendments in 2007 modified the exemption regime, creating debate about the scope of eligible properties. Properties must have formal classification through official decree or be recognized under Law No. 107/2001 for World Heritage properties, which are deemed to have national interest status.
How can a taxpayer challenge IMI tax assessments through CAAD arbitration proceedings?
Taxpayers can challenge IMI assessments through CAAD (Centro de Arbitragem Administrativa) by filing a petition for constitution of an arbitral tribunal. The process begins with submitting a formal request to CAAD's President, who reviews and accepts the petition. If the claimant does not appoint an arbitrator, the Deontological Council appoints one as occurred in Process 33/2016-T. The arbitral tribunal must be constituted within legal timeframes under Decree-Law No. 10/2011 (RJAT). Parties are notified of arbitrator appointments and may refuse within specified periods. The proceedings require legal representation, and parties can waive the preliminary hearing under Article 18 RJAT. CAAD arbitration provides an alternative dispute resolution mechanism for tax matters, offering faster resolution than traditional judicial courts.
What are the legal requirements for IMI exemption on heritage-classified properties in Portugal?
For IMI exemption on heritage-classified properties in Portugal, properties must be officially classified as national monuments, properties of public interest, or municipal interest according to cultural heritage legislation. The classification must be formalized through official decree published in the Official Gazette. Properties included in the UNESCO World Heritage List automatically gain national interest status under Law No. 107/2001, adopting the 'national monument' designation. Taxpayers must prove the property's classification status and location within classified zones. Documentary evidence includes classification decrees, certificates from the Directorate-General for Cultural Heritage, and municipal recognition of exemption status. The exemption regime changed in 2007, potentially affecting which properties qualify. Legal interpretation focuses on whether 'individually' classified properties alone qualify or whether properties within classified zones also merit exemption.
Can heirs claim IMI tax exemption for inherited properties designated as Imóvel de Interesse Público?
Yes, heirs can claim IMI tax exemption for inherited properties designated as Imóvel de Interesse Público (Property of Public Interest). In Process 33/2016-T, the claimant acted as Head of Estate, demonstrating that legal representatives of deceased property owners have standing to challenge IMI assessments and claim applicable exemptions. The exemption under Article 44(1)(n) EBF applies based on the property's classification status, not the owner's identity, meaning the exemption transfers with the property upon inheritance. Heirs must provide proof of their legal capacity as estate representatives, the property's heritage classification, and meet procedural requirements for claiming the exemption. Tax authorities may have incorrectly assessed IMI without recognizing the exemption, requiring heirs to challenge such assessments through administrative or arbitral proceedings to obtain rightful tax relief.
What was the outcome of CAAD arbitration process 33/2016-T regarding unlawful IMI tax assessments?
Process 33/2016-T involved arbitral examination of whether IMI assessments totaling €10,087.74 for 2010-2011 were lawful given the properties' location within the Historical Zone classified as public interest and UNESCO World Heritage. The claimant argued the properties qualified for Article 44(1)(n) EBF exemption because they were situated in a zone individually classified as public interest and recognized as World Heritage, which Law No. 107/2001 treats as national monuments. The Tax Authority's position centered on 2007 legislative amendments that modified exemption requirements. The arbitral tribunal, constituted as a singular tribunal under RJAT, had material competence under Decree-Law No. 10/2011 to decide the legality of the contested tax acts. The case addressed whether properties within classified zones merit exemption or only individually classified properties qualify, representing significant jurisprudence for heritage property taxation in Portugal.