Summary
Full Decision
ARBITRAL DECISION
I - REPORT
A - IDENTIFICATION OF THE PARTIES
Claimant: A..., domiciled at Rua ..., ..., ...-... Rio Tinto, bearing tax identification number ..., Head of the Succession Estate of B..., with tax identification number ..., hereinafter referred to as the Claimant or Taxpayer.
Respondent: Tax and Customs Authority, hereinafter referred to as the Respondent or TA.
The Claimant filed a petition for the constitution of an Arbitral Tribunal in tax matters and a request for arbitral ruling, under the provisions of subparagraph a) of paragraph 1 of article 2 and subparagraph a) of paragraph 1 of article 10, both of Decree-Law no. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT).
The petition for constitution of the Arbitral Tribunal was accepted by the President of CAAD, and in accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of January 20, as amended by article 228 of Law no. 66-B/2012, of December 31, the Tax Authority was notified on 2019-01-17.
The Claimant failed to appoint an arbitrator, whereupon, under the provisions of paragraph 1 of article 6 and subparagraph b) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of January 20, as amended by article 228 of Law no. 66-B/2012, of December 31, the Deontological Council appointed Rita Guerra Alves as Arbitrator, with her appointment being accepted in accordance with legal provisions.
On 2019-03-07, the parties were duly notified of this appointment, and neither expressed a wish to refuse it, in accordance with article 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.
Accordingly, the Single Arbitral Tribunal was properly constituted on 2019-03-27, pursuant to articles 2, paragraph 1, subparagraph a), and 10, paragraph 1, of Decree-Law no. 10/2011, of January 20, to hear and decide upon the subject matter of the present dispute, and the Tax and Customs Authority was automatically notified, to submit arguments if it so wished, as recorded in the respective minutes.
By order of 2019-05-07, the meeting provided for in article 18 of the RJAT was dispensed with, proceeding instead to optional and simultaneous written submissions for a period of 20 days.
The Claimant and the Respondent submitted written arguments.
The parties are duly represented, possess legal personality and capacity, and are legitimate (articles 4 and 10, paragraph 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of March 22).
The proceedings do not suffer from any nullities.
B - CLAIM
1. The Claimant filed a petition for an arbitral ruling declaring the illegality of the tax assessment act, in the matter of Municipal Property Tax, 2009..., relating to the year 2009, which set a tax liability of €5,043.87 (five thousand and forty-three euros and eighty-seven cents).
C - GROUNDS FOR CLAIM
2. In support of its petition for an arbitral ruling, the Claimant argued, with a view to declaring the illegality of the tax assessment act in the matter of Municipal Property Tax, the following:
3. These properties benefit from an exemption in Municipal Property Tax, as provided in subparagraph n) of paragraph 1 of article 44 of the Tax Benefits Statute;
4. The aforementioned urban properties targeted by the 2009 Municipal Property Tax assessment belong to the estate of B... and are located in a parish encompassed by the so-called "Historic Zone of Porto", specifically in the Parish of ...;
5. The "Historic Zone of Porto", formed by part of the territorial circumscription relating to the former Parishes of ..., ..., ..., ..., ... and ..., was individually classified, with the publication of Decree no. 67/97, of December 31, 1997, as a property of public interest and not as a set of properties of public interest;
6. The Claimant argues that the "Historic Zone of Porto" is a property individually classified as being of public interest under that Decree-Law no. 67/97, of December 31, 1997, which placed it on par with other properties individually classified in the same instrument as being of public interest;
7. Thus, given the foregoing, and inasmuch as the properties targeted by the Municipal Property Tax assessments in question are located 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.
D - RESPONDENT'S REPLY
8. The Respondent, duly notified for this purpose, timely submitted its reply in which, in summary, it argued the following:
9. The "Historic Zone of Porto" is not to be confused with the "Historic Centre of Porto"; they are two distinct cultural realities, notwithstanding their terminological similarity and geographical proximity;
10. The Respondent argues that the cultural asset "Historic Zone of Porto" is a distinct asset from the cultural asset "Historic Centre of Porto";
11. The "Historic Zone of Porto" is classified as being a "Property of Public Interest";
12. The "Historic Centre of Porto" is classified as a cultural asset of "National Interest";
13. The Respondent argues, as is clearly apparent from article 44, paragraph 1, subparagraph n) of the Tax Benefits Statute, that only properties individually classified as "Public Interest" are exempt from Municipal Property Tax, even those located within the perimeter of a Classified Set;
14. The legislator was very clear and precise in making the granting of this tax benefit contingent upon the existence of an individual classification for each of the properties making up a patrimonial set;
15. The Respondent maintains that the Claimant has not demonstrated that the urban properties are individually classified;
16. The Respondent concludes by arguing that the Municipal Property Tax assessment and the decision to dismiss the petition are not subject to any error regarding the premises of fact and law, since the Claimant at no time provided evidence of the location of the properties in the "Historic Zone of Porto" and of their individual classification.
E - FACTUAL BASIS
17. For the analysis of the question submitted for this Tribunal's consideration, it is necessary to set out the relevant factual matter, based on the documentary evidence in the file and facts which were not contested.
18. In this manner, this Tribunal finds the following facts to be established:
19. The Claimant was notified of the Municipal Property Tax assessment, 2009..., relating to the year 2009, which set a tax liability of €5,043.87 (five thousand and forty-three euros and eighty-seven cents);
20. The Claimant is the owner of a property registered in the extinct parish of ... under item ... - A,B,C,D,E,F,G,H,I,J, current item ... - A,B,C,D,E,F,G,H,I,J, of the Union of parishes of..., ..., ..., ..., ..., ... and ...;
21. The "Historic Zone of Porto" is formed by part of the territorial circumscription relating to the former Parishes of..., ..., ..., ..., ... and ...;
22. The "Historic Zone of Porto", which was inscribed on the UNESCO World Heritage List, as declared by Notice no. .../2010, published in the Official Gazette, Series II, of July 30, 2010, issued pursuant to paragraph 3 of article 72 of Decree-Law 309/2009, of October 23;
23. The urban properties targeted by these tax assessments are located in a parish encompassed by the so-called "Historic Zone of Porto", specifically in the Parish of ...;
24. The Claimant filed a petition for ex officio revision of the tax act, which proceeded in the Finance Directorate of Porto, under no. ...2016...;
25. The petition for ex officio revision of the tax act was expressly dismissed by the TA by letter no. 2018... dated 18-10-2018, and notified to the Claimant.
F - UNPROVEN FACTS
26. Of the facts of interest to the decision of the case, all of which were subject to concrete analysis, those not included in the factual description above were not proven.
G - ISSUES TO BE DECIDED
27. Considering the positions of the parties, as adopted in the arguments presented by each, the central issues to be resolved, which must therefore be considered and decided, are:
A) Regarding the declaration of illegality of the tax assessment act in the matter of Municipal Property Tax, 2009..., relating to the year 2009, which set a tax liability of €5,043.87 (five thousand and forty-three euros and eighty-seven cents).
B) Regarding the payment of compensatory interest.
C) Regarding the material incompetence of the Arbitral Tribunal.
H - MATERIAL INCOMPETENCE OF THE ARBITRAL TRIBUNAL
28. It is raised that the present Arbitral Tribunal is materially incompetent to hear and decide upon the claim that is the subject of the present dispute, in accordance with articles 2, paragraph 1, subparagraph a) and 4, paragraph 1, both of the RJAT, and articles 1 and 2, subparagraph a), both of Ordinance no. 112-A/2011, which constitutes a dilatory exception preventing consideration of the merits of the case, in accordance with the provisions of article 576, paragraphs 1 and 2 of the Code of Civil Procedure as applied by article 2, subparagraph e) of the Code of Tax Procedure and Process (CPPT) and article 29, paragraph 1, subparagraphs a) and e) of the RJAT, which bars consideration of the claim and results in the dismissal of the Respondent in accordance with articles 576, paragraph 2 and 577, subparagraph a) of the Code of Civil Procedure, as applied by article 29, paragraph 1, subparagraphs a) and e) of the RJAT.
29. The Respondent raises the exception of material incompetence of the Arbitral Tribunal, arguing by virtue of article 2 a) of Ordinance no. 112-A/2011, that disputes having as their object the declaration of illegality of assessments, as occurs in the situation sub judice, are excluded from the competence of arbitral tribunals if they are not preceded by an administrative complaint, in accordance with articles 131 to 133 of the Code of Tax Procedure and Process, regardless of whether such complaint is mandatory under the cited provision or whether the taxpayer has opted for Ex Officio Revision.
30. The Claimant, notified to comment on said incompetence, argued in summary that the present Petition for Arbitral Ruling (i) is based on an express act of dismissal in tax matters, as it involves the application of tax law norms (in this case, subparagraph n) of paragraph 1 of article 44 of the Tax Benefits Statute); (ii) that such an express act of dismissal involved an assessment of the (il)legality of the "Municipal Property Tax assessment act for the year 2009" and, concurrently, a decision on the merits of that claim; and (iii) that said act constitutes an "administrative act" in light of the definition provided by article 148 of the Code of Administrative Procedure (CPA), applicable ex vi of subparagraph c) of article 2 of the General Tax Law – inasmuch as it is a decision issued in the exercise of legal-administrative powers and intended to produce external legal effects in an individual and concrete situation, whereby the Arbitral Tribunal is competent.
31. It is necessary to decide:
32. Incompetence, whether absolute or relative, of the Arbitral Tribunal regarding its material capacity to hear the acts which are the object of the arbitral claim, constitutes a dilatory exception, pursuant to article 577 of the Code of Civil Procedure and article 2 of the RJAT.
33. The question of determining the competence of the tribunal is subject to ex officio review, in accordance with article 13 of the Code of Procedure for Administrative Tribunals (CPTA) and article 578 of the Code of Civil Procedure (CPC), by subsidiary application of article 29 of the Legal Framework for Arbitration in Tax Matters (RJAT), which is why it is important, given the foregoing, to consider the present petition.
34. The competence of arbitral tribunals comprises the consideration of the claims listed in article 2 of Decree-Law no. 10/2011, of January 20 (RJAT).
35. It follows from paragraph 1, subparagraph a) of article 2, for purposes of this matter, that arbitral tribunals have competence to hear claims for declaration of illegality of acts of assessment and self-assessment of taxes.
36. The competence of arbitral tribunals, in particular the competence of the Arbitral Tribunal operating in CAAD, is limited to the extent to which the Tax Administration bound itself to that jurisdiction, concretized in Ordinance no. 112-A/2011, of March 22. In this way, article 4 of the RJAT establishes that "the binding of the tax administration to the jurisdiction of tribunals constituted under the terms of the present law is dependent on an ordinance of the Government members responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered," wherein the binding to arbitral jurisdiction is postulated by the services - DGCI and DGAIEC - entities merged in the current Tax and Customs Authority, effective January 1, 2012.
37. Thus, the competence of the arbitral tribunals operating in CAAD depends essentially on the terms of this binding, for, even if one is faced with a situation that can be framed in that article 2 of the RJAT, if it is not covered by said binding, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be precluded.
38. In subparagraph a) of article 2 of Ordinance no. 112-A/2011, there are expressly excluded from the scope of binding of the Tax Administration to the jurisdiction of arbitral tribunals operating in CAAD the "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account, which have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process".
39. The express reference to the preceding "recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" should be interpreted as referring to cases in which such recourse is mandatory, through an administrative complaint, which is the administrative means indicated in those articles 131 to 133 of the Code of Tax Procedure and Process, to whose terms reference is made. In truth, it would not be understood from the outset why, if prior administrative challenge were not necessary "when its ground is exclusively a matter of law and the self-assessment has been made in accordance with generic guidance issued by the tax administration" (article 131, paragraph 3 of the Code of Tax Procedure and Process, applicable to assessment cases), one could preclude arbitral jurisdiction on account of such administrative challenge, which is understood to be unnecessary, not having been made."
40. In the case at hand, the declaration of illegality of tax assessment acts in the matter of Municipal Property Tax for 2009 is sought, as well as the declaration of illegality and annulment of the act dismissing the petition for ex officio revision, and the consequent reimbursement of the tax improperly assessed.
41. Thus, it is important, first and foremost, to clarify that the declaration of illegality of acts dismissing petitions for revision of the tax act, as provided in article 78 of the General Tax Law, is included in the competencies attributed to arbitral tribunals operating in CAAD, in accordance with article 2 of the RJAT.
42. In this same sense, abundant case law has been issued by CAAD, see: 617/2015-T, 668/2016-T, 50/2012-T, 73/2012-T, 117/2013-T, 202/2013-T, 210/2013-T, 245/2013-T, 147/2014-T, 630/2014-T, 799/2014-T, 843/2014-T, 203/2015-T, 670/2015-T, 704/2015-T, 143/2016-T, 199/2016-T, 193/2017-T, 381/2017-T, 384/2017-T, 428/2017-T, 473/2017-T.
43. In truth, article 2 makes no express reference to these acts, unlike what occurs with the legislative authorization on which the Government based itself to approve the RJAT, which refers to "petitions for revision of tax acts" and "administrative acts that entail the assessment of the legality of assessment acts".
44. However, the formula "declaration of illegality of acts of assessment of taxes, of self-assessment, of withholding at source and of payment on account", used in subparagraph a) of paragraph 1 of article 2 of the RJAT does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases in which an act of one of those types is directly challenged. In truth, the illegality of assessment acts can be declared by a court as a corollary of the illegality of a second-degree act, which confirms an assessment act, incorporating its illegality.
45. The inclusion in the competencies of arbitral tribunals operating in CAAD, in cases where the declaration of illegality of the acts indicated therein is made through the declaration of illegality of second-degree acts, which are the immediate object of the challenge claim, results with certainty from the reference made in that norm to acts of self-assessment, withholding at source and payment on account, which are expressly referred to as included among the competencies of arbitral tribunals.
46. Indeed, with respect to these acts, it is imposed, as a rule, in articles 131 to 133 of the Code of Tax Procedure and Process, an administrative complaint, wherefore, in these cases, the immediate object of the challenge proceedings is, as a rule, the second-degree act, which assesses the legality of the assessment act, an act which, if it confirms it, must be annulled in order to obtain the declaration of illegality of the assessment act.
47. The reference made in subparagraph a) of paragraph 1 of article 10 of the RJAT to paragraph 2 of article 102 of the Code of Tax Procedure and Process, which provides for challenging acts dismissing administrative complaints, dispels any doubts, extending to the competencies of arbitral tribunals operating in CAAD the cases where the declaration of illegality of the acts referred to in subparagraph a) of article 2 of the RJAT must be obtained following the declaration of the illegality of second-degree acts.
48. Moreover, it was precisely in this sense that the Government, through Ordinance no. 112-A/2011, of March 22, interpreted these competencies of arbitral tribunals operating in CAAD, by excluding from the scope of these competencies the "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account which have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which has the effect of restricting its binding to cases where such recourse to the administrative procedure was utilized.
49. Having reached the conclusion that the formula used in subparagraph a) of paragraph 1 of article 2 of the RJAT does not exclude cases where the declaration of illegality results from the illegality of a second-degree act, it shall also cover cases where the second-degree act is that of dismissal of a petition for revision of the tax act, as there is no apparent reason to restrict it, especially since, in cases where the petition for revision is filed within the period of the administrative complaint, it must be treated as equivalent to an administrative complaint.
50. The express reference to article 131 of the Code of Tax Procedure and Process made in article 2 of Ordinance no. 112-A/2011 cannot have the decisive effect of precluding the possibility of considering petitions for declaration of illegality of acts dismissing petitions for ex officio revision of acts of self-assessment.
51. In truth, the interpretation exclusively based on the literal tenor defended by the Tax and Customs Authority in the present case cannot be accepted, as in the interpretation of tax norms the general rules and principles of interpretation and application of laws are observed (article 11, paragraph 1, of the General Tax Law) and article 9, paragraph 1, which expressly prohibits interpretations exclusively based on the literal tenor of norms, by providing that "interpretation shall not be confined to the letter of the law", but rather should "reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was made and the specific conditions of the time in which it is applied".
52. As for the correspondence between the interpretation and the letter of the law, only "a minimum of verbal correspondence, even if imperfectly expressed" is required (article 9, paragraph 3, of the Civil Code), which shall only prevent the adoption of interpretations that cannot at all be reconciled with the letter of the law, even acknowledging therein imperfection in the expression of legislative intent.
53. Therefore, the letter of the law is not an obstacle to making a declarative interpretation, which clarifies the scope of the literal tenor, nor even an extensive interpretation, when it can be concluded that the legislator said less than what, in coherence, it would have intended to say, that is, when it imperfectly stated what it intended to say. In extensive interpretation "it is the very valuation of the norm (its "spirit") that leads to discovering the need to extend the text thereof to the hypothesis which it does not cover", "the expansive force of the legal valuation itself is capable of leading the provision of the norm to cover hypotheses of the same type not covered by the text".
54. Extensive interpretation is thus imposed by the axiological and evaluative coherence of the legal system, established by article 9, paragraph 1, of the Civil Code as a fundamental interpretive criterion through the imposition of observance of the principle of unity of the legal system.
55. It is manifest that the scope of the requirement of a prior administrative complaint, necessary to open the contentious avenue for challenging acts of self-assessment, provided in paragraph 1 of article 131 of the Code of Tax Procedure and Process, has as its sole justification the fact that with respect to this type of acts there is no pronouncement by the Tax Administration on the legality of the legal situation created by the act, a pronouncement that might even come to be favorable to the taxpayer, avoiding the need for recourse to the contentious avenue.
56. In truth, apart from not envisioning any other justification for this requirement, the fact that an identical necessary administrative complaint is also provided for challenging acts of withholding at source and payment on account (in articles 132, paragraph 3, and 133, paragraph 2, of the Code of Tax Procedure and Process), which have in common with acts of self-assessment the circumstance that there is likewise no pronouncement by the Tax Administration on the legality of the acts, confirms that this is the raison d'être of that necessary administrative complaint.
57. Another unequivocal confirmation that this is the raison d'être of the requirement for a necessary administrative complaint is found in paragraph 3 of article 131 of the Code of Tax Procedure and Process, by establishing that "without prejudice to the provisions of the preceding paragraphs, when its ground is exclusively a matter of law and the self-assessment has been made in accordance with generic guidance issued by the tax administration, the period for challenging is not dependent on a prior complaint, with the challenge to be presented within the period of paragraph 1 of article 102".
58. In truth, in situations of this type, there has been a prior generic pronouncement by the Tax Administration on the legality of the legal situation created by the act of self-assessment, and it is this fact that explains why the requirement for an administrative complaint ceases to apply.
59. Now, in cases where a petition for ex officio revision of an assessment act is filed, the Tax Administration is afforded, with this petition, an opportunity to pronounce on the merits of the taxpayer's claim before the latter resorts to the jurisdictional avenue, whereby, in coherence with the solutions adopted in paragraphs 1 and 3 of article 131 of the Code of Tax Procedure and Process, it cannot be required that, cumulatively with the possibility of administrative consideration within the scope of that ex officio revision procedure, a new administrative consideration be required through an administrative complaint.
60. On the other hand, it is unequivocal that the legislator did not intend to prevent taxpayers from filing petitions for ex officio revision in cases of acts of self-assessment, as these are expressly referred to in paragraph 2 of article 78 of the General Tax Law.
61. In this context, as the law expressly permits taxpayers to opt for an administrative complaint or for ex officio revision of acts of self-assessment, and the petition for ex officio revision being filed within the period of the administrative complaint being perfectly comparable to an administrative complaint, as stated, there can be no reason whatsoever that could explain why a taxpayer who has opted for revision of the tax act rather than an administrative complaint cannot access the arbitral avenue.
62. Given this, it must be concluded that the Government members who issued Ordinance no. 112-A/2011, in making reference to article 131 of the Code of Tax Procedure and Process, regarding petitions for declaration of illegality of acts of self-assessment, stated imperfectly what they intended, as, intending to impose prior administrative consideration to the contentious challenge of acts of self-assessment, they ended up including a reference to article 131 which does not exhaust the possibilities for administrative consideration of these acts.
63. Indeed, it should be noted that this interpretation, not confining itself to the literal tenor, is particularly justified in the case of subparagraph a) of article 2 of Ordinance no. 112-A/2011, as its imperfections are evident: one is associating the comprehensive formula "recourse to the administrative procedure" (which references, in addition to the administrative complaint, hierarchical review and revision of the tax act) with the "expression in accordance with articles 131 to 133 of the Code of Tax Procedure and Process", which has potential restrictive scope to the administrative complaint; another is using the formula "preceded" by recourse to the administrative procedure, referring to "claims relating to the declaration of illegality of acts", which, obviously, would align much better with the feminine word "preceded".
64. Therefore, apart from the general prohibition of interpretations limited to the letter of the law contained in article 9, paragraph 1, of the Civil Code, in the specific case of subparagraph a) of article 2 of Ordinance no. 112-A/2011 there is a particular reason not to justify great enthusiasm for a literal interpretation, which is the fact that the wording of that norm is manifestly defective.
65. Furthermore, as ex officio revision of the tax act ensures the possibility of consideration of the taxpayer's claim before access to the contentious avenue sought to be achieved with the necessary administrative challenge, the most correct solution, because it is more coherent with the legislative design of "strengthening effective and efficient protection of taxpayers' rights and legally protected interests" manifested in paragraph 2 of article 124 of Law no. 3-B/2010, of April 28, is the admissibility of the arbitral avenue to consider the legality of assessment acts previously considered in a revision procedure.
66. And, because it is the most correct solution, it must be presumed to have been normatively adopted (article 9, paragraph 3, of the Civil Code).
67. On the other hand, as that subparagraph a) of article 2 of Ordinance no. 112-A/2011 contains an imperfect formula, but which contains a comprehensive expression "recourse to the administrative procedure", which potentially also references ex officio revision of the tax act, the minimum verbal correspondence is found in the text, albeit imperfectly expressed, required by that paragraph 3 of article 9 for the viability of adopting the interpretation that consecrates the most correct solution.
68. It is thus to be concluded that article 2, subparagraph a) of Ordinance no. 112-A/2011, properly interpreted on the basis of the criteria for interpretation of law provided in article 9 of the Civil Code and applicable to substantive and procedural tax norms, by force of article 11, paragraph 1, of the General Tax Law, enables the filing of petitions for arbitral ruling regarding assessment acts that have been preceded by a petition for ex officio revision.
69. In view of the foregoing, it is concluded in accordance with article 11, paragraph 1, of the General Tax Law, that the filing of petitions for arbitral ruling regarding assessment acts that have been preceded by a petition for ex officio revision is enabled. In this sense, see Decision no. 117/2013-T issued by CAAD.
70. The Tax and Customs Authority equally argues incompetence based on the scope of the judicial challenge proceedings, by being excluded from the jurisdiction of this Arbitral Tribunal, by not being covered by article 2, paragraph 1, of the RJAT, the consideration of acts dismissing petitions for ex officio revision that do not involve the assessment of the legality of assessment acts.
71. The issue to be considered is limited to determining whether the case sub judice is included within the competencies of arbitral tribunals operating in CAAD to declare the illegality of assessment acts in the matter of Municipal Property Tax when such illegality was considered by the act that dismissed the petition for ex officio revision.
72. We are of the view that the equivalence between the petition for revision of the tax act and the administrative complaint regarding acts of self-assessment, withholding at source and payment on account is manifest.
73. It is settled that the dismissal, tacit or express, of the petition for revision is subject to judicial review, cf. article 95, paragraphs 1 and 2, subparagraph d), of the General Tax Law.
74. See what was set out in the Judgment of the Supreme Administrative Court (Plenary of the Tax Law Section, case no. 0793/2014), of June 3, 2015, "(…) the procedural means of revision of the tax act cannot be considered as an exceptional means to react against the consequences of an assessment act, but rather as an alternative means to the administrative and contentious challenge means (when used at a time when those can still be utilized) or complementary thereto (when the periods for use of the challenge means of the assessment act have already been exhausted)…"
75. It is today settled case law that, as the TA can, on its own initiative, proceed to ex officio revision of the tax act, within the period of four years following the assessment or at any time if the tax has not yet been paid, on the grounds of error attributable to the services (article 78, paragraph 1, of the General Tax Law), the taxpayer can likewise, within that period for ex officio revision, request revision on that ground.
76. In sum, the petition for ex officio revision of the tax act is a mechanism for opening the contentious avenue that is perfectly comparable to the necessary administrative complaint, in that it serves the purpose of enabling the TA to pronounce on the assessment acts.
77. In the case at hand, the TA expressly dismissed the petition for ex officio revision, which considered on the merits of the petition for ex officio revision, in the following terms:
78. From the foregoing, and considering the case law cited, we have that the TA expressly considered the issues of the petition for ex officio revision of the Municipal Property Tax assessment act, which is why the present Arbitral Tribunal has competence to consider the assessment act.
79. Therefore, the petition for incompetence of the Arbitral Tribunal on grounds of subject matter is without merit.
I - SUBSTANTIVE LAW
80. Considering the position assumed by the parties, the issue is whether properties located in the Historic Zone of Porto benefit from an exemption from Municipal Property Tax, in accordance with article 44, paragraph 1, subparagraph n) of the Tax Benefits Statute.
81. Considering the factual matter established, we shall determine the applicable law, giving priority, in compliance with subparagraph a) of paragraph 2 of article 124 of the Code of Tax Procedure and Process, to the analysis of defects in the assessment act.
82. The applicable legal framework, governing the granting of the exemption in the matter of Municipal Property Tax in question here, requires the consideration of a broad set of legal instruments.
83. Thus, regarding the matter of exemption from municipal property tax, article 44, paragraph 1, subparagraph n) of the Tax Benefits Statute, 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."
84. By applicable legislation, it refers us in particular to Law no. 107/2001, of September 8, that is, to the Law of Bases for the Protection and Enhancement of Cultural Heritage, which establishes the bases of the policy and regime for protection and enhancement of cultural heritage.
85. Its article 15 canonizes the necessary requirements that allow the classification of immovable assets as being of national interest, public interest or municipal interest and specifically the categories of Monument, Ensemble and Site, which it does as follows:
"1 - Immovable assets may belong to the categories of monument, ensemble or site, in accordance with the terms in which such categories are defined in international law, and movable assets, among others, to the categories indicated in title VII.
2 - Movable and immovable assets may be classified as being of national interest, public interest or municipal interest.
3 - For immovable assets classified as being of national interest, whether they are monuments, ensembles or sites, the designation "national monument" shall be adopted, and for movable assets classified as being of national interest the designation "national treasure" is created.
4 - An asset 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 - An asset 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 in classification as being of national interest would appear disproportionate.
6 - Assets whose protection and enhancement, in whole or in part, represent a cultural value of significance predominantly for a given municipality are considered to be of municipal interest.
7 - Immovable cultural assets included in the world heritage list are integrated, for all purposes and in their respective category, in the list of assets classified as being of national interest."
86. Additionally, Decree no. 45/93, of November 30, in its article 1, establishes the classification of immovables as follows:
"The following immovables are classified:
a) As national monuments, those listed in Annex I to this instrument, which forms an integral part thereof;
b) As immovables of public interest, those listed in Annex II to this instrument, which forms an integral part thereof;
c) As municipal values, those listed in Annex III to this instrument, which forms an integral part thereof."
87. Also article 2 of Decree-Law 309/2009, of October 23, defines classification as follows: "1 - An immovable asset is classified in the categories of monument, ensemble or site, in accordance with the terms in which such categories are defined in international law."
88. Decree-Law 309/2009, of October 23, further states in its article 3, paragraph 1, that "an immovable asset may be qualified as being of national interest, public interest or municipal interest", and in paragraph 3 that: "the designation "national monument" is attributed to immovable assets classified as being of national interest, whether they are monuments, ensembles or sites".
89. And article 15 above transcribed tells us in paragraph 1 that "1 - Immovable assets may belong to the categories of monument, ensemble or site, in accordance with the terms in which such categories are defined in international law...
90. Thus, as regards the scope of International Law, and in that sphere, we highlight the Convention for the Protection of the World Cultural and Natural Heritage, approved by Decree no. 49/79, of June 6, which defines cultural and natural heritage as follows:
91. It establishes in its article 1 the following:
"For the purposes of this Convention, the following shall be considered as cultural heritage: Monuments. – Architectural, sculptural or pictorial works of a monumental character, elements of structures of an archaeological character, inscriptions, caves and groups of elements having outstanding universal value from the point of view of history, art or science;
Ensembles. – Groups of separate or connected structures which, by virtue of their architecture, unity or integration in the landscape have outstanding 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, having outstanding universal value from the point of view of history, aesthetics, ethnology or anthropology."
92. And the Convention for the Safeguarding of the Architectural Heritage of Europe, approved by Resolution of the Assembly of the Republic no. 5/91, from which we highlight the definition of architectural heritage, established in its article 1: "For the purposes of this Convention, the expression "architectural heritage" is considered to comprise the following immovable assets:
1) Monuments: all structures that are particularly notable for their historical, archaeological, artistic, scientific, social or technical interest, including the facilities or decorative elements that form an integral part of such structures;
2) Architectural ensembles: homogeneous groupings of urban or rural structures that are notable for their historical, archaeological, artistic, scientific, social or technical interest and sufficiently coherent to be the object of a topographical delimitation;
3) Sites: combined works of man and nature, partially constructed and constituting spaces sufficiently characteristic and homogeneous to be the object of a topographical delimitation, notable for their historical, archaeological, artistic, scientific, social or technical interest."
93. Thus, from the analysis of the legislation transcribed, relevant to the present case, it follows from subparagraph n) of paragraph 1 of article 44 of the Tax Benefits Statute that the legislator proceeded to the establishment of two distinct situations.
94. That is, properties exempt from municipal property tax are those classified as national monuments and properties individually classified as being of public interest or municipal interest.
95. In the case under discussion, the "Historic Zone of Porto", inscribed on the UNESCO World Heritage List, as declared by Notice no. 15173/2010, published in the Official Gazette, Series II, of July 30, 2010, issued pursuant to paragraph 3 of article 72 of Decree-Law 309/2009, of October 23, is attributed the classification of national interest and the consequent classification of "national monument".
96. Inscription on the UNESCO World Heritage List naturally meant the classification of "Historic Zone of Porto" as immovables of public interest, which originally was already the case by way of Decree 67/97, of December 31.
97. Indeed, as stated in article 15 of Law 107/2001 and article 3 of Decree-Law 309/2009, an asset classified as being of national interest is designated as a national monument regardless of whether it is a single building, ensemble or site, and it is clear that the immovables that make up the ensemble or site are encompassed by this classification.
98. The immovables that compose the "Historic Zone of Porto" are classified in the category of ensemble or site.
99. Therefore, all immovables located in the "Historic Zone of Porto" are automatically attributed the classification of national interest and the consequent designation of "national monument".
100. Analyzing the legislation transcribed, we cannot fail to consider that the immovable under discussion is part of an ensemble, in the concrete case the "Historic Zone of Porto" it is relevant the fact that the protected heritage is seen as a whole, as an ensemble.
101. On this question, abundant case law has already been issued which we shall follow closely. We bear in mind, in particular, the Judgment of the Central Administrative Court North, of 01-06-2017, issued in case no. 00693/14.1BEPRT, and in the Central Administrative Court no. 00134/14.4BEPRT.
102. Also decisions issued by the Tax Arbitration Centre (CAAD) in case numbers no. 325/2014 T, Case no. 76/2015-T, Case no. 33/2016-T, Case no. 98/2016-T, Case no. 379/2016-T, Case no. 354/2017-T, Case no. 172/2017-T, Case no. 470/2018-T, Case no. 471/2018-T.
103. Taking into account the Judgments of the Central Administrative Court referred to above:
The Convention for the Protection of the World Cultural and Natural Heritage, which took place in Paris, and was approved by Decree no. 49/79, of June 6, sought to establish which natural and cultural assets could be inscribed on the World Heritage List, setting the duties of Member States as to the identification and protection of these assets.
In this sequence, various monuments, sites or ensembles came to obtain the classification of UNESCO World Heritage, standing out in particular the classified ensembles, more specifically the Historic Centres classified as UNESCO World Heritage, in this case, the Historic Centre of Porto.
The referred ensembles classified as World Heritage benefited, for several years, from exemption from Municipal Property Tax, under the combined provisions of articles 44, paragraph 1, subparagraph n) of the Tax Benefits Statute and 15, paragraphs 2, 3 and 7 of Law no. 107/2001, of September 8 (Law of Bases for Protection of Cultural Heritage).
Indeed, article 44 of the Tax Benefits Statute, paragraph 1, establishes: "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".
We can see that this article comprises two provisions. First, properties exempt from municipal property tax are those classified as national monuments. Second, properties exempt from the same tax are those individually classified as being of public interest or municipal interest.
In turn, article 15 of Law no. 107/2001, of September 8, establishes:
"1 - Immovable assets may belong to the categories of monument, ensemble or site, in accordance with the terms in which such categories are defined in international law, and movable assets, among others, to the categories indicated in title VII.
2 - Movable and immovable assets may be classified as being of national interest, public interest or municipal interest.
3 - For immovable assets classified as being of national interest, whether they are monuments, ensembles or sites, the designation "national monument" shall be adopted, and for movable assets classified as being of national interest the designation "national treasure" is created.
4 - An asset 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.
(...)
7 - Immovable cultural assets included in the world heritage list are integrated, for all purposes and in their respective category, in the list of assets classified as being of national interest."
From the articulation of these provisions it follows that immovables located in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling into the category of "national monuments" and, consequently, benefiting from the exemption established in subparagraph n), of paragraph 1, of article 44 of the Tax Benefits Statute.
(...)
The immovables in question are part of the Historic Zone of Porto, which was inscribed on the UNESCO World Heritage List, as declared by Notice no. 15173/2010, published in the Official Gazette, Series II, of July 30, 2010, issued pursuant to paragraph 3 of article 72 of Decree-Law no. 309/2009, of October 23.
As we mentioned, article 15, paragraph 7, of Law no. 107/2001, of September 8, expressly states that "immovable cultural assets included in the world heritage list are integrated, for all purposes and in their respective category, in the list of assets classified as being of national interest".
This is the case with the Historic Zone of Porto, with its classification being altered from immovables of public interest, which originally was the case under Decree no. 67/97, of December 31.
Today, in light of Law no. 107/2001, of September 8, the properties in question are of national interest, and not of merely public or municipal interest, being consequently classified as national monuments.
(...)
For this reason it is understood that article 44 of the Tax Benefits Statute distinguishes between "property classified as national monument" and "property individually classified as being of public or municipal interest", only requiring individualization in relation to these latter two categories, not in relation to properties of national interest.
104. Taking into account the decisions issued by the Tax Arbitration Centre (CAAD), listed above, we partially transcribe what was decided in Case no. 256/2014-T:
In light of Law no. 107/2001, of September 8, the properties in question are of national interest, and not of merely public or municipal interest, being consequently classified as national monuments, regardless of whether it is a single building, ensemble or site. In this direction, it was further added that the article in question – article 44, paragraph 1, subparagraph n), of the Tax Benefits Statute – refers to two distinct realities: on the one hand, it establishes that properties exempt from Municipal Property Tax are those classified as national monuments (nothing further being required in this respect); on the other, it contemplates such exemption for properties individually classified as being of public interest or municipal interest. In support of the position that, as regards the category of national monuments (into which Historic Centres fall), the law does not impose an individualized classification, it was also pointed out the fact that the legislator did not make such a requirement, unlike what occurred, for example, in the matter of Municipal Tax on Onerous Transfers of Immovables (IMT), where subparagraph g) of article 6 of the IMT Code was amended, ceasing to encompass "acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law no. 107/2001, of September 8" to only contemplate "acquisitions of properties individually classified as being of national interest, public interest or municipal interest, in accordance with applicable legislation".
However, the legislator did not simultaneously alter tax benefits in the matter of Municipal Property Tax in the same sense, despite having proceeded to modify the wording of article 44 of the Tax Benefits Statute itself, its subparagraph n) continuing to require individualized classification for the granting of the exemption only in the case of immovables of public or municipal interest, but not making such a requirement for national monuments.
On the contrary, the provision of paragraph 5 of article 44, as worded by Law no. 3-B/2010, of April 28, expressly provides that "the exemption referred to in subparagraph n) of paragraph 1 is of an automatic character, operating through notification of the classification as national monuments or of the individualized classification as immovables of public interest 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 exemption from Municipal Property Tax for national monuments, requiring it only in relation to immovables of public interest or municipal interest.
Now, as the properties in question are integrated in the Historic Zone of Porto, legally qualified as a national monument, it is manifest that they benefit from the said exemption from Municipal Property Tax, and therefore the challenged act cannot remain in the legal order".
105. In this way, it is understood that what is stipulated in subparagraph n) of article 44 of the Tax Benefits Statute provides for two realities eligible for exemption from Municipal Property Tax: (i) properties classified as national monuments and (ii) properties individually classified as being of public or municipal interest.
106. In this same sense, see what was decided in case no. 325/2014:
"8. Today, in light of Law 107/2001, the properties in question are of national interest, and not of merely public or municipal interest, being consequently classified as national monuments.
9. Indeed, and as stated in article 15 of Law 107/2001 and article 3 of Decree-Law 309/2009, an asset classified as being of national interest is designated as a "national monument", regardless of whether it is a single building, ensemble or site, and it is clear that the immovables that make up the ensemble or site are encompassed by this classification.
10. The fact that individually classified properties may coexist, in the case of delimitation of an ensemble or of a site, in accordance with article 56 of Decree-Law 309/2009 has only provisional relevance for delimiting the protection zone of that immovable until the publication of the classification of the ensemble or of the site (cf. no. 2).
11. For this reason it is understood that article 44 of the Tax Benefits Statute distinguishes between "property classified as national monument" and "property individually classified as being of public or municipal interest", only requiring individualization in relation to these latter two categories, not in relation to properties of national interest.
12. It is a fact that there are authors such as José Casalta Nabais or Nuno Sá Gomes, who have defended a restrictive interpretation of exemptions to immovables classified with the intent of excluding from the benefits granted in the matter of Municipal Property Tax or Municipal Tax on Onerous Transfers of Immovables all situations in which no individualized procedure or act of classification as national monument, public interest property or municipal property has occurred.
13. The intent of following the position expressed by these illustrious authors determined the amendment to article 6 g) of the Municipal Tax on Onerous Transfers of Immovables Code by Law 55-A/2010, of December 31, leading to the exemption having ceased to encompass "acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law no. 107/2001, of September 8" to contemplate only "acquisitions of properties individually classified as being of national interest, public or municipal interest, in accordance with applicable legislation".
14. However, the legislator did not simultaneously alter tax benefits in the matter of Municipal Property Tax in the same sense, despite having proceeded to modify the wording of article 44 of the Tax Benefits Statute itself, its subparagraph n) continuing to require individualized classification for the granting of the exemption only in the case of immovables of public or municipal interest, but not making such a requirement for national monuments.
15. On the contrary, the provision of paragraph 5 of article 44, as worded by Law no. 3-B/2010, of April 28, expressly provides that "the exemption referred to in subparagraph n) of paragraph 1 is of an automatic character, operating through notification of the classification as national monuments or of the individualized classification as immovables of public interest 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 exemption from Municipal Property Tax for national monuments, requiring it only in relation to immovables of public interest or municipal interest.
16. Now, as the properties in question are integrated in the Historic Zone of..., legally qualified as a national monument, it is manifest that they benefit from the said exemption, thus being illegal the Municipal Property Tax assessments challenged, and the tax that was paid must be reimbursed."
107. Also in the same sense, see Case no. 76/2015-T:
"4.12 The fact that individually classified properties may coexist, in the case of delimitation of an ensemble or of a site, in accordance with article 56 of Decree-Law 309/2009 has only provisional relevance for delimiting the protection zone of that immovable until the publication of the classification of the ensemble or of the site.
4.13. For this reason it is understood that article 44 of the Tax Benefits Statute distinguishes between "property classified as national monument" and "property individually classified as being of public or municipal interest", only requiring individualization in relation to these latter two categories, not in relation to properties of national interest.
4.14. We understand that the argument is also not well-founded that some authors defend a restrictive interpretation of exemptions to immovables classified with the intent of excluding from the benefits granted in the matter of Municipal Property Tax or Municipal Tax on Onerous Transfers of Immovables all situations in which no individualized procedure or act of classification as national monument, public interest property or municipal property has occurred.
4.15. The truth is that article 6 g) of the Municipal Tax on Onerous Transfers of Immovables Code was amended in that sense by Law 55-A/2010, of December 31, leading to the exemption having ceased to encompass "acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law no. 107/2001, of September 8" to contemplate 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 tax benefits in the matter of Municipal Property Tax in the same sense, despite having proceeded to modify the wording of article 44 of the Tax Benefits Statute itself, its subparagraph n) continuing to require individualized classification for the granting of the exemption only in the case of immovables 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, as worded by Law no. 3-B/2010, of April 28, expressly provides that "the exemption referred to in subparagraph n) of paragraph 1 is of an automatic character, operating through notification of the classification as national monuments or of the individualized classification as immovables of public interest 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 exemption from Municipal Property Tax for national monuments, requiring it only in relation to immovables of public interest or municipal interest.
108. From the foregoing we can conclude that the properties in question are located within the "Historic Zone of Porto", legally classified as being of national interest and as a national monument, it is manifest that they benefit from the said exemption, thus being illegal the Municipal Property Tax assessments challenged, with the tax that was paid needing to be reimbursed to the Claimant.
J - COMPENSATORY INTEREST
109. The Claimant further requests the payment of compensatory interest.
110. In view of the foregoing, the assessment, in the part encompassed by the annulment, results from an error of fact and law attributable exclusively to the tax administration, to the extent that the Claimant fulfilled its duty of reporting.
111. In truth, it was demonstrated that the Claimant paid the impugned tax in an amount higher than what is due. In this manner and by virtue of articles 61 of the Code of Tax Procedure and Process and 43 of the General Tax Law, the Claimant is entitled to the compensatory interest owing, which interest must be calculated from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, whose period for payment is counted from the date of commencement of the period for voluntary compliance with the present decision (article 61, paragraphs 2 to 5, of the Code of Tax Procedure and Process), all at the rate determined in accordance with paragraph 4 of article 43 of the General Tax Law.
112. In light of all the foregoing and the legal provisions invoked, the Claimant's petition is granted.
H - DECISION
In light of all the foregoing, the present Arbitral Tribunal decides:
1. To judge the petition alleging material incompetence of the arbitral tribunal to be without merit;
2. To judge the petition for declaration of illegality of the tax assessment act in the matter of Municipal Property Tax, 2009..., relating to the year 2009, which set a tax liability of €5,043.87 (five thousand and forty-three euros and eighty-seven cents), to be well-founded.
3. To condemn the Respondent to reimburse to the Claimant that amount improperly assessed and paid, together with payment of compensatory interest already accrued, relating to the period between the date of payment of the tax until its return, as well as payment of future compensatory interest from the date of notification of this decision, until full and complete payment, all in accordance with paragraphs 2 to 5 of article 61 of the Code of Tax Procedure and Process, at the legal rate determined in accordance with paragraph 4 of article 43 of the General Tax Law until complete reimbursement.
The value of the case is fixed at €5,043.87 (five thousand and forty-three euros and eighty-seven cents), corresponding to the value of the assessment, taking into account the economic value of the case as gauged by the value of the assessment of tax impugned, and accordingly costs are fixed at the respective amount of €612.00 (six hundred and twelve euros), to be borne by the Respondent, in accordance with article 12, paragraph 2 of the Legal Framework for Tax Arbitration, article 4 of the Rules of Procedure for Tax Arbitration Cases and Table I annexed thereto – paragraph 10 of article 35, and paragraphs 1, 4 and 5 of article 43 of the General Tax Law, articles 5, paragraph 1, subparagraph a) of the Rules of Procedure for Tax Cases, 97-A, paragraph 1, subparagraph a) of the Code of Tax Procedure and Process and 559 of the Code of Civil Procedure).
Notify.
Lisbon, May 30, 2019.
The Arbitrator
Rita Guerra Alves
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