Summary
Full Decision
ENGLISH TRANSLATION
A – PARTIES
A… - …, S.A., with registered office at Rua … Porto, registered in the … Commercial Registry Conservatorate of Porto under the registration number for Legal Entity No. …, hereinafter designated as Claimant or taxpayer.
TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes, by means of Decree-Law No. 118/2011, of December 15) hereinafter designated as Respondent or AT.
The application for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was regularly constituted on 24-04-2014, to assess and decide the subject matter of the present proceedings, and automatically notified to the Tax and Customs Authority on 24-04-2014, as set forth in the respective minutes.
The Claimant did not proceed to appoint an arbitrator, whereupon, pursuant to Article 6, paragraph 1, and Article 11, paragraph 1, letter b) 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 Paulo Ferreira Alves, the appointment having been accepted as legally provided.
On 01-07-2014 the parties were duly notified of this appointment and did not manifest any intention to challenge the appointment of the arbitrators, in accordance with Article 11, paragraph 1, letters a) and b), of the RJAT and Articles 6 and 7 of the Deontological Code.
In compliance with the provision of Article 11, paragraph 1, letter c) of Decree-Law No. 10/2011, of January 20, as amended by Article 228 of Law No. 66-B/2012, of December 31, the singular arbitral tribunal is duly constituted on 16-07-2014.
The arbitral tribunal is regularly constituted. It is materially competent, under the terms of Articles 2, paragraph 1, letter a), and 30, paragraph 1, of Decree-Law No. 10/2011, of January 20.
On 17-10-2014, the meeting provided for in Article 18 of the RJAT took place, in which the representatives of the claimant and the respondent were given the floor.
The parties have legal personality and capacity, are legitimate, and are legally represented (Articles 4 and 10, paragraph 2, of the same statute and Article 1 of Ordinance No. 112-A/2011, of March 22).
The proceedings do not suffer from defects that would invalidate them.
B – CLAIM
The Claimant herein seeks a declaration of illegality of the tax assessment act in the Municipal Tax on Onerous Property Transfers, assessed against the Claimant, which set a total tax payable of €59,781.80 (fifty-nine thousand, seven hundred and eighty-one euros and eighty cents).
C – CAUSE OF ACTION
In support of its request for an arbitral pronouncement, the Claimant alleged, with a view to declaring the tax assessment act in the Municipal Tax on Onerous Property Transfers illegal, in summary, the following:
The Claimant is a commercial company whose business purpose is the construction industry, purchase, sale, resale and rental of real property.
The Claimant underwent a Special Revitalization Process (PER), case number …/…TYVNG, which took place at the Commercial Court of Vila Nova de Gaia.
The Claimant acquired on 01/06/2012, by way of exchange, an urban property consisting of a parcel of land intended for construction, registered under article ... of the extinct parish of Cedofeita, now article ... of the Parish Union of Cedofeita, S. Ildefonso, Sé, Miragaia, S. Nicolau and Vitória.
The Claimant alleges that it made a declaration that the property was intended for resale.
The Claimant alleges that within the scope of the PER, it was forced to transfer the aforementioned property to B... - Bank ..., SA, with a view to extinguishing its debts to the same, which constituted one of the Bank's main creditors.
The Claimant sustains that the transfer of the property was a measure that met with the consensus of B... and the other creditors, with a view to extinguishing the Claimant's debts.
The Claimant contends that the operation carried out within and in accordance with the PER was part of the set of measures that the Claimant was forced to undertake in order to achieve its revitalization, which necessarily presupposed the restructuring of its liabilities, particularly with respect to banking institutions.
On 29.05.2013, the Claimant transferred, by public deed of performance of the alternative obligation (dação em cumprimento), the aforementioned property to B... - Bank ..., SA; with this transfer, the Claimant's debt to B... was fully settled in the total amount of €985,540.80.
The Claimant alleges that the operation of performance of an alternative obligation did not differ from the typical purchase and sale of real property.
It sustains that the operation of property transfer here in question was, in accordance with applicable and current accounting rules and, moreover, in accordance with the technical opinion of the Portuguese Association of Accounting and Administration Companies, accounting recorded as a sale.
The Claimant sustains that it recorded the transfer in the following manner: a) Account 7113101 was credited in the amount of €985,540.80 - Sales Revenue account; b) Account 2111110645 was debited in the same amount; c) Subsequently, an "account clearing" was carried out at the level of the third-party account, debiting accounts 251206 and 2722604 and crediting account 2111110645, offsetting the outstanding debt with the credited amount; d) Inventory and cost of goods sold accounts were also adjusted to record the exit of the property from the company's assets.
The Claimant notes that with the fulfillment of the terms of the PER, it has been able to remain in business, which it has continued to develop in terms that allow it to meet its commitments and respect the projects it has underway.
The Claimant was notified by official notice No. …/…-…, dated ….12.2013, to provide proof of the fulfillment of the necessary requirements to verify the IMT exemption granted in accordance with Article 7, to which it submitted its response by means of an application, alleging that it proceeded with the performance of an alternative obligation of the property in accordance with the PER, invoking the exemption of Article 7 of the CIMT, supported by a decision of the Secretary of State for Tax Affairs of …/03/1987, issued in Case …/… - Bk. …/…, of the … Directorate of Services of the DGCI, which recommended the fulfillment of the necessary requirements to verify the exemption.
The Claimant was notified of official notice No. …/…-…, of …/01/2014, regarding the official assessment of IMT concerning the acquisition of the property, to proceed within the specified period to pay the amount of €59,781.80, as IMT, plus compensatory interest in the amount of €1,270.98.
The Claimant contends that the AT's reasoning was based solely and exclusively on the fact that it considered that the Claimant failed to provide proof of the fulfillment of the necessary requirements to verify the exemption that had been granted to it, and that the AT understood that the Claimant had not resold the property, having instead given it a different purpose through the performance of an alternative obligation.
The Claimant sustains that the AT understood that the performance of an alternative obligation does not fall within the concept of "resale," for purposes of the provision of Article 11, paragraph 5 of the CIMT, and considered the right to exemption to have lapsed.
The Claimant argues that the performance of an alternative obligation was treated in all respects as if it were a sale, having all the specific characteristics of a purchase and sale.
The Claimant sustains that the assessment made by the AT suffers from a defect of violation of law, in that it is based on a lapse that did not occur in this case.
The Claimant sustains that in the present proceedings, it must be determined whether the IMT exemption enshrined in Article 7 of the CIMT should lapse in cases in which the property subject to it is transferred by way of performance of an alternative obligation.
The Claimant states that the exemption will cease to benefit the taxpayer if any of three conditions occur: (i) the property acquired had a different purpose from that which would result from resale, (ii) it remained in the taxpayer's legal sphere for more than three years, counted from the date of its acquisition, or (iii) it was transferred again for resale.
In support of its argument, the Claimant alleges that it must be determined whether the performance of an alternative obligation can be considered to be within the scope, for purposes of the CIMT, of the concept of resale, and it must also be determined whether the purpose given to property subject to an alternative obligation differs from the purpose given to property subject to resale.
The Claimant understands that the concept of resale used by the CIMT, as regards its essential characteristics and the economic-legal effect of the contract of performance of an alternative obligation, coincides entirely.
The Claimant bases its position on the allegation that from an accounting perspective, the performance of an alternative obligation is treated as a sale, and in light of the most elementary accounting principles, the operation of performance of an alternative obligation should be treated accounting-wise as if it were any sale of inventory.
It further sustains that the technical opinion available on the APECA website, when questioned about the accounting treatment to be given to the entry of a performance of an alternative obligation, states that it "should be treated as a sale, proceeding thereafter to the clearing of accounts."
It further states that the APECA's conclusion in this technical opinion is incontestable: "performance of an alternative obligation should be treated as a sale for all accounting and tax purposes."
And this could not be otherwise, given the accounting principle of Substance over Form, to which the performance of an alternative obligation is equivalent to a purchase and sale.
It further states that the economic functionality of both contractual arrangements is the same.
In the Claimant's view, it is not justified to distinguish between the two arrangements in question for purposes of IMT.
For purposes of the lapse of the exemption granted by Article 7 of the CIMT, the performance of an alternative obligation is also equated with a purchase and sale.
Indeed, the Respondent sustains that if a given taxpayer acquires property by way of a performance of an alternative obligation, the AT would certainly not refrain from charging IMT thereon.
The Claimant invokes just impediment, given the particular circumstances surrounding the conclusion of the transaction in question, which is subsumable under the concept of just impediment, and it was not by its will, but because it was thus imposed on it by the PER, that the Claimant transferred the property by way of an alternative obligation and not by a purchase and sale contract.
Wherefore, the performance of an alternative obligation should be admitted as falling within the scope of the exemption, for which reason the determination of its lapse effected by the AT appears to be illegal.
In light of these arguments, the Claimant understands that recognition cannot be withheld of its right to benefit from the exemption enshrined in Article 7 of the CIMT with respect to the acquisition of the property, from which it would necessarily follow that the assessment of tax carried out by the AT was illegitimate, as it was based on its alleged lapse.
Through a transaction that in no way differs from a purchase and sale, whether with regard to its effect of transferring ownership, or with regard to the operational result it produced for the Claimant, or also with regard to its accounting treatment.
For the Claimant, supported by case law of the STA and binding information from the SEAF, this type of contract should be considered within the concept of resale, given the similarity of its economic substance with a purchase and sale, and the fact that the purposes of the properties transferred under one and the other contractual arrangements coincide entirely.
The Claimant thus advocates for the annulment of the tax assessment act for Municipal Tax on Real Property, for violation of law.
D – RESPONDENT'S ANSWER
The Respondent, duly notified to that effect, timely filed its answer in which, in abbreviated summary, alleged the following:
The Respondent alleges that the interpretation effected by the Claimant is an isolated and outdated interpretation, which is not being followed by the Supreme Court of Justice.
The Respondent invokes in support of its argument the judgment delivered in case No. 01061/11, of 23.01.2013, by the Plenary Session of the Tax Dispute Section of the STA, in which the Respondent emphasizes that the judgment focuses its approach on the question of what constitutes "resale," for purposes of preventing the lapse of the SISA exemption for a property acquired for resale under the terms of Articles 11, paragraph 13-A, and 16 of the SISA Code (CIMSISSD).
The Respondent alleges that the appealed judgment concluded that the conclusion of a promise to purchase and sell contract accompanied by delivery of the property to the promissory buyer fulfills the concept of resale contained in Article 16 of the CMISISSD, since a tax transfer occurred, and the judgment's position was that the concept of resale contained in that rule should be understood in the technical-legal sense, concretizing the conclusion of a purchase and sale contract, and not being satisfied with the conclusion of a promise contract even if accompanied by delivery.
It further sustains that one of the conclusions presented by the judgment is that the literal wording of the provision should be taken into account from the outset in its interpretation, referring specifically to the expression "resale."
The Respondent contends that the interpreter of tax law, looking, from the outset and primarily, to the letter of the law, cannot equate the tax transfer defined in the rule of incidence of the tax with the requirement of the rule that establishes the lapse of the exemption, defining it clearly, unequivocally and precisely: non-resale, that is, it requires the conclusion of a new purchase and sale contract within the specified period to prevent the lapse.
The Respondent reiterates that the rules of interpretation of the rule that establishes the lapse of the exemption due to the failure to resell within the period established should therefore be understood as meaning that resale only occurs with a new purchase and sale contract.
Thus, the contract of performance of an alternative obligation established in Articles 837 et seq. of the Civil Code should not be considered "resale," or equated with a purchase and sale contract, which also has its own regime.
Thus, these contracts have a different civil-legal regime, and tax law respects them.
The Respondent alleges that the legislator in Article 7 of the CIMT intended to distinguish the taxable event of the lapse of the exemption by specifically selecting one of among all taxable events of tax transfer of a property.
The Respondent sustains that, although the contract of performance of an alternative obligation was forced by the PER, such circumstance cannot interfere with the interpretation of legal-tax rules, and cannot serve as an interpretive criterion.
It further states, the Respondent, as to the prevalence of the economic substance of the facts, in this regard we can only consider that accounting rules cannot interfere with the interpretation of legal concepts of the rules.
The Respondent concludes to the effect that the act in question does not suffer from any illegality and therefore objects to it as unfounded, and the present request for arbitral pronouncement should be judged as dismissed for lack of proof, and consequently the Respondent entity should be absolved of all claims, with the assessments impugned remaining in the legal order, as they constitute a correct application of the law to the facts.
E – FINDINGS OF FACT
Before proceeding with the assessment of these issues, it is necessary to present the factual matter relevant to its understanding and decision, which has been made on the basis of documentary evidence and taking into account the facts alleged.
As regards relevant factual matters, the present tribunal finds the following facts to be established:
The Claimant is a commercial company whose business purpose is the construction industry, purchase, sale, resale and rental of real property.
The Claimant underwent a Special Revitalization Process (PER), case number …/…TYVNG, which took place at the Commercial Court of Vila Nova de Gaia.
The Claimant acquired on 01/06/2012, by way of exchange, an urban property consisting of a parcel of land intended for construction, registered under article ... of the extinct Parish of Cedofeita, now article ... of the Parish Union of Cedofeita, S. Ildefonso, Sé, Miragaia, S. Nicolau and Vitória.
The Claimant made a declaration that the property was intended for resale, by means of a public deed.
The Claimant transferred on 29.05.2013, by public deed of performance of an alternative obligation, the aforementioned property to B... - Bank ..., SA.
With this transfer, the Claimant's debt to B... was fully settled in the total amount of €985,540.80.
The Claimant was notified by official notice No. …/…-…, dated ….12.2013, to provide proof of the fulfillment of the necessary requirements to verify the IMT exemption granted in accordance with Article 7 of the CIMT.
The Claimant presented an application response to the official notice.
The Claimant was notified of official notice No. …/…-…, of …/01/2014, regarding the official assessment of IMT concerning the acquisition of the property, to proceed within the specified period to pay the amount of €59,781.80, as IMT, plus compensatory interest in the amount of €1,270.98.
The Claimant was subsequently notified of the assessment act No. … in the amount of €59,781.80.
The Claimant proceeded to pay the tax assessment in the amount of €59,781.80.
F – UNPROVEN FACTS
Of the facts with relevance to the decision of the case, contained in the challenge, all those subject to concrete analysis were not proven insofar as they do not appear in the factual description set forth above.
G – ISSUES TO BE DECIDED
Given the positions of the parties assumed in the arguments presented, the following constitutes the central issue to be resolved, which it is necessary to assess and decide:
The alleged declaration of illegality of the tax assessment act in the Municipal Tax on Onerous Property Transfers, sought by the Claimant.
H – MATTERS OF LAW
Given the positions of the parties assumed in the pleadings presented, the central issue to be resolved by the present arbitral tribunal consists in assessing the legality of the property transfer tax assessment in the Municipal Tax on Onerous Property Transfers.
On the matter under consideration, the present tribunal understands that regarding the same, it raises as main issues, which it will address, based on determining whether the contract concluded between the Claimant and B..., within the scope of the Special Revitalization Process affecting the Claimant, is subsumable under the scope of the objective incidence of Article 2 of the CIMT, and whether it complies with the requirements necessary therein for taxation under that tax, and
In the same manner it is necessary to assess whether the same contract is covered by the exemption of Article 7 of the CIMT, of which it is necessary to verify compliance with the rules for the Claimant's benefit of the exemption provided therein, and in particular it is necessary to determine whether the contract concluded subsumes to the word resale enshrined in Article 7, paragraph 1 and Article 11, paragraph 5 of the CIMT.
In these terms, the present decision focuses, primarily, on two issues.
REGARDING THE PERFORMANCE OF AN ALTERNATIVE OBLIGATION AND THE CONTRACT CONCLUDED
First, it is important to define what is meant by performance of an alternative obligation, whether the contract here concluded fulfills the requirements of performance of an alternative obligation, and whether the performance of an alternative obligation is a valid form of acquisition and transition of real property, i.e., ownership rights.
Under the terms of Articles 837 et seq. of the Civil Code, the performance of an alternative obligation is a form of extinction of obligations besides performance, in which Article 837 states as follows: "The rendering of something different from what is due, even if of greater value, only exonerates the debtor if the creditor gives its assent."
The performance of an alternative obligation (datio in solutum), which is one of the possible forms of satisfaction of the creditor's right (cf. Article 523), is distinguished from the performance in function of payment (datio pro solvendo), regulated in Article 840; in the first case, the debtor intends, with the rendering of something different from what is due, to immediately extinguish the obligation, whereas in the second, it intends only to facilitate performance by providing the creditor with the means necessary for him to obtain future satisfaction of his credit. (…) The performance of an alternative obligation may have as its object the delivery of money in place of the thing due, as conversely the delivery of a certain thing instead of a monetary performance, as the delivery of one thing in place of another (…). Fernando Andrade Pires de Lima and João de Matos Antunes Varela, Annotated Civil Code Volume II, Coimbra Ed., pp. 124 and 125.
According to Antunes Varela, the performance can have as its object either the transmission (of ownership) of a thing, or the transmission of another (right), (e.g. of a usufruct, of a credit that the debtor has over a third party, etc.), that is, it can have as its object a monetary performance (in place of the performance of the thing due) or the performance of a thing in place of a monetary performance. The author further tells us that it is essential that the performance: a) that there be a performance different from what is due; b) that such performance is intended to immediately extinguish the obligation. It further states that, for there to be a pure performance of an alternative obligation, it is essential that, notwithstanding the eventual difference in objective value between performances, these were intended by the parties as equivalent or reciprocal to each other. Otherwise there will be a mixed donation. cf. Antunes Varela, Obligations, 2nd ed., p. 135.
In the performance of an alternative obligation, the principle of freedom of form or consensuality prevails, Article 219 of the CC, however, as regards the performance here in question, since it concerns the ownership right of a real property, it is necessary to resort to the rules of real property registration, because it concerns the transfer of real rights over real property.
The regime of performance of an alternative obligation itself, in its Article 838, "the creditor to whom the performance of an alternative obligation is made has guarantee against defects of the thing or the right transferred, under the terms prescribed for purchase and sale; (…)", applies with appropriate adaptations of Article 914 of the CC the regime relating to the purchase and sale contract.
The reference made to the rules of purchase and sale is explained by Fernando Andrade Pires de Lima and João de Matos Antunes Varela, through the character of an onerous contract that "datio in solutum" (performance of an alternative obligation) assumes. One delivers or gives the thing (broadly speaking) in exchange (for the extinction) of the credit[1].
For the extinction of the obligation it is necessary that it be expressly manifested (Article 837, final part, and likewise subsidiary application of Article 859 as to novation), the extinction of the obligation with the performance of the real property extinguished by consent of the creditor the existing debt, otherwise it is presumed that we are faced with a performance "pro solvendo," Article 840, or even a novation, Article 857[2].
In these terms, the performance of an alternative obligation are applicable, with appropriate adaptations, the remaining provisions of the section relating to sale, a reference that to the application of the provisions of the purchase and sale contract results not only from the first part of Article 838, but also from the general reference of Article 939[3].
The performance of an alternative obligation only extinguished the Claimant's original obligation, with the B...'s acceptance of a different performance, an acceptance that only occurs with the actual transfer of ownership (urban property), which is only effective with registration under the terms of the CRPred, by means of, as occurred, a public deed.
It is a real contract (quoad effectum), in which ownership is transferred, and is acquired, as an immediate effect of the legal transaction, cf. Article 408, paragraph 1 of the CC.
From Article 408, paragraph 1, it results: "The constitution or transfer of real rights over a determined thing occurs by mere effect of the contract", the principle of consensuality is established. This means that contracts imply the constitution or transmission of real rights over certain and determined things, the effect of the contract is real and not of a subsequent act performed in execution thereof.
The rule that the transfer is effected by mere effect of the conclusion of the contract of performance of an alternative obligation is established in paragraph 1 of Article 408 of the C.C.
Otherwise, if the property were not definitely transferred from the Claimant's legal sphere, the Claimant's original obligation would not have been extinguished, Article 838.
The contract from which results a performance of an alternative obligation, under the terms of Article 834 of the CC, is a bilateral legal transaction [4] (or contract), in the sense of constituting a bilateral legal transaction, designed to transmit rights, which gave rise to the legal relationship corresponding to the real right, and modified the level of ownership of the ownership right.
Article 1316 of the CC tells us that ownership is acquired by contract, and in light of the above, it results that the legal transaction sub judice, from which results the performance of an alternative obligation, and for all purposes, is a contract under the terms of the articles referred to above.
In the case of the contract, the moment of acquisition of the ownership right is designated under the terms of Article 408[5], which establishes that the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract. The principle of consensuality is established.
This means that contracts that imply the constitution or transmission of real rights over certain and determined things produce, as a rule, per se, that consequence - that is, by the exclusive result of the consequence of the parties validly manifested and at the very moment of the conclusion.
However, since we are faced with a contract from which results the acquisition and modification of real property ownership rights, we must complement the regime of Article 1316 and Article 408 with the legal regime of Real Property Registration in force at the time.
It further tells us regarding the manner of acquisition of the ownership right[6], Article 1316 of the CC, that "The ownership right is acquired by contract, succession by death, adverse possession, occupation, cession and other modes provided by law", and an enumeration not exhaustive, according to Oliveira de Ascensão, Sc. Iur, 21-371.
The national legal regime does not consider as public policy the principle of the transfer of ownership by mere effect of the contract, it is established as a suppletive rule, so that the parties may depart from it, under the terms of Articles 1316 and 408 and 409 of the CC.
The essential function of real property registration as per Article 1 of the CRPred – "Real property registration is intended essentially to publicize the legal situation of real properties, with a view to the security of real property transactions."
The regime of real property registration tells us that it is subject to registration under its Article 2, paragraph 1, letter a) The legal facts that determine the constitution, recognition, acquisition or modification of ownership rights, usufruct, use and habitation, surface rights or easements;
From which it results that the present contract must be registered within the limits of real property registration to produce its full effects and constitutes a presumption that the right exists and belongs to the registered holder (cf. Article 7 of the CRPred), which was done by means of a public deed and registered in the respective real property registry office.
The preparation of the registration naturally involves various material supports and preparatory or complementary acts of registration, that is, the documents that the interested parties themselves must present, serving as evidence and proof of the fact they intend to register.
In the present case, it is verified that the characteristics and requirements that construct a contract in which there is a performance of an alternative obligation of Article 834 of the CC were complied with in the legal transaction concluded by the Claimant, from which results the transmission by means of a public deed of property and the ownership right thereto from the Claimant's legal sphere to the B...'s legal sphere, expressly consented to by the creditor as a means of extinction and fulfillment of an existing monetary debt.
REGARDING THE OBJECTIVE INCIDENCE OF ARTICLE 2 OF THE CIMT
It is now important to determine the scope of the objective incidence of the municipal tax on onerous property transfers, and whether it encompasses the transfer of the ownership right that was concluded by the Claimant in the contract from which resulted a performance of an alternative obligation, under the terms and in the manner in which it was concluded in the case sub judice.
As established by the general rule of objective incidence prescribed in Article 2, paragraph 1 of the CIMT:
"1 - The IMT applies to transfers, on an onerous basis, of the right of ownership or of fractional figures of that right, over real property situated in the national territory".
The concept of transfer of real property is broadened by paragraph 2 and following paragraphs of the same article, beyond what is considered from a civil law perspective"[7].
The legislator intends with the formula of Article 2, paragraph 1, to reach the multiple situations existing in the national legal regime in which the acquisition of real property, or real rights, is not celebrated exclusively by means of a purchase and sale contract (understood as the most common contract), and intends to apply to onerous transfers of ownership rights or fractional figures, such as usufruct, use, and surface rights, accession, exchange, and in the present case as will be demonstrated, performance of an alternative obligation.
In paragraphs 2 and following of Article 2 of the CIMT, other situations of tax incidence are provided for, norms which seek to prevent tax avoidance, through the imposition of specific anti-abuse rules. Saldanha Sanches tells us regarding the objective incidence of IMT, "the existence of these rules recalls that the intensity of the normative intention to obstruct any transaction that has an effect equivalent to that of a purchase and sale justifies the application of the general anti-abuse clause to any legal transaction of equivalent effect not expressly provided in the CIMT"[8][9].
The CIMT is quite clear, in including in its scope, all onerous transfers of the ownership right (excluding donations and successions), a conclusion that is drawn from the letter of the law, in particular in paragraph 2 of Article 2, which uses a non-restrictive enumeration and only states: "For purposes of paragraph 1, the concept of transfer of real property also includes:", from which it is extracted that by the use of the word "also", the legislator intends only to include the situations provided in paragraph 2, in addition to those already included in paragraph 1 of Article 2, which is quite comprehensive.
In general terms, the tax is due when there is an onerous acquisition of real rights, and by the person who acquires the rights.
Onerous transactions are understood to be those where there are presumed patrimonial attributions by both parties, existing, from the perspective of these parties, a nexus or relationship of reciprocity between said patrimonial attributions[10].
Thus, it results from the aforesaid Article 2, paragraph 1, the need to verify whether the transaction resulting from the contract concluded by the Claimant fulfills the requirements provided for to be subject to taxation under IMT.
These requirements are as follows: the existence of a transfer of the ownership right of a real property, that such transfer be on an onerous basis, concepts that must be fulfilled by resorting to civil law rules.
As to the first requirement, we can divide it into two parts, the first consists in verifying the existence of a transfer of an ownership right, and the second that the ownership right transferred be that of a real property.
Article 1316 of the CC tells us, "The ownership right is acquired by contract, succession by death, adverse possession, occupation, accession and other modes provided by law". It further tells us Article 408, paragraph 1 of the CC "The constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, except for exceptions provided by law."
It is verified that by written contract, by means of a public deed concluded between the Claimant and B..., resulted in the transfer of an urban property consisting of a parcel of land intended for construction, registered under article ... of the extinct parish of Cedofeita, now article ... of the Parish Union of Cedofeita, S. Ildefonso, Sé, Miragaia, S. Nicolau and Vitória.
It is verified that the urban property referred to above constitutes a real property under the terms of Article 204 of the CC, so that its transfer constitutes a transfer of the ownership right of a real property, and thus the second part comprising the first requirement of the objective incidence of Article 2, paragraph 1 is fulfilled.
As to the second requirement, that the transfer be on an onerous basis, excluding situations of succession and donation, it is verified that this requirement is likewise fulfilled, if we consider the following.
The property was subject to a performance of an alternative obligation to extinguish an existing debt between the Claimant (debtor) and B... (creditor), from which resulted a transaction valued at €985,540.80, corresponding to the value of the debt.
With the fulfillment of the requirements of objective incidence of IMT, the conclusion to be reached is that the operation sub judice integrates the scope of incidence of the said tax.
It likewise results from the legal regime of IMT that the responsibility for payment of IMT in this transaction is that of the acquirer (B...).
In light of the above, the contract concluded respects the second requirement - that the transfer be on an onerous basis - of the rule of objective incidence of Article 2, paragraph 1.
Thus the present tribunal determines that the transfer of the property effected by public deed through a performance of an alternative obligation is covered within the scope of IMT, under the terms of Article 2 of the CIMT, by fulfilling all its requirements.
REGARDING THE EXEMPTION OF ARTICLE 7, PARAGRAPH 1 AND THE LAPSE OF ARTICLE 11, PARAGRAPH 5
In light of the above, it now falls to the present tribunal to determine whether the legal transaction is covered for purposes of benefiting from the IMT exemption provided for in Article 7, paragraph 1, the legal transaction benefiting from such exemption being, in the Claimant's legal sphere, the exchange effected on 01/06/2012, the moment in which said exemption begins, and which was granted until the moment of conclusion of the contract and effective transfer of the ownership right under the terms provided in the CRPred, over the same property.
It results from Article 7, paragraph 1 of the CIMT:
1 - Acquisitions of properties for resale are exempt from IMT, under the terms of the following paragraph, provided that prior to the acquisition, the declaration provided for in Article 112 of the Personal Income Tax Code (IRS) or in letter a) of paragraph 1 of Article 109 of the Corporate Income Tax Code (IRC) has been presented, as the case may be, relating to the exercise of the activity of purchasing properties for resale.
The exemption under the terms of Article 7, paragraph 1 lapses under the terms of Article 11, paragraph 5 of the CIMT[11], which is transcribed:
5 - The acquisition referred to in Article 7 shall cease to benefit from exemption as soon as it is verified that the properties acquired for resale have been given a different purpose or that they have not been resold within three years or were resold again for resale.
An exemption whose foundation, on the one hand, rests, as noted by Nuno Sá Gomes, (Lapse, due to allocation to a different purpose, of the SISA exemption, Opinion No. 119/95, of 11/7/1995, in CTF 380, pp. 488 et seq.) on the fact that the acquired properties remain, as merchandise, in the interchangeable assets of the company taxed on the exercise of the activity of acquiring properties for resale and which, on the other hand, has as its ultimate purpose to remove high financial charges which, despite being deductible costs for purposes of determining the income subject to tax, would tend to be reflected in the final price of the sale of real property. (Cf. Silvério Mateus and Corvelo de Freitas, Taxes on Patrimony. The Stamp Tax: Annotated and Commented, Lisbon, Engifisco, 2005, p. 385. )
From the combination of both articles, it results that the Respondent, on acquiring the property by way of exchange, on the date of 01/06/2012 and complying with the declarative obligations and requirements imposed in Article 7, paragraph 1 to benefit from the IMT exemption, has a period of 3 years to resell the property under the same conditions and that it not be resold again for resale.
A period that was granted by the AT, based on the exchange contract and not on a purchase and sale contract.
Effectively, the question concerns whether the legal transaction concluded by means of a contract in the form of a public deed, from which resulted the transfer of a real right over the ownership right of an urban property, a real property, duly registered and with public faith, by means of a performance of an alternative obligation to extinguish a monetary obligation contracted by the Claimant with respect to a new acquirer of the property, whether the same is covered within the legal sphere of the expression resale used in Articles 7, paragraph 1 and Article 11, paragraph 5 of the CIMT.
The understanding advocated regarding the notion of resale intrinsically linked to the notion of "different purpose" as to the effects of the lapse of Article 11, paragraph 5. The case law of the STA[12] has already pronounced itself on a similar matter within the scope of the old SISA Code, but in the situation where the legal transaction that causes the lapse of the exemption is a promise contract with delivery of the thing, and not a real contract, as in the present case.
Case law that, given the similarities of the SISA Code with the current CIMI code, we will study, in particular as regards the understanding to be given to different purpose and to resale.
It determined the scope of the meaning of the expression "different purpose," in which it is presumed in resale the transfer of the property in the state in which it was acquired, that is, the commercialization of the same without it having undergone a significant or substantial transformation, and does not result in substantial alteration of the external structure or the internal arrangement of the divisions of the buildings.
It is not verified in the situation sub judice that a different purpose was given to the property, in the terms that the aforesaid decision expounds, so that this requirement is fulfilled, nor was such fact invoked by the parties.
However, it is regarding the scope of the expression resale that it raises greater doubts, as to its application to this contract in particular, it is on the same that the present tribunal now turns its attention.
The case law, on the application of the concept of resale of Article 7 and Article 11, on contracts that result in a performance of an alternative obligation has not yet pronounced itself directly, however, there are several STA judgments on the understanding to be given to the concept of resale of those articles.
However, it is very important to bear in mind that the case law of the STA that pronounced itself on the concept of resale, still within the scope of the old CISA tax, and being in question a promise to purchase and sell contract with delivery of the thing, a contract where there is no transfer of the ownership right under the terms of Articles 1316 and 408 of the CC, and such case law is not unanimous.
But first of all it is important to refer to the first paragraph of the preamble of the CIMT, before turning our attention to the case law: The municipal tax on onerous property transfers (IMT), which replaces the municipal sisa tax, continues to apply to transfers, on an onerous basis, of the ownership right over real property and the fractional figures of that right, with these rights being able to be transferred under various forms or occurring in the constitution or extinction of various types of contracts.
The most recent case law[13] has been of the understanding through the decision of the plenary session of the STA in case 01061/11 of 01/23/12, to the effect: the conclusion of a promise to purchase and sell contract for a real property within the three-year period following the acquisition for resale, even if accompanied by delivery of the property, has decided that the same does not prevent the lapse of the sisa exemption, which only subsists with the conclusion of the purchase and sale contract.
According to the case law, it is necessary, for the fulfillment of the resale criterion of the aforesaid articles, the definitive transfer of the property by means of the finalization of the purchase and sale contract, which follows the promise to purchase and sell contract, the promise contract with delivery of the property not being sufficient for such, even if that property has been subject to taxation under IMT under the terms of Article 2, paragraph 2, letter a).
Thus, under the terms of the most recent case law there is simultaneous taxation of IMT on the same property, on the part of the promise-seller (Real Estate Company) and the property owner who requested the exemption under Article 7, paragraph 1, and on the part of the promise-buyer, who does not hold the ownership right of the property.
Effectively, in the promise to purchase and sell contract with delivery of the property, there is no transfer of the ownership right under the terms of Articles 1316 and 408 of the CC and Article 2, paragraph 1 of the CIMT, however the legislator provided for an anti-abuse rule in paragraph 2, letter a) of the same article to tax these same contracts, considering them as transfer of real property rights, for purposes of IMT.
However, part of the case law went further in considering that resale does not suffice with the delivery of the property and the respective taxation as if it were a transfer of ownership, but there must exist a purchase and sale contract, to effectuate the transfer of the ownership right.
The aforesaid case law, however, did not decide on the applicability of the term resale for purposes of whether or not to encompass the remaining forms of contracts that permit the transfer of ownership right under the terms of Articles 1316 and 408 of the CC, contracts which include the present contract.
In our opinion, the case law decided that to benefit from the exemption, the promise contract must be finalized within the 3-year period in the final purchase and sale contract with the transfer of ownership.
As to the term resale, it is a term non-existent in civil law, and in tax legislation, being only referred to in this situation.
There is no statutory provision which expressly and solely refers to resale being business concluded by purchase and sale, nor can it be accepted that resale in the article only directs itself to the purchase and sale contract as a valid means of transmitting the ownership right on an onerous basis, so as to comply with the general rule of incidence of Article 2, paragraph 1 and with the civil rules of Articles 1316 and 408 of the CC.
The scope of objective incidence of IMT, as per Article 2 of the CIMT, and the CIMT itself, does not anywhere expressly refer that the CIMT is limited solely to the purchase and sale contract, it does not do so, as can be verified that the scope of objective incidence of IMT is onerous transfers of the ownership right, and it further states in Article 7 that the said exemption is intended for the acquisition of real properties, urban or rural, that is, the majority of real property.
The present tribunal understands that the term resale encompasses all situations in which the taxpayer is engaged in the activity of purchase and sale of real property, in which it acquires or the common expression "buys" a property/real property to subsequently transmit or the more common expression "sells" in order to obtain a profit. It further states that the taxpayer must necessarily transmit the property with the same purpose, ruling out situations of deep renovations or new constructions, and the same property must be transferred to an acquirer that does not also benefit from the exemption of Article 7, paragraph 1.
By limiting said exemption only when the sale is made by a purchase and sale contract, the scope of action of the taxpayer and of the Portuguese civil regime itself is being limited.
Effectively, the exemption of Article 7 is intended for persons (natural or legal) engaged in the activity of purchasing properties for resale, that is, for whom the respective properties are viewed as an investment and as merchandise, from which would result taxation only of the gain of that activity. It is an activity like any other that involves the purchase and sale of merchandise.
Article 7 itself, as well as the jurisprudential position, has been to accept for the beginning of the period of benefit of the exemption, with the acquisition by the taxpayer engaged in such activity, all acquisitions of properties (expression used by Article 7, paragraph 1), under the terms provided in Article 2, paragraph 1 and Articles 1316 and 408 of the CC.
This is verified in the present case, that the AT granted the right of exemption to the Claimant on the property it acquired by exchange. Thus, in a hypothetical situation, in which the Claimant would have transferred the property through a purchase and sale contract, it would never fulfill the requirements of resale, because there is no first purchase and sale contract in which the Claimant acquired the property, so there is no resale.
That is, it is relevant for purposes of Article 7 all forms of transmission of the ownership right, this includes all contracts concluded under the terms of civil law for the transmission of real rights, such as the purchase and sale contract, the contract from which results a performance of an alternative obligation, and other contracts that fulfill the requirements.
With this, the present tribunal intends to conclude to the effect that the concept of resale of Article 7 must necessarily encompass all situations in which there exists a transmission of the ownership right, a situation that does not occur in the promise to purchase and sell contract, but is verified with all legal and public effects in the contract here in question.
Real property for purposes of this exemption must be understood as merchandise comprising an activity developed, where in principle only the gain or increase in patrimony will be taxed.
In the present case, the Claimant engages in the activity of purchase, sale, resale and rental of real property, and in the course of its activity contracted debts to a debtor (B...), which it was unable to extinguish in the manner originally agreed, and as a way of extinguishing the debt it resorted to a figure provided for in the Civil Code, and concluded a contract to produce the necessary effects.
There are exactly the same legal and tax effects of a purchase and sale contract, and the requirements of form of the purchase and sale contract are likewise verified (public deed) and of transmission of the ownership right (Article 2, paragraph 1 of the CRPred), and moreover it is stated that the contract in all respects fulfills the requirements of the purchase and sale contract provided for in Article 874 "purchase and sale is the contract by which the ownership of a thing, or another right is transferred, by means of a price".
Nor can it be accepted that the term resale is limited solely to purchase and sale contracts, since the IMT itself is not limited to purchase and sale contracts. The concept of resale does not presuppose a purchase and sale contract, because the CIMT itself does not presuppose for its objective incidence the existence of a purchase and sale contract, as has already been demonstrated.
It is understood, yes, in accordance with the case law cited above, that to benefit from the exemption, the promise to purchase and sell contract, even with delivery of the property, must actually result in the conclusion of the respective contract that finalizes the transfer of the ownership right, a contract which would be in the present case the purchase and sale contract, because in the promise contract there is no acquisition of the property, as the expression of Article 7, paragraph 1 requires.
And more importantly still, Article 7 itself, paragraph 1, does not use the expression purchase and sale, but rather resale, in the sense of referring to the activity of purchase and sale of real property, an activity that is not limited to acting by means of purchase and sale contracts, a reality well known to the legislator, which in the preamble to the CIMT itself, makes express reference to it.
And in this sense, it would be incongruous to presume that the legislator, for the scope of incidence of IMT, does not expressly limit the same to the purchase and sale contract, but grants an exemption within the scope of the development of an activity of commercialization of real property for resale, which would only benefit from the exemption when the sale of the property is by means of a purchase and sale contract, even though the acquisition could be by means of another contract.
One cannot prejudice the taxpayer for resorting to a figure legally provided for in the Civil Code, validly executed, with fulfillment of form requirements extra (public deed), not required for that figure, correctly registered, and validly taxable under IMT, contrary to what occurs with the figure of resale, which is non-existent, whether in the civil code, or in the IMT code, or in the LGT.
Nor at the civil law level is the figure of resale found provided for or associated with the purchase and sale contract. It is further stated that the figure of resale itself is not expressly provided for in the civil code, nor can it be considered as being the direct result of a first purchase and sale, because if it were, the exchange effected by the Claimant in which it acquired the ownership right over the urban property would not benefit from said exemption because it is not a purchase and sale.
The performance of an alternative obligation is not a form of transmission of ownership of real property.
To admit taxation in the legal sphere of the Respondent, when it respected all requirements necessary to benefit from the exemption, on a property that it transferred and no longer holds the respective ownership right, using a legally established figure, through an onerous contract from which resulted an onerous exchange, in the same terms that would be verified in a purchase and sale, would be against the very nature of IMT.
From a practical standpoint, the bank bought the property from the Claimant in exchange for a price, a price that had already been paid resulting from another legal transaction in the Respondent's activity, which it failed to comply with, and as has been said, the price practiced must correspond to the real price of the legal transaction to be concluded, as if it were a purchase and sale contract for comparative purposes, because from the perspective of the Claimant's activity, otherwise we would be faced with a donation as regards the part exceeding the value of the property and the prior debt.
It was in fact a sale, because the property acquired was with the intention of resale on the part of the Respondent, an intention expressly manifested.
It is further stated, as to the effects of purchase and sale, Article 879, the same provides for three fundamental effects, the first, the transmission of the thing or of the ownership right, the second the obligation to deliver the thing, and the third the obligation to pay the price.
The contract sub judice fulfills the requirements of Article 874 and the effects of Article 879, if we consider that we are faced with a contract, and it is a valid contract for the transmission of a real estate property right (urban property), it is onerous and concluded by means of a price, a price that was paid before the conclusion of the transaction, and Article 885 of the CC does not impose the moment of payment.
Soares Martinez, cited in the Judgment of the STA, of 21/4/2010, tells us "the legislator feared that, in order to avoid the payment of sisa tax, the promise-buyer would not conclude the respective purchase and sale contract, being content with a de facto transmission", ( Soares Martinez, Tax Law, 7th ed., Coimbra, Almedina, 1993, p. 67. ) reasons that are related to the fact that promise to purchase and sell contracts for real property have progressively ceased to be, with the development of economic activity, mere preparatory business of purchase and sale contracts, coming to be used as instruments for the realization of investments and real estate speculation based on purely economic transmissions of goods, providing income. (Cf. the Judgment of the STA, of 21/4/2010, case. No. 924/09; as well as José Maria Fernandes Pires, Lessons on Taxes on Patrimony and Stamp Tax, ed. Almedina, 2010, pp. 263 to 266. )
A fear that does not occur in the present situation once there is definitive transfer of the property, as is also not verified as established in the aforesaid judgment, of a mere preparatory transaction, or as instruments for the realization of investments and real estate speculation based on purely economic transmissions of goods, providing income.
It is further stated by the case law, as to the concept of resale: "Now, if it is true that Sisa establishes its own concept of transmission of real property subject to that tax (considering as transmissions, for that purpose, legal transactions that, in light of civil law, do not transmit, ipso facto, the ownership right – as is the case with the promise to purchase and sell contract for real property with delivery of the possession) it is also true that that same code does not equate such acts to resale itself. Hence, using the legislator, in paragraph 1 of article 16 of CSisa, the concept of resale and not that of transmission, it is concluded that no other concept of resale can be appealed to there (a concept non-existent in tax law), and it is rather indispensable that there be a new sale of the property (which can only be the legal act defined in article 874 of the Civil Code), that is, the transmission of the ownership title and not being enough for that reason, the conclusion of a promise to purchase and sell contract, even if with delivery of the property. That is, although the conclusion of this type of contract with delivery of possession is considered by CSisa as a fact subject to tax, the fact is that in the case of the exemption for properties acquired for resale, the law requires, without more, the effectuation of resale as an essential presupposition of the exemption, without equating any other type of act or contract to it. (In this sense, although referring to the current IMT, cf. José Maria Fernandes Pires, op. cit., pp. 422 to 424. As well as, Pinto Fernandes and Cardoso dos Santos, Code of Sisa and Tax on Successions and Donations, edition of the National Press, Vol. I, p. 371; and Silvério Mateus/Corvelo de Freitas, op. cited, p. 386. )[14][15]".
From the above, the following conclusions are drawn from the judgment, which although correct, are not applicable to the present contract, as the judgment states:
"CSisa establishes its own concept of transmission of real property subject to that tax." - A concept which is complemented as we have seen by the rules of legal transactions and the transfer of ownership, i.e. real rights, under the terms of civil law and real property registration, with the contract as the highest exponent - as a bilateral legal transaction, which the present contract fulfills fully.
"it is also true that that same code does not equate such acts to resale itself." and "the concept of resale and not that of transmission, it is concluded that no other concept of resale can be appealed to there" - It is true that the Civil Code, the IMT Code, the LGT, or any other statute, there exists a reference to the term resale, or even to what is understood regarding the same, one must resort to the rules of interpretation of the law, as the judgment itself states "resale (a concept non-existent in tax law),"
"It is indispensable that there be a new sale of the property, that is, the transmission of the ownership title;" - In line with what the civil code provides as to the transmission of the ownership right, where it is understood that there is a transmission of the right by means of a contract, and does not limit that transfer of the ownership right, including for real property, to the purchase and sale contract (nominative), it can be done by an innominate contract, provided it complies with general rules.
"the law requires, without more, the effectuation of resale as an essential presupposition of the exemption, without equating any other type of act or contract to it." - Well, in the interpretation of the law, it must be presumed that the legislator established the most correct solutions and knew how to express its thinking in adequate terms (Article 9, paragraph 3 of the Civil Code). Thus, for the analysis of the provision, it is necessary to resort to interpretive aids of the grammatical element and also to the ratio legis, always bearing in mind that the capture of the meaning of a rule cannot be made in an isolated manner. IMT taxes the transfer, on an onerous basis, of real property, the taxpayer being the buyer or acquirer of that property. Because it applies to onerous acquisitions, the tax does not aim at the subjection of net increase in wealth, because it cannot be verified. In truth, being the acquisition onerous, there results from it no increase in net patrimony of the acquirer, but rather a mere substitution of the support in which that patrimony or wealth is materialized, money for real property in the majority of cases (See in this sense, José Maria Fernandes Pires, Lessons on Taxes on Patrimony and Stamp Tax, p. 151.). It is, after all, a situation that has some parallelism with the regimes of non-subjection and exemption of properties acquired for resale and for construction when the acquirers and owners are companies exercising the activity of purchasing properties for resale, for whom that real property is merely the merchandise with which they exercise their commercial activity. Cf. Judgment No. 0599/10 of the STA.
By limiting the concept of resale, the acquisition of properties solely by means of a purchase and sale contract by force of Article 1316 and 874, both of the C.C., is something that Article 1316 does not state, even quite the opposite, given its non-exhaustive enumeration[16], nor does civil law state so, which emphasizes the important principles of private autonomy and contractual freedom, Article 405 of the CC.
Private autonomy has its most expressive manifestation in bilateral legal transactions, or contracts, as contractual freedom, its legal establishment takes place in Article 405, integrating into the section relating to contracts as sources of obligations, and the autonomy of will finds, in this domain of obligational contracts, its widest dimension. Carlos Alberto da Mota Pinto, General Theory of Civil Law, 4th ed. Coimbra ed.
Article 405 establishes the principles contained in contractual freedom, the freedom of modeling, freedom of setting or freedom of stipulation of contractual content.
With the principle of freedom of modeling, the parties may conclude typical or named contracts, add clauses to these or conclude atypical or unnamed contracts, applying to both the general civil rules.
In contracts with real efficacy, that is, constitutive, modifying or extinguishing of real rights, there is freedom of conclusion, but the freedom of setting the contractual content is subject to an important restriction. The contracting parties, though able to conclude unnamed contracts, cannot constitute real rights that are not integrated into the types provided by law - the principle of typicality or "numerus clausus" of real rights. It is not possible to alter by contract the characteristics of the real rights typified by the law nor create ex contratu other types, Article 1306 of the CC. Cf. Carlos Alberto da Mota Pinto, General Theory of Civil Law, 4th ed. Coimbra ed.
Specifically, if the law provides for the possibility of a real right being transferred by contract, this may be effected even through an atypical or unnamed contract, but what cannot be done is to constitute by contract a real right, if the law does not indicate the contract among the modes of constitution of that real right. (Mota Pinto, Real Rights, 1970/17, p. 117 et seq).
Specifically, the legal transaction is a manifestation of the principle of private autonomy or of the autonomy of will, underlying all private law, a private autonomy or autonomy of will which consists in the power recognized by individuals to self-regulate their interests, self-government in their legal sphere. In the performance of legal transactions, of acts by which individuals dictate the regulation of their relations, constituting, modifying, extinguishing them and determining their content. (Carlos Alberto da Mota Pinto, General Theory of Civil Law, 4th ed. Coimbra ed.).
As has been stated, there is no reference to the term resale, just as the concept of resale cannot be limited as being solely the purchase and sale contract, because this does not result from the legislation in force. Thus, the interpretation to be made of the concept of resale is that which the taxpayer develops in its activity of purchase and sale of real property, or in other words, the acquisition and transmission of properties, the only terms used by the CIMT and CC, since in none of these statutes is purchase compared with acquisition as is prescribed in Article 874 of the CC, an article which states that Purchase and Sale is the contract by which the ownership right over a thing is transmitted, what results from it is a transmission, an obligation to deliver, and an obligation to pay. Transmission which is regulated by the same regime that regulates the Claimant's contract with B....
From these requirements it results with complete clarity that it is intended to confer the exemption by transmission, but taking into account the quality of reseller of the acquirer.
And in the exercise of that activity it transmits properties on an onerous basis, by means of a contract, as Civil Code provides for these legal transactions.
It is in the sense that the property is acquired as merchandise, to be transmitted in exchange for a profit.
In the present contract there is definitive transmission, contrary to what occurs in the promise to purchase and sale contract.
However, we have the decision of judgment No. 01205/12 of 02/20/2013 of the STA, to the effect, regarding accession, which states: "being only to consider resale in its technical-legal sense. In the concept of "resale" referred to in article 11, paragraph 3 of the CIMSISSD, only the transmission of the ownership right effected by purchase and sale contract as this is defined in article 874 of the Civil Code, carried out by the acquirer exercising the activity of acquisition of real property for resale, is encompassed. Thus, transmission (acquisition) of ownership by any of the other forms provided in article 1316 of the Civil Code is excluded from said exemption."
The aforesaid judgment refers to civil law, "transmission (acquisition) of ownership by any of the other forms provided in article 1316 of the Civil Code is excluded from said exemption", from a brief reading of Article 1316, the expression contract is used, and not purchase and sale contract, it is understood by contract the bilateral legal transaction with two or more declarations of will, of opposing content, but converging, being adjusted in its common intent to produce a unitary legal result, although with a meaning for each party. This is the paradigmatic case of purchase and sale[17], but it is not the only one.
The question arises as has been stated above, that Article 1316 of the CC does not refer to purchase and sale contract, but only the expression contract, and one cannot limit transmission (acquisition) of ownership as the judgment states to the purchase and sale contract, because that is not what is established in that article.
Since it is necessary to resort to civil law to determine the scope of concepts provided for in the CIMT, in particular, the term resale, the term acquisition of properties both of Article 7, and also the terms used in the definition of objective incidence of Article 2, it is concluded that the civil rules must be used in their definition, and it could not be otherwise.
The performance of an alternative obligation is one of the forms that Civil Code provides for the extinction of obligations, by itself the performance does not constitute a contract and nor is it understood as a named contract[18]. What constitutes a contract in accordance with the general rules of contracts provided for in Articles 405 to 456 of the CC, and the general theory of legal transaction of Article 217 to 294 of the CC, is the contract by means of which the ownership right of a movable or immovable thing, or right, credit, or monetary performance, is transmitted, in exchange for the extinction of the existing obligation, in which according to Article 834, the performance that the contract provides must necessarily have similar value, although less or more, otherwise we would be faced with a donation contract. A contract which is normally given the name of Performance of an Alternative Obligation, because it results from the application of a figure already regulated.
Although the performance of an alternative obligation does not require in its regime, form, what is required is the fulfillment of general rules as to real rights, it requires the conclusion of a contract from which results a performance of an alternative obligation, and from those rules, in particular Article 408, paragraph 1, in compliance with the real property registration rules, the transmission of a property must be registered, which can only be done by means of a contract, a contract which must be written and signed by both parties, by means of a private document, an authenticated private document, and by public deed, which has the greatest probative value, and which was used by the Claimant.
Thus the concept of resale prescribed in Article 7, paragraph 1 of the CIMT refers to the situations provided for in the civil code of transmission of ownership, (on an onerous basis, Article 2, paragraph 1 of the CIMT), by application of Article 408, which requires that the transition must be done by means of a contract, complemented by Article 1316 of the CC, which establishes that it must be acquired by contract.
And even understanding that the concept of resale is linked only to the purchase and sale contract, a connection not provided for in civil or tax law, it is further stated that Article 874 et seq., in the treatment it gives to the named purchase and sale contract, expressly refers that the purchase and sale contract is a contract from which results the transmission of ownership by means of a price, what results from the contract is a transmission, an obligation to deliver, and an obligation to pay. A transmission which is regulated by the same regime that regulates the Claimant's contract with B....
The contract from which resulted a performance of an alternative obligation is a contract defined and accepted under the terms of Article 1316, is included in the civil sphere of the concept of contract, as is the purchase and sale contract.
As to the remaining requirements imposed for the verification of the exemption, it is stated regarding the same that they were fulfilled, thus having the Respondent transferred the respective urban property by means of public deed, on the date of 29.05.2013, it is verified that the property was resold within the 3-year period provided in Article 11, paragraph 5. Likewise, the exemption does not lapse, because the declaration is not verified on the part of the acquirer of the property (B...), of the intention to resell the property under the terms of Article 7, paragraph 1, which would rule out the right to benefit from the exemption of the Respondent under the terms of Article 11, paragraph 5, final part.
In light of the factual situation presented and deemed proven, it is proven that the Respondent fulfills the remaining requirements of Article 7, paragraph 1, regarding the presentation of the declaration of letter a) of paragraph 1 of Article 109 of the Corporate Income Tax Code (IRC) as the case may be, relating to the exercise of the activity of purchasing properties for resale.
In light of the above, the present tribunal concludes for the declaration of illegality of the sub judice assessments, for suffering from a defect of violation of Article 2, paragraph 1, Article 7, paragraph 1, and Article 11, paragraph 5, all of the CIMT, for error as to the legal presuppositions, which justifies the declaration of its illegality and annulment (Article 135 of the CPA).
I – DECISION
Accordingly, in light of all the above, the present Arbitral Tribunal decides as follows:
To judge the request for declaration of illegality of the tax assessment act as well-founded, for error as to the legal presuppositions, which justifies the declaration of its illegality and annulment.
Condemns the Respondent to repay to the Claimant the amount indebtedly assessed and paid.
The value of the proceedings is fixed at €59,781.80, the value of the assessment, taking into account the economic value of the proceedings as measured by the value of the tax assessments challenged, and accordingly the costs are fixed, in the respective amount at €2,142.00 (two thousand, one hundred and forty-two euros), to the charge of the Respondent in accordance with Article 12, paragraph 2 of the Tax Arbitration Regime, Article 4 of the RCPAT and the Table I attached thereto – paragraph 10 of Article 35, and paragraphs 1, 4 and 5 of Article 43 of the LGT, Articles 5, paragraph 1, letter a) of the RCPT, 97-A, paragraph 1, letter a) of the CPPT and 559 of the CPC).
Let it be notified.
Lisbon, October 20, 2014
The Arbitrator
Paulo Renato Ferreira Alves
Frequently Asked Questions
Automatically Created