CAAD 348/2018-T: IMT Subsequent Price Reduction Under Article 12(1) CIMT – Tax Reassessment

ARBITRAL DECISION

The Arbitrators, Dr. Alexandra Coelho Martins (in the capacity of arbitrator-president), Dr. Rui Ferreira Rodrigues (in the capacity of arbitrator-member) and Dr. Alexandre Andrade (in the capacity of arbitrator-member), designated by the Deontological Council of the Administrative Arbitration Centre (hereinafter referred to as "CAAD") to form the Collective Arbitral Tribunal, constituted on 27 September 2018, decide as follows:

1. Report

A..., Lda. (hereinafter referred to only as "Claimant"), with VAT number ..., with registered address at Av. ..., no. ..., ..., in Lisbon, filed a request for constitution of a Collective Arbitral Tribunal, pursuant to Decree-Law no. 10/2011, of 20 January (Legal Framework of Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (hereinafter "Respondent" or "AT") is the respondent party.

The Claimant seeks that the alleged illegality of the decision dismissing Hierarchical Appeal no. ...2015..., of 4 May 2018, which proceeded in the Department of Services for Municipal Tax on Onerous Real Property Transfers ("IMT"), issued, pursuant to subdelegation of powers, by the Head of IMT Services, which concerned the decision dismissing the Amicable Claim filed under no. ...2014..., lodged against the IMT assessment, in the context of case no. ...2012... of the Tax Office ... ..., in the amount of € 84,796.65, plus compensatory interest of € 4,804.31, as per collection document no.... This assessment was based on the price declared in the deed executed on 1 February 2008, relating to the transfer of rural property registered in the cadastral matrix under article..., Section E, described in the ... Land Registry Office of ... under no....

The Claimant petitions for the declaration of nullity or partial annulment of the acts identified above and, equally, of the corresponding administrative fine in the amount of € 17,035.63, and for the AT to be condemned to partial refund of the amounts paid in the sum of € 70,332.28, plus indemnity interest, calculated in accordance with article 61, paragraph 5 of the Tax Procedural Code ("CPPT").

To support the claims made, the Claimant alleges that the price declared in the deed relating to the acquisition of the property does not correspond to the truth, nor to its tax property value ("VPT"), having been substantially reduced to a total price paid that was fixed at € 525,000.00.

The Claimant argues that the initial public deed of acquisition of the property, executed on 1 February 2008, was rectified by deed dated 30 September 2014. Thus, in its view, the AT should have revised the IMT assessment, recalculating the tax on the reduced value, in conformity with articles 12 of the IMT Code, 36 of the General Tax Law (LGT) and with the principle of good faith. It invokes article 100 of the CPPT, whereby, in case of doubt about the existence and quantification of the tax fact, the act challenged here should be annulled.

As referred to above, the Claimant concludes by requesting the declaration of nullity or, if not so determined, the annulment of the tax acts of first and second instance aforementioned. It submitted documents and requested evidence by party statements.

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD on 20 July 2018 and subsequently notified to the Respondent.

In accordance with articles 5, paragraph 3, subparagraph a), 6, paragraph 2, subparagraph a) and 11, paragraph 1, subparagraph a), all of the RJAT, the Deontological Council of CAAD designated as arbitrators of the Collective Arbitral Tribunal the signatories, who communicated acceptance of the appointment within the time limit provided in article 4, paragraph 2 of the CAAD Deontological Code.

On 7 September 2018, the parties were duly notified of this designation and did not express any wish to refuse the appointment of the arbitrators, in accordance with articles 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the CAAD Deontological Code.

In accordance with the provision of article 11, paragraph 1, subparagraph c) of the RJAT, the Collective Arbitral Tribunal was constituted on 27 September 2018.

On 28 September 2018, the Respondent was notified to submit its Answer, attach a copy of the Administrative Process ("PA") and request, if it so wished, the production of additional evidence.

The Respondent submitted its answer and attached the PA on 31 October 2018. It contends for the dismissal of the arbitral request, for which purpose it invokes, by exception, the impropriety of the procedural means used, with regard to the matter of the administrative fine. By impugning, the Respondent argues the lack of proof of the facts alleged regarding the amount paid, with various discrepancies in the Claimant's version and in the documents, since the initial deed shows that the amount of € 758,172.96 was paid, in the PA the Claimant states that the amount € 300,000.00 was paid and, finally, in the Request for Arbitral Pronouncement ("ppa"), € 325,000.00.

The Respondent states in its Answer that the Claimant did not point out any illegality to the contested decision [dismissing the Hierarchical Appeal], but only to the act of IMT assessment. As for this, all the vicissitudes that the Claimant describes occurred after the date of the tax fact and, for that reason, cannot prevent the assessment. No fact occurred that could justify the rectification or annulment of the IMT assessment, as the consolidated tax legal relationship cannot be altered subsequently by the will of the parties, whereby the acts that are the subject of this action are valid. With regard to the request for indemnity interest, there is no error attributable to the services, whereby the respective constitutive requirements are not met.

The Claimant, notified for this purpose, exercised the right to reply regarding the exception raised, arguing for its dismissal.

By order dated 7 November 2018, this Arbitral Tribunal decided to dispense with the production of evidence by party statements, in light of the finding that relevant facts are only subject to documentary proof, and dispensed with the meeting provided for in article 18 of the RJAT, as being unnecessary.

The Arbitral Tribunal set as the deadline for issuing the Arbitral Decision the time limit provided in article 21 of the RJAT.

The parties submitted arguments, in which they maintain, in substance, the positions expressed in the initial pleadings.

2. Preliminary Issues and Dismissal

The Tribunal was regularly constituted and is competent in respect of the subject matter, given the configuration of the subject of the case, in accordance with articles 2, paragraph 1, subparagraph a) and 5 of the RJAT, with the exception of the claim made in relation to the administrative fine applied, in the terms that are explained below.

2.1. Impropriety of the Procedural Means and Incompetence of Arbitral Jurisdiction - Administrative Fine

It follows from the ppa that the Claimant petitions for the partial annulment of the administrative fine applied pursuant to article 52 of the General Framework for Tax Infringements ("RGIT"), in the amount of € 17,035.63, which the Respondent contests based on the impropriety of the procedural means used, since the procedural species provided for reacting against the application of administrative fines is the appeal to the tax court of first instance, as provided in article 80 of the RGIT.

Indeed, the present procedural means – arbitral action – is not suitable for attacking the contested act, consisting of the decision applying an administrative fine. However, it is not merely a matter of error in the form of procedure that could, under certain conditions, be remedied and converted into the appropriate form of procedure, under article 98, paragraph 4 of the CPPT. In the case of Arbitral Tribunals, their jurisdiction is limited to the claims enumerated in article 2, paragraph 1 of the RJAT, which does not contemplate sanctionary matters, namely the review of decisions applying administrative fines, as can be seen from the reading of the provision transcribed below:

"1 – The competence of arbitral tribunals comprises the review of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts determining the taxable matter when it does not give rise to the assessment of any tax, of acts determining the taxable income and of acts establishing tax property values".

Thus, considering that the administrative act applying administrative fines does not fall under any of the above subparagraphs, finding support in the RGIT or, subsidiarily, by virtue of the provision in subparagraph b) of article 3, in the General Framework for Administrative Violations, approved by Decree-Law no. 433/82, of 27 October, there is an exception of absolute incompetence (and lack of jurisdiction) of this Arbitral Tribunal which, for that reason, is prevented from reviewing the claim for annulment relating to the decision that applied the administrative fine (articles 16 of the CPPT and 89, paragraphs 1, 2 and 4, subparagraph a) of the Code of Administrative Court Procedure ("CPTA"), in accordance with the referral made by article 29, paragraph 1, subparagraph c) of the RJAT, without prejudice to the continuance of the instance with regard to the other claims made.

In these terms, the exception of absolute incompetence (by reason of subject matter) of the Arbitral Tribunal is well-founded with respect to the decision applying the administrative fine.

2.2. Timeliness

One of the grounds for the decision dismissing the Hierarchical Appeal, which is the subject of this action, is that the period for the taxpayer to react has expired, whereby the tax act of IMT assessment, dating from 2012, would no longer be subject to claim, review or challenge and would have, for that reason, become final. Not occurring a situation of error in the expression of the transaction, which if it existed would have to be clear and manifest, it would not be a matter of rectification of the price, but of a later alteration (reduction) of the price, resulting from a transaction approved in the insolvency proceedings of the sellers' estate.

It is important to note that this argument of untimeliness of amicable reaction would imply, in case of success, the timeliness defect of the arbitral proceedings, as more than 90 days having elapsed from the tax act of assessment, the contentious means would depend on the admissibility of the administrative challenge made, in accordance with articles 10, paragraph 1, subparagraph a) of the RJAT and 102, paragraph 1 of the CPPT.

However, as invoked by the Claimant, the AT's position does not take into account the occurrence of a supervening fact, namely the execution of the deed of rectification (reduction) of the price on 30 September 2014[1]. This deed constitutes the ground of the request for revision of the IMT assessment, whereby the period should be counted from that fact subsequent to the act of assessment, as results from article 70, paragraph 4 of the CPPT, which provides that "[i]n case of a supervening document or judgment, as well as any other fact that could not have been invoked within the time limit provided in paragraph 1, this is counted from the date when it became possible for the claimant to obtain the document or become aware of the fact."

Considering that the Amicable Claim was filed within the 120-day period provided in article 70, paragraph 1 of the CPPT, counting from the date of the rectification deed, no alleged timeliness defect of the administrative means of reaction is apparent.

On the other hand, the request for arbitral pronouncement is timely, because it was submitted within the 90-day period provided in article 10, paragraph 1, subparagraph a) of the RJAT, counting from the notification of the decision dismissing the Hierarchical Appeal, which occurred on 14 May 2018, with the action being filed on 20 July 2018.

2.3. Other Procedural Requirements

The parties have legal capacity and are duly capable, are legitimate and are properly represented (article 4 and paragraph 2 of article 10, both of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities.

3. Findings of Fact

Proven Facts

Having analyzed the documentary evidence produced, the following facts are considered proved as being relevant to the decision:

A. A..., Lda., here Claimant, is a commercial company whose business is the construction industry and public works, urbanization, execution of technical projects, exploitation and administration of rural and urban properties that it may construct, acquire or lease, shares or quotas of capital of commercial companies, tourism enterprises of its own or others, and it may also resell the properties it acquires and sell those it constructs – cf. permanent certificate attached with the ppa.

B. The Claimant acquired, by Public Deed of Purchase and Sale, executed on 1 February 2008, from B... and C..., rural property with an area of 27,850 m2, located in ..., in the Municipality of ..., County of ..., registered in the cadastral matrix under article..., Section E and described in the ... Land Registry Office of ... under the number ... – cf. copy of the public deed attached with the ppa and contained in the PA and copy of the property card.

C. In this deed a sale price of € 1,695,913.00 (one million six hundred ninety-five thousand nine hundred thirteen euros) was declared and that the Claimant had already received the sum of € 758,172.96 (seven hundred fifty-eight thousand one hundred seventy-two euros and ninety-six cents), with the remaining amount of € 937,740.04 (nine hundred thirty-seven thousand seven hundred forty euros and four cents) remaining in the possession of the Claimant until the final judgment of the court action concerning the attachment registered in the ... Land Registry Office of ... by registration F, AP 57, of 11 January 2006 – cf. copy of the public deed attached with the ppa and contained in the PA.

D. The same deed contains a reference to a certificate from the Tax Office of Lisbon ... proving that the Claimant usually exercised the activity of purchase of properties for resale in the previous year, and it was declared that the acquired property was intended for resale, whereby its acquisition was carried out with IMT exemption, in accordance with article 7, paragraph 1 of the Code of this tax. The acquisition of the property was registered in favor of the Claimant at the Land Registry Office, with entry 1, of 7 July 2008 – cf. copies of the public deeds of purchase and sale and rectification attached with the ppa and contained in the PA.

E. The seller of the rural property identified above, B..., died in July 2008, and the Claimant was cited in Estate Proceedings no. .../08...T..., which took place in the Judicial Court of ..., as a consequence of which it presented a claim against the statement of assets presented by the Head of the Estate left by B..., since the credit related to the Claimant, in the amount of € 1,395,912.84, was, in the Claimant's understanding, of greater value than the actual one – cf. grounds of the decision on Hierarchical Appeal contained in the PA.

F. In the referred Estate Proceedings, the Claimant petitioned for reduction of the legal transaction, i.e., the reduction of the purchase price of the rural property, depending on the area of land that could actually be used for subdivision and residential construction – cf. grounds of the decision on Hierarchical Appeal contained in the PA.

G. On 8 November 2011, the Claimant also filed a declaratory action against the Heirs of the Undivided Estate left by the death of B... and C..., which took place in ... Court of the Judicial Court of ..., under no. .../11...T..., and it was appended to the insolvency proceedings of the said Estate, with no. .../11...T..., and it again petitioned for the reduction of the purchase price of the rural property with identical grounds – cf. grounds of the decision on Hierarchical Appeal contained in the PA.

H. In the insolvency proceedings of the Estate (no. .../11...T...), the Claimant argued that the price of the transaction relating to the purchase of the rural property identified above had to be adjusted to its real market value, an appraisal being conducted at the request of the insolvency administrator and the Court, which established the value of this property, with reference to March 2012, in the following terms:

"Conclusion of Values

In accordance with the assumptions and constraints to be described below and as presented in the assessment tables in the annexes, the Market Value of the Property, as of March 2012, is in our opinion reasonably represented by the following amounts:

It was further analyzed the urban development of a scenario considering the construction potential according to the urban parameters defined in the Urban Development Plan under review with the value determined in these circumstances being 1,334,000 Euros."

– cf. document authored by D..., Lda. attached with the ppa.

I. In 2012, the Claimant was subject to internal audit action, determined by Service Order no. OI2012..., with the objective of monitoring "the exemption from payment of Municipal Tax on Onerous Real Property Transfers (IMT), in acquisitions of properties intended for resale", in accordance with article 7 of the Code of this tax – cf. Tax Inspection Report ("RIT") contained in the PA.

J. In the course of this audit action, the AT requested clarifications from the Claimant, under the principle of cooperation, and the latter replied in the following terms:

"2. Considering the attachments and resources affecting the property in question, it was agreed between the parties a payment plan of the price conditional on the conversion of the registrations and on obtaining approval of the subdivision project by the City Council of ... (essential condition for the realization of the legal transaction), a payment plan that resulted in the following:

i. Until the date of execution of the deed of purchase and sale the payment of the sum of € 300,000.00 (three hundred thousand euros);

ii. On the day of the deed a guarantee check in the value of € 458,172.80 (four hundred fifty-eight thousand one hundred seventy-two euros and eighty cents) which would remain with Mr. E... in the capacity of depositary, as per the statement attached and given as fully reproduced – which would only be presented for payment after approval of the subdivision project by the City Council of .... A requirement that has not been fulfilled to the present date.

iii. The remainder in the amount of € 937,740.20 (nine hundred thirty-seven thousand seven hundred forty euros and twenty cents) which would remain in the possession of the Claimant until the final judgment of the court action that is proceeding through the Judicial Court of ..., case no. .../06... C...-A of the first court of mixed jurisdiction.

1. At the time of the deed on 1 February 2008 only the sum of € 300,000.00 (three hundred thousand euros) was liquidated, and up to that date none of the requirements that would lead the buyer to liquidate the remaining amounts have been met.

2. Moreover, it transpired that the expectations created for the realization of the transaction proved to be false, as they did not correspond to the truth (the land could not be subdivided in its entirety and the City Council did not approve the Projects in the manner they were "sold" to the Claimant) so the A... came to the Insolvency Action of the "Undivided Estates opened by the death of B... and C...", which is proceeding through ... Court of the Judicial Court of ..., with the number .../11...T..., to request the reduction of the price established in the deed of purchase and sale, which should be fixed at € 830,997.37 (eight hundred thirty thousand nine hundred ninety-seven euros and thirty-seven cents).

3. As such the global value of the sale for purposes of IMT assessment is requested to be calculated on the global value of € 830,997.37 (eight hundred thirty thousand nine hundred ninety-seven euros and thirty-seven cents) and not on the value initially provided for the sale of € 1,695,913.00 (one million, six hundred ninety-five thousand nine hundred thirteen euros)." – cf. reply of the Claimant dated 14 May 2012, on the subject: "Request for clarification regarding the acquisition of properties with IMT exemption" contained in the PA.

K. Also within the scope of the audit action, the Claimant presented to the Tax Office a request for IMT assessment regarding the acquisition of the property in question, and was notified, through official letter no.... of 24 July 2012, of the IMT assessment in the amount of € 84,796.65, to which "are added compensatory interest, in accordance with paragraph 1 of article 33 of the CIMT, calculated day by day" and which were fixed at € 4,804.31, totaling € 89,599.96, as per collection document with reference no. ... and payment deadline of 30 August 2012 – cf. copy of the official letter and collection document contained in the PA.

L. According to the Inspection Report, "[t]he taxpayer identified above acquired the property(ies) listed in the following table, which benefited from IMT exemption, in accordance with article 7 of the Code [...]:

In accordance with the "Heritage – Form 11" database, the taxpayer does not appear as a party to any deed after 1-Feb.-2018, whereby it appears that it did not proceed with the resale of the property in question [...].

Under the principle of cooperation provided in article 59 of the General Tax Law (LGT), the taxpayer was notified through official letter no.... dated 19-Apr-2012 [...] to present the following justifications, which motivate the situation of non-compliance, regarding IMT assessment: [...]

– To have proceeded with the resale of the referred property(ies) within the period provided in paragraph 4 of article 7 and paragraph 5 of article 11 of the CIMT, or;

– In the case of not having resold the Properties within the previously mentioned period, a situation in which the previously granted exemption ceases, prove having proceeded with its regularization, as provided in article 34 of the referred Code.

[...]

In response to the notification, the taxpayer [...] sent to these Services the elements proving having proceeded with the voluntary regularization of IMT, within the time limit granted to it" – cf. Tax Inspection Report ("RIT") contained in the PA.

M. The Team Leader issued an opinion, dated 3 October 2012, recommending closure of the inspection proceedings, considering that the taxpayer made the request for assessment of the tax owed. On this opinion there was a concordant decision by the substitute Chief of Division, on 13 November 2012 – in accordance with a copy of the RIT contained in the PA.

N. On 3 September 2012, Notice Record no. .../2012 was issued to the Claimant and, as a consequence, administrative violation proceedings were initiated, as a result of which the payment of an administrative fine corresponding to 20% of the value of the tax in question was determined, in accordance with the General Framework for Tax Infringements ("RGIT"), fixed in the amount of € 17,035.63 – cf. Notice Record and documents contained in the PA.

O. On 5 March 2014, a Creditors' Assembly took place in case no. .../11...T..., of the ... Court of the Judicial Court of ..., regarding the insolvency of the Estate of the seller of the rural property, at which the transaction project presented by the Claimant was voted favorably and approved, in the following terms:

"1 – The definitive transfer, free of encumbrances or charges, of the ownership of the properties located in the County of ..., described in the following number to the Creditor A..., Lda., in exchange for payment by the Creditor A..., Lda. to the Insolvency Proceedings of the sum of € 350,000.00 (three hundred fifty euros), as:

• Of the agreed price due for the rural property in the amount of € 200,000.00 (two hundred thousand euros), registered in the cadastral matrix under article..., Section E and described in the ... Land Registry Office of ..., under no. ... [...].

– [...].

With regard to the property with property description no. ..., the rectification deed shall state that it is paid in full and that nothing further is owed by the Creditor with respect to this property.

• cf. Minutes of the General Assembly of Creditors contained in the copy of the certificate from the Judicial Court of ... attached with the ppa and contained in the PA.

P. On 30 September 2014, a Public Deed of Rectification and Alteration of Purchase and Sale was executed, in which it was declared:

"That on the first day of February two thousand and eight, at the Notarial Registry in ..., in charge of Notary Dr. F..., by deed recorded on pages twenty-seven of book number seventy-three, between the represented party of the second grantor [here Claimant] and B..., by him and in the capacity of attorney for his wife C..., a deed of purchase and sale of rural property located in ..., municipality of ..., county of ..., described in the Land Registry Office of ... under number ..., of that municipality, registered in the matrix under part of article..., Section E, was celebrated.

[...]

That the sellers have since died and their respective estate was subject to insolvency proceedings no. .../11...T..., which are proceeding through ... Court of the Judicial Court of ....

That within the context of the said proceedings a transaction concerning the alteration of the agreed price was subject to transaction.

That they hereby rectify the said deed, in that in the same it was declared that the sellers had already received the sum of seven hundred fifty-eight thousand one hundred seventy-two euros and ninety-six cents, when in reality only the amount of three hundred twenty-five thousand euros was paid.

That they also alter/reduce the respective price, previously agreed at one million six hundred ninety-five thousand nine hundred thirteen euros), in accordance with the transaction referred to, to five hundred twenty-five thousand euros.

That on this date the remainder of the price is paid in the amount of two hundred thousand euros, in respect of which the first grantor gives full receipt, nothing further being due from the purchasing company."

– cf. copy of the public deed attached with the ppa and contained in the PA.

Q. On 13 October 2014, not agreeing with the IMT assessment identified above, the Claimant filed an Amicable Claim, and was notified, by Official Letter no.... dated 12 November 2014, of the respective proposed decision of dismissal, in which it states:

"V – PROPOSED DECISION

1. For all the above and considering that the assessment was made in accordance with the CIMT, namely on the basis of the amount of € 1,695,913.00 stated in the deed of purchase and sale celebrated between the claimant and the sellers and duly notified; that the claimant did not claim or challenge the assessment, the tax became final, being certain, liquid and exigible, it is proposed that the Claim be dismissed for lack of legal basis."

– cf. amicable claim proceedings contained in the PA.

R. The Amicable Claim was dismissed, after exercise of the right to be heard, by order of the Head of Finances, dated 9 December 2014, based on the grounds transcribed as follows:

"From the decision in the referred insolvency proceedings it does not follow that the IMT assessment is rectified.

Although it was decided to rectify the deed of purchase and sale executed on 01/02/2008 in accordance with what was agreed by the creditors' assembly (approved by the Judicial Court of ...) it is not this rectification that implies the annulment of the IMT. In fact, formed the will of the grantors (having the first grantors already died well before the rectification) duly confirmed before the official responsible for executing the corresponding Public Deed to the transaction, at the agreed price, it is not enough that the subsequent rectification of this is sufficient to put in question the assessment of the tax. This would not be the case in the case of rescission of the contract.

Indeed, this Service merely proceeded in accordance with paragraph 1 of article 12 of the Code of Municipal Tax on Onerous Real Property Transfers (CIMT) – "The IMT shall be assessed on the value stated in the act or contract or on the tax property value of the properties, whichever is greater.

The assessment was made in accordance with applicable law and the declared values are not showing any legal justification for their correction/annulment.

There is therefore no error or illegality that puts in question the assessment claimed and justifies its revision, which would not be the case if there were rescission of the contract which would allow the proportional annulment of the tax in accordance with the terms provided in article 45 of the CIMT.

In this way, no other relevant facts being invoked, the initial proposed dismissal is maintained because there is no error or illegality in the IMT assessment." – cf. copy of the dismissal order and respective grounds contained in the PA.

S. By disagreeing with the decision dismissing the Amicable Claim, the Claimant filed a Hierarchical Appeal, which was also dismissed, by order dated 4 May 2018 and notified on 14 May of that year, by the Director of Services, by subdelegation of powers, based on the information no.... from the Department of Services of the IMT and other taxes on assets, from which the following relevant excerpts are extracted:

"V – Analysis

Considering all the factual context described above, and taking into account the applicable legal framework, it is incumbent upon us to analyze the request for revocation of the decision dismissing the amicable claim presented against the IMT assessment submitted.

For this purpose, it is important to note first that, taking into account what is requested in the petition, the amicable claim has as its objective to assess the legality of the tax assessment and the subsequent hierarchical appeal to assess the legality and merit of that first instance decision. In that respect, requests that do not deal with this issue are therefore outside the scope of this analysis, namely, those relating to issues related to the enforcement process or payment in installments.

Having delimited the request to the amicable claim decision that assessed the legality of the assessment, it is on this that this review focuses.

And indeed, the assessment in question results from the forfeiture of the IMT exemption for properties intended for resale. Article 7 of the CIMT provides for the exemption from tax for the acquisition of properties intended for resale, under the conditions set out there which are not immediately relevant in the present situation, and establishes a maximum period of three years for this resale to occur.

As a result of this maximum period of three years defined by the IMT legislator, paragraph 5 of article 11, relating to the forfeiture of exemptions, determines that this no longer applies "as soon as it is established that the properties acquired for resale were given a different purpose or that the same were not resold within the period of three years or were resold again for resale."

In turn, article 34 of the same statute provides in its paragraph 1 that "In the case that the exemption or reduction of rates is rendered without effect, in accordance with article 11, taxpayers must request, within 30 days, the respective assessment."

If this is not the case, it falls to the services to assess the tax officially, plus compensatory interest, as provided in article 33 which expressly states that "Whenever, due to a fact attributable to the taxpayer, the assessment of the tax owed is delayed, compensatory interest shall be added to this in accordance with article 35 of the General Tax Law."

In this specific case, the verification of the forfeiture of the exemption resulted from internal audit proceedings (Service Order no. OI2012...), but it was concluded during the proceedings that the taxpayer sent to the services elements proving having proceeded with the voluntary regularization of IMT within the time limit granted to it.

[...]

Now, considering the terms in which the assessment was made, we verify that for the same the general rule contained in article 12, paragraph 1 of the CIMT was applied, due to the fact that the forfeiture of the exemption was verified. A ground that is contained in the decision dismissing the decision made in amicable claim proceedings.

Namely, in so far as in their assessment, the services understood that, "reading the deed of purchase and sale celebrated in 2008, it does not appear that the declared price of € 1,695,913.00 was dependent on any requirement, namely the approval of the subdivision project and consequent building capacity."

However, the decision made was of dismissal in that, as stated in the proposed decision notified to the here appellant for purposes of prior hearing, "the assessment was made in accordance with the CIMT, namely on the basis of the amount of € 1,695,913.00 stated in the deed of purchase and sale celebrated between the claimant and the sellers and duly notified; that the claimant did not claim or challenge the assessment, the tax became final, being certain, liquid and exigible, it is proposed that the claim be dismissed for lack of legal basis."

In light of the arguments produced by the appellant in the prior hearing, these were further assessed, whereby, despite the lack of legal basis, nonetheless from the facts produced in the insolvency proceedings no grounds for the rectification or annulment of the IMT assessment result, namely in that it is not enough that the subsequent rectification of the declared will regarding the price of the transaction is sufficient to put in question the IMT assessment, which would not be the case in the event of rescission of the contract.

Now,

In analyzing the present hierarchical appeal we cannot be more in agreement with the decision made in amicable claim proceedings. Specifically as follows.

With the IMT assessment and its corresponding notification, the periods for reacting to the tax act begin to run, namely, the period of amicable claim, official revision or judicial challenge. If these are not exercised and these being peremptory periods, the tax act becomes final in the tax law order of that concrete legal relationship.

It is therefore to say that, only in the case of a supervening document or judgment, that could not have been invoked due to a fact not attributable to the taxpayer, as provided in paragraph 4 of article 70 of the CPPT, can a period for amicable claim be opened.

In this specific case, it appears that the "rectification" of the deed does not constitute, in practice, a supervening fact capable of opening the period to claim amicably against that assessment.

This is because, in fact, we are not facing a rectification that meets the content of the rule provided in article 249 of the Civil Code (CC), that is, it does not allow us to consider that the requirements of rectification of the declaration of will are met, since it does not reduce to the correction of "mere error of calculation or writing, revealed in the very context of the declaration, or through the circumstances in which the declaration is made."

It is therefore necessary that we are facing a situation of error, which must be clear and manifest. In the words of Vaz Serra "when the error in the declaration of will is not clear and manifest, it is not reasonable to subject the other party to the declaration or even third parties to whom that declaration may be opposed, to the mere rectification of an error that they may not have been aware of." (cf. Revista de Legislação e Jurisprudência, no. 112).

In this way, even if the intended rectification of the title is formalized, such procedure may have full efficacy between the parties, but will not be opposable to the AT, which, in accordance with the provision in paragraph 4, of article 36 of the LGT, is not bound by the qualification made by the parties.

Because in truth, what it is is a later alteration to the value of the contract, resulting from a transaction approved within the insolvency proceedings of the estate of the sellers.

This fact thus determines that, from the start, and as was understood in amicable claim proceedings, the appellant is not in time to react against the tax assessment, both by effect of general periods, as well as it does not appear possible to take advantage of the period provided in article 70, paragraph 4 of the CPPT.

Nevertheless, without prejudice to the foregoing, it shall be said that even if it were in time for an amicable claim, and as such, analyzing the substantive matter, it would still not be justified to have reason, namely, and as was said, because the reduction of the agreed price in the context of the also already mentioned insolvency proceedings does not configure a rectification of the deed, capable of producing tax effects.

VI – Proposed Decision

In light of the foregoing, it is proposed that the present request be dismissed, maintaining the decision dismissing the amicable claim."

– cf. copy of the dismissal order and respective grounds contained in the PA.

T. Not conforming with the decision dismissing the Hierarchical Appeal regarding the IMT assessment issued in 2012, the Claimant submitted on 20 July 2018 in the CAAD computer system the request for constitution of the Collective Arbitral Tribunal that gave rise to the present proceedings.

3.2. Reasoning

The pertinent facts for judgment of the case were chosen and determined by this Tribunal based on their legal relevance, in light of the plausible solutions to the legal questions, in accordance with the combined application of articles 123, paragraph 2 of the CPPT, 596, paragraph 1 and 607, paragraph 3 of the Code of Civil Procedure ("CPC"), by referral of article 29, paragraph 1, subparagraphs a) and e) of the RJAT.

With regard to the proven facts, the conviction of the arbitrators was based on the critical analysis of the documentary evidence submitted and on the position assumed by each of the parties in the pleadings.

3.3. Facts Not Proved

The Claimant failed to demonstrate the facts alleged in articles 5, 6, 14, 20 and 43 of the ppa, namely that the contract was celebrated under condition, whereby the remainder of the price would only be due after the subdivision project of the property was approved by the City Council. In fact, beyond the initial deed of purchase and sale, celebrated in 2008, not containing any term or condition for the purchase and sale, the Claimant declared payment of a much higher amount (of € 758,172.96), and in the clarifications given to the AT in May 2012, in the course of the audit action, it informed, in writing, that that amount had been € 300,000.00 (subparagraph J) of the findings) and, later, in 2014, it ultimately proceeded to rectify the deed by a different amount, of € 325,000.00. It is not possible to conclude which of the three versions occurred. On the other hand, there are no elements that suggest manifest error regarding the subject matter of the deed of purchase and sale of the property.

Likewise, it was not demonstrated that the commercial, real and market value of the property corresponded to € 525,000.00. In fact, in May 2012, the Claimant clarified to the AT, in writing, that the market value of the same (on which the IMT should have been assessed) was € 830,997.37, and attached to the proceedings an appraisal of the same carried out by a real estate consulting firm that indicates as market value € 998,000.00, quite distinct from the value of € 600,000.00 which, in article 11 of the ppa, the Claimant states resulted from that appraisal.

As for the allegation that the deed had been rectified, it was demonstrated that it was only regarding the amount that was declared as received (initially € 758,172.96 and then € 325,000.00), but not regarding the value / purchase price of the rural property. On this matter, the deed of 30 September 2014 is clear: it frames it as an alteration/reduction (subsequent) of price (which was based on an agreement of creditors in the insolvency proceedings of the Estate of the seller) and not as a rectification or retroactive correction of an error.

Finally, it was not demonstrated that the full payment of the amounts assessed for IMT and compensatory interest was made, only that payment in installments was agreed.

4. Legal Grounds

4.1. Of the Alleged Nullity of Tax Acts of First and Second Instance

The Claimant requests, as principal relief, the declaration of nullity of the acts dismissing the request for revision of the IMT assessment and of the assessment act itself. The regime for null acts is contained in articles 133 and 134 of the Administrative Procedure Code ("CPA"), in force at the date of the assessment, and is applicable by referral of article 2, subparagraph d) of the CPPT. The declaration of nullity is reserved for infringements of particular gravity, being subject to a principle of numerus clausus, as provided in paragraph 1 of the cited article 133. Acts are null "to which any of the essential elements are lacking or for which the law expressly declares this form of invalidity", with some illustrative examples being enumerated in its paragraph 2. In the situation under review there is no lack of any essential element, nor does the law provide for the defects invoked by the Claimant the disvalue of nullity. In this way, it is concluded that the issues to be reviewed fall within the rule-regime of voidability, provided in article 135 of the CPA, whereby the assertion of nullity is unfounded.

It is important to note that the understanding adopted is maintained within the framework of the new CPA, approved by Decree-Law no. 4/2015, of 7 January, in force since April 2015, which contains similar rules in articles 161, 162 (regime of nullity) and 163 (regime of voidability).

4.2. Of the Alleged Rectification of the Value of the Deed of Transfer of the Property

It follows from the petition that the Claimant seeks the annulment, in part, of the IMT assessments and respective compensatory interest made in accordance with articles 19, paragraph 2, 34 and 33, all of the IMT Code, relating to the acquisition, by the Claimant, on 1 February 2008, of rural property registered in the matrix of the Municipality of ..., County of ..., under article..., Section E, and described in the respective Land Registry Office under no...., inasmuch as this acquisition initially benefited from IMT exemption, under article 7, paragraph 1 of the referred Code, because the property was intended for resale, forfeiting, however, because the same was not resold within the period of three years, that is, by 1 February 2011, as provided in article 11, paragraph 5 of the Code of this tax.

The Claimant further states that the Amicable Claim and Hierarchical Appeal dismissed and here challenged are based on the express rectification of the public deed of 1 February 2008 and the respective price, from € 1,695,913.00 to € 525,000.00, which resulted from the outcome of the judicial proceedings of the Judicial Court of ..., with no. .../11...T...-U, regarding the insolvency of the Estate of the sellers, by judgment of 5 March 2014.

The disputed question consists in knowing whether, in light of the provision in article 12, paragraph 1 of the IMT Code, the alleged reduction of the price occurring in 2014 should imply the concomitant diminution of the basis of incidence of this tax and the consequent revision of the IMT assessment that took place in 2012, relating to the rural property identified in subparagraph B of the findings, due to forfeiture of the exemption for purchase for resale.

Specifically, it is under review whether the value of incidence of the IMT is, as advocated by the Respondent, that contained in the Public Deed of Purchase and Sale, dated 1 February 2008, in the amount of € 1,695,913.00, granted by the sellers and by the Claimant, in the capacity of buyer, or that contained in the Deed of Rectification and Alteration of Purchase and Sale, following the agreement approved in the creditors' assembly, on 5 March 2014, within the insolvency proceedings no. .../11...T..., which took place in the Judicial Court of ..., in the amount of € 525,000.00, as argued by the Claimant.

In this respect, article 5 of the IMT Code provides that "[t]he incidence of IMT is governed by the legislation in force at the time when the tax obligation is constituted" (paragraph 1) and that the tax obligation is constituted at the moment when the transfer occurs (paragraph 2). As the exemption in article 7, paragraph 1 of this Code applies in the situation at hand, having been declared the intention of resale at the moment of execution of the acquisition deed, the tax fact is reported to the forfeiture of the exemption, i.e., according to article 11, paragraph 1 of the IMT Code, "as soon as it is established that the properties acquired for resale were given a different purpose or that the same were not resold within the period of three years or were resold again for resale", with article 36, paragraph 1 of the LGT determining that the tax legal relationship is constituted with the tax fact, and its essential elements cannot be altered by the will of the parties, in accordance with paragraph 2 of this provision. It further provides that article 18, paragraph 2 of the IMT Code that if forfeiture of the exemption occurs, as is verified in the situation under review, the rate and the value to be considered in the assessment shall be those in force at the date of assessment.

Furthermore, in accordance with article 12, paragraph 1 of the cited Code, "the IMT shall be assessed on the value stated in the act or contract or on the tax property value of the properties, whichever is greater".

In the case under review, it is important to highlight a set of essential facts.

In the Public Deed of purchase and sale, executed on 1 February 2008, in which the ownership of the rural property located in the municipality of..., County of ... was transferred, better identified in subparagraph B of the findings, a sale price of € 1,695,913.00 was declared, to be paid in a certain way.

For IMT purposes, the basis of incidence should be calculated on the value of the contract, i.e., on the price agreed for the transfer (if higher than the VPT, as is the case in this situation), with no tax relevance being given to the manner in which that price is paid, whether in one lump sum or in installments.

On the other hand, the legal transaction in question was not made subject to any condition or term, suspensive or resolutive. Moreover, being a formal transaction (the purchase and sale of an immovable property), that condition or term would have to be in written form.

What is evident from the record is a version of the facts different from what the Claimant intends to maintain. From the outset, in the written clarifications given to the Respondent on 14 May 2012, in the course of the audit action, the Claimant states that it paid the amount of € 300,000.00, despite later, on 30 September 2014, having rectified the deed to € 325,000.00 (whereas it had initially declared receipt of € 758,172.96). Additionally, in this arbitral action, it argues that the market value of the property is € 525,000.00, having, however, proceeded to attach an appraisal carried out by a specialized company that values it at € 998,000.00 and transmitted to the AT, in the clarifications given on 14 May 2012, that the price established in the deed of purchase and sale of the rural property should be fixed at € 830,997.37 (eight hundred thirty thousand nine hundred ninety-seven euros and thirty-seven cents), requesting IMT assessment on this value, and not, as now, on € 525,000.00. Clarifications which, it should be noted, are not supported.

In summary, the Claimant alleges a set of arguments, invoking in particular that the transaction was celebrated under condition and that it suffers from error in the subject matter, without, however, satisfying the burden of proof that fell upon it.

It is important to take into account that the reduction of the value of the transfer of the property that the Claimant invokes (€ 525,000.00) results from an agreement approved in the creditors' assembly in the insolvency proceedings of the sellers of the property. This agreement served as the basis for the Public Deed of Rectification and Alteration of Purchase and Sale, executed on 30 September 2014, which expressly refers to two distinct situations:

• First, the rectification of the Deed of 1 February 2008, in that in the same it was declared that the sellers had already received the sum of € 758,172.96, when a lower amount of € 325,000.00 had been paid;

• Second, the alteration/reduction of the previously agreed price of € 1,695,913.00, by judicial transaction.

It is apparent that the purchase price of the rural property in question in these proceedings (subparagraph ii)), stated in the Public Deed of Purchase and Sale celebrated on 1 February 2008, was not rectified. The rectification of the Public Deed concerned only, as expressly stated in it, the part relating to the declaration of the amount paid at the moment of its execution.

Moreover, it was not a matter of rectification, but of a true alteration/reduction of the price, subsequent to the celebration of the transaction, by way of judicial transaction, with ex nunc effects. It appears that the fact that it was approved by court does not alter the fact that it is an agreement between the parties regarding matter that falls within available rights.

Thus, it was not a matter of correction, with retroactive effects of a price that ab initio was wrong – note that this was alleged, but it was not proved that the condition invoked by the Claimant that the price would be altered if certain building capacity were not verified -, but rather, an alteration of the price by agreement of the parties at a later moment.

With this configuration, the taxable value on which the IMT was assessed in 2008 was correctly determined, corresponding to the price validly agreed between the parties in the transaction, under articles 12, paragraphs 1 and 5 and 18, paragraph 2 of the Code of this tax. A later reduction of price, devoid of retroactive effects, occurring more than two years after the IMT assessment, does not have the capacity to produce effects on that assessment, as the law does not provide for it.

It is emphasized that the deed of purchase and sale, entitled by the Public Deed of Purchase and Sale, dated 1 February 2008, is perfect in its validity and efficacy, both as to subject matter (article 874 of the Civil Code) and as to form (article 875 of the same Code), with the price, in the amount of € 1,695,913.00 and the obligation of its payment being stated in it, this obligation constituting one of the essential effects of the contract, as well as the others provided in article 879 of the Civil Code.

It is also important to note that the actual payment of the price is not a condition of efficacy of the contract, since the constitution or transfer of real rights over a determined thing is given by mere effect of the contract (as stipulated in article 408, paragraph 1 of the Civil Code). This same results from the fact that the acquisition of the property in favor of the buyer and here Claimant is registered with entry 1 of 7 July 2008, notwithstanding the price not having been paid in full (in accordance with the Deed).

Furthermore, as noted above, the deed of purchase and sale, entitled by the Public Deed of Purchase and Sale, dated 1 February 2008, is not made subject to any suspensive or resolutive condition or term, whereby, in accordance with article 406, paragraph 1 of the Civil Code, it must be punctually fulfilled (pacta sunt servanda), notwithstanding that it may be modified or terminated by mutual agreement of the contracting parties or by alteration of circumstances, in accordance with article 437 of the Civil Code (rebus sic stantibus clause).

The agreement for reduction of the price to € 525,000.00, approved by the creditors' assembly on 5 March 2014, within the insolvency proceedings of the Undivided Estates Opened by the death of B... and C..., that is of the sellers of the property, which took place through ... Court of the Judicial Court of ... with no. .../11...T..., does not derive from the existence of error or vices of the will of the contracting parties regarding the price fixed in 2008, for example error in the declaration or fraud, provided in articles 247 and 253 of the Civil Code, respectively, deserving of rectification of the deed of purchase and sale, nor is it endowed with retroactive effects, being non-opposable to the AT as the basis of the IMT assessment, given that the legal hypothesis in article 12, paragraph 1 of the IMT Code refers to the value stated in the contract (the price indicated in the Public Deed of Purchase and Sale, dated 1 February 2008) and not to what results from later agreements to the contract, and the rate and the value to be considered in the assessment shall be those in force at the date of assessment (article 18, paragraph 2 of the IMT Code).

That is, the reduction of the price does not occur as a function of a condition of the very transaction taxed in the IMT assessment, the restoration of which the Claimant petitions, but rather of a new and autonomous act – the agreement approved by the creditors' assembly -, which has it as its object, but which, moreover, has a cause that is external and supervening to it.

In this context, this Tribunal is aligned with the Arbitral Decision in case no. 32/2013-T, of 9 August 2013, of which the following illustrative excerpt is highlighted: As Carlos Alberto da Mota Pinto taught, with regard to the legal transaction but in terms perfectly transferable to the tax act, the invalidity of an act "comes from a lack or irregularity of internal elements (essential, formative)", it being that "the absence of production of effects ... results from vices or deficiencies ... contemporary with its formation" ("General Theory of Civil Law", 3rd Updated Edition, Coimbra Editora, p. 605". That is, in summary, the validity of the act must be assessed in relation to the circumstances existing at the moment of its completion. Supervening circumstances may, if the law so determines, modify it, extinguish it, or suspend or restrict its efficacy, but not cause the invalidity of an act that validly was formed".

It should also be noted that, if the rescission of the contract were included in the said agreement, which civilly would have retroactive effects in accordance with article 434 of the Civil Code, such would not have the capacity to cause the annulment of the IMT owed for the onerous transfer stated in the deed of 1 February 2008, as the reentry of the property into the patrimony of the sellers would be subject to IMT (discipline that results from article 2, paragraph 5, subparagraph a) of the IMT Code), unless such rescission was the subject of judicial proceedings terminated by judgment and not by any other of the causes of termination provided in article 277 of the Code of Civil Procedure, such as transaction, for example (in accordance with José Maria Fernandes Pires, in "Lessons on Taxes on Heritage and Stamp Duty", 2016, 3rd Edition, Almedina, pp. 272/273). And even then the annulment of the tax would be equivalent to the product of its one-eighth by the number of complete years missing until eight (cf. article 45 of the IMT Code).

In this way, it is considered that, given that the IMT was assessed on the value stated in the deed of purchase and sale, entitled by the Public Deed of Purchase and Sale, dated 1 February 2008, in the amount of € 1,695,913.00, the law was correctly applied, more specifically the provision in article 12, paragraph 1 of the CIMT, whereby the Claimant's claim fails and the substantive defect of violation of law by error in the factual or legal assumptions is unfounded.

The tax legal relationship maintains the tax act of IMT and compensatory interest assessment, in the latter case due to the fulfillment of the conditions provided in article 35 of the LGT, and equally the decisions dismissing the second instance proceedings that fell upon it and that confirm it.

4.3. Of the Defect of Lack of Reasoning of the Amicable Claim

The Claimant argues the formal defect of lack of reasoning, by considering that the proposed decision dismissing the Amicable Claim did not rule on "the judgment of the Court, respective public deed and rectification of the price of the property".

Without prejudice to any shortcomings of the mentioned proposed decision, it appears that these were not such as to compromise the exercise of the right to be heard, which, moreover, was effectively concretized. In fact, in the context of prior hearing, the Claimant had the opportunity to point out the reasons for its disagreement and to point out the omissions it considered relevant, whereby it perceived the sense and scope of the proposed dismissal decision.

On the other hand, the definitive reasoning of the decision dismissing the Amicable Claim explicitly contemplates the points indicated by the Claimant following the right to be heard (cf. subparagraphs Q and R of the findings), whereby this decision does not violate the duty to give reasons which, in tax matters, is contained in article 77 of the LGT, whereby the assertion of this defect is unfounded, with the consequent maintenance of the act.

4.4. Indemnity Interest

The right to indemnity interest is grounded in article 43 of the LGT which, in its paragraph 1, makes it dependent on the occurrence of error attributable to the services from which has resulted the payment of a tax liability superior to that legally due. This provision provides that "[i]ndemnity interest is due when it is determined, in amicable claim or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount superior to that legally due".

The act of IMT assessment and compensatory interest object of this action does not suffer from the defects raised by the Claimant, whereby it cannot be concluded that there were improper payments, nor is the necessary requirement regarding "error attributable to the services" apparent.

In these terms, the legal conditions or requirements constitutive of the right to indemnity interest are not met, it not having been established that there was error attributable to the services from which resulted payment of tax liability in an amount superior to that legally due, in accordance with article 43, paragraph 1 of the LGT, whereby the Claimant's request also fails in this segment.

Finally, it is important to state that the relevant questions submitted for review by this Tribunal were known and assessed, as were not those whose decision was prejudiced by the solution given to others (cf. article 608 of the CPC, applicable by referral of article 29, paragraph 1, subparagraph e) of the RJAT).

5. Decision

In view of the foregoing, the arbitrators of this Arbitral Tribunal agree in deciding:

• The exception of absolute incompetence by reason of subject matter with respect to the administrative fine applied to the Claimant is well-founded and the Respondent is absolved of the proceedings in that part;

• The request for partial annulment of the decisions dismissing the Amicable Claim and Hierarchical Appeal and, equally, of the act of IMT assessment and compensatory interest on which they fell is unfounded;

• The request for the Respondent to be condemned to refund the amounts paid by the Claimant (of IMT and compensatory interest) and to pay indemnity interest is unfounded,

All with the legal consequences.

The process is fixed at the amount of € 70,332.28 in accordance with the provision of articles 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, paragraph 1, subparagraph a) of the CPPT and 306, paragraphs 1 and 2 of the CPC, the latter ex vi article 29, paragraph 1, subparagraph e) of the RJAT.

Costs in the amount of € 2,448.00, to be borne by the Claimant, in accordance with Table I attached to the RCPAT, and with the provision of articles 12, paragraph 2 and 22, paragraph 4 of the RJAT, 4, paragraph 5 of the RCPAT and 527, paragraphs 1 and 2 of the CPC, ex vi article 29, paragraph 1, subparagraph e) of the RJAT.

Let notice be given.

Lisbon, 12 February 2019

The Arbitrators,

Alexandra Coelho Martins

Rui Ferreira Rodrigues

Alexandre Andrade

[1] The Claimant invokes in the ppa the date of the deed as "5-6-2012", this reference being interpreted as a lapsus, as not only does no such deed with that date exist in the proceedings, but if it did it would certainly be out of time for the Amicable Claim that was filed in October 2014.

[2] Emphasis ours.