Process: 331/2015-T

Date: February 28, 2016

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This arbitral decision (Process 331/2015-T) addresses the constitutional validity of IMT (Property Transfer Tax) and Stamp Tax assessments totaling €16,197.37 imposed on a real estate investment fund (FIIAH) under Article 236 of Law 83-C/2013 (2014 State Budget). The fund manager challenged the assessments as unconstitutional violations of Article 103 of the Portuguese Constitution (tax legality principle), seeking nullity declarations and refunds with compensatory interest. The Tax Authority raised two key defenses: (1) the arbitral tribunal lacks jurisdiction to declare unconstitutionality, and (2) even if unconstitutional, the assessments are merely voidable (not null), making the challenge time-barred. The tribunal examined whether Article 236—which established compliance deadlines for FIIAH/SIIAH tax exemption requirements—created retroactive taxation or simply regulated proof of pre-existing conditions. Critical to the decision was distinguishing between nullity and voidability in Portuguese administrative law: assessments based on unconstitutional norms are generally voidable for legal certainty purposes unless they violate the essential content of fundamental rights. The tribunal found that violations of the tax legality principle do not constitute offenses to essential fundamental rights content, following established Supreme Administrative Court precedent. Therefore, the challenge faced procedural barriers regarding timeliness and the arbitral tribunal's constitutional review powers, beyond the substantive question of whether Article 236 unlawfully modified the special tax regime for real estate investment vehicles.

Full Decision

ARBITRAL DECISION

Arbitrator Dr. Maria Antónia Torres, appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to form the Single Arbitral Tribunal, constituted on 17 August 2015, decides as follows:

Arbitral Decision

  1. REPORT

1.1. A..., S.A., in its capacity as manager of fund B..., taxpayer no. ..., with registered office at Avenida..., no. ..., Lisbon, hereinafter referred to as the "Claimant," requested the constitution of an arbitral tribunal pursuant to Article 2, paragraph 1, subparagraph a), and Article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral ruling concerns the declaration of nullity of the tax assessment acts for IMT and IS in the total value of €16,197.37 (sixteen thousand one hundred ninety-seven euros and thirty-seven cents), better identified in the initial petition submitted by the Claimant, and which are hereby considered pleaded and reproduced for all legal purposes, which concern the urban property owned by the Claimant, located at Rua..., no. ..., registered with the matriculation article ..., Parish of ..., Municipality of ..., as per documents attached to the initial petition.

The Claimant further requests the condemnation of the Respondent to restitution of the amounts unduly paid and that it be recognized the right to compensatory interest on all amounts paid.

1.3. To support its request, the Claimant alleges that the assessments that are the subject of this petition are unlawful as it considers unconstitutional, by violation of Article 103 of the Constitution of the Portuguese Republic, Article 236 of Law 83-C/2013, of 31 December, which approved the State Budget for 2014.

The Claimant further considers that the impugned assessments are null pursuant to subparagraph d) of paragraph 2 of Article 133 of the Administrative Procedure Code (CPA) because they offend the essential content of a fundamental right, and are therefore challengeable at any time.

1.4. The Tax Authority defends that the request for declaration of nullity of the contested assessments should be judged unfounded, defending itself by exception and by objection. By exception, the Respondent argues that in the Portuguese administrative-legal system, the general regime of invalidity of acts is, for reasons of legal certainty, mere voidability, including for acts carried out on the basis of illegal or unconstitutional deliberations, with the Supreme Administrative Court having pronounced itself in the same sense.

The Respondent notes that the declaration of nullity appears to be reserved for those acts that offend the essential content of a fundamental right, conflicting with the rights, freedoms and guarantees of citizens, but not those that conflict with the principle of legality, as is the case in the present proceedings.

The acts in question, being, without such being conceded, in violation of the principle of tax legality, would thus be voidable, but not null, whereby the present arbitral request is time-barred, as the period for challenging the assessment acts has long since expired.

The Respondent further adds, in its defense by exception, that the Arbitral Tribunal is not competent to assess or declare the constitutionality or unconstitutionality of Article 236 of Law 83-C/2013, of 31 December, as the Claimant essentially seeks.

It defends itself by objection stating that the law established no new requirement for application of the exemption provided for in the fiscal regime of FIAH, but merely granted a deadline for compliance with a requirement already inherent to the regime itself, a deadline that only begins after the entry into force of the new law.

This is not therefore a matter of altering the assumptions, conditions of attribution or recognition of a tax benefit, but solely and exclusively regulating the period of time for purposes of proving compliance with a previously established requirement. Whereby the Respondent considers that the provision in question is not unconstitutional.

Whereby the Respondent considers that the present petition should be declared unfounded.

1.5. The parties agreed to waive submissions and the meeting of the arbitral tribunal provided for in Article 18 of the RJAT.

  1. CASE MANAGEMENT

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with Article 2 of the RJAT.

The parties have legal personality and capacity, prove themselves legitimate and are regularly represented (cf. Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Regulation no. 112-A/2011, of 22 March).

No procedural defects were identified.

  1. FINDINGS OF FACT

As relevant to the decision on the merits, the Tribunal considers the following facts proven:

  1. Fund B... was, as of the date of the assessments sub judice, the owner of the urban property that is the subject of those same assessments, located at..., ..., Parish of..., Municipality of....

  2. In accordance with what was mentioned in the initial petition and in the response given by the Respondent, an IMT assessment was made in the amount of €13,718.95 (thirteen thousand seven hundred eighteen euros and ninety-five cents) and an IS assessment in the amount of €2,475.42 (two thousand four hundred seventy-five euros and forty-two cents), both with a payment deadline of 25 August 2014, which were paid by the Claimant.

  3. Such assessments were made pursuant to Article 236 of Law 83-C/2013, of 31 December (State Budget for 2014).

Facts Not Proven

No essential facts, with relevance to the assessment of the merits of the case, which were not proven, were found.

Reasoning on Findings of Fact

The conviction regarding the facts determined as proven was based on documentary evidence submitted by the Claimant, whose authenticity and correspondence to reality were not contested by the Respondent.

  1. ISSUES TO BE DECIDED

Two issues are to be decided in the present proceedings:

a) To rule on the exception of challengeability of the acts due to the time-barred nature of the request and the lack of jurisdiction of the Arbitral Tribunal;

b) To determine whether the IMT and IS assessments sub judice carried out pursuant to Article 236 of Law 83-C/2013, of 31 December (State Budget for 2014) are unlawful or not.

  1. On the Challengeability of the Acts and the Lack of Jurisdiction of the Arbitral Tribunal

Prior to the assessment of the merits of the case, it is necessary, first and foremost, to determine the timeliness of the arbitral action request submitted by the Claimant.

The Tax Authority bases its position, with regard to the exception of challengeability of the acts, on the fact that the assessment acts sub judice should be considered voidable and not null, whereby the present arbitral request is time-barred, as the period for challenging the assessment acts had long since expired when the present petition was filed in the Arbitral Tribunal.

Now, it is well-established case law in various judgments that, in the domain of tax litigation, the nullity or even the non-existence of a rule on which a tax assessment act is based does not imply the nullity of that act, generating only a situation of abstract illegality of the assessment.

The same regime applies with regard to an assessment act that applies an unconstitutional rule, unless it offends the essential content of a fundamental right, which is not the case with the principle of legality.

In other words, even if the assessment acts sub judice were based on an unconstitutional rule, the defect from which they suffer would always be voidability and not nullity.

By way of example, the Judgment of 27.01.2010 - Appeal no. 948/09, in which it was stated: "In fact, it is well known that in the domain of tax litigation the non-existence of a rule on which a tax assessment act is based does not imply the nullity of that act, generating only a situation of abstract illegality of the assessment ….which may be invoked under the terms of compulsory collection, until the end of the deadline for opposing tax execution, even if after the deadline for challenging voidable acts, but never at any time".

According to settled and reiterated case law of the SAC, even in cases of acts applying unconstitutional rules, the corresponding defect of violation of law due to error in the assumptions of law generates mere voidability, unless it arises from the content of a fundamental right (subparagraph d) paragraph 2 of Article 133 of the CPA), which is not the case with the principle of legality, protection of good faith or right to private property (judgments of 30/01/01, 15/01/03, 25/05/04, 16/11/05, 10/01/07, 5/07/07 and 7/05/08, in proceedings nos. 26,392, 1629/02, 208/04, 1108/03 (Plenary), 736/05, 496/06, 479/06 (Plenary) and 1034/07).

We see no reason to follow a different understanding from that which has been followed by the SAC judgments mentioned above, because one thing is the defect of the rule, another, different thing, is the defect of the act. That is, an assessment act that applies a rule under the incorrect assumption of its validity, its existence or legal relevance, suffers from a defect of violation of law due to error in the legal assumption, which is a cause of mere voidability, but not of nullity.

And, thus being, with the assessment acts sub judice being sanctioned only by the general rule of voidability, the applicable regime as to the deadline for filing a challenge is that of subparagraph a) of paragraph 1 of Article 102 of the CPPT.

Thus, having the Claimant been notified to pay the assessments sub judice by 25 August 2014, the Claimant's petition was filed in this Tribunal, with the respective deadline already having been exceeded, whereby the Claimant's right to challenge by means of filing the request for constitution of an arbitral tribunal the assessments in question has lapsed.

Whereby the request for arbitral ruling submitted is considered time-barred, by lapse of the right of action, thus prejudicing the examination of the question of merits.

  1. DECISION

In light of the foregoing, it is decided to declare the request for arbitral ruling submitted time-barred, by lapse of the right of action, thus absolving, in consequence, the Respondent of the request.

The value of the case is fixed at €16,197.37 (sixteen thousand one hundred ninety-seven euros and thirty-seven cents), in accordance with the provisions of Article 3, paragraph 2 of the Rules of Costs in Tax Arbitration Proceedings (RCPAT), Article 97-A, paragraph 1, subparagraph a) of the CPPT and Article 306 of the CPC.

The amount of costs is fixed at €1,224 (one thousand two hundred twenty-four euros) pursuant to Article 22, paragraph 4 of the RJAT and Table I attached to the RCPAT, borne by the Claimant, in accordance with the provisions of Articles 12, paragraph 2 of the RJAT and 4, paragraph 4 of the RCPAT.

Let notification be made.

Lisbon, 28 February 2016

The Arbitrator

(Maria Antónia Torres)

Text prepared by computer, pursuant to Article 131, paragraph 5 of the Code of Civil Procedure, applicable by reference of Article 29, paragraph 1, subparagraph e) of the RJAT.

The drafting of the present arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

What is the FIIAH and SIIAH special tax regime for IMT and Stamp Tax under Portuguese law?
The FIIAH (Real Estate Investment Funds) and SIIAH (Real Estate Investment Companies) special tax regime provides exemptions from IMT and Stamp Tax on property acquisitions when specific conditions are met. Article 236 of Law 83-C/2013 established deadlines for proving compliance with requirements inherent to this exemption regime. The Tax Authority maintained this provision merely regulated the timeframe for demonstrating compliance with pre-existing requirements rather than creating new substantive conditions, meaning it did not retroactively alter the fundamental assumptions for tax benefit eligibility under the special regime applicable to these real estate investment vehicles.
Can IMT and Stamp Tax assessments under Article 236 of Law 83-C/2013 be declared null on constitutional grounds?
Under Portuguese tax law, IMT and Stamp Tax assessments based on allegedly unconstitutional provisions cannot be declared null solely on constitutional grounds. Even when applying an unconstitutional rule, tax assessments are classified as voidable rather than null, unless they offend the essential content of a fundamental right. Violations of the tax legality principle (Article 103 of the Constitution) do not qualify as offenses to essential fundamental rights content according to established Supreme Administrative Court jurisprudence. This classification has critical procedural consequences: voidable acts must be challenged within statutory deadlines, while null acts can be contested at any time.
What is the difference between nullity and annulability of tax assessments in Portuguese administrative law?
Portuguese administrative law distinguishes between nullity and annulability (voidability) of tax assessments based on legal certainty principles. Null acts suffer from the most severe defects—such as offending the essential content of fundamental rights—and can be challenged at any time without time-bar limitations. Voidable acts, conversely, have less serious defects and are subject to mandatory challenge deadlines (typically 90 days for administrative appeals or 3 months for arbitral proceedings). The general regime favors voidability over nullity, even for assessments based on illegal or unconstitutional norms, reserving nullity for exceptional circumstances involving fundamental rights violations. This distinction determines whether taxpayers can bring time-barred challenges.
How does Article 103 of the Portuguese Constitution apply to retroactive IMT and Stamp Tax charges on real estate funds?
Article 103 of the Portuguese Constitution enshrines the tax legality principle, requiring taxes to be created by law with clear definitions of essential elements. The claimant argued that Article 236 of Law 83-C/2013 violated this principle by retroactively imposing IMT and Stamp Tax charges on real estate funds that previously enjoyed exemptions. However, Portuguese arbitral and administrative courts have consistently held that violations of the tax legality principle—even if proven unconstitutional—do not constitute offenses to the essential content of fundamental rights. Consequently, assessments based on allegedly unconstitutional retroactive provisions remain voidable rather than null, requiring timely challenge within statutory deadlines and limiting the grounds for declarations of absolute invalidity.
Are taxpayers entitled to refund and compensatory interest when challenging IMT and IS assessments before CAAD?
Taxpayers challenging IMT and Stamp Tax assessments before CAAD (Centro de Arbitragem Administrativa) are entitled to request both refund of amounts unduly paid and compensatory interest if their challenges succeed on the merits. However, entitlement to these remedies depends on successfully overcoming procedural defenses such as timeliness requirements and jurisdictional limitations. In cases where assessments are classified as voidable rather than null, challenges filed after statutory deadlines may be rejected as time-barred regardless of substantive merit. Additionally, arbitral tribunals face jurisdictional constraints regarding constitutional review powers, potentially limiting their ability to declare legislative provisions unconstitutional, which may affect the ultimate success of refund claims based on constitutional arguments.